G.R. No.

80609 August 23, 1988

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION and MARILYN ABUCAY,
respondents.
The only issue presented in the case at bar is the legality of the award of financial assistance to
an employee who had been dismissed for cause as found by the public respondent.
Marilyn Abucay, a traffic operator of the Philippine Long Distance Telephone Company, was
accused by two complainants of having demanded and received from them the total amount of
P3,800.00 in consideration of her promise to facilitate approval of their applications for
telephone installation. 1 Investigated and heard, she was found guilty as charged and
accordingly separated from the service. 2 She went to the Ministry of Labor and Employment
claiming she had been illegally removed. After consideration of the evidence and arguments of
the parties, the company was sustained and the complaint was dismissed for lack of merit.
Nevertheless, the dispositive portion of labor arbiter's decision declared:
WHEREFORE, the instant complaint is dismissed for lack of merit.
Considering that Dr. Helen Bangayan and Mrs. Consolacion Martinez are
not totally blameless in the light of the fact that the deal happened outhide
the premises of respondent company and that their act of giving P3,800.00
without any receipt is tantamount to corruption of public officers,
complainant must be given one month pay for every year of service as
financial assistance. 3
Both the petitioner and the private respondent appealed to the National Labor Relations Board,
which upheld the said decision in toto and dismissed the appeals. 4 The private respondent
took no further action, thereby impliedly accepting the validity of her dismissal. The
petitioner, however, is now before us to question the affirmance of the above- quoted award as
having been made with grave abuse of discretion.

and compassion that we resolve to uphold the award of financial

assistance in her favor. 5
The position of the petitioner is simply stated: It is conceded that an employee illegally
dismissed is entitled to reinstatement and backwages as required by the labor laws. However,
an employee dismissed for cause is entitled to neither reinstatement nor backwages and is not
allowed any relief at all because his dismissal is in accordance with law. In the case of the
private respondent, she has been awarded financial assistance equivalent to ten months pay
corresponding to her 10 year service in the company despite her removal for cause. She is,
therefore, in effect rewarded rather than punished for her dishonesty, and without any legal
authorization or justification. The award is made on the ground of equity and compassion,
which cannot be a substitute for law. Moreover, such award puts a premium on dishonesty and
encourages instead of deterring corruption.
For its part, the public respondent claims that the employee is sufficiently punished with her
dismissal. The grant of financial assistance is not intended as a reward for her offense but
merely to help her for the loss of her employment after working faithfully with the company
for ten years. In support of this position, the Solicitor General cites the cases of Firestone Tire
and Rubber Company of the Philippines v. Lariosa 6 and Soco v. Mercantile Corporation of
Davao, 7 where the employees were dismissed for cause but were nevertheless allowed
separation pay on grounds of social and compassionate justice. As the Court put it in the
Firestone case:
In view of the foregoing, We rule that Firestone had valid grounds to dispense with
the services of Lariosa and that the NLRC acted with grave abuse of discretion in
ordering his reinstatement. However, considering that Lariosa had worked with the
company for eleven years with no known previous bad record, the ends of social
and compassionate justice would be served if he is paid full separation pay but not
reinstatement without backwages by the NLRC.

In the said case, the employee was validly dismissed for theft but the NLRC nevertheless
awarded him full separation pay for his 11 years of service with the company. In Soco, the
employee was also legally separated for unauthorized use of a company vehicle and refusal to
attend the grievance proceedings but he was just the same granted one-half month separation
pay for every year of his 18-year service.

In its challenged resolution of September 22, 1987, the NLRC said:

... Anent the award of separation pay as financial assistance in
complainant's favor, We find the same to be equitable, taking into
consideration her long years of service to the company whereby she had
undoubtedly contributed to the success of respondent. While we do not in
any way approve of complainants (private respondent) mal feasance, for
which she is to suffer the penalty of dismissal, it is for reasons of equity

Similar action was taken in Filipro, Inc. v. NLRC, 8 where the employee was validly dismissed
for preferring certain dealers in violation of company policy but was allowed separation pay
for his 2 years of service. In Metro Drug Corporation v. NLRC, 9 the employee was validly
removed for loss of confidence because of her failure to account for certain funds but she was
awarded separation pay equivalent to one-half month's salary for every year of her service of
15 years. In Engineering Equipment, Inc. v. NLRC, 10 the dismissal of the employee was
justified because he had instigated labor unrest among the workers and had serious differences

with them, among other grounds, but he was still granted three months separation pay
corresponding to his 3-year service. In New Frontier Mines, Inc. v. NLRC, 11 the employee's 3year service was held validly terminated for lack of confidence and abandonment of work but
he was nonetheless granted three months separation pay. And in San Miguel Corporation v.
Deputy Minister of Labor and Employment, et al ., 12 full separation pay for 6, 10, and 16
years service, respectively, was also allowed three employees who had been dismissed after
they were found guilty of misappropriating company funds.

The Court feels that distinctions are in order. We note that heretofore the separation pay, when
it was considered warranted, was required regardless of the nature or degree of the ground
proved, be it mere inefficiency or something graver like immorality or dishonesty. The
benediction of compassion was made to cover a multitude of sins, as it were, and to justify the
helping hand to the validly dismissed employee whatever the reason for his dismissal. This
policy should be re-examined. It is time we rationalized the exception, to make it fair to both
labor and management, especially to labor.

The rule embodied in the Labor Code is that a person dismissed for cause as defined therein is
not entitled to separation pay. 13 The cases above cited constitute the exception, based upon
considerations of equity. Equity has been defined as justice outside law, 14 being ethical rather
than jural and belonging to the sphere of morals than of law. 15 It is grounded on the precepts
of conscience and not on any sanction of positive law. 16 Hence, it cannot prevail against the
expressed provision of the labor laws allowing dismissal of employees for cause and without
any provision for separation pay.

There should be no question that where it comes to such valid but not iniquitous causes as
failure to comply with work standards, the grant of separation pay to the dismissed employee
may be both just and compassionate, particularly if he has worked for some time with the
company. For example, a subordinate who has irreconcilable policy or personal differences
with his employer may be validly dismissed for demonstrated loss of confidence, which is an
allowable ground. A working mother who has to be frequently absent because she has also to
take care of her child may also be removed because of her poor attendance, this being another
authorized ground. It is not the employee's fault if he does not have the necessary aptitude for
his work but on the other hand the company cannot be required to maintain him just the same
at the expense of the efficiency of its operations. He too may be validly replaced. Under these
and similar circumstances, however, the award to the employee of separation pay would be
sustainable under the social justice policy even if the separation is for cause.

Strictly speaking, however, it is not correct to say that there is no express justification for the
grant of separation pay to lawfully dismissed employees other than the abstract consideration
of equity. The reason is that our Constitution is replete with positive commands for the
promotion of social justice, and particularly the protection of the rights of the workers. The
enhancement of their welfare is one of the primary concerns of the present charter. In fact,
instead of confining itself to the general commitment to the cause of labor in Article II on the
Declaration of Principles of State Policies, the new Constitution contains a separate article
devoted to the promotion of social justice and human rights with a separate sub- topic for
labor. Article XIII expressly recognizes the vital role of labor, hand in hand with management,
in the advancement of the national economy and the welfare of the people in general. The
categorical mandates in the Constitution for the improvement of the lot of the workers are
more than sufficient basis to justify the award of separation pay in proper cases even if the
dismissal be for cause.
The Court notes, however, that where the exception has been applied, the decisions have not
been consistent as to the justification for the grant of separation pay and the amount or rate of
such award. Thus, the employees dismissed for theft in the Firestone case and for animosities
with fellow workers in the Engineering Equipment case were both awarded separation pay
notnvithstanding that the first cause was certainly more serious than the second. No less
curiously, the employee in the Soco case was allowed only one-half month pay for every year
of his 18 years of service, but in Filipro the award was two months separation pay for 2 years
service. In Firestone, the emplovee was allowed full separation pay corresponding to his 11
years of service, but in Metro, the employee was granted only one-half month separation pay
for every year of her 15year service. It would seem then that length of service is not
necessarily a criterion for the grant of separation pay and neither apparently is the reason for
the dismissal.

But where the cause of the separation is more serious than mere inefficiency, the generosity of
the law must be more discerning. There is no doubt it is compassionate to give separation pay
to a salesman if he is dismissed for his inability to fill his quota but surely he does not deserve
such generosity if his offense is misappropriation of the receipts of his sales. This is no longer
mere incompetence but clear dishonesty. A security guard found sleeping on the job is
doubtless subject to dismissal but may be allowed separation pay since his conduct, while
inept, is not depraved. But if he was in fact not really sleeping but sleeping with a prostitute
during his tour of duty and in the company premises, the situation is changed completely. This
is not only inefficiency but immorality and the grant of separation pay would be entirely
unjustified.
We hold that henceforth separation pay shall be allowed as a measure of social justice only in
those instances where the employee is validly dismissed for causes other than serious
misconduct or those reflecting on his moral character. Where the reason for the valid dismissal
is, for example, habitual intoxication or an offense involving moral turpitude, like theft or
illicit sexual relations with a fellow worker, the employer may not be required to give the
dismissed employee separation pay, or financial assistance, or whatever other name it is called,
on the ground of social justice.
A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather
than punishing the erring employee for his offense. And we do not agree that the punishment
is his dismissal only and that the separation pay has nothing to do with the wrong he has

committed. Of course it has. Indeed, if the employee who steals from the company is granted
separation pay even as he is validly dismissed, it is not unlikely that he will commit a similar
offense in his next employment because he thinks he can expect a like leniency if he is again
found out. This kind of misplaced compassion is not going to do labor in general any good as
it will encourage the infiltration of its ranks by those who do not deserve the protection and
concern of the Constitution.
The policy of social justice is not intended to countenance wrongdoing simply because it is
committed by the underprivileged. At best it may mitigate the penalty but it certainly will not
condone the offense. Compassion for the poor is an imperative of every humane society but
only when the recipient is not a rascal claiming an undeserved privilege. Social justice cannot
be permitted to be refuge of scoundrels any more than can equity be an impediment to the
punishment of the guilty. Those who invoke social justice may do so only if their hands are
clean and their motives blameless and not simply because they happen to be poor. This great
policy of our Constitution is not meant for the protection of those who have proved they are
not worthy of it, like the workers who have tainted the cause of labor with the blemishes of
their own character.
Applying the above considerations, we hold that the grant of separation pay in the case at bar
is unjustified. The private respondent has been dismissed for dishonesty, as found by the labor
arbiter and affirmed by the NLRC and as she herself has impliedly admitted. The fact that she
has worked with the PLDT for more than a decade, if it is to be considered at all, should be
taken against her as it reflects a regrettable lack of loyalty that she should have strengthened
instead of betraying during all of her 10 years of service with the company. If 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.
The Court also rules that the separation pay, if found due under the circumstances of each
case, should be computed at the rate of one month salary for every year of service, assuming
the length of such service is deemed material. This is without prejudice to the application of
special agreements between the employer and the employee stipulating a higher rate of
computation and providing for more benefits to the discharged employee. 17
WHEREFORE, the petition is GRANTED. The challenged resolution of September 22,1987,
is AFFIRMED in toto except for the grant of separation pay in the form of financial assistance,
which is hereby DISALLOWED. The temporary restraining order dated March 23, 1988, is
LIFTED. It is so ordered.

G.R. Nos. 158798-99

TOYOTA MOTOR PHILIPPINES CORPORATION, Petitioner,

vs.
TOYOTA MOTOR PHILIPPINES CORP. WORKERS ASSOCIATION (TMPCWA),
Respondent.
The Case
In the instant petition under Rule 45 subject of G.R. Nos. 158786 and 158789, Toyota Motor
Philippines Corporation Workers Association (Union) and its dismissed officers and members
seek to set aside the February 27, 2003 Decision 1 of the Court of Appeals (CA) in CA-G.R. SP
Nos. 67100 and 67561, which affirmed the August 9, 2001 Decision 2 and September 14, 2001
Resolution3 of the National Labor Relations Commission (NLRC), declaring illegal the strikes
staged by the Union and upholding the dismissal of the 227 Union officers and members.
On the other hand, in the related cases docketed as G.R. Nos. 158798-99, Toyota Motor
Philippines Corporation (Toyota) prays for the recall of the award of severance compensation
to the 227 dismissed employees, which was granted under the June 20, 2003 CA Resolution 4
in CA-G.R. SP Nos. 67100 and 67561.
In view of the fact that the parties are petitioner/s and respondent/s and vice-versa in the four
(4) interrelated cases, they will be referred to as simply the Union and Toyota hereafter.
The Facts
The Union is a legitimate labor organization duly registered with the Department of Labor and
Employment (DOLE) and is the sole and exclusive bargaining agent of all Toyota rank and file
employees.5
Toyota, on the other hand, is a domestic corporation engaged in the assembly and sale of
vehicles and parts.6 It is a Board of Investments (BOI) participant in the Car Development
Program and the Commercial Vehicle Development Program. It is likewise a BOI-preferred
non-pioneer export trader of automotive parts and is under the "Special Economic Zone Act of
1995." It is one of the largest motor vehicle manufacturers in the country employing around
1,400 workers for its plants in Bicutan and Sta. Rosa, Laguna. It is claimed that its assets
amount to PhP 5.525 billion, with net sales of PhP 14.646 billion and provisions for income
tax of PhP 120.9 million.
On February 14, 1999, the Union filed a petition for certification election among the Toyota
rank and file employees with the National Conciliation and Mediation Board (NCMB), which
was docketed as Case No. NCR-OD-M-9902-001. Med-Arbiter Ma. Zosima C. Lameyra
denied the petition, but, on appeal, the DOLE Secretary granted the Unions prayer, and,
through the June 25, 1999 Order, directed the immediate holding of the certification election. 7

After Toyotas plea for reconsideration was denied, the certification election was conducted.
Med-Arbiter Lameyras May 12, 2000 Order certified the Union as the sole and exclusive
bargaining agent of all the Toyota rank and file employees. Toyota challenged said Order via
an appeal to the DOLE Secretary.8
In the meantime, the Union submitted its Collective Bargaining Agreement (CBA) proposals
to Toyota, but the latter refused to negotiate in view of its pending appeal. Consequently, the
Union filed a notice of strike on January 16, 2001 with the NCMB, docketed as NCMB-NCRNS-01-011-01, based on Toyotas refusal to bargain. On February 5, 2001, the NCMB-NCR
converted the notice of strike into a preventive mediation case on the ground that the issue of
whether or not the Union is the exclusive bargaining agent of all Toyota rank and file
employees was still unresolved by the DOLE Secretary.
In connection with Toyotas appeal, Toyota and the Union were required to attend a hearing on
February 21, 2001 before the Bureau of Labor Relations (BLR) in relation to the exclusion of
the votes of alleged supervisory employees from the votes cast during the certification
election. The February 21, 2001 hearing was cancelled and reset to February 22, 2001. On
February 21, 2001, 135 Union officers and members failed to render the required overtime
work, and instead marched to and staged a picket in front of the BLR office in Intramuros,
Manila.9 The Union, in a letter of the same date, also requested that its members be allowed to
be absent on February 22, 2001 to attend the hearing and instead work on their next scheduled
rest day. This request however was denied by Toyota.
Despite denial of the Unions request, more than 200 employees staged mass actions on
February 22 and 23, 2001 in front of the BLR and the DOLE offices, to protest the partisan
and anti-union stance of Toyota. Due to the deliberate absence of a considerable number of
employees on February 22 to 23, 2001, Toyota experienced acute lack of manpower in its
manufacturing and production lines, and was unable to meet its production goals resulting in
huge losses of PhP 53,849,991.
Soon thereafter, on February 27, 2001, Toyota sent individual letters to some 360 employees
requiring them to explain within 24 hours why they should not be dismissed for their obstinate
defiance of the companys directive to render overtime work on February 21, 2001, for their
failure to report for work on February 22 and 23, 2001, and for their participation in the
concerted actions which severely disrupted and paralyzed the plants operations. 10 These letters
specifically cited Section D, paragraph 6 of the Companys Code of Conduct, to wit:
Inciting or participating in riots, disorders, alleged strikes, or concerted actions detrimental to
[Toyotas] interest.
1st offense dismissal.11

Meanwhile, a February 27, 2001 Manifesto was circulated by the Union which urged its
members to participate in a strike/picket and to abandon their posts, the pertinent portion of
which reads, as follows:
YANIG sa kanyang komportableng upuan ang management ng TOYOTA. And dating takot,
kimi, at mahiyaing manggagawa ay walang takot na nagmartsa at nagprotesta laban sa
desperadong pagtatangkang baguhin ang desisyon ng DOLE na pabor sa UNYON. Sa tatlong
araw na protesta, mahigit sa tatlong daang manggagawa ang lumahok.
xxxx
HANDA na tayong lumabas anumang oras kung patuloy na ipagkakait ng management
ang CBA. Oo maari tayong masaktan sa welga. Oo, maari tayong magutom sa piketlayn.
Subalit may pagkakaiba ba ito sa unti-unting pagpatay sa atin sa loob ng 12 taong makabaling
likod ng pagtatrabaho? Ilang taon na lang ay magkakabutas na ang ating mga baga sa mga
alipato at usok ng welding. Ilang taon na lang ay marupok na ang ating mga buto sa
kabubuhat. Kung dumating na ang panahong ito at wala pa tayong CBA, paano na? Hahayaan
ba nating ang kumpanya lang ang makinabang sa yamang likha ng higit sa isang dekadang
pagpapagal natin?
HUWAG BIBITIW SA NASIMULANG TAGUMPAY!
PAIGTINGIN ANG PAKIKIBAKA PARA SA ISANG MAKATARUNGANG
CBA!
HIGIT PANG PATATAGIN ANG PAGKAKAISA NG MGA MANGGAGAWA SA
TOYOTA!12 (Emphasis supplied.)
On the next day, the Union filed with the NCMB another notice of strike docketed as NCMBNCR-NS-02-061-01 for union busting amounting to unfair labor practice.
On March 1, 2001, the Union nonetheless submitted an explanation in compliance with the
February 27, 2001 notices sent by Toyota to the erring employees. The Union members
explained that their refusal to work on their scheduled work time for two consecutive days was
simply an exercise of their constitutional right to peaceably assemble and to petition the
government for redress of grievances. It further argued that the demonstrations staged by the
employees on February 22 and 23, 2001 could not be classified as an illegal strike or picket,
and that Toyota had already condoned the alleged acts when it accepted back the subject
employees.13
Consequently, on March 2 and 5, 2001, Toyota issued two (2) memoranda to the concerned
employees to clarify whether or not they are adopting the March 1, 2001 Unions explanation

as their own. The employees were also required to attend an investigative interview, 14 but they
refused to do so.

Based on the above, TMP Management is left with no other recourse but to
terminate your employment effective upon your receipt thereof.

On March 16, 2001, Toyota terminated the employment of 227 employees 15 for participation
in concerted actions in violation of its Code of Conduct and for misconduct under Article 282
of the Labor Code. The notice of termination reads:

[Sgd.]
JOSE MARIA ALIGADA
Deputy Division Manager16

After a careful evaluation of the evidence on hand, and a thorough assessment of your
explanation, TMP has concluded that there are overwhelming reasons to terminate your
services based on Article 282 of the Labor Code and TMPs Code of Conduct.
Your repeated absences without permission on February 22 to 23, 2001 to participate in a
concerted action against TMP constitute abandonment of work and/or very serious misconduct
under Article 282 of the Labor Code.
The degree of your offense is aggravated by the following circumstances:
1. You expressed to management that you will adopt the unions letter dated March
1, 2001, as your own explanation to the charges contained in the Due Process Form
dated February 27, 2001. It is evident from such explanation that you did not come
to work because you deliberately participated together with other Team Members in
a plan to engage in concerted actions detrimental to TMPs interest. As a result of
your participation in the widespread abandonment of work by Team Members from
February 22 to 23, 2001, TMP suffered substantial damage.
It is significant that the absences you incurred in order to attend the clarificatory
hearing conducted by the Bureau of Labor Relations were unnecessary because the
union was amply represented in the said hearings by its counsel and certain
members who sought and were granted leave for the purpose. Your reason for being
absent is, therefore, not acceptable; and
2. Your participation in the organized work boycott by Team Members on February
22 and 23 led to work disruptions that prevented the Company from meeting its
production targets, resulting [in] foregone sales of more than eighty (80) vehicles,
mostly new-model Revos, valued at more than Fifty Million Pesos (50,000,000.00).
The foregoing is also a violation of TMPs Code of Conduct (Section D, Paragraph
6) to wit:
"Inciting or participating in riots, disorders, illegal strikes or concerted actions
detrimental to TMPs interest."

In reaction to the dismissal of its union members and officers, the Union went on
strike on March 17, 2001. Subsequently, from March 28, 2001 to April 12, 2001, the
Union intensified its strike by barricading the gates of Toyotas Bicutan and Sta.
Rosa plants. The strikers prevented workers who reported for work from entering the
plants. In his Affidavit, Mr. Eduardo Nicolas III, Security Department Head, stated
that:
3. On March 17, 2001, members of the Toyota Motor Philippines Corporation
Workers Association (TMPCWA), in response to the dismissal of some two hundred
twenty seven (227) leaders and members of TMPCWA and without observing the
requirements mandated by the Labor Code, refused to report for work and picketed
TMPC premises from 8:00 a.m. to 5:00 p.m. The strikers badmouthed people
coming in and hurled invectives such as "bakeru" at Japanese officers of the
company. The strikers likewise pounded the officers vehicle as they tried to enter
the premises of the company.
4. On March 28, 2001, the strikers intensified their picketing and barricaded the
gates of TMPCs Bicutan and Sta. Rosa plants, thus, blocking the free ingress/egress
to and from the premises. Shuttle buses and cars containing TMPC employees,
suppliers, dealers, customers and other people having business with the company,
were prevented by the strikers from entering the plants.
5. As a standard operating procedure, I instructed my men to take photographs and
video footages of those who participated in the strike. Seen on video footages taken
on various dates actively participating in the strike were union officers Emilio C.
Completo, Alexander Esteva, Joey Javellonar and Lorenzo Caraqueo.
6. Based on the pictures, among those identified to have participated in the March
28, 2001 strike were Grant Robert Toral, John Posadas, Alex Sierra, Allan John
Malabanan, Abel Bersos, Ernesto Bonavente, Ariel Garcia, Pablito Adaya, Feliciano
Mercado, Charlie Oliveria, Philip Roxas, June Lamberte, Manjolito Puno, Baldwin
San Pablo, Joseph Naguit, Federico Torres, Larry Gerola, Roderick Bayani, Allan
Oclarino, Reynaldo Cuevas, Jorge Polutan, Arman Ercillo, Jimmy Hembra, Albert
Mariquit, Ramil Gecale, Jimmy Palisoc, Normandy Castalone, Joey Llanera, Greg

Castro, Felicisimo Escrimadora, Rodolfo Bay, Ramon Clemente, Dante Baclino,

Allan Palomares, Arturo Murillo and Robert Gonzales. Attached hereto as Annexes
"1" to "18" are the pictures taken on March 28, 2001 at the Bicutan and Sta. Rosa
plants.
7. From March 29 to 31, 2001, the strikers continued to barricade the entrances to
TMPCs two (2) plants. Once again, the strikers hurled nasty remarks and prevented
employees aboard shuttle buses from entering the plants. Among the strikers were
Christopher Saldivar, Basilio Laqui, Sabas Bernabise, Federico Torres, Freddie Olit,
Josel Agosto, Arthur Parilla, Richard Calalang, Ariel Garcia, Edgar Hilaga, Charlie
Oliveria, Ferdinand Jaen, Wilfredo Tagle, Alejandro Imperial, Manjolito Puno,
Delmar Espadilla, Domingo Javier, Apollo Violeta and Elvis Tabinao. 17
On March 29, 2001, Toyota filed a petition for injunction with a prayer for the issuance of a
temporary restraining order (TRO) with the NLRC, which was docketed as NLRC NCR Case
No. INJ-0001054-01. It sought free ingress to and egress from its Bicutan and Sta. Rosa
manufacturing plants. Acting on said petition, the NLRC, on April 5, 2001, issued a TRO
against the Union, ordering its leaders and members as well as its sympathizers to remove
their barricades and all forms of obstruction to ensure free ingress to and egress from the
companys premises. In addition, the NLRC rejected the Unions motion to dismiss based on
lack of jurisdiction.18
Meanwhile, Toyota filed a petition to declare the strike illegal with the NLRC arbitration
branch, which was docketed as NLRC NCR (South) Case No. 30-04-01775-01, and prayed
that the erring Union officers, directors, and members be dismissed. 19
On April 10, 2001, the DOLE Secretary assumed jurisdiction over the labor dispute and issued
an Order20 certifying the labor dispute to the NLRC. In said Order, the DOLE Secretary
directed all striking workers to return to work at their regular shifts by April 16, 2001. On the
other hand, it ordered Toyota to accept the returning employees under the same terms and
conditions obtaining prior to the strike or at its option, put them under payroll reinstatement.
The parties were also enjoined from committing acts that may worsen the situation.1wphi1
The Union ended the strike on April 12, 2001. The union members and officers tried to return
to work on April 16, 2001 but were told that Toyota opted for payroll-reinstatement authorized
by the Order of the DOLE Secretary.
In the meantime, the Union filed a motion for reconsideration of the DOLE Secretarys April
10, 2001 certification Order, which, however, was denied by the DOLE Secretary in her May
25, 2001 Resolution. Consequently, a petition for certiorari was filed before the CA, which
was docketed as CA-G.R. SP No. 64998.

In the intervening time, the NLRC, in compliance with the April 10, 2001 Order of the DOLE
Secretary, docketed the case as Certified Case No. 000203-01.
Meanwhile, on May 23, 2001, at around 12:00 nn., despite the issuance of the DOLE
Secretarys certification Order, several payroll-reinstated members of the Union staged a
protest rally in front of Toyotas Bicutan Plant bearing placards and streamers in defiance of
the April 10, 2001 Order.
Then, on May 28, 2001, around forty-four (44) Union members staged another protest action
in front of the Bicutan Plant. At the same time, some twenty-nine (29) payroll-reinstated
employees picketed in front of the Santa Rosa Plants main entrance, and were later joined by
other Union members.
On June 5, 2001, notwithstanding the certification Order, the Union filed another notice of
strike, which was docketed as NCMB-NCR-NS-06-150-01. On June 18, 2001, the DOLE
Secretary directed the second notice of strike to be subsumed in the April 10, 2001
certification Order.
In the meantime, the NLRC, in Certified Case No. 000203-01, ordered both parties to submit
their respective position papers on June 8, 2001. The union, however, requested for abeyance
of the proceedings considering that there is a pending petition for certiorari with the CA
assailing the validity of the DOLE Secretarys Assumption of Jurisdiction Order.
Thereafter, on June 19, 2001, the NLRC issued an Order, reiterating its previous order for both
parties to submit their respective position papers on or before June 2, 2001. The same Order
also denied the Unions verbal motion to defer hearing on the certified cases.
On June 27, 2001, the Union filed a Motion for Reconsideration of the NLRCs June 19, 2001
Order, praying for the deferment of the submission of position papers until its petition for
certiorari is resolved by the CA.
On June 29, 2001, only Toyota submitted its position paper. On July 11, 2001, the NLRC
again ordered the Union to submit its position paper by July 19, 2001, with a warning that
upon failure for it to do so, the case shall be considered submitted for decision.
Meanwhile, on July 17, 2001, the CA dismissed the Unions petition for certiorari in CA-G.R.
SP No. 64998, assailing the DOLE Secretarys April 10, 2001 Order.
Notwithstanding repeated orders to file its position paper, the Union still failed to submit its
position paper on July 19, 2001. Consequently, the NLRC issued an Order directing the Union
to submit its position paper on the scheduled August 3, 2001 hearing; otherwise, the case shall
be deemed submitted for resolution based on the evidence on record.

During the August 3, 2001 hearing, the Union, despite several accommodations, still failed to
submit its position paper. Later that day, the Union claimed it filed its position paper by
registered mail.
Subsequently, the NLRC, in its August 9, 2001 Decision, declared the strikes staged by the
Union on February 21 to 23, 2001 and May 23 and 28, 2001 as illegal. The decretal portion
reads:
WHEREFORE, premises considered, it is hereby ordered:
(1) Declaring the strikes staged by the Union to be illegal.
(2) Declared [sic] that the dismissal of the 227 who participated in the illegal strike
on February 21-23, 2001 is legal.
(3) However, the Company is ordered to pay the 227 Union members, who
participated in the illegal strike severance compensation in an amount equivalent to
one month salary for every year of service, as an alternative relief to continued
employment.
(4) Declared [sic] that the following Union officers and directors to have forfeited
their employment status for having led the illegal strikes on February 21-23, 2001
and May 23 and 28, 2001: Ed Cubelo, Maximino Cruz, Jr., Ricky Chavez, Joselito
Hugo, Virgilio Colandog, Rommel Digma, Federico Torres, Emilio Completo,
Alexander Esteva, Joey Javellonar, Lorenzo Caraqueo, Roderick Nieres, Antonio
Borsigue, Bayani Manguil, Jr., and Mayo Mata.21

Accordingly, both Toyota and the Union filed Motions for Reconsideration, which the NLRC
denied in its September 14, 2001 Resolution.23 Consequently, both parties questioned the
August 9, 2001 Decision24 and September 14, 2001 Resolution of the NLRC in separate
petitions for certiorari filed with the CA, which were docketed as CA-G.R. SP Nos. 67100 and
67561, respectively. The CA then consolidated the petitions.
In its February 27, 2003 Decision,25 the CA ruled that the Unions petition is defective in form
for its failure to append a proper verification and certificate of non-forum shopping, given that,
out of the 227 petitioners, only 159 signed the verification and certificate of non-forum
shopping. Despite the flaw, the CA proceeded to resolve the petitions on the merits and
affirmed the assailed NLRC Decision and Resolution with a modification, however, of
deleting the award of severance compensation to the dismissed Union members.
In justifying the recall of the severance compensation, the CA
considered the participation in illegal strikes as serious misconduct. It defined serious
misconduct as a transgression of some established and definite rule of action, a forbidden act,
a dereliction of duty, willful in character, and implies wrongful intent and not mere error in
judgment. It cited Panay Electric Company, Inc. v. NLRC,26 where we revoked the grant of
separation benefits to employees who lawfully participated in an illegal strike based on Art.
264 of the Labor Code, which states that "any union officer who knowingly participates in an
illegal strike and any worker or union officer who knowingly participates in the commission of
illegal acts during a strike may be declared to have lost his employment status." 27
However, in its June 20, 2003 Resolution, 28 the CA modified its February 27, 2003 Decision
by reinstating severance compensation to the dismissed employees based on social justice.

SO ORDERED.22

The Issues

The NLRC considered the mass actions staged on February 21 to 23, 2001 illegal as the Union
failed to comply with the procedural requirements of a valid strike under Art. 263 of the Labor
Code.

Petitioner Union now comes to this Court and raises the following issues for our
consideration:

After the DOLE Secretary assumed jurisdiction over the Toyota dispute on April 10, 2001, the
Union again staged strikes on May 23 and 28, 2001. The NLRC found the strikes illegal as
they violated Art. 264 of the Labor Code which proscribes any strike or lockout after
jurisdiction is assumed over the dispute by the President or the DOLE Secretary.
The NLRC held that both parties must have maintained the status quo after the DOLE
Secretary issued the assumption/certification Order, and ruled that the Union did not respect
the DOLE Secretarys directive.

I. Whether the mere participation of ordinary employees in an illegal strike is

enough reason to warrant their dismissal.
II. Whether the Union officers and members act of holding the protest rallies in
front of the BLR office and the Office of the Secretary of Labor and Employment on
February 22 and 23, 2001 should be held as illegal strikes. In relation hereto,
whether the protests committed on May 23 and 28, 2001, should be held as illegal
strikes. Lastly, whether the Union violated the Assumption of Jurisdiction Order
issued by the Secretary of Labor and Employment.

III. Whether the dismissal of 227 Union officers and members constitutes unfair
labor practice.
IV. Whether the CA erred in affirming the Decision of the NLRC which excluded
the Unions Position Paper which the Union filed by mail. In the same vein, whether
the Unions right to due process was violated when the NLRC excluded their
Position Paper.

On a procedural aspect, the Union faults the CA for treating its petition as an unsigned
pleading and posits that the verification signed by 159 out of the 227 petitioners has already
substantially complied with and satisfied the requirements under Secs. 4 and 5 of Rule 7 of the
Rules of Court.
The Unions proposition is partly correct.
Sec. 4 of Rule 7 of the Rules of Court states:

V. Whether the CA erred in dismissing the Unions Petition for Certiorari.

Toyota, on the other hand, presents this sole issue for our determination:

Sec. 4. Verification.Except when otherwise specifically required by law or rule, pleadings

need not be under oath, verified or accompanied by affidavit.

I. Whether the Court of Appeals erred in issuing its Resolution dated June 20, 2003, partially
modifying its Decision dated February 27, 2003, and awarding severance compensation to the
dismissed Union members.

A pleading is verified by an affidavit that the affiant has read the pleading and that the
allegations therein are true and correct of his personal knowledge or based on authentic
records.

In sum, two main issues are brought to the fore:

A pleading required to be verified which contains a verification based on "information and

belief" or upon "knowledge, information and belief," or lacks a proper verification, shall be
treated as an unsigned pleading.

(1) Whether the mass actions committed by the Union on different occasions are
illegal strikes; and
(2) Whether separation pay should be awarded to the Union members who
participated in the illegal strikes.
The Courts Ruling
The Union contends that the NLRC violated its right to due process when it disregarded its
position paper in deciding Toyotas petition to declare the strike illegal.
We rule otherwise.
It is entirely the Unions fault that its position paper was not considered by the NLRC.
Records readily reveal that the NLRC was even too generous in affording due process to the
Union. It issued no less than three (3) orders for the parties to submit its position papers,
which the Union ignored until the last minute. No sufficient justification was offered why the
Union belatedly filed its position paper. In Datu Eduardo Ampo v. The Hon. Court of Appeals,
it was explained that a party cannot complain of deprivation of due process if he was afforded
an opportunity to participate in the proceedings but failed to do so. If he does not avail himself
of the chance to be heard, then it is deemed waived or forfeited without violating the
constitutional guarantee.29 Thus, there was no violation of the Unions right to due process on
the part of the NLRC.

The verification requirement is significant, as it is intended to secure an assurance that the

allegations in the pleading are true and correct and not the product of the imagination or a
matter of speculation.30 This requirement is simply a condition affecting the form of pleadings,
and noncompliance with the requirement does not necessarily render it fatally defective.
Indeed, verification is only a formal and not a jurisdictional requirement. 31
In this case, the problem is not the absence but the adequacy of the Unions verification, since
only 159 out of the 227 petitioners executed the verification. Undeniably, the petition meets
the requirement on the verification with respect to the 159 petitioners who executed the
verification, attesting that they have sufficient knowledge of the truth and correctness of the
allegations of the petition. However, their signatures cannot be considered as verification of
the petition by the other 68 named petitioners unless the latter gave written authorization to the
159 petitioners to sign the verification on their behalf. Thus, in Loquias v. Office of the
Ombudsman, we ruled that the petition satisfies the formal requirements only with regard to
the petitioner who signed the petition but not his co-petitioner who did not sign nor authorize
the other petitioner to sign it on his behalf. 32 The proper ruling in this situation is to consider
the petition as compliant with the formal requirements with respect to the parties who signed it
and, therefore, can be given due course only with regard to them. The other petitioners who
did not sign the verification and certificate against forum shopping cannot be recognized as
petitioners have no legal standing before the Court. The petition should be dismissed outright
with respect to the non-conforming petitioners.

In the case at bench, however, the CA, in the exercise of sound discretion, did not strictly
apply the ruling in Loquias and instead proceeded to decide the case on the merits.
The alleged protest rallies in front of the offices of BLR and DOLE Secretary and at the
Toyota plants constituted illegal strikes
When is a strike illegal?
Noted authority on labor law, Ludwig Teller, lists six (6) categories of an illegal strike, viz:
(1) [when it] is contrary to a specific prohibition of law, such as strike by employees
performing governmental functions; or
(2) [when it] violates a specific requirement of law[, such as Article 263 of the Labor
Code on the requisites of a valid strike]; or
(3) [when it] is declared for an unlawful purpose, such as inducing the employer to
commit an unfair labor practice against non-union employees; or
(4) [when it] employs unlawful means in the pursuit of its objective, such as a
widespread terrorism of non-strikers [for example, prohibited acts under Art. 264(e)
of the Labor Code]; or
(5) [when it] is declared in violation of an existing injunction[, such as injunction,
prohibition, or order issued by the DOLE Secretary and the NLRC under Art. 263 of
the Labor Code]; or
(6) [when it] is contrary to an existing agreement, such as a no-strike clause or
conclusive arbitration clause.33
Petitioner Union contends that the protests or rallies conducted on February 21 and 23, 2001
are not within the ambit of strikes as defined in the Labor Code, since they were legitimate
exercises of their right to peaceably assemble and petition the government for redress of
grievances. Mainly relying on the doctrine laid down in the case of Philippine Blooming Mills
Employees Organization v. Philippine Blooming Mills Co., Inc.,34 it argues that the protest was
not directed at Toyota but towards the Government (DOLE and BLR). It explains that the
protest is not a strike as contemplated in the Labor Code. The Union points out that in
Philippine Blooming Mills Employees Organization, the mass action staged in Malacaang to
petition the Chief Executive against the abusive behavior of some police officers was a proper
exercise of the employees right to speak out and to peaceably gather and ask government for
redress of their grievances.

The Unions position fails to convince us.

While the facts in Philippine Blooming Mills Employees Organization are similar in some
respects to that of the present case, the Union fails to realize one major difference: there was
no labor dispute in Philippine Blooming Mills Employees Organization. In the present case,
there was an on-going labor dispute arising from Toyotas refusal to recognize and negotiate
with the Union, which was the subject of the notice of strike filed by the Union on January 16,
2001. Thus, the Unions reliance on Phililippine Blooming Mills Employees Organization is
misplaced, as it cannot be considered a precedent to the case at bar.
A strike means any temporary stoppage of work by the concerted action of employees as a
result of an industrial or labor dispute. A labor dispute, in turn, includes any controversy or
matter concerning terms or conditions of employment or the association or representation of
persons in negotiating, fixing, maintaining, changing, or arranging the terms and conditions of
employment, regardless of whether the disputants stand in the proximate relation of the
employer and the employee.35
In Bangalisan v. Court of Appeals, it was explained that "[t]he fact that the conventional term
strike was not used by the striking employees to describe their common course of action is
inconsequential, since the substance of the situation and not its appearance, will be deemed
controlling."36 The term "strike" has been elucidated to encompass not only concerted work
stoppages, but also slowdowns, mass leaves, sit-downs, attempts to damage, destroy, or
sabotage plant equipment and facilities, and similar activities. 37
Applying pertinent legal provisions and jurisprudence, we rule that the protest actions
undertaken by the Union officials and members on February 21 to 23, 2001 are not valid and
proper exercises of their right to assemble and ask government for redress of their complaints,
but are illegal strikes in breach of the Labor Code. The Unions position is weakened by the
lack of permit from the City of Manila to hold "rallies." Shrouded as demonstrations, they
were in reality temporary stoppages of work perpetrated through the concerted action of the
employees who deliberately failed to report for work on the convenient excuse that they will
hold a rally at the BLR and DOLE offices in Intramuros, Manila, on February 21 to 23, 2001.
The purported reason for these protest actions was to safeguard their rights against any abuse
which the med-arbiter may commit against their cause. However, the Union failed to advance
convincing proof that the med-arbiter was biased against them. The acts of the med-arbiter in
the performance of his duties are presumed regular. Sans ample evidence to the contrary, the
Union was unable to justify the February 2001 mass actions. What comes to the fore is that the
decision not to work for two days was designed and calculated to cripple the manufacturing
arm of Toyota. It becomes obvious that the real and ultimate goal of the Union is to coerce
Toyota to finally acknowledge the Union as the sole bargaining agent of the company. This is
not a legal and valid exercise of the right of assembly and to demand redress of grievance.

We sustain the CAs affirmance of the NLRCs finding that the protest rallies staged on
February 21 to 23, 2001 were actually illegal strikes. The illegality of the Unions mass actions
was succinctly elaborated by the labor tribunal, thus:
We have stated in our questioned decision that such mass actions staged before the Bureau of
Labor Relations on February 21-23, 2001 by the union officers and members fall squarely
within the definition of a strike (Article 212 (o), Labor Code). These concerted actions
resulted in the temporary stoppage of work causing the latter substantial losses. Thus, without
the requirements for a valid strike having been complied with, we were constrained to
consider the strike staged on such dates as illegal and all employees who participated in the
concerted actions to have consequently lost their employment status.
If we are going to stamp a color of legality on the two (2) [day-] walk out/strike of respondents
without filing a notice of strike, in effect we are giving license to all the unions in the country
to paralyze the operations of their companies/employers every time they wish to hold a
demonstration in front of any government agency. While we recognize the right of every
person or a group to peaceably assemble and petition the government for redress of
grievances, the exercise of such right is governed by existing laws, rules and regulations.
Although the respondent union admittedly made earnest representations with the company to
hold a mass protest before the BLR, together with their officers and members, the denial of the
request by the management should have been heeded and ended their insistence to hold the
planned mass demonstration. Verily, the violation of the company rule cannot be dismissed as
mere absences of two days as being suggested by the union [are but] concerted actions
detrimental to Petitioner Toyotas interest.38 (Emphasis supplied.)
It is obvious that the February 21 to 23, 2001 concerted actions were undertaken without
satisfying the prerequisites for a valid strike under Art. 263 of the Labor Code. The Union
failed to comply with the following requirements: (1) a notice of strike filed with the DOLE
30 days before the intended date of strike, or 15 days in case of unfair labor practice; 39 (2)
strike vote approved by a majority of the total union membership in the bargaining unit
concerned obtained by secret ballot in a meeting called for that purpose; and (3) notice given
to the DOLE of the results of the voting at least seven days before the intended strike. These
requirements are mandatory and the failure of a union to comply with them renders the strike
illegal.40 The evident intention of the law in requiring the strike notice and the strike-vote
report is to reasonably regulate the right to strike, which is essential to the attainment of
legitimate policy objectives embodied in the law.41 As they failed to conform to the law, the
strikes on February 21, 22, and 23, 2001 were illegal.
Moreover, the aforementioned February 2001 strikes are in blatant violation of Sec. D, par. 6
of Toyotas Code of Conduct which prohibits "inciting or participating in riots, disorders,
alleged strikes or concerted actions detrimental to [Toyotas] interest." The penalty for the
offense is dismissal. The Union and its members are bound by the company rules, and the

February 2001 mass actions and deliberate refusal to render regular and overtime work on said
days violated these rules. In sum, the February 2001 strikes and walk-outs were illegal as these
were in violation of specific requirements of the Labor Code and a company rule against
illegal strikes or concerted actions.
With respect to the strikes committed from March 17 to April 12, 2001, those were initially
legal as the legal requirements were met. However, on March 28 to April 12, 2001, the Union
barricaded the gates of the Bicutan and Sta. Rosa plants and blocked the free ingress to and
egress from the company premises. Toyota employees, customers, and other people having
business with the company were intimidated and were refused entry to the plants. As earlier
explained, these strikes were illegal because unlawful means were employed. The acts of the
Union officers and members are in palpable violation of Art. 264(e), which proscribes acts of
violence, coercion, or intimidation, or which obstruct the free ingress to and egress from the
company premises. Undeniably, the strikes from March 28 to April 12, 2001 were illegal.
Petitioner Union also posits that strikes were not committed on May 23 and 28, 2001. The
Union asserts that the rallies held on May 23 and 28, 2001 could not be considered strikes, as
the participants were the dismissed employees who were on payroll reinstatement. It
concludes that there was no work stoppage.
This contention has no basis.
It is clear that once the DOLE Secretary assumes jurisdiction over the labor dispute and
certifies the case for compulsory arbitration with the NLRC, the parties have to revert to the
status quo ante (the state of things as it was before). The intended normalcy of operations is
apparent from the fallo of the April 10, 2001 Order of then DOLE Secretary Patricia A. Sto.
Tomas, which reads:
WHEREFORE, PREMISES CONSIDERED, this Office hereby CERTIFIES the labor dispute
at Toyota Motors Philippines Corporation to the [NLRC] pursuant to Article 263 (g) of the
Labor Code, as amended. This Certification covers the current labor cases filed in relation
with the Toyota strike, particularly, the Petition for Injunction filed with the National Labor
Relations Commission entitled Toyota Motor Philippines Corporation vs. Toyota Motor
Philippines Corporation Workers Association (TMPCWA), Ed Cubelo, et al., NLRC
Injunction Case No. 3401054-01; Toyota Motor Philippines Corporation vs. Toyota Motor
Philippines Corporation Workers Association, et al., NLRC NCR Case No. 3004-01775-01,
and such other labor cases that the parties may file relating to the strike and its effects while
this Certification is in effect.
As provided under Article 2634(g) of the Labor Code, all striking workers are directed to
return to work at their regular shifts by April 16, 2001; the Company is in turn directed to
accept them back to work under the same terms and conditions obtaining prior to the work

stoppage, subject to the option of the company to merely reinstate a worker or workers in the
payroll in light of the negative emotions that the strike has generated and the need to prevent
the further deterioration of the relationship between the company and its workers.
Further, the parties are hereby ordered to cease and desist from committing any act that might
lead to the worsening of an already deteriorated situation. 42 (Emphasis supplied.)
It is explicit from this directive that the Union and its members shall refrain from engaging in
any activity that might exacerbate the tense labor situation in Toyota, which certainly includes
concerted actions.
This was not heeded by the Union and the individual respondents who staged illegal concerted
actions on May 23 and 28, 2001 in contravention of the Order of the DOLE Secretary that no
acts should be undertaken by them to aggravate the "already deteriorated situation."
While it may be conceded that there was no work disruption in the two Toyota plants, the fact
still remains that the Union and its members picketed and performed concerted actions in front
of the Company premises. This is a patent violation of the assumption of jurisdiction and
certification Order of the DOLE Secretary, which ordered the parties "to cease and desist from
committing any act that might lead to the worsening of an already deteriorated situation."
While there are no work stoppages, the pickets and concerted actions outside the plants have a
demoralizing and even chilling effect on the workers inside the plants and can be considered
as veiled threats of possible trouble to the workers when they go out of the company premises
after work and of impending disruption of operations to company officials and even to
customers in the days to come. The pictures presented by Toyota undoubtedly show that the
company officials and employees are being intimidated and threatened by the strikers. In short,
the Union, by its mass actions, has inflamed an already volatile situation, which was explicitly
proscribed by the DOLE Secretarys Order. We do not find any compelling reason to reverse
the NLRC findings that the pickets on May 23 and 28, 2001 were unlawful strikes.
From the foregoing discussion, we rule that the February 21 to 23, 2001 concerted actions, the
March 17 to April 12, 2001 strikes, and the May 23 and 28, 2001 mass actions were illegal
strikes.
Union officers are liable for unlawful strikes or illegal acts during a strike
Art. 264 (a) of the Labor Code provides:
ART. 264. PROHIBITED ACTIVITIES
(a) x x x

Any worker whose employment has been terminated as a consequence of an unlawful lockout
shall be entitled to reinstatement with full backwages. Any union officer who knowingly
participates in an illegal strike and any worker or union officer who knowingly participates in
the commission of illegal acts during a strike may be declared to have lost his employment
status: Provided, That mere participation of a worker in a lawful strike shall not constitute
sufficient ground for termination of his employment, even if a replacement had been hired by
the employer during such lawful strike.
Art. 264(a) sanctions the dismissal of a union officer who knowingly participates in an illegal
strike or who knowingly participates in the commission of illegal acts during a lawful strike.
It is clear that the responsibility of union officials is greater than that of the members. They are
tasked with the duty to lead and guide the membership in decision making on union activities
in accordance with the law, government rules and regulations, and established labor practices.
The leaders are expected to recommend actions that are arrived at with circumspection and
contemplation, and always keep paramount the best interests of the members and union within
the bounds of law. If the implementation of an illegal strike is recommended, then they would
mislead and deceive the membership and the supreme penalty of dismissal is appropriate. On
the other hand, if the strike is legal at the beginning and the officials commit illegal acts during
the duration of the strike, then they cannot evade personal and individual liability for said acts.
The Union officials were in clear breach of Art. 264(a) when they knowingly participated in
the illegal strikes held from February 21 to 23, 2001, from March 17 to April 12, 2001, and on
May 23 and 28, 2001. We uphold the findings of fact of the NLRC on the involvement of said
union officials in the unlawful concerted actions as affirmed by the CA, thus:
As regards to the Union officers and directors, there is overwhelming justification to declare
their termination from service. Having instigated the Union members to stage and carry out all
illegal strikes from February 21-23, 2001, and May 23 and 28, 2001, the following Union
officers are hereby terminated for cause pursuant to Article 264(a) of the Labor Code: Ed
Cubelo, Maximino Cruz, Jr., Ricky Chavez, Joselito Hugo, Virgilio Colandog, Rommel
Digma, Federico Torres, Emilio Completo, Alexander Esteva, Joey Javellonar, Lorenzo
Caraqueo, Roderick Nieres, Antonio Borsigue, Bayani Manguil, Jr., and Mayo Mata. 43
The rule is well entrenched in this jurisdiction that factual findings of the labor tribunal, when
affirmed by the appellate court, are generally accorded great respect, even finality. 44
Likewise, we are not duty-bound to delve into the accuracy of the factual findings of the
NLRC in the absence of clear showing that these were arbitrary and bereft of any rational
basis.45 In the case at bench, the Union failed to convince us that the NLRC findings that the
Union officials instigated, led, and knowingly participated in the series of illegal strikes are
not reinforced by substantial evidence. Verily, said findings have to be maintained and upheld.

We reiterate, as a reminder to labor leaders, the rule that "[u]nion officers are duty bound to
guide their members to respect the law."46 Contrarily, if the "officers urge the members to
violate the law and defy the duly constituted authorities, their dismissal from the service is a
just penalty or sanction for their unlawful acts."47
Members liability depends on participation in illegal acts
Art. 264(a) of the Labor Code provides that a member is liable when he knowingly
participates in an illegal act "during a strike." While the provision is silent on whether the
strike is legal or illegal, we find that the same is irrelevant. As long as the members commit
illegal acts, in a legal or illegal strike, then they can be terminated. 48 However, when union
members merely participate in an illegal strike without committing any illegal act, are they
liable?
This was squarely answered in Gold City Integrated Port Service, Inc. v. NLRC, 49 where it was
held that an ordinary striking worker cannot be terminated for mere participation in an illegal
strike. This was an affirmation of the rulings in Bacus v. Ople 50 and Progressive Workers
Union v. Aguas,51 where it was held that though the strike is illegal, the ordinary member who
merely participates in the strike should not be meted loss of employment on the considerations
of compassion and good faith and in view of the security of tenure provisions under the
Constitution. In Esso Philippines, Inc. v. Malayang Manggagawa sa Esso (MME), it was
explained that a member is not responsible for the unions illegal strike even if he voted for the
holding of a strike which became illegal.52
Noted labor law expert, Professor Cesario A. Azucena, Jr., traced the history relating to the
liability of a union member in an illegal strike, starting with the "rule of vicarious liability,"
thus:
Under [the rule of vicarious liability], mere membership in a labor union serves as basis of
liability for acts of individuals, or for a labor activity, done on behalf of the union. The union
member is made liable on the theory that all the members are engaged in a general conspiracy,
and the unlawful acts of the particular members are viewed as necessary incidents of the
conspiracy. It has been said that in the absence of statute providing otherwise, the rule of
vicarious liability applies.
Even the Industrial Peace Act, however, which was in effect from 1953 to 1974, did not adopt
the vicarious liability concept. It expressly provided that:
No officer or member of any association or organization, and no association or organization
participating or interested in a labor dispute shall be held responsible or liable for the unlawful
acts of individual officers, members, or agents, except upon proof of actual participation in, or
actual authorization of, such acts or of ratifying of such acts after actual knowledge thereof.

Replacing the Industrial Peace Act, the Labor Code has not adopted the vicarious liability
rule.53
Thus, the rule on vicarious liability of a union member was abandoned and it is only when a
striking worker "knowingly participates in the commission of illegal acts during a strike" that
he will be penalized with dismissal.
Now, what are considered "illegal acts" under Art. 264(a)?
No precise meaning was given to the phrase "illegal acts." It may encompass a number of acts
that violate existing labor or criminal laws, such as the following:
(1) Violation of Art. 264(e) of the Labor Code which provides that "[n]o person
engaged in picketing shall commit any act of violence, coercion or intimidation or
obstruct the free ingress to or egress from the employers premises for lawful
purposes, or obstruct public thoroughfares";
(2) Commission of crimes and other unlawful acts in carrying out the strike; 54 and
(3) Violation of any order, prohibition, or injunction issued by the DOLE Secretary
or NLRC in connection with the assumption of jurisdiction/certification Order under
Art. 263(g) of the Labor Code.
As earlier explained, this enumeration is not exclusive and it may cover other breaches of
existing laws.
In the cases at bench, the individual respondents participated in several mass actions, viz:
(1) The rallies held at the DOLE and BLR offices on February 21, 22, and 23, 2001;
(2) The strikes held on March 17 to April 12, 2001; and
(3) The rallies and picketing on May 23 and 28, 2001 in front of the Toyota Bicutan
and Sta. Rosa plants.
Did they commit illegal acts during the illegal strikes on February 21 to 23, 2001, from March
17 to April 12, 2001, and on May 23 and 28, 2001?
The answer is in the affirmative.

As we have ruled that the strikes by the Union on the three different occasions were illegal, we
now proceed to determine the individual liabilities of the affected union members for acts
committed during these forbidden concerted actions.
Our ruling in Association of Independent Unions in the Philippines v. NLRC lays down the
rule on the liability of the union members:
Decisive on the matter is the pertinent provisions of Article 264 (a) of the Labor Code that: "[x
x x] any worker [x x x] who knowingly participates in the commission of illegal acts during a
strike may be declared to have lost his employment status. [x x x]" It can be gleaned
unerringly from the aforecited provision of law in point, however, that an ordinary striking
employee can not be terminated for mere participation in an illegal strike. There must be
proof that he committed illegal acts during the strike and the striker who participated in
the commission of illegal act[s] must be identified. But proof beyond reasonable doubt is
not required. Substantial evidence available under the circumstances, which may justify
the imposition of the penalty of dismissal, may suffice.
In the landmark case of Ang Tibay vs. CIR, the court ruled "Not only must there be some
evidence to support a finding or conclusion, but the evidence must be substantial.
Substantial evidence is more than a mere scintilla. It means such relevant evidence that a
reasonable mind might accept as sufficient to support a conclusion."55 (Emphasis
supplied.)
Thus, it is necessary for the company to adduce proof on the participation of the striking
employee in the commission of illegal acts during the strikes.
After a scrutiny of the records, we find that the 227 employees indeed joined the February 21,
22, and 23, 2001 rallies and refused to render overtime work or report for work. These rallies,
as we earlier ruled, are in reality illegal strikes, as the procedural requirements for strikes
under Art. 263 were not complied with. Worse, said strikes were in violation of the company
rule prohibiting acts "in citing or participating in riots, disorders, alleged strikes or concerted
action detrimental to Toyotas interest."
With respect to the February 21, 22, and 23, 2001 concerted actions, Toyota submitted the list
of employees who did not render overtime work on February 21, 2001 and who did not report
for work on February 22 and 23, 2001 as shown by Annex "I" of Toyotas Position Paper in
NLRC Certified Case No. 000203-01 entitled In Re: Labor Dispute at Toyota Motor
Philippines Corp. The employees who participated in the illegal concerted actions were as
follows:
1. Aclan, Eugenio; 2. Agosto, Joel; 3. Agot, Rodelio; 4. Alarana, Edwin; 5. Alejo, Alex; 6.
Alfonso, Erwin; 7. Apolinario, Dennis; 8. Apostol, Melvin; 9. Arceta, Romel; 10. Arellano,

Ruel; 11. Ariate, Abraham; 12. Arollado, Daniel; 13. Arriola, Dominador; 14. Atun, Lester; 15.
Bala, Rizalino; 16. Baluyut, Rolando; 17. Banzuela, Tirso Jr.; 18. Bayani, Roderick; 19.
Benabise, Sabas Jr.; 20. Berces, Abel; 21. Bering, Benny; 22. Birondo, Alberto; 23. Blanco,
Melchor; 24. Bolanos, Dexter; 25. Bolocon, Jerry; 26. Borebor, Rurel; 27. Borromeo, Jubert;
28. Borsigue, Antonio; 29. Bulan, Elmer; 30. Busano, Freddie; 31. Bustillo, Ernesto Jr.; 32.
Caalim, Alexander; 33. Cabahug, Nelson; 34. Cabatay, Jessie; 35. Cabezas, Marcelo; 36.
Calalang, Richard; 37. Candelario, Roque Jr.; 38. Capate, Leo Nelson; 39. Carandang, Resty;
40. Caraqueo, Lorenzo; 41. Caringal, Dennis; 42. Casaba, Gienell; 43. Catapusan,
Christopher; 44. Catral, Rico; 45. Cecilio, Felipe; 46. Cinense, Joey; 47. Cometa, Julius; 48.
Completo, Emilio; 49. Consignado, Randy; 50. Coral, Jay Antonio; 51. Correa, Claudio Jr.; 52.
Cuevas, Reynaldo; 53. Dacalcap, Albert; 54. Dakay, Ryan; 55. Dalanon, Herbert; 56. Dalisay,
Rene; 57. David, Benigno Jr.; 58. De Guzman, Joey; 59. Dela Cruz, Basilio; 60. Dela Cruz,
Ferdinand; 61. Dela Torre, Heremo; 62. De Leon, Leonardo; 63. Delos Santos, Rogelio; 64.
De Ocampo, Joselito; 65. De Silva, Leodegario; 66. Del Mundo, Alex; 67. Del Rio, Rey; 68.
Dela Ysla, Alex; 69. Dia, Frank Manuel; 70. Dimayuga, Antonio; 71. Dingcong, Jessiah; 72.
Dumalag, Jasper; 73. Duyag, Aldrin; 74. Ercillo, Armando; 75. Espadilla, Delmar; 76. Espejo,
Lionel; 77. Espeloa, Dennis; 78. Esteva, Alexander; 79. Estole, Francisco; 80. Fajardo,
George; 81. Fajilagutan, Jason; 82. Fajura, John; 83. Franco, Melencio; 84. Franco, Nikko; 85.
Fulgar, Dexter; 86. Fulo, Dante; 87. Gado, Eduardo; 88. Galang, Erwin; 89. Gamit, Rodel; 90.
Garces, Robin; 91. Garcia, Ariel; 92. Gaspi, Ronald; 93. Gavarra, Angelo; 94. Gerola, Genaro
Jr.; 95. Gerola, Larry; 96. Gohilde, Michael; 97. Gojar, Regino; 98. Gojar, Reynaldo; 99.
Gonzales, Roberto; 100. Gutierrez, Bernabe; 101. Hilaga, Edgar; 102. Hilanga, Melchor; 103.
Hondrada, Eugene Jay; 104. Imperial, Alejandro; 105. Jaen, Ferdinand; 106. Jalea, Philip; 107.
Javillonar, Joey; 108. Julve, Frederick; 109. Lalisan, Victorio; 110. Landicho, Danny; 111.
Laqui, Basilio; 112. Lavide, Edgar; 113. Lazaro, Orlando; 114. Legaspi, Noel; 115. Lising,
Reynaldo Jr.; 116. Llanera, Joey; 117. Lomboy, Alberto; 118. Lopez, Geronimo; 119. Lozada,
Jude Jonobell; 120. Lucido, Johny; 121. Macalindong, Rommel; 122. Madrazo, Nixon; 123.
Magbalita, Valentin; 124. Magistrado, Rogelio Jr.; 125. Magnaye, Philip John; 126.
Malabanan, Allan John; 127. Malabrigo, Angelito; 128. Malaluan, Rolando Jr.; 129. Malate,
Leoncio Jr.; 130. Maleon, Paulino; 131. Manaig, Roger; 132. Manalang, Joseph Patrick; 133.
Manalo, Manuel Jr.; 134. Manaog, Jonamar; 135. Manaog, Melchor; 136. Mandolado, Melvin;
137. Maneclang, Jovito; 138. Manego, Ruel; 139. Manguil, Bayani Jr.; 140. Manigbas, June;
141. Manjares, Alfred; 142. Manzanilla, Edwin; 143. Marasigan, Carlito; 144. Marcial, Nilo;
145. Mariano, Rommel; 146. Mata, Mayo; 147. Mendoza, Bobit; 148. Mendoza, Roberto; 149.
Milan, Joseph; 150. Miranda, Eduardo; 151. Miranda, Luis; 152. Montero, Ericson; 153.
Montero, Marlaw; 154. Montes, Ruel; 155. Morales, Dennis; 156. Natividad, Kenneth; 157.
Nava, Ronaldo; 158. Nevalga, Alexander; 159. Nicanor, Edwin; 160. Nierves, Roderick; 161.
Nunez, Alex; 162. Nunez, Lolito; 163. Obe, Victor; 164. Oclarino, Alfonso; 165. Ojenal, Leo;
166. Olit, Freddie; 167. Oliver, Rex; 168. Oliveria, Charlie; 169. Operana, Danny; 170.
Oriana, Allan; 171. Ormilla, Larry; 172. Ortiz, Felimon; 173. Paniterce, Alvin; 174. Parallag,
Gerald; 175. Pecayo, Edwin; 176. Pena, Erwin; 177. Penamante, Jowald; 178. Piamonte,
Melvin; 179. Piamonte, Rogelio; 180. Platon, Cornelio; 181. Polutan, Jorge; 182. Posada,
John; 183. Puno, Manjolito; 184. Ramos, Eddie; 185. Reyes, Rolando; 186. Roxas, Philip;

187. Sales, Paul Arthur; 188. Sallan, David Jr.; 189. Salvador, Bernardo; 190. Sampang,
Alejandro; 191. San Pablo, Baldwin; 192. Sangalang, Jeffrey; 193. Santiago, Eric; 194.
Santos, Raymond; 195. Sapin, Al Jose; 196. Saquilabon, Bernabe; 197. Serrano, Ariel; 198.
Sierra, Alex; 199. Simborio, Romualdo; 200. Sulit, Lauro; 201. Tabirao, Elvisanto; 202.
Tablizo, Edwin; 203. Taclan, Petronio; 204. Tagala, Rommel; 205. Tagle, Wilfredo Jr.; 206.
Tecson Alexander; 207. Templo, Christopher; 208. Tenorio, Roderick; 209. Tolentino, Rodel;
210. Tolentino, Rommel; 211. Tolentino, Romulo Jr.; 212. Tomas, Rolando; 213. Topaz,
Arturo Sr.; 214. Toral, Grant Robert; 215. Torres, Dennis; 216. Torres, Federico; 217. Trazona,
Jose Rommel; 218. Tulio, Emmanuel; 219. Umiten, Nestor Jr.; 220. Vargas, Joseph; 221.
Vergara, Allan; 222. Vergara, Esdwin; 223. Violeta, Apollo Sr.; 224. Vistal, Alex; 225.
Yangyon, Michael Teddy; 226. Zaldevar, Christopher; and 227. Zamora, Dominador Jr.
Toyotas Position Paper containing the list of striking workers was attested to as true and
correct under oath by Mr. Jose Ma. Aligada, First Vice President of the Group Administration
Division of Toyota. Mr. Emerito Dumaraos, Assistant Department Manager of the Production
Department of Toyota, likewise submitted a June 29, 2001 Affidavit 56 confirming the low
attendance of employees on February 21, 22, and 23, 2001, which resulted from the intentional
absences of the aforelisted striking workers. The Union, on the other hand, did not refute
Toyotas categorical assertions on the participation of said workers in the mass actions and
their deliberate refusal to perform their assigned work on February 21, 22, and 23, 2001. More
importantly, it did not deny the fact of absence of the employees on those days from the
Toyota manufacturing plants and their deliberate refusal to render work. Their admission that
they participated in the February 21 to 23, 2001 mass actions necessarily means they were
absent from their work on those days.
Anent the March 28 to April 12, 2001 strikes, evidence is ample to show commission of illegal
acts like acts of coercion or intimidation and obstructing free ingress to or egress from the
company premises. Mr. Eduardo Nicolas III, Toyotas Security Chief, attested in his affidavit
that the strikers "badmouthed people coming in and shouted invectives such as bakeru at
Japanese officers of the company." The strikers even pounded the vehicles of Toyota officials.
More importantly, they prevented the ingress of Toyota employees, customers, suppliers, and
other persons who wanted to transact business with the company. These were patent violations
of Art. 264(e) of the Labor Code, and may even constitute crimes under the Revised Penal
Code such as threats or coercion among others.
On March 28, 2001, the following have committed illegal actsblocking the ingress to or
egress from the two (2) Toyota plants and preventing the ingress of Toyota employees on
board the company shuttle at the Bicutan and Sta. Rosa Plants, viz:
1. Grant Robert Toral; 2. John Posadas; 3. Alex Sierra; 4. Allan John Malabanan; 5. Abel
Berces; 6. Ariel Garcia; 7. Charlie Oliveria; 8. Manjolito Puno; 9. Baldwin San Pablo; 10.
Federico Torres; 11. Larry Gerola; 12. Roderick Bayani; 13. Allan Oclarino; 14. Reynaldo
Cuevas; 15. George Polutan; 16. Arman Ercillo; 17. Joey Llanera; and 18. Roberto Gonzales

Photographs were submitted by Toyota marked as Annexes "1" through "18" of its Position
Paper, vividly showing the participation of the aforelisted employees in illegal acts. 57
To further aggravate the situation, a number of union members committed illegal acts
(blocking the ingress to and egress from the plant) during the strike staged on March 29, 2001
at the Toyota plant in Bicutan, to wit:
1. Basilio Laqui; 2. Sabas Benabise; 3. Federico Torres; 4. Freddie Olit; and 5. Joel Agosto
Pictures marked as Annexes "21" to "22" of Toyotas Position Paper reveal the illegal acts
committed by the aforelisted workers.58
On the next day, March 30, 2001, several employees again committed illegal acts (blocking
ingress to and egress from the plant) during the strike at the Bicutan plant, to wit:
1. Ariel Garcia; 2. Edgar Hilaga; 3. Charlie Oliveria; 4. Ferdinand Jaen; 5. Wilfredo Tagle; 6.
Alejandro Imperial; 7. Manjolito Puno; 8. Delmar Espadilla; 9. Apollo Violeta; and 10. Elvis
Tabirao
Pictures marked as Annexes "25" to "26" and "28" of Toyotas Position Paper show the
participation of these workers in unlawful acts. 59
On April 5, 2001, seven (7) Toyota employees were identified to have committed illegal acts
(blocking ingress to and egress from the plant) during the strike held at the Bicutan plant, to
wit:
1. Raymund Santos; 2. Elvis Tabirao; 3. Joseph Vargas; 4. Bernardo Salvador; 5. Antonio
Dimayuga; 6. Rurel Borebor; and 7. Alberto Lomboy
The participations of the strikers in illegal acts are manifest in the pictures marked as Annexes
"32" and "33" of Toyotas Position Paper.60
On April 6, 2001, only Rogelio Piamonte was identified to have committed illegal acts
(blocking ingress to and egress from the Toyota plant) during the strike at the Toyota Santa
Rosa plant.61 Then, on April 9, 2001, Alvin Paniterce, Dennis Apolinario, and Eduardo
Miranda62 were identified to have committed illegal acts (blocking ingress to and egress from
the Toyota plant) during the strike at the Toyota Santa Rosa plant and were validly dismissed
by Toyota.
Lastly, the strikers, though on payroll reinstatement, staged protest rallies on May 23, 2001
and May 28, 2001 in front of the Bicutan and Sta. Rosa plants. These workers acts in joining
and participating in the May 23 and 28, 2001 rallies or pickets were patent violations of the

April 10, 2001 assumption of jurisdiction/certification Order issued by the DOLE Secretary,
which proscribed the commission of acts that might lead to the "worsening of an already
deteriorated situation." Art. 263(g) is clear that strikers who violate the
assumption/certification Order may suffer dismissal from work. This was the situation in the
May 23 and 28, 2001 pickets and concerted actions, with the following employees who
committed illegal acts:
a. Strikers who joined the illegal pickets on May 23, 2001 were (1) Dennis Apolinario; (2)
Abel Berces; (3) Benny Bering; (4) Dexter Bolaos; (5) Freddie Busano; (6) Ernesto Bustillo,
Jr.; (7) Randy Consignado; (8) Herbert Dalanon; (9) Leodegario De Silva; (10) Alexander
Esteva; (11) Jason Fajilagutan; (12) Nikko Franco; (13) Genaro Gerola, Jr.; (14) Michael
Gohilde; (15) Rogelio Magistrado; (16) Rolando Malaluan, Jr.; (17) Leoncio Malate, Jr.; (18)
Edwin Manzanilla; (19) Nila Marcial; (20) Roderick Nierves; (21) Larry Ormilla; (22)
Filemon Ortiz; (23) Cornelio Platon; (24) Alejandro Sampang; (25) Eric Santiago; (26)
Romualdo Simborio; (27) Lauro Sulit; and (28) Rommel Tagala.
Pictures show the illegal acts (participation in pickets/strikes despite the issuance of a returnto-work order) committed by the aforelisted strikers. 63
b. Strikers who participated in the May 28, 2001 were (1) Joel Agosto; (2) Alex Alejo; (3)
Erwin Alfonso; (4) Dennis Apolinario; (5) Melvin Apostol; (6) Rommel Arceta; (7) Lester
Atun; (8) Abel Berces; (9) Benny Bering; (10) Dexter Bolanos; (11) Marcelo Cabezas; (12)
Nelson Leo Capate; (13) Lorenzo Caraqueo; (14) Christopher Catapusan; (15) Ricky Chavez;
(16) Virgilio Colandog; (17) Claudio Correa; (18) Ed Cubelo; (19) Reynaldo Cuevas; (20)
Rene Dalisay; (21) Benigno David, Jr.; (22) Alex Del Mundo; (23) Basilio Dela Cruz; (24)
Roel Digma; (25) Aldrin Duyag; (26) Armando Ercillo; (27) Delmar Espadilla; (28) Alexander
Esteva; (29) Nikko Franco; (30) Dexter Fulgar; (31) Dante Fulo; (32) Eduardo Gado; (33)
Michael Gohilde; (34) Eugene Jay Hondrada II; (35) Joey Javillonar; (36) Basilio Laqui; (37)
Alberto Lomboy; (38) Geronimo Lopez; (39) Rommel Macalindog; (40) Nixon Madrazo; (41)
Valentin Magbalita; (42) Allan Jon Malabanan; (43) Jonamar Manaog; (44) Bayani Manguil;
(45) June Manigbas; (46) Alfred Manjares; (47) Edwin Manzanilla; (48) Mayo Mata; (49) Leo
Ojenal; (50) Allan Oriana; (51) Rogelio Piamonte; (52) George Polutan; (53) Eric Santiago;
(54) Bernabe Saquilabon; (55) Alex Sierra; (56) Romualdo Simborio; (57) Lauro Sulit; (58)
Elvisanto Tabirao; (59) Edwin Tablizo; (60) Emmanuel Tulio; (61) Nestor Umiten; (62) Joseph
Vargas; (63) Edwin Vergara; and (64) Michael Teddy Yangyon.
Toyota presented photographs which show said employees conducting mass pickets and
concerted actions.64
Anent the grant of severance compensation to legally dismissed union members, Toyota
assails the turn-around by the CA in granting separation pay in its June 20, 2003 Resolution
after initially denying it in its February 27, 2003 Decision. The company asseverates that
based on the CA finding that the illegal acts of said union members constitute gross

misconduct, not to mention the huge losses it suffered, then the grant of separation pay was
not proper.
The general rule is that when just causes for terminating the services of an employee under
Art. 282 of the Labor Code exist, the employee is not entitled to separation pay. The apparent
reason behind the forfeiture of the right to termination pay is that lawbreakers should not
benefit from their illegal acts. The dismissed employee, however, is entitled to "whatever
rights, benefits and privileges [s/he] may have under the applicable individual or collective
bargaining agreement with the employer or voluntary employer policy or practice" 65 or under
the Labor Code and other existing laws. This means that the employee, despite the dismissal
for a valid cause, retains the right to receive from the employer benefits provided by law, like
accrued service incentive leaves. With respect to benefits granted by the CBA provisions and
voluntary management policy or practice, the entitlement of the dismissed employees to the
benefits depends on the stipulations of the CBA or the company rules and policies.
As in any rule, there are exceptions. One exception where separation pay is given even though
an employee is validly dismissed is when the court finds justification in applying the principle
of social justice well entrenched in the 1987 Constitution. In Phil. Long Distance Telephone
Co. (PLDT) v. NLRC, the Court elucidated why social justice can validate the grant of
separation pay, thus:
The reason is that our Constitution is replete with positive commands for the promotion of
social justice, and particularly the protection of the rights of the workers. The enhancement of
their welfare is one of the primary concerns of the present charter. In fact, instead of confining
itself to the general commitment to the cause of labor in Article II on the Declaration of
Principles of State Policies, the new Constitution contains a separate article devoted to the
promotion of social justice and human rights with a separate sub-topic for labor. Article XIII
expressly recognizes the vital role of labor, hand in hand with management, in the
advancement of the national economy and the welfare of the people in general. The categorical
mandates in the Constitution for the improvement of the lot of the workers are more than
sufficient basis to justify the award of separation pay in proper cases even if the dismissal be
for cause.66
In the same case, the Court laid down the rule that severance compensation shall be allowed
only when the cause of the dismissal is other than serious misconduct or that which reflects
adversely on the employees moral character. The Court succinctly discussed the propriety of
the grant of separation pay in this wise:
We hold that henceforth separation pay shall be allowed as a measure of social justice only in
those instances where the employee is validly dismissed for causes other than serious
misconduct or those reflecting on his moral character. Where the reason for the valid dismissal
is, for example, habitual intoxication or an offense involving moral turpitude, like theft or
illicit sexual relations with a fellow worker, the employer may not be required to give the

dismissed employee separation pay, or financial assistance, or whatever other name it is called,
on the ground of social justice.
A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather
than punishing the erring employee for his offense. And we do not agree that the punishment
is his dismissal only and that the separation pay has nothing to do with the wrong he has
committed. Of course it has. Indeed, if the employee who steals from the company is granted
separation pay even as he is validly dismissed, it is not unlikely that he will commit a similar
offense in his next employment because he thinks he can expect a like leniency if he is again
found out. This kind of misplaced compassion is not going to do labor in general any good as
it will encourage the infiltration of its ranks by those who do not deserve the protection and
concern of the Constitution.
The policy of social justice is not intended to countenance wrongdoing simply because it is
committed by the underprivileged. At best it may mitigate the penalty but it certainly will not
condone the offense. Compassion for the poor is an imperative of every humane society but
only when the recipient is not a rascal claiming an undeserved privilege. Social justice cannot
be permitted to be refuge of scoundrels any more than can equity be an impediment to the
punishment of the guilty. Those who invoke social justice may do so only if their hands are
clean and their motives blameless and not simply because they happen to be poor. This great
policy of our Constitution is not meant for the protection of those who have proved they are
not worthy of it, like the workers who have tainted the cause of labor with the blemishes of
their own character.67

and regulations and whose employment was thus terminated for gross and habitual neglect of
his duties. In the doctrinal case of San Miguel v. Lao,71 this Court reversed and set aside the
ruling of the CA granting retirement benefits or separation pay to an employee who was
dismissed for willful breach of trust and confidence by causing the delivery of raw materials,
which are needed for its glass production plant, to its competitor. While a review of the case
reports does not reveal a case involving a termination by reason of the commission of a crime
against the employer or his/her family which dealt with the issue of separation pay, it would be
adding insult to injury if the employer would still be compelled to shell out money to the
offender after the harm done.
In all of the foregoing situations, the Court declined to grant termination pay because the
causes for dismissal recognized under Art. 282 of the Labor Code were serious or grave in
nature and attended by willful or wrongful intent or they reflected adversely on the moral
character of the employees. We therefore find that in addition to serious misconduct, in
dismissals based on other grounds under Art. 282 like willful disobedience, gross and habitual
neglect of duty, fraud or willful breach of trust, and commission of a crime against the
employer or his family, separation pay should not be conceded to the dismissed employee.
In analogous causes for termination like inefficiency, drug use, and others, the NLRC or the
courts may opt to grant separation pay anchored on social justice in consideration of the length
of service of the employee, the amount involved, whether the act is the first offense, the
performance of the employee and the like, using the guideposts enunciated in PLDT on the
propriety of the award of separation pay.

Explicit in PLDT are two exceptions when the NLRC or the courts should not grant separation
pay based on social justiceserious misconduct (which is the first ground for dismissal under
Art. 282) or acts that reflect on the moral character of the employee. What is unclear is
whether the ruling likewise precludes the grant of separation pay when the employee is validly
terminated from work on grounds laid down in Art. 282 of the Labor Code other than serious
misconduct.

In the case at bench, are the 227 striking employees entitled to separation pay?

A recall of recent cases decided bearing on the issue reveals that when the termination is
legally justified on any of the grounds under Art. 282, separation pay was not allowed. In Ha
Yuan Restaurant v. NLRC,68 we deleted the award of separation pay to an employee who, while
unprovoked, hit her co-workers face, causing injuries, which then resulted in a series of fights
and scuffles between them. We viewed her act as serious misconduct which did not warrant
the award of separation pay. In House of Sara Lee v. Rey,69 this Court deleted the award of
separation pay to a branch supervisor who regularly, without authorization, extended the
payment deadlines of the companys sales agents. Since the cause for the supervisors
dismissal involved her integrity (which can be considered as breach of trust), she was not
worthy of compassion as to deserve separation pay based on her length of service. In Gustilo
v. Wyeth Phils., Inc.,70 this Court found no exceptional circumstance to warrant the grant of
financial assistance to an employee who repeatedly violated the companys disciplinary rules

Neither can social justice justify the award to them of severance compensation or any other
form of financial assistance. x x x

In the instant case, the CA concluded that the illegal strikes committed by the Union members
constituted serious misconduct.72
The CA ratiocinated in this manner:

xxxx
Considering that the dismissal of the employees was due to their participation in the illegal
strikes as well as violation of the Code of Conduct of the company, the same constitutes
serious misconduct. A serious misconduct is a transgression of some established and definite
rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful
intent and not mere error in judgment. In fact, in Panay Electric Company, Inc. v. NLRC, the
Supreme Court nullified the grant of separation benefits to employees who unlawfully

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

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

progressive and truly effective means of dispute resolution lies in mediation, conciliation, and
arbitration, which do not increase tension but instead provide relief from them. In the end, an
atmosphere of trust and understanding has much more to offer a business relationship than the
traditional enmity that has long divided the employer and the employee.
WHEREFORE, the petitions in G.R. Nos. 158786 and 158789 are DENIED while those in
G.R. Nos. 158798-99 are GRANTED.
The June 20, 2003 CA Resolution in CA-G.R. SP Nos. 67100 and 67561 restoring the grant of
severance compensation is ANNULLED and SET ASIDE.
The February 27, 2003 CA Decision in CA-G.R. SP Nos. 67100 and 67561, which affirmed
the August 9, 2001 Decision of the NLRC but deleted the grant of severance compensation, is
REINSTATED and AFFIRMED. No costs. SO ORDERED.

G.R. No. 123294

October 20, 2010

Complainant Quijano rose from the ranks starting as accounting clerk in December 1967 until
she became effective September 1, 1984, Manager-Agents Services Accounting Division
(ASAD), vice Josefina Sioson.
ASAD, the specific unit in PAL charged with the processing, verification, reconciliation, and
validation of all claims for commission filed by agents worldwide, is under the direct
supervision and control of the Vice President-Comptroller, and within the scope of the audit
program of the Vice President-Internal Audit & Control.
On May 5, 1989, an investigating committee chaired by Leslie W. Espino (hereinafter referred
to as the Espino Committee) formally charged Quijano as Manager-ASAD in connection with
the processing and payment of commission claims to Goldair Pty. Ltd. (Goldair for short)
wherein PAL overpaid commissions to the latter amounting to several million Australian
dollars during the period 1984-1987. Specifically, Quijano was charged as Manager-ASAD
with the following:
"Failure on the job and gross negligence resulting in loss of trust and confidence in that you
failed to:

PHILIPPINE AIRLINES, INC., Petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and AIDA M. QUIJANO,
Respondents.

a. Exercise the necessary monitoring, control and supervision over your Senior
Accounts Analyst to ensure that the latter was performing the basic duties and
responsibilities of her job in checking and verifying the correctness and validity of
the commission claims from Goldair.

This is a Petition for Certiorari under Rule 65 of the Rules of Court seeking to annul, reverse
and set aside the following issuances of public respondent National Labor Relations
Commission (NLRC): (1) Decision1 dated September 29, 1995 in NLRC NCR CA 007860-94
(NLRC NCR 00-03-01859-91), entitled "Aida M. Quijano v. Philippine Airlines, Inc.," which
set aside the Decision2 of Labor Arbiter Roberto I. Santos and ordered petitioner Philippine
Airlines, Inc. (PAL) to pay private respondent Aida M. Quijano (Quijano) her separation pay
in accordance with petitioners "Special Retirement & Separation Program," and (2)
Resolution3 dated November 14, 1995 denying petitioners Motion for Reconsideration
thereof.

b. Adopt and perform the necessary checks and verification procedures as demanded
by your position in order to ensure that the commission claims of Goldair which you
were approving for payment were correct and valid claims thus resulting in
consistent substantial overpayments to Goldair over a period of more than three
years.

It bears stressing that pursuant to St. Martin Funeral Home v. National Labor Relations
Commission4 and In Re: Dismissal of Special Civil Actions in NLRC Cases,5 all special civil
actions arising out of any decision, final resolution or order of the NLRC must be filed with
the Court of Appeals. However, since both parties of this case had filed their respective
Memoranda prior to the promulgation of our decision in St. Martin Funeral Home, this case
was no longer referred to the Court of Appeals.
The following are the pertinent facts, as summarized by the NLRC:

c. Require or otherwise cause a final reconciliation of the remaining balance due as

commission claims to Goldair for a particular month such that a claim for a
particular month was never liquidated in a final amount and thus contributing to
consistent overpayments to Goldair."
The Senior Accounts Analyst referred to in the charge was Dora Jane Prado Curammeng who
was included as a respondent. Curammeng was specifically assigned to handle and process
commissions of agents in, among others, the Australia Region, and Goldair was among the
travel agents whose production reports and commission claims were handled by her.
Curammeng was accused of failing to verify the completeness of the documents supporting
the claims; to trace and match each ticket in the production report submitted by Goldair with
the IATA, BSP and CTO sales report; and to perform a complete verification of the net/net

amounts claimed in the production reports against the approved marketing arrangements.
However, Curammeng had already resigned and became a resident of Canada at the time of
the investigation conducted by the Espino Committee.

A final check whether accounting procedures being observed were appropriate in accordance
with accounting standards, is the periodic examination of both our internal and external
auditors.

Pending further investigation, the Espino Committee placed Quijano under preventive
suspension and at the same time required her to submit her answer to the charges. As directed,
Quijano submitted her answer wherein, among others, she explained as follows:

During all these 4-1/2 years I have been with ASAD, I did not receive any feedback that there
were weaknesses or lapses in accounting controls and procedures being followed.

"My staff processes production reports submitted by both passenger and cargo agents. In 1984,
they were only seven (7) people (with one on loan to Financial Analysis Division) and yet they
process commission claims of an average of PHP four billion annually. My colleagues who are
responsible for processing and recording gross passenger and cargo sales have around 51
people. Just the ratio of my staff to accounting sales staff, which is one to seven, would
indicate the heavy load our unit experience.
I wish to emphasize however, that the staff assigned under my division have been selected on
the basis of their judgment competence considering the very nature of marketing arrangements
with agents are strictly private and confidential. Under the circumstances I have just
mentioned, my staffs judgment and competence is heavily relied on particularly when random
checking of commission claims for traffic documents and airway bills against sales reports is
being performed by them. I also seek your appreciation of the work environment we are in and
the intermittent conflicts we experience due to the pressure of prompt settlement of claims to
agents and yet having the satisfaction that the processing procedures are adequate.
xxxx
May I reiterate to the Committee that when my staff informed me of their findings of double
claims on the production reports for the months of October and November 1987, I followed
this up with a representative of Goldair. On June 1988, I received a handwritten note from the
representative of Goldair signed by its General Manager Aleco Papazoglou, a xerox copy of it
is hereto attached as Annex "A". Mr. Papazoglou, in this note, guaranteed to me that he will
undertake to collect any excessive payments on the agent fees from his agents and pay these to
us afterwards.
At this point, I would like to emphasize that ASAD, before known as "Confidential Staff"
under the Office of the VP-Comptroller, became a unit since 1976. Due to the confidential
nature of its functions, the accounting procedures were not written. The procedures being
performed by the staff were mainly practices handed down from their predecessors. Further,
the procedures were tailored to adopt to the market environment of the country which were
based on the approved marketing arrangements. But of course, there were inherent internal
controls.

In 1985, Cressop Mccormick & Paget made a study of the CMAs. They conducted an
interview of all key personnel including me who were involved in handling CMAs. It was of
course necessary for them to observe and evaluate the existing accounting procedures and
controls. Their report, however, did not mention any adverse findings concerning my
division.1avvphi1
In 1986, Sycip, Gorres, Velayo & Co. were engaged to look into the CMA functional
specifications and to propose the best method of allocating commission expenses to flown
revenues. To be able for them to render a report, it is, of course, necessary for them to delve
into the reports we receive and the records we maintain. It is safe to surmise that they "walked
through" our accounting procedures. No mention, however, of weaknesses on our accounting
procedures and controls was made in their report.
Again, during the early part of 1987, all the production reports from Australia for the period
April to September 1986 were borrowed and audited by Internal Audit and control. We
apprised the auditor then of the various procedures we observed in processing these
production reports. We did not receive any adverse feedback about their audit. Our confidence
that the AMAs were properly enforced by Australian agents and that there were no
irregularities committed were thus regained. We shifted our concentration to the other agents
particularly those under Nett-Nett settlement arrangements and tried to recall any commission
that should be disallowed.
In the middle of 1987, a special team from the Commission on Audit conducted a fraud audit
and again, interviewed my staff and I on our accounting procedures. Incentive commission
figures by agent by country were also furnished to them. I wasnt informed of any flaws in our
accounting procedures and control nor existence of any fraud.
My division underwent scrutiny of three (3) prestigious consulting firms and of our own
internal audit. I relied heavily on the absence of any unfavorable findings on accounting
procedures and controls from them since their studies were quite extensive and lengthy. It is
quite surprising at times why I am now asked how I could have failed to observe that certain
accounting procedures were not being followed by my staff.
xxxx

Also, Internal Audit & Control made a regular audit in Australia in November, 1986 headed by
no less than the Vice President-Internal Audit & Control. They did not discover any fraud nor
report any questionable transaction on Passenger but on Cargo transaction only. If they, the
auditors, did not find any discrepancy when their concentration is on Australia alone, how
much more with us when our concentration is on the whole system? The production reports of
Goldair was borrowed and assessed by the auditor before and after the regular audit."
The other members of the Espino Committee were Ricardo G. Paloma, then Senior Vice
President-Strategic Planning & Corporate Services wrote a dissenting opinion to the Final
Draft Majority Report in the following manner, to wit:
"A new set of procedures was apparently installed by Romeo Ines and Josefina Sioson in
April, 1984 (without any evident formal authorization by the Comptroller Dept.) upon receipt
of Aleco Papazoglous letter that automatic payment be made upon presentation of his
production reports in Manila Gold Air gained immunity against any possibility of cross of
their production reports: it was simply impossible to cross check the production reports against
sales reports are not yet in by the time the hand carried production reports arrive in ASAD.
Upon assumption of office by Aida Quijano this new set of procedure was carried over. She
was made to understand that these were the OFFICIAL PROCEDURES, contrary to the actual
procedure which called for production reports being initially checked by PAL Melbourne
during the 1981 to 1983 period. This initial check which had until them been handled by the
Regional Office was combined with the secondary check and were all dumped on ASAD.
A mitigating factor in Quijanos favor is that UNSEEN HANDS designed or allowed this new
procedures to be put in place. Ines, who became the VP Internal Audit should have known the
prescribed procedures (or at the very least the actual practice during the period 1981 to 1983
when he was the VP Comptroller) and yet, did not alert her. Unknowingly, Quijano allowed
the by-pass and the automatic payment of 80% upon presentation of production reports
because Sioson assured her that was the procedure previously followed. Trustingly, she
became a participant in this mess."
It should be noted that the Romeo Ines mentioned in the dissenting opinion is the same Romeo
R. Ines who was one of the members of the Espino Committee and who was later named a
respondent in the second Goldair charge, together with Chairman Espino. Romeo R. Ines was
the VP-Comptroller for the period 1981-1983 and VP-Internal Audit for the period 1984-1987.
While Josefina Sioson, as earlier shown, was the Manager-ASAD during the period 19811983 until she was replaced by Quijano on September 1, 1984. Incidentally, as found by
respondents witness Benigno Datoc, the Goldair fraud started in 1981 and continued until its
discovery sometime in the latter part of 1987. And as of that year, Goldair had been PALs
agent for about seventeen (17) years already.

On July 2, 1990, another Administrative charge involving the same Goldair anomaly was filed,
this time including Committee Chairman Leslie W. Espino and Committee Member Romeo R.
Ines and several others, for "gross incompetence and inefficiency, negligence, imprudence,
mismanagement, dereliction of duty, failure to observe and/or implement administrative and
executive policies, and related acts or omissions." Pending the result of investigation by
another committee chaired by Judge Martin S. Ocampo, the PAL Board of Directors
suspended respondents Leslie W. Espino, Executive Vice-President and Chief Operating
Officer; Ramon C. Lozon, Senior Vice-President-Finance; Romeo R. Ines, Vice PresidentInternal Audit & Control; Josefina Sioson, Manager-Staff Pricing; except respondents VPComptroller Robin C. Dui and Manager-ASAD Aida Quijano who were already suspended by
the Espino Committee, and respondent Juan Yoga, former Regional Vice President-Australia
who has already retired.
Meantime, PAL filed a civil case in Australia against Goldair seeking to recover AUD 11
million. Twice, Quijano went to Australia as witness for PAL. Thereafter, a settlement was
reached whereby Goldair was to pay PAL a total of around AUD 7 million inclusive of court
costs. A criminal case was nevertheless filed against Goldairs owner, Alexandro Papazoglou,
by the Fraud Squad Victorian Police.
The Ocampo Committee having submitted its findings to the PAL Board of Directors, the
latter, in a resolution dated January 18, 1991, considered respondents Leslie W. Espino,
Ramon C. Lozon, Romeo R. Ines, Robin C. Dui, Josefina Sioson, and Aida M. Quijano,
resigned from the service effective immediately, for loss of confidence and for acts inimical to
the interest of the company.
The Board found as follows:
"This is the extended Resolution.
The Goldair fraud has caused a total loss to PAL as of August 1990 in the amount of AUD
14.6 million (PHP 204 million). Goldair is a company that served then as the General Sales
Agent of PAL in Australia against Goldair, a settlement was reached whereby Goldair was to
pay PAL a total of around AUD 7 million inclusive of court costs. This settlement is said to be
the most practical and realistic under the circumstances. A criminal case was nevertheless filed
against Goldairs owner, Alexandro Papazoglou, by the Fraud Squad Victorian Police.
Hearings are still going on.
According to the evidence received and evaluated by the investigating committee, PAL lost the
above huge sum of money to Goldair as a result of false, padded, erroneous or irregular claims
for commissions submitted by Goldair and unwittingly paid by PAL. The Agents Services
Accounting Division (ASAD), one of the divisions under the Comptroller Department, is the
specific unit in the company charged with the processing, verification, and validation of all

claims for commissions filed by the companys agents worldwide (excluding the U.S. which is
processed by the San Francisco Regional Office). Consequently, responsibility for the Goldair
fraud has been attributed mainly to the failure of ASAD to properly process and validate
Goldairs commission claims prior to payment.
Thus, the following lapses or irregularities were uncovered in the course of the investigations
that have been conducted:
1. No adequate effort was exerted to see to it that the supporting documents
(photocopies of tickets submitted and attached to the production report were
complete). Neither was a verification or comparison made between the tickets and
the production report.
2. The simple and basic step of verifying the names of the passengers and their ticket
numbers against ticket numbers, even on a check basis, to see whether they were
reported more than once was not accomplished. If done, double or multiple reporting
of tickets could have been readily detected.
3. Validation of the correctness of prorate values, by performing the proration, was
not undertaken.
4. No reconciliation was made of all the amounts due the agent for a particular
month. Such reconciliation would have disclosed whether or not the account for a
particular month could be closed.
5. Production reports were not cross-checked against sales report or flight coupon
registers.
6. Superiors failed to adequately monitor the activities of their subordinates to
ensure that the latter were performing their duties.
7. The policy that cash vouchers could be approved only by duly authorized persons
was in several cases violated."
Resolving the case of Quijano, the Board said:
"The charge against Ms. Quijano is that:
Quijano was the Manager-ASAD (Agents Services Accounting Division) in 1984-87, and
responsible for the final scrutiny of agents Production Reports and final recommendation for
payment of travel agents commissions.

As Manager-ASAD from 1984 to 1987 (when the fraud was discovered), she failed to uncover
or detect and report or grossly disregarded the fraud although the commissions vis--vis
production were scandalously high.
Ms. Quijano claims that she relied heavily on Ms. Curammengs judgment competence to
perform her work, particularly the "completeness of the documents" check. She argues that if
she were to do the completeness check herself, there would be no need for the analyst. This
argument, however, wittingly or unwittingly, misconceives the nature of her job. Precisely, her
basic role and duty as a manager was to make sure that the analysts in her division were
performing the tasks assigned to them. But Ms. Quijano did not see to it that the completeness
check was actually being performed by Ms. Curammeng. This lapse in control, contributed
materially to the double, multiple and fictitious reporting of tickets, and double claims for
commissions perpetrated by Goldair. Ms. Quijano was certainly not expected to personally do
and perform the completeness check herself. But as manager, it was clearly incumbent upon
her to see to it that this completeness check was being done by her subordinates competently
and efficiently. Yet, Ms. Quijano even failed to adopt ways and means of keeping herself
sufficiently informed of the activities of her staff members so as to prevent or at least discover
at an early stage the fraud being perpetrated on a massive scale by Goldair against her
company.
Her incompetence at her job is patent."
Her motion for reconsideration having been denied by the Board in a Resolution dated
February 19, 1991, Quijano filed on March 25, 1991 the instant case against PAL for illegal
suspension and illegal dismissal.6
The Labor Arbiter dismissed private respondents complaint in a Decision dated September 7,
1994, the dispositive portion of which reads:
WHEREFORE, in conformity with the opinion above-expressed, judgment is hereby rendered
dismissing the above-captioned case for lack of merit and, consequently, the respondent is
absolved from any liability.7
Undeterred, private respondent filed an appeal before the NLRC which rendered the assailed
Decision dated September 29, 1995, the dispositive portion of which reads:
WHEREFORE, in view of all the foregoing considerations, the decision appealed from should
be, as it is hereby, VACATED and SET ASIDE and another one entered, directing the
Philippine Airlines, Inc., thru its responsible officials, to pay Aida M. Quijano her separation
pay in accordance with its "Special Retirement & Separation Program" dated February 15,
1988, plus ten percent (10%) of the total amount by way of attorneys fee. 8

Petitioner filed a Motion for Reconsideration but this was denied by the NLRC in its
Resolution dated November 14, 1995, the dispositive portion of which reads:
After due consideration of the Motion for Reconsideration filed by respondent-appellee on
October 20, 1995, from the Decision of September 29, 1995, the Commission (Second
Division) RESOLVED to deny the same for lack of merit. 9
Hence, this petition for certiorari.
Both parties submitted their respective Memoranda 10 in late 1997, however, on September 11,
1998, petitioner filed a Motion for Suspension of Proceedings 11 based on Presidential Decree
No. 902-A which reads, in part:
That upon appointment of management committee, rehabilitation receiver, board or body,
pursuant to this Decree, all actions for claims against corporations, partnerships or associations
under management or receivership pending before any court, tribunal, board or body shall be
suspended accordingly.12 (Underscoring supplied.)
The said motion referred to an Order 13 dated June 23, 1998 of the Securities and Exchange
Commission (SEC) which appointed an Interim Rehabilitation Receiver for petitioner pursuant
to Presidential Decree No. 902-A that was followed by the issuance of another Order 14 dated
July 1, 1998 which commanded that "all claims against PAL are deemed suspended."
After hearing both parties on the question of whether or not the Court should render judgment
during the state of suspension of claims, we ruled in the negative in a Resolution 15 dated
September 4, 2000, the dispositive portion of which reads:
IN VIEW THEREOF, the Motion for Suspension of Proceedings of petitioner is GRANTED. 16
Private respondent filed a Motion for Reconsideration 17 on October 3, 2000 of the above
Resolution but we denied the same in a Resolution18 dated November 13, 2000.
Since then petitioner was required by this Court to submit periodic status reports on the
rehabilitation proceedings, the last of which was dated October 22, 2007, 19 declaring that the
petitioners request to exit from rehabilitation had been granted by the SEC via an Order20
issued on September 28, 2007, the dispositive portion of which reads:
WHEREFORE, in the light of the foregoing, and considering PALs firm commitment to settle
its outstanding obligations as well as the fact that its operations and its financial condition
have been normalized and stabilized in conformity with the Amended and Restated
Rehabilitation Plan exemplifying a successful corporate rehabilitation, the PALs request to
exit from rehabilitation is hereby GRANTED.

The PRR is likewise directed to furnish all creditors and parties concerned with copies of this
Order at the expense of the Petitioner and submit proof of service thereof to the Commission,
within fifteen (15) days from date of receipt of this Order.21
Considering the foregoing and the fact that both parties have long submitted their respective
Memoranda in the instant case, private respondent filed a Motion to Resume Proceedings and
to Render Judgment22 on December 11, 2007. In compliance with this Courts Resolution 23
dated January 21, 2008 requiring petitioner to comment on private respondents motion,
petitioner filed a Comment/Manifestation24 on February 28, 2008 which confirmed that "with
the issuance of the Securities and Exchange Commissions September 28, 2007 Order granting
PALs request to exit from rehabilitation, there is no longer any legal impediment to the
resumption of the instant proceedings."
In the instant petition, petitioner puts forward a singular argument, to wit:
ASSUMING ARGUENDO (WITHOUT ADMITTING) THAT THE EQUITABLE
CONSIDERATIONS CITED BY THE NLRC DID EXIST, THE SAME CANNOT JUSTIFY
THE AWARD OF SEPARATION PAY TO MRS. QUIJANO (despite the finding that she was
legally suspended and thereafter legally dismissed) IN THE FACE OF OVERWHELMING
EVIDENCE SUBMITTED BY PETITIONER WHICH CLEARLY SHOW THAT
PHILIPPINE AIRLINES, INC. LOST SEVERAL MILLION AUSTRALIAN DOLLARS AS
A RESULT OF THE FRAUD COMMITTED BY GOLDAIR AND THAT SAID FRAUD
COULD ONLY HAVE BEEN MADE POSSIBLE BY MRS. QUIJANOS PATENT
MISMANAGEMENT AND GROSS INCOMPETENCE AS ASAD MANAGER IN FAILING
TO DETECT THE IRREGULARITY. IN AWARDING SEPARATION PAY TO MRS.
QUIJANO, THE NLRC COMMITTED A GRAVE ABUSE OF ITS DISCRETION
AMOUNTING TO LACK OF JURISDICTION.25
We affirm the NLRC ruling with modification.
At the onset, it should be noted that the parties do not dispute the validity of private
respondents dismissal from employment for loss of confidence and acts inimical to the
interest of the employer. The assailed September 29, 1995 Decision of the NLRC was
emphatic in declaring that it was "not prepared to rule as illegal the preventive suspension and
eventual dismissal from the service of [private respondent]" 26 and rightfully so because the last
position that private respondent held, Manager-ASAD (Agents Services Accounting Division),
undeniably qualifies as a position of trust and confidence.
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.27

The language of Article 279 of the Labor Code is pregnant with the implication that a legally
dismissed employee is not entitled to separation pay, to wit:

The January 18, 1991 Resolution of the PAL Board of Directors, the relevant portions of
which are discussed in the narration of the facts of this case as culled from the assailed
September 29, 1995 NLRC Decision, clearly laid out the reasons why it considered private
respondent along with her other co-employees in PAL resigned from the service effective
immediately for loss of confidence and for acts inimical to the interest of the company. In
private respondents case, the Resolution underscored her acts of mismanagement and gross
incompetence which made her fail to detect the irregularities in the Goldair account that
resulted in huge financial losses for petitioner. Admittedly, the said findings are not backed by
proof beyond reasonable doubt but are, nevertheless, given credence since they have been
adopted by both the labor arbiter and the NLRC and are supported by substantial evidence. As
we have consistently held, the degree of proof required in labor cases is not as stringent as in
other types of cases.28

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.

As a general rule, employers are allowed a wider latitude of discretion in terminating the
employment of managerial personnel or those who, while not of similar rank, perform
functions which by their nature require the employers full trust and confidence. This must be
distinguished from the case of ordinary rank and file employees, whose termination on the
basis of these same grounds requires a higher proof of involvement in the events in question;
mere uncorroborated assertions and accusations by the employer will not suffice. 29
Having succinctly disposed of the issue of the validity of private respondents dismissal, we
now delve into the true crux of this controversy which is the legality of the award of
separation pay to private respondent despite having been lawfully terminated for a just cause.
Petitioner argues that, in light of the fact that a just cause forms the basis for her lawful
termination from the job, private respondent is not entitled to separation pay. Likewise,
petitioner insists that even assuming that the equitable considerations cited by the NLRC did
exist, the same cannot justify the award of separation pay. And, in awarding the same, the
NLRC committed grave abuse of discretion amounting to lack of jurisdiction.
We do not agree.
Grave abuse of discretion is an evasion of a positive duty or a virtual refusal to perform a duty
enjoined by law or to act in contemplation of law as when the judgment rendered is not based
on law and evidence but on caprice, whim and despotism. 30 This Court holds that the NLRC
did not gravely abuse its discretion in granting separation pay to private respondent as the
same is not characterized by caprice or arbitrariness being rooted in established jurisprudence.

However, in exceptional cases, this Court has granted separation pay to a legally dismissed
employee as an act of "social justice" or based on "equity." 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 employee31 or would involve moral turpitude. This equitable and humanitarian
principle was first discussed by the Court in the landmark case of Philippine Long Distance
Telephone Co. (PLDT) v. National Labor Relations Commission, 32 wherein it was held:
Strictly speaking, however, it is not correct to say that there is no express justification for the
grant of separation pay to lawfully dismissed employees other than the abstract consideration
of equity. The reason is that our Constitution is replete with positive commands for the
promotion of social justice, and particularly the protection of the rights of the workers. The
enhancement of their welfare is one of the primary concerns of the present charter. In fact,
instead of confining itself to the general commitment to the cause of labor in Article II on the
Declaration of Principles of State Policies, the new Constitution contains a separate article
devoted to the promotion of social justice and human rights with a separate sub-topic for labor.
Article XIII expressly recognizes the vital role of labor, hand in hand with management, in the
advancement of the national economy and the welfare of the people in general. The categorical
mandates in the Constitution for the improvement of the lot of the workers are more than
sufficient basis to justify the award of separation pay in proper cases even if the dismissal be
for cause.
xxxx
There should be no question that where it comes to such valid but not iniquitous causes as
failure to comply with work standards, the grant of separation pay to the dismissed employee
may be both just and compassionate, particularly if he has worked for some time with the
company. For example, a subordinate who has irreconcilable policy or personal differences
with his employer may be validly dismissed for demonstrated loss of confidence, which is an
allowable ground. A working mother who has to be frequently absent because she has also to
take care of her child may also be removed because of her poor attendance, this being another
authorized ground. It is not the employee's fault if he does not have the necessary aptitude for
his work but on the other hand the company cannot be required to maintain him just the same
at the expense of the efficiency of its operations. He too may be validly replaced. Under these
and similar circumstances, however, the award to the employee of separation pay would be
sustainable under the social justice policy even if the separation is for cause.

But where the cause of the separation is more serious than mere inefficiency, the generosity of
the law must be more discerning. There is no doubt it is compassionate to give separation pay
to a salesman if he is dismissed for his inability to fill his quota but surely he does not deserve
such generosity if his offense is misappropriation of the receipts of his sales. This is no longer
mere incompetence but clear dishonesty. A security guard found sleeping on the job is
doubtless subject to dismissal but may be allowed separation pay since his conduct, while
inept, is not depraved. But if he was in fact not really sleeping but sleeping with a prostitute
during his tour of duty and in the company premises, the situation is changed completely. This
is not only inefficiency but immorality and the grant of separation pay would be entirely
unjustified.

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.

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.33

In other words, under the present jurisprudential framework, the grant of separation pay as a
matter of equity to a validly dismissed employee is not contingent on whether the ground for
dismissal is expressly under Article 282(a) but whether the ground relied upon is akin to
serious misconduct or involves willful or wrongful intent on the part of the employee.

In Toyota Motor Phils. Corp. Workers Association (TMPCWA) v. National Labor Relations
Commission,34 we clarified that the grant of separation pay may still be precluded even if the
ground for the employees dismissal is not serious misconduct under Article 282(a) of the
Labor Code but other just causes under the same article and/or other authorized causes
provided for under the Labor Code. However, the TMPCWA case still recognized the social
justice exception prescribed in Philippine Long Distance Telephone Company. To quote the
relevant portions of that decision:
Explicit in PLDT are two exceptions when the NLRC or the courts should not grant separation
pay based on social justiceserious misconduct (which is the first ground for dismissal under
Art. 282) or acts that reflect on the moral character of the employee. What is unclear is
whether the ruling likewise precludes the grant of separation pay when the employee is validly
terminated from work on grounds laid down in Art. 282 of the Labor Code other than serious
misconduct.
A recall of recent cases decided bearing on the issue reveals that when the termination is
legally justified on any of the grounds under Art. 282, separation pay was not allowed. x x x.
xxxx
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

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.35 (Emphases supplied.)

It, thus, becomes pertinent to examine the ground relied upon for the dismissal of private
respondent and to determine if the special circumstances described in PLDT are present in the
case at bar.
Serious misconduct as a valid cause for the dismissal of an employee is defined simply as
improper or wrong conduct. It is a transgression of some established and definite rule of
action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent
and not mere error of judgment. To be serious within the meaning and intendment of the law,
the misconduct must be of such grave and aggravated character and not merely trivial or
unimportant. However serious such misconduct, it must, nevertheless, be in connection with
the employees work to constitute just cause for his separation. The act complained of must be
related to the performance of the employees duties such as would show him to be unfit to
continue working for the employer.36 On the other hand, moral turpitude has been defined as
"everything which is done contrary to justice, modesty, or good morals; an act of baseness,
vileness or depravity in the private and social duties which a man owes his fellowmen, or to
society in general, contrary to justice, honesty, modesty, or good morals."37
In the case at bar, the transgressions imputed to private respondent have never been firmly
established as deliberate and willful acts clearly directed at making petitioner lose millions of
pesos. At the very most, they can only be characterized as unintentional, albeit major, lapses in
professional judgment. Likewise, the same cannot be described as morally reprehensible
actions. Thus, private respondent may be granted separation pay on the ground of equity
which this Court had defined as "justice outside law, being ethical rather than jural and
belonging to the sphere of morals than of law. It is grounded on the precepts of conscience and
not on any sanction of positive law, for equity finds no room for application where there is
law."38

A perusal of the assailed September 29, 1995 NLRC Decision would show that the following
equitable considerations were relied upon by the NLRC to arrive at its assailed ruling, to wit:
a) The Goldair fraud was found to have started in 1981. Private respondent became
the Manager-ASAD only on September 1, 1984. The former Manager-ASAD from
1981 to August 1984 was Josefina Sioson.39
b) ASAD is under the direct supervision and control of the Vice PresidentComptroller and within the scope of the audit program of the Vice President-Internal
Audit and Control. The VP-Comptroller for the period 1981 to 1983 and the VPInternal Audit for the period 1984 to 1987 was Romeo Ines. 40
c) The accounting procedures and controls inherited by private respondent when she
took over ASAD were subjected to the scrutiny of prestigious accounting firms like
Cressop, McCormick & Paget in 1985, the Sycip, Gorres, Velayo & Co., Inc. in
1986, including a special team from the Commission on Audit in 1987 all of which
made no adverse findings concerning ASAD.41
d) No less than the VP-Internal Audit made a regular audit in Australia in November
1986 and in the early part of 1987, by borrowing all production reports covering
April to September 1986, but found no irregularities nor made any adverse feedback
against ASAD.42
e) Private respondent was the first to discover the overpayment of commission
claims to Goldair in 1984 in rate differences in net/net settlement which, after her
intervention, did not recur. She was also the one who first discovered the fraud in
double and fictitious commission claims and promptly took action when she
withheld all provisional payments due Goldair.43
f) Even after the Goldair anomaly was discovered, private respondent could have
availed of PALs Special Retirement and Separation Program, but she stayed put and
had gone twice to Australia, while under preventive suspension, to attend court
proceedings as a witness for petitioner enabling the said company to recover and
minimize its economic loss.44
g) Private respondent has no derogatory record during the entire period of her
employment with petitioner for more than two decades. She steadily rose from the
ranks until she became the ASAD Manager.45
h) In the dissenting opinion of Ricardo Paloma, Vice Chairman of the Espino
Committee and PAL Senior VP Strategic Planning and Corporate Service, to the
Final Draft Majority Report, he observed that "a mitigating factor in [private

respondents] favor is that UNSEEN HANDS designed or allowed this new

procedures to be put in place. Ines, who became the VP Internal Audit should have
known the prescribed procedures (or at the very least the actual practice during the
period 1981 to 1983 when he was the VP Comptroller) and yet, did not alert her.
Unknowingly, [private respondent] allowed the by-pass and the automatic payment
of 80% upon presentation of production reports because Sioson assured her that was
the procedure previously followed. Trusting, she became a participant in this
mess."46
Considering the foregoing uncontroverted special circumstances, we rule that the NLRC did
not commit grave abuse of discretion amounting to lack of jurisdiction in ordering petitioner to
pay private respondent separation pay for equitable considerations.
However, we do not agree with the NLRC that private respondents separation pay should be
awarded in accordance with PALs "Special Retirement & Separation Program" dated
February 15, 1988 plus ten percent (10%) of the total amount by way of attorneys fees.
At the risk of stating the obvious, private respondent was not separated from petitioners
employ due to mandatory or optional retirement but, rather, by termination of employment for
a just cause. Thus, any retirement pay provided by PALs "Special Retirement & Separation
Program" dated February 15, 1988 or, in the absence or legal inadequacy thereof, by Article
287 of the Labor Code 47 does not operate nor can be made to operate for the benefit of private
respondent. Even private respondents assertion that, at the time of her lawful dismissal, she
was already qualified for retirement does not aid her case because the fact remains that private
respondent was already terminated for cause thereby rendering nugatory any entitlement to
mandatory or optional retirement pay that she might have previously possessed.
Likewise, attorneys fees are not proper in this case because the same can only be awarded
when the employee is illegally dismissed in bad faith and is compelled to litigate or incur
expenses to protect his rights by reason of the unjustified act of his employer. 48 The
aforementioned conditions do not obtain in this case.
As to the matter of the proper amount of separation pay to be awarded to private respondent
on the basis of equitable considerations, our pronouncement in Yrasuegui v. Philippine
Airlines, Inc.49 is instructive, to wit:
Here, We grant petitioner separation pay equivalent to one-half (1/2) months pay for every
year of service. It should include regular allowances which he might have been receiving. 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.

Private respondents circumstances are more or less identical to the above-cited case in the
sense that, as previously discussed, her dismissal was neither for serious misconduct nor for an
offense involving moral turpitude. Furthermore, her employment with petitioner spanned more
than two decades unblemished with any derogatory record prior to the infractions at issue in
the case at bar.
WHEREFORE, the assailed NLRC Decision dated September 29, 1995 as well as the
Resolution dated November 14, 1995 are AFFIRMED with the MODIFICATION that
petitioner Philippine Airlines, Inc. pay private respondent Aida Quijano one-half (1/2) month
salary for every year of service as separation pay on equitable grounds.

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.

SO ORDERED
The issues for our consideration are:

G.R. No. 156934

March 16, 2007

ALPHA C. JACULBE, Petitioner,

vs.
SILLIMAN UNIVERSITY,Respondent.
Petitioner comes to us via this petition for review on certiorari 1 to challenge a decision 2 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 letters 7 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 SSS 8 pension. But respondent stood pat
on its decision to retire her, citing "company policy."

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 employees as 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. xxx 14 (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.

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."17 What 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.

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:

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 is REVERSED 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.

G.R. No. 188154

October 13, 2010

LOURDES A. CERCADO, Petitioner,

vs.
UNIPROM, INC., Respondent.
DECISION

Assailed in this Petition for Review on Certiorari 1 are the July 31, 2007 Decision 2 and the May
26, 2009 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 87508, declaring as
valid the unilateral retirement of petitioner by respondent.
The Facts
Petitioner Lourdes A. Cercado (Cercado) started working for respondent UNIPROM, Inc.
(UNIPROM) on December 15, 1978 as a ticket seller assigned at Fiesta Carnival, Araneta
Center, Quezon City. Later on, she was promoted as cashier and then as clerk typist.
On April 1, 1980, UNIPROM instituted an Employees Non-Contributory Retirement Plan 4
which provides that any participant with twenty (20) years of service, regardless of age, may
be retired at his option or at the option of the company.
On January 1, 2001, UNIPROM amended the retirement plan in compliance with Republic
Act (R.A.) No. 7641.5 Under the revised retirement plan, 6 UNIPROM reserved the option to
retire employees who were qualified to retire under the program.
Sometime in December 2000, UNIPROM implemented a company-wide early retirement
program for its 41 employees, including herein petitioner, who, at that time, was 47 years old,
with 22 years of continuous service to the company. She was offered an early retirement
package amounting to P171,982.90, but she rejected the same.
UNIPROM exercised its option under the retirement plan, and decided to retire Cercado
effective at the end of business hours on February 15, 2001. A check of even date in the
amount of P100,811.70, representing her retirement benefits under the regular retirement
package, was issued to her. Cercado refused to accept the check.
UNIPROM nonetheless pursued its decision and Cercado was no longer given any work
assignment after February 15, 2001. This prompted Cercado to file a complaint for illegal
dismissal before the Labor Arbiter (LA), alleging, among others, that UNIPROM did not have
a bona fide retirement plan, and that even if there was, she did not consent thereto.
For its part, respondent UNIPROM averred that Cercado was automatically covered by the
retirement plan when she agreed to the companys rules and regulations, and that her
retirement from service was a valid exercise of a management prerogative.
After submission of the parties position papers, the LA rendered a decision 7 finding petitioner
to be illegally dismissed. Respondent company was ordered to reinstate her with payment of
full backwages.

The National Labor Relations Commission (NLRC) affirmed the LAs decision, adding that
there was no evidence that Cercado consented to the alleged retirement plan of UNIPROM or
that she was notified thereof.8
On certiorari, the CA set aside the decisions of the LA and the NLRC. The decretal portion of
the Decision reads:
WHEREFORE, the petition is GRANTED. The Decision of the Labor Arbiter and the assailed
Resolutions of the NLRC are NULLIFIED and SET ASIDE. Judgment is hereby rendered
declaring respondents retirement as valid and legal being in conformity with petitioners
Retirement Plan.9
The CA ruled that UNIPROMs retirement plan was consistent with Article 287 of the Labor
Code, which provides that "any employee may be retired upon reaching the retirement age
established in the collective bargaining agreement or other applicable employment contract."
The CA applied the doctrine laid down in Progressive Development Corporation v. NLRC 10
wherein the phrase "may be retired" in Article 287 of the Labor Code was interpreted to mean
that an option is given to an employer to retire an employee, and such option is within the
discretion of the employer to exercise.
The CA further noted that Cercado cannot feign ignorance of the retirement plan considering
that she was already working with the company when it took effect in 1980.
11

Cercado moved for reconsideration, but the same was denied. Hence, the instant recourse
raising the following issues: 1) whether UNIPROM has a bona fide retirement plan; and 2)
whether petitioner was validly retired pursuant thereto.
The petition is meritorious.
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.12
Article 287 of the Labor Code, as amended by R.A. No. 7641, 13 pegs the age for compulsory
retirement at 65 years, while the minimum age for optional retirement is set at 60 years. An
employer is, however, free to impose a retirement age earlier than the foregoing mandates.
This has been upheld in numerous cases14 as a valid exercise of management prerogative.
In this case, petitioner was retired by UNIPROM at the age of 47, after having served the
company for 22 years, pursuant to UNIPROMs Employees Non-Contributory Retirement
Plan,15 which provides that employees who have rendered at least 20 years of service may be
retired at the option of the company. At first blush, respondents retirement plan can be

expediently stamped with validity and justified under the all encompassing phrase
"management prerogative," which is what the CA did. But the attendant circumstances in this
case, vis--vis the factual milieu of the string of jurisprudence on this matter, impel us to take
a deeper look.
In Pantranco North Express, Inc. v. NLRC, 16 the Court upheld the retirement of private
respondent pursuant to a Collective Bargaining Agreement (CBA) allowing Pantranco to
compulsorily retire employees upon completing 25 years of service to the company.
Interpreting Article 287, the Court ruled that the Labor Code permits employers and
employees to fix the applicable retirement age lower than 60 years of age. The Court also held
that there was no illegal dismissal involved, since it was the CBA itself that incorporated the
agreement between the employer and the bargaining agent with respect to the terms and
conditions of employment. Hence, when the private respondent ratified the CBA, he
concurrently agreed to conform to and abide by its provisions. Thus, the Court stressed,
"[p]roviding in a CBA for compulsory retirement of employees after twenty-five (25) years of
service is legal and enforceable so long as the parties agree to be governed by such CBA."
Similarly, in Philippine Airlines, Inc. (PAL) v. Airline Pilots Association of the Philippines
(APAP),17 the retirement plan contained in the CBA between PAL and APAP was declared
valid. The Court explained that by their acceptance of the CBA, APAP and its members are
obliged to abide by the commitments and limitations they had agreed to cede to management.
The foregoing pronouncements served as guiding principles in the recent Cainta Catholic
School v. Cainta Catholic School Employees Union (CCSEU), 18 wherein the compulsory
retirement of two teachers was upheld as valid and consistent with the CBA provision
allowing an employee to be retired by the school even before reaching the age of 60, provided
that he/she had rendered 20 years of service.
In Progressive Development Corporation v. NLRC, 19 although the retirement plan was not
embodied in a CBA, its provisions were made known to the employees union. The validity of
the retirement plan was sustained on the basis of the finding of the Director of the Bureau of
Working Conditions of the Department of Labor and Employment that it was expressly made
known to the employees and accepted by them.
It is axiomatic that a retirement plan giving the employer the option to retire its employees
below the ages provided by law must be assented to and accepted by the latter, otherwise, its
adhesive imposition will amount to a deprivation of property without due process of law.
In the above-discussed cases, the retirement plans in issue were the result of negotiations and
eventual agreement between the employer and the employees. The plan was either embodied
in a CBA, or established after consultations and negotiations with the employees bargaining

representative. The consent of the employees to be retired even before the statutory retirement
age of 65 years was thus clear and unequivocal.
Unfortunately, no similar situation obtains in the present case. In fact, not even an iota of
voluntary acquiescence to UNIPROMs early retirement age option is attributable to petitioner.
The assailed retirement plan of UNIPROM is not embodied in a CBA or in any employment
contract or agreement assented to by petitioner and her co-employees. On the contrary,
UNIPROMs Employees Non-Contributory Retirement Plan was unilaterally and
compulsorily imposed on them. This is evident in the following provisions of the 1980
retirement plan and its amended version in 2000:
ARTICLE
ELIGIBILITY FOR PARTICIPATION

The following pronouncements in Jaculbe v. Silliman University21 are elucidating:

[A]n 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.1avvphi1
We disagree with the CAs conclusion that the retirement plan is part of petitioners
employment contract with respondent. It must be underscored that petitioner was hired in 1978
or 2 years before the institution of UNIPROMs retirement plan in 1980. Logically, her
employment contract did not include the retirement plan, much less the early retirement age
option contained therein.

III

Section 1. Any regular employee, as of the Effective Date, shall automatically become a
Participant in the Plan, provided the Employee was hired below age 60.
Verily, petitioner was forced to participate in the plan, and the only way she could have
rejected the same was to resign or lose her job. The assailed CA Decision did not really make a
finding that petitioner actually accepted and consented to the plan. The CA simply declared
that petitioner was deemed aware of the retirement plan on account of the length of her
employment with respondent. Implied knowledge, regardless of duration, cannot equate to the
voluntary acceptance required by law in granting an early retirement age option to an
employer. The law demands more than a passive acquiescence on the part of employees,
considering that an employers early retirement age option involves a concession of the
formers constitutional right to security of tenure.
We reiterate the well-established meaning of retirement in this jurisdiction: 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.20
Acceptance by the employees of an early retirement age option must be explicit, voluntary,
free, and uncompelled. While an employer may unilaterally retire an employee earlier than the
legally permissible ages under the Labor Code, this prerogative must be exercised pursuant to
a mutually instituted early retirement plan. In other words, only the implementation and
execution of the option may be unilateral, but not the adoption and institution of the retirement
plan containing such option. For the option to be valid, the retirement plan containing it must
be voluntarily assented to by the employees or at least by a majority of them through a
bargaining representative.

We also cannot subscribe to respondents submission that petitioners consent to the retirement
plan may be inferred from her signature in the personnel action forms 22 containing the phrase:
"Employee hereby expressly acknowledges receipt of and undertakes to abide by the
provisions of his/her Job Description, Company Code of Conduct and such other policies,
guidelines, rules and regulations the company may prescribe."
It should be noted that the personnel action forms relate to the increase in petitioners salary at
various periodic intervals. To conclude that her acceptance of the salary increases was also,
simultaneously, a concurrence to the retirement plan would be tantamount to compelling her to
agree to the latter. Moreover, voluntary and equivocal acceptance by an employee of an early
retirement age option in a retirement plan necessarily connotes that her consent specifically
refers to the plan or that she has at least read the same when she affixed her conformity
thereto.
Hence, consistent with the Courts ruling in Jaculbe, 23 having terminated petitioner merely on
the basis of a provision in the retirement plan which was not freely assented to by her,
UNIPROM is guilty of illegal dismissal. Petitioner is thus entitled to reinstatement without
loss of seniority rights and to full backwages computed from the time of her illegal dismissal
in February 16, 2001 until the actual date of her reinstatement. If reinstatement is no longer
possible because the position that petitioner held no longer exists, UNIPROM shall pay
backwages as computed above, plus, in lieu of reinstatement, separation pay equivalent to onemonth pay for every year of service. This is consistent with the preponderance of
jurisprudence24 relative to the award of separation pay in case reinstatement is no longer
feasible.
WHEREFORE, the petition is GRANTED. The July 31, 2007 Decision and the May 26, 2009
Resolution of the Court of Appeals in CA- G.R. SP No. 87508 are hereby REVERSED and
SET ASIDE. The October 30, 2002 Decision of the Labor Arbiter is REINSTATED, with the
MODIFICATION that the award of backwages shall be computed from the time of her illegal

dismissal until the actual date of her reinstatement. If reinstatement is no longer possible
because the position that petitioner held no longer exists, respondent UNIPROM shall pay
backwages as computed above, plus, in lieu of reinstatement, separation pay equivalent to onemonth pay for every year of service.

SO ORDERED.