UNIVERSITY OF SAN CARLOS

SCHOOL OF LAW AND GOVERNANCE

LABOR
STANDARDS
CASE DIGEST (S. Y. 2015-2016)

SUBMITTED BY:
MARK JEEG JAMIN- JD2 (EH407)

SUBMITTED TO:
ATTY. JEFFERSON M. MARQUEZ
Topic 13. 2011 NLRC RULES OF PROCEDURE
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1. T/SGP Larkins vs. NLRC, G.R. No. 92432, February 23, 1995
2. UERM Memorial Medical Center vs. NLRC, G.R. No. 110419, March 3, 1997
3. Phil Tranco Services vs. NLRC, G.R. No. 124100, April 1, 1998
4. St. Martin Funeral Homes vs. NLRC, G.R. No. 130866, September 16, 1998
5. Ludo & Luym Corp., vs. Saornido, G.R. No. 140960, January 20, 2003
6. Hansin Engineering & Construction vs. CA, G.R. No. 165910, April 10, 2006
7. Phil. Journalist Inc. vs. NLRC, G.R. No. 166421, Sept. 5, 2006
8. Balagtas Multi-purpose Coop. Vs. CA, G.R. No. 159268, Oct. 27, 2006
9. St. Martin Funeral Homes vs. NLRC, G.R. No. 142351, Nov. 22, 2006
10. DOLE Phils. Vs. Esteva, G.R. No. 161115, Nov. 30, 2006
11. Intercontinental Broadcasting Corp., vs. Panganiban, G.R. No. 151407, February 6, 2007
12. Far East Agricutural Supply vs. Lebatigue, G.R. No. 162813, February 12, 2007
13. Letran Calamba Faculty & Employees Association vs. NLRC, G.R. No. 156225, January 2008
14. Metro Transit Organization vs. Piglas NFWU-KMU et al., G.R. No. 175460, April 14, 2008
15. J.K. Mercado & Sons Agricultural Enterprises, Inc., vs Sto. Tomas, G.R.No. 158084
16. J. Phil. Marine Inc., vs. NLRC, G.R. No. 1753661, August 11, 2008;
17. Sy vs. ALC Industries, G.R. No. 168339, October 10, 2008
18. PCI Travel Corp., vs. NLRC, G.R. No. 154379, October 31, 2008
19. Lopez vs. Q. C. Sports Club, G.R. No. 164032, January 19, 2009
20. Lockheed Detective & Watchman Agency, G.R. No. 185918, April 18, 2012
21. Portillo vs. Rudolf Lietz, Inc. et al., G.R. No. 196539, October 10, 2012
22. Building Care Corp. vs. Macaraeg, G.R. No. 198357, December 10, 2012
23. McBurnie vs. Ganzon, GR No. 178034/1718117, October 17, 2013
24. Indophil Textile Mills Inc. vs. Engr. 25. Adviento, G.R. No. 171212, August 4, 2014
26. Manila Mining Corp., vs. Amor G.R. No. 182800, April 20, 2015
Topic 14. OTHER IMPORTANT LABOR PROVISIONS
A.CONTRACTING ARRANGEMENT
1. PBCom vs. NLRC, 146 SCRA 347 [1986]
2. Neri vs. NLRC, 224 SCRA 717 [1993]
3. Filipinas Synthetic Fiber Corp. vs. NLRC, 257 SCRA 336 [1996]
4. Maraquinot vs. NLRC, 284 SCRA 539 [1998]
5. Urbanes Jr. vs. Sec. Of Labor, G.R. No. 122791, Feb. 19, 2003
6. San Miguel vs. Maerc Integrated Services, G.R. No. 144672, July 10, 2003
7. Mariveles Shipyard vs. CA, G.R. No. 144134, Nov. 11, 2003
8. New Golden City Builders vs. CA, G.R. No. 154715, Dec. 11, 2003
9. National Food Authority vs. Maceda SecurIty Agency, G.R. No. 163448, March 8, 2005
10. Abella vs. PLDT, G.R. No. 159469, June 8, 2005
11. San Miguel vs. Aballa, G.R. No. 149011, June 28, 2005
12. Manila Electric Co., vs. Benamira, G.R. No. 145271, July 14, 2005
13. Granspan Development Corp., vs. Bernardo, G.R. No. 141464, Sept. 21, 2005
14. Acevedo vs. Advanstar Co., G.R. No. 157656, Nov. 11, 2005
15. Big AA Manufacturer vs. Antonio, G.R. No. 1608504, March 3, 2006
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16. DOLE Phils. Vs. Esteva, G.R. No. 161115, Nov. 30, 2006
17. San Miguel Vs. NLRC, G.R. No. 147566, Dec. 6, 2006 citing Maerc Integrated Services case
18. Eparwa Security & Janitorial Services vs. Liceo De Cagayan University. G.R. No.150402
19. Lapanday Agri Development Corp., vs. Court of Appeals, 324 SCRA 39
20. Escario vs. NLRC, 333 SCRA 257 [2000]
21. Aboitiz Haulers vs. Dimapatoi, G.R. No. 148619, Sept. 19, 2006
22. GSIS vs. NLRC, G.R. No. 157647, October 15, 2007, citing Rosewood Processing vs. NLRC
23. Republic of the Phils. vs. Asiapro Cooperative, G.R. No. 172101, November 23, 2007
24. Almeda et al., vs. Asahi Glass, G.R. No. 177785, Sept 3, 2008
25. Sasan, Sr et al., vs. NLRC and EPCIB, G.R. No. 176240, October 17, 2008
26. Purefoods Corp., vs. NLRC et al., G.R. No. 172241, November 20, 2008
27. Maranaw Hotels and Resort vs. Court of Appeals, et al., G.R. No. 149660, Jan. 20, 2009
28. CCBPI vs. Agito et al., G.R. No. 179546, Feb. 13, 2009
29. South Davao Development Company et al., vs. Gamo et al., GR No. 171814, May 8, 2009
30. Traveno vs. Bobongon Banana Growers Multi-purpose Coop. GR No. 164205, Sept. 3, 2009
31. Locsin et al., vs. PLDT, GR No. 185251, Oct 2, 2009
32. Aliviado et al vs. Procter & Gamble Phils GR No. 160506, March 9, 2010
33. San Miguel Corp. vs. Semillano GR No. 164257, July 5, 201
34. Manila Water Co. vs. Dalumpines, GR No. 175501, Oct. 4, 2010
35. Teng vs. Pahagac, GR No. 169704, November 17, 2010
36. GSIS vs. NLRC et al., GR No. 180045, Nov. 17, 2010
37. Sy et al., vs. Fairland Knitcraft Co Inc. G.R. No. 189658, December 12, 2011
38. Polyfoam-RGC International Corp., vs. Concepcion, G.R. No. 172349, June 13, 2012
39. Superior Packaging Corp., vs. Balagsay et al., G.R. No. 178909, October 10, 2012
40. Digital Telecom Phils Inc. vs. Digitel Employees Union G.R. No. 184903-04
41. Norkis Trading Corp., vs. Buenavista, et al., G.R. No. 182018, October 10, 2012
42. Goya Inc. vs. Goya Inc. Employees Union-FFW G.R. No. 170054, Jan. 21, 2013
43. Vigilla et al., vs. Phil. College of Criminology Inc., G.R. No. 200094, June 10, 2013
44. BPI Employees Union-Davao vs. Bank of the Phil Islands G.R. No. 174912, July 24, 2013
45. Alilin et al., vs. Petron Corp., GR No. 177592, June 9, 2014
46. Ampeleloquio vs. Jaka Distribution Inc., GR No. 196936, July 2, 2014
47. FVR Skills & Services Exponenets Inc. vs. Seva, et al., GR No. 200857, Oct. 22, 2014
48. Fonterra Brand Phils vs. Largado et al., GR No. 205300, March 18, 2015
B.WORKER'S PREFERENCE
1. DBP vs. NLRC, 242 SCRA 59 [1995]
2. Batongbuhay Gold Mines vs. De la Serna, 312 SCRA 45
3. Barayoga vs. Asset Privatization Trust, G.R. No. 160073, October 24, 2005
4. Phil. Airlines vs. Zamora, G.R. No. 166996, Feb. 6, 2007
5. Phil. Airlines vs. Phil. Airlines Employees Association, 525 SCRA 29 [2007]
6. Rubberworld vs. NLRC, 305 SCRA 721 [1999]
7. Garcia vs. Phil Air Lines, G.R. No. 164856, January 20, 2009
C.ATTORNEY'S FEES & APPEARANCE OF LAWYERS
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1. Bank of the Philippines Island vs. NLRC, 171 SCRA 556

2. Traders Royal Bank Employees Union vs. NLRC, 269 SCRA 733 [1997]
3. Brahm Industries vs. NLRC, 280 SCRA 824 [1997]
4. Heirs of Aniban vs. NLRC, 282 SCRA 377 [1997]
5. Sapio vs. Undaloc Construction G.R. No. 155034, May 22, 2008
6. Atty. Ortiz vs. San Miguel Corp., G.R. No. 151983-84, July 31, 2008
7. Masmud vs. NLRC G.R. No. 183385, Feb. 13, 2009
8. Kaisahan at kapatiran ng mga Manggagawa at Kawani sa MWC-East Zone Union vs. Manila Water
Company, G.R. No. 174179, November 16, 2011
9. Malvar vs. Kraft Food Phils Inc. et al., G.R. No. 183952, Sept. 9, 2013
10. T&H Shopfitters Corp., vs. T&H Shopfitters Corp Workers Union, GR No. 191714
15.MISCELLANEOUS PROVISIONS
A. SPECIAL TYPES OF WORKERS
1.Bernardo vs. NLRC, 310 SCRA 186 [1999]
B. EMPLOYMENT OF WOMEN
1. PT&T vs. NLRC, 272 SCRA 596 [1997]
2. Del Monte Phils vs. Velasco, G.R. No. 153477, March 6, 2007
3. Co vs. Vargas, G.R. No. 195167, November 16, 2011
C. EMPLOYMENT OF DOMESTIC WORKERS
1. Ultra Villa Food Haus vs. Geniston, 309 SCRA 17 [1999]
2. Remington Industrial Sales Corp., vs. Castaneda, G.R. No. 169295-96, Nov. 20, 2006
3. Co vs. Vargas, G.R. No. 195167, November 16, 2011
D. EMPLOYMENT OF ACADEMIC/NON-ACADEMIC PERSONNEL IN
INSTITUTION
1. University of the east et al., vs. Pepanio, G.R. No. 193897, Jan. 23, 2013
2. Colegio Del Santisimo Rosario et al., vs. Rojo, G.R. No. 170388, Sept. 4, 2013
3. Herrera-Manaois vs. St. Scholasticas College, GR No. 188914, December 11, 2013

PRVT.

EDUC.

16. MEDICAL, DENTAL AND OCCUPATIONAL SAFETY

1. Tolosa vs. NLRC, G.R. No. 149578, April 10, 2003
2. U-Bix Corp., vs. Bandiola, 525 SCRA 566 [2007[
3. Ocean Builders Construction vs. Sps. Cubacub, GR No. 150898, April 13, 2011
17. MIGRANT WORKER'S ACT & OVERSEAS FILIPINO ACT
1. ISS Indochina Corp., vs. Ferrer, G.R. No. 156381, Oct. 14, 2005
2. People vs. Capt. Gasacao, G.R. No. 168449, Nov. 11, 2005
3. Acuna vs. CA, G.R. No. 159832, May 5, 2006
4. Asian International Manpower Services vs. CA, G.R. No. 169652, October 9, 2006
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5. Sim vs. NLRC et al., G.R. No. 157376, October 2, 2007

6. Bahia Shipping Services vs. Chua, G.R. No. 162195, April 8, 2008
7. Masangkay vs. Trans-Global Maritime Agency Inc., et al., G.R. No. 172800, October 17, 2008
8.Magsaysay Maritime Corp., et al., vs. Velasquez, et al., G.R. No. 179802, Nov 14, 2008
9. Serrano vs. Gallant Maritime Services et al., G.R. No. 167614, March 24, 2009 En Banc
10. Becmen Service Exporter and Promotion Inc., vs. Spouses Cuaresma, GR Nos. 182978-79
11. People vs. Domingo, GR No. 181475, April 7, 2009
12. ATCI Overseas Corp. et al., vs. Echin, GR No. 178551, Oct. 11, 2010
13. Yap vs. Thenamaris Ship Management et al., G.R. No. 179532, May 30, 2011
14. Skippers United Pacific vs. Doza et al., G.R. No. 175558, February 8, 2012
15. International Management Services vs. Logarta, G.R. No. 163657, April 18, 2012
16. Pert/Cpm Manpower Exponent Co., Inc. vs. Vinuya et al., G.R. No. 197528, Sept. 2012
17. Hon. Sto. Tomas, et al., vs. Salac et al., G.R. No. 152642 & 152710, November 13, 2012
18. Sameer Overseas Palcement Agency Inc., vs. Cabiles, GR No. 170139, August 5, 2014
19. Racelis vs. United Philippine Lines Inc. GR No. 198408, November 12, 2014

TOPIC 13
2011 NLRC RULES OF PROCEDURE
T/SGP Larkins vs. NLRC, G.R. No. 92432, February 23, 1995

Facts: Petitioner was a member of the United States Air Force (USAF) assigned to oversee the
dormitories of the Third Aircraft Generation Squadron (3 AGS) at Clark Air Base, Pampanga. On August
10, 1988, 3 AGS terminated the contract for the maintenance and upkeep of the dormitories with the De
Guzman Custodial Services. The employees thereof, including private respondents, were allowed to
continue working for 3 AGS. It was left to the new contractor, the JAC Maintenance Services owned by
Joselito Cunanan, to decide whether it would retain their services. Joselito Cunanan, however, chose to
bring in his own workers. As a result, the workers of the De Guzman Custodial Services were requested
to surrender their base passes to Lt. Col. Frankhauser or to petitioner. On August 12, 1988, private
respondents filed a complaint with the Regional Arbitration Branch No. III of the NLRC, San Fernando,
Pampanga, against petitioner, Lt. Col. Frankhauser, and Cunanan for illegal dismissal and underpayment
of wages. On September 9, 1988, private respondents amended their complaint and added therein claims
for emergency cost of living allowance, thirteenth-month pay, service incentive leave pay and holiday
premiums. Petitioner and Lt. Col. Frankhauser failed to answer the complaint and to appear at the
hearings. They, likewise, failed to submit their position paper, which the Labor Arbiter deemed a waiver
on their part to do so. The case was therefore submitted for decision on the basis of private respondents'
position paper and supporting documents. On November 21, 1988, the Labor Arbiter rendered a decision
granting all the claims of private respondents. He found both Lt. Col. Frankhauser and petitioner "guilty
of illegal dismissal" and ordered them to reinstate private respondents with full back wages, or if that is
no longer possible, to pay private respondents' separation pay. Petitioner appealed to the NLRC claiming
that the Labor Arbiter never acquired jurisdiction over her person because no summons or copies of the
complaints, both original and amended, were ever served on her.
Issue: Whether or not Labor Arbiter acquired jurisdiction over petitioners person because no summons or
copies of the complaints, both original and amended, were ever served.
Ruling: Labor Arbiter acquired no jurisdiction over the case and the person of petitioner.
Firstly, the "Agreement Between the Republic of the Philippines and the United States of America
Concerning Military Bases," otherwise known as the R.P. U.S. Military Bases Agreement, governed
the rights, duties, authority, and the exercise thereof by Philippine and American nationals inside the U.S.
military bases in the country. Article XIV is the governing procedure for service of summons on persons
inside U.S. military bases. Summonses and other processes issued by Philippine courts and administrative
agencies for United States Armed Forces personnel within any U.S. base in the Philippines could be
served therein only with the permission of the Base Commander. If he withholds giving his permission,
he should instead designate another person to serve the process, and obtain the server's affidavit for filing
with the appropriate court. Respondent Labor Arbiter did not follow said procedure. He instead, addressed
the summons to Lt. Col. Frankhauser and not the Base Commander.
Secondly, under Base Labor Agreement of May 27, 1968, any dispute or disagreement between the
United States Armed Forces and Filipino employees should be settled under grievance or labor relations
procedures established therein (Art. II) or by the arbitration process provided in the Romualdez-Bosworth
Memorandum of Agreement dated September 5, 1985. If no agreement was reached or if the grievance
procedure failed, the dispute was appealable by either party to a Joint Labor Committee established in
Article III of the Base Labor Agreement. Therefore, no jurisdiction was ever acquired by the Labor
Arbiter over the case and the person of petitioner and the judgment rendered is null and void (Filmerco
Commercial Co. v. Intermediate Appellate Court,supra.; Sy v. Navarro, 81 SCRA 458 [1978]). Lastly,
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notices of hearing are not summonses. It is basic that the Labor Arbiter cannot acquire jurisdiction over
the person without being served with summons. In the absence of service of summons or a valid waiver
thereof, the hearings and judgment rendered by the Labor Arbiter are null and void (cf. Vda. de Macoy v.
Court of Appeals,supra.)
Petitioner, in the case at bench, appealed to the NLRC and participated in the oral argument before the
said body. This, however, does not constitute a waiver of the lack of summons and a voluntary submission
of her person to the jurisdiction of the Labor Arbiter. If an appearance before the NLRC is precisely to
question the jurisdiction of the said agency over the person of the defendant, then this appearance is not
equivalent to service of summons (De los Santos v. Montera, 221 SCRA 15 [1993]).
The petition for certiorari is GRANTED.

UERM Memorial Medical Center vs. NLRC, G.R. No. 110419, March 3, 1997
Facts: A complaint was filed by the private respondents, represented by the Federation of Free Workers
(FFW), claiming salary differentials under Republic Act Nos. 6640 and 6727, correction of the wage
distortion and the payment of salaries for Saturdays and Sundays under Policy Instruction No. 54. Labor
Arbiter Nieves de Castro sustained the private respondents except for their claim of wage distortion.
Respondents are directed to pay the 517 individual complainants a total of P17,082,448.56 plus
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exemplary damages of P2,000 each. Within the reglementary period for appeal, the petitioners filed their
Notice and Memorandum of Appeal with a Real Estate Bond consisting of land and various
improvements therein worth P102,345,650. 2 The private respondents moved to dismiss the appeal on the
ground that Article 223 of the Labor Code, as amended, requires the posting of a cash or surety bond. The
NLRC directed petitioners to post a cash or surety bond of P17,082,448.56 with a warning that failure to
do so would cause the dismissal of the appeal. The petitioners filed a Motion for Reconsideration alleging
it is not in a viable financial condition to post a cash bond nor to pay the annual premium of P700,000.00
for a surety bond. On 6 October 1992, the NLRC dismissed petitioners' appeal. Petitioners' Motion for
Reconsideration was also denied by the NLRC in a resolution 3 dated 7 June 1993.
Issue: WON in perfecting an appeal to the National Labor Relations Commission (NLRC) a property
bond is excluded by the two forms of appeal bond ?
Ruling: The applicable law is Article 223 of the Labor Code, as amended by Republic Act No. 6715,
which provides: In case of a judgment involving a monetary award, an appeal by the employer may be
perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly
accredited by the Commission in the amount equivalent to the monetary award in the judgment appealed
from. We have given a liberal interpretation to this provision. In Oriental Mindoro Electric Cooperative,
Inc. v. National Labor Relations Commission we held: The intention of the lawmakers to make the bond
an indispensable requisite for the perfection of an appeal by the employer is underscored by the provision
that an appeal by the employer may be perfected "only upon the posting of a cash or surety bond." The
word "only" makes it perfectly clear, that the lawmakers intended the posting of a cash or surety bond by
the employer to be the exclusive means by which an employer's appeal may be perfected. The
requirement is intended to discourage employers from using an appeal to delay, or even evade, their
obligation to satisfy their employees' just and lawful claims. Considering, however, that the current policy
is not to strictly follow technical rules but rather to take into account the spirit and intention of the Labor
Code, it would be prudent for us to look into the merits of the case, especially since petitioner disputes the
allegation that private respondent was illegally dismissed.
We reiterate this policy which stresses the importance of deciding cases on the basis of their substantive
merit and not on strict technical rules. In the case at bar, the judgment involved is more than P17 million
and its precipitate execution can adversely affect the existence of petitioner medical center. Likewise, the
issues involved are not insignificant and they deserve a full discourse by our quasi-judicial and judicial
authorities. We are also confident that the real property bond posted by the petitioners sufficiently protects
the interests of private respondents should they finally prevail. It is not disputed that the real property
offered by petitioners is worth P102,345,650. The judgment in favor of private respondent is only a little
more than P17 million.
Phil. Tranco Services vs. NLRC, G.R. No. 124100, April 1, 1998
Facts: Nieva was employed as a driver by petitioner assigned to the Legaspi City-Pasay City route.
Nieva sideswiped an owner-type jeep and a criminal complaint was filed against him. Philtranco posted a
bail bond for Nieva. After having been suspended, he was told to wait until his case was settled. The
case was finally settled he was requested to file a new application as he was no longer considered an
employee of Philtranco, allegedly for being absent without leave from October 19 to November 20, 1989.
Nieva filed a complaint for illegal dismissal and demanded for 13th month pay with the NLRCs National
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Capital Region Arbitration Branch in Manila. Philtranco filed a motion to dismiss on the ground of
improper venue, stating that the complaint should have been lodged with the NLRCs Regional
Arbitration Branch in Legaspi City, not only because Nieva was a resident thereof, but also because the
latter was hired, assigned, and based in Legaspi City.
Issue: WON NLRCs NCR Arbitration Branch in Manila was a proper venue for the filing of Nievas
complaints for illegal dismissal.
Ruling: The filing of the complaint with the National Capital Region Arbitration Branch was proper,
Manila being considered as part of Nievas workplace by reason of his plying the Legaspi City-Pasay City
route. In fact, Section 1(a), Rule IV of the New Rules of Procedure of the NLRC is merely permissive.
Provisions on venue are intended to assure convenience for the employee and his witnesses and to
promote the ends of justice provided that it is not oppressive to the employer.

St. Martin Funeral Homes vs. NLRC, G.R. No. 130866, September 16, 1998
Facts: Private respondent alleges that he started working as Operations Manager of petitioner St. Martin
Funeral Home on February 6, 1995. Petitioner on the other hand claims that private respondent was not its
employee but only the uncle of Amelita Malabed, the owner of petitioner St. Martin's Funeral Home.
When the mother of Amelita passed away, the latter then took over the management of the business and
made some changes in the business operation and private respondent and his wife were no longer allowed
to participate in the management thereof. As a consequence, the latter filed a complaint charging that
petitioner had illegally terminated his employment.
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The labor arbiter rendered a decision in favor of petitioner declaring that no employer-employee
relationship existed between the parties and, therefore, his office had no jurisdiction over the case.
On June 13, 1997, the NLRC rendered a resolution setting aside the questioned decision and remanding
the case to the labor arbiter for immediate appropriate proceedings. Petitioner then filed a motion for
reconsideration which was denied by the NLRC in its resolution dated August 18, 1997 for lack of merit.
Issue: WON the Court has the power to review decisions of the NLRC.
Ruling: When the issue was raised in an early case on the argument that this Court has no jurisdiction to
review the decisions of the NLRC, and formerly of the Secretary of Labor, since there is no legal
provision for appellate review thereof, the Court nevertheless rejected that thesis. It held that there is an
underlying power of the courts to scrutinize the acts of such agencies on questions of law and jurisdiction
even though no right of review is given by statute; that the purpose of judicial review is to keep the
administrative agency within its jurisdiction and protect the substantial rights of the parties; and that it is
that part of the checks and balances which restricts the separation of powers and forestalls arbitrary and
unjust adjudications.
Pursuant to such ruling, and as sanctioned by subsequent decisions of this Court, the remedy of the
aggrieved party is to timely file a motion for reconsideration as a precondition for any further or
subsequent remedy, and then seasonably avail of the special civil action of certiorari under Rule 65, for
which said Rule has now fixed the reglementary period of sixty days from notice of the decision.
Curiously, although the 10-day period for finality of the decision of the NLRC may already have lapsed
as contemplated in Section 223 of the Labor Code, it has been held that this Court may still take
cognizance of the petition for certiorari on jurisdictional and due process considerations if filed within the
reglementary period under Rule 65.
Sec. 9.Jurisdiction. The Court of Appeals shall exercise: (3) Exclusive appellate jurisdiction over all final
judgments, decisions, resolutions, orders or awards of Regional Trial Courts and quasi-judicial agencies,
instrumentalities, boards or commissions, including the Securities and Exchange Commission, the Social
Security Commission, the Employees Compensation Commission and the Civil Service Commission,
except those falling within the appellate jurisdiction of the Supreme Court in accordance with the
Constitution, the Labor Code of the Philippines under Presidential Decree No. 442, as amended, the
provisions of this Act, and of subparagraph (1) of the third paragraph and subparagraph (4) of the fourth
paragraph of Section 17 of the Judiciary Act of 1948.

Ludo &Luym Corp. vs. Soarnido, G.R. No. 140960, January 20, 2003
Facts: LUDO engaged the arrastre services of Cresencio Lu Arrastre Services (CLAS) for the loading
and unloading of its finished products at the wharf. Accordingly, several arrastre workers were deployed
by CLAS to perform the services needed by LUDO. These arrastre workers were subsequently hired, on
different dates, as regular rank-and-file employees of LUDO every time the latter needed additional
manpower services. Said employees thereafter joined respondent union, the LUDO Employees Union
(LEU), which acted as the exclusive bargaining agent of the rank-and-file employees. Respondent union
entered into a collective bargaining agreement with LUDO which provides certain benefits to the
employees, the amount of which vary according to the length of service rendered by the availing
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employee. Thereafter, the union requested LUDO to include in its members period of service the time
during which they rendered arrastre services to LUDO through the CLAS so that they could get higher
benefits. LUDO failed to act on the request. Thus, the matter was submitted for voluntary arbitration.
Voluntary Arbitrator ruled that: (1) the respondent employees were engaged in activities necessary and
desirable to the business of petitioner, and (2) CLAS is a labor-only contractor of petitioner. The Court of
Appeals affirmed in toto the decision of the Voluntary Arbitrator. Petitioner contends that the appellate
court erred when it upheld the award of benefits which were beyond the terms of submission agreement
and that the arbitrator must confine its adjudication to those issues submitted by the parties for arbitration,
which in this case is the sole issue of the date of regularization of the workers. Hence, the award of
benefits by the arbitrator was done in excess of jurisdiction.
Issue: WON the appellate court gravely erred when it upheld the award of benefits which were beyond
the terms of submission agreement.
Ruling: Generally, the arbitrator is expected to decide only those questions expressly delineated by the
submission agreement. Nevertheless, the arbitrator can assume that he has the necessary power to make a
final settlement since arbitration is the final resort for the adjudication of disputes.13 The succinct
reasoning enunciated by the CA in support of its holding, that the Voluntary Arbitrator in a labor
controversy has jurisdiction to render the questioned arbitral awards, deserves our concurrence, thus: In
general, the arbitrator is expected to decide those questions expressly stated and limited in the submission
agreement. However, since arbitration is the final resort for the adjudication of disputes, the arbitrator can
assume that he has the power to make a final settlement. Thus, assuming that the submission empowers
the arbitrator to decide whether an employee was discharged for just cause, the arbitrator in this instance
can reasonable assume that his powers extended beyond giving a yes-or-no answer and included the
power to reinstate him with or without back pay.

Hansin Engineering & Construction vs. CA, G.R. No. 165910, April 10, 2006
Facts: Hanjin is a construction company that had been contracted by the Philippine Government for the
construction of various foreign-financed projects. Hanjin and the Philippine Government entered into
contracts for the construction of the Malinao Dam at Pilar, Bohol, with a projected completion period of
1,050 calendar days, including main canal and lateral projects for 750 days. From August 1995 to August
1996, Hanjin contracted the services of 712 carpenters, masons, truck drivers, helpers, laborers, heavy
equipment operators, leadmen, engineers, steelmen, mechanics, electricians and others. In April 1998, 712
employees filed complaints for illegal dismissal and for payment of benefits against petitioners, before the
NLRC. The complainants averred that they were regular employees of Hanjin and that they were
separated from employment without any lawful or just cause. Only 521 of the complainants affixed their
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signatures in the complaints. Petitioners alleged that the complainants were mere project employees in its
Bohol Irrigation Project and that 2 of the workers were charged with qualified theft before the RTC. Some
of the complainants had already migrated to USA or had died, while 117 of them were still under the
employ of Hanjin. Petitioner stated that some of the complainants had voluntarily resigned; 14 were
absent without prior approved leave; 15 had signed a Motion to Withdraw from the complaint; and many
of the complainants were separated on account of the completion of the project. However, petitioners
failed to append any document to support their claim. Labor Arbiter rendered judgment in favor of the
428 complainants, granting separation pay and attorney's fees to each of them stating that the
complainants were regular employees of petitioner and their claims for underpayment, holiday pay,
premium pay for holiday and rest day, 13th month pay, and service incentive leave would be computed
after sufficient data were made available. Petitioners appealed the decision to the NLRC, which affirmed
with modification the Labor Arbiter's ruling. Petitioners filed a Motion for the Reconsideration of the
decision (with a motion to conduct clarificatory hearings) NLRC partially granted petitioners' motion.
Unsatisfied, petitioners filed a Petition for Certiorari under Rule 65 of the Revised Rules of Court in the
CA. CA dismissed the petition and affirmed the NLRC's ruling that the dismissed employees were
regular employees. The CA stressed that petitioners failed to refute the claim of the respondents that they
were regular employees. Petitioners moved to reconsider the decision, which the CA denied.
Issue: WON respondents are project employees.
Ruling: While respondent alleged that "complainants all signed a contract of employment at the time they
were hired indicating therein the particular project they will be working on, the period and other
conditions provided in their contracts which complainants fully knew and understood," nowhere in the
records can the said contracts be found. Moreover, let it be stressed that under DO No. 19, Series of 1993
on project employment, six (6) indicators are enumerated therein and one of which is that: "(T)he
termination of his employment in the particular project/undertaking is reported to the Department of
Labor and Employment (DOLE) Regional Office having jurisdiction over the workplace within 30 days
following the date of his separation from work x x x."
In this particular case, the records do not show that a similar report was ever made by respondent to the
Department of Labor and Employment. Such failure of respondent employer to report to the nearest
employment office of the Department of Labor, the termination of the workers it claimed as project
employees at the time it completed the project, is proof that complainants were not project employees.
The principal test for determining whether particular employees are properly characterized as project
employees is: whether or not the project employees were assigned to carry out a specific project or
undertaking, the duration of which were specified at the time the employees were engaged for that
project. Predetermination of the duration or period of project employment is essential in resolving
whether one is a project employee or not. In the instant case, the completion of the project for which the
complainants were hired was not determined at the start of their employment, there being no substantial
proof thereof. The fact that complainants had rendered more than one year of service at the time of their
dismissal and there being no substantial evidence to support that they were engaged to work on a specific
project or undertaking, overturns respondents allegation that complainants were project employees hired
for a specific fixed project for a limited period of time.
Complainants herein were, therefore, non-project employees, but regular employees. Admittedly, being a
duly licensed contractor firm in the Philippines, respondent is the awardee of several construction projects
12

and in many occasions it has been given the priority in the awarding of subsequent projects. In the light of
the above facts and circumstances, the respondent's main defense that completion of the project worked
on by the complainants constitute a valid cause of termination is unsustainable. To repeat, there is no
substantial evidence on record to sustain this contention. The mere allegation of the respondents that
under their employment contracts the complainants were made to understand that they were project
employees is definitely not persuasive or unworthy of credence. The best evidence of which would have
been the alleged contracts. These employees signed duly notarized waivers/quitclaims and who did not
recant later. In the absence of evidence showing the contrary, said quitclaims were executed voluntarily
and without any force or intimidation.
Petitioners submitted to the NLRC dubious machine copies of only some of respondents? contracts,
including alleged employment termination reports submitted to the DOLE. The NLRC found the contracts
barren of probative weight and utterly insufficient to buttress the contention of petitioners that
respondents were only project employees.
Contrary to the representation of respondent's counsel, the original copies of the reports made to DOLE
were never produced and submitted to this Commission. Neither were they presented for comparison with
the machine copies. These machine copies were not also certified as true copies by the DOLE. The actual
continuous employment of complainants by respondent Hanjin since 1991 until 1995 overcomes the
piecemeal "appointments" covering for periods of six (6) months or less. From these short term but
repeated "appointments," it is apparent that the periods have been imposed to preclude the acquisition of
tenurial security by the employee and which kind of employment contracts should be disregarded for
being contrary to public policy.
The appellate court, the NLRC and the Labor Arbiter are thus one in finding that respondents were not
project employees, and in sustaining respondents' claim of illegal dismissal due to petitioners? failure to
adduce contrary evidence. Well-settled is the rule that findings of fact of quasi-judicial agencies, like the
NLRC, are accorded not only respect but at times even finality if such findings are supported by
substantial evidence. Such findings of facts can only be set aside upon showing of grave abuse of
discretion, fraud or error of law, none of which have been shown in this case.

Phil. Journalist Inc. vs. NLRC, G.R. No. 166421, Sept. 5, 2006
Facts: The Philippine Journalists, Inc. (PJI) is a domestic corporation engaged in the publication and sale
of newspapers and magazines. The exclusive bargaining agent of all the rank-and-file employees in the
company is the Journal Employees Union (Union for brevity). Sometime in April 2005, the Union filed a
notice of strike before the National Conciliation and Mediation Board (NCMB), claiming that PJI was
guilty of unfair labor practice. PJI was then going to implement a retrenchment program due to overstaffing or bloated work force and continuing actual losses sustained by the company for the past three
years resulting in negative stockholders equity of P127.0 million. The Secretary of the Department of
Labor and Employment (DOLE) certified the labor dispute to the National Labor Relations Commission
(NLRC) for compulsory arbitration pursuant to Article 263 (g) of the Labor Code.
The parties were required to submit their respective position papers. PJI filed a motion to dismiss,
contending that the Secretary of Labor had no jurisdiction to assume over the case and thus erred in
13

certifying it to the Commission. The NLRC denied the motion. PJI, thereafter, filed a Motion to Defer
Further Proceedings, alleging, among others, that the filing of its position paper might jeopardize attempts
to settle the matter extrajudicially, which the NLRC also denied. The case was, thereafter, submitted for
decision wherein it adjudged PJI liable in the total amount of P6,447,008.57.
Thereafter, the parties executed a Compromise Agreement dated July 9, 2001, where PJI undertook to
reinstate the 31 complainant-employees effective July 1, 2001 without loss of seniority rights and
benefits; 17 of them who were previously retrenched were agreed to be given full and complete payment
of their respective monetary claims, while 14 others would be paid their monetary claims minus what they
received by way of separation pay. The agreement stated that the parties entered the agreement [i]n a
sincere effort at peace and reconciliation as well as to jointly establish a new era in labor management
relations marked by mutual trust, cooperation and assistance, enhanced by open, constant and sincere
communication with a view of advancing the interest of both the company and its employees. The
compromise agreement was submitted to the NLRC for approval. All the employees mentioned in the
agreement and in the NLRC Resolution affixed their signatures thereon. They likewise signed the Joint
Manifesto and Declaration of Mutual Support and Cooperation.
Issue: WON an NLRC Resolution, which includes a pronouncement that the members of a union had
been illegally dismissed, is abandoned or rendered moot and academic by a compromise agreement
subsequently entered into between the dismissed employees and the employer; this, in turn, raises the
question of whether such a compromise agreement constitutes res judicata to a new complaint later filed
by other union members-employees, not parties to the agreement, who likewise claim to have been
illegally dismissed.
Ruling: The petition is denied. The nature of a compromise is spelled out in Article 2028 of the New
Civil Code: it is a contract whereby the parties, by making reciprocal concessions, avoid litigation or put
an end to one already commenced. Parties to a compromise are motivated by the hope of gaining,
balanced by the dangers of losing. It contemplates mutual concessions and mutual gains to avoid the
expenses of litigation, or, when litigation has already begun, to end it because of the uncertainty of the
result. Article 227 of the Labor Code of the Philippines authorizes compromise agreements voluntarily
agreed upon by the parties, in conformity with the basic policy of the State 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. As the Court held in Reformist Union of
R.B. Liner, Inc. v. NLRC, the provision bestows finality to unvitiated compromise agreements,
particularly if there is no allegation that either party did not comply with what was incumbent upon them
under the agreement. The provision reads:
ART. 227 Compromise Agreements. Any compromise settlement, including those involving labor
standard laws, voluntarily agreed upon by the parties with the assistance of the Bureau or the regional
office of the Department of Labor, shall be final and binding upon the parties. The National Labor
Relations Commission or any court shall not assume jurisdiction over issues involved therein except in
case of noncompliance thereof or if there is prima facie evidence that the settlement was obtained through
fraud, misrepresentation, or coercion. Thus, a judgment rendered in accordance with a compromise
agreement is not appealable, and is immediately executory unless a motion is filed to set aside the
agreement on the ground of fraud, mistake, or duress, in which case an appeal may be taken against the
order denying the motion. Under Article 2037 of the Civil Code, a compromise has upon the parties the
14

effect and authority of res judicata, even when effected without judicial approval; and under the principle
of res judicata, an issue which had already been laid to rest by the parties themselves can no longer be
relitigated.
In AFP Mutual Benefit Association, Inc. v. Court of Appeals, the Court spelled out the distinguishing
features of a compromise agreement that is basically intended to resolve a matter already in litigation, or
what is normally termed as a judicial compromise. The Court held that once approved, the agreement
becomes more than a mere contract binding upon the parties, considering that it has been entered as the
courts determination of the controversy and has the force and effect of any other judgment. The Court
went on to state: Adjective law governing judicial compromises annunciate that once approved by the
court, a judicial compromise is not appealable and it thereby becomes immediately executory but this rule
must be understood to refer and apply only to those who are bound by the compromise and, on the
assumption that they are the only parties to the case, the litigation comes to an end except only as regards
to its compliance and the fulfillment by the parties of their respective obligations thereunder. The reason
for the rule, said the Court in Domingo v. Court of Appeals [325 Phil. 469], is that when both parties so
enter into the agreement to put a close to a pending litigation between them and ask that a decision be
rendered in conformity therewith, it would only be natural to presume that such action constitutes an
implicit waiver of the right to appeal against that decision. The order approving the compromise
agreement thus becomes a final act, and it forms part and parcel of the judgment that can be enforced by a
writ of execution unless otherwise enjoined by a restraining order.
Thus, contrary to the allegation of petitioners, the execution and subsequent approval by the NLRC of the
agreement forged between it and the respondent Union did not render the NLRC resolution ineffectual,
nor rendered it moot and academic. The agreement becomes part of the judgment of the court or
tribunal, and as a logical consequence, there is an implicit waiver of the right to appeal.
In any event, the compromise agreement cannot bind a party who did not voluntarily take part in the
settlement itself and gave specific individual consent. It must be remembered that a compromise
agreement is also a contract; it requires the consent of the parties, and it is only then that the agreement
may be considered as voluntarily entered into.
The case of Golden Donuts, Inc. v. National Labor Relations Commission, which petitioners erroneously
rely upon, is instructive on this point. The Court therein was confronted with the following questions: x x
x (1) whether or not a union may compromise or waive the rights to security of tenure and money claims
of its minority members, without the latters consent, and (2) whether or not the compromise agreement
entered into by the union with petitioner company, which has not been consented to nor ratified by
respondents minority members has the effect of res judicata upon them.
Speaking through Justice Reynato C. Puno, the Court held that pursuant to Section 23, Rule 138 of the
then 1964 Revised Rules of Court, a special authority is required before a lawyer may compromise his
clients litigation; thus, the union has no authority to compromise the individual claims of members who
did not consent to the settlement. The Court also stated that the authority to compromise cannot lightly
be presumed and should be duly established by evidence, and that a compromise agreement is not valid
when a party in the case has not signed the same or when someone signs for and in behalf of such party
without authority to do so; consequently, the affected employees may still pursue their individual claims
against their employer. The Court went on to state that a judgment approving a compromise agreement
cannot have the effect of res judicata upon non-signatories since the requirement of identity of parties is
not satisfied. A judgment upon a compromise agreement has all the force and effect of any other
15

judgment, and, conclusive only upon parties thereto and their privies, hence, not binding on third persons
who are not parties to it.
A careful perusal of the wordings of the compromise agreement will show that the parties agreed that the
only issue to be resolved was the question of the monetary claim of several employees. The agreement
was later approved by the NLRC. The case was considered closed and terminated and the Resolution
dated May 31, 2001 fully implemented insofar as the employees mentioned in paragraphs 2c and 2d of
the compromise agreement were concerned. Hence, the CA was correct in holding that the compromise
agreement pertained only to the monetary obligation of the employer to the dismissed employees, and
in no way affected the Resolution in NCMB-NCR-NS-03-087-00 dated May 31, 2001 where the NLRC
made the pronouncement that there was no basis for the implementation of petitioners retrenchment
program. To reiterate, the rule is that when judgment is rendered based on a compromise agreement, the
judgment becomes immediately executory, there being an implied waiver of the parties right to appeal
from the decision. The judgment having become final, the Court can no longer reverse, much less modify
it.

Balagtas Multi Purpose Coop. vs. CA, G.R. No. 159268, Oct. 27, 2006
Facts: Balagtas Multi-Purpose Cooperative, Inc. is a duly organized and existing cooperative under the
laws of the Philippines. Sometime in April 1991, Balagtas hired Josefina G. Hipolito-Herrero, as part time
manager in its office. Subsequently, Josefina made known of her intention to take a leave of absence. Her
proposal was immediately approved. However, after the lapse of her leave of absence, Josefina did not
report for work anymore. Later on, she filed her resignation. Consequently Josefina filed a complaint with
the Provincial Office of the Department of Labor in Malolos, Bulacan for illegal dismissal, and nonpayment of 13th month pay or Christmas Bonus. She also prayed for reinstatement and paid backwages as
well as moral damages. The Labor Arbiter rendered judgment in favor of complainant and against
respondents and ordered the latter to pay the former 13th month pay, backwages and separation pay.
Aggrieved, herein petitioners appealed the decision to NLRC but failed to post either a cash or surety
bond as required by Article 223 of the Labor Code. They filed a manifestation and motion instead, stating,
that under Republic Act No. 6938, Article 62(7) of the Cooperative Code of the Philippines, petitioners
are exempt from putting up a bond in an appeal from the decision of the inferior court. NLRC ordered
16

respondents to post a cash or surety bond in the amount of P218,000.00, within 10 inextendible days from
receipt of the Order, failure of which shall constitute a waiver and non-perfection of the appeal. Balagtas
appealed to CA, which dismissed the petition holding that the exemption from putting up a bond by a
cooperative applies to cases decided by inferior courts only.
Issues:
1. WON cooperatives are exempted from filing a cash or surety bond required to perfect an
employers appeal under Section 223 of Presidential Decree No. 442 (the Labor Code);
2. WON a certification issued by the Cooperative Development Authority constitutes substantial
compliance with the requirement for the posting of a bond.
Ruling:
1. No. Petitioners argue that there are certain benefits and privileges expressly granted to
cooperative under the Cooperative Code. It invoked the provision on Article 62 regarding the
exemption from payment of an appeal bond, to wit: (7)All cooperatives shall be exempt from
putting up a bond for bringing an appeal against the decision of an inferior court or for seeking to
set aside any third party claim: Provided, That a certification of the Authority showing that the net
assets of the cooperative are in excess of the amount of the bond required by the court in similar
cases shall be accepted by the court as a sufficient bond.
However, it is only one among a number of such privileges which appear under the article entitled Tax
and Other Exemptions of the code. The provision cited by petitioners cannot be taken in isolation and
must be interpreted in relation to the Cooperative Code in its entirety. Exceptions are to be strictly but
reasonably construed; they extend only so far as their language warrants, and all doubts should be
resolved in favor of the general provision rather than the exceptions.
2. No. Article 119 of the Cooperative Code itself expressly embodies the legislative intention to
extend the coverage of labor statutes to cooperatives. For this reason, petitioners must comply
with the requirement set forth in Article 223 of the Labor Code in order to perfect their appeal to
the NLRC. It must be pointed out that the right to appeal is not a constitutional, natural or
inherent right. It is a privilege of statutory origin and, therefore, available only if granted or
provided by statute. The law may validly provide limitations or qualifications thereto or relief to
the prevailing party in the event an appeal is interposed by the losing party.
In this case, the obvious and logical purpose of an appeal bond is to insure, during the period of appeal,
against any occurrence that would defeat or diminish recovery by the employee under the judgment if the
latter is subsequently affirmed.
Therefore, no error can be ascribed to the CA for holding that the phrase inferior courts appearing in
Article 62 paragraph (7) of the Cooperative Code does not extend to quasi-judicial agencies and that,
petitioners are not exempt from posting the appeal bond required under Article 223 of the Labor Code.

DOLE Phils. Vs. Esteva, G.R. No. 161115, Nov. 30, 2006
Facts: Petitioner is a corporation engaged principally in the production and processing of pineapple for
the export market. Respondents are members of the Cannery Multi-Purpose Cooperative (CAMPCO).
CAMPCO was organized in accordance with Republic Act No. 6938, otherwise known as the Cooperative
17

Code of the Philippines. Pursuant to the Service Contract, CAMPCO members rendered services to
petitioner. The number of CAMPCO members that report for work and the type of service they
performed depended on the needs of petitioner at any given time. Although the Service Contract
specifically stated that it shall only be for a period of six months, i.e., from 1 July to 31 December 1993,
the parties had apparently extended or renewed the same for the succeeding years without executing
another written contract. It was under these circumstances that respondents came to work for petitioner.
DOLE organized a Task Force that conducted an investigation into the alleged labor-only contracting
activities of the cooperatives. The Task Force identified six cooperatives that were engaged in labor-only
contracting, one of which was CAMPCO. In this case, respondents alleged that they started working for
petitioner at various times in the years 1993 and 1994, by virtue of the Service Contract executed between
CAMPCO and petitioner. All of the respondents had already rendered more than one year of service to
petitioner. While some of the respondents were still working for petitioner, others were put on stay
home status on varying dates in the years 1994, 1995, and 1996 and were no longer furnished with work
thereafter. Together, respondents filed a Complaint with the NLRC for illegal dismissal, regularization,
wage differentials, damages and attorneys fees. Petitioner denied that respondents were its employees. It
explained that it found the need to engage external services to augment its regular workforce, which was
affected by peaks in operation, work backlogs, absenteeism, and excessive leaves. It used to engage the
services of individual workers for definite periods specified in their employment contracts and never
exceeding one year. However, such an arrangement became the subject of a labor case, in which
petitioner was accused of preventing the regularization of such workers.
Issues:
WON the court of appeals was correct when it made its own factual findings and disregarded the
factual findings of the labor arbiter and the NLRC.
WON CAMPCO was a mere labor-only contractor.
Ruling: The Court in the exercise of its equity jurisdiction may look into the records of the case and reexamine the questioned findings. As a corollary, this Court is clothed with ample authority to review
matters, even if they are not assigned as errors in their appeal, if it finds that their consideration is
necessary to arrive at a just decision of the case. The same principles are now necessarily adhered to and
are applied by the Court of Appeals in its expanded jurisdiction over labor cases elevated through a
petition for certiorari; thus, we see no error on its part when it made anew a factual determination of the
matters and on that basis reversed the ruling of the NLRC.
On the second issue, CAMPCO was a mere labor-only contractor. First, although petitioner touts the
multi-million pesos assets of CAMPCO, it does well to remember that such were amassed in the years
following its establishment. In 1993, when CAMPCO was established and the Service Contract between
petitioner and CAMPCO was entered into, CAMPCO only had P6,600.00 paid-up capital, which could
hardly be considered substantial. It only managed to increase its capitalization and assets in the
succeeding years by continually and defiantly engaging in what had been declared by authorized DOLE
officials as labor-only contracting. Second, CAMPCO did not carry out an independent business from
petitioner. It was precisely established to render services to petitioner to augment its workforce during
peak seasons. Petitioner was its only client. Even as CAMPCO had its own office and office equipment,
these were mainly used for administrative purposes; the tools, machineries, and equipment actually used
by CAMPCO members when rendering services to the petitioner belonged to the latter. Third, petitioner
18

exercised control over the CAMPCO members, including respondents. Petitioner attempts to refute
control by alleging the presence of a CAMPCO supervisor in the work premises. Yet, the mere presence
within the premises of a supervisor from the cooperative did not necessarily mean that CAMPCO had
control over its members. Section 8(1), Rule VIII, Book III of the implementing rules of the Labor Code,
as amended, required for permissible job contracting that the contractor undertakes the contract work on
his 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. As alleged by the respondents, and unrebutted by petitioner, CAMPCO
members, before working for the petitioner, had to undergo instructions and pass the training provided by
petitioners personnel. It was petitioner who determined and prepared the work assignments of the
CAMPCO members. CAMPCO members worked within petitioners plantation and processing plants
alongside regular employees performing identical jobs, a circumstance recognized as an indicium of a
labor-only contractorship. Fourth, CAMPCO was not engaged to perform a specific and special job or
service. In the Service Contract of 1993, CAMPCO agreed to assist petitioner in its daily operations, and
perform odd jobs as may be assigned. CAMPCO complied with this venture by assigning members to
petitioner. Apart from that, no other particular job, work or service was required from CAMPCO, and it
is apparent, with such an arrangement, that CAMPCO merely acted as a recruitment agency for
petitioner. Since the undertaking of CAMPCO did not involve the performance of a specific job, but
rather the supply of manpower only, CAMPCO clearly conducted itself as a labor-only contractor. Lastly,
CAMPCO members, including respondents, performed activities directly related to the principal business
of petitioner. They worked as can processing attendant, feeder of canned pineapple and pineapple
processing, nata de coco processing attendant, fruit cocktail processing attendant, and etc., functions
which were, not only directly related, but were very vital to petitioners business of production and
processing of pineapple products for export. The declaration that CAMPCO is indeed engaged in the
prohibited activities of labor-only contracting, then consequently, an employer-employee relationship is
deemed to exist between petitioner and respondents, since CAMPCO shall be considered as a mere agent
or intermediary of petitioner. Since respondents are now recognized as employees of petitioner, this Court
is tasked to determine the nature of their employment. In consideration of all the attendant circumstances
in this case, this Court concludes that respondents are regular employees of petitioner. As such, they are
entitled to security of tenure. They could only be removed based on just and authorized causes as
provided for in the Labor Code, as amended, and after they are accorded procedural due process.
Therefore, petitioners acts of placing some of the respondents on stay home status and not giving them
work assignments for more than six months were already tantamount to constructive and illegal dismissal.
Intercontinental Broadcasting Corp. vs. Panganiban, G.R. No. 151407, Februarry 6, 2007
Facts: Ireneo Panganiban (respondent) was employed as Assistant
General Manager of the
Intercontinental Broadcasting Corporation (petitioner) from May 1986 until his preventive suspension on
August 26, 1988. Respondent resigned from his employment on September 2, 1988.
On April 12, 1989, respondent filed a civil case with the RTC of Quezon City, Branch 93 against the
members of the Board of Administrators (BOA) of petitioner alleging, among others, non-payment of his
unpaid commissions. A motion to dismiss was filed by Joselito Santiago, one of the defendants, on the
ground of lack of jurisdiction, as respondent's claim was a labor money claim, but this was denied by the
RTC. Thus, Santiago filed a petition for certiorari with the CA which granted Santiago's petition for lack
19

of jurisdiction and set aside the RTC's Orders. Thereafter, respondent was elected by the BOA as VicePresident for Marketing in July 1992. He resigned in April 1993. On July 24, 1996, respondent filed
against petitioner a complaint for illegal dismissal, separation pay, retirement benefits, unpaid
commissions, and damages. The Labor Arbiter (LA) ordered respondent's reinstatement with full
backwages, and the payment of his unpaid commission, damages and attorney's fees. Petitioner appealed
to the NLRC but due to petitioner's failure to post a bond, the appeal was dismissed. The decision was
deemed final and executory.
Issue: WON respondent's claim for unpaid commissions has already prescribed.
Ruling: Yes. Respondent's claim had already prescribed as of September 1991. In addition, the claims of
private respondent for reinstatement, backwages and benefits in conjunction with his employment from
1986 to 1988 have prescribed. The applicable law in this case is Article 291 of the Labor Code which
provides that "all money claims arising from employer-employee relations accruing during the effectivity
of this Code shall be filed within three (3) years from the time the cause of action accrued; otherwise they
shall be forever barred."
The term "money claims" covers all money claims arising from an employer-employee relation the
prescription of an action is interrupted by (a) the filing of an action, (b) a written extrajudicial demand by
the creditor, and (c) a written acknowledgment of the debt by the debtor. On this point, the Court ruled
that although the commencement of a civil action stops the running of the statute of prescription or
limitations, its dismissal or voluntary abandonment by plaintiff leaves the parties in exactly the same
position as though no action had been commenced at all. Hence, while the filing of Civil Case could have
interrupted the running of the three-year prescriptive period, its consequent dismissal by the CA due to
lack of jurisdiction effectively canceled the tolling of the prescriptive period within which to file his
money claim, leaving respondent in exactly the same position as though no civil case had been filed at all.
The running of the three-year prescriptive period not having been interrupted by the filing of Civil Case
respondent's cause of action had already prescribed on September 2, 1991, three years after his cessation
of employment on September 2, 1988. Consequently, when respondent filed his complaint for illegal
dismissal, separation pay, retirement benefits, and damages in July 24, 1996, his claim, clearly, had
already been barred by prescription.
Far East Agricultural Supply vs. Lebatigue, G.R. No. 162813, February 12, 2007
Facts: Petitioner Far East Agricultural Supply hired private respondent Jimmy Lebatique as truck driver
tasked to deliver animal feeds. On January 24, 2000, Lebatique complained of nonpayment of overtime
work particularly on January 22, 2000, when he was required to make a second delivery in Novaliches.
That same day Lebatique was suspended apparently for illegal use of company vehicle. He reported for
work the next day but was prohibited from entering the company premises.
On January 26, 2000, Lebatique sought assistance concerning the nonpayment of his overtime pay.
According to him, two days later, he received a telegram from petitioners requiring him to report for
work. He reported for work on January 29, 2000 and was asked to explain why he was claiming overtime
pay. Later, Lebatique was terminated and was told to look for another job. On March 20, 2000, Lebatique
filed a complaint for illegal dismissal and nonpayment of overtime pay.
20

Issue: What is the prescriptive period for money claims?

Ruling: All money claims arising from an employer-employee relationship shall be filed within three
years from the time the cause of action accrued; otherwise, they shall be forever barred (Article 291,
LC). If it is established that the benefits being claimed have been withheld from the employee for a period
longer than three years, the amount pertaining to the period beyond the three-year prescriptive period is
therefore barred by prescription. The amount that can only be demanded by the aggrieved employee shall
be limited to the amount of the benefits withheld within three years before the filing of the complaint.
Lebatique timely filed his claim for service incentive leave pay, considering that in this situation, the
prescriptive period commences at the time he was terminated. On the other hand, his claim regarding
nonpayment of overtime pay since he was hired in March 1996 is a different matter. In the case of
overtime pay, he can only demand for the overtime pay withheld for the period within three years
preceding the filing of the complaint on March 20, 2000. However, we find insufficient the selected time
records presented by petitioners to compute properly his overtime pay. The Labor Arbiter should have
required petitioners to present the daily time records, payroll, or other documents in managements
control to determine the correct payment due to him.
It is immaterial that Lebatique had filed a complaint for nonpayment of overtime pay the day he was
suspended by managements unilateral act. What matters is that he filed the complaint for illegal
dismissal on March 20, 2000, after he was told not to report for work, and his filing was well within the
prescriptive period allowed under the law.

LETRAN CALAMBA FACULTY and EMPLOYEES ASSOCIATION, petitioner, vs. NATIONAL

LABOR RELATIONS COMMISSION and COLEGIO DE SANJUAN DE LETRAN CALAMBA,
INC.,respondent.
FACTS: On October 8, 1992, the Letran Calamba Faculty and Employees Association filed with
Regional Arbitration Branch No. IV of the NLRC a Complaint against Colegio de San Juan de Letran,
Calamba, Inc for collection of various monetary claims due its members. The complaint alleges among
many things, that in the computation for 13 th month pay of its academic personnel respondent does not
include as basis therefor their compensation for overloads, that respondent has not paid the wage increase,
the salary increase due to the non-academic personnel as a result of job grading has not been given, that
the acts of the respondent has resulted in diminution of benefits of the faculty members. In its position
paper, respondent denied all the allegations.
Prior to the filing of the above-mentioned complaint, petitioner filed a separate complaint against the
respondent for money claims with Regional Office No. IV of the Department of Labor and Employment
(DOLE). On the other hand, pending resolution in another NLRC case, responden school filed with
Regional Arbitration Branch No. IV of the NLRC a petition to declare as illegal the strike staged by
petitioner.
On September 28, 1998, the Labor Arbiter (LA) handling the consolidated cases rendered a Decision
dismissing the money claims and declaring the strike illegal. Upon appeal to the NLRC, the petition was
dismissed. Petitioner then availed of an action for certiorari with the CA but was also dismissed.
ISSUES:
21

1. Whether or nor the CA erred in holding that the factual findings of the NLRCcannot be revied in
certiorari proceedings?
2. Whether or not the teaching overload should be included in the basis in the computation of their
13th month pay?
RULING:
On the first issue
The Court finds no error in the ruling of the CA that since nowhere in the petition is there any acceptable
demonstration that the LA or the NLRC acted either with grave abuse of discretion or without or in excess
of its jurisdiction, the appellate court has no reason to look into the correctness of the evaluation of
evidence which supports the labor tribunals' findings of fact.
The findings of the Labor Arbiter, when affirmed by the NLRC and the CA, are binding on the Supreme
Court unless patently erroneous. Thus, in a petitioner for review on certiorari, this Courts jurisdiction is
limited to reviewing errors of law in the absence of any showing that the factual findings complained of
are devoid of support in the records or are glaringly erroneous.
In petitions for review on certiorari like the instant case, the Court invariably sustains the unanimous
factual findings of the LA, the NLRC and the CA, specially when such findings are supported by
substantial evidence and there is no cogent basis to reverse the same, as in this case.
On the second issue
Settled is the doctrine that when an administrative or executive agency renders an opinion or issues a
statement of policy, it merely interprets a pre-existing law and the administrative interpretation is at best
advisory for it is the courts that finally determine what the law means. Hence, while the DOLE order may
not be applicable, the Court finds that overload pay should be excluded from the computation of the 13 th
month pay of petitioners members.
In the same manner that payment for overtime work and work performed during special holidays is
considered as additional compensation apart and distinct from an employee's regular wage or basic salary,
an overload pay, owing to its very nature and definition, may not be considered as part of a teacher's
regular or basic salary, because it is being paid for additional work performed in excess of the regular
teaching load.

Metro Transit Organization vs. Piglas NFWU-KMU et al., G.R. No. 175460, April 14, 2008
Facts: Petitioner Metro Transit Organization, Inc. (MTO) is a government owned and controlled
corporation which entered into a Management and Operations Agreement (MOA) with the Light Rail
Transit Authority (LRTA) for the operation of the Light Rail Transit (LRT) Baclaran-Monumento Line.
For purposes of collective bargaining agreement (CBA), petitioner MTOs rank and file employees
formed the Pinag-isang Lakas ng Manggagawa sa Metro, Inc.-National Federation of Labor (PIGLAS).
Petitioners MTO and PIGLAS entered into a CBA covering the period of 13 February 1995 to 13
February 2000. Thereafter, PIGLAS renegotiated the CBA demanding higher benefits.
On 25 July 2000, due to a bargaining deadlock, PIGLAS filed a Notice of Strike before the
National Conciliation and Mediation Board (NCMB).
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The striking PIGLAS members refused to accede to the Return to Work Order. Following their continued
non-compliance, on 28 July 2000, the LRTA formally informed petitioner MTO that it had issued a Board
Resolution which: (1) allowed the expiration after 31 July 2000 of LRTAs MOA with petitioner MTO;
and (2) directed the LRTA to take over the operations and maintenance of the LRT Line. By virtue of said
Resolution, petitioner MTO sent termination notices to its employees, including herein respondents.
Resultantly, respondents filed with the Labor Arbiter Complaints [4] against petitioners and the LRTA for
the following: (1) illegal dismissal; (2) unfair labor practice for union busting; (3) moral and exemplary
damages; and (4) attorneys fees.
On 13 September 2004, the Labor Arbiter rendered judgment in favor of respondents.
Petitioners appealed to the National Labor Relations Commission (NLRC). In a Resolution dated 19 May
2006, the NLRC dismissed petitioners appeal for non-perfection since it failed to post the required bond.
Without filing a Motion for Reconsideration of the afore-quoted NLRC Resolution, petitioners filed a
Petition for Certiorari with the Court of Appeals assailing the same.
They have not, however, filed a motion for reconsideration of the ruling prior to filing the petition. This
renders the petition fatally defective.
Issue: Whether or not the non-filing of motion of reconsideration to the NLRC is a ground for dismissal
of the appeal.
Held: We agree in the Court of Appeals finding that petitioners case does not fall under any of the
recognized exceptions to the filing of a motion for reconsideration, to wit: (1) when the issue raised is
purely of law; (2) when public interest is involved; (3) in case of urgency; or when the questions raised
are the same as those that have already been squarely argued and exhaustively passed upon by the lower
court. As the Court of Appeals reasoned, the issue before the NLRC is both factual and legal at the same
time, involving as it does the requirements of the property bond for the perfection of the appeal, as well as
the finding that petitioners failed to perfect the same. Evidently, the burden is on petitioners seeking
exception to the rule to show sufficient justification for dispensing with the requirement.
Certiorari cannot be resorted to as a shield from the adverse consequences of petitioners' own omission of
the filing of the required motion for reconsideration.
Nonetheless, even if we are to disregard the petitioners procedural faux pas with the Court of Appeals,
and proceed to review the propriety of the 19 May 2006 NLRC Resolution, we still arrive at the
conclusion that the NLRC did not err in denying petitioners appeal for its failure to file a bond in
accordance with the Rules of Procedure of the NLRC.
In cases involving a monetary award, an employer seeking to appeal the decision of the Labor Arbiter to
the NLRC is unconditionally required by Article 223of the Labor Code to post a cash or surety bond
equivalent to the amount of the monetary award adjudged. It should be stressed that the intention of
lawmakers to make the bond an indispensable requisite for the perfection of an appeal by the employer is
underscored by the provision that an appeal by the employer may be perfected only upon the posting of a
cash or surety bond. The word only makes it perfectly clear that the lawmakers intended the posting of
a cash or surety bond by the employer to be the exclusive means by which an employers appeal may be
perfected. Moreover, it bears stressing that the perfection of an appeal in the manner and within the
period prescribed by law is not only mandatory but jurisdictional, and failure to conform to the rules will
render the judgment sought to be reviewed final and unappealable. It cannot be overemphasized that the
23

NLRC Rules, akin to the Rules of Court, promulgated by authority of law, have the force and effect of
law.[
As borne by the records, petitioners filed a property bond which was conditionally accepted by the
NLRC subject to the following conditions specified in its 24 February 2006Order:
The conditional acceptance of petitioners property bond was subject to the submission of the following:
1) Certified copy of Board Resolution or a Certificate from the Corporate Secretary of Light Rail Transit
Authority stating that the Corporation President is authorized by a Board Resolution to submit title as
guarantee of judgment award; 2) Certified Copy of the Titles issued by the Registry of Deeds of Pasay
City; 3) Certified Copy of the current tax declarations of Titles; 4) Tax clearance from the City Treasurer
of Pasay City; 5) Appraisal report of an accredited appraisal company attesting to the fair market value of
property within ten (10) days from receipt of this Order. Failure to comply therewith will result in the
dismissal of the appeal for non-perfection thereof.

J. K. MERCADO & SONS AGRICULTURAL ENTERPRISES, INC., vs. STO. TOMAS

FACTS: On December 3, 1993, the Regional Tripartite Wages and Productivity Board, Region XI, issued
Wage Order No. RTWPB-XI-03, granting a Cost of Living Allowance (COLA) to covered workers.
On January 28, 1994, petitioner filed an application for exemption from the coverage of the aforesaid
wage order. Thus, however, was denied by the regional wage board in an Order dated April 11, 1994.
Notwithstanding the said order, private respondents were not given the benefits due them under Wage
Order No. RTWPB-XI-03. On July 10, 1998, private respondents filed an Urgent Motion for Writ of
Execution, and Writ of Garnishment seeking the enforcement of subject wage order against several
entities including herein petitioner. On October 7, 1998, the OIC-Regional Director, Region XI, issued a
Writ of Execution for the enforcement of the Order dated April 11, 1994 of the Regional Tripartite Wages
and Productivity Board. On November 17, 1998 and November 23, 1998, respectively, petitioner filed a
Motion to Quash the Writ of Execution and a Supplemental Motion to the Motion to Quash. Petitioner
argued that herein private respondents' right had already prescribed due to their failure to move for the
execution of the April 11, 1994 Order within the period provided under Article 291 of the Labor Code, as
amended, or within three (3) years from the finality of the said order.
Ruling that the benefits which remained unpaid have not prescribed and that the private respondents need
not file a claim to be entitled thereto, the Regional Director denied the Motion to Quash in an Order dated
January 7, 1999. Not satisfied with the denial of its motion to quash, petitioner filed a Notice of Appeal on
January 29, 1999. Petitioner argued on appeal that the Regional Director abused his discretion in issuing
the writ of execution since it was not a party to the case. Petitioner likewise argued that the Regional
Director abused his discretion in issuing the writ of execution in the absence of any motion filed by
private respondents. Petitioner likewise claimed that since more than three (3) years have already elapsed
24

from the time of the finality of the order dated April 11, 1994, the right of private respondents to claim the
benefits under the same had already prescribed.
However, the appeal to the CA was denied. On March 2, 2001, petitioner filed a Motion for
Reconsideration but the same was denied for lack of merit by public respondent in an Order dated March
14, 2002. Hence, this petition.
ISSUES: WON the claim of the private respondents for cost of living allowance (COLA) pursuant to
Wage Order No. RTWPB-XI-03 has already prescribed because of the failure of the respondents to make
the appropriate claim within the three (3) year prescriptive period provided by Article 291 of the Labor
Code, as amended.
WON a money claim must be filed first by private respondents against petitioner for the latter's
refusal to pay the COLA granted under WO.
RULING: Art. 291 of the Labor Code applies to money claims in general and provides for a 3-year
prescriptive period to file them. On the other hand, respondent employees' money claims in this case had
been reduced to a judgment, in the form of a Wage Order, which has become final and executory. The
prescription applicable, therefore, is not the general one that applies to money claims, but the specific one
applying to judgments. Thus, the right to enforce the judgment, having been exercised within five years,
has not yet prescribed. Stated otherwise, a claimant has three years to press a money claim. Once
judgment is rendered in her favor, she has five years to ask for execution of the judgment, counted from
its finality. This is consistent with the rule on statutory construction that a general provision should yield
to a specific one and with the mandate of social justice that doubts should be resolved in favor of labor.
Clearly, petitioner's contention is premised on the mistaken belief that the right of private
respondents to recover their wage differential or COLA under Wage Order No. 03 is still a contestable
issue. It must be emphasized that the order dated April 11, 1994 had long become final and executory.
Petitioner did not appeal the said order. Having failed to avail of the remedy of appeal of the said order,
petitioner cannot belatedly avoid its duty to comply with the said order by insisting that a money claim
must first be filed by herein private respondents. A contrary ruling would result to absurdity and would
even unjustly benefit petitioner who for quite sometime had exerted every effort to avoid the obligation of
giving the wage differential or COLA granted under Wage Order No. 3.

J. Phil. Marine Inc., vs. NLRC, G.R. No. 1753661, August 11, 2008
Facts: Warlito E. Dumalaog (respondent), who served as cook aboard vessels plying overseas, filed on
March 4, 2002 before the National Labor Relations Commission (NLRC) a pro-forma complaint 1 against
petitioners manning agency J-Phil Marine, Inc. (J-Phil), its then president Jesus Candava, and its
foreign principal Norman Shipping Services for unpaid money claims, moral and exemplary damages,
and attorneys fees. Respondent thereafter filed two amended pro forma complaints praying for the award
of overtime pay, vacation leave pay, sick leave pay, and disability/medical benefits, he having, by his
claim, contracted enlargement of the heart and severe thyroid enlargement in the discharge of his duties as
cook which rendered him disabled. Respondents total claim against petitioners was P864,343.30 plus
P117,557.60 representing interest and P195,928.66 representing attorneys fees. By Decision of August
29, 2003, Labor Arbiter Fe Superiaso-Cellan dismissed respondents complaint for lack of merit. On
appeal, the NLRC, by Decision of September 27, 2004, reversed the Labor Arbiters decision and
25

awarded US$50,000.00 disability benefit to respondent. It dismissed respondents other claims, however,
for lack of basis or jurisdiction. Petitioners Motion for Reconsideration having been denied by the
NLRC, they filed a petition for certiorari before the Court of Appeals. By Resolution of September 22,
2005, the Court of Appeals dismissed petitioners petition for, inter alia, failure to attach to the petition all
material documents, and for defective verification and certification. Petitioners Motion for
Reconsideration of the appellate courts Resolution was denied; hence, they filed the present Petition for
Review on Certiorari. During the pendency of the case before this Court, respondent, against the advice of
his counsel, entered into a compromise agreement with petitioners. He thereupon signed a Quitclaim and
Release subscribed and sworn to before the Labor Arbiter.
Issues: WON the compromise agreement is valid even without the intervention of the counsel.
Held: Yes. The compromise agreement is valid even without the intervention of the counsel.
Article 227 of the Labor Code provides: Any compromise settlement, including those involving labor
standard laws, voluntarily agreed upon by the parties with the assistance of the Department of Labor,
shall be final and binding upon the parties. The National Labor Relations Commission or any court shall
not assume jurisdiction over issues involved therein except in case of non-compliance thereof or if there
is prima facie evidence that the settlement was obtained through fraud, misrepresentation, or coercion.
That a client has undoubtedly the right to compromise a suit without the intervention of his lawyer cannot
be gainsaid, the only qualification being that if such compromise is entered into with the intent of
defrauding the lawyer of the fees justly due him, the compromise must be subject to the said fees. In the
case at bar, there is no showing that respondent intended to defraud his counsel of his fees. In fact, the
Quitclaim and Release, the execution of which was witnessed by petitioner J-Phils president Eulalio C.
Candava and one Antonio C. Casim, notes that the 20% attorneys fees would be "paid 12 April 2007
P90,000."

Sy vs. ALC Industries, G.R. No. 168339, October 10, 2008

Facts: Petitioner was hired by respondent corporation ALCII as a supervisor in its purchasing office. She
was thereafter assigned to ALCII's construction project in Davao City as business manager and supervisor
of the Administrative Division. Her Davao assignment was from May 1997 to April 15, 1999.
Petitioner alleged that respondents refused to pay her salary beginning August 1998 and
allowances beginning June 1998, despite her almost weekly verbal follow-up. Petitioner filed a complaint
before the labor arbiter for unpaid salaries and allowances. Despite several notices and warnings,
respondents did not file a position paper to controvert petitioner's claims. The case was submitted for
resolution based solely on petitioner's allegations and evidence.
In his June 30, 2000 decision, the labor arbiter ordered ALCII and/or Dexter Ceriales to pay
petitioner P282,560 representing her unpaid salary and allowance.
Respondents filed an appeal with motion for reduction of bond in the National Labor Relations
Commission (NLRC) without posting any cash or surety bond. In a resolution dated September 6, 2001,
the NLRC dismissed respondents' appeal. It ruled that respondents failed to adduce substantial evidence
to support their arguments of non-liability. Moreover, it found no justifiable reason to grant a reduction in
the required bond.
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Respondents were able to file a motion for reconsideration on time, accompanied by a joint
undertaking/declaration in lieu of the cash or surety bond. Nevertheless, respondents' motion for
reconsideration was denied.
On August 2, 2002, respondents filed a motion for clarification but this was likewise denied.
Respondents questioned the NLRC's denial of their motion for clarification and reconsideration in the CA
via a petition for certiorari and prohibition.
In its March 30, 2005 decision, the CA set aside the resolutions of the NLRC and the decision of
the labor arbiter and dismissed petitioner's complaint.
Issue: WON the decision of the Labor Arbiter has become final and executory.
Ruling:
Article 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 calendar days from
receipt of such decisions, awards, or orders. xxx.
In case of a judgment involving a monetary award, an appeal by the employer may be perfected only
upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the
Commission in the amount equivalent to the monetary award in the judgment appealed from. Section 1,
Rule VI of the Rules of Procedure of the NLRC, as amended, likewise provides that the appeal must be
filed within ten days from receipt of the decision, resolution or order of the labor arbiter. Moreover,
Section 6 of the same rules provides that an appeal by the employer may be perfected only upon the
posting of a cash or surety bond. As the right to appeal is merely a statutory privilege, it must be exercised
only in the manner and in accordance with the provisions of the law. Otherwise, the right to appeal is lost.
In a long line of cases, we have ruled that the payment of the appeal bond is a jurisdictional
requisite for the perfection of an appeal to the NLRC. The lawmakers intended to make the posting of a
cash or surety bond by the employer the exclusive means by which an employer's appeal may be
perfected. The rationale for this rule is: The requirement that the employer post a cash or surety bond to
perfect its/his appeal is apparently intended to assure the workers that if they prevail in the case, they will
receive the money judgment in their favor upon the dismissal of the employers' appeal. It was intended to
discourage employers from using an appeal to delay, or even evade, their obligation to satisfy their
employee's just and lawful claims. The explanation advanced by respondents for their failure to pay the
appeal bond belies their claim. The NLRC found that respondents did not pay the appeal bond on the
mistaken notion that they were not liable for the monetary award and had already ceased operations due
to bankruptcy. Respondents belatedly filed a bond with their motion for reconsideration of the NLRC's
dismissal of their appeal. We cannot countenance such flagrant disregard of established rules of procedure
on appeals.
Moreover, the filing of a joint undertaking/declaration, filed way beyond the ten-day
reglementary period for perfecting an appeal and as a substitute for the cash or surety bond, did not
operate to validate the lost appeal.
The decision of the labor arbiter therefore became final and executory for failure of respondents
to perfect their appeal within the reglementary period. Clearly, the CA no longer had jurisdiction to
entertain respondents' appeal from the labor arbiter's decision.
Respondents point out that we have occasionally allowed exceptions to mandatory and
jurisdictional requirements in the perfection of appeals, such as disregarding unintended lapses on the
27

basis of strong and compelling reasons. This is true. However, the obvious motive behind respondents'
plea for liberality is to thwart petitioner's claims. This we cannot allow. Respondents' lapses were far from
unintentional. They were deliberate attempts to circumvent established rules.
Respondents' other contention that they were deprived of due process is likewise devoid of merit.
Due process is satisfied when the parties are afforded fair and reasonable opportunity to explain their
respective sides of the controversy. In Mariveles Shipyard Corp. v. CA, we held:
The requirements of due process in labor cases before a Labor Arbiter is satisfied when the parties
are given the opportunity to submit their position papers to which they are supposed to attach all the
supporting documents or documentary evidence that would prove their respective claims, in the event that
the Labor Arbiter determines that no formal hearing would be conducted or that such hearing was not
necessary. (emphasis supplied).
We ruled in Times Transportation Company, Inc. v. Sotelo:
To extend the period of appeal is to prolong the resolution of the case, a circumstance which would give
the employer the opportunity to wear out the energy and meager resources of the workers to the point that
they would be constrained to give up for less than what they deserve in law.

PCI TRAVEL CORPORATION Vs NLRC

Facts: Sometime in 1994, respondent NUBE-AMEXPEA/PCI Travel Employees Union filed a Complaint
for unfair labor practice against petitioner PCI Travel Corporation. It claimed that petitioner had been
filling up positions left by regular rank-and-file with contractual employees, but were performing work
which were usually necessary and desirable in the usual business or trade of the petitioner. Respondent
prayed that the Labor Arbiter order the petitioner to pay the contractual employees the differentials
between the wages/benefits of regular employees and the actual wages/benefits paid to them from the first
day of their employment, plus moral and exemplary damages, and attorneys fees of not less
than P300,000.00 per employee.
Petitioner moved to dismiss the complaint on the ground that the Union was not the real party-ininterest. Subsequently, petitioner manifested that while it was ready and willing to prove that said
employees were provided by independent legitimate contractors and that it was not engaged in labor-only
contracting in a position paper yet to be submitted, petitioner prayed that the Labor Arbiter first resolve
the issues raised in their motion to dismiss.
Labor Arbiter ruled that motion to dismiss is a prohibited pleading. Labor arbiter decided that the
petitioner is guilty of unfair labor practices.
Petitioner filed petition for certiorari with the Court of Appeals. However, the CA dismissed the appeal
for failure of the petitioner to attach the necessary documents and pleading in support for the relief they
sought. Additionally, the verification for non-forum shopping was signed by Companys President
without proof that he is authorized by the corporation to sign it trough resolution.
Issue: WON the CA was correct in dismissing the case based on the aforementioned technical grounds.
Ruling: No, the Court of Appeals erred in its decision. The case must be remanded to the CA for
resolution on the merits. President of the corporation can sign the verification and certification without
need of a board resolution, there thus exists a compelling reason for the reinstatement of the petition
28

before the Court of Appeals. A perusal of the petition for certiorari would reveal that petitioner intended
to show the grave abuse of discretion committed by the labor tribunals in not allowing the petitioner the
ample opportunity to submit its position paper on the alleged violation of the CBA. The Labor Arbiter and
the NLRC viewed it as a waiver on its part and hastened to rule that since the complainants allegations
remain unrebutted, they are deemed correct and valid. Due process dictates that a person should be
given the opportunity to be heard. Unfortunately, this was not accorded to the petitioner and such right
was even foreclosed when the appellate court dismissed the petition before it on technical grounds. The
policy of our judicial system is to encourage full adjudication of the merits of an appeal. Ends of justice
are better served when both parties are heard and the controversy decided on its merits. Thus, in the
exercise of its equity jurisdiction, the Court will not hesitate to reverse the dismissal of appeals that are
grounded merely on technicalities.
Lolita Lopez et al. vs. Quezon City Sports Club, Inc.
Facts: In this case, there are two actions. First, the one initiated by the labor organization and the other
initiated by the employer. In the first case, the Kasapiang Manggagawa sa Quezon City Sports Club
(union) claims that it is a registered independent labor organization and the incumbent collective
bargaining agent of Quezon City Sports Club (QCSC). They filed a complaint for unfair labor practice
against QCSC on 12 November 1997.
The Union averred that it was ordered to submit a new information sheet. It immediately wrote a letter
addressed to the general manager, Angel Sadang, to inquire about the information sheet, only to be
insulted by the latter. The members of the union were not paid their salaries on 30 June 1997. A QCSC
board member, Antonio Chua allegedly harassed one of the employees and told him not to join the strike
and even promised a promotion. On 4 July 1997, the union wrote a letter to the management for the
release of the members salaries for the period 16-30 June 1997, implementation of Wage Order No. 5,
and granting of wage increases mandated by the Collective Bargaining Agreement (CBA). When its letter
went unanswered, the union filed a notice of strike on 10 July 1997 for violation of Article 248 (a)(c)(e)
of the Labor Code, nonpayment of overtime pay, refusal to hear its grievances, and malicious refusal to
comply with the economic provisions of the CBA. After conducting a strike vote, it staged a strike on 12
August 1997. On 16 August 1997, the QCSC placed some of its employees under temporary lay-off status
due to redundancy.
The second case: It appears that on 22 December 1997, QCSC also filed a petition for cancellation of
registration against the union and to declare the unions strike on August 12, 1997 as illegal. This action
by QCSC is docketed as NLRC CASE NO. 00-09-0663-97. The Labor Arbiter Ernesto Dinopol declared
the strike of the union illegal in its decision dated October 9, 1998 (Dinopol decision). The dispositive
reads: WHEREFORE, in view of the Unions having violated the no-strike-no-lockout provision of the
Collective Bargaining Agreement, the strike it staged on August 12, 1998 is hereby declared illegal and
consequently, pursuant to Article 264 of the Labor Code, the individual respondents, namely: RONILO C.
LEE, EDUARDO V. SANTIA, CECILLE C. PANGAN, ROMEO M. MORGA, GENARO C. BANDO
AND ALEX J. SANTIAGO, who admitted in paragraph 1 of their position paper that they are
officers/members of the complaining Union are hereby declared to have lost their employment status.
Back to the first case, the Labor Arbiter (Joel Lustria) found QCSC guilty of unfair labor practice. QCSC
appealed from the labor arbiters decision. It also filed a motion for reduction of the appeal bond to
P4,000,000.00. The NLRC ordered the posting of an additional P6,000,000.00). QCSC filed a
29

supplement to its appeal, citing the Dinopol decision. Meanwhile, the National Labor Relations
Commission (NLRC) rendered a decision granting the appeal and reversing the Lustria decision. The
NLRC said that the Dinopol Decision in the illegal strike case must prevail over the Lustria Decision
because of the established doctrine of primacy and finality of decision. In the illegal strike case, Ronilo
Lee, Eduardo Santia, Cecille Pangan, Romeo Morga, Genaro Bando and Alex Santiago lost or forfeited
their employment on the day the illegal strike was staged. The NLRC said that the forfeiture of their
employment status carries with it the extinction of their right to demand for and be entitled to the
economic benefits accorded to them by law and the existing CBA. The other complainants (petitioners)
meanwhile filed a motion for reconsideration, which was denied by the NLRC. They filed a petition for
certiorari under Rule 65 before the Court of Appeals but was denied.
Issues:
1. Do the simultaneous filing of the motion to reduce the appeal bond and posting of the reduced amount
of bond within the reglementary period for appeal constitute substantial compliance with Article 223 of
the Labor Code?
2. Whether the NLRC erred in declaring them to have lost their employment contrary to the Dinopol
decision which only affected a few of the employees who were union members.
Ruling:
First issue: Under the Rules, appeals involving monetary awards are perfected only upon compliance
with the following mandatory requisites, namely: (1) payment of the appeal fees; (2) filing of the
memorandum of appeal; and (3) payment of the required cash or surety bond.
Thus, the posting of a bond is indispensable to the perfection of an appeal in cases involving monetary
awards from the decision of the labor arbiter. The filing of the bond is not only mandatory but also a
jurisdictional requirement that must be complied with in order to confer jurisdiction upon the NLRC.
Non-compliance with the requirement renders the decision of the labor arbiter final and executory. This
requirement is intended to assure the workers that if they prevail in the case, they will receive the money
judgment in their favor upon the dismissal of the employers appeal. It is intended to discourage
employers from using an appeal to delay or evade their obligation to satisfy their employees just and
lawful claims. However, Section 6 of the New Rules of Procedure of the NLRC also mandates, among
others, that no motion to reduce bond shall be entertained except on meritorious grounds and upon the
posting of a bond in a reasonable amount in relation to the monetary award. Hence, the NLRC has the full
discretion to grant or deny the motion to reduce the amount of the appeal bond.
In the case of Nicol v. Footjoy Industrial Corporation ruled that the bond requirement on appeals
involving monetary awards had been and could be relaxed in meritorious cases such as: (1) there was
substantial compliance with the Rules; (2) the surrounding facts and circumstances constitute meritorious
grounds to reduce the bond; (3) a liberal interpretation of the requirement of an appeal bond would serve
the desired objective of resolving controversies on the merits; or (4) the appellants, at the very least,
exhibited their willingness and/or good faith by posting a partial bond during the reglementary period.
Applying these jurisprudential guidelines, we find and hold that the NLRC did not err in reducing the
amount of the appeal bond and considering the appeal as having been filed within the reglementary
period. The posting of the amount of P4,000,000.00 simultaneously with the filing of the motion to reduce
the bond to that amount, as well as the filing of the memorandum of appeal, all within the reglementary
period, altogether constitute substantial compliance with the Rules.
30

Second issue: We rule in favor of petitioners. The assailed Dinopol decision involves a complaint for
illegal strike filed by QCSC on the ground of a no-strike no lockout provision in the CBA. The
challenged decision was rendered in accordance with law and is supported by factual evidence on record.
In the notice of strike, the union did not state in particular the acts, which allegedly constitute unfair labor
practice. Moreover, by virtue of the no-strike no lockout provision in the CBA, the union was
prohibited from staging an economic strike, i.e., to force wage or other concessions from the employer,
which he is not required by law to grant. However, it should be noted that while the strike declared by the
union was held illegal, only the union officers were declared as having lost their employment status.
In effect, there was a ruling only with respect to some union members while the status of all others
had remained disputed.
There is no conflict between the Dinopol and the Lustria decisions. While both rulings involve the same
parties and same issues, there is a distinction between the remedies sought by the parties in these two
cases. In the Dinopol decision, it was QCSC which filed a petition to declare the illegality of the 12
August 1997 strike by the union. The consequence of the declaration of an illegal strike is termination
from employment, which the Labor Arbiter did so rule in said case. However, not all union members were
terminated. In fact, only a few union officers were validly dismissed in accordance with Article 264 of the
Labor Code (the six named). Corollarily, the other union members who had merely participated in the
strike but had not committed any illegal acts were not dismissed from employment. Hence, the NLRC
erred in declaring the employment status of all employees as having been lost or forfeited by virtue of the
Dinopol decision.
On the other hand, the Lustria decision involved the unfair labor practices alleged by the union with
particularity. In said case, Labor Arbiter Lustria sided with the Union and found QCSC guilty of such
practices. As a consequence, the affected employees were granted backwages and separation pay. The
grant of backwages and separation pay however was not premised on the declaration of the illegality of
the strike but on the finding that these affected employees were constructively dismissed from work, as
evidenced by the layoffs effected by the company.
Therefore, with respect to petitioners and union officers Alex J. Santiago, Ma. Cecilia Pangan, Ronilo E.
Lee, and Genaro Bando, who apparently had been substituted by present petitioner Teresita Bando, the
Dinopol decision declaring them as having lost their employment status still stands.
To recapitulate, the NLRC erred in setting aside the Lustria decision, as well as in deleting the award of
backwages and separation pay, despite the finding that the affected employees had been constructively
dismissed.
Based on the foregoing, the Lustria decision should be upheld and therefore reinstated except as regards
the four petitioners.

Lockheed Detective & Watchman Agency vs UP G.R. No. 185918, April 18, 2012

31

Facts: Petitioner entered into a contract for security services with respondent. An NLRC Decision holding
respondent solidarily liable with petitioner to security guards for P12,142,522.69 became final and
executory.
A writ of execution was issued by the Labor Arbiter, which was later on quashed upon motion by
respondent. The quashal was reversed by the NLRC. Upon reconsideration, the NLRC reconsidered and
modified that the satisfaction of the award will be only against the funds of respondent which are not
identified as public funds. The NRLCs order and resolution having become final, an alias writ of
execution was issued. A notice of garnishment was served upon PNB Diliman Branch. Upon learning of
the notice, respondent filed an urgent motion to quash garnishment which was dismissed by the Labor
Arbiter. Funds from PNB were withdrawn by the sheriff. Respondent filed a petition for certiorari with
the Court of Appeals. The CA dismissed the petition ruling that the funds are not public funds but on
reconsideration, amended its decision holding still that the funds are not public funds but the petition is
granted because of the case of National Electrification Administration vs Morales(NEA case) that all
money claims against the government must be first filed with the Commission on Audit. Petitioner moved
for reconsideration but was denied. The Amended Decision and Resolution are now being assailed in this
petition for review on certiorari.
Issue: Whether or not the funds of respondent were properly garnished?
Ruling: No, the funds of respondent were not properly garnished. The Court ruled that the CA correctly
cited the NEA case. Respondent is a juridical personality separate and distinct from the government and
has the capacity to sue and be sued. Thus, it cannot evade execution, and its funds may be subject to
garnishment or levy. However, before execution may be had, a claim for payment of the judgment award
must first be filed with COA pursuant to Commonwealth Act No. 327.

Portillo vs. Rudolf Lietz, Inc. et al., G.R. No. 196539, October 10, 2012
Facts: Portillo was a Sales Representative of Rudolf Lietz, Inc. pharmaceutical business. Portillo signed
an employment contract containing a Goodwill Clause as follows:
It remains understood and you agreed that, on the termination of your employment by act of either you
or [Lietz Inc.], and for a period of three (3) years thereafter, you shall not engage directly or indirectly as
employee, manager, proprietor, or solicitor for yourself or others in a similar or competitive business or
the same character of work which you were employed by [Lietz Inc.] to do and perform. Should you
breach this good will clause of this Contract, you shall pay [Lietz Inc.] as liquidated damages the amount
of 100% of your gross compensation over the last 12 months, it being agreed that this sum is reasonable
and just.
Portillo subsequently resigned from her employment with Lietz. She demanded from Lietz Inc. for the
payment of her remaining salaries and commissions, which were not paid to her upon such resignation.
Later, and within the 3-year prohibitory period, Lietz learned that Portillo was hired by Ed Keller
Philippine as head of its Pharma Raw Material Department. Ed Keller is direct competitor of Lietz. As
Portillos demand for remaining salaries and commissions from Lietz still went unheeded, she filed a
complaint with the NLRC for non-payment of 1 months salary, 2 months commission, 13th month pay,
plus moral, exemplary and actual damages and attorneys fees. In its position paper, Lietz admitted
32

liability for Portillos money claims. However, Lietz raised the defense of legal compensation: Portillos
money claims should be offset against her liability to Lietz for liquidated damages for Portillos breach of
the Goodwill Clause in the employment contract when she became employed with Ed Keller.
Issue:
Should the claims of Portillo against Lietz for unpaid wages, commissions, etc. be offset against her
liability to Lietz for damages from breach of the Goodwill Clause in the contract?
Ruling: No, it should not be offset. While Portillos claim for unpaid salaries is a money claim that arises
out of or in connection with an employer-employee relationship, Lietz claim against Portillo for
violation of the goodwill clause is a money claim based on an act done after the cessation of the
employment relationship. And, while the jurisdiction over Portillos claim is vested in the labor
arbiter, the jurisdiction over Lietz Inc.s claim rests on the regular courts. The difference in the
nature of the credits that one has against the other, conversely, the nature of the debt one owes another,
which difference in turn results in the difference of the forum where the different credits can be enforced,
prevents the application of compensation. The labor tribunal does not have jurisdiction over the civil case
of breach of contract.

Building Care Corp. vs. Macaraeg, G.R. No. 198357, December 10, 2012
Facts: Petitioners are in the business of providing security services to their clients. They hired respondent
as a security guard beginning August 25, 1996, assigning her at Genato Building in Caloocan City.
However, on March 9, 2008, respondent was relieved of her post. She was re-assigned to Bayview Park
Hotel from March 9-13, 2008, but after said period, she was allegedly no longer given any assignment.
Thus, on September 9, 2008, respondent filed a complaint against petitioners for illegal dismissal,
underpayment of salaries, non-payment of separation pay and refund of cash bond. Conciliation and
mediation proceedings failed, so the parties were ordered to submit their respective position papers.
Respondent claimed that petitioners failed to give her an assignment for more than nine months,
amounting to constructive dismissal, and this compelled her to file the complaint for illegal dismissal. On
the other hand, petitioners that respondent was relieved from her post as requested by the client because
of her habitual tardiness, persistent borrowing of money from employees and tenants of the client, and
sleeping on the job. Respondent filed a complaint for illegal dismissal with the Labor Arbiter. The Labor
Arbiter (LA) in favor of petitioners, holding that the dismissal of Macaraeg was valid, but ordered the
former to pay a certain sum as financial assistance. The Appeal which respondent filed with the NLRC
was for having been filed out of time. Hence, NLRC declared that the LA's Decision had become final
and executory on June 16, 2009.
Respondent elevated the case to the CA via a petition for certiorari. The CA reversed and set aside the
decision of NLRC and declared Macaraeg to have been illegally dismissed. Petitioners were ordered to
reinstate petitioner without loss of seniority rights, benefits and privileges; and to pay her backwages and
other monetary benefits during the period of her illegal dismissal up to actual reinstatement. Petitioners'
motion for reconsideration was denied. Hence, the present petition.
ISSUE: Whether the CA erred in liberally applying the rules of procedure and ruling that respondent's
appeal should be allowed and resolved on the merits despite having been filed out of time.
33

RULING: The Court cannot sustain the CA's Decision. It should be emphasized that the resort to a liberal
application, or suspension of the application of procedural rules, must remain as the exception to the wellsettled principle that rules must be complied with for the orderly administration of justice. In
Marohomsalic v. Cole, the Court stated: While procedural rules may be relaxed in the interest of justice, it
is well-settled that these are tools designed to facilitate the adjudication of cases. The relaxation of
procedural rules in the interest of justice was never intended to be a license for erring litigants to violate
the rules with impunity. Liberality in the interpretation and application of the rules can be invoked only in
proper cases and under justifiable causes and circumstances. While litigation is not a game of
technicalities, every case must be prosecuted in accordance with the prescribed procedure to ensure an
orderly and speedy administration of justice. The later case of Daikoku Electronics Phils., Inc. v. Raza,
further explained that: To be sure, the relaxation of procedural rules cannot be made without any valid
reasons proffered for or underpinning it. To merit liberality, petitioner must show reasonable cause
justifying its non-compliance with the rules and must convince the Court that the outright dismissal of the
petition would defeat the administration of substantial justice. x x x The desired leniency cannot be
accorded absent valid and compelling reasons for such a procedural lapse. x x x In this case, the
justifications given by the CA for its liberality by choosing to overlook the belated filing of the appeal are,
the importance of the issue raised, i.e., whether respondent was illegally dismissed; and the belief that
respondent should be "afforded the amplest opportunity for the proper and just determination of his cause,
free from the constraints of technicalities," considering that the belated filing of respondent's appeal
before the NLRC was the fault of respondent's former counsel. Note, however, that neither respondent nor
her former counsel gave any explanation or reason citing extraordinary circumstances for her lawyer's
failure to abide by the rules for filing an appeal. Respondent merely insisted that she had not been remiss
in following up her case with said lawyer. It is, however, an oft-repeated ruling that the negligence and
mistakes of counsel bind the client. A departure from this rule would bring about never-ending suits, so
long as lawyers could allege their own fault or negligence to support the clients case and obtain remedies
and reliefs already lost by the operation of law. It should also be borne in mind that the right of the
winning party to enjoy the finality of the resolution of the case is also an essential part of public policy
and the orderly administration of justice. Hence, such right is just as weighty or equally important as the
right of the losing party to appeal or seek reconsideration within the prescribed period. When the Labor
Arbiter's Decision became final, petitioners attained a vested right to said judgment.

McBurnie vs. Ganzon

Facts: On October 4, 2002, McBurnie, an Australian national, instituted a complaint for illegal dismissal
and other monetary claims against the respondents. McBurnie claimed that on May 11, 1999, he signed a
five-year employment agreement with the company EGI as an Executive Vice-President who shall
oversee the management of the company's hotels and resorts within the Philippines. He performed work
for the company until sometime in November 1999, when he figured in an accident that compelled him to
go back to Australia while recuperating from his injuries. While in Australia, he was informed by
respondent Ganzon that his services were no longer needed because their intended project would no
longer push through. The respondents opposed the complaint, contending that their agreement with
McBurnie was to jointly invest in and establish a company for the management of hotels. They did not
34

intend to create an employer-employee relationship, and the execution of the employment contract that
was being invoked by McBurnie was solely for the purpose of allowing McBurnie to obtain an alien work
permit in the Philippines. At the time McBurnie left for Australia for his medical treatment, he had not yet
obtained a work permit. The LA declared McBurnie as having been illegally dismissed from employment.
Feeling aggrieved, the respondents appealed the LA's Decision to the NLRC. On November 5, 2004, they
filed their Memorandum of Appeal and Motion to Reduce Bond, and posted an appeal bond in the amount
of P100,000.00. The respondents contended in their Motion to Reduce Bond, inter alia, that the monetary
awards of the LA were null and excessive, allegedly with the intention of rendering them incapable of
posting the necessary appeal bond. They claimed that an award of "more than P60 Million Pesos to a
single foreigner who had no work permit and who left the country for good one month after the purported
commencement of his employment" was a patent nullity.
Issue: The sufficiency of the appeal bond that was posted by the respondents.
Held: To clarify, the prevailing jurisprudence on the matter provides that the filing of a motion to reduce
bond, coupled with compliance with the two conditions emphasized in Garcia v. KJ Commercial for the
grant of such motion, namely, (1) a meritorious ground, and (2) posting of a bond in a reasonable amount,
shall suffice to suspend the running of the period to perfect an appeal from the labor arbiter's decision to
the NLRC. It is in this light that the Court finds it necessary to set a parameter for the litigants' and the
NLRC's guidance on the amount of bond that shall hereafter be filed with a motion for a bond's reduction.
To ensure that the provisions of Section 6, Rule VI of the NLRC Rules of Procedure that give parties the
chance to seek a reduction of the appeal bond are effectively carried out, without however defeating the
benefits of the bond requirement in favor of a winning litigant, all motions to reduce bond that are to be
filed with the NLRC shall be accompanied by the posting of a cash or surety bond equivalent to 10% of
the monetary award that is subject of the appeal, which shall provisionally be deemed the reasonable
amount of the bond in the meantime that an appellant's motion is pending resolution by the Commission.
In conformity with the NLRC Rules, the monetary award, for the purpose of computing the necessary
appeal bond, shall exclude damages and attorney's fees. 94 Only after the posting of a bond in the
required percentage shall an appellant's period to perfect an appeal under the NLRC Rules be deemed
suspended.
The work performed by McBurnie in relation to the project was merely preliminary to the business
venture and part of his "due diligence" study before pursuing the project, "done at his own instance, not in
furtherance of the employment contract but for his own investment purposes." Hence, no employeremployee relationship. The complaint for illegal dismissal filed by petitioner Andrew James McBurnie
against respondents Eulalio Ganzon, EGI-Managers, Inc. and E. Ganzon, Inc. is DISMISSED.

Indophil Textile Mills Inc. vs. Engr. Adviento

Facts: Petitioner Indophil Textile Mills, Inc. is a domestic corporation engaged in the business of
manufacturing thread for weaving. On August 21, 1990, petitioner hired respondent Engr. Salvador
Adviento as Civil Engineer to maintain its facilities in Lambakin, Marilao, Bulacan. On August 7, 2002,
respondent consulted a physician due to recurring weakness and dizziness. Few days later, he was
35

diagnosed with Chronic Poly Sinusitis, and thereafter, with moderate, severe and persistent Allergic
Rhinitis. Accordingly, respondent was advised by his doctor to totally avoid house dust mite and textile
dust as it will transmute into health problems.
Distressed, respondent filed a complaint against petitioner with the National Labor Relations Commission
(NLRC), San Fernando, Pampanga, for alleged illegal dismissal and for the payment of backwages,
separation pay, actual damages and attorney's fees. Subsequently, respondent filed another Complaint
with the Regional Trial Court (RTC) of Aparri, Cagayan, alleging that he contracted such occupational
disease by reason of the gross negligence of petitioner to provide him with a safe, healthy and workable
environment.
Issue: Whether or not the RTC has jurisdiction over the subject matter of respondent's complaint anchored
on petitioner's alleged gross negligence in failing to provide a safe and healthy working environment for
respondent.
Held: Here, we find that jurisdiction rests on the regular courts. The fact of respondent's employment with
petitioner as a civil engineer is a necessary element of his cause of action because without the same,
respondent cannot claim to have a right to a safe, healthy and workable environment. Indeed,
jurisprudence has evolved the rule that claims for damages under Article 217 (a) (4) of the Labor Code, to
be cognizable by the LA, must have a reasonable causal connection with any of the claims provided for in
that article. Only if there is such a connection with the other claims can a claim for damages be
considered as arising from employer-employee relations. In the case at bench, we find that such
connection is nil. True, the maintenance of a safe and healthy workplace is ordinarily a subject of labor
cases. More, the acts complained of appear to constitute matters involving employee-employer relations
since respondent used to be the Civil Engineer of petitioner. However, it should be stressed that
respondent's claim for damages is specifically grounded on petitioner's gross negligence to provide a safe,
healthy and workable environment for its employees a case of quasi-delict. In the case at bar,
respondent alleges that due to the continued and prolonged exposure to textile dust seriously inimical to
his health, he suffered work-contracted disease which is now irreversible and incurable, and deprived him
of job opportunities. 52 Clearly, injury and damages were allegedly suffered by respondent, an element of
quasi-delict. Secondly, the previous contract of employment between petitioner and respondent cannot be
used to counter the element of "no pre-existing contractual relation" since petitioner's alleged gross
negligence in maintaining a hazardous work environment cannot be considered a mere breach of such
contract of employment, but falls squarely within the elements of quasi-delict under Article 2176 of the
Civil Code since the negligence is direct, substantive and independent. It also bears stressing that
respondent is not praying for any relief under the Labor Code of the Philippines. He neither claims for
reinstatement nor backwages or separation pay resulting from an illegal termination. The cause of action
herein pertains to the consequence of petitioner's omission which led to a work-related disease suffered by
respondent, causing harm or damage to his person. Such cause of action is within the realm of Civil Law,
and jurisdiction over the controversy belongs to the regular courts.

Manila Mining Corp., vs. Amor

36

Facts: Respondents Lowito Amor, Rollybie Ceredon, Julius Cesar, Ronito Martinez and Fermin Tabili, Jr.
were regular employees of petitioner Manila Mining Corporation, a domestic corporation which operated
a mining claim in Placer, Surigao del Norte, in pursuit of its business of large-scale open-pit mining for
gold and copper ore. In compliance with existing environmental laws, petitioner maintained Tailing Pond
No. 7 (TP No. 7), a tailings containment facility required for the storage of waste materials generated by
its mining operations. When the mine tailings being pumped into TP No. 7 reached the maximum level in
December 2000, petitioner temporarily shut down its mining operations. On 27 July 2001, petitioner
served a notice, informing its employees and the Department of Labor and Employment Regional Office
No. XII (DOLE) of the temporary suspension of its operations for six months and the temporary lay-off of
two-thirds of its employees. After the lapse of said period, petitioner notified the DOLE on 11 December
2001 that it was extending the temporary shutdown of its operations for another six months. Adversely
affected by petitioner's continued failure to resume its operations, respondents filed the complaint for
constructive dismissal and monetary claims before the Regional Arbitration Branch No. of the National
Labor Relations Commission (NLRC). Labor Arbiter rendered a Decision holding petitioner liable for
constructive dismissal in view of the suspension of its operations beyond the six-month period allowed
under Article 286 7 of the Labor Code of the Philippines ordering petitioner to pay respondents their
separation pay equivalent to P2,138,190.02. Aggrieved, petitioner filed its memorandum of appeal before
the NLRC and moved for the reduction of the appeal bond to P100,000.00, on the ground that its financial
losses in the preceding years had rendered it unable to put up one in cash and/or surety equivalent to the
monetary award.
Held: The question regarding the appeal bond rises from the record which shows that, in addition to its
memorandum of appeal, petitioner filed a 6 December 2004 motion for the reduction of the appeal bond
on the ground that the cash equivalent of the monetary award and/or cost of the surety bond have proven
to be prohibitive in view of the tremendous business losses it allegedly sustained. As supposed measure of
its good faith in complying with the Rules, petitioner attached to its motion Philam Bank Check No.
0000627153, dated 6 December 2004, in the amount of P100,000.00 only. As pointed out by respondents,
however, said check was subsequently dishonored upon presentment for payment for insufficiency of
funds. In its 1 April 2005 Ex-Parte Manifestation, petitioner informed the NLRC that it "only learned
belatedly that the same check was dishonored" as there appeared to be "an inadvertent mix-up as other
checks issued for [its] other obligations were negotiated ahead [thereof], leaving an insufficient balance in
its account." As a consequence, petitioner claimed that "the deficiency in deposit has been promptly and
immediately replenished as soon as the check's dishonor was reported" and that the same may already be
redeposited at any of NLRC's depositary banks. Furthermore, on the matter of the filing and acceptance of
motions to reduce appeal bond, as provided in Section 6, Rule VI of the 2011 NLRC Rules of Procedure,
the Court hereby RESOLVES that henceforth, the following guidelines shall be observed:
(a) The filing of a motion to reduce appeal bond shall be entertained by the NLRC subject to the
following conditions: (1) there is meritorious ground; and (2) a bond in a reasonable amount is posted;
(b) For purposes of compliance with condition no. (2), a motion shall be accompanied by the posting of a
provisional cash or surety bond equivalent to ten percent (10), of the monetary award subject of the
appeal, exclusive of damages and attorney's fees;
(c) Compliance with the foregoing conditions shall suffice to suspend the running of the 10-day
reglementary period to perfect an appeal from the labor arbiter's decision to the NLRC;
37

(d) The NLRC retains its authority and duty to resolve the motion to reduce bond and determine the final
amount of bond that shall be posted by the appellant, still in accordance with the standards of meritorious
grounds and reasonable amount; and
(e) In the event that the NLRC denies the motion to reduce bond, or requires a bond that exceeds the
amount of the provisional bond, the appellant shall be given a fresh period of ten (10) days from notice of
the NLRC order within which to perfect the appeal by posting the required appeal bond.
Respondent correctly called attention to the fact that the check submitted by petitioner was dishonored
upon presentment for payment, thereby rendering the tender thereof ineffectual. Although the NLRC
chose not to address the issue of the perfection of the appeal as well as the reduction of the bond in its
Resolution dated 25 April 2005, the record shows that petitioner only manifested its deposit of the funds
for the check 24 days before the resolution of its appeal or 116 days after its right to appeal the Labor
Arbiter's decision had expired. Having filed its motion and memorandum on the very last day of the
reglementary period for appeal, moreover, petitioner had no one but itself to blame for failing to post the
full amount pending the NLRC's action on its motion for reduction of the appeal bond. If redundancy be
risked it must be emphasized that the posting of a bond is indispensable to the perfection of an appeal in
cases involving monetary awards from the decision of the Labor Arbiter. Since it is the posting of a cash
or surety bond which confers jurisdiction upon the NLRC, 40 the rule is settled that non-compliance is
fatal and has the effect of rendering the award final and executory.

38

TOPIC 14
OTHER IMPORTANT LABOR PROVISIONS
PHILIPPINE BANK OF COMMUNICATIONS vs. THE NATIONAL LABOR RELATIONS
COMMISSION et al. G.R. No. L-66598 December 19, 1986
FACTS: Petitioner Philippine Bank of Communications and the Corporate Executive Search Inc. (CESI)
entered into a letter agreement dated January 1976 under which (CESI) undertook to provide
"Tempo[rary] Services" to petitioner Consisting of the "temporary services" of eleven (11) messengers.
The contract period is described as being "from January 1976." The petitioner in truth undertook to pay
a "daily service rate of P18, " on a per person basis.
Attached to the letter agreement was a "List of Messengers assigned at Philippine Bank of
Communications" which list included, as item No. 5 thereof, the name of private respondent Ricardo
Orpiada.
Ricardo Orpiada was thus assigned to work with the petitioner bank. As such, he rendered services to the
bank, within the premises of the bank and alongside other people also rendering services to the bank.
There was some question as to when Ricardo Orpiada commenced rendering services to the bank. As
noted above, the letter agreement was dated January 1976. However, the position paper submitted by
(CESI) to the National Labor Relations Commission stated that (CESI) hired Ricardo Orpiada on 25 June
1975 as a Tempo Service employee, and assigned him to work with the petitioner bank "as evidenced by
the appointment memo issued to him on 25 June 1975. " Be that as it may, on or about October 1976, the
petitioner requested (CESI) to withdraw Orpiada's assignment because, in the allegation of the bank,
Orpiada's services "were no longer needed."
On 29 October 1976, Orpiada instituted a complaint in the Department of Labor (now Ministry of Labor
and Employment) against the petitioner for illegal dismissal and failure to pay the 13th month pay
provided for in Presidential Decree No. 851. This complaint was docketed as Case No. R04-1010184-76E.After investigation, the Office of the Regional Director, Regional Office No. IV of the Department of
Labor, issued an order dismissing Orpiada's complaint for failure of Mr.Orpiada to show the existence of
an employer-employee relationship between the bank and himself.
Despite the foregoing order, Orpiada succeeded in having his complaint certified for compulsory
arbitration in Case No. RB-IV-11187-77 entitled "Ricardo Orpiada, complaint vs. Philippine Bank of
Communications, respondent." During the compulsory arbitration proceedings, CESI was brought into the
picture as an additional respondent by the bank. Both the bank and (CESI) stoutly maintained that (CESI)
(and not the bank) was the employer of Orpiada.
ISSUE:
Whether or not an employer-employee relationship existed between the petitioner bank and private
respondent Ricardo Orpiada. The petitioner bank maintains that no employer-employee relationship was
established between itself and Ricardo Orpiada and that Ricardo Orpiada was an employee of (CESI) and
not of the bank.
The second ("payment of wages") and third ("power of dismissal") factors suggest that the relevant
relationship was that subsisting between (CESI) and Orpiada, a relationship conceded by (CESI) to be
one between employer and employee. Upon the other hand, the first ("selection and engagement") and
fourth ("control of employee's conduct") factors indicate that some direct relationship did exist between
Orpiada and the bank and that such relationship may be assimilated to employment. Perhaps the most
39

important circumstance which emerges from an examination of the facts of the tri-lateral relationship
between the bank, (CESI) and Orpiada is that the employer-employee relationship between (CESI) and
Orpiada was established precisely in anticipation of, and for the very purpose of making possible, the
secondment of Orpiada to the bank. It is therefore necessary to confront the task of determining the
appropriate characterization of the relationship between the bank and (CESI) was that relationship one of
employer and job (independent) contractor or one of employer and "labor-only" contractor?
Under the general rule set out in the first and second paragraphs of Article 106, an employer who enters
into a contract with a contractor for the performance of work for the employer, does not thereby create an
employer-employes relationship between himself and the employees of the contractor. Thus, the
employees of the contractor remain the contractor's employees and his alone. Nonetheless when a
contractor fails to pay the wages of his employees in accordance with the Labor Code, the employer who
contracted out the job to the contractor becomes jointly and severally liable with his contractor to the
employees of the latter "to the extent of the work performed under the contract" as such employer were
the employer of the contractor's employees. The law itself, in other words, establishes an employeremployee relationship between the employer and the job contractor's employees for a limited purpose,
i.e., in order to ensure that the latter get paid the wages due to them.
A similar situation obtains where there is "labor only" contracting. The "labor-only" contractor-i.e "the
person or intermediary" is considered "merely as an agent of the employer. " The employer is made by the
statute responsible to the employees of the "labor only" contractor as if such employees had been directly
employed by the employer. Thus, where "labor only" contracting exists in a given case, the statute itself
implies or establishes an employer-employee relationship between the employer (the owner of the
project) and the employees of the "labor only" contractor, this time for a comprehensive purpose:
"employer for purposes of this Code, to prevent any violation or circumvention of any provision of this
Code. " The law in effect holds both the employer and the "labor-only" contractor responsible to the
latter's employees for the more effective safeguarding of the employees' rights under the Labor Code.
Both the petitioner bank and (CESI) have insisted that (CESI) was not a "labor only" contractor. Section 9
of Rule VIII of Book III entitled "Conditions of Employment," of the Omnibus Rules Implementing the
Labor Code provides as follows:
In contrast, job contracting-contracting out a particular job to an independent contractor is defined by the
Implementing Rules as follows:
The definition of "labor-only" contracting in Rule VIII, Book III of the Implementing Rules must be read
in conjunction with the definition of job contracting given in Section 8 of the same Rules. The
undertaking given by CESI in favor of the bank was not the performance of a specific job for instance,
the carriage and delivery of documents and parcels to the addresses thereof. There appear to be many
companies today which perform this discrete service, companies with their own personnel who pick up
documents and packages from the offices of a client or customer, and who deliver such materials utilizing
their own delivery vans or motorcycles to the addresses. In the present case, the undertaking of (CESI)
was toprovideits client-thebank-with a certain number of persons able to carry out the work of
messengers. Such undertaking of CESI was complied with when the requisite number of persons were
assigned or seconded to the petitioner bank. Orpiada utilized the premises and office equipment of the
bank and not those of (CESI) Messengerial work-the delivery of documents to designated persons
whether within or without the bank premises is of course directly related to the day-to-day operations
of the bank. Section 9(2) quoted above does notrequire for its applicability that the petitioner must be
engaged in the delivery of items as a distinct and separate line of business.
40

Succinctly put, CESI is not a parcel delivery company: as its name indicates, it is a recruitment and
placement corporation placing bodies, as it were, in different client companies for longer or shorter
periods of time. It is this factor that, to our mind, distinguishes this case from American President v.
Clave et al, 114 SCRA 826 (1982) if indeed distinguishing way is needed.
The bank urged that the letter agreement entered into with CESI was designed to enable the bank to
obtain the temporary services of people necessary to enable the bank to cope with peak loads, to replace
temporary workers who were out on vacation or sick leave, and to handle specialized work. There is, of
course, nothing illegal about hiring persons to carry out "a specific project or undertaking the completion
or termination of which [was] determined at the time of the engagement of [the] employee, or where the
work or service to be performed is seasonal in nature and the employment is for the duration of the
season" (Article 281, Labor Code).<re||an1w> The letter agreement itself, however, merely required
(CESI) to furnish the bank with eleven 11) messengers for " a contract period from January 19, 1976 ."
The eleven (11) messengers were thus supposed to render "temporary" services for an indefinite or
unstated period of time. Ricardo Orpiada himself was assigned to the bank's offices from 25 June 1975
and rendered services to the bank until sometime in October 1976, or a period of about sixteen months.
Under the Labor Code, however, any employee who has rendered at least one year of service, whether
such service is continuous or not, shall be considered a regular employee (Article 281, Second
paragraph). Assuming, therefore, that Orpiada could properly be regarded as a casual (as distinguished
from a regular) employee of the bank, he became entitled to be regarded as a regular employee of the
bank as soon as he had completed one year of service to the bank. Employers may not terminate the
service of a regular employee except for a just cause or when authorized under the Labor Code (Article
280, Labor Code). It is not difficult to see that to uphold the contractual arrangement between the bank
and (CESI) would in effect be to permit employers to avoid the necessity of hiring regular or permanent
employees and to enable them to keep their employees indefinitely on a temporary or casual status, thus
to deny them security of tenure in their jobs. Article 106 of the Labor Code is precisely designed to
prevent such a result.
We hold that, in the circumstances 'instances of this case, (CESI) was engaged in "labor-only" or
attracting vis-a-vis the petitioner and in respect c Ricardo Orpiada, and that consequently, the petitioner
bank is liable to Orpiada as if Orpiada had been directly, employed not only by (CESI) but also by the
bank. It may well be that the bank may in turn proceed against (CESI) to obtain reimbursement of, or
some contribution to, the amounts which the bank will have to pay to Orpiada; but this it is not necessary
to determine here.
WHEREFORE, the petition for certiorari is DENIED and the decision promulgated on 29 December 1983
of the National Labor Relations Commission is AFFIRMED. The Temporary Restraining Order issued by
this Court on 11 April 1984 is hereby lifted. Costs against petitioner.
SO ORDERED.

VIRGINIA G. NERI and JOSE CABELIN vs. NATIONAL LABOR RELATIONS COMMISSION
FAR EAST BANK & TRUST COMPANY (FEBTC) and BUILDING CARE CORPORATION
G.R. No. Nos. 97008-09 July 23, 1993

41

FACTS: Neri and Cabelinapllied for and were hired by respondent BCC, a corporation engaged in
providing technical, maintenance, engineering, housekeeping, security and other specific services to its
clientele.They were assigned to work in the Cagayan de Oro City Branch of respondent FEBTC on 1 May
1979 and 1 August 1980, respectively, Neri a radio/telex operator and Cabelin as janitor, before being
promoted to messenger on 1 April 1989.
On 28 June 1989, petitioners instituted complaints against FEBTC and BCC before Regional Arbitration
Branch No. 10 of the Department of Labor and Employment to recognize them as its regular employees
and be paid the same wages which its employees receive.
On 16 November 1989, the Labor Arbiter dismissed the complaint for lack of merit. Respondent BCC
was considered an independent contractor because it proved it had substantial capital. Thus, petitioners
were held to be regular employees of BCC, not FEBTC. The dismissal was appealed to NLRC which on
28 September 1990 affirmed the decision on appeal. On 22 October 1990, NLRC denied reconsideration
of its affirmance,prompting petitioners to seek redress from this Court.
Nevertheless, petitioners insist before that BCC is engaged in "labor-only" contracting hence, they
conclude, they are employees of respondent FEBTC.
ISSUE: Whether or not BCC is only a job contracting company, hence petitioners are not regular
employees of FEBTC.
RULING: We cannot sustain the petition. Respondent BCC need not prove that it made investments in
the form of tools, equipment, machineries, work premises, among others, because it has established that it
has sufficient capitalization. The Labor Arbiter and the NLRC both determined that BCC had a capital
stock of P1 million fully subscribed and paid for.BCC is therefore a highly capitalized venture and
cannot be deemed engaged in "labor-only" contracting.
It is well-settled that there is "labor-only" contracting where:
(a) the person supplying workers to an employer does not have substantial capital or investment in the
form of tools, equipment, machineries, work premises, among others; and,
(b) the workers recruited and placed by such person are performing activities which are directly related to
the principal business of the employer.
Article 106 of the Labor Code defines "labor-only" contracting thus
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 by such persons are performing
activities which are directly related to the principal business of such employer . . . . (emphasis supplied).
Based on the foregoing, BCC cannot be considered a "labor-only" contractor because it has
substantial capital. While there may be no evidence that it has investment in the form of tools,
equipment, machineries, work premises, among others, it is enough that it has substantial capital, as was
established before the Labor Arbiter as well as the NLRC. In other words, the law does not require both
substantial capital and investment in the form of tools, equipment, machineries, etc. This is clear from the
use of the conjunction "or". If the intention was to require the contractor to prove that he has both capital
and the requisite investment, then the conjunction "and" should have been used. But, having established
that it has substantial capital, it was no longer necessary for BCC to further adduce evidence to prove that
it does not fall within the purview of "labor-only" contracting. There is even no need for it to refute
42

petitioners' contention that the activities they perform are directly related to the principal business of
respondent bank.
Even assuming ex argumentithat petitioners were performing activities directly related to the
principal business of the bank, under the "right of control" test they must still be considered
employees of BCC. In the case of petitioner Neri, it is admitted that FEBTC issued a job description
which detailed her functions as a radio/telex operator. However, a cursory reading of the job description
shows that what was sought to be controlled by FEBTC was actually the end-result of the task,e.g.,
that the daily incoming and outgoing telegraphic transfer of funds received and relayed by her,
respectively, tallies with that of the register. The guidelines were laid down merely to ensure that the
desired end-result was achieved. It did not, however, tell Neri how the radio/telex machine should be
operated.
More importantly, under the terms and conditions of the contract, it was BCC alone which had the power
to reassign petitioners. Their deployment to FEBTC was not subject to the bank's acceptance. Cabelin was
promoted to messenger because the FEBTC branch manager promised BCC that two (2) additional
janitors would be hired from the company if the promotion was to be effected. Furthermore, BCC was to
be paid in lump sum unlike in the situation in Philippine Bank of Communications where the contractor,
CESI, was to be paid at a daily rate on a per person basis. And, the contract therein stipulated that the
CESI was merely to provide manpower that would render temporary services. In the case at bar, Neri and
Cabelin were to perform specific special services. Consequently, petitioners cannot be held to be
employees of FEBTC as BCC "carries an independent business" and undertaken the performance of its
contract with various clients according to its "own manner and method, free from the control and
supervision" of its principals in all matters "except as to the results thereof."
The Petition for Certiorari is dismissed.

Filipinas Synthetic Fiber Corporation vs. NLRC, et al. [257 SCRA 336 June 14, 1996]
Facts: On 4 April 1991 FILSYN, a domestic corporation engaged in the manufacture of polyester fiber,
contracted with De Lima Trading andGeneral Services (DE LIMA) for the performance of specific
janitorial services Pursuant to the agreement Felipe Loterte, among others, wasdeployed at FILSYN to
take care of the plants and maintain general cleanliness around the premises.On 24 February 1992 Loterte
sued FILSYN and DE LIMA as alternative defendants for illegal dismissal, underpayment of wages,nonpayment of legal holiday pay, service incentive leave pay and 13th month pay alleging that he was first
assigned to perform janitorial work atFILSYN in 1981 by the La Saga General Services; that the La Saga
was changed to DE LIMA on August 1991; that when a movement todemand increased wages and 13th
month pay arose among the workers on December 1991 he was accused by a certain Dodie La Flores of
having posted in the bulletin board at FILSYN an article attributing to management a secret
understanding to block the demand; and, for denying responsibility, his gate pass was unceremoniously
cancelled on 6 February 1992 and he was subsequently dismissed
Loterte was classified by the Labor Arbiter as a regular employee on the ground that he performed tasks
usually necessary or desirable in the main business of FILSYN for more than ten (10) years or since 1981.
FILSYN was declared to be the real employer of Loterte and DELIMA as a mere labor contractor. Hence,
FILSYN was adjudged liable for Loterte's reinstatement, payment of salary differentials and back wages
and other benefits. Hence, this petition for certiorari by FILSYN.
43

Issue:
Whether or not there exists an employer-employee relationship between FILSYN and private respondent
Felipe Loterte.
SC Ruling:
DE LIMA is an independent job contractor, therefore no direct employer-employee relationship exists
between petitioner FILSYN and private respondent Felipe Loterte. The relationship between petitioner
Filipinas Synthetic Fiber Corporation (FILSYN) and private respondent De Lima Trading and General
Services (DE LIMA) is one of job-contractorship.
Under the Labor Code, two (2) elements must exist for a finding of labor-only contracting: (a) the person
supplying workers to an employer does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, and (b) the workers recruited and placed by such
persons are performing activities directly related to the principal business of such employer.
These two (2) elements do not exist in the instant case. As pointed out by petitioner, private respondent
DE LIMA is a going concern duly registered with the Securities and Exchange Commission with
substantial capitalization of P1,600,000.00, P400,000.00 of which is actually subscribed. Hence, it cannot
be considered as engaged in labor-only contracting being a highly capitalized venture. Moreover, while
the janitorial services performed by Felipe Loterte pursuant to the agreement between FILSYN and DE
LIMA may be considered directly related to the principal business of FILSYN which is the manufacture
of polyester fiber, nevertheless, they are not necessary in its operation. On the contrary, they are merely
incidental thereto, as opposed to being integral, without which production and company sales will not
suffer. Judicial notice has already been taken of the general practice in private as well as in government
institutions and industries of hiring janitorial services on an independent contractor basis.
Respondent De Lima Trading and General Services (DE LIMA) are ordered to reinstate private
respondent FELIPE LOTERTE to his former position or its equivalent without loss of seniority rights.
And private respondent De Lima Trading and General Services (DE LIMA) is ordered jointly and
severally with petitioner Filipinas Synthetic Fiber Corporation (FILSYN) to pay private respondent
FELIPE LOTERTE his salary differentials, 13th month pay, service incentive leave pay, and back wages
without prejudice to FILSYN seeking reimbursement from DELIMA for whatever amount the former
may pay or have paid the latter

Alejandro Maraguinot and Paulino Enero v. NLRC, GR No. 120969, 22 January 1998
Facts: Maraguinot and Enero were both hired by Vic del Rosario to work for his projects under Viva
films; Sometime in 1992, they asked for their salary to be adjusted according to the minimum wage; It is
to be noted that at the time, Maraguinot was having a salary of only 475 per week (this was in 1991);
Both Maraguinot and Enero asked their supervisors for their wage to be adjusted according to the
44

minimum wage however, they were told that their concern is to be aired to the owner of Viva; They were
told that their wage will be adjusted but they have to sign a blank employment contract; Enero did not
accept and so he was fired; Maraguinot was fired but was asked to return few days after; He was once
again asked to sign a blank employment contract in exchange of the adjustment of his salary according to
the minimum wage; this, he did not accede to, hence, he was fired;
A case was filed by the two against Viva but NLRC ruled in favour of Viva saying that there was really no
employer-employee relationship between them;
Issue
1. Whether there was employer-employee relationship between Viva and the complainants that
would merit a filing of an illegal dismissal case?
Held
1. Yes, the complainants are employees of Viva. In fact in most cases, it was Viva that paid the
complainants. Further, the argument of Viva that they are contractual employees is untenable for
the reason that the complainants are employed on long-term basis.

Urbanes Jr. vs. Sec. of Labor, G.R. No. 122791, Feb. 19, 2003
Facts:
Petitioner Placido O. Urbanes, Jr., doing business under the name and style of Catalina Security Agency,
entered into an agreement to provide security services to respondent Social Security System (SSS).
During the effectivity of the agreement, petitioner, by letter of May 16, 1994, requested the SSS for the
upward adjustment of their contract rate in view of Wage Order No. NCR-03 which was issued by the
Regional Tripartite Wages and Productivity Board-NCR.
Petitioner sent several letters dated June 7 and June 8, 1994, reiterating the request. On June 24, 1994,
petitioner pulled out his agencys services from the premises of the SSS. Petitioner, on June 29, 1994,
filed a complaint with the DOLE-NCR against the SSS seeking the implementation of Wage Order No.
NCR-03.
In its position paper, the SSS prayed for the dismissal of the complaint on the ground that petitioner is not
the real party in interest and has no legal capacity to file the same. In any event, it argued that if it had any
obligation, it was to the security guards. Morever, it contended that the security guards assigned to the
SSS do not have any legal basis to file a complaint against it for lack of contractual privity.
Finding for petitioner, the Regional Director of the DOLE-NCR ordered respondent SSS to pay
complainant the sum of P 1,600,858.46 representing the wage differentials under Wage Order No. NCR03 of the 168 Security Guards of Catalina Security Agency covering the period from December 16, 1993
to June 24, 1994.
The SSS moved to reconsider the September 16, 1994 Order of the Regional Director, praying that the
computation be revised. By Order of December 9, 1994, the Regional Director modified his September
16, 1994 Order by reducing the amount payable by the SSS to petitioner. The amount was reduced to P
1,237,740.00.
The SSS appealed to the Secretary of Labor upon several assigned errors. Thereafter, the
Secretary of Labor, by Order of June 22, 1995, set aside the order of the Regional Director and remanded
the records of the case "for recomputation of the wage differentials using P 5,281.00 as the basis of the
45

wage adjustment." And the Secretary held petitioners security agency "Jointly and severally liable for
wage differentials, the amount of which should be paid directly to the security guards concerned."
Issues:
1. Whether or not the Secretary of Labor has jurisdiction to review appeals from decisions of the Regional
Directors.
2. Whether or not SSS is liable to pay petitioner for wage differentials.
Contentions:
Petitioner asserts that the Secretary of Labor does not have jurisdiction to review appeals from
decisions of the Regional Directors in complaints filed under Article 129 of the Labor Code which
provides:
ART. 129. RECOVERY OF WAGES, SIMPLE MONEY CLAIMS AND OTHER BENEFITS. Upon
complaint of any interested party, the regional director of the Department of Labor and Employment or
any duly authorized hearing officers of the Department is empowered, through summary proceeding and
after due notice, to hear and decide any matter involving the recovery of wages and other monetary
claims and benefits, including legal interest, owing to an employee or person employed in domestic or
household service or househelper under this Code, arising from employer-employee relations: Provided,
That such complaint does not include a claim for reinstatement; Provided, further, That the aggregate
money claim of each employee or househelper does not exceed Five Thousand pesos (P5,000.00). The
regional director or hearing officer shall decide or resolve the complaint within thirty (30) calendar days
from the date of the filing of the same. Any sum thus recovered on behalf of any employee or househelper
pursuant to this Article shall be held in a special deposit account by, and shall be paid on order of, the
Secretary of Labor and Employment or the regional director directly to the employee or househelper
concerned. Any such sum not paid to the employee or househelper, because he cannot be located after
diligent and reasonable effort to locate him within a period of three (3) years, shall be held as a special
fund of the Department of Labor and Employment to be used exclusively for the amelioration and benefit
of workers.
Any decision or resolution of the regional director or officer pursuant to this provision may be
appealed on the same grounds provided in Article 223 of this Code, within five (5) calendar days from
receipt of a copy of said decision or resolution, to the National Labor Relations Commission which shall
resolve the appeal within ten (10) calendar days from submission of the last pleading required or allowed
under its rules.
xxx
Petitioner thus contends that as the appeal of SSS was filed with the wrong forum, it should have
been dismissed.
The SSS, on the other hand, contends that Article 128, not Article 129, is applicable to the case.
Article 128 provides:
ART. 128. VISITORIAL AND ENFORCEMENT POWERS
xxx
(b) Notwithstanding the provisions of Article 129 and 217 of this Code to the contrary, and in cases where
the relationship of employer-employee still exists, the Secretary of Labor and Employment or his duly
46

authorized representatives shall have the power to issue compliance orders to give effect to labor
legislation based on the findings of labor employment and enforcement officers or industrial safety
engineers made in the course of inspection.
xxx
An order issued by the duly authorized representative of the Secretary of Labor and Employment under
this article may be appealed to the latter.
x x x.
Held:
Neither the petitioners contention nor the SSSs is impressed with merit. Lapanday Agricultural
Development Corporation v. Court of Appeals instructs so. In that case, the security agency filed a
complaint before the RTC against the principal or client Lapanday for the upward adjustment of the
contract rate in accordance with Wage Order Nos. 5 and 6. Lapanday argued that it is the National Labor
Relations Commission, not the civil courts, which has jurisdiction to resolve the issue in the case, it
involving the enforcement of wage adjustment and other benefits due the agencys security guards as
mandated by several wage orders. Holding that the RTC has jurisdiction over the controversy, this Court
ruled:
We agree with the respondent that the RTC has jurisdiction over the subject matter of the present
case. It is well settled in law and jurisprudence that where no employer-employee relationship exists
between the parties and no issue is involved which may be resolved by reference to the Labor Code, other
labor statutes or any collective bargaining agreement, it is the Regional Trial Court that has jurisdiction.
In its complaint, private respondent is not seeking any relief under the Labor Code but seeks payment of a
sum of money and damages on account of petitioner's alleged breach of its obligation under their Guard
Service Contract. The action is within the realm of civil law hence jurisdiction over the case belongs to
the regular courts. While the resolution of the issue involves the application of labor laws, reference to the
labor code was only for the determination of the solidary liability of the petitioner to the respondent
where no employer-employee relation exists.
In the case at bar, even if petitioner filed the complaint on his and also on behalf of the security
guards, the relief sought has to do with the enforcement of the contract between him and the SSS which
was deemed amended by virtue of Wage Order No. NCR-03. The controversy subject of the case at bar is
thus a civil dispute, the proper forum for the resolution of which is the civil courts.
But even assuming arguendo that petitioners complaint were filed with the proper forum, for lack
of cause of action it must be dismissed. Articles 106, 107 and 109 of the Labor Code provide:
ART. 106. CONTRACTOR OR SUBCONTRACTOR. Whenever an employer enters into contract with
another person for the performance of the formers work, the employees of the contractor and of the
latters subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wage of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his contractor or
subcontractor to such employees to the extent of the work performed under the contract, in the same
manner and extent that he is liable to employees directly employed by him.
xxx
ART. 107 INDIRECT EMPLOYER. The provisions of the immediately preceding Article shall likewise
apply to any person, partnership, association or corporation which, not being an employer, contracts with
an independent contractor for the performance of any work, task, job or project.
47

ART. 109. SOLIDARY LIABILTY. The provisions of existing laws to the contrary notwithstanding, every
employer or indirect employer shall be held responsible with his contractor or subcontractor for any
violation of any provision of this Code. For purposes of determining the extent of their civil liability
under this Chapter, they shall be considered as direct employers.
As to the second issue, the liability of the SSS to reimburse petitioner arises only if and when
petitioner pays his employee-security guards "the increases" mandated by Wage Order No. NCR-03.
The records do not show that petitioner has paid the mandated increases to the security guards. The
security guards in fact have filed a complaint with the NLRC against petitioner relative to, among other
things, underpayment of wages.

San Miguel vs. Maerc Integrated Services, G.R. No. 144672, July 10, 2003
Facts:
In a decision by the court, it Decision petitioner jointly and severally liable with MAERC for the
payment of separation benefits and wage differential of 291 complainants. Petitioner reiterated that no
employer- employee relationship exists between it and the complainants. And that MAERC is an
independent contractor hence petitioner should not be Decision solidarily liable with it. It disputes this
courts finding that MAERC solely engaged the services of complainants and exercised control over the
complainants conduct; that no intervention or influence could have been extended by it in the selection or
hiring of complainants or the majority of them had worked to the petitioner before it signed a contract
with MAERC.
Issue: Whether or not an employer- employee relationship exists between the parties;
Ruling:
Petitioners contention must be rejected. While the continuity of service rendered by the workers
to petitioner by itself does not signify an employer- employee relationship, it was Decision to be so
considering the other circumstances present. More so, since the workers continued to work for petitioner
without break from their former employer and then as employees of MAERC even before the latter was
incorporated. The record adequately supports the fact that MAERC admitted recruiting workers for
petitioner before its incorporation.
Most importantly, petitioner refutes this Courts conclusion that petitioner exercised control over
the workplace. It stresses that checkers assigned to the workplace did not stay there continuously to merit
the conclusion that they maintained constant presence as Decision by the court.
We disagree. While petitioners checkers may not have stayed the full eight hours in the workplace
because they had to leave for their office to make their reports, their attendance need not be continuous to
be considered constant and therefore an indication of control. We find in fact that they maintained
sufficient presence at the workplace to be able to pinpoint the workers whose performance was not at par
and to report who they are.

Mariveles Shipyard vs. CA, G.R. No. 144134, Nov. 11, 2003
48

Facts:
Sometime in October 1993, petitioner Mariveles Shipyard Corp. engaged the services of Longest Force
Investigation and Security Agency, Inc. to render security services at its premises. Petitioner religiously
complied with the terms of the contract, promptly paying its bills and the contract rates. However, it
found the services unsatisfactory and inadequate causing it to terminate its contract with Longest Force.
Longest force in turn terminated the employment of the security guards deployed to petitioner.
On September 2, 1996 private respondents filed a case of illegal dismissal, underpayment of
wages pursuant to the PNPSOSIA-PADPAO rates, nonpayment of overtime pay, premium pay for holiday
and rest day, service incentive leave pay, 13th month pay and attorneys fees against petitioner and Longest
Force. Labor Arbiter and NLRC ruled in favor of private respondents and declared Longest Force and
petitioner jointly and severally liable to pay the money claims of complainants.
Issue: Whether or not petitioner is jointly and severally liable with Longest Force.
Held:
Petitioners liability is joint and several with Longest Force pursuant to Art 106, 107 and 109 of the Labor
Code. When petitioner contracted for security services with Longest Force as the security agency that
hired private respondents to work as guards for the shipyard corporation, petitioner became indirect
employer of private respondents pursuant to Art 107. Following Art 106, when the agency as contractor
failed to pay the guards, the corporation as principal becomes jointly and severally liable for the guards
wages.
Petitioner cannot evade its liability by claiming that it had religiously paid the compensation of
the guards as stipulated under the contract. Labor Standards are enacted by the legislature to alleviate the
plight of workers whose wages barely meet the costs of their basic needs.
However, petitioner has the right of reimbursement from his co-debtor.

New Golden City Builders vs. CA, G.R. No. 154715, Dec. 11, 2004
Facts:
On April 4, 1995, petitioner New Golden City Builders and Development Corporation, a corporation
engaged in the construction business, entered into a construction contract with Prince David Development
Corporation for the construction of a 17-storey office and residential condominium building. Petitioner
engaged the services of Nilo Layno Builders to do the specialized "concrete works, form works and steel
rebars works". Pursuant to the contract, Nilo Layno Builders hired private respondents to perform work at
the project. After the completion of the phase for which Nilo Layno Builders was contracted sometime in
1996, private respondents filed a complaint case against petitioner and its president, Manuel Sy, with the
Arbitration Branch of the NLRC for "unfair labor practice, non-payment of 13th month pay, non-payment
49

of 5 days service incentive leave, illegal dismissal and severance pay in lieu of reinstatement." The Labor
Arbiter rendered a decision finding that Nilo Layno Builders was a labor-only-contractor; thus, private
respondents were deemed employees of the petitioner.
Issues:
Whether Nilo Layno Builders was an "independent contractor" or a "labor-only" contractor.
Whether or not there existed an employer-employee relationship between the petitioner and the
respondent.
Held:
Section 8, Rule VIII, Book III, of the Omnibus Rules Implementing the Labor Code, 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, equipments, machineries, work premises,
and other materials which are necessary in the conduct of the business.
Nilo Layno Builders is undertaking permissible labor or job contracting. Nilo Layno Builders is a duly
licensed labor contractor carrying on an independent business for a specialized work that involves the use
of some particular, unusual and peculiar skills and expertise, like concrete works, form works and steel
rebars works. As a licensed labor contractor, it complied with the conditions set forth in Section 5, Rule
VII-A, Book III, Rules to Implement the Labor Code, among others, proof of financial capability and list
of equipment, tools, machineries and implements to be used in the business. Further, it entered into a
written contract with the petitioner, a requirement under Section 3, Rule VII-A, Book III, Rules to
Implement the Labor Code to assure the employees of the minimum labor standards and benefits provided
by existing laws.
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 to the results of the work. This is exactly the situation
obtaining in the case at bar. Nilo Layno Builders hired its own employees, the private respondents, to do
specialized work in the Prince David Project of the petitioner. The means and methods adopted by the
private respondents were directed by Nilo Layno Builders except that, from time to time, the engineers of
the petitioner visited the site to check whether the work was in accord with the plans and specifications of
the principal.
Second issue, we hold that there existed an employer-employee relationship between petitioner and
private respondents albeit for a limited purpose. In legitimate job contracting, the law creates an
employer-employee relationship for a limited purpose, i.e., to ensure that the employees are paid their
wages. The principal employer becomes jointly and severally liable with the job contractor only for the
payment of the employees' wages whenever the contractor fails to pay the same. Other than that, the
principal employer is not responsible for any claim made by the employees. From the foregoing
disquisition, the petitioner did not, as it could not, illegally dismiss the private complainants. Hence, it
could not be held liable for backwages and separation pay. Nevertheless, it is jointly and severally liable
50

with Nilo Layno Builders for the private complainants' wages, in the same manner and extent that it is
liable to its direct employees. The pertinent provisions of the Labor Code read:
ART. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another
person for the performance of the former's work, the employees of the contractor and of the latter's
subcontractor, if any, shall be paid in accordance with the provisions of this Code. In the event that the
contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the
employer shall be jointly and severally liable with his contractor or subcontractor to such employees to
the extent of the work performed under the contract, in the same manner and extent that he is liable to
employees directly employed by him.
ART. 107. Indirect employer. The provisions of the immediately preceding Article shall likewise apply
to any person, partnership, association or corporation which, not being an employer, contracts with an
independent contractor for the performance of any work, task, job or project.
NFA vs. MASADA SECURITY AGENCY, INC.G.R. No. 163448.March 08, 2005
Facts: On September 17, 1996, respondent MASADA Security Agency, Inc., entered into a one year
contract with NFA to provide security services to the various offices, warehouses and installations of the
scope of the NFA Region I.
Upon the expiration of said contract, the parties extended the effectivity of the contract on a monthly basis
under same terms and condition.
Meanwhile on several occasions, the Regional Tripartite Wages and Productivity Board issued several
wage orders mandating increases in the daily wage rate.
Therefore because of the wage orders mandating increase in the wage rates, respondent requested NFA for
a corresponding upward adjustment in the monthly contract rate consisting of the increases in the
daily minimum wage of the security guards as well as the corresponding raise in their overtime pay,
holiday pay, 13th month pay, holiday and rest day pay.
NFA, however, granted the request but only with respect to the increase in the daily wage and denied
the same with respect to the adjustments in the other benefits and remunerations computed on the basis
of the daily wage.
Respondent sought the intervention of the Office of the Regional Director, Regional Office No. I.
Despite the advisory of DOLE Regional Director sustaining the claim of respondent that the increase
mandated by Republic Act No. 6727 (RA 6727) and the wage orders issued by the RTWPB is not limited
to the daily pay, NFA maintained its stance that it is not liable to pay the corresponding adjustments
in the wage related benefits of respondents security guards.
Respondent filed with the Regional Trial Court of Quezon, City, Branch 83, a case for recovery of sum of
money against NFA.
On September 19, 2002, the trial court rendered a decision in favor of respondent holding that NFA is
liable to pay the security guards wage related benefits pursuant to RA 6727.
NFA appealed to the Court of Appeals but the same was dismissed on February 12, 2004. Hence, this
petition.
Issue:
Whether or not the liability of principals in service contracts under Section 6 of RA 6727 and the wage
orders issued by the Regional Tripartite Wages and Productivity Board is limited only to the increment in
the minimum wage.
51

Ruling:
General rule, payment of the increases in the wage rate of workers is ordinarily shouldered by the
employer. However, Section 6 of RA 6727, expressly lodged said obligation to the principals or indirect
employers in construction projects and establishments providing security, janitorial and similar
services.
Section 6 of RA 6727, provides:
SEC. 6. In the case of contracts for construction projects and for security, janitorial and similar services, the prescribed
increases in the wage rates of the workers shall be borne by the principals or clients of the construction/service
contractors and the contract shall be deemed amended accordingly. In the event, however, that the principal or client
fails to pay the prescribed wage rates, the construction/service contractor shall be jointly and severally liable with his
principal or client.
There is merit on the contention of NFA that its additional liability under the aforecited provision is limited only to
the payment of the increment in the statutory minimum wage rate, i.e., the rate for a regular eight (8) hour work
day.

The term wage as used in Section 6 of RA 6727 pertains to no other than the statutory minimum
wage which is the lowest wage rate fixed by law that an employer can pay his worker. Hence, the
prescribed increases or the additional liability to be borne by the principal under Section 6 of RA 6727 is
the increment or amount added to the remuneration of an employee for an 8-hour work.
Therefore, since the increase in wage referred to in Section 6 pertains to the statutory minimum wage as
defined herein, principals in service contracts cannot be made to pay the corresponding wage increase
in the overtime pay, night shift differential, holiday and rest day pay, premium pay and other
benefits granted to workers.
Applying the elementary rule on statutory construction that if the statute is clear, plain and free from
ambiguity, it must be given its literal meaning and applied without interpretation. Therefore, the
presumption is that lawmakers are well aware that the word wage as used in Section 6 means the
statutory minimum wage. If their intention was to extend the obligation of principals in service contracts
to the payment of the increment in the other benefits and remuneration of workers, it would have so
expressly specified. In not so doing, the only logical conclusion is that the legislature intended to limit
the additional obligation imposed on principals in service contracts to the payment of the increment in the
statutory minimum wage.
Although the general rule is that construction of a statute by an administrative agency charged with the
task of interpreting or applying the same is entitled to great weight and respect. The Court, however, is
not bound to apply said rule where such executive interpretation, is clearly erroneous, or when there is no
ambiguity in the law interpreted, or when the language of the words used is clear and plain, as in the case
at bar. Besides, administrative interpretations are at best advisory for it is the Court that finally
determines what the law means.
Hence, the interpretation given by the labor agencies in the instant case which went as far as
supplementing what is otherwise not stated in the law cannot bind this Court.
So long as the minimum obligation of the principal, i.e., payment of the increased statutory minimum
wage is complied with, the Wage Rationalization Act is not violated.

Abella vs. PLDT, G.R. No. 159469, June 8, 2005

Facts:
52

Respondent Peoples Security Incorporated entered into an agreement with the PLDT to provide
the latter with such number of qualified uniformed and properly armed security guards for the purpose of
guarding and protecting PLDTs installations and properties from theft, pilferage, intentional damage,
trespass or other unlawful acts. Under the agreement, it was expressly provided that there shall be no
employer-employee relationship between the PLDT and the security guards, which may be supplied to it
by PSI, and that the latter shall have the entire charge, control and supervision over the work and services
of the supplied security guards. It was likewise stipulated therein that PSI shall also have the exclusive
authority to select, engage, and discharge its security guards, with full control over their wages, salaries or
compensation.
Consequently, respondent PSI deployed security guards to the PLDT. The sixty-five (65) security
guards supplied by respondent PSI filed a Complaint for regularization against the PLDT alleging that
petitioner security guards have been employed by the company through the years and that PSI acted as the
middleman in the payment of the minimum pay to the security guards, but no premium for work rendered
beyond eight hours was paid to them nor were they paid their 13th month pay. In sum, the Complaint
states that inasmuch as the complainants are under the direct control and supervision of PLDT. Hence
they should be considered as regular employees by the latter.
Issue: Whether or not an employer- employee relationship exists between petitioners and respondent
PLDT;
Ruling:
We considered the following factors in considering the existence of an employer-employee
relationship: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power
to dismiss; and (4) the power to control the employees conduct.
Testimonies during the trial reveal that interviews and evaluation were conducted by PLDT to ensure that
the standards it set are met by the security guards. In fact, PLDT rarely failed to accept security guards
referred to by PSI but on account of height deficiency. The referral is nothing but for possible assignment
in a designated client which has the inherent prerogative to accept and reject the assignee for justifiable
grounds or even arbitrarily. We are thus convinced that the employer-employee relationship is deemed
perfected even before the posting of the complainants with the PLDT, as assignment only comes after
employment.
PSI is a legitimate job contractor pursuant to Section 8, Rule VII, Book II of the Omnibus Rules
Implementing the Labor Code. It is a registered corporation duly licensed by the Philippine National
Police to engage in security business. It has substantial capital and investment in the form of guns,
ammunitions, communication equipments, vehicles, office equipments like computer, typewriters,
photocopying machines, etc., and above all, it is servicing clients other than PLDT like PCIBank, Crown
Triumph, and Philippine Cable, among others. Here, the security guards which PSI had assigned to PLDT
are already the formers employees prior to assignment and if the assigned guards to PLDT are rejected
by PLDT for reasons germane to the security agreement, then the rejected or terminated guard may still
be assigned to other clients of PSI as in the case of Jonathan Daguno who was posted at PLDT on 21
February 1996 but was subsequently relieved therefrom and assigned at PCIBank Makati Square effective
10 May 1996. Therefore, the evidence as it stands is at odds with petitioners assertion that PSI is an inhouse agency of PLDT so as to call for a piercing of veil of corporate identity
It is PSI that determined and paid the petitioners wages, salaries, and compensation. As
elucidated by the Labor Arbiter, petitioners witness testified that his wages were collected and withdrawn
at the office of PSI and PLDT pays PSI for the security services on a lump-sum basis and that the wages
53

of complainants are only a portion of the total sum. The signature of the PLDT supervisor in the Daily
Time Records does not ipso facto make PLDT the employer of complainants inasmuch as the Labor
Arbiter had found that the record is replete with evidence showing that some of the Daily Time Records
do not bear the signature of a PLDT supervisor yet no complaint was lodged for nonpayment of the
guards wages evidencing that the signature of the PLDTs supervisor is not a condition precedent for the
payment of wages of the guards. Notably, it was not disputed that complainants enjoy the benefits and
incentives of employees of PSI and that they are reported as employees of PSI with the SSS.
Lastly, petitioners capitalize on the delinquency reports prepared by PLDT personnel against
some of the security guards as well as certificates of participation in civil disturbance course, certificates
of attendance in first aid training, certificate of completion in fire brigade training seminar and certificate
of completion on restricted land mobile radio telephone operation to show that the petitioners are under
the direct control and supervision of PLDT and that the latter has, in fact, the power to dismiss them.
The Labor Arbiter found from the evidence that the delinquency reports were nothing but
reminders of the infractions committed by the petitioners while on duty which serve as basis for PLDT to
recommend the termination of the concerned security guard from PLDT. As already adverted to earlier,
termination of services from PLDT did not ipso facto mean dismissal from PSI inasmuch as some of
those pulled out from PLDT were merely detailed at the other clients of PSI as in the case of Jonathan
Daguno, who was merely transferred to PCIBank Makati.

San Miguel vs. Aballa, G.R. No. 149011, June 28, 2005
Facts: Petitioner San Miguel Corporation entered into a one-year contract with the Sunflower MultiPurpose Cooperative. Sunflower undertook and agreed to perform and provide the company on a non
exclusive basis for a period of one year the following: Messengerial, Janitorial, Shrimp harvesting and
Sanitation. Pursuant to the contract, Sunflower engaged private respondents to render services at SMCs
Bacolod Shrimp Processing Plant. The contract was renewed and private respondent continued to perform
their tasks Later, private respondents filed a complaint praying to be declared as regular employees of
SMC, with claims of recovery of all benefits and privileges.
Issue: Whether or not Sunflower is engaged in labor only contracting
Ruling: 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 results of the work.
In legitimate labor contracting, the law creates an employer-employee relationship for a limited purpose,
i.e., to ensure that the employees are paid their wages. The principal employer becomes jointly and
severally liable with the job contractor, only for the payment of the employees wages whenever the
54

contractor fails to pay the same. Other than that, the principal employer is not responsible for any claim
made by the employees.
In labor-only contracting, the statute creates an employer-employee relationship for a comprehensive
purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the
principal employer and the latter is responsible to the employees of the labor-only contractor as if such
employees had been directly employed by the principal employer.
The following would show that sunflower is engaged in labor only contracting: What appears is that
Sunflower does not have substantial capitalization or investment in the form of tools, equipment,
machineries, work premises and other materials to qualify it as an independent contractor.
It is gathered that the lot, building, machineries and all other working tools utilized by private respondents
in carrying out their tasks were owned and provided by SMC.
Sunflower, during the existence of its service contract with respondent SMC, did not own a single
machinery, equipment, or working tool used in the processing plant. Everything was owned and provided
by respondent SMC. The lot, the building, and working facilities are owned by respondent SMC.
And from the job description provided by SMC itself, the work assigned to private respondents was
directly related to the aquaculture operations of SMC. Undoubtedly, the nature of the work performed by
private respondents in shrimp harvesting, receiving and packing formed an integral part of the shrimp
processing operations of SMC. As for janitorial and messengerial services, that they are considered
directly related to the principal business of the employer has been jurisprudentially recognized.
Furthermore, Sunflower did not carry on an independent business or undertake the performance of its
service contract according to its own manner and method, free from the control and supervision of its
principal, SMC, its apparent role having been merely to recruit persons to work for SMC.
Therefore since Sunflower is labor only contracting, there is the existence of an employer- employee
relationship between SMC and private respondents.

Manila Electric Co. vs. Benamira, G.R. No. 145271, July 14, 2005
Facts:
The individual respondents are licensed security guards formerly employed by Peoples Security,
Inc. and deployed as such at MERALCOs head office. The security service agreement between PSI and
MERALCO was terminated. Thereafter, 56 of PSIs security guards, including herein eight individual
respondents, filed a complaint for unpaid monetary benefits against PSI and MERALCO. Meanwhile, the
security service agreement between respondent Armed Security & Detective Agency, Inc., (ASDAI) and
MERALCO took effect. Subsequently, the individual respondents were absorbed by ASDAI and retained
at MERALCOs head office. Later, the security service agreement between respondent Advance Forces
Security & Investigation Services, Inc. (AFSISI) and MERALCO took effect, terminating the previous
security service agreement with ASDAI. The individual respondents amended their complaint to implead
AFSISI as party respondent.
Issue: Whether or not the individual respondents are employees of MERALCO;
Ruling:
No. In this case, the terms and conditions embodied in the security service agreement between
MERALCO and ASDAI expressly recognized ASDAI as the employer of individual respondents. Under
the security service agreement, it was ASDAI which (a) selected, engaged or hired and discharged the
55

security guards; (b) assigned them to MERALCO according to the number agreed upon; (c) provided the
uniform, firearms and ammunition, nightsticks, flashlights, raincoats and other paraphernalia of the
security guards; (d) paid them salaries or wages; and, (e) disciplined and supervised them or principally
controlled their conduct. The agreement even explicitly provided that [n]othing herein contained shall
be understood to make the security guards under this Agreement, employees of the COMPANY, it being
clearly understood that such security guards shall be considered as they are, employees of the AGENCY
alone. Clearly, the individual respondents are the employees of ASDAI.
Neither is the stipulation that the agency cannot pull out any security guard from MERALCO
without its consent an indication of control. It is simply a security clause designed to prevent the agency
from unilaterally removing its security guards from their assigned posts at MERALCOs premises to the
latters detriment.
The clause that MERALCO has the right at all times to inspect the guards of the agency detailed
in its premises is likewise not indicative of control as it is not a unilateral right. The agreement provides
that the agency is principally mandated to conduct inspections, without prejudice to MERALCOs right to
conduct its own inspections.
Moreover, ASDAI and AFSISI are not labor-only contractors. There is labor only contract
when the person acting as contractor is considered merely as an agent or intermediary of the principal
who is responsible to the workers in the same manner and to the same extent as if they had been directly
employed by him. On the other hand, job (independent) contracting is present if the following
conditions are met: (a) 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 to the result thereof; and (b) the contractor has substantial capital or investments in the form
of tools, equipment, machineries, work premises and other materials which are necessary in the conduct
of his business. Given the above distinction and the provisions of the security service agreements entered
into by petitioner with ASDAI and AFSISI, we are convinced that ASDAI and AFSISI were engaged in
job contracting.
The individual respondents can not be considered as regular employees of the MERALCO for,
although security services are necessary and desirable to the business of MERALCO, it is not directly
related to its principal business and may even be considered unnecessary in the conduct of MERALCOs
principal business, which is the distribution of electricity.
Furthermore, the fact that the individual respondents filed their claim for unpaid monetary
benefits against ASDAI is a clear indication that the individual respondents acknowledge that ASDAI is
their employer.

Granspan Development Corp., vs. Bernardo, G.R. No. 141464, Sept. 21, 2005
Facts: The instant controversy stemmed from a complaint for illegal dismissal and non-payment of
benefits filed with the Labor Arbiter by Ricardo Bernardo, Antonino Ceidoza and Edgar Del Prado,
respondents, against Grandspan Development Corporation, petitioner, and/or its warehouse manager,
Manuel G. Lee, docketed as NLRC Case No. RAB-IV-11-4605-92-RI.
Those three respondents alleged in their complaint that they were terminated illegally, the petitioners
(granspan development corp) sent them a notice that they were terminated on the grounds that they
56

vandalized the logbooks and for the use of profane language. Also they alleged that they were employed
by the petitioner, they were given ID and a daily salary of 104 php.
Petitioner denied these allegations, claiming that they are contractors. Thus there is no employeeemployer relationship, And that the warehouse manager received reports from their supervisor that those
respondents vandalized the companys log book, which violates their companys rules and regulations.
After the submission of the parties pleadings and position papers, the Labor Arbiter rendered a Decision
dated June 30, 1994 dismissing respondents complaint. In concluding that respondents were validly
dismissed from employment, the Labor Arbiter held that they were project employees whose services
were terminated upon completion of the project for which they were hired.
When the case was appealed at the NLRC, the NLRC ordered that the case is remanded to the labor
arbiter for proper proceeding. This prompted both parties to file motion for reconsideration, which were
denied by the NLRC.
Then respondents filed a petition for certiorari in Supreme Court(SC), which was referred to the Court of
Appeals (CA). While the case was pending, Del Prado died and was substituted by his surviving parent,
Edgardo Del Prado.
The CA, ruled in favor of the respondents. The court ordered that these respondents should be reinstated
and that del prado shall be paid of his separation pay.
Petitioner filed a motion for reconsideration. Respondents also filed a motion for reconsideration and/or
clarification praying that the Appellate Courts Decision be modified by awarding respondent Del Prado
his backwages. Court of Appeals promulgated its Resolution denying petitioners motion for
reconsideration but modifying its Decision in the sense that petitioner and J. Narag Construction are
ordered to pay respondent Del Prado his separation pay and backwages.
Hence, this petition for review on certiorari in SC.
Issues: Whether or Not there is employer-employee relationship in the case at bar.
Ruling: Yes, there is employer-employee relationship.
The SC upheld the CAs ruling. CA found that the J. Narag Construction assigned the respondents to
perform activities directly related to the main business of the petitioner, all the documents that proved the
employment of the respondents were all approved by the petitioner, such as the payrolls, the using of
equipment, materials and supplies of the J. narag construction. The termination of the respondents also
proves that there is employer-employee relationship, since it was the petitioner who terminated them and
the J. Narag construction.
Being a legitimate independent contractor cannot be pinned on J. Narag Construction, rather the CA held
that they are labor-only contractor which was upheld by the SC too.
On the basis of the records, we have no reason to deviate from the Appellate Courts finding that J. Narag
Construction is indeed a labor-only contractor. These are the reasons: (1) it is not registered as a building
contractor with the SEC; (2) it has no contract with petitioner; and (3) there is no proof of its financial
capability and has no list of equipment, tools, machineries and implements used in the business.
The allegations of the petitioners that the respondents are project employees, thus making them
contractors and that their services ended up when the project was finished is untenable. petitioner could
not present employment contracts signed by respondents showing that their employment was for the
duration of the HCMG or Sogo project. Likewise, as correctly observed by the Court of Appeals,
petitioner failed to present any report terminating the services of respondents when its projects were
actually finished.
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Time and again, we held that failure of the employer to file termination reports after every project
completion with the nearest public employment
office is an indication that respondents were
employees.
Records show that respondents were not served by petitioner with notices, verbal or written, informing
them of the particular acts for which their dismissal is sought. Neither were they required to give their
side regarding the alleged serious misconduct imputed against them.
We thus sustain the Court of Appeals ruling that respondents were deprived of both their substantive and
procedural rights to due process and, therefore, the termination of their employment is illegal.

ACEVEDO v ADVANSTAR, GR 157656

FACTS: The Advanstar Company Inc. (ACI) was engaged in the distribution and sale of various brands of
liquor and alcoholic spirits, including the Tanduay brand. To effectively launch its vigorous marketing
operations, ACI hired several salesmen, one of whom was Tony Jalapadan. On September 1, 1994, ACI
executed an Agreement for the Sale of Merchandise with Jalapadan for a period of one year, renewable
for another year under the same terms and conditions. Under the agreement, the parties agreed, inter alia,
that Jalapadan would promote and sell products of ACI, solicit from customers and outlets within his
designated territory, collect payments from such customers and account the same to ACI. Jalapadan was
provided with a 6-wheeler truck to facilitate the sale and delivery of products to customers and outlets
from his base of operations. Jalapadan was also authorized to employ and discharge a driver and other
assistants as he deemed necessary. It was stipulated, however, that the hired hands would be
considered his employees, and that he alone would be liable for their compensation and actual
expenses, including meals while on duty.
Jalapadan hired Arnulfo Acevedo as the driver of the truck assigned to him by ACI. Acevedo was tasked
to sell and deliver stocks to outlets and customers, collect payments, and to maintain the truck in good
and clean condition. He reported for work from 6:00 a.m. to 8:00 or 9:00 p.m. Acevedo received a daily
wage of P152.00 and was paid on a weekly basis. He also enjoyed sick leave privilege, which benefit
was convertible into cash. Sometime in June 1998, he received from Jalapadan a salary differential for
the period of December 1997 to June 1998, following a P15.00 increase in his daily wage. He received
his wages from Jalapadan through vouchers approved by the latter.
Sometime in July 1998, Acevedo failed to comply with Jalapadans instructions. At that time, they
were on their way to Plaridel, Misamis Oriental on board the truck. Jalapadan ordered Acevedo to alight
from the truck, and threatened to leave him behind to fend for himself. However, Jalapadan later asked
him to return to work and the latter agreed.
On October 7, 1998, Acevedo failed to report for work. The next day, Jalapadan inquired why he failed to
check and wash the truck. Jalapadan berated Acevedo and ordered him to get his personal belongings and
leave. Acevedo did as he was told. Later, Jalapadan urged Acevedo to go back to work, stating that they
were one big family, but Acevedo refused. He then signed a Letterdated October 10, 1998, informing
Jalapadan that he was resigning effective that date.
However, on October 26, 1998, Acevedo filed a complaint against Jalapadan, ACI and its general
manager, Felipe Loi, for illegal dismissal and for the recovery of backwages and other monetary benefits.
ISSUES:
58

1. WON ACI was the employer of Jalapadan---YES. LABOR-ONLY CONTRACTOR

2. WON Acevedo is an employee of ACI---YES
3. WON Acevedo resigned from his employment---NO
HELD:
ISSUES 1&2:
The pertinent provision of the Labor Code on labor-only contracting is paragraph 4 of Article 106, which
provides:
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.
Rule VIII-A, Book III, Section 4(f) of the Omnibus Rules Implementing the Labor Code further defines
labor-only contracting as an arrangement where the contractor or subcontractor merely recruits,
supplies or places workers to perform a job, work or service for a principal. In labor-only contracting, the
following elements are present:
(a)
The contractor or subcontractor does not have substantial capital or investment to actually
perform the job, work or service under its own account and responsibility;
(b)
The employees recruited, supplied or placed by such contractor or subcontractor, are
performing activities which are directly related to the main business of the principal.
In such case, the law creates an employee-employer relationship so that labor laws may not be
circumvented. The principal employer becomes solidarily liable with the labor-only contractor for all the
rightful claims of the employees. The labor-only contractor is considered merely as an agent of the
employer, the employer having been made, by law, responsible to the employees of the labor-only
contractor as if such employees had been directly employed by it.
On the other hand, permissible job contracting or subcontracting refers to an arrangement whereby a
principal agrees to put out or farm out with the contractor or subcontractor the performance or completion
of a specific job, work or service within a definite or predetermined period regardless of whether such
job, work or service is to be performed or completed within or outside the premises of the principal.
A person is considered engaging in legitimate job contracting or subcontracting if the following
conditions concur:
(a)
The 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;
(b)
The contractor or subcontractor has substantial capital or investment; and
(c)
The agreement between the principal and contractor or subcontractor assures the
contractual employees entitlement to all labor and occupational safety and health standards, free exercise
of the right to self-organization, security of tenure, and social and welfare benefits.
The test to determine the existence of an independent contractorship is whether one who claims to
be an independent contractor has contracted to do the work according to his own methods and
without being subject to the employers control except only as to the results. Each case must be
determined by its own facts and all the features of the relationship are to be considered.
59

In the case of Vinoya v. NLRC, the Court declared that it is not enough to show substantial capitalization
or investment in the form of tools, equipment, etc. to determine whether one is an independent contractor.
Other factors that may be considered include the following: whether or not the contractor is carrying on
an independent business; the nature and extent of the work; the skill required; the term and duration of the
relationship; the right to assign the performance of specified pieces of work; the control and supervision
of the work to another; the employers power with respect to the hiring, firing and payment of the
contractors workers; the control of the premises; the duty to supply premises, tools, appliances, materials
and labor; and the mode and manner or terms of payment.
In the present case, the respondents failed to prove that respondent Jalapadan was an independent
contractor. Indeed, the substantial evidence on record shows that he was merely a labor-only contractor.
First. The respondents failed to adduce a scintilla of evidence that respondent Jalapadan had any
substantial capital or investment, such as tools and equipment, to perform the work contracted for. There
is even no evidence that respondent Jalapadan had any assets, or that he maintained an office, staff or a
terminal for the truck entrusted to him by respondent ACI.
Second. Respondent Jalapadan bound and obliged himself to work exclusively for respondent ACI
during the terms of the agreement.
Third. Under the agreement, respondent ACI had the right to control not only the end to be attained
but also the manner and means to be used in accomplishing that end or purpose. Aside from Jalapadans
duties/obligations as salesman, respondent ACI could require him to perform other duties and
obligations. Respondent Jalapadan was, likewise, mandated to obey all rules, regulations, orders, and
instructions, whether oral or written, of respondent ACI. He was obliged to work only in the territory
assigned to him, which may be altered at any time upon the discretion of ACI. He was also prohibited
from overpricing or underpricing the products of respondent ACI, and was required to sell the same
according to the prices dictated solely by it. While Jalapadan was entitled to a monthly compensation
of P3,590.00 payable on a bi-monthly basis and an unspecified commission based on booking sales fully
remitted to respondent ACI, the latter had the absolute right to change, at any time, the amount and/or all
the payments of such compensation and commission. Moreover, notice of such changes was only for
information purposes. Furthermore, Jalapadan was obliged to inform respondent ACI of his activities,
situation or whereabouts. Since he did not have any truck for the delivery of products to customers or
outlets, he had to rely on the truck entrusted to him by respondent ACI or, in lieu thereof, a traveling
allowance of P600.00 a month which could even be changed. Respondent Jalapadan was prohibited from
incurring any other expenses unless permission was first secured from respondent ACI. He was
prohibited from using the truck for purposes other than the performance of his duties and responsibilities
under the agreement. Respondent Jalapadan was mandated to maintain the truck and its accessories in
clean and good order and condition. The agreement was for a period of one year, renewable under the
same terms and conditions but the parties could terminate the agreement upon notice to the other.
Moreover, while respondent ACI did not fix or impose any quota on respondent Jalapadan, it reserved the
right to do so.
Fourth. Respondent Jalapadan was obliged to pay the petitioners monthly wage of P3,648.00, as
well as that of his helper, another P4,000.00 a month, totaling P7,648.00, exclusive of other expenses such
as meals, gasoline, and the upkeep of the vehicle. On the other hand, respondent Jalapadan received from
respondent ACI only P3,590.00 a month as compensation. He had no other means of income because he
was obliged, under the agreement, to devote all his time for respondent ACI. Respondent Jalapadans
60

claim that he sold the products of the respondent ACI for a marked-up price as his commission is belied
by their agreement, which precisely prohibited him from selling such products at a different price.
Respondent Jalapadan was only entitled to a commission based on their booked sales. Aside from the fact
that such commission was not fixed, there is no evidence on record how much, if any, respondent
Jalapadan received from the respondent ACI by way of commission.
Considering all these, then, the Court concludes that the petitioners wages must have been paid for
by respondent ACI through respondent Jalapadan, its labor-only contractor.
ISSUE 3:
Ruling of NLRC and CA which the SC agrees with:
The only incident from which complainant drew the conclusion that he was dismissed from work is when
he was allegedly told to disembark from the vehicle. Nothing on record shows that he was terminated
from work. On the contrary, complainant himself reveals that previously (in July 1995) he was also told
to disembark to be left on the road by an angry Jalapadan, the latter went back to fetch him and told him
that we are just one family. Evidently, [these] incidents were mere expressions of anger on the part of
Jalapadan without intention of terminating his employment. Rather, it was complainant as admitted by
him who, this time, refused to return to work
When he testified before the Labor Arbiter, the petitioner admitted that he was not dismissed from
employment. In fact, respondent Jalapadan appealed to the petitioner to go back to work, and the latter
spurned such plea. The Court finds, however, that contrary to the rulings of the NLRC and the CA, the
petitioner did not resign from his employment.
Reliance on the handwritten letter of resignation dated October 10, 1998 signed and thumbmarked by the
petitioner is misplaced. The handwritten letter of resignation signed by the petitioner is inconsistent with
the respondents claim that respondent Jalapadan was the petitioners employer. This is so because the
said letter is addressed to Tanduay Corporation, and not to respondent Jalapadan, thus:
TANDUAY CORPORATION
OZAMIS BRANCH
THRU: MR. TONY JALAPADAN, SALESMAN
SIR:
I HAVE THE HONOR TO TENDER MY RESIGNATION, EFFECTIVE OCT. 10, 1998, BY REASON THAT
I AM SEARCHING FOR BETTER INCOME. BY VIRTUE THAT MY SALARY CURRENTLY IS NOT
SUFFICIENT FOR MY FAMILY.
HOPE AND PRAY FOR YOUR CONSIDERATION AND I REMAIN PRAYING FOR THE CONTINUOUS
SUCCESS OF YOUR MOST PROGRESSIVE COMPANY AND I HAVE NO CLAIM WHATSOEVER.
HANDTHUMBMARK

VERY TRULY YOURS,

HANDTHUMBMARK

(SGD.)________
ARNULFO ACEBEDO

Neither the petitioner nor the respondents explained why the letter was addressed to Tanduay
Corporation. Significantly, respondent Jalapadan did not deny the petitioners claim that the letter was
handwritten by him (Jalapadan). If such claim were true, there is neither rhyme nor reason why Tanduay
Corporation was its addressee. Moreover, it appears that the letter was coursed through respondent
Jalapadan as salesman of the said corporation, which is antithetical to the respondents claim that he was
the petitioners employer and an independent contractor of respondent ACI.

61

Big AA Manufacturer vs. Antonio, G.R. No. 1608504, March 3, 2006

Facts:
Petitioner is a sole proprietorship registered in the name of its proprietor, Enrico E. Alejo, with office
address at 311 Barrio Santol, Balagtas, Bulacan.
On January 13, 2000, herein respondents Eutiquio Antonio,Jay Antonio, Felicisimo Antonio, Leonardo
Antonio, Sr. and Roberto Fabian filed a complaint for illegal lay-off and illegal deductions before the
NLRCs Regional Arbitration Branch No. III. They claimed that they were dismissed on January 11, 2000
and sought separation pay from petitioner.
In respondents position paper,they alleged that as regular employees, they worked from 8:00 a.m. to 5:00
p.m. at petitioners premises using petitioners tools and equipment and they received P250 per day.
Eutiquio was employed as carpenter-foreman from 1991-1999; Jay as carpenter from 1993-1999;
Felicisimo as carpenter from 1994-1999; and Leonardo, Sr. also as carpenter from 1997-1999. According
to respondents, they were dismissed without just cause and due process; hence, their prayer for
reinstatement and full backwages.
On the other hand, petitioner denied that respondents were its regular employees. Instead, petitioner
claimed that Eutiquio Antonio was one of its independent contractors who used the services of the other
respondents. According to petitioner, its independent contractors were paid by results and were
responsible for the salaries of their own workers. Allegedly, there was no employer-employee relationship
between petitioner and respondents. However, petitioner stated it allowed respondents to use its facilities
to meet job orders.
Petitioner also denied that respondents were laid-off, since they were project employees only. It added
that since Eutiquio Antonio had refused a job order of office tables, their contractual relationship ended.
On June 1, 2000, the Labor Arbiter rendered a decisionordering petitioner to pay separation pay and
backwages. It ruled that respondents were regular employees because their work as carpenters was
necessary and desirable in petitioners business. Since Eutiquio worked in petitioners premises and was
without substantial capital or investment in the form of tools, equipment, machinery or work premises,
the Labor Arbiter held that Eutiquio was not an independent contractor. Noting the absence of contracts
providing the duration of respondents employment and of reports of project completion to the
Department of Labor and Employment (DOLE), the Labor Arbiter also rejected petitioners allegation
that respondents were project employees. The Labor Arbiter further held that respondents were
constructively dismissed when the Implementing Guidelines changed their status from regular employees
to project employees.
On appeal, the NLRC modified the Labor Arbiters decision by ordering petitioner to reinstate
respondents to their former positions or to pay them separation pay in case reinstatement was no longer
feasible, with full backwages in either case. It ruled that respondents were regular employees, not
independent contractors. It further held that petitioner failed to justify its reason for terminating
respondents and its failure to comply with the due process requirements.
Issue:
Whether or not respondents were regular employees and were illegally dismissed.
Ruling:
Respondents are petitioners regular employees. Respondents were employed for more than one year and
their work as carpenters was necessary or desirable in petitioners usual trade or business of
manufacturing office furniture. Under Article 280 of the Labor Code, the applicable test to determine
whether an employment should be considered regular or non-regular is the reasonable connection
62

between the particular activity performed by the employee in relation to the usual business or trade of the
employer.
True, certain forms of employment require the performance of usual or desirable functions and exceed
one year but do not necessarily result to regular employment under Article 280 of the Labor Code.Some
specific exceptions include project or seasonal employment. Yet, in this case, respondents cannot be
considered project employees. Petitioner had neither shown that respondents were hired for a specific
project the duration of which was determined at the time of their hiring nor identified the specific project
or phase thereof for which respondents were hired.
We also agree that Eutiquio was not an independent contractor for he does not carry a distinct and
independent business, and he does not possess substantial capital or investment in tools, equipment,
machinery or work premises.He works within petitioners premises using the latters tools and materials,
as admitted by petitioner. Eutiquio is also under petitioners control and supervision. Attesting to this is
petitioners admission that it allowed respondents to use its facilities for the "proper implementation" of
job orders. Moreover, the Implementing Guidelines regulating attendance, overtime, deadlines, penalties;
providing petitioners right to fire employees or "contractors"; requiring the carpentry division to join
petitioners exercise program; and providing rules on machine maintenance, all reflect control and
supervision over respondents.
Petitioner likewise alleges that it did not dismiss respondents as they were not its regular employees; that
respondents failed to sufficiently establish the fact of illegal dismissal; and that respondents abandoned
the work after it issued the Implementing Guidelines.
Having ruled that respondents are regular employees, we shall proceed to determine whether respondents
have, as petitioner contends, abandoned their work, or they have been illegally dismissed.
The consistent rule is that the employer must affirmatively show rationally adequate evidence that the
dismissal was for a justifiable cause, failing in which would make the termination illegal, as in this case.
For accusing respondents of abandonment, petitioner must present evidence (1) not only of respondents
failure to report for work or absence without valid reason, but (2) also of respondents clear intention to
sever employer-employee relations as manifested by some overt acts. The second element is the more
determinative factor.
Here, petitioners argument in support of its abandonment charge was that respondents may have resented
its issuance of the Implementing Guidelines. This, in our view, fails to establish respondents intention to
abandon their jobs. On the contrary, by filing the complaint for illegal dismissal within two days of their
dismissal on January 11, 2000 and by seeking reinstatement in their position paper, respondents
manifested their intention against severing their employment relationship with petitioner and abandoning
their jobs. It is settled that an employee who forthwith protests his layoff cannot be said to have
abandoned his work.
Finally, Article 279 of the Labor Code,provides that a regular employee who is unjustly dismissed from
work is 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. If
reinstatement is no longer feasible, separation pay equivalent to one month salary for every year of
service should be awarded as an alternative. This has been our consistent ruling in the award of separation
pay to illegally dismissed employees in lieu of reinstatement.

63

DOLE Philippines, Inc. Vs. Esteva G.R. No. 161115, Nov. 30, 2006
Facts: Petitioner is a corporation engaged principally in the production and processing of pineapple for
the export market. Respondents are members of the Cannery Multi-Purpose Cooperative (CAMPCO).
CAMPCO was organized in accordance with Republic Act No. 6938, otherwise known as the Cooperative
Code of the Philippines. Pursuant to the Service Contract, CAMPCO members rendered services to
petitioner. The number of CAMPCO members that report for work and the type of service they
performed depended on the needs of petitioner at any given time. Although the Service Contract
specifically stated that it shall only be for a period of six months, i.e., from 1 July to 31 December 1993,
the parties had apparently extended or renewed the same for the succeeding years without executing
another written contract. It was under these circumstances that respondents came to work for petitioner.
DOLE organized a Task Force that conducted an investigation into the alleged labor-only contracting
activities of the cooperatives. The Task Force identified six cooperatives that were engaged in labor-only
contracting, one of which was CAMPCO. In this case, respondents alleged that they started working for
petitioner at various times in the years 1993 and 1994, by virtue of the Service Contract executed between
CAMPCO and petitioner. All of the respondents had already rendered more than one year of service to
petitioner. While some of the respondents were still working for petitioner, others were put on stay
home status on varying dates in the years 1994, 1995, and 1996 and were no longer furnished with work
thereafter. Together, respondents filed a Complaint with the NLRC for illegal dismissal, regularization,
wage differentials, damages and attorneys fees. Petitioner denied that respondents were its employees. It
explained that it found the need to engage external services to augment its regular workforce, which was
affected by peaks in operation, work backlogs, absenteeism, and excessive leaves. It used to engage the
services of individual workers for definite periods specified in their employment contracts and never
exceeding one year. However, such an arrangement became the subject of a labor case, in which
petitioner was accused of preventing the regularization of such workers.
Issues

Whether or not the court of appeals was correct when it made its own factual findings and
disregarded the factual findings of the labor arbiter and the NLRC.
Whether or not CAMPCO was a mere labor-only contractor.

Ruling
The Court in the exercise of its equity jurisdiction may look into the records of the case and re-examine
the questioned findings. As a corollary, this Court is clothed with ample authority to review matters, even
if they are not assigned as errors in their appeal, if it finds that their consideration is necessary to arrive at
a just decision of the case. The same principles are now necessarily adhered to and are applied by the
Court of Appeals in its expanded jurisdiction over labor cases elevated through a petition for certiorari;
thus, we see no error on its part when it made anew a factual determination of the matters and on that
basis reversed the ruling of the NLRC.
On the second issue, CAMPCO was a mere labor-only contractor. First, although petitioner touts the
multi-million pesos assets of CAMPCO, it does well to remember that such were amassed in the years
following its establishment. In 1993, when CAMPCO was established and the Service Contract between
petitioner and CAMPCO was entered into, CAMPCO only had P6,600.00 paid-up capital, which could
hardly be considered substantial. It only managed to increase its capitalization and assets in the
succeeding years by continually and defiantly engaging in what had been declared by authorized DOLE
64

officials as labor-only contracting. Second, CAMPCO did not carry out an independent business from
petitioner. It was precisely established to render services to petitioner to augment its workforce during
peak seasons. Petitioner was its only client. Even as CAMPCO had its own office and office equipment,
these were mainly used for administrative purposes; the tools, machineries, and equipment actually used
by CAMPCO members when rendering services to the petitioner belonged to the latter. Third, petitioner
exercised control over the CAMPCO members, including respondents. Petitioner attempts to refute
control by alleging the presence of a CAMPCO supervisor in the work premises. Yet, the mere presence
within the premises of a supervisor from the cooperative did not necessarily mean that CAMPCO had
control over its members. Section 8(1), Rule VIII, Book III of the implementing rules of the Labor Code,
as amended, required for permissible job contracting that the contractor undertakes the contract work on
his 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. As alleged by the respondents, and unrebutted by petitioner, CAMPCO
members, before working for the petitioner, had to undergo instructions and pass the training provided by
petitioners personnel. It was petitioner who determined and prepared the work assignments of the
CAMPCO members. CAMPCO members worked within petitioners plantation and processing plants
alongside regular employees performing identical jobs, a circumstance recognized as an indicium of a
labor-only contractorship. Fourth, CAMPCO was not engaged to perform a specific and special job or
service. In the Service Contract of 1993, CAMPCO agreed to assist petitioner in its daily operations, and
perform odd jobs as may be assigned. CAMPCO complied with this venture by assigning members to
petitioner. Apart from that, no other particular job, work or service was required from CAMPCO, and it
is apparent, with such an arrangement, that CAMPCO merely acted as a recruitment agency for
petitioner. Since the undertaking of CAMPCO did not involve the performance of a specific job, but
rather the supply of manpower only, CAMPCO clearly conducted itself as a labor-only contractor. Lastly,
CAMPCO members, including respondents, performed activities directly related to the principal business
of petitioner. They worked as can processing attendant, feeder of canned pineapple and pineapple
processing, nata de coco processing attendant, fruit cocktail processing attendant, and etc., functions
which were, not only directly related, but were very vital to petitioners business of production and
processing of pineapple products for export.
The declaration that CAMPCO is indeed engaged in the prohibited activities of labor-only contracting,
then consequently, an employer-employee relationship is deemed to exist between petitioner and
respondents, since CAMPCO shall be considered as a mere agent or intermediary of petitioner.
Since respondents are now recognized as employees of petitioner, this Court is tasked to determine the
nature of their employment. In consideration of all the attendant circumstances in this case, this Court
concludes that respondents are regular employees of petitioner. As such, they are entitled to security of
tenure. They could only be removed based on just and authorized causes as provided for in the Labor
Code, as amended, and after they are accorded procedural due process. Therefore, petitioners acts of
placing some of the respondents on stay home status and not giving them work assignments for more
than six months were already tantamount to constructive and illegal dismissal.

SAN MIGUEL CORPORATIONr vs. NATIONAL LABOR RELATIONS COMMISSION AND

RAFAEL MALIKSI
65

FACTS:
On 16 October 1990, Rafael M. Maliksi filed a complaint against the San Miguel CorporationMagnolia Division, herein referred to as SMC and Philippine Software Services and Education Center
herein referred to as PHILSSEC to compel the said respondents to recognize him as a regular employee.
He amended the complaint on 12 November 1990 to include the charge of illegal dismissal because his
services were terminated on 31 October 1990.
The complainants employment record indicates that he rendered service with Lipercon Services
from 1 April 1981 to February 1982 as budget head assigned to SMC-Beer Division, then from July 1983
to April 1985 with Skillpower, Inc., as accounting clerk assigned to SMC-Magnolia Division, then from
October 1988 to 1989 also with Skillpower, Inc. as acting clerk assigned to SMC-Magnolia Finance, and
from October 1989 to 31 October 1990 with PHILSSEC assigned to Magnolia Finance as accounting
clerk. The complainant considered himself as an employee of SMC-Magnolia. Lipercon Services,
Skillpower, Inc. and PHILSSEC are labor-only contractors and any one of which had never been his
employer. His dismissal, according to him, was in retaliation for his filing of the complaint for
regularization in service. His dismissal was illegal there being no just cause for the action. He was not
accorded due process neither was his dismissal reported to the Department of Labor and Employment.
SMC likewise contends that PHILSSEC exercised exclusive managerial prerogative over the
complainant as to hiring, payment of salary, dismissal and most importantly, the control over his work.
SMC was interested only in the result of the work specified in the contract but not as to the means and
methods of accomplishing the same. Moreover, PHILSSEC has substantial capital of its own. It has an
IBM system, 3 computers, 17 IBM or IBM-compatible computers; it has a building where the computer
training center and main office are located. What it markets to clients are computer programs and training
systems on computer technology and not the usual labor or manpower supply to establishment concerns.
Moreover, what PHILSSEC set up employing the complainant, among others, has no relation to the
principal business of SMC, which is food and beverage..
The Labor Arbiter declared Maliksi a regular employee of PHILSSEC and absolved SMC from
liability. Maliksi appealed to the NLRC. In turn, in a decision dated January 26, 1998, the NLRC reversed
that of the Labor Arbiter by declaring Maliksi a regular employee of the petitioner and ordering the latter
to reinstate him without loss of seniority rights and with full benefits.
Issue:
WHETHER OR NOT PRIVATE RESPONDENT IS A REGULAR EMPLOYEE OF
PETITIONER SMC DESPITE ITS FINDINGS THAT PHILSSEC IS AN INDEPENDENT JOB
CONTRACTOR? (affirmative)
Ruling:
SMC concedes that Maliksi, before his employment with PHILSSEC, worked in SMC from
November 1988 to April 1990, but as employee of Skillpower and that he was previously assigned to
SMC between 1981 up to February 1985, for periods spread apart. The Labor Arbiter found, as earlier
stated, that Maliksi rendered service with Lipercon from 1 April 1981 to February 1982 as budget head
assigned to SMC-Beer Division; from July 1983 to April 1985 with Skillpower as accounting clerk
assigned to SMC-Magnolia Division, then from October 1988 to 1989 also with Skillpower as acting
clerk assigned to SMC-Magnolia Finance, and from October 1989 to 31 October 1990 with PHILSSEC
assigned to Magnolia Finance as accounting clerk. In all, it appears that, while under the employ of
either Lipercon or Skillpower, Maliksi has undisputedly rendered service with SMC for at least three
years and seven months.
66

The Court takes judicial notice of the fact that Lipercon and Skillpower were declared to be laboronly contractors, providing as they do manpower services to the public for a fee. The existence of an
employer-employee relationship is factual and we give due deference to the factual findings of both the
NLRC and the CA that an employer-employee relationship existed between SMC and Maliksi. Indeed,
having served SMC for an aggregate period of more than three (3) years through employment contracts
with these two labor contractors, Maliksi should be considered as SMCs regular employee. The hard fact
is that he was hired and re-hired by SMC to perform administrative and clerical work that was necessary
to SMCs business on a daily basis.
The act of hiring and re-hiring the petitioners over a period of time without considering them
as regular employees evidences bad faith on the part of private respondent. The public respondent
made a finding to this effect when it stated that the subsequent re-hiring of petitioners on a probationary
status clearly appears to be a convenient subterfuge on the part of management to prevent complainants
(petitioners) from becoming regular employees.
Issue:
Whether or not individual private respondents should first comply with certain requirements, like
submission of NBI and police clearances and submission to physicak and medical examinations and etc?
Ruling:
Considering that the clearances and examinations sought by petitioners from private respondents are
not 'periodic' in nature but are made preconditions for reinstatement, as in fact the petition filed alleged
that reinstatement shall be effective upon compliance with such requirements, which should not be the
case because this is not a case of initial hiring, the workers concerned having rendered years of service
to petitioners who are considered direct employers, and that regularization is a labor benefit that
should apply to all qualified employees similarly situated and may not be denied merely because
some employees were allegedly not parties to or were not impleaded in the voluntary arbitration
case, even as the finding of Labor Arbiter Genilo is to the contrary, this Court finds no grave abuse
of discretion committed by Labor Arbiter Genilo in issuing the questioned order of October 20,
1988.

Eparwa Security and Janitorial Services vs. Liceo De Cagayan University

Facts: Eparwa and LDCU, through their representatives, entered into a Contract for Security Services.
Subsequently, 11 security guardswhom Eparwa assigned to LDCU filed a complaint before the NLRCRAB against both Eparwa and LDCU for underpayment of salary, legalholiday pay, 13th month pay, rest
day, service incentive leave, night shift differential, overtime pay, and payment for attorney's fees. LDCU
madea cross-claim and prayed that Eparwa should reimburse LDCU for any payment to the security
guards.The LA found that the security guards are entitled to wage differentials and premium for holiday
and rest day work. The LA held Eparwa and LDCU solidarily liable pursuant to Article 109 of the Labor
Code and likewise orderd Eparwa to reimburse LDCU for whateveramount the latter may be required to
pay the security guards. On appeal to the NLRC, Eparwa and LDCU was held solidarily liable for the
wagedifferentials and premium for holiday and rest day work, but the NLRC did not require Eparwa to
reimburse LDCU for its payments to thesecurity guards. Upon motion for reconsideration, NLRC
declared that although Eparwa and LDCU are solidarily liable to the security guards forthe monetary
67

award, LDCU alone is ultimately liable ordering it to reimburse Eparwa for payments made to the
contractual employees. Uponappeal to the CA, the appellate court allowed LDCU to claim reimbursement
from Eparwa. Eparwa then filed an action for certiorari before the SC.
Issue: Whether or not LDCU alone is ultimately liable to the security guards for the wage differentials
and premium for holiday and rest daypay without any right of reimbursement from Eparwa.
Ruling: This joint and several liability of the contractor and the principal is mandated by the Labor Code
to assure compliance of theprovisions therein including the statutory minimum wage. The contractor is
made liable by virtue of his status as direct employer. The principal,on the other hand, is made the indirect
employer of the contractor's employees for purposes of paying the employees their wages should
thecontractor be unable to pay them. This joint and several liability facilitates, if not guarantees, payment
of the workers' performance of any work,task, job or project, thus giving the workers ample protection as
mandated by the 1987 Constitution. For the security guards, the actual source of the payment of their
wage differentials and premium for holiday and rest day work does not matter as long as they are paid.
This is the import of Eparwa and LDCU's solidary liability. Creditors, such as the security guards, may
collect from anyone of the solidary debtors. Solidary liabilitydoes not mean that, as between themselves,
two solidary debtors are liable for only half of the payment. LDCU's ultimate liability comes intoplay
because of the expiration of the Contract for Security Services. There is no privity of contract between the
security guards and LDCU, butLDCU's liability to the security guards remains because of Articles 106,
107 and 109 of the Labor Code. Eparwa is already precluded from askingLDCU for an adjustment in the
contract price because of the expiration of the contract, but Eparwa's liability to the security guards
remainsbecause of their employer-employee relationship. In lieu of an adjustment in the contract price,
Eparwa may claim reimbursement from LDCUfor any payment it may make to the security guards.
However, LDCU cannot claim any reimbursement from Eparwa for any payment it maymake to the
security guards.
Lapanday Agri Development Corp., vs. Court of Appeals, 324 SCRA 39
FACTS: On June 1986 private respondent and plaintiff entered into a Guard Service Contract.
Respondent provided security guards in defendant's banana plantation. The contract called for the
payment to a guard of P754.28 on a daily 8-hour basis and an additional P565.72 for a four hour overtime
while the shift-in-charge was to be paid P811.40 on a daily 8-hour basis and P808.60 for the 4-hour
overtime.
Wage Orders increasing the minimum wage in 1983 were complied with by the defendant. On June 16,
1984, Wage Order No. 5 was promulgated directing an increase of P3.00 per day on the minimum wage
of workers in the private sector and a P5.00 increase on the ECOLA. This was followed on November 1,
1984 by Wage Order No. 6 which further increased said minimum wage by P3.00 on the ECOLA. Both
Wage Orders contain the following provision:
"In the case of contract for construction projects and for security, janitorial and similar services, the
increase in the minimum wage and allowances rates of the workers shall be borne by the principal or
client of the construction/service contractor and the contracts shall be deemed amended accordingly,
subject to the provisions of Sec. 3 (b) of this order" (Sec. 6 and Sec. 9, Wage Orders No. 5 and 6,
respectively).
68

- Respondent demanded that its Guard Service Contract with defendant be upgraded in compliance with
Wage Order Nos. 5 and 6. Plaintiff refused. Their Contract expired on June 6, 1986 without the rate
adjustment called for Wage Order Nos. 5 and 6 being implemented. The security agency then filed a case
for the collection of a sum of money with the regional Trial Court that had jurisdiction over the case.
Lapanday opposed, stating the NLRC was the proper forum for the case.
ISSUES:
1. WON RTC has jurisdiction over the case
2. WON petitioner is liable to the private respondent for the wage adjustments provided under Wage
Order Nos. 5 and 6 and for attorney's fees
RULING:
1. YES
The enforcement of the written contract does not fall under the jurisdiction of the NLRC because the
money claims involved therein did not arise from employer-employee relations between the parties and is
intrinsically a civil dispute. Thus, jurisdiction lies with the regular courts. The RTC has jurisdiction over
the subject matter of the present case. It is well settled in law and jurisprudence that where no employeremployee relationship exists between the parties and no issue is involved which may be resolved by
reference to the Labor Code, other labor statutes or any collective bargaining agreement, it is the Regional
Trial Court that has jurisdiction.
In its complaint, private respondent is not seeking any relief under the Labor Code but seeks payment of a
sum of money and damages on account of petitioner's alleged breach of its obligation under their Guard
Service Contract. The action is within the realm of civil law hence jurisdiction over the case belongs to
the regular courts. While the resolution of the issue involves the application of labor laws, reference to the
labor code was only for the determination of the solidary liability of the petitioner to the respondent
where no employer-employee relation exists.
The liability of the petitioner to reimburse the respondent only arises if and when respondent actually
pays its employees the increases granted by Wage Order Nos. 5 and 6. Payment, which means not only
the delivery of money but also the performance, in any other manner, of the obligation, is the operative
fact which will entitle either of the solidary debtors to seek reimbursement for the share which
corresponds to each of the debtors.
It is not disputed that the private respondent has not actually paid the security guards the wage increases
granted under the Wage Orders in question. Neither is it alleged that there is an extant claim for such
wage adjustments from the security guards concerned, whose services have already been terminated by
the contractor. Accordingly, private respondent has no cause of action against petitioner to recover the
wage increases. Needless to stress, the increases in wages are intended for the benefit of the laborers and
the contractor may not assert a claim against the principal for salary wage adjustments that it has not
actually paid. Otherwise, as correctly put by the respondent, the contractor would be unduly enriching
itself by recovering wage increases, for its own benefit.
Finally, considering that the private respondent has no cause of action against the petitioner, private
respondent is not entitled to attorney's fees.
Petition GRANTED. The complaint of private respondent COMMANDO SECURITY SERVICE
AGENCY, INC. is hereby DISMISSED.

69

Escario vs. NLRC, 333 SCRA 257 [2000]

FACTS: Petitioners worked as merchandisers for CMC, a company engaged in manufacturing and
distributing food products. They filed a case against CMC to regularize their employment status. Pending
determination of the case, D.L. Admark, a promotional firm, dismissed the petitioners. Hence, they
amended their complaint to include illegal dismissal as a cause of action and impleaded D.L. Admark as
party-defendant.
The issue brought to the fore is whether petitioners are employees of CMC or D.L. Admark. IDESTH
The Labor Arbiter ruled that petitioners should be reinstated by CMC as they are employees engaged in
activities necessary and desirable in the usual business of CMC. The NLRC, on the other hand, ruled that
D.L. Admark is a legitimate independent contractor, which should be the one to reinstate the petitioners
with backwages.
Hence, this petition.
ISSUE: whether petitioners are employees of CMC or D.L. Admark. In resolving this, it is necessary to
determine whether D.L. Admark is a labor-only contractor or an independent contractor.
HELD:the Supreme Court affirmed the decision of the NLRC, ruling that based on the criteria for
determining whether there is labor-only contracting or job contracting, the status of D.L. Admark as a job
contractor or independent contractor, hence, the true employer of petitioners, was established in this case.
The Court also affirmed the NLRC finding that D.L. Admark had no just cause in dismissing petitioners
for allegedly disowning them as their employer.
There is labor-only contracting when the contractor or sub-contractor merely recruits, supplies or places
workers to perform a job, work or service for a principal. In labor-only contracting, the following
elements are present:
(a) The person supplying workers to an employer does not have substantial capital or investment in the
form of tools, equipment, machineries, work premises, among others; and
(b) The workers recruited and placed by such person are performing activities which are directly related
to the principal business of the employer. 7
In contrast, there is permissible job contracting when a principal agrees to put out or farm out with a
contractor or a subcontractor the performance or completion of a specific job, work or service within a
definite or predetermined period, regardless of whether such job or work or service is to be performed or
completed within or outside the premises of the principal. In this arrangement, the following conditions
must concur:
(a) The contractor carries on a distinct and independent business and undertakes the contract work on his
account under his own responsibility according to his own manner and method, free from the control and
70

direction of his employer or principal in all matters connected with the performance of his work except as
to the results thereof; and cdphil
(b) The contractor has substantial capital or investment in the form of tools, equipment, machineries (sic),
work premises, and other materials which are necessary in the conduct of his business.
In the recent case of Alexander Vinoya vs. NLRC, et al., 9 this Court ruled that in order to be considered
an independent contractor it is not enough to show substantial capitalization or investment in the form of
tools, equipment, machinery and work premises. In addition, the following factors need be considered: (a)
whether the contractor is carrying on an independent business; (b) the nature and extent of the work; (c)
the skill required; (d) the term and duration of the relationship; (e) the right to assign the performance of
specified pieces of work; (f) the control and supervision of the workers; (g) the power of the employer
with respect to the hiring, firing and payment of workers of the contractor; (h) the control of the premises;
(i) the duty to supply premises, tools, appliances, materials, and labor; and (j) the mode, manner and
terms of payment. 10
Based on the foregoing criterion, we find that D.L. Admark is a legitimate independent contractor.
Among the circumstances that tend to establish the status of D.L. Admark as a legitimate job contractor
are:
1) The SEC registration certificate of D.L. Admark states that it is a firm engaged in promotional,
advertising, marketing and merchandising activities.
2) The service contract between CMC and D.L. Admark clearly provides that the agreement is for the
supply of sales promoting merchandising services rather than one of manpower placement. 11
3) D.L. Admark was actually engaged in several activities, such as advertising, publication, promotions,
marketing and merchandising. It had several merchandising contracts with companies like Purefoods,
Corona Supply, Nabisco Biscuits, and Licron. It was likewise engaged in the publication business as
evidenced by its magazine the "Phenomenon." 12
4) It had its own capital assets to carry out its promotion business. It then had current assets amounting to
P6 million and is therefore a highly capitalized venture. 13 It had an authorized capital stock of
P500,000.00. It owned several motor vehicles and other tools, materials and equipment to service its
clients. It paid rentals of P30,020 for the office space it occupied.

Aboitiz Haulers vs. Dimapatoi, G.R. No. 148619, Sept. 19, 2006
Facts:
Petitioner Aboitiz Haulers, Inc. is a domestic corporation principally engaged in the nationwide
and overseas forwarding and distribution of cargoes. Private respondents Monaorai Dimapatoi, Cecilia
Agawin, Raul Mamate, Emmanuel Guerrero and Gemeniano Bigaw worked as checkers in the Mega
Warehouse, which is owned by the petitioner, located at the Tabacalera Compound, United Nations
Avenue, Manila.
Respondents maintain that during their employment with the petitioner, they were not paid their
regular holiday pay, night shift differential, 5-day service incentive leave, and overtime premium. They
also averred that illegal deductions were being made on their wages, particularly the contributions for a
Mutual Assistance Fund, a Cash Bond, and claims for damaged and misrouted cargoes incurred by
petitioner.
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On 17 May 1996, respondent Raul Mamate filed a complaint before the Department of Labor and
Employment (DOLE) for nonpayment of wages and other benefits, as well as illegal deductions. The
other respondents filed their own complaints. Since the claims of the respondents exceeded Five
Thousand Pesos (P5,000.00), the case was referred to the NLRC. Thereafter, respondents filed their
complaint for illegal dismissal and other money claims before the Arbitration Branch of the NLRC.
Petitioner claims that respondents are not its employees, rather they are the employees of Grigio
Security Agency and General Services (Grigio), a manpower agency that supplies security guards,
checkers and stuffers. It allegedly entered into a Written Contract of Service with Grigio on 1 March
1994. By virtue of the aforementioned Written Contract of Service, Grigio supplied petitioner with
security guards, checkers and stuffers for petitioner's Mega Warehouse. The respondents were among the
checkers that were assigned to the petitioner's warehouse.
Petitioner emphasizes that Grigio retained control over the respondents by providing their own
supervisors to oversee Grigio's personnel, as well as time cards to monitor the attendance of its personnel.
Petitioner also alleges that on 9 May 1996, the respondents left the warehouse and did not report to work
thereafter. As a result of the respondents' sudden abandonment of their work, there was no orderly and
proper turnover of papers and other company property in connection with the termination of the Written
Contract for Services.
Respondents, on the other hand, claim that most of them worked as checkers in petitioner's
warehouse even before 1 March 1994.
Issue: Whether or not Grigio is a "labor-only" contractor.
Ruling:
Grigio is a "labor-only" contractor. The first issue that needs to be resolved is whether Grigio is a
"labor-only" contractor, which is tantamount to a finding that the petitioner is the employer of the
respondents. Article 106 of the Labor Code 24 explains the relations which may arise between an
employer, a contractor and the contractor's employees thus:
ART. 106.
Contractor or subcontractor. Whenever an employer enters into a contract with another
person for the performance of the former's work, the employees of the contractor and of the latter's
subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his contractor or
subcontractor to such employees to the extent of the work performed under the contract in the same
manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of
labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may
make appropriate distinctions between labor only contracting and job contracting as well as
differentiations within these types of contracting and determine who among the parties involved shall be
considered the employer for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer does not
have substantial capital or investment in the form of tools, equipment, machineries, work premises,
among others, and the workers recruited and placed by such persons are performing activities which
directly related to the principal business of such employer. In such cases, the person or intermediary shall
72

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.
The first two paragraphs of Art. 106 set the general rule that a principal is permitted by law to
engage the services of a contractor for the performance of a particular job, but the principal, nevertheless,
becomes solidarily liable with the contractor for the wages of the contractor's employees. The third
paragraph of Art. 106, however, empowers the Secretary of Labor to make distinctions between
permissible job contracting and "labor-only" contracting, which is a prohibited act further defined under
the last paragraph. A finding that a contractor is a "labor-only" contractor is equivalent to declaring that
there is an employer-employee relationship between the principal and the employees of the supposed
contractor, and the "labor-only" contractor is considered as a mere agent of the principal, the real
employer. Section 7 of the Rules Implementing Articles 106 to 109 of the Labor Code, as amended,
reiterates the rules in determining the existence of employer-employee relationship between employer,
contractor or subcontractor, and the contractor's or subcontractor's employee.
Section 7.
Existence of an employer-employee relationship. The contractor or subcontractor shall
be considered the employer of the contractual employee for purposes of enforcing the provisions of the
Labor Code and other social legislation. The principal, however, shall be solidarily liable with the
contractor in the event of any violation of any provision of the Labor Code, including the failure to pay
wages.
The principal shall be deemed the employer of the contractual employee in any of the following cases, as
declared by a competent authority:
a. where there is a labor-only contracting; or
b. where the contracting arrangement falls within the prohibitions provided in Section 6
(Prohibitions) hereof.
In determining whether or not a "labor-only" contracting exists, Art. 106 of the Labor Code and Section 5
of the Rules Implementing Articles 106 to 109 of the Labor Code, as amended, provides the following
criteria: (1) 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 other things; (2) the
workers recruited and placed by such persons are performing activities which are directly related to the
principal business of such employer; and (3) the contractor does not exercise the right to control the
performance of the work of the contractual employee. In order that one is considered by law as a "laboronly" contractor, all three aforementioned criteria need not be present. If the contractor enters into an
arrangement characterized by any one of the criteria provided, this would be a clear case of "labor-only
contracting." The clear phrasing of Section 5 of the Rules Implementing
Articles 106 to 109 of the Labor Code, as amended, support this interpretation.
Section 5.
Prohibition against labor-only contracting. Labor-only contracting is hereby declared
prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal,
and any of the following elements are is present:
i)

The contractor or subcontractor does not have substantial capital or investment

which relates to the job, work or service to be performed and the employees
recruited, supplied or placed by such contractor or subcontractor are performing
activities which are directly related to the main business of the principal; or
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ii)

the contractor does not exercise the right to control over the performance of the
work of the contractual employee.
The foregoing provisions shall be without prejudice to the application of Article 248 (C) of the Labor
Code, as amended.
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements, machineries and work premises, actually and directly used by
the contractor or subcontractor in the performance or completion of the job, work or service contracted
out.
The "right to control" shall refer to the right reserved to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but also the manner and
means to be used in reaching that end.
The allegation of the petitioner that Grigio is an independent job contractor, and, therefore, this
case is one of permissible job contracting, is without basis. In this case, the respondents' work, as
warehouse checkers, is directly related to the principal business of the petitioner. Petitioner also exercises
the right to control and determines not only the end to be achieved, but also the manner and means to be
used in reaching that end. Lastly, petitioner failed to sufficiently prove that Grigio had "substantial capital
or investment."
The respondents, as checkers, were employed to check and inspect these cargoes, a task which is
clearly necessary for the petitioner's business of forwarding and distributing of cargoes. The petitioner did
not dispute the fact that the respondents were hired as checkers as early as 1992. The fact that they were
employed before the Written Contract of Services took effect on 24 February 1994, and continued with
their jobs until 1996, after the said contract had already expired on 24 February 1995, 29 indicates that the
respondents' work was indeed necessary for the petitioner's business. In a similar case, Guarin v. National
Labor Relations Commission, the workers' contracts were repeatedly renewed to perform services
necessary for the employer's business. Thus, the Court described the arrangement as "labor-only"
contracting:
The jobs assigned to the petitioners as mechanics, janitors, gardeners, firemen and grasscutters
were directly related to the business of Novelty as a garment manufacturer. In the case of Philippine Bank
of Communications vs. NLRC, 146 SCRA 347, we ruled that the work of a messenger is directly related
to a bank's operations. In its Comment, Novelty contends that the services which are directly related to
manufacturing garments are sewing, textile cutting, designs, dying, quality control, personnel,
administration, accounting, finance, customs, delivery and similar other activities; and that allegedly, "it is
only by stretching the imagination that one may conclude that the services of janitors, janitresses,
firemen, grasscutters, mechanics and helpers are directly related to the business of manufacturing
garments" (p. 78, Rollo). Not so, for the work of gardeners in maintaining clean and well-kept grounds
around the factory, mechanics to keep the machines functioning properly, and firemen to look out for
fires, are directly related to the daily operations of a garment factory. That fact is confirmed by Novelty's
rehiring the workers or renewing the contract with Lipercon every year from 1983 to 1986, a period of
three (3) years.
As Lipercon was a "labor-only" contractor, the workers it supplied Novelty became regular
employees of the latter.Where the employees are tasked to undertake activities usually desirable or
necessary in the usual business of the employer, the contractor is considered as a "labor-only" contractor
and such employees are considered as regular employees of the employer.
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In addition, Grigio did not undertake the performance of its service contract according to its own
manner and method, free from the control and supervision of its principal. The work activities, work
shifts, and schedules of the respondents, including the time allowed for "recess" were set under the
Written Contract of Services. This clearly indicates that these matters, which consist of the means and
methods by which the work is to be accomplished, were not within the absolute control of Grigio. By
stipulating these matters in a contract, Grigio is constrained to follow these provisions and would no
longer be able to exercise the freedom to alter these work shifts and schedules at its own convenience.
Such being the case, Grigio cannot be considered as an independent job contractor.
Petitioner's allegation that Grigio retained control over the respondents by providing supervisors
to monitor the performance of the respondents cannot be given much weight. Instead of exercising their
own discretion or referring the matter to the officers of Grigio, Grigio's supervisors were obligated to
refer to petitioner's supervisors any discrepancy in the performance of the respondents with their specified
duties. The Written Contract of Services provided that:
5.c.
That the GRIGIO personnel, particularly the supervisors, shall perform the following:
The Supervisor for the warehouse operation shall monitor the performance and productivity of all
the checkers, jacklifters, stuffers/strippers, forklift operators, drivers, and helpers. He shall coordinate
with AHI's supervisors regarding the operations at the Warehouse to ensure safety at the place of work.
He shall see to it that the cargoes are not overlanded, shortlanded, delivered at a wrong destination, or
misdelivered to consignee's port of destination. Any discrepancy shall be reported immediately to AHI's
Logistic Manager, Mr. Andy Valeroso.
The control exercised by petitioner's supervisors over the performance of respondents was to such
extent that petitioner's Warehouse Supervisor, Roger Borromeo, confidently gave an evaluation of the
performance of respondent Monaorai Dimapatoi, who likewise felt obliged to obtain such Certification
from Borromeo.
Petitioner's control over the respondents is evident. And it is this 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, that constitutes the most important index of the existence of the employeremployee relationship.
Lastly, the law casts the burden on the contractor to prove that it has substantial capital,
investment, tools, etc. Employees, on the other hand, need not prove that the contractor does not have
substantial capital, investment, and tools to engage in job-contracting. In this case, neither Grigio nor the
petitioner was able to present any proof that Grigio had substantial capital. There was no evidence
pertaining to its capitalization nor its investment in tools, equipment or implements actually used in the
performance or completion of the job, work, or service that it was contracted to render. Grigio was merely
expected to supply petitioner with manpower to carry out work necessary for its business, to be carried
out in the manner which petitioner provided in the contract.
Thus, Grigio is obviously a "labor-only" contractor since it did not have substantial capital or
investment which relates to the service performed; the respondents performed activities which were
directly related to the main business of the petitioner; and Grigio did not exercise control over the
performance of the work of the respondents. Consequently, the petitioner is considered as the employer of
the respondents.
In prohibiting "labor-only" contracting and creating an employer-employee relationship between
the principal and the supposed contractor's employees, the law intends to prevent employers from
75

circumventing labor laws intended to protect employees. In the case of Aurora Land Projects Corp. v.
National Labor Relations Commission, this Court pronounced:
The question as to whether an employer-employee relationship exists in a certain situation
continues to bedevil the courts. Some businessmen try to avoid the bringing about of an employeremployee relationship in their enterprises because that judicial relation spawns obligations connected with
workmen's compensation, social security, medicare, minimum wage, termination pay, and unionism. In
light of this observation, it behooves this Court to be ever vigilant in checking the unscrupulous efforts of
some of our entrepreneurs, primarily aimed at maximizing their return on investments at the expense of
the lowly workingman.
GSIS vs. NLRC, G.R. No. 157647, October 15, 2007,
Facts:
Tomas Lanting, doing business under the name and style of Lanting Security and Watchman
Agency (LSWA) entered into a Security Service Contract to provide security guards to the properties of
the Government Service Insurance System (GSIS) at the contract rate of P3,000.00 per guard per month.
During the effectivity of the contract, LSWA requested the GSIS for an upward adjustment of the
contract rate in view of Section 7 of Wage Order No. 1 and Section 3 of Wage Order No. 2, which were
issued by the Regional Tripartite Wages and Productivity Board-NCR pursuant to Republic Act No. 6727,
otherwise known as the Wage Rationalization Act.
Acting on the request of LSWA, the GSIS, through its Board of Trustees and under Board
Resolution No. 207, dated May 24, 1991, approved the upward adjustments of the contract price from
P3,000.00 to P3,716.07 per guard, per month effective November 1, 1990 to January 7, 1991, and
P4,200.00 effective January 8, 1991 to May 31, 1991. LSWA assigned security guards Daniel Fanila,
Hector Moreno, Isauro Ferrer, Rubin Wilfredo, Jesus Delima Jr., Maria Legaspi, Santiago Noto Jr., and
Virgilio Soriano (hereafter complainants) to guard one of GSIS's properties.
On March 15, 1993, GSIS terminated the Security Service Contract with LSWA. All the
complainants, except Virgilio Soriano, were absorbed by the incoming security agency. On March 7,
1994, complainants filed separate complaints against LSWA for underpayment of wages and non-payment
of labor standard benefits from March 1991 to March 15, 1993. Virgilio Soriano also complained of
illegal dismissal.
In its Position Paper, LSWA alleged that complainants were estopped from claiming that they
were underpaid because they were informed that the pay and benefits given to them were based on the
contract rate of P103.00 per eight hours of work or about P3,100.00 per month.
On August 9, 1994, LSWA filed a Third-Party Complaint against GSIS for underpayment of
complainants' wages.
In its Position Paper, GSIS alleged that the Third-Party Complaint states no cause of action
against it; that LSWA obligated itself in the Security Service Contract to be solely liable for the
enforcement of and compliance with all existing labor laws, rules and regulations; that the GSIS Board of
Trustees approved the upward adjustment on a month-to-month basis, at P4,200 per guard per month,
effective January 8, 1991 to May 31, 1991, under Board Resolution No. 207 dated May 24, 1991, which
was incorporated in the Security Service Contract; that GSIS fully paid the services of the security guards
as agreed upon in the Security Service Contract.
Issues: Whether GSIS is solidarily liable for payment of complainants-respondnents' salary differentials.
76

Ruling:
Yes. Articles 106 and 107 of the Labor Code provide:
ART. 106.
Contractor or subcontractor. Whenever an employer enters into contract with another
person for the performance of the former's work, the employees of the contractor and of the latter's
subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wage of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his contractor or
subcontractor to such employees to the extent of the work performed under the contract, in the same
manner and extent that he is liable to employees directly employed by him.
ART. 107
Indirect employer. The provisions of the immediately preceding Article shall likewise
apply to any person, partnership, association or corporation which, not being an employer, contracts with
an independent contractor for the performance of any work, task, job or project.
In this case, the GSIS cannot evade liability by claiming that it had fully paid complainants'
salaries by incorporating in the Security Service Contract the salary rate increases mandated by Wage
Order Nos. 1 and 2 by increasing the contract price from P3,000.00 to P3,176.07 per guard per month
effective November 1, 1990 to January 7, 1991, and P4,200.00 effective January 8, 1991 to May 31,
1991.
In Rosewood Processing, Inc. v. National Labor Relations Commission, 25 the Court explained
the rationale for the joint and several liability of the employer, thus:
The joint and several liability of the employer or principal was enacted to ensure compliance with
the provisions of the Code, principally those on statutory minimum wage. The contractor or subcontractor
is made liable by virtue of his or her status as a direct employer, and the principal as the indirect employer
of the contractor's employees. This liability facilitates, if not guarantees, payment of the workers'
compensation, thus, giving the workers ample protection as mandated by the 1987 Constitution. This is
not unduly burdensome to the employer. Should the indirect employer be constrained to pay the workers,
it can recover whatever amount it had paid in accordance with the terms of the service contract between
itself and the contractor.
Thus, the Court does not agree with the GSIS's claim that a double burden would be imposed
upon the latter because it would be paying twice for complainants' services. Such fears are unfounded.
Under Article 1217 of the Civil Code, if the GSIS should pay the money claims of complainants, it has
the right to recover from LSWA whatever amount it has paid in accordance with the terms of the service
contract between the LSWA and the GSIS.
Joint and solidary liability is simply meant to assure aggrieved workers of immediate and
sufficient payment of what is due them. This is in line with the policy of the State to protect and alleviate
the plight of the working class.

77

Republic of the Phils/SSC/SSS vs. Asiapro Cooperative

Facts:
Respondent Asiapro, as a cooperative, is composed of owners-members.Under its by-laws, ownersmembers are of two categories, to wit: (1) regular member, who is entitled to all the rights and privileges
of membership; and (2) associate member, who has no right to vote and be voted upon and shall be
entitled only to such rights and privileges provided in its by-laws, Its primary objectives are to provide
savings and credit facilities and to develop other livelihood services for its owners-members.In the
discharge of the aforesaid primary objectives, respondent cooperative entered into several Service
Contracts with Stanfilco - a division of DOLE Philippines, Inc. and a company based in Bukidnon.The
owners-members do not receive compensation or wages from the respondent cooperative.Instead, they
receive a share in the service surplus which the respondent cooperative earns from different areas of trade
it engages in, such as the income derived from the said Service Contracts with Stanfilco. The ownersmembers get their income from the service surplus generated by the quality and amount of services they
rendered, which is determined by the Board of Directors of the respondent cooperative.
In order to enjoy the benefits under the Social Security Law of 1997, the owners-members of the
respondent cooperative, who were assigned to Stanfilco requested the services of the latter to register
them with petitioner SSS as self-employed and to remit their contributions as such. Also, to comply with
Section 19-A of Republic Act No. 1161, as amended by Republic Act No. 8282, the SSS contributions of
the said owners-members were equal to the share of both the employer and the employee.
On 26 September 2002, however, petitioner SSS through its Vice-President for Mindanao Division, Atty.
Eddie A. Jara, sent a letter to the respondent cooperative, addressed to its Chief Executive Officer (CEO)
and General Manager Leo G. Parma, informing the latter that based on the Service Contracts it executed
with Stanfilco, respondent cooperative is actually a manpower contractor supplying employees to
Stanfilco and for that reason, it is an employer of its owners-members working with Stanfilco.Thus,
respondent cooperative should register itself with petitioner SSS as an employer and make the
corresponding report and remittance of premium contributions in accordance with the Social Security
Law of 1997.On 9 October 2002, respondent cooperative, through its counsel, sent a reply to petitioner
SSSs letter asserting that it is not an employer because its owners-members are the cooperative itself;
hence, it cannot be its own employer.Again, on 21 October 2002 petitioner SSS sent a letter to respondent
cooperative ordering the latter to register as an employer and report its owners-members as employees for
compulsory coverage with the petitioner SSS.Respondent cooperative continuously ignored the demand
of petitioner SSS.
Accordingly, petitioner SSS, on 12 June 2003, filed a Petition before petitioner SSC against the
respondent cooperative and Stanfilco praying that the respondent cooperative or, in the alternative,
Stanfilco be directed to register as an employer and to report respondent cooperatives owners-members as
covered employees under the compulsory coverage of SSS and to remit the necessary contributions in
accordance with the Social Security Law of 1997.The same was docketed as SSC Case No. 6-15507-03.
Respondent cooperative filed its Answer with Motion to Dismiss alleging that no employer-employee
relationship exists between it and its owners-members, thus, petitioner SSC has no jurisdiction over the
respondent cooperative.Stanfilco, on the other hand, filed an Answer with Cross-claim against the
respondent cooperative.
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I.

Whether the petitioner SSC has jurisdiction over the petition-complaint filed
before it by petitioner SSS against the respondent cooperative.
Petitioner SSCs jurisdiction is clearly stated in Section 5 of Republic Act No. 8282 as well as in Section
1, Rule III of the 1997 SSS Revised Rules of Procedure.
Section 5 of Republic Act No. 8282 provides:
SEC. 5.Settlement of Disputes. (a) Any dispute arising under this Act with respect to coverage, benefits,
contributions and penalties thereon or any other matter related thereto, shall be cognizable by the
Commission, x x x.(Emphasis supplied.)
Similarly, Section 1, Rule III of the 1997 SSS Revised Rules of Procedure states:
Section 1.Jurisdiction. Any dispute arising under the Social Security Act with respect to coverage,
entitlement of benefits, collection and settlement of contributions and penalties thereon, or any other
matter related thereto, shall be cognizable by the Commission after the SSS through its President,
Manager or Officer-in-charge of the Department/Branch/Representative Office concerned had first taken
action thereon in writing.(Emphasis supplied.)
It is clear then from the aforesaid provisions that any issue regarding the compulsory coverage of the SSS
is well within the exclusive domain of the petitioner SSC.It is important to note, though, that the
mandatory coverage under the SSS Law is premised on the existence of an employer-employee
relationship except in cases of compulsory coverage of the self-employed.
It is axiomatic that the allegations in the complaint, not the defenses set up in the Answer or in the
Motion to Dismiss, determine which court has jurisdiction over an action; otherwise, the question of
jurisdiction would depend almost entirely upon the defendant. Moreover, it is well-settled that once
jurisdiction is acquired by the court, it remains with it until the full termination of the case. The said
principle may be applied even to quasi-judicial bodies.
In this case, the petition-complaint filed by the petitioner SSS before the petitioner SSC against the
respondent cooperative and Stanfilco alleges that the owners-members of the respondent cooperative are
subject to the compulsory coverage of the SSS because they are employees of the respondent
cooperative.Consequently, the respondent cooperative being the employer of its owners-members must
register as employer and report its owners-members as covered members of the SSS and remit the
necessary premium contributions in accordance with the Social Security Law of 1997. Accordingly, based
on the aforesaid allegations in the petition-complaint filed before the petitioner SSC, the case clearly falls
within its jurisdiction.Although the Answer with Motion to Dismiss filed by the respondent cooperative
challenged the jurisdiction of the petitioner SSC on the alleged lack of employer-employee relationship
between itself and its owners-members, the same is not enough to deprive the petitioner SSC of its
jurisdiction over the petition-complaint filed before it.Thus, the petitioner SSC cannot be faulted for
initially assuming jurisdiction over the petition-complaint of the petitioner SSS.
Nonetheless, since the existence of an employer-employee relationship between the respondent
cooperative and its owners-members was put in issue and considering that the compulsory coverage of the
SSS Law is predicated on the existence of such relationship, it behooves the petitioner SSC to determine
if there is really an employer-employee relationship that exists between the respondent cooperative and its
owners-members.
The question on the existence of an employer-employee relationship is not within the exclusive
jurisdiction of the National Labor Relations Commission (NLRC).Article 217 of the Labor Code
enumerating the jurisdiction of the Labor Arbiters and the NLRC provides that:
ART. 217.JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. - (a) x x
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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.
Although the aforesaid provision speaks merely of claims for Social Security, it would necessarily include
issues on the coverage thereof, because claims are undeniably rooted in the coverage by the
system.Hence, the question on the existence of an employer-employee relationship for the purpose of
determining the coverage of the Social Security System is explicitly excluded from the jurisdiction of
the NLRC and falls within the jurisdiction of the SSC which is primarily charged with the duty of settling
disputes arising under the Social Security Law of 1997.
On the basis thereof, considering that the petition-complaint of the petitioner SSS involved the
issue of compulsory coverage of the owners-members of the respondent cooperative, this Court agrees
with the petitioner SSC when it declared in its Order dated 17 February 2004 that as an incident to the
issue of compulsory coverage, it may inquire into the presence or absence of an employer-employee
relationship without need of waiting for a prior pronouncement or submitting the issue to the NLRC for
prior determination.Since both the petitioner SSC and the NLRC are independent bodies and their
jurisdiction are well-defined by the separate statutes creating them, petitioner SSC has the authority to
inquire into the relationship existing between the worker and the person or entity to whom he renders
service to determine if the employment, indeed, is one that is excepted by the Social Security Law of
1997 from compulsory coverage.
In determining the existence of an employer-employee relationship, the following elements are
considered: (1) the selection and engagement of the workers; (2) the payment of wages by whatever
means; (3) the power of dismissal; and (4) the power to control the workers conduct, with the latter
assuming primacy in the overall consideration. The most important element is the employers control
of the employees conduct, not only as to the result of the work to be done, but also as to the means
and methods to accomplish. The power of control refers to the existence of the power and not
necessarily to the actual exercise thereof.It is not 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.
All the aforesaid elements are present in this case.
First.It is expressly provided in the Service Contracts that it is the respondent cooperative which has the
exclusive discretion in theselection and engagement of the owners-members as well as its team
leaders who will be assigned at Stanfilco. Second.Wages are defined as 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. In this case, the weekly stipends or the so-called
shares in the service surplus given by the respondent cooperative to its owners-members were in reality
wages, as the same were equivalent to an amount not lower than that prescribed by existing labor laws,
rules and regulations, including the wage order applicable to the area and industry; or the same shall not
be lower than the prevailing rates of wages. It cannot be doubted then that those stipends or shares in the
service surplus are indeed wages, because these are given to the owners-members as compensation in
rendering services to respondent cooperatives client, Stanfilco.Third.It is also stated in the abovementioned Service Contracts that it is the respondent cooperative which has the power to investigate,
discipline and remove the owners-members and its team leaders who were rendering services at
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Stanfilco. Fourth.As earlier opined, of the four elements of the employer-employee relationship, the
control test is the most important.In the case at bar, it is the respondent cooperative which has the sole
control over the manner and means of performing the services under the Service Contracts with
Stanfilco as well as the means and methods of work. Also, the respondent cooperative is solely and
entirely responsible for its owners-members, team leaders and other representatives at Stanfilco. All these
clearly prove that, indeed, there is an employer-employee relationship between the respondent
cooperative and its owners-members.
It is true that the Service Contracts executed between the respondent cooperative and Stanfilco expressly
provide that there shall be no employer-employee relationship between the respondent cooperative and its
owners-members. This Court, however, cannot give the said provision force and effect.
As previously pointed out by this Court, an employee-employer relationship actually exists between the
respondent cooperative and its owners-members.The four elements in the four-fold test for the existence
of an employment relationship have been complied with.The respondent cooperative must not be allowed
to deny its employment relationship with its owners-members by invoking the questionable Service
Contracts provision, when in actuality, it does exist.The existence of an employer-employee
relationship cannot be negated by expressly repudiating it in a contract, when the terms and
surrounding circumstances show otherwise.The employment status of a person is defined and
prescribed by law and not by what the parties say it should be.
It is settled that the contracting parties may establish such stipulations, clauses, terms and conditions as
they want, and their agreement would have the force of law between them.However, theagreed terms
and conditions must not be contrary to law, morals, customs, public policy or public order. The
Service Contract provision in question must be struck down for being contrary to law and public policy
since it is apparently being used by the respondent cooperative merely to circumvent the compulsory
coverage of its employees, who are also its owners-members, by the Social Security Law.
This Court is not unmindful of the pronouncement it made in Cooperative Rural Bank of Davao
City, Inc. v. Ferrer-Calleja wherein it held that:
A cooperative, therefore, is by its nature different from an ordinary business concern, being run either by
persons, partnerships, or corporations. Its owners and/or members are the ones who run and operate the
business while the others are its employees x x x.
An employee therefore of such a cooperative who is a member and co-owner thereof cannot invoke
the right to collective bargaining for certainly an owner cannot bargain with himself or his coowners. In the opinion of August 14, 1981 of the Solicitor General he correctly opined that employees of
cooperatives who are themselves members of the cooperative have no right to form or join labor
organizations for purposes of collective bargaining for being themselves co-owners of the cooperative.
However, in so far as it involves cooperatives with employees who are not members or co-owners thereof,
certainly such employees are entitled to exercise the rights of all workers to organization, collective
bargaining, negotiations and others as are enshrined in the Constitution and existing laws of the country.
The situation in the aforesaid case is very much different from the present case.The declaration made by
the Court in the aforesaid case was made in the context of whether an employee who is also an ownermember of a cooperative can exercise the right to bargain collectively with the employer who is the
cooperative wherein he is an owner-member.Obviously, an owner-member cannot bargain collectively
with the cooperative of which he is also the owner because an owner cannot bargain with himself.In the
instant case, there is no issue regarding an owner-members right to bargain collectively with the
cooperative.The question involved here is whether an employer-employee relationship can exist between
81

the cooperative and an owner-member.In fact, a closer look at Cooperative Rural Bank of Davao City,
Inc. will show that it actually recognized that an owner-member of a cooperative can be its own
employee.
It bears stressing, too, that a cooperative acquires juridical personality upon its registration with the
Cooperative Development Authority. It has its Board of Directors, which directs and supervises its
business; meaning, its Board of Directors is the one in charge in the conduct and management of its
affairs. With that, a cooperative can be likened to a corporation with a personality separate and distinct
from its owners-members.Consequently, an owner-member of a cooperative can be an employee of the
latter and an employer-employee relationship can exist between them.
In the present case, it is not disputed that the respondent cooperative had registered itself with the
Cooperative Development Authority, as evidenced by its Certificate of Registration No. 0-623-2460. In its
by-laws, its Board of Directors directs, controls, and supervises the business and manages the property of
the respondent cooperative. Clearly then, the management of the affairs of the respondent cooperative is
vested in its Board of Directors and not in its owners-members as a whole. Therefore, it is completely
logical that the respondent cooperative, as a juridical person represented by its Board of Directors, can
enter into an employment with its owners-members.
In sum, having declared that there is an employer-employee relationship between the respondent
cooperative and its owners-member, we conclude that the petitioner SSC has jurisdiction over the
petition-complaint filed before it by the petitioner SSS.

Almeda et al., vs. Asahi Glass, G.R. No. 177785, Sept. 3, 2008
Facts:
This a complaint for illegal dismissal with claims for moral and exemplary damages and attorneys fees
filed by Almeda, et al against Asahi Glass and San Sebastian Allied Services, Inc. SSASI. Petitioners
alleged that Asahi and SSASI entered into a service contract whereby SSASI undertook to provide Asahi
with the necessary manpower for its operations. Pursuant to such a contract, SSASI employed petitioners
Randy Almeda, Edwin Audencial, Nolie Ramirez and Ernesto Calicagan as glass cutters, and petitioner
Reynaldo Calicagan as Quality Controller, all assigned to work for respondent. Asahi terminated its
service contract with SSASI, which in turn, terminated the employment of petitioners on the same date.
Believing that SSASI was a labor-only contractor, and having continuously worked as glass cutters and
quality controllers for the respondent - functions which are directly related to its main line of business as
glass manufacturer - for three to 11 years, petitioners asserted that they should be considered regular
employees of the Asahi; and that their dismissal from employment without the benefit of due process of
law was unlawful.
Asahi claimed that petitioners were employees of SSASI and were merely assigned by SSASI to work for
respondent to perform intermittent services pursuant to an Accreditation Agreement. SSASI averred that it
was the one who hired petitioners and assigned them to work for respondent on occasions that the latters
work force could not meet the demands of its customers. Eventually, however, respondent ceased to give
job orders to SSASI, constraining the latter to terminate petitioners employment.

82

Issue: Are Almeda, et al employees of Asahi Glass even considering that they were originally hired by
San Sebastian Allied Services, Inc.?
Ruling:
Yes. Almeda, et al are employees of Asahi Glass.
Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to
put out or farm out to a contractor or subcontractor the performance or completion of a specific job, work
or service within a definite or predetermined period, regardless of whether such job, work or service is to
be performed or completed within or outside the premises of the principal. A person is considered
engaged in legitimate job contracting or subcontracting if the following conditions concur:
(a) The 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;
(b) The contractor or subcontractor has substantial capital or investment; and
(c) The agreement between the principal and contractor or subcontractor assures the contractual
employees entitlement to all labor and occupational safety and health standards, free exercise of the right
to self-organization, security of tenure, and social and welfare benefits.
On the other hand, labor-only contracting, a prohibited act, is an arrangement in which the contractor or
subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal.
In labor-only contracting, the following elements are present:
(a) The contractor or subcontractor does not have substantial capital or investment to actually perform the
job, work or service under its own account and responsibility;
(b) The employees recruited, supplied or placed by such contractor or subcontractor is performing
activities which are directly related to the main business of the principal.
In labor-only contracting, the statutes create an employer-employee relationship for a comprehensive
purpose: to prevent circumvention of labor laws. The contractor is considered as merely the agent of
the principal employer and the latter is responsible to the employees of the labor-only contractor as
if such employees are directly employed by the principal employer. Therefore, if SSASI was a laboronly contractor, then respondent shall be considered as the employer of petitioners who must bear the
liability for the dismissal of the latter, if any.
An important element of legitimate job contracting is that the contractor has substantial capital or
investment, which respondent failed to prove. There is a dearth of evidence to prove that SSASI
possessed substantial capital or investment when respondent began contractual relations with it more than
a decade before 2003. The Court did not find a single financial statement or record to attest to the
economic status and financial capacity of SSASI to venture into and sustain its own business independent
from petitioner.
Furthermore, the Court is unconvinced by respondents argument that petitioners were performing jobs
that were not directly related to respondents main line of business. Respondent is engaged in glass
manufacturing. One of the petitioners served as a quality controller, while the rest were glass cutters. The
only excuse offered by respondent - that petitioners services were required only when there was an
increase in the markets demand with which respondent could not cope - only prove even more that the
services rendered by petitioners were indeed part of the main business of respondent. It would mean that
petitioners supplemented the regular workforce when the latter could not comply with the markets
83

demand; necessarily, therefore, petitioners performed the same functions as the regular workforce. The
indispensability of petitioners services was fortified by the length and continuity of their performance,
lasting for periods ranging from three to 11 years.
More importantly, the Court finds that the crucial element of control over petitioners rested in respondent.
The power of control refers to the authority of the employer to control the employee not only with regard
to the result of work to be done, but also to the means and methods by which the work is to be
accomplished. It should be borne in mind that the power of control refers merely to the existence of
the power and not to the actual exercise thereof. It is not essential for the employer to actually
supervise the performance of duties of the employee; it is enough that the former has a right to
wield the power.
Petitioners followed the work schedule prepared by respondent. They were required to observe all rules
and regulations of the respondent pertaining to, among other things, the quality of job performance,
regularity of job output, and the manner and method of accomplishing the jobs. Other than being the one
who hired petitioners, there was absolute lack of evidence that SSASI exercised control over them or their
work.
The fact that it was SSASI which dismissed petitioners from employment is irrelevant. It is hardly proof
of control, since it was demonstrated only at the end of petitioners employment. What is more, the
dismissal of petitioners by SSASI was a mere result of the termination by respondent of its contractual
relations with SSASI.
SSASI is a labor-only contractor; hence, it is considered as the agent of respondent. Respondent is
deemed by law as the employer of petitioners.
Equally unavailing is respondents stance that its relationship with petitioners should be governed by the
Accreditation Agreement stipulating that petitioners were to remain employees of SSASI and shall not
become regular employees of the respondent. A party cannot dictate, by the mere expedient of a unilateral
declaration in a contract, the character of its business, i.e., whether as labor-only contractor or as job
contractor, it being crucial that its character be measured in terms of and determined by the criteria set by
statute.

84

Sasan, Sr. et al. vs. NLRC and EPCIB, G.R. No. 176240, October 17, 2008
Facts:
Equitable-PCI Bank (E-PCIBank), a banking entity entered into a Contract for Services with HI, a
corporation primarily engaged in the business of providing janitorial and messengerial services. Pursuant
to their contract, HI shall hire and assign workers to E-PCIBank to perform janitorial/messengerial and
maintenance services. The contract was impliedly renewed year after year. Petitioners were among those
employed and assigned to E-PCIBank at its branch along Gorordo Avenue, Lahug, Cebu City, as well as
to its other branches in the Visayas.
On 23 July 2001, petitioners filed with the Arbitration Branch of the NLRC separate complaints against
E-PCIBank and HI for illegal dismissal, with claims for separation pay, service incentive leave pay,
allowances, damages, attorneys fees and costs; later amended to include a claim for 13 th month-pay.
Petitioners claimed that they had become regular employees of E-PCIBank with respect to the activities
for which they were employed, having continuously rendered janitorial and messengerial services to the
bank for more than one year; that E-PCIBank had direct control and supervision over the means and
methods by which they were to perform their jobs; and that their dismissal by HI was null and void
because the latter had no power to do so since they had become regular employees of E-PCIBank.
E-PCIBank averred that it entered into a Contract for Services with HI, an independent job contractor
which hired and assigned petitioners to the bank to perform janitorial and messengerial services thereat.
It was HI that paid petitioners wages, monitored petitioners daily time records (DTR) and uniforms, and
exercised direct control and supervision over the petitioners and that therefore HI has every right to
terminate their services legally. E-PCIBank could not be held liable for whatever misdeed HI had
committed against its employees.
HI asserted that it was an independent job contractor engaged in the business of providing janitorial and
related services to business establishments, and E-PCIBank was one of its clients. Petitioners were its
employees, part of its pool of janitors/messengers assigned to E-PCIBank. The Contract for Services
between HI and E-PCIBank expired on 15 July 2000. E-PCIBank no longer renewed said contract with
HI. HI designated petitioners to new work assignments, but the latter refused to comply with the same.
Petitioners were not dismissed by HI, whether actually or constructively, thus, petitioners complaints
before the NLRC were without basis.
The LA rendered a Decision finding that HI was not a legitimate job contractor on the ground that it did
not possess the required substantial capital or investment to actually perform the job, work, or service
under its own account and responsibility as required under the Labor Code. HI is therefore a labor-only
contractor and the real employer of petitioners is E-PCIBank which is held liable to petitioners.
E-PCIBank and HI appealed the same to the NLRC. HI submitted before the NLRC several documents
which it did not present before the LA. The NLRC took into consideration the documentary evidence
presented by HI for the first time on appeal and, on the basis thereof, declared HI as a highly capitalized
venture with sufficient capitalization, which cannot be considered engaged in labor-only contracting.
The CA affirmed the findings of the NLRC that HI was a legitimate job contractor and that it did not
illegally dismiss petitioners.
Issues:
1. WON HI is a labor-only contactor
2. WON E-PCIBank should be deemed petitioners principal employer
3. WON petitioners were illegally dismissed from their employment.
85

Ruling:
HI is a legitimate job contractor.
Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to put
out or farm out to a contractor or subcontractor the performance or completion of a specific job, work or
service within a definite or predetermined period, regardless of whether such job, work or service is to be
performed or completed within or outside the premises of the principal. A person is considered engaged
in legitimate job contracting or subcontracting if the following conditions concur:
(a) The 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;
(b) The contractor or subcontractor has substantial capital or investment; and
(c) The agreement between the principal and contractor or subcontractor assures the contractual
employees entitlement to all labor and occupational safety and health standards, free exercise of the right
to self-organization, security of tenure, and social and welfare benefits.
In contrast, labor-only contracting, a prohibited act, is an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a job, work or service for a
principal. In labor-only contracting, the following elements are present:
(a) The contractor or subcontractor does not have substantial capital or investment to actually perform the
job, work or service under its own account and responsibility; and
(b) The employees recruited, supplied or placed by such contractor or subcontractor are performing
activities which are directly related to the main business of the principal.
In distinguishing between permissible job contracting and prohibited labor-only contracting, we
elucidated in Vinoya v. National Labor Relations Commission, that it is not enough to show substantial
capitalization or investment in the form of tools, equipment, etc. Other facts that may be considered
include the following: whether or not the contractor is carrying on an independent business; the nature
and extent of the work; the skill required; the term and duration of the relationship; the right to assign the
performance of specified pieces of work; the control and supervision of the work to another; the
employers power with respect to the hiring, firing and payment of the contractors workers; the control
of the premises; the duty to supply premises, tools, appliances, materials and labor; and the mode and
manner or terms of payment. Simply put, the totality of the facts and the surrounding circumstances of
the case are to be considered. Each case must be determined by its own facts and all the features of the
relationship are to be considered.
We take note that HI has been issued by the Department of Labor and Employment (DOLE) Certificate of
Registration Numbered VII-859-1297-048, stating among others that it had complied with the
requirements as provided for under the Labor Code, as amended, and its Implementing Rules.
The evidence on record also shows that HI is carrying on a distinct and independent business from EPCIBank. The employees of HI are assigned to clients to perform janitorial and messengerial services,
clearly distinguishable from the banking services in which E-PCIBank is engaged.
Substantial capital or investment refers to capital stocks and subscribed capitalization in the case of
corporations, tools, equipments, implements, machineries and work premises, actually and directly used
by the contractor or subcontractor in the performance or completion of the job, work or service contracted
out. An independent contractor must have either substantial capital or investment in the form of tools,
86

equipment, machineries, work premises, among others. The law does not require both substantial capital
and investment in the form of tools, equipment, machineries, etc. It is enough that it has substantial
capital. In the case of HI, it has proven both.
Once it is established that an entity such as in this case, HI has substantial capital, it was no longer
necessary to adduce further evidence to prove that it does not fall within the purview of labor-only
contracting. There is even no need for HI to refute the contention of petitioners that some of the activities
they performed such as those of messengerial services are directly related to the principal business of EPCIBank.
In any event, we have earlier declared that while these services rendered by the petitioners as janitors,
messengers and drivers are considered directly related to the principal business of a bank, in this case EPCIBank, nevertheless, they are not necessary in the conduct of its (E-PCIBANKs) principal business.
Etched in an unending stream of cases are four standards in determining the existence of an employeremployee relationship, namely: (a) the manner of selection and engagement of the putative employee; (b)
the mode of payment of wages; (c) the presence or absence of power of dismissal; and, (d) the presence or
absence of control of the putative employees conduct. Most determinative among these factors is the socalled control test.
All the circumstances establish that HI undertook said contract on its account, under its own
responsibility, according to its own manner and method, and free from the control and direction of EPCIBank. Where the control of the principal is limited only to the result of the work, independent job
contracting exists. The janitorial service agreement between E-PCIBank and HI is a case of permissible
job contracting.
Considering the foregoing, plus taking judicial notice of the general practice in private, as well as in
government institutions and industries, of hiring an independent contractor to perform special services,
ranging from janitorial, security and even technical services, we can only conclude that HI is a legitimate
job contractor. As such legitimate job contractor, the law creates an employer-employee relationship
between HI and petitioners which renders HI liable for the latters claims.
In view of the preceding conclusions, petitioners will never become regular employees of E-PCIBank
regardless of how long they were working for the latter.
Petitioners were not illegally dismissed by HI. Upon the termination of the Contract of Service between
HI and E-PCIBank, petitioners cannot insist to continue to work for the latter. Their pull-out from EPCIBank did not constitute illegal dismissal since, first, petitioners were not employees of E-PCIBank;
and second, they were pulled out from said assignment due to the non-renewal of the Contract of Service
between HI and E-PCIBank. At the time they filed their complaints with the Labor Arbiter, petitioners
were not even dismissed by HI; they were only off-detail pending their re-assignment by HI to another
client. And when they were actually given new assignments by HI with other clients, petitioners even
refused the same.

87

Purefoods Corp. vs. NLRC et al., G.R. No. 172241, November 20, 2008
FACTS:
Lolita Neri (Neri) originally filed a claim for nonpayment of additional wage increase, regularization,
nonpayment of service incentive leave, underpayment of 13 th month pay, and nonpayment of premium
pay for holiday and holiday pay against Purefoods Corporation (Purefoods). By July 4, 1992, however,
Neri was dismissed from her work as a Deli-Attendant. Subsequently, or on 13 July 1992, eleven (11)
other complainantsjoined forces with Neri and together they filed an amended complaint, with Neri
charging Purefoods with illegal dismissal.All the other complainants, save for Neri, were still working for
Purefoods at the time of the filing of the amended complaint. On August 31, 1993, Labor declared Neri
and the complainants as Purefoods' regular employees; and Neri as having been illegally dismissed and
entitled to reinstatement with payment of backwages. Purefoods filed a partial appeal, praying that the
claims of complainants be dismissed for lack of merit, or in the alternative, the case be remanded for
formal hearing on the merits and to implead D.L. Admark as a party-respondent.The NLRC granted the
appeal and remanded the case for further hearings on the factual issues.
The case was remanded to Labor Arbiter, who, after finding that Neri is not an employee of petitioner,
but rather of D.L. Admark, an independent labor contractor, dismissed the complaint. A
memorandum on appeal was nominally filed by all the complainants; the NLRC ruled in complainants'
favor and reversed and set aside the labor arbiter's decision. According to the NLRC, the pieces of
evidence on record established the employer-employee relationship between Purefoods and Neri and the
other complainants. Purefoods moved for the reconsideration of the decision but its motion was denied
for lack of merit. Hence, its recourse to the Court of Appeals via a petition for certiorari.
The Court of Appeals, relying on the case of Escario v. NLRC, held that D.L. Admark is a legitimate
independent contractor. However, it ruled that complainants are regular employees of Purefoods. Citing
Art. 280 of the Labor Code, the appellate court found that complainants were engaged to perform
activities which are usually necessary or desirable in the usual business or trade of Purefoods, and that
they were under the control and supervision of Purefoods' supervisors, and not of D.L. Admark's. It noted
that in the Promotions Agreements between D.L. Admark and Purefoods, there was no mention of the list
of D.L. Admark employees who will handle particular promotions for petitioner, and that complainants'
periods of employment are not fully covered by the Promotions Agreements.
Issue: Whether or not Neri and the other complainants are employees of PUREFOODS or A.D.
ADMARKS
Ruling:
The Court agrees with Purefoods' argument that Art. 280 of the Labor Codefinds no application in a
trilateral relationship involving a principal, an independent job contractor, and the latter's employees.
Indeed, the Court has ruled that said provision is not the yardstick for determining the existence of an
employment relationship because it merely distinguishes between two kinds of employees, i.e., regular
employees and casual employees, for purposes of determining the right of an employee to certain
benefits, to join or form a union, or to security of tenure; it does not apply where the existence of an
employment relationship is in dispute. It is therefore erroneous on the part of the Court of Appeals to rely
on Art. 280 in determining whether an employer-employee relationship exists between respondent Neri
and Purefoods.
88

Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to

put out or farm out with the contractor or subcontractor the performance or completion of a specific job,
work or service within a definite or predetermined period regardless of whether such job, work or service
is to be performed or completed within or outside the premises of the principal. In this arrangement, the
following conditions must be met: (a)the contractor carries on a distinct and independent business and
undertakes the contract work on his 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 his work except as to the results thereof; (b)the contractor has substantial capital or
investment; and(c)the agreement between the principal and contractor or subcontractor assures the
contractual employees' entitlement to all labor and occupational safety and health standards, free
exercise of the right to self-organization, security of tenure, and social welfare benefits.
To support its position that respondent is not its employee, Purefoods relies on the following: (i) the
Promotions Agreements it entered into with D.L. Admark; (ii) Department Order No. 10 (Series of 1997)
which defines legitimate contracting or subcontracting; and (iii) Escario v. NLRC wherein the Court
declared D.L. Admark as a legitimate labor contractor.
On the other hand, early on, Neri and the rest of the complainants admitted that they worked for petitioner
through D.L. Admark. However, they also averred that they were under the control and supervision of
petitioner's employeessalesmen, poultry sales managers, deli supervisorswho give them work orders
and to whom they submit weekly inventory reports and monthly competitive sales report. In support of
these statements, Neri appended several documents (various Identification Cards, Certification from
Rustan's Supermarkets stating that respondent Neri is from Purefoods, Memoranda to respondent Neri
written by a supervisor from
Purefoods, letters from Purefoods area sales managers introducing complainants as Purefoods
Merchandisers). Purefoods, meanwhile, claims that these documents must be taken in the context of the
performance of the service contracted outpromotion of its products.
In the first place, D.L. Admark's status as a legitimate independent contractor has already been established
in Escario v. NLRC. In the said case, complainants, through D.L. Admark, worked as merchandisers for
California Manufacturing Corporation (CMC). They filed a case before the labor arbiter for the
regularization of their employment status with CMC, and while the case was pending, D.L. Admark sent
termination letters to complainants. The complainants thereafter amended their complaint to include
illegal dismissal. The Court considered the following circumstances as tending to establish D.L. Admark's
status as a legitimate job contractor:
1) The SEC registration certificate of D.L. Admark states that it is a firm engaged in promotional,
advertising, marketing and merchandising activities.
2) The service contract between CMC and D.L. Admark clearly provides that the agreement is for the
supply of sales promoting merchandising services rather than one of manpower placement.
3) D.L. Admark was actually engaged in several activities, such as advertising, publication, promotions,
marketing and merchandising. It had several merchandising contracts with companies like Purefoods,
Corona Supply, Nabisco Biscuits, and Licron. It was likewise engaged in the publication business as
evidenced by its magazine the "Phenomenon."
4) It had its own capital assets to carry out its promotion business. It then had current assets amounting to
P6 million and is therefore a highly capitalized venture. It had an authorized capital stock of P500,000.00.
It owned several motor vehicles and other tools, materials and equipment to service its clients. It paid
rentals of P30,020 for the office space it occupied.
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Moreover, applying the four-fold test used in determining employer-employee relationship, the Court
found that: the employees therein were selected and hired by D.L. Admark; D.L. Admark paid their
salaries, as evidenced by the payroll prepared by D.L. Admark and sample contribution forms; D.L.
Admark had the power of dismissal as it admitted that it was the one who terminated the employment of
the employees; and finally, it was D.L. Admark who exercised control and supervision over the
employees.
Furthermore, it is evident from the Promotions Agreements entered into by Purefoods that D.L.
Admark is a legitimate labor contractor. A sample agreement reads in part:
WHEREAS, The FIRST PARTY is engaged in the general promotion business;
WHEREAS, The SECOND PARTY will launch its "Handog sa Graduates" promotion project;
WHEREAS, The FIRST PARTY has offered its services to the SECOND PARTY, in connection with the
said promotion project, and the latter has accepted the said offer;
NOW, THEREFORE, for and in consideration of the foregoing premises, and of the mutual convenience
between them, the parties have agreed as follows:
1. The FIRST PARTY shall handle and implement the "Handog sa Graduates" promotion project of the
SECOND PARTY, said project to last from February 1, 1992 to July 31, 1992.
2. The FIRST PARTY shall indemnify the SECOND PARTY for any loss or damage to the latter's
properties, if such loss or damage is due to the fault or negligence of the FIRST PARTY or its agents or
employees.
3. There shall be no employer-employee relationship between the FIRST PARTY or its agents or
employees and the SECOND PARTY.
4. In consideration for the services to be rendered by the FIRST PARTY to the SECOND PARTY, the
latter shall pay the former the amount of Two Million Six Hundred Fifty Two Thousand pesos only
(P2,652,000.00) payable as follows:
The agreements confirm that D.L. Admark is an independent contractor which Purefoods had
engaged to supply general promotion services, and not mere manpower services, to it. The
provisions expressly permit D.L. Admark to handle and implement Purefoods' project, and categorically
state that there shall be no employer-employee relationship between D.L. Admark's employees and
Purefoods. While it may be true that complainants were required to submit regular reports and were
introduced as Purefoods merchandisers, these are not enough to establish Purefoods' control over them.
Even if the report requirements are somehow considered as control measures, they were imposed only to
ensure the effectiveness of the promotion services rendered by D.L. Admark. 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.Indeed, it would be foolhardy for any company to completely give the
reins and totally ignore the operations it has contracted out.
Significantly, the pieces of evidence submitted by Neri do not support her claim of having been a regular
employee of Purefoods. We note that two "Statement of Earnings and Deductions"were issued for the
same period, December 1989, and in one "Statement," someone deliberately erased the notation "January
1997," thereby casting doubt on the authenticity of the said documents. Even the identification cards
presented by Neri are neither binding on Purefoods nor even indicative of her claimed employee status of
Purefoods, issued as they were by the supermarkets concerned and not by Purefoods itself. Moreover, the
check voucher issued by Purefoods marked "IN PAYMENT OF DL ADMARK DELI ATTENDANTS
12.00 PESOS ADJUSTMENT JAN 30, 1991 TO JUNE 22, 1992," signed and received by Neri, is proof
90

that Purefoods never considered Neri as its own employee, but rather as one of D.L. Admark's deli
attendants.
We also note that Neri herself admitted in her Sinumpaang Salaysay and in the hearings that she applied
with D.L. Admark and that she worked for Purefoods through D.L. Admark. Neri was aware from the
start that D.L. Admark was her employer and not Purefoods. She had kept her contract with D.L. Admark,
and inquired about her employment status with D.L. Admark. It was D.L. Admark, as her employer,
which had the final say in, and which actually effected, her termination.
In view of the foregoing, we hold that Neri is not an employee of Purefoods, but that of D.L. Admark.
In the absence of employer-employee relations between Neri and Purefoods, the complaint for
illegal dismissal and other monetary claims must fail.

Maranaw Hotels and Resort vs. Court of Appeals, et. al., G.R. No. 149660, Jan. 20, 2009
Facts:
Oabel was hired by petitioner as an extra beverage attendant. He worked in Century Park Hotel, an
establishment owned by the petitioner. Petitioner contracted with Manila Resource Development Corp or
MANRED.
Oabel was transferred to MANRED with the latter deporting itself as her employer. Oabel worked as
secretary, public relations, gift shop attendant, waitress and shop attendant. Oabel filed a petition for
regularization of employment. She was dismissed from employment.
Petitioner argues that it entered into a service agreement with MANRED. MANRED maintains that Oabel
is its employee and was willing to reinstate her.
Ruling:
Notably, private respondents purported employment with MANRED commenced only in 1996, way after
she was hired by the petitioner as extra beverage attendant on April 24, 1995. There is thus much
credence in the private respondents claim that the service agreement executed between the petitioner and
MANRED is a mere ploy to circumvent the law on employment, in particular that which pertains on
regularization.
In this regard, it has not escaped the notice of the Court that the operations of the hotel itself do not cease
with the end of each event or function and that there is an ever present need for individuals to perform
certain tasks necessary in the petitioners business. Thus, although the tasks themselves may vary, the
need for sufficient manpower to carry them out does not. In any event, as borne out by the findings of the
NLRC, the petitioner determines the nature of the tasks to be performed by the private respondent, in the
process exercising control.
This being so, the Court finds no difficulty in sustaining the finding of the NLRC that MANRED is a
labor-only contractor. Concordantly, the real employer of private respondent Oabel is the petitioner.
It appears further that private respondent has already rendered more than one year of service to the
petitioner, for the period 1995-1998, for which she must already be considered a regular employee,
pursuant to Article 280 of the Labor Code:
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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 service to be performed is seasonal in nature and
the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph:
Provided, That any employee who has rendered at least one year of service, whether such service is
continuous or broken, shall be considered a regular employee with respect to the activity in which
he is employed and his employment shall continue while such activity exists. (Emphasis supplied)

CCBPI vs. Agito et. al., G.R. No. 179546, Feb. 13, 2009
Facts:
Petitioner is a domestic corporation duly registered with the Securities and Exchange Commission (SEC)
and engaged in manufacturing, bottling and distributing soft drink beverages and other allied products.
Respondents filed before the NLRC two complaints against petitioner, Interserve, Peerless Integrated
Services, Inc., Better Builders, Inc., and Excellent Partners, Inc. for reinstatement with backwages,
regularization, nonpayment of 13th month pay, and damages.
Respondents alleged in their Position Paper that they were salesmen assigned at the Lagro Sales Office of
petitioner. They had been in the employ of petitioner for years, but were not regularized. Their
employment was terminated without just cause and due process. However, they failed to state the reason/s
for filing a complaint against Interserve; Peerless Integrated Services, Inc.; Better Builders, Inc.; and
Excellent Partners, Inc.
Petitioner filed its Position Paper (with Motion to Dismiss), where it averred that respondents were
employees of Interserve who were tasked to perform contracted services in accordance with the
provisions of the Contract of Services executed between petitioner and Interserve. Said Contract between
petitioner and Interserve, covering the period of 1 April 2002 to 30 September 2002, constituted
legitimate job contracting, given that the latter was a bona fide independent contractor with substantial
capital or investment in the form of tools, equipment, and machinery necessary in the conduct of its
business.
To prove the status of Interserve as an independent contractor, petitioner presented the following pieces of
evidence: (1) the Articles of Incorporation of Interserve; (2) the Certificate of Registration of Interserve
with the Bureau of Internal Revenue; (3) the Income Tax Return, with Audited Financial Statements, of
Interserve for 2001; and (4) the Certificate of Registration of Interserve as an independent job contractor,
issued by the Department of Labor and Employment (DOLE).
As a result, petitioner asserted that respondents were employees of Interserve, since it was the latter
which hired them, paid their wages, and supervised their work, as proven by: (1) respondents Personal
Data Files in the records of Interserve; (2) respondents Contract of Temporary Employment with
Interserve; and (3) the payroll records of Interserve.
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Petitioner, thus, sought the dismissal of respondents complaint against it on the ground that the Labor
Arbiter did not acquire jurisdiction over the same in the absence of an employer-employee relationship
between petitioner and the respondents.
Petitioner argues that there could not have been labor-only contracting, since respondents did not perform
activities that were indispensable to petitioners principal business. And, even assuming that they did,
such fact alone does not establish an employer-employee relationship between petitioner and the
respondents, since respondents were unable to show that petitioner exercised the power to select and hire
them, pay their wages, dismiss them, and control their conduct.
Issue: Whether or not Interserve is a legitimate job contractor.
Ruling: Interserve is not a legitimate job contractor.
Article 106.Contractor or subcontractor. - Whenever an employer enters into a contract with another
person for the performance of the formers work, the employees of the contractor and of the latters
subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance
with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to
such employees to the extent of the work performed under the contract, in the same manner and extent
that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to
protect the rights of workers established under this Code. In so prohibiting or restriction, he may make
appropriate distinctions between labor-only contracting and job contracting as well as differentiations
within these types of contracting and determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or circumvention of any provision of this
Code.
There is "labor-only" contracting where the person supplying workers to an employee 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.
The afore-quoted provision recognizes two possible relations among the parties: (1) the permitted
legitimate job contract, or (2) the prohibited labor-only contracting.
A legitimate job contract, wherein an employer enters into a contract with a job contractor for the
performance of the formers work, is permitted by law. Thus, the employer-employee relationship
between the job contractor and his employees is maintained. In legitimate job contracting, the law creates
an employer-employee relationship between the employer and the contractors employees only for a
limited purpose, i.e., to ensure that the employees are paid their wages. The employer becomes jointly and
severally liable with the job contractor only for the payment of the employees wages whenever the
contractor fails to pay the same. Other than that, the employer is not responsible for any claim made by
the contractors employees.On the other hand, labor-only contracting is an arrangement wherein the
contractor merely acts as an agent in recruiting and supplying the principal employer with workers for the
purpose of circumventing labor law provisions setting down the rights of employees. It is not condoned
by law. A finding by the appropriate authorities that a contractor is a "labor-only" contractor establishes an
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employer-employee relationship between the principal employer and the contractors employees and the
former becomes solidarily liable for all the rightful claims of the employees.
Section 5 of the Rules Implementing Articles 106-109 of the Labor Code, as amended, provides the
guidelines in determining whether labor-only contracting exists:
Section 5.Prohibition against labor-only contracting. Labor-only contracting is hereby declared
prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or
subcontractor merely recruits, supplies, or places workers to perform a job, work or service for a
principal, and any of the following elements are present:
i) The contractor or subcontractor does not have substantial capital or investment which relates to the job,
work, or service to be performed and the employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the main business of the principal; or
ii) The contractor does not exercise the right to control the performance of the work of the contractual
employee.
The foregoing provisions shall be without prejudice to the application of Article 248(C) of the Labor
Code, as amended.
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements, machineries and work premises, actually and directly used by
the contractor or subcontractor in the performance or completion of the job, work, or service contracted
out.
The "right to control" shall refer to the right reversed to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but also the manner and
means to be used in reaching that end. (Emphasis supplied.)
When there is labor-only contracting, Section 7 of the same implementing rules, describes the
consequences thereof:
Section 7. Existence of an employer-employee relationship.The contractor or subcontractor shall be
considered the employer of the contractual employee for purposes of enforcing the provisions of the
Labor Code and other social legislation. The principal, however, shall be solidarily liable with the
contractor in the event of any violation of any provision of the Labor Code, including the failure to pay
wages.
The principal shall be deemed the employer of the contractual employee in any of the following case, as
declared by a competent authority:
a. where there is labor-only contracting; or
b. where the contracting arrangement falls within the prohibitions provided in Section 6 (Prohibitions)
hereof.
Labor-only contracting would give rise to: (1) the creation of an employer-employee relationship between
the principal and the employees of the contractor or sub-contractor; and (2) the solidary liability of the
principal and the contractor to the employees in the event of any violation of the Labor Code.
The law clearly establishes an employer-employee relationship between the principal employer and the
contractors employee upon a finding that the contractor is engaged in "labor-only" contracting. Article
106 of the Labor Code categorically states: "There is labor-only contracting where the person supplying
workers to an employee 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." Thus,
performing activities directly related to the principal business of the employer is only one of the two
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indicators that "labor-only" contracting exists; the other is lack of substantial capital or investment. The
Court finds that both indicators exist in the case at bar.
Interserve did not have substantial capital or investment in the form of tools, equipment, machineries, and
work premises; and respondents, its supposed employees, performed work which was directly related to
the principal business of petitioner. Interserve falls under the definition of a "labor-only" contractor, under
Article 106 of the Labor Code; as well as Section 5(i) of the Rules Implementing Articles 106-109 of the
Labor Code, as amended.
Interserve is a labor-only contractor under Section 5(ii) of the Rules Implementing Articles 106-109 of the
Labor Code, as amended, since it did not exercise the right to control the performance of the work of
respondents.
Paragraph 3 of the Contract specified that the personnel of contractor Interserve, which included the
respondents, would comply with "CLIENT" as well as "CLIENTs policies, rules and regulations." It
even required Interserve personnel to subject themselves to on-the-spot searches by petitioner or its duly
authorized guards or security men on duty every time the said personnel entered and left the premises of
petitioner. Said paragraph explicitly established the control of petitioner over the conduct of respondents.
Although under paragraph 4 of the same Contract, Interserve warranted that it would exercise the
necessary and due supervision of the work of its personnel, there is a dearth of evidence to demonstrate
the extent or degree of supervision exercised by Interserve over respondents or the manner in which it
was actually exercised. There is even no showing that Interserve had representatives who supervised
respondents work while they were in the premises of petitioner.
Also significant was the right of petitioner under paragraph 2 of the Contract to "request the replacement
of the CONTRACTORS personnel." True, this right was conveniently qualified by the phrase "if from its
judgment, the jobs or the projects being done could not be completed within the time specified or that the
quality of the desired result is not being achieved," but such qualification was rendered meaningless by
the fact that the Contract did not stipulate what work or job the personnel needed to complete, the time for
its completion, or the results desired. The said provision left a gap which could enable petitioner to
demand the removal or replacement of any employee in the guise of his or her inability to complete a
project in time or to deliver the desired result. The power to recommend penalties or dismiss workers is
the strongest indication of a companys right of control as direct employer.1avvphil.zw+
Paragraph 4 of the same Contract, in which Interserve warranted to petitioner that the former would
provide relievers and replacements in case of absences of its personnel, raises another red flag. An
independent job contractor, who is answerable to the principal only for the results of a certain work, job,
or service need not guarantee to said principal the daily attendance of the workers assigned to the latter.
An independent job contractor would surely have the discretion over the pace at which the work is
performed, the number of employees required to complete the same, and the work schedule which its
employees need to follow.
The Contract of Services between Interserve and petitioner did not identify the work needed to be
performed and the final result required to be accomplished. Instead, the Contract specified the type of
workers Interserve must provide petitioner ("Route Helpers, Salesmen, Drivers, Clericals, Encoders&
PD") and their qualifications (technical/vocational course graduates, physically fit, of good moral
character, and have not been convicted of any crime). The Contract also states that, "to carry out the
undertakings specified in the immediately preceding paragraph, the CONTRACTOR shall employ the
necessary personnel," thus, acknowledging that Interserve did not yet have in its employ the personnel
needed by petitioner and would still pick out such personnel based on the criteria provided by petitioner.
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In other words, Interserve did not obligate itself to perform an identifiable job, work, or service for
petitioner, but merely bound itself to provide the latter with specific types of employees. These
contractual provisions strongly indicated that Interserve was merely a recruiting and manpower agency
providing petitioner with workers performing tasks directly related to the latters principal business.
Interserve was engaged in prohibited labor-only contracting, petitioner shall be deemed the true employer
of respondents. As regular employees of petitioner, respondents cannot be dismissed except for just or
authorized causes, none of which were alleged or proven to exist in this case, the only defense of
petitioner against the charge of illegal dismissal being that respondents were not its employees.

South Davao Development Company, et. al. vs Gamo et. al., G.R. No. 171814, May 8, 2009
Facts:
Petitioner South Davao Development Company is the operator of a coconut and mango farm in San
Isidro, Davao Oriental and Inawayan/Baracatan, Davao del Sur.
On 1963 petitioner hired respondent Sergio L. Gamo (Gamo) as a foreman. Sometime in 1987, petitioner
appointed Gamo as a copra maker contractor. Respondents Ernesto Belleza, Carlos Rojas, Maximo
Malinao were all employees in petitioners coconut farm, while respondents Felix Terona, Virgilio Cosep,
Maximo Tolda, and Nelson Bagaan were assigned to petitioners mango farm. All of the abovenamed
respondents (copra workers) were later transferred by petitioner to Gamo as the latters copraceros.
From 1987 to 1999, Gamo and petitioner entered into a profit-sharing agreement wherein 70% of the net
proceeds of the sale of copra went to petitioner and 30% to Gamo. The copra workers were paid by Gamo
from his 30% share.
Petitioner wanted to standardize payments to its "contractors" in its coconut farms. Petitioner proposed a
new payment scheme to Gamo. The new scheme provided a specific price for each copra making activity.
Gamo submitted his counter proposal. Petitioner did not accept Gamos counter proposal since it was
higher by at least fifty percent (50%) from its original offer.
Without agreeing to the new payment scheme, Gamo and his copra workers started to do harvesting work.
Petitioner told them to stop. Eventually, petitioner and Gamo agreed that the latter may continue with the
harvest provided that it would be his last "contract" with petitioner. Gamo suggested to petitioner to look
for a new "contractor" since he was not amenable to the new payment scheme.
Gamo and petitioner failed to agree on a payment scheme, thus, petitioner did not renew the "contract" of
Gamo. Gamo and the copra workers alleged that they were illegally dismissed.
On the other hand, respondent Eleonor Cosep (Eleonor) was employed as a mango classifier in the
packing house of petitioners mango farm in San Isidro, Davao Oriental. Sometime in October 1999, she
did not report for work as she had wanted to raise and sell pigs instead. Petitioner, through Malone
Pacquiao, tried to convince Eleonor to report for work but to no avail.
Respondents filed a complaint for illegal dismissal against petitioner. They alleged that sometime in
December 1999, petitioner verbally terminated them en masse.
Issue:
Petitioner raises the following issues:
(1) whether there is a valid job contracting between petitioner and Gamo; and
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(2) whether Eleonor had effectively abandoned her work.

Ruling:
To establish the existence of an independent contractor, we apply the following conditions:
First, 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 to
the result thereof; and
Second, the contractor has substantial capital or investments in the form of tools, equipment, machineries,
work premises and other materials which are necessary in the conduct of his business.
Gamo and the copra workers did not exercise independent judgment in the performance of their tasks.
The tools used by Gamo and his copra workers like the karit, bolo, pangbunot, panglugit and pangtapok
are not sufficient to enable them to complete the job. Reliance on these primitive tools is not enough. In
fact, the accomplishment of their task required more expensive machineries and equipment, like the
trucks to haul the harvests and the drying facility, which petitioner corporation owns.
SC also ruled that there exist employer- employee relationship applying the 4 fold test especially the
control power exercised by petitioner wherein petitioner corporation transferred the copra workers from
their previous assignments to work as copraceros. It was also in the exercise of the same power that
petitioner corporation put Gamo in charge of the copra workers although under a different payment
scheme. Thus, it is clear that an employer-employee relationship has existed between petitioner
corporation and respondents since the beginning and such relationship did not cease despite their
reassignments and the change of payment scheme.
3.) It is well settled that abandonment as a just and valid ground for dismissal requires the deliberate and
unjustified refusal of the employee to return for work. Two elements must be present, namely:
(1) the failure to report for work or absence without valid or justifiable reason, and
(2) a clear intention to sever the employer-employee relationship.
The second element is more determinative of the intent and must be evinced by overt acts. Mere absence,
not being sufficient, the burden of proof rests upon the employer to show that the employee clearly and
deliberately intended to discontinue her employment without any intention of returning. In Samarca v.
Arc-Men Industries, Inc, we held that abandonment is a matter of intention and cannot lightly be
presumed from certain equivocal acts.
An employee who takes steps to protest her layoff cannot be said to have abandoned her work because a
charge of abandonment is totally inconsistent with the immediate filing of a complaint for illegal
dismissal, more so when it includes a prayer for reinstatement. When Eleonor filed the illegal dismissal
complaint, it totally negated petitioners theory of abandonment.
Also, to effectively dismiss an employee for abandonment, the employer must comply with the due
process requirement of sending notices to the employee. In Brahm Industries, Inc. v. NLRC, we ruled that
this requirement is not a mere formality that may be dispensed with at will. Its disregard is a matter of
serious concern since it constitutes a safeguard of the highest order in response to mans innate sense of
justice. Petitioner was not able to send the necessary notice requirement to Eleonor. Based on the
foregoing, Eleonor did not abandon her work.

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Traveno, et. al. vs. Bobongon Banana Growers Multi-purpose Cooperative et. al., G.R. No. 164205,
Sept. 3, 2009
Facts:
By the account of petitioner Oldarico Traveo and his 16 co-petitioners, in 1992, respondent Timog
Agricultural Corporation (TACOR) and respondent Diamond Farms, Inc. (DFI) hired them to work at a
banana plantation at Bobongon, Santo Tomas, Davao Del Norte which covered lands previously planted
with rice and corn but whose owners had agreed to convert into a banana plantation upon being convinced
that TACOR and DFI could provide the needed capital, expertise, and equipment. Petitioners helped
prepare the lands for the planting of banana suckers and eventually carried out the planting as well.
Petitioners asseverated that while they worked under the direct control of supervisors assigned by
TACOR and DFI, these companies used different schemes to make it appear that petitioners were hired
through independent contractors, including individuals, unregistered associations, and cooperatives; that
the successive changes in the names of their employers notwithstanding, they continued to perform the
same work under the direct control of TACOR and DFI supervisors; and that under the last scheme
adopted by these companies, the nominal individual contractors were required to, as they did, join a
cooperative and thus became members of respondent Bobongon Banana Growers Multi-purpose
Cooperative (the Cooperative).
Continued petitioners: Sometime in 2000, above-named respondents began utilizing harassment tactics to
ease them out of their jobs. Without first seeking the approval of the Department of Labor and
Employment (DOLE), they changed their compensation package from being based on a daily rate to a
pakyawan rate that depended on the combined productivity of the gangs they had been grouped into.
Soon thereafter, they stopped paying their salaries, prompting them to stop working.
Issue: Whether or not DFI (with which TACOR had been merged) and DPI should be held solidarily
liable with the Cooperative for petitioners illegal dismissal and money claims.
Ruling:
They are not solidarily liable with the Cooperative.
To be sure, the matter of whether the Cooperative is an independent contractor or a labor-only contractor
may not be used to predicate a ruling in this case. Job contracting or subcontracting refers to an
arrangement whereby a principal agrees to farm out with a contractor or subcontractor the performance of
a specific job, work or service within a definite or predetermined period, regardless of whether such job,
work or service is to be performed or completed within or outside the premises of the principal. The
present case does not involve such an arrangement.
DFI did not farm out to the Cooperative the performance of a specific job, work, or service. Instead, it
entered into a Banana Production and Purchase Agreement (Contract) with the Cooperative, under which
the Cooperative would handle and fund the production of bananas and operation of the plantation
covering lands owned by its members in consideration of DFIs commitment to provide financial and
technical assistance as needed, including the supply of information and equipment in growing, packing,
and shipping bananas. The Cooperative would hire its own workers and pay their wages and benefits, and
sell exclusively to DFI all export quality bananas produced that meet the specifications agreed upon.
To the Court, the Contract between the Cooperative and DFI, far from being a job contracting
arrangement, is in essence a business partnership that partakes of the nature of a joint venture. The rules
on job contracting are, therefore, inapposite. The Court may not alter the intention of the contracting
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parties as gleaned from their stipulations without violating the autonomy of contracts principle under
Article 1306 of the Civil Code which gives the contracting parties the utmost liberality and freedom to
establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are
not contrary to law, morals, good custom, public order or public policy.
Petitioners claim of employment relationship with the Cooperatives herein co-respondents must be
assessed on the basis of four standards, viz: (a) the manner of their selection and engagement; (b) the
mode of payment of their wages; (c) the presence or absence of the power of dismissal; and (d) the
presence or absence of control over their conduct. Most determinative among these factors is the socalled control test.
There is nothing in the records which indicates the presence of any of the foregoing elements of an
employer-employee relationship.
The absence of the first requisite, which refers to selection and engagement, is shown by DFIs total lack
of knowledge on who actually were engaged by the Cooperative to work in the banana plantation. This is
borne out by the Contract between the Cooperative and DFI, under which the Cooperative was to hire its
own workers. As TACOR had been merged with DFI, and DPI is merely alleged to have previously
owned TACOR, this applies to them as well. Petitioners failed to prove the contrary. No employment
contract whatsoever was submitted to substantiate how petitioners were hired and by whom.
On the second requisite, which refers to the payment of wages, it was likewise the Cooperative that paid
the same. As reflected earlier, under the Contract, the Cooperative was to handle and fund the production
of bananas and operation of the plantation. The Cooperative was also to be responsible for the proper
conduct, safety, benefits, and general welfare of its members and workers in the plantation.
As to the third requisite, which refers to the power of dismissal, and the fourth requisite, which refers to
the power of control, both were retained by the Cooperative. Again, the Contract stipulated that the
Cooperative was to be responsible for the proper conduct and general welfare of its members and workers
in the plantation.
The crucial element of control refers to the authority of the employer to control the employee not only
with regard to the result of the work to be done, but also to the means and methods by which the work is
to be accomplished. While it suffices that the power of control exists, albeit not actually exercised, there
must be some evidence of such power. In the present case, petitioners did not present any.
There being no employer-employee relationship between petitioners and the Cooperatives corespondents, the latter are not solidarily liable with the Cooperative for petitioners illegal dismissal and
money claims.
While the Court commiserates with petitioners on their loss of employment, especially now that the
Cooperative is no longer a going concern, it cannot simply, by default, hold the Cooperatives corespondents liable for their claims without any factual and legal justification therefor. The social justice
policy of labor laws and the Constitution is not meant to be oppressive of capital.

Locsin, et. al. vs PLDT, G.R. No. 185251, Oct. 2, 2009

Facts:
On November 1, 1990, respondent Philippine Long Distance Telephone Company (PLDT) and the
Security and Safety Corporation of the Philippines (SSCP) entered into a Security Services Agreement
(Agreement) whereby SSCP would provide armed security guards to PLDT to be assigned to its various
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offices. Pursuant to such agreement, petitioners Raul Locsin and Eddie Tomaquin, among other security
guards, were posted at a PLDT office.
On August 30, 2001, respondent issued a Letter dated August 30, 2001 terminating the Agreement
effective October 1, 2001. Despite the termination of the Agreement, however, petitioners continued to
secure the premises of their assigned office. They were allegedly directed to remain at their post by
representatives of respondent. In support of their contention, petitioners provided the Labor Arbiter with
copies of petitioner Locsins pay slips for the period of January to September 2002.
Then, on September 30, 2002, petitioners services were terminated. Thus, petitioners filed a complaint
before the Labor Arbiter for illegal dismissal and recovery of money claims such as overtime pay, holiday
pay, premium pay for holiday and rest day, service incentive leave pay, Emergency Cost of Living
Allowance, and moral and exemplary damages against PLDT.
The Labor Arbiter rendered a Decision finding PLDT liable for illegal dismissal. It was explained in the
Decision that petitioners were found to be employees of PLDT and not of SSCP. Such conclusion was
arrived at with the factual finding that petitioners continued to serve as guards of PLDTs offices. As such
employees, petitioners were entitled to substantive and procedural due process before termination of
employment.
Issue: Is there employer-employee relationship?
Ruling:
Yes. From the foregoing circumstances, reason dictates that we conclude that petitioners remained at
their post under the instructions of respondent. We can further conclude that respondent dictated upon
petitioners that the latter perform their regular duties to secure the premises during operating hours. This,
to our mind and under the circumstances, is sufficient to establish the existence of an employer-employee
relationship.
To reiterate, while respondent and SSCP no longer had any legal relationship with the termination of the
Agreement, petitioners remained at their post securing the premises of respondent while receiving their
salaries, allegedly from SSCP. Clearly, such a situation makes no sense, and the denials proffered by
respondent do not shed any light to the situation. It is but reasonable to conclude that, with the behest and,
presumably, directive of respondent, petitioners continued with their services. Evidently, such are indicia
of control that respondent exercised over petitioners.
Evidently, respondent having the power of control over petitioners must be considered as petitioners
employerfrom the termination of the Agreement onwardsas this was the only time that any evidence
of control was exhibited by respondent over petitioners and in light of our ruling in Abella. Thus, as aptly
declared by the NLRC, petitioners were entitled to the rights and benefits of employees of respondent,
including due process requirements in the termination of their services.
Both the Labor Arbiter and NLRC found that respondent did not observe such due process requirements.
Having failed to do so, respondent is guilty of illegal dismissal.

Aliviado, et. al. vs. Proctor & Gamble Phils., G.R. No. 160506, March 9, 2010
Facts:
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Petitioners worked as merchandisers of P&G from various dates, allegedly starting as early as 1982 or as
late as June 1991, to either May 5, 1992 or March 11, 1993. They all individually signed employment
contracts with either Promm-Gem or SAPS for periods of more or less five months at a time. They were
assigned at different outlets, supermarkets and stores where they handled all the products of P&G. They
received their wages from Promm-Gem or SAPS.
SAPS and Promm-Gem imposed disciplinary measures on erring merchandisers for reasons such as
habitual absenteeism, dishonesty or changing day-off without prior notice.
P&G is principally engaged in the manufacture and production of different consumer and health products,
which it sells on a wholesale basis to various supermarkets and distributors. To enhance consumer
awareness and acceptance of the products, P&G entered into contracts with Promm-Gem and SAPS for
the promotion and merchandising of its products.
In December 1991, petitioners filed a complaint against P&G for regularization, service incentive leave
pay and other benefits with damages. The complaint was later amended to include the matter of their
subsequent dismissal.
On November 29, 1996, the Labor Arbiter dismissed the complaint for lack of merit and ruled that there
was no employer-employee relationship between petitioners and P&G. He found that the selection and
engagement of the petitioners, the payment of their wages, the power of dismissal and control with
respect to the means and methods by which their work was accomplished, were all done and exercised by
Promm-Gem/SAPS. He further found that Promm-Gem and SAPS were legitimate independent job
contractors.
Appealing to the NLRC, petitioners disputed the Labor Arbiters findings. On July 27, 1998, the NLRC
rendered a Decision dismissing their appeal. Petitioners then filed a petition for certiorari with the CA,
alleging grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the Labor
Arbiter and the NLRC. However, said petition was also denied by the CA.
Petitioners filed a motion for reconsideration but the motion was also denied. Hence, this petition.
Issue:Whether or not Promm-Gem and SAPS are labor-only contractors
Ruling:
Promm-Gem is an independent contractor however, SAPS is a labor-only contractor.
The pertinent Labor Code provision on the matter states:
ART. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another
person for the performance of the formers work, the employees of the contractor and of the latters
subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance
with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to
such employees to the extent of the work performed under the contract, in the same manner and extent
that he is liable to employees directly employed by him.
There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such person are performing activities which are directly
related to the principal business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.
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Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by Department
Order No. 18-02, distinguishes between legitimate and labor-only contracting:
Section 3.Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists a
trilateral relationship under which there is a contract for a specific job, work or service between the
principal and the contractor or subcontractor, and a contract of employment between the contractor or
subcontractor and its workers. Hence, there are three parties involved in these arrangements, the principal
which decides to farm out a job or service to a contractor or subcontractor, the contractor or subcontractor
which has the capacity to independently undertake the performance of the job, work or service, and the
contractual workers engaged by the contractor or subcontractor to accomplish the job, work or service.
Section 5.Prohibition against labor-only contracting. Labor-only contracting is hereby declared
prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal,
and any of the following elements are present:
i) The contractor or subcontractor does not have substantial capital or investment which relates to the job,
work or service to be performed and the employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the main business of the principal; or
ii) [T]he contractor does not exercise the right to control over the performance of the work of the
contractual employee.
The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor
Code, as amended.
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements, machineries and work premises, actually and directly used by
the contractor or subcontractor in the performance or completion of the job, work or service contracted
out.
The "right to control" shall refer to the right reserved to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but also the manner and
means to be used in reaching that end.
Clearly, the law and its implementing rules allow contracting arrangements for the performance of
specific jobs, works or services. Indeed, it is management prerogative to farm out any of its activities,
regardless of whether such activity is peripheral or core in nature. However, in order for such outsourcing
to be valid, it must be made to an independent contractor because the current labor rules expressly
prohibit labor-only contracting.
In the instant case, the financial statements of Promm-Gem show that it has authorized capital stock of P1
million and a paid-in capital, or capital available for operations, of P500,000.00 as of 1990. It also has
long term assets worth P432,895.28 and current assets of P719,042.32. Promm-Gem has also proven that
it maintained its own warehouse and office space with a floor area of 870 square meters. It also had under
its name three registered vehicles which were used for its promotional / merchandising business. PrommGem also has other clients aside from P&G. Under the circumstances, we find that Promm-Gem has
substantial investment which relates to the work to be performed. These factors negate the existence of
the element specified in Section 5(i) of DOLE Department Order No. 18-02. The records also show that
Promm-Gem supplied its complainant-workers with the relevant materials, such as markers, tapes, liners
and cutters, necessary for them to perform their work. Promm-Gem also issued uniforms to them. It is
also relevant to mention that Promm-Gem already considered the complainants working under it as its
regular, not merely contractual or project, employees. This circumstance negates the existence of element
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(ii) as stated in Section 5 of DOLE Department Order No. 18-02, which speaks of contractual employees.
This, furthermore, negates on the part of Promm-Gem bad faith and intent to circumvent labor laws
which factors have often been tipping points that lead the Court to strike down the employment practice
or agreement concerned as contrary to public policy, morals, good customs or public order.
Under the circumstances, Promm-Gem cannot be considered as a labor-only contractor. We find that it is a
legitimate independent contractor.
On the other hand, the Articles of Incorporation of SAPS shows that it has a paid-in capital of only
P31,250.00. There is no other evidence presented to show how much its working capital and assets are.
Furthermore, there is no showing of substantial investment in tools, equipment or other assets.
In Vinoya v. National Labor Relations Commission, the Court held that "[w]ith the current economic
atmosphere in the country, the paid-in capitalization of PMCI amounting to P75,000.00 cannot be
considered as substantial capital and, as such, PMCI cannot qualify as an independent
contractor."Applying the same rationale to the present case, it is clear that SAPS having a paid-in capital
of only P31,250 - has no substantial capital. SAPS lack of substantial capital is underlined by the records
which show that its payroll for its merchandisers alone for one month would already total P44,561.00. It
had 6-month contracts with P&G. Yet SAPS failed to show that it could complete the 6-month contracts
using its own capital and investment. Its capital is not even sufficient for one months payroll. SAPS
failed to show that its paid-in capital of P31,250.00 is sufficient for the period required for it to generate
its needed revenue to sustain its operations independently. Substantial capital refers to capitalization used
in the performance or completion of the job, work or service contracted out. In the present case, SAPS has
failed to show substantial capital.
Furthermore, the petitioners have been charged with the merchandising and promotion of the products of
P&G, an activity that has already been considered by the Court as doubtlessly directly related to the
manufacturing business, which is the principal business of P&G. Considering that SAPS has no
substantial capital or investment and the workers it recruited are performing activities which are directly
related to the principal business of P&G, we find that the former is engaged in "labor-only contracting".
"Where labor-only contracting exists, the Labor Code itself establishes an employer-employee
relationship between the employer and the employees of the labor-only contractor." The statute
establishes this relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The
contractor is considered merely an agent of the principal employer and the latter is responsible to the
employees of the labor-only contractor as if such employees had been directly employed by the principal
employer.
Consequently, petitioners recruited and supplied by SAPS -- which engaged in labor-only contracting -are considered as the employees of P&G while those having worked under, and been dismissed by
Promm-Gem, are considered the employees of Promm-Gem, not of P&G.

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San Miguel Corp. vs. Semillano, et. al., G.R. No. 161257, July 5, 2010
Facts:
It appears that AMPCO hired the services of Vicente et al. [Vicente Semillano, Nelson Mondejar, Jovito
Remada and Alex Hawod, respondents herein] on different dates in December [of 1991 and] 1994. All of
them were assigned to work in SMC's Bottling Plant situated at Brgy. Granada Sta. Fe, Bacolod City, in
order to perform the following tasks: segregating bottles, removing dirt therefrom, filing them in
designated places, loading and unloading the bottles to and from the delivery trucks, and performing other
tasks as may be ordered by SMC's officers. [They] were required to work inside the premises of SMC
using [SMC's] equipment. [They] rendered service with SMC for more than 6 months.
Subsequently, SMC entered into a Contract of Services 5 with AMPCO designating the latter as the
employer of Vicente, et al. As a result, Vicente et al. failed to claim the rights and benefits ordinarily
accorded a regular employee of SMC. In fact, they were not paid their 13 thmonth pay. On June 6, 1995,
they were not allowed to enter the premises of SMC. The project manager of AMPCO, Merlyn Polidario,
told them to wait for further instructions from the SMC's supervisor. Vicente et al. waited for one month,
unfortunately, they never heard a word from SMC.
Consequently, Vicente et al., as complainants, filed on July 17, 1995 a COMPLAINT FOR ILLEGAL
DISMISSAL with the Labor Arbiter against AMPCO, Merlyn V. Polidario, SMC and Rufino I. Yatar
[SMC Plant Manager], as respondents.
Issue: Whether or not AMPCO is a legitimate job contractor.
Held:
A claim that an action for regularization has no legal basis and is violative of petitioner's constitutional
and statutory rights is, therefore, dependent upon the resolution of the issue posed above.
The petition fails.
Generally, the findings of fact made by the Labor Arbiter and the NLRC, as the specialized agencies
presumed to have the expertise on matters within their respective fields, are accorded much respect and
even finality, when supported by ample evidence and affirmed by the CA. The fact that the NLRC, in its
subsequent resolution, reversed its original decision does not render the foregoing inapplicable where the
resolution itself is not supported by substantial evidence.
Department of Labor and Employment (DOLE) Department Order No. 10, Series of 1997, defines "job
contracting" and "labor-only contracting" as follows:
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.
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
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(2) The workers recruited and placed by such persons are performing activities which are directly related
to the principal business or operations of the employer in which workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall
be considered merely as an agent or intermediary of the employer who shall be responsible to the workers
in the same manner and extent as if the latter were directly employed by him.
(c) For cases not falling under this Article, the Secretary of Labor shall determine through appropriate
orders whether or not the contracting out of labor is permissible in the light of the circumstances of each
case and after considering the operating needs of the employer and the rights of the workers involved. In
such case, he may prescribe conditions and restrictions to insure the protection and welfare of the
workers.
Section 5 of Department Order No. 18-02 (Series of 2002) of the Rules Implementing Articles 106 to 109
of the Labor Code further provides that:
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements, machineries and work premises,actually and directly used by
the contractor or subcontractor in the performance or completion of the job work or service contracted
out. (emphasis supplied)
The "right to control" shall refer to the right reserved to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but also the manner and
means to be used in reaching that end.
The test to determine the existence of independent contractorship is whether or not the 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 results of the work.
The existence of an independent and permissible contractor relationship is generally established by the
following criteria: whether or not the contractor is carrying on an independent business; the nature and
extent of the work; the skill required; the term and duration of the relationship; the right to assign the
performance of a specified piece of work; the control and supervision of the work to another; the
employer's power with respect to the hiring, firing and payment of the contractor's workers; the control of
the premises; the duty to supply the premises, tools, appliances, materials, and labor; and the mode,
manner and terms of payment.
Although there may be indications of an independent contractor arrangement between petitioner and
AMPCO, the most determinant of factors exists which indicate otherwise.
Petitioner's averment that AMPCO had total assets amounting to P932,599.22 and income
of P2,777,603.46 in 1994 was squarely debunked by the LA. Thus:
Furthermore, there are no pieces of evidence that AMPCO has substantial capital or investment. An
examination its "Statement of Income and Changes in Undivided Savings" show that its income for the
year 1994 was P2,777,603.46 while its operating expenses for said year is P2,718,315.33 or a net income
of P59,288.13 for the year 1994; that its cash on hand for 1994 is P22,154.80.
In fact, the NLRC in its original decision likewise stated as follows:
In contrast, the (sic) AMPCO's main business activity is trading, maintaining a store catering to members
and the public. Its job contracting with SMC is only a minor activity or sideline. The component of
AMPCO's substantial capital are [ sic ]in fact invested and used in the trading business. This is palpably
shown in the sizable amount of its accounts receivables amounting to more than P.6M out of its members'
capital of only P.47M in 1994.
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Neither did petitioner prove that AMPCO had substantial equipment, tools, machineries, and supplies
actually and directly used by it in the performance or completion of the segregation and piling job. In fact,
as correctly pointed out by the NLRC in its original decision, there is nothing in AMPCO's list of fixed
assets, machineries, tools, and equipment which it could have used, actually and directly, in the
performance or completion of its contracted job, work or service with petitioner. For said reason, there
can be no other logical conclusion but that the tools and equipment utilized by respondents are owned by
petitioner SMC. It is likewise noteworthy that neither petitioner nor AMPCO has shown that the latter had
clients other than petitioner. Therefore, AMPCO has no independent business.
In the case at bench, petitioner faults the CA for holding that the respondents were under the control of
petitioner whenever they performed the task of loading in the delivery trucks and unloading from them. It,
however, fails to show how AMPCO took "entire charge, control and supervision of the work and service
agreed upon." AMPCO's Comment on the Petition is likewise utterly silent on this point. Notably, both
petitioner and AMPCO chose to ignore the uniform finding of the LA, NLRC (in its original decision)
and the CA that one of the assigned jobs of respondents was to "perform other acts as may be ordered by
SMC's officers." Significantly, AMPCO, opted not to challenge the original decision of the NLRC that
found it a mere labor-only contractor.
Moreover, the Court is not convinced that AMPCO wielded "exclusive discretion in the discharge" of
respondents. As the CA correctly pointed out, Merlyn Polidario, AMPCO's project manager, even told
respondents to "wait for further instructions from the SMC's supervisor" after they were prevented from
entering petitioner SMC's premises. Based on the foregoing, no other logical conclusion can be reached
than that it was petitioner, not AMPCO, who wielded power of control.
Despite the fact that the service contracts contain stipulations which are earmarks of independent
contractorship, they do not make it legally so. The language of a contract is neither determinative nor
conclusive of the relationship between the parties. Petitioner SMC and AMPCO cannot dictate, by a
declaration in a contract, the character of AMPCO's business, that is, whether as labor-only contractor, or
job contractor. AMPCO's character should be measured in terms of, and determined by, the criteria set by
statute. At a closer look, AMPCO's actual status and participation regarding respondents' employment
clearly belie the contents of the written service contract.
Petitioner cannot rely either on AMPCO's Certificate of Registration as an Independent Contractor issued
by the proper Regional Office of the DOLE to prove its claim. It is not conclusive evidence of such status.
The fact of registration simply prevents the legal presumption of being a mere labor-only contractor from
arising. In distinguishing between permissible job contracting and prohibited labor-only contracting, the
totality of the facts and the surrounding circumstances of the case are to be considered.
Petitioner also argues that among the permissible contracting arrangements include "work or services not
directly related or not integral to the main business or operation of the principal including. work related to
manufacturing processes of manufacturing establishments." The Court is not persuaded. The evidence is
clear that respondents performed activities which were directly related to petitioner's main line of
business. Petitioner is primarily engaged in manufacturing and marketing of beer products, and
respondents' work of segregating and cleaning bottles is unarguably an important part of its
manufacturing and marketing process.
Lastly, petitioner claims that the present case is outside the jurisdiction of the labor tribunals because
respondent Vicente Semillano is a member of AMPCO, not SMC. Precisely, he has joined the others in
filing this complaint because it is his position that petitioner SMC is his true employer and liable for all
his claims under the Labor Code.
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Thus, petitioner SMC, as principal employer, is solidarily liable with AMPCO, the labor-only contractor,
for all the rightful claims of respondents. Under this set-up, AMPCO, as the "labor-only" contractor, is
deemed an agent of the principal (SMC). The law makes the principal responsible over the employees of
the "labor-only" contractor as if the principal itself directly hired the employees.

107

Manila Water Co. vs. Dalumpines, G.R. No. 175501, Oct. 4, 2010
Facts:
By virtue of Republic Act No. 8041, otherwise known as the "National Water Crisis Act of 1995," the
Metropolitan Waterworks and Sewerage System (MWSS) was given the authority to enter into concession
agreements allowing the private sector in its operations. Petitioner Manila Water Company, Inc. (Manila
Water) was one of two private concessionaires contracted by the MWSS to manage the water distribution
system in the east zone of Metro Manila. The east service area included the following towns and cities:
Mandaluyong, Marikina, Pasig, Pateros, San Juan, Taguig, Makati, parts of Quezon City and Manila,
Angono, Antipolo, Baras, Binangonan, Cainta, Cardona, Jala-Jala, Morong, Pililla, Rodriguez, Tanay,
Taytay, Teresa, and San Mateo.
Under the concession agreement, Manila Water undertook to absorb the regular employees of MWSS
listed by the latter effective August 1, 1997. Individual respondents, with the exception of Moises
Zapatero (Zapatero) and Edgar Pamoraga (Pamoraga), were among the one hundred twenty-one (121)
employees not included in the list of employees to be absorbed by Manila Water. Nevertheless, Manila
Water engaged their services without written contract from August 1, 1997 to August 31, 1997.
On September 1, 1997, individual respondents signed a three (3)-month contract to perform collection
services on commission basis for Manila Waters branches in the east zone.
On November 21, 1997, before the expiration of the contract of services, the 121 bill collectors formed a
corporation duly registered with the Securities and Exchange Commission (SEC) as the "Association
Collectors Group, Inc." (ACGI). ACGI was one of the entities engaged by Manila Water for its courier
service. However, Manila Water contracted ACGI for collection services only in its Balara Branch.
In December 1997, Manila Water entered into a service agreement with respondent First Classic Courier
Services, Inc. (FCCSI) also for its courier needs. The service agreements between Manila Water and
FCCSI covered the periods 1997 to 1999 and 2000 to 2002. 7 Earlier, in a memorandum dated November
28, 1997, FCCSI gave a deadline for the bill collectors who were members of ACGI to submit
applications and letters of intent to transfer to FCCSI. The individual respondents in this case were among
the bill collectors who joined FCCSI and were hired effective December 1, 1997.
On various dates between May and October 2002, individual respondents were terminated from
employment. Manila Water no longer renewed its contract with FCCSI because it decided to implement a
"collectorless" scheme whereby Manila Water customers would instead remit payments through "Bayad
Centers." The aggrieved bill collectors individually filed complaints for illegal dismissal, unfair labor
practice, damages, and attorneys fees, with prayer for reinstatement and backwages against petitioner
Manila Water and respondent FCCSI. The complaints were consolidated and jointly heard.
Issues: WON anemployment relationship exists between respondent bill collectors and petitioner Manila
Water
Held:
FCCSI has no sufficient investment in the form of tools, equipment and machinery to undertake contract
services for Manila Water involving a fleet of around 100 collectors assigned to several branches and
covering the service area of Manila Water customers spread out in several cities/towns of the East Zone.
The only rational conclusion is that it is Manila Water that provides most if not all the logistics and
equipment including service vehicles in the performance of the contracted service, notwithstanding that
the contract between FCCSI and Manila Water states that it is the Contractor which shall furnish at its
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own expense all materials, tools and equipment needed to perform the tasks of collectors. Moreover, it
must be emphasized that petitioners who are "trained collectors" performed tasks that cannot be simply
categorized as "messengerial." In fact, these are the very functions they were already discharging even
before they joined FCCSI which "invited" or "solicited" their placement just about the expiration of their
three (3)-month contract with Manila Water on November 28, 1997. The Agreement between FCCSI and
Manila Water provides that FCCSI shall "field the required number of trained collectors to the following
Customer Relations Branch Office": Cubao, Espaa, San Juan-Mandaluyong, Marikina, Pasig, TaguigPateros and Makati.
As correctly ruled by the CA, FCCSIs capitalization may not be considered substantial considering that it
had close to a hundred collectors covering the east zone service area of Manila Water customers. The
allegation in the position paper of FCCSI that it serves other companies courier needs does not "cure" the
fact that it has insufficient capitalization to qualify as independent contractor. Neither did FCCSI prove its
allegation by substantial evidence other than by their self-serving declarations. What is evident is that it
was Manila Water that provided the equipment and service vehicles needed in the performance of the
contracted service, even if the contract between FCCSI and Manila Water stated that it was the Contractor
which shall furnish at its own expense all materials, tools, and equipment needed to perform the tasks of
collectors.
Based on the four-fold test of employer-employee relationship, Manila Water emerges as the employer of
respondent collectors. The elements to determine the existence of an employment relationship are: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d)
the employer's power to control the employee's conduct. The most important of these elements 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 it.
Respondent bill collectors are, therefore, employees of petitioner Manila Water. It cannot be denied that
the tasks performed by respondent bill collectors are directly related to the principal business or trade of
Manila Water. Payments made by the subscribers are the lifeblood of the company, and the respondent bill
collectors are the ones who collect these payments.
The primary standard of determining regular employment is the reasonable connection between the
particular activity performed by the employee in relation to the usual business or trade of the employer. In
this case, the connection is obvious when we consider the nature of the work performed and its relation to
the scheme of the particular business or trade in its entirety. Finally, the repeated and continuing need for
the performance of the job is sufficient evidence of the necessity, if not indispensability of the activity to
the business.

Teng vs. Pahagac, G.R. No. 169704, November 17, 2010

Facts:
Albert Teng Fish Trading is engaged in deep sea fishing and, for this purpose, owns boats (basnig),
equipment, and other fishing paraphernalia. As owner of the business, Teng claims that he customarily
enters into joint venture agreements with master fishermen (maestros) who are skilled and are experts in
deep sea fishing; they take charge of the management of each fishing venture, including the hiring of the
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members of its complement. He avers that the maestros hired the respondent workers as checkers to
determine the volume of the fish caught in every fishing voyage.
On February 20, 2003, the respondent workers filed a complaint for illegal dismissal against Albert Teng
Fish Trading, Teng, and Chua before the NCMB, Region Branch No. IX, Zamboanga City.
Issues:
1. WON the VAs decision is not subject to a motion for reconsideration.
2. WON an employer-employee relationship existed between Teng and the respondent workers.
Held:The petition is denied.
1. Article 262-A of the Labor Code does not prohibit the filing of a motion for reconsideration.
On March 21, 1989, Republic Act No. 6715 took effect, amending, among others, Article 263 of the
Labor Code which was originally worded as:
Art. 263 x x x Voluntary arbitration awards or decisions shall be final, unappealable, and executory.
As amended, Article 263 is now Article 262-A, which states:
Art. 262-A. x x x [T]he award or decision x x x shall contain the facts and the law on which it is based. It
shall be final and executory after ten (10) calendar days from receipt of the copy of the award or decision
by the parties.
Notably, Article 262-A deleted the word "unappealable" from Article 263. The deliberate selection of the
language in the amendatory act differing from that of the original act indicates that the legislature
intended a change in the law, and the court should endeavor to give effect to such intent.We recognized
the intent of the change of phraseology in Imperial Textile Mills, Inc. v. Sampang, where we ruled that:
It is true that the present rule [Art. 262-A] makes the voluntary arbitration award final and executory after
ten calendar days from receipt of the copy of the award or decision by the parties. Presumably, the
decision may still be reconsidered by the Voluntary Arbitrator on the basis of a motion for reconsideration
duly filed during that period.
Tengs allegation that the VAs decision had become final and executory by the time the respondent
workers filed an appeal with the CA thus fails. We consequently rule that the respondent workers
seasonably filed a motion for reconsideration of the VAs judgment, and the VA erred in denying the
motion because no motion for reconsideration is allowed.
2. There exists an employer-employee relationship between Teng and the respondent workers.
While Teng alleged that it was the maestros who hired the respondent workers, it was his company that
issued to the respondent workers identification cards (IDs) bearing their names as employees and Tengs
signature as the employer. Generally, in a business establishment, IDs are issued to identify the holder as
a bona fide employee of the issuing entity.
For the 13 years that the respondent workers worked for Teng, they received wages on a regular basis, in
addition to their shares in the fish caught. The worksheet showed that the respondent workers received
uniform amounts within a given year, which amounts annually increased until the termination of their
employment in 2002. Tengs claim that the amounts received by the respondent workers are mere
commissions is incredulous, as it would mean that the fish caught throughout the year is uniform and
increases in number each year.
More importantly, the element of control which we have ruled in a number of cases to be a strong
indicator of the existence of an employer-employee relationship is present in this case. Teng not only
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owned the tools and equipment, he directed how the respondent workers were to perform their job as
checkers; they, in fact, acted as Tengs eyes and ears in every fishing expedition.
Teng cannot hide behind his argument that the respondent workers were hired by the maestros. To
consider the respondent workers as employees of the maestros would mean that Teng committed
impermissible labor-only contracting. As a policy, the Labor Code prohibits labor-only contracting:
ART. 106. Contractor or Subcontractor x x x The Secretary of Labor and Employment may, by
appropriate regulations, restrict or prohibit the contracting-out of labor.
xxxx
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.
Section 5 of the DO No. 18-02, which implements Article 106 of the Labor Code, provides:
Section 5.Prohibition against labor-only contracting. Labor-only contracting is hereby declared
prohibited.For this purpose, labor-only contracting shall refer to an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal,
and any of the following elements are present:
(i) The contractor or subcontractor does not have substantial capital or investment which relates to the
job, work or service to be performed and the employees recruited, supplied or placed by such contractor
or subcontractor are performing activities which are directly related to the main business of the principal;
or
(ii) The contractor does not exercise the right to control over the performance of the work of the
contractual employee.
In the present case, the maestros did not have any substantial capital or investment. Teng admitted that he
solely provided the capital and equipment, while the maestros supplied the workers. The power of control
over the respondent workers was lodged not with the maestros but with Teng. As checkers, the respondent
workers main tasks were to count and classify the fish caught and report them to Teng. They performed
tasks that were necessary and desirable in Tengs fishing business. Taken together, these incidents confirm
the existence of a labor-only contracting which is prohibited in our jurisdiction, as it is considered to be
the employers attempt to evade obligations afforded by law to employees.
Accordingly, we hold that employer-employee ties exist between Teng and the respondent workers. A
finding that the maestros are labor-only contractors is equivalent to a finding that an employer-employee
relationship exists between Teng and the respondent workers. As regular employees, the respondent
workers are entitled to all the benefits and rights appurtenant to regular employment.

GSIS vs. NLRC, et. al., G.R. No. 180045, Nov. 17, 2010
Facts:
Respondents Dionisio Banlasan, Alfredo T. Tafalla, Telesforo D. Rubia, Rogelio A. Alvarez, Dominador
A. Escobal, and Rosauro Panis were employed as security guards by DNL Security Agency (DNL
Security). By virtue of the service contract entered into by DNL Security and petitioner Government
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Service Insurance System on May 1, 1978, respondents were assigned to petitioners Tacloban City
office, each receiving a monthly income ofP1,400.00. Sometime in July 1989, petitioner voluntarily
increased respondents monthly salary to P3,000.00.3
In February 1993, DNL Security informed respondents that its service contract with petitioner was
terminated. This notwithstanding, DNL Security instructed respondents to continue reporting for work to
petitioner. Respondents worked as instructed until April 20, 1993, but without receiving their wages; after
which, they were terminated from employment. 4
On June 15, 1995, respondents filed with the National Labor Relations Commission (NLRC), Regional
Arbitration Branch No. VIII, Tacloban City, a complaint against DNL Security and petitioner for illegal
dismissal, separation pay, salary differential, 13th month pay, and payment of unpaid salary.
Issue: WON GSIS is jointly and severally liable with DNL Security Agency for payment of the
unsubstantiated amounts of Salary Differentials and the 13th Month Pay to the private respondent security
guards.
Held:
The fact that there is no actual and direct employer-employee relationship between petitioner and
respondents does not absolve the former from liability for the latters monetary claims. When petitioner
contracted DNL Securitys services, petitioner became an indirect employer of respondents, pursuant to
Article 107 of the Labor Code, which reads:
ART. 107. Indirect employer. The provisions of the immediately preceding Article shall likewise apply
to any person, partnership, association or corporation which, not being an employer, contracts with an
independent contractor for the performance of any work, task, job or project.
After DNL Security failed to pay respondents the correct wages and other monetary benefits, petitioner,
as principal, became jointly and severally liable, as provided in Articles 106 and 109 of the Labor Code,
which state:
ART. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another
person for the performance of the formers work, the employees of the contractor and of the latters
subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance
with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to
such employees to the extent of the work performed under the contract, in the same manner and extent
that he is liable to employees directly employed by him. x x x.
xxxx
ART. 109. Solidary liability. The provisions of existing laws to the contrary notwithstanding, every
employer or indirect employer shall be held responsible with his contractor or subcontractor for any
violation of any provision of this Code. For purposes of determining the extent of their civil liability
under this Chapter, they shall be considered as direct employers.
This statutory scheme is designed to give the workers ample protection, consonant with labor and social
justice provisions of the 1987 Constitution.
Petitioners liability covers the payment of respondents salary differential and 13th month pay during the
time they worked for petitioner. In addition, petitioner is solidarily liable with DNL Security for
respondents unpaid wages from February 1993 until April 20, 1993. While it is true that respondents
continued working for petitioner after the expiration of their contract, based on the instruction of DNL
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Security, petitioner did not object to such assignment and allowed respondents to render service. Thus,
petitioner impliedly approved the extension of respondents services. Accordingly, petitioner is bound by
the provisions of the Labor Code on indirect employment. Petitioner cannot be allowed to deny its
obligation to respondents after it had benefited from their services. So long as the work, task, job, or
project has been performed for petitioners benefit or on its behalf, the liability accrues for such
services. The principal is made liable to its indirect employees because, after all, it can protect itself from
irresponsible contractors by withholding payment of such sums that are due the employees and by paying
the employees directly, or by requiring a bond from the contractor or subcontractor for this purpose.
Petitioners liability, however, cannot extend to the payment of separation pay. An order to pay separation
pay is invested with a punitive character, such that an indirect employer should not be made liable without
a finding that it had conspired in the illegal dismissal of the employees.
Lastly, we do not agree with petitioner that the enforcement of the decision is impossible because its
charter unequivocally exempts it from execution.
To be sure, petitioners charter should not be used to evade its liabilities to its employees, even to its
indirect employees, as mandated by the Labor Code.

Marialy Sy, et al. vs. Fairland Knitcraft Co., Inc.,x (consolidated with) Susan T. De Leon vs.
Fairland Knitcraft Co., Inc., et al.
Facts:
Fairland is a domestic corporation engaged in garments business, while Susan de Leon (Susan) is the
owner/proprietress of Weesan Garments (Weesan).
On the other hand, the complaining workers, Marialy Sy and 33 others (the workers) are sewers,
trimmers, helpers, a guard and a secretary who were hired by Weesan.
The workers filed separate complaints for underpayment and/or non-payment of wages, overtime pay,
premium pay, 13th month pay and other monetary benefits against Susan/Weesan. These complaints were
then consolidated by the Arbitration Branch of the NLRC in January 2003.
February 5, 2003, Weesan filed before the Department of Labor and Employment-National Capital
Region (DOLE-NCR) a report on its temporary closure for a period of not less than six months. On the
same day, the workers were not anymore allowed to work. So on February 18, 2003 they filed an
Amended Complaint, and on March 13, 2003, another pleading entitled Amended Complaints and
Position Paper for Complainants, to include the charge of illegal dismissal and impleaded Fairland and its
manager, Debbie Manduabas (Debbie), as additional respondents.
At the Hearings set by the Labor Arbiter Ramon Valentin Reyes, Atty. Antonio Geronimo represented
both Susan/Weesan and Fairland. He submitted 2 position papers for the two entities. The workers filed a
Reply, to which Atty. Geronimo also submitted a Consolidated Reply by Susan/Weesan and Fairland.
Workers answered back through a Rejoinder.
The Labor Arbiter dismissed the case for lack of merit, but ordered the respondent companies to pay each
complainant P5,000.00 by way of financial assistance.
The NLRC granted the workers appeal and set aside the Labor Arbiters decision. The Commission
declared the dismissal of the workers as illegal and ordered reinstatement, will full backwages from
February 5, 2003 and payment all the unpaid benefits to be paid solidarily by Susan/Weesan and Fairland.
Atty. Geronimo filed a Motion for Reconsideration. However, Fairland filed another Motion for
Reconsideration through Atty. Melina O. Tecson (Atty. Tecson) assailing the jurisdiction of the Labor
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Arbiter and the NLRC over it, claiming that it was never summoned to appear, attend or participate in all
the proceedings conducted therein. It also denied that it engaged the services of Atty. Geronimo. These
MRs were denied by the NLRC.
Thus, Fairland and Susan/Weesan filed their petitions for certiorari before the Court of Appeals.
CAs decision on Fairlands petition:
The CA denied Fairlands petition and affirmed the NLRC ruling which held Fairland solidarily liable
with Susan.
On MR, Fairland moved also for the voluntary inhibition of Justices Leagogo and Maambong. The CA
granted the motion for voluntary inhibition and transferred the case from the First Division to the Ninth
Division. The Ninth Division reversed the earlier denial of Fairlands petition It held that the labor
tribunals did not acquire jurisdiction over the person of Fairland, and even assuming they did, Fairland is
not liable to the workers since Weesan is not a mere labor-only contractor but a bona fide independent
contractor. The Special Ninth Division thus annulled and set aside the assailed NLRC Decision and
Resolution insofar as Fairland is concerned and excluded the latter therefrom.
Workers appealed this decision to the Supreme Court.
CAs decision on Susans petition:
Susans petition was denied due course and dismissed for lack of merit. The CA affirmed the NLRC
ruling with respect to Susan.
Her MR was denied by the CA.
Before the Supreme Court:
Susan filed a petition for review on certiorari with the SC, which was dismissed by the Supreme Court on
technicality and for failure to sufficiently show any reversible error in the assailed judgment. Susan filed
an appeal but before it could be resolved, the Supreme Court consolidated Susans case with that the
workers.
The Supreme Court granted Susans Motion for Reconsideration and reinstated her petition for review on
certiorari.
Issues:
1. Whether or not Susan/Weesan is a labor-only contracting agent acting as an agent of Fairland?
2. Whether or not the individual private respondents (Sy, et al.) were illegal dismissed?
Ruling:
G.R. No. 182915 (Susan de Leon vs. Fairland, Sy et al.)
1. Susan is a mere labor-only contractor.
There is labor-only contracting when the contractor or subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a principal. In labor-only contracting, the following
elements are present:
(a) The person supplying workers to an employer does not have substantial capital or investment in the
form of tools, equipment, machineries, work premises, among others; and
(b) The workers recruited and placed by such person are performing activities which are directly related
to the principal business of the employer.
The workers, majority of whom are sewers, were recruited by Susan/Weesan and that they performed
activities which are directly related to Fairlands principal business of garments. Did Susan/Weesan have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others? The SC said that there was nothing in the records that would show that Weesan has investment in
the form of tools, equipment or machineries. The records show that Fairland has to furnish Weesan with
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sewing machines for it to be able to provide the sewing needs of the former. Weesan was unable to show
that apart from the borrowed sewing machines, it owned and possessed any other tools, equipment, and
machineries necessary to its being a contractor or sub-contractor for garments. Neither was Weesan able
to prove that it has substantial capital for its business.
Further, the work premises utilized by Weesan is owned by Fairland, which significantly, was not in the
business of renting properties. They also advanced that there was no showing that Susan/Weesan paid
any rentals for the use of the premises. Instead of refuting the workers allegations, Susan instead
claimed that Weesan rented the premises from another entity, De Luxe. To support this, she attached to
her petition two Contracts of Lease purportedly entered into by her and De Luxe for the lease of the
premises covering the periods August 1, 1997 to July 31, 2000 and January 1, 2001 to December 31, 2004
as well as TCTs and Tax declarations in De Luxes name but the SC found it wanting. There were no
rental receipts presented nor did the TCTs indicate with certainty that the registered property is the same
one used for Weesans work premises. Weesan does not have its own workplace and is only utilizing the
workplace of Fairland to whom it supplied workers for its garment business.
Suffice it to say that [t]he presumption is that a contractor is a labor-only contractor unless such
contractor overcomes the burden of proving that it has substantial capital, investment, tools and the
like. As Susan/Weesan was not able to adduce evidence that Weesan had any substantial capital,
investment or assets to perform the work contracted for, the presumption that Weesan is a labor-only
contractor stands.
2. Yes, the workers were illegally dismissed.
Susan relies on Article 283 of the Labor Code which allows as a mode of termination of employment the
closure or termination of business, which is a management prerogative. The exercise of which requires: a)
that the closure/cessation of business is bona fide, i.e., its purpose is to advance the interest of the
employer and not to defeat or circumvent the rights of employees under the law or a valid agreement ; b)
that written notice was served on the employees and the DOLE at least one month before the intended
date of closure or cessation of business; and c) in case of closure/cessation of business not due to
financial losses, that the employees affected have been given separation pay equivalent to month pay
for every year of service or one month pay, whichever is higher.
The burden of proving that a temporary suspension is bona fide falls upon the employer. Clearly here,
Susan/Weesan was not able to discharge this burden. The documents Weesan submitted to support its
claim of severe business losses cannot be considered as proof of financial crisis to justify the temporary
suspension of its operations since they clearly appear to have not been duly filed with the BIR. Weesan
failed to satisfactorily explain why the Income Tax Returns and financial statements it submitted do not
bear the signature of the receiving officers. Also hard to ignore is the absence of the mandatory 30-day
prior notice to the workers.
Hence, the Court finds that Susan failed to prove that the suspension of operations of Weesan was bona
fide and that it complied with the mandatory requirement of notice under the law. Susan likewise failed to
discharge her burden of proving that the termination of the workers was for a lawful cause. Therefore, the
NLRC and the CA, in CA-G.R. SP No. 93860, did not err in their findings that the workers were illegally
dismissed by Susan/Weesan.

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The court also ruled that Fairlands claim of prescription does not deserve consideration. Fairland says
that they only engaged Weesans services 1996 to 1997, but in January 31, 2003, Fairland wrote Weesan
requesting for the sewing machines back.
G.R. No. 182915 (Sy vs. Fairland)
It is basic that the Labor Arbiter cannot acquire jurisdiction over the person of the respondent without the
latter being served with summons. However, if there is no valid service of summons, the court can still
acquire jurisdiction over the person of the defendant by virtue of the latters voluntary appearance.
Although not served with summons, jurisdiction over Fairland and Debbie was acquired through their
voluntary appearance. When the workers complaint was before the Labor Arbiter, it is confirmed that
Fairland and Debbie were never summoned.
The crucial question now is: Did Fairland and Debbie voluntarily appear before the Labor
Arbiter as to submit themselves to its jurisdiction?
Fairland argued before the CA that it did not engage Atty. Geronimo as its counsel. However, the
Court held in Santos v. National Labor Relations Commission viz:
Moreover, jurisdiction over the person of the defendant in civil cases is acquired not only by service of
summons but also by voluntary appearance in court and submission to its authority. Appearance by a
legal advocate is such voluntary submission to a courts jurisdiction. It may be made not only by actual
physical appearance but likewise by the submission of pleadings in compliance with the order of the court
or tribunal.
The fact that Atty. Geronimo entered his appearance for Fairland and Debbie and that he actively
defended them before the Labor Arbiter raised the presumption that he is authorized to appear for
them. As held in Santos, it is unlikely that Atty. Geronimo would have been so irresponsible as to
represent Fairland and Debbie if he were not in fact authorized. As an officer of the Court, Atty.
Geronimo is presumed to have acted with due propriety. Moreover, [i]t strains credulity that a counsel
who has no personal interest in the case would fight for and defend a case with persistence and vigor if he
has not been authorized or employed by the party concerned.
The presumption of authority of counsel to appear on behalf of a client is found both in the Rules
of Court and in the New Rules of Procedure of the NLRC.
Sec. 8, Rule III of the New Rules of Procedure of the NLRC, which is the rules prevailing at that time,
states in part:
SECTION 8. APPEARANCES. - An attorney appearing for a party is presumed to be properly
authorized for that purpose. However, he shall be required to indicate in his pleadings his PTR and IBP
numbers for the current year.
As Atty. Geronimo consistently indicated his PTR and IBP numbers in the pleadings he filed, there is no
reason for the Labor Arbiter not to extend to Atty. Geronimo the presumption that he is authorized to
represent Fairland.
Moreover, the fact that Debbie signed the verification attached to the position paper filed by Atty.
Geronimo, without a secretarys certificate or board resolution attached thereto, is not sufficient reason for
the Labor Arbiter to be on his guard and require Atty. Geronimo to prove his authority. Debbie, as
General Manager of Fairland is one of the officials of the company who can sign the verification without
need of a board resolution because as such, she is in a position to verify the allegations in the petition.
Suffice it to say that an attorneys presumption of authority is a strong one . A mere denial by a party that
he authorized an attorney to appear for him, in the absence of a compelling reason, is insufficient to
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overcome the presumption, especially when the denial comes after the rendition of an adverse
judgment, such as in the present case.
To stress, Article 224 contemplates the furnishing of copies of final decisions, orders or awards both to
the parties and their counsel in connection with the execution of such final decisions, orders or
awards. However, for the purpose of computing the period for filing an appeal from the NLRC to the CA,
same shall be counted from receipt of the decision, order or award by the counsel of record pursuant to
the established rule that notice to counsel is notice to party. In sum, we hold that the Labor Arbiter
had validly acquired jurisdiction over Fairland and its manager, Debbie, through the appearance of
Atty. Geronimo as their counsel and likewise, through the latters filing of pleadings on their
behalf.
Further proof that Fairland is Weesans principal: (1) aside from sewing machines, Fairland also lent
Weesan other equipment such as fire extinguishers, office tables and chairs, and plastic chairs; (2) no
proof evidencing the contractual arrangement between Weesan and Fairland was ever submitted by
Fairland; (3) while both Weesan and Fairland assert that the former had other clients aside from the latter,
no proof of Weesans contractual relationship with its other alleged client is extant on the records; and (4)
there is no showing that any of the workers were assigned to other clients aside from Fairland. Moreover,
the activities, the manner of work and the movement of the workers were subject to Fairlands control.
Fairland, therefore, as the principal employer, is solidarily liable with Susan/Weesan, the labor-only
contractor, for the rightful claims of the employees. Under this set-up, Susan/Weesan, as the "labor-only"
contractor, is deemed an agent of the principal, Fairland, and 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.
WHEREFORE, the Court,
1) in GR No. 189658 denies Susans Petition for Review on Certiorari. The CA decision declaring her a
labor-only contractor is affirmed.
2) in G.R. No. 182915, grants the workers Petition for Review on Certiorari. Decision of the CA (ninth
division) which excluded Fairland from being solidarily liable is reversed and set aside. The Decision of
the CA (first division) which held Fairland as solidarily liable with Susan/Weesan is reinstated and
affirmed.

Polyfoam-RGC International Corp., vs. Concepcion G.R. No. 172349, June 13, 2012
Facts: Respondent filed a complaint against petitioner Polyfoam for illegal dismissal alleging that he was
an all-around factory worker who served for almost six years. He was illegally dismissed when he
discovered that his time card was not in the rack and that he was informed by the security guard that he
can no longer punch his card. Protesting to the supervisor, he found out that he was dismissed due to an
infraction of a company rule. A request was sent to Polyfoams manager asking for respondents readmittance but was unheeded.
Co-petitioner Gramaje filed a Motion for Intervention claiming to be the real employer of respondent. She
alleges that her business PAGES is a legitimate job contractor. Polyfoam, then, filed a Motion to Dismiss
since there was no employer-employee relationship between Polyfoam and respondent. Gramaje assert
that respondent was not illegally dismissed but rather, it was respondent that abandoned work.
The Motion to Intervene was granted but the Motion to Dismiss was denied. In denying the motion to
dismiss, the Labor Arbiter ruled that the non-existence of the relationship is a matter of defense. In
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deciding the case, the Labor Arbiter ruled in favor of respondent finding him to be illegally dismissed and
awarded his money claims. It ruled that Polyfoam and Gramaje are solidarily liable to respondent. On
appeal the NLRC, the LAs decision was modified by exonerating Polyfoam from responsibility and
deleting some of the money awards. It ruled that Gramaje is an independent contractor and was not
illegally dismissed but abandoned work. On appeal to the CA, the NLRCs decision was reversed and the
LAs decision reinstated. Aggrieved, petitioners filed this petition for review on ceritiorari.
Issues:
Whether or not Polyfoam is solidarily liable?
Whether or not respondent was illegally dismissed?
Ruling:
Yes, Polyfoam is solidarily liable. Yes, respondent was illegally dismissed. The Court ruled that Gramaje
was involved in labor-only contracting and that respondent did not abandon work but was illegally
dismissed.
In support of its conclusion that Polyfoam is involved in labor-only contracting, the following were
considered by the Court: (a) Gramaje has no substantial capital; and (b) Gramaje did not carry on an
independent business or undertake the performance of its service contract according to its own manner
and method, free from the control and supervision of its principal, Polyfoam. On the first ground, it was
not able to prove ownership over the equipment in Polyfoams premises that is allegedly owned by
Gramaje.
Respondent was illegally dismissed. Credence was given to respondents narration of facts. Several
circumstance also negated the theory of abandonment like: (a) he immediately inquired from his
supervisor; (b) he wrote a letter asking to be re-admitted and (c) he filed a case for illegal dismissal.
.
SUPERIOR PACKAGING CORP., VS. BALAGSAY ET AL., G.R. NO. 178909, OCTOBER 10,
2012
Facts:
Superior Packaging Corporation (Superior) is involved in the manufacture and sale of commercial and
industrial corrugated boxes. It engaged the services of Lancer Staffing & Services Network, Inc. (Lancer)
to provide reliever services to its business. The respondents in this case are the workers of Lancer
assigned to Superior for such reliever services.
The workers filed a complaint with the DOLE against Superior for underpayment of wages, non- payment
of premium pay for worked rest, overtime pay and non-payment of salaries. The DOLE then conducted an
inspection of the Superiors premises and made a finding, among others, that Superior is engaged in
labor-only contracting and is consequently an indirect employer of the workers. Having found that
Superior committed the violations alleged by the workers, the DOLE issued an Order finding in favor of
the workers and ordering Superior to pay their claims.
Superior filed a motion for reconsideration on the ground that the workers are not its employees but of
Lancer. It objects to the finding that it is engaged in labor-only contracting and is consequently an indirect
employer, and alleges that it is beyond the visitorial and enforcement power of the DOLE to make such
conclusion. According to Superior, such conclusion may be made only upon consideration of evidentiary
matters and cannot be determined solely through a labor inspection.
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Issue:
Can the DOLE make a finding as to the existence or non-existence of employer-employee relationship in
the course of an inspection conducted pursuant to its visitorial and enforcement power?
Ruling:
Yes, the DOLE can.
Under Art. 128(b) of the Labor Code, as amended by RA 7730, the DOLE is fully empowered to make a
determination as to the existence of an employer-employee relationship in the exercise of its visitorial and
enforcement power.
The expanded visitorial and enforcement power of the DOLE granted by RA 7730 would be rendered
nugatory if the alleged employer could, by the simple expedient of disputing the employer-employee
relationship, force the referral of the matter to the NLRC. At least a prima facie showing of the absence of
an employer-employee relationship be made to oust the DOLE of jurisdiction. But it is precisely the
DOLE that will be faced with that evidence, and it is the DOLE that will weigh it, to see if the same
does successfully refute the existence of an employer- employee relationship.
Here, the DOLE finding Lancer was not an independent contractor and that Superior and Lancer were
engaged in labor-only contracting is a finding as to the existence of employer-employee relationship.
Hence, Superior was considered an indirect employer of the workers and liable to the latter for their
unpaid money claims.

DIGITAL TELECOMMUNICATIONS PHIL., INC. VS. DIGITEL EMPLOYEES UNION (G.R.

NOS. 184903, 10OCT2012)
FACTS: By virtue of a certification election, Digitel Employees Union (Union) became the exclusive
bargaining agent of all rank and file employees of Digitel in 1994. The Union and Digitel then
commenced collective bargaining negotiations which resulted in a bargaining deadlock. The Union
threatened to go on strike, but then the Labor Secretary assumed jurisdiction over the dispute and
eventually directed the parties to execute a CBA.
However, no CBA was forged between Digitel and the Union. Some Union members abandoned their
employment with Digitel. The Union later became dormant. Ten (10) years thereafter or on 28 September
2004, Digitel received from Esplana, who was President of the Union, a letter containing the list of
officers, CBA proposals and ground rules.
Digitel was reluctant to negotiate with the Union and demanded that the latter Union show compliance
with the provisions of the Unions Constitution and By -laws on union membership and election
of officers. On 4 November 2004, Esplana and his group filed a case for Preventive Mediation before the
National Conciliation and Mediation Board based on Digitels violation of the duty to bargain. On 25
November 2004, Esplana filed a notice of strike. On 10 March 2005, the then Labor Secretary issued an
Order.
Assuming jurisdiction over the labor dispute. During the pendency of the controversy, Digitel Service,
Inc. (Digiserv), a non-profit enterprise engaged in call center servicing, filed with the DOLE an
Establishment Termination Report stating that it will cease its business operation. The closure affected at
least 100 employees, 42 of whom are members of the herein respondent Union. Alleging that the affected
employees are its members and in reaction to Digiservs action, Esplana and his group filed another
Notice of Strike for union busting, illegal lock-out, and violation of the assumption order. On 23 May
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2005, the Labor Secretary ordered the second notice of strike subsumed by the previous Assumption
Order.
Meanwhile, on 14 March 2005, Digitel filed a petition with the Bureau of Labor Relations (BLR) seeking
cancellation of the Unions registration. In a Decision dated 11 May 2005, the Regional Director of the
DOLE dismissed the petition forcancellation of union registration for lack of merit. The appeal filed by
Digitel with the BLR was eventually dismissed for lackof merit in a Resolution dated 9 March 2007. In an
Order dated 13 July 2005, the Secretary of Labor directed Digitel to commence the CBA negotiation with
theUnion and certified for compulsory arbitration before the NLRC the issue of unfair labor practice.In
accordance with the 13 July 2005 Order of the Secretary of Labor, the unfair labor practice issue was
certified forcompulsory arbitration before the NLRC. On 31 January 2006, NLRC rendered a Decision
dismissing the unfair labor practicecharge against Digitel but declaring the dismissal of the 13 employees
of Digiserv as illegal and ordering their reinstatement.
The Union manifested that out of 42 employees, only 13 remained, as most had already accepted
separation pay.In view of this unfavorable decision, Digitel filed a petition on 9 June 2006 before
the Court of Appeals, challenging theabove NLRC Decision and Resolution and arguing mainly
that Digiserv employees are not employees of Digitel.On 18 June 2008, CA partially granted the case for
ULP, thus modifying the assailed NLRC dispositions. The CAlikewise sustained the finding that Digiserv
is engaged in labor-only contracting and that its employees are actually employeesof Digitel.Digitel filed
a motion for reconsideration but was denied in a Resolution dated 9 October 2008. Hence, this petition
forreview on certiorari.

ISSUES:
1) Whether Digiserv is a legitimate contractor; and
2) Whether there was a valid dismissal.
RULING:
Digiserv is a labor-only contractor.
Labor-only contracting is expressly prohibited by our labor laws. After an exhaustive review of the
records, there is no showing that first, Digiserv has substantial investment in the form of capital,
equipment or tools. The NLRC, as echoed by the CA, did not find substantial Digiservs authorized
capital stock of P 1,000,000.00. It pointed out that only P 250,000.00 of the authorized capital stock had
been subscribed and only P 62,500.00 had been paid up. There was no increase in capitalization for the
last 10 years.
Moreover, in the Amended Articles of Incorporation, as well as in the General Information Sheets for the
years 1994, 2001 and 2005, the primary purpose of Digiserv is to provide manpower services. In PCI
Automation Center, Inc. v. National Labor Relations Commission the Court made the following
distinction: "the legitimate job contractor provides services while the labor-only contractor provides only
manpower. The legitimate job contractor undertakes to perform a specific job for the principal employer
while the labor-only contractor merely provides the personnel to work for the principal employer."The
services provided by employees of Digiserv are directly related to the business of Digitel. It is undisputed
that as early as March 1994, the affected employees, except for two, were already performing their job as
Traffic Operator which was later renamed as Customer Service Representative (CSR). It is equally
undisputed that all throughout their employment, their function as CSR remains the same until they were
terminated effective May 30, 2005. Their long period of employment as such is an indication that their
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job is directly related to the main business of DIGITEL which is telecommunications. Furthermore,
Digiserv does not exercise control over the affected employees. Digiserv shared the same Human
Resources, Accounting, Audit and Legal Departments with Digitel which manifested that it was Digitel
who exercised control over the performance of the affected employees. The NLRC also relied on the
letters of commendation, plaques of appreciation and certification issued by Digitel to the Customer
Service Representatives as evidence of control. Considering that Digiserv has been found to be engaged
in labor-only contracting, the dismissed employees aredeemed employees of Digitel.
The affected employees were illegally dismissed.
In addition to finding that Digiserv is a labor-only contractor, records teemwith proof that its dismissed
employees are in fact employees of Digitel. The NLRC enumerated these pieces of evidence, thus:
The remaining affected employees, except for two (2), were already hired by DIGITEL even before the
existence of DIGISERV. Likewise, the remaining affected employees continuously held the position of
Customer Service Representative, which was earlier known as Traffic Operator, from the time they were
appointed on March 1, 1994until they were terminated on May 30, 2005.
Further, the Certificates issued to Customer Service Representative likewise show that they are employees
of DIGITEL, Take for example the "Service Award" issued to Ma. Loretta C. Esen, one of the remaining
affected employees. The "Service Award" was signed by the officers of DIGITEL - the VP-Customer
Services Division, the VP-Human Resources Division and the Group Head-Human Resources Division. It
cannot be gainsaid that it is only the employer that issues service award to its employees.
As an alternative argument, Digitel maintains that the affected employees were validly dismissed on the
grounds of closure of Digiserv, a department within Digitel. In the recent case of Waterfront Cebu City
Hotel v. Jimenez.
We reffered to the closure of a department or division of a company as retrenchment. For a
valid retrenchment, the following elements must be present:(1) That retrenchment is reasonably necessary
and likely to prevent business losses which, if already incurred, must be substantial, serious, actual and
real, or if only expected, are reasonably imminent as perceived objectively and in good faith by the
employer;(2) That the employer served written notice both to the employees and to the Department of
Labor and Employment at least one month prior to the intended date of retrenchment;(3) That the
employer pays the retrenched employees separation pay equivalent to one (1) month pay or at least
month pay for every year of service, whichever is higher;(4) That the employer exercises its prerogative
to retrench employees in good faith for the advancement of its interest and not to defeat or circumvent the
employees right to security of tenure; and
(5) That the employer used fair and reasonable criteria in ascertaining who would be dismissed and who
would be retained among the employees, such as status, efficiency, seniority, physical fitness, age, and
financial hardship for certain workers.
Only the 3 elements of a valid retrenchment had been here satisfied. Indeed, it is management prerogative
to close a department of the company. Digitels decision to outsource the call center operation of the
company is a valid reason to close down the operations of a department under which the affected
employees were employed. The fifth element regarding the criteria to be observed by Digitel clearly does
not apply because all employees under Digiserv were dismissed. The instant case is all about the fourth
element, that is, whether or not the affected employees were dismissed in good faith. We find that there
was no good faith in the retrenchment. Prior to the cessation of Digiservs operations, the Secretary of
Labor had issued the first and second assumption order. The effects of the assumption order issued by the
Secretary of Labor are two-fold. It enjoins an impending strike on the part of the employees and orders
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the employer to maintain the status quo. There is no doubt that Digitel defied the assumption order by
abruptly closing down Digiserv. The closure of a department is not illegal per se. What makes it unlawful
is when the closure is undertaken in bad faith. In St. John Colleges, Inc.v. St. John Academy Faculty and
Employees Union, bad faith was evidenced by the timing of and reasons for the closure andthe timing of
and reasons for the subsequent opening.

NORKIS TRADING CORPORATION vs. JOAQUIN BUENA VISTA et al

G.R. No. 182018
October 10, 2012
The Facts
The respondents were hired by Norkis Trading, a domestic corporation engaged in the business of
manufacturing and marketing of Yamaha motorcycles and multi-purpose vehicles, on separate dates and
for various positions.
Although they worked for Norkis Trading as skilled workers assigned in the operation of industrial and
welding machines owned and used by Norkis Trading for its business, they were not treated as regular
employees by Norkis Trading. Instead, they were regarded by Norkis Trading as members of PASAKA, a
cooperative organized under the Cooperative Code of the Philippines, and which was deemed an
independent contractor that merely deployed the respondents to render services for Norkis Trading. 4 The
respondents nonetheless believed that they were regular employees of Norkis Trading, citing in their
Position Paper5 the following circumstances that allegedly characterized their employment with the
company:
The work of the operators involves operating industrial machines, such as, press machine, hydraulic
machine, and spotweld machine. On the other hand, the welders used the welding machines. The
machines used by complainants herein respondents in their work are all owned by respondent Norkis
Trading herein petitioner and these are installed and located in the working area of the complainants
inside the companys premises.
The salaries of complainants are paid inside the premises of respondent Norkis Trading by Dalia Rojo and
Belen Rubio, who are also employees of the said company assigned at the accounting office.
Despite having served respondent Norkis Trading for many years and performing the same functions as
regular employees, complainants were not accorded regular status. It was made to appear that
complainants are not employees of said company but that of respondent PASAKA. 6
Against the foregoing scenario, the respondents, together with several other complainants, 7 filed on June
9, 1999 with the Department of Labor and Employment (DOLE) a complaint against Norkis Trading and
PASAKA for labor-only contracting and non-payment of minimum wage and overtime pay. The
complaint was docketed as LSED Case No. RO700-9906-CI-CS-168.
The filing of the complaint for labor-only contracting allegedly led to the suspension of the respondents
membership with PASAKA. On July 22, 1999, they were served by PASAKA with memoranda charging
them with a violation of the rule against commission of acts injurious or prejudicial to the interest or
welfare of the cooperative. The memoranda cited that the respondents filing of a case against Norkis
Trading had greatly prejudiced the interest and welfare of the cooperative. 8 In their answer9 to the
memoranda, the respondents explained that they merely wanted to be recognized as regular employees of
Norkis Trading. The case records include copies of the memoranda sent to respondents Buenavista,
Fabroa and Dondoyano.10
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On August 16, 1999, the respondents received another set of memoranda from PASAKA, now charging
them with the following violations of the cooperatives rules and regulations: (1) serious misconduct or
willful disobedience of superiors instructions or orders; (2) gross and habitual neglect of duties by
abandoning work without permission; (3) absences without filing leave of absence; and (4) wasting time
or loitering on companys time or leaving their post temporarily without permission during office
hours.11 Copies of the memoranda12 sent to Fabroa and Cape form part of the records.
On August 26, 1999, PASAKA informed the respondents of the cooperatives decision to suspend them
for fifteen (15) working days, to be effective from September 1 to 21, 1999, for violation of PASAKA
rules.
The records include copies of the memoranda 13 sent to Fabroa and Cape. The suspension prompted the
respondents to file with the NLRC the complaint for illegal suspension against Norkis Trading and
PASAKA.
The 15-day suspension of the respondents was extended for another period of 15 days, from September
22, 1999 to October 12, 1999. 14 Copies of PASAKAs separate letters15 to Buenavista, Fabroa, Cape and
Dondoyano on the cooperatives decision to extend the suspension form part of the records.
On October 13, 1999, the respondents were to report back to work but during the hearing in their NLRC
case, they were informed by PASAKA that they would be transferred to NorkisTradings sister company,
PortaCoeli Industrial Corporation (PortaCoeli), as washers of Multicab vehicles.
The respondents opposed the transfer as it would allegedly result in a change of employers, from Norkis
Trading to PortaCoeli. The respondents also believed that the transfer would result in a demotion since
from being skilled workers in NorkisTrading, they would be reduced to being utility workers.These
circumstances made the respondents amend their complaint for illegal suspension, to include the charges
of unfair labor practice, illegal dismissal, damages and attorneys fees.
For their part, both Norkis Trading and PASAKA claimed that the respondents were not employees of
Norkis Trading. They insisted that the respondents were members of PASAKA, which served as an
independent contractor that merely supplied services to Norkis International Co., Inc. (Norkis
International) pursuant to a job contract 16 which PASAKA and Norkis International executed on January
14, 1999 for 121,500 pieces of F/GF-Series Reinforcement Production. After PASAKA received reports
from its coordinator at Norkis International of the respondents low efficiency and violation of the
cooperatives rules, and after giving said respondents the chance to present their side, a penalty of
suspension was imposed upon them by the cooperative. The illegal suspension being complained of was
then not linked to the respondents employment, but to their membership with PASAKA.
Norkis Trading stressed that the respondents were deployed by PASAKA to Norkis International, a
company that is entirely separate and distinct from Norkis Trading.
ISSUES:
1) THE COURT OF APPEALS HAS DEPARTED FROM THE USUAL COURSE OF JUDICIAL
PROCEEDINGS WHEN IT MADE ITS OWN FACTUAL FINDINGS AND DISREGARDED THE
UNIFORM AND CONSISTENT FACTUAL FINDINGS OF THE LABOR ARBITER AND THE NLRC,
WHICH MUST BE ACCORDED GREAT WEIGHT, RESPECT AND EVEN FINALITY. IN SO
DOING, THE COURT OF APPEALS EXCEEDED ITS AUTHORITY ON CERTIORARI UNDER
RULE 65 OF THE RULES OF COURT BECAUSE SUCH FACTUAL FINDINGS WERE BASED ON
SPECULATIONS AND NOT ON OTHER EVIDENCES [SIC] ON RECORD.
4) THE COURT OF APPEALS HAS DETERMINED A QUESTION OF SUBSTANCE NOT IN
ACCORD WITH LAW AND JURISPRUDENCE IN RULING THAT THE RESPONDENTS WERE
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CONSTRUCTIVELY DISMISSED CONTRARY TO THE FACTUAL FINDINGS OF THE LABOR

ARBITER AND THE NLRC AND WITHOUT SHOWING ANY EVIDENCE TO OVERTURN SUCH
FINDING OF FACT.42
This Courts Ruling
The Court resolves to deny the petition.
Factual findings of labor officials
may be examined by the courts
when there is a showing that they
were arrived at arbitrarily or in
disregard of evidence on record.
As regards the first ground, the petitioner questions the CAs reversal of LA Gutierrezs and the NLRCs
rulings, and argues that said rulings should have been accorded great weight and finality by the appellate
court as these were allegedly supported by substantial evidence.
On this matter, the settled rule is that factual findings of labor officials, who are deemed to have acquired
expertise in matters within their jurisdiction, are generally accorded not only respect but even finality by
the courts when supported by substantial evidence, i.e., the amount of relevant evidence which a
reasonable mind might accept as adequate to support a conclusion. We emphasize, nonetheless, that these
findings are not infallible. When there is a showing that they were arrived at arbitrarily or in disregard of
the evidence on record, they may be examined by the courts. The CA can then grant a petition
for certiorari if it finds that the NLRC, in its assailed decision or resolution, has made a factual finding
that is not supported by substantial evidence. It is within the jurisdiction of the CA, whose jurisdiction
over labor cases has been expanded to review the findings of the NLRC. 47
We have thus explained in Cocomangas Hotel Beach Resort v. Visca 48 that the CA can take cognizance of
a petition for certiorari if it finds that the NLRC committed grave abuse of discretion by capriciously,
whimsically, or arbitrarily disregarding evidence which are material to or decisive of the controversy. The
CA cannot make this determination without looking into the evidence presented by the parties. The
appellate court needs to evaluate the materiality or significance of the evidence, which are alleged to have
been capriciously, whimsically, or arbitrarily disregarded by the NLRC, in relation to all other evidence
on record.
This case falls within the exception to the general rule that findings of fact of labor officials are to be
accorded respect and finality on appeal. As our discussions in the other grounds that are raised in this
petition will demonstrate, the CA has correctly held that the NLRC has disregarded facts and evidence
that are material to the outcome of the respondents case. No error can be ascribed to the appellate court
for making its own assessment of the facts that are significant to the case to determine the presence or
absence of grave abuse of discretion on the part of the NLRC, even if the CAs findings turn out to be
different from the factual findings of both the LA and NLRC.
Termination of an employment for
no just or authorized cause
amounts to an illegal dismissal.
As to the issue of whether the respondents were illegally dismissed by Norkis Trading, we answer in the
affirmative, although not by constructive dismissal as declared by the CA, but by actual dismissal.
Where an entity is declared to be a labor-only contractor, the employees supplied by said contractor to the
principal employer become regular employees of the latter. Having gained regular status, the employees
are entitled to security of tenure and can only be dismissed for just or authorized causes and after they had
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been afforded due process.66 Termination of employment without just or authorized cause and without
observing procedural due process is illegal.1wphi1
In claiming that they were illegally dismissed from their employment, the respondents alleged having
been informed by PASAKA that they would be transferred, upon the behest of Norkis Trading, as
Multicab washers or utility workers to PortaCoeli, a sister company of Norkis Trading. Norkis Trading
does not dispute that such job transfer was relayed by PASAKA unto the respondents, although the
company contends that the transfer was merely an "offer" that did not constitute a dismissal. It bears
mentioning, however, that the respondents were not given any other option by PASAKA and Norkis
Trading but to accede to said transfer. In fact, there is no showing that Norkis Trading would still
willingly accept the respondents to work for the company. Worse, it still vehemently denies that the
respondents had ever worked for it. Again, all defenses of Norkis Trading that anchor on the alleged lack
of employer-employee relationship between it and the respondents no longer merit any consideration,
given that this Courts findings in G.R. Nos. 180078-79 have become conclusive. Thus, the respondents
transfer to PortaCoeli, although relayed to the respondents by PASAKA was effectively an act of Norkis
Trading. Where labor-only contracting exists, the Labor Code itself establishes an employer-employee
relationship between the employer and the employees of the labor-only contractor. The statute establishes
this relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The contractor is
considered merely an agent of the principal employer and the latter is responsible to the employees of the
labor-only contractor as if such employees had been directly employed by the principal employer.
No further evidence or document should then be required from the respondents to prove such fact of
dismissal, especially since Norkis Trading maintains that it has no duty to admit and treat said
respondents as its employees. Considering that PortaCoeli is an entity separate and distinct from Norkis
Trading, the respondents employment with Norkis Trading was necessarily severed by the change in
work assignment. It then did not even matter whether or not the transfer involved a demotion in the
respondents rank and work functions; the intention to dismiss, and the actual dismissal of the respondents
were sufficiently established.
In the absence of a clear showing that the respondents dismissal was for just or authorized causes, the
termination of the respondents employment was illegal. What may be reasonably deduced from the
records was that Norkis Trading decided on the transfer, after the respondents had earlier filed their
complaint for labor-only contracting against the company. Even Norkis Tradings contention that the
transfer may be deemed a valid exercise of management prerogative is misplaced. First, the exercise of
management prerogative presupposes that the transfer is only for positions within the business
establishment. Second, the exercise of management prerogative by employers is not absolute, as it is
limited by law and the general principles of fair play and justice.

GOYA, INC. v. GOYA, INC. EMPLOYEES UNION-FFW G.R. No. 170054 : January 21, 2013
FACTS: Goya, Inc. (Company) is a domestic corporation engaged in the manufacture, importation, and
wholesale of top quality food products. Sometime in January 2004, the company hired contractual
employees from PESO Resources Development Corporation (PESO) to perform temporary and
occasional services. Respondent Goya, Inc. Employees UnionFFW (Union) requested for a grievance
conference on the ground that the contractual workers do not belong to the categories of employees
stipulated in the existing CBA.
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The hiring of contractual employees was in contravention to their CBA agreement which has been
applied since 1970 where there are only 3 kinds of employees: regular employees, probationary
employees and casual employees. The Union asserted that the hiring of contractual employees from
PESO is not a management prerogative and in gross violation of the CBA tantamount to unfair labor
practice (ULP).
The Union moreover advanced that sustaining the Companys position would easily weaken and
ultimately destroy the former with the latters resort to retrenchment and/or retirement of employees and
not filling up the vacant regular positions through the hiring of contractual workers from PESO, and that a
possible scenario could also be created by the Company wherein it could "import" workers from PESO
during an actual strike.
The case was brought before the NCMB when the matter remained unsolved for voluntary
arbitration. Voluntary Arbitrator Bienvenido E. Laguesma manifested that amicable settlement was no
longer possible; hence, they agreed to submit for resolution the solitary issue of "[w]hether or not the
Company is guilty of unfair labor acts in engaging the services of PESO, a third party service provider,
under the existing CBA, laws, and jurisprudence."
ISSUE:
Whether or not the Company is guilty of unfair labor acts in engaging the services of PESO, a
third party service provider, under the existing CBA, laws, and jurisprudence.
RULING:
The companys defense is that their act of hiring contractual employees is a management
prerogative and is a valid act thereof.
Declaring that a particular act falls within the concept of management prerogative is significantly
different from acknowledging that such act is a valid exercise thereof. What the VA and the CA correctly
ruled was that the Companys act of contracting out/outsourcing is within the purview of management
prerogative. Both did not say, however, that such act is a valid exercise thereof. Obviously, this is due to
the recognition that the CBA provisions agreed upon by the Company and the Union delimit the free
exercise of management prerogative pertaining to the hiring of contractual employees. Indeed, the VA
opined that "the right of the management to outsource parts of its operations is not totally eliminated but
is merely limited by the CBA," while the CA held that "this management prerogative of contracting out
services, however, is not without limitation. x x x These categories of employees particularly with respect
to casual employees serve as limitation to the Companys prerogative to outsource parts of its operations
especially when hiring contractual employees.
A collective bargaining agreement is the law between the parties.
It is familiar and fundamental doctrine in labor law that the CBA is the law between the parties and they
are obliged to comply with its provisions.
A collective bargaining agreement or CBA refers to the negotiated contract between a legitimate labor
organization and the employer concerning wages, hours of work and all other terms and conditions of
employment in a bargaining unit. As in all contracts, the parties in a CBA may establish such stipulations,
clauses, terms and conditions as they may deem convenient provided these are not contrary to law,
morals, good customs, public order or public policy. Thus, where the CBA is clear and unambiguous, it
becomes the law between the parties and compliance therewith is mandated by the express policy of the
law.
Moreover, if the terms of a contract, as in a CBA, are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of their stipulations shall control.
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On the power of the voluntary arbitrator:

In general, the arbitrator is expected to decide those questions expressly stated and limited in the
submission agreement. However, since arbitration is the final resort for the adjudication of disputes, the
arbitrator can assume that he has the power to make a final settlement. Thus, assuming that the
submission empowers the arbitrator to decide whether an employee was discharged for just cause, the
arbitrator in this instance can reasonably assume that his powers extended beyond giving a yes-or-no
answer and included the power to reinstate him with or without back pay.
Vigilla et al., vs. Phil. College of Criminology Inc., G.R. No. 200094, June 10, 2013
Facts:
PCCr is a non-stock educational institution, while the petitioners were janitors, janitresses and supervisor
in the Maintenance Department of PCCr under the supervision and control of Atty. Florante A. Seril (Atty.
Seril), PCCrs Senior Vice President for Administration. The petitioners, however, were made to
understand, upon application with respondent school, that they were under MBMSI, a corporation
engaged in providing janitorial services to clients. Atty. Seril is also the President and General Manager of
MBMSI.
Sometime in 2008, PCCr discovered that the Certificate of Incorporation of MBMSI had been revoked as
of July 2, 2003. On March 16, 2009, PCCr, through its President, respondent Gregory Alan F. Bautista
(Bautista), citing the revocation, terminated the schools relationship with MBMSI, resulting in the
dismissal of the employees or maintenance personnel under MBMSI, except Alfonso Bongot (Bongot)
who was retired.
In September, 2009, the dismissed employees, led by their supervisor, Benigno Vigilla (Vigilla), filed
their respective complaints for illegal dismissal, reinstatement, back wages, separation pay (for Bongot),
underpayment of salaries, overtime pay, holiday pay, service incentive leave, and 13th month pay against
MBMSI, Atty. Seril, PCCr, and Bautista.
In their complaints, they alleged that it was the school, not MBMSI, which was their real employer
because (a) MBMSIs certification had been revoked; (b) PCCr had direct control over MBMSIs
operations; (c) there was no contract between MBMSI and PCCr; and (d) the selection and hiring of
employees were undertaken by PCCr.
On the other hand, PCCr and Bautista contended that (a) PCCr could not have illegally dismissed the
complainants because it was not their direct employer; (b) MBMSI was the one who had complete and
direct control over the complainants; and (c) PCCr had a contractual agreement with MBMSI, thus,
making the latter their direct employer.
On September 11, 2009, PCCr submitted several documents before LA Ronaldo Hernandez, including
releases, waivers and quitclaims in favor of MBMSI executed by the complainants to prove that they were
employees of MBMSI and not PCCr.
Ruling of the Labor Arbiter
After due proceedings, the LA handed down his decision, finding that (a) PCCr was the real principal
employer of the complainants ; (b) MBMSI was a mere adjunct or alter ego/labor-only contractor; (c) the
complainants were regular employees of PCCr; and (d) PCCr/Bautista were in bad faith in dismissing the
complainants.
The LA explained that PCCr was actually the one which exercised control over the means and methods of
the work of the petitioners, thru Atty. Seril, who was acting, throughout the time in his capacity as Senior
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Vice President for Administration of PCCr, not in any way or time as the supposed employer/general
manager or president of MBMSI.
.Ruling of the NLRC
Not satisfied, the respondents filed an appeal before the NLRC. In its Resolution, dated February 11,
2011, the NLRC affirmed the LAs findings. Nevertheless, the respondents were excused from their
liability by virtue of the releases, waivers and quitclaims executed by the petitioners.
In their motion for reconsideration, petitioners attached as annexes their affidavits denying that they had
signed the releases, waivers, and quitclaims. They prayed for the reinstatement in toto of the July 30,
2010 Decision of the LA MBMSI/Atty. Seril also filed a motion for reconsideration 9 questioning the
declaration of the NLRC that he was solidarily liable with PCCr.
On April 28, 2011, NLRC modified its February 11, 2011 Resolution by affirming the July 30, 2010
Decision of the LA only in so far as complainants Ernesto B. Ayento and Eduardo B. Salonga were
concerned. As for the other 17 complainants, the NLRC ruled that their awards had been superseded by
their respective releases, waivers and quitclaims.
Ruling of the Court of Appeals
On September 16, 2011, the CA denied the petition and affirmed the two Resolutions of the NLRC, dated
February 11, 2011 and April 28, 2011. The CA pointed out that based on the principle of solidary liability
and Article 1217 of the New Civil Code, petitioners respective releases, waivers and quitclaims in favor
of MBMSI and Atty. Seril redounded to the benefit of the respondents. The CA also upheld the factual
findings of the NLRC as to the authenticity and due execution of the individual releases, waivers and
quitclaims because of the failure of petitioners to substantiate their claim of forgery and to overcome the
presumption of regularity of a notarized document. Petitioners motion for reconsideration was likewise
denied by the CA in its January 4, 2012 Resolution.
Hence, this petition under Rule 45 challenging the CA Decision.
Issue:
Whether or not their claims against the respondents were amicably settled by virtue of the
releases, waivers and quitclaims which they had executed in favor of MBMSI.
o whether or not petitioners executed the said releases, waivers and quitclaims
o whether or not a labor-only contractor is solidarily liable with the employer.
Ruling:
The petition fails.
The Releases, Waivers and Quitclaims are Valid
We noted that the individual quitclaims, waivers and releases executed by the complainants showing that
they received their separation pay from MBMSI were duly notarized by a Notary Public. Such
notarization gives prima facie evidence of their due execution. Further, said releases, waivers, and
quitclaims were not refuted nor disputed by complainants herein, thus, we have no recourse but to uphold
their due execution
A Labor-only Contractor is Solidarily Liable with the Employer
The issue of whether there is solidary liability between the labor-only contractor and the employer is
crucial in this case. If a labor-only contractor is solidarily liable with the employer, then the releases,
waivers and quitclaims in favor of MBMSI will redound to the benefit of PCCr. On the other hand, if a
labor-only contractor is not solidarily liable with the employer, the latter being directly liable, then the
releases, waivers and quitclaims in favor of MBMSI will not extinguish the liability of PCCr.
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xxx
The NLRC and the CA correctly ruled that the releases, waivers and quitclaims executed by petitioners in
favor of MBMSI redounded to the benefit of PCCr pursuant to Article 1217 of the New Civil Code. The
reason is that MBMSI is solidarily liable with the respondents for the valid claims of petitioners pursuant
to Article 109 of the Labor Code.
As correctly pointed out by the respondents, the basis of the solidary liability of the principal with those
engaged in labor-only contracting is the last paragraph of Article 106 of the Labor Code, which in part
provides: "In such cases labor-only contracting, 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."
Xxx
Under the general rule set out in the first and second paragraphs of Article 106, an employer who enters
into a contract with a contractor for the performance of work for the employer, does not thereby create an
employer-employees relationship between himself and the employees of the contractor. Thus, the
employees of the contractor remain the contractor's employees and his alone. Nonetheless when a
contractor fails to pay the wages of his employees in accordance with the Labor Code, the employer who
contracted out the job to the contractor becomes jointly and severally liable with his contractor to the
employees of the latter "to the extent of the work performed under the contract" as such employer were
the employer of the contractor's employees. The law itself, in other words, establishes an employeremployee relationship between the employer and the job contractor's employees for a limited purpose,
i.e., in order to ensure that the latter get paid the wages due to them.
A similar situation obtains where there is "labor only" contracting. The "labor-only" contractor-i.e "the
person or intermediary" - is considered "merely as an agent of the employer." The employer is made by
the statute responsible to the employees of the "labor only" contractor as if such employees had been
directly employed by the employer. Thus, where "labor-only" contracting exists in a given case, the
statute itself implies or establishes an employer-employee relationship between the employer (the owner
of the project) and the employees of the "labor only" contractor, this time for a comprehensive purpose:
"employer for purposes of this Code, to prevent any violation or circumvention of any provision of this
Code." The law in effect holds both the employer and the "laboronly" contractor responsible to the latter's
employees for the more effective safeguarding of the employees' rights under the Labor Code.35

BPI Employees Union-Davao city-FUBU vs. Bank of the Phil Islands et al., G.R. No. 174912, July
24, 2013
Facts:
BOMC, which was created pursuant to Central Bank Circular No. 1388, Series of 1993 (CBP Circular
No. 1388, 1993), and primarily engaged in providing and/or handling support services for banks and other
financial institutions, is a subsidiary of the Bank of Philippine Islands (BPI) operating and functioning as
an entirely separate and distinct entity.
A service agreement between BPI and BOMC was initially implemented in BPIs Metro Manila branches.
In this agreement, BOMC undertook to provide services such as check clearing, delivery of bank
statements, fund transfers, card production, operations accounting and control, and cash servicing,
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conformably with BSP Circular No. 1388. Not a single BPI employee was displaced and those
performing the functions, which were transferred to BOMC, were given other assignments.
The Manila chapter of BPI Employees Union (BPIEU-Metro ManilaFUBU) then filed a complaint for
unfair labor practice (ULP). The Labor Arbiter (LA) decided the case in favor of the union. The decision
was, however, reversed on appeal by the NLRC. BPIEU-Metro Manila-FUBU filed a petition for
certiorari before the CA which denied it, holding that BPI transferred the employees in the affected
departments in the pursuit of its legitimate business. The employees were neither demoted nor were their
salaries, benefits and other privileges diminished.
On January 1, 1996, the service agreement was likewise implemented in Davao City. Later, a merger
between BPI and Far East Bank and Trust Company (FEBTC) took effect on April 10, 2000 with BPI as
the surviving corporation. Thereafter, BPIs cashiering function and FEBTCs cashiering, distribution and
bookkeeping functions were handled by BOMC. Consequently, twelve (12) former FEBTC employees
were transferred to BOMC to complete the latters service complement.
BPI Davaos rank and file collective bargaining agent, BPI Employees Union-Davao City-FUBU (Union),
objected to the transfer of the functions and the twelve (12) personnel to BOMC contending that the
functions rightfully belonged to the BPI employees and that the Union was deprived of membership of
former FEBTC personnel who, by virtue of the merger, would have formed part of the bargaining unit
represented by the Union pursuant to its union shop provision in the CBA.7
The Union then filed a formal protest on June 14, 2000 addressed to BPI Vice Presidents Claro M. Reyes
and Cecil Conanan reiterating its objection. It requested the BPI management to submit the BOMC issue
to the grievance procedure under the CBA, but BPI did not consider it as "grievable." Instead, BPI
proposed a Labor Management Conference (LMC) between the parties.
Thereafter, the Union demanded that the matter be submitted to the grievance machinery as the resort to
the LMC was unsuccessful. As BPI allegedly ignored the demand, the Union filed a notice of strike
before the National Conciliation and Mediation Board (NCMB) on the following grounds:
a) Contracting out services/functions performed by union members that interfered with, restrained and/or
coerced the employees in the exercise of their right to self-organization;
b) Violation of duty to bargain; and
c) Union busting.
BPI then filed a petition for assumption of jurisdiction/certification with the Secretary of the Department
of Labor and Employment (DOLE), who subsequently issued an order certifying the labor dispute to the
NLRC for compulsory arbitration. The DOLE Secretary directed the parties to cease and desist from
committing any act that might exacerbate the situation.
On October 27, 2000, a hearing was conducted. Thereafter, the parties were required to submit their
respective position papers
On December 21, 2001, the NLRC came out with a resolution upholding the validity of the service
agreement between BPI and BOMC and dismissing the charge of ULP. It ruled that the engagement by
BPI of BOMC to undertake some of its activities was clearly a valid exercise of its management
prerogative. It further stated that the spinning off by BPI to BOMC of certain services and functions did
not interfere with, restrain or coerce employees in the exercise of their right to self-organization. The
Union did not present even an iota of evidence showing that BPI had terminated employees, who were its
members. In fact, BPI exerted utmost diligence, care and effort to see to it that no union member was
terminated.13 The NLRC also stressed that Department Order (D.O.) No. 10 series of 1997, strongly
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relied upon by the Union, did not apply in this case as BSP Circular No. 1388, series of 1993, was the
applicable rule.
After the denial of its motion for reconsideration, the Union elevated its grievance to the CA via a petition
for certiorari under Rule 65. The CA, however, affirmed the NLRCs December 21, 2001 Resolution with
modification that the enumeration of functions listed under BSP Circular No. 1388 in the said resolution
be deleted. The CA noted at the outset that the petition must be dismissed as it merely touched on factual
matters which were beyond the ambit of the remedy availed of.14 Be that as it may, the CA found that the
factual findings of the NLRC were supported by substantial evidence and, thus, entitled to great respect
and finality. To the CA, the NLRC did not act with grave abuse of discretion as to merit the reversal of the
resolution.
As to the applicability of D.O. No. 10, the CA agreed with the NLRC that the said order did not apply as
BPI, being a commercial bank, its transactions were subject to the rules and regulations of the BSP.
Not satisfied, the Union filed a motion for reconsideration which was, however, denied by the CA.
Hence, the present petition
Issue:
Whether or not the act of BPI to outsource the cashiering, distribution and bookkeeping functions to
BOMC is in conformity with the law and the existing CBA. Particularly in dispute is the validity of
the transfer of twelve (12) former FEBTC employees to BOMC, instead of being absorbed in BPI
after the corporate merger.
Ruling:
ART. 261. Jurisdiction of Voluntary Arbitrators or panel of Voluntary Arbitrators. x x x Accordingly,
violations of a Collective Bargaining Agreement, except those which are gross in character, shall no
longer be treated as unfair labor practice and shall be resolved as grievances under the Collective
Bargaining Agreement. For purposes of this article, gross violations of Collective Bargaining Agreement
shall mean flagrant and/or malicious refusal to comply with the economic provisions of such agreement.
Clearly, only gross violations of the economic provisions of the CBA are treated as ULP. Otherwise, they
are mere grievances.
In the present case, the alleged violation of the union shop agreement in the CBA, even assuming it was
malicious and flagrant, is not a violation of an economic provision in the agreement. The provisions relied
upon by the Union were those articles referring to the recognition of the union as the sole and exclusive
bargaining representative of all rank-and-file employees, as well as the articles on union security,
specifically, the maintenance of membership in good standing as a condition for continued employment
and the union shop clause.26 It failed to take into consideration its recognition of the banks exclusive
rights and prerogatives, likewise provided in the CBA, which included the hiring of employees,
promotion, transfers, and dismissals for just cause and the maintenance of order, discipline and efficiency
in its operations
The Union, however, insists that jobs being outsourced to BOMC were included in the existing bargaining
unit, thus, resulting in a reduction of a number of positions in such unit. The reduction interfered with the
employees right to self-organization because the power of a union primarily depends on its strength in
number.28
It is incomprehensible how the "reduction of positions in the collective bargaining unit" interferes with
the employees right to self-organization because the employees themselves were neither transferred nor
dismissed from the service. As the NLRC clearly stated:
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In the case at hand, the union has not presented even an iota of evidence that petitioner bank has started to
terminate certain employees, members of the union. In fact, what appears is that the Bank has exerted
utmost diligence, care and effort to see to it that no union member has been terminated. In the process of
the consolidation or merger of the two banks which resulted in increased diversification of functions,
some of these non-banking functions were merely transferred to the BOMC without affecting the union
membership.
Alilin et al., vs. Petron Corp.
Facts: Petron is a domestic corporation engaged in the oil business. It owns several bulk plants in the
country for receiving, storing and distributing its petroleum products. In 1968, Romualdo D. Gindang
Contractor, which was owned and operated by Romualdo D. Gindang (Romualdo), started recruiting
laborers for fielding to Petron's Mandaue Bulk Plant. When Romualdo died in 1989, his son Romeo D.
Gindang (Romeo), through Romeo D. Gindang Services (RDG), took over the business and continued to
provide manpower services to Petron. Petitioners were among those recruited by Romualdo D. Gindang
Contractor and RDG to work in the premises of the said bulk plant. On June 1, 2000, Petron and RDG
entered into a Contract for Services for the period from June 1, 2000 to May 31, 2002, whereby RDG
undertook to provide Petron with janitorial, maintenance, tanker receiving, packaging and other utility
services in its Mandaue Bulk Plant. This contract was extended on July 31, 2002 and further extended
until September 30, 2002. Upon expiration thereof, no further renewal of the service contract was done.
Alleging that they were barred from continuing their services on October 16, 2002, petitioners Alilin,
Calesa, Hindang, Gindang, Sungahid, Lee, Morato and Gabilan filed a Complaint for illegal dismissal,
underpayment of wages, damages and attorney's fees against Petron and RDG on November 12, 2002.
Issue: The primary issue to be resolved in this case is whether RDG is a legitimate job contractor.
Held: Generally, the contractor is presumed to be a labor-only contractor, unless such contractor
overcomes the burden of proving that it has the substantial capital, investment, tools and the like.
However, where the principal is the one claiming that the contractor is a legitimate contractor, as in the
present case, said principal has the burden of proving that supposed status. It is thus incumbent upon
Petron, and not upon petitioners as Petron insists, to prove that RDG is an independent contractor. The
audited financial statements and other financial documents of RDG for the years 1999 to 2001 establish
that it does have sufficient working capital to meet the requirements of its service contract. In fact, the
financial evaluation conducted by Petron of RDG's financial statements for years 1998-2000 showed
RDG to have a maximum financial capability of Php4.807 Million as of December 1998, and Php1.611
Million as of December 2000. Petron was able to establish RDG's sufficient capitalization when it entered
into the service contract in 2000. While Petron was able to establish that RDG was financially capable as
a legitimate contractor at the time of the execution of the service contract in 2000, it nevertheless failed to
establish the financial capability of RDG at the time when petitioners actually started to work for Petron
in 1968, 1979, 1981, 1987, 1990, 1992 and 1993.
The fact that petitioners were hired by Romeo or his father and that their salaries were paid by them do
not detract from the conclusion that there exists an employer-employee relationship between the parties
due to Petron's power of control over the petitioners. One manifestation of the power of control is the
power to transfer employees from one work assignment to another. 55 Here, Petron could order
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petitioners to do work outside of their regular "maintenance/utility" job. Also, petitioners were required to
report for work everyday at the bulk plant, observe an 8:00 a.m. to 5:00 p.m. daily work schedule, and
wear proper uniform and safety helmets as prescribed by the safety and security measures being
implemented within the bulk plant. All these imply control. In an industry where safety is of paramount
concern, control and supervision over sensitive operations, such as those performed by the petitioners, are
inevitable if not at all necessary. Indeed, Petron deals with commodities that are highly volatile and
flammable which, if mishandled or not properly attended to, may cause serious injuries and damage to
property and the environment. Naturally, supervision by Petron is essential in every aspect of its product
handling in order not to compromise the integrity, quality and safety of the products that it distributes to
the consuming public.
In sum, the Court finds that RDG is a labor-only contractor. As such, it is considered merely as an agent
of Petron. Consequently, the employer-employee relationship which the Court finds to exist in this case is
between petitioners as employees and Petron as their employer. Petron therefore, being the principal
employer and RDG, being the labor-only contractor, are solidarily liable for petitioners' illegal dismissal
and monetary claims.
Ampeleloquio vs. Jaka Distribution Inc
Facts: Petitioner Monchito R. Ampeloquio (Ampeloquio) is a reinstated employee of respondent Jaka
Distribution, Inc. (JAKA), formerly RMI Marketing Corporation (RMI). Previously, Ampeloquio had
filed a complaint for illegal dismissal against RMI before the National Labor Relations Commission
(NLRC). Subsequently, the Labor Arbiter found RMI guilty of illegal dismissal. On 6 August 2004,
Ampeloquio resumed work as merchandiser at JAKA and reported at JAKA's outlets within Metro
Manila, Shopwise Makati and Alabang. He received a daily wage of PhP252.00, without meal and
transportation allowance. On 4 April 2005, Ampeloquio was transferred outside of Metro Manila, to
Lucena City and subsequently to San Pablo City. At that time, he was receiving the same daily wage of
PhP252.00, without meal and transportation allowance. Ampeloquio was given a monthly cost of living
allowance (COLA) of PhP720.00. In a Letter dated 16 March 2005 addressed to JAKA's general manager,
Ampeloquio requested for salary adjustment and benefits retroactive to the date of his reinstatement, 6
August 2004, and payment of salary differential in the total amount of PhP42,196.00. In another Letter
dated 7 July 2006, Ampeloquio wrote JAKA reiterating his request for salary adjustment and payment of
benefits retroactive to his reinstatement, and an increase from his previous request of salary differential
which amounted to a total of PhP180,590.00. Because of the discrepancy in wages, Ampeloquio filed
anew before the NLRC, a complaint for underpayment of wages, COLA, non-payment of meal and
transportation allowances.
Issue: The issue is the scope of reinstatement "without loss of seniority rights and other privileges."
Held: Seniority rights refer to the creditable years of service in the employment record of the illegally
dismissed employee as if he or she never ceased working for the employer. In other words, the employee's
years of service is deemed continuous and never interrupted. Such is likewise the rationale for
reinstatement's twin relief of full backwages. Ampeloquio is correct in asserting that he is a senior
employee compared to the other merchandisers whom he himself designates as casual or contractual
merchandisers. He is likewise senior to other regular employees subsequently hired by JAKA, specifically
two regular messenger employees which Ampeloquio claims receive wages higher than what he is
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receiving from JAKA. Attached to the recognition of seniority rights of a reinstated employee who had
been illegally dismissed is the entitlement to wages appurtenant thereto. The case of Ampeloquio is
outside the ordinary. His reinstatement was ordered when merchandisers like him were no longer
employed by JAKA. He is not entitled to the same terms and conditions of employment as that which was
offered to the other regular employees (not merchandisers) subsequently hired by JAKA. JAKA's
decision to grant or withhold certain benefits to other employees is part of its management prerogative as
a function of an employer's constitutionally protected right to reasonable return on investments. EACTSH
Ampeloquio cannot likewise compare his wages to that received by "casual or contractual merchandisers"
or merchandisers who are admittedly outsourced from manpower agencies or those who are considered
seasonal employees hired only during peak season when JAKA is in need of extra merchandisers. As the
sole regular merchandiser of JAKA, Ampeloquio's reinstatement entitles him, at the minimum, to the
standard minimum wage at the time of his employment and to the wages he would have received from
JAKA had he not been illegally dismissed, as if there was no cessation of employment. Ampeloquio is
likewise entitled to any increase which JAKA may have given across the board to all its regular
employees. To repeat, Ampeloquio is not entitled to all benefits or privileges received by other employees
subsequently hired by JAKA just by the fact of his seniority in the service with JAKA.

FVR Skills & Services Exponenets Inc. vs. Seva, et al.

Facts: The twenty-eight (28) respondents in this case were employees of petitioner FVR Skills and
Services Exponents, Inc. (petitioner), an independent contractor engaged in the business of providing
janitorial and other manpower services to its clients. As early as 1998, some of the respondents had
already been under the petitioner's employ. On April 21, 2008, the petitioner entered into a Contract of
Janitorial Service (service contract) with Robinsons Land Corporation (Robinsons). Both agreed that the
petitioner shall supply janitorial, manpower and sanitation services to Robinsons Place Ermita Mall for a
period of one year from January 1, 2008 to December 31, 2008. Pursuant to this, the respondents were
deployed to Robinsons. Halfway through the service contract, the petitioner asked the respondents to
execute individual contracts which stipulated that their respective employments shall end on December
31, 2008, unless earlier terminated. The petitioner and Robinsons no longer extended their contract of
janitorial services. Consequently, the petitioner dismissed the respondents as they were project employees
whose duration of employment was dependent on the petitioner's service contract with Robinsons. The
respondents responded to the termination of their employment by filing a complaint for illegal dismissal
with the NLRC. They argued that they were not project employees; they were regular employees who
may only be dismissed for just or authorized causes.
Held: The respondents are regular employees, not project employees. The primary standard in
determining regular employment is the reasonable connection between the particular activity performed
by the employee and the employer's business or trade. This connection can be ascertained by considering
the nature of the work performed and its relation to the scheme of the particular business, or the trade in
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its entirety. Guided by this test, we conclude that the respondents' work as janitors, service crews and
sanitation aides, are necessary or desirable to the petitioner's business of providing janitorial and
manpower services to its clients as an independent contractor. Also, the respondents had already been
working for the petitioner as early as 1998. Even before the service contract with Robinsons, the
respondents were already under the petitioner's employ. They had been doing the same type of work and
occupying the same positions from the time they were hired and until they were dismissed in January
2009. DO 18-02 grants contractual employees all the rights and privileges due a regular employee,
including the following: (a) safe and healthful working conditions; (b) labor standards such as service
incentive leave, rest days, overtime pay, holiday pay, 13th month pay and separation pay; (c) social
security and welfare benefits; (d) self-organization, collective bargaining and peaceful concerted action;
and (e) security of tenure. In this light, we thus conclude that although the respondents were assigned as
contractual employees to the petitioner's various clients, under the law, they remain to be the petitioner's
regular employees, who are entitled to all the rights and benefits of regular employment.
The respondents were illegally dismissed. To be valid, an employee's dismissal must comply with the
substantive and procedural requirements of due process. Substantively, a dismissal should be supported
by a just or authorized cause. Procedurally, the employer must observe the twin notice and hearing
requirements in carrying out an employee's dismissal. Having already determined that the respondents are
regular employees and not project employees, and that the respondents' belated employment contracts
could not be given any binding effect for being signed under duress, we hold that illegal dismissal took
place when the petitioner failed to comply with the substantive and procedural due process requirements
of the law.
Finally, we modify the CA's ruling that Rana and Burgos, as the petitioner's president and general
manager, should be held solidarily liable with the corporation for its monetary liabilities with the
respondents. A corporation is a juridical entity with legal personality separate and distinct from those
acting for and in its behalf and, in general, from the people comprising it. The general rule is that,
obligations incurred by the corporation, acting through its directors, officers and employees, are its sole
liabilities.

Fonterra Brand Phils vs. Largado et al.

Facts: Petitioner Fonterra Brands Phils., Inc. (Fonterra) contracted the services of Zytron Marketing and
Promotions Corp. (Zytron) for the marketing and promotion of its milk and dairy products. Pursuant to
the contract, Zytron provided Fonterra with trade merchandising representatives (TMRs), including
respondents Leonardo Largado (Largado) and Teotimo Estrellado (Estrellado). The engagement of their
services began on September 15, 2003 and May 27, 2002, respectively, and ended on June 6, 2006. On
May 3, 2006, Fonterra sent Zytron a letter terminating its promotions contract, effective June 5, 2006.
Fonterra then entered into an agreement for manpower supply with A.C. Sicat Marketing and Promotional
Services (A.C. Sicat). Desirous of continuing their work as TMRs, respondents submitted their job
applications with A.C. Sicat, which hired them for a term of five (5) months, beginning June 7, 2006 up to
November 6, 2006. When respondents' 5-month contracts with A.C. Sicat were about to expire, they
allegedly sought renewal thereof, but were allegedly refused. This prompted respondents to file
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complaints for illegal dismissal, regularization, non-payment of service incentive leave and 13th month
pay, and actual and moral damages, against petitioner, Zytron, and A.C. Sicat.
Issue: Whether or not Zytron and A.C. Sicat are labor-only contractors, making Fonterra the employer of
herein respondents; and whether or not respondents were illegally dismissed.
Held: Respondents voluntarily terminated their employment with Zytron, contrary to their allegation that
their employment with Zytron was illegally terminated. The termination of respondents' employment with
Zytron was brought about by the cessation of their contracts with the latter. We give credence to the Labor
Arbiter's conclusion that respondents were the ones who refused to renew their contracts with Zytron, and
the NLRC's finding that they themselves acquiesced to their transfer to A.C. Sicat.
The CA correctly found that A.C. Sicat is engaged in legitimate job contracting. It duly noted that A.C.
Sicat was able to prove its status as a legitimate job contractor for having presented the following
evidence, to wit:
1. Certificate of Business Registration;
2. Certificate of Registration with the Bureau of Internal Revenue;
3. Mayor's Permit;
4. Certificate of Membership with the Social Security System;
5. Certificate of Registration with the Department of Labor and Employment;
6. Company Profile; and
7. Certifications issued by its clients.
Furthermore, A.C. Sicat has substantial capital, having assets totaling P5,926,155.76 as of December 31,
2006. Too, its Agreement with Fonterra clearly sets forth that A.C. Sicat shall be liable for the wages and
salaries of its employees or workers, including benefits, premiums, and protection due them, as well as
remittance to the proper government entities of all withholding taxes, Social Security Service, and
Medicare premiums, in accordance with relevant laws.
We agree with the findings of the CA that the termination of respondents' employment with the latter was
simply brought about by the expiration of their employment contracts. In the case at bar, it is clear that
respondents were employed by A.C. Sicat as project employees. In their employment contract with the
latter, it is clearly stated that " [A.C. Sicat is] temporarily employing [respondents] as TMR[s] effective
June 6[, 2006] under the following terms and conditions: The need for your service being only for a
specific project, your temporary employment will be for the duration only of said project of our client,
namely to promote FONTERRA BRANDS products . . . which is expected to be finished on or before
Nov. 06, 2006."
Respondents, by accepting the conditions of the contract with A.C. Sicat, were well aware of and even
acceded to the condition that their employment thereat will end on said pre-determined date of
termination. They cannot now argue that they were illegally dismissed by the latter when it refused to
renew their contracts after its expiration.

DBP vs. NLRC, 242 SCRA 59 [1995]

Facts: In September 1983, petitioner Development Bank of the Philippines, as mortgagee of TPWII,
foreclosed its plant facilities and equipment. Nevertheless, TPWII continued its business operations
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interrupted only by brief shutdowns for the purpose of servicing its plant facilities and equipment. In
January 1986 petitioner took possession of the foreclosed properties. From then on the company ceased
its operations. As a consequence private respondent Leonor A. Ang was on 15 April 1986 verbally
terminated from the service.
After hearing on a complaint for separation pay, 13th month pay, vacation and sick leave pay,
salaries and allowances against TPWII, its General Manager, and petitioner, the Labor Arbiter found
TPWII primarily liable to private respondent but only for her separation pay and vacation and sick leave
pay because her claims for unpaid wages and 13th month pay were later paid after the complaint was
filed. The General Manager was absolved of any liability. But with respect to petitioner, it was held
subsidiarily liable in the event the company failed to satisfy the judgment. The Labor Arbiter rationalized
that the right of an employee to be paid benefits due him from the properties of his employer is superior
to the right of the latter's mortgagee, citing this Court's resolution in PNB v. Delta Motor Workers Union.
On 16 November 1992 public respondent National Labor Relations Commission affirmed the
ruling of the Labor Arbiter.Petitioner argues that the decision of public respondent runs counter to the
consistent rulings of this Court in a long line of cases emphasizing that the applicant of Art. 110 of the
Labor Code is contingent upon the institution of bankruptcy or judicial liquidation proceedings against
the employer.
Issue:
Whether or not Art. 110 of the Labor Code, as amended, which refers to worker preference in
case of bankruptcy or liquidation of an employer's business, is applicable to the present case
notwithstanding the absence of any formal declaration of bankruptcy or judicial liquidation of TPWII. In
other words, is declaration of bankruptcy or judicial liquidation required before the worker's preference
may be invoked under Art. 110 of the Labor Code?
Ruling:
Article 110 is NOT applicable in the absence of any formal declaration of bankruptcy or judicial
liquidation of TPWII.We hold that public respondent gravely abused its discretion in affirming the
decision of the Labor Arbiter. Art. 110 should not be treated apart from other laws but applied in
conjunction with the pertinent provisions of the Civil Code and the Insolvency Law to the extent that
piece-meal distribution of the assets of the debtor is avoided. Art. 110, then prevailing, provides:
ARTICLE 110.Worker preference in case of bankruptcy. In the event of bankruptcy or liquidation
of an employer's business, his workers shall enjoy first preference as regards wages due them for services
rendered during the period prior to the bankruptcy or liquidation, any provision to the contrary
notwithstanding. Unpaid wages shall be paid in full before other creditors may establish any claim to a
share in the assets of the employer.
Complementing Art. 110, Sec. 10, Rule VIII, Book III, of the Revised Rules and Regulations
Implementing the Labor Code provides:
SECTION 10. Payment of wages in case of bankruptcy. Unpaid wages earned by the employees
before the declaration of bankruptcy or judicial liquidation of the employer's business shall be given first
preference and shall be paid in full before other creditors may establish any claim to a share in the assets
of the employer.
We interpreted this provision in Development Bank of the Philippines v. Santos to mean that . . .
a declaration of bankruptcy or a judicial liquidation must be present before the worker's preference may
be enforced. Thus, Article 110 of the Labor Code and its implementing rule cannot be invoked by the
respondents in this case absent a formal declaration of bankruptcy or a liquidation order . . .
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The rationale is that to hold Art. 110 to be applicable also to extrajudicial proceedings would be
putting the worker in a better position than the State which could only assert its own prior preference in
case of a judicial proceeding. Art. 110, which was amended by R.A. 6715 effective 21 March 1989, now
reads:
ARTICLE 110.Worker preference in case of bankruptcy. In the event of bankruptcy or liquidation
of an employer's business, his workers shall enjoy first preference as regards their unpaid wages and other
monetary claims, any provision of law to the contrary notwithstanding. Such unpaid wages and monetary
claims shall be paid in full before the claims of the Government and other creditors may be paid.
Obviously, the amendment expanded the concept of "worker preference" to cover not only
unpaid wages but also other monetary claims to which even claims of the Government must be
deemed subordinate. The Rules and Regulations Implementing R.A. 6715, approved 24 May 1989, also
amended the corresponding implementing rule, and now reads:
SECTION 10. Payment of wages and other monetary claims in case of bankruptcy. In case of
bankruptcy or liquidation of the employer's business, the unpaid wages and other monetary claims of the
employees shall be given first preference and shall be paid in full before the claims of government and
other creditors may be paid.
Although the terms "declaration" (of bankruptcy) or "judicial" (liquidation) have been notably
eliminated, still in Development Bank of the Philippines v. NLRC , this Court did not alter its original
position that the right to preference given to workers under Art. 110 cannot exist in any effective way
prior to the time of its presentation in distribution proceedings. In effect, we reiterated our previous
interpretation in Development Bank of the Philippines v. Santos where we said:
It (worker preference) will find application when, in proceedings such as insolvency, such unpaid wages
shall be paid in full before the 'claims of the Government and other creditors' may be paid. But, for an
orderly settlement of a debtor's assets, all creditors must be convened, their claims ascertained and
inventoried, and thereafter the preferences determined in the course of judicial proceedings which have
for their object the subjection of the property of the debtor to the payment of his debts or other lawful
obligations. Thereby, an orderly determination of preference of creditors' claims is assured (Philippine
Savings Bank vs. Lantin, No. L-33929, September 2, 1983, 124 SCRA 476); the adjudication made will
be binding on all parties-in-interest since those proceedings are proceedings in rem; and the legal scheme
of classification, concurrence and preference of credits in the Civil Code, the Insolvency Law, and the
Labor Code is preserved in harmony.
In ruling, as we did, in Development Bank of the Philippines v. Santos, we took into account the
following pronouncements: In the event of insolvency, a principal objective should be to effect an
equitable distribution of the insolvent's property among his creditors. To accomplish this there must first
be some proceeding where notice to all of the insolvent's creditors may be given and where the claims of
preferred creditors may be bindingly adjudicated.
The rationale therefore has been expressed in the recent case of DBP v. Secretary of Labor (G.R. No.
79351, 28 November 1989), which we quote:
A preference of credit bestows upon the preferred creditor an advantage of having his credit
satisfied first ahead of other claims which may be established against the debtor. Logically, it becomes
material only when the properties and assets of the debtors are insufficient to pay his debts in full; for if
the debtor is amply able to pay his various creditors in full, how can the necessity exist to determine
which of his creditors shall be paid first or whether they shall be paid out of the proceeds of the sale (of)
the debtor's specific property. Indubitably, the preferential right of credit attains significance only after the
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properties of the debtor have been inventoried and liquidated, and the claims held by his various creditors
have been established.
In the present case, there is as yet no declaration of bankruptcy nor judicial liquidation of TPWII.
Hence, it would be premature to enforce the worker's preference. The additional ratiocination of public
respondent that "under Article 110 of the Labor Code complainant enjoys a preference of credit over the
properties of TPWII being held in possession by DBP," is a dismal misconception of the nature of
preference of credit.
The DBP anchors its claims on a mortgage credit. A mortgage directly and immediately subjects
the property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation
for whose security it was constituted (Article 2176, Civil Code). It creates a real right which is
enforceable against the whole world. It is a lien on an identified immovable property, which a preference
is not. A recorded mortgage credit is a special preferred credit under Article 2242 (5) of the Civil Code on
classification of credits. The preference given by Article 110, when not falling within Article 2241 (6) and
Article 2242 (3) of the Civil Code and not attached to any specific property, is an ordinary preferred credit
although its impact is to move it from second priority to first priority in order of preference established by
Article 2244 of the Civil Code.
The present controversy could have been easily settled by public respondent had it referred to
ample jurisprudence which already provides the solution. Stare decisis et non quietamovere. Once a case
is decided by this Court as the final arbiter of any justiciable controversy one way, then another case
involving exactly the same point at issue should be decided in the same manner. Public respondent had no
choice on the matter. It could not have ruled any other way. This Court having spoken in a string of cases
against public respondent, its duty is simply to obey judicial precedents. Any further disregard, if not
defiance, of our rulings will be considered a ground to hold public respondent in contempt.

Batongbuhay Gold Mines vs. De la Serna G.R. No. 86963 August 6, 1999
Facts: On February 5, 1987, respondents Ty, Mendelebar, Reyes and 1,247 others filed a complaint
against BatongBuhay Gold Mines, Inc. for:
(1) Non-payment of their basic pay and allowances for the period of July 1983 to July 1984, inclusive,
under Wage Order No. 2;
(2) Non-payment of their basic pay and allowances for the period June 1984 to October 1986, inclusive
under Wage Order No. 5;
(3) Non-payment of their salaries for the period March 1986 to the present;
(4) Non-payment of their 13th month pay for 1985, 1986 and 1987;
(5) Non-payment of their vacation and sick leave, and the compensatory leaves of mine site employees;
and
(6) Non-payment of the salaries of employees who were placed on forced leaves since November, 1985 to
the present, if this is not feasible, the affected employees be awarded corresponding separation pay.
On February 27, 1987, the complainants filed a Motion for the issuance of an inspection authority. After
said inspection, the Labor Standards and Welfare Officers submitted their report with the
recommendations that an Order of Compliance be issued directing BatongBuhay Gold Mines Inc. to pay
complainants' Elsie Rosalina Ty, et al. P4,818,746.40 by way of unpaid salaries of workers from March
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16, 1987 to present, unpaid and ECOLA differentials under Wage Order Nos. 2 and 5 unpaid 13th months
pay for 1985 and 1986, and unpaid (sic) vacation/sick/compensatory leave benefits.
RD adopted recommendation of LSWOs. Complainant filed an ex-parte motion for issuance of a writ of
execution and appointment of special sheriff. The Regional Director issued an Order directing BBGMI to
put up a cash or surety bond otherwise a writ of execution will be issued. Respondent, however, failed to
do so and RD appointed a special sheriff thereafter to collect amount from respondent. The Special
Sheriff proceeded to execute the order and seized properties by respondent and sold them at public
auction.
On December 1987, BBGMI finally posted a supersedeas bond which prompted this Office to issue an
Order restraining the complainants and Sheriff Ramos from enforcing the writ of execution. Herein
petitioner appealed the Order dated July 31, 1987 of Regional Director Luna C. Piezas to respondent
Undersecretary Dionisio de la Serna, contending that the Regional Director had no jurisdiction over the
case. But the respondent upheld the jurisdiction of the Regional Director and annulled all the auction sales
conducted by Special Sheriff John Ramos.
Issues:
Whether the Regional Director has jurisdiction over the complaint filed by the employees of BBGMI
SC Ruling:
(1) YES. The Regional Director has jurisdiction over the BBGMI employees who are the complainants in
Case Number NCR-LSED-CI-2047-87. The subject labor standards case of the petition arose from the
visitorial and enforcement powers by the Regional Director of Department of Labor and Employment
(DOLE). Labor standards cases are governed by Article 128(b) of the Labor Code. As can be gleaned
from the records on hand, subject labor standards case was filed on February 5, 1987 at which time
Article 128 (b) read as follows:
Art. 128 (b) Visitorial and enforcement powers.
(b) The Minister of Labor or his duly authorized representative shall have the power to order and
administer, after due notice and hearing, compliance with the labor standards provisions of this Code
based on the findings of labor regulation officers or industrial safety engineers made in the course of
inspection, and to issue writs of execution to the appropriate authority for the enforcement of their order,
except in cases where the employer contests the findings of the labor regulations officers and raises issues
which cannot be resolved without considering evidentiary matters that are not verifiable in the ordinary
course of inspection.
Respondent Undersecretary Dionisio C. DelaSerna, upheld the jurisdiction of Regional Director Luna C.
Piezas by relying on Sec 2 of E.O. 111, which states:
The provisions of article 217 of this code to the contrary notwithstanding and in cases where the
relationship of employer-employee still exists, the Minister of Labor and Employment or his duly
authorized representative shall have the power to order and administer, after due notice and hearing,
compliance with the labor standards provision of this Code based on the findings of the findings of labor
regulation officers or industrial safety engineers made in the course of inspection, and to issue writs of
execution to the appropriate authority for the enforcement of their order, except in cases where the
employer contests the findings of the labor regulations officers and raises issues which cannot be
resolved without considering evidentiary matters that are not verifiable in the ordinary course of
inspection.
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The Court would have ruled differently had the petitioner shown that subject labor standards case is
within the purview of the exception clause in Article 128 (b) of the Labor Code. Said provision requires
the concurrence of the following elements in order to divest the Regional Director or his representatives
of jurisdiction, to wit: (a) that the petitioner (employer) contests the findings of the labor regulations
officer and raises issues thereon; (b) that in order to resolve such issues, there is a need to examine
evidentiary matters; and (c) that such matters are not verifiable in the normal course of inspection.
Nowhere in the records does it appear that the petitioner alleged any of the aforestated grounds. The only
instance when there was a semblance of raising the aforestated grounds, was when they filed an Appeal
Memorandum wherein petitioner comes up with the defense that the Regional Director was without
jurisdiction, as employer-employee relationship was absent, since petitioner had ceased doing business
since 1985.
Records indicate that the Labor Standards and Welfare Officers, pursuant to Complaint Inspection
Authority No. CI-2-047-87, were not allowed to look into records, vouchers and other related documents.
The officers of the petitioner alleged that the company is presently under receivership of the Development
Bank of the Philippines. In lieu of this, the Regional Director had ordered that a summary investigation be
conducted. Despite proper notices, the petitioner refused to appear before the Regional Director. To give it
another chance, an order to file its position paper was issued to substantiate its defenses. Notwithstanding
all these opportunities to be heard, petitioner chose not to avail of such.
As held in the case of M. Ramirez Industries vs. Sec. of Labor and Employment, . . .Under Art. 128(a) of
the Labor Code, the Secretary of Labor of his duly authorized representatives, such as the Regional
Directors, has visitorial powers which authorize him to inspect the records and premises of an employer
at any time of the day or night whenever work is being undertaken therein, to question any employee and
investigate any fact, condition or matter, and to determine violations of labor laws, wage orders or rules
and regulations. If the employer refuses to attend the inspection or conference or to submit any record,
such as payrolls and daily time records, he will be deemed to have waived his right to present evidence.
Petitioner's refusal to allow the Labor Standards and Welfare Officers to conduct inspection in the
premises of their head office in Makati and the failure to file their position paper is equivalent to a waiver
of its right to contest the claims of the employees. This Court had occasion to hold there is no violation of
due process where the Regional Director merely required the submission of position papers and resolved
the case summarily thereafter. Furthermore, the issuance of the compliance order was well within the
jurisdiction of the Regional Director, as Section 14 of the Rules on the Disposition of Labor Standards
Cases provides:
Sec. 14.Failure to Appear. Where the employer or the complainant fails or refuses to appear during the
investigation, despite proper notice, for two (2) consecutive hearings without justifiable reasons, the
hearing officer may recommend to the Regional Director the issuance of a compliance order based on the
evidence at hand or an order of dismissal of the complaint as the case may be.
It bears stressing that this petition involves a labor standards case and it is in keeping with the law that
"the worker need not litigate to get what legally belongs to him, for the whole enforcement machinery of
the Department of Labor exists to insure its expeditious delivery to him free of charge." Thus, their claim
of closure for business, among other things, are factual issues which cannot be brought here for the first
time. As petitioner refused to participate in the proceedings below where it could have ventilated the
appropriate defenses, to do so in this petition is unavailing. The reason for this is that factual issues are
not proper subjects of a special civil action for certiorari to the Supreme Court. It is therefore abundantly
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clear that at the time of the filing of the claims of petitioner's employees, the Regional Director was
already exercising visitorial and enforcement powers.
The present law, RA 7730, can be considered a curative statute to reinforce the conclusion that the
Regional Director has jurisdiction over the present labor standards case. Republic Act 7730, the law
governing the visitorial and enforcement powers of the Labor Secretary and his representatives reads:
Art. 128 (b)Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in
cases where the relationship of employer-employee still exists, the Secretary of Labor and Employment or
his duly authorized representatives shall have the power to issue compliance orders to give effect to the
labor standards provisions of this Code and other labor legislation based on the findings of labor
employment and enforcement officers or industrial safety engineers made in the course of inspection. The
Secretary or his duly authorized representative shall issue writs of execution to the appropriate authority
for the enforcement of their orders, except in cases where the employer contests the findings of the labor
employment and enforcement officer and raises issues supported by documentary proofs which were not
considered in the course of inspection.

ABUNDIO BARAYOGA and BISUDECO-PHILSUCORCORFARM WORKERS UNION

(PACIWU CHAP-TPC) v. ASSET PRIVATIZATION G.R. No. 160073; October 24, 2005
Facts: Bisudeco-Philsucor Corfarm Workers Union is composed of workers of Bicolandia Sugar
Development Corporation (BISUDECO), a sugar plantation mill located in Himaao, Pili, Camarines Sur.
Asset Privatization Trust (APT), a public trust was created under Proclamation No. 50, as amended,
mandated to take title to and possession of, conserve, provisionally manage and dispose of nonperforming assets of the Philippine government identified for privatization or disposition. Pursuant to
Section 23 of Proclamation No. 50, former President Corazon Aquino issued Administrative Order No.
14identifying certain assets of government institutions that were to be transferred to the National
Government. Among the assets transferred was the financial claim of the Philippine National Bank
against BISUDECO in the form of a secured loan. Consequently, by virtue of a Trust Agreement executed
between the National Government and APT on February 27, 1987, APT was constituted as trustee over
BISUDECOs account with the PNB.
Sometime later, BISUDECO contracted the services of Philippine Sugar Corporation (Philsucor) to take
over the management of the sugar plantation and milling operations until August 31, 1992.Meanwhile,
because of the continued failure of BISUDECO to pay its outstanding loan with PNB, its mortgaged
properties were foreclosed and subsequently sold in a public auction to APT, as the sole bidder. On April
2, 1991, APT was issued a Sheriffs Certificate of Sale.
The union filed a complaint for unfair labor practice, illegal dismissal, illegal deduction and
underpayment of wages and other labor standard benefits plus damages. In the meantime, APTs Board of
Trustees issued a resolution accepting the offer of Bicol-Agro-Industrial Cooperative (BAPCI) to buy the
sugar plantation and mill. Again, on September 23, 1992, the board passed another resolution authorizing
the payment of separation benefits to BISUDECOs employees in the event of the companys
privatization.
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Then, on October 30, 1992, BAPCI purchased the foreclosed assets of BISUDECO from APT and took
over its sugar milling operations under the trade name Peafrancia Sugar Mill (Pensumil). The union
alleged that when Philsucor initially took over the operations of the company, it retained BISUDECOs
existing
personnel under the same terms and conditions of employment. Nonetheless, at the start of the season
sometime in May1991, Philsucor started recalling workers back to work, to the exception of the union
members. Management told them thatthey will be re-hired only if they resign from the union. Just the
same, thereafter, the company started to employ the services of outsiders under the pakyaw system.
Issue: whether APT is liable to pay petitioners monetary claims, including back wages from May 1,
1991, to October 30, 1992 (the date of the sale of BISUDECO assets to BAPCI).
Held: No. Pursuant to Administrative Order No. 14, Series of 1987, PNBs assets, loans and receivables
from its borrowers were transferred to APT as trustee of the national government. Among the liabilities
transferred to APT was PNBs financial claim against BISUDECO, not the latters assets and chattel.
BISUDECO remained the owner of the mortgaged properties in August 1988, when the Philippine Sugar
Corporation (Philsucor) undertook the operation and management of the sugar plantation until August 31,
1992, under a so-called Contract of Lease between the two corporations. At the time, APT was merely a
secured creditor of BISUDECO.

Philippine Airlines vs Zamora G.R. 166996 February 6, 2007

FACTS: Respondent Zamora had been in the employ of petitioner PAL since 9 February 1981 when the
former was hired as a Cargo Representative at petitioner PALs Import Operations Division. Respondent
Zamora was then dismissed from service for having been found by petitioner PALs management to be
liable for insubordination, neglect of customer, disrespect for authority and absence without official leave.
On 12 March 1996, respondent Zamora filed a complaint against petitioners PAL and Francisco X.
Yngente IV before the NLRC for illegal dismissal, unfair labor practice, non-payment of wages, damages
and attorneys fees
On 1 February 2005, the Court of Appeals promulgated an Amended Decision modifying its 13 August
2004 Decision but at the same time resolving petitioner PAL's Motion for Reconsideration in this
wise: WHEREFORE, this Court's August 13, 2004 decision is hereby AMENDED, the dispositive portion
to read as follows:
WHEREFORE, in view of the foregoing, the petition is GRANTED. The NLRC resolution dated April
27, 2001 is MODIFIED. Considering that petitioner is a detention prisoner making reinstatement
impossible, PAL is hereby ordered to pay petitioner Zamora his separation pay, in lieu of reinstatement, to
be computed at one month salary for every year of service from February 9, 1981 and back wages to be
computed from December 19, 1995, both up to October 1, 2000, the date of his incarceration.
Considering that PAL is still under receivership, the monetary claims of petitioner Zamora must be
presented to the PAL Rehabilitation Receiver, subject to the rules on preference of credits. The Court of
Appeals took into account respondent Zamora's incarceration when it recalled its order of reinstatement.
Anent its earlier pronouncement against the suspension of the proceedings of the case owing to the
present rehabilitation of petitioner PAL, the appellate court only had this to say: However, since PAL is
still under receivership, the provisions of PD 902-A, should apply. The enforcement of the monetary
claims of petitioner should be brought before the PAL Rehabilitation Receiver for proper disposition.
ISSUE:
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WON respondent Zamoras monetary claim should be presented to the PAL rehabilitation receiver,
subject to the rules on preference of credits
RULING:
No. The relevant law dealing with the suspension of actions for claims against corporations is Presidential
Decree No. 902-A, 52 as amended. The term "claim," as contemplated in Sec. 6 (c) of Presidential Decree
No. 902-A, refers "to debts or demands of a pecuniary nature. It means 'the assertion of a right to have
money paid.
It is plain from the foregoing provisions of law that "upon the appointment [by the SEC] of a management
committee or a rehabilitation receiver" all actions for claims against the corporation pending before
any court, tribunal or board shall ipso jure be suspended.
The law is clear: upon the creation of a management committee or the appointment of a rehabilitation
receiver, all claims for actions "shall be suspended accordingly." No exception in favor of labor claims is
mentioned in the law. Since the law makes no distinction or exemptions, neither should this Court.
Otherwise stated, no other action may be taken in, including the rendition of judgment during the state
of suspension what are automatically stayed or suspended are the proceedings of an action or suit and
not just the payment of claims during the execution stage after the case had become final and executory.
The suspension of action for claims against a corporation under rehabilitation receiver or management
committee embraces all phases of the suit, be it before the trial court or any tribunal or before this Court.
Furthermore, the actions that are suspended cover all claims against a distressed corporation whether for
damages
founded
on
a breach of contract of carriage,
labor
cases,
collection suits or any other claims of a pecuniary nature. As to the appellate court's amended directive
that "the monetary claims of petitioner Zamora must be presented to the PAL Rehabilitation Receiver,
subject to the rules on preference of credits," the same is erroneous for there has been no declaration of
bankruptcy or judicial liquidation. Thus, the rules on preference of credits do not apply.

PAL vs. PALEA G.R. No. 142399

June 19, 2007
Facts:
This case arose from a labor Complaint, filed by herein PALEA against herein PAL and one Mary Anne
del Rosario, Director of Personnel, PAL, on 1 March 1989, charging them with unfair labor practice for
the non-payment of 13th month pay of employees who had not been regularized as of the 30 th of April
1988, as allegedly stipulated in the Collective Bargaining Agreement (CBA) entered into by herein
parties. the facts are:
On 6 February 1987, herein parties, PAL and PALEA, the collective bargaining agent of the rank and file
employees of PAL, entered into a CBA that was to cover the period of 1986 1989. Part of said
agreement required PAL to pay its rank and file employees the following bonuses:
Section 4 13th Month Pay (Mid-year Bonus)
A 13th month pay, equivalent to one month's current basic pay, consistent with the existing practice shall
be paid in advance in May.
Section 5 Christmas Bonus
The equivalent of one month's basic pay as of November 30, shall be paid in December as a Christmas
bonus. Payment may be staggered in two (2) stages. It is distinctly understood that nothing herein
contained shall be construed to mean that the Company may not at its sole discretion give an additional
amount or increase the Christmas bonus.
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Prior to the payment of the 13th month pay (mid year bonus), PAL released an implementing
guideline on 22 April 1988. It stated that:
1) Eligibility
a) Ground employees in the general payroll who are regular as of April 30, 1988;
b) Other ground employees in the general payroll, not falling within category a) above shall receive their
13th Month Pay on or before December 24, 1988;
2) Amount
a) For category a) above, one month basic salary as of April 30, 1988;
b) Employees covered under 1 b) above shall be paid not less than 1/12 of their basic salary for every
month of service within the calendar year.
3) Payment Date: May 9, 1988 for category 1 a) above.
PALEA assailed the implementation of the foregoing guideline. In response to the above, PAL informed
PALEA that rank and file employees who were regularized after 30 April 1988 were not entitled to the
13th month pay as they were already given the Christmas bonus in December of 1988, per the
Implementing Rules of Presidential Decree No. 851.
PALEA, disagreeing with PAL, filed a Complaint for unfair labor practice before the NLRC.
PAL answered that those rank and file employees who were not regularized by 30 April of a particular
year are, in principle, not denied their 13 month pay, considering they receive said mandatory bonus in
the form of the Christmas Bonus.
The Labor Arbiter rendered his decision dismissing the complaint for lack of merit. The Labor Arbiter
ruled that PAL was not guilty of unfair labor practice in withholding the grant of the 13th Month Pay or
Mid-Year Bonus, as set out in Section 4 of the CBA, to the concerned employees. The giving of the
particular bonus was said to be merely an additional practice made in the past, "such being the case, it
violated no agreement or existing practice or committed unfair labor practice, as charged."
On appeal to the NLRC, the assailed decision of the Labor Arbiter was reversed.
Undaunted, PAL went to this Court via a Petition for Review on Certiorari, however, the petition was
referred to the Court of Appeals for proper resolution.
The Court of Appeals promulgated its Decision dismissing the petition filed by PAL. It affirmed the 28
January 1998 NLRC Resolution.
Hence, this Petition for Review on Certiorari.
Issue:
Can a court or quasi-judicial agency amend or alter a Collective Bargaining Agreement by expanding its
coverage to non-regular employees who are not covered by the bargaining unit?"
Ruling:
The Securities and Exchange Commission (SEC) had mandated the rehabilitation of PAL. Thus, PAL is
still undergoing rehabilitation.
The pertinent law concerning the suspension of actions for claims against corporations due to its
rehabilitation is Presidential Decree No. 902-A, as amended.
The aforementioned law provides that SEC assumes jurisdiction in cases where the corporation is
undergoing rehabilitation with pending money claims against the corporation.
The underlying principle behind the suspension of claims pending rehabilitation proceedings was
explained in the case of BF Homes, Incorporated v. Court of Appeals:
the real justification is to enable the management committee or rehabilitation receiver to effectively
exercise its/his powers free from any judicial or extra-judicial interference that might unduly hinder or
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prevent the "rescue" of the debtor company. To allow such other action to continue would only add to the
burden of the management committee or rehabilitation receiver, whose time, effort and resources would
be wasted in defending claims against the corporation instead of being directed toward its restructuring
and rehabilitation.
The Supreme Court citing Rubberworld vs. NLRC said:
we held that worker's claims before the NLRC and labor arbiters are included among the actions
suspended upon the placing under receivership of the employer-corporations. Although strictly speaking,
the ruling in Rubberworld dealt with actions for claims pending before the NLRC and labor arbiters, we
find that the rationale for the automatic suspension therein set out would apply to the instant case where
the employee's claim was elevated on certiorari before this Court
In another PAL case, specifically, Philippine Airlines, Inc. v. Court of Appeal, the SC held that:
that this Court is "not prepared to depart from the well-established doctrines" essentially maintaining that
all actions for claims against a corporation pending before any court, tribunal or board shall ipso jure be
suspended in whatever stage such actions may be found upon the appointment by the SEC of a
management committee or a rehabilitation receiver.
In view of the ongoing rehabilitation of petitioner Philippine Airlines, Inc., herein proceedings are
heretoforeSUSPENDED

Garcia vs. Phil. Air Lines, G.R. No. 164856, January 20, 2009
Facts: The case stemmed from the administrative charge filed by PAL against its employees-herein
petitioners3 after they were allegedly caught in the act of sniffing shabu when a team of company security
personnel and law enforcers raided the PAL Technical Centers Toolroom Section on July 24, 1995.
After due notice, PAL dismissed petitioners on October 9, 1995 for transgressing the PAL Code of
Discipline, prompting them to file a complaint for illegal dismissal and damages resolved by the Labor
Arbiter in their favor, thus ordering PAL to, inter alia, immediately comply with the reinstatement aspect
of the decision.
Prior to the promulgation of the Labor Arbiters decision, the Securities and Exchange Commission
(SEC) placed PAL (hereafter referred to as respondent), which was suffering from severe financial losses,
under an Interim Rehabilitation Receiver, who was subsequently replaced by a Permanent Rehabilitation
Receiver on June 7, 1999.
The Labor Arbiter issued a Writ of Execution (Writ) respecting therein statement aspect of his January 11,
1999 Decision, and on October 25, 2000, he issued a Notice of Garnishment (Notice). Respondent
thereupon moved to quash the Writ and to lift the Notice while petitioners moved to release the garnished
amount.
Issue:
1 Whether petitioners may collect their wages during the period between the Labor Arbiters order
of reinstatement pending appeal and the NLRC decision overturning that of the Labor Arbiter,
now that respondent has exited from rehabilitation proceedings.
2 WON peculiar predicament of a corporate rehabilitation rendered it impossible for respondent to
exercise its option under the circumstances.
Ruling:
1 The decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the
reinstatement aspect is concerned, shall immediately be executory, pending appeal. The employee
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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.
The view as maintained in a number of cases is that:
x x x [E]ven 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 dismissed employee during the
period of appeal until reversal by the higher court. On the other hand, if the employee has been
reinstated during the appeal period and such reinstatement order is reversed with finality, the employee is
not required to reimburse whatever salary he received for he is entitled to such, more so if he actually
rendered services during the period.
In other words, a dismissed employee whose case was favorably decided by the Labor Arbiter is entitled
to receive wages pending appeal upon reinstatement, which is immediately executory. Unless there is a
restraining order, it is ministerial upon the Labor Arbiter to implement the order of reinstatement and it is
mandatory on the employer to comply therewith.
The Court reaffirms the prevailing principle that 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
dismissed employee during the period of appeal until reversal by the higher court. It settles the view that
the Labor Arbiter's order of reinstatement is immediately executory and the employer has to either readmit them to work under the same terms and conditions prevailing prior to their dismissal, or to reinstate
them in the payroll, and that failing to exercise the options in the alternative, employer must pay the
employees salaries.
2 The spirit of the rule on reinstatement pending appeal animates the proceedings once the Labor
Arbiter issues the decision containing an order of reinstatement. The immediacy of its execution
needs no further elaboration.Reinstatement pending appeal necessitates its immediate execution
during the pendency of the appeal, if the law is to serve its noble purpose. At the same time, any
attempt on the part of the employer to evade or delay its execution, as observed in Panuncillo and
as what actually transpired in Kimberly, Composite, Air Philippines, and Roquero, should not be
countenanced.
After the labor arbiters decision is reversed by a higher tribunal, the employee may be barred
from collecting the accrued wages, if it is shown that the delay in enforcing the reinstatement
pending appeal was without fault on the part of the employer.
The test is two-fold: (1) there must be actual delay or the fact that the order of reinstatement pending
appeal was not executed prior to its reversal; and (2) the delay must not be due to the employers
unjustified act or omission. If the delay is due to the employers unjustified refusal, the employer may still
be required to pay the salaries notwithstanding the reversal of the Labor Arbiters decision.
The new NLRC Rules of Procedure, which took effect on January 7, 2006, now require the employer to
submit areport of compliance within 10 calendar days from receipt of the Labor Arbiters
decision, disobedience to which clearly denotes a refusal to reinstate. The employee need not file a
motion for the issuance of the writ of execution since the Labor Arbiter shall thereafter motu proprio issue
the writ. With the new rules in place, there is hardly any difficulty in determining the employers
intransigence in immediately complying with the order.
In the case at bar, petitioners exerted efforts to execute the Labor Arbiters order of reinstatement until
they were able to secure a writ of execution, albeit issued on October 5, 2000 after the reversal by the
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NLRC of the Labor Arbiters decision. Technically, there was still actual delay which brings to the
question of whether the delay was due to respondents unjustified act or omission.
It is apparent that there was inaction on the part of respondent to reinstate them, but whether such
omission was justified depends on the onset of the exigency of corporate rehabilitation.
It is settled that upon appointment by the SEC of a rehabilitation receiver, all actions for claims before
any court, tribunal or board against the corporation shall ipso jure be suspended. As stated early on,
during the pendency of petitioners complaint before the Labor Arbiter, the SEC placed respondent under
an Interim Rehabilitation Receiver. After the Labor Arbiter rendered his decision, the SEC replaced the
Interim Rehabilitation Receiver with a Permanent Rehabilitation Receiver.
Case law recognizes that unless there is a restraining order, the implementation of the order of
reinstatement is ministerial and mandatory. This injunction or suspension of claims by legislative
fiat partakes of the nature of a restraining order that constitutes a legal justification for respondents noncompliance with the reinstatement order. Respondents failure to exercise the alternative options of actual
reinstatement and payroll reinstatement was thus justified. Such being the case, respondents obligation to
pay the salaries pending appeal, as the normal effect of the non-exercise of the options, did not attach.
While reinstatement pending appeal aims to avert the continuing threat or danger to the survival or even
the life of the dismissed employee and his family, it does not contemplate the period when the employercorporation itself is similarly in a judicially monitored state of being resuscitated in order to survive.
The parallelism between a judicial order of corporation rehabilitation as a justification for the nonexercise of its options, on the one hand, and a claim of actual and imminent substantial losses as ground
for retrenchment, on the other hand, stops at the red line on the financial statements.
More importantly, there are legal effects arising from a judicial order placing a corporation under
rehabilitation. Respondent was, during the period material to the case, effectively deprived of the
alternative choices under Article 223 of the Labor Code, not only by virtue of the statutory injunction but
also in view of the interim relinquishment of management control to give way to the full exercise of the
powers of the rehabilitation receiver. Had there been no need to rehabilitate, respondent may have opted
for actual physical reinstatement pending appeal to optimize the utilization of resources. Then again,
though the management may think this wise, the rehabilitation receiver may decide otherwise, not to
mention the subsistence of the injunction on claims.
In sum, the obligation to pay the employees salaries upon the employers failure to exercise the
alternative options under Article 223 of the Labor Code is not a hard and fast rule, considering the
inherent constraints of corporate rehabilitation
Bank of the Philippines Island vs. NLRC, 171 SCRA 556
Facts:
On March 22, 1983, the NLRC resolved the bargaining deadlock between BPI and its employees
by fixing the wage increases and other economic benefits and ordering them to be embodied in a new
collective bargaining agreement to be concluded by BPIEU-Metro Manila and ALU with BPI. It did not
decide the intra-union dispute, however, holding that this was under the original jurisdiction of the medarbiter and the exclusive appellate jurisdiction of the Bureau of Labor Relations.
Following the promulgation by the NLRC of its decision of March 23, 1983, in Certified Cases
Nos. 0279 and 0281, private respondent Ignacio Lacsina filed a motion for the entry of attorney's lien for
legal services to be rendered by him as counsel of BPIEU in the negotiation of the new collective
bargaining agreement with BPI.The basis of this motion was a resolution dated August 26, 1982, signed
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by members of the BPI Employees Union, providing for the terms and conditions, including attorneys
fees and his authority to check-off with the company.
Accordingly, BPI deducted the amount of P200.00 from each of the employees who had signed
the authorization. Upon learning about this, the petitioners (ALU and BPIEU-ALU) challenged the said
order, on the ground that it was not authorized under the Labor Code.
On April 15, 1983, the NLRC issued a resolution setting aside the order and requiring BPI to
safe-keep the amounts sought to be deducted "until the rights thereto of the interested parties shall have
been determined in appropriate proceedings. Subsequently, the NLRC issued an en banc resolution dated
September 27, 1983, ordering the release to Lacsina of the amounts deducted "except with respect to any
portion thereof as to which no individual signed authorization has been given by the members concerned
or where such authorization has been withdrawn.
The petitioners now impugn this order as contrary to the provisions and spirit of the Labor Code.
While conceding that Lacsina is entitled to payment for his legal services, they argue that this must be
made not by the individual workers directly, as this is prohibited by law, but by the union itself from its
own funds. In support of this contention, they invoke Article 222(b) of the Labor Code, providing as
follows:
Art. 222.
Appearances and Fees.
(b)
No attorney's fees, negotiation fees or similar charges of any kind arising from any collective
bargaining negotiations or conclusions of the collective agreement shall be imposed on any individual
member of the contracting union: Provided, however, that attorneys fees may be charged against union
funds in an amount to be agreed upon by the parties. Any contract, agreement or arrangement of any sort
to the contrary shall be null and void.
They also cite the case of Pacific Banking Corporation v. Clave, where the lawyer's fee was taken not
from the total economic benefits received by the workers but from the funds of their labor union.
Issue: Is the mentioned Resolution signed by the BPI employees granting attorneys fees to Lacsina to be
deducted from the employees wages valid?
Ruling:
Yes. The Court reads the afore-cited provision as prohibiting the payment of attorney's fees only when it
is effected through forced contributions from the workers from their own funds as distinguished from the
union funds.
The purpose of the provision is to prevent imposition on the workers of the duty to individually
contribute their respective shares in the fee to be paid the attorney for his services on behalf of the union
in its negotiations with the management. The obligation to pay the attorney's fees belongs to the union
and cannot be shunted to the workers as their direct responsibility. Neither the lawyer nor the union itself
may require the individual workers to assume the obligation to pay the attorney's fees from their own
pockets. So categorical is this intent that the law also makes it clear that any agreement to the contrary
shall be null and void ab initio.
We see no such imposition in the case at bar. A reading of the above-cited resolution will clearly
show that the signatories thereof have not been in any manner compelled to undertake the obligation they
have there assumed. On the contrary, it is plain that they were voluntarily authorizing the check-off of the
attorney's fees from their payment of benefits and the turnover to Lacsina of the amounts deducted,
conformably to their agreement with him. There is no compulsion here. And significantly, the authorized
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deductions affected only the workers who adopted and signed the resolution and who were the only ones
from whose benefits the deductions were made by BPI. No similar deductions were taken from the other
workers who did not sign the resolution and so were not bound by it.
That only those who signed the resolution could be subjected to the authorized deductions was
recognized and made clear by the order itself of the NLRC. It was there categorically declared that the
check-off could not be made where "no individual signed authorization has been given by the members
concerned or where such authorization has been withdrawn."
The Pacific Banking Corporation case is not applicable to the present case because there was
there no similar agreement as that entered into between Lacsina and the signatories of the resolution in
question. Absent such an agreement, there was no question that the basic proscription in Article 222
would have to operate. It is noteworthy, though, that the Court there impliedly recognized arrangements
such as the one at bar with the following significant observation:
Moreover, the case is covered squarely by the mandatory and explicit prescription of Art. 222
which is another guarantee intended to protect the employee against unwarranted practices that would
diminish his compensation without his knowledge and consent.
A similar recognition was made in Galvadores v. Trajano, where the payment of the attorney's
fees from the wages of the employees was not allowed because: "No check-offs from any amount due to
employees may be effected without individual written authorities duly signed by the employees
specifically stating the amount, purpose and beneficiary of the deduction. The required individual
authorizations in this case are wanting."
Finally, we hold that the agreement in question is in every respect a valid contract as it satisfies
all the elements thereof and does not contravene law, morals, good customs, public order, or public policy.
On the contrary, it enables the workers to avail themselves of the services of the lawyer of their choice
and confidence under terms mutually acceptable to the parties and, hopefully, also for their mutual
benefit.

Traders Royal Bank Employees Union vs. NLRC, 269 SCRA 733 [1997]
Facts:
Petitioner Traders Royal Bank Employees Union and private respondent Atty. Emmanuel Noel A.
Cruz, head of the E.N.A. Cruz and Associates law firm, entered into a retainer agreement on February 26,
1987 whereby the former obligated itself to pay the latter a monthly retainer fee of P3,000.00 in
consideration of the law firm's undertaking to render the services enumerated in their contract. During the
existence of that agreement, petitioner union referred to private respondent the claims of its members for
holiday, mid-year and year-end bonuses against their employer, Traders Royal Bank (TRB). These
employees obtained favorable decision from their complaint which went through the SC.
The Supreme Court, in its decision promulgated on August 30, 1990, modified the decision of the
NLRC by deleting the award of mid-year and year-end bonus differentials while affirming the award of
holiday pay differential. The bank voluntarily complied with such final judgment and determined the
holiday pay differential to be in the amount of P175,794.32. Petitioner never contested the amount thus
found by TRB. The latter duly paid its concerned employees their respective entitlement in said sum
through their payroll. After private respondent received the above decision of the Supreme Court on
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September 18, 1990, he notified the petitioner union, the TRB management and the NLRC of his right to
exercise and enforce his attorney's lien over the award of holiday pay differential through a letter dated
October 8, 1990.
Thereafter, on July 2, 1991, private respondent filed a motion before Labor Arbiter Lorenzo for
the determination of his attorney's fees, praying that ten percent (10%) of the total award for holiday pay
differential computed by TRB at P175,794.32, or the amount of P17,579.43, be declared as his attorney's
fees, and that petitioner union be ordered to pay and remit said amount to him. The LA and the NLRC
affirmed Atty. Cruz motion.
Petitioner union filed a comment and opposition to said motion on July 15, 1991. Petitioner
maintains that the NLRC committed grave abuse of discretion amounting to lack of jurisdiction in
upholding the award of attorney's fees in the amount of P17,574.43, or ten percent (10%) of the
P175,794.32 granted as holiday pay differential to its members, in violation of the retainer agreement; and
that the challenged resolution of the NLRC is null and void, for the reasons hereunder stated.
Although petitioner union concedes that the NLRC has jurisdiction to decide claims for attorney's
fees, it contends that the award for attorney' s fees should have been incorporated in the main case and not
after the Supreme Court had already reviewed and passed upon the decision of the NLRC. Since the claim
for attorney's fees by private respondent was neither taken up nor approved by the Supreme Court, no
attorney's fees should have been allowed by the NLRC. Thus, petitioner posits that the NLRC acted
without jurisdiction in making the award of attorney's fees, as said act constituted a modification of a final
and executory judgment of the Supreme Court which did not award attorney's fees. It then cited decisions
of the Court declaring that a decision which has become final and executory can no longer be altered or
modified even by the court which rendered the same.
Issue: Whether or not Atty. Cruz is entitled to 10 % of the judgment award as his attorneys fees even if it
was not taken up in the main decision of the SC.
Ruling:
Yes, not in the concept contemplatedin Article 111 of the Labor Code. The Labor Arbiter
erroneously set the amount of attorney's fees on the basis of Art. 111 of the Labor Code; a hearing should
have been conducted for the proper determination of attorney's fees.
There are two commonly accepted concepts of attorney's fees, the so-called ordinary and
extraordinary. In its ordinary concept, an attorney's fee is the reasonable compensation paid to a lawyer by
his client for the legal services he has rendered to the latter. The basis of this compensation is the fact of
his employment by and his agreement with the client.
In its extraordinary concept, an attorney's fee is an indemnity for damages ordered by the court to
be paid by the losing party in a litigation. The basis of this is any of the cases provided by law where such
award can be made, such as those authorized in Article 2208, Civil Code, and is payable not to the lawyer
but to the client, unless they have agreed that the award shall pertain to the lawyer as additional
compensation or as part thereof.
It is the first type of attorney's fees which private respondent demanded before the labor arbiter.
Also, the present controversy stems from petitioner's apparent misperception that the NLRC has
jurisdiction over claims for attorney's fees only before its judgment is reviewed and ruled upon by the
Supreme Court, and that thereafter the former may no longer entertain claims for attorney's fees. It will be
noted that no claim for attorney's fees was filed by private respondent before the NLRC when it acted on
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the money claims of petitioner, nor before the Supreme Court when it reviewed the decision of the NLRC.
It was only after the High Tribunal modified the judgment of the NLRC awarding the differentials that
private respondent filed his claim before the NLRC for a percentage thereof as attorney's fees.
It would obviously have been impossible, if not improper, for the NLRC in the first instance and
for the Supreme Court thereafter to make an award for attorney's fees when no claim therefor was
pending before them. Courts generally rule only on issues and claims presented to them for adjudication.
Accordingly, when the labor arbiter ordered the payment of attorney's fees, he did not in any way modify
the judgment of the Supreme Court.
A CLAIM FOR ATTORNEY'S FEES MAY BE ASSERTED EITHER IN THE VERY ACTION
IN WHICH THE SERVICES OF A LAWYER HAD BEEN RENDERED OR IN A SEPARATE ACTION
- It is well settled that a claim for attorney's fees may be asserted either in the very action in which the
services of a lawyer had been rendered or in a separate action. Attorney's fees cannot be determined until
after the main litigation has been decided and the subject of the recovery is at the disposition of the court.
The issue over attorney's fees only arises when something has been recovered from which the fee is to be
paid. While a claim for attorney's fees may be filed before the judgment is rendered, the determination as
to the propriety of the fees or as to the amount thereof will have to be held in abeyance until the main case
from which the lawyer's claim for attorney's fees may arise has become final. Otherwise, the
determination to be made by the courts will be premature. Of course, a petition for attorney's fees may be
filed before the judgment in favor of the client is satisfied or the proceeds thereof delivered to the client.
It is apparent from the foregoing discussion that a lawyer has two options as to when to file his claim for
professional fees. Hence, private respondent was well within his rights when he made his claim and
waited for the finality of the judgment for holiday pay differential, instead of filing it ahead of the award's
complete resolution. To declare that a lawyer may file a claim for fees in the same action only before the
judgment is reviewed by a higher tribunal would deprive him of his aforestated options and render
ineffective the foregoing pronouncements of this Court.
The provisions of the contract entered into between petitioner and respondents are clear and need
no further interpretation; all that is required to be done in the instant controversy is its application. The
P3,000.00 which petitioner pays monthly to private respondent does not cover the services the latter
actually rendered before the labor arbiter and the NLRC in behalf of the former. As stipulated in Part C of
the agreement, the monthly fee is intended merely as a consideration for the law firm's commitment to
render the services enumerated in Part A (General Services) and Part B (Special Legal Services) of the
retainer agreement.
The difference between a compensation for a commitment to render legal services and a
remuneration for legal services actually rendered can better be appreciated with a discussion of the two
kinds of retainer fees a client may pay his lawyer. These are a general retainer, or a retaining fee, and a
special retainer.
RETAINER FEES, GENERAL RETAINER AND A SPECIAL RETAINER A general retainer,
or retaining fee, is the fee paid to a lawyer to secure his future services as general counsel for any
ordinary legal problem that may arise in the routinary business of the client and referred to him for legal
action. The future services of the lawyer are secured and committed to the retaining client. For this, the
client pays the lawyer a fixed retainer fee which could be monthly or otherwise, depending upon their
arrangement. The fees are paid whether or not there are cases referred to the lawyer. The reason for the
remuneration is that the lawyer is deprived of the opportunity of rendering services for a fee to the
opposing party or other parties. In fine, it is a compensation for lost opportunities. A special retainer is a
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fee for a specific case handled or special service rendered by the lawyer for a client. A client may have
several cases demanding special or individual attention. If for every case there is a separate and
independent contract for attorney's fees, each fee is considered a special retainer.
THE P3,000.00 MONTHLY FEE PROVIDED IN THE RETAINER AGREEMENT BETWEEN
THE UNION AND THE LAW FIRM REFERS TO A GENERAL RETAINER OR A RETAINING FEE.
The P3,000.00 which petitioner pays monthly to private respondent does not cover the services the
latter actually rendered before the labor arbiter and the NLRC in behalf of the former. As stipulated in
Part C of the agreement, the monthly fee is intended merely as a consideration for the law firm's
commitment to render the services enumerated in Part A (General Services) and Part B (Special Legal
Services) of the retainer agreement. Evidently, the P3,000.00 monthly fee provided in the retainer
agreement between the union and the law firm refers to a general retainer, or a retaining fee, as said
monthly fee covers only the law firm's pledge, or as expressly stated therein, its "commitment to render
the legal services enumerated." The fee is not payment for private respondent's execution or performance
of the services listed in the contract, subject to some particular qualifications or permutations stated there.
We have already shown that the P3,000.00 is independent and different from the compensation which
private respondent should receive in payment for his services. While petitioner and private respondent
were able to fix a fee for the latter's promise to extend services, they were not able to come into
agreement as to the law firm's actual performance of services in favor of the union. Hence, the retainer
agreement cannot control the measure of remuneration for private respondent's services.
PRIVATE RESPONDENT'S ENTITLEMENT TO AN ADDITIONAL REMUNERATION FOR
SPECIAL SERVICES RENDERED IN THE INTEREST OF PETITIONER IS BASED ON QUASICONTRACT. The fact that petitioner and private respondent failed to reach a meeting of the minds
with regard to the payment of professional fees for special services will not absolve the former of civil
liability for the corresponding remuneration therefor in favor of the latter. Obligations do not emanate
only from contracts. One of the sources of extra-contractual obligations found in our Civil Code is the
quasi-contract premised on the Roman maxim that nemo cum alterius detrimento locupletari protest. As
embodied in our law, certain lawful, voluntary and unilateral acts give rise to the juridical relation of
quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another. A
quasi-contract between the parties in the case at bar arose from private respondent's lawful, voluntary and
unilateral prosecution of petitioner's cause without awaiting the latter's consent and approval. Petitioner
cannot deny that it did benefit from private respondent's efforts as the law firm was able to obtain an
award of holiday pay differential in favor of the union. It cannot even hide behind the cloak of the
monthly retainer of P3,000.00 paid to private respondent because, as demonstrated earlier, private
respondent's actual rendition of legal services is not compensable merely by said amount.
THE LABOR ARBITER ERRONEOUSLY SET THE AMOUNT OF ATTORNEY'S FEES ON
THE BASIS OF ART. 111 OF THE LABOR CODE; A HEARING SHOULD HAVE BEEN
CONDUCTED FOR THE PROPER DETERMINATION OF ATTORNEY'S FEES. - Here, then, is the
flaw we find in the award for attorney's fees in favor of private respondent. Instead of adopting the above
guidelines, the labor arbiter forthwith but erroneously set the amount of attorney's fees on the basis of
Article 111 of the Labor Code. He completely relied on the operation of Article 111 when he fixed the
amount of attorney's fees at P17,574.43. As already stated, Article 111 of the Labor Code regulates the
amount recoverable as attorney's fees in the nature of damages sustained by and awarded to the prevailing
party. It may not be used therefore, as the lone standard in fixing the exact amount payable to the lawyer
by his client for the legal services he rendered. Also, while it limits the maximum allowable amount of
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attorney's fees, it does not direct instantaneous and automatic award of attorney's fees in such maximum
limit. It, therefore, behooves the adjudicator in questions and circumstances similar to those in the case at
bar, involving a conflict between lawyer and client, to observe the above guidelines in cases calling for
the operation of the principles of quasi-contract and quantum meruit, and to conduct a hearing for the
proper determination of attorney's fees. The criteria found in the Code of Professional Responsibility are
to be considered, and not disregarded, in assessing the proper amount. Here, the records do not reveal that
the parties were duly heard by the labor arbiter on the matter and for the resolution of private respondent's
fees.
As already stated, Article 111 of the Labor Code regulates the amount recoverable as attorney's
fees in the nature of damages sustained by and awarded to the prevailing party. It may not be used
therefore, as the lone standard in fixing the exact amount payable to the lawyer by his client for the legal
services he rendered. Also, while it limits the maximum allowable amount of attorney's fees, it does not
direct the instantaneous and automatic award of attorney's fees in such maximum limit.
It, therefore, behooves the adjudicator in questions and circumstances similar to those in the case
at bar, involving a conflict between lawyer and client, to observe the above guidelines in cases calling for
the operation of the principles of quasi-contract and quantum meruit, and to conduct a hearing for the
proper determination of attorney's fees. The criteria found in the Code of Professional Responsibility are
to be considered, and not disregarded, in assessing the proper amount. Here, the records do not reveal that
the parties were duly heard by the labor arbiter on the matter and for the resolution of private respondent's
fees.
It is axiomatic that the reasonableness of attorney's fees is a question of fact. Ordinarily,
therefore, we would have remanded this case for further reception of evidence as to the extent and value
of the services rendered by private respondent to petitioner. However, so as not to needlessly prolong the
resolution of a comparatively simple controversy, we deem it just and equitable to fix in the present
recourse a reasonable amount of attorney's fees in favor of private respondent. For that purpose, we have
duly taken into account the accepted guidelines therefor and so much of the pertinent data as are extant in
the records of this case which are assistive in that regard. On such premises and in the exercise of our
sound discretion, we hold that the amount of P10,000.00 is a reasonable and fair compensation for the
legal services rendered by private respondent to petitioner before the labor arbiter and the NLRC.

Brahm Industries vs. NLRC, 280 SCRA 824 [1997]

Facts:
On 8 February 1994 Labor Arbiter Fatima J. Franco ruled that complainants Roberto M. Durian
and Jone M. Comendador were illegally dismissed by BRAHM and accordingly ordered the latter to: (a)
reinstate complainants to their former positions or equivalent positions without loss of seniority rights, but
if reinstatement was no longer possible, to pay them separation pay equivalent to one (1) month for every
year of service; (b) pay Roberto M. Durian the amount of Forty-Eight Thousand Thirty-Eight Pesos and
Twenty-Five Centavos (P48,038.25) representing his back wages; and, Jone M. Comendador the amount
of Sixty Thousand Four Hundred Seventy-Four Pesos and Ninety-Two Centavos (P60,474.92)
representing his back wages, 13th month pay and service incentive leave pay; and, (c) pay complainants
the amount equivalent to 10% of the total award as attorney's fees.
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Upon appeal by BRAHM, the NLRC affirmed the decision of the Labor Arbiter, subject to the
modification that the attorney's fees awarded be reduced to five percent (5%) of the total monetary
award.BRAHM now argues that the NLRC gravely abused its discretion when it held that: (a) private
respondents Roberto M. Durian and Jone M. Comendador were regular employees and not merely
contractual employees hired on a per project basis; (b) they were illegally dismissed; and, (c) they were
entitled to attorney's fees despite the fact that the award lacks factual and legal basis.
Issue:
Whether or not private respondents are entitled to attorneys fees.
Ruling:
Yes. With regard to the propriety of the award of attorney's fees in favor of private respondents,
petitioner contends that it was erroneous for the NLRC to merely reduce the award of attorney's fees
when it should have been completely deleted. Petitioner claims that the award is baseless since the matter
of attorney's fees was touched only once in the dispositive portion of the Labor Arbiter's decision and no
discussion or reason was stated therefor.
This argument is unfounded. A perusal of the decision shows that the reason for the award of
attorney's fees is clearly and unequivocally set forth in the body of the Labor Arbiter's decision, to
witHaving been compelled to litigate, complainants should be paid an amount equivalent to ten percent
(10%) of the total award as and for attorney's fees." It used as basis Art. 2208 of the Civil Code which
allows attorney's fees to be awarded by a court when its claimant is compelled to litigate with third
persons or to incur expenses to protect his interest by reason of an unjustified act or omission of the party
from whom it is sought.
However, nothing precludes the appellate courts from reducing the award of attorney's fees when
it is found to be unconscionable or excessive under the circumstances. Thus, we agree with the NLRC's
ruling that the award of attorney's fees is proper on account of complainants' being compelled to litigate
their claims against respondent. The amount is however reduced to five percent (5%) of the adjudged
relief, it appearing that the substantial portion of the award refers to complainants' back wages and not to
withheld salaries.
Finally, this Court has consistently held that findings of fact of administrative agencies and quasijudicial bodies which have acquired expertise because their jurisdiction is confined to specific matters are
generally accorded not only respect but even finality and are binding upon this Court unless there is grave
abuse of discretion or where it is clearly shown that they were arrived at arbitrarily or in disregard of the
evidence on record. Petitioner failed to convince us that we should depart from this time-honored rule.

Heirs of Aniban vs. NLRC, 282 SCRA 377 [1997]

Facts:
Reynaldo Aniban was employed by the Philippine Transmarine Carriers, Inc. (TRANSMARINE)
acting in behalf of its foreign principal Norwegian Ship Management A/S (NORWEGIAN) as radio
operator on board the vessel "Kassel." Aniban died due to myocardial infarction during the period of his
employment. A claim was made for additional death benefits under the Collective Bargaining Agreement
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between Associated Marine Officers and Seamen's Union of the Philippines and NORWEGIAN. The
claim was rejected on the ground that myocardial infarction was not an occupational disease.
However, on 11 January 1994 the POEA ruled that myocardial infarction was an occupational
disease in the case of R/O Aniban and granted the prayer of his heirs for payment of death benefits under
the POEA Standard Employment Contract as well as under the Collective Bargaining Agreement plus
attorney's fees of US$6,700.00 equivalent to 10% of the total award.
On appeal, the NLRC reversed the POEA and denied the claim on the ground that it was the
Employees' Compensation Commission (ECC) which had original jurisdiction to hear and determine the
claim for death benefits. NLRC likewise deleted he award of attorneys fees on the ground that there was
no unlawful withholding of wages.
A motion to reconsider the decision of the NLRC was denied; hence, this petition by the heirs of
Aniban. The Supreme Court ruled that the Employees Compensation Commission may not be considered
as having jurisdiction over money claims, albeit death compensation benefits of overseas contract
workers. Article 180 of the Labor Code provides that the Commission exercises appellate jurisdiction
only over decisions rendered either by the GSIS or the SSS in the exercise of their respective original and
exclusive jurisdictions. On the issue of whether the death of Aniban due to myocardial infarction is
compensable, the Court ruled that it is compensable. Although the physical exertion involved in carrying
out the functions of a radio operator may have been quite minimal, the pressure and strain that went with
the position should be considered. Furthermore, the Court stressed that probability and not the ultimate
degree of certainty is the test of proof in compensation.
Issue: Whether or not attorneys fees can be awarded in a case not involving unlawful withholding of
wages.
Ruling:
Yes. ARTICLE 111 OF THE LABOR CODE DOES NOT LIMIT THE AWARD OF
ATTORNEY'S FEES TO CASES OF UNLAWFUL WITHHOLDING OF WAGES ONLY; WHAT THE
PROVISION EXPLICITLY PROHIBITS IS THE AWARD OF ATTORNEY'S FEES WHICH
EXCEEDED 10% OF THE AMOUNT OF WAGES RECOVERED. On the award of attorney's fees
which NLRC deleted on the ground that there was no unlawful withholding of wages, suffice it to say that
Art.111 of the Labor Code does not limit the award of attorney's fees to cases of unlawful withholding of
wages only. What it explicitly prohibits is the award of attorney's fees which exceed 10% of the amount
of wages recovered. Thus, under the circumstances, attorney's fees are recoverable for the services
rendered by petitioner's counsel to compel Aniban's employer to pay its monetary obligations under the
CBA. However the amount of P50,000.00 claimed as attorney's fees in this case is the reasonable
compensation based on the records and not the maximum 10% of the total award as granted by POEA.
The reduction of unreasonable attorney's fees is within our regulatory powers.

Sapio vs. Undaloc Construction, et. al., G.R. No. 155034, May 22, 2008
Facts:
The controversy started with a complaint filed by petitioner against Undaloc Construction and/or
Engineer Cirilo Undaloc for illegal dismissal, underpayment of wages and nonpayment of statutory
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benefits. Respondent Undaloc Construction, a single proprietorship owned by Cirilo Undaloc, is engaged
in road construction business in Cebu City.
Petitioner avers that he was paid a daily salary way below the minimum wage provided for by
law. 14 His claim of salary differential represents the difference between the daily wage he actually
received and the statutory minimum wageTo counter petitioner's assertions, respondents submitted
typewritten and signed payroll sheets from 2 September to 8 December 1996, from 26 May to 15 June
1997, and from 12 January to 31 May 1998. 15 These payroll sheets clearly indicate that petitioner did
receive a daily salary of P141.00.
Banking on the fact that the December 1995 payroll sheet was written in pencil, the Labor Arbiter
concluded that the entries were susceptible to change or erasure and that that susceptibility in turn
rendered the other payroll sheets though typewritten less credible.
Thereupon, the Labor Arbiter proceeded to grant petitioner's salary differential to the tune of
P24,902.88. Attorney's fee of P3,000.00 was also awarded. Respondents appealed the award of salary
differential to the National Labor Relations Commission (NLRC). In a Decision dated 28 August 2000,
the NLRC sustained the findings of the Labor Arbiter.
The Court of Appeals did not subscribe to the common findings of the Labor Arbiter and the
NLRC. The appellate court pointed out that allegations of fraud in the preparation of payroll sheets must
be substantiated by evidence and not by mere suspicions or conjectures. Thus, it deleted the award of
salary differential and attorney's fees.
Issue: Whether or not the award petitioner-employee Saipo is entitled to salary differential and attorneys
fees.
Ruling:
Yes. It is elementary in this jurisdiction that whoever alleges fraud or mistake affecting a
transaction must substantiate his allegation, since it is presumed that a person takes ordinary care of his
concerns and private transactions have been fair and regular. Persons are presumed to have taken care of
their business.
Absent any indication sufficient enough to support a conclusion, we cannot uphold the findings of
the Labor Arbiter and the NLRC. The conclusion of the Labor Arbiter that entries in the December 1995
payroll sheet could have been altered is utterly baseless.
While we adhere to the position of the appellate court that the "tendency" to alter the entries in
the payrolls was not substantiated, we cannot however subscribe to the total deletion of the award of
salary differential and attorney's fees, as it so ruled.The Labor Arbiter granted a salary differential of
P24,902.88.
The Labor Arbiter erred in his computation. He fixed the daily wage rate actually received by petitioner at
P105.00 without taking into consideration the P141.00 rate indicated in the typewritten payroll sheets
submitted by respondents. Moreover, the Labor Arbiter misapplied the wage orders when he wrongly
categorized respondent as falling within the first category. Based on the stipulated number of employees
and audited financial statements, respondents should have been covered by the second category.
To avoid further delay in the disposition of this case which is not in consonance with the
objective of speedy justice, we have to adjudge the rightful computation of the salary differential based on
the applicable wage orders. After all, the supporting records are complete.
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The total salary differential that petitioner is lawfully entitled to amounts to P6,578.00. However,
pursuant to Section 12 of Republic Act (R.A.) No. 6727, as amended by R.A. No. 8188. Respondents are
required to pay double the amount owed to petitioner, bringing their total liability to P13,156.00.
The award of attorney's fees is warranted under the circumstances of this case. Under Article
2208 of the New Civil Code, attorney's fees can be recovered in actions for the recovery of wages of
laborers and actions for indemnity under employer's liability laws but shall not exceed 10% of the
amount awarded. The fees may be deducted from the total amount due the winning party.

Atty. Ortiz vs. San Miguel Corp., G.R. No. 151983-84, July 31, 2008
Facts:
Petitioner represented the complainants in 2 separate cases for illegal dismissal with backwages and other
benefits against respondent (1992 & 1993). In both cases, the LA rule in favor of petitioners clients.
SMC elevated the matter to the NLRC then to the Court of Appeals. NLRC rendered a decision
modifying the award to 10 % attorney's fees of the total monetary award or P198,296.95. While the
private respondent's Petitions for Certiorari were pending before the Court of Appeals, all but one of the
remaining complainants in both cases appeared on various dates before LAs and in the presence of two
witnesses, signed separate Deeds of Release, Waiver and Quitclaim in favor of private respondent.
Complainants agreed to settle their claims against private respondent for amounts less than what the
NLRC actually awarded. Private respondent withheld 10% of the total amount agreed upon by the parties
in the said Deeds as attorney's fees and handed it over to petitioner.
CA rendered a Decision affirming the NLRC Decision only insofar as it concerned complainant
Alfredo Gadian, Jr. the only complainant who did not execute a Deed of Release, Waiver and Quitclaim.
With respect to the other complainants, their complaints were dismissed on account of their duly executed
Deeds of Release, Waiver and Quitclaim.
Herein petitioner, for their part, likewise moved for the partial reconsideration of the same
Decision of the appellate court praying that the award of attorney's fees of 10% should be based on the
monetary awards adjudged by the NLRC.
Issues:
1) Basis of computing the 10% award of attorneys fees whether based:
on the decision of NLRC decision or
10% of the amounts actually paid to his clients, the complainants who signed the Deeds of Release,
Waiver and Quitclaim
2) validity of the Quitclaim
Ruling:
Article 111 of the Labor Code, as amended, specifically provides:
(a) In cases of unlawful withholding of wages the culpable party may be assessed attorney's fees
equivalent to ten percent of the amount of wages recovered.
There are two commonly accepted concepts of attorney's fees, the so-calledordinary and
extraordinary. In its ordinary concept, an attorney's fee is the reasonable compensation paid to a lawyer
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by his client for the legal services the former has rendered to the latter. The basis of this compensation is
the fact of the attorney's employment by and his agreement with the client.
In its extraordinary concept, attorney's fees are deemed indemnity for damages ordered by the court to
be paid by the losing party in a litigation. It ispayable not to the lawyer but to the client, unless they have
agreed that the award shall pertain to the lawyer as additional compensation or as part thereof. Article 111
of the LC, as amended, contemplates the extraordinary concept of attorney's fees.
Based on the foregoing, the attorney's fees awarded by the NLRC pertain to the complainants, petitioner's
clients, as indemnity for damages; and not to petitioner as compensation for his legal services. Petitioner
never proved that the complainants willingly agreed that the award of attorney's fees would accrue to him
as an additional compensation or part thereof. The Deeds were executed between complainants and
private respondent, the petitioner was not even a party to the said documents; and (2) private
complainants' request that private respondent withhold 10% attorney's fees to be payable to petitioner was
in relation to the amount of gross settlement under the Deeds and not to the amounts awarded by the
NLRC.
What the complainants explicitly agreed to in their individual Deeds of Release, Waiver, and Quitclaim
was that the 10% attorney's fees of the petitioner shall be deducted from the amount of the gross
settlement.
Petitioner is not the real party in interest. To reiterate, the award of attorney's fees pertain to the
prevailing parties in the NLRC cases, namely, the complainants, all but one of whom no longer pursued
their complaints against private respondent after executing Deeds of Release, Waiver and Quitclaim.
On the second issue, the Deeds of Release, Waiver and Quitclaim individually executed by the
complainants is valid. The LC does not require the conformity of petitioner for its validity. The only
requisites for the validity of any Deed of Release, Waiver and Quitclaim are the following: (1) that there
was no fraud or deceit on the part of any of the parties; (2) that the consideration for the quitclaim is
credible and reasonable; and (3) that the contract is not contrary to law, public order, public policy, morals
or good customs or prejudicial to a third person with a right recognized by law.
Masmud vs. NLRC, et. al., G.R. No. 183385, Feb. 13, 2009
Facts:
Evangelina Masmuds husband, the late Alexander Masmud filed a complaint against First Victory
Shipping Services and Angelakos for non-payment of permanent disability benefits, medical expenses,
sickness allowance, moral and exemplary damages, and attorneys fees. Alexander engaged the services
of Atty. Rolando Go, Alexander agreed to pay attorneys fees on a contingent basis, as follows: 20% of
total monetary claims as settled or paid and an additional 10% in case of appeal. It was likewise agreed
that any award of attorneys fees shall pertain to respondents law firm. The Labor Arbiter granted the
monetary claims of Alexander. Alexanders claim for payment of medical expenses is dismissed for lack
of basis. Alexanders employer filed an appeal before the NLRC. During the pendency of the proceedings
before the NLRC, Alexander died. After explaining the terms of the lawyers fees to Evangelina, Atty. Go
caused her substitution as complainant. The NLRC dismissed the appeal of Alexanders employer. On
appeal before the CA, the award of moral and exemplary damages was deleted. Alexanders employers
filed a petition for certiorariwhich was dismissed Atty. Go moved for the execution of the NLRC
decision.
The LA directed the NLRC Cashier to release the amount of P3,454,079.20 to Evangelina. Out of the said
amount, Evangelina paid Atty. Go P680,000.00. Dissatisfied, Atty. Go filed a motion to enforce the
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attorneys lien alleging that Evangelina reneged on their contingent fee agreement. Evangelina paid only
the amount of P680,000.00, equivalent to 20% of the award as attorneys fees, leaving a balance of 10%,
plus the award pertaining to the counsel as attorneys fees. Evangelina filed a motion to release the
amount. Evangelina argued that Atty. Gos attorneys fees of 40% of the total monetary award was void
based on Article 111 of the Labor Code.
Issue: Lawyers Claim of 40% of the monetary award in a labor case as attorneys fees is valid.
Ruling:
There are two concepts of attorney's fees. In the ordinary sense, attorney's fees represent the reasonable
compensation paid to a lawyer by his client for the legal services rendered to the latter. In its
extraordinary concept, attorney's fees may be awarded by the court as indemnity for damages to be paid
by the losing party to the prevailing party, such that, in any of the cases provided by law where such
award can be made. Here, we apply the ordinary concept of attorneys fees, that Atty. Go is entitled to
receive for representing Evangelina, in substitution of her husband. Article 111 of the Labor Code deals
with the extraordinary concept of attorneys fees, it regulates the amount recoverable as attorney's fees in
the nature of damages sustained by and awarded to the prevailing party. It may not be used as the standard
in fixing the amount payable to the lawyer by his client for the legal services he rendered.
The retainer contract between Atty. Go and Evangelina provides for a contingent fee. The contract shall
control in the determination of the amount to be paid, unless found by the court to be unconscionable or
unreasonable. Attorney's fees are unconscionable if they affront one's sense of justice, decency or
reasonableness. The decree of unconscionability or unreasonableness of a stipulated amount in a
contingent fee contract will not preclude recovery. It merely justifies the fixing by the court of a
reasonable compensation for the lawyer's services. Contingent fee contracts are subject to the supervision
and close scrutiny of the court in order that clients may be protected from unjust charges. The amount of
contingent fees agreed upon by the parties is subject to the stipulation that counsel will be paid for his
legal services only if the suit or litigation prospers. The Court finds nothing illegal in the contingent fee.

KAISAHAN AT KAPATIRAN NG MGA MANGGAGAWA AT KAWANI SA MWC-EAST ZONE

UNION and EDUARDO BORELA vs. MANILA WATER COMPANY, INC.,
FACTS:
The Union is the duly-recognized bargaining agent of the rank-and-file employees of the respondent
Manila Water Company, Inc. while Borela is the Union President. In 1997, the Metropolitan Waterworks
and Sewerage System (MWSS) entered into a Concession Agreement with the Company to privatize the
operations of the MWSS. The Agreement provides that the Concessionaire shall grant its employees
benefits no less favorable than those granted to MWSS employees at the time of their separation from
MWSS. Among the benefits enjoyed by the employees of the MWSS were the amelioration allowance
(AA) and the cost-of-living allowance (COLA). The payment of the AA and the COLA was discontinued
pursuant to Republic Act No. 6758, otherwise known as the Salary Standardization Law, which
integrated the allowances into the standardized salary. The Company agreed to reinstate them upon
renegotiation of the parties CBA but however failed to give them. As a result, the Union and Borela filed
a complaint against the Company for payment of the AA, COLA, moral and exemplary damages, legal
interest, and attorneys fees before the National Labor Relations Commission (NLRC). In his decision of
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August 20, 2003, Labor Arbiter Aliman D. Mangandog ( LA) ruled in favor of the petitioners and ordered
the payment of ten percent (10%) attorneys fees in addition to their benefits and interests. The award of
attorneys fees was upheld by NLRC. However, this was reversed by the CA. CAs Decision: The
additional grant of 10% attorneys fees violates Article 111 of the Labor Code considering that the MOA
between the parties already ensured the payment of 10% attorneys fees, deductible from the AA and
CBA receivables of the Unions members.
ISSUE:
1.Whether or not the workers are entitled to attorneys fees.
RULING:
Yes.
In the present case, the ten percent (10%) attorneys fees awarded by the NLRC on the basis of Article
111 of the Labor Code accrue to the Unions members as indemnity for damages and not to the Unions
counsel as compensation for his legal services, unless, they agreed that the award shall be given to their
counsel as additional or part of his compensation; in this case the Union bound itself to pay 10%
attorneys fees to its counsel under the MOA and also gave up the attorneys fees awarded to the Unions
members in favor of their counsel. This is supported by Borelas affidavit which stated that [t]he 10%
attorneys fees paid by the members/employees is separate and distinct from the obligation of the
company to pay the 10% awarded attorneys fees which we also gave to our counsel as part of our
contingent fee agreement.[43] The limit to this agreement is that the indemnity for damages imposed by
the NLRC on the losing party (i.e., the Company) cannot exceed ten percent (10%).
Properly viewed from this perspective, the award cannot be taken to mean an additional grant of
attorneys fees, in violation of the ten percent (10%) limit under Article 111 of the Labor Code since it
rests on an entirely different legal obligation than the one contracted under the MOA. Simply stated, the
attorneys fees contracted under the MOA do not refer to the amount of attorneys fees awarded by the
NLRC; the MOA provision on attorneys fees does not have any bearing at all to the attorneys fees
awarded by the NLRC under Article 111 of the Labor Code. Based on these considerations, it is clear that
the CA erred in ruling that the LAs award of attorneys fees violated the maximum limit of ten percent
(10%) fixed by Article 111 of the Labor Code.
Under this interpretation, the Companys argument that the attorneys fees are unconscionable as they
represent 20% of the amount due or about P21.4 million is more apparent than real. Since the attorneys
fees awarded by the LA pertained to the Unions members as indemnity for damages, it was totally within
their right to waive the amount and give it to their counsel as part of their contingent fee agreement.
Beyond the limit fixed by Article 111 of the Labor Code, such as between the lawyer and the client, the
attorneys fees may exceed ten percent (10%) on the basis of quantum meruit, as in the present case.

Malvar vs. Kraft Food Phils Inc. et al., G.R. No. 183952, Sept. 9, 2013
Facts:
The case initially concerned the execution of a final decision of the Court of Appeals (CA) in a labor
litigation, but has mutated into a dispute over attorney's fees between the winning employee and her
attorney after she entered into a compromise agreement with her employer under circumstances that the
attorney has bewailed as designed to prevent the recovery of just professional fees.
Antecedents
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On August 1, 1988, Kraft Foods (Phils.), Inc. (KFPI) hired Czarina Malvar (Malvar) as its Corporate
Planning Manager. From then on, she gradually rose from the ranks, becoming in 1996 the Vice President
for Finance in the Southeast Asia Region of Kraft Foods International (KFI),KFPIs mother company. On
November 29, 1999, respondent Bienvenido S. Bautista, as Chairman of the Board of KFPI and
concurrently the Vice President and Area Director for Southeast Asia of KFI, sent Malvar a memo
directing her to explain why no administrative sanctions should be imposed on her for possible breach of
trust and confidence and for willful violation of company rules and regulations. Following the submission
of her written explanation, an investigating body was formed. In due time, she was placed under
preventive suspension with pay. Ultimately, on March 16, 2000, she was served a notice of termination.
Obviously aggrieved, Malvar filed a complaint for illegal suspension and illegal dismissal against KFPI
and Bautista in the National Labor Relations Commission (NLRC). In a decision dated April 30, 2001,
the Labor Arbiter found and declared her suspension and dismissal illegal, and ordered her reinstatement,
and the payment of her full backwages, inclusive of allowances and other benefits, plus attorneys fees.
On October 22, 2001, the NLRC affirmed the decision of the Labor Arbiter but additionally ruled that
Malvar was entitled to "any and all stock options and bonuses she was entitled to or would have been
entitled to had she not been illegally dismissed from her employment," as well as to moral and exemplary
damages.
KFPI and Bautista sought the reconsideration of the NLRCs decision, but the NLRC denied their motion
to that effect.
Undaunted, KFPI and Bautista assailed the adverse outcome before the CA on certiorari, contending that
the NLRC thereby committed grave abuse of discretion. However, the petition for certiorari was
dismissed by the CA on December 22, 2004, but with the CA reversing the order of reinstatement and
instead directing the payment of separation pay to Malvar, and also reducing the amounts awarded as
moral and exemplary damages.
After the judgment in her favor became final and executory on March14, 2006, Malvar moved for the
issuance of a writ of execution. The Executive Labor Arbiter then referred the case to the Research and
Computation Unit (RCU) of the NLRC for the computation of the monetary awards under the judgment.
The RCUs computation ultimately arrived at the total sum of P41,627,593.75.
On November 9, 2006, however, Labor Arbiter Jaime M. Reyno issued an order, finding that the RCUs
computation lacked legal basis for including the salary increases that the decision promulgated did not
include. Hence, Labor Arbiter Reyno reduced Malvars total monetary award to P27,786,378.11.
Both parties appealed the computation to the NLRC, which, on April19, 2007, rendered its decision
setting aside Labor Arbiter Reynos November 9, 2006 order, and adopting the computation by the RCU.
In its resolution dated May 31, 2007, the NLRC denied the respondents motion for reconsideration.
Malvar filed a second motion for the issuance of a writ of execution to enforce the decision of the NLRC
rendered on April 19, 2007. After the writ of execution was issued, a partial enforcement as effected by
garnishing the respondents funds deposited with Citibank worth 37,391,696.06.
On July 27, 2007, the respondents went to the CA on certiorari (with prayer for the issuance of a
temporary restraining order (TRO) or writ of preliminary injunction), assailing the NLRCs setting aside
of the computation by Labor Arbiter Reyno (CA-G.R. SP No. 99865). The petition mainly argued that the
NLRC had gravely abused its discretion in ruling that: (a) the inclusion of the salary increases and other
monetary benefits in the award to Malvar was final and executory; and (b) the finality of the ruling in CAG.R. SP No. 69660 precluded the respondents from challenging the inclusion of the salary increases and
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other monetary benefits. The CA issued a TRO, enjoining the NLRC and Malvar from implementing the
NLRCs decision.
On April 17, 2008, the CA rendered its decision reversing the NLRC decision.
The matter of computation of monetary awards for private respondent is hereby REMANDED to the
Labor Arbiter and he is DIRECTED to recompute the monetary award due to private respondent based on
her salary at the time of her termination, without including projected salary increases.
Malvar sought reconsideration, but the CA denied her motion on July30, 2008.
Aggrieved, Malvar appealed to the Court, assailing the CAs decision.
On December 9, 2010, while her appeal was pending in this Court, Malvar and the respondents entered
into a compromise agreement, the pertinent dispositive portion of which is quoted as follows:
The Compromise Payment includes full and complete payment and settlement of Ms. Malvars salaries
and wages up to the last day of her employment, allowances, 13th and 14th month pay, cash conversion of
her accrued vacation, sick and emergency leaves, separation pay, retirement pay and such other benefits,
entitlements, claims for stock, stock options or other forms of equity compensation whether vested or
otherwise and claims of any and all kinds against KFPI and KFI and Altria Group, Inc., their
predecessors-in-interest, their stockholders, officers, directors, agents or successors-in-interest, affiliates
and subsidiaries, up to the last day of the aforesaid cessation of her employment.
Thereafter, Malvar filed an undated Motion to Dismiss/Withdraw Case, praying that the appeal be
immediately dismissed/withdrawn in view of the compromise agreement, and that the case be considered
closed and terminated.
Before the Court could act on Malvars Motion to Dismiss/Withdraw Case, the Court received on
February 15, 2011 a so-called Motion for Intervention to Protect Attorneys Rights from The Law Firm of
Dasal, Llasos and Associates, through its Of Counsel Retired Supreme Court Associate Justice Josue N.
Bellosillo (Intervenor), whereby the Intervenor sought, among others, that both Malvar and KFPI be held
and ordered to pay jointly and severally the Intervenors contingent fees.
Upon execution of the Compromise Agreement and pursuant thereto, Petitioner immediately received
(supposedly) from RespondentsP40,000,000.00. But despite the settlement between the parties, Petitioner
did not pay Intervenor its just compensation as set forth in their engagement agreement; instead, she
immediately moved to Dismiss/Withdraw the Present Petition On 15.
Opposing the Motion for Intervention, 28 Malvar stresses that there was no truth to the Intervenors claim
to defraud it of its professional fees; that the Intervenor lacked the legal capacity to intervene because it
had ceased to exist after Atty. Marwil N. Llasos resigned from the Intervenor and Atty. Richard B. Dasal
became barred from private practice upon his appointment as head of the Legal Department of the Small
Business Guarantee and Finance Corporation, a government subsidiary; and that Atty. Llasos and Atty.
Dasal had personally handled her case.
Issues
(a) Whether or not Malvars motion to dismiss the petition on the ground of the execution of the
compromise agreement was proper; and (b) whether or not the Motion for Intervention to protect
attorneys rights can prosper..
Ruling:
Clients right to settle litigation by compromise agreement, and to terminate counsel; limitations A
compromise agreement is a contract, whereby the parties undertake reciprocal obligations to avoid
litigation, or put an end to one already commenced. The client may enter into a compromise agreement
with the adverse party to terminate the litigation before a judgment is rendered therein. If the compromise
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agreement is found to be in order and not contrary to law, morals, good customs and public policy, its
judicial approval is in order. Compromise agreement, once approved by final order of the court, has the
force of res judicata between the parties and will not be disturbed except for vices of consent or forgery.
A client has an undoubted right to settle her litigation without the intervention of the attorney, for the
former is generally conceded to have exclusive control over the subject matter of the litigation and may at
anytime, if acting in good faith, settle and adjust the cause of action out of court before judgment, even
without the attorneys intervention. It is important for the client to show, however, that the compromise
agreement does not adversely affect third persons who are not parties to the agreement.
By the same token, a client has the absolute right to terminate the attorney-client relationship at any time
with or without cause. But this right of the client is not unlimited because good faith is required in
terminating the relationship. The right is also subject to the right of the attorney to be compensated.
A client may at any time dismiss his attorney or substitute another in his place, but if the contract between
client and attorney has been reduced to writing and the dismissal of the attorney was without justifiable
cause, he shall be entitled to recover from the client the full compensation stipulated in the contract.
However, the attorney may, in the discretion of the court, intervene in the case to protect his rights. For
the payment of his compensation the attorney shall have a lien upon all judgments for the payment of
money, and executions issued in pursuance of such judgment, rendered in the case wherein his services
had been retained by the client. (Bold emphasis supplied)
In fine, it is basic that an attorney is entitled to have and to receive a just and reasonable compensation for
services performed at the special instance and request of his client. The attorney who has acted in good
faith and honesty in representing and serving the interests of the client should be reasonably compensated
for his service. Compromise agreement is to be approved despite favorable action on the Intervenors
Motion for Intervention On considerations of equity and fairness, the Court disapproves of the tendencies
of clients compromising their cases behind the backs of their attorneys for the purpose of unreasonably
reducing or completely setting to naught the stipulated contingent fees. Thus, the Court grants the
Intervenors Motion for Intervention to Protect Attorneys Rights as a measure of protecting the
Intervenors right to its stipulated professional fees that would be denied under the compromise
agreement. The Court does so in the interest of protecting the rights of the practicing Bar rendering
professional services on contingent fee basis.
Nonetheless, the claim for attorneys fees does not void or nullify the compromise agreement between
Malvar and the respondents. There being no obstacles to its approval, the Court approves the compromise
agreement. The Court adds, however, that the Intervenor is not left without a remedy, for the payment of
its adequate and reasonable compensation could not be annulled by the settlement of the litigation without
its participation and conformity. It remains entitled to the compensation, and its right is safeguarded by
the Court because its members are officers of the Court who are as entitled to judicial protection against
injustice or imposition of fraud committed by the client as much as the client is against their abuses as her
counsel. In other words, the duty of the Court is not only to ensure that the attorney acts in a proper and
lawful manner, but also to see to it that the attorney is paid his just fees. Even if the compensation of the
attorney is dependent only on winning the litigation, the subsequent withdrawal of the case upon the
clients initiative would not deprive the attorney of the legitimate compensation for professional services
rendered.
The stipulations of the written agreement between Malvar and the Intervenors, not being contrary to law,
morals, public policy, public order or good customs, were valid and binding on her. They expressly gave
rise to the right of the Intervenor to demand compensation. In a word, she could not simply walk away
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from her contractual obligations towards the Intervenor, for Article 1159 of the Civil Code provides that
obligations arising from contracts have the force of law between the parties and should be complied with
in good faith.
As a final word, it is necessary to state that no court can shirk from enforcing the contractual stipulations
in the manner they have agreed upon and written. As a rule, the courts, whether trial or appellate, have no
power to make or modify contracts between the parties. Nor can the courts save the parties from
disadvantageous provisions. The same precepts hold sway when it comes to enforcing fee arrangements
entered into in writing between clients and attorneys. In the exercise of their supervisory authority over
attorneys as officers of the Court, the courts are bound to respect and protect the attorneys lien as a
necessary means to preserve the decorum and respectability of the Law Profession. Hence, the Court must
thwart any and every effort of clients already served by their attorneys worthy services to deprive them
of their hard-earned compensation. Truly, the duty of the courts is not only to see to it that attorneys act in
a proper and lawful manner, but also to see to it that attorneys are paid their just and lawful fees.
WHEREFORE, the Court APPROVES the compromise agreement; GRANTS the Motion for Intervention
to Protect Attorney's Rights; and ORDERS Czarina T. Malvar and respondents Kraft Food Philippines
Inc. and Kraft Foods International to jointly and severally pay to Intervenor Law Firm, represented by
Retired Associate Justice Josue N. Bellosillo, its stipulated contingent fees of 10% of P41,627,593.75, and
the further sum equivalent to 10% of the value of the stock option.

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TOPIC 15
MISCELLANEOUS PROVISIONS

Bernardo vs. NLRC, 310 SCRA 186 [1999]

Facts:
Complainants numbering 43 are deaf-mutes who were hired on various periods from 1988 to
1993 by respondent Far East Bank and Trust Co. as Money Sorters and Counters through a uniformly
worded agreement called 'Employment Contract for Handicapped Workers.'
Petitioners maintain that they should be considered regular employees, because their task as
money sorters and counters was necessary and desirable to the business of respondent bank. They further
allege that their contracts served merely to preclude the application of Article 280 and to bar them from
becoming regular employees.
Private respondent, on the other hand, submits that petitioners were hired only as "special
workers and should not in any way be considered as part of the regular complement of the Bank." Rather,
they were "special" workers under Article 80 of the Labor Code. Private respondent contends that it never
solicited the services of petitioners, whose employment was merely an "accommodation" in response to
the requests of government officials and civic-minded citizens. They were told from the start, "with the
assistance of government representatives," that they could not become regular employees because there
were no plantilla positions for "money sorters," whose task used to be performed by tellers. Their
contracts were renewed several times, not because of need "but merely for humanitarian reasons."
Respondent submits that "as of the present, the 'special position' that was created for the petitioners no
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longer exists in private respondent bank, after the latter had decided not to renew anymore their special
employment contracts."
In affirming the ruling of the labor arbiter that herein petitioners could not be deemed regular employees
under Article 280 of the Labor Code, as amended, Respondent Commission ratiocinated as follows:
"We agree that Art. 280 is not controlling herein. We give due credence to the conclusion that
complainants were hired as an accommodation to [the] recommendation of civic oriented personalities
whose employment[s] were covered by . . . Employment Contract[s] with special provisions on duration
of contract as specified under Art. 80. Hence, as correctly held by the Labor Arbiter a quo, the terms of
the contract shall be the law between the parties."
The NLRC also declared that the Magna Carta for Disabled Persons was not applicable, "considering the
prevailing circumstances/milieu of the case."
Issues:
1. Whether or not petitioners have become regular employees.
2. Whether or not the provisions of the Magna Carta for the Disabled (Republic Act No. 7277), on
proscription against discrimination against disabled persons is applicable in this case.
Ruling:
Yes. The petition is meritorious. However, only the employees, who worked for more than six months
and whose contracts were renewed are deemed regular. Hence, their dismissal from employment was
illegal.
The facts, viewed in light of the Labor Code and the Magna Carta for Disabled Persons,
indubitably show that the petitioners, except sixteen of them, should be deemed regular employees. As
such, they have acquired legal rights that this Court is duty-bound to protect and uphold, not as a matter
of compassion but as a consequence of law and justice.
The uniform employment contracts of the petitioners stipulated that they shall be trained for a
period of one month, after which the employer shall determine whether or not they should be allowed to
finish the 6-month term of the contract. Furthermore, the employer may terminate the contract at any time
for a just and reasonable cause. Unless renewed in writing by the employer, the contract shall
automatically expire at the end of the term.
According to private respondent, the employment contracts were prepared in accordance with Article 80
of the Labor Code, which provides:
"ARTICLE 80. Employment agreement. Any employer who employs handicapped workers shall enter
into an employment agreement with them, which agreement shall include:
(a) The names and addresses of the handicapped workers to be employed;
(b)The rate to be paid the handicapped workers which shall be not less than seventy five (75%) per cent
of the applicable legal minimum wage;
(c) The duration of employment period; and
(d) The work to be performed by handicapped workers.
The employment agreement shall be subject to inspection by the Secretary of Labor or his duly authorized
representatives."The stipulations in the employment contracts indubitably conform with the aforecited
provision. Succeeding events and the enactment of RA No. 7277 (the Magna Carta for Disabled Persons),
however, justify the application of Article 280 of the Labor Code.
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Respondent bank entered into the aforesaid contract with a total of 56 handicapped workers and renewed
the contracts of 37 of them. In fact, two of them worked from 1988 to 1993. Verily, the renewal of the
contracts of the handicapped workers and the hiring of others lead to the conclusion that their tasks were
beneficial and necessary to the bank. More important, these facts show that they were qualified to
perform the responsibilities of their positions. In other words, their disability did not render them
unqualified or unfit for the tasks assigned to them.
QUALIFIED DISABLED PERSONS REMOVE CONTRACT FROM AMBIT OF ARTICLE 80
OF LABOR CODE. - In this light, the Magna Carta for Disabled Persons mandates that a qualified
disabled employee should be given the same terms and conditions of employment as a qualified ablebodied person. Section 5 of the Magna Carta provides:
"SECTION 5. Equal Opportunity for Employment. No disabled person shall be denied access to
opportunities for suitable employment. A qualified disabled employee shall be subject to the same terms
and conditions of employment and the same compensation, privileges, benefits, fringe benefits, incentives
or allowances as a qualified able bodied person."
The fact that the employees were qualified disabled persons necessarily removes the employment
contracts from the ambit of Article 80. Since the Magna Carta accords them the rights of qualified ablebodied persons, they are thus covered by Article 280 of the Labor Code, which provides:
"ARTICLE 280.
Regular and Casual Employment. The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be
deemed to be regular where the employee has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer, except where the employment has
been fixed for a specific project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the work or services to be performed
is seasonal in nature and the employment is for the duration of the season.
"An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided,
That, any employee who has rendered at least one year of service, whether such service is continuous or
broken, shall be considered as regular employee with respect to the activity in which he is employed and
his employment shall continue while such activity exists."
TEST WHETHER EMPLOYEE IS REGULAR - The test of whether an employee is regular was laid
down in De Leon v. NLRC , in which this Court held:
"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 the 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 one 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."
Without a doubt, the task of counting and sorting bills is necessary and desirable to the business
of respondent bank. With the exception of sixteen of them, petitioners performed these tasks for more
than six months.
As held by the Court, "Articles 280 and 281 of the Labor Code put an end to the pernicious
practice of making permanent casuals of our lowly employees by the simple expedient of extending to
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them probationary appointments, ad infinitum." The contract signed by petitioners is akin to a

probationary employment, during which the bank determined the employees' fitness for the job. When the
bank renewed the contract after the lapse of the six-month probationary period, the employees thereby
became regular employees. No employer is allowed to determine indefinitely the fitness of its employees.
As regular employees, the twenty-seven petitioners are entitled to security of tenure; that is, their services
may be terminated only for a just or authorized cause. Because respondent failed to show such cause,
these twenty-seven petitioners are deemed illegally dismissed and therefore entitled to back wages and
reinstatement without loss of seniority rights and other privileges. Considering the allegation of
respondent that the job of money sorting is no longer available because it has been assigned back to the
tellers to whom it originally belonged, petitioners are hereby awarded separation pay in lieu of
reinstatement.
Because the other sixteen worked only for six months, they are not deemed regular employees
and hence not entitled to the same benefits.
EMPLOYMENT CONTRACT WITH FIXED TERM; RULING IN BRENT CASE NOT
APPLICABLE IN CASE AT BAR - Respondent bank, citing Brent School v. Zamora, in which the Court
upheld the validity of an employment contract with a fixed term, argues that the parties entered into the
contract on equal footing. It adds that the petitioners had in fact an advantage, because they were backed
by then DSWD Secretary Mita Pardo de Tavera and Representative Arturo Borjal.
We are not persuaded. The term limit in the contract was premised on the fact that the petitioners
were disabled, and that the bank had to determine their fitness for the position. Indeed, its validity is
based on Article 80 of the Labor Code. But as noted earlier, petitioners proved themselves to be qualified
disabled persons who, under the Magna Carta for Disabled Persons, are entitled to terms and conditions
of employment enjoyed by qualified able-bodied individuals; hence, Article 80 does not apply because
petitioners are qualified for their positions. The validation of the limit imposed on their contracts,
imposed by reason of their disability, was a glaring instance of the very mischief sought to be addressed
by the new law.

Employment contract; impressed with public interest; parties are not at liberty to insulate
themselves. - Moreover, it must be emphasized that a contract of employment is impressed with public
interest. Provisions of applicable statutes are deemed written into the contract, and the "parties are not at
liberty to insulate themselves and their relationships from the impact of labor laws and regulations by
simply contracting with each other." Clearly, the agreement of the parties regarding the period of
employment cannot prevail over the provisions of the Magna Carta for Disabled Persons, which mandate
that petitioners must be treated as qualified able-bodied employees.
Respondent's reason for terminating the employment of petitioners is instructive. Because the Bangko
Sentral ng Pilipinas (BSP) required that cash in the bank be turned over to the BSP during business hours
from 8:00 a.m. to 5:00 p.m., respondent resorted to nighttime sorting and counting of money. Thus, it
reasons that this task "could not be done by deaf mutes because of their physical limitations as it is very
risky for them to travel at night." We find no basis for this argument. Travelling at night involves risks to
handicapped and able-bodied persons alike. This excuse cannot justify the termination of their
employment.
EMPLOYMENT; CHARACTER OF EMPLOYMENT; HOW DETERMINED - Respondent
argues that petitioners were merely "accommodated" employees. This fact does not change the nature of
their employment. As earlier noted, an employee is regular because of the nature of work and the length
of service, not because of the mode or even the reason for hiring them.
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Equally unavailing are private respondent's arguments that it did not go out of its way to recruit
petitioners, and that its plantilla did not contain their positions. In L. T . Datu v. NLRC, the Court held
that "the determination of whether employment is casual or regular does not depend on the will or word
of the employer, and the procedure of hiring . . . but on the nature of the activities performed by the
employee, and to some extent, the length of performance and its continued existence."
Private respondent argues that the petitioners were informed from the start that they could not
become regular employees. In fact, the bank adds, they agreed with the stipulation in the contract
regarding this point. Still, we are not persuaded. The well-settled rule is that the character of employment
is determined not by stipulations in the contract, but by the nature of the work performed. Otherwise, no
employee can become regular by the simple expedient of incorporating this condition in the contract of
employment.
In this light, we iterate our ruling in Romares v. NLRC :
Article 280 was emplaced in our statute books to prevent the circumvention of the employee's
right to be secure in his tenure by indiscriminately and completely ruling out all written and oral
agreements inconsistent with the concept of regular employment defined therein. Where an employee has
been engaged to perform activities which are usually necessary or desirable in the usual business of the
employer, such employee is deemed a regular employee and is entitled to security of tenure
notwithstanding the contrary provisions of his contract of employment.
"At this juncture, the leading case of Brent School, Inc. v. Zamora proves instructive. As reaffirmed in
subsequent cases, this Court has upheld the legality of fixed-term employment. It ruled that the decisive
determinant in 'term employment' should not be the activities that the employee is called upon to perform
but the day certain agreed upon the parties for the commencement and termination of their employment
relationship. But this Court went on to say that where from the circumstances it is apparent that the
periods have been imposed to preclude acquisition of tenurial security by the employee, they should be
struck down or disregarded as contrary to public policy and morals."
In rendering this Decision, the Court emphasizes not only the constitutional bias in favor of the
working class, but also the concern of the State for the plight of the disabled. The noble objectives of
Magna Carta for Disabled Persons are not based merely on charity or accommodation, but on justice and
the equal treatment of qualified persons, disabled or not. In the present case, the handicap of petitioners
(deaf-mutes) is not a hindrance to their work. The eloquent proof of this statement is the repeated renewal
of their employment contracts. Why then should they be dismissed, simply because they are physically
impaired? The Court believes, that, after showing their fitness for the work assigned to them, they should
be treated and granted the same rights like any other regular employees.

PT&T vs. NLRC, 272 SCRA 596 [1997]

Facts:
Grace de Guzman was initially hired by petitioner as a reliever, for a fixed period to substitute
one C.F. Tenorio who went on maternity leave. Her services as reliever were again engaged by petitioner,
this time in replacement of another person. After August 8, 1991, and pursuant to their Reliever
Agreement, her services were terminated.She was once more asked to join the company as a probationary
employee, the probationary period to cover 150 days. In the job application form that was furnished her to
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be filled up for the purpose, she indicated in the portion for civil status therein that she was single
although she had contracted marriage a few months earlier.
When petitioner supposedly learned about the same later, its branch supervisor in Baguio City,
Delia M. Official, sent to private respondent a memorandum dated January 15, 1992 requiring her to
explain the discrepancy. In that memorandum, she was reminded about the company's policy of not
accepting married women for employment. She stated that she was not aware of PT&T's policy regarding
married women at the time, and that all along she had not deliberately hidden her true civil status.
Petitioner nonetheless remained unconvinced by her explanations. Private respondent was dismissed from
the company. She filed a complaint for illegal dismissal, coupled with a claim for non-payment of cost of
living allowances.
Issue: Whether the company policy tantamounts to unjust and unlawful discrimination against married
women.
Ruling:
Yes. EMPLOYER'S POLICY OF NOT ACCEPTING FOR WORK ANY WOMAN WORKER
WHO CONTRACTS MARRIAGE, CONTRARY TO LAW, GOOD MORALS AND PUBLIC POLICY
In the case at bar, petitioner's policy of not accepting or considering as disqualified from work any
woman worker who contracts marriage runs afoul of the test of, and the right against, discrimination,
afforded all women workers by our labor laws and by no less than the Constitution.
Petitioner's policy is not only in derogation of the provisions of Article 136 of the Labor Code on
the right of a woman to be free from any kind of stipulation against marriage in connection with her
employment, but it likewise assaults good morals and public policy, tending as it does to deprive a woman
of the freedom to choose her status, a privilege that by all accounts inheres in the individual as an
intangible and inalienable right. Hence, while it is true that the parties to a contract may establish any
agreements, terms, and conditions that they may deem convenient the same should not be contrary to law,
morals, good customs, public order, or public policy. Carried to its logical consequences, it may even be
said that petitioner's policy against legitimate marital bonds would encourage illicit or common-law
relations and subvert the sacrament of marriage.
DISMISSAL; LOSS OF CONFIDENCE, VALID GROUND While loss of confidence is a just cause
of termination of employment, it should not be simulated. It must rest on an actual breach of duty
committed by the employee and not on the employer's caprices. Furthermore, it should never be used as a
subterfuge for causes which are improper, illegal, or unjustified.
CONCEALMENT OF FEMALE EMPLOYEE OF TRUE NATURE OF STATUS FOR FEAR OF
BEING DISQUALIFIED FROM WORK, NOT SUFFICIENT BASIS Contrary to petitioner's
assertion that it dismissed private respondent from employment on account of her dishonesty, the record
discloses clearly that her ties with the company were dissolved principally because of the company's
policy that married women are not qualified for employment in PT & T, and not merely because of her
supposed acts of dishonesty. Private respondent's act of concealing the true nature of her status from PT &
T could not be properly characterized as willful or in bad faith as she was moved to act the way she did
mainly because she wanted to retain a permanent job in a stable company. In other words, she was
practically forced by that very same illegal company policy into misrepresenting her civil status for fear
of being disqualified from work.
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FAILURE TO REMIT COMPANY FUNDS, NOT AN ADDITIONAL GROUND; CASE AT BAR

Finally, petitioner's collateral insistence on the admission of private respondent that she supposedly
misappropriated company funds, as an additional ground to dismiss her from employment, is somewhat
insincere and self-serving. Concededly, private respondent admitted in the course of the proceedings that
she failed to remit some of her collections, but that is an altogether different story. The fact is that she was
dismissed solely because of her concealment of her marital status, and not on the basis of that supposed
defalcation of company funds. That the labor arbiter would thus consider petitioner's submissions on this
a mere afterthought, just too bolster its supposed dishonesty as case for dismissal, is a perceptive
conclusion born of experience in labor

Del Monte Phils. Vs. Velasco, G.R. No. 153477, March 6, 2007
Facts:
Velasco started working with Del Monte Philippines (petitioner) on October 21, 1976 as a
seasonal employee and was regularized on May 1, 1977. Her latest assignment was as Field Laborer. On
June 16, 1987, respondent was warned in writing due to her absences. On May 4, 1991, respondent, thru
a letter, was again warned in writing by petitioner about her absences without permission and a forfeiture
of her vacation leave entitlement for the year 1990-1991 was imposed against her. On September 14,
1992, another warning letter was sent to respondent regarding her absences without permission during the
year 1991-1992. Her vacation entitlement for the said employment year affected was consequently
forfeited.
In view of the said alleged absences without permission, on September 17, 1994, a notice of
hearing was sent to respondent notifying her of the charges filed against her for violating the Absence
Without Official Leave rule: that is for excessive absence without permission on August 15-18, 29-31
and September 1-10, 1994. Respondent having failed to appear on September 23, 1994 hearing, another
notice of hearing was sent to her resetting the investigation on September 30, 1994. It was again reset to
October 5, 1994. After hearing, the petitioner terminated the services of respondent effective January 16,
1994 due to excessive absences without permission.
Issue: Whether or not the employment of respondent had been terminated on account of her pregnancy,
and therefore violates the Labor Code which prohibits an employer to discharge an employee on account
of the latter's pregnancy.
Ruling:
Respondent's sickness was pregnancy-related and, therefore, the petitioner cannot terminate
respondent's services because in doing so, petitioner will, in effect, be violating the Labor Code which
prohibits an employer to discharge an employee on account of the latter's pregnancy. Article 137 of the
Labor Code provides: that it shall be unlawful for any employer: (1) To deny any woman employee the
benefits provided for in this Chapter or to discharge any woman employed by him for the purpose of
preventing her from enjoying any of the benefits provided under this Code; (2) To discharge such woman
on account of her pregnancy, while on leave or in confinement due to her pregnancy; or (3) To discharge
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or refuse the admission of such woman upon returning to her work for fear that she may again be
pregnant.
Respondent was able to subsequently justify her absences in accordance with company rules and
policy; that the respondent was pregnant at the time she incurred the absences; that this fact of pregnancy
and its related illnesses had been duly proven through substantial evidence; that the respondent attempted
to file leaves of absence but the petitioner's supervisor refused to receive them; that she could not have
filed prior leaves due to her continuing condition; and that the petitioner, in the last analysis, dismissed
the respondent on account of her pregnancy, a prohibited act.
Petitioner terminated the services of respondent on account of her pregnancy which justified her
absences and, thus, committed a prohibited act rendering the dismissal illegal.

Ultra Villa Food Haus vs. Georston, 309 SCRA 17 [1999]

Facts:
Private respondent Renato Geniston was employed by petitioner Ultra Villa Food House and/or its alleged
owner Rosie Tio. Private respondent alleged that he was employed as a "do it all guy" acting as waiter,
driver and maintenance man, in said restaurant. During the elections of May 11, 1992, private respondent
acted as Poll Watcher. The counting of votes lasted until 3:00 p.m. the next day, May 12. Private
respondent did not report for work on both days on account of his poll watching. As a result, his
employment was terminated by petitioner Tio on the ground of abandonment.
Private respondent filed a case of illegal dismissal against petitioners. Petitioner Tio maintained
that private respondent was her personal driver, not an employee of Ultra Villa Food Haus and denied
dismissing private respondent whom she claimed abandoned his job.
The Labor Arbiter found that private respondent was indeed petitioner's personal driver. The
Labor Arbiter concluded that private respondent, being a personal driver, was not entitled to overtime pay,
premium pay, service incentive leave and 13th month pay.On appeal, the NLRC reversed the decision of
the labor arbiter and ordered the reinstatement of private respondent and payment of backwages, overtime
pay, premium pay for holiday and rest days, etc. The NLRC also granted private respondent separation
pay in lieu of reinstatement on account of the establishment's closure but denied his prayer for moral,
actual and exemplary damages, and attorney's fees. Petitioner moved for reconsideration but was denied.
Issues:
1. Whether private respondent was an employee of the Ultra Villa Food Haus or the personal driver
of petitioner; and
2. Whether private respondent was illegally dismissed from employment.
Ruling:
I.
THE LABOR ARBITER CORRECTLY RULED THAT PRIVATE RESPONDENT WAS
PETITIONER'S PERSONAL DRIVER AND NOT AN EMPLOYEE OF THE SUBJECT
ESTABLISHMENT. We find that private respondent was indeed the personal driver of petitioner, and
not an employee of the Ultra Villa Food Haus. There is substantial evidence to support such conclusion,
namely:
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(1) Private respondent's admission during the mandatory conference that he was petitioner's personal
driver.
(2) Copies of the Ultra Villa Food Haus payroll which do not contain private respondent's name.
(3) Affidavits of Ultra Villa Food Haus employees attesting that private respondent was never an
employee of said establishment.
(4) Petitioner Tio's undisputed allegation that she works as the branch manager of the CFC Corporation
whose office is located in Mandaue City. This would support the Labor Arbiter's observation that private
respondents' position as driver would be "incongruous" with his functions as a waiter of Ultra Villa Food
Haus.
(5) The Joint Affidavit of the warehouseman and warehouse checker of the CFC Corporation stating that:
Renato Geniston usually drive[s] Mrs. Tio from her residence to the office. Thereafter, Mr. Geniston will
wait for Mrs. Tio in her car. Most of the time, Renato Geniston slept in the car of Mrs. Tio and will be
awakened only when the latter will leave the office for lunch. Mr. Geniston will again drive Mrs. Tio to
the office at around 2:00 o'clock in the afternoon and thereafter the former will again wait for Mrs. Tio at
the latter's car until Mrs. Tio will again leave the office to make her rounds at our branch office at the
downtown area. In contrast, private respondent has not presented any evidence other than his self-serving
allegation to show that he was employed in the Ultra Villa Food Haus.
On this issue, therefore, the evidence weighs heavily in petitioner's favor. The Labor Arbiter thus
correctly ruled that private respondent was petitioner's personal driver and not an employee of the subject
establishment. Accordingly, the terms and conditions of private respondent's employment are governed by
Chapter III, Title III, Book III of the Labor Code as well as by the pertinent provisions of the Civil Code.
PETITIONER IS NOT OBLIGED UNDER THE LAW TO GRANT PRIVATE RESPONDENT
OVERTIME PAY, HOLIDAY PAY, PREMIUM PAY AND SERVICE INCENTIVE LEAVE.
Chapter III, Title III, Book III, however, is silent on the grant of overtime pay, holiday pay, premium pay
and service incentive leave to those engaged in the domestic or household service.
Moreover, the specific provisions mandating these benefits are found in Book III, Title I of the Labor
Code, and Article 82, which defines the scope of the application of these provisions, expressly excludes
domestic helpers from its coverage:
Art. 82. Coverage. The provision of this title shall apply to employees in all establishments and
undertakings whether for profit or not, but not to government employees, managerial employees, field
personnel, members of the family of the employer who are dependent on him for support, domestic
helpers, persons in the personal service of another, and workers who are paid by results as determined by
the Secretary of Labor in appropriate regulations.
The limitations set out in the above article are echoed in Book III of the Omnibus Rules Implementing the
Labor Code. Clearly then, petitioner is not obliged by law to grant private respondent any of these
benefits.
II.
PRIVATE RESPONDENT IS ENTITLED TO BE INDEMNIFIED FOR HIS UNJUST
DISMISSAL AND FOR PETITIONER'S FAILURE TO COMPLY WITH THE REQUIREMENTS OF
DUE PROCESS IN EFFECTING HIS DISMISSAL.
To constitute abandonment, two requisites must concur: (1) the failure to report to work or absence
without valid or justifiable reason, and (2) a clear intention to sever the employer-employee relationship
as manifested by some overt acts, with the second requisite as the more determinative factor.
The burden of proving abandonment as a just cause for dismissal is on the employer. Petitioner
failed to discharge this burden. The only evidence adduced by petitioner to prove abandonment is her
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affidavit. It is quite unbelievable that private respondent would leave a stable and relatively well paying
job as petitioner's family driver to work as an election watcher.
Though the latter may pay more in a day, elections in this country are so far in between that it is
unlikely that any person would abandon his job to embark on a career as an election watcher, the
functions of which are seasonal and temporary in nature. Consequently, we do not find private respondent
to have abandoned his job. His dismissal from petitioner's employ being unjust, petitioner is entitled to an
indemnity under Article 149 of the Labor Code.
Petitioner likewise concedes that she failed to comply with due process in dismissing private
respondent since private respondent had already abandoned his job. As we have shown earlier however,
petitioner's theory of abandonment has no leg to stand on, and with it, her attempts to justify her failure to
accord due process must also fall. Accordingly, private respondent is ordered to pay private respondent
the sum of P1,000.00.

Remington Industrial Sales Corp. vs. Castaneda, G.R. No. 169295-96, Nov. 20, 2006 citing Apex
Mining
Facts:
Erlinda alleged that she started working in August 1983 as company cook with a salary of Php
4,000.00 for Remington, a corporation engaged in the trading business; that she worked for six (6) days a
week, starting as early as 6:00 a.m. because she had to do the marketing and would end at around 5:30
p.m., or even later, after most of the employees, if not all, had left the company premises; that she
continuously worked with Remington until she was unceremoniously prevented from reporting for work
when Remington transferred to a new site in Edsa, Caloocan City.
She averred that she reported for work at the new site in Caloocan City on January 15, 1998, only
to be informed that Remington no longer needed her services. Erlinda believed that her dismissal was
illegal because she was not given the notices required by law; hence, she filed her complaint for
reinstatement without loss of seniority rights, salary differentials, service incentive leave pay, 13th month
pay and 10% attorney's fees.
Remington denied that it dismissed Erlinda illegally. It posited that Erlinda was a domestic
helper, not a regular employee; Erlinda worked as a cook and this job had nothing to do with Remington's
business of trading in construction or hardware materials, steel plates and wire rope products. It also
contended that contrary to Erlinda's allegations that she worked for eight (8) hours a day, Erlinda's duty
was merely to cook lunch and "merienda", after which her time was hers to spend as she pleased.
Remington also maintained that it did not exercise any degree of control and/or supervision over Erlinda's
work as her only concern was to ensure that the employees' lunch and "merienda" were available and
served at the designated time. Remington likewise belied Erlinda's assertion that her work extended
beyond 5:00 p.m. as she could only leave after all the employees had gone.
The truth, according to Remington, is that Erlinda did not have to punch any time card in the way
that other employees of Remington did; she was free to roam around the company premises, read
magazines, and to even nap when not doing her assigned chores. Remington averred that the illegal
dismissal complaint lacked factual and legal bases. Allegedly, it was Erlinda who refused to report for
work when Remington moved to a new location in Caloocan City.
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LA and NLRC decided the case in favor of the complainant. Petitioner appealed to the CA. While
the petition was pending with the Court of Appeals, the NLRC rendered another Decision in the same
case on August 29, 2001, which included the retirement pay not included in their first decision. Petitioner
challenged the second decision of the NLRC, including the resolution denying its motion for
reconsideration, through a second
Issues and Rulings:
The petition must fail.
I. Whether or not respondent is petitioner's regular employee or a domestic helper.
We
affirm that respondent was a regular employee of the petitioner and that the latter was guilty of
illegal dismissal.
Petitioner relies heavily on the affidavit of a certain Mr. Antonio Tan and contends that
respondent is the latter's domestic helper and not a regular employee of the company since Mr. Tan has a
separate and distinct personality from the petitioner. It maintains that it did not exercise control and
supervision over her functions; and that it operates as a trading company and does not engage in the
restaurant business, and therefore respondent's work as a cook, which was not usually necessary or
desirable to its usual line of business or trade, could not make her its regular employee.This contention
fails to impress.
In Apex Mining Company, Inc. v. NLRC, this Court held that a househelper in the staff houses of
an industrial company was a regular employee of the said firm. We ratiocinated that:Under Rule XIII,
Section 1(b), Book 3 of the Labor Code, as amended, the terms "househelper" or "domestic servant" are
defined as follows:
"The term 'househelper' as used herein is synonymous to the term 'domestic servant' and shall
refer to any person, whether male or female, who renders services in and about the employer's home and
which services are usually necessary or desirable for the maintenance and enjoyment thereof, and
ministers exclusively to the personal comfort and enjoyment of the employer's family."
The foregoing definition clearly contemplates such househelper or domestic servant who is
employed in the employer's home to minister exclusively to the personal comfort and enjoyment of the
employer's family. Such definition covers family drivers, domestic servants, laundry women, yayas,
gardeners, houseboys and similar househelps.
The criteria is the personal comfort and enjoyment of the family of the employer in the home of
said employer. While it may be true that the nature of the work of a househelper, domestic servant or
laundrywoman in a home or in a company staffhouse may be similar in nature, the difference in their
circumstances is that in the former instance they are actually serving the family while in the latter case,
whether it is a corporation or a single proprietorship engaged in business or industry or any other
agricultural or similar pursuit, service is being rendered in the staffhouses or within the premises of the
business of the employer. In such instance, they are employees of the company or employer in the
business concerned entitled to the privileges of a regular employee.
Petitioner contends that it is only when the househelper or domestic servant is assigned to certain
aspects of the business of the employer that such househelper or domestic servant may be considered as
such an employee. The Court finds no merit in making any such distinction. The mere fact that the
househelper or domestic servant is working within the premises of the business of the employer and in
relation to or in connection with its business, as in its staffhouses for its guest or even for its officers and
employees, warrants the conclusion that such househelper or domestic servant is and should be
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considered as a regular employee of the employer and not as a mere family househelper or domestic
servant as contemplated in Rule XIII, Section 1(b), Book 3 of the Labor Code, as amended.
In the case at bar, the petitioner itself admits in its position paper that respondent worked at the
company premises and her duty was to cook and prepare its employees' lunch and merienda. Clearly, the
situs, as well as the nature of respondent's work as a cook, who caters not only to the needs of Mr. Tan
and his family but also to that of the petitioner's employees, makes her fall squarely within the definition
of a regular employee under the doctrine enunciated in the Apex Mining case. That she works within
company premises, and that she does not cater exclusively to the personal comfort of Mr. Tan and his
family, is reflective of the existence of the petitioner's right of control over her functions, which is the
primary indicator of the existence of an employer-employee relationship.
Moreover, it is wrong to say that if the work is not directly related to the employer's business,
then the person performing such work could not be considered an employee of the latter. The
determination of the existence of an employer-employee relationship is defined by law according to the
facts of each case, regardless of the nature of the activities involved. Indeed, it would be the height of
injustice if we were to hold that despite the fact that respondent was made to cook lunch and merienda for
the petitioner's employees, which work ultimately redounded to the benefit of the petitioner corporation,
she was merely a domestic worker of the family of Mr. Tan.
We note the findings of the NLRC, affirmed by the Court of Appeals, that no less than the
company's corporate secretary has certified that respondent is a bonafide company employee; she had a
fixed schedule and routine of work and was paid a monthly salary of P4,000.00; she served with the
company for 15 years starting in 1983, buying and cooking food served to company employees at lunch
and merienda, and that this service was a regular feature of employment with the company. Indubitably,
the Court of Appeals, as well as the NLRC, correctly held that based on the given circumstances, the
respondent is a regular employee of the petitioner.
II.
Whether or not respondent was illegally dismissed.
Petitioner contends that there was abandonment on respondent's part when she refused to report for work
when the corporation transferred to a new location in Caloocan City, claiming that her poor eyesight
would make long distance travel a problem. Thus, it cannot be held guilty of illegal dismissal.
On the other hand, the respondent claims that when the petitioner relocated, she was no longer
called for duty and that when she tried to report for work, she was told that her services were no longer
needed. She contends that the petitioner dismissed her without a just or authorized cause and that she was
not given prior notice, hence rendering the dismissal illegal.
We rule for the respondent. As a regular employee, respondent enjoys the right to security of
tenure under Article 279 38 of the Labor Code and may only be dismissed for a just or authorized cause,
otherwise the dismissal becomes illegal and the employee becomes entitled to reinstatement and full
backwages computed from the time compensation was withheld up to the time of actual reinstatement.
Abandonment is the deliberate and unjustified refusal of an employee to resume his employment.
It is a form of neglect of duty; hence, a just cause for termination of employment by the employer under
Article 282 of the Labor Code, which enumerates the just causes for termination by the employer. 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 employee has no more intention to work. The intent to discontinue the
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employment must be shown by clear proof that it was deliberate and unjustified. This, the petitioner failed
to do in the case at bar.
Alongside the petitioner's contention that it was the respondent who quit her employment and
refused to return to work, greater stock may be taken of the respondent's immediate filing of her
complaint with the NLRC. Indeed, an employee who loses no time in protesting her layoff cannot by any
reasoning be said to have abandoned her work, for it is well-settled that the filing of an employee of a
complaint for illegal dismissal with a prayer for reinstatement is proof enough of her desire to return to
work, thus, negating the employer's charge of abandonment.
In termination cases, the burden of proof rests upon the employer to show that the dismissal is for
a just and valid cause; failure to do so would necessarily mean that the dismissal was illegal. The
employer's case succeeds or fails on the strength of its evidence and not on the weakness of the
employee's defense. If doubt exists between the evidence presented by the employer and the employee,
the scales of justice must be tilted in favor of the latter.
III.
Whether the second NLRC decision promulgated during the pendency of the first petition for
certiorari has basis in law.
The petitioner contends that the respondent's motion for reconsideration, upon which the second NLRC
decision was based, was not under oath and did not contain a certification as to why it was not decided on
time as required under the New Rules of Procedure of the NLRC. Furthermore, the former also raises for
the first time the contention that respondent's motion was filed beyond the ten (10)-calendar day period
required under the same Rules, since the latter received a copy of the first NLRC decision on December
6, 2000, and respondent filed her motion only on December 18, 2000. Thus, according to petitioner, the
respondent's motion for reconsideration was a mere scrap of paper and the second NLRC decision has no
basis in law. We do not agree.
It is well-settled that the application of technical rules of procedure may be relaxed to serve the
demands of substantial justice, particularly in labor cases. Labor cases must be decided according to
justice and equity and the substantial merits of the controversy. Rules of procedure are but mere tools
designed to facilitate the attainment of justice. Their strict and rigid application, which would result in
technicalities that tend to frustrate rather than promote substantial justice, must always be avoided.
This Court has consistently held that the requirement of verification is formal, and not
jurisdictional. Such requirement is merely a condition affecting the form of the pleading, non-compliance
with which does not necessarily render it fatally defective. Verification is simply intended to secure an
assurance that the allegations in the pleading are true and correct and not the product of the imagination
or a matter of speculation, and that the pleading is filed in good faith. The court may order the correction
of the pleading if verification is lacking or act on the pleading although it is not verified, if the attending
circumstances are such that strict compliance with the rules may be dispensed with in order that the ends
of justice may thereby be served.
Anent the argument that respondent's motion for reconsideration, on which the NLRC's second
decision was based, was filed out of time, such issue was only brought up for the first time in the instant
petition where no new issues may be raised by a party in his pleadings without offending the right to due
process of the opposing party.
Nonetheless, the petitioner asserts that the respondent received a copy of the NLRC's first
decision on December 6, 2000, and the motion for reconsideration was filed only on December 18, 2000,
or two (2) days beyond the ten (10)-calendar day period requirement under the New Rules of Procedure
of the NLRC and should not be allowed. This contention must fail.
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Under Article 223 of the Labor Code, the decision of the NLRC shall be final and executory after ten (10)
calendar days from the receipt thereof by the parties.
While it is an established rule that the perfection of an appeal in the manner and within the period
prescribed by law is not only mandatory but jurisdictional, and failure to perfect an appeal has the effect
of rendering the judgment final and executory, it is equally settled that the NLRC may disregard the
procedural lapse where there is an acceptable reason to excuse tardiness in the taking of the appeal.
Among the acceptable reasons recognized by this Court are (a) counsel's reliance on the footnote of the
notice of the decision of the Labor Arbiter that "the aggrieved party may appeal . . . within ten (10)
working days"; (b) fundamental consideration of substantial justice; (c) prevention of miscarriage of
justice or of unjust enrichment, as where the tardy appeal is from a decision granting separation pay
which was already granted in an earlier final decision; and (d) special circumstances of the case combined
with its legal merits or the amount and the issue involved.
We hold that the particular circumstances in the case at bar, in accordance with substantial justice,
call for a liberalization of the application of this rule. Notably, respondent's last day for filing her motion
for reconsideration fell on December 16, 2000, which was a Saturday. In a number of cases, we have
ruled that if the tenth day for perfecting an appeal fell on a Saturday, the appeal shall be made on the next
working day. The reason for this ruling is that on Saturdays, the office of the NLRC and certain post
offices are closed. With all the more reason should this doctrine apply to respondent's filing of the motion
for reconsideration of her cause, which the NLRC itself found to be impressed with merit. Indeed,
technicality should not be permitted to stand in the way of equitably and completely resolving the rights
and obligations of the parties for the ends of justice are reached not only through the speedy disposal of
cases but, more importantly, through a meticulous and comprehensive evaluation of the merits of a case.
Finally, as to petitioner's argument that the NLRC had already lost its jurisdiction to decide the
case when it filed its petition for certiorari with the Court of Appeals upon the denial of its motion for
reconsideration, suffice it to state that under Section 7 of Rule 65 of the Revised Rules of Court, the
petition shall not interrupt the course of the principal case unless a temporary restraining order or a writ of
preliminary injunction has been issued against the public respondent from further proceeding with the
case. Thus, the mere pendency of a special civil action for certiorari, in connection with a pending case in
a lower court, does not interrupt the course of the latter if there is no writ of injunction. Clearly, there was
no grave abuse of discretion on the part of the NLRC in issuing its second decision which modified the
first, especially since it failed to consider the respondent's motion for reconsideration when it issued its
first decision.

Tolosa vs. NLRC, G.R. No. 149578, April 10, 2003

Facts:
Petitioner was the widow of Capt. Virgilio Tolosa who was hired by Qwana-Kaiun, through its
manning agent, Asia Bulk, to be the master of the Vessel named M/V Lady Dona. His contract officially
began on November 1, 1992, as supported by his contract of employment when he assumed command of
the vessel in Yokohama, Japan. The vessel departed for Long Beach California, passing by Hawaii in the
middle of the voyage. At the time of embarkation, CAPT. TOLOSA was allegedly shown to be in good
health.
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During 'channeling activities' upon the vessel's departure from Yokohama sometime on November
6, 1992, CAPT. TOLOSA was drenched with rainwater. The following day, November 7, 1992, he had a
slight fever and in the succeeding twelve (12) days, his health rapidly deteriorated resulting in his death
on November 18, 1992.
When petitioner filed a complaint with the POEA, transferred to the DOLE, NLRC, the Labor
Arbiter ruled in her favor. The NLRC, affirmed by the Court of Appeals, however, ruled that the labor
commission had no jurisdiction over the subject matter filed by petitioner. Hence, this appeal.
Summary of Ruling: The Court affirmed the appealed decision. Petitioner's action was recovery
of damages based on a quasi-delict or tort, not adjudication of a labor dispute to which jurisdiction of
labor tribunals is limited. Petitioner is actually suing shipmates Garate and Asis for gross negligence, and
the said shipmates have no employer-employee relations with Capt. Tolosa. While labor arbiters and the
NLRC have jurisdiction to award not only relief provided by labor laws, but also damages under the Civil
Code, these relief must still be based on an action that has reasonable causal connection with matters
Issues and Rulings:
1. Whether or not the NLRC has jurisdiction over the case (whether the labor arbiter and the NLRC had
jurisdiction over petitioner's action).
Petitioner argues that her cause of action is not predicated on a quasi delict or tort, but on the failure of
private respondents as employers of her husband (Captain Tolosa) to provide him with timely,
adequate and competent medical services under Article 161 of the Labor Code:
"ART 161.
Assistance of employer. It shall be the duty of any employer to provide all the
necessary assistance to ensure the adequate and immediate medical and dental attendance and treatment to
an injured or sick employee in case of emergency."
Likewise, she contends that Article 217 (a) (4) of the Labor Code vests labor arbiters and the NLRC with
jurisdiction to award all kinds of damages in cases arising from employer-employee relations.
Petitioner also alleges that the "reasonable causal connection" rule should be applied in her favor. Citing
San Miguel Corporation v. Etcuban, she insists that a reasonable causal connection between the claim
asserted and the employer-employee relation confers jurisdiction upon labor tribunals. She adds that she
has satisfied the required conditions: 1) the dispute arose from an employer-employee relation,
considering that the claim was for damages based on the failure of private respondents to comply with
their obligation under Article 161 of the Labor Code; and 2) the dispute can be resolved by reference to
the Labor Code, because the material issue is whether private respondents complied with their legal
obligation to provide timely, adequate and competent medical services to guarantee Captain Tolosa's
occupational safety. We disagree.
We affirm the CA's ruling that the NLRC and the labor arbiter had no jurisdiction over petitioner's
claim for damages, because that ruling was based on a quasi delict or tort per Article 2176 of the Civil
Code.
REMEDIAL LAW; CIVIL PROCEDURE; JURISDICTION; LABOR TRIBUNALS; ACTION BASED
ON QUASI DELICT THAT DOES NOT INVOLVE LABOR DISPUTE, NOT INCLUDED - Time and
time again, we have held that the allegations in the complaint determine the nature of the action and,
consequently, the jurisdiction of the courts. After carefully examining the complaint/position paper of
petitioner, we are convinced that the allegations therein are in the nature of an action based on a quasi
delict or tort. It is evident that she sued Pedro Garate and Mario Asis for gross negligence.
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Petitioner's complaint/position paper refers to and extensively discusses the negligent acts of shipmates
Garate and Asis, who had no employer-employee relation with Captain Tolosa. The labor arbiter himself
classified petitioner's case as "a complaint for damages, blacklisting and watchlisting (pending inquiry)
for gross negligence resulting in the death of complainant's husband, Capt. Virgilio Tolosa."
We stress that the case does not involve the adjudication of a labor dispute, but the recovery of
damages based on a quasi delict. The jurisdiction of labor tribunals is limited to disputes arising from
employer-employee relations, as we ruled in Georg Grotjahn GMBH & Co. v. Isnani:
"Not every dispute between an employer and employee involves matters that only labor arbiters
and the NLRC can resolve in the exercise of their adjudicatory or quasi-judicial powers. The jurisdiction
of labor arbiters and the NLRC under Article 217 of the Labor Code is limited to disputes arising from an
employer-employee relationship which can only be resolved by reference to the Labor Code, other labor
statutes, or their collective bargaining agreement."
The pivotal question is whether the Labor Code has any relevance to the relief sought by
petitioner. From her paper, it is evident that the primary reliefs she seeks are as follows:
(a) loss of earning capacity denominated therein as "actual damages" or "lost income" and
(b) blacklisting. The loss she claims does not refer to the actual earnings of the deceased, but to his
earning capacity based on a life expectancy of 65 years. This amount is recoverable if the action is based
on a quasi delict as provided for in Article 2206 of the Civil Code, 18 but not in the Labor Code.
DAMAGES PROVIDED BY THE CIVIL CODE; AWARD PROPER IF RELIEF SOUGHT HAS
CAUSAL RELATIONS WITH LABOR MATTERS - While it is true that labor arbiters and the NLRC
have jurisdiction to award not only reliefs provided by labor laws, but also damages governed by the Civil
Code, these reliefs must still be based on an action that has a reasonable causal connection with the Labor
Code, other labor statutes, or collective bargaining agreements.
The central issue is determined essentially from the relief sought in the complaint. In San Miguel
Corporation v. NLRC, this Court held:"It is the character of the principal relief sought that appears
essential in this connection. Where such principal relief is to be granted under labor legislation or a
collective bargaining agreement, the case should fall within the jurisdiction of the Labor Arbiter and the
NLRC, even though a claim for damages might be asserted as an incident to such claim."
The labor arbiter found private respondents to be grossly negligent. He ruled that Captain Tolosa,
who died at age 58, could expect to live up to 65 years and to have an earning capacity of US$176,400.
LOSS OF EARNING CAPACITY; NOT TO BE EQUATED WITH LABOR BENEFITS COGNIZED IN
LABOR DISPUTES - It must be noted that a worker's loss of earning capacity and blacklisting are not to
be equated with wages, overtime compensation or separation pay, and other labor benefits that are
generally cognized in labor disputes. The loss of earning capacity is a relief or claim resulting from a
quasi delict or a similar cause within the realm of civil law.
Claims for damages under paragraph 4 of Article 217 must have a reasonable causal connection
with any of the claims provided for in the article in order to be cognizable by the labor arbiter. Only if
there is such a connection with the other claims can the claim for damages be considered as arising from
employer-employee relations. In the present case, petitioner's claim for damages is not related to any
other claim under Article 217, other labor statutes, or collective bargaining agreements.
Petitioner cannot anchor her claim for damages to Article 161 of the Labor Code, which does not
grant or specify a claim or relief. This provision is only a safety and health standard under Book IV of the
same Code. The enforcement of this labor standard rests with the labor secretary. Thus, claims for an
employer's violation thereof are beyond the jurisdiction of the labor arbiter. In other words, petitioner
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cannot enforce the labor standard provided for in Article 161 by suing for damages before the labor
arbiter.
REGULAR COURTS HAVE AUTHORITY OVER ACTION FOR DAMAGES PREDICATED ON
QUASI DELICT AND HAS NO CONNECTION WITH LABOR-RELATED CLAIMS - It is not the
NLRC but the regular courts that have jurisdiction over actions for damages, in which the employeremployee relation is merely incidental, and in which the cause of action proceeds from a different source
of obligation such as a tort. Since petitioner's claim for damages is predicated on a quasi delict or tort that
has no reasonable causal connection with any of the claims provided for in Article 217, other labor
statutes, or collective bargaining agreements, jurisdiction over the action lies with the regular courts
not with the NLRC or the labor arbiters.
2.
Whether or not Evelyn is entitled to the monetary awards granted by the labor arbiter (whether
the monetary award granted by the labor arbiter has already reached finality).
ISSUES NOT RAISED IN COURTS A QUO CANNOT BE RAISED FOR THE FIRST TIME ON
APPEAL Petitioner contends that the labor arbiter's monetary award has already reached finality, since
private respondents were not able to file a timely appeal before the NLRC.
This argument cannot be passed upon in this appeal, because it was not raised in the tribunals a
quo. Well-settled is the rule that issues not raised below cannot be raised for the first time on appeal.
Thus, points of law, theories, and arguments not brought to the attention of the Court of Appeals need not
and ordinarily will not be considered by this Court. Petitioner's allegation cannot be accepted by
this Court on its face; to do so would be tantamount to a denial of respondents' right to due process.
Furthermore, whether respondents were able to appeal on time is a question of fact that cannot be
entertained in a petition for review under Rule 45 of the Rules of Court. In general, the jurisdiction of this
Court in cases brought before it from the Court of Appeals is limited to a review of errors of law allegedly
committed by the court a quo.

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U-Bix Corp. vs. Bandiola, 525 SCRA 566 [2007]

Facts:
Sometime in April 1995, Bandiola was employed by U-BIX to install furniture for its customers.
On 13 April 1997, Bandiola and two other U-BIX employees were involved in a vehicular accident on
their way to Baguio, where they were assigned by U-BIX to install furniture for an exhibit. As a result of
the accident, Bandiola sustained a fracture on his left leg. Bandiola and his co-employees were initially
brought to the Rosario District Hospital. The next day, 14 April 1997, they were transferred to the
Philippine Orthopedic Hospital (Orthopedic). After his broken leg was cemented, Bandiola was advised to
go back for further medical treatment. U-BIX paid for the medical expenses incurred in both mentioned
hospitals.
When Bandiola asked for additional financial assistance for further expenses in the treatment of
his leg which even needed to be casted in fiberglass, U-BIX allegedly refused. On September 1998,
Bandiola filed a Complaint before the Labor Arbiter, where he alleged underpayment of salary; nonpayment of overtime pay; premium pay for work performed on holidays and rest days; separation pay;
service incentive leave pay; 13th month pay; and the payment of actual, moral and exemplary damages.
In its Decision, dated 16 September 1998, Labor Arbiter allowed Bandiola's claim for salary
differential, service incentive leave pay and 13th month pay due to U-BIX's failure to present payrolls or
similar documents. Incidentally, the award of these claims is no longer questioned in the present petition.
The other claims, particularly those for medical expenses that Bandiola allegedly incurred and for moral
and exemplary damages, were dismissed. Bandiola asserts that U-BIX failed to extend to him any
financial assistance after he was injured in the performance of his duties, and that as a result, he suffered
physical pain, mental torture, fright, sleepless nights, and serious anxiety. He claims that this entitles him
to moral and exemplary damages.
Bandiola filed an appeal before the NLRC. NLRC amended the Decision rendered by the Labor
Arbiter ruling that U-BIX should reimburse Bandiola the amount for the medical expenses he incurred in
connection with his fractured leg; and further ruled that U-BIX is liable to pay Bandiola P25,000.00 in
moral damages and P25,000.00 in exemplary damages for refusing to reimburse Bandiola for the medical
expenses he incurred after it failed to report to the Social Security System (SSS) the injuries sustained by
Bandiola
It affirmed Bandiola's entitlement to reimbursement of his medical expenses, but reduced the
amount to P7,742.50, the amount of actual damages he was able to prove. It also affirmed without
modification the award of moral and exemplary damages, and the monetary award granted by the Labor
Arbiter
Issue:
Whether or not petitioner U-BIX should reimburse respondent Bandiola for alleged medical expenses of
P7,742.50 and pay for moral damages of P25,000.00 and exemplary damages of P25,000.00 to said
respondent Bandiola.
Ruling:
Yes. Contrary to the arguments put forward by U-BIX, it is liable to reimburse Bandiola the
amount of P7,742.50 for medical expenses because its failure to comply with its duty to record and report
Bandiola's injury to the SSS precluded Bandiola from making any claims. Moreover, U-BIX, by its own
admission, reimbursed its other employees who were involved in the same accident for their medical
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expenses. Clearly, the reimbursement of medical expenses for injuries incurred in the course of
employment is part of the benefits enjoyed by U-BIX's employees. The only justification for its refusal to
reimburse Bandiola was that he intended to defraud the company by presenting spurious receipts
amounting to P7,742.50 that were allegedly issued four months before their presentation.
EMPLOYEES COMPENSATION FOR WORK-RELATED INJURIES, DISABILITIES AND DEATHS
- Articles 205 and 206 of the Labor Code set the reportorial requirements in cases when an employee falls
sick or suffers an injury arising in the course of employment. An injury is said to arise "in the course of
employment" when it takes place within the period of employment, at a place where the employee may
reasonably be, and while he is fulfilling his duties or is engaged in doing something incidental thereto. 20
The aforecited provisions of the Labor Code provide that:
ART 205.
RECORD OF DEATH OR DISABILITY
(a)
All employers shall keep a logbook to record chronologically the sickness, injury or death of their
employees, setting forth therein their names, dates and places of the contingency, nature of the
contingency and absences. Entries in the logbook shall be made within five days from notice or
knowledge of the occurrence of contingency. Within five days after entry in the logbook, the employer
shall report to the System only those contingencies he deems to be work-connected.
(b)
All entries in the employers logbook shall be made by the employer or any of his authorized
official after verification of the contingencies or the employees absences for a period of a day or more.
Upon request by the System, the employer shall furnish the necessary certificate regarding information
about any contingency appearing in the logbook, citing the entry number, page number and date. Such
logbook shall be made available for inspection to the duly authorized representatives of the System.
ART 206.
NOTICE OF SICKNESS, INJURY OR DEATH
Notice of sickness, injury or death shall be given to the employer by the employee or by his dependents or
anybody on his behalf within five days from the occurrence of the contingency. No notice to the employer
shall be required if the contingency is known to the employer or his agents or representatives.
GENERAL RULE AND EXCEPTION ON NOTIFICATION - As a general rule, the injured employee
must notify his employer, who is obligated to enter the notice in a logbook within five days after
notification. Within five days after making the entry, the employer of a private company reports the workrelated sickness or injury to the SSS. The claim is forwarded to the SSS, which decides on the validity of
the claim. When the SSS denies the claim, the denial may be appealed to the Employees' Compensation
Commission (ECC) within 30 days.
However, the law provides an exception to the rule requiring an employee to notify his or her employer of
his injuries. Under Section B of ECC Board Resolution No. 2127, issued on 5 August 1982, notice of
injury, sickness or death of the employee need not be given to the employer in any of the following
situations:
(1)
When the employee suffers the contingency within the employer's premises;
(2)
When the employee officially files an application for leave of absence by reason of the
contingency from which he suffers;
(3)
When the employer provides medical services and/or medical supplies to the employee who
suffers from the contingency; and
(4)
When the employer can be reasonably presumed to have had knowledge of the employee's
contingency, in view of the following circumstances:
(4.1) The employee was performing an official function for the employer when the contingency
occurred;
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(4.2) The employee's contingency has been publicized through mass media outlets; or
(4.3) The specific circumstances of the occurrence of the contingency have been such that the
employer can be reasonably presumed to have readily known it soon thereafter; or
(4.4) Any other circumstances that may give rise to a reasonable presumption that the employer has
been aware of the contingency.
In the present case, there is no dispute that Bandiola's leg injury was sustained in the course of his
employment with U-BIX. At the time of the accident, Bandiola was on the way to Baguio, where he was
ordered by U-BIX to install furniture for an exhibit. Moreover, U-BIX was aware that Bandiola, as well
as his other co-employees, were injured during the accident. U-BIX admitted to providing Bandiola and
his co-employees with medical assistance and it even sent its representative, Rey Reynes, to Rosario
District Hospital, where they were confined, and had them transferred to the Orthopedic. U-BIX was also
aware that the Orthopedic instructed Bandiola to return for further medical treatment. It is implicit that
Bandiola needed further treatment for his broken leg and was, thus, incapacitated to work.
Given the foregoing circumstances, U-BIX had the legal obligation to record pertinent
information in connection with the injuries sustained by Bandiola in its logbook within five days after it
had known about the injuries; and to report the same to the SSS within five days after it was recorded in
the logbook, in accordance with Articles 205 and 206 of the Labor Code. Had U-BIX performed its lawful
duties, the SSS, or the ECC on appeal, could have properly considered whether or not Bandiola was
entitled to reimbursement for his medical expenses, as well as disability benefits while he was unable to
work. However, U-BIX did not present any evidence showing that it had complied with these legal
requirements. It had not even replied to Bandiola's allegations in his Position Paper, dated 13 April 1998,
that its employees were not even members of the SSS.
HISTORY AND IMPORTANCE OF EMPLOYEES COMPENSATION - As early as 1938, this Court
emphasized, in the case of Murillo v. Mendoza, 22 that labor laws have demonstrated an impetus towards
ensuring that employees are compensated for work-related injuries. The law has since treated such
compensation as a right, which the employees can claim, instead of an act of charity to be given at the
employer's discretion.
The intention of the Legislature in enacting the Workmen's Compensation Act was to secure workmen
and their dependents against becoming objects of charity, by making a reasonable compensation for such
accidental calamities as are incidental to the employment. Under such act injuries to workmen and
employees are to be considered no longer as results of fault or negligence, but as the products of the
industry in which the employee is concerned. Compensation for such injuries is, under the theory of such
statute, like any other item in the cost of production or transportation, and ultimately charged to the
consumer. The law substitutes for liability for negligence an entirely new conception; that is, that if the
injury arises out of and in the course of the employment, under the doctrine of man's humanity to man, the
cost of compensation must be one of the elements to be liquidated and balanced in the course of
consumption. In other words, the theory of law is that, if the industry produces an injury, the cost of that
injury shall be included in the cost of the product of the industry.
In De Jesus v. Employee's Compensation Commission, this Court further noted that while the
present law protects employers from spurious and long overdue claims, it stresses at the same time that
the claims for compensation are to be promptly and properly addressed. More importantly, employers no
longer need to determine the validity of a claim or to defend themselves from spurious claims. Their
duties are thus limited to paying the monthly premiums and reporting the sickness, injury or death for
which compensation is due.
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The new law establishes a state insurance fund built up by the contributions of employers based
on the salaries of their employees. The injured worker does not have to litigate his right to compensation.
No employer opposes his claim. There is no notice of injury nor requirement of controversion. The sick
worker simply files a claim with a new neutral Employees' Compensation Commission which then
determines on the basis of the employee's supporting papers and medical evidence whether or not
compensation may be paid. The payment of benefits is more prompt. The cost of administration is low.
The amount of death benefits has also been doubled.
On the other hand, the employer's duty is only to pay the regular monthly premiums to the
scheme. It does not look for insurance companies to meet sudden demands for compensation payments or
set up its own funds to meet these contingencies. It does not have to defend itself from spuriously
documented or long past claims.
The new law applies the social security principle in the handling of workmen's compensation.
The Commission administers and settles claims from a fund under its exclusive control. The employer
does not intervene in the compensation process and it has no control, as in the past, over payment of
benefits. . . . .
Since there is no employer opposing or fighting a claim for compensation, the rules on presumption of
compensability and controversion cease to have importance. The lopsided situation of an employer versus
one employee, which called for equalization through the various rules and concepts favoring the claimant,
is now absent.
By failing to report Bandiola's injury to the SSS, U-BIX disregarded the law and its purpose; that
is, to provide a proper and prompt settlement of his claims. Instead, U-BIX arrogated upon itself the duty
of determining which medical expenses are proper for reimbursement. In doing so, it could unnecessarily
delay and unjustifiably refuse to reimburse Bandiola for medical expenses even if they were adequately
supported by receipts, as was done in this instance. The expense and delay undergone by Bandiola since
1997 in obtaining reimbursement for his medical expenses of P7,742.50 very clearly defeat the purpose of
the law.
BURDEN OF PROOF ON THE DEFENDANT OF A CLAIM - U-BIX does not question its liability to
pay for medical expenses incurred in connection with the 13 April 1997 accident; it admits that it paid for
all the medical expenses of its other employees, who were involved in the accident. It refused, however,
to reimburse Bandiola for further medical expenses on the ground that the receipts were counterfeit and
belatedly presented to U-BIX.
Bandiola presented eight receipts with a total amount of P7,742.50 issued by MCP and his attending
physician, Dr. Celestino Musngi. The amounts indicated therein range from P200.00 to P2,936.00. The
receipts were issued on 24 April 1997 and 6 May 1997, or around the time the accident occurred on 13
April 1997. From the face of the receipts, there is no showing that these documents are false or falsified.
U-BIX could have easily confirmed with MCP or Dr. Celestino Musngi, who issued said receipts, the
authenticity of the documents. However, it failed to allege that it took any steps to check the authenticity
of the receipts. It also failed to present any evidence that these receipts are fake. Absent any proof, no
weight can be attached to the allegation that the receipts are spurious.
The party who alleges the fact has the burden of proving it. The burden of proof is assigned to the
defendant of a claim when he or she alleges an affirmative defense, which is not a denial of an essential
ingredient in the complainant's cause of action the existence of the receipts, in the present case but
is one which, if established, will be a good defense, i.e., an avoidance of the claim. One who alleges an
affirmative defense that is denied by the complainant the falsity of the receipts, in this case has the
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burden of proving it. Unless the party asserting the affirmative of an issue sustains the burden of proof,
his or her cause will not succeed. If he or she fails to establish the facts of which the matter asserted is
predicated, the complainant is entitled to a verdict or decision in his or her favor. In this case, U-BIX's
affirmative defense that the receipts are spurious is rejected due to utter lack of proof.
U-BIX asserts that no demand was made by the petitioner and that it only came to know of
Bandiola's medical expenses when it received the Summons to attend a preliminary conference before the
Labor Arbiter. For his part, Bandiola insists that before filing the case with the NLRC, he approached UBIX three times for financial assistance in connection with his medical expenses, but he was refused.
Bandiola identified the persons he spoke to as Rey Reynes and a certain Ms. Clarisse. U-BIX alleges that
it sent Rey Reynes to look for Bandiola in the address recorded in their office files, but that he no longer
resided therein. Bandiola contested this allegation by stating that he had not changed his residence. As of
20 September 2006, Bandiola still resided at the same address, Sampaloc Site II-B, Barangay B.F. Homes,
Paraaque City, as evidenced by the Certificate of Indigency issued by Barangay BF Homes Chairperson
Florencia N. Amurao.
U-BIX maintains that Bandiola kept the company in the dark regarding his medical expenses
because he intended to file a baseless suit aimed at extorting money from the company. This Court finds it
implausible that a worker who received less than minimum wage would choose to initiate legal
proceedings before even seeking to collect from his employer. To automatically presume that Bandiola
intended to defraud the company despite the absence of supporting evidence would constitute a hasty and
unsubstantiated generalization, which displays a prejudice against ordinary workers, such as Bandiola.
U-BIX's continued and stubborn refusal to reimburse Bandiola's medical expenses was made
evident during the mandatory conference before the Labor Arbiter when it refused to recognize the
receipts shown to it. If U-BIX had refused to take cognizance of the receipts presented during a quasijudicial proceeding before a public officer, then it would have been more likely that it ignored, if not flatout refused, to consider the said receipts when the same were presented by a lowly employee.
Under the facts of the case, Bandiola is entitled to moral and exemplary damages. There is no
question that moral damages may be awarded in cases when a wrongful act or omission has caused the
complainant mental anguish, fright and serious anxiety.
Articles 2217 and 2219, in connection with Article 21 of the Civil Code, read:
Art. 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation and similar injury. Though incapable of
pecuniary computation, moral damages may be recovered if they are the proximate result of the
defendant's wrongful act for omission.
Art. 2219. Moral damages may be recovered in the following and analogous cases:
(10)
Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.
Art. 21. Any person who willfully causes loss or injury to another in a manner that is contrary to morals,
good customs or public policy shall compensate the latter for the damage.
U-BIX failed to perform its legal obligation to report to the SSS the injuries suffered by Bandiola, and,
thereafter, failed to extend the same "financial aid" it extended to other employees who were involved in
the same accident. After it was shown the receipts for the medical expenses Bandiola paid for in
connection with the injuries, U-BIX unreasonably refused to reimburse him for the expenses. It is not
difficult to accept Bandiola's claim that he suffered mental anguish, serious anxiety and fright when UBIX left him without any options for financial support while he was suffering from and rendered
incapacitated by work-related injuries. He was severely distressed by his plight that he felt that he could
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no longer continue to work for U-BIX. U-BIX's unjustified and continued refusal to reimburse Bandiola
after it failed to report his injury to the SSS, despite the receipts he presented, demonstrates bad faith. By
singling out Bandiola from its other employees, who were reimbursed for their medical expenses, and
forcing him to litigate for ten years in order to claim the unsubstantial amount of P7,742.50, U-BIX was
clearly indulging in malicious conduct.
AWARD ON MORAL DAMAGES - As regards the award of moral damages, this Court has
ruled that there is no hard and fast rule in determining the fair amount for moral damages, since each case
must be governed by its own peculiar circumstances. It should enable the injured parties to obtain means,
diversions or amusements that will serve to alleviate the moral sufferings the injured party has undergone
by reason of defendant's culpable action. In other words, the award of moral damages is aimed at a
restoration within the limits of the possible, of the spiritual and/or psychological status quo ante; and
therefore it must be proportionate to the suffering inflicted. Therefore, in light of the sufferings sustained
by Bandiola, this Court sustains the award of P25,000.00 as moral damages.
Article 2229 of the Civil Code provides that exemplary damages may be imposed by way of example or
correction for public good. It reads:
Art. 2229.
Exemplary or corrective damages are imposed, by way of example or correction for the
public good, in addition to the moral, temperate, liquidated or compensatory damages.
Exemplary damages are designed to permit the courts to mould behavior that has socially
deleterious consequences, and their imposition is required by public policy to suppress the wanton acts of
the offender.
The Labor Code provides for the medical expenses, as well as disability benefits of workers
suffering from work-related injuries and recognizes such compensation as their right. Indeed, a system
has been put in place for the prompt collection of the benefits, which are given by law to injured
employees. All that U-BIX was required to do was to report the injury; it need not have defended itself
from what it perceived to be spurious claims. Instead, it took upon itself the duty of determining the
validity of Bandiola's claims and unjustifiably refused to reimburse his properly receipted medical
expenses. The prolonged litigation of his valid claims is not the only miserable situation which the present
labor laws sought to prevent, but the pathetic situation wherein a laborer is placed at the mercy of his or
her employer for recompense that is his or hers by right. Exemplary damages are, thus, rightfully imposed
against U-BIX.

Ocean Builders Construction vs. Sps. Cubacub, G.R. No. 150898, April 13, 2011
Facts:
Bladimir Cubacub (Bladimir) was employed as maintenance man by petitioner company Ocean Builders
Construction Corp. at its office in Caloocan City.
On April 9, 1995, Bladimir was afflicted with chicken pox. He was thus advised by petitioner Dennis Hao
(Hao), the companys general manager, to rest for three days which he did at the companys "barracks"
where he lives free of charge.
Three days later or on April 12, 1995, Bladimir went about his usual chores of manning the gate of the
company premises and even cleaned the company vehicles. Later in the afternoon, however, he asked a
co-worker, Ignacio Silangga (Silangga), to accompany him to his house in Capas, Tarlac so he could rest.
Informed by Silangga of Bladimirs intention, Hao gave Bladimir P1,000.00 and ordered Silangga to
instead bring Bladimir to the nearest hospital.
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Along with co-workers Narding and Tito Vergado, Silangga thus brought Bladimir to the Caybiga
Community Hospital (Caybiga Hospital), a primary-care hospital around one kilometer away from the
office of the company.
The hospital did not allow Bladimir to leave the hospital. He was then confined, with Narding keeping
watch over him.
At about 8 oclock in the evening of the same day, April 13, 1995, Bladimirs parents-respondent spouses
Cubacub, with their friend Dr. Hermes Frias (Dr. Frias), arrived at the Caybiga Hospital and transferred
Bladimir to the Quezon City General Hospital (QCGH) where he was placed in the intensive care unit and
died the following day, April 14, 1995.
Issue: WON Hao was guilty of negligence which resulted in the deterioration of Bladimirs condition
leading to his death.

Held:
At the onset, the Court notes that the present case is one for damages based on torts, the employeremployee relationship being merely incidental. To successfully prosecute an action anchored on torts,
three elements must be present, viz: (1) duty (2) breach (3) injury and proximate causation. The assailed
decision of the appellate court held that it was the duty of petitioners to provide adequate medical
assistance to the employees under Art. 161 of the Labor Code, failing which a breach is committed.
Art. 161 of the Labor Code provides:
ART. 161. Assistance of employer. It shall be the duty of any employer to provide all the necessary
assistance to ensure the adequate and immediate medical and dental attendance and treatment to an
injured or sick employee in case of emergency. (emphasis and underscoring supplied)
The Implementing Rules of the Code do not enlighten what the phrase "adequate and immediate" medical
attendance means in relation to an "emergency." It would thus appear that the determination of what it
means is left to the employer, except when a full-time registered nurse or physician are available on-site
as required, also under the Labor Code, specifically Art. 157 which provides:
Article 157.Emergency Medical and Dental Services. It shall be the duty of every employer to furnish
his employees in any locality with free medical and dental attendance and facilities consisting of:
(a) The services of a full-time registered nurse when the number of employees exceeds fifty (50) but not
more than two hundred (200) except when the employer does not maintain hazardous workplaces, in
which case, the services of a graduate first-aider shall be provided for the protection of workers, where no
registered nurse is available. The Secretary of Labor and Employment shall provide by appropriate
regulations, the services that shall be required where the number of employees does not exceed fifty (50)
and shall determine by appropriate order, hazardous workplaces for purposes of this Article;
(b) The services of a full-time registered nurse, a part-time physician and dentist, and an emergency
clinic, when the number of employees exceeds two hundred (200) but not more than three hundred (300);
and
(c) The services of a full-time physician, dentist and a full-time registered nurse as well as a dental clinic
and an infirmary or emergency hospital with one bed capacity for every one hundred (100) employees
when the number of employees exceeds three hundred (300). (emphasis and underscoring supplied)
In the present case, there is no allegation that the company premises are hazardous. Neither is there any
allegation on the number of employees the company has. If Haos testimony 4 would be believed, the
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company had only seven regular employees and 20 contractual employees still short of the minimum
50 workers that an establishment must have for it to be required to have a full-time registered nurse.
As found by the trial court and borne by the records, petitioner Haos advice for Bladimir to, as he did,
take a 3-day rest and to later have him brought to the nearest hospital constituted "adequate and
immediate medical" attendance that he is mandated, under Art. 161, to provide to a sick employee in an
emergency.
AT ALL EVENTS, the alleged negligence of Hao cannot be considered as the proximate cause of the
death of Bladimir. Proximate cause is that which, in natural and continuous sequence, unbroken by an
efficient intervening cause, produces injury, and without which, the result would not have occurred. An
injury or damage is proximately caused by an act or failure to act, whenever it appears from the evidence
in the case that the act or omission played a substantial part in bringing about or actually causing the
injury or damage, and that the injury or damage was either a direct result or a reasonably probable
consequence of the act or omission.

190

MIGRANT WORKERS ACT & OVERSEAS FILIPINO ACT OF 1995 & RECRUITMENT AND
PLACEMENT
ISS Indochina Corp. vs. Ferrer, G.R. No. 156381, Oct. 14, 2005
Facts:
Respondents, in their complaint, alleged that petitioner hired them as construction workers for its
Taiwan-based principal/employer Formosa Plastics Corporation. Pursuant to the parties' contracts of
employment, each respondent would receive a monthly salary of NT$15,360.00. Their employment
covered a period of one (1) year or from May 1, 1997 to May 1, 1998.
On May 1, 1997, respondents, along with other Filipino contract workers, were deployed to
Taiwan. But upon their arrival, only 20 workers, excluding respondents, were employed as construction
workers at Formosa Plastics Corporation. Aggrieved, they sought assistance from Manila Economic and
Cultural Office (MECO) officials who directed them to sign separate affidavits alleging that they were
assigned, not as construction workers for Formosa Plastics Corporation, but as cable tray/pipe tract
workers at Shin Kwan Enterprise Co., Ltd.
On May 17, 1997, they were repatriated to t he Philippines. They alleged that they were forced to
resign since "they were left out from among those workers who were considered for
employment."Subsequetly, a complaint was filed by private respondents for illegal dismissal, payment of
salaries, refund of placement fee, damages and attorney's fees filed with the Office of the Labor Arbiter
against JSS Indochina Corporation, petitioner, docketed as NLRC NCR OFW Case (L) 97-05-3715.
Petitioner denied the allegations in the complaint, claiming that, assisted by MECO officials,
respondents pre-terminated their respective contracts of employment as they refused to work after being
assigned as cable tray/pipe tract workers by Formosa Plastics Corporation to 33 KV Worksite being
administered by Shin Kwan Construction Company Limited.
Issue:
Whether or not respondents were illegally dismissed from employment by petitioner.
Ruling:
We take this opportunity to stress the need for strict enforcement of the law and the rules and
regulations governing Filipino contract workers abroad. Many hapless citizens of this country who have
sought foreign employment to earn a few dollars to ensure for their families a life worthy of human
dignity and provide proper education and a decent future for their children have found themselves
enslaved by foreign masters, harassed or abused and deprived of their employment for the slightest cause.
No one should be made to unjustly profit from their suffering. Hence, recruiting agencies must not only
faithfully comply with Government-prescribed responsibilities; they must impose upon themselves the
duty, borne out of a social conscience, to help citizens of this country sent abroad to work for foreign
principals. They must keep in mind that this country is not exporting slaves but human beings, and above
all, fellow Filipinos seeking merely to improve their lives.
There is no question that petitioner violated its contract with respondents. As found by the Labor
Arbiter, the NLRC and the Appellate Court, petitioner did not assign them as construction workers for
Formosa Plastics Corporation. Instead, they were directed to work as cable tray/pipe tract workers at Shin
Kwan Enterprise Co., Ltd.
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The Labor Arbiter found that respondents' "decision to resign from their employment were made
by force of circumstances not attributable to their own fault," and "it was not their fault that they were left
out from among those workers who were considered for employment by the foreign employer." Likewise,
the NLRC held that respondents' "decision to go home to the Philippines was justified in view of the
evident breach of contract" by petitioner, as "it clearly appeared that upon their arrival at the jobsite, there
was no employer on hand." Clearly, both labor tribunals correctly concluded, as affirmed by the Court of
Appeals, that they were forced to resign and to pre-terminate their employment contracts in view of
petitioner's breach of their provisions. Undoubtedly, the termination of respondents' services is without
just or valid cause.
Section 10 of RA 8042, otherwise known as the Migrant Workers and Overseas Filipinos Act, provides:
"SECTION 10. Money Claims.
In case of termination of overseas employment without just, valid or authorized cause as defined
by law or contract, the worker shall be entitled to the full reimbursement of his placement fee with
interest at twelve percent (12%) per annum, plus his salaries for the unexpired portion of his employment
contract or for three (3) months for every year of the unexpired term, whichever is less.
Verily, as correctly held by the Court of Appeals, respondents who were unjustly dismissed from work are
actually entitled to an amount representing their three (3) months salary considering that their
employment contract has a term of exactly one (1) year; plus a full refund of their placement fee, with no
ceiling, with interest at 12% per annum.
In Olarte vs. Nayona, we ordered petitioner Olarte to pay respondent Nayona, an illegally
dismissed overseas contract worker, an amount corresponding to her 3 months salary and to reimburse her
placement fee of P23,000.00, with legal interest of 12% per annum.

People vs. Capt. Gasacao, G.R. No. 168449, Nov. 11, 2005
Facts:
Appellant was the Crewing Manager of Great Eastern Shipping Agency Inc., a licensed local
manning agency, while his nephew and co-accused, Jose Gasacao, was the President. As the crewing
manager, appellant's duties included receiving job applications, interviewing the applicants and informing
them of the agency's requirement of payment of performance or cash bond prior to deployment.
On August 4, 2000, appellant and Jose Gasacao were charged with Large Scale Illegal
Recruitment defined under Section 6, paragraphs (a), (l) and (m) of Republic Act (RA) No. 8042 or the
Migrant Workers and Overseas Filipinos Act of 1995, and penalized under Section 7 (b) of the same law,
before the RTC of Quezon City.
Only the appellant was arrested while Jose Gasacao remained at large. When arraigned, appellant
pleaded not guilty to the offense charged. Thereafter, trial on the merits ensued. On March 5, 2001, the
RTC of Quezon City, Branch 218, rendered its Joint Decision convicting appellant of Large Scale Illegal
Recruitment in Crim. Case No. Q-00-94240 and acquitting him of the charge in Crim. Case No.Q-0094241.
Conformably with our pronouncement in People v. Mateo, 6 which modified pertinent provisions
of the Rules of Court insofar as they provide for direct appeals from the RTC to the Supreme Court in
cases where the penalty imposed is death, reclusion perpetua or life imprisonment, as in this case, as well
as this Court's Resolution dated September 19, 1995, we resolved on February 2, 2005 to transfer the case
to the Court of Appeals for appropriate action and disposition.
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On May 18, 2005, the Court of Appeals promulgated the assailed Decision, the dispositive
portion of which reads:
WHEREFORE, premises considered, the present appeal is hereby DISMISSED for lack of merit. The
appealed Joint Decision dated March 5, 2001 of the trial court in Criminal Case No. Q-00-94240 is
hereby AFFIRMED and UPHELD.
Issue:
Whether or not error attended the trial court's findings, as affirmed by the Court of Appeals, that appellant
was guilty beyond reasonable doubt of the crime of large scale illegal recruitment.
Ruling:
RA No. 8042 defines illegal recruitment as follows:
II.
ILLEGAL RECRUITMENT
Sec. 6. DEFINITIONS. For purposes of this Act, illegal recruitment shall mean any act of canvassing,
enlisting, contracting, transporting, utilizing, hiring, procuring workers and includes referring, contract
services, promising or advertising for employment abroad, whether for profit or not, when undertaken by
a non-licensee or non-holder of authority contemplated under Article 13(f) of Presidential Decree No.
442, as amended, otherwise known as the Labor Code of the Philippines: Provided, that such non-licensee
or non-holder who, in any manner, offers or promises for a fee employment abroad to two or more
persons shall be deemed so engaged. It shall likewise include the following acts, whether committed by
any persons, whether a non-licensee, non-holder, licensee or holder of authority.
(a)
To charge or accept directly or indirectly any amount greater than the specified in the schedule of
allowable fees prescribed by the Secretary of Labor and Employment, or to make a worker pay any
amount greater than that actually received by him as a loan or advance;
(l)
Failure to actually deploy without valid reason as determined by the Department of Labor and
Employment; and
(m)
Failure to reimburse expenses incurred by the workers in connection with his documentation and
processing for purposes of deployment, in cases where the deployment does not actually take place
without the worker's fault. Illegal recruitment when committed by a syndicate or in large scale shall be
considered as offense involving economic sabotage.
Illegal recruitment is deemed committed by a syndicate carried out by a group of three (3) or more
persons conspiring or confederating with one another. It is deemed committed in large scale if committed
against three (3) or more persons individually or as a group.
REPUBLIC ACT NO. 8042 (THE MIGRANT WORKERS AND OVERSEAS FILIPINO ACT OF 1995);
LICENSE DIFFERENTIATED FROM AUTHORITY - A license is a document issued by the Department
of Labor and Employment (DOLE) authorizing a person or entity to operate a private employment
agency, while an authority is a document issued by the DOLE authorizing a person or association to
engage in recruitment and placement activities as a private recruitment entity. However, it appears that
even licensees or holders of authority can be held liable for illegal recruitment should they commit any of
the above-enumerated acts.
Thus, it is inconsequential that appellant committed large scale illegal recruitment while Great
Eastern Shipping Agency, Inc. was holding a valid authority. We thus find that the court below committed
no reversible error in not appreciating that the manning agency was a holder of a valid authority when
appellant recruited the private complainants.
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There is no merit in appellant's contention that he could not be held liable for illegal recruitment
since he was a mere employee of the manning agency, pursuant to Section 6 of RA No. 8042 which
provides:
The persons criminally liable for the above offenses are the principals, accomplices and accessories. In
case of juridical persons, the officers having control, management or direction of their business shall be
liable.
ILLEGAL RECRUITMENT IN LARGE SCALE, CREWING MANAGER OF A SHIPPING AGENCY
PROMISED THE COMPLAINANTS THAT THEY WILL BE DEPLOYED ABROAD AFTER THEY
HAVE PAID THE CASH BOND Contrary to appellant's claim, he is not a mere employee of the
manning agency but the crewing manager. As such, he receives job applications, interviews applicants
and informs them of the agency's requirement of payment of performance or cash bond prior to the
applicant's deployment. As the crewing manager, he was at the forefront of the company's recruitment
activities.
The testimonies of the private complainants clearly established that appellant is not a mere
employee of Great Eastern Shipping Agency Inc. As the crewing manager, it was appellant who made
representations with the private complainants that he can secure overseas employment for them upon
payment of the cash bond.
It is well settled that to prove illegal recruitment, it must be shown that appellant gave
complainants the distinct impression that he had the power or ability to send complainants abroad for
work such that the latter were convinced to part with their money in order to be employed. 10 Appellant's
act of promising the private complainants that they will be deployed abroad within three months after
they have paid the cash bond clearly shows that he is engaged in illegal recruitment.
AN EMPLOYEE OF A COMPANY OR CORPORATION ENGAGED THEREIN MAY BE HELD
LIABLE AS PRINCIPAL TOGETHER WITH HIS EMPLOYER. The trial court's appreciation of the
complainants' testimonies deserves the highest respect since it was in a better position to assess their
credibility.
Even assuming that appellant was a mere employee, such fact is not a shield against his
conviction for large scale illegal recruitment. In the case of People vs. Cabais, we have held that an
employee of a company or corporation engaged in illegal recruitment may be held liable as principal,
together with the employer, if it is shown that he actively and consciously participated in the recruitment
process.
Clearly, the acts of appellant vis--vis the private complainants, either as the crewing manager of
Great Eastern Shipping Agency Inc. or as a mere employee of the same, constitute acts of large scale
illegal recruitment which should not be countenanced.
We find no reason to deviate from the findings of the trial court that appellant is guilty beyond
reasonable doubt of large scale illegal recruitment. It was established that he promised overseas
employment to five applicants, herein private complainants. He interviewed and required them to
complete and submit documents purportedly needed for their employment. Although he informed them
that it is optional, he collected cash bonds and promised their deployment notwithstanding the
proscription against its collection under Section 60 of the Omnibus Rules and Regulations Implementing
R.A. No. 8042 13 which state that:
SEC. 60.
Prohibition on Bonds and Deposits. In no case shall an employment agency require
any bond or cash deposit from the worker to guarantee performance under the contract or his/her
repatriation.
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NOT NEGATED BY THE DEFENSE OF THE CREWING MANAGER THAT HE COLLECTED THE
BONDS OR CASH DEPOSITS IN GOOD FAITH - We find as flimsy and self serving appellant's
assertion that he was unaware of the prohibition against the collection of bonds or cash deposits from
applicants. It is an established dictum that ignorance of the law excuses no one from compliance
therewith. 14 The defense of good faith is neither available.
It is also undisputed that appellant failed to deploy the private complainants without any valid
reason, this notwithstanding his promise to them that those who can pay the cash bond will be deployed
within three months from payment of the same. Such failure to deploy constitutes a violation of Section 6
(l) of RA No. 8042. Worse, when it became clear that appellant cannot deploy the private complainants
without their fault, he failed to return the amount of the cash bond paid by them.
IMPOSABLE PENALTY - Illegal recruitment is deemed committed in large scale if committed against
three or more persons individually or as a group. In this case, five complainants testified against
appellant's acts of illegal recruitment, thereby rendering his acts tantamount to economic sabotage. Under
Section 7 (b) of RA No. 8042, the penalty of life imprisonment and a fine of not less than P500,000.00
nor more than P1,000,000.00 shall be imposed if illegal recruitment constitutes economic sabotage.
Verily, the trial court and the Court of Appeals correctly found appellant guilty beyond reasonable
of large scale illegal recruitment.

195

Acuna vs. CA, G.R. No. 159832, May 5, 2006

Facts:
Petitioners are Filipino overseas workers deployed by private respondent Join International
Corporation (JIC), a licensed recruitment agency, to its principal, 3D Pre-Color Plastic, Inc., (3D) in
Taiwan, Republic of China, under a uniformly-worded employment contract for a period of two years.
Herein private respondent Elizabeth Alaon is the president of Join International Corporation.
Sometime in September 1999, petitioners filed with private respondents applications for
employment abroad. After their papers were processed, petitioners claimed they signed a uniformlyworded employment contract with private respondents which stipulated that they were to work as
machine operators with a monthly salary of NT$15,840.00, exclusive of overtime, for a period of two
years.
On December 9, 1999, with 18 other contract workers they left for Taiwan. Upon arriving at the
job site, a factory owned by 3D, they were made to sign another contract which stated that their salary
was only NT$11,840.00. They were likewise informed that the dormitory which would serve as their
living quarters was still under construction. They were requested to temporarily bear with the
inconvenience but were assured that their dormitory would be completed in a short time.
Petitioners alleged that they were brought to a "small room with a cement floor so dirty and
smelling with foul odor". Forty women were jampacked in the room and each person was given a pillow.
Since the ladies' comfort room was out of order, they had to ask permission to use the men's comfort
room. Petitioners claim they were made to work twelve hours a day, from 8:00 p.m. to 8:00 a.m.
The petitioners averred that on December 16, 1999, due to unbearable working conditions, they
were constrained to inform management that they were leaving. They booked a flight home, at their own
expense. Before they left, they were made to sign a written waiver. In addition, petitioners were not paid
any salary for work rendered on December 11-15, 1999.
Immediately upon arrival in the Philippines, petitioners went to private respondents' office,
narrated what happened, and demanded the return of their placement fees and plane fare. Private
respondents refused.
On December 28, 1999, private respondents offered a settlement. Petitioner Mendez received P15,080.
The next day, petitioners Acua and Ramones went back and received P13,640 10 and P16,200,
respectively. They claim they signed a waiver, otherwise they would not be refunded.
On January 14, 2000, petitioners Acua and Mendez invoking Republic Act No. 8042 filed a
complaint for illegal dismissal and non-payment/underpayment of salaries or wages, overtime pay, refund
of transportation fare, payment of salaries/wages for 3 months, moral and exemplary damages, and refund
of placement fee before the National Labor Relations Commission (NLRC).
Issue:
Whether or not petitioners were illegally dismissed under Rep. Act No. 8042, thus entitling them to
benefits plus damages.
Ruling:
No illegal dismissal. As we have held previously, constructive dismissal covers the involuntary
resignation resorted to when continued employment becomes impossible, unreasonable or unlikely; when
there is a demotion in rank or a diminution in pay; or when a clear discrimination, insensibility or disdain
by an employer becomes unbearable to an employee.
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In this case, the appellate court found that petitioners did not deny that the accommodations were
not as homely as expected. In the petitioners' memorandum, they admitted that they were told by the
principal, upon their arrival, that the dormitory was still under construction and were requested to bear
with the temporary inconvenience and the dormitory would soon be finished. We likewise note that
petitioners did not refute private respondents' assertion that they had deployed approximately sixty other
workers to their principal, and to the best of their knowledge, no other worker assigned to the same
principal has resigned, much less, filed a case for illegal dismissal.
To our mind these cited circumstances do not reflect malice by private respondents nor do they
show the principal's intention to subject petitioners to unhealthy accommodations. Under these facts, we
cannot rule that there was constructive dismissal.
Overtime Pay.Private respondents also claim that petitioners were not entitled to overtime pay,
since they had offered no proof that they actually rendered overtime work. Petitioners, on the other hand,
say that they could not show any documentary proof since their employment records were all in the
custody of the principal employer. It was sufficient, they claim, that they alleged the same with
particularity.
On this matter, we rule for the petitioners. The claim for overtime pay should not have been
disallowed because of the failure of the petitioners to substantiate them. The claim of overseas workers
against foreign employers could not be subjected to same rules of evidence and procedure easily obtained
by complainants whose employers are locally based. While normally we would require the presentation
of payrolls, daily time records and similar documents before allowing claims for overtime pay, in this
case, that would be requiring the near-impossible.
It is a time-honored rule that in controversies between a worker and his employer, doubts
reasonably arising from the evidence, or in the interpretation of agreements and writing should be
resolved in the worker's favor. The policy is to extend the applicability of the decree to a greater number
of employees who can avail of the benefits under the law, which is in consonance with the avowed policy
of the State to give maximum aid and protection to labor. Accordingly, we rule that private respondents
are solidarily liable with the foreign principal for the overtime pay claims of petitioners.
Moral and exemplary damages. On the award of moral and exemplary damages, we hold that
such award lacks legal basis. Moral and exemplary damages are recoverable only where the dismissal of
an employee was attended by bad faith or fraud, or constituted an act oppressive to labor, or was done in a
manner contrary to morals, good customs or public policy. The person claiming moral damages must
prove the existence of bad faith by clear and convincing evidence, for the law always presumes good
faith. Petitioners allege they suffered humiliation, sleepless nights and mental anguish, thinking how they
would pay the money they borrowed for their placement fees. Even so, they failed to prove bad faith,
fraud or ill motive on the part of private respondents. Moral damages cannot be awarded. Without the
award of moral damages, there can be no award of exemplary damages, nor attorney's fees.
Quitclaims are valid.Quitclaims executed by the employees are commonly frowned upon as
contrary to public policy and ineffective to bar claims for the full measure of the workers' legal rights,
considering the economic disadvantage of the employee and the inevitable pressure upon him by financial
necessity. Nonetheless, the so-called "economic difficulties and financial crises" allegedly confronting the
employee is not an acceptable ground to annul the compromise agreement unless it is accompanied by a
gross disparity between the actual claim and the amount of the settlement.
A perusal of the records reveals that petitioners were not in any way deceived, coerced or
intimidated into signing a quitclaim waiver in the amounts of P13,640, P15,080 and P16,200 respectively.
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Nor was there a disparity between the amount of the quitclaim and the amount actually due the
petitioners.
According to the Bangko Sentral Treasury Department, the prevailing exchange rates on
December 1999 was NT$1 to P1.268805. Hence, after conversion to Philippine pesos, the amount of the
quitclaim paid to petitioners was actually higher than the amount due them.
May still file a complaint for illegal recruitment.The petition is DISMISSED, without prejudice to
the filing of illegal recruitment complaint against the respondents pursuant to Section 6(i) of The Migrant
Workers and Overseas Filipino Act of 1995 (Rep. Act No. 8042).

198

Asian International Manpower Services vs. CA, G.R. No. 169652, October 9, 2006
Facts:
Proxy Maid Services Centre (Proxy), a Hong Kong based recruitment agency hired her through
AIMS, a recruitment entity in the Philippines. On February 10, 2000, she signed an employment contract
to work as a domestic helper of Low See Ting who later cancelled the contract sometime in March 2000.
Nevertheless, Lacerna heeded AIMS's advice to proceed to Hong Kong on the assurance that she will be
provided with an employment abroad. Upon arrival at Proxy's office on April 1, 2000, Lacerna was
fetched by her employer, Tan Kmin Shwe Lin Charmain (Charmain). However, the latter dismissed her in
a Notification dated May 2, 2000 citing as reason the "difficulty in communication."
On May 20, 2000, Proxy transferred Lacerna to Tam Ching-yee, Donna. On June 30, 2000 she
was dismissed by Donna without stating the reason for her termination. Neither did Proxy explain why
she was dismissed. On July 1, 2000, Lacerna agreed to take a three-day trial period with another
employer, Daisy Lee. However, before she could sign her contract with the latter, the Hong Kong
government denied her request for change of employer and advised her to submit a fresh application with
her country of origin.
Following the denial of her work permit, Lacerna returned to the Philippines on July 13, 2000 but
was informed by AIMS that Daisy Lee is no longer interested in hiring her. Lacerna demanded the return
of her placement fee but was denied, hence, she filed the instant illegal dismissal case.AIMS, on the other
hand, alleged that Lacerna resigned after working for five days as a domestic helper of Low See Ting
from April 1, 2000 to April 5, 2000, as evidenced by her resignation letter. Proxy paid her wages and fare
for a return ticket to the Philippines but she refused to be repatriated. Thereafter, with the assistance of
Proxy, she was hired in the household of Charmain. Unfortunately, the latter dismissed Lacerna on the
ground of difficulty in communication. On May 8, 2000, the Hong Kong Immigration Department
granted her an extension of time to stay in Hong Kong with a warning that the same is her last chance to
stay in the country. When Lacerna requested another extension, the same was denied and she was directed
to leave Hong Kong.
In her Reply, Lacerna insisted that her first employer was Charmain because she never worked for
Low See Ting, who as early as March 2000, cancelled the contract before she flew to Hong Kong. She
added that the signature appearing in the resignation letter and receipt of payment for the period April 1 to
5, 2000 is not her handwriting.
Issues:
Was Lacerna illegally dismissed?
If yes, may AIMS be held liable for the monetary claims of Lacerna?
Ruling:
On both issues, the Court rules in the affirmative.
There is no dispute that the last employer of Lacerna was Donna and not Daisy Lee because the Hong
Kong government directed her repatriation before she could sign her contract with the latter. In dismissing
her, Donna gave no reason for her termination. Neither did Proxy explain the ground for her dismissal.
And where there is no showing of a clear, valid, and legal cause for the termination, the law considers the
matter, a case of illegal dismissal. In termination cases involving Filipino workers recruited for overseas
employment, the burden of proving just or authorized cause for termination rests with the foreign based
employer/principal and the local based entity which recruited the worker both being solidarily liable for
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liabilities arising from the illegal dismissal of the worker. In this case, the Court of Appeals correctly
declared Lacerna's termination illegal since no reason was given to justify her termination.
AIMS argued that it cannot be held liable for the monetary claims of Lacerna because its contract
was limited only to Lacerna's employment with Low See Ting. When she resigned as domestic helper of
the latter, the contract was allegedly extinguished making AIMS no longer privy to the subsequent
employment contract entered into by Proxy and Lacerna.
However, the records of the Immigration Department of Hong Kong belie the contention of AIMS
that Lacerna was employed by Low See Ting. The Immigration Department noted that the application of
Lacerna was her second request for change of employer. She filed the first application after her contract
was pre-terminated on May 4, 2000. This refers to the pre-termination by Charmain in the Notification of
Cancellation of Employment Contract dated May 2, 2000. However, the prospective employer subject of
said first application backed out, hence, Lacerna submitted a second application for change of employer
which was granted with a warning that the same will be her last chance to stay in Hong Kong. Said
second application landed her a job in the household of Donna on May 20, 2000. When the latter
dismissed Lacerna on June 30, 2000, she applied for the third time to change employer but was denied by
the Immigration Department which directed her to leave Hong Kong.
The Hong Kong Immigration Department gave Lacerna only two chances to change employer.
The subject of the first was the prospective employer who backed out, and the second was Donna. If we
follow the version of AIMS, then the sequence of her employment would have been that with: (1) Low
See Ting, (2) Charmain, (3) prospective employer who backed out, and (4) Donna.
However Lacerna's employment with Low See Ting is not supported by the records of the
Immigration Department. If Low See Ting was the first employer, then Lacerna's two chances to change
employer would have ended on her prospective employer who backed out and would not have enabled
her to work for Charmain and Donna.
Clearly, the version of AIMS does not jibe with the official records of the Hong Kong government.
Hence, between the alleged Lacerna's resignation letter to Low See Ting and the letters of the Hong Kong
Immigration Department showing that Lacerna could not have been employed by her, credence must be
given to the said official records, especially so that AIMS never assailed their authenticity.
Moreover, even granting that Lacerna truly resigned as domestic helper of Low See Ting, the liability of
AIMS was not extinguished. The contract of Lacerna as approved by the Philippine Overseas
Employment Administration (POEA) reveals that Proxy was her designated principal employer; the
agreed salary was HK$3,670.00 a month; and the contract duration was for two years. Since AIMS was
the local agency which recruited Lacerna for Proxy, it is solidarily liable with the latter for liabilities
arising from her illegal dismissal. To detach itself from the liability of Proxy, AIMS must show by clear
and convincing evidence that its contract is limited to Lacerna's employment by Low See Ting.
However, aside from its bare allegation, AIMS presented no proof to corroborate its claim. On the
contrary, it appears that in transferring Lacerna from one employer to another, Proxy did not demand a
new placement fee from Lacerna. This only shows that Proxy's conduct was in accordance with the
original contract executed with AIMS and not on an entirely new and separate agreement entered into in
Hong Kong.
This interpretation is in accord with the rule that all doubts in the construction of labor contracts should
be resolved in favor of the working class. The Constitution mandates the protection of labor and the
sympathetic concern of the State for the workers conformably to the social justice policy.
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Verily, to absolve AIMS from liability based on its unsubstantiated claim that it is not privy to the
subsequent employment provided by Proxy for Lacerna would be to undermine the avowed policy of the
State. The joint and solidary liability imposed by law against recruitment agencies and foreign employers
is meant to assure the aggrieved worker of immediate and sufficient payment of what is due him. Thus,
Section 10 of R.A. No. 8042, provides:
SEC. 10.
Money Claims.
The liability of the principal/employer and the recruitment/placement agency for any and all
claims under this section shall be joint and several. This provision shall be incorporated in the contract for
overseas employment and shall be a condition precedent for its approval. The performance bond to be
filed by the recruitment/placement agency, as provided by law, shall be answerable for all money claims
or damages that may be awarded to the workers. If the recruitment/placement agency is a juridical being,
the corporate officers and directors and partners as the case may be, shall themselves be jointly and
solidarily liable with the corporation or partnership for the aforesaid claims and damages.
Such liabilities shall continue during the entire period or duration of the employment contract and shall
not be affected by any substitution, amendment or modification made locally or in a foreign country of
the said contract.In case of termination of overseas employment without just, valid or authorized cause as
defined by law or contract, the worker shall be entitled to the full reimbursement of his placement fee
with interest at twelve percent (12%) per annum, plus his salaries for the unexpired portion of the
employment contract or for three (3) months for every year of the unexpired term, whichever is less
The illegal dismissal of Lacerna entitles her to the full reimbursement of placement fee with
interest at twelve percent (12%) per annum, plus salaries for the unexpired portion of her employment
contract or for three months for every year of the unexpired term, whichever is less. Thus, the Court of
Appeals was correct in ordering AIMS to pay HK$11,010.00 corresponding to three months of her salary
or its equivalent in the Philippine Peso at the time of payment, plus placement fee of P18,0000.00.
No moral and exemplary damages. The Court of Appeals, however, erred in awarding moral and
exemplary damages inasmuch as Lacerna failed to prove that AIMS and Proxy are guilty of bad faith.
While it is true that they were not able to justify Lacerna's dismissal, the same does not automatically
amount to bad faith. Moral and exemplary damages cannot be based solely upon the premise that the
employer dismissed the employee without cause or due process. The termination must be attended with
bad faith, or fraud, or was oppressive to labor or done in a manner contrary to morals, good customs or
public policy and that social humiliation, wounded feelings, or grave anxiety resulted therefrom.
Similarly, exemplary damages are recoverable only when the dismissal was effected in a wanton,
oppressive or malevolent manner. To merit the award of these damages, additional facts showing bad faith
are necessary but Lacerna failed to plead and prove the same in this case. Hence, the awards of moral and
exemplary damages should be deleted.
The award of attorney's fees is sustained. In actions for recovery of wages or where an employee
was forced to litigate and thus incurred expenses to protect his rights and interests, a maximum of ten
percent (10%) of the total monetary award by way of attorney's fees is justified under Article 111 of the
Labor Code, Section 8, Rule VIII, Book III of its Implementing Rules, and paragraph 7, Article 2208 of
the Civil Code. There need not be any showing that the employer acted maliciously or in bad faith when it
withheld the wages. There need only be a showing that the lawful wages were not paid accordingly and
that the employee was forced to file a case, as in the instant case.

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Sim vs. NLRC, et. al., G.R. No. 157376, October 2, 2007
Facts:
Corazon Sim (petitioner) filed a case for illegal dismissal with the Labor Arbiter, alleging that she
was initially employed by Equitable PCI-Bank (respondent) in 1990 as Italian Remittance Marketing
Consultant to the Frankfurt Representative Office. Eventually, she was promoted to Manager position,
until September 1999, when she received a letter from Remegio David the Senior Officer, European
Head of PCIBank, and Managing Director of PCIB-Europe informing her that she was being
dismissed due to loss of trust and confidence based on alleged mismanagement and misappropriation of
funds.
Respondent denied any employer-employee relationship between them, and sought the dismissal
of the complaint.On September 3, 2001, the Labor Arbiter rendered its Decision dismissing the case for
want of jurisdiction and/or lack of merit. On appeal, the National Labor Relations Commission (NLRC)
affirmed the Labor Arbiter's Decision and dismissed petitioner's appeal for lack of merit.
Without filing a motion for reconsideration with the NLRC, petitioner went to the Court of
Appeals (CA) via a petition for certiorari under Rule 65 of the Rules of Court. In a Resolution dated
October 29, 2002, the CA dismissed the petition due to petitioner's non-filing of a motion for
reconsideration with the NLRC
Issues and Rulings:
I. Whether or not labor relations system in the Philippines has extra-territorial jurisdiction.
The Court notes, however, a palpable error in the Labor Arbiter's disposition of the case, which was
affirmed by the NLRC, with regard to the issue on jurisdiction. It was wrong for the Labor Arbiter to rule
that "labor relations system in the Philippines has no extra-territorial jurisdiction."
Article 217 of the Labor Code provides for the jurisdiction of the Labor Arbiter and the National Labor
Relations Commission, viz.:
ART. 217.
Jurisdiction of Labor Arbiters and the Commission.
(a) Except as otherwise provided under this Code the Labor Arbiters shall have original and exclusive
jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the
parties for decision without extension, even in the absence of stenographic notes, 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 wage,
rates of pay, hours of work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from the employeremployee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving the
legality of strikes and lockouts; 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 of exceeding five thousand pesos (P5,000.00) regardless
of whether accompanied with a claim for reinstatement.
(b)
The commission shall have exclusive appellate jurisdiction over all cases decided by Labor
Arbiters.
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Moreover, Section 10 of Republic Act (R.A.) No. 8042, or the Migrant Workers and Overseas Filipinos
Act of 1995, provides:
SECTION 10. Money Claims. Notwithstanding any provision of law to the contrary, the Labor
Arbiters of the National Labor Relations Commission (NLRC) shall have the original and exclusive
jurisdiction to hear and decide, within ninety (90) calendar days after the filing of the complaint, the
claims arising out of an employer-employee relationship or by virtue of any law or contract involving
Filipino workers for overseas deployment including claims for actual, moral, exemplary and other forms
of damages.
Also, Section 62 of the Omnibus Rules and Regulations Implementing R.A. No. 8042 provides that the
Labor Arbiters of the NLRC shall have the original and exclusive jurisdiction to hear and decide all
claims arising out of employer-employee relationship or by virtue of any law or contract involving
Filipino workers for overseas deployment including claims for actual, moral, exemplary and other forms
of damages, subject to the rules and procedures of the NLRC.
Under these provisions, it is clear that labor arbiters have original and exclusive jurisdiction over
claims arising from employer-employee relations, including termination disputes involving all workers,
among whom are overseas Filipino workers. In Philippine National Bank v. Cabansag, the Court
pronounced: . . Whether employed locally or overseas, all Filipino workers enjoy the protective mantle of
Philippine labor and social legislation, contract stipulations to the contrary notwithstanding. This
pronouncement is in keeping with the basic public policy of the State to 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. For the State assures the basic rights of all workers to selforganization, collective bargaining, security of tenure, and just and humane conditions of work [Article 3
of the Labor Code of the Philippines; See also Section 18, Article II and Section 3, Article XIII, 1987
Constitution]. This ruling is likewise rendered imperative by Article 17 of the Civil Code which states that
laws "which have for their object public order, public policy and good customs shall not be rendered
ineffective by laws or judgments promulgated, or by determination or conventions agreed upon in a
foreign country."
In any event, since the CA did not commit any error in dismissing the petition before it for failure
to file a prior motion for reconsideration with the NLRC, and considering that the Labor Arbiter and the
NLRC's factual findings as regards the validity of petitioner's dismissal are accorded great weight and
respect and even finality when the same are supported by substantial evidence, the Court finds no
compelling reason to relax the rule on the filing of a motion for reconsideration prior to the filing of a
petition for certiorari.
II. Whether or not a prior motion for reconsideration is indispensable for the filing of a petition for
certiorari under Rule 65 of the Rules of Court with the CA.
Under Rule 65, the remedy of filing a special civil action for certiorari is available only when there is no
appeal; or any plain, speedy, and adequate remedy in the ordinary course of law. A "plain" and "adequate
remedy" is a motion for reconsideration of the assailed order or resolution, the filing of which is an
indispensable condition to the filing of a special civil action for certiorari. This is to give the lower court
the opportunity to correct itself.
There are, of course, exceptions to the foregoing rule, to wit:
a. where the order is a patent nullity, as where the court a quo has no jurisdiction;
b. where the questions raised in the certiorari proceedings have been duly raised and passed upon by
the lower court, or are the same as those raised and passed upon in the lower court;
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c. where there is an urgent necessity for the resolution of the question and any further delay would
prejudice the interests of the Government or of the petitioner or the subject matter of the action is
perishable;
d. where, under the circumstances, a motion for reconsideration would be useless;
e. where petitioner was deprived of due process and there is extreme urgency for relief;
f. where, in a criminal case, relief from an order of arrest is urgent and the granting of such relief by
the trial court is improbable;
g. where the proceedings in the lower court are a nullity for lack of due process;
h. where the proceeding was ex parte or in which the petitioner had no opportunity to object; and
i. where the issue raised is one purely of law or public interest is involved.
Petitioner, however, failed to qualify her case as among the few exceptions. In fact, the Court notes that
the petition filed before the CA failed to allege any reason why a motion for reconsideration was
dispensed with by petitioner. It was only in her motion for reconsideration of the CA's resolution of
dismissal and in the petition filed in this case that petitioner justified her non-filing of a motion for
reconsideration.
Petitioner argues that filing a motion for reconsideration with the NLRC would be merely an exercise in
futility and useless. But it is not for petitioner to determine whether it is so. As stressed in Cervantes v.
Court of Appeals:
It must be emphasized that a writ of certiorari is a prerogative writ, never demandable as a matter
of right, never issued except in the exercise of judicial discretion. Hence, he who seeks a writ of certiorari
must apply for it only in the manner and strictly in accordance with the provisions of the law and the
Rules. Petitioner may not arrogate to himself the determination of whether a motion for reconsideration is
necessary or not. To dispense with the requirement of filing a motion for reconsideration, petitioner must
show a concrete, compelling, and valid reason for doing so, which petitioner failed to do. Thus, the Court
of Appeals correctly dismissed the petition.
Petitioner also contends that the issue at bench is purely a question of law, hence, an exception to
the rule. A reading of the petition filed with the CA shows otherwise. The issues raised in this case are
mixed questions of fact and law. There is a question of fact when doubt or difference arises as to the truth
or falsehood of the alleged facts, and there is a question of law where the doubt or difference arises as to
what the law is on a certain state of facts.
Petitioner, aside from questioning the ruling of the NLRC sustaining the Labor Arbiter's view that
it does not have any jurisdiction over the case, also questions the NLRC's ruling affirming the Labor
Arbiter's conclusion that she was validly dismissed by respondent. The legality of petitioner's dismissal
hinges on the question of whether there was an employer-employee relationship, which was denied by
respondent; and, if in the affirmative, whether petitioner, indeed, committed a breach of trust and
confidence justifying her dismissal. These are mixed questions of fact and law and, as such, do not fall
within the exception from the filing of a motion for reconsideration.
Consequently, the CA was not in error when it dismissed the petition. More so since petitioner
failed to show any error on the part of the Labor Arbiter and the NLRC in ruling that she was dismissed
for cause.
The rule is that the Court is bound by the findings of facts of the Labor Arbiter or the NLRC, unless it is
shown that grave abuse of discretion or lack or excess of jurisdiction has been committed by said quasijudicial bodies. The Court will not deviate from said doctrine without any clear showing that the findings
of the Labor Arbiter, as affirmed by the NLRC, are bereft of sufficient substantiation.
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Petitioner does not deny having withdrawn the amount of P3, 000,000.00 lire from the bank's
account. What petitioner submits is that she used said amount for the Radio Pilipinas sa Roma radio
program of the company. Respondent, however, countered that at the time she withdrew said amount, the
radio program was already off the air. Respondent is a managerial employee. Thus, loss of trust and
confidence is a valid ground for her dismissal. The mere existence of a basis for believing that a
managerial employee has breached the trust of the employer would suffice for his/her dismissal.

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Bahia Shipping Services vs. Chua, G.R. No. 162195, April 8, 2008
Facts:
Private respondent Reynaldo Chua was hired by the petitioner shipping company, Bahia Shipping
Services, Inc., as a restaurant waiter on board a luxury cruise ship liner M/S Black Watch pursuant to a
Philippine Overseas Employment Administration (POEA) approved employment contract dated October
9, 1996 for a period of nine (9) months from October 18, 1996 to July 17, 1997. On October 18, 1996, the
private respondent left Manila for Heathrow, England to board the said sea vessel where he will be
assigned to work.
On February 15, 1997, the private respondent reported for his working station one and one-half (1
1/2) hours late. On February 17, 1997, the master of the vessel served to the private respondent an official
warning-termination form pertaining to the said incident. On March 8, 1997, the vessel's master, ship
captain Thor Fleten conducted an inquisitorial hearing to investigate the said incident. Thereafter, on
March 9, 1997, private respondent was dismissed from the service on the strength of an unsigned and
undated notice of dismissal. An alleged record or minutes of the said investigation was attached to the
said dismissal notice.
On March 24, 1997, the private respondent filed a complaint for illegal dismissal and other
monetary claims, which case was assigned to Labor Arbiter Manuel M. Manansala.
Issues:
1. Whether or not reporting for work one and one-half (1 1/2) hours late and abandoning his work are
valid grounds for dismissal.
2. Whether or not the Court of Appeals could grant additional affirmative relief by increasing the award
despite the fact that respondent did not appeal the decision of both the Labor Arbiter and the NLRC.
3. Whether or not respondent is entitled to overtime pay which was incorporated in his award for the
unexpired portion of the contract despite the fact that he did not render overtime work, and whether or
not, it is proper for the NLRC to award money claims despite the fact that the NLRC decision, and
affirmed by the Court of Appeals, did not state clearly the facts and the evidence upon which such
conclusions are based.
Ruling:
The findings of facts and conclusion of the NLRC are generally accorded not only great weight and
respect but even clothed with finality and deemed binding on this Court as long as they are supported by
substantial evidence.
The LA declared the dismissal of respondent illegal for the reason that the infraction he
committed of being tardy by 1 1/2 hours should not have been penalized by petitioner with the ultimate
punishment of termination; rather, the commensurate penalty for such single tardiness would have been
suspension for one or two weeks. The LA further noted that petitioner meted out on respondent the
penalty of dismissal hastily and summarily in that it merely went through the motions of notifying
respondent and hearing his side when, all along, it had already decided to dismiss him.
The NLRC sustained the foregoing findings of the LA, noting that the claim of petitioner that
respondent's tardiness was not infrequent but habitual is not supported by evidence. However, the NLRC
held that, although the penalty of dismissal on respondent was properly lifted, a penalty of deduction of
one day's salary, the same to be subtracted from his monetary award, should be imposed on the latter for
the tardiness he incurred.
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The CA held that the NLRC and LA did not commit any grave abuse of discretion in arriving at
the factual assessments which are all supported by substantial evidence. Petitioner assails the ruling of the
CA for being based on the faulty premise that respondent incurred tardiness only once when in fact he had
done so habitually. Whether respondent had been habitually tardy prior to February 15, 1997 when he
reported for work 1 1/2 hours late is purely factual in nature. As such, the Court defers to the concurrent
assessments of the LA and NLRC, as affirmed by the CA, for the evaluation of evidence and the
appreciation of the credibility of witnesses fall within their expertise.
As the Court held in Acebedo Optical v. National Labor Relations Commission:Judicial Review
of labor cases does not go beyond the evaluation of the sufficiency of the evidence upon which its labor
officials' findings rest. As such, the findings of facts and conclusion of the NLRC are generally accorded
not only great weight and respect but even clothed with finality and deemed binding on this Court as long
as they are supported by substantial evidence.
In the present case, petitioner has failed to establish a compelling reason for the Court to depart
from this rule. In fact, as pointed out by the CA, petitioner's claim that respondent's tardiness was habitual
lacks evidentiary support as "no other documents on record were attached to substantiate that the private
respondent was forewarned for the first and second time for any infraction or offense, work-related or not,
vis--vis the performance of his regular duties and functions."
Such empty claim of petitioner, therefore, cannot persuade the Court to simply disregard three
layers of thorough and in-depth assessments on the matter by the CA, NLRC and LA.
While as a general rule, a party who has not appealed is not entitled to affirmative relief other
than the ones granted in the decision of the court below, the Court of Appeals is imbued with sufficient
authority and discretion to review matters, not otherwise assigned as errors on appeal, if it finds that their
consideration is necessary in arriving at a complete and just resolution of the case or to serve the interests
of justice or to avoid dispensing piecemeal justice.
It being settled that the dismissal of respondent was illegal, it follows that the latter is entitled to
payment of his salary for the unexpired portion of his contract, as provided under Republic Act (R.A.) No.
8042, considering that his employment was pre-terminated on March 9, 1997 or four months prior to the
expiration of his employment contract on July 17, 1997.
However, the LA limited the award to an amount equivalent to respondent's salary for three
months. The NLRC affirmed said award but deducted therefrom his salary for one day as penalty for the
tardiness incurred. The CA affirmed the one-day salary deduction imposed by the NLRC but removed the
three months salary cap imposed by the LA. In effect, as this particular monetary award now stands, it
is to be computed based on the salary of respondent covering the period March 9, 1997 to July 17, 1997,
less his salary for one day.
Petitioner questions the CA for lifting the three-month salary cap, pointing out that the LA and
NLRC decisions which imposed the cap can no longer be altered as said decisions where not questioned
by respondent. Indeed, a party who has failed to appeal from a judgment is deemed to have acquiesced to
it and can no longer obtain from the appellate court any affirmative relief other that what was already
granted under said judgment. However, when strict adherence to such technical rule will impair a
substantive right, such as that of an illegally dismissed employee to monetary compensation as provided
by law, then equity dictates that the Court set aside the rule to pave the way for a full and just adjudication
of the case. As the Court held in St. Michael's Institute v. Santos:
On the matter of the award of backwages, petitioners advance the view that by awarding
backwages, the appellate court "unwittingly reversed a time-honored doctrine that a party who has not
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appealed cannot obtain from the appellate court any affirmative relief other than the ones granted in the
appealed decision."
We do not agree. The fact that the NLRC did not award backwages to the respondents or that the
respondents themselves did not appeal the NLRC decision does not bar the Court of Appeals from
awarding backwages. While as a general rule, a party who has not appealed is not entitled to affirmative
relief other than the ones granted in the decision of the court below, the Court of Appeals is imbued with
sufficient authority and discretion to review matters, not otherwise assigned as errors on appeal, if it finds
that their consideration is necessary in arriving at a complete and just resolution of the case or to serve the
interests of justice or to avoid dispensing piecemeal justice.
Article 279 of the Labor Code, as amended, mandates that an illegally dismissed employee is
entitled to the twin reliefs of (a) either reinstatement or separation pay, if reinstatement is no longer
viable, and (b) backwages. Both are distinct reliefs given to alleviate the economic damage suffered by an
illegally dismissed employee and, thus, the award of one does not bar the other. Both reliefs are rights
granted by substantive law which cannot be defeated by mere procedural lapses. Substantive rights like
the award of backwages resulting from illegal dismissal must not be prejudiced by a rigid and technical
application of the rules. The order of the Court of Appeals to award backwages being a mere legal
consequence of the finding that respondents were illegally dismissed by petitioners, there was no error in
awarding the same.
The Court has consistently applied the foregoing exception to the general rule. It does so yet
again in the present case. Salary cap applies only when the term of the overseas contract is fixed at one
year or longer.
Section 10 of R.A. No. 8042, entitles an overseas worker who has been illegally dismissed to "his salaries
for the unexpired portion of the employment contract or for three (3) months for every year of the
unexpired term, whichever is less."
The CA correctly applied the interpretation of the Court in Marsaman Manning Agency, Inc. v.
National Labor Relations Commission that the second option which imposes a three months salary cap
applies only when the term of the overseas contract is fixed at one year or longer; otherwise, the first
option applies in that the overseas worker shall be entitled payment of all his salaries for the entire
unexpired period of his contract.
In Skippers Pacific, Inc. v. Mira, wherein the overseas contract involved was only for six months,
the Court held that it is the first option provided under Section 10 of R.A. No. 8042 which is applicable in
that the overseas worker who was illegally dismissed is entitled to payment of all his salaries covering the
entire unexpired period of his contract. The CA committed no error in adhering to the prevailing
interpretation of Section 10 of R.A. No. 8042.
No guaranteed overtime for the unexpired portion of the contract.Finally, the Court comes to the
last issue on whether in the computation of the foregoing award, respondent's "guaranteed overtime" pay
amounting to US$197.00 per month should be included as part of his salary. Petitioner contends that there
is no factual or legal basis for the inclusion of said amount because, after respondent's repatriation, he
could not have rendered any overtime work.
This time, petitioner's contention is well-taken.The Court had occasion to rule on a similar issue
in Stolt-Nielsen Marine Services (Phils.), Inc. v. National Labor Relations Commission, where the NLRC
was questioned for awarding to an illegally dismissed overseas worker fixed overtime pay equivalent to
the unexpired portion of the latter's contract. In resolving the question, the Court, citing Cagampan v.
National Labor Relations Commission, held that although an overseas employment contract may
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guarantee the right to overtime pay, entitlement to such benefit must first be established, otherwise the
same cannot be allowed.
Hence, it being improbable that respondent rendered overtime work during the unexpired term of
his contract, the inclusion of his "guaranteed overtime" pay into his monthly salary as basis in the
computation of his salaries for the entire unexpired period of his contract has no factual or legal basis and
the same should have been disallowed.

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Masangkay vs. Trans-Global Maritime Agency Inc., et. al., G.R. No. 172800, October 17, 2008
Facts:
Ventnor is a foreign company based in Liberia and engaged in maritime commerce. It is represented in the
Philippines by its manning agent, and co-respondent herein, Trans-Global, a corporation organized and
existing under Philippine laws.
Petitioner Marciano Masangcay was hired by Ventnor, through its manning agent, Trans-Global, as an
oiler on M/T Eastern Jewel, an oil tanker. His employment was to run for a period of seven (7) months;
and he was to receive, inter alia, a basic monthly salary of US$445.00.
Twenty-one days later while on board M/T Eastern Jewel, Masangcay noticed a reddish discoloration of
his urine upon micturation (urination). This happened several times and later became associated with
bouts of left lower abdominal pain radiating to the loin area. Docking at the nearest port, , Masangcay
was brought to the Fujairah Hospital, Fujairah, United Arab Emirates, because of lower abdominal pain
and left loin pain of ten (10) days duration with difficulty in urinating. The attending physician at said
hospital diagnosed him to be suffering from renalfailure.L]eft nephrostomy or better removal of the right
pelvi-ureteric calculus was the recommended treatment but Masangcay refused surgical intervention and
insisted on being repatriated back to the Philippines instead.
Upon his arrival in Manila, Masangcay was immediately referred to Trans-Globals designated physician
for evaluation. In turn, she referred him to one of the urologists at the Makati Medical Center for a consult
and eventual management because his blood test results showed elevated BUN and Creatinine levels and
his urinalysis revealed an active infection. From the 21 st until the 26th of October 2002, Masangcay was
hospitalized at the MMC for the treatment of his Non-Functional Right Kidney and Left Pelvolithiasis
During one of Masangcays subsequent follow-ups his attending physician, requested a CT scan of his
upper abdomen to asses the status of his right kidney, even though the urinalysis showed no more trace of
blood. The result of the scan revealed a poorly functioning right kidney where the flow of urine is
obstructed by the presence of kidney stones. Due to the aforementioned result, the removal of the nonfunctioning right kidney was advised but Masangcay refused. He was then referred to another physician
for second opinion. Thereat, due to right ureterolithiasis, said physician confirmed the need for another
operation. The medical procedures proved successful.
Dr. dela Cruz pronounced Masangcay fit to resume work as all his laboratory examinations showed
normal results. Accordingly, Trans-Globals designated physician, Dr. Barrientos of the Associated
Medical & Clinical Services, Inc., declared Masangcay fit to go back to work after a regular medical
examination and pegged the disability period of the latter to be from 3 October 2002 until 3 February
2003. Trans-Global, in behalf of Ventnor, paid Masangcay his full 120 days Sick Leave pay as well as all
his medical and hospital expenses, professional fees of his attending physicians.
Masangcay was asked to report back to the office of Trans-Global for deployment line-up. He was also
asked to undergo medical examination in view of his impending deployment. When Masangcay reported
to the premises of Trans-Global, however, he was informed by the Port Captain that he can no longer be
deployed due to negative reports about him coming from its principal, Ventnor.
More than six months later, , however, armed with a Medical Certificate issued a cardiologist, Masangcay
instituted a complaint against Trans-Global and Ventnor, including Trans-Globals President, Michael
Estaniel, before the National Labor Relations Commission for the payment of disability benefit, damages
and attorneys fees. Masangcay is claiming disability benefit under Section 20(b), paragraph 5 of the
Philippine Overseas Employment Administration (POEA) Revised Standard Terms and Conditions
Governing the Employment of Filipino Seafarers on Board Ocean-Going Vessels, as amended by
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Memorandum Circular No. 55, Series of 1996, which is deemed integrated in every contract of
employment of Filipino seafarers on ocean-going vessels. Masangcay alleged that his illness was
contracted during the term of his Contract of Employment. He likewise prayed for moral and exemplary
damages in view of the respondents supposed deliberate and wanton refusal to pay his claims.
Issue: WON Masangcay is entitled to disability benefits on account of his present condition.
Ruling:
SC ruled in the negative.
As with all other kinds of worker, the terms and conditions of a seafarers employment is governed by the
provisions of the contract he signs at the time he is hired. But unlike that of others, deemed written in the
seafarers contract is a set of standard provisions set and implemented by the POEA, called the Standard
Terms and Conditions Governing the Employment of Filipino Seafarers on Board Ocean-Going Vessels,
which are considered to be the minimum requirements acceptable to the government for the employment
of Filipino seafarers on board foreign ocean-going vessels. The issue of whether Masangcay can legally
demand and claim disability benefits from Trans-Global and Ventnor for an illness that became apparent
during his contract of employment with the shipping company, is governed by the provisions of the
POEA Standard Terms and Conditions Governing the Employment of Filipino Seafarers on Board OceanGoing Vessels; hence, it is said standard terms and conditions which are relevant and need to be construed
in the present case. Considering that Masangcay was employed on 3 September 2002, it is the 2000
POEA Amended Standard Terms and Conditions Governing the Employment of Filipino Seafarers on
Board Ocean-Going Vessels that is considered appended in his contract of employment and is controlling
for purposes of resolving the issue at hand and not the 1996 POEA Revised Amended Standard Terms and
Conditions Governing the Employment of Filipino Seafarers on Board Ocean-Going Vessels as alluded to
by Masangcay.
Taking into consideration the arguments of the parties, the contract provisions, as well as the law and
jurisprudence on the matter, we rule in favor of Trans-Global and Ventnor.
Under Sec. 20(b), paragraph 6, of the 2000 POEA Amended Standard Terms and Conditions Governing
the Employment of Filipino Seafarers on Board Ocean-Going Vessels, viz:
SECTION 20. COMPENSATION AND BENEFITS
B.
COMPENSATION AND BENEFITS FOR INJURY OR ILLNESS
The liabilities of the employer when the seafarer suffers work-related injury or illness during the term
of his contract are as follows:
xxxx
6.
In case of permanent total or partial disability of the seafarer caused by either injury or
illness the seafarer shall be compensated in accordance with the schedule of benefits enumerated in
Section 32 of this Contract. Computation of his benefits arising from an illness or disease shall be
governed by the rates and the rules of compensation applicable at the time the illness or disease was
contracted. [Emphasis supplied.]
Evident from the afore-quoted provision is that the permanent total or partial disability suffered by a
seafarer during the term of his contract must be caused by work-related illness or injury. In other words,
to be entitled to compensation and benefits under said provision, it is not sufficient to establish that the
seafarers illness or injury has rendered him permanently or partially disabled, but it must also be shown
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that there is a causal connection between the seafarers illness or injury and the work for which he had
been contracted for.
Accordingly, in order to hold Trans-Global and Ventnor liable for payment of his claims under Sec. 20(b),
paragraph 6, of the 2000 POEA Amended Standard Terms and Conditions Governing the Employment of
Filipino Seafarers on Board Ocean-Going Vessels, Masangcay must prove that he is suffering from
permanent total or partial disability due to a work-related illness occurring during the term of his contract.
Proof that he not only acquired or contracted his illness during the term of his employment contract is
clearly not enough; Masangcay must also present evidence that such infirmity was work-related, or at the
very least aggravated by the conditions of the work for which he was contracted for.
In the case of Rio v. Employees Compensation Commission, this Court had the occasion to state that a
claimant must submit such proof as would constitute a reasonable basis for concluding either that the
conditions of employment of the claimant caused the ailment or that such working conditions had
aggravated the risk of contracting that ailment. What kind and quantum of evidence would constitute an
adequate basis for a reasonable man (not necessarily a medical scientist) to reach one or the other
conclusion, can obviously be determined only on a case-to-case basis. That evidence must, however, be
real and substantial, and not merely apparent; for the duty to prove work-causation or work-aggravation
imposed by existing law is real x x x not merely apparent.
The burden is clearly upon Masangcay to present substantial evidence, or such relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion, showing a reasonable connection that
the nature of his employment or working conditions between the conditions of his work and his illness,
i.e., renal failure, uremia and/or nephrolithiasis; or that the risk of contracting the same was increased by
his working conditions. This, he did not do. If truth be told, Masangcay does not even assert that his
illness is work-related and/or was, at the minimum, aggravated by his working conditions at the M/T
Eastern Jewel.
There is no substantiation that the progression of his ailment was brought about largely by the conditions
of his job as an oiler. His medical history and/or records prior to his deployment as an oiler in M/T
Eastern Jewel were neither presented nor alluded to in order to demonstrate that the working conditions
on board said vessel increased the risk of contracting renal failure, chronic or otherwise.
To demonstrate just how bare the records are with respect to the illness with which Masangcay is
allegedly afflicted, we cannot even make a definitive statement whether he had merely been afflicted with
renal stones, or he is suffering from the more serious disease of chronic renal failure. The two physicians
who issued their respective medical certificates have conflicting findings.
But even assuming that Masangcay is suffering from chronic renal failure, it still does not entitle him to
compensation and benefits for a permanent disability.
It is of no moment that Masangcay passed his pre-employment medical examination. It is probable that
the pre-employment medical examination conducted on him could not have divulged his illness for which
he had been brought to the Fujairah Hospital in the United Arab Emirates, considering the fact that most,
if not all, of such medical examinations are not so exploratory. The decrease of GFR, which is an
indicator of chronic renal failure, is measured thru the renal function test. In pre-employment
examination, the urine analysis (urinalysis), which is normally included, measures only the creatinine, the
presence of which cannot conclusively indicate chronic renal failure.
Moreover, chronic renal failure, is neither listed as a disability under Sec. 32 of the 2000 POEA Amended
Standard Terms and Conditions Governing the Employment of Filipino Seafarers on Board Ocean-Going
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Vessels; nor an occupational disease under Sec. 32-A thereof, which provides for the schedule of disability
or impediment for injuries suffered and diseases including occupational diseases or illness.
Under Sec. 32 of the POEA Amended Standard Terms and Conditions, it is the loss of a kidney, i.e., its
removal, that is compensated, and not merely the presence and subsequent removal of kidney stones.
And under Sec. 32-A of the same, Masangcays illness cannot also be classified as an occupational
disease. A compensable occupational disease must satisfy several conditions, to wit:
SECTION 32-A. OCCUPATIONAL DISEASES
For an occupational disease and the resulting disability or death to be compensable, all of the
following conditions must be satisfied:
(1)
The seafarers work must involve the risks described herein;
(2)
The disease was contracted as a result of the seafarers exposure to the described risks;
(3)
The disease was contracted within a period of exposure and under such other factors necessary to
contract it;
(4)
There was no notorious negligence on the part of the seafarer.
But other than Masangcays bare avowal of entitlement just because an illness became manifest during
his contract of employment, there is nothing on record to substantiate the same and would have justified
an award of compensation on top of the aid or assistance already extended to him by Trans-Global and
Ventnor.
Masangcay asserts that by virtue of our pronouncement in Crystal Shipping, Inc. v. Natividad that [i]n
disability compensation, it is not the injury which is compensated, but rather it is the incapacity to work
resulting in the impairment of ones earning capacity, he is entitled to disability benefits under his
contract of employment.
We are not persuaded. Masangcay cannot invoke a single line declared by this Court in another case
under a totally different factual c The Court notes that any dispute as to Masangcays state of health or the
exact nature of the illness from which he is suffering could have easily been resolved had the parties
stayed true to the provisions of Sec. 20(b), paragraph 3 of the 2000 POEA Amended Standard Terms and
Conditions, which declares that:
SECTION 20. COMPENSATION AND BENEFITS
B.
COMPENSATION AND BENEFITS FOR INJURY OR ILLNESS
The liabilities of the employer when the seafarer suffers work-related injury or illness during the term
of his contract are as follows:
xxxx
3.
Upon sign-off from the vessel for medical treatment , the seafarer is entitled to sickness
allowance x x x until he is declared fit to work or the degree of permanent disability has been assessed by
the company-designated physician x x x
xxxx
If a doctor appointed by the seafarer disagrees with the assessment, a third doctor may be agreed jointly
between the Employer and the seafarer. The third doctors decision shall be final and binding on both
parties.
Without the opinion of a third doctor, we are constrained to make a ruling based on the evidences
submitted by the parties and made part of the records of this case, which included the medical
certifications of their respective physicians.
All told, except for the bare assertion that he is no longer fit to work due to the illness that became
manifest during his contract of employment with Trans-Global and Ventnor, Masangcay makes no
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allegation, much less presents no proof, that the illness was caused or aggravated by his employment. The
evidence on record is totally bare of essential facts on how he contracted or developed such disease and
on how and why his working conditions increased the risk of contracting the same. Consequently, the
labor arbiter and the NLRC had no basis at all to rule that Masangcay is deserving of other disability
benefits espoused by Sec. 20(b), paragraph 6 of the 2000 POEA Amended Standard Terms and Conditions
other than that already extended to him by Trans-Global and Ventnor.

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Magsaysay Maritime Corp., et. al. vs. Velasquez, et. al., G.R. No. 179802, Nov. 14, 2008
Facts:
Velasquez was hired by petitioner Magsaysay Maritime Corporation as second cook for its foreign
principal, co-petitioner ODF Jell ASA. The parties had a considerably long employment history covered
by about ten (10) employment contracts wherein petitioners engaged respondents services on board
vessels owned by ODF Jell ASA. On July 28, 2003, while on duty as second cook on board the vessel
M/T Bow Favour, respondent suffered high fever and was unable to work. He took fever relieving
medicine but his condition worsened. By the fourth day, his body temperature reached 40.9C. His
extremities were swollen and he could not walk. He also had edema in the abdominal area. Respondent
was brought to a hospital in Singapore where he was confined from August 12 to October 13, 2003.
Thereafter, he was repatriated to the Philippines.
On October 13, 2003, he was immediately referred to a company designated physician for further medical
care and treatment; that the initial impression was Systemic Staphylococcal Infections; Resolving; that he
was under the care of said physician for three (3) months during which he underwent extensive
medications and treatment; that he was admitted and confined at St. Lukes Medical Center from October
13, 2003 to November 11, 2003; that progress reports on his recovery have been issued; that by January 5,
2004, respondent was declared as cleared to work resumption as seafarer; and that petitioners were the
ones who shouldered respondents hospitalization expenses.
However, On November 13, 2003, he consulted a certain Dr. Efren Vicaldo (Dr. Vicaldo) who diagnosed
him to be suffering from staphylococcal bacteremia, multiple metastatic abcesses, pleural effusion and
hypertension and declared his disability as Impediment Grade 1 (120%). Dr. Vicaldo further concluded
that respondent was unfit to resume work as seaman in any capacity. Hence, respondent filed a claim
for disability benefits, illness allowance/ reimbursement of medical expenses, damages and attorneys
fees but petitioners refused to pay.
Issue: Whether or not the findings of the company-designated physician prevails over the findings of
respondents private physician.
Ruling:
Company-designated physician prevails:
The POEA Contract is clear in its provisions when it provided who should determine the disability
grading or fitness to work of seafarers. The POEA contract recognizes only the disability grading
provided by the company-designated physicians. Section 20 B.3 of the POEA contract provides:
3. Upon sign-off from the vessel for medical treatment, the seafarer is entitled to sickness allowance
equivalent to his basic wage until he is declared fit to work or the degree of permanent disability has been
assessed by the company-designated physician but in no case shall exceed one hundred twenty (120)
days.
xxx
For this purpose the seafarer shall submit himself to a post-employment medical examination by a
company designated physician within three working days upon his return except when he is physically
incapacitated to do so, in which case, a written notice to the agency within the same period is deemed as
compliance. Failure of the seafarer to comply with the mandatory reporting requirement shall resort in
his forfeiture of the right to claim the above benefits.
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These provisions clearly illustrate that respondents disability can only be assessed by the
company-designated physician. If the company-designated physician declares him fit to work, then the
seaman is bound by such declaration.
Under the Standard Terms and Conditions Governing the Employment of Filipino Seafarers On-Board
Ocean-Going Vessel or the POEA Contract issued pursuant to DOLE Department Order No. 4 and POEA
Memorandum Circular No. 9, both Series of 2000, respondent could not disregard the findings of the
company-designated physician. Section 20-B, paragraph 3 of the POEA Contract provides:
3. xxx
If a doctor appointed by the seafarer disagrees with the assessment, a third doctor may be agreed jointly
between the employer and the seafarer. The third doctors decision shall be final and binding on both
parties.
It is beyond cavil that it is the company-designated physician who is entrusted with the task of assessing
the seamans disability. But under the aforecited provision, when the seamans private physician
disagrees with the assessment of the company-designated physician, as here, a third doctors opinion may
be availed of in determining his disability. This however was not resorted to by the parties. As such, the
credibility of the findings of their respective doctors was properly evaluated by the NLRC.
The Court has applied the Labor Code concept of permanent total disability to the case of seafarers. In a
catena of cases, the Court declared that disability should not be understood more on its medical
significance but on the loss of earning capacity. Permanent total disability means disablement of an
employee to earn wages in the same kind of work, or work of similar nature that he was trained for or
accustomed to perform, or any kind of work which a person of his mentality and attainment could do. In
addition, the Court in GSIS v. Cadiz and Ijares v. CA held that permanent disability is the inability of a
worker to perform his job for more than 120 days, regardless of whether or not he loses the use of any
part of his body.

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Serrano vs. Gallant Maritime Services, et. al. vs. Spouses Cuaresma, G.R. Nos. 182978-79 &
184298-99, April 7, 2009
Facts:
For Antonio Serrano (petitioner), a Filipino seafarer, the last clause in the 5th paragraph of Section 10,
Republic Act (R.A.) No. 8042, to wit:
Sec. 10.Money Claims. - x x x In case of termination of overseas employment without just, valid or
authorized cause as defined by law or contract, the workers shall be entitled to the full reimbursement of
his placement fee with interest of twelve percent (12%) per annum, plus his salaries for the unexpired
portion of his employment contract or for three (3) months for every year of the unexpired term,
whichever is less.
Petitioner claims that the last clause violates the OFWs' constitutional rights in that it impairs the terms of
their contract, deprives them of equal protection and denies them due process.
Petitioner was hired by respondents under a Philippine Overseas Employment Administration (POEA)approved Contract of Employment.
Petitioner was constrained to accept a downgraded employment contract for the position upon the
assurance and representation of respondents that he would be made Chief Officer by the end of April
1998. Respondents did not deliver on their promise to make petitioner Chief Officer. Hence, petitioner
refused to stay on as Second Officer and was repatriated to the Philippines.
Petitioner's employment contract was for a period of 12 months but at the time of his repatriation on May
26, 1998, he had served only two (2) months and seven (7) days of his contract, leaving an unexpired
portion of nine (9) months and twenty-three (23) days.
Petitioner filed with the Labor Arbiter (LA) a Complaint against respondents for constructive dismissal
and for payment of his money claims as well as moral and exemplary damages and attorney's fees.
In awarding petitioner a lump-sum salary of US$8,770.00, the LA based his computation on the salary
period of three months only -- rather than the entire unexpired portion of nine months and 23 days
of petitioner's employment contract - applying the subject clause.
Issues:
1. Is the granting unto the migrant worker back wages equal to the unexpired portion of his contract
of employment instead of limiting it to three (3) months proper?
2. Even without considering the constitutional limitations [of] Sec. 10 of Republic Act No. 8042,
whether the Court of Appeals gravely erred in law in excluding from petitioners award the
overtime pay and vacation pay provided in his contract since under the contract they form part
of his salary.
Ruling:
1. The subject clause being unconstitutional,petitioner is entitled to his salaries for the entire
unexpired period of nine months and 23 days of his employment contract, pursuant to law
and jurisprudence prior to the enactment of R.A. No. 8042
The unanimous finding of the LA, NLRC and CA that the dismissal of petitioner was illegal is not
disputed. What remains disputed is only the computation of the lump-sum salary to be awarded to
petitioner by reason of his illegal dismissal.
When the Court is called upon to exercise its power of judicial review of the acts of its co-equals, such as
the Congress, it does so only when these conditions obtain:
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(1) that there is an actual case or controversy involving a conflict of rights susceptible of judicial
determination;
(2) that the constitutional question is raised by a proper party and at the earliest opportunity; and
(3) thatthe constitutional question is the very lis mota of the case, otherwise the Court will dismiss the
case or decide the same on some other ground.
The issue is deemed seasonably raised because it is not the NLRC but the CA which has the
competence to resolve the constitutional issue. The NLRC is a labor tribunal that merely performs a
quasi-judicial function its function in the present case is limited to determining questions of fact to
which the legislative policy of R.A. No. 8042 is to be applied and to resolving such questions in
accordance with the standards laid down by the law itself; thus, its foremost function is to administer and
enforce R.A. No. 8042, and not to inquire into the validity of its provisions. The CA, on the other hand, is
vested with the power of judicial review or the power to declare unconstitutional a law or a provision
thereof, such as the subject clause,Petitioner's interposition of the constitutional issue before the CA was
undoubtedly seasonable.
The third condition that the constitutional issue be critical to the resolution of the case likewise obtains
because the monetary claim of petitioner to his lump-sum salary for the entire unexpired portion of his
12-month employment contract, and not just for a period of three months, strikes at the very core of the
subject clause.
Thus, the stage is all set for the determination of the constitutionality of the subject clause.
Does the subject clause violate Section 10, Article III of the Constitution on non-impairment of
contracts?
The answer is in the negative.
Section 10, Article III of the Constitution provides:No law impairing the obligation of contracts shall be
passed.
The prohibition is aligned with the general principle that laws newly enacted have only a prospective
operation, and cannot affect acts or contracts already perfected; however, as to laws already in existence,
their provisions are read into contracts and deemed a part thereof. Thus, the non-impairment clause
under Section 10, Article II is limited in application to laws about to be enacted that would in any way
derogate from existing acts or contracts by enlarging, abridging or in any manner changing the intention
of the parties thereto.
Does the subject clause violate Section 1, Article III of the Constitution, and Section 18, Article II and
Section 3, Article XIII on labor as a protected sector?
The answer is in the affirmative.
Section 1, Article III of the Constitution guarantees:
No person shall be deprived of life, liberty, or property without due process of law nor shall any person be
denied the equal protection of the law.
Section 18, Article II and Section 3, Article XIII accord all members of the labor sector, without
distinction as to place of deployment, full protection of their rights and welfare.
To Filipino workers, the rights guaranteed under the foregoing constitutional provisions translate to
economic security and parity: all monetary benefits should be equally enjoyed by workers of similar
category, while all monetary obligations should be borne by them in equal degree; none should be denied
the protection of the laws which is enjoyed by, or spared the burden imposed on, others in like
circumstances.
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Such rights are not absolute but subject to the inherent power of Congress to incorporate, when it sees fit,
a system of classification into its legislation; however, to be valid, the classification must comply with
these requirements: 1) it is based on substantial distinctions; 2) it is germane to the purposes of the law;
3) it is not limited to existing conditions only; and 4) it applies equally to all members of the class.
There are three levels of scrutiny at which the Court reviews the constitutionality of a classification
embodied in a law: a) the deferential or rational basis scrutiny in which the challenged classification
needs only be shown to be rationally related to serving a legitimate state interest; b) the middle-tier or
intermediate scrutiny in which the government must show that the challenged classification serves an
important state interest and that the classification is at least substantially related to serving that interest;
and c) strict judicial scrutiny in which a legislative classification which impermissibly interferes with the
exercise of a fundamental right or operates to the peculiar disadvantage of a suspect class is presumed
unconstitutional, and the burden is upon the government to prove that the classification is necessary to
achieve a compelling state interest and that it is the least restrictive means to protect such interest.
Congress retains its wide discretion in providing for a valid classification, and its policies should be
accorded recognition and respect by the courts of justice except when they run afoul of the Constitution.
The deference stops where the classification violates a fundamental right, or prejudices persons
accorded special protection by the Constitution. When these violations arise, this Court must discharge
its primary role as the vanguard of constitutional guaranties, and require a stricter and more exacting
adherence to constitutional limitations. Rational basis should not suffice.
Further, the quest for a better and more "equal" world calls for the use of equal protection as a tool of
effective judicial intervention.
Equality is one ideal which cries out for bold attention and action in the Constitution. The Preamble
proclaims "equality" as an ideal precisely in protest against crushing inequities in Philippine society. The
command to promote social justice in Article II, Section 10, in "all phases of national development,"
further explicitated in Article XIII, are clear commands to the State to take affirmative action in the
direction of greater equality. x x x [T]here is thus in the Philippine Constitution no lack of doctrinal
support for a more vigorous state effort towards achieving a reasonable measure of equality.
Under most circumstances, the Court will exercise judicial restraint in deciding questions of
constitutionality, recognizing the broad discretion given to Congress in exercising its legislative power.
Judicial scrutiny would be based on the "rational basis" test, and the legislative discretion would be
given deferential treatment.
But if the challenge to the statute is premised on the denial of a fundamental right, or the perpetuation of
prejudice against persons favored by the Constitution with special protection, judicial scrutiny
ought to be more strict. A weak and watered down view would call for the abdication of this Courts
solemn duty to strike down any law repugnant to the Constitution and the rights it enshrines. This is true
whether the actor committing the unconstitutional act is a private person or the government itself or one
of its instrumentalities. Oppressive acts will be struck down regardless of the character or nature of the
actor.
In the case at bar, the challenged proviso operates on the basis of the salary grade or officer-employee
status. It is akin to a distinction based on economic class and status, with the higher grades as recipients
of a benefit specifically withheld from the lower grades. This is in accord with the policy of the
Constitution "to free the people from poverty, provide adequate social services, extend to them a decent
standard of living, and improve the quality of life for all." Any act of Congress that runs counter to this
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constitutional desideratum deserves strict scrutiny by this Court before it can pass muster. (Emphasis
supplied)
Imbued with the same sense of "obligation to afford protection to labor," the Court in the present case
also employs the standard of strict judicial scrutiny, for it perceives in the subject clause a suspect
classification prejudicial to OFWs.
Upon cursory reading, the subject clause appears facially neutral, for it applies to all OFWs.
However, a closer examination reveals that the subject clause has a discriminatory intent against, and an
invidious impact on, OFWs at two levels:
First, OFWs with employment contracts of less than one year vis--vis OFWs with employment contracts
of one year or more;
Second, among OFWs with employment contracts of more than one year; and
Third, OFWs vis--vis local workers with fixed-period employment;
OFWs with employment contracts of less than one year vis--vis OFWs with employment contracts
of one year or more
As pointed out by petitioner, it was in Marsaman Manning Agency, Inc. v. National Labor Relations
Commission (Second Division, 1999) that the Court laid down the following rules on the application of
the periods prescribed under Section 10(5) of R.A. No. 804, to wit:
A plain reading of Sec. 10 clearly reveals that the choice of which amount to award an illegally
dismissed overseas contract worker, i.e., whether his salaries for the unexpired portion of his
employment contract or three (3) months salary for every year of the unexpired term, whichever is
less, comes into play only when the employment contract concerned has a term of at least one (1) year
or more.This is evident from the words "for every year of the unexpired term" which follows the words
"salaries x x x for three months." To follow petitioners thinking that private respondent is entitled to
three (3) months salary only simply because it is the lesser amount is to completely disregard and
overlook some words used in the statute while giving effect to some. This is contrary to the wellestablished rule in legal hermeneutics that in interpreting a statute, care should be taken that every part or
word thereof be given effect since the law-making body is presumed to know the meaning of the words
employed in the statue and to have used them advisedly. Ut res magis valeat quam pereat. (Emphasis
supplied)
Under Section 10 of R.A. No. 8042, a worker dismissed from overseas employment without just,
valid or authorized causeis entitled to his salary for the unexpired portion of his employment
contract or for three (3) months for every year of the unexpired term, whichever is less.
In the case at bar, the unexpired portion of private respondents employment contract is eight (8)
months. Private respondent should therefore be paid his basic salary corresponding to three (3)
months .
It is plain that prior to R.A. No. 8042, all OFWs, regardless of contract periods or the unexpired portions
thereof, were treated alike in terms of the computation of their monetary benefits in case of illegal
dismissal. Their claims were subjected to a uniform rule of computation: their basic salaries multiplied
by the entire unexpired portion of their employment contracts.
The Court notes that the subject clause "or for three (3) months for every year of the unexpired term,
whichever is less" contains the qualifying phrases "every year" and "unexpired term." By its ordinary
meaning, the word "term" means a limited or definite extent of time. Corollarily, that "every year" is but
part of an "unexpired term" is significant in many ways: first, the unexpired term must be at least one
year, for if it were any shorter, there would be no occasion for such unexpired term to be measured by
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every year; and second, the original term must be more than one year, for otherwise, whatever would be
the unexpired term thereof will not reach even a year. Consequently, the more decisive factor in the
determination of when the subject clause "for three (3) months for every year of the unexpired term,
whichever is less" shall apply is not the length of the original contract period as held in Marsaman, but
the length of the unexpired portion of the contract period -- the subject clause applies in cases when the
unexpired portion of the contract period is at least one year, which arithmetically requires that the original
contract period be more than one year.
Viewed in that light, the subject clause creates a sub-layer of discrimination among OFWs whose contract
periods are for more than one year: those who are illegally dismissed with less than one year left in their
contracts shall be entitled to their salaries for the entire unexpired portion thereof, while those who are
illegally dismissed with one year or more remaining in their contracts shall be covered by the subject
clause, and their monetary benefits limited to their salaries for three months only.
There is a more specific rule as far as seafarers are concerned: Article 605 of the Code of Commerce
which provides:
Article 605. If the contracts of the captain and members of the crew with the agent should be for a definite
period or voyage, they cannot be discharged until the fulfillment of their contracts, except for reasons of
insubordination in serious matters, robbery, theft, habitual drunkenness, and damage caused to the vessel
or to its cargo by malice or manifest or proven negligence.
Article 605 was applied to Madrigal Shipping Company, Inc. v. Ogilvie, in
Which the Court held the shipping company liable for the salaries and subsistence allowance of its
illegally dismissed employees for the entire unexpired portion of their employment contracts.
While Article 605 has remained good law up to the present, Article 299 of the Code of Commerce was
replaced by Art. 1586 of the Civil Code of 1889, to wit:
Article 1586. Field hands, mechanics, artisans, and other laborers hired for a certain time and for a certain
work cannot leave or be dismissed without sufficient cause, before the fulfillment of the contract.
(Emphasis supplied.)
In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term employment who were illegally
discharged were treated alike in terms of the computation of their money claims: they were uniformly
entitled to their salaries for the entire unexpired portions of their contracts. But with the enactment of
R.A. No. 8042, specifically the adoption of the subject clause, illegally dismissed OFWs with an
unexpired portion of one year or more in their employment contract have since been differently treated in
that their money claims are subject to a 3-month cap, whereas no such limitation is imposed on local
workers with fixed-term employment.
The Court concludes that the subject clause contains a suspect classification in that, in the
computation of the monetary benefits of fixed-term employees who are illegally discharged, it imposes
a 3-month cap on the claim of OFWs with an unexpired portion of one year or more in their contracts,
but none on the claims of other OFWs or local workers with fixed-term employment. The subject
clause singles out one classification of OFWs and burdens it with a peculiar disadvantage.
There being a suspect classification involving a vulnerable sector protected by the Constitution, the Court
now subjects the classification to a strict judicial scrutiny, and determines whether it serves a compelling
state interest through the least restrictive means.
What constitutes compelling state interest is measured by the scale of rights and powers arrayed in the
Constitution and calibrated by history. It is akin to the paramount interest of the statefor which some
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individual liberties must give way, such as the public interest in safeguarding health or maintaining
medical standards, or in maintaining access to information on matters of public concern.
In the present case, the Court dug deep into the records but found no compelling state interest that the
subject clause may possibly serve.
On the other hand, Senate Bill No. 2077 (SB 2077) contains a provision on money claims, to wit:
Sec. 10.Money Claims. - Notwithstanding any provision of law to the contrary, the Labor Arbiters of the
National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear
and decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out of an
employer-employee relationship or by virtue of the complaint, the claim arising out of an employeremployee relationship or by virtue of any law or contract involving Filipino workers for overseas
employment including claims for actual, moral, exemplary and other forms of damages.
The liability of the principal and the recruitment/placement agency or any and all claims under this
Section shall be joint and several.
In fine, the Government has failed to discharge its burden of proving the existence of a compelling state
interest that would justify the perpetuation of the discrimination against OFWs under the subject clause.
Moreover, even if the purpose of the subject clause is to lessen the solidary liability of placement agencies
vis-a-vis their foreign principals, there are mechanisms already in place that can be employed to achieve
that purpose without infringing on the constitutional rights of OFWs.
Thus, the subject clause in the 5th paragraph of Section 10 of R.A. No. 8042 is violative of the right
of petitioner and other OFWs to equal protection.
Further, there would be certain misgivings if one is to approach the declaration of the unconstitutionality
of the subject clause from the lone perspective that the clause directly violates state policy on labor under
Section 3, Article XIII of the Constitution.
While all the provisions of the 1987 Constitution are presumed self-executing, there are some which this
Court has declared not judicially enforceable, Article XIII being one, particularly Section 3 thereof, the
nature of which, this Court, in Agabon v. National Labor Relations Commission has described to be not
self-actuating:
Thus, the constitutional mandates of protection to labor and security of tenure may be deemed as
self-executing in the sense that these are automatically acknowledged and observed without need for
any enabling legislation. However, to declare that the constitutional provisions are enough to guarantee
the full exercise of the rights embodied therein, and the realization of ideals therein expressed, would be
impractical, if not unrealistic. The espousal of such view presents the dangerous tendency of being
overbroad and exaggerated. The guarantees of "full protection to labor" and "security of tenure", when
examined in isolation, are facially unqualified, and the broadest interpretation possible suggests a blanket
shield in favor of labor against any form of removal regardless of circumstance. This interpretation
implies an unimpeachable right to continued employment-a utopian notion, doubtless-but still hardly
within the contemplation of the framers. Subsequent legislation is still needed to define the parameters
of these guaranteed rights to ensure the protection and promotion, not only the rights of the labor
sector, but of the employers' as well. Without specific and pertinent legislation, judicial bodies will
be at a loss, formulating their own conclusion to approximate at least the aims of the Constitution.
Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a source of a positive enforceable
right to stave off the dismissal of an employee for just cause owing to the failure to serve proper notice or
hearing. As manifested by several framers of the 1987 Constitution, the provisions on social justice
require legislative enactments for their enforceability. (Emphasis added)
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2. Petitioner contends that his overtime and leave pay should form part of the salary basis in
the computation of his monetary award, because these are fixed benefits that have been
stipulated into his contract.
Petitioner is mistaken.
The word salaries in Section 10(5) does not include overtime and leave pay. For seafarers like petitioner,
DOLE Department Order No. 33, series 1996, provides a Standard Employment Contract of Seafarers, in
which salary is understood as the basic wage, exclusive of overtime, leave pay and other bonuses;
whereas overtime pay is compensation for all work "performed" in excess of the regular eight
hours, and holiday pay is compensation for any work "performed" on designated rest days and
holidays.
By the foregoing definition alone, there is no basis for the automatic inclusion of overtime and holiday
pay in the computation of petitioner's monetary award, unless there is evidence that he performed work
during those periods. As the Court held in Centennial Transmarine, Inc. v. Dela Cruz,
However, the payment of overtime pay and leave pay should be disallowed in light of our ruling in
Cagampan v. National Labor Relations Commission, to wit:
The rendition of overtime work and the submission of sufficient proof that said was actually performed
are conditions to be satisfied before a seaman could be entitled to overtime pay which should be
computed on the basis of 30% of the basic monthly salary. In short, the contract provision guarantees the
right to overtime pay but the entitlement to such benefit must first be established.
In the same vein, the claim for the day's leave pay for the unexpired portion of the contract is unwarranted
since the same is given during the actual service of the seamen.

223

People vs. Domingo, G.R. No. 181475, April 7, 2009

Facts:
Appellant Larry Domingo was accused of the crime of illegal recruitment, defined and penalized under
the provisions of Article 38 in relation to Articles 34 and 39 of the Labor Code of the Philippines, as
amended by presidential Decree Nos. 1920 and 2018 and for 23 counts of Estafa. The offense involved
economic sabotage, as it was committed in large scale.
Of the 23 complainants, only five testified, namely: Rogelio Cambay, Florentino Ondra, Dionisio
Aguilar, Ma. Leah Vivas, and Simeon Cabigao. The substance of their respective testimonies includes the
payment of a sum of money as a condition for employment abroad but the same never took place.
Private complainant Cabigao later recanted this testimony, per his affidavit dated March 3, 2003.
Testifying anew, this time for the defense, he averred that the one who actually recruited him and his cocomplainants and received their money was Danilo Gimeno (Gimeno), and that they only agreed among
themselves to file a case against appellant because Gimeno was nowhere to be found.
Appellant, denying all the accusations against him, claimed as follows: He was a driver hired by the real
recruiter, Gimeno, whom he met inside the Victory Liner Bus bound for Manila in September, 2000. It
was Gimeno who undertakes recruitment activities in Dakila, Malolos, Bulacan at the residence of Eddie
Simbayan, and that the other cases for illegal recruitment filed against him before other courts have all
been dismissed.
Appellant likewise presented as witnesses private complainants Enrico Espiritu and Roberto Castillo who
corroborated his claim that it was Gimeno who actually recruited them, and that the filing of the
complaint against appellant was a desperate attempt on their part to get even because Gimeno could not
be located.
By Joint Decision dated October 19, 2004, the trial court found appellant guilty beyond reasonable doubt
of Illegal Recruitment (Large Scale) and of 2 counts of Estafa.
The appellate court affirmed the trial courts decision.
Issues:
Appellant raised the following issues:
1. The trial court erred in finding him guilty beyond reasonable doubt as there were no receipts to
show that he actually received money from the private complainants; and
2. The trial court failed to give weight to Cabigaos retraction.
Ruling:
The appeal is bereft of merit.
The term recruitment and placement is defined under Article 13(b) of the Labor Code of the Philippines
as follows:
(b)
Recruitment and placement refers to any act of canvassing, enlisting, contracting,
transporting, utilizing, hiring, or procuring workers, and includes referrals, contract services,
promising or advertising for employment, locally or abroad, whether for profit or not. Provided,
That any person or entity which, in any manner, offers or promises for a fee employment to two or more
persons shall be deemed engaged in recruitment and placement. (Emphasis supplied)
On the other hand, Article 38, paragraph (a) of the Labor Code, as amended, under which the accused
stands charged, provides:
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Art. 38. Illegal Recruitment. - (a) Any recruitment activities, including the prohibited practices
enumerated under Article 34 of this Code, to be undertaken by non-licensees or non-holders of
authority shall be deemed illegal and punishable under Article 39 of this Code. The Ministry of
Labor and Employment or any law enforcement officer may initiate complaints under this Article.
(b) Illegal recruitment when committed by a syndicate or in large scale shall be considered an offense
involving economic sabotage and shall be penalized in accordance with Article 39 hereof.
Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3) or more
persons conspiring and/or confederating with one another in carrying out any unlawful or illegal
transaction, enterprise or scheme defined under the first paragraph hereof. Illegal recruitment is deemed
committed in large scale if committed against three (3) or more persons individually or as a group .
(Emphasis supplied)
From the foregoing provisions, it is clear that any recruitment activities to be undertaken by non-licensee
or non-holder of authority shall be deemed illegal and punishable under Article 39 of the Labor Code of
the Philippines. Illegal recruitment is deemed committed in large scale if committed against three (3) or
more persons individually or as a group.
To prove illegal recruitment in large scale, the prosecution must prove three essential elements, to wit: (1)
the person charged undertook a recruitment activity under Article 13(b) or any prohibited practice under
Article 34 of the Labor Code; (2) he/she did not have the license or the authority to lawfully engage in the
recruitment and placement of workers; and (3) he/she committed the prohibited practice against three or
more persons individually or as a group.
The Court finds that the prosecution ably discharged its onus of proving the guilt beyond reasonable
doubt of appellant of the crimes charged.
That no receipt or document in which appellant acknowledged receipt of money for the promised jobs
was adduced in evidence does not free him of liability. For even if at the time appellant was promising
employment no cash was given to him, he is still considered as having been engaged in recruitment
activities, since Article 13(b) of the Labor Code states that the act of recruitment may be for profit or
not. It suffices that appellant promised or offered employment for a fee to the complaining witnesses to
warrant his conviction for illegal recruitment.
That one of the original complaining witnesses, Cabigao, later recanted, via an affidavit and his testimony
in open court, does not necessarily cancel an earlier declaration. Like any other testimony, the same is
subject to the test of credibility and should be received with caution. For a testimony solemnly given in
court should not be set aside lightly, least of all by a mere affidavit executed after the lapse of
considerable time. In the case at bar, the Affidavit of Recantation was executed three years after the
complaint was filed. It is thus not unreasonable to consider his retraction an afterthought to deny its
probative value.AT ALL EVENTS, and even with Cabigaos recantation, the Court finds that the
prosecution evidence consisting of the testimonies of the four other complainants, whose credibility has
not been impaired, has not been overcome.
As to the conviction of appellant for two counts of estafa, it is well established that a person may be
charged and convicted of both illegal recruitment and estafa.

225

ATCI Overseas Corp., et. al. vs. Echin, G.R. No. 178551, Oct. 11, 2010
Facts:
Josefina Echin (respondent) was hired by petitioner ATCI Overseas Corporation in behalf of its principalco-petitioner, the Ministry of Public Health of Kuwait (the Ministry), for the position of medical
technologist under a two-year contract, denominated as a Memorandum of Agreement (MOA), with a
monthly salary of US$1,200.00.
Under the MOA, all newly-hired employees undergo a probationary period of one (1) year and are
covered by Kuwaits Civil Service Board Employment Contract No. 2.
Respondent was deployed on February 17, 2000 but was terminated from employment on February 11,
2001, she not having allegedly passed the probationary period.
As the Ministry denied respondents request for reconsideration, she returned to the Philippines on March
17, 2001, shouldering her own air fare.
On July 27, 2001, respondent filed with the National Labor Relations Commission (NLRC) a
complaint[2] for illegal dismissal against petitioner ATCI as the local recruitment agency, represented by
petitioner, Amalia Ikdal (Ikdal), and the Ministry, as the foreign principal.
Issue WON petitioner is liable.
Held:
Petitioner ATCI, as a private recruitment agency, cannot evade responsibility for the money claims of
Overseas Filipino workers (OFWs) which it deploys abroad by the mere expediency of claiming that its
foreign principal is a government agency clothed with immunity from suit, or that such foreign principals
liability must first be established before it, as agent, can be held jointly and solidarily liable.
In providing for the joint and solidary liability of private recruitment agencies with their foreign
principals, Republic Act No. 8042 precisely affords the OFWs with a recourse and assures them of
immediate and sufficient payment of what is due them.
The imposition of joint and solidary liability is in line with the policy of the state to protect and alleviate
the plight of the working class. [9] Verily, to allow petitioners to simply invoke the immunity from suit of
its foreign principal or to wait for the judicial determination of the foreign principals liability before
petitioner can be held liable renders the law on joint and solidary liability inutile.
As to petitioners contentions that Philippine labor laws on probationary employment are not applicable
since it was expressly provided in respondents employment contract, which she voluntarily entered into,
that the terms of her engagement shall be governed by prevailing Kuwaiti Civil Service Laws and
Regulations as in fact POEA Rules accord respect to such rules, customs and practices of the host country,
the same was not substantiated.
It is hornbook principle, however, that the party invoking the application of a foreign law has the
burden of proving the law, under the doctrine of processual presumption which, in this case, petitioners
failed to discharge.
The Philippines does not take judicial notice of foreign laws, hence, they must not only be
alleged; they must be proven. To prove a foreign law, the party invoking it must present a copy thereof
and comply with Sections 24 and 25 of Rule 132 of the Revised Rules of Court which reads:
SEC. 24. Proof of official record. The record of public documents referred to in paragraph (a) of
Section 19, when admissible for any purpose, may be evidenced by an official publication thereof or by a
copy attested by the officer having the legal custody of the record, or by his deputy, and accompanied, if
226

the record is not kept in the Philippines, with a certificate that such officer has the custody. If the office in
which the record is kept is in a foreign country, the certificate may be made by a secretary of the
embassy or legation, consul general, consul, vice consul, or consular agent or by any officer in the
foreign service of the Philippines stationed in the foreign country in which the record is kept, and
authenticated by the seal of his office. (emphasis supplied)
SEC. 25. What attestation of copy must state. Whenever a copy of a document or record is attested for
the purpose of the evidence, the attestation must state, in substance, that the copy is a correct copy of the
original, or a specific part thereof, as the case may be. The attestation must be under the official seal of
the attesting officer, if there be any, or if he be the clerk of a court having a seal, under the seal of such
court.
Instead of submitting a copy of the pertinent Kuwaiti labor laws duly authenticated and
translated by Embassy officials thereat, as required under the Rules, what petitioners submitted
were mere certifications attesting only to the correctness of the translations of the MOA and the
termination letter which does not prove at all that Kuwaiti civil service laws differ from Philippine
laws and that under such Kuwaiti laws, respondent was validly terminated.
Respecting Ikdals joint and solidary liability as a corporate officer, the same is in order too following the
express provision of R.A. 8042 on money claims, viz:
SEC. 10. Money Claims.Notwithstanding any provision of law to the contrary, the Labor Arbiters of the
National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear
and decide, within ninety (90) calendar days after the filing of the complaint, the claims arising out of an
employer-employee relationship or by virtue of any law or contract involving Filipino workers for
overseas deployment including claims for actual moral, exemplary and other forms of damages.
The liability of the principal/employer and the recruitment/placement agency for any and all claims under
this section shall be joint and several. This provision shall be incorporated in the contract for overseas
employment and shall be a condition precedent for its approval. The performance bond to be filed by the
recruitment/placement agency, as provided by law, shall be answerable for all money claims or damages
that may be awarded to the workers. If the recruitment/placement agency is a juridical being, the
corporate officers and directors and partners as the case may be, shall themselves be jointly and
solidarily liable with the corporation or partnership for the aforesaid claims and damages.
(emphasis and underscoring supplied)

Colegio del Santisimo Rosario vs. Rojo

227

Facts: Petitioner hired respondent as a high school teacher on probationary basis. After working for 3
years with petitioners, respondent was informed that his services will not be renewed. Petitioner then filed
case for illegal dismissal.
Labor Arbiter, NLRC, and CA ruled for the respondent citing that respondent has attained regular
employment status for having serve 3 consecutive school years that is allowed for probationary
employment under the 1970 Manual of Regulations for Private Schools.
Hence, the petition.
Held: The SC sustained the CA ruling. The manual provides that full-time teachers become regular or
permanent employees once they have satisfactorily completed the probationary period of three
years.Since the petitioner failed to produce respondent's unsatisfactory performance evaluation, it can be
presumed that his performance was satisfactory especially with his achievements made during his 3-year
employment with petitioner.
JOCELYN HERRERAMANAOIS v. ST. SCHOLASTICAS COLLEGE
FACTS:
St. Scholasticas College (SSC), situated in the City of Manila, is a private educational institution offering
elementary, secondary, and tertiary education. Manaois graduated from SSC in October 1992 with a
degree in Bachelor of Arts in English. In 1994, she returned to her alma mater as a parttime English
teacher. After taking a leave of absence for one year, she was again rehired by SSC for the same position.
Four years into the service, she was later on recommended by her Department Chairperson to become a
fulltime faculty member of the English Department.
Manaois thus applied for a position as fulltime instructor for school year 20002001. She mentioned in
her application letter that she had been taking the course Master of Arts in English Studies, Major in
Creative Writing, at the University of the Philippines, Diliman (UP); that she was completing her masters
thesis; and that her oral defense was scheduled for June 2000. In a reply letter 4 dated 17 April 2000, the
Dean of Arts and Sciences informed her of the SSC Administrative Councils approval of her application.
She was then advised to maintain the good performance that she had shown for the past years and to
submit the necessary papers pertaining to her masters degree. Accordingly, SSC hired her as a
probationary fulltime faculty member with the assigned rank of instructor for the school year 2000
2001.5 Her probationary employment continued for a total of three consecutive years. Throughout her
service as a probationary fulltime faculty member with no derogatory record, she was given above
satisfactory ratings by both the Department Chairperson and the Dean of Arts and Sciences.
Because of the forthcoming completion of her third year of probationary employment, Manaois wrote the
Dean of Arts and Sciences requesting an extension of her teaching load for the school year 20032004.
She again mentioned in her letter that she was a candidate for a masters degree in English Studies; that
the schedule of her oral defense may actually materialize anytime within the first academic semester of
2003; and that she intended to fully earn her degree that year. She also furnished the school with a
Certification from UP, stating that she had already finished her coursework in her masters studies.
Furthermore, she indicated that it was her longterm goal to apply for a return to fulltime faculty status
by then and for SSC to consider the aforesaid matters.
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Manaois eventually received a letter from the Dean of College and Chairperson of the Promotions and
Permanency Board officially informing her of the boards decision not to renew her contract.
Manaois sought clarification and reconsideration of the decision of SSC to terminate her services. SSC
denied her request in a letter dated 11 July 2003. Consequently, she filed a complaint for illegal dismissal,
payment of 13th month pay, damages, and attorneys fees against SSC.SSC explained that upon
consideration of the written application of Manaois, the Dean of Arts and Sciences wrote the following
notation at the bottom of her letter of application APPROVED: on the basis that she finishes her
MA. The college clarified that the application for fulltime faculty status of Manaois was accepted with
the specific qualification that she would submit the necessary papers pertaining to her masters degree. It
stressed that permanency may only be extended to fulltime faculty members if they had fulfilled the
criteria provided in the SSC Faculty Manual. According to SSC, the Chair of the English Department did
not endorse the application for permanency of Manaois, since the latter had not finished her masters
degree within the threeyear probationary period. SSC then refuted the supposed performance ratings of
Manaois and instead pointed out that she had merely received an average rating from her students.
Finally, it asserted that her specialization was the subject of writing and not English Literature, which was
the subject area that they needed a faculty member for.
The labor arbiter rendered a Decision finding the dismissal of petitioner to be illegal. In addressing the
issues, he first noted the two reasons given by SSC for not renewing the contract of Manaois: (1) the
failure of petitioner to finish her masters degree within the threeyear probationary period; and (2) SSCs
inability to maximize petitioners specialization due to curriculum changes and streamlining.
The National Labor Relations Commission (NLRC) issued a Resolution upholding the labor arbiters
Decision. The NLRC reiterated the labor arbiters finding that the failure of petitioner to finish her
masters degree within the threeyear probationary period was not a valid ground for the termination of
employment, as the condition was not made known to her at the time of engagement.
The CA issued the presently assailed Decision reversing the NLRC judgment on the ground of grave
abuse of discretion and thus dismissing the complaint of Manaois. According to the appellate court, it was
compelled to conduct its independent evaluation of the facts of the case, since the factual findings of the
labor arbiter and the NLRC were contrary to the evidence on record. It also ruled that various pieces of
evidence showed that Manaois had been, at the time of engagement, aware and knowledgeable that
possession of a masters degree was a criterion for permanency as a fulltime faculty member at SSC.
ISSUE:
Whether the completion of a masters degree is required in order for a tertiary level educator to earn the
status of permanency in a private educational institution.
RULING:
Yes, a masters degree is required in order for a tertiary level educator to earn the status of permanency in
a private educational institution.
The Supreme Court stated that it is settled jurisprudence that the probationer can only qualify upon
fulfillment of the reasonable standards set for permanent employment as a member of the teaching
personnel. In line with academic freedom and constitutional autonomy, an institution of higher learning
has the discretion and prerogative to impose standards on its teachers and determine whether these have
been met. Upon conclusion of the probation period, the college or university, being the employer, has the
sole prerogative to make a decision on whether or not to rehire the probationer. The probationer cannot
automatically assert the acquisition of security of tenure and force the employer to renew the employment
229

contract. In the case at bar, Manaois failed to comply with the stated academic qualifications required for
the position of a permanent fulltime faculty member.
SSC Faculty Manual in turn provides for the following conditions in order for a faculty member to
acquire permanent employment status:
B. PERMANENCY
1 Prior to the end of the probationary period, the faculty member formally applies for permanency
to her/his Department Chair/Coordinator. The Department Chair/Coordinator, in consultation with
the faculty member, reviews the applicants overall performance. If the records show that the
criteria for permanency are met, the applicant is recommended for permanency to the Promotions
and Permanency Board by the Department Chair/Coordinator. In certain instances (i.e., when the
Department Chair/Coordinator does not give a recommendation for permanency), the Academic
Dean
can
exercise
her
prerogative
to
recommend
the
applicant.
CRITERIA FOR PERMANENCY
1 The faculty member must have completed at least a masters degree.
Notwithstanding the existence of the SSC Faculty Manual, Manaois still cannot legally acquire a
permanent status of employment. Private educational institutions must still supplementarily refer to the
prevailing standards, qualifications, and conditions set by the appropriate government agencies (presently
the Department of Education, the Commission on Higher Education, and the Technical Education and
Skills Development Authority). This limitation on the right of private schools, colleges, and universities
to select and determine the employment status of their academic personnel has been imposed by the state
in view of the public interest nature of educational institutions, so as to ensure the quality and competency
of our schools and educators.
The applicable guidebook at the time petitioner was engaged as a probationary fulltime instructor for the
school year 2000 to 2003 is the 1992 Manual of Regulations for Private Schools (1992 Manual). 21 It
provides the following conditions of a probationary employment:chanRobles
Section 44. Minimum Faculty Qualifications. The minimum qualifications for faculty for the different
grades and levels of instruction duly supported by appropriate credentials on file in the school shall be as follows:
c.Tertiary
(1) For undergraduate courses, other than vocational:
a
Holder of a masters degree, to teach largely in his major field; or, for professional courses, holder
of the appropriate professional license required for at least a bachelors degree. Any deviation from
this requirement will be subject to regulation by the Department. Awlibra
Section 45. Fulltime and Parttime Faculty. As a general rule, all private schools shall employ fulltime academic
personnel
consistent
with
the
levels
of
instruction.

Fulltime academic personnel are those meeting all the following requirements:
Who possess at least the minimum academic qualifications prescribed by the Department under
this Manual for all academic personnel;
Thus, pursuant to the 1992 Manual, private educational institutions in the tertiary level may extend full
time faculty status only to those who possess, inter alia, a masters degree in the field of study that will
be taught. This minimum requirement is neither subject to the prerogative of the school nor to the
agreement between the parties. For all intents and purposes, this qualification must be deemed impliedly
written in the employment contracts between private educational institutions and prospective faculty
a

230

members. The issue of whether probationers were informed of this academic requirement before they
were engaged as probationary employees is thus no longer material, as those who are seeking to be
educators are presumed to know these mandated qualifications. Thus, all those who fail to meet the
criteria under the 1992 Manual cannot legally attain the status of permanent fulltime faculty members,
even if they have completed three years of satisfactory service.

Becmen Service Exporter and Promotion Inc., vs Spouses Cuaresma

FACTS:
On January 6, 1997, Jasmin Cuaresma (Jasmin) was deployed by Becmen Service Exporter and
Promotion, Inc. (Becmen) to serve as assistant nurse in Al-Birk Hospital in the Kingdom of Saudi Arabia
(KSA), for a contract duration of three years, with a corresponding salary of US$247.00 per month. Over
a year later, she died allegedly of poisoning. Jessie Fajardo, a co-worker of Jasmin, narrated that on June
21, 1998, Jasmin was found dead by a female cleaner lying on the floor inside her dormitory room with
her mouth foaming and smelling of poison.
Based on the police report and the medical report of the examining physician of the Al-Birk Hospital,
who conducted an autopsy of Jasmins body, the likely cause of her death was poisoning.
Jasmins body was repatriated to Manila on September 3, 1998. The following day, the City Health
Officer of Cabanatuan City conducted an autopsy and the resulting medical report indicated that Jasmin
died under violent circumstances, and not poisoning as originally found by the KSA examining physician.
The toxicology report of the NBI, however, tested negative for non-volatile, metallic poison and
insecticides.
Simplicio and Mila Cuaresma (the Cuaresmas), Jasmins parents and her surviving heirs, received from
the Overseas Workers Welfare Administration (OWWA) the following amounts: P50,000.00 for death
benefits; P50,000.00 for loss of life; P20,000.00 for funeral expenses; and P10,000.00 for medical
reimbursement.
On November 22, 1999, the Cuaresmas filed a complaint against Becmen and its principal in the KSA,
Rajab & Silsilah Company (Rajab), claiming death and insurance benefits, as well as moral and
exemplary damages for Jasmins death, Jasmins death was work-related, having occurred at the
employers premises; that under Jasmins contract with Becmen, she is entitled to iqama insurance
coverage; that Jasmin is entitled to compensatory damages in the amount of US$103,740.00, which is the
sum total of her monthly salary of US$247.00 per month under her employment contract, multiplied by
35 years (or the remaining years of her productive life had death not supervened at age 25, assuming that
she lived and would have retired at age 60).
In their position paper, Becmen and Rajab insist that Jasmin committed suicide, citing a prior
unsuccessful suicide attempt sometime in March or April 1998 and relying on the medical report of the
examining physician of the Al-Birk Hospital. They likewise deny liability because the Cuaresmas already
recovered death and other benefits totaling P130,000.00 from the OWWA. They insist that the Cuaresmas
231

are not entitled to iqama insurance because this refers to the issuance not insurance of iqama, or
residency/work permit required in the KSA. On the issue of moral and exemplary damages, they claim
that the Cuaresmas are not entitled to the same because they have not acted with fraud, nor have they
been in bad faith in handling Jasmins case.
While the case was pending, Becmen filed a manifestation and motion for substitution alleging that Rajab
terminated their agency relationship and had appointed White Falcon Services, Inc. (White Falcon) as its
new recruitment agent in the Philippines. Thus, White Falcon was impleaded as respondent as well, and it
adopted and reiterated Becmens arguments in the position paper it subsequently filed.
ISSUES:
(1.) whether the Cuaresmas are entitled to monetary claims, by way of benefits and damages, for the
death of their daughter Jasmin.
(2) whether or not Jasmins death be considered as work-connected and thus compensable even while she
was not on duty;
HELD:
Article 19 of the Civil Code provides that every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and observe honesty and good faith.
Article 21 of the Code states that any person who wilfully causes loss or injury to another in a manner
that is contrary to morals, good customs or public policy shall compensate the latter for the damage. And,
lastly, Article 24 requires that in all contractual, property or other relations, when one of the parties is at a
disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or
other handicap, the courts must be vigilant for his protection.
Clearly, Rajab, Becmen and White Falcons acts and omissions are against public policy because they
undermine and subvert the interest and general welfare of our OFWs abroad, who are entitled to full
protection under the law. They set an awful example of how foreign employers and recruitment agencies
should treat and act with respect to their distressed employees and workers abroad. Their shabby and
callous treatment of Jasmins case; their uncaring attitude; their unjustified failure and refusal to assist in
the determination of the true circumstances surrounding her mysterious death, and instead finding
satisfaction in the unreasonable insistence that she committed suicide just so they can conveniently avoid
pecuniary liability; placing their own corporate interests above of the welfare of their employees all
these are contrary to morals, good customs and public policy, and constitute taking advantage of the poor
employee and her familys ignorance, helplessness, indigence and lack of power and resources to seek the
truth and obtain justice for the death of a loved one.
Giving in handily to the idea that Jasmin committed suicide, and adamantly insisting on it just to protect
Rajab and Becmens material interest despite evidence to the contrary is against the moral law and
runs contrary to the good custom of not denouncing ones fellowmen for alleged grave wrongdoings that
undermine their good name and honor.
Whether employed locally or overseas, all Filipino workers enjoy the protective mantle of Philippine
labor and social legislation, contract stipulations to the contrary notwithstanding. This pronouncement is
in keeping with the basic public policy of the State to afford protection to labor, promote full
employment, ensure equal work opportunities regardless of sex, race or creed, and regulate the relations
232

between workers and employers. This ruling is likewise rendered imperative by Article 17 of the Civil
Code which states that laws which have for their object public order, public policy and good customs
shall not be rendered ineffective by laws or judgments promulgated, or by determinations or conventions
agreed upon in a foreign country.
The relations between capital and labor are so impressed with public interest,and neither shall act
oppressively against the other, or impair the interest or convenience of the public. In case of doubt, all
labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the
laborer.
The grant of moral damages to the employee by reason of misconduct on the part of the employer is
sanctioned by Article 2219 (10) of the Civil Code, which allows recovery of such damages in actions
referred to in Article 21.
Thus, in view of the foregoing, the Court holds that the Cuaresmas are entitled to moral damages, which
Becmen and White Falcon are jointly and solidarily liable to pay, together with exemplary damages for
wanton and oppressive behavior, and by way of example for the public good.
On the second issue:
While the employers premises may be defined very broadly not only to include premises owned by it,
but also premises it leases, hires, supplies or uses, we are not prepared to rule that the dormitory wherein
Jasmin stayed should constitute employers premises as would allow a finding that death or injury therein
is considered to have been incurred or sustained in the course of or arose out of her employment. There
are certainly exceptions, but they do not appear to apply here. Moreover, a complete determination would
have to depend on the unique circumstances obtaining and the overall factual environment of the case,
which are here lacking.
WHEREFORE, Rajab & Silsilah Company, White Falcon Services, Inc., Becmen Service Exporter and
Promotion, Inc., and their corporate directors and officers are found jointly and solidarily liable and
ORDERED to indemnify the heirs of Jasmin Cuaresma, spouses Simplicio and Mila Cuaresma, the
following amounts: (1) TWO MILLION FIVE HUNDRED THOUSAND PESOS (P2,500,000.00) as
moral damages; (2) TWO MILLION FIVE HUNDRED THOUSAND PESOS (P2,500,000.00) as
exemplary damages; (3)Attorneys fees equivalent to ten percent (10%) of the total monetary award.

Claudio S. Yap vsThenamaris Ships Management and Intermare Maritime Agencies, Inc.
FACTS:
Claudio S. Yap was employed as electrician of the vessel, M/T SEASCOUT on 14 August 2001 by
Intermare Maritime Agencies, Inc. in behalf of its principal, Vulture Shipping Limited. The contract of
employment entered into by Yap and Capt. Francisco B. Adviento, the General Manager of Intermare,
was for a duration of 12 months. On 23 August 2001, Yap boarded M/T SEASCOUT and commenced his
job as electrician. However, on or about 08 November 2001, the vessel was sold. The Philippine Overseas
Employment Administration (POEA) was informed about the sale on 06 December 2001 in a letter signed
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by Capt. Adviento. Yap, along with the other crewmembers, was informed by the Master of their vessel
that the same was sold and will be scrapped. They were also informed about the
Advisory sent by Capt. Constatinou, which states, among others:
". . . PLEASE ASK YR OFFICERS AND RATINGS IF THEY WISH TO BE TRANSFERRED TO
OTHER VESSELS AFTER VESSEL S DELIVERY (GREEK VIA ATHENS-PHILIPINOS VIA
MANILA. . . . . . FOR CREW NOT WISH TRANSFER TO DECLARE THEIR PROSPECTED TIME
FOR REEMBARKATION IN ORDER TO SCHEDULE THEM ACCLY. . ."
Yap received his seniority bonus, vacation bonus, extra bonus along with the scrapping bonus. However,
with respect to the payment of his wage, he refused to accept the payment of one-month basic wage. He
insisted that he was entitled to the payment of the unexpired portion of his contract since he was illegally
dismissed from employment. He alleged that he opted for immediate transfer but none was made.
Respondents, for their part, contended that Yap was not illegally dismissed. They alleged that following
the sale of the M/T SEASCOUT, Yap signed off from the vessel on 10 November 2001 and was paid his
wages corresponding to the months he worked or until 10 November 2001 plus his seniority bonus,
vacation bonus and extra bonus. They further alleged that Yap's employment contract was validly
terminated due to the sale of the vessel and no arrangement was made for Yap's transfer to Thenamaris'
other vessels. Thus, Claudio S. Yap filed a complaint for Illegal Dismissal with Damages and Attorney's
Fees before the Labor Arbiter.
Petitioner claimed that he was entitled to the salaries corresponding to the unexpired portion of his
contract. Subsequently, he filed an amended complaint, impleading Captain Francisco Adviento of
respondents Intermare Maritime Agencies, Inc. and Thenamaris Ship's Management, together with C.J.
Martionos, Interseas Trading and Financing Corporation, and Vulture Shipping Limited/Stejo Shipping
Limited. On July 26, 2004, the LA rendered a decisionin favor of petitioner, finding the latter to have
been constructively and illegally dismissed by respondents. Moreover, the LA found that respondents
acted in bad faith when they assured petitioner of reembarkation and required him to produce an
electrician certificate during the period of his contract, but actually he was not able to board one despite
of respondents' numerous vessels. Petitioner made several follow-ups for his re-embarkation but
respondents failed to heed his plea; thus, petitioner was forced to litigate in order to vindicate his rights.
Lastly, the LA opined that since the unexpired portion of petitioner's contract was less than one year,
petitioner was entitled to his salaries for the unexpired portion of his contract for a period of nine months.
Aggrieved, respondents sought recourse from the NLRC.In its decisiondated January 14, 2005, the NLRC
affirmed the LA's findings thatpetitioner was indeed constructively and illegally dismissed; that
respondents' badfaith was evident on their willful failure to transfer petitioner to another vessel; andthat
the award of attorney's fees was warranted. However, the NLRC held thatinstead of an award of salaries
corresponding to nine months, petitioner was onlyentitled to salaries for three months as provided under
Section 10 of Republic Act(R.A.) No. 8042, as enunciated in our ruling in Marsaman Manning Agency,
Inc. v.National Labor Relations Commission. Respondents filed a Motion for Partial Reconsideration,
praying for the reversaland setting aside of the NLRC decision, and that a new one be rendered
dismissing the complaint. Petitioner, on the other hand, filed his own Motion for
PartialReconsideration,praying that he be paid the nine (9)-month basic salary, asawarded by the LA.On
April 20, 2005, a resolution was rendered by the NLRC, affirming the findingsof Illegal Dismissal and
respondents' failure to transfer petitioner to another vessel.However, finding merit in petitioner's
arguments, the NLRC reversed its earlier Decision, holding that "there can be no choice to grant only
three (3) months salaryfor every year of the unexpired term because there is no full year of unexpired
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termwhich this can be applied. Respondents filed a Motion for Reconsideration, which the NLRC denied.
Undaunted, respondents filed a petition for certiorari under Rule 65 of the Rules of Civil Procedure before
the CA. On February 28, 2007, the CA affirmed the findings and ruling of the LA and the NLRC that
petitioner was constructively and illegally dismissed. The CA held that respondents failed to show that the
NLRC acted without statutory authority and that its findings were not supported by law, jurisprudence,
and evidence on record. Likewise, the CA affirmed the lower agencies' findings that the advisory of
Captain Constantinou, taken together with the other documents and additional requirements imposed on
petitioner, only meant that the latter should have been re-embarked. In the same token, the CA upheld the
lower agencies' unanimous finding of bad faith, warranting the imposition of moral and exemplary
damages and attorney's fees. However, the CA ruled that the NLRC erred in sustaining the LA's
interpretation of Section 10 of R.A. No. 8042. In this regard, the CA relied on the clause "or for three
months for every year of the unexpired term, whichever is less" provided in the 5th paragraph of Section
10 of R.A. No. 8042 and held: In the present case, the employment contract concerned has a term of one
year or 12 months which commenced on August 14, 2001. However, it was preterminated without a valid
cause. Petitioner was paid his wages for the corresponding months he worked until the 10th of November.
Pursuant to the provisions of Sec. 10, [R.A. No.] 8042, therefore, the option of "three months for every
year of the unexpired term" is applicable. Both parties filed their respective motions for reconsideration,
which the CA, however, denied in its Resolution dated August 30, 2007. Unyielding, petitioner filed this
petition.
ISSUE:
Whether or not 5th paragraph of Section 10 of R.A. No. 8042 is constitutional, and what is the proper
computation of the lumpsum salary to be awarded to petitioner by reason of his illegal dismissal.
RULING:
The petition is impressed with merit. Petition is granted.
Prefatorily, it bears emphasis that the unanimous finding of the LA, the NLRC and the CA that the
dismissal of petitioner was illegal is not disputed. Likewise not disputed is the tribunals' unanimous
finding of bad faith on the part of respondents, thus, warranting the award of moral and exemplary
damages and attorney's fees.
Verily, we have already declared in Serrano that the clause "or for three months for every year of the
unexpired term, whichever is less" provided in the 5 th paragraph of Section 10 of R.A. No. 8042 is
unconstitutional for being violative of the rights of Overseas Filipino Workers (OFWs) to equal protection
of the laws. We hold that this case should not be included in the aforementioned exception. After all, it
was not the fault of petitioner that he lost his job due to an act of illegal dismissal committed by
respondents. To rule otherwise would be iniquitous to petitioner and other OFWs, and would, in effect,
send a wrong signal that principals/employers and recruitment/manning agencies may violate an OFW's
security of tenure which an employment contract embodies and actually profit from such violation based
on an unconstitutional provision of law.
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In the same vein, we cannot subscribe to respondents' postulation that the tanker allowance of US$130.00
should not be included in the computation of the lumpsum salary to be awarded to petitioner. First. It is
only at this late stage, more particularly in their Memorandum, that respondents are raising this issue. It
was not raised before the LA, the NLRC, and the CA. They did not even assail the award accorded by the
CA, which computed the lump-sum salary of petitioner at the basic salary of US$1,430.00, and which
clearly included the US$130.00 tanker allowance. Hence, fair play, justice, and due process dictate that
this Court cannot now, for the first time on appeal, pass upon this question. Matters not taken up below
cannot be raised for the first time on appeal. They must be raised seasonably in the proceedings before the
lower tribunals. Questions raised on appeal must be within the issues framed by the parties; consequently,
issues not raised before the lower tribunals cannot be raised for the first time on appeal. Second.
Respondents' invocation of Serrano is unavailing. Indeed, we made the following pronouncements in
Serrano, to wit: The word salaries in Section 10(5) does not include overtime andleave pay. For seafarers
like petitioner, DOLE Department Order No. 33, series 1996, provides a Standard Employment Contract
of Seafarers, in which salary is understood as the basic wage, exclusive ofovertime, leave pay and other
bonuses; whereas overtime pay is compensation for all work "performed" in excess of the regular eight
hours, and holiday pay is compensation for any work "performed" on designated rest days and holidays. A
close perusal of the contract reveals that the tanker allowance of US$130.00 was not categorized as a
bonus but was rather encapsulated in the basic salary clause, hence, forming part of the basic salary of
petitioner. Respondents themselves in their petition for certiorari before the CA averred that petitioner's
basic salary, pursuant to the contract, was "US$1,300.00 + US$130.00 tanker allowance."If respondents
intended it differently, the contract per se should have indicated that said allowance does not form part of
the basic salary or, simply, the contract should have separated it from the basic salary clause.

SKIPPERS UNITED PACIFIC vs.DOZA, et. al.

FACTS:
Petitioner deployed De Gracia, Lata and Aprosta to work on board the vessel MV Wisdom Star. On
December 3 1998, Skippers alleged that De Garcia, whose scent was strongly of alcohol, went to the
cabin of Gabriel Oleszek, MV Wisdom Stars Master. Skippers claimed that he was rude and shouted
noisily to the master. De Gracia left the masters cabin after a few minutes and was heard shouting very
loudly somewhere down the corridors. The incident was evidenced by the Captains report sent on said
date. Furthermore, Skippers also claimed that on January 22, 1999, Aprosta, De Gracia, Lata and Daza
arrived in the masters cabin and demanded immediate repatriation because they were not satisfied with
the ship. De Gracia, et al. threatened that they may become crazy any moment and demanded for all
outstanding payments due them. The incident is evidenced by a telex of Cosmoship MV Wisdom to
Skippers, which, however, had conflicting dates. De Gracia claimed that Skippers failed to remit their
respective allotments, compelling them to vent their grievances with the Romanian Seafarers Union. On
January 28, 1999, the Filipino seafarers were unceremoniously discharged and immediately repatriated.
Upon arrival in the Philippines, they filed a complaint for illegal dismissal with the Labor Arbiter. The
Labor Arbiter dismissed the seafarers complaint as well as the seafarers demand for immediate
repatriation due to the seafarers dissatisfaction with the ship. It was considered a voluntary pretermination of employment. Such act was deemed akin to resignation recognized under Article 285 of the
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Labor Code. The Labor Arbiter gave credence to the telex of the masters report that the seafarers indeed
demanded immediate repatriation.
The NLRC agreed with the LAs decision.
The CA however reversed the LAs and the NLRCs decision.
The Court deemed the telex message a self-serving document that did not satisfy the requirement of
substantial evidence, or that amount of relevant evidence which a reasonable mind might accept as
adequate to justify the conclusion that petitioners indeed voluntarily demanded their immediate
repatriation. Aggrieved, Skippers appealed the case with the Supreme Court.
ISSUE:
Whether or not the seafarers demand for immediate repatriation can be considered an act of voluntary
resignation.
HELD:
For a worker's dismissal to be considered valid, it must comply with both procedural and substantive due
process. The legality of the manner of dismissal constitutes procedural due process, while the legality of
the act of dismissal constitutes substantive due process. Procedural due process in dismissal cases consists
of the twin requirements of notice and hearing. The employer must furnish the employee with two written
notices before the termination of employment can be effected: (1) the first notice apprises the employee of
the particular acts or omissions for which his dismissal is sought; and (2) the second notice informs the
employee of the employer's decision to dismiss him. Before the issuance of the second notice, the
requirement of a hearing must be complied with by giving the worker an opportunity to be heard. It is not
necessary that an actual hearing be conducted. Substantive due process, on the other hand, requires
that dismissal by the employer be made under a just or authorized cause under Articles 282 to 284 of the
Labor Code. In this case, there was no written notice furnished to De Gracia, et al., regarding the cause of
their dismissal. Cosmoship furnished a written notice (telex) to Skippers, the local manning agency,
claiming that De Gracia, et al., were repatriated because the latter voluntarily pre-terminated their
contracts. This telex was given credibility and weight by the Labor Arbiter and NLRC in deciding that
there was pre-termination of the employment contract "akin to resignation" and no illegal dismissal.
However, as correctly ruled by the CA, the telex message is "a biased and self-serving document that does
not satisfy the requirement of substantial evidence." If, indeed, De Gracia, et al., voluntarily preterminated their contracts, then De Gracia, et al., should have submitted their written resignations.
Article 285 of the Labor Code recognizes termination by the employee of the employment contract
by"serving written notice on the employer at least one (1) month in advance." Given that provision,
thelaw contemplates the requirement of a written notice of resignation. In the absence of a
writtenresignation, it is safe to presume that the employer terminated the seafarers. In addition, the
telexmessage relied upon by the Labor Arbiter and NLRC bore conflicting dates of 22 January 1998 and
22January 1999, giving doubt to the veracity and authenticity of the document. In 22 January 1998,
DeGracia, et al., were not even employed yet by the foreign principal.
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INTERNATIONAL MANAGEMENT SERVICES/MARILYN C. PASCUAL vs. LOGARTA

Facts:
Sometime in 1997, the petitioner recruitment agency, International Management Services (IMS), a single
proprietorship owned and operated by Marilyn C. Pascual, deployed respondent Roel P. Logarta to work
for Petrocon Arabia Limited (Petrocon) in Alkhobar, Kingdom of Saudi Arabia, in connection with
general engineering services of Petrocon for the Saudi Arabian Oil Company (Saudi Aramco).
Respondent was employed for a period of two (2) years, commencing on October 2, 1997, with a monthly
salary of eight hundred US Dollars (US$800.00). In October 1997, respondent started to work for
Petrocon as Piping Designer for works on the projects of Saudi Aramco.
Thereafter, in a letter 3 dated December 21, 1997, Saudi Aramco informed Petrocon that for the year
1998, the former is allotting to the latter a total work load level of 170,850 man-hours, of which 100,000
man-hours will be allotted for cross-country pipeline projects.
However, in a letter 4 dated April 29, 1998, Saudi Aramco notified Petrocon that due to changes in the
general engineering services work forecast for 1998, the man-hours that were formerly allotted to
Petrocon is going to be reduced by 40%. DTAcIa
Consequently, due to the considerable decrease in the work requirements of Saudi Aramco, Petrocon was
constrained to reduce its personnel that were employed as piping designers, instrument engineers, inside
plant engineers, etc., which totaled to some 73 personnel, one of whom was respondent.
Thus, on June 1, 1998, Petrocon gave respondent a written notice 5 informing the latter that due to the
lack of project works related to his expertise, he is given a 30-day notice of termination, and that his last
day of work with Petrocon will be on July 1, 1998. Petrocon also informed respondent that all due
benefits in accordance with the terms and conditions of his employment contract will be paid to
respondent, including his ticket back to the Philippines.
On June 23, 1998, respondent, together with his co-employees, requested Petrocon to issue them a letter
of Intent stating that the latter will issue them a No Objection Certificate once they find another employer
before they leave Saudi Arabia. 6 On June 27, 1998, Petrocon granted the request and issued a letter of
intent to respondent. 7
Before his departure from Saudi Arabia, respondent received his final paycheck 8 from Petrocon
amounting SR7,488.57.
Upon his return, respondent filed a complaint with the Regional Arbitration Branch VII, National Labor
Relations Commission (NLRC), Cebu City, against petitioner as the recruitment agency which employed
him for employment abroad. In filing the complaint, respondent sought to recover his unearned salaries
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covering the unexpired portion of his employment contract with Petrocon on the ground that he was
illegally dismissed.
Issue:
WON respondent dismissal was valid.

Held:
The petition is partly meritorious.
Retrenchment is the reduction of work personnel usually due to poor financial returns, aimed to cut down
costs for operation particularly on salaries and wages. 22 It is one of the economic grounds to dismiss
employees and is resorted by an employer primarily to avoid or minimize business losses. 23 ISTHED
Retrenchment programs are purely business decisions within the purview of a valid and reasonable
exercise of management prerogative. It is one way of downsizing an employer's workforce and is often
resorted to by the employer during periods of business recession, industrial depression, or seasonal
fluctuations, and during lulls in production occasioned by lack of orders, shortage of materials,
conversion of the plant for a new production program, or introduction of new methods or more efficient
machinery or automation. It is a valid management prerogative, provided it is done in good faith and the
employer faithfully complies with the substantive and procedural requirements laid down by law and
jurisprudence. 24
In the case at bar, despite the fact that respondent was employed by Petrocon as an OFW in Saudi Arabia,
still both he and his employer are subject to the provisions of the Labor Code when applicable. The basic
policy in this jurisdiction is that all Filipino workers, whether employed locally or overseas, enjoy the
protective mantle of Philippine labor and social legislations. 25 In the case of Royal Crown Internationale
v. NLRC, 26 this Court has made the policy pronouncement, thus: SEHaDI
. . . . Whether employed locally or overseas, all Filipino workers enjoy the protective mantle of Philippine
labor and social legislation, contract stipulations to the contrary notwithstanding. This pronouncement is
in keeping with the basic public policy of the State to 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. . . . 27
Philippine Law recognizes retrenchment as a valid cause for the dismissal of a migrant or overseas
Filipino worker under Article 283 of the Labor Code, which 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
239

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.
Thus, retrenchment is a valid exercise of management prerogative subject to the strict requirements set by
jurisprudence, to wit: DHSCTI
(1)That the retrenchment is reasonably necessary and likely to prevent business losses which, if already
incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, are
reasonably imminent as perceived objectively and in good faith by the employer;
(2)That the employer served written notice both to the employees and to the Department of Labor and
Employment at least one month prior to the intended date of retrenchment;
(3)That the employer pays the retrenched employees separation pay equivalent to one month pay or at
least 1/2 month pay for every year of service, whichever is higher;
(4)That the employer exercises its prerogative to retrench employees in good faith for the advancement of
its interest and not to defeat or circumvent the employees' right to security of tenure; and
(5)That the employer used fair and reasonable criteria in ascertaining who would be dismissed and who
would be retained among the employees, such as status, . . . efficiency, seniority, physical fitness, age, and
financial hardship for certain workers. 28
Applying the above-stated requisites for a valid retrenchment in the case at bar, it is apparent that the first,
fourth and fifth requirements were complied with by respondent's employer. However, the second and
third requisites were absent when Petrocon terminated the services of respondent.

Pert/CPM Manpower Exponent Co., Inc. vs. Amando A. Vinuya, et al.

The agency and its principal, Modern Metal, committed a prohibited practice and engaged in illegal
recruitment when they altered or substituted the contracts approved by the Philippine Overseas
Employment Administration (POEA). Article 34 (i) of the Labor Code provides: It shall be unlawful for
any individual, entity, licensee, or holder of authority to substitute or alter employment contracts
approved and verified by the Department of Labor from the time of actual signing thereof by the parties
up to and including the period of expiration of the same without the approval of the Secretary of Labor.
Meanwhile, Article 38 (i) of the Labor Code, as amended by R.A. 8042, defined illegal recruitment to
include the substitution or alteration, to the prejudice of the worker, of employment contracts approved
and verified by the Department of Labor and Employment from the time of actual signing thereof by the
240

parties up to and including the period of the expiration of the same without the approval of the
Department of Labor and Employment.
Furthermore, the agency and Modern Metal committed breach of contract by providing substandard
working and living arrangements, when the contract provided free and suitable housing. The living
quarters were cramped as they shared them with 27 other workers. The lodging house was far from the
jobsite, leaving them only three to four hours of sleep every workday because of the long hours of travel
to and from their place of work, not to mention that there was no potable water in the lodging house
which was located in an area where the air was polluted. They complained with the agency about the
hardships that they were suffering, but the agency failed to act on their reports. Significantly, the agency
failed to refute their claims.

Thus, with their original contracts substituted and their oppressive working and living conditions
unmitigated or unresolved, the decision to resign is not surprising. They were compelled by the dismal
state of their employment to give up their jobs; effectively, they were constructively dismissed. A
constructive dismissal or discharge is a quitting because continued employment is rendered impossible,
unreasonable or unlikely, as, an offer involving a demotion in rank and a diminution in pay.
Without doubt, continued employment with Modern Metal had become unreasonable. A reasonable mind
would not approve of a substituted contract that pays a diminished salary from 1350 AED a month in
the original contract to 1,000 AED to 1,200 AED in the appointment letters, a difference of 150 AED to
250 AED (not just 50 AED as the agency claimed) or an extended employment (from 2 to 3 years) at such
inferior terms, or a free and suitable housing which is hours away from the job site, cramped and
crowded, without potable water and exposed to air pollution.
We thus cannot accept the agencys insistence that the respondents voluntarily resigned since they
personally prepared their resignation letters in their own handwriting.

Hon. Sto. Tomas, et al., vs Salac

Facts:
On August 21, 1995 respondent Philippine Association of Service Exporters, Inc. (PASEI) filed a petition
for declaratory relief and prohibition with prayer for issuance of TRO and writ of preliminary injunction
before the RTC of Manila, seeking to annul Sections 6, 7, and 9 of R.A. 8042 for being unconstitutional.
PASEI also sought to annul a portion of Section 10 but the Court will take up this point later together with
a related case.
Issue:
Constitutionality of Sections 6, 7, and 9 of R.A. 8042
Ruling:
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Section 6 defines the crime of "illegal recruitment" and enumerates the acts constituting the same. Section
7 provides the penalties for prohibited acts. Thus:
SEC. 6.Definition. For purposes of this Act, illegal recruitment shall mean any act of canvassing,
enlisting, contracting, transporting, utilizing, hiring, procuring workers and includes referring, contract
services, promising or advertising for employment abroad, whether for profit or not, when undertaken by
a non-license or non-holder of authority contemplated under Article 13(f) of Presidential Decree No. 442,
as amended, otherwise known as the Labor Code of the Philippines: Provided, That such non-license or
non-holder, who, in any manner, offers or promises for a fee employment abroad to two or more persons
shall be deemed so engaged. It shall likewise include the following acts, whether committed by any
person, whether a non-licensee, non-holder, licensee or holder of authority: xxx xxx xxx
SEC. 7.Penalties.
(a)Any person found guilty of illegal recruitment shall suffer the penalty of imprisonment of not less than
six (6) years and one (1) day but not more than twelve (12) years and a fine not less than two hundred
thousand pesos (P200,000.00) nor more than five hundred thousand pesos (P500,000.00).
(b)The penalty of life imprisonment and a fine of not less than five hundred thousand pesos
(P500,000.00) nor more than one million pesos (P1,000,000.00) shall be imposed if illegal recruitment
constitutes economic sabotage as defined herein.
Provided, however, That the maximum penalty shall be imposed if the person illegally recruited is less
than eighteen (18) years of age or committed by a non-licensee or non-holder of authority.
Finally, Section 9 of R.A. 8042 allowed the filing of criminal actions arising from "illegal recruitment"
before the RTC of the province or city where the offense was committed or where the offended party
actually resides at the time of the commission of the offense.
The RTC of Manila declared Section 6 unconstitutional after hearing on the ground that its definition of
"illegal recruitment" is vague as it fails to distinguish between licensed and non-licensed recruiters and
for that reason gives undue advantage to the non-licensed recruiters in violation of the right to equal
protection of those that operate with government licenses or authorities.
But "illegal recruitment" as defined in Section 6 is clear and unambiguous and, contrary to the RTC's
finding, actually makes a distinction between licensed and non-licensed recruiters. By its terms, persons
who engage in "canvassing, enlisting, contracting, transporting, utilizing, hiring, or procuring workers"
without the appropriate government license or authority are guilty of illegal recruitment whether or not
they commit the wrongful acts enumerated in that section. On the other hand, recruiters who engage in the
canvassing, enlisting, etc. of OFWs, although with the appropriate government license or authority, are
guilty of illegal recruitment only if they commit any of the wrongful acts enumerated in Section 6.
The Manila RTC also declared Section 7 unconstitutional on the ground that its sweeping application of
the penalties failed to make any distinction as to the seriousness of the act committed for the application
of the penalty imposed on such violation. As an example, said the trial court, the mere failure to render a
report under Section 6 (h) or obstructing the inspection by the Labor Department under Section 6 (g) are
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penalized by imprisonment for six years and one day and a minimum fine of P200,000.00 but which
could unreasonably go even as high as life imprisonment if committed by at least three persons.
Apparently, the Manila RTC did not agree that the law can impose such grave penalties upon what it
believed were specific acts that were not as condemnable as the others in the lists. But, in fixing uniform
penalties for each of the enumerated acts under Section 6, Congress was within its prerogative to
determine what individual acts are equally reprehensible, consistent with the State policy of according full
protection to labor, and deserving of the same penalties. It is not within the power of the Court to question
the wisdom of this kind of choice. Notably, this legislative policy has been further stressed in July 2010
with the enactment of R.A. 10022 which increased even more the duration of the penalties of
imprisonment and the amounts of fine for the commission of the acts listed under Section 7.
Obviously, in fixing such tough penalties, the law considered the unsettling fact that OFWs must work
outside the country's borders and beyond its immediate protection. The law must, therefore, make an
effort to somehow protect them from conscienceless individuals within its jurisdiction who, fueled by
greed, are willing to ship them out without clear assurance that their contracted principals would treat
such OFWs fairly and humanely.
As the Court held in People v. Ventura, the State under its police power "may prescribe such regulations
as in its judgment will secure or tend to secure the general welfare of the people, to protect them against
the consequence of ignorance and incapacity as well as of deception and fraud." Police power is "that
inherent and plenary power of the State which enables it to prohibit all things hurtful to the comfort,
safety, and welfare of society."
The Manila RTC also invalidated Section 9 of R.A. 8042 on the ground that allowing the offended parties
to file the criminal case in their place of residence would negate the general rule on venue of criminal
cases which is the place where the crime or any of its essential elements were committed. Venue, said the
RTC, is jurisdictional in penal laws and, allowing the filing of criminal actions at the place of residence of
the offended parties violates their right to due process. Section 9 provides:
SEC. 9.Venue. A criminal action arising from illegal recruitment as defined herein shall be filed with
the Regional Trial Court of the province or city where the offense was committed or where the offended
party actually resides at the time of the commission of the offense: Provided, That the court where the
criminal action is first filed shall acquire jurisdiction to the exclusion of other courts: Provided,
however, That the aforestated provisions shall also apply to those criminal actions that have already been
filed in court at the time of the effectivity of this Act.
But there is nothing arbitrary or unconstitutional in Congress fixing an alternative venue for violations of
Section 6 of R.A. 8042 that differs from the venue established by the Rules on Criminal Procedure.
Indeed, Section 15 (a), Rule 110 of the latter Rules allows exceptions provided by laws. Thus:
SEC. 15.Place where action is to be instituted. (a) Subject to existing laws, the criminal action shall be
instituted and tried in the court of the municipality or territory where the offense was committed or where
any of its essential ingredients occurred. (Emphasis supplied)
xxx xxx xxx
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Section 9 of R.A. 8042, as an exception to the rule on venue of criminal actions is, consistent with that
law's declared policy of providing a criminal justice system that protects and serves the best interests of
the victims of illegal recruitment.
G.R. 167590, G.R. 182978-79, and G.R. 184298-99
(Constitutionality of Section 10, last sentence of 2nd paragraph)
G.R. 182978-79 and G.R. 184298-99 are consolidated cases. Respondent spouses Simplicio and Mila
Cuaresma (the Cuaresmas) filed a claim for death and insurance benefits and damages against petitioners
Becmen Service Exporter and Promotion, Inc. (Becmen) and White Falcon Services, Inc. (White Falcon)
for the death of their daughter Jasmin Cuaresma while working as staff nurse in Riyadh, Saudi Arabia.
The Labor Arbiter (LA) dismissed the claim on the ground that the Cuaresmas had already received
insurance benefits arising from their daughter's death from the Overseas Workers Welfare Administration
(OWWA). The LA also gave due credence to the findings of the Saudi Arabian authorities that Jasmin
committed suicide.
On appeal, however, the National Labor Relations Commission (NLRC) found Becmen and White Falcon
jointly and severally liable for Jasmin's death and ordered them to pay the Cuaresmas the amount of
US$113,000.00 as actual damages. The NLRC relied on the Cabanatuan City Health Office's autopsy
finding that Jasmin died of criminal violence and rape.
Becmen and White Falcon appealed the NLRC Decision to the Court of Appeals (CA). On June 28, 2006
the CA held Becmen and White Falcon jointly and severally liable with their Saudi Arabian employer for
actual damages, with Becmen having a right of reimbursement from White Falcon. Becmen and White
Falcon appealed the CA Decision to this Court.
On April 7, 2009 the Court found Jasmin's death not work-related or work-connected since her rape and
death did not occur while she was on duty at the hospital or doing acts incidental to her employment. The
Court deleted the award of actual damages but ruled that Becmen's corporate directors and officers are
solidarily liable with their company for its failure to investigate the true nature of her death. Becmen and
White Falcon abandoned their legal, moral, and social duty to assist the Cuaresmas in obtaining justice
for their daughter. Consequently, the Court held the foreign employer Rajab and Silsilah, White Falcon,
Becmen, and the latter's corporate directors and officers jointly and severally liable to the Cuaresmas
for: 1) P2,500,000.00 as moral damages; 2) P2,500,000.00 as exemplary damages; 3) attorney's fees of
10% of the total monetary award; and 4) cost of suit.
On July 16, 2009 the corporate directors and officers of Becmen, namely, Eufrocina Gumabay, Elvira
Taguiam, Lourdes Bonifacio and Eddie De Guzman (Gumabay, et al.) filed a motion for leave to
Intervene. They questioned the constitutionality of the last sentence of the second paragraph of Section
10, R.A. 8042 which holds the corporate directors, officers and partners jointly and solidarily liable with
their company for money claims filed by OFWs against their employers and the recruitment firms. On
September 9, 2009 the Court allowed the intervention and admitted Gumabay, et al.'s motion for
reconsideration.
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The key issue that Gumabay, et al. present is whether or not the 2nd paragraph of Section 10, R.A. 8042,
which holds the corporate directors, officers, and partners of recruitment and placement agencies jointly
and solidarily liable for money claims and damages that may be adjudged against the latter agencies, is
unconstitutional.
In G.R. 167590 (the PASEI case), the Quezon City RTC held as unconstitutional the last sentence of the
2nd paragraph of Section 10 of R.A. 8042. It pointed out that, absent sufficient proof that the corporate
officers and directors of the erring company had knowledge of and allowed the illegal recruitment,
making them automatically liable would violate their right to due process of law.
The pertinent portion of Section 10 provides:
SEC. 10.Money Claims. . . .
The liability of the principal/employer and the recruitment/placement agency for any and all claims under
this section shall be joint and several. This provision shall be incorporated in the contract for overseas
employment and shall be a condition precedent for its approval. The performance bond to be filed by the
recruitment/placement agency, as provided by law, shall be answerable for all money claims or damages
that may be awarded to the workers. If the recruitment/placement agency is a juridical being, the
corporate officers and directors and partners as the case may be, shall themselves be jointly and solidarily
liable with the corporation or partnership for the aforesaid claims and damages.
But the Court has already held, pending adjudication of this case, that the liability of corporate directors
and officers is not automatic. To make them jointly and solidarily liable with their company, there must be
a finding that they were remiss in directing the affairs of that company, such as sponsoring or tolerating
the conduct of illegal activities. In the case of Becmen and White Falcon, while there is evidence that
these companies were at fault in not investigating the cause of Jasmin's death, there is no mention of any
evidence in the case against them that intervenors Gumabay, et al., Becmen's corporate officers and
directors, were personally involved in their company's particular actions or omissions in Jasmin's case.
As a final note, R.A. 8042 is a police power measure intended to regulate the recruitment and deployment
of OFWs. It aims to curb, if not eliminate, the injustices and abuses suffered by numerous OFWs seeking
to work abroad. The rule is settled that every statute has in its favor the presumption of constitutionality.
The Court cannot inquire into the wisdom or expediency of the laws enacted by the Legislative
Department. Hence, in the absence of a clear and unmistakable case that the statute is unconstitutional,
the Court must uphold its validity.

Sameer Overseas Placement Agency vs. Joy Cabiles

Facts: Petitioners a recruitment and placement agency. Joy Cabiles applied for work offered by petitioner
for a quality control job in Taiwan.

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Upon approval of Joys application, She was asked ny petitioner to sign a one-year employment contract
for a monthly salary of NT$15,360.00. She alleged that Sameer Overseas Agency required her to pay a
placement fee of PhP70,000.00 when she signed the employment contract.
Joy was deployed to work for Taiwan Wacoal, Co. Ltd. (Wacoal) on June 26, 1997. She alleged that in
her employment contract, she agreed to work as quality control for one year. In Taiwan, she was asked to
work as a cutter.
Sameer Overseas Placement Agency claims that on July 14, 1997, a certain Mr. Huwang from Wacoal
informed Joy, without prior notice, that she was terminated and that "she should immediately report to
their office to get her salary and passport." She was asked to "prepare for immediate repatriation."
Joy claims that she was told that from June 26 to July 14, 1997, she only earned a total of
NT$9,000. According to her, Wacoal deducted NT$3,000 to cover her plane ticket to Manila.
Thus, on October 15, 1997, Joy filed a complaint with the National Labor Relations Commission against
petitioner and Wacoal. She claimed that she was illegally dismissed. She asked for the return of her
placement fee, the withheld amount for repatriation costs, payment of her salary for 23 months as well as
moral and exemplary damages. She identified Wacoal as Sameer Overseas Placement Agency's foreign
principal.
Sameer Overseas Placement Agency alleged that respondent's termination was due to her inefficiency,
negligence in her duties, and her "failure to comply with the work requirements [of] her foreign
[employer]".
Both NLRC and CA ruled that Joy was illegally dismissed and thus she is entitled to to the equivalent of
three months worth of salary, reimbursement of withheld repatriation expense, and attorney's fees.
Issue: Whether or not Petitioner is liable to Joy
Ruling:
1 The petitioner is liable to the respondent. Sameer Overseas Placement Agency failed to show that
there was just cause for causing Joy's dismissal. The employer, Wacoal, also failed to accord her due
process of law. OFWs are not stripped of their security of tenure when they move to work in a
different jurisdiction. With respect to the rights of overseas Filipino workers, we follow the principle
of lex loci contractus. Established is the rule that lex loci contractus (the law of the place where the
contract is made) governs in this jurisdiction. There is no question that the contract of employment
in this case was perfected here in the Philippines. Therefore, the Labor Code, its implementing
rules and regulations, and other laws affecting labor apply in this case
Thus, as in line with our Labor Law, Petitioner has the burden of proving that respondent was inefficient
in her work and negligent in her duties . The burden of proving that there is just cause for termination is
on the employer. "The employer must affirmatively show rationally adequate evidence that the dismissal
was for a justifiable cause." Failure to show that there was valid or just cause for termination would
necessarily mean that the dismissal was illegal.
2 We uphold the finding that respondent is entitled to all of these awards. The award of the threemonth equivalent of respondent's salary should, however, be increased to the amount equivalent to
the unexpired term of the employment contract.
In Serrano v. Gallant Maritime Services, Inc. and Marlow Navigation Co., Inc., this court ruled that the
clause "or for three (3) months for every year of the unexpired term, whichever is less" is
unconstitutional for violating the equal protection clause and substantive due process. We are aware that
the clause "or for three (3) months for every year of the unexpired term, whichever is less" was reinstated
in Republic Act No. 8042 upon promulgation of Republic Act No. 10022 in 2010. Republic Act No.
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10022 was promulgated on March 8, 2010. This means that the reinstatement of the clause in Republic
Act No. 8042 was not yet in effect at the time of respondent's termination from work in 1997. Republic
Act No. 8042 before it was amended by Republic Act No. 10022 governs this case.
In the hierarchy of laws, the Constitution is supreme. No branch or office of the government may exercise
its powers in any manner inconsistent with the Constitution, regardless of the existence of any law that
supports such exercise. The Constitution cannot be trumped by any other law. All laws must be read in
light of the Constitution. Any law that is inconsistent with it is a nullity.
Thus, when a law or a provision of law is null because it is inconsistent with the Constitution, the nullity
cannot be cured by reincorporation or reenactment of the same or a similar law or provision. A law or
provision of law that was already declared unconstitutional remains as such unless circumstances have so
changed as to warrant a reverse conclusion.
Limiting the wages that should be recovered by an illegally dismissed overseas worker to three months
is both a violation of due process and the equal protection clauses of the Constitution.
Putting a cap on the money claims of certain overseas workers does not increase the standard of
protection afforded to them. On the other hand, foreign employers are more incentivized by the reinstated
clause to enter into contracts of at least a year because it gives them more flexibility to violate our
overseas workers' rights. Their liability for arbitrarily terminating overseas workers is decreased at the
expense of the workers whose rights they violated. Meanwhile, these overseas workers who are impressed
with an expectation of a stable job overseas for the longer contract period disregard other opportunities
only to be terminated earlier. They are left with claims that are less than what others in the same situation
would receive. The reinstated clause, therefore, creates a situation where the law meant to protect them
makes violation of rights easier and simply benign to the violator.
Along the same line, we held that the reinstated clause violates due process rights. It is arbitrary as it
deprives overseas workers of their monetary claims without any discernable valid purpose.
3 As to the interest of the awards, it must be noted that the Bangko Sentral ng Pilipinas Circular No.
799 of June 21, 2013 states that as to judgment of court awarding a sum of money, the interest rate is
6% per annum.
However, Circular No. 799 is not applicable when there is a law that states otherwise. While the Bangko
Sentral ng Pilipinas has the power to set or limit interest rates, these interest rates do not apply when the
law provides that a different interest rate shall be applied. "[A] Central Bank Circular cannot repeal a law.
Only a law can repeal another law."
For example, Section 10 of Republic Act No. 8042 provides that unlawfully terminated overseas workers
are entitled to the reimbursement of his or her placement fee with an interest of 12% per annum. Since
Bangko Sentral ng Pilipinas circulars cannot repeal Republic Act No. 8042, the issuance of Circular No.
799 does not have the effect of changing the interest on awards for reimbursement of placement fees from
12% to 6%. This is despite Section 1 of Circular No. 799, which provides that the 6% interest rate applies
even to judgments.
But as to the awards of salary for the unexpired portion of the employment contract, the circular applies
because the law does not provide for a specific interest rate that should apply.
4 As to the joint and several liability of both petitioner and Wacoal, it is sufficient that only one of them
is impleaded as a party in a civil case.
The provision on joint and several liability in the Migrant Workers and Overseas Filipinos Act of 1995
assures overseas workers that their rights will not be frustrated with these complications.
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The fundamental effect of joint and several liability is that "each of the debtors is liable for the entire
obligation." A final determination may, therefore, be achieved even if only one of the joint and several
debtors are impleaded in an action. Hence, in the case of overseas employment, either the local agency or
the foreign employer may be sued for all claims arising from the foreign employer's labor law violations.
This way, the overseas workers are assured that someone the foreign employer's local agent may be
made to answer for violations that the foreign employer may have committed.
The Migrant Workers and Overseas Filipinos Act of 1995 ensures that overseas workers have recourse in
law despite the circumstances of their employment. By providing that the liability of the foreign employer
may be "enforced to the full extent" against the local agent, the overseas worker is assured of immediate
and sufficient payment of what is due them.
Corollary to the assurance of immediate recourse in law, the provision on joint and several liability in the
Migrant Workers and Overseas Filipinos Act of 1995 shifts the burden of going after the foreign employer
from the overseas worker to the local employment agency. However, it must be emphasized that the local
agency that is held to answer for the overseas worker's money claims is not left without remedy. The law
does not preclude it from going after the foreign employer for reimbursement of whatever payment it has
made to the employee to answer for the money claims against the foreign employer.
A further implication of making local agencies jointly and severally liable with the foreign employer is
that an additional layer of protection is afforded to overseas workers. Local agencies, which are
businesses by nature, are inoculated with interest in being always on the lookout against foreign
employers that tend to violate labor law. Lest they risk their reputation or finances, local agencies must
already have mechanisms for guarding against unscrupulous foreign employers even at the level prior to
overseas employment applications.

Racelis vs. United Philippine Lines Inc.

Facts: On January 15, 2008, Rodolfo L. Racelis (Rodolfo) was recruited and hired by respondent United
Philippine Lines, Inc. (UPL) for its principal, respondent Holland America Lines, Inc. (HAL) to serve as
"Demi Chef De Partie" on board the vessel MS Prinsendam, with a basic monthly salary of US$799.55.
The Contract of Employment 6 was for a term of four (4) months, extendible for another two (2) months
upon mutual consent. After complying with the required pre-employment medical examination where he
was declared fit to work, Rodolfo joined the vessel on January 25, 2008. Prior thereto, Rodolfo was
repeatedly contracted by said respondents and was deployed under various contracts since December 17,
1985.
In the course of his last employment contract, Rodolfo experienced severe pain in his ears and high blood
pressure causing him to collapse while in the performance of his duties. He consulted a doctor in
Argentina and was medically repatriated on February 20, 2008 for further medical treatment. Upon arrival
in Manila, he was immediately brought to Medical City, Pasig City, where he was seen by a companydesignated physician, Dr. Gerardo Legaspi, M.D. (Dr. Legaspi), and was diagnosed to be suffering from
Brainstem (pontine) Cavernous Malformation. He underwent surgery twice for the said ailment but
developed complications and died on March 2, 2008. Through an electronic mail (e-mail) dated July 22,
2008, a certain Dr. Antonio "Toby" Abaya (Dr. Abaya) informed Atty. Florencio L. Aquino, Managing
Associate of the law firm of Del Rosario and Del Rosario, counsel for UPL, HAL, and its officer,
Fernando T. Lising (respondents), that Rodolfo's illness was congenital and that there may be familial
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strains in his case, hence, his death was not workrelated. Rodolfo's surviving spouse, herein petitioner,
sought to claim death benefits pursuant to the International Transport Workers' Federation-Collective
Bargaining Agreement (ITWF-CBA), of which her husband was a member, but to no avail. Consequently,
she filed a Complaint for death benefits, burial assistance, moral and exemplary damages, and attorney's
fees against herein respondents before the NLRC.
Issue: WON petitioner is entitled to death benefits under the 2000 Philippine Overseas Employment
Administration Standard Employment Contract (2000 POEA-SEC).
Held: Among other basic provisions, the POEA-SEC specifically, its 2000 version stipulates that
the beneficiaries of a deceased seafarer may be able to claim death benefits for as long as they are able to
establish that (a) the seafarer's death is work-related, and (b) such death had occurred during the term of
his employment contract.
The death of the seafarer is work-related. In this case, respondents point to the fact that Brainstem
(pontine) Cavernous Malformation is not listed as an occupational disease under Section 32-A of the 2000
POEA-SEC. While it is true that Brainstem (pontine) Cavernous Malformation is not listed as an
occupational disease under Section 32-A of the 2000 POEA-SEC, Section 20 (B) (4) of the same
explicitly provides that "[t]he liabilities of the employer when the seafarer suffers work-related injury or
illness during the term of his contract are as follows: (t)hose illnesses not listed in Section 32 of this
Contract are disputably presumed as work related." In other words, the 2000 POEA-SEC "has created a
disputable presumption in favor of compensability[,] saying that those illnesses not listed in Section 32
are disputably presumed as work-related. This means that even if the illness is not listed under Section 32A of the POEA-SEC as an occupational disease or illness, it will still be presumed as work-related, and it
becomes incumbent on the employer to overcome the presumption."
The seafarer's death occurred during the term of employment. Respondents assert that Rodolfo's death on
March 2, 2008 had occurred beyond the term of his employment, considering his prior medical
repatriation on February 20, 2008 which had the effect of contract termination. While it is true that a
medical repatriation has the effect of terminating the seafarer's contract of employment, it is, however,
enough that the work-related illness, which eventually becomes the proximate cause of death, occurred
while the contract was effective for recovery to be had. Were it not for his illness, Rodolfo would not have
been medically repatriated and his employment contract, in turn, terminated. Evidently, the termination of
employment was forced upon by a workrelated cause and it would be in contrast to the State's policy on
labor to deprive the seafarer's heirs of death compensation despite its ascertained work-connection.

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