LABOR RELATIONS

SERIOUS MISCONDUCT PART 2

Republic of the Philippines
SUPREME COURT
Baguio City
FIRST DIVISION
G.R. No. 192582

April 7, 2014

BLUER THAN BLUE JOINT VENTURES COMPANY/MARY ANN

DELA VEGA, Petitioners,
vs.
GLYZA ESTEBAN, Respondent.
DECISION
REYES, J.:
"It is not the job title but the actual work that the employee performs that
determines whether he or she occupies a position of trust and
confidence."1 In this case, while respondent's position was denominated as
Sales Clerk, the nature of her work included inventory and cashiering, a
function that clearly falls within the sphere of rank-and-file positions imbued
with trust and confidence.
Facts of the Case
Respondent Glyza Esteban (Esteban) was employed in January 2004 as
Sales Clerk, and assigned at Bluer Than Blue Joint Ventures Company's
(petitioner) EGG boutique in SM City Marilao, Bulacan, beginning the year
2006. Part of her primary tasks were attending to all customer needs,
ensuring efficient inventory, coordinating orders from clients, cashiering and
reporting to the accounting department.
In November 2006, the petitioner received a report that several employees
have access to its point-of-sale (POS) system through a universal password
given by Elmer Flores (Flores). Upon investigation, it was discovered that it
was Esteban who gave Flores the password. The petitioner sent a letter

memorandum to Esteban on November 8, 2006, asking her to explain in

writing why she should not be disciplinary dealt with for tampering with the
companys POS system through the use of an unauthorized password.
Esteban was also placed under preventive suspension for ten days.
In her explanation, Esteban admitted that she used the universal password
three times on the same day in December 2005, after she learned of it from
two other employees who she saw browsing through the petitioners sales
inquiry. She inquired how the employees were able to open the system and
she was told that they used the "123456" password.
On November 13, 2006, Estebans preventive suspension was lifted, but at
the same time, a notice of termination was sent to her, finding her
explanation unsatisfactory and terminating her employment immediately on
the ground of loss of trust and confidence. Esteban was given her final pay,
including benefits and bonuses, less inventory variances incurred by the
store amounting to P8,304.93. Esteban signed a quitclaim and release in
favor of the petitioner.
On December 6, 2006, Esteban filed a complaint for illegal dismissal, illegal
suspension, holiday pay, rest day and separation pay.
In a Decision2 dated September 28, 2007, the Labor Arbiter (LA) ruled in
favor of Esteban and found that she was illegally dismissed. The LA also
awarded separation pay, backwages, unpaid salary during her preventive
suspension and attorneys fees. The dispositive portion of the LA decision
provides:
WHEREFORE, a Decision is hereby rendered declaring [Esteban] to have
been illegally dismissed. Corollarily, she is entitled for the payment of
separation pay as prayed for at one month salary for every year of service,
plus backwages from November 13, 2006 when she was dismissed up to the
rendition of this Decision.
Further, as [Esteban] was illegally suspended she is entitled to salaries
during her suspension from November 9-13, 2006.
In addition, an attorneys fees equivalent to ten (10%) percent of the total
award is hereby granted, computed as follows:

a)

Backwages
11/13/06 - 9/28/07

10.50 mos.

[P]350 x 26 x 10.50

= [P]95,550.00

13th Month Pay

b)

1/12 of [P]95,550.00
SILP

= 7,962.50

[P]350 x 5/12 x 10.50

= 1,531.25

[P]105,043.75

Separation Pay
11/25/03 - 12/6/06

= 3 yrs.

[P]350 x 26 x 3 27,300.00
c)

Unpaid Salaries
11/9 - 13/06

= 5 days

[P]350 x 5

1,750.00
[P]134,093.75

Ten (10%) Percent Attorneys Fees

TOTAL

13,409.37
[P]147,503.12

SO ORDERED.3
The petitioner filed an appeal with the National Labor Relations
Commission (NLRC), and in its Decision4 dated September 23, 2008, the
NLRC reversed the decision of the LA and dismissed the case for illegal
dismissal. The dispositive portion of the NLRC decision reads:
WHEREFORE, the decision appealed from is hereby reversed and set aside
and in its stead a new one is rendered dismissing this case for lack of merit.
[Petitioners] however are ordered to refund to [Esteban] the amount of
[P]8,304.93 which was illegally deducted from her salary.
SO ORDERED.5

Thus, Esteban went to the Court of Appeals (CA) on certiorari. In the

assailed Decision6 dated November 25, 2009, the CA granted Estebans
petition and reinstated the LA decision, to wit:
WHEREFORE, premises considered, the petition is hereby GRANTED. The
assailed Decision dated September 23, 2008 and Resolution dated November
27, 2008 of public respondent National Labor Relations Commission are
ANNULLED and SET ASIDE[.]
Accordingly, the Decision of the Labor Arbiter dated September 28, 2007 is
REINSTATED with MODIFICATION, that the award of separation pay is
computed from January 2, 2004, and not from November 25, 2003.
SO ORDERED.7
Hence, this petition with the following assignment of errors:
I. THE HONORABLE COURT OF APPEALS GRAVELY ABUSED
ITS DISCRETION WHEN IT HELD THAT RANK-AND-FILE
EMPLOYEES CANNOT BE DISMISSED ON GROUND OF LOSS
OF TRUST AND CONFIDENCE.
II. THE HONORABLE COURT OF APPEALS GRAVELY ABUSED
ITS DISCRETION IN APPLYING THE PRINCIPLE OF
REASONABLE PROPORTIONALITY ON THE WRONGFUL
ACTS OF RESPONDENT ESTEBAN.
II. THE HONORABLE COURT OF APPEALS GRAVELY ABUSED
ITS DISCRETION IN HOLDING THAT THE PREVENTIVE
SUSPENSION OF RESPONDENT ESTEBAN WAS
UNWARRANTED.
IV. THE HONORABLE COURT OF APPEALS GRAVELY
ABUSED ITS DISCRETION IN HOLDING THAT THE WAGE
DEDUCTION FOR THE NEGATIVE VARIANCE AMOUNTING
TO [P]8,304.93 IS UNFOUNDED.8
The petitioner argues that it had just cause to terminate the employment of
Esteban, that is, loss of trust and confidence. Esteban, the petitioner believes,
is a rank-and-file employee whose nature of work is reposed with trust and
confidence. Her unauthorized access to the POS system of the company and

her dissemination of the unauthorized password, which Esteban admitted, is

a breach of trust and confidence, and justifies her dismissal.9
The petitioner also contends that the CA failed to appreciate the significance
of Estebans infraction when it ruled that suspension would have sufficed to
discipline her. Estebans length of service should also not have been
considered to mitigate the penalty imposed, as her acts show a lack of
concern for her employer. As regards her preventive suspension, the
petitioner maintains that it was justified in imposing the same despite that
the acts were committed almost a year before the investigation since it did
not have any prior knowledge of the infraction.10
Finally, the petitioner contends that the deduction on Estebans wages of the
negative variances in the sales is allowed by the Labor Code, and such
practice has been widely recognized in the retail industry.11
Esteban, on the other hand, avers that the competency clause she signed with
the petitioner merely states the following functions: (1) attend to and assist
the customer in all their needs; (2) conduct physical inventory; (3) clean and
tidy up the merchandise and store; and (4) coordinate with the stockroom for
orders. As regards the cashiering function, it merely states "to follow."12 As
such, her main task is that of a sales clerk.
Esteban also avers, albeit belatedly, that the notice to explain given to her
did not identify the acts or omissions allegedly committed by her. She also
contends that it was the companys fault in not creating a strong password,
and that she was forced into signing the quitclaim and waiver, among
others.13
Ruling of the Court
The LA and the CA were one in ruling that Esteban was illegally dismissed
by the petitioner. It was their finding that the position occupied by Esteban
was that of a rank-and-file employee and she is neither a supervisor,
manager nor a cashier; thus, she does not hold a position of trust and
confidence.14 The CA also affirmed the ruling of the LA that Estebans
preventive suspension was not warranted.15 The CA also upheld the finding
of the NLRC that the deduction of P8,304.93, representing the stores
negative variance, from Estebans salary violates Article 113 of the Labor
Code, which prohibits wage deduction.16

The NLRC, on the other hand, found that Esteban was dismissed for cause.
According to the NLRC, Esteban admitted that she violated the petitioner
when she made an unauthorized access to the POS system, and even shared
the password to another employee. The NLRC also rejected Estebans
assertion that her job as sales clerk does not occupy a position of trust, and
that her preventive suspension was not warranted. With regard to her waiver
and quitclaim, the NLRC upheld its validity as Esteban signed the same with
full awareness that she committed a wrong.17
Loss of trust and confidence as a
valid ground for dismissal from
employment
The antecedent facts that gave rise to Estebans dismissal from employment
are not disputed in this case. The issue is whether Estebans acts constitute
just cause to terminate her employment with the company on the ground of
loss of trust and confidence.
Loss of trust and confidence is premised on the fact that the employee
concerned holds a position of responsibility, trust and confidence. The
employee must be invested with confidence on delicate matters, such as the
custody, handling, care and protection of the employers property and
funds.18 "[W]ith respect to rank-and-file personnel, loss of trust and
confidence as ground for valid dismissal requires proof of involvement in
the alleged events in question, and that mere uncorroborated assertions and
accusations by the employer will not be sufficient."19
Esteban is, no doubt, a rank-and-file employee. The question now is whether
she occupies a position of trust and confidence.
Among the fiduciary rank-and-file employees are cashiers, auditors,
property custodians, or those who, in the normal exercise of their functions,
regularly handle significant amounts of money or property.20 These
employees, though rank-and-file, are routinely charged with the care and
custody of the employers money or property, and are thus classified as
occupying positions of trust and confidence.21
In this case, Esteban was a sales clerk. Her duties, however, were more than
that of a sales clerk. Aside from attending to customers and tending to the
shop, Esteban also assumed cashiering duties. This, she does not deny;
instead, she insists that the competency clause provided that her tasks were

that of a sales clerk and the cashiering function was labelled "to follow."22 A
perusal of the competency clause, however, shows that it is merely an
attestation on her part that she is competent to "meet the basic requirements
needed for the position [she] is applying for x x x". It does not define her
actual duties. As consistently ruled by the Court, it is not the job title but the
actual work that the employee performs that determines whether he or she
occupies a position of trust and confidence.23 In Philippine Plaza Holdings,
Inc. v. Episcope,24 the Court ruled that a service attendant, who was tasked to
attend to dining guests, handle their bills and receive payments for
transmittal to the cashier and was therefore involved in the handling of
company funds, is considered an employee occupying a position of trust and
confidence. Similarly in Estebans case, given that she had in her care and
custody the stores property and funds, she is considered as a rank-and-file
employee occupying a position of trust and confidence.
Proceeding from the above conclusion, the pivotal question that must be
answered is whether Estebans acts constitute just cause to terminate her
employment.
Loss of trust and confidence to be a valid cause for dismissal must be work
related such as would show the employee concerned to be unfit to continue
working for the employer and it must be based on a wilful breach of trust
and founded on clearly established facts.25 Such breach is wilful if it is done
intentionally, knowingly, and purposely, without justifiable excuse as
distinguished from an act done carelessly, thoughtlessly, heedlessly or
inadvertently.26 The loss of trust and confidence must spring from the
voluntary or wilful act of the employee, or by reason of some blameworthy
act or omission on the part of the employee.27
In this case, the Court finds that the acts committed by Esteban do not
amount to a wilful breach of trust. She admitted that she accessed the POS
system28 with the use of the unauthorized "123456" password. She did so,
however, out of curiosity and without any obvious intention of defrauding
the petitioner. As professed by Esteban, "she was acting in good faith in
verifying what her co-staff told her about the opening of the computer by the
use of the "123456" password, x x x. She even told her co-staff not to open
again said computer, and that was the first and last time she opened said
computer."29 Moreover, the petitioner even admitted that Esteban has her
own password to the POS system. If it was her intention to manipulate the
stores inventory and funds, she could have done so long before she had

knowledge of the unauthorized password. But the facts on hand show that
she did not. The petitioner also failed to establish a substantial connection
between Estebans use of the "123456" password and any loss suffered by
the petitioner. Indeed, it may be true that, as posited by the petitioner, it is
the fact that she used the password that gives cause to the loss of trust and
confidence on Esteban. However, as ruled above, such breach must have
been done intentionally, knowingly, and purposely, and without any
justifiable excuse, and not simply something done carelessly, thoughtlessly,
heedlessly or inadvertently. To the Courts mind, Estebans lapse is, at best, a
careless act that does not merit the imposition of the penalty of dismissal.
The Court is not saying that Esteban is innocent of any breach of company
policy.1wphi1 That she relayed the password to another employee is
likewise demonstrative of her mindless appreciation of her duties as a sales
clerk in the petitioners employ. But absent any showing that her acts were
done with "moral perverseness" that would justify the claimed loss of trust
and confidence attendant to her job,30 the Court must sustain the conclusion
that Esteban was illegally dismissed. As stated by the CA, "[s]uspension
would have sufficed as punishment, considering that the petitioner had
already been with the company for more than 2 years, and the petitioner
apologized and readily admitted her mistake in her written explanation, and
considering that no clear and convincing evidence of loss or prejudice,
which was suffered by the [petitioner] from [Estebans] supposed
infraction."31
Preventive suspension during
investigation
Preventive suspension is a measure allowed by law and afforded to the
employer if an employees continued employment poses a serious and
imminent threat to the employers life or property or of his co-workers.32 It
may be legally imposed against an employee whose alleged violation is the
subject of an investigation.33
In this case, the petitioner was acting well within its rights when it imposed
a 10-day preventive suspension on Esteban. While it may be that the acts
complained of were committed by Esteban almost a year before the
investigation was conducted, still, it should be pointed out that Esteban was
performing functions that involve handling of the petitioners property and

funds, and the petitioner had every right to protect its assets and operations
pending Estebans investigation.34
Sales negative variances as wage
deductions
The petitioner deducted the amount of P8,304.93 from Estebans last salary.
According to the petitioner, this represents the stores negative variance for
the year 2005 to 2006. The petitioner justifies the deduction on the basis of
alleged trade practice and that it is allowed by the Labor Code.
Article 113 of the Labor Code provides that no employer, in his own behalf
or in behalf of any person, shall make any deduction from the wages of his
employees, except in cases where the employer is authorized by law or
regulations issued by the Secretary of Labor and Employment, among
others. The Omnibus Rules Implementing the Labor Code, meanwhile,
provides:
SECTION 14. Deduction for loss or damage. Where the employer is
engaged in a trade, occupation or business where the practice of making
deductions or requiring deposits is recognized to answer for the
reimbursement of loss or damage to tools, materials, or equipment supplied
by the employer to the employee, the employer may make wage deductions
or require the employees to make deposits from which deductions shall be
made, subject to the following conditions:
(a) That the employee concerned is clearly shown to be responsible
for the loss or damage;
(b) That the employee is given reasonable opportunity to show cause
why deduction should not be made;
(c) That the amount of such deduction is fair and reasonable and shall
not exceed the actual loss or damage; and
(d) That the deduction from the wages of the employee does not
exceed 20 percent of the employees wages in a week.
In this case, the petitioner failed to sufficiently establish that Esteban was
responsible for the negative variance it had in its sales for the year 2005 to
2006 and that Esteban was given the opportunity to show cause the

deduction from her last salary should not be made. The Court cannot accept
the petitioners statement that it is the practice in the retail industry to deduct
variances from an employees salary, without more. In Nia Jewelry
Manufacturing of Metal Arts, Inc. v. Montecillo,35 the Court ruled that:
[T]he petitioners should first establish that the making of deductions from
the salaries is authorized by law, or regulations issued by the Secretary of
Labor. Further, the posting of cash bonds should be proven as a recognized
practice in the jewelry manufacturing business, or alternatively, the
petitioners should seek for the determination by the Secretary of Labor
through the issuance of appropriate rules and regulations that the policy the
former seeks to implement is necessary or desirable in the conduct of
business. The petitioners failed in this respect. It bears stressing that without
proofs that requiring deposits and effecting deductions are recognized
practices, or without securing the Secretary of Labor's determination of the
necessity or desirability of the same, the imposition of new policies relative
to deductions and deposits can be made subject to abuse by the
employers.1wphi1 This is not what the law intends.36
WHEREFORE, the petition is PARTIALLY GRANTED. The Decision dated
November 25, 2009 and Resolution dated June 10, 2010 of the Court of
Appeals in CA-G.R. SP No. 107573 insofar as it reinstated with
modification the Decision of the Labor Arbiter dated September 28, 2007 are
AFFIRMED. Insofar as it affirmed respondent Glyza Esteban's preventive
suspension, the same are hereby REVERSED.
The Labor Arbiter is hereby ORDERED to re-compute the monetary award
in favor of Glyza Esteban and to exclude the award of backwages during
such period of preventive suspension, if any.
SO ORDERED.
THIRD DIVISION
G.R. No. 198620, November 12, 2014
P.J. LHUILLIER, INC. AND MARIO RAMON
LUDEA, Petitioners, v. FLORDELIZ VELAYO,Respondent.
DECISION

REYES, J.:
Before this Court is a petition for review on certiorari1 under Rule 45 of the
Decision2 dated June 30, 2011 of the Court of Appeals (CA) in CA-G.R. SP
No. 03069, affirming the finding of the National Labor Relations
Commission (NLRC) that respondent Flordeliz Velayo (respondent) was
illegally dismissed. The Resolution3 dated September 14, 2011 denied the
motion for reconsideration thereof.ChanRoblesVirtualawlibrary
The Facts
The essential antecedent facts are summarized in the assailed CA decision,
to wit:chanroblesvirtuallawlibrary
On June 13, 2003, (herein petitioner) PJ (CEBU) LHUILLIER, INC. (PJ
LHUILLIER for brevity) hired FLORDELIZ M. ABATAYO [sic] as
Accounting Clerk at the LH-4, Cagayan de Oro City Branch with a basic
monthly salary of P9,353.00. On February 9, 2008 appellant (herein private
respondent) was served with a Show Cause Memo by MARIO RAMON
LUDENA, Area Operations Manager of PJ Lhuillier (herein petitioner),
ordering her to explain within 48 hours why no disciplinary action should be
taken against her for dishonesty, misappropriation, theft or embezz[le]ment
of company funds in violation of Item 11, Rule V of the Company Code of
Conduct. Thereafter, (s)he was placed under preventive suspension from
February 9 to March 8, 2008 while her case was under investigation.
The charges against the appellant (herein private respondent) were based on
the Audit Findings conducted on October 29, 2007, where the overage
amount of P540.00 was not reported immediately to the supervisor, not
recorded at the end of that day.
On February 11, 2008, complainant (herein private respondent) submitted
her reply and admitted that she was not able to report the overage to the
supervisor since the latter was on leave on that day and that she was still
tracing the overage; and that the omission or failure to report immediately
the overage (sic) was just a simple mistake without intent to defraud her
employer.
On March 10, 2008, after the conduct of a formal investigation and after
finding complainant's (herein private respondent's) [explanations] without

merit, PJ LHUILLIER (herein petitioner) terminated her employment as per

Notice of Termination on grounds of serious misconduct and breach of
trust.4 (Citation omitted)
On March 14, 2008, the respondent filed a complaint for illegal dismissal,
separation pay and other damages against RJ. Lhuillier, Inc. (PJLI) and
Mario Ramon Ludena, Area Operations Manager (petitioners). On July 23,
2008, the Labor Arbiter (LA) rendered judgment, the dispositive portion of
which reads as follows:chanroblesvirtuallawlibrary
WHEREFORE, in view of all the foregoing, judgment is hereby entered
ordering the dismissal of the instant complaint for lack of merit.
SO ORDERED.5chanrobleslaw
The LA found that the respondent's termination was valid and based not on a
mere act of simple negligence in the performance of her duties as
cashier:chanroblesvirtuallawlibrary
This is not a case of simple negligence as the facts show that complainant,
instead of reporting the matter immediately, had set aside the P540.00 for
her personal use instead of reporting the overage or recording it in the
operating system of the company.
Complainant is not entitled to moral as well as exemplary damages for lack
of basis.6chanrobleslaw
On appeal, the NLRC in its Decision dated March 19, 2009 countermanded
the LA, holding that the respondent was illegally dismissed since the
petitioners failed to prove a just cause of serious misconduct and willful
breach of trust:chanroblesvirtuallawlibrary
In fine, the Labor Arbiter a quo utterly disregarded the rule on
proportionality that has been observed in a number of cases, that is, "the
penalty imposed should be commensurate to the gravity of his offense." x x
x
xxxx
In the instant case, PJ LHUILLIER was not able to discharge the burden of
proving that the dismissal of the complainant was for valid or just causes of

serious misconduct and willful breach of trust. Thus, We disagree with the
Labor Arbiter's findings and conclusion that complainant was validly
dismissed from service.
xxxx
... Significantly, the complainant's omission or procedural lapse did not
cause any loss or damage to the company.7chanrobleslaw
Nonetheless, finding that the relations between the petitioners and the
respondent have become strained, the NLRC did not order the reinstatement
of the respondent. Thus:chanroblesvirtuallawlibrary
WHEREFORE, the instant appeal is GRANTED. The assailed decision is
hereby SET ASIDE and REVERSED, and a new one entered declaring that
complainant was ILLEGALLY DISMISSED. Accordingly, respondent PJ
(CEBU) LHUILLIER, INC. is hereby
ORDERED:chanroblesvirtuallawlibrary
(a) to pay complainant separation pay equivalent to one (1) month salary for
every year of service, a fraction of at least six (6) months being considered
as one (1) whole year in lieu of reinstatement due to strained relationship,
computed from June 13, 2003 up to the finality of the promulgation of this
judgment;cralawlawlibrary
(b) to pay complainant FULL BACKWAGES in accordance with
Bustamante vs. NLRC ruling (265 SCRA 061); and
(c) to pay ten percent (10%) of the total money award as attorney's fees.
SO ORDERED.8chanrobleslaw
The NLRC subsequently denied the petitioners' motion for reconsideration
thereof. On July 31, 2009, the petitioners filed a petition for certiorari in the
CA with prayer for issuance of a temporary restraining order (TRO) and/or
writ of preliminary injunction, invoking the following
issues:chanroblesvirtuallawlibrary
I

WHETHER OR NOT THE RESPONDENT [NLRC] COMMITTED

GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR IN
EXCESS OF JURISDICTION WHEN IT DEVIATED FROM THE
FINDINGS OF FACTS OF THE HONORABLE LABOR
ARBITER.ChanRoblesVirtualawlibrary
II
WHETHER OR NOT PETITIONERS ARE ENTITLED TO THE
ISSUANCE OF A TEMPORARY RESTRAINING ORDER AND/OR
WRIT OF PRELIMINARY INJUNCTION PENDING THE RESOLUTION
OF THE INSTANT PETITION.9chanrobleslaw
The respondent filed her comment on August 19, 2009. On October 8, 2009,
the petitioners filed an urgent motion to resolve their petition
for certiorari and prayer for TRO and/or writ of preliminary injunction. On
November 9, 2009, the CA denied the petitioners' prayer for TRO stating
that they have not shown that they stood to suffer grave and irreparable
injury if the TRO was denied. The remaining issue in the CA, then, was
whether the NLRC acted with grave abuse of discretion amounting to lack or
excess of jurisdiction when it set aside the factual conclusion and ruling of
the LA. The CA ruled in the negative:chanroblesvirtuallawlibrary
We concur with the NLRC in finding for private respondent. Time and
again, the Supreme Court has held that it is cruel and unjust to impose the
drastic penalty of dismissal if not commensurate to the gravity of the
misdeed.
In employee termination disputes, the employer bears the burden of proving
that the employee's dismissal was for just and valid cause. In the instant
case, the evidence does not support the finding of the Labor Arbiter that
private respondent is guilty of serious misconduct.
In this jurisdiction, the Supreme Court has consistently defined misconduct
as an improper or wrong conduct, a transgression of some established and
definite rule of action, a forbidden act, a dereliction of duty, willful in
character, implies wrongful intent and not mere error of judgment. To be a
just cause for termination under Article 282 of the Labor Code of the
Philippines, the misconduct must be serious, that is, it must be of such grave

and aggravated character and not merely trivial or unimportant. However

serious, such misconduct must nevertheless be in connection with the
employee's work; the act complained of must be related to the performance
of the employee's duties showing him to be unfit to continue working for the
employer.
Private respondent's lapse was not a "serious" one, let alone indicative
of serious misconduct. In fact, she (herein private respondent) admitted that
she was not able to report the overage to the supervisor since the latter was
on leave on that day and that she was still tracing the overage; and that the
omission or failure to report immediately the overage was just a simple
mistake without intent to defraud her employer. As found by the NLRC,
private respondent worked for petitioner for almost six (6) years, and it is
not shown that she committed any infraction of company rules during her
employment. In fact, private respondent was once awarded by petitioner due
to her heroic act of defending her Manager, Ms. Lilibeth Cortez, while
resisting a hold-upper.
The settled rule is that when supported by substantial evidence, factual
findings made by quasi-judicial and administrative bodies are accorded great
respect and even finality by the courts. These findings are not infallible,
though; 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.
Hence, when factual findings of the Labor Arbiter and the NLRC are
contrary to each other, there is a necessity to review the records to determine
which conclusions are more conformable to the evidentiary facts. The case
before Us shows that the finding of the NLRC is supported by substantive
evidence as compared to the finding of the Labor Arbiter with respect to the
issue of illegal dismissal. Moreover, in case of doubt, such cases should be
resolved in favor of labor, pursuant to the social justice policy of labor laws
and the Constitution.
Finally, it is a time-honored principle that although it is the prerogative of
management to employ the services of a person and likewise to discharge
him, such is not without limitations and restrictions. The dismissal of an
employee must be done with just cause and without abuse of discretion. It
must not be done in an arbitrary and despotic manner. To hold otherwise
would render nugatory the security of tenure clause enshrined in the
Constitution.10 (Citations omitted and emphasis ours)

Invoking Article 27911 of the Labor Code, the CA agreed with the NLRC that
the respondent should have been reinstated without loss of seniority rights
and other privileges, with payment of her full backwages, inclusive of
allowances and other benefits or their monetary equivalent computed from
the time her compensation was withheld up to the time of actual
reinstatement. However, with the parties' relations now strained, the CA
conceded that the payment of a separation pay, along with backwages as a
separate and distinct relief, is an acceptable alternative to reinstatement. The
CA further awarded the respondent attorney's fees since she was forced to
litigate and incur expenses to protect her rights and interests by reason of the
unjustified acts of the petitioners.ChanRoblesVirtualawlibrary
Petition for Review in the Supreme Court
In this petition, the petitioners raise the following
issues:chanroblesvirtuallawlibrary
I.

II.

WHETHER OR NOT THE MISAPPROPRIATION BY A

PAWNSHOP PERSONNEL IN THE AMOUNT OF [P]540.00,
COUPLED WITH SUBSEQUENT DENIALS, AMOUNT TO A
SERIOUS MISCONDUCT IN OFFICE?
WHETHER OR NOT THE IMPOSITION OF THE PENALTY OF
TERMINATION FROM OFFICE [UPON] A PAWNSHOP
PERSONNEL WHO MISAPPROPRIATED AN AMOUNT OF
P540.00 FROM THE COFFERS OF THE PAWNSHOP, AND WHO
MADE SUBSEQUENT DENIALS, IS CRUEL AND UNJUST?12

The appellate court agreed with the NLRC that the respondent's lapse was
"just a simple mistake without intent to defraud her employer;"13 that the
incident was neither serious nor indicative of serious misconduct; and that
her dismissal was disproportionate to her offense. It accepted the
respondent's explanation that her failure to report her cash overage of
P540.00 on October 29, 2007 to the branch manager, who was her
immediate superior, was because the latter was then on leave, and that for
days thereafter, she was hard-pressed in trying to trace and determine the
cause thereof. The CA noted that the respondent had worked for PJLI for
almost six years without any previous infractions of company rules, and that

she was once commended for a heroic act of defending her former branch
manager, Ms. Lilibeth Cortez, during a branch holdup.
On the other hand, the petitioners strongly maintain that under Rule V(A)
(11) of its Code of Conduct on "Dishonesty, Misappropriation, Theft or
Embezzlement of Company Funds or Property," the respondent committed a
"First Level Offense" which is punishable by outright dismissal. According
to the petitioners, the respondent committed the following acts which
constitute dishonesty and serious misconduct:chanroblesvirtuallawlibrary
1. The respondent did not enter the discovered cash overage in the
"operating system" (computerized cash ledger) of the branch on
October 29, 2007 notwithstanding that she was fully aware of the
company's policy that such unexplained receipt should be recorded
at the end of the business day;cralawlawlibrary
2. The respondent did not report the cash overage to her immediate
superior, Branch Manager Violette Grace Tuling (Tuling), upon the
latter's return from a leave of absence on November 3, 2007. Neither
did the respondent seek Tuling's help concerning the matter, and just
averred that she was afraid to be scolded by Tuling;cralawlawlibrary
3. The respondent deliberately lied about her cash overage after Tuling
confronted her on December 17, 2007;cralawlawlibrary
4. Again, the respondent falsely denied the cash overage when the
company auditor asked her to explain how it happened; and
5. The respondent concocted a cover-up by claiming that a computer
glitch occurred when she was about to post the cash overage in the
operating system.14
Ruling of the Court
There is merit in the petition.
It need not be stressed that the nature or extent of the penalty imposed on an
erring employee must be commensurate to the gravity of the offense as
weighed against the degree of responsibility and trust expected of the
employee's position. On the other hand, the respondent is not just charged

with a misdeed, but with loss of trust and confidence under Article 282(c) of
the Labor Code, a cause premised on the fact that the employee holds a
position whose functions may only be performed by someone who enjoys
the trust and confidence of management. Needless to say, such an employee
bears a greater burden of trustworthiness than ordinary workers, and the
betrayal of the trust reposed is the essence of the loss of trust and confidence
which is a ground for the employee's dismissal.15
The respondent's misconduct must
be viewed in light of the strictly fiduciary
nature of her position.
In addition to its pawnshop operations, the PJLI offers its "Pera Padala"
cash remittance service whereby, for a fee or "sending charge," a customer
may remit money to a consignee through its network of pawnshop branches
all over the country. On October 29, 2007, a customer sent P500.00 through
its branch in Capistrano, Cagayan de Oro City, and paid a remittance fee of
P40.00. Inexplicably, however, no corresponding entry was made to
recognize the cash receipt of P540.00 in the computerized accounting system
(operating system) of the PJLI. The respondent claimed that she tried very
hard but could not trace the source of her unexplained cash surplus of
P540.00, but a branch audit conducted sometime in December 2007 showed
that it came from a "Pera Padala"customer.
To be sure, no significant financial injury was sustained by the PJLI in the
loss of a mere P540.00 in cash, which, according to the respondent she
sincerely wanted to account for except that she was pre-empted by fear of
what her branch manager might do once she learned of it. But in treating the
respondent's misconduct as a simple negligence or a simple mistake, both
the CA and the NLRC grossly failed to consider that she held a position of
utmost trust and confidence in the company.
There are two classes of corporate positions of trust: on the one hand are
the managerialemployees whose primary duty consists of the management
of the establishment in which they are employed or of a department or a
subdivision thereof, and other officers or members of the managerial staff;
on the other hand are the fiduciary rank-and-file employees, such as
cashiers, auditors, property custodians, or those who, in the normal exercise
of their functions, regularly handle significant amounts of money or
property. These employees, though rank-and-file, are routinely charged with

the care and custody of the employer's money or property, and are thus
classified as occupying positions of trust and confidence.16
The respondent was first hired by the petitioners as an accounting clerk on
June 13, 2003, for which she received a basic monthly salary of P9,353.00.
On October 29, 2007, the date of the subject incident, she performed the
function of vault custodian and cashier in the petitioners' Branch 4
pawnshop in Capistrano, Cagayan de Oro City. In addition to her custodial
duties, it was the respondent who electronically posted the day's transactions
in the books of accounts of the branch, a function that is essentially separate
from that of cashier or custodian. It is plain to see then that when both
functions are assigned to one person to perform, a very risky situation of
conflicting interests is created whereby the cashier can purloin the money in
her custody and effectively cover her tracks, at least temporarily, by simply
not recording in the books the cash receipt she misappropriated. This is
commonly referred to as lapping of accounts.17 Only a most trusted clerk
would be allowed to perform the two functions, and the respondent enjoyed
this trust.
The series of willful misconduct
committed by the respondent in
mishandling the unaccounted cash
receipt exposes her as unworthy
of the utmost trust inherent in her
position as branch cashier and vault
custodian and bookkeeper.
The respondent insists that she never intended to appropriate the money but
was afraid that Tuling would scold her, and that she kept the money for a
long time in her drawer and only decided to take it home after her search for
the cause of the cash overage had proved futile. Both the CA and the NLRC
agreed with her, and held that what she committed was a simple mistake or
simple negligence.
The Court disagrees.
Granting arguendo that for some reason not due to her fault, the respondent
could not trace the source of the cash surplus, she nonetheless well knew and
understood the company's policy that unexplained cash must be treated as
miscellaneous income under the account "Other Income," and that the same

must be so recognized and recorded at the end of the day in the branch books
or "operating system." No such entry was made by the respondent, resulting
in unrecorded cash in her possession of P540.00, which the company learned
about only two months thereafter through a branch audit.
Significantly, when Tuling returned on November 3, 2007 from her leave of
absence, the respondent did not just withhold from her the fact that she had
an unaccounted overage, but she refused to seek her help on what to do
about it, despite having had five days to mull over the matter until Tuling's
return.
In order that an employer may invoke loss of trust and confidence in
terminating an employee under Article 282(c) of the Labor Code, certain
requirements must be complied with, namely: (1) the employee must be
holding a position of trust and confidence; and (2) there must be an act that
would justify the loss of trust and confidence.18 While loss of trust and
confidence should be genuine, it does not require proof beyond reasonable
doubt,19 it being sufficient that there is some basis to believe that the
employee concerned is responsible for the misconduct and that the nature of
the employee's participation therein rendered him unworthy of trust and
confidence demanded by his position.20
The petitioners are fully justified in claiming loss of trust and confidence in
the respondent. While it is natural and understandable that the respondent
should feel apprehensive about Tuling's reaction concerning her cash
overage, considering that it was their first time to be working together in the
same branch, we must keep in mind that the unaccounted cash can only be
imputed to the respondent's own negligence in failing to keep track of the
transaction from which the money came. A subsequent branch audit revealed
that it came from a "Pera Padala" remittance, implying that although the
amount had been duly remitted to the consignee, the sending branch failed to
record the payment received from the consigning customer. For days
following the overage, the respondent tried but failed to reconcile her
records, and for this inept handling of a "Pera Padala" remittance, she
already deserved to be sanctioned.
Further, as a matter of strict company policy, unexplained cash is recognized
at the end of the day as miscellaneous income. Inexplicably, despite being
with the company for four years as accounting clerk and cashier, the
respondent failed to make the required entry in the branch operating system

recognizing miscellaneous income. Such an entry could have been easily

reversed once it became clear how the overage came about. But the
respondent obviously thought that by skipping the entry, she could keep
Tuling from learning about the overage. Her trustworthiness as branch
cashier and bookkeeper has been irreparably tarnished. The respondent's
untrustworthiness is further demonstrated when she began to concoct lies
concerning the overage: first, by denying its existence to Tuling and again to
the company auditor; later, when she falsely claimed that a computer glitch
or malfunction had prevented her from posting the amount on October 29,
2007; and finally, when she was forced to admit before the company's
investigating panel that she took and spent the money.[21
Mere substantial evidence is
sufficient to establish loss of trust
and confidence
The respondent's actuations were willful and deliberate. A cashier who,
through carelessness, lost a document evidencing a cash receipt, and then
wilfully chose not to record the excess cash as miscellaneous income and
instead took it home and spent it on herself, and later repeatedly denied or
concealed the cash overage when confronted, deserves to be dismissed.
Article 28222 of the Labor Code allows an employer to dismiss an employee
for willful breach of trust or loss of confidence. It has been held that a
special and unique employment relationship exists between a corporation
and its cashier. Truly, more than most key positions, that of a cashier calls
for utmost trust and confidence,23 and it is the breach of this trust that results
in an employer's loss of confidence in the employee.24 In San Miguel
Corporation v. NLRC, et al.,25cralawred the Court
held:chanroblesvirtuallawlibrary
As a rule this Court leans over backwards to help workers and employees
continue in their employment. We have mitigated penalties imposed by
management on erring employees and ordered employers to reinstate
workers who have been punished enough through suspension. However,
breach of trust and confidence and acts of dishonesty and infidelity
inthe handling of funds and properties are an entirely different
matter. 26 (Emphasis ours)
It has been held that in dismissing a cashier on the ground of loss of

confidence, it is sufficient that there is some basis for the same or that the
employer has a reasonable ground to believe that the employee is
responsible for the misconduct, thus making him unworthy of the trust and
confidence reposed in him.27 Therefore, if there is sufficient evidence to
show that the employer has ample reason to distrust the employee, the labor
tribunal cannot justly deny the employer the authority to dismiss him.
[28
Indeed, employers are allowed wider latitude in dismissing an employee
for loss of trust and confidence, as the Court held in Atlas Fertilizer
Corporation v. NLRC:[29
As a general rule, employers are allowed a wider latitude of discretion in
terminating the services of employees who perform functions which by their
nature require the employer's full trust and confidence. Mere existence of
basis for believing that the employee has breached the trust of the employer
is sufficient and does not require proof beyond reasonable doubt. Thus,
when an employee has been guilty of breach of trust or his employer has
ample reason to distrust him, a labor tribunal cannot deny the employer the
authority to dismiss him. x x x.30 (Citations omitted)
Furthermore, it must also be stressed that only substantial evidence is
required in order to support a finding that an employer's trust and confidence
accorded to its employee had been breached. As explained in Lopez v.
Alturas Group of Companies:[31
[T]he language of Article 282(c) of the Labor Code states that the loss of
trust and confidence must be based on willful breach of the trust reposed
in the employee by his employer. Such breach is willful if it is done
intentionally, knowingly, and purposely, without justifiable excuse, as
distinguished from an act done carelessly, thoughtlessly, heedlessly or
inadvertently. Moreover, it must be based onsubstantial evidence and not
on the employer's whims or caprices or suspicionsotherwise, the
employee would eternally remain at the mercy of the employer. Loss of
confidence must not be indiscriminately used as a shield by the employer
against a claim that the dismissal of an employee was arbitrary. And, in order
to constitute a just cause for dismissal, the act complained of must be
work-related and shows that the employee concerned is unfit to
continue working for the employer. In addition, loss of confidence as a
just cause for termination of employment is premised on the fact that
the employee concerned holds a position of responsibility, trust and
confidence or that the employee concerned is entrusted with confidence with

respect to delicate matters, such as the handling or care and protection

of the property and assets of the employer. The betrayal of this trust is the
essence of the offense for which an employee is penalized.32 (Emphasis and
underscoring in the original)
In holding a position requiring full trust and confidence, the respondent gave
up some of the rigid guarantees available to ordinary employees. She
insisted that her misconduct was just an "innocent mistake," and maybe it
was, had it been committed by other employees. But surely not as to the
respondent who precisely because of the special trust and confidence given
her by her employer must be penalized with a more severe sanction.33
A cashier's inability to safeguard
and account for missing cash is sufficient
cause to dismiss her.
The respondent insisted that she never intended to misappropriate the
missing fund, but in Santos v. San Miguel Corp.,34 the Court held that
misappropriation of company funds, notwithstanding that the shortage has
been restituted, is a valid ground to terminate the services of an employee
for loss of trust and confidence.35 Also, in Caeda v. Philippine Airlines,
Inc. ,36 the Court held that it is immaterial what the respondent's intent was
concerning the missing fund, for the undisputed fact is that cash which she
held in trust for the company was missing in her custody. At the very least,
she was negligent and failed to meet the degree of care and fidelity
demanded of her as cashier. Her excuses and failure to give a satisfactory
explanation for the missing cash only gave the petitioners sufficient reason
to lose confidence in her.37 As it was held in Metro Drug Corporation v.
NLRC:38
It would be most unfair to require an employer to continue employing as
its cashier a person whom it reasonably believes is no longer capable of
giving full and wholehearted trustworthiness in the stewardship of company
funds.39chanrobleslaw
WHEREFORE, premises considered, the petition is
hereby GRANTED. The Decision dated June 30, 2011 of the Court of
Appeals in CA-G.R. SP No. 03069 is REVERSED and SET ASIDE. The
Decision of the Labor Arbiter dated July 23, 2008 is REINSTATED.

SO ORDERED.
SECOND DIVISION
WENSHA SPA CENTER,
INC. and/or XU ZHI JIE,
Petitioners,

G.R. No. 185122

Present:
CARPIO, J., Chairperson,
NACHURA,
PERALTA,
ABAD, and
MENDOZA, JJ.

- versus -

Promulgated:
LORETA T. YUNG,
Respondent.

August 16, 2010

X -------------------------------------------------------------------------------------- X
DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules
of Court filed by an employer who was charged before the National Labor
Relations Commission (NLRC) for dismissing an employee upon the advice
of a Feng Shui master. In this action, the petitioners assail the May 28, 2008
Decision[1] and October 23, 2008 Resolution[2] of the Court of
Appeals (CA) in CA-G.R. SP No. 98855 entitled Loreta T. Yung v. National
Labor Relations Commission, Wensha Spa Center, Inc. and/or Xu Zhi Jie.
THE FACTS:

Wensha Spa Center, Inc. (Wensha) in Quezon City is in the business

of sauna bath and massage services. Xu Zhi Jie a.k.a. Pobby Co (Xu) is its
president,[3] respondent Loreta T. Yung (Loreta) was its administrative
manager at the time of her termination from employment.
In her position paper,[4] Loreta stated that she used to be employed by
Manmen Services Co., Ltd. (Manmen) where Xu was a client. Xu was
apparently impressed by Loretas performance. After he established Wensha,
he convinced Loreta to transfer and work at Wensha. Loreta was initially
reluctant to accept Xus offer because her job at Manmen was stable and she
had been with Manmen for seven years. But Xu was persistent and offered
her a higher pay. Enticed, Loreta resigned from Manmen and transferred to
Wensha. She started working on April 21, 2004 as Xus personal assistant
and interpreter at a monthly salary ofP12,000.00.
Loreta introduced positive changes to Wensha which resulted in
increased business. This pleased Xu so that on May 18, 2004, she was
promoted to the position of Administrative Manager.[5]
Loreta recounted that on August 10, 2004, she was asked to leave her
office because Xu and a Feng Shui master were exploring the
premises. Later that day, Xu asked Loreta to go on leave with pay for one
month. She did so and returned on September 10, 2004. Upon her return, Xu
and his wife asked her to resign from Wensha because, according to the Feng
Shui master, her aura did not match that of Xu. Loreta refused but was
informed that she could no longer continue working at Wensha. That same
afternoon, Loreta went to the NLRC and filed a case for illegal dismissal
against Xu and Wensha.
Wensha and Xu denied illegally terminating Loretas employment.
They claimed that two months after Loreta was hired, they received various
complaints against her from the employees so that on August 10, 2004, they
advised her to take a leave of absence for one month while they conducted
an investigation on the matter. Based on the results of the investigation, they
terminated Loretas employment on August 31, 2004 for loss of trust and
confidence.[6]

The Labor Arbiter (LA) Francisco Robles dismissed Loretas complaint

for lack of merit. He found it more probable that Loreta was dismissed from
her employment due to Wenshas loss of trust and confidence in her. The LAs
decision[7] partly reads:
However, this office has found it dubious and hard to
believe the contentions made by the complainant that she was
dismissed by the respondents on the sole ground that she is a
mismatch in respondents' business as advised by an alleged
Feng Shui Master. The complainant herself alleged in her
position paper that she has done several improvements in
respondents business such as uplifting the morale and efficiency
of its employees and increasing respondents clientele, and that
respondent Co was very much pleased with the improvements
made by the complainant that she was offered twice a
promotion but she nevertheless declined. It would be against
human experience and contrary to business acumen to let go of
someone, who was an asset and has done so much for the
company merely on the ground that she is a mismatch to the
business. Absent any proof submitted by the complainant, this
office finds it more probable that the complainant was
dismissed due to loss of trust and confidence.[8]
This ruling was affirmed by the NLRC in its December 29, 2006
Resolution,[9] citing its observation that Wensha was still considering the
proper action to take on the day Loreta left Wensha and filed her
complaint. The NLRC added that this finding was bolstered by
Wenshas September 10, 2004 letter to Loreta asking her to come back to
personally clarify some matters, but she declined because she had already
filed a case.
Loreta moved for a reconsideration of the NLRCs ruling but her
motion was denied. Loreta then went to the CA on a petition for
certiorari. The CAreversed the ruling of the NLRC on the ground that it
gravely abused its discretion in appreciating the factual bases that led to
Loretas dismissal. The CA noted that there were irregularities and
inconsistencies in Wenshas position. The CA stated the following:

We, thus, peruse the affidavits and documentary evidence

of the Private Respondents and find the following: First, on the
affidavits of their witnesses, it must be noted that the same were
mere photocopies. It was held that [T]he purpose of the rule in
requiring the production of the best evidence is the prevention
of fraud, because if a party is in possession of such evidence
and withholds it, and seeks to substitute inferior evidence in its
place, the presumption naturally arise[s] that the better
evidence is withheld for fraudulent purposes which its
production would expose and defeat. Moreover, the affidavits
were not executed under oath. The rule is that an affiant must
sign the document in the presence of and take his oath before a
notary public as evidence that the affidavit was properly
made. Guided by these principles, the affidavits cannot be
assigned any weighty probative value and are mere scraps of
paper the contents of which are hearsay. Second, on the sales
report and order slips, which allegedly prove that Yung had
been charging her food and drinks to Wensha, the said pieces of
evidence do not, however, bear Yungs name thereon or even her
signature. In fact, it does not state anyones name, except that of
Wensha. Hence, it would simply be capricious to pinpoint, or
impute, on Yung as the author in charging such expenses to
Wensha on the basis of hearsay evidence. Third, while the
affidavit of Wenshas Operations Manager, Princess delos Reyes
(delos Reyes), may have been duly executed under oath, she did
not, however, specify the alleged infractions that Yung
committed. If at all, delos Reyes only made general statements
on the alleged complaints against Yung that were not even
substantiated by any other piece of evidence. Finally, the daily
time records (DTRs) of Yung, which supposedly prove her
habitual tardiness, were mere photocopies that are not even
signed by Wenshas authorized representative, thus suspect, if
not violative of the best evidence rule and, therefore,
incompetent evidence. x x x [Emphases appear in the original]
x x x x.
Finally, after the Private Respondents filed their position
paper, they alleged mistake on the part of their former counsel

in stating that Yung was dismissed on August 31, 2004. Thus,

they subsequently moved for the admission of their
rejoinder. Notably, however, the said rejoinder was
dated October 4, 2004, earlier than the date when their position
paper was filed, which was on November 3, 2004. It is also
puzzling that their position paper was datedNovember 25, 2004,
much later than its date of filing. The irregularities are simply
too glaring to be ignored. Nevertheless, the Private
Respondents admission of Yungs termination on August 31,
2004 cannot be retracted. They cannot use the mistake of
their counsel as an excuse considering that the position
paper was verified by their Operations Manager, delos
Reyes, who attested to the truth of the contents therein.
[10]
[Emphasis supplied]
Hence, the fallo of the CA decision reads:
WHEREFORE, the instant petition is GRANTED.
Wensha Spa Center, Inc. and Xu Zhi Jie are ORDERED to,
jointly and severally, pay Loreta T. Yung her full backwages,
other privileges, and benefits, or their monetary equivalent,
corresponding to the period of her dismissal from September 1,
2004 up to the finality of this decision, and damages in the
amounts of fifty thousand pesos (Php50,000.00) as moral
damages, twenty five thousand pesos (Php25,000.00) as
exemplary damages, and twenty thousand pesos (Php20,000.00)
as attorneys fees. No costs.
SO ORDERED.[11]

Wensha and Xu now assail this ruling of the CA in this petition

presenting the following:
V.

GROUNDS FOR THE ALLOWANCE OF

THE PETITION

5.1 The following are the reasons and arguments, which

are purely questions of law and some questions of facts, which

justify the appeal by certiorari under Rule 45 of the 1997

Revised Rules of Civil Procedure, as amended, to this
Honorable SUPREME COURT of the assailed Decision and
Resolution, to wit:
5.1.1 The Honorable COURT OF APPEALS
gravely erred in reversing that factual
findings of the Honorable Labor Arbiter
and the Honorable NLRC (Third Division)
notwithstanding recognized and established
rule in our jurisdiction that findings of facts
of quasi-judicial agencies who have gained
expertise on their respective subject matters
are given respect and finality;
5.1.2 The Honorable COURT OF APPEALS
committed grave abuse of discretion and
serious errors when it ruled that findings of
facts of the Honorable Labor Arbiter and the
Honorable NLRC are not supported by
substantial evidence despite the fact that the
records clearly show that petitioner therein
was not dismissed but is under investigation,
and that she is guilty of serious infractions
that warranted her termination;
5.1.3 The Honorable COURT OF APPEALS
grave[ly] erred when it ordered herein
petitioner to pay herein respondent her
separation pay, in lieu of reinstatement, and
full backwages, as well as damages and
attorneys fees;
5.1.4 The Honorable COURT OF APPEALS
committed grave abuse of discretion and
serious errors when it held that petitioner
XU ZHI JIE to be solidarily liable with
WENSHA, assuming that respondent was
illegally dismissed;

5.2 The same need to be corrected as they would work

injustice to the herein petitioner, grave and irreparable damage
will be done to him, and would pose dangerous precedent.[12]
THE COURTS RULING:
Loretas security of tenure is guaranteed by the Constitution and the
Labor Code. The 1987 Philippine Constitution provides in Section 18,
Article II that the State shall protect the rights of workers and promote their
welfare. Section 3, Article XIII also provides that all workers shall be
entitled to security of tenure.Along that line, Article 3 of the Labor Code
mandates that the State shall assure the rights of workers to security of
tenure.
Under the security of tenure guarantee, a worker can only be
terminated from his employment for cause and after due process. For a valid
termination by the employer: (1) the dismissal must be for a valid cause as
provided in Article 282, or for any of the authorized causes under Articles
283 and 284 of the Labor Code; and (2) the employee must be afforded an
opportunity to be heard and to defend himself. A just and valid cause for an
employees dismissal must be supported by substantial evidence, and before
the employee can be dismissed, he must be given notice and an adequate
opportunity to be heard.[13] In the process, the employer bears the burden of
proving that the dismissal of an employee was for a valid cause. Its failure to
discharge this burden renders the dismissal unjustified and, therefore, illegal.
[14]

As a rule, the factual findings of the court below are conclusive on Us

in a petition for review on certiorari where We review only errors of law.
This case, however, is an exception because the CAs factual findings are not
congruent with those of the NLRC and the LA.
According to Wensha in its position paper,[15] it dismissed Loreta
on August 31, 2004 after investigating the complaints against her. Wensha
asserted that her dismissal was a valid exercise of an employers right to
terminate a managerial employee for loss of trust and confidence. It claimed

that she caused the resignation of an employee because of gossips initiated

by her. It was the reason she was asked to take a leave of absence with pay
for one month starting August 10, 2004.[16]
Wensha also alleged that Loreta was sowing intrigues in the company
which was inimical to Wensha. She was also accused of dishonesty, serious
breach of trust reposed in her, tardiness, and abuse of authority.[17]
In its Rejoinder, Wensha changed its position claiming that it did not
terminate Loretas employment on August 31, 2004. It even sent her a notice
requesting her to report back to work. She, however, declined because she
had already filed her complaint.[18]
As correctly found by the CA, the cause of Loretas dismissal is
questionable. Loss of trust and confidence to be a valid ground for dismissal
must have basis and must be founded on clearly established facts.[19]

The Court finds the LA ruling that states, [a]bsent any proof submitted
by the complainant, this office finds it more probable that the complainant
was dismissed due to loss of trust and confidence, [20] to be utterly erroneous
as it is contrary to the applicable rules and pertinent jurisprudence. The onus
of proving a valid dismissal rests on the employer, not on the employee. [21] It
is the employer who bears the burden of proving that its dismissal of the
employee is for a valid or authorized cause supported by substantial
evidence. [22]
According to the NLRC, [p]erusal of the entire records show that
complainant left the respondents premises when she was confronted with the
infractions imputed against her.[23] This information was taken from the
affidavit[24] of Princess Delos Reyes (Delos Reyes) which was dated March
21, 2005, not in Wenshas earlier position paper or pleadings submitted to the
LA. The affidavits[25] of employees attached to Delos Reyes affidavit were
all dated November 19, 2004 indicating that they were not yet executed
when the complaints against Loreta were supposedly being investigated in
August 2004.

It is also noteworthy that Wenshas position paper related that because

of
the
gossips
perpetrated
by
Loreta,
a
certain
Oliva
Gonzalo (Gonzalo) resigned from Wensha. Because of the incident,
Gonzalo, whose father was a policeman, reportedly got angry with
complainant and of the management telling her friends at respondent
company that she would retaliate thus creating fear among those concerned.
[26]
As a result, Loreta was advised to take a paid leave of absence for one
month while Wensha conducted an investigation.
According to Loreta, however, the reason for her termination was her aura
did not match that of Xu and the work environment at Wensha. Loreta
narrated:
On August 10, 2004 however, complainant was called by
respondent Xu and told her to wait at the lounge area while the
latter and a Feng Shui Master were doing some analysis of the
office. After several hours of waiting, respondent Xu then told
complainant that according to the Feng Shui master her Chinese
Zodiac sign is a mismatch with that of the respondents; that
complainant should not enter the administrative office for a
month while an altar was to be placed on the left side where
complainant has her table to allegedly correct the mismatch and
that it is necessary that offerings and prayers have to be made
and said for about a month to correct the alleged
jinx. Respondent Xu instructed complainant not to report to the
office for a month with assurance of continued and regular
salary. She was ordered not to seek employment elsewhere and
was told to come back on the 10th of September 2004.[27]
Although she was a little confused, Loreta did as she was instructed
and did not report for work for a month. She returned to work on September
10, 2004.This is how Loreta recounted the events of that day:
On September 10, 2004, in the morning, complainant
reported to the office of respondents. As usual, she punched-in
her time card and signed in the logbook of the security
guard. When she entered the administrative office, some of its
employees immediately contacted respondent Xu. Respondent
Xu then contacted complainant thru her mobile phone and told

her to leave the administrative office immediately and instead

to wait for him in the dining area.
xxx
Complainant waited for respondent Xu in the dining
area. After waiting for about two (2) hours, respondent Xu was
nowhere. Instead, it was Jiang Xue Qin a.k.a Annie Co, the
Chinese wife of respondent Xu, who arrived and after a short
conversation between them, the former frankly told
complainant that she has to resign allegedly she is a mismatch
to respondent Xu according to the Feng Shui master and
therefore she does not fit to work (sic) with the
respondents. Surprised and shocked, complainant demanded of
Jiang Xue Qin to issue a letter of termination if it were the
reason therefor.
Instead of a termination letter issued, Jiang Xue Qin
insisted for the complainant's resignation. But when
complainant stood her ground, Jian Xue Qin shouted invectives
at her and told to leave the office immediately.
Respondent Xu did not show up but talked to the
complainant over the mobile phone and convinced her likewise
to resign from the company since there is no way to retain her
because her aura unbalanced the area of employment according
to the Feng Shui, the Chinese spiritual art of
placement. Hearing this from no lees than respondent Xu,
complainant left the office and went straight to this Office and
filed the present case on September 10, 2004. xxx[28]
Loreta also alleged that in the afternoon of that day, September 10,
2004, a notice was posted on the Wensha bulletin board that reads:
TO ALL EMPLOYEES OF WENSHA SPA CENTER
WE WOULD LIKE TO INFORM YOU THAT MS. LORIE
TSE YUNG, FORMER ADMINISTRATIVE OFFICER

OF WENSHA SPA CENTER IS NO LONGERCONNECTED

TO THIS COMPANY STARTING TODAY SEPTEMBER 10,
2004.
ANY TRANSACTION MADE BY HER IS NO
LONGER A LIABILITY OF THE COMPANY.
(SGD.) THE MANAGEMENT [Italics were in red letters.][29]

The Court finds Loretas complaint credible. There is consistency in

her pleadings and evidence. In contrast, Wenshas pleadings and evidence,
taken as a whole, suffer from inconsistency. Moreover, the affidavits of the
employees only pertain to petty matters that, to the Courts mind, are not
sufficient to support Wenshas alleged loss of trust and confidence. To be a
valid cause for termination of employment, the act or acts constituting
breach of trust must have been done intentionally, knowingly, and purposely;
and they must be founded on clearly established facts.
The CA decision is supported by evidence and logically flows from a
review of the records. Loretas narration of the events surrounding her
termination from employment was simple and straightforward. Her claims
are more credible than the affidavits which were clearly prepared as an
afterthought.
More importantly, the records are bereft of evidence that Loreta was
duly informed of the charges against her and that she was given the
opportunity to respond to those charges prior to her dismissal. If there were
indeed charges against Loreta that Wensha had to investigate, then it should
have informed her of those charges and required her to explain her
side. Wensha should also have kept records of the investigation conducted
while Loreta was on leave. The law requires that two notices be given to an
employee prior to a valid termination: the first notice is to inform the
employee of the charges against her with a warning that she may be
terminated from her employment and giving her reasonable opportunity
within which to explain her side, and the second notice is the notice to the
employee that upon due consideration of all the circumstances, she is being

terminated from her employment.[30] This is a requirement of due process

and clearly, Loreta did not receive any of those required notices.
We are in accord with the pronouncement of the CA that the
reinstatement of Loreta to her former position is no longer feasible in the
light of the strained relations between the parties. Reinstatement, under the
circumstances, would no longer be practical as it would not be in the interest
of both parties. Under the law and jurisprudence, an illegally dismissed
employee is entitled to two reliefs - backwages and reinstatement, which are
separate and distinct. If reinstatement would only exacerbate the tension and
further ruin the relations of the employer and the employee, or if their
relationship has been unduly strained due to irreconcilable differences,
particularly where the illegally dismissed employee held a managerial or key
position in the company, it would be prudent to order payment of separation
pay instead of reinstatement.[31] In the case of Golden Ace Builders v. Talde,
[32]
We wrote:
Under the doctrine of strained relations, the payment of
separation pay has been considered an acceptable alternative to
reinstatement when the latter option is no longer desirable or
viable. On the one hand, such payment liberates the employee
from what could be a highly oppressive work environment. On
the other, the payment releases the employer from the grossly
unpalatable obligation of maintaining in its employ a worker it
could no longer trust.
In the case at bench, the CA, upon its own assessment, pronounced
that the relations between petitioners and the respondent have become
strained because of her dismissal anchored on dubious charges. The
respondent has not contested the finding. As she is not insisting on being
reinstated, she should be paid separation pay equivalent to one (1) month
salary for every year of service.[33] The CA, however, failed to decree such
award in the dispositive portion. This should be rectified.
Nevertheless, the Court finds merit in the argument of petitioner
Xu that the CA erred in ruling that he is solidarily liable with Wensha.

Elementary is the rule that a corporation is invested by law with a

personality separate and distinct from those of the persons composing it and
from that of any other legal entity to which it may be related. Mere
ownership by a single stockholder or by another corporation of all or nearly
all of the capital stock of a corporation is not of itself sufficient ground for
disregarding the separate corporate personality.[34]
In labor cases, corporate directors and officers may be held solidarily
liable with the corporation for the termination of employment only if done
with malice or in bad faith.[35] Bad faith does not connote bad judgment or
negligence; it imports a dishonest purpose or some moral obliquity and
conscious doing of wrong; it means breach of a known duty through some
motive or interest or ill will; it partakes of the nature of fraud.[36]

In the subject decision, the CA concluded that petitioner Xu and

Wensha are jointly and severally liable to Loreta.[37] We have read the
decision in its entirety but simply failed to come across any finding of bad
faith or malice on the part of Xu. There is, therefore, no justification for such
a ruling. To sustain such a finding, there should be an evidence on record
that an officer or director acted maliciously or in bad faith in terminating the
services of an employee.[38]Moreover, the finding or indication that the
dismissal was effected with malice or bad faith should be stated in the
decision itself.[39]
WHEREFORE, the petition is PARTIALLY GRANTED. The decretal
portion of the May 28, 2008 Decision of the Court of Appeals, in CA-G.R.
SP No. 98855, is hereby MODIFIED to read as follows:
WHEREFORE, the petition is GRANTED. Wensha Spa
Center, Inc. is hereby ordered to pay Loreta T. Yung her full
backwages, other privileges, and benefits, or their monetary
equivalent, and separation pay reckoned from the date of her
dismissal, September 1, 2004, up to the finality of this decision,
plus damages in the amounts of Fifty Thousand (P50,000.00)
Pesos, as moral damages; Twenty Five Thousand (P25,000.00)

Pesos as exemplary damages; and Twenty

(P20,000.00) Pesos, as attorneys fees. No costs.

Thousand

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 148410

January 17, 2005

VICENTE C. ETCUBAN, JR., petitioner,

vs.
SULPICIO LINES, INC., respondent.
DECISION
CALLEJO, SR., J.:
The stakes are high in a position imbued with trust, and for petitioner
Vicente C. Etcuban, Jr., the loss of trust in him by his employer cost him his
job after 16 years of service. He cries that the penalty was too harsh for an
unproved and petty infraction. Upon the other hand, his employer avers that
it acted well within its rights in terminating the petitioners services after the
investigation revealed that the latter failed to live up to the trust and
confidence expected of him as Chief Purser. The Labor Arbiter and the
National Labor Relations Commission (NLRC) agreed with the petitioner,
while the Court of Appeals ruled for the employer.
The Antecedents
Respondent Sulpicio Lines, Inc. is a domestic corporation engaged in the
business domestic shipping. Among its fleet of inter-island vessels was the
M/V Surigao Princess, plying the CebuCagayan de OroJagnaBohol
route.1
The petitioner was employed by the respondent on January 30, 1978 until
his dismissal on June 10, 1994 for loss of trust and confidence.2 At the time

of his dismissal, the petitioner was the Chief Purser of the M/V Surigao
Princess receiving a monthly salary of P5,000.00.3 As the Chief Purser, the
petitioner handled the funds of the vessel and was the custodian of all the
passage tickets and bills of lading.4 It was his responsibility, among other
things, to issue passage tickets and to receive payments from the customers
of the respondent, as well as to issue the corresponding official receipts
therefor.5 He was also tasked to disburse the salaries of the crewmen of the
vessel.6
Sometime in the last week of May 1994, the newly designated jefe de
viaje7 of the M/V Surigao Princess, in a surprise examination, discovered
that several yellow passengers duplicate original8 of yet to be sold or
unissued passage tickets already contained the amount of P88.00 the fare
for adult passengers for the Cagayan de Oro to Jagna, Bohol route. He
noticed that three other original copies which made up the full set did not
bear the same impression, although they were supposed to have been
prepared at the same time. Acting on what appeared to be a strong evidence
of short-changing the company, the jefe de viaje dug deeper on what he
uncovered. As expected, he found inordinate amount of ticket issuances for
children at half the fare of P44.00 in Voyage 434 of the vessel.9 When word
of the anomaly reached the respondent, it waited for the petitioner to return
to Cebu City in the hope of shedding more light on the matter.
On May 30, 1994, shortly after disembarking from the M/V Surigao Princess
at the port of Cebu, the petitioner received a memorandum of even date from
Personnel Officer Artemio F. Aiga relative to the irregularity in the "alleged
involvement in anomaly of ticket issuance," instructing him to forthwith
report to the main office and to explain in writing why no disciplinary action
should be meted on him or to submit himself to an investigation. The
memorandum warned the petitioner that his failure to comply with the
aforementioned instructions would be construed as a waiver of his right to
be heard. It also informed the petitioner of his immediate preventive
suspension until further notice.10 The petitioner, however, refused to
acknowledge receipt of the memorandum which was personally served on
him,11 prompting the respondent to mail the same, and which the petitioner
received days later.121awphi1.nt
Meanwhile, upon his arrival at the office, the petitioner was questioned by
Mr. Carlo S. Go, Senior Executive Vice-President and General Manager of
respondent. Thereafter, petitioner was preliminarily investigated by Mr.

Aiga wherein his statements were taken down.13 After the initial
investigation, the petitioner was told to sign its minutes but he adamantly
refused, claiming the same to be "self-incriminatory."14 The next day, the
petitioner was replaced by Mr. Felix Almonicar as the Chief Purser of the
M/V Surigao Princess.15 As a result of his replacement, the petitioner
thought he was fired from his job.
Barely a week after the petitioners preventive suspension and pending his
administrative investigation, he filed a complaint against the respondent for
illegal dismissal, non-payment of overtime pay, 13th month pay and other
monetary benefits with the NLRC, Regional Arbitration Branch No. VII,
Cebu City. The case was docketed as NLRC No. RAB-VII-06-0607-84. The
petitioner alleged that the ground for his dismissal, i.e., loss of trust and
confidence, was ill-motivated and without factual basis. He did not deny that
the anomalous tickets were in his possession, but denied that he was guilty
of any wrongdoing. He dismissed the handwriting on the tickets as his, and
claimed that he was singled out for the dismissal. He averred that the
"trumped-up" charge was a clever scheme resorted to by his employer so it
could avoid paying him monetary benefits, considering that he was with the
company for more than sixteen (16) years. He argued that assuming that it
was he who wrote those entries in the tickets, the fact remains that they were
still unissued; hence, no money went to his pocket and no material prejudice
was caused to the respondent. According to the petitioner, he would not
jeopardize his livelihood for something as miniscule as P88.00. He prayed
not for reinstatement but for separation pay, monetary benefits plus
damages.16
On June 9, 1994, the respondent received its summons.17 Short of preempting its administrative investigation, coupled with the petitioners
obstinate refusal to submit to further investigation, the respondent decided to
terminate the petitioners employment for loss of trust and confidence in
connection with passage tickets nos. 636742-636748.18 A copy of the notice
of termination19 dated June 10, 1994 was sent by mail to the petitioner.
After hearing on the merits, Labor Arbiter Ernesto F. Carreon rendered his
Decision dated March 13, 1995, finding the petitioners dismissal illegal. He
ruled that the respondent failed to substantiate and prove that the petitioner
committed any wrongdoing. He found the evidence of impression on the
tickets inadequate, considering that the petitioner was not the only person in
the vessel handling or issuing the passage tickets. According to the Labor

Arbiter, the anomalous entries on the unissued tickets could not be attributed
entirely to the petitioner; thus, there was no reason for the respondent to lose
its trust and confidence on the petitioner.20 The dispositive portion of the
decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering
respondent Sulpicio Lines, Inc., to pay the complainant Vicente C. Etcuban,
Jr. the following :
1. Separation pay --------------------------------

P80,480.00

2. Backwages ------------------------------------

40,703.23

3. Proportionate 13th Month Pay -------------

2,235.50
P123,418.73
vvvvvvvvvvvv

The other claims are dismissed for lack of merit.

SO ORDERED.21
Both parties appealed to the NLRC, 4th Division, Cebu City. In its appeal,
the respondent insisted that the dismissal was justified.22 The petitioner, on
the other hand, questioned the computation of his backwages, besides
reiterating his claim for moral damages.23
On February 21, 1996, a Decision24 was rendered by the NLRC affirming the
challenged decision with the modification that the backwages to be paid to
the petitioner shall be reckoned from the time of his actual dismissal on June
10, 1994, up to the issuance of the writ of execution on the finality of the
decision, but not to exceed five (5) years. In fixing the additional backwages,
the NLRC concluded that the respondent has "the open recourse to the
Supreme Court" which could "prolong his (petitioners) agony." The decretal
part of the decision reads:
WHEREFORE, premises considered, the assailed decision is MODIFIED
with respect to the monetary awards. The award of backwages shall be
computed from the date of the actual dismissal or 10 June 1994 up to the
issuance of the Writ of Execution on the finality of the decision in this case
but not to exceed five (5) years. The backwages shall include the

corresponding 13th month pay and leave (sick and vacation) benefits for the
whole period covered.
SO ORDERED.25
In affirming the decision of the Labor Arbiter, the NLRC ruled as follows
We do not find the allegedly highly irregular condition of the tickets valid
reason to even suspend, much less terminate the complainant-appellant for
loss of trust and confidence. It has not been established by clear and
competent evidence that the alleged irregular condition of the tickets
was attributable to the complainant or to other members of the team of
inspectors who have equal access to the tickets. This is vital in view of the
complainants denial to have committed the same. Moreover, there is no
showing at all on record that the respondent suffered damage as a
consequence of the existence of these tickets with entry of the rate or cost
of transportation from Cagayan de Oro City to Jagna, Bohol, or that the
complainant has benefited from the same. To establish loss of confidence,
the employer must have reasonable ground to believe that the employee is
responsible for the misconduct and his participation therein renders him
unworthy of the trust and confidence demanded of his position, and makes
him absolutely unfit to continue with his employment.
With more reason, we do not find valid loss of confidence to warrant
dismissal the alleged "stabbing the back" by the complainant-appellant of
the respondent-appellant by the mere filing of the case. This act of the
complainant-appellant is not a misconduct. It is a valid recourse to the
instrumentality of the government that can give him ample protection and
labor justice especially when he felt that his 16 years of service is being
threatened.26
The respondent filed a motion for reconsideration27 which was denied by the
NLRC in a Resolution28promulgated on April 15, 1996. It stressed its finding
that the petitioners alleged breach of trust was not sufficiently established
by the evidence on record. It further ruled that the petitioners indefinite
suspension from work amounted to his constructive dismissal.29
On June 14, 1996, the respondent filed a petition for certiorari30 with this
Court, ascribing to the NLRC, among others, grave abuse of discretion when
it ruled that the preventive suspension of the petitioner was tantamount to
constructive dismissal. Following the pronouncement in St. Martin Funeral

Home v. NLRC ,31 the petition was referred to the Court of Appeals for its
appropriate action and disposition.32
On December 28, 2000, the Court of Appeals reversed and set aside the
NLRC decision.33 It ruled that there was valid and just cause for the
petitioners dismissal, as there was sufficient basis for loss of trust and
confidence on him. The appellate court amplified that in cases of dismissal
for loss of trust and confidence, it is not required that there is proof beyond
reasonable doubt. It ratiocinated, thus:
The office of a purser involves a high degree of trust and confidence. Private
respondent had access to company funds as it was his sensitive duty to issue
tickets and accept payments from the passengers of the vessel. When the
passenger copies of unissued tickets in his custody were written with the
amount of P88.00 while the other copies were clean, this already constituted
culpable tampering of the tickets. This Court is fully aware of the standard
operating procedure that tickets should be accomplished only at the time of
their issuance and that the duplicate or triplicate copies should contain exact
carbon impressions of the entries in the original copies. It was then highly
anomalous that the original copies of the tickets were already written with
the amount of P88.00 when they were still unissued. More so, because the
amount of P88.00 were not duplicated in the other copies of the tickets.
There was a clear case of tampering of the unissued tickets in private
respondents possession. This clearly was intended to facilitate the anomaly
of entering in the duplicate copies an amount different if not lower than what
is stated in the original copy and remitting to the petitioner the lower
amount.
Complainant was the custodian of the tickets with the authority to issue the
same. The tampered tickets were in his possession. As such, it was therefore
reasonable and logical for petitioner to conclude if not certain a wellgrounded moral conviction that private respondent Etcuban committed the
tampering. Even if it is allowed that another person committed the
tampering, private respondent was still culpable as the tampered tickets were
found in his possession and the same could not have been done without his
conformity or negligence. His possession of the tickets with unexplained
written entries in the passenger copies of the unissued tickets was by itself
sufficient basis enough to prove respondents culpability.1a\^/phi1.net He
was the custodian of the tickets and he should be culpable for any violation
of the integrity of the tickets. On this score, this Court agrees with petitioner

that the anomalous entries in the tickets in his custody was sufficient basis
for petitioner to lose trust and confidence on private respondent.
In cases of dismissal for loss of trust and confidence, it is not required that
there is proof beyond reasonable doubt. It is sufficient that there is sufficient
basis for loss of trust and confidence.34

In the instant case, this Court holds that there was sufficient basis for
petitioner to lose trust and confidence in private respondent so as to justify
his termination. It may be pertinent to note that private respondents overall
conduct is inconsistent with innocence. Private respondent did not wait for
the result of petitioners investigation and filed a complaint for illegal
dismissal despite private respondents admission that he was merely placed
under preventive suspension. Preventive suspension is allowed under
Section 3, Rule XIV of the Implementing Rules of the Labor Code. While it
is true that no penalty should be attached to an employees recourse to the
NLRC, his immediate filing of the case in the light of the discovery of the
anomalous tickets only betrays his culpability.
It bears emphasis that private respondents position as purser was highly
sensitive. As such, he must demonstrate utmost honesty and fidelity to the
trust reposed in him. On its part, petitioner was well within its prerogative to
require from its purser a high degree of uprightness and probity. Their
integrity was impaired by the tampered tickets in his possession. There was
sufficient basis for petitioner to lose trust and confidence in private
respondent. Having lost its trust and confidence, petitioner cannot be
expected to allow private respondent to handle the funds of the corporation.
It would be highly unfair to require petitioner to continue employing private
respondent in such sensitive post in the absence of full trust and confidence.
The requirement of due process has been fully satisfied in the instant case.
Private respondent was served notice for investigation as he himself
admitted that he submitted himself to an investigation on May 30, 1994
though he did not signed (sic) the statement as it was self-incriminatory. It is
true that when he filed the case, private respondent has not been served
notice of termination precisely because he took it upon himself to consider
that he was terminated without waiting for the result of the investigation. At

any rate, after petitioner received the summons of the instant case, it
subsequently served upon private respondent a notice of termination.35
The petitioners motion for reconsideration36 was denied by the Court of
Appeals for lack of merit in its Resolution37 dated May 31, 2001.
Aggrieved at the unfortunate turn of events, the petitioner took the present
recourse, and now asks the Court to reinstate and uphold the NLRC
decision. The petitioner anchors his petition for review on the following
grounds:
I
PUBLIC RESPONDENT ACTED IN VIOLATION OF EXISTING LAWS
WHEN IT ORDERED THE DISMISSAL OF THE PETITIONER DESPITE
HIS LONG YEARS IN THE COMPANY AND THE MINIMAL AMOUNT
INVOLVED IN THE CASE.
II
PUBLIC RESPONDENT ACTED IN VIOLATION OF EXISTING LAWS
AND JURISPRUDENCE IN ORDERING THE DISMISSAL OF
PETITIONER DESPITE THE FACT THAT NO LOSS OR PREJUDICE
WAS SUFFERED BY THE COMPANY FROM HIS SUPPOSED
INFRACTION.
III
PUBLIC RESPONDENT COMMITTED A SERIOUS LEGAL ERROR IN
ORDERING THE DISMISSAL OF THE PETITIONER DESPITE THE
FACT THAT OTHER EMPLOYEES COULD HAVE FILLED-UP THE
TICKETS IN QUESTION.
IV
PUBLIC RESPONDENT LEGALLY ERRED IN DELETING THE
AWARD OF 13th MONTH PAY PREVIOUSLY GRANTED TO
PETITIONER.38
The petition is bereft of merit.

The petitioner insists that his dismissal was without factual and legal basis.
Echoing the findings of the Labor Arbiter and the NLRC, he maintains that
the handwriting on the irregular tickets was not proven to be his. He argues
that the reluctance of the respondent to take on his challenge to subject the
same tickets to a handwriting expert proved his inculpability.39 Moreover, he
points out that the very testimony of the respondents Personnel Officer, Mr.
Aiga, to the effect that the latter had no idea whose handwriting it was on
the questioned tickets, helped clear his innocence.40
Upon the other hand, the respondent counters that there was sufficient basis
for its loss of trust and confidence on petitioner; the tampered tickets were
found in his possession, and as Chief Purser, he was the custodian of the
unissued tickets. The respondent avers that proof beyond reasonable doubt is
not necessary to justify loss of trust and confidence, it being sufficient that
there is some basis to justify it.41
We agree with the respondent.
Law42 and jurisprudence have long recognized the right of employers to
dismiss employees by reason of loss of trust and confidence.43 More so, in
the case of supervisors or personnel occupying positions of responsibility,
loss of trust justifies termination.44 Loss of confidence as a just cause for
termination of employment is premised from the fact that an employee
concerned holds a position of trust and confidence. This situation holds
where a person is entrusted with confidence on delicate matters, such as the
custody, handling, or care and protection of the employers property. But, in
order to constitute a just cause for dismissal, the act complained of must be
"work-related" such as would show the employee concerned to be unfit to
continue working for the employer.45
The degree of proof required in labor cases is not as stringent as in other
types of cases.46 It must be noted, however, that recent decisions of this
Court have distinguished the treatment of managerial employees from that of
rank-and-file personnel, insofar as the application of the doctrine of loss of
trust and confidence is concerned. Thus, with respect to rank-and-file
personnel, loss of trust and confidence as ground for valid dismissal requires
proof of involvement in the alleged events in question, and that mere
uncorroborated assertions and accusations by the employer will not be
sufficient. But as regards a managerial employee, the mere existence of a
basis for believing that such employee has breached the trust of his employer

would suffice for his dismissal. Hence, in the case of managerial employees,
proof beyond reasonable doubt is not required, it being sufficient that there
is some basis for such loss of confidence, such as when the employer has
reasonable ground to believe that the employee concerned is responsible for
the purported misconduct, and the nature of his participation therein renders
him unworthy of the trust and confidence demanded by his position.47
In the present case, the petitioner is not an ordinary rank-and-file employee.
The petitioners work is of such nature as to require a substantial amount of
trust and confidence on the part of the employer. Being the Chief Purser, he
occupied a highly sensitive and critical position and may thus be dismissed
on the ground of loss of trust and confidence. One of the many duties of the
petitioner included the preparation and filling up passage tickets, and
indicating the amounts therein before being given to the passengers. More
importantly, he handled the personnel funds of the MV Surigao Princess.
Clearly, the petitioners position involves a high degree of responsibility
requiring trust and confidence. The position carried with it the duty to
observe proper company procedures in the fulfillment of his job, as it relates
closely to the financial interests of the company.
The requirement that there be some basis or reasonable ground to believe
that the employee is responsible for the misconduct was sufficiently met in
the case at bar. As Chief Purser, the petitioner cannot feign ignorance on the
irregularity as he had custody of the tickets when the anomaly was
discovered. It would not be amiss to suppose that the petitioner, who would
benefit directly or indirectly from the fruits of such fraudulent scheme, was a
party to such irregularity. That there were other pursers who could have done
the irregularity is of no moment. It bears stressing that the petitioner was the
Chief Purser who was tasked to directly supervise each and every purser
under him. While, indeed, it was not proved that he was the one who made
the irregular entries on the tickets, the fact that he did not lift a finger at all
to determine who it was is a sad reflection of his job. In fact, even if the
petitioner had no actual and direct participation in the alleged anomalies, his
failure to detect any anomaly in the passage tickets amounts to gross
negligence and incompetence, which are, likewise, justifiable grounds for
his dismissal. Be that as it may, to our mind, it is no longer necessary to
prove the petitioners direct participation in the irregularity, for what is
material is that his actuations were more than sufficient to sow in his
employer the seed of mistrust and loss of confidence.

Neither are we impressed with the petitioners claim that he was singled out,
or that his dismissal was a ploy to obviate payment of his retirement
benefits. There is nothing in the records to show that beyond making these
allegations, the petitioner did nary of anything to substantiate the same.
Finally, the petitioner theorizes that even assuming that there was evidence
to support the charges against him, his dismissal from the service is
unwarranted, harsh and is not commensurate to his misdeeds, considering
the following: first, his 16 long years of service with the company; second,
no loss or damages was suffered by the company since the tickets were
unissued; third, he had no previous derogatory record; and, lastly, the
amount involved is miniscule.48 Citing jurisprudence,49 he appeals for
compassion and requests that he be merely suspended, or at the very least,
given separation pay for his length of service.501awphi1.nt
We find no merit in the petitioners contention.
We are not unmindful of the foregoing doctrine, but after a careful scrutiny
of the cited cases, the Court is convinced that the petitioners reliance
thereon is misplaced. It must be stressed that in all of the cases cited, the
employees involved were all rank-and-file or ordinary workers. As pointed
out earlier, the rules on termination of employment, penalties for infractions,
insofar as fiduciary employees are concerned, are not necessarily the same
as those applicable to the termination of employment of ordinary employees.
Employers, generally, are allowed a wider latitude of discretion in
terminating the employment of managerial personnel or those of similar rank
performing functions which by their nature require the employers trust and
confidence, than in the case of ordinary rank-and-file employees.51
The fact that the petitioner has worked with the respondent for more than 16
years, if it is to be considered at all, should be taken against him. The
infraction that he committed, vis-a-vis his long years of service with the
company, reflects a regrettable lack of loyalty. Loyalty that he should have
strengthened instead of betrayed. If an employees length of service is to be
regarded as a justification for moderating the penalty of dismissal, it will
actually become a prize for disloyalty, perverting the meaning of social
justice and undermining the efforts of labor to cleanse its ranks of all
undesirables.52

The argument that the petitioner was not guilty of anything because the
tickets were never issued or that he had received nothing from the
passengers that he could short-change the company would not mitigate his
liability, nor efface the respondents loss of trust and confidence in him.
Whether or not the respondent was financially prejudiced is immaterial.
Also, what matters is not the amount involved, be it paltry or gargantuan;
rather the fraudulent scheme in which the petitioner was involved, which
constitutes a clear betrayal of trust and confidence. In fact, there are
indications that this fraudulent act had been done before, and probably
would have continued had it not been discovered.
Moreover, the records show that the petitioner is not as blameless as he
claimed to be. In 1979 and 1980, he was suspended by the respondent for
several company infractions,53 which the petitioner did not deny. It must also
be stressed that when an employee accepts a promotion to a managerial
position or to an office requiring full trust and confidence, he gives up some
of the rigid guaranties available to an ordinary worker. Infractions which, if
committed by others, would be overlooked or condoned or penalties
mitigated may be visited with more serious disciplinary action.54
It cannot be over emphasized that there is no substitute for honesty for
sensitive positions which call for utmost trust. Fairness dictates that the
respondent should not be allowed to continue with the employment of the
petitioner who has breached the confidence reposed on him.55 Unlike other
just causes for dismissal, trust in an employee, once lost, is difficult, if not
impossible, to regain.56 There can be no doubt that the petitioners
continuance in the extremely sensitive fiduciary position of Chief Purser
would be patently inimical to the respondents interests. It would be
oppressive and unjust to order the respondent to take him back, for the law,
in protecting the rights of the employee, authorizes neither oppression nor
self-destruction of the employer.57
Anent the petitioners request for separation pay, the Court is constrained to
deny the same. Well-settled is the rule that separation pay shall be allowed
only in those instances where the employee is validly dismissed for causes
other than serious misconduct or those reflecting on his moral
character.58 Inasmuch as reason for which the petitioner was validly
separated involves his integrity, which is especially required for the position
of purser, he is not worthy of compassion as to deserve at least separation
pay for his length of service.59

WHEREFORE, the petition is DENIED and the assailed Decision and

Resolution of the Court of Appeals are hereby AFFIRMED in toto. No costs.
SO ORDERED.
FIRST DIVISION
JOHN HANCOCK LIFE G.R. No. 169549
INSURANCE CORPORATION
and/or MICHAEL PLAXTON,
Petitioners, Present:
PUNO, C.J., Chairperson,
CARPIO,
- v e r s u s - CORONA,
AZCUNA and
LEONARDO-DE CASTRO, JJ.
JOANNA CANTRE DAVIS,
Respondent. Promulgated:
September 3, 2009
x---------------------------------------------------x
DECISION
CORONA, J.:

Respondent Joanna Cantre Davis was agency administration officer of

petitioner John Hancock Life Insurance Corporation.[1]
On October 18, 2000, Patricia Yuseco, petitioners corporate affairs
manager, discovered that her wallet was missing. She immediately reported
the loss of her credit cards to AIG and BPI Express. To her surprise, she was
informed that Patricia Yuseco had just made substantial purchases using her
credit cards in various stores in the City of Manila. She was also told that a

proposed transaction in Abensons-Robinsons Place was disapproved because

she gave the wrong information upon verification.
Because loss of personal property among its employees had become
rampant in its office, petitioner sought the assistance of the National Bureau
of Investigation (NBI). The NBI, in the course of its investigation, obtained
a security video from Abensons showing the person who used Yusecos credit
cards. Yuseco and other witnesses positively identified the person in the
video as respondent.
Consequently, the NBI and Yuseco filed a complaint for qualified theft
against respondent in the office of the Manila city prosecutor. But because
the affidavits presented by the NBI (identifying respondent as the culprit)
were not properly verified, the city prosecutor dismissed the complaint due
to insufficiency of evidence.
Meanwhile, petitioner placed respondent under preventive suspension
and instructed her to cooperate with its ongoing investigation. Instead of
doing

so,

however,

respondent

filed

complaint

for

illegal

dismissal[2] alleging that petitioner terminated her employment without

cause.
The labor arbiter, in a decision dated May 21, 2002, [3] found that respondent
committed serious misconduct (she was the principal suspect for qualified
theft committed inside petitioners office during work hours). There was a
valid cause for her dismissal. Thus, the complaint was dismissed for lack of
merit.

Respondent appealed[4] the labor arbiters decision to the National Labor

Relations Commission (NLRC) which affirmed the assailed decision on July
31, 2003.[5] Respondent moved for reconsideration but it was denied in a
resolution dated October 30, 2003.[6]
Aggrieved, respondent filed a petition for certiorari[7] in the Court of Appeals
(CA) claiming that the NLRC committed grave abuse of discretion in
affirming the decision of the labor arbiter. She claimed there was no valid
cause for her termination because the city prosecutor of Manila did not find
probable cause for qualified theft against her. The dismissal of the complaint
proved that the charges against her were based on suspicion.
The CA, in its July 4, 2005 decision, [8] found that the labor arbiter and
NLRC merely adopted the findings of the NBI regarding respondents
culpability. Because the affidavits of the witnesses were not verified, they
did not constitute substantial evidence. The labor arbiter and NLRC should
have assessed evidence independently as unsubstantiated suspicions,
accusations and conclusions of employers (did) not provide legal
justification for dismissing an employee. Thus, the CA granted the petition.
Petitioner moved for reconsideration but it was denied. [9] Hence, this
petition.
The issue in this case is whether or not petitioner substantially proved
the presence of valid cause for respondents termination.
Petitioner essentially argues that the ground for an employees dismissal need
only be proven by substantial evidence. Thus, the dropping of charges
against an employee (specially on a technicality such as lack of proper

verification) or his subsequent acquittal does not preclude an employer from

dismissing him due to serious misconduct.
We grant the petition.
Article 282 of the Labor Code provides:
Article 282. Termination by Employer. An employer may
terminate an employment for any of the following causes:
(a)

Serious
misconduct or
willful
disobendience by the employee of the lawful
orders of his employer or his representatives in
connection with his work;

xxxxxxxxx
(e) Other causes analogous to the foregoing.

Misconduct involves the transgression of some established and

definite rule of action, forbidden act, a dereliction of duty, willful in
character, and implies wrongful intent and not mere error in judgment. [10] For
misconduct to be serious and therefore a valid ground for dismissal, it must
be:
1.
2.

of grave and aggravated character and not merely trivial

or unimportant and
connected with the work of the employee.[11]

In this case, petitioner dismissed respondent based on the NBIs

finding that the latter stole and used Yusecos credit cards. But since the theft
was not committed against petitioner itself but against one of its employees,

[12]

respondents misconduct was not work-related and therefore, she could

not be dismissed for serious misconduct.

Nonetheless, Article 282(e) of the Labor Code talks of other
analogous causes or those which are susceptible of comparison to another in
general or in specific detail.[13] For an employee to be validly dismissed for a
cause analogous to those enumerated in Article 282, the cause must involve
a voluntary and/or willful act or omission of the employee.[14]
A cause analogous to serious misconduct is a voluntary and/or willful
act or omission attesting to an employees moral depravity.[15] Theft
committed by an employee against a person other than his employer, if
proven by substantial evidence, is a cause analogous to serious misconduct.
[16]

Did petitioner substantially prove the existence of valid cause for

respondents separation? Yes. The labor arbiter and the NLRC relied not only
on the affidavits of the NBIs witnesses but also on that of respondent. They
likewise considered petitioners own investigative findings. Clearly, they did
not merely adopt the findings of the NBI but independently assessed
evidence presented by the parties. Their conclusion (that there was valid
cause for respondents separation from employment) was therefore supported
by substantial evidence.
All things considered, petitioner validly dismissed respondent for
cause analogous to serious misconduct.

WHEREFORE, the petition is hereby GRANTED. The July 4, 2005

decision and September 1, 2005 resolution of the Court of Appeals in CAG.R. SP No. 81515 are REVERSED and SET ASIDE.
The July 31, 2003 decision and October 30, 2003 resolution of the
National Labor Relations Commission in NLRC CA No. 032865-02
affirming the May 21, 2002 decision of the labor arbiter are REINSTATED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 167286

February 5, 2014

INTERNATIONAL SCHOOL MANILA AND/OR BRIAN

McCAULEY, Petitioners,
vs.
INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE)
AND MEMBERS REPRESENTED BY RAQUEL DAVID CHING,
PRESIDENT, EVANGELINE SANTOS, JOSELYN RUCIO AND
METHELYN FILLER,Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
In this petition for review on certiorari,1 petitioners International School
Manila (hereafter the School) and Brian McCauley seek to set aside the
Decision2 dated November 17, 2004 and the Resolution3 dated February 23,
2005 of the Court of Appeals in CA-G.R. SP No. 79031. The decision of the

appellate court upheld the illegality of respondent Evangeline Santos's

termination from employment in the School, while the assailed resolution
denied the petitioners' motion for reconsideration.
The complaint filed before the Labor Arbiter involved three individual
complainants, aside from the International School Alliance of Educators
(ISAE).4 However, the instant petition concerns only the case of Santos as
the causes of action of the other complainants, Joselyn Rucio and Methelyn
Filler, had since been dismissed by the Labor Arbiter and the Court of
Appeals, respectively.
The Material Facts
Santos was first hired by the School in 1978 as a full-time Spanish language
teacher. In April 1992, Santos filed for and was granted a leave of absence
for the school year 1992-1993. She came back from her leave of absence
sometime in August 1993.5 Upon Santoss return to the School, only one
class of Spanish was available for her to teach. Thus, for the school year
1993-1994, Santos agreed to teach one class of Spanish and four other
classes of Filipino that were left behind by a retired teacher.6
Since it was Santoss first time to teach Filipino, the Schools high school
administrators observed the way she conducted her classes. The results of
the observations on her classes were summarized in Classroom Standards
Evaluation Forms accomplished by the designated observers. In accordance
with said forms, Santos was evaluated in the areas of Planning, the Teaching
Act, Climate, Management and Communication.
On October 26, 1993, Dale Hill, then Assistant Principal, observed Santoss
Filipino II class. In the Classroom Standards Evaluation Form,7 Hill
remarked that the lesson plan that Santos provided "was written with little
detail given." Santos was also noted as needing improvement in the
following criteria: (1) uses effective questioning techniques; (2) is punctual
and time efficient; (3) states and enforces academic and classroom behavior
expectations in a positive manner; and (4) reinforces appropriate behavior.
Hill also stated that Santoss management of the class left much to be

desired. Hill added that "[t]he beginning and the end of the class were poorly
structured with students both coming late and leaving early with no apparent
expectations to the contrary."
On January 17, 1994, Santos submitted to the Personnel Department of the
School a memorandum/form,8 which stated her assignment preference for
the school year 1994-1995. She indicated therein that she planned to return
to the School staff for the said school year and she did not prefer a change of
teaching assignment.
On March 11, 1994, Hill observed Santoss Spanish I class. In the Classroom
Standards Evaluation Form9 he accomplished, Hill stated that Santos needed
improvement on the following areas: (1) uses effective questioning
techniques; (2) uses appropriate praise; (3) deals with students in a fair and
consistent manner; (4) is punctual and time efficient; (5) states and enforces
academic and classroom behavior expectations in a positive manner; (6)
reinforces appropriate behavior; (7) organizes the classroom to enhance
learning and minimize disruption; and (8) states expectations and ideas
clearly.
On May 30, 1994, Hill completed a Summary Evaluation Form10 of Santoss
performance. Hill stated, among others, that Santos should improve on
managing the students punctuality and time efficiency. Hill added that
instructions were not well stated and presented to the class. He said that
Santos needed to identify and state positively the expectations she has for
the students. In a Professional Standards Form11 accomplished on the same
date, Santos was found to be in need of improvement in these areas: (1) has
in-depth knowledge of the appropriate subject matter; and (2) clearly defines
consequences of inappropriate behavior and is consistent in follow through.
In the meantime, for the school year 1994-1995, Santos agreed to teach five
classes of Filipino.12 On November 7, 1994, Santos also informed the School
of her assignment preference for the incoming school year 1995-1996. In a
memorandum/form13 submitted to the Personnel Department of the School,
Santos indicated that she did not prefer a change of teaching assignment. In
the school year 1995-1996, Santos again taught five classes of Filipino.14

On February 1, 1996, then Assistant Principal Peter Loy observed a Filipino

IBS1 class of Santos. In the Classroom Standards Evaluation Form15 he
completed thereafter, Loy noted that Santos needed improvement on the
following aspects: (1) has daily lesson plans written out; (2) incorporates a
variety of activities, resources and teaching strategies into the lesson; (3)
plans for the entire instructional period; (4) provides an instructional
sequence which is clear and logical, leading to stated objectives; (5) uses
effective questioning techniques; (6) develops rapport with and between
students by creating a supportive environment; (7) is punctual and time
efficient; and (8) reinforces appropriate behavior. Loy also observed that
Santos did not meet the minimum standards in these areas of concern: (1)
has clearly defined lesson objectives that tie into unit objectives as well as
into the school curriculum; and (2) states and enforces academic and
classroom behavior expectations in a positive manner.
On February 2, 1996, Loy wrote a memo16 to Santos, calling her attention to
the deficiencies in her planning, to wit:
Good teaching is not something that happens spontaneously all the time.
Good teaching is the result, in part, of hard work and planning. Clearly the
planning for your classes, as indicated by the absence of detailed lesson
plans, has resulted in below standard instruction. This is simply not
acceptable. A review of your planning book shows less-than-skeletal entries
with no detail or unification of direction of syllabus. You said that you had
other written plans, but these were not visible nor used for reference during
class. Relying solely on memory is not always the best approach. Although
you are a veteran teacher with three decades of experience, you have been
teaching Filipino for only two years during which time there have been
important changes in the International Bacc[a]laureate structure. It is crucial
that your plans, both medium and long range, be well constructed and
written and then utilized. (Emphasis ours.)
In a memo17 dated March 25, 1996, Loy commented on the outline of goals
and activities of Santos as follows:

1. You do not address any of the comments made in the Classroom

Standards Evaluation Form, nor how you plan to address those concerns. At
present, your outline of activities for this semester is sketchy. That is, your
general lesson topics are listed, but without any daily substance or sequence.
One example, the area of planning, along with objectives and activities, is an
area of major concern for us. It is vital to your growth plan that you submit
your detailed lesson plans to Mrs. Villajuan daily and discuss these with her
before the lesson and after to ensure direction and implementation. Thus, a
daily meeting with your department chair is required.
On March 29, 1996, Loy sent another memo18 to Santos, which required her
to undergo the remediation phase19of the evaluation process through a
Professional Growth Plan. Thus:
Given that planning is one of the areas of major concern, it is all the more
disturbing that you have shown virtually no written planning for this quarter.
For the record, please note that we met on February 2, 1996, the day after I
observed your class for the second time this school year. At that meeting,
you were given a draft of my comments and concerns, along with a two[-]
page memo. Since that date, I have received a mere outline of your fourth
quarter syllabus which contains virtually no specific plan of activity, action,
or means of addressing the concerns. My memo of March 25 reiterates some
of the concerns, while elaborating on the shortcomings of the outline you
submitted that same day.
xxxx
The impression you are creating is that planning for your classes is not
taking place, nor is there any immediate movement towards improvement.
This lack of attention on your part only serves to heighten our concern.
Please find attached, therefore, my draft of your Growth Plan.
The March 29, 1996 Professional Growth Plan20 of Santos, which she signed
with then Principal Jeffrey Hammett, Assistant Principal Peter Loy, and
Modern Languages Department Chair Normelita Villajuan, reads:

Goals:
Improve classroom instruction through the implementation of the areas
marked as "does not meet minimum standards," "needs improvement," or
"not observed" in classroom observations from October 1993 through
February 1996, as well as concerns noted in your Summary Evaluation of
May 30, 1994. These areas include PLANNING, THE TEACHING ACT,
CLIMATE, MANAGEMENT as specified and dated below.
Initial focus for the first part of this GROWTH PLAN, namely the fourth
quarter of SY 1995-96 will be on PLANNING. By focusing on planning
first, other issues relative to climate and management may also be assisted.
This Growth Plan will be reviewed and revised as necessary for SY 1996-97.
Actions:
1. Write daily lesson plans (2/96)
2. Have clearly defined lesson objectives that tie into unit objectives
as well as into the school curriculum (2/96)
3. Incorporate a variety of activities, resources and teaching strategies
into the lesson (2/96)
4. Plan for the entire instructional period (2/96)
5. Provide an instructional sequence which is clear and logical,
leading to stated objectives (2/96)
6. Use effective questioning techniques (2/96, 3/94, 10/93)
7. Provide sufficient guided practice and modeling to ensure success,
particularly homework assignments (11/95)
8. Develop rapport with and between students by creating a supportive
environment (2/96, 11/95)
9. Be punctual and time efficient (2/96, 3/94, 10/93)

10. State and enforce academic and classroom behavior expectations

in a positive manner (2/96, 3/94, 10/93)
11. Reinforce appropriate behavior (2/96, 3/94, 10/93)
12. Organize the classroom to enhance learning and minimize
disruption (11/95, 3/94)
In the memo21 to Santos dated April 18, 1996, Loy commented that since the
implementation of Santoss Professional Growth Plan, it was observed that
there was noticeable improvement in the writing of her lesson plans and the
same had a clearer sense of direction for her classes.
Likewise, in the memo22 dated April 26, 1996, Loy noted that Santos was
observed to be taking steps to address the concerns in her Professional
Growth Plan. In the succeeding memos to Santos dated May 10, 199623 and
May 16, 1996,24 Loy expressed his gladness at the progress of Santos and the
positive effect of the Professional Growth Plan on her performance.
Accordingly, in a memo25 dated May 24, 1996, Loy advised Santos that her
Professional Growth Plan had been revised as a result of her efforts and
improvements.
The May 24, 1996 Revised Professional Growth Plan26 of Santos states:
Goals:
Improve classroom instruction through the implementation of the areas
marked as "does not meet minimum standards," "needs improvement," or
"not observed" in classroom observations from October 1993 through
February 1996, as well as concerns noted in your Summary Evaluation of
May 30, 1994. These areas include PLANNING, THE TEACHING ACT,
CLIMATE, MANAGEMENT as specified and dated below.
Initial focus for the first part of this GROWTH PLAN was on PLANNING.
Ms. Santos has shown improvement in areas #1-4 under Short Term
Planning during the fourth quarter of SY 1995-1996. Having focused on

planning first, other issues relative to climate and management may also
have assisted and can now be directly addressed in the 1996-97 school year.
Actions:
I. Continue the following, which was an area of focus in SY 1995-96:
A. Short Term Planning
1. Write daily lesson plans (2/96)
2. Have clearly defined lesson objectives that tie into unit
objectives as well as into the school curriculum (2/96)
3. Incorporate a variety of activities, resources and
teaching strategies into the lesson (2/96)
4. Plan for the entire instructional period (2/96)
II. Focus on the following areas in need of improvement:
(Note: these items have been grouped by topic area in this revised
growth plan and therefore re-numbered from the listing in the original
growth plan)
B. Medium and Long Range Planning
5. Provide an instructional sequence which is clear and
logical, leading to stated objectives (2/96)
6. Be punctual and time efficient (2/96, 3/94, 10/93)
C. Classroom Climate and Management
7. Develop rapport with and between students by creating
a supportive environment (2/96, 11/95)

8. State and enforce academic and classroom behavior

expectations in a positive manner (2/96, 3/94, 10/93)
9. Reinforce appropriate behavior (2/96, 3/94, 10/93)
10. Organize the classroom to enhance learning and
minimize disruption (11/95, 3/94)
D. Teaching Techniques
11. Use effective questioning techniques (2/96, 3/94,
10/93)
12. Provide sufficient guided practice and modeling to
ensure success, particularly homework assignments
(11/95)
For the school year 1996-1997, Santos again taught five classes of Filipino.27
In a memo28 dated September 6, 1996, Loy reminded Santos that, to support
her planning and instruction, they agreed, among others, that she "would
keep detailed daily lesson plans, medium and long range plans and syllabi,
and copies of instructional materials used." Subsequently, in a memo29 dated
September 19, 1996, Loy noted that there seemed to be progress as regards
the instruction that Santos would keep detailed lesson plans. Santos was then
advised to continue and improve her focus on medium and long range plans.
Thereafter, it seemed that the positive reviews of Santoss performance were
gradually replaced by renewed concerns on her planning. In a memo30 dated
October 4, 1996, Loy stated that:
[Santos] submitted a plan for the semester using a form from Anne Marie
that will be used by the department to review the curriculum. A review of the
plan submitted by [Santos] indicates that the plan is vague; it needs
additional thought and revision with regards to detail and timelines. The
vagueness of this plan is of concern because proper planning is one of the
key areas in Santoss] Professional Growth Plan. Proper planning was also

noted in Mr. Hammetts observation comments x x x. [Santos] needs to

revise this semestral plan for our next meeting. (Emphasis ours.)
In the following memo31 dated October 18, 1996, Loy noted that Santos
revised her plan for the semester, but the same could use another revision.
Santos was directed to add more details to her plan.
On October 29, 1996, Loy observed the Conversational Filipino class of
Santos. In the Classroom Standards Evaluation Form32 he accomplished for
that day, Loy observed that Santos needed improvement on the following
areas: (1) has daily lesson plans written out; (2) has clearly defined lesson
objectives that tie into unit objectives as well as into the school curriculum;
and (3) reinforces appropriate behavior. Loy also remarked to Santos that:
[T]here is still noted deficiency in the planning of your classes overall.
Although your lesson plans for Conversational Filipino and Filipino III are
better organized than previously, they are still vague, lack detail and are not
clear as to how they fit into a well-sequenced unit. They are still stand-alone
lessons. In addition, your last written lesson plan for Filipino I was for
October 24 -- two class meetings ago. For Filipino A IBS2, there was only
one written lesson plan -- for October 17, the first day of the quarter.
(Emphases ours.)
Thereafter, Loys memo33 dated November 14, 1996 sternly told Santos the
following words:
Vangie, you stated that you had not revised your lesson plans, yet there was
no reason. In light of my observation of your class on October 29 which
followed, planning remains a major concern. I voiced concern that, given the
draft of my October 29 observation which had three notations which did not
meet expectations, you had not responded to my request for a follow-up
conference. x x x
Vangie, you need to plan thematic units and daily lessons for each class
which are well sequenced and relevant to the unit. This is one of the major
areas of concern in your Professional Growth Plan. For you not to address

this issue from our previous meetings, and to have a planning book that does
not reflect proper planning, does not address the concerns of that Growth
Plan; instead the concerns not only persist, they become more problematic.
Vangie, to quote you, you "play it by ear." Flexibility only works when you
are flexible within a clear plan. Otherwise, "playing it by ear" is
synonymous with "winging it day-by-day." You must plan, and you need to
begin your second semester outlines now. To this end, I am asking that you
present a draft of your second semester syllabi and plans at our next
meeting."
The memo34 of Loy on November 15, 1996, further stated:
Thank you for coming to speak with me as follow-up to our meeting
yesterday and to share your impressions. You stated that you feel I am being
too hard on you. However, when we reviewed your lesson planning book
which you brought with you we noted the following:
- For your Filipino 1 classes, there were lesson plans for November 6,
7 and 13, but no lesson plans for November 11 and 12.
- For your Conversational Filipino and Filipino 3 classes, there were
at least three "lesson plans" with no activities listed.
- For your Filipino A1/S2, you had gone back to write, using a pen
with a slightly different colored ink to fill in parts of the lesson plan
which I noted as deficient in my observation report of October 29.
- There are no lesson plans for any class beyond todays date.
Clearly, this indicates a lack of planning. With this as your planning guide, I
cannot agree that I am "being too hard on you." As I have stated, your daily
planning is often vague at best; your long term planning does not exist in
writing. A review of your planning book today only supports this.
(Emphases ours.)
In the memo35 dated December 6, 1996, Loy disclosed to Santos that:

Concern was expressed by both Mr. Hammett and myself that, after eight
months working with your Professional Growth Plan, we are still focused on
but one of the four major areas of concern. Still to be addressed, following
Planning, are concerns under the Teaching Act, Climate and Management.
The third quarter is a crucial one for you, Vangie. We need to move beyond
the initial concern in the Growth Plan to work in the other areas as well.
On January 22, 1997, Loy observed the Filipino 3 class of Santos. The
Classroom Standards Evaluation Form36he accomplished stated that Santos
still needed improvement on the following aspects: (1) has daily lesson plans
written out; (2) incorporates a variety of activities, resources and teaching
strategies into the lesson; (3) provides an instructional sequence which is
clear and logical, leading to stated objectives; and (4) states and enforces
academic and classroom behavior expectations in a positive manner. Loy
also remarked that Santoss "lesson plans do not give a clear sense of
direction towards a specified goal other than to reach the end of the chapter
and the book."
In his memo37 dated January 24, 1997, Loy made known his apparent
frustration at Santoss performance in this manner:
As I said today, Vangie, I find myself continuing to use the phrases "vague"
and "lacking specifics" in reviewing your daily, unit, or semestral plans.
Moreover, suggestions and contributions made in our meetings to address
those concerns do not seem to affect your planning. In your lesson plans,
your objectives are basic and elementary; your activities, vacuous.
Objectives such as "enrich vocabulary," "identify the theme of the chapter,"
and "participate actively in discussion" (for a class of 7) are not fitting of a
high school lesson plan, much less a pre-International Baccalaureate course.
Your activities do not specify the format, criteria, analytical features, or
relationship to the days/courses objectives.
While you claim that you are doing much more than what you have in your
lesson plans, my contention is then, that the plans do not accurately reflect
the lesson. As it is, I entered a question mark next to "plans for the entire
instructional period" because your plan gave so little direction about what

you were planning that day. If you know what the specific objectives are,
based on assessment goals, and you plan to include an activity as part of the
lesson, include it in the plan and be specific about what it is, what the
criteria are, and why it is important. (Emphasis ours.)
Since then, Loy continued to voice his concerns on the planning process of
Santos. He noted on his memo38dated February 7, 1997 that the objectives in
Santoss daily lesson plans were very generic and the activities listed were
elementary and very basic. Judging from the lesson plans, Loy concluded
that Santoss planning is still substandard. On February 28, 1997, Loy sent
another memo39 to Santos, which informed her in no uncertain terms that the
growth they see was insufficient. Other than the substandard lessons, Loy
commented that there was virtually no written work nor adequate direction
in her syllabus. Loy also warned her that "continuance in this manner
without marked improvement cannot be tolerated."
In a memo40 dated March 14, 1997, Loy called Santoss attention about a
problem they discovered in one of her classes. Loy said:
With regards to IBS2 Filipino, three of the eight students did not submit
world literature papers as required by the International Baccalaureate
syllabus. Why? You have had these students for the past two years and know
the syllabus of the course. This required component should have been part of
the planning of the course throughout. Although these students are not IB
diploma candidates, the paper should have been drafted, revised, reviewed
and polished throughout the course of the past two years. As you admitted,
you did not know until the day the papers were due that these students were
not submitting a paper.
With regards to your lesson planning, there is still a marked absence of
writing activities in all your classes. x x x
Vangie, I hear that you feel you are doing a good job. What worries me,
then, is your perception of how problematic this situation is. You are now
one year into a Professional Growth Plan with incremental movement in just
one of several areas of concern. I am disappointed that you believe that I do

not want to have you continue as a member of our faculty. I have worked
with you for the past twelve months on this growth plan, meeting with you
no fewer [than] fifteen times since August 1996. Throughout this time, I
have offered observations on the areas of deficiency and suggestions for
ways to improve. Ms. Butt and Mr. Hammett have also been supportive of
your stated desire to improve. We want you to be a successful teacher in the
area you teach for the sake of our students. If, as you have confided, Filipino
is not the language you would choose to teach, what are the options? Mr.
Hammett said again for the record that he did try to schedule a section of
Spanish this year, but was unable to do so. That situation may also exist next
year as we already have four other teachers teaching Spanish. Knowing all
this, it may be difficult to consider your placement next year.
I look forward to continued discussions with you, Vangie, as we search for
ways to assist your improvement toward success as a teacher. I think we all
realize, however, that we are running out of time.
On April 2, 1997, Jeffrey Hammett sent a memo41 to Santos, likewise
expressing his disappointment with the latters performance. Hammett
stated:
Vangie, we have been focusing on your planning for just over one year now,
and this is just the first of four areas we wanted to address in your growth
plan of last March. We have met with you more than thirty times this past
year to check-on, discuss, and help improve your planning processes. Your
planning has become our number one concern. Still, as I look at the threeday plan you presented me today for this pre-IB Filipino 3 class (see
attached) note that this "plan" covers last Monday (31 March), today (2
April), and this coming Friday (4 April) - this one-page planning sheet is less
than half complete. In fact, the "objectives" section contains nothing more
than an unfinished sentence. You list no activities, no student outcomes.
Whats more, I found nothing but blank pages for any future class sessions.
In all honesty, Vangie, this illustrates to me even more explicitly than ever
before how justified we are in focusing our concerns on your planning. You
cannot keep the daily objectives, activities, and expected student outcomes

only "in your head" and "wing it" as you did today. Frankly speaking, you
know how concerned we are with your planning, and you also know that you
and I have had informal conversations relative to your continued
employment with us. I would have hoped and expected, therefore, to see the
complete plans for this quarter in your folder, or at the very least, a
thoroughly planned unit on Noli Me Tangere, the material being presented
and covered this week. Your "plan" shows me very little, and what I do see
is completely unacceptable!
For me, the reality of this unacceptable lesson plan only reinforces the
concerns being expressed by Mr. Loy. You do not plan in any written and
complete way for the success of your students, and this lack of planning is
now, has been, and always will be unacceptable in our school and in our
profession. (Emphasis ours.)
Subsequently, on April 10, 1997, McCauley sent a letter42 to Santos directing
her to explain in writing why her employment from the School should not be
terminated because of her failure to meet the criteria for improvement set out
in her Professional Growth Plan and her substandard performance as a
teacher.
In her reply letter43 dated April 14, 1997, Santos blamed the School for her
predicament. She said that, in the last few years, she had been forced to
teach Filipino, a subject which she had no preparation for. The School
allegedly made this happen against her objections and despite the fact that
she had no training in Filipino linguistics and literature. Santos also asked
for clarification on why she was being asked to explain and the reasons
therefor.
On April 21, 1997, McCauley wrote a letter44 to Santos informing her that
the School considered her letter dated April 14, 1997 as her explanation. The
School also set a formal administrative investigation on April 23, 1997 in
order to further clarify matters and accord Santos the opportunity to explain
her side. Santos was given the choice of bringing a representative or counsel
to assist her.

According to the Minutes of the Administrative Investigation45 conducted on

April 23, 1997, Santos was accompanied by Raquel David Ching, the
President of the ISAE. Ching first sought clarification as regards the specific
charge against Santos. McCauley referred to the letter dated April 10, 1997,
which asked Santos to explain why her employment should not be
terminated by reason of her performance that fell below the acceptable
standards of the School. The charge against Santos was gross inefficiency or
negligence in the performance of her assigned work. After the parties made
known their positions, the investigating committee informed Santos and
Ching that they would consider the views presented and they would advise
Santos of the Schools action on her case.
In a letter46 dated May 29, 1997, McCauley informed Santos that he was
adopting the recommendation of the investigation committee that Santoss
employment from the School cannot be continued. According to McCauley,
the committee found that the numerous consultations of Santos with her
supervisors for the last three school years did not result in any appreciable
improvement on her part. McCauley pointed out that Santos categorically
indicated that she preferred to continue teaching Filipino for the school years
1994-1995 and 1995-1996. Given that Santos was duly licensed to teach
Filipino, McCauley stated that the committee could not accept her claim that
she was ill-equipped to teach the language. McCauley then told Santos that
her employment with the School would cease effective June 7, 1997.
On June 26, 1997, the ISAE filed a complaint47 against the petitioners,
alleging the following causes of action: (1) unfair labor practice; (2) illegal
dismissal; (3) moral and exemplary damages; (4) violation and refusal to
comply with grievance procedures in the CBA; and (5) unresolved grievance
matter. The reliefs prayed for included reinstatement and the payment of
backwages and damages. The complaint was docketed as NLRC-NCR Case
No. 00-06-04491-97. The complaint was subsequently amended48 to include
as complainants Evangeline Santos, Joselyn Rucio and Methelyn Filler.49
The Ruling of the Labor Arbiter

On April 3, 2001, the Labor Arbiter rendered a Decision50 finding, among

others, that Santos was illegally terminated from her employment. The
relevant portions of the ruling state that:
The law is clear that for an employee to be validly dismissed, it must be
shown that the inefficiency or incompetency of the employee must be "gross
or serious" and "habitual." What is gathered from the submission made by
the respondent is the fact that complainant Santos does not have the skill and
competency to teach Filipino as she was observed by her superior and peers
to be lacking in "preparation" of her lesson plan; she was not in control of
her classes as observed since students come in late; and, she has not
communicated well with her students what the expectations and objectives
of the class were.
Based on the above arguments, it is this Offices finding, that if she was
measured against them, the complainant could not be considered as grossly
or seriously inefficient or incompetent and therefore her dismissal is
unwarranted. It is unwarranted since her being caught once for not preparing
her lesson plan for the day is not and could not be, by itself as "gross or
serious" as defined by law. Likewise, the observations made by her superior
and peers could not be the basis for concluding or finding that she is grossly
incompetent or inefficient.
The attendance of students to a greater extent is outside the control of the
teacher. To hold her grossly incompetent on account of the late coming of
students under her class is erroneous application of the intent of the law.
xxxx
This Office observed first hand (sic) the strained relations that developed
and at times consumed the parties, making reinstatement a not prudent
disposition of the case, for it will only inflame so far the subdued and
subsiding emotions.
This Office was witness to the long and emotional and loud arguments that
transpire every hearing. This Office had to step in most of the times to

control flying tempers and emotions. Thus, in lieu of reinstatement, the

respondent is directed to pay complainant separation pay equivalent to onehalf (1/2) month salary for every year of service.
Full backwages will not be awarded as well considering the fact that
complainant is not without fault. Partly, she contributed to the problem she
found herself in only that, it is not "serious" or "gross" to make a finding of
legality of her termination. She is, therefore, awarded a limited backwages
not to exceed a year and a half in backwages as a form of penalty.
xxxx
WHEREFORE, judgment is hereby rendered as follows:
1. The complaint for unfair labor practice is dismissed for lack of
merit;
2. The complaint of Rucio is dismissed for lack of merit;
3. The dismissal of Santos is declared unwarranted, and in view
thereof, she is ordered paid separation pay in lieu of reinstatement in
the amount of Seven Hundred Fifty-Six Thousand Five Hundred
Thirty-Six and 55/100 (P756,536.55) Pesos, and, she is likewise
ordered [paid] a limited backwages equivalent to one and a half (1
1/2) year in the amount of One Million One Hundred Fifty-Two
Thousand Eight Hundred Seventeen and 60/100 (P1,152,817.60)
Pesos (please see computation Annex "A");
4. Ms. Filler is declared a regular employee. She is ordered paid
backwages and benefits due a regular employee covering the period
from July 25, 1994 to the time of the rendition of this decision in the
total amount of One Million Thirty[-]Three Thousand Three Hundred
Seventy Five and 80/100 (P1,033,375.80) Pesos (please see
computation Annex "A").
All other claims are denied for lack of merit.51 (Emphasis ours.)

Both parties appealed the Labor Arbiters Decision to the National Labor
Relations Commission (NLRC).52 The appeals were docketed as NLRC CA
No. 028558-01.
The Judgment of the NLRC
On February 28, 2003, the NLRC issued a Resolution,53 which affirmed the
decision of the Labor Arbiter in this wise:
WHEREFORE, premises considered, the appeal is dismissed for lack of
merit and the Decision appealed from is affirmed en toto.
The NLRC upheld the ruling of the Labor Arbiter that Santoss dismissal
from employment was not warranted given that "her being caught once for
not preparing her lesson plan for the day is not and could not be, by itself, as
gross or serious as defined by law. Likewise, the observations made by her
superior and peers could not be the basis for concluding or finding that she is
grossly incompetent or inefficient."54 The NLRC found the conclusion of the
Labor Arbiter to be supported by substantial evidence.
Petitioners moved for a reconsideration55 of the NLRC Resolution but the
same was denied in a Resolution56dated June 30, 2003. Petitioners then filed
a petition for certiorari57 before the Court of Appeals.
The Decision of the Court of Appeals
On November 17, 2004, the Court of Appeals promulgated the assailed
decision the decretal portion of which provides:
UPON THE VIEW WE TAKE OF THIS CASE, THUS, the instant petition
is PARTLY GRANTED. The Resolution of public respondent National
Labor Relations Commission dated February 28, 2003, in NLRC CA No.
028558-01, and its Resolution of June 30, 2003 on the partial motion for
reconsideration are AFFIRMED subject to the MODIFICATION that the
award to private respondent METHELYN FILLER of backwages and
benefits due a regular employee from July 25, 1994 until the rendition of the

Labor Arbiters decision on April 3, 2001 is hereby DELETED. Without

costs.58
Brushing aside the argument that Santos did not exercise slight care or
diligence in the performance of her duties, the Court of Appeals pointed out
that Santos did exert efforts to improve her performance, which led to a
revision of her original Professional Growth Plan. Echoing the findings of
the Labor Arbiter and the NLRC, the Court of Appeals agreed that Santos
could not be said to be habitually neglectful of her duties after she was
"caught once with an inadequately prepared lesson plan in 1997."59 Although
the Court of Appeals acknowledged that Santoss performance as a teacher
was not at all satisfactory, it ruled that the same did not warrant the penalty
of dismissal. To the appellate court, a penalty of suspension from work was
more equitable under the circumstances. As a matter of right, Santos was
adjudged to be entitled to reinstatement and backwages. However, given the
deep antagonism between her and the petitioners, the Court of Appeals
ordered the award of separation pay in lieu of reinstatement.
Both parties filed their respective motions for reconsideration60 of the above
decision of the Court of Appeals, but the same were denied in the assailed
Resolution dated February 23, 2005.
The Petitioners Arguments
In challenging the assailed decision of the appellate court, petitioners raise
for our consideration the following issues:
a) WHETHER OR NOT THE COURT OF APPEALS ERRED IN
FINDING THAT RESPONDENT EVANGELINE SANTOS WAS
ILLEGALLY DISMISSED; and
b) WHETHER OR NOT RESPONDENT EVANGELINE SANTOS
IS ENTITLED TO REINSTATEMENT OR SEPARATION PAY
WITH BACKWAGES.61

Petitioners argue that Santoss repeated failure to maintain the standards of

quality teaching expected from every faculty member of the School
illustrates her gross and habitual neglect of her duties, which is a just cause
for dismissal under Article 282 of the Labor Code. Petitioners lament the
fact that the Court of Appeals allegedly substituted its own judgment with
the reasonable standards of teaching set by the School. Petitioners point out
that there was neither a finding that such standards were arbitrary, nor was
the evaluation process biased or that the School or any of its personnel was
motivated by ill will against Santos. Petitioners stress that Santos was not
dismissed solely on the ground that she failed to prepare her lesson plan for
one particular day. On the contrary, petitioners assert that Santos was
dismissed from employment because she repeatedly failed to meet the
standards required by the school from 1993 to 1997. According to
petitioners, this repeated failure, especially after the one-year remediation
period wherein school administrators met with Santos no less than thirty
(30) times to check on her, clarify and discuss her planning process, and help
her improve her performance, was clearly overlooked by the Court of
Appeals.
Despite the application of the Professional Growth Plan, petitioners insist
that Santos was still repeatedly found to be lacking in preparation and
planning. Petitioners claim that Santoss failure to improve, most especially
in the planning area of her teaching, justified the Schools decision to
terminate her services. Otherwise, to retain her in the roster of faculty would
be tantamount to sacrificing the welfare of the Schools very own students.
At the very least, petitioners aver that Santos was guilty of gross inefficiency
in the performance of her teaching duties. Petitioners further state that the
School observed procedural due process before dismissing Santos. Since her
employment was lawfully terminated, petitioners posit that an award of
separation pay with backwages is not proper.
The Respondents Arguments
Respondents argue that the Court cannot examine anymore the factual
findings of an administrative tribunal, such as the Labor Arbiter, which has

already gained expertise in its field. This holds truer if the factual findings
had been affirmed upon review by the NLRC and the Court of Appeals.
According to the respondents, it cannot be said that Santos did not exercise
slight care or diligence in the performance of her duties as she did exert
efforts to make the necessary adjustments. That Santos was shown to have
inadequately prepared a lesson plan in 1997 did not necessarily show that
she was habitually neglectful of her duties. For the said reasons, respondents
also rejected the charge of gross inefficiency. Respondents aver that the
administrative superiors of Santos found that she had greatly improved on
her preparations and she was never found wanting in the other areas of her
teaching. Respondents also stress that petitioners only brought up the claim
of gross inefficiency in the petition for certiorari before the Court of
Appeals. Although respondents admit that Santos did indeed perform her
duties unsatisfactorily, they argue that the same does not warrant dismissal.
Considering that she had worked with the School for 17 long years with no
known previous bad record, they allege that the ends of social and
compassionate justice would be better served if she was merely suspended
from work rather than terminated.
The Judgment of the Court
The Court finds the appeal meritorious.
Generally, on appeal, the findings of fact of an administrative agency like
the NLRC are accorded not only respect but also finality if the findings are
supported by substantial evidence. Such rule, however, is by no means
absolute. As held in San Miguel Corporation v. Aballa,62 "when the findings
of fact of the labor arbiter and the NLRC are not supported by substantial
evidence or their judgment was based on a misapprehension of facts, the
appellate court may make an independent evaluation of the facts of the
case." The Court finds the said exceptions extant in this case.
In Janssen Pharmaceutica v. Silayro,63 we stated that "[t]o constitute a valid
dismissal from employment, two requisites must concur: (1) the dismissal
must be for any of the causes provided in Article 282 of the Labor Code;

and, (2) the employee must be given an opportunity to be heard and to

defend himself."
In the collective bargaining agreement (CBA) between the School and ISAE
for the years 1992-1995, Section 13 of Appendix A thereof expressly states
that "[t]ermination of employment shall be in accordance with the laws of
the Philippines as presented in the LABOR CODE (Book VI, Art. 282)."64
Article 28265 of the Labor Code provides:
ART. 282. Termination by employer. An employer may terminate an
employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the
lawful orders of his employer or representative in connection with his
work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him
by his employer or duly authorized representative;
(d) Commission of a crime or offense by the employee against the
person of his employer or any immediate member of his family or his
duly authorized representative; and
(e) Other causes analogous to the foregoing.
In all cases involving termination of employment, the burden of proving the
existence of the above just causes rests upon the employer.66 The quantum of
proof required in these cases is substantial evidence, that is, such relevant
evidence that a reasonable mind might accept as adequate to support a
conclusion, even if other equally reasonable minds might conceivably opine
otherwise.67
The Court had occasion to explain in Century Iron Works, Inc. v. Baas68 the
concept of gross and habitual neglect of duties. Thus:

Gross negligence connotes want or absence of or failure to exercise slight

care or diligence, or the entire absence of care. It evinces a thoughtless
disregard of consequences without exerting any effort to avoid them. Fraud
and willful neglect of duties imply bad faith of the employee in failing to
perform his job, to the detriment of the employer and the latters business.
Habitual neglect, on the other hand, implies repeated failure to perform ones
duties for a period of time, depending upon the circumstances. (Citations
omitted, emphasis supplied.)
We also reiterated in Union Motor Corporation v. National Labor Relations
Commission69 that in dismissing an employee for gross and habitual neglect
of duties, the negligence should not merely be gross, it should also be
habitual.
On gross inefficiency, we ruled in Lim v. National Labor Relations
Commission70 that:
[G]ross inefficiency falls within the purview of "other causes analogous to
the foregoing," and constitutes, therefore, just cause to terminate an
employee under Article 282 of the Labor Code. One is analogous to another
if it is susceptible of comparison with the latter either in general or in some
specific detail; or has a close relationship with the latter. "Gross
inefficiency" is closely related to "gross neglect," for both involve specific
acts of omission on the part of the employee resulting in damage to the
employer or to his business. In Buiser vs. Leogardo, this Court ruled that
failure to observe prescribed standards of work, or to fulfill reasonable work
assignments due to inefficiency may constitute just cause for dismissal.
(Emphases ours; citations omitted.)
Viewed in light of the above doctrines, the Court is not convinced that the
actuations of Santos complained of by the petitioners constituted gross and
habitual neglect of her duties.
From the very beginning of her tenure as a teacher of the Filipino language,
the recurring problem observed of Santos was that her lesson plans lacked
details and coherent correlation to each other, to the course, and to the

curriculum, which in turn affected how lessons and instructions were

conveyed to the students.71 After Santos was placed in a Professional Growth
Plan on March 29, 1996, petitioners observed a noticeable improvement on
her part. In his memo72 dated May 24, 1996, then Assistant Principal Loy
even stated that Santoss improvement was a result of her positive attitude in
approaching her growth plan. Unfortunately, though, Santos could not
sustain this progress. Not long after, the School administrators were again
admonishing Santos for her vague lesson plans that lacked specifics.
What can be gathered from a thorough review of the records of this case is
that the inadequacies of Santos as a teacher did not stem from a reckless
disregard of the welfare of her students or of the issues raised by the School
regarding her teaching. Far from being tainted with bad faith, Santoss
failings appeared to have resulted from her lack of necessary skills, in-depth
knowledge, and expertise to teach the Filipino language at the standards
required of her by the School.
Be that as it may, we find that the petitioners had sufficiently proved the
charge of gross inefficiency, which warranted the dismissal of Santos from
the School.
The Court enunciated in Pea v. National Labor Relations Commission73 that
"it is the prerogative of the school to set high standards of efficiency for its
teachers since quality education is a mandate of the Constitution. As long as
the standards fixed are reasonable and not arbitrary, courts are not at liberty
to set them aside." Moreover, the prerogative of a school to provide
standards for its teachers and to determine whether these standards have
been met is in accordance with academic freedom, which gives the
educational institution the right to choose who should teach.74
The CBA between ISAE and the School for the years 1992-1995 also
recognized the exclusive right of the School to "hire and appoint qualified
faculty subject to such reasonable rules and regulations as it may
prescribe,"75 as well as the right of the School to discipline its faculty and
determine reasonable levels of performance.76 Section 8 of Appendix A77 of
the CBA also states that "[a]ll faculty members must meet the high standard

of performance expected by the SCHOOL and abide by all its policies,

procedures and contractual terms."
Contrary to the ruling of the Labor Arbiter, it is not accurate to state that
Santos was dismissed by the School for inefficiency on account of the fact
that she was caught only once without a lesson plan. The documentary
evidence submitted by petitioners, the contents of which we laid down in
detail in our statement of facts, pointed to the numerous instances when
Santos failed to observe the prescribed standards of performance set by the
School in several areas of concern, not the least of which was her lack of
adequate planning for her Filipino classes. Said evidence established that the
School administrators informed Santos of her inadequacies as soon as they
became apparent; that they provided constructive criticism of her planning
process and teaching performance; and that regular conferences were held
between Santos and the administrators in order to address the latters
concerns. In view of her slow progress, the School required her to undergo
the remediation phase of the evaluation process through a Professional
Growth Plan. Despite the efforts of the School administrators, Santos failed
to show any substantial improvement in her planning process. Having failed
to exit the remediation process successfully, the School was left with no
choice but to terminate her employment.
The Court finds that, not only did the petitioners documentary evidence
sufficiently prove Santoss inefficient performance of duties, but the same
also remained unrebutted by respondents own evidence. On the contrary,
Santos admits in her pleadings that her performance as a teacher of Filipino
had not been satisfactory but she prays for leniency on account of her prior
good record as a Spanish teacher at the School. Indeed, even the Labor
Arbiter, the NLRC and the Court of Appeals agreed that Santos was not
without fault but the lower tribunals deemed that termination was too harsh a
penalty.
Nonetheless, the Court finds that petitioners had satisfactorily discharged the
burden of proving the existence of gross inefficiency on the part of Santos,
warranting her separation from the school.

Anent the conclusion of the Labor Arbiter that "the observations made by
[Santoss] superior and peers could not be the basis for concluding or finding
that she is grossly incompetent or inefficient,"78 the Court finds the same
utterly baseless. Far from being random and unstructured exercises, said
observations were borne out of the evaluation procedures set up by the
School in order to assist the members of its faculty to improve their
performance. In their petition before this Court, petitioners attached a copy
of their Reply/Position Paper79 before the Labor Arbiter. Annexed to said
pleading is the Schools Position Paper Regarding Professional Growth,
Supervision and Evaluation of Faculty,80 which expressly states that:
It is the policy of the International School Manila to assist teachers in the
improvement of classroom instruction at all levels in order to provide the
highest quality educational program at ISM. To that end, procedures have
been established which include 1) the promotion of on-going professional
growth, 2) on-going supervision including regular monitoring, improvement
of instructional practices and evaluation for continuing employment or
tenure, and 3) evaluation (performance assessment, directed assistance,
remediation and, if necessary, termination of employment).81
Included in the supervision and evaluation process are formal and informal
observations of a faculty members performance in his/her classes. Thus, 2.1
Formal observations will take several forms. Some will be total [sic]
unannounced, with or without a pre-observation conference.
Others will be scheduled in advance, possibly including a pre-observation
conference, and with a post observation conference. One component of the
formal observation will always be a written commentary by the supervisor
or colleague making the observation.
xxxx
2.3 Drop-in, informal observations, will be a part of the supervision and
evaluation process. Drop-ins may be of any length, from a few minutes to an
hour or more. A note from the observer confirming his or her impressions
will be helpful to the teacher observed.82

From the foregoing, it is clear that the Labor Arbiter erred in not giving
weight to the observations made by Santoss superiors and peers in
determining whether she was grossly inefficient or not.
In view of the acts and omissions of Santos that constituted gross
inefficiency, the Court finds that the School was justified in not keeping her
in its employ. At this point, the Court needs to stress that Santos voluntarily
agreed to teach the Filipino classes given to her when she came back from
her leave of absence. Said classes were not forced upon her by the School.
This much she admitted in the hearing of the case before the Labor Arbiter.
She stated therein that for the school year 1993-1994, she was given the
option to teach only one Spanish class and not have any Filipino teaching
loads. She, however, said that if she took that option she would have been
underpaid and her salary would not have been the same.83 Moreover, for the
school years 1994-1995 and 1995-1996, she made known to the School that
she did not prefer a change in teaching assignment. Thus, when she
consented to take on the Filipino classes, it was Santoss responsibility to
teach them well within the standards of teaching required by the School, as
she had done previously as a teacher of Spanish. Failing in this, she must
answer for the consequences.
As held in Agabon v. National Labor Relations Commission84:
The law imposes many obligations on the employer such as providing just
compensation to workers, observance of the procedural requirements of
notice and hearing in the termination of employment. On the other hand, the
law also recognizes the right of the employer to expect from its workers not
only good performance, adequate work and diligence, but also good conduct
and loyalty. The employer may not be compelled to continue to employ such
persons whose continuance in the service will patently be inimical to his
interests. (citations omitted.)
As regards the requirements of procedural due process, Section 2(d) of Rule
1 of The Implementing Rules of Book VI states that:

For termination of employment based on just causes as defined in Article

282 of the Labor Code:
(i) A written notice served on the employee specifying the ground or
grounds for termination, and giving said employee reasonable
opportunity within which to explain his side.
(ii) A hearing or conference during which the employee concerned,
with the assistance of counsel if he so desires is given opportunity to
respond to the charge, present his evidence, or rebut the evidence
presented against him.
(iii) A written notice of termination served on the employee,
indicating that upon due consideration of all the circumstances,
grounds have been established to justify his termination. (Emphases
ours.)
In this case, the School complied with the above requirements. After a
thorough evaluation of Santoss performance, the School held a series of
conferences and meetings with Santos, in order to improve her performance.
On March 29, 1996, the School required Santos to undertake a Professional
Growth Plan. Thereafter, when the intervention of the School failed to yield
any considerable improvement on Santos, McCauley wrote her a letter on
April 10, 1997, which required her to explain in writing within forty-eight
(48) hours why her employment should not be terminated in view of her
failure to meet the standards of the School on very specific areas of concern.
On April 16, 1997, Santos responded to McCauleys letter, asking why she
was being required to explain. On April 21, 1997, McCauley wrote Santos a
letter informing her that an administrative investigation would be conducted
on April 23, 1997 where she would be given the opportunity to be heard. On
April 23, 1997, an administrative investigation was conducted. Santos
appeared therein with the assistance of ISAE President Ching. In a letter
dated May 29, 1997, the School informed Santos of its decision to terminate
her employment on the ground of her failure to meet the standards of the
School, which as discussed was tantamount to gross inefficiency.

In view of the finding that Santos was validly dismissed from employment,
she would not ordinarily be entitled to separation pay.85 An exception to this
rule is when the court finds justification in applying the principle of social
justice according to the equities of the case. The Court explained in
Philippine Long Distance Telephone Co. (PLDT) v. National Labor
Relations Commission86 that:
We hold that henceforth separation pay shall be allowed as a measure of
social justice only in those instances where the employee is validly
dismissed for causes other than serious misconduct or those reflecting on his
moral character. Where the reason for the valid dismissal is, for example,
habitual intoxication or an offense involving moral turpitude, like theft or
illicit sexual relations with a fellow worker, the employer may not be
required to give the dismissed employee separation pay, or financial
assistance, or whatever other name it is called, on the ground of social
justice.
xxxx
The policy of social justice is not intended to countenance wrongdoing
simply because it is committed by the underprivileged. At best it may
mitigate the penalty but it certainly will not condone the offense.
Compassion for the poor is an imperative of every humane society but only
when the recipient is not a rascal claiming an undeserved privilege. Social
justice cannot be permitted to be refuge of scoundrels any more than can
equity be an impediment to the punishment of the guilty. Those who invoke
social justice may do so only if their hands are clean and their motives
blameless and not simply because they happen to be poor. This great policy
of our Constitution is not meant for the protection of those who have proved
they are not worthy of it, like the workers who have tainted the cause of
labor with the blemishes of their own character.
In Toyota Motor Phils. Corp. Workers Association v. National Labor
Relations Commission,87 we modified our ruling in PLDT in this wise:

In all of the foregoing situations, the Court declined to grant termination pay
because the causes for dismissal recognized under Art. 282 of the Labor
Code were serious or grave in nature and attended by willful or wrongful
intent or they reflected adversely on the moral character of the employees.
We therefore find that in addition to serious misconduct, in dismissals based
on other grounds under Art. 282 like willful disobedience, gross and habitual
neglect of duty, fraud or willful breach of trust, and commission of a crime
against the employer or his family, separation pay should not be conceded to
the dismissed employee.
In analogous causes for termination like inefficiency, drug use, and others,
the NLRC or the courts may opt to grant separation pay anchored on social
justice in consideration of the length of service of the employee, the amount
involved, whether the act is the first offense, the performance of the
employee and the like, using the guideposts enunciated in PLDT on the
propriety of the award of separation pay.1wphi1 (Emphasis ours.)
In the instant case, the Court finds equitable and proper the award of
separation pay in favor of Santos in view of the length of her service with
the School prior to the events that led to the termination of her employment.
To recall, Santos was first employed by the School in 1978 as a Spanish
language teacher. During this time, the records of this case are silent as to
the fact of any infraction that she committed and/or any other administrative
case against her that was filed by the School. Thus, an award of separation
pay equivalent to one-half (1/2) month pay for every year of service is
awarded in favor of Santos on grounds of equity and social justice.88
WHEREFORE, the instant petition is GRANTED. The assailed Decision
and the Resolution of the Court of Appeals in CA-G.R. SP No. 79031 are
hereby REVERSED and a new one is entered ordering the dismissal of the
complaint of Evangeline Santos in NLRC-NCR Case No. 00-06-04491-97.
Petitioner International School Manila is ORDERED to pay respondent
Evangeline Santos separation pay equivalent to one-half (1/2) month pay for
every year of service. No costs.
SO ORDERED.

SECOND DIVISION

NEW SUNRISE METAL

CONSTRUCTION, FRANK
WONG
&
ERLINDA
WONG,

G.R. No. 171131

Present:

Petitioners,

- versus -

QUISUMBING,* J.,
Chairperson,
CARPIO,**
CARPIO MORALES,
TINGA, and

VICTOR PIA, ILDEFONSO

SACARE, RENEBOY SUA, VELASCO, JR., JJ.
ALLAN SACARE, CELSO
MOROJO,
ISMAEL ALINAPON,
JOHNNY
SIRINGAN,
TIRSO JUAN, ROLANDO
RABAGO,
RUDING
ABORDO,
JACKSON
ORTEGA,
POLITO
MANEJA,
CARLOS
ZIPAGAN
and
LABORALLIANCE FOR
NATIONAL

DEVELOPMENT (LAND),
Respondents.

Promulgated:

July 10, 2007

x-------------------------------------------------x

DECISION

CARPIO MORALES, J.:

Respondent Johnny Siringan was an employee of Queen

Tower Manpower Services (Queen Tower). He was assigned to
work for petitioner New Sunrise Metal Construction which is
owned by its co-petitioners Frank Wong and Erlinda Wong on
March
1999. He
was
later
recalled
by
his
[1]
employer Queen Tower effectiveApril 8, 2000.

The 12 other individual respondents were hired by petitioners

under separate 6-month contracts denominated Contract of
Hire,[2] but their services were terminated even prior to the
expiration thereof as the table below shows:

Date Hired

Date Dismissed

1. Victor Pia

December 11,
1999

May 15, 2000

2.
Sacare

November 11,
1999

April 8, 2000

3. Reneboy Sua

December 13,
1999

May 13, 2000

4. Allan Sacare

December 13,
1999

May 13, 2000

5. Celso Morojo,
Jr.

December 13,
1999

May 12, 2000

November 8,
1999

April 8, 2000

February 10,
2000

April 8, 2000

6.
Alinapon

Ildefenso

Ismael

7. Tirso Juan

8.
Rabago

Rolando January 18, 2000

9. Ruding Abordo

10.
Ortega

Jackson January 26, 2000

11. Polito Maneja

12.
Zipagan

November 8,
1999

April 8, 2000

April 8, 2000

April 8, 2000

January 24, 2000

April 8, 2000

Carlos February 5, 2000

April 8, 2000

Respondents subsequently filed a complaint for illegal

dismissal as well as for non-payment of benefits against
petitioners, claiming that they were dismissed without just
cause and in violation of their right to due process; and that
they were underpaid of their wages and were not paid their
overtime pay, 13th month pay, legal holiday pay and 5 days
incentive leave. They thus prayed for reinstatement and
payment of their monetary claims.

Petitioners, denying respondents allegations, claimed that

documentary evidence shows that respondents were paid
their wages and other benefits in accordance with law; and
that respondents were terminated from the service for
inefficiency performance below par.

By Decision[3] of March 19, 2001, the labor arbiter to which

the case was assigned found for respondents except with
respect to Siringan, thus:

Complainant Johnny Siringan was not illegally

dismissed. He was recalled by his real employer
Queen T[ower] Manpower Services or QTMS.
These facts are evidenced by his and others recall
order dated April 8, 2000. The fact that his

employer is QTMS is evidenced by the payrolls

exhibited by [petitioners in] their Position Paper.

The rest who were signed Contract of Hire

duration of no more than six (6) months
which
it
is
deemed
terminated,
were dismissed before the 6th month of
contract, without proof of valid cause
illegally terminated. . . . [4] (Emphasis
underscoring supplied)

for a
after
but
their
were
and

Thus, the labor arbiter disposed:

WHEREFORE, premises considered, Respondents are

hereby declared to have illegally preterminated
Complainants Contracts of Hire, and have failed to
pay them their proportionate 13th month pay for
year 2000. Respondents therefore are hereby
Ordered to pay Complainants their salaries for the
period Complainants should have worked under
the unexpired contracts, and their proportionate
13th month pay, per computation prepared by the
NLRC-NCR Computation Unit and is attached as
part of this decision in the total amount
of P184,208.70.

The

other claims of Complainants are hereby

DISMISSED for lack of merit (service incentive
leave pay) or for lack of basis (overtime pay,
holiday work, and premium pay). [5](Emphasis in
the original)

Petitioners appealed the labor arbiters decision to the

National Labor Relations Commission (NLRC), arguing that
the labor arbiter failed to examine paragraph (4) of the
individual contracts of the 12 respondents which reads:

(4) SUNRISE reserves the right to terminate this

contract even prior to the expiry thereof, and
for any cause or reason it may deem proper.
Contract Worker hereby waives any prior
notice
on
that
account and
shall
hold SUNRISE free and harmless from any and
all liability arising from, or on account of, the
operation of this contract.[6](Underscoring
supplied)

Petitioners thus prayed that the NLRC delete the portion

awarding payment of wages for the unexpired portion of the
contract and to retain the portion awarding the proportionate
13th month pay.

By Resolution[7] dated September

dismissed petitioners appeal.

18,

2002,

the

NLRC

The NLRC, by Resolution of April 11, 2003, reversed

its September
18,
2002 Resolution,
however,
upon
[8]
petitioners motion for reconsideration to which copies of
the monthly production reports[9] describing the performance
of respondents were appended. The NLRC thus dismissed the
complaint filed by respondents, ratiocinating as follows:

In
their
Motion
for
Reconsideration,
the
[petitioners] reiterated that complainants were
dismissed due to their poor performance. And in
support thereto, [petitioners] submitted the
various
production
reports
of
the
complainants for the period covering January
2000 to April 2000. The [petitioners]
inadvertently failed to attach the production
reports in its position paper which showed
that during their first four months of
employment, complainants miserably failed
to meet the required quota. Their poor
performance was due to their being slow
workers (mabagal magtrabaho) and telling
stories while working (nagkukwentuhan).
Despite ample opportunity given by the
[petitioners], complainants did not even try
to improve their performance and output.
Complainants work which consisted of either
fil[l]ing up bottles or sealing the same,
requires an average or accomplishment of at
least 1,500 bottles per day. However,

complainants output average only about

1,000 or 1,200 bottles per day. Their output
is certainly below the expected quota of at
least 1,500 bottles a day.

xxxx

Complainants
actuation
of
disregarding
compliance with their quota commitment does not
speak well of their work attitude. Thus,
[petitioners] could not be faulted if after
evaluation of the complainants work performance,
they decided to terminate their employment
within the probationary period stated in their
employment contract. It would be unfair and
unjust for the [petitioners] to be required to keep
complainants under their employ despite their
not-so-interested work attitude.

x x x x[10] (Emphasis supplied)

Respondents thereupon filed a petition for certiorari before

the Court of Appeals, arguing that the NLRC committed grave
abuse of discretion amounting to lack or in excess of
jurisdiction in dismissing their complaint for lack of merit, in
violation of respondents right to security of tenure and to
their monetary claims.[11]

By Decision[12] dated September 28, 2005, the appellate court

set aside the April 11, 2003 Resolution of the NLRC and
reinstated the March 19, 2001 decision of the labor arbiter, it
holding that the evidence supports the findings and
conclusion of the labor arbiter.

Hence, the present petition for review on certiorari, positing,

in the main, that contrary to the findings of the appellate
court, the NLRC correctly found that there was clearly a valid
cause to terminate the employment of respondents due to
their incompetence and their poor performance.

The Court finds that, as held by the labor arbiter, respondent

Siringan cannot be considered to have been illegally
dismissed by petitioners. For Siringans real employer
is Queen Tower. When he ceased to render services for
petitioners, it was not because he was dismissed by them but
because he was recalled by QueenTower.

That Queen Tower is Siringans employer is confirmed by

its payroll showing him to be its employee.

Respecting the other respondents, their employment being

one with a fixed period as shown by the contracts they
signed, it only terminates by its own term at the end of six
months[13] unless they are dismissed with just cause.[14]

Petitioners insist, however, that the 12 respondents

were dismissed prior to the expiration of the 6-month period
for just cause inefficiency, their performance being below
par as shown by the monthly production reports.

Assuming that what is reflected in the monthly

production reports is an accurate account of each of the 12
respondents performance, petitioners failed to establish that
they were informed, at the time of hiring, of the standards
they were expected to meet, i.e., that they were supposed to
reach certain quotas.[15] This is not to mention that petitioners
failed to present proof that respondents were apprised of
their poor or below average performance after each
evaluation period to at least give them the opportunity to
improve their performance.

At all events, unsatisfactory performance cannot be

considered a just cause for dismissal under the Labor Code if
it does not amount to gross and habitual neglect of duties.
[16]
On this score, petitioners failed to prove that the alleged
inefficiency of the 12 respondents amounted to gross and
habitual neglect of duties.

Petitioners having failed to substantiate their claim that the

12 respondents were dismissed for just cause, the decision of
the labor arbiter directing them to pay respondents their
salaries corresponding to the unexpired period of their
respective contracts,[17] plus the proportionate 13th month pay
to which they are entitled, is in order.

WHEREFORE, the petition is DENIED. The Court of

Appeals assailed decision reinstating the labor arbiters
decision
dated March
19,
2001 isAFFIRMED, with
the MODIFICATION that the award in favor of respondent
Johnny Siringan is deleted.

Costs against petitioners.

SO ORDERED.
Republic of the Philippines
Supreme Court
Manila
THIRD DIVISION
ARMANDO G. YRASUEGUI, G.R. No. 168081
Petitioner,
Present:
YNARES-SANTIAGO, J.,
Chairperson,
- versus - AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
Promulgated:
PHILIPPINE AIRLINES, INC.,
Respondent. October 17, 2008

x--------------------------------------------------x
DECISION
REYES, R.T., J.:
THIS case portrays the peculiar story of an international flight steward
who was dismissed because of his failure to adhere to the weight standards
of the airline company.

He is now before this Court via a petition for review

on certiorari claiming that he was illegally dismissed. To buttress his stance,
he argues that (1) his dismissal does not fall under 282(e) of the Labor
Code; (2) continuing adherence to the weight standards of the company is
not a bona fide occupational qualification; and (3) he was discriminated
against because other overweight employees were promoted instead of being
disciplined.
After a meticulous consideration of all arguments pro and con, We uphold
the legality of dismissal. Separation pay, however, should be awarded in
favor of the employee as an act of social justice or based on equity. This is
so because his dismissal is not for serious misconduct. Neither is it reflective
of his moral character.
The Facts
Petitioner Armando G. Yrasuegui was a former international flight
steward of Philippine Airlines, Inc. (PAL). He stands five feet and eight
inches (58) with a large body frame. The proper weight for a man of his
height and body structure is from 147 to 166 pounds, the ideal weight being
166 pounds, as mandated by the Cabin and Crew Administration
Manual[1] of PAL.
The weight problem of petitioner dates back to 1984. Back
then, PAL advised him to go on an extended vacation leave from December
29, 1984 to March 4, 1985 to address his weight concerns. Apparently,
petitioner
failed
to
meet
the
companys
weight
standards, prompting another leave without pay from March 5, 1985 to
November 1985.
After meeting the required weight, petitioner was allowed to return to
work. But petitioners weight problem recurred. He again went on leave
without pay from October 17, 1988 to February 1989.
On April 26, 1989, petitioner weighed 209 pounds, 43 pounds over his
ideal weight. In line with company policy, he was removed from flight duty

effective May 6, 1989 to July 3, 1989. He was formally requested to trim

down to his ideal weight and report for weight checks on several
dates. He was also toldthat he may avail of the services of the company
physician should he wish to do so. He was advised that his case will be
evaluated on July 3, 1989.[2]
On February 25, 1989, petitioner underwent weight check. It was
discovered that he gained, instead of losing, weight. He was overweight
at 215 pounds, which is 49 pounds beyond the limit. Consequently, his offduty status was retained.
On October
17,
1989, PAL Line
Administrator
Gloria Dizon personally visited petitioner at his residence to check on the
progress of his effort to lose weight. Petitioner weighed 217 pounds, gaining
2 pounds from his previous weight. After the visit, petitioner made a
commitment[3] to reduce weight in a letter addressed to Cabin Crew Group
Manager Augusto Barrios. The letter, in full, reads:
Dear Sir:
I would like to guaranty my commitment towards a
weight loss from 217 pounds to 200 pounds from today until 31
Dec. 1989.
From thereon, I promise to continue reducing at a
reasonable percentage until such time that my ideal weight is
achieved.
Likewise, I promise to personally report to your office at
the designated time schedule you will set for my weight check.
Respectfully Yours,
F/S
Armando Yrasuegui[4]
Despite the lapse of a ninety-day period given him to reach his ideal
weight, petitioner remained overweight. On January 3, 1990, he was

informed of thePAL decision for him to remain grounded until such time that
he satisfactorily complies with the weight standards. Again, he was directed
to report every two weeks for weight checks.

Petitioner failed to report for weight checks. Despite that, he was

given one more month to comply with the weight requirement. As usual, he
was asked to report for weight check on different dates. He was reminded
that his grounding would continue pending satisfactory compliance with the
weight standards.[5]
Again, petitioner failed to report for weight checks, although he was
seen submitting his passport for processing at the PAL Staff Service
Division.
On April 17, 1990, petitioner was formally warned that a repeated
refusal to report for weight check would be dealt with accordingly. He was
given another set of weight check dates.[6] Again, petitioner ignored the
directive and did not report for weight checks. On June 26, 1990, petitioner
was required to explain his refusal to undergo weight checks.[7]
When petitioner tipped the scale on July 30, 1990, he weighed at 212
pounds. Clearly, he was still way over his ideal weight of 166 pounds.
From then on, nothing was heard from petitioner until he followed up
his case requesting for leniency on the latter part of 1992. He weighed at 219
poundson August 20, 1992 and 205 pounds on November 5, 1992.
On November 13, 1992, PAL finally served petitioner a Notice of
Administrative Charge for violation of company standards on weight
requirements. He was given ten (10) days from receipt of the charge within
which to file his answer and submit controverting evidence.[8]

On December 7, 1992, petitioner submitted his Answer.[9] Notably, he

did not deny being overweight. What he claimed, instead, is that his
violation, ifany, had already been condoned by PAL since no action has been
taken by the company regarding his case since 1988. He also claimed
that PAL discriminated against him because the company has not been fair in
treating the cabin crew members who are similarly situated.
On December 8, 1992, a clarificatory hearing was held where
petitioner manifested that he was undergoing a weight reduction program to
lose at least two (2) pounds per week so as to attain his ideal weight.[10]
On June 15, 1993, petitioner was formally informed by PAL that due
to his inability to attain his ideal weight, and considering the utmost leniency
extended to him which spanned a period covering a total of almost five (5)
years, his services were considered terminated effective immediately.[11]
His motion for reconsideration having been denied,[12] petitioner filed
a complaint for illegal dismissal against PAL.
Labor Arbiter, NLRC and CA Dispositions
On November 18, 1998, Labor Arbiter Valentin C. Reyes ruled[13] that
petitioner was illegally dismissed. The dispositive part of the Arbiter ruling
runs as follows:
WHEREFORE, in view of the foregoing, judgment is
hereby rendered, declaring the complainants dismissal illegal,
and ordering the respondent to reinstate him to his former
position or substantially equivalent one, and to pay him:
a. Backwages of Php10,500.00 per month from his
dismissal on June 15, 1993 until reinstated, which for purposes
of appeal is hereby set from June 15, 1993 up toAugust 15,
1998 at P651,000.00;
b. Attorneys fees of five percent (5%) of the total award.

SO ORDERED.[14]
The Labor Arbiter held that the weight standards of PAL are
reasonable in view of the nature of the job of petitioner.[15] However, the
weight standards need not be complied with under pain of dismissal since
his weight did not hamper the performance of his duties. [16] Assuming that it
did, petitioner could be transferred to other positions where his weight
would not be a negative factor.[17] Notably, other overweight employees, i.e.,
Mr. Palacios, Mr. Cui, and Mr. Barrios, were promoted instead of being
disciplined.[18]
Both parties appealed to the National Labor Relations Commission
(NLRC).[19]
On October 8, 1999, the Labor Arbiter issued a writ of execution
directing the reinstatement of petitioner without loss of seniority rights and
other benefits.[20]
On February 1, 2000, the Labor Arbiter denied[21] the Motion to Quash
Writ of Execution[22] of PAL.
On March 6, 2000, PAL appealed the denial of its motion to quash to
the NLRC.[23]

On June 23, 2000, the NLRC rendered judgment[24] in the following

tenor:
WHEREFORE, premises considered[,] the Decision of
the Arbiter dated 18 November 1998 as modified by our
findings herein, is hereby AFFIRMED and that part of the
dispositive portion of said decision concerning complainants
entitlement to backwages shall be deemed to refer to
complainants entitlement to his full backwages,inclusive of
allowances and to his other benefits or their monetary
equivalent instead of simply backwages, from date of dismissal

until his actual reinstatement or finality hereof. Respondent is

enjoined to manifests (sic) its choice of the form of the
reinstatement of complainant, whether physical or through
payroll within ten (10) days from notice failing which, the same
shall be deemed as complainants reinstatement through payroll
and execution in case of non-payment shall accordingly be
issued by the Arbiter. Both appeals of respondent thus,
are DISMISSED for utter lack of merit.[25]
According to the NLRC, obesity, or the tendency to gain weight
uncontrollably regardless of the amount of food intake, is a disease in itself.
[26]
As a consequence, there can be no intentional defiance or serious
misconduct by petitioner to the lawful order of PAL for him to lose weight.
[27]

Like the Labor Arbiter, the NLRC found the weight standards
of PAL to be reasonable. However, it found as unnecessary the Labor Arbiter
holding that petitioner was not remiss in the performance of his duties as
flight steward despite being overweight. According to the NLRC, the Labor
Arbiter should have limited himself to the issue of whether the failure of
petitioner to attain his ideal weight constituted willful defiance of the weight
standards of PAL.[28]

PAL moved for reconsideration to no avail.[29] Thus, PAL elevated the

matter to the Court of Appeals (CA) via a petition for certiorari under Rule
65 of the 1997 Rules of Civil Procedure.[30]
By Decision dated August 31, 2004, the CA reversed[31] the NLRC:
WHEREFORE, premises considered, we hereby GRANT
the petition. The assailed NLRC decision is declared NULL and
VOID and is hereby SET ASIDE. The private respondents
complaint is hereby DISMISSED. No costs.

SO ORDERED.[32]
The CA opined that there was grave abuse of discretion on the part of
the NLRC because it looked at wrong and irrelevant considerations [33] in
evaluating the evidence of the parties. Contrary to the NLRC ruling, the
weight standards of PAL are meant to be a continuing qualification for an
employees position.[34]The failure to adhere to the weight standards is
an analogous cause for the dismissal of an employee under Article 282(e) of
the Labor Code in relation to Article 282(a). It is not willful disobedience as
the NLRC seemed to suggest.[35] Said the CA, the element of willfulness that
the NLRC decision cites is an irrelevant consideration in arriving at a
conclusion on whether the dismissal is legally proper.[36] In other words, the
relevant question to ask is not one of willfulness but one of reasonableness
of the standard and whether or not the employee qualifies or continues to
qualify under this standard.[37]

Just like the Labor Arbiter and the NLRC, the CA held that the weight
standards of PAL are reasonable.[38] Thus, petitioner was legally dismissed
because he repeatedly failed to meet the prescribed weight standards. [39] It is
obvious that the issue of discrimination was only invoked by petitioner for
purposes of escaping the result of his dismissal for being overweight.[40]
On May 10, 2005, the CA denied petitioners motion for
reconsideration.[41] Elaborating on its earlier ruling, the CA held that the
weight standards of PALare a bona fide occupational qualification which, in
case of violation, justifies an employees separation from the service.[42]
Issues
In this Rule 45 petition for review, the following issues are posed for
resolution:
I.

WHETHER OR NOT THE COURT OF APPEALS

GRAVELY ERRED IN HOLDING THAT PETITIONERS
OBESITY CAN BE A GROUND FOR DISMISSAL UNDER
PARAGRAPH (e) OF ARTICLE 282 OF THE LABOR CODE
OF THE PHILIPPINES;
II.
WHETHER OR NOT THE COURT OF APPEALS
GRAVELY ERRED IN HOLDING THAT PETITIONERS
DISMISSAL FOR OBESITY CAN BE PREDICATED ON
THE BONA FIDE OCCUPATIONAL QUALIFICATION
(BFOQ) DEFENSE;
III.
WHETHER OR NOT THE COURT OF APPEALS GRAVELY
ERRED IN HOLDING THAT PETITIONER WAS NOT
UNDULY DISCRIMINATED AGAINST WHEN HE WAS
DISMISSED WHILE OTHER OVERWEIGHT CABIN
ATTENDANTS WERE EITHER GIVEN FLYING DUTIES
OR PROMOTED;
IV.
WHETHER OR NOT THE COURT OF APPEALS
GRAVELY ERRED WHEN IT BRUSHED ASIDE
PETITIONERS CLAIMS FOR REINSTATEMENT [AND]
WAGES
ALLEGEDLY
FOR
BEING
[43]
MOOT AND ACADEMIC. (Underscoring supplied)
Our Ruling
I. The obesity of petitioner is a ground for dismissal under Article
282(e) [44] of the Labor Code.
A reading of the weight standards of PAL would lead to no other conclusion
than that they constitute a continuing qualification of an employee in order
to keep the job. Tersely put, an employee may be dismissed the moment he
is unable to comply with his ideal weight as prescribed by the weight

standards. The dismissal of the employee would thus fall under Article
282(e) of the Labor Code. As explained by the CA:
x x x [T]he standards violated in this case were not mere orders
of the employer; they were the prescribed weights that a cabin
crew must maintain in order to qualify for and keep his or her
position in the company. In other words, they were standards
that establish continuing qualifications for an employees
position. In this sense, the failure to maintain these standards
does not fall under Article 282(a) whose express terms require
the element of willfulness in order to be a ground for
dismissal. The failure to meet the employers qualifying
standards is in fact a ground that does not squarely fall under
grounds (a) to (d) and is therefore one that falls under Article
282(e) the other causes analogous to the foregoing.
By its nature, these qualifying standards are norms that
apply prior to and after an employee is hired. They apply prior
to employment because these are the standards a job applicant
must initially meet in order to be hired. They apply after
hiring because an employee must continue to meet these
standards while on the job in order to keep his job. Under this
perspective, a violation is not one of the faults for which an
employee can be dismissed pursuant to pars. (a) to (d) of Article
282; the employee can be dismissed simply because he no
longer qualifies for his job irrespective of whether or not the
failure to qualify was willful or intentional. x x x[45]
Petitioner, though, advances a very interesting argument. He claims that
obesity is a physical abnormality and/or illness.[46] Relying
on Nadura v. BenguetConsolidated, Inc.,[47] he says his dismissal is illegal:
Conscious of the fact that Naduras case cannot be made to
fall squarely within the specific causes enumerated in
subparagraphs 1(a) to (e), Benguet invokes the provisions of
subparagraph 1(f) and says that Naduras illness occasional
attacks of asthma is a cause analogous to them.

Even a cursory reading of the legal provision under

consideration is sufficient to convince anyone that, as the trial
court said, illness cannot be included as an analogous cause by
any stretch of imagination.
It is clear that, except the just cause mentioned in subparagraph 1(a), all the others expressly enumerated in the law
are due to the voluntary and/or willful act of the
employee. How Naduras illness could be considered as
analogous to any of them is beyond our understanding, there
being no claim or pretense that the same was contracted
through his own voluntary act.[48]
The reliance on Nadura is off-tangent. The factual milieu in Nadura is
substantially different from the case at bar. First, Nadura was not decided
under the Labor Code. The law applied in that case was Republic Act (RA)
No. 1787. Second, the issue of flight safety is absent in Nadura, thus, the
rationale there cannot apply here. Third, in Nadura, the employee who was
a miner, was laid off from work because of illness, i.e., asthma. Here,
petitioner was dismissed for his failure to meet the weight standards
of PAL. He was not dismissed due to illness. Fourth, the issue in Nadura is
whether or not the dismissed employee is entitled to separation pay and
damages. Here, the issue centers on the propriety of the dismissal of
petitioner for his failure to meet the weight standards of PAL. Fifth,
inNadura, the employee was not accorded due process. Here, petitioner was
accorded utmost leniency. He was given more than four (4) years to comply
with the weight standards of PAL.

In the case at bar, the evidence on record militates against petitioners

claims that obesity is a disease. That he was able to reduce his weight from
1984 to 1992 clearly shows that it is possible for him to lose weight given
the proper attitude, determination, and self-discipline. Indeed, during
the clarificatory hearing on December 8, 1992, petitioner himself claimed
that [t]he issue is could I bring my weight down to ideal weight which is
172, then the answer is yes. I can do it now.[49]

True, petitioner claims that reducing weight is costing him a lot of

expenses.[50] However, petitioner has only himself to blame. He could have
easily availed the assistance of the company physician, per the advice
of PAL.[51] He chose to ignore the suggestion. In fact, he repeatedly failed to
report when required to undergo weight checks, without offering a valid
explanation. Thus, his fluctuating weight indicates absence of willpower
rather than an illness.
Petitioner cites Bonnie Cook v. State of Rhode Island, Department of
Mental Health, Retardation and Hospitals,[52] decided by the United States
Court of Appeals (First Circuit). In that case, Cook worked from 1978 to
1980 and from 1981 to 1986 as an institutional attendant for the mentally
retarded at the Ladd Center that was being operated by respondent. She
twice resigned voluntarily with an unblemished record. Even respondent
admitted that her performance met the Centers legitimate expectations. In
1988, Cook re-applied for a similar position. At that time, she stood 52 tall
and weighed over 320 pounds. Respondent claimed that the morbid obesity
of plaintiff compromised her ability to evacuate patients in case of
emergency and it also put her at greater risk of serious diseases.

Cook contended that the action of respondent amounted to

discrimination on the basis of a handicap. This was in direct violation of
Section 504(a) of the Rehabilitation Act of 1973,[53] which incorporates the
remedies contained in Title VI of the Civil Rights Act of 1964. Respondent
claimed, however, that morbid obesity could never constitute a handicap
within the purview of the Rehabilitation Act. Among others, obesity is a
mutable condition, thus plaintiff could simply lose weight and rid herself of
concomitant disability.
The appellate Court disagreed and held that morbid obesity is a
disability under the Rehabilitation Act and that respondent discriminated
against Cook based on perceived disability. The evidence included expert
testimony that morbid obesity is a physiological disorder. It involves a
dysfunction of both the metabolic system and the neurological appetite
suppressing signal system, which is capable of causing adverse effects

within the musculoskeletal, respiratory, and cardiovascular systems. Notably,

the Court stated that mutability is relevant only in determining the
substantiality of the limitation flowing from a given impairment, thus
mutability only precludes those conditions that an individual can easily and
quickly reverse by behavioral alteration.
Unlike Cook, however, petitioner is not morbidly obese. In the words
of the District Court for the District of Rhode Island, Cook was sometime
before 1978 at least one hundred pounds more than what is considered
appropriate of her height. According to the Circuit Judge, Cook weighed
over 320 pounds in 1988. Clearly, that is not the case here. At his heaviest,
petitioner was only less than 50 pounds over his ideal weight.
In fine, We hold that the obesity of petitioner, when placed in the
context of his work as flight attendant, becomes an analogous cause under
Article 282(e) of the Labor Code that justifies his dismissal from the
service. His obesity may not be unintended, but is nonetheless voluntary. As
the CA correctly puts it, [v]oluntariness basically means that the just cause is
solely attributable to the employee without any external force influencing or
controlling his actions. This element runs through all just causes under
Article 282, whether they be in the nature of a wrongful action or
omission. Gross and habitual neglect, a recognized just cause, is considered
voluntary although it lacks the element of intent found in Article 282(a), (c),
and (d).[54]
II. The dismissal of petitioner can be predicated on the bona fide
occupational qualification defense.
Employment in particular jobs may not be limited to persons of a particular
sex, religion, or national origin unless the employer can show that sex,
religion, or national origin is an actual qualification for performing the
job. The qualification is called a bona fide occupational qualification
(BFOQ).[55] In the United States, there are a few federal and many state job
discrimination laws that contain an exception allowing an employer to
engage in an otherwise unlawful form of prohibited discrimination when the

action is based on a BFOQ necessary to the normal operation of a business

or enterprise.[56]
Petitioner contends that BFOQ is a statutory defense. It does not exist
if there is no statute providing for it.[57] Further, there is no existing BFOQ
statute that could justify his dismissal.[58]
Both arguments must fail.
First, the Constitution,[59] the Labor Code,[60] and RA No. 7277[61] or
the Magna Carta for Disabled Persons[62] contain provisions similar to
BFOQ.
Second, in British Columbia Public Service Employee Commission
(BSPSERC) v. The British Columbia Government and Service Employees
Union (BCGSEU),[63] the Supreme Court of Canada adopted the socalled Meiorin Test in determining whether an employment policy is
justified. Under this test, (1) the employer must show that it adopted the
standard for a purpose rationally connected to the performance of the job;
[64]
(2) the employer must establish that the standard is reasonably
necessary[65] to the accomplishment of that work-related purpose; and (3) the
employer must establish that the standard is reasonably necessary in order to
accomplish the legitimate work-related purpose. Similarly, in Star Paper
Corporation v. Simbol,[66] this Court held that in order to justify a BFOQ, the
employer must prove that (1) the employment qualification is reasonably
related to the essential operation of the job involved; and (2) that there is
factual basis for believing that all or substantially all persons meeting the
qualification would be unable to properly perform the duties of the job.[67]
In short, the test of reasonableness of the company policy is used
because it is parallel to BFOQ.[68] BFOQ is valid provided it reflects an
inherent quality reasonably necessary for satisfactory job performance.[69]
In Duncan
Association
of Detailman-PTGWTO
[70]
v. Glaxo Wellcome Philippines, Inc., the Court did not hesitate to pass
upon the validity of a company policy which prohibits its employees from
marrying employees of a rival company. It was held that the company policy

is reasonable considering that its purpose is the protection of the interests of

the company against possible competitor infiltration on its trade secrets and
procedures.
Verily, there is no merit to the argument that BFOQ cannot be applied
if it has no supporting statute. Too, the Labor Arbiter,[71] NLRC,[72] and
CA[73]are one in holding that the weight standards of PAL are reasonable. A
common carrier, from the nature of its business and for reasons of public
policy, is bound to observe extraordinary diligence for the safety of the
passengers it transports.[74] It is bound to carry its passengers safely as far as
human care and foresightcan provide, using the utmost diligence of very
cautious persons, with due regard for all the circumstances.[75]
The law leaves no room for mistake or oversight on the part of a
common carrier. Thus, it is only logical to hold that the weight standards
of PAL show its effort to comply with the exacting obligations imposed
upon it by law by virtue of being a common carrier.
The business of PAL is air transportation. As such, it has committed
itself to safely transport its passengers. In order to achieve this, it must
necessarily rely on its employees, most particularly the cabin flight deck
crew who are on board the aircraft. The weight standards of PAL should be
viewed as imposing strict norms of discipline upon its employees.
In other words, the primary objective of PAL in the imposition of the
weight standards for cabin crew is flight safety. It cannot be gainsaid that
cabin attendants must maintain agility at all times in order to inspire
passenger confidence on their ability to care for the passengers when
something goes wrong. It is not farfetched to say that airline companies, just
like all common carriers, thrive due to public confidence on their safety
records. People, especially the riding public, expect no less than that
airline companies transport their passengers to their respective destinations
safely and soundly. A lesser performance is unacceptable.
The task of a cabin crew or flight attendant is not limited to serving
meals or attending to the whims and caprices of the passengers. The most
important activity of the cabin crew is to care for the safety of passengers

and the evacuation of the aircraft when an emergency occurs. Passenger

safety goes to the core of the job of a cabin attendant. Truly, airlines need
cabin attendants who have the necessary strength to open emergency doors,
the agility to attend to passengers in cramped working conditions, and the
stamina to withstand grueling flight schedules.
On board an aircraft, the body weight and size of a cabin attendant are
important factors to consider in case of emergency. Aircrafts have
constricted cabin space, and narrow aisles and exit doors. Thus, the
arguments of respondent that [w]hether the airlines flight attendants are
overweight or not has no direct relation to its mission of transporting
passengers to their destination; and that the weight standards has nothing to
do with airworthiness of respondents airlines, must fail.
The rationale in Western Air Lines v. Criswell[76] relied upon by
petitioner cannot apply to his case. What was involved there were two (2)
airline pilots who were denied reassignment as flight engineers upon
reaching the age of 60, and a flight engineer who was forced to retire at age
60. They sued the airline company, alleging that the age-60 retirement for
flight engineers violated the Age Discrimination in Employment Act of
1967. Age-based BFOQ and being overweight are not the same. The case of
overweight cabin attendants is another matter. Given the cramped cabin
space and narrow aisles and emergency exit doors of the airplane, any
overweight cabin attendant would certainly have difficulty navigating the
cramped cabin area.
In short, there is no need to individually evaluate their ability to
perform their task. That an obese cabin attendant occupies more space than a
slim one is an unquestionable fact which courts can judicially recognize
without introduction of evidence.[77] It would also be absurd to require airline
companies to reconfigure the aircraft in order to widen the aisles and exit
doors just to accommodate overweight cabin attendants like petitioner.
The biggest problem with an overweight cabin attendant is the
possibility of impeding passengers from evacuating the aircraft, should the
occasion call for it. The job of a cabin attendant during emergencies is to

speedily get the passengers out of the aircraft safely. Being overweight
necessarily impedes mobility.Indeed, in an emergency situation, seconds are
what cabin attendants are dealing with, not minutes. Three lost seconds can
translate into three lost lives.Evacuation might slow down just because a
wide-bodied cabin attendant is blocking the narrow aisles. These
possibilities are not remote.

Petitioner is also in estoppel. He does not dispute that the weight

standards of PAL were made known to him prior to his employment. He is
presumed to know the weight limit that he must maintain at all times.[78] In
fact, never did he question the authority of PAL when he was repeatedly
asked to trim down his weight. Bona fides exigit ut quod convenit fiat. Good
faith demands that what is agreed upon shall be
done. Kung ang tao ay tapat kanyang tutuparin angnapagkasunduan.
Too, the weight standards of PAL provide for separate weight
limitations based on height and body frame for both male and female cabin
attendants. A progressive discipline is imposed to allow non-compliant cabin
attendants sufficient opportunity to meet the weight standards. Thus, the
clear-cut rules obviate any possibility for the commission of abuse or
arbitrary action on the part of PAL.
III. Petitioner failed to substantiate his claim that he was
discriminated against by PAL.
Petitioner next claims that PAL is using passenger safety as a
convenient excuse to discriminate against him.[79] We are constrained,
however, to hold otherwise. We agree with the CA that [t]he element of
discrimination came into play in this case as a secondary position for the
private respondent in order to escape the consequence of dismissal that being
overweight entailed. It is a confession-and-avoidance position that impliedly
admitted the cause of dismissal, including the reasonableness of the
applicable standard and the private respondents failure to comply.[80] It is a

basic rule in evidence that each party must prove his affirmative allegation.
[81]

Since the burden of evidence lies with the party who asserts an
affirmative allegation, petitioner has to prove his allegation with
particularity. There is nothing on the records which could support the finding
of discriminatory treatment. Petitioner cannot establish discrimination by
simply naming the supposed cabin attendants who are allegedly similarly
situated with him. Substantial proof must be shown as to how and why they
are similarly situated and the differential treatment petitioner got
from PAL despite the similarity of his situation with other employees.
Indeed, except for pointing out the names of the supposed overweight cabin
attendants, petitioner miserably failed to indicate their respective ideal
weights; weights over their ideal weights; the periods they were allowed to
fly despite their being overweight; the particular flights assigned to them;
the discriminating treatment they got from PAL; and other relevant data that
could have adequately established a case of discriminatory treatment
by PAL. In the words of the CA,PAL really had no substantial case of
discrimination to meet.[82]
We are not unmindful that findings of facts of administrative agencies,
like the Labor Arbiter and the NLRC, are accorded respect, even finality.
[83]
The reason is simple: administrative agencies are experts in matters
within their specific and specialized jurisdiction.[84] But the principle is not a
hard and fast rule.It only applies if the findings of facts are duly supported
by substantial evidence. If it can be shown that administrative bodies
grossly misappreciated evidence of such nature so as to compel a conclusion
to the contrary, their findings of facts must necessarily be reversed. Factual
findings of administrative agencies do not have infallibility and must be set
aside when they fail the test of arbitrariness.[85]
Here, the Labor Arbiter and the NLRC
inexplicably misappreciated evidence. We thus annul their findings.
To make his claim more believable, petitioner invokes the equal
protection clause guaranty[86] of the Constitution. However, in the absence of

governmental interference, the liberties guaranteed by the Constitution

cannot be invoked.[87] Put differently, the Bill of Rights is not meant to be
invoked against acts of private individuals.[88] Indeed, the United
States Supreme Court, in interpreting the Fourteenth Amendment,[89] which
is the source of our equal protection guarantee, is consistent in saying that
the equal protection erects no shield against private conduct, however
discriminatory or wrongful.[90] Private actions, no matter how egregious,
cannot violate the equal protection guarantee.[91]

IV. The claims of petitioner for reinstatement and wages are moot.
As his last contention, petitioner avers that his claims for reinstatement and
wages have not been mooted. He is entitled to reinstatement and his
full backwages, from the time he was illegally dismissed up to the time that
the NLRC was reversed by the CA.[92]
At this point, Article 223 of the Labor Code finds relevance:
In any event, the decision of the Labor Arbiter reinstating a
dismissed or separated employee, insofar as the reinstatement
aspect is concerned, shall immediately be executory, even
pending appeal. The employee shall either be admitted back to
work under the same terms and conditions prevailing prior to
his dismissal or separation or, at the option of the employer,
merely reinstated in the payroll. The posting of a bond by the
employer shall not stay the execution for reinstatement
provided herein.
The law is very clear. Although an award or order of reinstatement is
self-executory and does not require a writ of execution,[93] the option to
exercise actual reinstatement or payroll reinstatement belongs to the
employer. It does not belong to the employee, to the labor tribunals, or even
to the courts.

Contrary to the allegation of petitioner that PAL did everything under

the sun to frustrate his immediate return to his previous position,[94] there is
evidence that PAL opted to physically reinstate him to a substantially
equivalent position in accordance with the order of the Labor Arbiter.[95] In
fact, petitioner duly received the return to work notice on February 23, 2001,
as shown by his signature.[96]
Petitioner cannot take refuge in the pronouncements of the Court in a
case that [t]he unjustified refusal of the employer to reinstate the
dismissed employee entitles him to payment of his salaries effective from
the time the employer failed to reinstate him despite the issuance of a writ of
execution[98] and even if the order of reinstatement of the Labor Arbiter is
reversed on appeal, it is obligatory on the part of the employer to reinstate
and pay the wages of the employee during the period of appeal until reversal
by the higher court.[99] He failed to prove that he complied with the return to
work order of PAL. Neither does it appear on record that he actually
rendered services for PAL from the moment he was dismissed, in order to
insist on the payment of his full backwages.
[97]

In insisting that he be reinstated to his actual position despite being

overweight, petitioner in effect wants to render the issues in the present case
moot. He asks PAL to comply with the impossible. Time and again, the
Court ruled that the law does not exact compliance with the impossible.[100]
V. Petitioner is entitled to separation pay.
Be that as it may, all is not lost for petitioner.
Normally, a legally dismissed employee is not entitled to separation
pay. This may be deduced from the language of Article 279 of the Labor
Code that [a]n employee who is unjustly dismissed from work shall be
entitled to reinstatement without loss of seniority rights and other privileges
and to his fullbackwages, inclusive of allowances, and to his other benefits
or their monetary equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement. Luckily for
petitioner, this is not an ironclad rule.

Exceptionally, separation pay is granted to a legally dismissed

employee as an act social justice,[101] or based on equity.[102] In both
instances, it is required that the dismissal (1) was not for serious misconduct;
and (2) does not reflect on the moral character of the employee.[103]
Here, We grant petitioner separation pay equivalent to one-half (1/2)
months pay for every year of service.[104] It should include regular
allowances which he might have been receiving.[105] We are not blind to the
fact that he was not dismissed for any serious misconduct or to any act
which would reflect on his moral character. We also recognize that his
employment with PAL lasted for more or less a decade.
WHEREFORE, the appealed Decision of the Court of Appeals
is AFFIRMED but MODIFIED in that petitioner Armando G. Yrasuegui is
entitled to separation pay in an amount equivalent to one-half (1/2) months
pay for every year of service, which should include his regular allowances.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
ALABANG COUNTRY CLUB, INC., G.R. No. 170287
Petitioner,
Present:
- versus QUISUMBING, J., Chairperson,
CARPIO MORALES,
NATIONAL LABOR RELATIONS AZCUNA,*
COMMISSION, ALABANG TINGA, and
COUNTRY CLUB INDEPENDENT VELASCO, JR., JJ.
EMPLOYEES UNION,

CHRISTOPHER PIZARRO,
MICHAEL BRAZA, and Promulgated:
NOLASCO CASTUERAS,
Respondents. February 14, 2008
x-----------------------------------------------------------------------------------------x
DECISION
VELASCO, JR., J.:
Petitioner Alabang Country Club, Inc. (Club) is a domestic non-profit
corporation with principal office at Country Club Drive, Ayala
Alabang, Muntinlupa City. Respondent Alabang Country Club Independent
Employees Union (Union) is the exclusive bargaining agent of the Clubs
rank-and-file employees. In April 1996, respondents Christopher Pizarro,
Michael Braza, and Nolasco Castueras were elected Union President, VicePresident, and Treasurer, respectively.
On June 21, 1999, the Club and the Union entered into a Collective
Bargaining Agreement (CBA), which provided for a Union shop and
maintenance of membership shop.
The pertinent parts of the CBA included in Article II on Union
Security read, as follows:
ARTICLE II
UNION SECURITY
SECTION 1. CONDITION OF EMPLOYMENT. All
regular rank-and-file employees, who are members or
subsequently become members of the UNION shall maintain
their membership in good standing as a condition for their
continued employment by the CLUB during the lifetime of this
Agreement or any extension thereof.
SECTION 2. [COMPULSORY] UNION MEMBERSHIP
FOR NEW REGULAR RANK-AND-FILE EMPLOYEES

a)

New regular rank-and-file employees of the Club shall

join the UNION within five (5) days from the date of their
appointment as regular employees as a condition for their
continued employment during the lifetime of this
Agreement, otherwise, their failure to do so shall be a
ground for dismissal from the CLUB upon demand by
theUNION.
b)
The Club agrees to furnish the UNION the names of all
new probationary and regular employees covered by this
Agreement not later than three (3) days from the date of
regular appointment showing the positions and dates of
hiring.
xxxx
SECTION 4. TERMINATION UPON UNION
DEMAND. Upon written demand of the UNION and after
observing due process, the Club shall dismiss a regular rankand-file employee on any of the following grounds:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)

Failure to join the UNION within five (5)

days from the time of regularization;
Resignation from the UNION, except within
the period allowed by law;
Conviction of a crime involving moral
turpitude;
Non-payment of UNION dues, fees, and
assessments;
Joining another UNION except within the
period allowed by law;
Malversation of union funds;
Actively campaigning to discourage
membership in the UNION; and
Inflicting harm or injury to any member or
officer of the UNION.

It is understood that the UNION shall hold the CLUB

free and harmless [sic] from any liability or damage whatsoever
which may be imposed upon it by any competent judicial or
quasi-judicial authority as a result of such dismissal and

the UNION shall reimburse the CLUB for any and all liability
or damage it may be adjudged.[1] (Emphasis supplied.)
Subsequently, in July 2001, an election was held and a new set of
officers was elected. Soon thereafter, the new officers conducted an audit of
the Union funds. They discovered some irregularly recorded entries,
unaccounted expenses and disbursements, and uncollected loans from the
Union funds. The Union notified respondents Pizarro, Braza, and Castueras
of the audit results and asked them to explain the discrepancies in writing.[2]
Thereafter, on October 6, 2001, in a meeting called by the Union,
respondents Pizarro, Braza, and Castueras explained their side. Braza denied
any wrongdoing and instead asked that the investigation be addressed to
Castueras, who was the Union Treasurer at that time. With regard to his
unpaid loans, Braza claimed he had been paying through monthly salary
deductions and said the Union could continue to deduct from his salary until
full payment of his loans, provided he would be reimbursed should the result
of the initial audit be proven wrong by a licensed auditor. With regard to the
Union expenses which were without receipts, Braza explained that these
were legitimate expenses for which receipts were not issued, e.g.
transportation fares, food purchases from small eateries, and food and
transportation allowances given to Union members with pending complaints
with the Department of Labor and Employment, the National Labor
Relations Commission (NLRC), and the fiscals office. He explained that
though there were no receipts for these expenses, these were supported by
vouchers and itemized as expenses. Regarding his unpaid and unliquidated
cash advances amounting to almost PhP 20,000, Braza explained that these
were not actual cash advances but payments to a certain Ricardo Ricafrente
who had loaned PhP 200,000 to the Union.[3]
Pizarro, for his part, blamed Castueras for his unpaid and uncollected
loan and cash advances. He claimed his salaries were regularly deducted to
pay his loan and he did not know why these remained unpaid in the
records. Nonetheless, he likewise agreed to continuous salary deductions
until all his accountabilities were paid.[4]

Castueras also denied any wrongdoing and claimed that the irregular
entries in the records were unintentional and were due to inadvertence
because of his voluminous work load. He offered that his unpaid personal
loan of PhP 27,500 also be deducted from his salary until the loans were
fully paid. Without admitting any fault on his part, Castueras suggested that
his salary be deducted until the unaccounted difference between the loans
and the amount collected amounting to a total of PhP 22,000 is paid.[5]
Despite their explanations, respondents Pizarro, Braza, and Castueras
were expelled from the Union, and, on October 16, 2001, were furnished
individual letters of expulsion for malversation of Union funds. [6] Attached
to the letters were copies of the Panawagan ng mga Opisyales ng
Unyon signed by 37 out of 63 Union members and officers, and a Board of
Directors Resolution[7] expelling them from the Union.
In a letter dated October 18, 2001, the Union, invoking the Security Clause
of the CBA, demanded that the Club dismiss respondents Pizarro, Braza, and
Castueras in view of their expulsion from the Union.[8] The Club required the
three respondents to show cause in writing within 48 hours from notice why
they should not be dismissed. Pizarro and Castueras submitted their
respective written explanations on October 20, 2001, while Braza submitted
his explanation the following day.

During the last week of October 2001, the Clubs general manager called
respondents Pizarro, Braza, and Castueras for an informal conference
inquiring about the charges against them. Said respondents gave their
explanation and asserted that the Union funds allegedly malversed by them
were even over the total amount collected during their tenure as Union
officersPhP 120,000 for Braza, PhP 57,000 for Castueras, and PhP 10,840
for Pizarro, as against the total collection from April 1996 to December 2001
of only PhP 102,000. They claimed the charges are baseless. The general
manager announced he would conduct a formal investigation.

Nonetheless, after weighing the verbal and written explanations of the three
respondents, the Club concluded that said respondents failed to refute the
validity of their expulsion from the Union. Thus, it was constrained to
terminate the employment of said respondents. On December 26, 2001, said
respondents received their notices of termination from the Club.[9]
Respondents Pizarro, Braza, and Castueras challenged their dismissal from
the Club in an illegal dismissal complaint docketed as NLRC-NCR Case No.
30-01-00130-02 filed with the NLRC, National Capital Region Arbitration
Branch. In his January 27, 2003 Decision,[10] the Labor Arbiter ruled in favor
of the Club,and found that there was justifiable cause in terminating said
respondents. He dismissed the complaint for lack of merit.
On February 21, 2003, respondents Pizarro, Braza, and Castueras filed an
Appeal docketed as NLRC NCR CA No. 034601-03 with the NLRC.
On February 26, 2004, the NLRC rendered a Decision [11] granting the
appeal, the fallo of which reads:
WHEREFORE, finding merit in the Appeal, judgment is hereby
rendered declaring the dismissal of the complainants illegal. x x
x Alabang Country Club, Inc. and Alabang Country Club
Independent Union are hereby ordered to reinstate complainants
Christopher Pizarro, Nolasco Castueras and Michael Braza to
their former positions without loss of seniority rights and other
privileges with full backwages from the time they were
dismissed up to their actual reinstatement.
SO ORDERED.
The NLRC ruled that there was no justifiable cause for the termination of
respondents Pizarro, Braza, and Castueras. The commissioners relied heavily
on Section 2, Rule XVIII of the Rules Implementing Book V of the Labor
Code. Sec. 2 provides:

SEC. 2. Actions arising from Article 241 of the Code.

Any action arising from the administration or accounting of
union funds shall be filed and disposed of as an intra-union
dispute in accordance with Rule XIV of this Book.
In case of violation, the Regional or Bureau Director
shall order the responsible officer to render an accounting of
funds before the general membership and may, where
circumstances warrant, mete the appropriate penalty to the
erring officer/s, including suspension or expulsion from the
union.[12]
According to the NLRC, said respondents expulsion from the Union was
illegal since the DOLE had not yet made any definitive ruling on their
liability regarding the administration of the Unions funds.
The Club then filed a motion for reconsideration which the NLRC denied in
its June 20, 2004 Resolution.[13]
Aggrieved by the Decision and Resolution of the NLRC, the Club filed a
Petition for Certiorari which was docketed as CA-G.R. SP No. 86171 with
the Court of Appeals (CA).
The CA Upheld the NLRC Ruling
that the Three Respondents were Deprived Due Process
On July 5, 2005, the appellate court rendered a Decision, [14] denying the
petition and upholding the Decision of the NLRC. The CAs Decision
focused mainly on the Clubs perceived failure to afford due process to the
three respondents. It found that said respondents were not given the
opportunity to be heard in a separate hearing as required by Sec. 2(b), Rule
XXIII, Book V of the Omnibus Rules Implementing the Labor Code, as
follows:
SEC. 2. Standards of due process; requirements of notice.In
all cases of termination of employment, the following standards
of due process shall be substantially observed:

For termination of employment based on just causes as defined

in Article 282 of the Code:
xxxx
(b) A hearing or conference during which the employee
concerned, with the assistance of counsel if the employee so
desires, is given opportunity to respond to the charge, present
his evidence or rebut the evidence presented against him.
The CA also said the dismissal of the three respondents was contrary to the
doctrine laid down in Malayang Samahan ng mga Manggagawa sa M.
Greenfield v. Ramos (Malayang Samahan), where this Court ruled that even
on the assumption that the union had valid grounds to expel the local union
officers, due process requires that the union officers be accorded a separate
hearing by the employer company.[15]
In a Resolution[16] dated October 20, 2005, the CA denied the Clubs motion
for reconsideration.
The Club now comes before this Court with these issues for our resolution,
summarized as follows:
1.
Whether there was just cause to dismiss private
respondents, and whether they were afforded due process
in accordance with the standards provided for by the
Labor Code and its Implementing Rules.
2.

Whether or not the CA erred in not finding that the

NLRC committed grave abuse of discretion amounting to
lack or excess of jurisdiction when it ruled that
respondents Pizarro, Braza, and Castueras were illegally
expelled from the Union.

3.

Whether the case of Agabon vs. NLRC[17] should

be applied to this case.

4.

Whether that in the absence of bad faith and

malice on the part of the Club, the Union is solely liable
for the termination from employment of said
respondents.

The main issue is whether the three respondents were illegally dismissed and
whether they were afforded due process.
The Club avers that the dismissal of the three respondents was in accordance
with the Union security provisions in their CBA. The Club also claims that
the three respondents were afforded due process, since the Club conducted
an investigation separate and independent from that conducted by the Union.
Respondents Pizarro, Braza, and Castueras, on the other hand, contend that
the Club failed to conduct a separate hearing as prescribed by Sec. 2(b), Rule
XXIII, Book V of the implementing rules of the Code.
First, we resolve the legality of the three respondents dismissal from the
Club.

Valid Grounds for Termination

Under the Labor Code, an employee may be validly terminated on the
following grounds: (1) just causes under Art. 282; (2) authorized causes
under Art. 283; (3) termination due to disease under Art. 284; and (4)
termination by the employee or resignation under Art. 285.
Another cause for termination is dismissal from employment due to
the enforcement of the union security clause in the CBA. Here, Art. II of the
CBA on Union security contains the provisions on the Union shop and
maintenance of membership shop. There is union shop when all new regular
employees are required to join the union within a certain period as a
condition for their continued employment. There is maintenance of
membership shop when employees who are union members as of the

effective date of the agreement, or who thereafter become members, must

maintain union membership as a condition for continued employment until
they are promoted or transferred out of the bargaining unit or the agreement
is terminated.[18] Termination of employment by virtue of a union security
clause embodied in a CBA is recognized and accepted in our jurisdiction.
[19]
This practice strengthens the union and prevents disunity in the
bargaining unit within the duration of the CBA. By preventing member
disaffiliation with the threat of expulsion from the union and the consequent
termination of employment, the authorized bargaining representative gains
more numbers and strengthens its position as against other unions which
may want to claim majority representation.
In terminating the employment of an employee by enforcing the union
security clause, the employer needs only to determine and prove that: (1) the
union security clause is applicable; (2) the union is requesting for the
enforcement of the union security provision in the CBA; and (3) there is
sufficient evidence to support the unions decision to expel the employee
from the union. These requisites constitute just cause for terminating an
employee based on the CBAs union security provision.
The language of Art. II of the CBA that the Union members must
maintain their membership in good standing as a condition sine qua non for
their continued employment with the Club is unequivocal. It is also clear
that upon demand by the Union and after due process, the Club shall
terminate the employment of a regular rank-and-file employee who may be
found liable for a number of offenses, one of which is malversation of Union
funds.[20]
Below is the letter sent to respondents Pizarro, Braza, and Castueras,
informing them of their termination:
On October 18, 2001, the Club received a letter from the
Board of Directors of the Alabang Country Club Independent
Employees Union (Union) demanding your dismissal from
service by reason of your alleged commission of act of
dishonesty, specifically malversation of union funds. In support

thereof, the Club was furnished copies of the following

documents:
1.

A letter under the subject Result of Audit dated

September 14, 2001 (receipt of which was duly
acknowledged from your end), which required you to
explain in writing the charges against you (copy
attached);

2.

The Unions Board of Directors Resolution dated

October
2,
2001,
which
explained
that
the Union afforded you an opportunity to explain your
side to the charges;

3.

Minutes of the meeting of the Unions Board of

Directors wherein an administrative investigation of
the case was conducted last October 6, 2001; and

4.

The Unions Board of Directors Resolution dated

October 15, 2001 which resolved your expulsion from
the Union for acts of dishonesty and malversation of
union funds, which was duly approved by the general
membership.

After a careful evaluation of the evidence on hand vis--vis a

thorough assessment of your defenses presented in your letterexplanation dated October 6, 2001 of which you also expressed
that you waived your right to be present during the
administrative investigation conducted by the Unions Board of
Directors on October 6, 2001, Management has reached the
conclusion that there are overwhelming reasons to consider that
you have violated Section 4(f) of the CBA, particularly on the
grounds of malversation of union funds. The Club has
determined that you were sufficiently afforded due process
under the circumstances.
Inasmuch as the Club is duty-bound to comply with its
obligation under Section 4(f) of the CBA, it is unfortunate that
Management is left with no other recourse but to consider your
termination from service effective upon your receipt thereof.

We wish to thank you for your services during your

employment with the Company. It would be more prudent that
we just move on independently if only to maintain industrial
peace in the workplace.
Be guided accordingly.[21]
Gleaned from the above, the three respondents were expelled from
and by the Union after due investigation for acts of dishonesty and
malversation of Union funds. In accordance with the CBA,
the Union properly requested the Club, through the October 18, 2001
letter[22] signed by Mario Orense, the Union President, and addressed to
Cynthia Figueroa, the Clubs HRD Manager, to enforce the Union security
provision in their CBA and terminate said respondents.Then, in compliance
with the Unions request, the Club reviewed the documents submitted by
the Union, requested said respondents to submit written explanations, and
thereafter afforded them reasonable opportunity to present their side. After it
had determined that there was sufficient evidence that said respondents
malversed Union funds, the Club dismissed them from their employment
conformably with Sec. 4(f) of the CBA.
Considering the foregoing circumstances, we are constrained to rule that
there is sufficient cause for the three respondents termination from
employment.
Were respondents Pizarro, Braza, and Castueras accorded due process before
their employments were terminated?
We rule that the Club substantially complied with the due process
requirements before it dismissed the three respondents.
The three respondents aver that the Club violated their rights to due
process as enunciated in Malayang Samahan,[23] when it failed to conduct an
independent and separate hearing before they were dismissed from service.

The CA, in dismissing the Clubs petition and affirming the Decision of the
NLRC, also relied on the same case. We explained in Malayang Samahan:
x x x Although this Court has ruled that union security
clauses embodied in the collective bargaining agreement may
be validly enforced and that dismissals pursuant thereto may
likewise be valid, this does not erode the fundamental
requirements of due process. The reason behind the
enforcement of union security clauses which is the sanctity and
inviolability of contracts cannot override ones right to due
process.[24]
In the above case, we pronounced that while the company, under a
maintenance of membership provision of the CBA, is bound to dismiss any
employee expelled by the union for disloyalty upon its written request, this
undertaking should not be done hastily and summarily. The company acts in
bad faith in dismissing a worker without giving him the benefit of a hearing.
[25]
We cautioned in the same case that the power to dismiss is a normal
prerogative of the employer; however, this power has a limitation. The
employer is bound to exercise caution in terminating the services of the
employees especially so when it is made upon the request of a labor union
pursuant to the CBA. Dismissals must not be arbitrary and capricious. Due
process must be observed in dismissing employees because the dismissal
affects not only their positions but also their means of livelihood. Employers
should respect and protect the rights of their employees, which include the
right to labor.[26]
The CA and the three respondents err in relying on Malayang
Samahan, as its ruling has no application to this case. In Malayang
Samahan, the union members were expelled from the union and were
immediately dismissed from the company without any semblance of due
process. Both the union and the company did not conduct administrative
hearings to give the employees a chance to explain themselves. In the
present case, the Club has substantially complied with due process. The
three respondents were notified that their dismissal was being requested by
the Union, and their explanations were heard. Then, the Club, through its

President, conferred with said respondents during the last week of October
2001. The three respondents were dismissed only after the Club reviewed
and considered the documents submitted by the Union vis--vis the written
explanations submitted by said respondents. Under these circumstances, we
find that the Club had afforded the three respondents a reasonable
opportunity to be heard and defend themselves.
On the applicability of Agabon, the Club points out that the CA ruled
that the three respondents were illegally dismissed primarily because they
were not afforded due process. We are not unaware of the doctrine
enunciated in Agabon that when there is just cause for the dismissal of an
employee, the lack of statutory due process should not nullify the dismissal,
or render it illegal or ineffectual, and the employer should indemnify the
employee for the violation of his statutory rights. [27] However, we find that
we could not apply Agabon to this case as we have found that the three
respondents were validly dismissed and were actually afforded due process.
Finally, the issue that since there was no bad faith on the part of the
Club, the Union is solely liable for the termination from employment of the
three respondents, has been mooted by our finding that their dismissal is
valid.
WHEREFORE, premises considered, the Decision dated July 5,
2005 of the CA and the Decision dated February 26, 2004 of the NLRC are
herebyREVERSED and SET ASIDE. The Decision dated January 27,
2003 of the Labor Arbiter in NLRC-NCR Case No. 30-01-00130-02 is
hereby REINSTATED.
No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION
G.R. No. 148132

January 28, 2008

SMART COMMUNICATIONS, INC., petitioner,

vs.
REGINA M. ASTORGA, respondent.
x---------------------------------------------------x
G.R. No. 151079

January 28, 2008

SMART COMMUNICATIONS, INC., petitioner,

vs.
REGINA M. ASTORGA, respondent.
x---------------------------------------------------x
G.R. No. 151372

January 28, 2008

REGINA M. ASTORGA, petitioner,

vs.
SMART COMMUNICATIONS, INC. and ANN MARGARET V.
SANTIAGO, respondents.
DECISION
NACHURA, J.:
For the resolution of the Court are three consolidated petitions for review
on certiorari under Rule 45 of the Rules of Court. G.R. No. 148132 assails
the February 28, 2000 Decision1 and the May 7, 2001 Resolution2 of the
Court of Appeals (CA) in CA-G.R. SP. No. 53831. G.R. Nos. 151079 and
151372 question the June 11, 2001 Decision3and the December 18, 2001
Resolution4 in CA-G.R. SP. No. 57065.
Regina M. Astorga (Astorga) was employed by respondent Smart
Communications, Incorporated (SMART) on May 8, 1997 as District Sales
Manager of the Corporate Sales Marketing Group/ Fixed Services Division
(CSMG/FSD). She was receiving a monthly salary of P33,650.00. As
District Sales Manager, Astorga enjoyed additional benefits, namely, annual

performance incentive equivalent to 30% of her annual gross salary, a group

life and hospitalization insurance coverage, and a car plan in the amount
of P455,000.00.5
In February 1998, SMART launched an organizational realignment to
achieve more efficient operations. This was made known to the employees
on February 27, 1998.6 Part of the reorganization was the outsourcing of the
marketing and sales force. Thus, SMART entered into a joint venture
agreement with NTT of Japan, and formed SMART-NTT Multimedia,
Incorporated (SNMI). Since SNMI was formed to do the sales and
marketing work, SMART abolished the CSMG/FSD, Astorgas division.
To soften the blow of the realignment, SNMI agreed to absorb the CSMG
personnel who would be recommended by SMART. SMART then conducted
a performance evaluation of CSMG personnel and those who garnered the
highest ratings were favorably recommended to SNMI. Astorga landed last
in the performance evaluation, thus, she was not recommended by SMART.
SMART, nonetheless, offered her a supervisory position in the Customer
Care Department, but she refused the offer because the position carried
lower salary rank and rate.
Despite the abolition of the CSMG/FSD, Astorga continued reporting for
work. But on March 3, 1998, SMART issued a memorandum advising
Astorga of the termination of her employment on ground of redundancy,
effective April 3, 1998. Astorga received it on March 16, 1998.7
The termination of her employment prompted Astorga to file a
Complaint8 for illegal dismissal, non-payment of salaries and other benefits
with prayer for moral and exemplary damages against SMART and Ann
Margaret V. Santiago (Santiago). She claimed that abolishing CSMG and,
consequently, terminating her employment was illegal for it violated her
right to security of tenure. She also posited that it was illegal for an
employer, like SMART, to contract out services which will displace the
employees, especially if the contractor is an in-house agency.9
SMART responded that there was valid termination. It argued that Astorga
was dismissed by reason of redundancy, which is an authorized cause for
termination of employment, and the dismissal was effected in accordance
with the requirements of the Labor Code. The redundancy of Astorgas
position was the result of the abolition of CSMG and the creation of a

specialized and more technically equipped SNMI, which is a valid and

legitimate exercise of management prerogative.10
In the meantime, on May 18, 1998, SMART sent a letter to Astorga
demanding that she pay the current market value of the Honda Civic Sedan
which was given to her under the companys car plan program, or to
surrender the same to the company for proper disposition.11 Astorga,
however, failed and refused to do either, thus prompting SMART to file a
suit for replevin with the Regional Trial Court of Makati (RTC) on August
10, 1998. The case was docketed as Civil Case No. 98-1936 and was raffled
to Branch 57.12
Astorga moved to dismiss the complaint on grounds of (i) lack of
jurisdiction; (ii) failure to state a cause of action; (iii) litis pendentia; and (iv)
forum-shopping. Astorga posited that the regular courts have no jurisdiction
over the complaint because the subject thereof pertains to a benefit arising
from an employment contract; hence, jurisdiction over the same is vested in
the labor tribunal and not in regular courts.13
Pending resolution of Astorgas motion to dismiss the replevin case, the
Labor Arbiter rendered a Decision14dated August 20, 1998, declaring
Astorgas dismissal from employment illegal. While recognizing SMARTs
right to abolish any of its departments, the Labor Arbiter held that such right
should be exercised in good faith and for causes beyond its control. The
Arbiter found the abolition of CSMG done neither in good faith nor for
causes beyond the control of SMART, but a ploy to terminate Astorgas
employment. The Arbiter also ruled that contracting out the functions
performed by Astorga to an in-house agency like SNMI was illegal, citing
Section 7(e), Rule VIII-A of the Rules Implementing the Labor Code.
Accordingly, the Labor Arbiter ordered:
WHEREFORE, judgment is hereby rendered declaring the dismissal
of [Astorga] to be illegal and unjust. [SMART and Santiago] are
hereby ordered to:
1. Reinstate [Astorga] to [her] former position or to a substantially
equivalent position, without loss of seniority rights and other
privileges, with full backwages, inclusive of allowances and other
benefits from the time of [her] dismissal to the date of reinstatement,
which computed as of this date, are as follows:

(a
)

Astorga

BACKWAGES;
(P33,650.00 x 4 months)

= P134,600.00

UNPAID SALARIES
(February 15, 1998-April 3,
1998
February 15-28, 1998

= P 16,823.00

March 1-31, [1998]

= P 33,650.00

April 1-3, 1998

= P 3,882.69

CAR MAINTENANCE
ALLOWANCE
(P2,000.00 x 4)

= P 8,000.00

FUEL ALLOWANCE
(300 liters/mo. x 4 mos.
at P12.04/liter)

= P 14,457.83

TOTAL
xxxx

= P211,415.52

3. Jointly and severally pay moral damages in the amount

of P500,000.00 x x x and exemplary damages in the amount
of P300,000.00. x x x
4. Jointly and severally pay 10% of the amount due as attorneys fees.
SO ORDERED.15
Subsequently, on March 29, 1999, the RTC issued an Order16 denying
Astorgas motion to dismiss the replevin case. In so ruling, the RTC
ratiocinated that:
Assessing the [submission] of the parties, the Court finds no merit in
the motion to dismiss.
As correctly pointed out, this case is to enforce a right of possession
over a company car assigned to the defendant under a car plan
privilege arrangement. The car is registered in the name of the
plaintiff. Recovery thereof via replevin suit is allowed by Rule 60 of
the 1997 Rules of Civil Procedure, which is undoubtedly within the
jurisdiction of the Regional Trial Court.
In the Complaint, plaintiff claims to be the owner of the company car
and despite demand, defendant refused to return said car. This is
clearly sufficient statement of plaintiffs cause of action.
Neither is there forum shopping. The element of litis penden[t]ia does
not appear to exist because the judgment in the labor dispute will not
constitute res judicata to bar the filing of this case.
WHEREFORE, the Motion to Dismiss is hereby denied for lack of
merit.
SO ORDERED.17
Astorga filed a motion for reconsideration, but the RTC denied it on June 18,
1999.18
Astorga elevated the denial of her motion via certiorari to the CA, which, in
its February 28, 2000 Decision,19reversed the RTC ruling. Granting the
petition and, consequently, dismissing the replevin case, the CA held that the

case is intertwined with Astorgas complaint for illegal dismissal; thus, it is

the labor tribunal that has rightful jurisdiction over the complaint. SMARTs
motion for reconsideration having been denied,20 it elevated the case to this
Court, now docketed as G.R. No. 148132.
Meanwhile, SMART also appealed the unfavorable ruling of the Labor
Arbiter in the illegal dismissal case to the National Labor Relations
Commission (NLRC). In its September 27, 1999 Decision,21 the NLRC
sustained Astorgas dismissal. Reversing the Labor Arbiter, the NLRC
declared the abolition of CSMG and the creation of SNMI to do the sales
and marketing services for SMART a valid organizational action. It
overruled the Labor Arbiters ruling that SNMI is an in-house agency,
holding that it lacked legal basis. It also declared that contracting,
subcontracting and streamlining of operations for the purpose of increasing
efficiency are allowed under the law. The NLRC further found erroneous the
Labor Arbiters disquisition that redundancy to be valid must be impelled by
economic reasons, and upheld the redundancy measures undertaken by
SMART.
The NLRC disposed, thus:
WHEREFORE, the Decision of the Labor Arbiter is hereby reversed
and set aside. [Astorga] is further ordered to immediately return the
company vehicle assigned to her. [Smart and Santiago] are hereby
ordered to pay the final wages of [Astorga] after [she] had submitted
the required supporting papers therefor.
SO ORDERED.22
Astorga filed a motion for reconsideration, but the NLRC denied it on
December 21, 1999.23
Astorga then went to the CA via certiorari. On June 11, 2001, the CA
rendered a Decision24 affirming with modification the resolutions of the
NLRC. In gist, the CA agreed with the NLRC that the reorganization
undertaken by SMART resulting in the abolition of CSMG was a legitimate
exercise of management prerogative. It rejected Astorgas posturing that her
non-absorption into SNMI was tainted with bad faith. However, the CA
found that SMART failed to comply with the mandatory one-month notice
prior to the intended termination. Accordingly, the CA imposed a penalty
equivalent to Astorgas one-month salary for this non-compliance. The CA

also set aside the NLRCs order for the return of the company vehicle
holding that this issue is not essentially a labor concern, but is civil in nature,
and thus, within the competence of the regular court to decide. It added that
the matter had not been fully ventilated before the NLRC, but in the regular
court.
Astorga filed a motion for reconsideration, while SMART sought partial
reconsideration, of the Decision. On December 18, 2001, the CA resolved
the motions, viz.:
WHEREFORE, [Astorgas] motion for reconsideration is hereby
PARTIALLY GRANTED. [Smart] is hereby ordered to pay [Astorga]
her backwages from 15 February 1998 to 06 November 1998.
[Smarts] motion for reconsideration is outrightly DENIED.
SO ORDERED.25
Astorga and SMART came to us with their respective petitions for review
assailing the CA ruling, docketed as G.R Nos. 151079 and 151372. On
February 27, 2002, this Court ordered the consolidation of these petitions
with G.R. No. 148132.26
In her Memorandum, Astorga argues:
I
THE COURT OF APPEALS ERRED IN UPHOLDING THE
VALIDITY OF ASTORGAS DISMISSAL DESPITE THE FACT
THAT HER DISMISSAL WAS EFFECTED IN CLEAR VIOLATION
OF THE CONSTITUTIONAL RIGHT TO SECURITY OF TENURE,
CONSIDERING THAT THERE WAS NO GENUINE GROUND
FOR HER DISMISSAL.
II
SMARTS REFUSAL TO REINSTATE ASTORGA DURING THE
PENDENCY OF THE APPEAL AS REQUIRED BY ARTICLE 223
OF THE LABOR CODE, ENTITLES ASTORGA TO HER
SALARIES DURING THE PENDENCY OF THE APPEAL.
III

THE COURT OF APPEALS WAS CORRECT IN HOLDING THAT

THE REGIONAL TRIAL COURT HAS NO JURISDICTION OVER
THE COMPLAINT FOR RECOVERY OF A CAR WHICH
ASTORGA ACQUIRED AS PART OF HER EMPLOYEE (sic)
BENEFIT.27
On the other hand, Smart in its Memoranda raises the following issues:
I
WHETHER THE HONORABLE COURT OF APPEALS HAS
DECIDED A QUESTION OF SUBSTANCE IN A WAY PROBABLY
NOT IN ACCORD WITH LAW OR WITH APPLICABLE
DECISION OF THE HONORABLE SUPREME COURT AND HAS
SO FAR DEPARTED FROM THE ACCEPTED AND USUAL
COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN
EXERCISE OF THE POWER OF SUPERVISION WHEN IT
RULED THAT SMART DID NOT COMPLY WITH THE NOTICE
REQUIREMENTS PRIOR TO TERMINATING ASTORGA ON THE
GROUND OF REDUNDANCY.
II
WHETHER THE NOTICES GIVEN BY SMART TO ASTORGA
AND THE DEPARTMENT OF LABOR AND EMPLOYMENT ARE
SUBSTANTIAL COMPLIANCE WITH THE NOTICE
REQUIREMENTS BEFORE TERMINATION.
III
WHETHER THE RULE ENUNCIATED IN SERRANO VS.
NATIONAL LABOR RELATIONS COMMISSION FINDS
APPLICATION IN THE CASE AT BAR CONSIDERING THAT IN
THE SERRANO CASE THERE WAS ABSOLUTELY NO NOTICE
AT ALL.28
IV
WHETHER THE HONORABLE COURT OF APPEALS HAS
DECIDED A QUESTION OF SUBSTANCE IN A WAY PROBABLY
NOT IN ACCORD WITH LAW OR WITH APPLICABLE

DECISION[S] OF THE HONORABLE SUPREME COURT AND

HAS SO FAR DEPARTED FROM THE ACCEPTED AND USUAL
COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN
EXERCISE OF THE POWER OF SUPERVISION WHEN IT
RULED THAT THE REGIONAL TRIAL COURT DOES NOT
HAVE JURISDICTION OVER THE COMPLAINT FOR REPLEVIN
FILED BY SMART TO RECOVER ITS OWN COMPANY
VEHICLE FROM A FORMER EMPLOYEE WHO WAS LEGALLY
DISMISSED.
V
WHETHER THE HONORABLE COURT OF APPEALS HAS
FAILED TO APPRECIATE THAT THE SUBJECT OF THE
REPLEVIN CASE IS NOT THE ENFORCEMENT OF A CAR
PLAN PRIVILEGE BUT SIMPLY THE RECOVERY OF A
COMPANY CAR.
VI
WHETHER THE HONORABLE COURT OF APPEALS HAS
FAILED TO APPRECIATE THAT ASTORGA CAN NO LONGER
BE CONSIDERED AS AN EMPLOYEE OF SMART UNDER THE
LABOR CODE.29
The Court shall first deal with the propriety of dismissing the replevin case
filed with the RTC of Makati City allegedly for lack of jurisdiction, which is
the issue raised in G.R. No. 148132.
Replevin is an action whereby the owner or person entitled to repossession
of goods or chattels may recover those goods or chattels from one who has
wrongfully distrained or taken, or who wrongfully detains such goods or
chattels. It is designed to permit one having right to possession to recover
property in specie from one who has wrongfully taken or detained the
property.30 The term may refer either to the action itself, for the recovery of
personalty, or to the provisional remedy traditionally associated with it, by
which possession of the property may be obtained by the plaintiff and
retained during the pendency of the action.31
That the action commenced by SMART against Astorga in the RTC of
Makati City was one for replevin hardly admits of doubt.

In reversing the RTC ruling and consequently dismissing the case for lack of
jurisdiction, the CA made the following disquisition, viz.:
[I]t is plain to see that the vehicle was issued to [Astorga] by [Smart]
as part of the employment package. We doubt that [SMART] would
extend [to Astorga] the same car plan privilege were it not for her
employment as district sales manager of the company. Furthermore,
there is no civil contract for a loan between [Astorga] and [Smart].
Consequently, We find that the car plan privilege is a benefit arising
out of employer-employee relationship. Thus, the claim for such falls
squarely within the original and exclusive jurisdiction of the labor
arbiters and the NLRC.32
We do not agree. Contrary to the CAs ratiocination, the RTC rightfully
assumed jurisdiction over the suit and acted well within its discretion in
denying Astorgas motion to dismiss. SMARTs demand for payment of the
market value of the car or, in the alternative, the surrender of the car, is not a
labor, but a civil, dispute. It involves the relationship of debtor and creditor
rather than employee-employer relations.33 As such, the dispute falls within
the jurisdiction of the regular courts.
In Basaya, Jr. v. Militante,34 this Court, in upholding the jurisdiction of the
RTC over the replevin suit, explained:
Replevin is a possessory action, the gist of which is the right of
possession in the plaintiff. The primary relief sought therein is the
return of the property in specie wrongfully detained by another
person. It is an ordinary statutory proceeding to adjudicate rights to
the title or possession of personal property. The question of whether or
not a party has the right of possession over the property involved and
if so, whether or not the adverse party has wrongfully taken and
detained said property as to require its return to plaintiff, is outside the
pale of competence of a labor tribunal and beyond the field of
specialization of Labor Arbiters.
xxxx
The labor dispute involved is not intertwined with the issue in the
Replevin Case. The respective issues raised in each forum can be
resolved independently on the other. In fact in 18 November 1986, the
NLRC in the case before it had issued an Injunctive Writ enjoining the

petitioners from blocking the free ingress and egress to the Vessel and
ordering the petitioners to disembark and vacate. That aspect of the
controversy is properly settled under the Labor Code. So also with
petitioners right to picket. But the determination of the question of
who has the better right to take possession of the Vessel and whether
petitioners can deprive the Charterer, as the legal possessor of the
Vessel, of that right to possess in addressed to the competence of Civil
Courts.
In thus ruling, this Court is not sanctioning split jurisdiction but
defining avenues of jurisdiction as laid down by pertinent laws.
The CA, therefore, committed reversible error when it overturned the RTC
ruling and ordered the dismissal of the replevin case for lack of jurisdiction.
Having resolved that issue, we proceed to rule on the validity of Astorgas
dismissal.
Astorga was terminated due to redundancy, which is one of the authorized
causes for the dismissal of an employee. The nature of redundancy as an
authorized cause for dismissal is explained in the leading case ofWiltshire
File Co., Inc. v. National Labor Relations Commission,35 viz:
x x x redundancy in an employers personnel force necessarily or even
ordinarily refers to duplication of work. That no other person was
holding the same position that private respondent held prior to
termination of his services does not show that his position had not
become redundant. Indeed, in any well organized business enterprise,
it would be surprising to find duplication of work and two (2) or more
people doing the work of one person. We believe that redundancy, for
purposes of the Labor Code, exists where the services of an employee
are in excess of what is reasonably demanded by the actual
requirements of the enterprise. Succinctly put, a position is redundant
where it is superfluous, and superfluity of a position or positions may
be the outcome of a number of factors, such as overhiring of workers,
decreased volume of business, or dropping of a particular product line
or service activity previously manufactured or undertaken by the
enterprise.
The characterization of an employees services as superfluous or no longer
necessary and, therefore, properly terminable, is an exercise of business

judgment on the part of the employer. The wisdom and soundness of such
characterization or decision is not subject to discretionary review provided,
of course, that a violation of law or arbitrary or malicious action is not
shown.36
Astorga claims that the termination of her employment was illegal and
tainted with bad faith. She asserts that the reorganization was done in order
to get rid of her. But except for her barefaced allegation, no convincing
evidence was offered to prove it. This Court finds it extremely difficult to
believe that SMART would enter into a joint venture agreement with NTT,
form SNMI and abolish CSMG/FSD simply for the sole purpose of easing
out a particular employee, such as Astorga. Moreover, Astorga never denied
that SMART offered her a supervisory position in the Customer Care
Department, but she refused the offer because the position carried a lower
salary rank and rate. If indeed SMART simply wanted to get rid of her, it
would not have offered her a position in any department in the enterprise.
Astorga also states that the justification advanced by SMART is not true
because there was no compelling economic reason for redundancy. But
contrary to her claim, an employer is not precluded from adopting a new
policy conducive to a more economical and effective management even if it
is not experiencing economic reverses. Neither does the law require that the
employer should suffer financial losses before he can terminate the services
of the employee on the ground of redundancy. 37
We agree with the CA that the organizational realignment introduced by
SMART, which culminated in the abolition of CSMG/FSD and termination
of Astorgas employment was an honest effort to make SMARTs sales and
marketing departments more efficient and competitive. As the CA had taken
pains to elucidate:
x x x a careful and assiduous review of the records will yield no other
conclusion than that the reorganization undertaken by SMART is for
no purpose other than its declared objective as a labor and cost
savings device. Indeed, this Court finds no fault in SMARTs decision
to outsource the corporate sales market to SNMI in order to attain
greater productivity. [Astorga] belonged to the Sales Marketing Group
under the Fixed Services Division (CSMG/FSD), a distinct sales force
of SMART in charge of selling SMARTs telecommunications
services to the corporate market. SMART, to ensure it can respond

quickly, efficiently and flexibly to its customers requirement,

abolished CSMG/FSD and shortly thereafter assigned its functions to
newly-created SNMI Multimedia Incorporated, a joint venture
company of SMART and NTT of Japan, for the reason that
CSMG/FSD does not have the necessary technical expertise required
for the value added services. By transferring the duties of CSMG/FSD
to SNMI, SMART has created a more competent and specialized
organization to perform the work required for corporate accounts. It is
also relieved SMART of all administrative costs management, time
and money-needed in maintaining the CSMG/FSD. The determination
to outsource the duties of the CSMG/FSD to SNMI was, to Our mind,
a sound business judgment based on relevant criteria and is therefore a
legitimate exercise of management prerogative.
Indeed, out of our concern for those lesser circumstanced in life, this Court
has inclined towards the worker and upheld his cause in most of his conflicts
with his employer. This favored treatment is consonant with the social
justice policy of the Constitution. But while tilting the scales of justice in
favor of workers, the fundamental law also guarantees the right of the
employer to reasonable returns for his investment.38 In this light, we must
acknowledge the prerogative of the employer to adopt such measures as will
promote greater efficiency, reduce overhead costs and enhance prospects of
economic gains, albeit always within the framework of existing laws.
Accordingly, we sustain the reorganization and redundancy program
undertaken by SMART.
However, as aptly found by the CA, SMART failed to comply with the
mandated one (1) month notice prior to termination. The record is clear that
Astorga received the notice of termination only on March 16, 199839 or less
than a month prior to its effectivity on April 3, 1998. Likewise, the
Department of Labor and Employment was notified of the redundancy
program only on March 6, 1998.40
Article 283 of the Labor Code clearly provides:
Art. 283. Closure of establishment and reduction of personnel. The
employer may also terminate the employment of any employee due to
the installation of labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of

circumventing the provisions of this Title, by serving a written notice

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

and (2) if the dismissal is based on an authorized cause under Article

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

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

Republic of the Philippines

Supreme Court
Manila
FIRST DIVISION

NELSON A. CULILI,
Petitioner,

G.R. No. 165381

Present:

- versus -

CORONA, C.J.,
Chairperson,
VELASCO, JR.,

EASTERN
TELECOMMUNICATIONS

LEONARDO-DE
CASTRO,

PHILIPPINES,
INC.,
SALVADOR HIZON (President
and Chief Executive Officer),
EMILIANO JURADO (Chairman
of
the
Board),
VIRGILIO
GARCIA (Vice President) and
STELLA GARCIA (Assistant Vice
President),
Respondents.

DEL CASTILLO, and

PEREZ, JJ.
Promulgated:

February 9, 2011

x----------------------------------------------------x

DECISION

LEONARDO-DE CASTRO, J.:

Before Us is a petition for review on certiorari[1] of the February 5,

2004 Decision[2] and September 13, 2004 Resolution[3] of the Court of
Appeals inCA-G.R. SP No. 75001, wherein the Court of Appeals set aside
the March 1, 2002 Decision[4] and September 24, 2002 Resolution[5] of the
National Labor Relations Commission (NLRC), which affirmed the Labor
Arbiters Decision[6] dated April 30, 2001.

Respondent Eastern Telecommunications Philippines, Inc. (ETPI) is a

telecommunications company engaged mainly in the business of establishing

commercial telecommunications systems and leasing of international

datalines or circuits that pass through the international gateway facility
(IGF).[7] The other respondents are ETPIs officers: Salvador Hizon, President
and Chief Executive Officer; Emiliano Jurado, Chairman of the Board;
Virgilio Garcia, Vice President; and Stella Garcia, Assistant Vice President.

Petitioner Nelson A. Culili (Culili) was employed by ETPI as a

Technician in its Field Operations Department on January 27, 1981. On
December 12, 1996, Culili was promoted to Senior Technician in the
Customer Premises Equipment Management Unit of the Service Quality
Department and his basic salary was increased.[8]

As a telecommunications company and an authorized IGF operator,

ETPI was required, under Republic Act. No. 7925 and Executive Order No.
109, to establish landlines in Metro Manila and certain provinces.
[9]
However, due to interconnection problems with the Philippine Long
Distance Telephone Company (PLDT), poor subscription and cancellation of
subscriptions, and other business difficulties, ETPI was forced to halt its roll
out of one hundred twenty-nine thousand (129,000) landlines already
allocated to a number of its employees.[10]

In 1998, due to business troubles and losses, ETPI was compelled to

implement a Right-Sizing Program which consisted of two phases: the first
phaseinvolved the reduction of ETPIs workforce to only those employees
that were necessary and which ETPI could sustain; the second
phase entailed a company-wide reorganization which would result in the
transfer, merger, absorption or abolition of certain departments of ETPI.[11]

As part of the first phase, ETPI, on December 10, 1998, offered to its
employees who had rendered at least fifteen years of service, the Special
Retirement Program, which consisted of the option to voluntarily retire at an

earlier age and a retirement package equivalent to two and a half (2) months
salary for every year of service.[12] This offer was initially rejected by the
Eastern Telecommunications Employees Union (ETEU), ETPIs duly
recognized bargaining agent, which threatened to stage a strike. ETPI
explained to ETEU the exact details of the Right-Sizing Program and the
Special Retirement Program and after consultations with ETEUs members,
ETEU agreed to the implementation of both programs. [13] Thus, on February
8, 1999, ETPI re-offered the Special Retirement Program and the
corresponding retirement package to the one hundred two (102) employees
who qualified for the program.[14] Of all the employees who qualified to avail
of the program, only Culili rejected the offer.[15]

After the successful implementation of the first phase of the RightSizing Program, ETPI, on March 1, 1999 proceeded with the second phase
which necessitated the abolition, transfer and merger of a number of ETPIs
departments.[16]

Among the departments abolished was the Service Quality

Department. The functions of the Customer Premises Equipment
Management Unit, Culilis unit, were absorbed by the Business and
Consumer Accounts Department. The abolition of the Service Quality
Department rendered the specialized functions of a Senior Technician
unnecessary. As a result, Culilis position was abolished due to redundancy
and his functions were absorbed by Andre Andrada, another employee
already with the Business and Consumer Accounts Department.[17]

On March 5, 1999, Culili discovered that his name was omitted in

ETPIs New Table of Organization. Culili, along with three of his coemployees who were similarly situated, wrote their union president to
protest such omission.[18]

In a letter dated March 8, 1999, ETPI, through its Assistant Vice

President Stella Garcia, informed Culili of his termination from employment
effective April 8, 1999. The letter reads:

March 8, 1999

To: N. Culili
Thru: S. Dobbin/G. Ebue
From: AVP-HRD
-----------------------------------------------------------------------------------------

As you are aware, the current economic crisis has adversely

affected our operations and undermined our earlier plans to put
in place major work programs and activities.Because of this, we
have to implement a Rightsizing Program in order to cut
administrative/operating costs and to avoid losses. In line with
this program, your employment with the company shall
terminate effective at the close of business hours on April 08,
1999. However, to give you ample time to look for other
employment, provided you have amply turned over your
pending work and settled your accountabilities, you are no
longer required to report to work starting tomorrow. You will be
considered on paid leave until April 08, 1999.

You will likewise be paid separation pay in compliance with

legal requirements (see attached), as well as other benefits
accruing to you under the law, and the CBA. We take this

opportunity to thank you for your services and wish you well in
your future endeavors.

(Signed)
Stella J. Garcia[19]

This letter was similar to the memo shown to Culili by the union
president weeks before Culili was dismissed. The memo was dated
December 7, 1998, and was advising him of his dismissal effective January
4, 1999 due to the Right-Sizing Program ETPI was going to implement to
cut costs and avoid losses.[20]

Culili alleged that neither he nor the Department of Labor and

Employment (DOLE) were formally notified of his termination. Culili
claimed that he only found out about it sometime in March 1999 when Vice
President Virgilio Garcia handed him a copy of the March 8, 1999 letter,
after he was barred from entering ETPIs premises by its armed security
personnel when he tried to report for work.[21] Culili believed that ETPI had
already decided to dismiss him even prior to the March 8, 1999 letter as
evidenced by the December 7, 1998 version of that letter. Moreover, Culili
asserted that ETPI had contracted out the services he used to perform to a
labor-only contractor which not only proved that his functions had not
become unnecessary, but which also violated their Collective Bargaining
Agreement (CBA) and the Labor Code. Aside from these, Culili also alleged
that he was discriminated against when ETPI offered some of his coemployees an additional benefit in the form of motorcycles to induce them
to avail of the Special Retirement Program, while he was not.[22]

ETPI denied singling Culili out for termination. ETPI claimed that
while it is true that they offered the Special Retirement Package to reduce

their workforce to a sustainable level, this was only the first phase of the
Right-Sizing Program to which ETEU agreed. The second phase intended to
simplify and streamline the functions of the departments and employees of
ETPI. The abolition of Culilis department - the Service Quality Department and the absorption of its functions by the Business and Consumer Accounts
Department were in line with the programs goals as the Business and
Consumer Accounts Department was more economical and versatile and it
was flexible enough to handle the limited functions of the Service Quality
Department. ETPI averred that since Culili did not avail of the Special
Retirement Program and his position was subsequently declared redundant,
it had no choice but to terminate Culili. [23] Culili, however, continued to
report for work. ETPI said that because there was no more work for Culili, it
was constrained to serve a final notice of termination[24] to Culili, which
Culili ignored. ETPI alleged that Culili informed his superiors that he would
agree to his termination if ETPI would give him certain special work tools in
addition to the benefits he was already offered. ETPI claimed that Culilis
counter-offer was unacceptable as the work tools Culili wanted were worth
almost a million pesos. Thus, on March 26, 1999, ETPI tendered to Culili
his final pay check of Eight Hundred Fifty-Nine Thousand Thirty-Three and
99/100 Pesos (P859,033.99) consisting of his basic salary, leaves, 13th month
pay and separation pay.[25] ETPI claimed that Culili refused to accept his
termination and continued to report for work.[26] ETPI denied hiring outside
contractors to perform Culilis work and denied offering added incentives to
its employees to induce them to retire early. ETPI also explained that the
December 7, 1998 letter was never given to Culili in an official
capacity. ETPI claimed that it really needed to reduce its workforce at that
time and that it had to prepare several letters in advance in the event that
none of the employees avail of the Special Retirement Program. However,
ETPI decided to wait for a favorable response from its employees regarding
the Special Retirement Program instead of terminating them.[27]

On February 8, 2000, Culili filed a complaint against ETPI and its

officers for illegal dismissal, unfair labor practice, and money claims before
the Labor Arbiter.

On April 30, 2001, the Labor Arbiter rendered a decision finding ETPI
guilty of illegal dismissal and unfair labor practice, to wit:

WHEREFORE, decision is hereby rendered declaring the

dismissal of complainant Nelson A. Culili illegal for having
been made through an arbitrary and malicious declaration of
redundancy of his position and for having been done without
due process for failure of the respondent to give complainant
and the DOLE written notice of such termination prior to the
effectivity thereof.

In view of the foregoing, respondents Eastern

Telecommunications Philippines and the individual respondents
are hereby found guilty of unfair labor practice/discrimination
and illegal dismissal and ordered to pay complainant
backwages and such other benefits due him if he were not
illegally dismissed, including moral and exemplary damages
and 10% attorneys fees. Complainant likewise is to be
reinstated to his former position or to a substantially equivalent
position in accordance with the pertinent provisions of the
Labor Code as interpreted in the case of Pioneer texturing
[Pioneer Texturizing Corp. v. National Labor Relations
Commission], G.R. No. 11865[1], 16 October 1997.Hence,
Complainant must be paid the total amount of TWO MILLION
SEVEN HUNDRED FORTY[-]FOUR THOUSAND THREE
[HUNDRED] SEVENTY[-] NINE and 41/100 (P2,744,379.41),
computed as follows:
I.

Backwages (from 16 March 1999 to 16 March 2001)

a.

Basic
Salary
mos.) P696,720.96

(P29,030

24

b.

13th Month Pay (P692,720.96/12) 58,060.88

c.

Leave Benefits

1.

Vacation Leave (30 days/annum)

P1,116.54 x 60 days 66,992.40

2.

Sick Leave (30 days/annum)

P1,116.54 x 60 days 66,992.40

3.

Birthday Leave (1 day/annum)

P1,116.54 x 2 days 2,233.08

d.

Rice and Meal Subsidy

16 March 31 July 1999
(P1,750 x 4.5 mos. = P7,875.00)

01 August 1991 31 July 2000

(P1,850 x 12 mos. = P22,200.00)

01 August 2000 16 March 2001

(P1,950 x 7.5 mos. = P14,625.00) 44,700.00

e.

Uniform Allowance
P7,000/annum x 2 years __14,000.00

P949,699.72

II. Damages

a.

MoralP500,000.00

b.

ExemplaryP250,000.00

III. Attorneys Fees (10% of award) __94,969.97

GRAND TOTAL: P2,744,379.41[28]

The Labor Arbiter believed Culilis claim that ETPI intended to

dismiss him even before his position was declared redundant. He found the
December 7, 1998 letter to be a telling sign of this intention. The Labor
Arbiter held that a reading of the termination letter shows that the ground
ETPI was actually invoking was retrenchment and not redundancy, but ETPI
stuck to redundancy because it was easier to prove than retrenchment. He
also did not believe that Culilis functions were as limited as ETPI made it
appear to be, and held that ETPI failed to present any reasonable criteria to
justify the declaration of Culilis position as redundant. On the issue of unfair
labor practice, the Labor Arbiter agreed that the contracting out of Culilis
functions to non-union members violated Culilis rights as a union
member. Moreover, the Labor Arbiter said that ETPI was not able to dispute

Culilis claims of discrimination and subcontracting, hence, ETPI was guilty

of unfair labor practice.

On appeal, the NLRC affirmed the Labor Arbiters decision but

modified the amount of moral and exemplary damages awarded, viz:

WHEREFORE,
the
Decision
appealed
from
is AFFIRMED granting complainant the money claims prayed
for including full backwages, allowances and other benefits or
their monetary equivalent computed from the time of his illegal
dismissal on 16 March 1999 up to his actual reinstatement
except the award of moral and exemplary damages which is
modified to P200,000.00 for moral and P100,000.00 for
exemplary
damages. For
this
purpose,
this
case
is REMANDED to the Labor Arbiter for computation of
backwages and other monetary awards to complainant.[29]

ETPI filed a Petition for Certiorari under Rule 65 of the Rules of Civil
Procedure before the Court of Appeals on the ground of grave abuse of
discretion. ETPI prayed that a Temporary Restraining Order be issued
against the NLRC from implementing its decision and that the NLRC
decision and resolution be set aside.

The Court of Appeals, on February 5, 2004, partially granted ETPIs

petition. The dispositive portion of the decision reads as follows:
WHEREFORE, all the foregoing considered, the petition
is PARTIALLY GRANTED. The assailed Decision of public
respondent
National
Labor
Relations
Commission
isMODIFIED in that petitioner Eastern Telecommunications

Philippines Inc. (ETPI) is hereby ORDERED to pay respondent

Nelson Culili full backwages from the time his salaries were
not paid until the finality of this Decision plus separation pay in
an amount equivalent to one (1) month salary for every year of
service. The awards for moral and exemplary damages
are DELETED. The Writ of Execution issued by the Labor
Arbiter dated September 8, 2003 is DISSOLVED.[30]

The Court of Appeals found that Culilis position was validly abolished due
to redundancy. The Court of Appeals said that ETPI had been very candid
with its employees in implementing its Right-Sizing Program, and that it
was highly unlikely that ETPI would effect a company-wide reorganization
simply for the purpose of getting rid of Culili. The Court of Appeals also
held that ETPI cannot be held guilty of unfair labor practice as mere
contracting out of services being performed by union members does not per
se amount to unfair labor practice unless it interferes with the employees
right to self-organization. The Court of Appeals further held that ETPIs
officers cannot be held liable absent a showing of bad faith or
malice. However, the Court of Appeals found that ETPI failed to observe the
standards of due process as required by our laws when it failed to properly
notify both Culili and the DOLE of Culilis termination. The Court of
Appeals maintained its position in its September 13, 2004 Resolution when
it denied Culilis Motion for Reconsideration and Urgent Motion to Reinstate
the Writ of Execution issued by the Labor Arbiter, and ETPIs Motion for
Partial Reconsideration.

Culili is now before this Court praying for the reversal of the Court of
Appeals decision and the reinstatement of the NLRCs decision based on the
following grounds:

THE COURT OF APPEALS DECIDED A QUESTION OF

SUBSTANCE NOT IN ACCORD WITH THE APPLICABLE
LAW AND JURISPRUDENCE WHEN IT REVERSED THE
DECISIONS OF THE NLRC AND THE LABOR ARBITER
HOLDING THE DISMISSAL OF PETITIONER ILLEGAL IN
THAT:

A.

CONTRARY TO THE FINDINGS OF

THE
COURT
OF
APPEALS,
RESPONDENTS CHARACTERIZATION
OF
PETITIONERS
POSITION
AS
REDUNDANT WAS TAINTED BY BAD
FAITH.

B.

THERE WAS NO ADEQUATE

JUSTIFICATION
TO
DECLARE
PETITIONERS
POSITION
AS
REDUNDANT.

II
THE COURT OF APPEALS DECIDED A QUESTION OF
SUBSTANCE NOT IN ACCORD WITH LAW AND
JURISPRUDENCE IN FINDING THAT NO UNFAIR LABOR
PRACTICE ACTS WERE COMMITTED AGAINST THE
PETITIONER.

III
THE COURT OF APPEALS DECIDED A QUESTION OF
SUBSTANCE NOT IN ACCORD WITH LAW AND
JURISPRUDENCE IN DELETING THE AWARD OF
MORAL
AND
EXEMPLARY
DAMAGES
AND
ATTORNEYS FEES IN FAVOR OF PETITIONER AND IN
DISSOLVING THE WRIT OF EXECUTION DATED 8
SEPTEMBER 2003 ISSUED BY THE LABOR ARBITER.

IV
THE COURT OF APPEALS DECIDED A QUESTION OF
SUBSTANCE NOT IN ACCORD WITH LAW AND
JURISPRUDENCE IN ABSOLVING THE INDIVIDUAL
RESPONDENTS OF PERSONAL LIABILITY.

CONTRARY
TO
APPLICABLE
LAW
AND
JURISPRUDENCE, THE COURT OF APPEALS, IN A
CERTIORARI PROCEEDING, REVIEWED THE FACTUAL
FINDINGS OF THE NLRC WHICH AFFIRMED THAT OF
THE LABOR ARBITER AND, THEREAFTER, ISSUED A
WRIT OF CERTIORARI REVERSING THE DECISIONS OF

THE NLRC AND THE LABOR ARBITER EVEN IN THE

ABSENCE OF GRAVE ABUSE OF DISCRETION.[31]

Procedural Issue: Court of Appeals

Power to Review Facts in a Petition
For Certiorari under Rule 65

Culili argued that the Court of Appeals acted in contravention of applicable

law and jurisprudence when it reexamined the facts in this case and reversed
the factual findings of the Labor Arbiter and the NLRC in a special civil
action for certiorari.

This Court has already confirmed the power of the Court of Appeals, even
on a Petition for Certiorari under Rule 65,[32] to review the evidence on
record, when necessary, to resolve factual issues:

The power of the Court of Appeals to review NLRC decisions

via Rule 65 or Petition for Certiorari has been settled as early as
in our decision in St. Martin Funeral Home v. National Labor
Relations Commission. This Court held that the proper vehicle
for such review was a Special Civil Action for Certiorari under
Rule 65 of the Rules of Court, and that this action should be
filed in the Court of Appeals in strict observance of the doctrine
of the hierarchy of courts. Moreover, it is already settled that
under Section 9 of Batas Pambansa Blg. 129, as amended by
Republic Act No. 7902[10] (An Act Expanding the Jurisdiction
of the Court of Appeals, amending for the purpose of Section
Nine of Batas Pambansa Blg. 129 as amended, known as

the Judiciary Reorganization Act of 1980), the Court of Appeals

pursuant to the exercise of its original jurisdiction over Petitions
for Certiorari is specifically given the power to pass upon the
evidence, if and when necessary, to resolve factual issues.[33]

While it is true that factual findings made by quasi-judicial and

administrative tribunals, if supported by substantial evidence, are accorded
great respect and even finality by the courts, this general rule admits of
exceptions. When there is a showing that a palpable and demonstrable
mistake that needs rectification has been committed[34] or when the factual
findings were arrived at arbitrarily or in disregard of the evidence on record,
these findings may be examined by the courts.[35]

In the case at bench, the Court of Appeals found itself unable to

completely sustain the findings of the NLRC thus, it was compelled to
review the facts and evidence and not limit itself to the issue of grave abuse
of discretion.

With the conflicting findings of facts by the tribunals below now

before us, it behooves this Court to make an independent evaluation of the
facts in this case.

Main Issue: Legality of Dismissal

Culili asserted that he was illegally dismissed because there was no

valid cause to terminate his employment. He claimed that ETPI failed to
prove that his position had become redundant and that ETPI was indeed
incurring losses. Culili further alleged that his functions as a Senior

Technician could not be considered a superfluity because his tasks were

crucial and critical to ETPIs business.

Under our laws, an employee may be terminated for reasons

involving measures taken by the employer due to business
necessities. Article 283 of the Labor Code provides:
Art. 283. Closure of establishment and reduction of
personnel. - The employer may also terminate the employment
of any employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking
unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the
workers and the Department of Labor and Employment at least
one (1) month before the intended date thereof. In case of
termination due to the installation of labor-saving devices or
redundancy, the worker affected thereby shall be entitled to a
separation pay equivalent to at least his one (1) month pay or to
at least one (1) month pay for every year of service, whichever
is higher. In case of retrenchment to prevent losses and in cases
of closures or cessation of operations of establishment or
undertaking not due to serious business losses or financial
reverses, the separation pay shall be equivalent to one (1)
month pay or at least one-half (1/2) month pay for every year of
service, whichever is higher. A fraction of at least six (6)
months shall be considered one (1) whole year.

There is redundancy when the service capability of the workforce is

greater than what is reasonably required to meet the demands of the business

enterprise. A position becomes redundant when it is rendered superfluous by

any number of factors such as over-hiring of workers, decrease in volume of
business, or dropping a particular product line or service activity previously
manufactured or undertaken by the enterprise.[36]

This Court has been consistent in holding that the determination of

whether or not an employees services are still needed or sustainable properly
belongs to the employer. Provided there is no violation of law or a showing
that the employer was prompted by an arbitrary or malicious act, the
soundness or wisdom of this exercise of business judgment is not subject to
the discretionary review of the Labor Arbiter and the NLRC.[37]

However, an employer cannot simply declare that it has become overmanned

and dismiss its employees without producing adequate proof to sustain its
claim of redundancy.[38] Among the requisites of a valid redundancy program
are: (1) the good faith of the employer in abolishing the redundant position;
and (2) fair and reasonable criteria in ascertaining what positions are to be
declared redundant,[39] such as but not limited to: preferred status, efficiency,
and seniority.[40]

This Court also held that the following evidence may be proffered to
substantiate redundancy: the new staffing pattern, feasibility studies/
proposal on the viability of the newly created positions, job description and
the approval by the management of the restructuring.[41]
In the case at bar, ETPI was upfront with its employees about its plan
to implement a Right-Sizing Program. Even in the face of initial opposition
from and rejection of the said program by ETEU, ETPI patiently negotiated
with ETEUs officers to make them understand ETPIs business dilemma and
its need to reduce its workforce and streamline its organization. This
evidently rules out bad faith on the part of ETPI.

In deciding which positions to retain and which to abolish, ETPI

chose on the basis of efficiency, economy, versatility and flexibility. It
needed to reduce its workforce to a sustainable level while maintaining
functions necessary to keep it operating. The records show that ETPI had
sufficiently established not only its need to reduce its workforce and
streamline its organization, but also the existence of redundancy in the
position of a Senior Technician. ETPI explained how it failed to meet its
business targets and the factors that caused this, and how this necessitated it
to reduce its workforce and streamline its organization. ETPI also submitted
its old and new tables of organization and sufficiently described how limited
the functions of the abolished position of a Senior Technician were and how
it decided on whom to absorb these functions.

In his affidavit dated April 10, 2000,[42] Mr. Arnel D. Reyel, the Head
of both the Business Services Department and the Finance Department of
ETPI, described how ETPI went about in reorganizing its departments. Mr.
Reyel said that in the course of ETPIs reorganization, new departments were
created, some were transferred, and two were abolished. Among the
departments abolished was the Service Quality Department. Mr. Reyel said
that ETPI felt that the functions of the Service Quality Department, which
catered to both corporate and small and medium-sized clients, overlapped
and were too large for a single department, thus, the functions of this
department were split and simplified into two smaller but more focused and
efficient departments. In arriving at the decision to abolish the position of
Senior Technician, Mr. Reyel explained:

11.3. Thus, in accordance with the reorganization of the

different departments of ETPI, the Service Quality Department
was abolished and its functions were absorbed by the Business
and Consumer Accounts Department and the Corporate and
Major Accounts Department.
11.4. With the abolition and resulting simplification of the
Service Quality Department, one of the units thereunder, the

Customer Premises Equipment Maintenance (CPEM) unit was

transferred to the Business and Consumer Accounts
Department. Since the Business and Consumer Accounts
Department had to remain economical and focused yet versatile
enough to meet all the needs of its small and medium sized
clients, it was decided that, in the judgment of ETPI
management, the specialized functions of a Senior Technician
in the CPEM unit whose sole function was essentially the repair
and servicing of ETPIs telecommunications equipment was no
longer needed since the Business and Consumer [Accounts]
Department had to remain economical and focused yet versatile
enough to meet all the multifarious needs of its small and
medium sized clients.

11.5. The business reason for the abolition of the position of

Senior Technician was because in ETPIs judgment, what was
needed in the Business and Consumer Accounts Department
was a versatile, yet economical position with functions which
were not limited to the mere repair and servicing of
telecommunications equipment. It was determined that what
was called for was a position that could also perform varying
functions such as the actual installation of telecommunications
products for medium and small scale clients, handle
telecommunications
equipment
inventory
monitoring,
evaluation of telecommunications equipment purchased and the
preparation of reports on the daily and monthly activation of
telecommunications equipment by these small and medium
scale clients.
11.6. Thus, for the foregoing reasons, ETPI decided that the
position of Senior Technician was to be abolished due to
redundancy. The functions of a Senior Technician was to be
abolished due to redundancy. The functions of a Senior
Technician would then be absorbed by an employee assigned to

the Business and Consumer Accounts Department who was

already performing the functions of actual installation of
telecommunications products in the field and handling
telecommunications
equipment
inventory
monitoring,
evaluation of telecommunications equipment purchased and the
preparation of reports on the daily and monthly activation of
telecommunications equipment. This employee would then
simply add to his many other functions the duty of repairing
and servicing telecommunications equipment which had been
previously performed by a Senior Technician.[43]

In the new table of organization that the management approved, one

hundred twelve (112) employees were redeployed and nine (9) positions
were declared redundant.[44] It is inconceivable that ETPI would effect a
company-wide reorganization of this scale for the mere purpose of singling
out Culili and terminating him. If Culilis position were indeed indispensable
to ETPI, then it would be absurd for ETPI, which was then trying to save its
operations, to abolish that one position which it needed the most. Contrary to
Culilis assertions that ETPI could not do away with his functions as long as
it is in the telecommunications industry, ETPI did not abolish the functions
performed by Culili as a Senior Technician. What ETPI did was to abolish
the position itself for being too specialized and limited. The functions of that
position were then added to another employee whose functions were broad
enough to absorb the tasks of a Senior Technician.

Culili maintains that ETPI had already decided to dismiss him even
before the second phase of the Right-Sizing Program was implemented as
evidenced by the December 7, 1998 letter.

The December 7, 1998 termination letter signed by ETPIs AVP Stella

Garcia hardly suffices to prove bad faith on the part of the company. The
fact remains that the said letter was never officially transmitted and Culili
was not terminated at the end of the first phase of ETPIs Right-Sizing
Program. ETPI had given an adequate explanation for the existence of the
letter and considering that it had been transparent with its employees,
through their union ETEU, so much so that ETPI even gave ETEU this
unofficial letter, there is no reason to speculate and attach malice to such
act. That Culili would be subsequently terminated during the second phase
of the Right-Sizing Program is not evidence of undue discrimination or
singling out since not only Culilis position, but his entire unit was abolished
and absorbed by another department.
Unfair Labor Practice

Culili also alleged that ETPI is guilty of unfair labor practice for
violating Article 248(c) and (e) of the Labor Code, to wit:
Art. 248. Unfair labor practices of employers. - It shall
be unlawful for an employer to commit any of the following
unfair labor practice:

xxxx

c. To contract out services or functions being performed

by union members when such will interfere with, restrain or
coerce employees in the exercise of their rights to selforganization;

xxxx

e. To discriminate in regard to wages, hours of work, and

other terms and conditions of employment in order to
encourage or discourage membership in any labor organization.
Nothing in this Code or in any other law shall stop the parties
from requiring membership in a recognized collective
bargaining agent as a condition for employment, except those
employees who are already members of another union at the
time of the signing of the collective bargaining agreement.
Employees of an appropriate collective bargaining unit who are
not members of the recognized collective bargaining agent may
be assessed a reasonable fee equivalent to the dues and other
fees paid by members of the recognized collective bargaining
agent, if such non-union members accept the benefits under the
collective agreement: Provided, that the individual
authorization required under Article 242, paragraph (o) of this
Code shall not apply to the non-members of the recognized
collective bargaining agent.

Culili asserted that ETPI is guilty of unfair labor practice because

his functions were sourced out to labor-only contractors and he was
discriminated against when his co-employees were treated differently
when they were each offered an additional motorcycle to induce them to
avail of the Special Retirement Program. ETPI denied hiring outside
contractors and averred that the motorcycles were not given to his coemployees but were purchased by them pursuant to their Collective
Bargaining Agreement, which allowed a retiring employee to purchase
the motorcycle he was assigned during his employment.

The concept of unfair labor practice is provided in Article 247 of the

Labor Code which states:

Article 247. Concept of unfair labor practice and

procedure for prosecution thereof. -- Unfair labor practices
violate the constitutional right of workers and employees to
self-organization, are inimical to the legitimate interest of both
labor and management, including their right to bargain
collectively and otherwise deal with each other in an
atmosphere of freedom and mutual respect, disrupt industrial
peace and hinder the promotion of healthy and stable labormanagement relations.

In the past, we have ruled that unfair labor practice refers to acts that
violate the workers' right to organize. The prohibited acts are related to the
workers' right to self-organization and to the observance of a CBA. [45] We
have likewise declared that there should be no dispute that all the prohibited
acts constituting unfair labor practice in essence relate to the workers' right
to self-organization.[46] Thus, an employer may only be held liable for unfair
labor practice if it can be shown that his acts affect in whatever manner the
right of his employees to self-organize.[47]

There is no showing that ETPI, in implementing its Right-Sizing

Program, was motivated by ill will, bad faith or malice, or that it was aimed
at interfering with its employees right to self-organize. In fact, ETPI
negotiated and consulted with ETEU before implementing its Right-Sizing
Program.

Both the Labor Arbiter and the NLRC found ETPI guilty of unfair
labor practice because of its failure to dispute Culilis allegations.
According to jurisprudence, basic is the principle that good faith is
presumed and he who alleges bad faith has the duty to prove the same.[48] By
imputing bad faith to the actuations of ETPI, Culili has the burden of proof
to present substantial evidence to support the allegation of unfair labor
practice. Culili failed to discharge this burden and his bare allegations
deserve no credit.

Observance of Procedural Due Process

Although the Court finds Culilis dismissal was for a lawful cause and
not an act of unfair labor practice, ETPI, however, was remiss in its duty to
observe procedural due process in effecting the termination of Culili.

We have previously held that there are two aspects which characterize
the concept of due process under the Labor Code: one is substantive whether
the termination of employment was based on the provision of the Labor
Code or in accordance with the prevailing jurisprudence; the other is
procedural the manner in which the dismissal was effected.[49]

Section 2(d), Rule I, Book VI of the Rules Implementing the Labor Code
provides:

(d) In all cases of termination of employment, the

following standards of due process shall be substantially
observed:

xxxx

For termination of employment as defined in Article 283

of the Labor Code, the requirement of due process shall be
deemed complied with upon service of a written notice to the
employee and the appropriate Regional Office of the
Department of Labor and Employment at least thirty days
before effectivity of the termination, specifying the ground or
grounds for termination.

In Mayon Hotel & Restaurant v. Adana,[50] we observed:

The requirement of law mandating the giving of notices

was intended not only to enable the employees to look for
another employment and therefore ease the impact of the loss of
their jobs and the corresponding income, but more importantly,
to give the Department of Labor and Employment (DOLE) the
opportunity to ascertain the verity of the alleged authorized
cause of termination.[51]

ETPI does not deny its failure to provide DOLE with a written notice
regarding Culilis termination. It, however, insists that it has complied with
the requirement to serve a written notice to Culili as evidenced by his
admission of having received it and forwarding it to his union president.

In Serrano v. National Labor Relations Commission,[52] we noted that a job is

more than the salary that it carries. There is a psychological effect or a
stigma in immediately finding ones self laid off from work.[53] This is exactly
why our labor laws have provided for mandating procedural due process
clauses. Our laws, while recognizing the right of employers to terminate
employees it cannot sustain, also recognize the employees right to be
properly informed of the impending severance of his ties with the company
he is working for. In the case at bar, ETPI, in effecting Culilis termination,
simply asked one of its guards to serve the required written notice on
Culili. Culili, on one hand, claims in his petition that this was handed to him
by ETPIs vice president, but previously testified before the Labor Arbiter
that this was left on his table.[54] Regardless of how this notice was served on
Culili, this Court believes that ETPI failed to properly notify Culili about his
termination. Aside from the manner the written notice was served, a reading
of that notice shows that ETPI failed to properly inform Culili of the
grounds for his termination.

The Court of Appeals, in finding that Culili was not afforded procedural due
process, held that Culilis dismissal was ineffectual, and required ETPI to pay
Culili full backwages in accordance with our decision in Serrano v. National
Labor Relations Commission.[55] Over the years, this Court has had the
opportunity to reexamine the sanctions imposed upon employers who fail to
comply with the procedural due process requirements in terminating its
employees. In Agabon v. National Labor Relations Commission,[56] this
Court reverted back to the doctrine in Wenphil Corporation v. National
Labor Relations Commission[57] and held that where the dismissal is due to a
just or authorized cause, but without observance of the due process
requirements, the dismissal may be upheld but the employer must pay an
indemnity to the employee. The sanctions to be imposed however, must be
stiffer than those imposed in Wenphil to achieve a result fair to both the
employers and the employees.[58]

In Jaka Food Processing Corporation v. Pacot,[59] this Court, taking a

cue from Agabon, held that since there is a clear-cut distinction between a
dismissal due to a just cause and a dismissal due to an authorized cause, the
legal implications for employers who fail to comply with the notice
requirements must also be treated differently:

Accordingly, it is wise to hold that: (1) if the dismissal is

based on a just cause under Article 282 but the employer failed
to comply with the notice requirement, the sanction to be
imposed upon him should be tempered because the dismissal
process was, in effect, initiated by an act imputable to the
employee; and (2) if the dismissal is based on an authorized
cause under Article 283 but the employer failed to comply with
the notice requirement, the sanction should be stiffer because
the dismissal process was initiated by the employer's exercise of
his management prerogative.[60]

Hence, since it has been established that Culilis termination was due to an
authorized cause and cannot be considered unfair labor practice on the part
of ETPI, his dismissal is valid. However, in view of ETPIs failure to comply
with the notice requirements under the Labor Code, Culili is entitled to
nominal damages in addition to his separation pay.

Personal Liability of ETPIs Officers

And Award of Damages

Culili
asserts
that
the
individual
respondents, Salvador
Hizon, Emiliano Jurado, Virgilio Garcia, and Stella Garcia, as ETPIs
officers, should be held personally liable for the acts of ETPI which were

tainted with bad faith and arbitrariness. Furthermore, Culili insists that he is
entitled to damages because of the sufferings he had to endure and the
malicious manner he was terminated.

As a general rule, a corporate officer cannot be held liable for acts

done in his official capacity because a corporation, by legal fiction, has a
personality separate and distinct from its officers, stockholders, and
members. To pierce this fictional veil, it must be shown that the corporate
personality was used to perpetuate fraud or an illegal act, or to evade an
existing obligation, or to confuse a legitimate issue. In illegal dismissal
cases, corporate officers may be held solidarily liable with the corporation if
the termination was done with malice or bad faith. [61]

In illegal dismissal cases, moral damages are awarded only where the
dismissal 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.[62] Exemplary damages may avail if the dismissal was effected in a
wanton, oppressive or malevolent manner to warrant an award for exemplary
damages.[63]

It is our considered view that Culili has failed to prove that his
dismissal was orchestrated by the individual respondents herein for the mere
purpose of getting rid of him. In fact, most of them have not even dealt with
Culili personally. Moreover, it has been established that his termination was
for an authorized cause, and that there was no bad faith on the part of ETPI
in implementing its Right-Sizing Program, which involved abolishing
certain positions and departments for redundancy. It is not enough that ETPI
failed to comply with the due process requirements to warrant an award of
damages, there being no showing that the companys and its officers acts
were attended with bad faith or were done oppressively.

WHEREFORE, the instant petition is DENIED and the assailed

February 5, 2004 Decision and September 13, 2004 Resolution of the Court
of
Appeals
in CA-G.R.
SP
No.
75001 are AFFIRMED with
the MODIFICATION that petitioner Nelson A. Culilis dismissal is declared
valid but respondent Eastern Telecommunications Philippines, Inc. is
ordered to pay petitioner Nelson A. Culili the amount of Fifty Thousand
Pesos (P50,000.00) representing nominal damages for non-compliance with
statutory due process, in addition to the mandatory separation pay required
under Article 283 of the Labor Code.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 181738

January 30, 2013

GENERAL MILLING CORPORATION, Petitioner,

vs.
VIOLETA L. VIAJAR, Respondent.
DECISION
REYES, J.:
This is a Petition1 for Review on Certiorari under Rule 45 of the Rules of
Court filed by petitioner General Milling Corporation (GMC), asking the
Court to set aside the Decision2 dated September 21, 2007 and the
Resolution3dated January 30, 2008 of the Court of Appeals (CA) in CA-G.R.
SP No. 01734; and to reinstate the Decision4dated October 28, 2005 and
Resolution5 dated January 31, 2006 of the National Labor Relations
Commission (NLRC) in NLRC Case No. V-000416-05.
The antecedent facts are as follows:

GMC is a domestic corporation with principal office in Makati City and a

manufacturing plant in Lapu-Lapu City.
In October 2003, GMC terminated the services of thirteen (13) employees
for redundancy, including herein respondent, Violeta Viajar (Viajar). GMC
alleged that it has been gradually downsizing its Vismin (Visayas-Mindanao)
Operations in Cebu where a sizeable number of positions became redundant
over a period of time.6
On December 2, 2003, Viajar filed a Complaint7 for Illegal Dismissal with
damages against GMC, its Human Resource Department (HRD) Manager,
Johnny T. Almocera (Almocera), and Purchasing Manager, Joel Paulino
before the Regional Arbitration Branch (RAB) No. VII, NLRC, Cebu City.
In her Position Paper,8 Viajar alleged that she was employed by GMC on
August 6, 1979 as Invoicing Clerk. Through the years, the respondent held
various positions in the company until she became Purchasing Staff.
On October 30, 2003, Viajar received a Letter-Memorandum dated October
27, 2003 from GMC, through Almocera, informing her that her services
were no longer needed, effective November 30, 2003 because her position as
Purchasing Staff at the Purchasing Group, Cebu Operations was deemed
redundant. Immediately thereafter, the respondent consulted her immediate
superior at that time, Thaddeus Oyas, who told her that he too was shocked
upon learning about it.9
When Viajar reported for work on October 31, 2003, almost a month before
the effectivity of her severance from the company, the guard on duty barred
her from entering GMCs premises. She was also denied access to her office
computer and was restricted from punching her daily time record in the
bundy clock.10
On November 7, 2003, Viajar was invited to the HRD Cebu Office where
she was asked to sign certain documents, which turned out to be an
"Application for Retirement and Benefits." The respondent refused to sign
and sought clarification because she did not apply for retirement and instead
asserted that her services were terminated for alleged redundancy. Almocera
told her that her signature on the Application for Retirement and Benefits
was needed to process her separation pay. The respondent also claimed that
between the period of July 4, 2003 and October 13, 2003, GMC hired fifteen
(15) new employees which aroused her suspicion that her dismissal was not

necessary.11 At the time of her termination, the respondent was receiving the
salary rate ofP19,651.41 per month.12
For its part, the petitioner insisted that Viajars dismissal was due to the
redundancy of her position. GMC reasoned out that it was forced to
terminate the services of the respondent because of the economic setbacks
the company was suffering which affected the companys profitability, and
the continuing rise of its operating and interest expenditures. Redundancy
was part of the petitioners concrete and actual cost reduction measures.
GMC also presented the required "Establishment Termination Report" which
it filed before the Department of Labor and Employment (DOLE) on
October 28, 2003, involving thirteen (13) of its employees, including Viajar.
Subsequently, GMC issued to the respondent two (2) checks respectively
amounting to P440,253.02 andP21,211.35 as her separation pay.13
On April 18, 2005, the Labor Arbiter (LA) of the NLRC RAB No. VII, Cebu
City, rendered a Decision, the decretal portion of which reads:
WHEREFORE, foregoing considered, judgment is hereby rendered
declaring that respondents acted in good faith in terminating the complainant
from the service due to redundancy of works, thus, complainants refusal to
accept the payment of her allowed separation pay and other benefits under
the law is NOT JUSTIFIED both in fact and law, and so, therefore
complainants case for illegal dismissal against the herein respondents and
so are complainants monetary claims are hereby ordered DISMISSED for
lack of merit.
SO ORDERED.14
The LA found that the respondent was properly notified on October 30, 2003
through a Letter-Memorandum dated October 27, 2003, signed by GMCs
HRD Manager Almocera, that her position as Purchasing Staff had been
declared redundant. It also found that the petitioner submitted to the DOLE
on October 28, 2003 the "Establishment Termination Report." The LA even
faulted the respondent for not questioning the companys action before the
DOLE Regional Office, Region VII, Cebu City so as to compel the
petitioner to prove that Viajars position was indeed redundant. It ruled that
the petitioner complied with the requirements under Article 283 of the Labor
Code, considering that the nation was then experiencing an economic
downturn and that GMC must adopt measures for its survival.15

Viajar appealed the aforesaid decision to the NLRC. On October 28, 2005,
the NLRC promulgated its decision, the dispositive portion of which reads:
WHEREFORE, premises considered, the Decision of the Labor Arbiter
declaring the validity of complainants termination due to redundancy is
hereby AFFIRMED. Respondent General Milling Corporation is hereby
ordered to pay complainants separation pay in the amount of P461,464.37.
SO ORDERED.16
The NLRC, however, stated that it did not agree with the LA that Viajar
should be faulted for failing to question the petitioners declaration of
redundancy before the DOLE Regional Office, Region VII, Cebu City. It
was not imperative for Viajar to challenge the validity of her termination due
to redundancy.17 Notwithstanding, the NLRC affirmed the findings of the LA
that Viajars dismissal was legal considering that GMC complied with the
requirements provided for under Article 283 of the Labor Code and existing
jurisprudence, particularly citing Asian Alcohol Corporation v. NLRC.18 The
NLRC further stated that Viajar was aware of GMCs "reduction mode," as
shown in the GMC Vismin Manpower Complement, as follows:
No. of Employees
Terminated (Redundancy)

Year

Manpower Profile

2000

795

2001

782

2002

736

41

2003

721

24

2004

697

16

2005

696 (As of June 2005)

0619

The NLRC stated that the characterization of positions as redundant is an

exercise of the employers business judgment and prerogative. It also ruled
that the petitioner did not exercise this prerogative in bad faith and that the
payment of separation pay in the amount of P461,464.37 was in compliance
with Article 283 of the Labor Code.20

Respondent Viajar filed a Motion for Reconsideration which was denied by

the NLRC in its Resolution dated January 31, 2006.
Undaunted, Viajar filed a petition for certiorari before the CA. In the now
assailed Decision dated September 21, 2007, the CA granted the petition,
reversing the decision of the NLRC in the following manner:
WHEREFORE, premises considered, this Petition for Certiorari is
GRANTED. The Decision, dated 28 October 2005, and Resolution, dated 31
January 2006 respectively, of public respondent National Labor Relations
Commission-Fourth Division, Cebu City, in NLRC Case No. V-000416-05
(RAB VII-12-2495-03) are SET ASIDE. A new judgment is entered
DECLARING the dismissal ILLEGAL and ordering respondent to reinstate
petitioner without loss of seniority rights and other privileges with full
backwages inclusive of allowances and other benefits computed from the
time she was dismissed on 30 November 2003 up to the date of actual
reinstatement. Further, moral and exemplary damages, in the amount of Fifty
Thousand Pesos ([P]50,000.00) each; and attorneys fees equivalent to ten
percent (10%) of the total monetary award, are awarded.
Costs against respondent.
SO ORDERED.21
Aggrieved by the reversal of the NLRC decision, GMC filed a motion for
reconsideration. However, in its Resolution dated January 30, 2008, the CA
denied the same; hence, this petition.
The petitioner raises the following issues, to wit:
I. THE DECISION OF SEPTEMBER 21, 2007 AND THE
RESOLUTION OF JANUARY 30, 2008 OF THE COURT OF
APPEALS ARE CONTRARY TO LAW AND ESTABLISHED
JURISPRUDENCE.
II. THE DECISION OF SEPTEMBER 21, 2007 AND THE
RESOLUTION OF JANUARY 30, 2008 OF THE COURT OF
APPEALS VIOLATE THE LAW AND ESTABLISHED
JURISPRUDENCE ON THE OBSERVANCE OF RESPECT AND
FINALITY TO FACTUAL FINDINGS OF THE NATIONAL
LABOR RELATIONS COMMISSION.

III. THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF

DISCRETION IN ITS DECISION OF SEPTEMBER 21, 2007 AND
RESOLUTION OF JANUARY 30, 2008 AS THE SAME ARE
CONTRARY TO THE EVIDENCE ON RECORD.22
The petition is denied.
The petitioner argues that the factual findings of the NLRC, affirming that of
the LA must be accorded respect and finality as it is supported by evidence
on record. Both the LA and the NLRC found the petitioners evidence
sufficient to terminate the employment of respondent on the ground of
redundancy. The evidence also shows that GMC has complied with the
procedural and substantive requirements for a valid termination. There was,
therefore, no reason for the CA to disturb the factual findings of the NLRC.23
The rule is that factual findings of quasi-judicial agencies such as the NLRC
are generally accorded not only respect, but at times, even finality because
of the special knowledge and expertise gained by these agencies from
handling matters falling under their specialized jurisdiction.24 It is also
settled that this Court is not a trier of facts and does not normally embark in
the evaluation of evidence adduced during trial.25 This rule, however, allows
for exceptions. One of these exceptions covers instances when the findings
of fact of the trial court, or of the quasi-judicial agencies concerned, are
conflicting or contradictory with those of the CA. When there is a variance
in the factual findings, it is incumbent upon the Court to re-examine the facts
once again.26
Furthermore, another exception to the general rule is when the said findings
are not supported by substantial evidence or if on the basis of the available
facts, the inference or conclusion arrived at is manifestly erroneous.27Factual
findings of administrative agencies are not infallible and will be set aside
when they fail the test of arbitrariness.28 In the instant case, the Court agrees
with the CA that the conclusions arrived at by the LA and the NLRC are
manifestly erroneous.
GMC claims that Viajar was validly dismissed on the ground of redundancy
which is one of the authorized causes for termination of employment. The
petitioner asserts that it has observed the procedure provided by law and that
the same was done in good faith. To justify the respondents dismissal, the
petitioner presented: (i) the notification Letter-Memorandum dated October

27, 2003 addressed to the respondent which was received on October 30,
2003;29 (ii) the "Establishment Termination Report" as prescribed by the
DOLE;30 (iii) the two (2) checks issued in the respondents name amounting
to P440,253.02 and P21,211.35 as separation pay;31 and (iv) the list of
dismissed employees as of June 6, 2006 to show that GMC was in a
"reduction mode."32 Both the LA and the NLRC found these sufficient to
prove that the dismissal on the ground of redundancy was done in good
faith.
The Court does not agree.
Article 283 of the Labor Code provides that redundancy is one of the
authorized causes for dismissal. It reads:
Article 283. Closure of establishment and reduction of personnel. The
employer may also terminate the employment of any employee due to the
installment of labor-saving devices, redundancy, retrenchment to prevent
losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the worker and the
Ministry of Labor and Employment at least one (1) month before the
intended date thereof. In case of termination due to the installation of laborsaving devices or redundancy, the worker affected thereby shall be entitled
to a separation pay equivalent to at least his one (1) month pay or to at least
one (1) month pay for every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to serious business losses
or reverses, the separation pay shall be equivalent to one (1) month pay or at
least one-half (1/2) month pay for every year of service, whichever is higher.
A fraction of at least six (6) months shall be considered one (1) whole year.
(Emphasis supplied)
From the above provision, it is imperative that the employer must comply
with the requirements for a valid implementation of the companys
redundancy program, to wit: (a) the employer must serve a written notice to
the affected employees and the DOLE at least one (1) month before the
intended date of retrenchment; (b) the employer must pay the employees a
separation pay equivalent to at least one month pay or at least one month pay
for every year of service, whichever is higher; (c) the employer must abolish
the redundant positions in good faith; and (d) the employer must set fair and

reasonable criteria in ascertaining which positions are redundant and may be

abolished.33
In Smart Communications, Inc., v. Astorga,34 the Court held that:
The nature of redundancy as an authorized cause for dismissal is explained
in the leading case of Wiltshire File Co., Inc. v. National Labor Relations
Commission, viz:
"x x x redundancy in an employers personnel force necessarily or even
ordinarily refers to duplication of work. That no other person was holding
the same position that private respondent held prior to termination of his
services does not show that his position had not become redundant. Indeed,
in any well organized business enterprise, it would be surprising to find
duplication of work and two (2) or more people doing the work of one
person. We believe that redundancy, for purposes of the Labor Code, exists
where the services of an employee are in excess of what is reasonably
demanded by the actual requirements of the enterprise. Succinctly put, a
position is redundant where it is superfluous, and superfluity of a position or
positions may be the outcome of a number of factors, such as overhiring of
workers, decreased volume of business, or dropping of a particular product
line or service activity previously manufactured or undertaken by the
enterprise."
The characterization of an employees services as superfluous or no longer
necessary and, therefore, properly terminable, is an exercise of business
judgment on the part of the employer. The wisdom and soundness of such
characterization or decision is not subject to discretionary review provided,
of course, that a violation of law or arbitrary or malicious action is not
shown.35 (Emphasis supplied and citations omitted)
While it is true that the "characterization of an employees services as
superfluous or no longer necessary and, therefore, properly terminable, is an
exercise of business judgment on the part of the employer,"36 the exercise of
such judgment, however, must not be in violation of the law, and must not be
arbitrary or malicious. The Court has always stressed that a company cannot
simply declare redundancy without basis. To exhibit its good faith and that
there was a fair and reasonable criteria in ascertaining redundant positions, a
company claiming to be over manned must produce adequate proof of the
same.

We reiterate what was held in Caltex (Phils.), Inc. v. NLRC:37

In Asufrin, Jr. v. San Miguel Corporation, we ruled that it is not enough for a
company to merely declare that it has become overmanned (sic). It must
produce adequate proof of such redundancy to justify the dismissal of the
affected employees.
In Panlilio v. National Labor Relations Commission, we held that evidence
must be presented to substantiate redundancy such as but not limited to the
new staffing pattern, feasibility studies/proposal, on the viability of the
newly created positions, job description and the approval by the
management of the restructuring.38 (Emphasis supplied and citations
omitted)
In the instant case, the Court agrees with the CA when it held that the
petitioner failed to present substantial proof to support GMCs general
allegations of redundancy. As shown from the records, the petitioner simply
presented as its evidence of good faith and compliance with the law the
notification letter to respondent Viajar;39 the "Establishment Termination
Report" it submitted to the DOLE Office;40 the two (2) checks issued in the
respondents name amounting to P440,253.02 and P21,211.35;41 and the list
of terminated employees as of June 6, 2006.42 We agree with the CA that
these are not enough proof for the valid termination of Viajars employment
on the ground of redundancy.
The letter-memorandum which contains general allegations is not enough to
convince this Court that Viajars termination of employment due to
redundancy was warranted under the circumstances. There is no showing
that GMC made an evaluation of the existing positions and their effect to the
company. Neither did GMC exert efforts to present tangible proof that it was
experiencing business slow down or over hiring. The "Establishment
Termination Report" it submitted to the DOLE Office did not account for
anything to justify declaring the positions redundant. The Court notes that
the list of terminated employees presented by GMC was a list taken as of
June 6, 2006 or almost three years after the respondent was illegally
dismissed and almost a year after the LA promulgated its decision. While the
petitioner had been harping that it was on a "reduction mode" of its
employees, it has not presented any evidence (such as new staffing pattern,
feasibility studies or proposal, viability of newly created positions, job
description and the approval of the management of the

restructuring,43audited financial documents like balance sheets, annual

income tax returns and others)44 which could readily show that the
companys declaration of redundant positions was justified. Such proofs, if
presented, would suffice to show the good faith on the part of the employer
or that this business prerogative was not whimsically exercised in
terminating respondents employment on the ground of redundancy.
Unfortunately, these are wanting in the instant case. The petitioner only
advanced a self-serving general claim that it was experiencing business
reverses and that there was a need to reduce its manpower complement.
On the other hand, the respondent presented proof that the petitioner had
been hiring new employees while it was firing the old ones,45 negating the
claim of redundancy. It must, however, be pointed out that in termination
cases, like the one before us, the burden of proving that the dismissal of the
employees was for a valid and authorized cause rests on the employer. It was
incumbent upon the petitioner to show by substantial evidence that the
termination of the employment of the respondent was validly made and
failure to discharge that duty would mean that the dismissal is not justified
and therefore illegal.46
Furthermore, the Court cannot overlook the fact that Viajar was prohibited
from entering the company premises even before the effectivity date of
termination; and was compelled to sign an "Application for Retirement and
Benefits." These acts exhibit the petitioners bad faith since it cannot be
denied that the respondent was still entitled to report for work until
November 30, 2003. The demand for her to sign the "Application for
Retirement and Benefits" also contravenes the fact that she was terminated
due to redundancy. Indeed, there is a difference between voluntary
retirement of an employee and forced termination due to authorized causes.
In Quevedo v. Benguet Electric Cooperative, Incorporated,47 this Court
explained the difference between retirement and termination due to
redundancy, to wit:
While termination of employment and retirement from service are common
modes of ending employment, they are mutually exclusive, with varying
juridical bases and resulting benefits. Retirement from service is contractual
(i.e. based on the bilateral agreement of the employer and employee), while
termination of employment is statutory (i.e. governed by the Labor Code and
other related laws as to its grounds, benefits and procedure). The benefits

resulting from termination vary, depending on the cause. For retirement,

Article 287 of the Labor Code gives leeway to the parties to stipulate above
a floor of benefits.
xxxx
The line between voluntary and involuntary retirement is thin but it is one
which this Court has drawn. Voluntary retirement cuts employment ties
leaving no residual employer liability; involuntary retirement amounts to a
discharge, rendering the employer liable for termination without cause. The
employees intent is the focal point of analysis. In determining such intent,
the fairness of the process governing the retirement decision, the payment of
stipulated benefits, and the absence of badges of intimidation or coercion are
relevant parameters.48 (Emphasis supplied and citations omitted)
Clearly, the instant case is not about retirement since the term has its
peculiar meaning and is governed by Article 287 of the Labor Code. Rather,
this is a case of termination due to redundancy under Article 283 of the
Labor Code. Thus, the demand of GMC for the respondent to sign an
"Application for Retirement and Benefits" is really suspect.
Finally, the Court agrees with the CA that the award of moral and exemplary
damages is proper.1wphi1 The Court has awarded moral damages in
termination cases when bad faith, malice or fraud attend the employees
dismissal or where the act oppresses labor, or where it was done in a manner
contrary to morals, good customs or public policy.49 We quote with favor the
findings of the CA:
We also award moral and exemplary damages to petitioner. While it is true
that good faith is presumed, the circumstances surrounding the dismissal of
petitioner negate its existence. Moral damages may be recovered only where
the dismissal of the employee was tainted by bad faith or fraud, or where it
constituted an act oppressive to labor, and done in a manner contrary to
morals, good customs or public policy while exemplary damages are
recoverable only if the dismissal was done in a wanton, oppressive, or
malevolent manner. To reiterate, immediately after receipt of her termination
letter which was effective on 30 November 2003, petitioner was no longer
treated as an employee of respondent as early as the 31st of October 2003;
she was already barred from entering the company premises; she was
deprived access to her office computer; and she was excluded from the

bandy [sic] clock. She was also made to sign documents, including an
"APPLICATION FOR RETIREMENT AND BENEFITS" in the guise of
payment of her separation pay. When petitioner confronted her immediate
superior regarding her termination, the latters shock aggravated her
confusion and suffering. She also learned about the employment of a number
of new employees, several of whom were even employed in her former
department. Petitioner likewise suffered mental torture brought about by her
termination even though its cause was not clear and
substantiated.50 (Citations omitted)
WHEREFORE, the petition is DENIED. The Decision dated September 21,
2007 of the Court of Appeals, as well as its Resolution dated January 30,
2008 in CA-G.R. SP No. 01734, are hereby AFFIRMED.
SO ORDERED.
THIRD DIVISION
G.R. No. 192518, October 15, 2014
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY AND/OR
ERNANI TUMIMBANG,Petitioners, v. HENRY
ESTRANERO, Respondent.
DECISION
REYES, J.:
This appeal by petition for review1 seeks to annul and set aside the
Decision2 dated February 15, 2010 and Resolution3 dated May 25, 2010 of
the Court of Appeals (CA) in CA-G.R. SP No. 108297, which affirmed the
Decision4 dated August 29, 2008 of the National Labor Relations
Commission (NLRC) in NLRC-NCR Case No. 00-10-08679-05, and its
Resolution5 dated January 30, 2009 denying Philippine Long Distance
Telephone Company's (PLDT) Motion for Reconsideration. The NLRC
Decision affirmed the Decision6 dated December 8, 2006 of the Labor
Arbiter (LA) ordering PLDT to pay Henry Estranero (respondent) his
separation pay.
The Facts

Petitioner PLDT is a public utility corporation engaged in the business of

providing telecommunication services to the general public. On July 1,
1995, PLDT employed the respondent as an Auto-Mechanic/Electrician
Helper, Job Grade 3 with a monthly salary of P15,000.00 at the time of his
separation from the service in 2003.
In the year 1995, PLDT adopted a company-wide Manpower Reduction
Program (MRP), aimed at reducing its work force. To commence with its
program, PLDT offered the affected employees an attractive redundancy pay
consisting of 100% of their basic monthly salary for every year of service, in
addition to their retirement benefits, if entitled. For those who were not
qualified to the retirement benefits, they were offered separation or
redundancy package of 200% of their basic monthly salary for every year of
service.
By virtue of the MRP, a number of positions were declared redundant.
Among those gravely affected by the MRP was the Fleet Management
Division where the respondent was assigned, on account of the significant
decrease of company vehicles, machineries, and equipment that required
mechanical servicing and repair. Consequently, the respondent's position was
included in those declared as redundant.
Attracted by the separation pay offered by the company, the respondent
expressed his conformity to his inclusion in the MRP. In the inter-office
Memorandum dated April 21, 2003, the respondent declared that he has no
objection to being included in the redundancy program of PLDT. After
having signified his intention and after approval thereof by his superior
officers, the respondent's name was included in the list of redundant
employees for that period and a Notice of Separation Due to Redundancy
was submitted to the Department of Labor and Employment on April 25,
2003. He was then made to sign a deed denominated as a Receipt, Release
and Quitclaim for his severance from employment, thus availed of the
offered personnel reduction program. Thereafter, PLDT proceeded to
compute the respondent's redundancy/separation benefits.
Since his length of service was seven (7) years, eleven (11) months and
fifteen (15) days, which was rounded to 8 years, the respondent was not
qualified for retirement pay which required an employee to have worked for
at least 15 years. The respondent was nonetheless entitled to 200% of his

basic monthly salary for every year of service by way of redundancy pay or
equivalent to P240,000.00. In addition, he was also entitled to other benefits
he has earned for the years prior to, and during the year of his actual
separation, i.e., 2002 and 2003 sick leave benefits, 2002 and 2003 vacation
leave and vacation leave premium benefits, longevity pay, mid-year bonus,
13th month pay and Christmas bonus, all in the sum of P27,028.37. Thus, his
aggregate redundancy pay plus other earned benefits amounted to
P267,028.37.
However, the respondent had outstanding liabilities arising from various
loans he obtained from different entities, namely: the Home Development
Mutual Fund (HDMF), PLDT Employees Credit Cooperative, Inc., PLDT
Service Cooperative, Inc.,7 Social Security System (SSS), and the
Manggagawa ng Komunikasyon sa Pilipinas, which summed to
P267,028.37.8 Thus, PLDT deducted the said amount from the payment that
the respondent was supposed to receive as his redundancy pay.
As a result, when the respondent was made to sign the Receipt, Release and
Quitclaim, it showed that his take home pay was in the amount of "zero
pesos." This prompted the respondent to retract his availment of the
separation pay package offered to him through a letter addressed to the
company dated May 8, 2003. Despite said retraction, however, the
respondent was no longer allowed to report for work.
Subsequently, the respondent filed a complaint for illegal dismissal with
reinstatement, as well as moral and exemplary damages plus attorney's fees,
docketed as NLRC-NCR Case No. 04-02820-97, against PLDT and Ernani
Tumimbang (petitioners), the Division Head of the Fleet Management
Division where the respondent was assigned.
In due course, the LA rendered a Decision dated December 8, 2006 in favor
of the respondent, disposing as follows:chanRoblesvirtualLawlibrary
WHEREFORE, foregoing premises considered, respondent Philippine Long
Distance Telephone Company is hereby ordered to pay complainant Henry
T. Estra[n]ero his separation pay in the amount of P267,038.37 [sic].
The "set-off of complainant's outstanding loans in the amount of
P267,038.37 [sic] against his separation pay invoked by respondents is
hereby dismissed for lack of jurisdiction.

All other claims are hereby ordered dismissed for lack of merit.
SO ORDERED.9
The LA sustained the validity of PLDT's redundancy program as an
authorized cause to terminate the employment of the respondent, and his
entitlement to the redundancy/separation pay pursuant to the MRP, being
more advantageous than the benefits allowed under the law. The LA,
however, ruled that the office lacks jurisdiction to pass upon the issue of
PLDT's act in deducting the total outstanding loans which the respondent
obtained from different entities since the same does not involve an
employer-employee relationship, and may only be enforced by PLDT
through a separate civil action in the regular courts.
On appeal, the NLRC affirmed the LA decision. The NLRC ruled that the
respondent should be paid his separation pay on account of redundancy. As
to the setting-off of the respondent's outstanding loans, it agreed with the LA
that the same is not a labor dispute but one arising from a debtor-creditor
relation where PLDT stands as a collecting agent over which the labor
tribunals has no jurisdiction.
The petitioners filed a motion for reconsideration but it was denied; hence,
they filed a petition forcertiorari with the CA.
On February 15, 2010, the appellate court promulgated its Decision
affirming the assailed NLRC decision. The CA held that there is no more
question as to the legality of the respondent's dismissal from employment as
the respondent had accepted the validity of his dismissal from service. The
controversy arose when the petitioners deducted from the respondent's
redundancy pay the latter's outstanding liabilities arising from various loans
he obtained from different entities such that his take home pay became zero.
In sustaining the respondent's claim for redundancy pay, the appellate court
ratiocinated:chanRoblesvirtualLawlibrary
The deductions subject of this case pertain to loans which x x x respondent
availed from various entities. Hence, as above stated, there must be proof
that there is a personal written authorization from x x x respondent
authorizing petitioners to deduct from his terminal pay his outstanding loans

from said entities. Petitioners failed to present convincing evidence that,

indeed, x x x respondent, has knowledge and consented to these deductions.
On the contrary, x x x respondent maintains that petitioners unilaterally
made the application of deductions without his knowledge, much less
consent. Thus, it is the burden of petitioners to present proof of the validity
of the deductions. However, aside from their bare allegations, they did not
offer any concrete and tangible evidence proving their authority to deduct
the outstanding loans of x x x respondents from his redundancy pay. They
did not submit any written Authority to Deduct to evince the validity of the
deductions. While they submitted two written Authority to Deduct signed by
x x x respondent pertaining to his loans in the PLDT Multi-Purpose
[Cooperative], Inc. (Telescoop), this Court cannot, on face value, conclude
from said documents that x x x respondent has given his consent to deduct
his loans from his redundancy pay. At most, said Authority to Deduct
pertain[s] only to his loan obtained from Telescoop, but even so, the amount
stated therein does not even match the amount deducted from his
redundancy pay.10 (Citation omitted)
The CA further stated that the petitioners are not without any recourse to
recover from the respondent the unauthorized payment they have made in
his behalf. It has a right to recover from the respondent the sum so paid out,
at least to the extent in which the payment may have been beneficial to the
respondent.
Aggrieved by the foregoing disquisition, the petitioners moved for
reconsideration but it was denied by the appellate court; hence, the present
petition for review on certiorari.
The Issue
As presented, the issue for resolution hinges on whether or not the
petitioners can validly deduct the respondent's outstanding loan obligation
from his redundancy pay.
Ruling of the Court
The petition is bereft of merit.
At the outset, the issues in this case are factual. "Under Rule 45 of the Rules
of Court, only questions of law may be raised in this Court; such factual

issues may be considered and resolved only when the findings of facts and
the conclusions of the [LA] are inconsistent with those of the NLRC and the
CA."11 It is apparent from the arguments of the petitioners that they are
calling for the Court to re-evaluate the evidence presented by the parties.
"Once the issue invites a review of the evidence, the question posed is one of
fact."12 The petitioners are, therefore, raising questions of facts beyond the
ambit of the Court's review.
Nevertheless, this Court has thoroughly reviewed the records in this case and
found that the NLRC did not commit any grave abuse of its discretion
amounting to lack or excess of jurisdiction in rendering its decision in favor
of the respondent. The CA acted in accord with the evidence on record and
case law when it dismissed the petition and affirmed the assailed decision
and resolution of the NLRC.
In the main, this Court is in consonance with the CA that the instant case is
not about jurisdiction to determine the validity of the set-off but more of the
petitioner's authority to deduct from the redundancy pay of the respondent
his outstanding loans obtained from different entities. It is whether the
deductions done by the petitioners are authorized under existing laws or
subject to a written authorization from the respondent.13cralawred
The antecedent facts that gave rise to the respondent's dismissal from
employment are not disputed in this case. There is no question about the
validity of the MRP implemented by PLDT in 1995, since redundancy is one
of the authorized causes for termination of employment.14 The respondent,
however, argued that the deduction of the outstanding loans that he obtained
from different entities from his redundancy pay was contrary to law. On the
other hand, the petitioners insisted that they can validly deduct the said loans
from the respondent's redundancy pay since the respondent was able to
obtain said loans because of his employment with PLDT.
It is clear in Article 11315 of the Labor Code that no employer, in his own
behalf or in behalf of any person, shall make any deduction from the wages
of his employees, except in cases where the employer is authorized by law
or regulations issued by the Secretary of Labor and Employment, among
others. The Omnibus Rules Implementing the Labor Code, meanwhile,
provides that deductions from the wages of the employees may be made by
the employer when such deductions are authorized by law, or when the
deductions are with the written authorization of the employees for payment

to a third person.16 Thus, any withholding of an employee's wages by an

employer may only be allowed in the form of wage deductions under the
circumstances provided in Article 113 of the Labor Code, as well as the
Omnibus Rules implementing it. Further, Article 11617 of the Labor Code
clearly provides that it is unlawful for any person, directly or indirectly, to
withhold any amount from the wages of a worker without the worker's
consent.
In this case, the deductions made to the respondent's redundancy pay do not
fall under any of the circumstances provided under Article 113, nor was it
established with certainty that the respondent has consented to the said
deductions or that the petitioners had authority to make such deductions.
As aptly stated by the CA, the matter would have been different if the
deductions refer to the respondent's contributions for his being a member of
SSS, HDMF, or withholding taxes on income, because if such was the case,
the contributions are deductions already sanctioned by existing laws. Here, it
is evidently emphasized that the subject deductions pertain to the
respondent's outstanding loans from various entities.
Furthermore, the petitioners may not offset the outstanding loans of the
respondent against the latter's monetary benefits. The records expressly
revealed that the respondent has obtained various loans from different
entities and not with PLDT. Accordingly, set-off or legal compensation
cannot take place between PLDT and the respondent because they are not
mutually creditor and debtor of each other. Thus, there can be no valid setoff because the respondent's creditor is not PLDT.18cralawred
The Court further agrees with the labor tribunals that the petitioners cannot
offset the outstanding balance of the respondent's loan obligation with his
redundancy pay because the balance on the loan does not come within the
scope of jurisdiction of the LA. The demand for payment of the said loans is
not a labor, but a civil dispute. It involves debtor-creditor relations, rather
than employee-employer relations. Evidently, the respondent's unpaid
balance on his loans cannot be offset against the redundancy pay due to him.
In fine, the Court rules that PLDT has no legal right to withhold the
respondent's redundancy pay and other benefits to recompense for his
outstanding loan obligations to different entities. The respondent's
entitlement to his redundancy pay is mandated by law which the petitioners

cannot unjustly deny.

WHEREFORE, the Decision dated February 15, 2010 and Resolution
dated May 25, 2010 of the Court of Appeals in CA-G.R. SP No. 108297
are AFFIRMED.
SO ORDERED.
Peralta,* (Acting Chairperson), Villarama, Jr., Reyes, PerlasBernabe,** and Jardeleza, JJ., concur.
Endnotes:
*

Acting Chairperson per Special Order No. 1815 dated October 3, 2014 vice
Associate Justice Presbitero J. Velasco, Jr.
**

Additional member per Special Order No. 1816 dated October 3, 2014 vice
Associate Justice Presbitero J. Velasco, Jr.
1

Rollo, pp. 10-45.

Penned by Associate Justice Rosmari D. Carandang, with Associate

Justices Ramon M. Bato, Jr. and Amy C. Lazaro-Javier, concurring; id. at
49-62.
3

Id. at 65-66.

Id. at 91-97.

Id. at 99-100.

Issued by Labor Arbiter Thelma M. Concepcion; id. at 154-160.

PLDT Service Cooperative Inc. was later renamed as PLDT Employees

Multi-Purpose Cooperative.
8

Home Development Mutual Fund Loan

Manggagawa ng Komunikasyon sa

P 5,585.57
4,000.00

Pilipinas Loan
PLDT Employees Credit Cooperative,
Inc. Loan
PLDT Service Cooperative, Inc. Loan
SSS
Loan___________________________
Total Outstanding Loans

78,011.93
177,704.31
11,730.00
267,028.37 [sic
]

Rollo, p. 157.
9

Rollo, p. 160.

10

Id. at 58-59.

11

Lopez Sugar Corp. v. Franco, 497 Phil. 806, 817 (2005).

12

Go v. Looyuko, G.R. No. 196529, July 1, 2013, 700 SCRA 313, 318-319.

13

Rollo, p. 35.

14

Article 283. Closure of establishment and reduction of personnel. - The

employer may also terminate the employment of any employee due to the
installation of labor saving devices, redundancy, retrenchment to prevent
losses or the closing or cessation of the operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the
Department of Labor and Employment at least one (1) month before the
intended date thereof. In case of termination due to the installation of labor
saving devices or redundancy, the worker affected thereby shall be entitled
to a separation pay equivalent to at least his one (1) month pay or to at least
one (1) month pay for every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to serious business losses
or financial reverses, the separation pay shall be equivalent to one (1) month
pay or to at least one-half (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be considered
one (1) whole year.
15

Article 113. Wage Deduction. No employer, in his own behalf or in

behalf of any person, shall make any deduction from wages of his

employees, except:chanroblesvirtuallawlibrary
(a) In cases where the worker is insured with his consent by the employer,
and the deduction is to recompense the employer for the amount paid by him
as premium on the insurance;
(b) For union dues, in cases where the right of the worker or his union to
check-off has been recognized by the employer or authorized in writing by
the individual worker concerned; and
(c) In cases where the employer is authorized by law or regulations issued by
Secretary of Labor.
16

Rule VIII, Section 10. Deductions from the wages of the employees
may be made by the employer in any of the following cases:
(a) When the deductions are authorized by law, including deductions for the
insurance premiums advanced by the employer in behalf of the employee as
well as union dues where the right to check-off has been recognized by the
employer or authorized in writing by the individual employee himself;
(b) When the deductions are with the written authorization of the
employees for payment to a third person and the employer agrees to do so,
provided that the latter does not receive any pecuniary benefit, directly or
indirectly, from the transaction
17

Article 116. Withholding of wages and kickbacks prohibited. It shall be

unlawful for any person, directly or indirectly, to withhold any amount from
the wages of a worker or induce him to give up any part of his wages by
force, stealth, intimidation, threat or by any other means whatsoever without
the worker's consent.
SECOND DIVISION
COATS MANILA BAY, INC., G.R. No. 172628
Petitioner,
Present:

QUISUMBING, J.,
Chairperson,
- versus - CARPIO MORALES,
TINGA,
VELASCO, JR., and
BRION, JJ.
PURITA M. ORTEGA (represented
by Alejandro San Pedro, Jr.) and
MARINA A. MONTERO, Promulgated:
Respondents.
February 13, 2009

x---------------------------------------------------------------------------x

DECISION
TINGA, J.:

In
this Petition
for Review,[1] Coats
Manila
Bay,
Inc.
[2]
(petitioner) assails the decision of the Court of Appeals dated 25 January
2002 which ruled that respondents were illegally dismissed by petitioner as
the latter failed to substantiate its claim that it observed fair and reasonable

criteria in selecting employees for dismissal as part of its redundancy

program. The appellate court set aside the decision and resolution of the
National Labor Relations Commission (NLRC) reversing the labor arbiters
decision granting respondents complaints for illegal dismissal.

The facts are as follows:

Petitioner, a corporation registered under Philippine laws, is primarily

engaged in the business of thread production. Purita M. Ortega and Marina
A. Montero (respondents) were both employed by petitioner as Clerk
Analysts in the Industrial Engineering Department. Both were members of
Anglo-KMU Monthly Union (Union).[3]

On 27 April 2000, petitioner issued a memorandum announcing that a

redundancy plan would be implemented.[4] It was stated that the redundancy
program was necessary to prevent further losses. Petitioner assured its
employees that implementing a redundancy program rather than a
retrenchment program would result in better benefits to those dismissed.

As a result of this redundancy program, 135 employees were terminated,

including respondents. They were advised on 9 May 2000 that they would be
dismissed effective 15 June 2000.[5] On 10 May 2000, petitioner filed with
the Department of Labor and Employment its Establishment Termination
Report,[6] indicating that it was terminating 135 of its employees, including
respondents, on the ground of redundancy. On 31 May 2000, petitioner and
the Union held a labor-management meeting to discuss the fate of the
employees affected by the redundancy program.[7] On 1 June 2000,
respondents received their respective separation payments and thereafter
executed release waivers and quitclaims in favor of petitioner.[8] In the
meantime, 11 of the terminated employees were rehired by petitioner to
different positions but with lower salaries.

On 8 June 2000, respondents filed a complaint for illegal dismissal,

backwages, reinstatement, vacation/sick leave, 13th month pay, moral and
exemplary damages, attorneys fees, litigation expenses and CBA benefits
with the NLRC against petitioner and/or its Chief Executive Officer Arsenio
N. Tanco (Tanco).[9]

Respondents asserted in their position paper that despite their

dismissal due to redundancy, their functions were assigned to other workers.
[10]
They also claimed that they were constrained to sign the quitclaims and
release waivers due to their pressing need for the separation pay. They
further alleged that as a result of their termination they had suffered
humiliation, wounded feelings, mental anguish and thus prayed for
exemplary and morals damages well as attorneys fees.

Petitioner and Tanco claimed that they had the management

prerogative to implement a redundancy program as per Article 283 of the
Labor Code.[11]They aver that both respondents were notified that they would

be subject to redundancy and that they never objected thereto as shown by

the execution of their respective waivers/quitclaims.

On 21 October 2002, the Labor Arbiter rendered a

decision[12] declaring illegal respondents dismissal and directing petitioner to
reinstate respondents to their former positions. The dispositive portion of the
decision reads:
WHEREFORE, premises considered, the complainants
are hereby declared illegally dismissed, and respondent Coats
Manila Bay, Inc. is thereby directed to reinstate them to their
former positions without loss of seniority rights and other
benefits, to pay their full backwages, including their 13 th month
pay, from the time of their termination up to the time of their
actual reinstatement, and to pay each complainant 10% of the
total award as attorneys fees.
Nevertheless, the sums of money already paid by and
received from the respondents by the complainants when they
were terminated from the service shall be deducted from the
total amount of their respective awards in this case, in the
amount as computed by the NLRC NCR Computation Unit.
All other claims are dismissed for lack of merit.
SO ORDERED.[13]

On 18 November 2002, petitioner appealed the decision of the Labor

Arbiter to the NLRC. On 21 January 2004, the NLRC reversed the decision
of the Labor Arbiter and held that the dismissal was valid due to redundancy.
Respondents moved for reconsideration but this was denied by the NLRC in
a resolution dated 30 March 2005.

Undaunted, respondents filed a petition for certiorari with the Court

of Appeals. The Court of Appeals granted their petition, reversed the
decision of the NLRC and reinstated the decision of the Labor Arbiter. The
dispositive portion of the decision states:
WHEREFORE, the petition, being meritorious is
GRANTED. The decision of the NLRC dated January 21, 2004
and its Resolution dated March 30, 2005 in NLRC NCR CA
No. 033967-03 (NLRC NCR Case No. 06-03132-2000) are
hereby REVERSED and SET ASIDE. The decision of the
Labor Arbiter dated October 21, 2002(NLRC NCR Case No.
06-03132-2000) is REINSTATED and AFFIRMED.
SO ORDERED.

The Court of Appeals ratiocinated that the record is bare of any

evidence that fair and reasonable criteria in selecting the respondents were
used. Moreover, the waivers and quitclaims executed by respondents did not
negate their right to pursue their claims, the appellate court stated.

In the instant petition, petitioner asserts that the implementation of its

redundancy program was not discriminatory, and that it implemented
reasonable criteria in selecting employees to be retrenched. Moreover, the
decision to dismiss respondents was reached after consultations with
the Union. Petitioner alsomaintains that the quitclaims executed by
respondents, in which the latter acknowledged receipt of their salaries,
13th month pay, vacation leave conversion, retrenchment pay and refund of
withholding taxes, were not procured through fraud or deceit on its part, and

that respondents had better educational attainment than the other workers;
hence, the two understood what they were signing.

Respondents filed their comment,[14] asserting that petitioner raised no

substantial argument to warrant reconsideration.[15] They contend that
petitionercannot invoke redundancy since there was no showing that the
functions of respondents are duplicitous or superfluous. They also assert that
petitioner failed to show that it was suffering from a serious downturn in
business that would warrant redundancy given that such serious business
downturn was the cause given by petitioner in the termination letters sent to
respondents. They also assert that their educational attainment is irrelevant
since the compelling factor in their acceptance of separation pay was the dire
economic necessity to be caused by their impending loss of jobs.
The issues posed before the Court may thus be simplified into two: (i) the
propriety of the redundancy program implemented by petitioner; and (ii) the
validity of the waivers and quitclaims executed by respondents.

The petition is meritorious.

Propriety of redundancy program

For purposes of the Labor Code, redundancy exists where the services
of an employee are in excess of what is reasonably demanded by the actual
requirements of the enterprise. Succinctly put, a position is redundant where
it is superfluous, and superfluity of a position or positions may be the
outcome of a number of factors, such as over hiring of workers, decreased
volume of business, or dropping of a particular product line or service
activity previously manufactured or undertaken by the enterprise.[16] That no
other person was holding the same position prior to the termination of ones
services, does not show that his position had not become redundant. Indeed,
in any well-organized business enterprise, it would be surprising to find
duplication of work and two (2) or more people doing the work of one
person.[17] Just like installation of labor-saving devices, the ground of

redundancy does not require the exhibition of proof of losses or imminent

losses. In fact, of all the statutory grounds provided in Article 283 of the
Labor Code, it is only retrenchment which requires proof of losses or
possible losses as justification for termination of employment.[18]

The Court recognizes that a host of relevant factors comes into play in
determining cost-efficient saving measures and in choosing who among the
employees should be retained or separated. It is well settled that the
characterization of an employees services as no longer necessary or
sustainable, and, therefore, properly terminable, is an exercise of business
judgment on the part of the employer. However, the wisdom or soundness of
such characterization or decision is not subject to discretionary review
provided, of course, that violation of law or arbitrary or malicious action is
not shown.[19] In several instances, the Court has held that it is important for
a company to have fair and reasonable criteria in implementing its
redundancy program, such as but not limited to, (a) preferred status, (b)
efficiency and (c) seniority.[20]

\
We are satisfied that petitioner employed reasonable criteria in
choosing which positions to declare redundant.

The Court notes that considerable deliberations were made before the
redundancy program was implemented. As early as 22 April 2000,
management had been upfront regarding its plans to implement a
redundancy program, issuing a memorandum informing its employees that
imminent serious business downturn had forced it to take urgent steps to
reduce (its) workforce. The memorandum also mentioned the criteria for
selection of employees to be made redundant. Thus: x x x primarily
performance, viz absenteeism, record of disciplinary action, efficiency and
work attitude. All other things being equal, the basis will be seniority.[21]

Records also show that petitioner held a labor-management meeting

on 31 May 2000, wherein it discussed with the Union the redundant
positions as well as the possible placement of the would-be displaced
employees, the wage rate and work hours. Obviously, the redundancy
program was carried out with the full consent and participation of the duly
recognized labor union, which represents the employees-members. The
minutes of the meeting which were duly signed by both the management and
the union panels read in part:

Marina Montero and Purita Ortegas positions are

redundant. The same is true with Robert Higados position. As
earlier mentioned, Management told the Union there are no
more available monthly positions but should they wish to take
up daily jobs Management is willing to accommodate them.
xxx
On the case of Marina Montero, Mr. Dequito suggested that
Management accommodate M. Montero for one or two more
years since she is already retirable. Engr. Valle told
the Union that they have checked the records and found out that
M. Monteros service is not even close to 28 years.[22]

Moreover, a review of the records shows that respondents positions

were abolished because there was duplicity of functions of clerk analysts in
the Industrial Engineering Section and finishing production clerks in the
Operations Department. Even the union representatives agreed that
respondents positions were redundant. Petitioner found that it was more

cost-efficient to maintain only one employee to handle the computation of

incentives of the production employees with the use of computers. [23]

Respondents, as well as the Court of Appeals, insist that petitioner did

not present a clear criteria in implementing its redundancy program. We do
not agree. Petitioners failure to exactly state in the memorandum or in the
termination notices that respondents do not enjoy a preferred status, or are
not efficient or do not possess seniority, cannot be equated with failure to
apply reasonable criteria. A simple reading of the memorandum and the
deliberations during the labor-management meeting shows that the fate of
the affected employees was deliberated upon and decided with
circumspection. The totality of the actions of petitioner shows that the
redundancy program was fair, well-thought of, and made in good faith.

Neither is the claim of discrimination well-founded. Respondents

compare themselves to the other employees who were included in the
redundancy program and allegedly reinstated by petitioner. Upon closer
scrutiny, however, we find that said employees were indeed part of the
redundancy program but were taken back, upon the agreement between
the Union and petitioner. Of the 135 terminated employees, only 11 were
taken back. It must be stressed, however, that true, the 11 employees were
re-employed but they were not reinstated in their former positions. Aside
from agreeing to a reduced workweek, these employees conceded to pay
cuts, and accepted positions which were different from the ones they
originally held prior to the implementation to the redundancy program.[24]

Moreover, of the remaining terminated employees who were not reemployed, only respondents complained of illegal dismissal and
discrimination. It would probably be a different matter had petitioner reemployed each and every terminated employee, save for respondents. Had
such been the case, it would have been easy to infer that respondents were
singled out and discriminated against, and more

important, it would prove that there was no valid reason to implement a

redundancy program. But, precisely, that is not the case here. Besides,
petitioner and theUnion had exercised business judgment in choosing who
should be re-employed. Absent any showing of arbitrariness or bad faith, the
Court will not interfere with their decision.
Validity of Release Waiver and Quitclaim

The Court of Appeals ruled that the release waivers and quitclaims had not
negated respondents right to pursue their claims, ratiocinating that:
What appears is that petitioners by reason of dire economic
necessity were constrained to accept their separation pay and
signed the quitclaims. When petitioners signed the quitclaims,
they faced the impending threat of losing their jobs after June
15, 2000. This dilemma placed petitioners in no position to
resist their employers offer of separation pay. The fact,
however, is that petitioners continue to press their claims
against private respondent company, which negates the idea
that they waived their rights or claims. The reason for this is
that the employee does not really stand on an equal footing with
his employer. In some cases, he may be so penurious that he is
willing to bargain even rights secured to him by law.
[25]
(emphasis supplied)

The Court disagrees. Not all quitclaims are per se invalid or against policy,
except: (1) where there is clear proof that the waiver was wangled from an

unsuspecting or gullible person; or (2) where the terms of settlement are

unconscionable on their face; in these cases, the law will step in to annul the
questionable transaction.[26] Indeed, there are legitimate waivers that
represent a voluntary and reasonable settlement of laborers claims which
should be respected by the Court as the law between the parties. Where the
person making the waiver has done so voluntarily, with a full understanding
thereof, and the consideration for the quitclaim is credible and reasonable,
the transaction must be recognized as being a valid and binding undertaking,
[27]
and may not later be disowned simply because of a change of mind.[28]
In the case at bar, the release waivers and quitclaims were executed by
respondents without any force or duress exerted on them. Respondents
merely alleged that they voluntarily executed the documents by reason of
dire economic necessity. Dire necessity may be an acceptable ground to
annul quitclaims if the consideration is unconscionably low and the
employee was tricked into accepting it,[29] but is not an acceptable ground
for annulling the release when it is not shown that the employee has been
forced to execute it.[30]

The release documents embodied reasonable settlement of the parties

claims. Respondents received hefty sumsOrtega received P363,594.28 while
Montero got P348,975.97the said amounts being what they are by law
entitled to receive,[31] much higher than the separation pay they would have
received had petitioners hand been forced and a retrenchment program
initiated. Respondents were made fully aware of the implications of release
documents. They are not unlearned nor gullible. They even wrote down in
Filipino that they understood the terms of the release document and attested
that they have received all the benefits due them.[32] There would have been
no question on their right to file their complaint had they not signed and
executed the Release Waiver and Quitclaim. In the absence of any showing
that they were forced or tricked into signing the release documents, the
Court cannot set aside the same merely because respondents had
subsequently changed their minds.

WHEREFORE, the petition is GRANTED. The Decision of the Court of

Appeals dated January 25, 2002 in C.A. G.R. SP No. 89754
is REVERSED and SET ASIDE and the Decision of the NLRC dated 21
January 2004 is REINSTATED. No costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 202996

June 18, 2014

MARLO A. DEOFERIO, Petitioner,

vs.
INTEL TECHNOLOGY PHILIPPINES, INC. and/or MIKE
WENTLING, Respondents.
DECISION
BRION, J.:
We resolve the petition for review on certiorari1 filed by petitioner Marlo A.
Deoferio to challenge the February 24, 2012 decision2 and the August 2,
2012 resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 115708.

The Factual Antecedents

On February 1, 1996, respondent Intel Technology Philippines, Inc.
(Intel)employed Deoferio as a product quality and reliability engineer with a
monthly salary of P9,000.00. In July2001, Intel assigned him to the United
States as a validation engineer for an agreed period of two years and with a
monthly salary of US$3,000.00. On January 27, 2002, Deoferio was
repatriated to the Philippines after being confined at Providence St. Vincent
Medical Center for major depression with psychosis.4 In the Philippines, he
worked as a product engineer with a monthly salary of P23,000.00.5
Deoferio underwent a series of medical and psychiatric treatment at Intels
expense after his confinement in the United States. In 2002, Dr. Elizabeth
Rondain of Makati Medical Center diagnosed him to be suffering from
mood disorder, major depression, and auditory hallucination.6 He was also
referred to Dr. Norieta Balderrama, Intels forensic psychologist, and to a
certain Dr. Cynthia Leynes who both confirmed his mental condition.7 On
August 8, 2005, Dr. Paul Lee, a consultant psychiatrist of the Philippine
General Hospital, concluded that Deoferio was suffering from
schizophrenia. After several consultations, Dr. Lee issued a psychiatric
report dated January 17,2006 concluding and stating that Deoferios
psychotic symptoms are not curable within a period of six months and "will
negatively affect his work and social relation with his coworker[s]."8 Pursuant to these findings, Intel issued Deoferio a notice of
termination on March 10, 2006.9
Deoferio responded to his termination of employment by filing a complaint
for illegal dismissal with prayer for money claims against respondents Intel
and Mike Wentling (respondents). He denied that he ever had mental illness
and insisted that he satisfactorily performed his duties as a product engineer.
He argued that Intel violated his statutory right to procedural due process
when it summarily issued a notice of termination. He further claimed that he
was entitled to a salary differential equivalent to the pre-terminated period of
his assignment in the United States minus the base pay that he had already

received. Deoferio also prayed for backwages, separation pay, moral and
exemplary damages, as well as attorneys fees.10
In defense, the respondents argued that Deoferios dismissal was based on
Dr. Lees certification that: (1) his schizophrenia was not curable within a
period of six months even with proper medical treatment; and (2) his
continued employment would be prejudicial to his and to the other
employees health.11 The respondents also insisted that Deoferios presence
at Intels premises would pose an actual harm to his co-employees as shown
by his previous acts. On May 8, 2003, Deoferio emailed an Intel employee
with this message: "All souls day back to work Monday WW45.1." On
January 18, 2005, he cut the mouse cables, stepped on the keyboards, and
disarranged the desks of his co-employees.12 The respondents also
highlighted that Deoferio incurred numerous absences from work due to his
mental condition, specifically, from January 31, 2002 until February 28,
2002,13from August 2002 until September 2002,14 and from May 2003 until
July 2003.15 Deoferio also took an administrative leave with pay from
January 2005 until December 2005.16
The respondents further asserted that the twin-notice requirement in
dismissals does not apply to terminations under Article 284 of the Labor
Code.17 They emphasized that the Labor Codes implementing rules (IRR)
only requires a competent public health authoritys certification to
effectively terminate the services of an employee.18They insisted that
Deoferios separation and retirement payments for P247,517.35 were offset
by his company car loan which amounted to P448,132.43.19 He was likewise
not entitled to moral and exemplary damages, as well as attorneys fees,
because the respondents faithfully relied on Dr. Lees certification that he
was not fit to work as a product engineer.20
The Labor Arbitration Ruling
In a decision21 dated March 6, 2008,the Labor Arbiter (LA) ruled that
Deoferio had been validly dismissed. The LA gave weight to Dr. Lees
certification that Deoferio had been suffering from schizophrenia and was
not fit for employment. The evidence on record shows that Deoferios

continued employment at Intel would pose a threat to the health of his coemployees. The LA further held that the Labor Code and its IRR do not
require the employer to comply with the twin-notice requirement in
dismissals due to disease. The LA also found unmeritorious Deoferios
money claims against Intel.22
On appeal by Deoferio, the National Labor Relations Commission (NLRC)
wholly affirmed the LAs ruling.23 The NLRC also denied24 Deoferios
motion for reconsideration,25 prompting him to seek relief from the CA
through a petition for certiorari under Rule 65 of the Rules of Court.
The CAs Ruling
On February 24, 2012, the CA affirmed the NLRC decision. It agreed with
the lower tribunals findings that Deoferio was suffering from schizophrenia
and that his continued employment at Intel would be prejudicial to his health
and to those of his co-employees. It ruled that the only procedural
requirement under the IRR is the certification by a competent public health
authority on the non-curability of the disease within a period of six months
even with proper medical treatment. It also concurred with the lower
tribunals that Intel was justified in not paying Deoferio separation pay as
required by Article 284 of the Labor Code because this obligation had
already been offset by the matured car loan that Deoferio owed Intel.26
Deoferio filed the present petition after the CA denied his motion for
reconsideration.27
The Petition
In the present petition before the Court, Deoferio argues that the uniform
finding that he was suffering from schizophrenia is belied by his subsequent
employment at Maxim Philippines Operating Corp. and Philips
Semiconductors Corp., which both offered him higher compensations. He
also asserts that the Labor Code does not exempt the employer from
complying with the twin-notice requirement in terminations due to disease.28

The Respondents Position

In their Comment,29 the respondents posit that the petition raises purely
questions of fact which a petition for review on certiorari does not allow.
They submit that Deoferios arguments have been fully passed upon and
found unmeritorious by the lower tribunals and by the CA. They additionally
argue that Deoferios subsequent employment in other corporations is
irrelevant in determining the validity of his dismissal; the law merely
requires the non-curability of the disease within a period of six months even
with proper medical treatment.
The respondents also maintain that Deoferios claim for salary differential is
already barred by prescription under Article 291 of the Labor Code.30 Even
assuming that the claim for salary differential has been timely filed, the
respondents assert that the parties expressly agreed in the International
Assignment Relocation Agreement that "the assignment length is only an
estimate and not a guarantee of employment for any particular length of
time."31Moreover, his assignment in the United States was merely temporary
and did not change his salary base, an amount which he already received.
The Issues
This case presents to us the following issues:
(1) Whether Deoferio was suffering from schizophrenia and whether
his continued employment was prejudicial to his health, as well as to
the health of his co-employees;
(2) Whether the twin-notice requirement in dismissals applies to
terminations due to disease; and
As part of the second issue, the following issues are raised:
(a) Whether Deoferio is entitled to nominal damages for violation of
his right to statutory procedural due process; and

(b) Whether the respondents are solidarily liable to Deoferio for

nominal damages.
(3) Whether Deoferio is entitled to salary differential, backwages,
separation pay, moral and exemplary damages, as well as attorneys
fees.
The Courts Ruling
We find the petition partly meritorious.
Intel had an authorized cause to dismiss Deoferio from employment
Concomitant to the employers right to freely select and engage an employee
is the employers right to discharge the employee for just and/or authorized
causes. To validly effect terminations of employment, the discharge must be
for a valid cause in the manner required by law. The purpose of these twopronged qualifications is to protect the working class from the employers
arbitrary and unreasonable exercise of its right to dismiss. Thus, in
termination cases, the law places the burden of proof upon the employer to
show by substantial evidence that the termination was for a lawful cause and
in the manner required by law.
In concrete terms, these qualifications embody the due process requirement
in labor cases - substantive and procedural due process. Substantive due
process means that the termination must be based on just and/or authorized
causes of dismissal. On the other hand, procedural due process requires the
employer to effect the dismissal in a manner specified in the Labor Code and
its IRR.32
The present case involves termination due to disease an authorized cause
for dismissal under Article 284 of the Labor Code. As substantive
requirements, the Labor Code and its IRR33 require the presence of the
following elements:
(1) An employer has been found to be suffering from any disease.

(2) His continued employment is prohibited by law or prejudicial to

his health, as well as to the health of his co-employees.
(3) A competent public health authority certifies that the disease is of
such nature or at such a stage that it cannot be cured within a period of
six months even with proper medical treatment. With respect to the
first and second elements, the Court liberally construed the phrase
"prejudicial to his health as well as to the health of his co-employees"
to mean "prejudicial to his health or to the health of his coemployees." We did not limit the scope of this phrase to contagious
diseases for the reason that this phrase is preceded by the phrase "any
disease" under Article 284 of the Labor Code, to wit:
Art. 284. Disease as ground for termination. An employer may terminate
the services of an employee who has been found to be suffering from any
disease and whose continued employment is prohibited by law or is
prejudicial to his health as well as to the health of his co-employees:
Provided, That he is paid separation pay equivalent to at least one (1) month
salary or to one-half (1/2) month salary for every year of service, whichever
is greater, a fraction of at least six (6) months being considered as one (1)
whole year. [underscores, italics and emphases ours]
Consistent with this construction, we applied this provision in resolving
illegal dismissal cases due to non-contagious diseases such as stroke, heart
attack, osteoarthritis, and eye cataract, among others. In Baby Bus, Inc. v.
Minister of Labor,34 we upheld the labor arbitrations finding that Jacinto
Mangalinos continued employment after he suffered several strokes
would be prejudicial to his health. In Duterte v. Kingswood Trading Co.,
Inc.,35 we recognized the applicability of Article 284 of the Labor Code to
heart attacks. In that case, we held that the employer- companys failure to
present a certification from a public health authority rendered Roque
Dutertes termination due to a heart attack illegal. We also applied this
provision in Sy v. Court of Appeals36to determine whether Jaime Sahot was
illegally dismissed dueto various ailments such as presleyopia, hypertensive
retinopathy, osteoarthritis, and heart enlargement, among others. In Manly

Express, Inc. v. Payong, Jr.,37 we ruled that the employer-companys nonpresentment of a certification from a public health authority with respect to
Romualdo Payong Jr.s eye cataract was fatal to its defense.
The third element substantiates the contention that the employee has indeed
been suffering from a disease that: (1) is prejudicial to his health as well as
to the health of his co-employees; and (2) cannot be cured within a period of
six months even with proper medical treatment. Without the medical
certificate, there can be no authorized cause for the employees dismissal.
The absence of this element thus renders the dismissal void and illegal.
Simply stated, this requirement is not merely a procedural requirement, but a
substantive one.1wphi1 The certification from a competent public health
authority is precisely the substantial evidence required by law to prove the
existence of the disease itself, its non-curability within a period of six
months even with proper medical treatment, and the prejudice that it would
cause to the health of the sick employee and to those of his co-employees.
In the current case, we agree with the CA that Dr. Lees psychiatric report
substantially proves that Deoferio was suffering from schizophrenia, that his
disease was not curable within a period of six months even with proper
medical treatment, and that his continued employment would be prejudicial
to his mental health. This conclusion is further substantiated by the unusual
and bizarre acts that Deoferio committed while at Intels employ.
The twin-notice requirement applies
to terminations under Article 284 of
the Labor Code
The Labor Code and its IRR are silent on the procedural due process
required in terminations due to disease. Despite the seeming gap in the law,
Section 2, Rule 1, Book VI of the IRR expressly states that the employee
should be afforded procedural due process in all cases of dismissals.38
In Sy v. Court of Appeals39 and Manly Express, Inc. v. Payong,
Jr.,40 promulgated in 2003 and 2005, respectively, the Court finally

pronounced the rule that the employer must furnish the employee two
written notices in terminations due to disease, namely: (1) the notice to
apprise the employee of the ground for which his dismissal is sought; and
(2) the notice informing the employee of his dismissal, to be issued after the
employee has been given reasonable opportunity to answer and to be heard
on his defense. These rulings reinforce the State policy of protecting the
workers from being terminated without cause and without affording them
the opportunity to explain their side of the controversy.
From these perspectives, the CA erred in not finding that the NLRC gravely
abused its discretion when it ruled that the twin-notice requirement does not
apply to Article 284 of the Labor Code. This conclusion is totally devoid of
any legal basis; its ruling is wholly unsupported by law and jurisprudence. In
other words, the NLRCs unprecedented, whimsical and arbitrary ruling,
which the CA erroneously affirmed, amounted to a jurisdictional error.
Deoferio is entitled to nominal
damages for violation of his right to
statutory procedural due process
Intels violation of Deoferios right to statutory procedural due process
warrants the payment of indemnity in the form of nominal damages. In Jaka
Food Processing Corp. v. Pacot,41 we distinguished between terminations
based on Article 282 of the Labor Code42 and dismissals under Article 283 of
the Labor Code.43 We then pegged the nominal damages at P30,000.00 if the
dismissal is based on a just cause but the employer failed to comply with the
twin-notice requirement. On the other hand, we fixed the nominal damages
at P50,000.00 if the dismissal is due to an authorized cause under Article
283 of the Labor Code but the employer failed to comply with the notice
requirement. The reason is that dismissals for just cause imply that the
employee has committed a violation against the employer, while
terminations under Article 283 of the Labor Code are initiated by the
employer in the exercise of his management prerogative.
With respect to Article 284 of the Labor Code, terminations due to disease
do not entail any wrongdoing on the part of the employee. It also does not

purely involve the employers willful and voluntary exercise of management

prerogative a function associated with the employer's inherent right to
control and effectively manage its enterprise.44 Rather, terminations due to
disease are occasioned by matters generally beyond the worker and the
employer's control.
In fixing the amount of nominal damages whose determination is addressed
to our sound discretion, the Court should take into account several factors
surrounding the case, such as: (1) the employers financial, medical, and/or
moral assistance to the sick employee; (2) the flexibility and leeway that the
employer allowed the sick employee in performing his duties while
attending to his medical needs; (3) the employers grant of other termination
benefits in favor of the employee; and (4) whether there was a bona fide
attempt on the part of the employer to comply with the twin-notice
requirement as opposed to giving no notice at all.
We award Deoferio the sum of P30,000.00 as nominal damages for violation
of his statutory right to procedural due process. In so ruling, we take into
account Intels faithful compliance with Article 284 of the Labor Code and
Section 8, Rule 1, Book 6 of the IRR. We also note that Deoferios
separation pay equivalent to one-half month salary for every year of
service45 was validly offset by his matured car loan. Under Article 1278 of
the Civil Code, in relation to Article 1706 of the Civil Code46 and Article
113(c) of the Labor Code,47 compensation shall take place when two persons
are creditors and debtors of each other in their own right. We likewise
consider the fact that Intel exhibited real concern to Deoferio when it
financed his medical expenses for more than four years. Furthermore, prior
to his termination, Intel liberally allowed Deoferio to take lengthy leave of
absences to allow him to attend to his medical needs.
Wentling is not personally liable for
the satisfaction of nominal damages
in favor of Deoferio
Intel shall be solely liable to Deoferio for the satisfaction of nominal
damages. Wentling, as a corporate officer, cannot be held liable for acts done

in his official capacity because a corporation, by legal fiction, has a

personality separate and distinct from its officers, stockholders, and
members. There is also no ground for piercing the veil of corporate fiction
because Wentling acted in good faith and merely relied on Dr. Lees
psychiatric report in carrying out the dismissal.48
Deoferio is not entitled to salary
differential, backwages, separation
pay, moral and exemplary damages,
as well as attorney's fees
Deoferio's claim for salary differential is already barred by prescription.
Under Article 291 of the Labor Code, all money claims arising from
employer-employee relations shall be filed within three years from the time
the cause of action accrued. In the current case, more than four years have
elapsed from the pre-termination of his assignment to the United States until
the filing of his complaint against the respondents. We thus see no point in
further discussing this matter. His claim for backwages, separation pay,
moral and exemplary damages, as well as attorney's fees must also
necessarily fail as a consequence of our finding that his dismissal was for an
authorized cause and that the respondents acted in good faith when they
terminated his services.
WHEREFORE, premises considered, we partially grant the petition; the
assailed February 24, 2012 decision and the August 2, 2012 resolution of the
Court of Appeals stand but respondent Intel Technology Philippines, Inc. is
ordered to pay petitioner Marlo A. Deoferio nominal damages in the amount
of P30,000.00. We totally deny the petition with respect to respondent Mike
Wending.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION
G.R. No. 160325

October 4, 2007

ROQUE S. DUTERTE, petitioner,

vs.
KINGSWOOD TRADING CO., INC., FILEMON LIM and
NATIONAL LABOR RELATIONS COMMISSION,respondents.
DECISION
GARCIA, J.:
By this petition for review on certiorari, petitioner Roque S. Duterte seeks
the review and setting aside of the decision1 dated June 20, 2003 of the
Court of Appeals (CA) in CA-G.R. SP No. 71729, as reiterated in its
resolution2 of October 5, 2003, affirming an earlier resolution3 of the
National Labor Relations Commission (NLRC) which ruled that petitioner
was not illegally dismissed from employment due to disease under Article
284 of the Labor Code.
The facts:
In September 1993, petitioner was hired as truck/trailer driver by respondent
Kingswood Trading Company, Inc. (KTC) of which co-respondent Filemon
Lim is the President. Petitioner was on the 6:00 a.m. 6:00 p.m. shift. He
averaged 21 trips per month, getting P700 per trip. When not driving,
petitioner was assigned to clean and maintain respondent KTCs equipment
and vehicles for which he was paid P125 per day. Regularly, petitioner
would be seconded by respondent Filemon Lim to drive for one of KTCs
clients, the Philippine National Oil Corporation, but always subject to
respondents convenience.
On November 8, 1998, petitioner had his first heart attack and was confined
for two weeks at the Philippine Heart Center (PHC). This was confirmed by
respondent KTC which admitted that petitioner was declared on sick leave
with corresponding notification.

A month later, petitioner returned to work armed with a medical certificate

signed by his attending physician at the PHC, attesting to petitioners fitness
to work. However, said certificate was not honored by the respondents who
refused to allow petitioner to work.
In February 1999, petitioner suffered a second heart attack and was again
confined at the PHC. Upon release, he stayed home and spent time to
recuperate.
In June 1999, petitioner attempted to report back to work but was told to
look for another job because he was unfit. Respondents refused to declare
petitioner fit to work unless physically examined by the company physician.
Respondents promise to pay petitioner his separation pay turned out to be
an empty one. Instead, petitioner was presented, for his signature, a
document as proof of his receipt of the amount of P14,375.00 as first
installment of his Social Security System (SSS) benefits. Having received no
such amount, petitioner refused to affix his signature thereon and instead
requested for the necessary documents from respondents to enable him to
claim his SSS benefits, but the latter did not heed his request.
On November 11, 1999, petitioner filed against his employer a complaint for
illegal dismissal and damages.
In a decision4 dated September 26, 2000, the labor arbiter found for the
petitioner. However, while categorically declaring that petitioners dismissal
was illegal, the labor arbiter, instead of applying Article 2795 of the Labor
Code on illegal dismissals, applied Article 284 on Disease as ground for
termination on the rationale that since the respondents admitted that
petitioner could not be allowed back to work because of the latters disease,
the case fell within the ambit of Article 284. We quote the fallo of the labor
arbiters decision:
WHEREFORE, in the light of the foregoing, judgment is hereby
rendered declaring complainant to have been terminated from
employment on the ground that he has been suffering from a disease.

Respondents are hereby directed to pay complainant as follows:

1. Separation pay equivalent to one-half (1/2) month salary for
every year of service computed at six (6) years of service in the
amount of Forty-Two Thousand (P42,000.00) Pesos.
2. Holiday pay for three (3) years in the amount of Twenty-One
Thousand (P21,000.00) Pesos; and
3. Service Incentive Leave pay for three (3) years in the amount
of Ten Thousand (P10,000.00) Pesos.
All other claims herein sought are hereby denied for lack of merit and
factual basis.
SO ORDERED.
On respondents appeal, the NLRC, in its Resolution6 of April 24, 2002, set
aside the labor arbiters decision, ruling that Article 284 of the Labor Code
has no application to this case, there being "no illegal dismissal to speak of."
The NLRC accordingly dismissed petitioners complaint for illegal
dismissal, thus:
WHEREFORE, the decision appealed from is VACATED and SET
ASIDE.7 A new one is hereby entered DISMISSING the instant case
for lack of merit.
Therefrom, petitioner went on certiorari to the CA in CA-G.R. SP No. 71729.
In the herein assailed decision dated June 20, 2003, the CA upheld the
NLRC Resolution, saying that the Commission committed no grave abuse of
discretion in holding that petitioner was not illegally dismissed and could
not be granted any relief. With his motion for a reconsideration having been
denied by the CA in its resolution of October 5, 2003, petitioner is now with
this Court via the present recourse.
We REVERSE.

At bottom, this case involves the simple issue of the legality of ones
termination from employment made complicated, however, by over analysis.
Simply put, the question at hand pivots on who has the onus of presenting
the necessary medical certificate to justify what would otherwise be
classified as legal or illegal, as the case may be, dismissal from the service.
The following may be another formulation of the issue: For purposes of
Article 284 of the Labor Code, would the dismissal of an employee on the
ground of disease under the said Article 284 still require the employer to
present a certification from a competent public health authority that the
disease is of such a nature that it could not be cured within a period of six
months even with proper medical treatment? To both the NLRC and the CA,
a dismissal on the ground of disease under Article 284 of the Code is illegal
only if the employee himself presents the required certification from the
proper health authority. Since, as in this case, petitioner failed to produce
such certification, his dismissal could not be illegal.
In the precise words of the NLRC which the CA effectively affirmed:
Neither can it be gainsaid that Article 284 of the Labor Code applies
in the instant case since the complainant [petitioner] failed to
establish that he is suffering from a disease and his continued
employment is prohibited by law or prejudicial to his health or to
the health of his co-employees nor was he able to prove that his illness
is of such nature or at such stage that it cannot be cured within a
period of six months even with proper treatment.8
In order for the complainant to be covered by Article 284 of the
Labor Code, he must first present a certification by a competent
public health authority that his continued employment will result
in the aforesaid consequences, but unfortunately for the
complainant, we find none in the instant case. For the respondents
to require the complainant to submit a medical certificate showing that
he is already physically fit as a condition of his continued
employment under the prevailing circumstance cannot be considered
as neither harsh nor oppressive. xxx

Prescinding from the above, there is no illegal dismissal to speak of.

This finding is further strengthened by the fact that no termination
letter or formal notice of dismissal was adduced to prove that
complainants services have been terminated. Considering that no
illegal dismissal took place, the complainants claim that his right to
due process of law had been violated finds no application to the case
at bar. (Emphasis added).
The Court disagrees with the NLRC and CA.
Article 284 of the Labor Code explicitly provides:
Art. 284. DISEASE AS GROUND FOR TERMINATION. -- An
employer may terminate the services of an employee who has been
found to be suffering from any disease and whose continued
employment is prohibited by law or is prejudicial to his health as well
as to the health of his co-employees: Provided, That he is paid
separation pay equivalent to at least one (1) month salary or to onehalf (1/2) month salary for every year of service, whichever is greater,
a fraction of at least six (6) months being considered as one (1) whole
year.
Corollarily, in order to validly terminate employment on the basis of disease,
Book VI, Rule I, Section 8 of the Omnibus Implementing Rules of the Labor
Code requires:
Disease as a ground for dismissal. -- Where the employee suffers from
a disease and his continued employment is prohibited by law or
prejudicial to his health or to the health of his co-employees, the
employer shall not terminate his employment unless there is a
certification by a competent public health authority that the
disease is of such nature or at such a stage that it cannot be cured
within a period of six (6) months even with proper medical
treatment. If the disease or ailment can be cured within the period,
the employer shall not terminate the employee but shall ask the
employee to take a leave. The employer shall reinstate such employee

to his former position immediately upon the restoration of his normal

health. (Book VI, Rule 1, Sec. 8 of the Implementing Rules)
In a very real sense, both the NLRC and the appellate court placed on the
petitioner the burden of establishing, by a certification of a competent public
authority, that his ailment is such that it cannot be cured within a period of
six months even with proper medical treatment. And pursuing their logic,
petitioner could not claim having been illegally dismissed due to disease,
failing, as he did, to present such certification.
To be sure, the NLRCs above posture is, to say the least, without basis in
law and jurisprudence. And when the CA affirmed the NLRC, the appellate
court in effect placed on the petitioner the onus of proving his entitlement to
separation pay and thereby validated herein respondents act of dismissing
him from employment even without proof of existence of a legal ground for
dismissal.
The law is unequivocal: the employer, before it can legally dismiss its
employee on the ground of disease, must adduce a certification from a
competent public authority that the disease of which its employee is
suffering is of such nature or at such a stage that it cannot be cured within a
period of six months even with proper treatment.
Here, the record does not contain the required certification. And when the
respondents asked the petitioner to look for another job because he was unfit
to work, such unilateral declaration, even if backed up by the findings of its
company doctors, did not meet the quantum requirement mandated by the
law, i.e., there must be a certification by a competent public authority.9
For sure, the posture taken by both the NLRC and the CA is inconsistent
with this Courts pronouncement in Tan v. National Labor Relations
Commission,10 thus:
Consistent with the Labor Code state policy of affording protection to
labor and of liberal construction of labor laws in favor of the working
class, Sec. 8, Rule 1, Book VI, of the Omnibus Rules Implementing

the Labor Code provides Where the employee suffers from a disease
and his continued employment is prohibited by law or prejudicial to
his health or to the health of his co-employees, the employer shall not
terminate his employment, unless there is a certification by a
competent public authority that the disease is of such nature or at such
a stage, that it cannot be cured within a period of six (6) months even
with proper medical treatment.. There is absolutely nothing on
record to show that such a certification was ever obtained by [the
employer] much less that one was issued by a competent public
authority [o]n the contrary, what appears on record is a Medical
Certificate dated May 5, 1999 issued by Dr. Lenita C. de Castro
certifying to the contrary, i.e., that [the employee] was in fact already
fit to return to work. However, [the employer] did not accept the
certificate and insisted that [the employee] present one issued by a
government physician. For his failure to present such a certificate, [the
employee] was penalized with dismissal. Obviously, the condition
imposed by [the employer] finds no basis under the law. To
reiterate, contrary to [the employers] insistence that [the
employee] first obtain a medical certificate attesting that he was
already cured of pulmonary tuberculosis, the abovequoted Sec. 9,
Rule 1, Book VI, of the Omnibus Rules is clear that the burden is
upon [the employer] not [the employee] to justify the dismissal
with a certificate public authority that [the employees] disease is
at such stage or of such nature that it cannot be cured within six
(6) months even with proper medical treatment. For [the
employers] blatant failure to present one, we can only rule that
[the employees] dismissal, like that of Garrido, is illegal, invalid
and unjustified. (Emphasis and words in brackets supplied.)
In Triple Eight Integrated Services, Inc. v. NLRC,11 the Court explains why
the submission of the requisite medical certificate is for the employers
compliance, thus:
The requirement for a medical certificate under Article 284 of the
Labor Code cannot be dispensed with; otherwise, it would sanction

the unilateral and arbitrary determination by the employer of the

gravity or extent of the employees illness and thus defeat the public
policy on the protection of labor.
In thus ruling out an illegal dismissal situation in the instant case, the CA
effectively agreed with the NLRCs view that the fact of dismissal must be
evidenced by positive and overt acts, citing Veterans Phil. Scout Security
Agency v. NLRC.12 Said case, however, is not on all fours with the present
one. In Veterans, the employer offered the complainant-employee a monthly
cash allowance and other benefit pending a new assignment. Therein, the
employee was not forthrightly nor constructively dismissed. In fact, the
employee in Veterans was found to be in bad faith as he filed his complaint
for illegal dismissal the day immediately after he accepted the companys
offer of employment benefits. Hence, the Courts ruling in Veterans that the
fact of dismissal must be evidenced by positive and overt acts indicating the
intention to dismiss. These considerations do not obtain here. Petitioner was
not allowed back to work. Neither did he receive any monetary assistance
from his employer, and, worse, respondents refused to give him the
necessary documents to enable him to claim his SSS benefits.
Much was made by the NLRC and the CA about petitioners refusal to
comply with respondents order to submit a medical certificate irresistibly
implying that such refusal is what constrained them to refuse to take
petitioner back in.
We are not persuaded.
Even assuming, in gratia argumenti, that petitioner committed what may be
considered an act of insubordination for refusing to present a medical
certificate, such offense, without more, certainly did not warrant the latters
placement in a floating status, a veritable dismissal, and deprived of his only
source of livelihood.
We are not unmindful of the connection between the nature of petitioners
disease and his job as a truck/trailer driver. We are also fully aware that
petitioners job places at stake the safety of the public. However, we do not

agree with the NLRC that petitioner was validly dismissed because his
continued employment was prohibited by the basic legal mandate that
reasonable diligence must be exercised to prevent prejudice to the public,
which justified respondents in refusing work to petitioner. Petitioner could
have been admitted back to work performing other tasks, such as cleaning
and maintaining respondent companys machine and transportation assets.
As a final consideration, the Court notes that the NLRC, as sustained by the
CA, considered the petitioner as a field worker and, on that basis, denied his
claim for benefits under Articles 9413 to 9514 of the Labor Code, such as
holiday pay and service incentive leave pay. Article 82 of the Code lists
personnel who are not entitled to the benefits aforementioned.15 Among the
excluded group are "field personnel," referring to non-agricultural
employees who regularly perform their duties away from the principal place
of business or branch office of the employer and whose actual hours of work
in the field cannot be determined with reasonable certainty. As a general
proposition, field personnel are those whose job/service are not or cannot be
effectively monitored by the employer or his representative, their workplace
being away from the principal office and whose hours and days of work
cannot be determined with reasonable certainty. Field personnel are paid
specific amount for rendering specific service or performing specific work.
If required to be at specific places at specific times, employees, including
drivers, cannot be said to be field personnel despite the fact that they are
performing work away from the principal office of the employer. Thus, to
determine whether an employee is a field employee, it is also necessary to
ascertain if actual hours of work in the field can be determined with
reasonable certainty by the employer. In so doing, an inquiry must be made
as to whether or not the employees time and performance are constantly
supervised by the employer.16
Guided by the foregoing norms, petitioner was definitely a regular employee
of respondent company and not its field personnel, as the term is used in the
Labor Code. As it were, he was based at the principal office of the
respondent company. His actual work hours, i.e., from 6:00 a.m. to 6:00

p.m., were ascertainable with reasonable certainty. He averaged 21 trips per

month. And if not driving for the company, he was paid P125.00 per day for
cleaning and maintaining KTCs equipment. Not falling under the category
of field personnel, petitioner is consequently entitled to both holiday pay and
service incentive leave pay, as mandated by Articles 94 and 95 of the Labor
Code.
All told, we rule and so hold that petitioners dismissal did not comply with
both the substantive and procedural aspects of due process. Clearly, his
dismissal is tainted with invalidity.17
WHEREFORE, the assailed decision of the CA in CA-G.R. SP No.
71729 is REVERSED and SET ASIDE.Respondents are declared guilty of
illegal dismissal and are ordered to pay petitioner separation pay equivalent
to one (1) month pay for every year of service, in lieu of his reinstatement,
plus his full backwages from the time his employment was terminated up to
the time this Decision becomes final. For this purpose, let this case
beREMANDED to the labor arbiter for the computation of petitioners
separation pay, backwages and other monetary awards due him.
Costs against respondents.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 177845

August 20, 2014

GRACE CHRISTIAN HIGH SCHOOL, represented by its Principal,

DR. JAMES TAN, Petitioner,
vs.
FILIPINAS A. LAVANDERA, Respondent.
DECISION

PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 is the Decision2 dated April
30, 2007 of the Court of Appeals (CA) in CA-G.R. SP. No. 75958 which
affirmed with modification the Decision3 dated August 30, 2002 of the
National Labor Relations Commission (NLRC) in NLRC CA No. 03173902, applying the 22.5-day multiplier in computing respondent Filipinas A.
Lavandera' s (Filipinas) retirement benefits differential, with legal interest
reckoned from the filing date of the latter's illegal dismissal complaint.
The Facts
Filipinas was employed by petitioner Grace Christian High School (GCHS)
as high school teacher since June1977, with a monthly salary of 18,662.00
as of May 31, 2001.4
On August 30, 2001,5 Filipinas filed a complaint for illegal (constructive)
dismissal, non-payment of service incentive leave (SIL) pay, separation pay,
service allowance, damages, and attorneys fees against GCHS6 and/or its
principal,7 Dr. James Tan. She alleged that on May 11, 2001, she was
informed that her serviceswere to be terminated effective May 31, 2001,
pursuant to GCHS retirement plan which gives the school the option to
retire a teacher who has rendered at least 20 years of service, regardless of
age, with a retirement pay of one-half () month for every year of service.
At that time, Filipinas was only 58 years old and still physically fit to work.
She pleaded with GCHS toallow her to continue teaching but her services
were terminated,8 contrary to the provisions of Republic Act No. (RA)
7641,9 otherwise known as the "Retirement Pay Law."
For their part, GCHS denied that they illegally dismissed Filipinas. They
asserted that the latter was considered retired on May 31, 1997 after having
rendered 20 years of service pursuant to GCHS retirement plan and that she
was duly advised that her retirement benefits in the amount of 136,210.00
based on her salary atthe time of retirement, i.e., 13,621.00, had been
deposited to the trustee-bank in her name. Nonetheless, her services were
retained on a yearly basis until May 11, 2001 when she was informed that
her year-to-year contract would no longer be renewed.10
The LA Ruling

In a Decision11 dated March 26, 2002, the Labor Arbiter (LA) dismissed the
illegal dismissal complaint for lack of merit.
The LA found that GCHS has a retirement plan for its faculty and nonfaculty members which pertinently provides:
ARTICLE X
RETIREMENT DATES12
Section 1. Normal Retirement Date For qualified members of the Plans, the
normal retirement date shall be the last day of the month during which he
attains age sixty (60) regardless of length of service or upon completion of
20 years of service unless extended at the option of the School. Such
extension is subject tothe approval of the School on a case to case and year
to year basis. The School reserves the right to require an employee before it
approveshis application for an extension of service beyond the normal
retirement date, to have a licensed physician appointed by the School, certify
that the employee concerned has no physical and/or mental impediments
which will prevent the employee from performing the duties in the
School.13 (Emphasis supplied)
Consequently, the LA ruled that Filipinas was not terminated from
employment but was considered retired14 as of May 31, 1997 after rendering
20 years of service15 and was only allowed by GCHS to continue teaching on
a year-to-year basis (until May 31, 2001)in the exercise of its option to do so
under the aforementioned retirement plan until she was informed that her
contract would not be renewed.16
Nonetheless, the LA found the retirement benefits payable under GCHS
retirement plan to be deficient vis--vis those provided under RA
7641,17 and, accordingly, awarded Filipinas retirement pay differentials
based on her latest salaryas follows:
P18,662.00/30 =

P622.06/day

P622.06 x 22.5 =

P13,996.35 x 20 =

P279,927.00
- P136,210.00
P143,717.00

18

The LA, however, denied Filipinasclaims for service allowance, salary

increase, and damages for lack of sufficient bases, but awarded her
attorneys fees equivalent to five percent (5%) of the total award, or the
amount ofP7,185.85.19
Dissatisfied, GCHS filed an appeal before the NLRC.
The NLRC Ruling
In a Decision20 dated August 30, 2002 (August 30, 2002 Decision), the
NLRC set aside the LAs award, and ruled that Filipinas retirement pay
should be computed based on her monthly salary at the time of her
retirementon May 31, 1997, i.e., 13,621.00. Moreover, it held that under
Article 287 of the Labor Code, as amended by RA 7641, the retirement
package consists of 15 days salary, plus 13th month pay and SIL pay prorated to their one-twelfth (1/12) equivalent.21
In view of the foregoing, the NLRC awarded Filipinas retirement pay
differentials in the amount of 27,057.20consisting of one-twelfth (1/12) of
the 13th month pay and SIL pay based on her salary at the time of her
retirement on May 31, 1997, or 13,621.00 multiplied by 20 years. It,
however, deleted the award of attorneys fees for failure of Filipinas to show
that GCHS had unreasonably and in bad faith refused to pay her retirement
benefits.22
Aggrieved, Filipinas filed a petition for certioraribefore the CA.
The CA Ruling
In a Decision23 dated April 30, 2007, the CA affirmed with modification the
NLRCs Decision. It held that the Court, in the case of Capitol Wireless,
Inc.v. Sec. Confesor,24 has simplified the computation of "one-half month
salary" by equating it to"22.5 days" which is "arrived at after adding 15 days
plus 2.5 days representing one-twelfth of the 13th month pay, plus 5 days of
[SIL]."25 Accordingly, it computed Filipinas retirement benefits differential
as follows:
1wphi1
Monthly salary
30 days

P13,624.00
30 days

26

Daily rate

P454.13

x 22.5 days

x 22.5 days

1/2 month salary28

P10,218.00

x 20 years

27

x 20 years

Total amount of retirement benefits

P204,360.00

- Amount deposited in trust

P136,210.00

Retirement benefits differential

P68,150.00

29

The CA further imposed legal interestat the rate of six percent (6%) per
annum on the award reckoned from the date of the filing of the illegal
dismissal complaint until actual payment30 pursuant to the Courts Decision
in Manuel L. Quezon University v. NLRC(MLQU v. NLRC).31 Unperturbed,
GCHS filed the instant petition.
The Issue before the Court
The essential issue in this case is whether or not the CA committed
reversible error in using the multiplier "22.5 days" in computing the
retirement pay differentials of Filipinas.
The Courts Ruling
The petition is bereft of merit.
RA 7641, which was enacted on December 9, 1992, amended Article 287 of
the Labor Code, providing for the rules on retirement pay to qualified private
sector employees in the absence of any retirement plan in the establishment.
The said law32 states that "an employees retirement benefits under any
collective bargaining [agreement (CBA)] and other agreements shall not be
less than those provided" under the same that is, at least onehalf (1/2)
month salary for every year of service, a fraction of at least six (6) months
being considered as one whole year and that "[u]nless the parties provide
for broader inclusions, the term one-half (1/2) month salary shall mean

fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash
equivalent of not more than five (5) days of service incentive leaves."
The foregoing provision is applicable where (a) there is no CBA or other
applicable agreement providing for retirement benefits to employees, or (b)
there is a CBA or other applicableagreement providing for retirement
benefits but it is below the requirement set by law.33 Verily, the determining
factor in choosing which retirement scheme to apply is still superiority in
terms of benefits provided.34
In the present case, GCHS has a retirement plan for its faculty and nonfaculty members, which gives it the option to retire a teacher who has
rendered at least 20 years of service, regardless of age, with a retirement pay
of one-half (1/2) month for every year ofservice. Considering, however, that
GCHS computed Filipinas retirement pay without including one-twelfth
(1/12) of her 13th month pay and the cash equivalent of her five (5) days
SIL, both the NLRC and the CA correctly ruled that Filipinas retirement
benefits should be computed in accordance withArticle 287 of the Labor
Code, as amended by RA 7641, being the more beneficent retirement
scheme. They differ, however, in the resulting benefit differentials due to
divergent interpretations of the term "one-half (1/2) month salary" as used
under the law.
The Court, in the case of Elegir v. Philippine Airlines,Inc.,35 has recently
affirmed that "one-half (1/2) month salary means 22.5 days: 15 days plus 2.5
days representingone-twelfth (1/12) of the 13th month pay and the
remaining 5 days for [SIL]."36 The Court sees no reason to depart from this
interpretation. GCHS argument37 therefore that the 5 days SIL should be
likewise pro-rated to their 1/12 equivalent must fail.1wphi1
Section 5.2, Rule II38 of the Implementing Rules of Book VI of the Labor
Code, as amended, promulgated to implement RA 7641, further clarifies
what comprises the " month salary" due a retiring employee, to wit:
RULE II
Retirement Benefits
xxxx
SEC. 5. Retirement Benefits.

xxxx
5.2 Components of One-half (1/2) Month Salary. For the purpose of
determining the minimum retirement pay due an employee under this Rule,
the term "one-half month salary" shall include all the following:
(a) Fifteen (15) days salary of the employee based on his latest salary
rate. As used herein, the term "salary" includes all remunerations paid
by an employer to his employees for services rendered during normal
working days and hours, whether such payments are fixed or
ascertained on a time, task, piece or commission basis, or other
method of calculating the same, and includes the fair and reasonable
value, as determined by the Secretary of Labor and Employment, of
food, lodging or other facilities customarily furnished by the employer
to his employees. The term does not include cost of living
allowance,profit-sharing payments and other monetary benefits which
are not considered as part of or integrated into the regular salary of the
employees.
(b) The cash equivalent of not more than five (5) days of service
incentive leave;
(c) One-twelfth of the 13th month paydue the employee.
(d) All other benefits that the employer and employee may agree upon
that should be included in the computation of the employees
retirement pay.
x x x x (Emphases supplied)
The foregoing rules are, thus, clear that the whole 5 days of SIL are included
in the computation of a retiring employees pay,39 as correctly ruled by the
CA.1wphi1
Nonetheless, the Court finds that the award of legal interest at the rate of 6%
per annum on the amount ofP68,150.00 representing the retirement pay
differentials due Filipinas should be reckoned from the rendition of the LA's
Decision on March 26, 2002 and not from the filing of the illegal dismissal
complaint as ordered by the CA,40 in accordance with the ruling in Eastern
Shipping Lines, Inc. v. CA41 (Eastern Shipping). Unlike in MLQU v. NLRC,
where the retired teachers sued for the payment of the deficiency in their

retirement benefits, Filipinas' complaint was for illegal (constructive)

dismissal, and the obligation to provide retirement pay was only determined
upon the rendition of the LA's Decision, which also found the same to be
deficient vis-a-vis those provided under RA 7641. As such, it is only from
the date of the LA's Decision that GCHS' obligation to pay Filipinas her
retirement pay differentials may be deemed to have been reasonably
ascertained and its payment legally adjudged to be due, although the actual
base for the computation of legal interest shall be on the amount finally
adjudged. As held in the Eastern Shipping case:42
When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed at
the discretion of the court at the rate of 6% per annum. No interest, however,
shall be adjudged on unliquidated claims or damages except when or until
the demand can be established with reasonable certainty. Accordingly, where
the demand is established with reasonable certainty, the interest shall begin
to run from the time the claim is made judicially or extrajudicially (Art.
1169, Civil Code) but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to run
only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in
any case, be on the amount finally adjudged. (Emphases supplied)
WHEREFORE, the petition is DENIED. The Decision dated April 30, 2007
of the Court of Appeals in CA-G.R. SP. No. 75958 is hereby AFFIRMED
with MODIFICATION that the legal interest at the rate of six percent (6%)
per annum on the amount of P68,150.00 representing the retirement pay
differentials payable by petitioner Grace Christian High School to
respondent Filipinas A. Lavandera shall be reckoned from the promulgation
of the Labor Arbiter's Decision on March 26, 2002 until full payment.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 155146

January 24, 2006

DR. PERLA A. POSTIGO, FRANCISCO F. ALMACEN, NARCISO M.

ALMENDRAL, NENA E. BASTO, JUANITO M. BERNARDINO,
ADELFA B. CRESCINI, MARCIAL R. DE JESUS, DR. PEDRO
LOPEZ DE LEON, PREMIA M. DUMLAO, DAVID F. ESTACIO,
LINA G. ESTRELLA, GENOVEVA V. HERNANDEZ, PEDRO A.
PARIL, PEDRO H. SINGSON, ALBERTO A. TUDIO, MARIETTA B.
ULIT, LOURDES C. LEGASPI, PEDRO PEROCHO, LANI CORTEZ,
GUADALUPE B. MACATANGAY, DOLORES C. FERNANDEZ,
LUMINOSA G. REYNO, ESTRELLA P. SURATOS, LYDIA E. DE
BOSCH, ZENAIDA C. CARRIEDO, DR. FINAFLOR C.
TAN, Petitioners,
vs.
PHILIPPINE TUBERCULOSIS SOCIETY, INC., Respondent.
DECISION
QUISUMBING, J.:
This petition assails the Decision1 dated June 13, 2002 of the Court of
Appeals in CA-G.R. SP No. 59597, which set aside the Resolution2 dated
January 31, 2000 of the National Labor Relations Commission (NLRC) in
NLRC NCR CN 00-02-02148-99. The NLRC had dismissed the
respondents appeal from the Decision of the Labor Arbiter, who ordered the
payment of retirement benefits under Republic Act No. 7641 to petitioners.
This petition likewise assails the Resolution3 dated September 3, 2002 of the
Court of Appeals denying petitioners motion for reconsideration.
The antecedent facts, as summarized by the Court of Appeals and borne by
the records, are as follows:
Petitioners Dr. Perla A. Postigo, et al., were regular employees of the
respondent Philippine Tuberculosis Society, Inc. (PTSI). They retired on
various dates from 1996 to 1998. Upon retirement from service, some of the

petitioners who were compulsory members of the Government Service

Insurance System (GSIS) obtained retirement benefits from the GSIS.
At the time the petitioners retired, Article 287 of the Labor Code had been
amended by Republic Act No. 7641.4Rep. Act No. 7641 granted retirement
pay to qualified employees in the private sector, in the absence of any
retirement plan or agreement with the company. As the respondent did not
have a retirement plan for its employees, aside from its contribution to the
GSIS, petitioners claimed from the respondent their retirement benefits
under Rep. Act No. 7641. The respondent denied their claims on the ground
that the accommodation extended by the GSIS to the petitioners removed
them from the coverage of the law.
The petitioners then sought the opinion of the Bureau of Working Conditions
(BWC) of the Department of Labor and Employment regarding their
entitlement to the retirement benefits provided in Rep. Act No. 7641.5 The
BWC confirmed their entitlement.6 The same opinion was rendered and
submitted by the respondents legal counsel, Atty. Rene V. Sarmiento, to its
Board of Directors.7 Despite this, respondent PTSI refused to pay the
petitioners their retirement benefits.
The petitioners then filed a complaint before the Labor Arbiter.
In a Decision8 dated June 30, 1999, the Labor Arbiter declared petitioners
entitled to retirement benefits under Rep. Act No. 7641. However, one
petitioner, Dr. Finaflor C. Tan who was awarded her terminal leave pay, was
not included in the award of retirement benefits.
Aggrieved, respondent PTSI appealed to the NLRC. Instead of posting the
required cash or surety bond equivalent to the amount of the award, the
respondent filed a Motion to Reduce Bond on the ground that the amount
awarded by the Labor Arbiter was erroneous. On January 31, 2000, the
NLRC dismissed the appeal for failure to post the required cash or surety
bond.

Undaunted, the respondent elevated the matter to the Court of Appeals. On

June 13, 2002, the CA reversed the NLRCs decision in this wise:
Indeed, in several occasions, the Supreme Court has cautioned the NLRC to
give Article 223 of the Labor Code, as amended, particularly the provisions
on requiring a bond on appeals involving monetary awards, a liberal
interpretation in line with the desired objective of resolving controversies on
the merits.
Hence, considering the timeliness of the filing of the motion to reduce the
appeal bond and the meritorious ground upon which it relies, We believe and
so hold that the legal requirement of posting an appeal bond has been
substantially satisfied. Public respondent acted with grave abuse of
discretion in dismissing the appeal without passing upon the motion to
reduce the appeal bond.
WHEREFORE, the petition is hereby GRANTED. Resolutions dated 31
January 2000 and 24 May 2000 in NLRC-NCR CN 00-02-02148-99 of
public respondent National Labor Relations Commission are hereby SET
ASIDE. The NLRC is directed to act on the Motion to Reduce Bond and to
give due course to the Appeal.
SO ORDERED.9
The petitioners now submit the following issues for our consideration:
I. Whether or not the remand of the case to the NLRC would only
further delay the resolution of this case.
II. Whether or not the Honorable Court of Appeals decided the instant
case in accordance with law and applicable jurisprudence and based
on the evidence on record for having failed to apply the
jurisprudential precepts that:
a. errors in the computation of the monetary award are properly
a subject of appeal and should be ventilated at the appropriate
time, not in a mere motion to reduce bond; and

b. the posting of a bond is an indispensable requirement to

perfect an employers appeal.
III. Whether or not Petitioners are entitled to the benefits of the
Retirement Pay Law.
IV. Whether or not Petitioners are entitled to interest on their
retirement benefits for the unjustified withholding thereof.
V. Whether or not Petitioner Dr. Tan should be made similarly entitled
to her retirement pay, which was inadvertently excluded by the Labor
Arbiter, pursuant to the timely motion to render judgment nunc pro
tuncshe filed before the Labor Arbiter and which was consistently
raised all the way up to this Honorable Court, in order to effect a
complete disposition of the instant case.10
In short, petitioners raise for our resolution these issues: (1) Did the Court of
Appeals err in granting the petition and directing the NLRC to act on the
Motion to Reduce Bond and to give due course to the appeal? and (2) Are
the petitioners entitled to benefits under Rep. Act No. 7641?
On the first issue, petitioners contend that (1) errors in the computation of
the monetary award are properly a subject of appeal and should be ventilated
at the appropriate time, not in a mere motion to reduce bond; and (2) the
posting of a bond is an indispensable requirement to perfect an employers
appeal.
Respondent counters that in case the monetary award is being disputed, an
appeal may still be filed without the appeal bond, provided that a motion to
reduce bond is filed within the reglementary period.
We think that the Court of Appeals did not err in granting the petition and
holding that there was substantial compliance in the posting of a cash or
surety bond. We likewise find Nationwide Security and Allied Services, Inc.
v. NLRC11 and Rosewood Processing, Inc. v. NLRC12 inapplicable to this
case.

In Nationwide Security, the petitioners therein filed a motion to reduce bond

instead of an appeal or surety bond. The NLRC denied the motion on the
grounds that petitioners alleged inability to post the bond was without basis,
and to grant the motion on the grounds stated therein would be tantamount
to ruling on the merits. In affirming the decision of the NLRC, the Court
noted that petitioners had funds from its other businesses to post the required
bond. Further, the errors raised in the motion dealt with matters that would
go into the merits of the case and were thus more appropriate in an appeal.
In this case, respondent deferred the posting of the surety bond in view of
the alleged erroneous computation by the Labor Arbiter of the monetary
award. While the Labor Arbiter awarded P5,480,484.2513 as retirement
benefits, only P5,072,277.73,14 according to the respondents computation
was due and owing to the petitioners. Since the motion raised a pure
mathematical error, the same may be resolved without going into the merits
of the case.
In Rosewood, the petitioner therein filed a motion to reduce the bond with
the appeal bond, albeit not in the amount equivalent to the monetary award
in the judgment appealed from. The Court held that the NLRC gravely
abused its discretion in dismissing the appeal since a consideration of the
merits appearing in the appeal as well as the filing of the appeal bond show
that there was substantial compliance with the rules governing appeal.
Here, aside from the fact that the filing of the motion was justified, the
respondent immediately submitted asupersedeas bond15 with its motion for
reconsideration of the NLRC resolution dismissing its appeal. In Ong v.
Court of Appeals,16 we ruled that the aggrieved party may file the appeal
bond within the ten-day reglementary period following the receipt of the
resolution of the NLRC to forestall the finality of such resolution.17 Hence,
while the appeal of a decision involving a monetary award in labor cases
may be perfected only upon the posting of a cash or surety bond and the
posting of the bond is an indispensable requirement to perfect such an
appeal, a relaxation of the appeal bond requirement could be justified by
substantial compliance with the rule.

Article 223 of the Labor Code provides that an appeal from a decision of the
Labor Arbiter must be made within ten calendar days from receipt of a copy
of the decision by the aggrieved party; and if the decision involves a
monetary award, an appeal by the aggrieved party may be perfected only
upon the posting of a cash or surety bond issued by a reputable bonding
company duly accredited by the NLRC in the amount equivalent to the
monetary award. In addition, Section 6, Rule VI of the New Rules of
Procedure of the NLRC provides that the Commission may, in justifiable
cases and upon motion of the aggrieved party, reduce the amount of the
bond. Further, the filing of the motion to reduce bond does not stop the
running of the period to perfect appeal.
Time and again, this Court has ruled that while the above-mentioned rule
treats the filing of a cash or surety bond in the amount equivalent to the
monetary award in the judgment appealed from, as a jurisdictional
requirement to perfect an appeal, the bond requirement on appeals involving
awards is sometimes given a liberal interpretation in line with the desired
objective of resolving controversies on the merits.18
The special circumstances in this case, upon which the motion to reduce the
bond was predicated, justify the relaxation of the appeal bond requirement.
However, considering that the claim for retirement benefits was made
sometime in 1999 to support the petitioners during the twilight years of their
lives, there is no doubt that a remand of the case to the NLRC will only
unduly delay the determination of their entitlement to such benefits.
Moreover, since the case calls for the resolution of a question of law, we
consider it more appropriate to resolve the appeal at this juncture, rather than
remand the case to the NLRC.
We come now to the second issue. The petitioners contend that despite their
compulsory membership in the GSIS, they are still covered by Rep. Act No.
7641 for the following reasons: (1) the respondent is registered with the
Securities and Exchange Commission as a non-stock and non-profit
corporation; hence, it is a private entity and its employees are employees in

the private sector; and (2) the petitioners are not included in the exemptions
from coverage of Rep. Act No. 7641.
Respondent PTSI counters that as an employer in the public sector, it is not
covered by Rep. Act No. 7641 which applies only to employees in the
private sector. It relies on Section 3, Rule I of the Amended Rules
Implementing Title II, Book IV of the Labor Code, to wit:
SEC. 3. Employer(a) The term shall mean any person natural or juridical,
domestic or foreign, who carries on in the Philippines any trade, business,
industry, undertaking or activity of any kind and uses the services of another
person who is under his orders as regards the employment.
(b) An employer shall belong to either:
(1) The public sector covered by the GSIS, comprising the National
Government, including government-owned or controlled corporations,
the Philippine Tuberculosis Society, the Philippine National Red
Cross, and the Philippine Veterans Bank; or
(2) The private sector covered by the SSS, comprising all employers
other than those defined in the immediately preceding paragraph.
Respondents reliance on the afore-quoted rules is unfounded. The definition
of a public sector employer as quoted above is relevant only for purposes of
coverage under the Employees Compensation and State Insurance Fund.
Instead, it is the implementing rules of Title II, Book VI of the Labor Code,
which provides for the coverage and exemptions of retirement benefits.
Thus:
SECTION 1. General Statement on Coverage. This Rule shall apply to all
employees in the private sector, regardless of their position, designation or
status and irrespective of the method by which their wages are paid, except
to those specifically exempted under Section 2 hereof. As used herein, the
term "Act" shall refer to Republic Act No. 7641 which took effect on
January 7, 1993.

SEC. 2. Exemption. This Rule shall not apply to the following employees:
2.1 Employees of the National Government and its political subdivisions,
including Government-owned and/or controlled corporations, if they are
covered by the Civil Service Law and its regulations.
...
Having determined the applicable implementing rules, we now proceed to
resolve whether the respondent is a private corporation or a public
corporation; and consequently, whether the petitioners are employees in the
private sector or in the public sector.
On this score, the case of Feliciano v. Commission on Audit,19 finds strong
relevance. Although with different factual circumstances, the Court
discussed therein the two classes of corporations recognized by the 1987
Constitution. The first refers to private corporations created under a general
law; the second refers to government-owned or controlled corporations
created by special charters. We also reiterated that under Section 14 of the
Corporation Code, "[a]ll corporations organized under this Code shall file
with the Securities and Exchange Commission articles of incorporation "
The respondent was incorporated on March 11, 1960 as a non-profit,
benevolent and non-stock corporation under the Corporation Code.20 Having
been created under the general corporation law instead of a special charter,
we hold that the respondent is a private and not a governmental corporation.
More so, Section 2(1), Article IX(B) of the 1987 Constitution provides:
SECTION 2. (1) The civil service embraces all branches, subdivisions,
instrumentalities, and agencies of the Government, including governmentowned or controlled corporations with original charters.
Extant on the records is the respondents admission that although its
employees are compulsory members of the GSIS, said employees are not
governed by the Civil Service Law. If the respondent is truly a governmentowned or controlled corporation, and petitioners are employees in the public

sector, then, they should have been covered by said law. The truth, however,
is that, the respondent is a non-profit but private corporation organized under
the Corporation Code, and the petitioners are covered by the Labor Code and
not by the Civil Service Law.
From the foregoing, it is clear to us that the petitioners are employees in the
private sector, hence entitled to the benefits of Rep. Act No. 7641.
Even assuming that by virtue of their compulsory inclusion in the GSIS, the
petitioners became employees in the public sector, they are still entitled to
the benefits of Rep. Act No. 7641 since they are not covered by the Civil
Service Law and its regulations. This much is certain upon reading the
implementing rules of Title II, Book VI of the Labor Code as afore-cited as
well as the Labor Advisory on Retirement Pay Law.21 Under the said
advisory, the coverage of, as well as the exclusion from, Rep. Act No. 7641
has been delineated as follows:
RA 7641 or the Retirement Pay Law shall apply to all employees in the
private sector, regardless of their position, designation or status and
irrespective of the method by which their wages are paid. They shall include
part-time employees, employees of service and other job contractors and
domestic helpers or persons in the personal service of another.
The law does not cover employees of retail, service and agricultural
establishments or operations employing not more than (10) employees or
workers and employees of the National Government and its political
subdivisions, including Government-owned and/or controlled corporations,
if they are covered by the Civil Service Law and its regulations.
(Underscoring ours.)
Neither do we find merit in the respondents argument that the rationale
behind the enactment of Rep. Act No. 7641 justifies the exclusion of
employees in the public sector, who are already enjoying retirement benefits
under the GSIS law, from the New Retirement Law.

We direct the respondents attention to Section 2 of Rep. Act No. 7641, to

wit:
SEC. 2. Nothing in this Act shall deprive any employee of benefits to which
he may be entitled under existing laws or company policies or practices.
In addition, Rule II of the Rules Implementing Book VI of the Labor Code
provides as follows:
SEC. 8. Relation to agreements and regulations. Nothing in this Rule
shall justify an employer from withdrawing or reducing any benefits,
supplements or payments as provided in existing laws, individual or
collective agreements or employment practices or policies.
...
In Juco v. NLRC,22 we clarified that employees of government-owned and
controlled corporations with special charters are covered under the Civil
Service. On the other hand, employees of government-owned and controlled
corporations under the Corporation Code are governed by the provisions of
the Labor Code.
The Philippine Tuberculosis Society, Inc. (PTSI) belongs to the latter
category and, therefore, covered by Rep. Act No. 7641 which is an
amendment to the Labor Code. The accommodation under Rep. Act No.
1820 extending GSIS coverage to PTSI employees did not take away from
petitioners the beneficial coverage afforded by Rep. Act No. 7641. Hence,
the retirement pay payable under Article 287 of the Labor Code as amended
by Rep. Act No. 7641 should be considered apart from the retirement benefit
claimable by the petitioners under the social security law or, as in this case,
the GSIS law.
As to the alleged prolonged refusal by the respondent to pay the petitioners
their retirement benefits, we do not think that the respondents stance was
entirely in bad faith. The respondent harbored the honest belief that their
compulsory coverage in the GSIS converted it into a public corporation

excluded from the coverage of Rep. Act No. 7641. As noted by this Court,
the respondent even filed a supersedeas bond, albeit belatedly, with its
motion for reconsideration of the NLRC resolution dismissing its appeal.
Such act only demonstrates that the respondent filed the appeal in good
faith. We could not speculate and say that respondent did not intend to pay
the petitioners their retirement benefits in case the appeal is dismissed.
On the matter of petitioner Dr. Finaflor C. Tan, records show she has two
causes of action: (1) non-payment of terminal leave pay; and (2) nonpayment of retirement benefits.23 While the Labor Arbiter ruled that she is
entitled to the commutation into cash of her unused leave credits which is
the equivalent of her terminal leave pay, the former did not include her in the
award of retirement benefits. This was properly raised in the Motion to
Render Judgment Nunc Pro Tunc24 filed by the petitioners on October 29,
1999 before the NLRC. We see no cogent reason why she should be
excluded from the over-all award of retirement benefits considering that she
has participated in the proceedings before the Labor Arbiter.
WHEREFORE, this petition is PARTIALLY GRANTED. The Decision
dated June 13, 2002 of the Court of Appeals in CA-G.R. SP No. 59597,
directing the NLRC to act on the Motion to Reduce Bond and to give due
course to the Appeal, as well as its Resolution denying the petitioners
motion for reconsideration, are MODIFIED.
Consequently, it is DECLARED that the petitioners are entitled to
retirement benefits under Rep. Act No. 7641. In addition to retirement
benefits, petitioner Dr. Finaflor C. Tan is entitled to the commutation into
cash of her unused leave credits which is the equivalent of her terminal leave
pay. Likewise, the petitioners are entitled to attorneys fees, equivalent to
10% of the total monetary award.
Let this case be remanded to the Labor Arbiter for the computation of the
retirement benefits and terminal leave pay above-mentioned. No
pronouncement as to costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 156934

March 16, 2007

ALPHA C. JACULBE, Petitioner,

vs.
SILLIMAN UNIVERSITY,Respondent.
DECISION
CORONA, J.:
Petitioner comes to us via this petition for review on certiorari1 to challenge
a decision2 of the Court of Appeals (CA) and the resolution3 affirming it.
Sometime in 1958, petitioner began working for respondents university
medical center as a nurse.4
In a letter dated December 3, 1992,5 respondent, through its Human
Resources Development Office, informed petitioner that she was
approaching her 35th year of service with the university and was due for
automatic retirement on November 18, 1993, at which time she would be 57
years old. This was pursuant to respondents retirement plan for its
employees which provided that its members could be automatically retired
"upon reaching the age of 65 or after 35 years of uninterrupted service to the
university."6 Respondent required certain documents in connection with
petitioners impending retirement.
A brief exchange of letters7 between petitioner and respondent followed.
Petitioner emphatically insisted that the compulsory retirement under the
plan was tantamount to a dismissal and pleaded with respondent to be
allowed to work until the age of 60 because this was the minimum age at

which she could qualify for SSS8 pension. But respondent stood pat on its
decision to retire her, citing "company policy."
On November 15, 1993, petitioner filed a complaint in the National Labor
Relations Commission (NLRC) for "termination of service with preliminary
injunction and/or restraining order."9 On November 18, 1993, respondent
compulsorily retired petitioner.
After the parties submitted their position papers, the labor arbiter rendered a
decision finding respondent guilty of illegal dismissal and ordered that
petitioner be reinstated and paid full backwages.10 On appeal, however, the
NLRC reversed the labor arbiters decision and dismissed the complaint for
lack of merit.11 The NLRC likewise denied petitioners motion for
reconsideration.12 In the assailed decision and resolution, the CA affirmed
the NLRC.
Hence, this petition.
The issues for our consideration are:
1) did respondents retirement plan imposing automatic retirement
after 35 years of service contravene the security of tenure clause in the
1987 Constitution and the Labor Code?
2) did respondent commit illegal dismissal by retiring petitioner solely
by reason of such provision in its retirement plan?
Retirement plans allowing employers to retire employees who are less than
the compulsory retirement age of 65 are not per se repugnant to the
constitutional guaranty of security of tenure. Article 287 of the Labor Code
provides:
ART. 287. Retirement - Any employee may be retired upon reaching the
retirement age established in the collective bargaining agreement or other
applicable employment contract. xxx

By its express language, the Labor Code permits employers and employees
to fix the applicable retirement age at below 60 years.13
However, after reviewing the assailed decision together with the rules and
regulations of respondents retirement plan, we find that the plan runs afoul
of the constitutional guaranty of security of tenure contained in Article XIII,
also known as the provision on Social Justice and Human Rights.
The CA, in ruling against petitioner, premised its decision to uphold the
retirement plan on her voluntary participation therein:
The petitioner in this case may, however, argue that the Pantranco case is not
applicable in the case at bar as the controversy in the said case involves a
compulsory retirement on the basis of the length of service rendered by the
employee as agreed in an existing CBA, whereas in the present case, the
private respondent compulsorily retired the petitioner not based on a CBA
but on the retirement scheme provided for in the private respondents
retirement plan. Nonetheless, this argument must fail. The contract fixing for
retirement age as allowed under Article 287 of the Labor Code does not
exclusively refer to CBA which provides for an agreed retirement age. The
said provision explicitly allows, as well, other applicable employment
contract to fix retirement age.
The records disclose that the private respondents Retirement Plan has been
in effect for more than 30 years. The said plan is deemed integrated into the
employment contract between private respondent and its employeesas
evidenced by the latters voluntary contribution through monthly salary
deductions. Previous retirees have already enjoyed the benefits of the
retirement plan, and ever since the said plan was effected, no questions or
disagreement have been raised, until the same was made to apply to the
petitioner. xxx14 (emphasis ours)
The problem with this line of reasoning is that a perusal of the rules and
regulations of the plan shows that participation therein was not voluntary at
all.

Rule III of the plan, on membership, stated:

SECTION 1 MEMBERSHIP
All full-time Filipino employees of the University will automatically
become members of the Plan, provided, however, that those who have
retired from the University, even if rehired, are no longer eligible for
membership in the Plan. A member who continues to serve the University
cannot withdraw from the Plan.
xxx xxx xxx
SECTION 2 EFFECTIVITY OF MEMBERSHIP
Membership in the Plan starts on the day a person is hired on a full-time
basis by the University.
SECTION 3 TERMINATION OF MEMBERSHIP
Termination of membership in the Plan shall be upon the death of the
member, resignation or termination of employees contract by the
University, or retirement from the University.15 (emphasis ours).
Rule IV, on contributions, stated:
The Plan is contributory. The University shall set aside an amount equivalent
to 3% of the basic salaries of the faculty and staff. To this shall be added a
5% deduction from the basic salaries of the faculty and staff.
A member on leave with the University approval shall continue paying,
based on his pay while on leave, his leave without pay should pay his
contributions to the Plan. However, a member, who has been on leave
without pay should pay his contributions based on his salary plus the
Universitys contributions while on leave or the full amount within one
month immediately after the date of his reinstatement. Provided[,] further
that if a member has no sufficient source of income while on leave may pay
within six months after his reinstatement.16

From the language of the foregoing retirement plan rules, the compulsory
nature of both membership in and contribution to the plan debunked the
CAs theory that petitioners "voluntary contributions" were evidence of her
willing participation therein. It was through no voluntary act of her own that
petitioner became a member of the plan. In fact, the only way she could have
ceased to be a member thereof was if she stopped working for respondent
altogether. Furthermore, in the rule on contributions, the repeated use of the
word "shall" ineluctably pointed to the conclusion that employees had no
choice but to contribute to the plan (even when they were on leave).
According to the assailed decision, respondents retirement plan "ha(d) been
in effect for more than 30 years."17What was not pointed out, however, was
that the retirement plan came into being in 197018 or 12 years after petitioner
started working for respondent. In short, it was not part of the terms of
employment to which petitioner agreed when she started working for
respondent. Neither did it become part of those terms shortly thereafter, as
the CA would have us believe.
Retirement is the result of a bilateral act of the parties, a voluntary
agreement between the employer and the employee whereby the latter, after
reaching a certain age agrees to sever his or her employment with the
former.19 In Pantranco North Express, Inc. v. NLRC,20 to which both the CA
and respondent refer, the imposition of a retirement age below the
compulsory age of 65 was deemed acceptable because this was part of the
CBA between the employer and the employees. The consent of the
employees, as represented by their bargaining unit, to be retired even before
the statutory retirement age of 65 was laid out clearly in black and white and
was therefore in accord with Article 287.
In this case, neither the CA nor the respondent cited any agreement,
collective or otherwise, to justify the latters imposition of the early
retirement age in its retirement plan, opting instead to harp on petitioners
alleged "voluntary" contributions to the plan, which was simply untrue. The
truth was that petitioner had no choice but to participate in the plan, given
that the only way she could refrain from doing so was to resign or lose her

job. It is axiomatic that employer and employee do not stand on equal

footing,21 a situation which often causes an employee to act out of need
instead of any genuine acquiescence to the employer. This was clearly just
such an instance.
Not only was petitioner still a good eight years away from the compulsory
retirement age but she was also still fully capable of discharging her duties
as shown by the fact that respondents board of trustees seriously considered
rehiring her after the effectivity of her "compulsory retirement."22
As already stated, an employer is free to impose a retirement age less than
65 for as long as it has the employees consent. Stated conversely,
employees are free to accept the employers offer to lower the retirement age
if they feel they can get a better deal with the retirement plan presented by
the employer. Thus, having terminated petitioner solely on the basis of a
provision of a retirement plan which was not freely assented to by her,
respondent was guilty of illegal dismissal.
At this point, reinstatement is out of the question.1awphi1.nt Petitioner is
now 71 years old and therefore well over the statutory compulsory
retirement age. For this reason, we grant her separation pay in lieu of
reinstatement. It is also for this reason that we modify the award of
backwages in her favor, to be computed from the time of her illegal
dismissal on November 18, 1993 up to her compulsory retirement age.
WHEREFORE, the petition is hereby GRANTED. The decision of the
Court of Appeals in CA-G.R. SP No. 50445 isREVERSED and SET
ASIDE. The October 25, 1994 decision of the labor arbiter finding
respondent guilty of illegal dismissal is REINSTATED, with
the MODIFICATION that, in lieu of reinstatement, petitioner is awarded
separation pay, the award of backwages to be computed from the time of her
illegal dismissal up to her compulsory retirement age.
SO ORDERED.
THIRD DIVISION

G.R. No. 201483, August 04, 2014

CONRADO A. LIM, Petitioner, v. HMR PHILIPPINES, INC., TERESA
SANTOS-CASTRO, HENRY BUNAG AND NELSON
CAMILLER, Respondents.
DECISION
MENDOZA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the
Rules of Court assailing the March 30, 20121 Decision of the Court of
Appeals (CA), in CA G.R. SP No. 112708, a case involving the computation
of the backwages of an illegally dismissed employee.
The Facts
On February 8, 2001, petitioner Conrado A. Lim (Lim) filed a case for illegal
dismissal and money claims against respondents, HMR Philippines,
Inc. (HMR) and its officers, Teresa G. Santos-Castro, Henry G. Bunag and
Nelson S. Camiller. The Labor Arbiter (LA) dismissed the complaint for lack
of merit. On April 11, 2003, the National Labor Relations
Commission (NLRC) in NLRC NCR No. 02-00926-01, reversed the LA and
declared Lim to have been illegally dismissed. The dispositive portion of the
NLRC decision reads:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, judgment is hereby rendered declaring
the appealed Decision REVERSED and SET ASIDE; that the dismissal of
herein complainant-appellant was illegal and the respondent-appellee
Company is hereby ordered to reinstate immediately the said employee to
his former position without loss of seniority rights and other privileges.
Furthermore, the respondent-appellee Company is hereby ordered to pay the
complainant-appellant his full backwages, reckoned from his dismissal
on February 3, 2001 up to the promulgation of this Decision.
All other claims are hereby DISMISSED for lack of merit.
The Computation and Research Unit (CRU) of this Commission is hereby
directed tocompute the backwages and the 10% annual increase from
1998 to 2000.

SO ORDERED.2]
[Emphases supplied]
Both Lim and HMR filed their respective petitions for certiorari before the
CA, docketed as CA-G.R. SP No. 80379 and CA-G.R. SP No. 80630,
respectively, which were consolidated. Pending resolution of the petitions,
the CA issued the Temporary Restraining Order (TRO) enjoining the
execution of the NLRC decision.
On November 15, 2005, the CA affirmed the NLRC decision with
modification as follows:chanRoblesvirtualLawlibrary
WHEREFORE, the Decision of the National Labor Relations Commission is
AFFIRMED, with MODIFICATION by awarding moral damages and
exemplary damages to Conrado A. Lim in the amount of P50,000.00 and
P20,000.00, respectively, as well as attorneys fees equivalent to 10% of the
total amount due him.
SO ORDERED.3chanrobleslaw
On February 7, 2007, this Court, in G.R. No. 175950-51, dismissed the
petition for certiorari4 filed by HMR assailing the November 15, 2005 CA
decision. Entry of judgment was ordered on July 27, 2007.5cralawred
On September 24, 2007, Lim moved for execution.6 On November 28, 2007,
the Computation and Research Unit (CRU) of the NLRC computed the total
award to amount to P2,020,053.46,7 which computed the backwages from
February 3, 2001, the date of the illegal dismissal, up to October 31, 2007,
the date of actual reinstatement.
HMR opposed the computation arguing that the backwages should be
computed until April 11, 2003 only, the date of promulgation of the NLRC
decision, as stated in the dispositive portion of the NLRC decision, which
provided that backwages shall be reckoned from his dismissal on February
3, 2001up to the promulgation of this Decision. It also noted that the 10%
annual increase was computed from 1998 to 2007, instead of only from 1998
to 2000 as decreed.8cralawred

In his Comment, Lim argued that the body of the NLRC decision explictly
stated that he was entitled to full backwages from the time he was illegally
dismissed until his actual reinstatement, which was also in accord with
Article 279 of the Labor Code and all prevailing jurisprudence.9cralawred
Ruling of the LA
On April 21, 2009, the LA issued the order10 granting the motion for
execution filed by Lim. Holding that the backwages should be reckoned
until April 11, 2003 only in accordance with the NLRC decision, the LA
disposed:chanRoblesvirtualLawlibrary
Accordingly, in computing complainants backwages, the following
conditions must apply: 1) that the backwages cover the period February 3,
2001 up to April 11, 2003; 2) that the base rate applicable is his salary as of
February 3, 2001 inclusive of the ten percent adjustment due at the time, or
P12,500.00 plus ten percent (10%) or P13,750.00; 3) that the computation
should include his 13th month pay; and 4) 15 days vacation pay in
accordance with the personnel policy handbook, in lieu of 5 days service
incentive leave pay.
While complainant claims that he is entitled to 15 days sick leave pay, a
perusal of the personnel policy handbook on the grant of said benefit shows
that sick leave pay is availed of only upon notification of illness and
conversion thereof to cash is subject to the discretion of management.
Accordingly, complainants monetary award, which is the proper subject of
enforcement through a writ of execution, in accordance with the Decision of
the Commission as modified by the Court of Appeals, is computed as
follows:cralawlawlibrary
A.

Backwages:
2/3/01 to 4/11/03 =
26.26
P13,750.00 x 26.26
13th month pay
(P366,575.00/12)
Vacation Leave
(P687.50 x 15 x
26.26/12)

=
=

P361,075.00
30,089.58

22,859.37

P414,023.95

B.
C.

Moral Damages
Exemplary Damages

=
=

50,000.00
20,000.00
P484,023.95

D.

Attorneys Fees

=
48,402.39
P532,426.34

WHEREFORE, complainants Motion for Issuance of Writ of Execution is

GRANTED. A Writ of Execution is hereby issued for the satisfaction of the
judgment award rendered in this case.
SO ORDERED.11
Ruling of the NLRC
Lim filed his Motion Ad Cautelam for Reconsideration or Recomputation
and Partial Execution of Monetary Award, insisting that his backwages
should be computed up to his actual reinstatement.12On August 28, 2009, the
NLRC treated the motion as an appeal and sustained the computation of the
LA, explaining that the dispositive portion was clear, and that it could not
alter or amend the amount based on the final decision of the NLRC which
was affirmed by both the CA and this Court.13Aggrieved, petitioner filed a
petition for certiorari before the CA.
Ruling of the CA
In its assailed March 30, 2012 Decision,14 the CA dismissed the petition. It
emphasized that the April 11, 2003 NLRC decision had long become final
and executory after it was affirmed by the Court and, as such, it may no
longer be amended or corrected. While noting that the body of the NLRC
decision stated that petitioner was entitled to backwages until his actual
reinstatement, the CA ruled that when there was a conflict between the
dispositive portion and the body of the decision, the former must prevail as
the dispositive portion was the final order, and that it was the dispositive
portion which was the subject of execution. It wrote that the fallo was clear
and unequivocal and could, therefore, be given effect without going to the
body of the decision or further interpretation or construction.
The CA found that although the NLRC had recognized that petitioner was

entitled to backwages until actual reinstatement, nonetheless, it expressly

limited the computation of backwages to the promulgation date of its
decision. It wrote that the issue of whether such limitation was lawful or
improper could no longer be ventilated due to the finality of the judgment.
Hence, the present petition.
ISSUES AND ARGUMENTS
I
Whether or not the Court of Appeals erred in peremptorily applying the
doctrine laid down in PH Credit Corporation v. Court of Appeals and
contrary to law as well as the established jurisprudence mandating the
payment of backwages until the illegally dismissed employee is actually
reinstated.
II
Whether or not the Court of Appeals erred in not affirming the
applicability ofEastern Shipping Lines v. Court of Appeals in the
computation of interest since the Decision on the illegal termination case
had become final and executory on June 6, 2007 inconsistent with
existing jurisprudence by its failure to include interest payments.15
Petitioner Lim argues that Article 279 of the Labor Code and the prevailing
jurisprudence provide that illegally dismissed workers are entitled to an
award of backwages from the time of the illegal dismissal until they are
actually reinstated. He states that the body of the NLRC decision was
explicit in its intent to award backwages until actual reinstatement,
especially when read with its fallo, which ordered his immediate
reinstatement. He further avers that it has been held that the dispositive part
of a decision must find support from the decisions ratio decidendi, because,
while the opinion of the court is not part of the judgment, it may, in case of
uncertainty or ambiguity, be referred to for the purpose of construing the
judgment, where the court may clarify by amendment even after judgment
has become final.
Lim also points out that the LA completely failed to include in the
computation the unpaid 10% annual increase in his salary from 1998 to

2000, as awarded in the fallo of the NLRC decision. He posits that the LA
also failed to include the payment of other benefits, such as a 10% increase
in salary per annum, 15 days vacation leave and 15 days sick leave per
annum, all as part of employee benefits found in HMRs Personnel Policy.
Petitioner Lim also argues that in accordance with the rules laid down
in Eastern Shipping Lines v. Court of Appeals,16 the monetary awards should
be subject to interest. He prays that the respondents be made to pay, jointly
and severally, additional moral and exemplary damages on account of their
bad faith in delaying the payment and reinstatement of the petitioner, which
prompted him to file the present petition.
Respondents Comment
In their Comment,17 the respondents argue that the August 28, 2009 NLRC
Resolution had already become final and executory and could no longer be
modified as the petitioner belatedly filed his motion for reconsideration. In
the same vein, they argue that the April 21, 2009 LA Order had also become
final and executory considering that the petitioners motion ad
cautelam/appeal was not seasonably filed.
The respondents insist that the decretal portion of the NLRC decision,
dated April 11, 2003 limited the amount of petitioners backwages from
February 3, 2001 and up to promulgation of such Decision on April 11, 2003
only.18 Granting that the body of such decision controls, they aver that the
recoverable backwages cannot go beyond December 26, 2007, the date
HMR offered to reinstate Lim, who refused to be reinstated and abandoned
his job. They add that it was also clear from the dispositive portion that the
10% annual salary increase awarded was only for the years 1998 to 2000.
They also point out that the P12,500.00 base pay of Lim was already
inclusive of holiday pay, and that the conversion of sick leave to cash was
subject to management discretion in accordance with company policy.
They further argue that the claims for legal interest and additional moral and
exemplary damages are without merit because these were not awarded in the
decision and they simply acted in good faith in pursuing the legal remedies
available to them.
Petitioners Reply

In his Reply,19 Lim counters that his pleadings before the NLRC and the LA
were timely filed as the notices of their respective orders had not been
received by an authorized representative. As to HMRs offer of
reinstatement, the petitioner explains that the respondent company never
responded to his reply-letter asking for a meeting to discuss the matter of his
compensation upon reinstatement. Lim also argued that holiday pay was not
shown by HMR to be included in his salary, and that it is unjust to leave the
sick leave conversion to management discretion.
Specifically, the Court has to address the following
ISSUES:
Whether the petitioners motion for reconsideration and motion ad
cautelam/appeal were belatedly filed?
Whether the computation of backwages should be reckoned until the
promulgation of the NLRC Decision on April 11, 2003 or until actual
reinstatement?
Whether the petitioner is entitled to the unpaid 10% annual salary
increase from 1998-2000?
Whether the petitioner is entitled to the 10% annual salary increase
after the year 2000?
Whether the petitioner is entitled to holiday pay?
Whether the petitioner is entitled to sick leave pay?
Whether the respondents should be held jointly and severally liable for
additional moral and exemplary damages?
Whether the interest in accordance with Eastern Shipping should be
awarded?
Ruling of The Court
The petition is partly meritorious.

Preliminarily, the Court shall first dispose of the lone procedural issue. The
respondents argue that the August 28, 2009 NLRC Resolution was already
final and executory and could no longer be modified as the petitioner
belatedly filed his motion for reconsideration thereto. In the same vein, they
aver that the April 21, 2009 LA Order was also final and executory
considering that petitioners motion ad cautelam/appeal was not seasonably
filed. The petitioner counters that his pleadings were timely filed because the
aforementioned NLRC Resolution and LA Order were not duly received by
an authorized representative.
It appears that the respondents raised this issue before the NLRC and the
CA. The lower courts, nonetheless, ruled on the merits of the assailed
pleadings of the petitioner. The lower courts, thus, gave credence to the
petitioners argument that the notices were not received by an authorized
representative. The Court sees no reason to deviate from their findings. In
any case, this issue is a question of fact which is beyond the Courts ambit of
review under Rule 45 of the Rules of Court, considering that a resolution of
the issue would require a review of the evidence presented in connection
therewith.
The Court now moves on to the substantive issues.
Backwages
It is beyond question that Lim was illegally dismissed by HMR. All that
remains to be settled is the exact amount owing to petitioner as an illegally
dismissed employee.
Article 279 of the Labor Code is clear in providing that an illegally
dismissed employee is entitled to his full backwages computed from the
time his compensation was withheld up to the time of his actual
reinstatement, to wit:chanRoblesvirtualLawlibrary
Art. 279. Security of tenure. In cases of regular employment, the employer
shall not terminate the services of an employee except for a just cause or
when authorized by this Title. An employee who is unjustly dismissed
from work shall be entitled to reinstatement without loss of seniority
rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary

equivalent computed from the time his compensation was withheld from
him up to the time of his actual reinstatement.
[Emphases and underscoring supplied]
In accordance with this provision, the body of the April 11, 2003 NLRC
decision expressly recognizes that Lim is entitled to his full backwages until
his actual reinstatement, as follows:chanRoblesvirtualLawlibrary
In fine, the act of complainant-appellant herein, do not constitute a serious
misconduct as to justify his dismissal. As such, he is, thus, entitled to
reinstatement to his former position as Assistant Technical Manager, unless
such position no longer exists, in which case, he shall be given a
substantially equivalent position without loss of seniority rights. He is,
likewise, entitled to his full backwages from the time he was illegally
dismissed until his actual reinstatement.20cralawred
[Emphasis and underscoring supplied]
Nowhere in the body of the NLRC decision was there a discussion
restricting the award of backwages. Nonetheless, the fallo of the said
decision limited the computation of the backwages up to its promulgation on
April 11, 2003, in this wise:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, judgment is hereby rendered declaring
the appealed Decision REVERSED and SET ASIDE; that the dismissal of
herein complainant-appellant was illegal and the respondent-appellee
Company is hereby ordered to reinstate immediately the said employee to
his former position without loss of seniority rights and other
privileges. Furthermore, the respondent-appellee Company is hereby
ordered to pay the complainant-appellant his full backwages, reckoned
from his dismissal on February 3, 2001 up to the promulgation of this
Decision.
All other claims are hereby DISMISSED for lack of merit.
The Computation and Research Unit (CRU) of this Commission is hereby
directed to compute the backwages and the 10% annual increase from 1998
to 2000.
SO ORDERED.21cralawred

[Emphasis and underscoring supplied]

Considering that the judgment decreeing the computation of backwages up
to the promulgation of the NLRC decision has long become final and
executory, the key question is whether a recomputation of backwages up to
the date of the actual reinstatement of Lim would violate the principle of
immutability of judgments.
The rule is that it is the dispositive portion that categorically states the rights
and obligations of the parties to the dispute as against each other. Thus, it is
the dispositive portion that must be enforced to ensure the validity of the
execution. That a judgment should be implemented according to the terms of
its dispositive portion is a long and well-established rule. A companion to
this rule is the principle of immutability of final judgments. Save for
recognized exceptions, a final judgment may no longer be altered, amended
or modified, even if the alteration, amendment or modification is meant to
correct what is perceived to be an erroneous conclusion of fact or law and
regardless of what court renders it. Any attempt to insert, change or add
matters not clearly contemplated in the dispositive portion violates the rule
on immutability of judgments.22cralawred
The cases of Session Delights Ice Cream and Fast Foods v. Court of Appeals
(Session Delights)23 andNacar v. Gallery Frames (Nacar)24 shed much light
on the apparent discrepancy in the case at hand. As in the present case, both
involve labor cases finding that the employees therein were illegally
dismissed. At the LA level, in awarding backwages, a precise computation
was provided from the time of illegal dismissal up to the promulgation of the
LA decision.25 Additionally, the dispositive portion of the LA decision
in Nacar also made a declaration that separation pay in lieu of reinstatement
be computed only up to promulgation of this decision.26 The LA decisions
in these cases were affirmed by the NLRC and the CA and subsequently
became final and executory. At the execution stage, the computation of
backwages came into issue.
Session Delights made clear that a case for illegal dismissal is one that
relates to status, where the decision or ruling is essentially declaratory of the
status and of the rights, obligations and monetary consequences that flow
from the declared status, such as, the payment of separation pay and
backwages. In execution, what is primarily implemented is the declaratory
finding on the status and the rights and obligations of the parties therein; the

arising monetary consequences from the declaration only follow as

component of the parties rights and obligations.27 The precise amount of
backwages should ideally be stated in the final decision; otherwise, the
matter is for handling and computation by the LA of origin as the labor
official charged with the implementation of decisions before the
NLRC.28cralawred
The Courts disquisition in Session Delights, also referenced with approval
in Nacar, is enlightening:chanRoblesvirtualLawlibrary
A source of misunderstanding in implementing the final decision in this case
proceeds from the way the original labor arbiter framed his decision. The
decision consists essentially of two parts.
The first is that part of the decision that cannot now be disputed because it
has been confirmed with finality. This is the finding of the illegality of the
dismissal and the awards of separation pay in lieu of reinstatement,
backwages, attorneys fees, and legal interests.
The second part is the computation of the awards made. On its face, the
computation the labor arbiter made shows that it was time-bound as can be
seen from the figures used in the computation. This part, being merely a
computation of what the first part of the decision established and declared,
can, by its nature, be re-computed. This is the part, too, that the petitioner
now posits should no longer be re-computed because the computation is
already in the labor arbiters decision that the CA had affirmed. The public
and private respondents, on the other hand, posit that a re-computation is
necessary because the relief in an illegal dismissal decision goes all the way
up to reinstatement if reinstatement is to be made, or up to the finality of the
decision, if separation pay is to be given in lieu of reinstatement.
xxx
Clearly implied from this original computation is its currency up to the
finality of the labor arbiters decision. As we noted above, this implication is
apparent from the terms of the computation itself, and no question would
have arisen had the parties terminated the case and implemented the decision
at that point.
However, the petitioner disagreed with the labor arbiters findings on all

counts i.e., on the finding of illegality as well as on all the consequent

awards made. Hence, the petitioner appealed the case to the NLRC which, in
turn, affirmed the labor arbiters decision. By law, the NLRC decision is
final, reviewable only by the CA on jurisdictional grounds.
The petitioner appropriately sought to nullify the NLRC decision on
jurisdictional grounds through a timely filed Rule 65 petition for certiorari.
The CA decision, finding that NLRC exceeded its authority in affirming the
payment of 13th month pay and indemnity, lapsed to finality and was
subsequently returned to the labor arbiter of origin for execution.
It was at this point that the present case arose. Focusing on the core illegal
dismissal portion of the original labor arbiters decision, the implementing
labor arbiter ordered the award re-computed; he apparently read the figures
originally ordered to be paid to be the computation due had the case been
terminated and implemented at the labor arbiters level. Thus, the labor
arbiter re-computed the award to include the separation pay and the
backwages due up to the finality of the CA decision that fully terminated the
case on the merits. Unfortunately, the labor arbiters approved computation
went beyond the finality of the CA decision (July 29, 2003) and included as
well the payment for awards the final CA decision had deleted specifically,
the proportionate 13th month pay and the indemnity awards. Hence, the CA
issued the decision now questioned in the present petition.
We see no error in the CA decision confirming that a re-computation is
necessary as it essentially considered the labor arbiters original decision in
accordance with its basic component parts as we discussed above. To
reiterate, the first part contains the finding of illegality and its monetary
consequences; the second part is the computation of the awards or monetary
consequences of the illegal dismissal, computed as of the time of the labor
arbiters original decision.
To illustrate these points, had the case involved a pure money claim for a
specific sum (e.g. salary for a specific period) or a specific benefit (e.g. 13th
month pay for a specific year) made by a former employee, the labor
arbiters computation would admittedly have continuing currency because
the sum is specific and any variation may only be on the interests that may
run from the finality of the decision ordering the payment of the specific
sum.

In contrast with a ruling on a specific pure money claim, is a claim that

relates to status (as in this case, where the claim is the legality of the
termination of the employment relationship). In this type of cases, the
decision or ruling is essentially declaratory of the status and of the rights,
obligations and monetary consequences that flow from the declared status
(in this case, the payment of separation pay and backwages and attorneys
fees when illegal dismissal is found). When this type of decision is executed,
what is primarily implemented is the declaratory finding on the status and
the rights and obligations of the parties therein; the arising monetary
consequences from the declaration only follow as component of the parties
rights and obligations.
In the present case, the CA confirmed that indeed an illegal dismissal had
taken place, so that separation pay in lieu of reinstatement and backwages
should be paid. How much that separation pay would be, would ideally be
stated in the final CA decision; if not, the matter is for handling and
computation by the labor arbiter of origin as the labor official charged with
the implementation of decisions before the NLRC.
xxx
Consistent with what we discussed above, we hold that under the terms of
the decision under execution, no essential change is made by a recomputation as this step is a necessary consequence that flows from the
nature of the illegality of dismissal declared in that decision. A recomputation (or an original computation, if no previous computation
has been made) is a part of the law specifically, Article 279 of the
Labor Code and the established jurisprudence on this provision that is
read into the decision. By the nature of an illegal dismissal case, the
reliefs continue to add on until full satisfaction, as expressed under
Article 279 of the Labor Code. The re-computation of the consequences
of illegal dismissal upon execution of the decision does not constitute an
alteration or amendment of the final decision being implemented. The
illegal dismissal ruling stands; only the computation of monetary
consequences of this dismissal is affected and this is not a violation of
the principle of immutability of final judgments.
xxx
That the amount the petitioner shall now pay has greatly increased is a

consequence that it cannot avoid as it is the risk that it ran when it

continued to seek recourses against the labor arbiters decision. Article
279 provides for the consequences of illegal dismissal in no uncertain terms,
qualified only by jurisprudence in its interpretation of when separation pay
in lieu of reinstatement is allowed. When that happens, the finality of the
illegal dismissal decision becomes the reckoning point instead of the
reinstatement that the law decrees. In allowing separation pay, the final
decision effectively declares that the employment relationship ended so that
separation pay and backwages are to be computed up to that point. x x
x29cralawred
[Emphases and underscoring supplied]
Although the NLRC decision in the present case did not provide a precise
computation, the principles enunciated in Session Delights still equally
apply. In Session Delights, the computation of the LA was found to be timebound, which implied the currency of the computation up to the finality of
the LA decision. In the present case, the NLRC declared backwages to be
reckoned up to the promulgation of its decision, which was an express
declaration of the currency of the computation up to the finality of the
NLRC decision, especially considering that HMR was ordered to reinstate
immediately petitioner Lim. The decisions in both cases are premised on
their immediate execution, in that no question would have arisen had the
parties terminated the case and the decision implemented at that
point.30cralawred
As discussed above, no essential change is being made by a recomputation
because such is a necessary consequence which flows from the nature of the
illegality of the dismissal. To reiterate, a recomputation, or an original
computation, if no previous computation was made, as in the present
case, is a part of the law that is read into the decision, namely, Article
279 of the Labor Code and established jurisprudence.31 Article 279
provides for the consequences of illegal dismissal, one of which is the
payment of full backwages until actual reinstatement,qualified only by
jurisprudence when separation pay in lieu of reinstatement is allowed,
where the finality of the illegal dismissal decision instead becomes the
reckoning point.32cralawred
The nature of an illegal dismissal case requires that backwages continue to
add on until full satisfaction. The computation required to reflect full

satisfaction does not constitute an alteration or amendment of the final

decision being implemented as the illegal dismissal ruling stands. Thus, in
the present case, a computation of backwages until actual reinstatement
is not a violation of the principle of immutability of final
judgments.33cralawred
The respondents aver that the recoverable backwages cannot go beyond
December 26, 2007, the date HMR offered to reinstate Lim, who allegedly
refused to be reinstated and abandoned his job.
HMR sent the petitioner a letter,34 dated December 22, 2007, directing him
to report for work on December 26, 2007, with an offer of separation pay in
the amount of P150,000.00 in lieu of reinstatement which he could avail of
not later than December 26, 2007. Lim replied in a letter,35dated December
24, 2007, requesting for a meeting in January 2008, considering that his
counsel was out of the country; that the NLRC was still in the process of
computing the amount of the award which was necessary to consider the
offer of separation pay; and that a writ of execution had not yet been issued.
HMR never responded to the petitioners request, and up to the present, the
latter has yet to be reinstated.
From the above, it is apparent that the petitioner cannot be deemed to have
refused reinstatement or to have abandoned his job. HMRs offer of
reinstatement appeared superficial and insincere considering that it never
replied to the petitioners letter. It did not make any further attempt to
reinstate the petitioner either. The recoverable backwages, thus, continue to
run, and must be reckoned up until the petitioners actual reinstatement.
10% annual salary increase
Petitioner Lim argues that the LA completely failed to include in its
computation the unpaid 10% annual increase in his salary from 1998 to
2000, as stated in the fallo of the NLRC decision, and the 10% salary
increase per annum in backwages until actual reinstatement.
The pertinent portion of the fallo of the NLRC decision
reads:chanRoblesvirtualLawlibrary

The Computation and Research Unit (CRU) of this Commission is hereby

directed to compute the backwages and the 10% annual increase from 1998
to 2000.36
In awarding the 10% annual salary increase from 1998 to 2000, the body of
the NLRC decision explained:chanRoblesvirtualLawlibrary
We see no reason, therefore, why complainant-appellant herein, being a
regular employee, should be deprived of what he is entitled to under
Company policy. As such,he should be paid his unpaid 10% annual
increase for the years 1998, 1999 and 2000.37cralawred
[Emphasis and underscoring supplied]
Lim is, thus, entitled to be paid his unpaid 10% annual salary increase for
the years 1998-2000.
A reading of the assailed order of the LA would reveal that it made the
following adjustment in connection to the 10% annual salary
increase:chanRoblesvirtualLawlibrary
2) that the base rate applicable is his salary as of February 3, 2003 inclusive
of the ten percent adjustment due at the time, or P12,500.00 plus ten percent
(10%) or P13,750.00;38chanrobleslaw
This is incorrect on two counts. First, the LA failed to include the actual
unpaid 10% annual increase from 1998-2000. The first computation of the
LA,39 as well as the suggested computation of respondent HMR itself,40 gave
the correct computation of the unpaid salary increase from 1998-2000, as
follows:cralawlawlibrary
Year

1998
1999
2000
Total

Rate (P)

12,500.00
13,750.00
15,125.00

Increase

Monthly

10%
10%
10%

Increase
(P)
1,250.00
1,375.00
1,512.50

Annual
Increase
(P)
15,000.00
16,500.00
18,150.00
49,650.00

Second, based on the above, the applicable base rate for the computation of
the petitioners backwages from the time he was illegally dismissed on
February 3, 2001 should be P15,125.00.
Lim cannot, however, insist that the 10% annual salary increase be applied
to his backwages past the year 2000 up to his actual reinstatement.
In Equitable Banking Corporation v. Sadac, 41 the Court held that although
Article 279 of the Labor Code mandates that an employees full backwages
be inclusive of allowances and other benefits, salary increases cannot be
interpreted as either an allowance or a benefit, as allowances and benefits are
separate from salary, while a salary increase is added to salary as an
increment thereto.42 It was further held therein that the base figure to be used
in the computation of backwages was pegged at the wage rate at the time of
the employees dismissal, inclusive of regular allowances that the employee
had been receiving such as the emergency living allowances and the 13th
month pay mandated by law. The award of salary differentials was not
allowed, the rule being that upon reinstatement, illegally dismissed
employees were to be paid their backwages without deduction and
qualification as to any wage increases or other benefits that might have been
received by their co-workers who were not dismissed.43cralawred
It must be noted that the NLRC did not err in awarding the unpaid salary
increase for the years 1998-2000 as such did not constitute backwages as a
consequence of the petitioners illegal dismissal, but was earned and owing
to the petitioner before he was illegally terminated.
Holiday pay
The respondents insist that the base pay of Lim is already inclusive of
holiday pay. The records, however, are insufficient to determine whether
holiday pay is indeed included in the petitioners base pay.
Under Article 94 of the Labor Code, every worker shall be paid his regular
daily wage during regular holidays. Thus, an employee must receive his
daily wage even if he does not work on a regular holiday. The purpose of
holiday pay is to prevent diminution of the monthly income of workers on
account of work interruptions declared by the State.44cralawred

Whether or not holiday pay is included in the monthly salary of an

employee, may be gleaned from the divisors used by the company in the
computation of overtime pay and employees absences. To illustrate, if all
nonworking days are paid, the divisor of the monthly salary to obtain daily
rate should be 365. If nonworking days are not paid, the divisor is 251,
which is a result of subtracting all Saturdays, Sundays, and the ten legal
holidays.45 Hence, if the petitioners base pay does not yet include holiday
pay, it must be added to his monetary award.
This matter is clearly for the LA to determine being the labor official
charged with the implementation of decision46 and concomitant
computations.
Sick leave pay
The LA found that that the petitioner was not entitled to have his sick leaves
converted to cash because such was subject to the discretion of management
in accordance with company policy.
The pertinent provision on sick leave conversion in the Personnel Policy
handbook of HMR reads:chanRoblesvirtualLawlibrary
d) Accumulated days of unused sick leave may be converted into cash, timeoff or vacation allowance at the end of the calendar year, any of these upon
the discretion of the General Manager.47
It is clear from the above that the provision does not give HMR the absolute
discretion to decide whether or not to grant sick leave conversion. The
discretion of the general manager only pertains to what form the sick leave
conversion may take, and not to whether or not sick leave conversion will be
granted at all. An HMR employee is, therefore, entitled to conversion of
unused sick leave, subject only to the general managers discretion as to the
form it will take, namely cash, time-off, or vacation allowance.
Considering that the conversion options of time-off and vacation allowance
are no longer feasible because the petitioner was illegally dismissed, he is
now entitled to have his unused sick leaves converted to cash.
Additional moral and exemplary damages
Petitioner Lim prays that the respondents be made to pay, jointly and

severally, additional moral and exemplary damages on account of their bad

faith in delaying the payment and his reinstatement.
There appears, however, no basis to award additional damages considering
that the respondents simply availed of the remedies available to them under
the law in good faith.
Legal interest
The petitioner argues that legal interest in accordance with the case
of Eastern Shipping must also be awarded, as
follows:chanRoblesvirtualLawlibrary
1. the unpaid 10% annual increase from 1998 to 2000 shall earn a 6%
interest annually starting 1998 until October 23, 2003 (Entry of
Judgment of the April 11, 2003 NLRC decision); and 12% legal
interest per annum thereafter until the same is fully paid;
andChanRoblesVirtualawlibrary
2. the backwages, 13th month pay as well as unpaid vacation and sick
leaves shall earn a 6% per annum interest starting at the time of
petitioners illegal dismissal on February 3, 2001 until October 23,
2003; and 12% legal interest per annumthereafter until the same is
fully paid.48
The respondents counter that interest may no longer be added considering
that such was not included in the any of the courts decisions before the
judgment became final and executory.
In both Session Delights and Nacar, no interest was expressly awarded
before the judgments became final and executory, yet in both cases, the
Court, nonetheless, awarded legal interest. Session Delights explained that
the decision had become a judgment for money from which another
consequence flowed, namely, the payment of interest in case of delay in
accordance with Eastern Shipping Lines v. Court of Appeals. It was held
therein that when the judgment of the court awarding a sum of money
became final and executory, the rate of legal interest, should be 12% per
annumfrom finality until satisfaction.49cralawred

The rules on legal interest in Eastern Shipping have, however, been recently
modified by Nacar in accordance with Bangko Sentral ng Pilipinas
Monetary Board (BSP-MB) Circular No. 799, which became effective on
July 1, 2013. Pertinently, it amended the rate of legal interest in judgments
from 12% to 6% per annum, with the qualification that the new rate be
applied prospectively. Thus, the 12% per annum legal interest in judgments
under Eastern Shipping shall apply only until June 30, 2013, and the new
rate of 6% per annum shall be applied from July 1, 2013
onwards.50cralawred
Petitioner also prays that he be awarded interest at a rate of 6% per
annum on the amounts awarded from the time they became legally due him
until entry of judgment, presumably under the second paragraph in Eastern
Shipping (which was not modified by Nacar), which
states:chanRoblesvirtualLawlibrary
2. When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be
imposed at the discretion of the court at the rate of 6% per annum. No
interest, however, shall be adjudged on unliquidated claims or damages
except when or until the demand can be established with reasonable
certainty. Accordingly, where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty
cannot be so reasonably established at the time the demand is made, the
interest shall begin to run only from the date the judgment of the court is
made (at which time the quantification of damages may be deemed to have
been reasonably ascertained). The actual base for the computation of legal
interest shall, in any case, be on the amount finally adjudged.51cralawred
[Emphasis supplied]
It is plain from the above that the interest of 6% per annum for obligations
not constituting a loan or forbearance of money is one that may be imposed
at the discretion of the court. This form of interest is not mandatory but
discretionary in nature and therefore, not necessarily owing to the petitioner
in the present case.
WHEREFORE, the petition is PARTLY GRANTED, the March 30, 2012
Decision of the Court of Appeals, in CA-G.R. SP No. 112708
is REVERSED and SET ASIDE. Respondent HMR Philippines, Inc.

is ORDERED to PAY petitioner Conrado A.

Lim:chanRoblesvirtualLawlibrary
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10
)

backwages computed from the time the petitioner was illegally

dismissed on February 3, 2001 up to his actual reinstatement, with
a monthly base pay in the amount of P15,125.00;
the unpaid 10% annual salary increase from 1998-2000 in the
amount of P49,650.00;
13th month pay;
vacation pay in accordance with the personnel policy handbook;
the cash value of his unused sick leaves;
holiday pay, provided that the Labor Arbiter finds that such is not
yet included in the base pay;
moral damages in the amount of P50,000.00;
exemplary damages in the amount of P20,000.00;
attorneys fees equivalent to 10% of the total amount due to the
petitioner; and
legal interest of 12% per annum of the total monetary awards
computed from July 27, 2007 to June 30, 2013, and 6% per
annum from July 1, 2013 until their full satisfaction.

The Labor Arbiter is ORDERED to compute the total monetary benefits

awarded and due the petitioner in accordance with this decision.
SO ORDERED.

Republic of the Philippines

Supreme Court
Manila
FIRST DIVISION
BPI
EMPLOYEES
UNION
METRO MANILA and
ZENAIDA UY,
Petitioners,

G.R. No. 178699

- versus BANK
OF
THE
PHILIPPINE
ISLANDS,
Respondent.
x--------------------x
BANK
OF
PHILIPPINE
ISLANDS,
Petitioner,

- versus -

THE

G.R. No. 178735

Present:
CORONA, C.J.,
Chairperson,
LEONARDO-DE
CASTRO,
BERSAMIN,
DEL CASTILLO, and
PEREZ, JJ.

BPI
EMPLOYEES
UNION
METRO MANILA and
ZENAIDA UY,
Promulgated:
Respondents.
September 21, 2011
x------------------------------------------------------------------x
DECISION
DEL CASTILLO, J.:
The base figure in computing the award of back wages to an illegally
dismissed employee is the employees basic salary plus regular allowances and
benefits received at the time of dismissal, unqualified by any wage and benefit
increases granted in the interim.[1]

By these consolidated Petitions for Review on Certiorari,[2] the Bank of the

Philippine Islands (BPI), BPI Employees Union-Metro Manila (the Union) and
Zenaida Uy (Uy) seek modification of the Court of Appeals' (CA) Amended
Decision[3] dated July 4, 2007 in CA-G.R. SP No. 92631. Said Amended Decision
computed Uy's back wages and other monetary awards pursuant to the final and
executory Decision[4] dated March 31, 2005 of this Court in G.R. No. 137863
based on her salary rate at the time of her dismissal and disregarded the salary
increases granted in the interim as well as other benefits which were not proven to
have been granted at the time of Uy's dismissal from the service.
Factual Antecedents
On December 14, 1995, Uys services as a bank teller in BPIs Escolta Branch was
terminated on grounds of gross disrespect/discourtesy towards an officer,
insubordination and absence without leave. Uy, together with the Union, thus filed
a case for illegal dismissal.
On December 31, 1997, the Voluntary Arbitrator[5] rendered a Decision[6] finding
Uy's dismissal as illegal and ordering BPI to immediately reinstate Uy and to pay
her full back wages, including all her other benefits under the Collective
Bargaining Agreement (CBA) and attorneys fees.[7]
On October 28, 1998, the CA affirmed with modification the Decision of the
Voluntary Arbitrator. Instead of reinstatement, the CA ordered BPI to pay Uy her
separation pay. Further, instead of full back wages, the CA fixed Uy's back wages
to three years.[8]
The case eventually reached this Court when both parties separately filed
petitions for review on certiorari. While BPIs petition which was docketed as
G.R. No. 137856 was denied for failure to comply with the requirements of a valid
certification of non-forum shopping,[9] Uys and the Unions petition which was
docketed as G.R. No. 137863 was given due course.
On March 31, 2005, the Court rendered its Decision[10] in G.R. No. 137863,
the dispositive portion of which reads:

WHEREFORE, the instant petition is GRANTED. The

assailed 28 October 1998 Decision and 8 March 1999 Resolution of
the Court of Appeals are hereby MODIFIED as follows: 1)
respondent BPI is DIRECTED to pay petitioner Uy backwages
from the time of her illegal dismissal until her actual reinstatement;
and 2) respondent BPI is ORDERED to reinstate petitioner Uy to
her former position, or to a substantially equivalent one, without loss
of seniority right and other benefits attendant to the position.
SO ORDERED.[11]
Ruling of the Voluntary Arbitrator
After the Decision in G.R. No. 137863 became final and executory, Uy and
the Union filed with the Office of the Voluntary Arbitrator a Motion for the
Issuance of a Writ of Execution.[12]
In Uys computation, she based the amount of her back wages on
the current wage level and included all the increases in wages and benefits under
the CBA that were granted during the entire period of her illegal dismissal. These
include the following: Cost of Living Allowance (COLA), Financial Assistance,
Quarterly Bonus, CBA Signing Bonus, Uniform Allowance, Medicine Allowance,
Dental Care, Medical and Doctors Allowance, Tellers Functional Allowance,
Vacation Leave, Sick Leave, Holiday Pay, Anniversary Bonus, Burial Assistance
and Omega watch.[13]
BPI disputed Uy's/Unions computation arguing that it contains items which
are not included in the term back wages and that no proof was presented to show
that Uy was receiving all the listed items therein before her termination. It claimed
that the basis for the computation of back wages should be the employees wage
rate at the time of dismissal.[14]
In an Order dated December 6, 2005,[15] the Voluntary Arbitrator agreed
with Uys/Unions contention that full back wages should include all wage and
benefit increases, including new benefits granted during the period of dismissal.
The Voluntary Arbitrator opined that this Courts March 31, 2005 Decision in G.R.

No. 137863 reinstated his December 31, 1997 Decision which ordered the
payment of full back wages computed from the time of dismissal until actual
reinstatement including all benefits under the CBA. Nonetheless, the Voluntary
Arbitrator excluded the claims for uniform allowance, anniversary bonus and
Omega watch for want of basis for their grant.
The Voluntary Arbitrator thus granted the motion for issuance of writ of
execution and computed Uys back wages in the total amount of P3,897,197.89 as
follows:
Basic Monthly Salary (BMS) ..............................................P 2,062,
087.50
Cost of Living Allowance.......................................................... 56,
100.00
Financial
Assistance.................................................................... 39,000.00
Total Quarterly Bonuses ....................................................... 693,
820.00
CBA Signing Bonus................................................................... 32,
500.00
Medicine Allowance................................................................... 58,
400.00
Dental
Care .............................................................................. 14,
120.00
Medical and Doctors Allowance.................................... 58,
400.00
Tellers
Functional Allowance........................................ 25,
500.00
Vacation Leave............................................................................ 187,
085.50
Sick Leave.................................................................................... 187,
085.50
Holiday Pay.................................................................................. 128,
808.65
Attorneys Fee.............................................................................. 354,
290.72
Grand
Total....................................................................................P 3
,897,197.89[16]

A Writ of Execution[17] and a Notice of Garnishment[18] were subsequently

issued.
Ruling of the Court of Appeals
Imputing grave abuse of discretion on the part of the Voluntary Arbitrator, BPI
filed with the CA a Petition for Certiorari with urgent Motion for the Issuance of
a Temporary Restraining Order (TRO) and/or Writ of Preliminary Injunction.
[19]
BPI alleged that the Voluntary Arbitrators erroneous computation of back
wages amended and varied the terms of the March 31, 2005 final and executory
Decision in G.R. No. 137863.
Specifically, it averred that the Voluntary Arbitrator erred in computing back
wages based on the current rate and in including the wage increases or benefits
given in the interim as well as attorney's fees. BPI further argued that there was no
basis for the award of tellers functional allowance, cash conversion of vacation
and sick leaves and dental care allowance.
In their Comment,[20] Uy and the Union alleged that BPIs remedy is not
a certiorari petition under Rule 65 of the Rules of Court but an appeal from
judgments, final orders and resolutions of voluntary arbitrators under Rule 43 of
the Rules of Court. They also contended that BPIs petition is wanting in
substance.
Meanwhile, the CA issued a TRO[21] restraining the implementation of the
December 6, 2005 Order of the Voluntary Arbitrator and the corresponding Writ of
Execution issued on December 12, 2005. Upon receipt of the TRO, Uy and the
Union filed an Urgent Motion for Clarification [22] on whether the TRO
encompasses even the implementation of the reinstatement aspect of the March
31, 2005 Decision of this Court in G.R. No. 137863.
The CA initially rendered a Decision[23] on May 24, 2006. In said Decision,
the CA held that BPI's resort to certiorari was proper and that the award of CBA
benefits and attorney's fees has legal basis. The CA however found that the

Voluntary Arbitrator erroneously computed Uy's back wages based on the current
rate. The CA also deleted the award of dental allowance since it was granted in
2002 or more than six years after Uy's dismissal.
Both parties thereafter filed their respective motions for
reconsideration. Consequently, on July 4, 2007, the CA issued the herein assailed
Amended Decision.
In its Amended Decision, the CA upheld the propriety of BPIs resort
to certiorari. It also ruled that this Courts March 31, 2005 Decision in G.R. No.
137863 did not reinstate the December 31, 1997 Decision of the Voluntary
Arbitrator awarding full back wages including CBA benefits. The CA ruled that
the computation of Uys full back wages, as defined under Republic Act No. 6715,
should be based on the basic salary at the time of her dismissal plus the regular
allowances that she had been receiving likewise at the time of her dismissal. It
held that any increase in the basic salary occurring after Uys dismissal as well as
all benefits given after said dismissal should not be awarded to her in consonance
with settled jurisprudence on the matter. Accordingly, the CA pronounced that
Uys basic salary, which amounted to P10,895.00 at the time of her dismissal on
December 14, 1995, is to be used as the base figure in computing her back wages,
exclusive of any increases and/or modifications. As Uys entitlement to COLA,
quarterly bonus and financial assistance are not disputed, the CA retained their
award provided that, again, the base figure for the computation of these benefits
should be the rate then prevailing at the time of Uys dismissal.
The CA deleted the award of CBA signing bonus, medicine allowance,
medical and doctors allowance and dental care allowance for lack of sufficient
proof that these benefits were already being received and enjoyed by Uy at the
time of her dismissal. However, it held that the tellers functional allowance should
rightfully be given to Uy as a regular bank teller as well as the holiday pay and
monetary equivalent of vacation and sick leave benefits. As for the attorneys fees,
the CA ruled that Uys right over the same has already been resolved and has
attained finality when it was neither assailed nor raised as an issue after the
Voluntary Arbitrator awarded it in favor of Uy.

Finally, the CA likewise ruled that Uys reinstatement was effectively

restrained by the TRO issued by it. Pertinent portions of the CAs Amended
Decision read:
All told, We find Petitioners Motion for Reconsideration to be
partly meritorious and so hold that Private Respondent Uy is entitled
to the following sums to be included in the computation:
1.

Basic Monthly Salary, COLA and Quarterly

Bonus, with P10,895.00 as the base figure, computed
from the time of her dismissal up to her actual
reinstatement;

2.

Tellers Functional Allowance, based on the rate at

the time of her dismissal;

3.

Monetary Equivalent of Vacation and Sick

Leaves, and Holiday Pay, based on the rate at the time of
her dismissal;

4.

Attorneys Fees, which is 10% of the total amount

of the award.

Anent the Private Respondents Urgent Motion for

Clarification, Private Respondent asked whether the TRO issued by
this Court on January 3, 2006 restrained the reinstatement of Private
Respondent Uy.
We answer in the affirmative.
The wordings of the Resolution ordering the issuance of a
temporary restraining order are clear. The TRO was issued to
restrain the implementation and/or enforcement of the Public
Respondents Order dated December 6, 200[5] and the Writ of
Execution, dated December 12, 200[5]. Considering that said Order
and the ensuing Writ are for the reinstatement of Private Respondent
Uy, hence, the TRO, indeed, effectively restrained Uys
reinstatement.

WHEREFORE, Private Respondents Motion for Partial

Reconsideration is DENIED and Petitioners Motion for Partial
Reconsideration is GRANTED IN PART. The Decision of this
Court promulgated on May 24, 2006 is hereby amended, and the
Public Respondent Voluntary Arbitrator is ordered to recompute the
amount of backwages due to Private Respondent Uy consistent with
the foregoing ruling.
SO ORDERED.[24]
From the foregoing Amended Decision, both parties separately filed
petitions before this Court. Uys and the Unions petition is docketed as G.R. No
178699, and that of BPI is docketed as G.R. No. 178735. The Court resolved to
consolidate both petitions in a Resolution dated September 3, 2007.[25]
Issues
G.R. No. 178699
Uy and the Union argue that the CA effectively amended the final Decision
in G.R. No. 137863. They allege that the issues raised in G.R. No. 137863 were
confined only to the propriety of the CAs award of back wages for a fixed period
of three years as well as the order for the payment of separation pay in lieu of
reinstatement. Hence, the Voluntary Arbitrators award of CBA benefits
as components of Uys back wages and the attorneys fees, which were not raised
as issues in G.R. No. 137863, should no longer be disturbed.
Uy and the Union likewise assail the CAs order restraining Uys
reinstatement despite the finality of this Courts Decision ordering such
reinstatement. They also fault the CA in not dismissing BPIs petition for being an
improper mode of appeal. Finally, Uy and the Union assert that a twelve percent
(12%) interest per annum should be imposed on the total amount due to Uy,
computed from the finality of the Decision of this Court in G.R. No. 137863 until
full compliance thereof by BPI.
G.R. No. 178735

On the other hand, BPI alleges that Uy's/Unions petition should be

dismissed for lack of proof of service of the petition on the lower court concerned
as required by the Rules of Court. BPI also argues that the CA erred in including
the tellers functional allowance and the vacation and sick leave cash equivalent in
the computation of Uys backwages. Also, BPI questions the propriety of the
award of attorneys fees.
Our Ruling
The March 31, 2005 Decision of this
Court in G.R. No. 137863 did not
reinstate the December 31, 1997
Decision of the Voluntary Arbitrator
which ordered the payment of full back
wages including all benefits under the
CBA.
We agree with the CAs finding that the March 31, 2005 Decision of this Court in
G.R. No. 137863 did not in anyway reinstate the Voluntary Arbitrators December
31, 1997 Decision regarding the award of CBA benefits.
To recall, after Uy and the Union filed the case for illegal dismissal,
the Voluntary Arbitrator rendered his Decision[26] on December 31, 1997, the
dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered
declaring the dismissal of complainant Zenaida Uy as illegal and
ordering the respondent Bank of the Philippine Islands to
immediately reinstate her to her position as bank teller of the Escolta
Branch without loss of seniority rights and with full backwages
computed from the time she was dismissed on December 14, 1995
until she is actually reinstated in the service, and including all her
other benefits which are benefits under their Collective Bargaining
Agreement (CBA).

For reasonable attorneys fees, respondent is also ordered to pay

complainant the equivalent of 10% of the recoverable award in this
case.
SO ORDERED.[27]
On appeal, the CA, in its October 28, 1998 Decision, [28] affirmed with
modification the Decision of the Voluntary Arbitrator. Instead of full back wages,
the CA limited the award to three years. Also, in lieu of reinstatement, the CA
ordered BPI to pay separation pay, thus:
WHEREFORE,
the
judgment
appealed
from
is AFFIRMED with the MODIFICATION that instead of
reinstatement, the petitioner Bank of the Philippine Islands
is DIRECTEDto pay Uy back salaries not exceeding three (3) years
and separation pay of one month for every year of service. The said
judgment is AFFIRMED in all other respects.
SO ORDERED.[29]
As already discussed, both parties appealed to this Court. However, BPIs
petition was dismissed outright for failure to comply with the requirements for a
valid certification of non- forum shopping. Uys and the Unions petition docketed
as G.R. No. 137863, on the other hand, was given due course. On March 31, 2005,
the Court rendered its Decision disposing thus:
WHEREFORE, the instant petition is GRANTED. The
assailed 28 October 1998 Decision and 8 March 1999 Resolution of
the Court of Appeals are hereby MODIFIED as follows: 1)
respondent BPI is DIRECTED to pay petitioner Uy backwages
from the time of her illegal dismissal until her actual reinstatement;
and 2) respondent BPI is ORDERED to reinstate petitioner Uy to
her former position, or to a substantially equivalent one, without loss
of seniority right and other benefits attendant to the position.
SO ORDERED.[30]

From the foregoing, it is clear that Uys and the Unions contention that the
March 31, 2005 Decision of this Court in G.R. No. 137863 in effect reinstated the
December 31, 1997 Decision of the Voluntary Arbitrator awarding full back wages
including the CBA benefits, is without basis. What is clear is that the March 31,
2005 Decision modified the October 28, 1998 Decision of the CA by awarding
full back wages instead of limiting the award to a period of three years. This
interpretation is further bolstered by the Courts discussion in the main body of
March 31, 2005 Decision as to the meaning of full back wages in view of the
passage of Republic Act No. 6715[31] on March 21, 1989 which amended Article
279 of the Labor Code, as follows:
ART. 279. Security of Tenure. - In cases of regular
employment, the employer shall not terminate the services of an
employee except for a just cause or when authorized by the Title. An
employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges
and to his full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual
reinstatement. (Italics supplied)
Jurisprudence dictates that such award of back wages is without
qualifications and deductions,[32] that is, unqualified by any wage increases or
other benefits that may have been received by co-workers who were not
dismissed.[33] It is likewise settled that the base figure to be used in the
computation of back wages is pegged at the wage rate at the time of the employees
dismissal unqualified by deductions, increases and/or modifications.[34]
We thus fully agree with the observation of the CA in its Amended
Decision that the back wages as discussed in the March 31, 2005 Decision in G.R.
No. 137863 did not include salary increases and CBA benefits, viz:
There is no ambiguity or omission in the dispositive portion
of the SC decision but Public Respondent erroneously concluded
that said SC decision effectively reinstated Public Respondent's
December 31, 1997 Decision. There is a need to read the findings

and conclusions reached by the Supreme Court in the subject

decision to understand what was finally adjudicated.
In the dispositive portion of Its Decision of March 31, 2005,
the Supreme Court expressly awarded Uy full backwages from the
time of her dismissal up to the time of her actual reinstatement. The
full backwages, as referred to in the body of the decision pertains to
backwages as defined in Republic Act No. 6715. Under said law,
and as provided in numerous jurisprudence, full backwages means
backwages without any deduction or qualification, including
benefits or their monetary equivalent the employee is enjoying at the
time of his dismissal.
Clearly, it is the intention of the Supreme Court to grant unto
Private Respondent Uy full backwages as defined under RA
6715. Consequently, any benefit or allowance over and above that
allowed and provided by said law is deemed excluded under said SC
Decision. The CBA benefits awarded by Public Respondent is not
within the benefits under RA 6715. Said benefits are not to be
included in the backwages. x x x[35]
The CA correctly deleted the
award of CBA benefits.
Thus, we find that the CA properly disregarded the salary increases and
correctly computed Uys back wages based on the salary rate at the time of Uys
dismissal plus the regular allowances that she had been receiving likewise at the
time of her dismissal.[36] The CA also correctly deleted the signing bonus,
medicine allowance, medical and doctors allowance and dental care allowance, as
they were all not proven to have been granted to Uy at the time of her dismissal
from service.
The award of attorneys fees is proper.
We likewise affirm the CAs award of attorneys fees. The issue on its grant
has already been threshed out and settled with finality when the parties failed to
question it on appeal. As aptly held by the CA in its Amended Decision:

Based on the evidence, We find Uy to be entitled to Attorneys

fees. True, the SC Decision did not include the award of attorneys
fees; however, after the Public Respondent awarded said attorneys
fees in favor of Private Respondent Uy, said award was neither
assailed nor raised as an issue before the Court of Appeals and the
Supreme Court. Hence, the March 31, 2005 Decision of the
Supreme Court and the Court of Appeals Decision as modified no
longer mention said award.
Consequently, as the right of Uy to attorneys fees has already
been resolved and had attained finality, Petitioner cannot now
question its inclusion to the computation of awards given to Private
Respondent Uy during the execution proceedings.[37]
The issue concerning the CAs temporary
restraining order which covered the
reinstatement aspect of this Courts final
decision has been rendered moot by Uys
subsequent reinstatement in BPIs payroll
on August 1, 2006.
While we agree with Uy's/Unions postulation that it was improper for the CA to
restrain the implementation of the reinstatement aspect of this Courts final and
executory Decision considering that BPIs appeal with the CA only questioned the
propriety of the Voluntary Arbitrators computation of back wages, suffice it to say
that this particular issue has already been rendered moot by Uys reinstatement. As
manifested by BPI in its Comment,[38] Uy, with her acquiescence, was reinstated in
BPI's payroll on August 1, 2006. Notably, this fact was not at all disputed or
denied by Uy in any of her pleadings.
BPI's resort to certiorari under Rule 65
of the Rules of Court is proper.
Section 1, Rule 41 of the Rules of Court explicitly provides that no appeal may be
taken from an order of execution, the remedy of an aggrieved party being an
appropriate special civil action under Rule 65 of the Rules of Court. Thus, BPI

correctly availed of the remedy of certiorari under Rule 65 of the Rules of Court
when it assailed the December 6, 2005 order of execution of the Voluntary
Arbitrator.
A legal interest at 12% per annum
should be imposed upon the monetary
awards granted in favor of Uy
commencing from the finality of this
Courts March 31, 2005 Decision until
full satisfaction thereof.
Pursuant to our ruling in Eastern Shipping Lines, Inc. v. Court of Appeals, [39] the
legal interest of 12% per annum shall be imposed upon the monetary award
granted in favor of Uy, from the time this Courts March 31, 2005 Decision
became final and executory until full satisfaction thereof, for the delay caused.
This natural consequence of a final judgment is not defeated notwithstanding the
fact that the parties were at variance in the computation of what is due to Uy under
the judgment.[40]
The CA was properly served with a copy
of Uy's/Unions petition in compliance
with the Rules of Court.
BPI's allegation that Uy's/Unions petition in G.R. No. 178699 should be dismissed
outright for failure to furnish the lower court concerned of their petition is without
basis.Records disclose that Uy's/Unions petition was accompanied with an
affidavit of service with the corresponding registry receipt[41] showing that the CA
was duly provided with a copy of the petition.
Uy is entitled to tellers functional
allowance but not to vacation and sick
leave cash conversion.
BPI contends that at the time of Uys dismissal, she was no longer functioning as a
teller but as a low-counter staff and as such, Uy is not anymore entitled to the

tellers functional allowance pursuant to company policy. Furthermore, BPI argues

that Uy is neither entitled to the monetary conversion of vacation and sick leaves
for failure to prove that she is entitled to these benefits at the time of her dismissal.
We rule that Uy is entitled to the tellers functional allowance since Uys function as
a teller at the time of her dismissal was factually established and was never
impugned by the parties during the proceedings held in the main case. Besides,
BPI did not present any evidence to substantiate its allegation that Uy was
assigned as a low-counter staff at the time of her dismissal. It is a hornbook rule
that he who alleges must prove.[42] Neither was there any proof on record which
could support this bare allegation.
As to the vacation and sick leave cash conversion benefit, we disagree with the
CAs pronouncement that entitlement to the same should not be necessarily
proved. It is to be noted that this privilege is not statutory or mandatory in
character but only voluntarily granted.[43] As such, the existence of this benefit as
well as the employee's entitlement thereto cannot be presumed but should be
proved by the employee.[44] The records, however, failed to prove that Uy was
receiving this benefit at the time of her dismissal on December 14, 1995. The
CBA covering the period April 1, 2001 to March 31, 2006, which was presented
by the parties does not at all prove that vacation and sick leave credits, as well as
the privilege of converting the same into cash, were granted before the CBAs
effectivity in 2001. We thus hold that Uy failed to prove that she is entitled to such
benefit as a matter of right.
WHEREFORE, the petitions in G.R. Nos. 178699 and 178735 are
both PARTIALLY GRANTED. The Amended Decision dated July 4, 2007 of
the Court of Appeals in CA-G.R. SP No. 92631 is hereby AFFIRMED
with MODIFICATIONS. The back wages of Zenaida Uy should be computed
as follows:
1.
Basic Monthly Salary, Cost of Living Allowance, Financial
Assistance and Quarterly Bonus, with P10,895.00 as the base figure which is her
salary rate at the time of her dismissal, computed from the time of her dismissal on
December 14, 1995 up to her reinstatement on August 1, 2006;

2.
dismissal;

Tellers Functional Allowance, based on the rate at the time of her

3.

Holiday Pay, based on the rate at the time of her dismissal;

4.

Attorneys Fees, which is 10% of the total amount of the award;

and
5.
Interest at 12% per annum on the total amount of the awards
commencing from the finality of the Decision in G.R. No. 137863 until full
payment thereof.
6.
The award for the monetary conversion of vacation and sick leave
is deleted.
The Voluntary Arbitrator is hereby ORDERED TO RECOMPUTE the
amounts due to Zenaida Uy in accordance with the above disposition.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 211228

November 12, 2014

UNIVERSITY OF PANGASINAN, INC., CESAR DUQUE/JUAN

LLAMAS AMOR/DOMINADOR REYES,Petitioners,
vs.
FLORENTINO FERNANDEZ and HEIRS OF NILDA
FERNANDEZ, Respondents.
DECISION
REYES, J.:
University of Pangasinan, Inc. (UPI), an educational institution, and its
former officials, Cesar Duque, Juan Llamas Amor and Dominador Reyes

(collectively referred to as the petitioners), are before this Court with a

petition for review on certiorari1 filed under Rule 45 of the Rules of Court to
assail the Decision2 rendered by the Court of Appeals (CA) on November 5,
2013 and the Resolution3 thereafter issued on February 7, 2014 in CA-G.R.
SP No. 107230. The CA reversed and set aside the Decision4 dated July 21,
2008 and Resolution5 dated November 11, 2008 of the National Labor
Relations Commissions (NLRC) First Division in NLRC-NCR CA No.
027116-01 (AE-09-06) granting the appeal filed by the petitioners against
the Order6 dated August 22, 2006 ofLabor Arbiter [LA] Luis D. Flores (LA
Flores). The CA, ineffect, reinstated LA Flores order approving an updated
computation of the money claims of Florentino Fernandez (Florentino) and
his now deceased wife, Nilda Fernandez (Nilda),7 both faculty members of
UPI, who were illegally dismissed from service on May 9, 2000 for alleged
dishonesty, abuse of authority and unbecoming conduct.
Antecedents
The CA aptly summarized the facts of the case up to the filing before it of
the Petition for Certiorari8 by Florentino and the heirs of Nilda
(respondents), viz:
This case arose from a complaint for illegal dismissal filed by [Florentino
and Nilda] on May 18, 2000 against [UPI], its President Cesar Duque,
Executive Vice-President Juan Llamas Amor and Director for Student
Affairs Dominador Reyes x x x.
In a Decision dated November 6, 2000, [Labor Arbiter Rolando D. Gambito
(LA Gambito)] ruled that [Florentino and Nilda] were illegally dismissed by
[the petitioners]. The dispositive portion of the Decision reads:
"ACCORDINGLY, judgment is hereby rendered as follows:
1. Declaring that [the petitioners] are not liable for unfair labor
practice;
2. Declaring that [Florentino and Nilda] were dismissed from their
positions as college instructors without just and valid cause;
3. Ordering [UPI] and/or its president Cesar T. Duque, and vicepresident, Juan Llamas Amor to pay [Florentino and Nilda]
backwages, allowances and other benefits computed from the date of

their dismissal on May 9, 2000 up to November 6, 2000, date of

promulgation of decision;
4. Ordering that instead of reinstatement of [Florentino and Nilda] to
their former positions, [the petitioners] should pay them separation
pay equivalent to one (1) month salary for every year of service, a
fraction of at least six (6) months shall be considered as one (1) whole
year;
5. Ordering the [petitioners] to pay [Florentino and Nilda] attorneys
fees inthe amount of P20,000[.00];
6. Denying [Florentino and Nildas] claim for moral and exemplary
damages and all other claims for want of merit.
COMPUTATION OF AWARD:
(
1
)

BACKWAGES (May 9November 6, 2000);

a
)

[Floren
tino]
P10,70
6.95
(mo.
rate) x
5 mos.
&
21
days =

P63,75
4.82

b
)

[Nilda]
P11,28
2.28
(mo.
rate) x
5 mos.
&
21
days =

P67,18
0.83

TOTAL

BACKWAGE
S
(
2
)

130,93
5.65

Separation Pay:
[Florentino]
P10,706.95
(mo. rate) x 26
years
[Nilda]
P11,282.28 x
29 years

P278,3
80.70
P327,1
86.12
P605,5
66.82

TOTAL
ATTORNEYS FEES:

P
20,000.
00
TOTAL AWARD:
BACKWAGES

P130,9
35.65

SEPARATION PAY

P605,5
66.82

ATTORNEYS FEES

P
20,000.
00
P756,5
02.47

SO ORDERED."
[The petitioners] interposed anappeal to the NLRC, which affirmed [LA
Gambitos] Decision in a Resolution dated June 29, 2001 x x x[.]
xxxx

[The petitioners] filed a Motion for Reconsiderationwhich was granted by

the NLRC in a Resolution dated February 21, 2002, the dispositive portion
of which reads:
"WHEREFORE, finding compelling reasons to reverse Our previous ruling,
the Motion for Reconsideration is hereby GRANTED, the Resolution dated
June 29, 2001 is hereby SET ASIDE and the decision of [LA Gambito]
REVERSED. The complaint is hereby DISMISSED with costs against
[Florentino and Nilda].
SO ORDERED."
Aggrieved, [Florentino and Nilda] filed a Petition for Certiorari with [the
CA] to annul the NLRCs Resolution dated February 21, 2002. On
September 13, 2004, [the CA] rendered a Decision granting the petition. The
dispositive portion thereof reads:
"WHEREFORE, premises considered, the petition is hereby GRANTED.
The assailed resolution dated February 21, 2002 of x x x NLRC (First
Division) in NLRC NCR Case No. SUB-RAB 01-07-05-0092-00; NLRC
NCR CA No. 027116-2001 is hereby REVERSED and SET ASIDE. The
decision of [LA Gambito] dated November 6, 2000 is hereby
REINSTATED.
SO ORDERED."
[UPI] appealed [the CAs] Decision to the Supreme Court but which was
denied by the Supreme Court in a Resolution dated February 21, 2005 on the
ground that [UPI] failed toproperly verify its petition in accordance with
Section 1, Rule 45 in relation to Section 4, Rule 7, and A.M. No. 00-2-10SC. [UPIs] motion for reconsideration was likewise denied with finality by
the Supreme Court in a Resolution dated June 6, 2005.
As a consequence, an Entry of Judgment was issued by the Supreme Court
declaring its Resolution dated February 21, 2005 final and executory as of
July 11, 2005.
Subsequently, [Florentino and Nilda] moved for a re-computation of their
award to include their backwages and other benefits from the date of the
decision of [LA Gambito] up to the finality of the decision on July 11, 2005.
They likewise moved for the issuance of a writ of execution. During the pre-

execution conference, [UPI] questioned the re-computation of [Florentino

and Nildas] backwages and awards. In view of a stand-off, [LA Flores]
required both parties to submit their respective computations and
justifications.
On August 22, 2006, [LA Flores] issuedan Order ruling as follows:
"Before Us is an OmnibusMotion filed by [UPI] through its legal counsel
alleging among other things the adoption of the final decision of [LA
Gambito] dated November 6, 2000.
"xxx Please take note that x x x the decision rendered by the [CA]
reinstating the decision of [LA Gambito] x x x was declared final and
executory by no less than the Supreme Court of the Philippines by its
issuance of a final entry of Judgment dated July 11, 2005.
Hence, there is a need to update and upgrade the computation of money
claims and separation pay which has amounted now to P2,165,467.02 as
finally completed by our Labor Arbitration Associate Galo Regino L.
Esperanza hereto attached as Annex "A".
The pending motion to Dismiss is hereby set aside for lack of merit.
The substitution of [the] heirs of [Nilda] is hereby granted.
SO ORDERED."
On the same date (August 22, 2006),[LA Flores] issued a writ of execution.
[UPI] filed a Motion for Reconsiderationof the above Order but it was
denied by [LA Flores] in an Order dated September 12, 2006 on the ground
that no motion for reconsideration of any order or decision is allowed under
Section 19, Rule V of the NLRC Rules of Procedure.
In another Order likewise dated September 12, 2006, [LA Flores] denied
[UPIs] Motion to Quash Writ of Executionand directed the sheriff to
proceed with the due execution of the writ.
[The petitioners] interposed an appeal to the NLRC questioning [LA Flores]
Orders dated August 22, 2006 and September 12, 2006 basically alleging
that [Florentino and Nilda] are only entitled to the amount of P756,502.47

awarded by [LA Gambito] in the Decision dated November 6, 2000, and not
the recomputed amount ofP2,165,467.02.
In the assailed Decision dated July 21, 2008, the NLRC granted the appeal. x
xx
xxxx
[Florentino and Nilda] filed a Motion for Reconsiderationbut it was denied
by the NLRC in a Resolution dated November 11, 2008 x x x[.]
x x x x9 (Citations omitted and italics in the original)
Proceedings before the CA
The respondents filed before the CA a Petition for Certiorari10 primarily
anchored on the issue of what the proper basis was for the computation of
backwages and benefits to be paid to an employee. They claimed that the
reckoning period should be from the time of illegal dismissal on May 9,
2000 up to the finalityof the decision to be executed on July 11, 2005 as
stated in the Entry of Judgment. Further, an interest of 12% per
annumshould be imposed upon the total adjudged award.
On November 5, 2013, the CA rendered the assailed Decision, the decretal
portion of which reads:
WHEREFORE,premises considered, the Petition for Certiorari is
GRANTED. The Decision dated July 21, 2008 and Resolution dated
November 11, 2008 of the [NLRC] are REVERSEDand SET ASIDEand
[LA Flores] Order dated August 22, 2006 is REINSTATED.
[The petitioners] are ORDEREDto PAY[the respondents] the following:
1) backwages computed from May 9, 2000 (the date when [Florentino
and Nilda] were illegally dismissed from employment) up to July 11,
2005 (the date of the finality of the Supreme Courts Resolution per
Entry of Judgment);
2) separation pay computed from [Florentino and Nildas] respective
first day[s] of employment with [UPI] up to July 11, 2005 at the rate
of one month pay per year of service;

3) attorneys fees inthe amount of P20,000.00; and

4) legal interest of twelve percent (12%) per annum of the total
monetary awards computed from July 11, 2005 until their full
satisfaction.
The [LA] is hereby ORDEREDto make another re-computation according to
the above directives.
SO ORDERED.11
In explaining its decision, the CA cited the following reasons:
We are mindful of the principle of immutability of judgment [and] that the
fallo embodies the courts decisive action on the issue/s posed, and is thus
the part of the decision that must be enforced during execution. However,
said doctrine finds no application in the case at bench.
It must be stressed that in illegal dismissal cases, the re- computation of
backwages and similar benefits is merely an inevitable consequence of the
delay in paying the awards stated in the [LAs] decision. The instant
controversy is not novel and was settled and adequately explained by the
Supreme Court in the case of Session Delights Ice Cream and Fast Foods vs.
[CA], viz: x x x x
In concrete terms, the question is whether a re-computation in the course of
execution of the [LAs] original computation of the awards made, pegged as
of the time the decision was rendered and confirmed with modification by a
final CA decision, is legally proper. The question is posed, given that the
petitioner did not immediately pay the awards stated in the original [LAs]
decision; it delayed payment because it continued with the litigation until
final judgment at the CA level.
A source of misunderstanding in implementing the final decision in this case
proceeds from the way the original [LA] framed his decision. The decision
consists essentially of two parts.
The first is that part of the decision that cannot now be disputed because it
has been confirmed with finality.This is the finding of the illegality of the
dismissal and the awards of separation pay in lieu of reinstatement,
backwages, attorneys fees, and legal interests.

The second part is the computation of the awards made.On its face, the
computation the [LA] made shows that it was time-bound as can be seen
from the figures used in the computation. This part, being merely a
computation of what the first part of the decision established and declared,
can, by its nature, be re-computed. This is the part, too, that the petitioner
now posits should no longer be re-computed because the computation is
already in the [LAs] decision that the CA had affirmed. The public and
private respondents, on the other hand, posit that a re-computation is
necessary because the relief in an illegal dismissal decision goes all the way
up to reinstatement if reinstatement is to be made, or up to the finality of the
decision, if separation pay is to be given in lieu reinstatement.
That the [LAs] decision, at the same time that it found that an illegal
dismissal had taken place, also made a computation of the award, is
understandable in light of Section 3, Rule VIII of the then NLRC Rules of
Procedure which requires that a computation be made. This Section in part
states:
[T]he [LA] of origin, in cases involving monetary awards and at all events,
as far as practicable, shall embody in any such decision or order the detailed
and full amount awarded.
Clearly implied from this original computation is its currency up to the
finality of the [LAs] decision. As we noted above, this implication is
apparent from the terms of the computation itself, and no question would
have arisen had the parties terminated the case and implemented the decision
at that point.
xxxx
We see no error in the CA decision confirming that a re-computation is
necessary as it essentially considered the [LAs] original decision in
accordance with its basic component parts as we discussed above. To
reiterate, the first part contains the finding of illegality and its monetary
consequences; the second part is the computation of the awards or monetary
consequences of the illegal dismissal, computed as of the time of the [LAs]
original decision. To illustrate these points,had the case involved a pure
money claim for a specific sum (e.g., salary for a specific period) or a
specific benefit (e.g., 13th month pay for a specific year) made by a former
employee, the [LAs] computation would admittedly have continuing

currency because the sum is specific and any variation may only be on the
interests that may run from the finality of the decision ordering the payment
of the specific sum.
In contrast with a ruling on a specific pure money claim, is a claim that
relates to status (as in this case, where the claim is the legality of the
termination of the employment relationship). Inthis type of cases, the
decision or ruling is essentially declaratory of the status and of the rights,
obligations and monetary consequences that flow from the declared status
(in this case, the payment of separation pay and backwages and attorneys
fees when illegal dismissal is found). When this type of decision is executed,
what is primarily implemented is the declaratory finding on the status and
the rights and obligations of the parties therein; the arising monetary
consequences from the declaration only follow as component of the
partiesrights and obligations.
In the present case, the CA confirmed that indeed an illegal dismissal had
taken place, so that separation pay in lieu of reinstatement and backwages
should be paid. How much that separation pay would be, would ideally be
stated in the final CA decision; if not, the matter is for handling and
computation by the [LA] of origin as the labor official charged with the
implementation of decisions before the NLRC.
As the CA correctly pointed out, the basis for the computation of separation
pay and backwages is Article 279 of the Labor Code, as amended, which
reads:
"xxx An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his
full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement."
xxxx
Consistent with what we discussed above, we hold that under the terms of
the decision under execution, no essential change is made bya recomputation as this step is a necessary consequence that flows from the
nature of the illegality of dismissal declared in that decision. A recomputation (or an original computation, if no previous computation has
been made) is a part of the law specifically, Article 279 of the Labor Code

and the established jurisprudence on this provision that is read into the
decision. By the nature of an illegal dismissal case, the reliefs continue to
add on until full satisfaction, as expressed under Article 279 of the Labor
Code. The re-computation of the consequences of illegal dismissal upon
execution of the decision does not constitute an alteration or amendment of
the final decision being implemented. The illegal dismissal ruling stands;
only the computation of monetary consequences of this dismissal is affected
and this is not a violation of the principle of immutability of final judgments.
xxxx
That the amount the petitioner shall now pay has greatly increased is a
consequence that it cannot avoid as it is the risk that it ran when it continued
to seek recourses against the [LAs] decision. Article 279 provides for the
consequences of illegal dismissal in no uncertain terms, qualified only by
jurisprudence in its interpretation of when separation pay in lieu of
reinstatement is allowed. When that happens, the finality of the illegal
dismissal decision becomes the reckoning point instead of the reinstatement
that the law decrees. In allowing separation pay, the final decision
effectively declares that the employment relationship ended so that
separation pay and backwages are to be computed up to that point. The
decision also becomes a judgment for money from which another
consequence flows the payment of interest in case ofdelay. This was what
the CA correctly decreed when it provided for the payment of the legal
interest of 12% from the finality of the judgment, in accordance with our
ruling in Eastern Shipping Lines, Inc. v. [CA].
x x x The strict legalism in limiting the computation of the backwages and
other benefits simply because the Decision of the [LA] provided a
computation only up to the date of the promulgation of his Decision on
November 6, 2000 cannotoverride or prejudice the substantive rights of
anillegally dismissed employee under the law and extant jurisprudence.
Likewise, pursuant to the above ruling of the Supreme Court, the monetary
award in favor of [the respondents] should earn legal interest at the rate of
12% fromJuly 11, 2005, the date of the finality of the Decision, as a
necessary consequence of [the petitioners] legal actions in questioning the
execution of the [LAs] Decision x x x.
xxxx

With regard to [the respondents] claims for additional attorneys fees as

well as moral and exemplary damages, suffice it to state that the [LA] has
already awarded [in their favor] the amount of P20,000.00 as attorneys
feesbut denied [their] claim for damages in his Decision dated November 6,
2000. Any modification, which effectively increases or decreases the
original amount awarded as attorneys fees is not included or contemplated
in the discussion above on re-computation of monetary awards. Pursuant to
the Session Delights Ice Cream and Fast Foodsruling, the award of
attorneys fees involves a specific sum and "would have continuing
currency". If at all, the attorneys fees awarded in favor of[the respondents]
will earn legal interest pursuant to the rules laid down in Eastern Shipping
Lines vs. [CA].
[The respondents] claim for moral and exemplary damages was correctly
denied by the [LA]. While their dismissal may be illegal, there was no
showing that [the petitioners] acted in bad faith. x x x.12 (Citations omitted)
The CA, in the herein assailed Resolution issued on February 7, 2014,
denied the petitioners Motion for Reconsideration.13
Issues
Unperturbed, the petitioners seekto reverse the CAs ruling by presenting
before this Court the arguments below:
A.
A FINAL AND EXECUTORY DECISION IS IMMUTABLE AND CAN
NO LONGER BE MODIFIED. THE ORDER OF [LA] FLORES, AS
SUSTAINED IN THE ASSAILED RULINGS, CANNOT MODIFY THE
FINALAND EXECUTORY GAMBITO DECISION.
B.
EVEN ASSUMING ARGUENDOTHAT THE RE-COMPUTATION OF
AWARDS IS VALID, [UPI] IS NOT LIABLE TO PAY BACKWAGES
AND SEPARATION PAY FOR THE FULL PERIOD FROM 06
NOVEMBER 2000 UP TO 11 JULY 2005. RESPONDENTS WERE NOT
REINSTATED IN THE GAMBITO DECISION.
C.

RESPONDENTS ARE NOT ENTITLED TO BACKWAGES AND

SEPARATION PAY BEYOND THEIR RETIREMENT AGES. NEITHER
ARE THEY ENTITLED TO LEGAL INTEREST AT 12%.14
In support of the instant petition,the petitioners allege that the doctrines
enunciated in Session Delights Ice Cream and Fast Foods v. Court of
Appeals (Sixth Division)15 do not apply in the case at bar. LA Gambito
explicitly qualified the award of backwages and separation pay to be
computed from the date of dismissal up to November 6, 2000. The said
qualification appears both in the immutable and computation portions of the
judgment.16
The petitioners also lament that the writ of execution issued by LA Flores
included an award of 13th month pay, which is nowhere to be found in LA
Gambitos decision.17
It is further claimed that the petitioners did not immediately satisfy LA
Gambitos award because the NLRC reversed the same. Hence, the
petitioners cannot be faulted for relying upon the NLRC decision and
defending it before the CA. Consequently, even if backwages and separation
pay were really due, their computation should not include the period from
February 21, 2002 to September 13, 2004,18 during which time the NLRCs
disquisition that there was no illegal dismissal stood.19
The petitioners likewise aver that since Florentino and Nilda turned 60 on
December 11, 2002 and April 30, 2002, respectively, backwages and
separation pay could only be computed up to those dates. Under both UPIs
retirement plan and Article 28720 of the Labor Code, 60 is the optional
retirement age. On July 18, 2005, Florentino and Nilda filed separate claims
for retirement benefits. They, in effect, had admitted that 60 and not 65 is the
retirement age for UPIs faculty members. Relevantly, in Espejo v.
NLRC,21 the Court ruled that an employee may retire, or may be retired by
his employer upon reaching the age of 60.22
Lastly, the petitioners cite Nacar v. Gallery Frames23 to argue that legal
interest should only be 6% and not 12%.24
In their Comment,25 the respondents insist that Florentinos compulsory
retirement was due only on the day before he turned 65 on December 11,
2002. Nilda, on the other hand, would have been retired only on the day
before she died on May 7, 2006.26 The respondents likewise claim that 12%

and not 6% should be imposed upon the award as annual interest. Ruling of
the Court
This Court affirms but modifies the ruling of the CA.
The issues, being interrelated, shall be discussed jointly.
Updating the computation of
awards to include as well
backwages and separation pay
corresponding to the period after
the rendition of LA Gambitos
decision on November 6, 2000 up to
its finality on July 11, 2005 is not
violative of the principle of
immutability of a final and
executory judgment.
This Court need not belabor the first two issues raised since they have been
amply discussed by the CA in the assailed decision and resolution.
In Session Delightsaptly quoted by the CA and reiterated in several cases
including Nacarand Gonzales v. Solid Cement Corporation,27 the Court was
emphatic that:
[N]o essential change is made by a re-computation as this step is a necessary
consequence that flows fromthe nature of the illegality of dismissal declared
in that decision. A re-computation (or an original computation, if no previous
computation has been made) is a part of the lawspecifically, Article 279 of
the Labor Code and the established jurisprudence on this provisionthat is
read into the decision. By the nature of an illegal dismissal case, the reliefs
continue to add on until full satisfaction, as expressed under Article 279 of
the Labor Code. The re- computation of the consequencesof illegal dismissal
upon execution of the decision does not constitute an alteration or
amendment of the final decision being implemented. The illegaldismissal
ruling stands; only the computation of monetary consequences of this
dismissal is affected and this is not a violation of the principle of
immutability of final judgments.
xxxx

That the amount the petitioner shall now pay has greatly increased is a
consequence that it cannot avoid asit is the risk that it ran when it continued
to seek recourses against the labor arbiters decision. Article 279 provides
for the consequences ofillegal dismissal in no uncertain terms, qualified only
by jurisprudence in its interpretation of when separation pay in lieu of
reinstatement is allowed. When that happens, the finality of the illegal
dismissal decision becomes the reckoning point instead of the reinstatement
that the law decrees. In allowing separation pay, the final decision
effectively declares that the employment relationship ended so that
separation pay and backwages are to be computed up to that point. x x
x.28 (Citation omitted and underscoring ours)
Prescinding from the above, the Court finds no reversible error committed
by the CA when it affirmed LA Flores Order dated August 22, 2006, which
allowed the updating beyond November 6, 2000 of the computation of
backwages and separation pay awarded to the respondents. The CA correctly
ruled that the backwages should be computed from May 9, 2000, the date of
illegal dismissal, up toJuly 11, 2005, the date of the Entry of Judgment,
while separation pay should be reckoned from the respective first days of
employment of Florentino and Nilda up to July 11, 2005 as well.
While the dispositive portion of the
herein assailed CA decision did not
explicitly refer to the 13th month
pay, its inclusion in the computation
approved by LA Flores is proper.
Presidential Decree No. 85129 (P.D. No. 851) is the law directing the 13th
month payment. On the other hand, Article 279 of the Labor Code in part
provides that an illegally-dismissed employee shall be entitled to full
backwages, inclusive of allowances, and other benefits ortheir monetary
equivalent computed from the time compensation was withheld up to the
time of actual reinstatement.
In Gonzales, a final and executory decision of the LA did not explicitly
award the 13th month pay. During the execution proceedings, the NLRC
included it in the computation. The CA deleted the same. This Court
thereafter ruled that the CA abused its discretion since "the 13th month pay
fell due x x x by legal mandate."30

In the body and dispositive portion of LA Gambitos Decision31 dated

November 6, 2000, which became final and executory on July 11, 2005, he
did not explicitly include the 13th month pay in the award. However, the
decision stated that Florentino and Nilda were entitled to full backwages and
other benefits.
Subsequently, the Labor Arbitration Associates updated computation of the
award32 included the 13th month pay and was approved by LA Flores
through the latters August 22, 2006 Order. The NLRC set aside LA Flores
order, but the CA reinstated the same. The dispositive portion of the CA
decision expressly ordered the award of backwages, separation pay,
attorneys fees and legal interest, but conspicuously absent was a reference
to the inclusion of the 13th month pay.33
The Court finds that despite the CAs non-explicit reference to the 13th
month pay, following the doctrine in Gonzales, its inclusion in the
computation is proper. Entitlement to it is a right granted by P.D. No. 851.
Besides, the computation of award for backwages and other benefits is a
mere legal consequence of the finding that there was illegal dismissal.34
In computing the backwages and
benefits awarded to the
respondents, the reckoning period
is not interrupted by the NLRCs
reversal of LA Gambitos finding of
illegal dismissal.
The petitioners argue that even if backwages and benefits were really due,
the computation should not includethe period from February 21, 2002 to
September 13, 2004, during which time the NLRCs disquisition that there
was no illegal dismissal stood.
The argument fails to persuade.
In Gonzales, the Court stated that the increase in the amount that the
corporation had to pay "is a consequence that it cannot avoid as it is the risk
that it ran when it continued to seek recourses against the [LAs] decision."35
Further, in Reyes v. NLRC, et al.,36 the Court declared that:

One of the natural consequences of a finding that an employee has been

illegally dismissed is the payment of backwages corresponding to the period
from his dismissal up to actual reinstatement. The statutory intent of this
matter is clearly discernible. The payment of backwages allows the
employee to recover from the employer that which he has lost by way of
wages as a result of his dismissal. Logically, it must be computed from the
date of petitioners illegal dismissal up to the time of actual reinstatement.
There can be no gap or interruption, lest we defeat the very reason of the law
in granting the same. x x x.37 (Citation omitted and underscoring ours)
Although in Reyes, the issue relates to the delay in filing of the complaint
for illegal dismissal from the time of termination, there is no preclusion to
apply the doctrine that there should be no gap or interruption in the
reckoning period during which the dismissed employee is entitled to
backwages and benefits. The statutory intent in the award of backwages and
benefits is clear. Further, as declared in Gonzales, an employer takes a risk in
assailing the LAs finding of illegal dismissal, but there is no insulation from
the consequences therefrom.
The CA properly imposed a legal
interest upon the total monetary
award reckoned from the Entry of
Judgment on July 11, 2005 until full
satisfaction thereof, but the Court
modifies the rate indicated in the
assailed decision to conform to the
doctrine in Nacar.
In Gonzales, the Court stated that when there is a finding of illegal dismissal
and an award of backwages and separation pay, "[t]he decision also becomes
a judgment for money from which another consequence flowsthe payment
of interest in case of delay."38
Again in Gonzales, the Court instructed that legal interest is imposable upon
the "total unpaid judgment amount, from the time x x x the decision (on the
merits in the original case) became final."39
In the case at bar, the CA properly imposed the legal interest upon the total
monetary award even if none was explicitly included in the fine print of LA
Gambitos decision and LA Flores order. The imposition of legal interest is

not to be considered as an alteration of the final judgment to be executed.

The legal interest is already deemed read into the decision.
As to the correct rate of imposable interest, the petitioners argue that only
6% and not 12% is mandated pursuant to the ruling in Nacar.
Nacaris instructive anent the rate ofinterest imposable upon the total
adjudged monetary award, viz:
[T]he Bangko Sentral ng Pilipinas Monetary Board (BSP-MB), in its
Resolution No. 796 dated May 16, 2013, approved the amendment of
Section 240 of Circular No. 905, Series of 1982 and, accordingly, issued
Circular No. 799,41 Series of 2013, effective July 1, 2013, the pertinent
portion of which reads:
The Monetary Board, in its Resolution No. 796 dated 16 May 2013,
approved the following revisions governing the rate of interest in the
absence of stipulation in loan contracts, thereby amending Section 2 of
Circular No. 905, Series of 1982:
Section 1. The rate of interest for the loan or for bearance of any
money, goods or credits and the rate allowed in judgments, in the
absence of an express contract as to such rate of interest, shall be six
percent (6%) per annum.
Section 2. In view of the above, Subsection X305.1 of the Manual of
Regulations for Banks and Sections 4305Q.1, 4305S.3 and 4303P.1 of
the Manual of Regulations for Non-Bank Financial Institutions are
hereby amended accordingly.
This Circular shall take effect on 1 July 2013.
Thus, from the foregoing, in the absence of an express stipulation as to the
rate of interest that would govern the parties, the rate of legal interest for
loans or forbearance ofany money, goods or credits and the rate allowed in
judgments shall no longer be twelve percent (12%) per annum as reflected
in the case of Eastern Shipping Linesand Subsection X305.1 of the Manual
of Regulationsfor Banks and Sections 4305Q.1, 4305S.3 and 4303P.1 of the
Manual of Regulations for Non-Bank Financial Institutions, before its
amendment by BSP-MB Circular No. 799 but will now be six percent
(6%) per annum effective July 1, 2013. It should be noted, nonetheless, that

the new rate could only be applied prospectively and not retroactively.
Consequently, the twelve percent (12%) per annumlegal interest shall apply
only until June 30, 2013. Come July 1, 2013 the new rate of six percent (6%)
per annum shall be the prevailing rate of interest when applicable.
xxxx
Nonetheless, with regard to those judgments that have become final and
executory prior to July 1, 2013, saidjudgments shall not be disturbed and
shall continue to be implemented applying the rate of interest fixed
therein.42 (Some citations omitted and underscoring ours)
In Nacar, during the execution proceedings, the LA, NLRC and the CA did
not impose a legal interestupon the total adjudged award. Thereafter, this
Court granted the petition filed before it by the dismissed employee pleading
for the imposition upon the monetary award of the legal interest, which the
Court declared to be 12% per annumfrom the date of the Entry of Judgment
on May 27, 2002 to June 30, 2013, and 6% per annum from July 1, 2013
until their full satisfaction.
Similarly, in the case of Florentino and Nilda, LA Gambitos decision
became final and executory on July11, 2005, during which time, the
prevailing rate of legal interest was 12%. Note, however, that LA Gambitos
decision and subsequently, even LA Flores Order, dated August 22, 2006,
made no explicit award of legal interest. As discussed above though, the
imposition of the legal interest is already deemed read into the decision and
order. For the same reason, the CA, in the herein assailed decision, expressly
included the said interest in the computation.
In Nacar, and in the case before this Court now, the judgments finding that
the employees were illegally dismissed became final and executory before
July 1, 2013. In both cases too, the said judgments did not explicitly include
the imposition of the legal interest upon the total adjudged award. In the case
of Florentino and Nilda, it was the CA, which first expressly included the
legal interest in the equation. In Nacar, this Court made the explicit inclusion
and pegged the rate at12% from the date of the Entry of Judgment up to June
30, 2013, and at 6% from July 1, 2013 until full satisfaction thereof. The
circumstances in the instant petition are similar to the foregoing, hence,
Nacarfinds application. Consequently, the Court imposes upon the total
adjudged award an interest of 12% interest per annum reckoned from July

11, 2005 until June30, 2013. The interest of 6% per annumis imposed from
July 1, 2013 until full satisfaction of the judgment award.
The computation of backwages and
separation pay due to Florentino
and Nilda properly includes the
period from 2002 to 2005.
The petitioners point out that Florentino and Nilda turned 60 on December
11, 2002 and April 30, 2002, respectively. Thus, backwages and separation
pay could only be computed up to those dates since under both UPIs
retirement plan and Article 287 ofthe Labor Code, 60 is the optional
retirement age. Further, on July 18, 2005, Florentino and Nilda filed separate
claims for retirement benefits, hence, effectively admitting that 60 and not
65 is the retirement age for UPIs faculty members.
Nilda and Florentino were born on April 30, 1942 and December 11, 1942,
respectively. In 2002, both had turned 60 and can opt to retire. The Court
cannot, however, agree that this isthe cut-off date for the computation of
backwages and separation pay due to them because of the reasons discussed
below.
First, 60 is merely an optional but not the mandatory retirement age. Second,
the evidence submitted do not showat whose option it is to retire the faculty
members before the age of 65. Third, there is no proof whatsoever that the
faculty members of UPI indeed retire at 60 years of age. Fourth, Florentino
and Nilda filed claims for retirement pay in 2005 when they were both 63,
hence, their acts did not necessarily constitute an admission that 60 is the
retirement age for UPIs faculty members.
In view of the above, the Court finds that no mistake was committed by LA
Flores and the CA in allowing the computation of backwages and separation
pay due to Florentino and Nilda to include the period beyond 2002.
WHEREFORE, premises considered, the Decision of the Court of Appeals
rendered on November 5, 2013,and the Resolution issued on February 7,
2014 in CA-G.R. SP No. 107230 are AFFIRMED with MODIFICATIONS.
The petitioners herein, University of Pangasinan, Inc. and its former
officials, Cesar Duque, Juan Llamas Amor and Dominador Reyes are
ORDERED TO PAY Florentino Fernandez and the Heirs of Nilda Fernandez
the following:

(1) backwages, including the 13th month pay, to be computed from

May 9, 2000, the date of illegal dismissal from employment, up to
July 11, 2005, the date of finalityof the Court Resolution in G.R. No.
166103 per Entry of Judgment;
(2) separation pay computed from Florentino Fernandez and Nilda
Fernandezs respective first days of employment with the University
of Pangasinan, Inc. up to July 11, 2005 at the rate of one month pay
per year of service;
(3) attorney's fees in the amount of P20,000.00; and
(4) interest of twelve percent ( 12%) per annum of the total monetary
award, computed from July 11, 2005 to June 30, 2013, and six percent
(6%) per annum from July 1, 2013 until full satisfaction.
The LABOR ARBITER is hereby ORDERED to make a
RECOMPUTATION of the total monetary benefits awarded and due to
Florentino Fernandez and Nilda Fernandez in accordance with this
Resolution.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 162447

December 27, 2006

ANABELLE MUAJE-TUAZON and ALMER R. ABING, petitioners,

vs.
WENPHIL CORPORATION, ELIZABETH P. ORBITA*, and THE
COURT OF APPEALS, respondents.

DECISION

QUISUMBING, J.:
Before us is a petition for review under Rule 45 assailing the Decision1 dated
August 27, 2003 of the Court of Appeals in CA-G.R. SP No. 75419 and its
Resolution dated February 23, 2004 denying reconsideration. The Court of
Appeals reversed the National Labor Relations Commission's finding of
illegal dismissal.
The pertinent facts of the case are as follows:
Petitioners Annabelle M. Tuazon and Almer R. Abing worked as branch
managers of the Wendy's food chains in MCU Caloocan and Meycauayan,
respectively, of respondent Wenphil Corporation. From September 14 to
November 8, 1998, Wendy's had a "Biggie Size It! Crew Challenge"
promotion contest. The branch with the highest sales of "Biggie Size It"
wins. The Meycauayan and MCU Caloocan branches won first and second
places, respectively. Because of its success, respondent had a second run of
the contest from April 26 to July 4, 1999. The Meycauayan branch won
again. The MCU Caloocan branch failed to make it among the winners.2
Before the start of the third round from October 18, 1999 to January 16,
2000, Abing was assigned to the SM North Edsa Annex branch while
Tuazon was assigned to the Meycauayan branch. Before the announcement
of the third round winners, management received reports that as early as the
first round of the contest, the Meycauayan, MCU Caloocan, Tandang Sora
and Fairview branches cheated. An internal investigation ensued.3
On February 3, 2000, petitioners were summoned to the main office
regarding the reported anomaly. Petitioners denied there was cheating.
Immediately thereafter, petitioners were notified, in writing, of hearings
scheduled on February 4 and 7, 2000 and of their immediate
suspension.4 Thereafter, on February 29, 2000, petitioners were dismissed.
Petitioners filed, with the Regional Arbitration Branch, a complaint for
illegal suspension and dismissal against respondent Wenphil Corporation
and its General Manager, Elizabeth P. Orbita. Petitioners insisted that they
were innocent of the accusations and were dismissed without cause. They
claimed that the real reason for their termination was their persistent

demands for overtime and holiday pay. They aver that (a) they were not
notified beforehand why they were called to the main office; (b) their right
to due process was denied; and (c) they were not afforded counsel despite
their request for one.
In their defense, respondents maintained that petitioners were terminated for
dishonesty amounting to serious misconduct and willful breach of trust.
They presented affidavits of witnesses, receipts and other documents to
support the charges against petitioners. Respondents posited that since
petitioners occupied managerial positions, loss of trust and confidence by
the employer was sufficient cause for their termination. Moreover,
respondents insisted that petitioners were afforded due process, with two
required notices, and the opportunity to defend themselves. Lastly,
respondents asserted that the preventive suspension was necessary for the
protection of the company's property and possible destruction of evidence
pending investigation.
During the hearings, the Labor Arbiter disregarded the affidavits of
respondents' witnesses for being executed only after the company
investigation and held that respondents' evidence insufficiently proved the
alleged cheating of the petitioners. The Labor Arbiter ruled in favor of the
petitioners as follows:
WHEREFORE, judgment is hereby rendered finding the suspension
and dismissal of complainants Almer R. Abing and Annabelle M.
Tuazon illegal. Respondent WENPHIL CORPORATION is hereby
ordered to:
1. immediately reinstate complainants to their former or
equivalent position, actual or in payroll at, their option, without
loss of seniority rights and benefits.
2. to pay them backwages from the time they were illegally
dismissed on 03 February 2000 until their reinstatement,
computed as of the date of this decision, as follows:
([P15,000] + 3,000 + 2,000 + 1,000) x 10 months
= P210,000.00 for each complainant.
3. to pay them ten (10%) percent attorney's fees.

All other claims are dismissed for lack of merit.

SO ORDERED.5
Respondents appealed to the National Labor Relations Commission
(NLRC), which affirmed with modification the decision of the Labor Arbiter
in this wise:
WHEREFORE, the appealed Decision is hereby AFFIRMED but with
the following modifications:
1. Declaring the preventive suspension of the complainants to be
legal. Accordingly, the period from February 3-28, 2000, during
which they were preventively suspended, shall be excluded in the
computation of their backwages; and
2. Ordering respondent company to pay complainants separation pay,
in lieu of reinstatement, at the rate of one (1) month salary for every
year of service to be computed from the date of employment up to the
actual payment thereof.
SO ORDERED.6
Denied reconsideration, respondents elevated the case to the Court of
Appeals, which found substantial proof of petitioners' misconduct. The
appellate court held that although the affidavits were executed after the
company investigation, the facts and issues therein were discussed during
the investigation and submitted to the management before the decision to
dismiss the petitioners was made. It also ruled that respondent Wenphil
sufficiently complied with the due process requirement. The appellate court
ruled as follows:
WHEREFORE, premises considered, the instant petition for certiorari
is hereby GRANTED. The assailed resolutions of the National Labor
Relations Commission dated January 30, 2002 and September 24,
2002 are hereby SET ASIDE. In lieu thereof, judgment is hereby
rendered REVERSING and SETTING ASIDE the decision of the
Labor Arbiter, dated December 8, 2000 rendered in NLRC NCR
Cases Nos. 30-03-00993-00 and 30-03-01020-00. The private
respondents' complaints filed in the aforementioned cases are hereby
DISMISSED.

SO ORDERED.7
Petitioners moved for reconsideration but the same was denied. Petitioners
now come before us assigning the following errors:
I. THE FACTUAL BASES USED BY THE COURT OF APPEALS
IN REVERSING THE RULING OF THE NLRC IS (sic)
ACTUALLY UNFOUNDED;
II. THE COURT OF APPEALS HAD DELIBERATELY
OVERLOOKED THE FACT THAT THE INTERROGATION
PROCESS CONDUCTED BY THE EMPLOYER IS VOID AB
INITIO, HENCE, CANNOT BE USED AS A SUBSTITUTE FOR
LAWFUL INVESTIGATION FOR PURPOSES OF DUE PROCESS;
III. THE COURT OF APPEALS HAD WHIMSICALLY GIVE[N]
TOO MUCH WEIGHT TO THE AFFIDAVITS WHICH ASIDE
FROM BEING SELF-SERVING, ARE NON-EXISTEN[T] AT THE
TIME THEY WERE USED AS A GROUND FOR THE DISMISSAL
OF THE PETITIONERS;
IV. IN REVERSING THE FACTUAL FINDINGS OF THE LABOR
TRIBUNALS, THE COURT OF APPEALS WENT TO THE
EXTENT OF OVER-EXPANDING ITS CERTIORARI
JURISDICTION, IN VIOLATION OF LAW AND ESTABLISHED
JURISPRUDENCE ON THE MATTER;
V. THE LABOR ARBITER, BEING THE ONE WHO ACTUALLY
CONDUCTED THE HEARING IN THE ARBITRATION STATE
AND HAD PERSONALLY OBSERVED THE DEMEANOR OF
[THE] PARTIES DURING THE HEARING, HIS FACTUAL
FINDINGS (sic) CARRY HEAVIER WEIGHT THAN THE
EVALUATION OF [THE] COURT OF APPEALS' JUSTICES WHO
MERELY RELY (sic) THEIR FINDINGS SOLELY FROM THE
RECORD OF THE CASE (sic).8
Essentially, we are asked to resolve the following issues: (1) Did the
appellate court act in excess of its jurisdiction when it reviewed factual
findings of the Labor Arbiter and NLRC? (2) Was there compliance with the
due process requirement? (3) Were petitioners illegally dismissed?

On the threshold procedural issue, petitioners contend that the appellate

court went beyond its jurisdiction when it re-evaluated the findings of facts
of the Labor Arbiter also affirmed by the NLRC.
Respondents counter that the appellate court correctly exercised its power of
certiorari since the Labor Arbiter and the NLRC gravely abused their
discretion when it failed to consider the affidavits of the witnesses against
the petitioners. They also point out that the present petition raises questions
of fact which are not proper in a petition for review under Rule 45.
The rule is that a petition for certiorari is available when any tribunal, board
or officer exercising judicial or quasi-judicial functions has acted without or
in excess of its or his jurisdiction, or with grave abuse of discretion
amounting to lack or excess of jurisdiction.9 Generally, factual issues are not
proper subjects for certiorari which is limited to the issue of jurisdiction and
grave abuse of discretion.10 Grave abuse of discretion is committed when the
board, tribunal or officer exercising judicial function fails to consider
evidence adduced by the parties.11 In the present case, the Labor Arbiter and
the NLRC disregarded the affidavits of the witnesses against the petitioners.
Moreover, where the party's contention appears to be clearly tenable, or
where the broader interest of justice and public policy so require, the court
may, in a certiorari proceeding, correct the error committed.12 Hence, in our
view, the Court of Appeals correctly exercised its power of certiorari when it
re-evaluated the findings of fact by the Labor Arbiter and the NLRC.
The general rule is that the jurisdiction of this Court in a petition for review
under Rule 45 is confined to a review of questions of law. Further, the
findings of fact of the Court of Appeals, when supported by substantial
evidence, are conclusive and binding on the parties, and are not reviewed by
this Court, except when the findings are contrary with those of the lower
court or quasi-judicial bodies.13 The contradictory findings of the NLRC and
the Court of Appeals provide sufficient justification for our review of the
facts.
On the second issue. Did Wenphil comply with the due process requirement
before dismissing the petitioners?
Petitioners aver that their right to due process was violated. They were not
notified of the accusation against them before they were summoned to the
main office of Wenphil on February 3, 2000 for investigation. Further, they

assert that the company investigation was irregular or void since they were
not allowed to seek the assistance of counsel, and that they were not present
when the testimonies of the witnesses were taken, and they were not given
the opportunity to confront the witnesses against them.
First, the law requires that the employee be given two written notices before
terminating his employment, namely: (1) a notice which apprises the
employee of the particular acts or omissions for which his dismissal is
sought; and (2) the subsequent notice which informs the employee of the
employer's decision to dismiss him.14
The records show that the petitioners were given written notices informing
them that they were charged with serious misconduct and dishonesty in
relation to the "Biggie Size It! Crew Challenge" program, and notifying
them of the scheduled hearings on February 4 and 7, 2000.15 Although
notices were given to them only on February 3, 2000, it will be noted that
there were other investigations or hearings set after February 4 and 7 where
they had the opportunity to explain their side after they were apprised of
their alleged infractions. We note likewise that petitioners, thinking that their
verbal explanations were sufficient, opted to forego a written explanation,
and did not appear during the set hearing. These actions were choices that
petitioners voluntarily made.
On record are the written notices dated February 29, 2000,16 whereby
petitioners were notified of respondents' decision to terminate them.
Petitioner Tuazon acknowledged receipt of her notice as evidenced by her
signature on the company's copy. Petitioner Abing's refusal to sign the
company's copy, despite his own copy having been tendered to him, does not
invalidate the notice of his termination.
Petitioners contend that they were not given the opportunity to confront the
witnesses against them. Petitioners must be reminded, however, that
confrontation of witnesses is required only in adversarial criminal
prosecutions, and not in company investigations for the administrative
liability of the employee.17 Additionally, actual adversarial proceedings
become necessary only for clarification, or when there is a need to propound
searching questions to witnesses who give vague testimonies. This is not an
inherent right, and in company investigations, summary proceedings may be
conducted.18

Finally, on the last issue. Petitioners contend that respondents did not
sufficiently prove the existence of a just cause for their termination, hence
they were illegally dismissed.
There is no denying that petitioners were managerial employees. They
executed management policies, they had the power to hire personnel and
assign them tasks; and discipline the employees in their branch. They
recommended actions on employees to the head office.19 Pertinent is Article
212 (m) of the Labor Code defining a managerial employee as one who is
vested with powers or prerogatives to lay down and execute management
policies and/or hire, transfer, suspend, lay-off, recall, discharge, assign or
discipline employees. Consequently, as managerial employees, in the case of
petitioners, the mere existence of grounds for the loss of trust and confidence
justify their dismissal.20 Pursuant to our ruling in Caoile v. National Labor
Relations Commission,21 as long as the employer has a reasonable ground to
believe that the managerial employee concerned is responsible for the
purported misconduct, or the nature of his participation renders him
unworthy of the trust and confidence demanded by his position, the
managerial employee can be dismissed.
In the present case, the tape receipts presented by respondents showed that
there were anomalies committed in the branches managed by the petitioners.
On the principle of respondeat superior or command responsibility alone,
petitioners may be held liable for negligence in the performance of their
managerial duties, unless petitioners can positively show that they were not
involved. Their position requires a high degree of responsibility that
necessarily includes unearthing of fraudulent and irregular activities.22 Their
bare, unsubstantiated and uncorroborated denial of any participation in the
cheating does not prove their innocence nor disprove their alleged
guilt.23 Additionally, some employees declared in their affidavits24 that the
cheating was actually the idea of the petitioners.
Petitioners make much of the fact that the affidavits were executed only after
the investigation. This is of no moment. For even without the affidavits,
sufficient basis exists for respondents' loss of trust and confidence on the
petitioners as managerial officers.
WHEREFORE, the petition is DENIED. The Decision dated August 27,
2003 and Resolution dated February 23, 2004 of the Court of Appeals in
CA-G.R. SP No. 75419 are hereby AFFIRMED.

No pronouncement as to costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Baguio City
SECOND DIVISION
G.R. No. 195227

April 21, 2014

FROILAN M. BERGONIO, JR., DEAN G. PELAEZ, CRISANTO O.

GEONGO, WARLITO O. JANAYA, SALVADOR VILLAR, JR.,
RONALDO CAFIRMA, RANDY LUCAR, ALBERTO ALBUERA,
DENNIS NOPUENTE and ALLAN SALVACION, Petitioners,
vs.
SOUTH EAST ASIAN AIRLINES and IRENE DORNIER, Respondents.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari1 the challenge to the
September 30, 2010 decision2 and the January 13, 2011 resolution3 of the
Court of Appeals (CA) in CA-G.R. SP No. 112011.
This CA decision reversed the July 16, 2008 decision4 of the National Labor
Relations Commission (NLRC), which, in turn, affirmed the March 13, 2008
order5 of the Labor Arbiter (LA) in NLRC Case No. 00-04-05469- 2004. The
LA granted the Motion filed by petitioners Froilan M. Bergonio, Jr., Dean G.
Pelaez, et.al., (collectively, the petitioners) for the release of the garnished
amount to satisfy the petitioners accrued wages.
The Factual Antecedents
On April 30, 2004, the petitioners filed before the LA a complaint for illegal
dismissal and illegal suspension with prayer for reinstatement against

respondents South East Asian Airlines (SEAIR) and Irene Dornier as

SEAIRs President (collectively, the respondents).
In a decision dated May 31, 2005, the LA found the petitioners illegally
dismissed and ordered the respondents, among others, to immediately
reinstate the petitioners with full backwages. The respondents received their
copy of this decision on July 8, 2005.6
On August 20, 2005, the petitioners filed before the LA a Motion for
issuance of Writ of Execution for their immediate reinstatement.
During the scheduled pre-execution conference held on September 14, 2005,
the respondents manifested their option to reinstate the petitioners in the
payroll. The payroll reinstatement, however, did not materialize. Thus, on
September 22, 2005, the petitioners filed before the LA a manifestation for
their immediate reinstatement.
On October 3, 2005, the respondents filed an opposition to the petitioners
motion for execution.7 They claimed that the relationship between them and
the petitioners had already been strained because of the petitioners
threatening text messages, thus precluding the latters reinstatement.
On October 7, 2005, the LA granted the petitioners motion and issued a writ
of execution.8
The respondents moved to quash the writ of execution with a prayer to hold
in abeyance the implementation of the reinstatement order.9 They maintained
that the relationship between them and the petitioners had been so strained
that reinstatement was no longer possible.
The October 7, 2005 writ of execution was returned unsatisfied. In response,
the petitioners filed a motion for re-computation of accrued wages, and, on
January 25, 2006, a motion for execution of the re-computed amount. On
February 16, 2006, the LA granted this motion and issued an alias writ of
execution.10

On February 21, 2006, the respondents issued a Memorandum11 directing the

petitioners to report for work on February 24, 2006. The petitioners failed to
report for work on the appointed date. On February 28, 2006, the
respondents moved before the LA to suspend the order for the petitioners
reinstatement.12
Meanwhile, the respondents appealed with the NLRC the May 31, 2005
illegal dismissal ruling of the LA.
In an order dated August 15, 2006,13 the NLRC dismissed the respondents
appeal for non-perfection. The NLRC likewise denied the respondents
motion for reconsideration in its November 29, 2006 resolution, prompting
the respondents to file before the CA a petition for certiorari.
The NLRC issued an Entry of Judgment on February 6, 2007 declaring its
November 29, 2006 resolution final and executory. The petitioners forthwith
filed with the LA another motion for the issuance of a writ of execution,
which the LA granted on April 24, 2007. The LA also issued another writ of
execution.14 A Notice of Garnishment was thereafter issued to the
respondents depositary bank Metrobank-San Lorenzo Village Branch,
Makati City in the amount of P1,900,000.00 on June 6, 2007.
On December 18, 2007, the CA rendered its decision (on the illegal
dismissal ruling of the LA) partly granting the respondents petition. The CA
declared the petitioners dismissal valid and awarded them P30,000.00 as
nominal damages for the respondents failure to observe due process.
The records show that the petitioners appealed the December 18, 2007 CA
decision with this Court. In a resolution dated August 4, 2008, the Court
denied the petition. The Court likewise denied the petitioners subsequent
motion for reconsideration, and thereafter issued an Entry of Judgment
certifying that its August 4, 2008 resolution had become final and executory
on March 9, 2009.
On January 31, 2008, the petitioners filed with the LA an Urgent Ex-Parte
Motion for the Immediate Release of the Garnished Amount.

In its March 13, 2008 order,15 the LA granted the petitioners motion; it
directed Metrobank-San Lorenzo to release the P1,900,000.00 garnished
amount. The LA found valid and meritorious the respondents claim for
accrued wages in view of the respondents refusal to reinstate the petitioners
despite the final and executory nature of the reinstatement aspect of its
(LAs) May 31, 2005 decision. The LA noted that as of the December 18,
2007 CA decision (that reversed the illegal dismissal findings of the LA), the
petitioners accrued wages amounted to P3,078,366.33.
In its July 16, 2008 resolution,16 the NLRC affirmed in toto the LAs March
13, 2008 order. The NLRC afterwards denied the respondents motion for
reconsideration for lack of merit.17
The respondents assailed the July 16, 2008 decision and September 29, 2009
resolution of the NLRC via a petition for certiorari filed with the CA.
The CAs ruling
The CA granted the respondents petition.18 It reversed and set aside the July
16, 2008 decision and the September 29, 2009 resolution of the NLRC and
remanded the case to the Computation and Examination Unit of the NLRC
for the proper computation of the petitioners accrued wages, computed up
to February 24, 2006.
The CA agreed that the reinstatement aspect of the LAs decision is
immediately executory even pending appeal, such that the employer is
obliged to reinstate and pay the wages of the dismissed employee during the
period of appeal until the decision (finding the employee illegally dismissed
including the reinstatement order) is reversed by a higher court. Applying
this principle, the CA noted that the petitioners accrued wages could have
been properly computed until December 18, 2007, the date of the CAs
decision finding the petitioners validly dismissed.
The CA, however, pointed out that when the LAs decision is "reversed by a
higher tribunal, an employee may be barred from collecting the accrued
wages if shown that the delay in enforcing the reinstatement pending appeal

was without fault" on the employers part. In this case, the CA declared that
the delay in the execution of the reinstatement order was not due to the
respondents unjustified act or omission. Rather, the petitioners refusal to
comply with the February 21, 2006 return-to-work Memorandum that the
respondents issued and personally delivered to them (the petitioners)
prevented the enforcement of the reinstatement order.
Thus, the CA declared that, given this peculiar circumstance (of the
petitioners failure to report for work), the petitioners accrued wages should
only be computed until February 24, 2006 when they were supposed to
report for work per the return-to-work Memorandum. Accordingly, the CA
reversed, for grave abuse of discretion, the NLRCs July 16, 2008 decision
that affirmed the LAs order to release the garnished amount.
The Petition
The petitioners argue that the CA gravely erred when it ruled, contrary to
Article 223, paragraph 3 of the Labor Code, that the computation of their
accrued wages stopped when they failed to report for work on February 24,
2006. They maintain that the February 21, 2006 Memorandum was merely
an afterthought on the respondents part to make it appear that they complied
with the LAs October 7, 2005 writ of execution. They likewise argue that
had the respondents really intended to have them report for work to comply
with the writ of execution, the respondents could and should have issued the
Memorandum immediately after the LA issued the first writ of execution. As
matters stand, the respondents issued the Memorandum more than four
months after the issuance of this writ and only after the LA issued the alias
writ of execution on February 16, 2006.
Additionally, the petitioners direct the Courts attention to the several
pleadings that the respondents filed to prevent the execution of the
reinstatement aspect of the LAs May 31, 2005 decision, i.e., the Opposition
to the Issuance of the Writ of Execution, the Motion to Quash the Writ of
Execution and the Motion to Suspend the Order of Reinstatement. They also
point out that in all these pleadings, the respondents claimed that strained

relationship barred their (the petitioners) reinstatement, evidently

confirming the respondents lack of intention to reinstate them.
Finally, the petitioners point out that the February 21, 2006 Memorandum
directed them to report for work at Clark Field, Angeles, Pampanga instead
of at the NAIA-Domestic Airport in Pasay City where they had been
assigned. They argue that this directive to report for work at Clark Field
violates Article 223, paragraph 3 of the Labor Code that requires the
employees reinstatement to be under the same terms and conditions
prevailing prior to the dismissal. Moreover, they point out that the
respondents handed the Memorandum only to Pelaez, who did not act in
representation of the other petitioners, and only in the afternoon of February
23, 2006.
Thus, the petitioners claim that the delay in their reinstatement was in fact
due to the respondents unjustified acts and that the respondents never really
complied with the LAs reinstatement order.
The Case for the Respondents
The respondents counter, in their comment,19 that the issues that the
petitioners raise in this petition are all factual in nature and had already
considered and explained in the CA decision. In any case, the respondents
maintain that the petitioners were validly dismissed and that they complied
with the LAs reinstatement order when it directed the petitioners to report
back to work, which directive the petitioners did not heed.
The respondents add that while the reinstatement of an employee found
illegally dismissed is immediately executory, the employer is nevertheless
not prohibited from questioning this rule especially when the latter has valid
and legal reasons to oppose the employees reinstatement. In the petitioners
case, the respondents point out that their relationship had been so strained
that reinstatement was no longer possible. Despite this strained relationship,
the respondents point out that they still required the petitioners to report
back to work if only to comply with the LAs reinstatement order. Instead of
reporting for work as directed, the petitioners, however, insisted for a payroll

reinstatement, which option the law grants to them (the respondents) as

employer. Also, contrary to the petitioners claim, the Memorandum directed
them to report at Clark Field, Pampanga only for a re-orientation of their
respective duties and responsibilities.
Thus, relying on the CAs ruling, the respondents claim that the delay in the
petitioners reinstatement was in fact due to the latters refusal to report for
work after the issuance of the February 21, 2006 Memorandum in addition
to their strained relationship.
The Courts Ruling
We GRANT the petition.
Preliminary considerations: jurisdictional
limitations of the Courts Rule 45 review of
the CAs Rule 65 decision in labor cases
In a Rule 45 petition for review on certiorari, what we review are the legal
errors that the CA may have committed in the assailed decision, in contrast
with the review for jurisdictional errors that we undertake in an original
certiorari action. In reviewing the legal correctness of the CA decision in a
labor case taken under Rule 65 of the Rules of Court, we examine the CA
decision in the context that it determined the presence or the absence of
grave abuse of discretion in the NLRC decision before it and not on the basis
of whether the NLRC decision, on the merits of the case, was correct.
Otherwise stated, we proceed from the premise that the CA undertook a Rule
65 review, not a review on appeal, of the NLRC decision challenged before
it. Within this narrow scope of our Rule 45 review, the question that we ask
is: Did the CA correctly determine whether the NLRC committed grave
abuse of discretion in ruling on the case?20
In addition, the Courts jurisdiction in a Rule 45 petition for review on
certiorari is limited to resolving only questions of law.
The present petition essentially raises the question whether the petitioners
may recover the accrued wages prior to the CAs reversal of the LAs May

31, 2005 decision. This is a question of law that falls well within the Courts
power in a Rule 45 petition.
Resolution of this question of law, however, is inextricably linked with the
largely factual issue of whether the accrued wages should be computed until
December 17, 2008 when the CA reversed the illegal dismissal findings of
the LA or only until February 24, 2006 when the petitioners were supposed
to report for work per the February 21, 2006 Memorandum. In either case,
the determination of this factual issue presupposes another factual issue, i.e.,
whether the delay in the execution of the reinstatement order was due to the
respondents fault. As questions of fact, they are proscribed by our Rule 45
jurisdiction; we generally cannot address these factual issues except to the
extent necessary to determine whether the CA correctly found the NLRC in
grave abuse of discretion in affirming the release of the garnished amount
despite the respondents issuance of and the petitioners failure to comply
with the February 21, 2006 return-to-work Memorandum.
The jurisdictional limitations of our Rule 45 review of the CAs Rule 65
decision in labor cases, notwithstanding, we resolve this petitions factual
issues for we find legal errors in the CAs decision. Our consideration of the
facts taken within this narrow scope of our factual review power convinced
us, as our subsequent discussion will show, that no grave abuse of discretion
attended the NLRC decision.
Nature of the reinstatement aspect of the
LAs decision on a finding of illegal
dismissal
Article 223 (now Article 229)21 of the Labor Code governs appeals from, and
the execution of, the LAs decision. Pertinently, paragraph 3, Article 223 of
the Labor Code provides:
Article 223. APPEAL
xxxx

In any event, the decision of the Labor Arbiter reinstating a dismissed or

separated employee, insofar as the reinstatement aspect is concerned, shall
immediately be executory, pending appeal. The employee shall either be
admitted back to work under the same terms and conditions prevailing prior
to his dismissal or separation or, at the option of the employer, merely
reinstated in the payroll. The posting of a bond by the employer shall not
stay the execution for reinstatement provided herein. [Emphasis and
underscoring supplied]
Under paragraph 3, Article 223 of the Labor Code, the LAs order for the
reinstatement of an employee found illegally dismissed is immediately
executory even during pendency of the employers appeal from the decision.
Under this provision, the employer must reinstate the employee either by
physically admitting him under the conditions prevailing prior to his
dismissal, and paying his wages; or, at the employers option, merely
reinstating the employee in the payroll until the decision is reversed by the
higher court.22 Failure of the employer to comply with the reinstatement
order, by exercising the options in the alternative, renders him liable to pay
the employees salaries.23
Otherwise stated, a dismissed employee whose case was favorably decided
by the LA is entitled to receive wages pending appeal upon reinstatement,
which reinstatement is immediately executory.24 Unless the appellate
tribunal issues a restraining order, the LA is duty bound to implement the
order of reinstatement and the employer has no option but to comply with
it.25
Moreover, and equally worth emphasizing, is that an order of reinstatement
issued by the LA is self-executory, i.e., the dismissed employee need not
even apply for and the LA need not even issue a writ of execution to trigger
the employers duty to reinstate the dismissed employee.
In Pioneer Texturizing Corp. v. NLRC, et. al.,26 decided in 1997, the Court
clarified once and for all this self-executory nature of a reinstatement order.
After tracing back the various Court rulings interpreting the amendments
introduced by Republic Act No. 671527 on the reinstatement aspect of a labor

decision under Article 223 of the Labor Code, the Court concluded that to
otherwise "require the application for and issuance of a writ of execution as
prerequisites for the execution of a reinstatement award would certainly
betray and run counter to the very object and intent of Article 223, i.e., the
immediate execution of a reinstatement order."28
In short, therefore, with respect to decisions reinstating employees, the law
itself has determined a sufficiently overwhelming reason for its immediate
and automatic execution even pending appeal.29 The employer is duty-bound
to reinstate the employee, failing which, the employer is liable instead to pay
the dismissed employees salary. The Courts consistent and prevailing
treatment and interpretation of the reinstatement order as immediately
enforceable, in fact, merely underscores the right to security of tenure of
employees that the Constitution30 protects.
The employer is obliged to pay the
dismissed employees salary if he
refuses to reinstate until actual
reinstatement or reversal by a higher
tribunal; circumstances that may bar an
employee from receiving the accrued wages
As we amply discussed above, an employer is obliged to immediately
reinstate the employee upon the LAs finding of illegal dismissal; if the
employer fails, it is liable to pay the salary of the dismissed employee. Of
course, it is not always the case that the LAs finding of illegal dismissal is,
on appeal by the employer, upheld by the appellate court. After the LAs
decision is reversed by a higher tribunal, the employers duty to reinstate the
dismissed employee is effectively terminated. This means that an employer
is no longer obliged to keep the employee in the actual service or in the
payroll. The employee, in turn, is not required to return the wages that he
had received prior to the reversal of the LAs decision.31
The reversal by a higher tribunal of the LAs finding (of illegal dismissal),
notwithstanding, an employer, who, despite the LAs order of reinstatement,
did not reinstate the employee during the pendency of the appeal up to the

reversal by a higher tribunal may still be held liable for the accrued wages of
the employee, i.e., the unpaid salary accruing up to the time the higher
tribunal reverses the decision.32 The rule, therefore, is that an employee may
still recover the accrued wages up to and despite the reversal by the higher
tribunal. This entitlement of the employee to the accrued wages proceeds
from the immediate and self-executory nature of the reinstatement aspect of
the LAs decision.
By way of exception to the above rule, an employee may be barred from
collecting the accrued wages if shown that the delay in enforcing the
reinstatement pending appeal was without fault on the part of the employer.
To determine whether an employee is thus barred, two tests must be
satisfied: (1) 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. Note that under the second
test, the delay must be without the employers fault. 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 LAs decision.33
Application of the two-fold test; the
petitioners are entitled to receive their
accrued salaries until December 18, 2007
As we earlier pointed out, the core issue to be resolved is whether the
petitioners may recover the accrued wages until the CAs reversal of the
LAs decision. An affirmative answer to this question will lead us to reverse
the assailed CA decision for legal errors and reinstate the NLRCs decision
affirming the release of the garnished amount. Otherwise, we uphold the
CAs decision to be legally correct. To resolve this question, we apply the
two-fold test.
First, the existence of delay - whether there was actual delay or whether the
order of reinstatement pending appeal was not executed prior to its reversal?
We answer this test in the affirmative.

To recall, on May 31, 2005, the LA rendered the decision finding the
petitioners illegally dismissed and ordering their immediate reinstatement.
Per the records, the respondents received copy of this decision on July 8,
2005. On August 20, 2005, the petitioners filed before the LA a Motion for
Issuance of Writ of Execution for their immediate reinstatement. The LA
issued the Writ of Execution on October 7, 2005. From the time the
respondents received copy of the LAs decision, and the issuance of the writ
of execution, until the CA reversed this decision on December 17, 2008, the
respondents had not reinstated the petitioners, either by actual reinstatement
or in the payroll. This continued non-execution of the reinstatement order in
fact moved the LA to issue an alias writ of execution on February 16, 2006
and another writ of execution on April 24, 2007.
From these facts and without doubt, there was actual delay in the execution
of the reinstatement aspect of the LAs May 31, 2005 decision before it was
reversed in the CAs decision.
Second, the cause of the delay whether the delay was not due to the
employers unjustified act or omission. We answer this test in the negative;
we find that the delay in the execution of the reinstatement pending appeal
was due to the respondents unjustified acts.
In reversing, for grave abuse of discretion, the NLRCs order affirming the
release of the garnished amount, the CA relied on the fact of the issuance of
the February 21, 2006 Memorandum and of the petitioners failure to
comply with its return-to-work directive. In other words, with the issuance
of this Memorandum, the CA considered the respondents as having
sufficiently complied with their obligation to reinstate the petitioners. And,
the subsequent delay in or the non-execution of the reinstatement order was
no longer the respondents fault, but rather of the petitioners who refused to
report back to work despite the directive.
Our careful consideration of the facts and the circumstances that surrounded
the case convinced us that the delay in the reinstatement pending appeal was
due to the respondents fault. For one, the respondents filed several
pleadings to suspend the execution of the LAs reinstatement order, i.e., the

opposition to the petitioners motion for execution filed on October 3, 2005;

the motion to quash the October 7, 2005 writ of execution with prayer to
hold in abeyance the implementation of the reinstatement order; and the
motion to suspend the order for the petitioners reinstatement filed on
February 28, 2006 after the LA issued the February 16, 2006 alias writ of
execution. These pleadings, to our mind, show a determined effort on the
respondents part to prevent or suspend the execution of the reinstatement
pending appeal.
Another reason is that the respondents, contrary to the CAs conclusion, did
not sufficiently notify the petitioners of their intent to actually reinstate
them; neither did the respondents give them ample opportunity to comply
with the return-to-work directive. We note that the respondents delivered the
February 21, 2006 Memorandum (requiring the petitioners to report for work
on February 24, 2006) only in the afternoon of February 23, 2006. Worse,
the respondents handed the notice to only one of the petitioners Pelaez
who did not act in representation of the others. Evidently, the petitioners
could not reasonably be expected to comply with a directive that they had no
or insufficient notice of.
Lastly, the petitioners continuously and actively pursued the execution of the
reinstatement aspect of the LAs decision, i.e., by filing several motions for
execution of the reinstatement order, and motion to cite the respondents in
contempt and re-computation of the accrued wages for the respondents
continued failure to reinstate them.
These facts altogether show that the respondents were not at all sincere in
reinstating the petitioners. These facts when taken together with the fact of
delay reveal the respondents obstinate resolve and willful disregard of the
immediate and self-executory nature of the reinstatement aspect of the LAs
decision.
A further and final point that we considered in concluding that the delay was
due to the respondents fault is the fact that per the 2005 Revised Rules of
Procedure of the NLRC (2005 NLRC Rules),34 employers are required to
submit a report of compliance within ten (10) calendar days from receipt of

the LAs decision, noncompliance with which signifies a clear refusal to

reinstate. Arguably, the 2005 NLRC Rules took effect only on January 7,
2006; hence, the respondents could not have been reasonably expected to
comply with this duty that was not yet in effect when the LA rendered its
decision (finding illegal dismissal) and issued the writ of execution in 2005.
Nevertheless, when the LA issued the February 16, 2006 alias writ of
execution and the April 24, 2007 writ of execution, the 2005 NLRC Rules
was already in place such that the respondents had become duty-bound to
submit the required compliance report; their noncompliance with this rule all
the more showed a clear and determined refusal to reinstate.
All told, under the facts and the surrounding circumstances, the delay was
due to the acts of the respondents that we find were unjustified. We reiterate
and emphasize, Article 223, paragraph 3, of the Labor Code mandates the
employer to immediately reinstate the dismissed employee, either by
actually reinstating him/her under the conditions prevailing prior to the
dismissal or, at the option of the employer, in the payroll. The respondents'
failure in this case to exercise either option rendered them liable for the
petitioners' accrued salary until the LA decision was reversed by the CA on
December 17, 2008. We, therefore, find that the NLRC, in affirming the
release of the garnished amount, merely implemented the mandate of Article
223; it simply recognized as immediate and self-executory the reinstatement
aspect of the LA's decision.
Accordingly, we reverse for legal errors the CA decision.1wphi1 We find
no grave abuse of discretion attended the NLRC's July 16, 2008 resolution
that affirmed the March 13, 2008 decision of the LA granting the release of
the garnished amount.
WHEREFORE, in light of these considerations, we hereby GRANT the
petition. We REVERSE and SET ASIDE the September 30, 2010 decision
and the January 13, 2011 resolution of the Court of Appeals (CA) in CAG.R. Sp No. 112011. Accordingly, we REINSTATE the July 16, 2008
decision of the National Labor Relations Commission (NLRC) affirming the

March 13, 2008 order of the Labor Arbiter in NLRC Case No. 00-04-054692004.
Costs against the respondents South East Asian Airlines and Irene Dornier.
SO ORDERED.