G.R. No.

78763 July 12,1989

MANILA ELECTRIC COMPANY, petitioner,

vs.
THE NATIONAL LABOR RELATIONS COMMISSION, and APOLINARIO M. SIGNO, respondents.

Angara, Abello, Concepcion, Regala & Cruz for petitioner.

Dominador Maglalang for private respondent.

MEDIALDEA, J.:

This is a petition for certiorari under Rule 65 of the Rules of Court seeking the annulment of the
resolution of the respondent National Labor Relations Commission dated March 12, 1987 (p.
28, Rollo) in NLRC Case No. NCR-8-3808-83, entitled, "Apolinario M. Signo, Complainant, versus
Manila Electric Company, Respondents", affirming the decision of the Labor Arbiter which ordered
the reinstatement of private respondent herein, Apolinario Signo, to his former position without
backwages.

The antecedent facts are as follows:

Private respondent Signo was employed in petitioner company as supervisor-leadman since January
1963 up to the time when his services were terminated on May 18, 1983.

In 1981, a certain Fernando de Lara filed an application with the petitioner company for electrical
services at his residence at Peafrancia Subdivision, Marcos Highway, Antipolo, Rizal. Private
respondent Signo facilitated the processing of the said application as well as the required
documentation for said application at the Municipality of Antipolo, Rizal. In consideration thereof,
private respondent received from Fernando de Lara the amount of P7,000.00. Signo thereafter filed
the application for electric services with the Power Sales Division of the company.

It was established that the area where the residence of de Lara was located is not yet within the
serviceable point of Meralco, because the place was beyond the 30-meter distance from the nearest
existing Meralco facilities. In order to expedite the electrical connections at de Lara's residence,
certain employees of the company, including respondent Signo, made it appear in the application
that the sari-sari store at the corner of Marcos Highway, an entrance to the subdivision, is applicant
de Lara's establishment, which, in reality is not owned by the latter.

As a result of this scheme, the electrical connections to de Lara's residence were installed and made
possible. However, due to the fault of the Power Sales Division of petitioner company, Fernando de
Lara was not billed for more than a year.

Petitioner company conducted an investigation of the matter and found respondent Signo
responsible for the said irregularities in the installation. Thus, the services of the latter were
terminated on May 18, 1983.
On August 10 1983, respondent Signo filed a complaint for illegal dismissal, unpaid wages, and
separation pay.

After the parties had submitted their position papers, the Labor Arbiter rendered a decision (p.
79, Rollo) on April 29, 1985, which stated, inter alia:

Verily, complainant's act of inducing the Meralco employees to effectuate the

installation on Engr. de Lara's residence prejudiced the respondent, and therefore,
complainant himself had indeed became a participant in the transactions, although
not directly, which turned out to be illegal, not to mention that some of the materials
used therein belongs to Meralco, some of which were inferior quality. . . .

While complainant may deny the violation, he cannot do away with company's Code
on Employee Discipline, more particularly Section 7, par. 8 and Section 6, par. 24
thereof However, as admitted by the respondent, the infraction of the above cited
Code is punishable by reprimand to dismissal."

... . And in this case, while considering that complainant indeed committed the above-
cited infractions of company Code of Employee Discipline, We shall also consider his
records of uninterrupted twenty (20) years of service coupled with two (2)
commendations for honesty. Likewise, We shall take note that subject offense is his
first, and therefore, to impose the extreme penalty of dismissal is certainly too
drastic. A penalty short of dismissal is more in keeping with justice, and adherence to
compassionate society.

WHEREFORE, respondent Meralco is hereby directed to reinstate complainant

Apolinario M. Signo to his former position as Supervisor Leadman without
backwages, considering that he is not at all faultless. He is however, here warned,
that commission of similar offense in the future, shall be dealt with more severely.

SO ORDERED.

Both parties appealed from the decision to the respondent Commission. On March 12, 1987, the
respondent Commission dismissed both appeals for lack of merit and affirmed in toto the decision of
the Labor Arbiter.

On June 23, 1987, the instant petition was filed with the petitioner contending that the respondent
Commission committed grave abuse of discretion in affirming the decision of the Labor Arbiter. A
temporary restraining order was issued by this Court on August 3, 1987, enjoining the respondents
from enforcing the questioned resolution of the respondent Commission.

The issue to resolve in the instant case is whether or not respondent Signo should be dismissed
from petitioner company on grounds of serious misconduct and loss of trust and confidence.

Petitioner contends that respondent Signo violated Sections 6 and 7 of the company's Code on
Employee Discipline, which provide:
 Section 6, Par. 24Encouraging, inducing or threatening another employee to
perform an act constituting a violation of this Code or of company work, rules or an
offense in connection with the official duties of the latter, or allowing himself to be
persuaded, induced or influenced to commit such offense.

PenaltyReprimand to dismissal, depending upon the gravity of the offense.

Section 7, Par. 8Soliciting or receiving money, gift, share, percentage or benefits

from any person, personally or through the mediation of another, to perform an act
prejudicial to the Company.

PenaltyDismissal. (pp. 13-14, Rollo)

Petitioner further argues that the acts of private respondent constituted breach of trust and caused
the petitioner company economic losses resulting from the unbilled electric consumption of de Lara;
that in view thereof, the dismissal of private respondent Signo is proper considering the
circumstances of the case.

The power to dismiss is the normal prerogative of the employer. An employer, generally, can dismiss
or lay-off an employee for just and authorized causes enumerated under Articles 282 and 283 of the
Labor Code. However, the right of an employer to freely discharge his employees is subject to
regulation by the State, basically in the exercise of its paramount police power. This is so because
the preservation of the lives of the citizens is a basic duty of the State, more vital than the
preservation of corporate profits (Euro-Linea, Phil. Inc. v. NLRC, G.R. No. 75782, December 1,
1987,156 SCRA 78).

There is no question that herein respondent Signo is guilty of breach of trust and violation of
company rules, the penalty for which ranges from reprimand to dismissal depending on the gravity of
the offense. However, as earlier stated, the respondent Commission and the Labor Arbiter found that
dismissal should not be meted to respondent Signo considering his twenty (20) years of service in
the employ of petitioner, without any previous derogatory record, in addition to the fact that petitioner
company had awarded him in the past, two (2) commendations for honesty. If ever the petitioner
suffered losses resulting from the unlisted electric consumption of de Lara, this was found to be the
fault of petitioner's Power Sales Division.

We find no reason to disturb these findings. Well-established is the principle that findings of
administrative agencies which have acquired expertise because their jurisdiction is confined to
specific matters are generally accorded not only respect but even finality. Judicial review by this
Court on labor cases does not go so far as to evaluate the sufficiency of the evidence upon which
the proper labor officer or office based his or its determination but is limited to issues of jurisdiction or
grave abuse of discretion (Special Events and Central Shipping Office Workers Union v. San Miguel
Corporation, G.R. Nos. L-51002-06, May 30,1983,122 SCRA 557).

This Court has held time and again, in a number of decisions, that notwithstanding the existence of a
valid cause for dismissal, such as breach of trust by an employee, nevertheless, dismissal should
not be imposed, as it is too severe a penalty if the latter has been employed for a considerable
length of time in the service of his employer. (Itogon-Suyoc Mines, Inc. v. NLRC, et al., G.R. No. L-
54280, September 30,1982,117 SCRA 523; Meracap v. International Ceramics Manufacturing Co.,
Inc., et al., G.R. Nos. L-48235-36, July 30,1979, 92 SCRA 412; Sampang v. Inciong, G.R. No.
50992, June 19,1985,137 SCRA 56; De Leon v. NLRC, G.R. No. L-52056, October 30,1980, 100
SCRA 691; Philippine Airlines, Inc. v. PALEA, G.R. No. L-24626, June 28, 1974, 57 SCRA 489).

In a similar case, this Court ruled:

As repeatedly been held by this Court, an employer cannot legally be compelled to

continue with the employment of a person who admittedly was guilty of breach of
trust towards his employer and whose continuance in the service of the latter is
patently inimical to its interest. The law in protecting the rights of the laborers,
authorized neither oppression nor self- destruction of the employer.

However, taking into account private respondent's 'twenty-three (23) years of service
which undisputedly is unblemished by any previous derogatory record' as found by
the respondent Commission itself, and since he has been under preventive
suspension during the pendency of this case, in the absence of a showing that the
continued employment of private respondent would result in petitioner's oppression
or self-destruction, We are of the considered view that his dismissal is a drastic
punishment. ... .

xxx xxx xxx

The ends of social and compassionate justice would therefore be served if private
respondent is reinstated but without backwages in view of petitioner's obvious good
faith. (Itogon- Suyoc Mines, Inc. v. NLRC, et al., 11 7 SCRA 528)

Further, in carrying out and interpreting the Labor Code's provisions and its implementing
regulations, the workingman's welfare should be the primordial and paramount consideration. This
kind of interpretation gives meaning and substance to the liberal and compassionate spirit of the law
as provided for in Article 4 of the New Labor Code which states that "all doubts in the implementation
and interpretation of the provisions of the Labor Code including its implementing rules and
regulations shall be resolved in favor of labor" (Abella v. NLRC, G.R. No. 71812, July 30,1987,152
SCRA 140).

In view of the foregoing, reinstatement of respondent Signo is proper in the instant case, but without
the award of backwages, considering the good faith of the employer in dismissing the respondent.

ACCORDINGLY, premises considered, the petition is hereby DISMISSED and the assailed decision
of the National Labor Relations Commission dated March 12, 1987 is AFFIRMED. The temporary
restraining order issued on August 3, 1987 is lifted.

SO ORDERED.

[G.R. No. 112630. September 5, 1997]

CORAZON JAMER and CRISTINA AMORTIZADO, petitioners,

vs. NATIONAL LABOR RELATIONS COMMISSION, ISETANN
DEPARTMENT STORE and/or JOHN GO, respondents.
 DECISION
HERMOSISIMA, JR., J.:

The decision of public respondent National Labor Relations Commission

[1]

(NLRC) in NLRC NCR CA 002074-91, promulgated on November 12 1993, is

[2] [3]

herein sought to be annulled for having been rendered with grave abuse of
discretion, it having reversed and set aside the decision of Labor Arbiter
[4]

Pablo C. Espiritu, Jr. by dismissing the petitioners complaint for illegal

dismissal against private respondent Isetann Department Store (Isetann, for
brevity). The decretal part of the NLRC decision reads:

WHEREFORE, premises considered, the appealed decision is hereby set aside and
new one promulgated declaring that the dismissal from the service of complainants
Corazon Jamer and Cristina Amortizado was valid and for cause. Consequently, the
order of reinstatement with backwages and attorneys fees are likewise vacated and set
aside.
[5]

Although the Labor Arbiter and the NLRC reached contrary conclusions,
[6]

both agree on the following facts:

Complainant, Corazon Jamer was employed on February 10, 1976 as a Cashier at Joy
Mart, a sister company of Isetann. After two (2) years, she was later on promoted to
the position of counter supervisor. She was transferred to Isetann, Carriedo Branch, as
a money changer. In 1982 she was transferred to the Cubao Branch of Isetann, as a
money changer, till her dismissal on August 31, 1990.

Complainant Cristina Amortizado, on the other hand, was employed also at Joy Mart
in May, 1977 as a sales clerk. In 1980 she was promoted to the position as counter
cashier. Thereafter, she was transferred to Young Un Department Store as an assistant
to the money changer. Later on, or in 1985, she transferred to Isetann, Cubao Branch
where she worked as a Store Cashier till her dismissal on August 31, 1990.

Both complainants were receiving a salary of P4,182.00 for eight (8) hours work at
the time of their dismissal.

Respondent Isetann Department Store on the other hand, is a corporation duly

organized and existing under laws of the Philippines and is engaged in retail trade and
the department store business. Individual respondent, John Go is the
President/General (Manager) of respondent Department Store.
This complaint arose from the dismissal of the complainants by the respondents. They
were both dismissed on August 31, 1990 on the alleged ground of dishonesty in their
work as Store Cashiers.

Complainants (sic) function as Store Cashiers is to accumulate, at the end of daily

operations, the cash sales receipts of the selling floor cash register clerks. At the close
of business hours, all the cash sales of the floor cash register clerks are turned over by
them to the Store Cashiers, complainants herein, together with the tally sheets
prepared by the cash register clerks. Thereafter, complainants will reconcile the cash
sales with the tally sheets to determine shortages or coverages(sic) and deposit the
same with the bank depositor(sic) of respondents company. Thereafter, the recorded
transactions are forwarded to the main branch of respondents company at Carriedo for
counter-checking.

On July 16, 1990, complainants discovered a shortage of P15,353.78. It was

complainant Corazon Jamer who first discovered the shortage. In fact at first, she
thought that it was merely a P1,000.00 shortage but when she reconciled the cash
receipts, from the cash register counters, with the tally sheets and the actual money on
hand, the shortage amounted to P15,353.78. She informed her co-store cashier,
complainant Cristina Amortizado, about the shortage. Cristina Amortizado also
reconciled and re-counted the sale previous to July 16, 1990 and she also confirmed
that there was a discrepancy or a shortage of P15,353.78.. They did not, (sic)
immediately report the shortage to management hoping to find the cause of the
shortage but to no avail they failed to reconcile the same. Hence, they had no other
alternative but to report the same to the management on July 17, 1990.

Complainants, together with another Store Cashier, Lutgarda Inducta, were asked to
explain and they submitted their respective written explanations for the shortage
of P15,353.78. and the P450.00 under deposit last July 14, 1990.

Respondents placed both complainants and their co-store cashier Lutgarda Inducta
under preventive suspension for the alleged shortages. Thereafter, respondents
conducted an administrative investigation. Finding the explanation of the
complainants to be unsatisfactory, respondent dismissed the complainants from the
service on August 31, 1990. Aggrieved and not satisfied with the decision of
management terminating their services, complainant instituted this present action on
September 26, 1990 for illegal dismissal praying for reinstatement with payment of
backwages and other benefits. [7]
In justifying complainants dismissal from their employment, respondents alleged:

When the transactions for July 15, 1990 were being reconciled, a shortage
of P15,353.78 was discovered. Also uncovered was an under-deposit of P450.00 of
cash receipts for July 14, 1990.

Considering that the foregoing deficits were attributable to herein appellees and to
another store cashier, Mrs. Lutgarda Inducta, who were the ones on duty those days
respondent Isetanns Human Resources Division Manager, Teresita A. Villanueva,
issued letters (Exh. 1 and 5) individually addressed to herein appellees and Mrs.
Inducta requiring them to submit written explanations in regard to their above
malfeasance within 48 hours from receipt thereof. Pursuant to said letters, they were
likewise placed under preventive suspension.

Thereafter, the Committee o Discipline of appellant Isetann conducted a series of

investigations probing appellees and Mrs. Inductas aforestated shortages. In addition
to the shortage of P15,353.78(sic) and underdeposit of P450.00, said investigation
also included the following sums which appellees failed to turnover or account for:

a) P1,000.00- amount borrowed by Lutgarda Inducta from Corazon Jamer;

b) P 70.00- over replenishment of petty cash expenses incurred by Cristina

Amortizado.

After the administrative investigation, the Committee on Discipline rendered its

decision (Exhs. 3, 3-A, to 3-D) dated August 23, 1990 duly approved by the General
Manager of respondent Isetann, finding the appellees and Mrs. Inducta responsible for
said shortages and consequently requiring them to restitute the same to respondent
Isetann. This Decision and the notices of termination were sent by respondent Isetann
to the appellees, and which the latter admittedly received.

On the other hand, the complainants account of the factual antecedents that let (sic) to
their dismissal is as follows:

Aside from the foregoing persons, Alex Mejia had and was allowed by management to
have uncontrolled access to the said room including the vault. Ostensibly, the purpose
was to assist in the bringing in or taking out of coin bags, monies, etc.

There were therefore, at a minimum at least six (6) persons who could have had
access to the company funds. To ascribe liability to the store cashiers alone, in the
absence of a clear proof of any wrongdoing is not only unfair and discriminatory but
is likewise illegal.

Parenthetically, and within the parameters of their assigned tasks, herein complainants
could not be faulted in any way for the said shortage as there is no showing that the
loss occurred at the time they were in control of the funds concerned.

Complainants do not dispute the fact that there appeared to be a shortage

of P15.373.78(sic) for the July 15, 1990 (a Sunday) sales and which were tallied and
the loss discovered on the following day, July 16, 1990. They however vehemently
deny any culpability or participation in any kind, directly or indirectly, in regard to the
said loss or shortage. Given the kind of trust reposed upon them by respondents for
fourteen and thirteen years respectively they were not about, although they could have
done so before given the negligence and laxity of management in regard to the control
and handling of funds of the store, to break said trust.

At the time the persons who had access either to the vault the money and/or the keys
aside from herein complainants, were: 1) Lutgarda Inducta, also a store cashier on
duty at the time; 2) the SOM Mrs. Samonte, the supervisor in charge; 3) Alex Mejia,
an employee assigned as utility man; and 4) Boy Cabatuando.

There were (sic) three (3) keys to the money changers room, and these keys were
assigned and distributed to: a) master key is or was with the SOMs (Mrs. Samonte)
room at the 3 floor of the building; b) another key is or was in the possession of the
rd

keeper of the keys, i.e. Boy Cabatuando; and c) the third and last key is any of the
store cashiers depending on who is on duty at the time.

Likewise, there were four (4) persons who were aware and knew of the vault
combination. These were the three store cashiers, i.e. herein complainants, Lutgarda
Inducta and their SOM, Mrs. Samonte. [8]

On July 23, 1991, Labor Arbiter Nieves V. de Castro, to whom the instant
contoversy was originally assigned, rendered a decision in favor of herein
[9]

petitioners, finding that petitioners had been illegally dismissed, the dispositive
portion of which reads:

WHEREFORE, respondents are hereby directed to reinstate complainants to service

effective August 1, 1991 with full backwages and without loss of seniority rights.

SO ORDERED. [10]
 Expectedly, respondents Isetann and John Go appealed the aforesaid
decision to the NLRC. On January 31, 1992, the NLRC issued a
resolution remanding this case to the NLRC National Capital Region
[11]

Arbitrattion Branch for further proceedings in the following manner:

WHEREFORE, premises considered, the challenged decision is hereby SET ASIDE

and VACATED.

The entire records of this case is hereby remanded to the NLRC National Capital
Region Arbitration Branch for further proceedings.

Considering that the Labor Arbiter a quo rendered a decision in this case and in order
to dispel any suspicion of pre-judgment of this case, the Executive Labor Arbiter is
hereby directed to have this case re-raffled to another Labor Arbiter.

SO ORDERED. [12]

Consequently, the present case was then re-raffled to Labor Arbiter Pablo
C. Espiritu, Jr. After a full-blown trial, the said Labor Arbiter found for the
petitioners and declared that there was no justification, whether in fact or in
law, for their dismissal. The decretal part of the decision dated March 31,
[13]

1993, states:

WHEREFORE, above premises considered, judgement(sic) is hereby rendered finding

the dismissal of complainants, Cristina Amortizado and Corazon Jamer to be illegal
and concomitantly, (r)espondents are hereby ordered to pay complainants, Corazon
Jamer the amount of P125,460.00 and Cristina Amortizado the
amount of P125,460.00, representing full backwages from the time of their dismissal
(August 31, 1990) till actual or payroll reinstatement at the option of the respondent
(computed until promulgation only). Respondents are also hereby further ordered to
reinstate the complainants to their former position as Store Cashiers without loss of
seniority rights, privileges and benefits, failure to do so backwages shall continue to
run but in no case to exceed three (3) years.

Respondents are also ordered to pay complainants the amount of P25,092.00

representing 10% attorneys fees based in the total judgement(sic) award
of P250,920.00.

SO ORDERED. [14]
 Dissatisfied over the decision of the Labor Arbiter which struck private
respondents as grossly contrary to the evidence presented, the herein private
respondents once again appealed to the NLRC. And, as earlier stated, the
NLRC rendered the challenged decision on November 12, 1993, vacating
[15]

the decision of the Labor Arbiter and entering a new one dismissing the
petitioners complaint.

Hence, this petition wherein the main issue to be resolved is whether

NLRC committed grave abuse of discretion in finding that petitioners were
validly dismissed on the ground of loss of trust and confidence.

At the outset, the Court notes petitioners inexcusable failure to move for
the reconsideration of respondent NLRCs decision. Thus, the present petition
suffers from a procedural defect that warrants its outright dismissal. While in
some exceptional cases we allowed the immediate recourse to this Court, we
find nothing herein that could warrant an exceptional treatment to this petition
which will justify the omission. This premature action of petitioners constitutes
a fatal infirmity as ruled in a long line of decisions, most recently in the case
[16]

of Building Care Corporation vs. National Labor Relations Commission, et al.:

[17]

the filing of such a motion is intended to afford public respondent an opportunity to

correct any actual or fancied error attributed to it by way of a re-examination of the
legal and factual aspects of the case. Petitioners inaction or negligence under the
circumstances is tantamount to a deprivation of the right and opportunity of the
respondent Commission to cleanse itself of an error unwittingly committed or to
vindicate itself of an act unfairly imputed. xxx

xxx And for failure to avail of the correct remedy expressly provided by law,
petitioner has permitted the subject Resolution to become final and executory after the
lapse of the ten day period within which to file such motion for reconsideration.

Likewise, a motion for reconsideration is an adequate remedy;

hence certiorari proceedings,as in this case, will not prosper. Rule 65, [18]

Section 1 of the Rules of Civil Procedure, as amended, clearly provides that:

When any tribunal, board or officer exercising judicial or quasi-judicial functions has
acted without or in excess of its or his jurisdiction, or with grave abuse of discretion
amounting to lack or excess of jurisdiction, and there is no appeal, or any plain,
speedy, and adequate remedy in the ordinary course of law, a person aggrieved
thereby may file a verified petition in the proper court, alleging the facts with
certainty and praying that judgment be rendered annulling or modifying the
proceedings of such tribunal, board or officer, xxx

The unquestioned rule in this jurisdiction is that certiorari will lie only if
there is no appeal or any other plain, speedy and adequate remedy in the
ordinary course of law against the acts of respondent. In the case at bench,
[19]

the plain and adequate remedy referred to in Rule 65, Section 1, is a motion
for reconsideration of the challenged decision and the resolution thereof,
which was expected to provide an adequate and a more speedy remedy than
the present petition for certiorari.

Petitioners asseverate that respondent NLRC committed a grave abuse of

discretion when it reversed the findings of facts of the Labor Arbiter.

We find said submissions untenable.

In asserting that there was a grave abuse of discretion, petitioners advert

to alleged variances in the factual findings of the Labor Arbiter and the
respondent NLRC. This is inept and erroneous. Firstly, errors of judgment, as
distinguished from errors of jurisdiction, are not within the province of a
special civil action for certiorari. Secondly, a careful reading of the records of
[20]

this case would readily show that there is any error by public respondent in its
analysis of the facts and its evaluation of the evidence, it is not of such a
degree as may be stigmatized as a grave abuse of discretion does not
necessarily follow just because there is a reversal by the NLRC of the
decision of the Labor Arbiter. Neither does the mere variance in the
evidentiary assessment of the NLRC and that of the Labor Arbiter would, as a
matter of course, so warrant another full review of the facts. The NLRCs
decision, so long as it is not bereft of support from the records, deserves
respect from the Court. [21]

We must once more reiterate our much repeated but not well-heeded rule
that the special civil action for certiorari is a remedy designed for the
correction of errors of jurisdiction and not errors of judgment. The rationale for
this rule is simple. When a court exercises its jurisdiction being exercised
when the error is committed. If it did, every error committed by a court would
deprive it of its jurisdiction and every erroneous judgment would be a void
judgment. This cannot be allowed. The administration of justice would not
countenance such a rule. Consequently, an error of judgment that the court
may commit in the exercise of its jurisdiction is not correctible through the
original special civil action of certiorari.
[22]

On the merits, we find and so hold that substantial evidence exists to

warrant the finding that petitioners were validly dismissed for just cause and
after observance of due process.

Under the Labor Code, as amended, the requirements for the lawful
dismissal of an employee by his employer are two-fold: the substantive and
the procedural. Not only must the dismissal be for a valid or authorized cause
as provided by law (Articles 282, 283 and 284, of the Labor Code, as
amended), but the rudimentary requirements of due process, basic of which
are the opportunity to be heard and to defend himself, must be observed
before an employee may be dismissed. [23]

With respect to the first requisite, Article 282 of the Labor Code, as
amended, provides:

ART. 282. Termination by Employer.- An employer may terminate an employment for

any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders
of his employer or representative in connection with his work;

(b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in him by his
employer or duly authorized representative;

(d) Commission of a crime or offense by the employee against the person of his
employer or any immediate member of his family or his duly authorized
representative; and

(e) Other causes analogous to the foregoing. (Italics supplied)

In the instant case, we find no difficulty in agreeing with the findings of the
public respondent that the herein petitioners were guilty of acts of dishonesty
by incurring several occurrences of shortages in the amounts
of P15,353.78, P1,000.00, P450.00 and P70.00 which they failed to turnover
and account for/and in behalf of respondent Isetann. Fittingly, the findings of
the NLRC are worth stressing at this point, to wit:

With regard to the several occurrences of shortages of the amounts

of P15,353.78, P1,000.00, P450.00 and P70.00 , the Labor Arbiter has failed to
consider the fact that complainants-appellees were accorded the chance to explain
their side as to the shortages and that they have utterly failed to do so providing basis
for their valid dismissal. This fact has been established by the respondents-appellants
in the findings of the Committee on Discipline on Exhibits 3, 3-A to 3-D, as follows:

a) On the Shortage of P15,353.78:

The 3 respondents, Lutgarda Inducta, Cristy Amortizado and Corazon Jamer denied
any involvement in the loss of P15,353.78. Although the money, is under their
responsibility, not one of them gave any explanation about the shortage or loss.

b) On the amount of P1,000.00 borrowed by Inducta from Jamer:

On July 18, 1990, Lutgarda Inducta borrowed money from respondents (sic) Jamer
amounting to P1,000.00 to cover her shortage.

Ms. Jamer said that Ms. Inducta paid the amount on that day. But Ms. Jamer did not
report the shortage.

c) On the Underdeposit of Cash = P450.00.

The computation of Ms. Amortizado s sales collections last July 14, 1990 resulted to
an overage of P350.00. Amortizado turned over the amount of P350.00, to cover up a
shortage incurred by her and Mrs. Inducta.

Jamer used the money given to her by Amortizado (P350.00), and borrowed (P150.00)
from the change fund to cover the total shortage amounting to P500.00 which she had
then.

Jamer cannot trace how the shortage came about. Inducta and Jamer shouldered the
total shortage amounting to P500.00, P330.00 for Jamer and P200.00 for Inducta.
Jamer claimed that she returned the P350.00 in the box. However, the claim of
respondent was further verified from the payroll section which revealed that
a value slip was issued last July 1990. Jamer and Inducta were charged for P200.00
each. A value slip was issued last August 10, 1990 charging P100.00 to Amortizado.
Jamer admitted that she failed to inform the Audit Staff regarding the P350.00 overage
which she received from Amortizado. A(s) per report of Ms. Agnes Gonzales dated 26
July 1990, there was a total under deposit of cash amounting to P450.00.

Total cash admitted P65,428.05

(cash in drawer)

Total cash remitted P64,978.05

(per tally sheet) _________

Overage P 450.00

d) On the P70.00 Replenishment of Petty Cash Expenses:

During the 3 Administrative hearing, the Committee informed Ms. Amortizado

rd

regarding the over replenishment of petty cash expenses as revealed by the Finance
Manager last August 10, 1990.

Mrs. Amortizado readily admitted and explained that she forgot to inform Mrs.
Inducta regarding the P70.00. She admitted her failure to correct the amount
from P100.00 to P30.00 (total expenses spent for the taxi fair).

She added that she previously incurred a shortage amounting to P100.00. Then she
used the P70.00 to cover for the shortage. The remaining balance of P30.00 was paid
by Amortizado.

Amortizado informed the Committee that she is willing to refund the P70.00 shortage.
(Underscoring supplied).[24]

From the foregoing premises, it is crystal clear that the failure of

petitioners to report the aforequoted shortages and overages to management
as soon as they arose resulted in the breach of the fiduciary trust reposed in
them by respondent company, thereby causing the latter to lose confidence in
them. This warrants their dismissal. Moreover, it must be pointed out that
herein petitioners have in fact admitted the underpayment of P450.00 not only
in their Sinumpaang Salaysay but also during the hearing conducted before
Labor Arbiter Pablo C. Espiritu. And, the record shows that the petitioners in
[25]

fact made a last ditch effort to conceal the same. Were it not for its timely
discovery by private respondents trusted employees, the incident could not
have been discovered at all. Furthermore, it is worth stressing at this juncture
that the petitioners have also expressly admitted the shortage of P15,353.78a
substantial amountin their respective sworn statements, and they were not
able to satisfactorily explain such shortage. The Court is convinced that
[26]

these particular acts or omissions provided Isetann with enough basis to

forfeit its trust and confidence over herein petitioners.

The NLRC, therefore, did not act with grave abuse of discretion in
declaring that petitioners were legally dismissed from employment. The failure
of petitioners to report to management the aforementioned irregularities
constitute fraud or willful breach of the trust reposed in them by their employer
or duly authorized representative one of the just causes in terminating
employment as provided for by paragraph (c), Article 282 of the Labor Code,
as amended.

In other words, petitioners admissions in their sworn statements, together

with the other documentary evidences on record, constituted breach of trust
on their part which justifies their dismissal. Private respondents Isetann
Department Store and Mr. John Go cannot be compelled to retain employees
who are clearly guilty of malfeasance as their continued employment will be
prejudicial to the formers best interest. The law, Iprotecting the rights of the
[27]

employees, authorizes neither oppression nor self-destruction of the

employer. [28]

The cause of social justice is not served by upholding the interest of

petitioners in disregard of the right of private respondents. Social justice
ceases to be an effective instrument for the equalization of the social and
economic forces by the State when it is used to shield wrongdoing. While it is
[29]

true that compassion and human consideration should guide the disposition of
cases involving termination of employment since it affects ones source or
means of livelihood, it should not be overlooked that the benefits accorded to
labor do not include compelling an employer to retain the services of an
employee who has been shown to be a gross liability to the employer. It
should be made clear that when the law tilts the scale of justice in favor of
labor, it is but a recognition of the inherent economic inequality between labor
and management. The intent is to balance the scale of justice; to put up the
two parties on relatively equal positions. There may be cases where the
circumstances warrant favoring labor over the interests of management but
never should the scale be so tilted if the result is an injustice to the
employer, Justicia remini regarda est (Justice is to be denied to none). [30]

Thus, this Court has held time and again, in a number of decisions, that: [31]

Loss of confidence is a valid ground for dismissing an employee and proof beyond reasonable
doubt of the employees misconduct is not required to dismiss him on this charge. It is sufficient
if there is some basis for such loss of confidence or if the employer has reasonable ground to
believe or to entertain the moral conviction that the employee concerned is responsible for the
misconduct and that the nature of his participation therein rendered him absolutely unworthy of
the trust and confidence demanded by his position. [32]

Parenthetically, the fact that petitioners Jamer and Amortizado had worked
for respondent company for fourteen (14) and thirteen (13) years, respectively,
should be taken against them. The infractions that they committed,
notwithstanding their long years of service with the company, reflects a
regrettable lack of loyaltyloyalty that they should have shouldered instead of
betrayed. If the petitioners length of service is to be regarded as a justifying
circumstance in moderating the 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. [33]

Petitioners also maintain that the NLRC acted with grave abuse of
discretion when it failed to consider the fact that, other than petitioners
themselves, there were four (4) other persons who had access to the
company vaults, and hence, could have been responsible for the aforesaid
cash shortages imputed to them. They aver therefore, that there was a serious
flaw and laxity in the supervision and handling of company funds by
respondent Isetann. [34]

We also find this contention devoid of merit.

First, it must pointed out that the petitioners remark that there was laxity in
the accounting procedures of the company is a matter addressed to the
respondent employer. However, this does not excuse dishonesty of
employees and should not in any case hamper the right of the employer to
terminate the employment of petitioners on the ground of loss of confidence or
breach of trust. Precisely, the accounting procedure which called for
improvements was based primarily on trust and confidence. [35]
 Secondly, it must be noted that the herein petitioners were store
cashiers and as such, a special and unique employment relationship exists
between them and the respondent company. More than most key positions,
that of cashier calls for the utmost trust and confidence because their primary
function involves basically the handling of a highly essential property of the
respondent employer --- the sales and revenues of the store. Employers are
consequently given wider latitude of discretion in terminating the employment
of managerial employees or other personnel occupying positions of
responsibility, such as in the instant case, than in the case of ordinary rank-
and-file employees, whose termination on the basis of these same grounds
requires proof of involvement in the malfeasance in question. Mere
uncorroborated assertions and accusations by the employer will not suffice.
In that respect , we quote with approval the observations of the NLRC:
[36]

To expound further, for the position of a cashier, the honesty and integrity of the
persons assuming said position are the primary considerations for the nature of her
work requires that her actuations should be beyond suspicion as they are accorded the
responsibility of handling money and whatever they would do to such property of the
employer largely depend on their trustworthiness. Hence, the right of the employer to
dismiss a cashier guilty of breach and trust and confidence should be recognized. In a
case decided by the Supreme Court it has been ruled that:

Honesty and integrity are the primary considerations in petitioners position. The
nature of his work requires that the actuations should be beyond suspicion, our
empathy with the cause of labor should not blind us to the rights of management. As
we have held, this Court should help stamp out, rather than tolerate, the commission
of irregular acts whenever these are noted. Malpractices should not be allowed to
continue but should be rebuked. (Del Carmen vs. NLRC, 203 SCRA 245) [37]

Finally, we are convinced that the NLRC did not commit grave abuse of
discretion in evaluating the evidence. Petitioners merely denied the charges
against them. Denials are weak forms of defenses, particularly when they are
not substantiated by clear and convincing evidence. The petitioners failure to
[38]

satisfactorily explain the cash shortages, for which sums they are responsible,
given their respective positions in respondent company, is enough reason to
warrant their dismissal on the ground of loss of confidence. They cannot place
the burden on somebody else given the factual circumstances of this case. As
succinctly put by the NLRC:
That there were other persons who had access to the vaults of the appellant company
implying that these other persons could have been responsible for the loss of
the P15,353.78 is of no moment inasmuch as the appellees were the ones who took
first custody of the possession of said collections. As store cashiers, it is expected of
them to exercise ordinary prudence to count the collection and record the same in the
tally sheet before depositing to said vault to avoid a slightest suspicion of having
pocketed part of it should a shortage arise. They did not exert efforts to exercise such
prudence demanded of their positions hence, appellants should not be blamed when
they were called for an investigation when said shortage was discovered.

xxx xxx xxx

That the occurrence of shortages is merely an isolated one and therefore should not be
taken against the complainant-appellees as a ground for loss of trust and confidence
that would cause their termination cannot be given any credence. The shortages
having been established and admitted has provided the employer sufficient basis for
loss of confidence and whether such occurrence is merely an isolated one or has been
repeatedly committed is no longer material. The bone of contention here is whether
there is some basis for such loss of trust and confidence and if the employer has
reasonable ground to believe or to entertain the moral conviction that the employee
concerned is responsible for the misconduct which in the instant case has been
established.[39]

We reiterate the rule that in cases of dismissal for breach of trust and
confidence, proof beyond reasonable doubt of the employees misconduct is
not required. It is sufficient that the employer had reasonable ground to
believe that the employees are responsible for the misconduct which renders
him unworthy of the trust and confidence demanded by their position. In the [40]

case at hand, it cannot be doubted that respondents succeeded in discharging

its burden of proof.

As regards to the second requisite, the law requires that the employer
must furnish the worker sought to be dismissed with two (2) written notices
before termination may be validly effected: first, a notice apprising the
employee of the particular acts or omission for which his dismissal is sought
and, second, a subsequent notice informing the employee of the decision to
dismiss him. [41]
 In accordance with this requirement, petitioners were given the required
notices, on August 2, 1990 and then on August 23, 1990. The Court finds that
petitioners were accorded due process before they were dismissed on August
31, 1990. It is a well-established rule that the essence of due process is
simply an opportunity to be heard, or as applied to administrative proceedings,
an opportunity to explain ones side or an opportunity to seek a
reconsideration of the action or ruling complained of. It is evident from the
[42]

records , that herein petitioners were given all the opportunities to defend
themselves and air their side before the Committee on Discipline, having been
notified by respondent Isetanns Human Resources Division Manager, Teresita
A. Villanueva, on August 2, 1990 through letters individually sent to them.
However, offered no explanation or theory which could account for money lost
in their possession. Hence, the company had no other alternative but to
terminate their employment. As we elucidated in the case of Philippine
Savings Bank vs. National Labor Relations Commission, to wit: [43]

xxx the requirement of due process is satisfied when a fair and reasonable opportunity
to explain his side of the controversy is afforded the party. A formal or trial-type
hearing is not at all times and in all circumstances essential, especially when the
employee chooses not to speak,

WHEREFORE, the assailed decision of the National Labor Relations

Commission in NLRC NCR CA 002074-91 is hereby AFFIRMED. The petition
is DISMISSED for lack of merit.

SO ORDERED.

[G.R. No. 98107. August 18, 1997]

BENJAMIN C. JUCO, petitioner, vs. NATIONAL LABOR RELATIONS

COMMISSION and NATIONAL HOUSING
CORPORATION, respondents.

DECISION
HERMOSISIMA, JR., J.:

This is a petition for certiorari to set aside the Decision of the National
Labor Relations Commission (NLRC) dated March 14, 1991, which reversed
the Decision dated May 21, 1990 of Labor Arbiter Manuel R. Caday, on the
ground of lack of jurisdiction.

Petitioner Benjamin C. Juco was hired as a project engineer of respondent

National Housing Corporation (NHC) from November 16, 1970 to May 14,
1975. On May 14, 1975, he was separated from the service for having been
implicated in a crime of theft and/or malversation of public funds.

On March 25, 1977, petitioner filed a complaint for illegal dismissal against
the NHC with the Department of Labor.

On September 17, 1977, the Labor Arbiter rendered a decision dismissing

the complaint on the ground that the NLRC had no jurisdiction over the case. [1]

Petitioner then elevated the case to the NLRC which rendered a decision
on December 28, 1982, reversing the decision of the Labor Arbiter. [2]

Dissatisfied with the decision of the NLRC, respondent NHC appealed

before this Court and on January 17, 1985, we rendered a decision, the
dispositive portion thereof reads as follows:

WHEREFORE, the petition is hereby GRANTED. The questioned decision of the

respondent National Labor Relations Commission is SET ASIDE. The decision of the
Labor Arbiter dismissing the case before it for lack of jurisdiction is REINSTATED. [3]

On January 6, 1989, petitioner filed with the Civil Service Commission a

complaint for illegal dismissal, with preliminary mandatory injunction. [4]

On February 6, 1989, respondent NHC moved for the dismissal of the

complaint on the ground that the Civil Service Commission has no jurisdiction
over the case. [5]

On April 11, 1989, the Civil Service Commission issued an order

dismissing the complaint for lack of jurisdiction. It ratiocinated that:

The Board finds the comment and/or motion to dismiss meritorious. It was not
disputed that NHC is a government corporation without an original charter but
organized/created under the Corporate Code.

Article IX, Section 2 (1) of the 1987 Constitution provides:

The civil service embraces all branches, subdivisions, instrumentalities and agencies
of the government, including government owned and controlled corporations with
original charters. (underscoring supplied)

From the aforequoted constitutional provision, it is clear that respondent NHC is not
within the scope of the civil service and is therefore beyond the jurisdiction of this
board. Moreover, it is pertinent to state that the 1987 Constitution was ratified and
became effective on February 2, 1987.

WHEREFORE, for lack of jurisdiction, the instant complaint is hereby dismissed. [6]

On April 28, 1989, petitioner filed with respondent NLRC a complaint for
illegal dismissal with preliminary mandatory injunction against respondent
NHC. [7]

On May 21, 1990, respondent NLRC thru Labor Arbiter Manuel R. Caday
ruled that petitioner was illegally dismissed from his employment by
respondent as there was evidence in the record that the criminal case against
him was purely fabricated, prompting the trial court to dismiss the charges
against him. Hence, he concluded that the dismissal was illegal as it was
devoid of basis, legal or factual.

He further ruled that the complaint is not barred by prescription

considering that the period from which to reckon the reglementary period of
four years should be from the date of the receipt of the decision of the Civil
Service Commission promulgated on April 11, 1989. He also ratiocinated that:

It appears x x x complainant filed the complaint for illegal dismissal with the Civil
Service Commission on January 6, 1989 and the same was dismissed on April 11,
1989 after which on April 28, 1989, this case was filed by the complainant. Prior to
that, this case was ruled upon by the Supreme Court on January 17, 1985 which
enjoined the complainant to go to the Civil Service Commission which in fact,
complainant did. Under the circumstances, there is merit on the contention that the
running of the reglementary period of four (4) years was suspended with the filing of
the complaint with the said Commission. Verily, it was not the fault of the respondent
for failing to file the complaint as alleged by the respondent but due to, in the words
of the complainant, a legal knot that has to be untangled.
[8]
 Thereafter, the Labor Arbiter rendered a decision, the dispositive portion of
which reads:

"Premises considered, judgment is hereby rendered declaring the dismissal of the

complainant as illegal and ordering the respondent to immediately reinstate him to his
former position without loss of seniority rights with full back wages inclusive of
allowance and to his other benefits or equivalent computed from the time it is
withheld from him when he was dismissed on March 27, 1977, until actually
reinstated. [9]

On June 1, 1990, respondent NHC filed its appeal before the NLRC and
on March 14, 1991, the NLRC promulgated a decision which reversed the
decision of Labor Arbiter Manuel R. Caday on the ground of lack of
jurisdiction. [10]

The primordial issue that confronts us is whether or not public respondent

committed grave abuse of discretion in holding that petitioner is not governed
by the Labor Code.

Under the laws then in force, employees of government-owned and /or

controlled corporations were governed by the Civil Service Law and not by the
Labor Code. Hence,

Article 277 of the Labor Code (PD 442) then provided:

"The terms and conditions of employment of all government employees, including

employees of government-owned and controlled corporations shall be governed by the
Civil Service Law, rules and regulations x x x.

The 1973 Constitution, Article II-B, Section 1(1), on the other hand provided:

The Civil Service embraces every branch, agency, subdivision and instrumentality of
the government, including government-owned or controlled corporations.

Although we had earlier ruled in National Housing Corporation v. Juco,

that employees of government-owned and/or controlled corporations,
[11]

whether created by special law or formed as subsidiaries under the general

Corporation Law, are governed by the Civil Service Law and not by the Labor
Code, this ruling has been supplanted by the 1987 Constitution. Thus, the
said Constitution now provides:
The civil service embraces all branches, subdivision, instrumentalities, and agencies
of the Government, including government owned or controlled corporations
with original charter. (Article IX-B, Section 2[1])

In National Service Corporation (NASECO) v. National Labor Relations

Commission, we had the occasion to apply the present Constitution in
[12]

deciding whether or not the employees of NASECO are covered by the Civil
Service Law or the Labor Code notwithstanding that the case arose at the
time when the 1973 Constitution was still in effect. We ruled that the NLRC
has jurisdiction over the employees of NASECO on the ground that it is the
1987 Constitution that governs because it is the Constitution in place at the
time of the decision. Furthermore, we ruled that the new phrase with original
charter means that government-owned and controlled corporations refer to
corporations chartered by special law as distinguished from corporations
organized under the Corporation Code.Thus, NASECO which had been
organized under the general incorporation stature and a subsidiary of the
National Investment Development Corporation, which in turn was a subsidiary
of the Philippine National Bank, is excluded from the purview of the Civil
Service Commission.

We see no cogent reason to depart from the ruling in the aforesaid case.

In the case at bench, the National Housing Corporation is a government

owned corporation organized in 1959 in accordance with Executive Order No.
399, otherwise known as the Uniform Charter of Government Corporation,
dated January 1, 1959. Its shares of stock are and have been one hundred
percent (100%) owned by the Government from its incorporation under Act
1459, the former corporation law. The government entities that own its shares
of stock are the Government Service Insurance System, the Social Security
System, the Development Bank of the Philippines, the National Investment
and Development Corporation and the Peoples Homesite and Housing
Corporation. Considering the fact that the NHA had been incorporated under
[13]

act 1459, the former corporation law, it is but correct to say that it is a
government-owned or controlled corporation whose employees are subject to
the provisions of the Labor Code. This observation is reiterated in recent case
of Trade Union of the Philippines and Allied Services (TUPAS) v. National
Housing Corporation, where we held that the NHA is now within the
[14]

jurisdiction of the Department of Labor and Employment, it being a

government-owned and/or controlled corporation without an original
charter. Furthermore, we also held that the workers or employees of the NHC
(now NHA) undoubtedly have the right to form unions or employees
organization and that there is no impediment to the holding of a certification
election among them as they are covered by the Labor Code.

Thus, the NLRC erred in dismissing petitioners complaint for lack of

jurisdiction because the rule now is that the Civil Service now covers only
government-owned or controlled corporations with original charters. Having [15]

been incorporated under the Corporation Law, its relations with its personnel
are governed by the Labor Code and come under the jurisdiction of the
National Labor Relations Commission.

One final point. Petitioners have been tossed from one forum to another
for a simple illegal dismissal case. It is but apt that we put an end to his
dilemma in the interest of justice.

WHEREFORE, the decision of the NLRC in NLRC NCR-04-02036089

dated March 14, 1991 is hereby REVERSED and the Decision of the Labor
Arbiter dated May 21, 1990 is REINSTATED.

SO ORDERED.

G.R. No. 120319 October 6, 1995

LUZON DEVELOPMENT BANK, petitioner,

vs.
ASSOCIATION OF LUZON DEVELOPMENT BANK EMPLOYEES and ATTY. ESTER S. GARCIA
in her capacity as VOLUNTARY ARBITRATOR, respondents.

ROMERO, J.:

From a submission agreement of the Luzon Development Bank (LDB) and the Association of Luzon
Development Bank Employees (ALDBE) arose an arbitration case to resolve the following issue:

Whether or not the company has violated the Collective Bargaining Agreement
provision and the Memorandum of Agreement dated April 1994, on promotion.

At a conference, the parties agreed on the submission of their respective Position Papers on
December 1-15, 1994. Atty. Ester S. Garcia, in her capacity as Voluntary Arbitrator, received
ALDBE's Position Paper on January 18, 1995. LDB, on the other hand, failed to submit its Position
Paper despite a letter from the Voluntary Arbitrator reminding them to do so. As of May 23, 1995 no
Position Paper had been filed by LDB.

On May 24, 1995, without LDB's Position Paper, the Voluntary Arbitrator rendered a decision
disposing as follows:

WHEREFORE, finding is hereby made that the Bank has not adhered to the
Collective Bargaining Agreement provision nor the Memorandum of Agreement on
promotion.

Hence, this petition for certiorari and prohibition seeking to set aside the decision of the Voluntary
Arbitrator and to prohibit her from enforcing the same.

In labor law context, arbitration is the reference of a labor dispute to an impartial third person for
determination on the basis of evidence and arguments presented by such parties who have bound
themselves to accept the decision of the arbitrator as final and binding.

Arbitration may be classified, on the basis of the obligation on which it is based, as either
compulsory or voluntary.

Compulsory arbitration is a system whereby the parties to a dispute are compelled by the
government to forego their right to strike and are compelled to accept the resolution of their dispute
through arbitration by a third party. 1The essence of arbitration remains since a resolution of a dispute is
arrived at by resort to a disinterested third party whose decision is final and binding on the parties, but in
compulsory arbitration, such a third party is normally appointed by the government.

Under voluntary arbitration, on the other hand, referral of a dispute by the parties is made, pursuant
to a voluntary arbitration clause in their collective agreement, to an impartial third person for a final
and binding resolution. 2Ideally, arbitration awards are supposed to be complied with by both parties
without delay, such that once an award has been rendered by an arbitrator, nothing is left to be done by
both parties but to comply with the same. After all, they are presumed to have freely chosen arbitration as
the mode of settlement for that particular dispute. Pursuant thereto, they have chosen a mutually
acceptable arbitrator who shall hear and decide their case. Above all, they have mutually agreed to de
bound by said arbitrator's decision.

In the Philippine context, the parties to a Collective Bargaining Agreement (CBA) are required to
include therein provisions for a machinery for the resolution of grievances arising from the
interpretation or implementation of the CBA or company personnel policies. 3 For this purpose, parties
to a CBA shall name and designate therein a voluntary arbitrator or a panel of arbitrators, or include a
procedure for their selection, preferably from those accredited by the National Conciliation and Mediation
Board (NCMB). Article 261 of the Labor Code accordingly provides for exclusive original jurisdiction of
such voluntary arbitrator or panel of arbitrators over (1) the interpretation or implementation of the CBA
and (2) the interpretation or enforcement of company personnel policies. Article 262 authorizes them, but
only upon agreement of the parties, to exercise jurisdiction over other labor disputes.

On the other hand, a labor arbiter under Article 217 of the Labor Code has jurisdiction over the
following enumerated cases:
 . . . (a) Except as otherwise provided under this Code the Labor Arbiters shall have
original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days
after the submission of the case by the parties for decision without extension, even in
the absence of stenographic notes, the following cases involving all workers, whether
agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that workers may file
involving wages, rates of pay, hours of work and other terms and conditions of
employment;

4. Claims for actual, moral, exemplary and other forms of damages arising from the
employer-employee relations;

5. Cases arising from any violation of Article 264 of this Code, including questions
involving the legality of strikes and lockouts;

6. Except claims for Employees Compensation, Social Security, Medicare and

maternity benefits, all other claims, arising from employer-employee relations,
including those of persons in domestic or household service, involving an amount
exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with
a claim for reinstatement.

xxx xxx xxx

It will thus be noted that the jurisdiction conferred by law on a voluntary arbitrator or a panel of such
arbitrators is quite limited compared to the original jurisdiction of the labor arbiter and the appellate
jurisdiction of the National Labor Relations Commission (NLRC) for that matter. 4 The state of our
present law relating to voluntary arbitration provides that "(t)he award or decision of the Voluntary
Arbitrator . . . shall be final and executory after ten (10) calendar days from receipt of the copy of the
award or decision by the parties," 5 while the "(d)ecision, awards, or orders of the Labor Arbiter are final
and executory unless appealed to the Commission by any or both parties within ten (10) calendar days
from receipt of such decisions, awards, or orders." 6 Hence, while there is an express mode of appeal from
the decision of a labor arbiter, Republic Act No. 6715 is silent with respect to an appeal from the decision
of a voluntary arbitrator.

Yet, past practice shows that a decision or award of a voluntary arbitrator is, more often than not,
elevated to the Supreme Court itself on a petition for certiorari, 7 in effect equating the voluntary
arbitrator with the NLRC or the Court of Appeals. In the view of the Court, this is illogical and imposes an
unnecessary burden upon it.

In Volkschel Labor Union, et al. v. NLRC, et al., 8 on the settled premise that the judgments of courts
and awards of quasi-judicial agencies must become final at some definite time, this Court ruled that the
awards of voluntary arbitrators determine the rights of parties; hence, their decisions have the same legal
effect as judgments of a court. In Oceanic Bic Division (FFW), et al. v. Romero, et al., 9 this Court ruled
that "a voluntary arbitrator by the nature of her functions acts in a quasi-judicial capacity." Under these
rulings, it follows that the voluntary arbitrator, whether acting solely or in a panel, enjoys in law the status
of a quasi-judicial agency but independent of, and apart from, the NLRC since his decisions are not
appealable to the latter. 10

Section 9 of B.P. Blg. 129, as amended by Republic Act No. 7902, provides that the Court of Appeals
shall exercise:

xxx xxx xxx

(B) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions,
orders or awards of Regional Trial Courts and quasi-judicial agencies,
instrumentalities, boards or commissions, including the Securities and Exchange
Commission, the Employees Compensation Commission and the Civil Service
Commission, except those falling within the appellate jurisdiction of the Supreme
Court in accordance with the Constitution, the Labor Code of the Philippines under
Presidential Decree No. 442, as amended, the provisions of this Act, and of
subparagraph (1) of the third paragraph and subparagraph (4) of the fourth
paragraph of Section 17 of the Judiciary Act of 1948.

xxx xxx xxx

Assuming arguendo that the voluntary arbitrator or the panel of voluntary arbitrators may not strictly
be considered as a quasi-judicial agency, board or commission, still both he and the panel are
comprehended within the concept of a "quasi-judicial instrumentality." It may even be stated that it
was to meet the very situation presented by the quasi-judicial functions of the voluntary arbitrators
here, as well as the subsequent arbitrator/arbitral tribunal operating under the Construction Industry
Arbitration Commission, 11 that the broader term "instrumentalities" was purposely included in the above-
quoted provision.

An "instrumentality" is anything used as a means or agency. 12 Thus, the terms governmental "agency"
or "instrumentality" are synonymous in the sense that either of them is a means by which a government
acts, or by which a certain government act or function is performed. 13 The word "instrumentality," with
respect to a state, contemplates an authority to which the state delegates governmental power for the
performance of a state function. 14 An individual person, like an administrator or executor, is a judicial
instrumentality in the settling of an estate, 15 in the same manner that a sub-agent appointed by a
bankruptcy court is an instrumentality of the court, 16 and a trustee in bankruptcy of a defunct corporation
is an instrumentality of the state. 17

The voluntary arbitrator no less performs a state function pursuant to a governmental power
delegated to him under the provisions therefor in the Labor Code and he falls, therefore, within the
contemplation of the term "instrumentality" in the aforequoted Sec. 9 of B.P. 129. The fact that his
functions and powers are provided for in the Labor Code does not place him within the exceptions to
said Sec. 9 since he is a quasi-judicial instrumentality as contemplated therein. It will be noted that,
although the Employees Compensation Commission is also provided for in the Labor Code, Circular
No. 1-91, which is the forerunner of the present Revised Administrative Circular No. 1-95, laid down
the procedure for the appealability of its decisions to the Court of Appeals under the foregoing
rationalization, and this was later adopted by Republic Act No. 7902 in amending Sec. 9 of B.P. 129.
A fortiori, the decision or award of the voluntary arbitrator or panel of arbitrators should likewise be
appealable to the Court of Appeals, in line with the procedure outlined in Revised Administrative
Circular No. 1-95, just like those of the quasi-judicial agencies, boards and commissions enumerated
therein.

This would be in furtherance of, and consistent with, the original purpose of Circular No. 1-91 to
provide a uniform procedure for the appellate review of adjudications of all quasi-judicial entities 18 not
expressly excepted from the coverage of Sec. 9 of B.P. 129 by either the Constitution or another statute.
Nor will it run counter to the legislative intendment that decisions of the NLRC be reviewable directly by
the Supreme Court since, precisely, the cases within the adjudicative competence of the voluntary
arbitrator are excluded from the jurisdiction of the NLRC or the labor arbiter.

In the same vein, it is worth mentioning that under Section 22 of Republic Act No. 876, also known
as the Arbitration Law, arbitration is deemed a special proceeding of which the court specified in the
contract or submission, or if none be specified, the Regional Trial Court for the province or city in
which one of the parties resides or is doing business, or in which the arbitration is held, shall have
jurisdiction. A party to the controversy may, at any time within one (1) month after an award is made,
apply to the court having jurisdiction for an order confirming the award and the court must grant such
order unless the award is vacated, modified or corrected. 19

In effect, this equates the award or decision of the voluntary arbitrator with that of the regional trial
court. Consequently, in a petition for certiorari from that award or decision, the Court of Appeals must
be deemed to have concurrent jurisdiction with the Supreme Court. As a matter of policy, this Court
shall henceforth remand to the Court of Appeals petitions of this nature for proper disposition.

ACCORDINGLY, the Court resolved to REFER this case to the Court of Appeals.

SO ORDERED.

G.R. No. 85279 July 28, 1989

SOCIAL SECURITY SYSTEM EMPLOYEES ASSOCIATION (SSSEA), DIONISION T. BAYLON,

RAMON MODESTO, JUANITO MADURA, REUBEN ZAMORA, VIRGILIO DE ALDAY, SERGIO
ARANETA, PLACIDO AGUSTIN, VIRGILIO MAGPAYO, petitioner,
vs.
THE COURT OF APPEALS, SOCIAL SECURITY SYSTEM (SSS), HON. CEZAR C. PERALEJO,
RTC, BRANCH 98, QUEZON CITY, respondents.

Vicente T. Ocampo & Associates for petitioners.

CORTES, J:

Primarily, the issue raised in this petition is whether or not the Regional Trial Court can enjoin the
Social Security System Employees Association (SSSEA) from striking and order the striking
employees to return to work. Collaterally, it is whether or not employees of the Social Security
System (SSS) have the right to strike.
The antecedents are as follows:

On June 11, 1987, the SSS filed with the Regional Trial Court of Quezon City a complaint for
damages with a prayer for a writ of preliminary injunction against petitioners, alleging that on June 9,
1987, the officers and members of SSSEA staged an illegal strike and baricaded the entrances to
the SSS Building, preventing non-striking employees from reporting for work and SSS members
from transacting business with the SSS; that the strike was reported to the Public Sector Labor -
Management Council, which ordered the strikers to return to work; that the strikers refused to return
to work; and that the SSS suffered damages as a result of the strike. The complaint prayed that a
writ of preliminary injunction be issued to enjoin the strike and that the strikers be ordered to return
to work; that the defendants (petitioners herein) be ordered to pay damages; and that the strike be
declared illegal.

It appears that the SSSEA went on strike after the SSS failed to act on the union's demands, which
included: implementation of the provisions of the old SSS-SSSEA collective bargaining agreement
(CBA) on check-off of union dues; payment of accrued overtime pay, night differential pay and
holiday pay; conversion of temporary or contractual employees with six (6) months or more of
service into regular and permanent employees and their entitlement to the same salaries,
allowances and benefits given to other regular employees of the SSS; and payment of the children's
allowance of P30.00, and after the SSS deducted certain amounts from the salaries of the
employees and allegedly committed acts of discrimination and unfair labor practices [Rollo, pp. 21-
241].

The court a quo, on June 11, 1987, issued a temporary restraining order pending resolution of the
application for a writ of preliminary injunction [Rollo, p. 71.] In the meantime, petitioners filed a
motion to dismiss alleging the trial court's lack of jurisdiction over the subject matter [Rollo, pp. 72-
82.] To this motion, the SSS filed an opposition, reiterating its prayer for the issuance of a writ of
injunction [Rollo, pp. 209-222]. On July 22,1987, in a four-page order, the court a quo denied the
motion to dismiss and converted the restraining order into an injunction upon posting of a bond, after
finding that the strike was illegal [Rollo, pp. 83- 86]. As petitioners' motion for the reconsideration of
the aforesaid order was also denied on August 14, 1988 [Rollo, p. 94], petitioners filed a petition
for certiorari and prohibition with preliminary injunction before this Court. Their petition was docketed
as G.R. No. 79577. In a resolution dated October 21, 1987, the Court, through the Third Division,
resolved to refer the case to the Court of Appeals. Petitioners filed a motion for reconsideration
thereof, but during its pendency the Court of Appeals on March 9,1988 promulgated its decision on
the referred case [Rollo, pp. 130-137]. Petitioners moved to recall the Court of Appeals' decision. In
the meantime, the Court on June 29,1988 denied the motion for reconsideration in G.R. No. 97577
for being moot and academic. Petitioners' motion to recall the decision of the Court of Appeals was
also denied in view of this Court's denial of the motion for reconsideration [Rollo, pp. 141- 143].
Hence, the instant petition to review the decision of the Court of Appeals [Rollo, pp. 12-37].

Upon motion of the SSS on February 6,1989, the Court issued a temporary restraining order
enjoining the petitioners from staging another strike or from pursuing the notice of strike they filed
with the Department of Labor and Employment on January 25, 1989 and to maintain the status
quo [Rollo, pp. 151-152].

The Court, taking the comment as answer, and noting the reply and supplemental reply filed by
petitioners, considered the issues joined and the case submitted for decision.
The position of the petitioners is that the Regional Trial Court had no jurisdiction to hear the case
initiated by the SSS and to issue the restraining order and the writ of preliminary injunction, as
jurisdiction lay with the Department of Labor and Employment or the National Labor Relations
Commission, since the case involves a labor dispute.

On the other hand, the SSS advances the contrary view, on the ground that the employees of the
SSS are covered by civil service laws and rules and regulations, not the Labor Code, therefore they
do not have the right to strike. Since neither the DOLE nor the NLRC has jurisdiction over the
dispute, the Regional Trial Court may enjoin the employees from striking.

In dismissing the petition for certiorari and prohibition with preliminary injunction filed by petitioners,
the Court of Appeals held that since the employees of the SSS, are government employees, they are
not allowed to strike, and may be enjoined by the Regional Trial Court, which had jurisdiction over
the SSS' complaint for damages, from continuing with their strike.

Thus, the sequential questions to be resolved by the Court in deciding whether or not the Court of
Appeals erred in finding that the Regional Trial Court did not act without or in excess of jurisdiction
when it took cognizance of the case and enjoined the strike are as follows:

1. Do the employees of the SSS have the right to strike?

2. Does the Regional Trial Court have jurisdiction to hear the case initiated by the SSS and to enjoin
the strikers from continuing with the strike and to order them to return to work?

These shall be discussed and resolved seriatim

The 1987 Constitution, in the Article on Social Justice and Human Rights, provides that the State
"shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations,
and peaceful concerted activities, including the right to strike in accordance with law" [Art. XIII, Sec.
31].

By itself, this provision would seem to recognize the right of all workers and employees, including
those in the public sector, to strike. But the Constitution itself fails to expressly confirm this
impression, for in the Sub-Article on the Civil Service Commission, it provides, after defining the
scope of the civil service as "all branches, subdivisions, instrumentalities, and agencies of the
Government, including government-owned or controlled corporations with original charters," that
"[t]he right to self-organization shall not be denied to government employees" [Art. IX(B), Sec. 2(l)
and (50)]. Parenthetically, the Bill of Rights also provides that "[tlhe right of the people, including
those employed in the public and private sectors, to form unions, associations, or societies for
purposes not contrary to law shall not abridged" [Art. III, Sec. 8]. Thus, while there is no question that
the Constitution recognizes the right of government employees to organize, it is silent as to whether
such recognition also includes the right to strike.

Resort to the intent of the framers of the organic law becomes helpful in understanding the meaning
of these provisions. A reading of the proceedings of the Constitutional Commission that drafted the
1987 Constitution would show that in recognizing the right of government employees to organize, the
commissioners intended to limit the right to the formation of unions or associations only, without
including the right to strike.

Thus, Commissioner Eulogio R. Lerum, one of the sponsors of the provision that "[tlhe right to self-
organization shall not be denied to government employees" [Art. IX(B), Sec. 2(5)], in answer to the
apprehensions expressed by Commissioner Ambrosio B. Padilla, Vice-President of the Commission,
explained:

MR. LERUM. I think what I will try to say will not take that long. When we proposed
this amendment providing for self-organization of government employees, it does not
mean that because they have the right to organize, they also have the right to strike.
That is a different matter. We are only talking about organizing, uniting as a union.
With regard to the right to strike, everyone will remember that in the Bill of Rights,
there is a provision that the right to form associations or societies whose purpose is
not contrary to law shall not be abridged. Now then, if the purpose of the state is to
prohibit the strikes coming from employees exercising government functions, that
could be done because the moment that is prohibited, then the union which will go on
strike will be an illegal union. And that provision is carried in Republic Act 875. In
Republic Act 875, workers, including those from the government-owned and
controlled, are allowed to organize but they are prohibited from striking. So, the fear
of our honorable Vice- President is unfounded. It does not mean that because we
approve this resolution, it carries with it the right to strike. That is a different matter.
As a matter of fact, that subject is now being discussed in the Committee on Social
Justice because we are trying to find a solution to this problem. We know that this
problem exist; that the moment we allow anybody in the government to strike, then
what will happen if the members of the Armed Forces will go on strike? What will
happen to those people trying to protect us? So that is a matter of discussion in the
Committee on Social Justice. But, I repeat, the right to form an organization does not
carry with it the right to strike. [Record of the Constitutional Commission, vol. 1, p.
569].

It will be recalled that the Industrial Peace Act (R.A. No. 875), which was repealed by the Labor
Code (P.D. 442) in 1974, expressly banned strikes by employees in the Government, including
instrumentalities exercising governmental functions, but excluding entities entrusted with proprietary
functions:

.Sec. 11. Prohibition Against Strikes in the Government. The terms and conditions
of employment in the Government, including any political subdivision or
instrumentality thereof, are governed by law and it is declared to be the policy of this
Act that employees therein shall not strike for the purpose of securing changes or
modification in their terms and conditions of employment. Such employees may
belong to any labor organization which does not impose the obligation to strike or to
join in strike: Provided, however, That this section shall apply only to employees
employed in governmental functions and not those employed in proprietary functions
of the Government including but not limited to governmental corporations.

No similar provision is found in the Labor Code, although at one time it recognized the right of
employees of government corporations established under the Corporation Code to organize and
bargain collectively and those in the civil service to "form organizations for purposes not contrary to
law" [Art. 244, before its amendment by B.P. Blg. 70 in 1980], in the same breath it provided that
"[t]he terms and conditions of employment of all government employees, including employees of
government owned and controlled corporations, shall be governed by the Civil Service Law, rules
and regulations" [now Art. 276]. Understandably, the Labor Code is silent as to whether or not
government employees may strike, for such are excluded from its coverage [Ibid]. But then the Civil
Service Decree [P.D. No. 807], is equally silent on the matter.

On June 1, 1987, to implement the constitutional guarantee of the right of government employees to
organize, the President issued E.O. No. 180 which provides guidelines for the exercise of the right to
organize of government employees. In Section 14 thereof, it is provided that "[t]he Civil Service law
and rules governing concerted activities and strikes in the government service shall be observed,
subject to any legislation that may be enacted by Congress." The President was apparently referring
to Memorandum Circular No. 6, s. 1987 of the Civil Service Commission under date April 21, 1987
which, "prior to the enactment by Congress of applicable laws concerning strike by government
employees ... enjoins under pain of administrative sanctions, all government officers and employees
from staging strikes, demonstrations, mass leaves, walk-outs and other forms of mass action which
will result in temporary stoppage or disruption of public service." The air was thus cleared of the
confusion. At present, in the absence of any legislation allowing government employees to strike,
recognizing their right to do so, or regulating the exercise of the right, they are prohibited from
striking, by express provision of Memorandum Circular No. 6 and as implied in E.O. No. 180. [At this
juncture, it must be stated that the validity of Memorandum Circular No. 6 is not at issue].

But are employees of the SSS covered by the prohibition against strikes?

The Court is of the considered view that they are. Considering that under the 1987 Constitution "[t]he
civil service embraces all branches, subdivisions, instrumentalities, and agencies of the
Government, including government-owned or controlled corporations with original charters" [Art.
IX(B), Sec. .2(l) see also Sec. 1 of E.O. No. 180 where the employees in the civil service are
denominated as "government employees"] and that the SSS is one such government-controlled
corporation with an original charter, having been created under R.A. No. 1161, its employees are
part of the civil service [NASECO v. NLRC, G.R. Nos. 69870 & 70295, November 24,1988] and are
covered by the Civil Service Commission's memorandum prohibiting strikes. This being the case, the
strike staged by the employees of the SSS was illegal.

The statement of the Court in Alliance of Government Workers v. Minister of Labor and
Employment [G.R. No. 60403, August 3, 1:983, 124 SCRA 11 is relevant as it furnishes the rationale
for distinguishing between workers in the private sector and government employees with regard to
the right to strike:

The general rule in the past and up to the present is that 'the terms and conditions of
employment in the Government, including any political subdivision or instrumentality
thereof are governed by law" (Section 11, the Industrial Peace Act, R.A. No. 875, as
amended and Article 277, the Labor Code, P.D. No. 442, as amended). Since the
terms and conditions of government employment are fixed by law, government
workers cannot use the same weapons employed by workers in the private sector to
secure concessions from their employers. The principle behind labor unionism in
private industry is that industrial peace cannot be secured through compulsion by
law. Relations between private employers and their employees rest on an essentially
voluntary basis. Subject to the minimum requirements of wage laws and other labor
 and welfare legislation, the terms and conditions of employment in the unionized
private sector are settled through the process of collective bargaining. In government
employment, however, it is the legislature and, where properly given delegated
power, the administrative heads of government which fix the terms and conditions of
employment. And this is effected through statutes or administrative circulars, rules,
and regulations, not through collective bargaining agreements. [At p. 13; Emphasis
supplied].

Apropos is the observation of the Acting Commissioner of Civil Service, in his position paper
submitted to the 1971 Constitutional Convention, and quoted with approval by the Court in Alliance,
to wit:

It is the stand, therefore, of this Commission that by reason of the nature of the public
employer and the peculiar character of the public service, it must necessarily regard
the right to strike given to unions in private industry as not applying to public
employees and civil service employees. It has been stated that the Government, in
contrast to the private employer, protects the interest of all people in the public
service, and that accordingly, such conflicting interests as are present in private labor
relations could not exist in the relations between government and those whom they
employ. [At pp. 16-17; also quoted in National Housing Corporation v. Juco, G.R. No.
64313, January 17,1985,134 SCRA 172,178-179].

E.O. No. 180, which provides guidelines for the exercise of the right to organize of government
employees, while clinging to the same philosophy, has, however, relaxed the rule to allow
negotiation where the terms and conditions of employment involved are not among those fixed by
law. Thus:

.SECTION 13. Terms and conditions of employment or improvements thereof, except

those that are fixed by law, may be the subject of negotiations between duly
recognized employees' organizations and appropriate government authorities.

The same executive order has also provided for the general mechanism for the settlement of labor
disputes in the public sector to wit:

.SECTION 16. The Civil Service and labor laws and procedures, whenever
applicable, shall be followed in the resolution of complaints, grievances and cases
involving government employees. In case any dispute remains unresolved after
exhausting all the available remedies under existing laws and procedures, the parties
may jointly refer the dispute to the [Public Sector Labor- Management] Council for
appropriate action.

Government employees may, therefore, through their unions or associations, either petition the
Congress for the betterment of the terms and conditions of employment which are within the ambit of
legislation or negotiate with the appropriate government agencies for the improvement of those
which are not fixed by law. If there be any unresolved grievances, the dispute may be referred to the
Public Sector Labor - Management Council for appropriate action. But employees in the civil service
may not resort to strikes, walk-outs and other temporary work stoppages, like workers in the private
sector, to pressure the Govemment to accede to their demands. As now provided under Sec. 4, Rule
III of the Rules and Regulations to Govern the Exercise of the Right of Government- Employees to
Self- Organization, which took effect after the instant dispute arose, "[t]he terms and conditions of
employment in the government, including any political subdivision or instrumentality thereof and
government- owned and controlled corporations with original charters are governed by law and
employees therein shall not strike for the purpose of securing changes thereof."

II

The strike staged by the employees of the SSS belonging to petitioner union being prohibited by law,
an injunction may be issued to restrain it.

It is futile for the petitioners to assert that the subject labor dispute falls within the exclusive
jurisdiction of the NLRC and, hence, the Regional Trial Court had no jurisdiction to issue a writ of
injunction enjoining the continuance of the strike. The Labor Code itself provides that terms and
conditions of employment of government employees shall be governed by the Civil Service Law,
rules and regulations [Art. 276]. More importantly, E.O. No. 180 vests the Public Sector Labor -
Management Council with jurisdiction over unresolved labor disputes involving government
employees [Sec. 16]. Clearly, the NLRC has no jurisdiction over the dispute.

This being the case, the Regional Trial Court was not precluded, in the exercise of its general
jurisdiction under B.P. Blg. 129, as amended, from assuming jurisdiction over the SSS's complaint
for damages and issuing the injunctive writ prayed for therein. Unlike the NLRC, the Public Sector
Labor - Management Council has not been granted by law authority to issue writs of injunction in
labor disputes within its jurisdiction. Thus, since it is the Council, and not the NLRC, that has
jurisdiction over the instant labor dispute, resort to the general courts of law for the issuance of a writ
of injunction to enjoin the strike is appropriate.

Neither could the court a quo be accused of imprudence or overzealousness, for in fact it had
proceeded with caution. Thus, after issuing a writ of injunction enjoining the continuance of the strike
to prevent any further disruption of public service, the respondent judge, in the same order,
admonished the parties to refer the unresolved controversies emanating from their employer-
employee relationship to the Public Sector Labor - Management Council for appropriate action
[Rollo, p. 86].

III

In their "Petition/Application for Preliminary and Mandatory Injunction," and reiterated in their reply
and supplemental reply, petitioners allege that the SSS unlawfully withheld bonuses and benefits
due the individual petitioners and they pray that the Court issue a writ of preliminary prohibitive and
mandatory injunction to restrain the SSS and its agents from withholding payment thereof and to
compel the SSS to pay them. In their supplemental reply, petitioners annexed an order of the Civil
Service Commission, dated May 5, 1989, which ruled that the officers of the SSSEA who are not
preventively suspended and who are reporting for work pending the resolution of the administrative
cases against them are entitled to their salaries, year-end bonuses and other fringe benefits and
affirmed the previous order of the Merit Systems Promotion Board.

The matter being extraneous to the issues elevated to this Court, it is Our view that petitioners'
remedy is not to petition this Court to issue an injunction, but to cause the execution of the aforesaid
order, if it has already become final.
WHEREFORE, no reversible error having been committed by the Court of Appeals, the instant
petition for review is hereby DENIED and the decision of the appellate court dated March 9, 1988 in
CA-G.R. SP No. 13192 is AFFIRMED. Petitioners' "Petition/Application for Preliminary and
Mandatory Injunction" dated December 13,1988 is DENIED.

SO ORDERED.

People v Panis
142 SCRA 664 (1986)

Facts:

Four informations were filed on January 9, 1981, in the Court of First Instance of Zambales and Olongapo
City alleging that Serapio Abug, private respondent herein, "without first securing a license from the
Ministry of Labor as a holder of authority to operate a fee-charging employment agency, did then and
there wilfully, unlawfully and criminally operate a private fee-charging employment agency by charging
fees and expenses (from) and promising employment in Saudi Arabia" to four separate individuals named
therein, in violation of Article 16 in relation to Article 39 of the Labor Code.

Abug filed a motion to quash on the ground that the informations did not charge an offense because he
was accused of illegally recruiting only one person in each of the four informations. Under the proviso in
Article 13(b), he claimed, there would be illegal recruitment only "whenever two or more persons are in
any manner promised or offered any employment for a fee."

The posture of the petitioner is that the private respondent is being prosecuted under Article 39 in relation
to Article 16 of the Labor Code; hence, Article 13(b) is not applicable. However, as the first two cited
articles penalize acts of recruitment and placement without proper authority, which is the charge
embodied in the informations, application of the definition of recruitment and placement in Article 13(b) is
unavoidable.

Issue:

Whether or not the petitioner is guilty of violating Article 13(b) of P. D. 442, otherwise known as the Labor
Code.

Held:

Article 13(b) of P. D. 442, otherwise known as the Labor Code, states that, "(b) 'Recruitment and
placement' refers to any act of canvassing, 'enlisting, contracting, transporting, hiring, or procuring
workers, and includes referrals, contract services, promising or advertising for employment, locally or
abroad, whether for profit or not: Provided, That any person or entity which, in any manner, offers or
promises for a fee employment to two or more persons shall be deemed engaged in recruitment and
placement."

As we see it, the proviso was intended neither to impose a condition on the basic rule nor to provide an
exception thereto but merely to create a presumption. The presumption is that the individual or entity is
engaged in recruitment and placement whenever he or it is dealing with two or more persons to whom, in
consideration of a fee, an offer or promise of employment is made in the course of the "canvassing,
enlisting, contracting, transporting, utilizing, hiring or procuring (of) workers."

At any rate, the interpretation here adopted should give more force to the campaign against illegal
recruitment and placement, which has victimized many Filipino workers seeking a better life in a foreign
land, and investing hard-earned savings or even borrowed funds in pursuit of their dream, only to be
awakened to the reality of a cynical deception at the hands of their own countrymen.

ANTONIO M. SERRANO, G.R. No. 167614

Petitioner,
Present:

PUNO, C.J.,
QUISUMBING,
YNARES-SANTIAGO,
CARPIO,
AUSTRIA-MARTINEZ,
- versus - CORONA,
CARPIO MORALES,
TINGA,
CHICO-NAZARIO,
VELASCO, Jr.,
NACHURA,
LEONARDO-DE CASTRO,
BRION, and
GALLANT MARITIME SERVICES, PERALTA, JJ.
INC. and MARLOW NAVIGATION
CO., INC., Promulgated:
Respondents. March 24, 2009
x----------------------------------------------------------x

DECISION

AUSTRIA-MARTINEZ, J.:

For decades, the toil of solitary migrants has helped lift entire families
and communities out of poverty. Their earnings have built houses, provided
 health care, equipped schools and planted the seeds of businesses. They have
woven together the world by transmitting ideas and knowledge from country to
country. They have provided the dynamic human link between cultures,
societies and economies. Yet, only recently have we begun to understand not
only how much international migration impacts development, but how smart
public policies can magnify this effect.

United Nations Secretary-General Ban Ki-Moon

Global Forum on Migration and Development
Brussels, July 10, 2007[1]

For Antonio Serrano (petitioner), a Filipino seafarer, the last clause in the
5thparagraph of Section 10, Republic Act (R.A.) No. 8042,[2] to wit:

Sec. 10. Money Claims. - x x x In case of termination of overseas

employment without just, valid or authorized cause as defined by law or
contract, the workers shall be entitled to the full reimbursement of his placement
fee with interest of twelve percent (12%) per annum, plus his salaries for the
unexpired portion of his employment contract or for three (3) months for every
year of the unexpired term, whichever is less.

x x x x (Emphasis and underscoring supplied)

does not magnify the contributions of overseas Filipino workers (OFWs) to national
development, but exacerbates the hardships borne by them by unduly limiting their
entitlement in case of illegal dismissal to their lump-sum salary either for the unexpired
portion of their employment contract or for three months for every year of the unexpired
term, whichever is less (subject clause). Petitioner claims that the last clause violates the
OFWs' constitutional rights in that it impairs the terms of their contract, deprives them of
equal protection and denies them due process.

By way of Petition for Review under Rule 45 of the Rules of Court, petitioner
assails the December 8, 2004 Decision[3] and April 1, 2005 Resolution[4] of the Court of
Appeals (CA), which applied the subject clause, entreating this Court to declare the subject
clause unconstitutional.
 Petitioner was hired by Gallant Maritime Services, Inc. and Marlow Navigation
Co., Ltd. (respondents) under a Philippine Overseas Employment Administration (POEA)-
approved Contract of Employment with the following terms and conditions:
Duration of contract 12 months
Position Chief Officer
Basic monthly salary US$1,400.00
Hours of work 48.0 hours per week
Overtime US$700.00 per month
Vacation leave with pay 7.00 days per month[5]

On March 19, 1998, the date of his departure, petitioner was constrained to accept a
downgraded employment contract for the position of Second Officer with a monthly salary
of US$1,000.00, upon the assurance and representation of respondents that he would be
made Chief Officer by the end of April 1998.[6]

Respondents did not deliver on their promise to make petitioner Chief Officer.
[7]
Hence, petitioner refused to stay on as Second Officer and was repatriated to
the Philippines on May 26, 1998.[8]

Petitioner's employment contract was for a period of 12 months or from March 19,
1998 up to March 19, 1999, but at the time of his repatriation on May 26, 1998, he had
served only two (2) months and seven (7) days of his contract, leaving an unexpired
portion of nine (9) months and twenty-three (23) days.

Petitioner filed with the Labor Arbiter (LA) a Complaint [9] against respondents for
constructive dismissal and for payment of his money claims in the total amount of
US$26,442.73, broken down as follows:

May 27/31, 1998 (5 days) incl. Leave pay US$ 413.90

June 01/30, 1998 2,590.00
July 01/31, 1998 2,590.00
August 01/31, 1998 2,590.00
Sept. 01/30, 1998 2,590.00
Oct. 01/31, 1998 2,590.00
Nov. 01/30, 1998 2,590.00
Dec. 01/31, 1998 2,590.00
Jan. 01/31, 1999 2,590.00
Feb. 01/28, 1999 2,590.00
Mar. 1/19, 1999 (19 days) incl. leave pay 1,640.00
--------------------------------------------------------------------------------
 25,382.23
Amount adjusted to chief mate's salary
(March 19/31, 1998 to April 1/30, 1998) + 1,060.50[10]
----------------------------------------------------------------------------------------------

TOTAL CLAIM US$ 26,442.73[11]

as well as moral and exemplary damages and attorney's fees.

The LA rendered a Decision dated July 15, 1999, declaring the dismissal of
petitioner illegal and awarding him monetary benefits, to wit:

WHEREFORE, premises considered, judgment is hereby rendered declaring

that the dismissal of the complainant (petitioner) by the respondents in the
above-entitled case was illegal and the respondents are hereby ordered to pay
the complainant [petitioner], jointly and severally, in Philippine Currency, based
on the rate of exchange prevailing at the time of payment, the amount
of EIGHT THOUSAND SEVEN HUNDRED SEVENTY U.S. DOLLARS
(US $8,770.00), representing the complainants salary for three (3) months of
the unexpired portion of the aforesaid contract of employment.

The respondents are likewise ordered to pay the complainant [petitioner], jointly
and severally, in Philippine Currency, based on the rate of exchange prevailing
at the time of payment, the amount of FORTY FIVE U.S. DOLLARS (US$
45.00),[12] representing the complainants claim for a salary differential. In
addition, the respondents are hereby ordered to pay the complainant, jointly and
severally, in Philippine Currency, at the exchange rate prevailing at the time of
payment, the complainants (petitioner's) claim for attorneys fees equivalent to
ten percent (10%) of the total amount awarded to the aforesaid employee under
this Decision.

The claims of the complainant for moral and exemplary damages are hereby
DISMISSED for lack of merit.

All other claims are hereby DISMISSED.

SO ORDERED.[13] (Emphasis supplied)

In awarding petitioner a lump-sum salary of US$8,770.00, the LA based his

computation on the salary period of three months only -- rather than the entire unexpired
portion of nine months and 23 days of petitioner's employment contract - applying the
subject clause. However, the LA applied the salary rate of US$2,590.00, consisting of
petitioner's [b]asic salary, US$1,400.00/month + US$700.00/month, fixed overtime pay, +
US$490.00/month, vacation leave pay = US$2,590.00/compensation per month.[14]

Respondents appealed[15] to the National Labor Relations Commission (NLRC) to

question the finding of the LA that petitioner was illegally dismissed.

Petitioner also appealed[16] to the NLRC on the sole issue that the LA erred in not
applying the ruling of the Court in Triple Integrated Services, Inc. v. National Labor
Relations Commission[17] that in case of illegal dismissal, OFWs are entitled to their
salaries for the unexpired portion of their contracts.[18]

In a Decision dated June 15, 2000, the NLRC modified the LA Decision, to wit:

WHEREFORE, the Decision dated 15 July 1999 is MODIFIED.

Respondents are hereby ordered to pay complainant, jointly and severally, in
Philippine currency, at the prevailing rate of exchange at the time of payment
the following:

1. Three (3) months salary

$1,400 x 3 US$4,200.00
2. Salary differential 45.00
US$4,245.00
3. 10% Attorneys fees 424.50
TOTAL US$4,669.50

The other findings are affirmed.

SO ORDERED.[19]

The NLRC corrected the LA's computation of the lump-sum salary awarded to
petitioner by reducing the applicable salary rate from US$2,590.00 to US$1,400.00
because R.A. No. 8042 does not provide for the award of overtime pay, which should be
proven to have been actually performed, and for vacation leave pay.[20]

Petitioner filed a Motion for Partial Reconsideration, but this time he questioned the
constitutionality of the subject clause.[21] The NLRC denied the motion.[22]

Petitioner filed a Petition for Certiorari[23] with the CA, reiterating the constitutional
challenge against the subject clause.[24] After initially dismissing the petition on a
technicality, the CA eventually gave due course to it, as directed by this Court in its
Resolution dated August 7, 2003 which granted the petition for certiorari, docketed as
G.R. No. 151833, filed by petitioner.

In a Decision dated December 8, 2004, the CA affirmed the NLRC ruling on the
reduction of the applicable salary rate; however, the CA skirted the constitutional issue
raised by petitioner.[25]

His Motion for Reconsideration[26] having been denied by the CA,

[27]
petitionerbrings his cause to this Court on the following grounds:

I
The Court of Appeals and the labor tribunals have decided the case in a
way not in accord with applicable decision of the Supreme Court involving
similar issue of granting unto the migrant worker back wages equal to the
unexpired portion of his contract of employment instead of limiting it to three
(3) months

II
In the alternative that the Court of Appeals and the Labor Tribunals were
merely applying their interpretation of Section 10 of Republic Act No. 8042, it
is submitted that the Court of Appeals gravely erred in law when it failed to
discharge its judicial duty to decide questions of substance not theretofore
determined by the Honorable Supreme Court, particularly, the constitutional
issues raised by the petitioner on the constitutionality of said law, which
unreasonably, unfairly and arbitrarily limits payment of the award for back
wages of overseas workers to three (3) months.

III
Even without considering the constitutional limitations [of] Sec. 10 of
Republic Act No. 8042, the Court of Appeals gravely erred in law in excluding
from petitioners award the overtime pay and vacation pay provided in his
contract since under the contract they form part of his salary.[28]

On February 26, 2008, petitioner wrote the Court to withdraw his petition as he is
already old and sickly, and he intends to make use of the monetary award for his medical
treatment and medication.[29] Required to comment, counsel for petitioner filed a motion,
urging the court to allow partial execution of the undisputed monetary award and, at the
same time, praying that the constitutional question be resolved.[30]
 Considering that the parties have filed their respective memoranda, the Court now
takes up the full merit of the petition mindful of the extreme importance of the
constitutional question raised therein.

On the first and second issues

The unanimous finding of the LA, NLRC and CA that the dismissal of petitioner
was illegal is not disputed. Likewise not disputed is the salary differential of US$45.00
awarded to petitioner in all three fora. What remains disputed is only the computation of
the lump-sum salary to be awarded to petitioner by reason of his illegal dismissal.
Applying the subject clause, the NLRC and the CA computed the lump-sum salary
of petitioner at the monthly rate of US$1,400.00 covering the period of three months out of
the unexpired portion of nine months and 23 days of his employment contract or a total of
US$4,200.00.

Impugning the constitutionality of the subject clause, petitioner contends that, in

addition to the US$4,200.00 awarded by the NLRC and the CA, he is entitled to
US$21,182.23 more or a total of US$25,382.23, equivalent to his salaries for the entire
nine months and 23 days left of his employment contract, computed at the monthly rate of
US$2,590.00.[31]
The Arguments of Petitioner

Petitioner contends that the subject clause is unconstitutional because it unduly

impairs the freedom of OFWs to negotiate for and stipulate in their overseas employment
contracts a determinate employment period and a fixed salary package.[32] It also impinges
on the equal protection clause, for it treats OFWs differently from local Filipino workers
(local workers) by putting a cap on the amount of lump-sum salary to which OFWs are
entitled in case of illegal dismissal, while setting no limit to the same monetary award for
local workers when their dismissal is declared illegal; that the disparate treatment is not
reasonable as there is no substantial distinction between the two groups; [33] and that it
defeats Section 18,[34] Article II of the Constitution which guarantees the protection of the
rights and welfare of all Filipino workers, whether deployed locally or overseas.[35]

Moreover, petitioner argues that the decisions of the CA and the labor tribunals are
not in line with existing jurisprudence on the issue of money claims of illegally dismissed
OFWs.Though there are conflicting rulings on this, petitioner urges the Court to sort them
out for the guidance of affected OFWs.[36]
Petitioner further underscores that the insertion of the subject clause into R.A. No.
8042 serves no other purpose but to benefit local placement agencies. He marks the
statement made by the Solicitor General in his Memorandum, viz.:

Often, placement agencies, their liability being solidary, shoulder the

payment of money claims in the event that jurisdiction over the foreign
employer is not acquired by the court or if the foreign employer reneges on its
obligation. Hence, placement agencies that are in good faith and which fulfill
their obligations are unnecessarily penalized for the acts of the foreign
employer. To protect them and to promote their continued helpful
contribution in deploying Filipino migrant workers, liability for money claims
was reduced under Section 10 of R.A. No. 8042. [37] (Emphasis supplied)

Petitioner argues that in mitigating the solidary liability of placement agencies, the
subject clause sacrifices the well-being of OFWs. Not only that, the provision makes
foreign employers better off than local employers because in cases involving the illegal
dismissal of employees, foreign employers are liable for salaries covering a maximum of
only three months of the unexpired employment contract while local employers are liable
for the full lump-sum salaries of their employees. As petitioner puts it:

In terms of practical application, the local employers are not limited to

the amount of backwages they have to give their employees they have illegally
dismissed, following well-entrenched and unequivocal jurisprudence on the
matter. On the other hand, foreign employers will only be limited to giving the
illegally dismissed migrant workers the maximum of three (3) months unpaid
salaries notwithstanding the unexpired term of the contract that can be more
than three (3) months.[38]

Lastly, petitioner claims that the subject clause violates the due process clause, for it
deprives him of the salaries and other emoluments he is entitled to under his fixed-period
employment contract.[39]

The Arguments of Respondents

In their Comment and Memorandum, respondents contend that the constitutional

issue should not be entertained, for this was belatedly interposed by petitioner in his appeal
before the CA, and not at the earliest opportunity, which was when he filed an appeal
before the NLRC.[40]

The Arguments of the Solicitor General

The Solicitor General (OSG)[41] points out that as R.A. No. 8042 took effect on July
15, 1995, its provisions could not have impaired petitioner's 1998 employment
contract.Rather, R.A. No. 8042 having preceded petitioner's contract, the provisions thereof
are deemed part of the minimum terms of petitioner's employment, especially on the matter
of money claims, as this was not stipulated upon by the parties.[42]

Moreover, the OSG emphasizes that OFWs and local workers differ in terms of the
nature of their employment, such that their rights to monetary benefits must necessarily be
treated differently. The OSG enumerates the essential elements that distinguish OFWs
from local workers: first, while local workers perform their jobs within Philippine territory,
OFWs perform their jobs for foreign employers, over whom it is difficult for our courts to
acquire jurisdiction, or against whom it is almost impossible to enforce judgment; and
second, as held in Coyoca v. National Labor Relations Commission[43] and Millares v.
National Labor Relations Commission,[44] OFWs are contractual employees who can never
acquire regular employment status, unlike local workers who are or can become regular
employees. Hence, the OSG posits that there are rights and privileges exclusive to local
workers, but not available to OFWs; that these peculiarities make for a reasonable and
valid basis for the differentiated treatment under the subject clause of the money claims of
OFWs who are illegally dismissed. Thus, the provision does not violate the equal
protection clause nor Section 18, Article II of the Constitution.[45]

Lastly, the OSG defends the rationale behind the subject clause as a police power
measure adopted to mitigate the solidary liability of placement agencies for this redounds
to the benefit of the migrant workers whose welfare the government seeks to promote. The
survival of legitimate placement agencies helps [assure] the government that migrant
workers are properly deployed and are employed under decent and humane conditions.[46]
The Court's Ruling

The Court sustains petitioner on the first and second issues.

 When the Court is called upon to exercise its power of judicial review of the acts of
its co-equals, such as the Congress, it does so only when these conditions obtain: (1) that
there is an actual case or controversy involving a conflict of rights susceptible of judicial
determination;[47] (2) that the constitutional question is raised by a proper party [48] and at the
earliest opportunity;[49] and (3) that the constitutional question is the very lis mota of the
case,[50] otherwise the Court will dismiss the case or decide the same on some other
ground.[51]

Without a doubt, there exists in this case an actual controversy directly involving
petitioner who is personally aggrieved that the labor tribunals and the CA computed his
monetary award based on the salary period of three months only as provided under the
subject clause.

The constitutional challenge is also timely. It should be borne in mind that the
requirement that a constitutional issue be raised at the earliest opportunity entails the
interposition of the issue in the pleadings before a competent court, such that, if the issue is
not raised in the pleadings before that competent court, it cannot be considered at the trial
and, if not considered in the trial, it cannot be considered on appeal. [52] Records disclose
that the issue on the constitutionality of the subject clause was first raised, not in petitioner's
appeal with the NLRC, but in his Motion for Partial Reconsideration with said labor
tribunal,[53] and reiterated in his Petition for Certiorari before the CA.[54] Nonetheless, the
issue is deemed seasonably raised because it is not the NLRC but the CA which has the
competence to resolve the constitutional issue. The NLRC is a labor tribunal that merely
performs a quasi-judicial function its function in the present case is limited to
determining questions of fact to which the legislative policy of R.A. No. 8042 is to be
applied and to resolving such questions in accordance with the standards laid down by the
law itself;[55] thus, its foremost function is to administer and enforce R.A. No. 8042, and
not to inquire into the validity of its provisions.The CA, on the other hand, is vested with
the power of judicial review or the power to declare unconstitutional a law or a provision
thereof, such as the subject clause.[56]Petitioner's interposition of the constitutional issue
before the CA was undoubtedly seasonable. The CA was therefore remiss in failing to take
up the issue in its decision.
The third condition that the constitutional issue be critical to the resolution of the
case likewise obtains because the monetary claim of petitioner to his lump-sum salary for
the entire unexpired portion of his 12-month employment contract, and not just for a period
of three months, strikes at the very core of the subject clause.
 Thus, the stage is all set for the determination of the constitutionality of the subject
clause.

Does the subject clause violate Section 10,

Article III of the Constitution on non-impairment
of contracts?

The answer is in the negative.

Petitioner's claim that the subject clause unduly interferes with the stipulations in his
contract on the term of his employment and the fixed salary package he will receive [57] is
not tenable.

Section 10, Article III of the Constitution provides:

No law impairing the obligation of contracts shall be passed.

The prohibition is aligned with the general principle that laws newly enacted have
only a prospective operation,[58] and cannot affect acts or contracts already perfected;
[59]
however, as to laws already in existence, their provisions are read into contracts and
deemed a part thereof.[60] Thus, the non-impairment clause under Section 10, Article II is
limited in application to laws about to be enacted that would in any way derogate from
existing acts or contracts by enlarging, abridging or in any manner changing the intention
of the parties thereto.

As aptly observed by the OSG, the enactment of R.A. No. 8042 in 1995 preceded
the execution of the employment contract between petitioner and respondents in
1998. Hence, it cannot be argued that R.A. No. 8042, particularly the subject clause,
impaired the employment contract of the parties. Rather, when the parties executed their
1998 employment contract, they were deemed to have incorporated into it all the
provisions of R.A. No. 8042.

But even if the Court were to disregard the timeline, the subject clause may not be
declared unconstitutional on the ground that it impinges on the impairment clause, for the
law was enacted in the exercise of the police power of the State to regulate a business,
profession or calling, particularly the recruitment and deployment of OFWs, with the noble
end in view of ensuring respect for the dignity and well-being of OFWs wherever they
may be employed.[61] Police power legislations adopted by the State to promote the health,
morals, peace, education, good order, safety, and general welfare of the people are
generally applicable not only to future contracts but even to those already in existence, for
all private contracts must yield to the superior and legitimate measures taken by the State to
promote public welfare.[62]

Does the subject clause violate Section 1,

Article III of the Constitution, and Section 18,
Article II and Section 3, Article XIII on labor
as a protected sector?

The answer is in the affirmative.

Section 1, Article III of the Constitution guarantees:

No person shall be deprived of life, liberty, or property without due process of

law nor shall any person be denied the equal protection of the law.

Section 18,[63] Article II and Section 3,[64] Article XIII accord all members of the
labor sector, without distinction as to place of deployment, full protection of their rights and
welfare.

To Filipino workers, the rights guaranteed under the foregoing constitutional

provisions translate to economic security and parity: all monetary benefits should be
equally enjoyed by workers of similar category, while all monetary obligations should be
borne by them in equal degree; none should be denied the protection of the laws which is
enjoyed by, or spared the burden imposed on, others in like circumstances.[65]

Such rights are not absolute but subject to the inherent power of Congress to
incorporate, when it sees fit, a system of classification into its legislation; however, to be
valid, the classification must comply with these requirements: 1) it is based on substantial
distinctions; 2) it is germane to the purposes of the law; 3) it is not limited to existing
conditions only; and 4) it applies equally to all members of the class.[66]
 There are three levels of scrutiny at which the Court reviews the constitutionality of
a classification embodied in a law: a) the deferential or rational basis scrutiny in which the
challenged classification needs only be shown to be rationally related to serving a
legitimate state interest;[67] b) the middle-tier or intermediate scrutiny in which the
government must show that the challenged classification serves an important state
interest and that the classification is at least substantially related to serving that
interest;[68] and c) strict judicial scrutiny[69] in which a legislative classification which
impermissibly interferes with the exercise of a fundamental right[70] or operates to the
peculiar disadvantage of a suspect class[71] is presumed unconstitutional, and the burden is
upon the government to prove that the classification is necessary to achieve a compelling
state interest and that it is the least restrictive means to protect such interest.[72]

Under American jurisprudence, strict judicial scrutiny is triggered by suspect

classifications[73] based on race[74] or gender[75] but not when the classification is drawn
along income categories.[76]

It is different in the Philippine setting. In Central Bank (now Bangko Sentral ng

Pilipinas) Employee Association, Inc. v. Bangko Sentral ng Pilipinas, [77] the
constitutionality of a provision in the charter of the Bangko Sentral ng Pilipinas (BSP), a
government financial institution (GFI), was challenged for maintaining its rank-and-file
employees under the Salary Standardization Law (SSL), even when the rank-and-file
employees of other GFIs had been exempted from the SSL by their respective
charters.Finding that the disputed provision contained a suspect classification based on
salary grade, the Court deliberately employed the standard of strict judicial scrutiny in its
review of the constitutionality of said provision. More significantly, it was in this case that
the Court revealed the broad outlines of its judicial philosophy, to wit:

Congress retains its wide discretion in providing for a valid

classification, and its policies should be accorded recognition and respect by the
courts of justice except when they run afoul of the Constitution. The deference
stops where the classification violates a fundamental right, or prejudices
persons accorded special protection by the Constitution.When these violations
arise, this Court must discharge its primary role as the vanguard of
constitutional guaranties, and require a stricter and more exacting adherence to
constitutional limitations. Rational basis should not suffice.
 Admittedly, the view that prejudice to persons accorded special
protection by the Constitution requires a stricter judicial scrutiny finds no
support in American or English jurisprudence. Nevertheless, these foreign
decisions and authorities are not per se controlling in this jurisdiction. At
best, they are persuasive and have been used to support many of our decisions.
We should not place undue and fawning reliance upon them and regard them as
indispensable mental crutches without which we cannot come to our own
decisions through the employment of our own endowments. We live in a
different ambience and must decide our own problems in the light of our own
interests and needs, and of our qualities and even idiosyncrasies as a people, and
always with our own concept of law and justice. Our laws must be construed in
accordance with the intention of our own lawmakers and such intent may be
deduced from the language of each law and the context of other local legislation
related thereto. More importantly, they must be construed to serve our own
public interest which is the be-all and the end-all of all our laws. And it need
not be stressed that our public interest is distinct and different from others.

xxxx

Further, the quest for a better and more equal world calls for the use of
equal protection as a tool of effective judicial intervention.

Equality is one ideal which cries out for bold attention and action in the
Constitution. The Preamble proclaims equality as an ideal precisely in protest
against crushing inequities in Philippine society. The command to promote
social justice in Article II, Section 10, in all phases of national development,
further explicitated in Article XIII, are clear commands to the State to take
affirmative action in the direction of greater equality. x x x [T]here is thus in the
Philippine Constitution no lack of doctrinal support for a more vigorous state
effort towards achieving a reasonable measure of equality.

Our present Constitution has gone further in guaranteeing vital social

and economic rights to marginalized groups of society, including labor.
Under the policy of social justice, the law bends over backward to
accommodate the interests of the working class on the humane justification
that those with less privilege in life should have more in law. And the
obligation to afford protection to labor is incumbent not only on the legislative
and executive branches but also on the judiciary to translate this pledge into a
living reality. Social justice calls for the humanization of laws and the
equalization of social and economic forces by the State so that justice in its
rational and objectively secular conception may at least be approximated.
 xxxx

Under most circumstances, the Court will exercise judicial restraint in

deciding questions of constitutionality, recognizing the broad discretion given to
Congress in exercising its legislative power. Judicial scrutiny would be based
on the rational basis test, and the legislative discretion would be given
deferential treatment.

But if the challenge to the statute is premised on the denial of a

fundamental right, orthe perpetuation of prejudice against persons favored by
the Constitution with special protection, judicial scrutiny ought to be more
strict. A weak and watered down view would call for the abdication of this
Courts solemn duty to strike down any law repugnant to the Constitution and
the rights it enshrines. This is true whether the actor committing the
unconstitutional act is a private person or the government itself or one of its
instrumentalities. Oppressive acts will be struck down regardless of the
character or nature of the actor.

xxxx

In the case at bar, the challenged proviso operates on the basis of the
salary grade or officer-employee status. It is akin to a distinction based on
economic class and status, with the higher grades as recipients of a benefit
specifically withheld from the lower grades. Officers of the BSP now receive
higher compensation packages that are competitive with the industry, while the
poorer, low-salaried employees are limited to the rates prescribed by the SSL.
The implications are quite disturbing: BSP rank-and-file employees are paid the
strictly regimented rates of the SSL while employees higher in rank - possessing
higher and better education and opportunities for career advancement - are
given higher compensation packages to entice them to stay. Considering that
majority, if not all, the rank-and-file employees consist of people whose status
and rank in life are less and limited, especially in terms of job marketability, it
is they - and not the officers - who have the real economic and financial need
for the adjustment . This is in accord with the policy of the Constitution "to free
the people from poverty, provide adequate social services, extend to them a
decent standard of living, and improve the quality of life for all. Any act of
Congress that runs counter to this constitutional desideratum deserves strict
scrutiny by this Court before it can pass muster. (Emphasis supplied)
 Imbued with the same sense of obligation to afford protection to labor, the Court in
the present case also employs the standard of strict judicial scrutiny, for it perceives in the
subject clause a suspect classification prejudicial to OFWs.

Upon cursory reading, the subject clause appears facially neutral, for it applies to all
OFWs. However, a closer examination reveals that the subject clause has a discriminatory
intent against, and an invidious impact on, OFWs at two levels:

First, OFWs with employment contracts of less than one year vis--vis
OFWs with employment contracts of one year or more;

Second, among OFWs with employment contracts of more than one

year; and

Third, OFWs vis--vis local workers with fixed-period employment;

OFWs with employment contracts of less

than one year vis--vis OFWs with
employment contracts of one year or more

As pointed out by petitioner,[78] it was in Marsaman Manning Agency, Inc. v.

National Labor Relations Commission[79] (Second Division, 1999) that the Court laid down
the following rules on the application of the periods prescribed under Section 10(5) of R.A.
No. 804, to wit:

A plain reading of Sec. 10 clearly reveals that the choice of which

amount to award an illegally dismissed overseas contract worker, i.e., whether
his salaries for the unexpired portion of his employment contract or three (3)
months salary for every year of the unexpired term, whichever is less, comes
into play only when the employment contract concerned has a term of at least
one (1) year or more. This is evident from the words for every year of the
unexpired term which follows the words salaries x x x for three months.To
follow petitioners thinking that private respondent is entitled to three (3)
months salary only simply because it is the lesser amount is to completely
disregard and overlook some words used in the statute while giving effect to
some. This is contrary to the well-established rule in legal hermeneutics that in
interpreting a statute, care should be taken that every part or word thereof be
given effect since the law-making body is presumed to know the meaning of the
 words employed in the statue and to have used them advisedly. Ut res magis
valeat quam pereat.[80] (Emphasis supplied)

In Marsaman, the OFW involved was illegally dismissed two months into his 10-month
contract, but was awarded his salaries for the remaining 8 months and 6 days of his
contract.

Prior to Marsaman, however, there were two cases in which the Court made
conflicting rulings on Section 10(5). One was Asian Center for Career and Employment
System and Services v. National Labor Relations Commission (Second Division, October
1998),[81] which involved an OFW who was awarded a two-year employment contract, but
was dismissed after working for one year and two months. The LA declared his dismissal
illegal and awarded him SR13,600.00 as lump-sum salary covering eight months,
theunexpired portion of his contract. On appeal, the Court reduced the award to
SR3,600.00 equivalent to his three months salary, this being the lesser value, to wit:

Under Section 10 of R.A. No. 8042, a worker dismissed from overseas

employment without just, valid or authorized cause is entitled to his salary for
the unexpired portion of his employment contract or for three (3) months for
every year of the unexpired term, whichever is less.

In the case at bar, the unexpired portion of private respondents

employment contract is eight (8) months. Private respondent should therefore
be paid his basic salary corresponding to three (3) months or a total of SR3,600.
[82]

Another was Triple-Eight Integrated Services, Inc. v. National Labor Relations

Commission (Third Division, December 1998),[83] which involved an OFW (therein
respondent Erlinda Osdana) who was originally granted a 12-month contract, which was
deemed renewed for another 12 months. After serving for one year and seven-and-a-half
months, respondent Osdana was illegally dismissed, and the Court awarded her salaries for
the entire unexpired portion of four and one-half months of her contract.

The Marsaman interpretation of Section 10(5) has since been adopted in the
following cases:
 Period Applied in
Case Title Contract Period of Unexpired the Computation
Period Service Period of the Monetary
Award
Skippers v. 6 months 2 months 4 months 4 months
Maguad[84]
Bahia Shippin 9 months 8 months 4 months 4 months
g v. Reynaldo
Chua [85]
Centennial 9 months 4 months 5 months 5 months
Transmarine v.
dela Cruz l[86]
Talidano v. 12 months 3 months 9 months 3 months
Falcon[87]
Univan v. 12 months 3 months 9 months 3 months
CA [88]
Oriental v. 12 months more than 2 10 months 3 months
CA [89] months
PCL v. 12 months more than 2 more or less 9 3 months
NLRC[90] months months
Olarte v. 12 months 21 days 11 months and 9 3 months
Nayona[91] days
JSS v. 12 months 16 days 11 months and 3 months
Ferrer[92] 24 days
Pentagon v. 12 months 9 months 2 months and 23 2 months and 23
[93]
Adelantar and 7 days days days
Phil. Employ 12 months 10 months 2 months Unexpired portion
v. Paramio,
et al.[94]
Flourish 2 years 26 days 23 months and 4 6 months or 3
Maritime v. days months for each
Almanzor [95] year of contract
Athenna 1 year, 10 1 month 1 year, 9 months 6 months or 3
Manpower v. months and and 28 days months for each
Villanos [96] 28 days year of contract
As the foregoing matrix readily shows, the subject clause classifies OFWs into two
categories. The first category includes OFWs with fixed-period employment contracts of
less than one year; in case of illegal dismissal, they are entitled to their salaries for the entire
unexpired portion of their contract. The second category consists of OFWs with fixed-
period employment contracts of one year or more; in case of illegal dismissal, they are
entitled to monetary award equivalent to only 3 months of the unexpired portion of their
contracts.

The disparity in the treatment of these two groups cannot be

discounted. In Skippers, the respondent OFW worked for only 2 months out of his 6-
month contract, but was awarded his salaries for the remaining 4 months. In contrast, the
respondent OFWs in Oriental and PCL who had also worked for about 2 months out of
their 12-month contracts were awarded their salaries for only 3 months of the unexpired
portion of their contracts. Even the OFWs involved in Talidano and Univan who
had worked for a longer period of 3 months out of their 12-month contracts before being
illegally dismissed were awarded their salaries for only 3 months.

To illustrate the disparity even more vividly, the Court assumes a hypothetical
OFW-A with an employment contract of 10 months at a monthly salary rate of
US$1,000.00 and a hypothetical OFW-B with an employment contract of 15 months with
the same monthly salary rate of US$1,000.00. Both commenced work on the same day
and under the same employer, and were illegally dismissed after one month of
work. Under the subject clause, OFW-A will be entitled to US$9,000.00, equivalent to his
salaries for the remaining 9 months of his contract, whereas OFW-B will be entitled to only
US$3,000.00, equivalent to his salaries for 3 months of the unexpired portion of his
contract, instead of US$14,000.00 for the unexpired portion of 14 months of his contract,
as the US$3,000.00 is the lesser amount.

The disparity becomes more aggravating when the Court takes into account
jurisprudence that, prior to the effectivity of R.A. No. 8042 on July 14, 1995, [97] illegally
dismissed OFWs, no matter how long the period of their employment contracts, were
entitled to their salaries for the entire unexpired portions of their contracts. The matrix
below speaks for itself:

Case Title Contract Period of Unexpired Period Applied in the

Period Service Period Computation of the
Monetary Award
ATCI v. CA, 2 years 2 months 22 months 22 months
et al.[98]
Phil. Integrated 2 years 7 days 23 months and 23 months and 23
 v. NLRC[99] 23 days days
JGB v. NLC[100] 2 years 9 months 15 months 15 months
Agoy v. 2 years 2 months 22 months 22 months
NLRC[101]
EDI v. NLRC, 2 years 5 months 19 months 19 months
et al.[102]
Barros v. 12 months 4 months 8 months 8 months
NLRC, et al.[103]
Philippine 12 months 6 months 5 months and 5 months and 18 days
Transmarine v. and 22 days 18 days
Carilla[104]

It is plain that prior to R.A. No. 8042, all OFWs, regardless of contract periods or
the unexpired portions thereof, were treated alike in terms of the computation of their
monetary benefits in case of illegal dismissal. Their claims were subjected to a uniform
rule of computation: their basic salaries multiplied by the entire unexpired portion of their
employment contracts.

The enactment of the subject clause in R.A. No. 8042 introduced a differentiated
rule of computation of the money claims of illegally dismissed OFWs based on their
employment periods, in the process singling out one category whose contracts have an
unexpired portion of one year or more and subjecting them to the peculiar disadvantage of
having their monetary awards limited to their salaries for 3 months or for the unexpired
portion thereof, whichever is less, but all the while sparing the other category from such
prejudice, simply because the latter's unexpired contracts fall short of one year.

Among OFWs With Employment

Contracts of More Than One Year

Upon closer examination of the terminology employed in the subject clause, the
Court now has misgivings on the accuracy of the Marsaman interpretation.

The Court notes that the subject clause or for three (3) months for every year of the
unexpired term, whichever is less contains the qualifying phrases every year and
unexpired term. By its ordinary meaning, the word term means a limited or definite extent
of time.[105]Corollarily, that every year is but part of an unexpired term is significant in
many ways: first,the unexpired term must be at least one year, for if it were any
shorter, there would be no occasion for such unexpired term to be measured by every
year; and second, the original term must be more than one year, for otherwise, whatever
would be the unexpired term thereof will not reach even a year. Consequently, the more
decisive factor in the determination of when the subject clause for three (3) months
for every year of the unexpired term, whichever is less shall apply is not the length of the
original contract period as held in Marsaman,[106]but the length of the unexpired portion of
the contract period -- the subject clause applies in cases when the unexpired portion of the
contract period is at least one year, which arithmetically requires that the original contract
period be more than one year.

Viewed in that light, the subject clause creates a sub-layer of discrimination among
OFWs whose contract periods are for more than one year: those who are illegally
dismissed with less than one year left in their contracts shall be entitled to their salaries for
the entire unexpired portion thereof, while those who are illegally dismissed with one year
or more remaining in their contracts shall be covered by the subject clause, and their
monetary benefits limited to their salaries for three months only.

To concretely illustrate the application of the foregoing interpretation of the subject

clause, the Court assumes hypothetical OFW-C and OFW-D, who each have a 24-month
contract at a salary rate of US$1,000.00 per month. OFW-C is illegally dismissed on the
12thmonth, and OFW-D, on the 13th month. Considering that there is at least 12 months
remaining in the contract period of OFW-C, the subject clause applies to the computation
of the latter's monetary benefits. Thus, OFW-C will be entitled, not to US$12,000,00 or the
latter's total salaries for the 12 months unexpired portion of the contract, but to the lesser
amount of US$3,000.00 or the latter's salaries for 3 months out of the 12-month unexpired
term of the contract. On the other hand, OFW-D is spared from the effects of the subject
clause, for there are only 11 months left in the latter's contract period. Thus, OFW-D will
be entitled to US$11,000.00, which is equivalent to his/her total salaries for the entire 11-
month unexpired portion.

OFWs vis--vis Local Workers

With Fixed-Period Employment
 As discussed earlier, prior to R.A. No. 8042, a uniform system of computation of
the monetary awards of illegally dismissed OFWs was in place. This uniform system was
applicable even to local workers with fixed-term employment.[107]

The earliest rule prescribing a uniform system of computation was actually Article
299 of the Code of Commerce (1888),[108] to wit:

Article 299. If the contracts between the merchants and their shop
clerks and employees should have been made of a fixed period, none of the
contracting parties, without the consent of the other, may withdraw from the
fulfillment of said contract until the termination of the period agreed upon.

Persons violating this clause shall be subject to indemnify the loss and
damage suffered, with the exception of the provisions contained in the following
articles.

In Reyes v. The Compaia Maritima,[109] the Court applied the foregoing provision to
determine the liability of a shipping company for the illegal discharge of its managers prior
to the expiration of their fixed-term employment. The Court therein held the shipping
company liable for the salaries of its managers for the remainder of their fixed-term
employment.
There is a more specific rule as far as seafarers are concerned: Article 605 of the
Code of Commerce which provides:

Article 605. If the contracts of the captain and members of the crew with
the agent should be for a definite period or voyage, they cannot be discharged
until the fulfillment of their contracts, except for reasons of insubordination in
serious matters, robbery, theft, habitual drunkenness, and damage caused to the
vessel or to its cargo by malice or manifest or proven negligence.

Article 605 was applied to Madrigal Shipping Company, Inc. v. Ogilvie,[110] in

which the Court held the shipping company liable for the salaries and subsistence
allowance of its illegally dismissed employees for the entire unexpired portion of their
employment contracts.

While Article 605 has remained good law up to the present,[111] Article 299 of the
Code of Commerce was replaced by Art. 1586 of the Civil Code of 1889, to wit:
 Article 1586. Field hands, mechanics, artisans, and other laborers hired
for a certain time and for a certain work cannot leave or be dismissed without
sufficient cause, before the fulfillment of the contract. (Emphasis supplied.)

Citing Manresa, the Court in Lemoine v. Alkan[112] read the disjunctive "or" in Article 1586
as a conjunctive "and" so as to apply the provision to local workers who are employed for a
time certain although for no particular skill. This interpretation of Article 1586 was
reiterated in Garcia Palomar v. Hotel de France Company.[113] And in
both Lemoine and Palomar,the Court adopted the general principle that in actions for
wrongful discharge founded on Article 1586, local workers are entitled to recover
damages to the extent of the amount stipulated to be paid to them by the terms of their
contract. On the computation of the amount of such damages, the Court in Aldaz v.
Gay[114] held:
The doctrine is well-established in American jurisprudence, and nothing
has been brought to our attention to the contrary under Spanish jurisprudence,
that when an employee is wrongfully discharged it is his duty to seek other
employment of the same kind in the same community, for the purpose of
reducing the damages resulting from such wrongful discharge. However, while
this is the general rule, the burden of showing that he failed to make an effort to
secure other employment of a like nature, and that other employment of a like
nature was obtainable, is upon the defendant. When an employee is wrongfully
discharged under a contract of employment his prima facie damage is the
amount which he would be entitled to had he continued in such employment
until the termination of the period. (Howard vs. Daly, 61 N. Y., 362; Allen vs.
Whitlark, 99 Mich., 492; Farrell vs. School District No. 2, 98 Mich., 43.)
[115]
(Emphasis supplied)
On August 30, 1950, the New Civil Code took effect with new provisions on fixed-
term employment: Section 2 (Obligations with a Period), Chapter 3, Title I, and Sections 2
(Contract of Labor) and 3 (Contract for a Piece of Work), Chapter 3, Title VIII, Book IV.
[116]
Much like Article 1586 of the Civil Code of 1889, the new provisions of the Civil Code
do not expressly provide for the remedies available to a fixed-term worker who is illegally
discharged. However, it is noted that in Mackay Radio & Telegraph Co., Inc. v. Rich,
[117]
the Court carried over the principles on the payment of damages underlying Article
1586 of the Civil Code of 1889 and applied the same to a case involving the illegal
discharge of a local worker whose fixed-period employment contract was entered into in
1952, when the new Civil Code was already in effect.[118]
 More significantly, the same principles were applied to cases involving overseas
Filipino workers whose fixed-term employment contracts were illegally terminated, such
as in First Asian Trans & Shipping Agency, Inc. v. Ople,[119] involving seafarers who were
illegally discharged. In Teknika Skills and Trade Services, Inc. v. National Labor Relations
Commission,[120] an OFW who was illegally dismissed prior to the expiration of her fixed-
period employment contract as a baby sitter, was awarded salaries corresponding to the
unexpired portion of her contract. The Court arrived at the same ruling in Anderson v.
National Labor Relations Commission,[121] which involved a foreman hired in 1988 in
Saudi Arabia for a fixed term of two years, but who was illegally dismissed after only nine
months on the job -- the Court awarded him salaries corresponding to 15 months, the
unexpired portion of his contract. In Asia World Recruitment, Inc. v. National Labor
Relations Commission,[122] a Filipino working as a security officer in 1989 in Angola was
awarded his salaries for the remaining period of his 12-month contract after he was
wrongfully discharged. Finally, in Vinta Maritime Co., Inc. v. National Labor Relations
Commission,[123] an OFW whose 12-month contract was illegally cut short in the second
month was declared entitled to his salaries for the remaining 10 months of his contract.

In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term
employment who were illegally discharged were treated alike in terms of the computation
of their money claims: they were uniformly entitled to their salaries for the entire
unexpired portions of their contracts. But with the enactment of R.A. No. 8042,
specifically the adoption of the subject clause, illegally dismissed OFWs with an unexpired
portion of one year or more in their employment contract have since been differently
treated in that their money claims are subject to a 3-month cap, whereas no such limitation
is imposed on local workers with fixed-term employment.

The Court concludes that the subject clause contains a suspect classification in
that, in the computation of the monetary benefits of fixed-term employees who are
illegally discharged, it imposes a 3-month cap on the claim of OFWs with an unexpired
portion of one year or more in their contracts, but none on the claims of other OFWs or
local workers with fixed-term employment. The subject clause singles out one
classification of OFWs and burdens it with a peculiar disadvantage.

There being a suspect classification involving a vulnerable sector protected by the

Constitution, the Court now subjects the classification to a strict judicial scrutiny, and
determines whether it serves a compelling state interest through the least restrictive means.
 What constitutes compelling state interest is measured by the scale of rights and
powers arrayed in the Constitution and calibrated by history.[124] It is akin to the paramount
interest of the state[125] for which some individual liberties must give way, such as the
public interest in safeguarding health or maintaining medical standards,[126] or in
maintaining access to information on matters of public concern.[127]

In the present case, the Court dug deep into the records but found no compelling
state interest that the subject clause may possibly serve.

The OSG defends the subject clause as a police power measure designed to protect
the employment of Filipino seafarers overseas x x x. By limiting the liability to three
months [sic], Filipino seafarers have better chance of getting hired by foreign
employers. The limitation also protects the interest of local placement agencies, which
otherwise may be made to shoulder millions of pesos in termination pay.[128]

The OSG explained further:

Often, placement agencies, their liability being solidary, shoulder the
payment of money claims in the event that jurisdiction over the foreign
employer is not acquired by the court or if the foreign employer reneges on its
obligation. Hence, placement agencies that are in good faith and which fulfill
their obligations are unnecessarily penalized for the acts of the foreign
employer. To protect them and to promote their continued helpful
contribution in deploying Filipino migrant workers, liability for money
are reduced under Section 10 of RA 8042.

This measure redounds to the benefit of the migrant workers whose

welfare the government seeks to promote. The survival of legitimate placement
agencies helps [assure] the government that migrant workers are properly
deployed and are employed under decent and humane conditions.[129] (Emphasis
supplied)

However, nowhere in the Comment or Memorandum does the OSG cite the source
of its perception of the state interest sought to be served by the subject clause.

The OSG locates the purpose of R.A. No. 8042 in the speech of Rep. Bonifacio
Gallego in sponsorship of House Bill No. 14314 (HB 14314), from which the law
originated;[130] but the speech makes no reference to the underlying reason for the adoption
of the subject clause. That is only natural for none of the 29 provisions in HB 14314
resembles the subject clause.

On the other hand, Senate Bill No. 2077 (SB 2077) contains a provision on money
claims, to wit:

Sec. 10. Money Claims. - Notwithstanding any provision of law to the

contrary, the Labor Arbiters of the National Labor Relations Commission
(NLRC) shall have the original and exclusive jurisdiction to hear and decide,
within ninety (90) calendar days after the filing of the complaint, the claims
arising out of an employer-employee relationship or by virtue of the complaint,
the claim arising out of an employer-employee relationship or by virtue of any
law or contract involving Filipino workers for overseas employment including
claims for actual, moral, exemplary and other forms of damages.

The liability of the principal and the recruitment/placement agency or

any and all claims under this Section shall be joint and several.

Any compromise/amicable settlement or voluntary agreement on any

money claims exclusive of damages under this Section shall not be less than
fifty percent (50%) of such money claims: Provided, That any installment
payments, if applicable, to satisfy any such compromise or voluntary settlement
shall not be more than two (2) months. Any compromise/voluntary agreement
in violation of this paragraph shall be null and void.

Non-compliance with the mandatory period for resolutions of cases

provided under this Section shall subject the responsible officials to any or all of
the following penalties:

(1) The salary of any such official who fails to render his decision
or resolution within the prescribed period shall be, or caused to
be, withheld until the said official complies therewith;
(2) Suspension for not more than ninety (90) days; or

(3) Dismissal from the service with disqualification to hold any

appointive public office for five (5) years.

Provided, however, That the penalties herein provided shall be without

prejudice to any liability which any such official may have incurred under other
 existing laws or rules and regulations as a consequence of violating the
provisions of this paragraph.

But significantly, Section 10 of SB 2077 does not provide for any rule on the computation
of money claims.

A rule on the computation of money claims containing the subject clause was
inserted and eventually adopted as the 5th paragraph of Section 10 of R.A. No. 8042. The
Court examined the rationale of the subject clause in the transcripts of the Bicameral
Conference Committee (Conference Committee) Meetings on the Magna Carta on OCWs
(Disagreeing Provisions of Senate Bill No. 2077 and House Bill No. 14314). However, the
Court finds no discernible state interest, let alone a compelling one, that is sought to be
protected or advanced by the adoption of the subject clause.

In fine, the Government has failed to discharge its burden of proving the existence
of a compelling state interest that would justify the perpetuation of the discrimination
against OFWs under the subject clause.

Assuming that, as advanced by the OSG, the purpose of the subject clause is to
protect the employment of OFWs by mitigating the solidary liability of placement
agencies, such callous and cavalier rationale will have to be rejected. There can never be a
justification for any form of government action that alleviates the burden of one sector, but
imposes the same burden on another sector, especially when the favored sector is
composed of private businesses such as placement agencies, while the disadvantaged
sector is composed of OFWs whose protection no less than the Constitution
commands. The idea that private business interest can be elevated to the level of a
compelling state interest is odious.

Moreover, even if the purpose of the subject clause is to lessen the solidary liability
of placement agencies vis-a-vis their foreign principals, there are mechanisms already in
place that can be employed to achieve that purpose without infringing on the constitutional
rights of OFWs.

The POEA Rules and Regulations Governing the Recruitment and Employment of
Land-Based Overseas Workers, dated February 4, 2002, imposes administrative
disciplinary measures on erring foreign employers who default on their contractual
obligations to migrant workers and/or their Philippine agents. These disciplinary measures
range from temporary disqualification to preventive suspension. The POEA Rules and
Regulations Governing the Recruitment and Employment of Seafarers, dated May 23,
2003, contains similar administrative disciplinary measures against erring foreign
employers.

Resort to these administrative measures is undoubtedly the less restrictive means of

aiding local placement agencies in enforcing the solidary liability of their foreign
principals.

Thus, the subject clause in the 5th paragraph of Section 10 of R.A. No. 8042 is
violative of the right of petitioner and other OFWs to equal protection.

Further, there would be certain misgivings if one is to approach the declaration of the
unconstitutionality of the subject clause from the lone perspective that the clause directly
violates state policy on labor under Section 3,[131] Article XIII of the Constitution.

While all the provisions of the 1987 Constitution are presumed self-executing,,[132] there are
some which this Court has declared not judicially enforceable, Article XIII being one,
[133]
particularly Section 3 thereof, the nature of which, this Court, in Agabon v. National
Labor Relations Commission,[134] has described to be not self-actuating:

Thus, the constitutional mandates of protection to labor and security of

tenure may be deemed as self-executing in the sense that these are automatically
acknowledged and observed without need for any enabling legislation.
However, to declare that the constitutional provisions are enough to guarantee
the full exercise of the rights embodied therein, and the realization of ideals
therein expressed, would be impractical, if not unrealistic. The espousal of such
view presents the dangerous tendency of being overbroad and exaggerated. The
guarantees of "full protection to labor" and "security of tenure", when examined
in isolation, are facially unqualified, and the broadest interpretation possible
suggests a blanket shield in favor of labor against any form of removal
regardless of circumstance. This interpretation implies an unimpeachable right
to continued employment-a utopian notion, doubtless-but still hardly within the
contemplation of the framers. Subsequent legislation is still needed to define the
parameters of these guaranteed rights to ensure the protection and promotion,
not only the rights of the labor sector, but of the employers' as well. Without
 specific and pertinent legislation, judicial bodies will be at a loss, formulating
their own conclusion to approximate at least the aims of the Constitution.

Ultimately, therefore, Section 3 of Article XIII cannot, on its own, be a

source of a positive enforceable right to stave off the dismissal of an employee
for just cause owing to the failure to serve proper notice or hearing. As
manifested by several framers of the 1987 Constitution, the provisions on social
justice require legislative enactments for their enforceability.[135] (Emphasis
added)

Thus, Section 3, Article XIII cannot be treated as a principal source of direct

enforceable rights, for the violation of which the questioned clause may be declared
unconstitutional. It may unwittingly risk opening the floodgates of litigation to every
worker or union over every conceivable violation of so broad a concept as social justice for
labor.

It must be stressed that Section 3, Article XIII does not directly bestow on the
working class any actual enforceable right, but merely clothes it with the status of a
sector for whom the Constitution urges protection through executive or legislative
action and judicial recognition. Its utility is best limited to being an impetus not just for
the executive and legislative departments, but for the judiciary as well, to protect the
welfare of the working class. And it was in fact consistent with that constitutional
agenda that the Court in Central Bank (now Bangko Sentral ng Pilipinas) Employee
Association, Inc. v. Bangko Sentral ng Pilipinas, penned by then Associate Justice now
Chief Justice Reynato S. Puno, formulated the judicial precept that when the challenge
to a statute is premised on the perpetuation of prejudice against persons favored by the
Constitution with special protection -- such as the working class or a section thereof --
the Court may recognize the existence of a suspect classification and subject the same
to strict judicial scrutiny.

The view that the concepts of suspect classification and strict judicial scrutiny
formulated in Central Bank Employee Association exaggerate the significance of Section
3, Article XIII is a groundless apprehension. Central Bank applied Article XIII in
conjunction with the equal protection clause. Article XIII, by itself, without the application
of the equal protection clause, has no life or force of its own as elucidated in Agabon.
 Along the same line of reasoning, the Court further holds that the subject clause
violates petitioner's right to substantive due process, for it deprives him of property,
consisting of monetary benefits, without any existing valid governmental purpose.[136]

The argument of the Solicitor General, that the actual purpose of the subject clause
of limiting the entitlement of OFWs to their three-month salary in case of illegal dismissal,
is to give them a better chance of getting hired by foreign employers. This is plain
speculation. As earlier discussed, there is nothing in the text of the law or the records of the
deliberations leading to its enactment or the pleadings of respondent that would indicate
that there is an existing governmental purpose for the subject clause, or even just a pretext
of one.

The subject clause does not state or imply any definitive governmental purpose; and
it is for that precise reason that the clause violates not just petitioner's right to equal
protection, but also her right to substantive due process under Section 1,[137] Article III of
the Constitution.

The subject clause being unconstitutional, petitioner is entitled to his salaries for the
entire unexpired period of nine months and 23 days of his employment contract, pursuant
to law and jurisprudence prior to the enactment of R.A. No. 8042.

On the Third Issue

Petitioner contends that his overtime and leave pay should form part of the salary
basis in the computation of his monetary award, because these are fixed benefits that have
been stipulated into his contract.

Petitioner is mistaken.

The word salaries in Section 10(5) does not include overtime and leave pay. For
seafarers like petitioner, DOLE Department Order No. 33, series 1996, provides a Standard
Employment Contract of Seafarers, in which salary is understood as the basic wage,
exclusive of overtime, leave pay and other bonuses; whereas overtime pay is compensation
for all work performed in excess of the regular eight hours, and holiday pay
is compensation for any work performed on designated rest days and holidays.
 By the foregoing definition alone, there is no basis for the automatic inclusion of
overtime and holiday pay in the computation of petitioner's monetary award, unless there is
evidence that he performed work during those periods. As the Court held in Centennial
Transmarine, Inc. v. Dela Cruz,[138]
However, the payment of overtime pay and leave pay should be
disallowed in light of our ruling in Cagampan v. National Labor Relations
Commission, to wit:

The rendition of overtime work and the submission of sufficient proof

that said was actually performed are conditions to be satisfied before a seaman
could be entitled to overtime pay which should be computed on the basis of 30%
of the basic monthly salary. In short, the contract provision guarantees the right to
overtime pay but the entitlement to such benefit must first be established.

In the same vein, the claim for the day's leave pay for the unexpired portion of the
contract is unwarranted since the same is given during the actual service of the
seamen.

WHEREFORE, the Court GRANTS the Petition. The subject clause or for three
months for every year of the unexpired term, whichever is less in the 5th paragraph of
Section 10 of Republic Act No. 8042 is DECLARED UNCONSTITUTIONAL; and
the December 8, 2004 Decision and April 1, 2005 Resolution of the Court of Appeals
are MODIFIED to the effect that petitioner is AWARDED his salaries for the entire
unexpired portion of his employment contract consisting of nine months and 23 days
computed at the rate of US$1,400.00 per month.

No costs.

SO ORDERED.
 CLAUDIO S. YAP,
Petitioner, G.R. No. 179532

Present:

CARPIO, J.,
- versus - Chairperson,
NACHURA,
PERALTA,
ABAD, and
THENAMARIS SHIPS MANAGEMENT MENDOZA, JJ.
and INTERMARE MARITIME AGENCIES,
INC., Promulgated:
Respondents.
May 30, 2011
x------------------------------------------------------------------------------------x

DECISION

NACHURA, J.:

Before this Court is a Petition for Review on Certiorari[1] under Rule 45 of

the Rules of Civil Procedure, seeking the reversal of the Court of Appeals (CA)
Decision[2] dated February 28, 2007, which affirmed with modification the
National Labor Relations Commission (NLRC) resolution[3] dated April 20, 2005.

The undisputed facts, as found by the CA, are as follows:

[Petitioner] Claudio S. Yap was employed as electrician of the vessel,

M/T SEASCOUT on 14 August 2001 by Intermare Maritime Agencies,
Inc. in behalf of its principal, Vulture Shipping Limited. The contract of
employment entered into by Yap and Capt. Francisco B. Adviento, the
General Manager of Intermare, was for a duration of 12 months. On 23
August 2001, Yap boarded M/T SEASCOUT and commenced his job as
electrician. However, on or about 08 November 2001, the vessel was
sold. The Philippine Overseas Employment Administration (POEA) was
 informed about the sale on 06 December 2001 in a letter signed by Capt.
Adviento.Yap, along with the other crewmembers, was informed by the
Master of their vessel that the same was sold and will be scrapped. They
were also informed about the Advisory sent by Capt. Constatinou, which
states, among others:

PLEASE ASK YR OFFICERS AND RATINGS IF THEY WISH TO BE

TRANSFERRED TO OTHER VESSELS AFTER VESSEL S
DELIVERY (GREEK VIA ATHENS-PHILIPINOS VIA MANILA
FOR CREW NOT WISH TRANSFER TO DECLARE THEIR
PROSPECTED TIME FOR REEMBARKATION IN ORDER TO
SCHEDULE THEM ACCLY

Yap received his seniority bonus, vacation bonus, extra bonus along with
the scrapping bonus. However, with respect to the payment of his wage,
he refused to accept the payment of one-month basic wage. He insisted
that he was entitled to the payment of the unexpired portion of his
contract since he was illegally dismissed from employment. He alleged
that he opted for immediate transfer but none was made.

[Respondents], for their part, contended that Yap was not illegally
dismissed. They alleged that following the sale of the M/T SEASCOUT,
Yap signed off from the vessel on 10 November 2001 and was paid his
wages corresponding to the months he worked or until 10 November
2001 plus his seniority bonus, vacation bonus and extra bonus. They
further alleged that Yaps employment contract was validly terminated
due to the sale of the vessel and no arrangement was made for Yaps
transfer to Thenamaris other vessels.[4]

Thus, Claudio S. Yap (petitioner) filed a complaint for Illegal Dismissal with
Damages and Attorneys Fees before the Labor Arbiter (LA). Petitioner claimed
that he was entitled to the salaries corresponding to the unexpired portion of his
contract. Subsequently, he filed an amended complaint, impleading Captain
Francisco Adviento of respondents Intermare Maritime Agencies, Inc. (Intermare)
and Thenamaris Ships Management (respondents), together with C.J. Martionos,
Interseas Trading and Financing Corporation, and Vulture Shipping Limited/Stejo
Shipping Limited.
On July 26, 2004, the LA rendered a decision[5] in favor of petitioner, finding the
latter to have been constructively and illegally dismissed by
respondents. Moreover, the LA found that respondents acted in bad faith when
they assured petitioner of re-embarkation and required him to produce an
electrician certificate during the period of his contract, but actually he was not able
to board one despite of respondents numerous vessels. Petitioner made several
follow-ups for his re-embarkation but respondents failed to heed his plea; thus,
petitioner was forced to litigate in order to vindicate his rights. Lastly, the LA
opined that since the unexpired portion of petitioners contract was less than one
year, petitioner was entitled to his salaries for the unexpired portion of his contract
for a period of nine months. The LA disposed, as follows:

WHEREFORE, in view of the foregoing, a decision is hereby

rendered declaring complainant to have been constructively
dismissed. Accordingly, respondents Intermare Maritime Agency
Incorporated, Thenamaris Ships Mgt., and Vulture Shipping Limited are
ordered to pay jointly and severally complainant Claudio S. Yap the sum
of $12,870.00 or its peso equivalent at the time of payment.In addition,
moral damages of ONE HUNDRED THOUSAND PESOS
(P100,000.00) and exemplary damages of FIFTY THOUSAND
PESOS (P50,000.00) are awarded plus ten percent (10%) of the total
award as attorneys fees.

Other money claims are DISMISSED for lack of merit.

SO ORDERED.[6]

Aggrieved, respondents sought recourse from the NLRC.

In its decision[7] dated January 14, 2005, the NLRC affirmed the LAs
findings that petitioner was indeed constructively and illegally dismissed; that
respondents bad faith was evident on their wilful failure to transfer petitioner to
another vessel; and that the award of attorneys fees was warranted. However, the
NLRC held that instead of an award of salaries corresponding to nine months,
petitioner was only entitled to salaries for three months as provided under Section
10[8] of Republic Act (R.A.) No. 8042,[9] as enunciated in our ruling in Marsaman
Manning Agency, Inc. v. National Labor Relations Commission.[10] Hence, the
NLRC ruled in this wise:

WHEREFORE, premises considered, the decision of the Labor

Arbiter finding the termination of complainant illegal is hereby
AFFIRMED with a MODIFICATION. Complainant[s] salary for the
unexpired portion of his contract should only be limited to three (3)
months basic salary.

Respondents Intermare Maritime Agency, Inc.[,] Vulture Shipping

Limited and Thenamaris Ship Management are hereby ordered to jointly
and severally pay complainant, the following:

1. Three (3) months basic salary US$4,290.00 or its peso

equivalent at the time of actual payment.
2. Moral damages P100,000.00
3. Exemplary damages P50,000.00
4. Attorneys fees equivalent to 10% of the total monetary award.

SO ORDERED.[11]

Respondents filed a Motion for Partial Reconsideration,[12] praying for the reversal
and setting aside of the NLRC decision, and that a new one be rendered dismissing
the complaint. Petitioner, on the other hand, filed his own Motion for Partial
Reconsideration,[13] praying that he be paid the nine (9)-month basic salary, as
awarded by the LA.

On April 20, 2005, a resolution [14] was rendered by the NLRC, affirming the
findings of Illegal Dismissal and respondents failure to transfer petitioner to
another vessel. However, finding merit in petitioners arguments, the NLRC
reversed its earlier Decision, holding that there can be no choice to grant only
three (3) months salary for every year of the unexpired term because there is no
full year of unexpired term which this can be applied. Hence

WHEREFORE, premises considered, complainants Motion for Partial

Reconsideration is hereby granted. The award of three (3) months basic
 salary in the sum of US$4,290.00 is hereby modified in that complainant
is entitled to his salary for the unexpired portion of employment contract
in the sum of US$12,870.00 or its peso equivalent at the time of actual
payment.

All aspect of our January 14, 2005 Decision STANDS.

SO ORDERED.[15]

Respondents filed a Motion for Reconsideration, which the NLRC denied.

Undaunted, respondents filed a petition for certiorari[16] under Rule 65 of the

Rules of Civil Procedure before the CA. On February 28, 2007, the CA affirmed
the findings and ruling of the LA and the NLRC that petitioner was constructively
and illegally dismissed. The CA held that respondents failed to show that the
NLRC acted without statutory authority and that its findings were not supported by
law, jurisprudence, and evidence on record. Likewise, the CA affirmed the lower
agencies findings that the advisory of Captain Constantinou, taken together with
the other documents and additional requirements imposed on petitioner, only
meant that the latter should have been re-embarked. In the same token, the CA
upheld the lower agencies unanimous finding of bad faith, warranting the
imposition of moral and exemplary damages and attorneys fees. However, the CA
ruled that the NLRC erred in sustaining the LAs interpretation of Section 10 of
R.A. No. 8042. In this regard, the CA relied on the clause or for three months for
every year of the unexpired term, whichever is less provided in the 5th paragraph of
Section 10 of R.A. No. 8042 and held:

In the present case, the employment contract concerned has a term

of one year or 12 months which commenced on August 14, 2001.
However, it was preterminated without a valid cause. [Petitioner] was
paid his wages for the corresponding months he worked until the 10 th of
November. Pursuant to the provisions of Sec. 10, [R.A. No.] 8042,
therefore, the option of three months for every year of the unexpired
term is applicable.[17]

Thus, the CA provided, to wit:

 WHEREFORE, premises considered, this Petition for Certiorari
is DENIED. The Decision dated January 14, 2005,
and Resolutions, dated April 20, 2005 and July 29, 2005, respectively, of
public respondent National Labor Relations Commission-Fourth
Division, Cebu City, in NLRC No. V-000038-04 (RAB VIII (OFW)-04-
01-0006) are hereby AFFIRMED with the MODIFICATION that
private respondent is entitled to three (3) months of basic salary
computed at US$4,290.00 or its peso equivalent at the time of actual
payment.

Costs against Petitioners.[18]

Both parties filed their respective motions for reconsideration, which the
CA, however, denied in its Resolution[19] dated August 30, 2007.

Unyielding, petitioner filed this petition, raising the following issues:

1) Whether or not Section 10 of R.A. [No.] 8042, to the extent that it

affords an illegally dismissed migrant worker the lesser benefit of
salaries for [the] unexpired portion of his employment
contract or for three (3) months for every year of the unexpired
term, whichever is less is constitutional; and

2) Assuming that it is, whether or not the Court of Appeals gravely

erred in granting petitioner only three (3) months backwages when
his unexpired term of 9 months is far short of the every year of the
unexpired term threshold.[20]

In the meantime, while this case was pending before this Court, we declared
as unconstitutional the clause or for three months for every year of the unexpired
term, whichever is less provided in the 5th paragraph of Section 10 of R.A. No.
8042 in the case of Serrano v. Gallant Maritime Services, Inc.[21] on March 24,
2009.

Apparently, unaware of our ruling in Serrano, petitioner claims that the

5thparagraph of Section 10, R.A. No. 8042, is violative of Section 1, [22] Article III
and Section 3,[23] Article XIII of the Constitution to the extent that it gives an erring
employer the option to pay an illegally dismissed migrant worker only three
months for every year of the unexpired term of his contract; that said provision of
law has long been a source of abuse by callous employers against migrant workers;
and that said provision violates the equal protection clause under the Constitution
because, while illegally dismissed local workers are guaranteed under the Labor
Code of reinstatement with full backwages computed from the time compensation
was withheld from them up to their actual reinstatement, migrant workers, by
virtue of Section 10 of R.A. No. 8042, have to waive nine months of their
collectible backwages every time they have a year of unexpired term of contract to
reckon with. Finally, petitioner posits that, assuming said provision of law is
constitutional, the CA gravely abused its discretion when it reduced petitioners
backwages from nine months to three months as his nine-month unexpired term
cannot accommodate the lesser relief of three months for every year of the
unexpired term.[24]

On the other hand, respondents, aware of our ruling in Serrano, aver that our
pronouncement of unconstitutionality of the clause or for three months for every
year of the unexpired term, whichever is less provided in the 5th paragraph of
Section 10 of R.A. No. 8042 in Serrano should not apply in this case because
Section 10 of R.A. No. 8042 is a substantive law that deals with the rights and
obligations of the parties in case of Illegal Dismissal of a migrant worker and is not
merely procedural in character. Thus, pursuant to the Civil Code, there should be
no retroactive application of the law in this case. Moreover, respondents asseverate
that petitioners tanker allowance of US$130.00 should not be included in the
computation of the award as petitioners basic salary, as provided under his
contract, was only US$1,300.00. Respondents submit that the CA erred in its
computation since it included the said tanker allowance. Respondents opine that
petitioner should be entitled only to US$3,900.00 and not to US$4,290.00, as
granted by the CA. Invoking Serrano, respondents claim that the tanker allowance
should be excluded from the definition of the term salary. Also, respondents
manifest that the full sum of P878,914.47 inIntermares bank account was garnished
and subsequently withdrawn and deposited with the NLRC Cashier of Tacloban
City on February 14, 2007. On February 16, 2007, while this case was pending
before the CA, the LA issued an Order releasing the amount of P781,870.03 to
petitioner as his award, together with the sum of P86,744.44 to petitioners former
lawyer as attorneys fees, and the amount of P3,570.00 as execution and deposit
fees. Thus, respondents pray that the instant petition be denied and that petitioner
be directed to return to Intermare the sum of US$8,970.00 or its peso equivalent.[25]

On this note, petitioner counters that this new issue as to the inclusion of the
tanker allowance in the computation of the award was not raised by respondents
before the LA, the NLRC and the CA, nor was it raised in respondents pleadings
other than in their Memorandum before this Court, which should not be allowed
under the circumstances.[26]
The petition is impressed with merit.

Prefatorily, it bears emphasis that the unanimous finding of the LA, the
NLRC and the CA that the dismissal of petitioner was illegal is not disputed.
Likewise not disputed is the tribunals unanimous finding of bad faith on the part of
respondents, thus, warranting the award of moral and exemplary damages and
attorneys fees. What remains in issue, therefore, is the constitutionality of the
5th paragraph of Section 10 of R.A. No. 8042 and, necessarily, the proper
computation of the lump-sum salary to be awarded to petitioner by reason of his
illegal dismissal.

Verily, we have already declared in Serrano that the clause or for three
months for every year of the unexpired term, whichever is less provided in the
5th paragraph of Section 10 of R.A. No. 8042 is unconstitutional for being violative
of the rights of Overseas Filipino Workers (OFWs) to equal protection of the laws.
In an exhaustive discussion of the intricacies and ramifications of the said clause,
this Court, in Serrano, pertinently held:

The Court concludes that the subject clause contains a suspect

classification in that, in the computation of the monetary benefits of
fixed-term employees who are illegally discharged, it imposes a 3-
month cap on the claim of OFWs with an unexpired portion of one
year or more in their contracts, but none on the claims of other OFWs
or local workers with fixed-term employment. The subject clause
singles out one classification of OFWs and burdens it with a peculiar
disadvantage.[27]

Moreover, this Court held therein that the subject clause does not state or
imply any definitive governmental purpose; hence, the same violates not just
therein petitioners right to equal protection, but also his right to substantive due
process under Section 1, Article III of the Constitution.[28] Consequently, petitioner
therein was accorded his salaries for the entire unexpired period of nine months
and 23 days of his employment contract, pursuant to law and jurisprudence prior to
the enactment of R.A. No. 8042.

We have already spoken. Thus, this case should not be different

from Serrano.

As a general rule, an unconstitutional act is not a law; it confers no rights; it

imposes no duties; it affords no protection; it creates no office; it is inoperative as
if it has not been passed at all. The general rule is supported by Article 7 of the
Civil Code, which provides:

Art. 7. Laws are repealed only by subsequent ones, and their

violation or non-observance shall not be excused by disuse or custom or
practice to the contrary.

The doctrine of operative fact serves as an exception to the aforementioned

general rule. In Planters Products, Inc. v. Fertiphil Corporation,[29] we held:

The doctrine of operative fact, as an exception to the general rule,

only applies as a matter of equity and fair play. It nullifies the effects of
an unconstitutional law by recognizing that the existence of a statute
prior to a determination of unconstitutionality is an operative fact and
may have consequences which cannot always be ignored. The past
cannot always be erased by a new judicial declaration.
The doctrine is applicable when a declaration of
unconstitutionality will impose an undue burden on those who have
relied on the invalid law. Thus, it was applied to a criminal case when a
declaration of unconstitutionality would put the accused in double
jeopardy or would put in limbo the acts done by a municipality in
reliance upon a law creating it.[30]

Following Serrano, we hold that this case should not be included in the
aforementioned exception. After all, it was not the fault of petitioner that he lost his
job due to an act of illegal dismissal committed by respondents. To rule otherwise
would be iniquitous to petitioner and other OFWs, and would, in effect, send a
wrong signal that principals/employers and recruitment/manning agencies may
violate an OFWs security of tenure which an employment contract embodies and
actually profit from such violation based on an unconstitutional provision of law.

In the same vein, we cannot subscribe to respondents postulation that the

tanker allowance of US$130.00 should not be included in the computation of the
lump-sum salary to be awarded to petitioner.

First. It is only at this late stage, more particularly in their Memorandum,

that respondents are raising this issue. It was not raised before the LA, the NLRC,
and the CA. They did not even assail the award accorded by the CA, which
computed the lump-sum salary of petitioner at the basic salary of US$1,430.00,
and which clearly included the US$130.00 tanker allowance. Hence, fair play,
justice, and due process dictate that this Court cannot now, for the first time on
appeal, pass upon this question. Matters not taken up below cannot be raised for
the first time on appeal. They must be raised seasonably in the proceedings before
the lower tribunals. Questions raised on appeal must be within the issues framed by
the parties; consequently, issues not raised before the lower tribunals cannot be
raised for the first time on appeal.[31]

Second. Respondents invocation of Serrano is unavailing. Indeed, we made

the following pronouncements in Serrano, to wit:

The word salaries in Section 10(5) does not include overtime

and leave pay. For seafarers like petitioner, DOLE Department Order
No. 33, series 1996, provides a Standard Employment Contract of
Seafarers, in which salary is understood as the basic wage, exclusive
of overtime, leave pay and other bonuses; whereas overtime pay is
compensation for all work performed in excess of the regular eight
hours, and holiday pay is compensation for any work performed on
designated rest days and holidays.[32]

A close perusal of the contract reveals that the tanker allowance of

US$130.00 was not categorized as a bonus but was rather encapsulated in the basic
salary clause, hence, forming part of the basic salary of petitioner. Respondents
themselves in their petition for certiorari before the CA averred that petitioners
basic salary, pursuant to the contract, was US$1,300.00 + US$130.00 tanker
allowance.[33] If respondents intended it differently, the contract per se should have
indicated that said allowance does not form part of the basic salary or, simply, the
contract should have separated it from the basic salary clause.

A final note.

We ought to be reminded of the plight and sacrifices of our OFWs. In Olarte

v. Nayona,[34] this Court held that:

Our overseas workers belong to a disadvantaged class. Most of

them come from the poorest sector of our society. Their profile shows
they live in suffocating slums, trapped in an environment of crimes.
Hardly literate and in ill health, their only hope lies in jobs they find with
difficulty in our country. Their unfortunate circumstance makes them
easy prey to avaricious employers. They will climb mountains, cross the
seas, endure slave treatment in foreign lands just to survive. Out of
despondence, they will work under sub-human conditions and accept
salaries below the minimum. The least we can do is to protect them with
our laws.

WHEREFORE, the Petition is GRANTED. The Court of Appeals Decision

dated February 28, 2007 and Resolution dated August 30, 2007 are
hereby MODIFIED to the effect that petitioner is AWARDED his salaries for the
entire unexpired portion of his employment contract consisting of nine months
computed at the rate of US$1,430.00 per month. All other awards are
hereby AFFIRMED. No costs.

SO ORDERED.

[G.R. No. 113911. January 23, 1998]

VINTA MARITIME CO., INC. and ELKANO SHIP MANAGEMENT,
INC., petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION and LEONIDES C. BASCONCILLO, respondents.

DECISION
PANGANIBAN, J.:

To justify an employees dismissal, the employer has the burden of proving the
presence of just cause and due process. An illegally dismissed worker whose
employment is for a fixed period is entitled to payment of his salaries corresponding to
the unexpired portion of his contract.

The Case

These rules of long standing are invoked by the Court in resolving this special civil
action for certiorari under Rule 65 of the Rules of Court seeking the reversal of the
Decision dated September 13, 1993 and the Resolution dated November 23, 1993 of
the National Labor Relations Commission in NLRC CA No. 000309 [POEA Case No.
(M) 87-05-327].

On April 20, 1987, Leonides C. Basconcillo, herein private respondent, filed a

complaint with the Philippine Overseas Employment Administration (POEA) Workers
[1]

Assistance and Adjudication Office for illegal dismissal against Vinta Maritime Co., Inc.
and Elkano Ship Management, Inc., herein petitioners. In their answer, petitioners
[2]

alleged that private respondent was dismissed for his gross negligence and
incompetent performance as chief engineer of the M/V Boracay, as exemplified by the
following recorded incidents:

3.1.a. During a maneuver of the Vessel, [private respondent] closed off the
operating air valve to the bridge control system despite the large sign on the
valve itself-DO NOT CLOSE.

3.1.b. During a standby period, there was a loss of the main sea water
pressure because the suction strainer was blocked by ice. [Private
respondents] failure to change over the sea suctions resulted in the
overheating of the main engine and the auxiliaries, which forced the Vessel to
stop.

3.1.c. In another instance, complainant assured that the fuel situation of the
Vessel was in order. But when the fuel figures were verified, it was discovered
that there were only five (5) tons of fuel left before the next bunkering, leaving
thus, no margin for safety. Because of this, an unscheduled bunkering
operation in Oslo had to be done, contrary to instructions.

3.1.d. As part of the safety procedures in the Vessel, it is necessary that all
items of safety equipment be tested every week and a report entered in the
engine room logbook.[Private respondent] was instructed and under duty to
test the engine room fire alarms by activating each one individually with a heat
or smoke source depending on its type. It was, however, discovered later that
[private respondent] miserably failed to do this xxx.

3.1.e. [Private respondent] as [c]hief [e]ngineer miserably failed to instill

discipline among the engine room personnel who are under his direct
supervision, causing unrest among them and lack of respect for him and
resulting in the disruption of the smooth operations of the Vessel.

3.2. Contrary to [private respondents] allegations, he was given fair warning

and enough opportunity to explain his side in the foregoing incidents, not to
mention all the chances given to him to improve his substandard work
performance before he was dismissed.Because of his gross negligence and
his failure to perform the duties for which he was hired, [petitioners] had no
other choice than to terminate his services for cause pursuant to
managements prerogative to terminate an employee because of gross and
habitual neglectof his duties (Article 283, Labor Code).

Private respondent rebutted these allegations in his position paper, stating: (1) it
would be childish for an experienced chief engineer to close the operating air valve to
the bridge; a low level of starting air is caused by excessive and continuous use thereof
during maneuvering, and such malfunction is due to the pilots error; (2) the loss of main
water pressure due to the formation of ice on the suction strainer occurred because the
sea water inlet was clogged; private respondent, who was at the engine room,
contacted the master of the vessel, who was then asleep, to stop the engine and
change the sea valve to activate the sea water pressure; during the same incident, it
was also found that the other valve did not fully open by remote control; (3) private
respondent denied that the fuel figures reached only five tons as demonstrated by the
low-level alarm which, while set at ten cubic meters, did not set off even until the next
bunkering of the ship; it was Peter Robinson, the ship superintendent, who panicked
and caused the unscheduled bunkering operation in Oslo; (4) private respondent
conducted safety equipment-testing religiously, but admitted that in one instance he did
not test the equipment with a heat or smoke source, upon Robinsons advice that the
alarm would upset the pilot and the crew who were then resting; (5) private respondent
denied that there was unrest among the engine personnel, averring that on the contrary,
they cooperated and signed the guidelines which the former issued to them; and (6) he
denied having been given a chance to explain his side regarding the mentioned
incidents, the truth being that he was surprised when he was told of his dismissal.
Petitioners filed their position paper and supporting documents which however failed
[3]

to rebut private respondents allegations. [4]

Despite an unopposed motion for hearing filed by private respondent, the POEA
[5]

considered the case submitted for resolution by mutual agreement of the parties after
submission of their respective position papers and supporting documents. In his
decision dated March 9, 1990, POEA Administrator Tomas D. Achacoso ruled that
private respondent was illegally dismissed. The dispositive portion of the decision reads
as follows: [6]

WHEREFORE, in view of the foregoing, respondents are hereby ordered to

pay, jointly and severally, herein complainant the amount of SEVENTEEN
THOUSAND EIGHT HUNDRED SEVENTY FIVE US DOLLARS
(US$17,875.00) or its peso equivalent at the time of actual payment,
representing his salaries for the unexpired portion of his employment contract
at US$1,787.50 per month.

All other claims are hereby DISMISSED.

On appeal, the National Labor Relations Commission (Respondent Commission,

[7]

for brevity) affirmed the POEA: [8]

Accordingly, the decision of the POEA Administrator is hereby AFFIRMED en

toto.

Respondent Commission denied the motion for reconsideration in the challenged

Resolution: [9]

After due consideration of the Motion for Reconsideration filed by

respondents-appellants Vinta Maritime Co., Inc/ Elkano Ship Management,
Inc. on October 22, 1993, from the Decision of September 13, 1993, the
Commission (Second Division) RESOLVED to deny the same for lack of merit.

Hence, this petition. [10]

The Facts

The facts of this case are undisputed. The solicitor general relates the following
circumstances leading to the complaint: [11]
This case arose from a complaint for illegal dismissal by private respondent
herein, Leonides O. Basconcillo, against petitioner companies, xxx Vinta
Maritime Company, Incorporation and the El Kano Ship Management
Incorporated, before the POEA Adjudication Office.

On February 13, 1987, private respondent, a licensed Marine Engineer since

1970, was hired as Chief Engineer for M.V. Boracay by the shipping company,
xxx Vinta Maritime Company, Incorporated, thru its accredited manning agent,
the Elkano Ship Management, Inc.

The crew contract for his employment was effective for a fixed duration of one
(1) year, with a stipulated monthly basic pay of $1,375.00 U.S. Dollars, and
fixed overtime pay of $402.50 U.S. Dollars a month, or a total of $1,787.50
U.S. Dollars per month, with an additional 2 days leave a month. So on
February 18, 1987, private respondent joined the vessel at the port of
Rotterdam, the Netherlands, and assumed his duties and responsibilities as
Chief Engineer.

On April 2, 1987, or barely three (3) months after boarding the vessel, private
respondent was informed by Captain Jose B. Orquinaza, the ships Master,
that he was relieved of his duties per recommendation of the Marine
Superintendent, Mr. Peter Robinson, due to his poor performance (Annex G,
Petition). He was in effect terminated from the service. This came after private
respondent had a verbal altercation with Robinson, a British national,
regarding the discipline or lack thereof of the Filipino crew under private
respondents supervision. No inquiry or investigation, however, regarding his
supposed incompetence or negligence was ever conducted; neither was
private respondent furnished with a notice or memorandum regarding the
cause of his dismissal.

Private respondent was made to disembark at the port of Oslo, Norway, and
immediately repatriated to the country. Contrary to his perceived
incompetence, private respondents Seamens Book contained the following
entries:

Conduct - Very good

Ability - Very good

Remarks - Highly Recommended

(Annex F, p. 5, Petition)

Assignment of Errors

In their memorandum, petitioners submit that Respondent Commission gravely

abused its discretion by: [12]

a. Rendering the assailed resolution and decisions without a full-blown trial on

the merits, and

b. Disregarding the evidence for the petitioners and ruling that the company
illegally dismissed Basconcillo.

The Courts Ruling

The petition is bereft of merit. The petitioners failed to prove the elements of a valid
dismissal, namely: (1) just cause and (2) due process.

First Issue: Trial is Not Indispensable in Administrative Due Process

Petitioners claim that Respondent Commission gravely abused its discretion in

upholding the POEAs decision, which was based on the position papers and documents
submitted by the parties in view of a motion for trial which remained unacted upon. They
insist that a hearing was an indispensable condition before a judgment could be
rendered in this case. We do not agree. Although bound by law and practice to observe
due process, administrative agencies exercising quasi-judicial powers are nonetheless
free from the rigidity of certain procedural requirements. As applied to these
proceedings, due process requires only an opportunity to explain ones side. [13]

In labor cases, this Court has consistently held that due process does not
necessarily mean or require a hearing, but simply an opportunity or a right to be
heard. The requirements of due process are deemed to have been satisfied when
parties are given the opportunity to submit position papers. The holding of an
[14]

adversarial trial is discretionary on the labor arbiter and the parties cannot demand it as
a matter of right. More often than not, a litigant may be heard more creditably through
[15]

pleadings than through oral arguments. In administrative proceedings, technical rules of

procedure and evidence are not strictly applied; administrative due process cannot be
fully equated with due process in its strict judicial sense. Due process was designed to
[16]

afford an opportunity to be heard, and an actual verbal hearing need not always be
held. The necessity of conducting a hearing is addressed to the sound discretion of
[17]

the labor arbiter.

 These rules equally apply to cases filed with the Philippine Overseas Employment
Administration Adjudication Office. Section 6 of Rule III, Book VII of the POEA Rules
and Regulations of 1991 categorically states that proceedings before a POEA hearing
[18]

officer is non-litigious, although they are still subject to the requirements of due process.
Under the POEA Rules in force at the time the complaint was filed, summary
[19] [20]

judgments in which the pleadings, affidavits and evidence submitted are sufficient to
render a decision -- are allowed under Section 4. Where the parties fail to agree on an
[21]

amicable settlement and summary judgment is not appropriate, a judgment based on

position papers may be resorted to under Section 5. Where there are complicated
[22]

factual issues involved which cannot be resolved through such means, the hearing
officer may direct the parties to submit suggested written clarificatory questions to be
propounded to the party concerned. [23]

Applied to this particular case, it is undeniable that petitioners were given their
chance to be heard. Their answer, position paper and supporting documents had
become parts of the records and were considered accordingly by the POEA
administrator and by the Respondent Commission in rendering their respective
decisions.

Furthermore, petitioners did not deem it necessary to ask the POEA Adjudication
Office to conduct a hearing. It was the private respondent who moved for a full-blown
trial.Although they did not oppose the motion, they did not concur with it either. Their
silence was not an assent to the motion or an argument showing its necessity. Rather, it
was an eloquent statement that the position paper they submitted sufficiently covered all
the issues. On the other hand, private respondents Motion for Decision, dated
November 10, 1989, indubitably shows his waiver of his earlier requested hearing.
This motion was similarly unopposed by petitioners. So too, petitioners present
[24]

insistence on the necessity of a hearing is weakened by the fact that their memorandum
before this Court failed to specify the matters which would have required a hearing.

In all, the Court concurs with the POEA administrator and Respondent Commission
that a verbal hearing was dispensable. Petitioners belated insistence is a veiled attempt
to reopen an otherwise decided case. Aside from being late, this attempt is purely
dilatory, designed to unnecessarily prolong the resolution of the case. The Court holds
that petitioners were not denied due process. No grave abuse of discretion was
committed by Respondent Commission.

Second Issue: Private Respondent Was Illegally Dismissed

Where there is no showing of a clear, valid, and legal cause for the termination of
employment, the law considers the matter a case of illegal dismissal. Verily, the burden
is on the employer to prove that the termination was for a valid or authorized cause.
For an employees dismissal to be valid, (1) the dismissal must be for a valid cause
[25]
and (2) the employee must be afforded due process. Article 282 of the Labor Code
[26]

lists the following causes for termination of employment by the employer: (1) serious
misconduct or willful disobedience of lawful orders in connection with his or her work,
(2) gross and habitual neglect of duties, (3) fraud or willful breach of trust, (4)
commission of a crime or an offense against the person of the employer or his
immediate family member or representative, and (5) analogous cases. [27]

The absence of a valid cause for termination in this case is patent. Petitioners
allege that private respondent was dismissed because of his incompetence,
enumerating incidents in proof thereof. However, this is contradicted by private
respondents seamans book which states that his discharge was due to an emergency
leave. Moreover, his alleged incompetence is belied by the remarks made by petitioners
in the same book that private respondents services were highly recommended and that
his conduct and ability were rated very good. Petitioners allegation that such remark
and ratings were given to private respondent as an accommodation for future
employment fails to persuade. The Court cannot consent to such an accommodation,
even if the allegation were true, as it is a blatant misrepresentation. It cannot exculpate
petitioners based on such (mis)representation. When petitioners issued the
accommodation, they must have known its possible repercussions. They cannot be
allowed to turn against their representation.

As correctly argued by the solicitor general in his comment, it was incumbent upon
the petitioners to clearly establish that the discharge was for a just cause before they
could legitimately terminate the private respondents services. However, they miserably
failed in this respect. The alleged incidents of incompetence were unsupported by
[28]

relevant and convincing evidence. The affidavits of Robinson and Capt. Jose B.
Orquinaza, who caused private respondents dismissal and recommendation, are highly
suspicious and do not in any way prove that the alleged incidents showing private
respondents incompetence were ever investigated and proven, as they were [29]

sufficiently rebutted by the entries in the seamans book. Mere allegations are not
[30]

synonymous with proof.

Further, the POEA administrator and the Respondent Commission have cleared the
private respondent of such charges, noting that he sufficiently rebutted
them. Petitioners, on the other hand, presented no adequate evidence or argument to
tilt the weight of the evidence in their favor. Without factual basis are their contentions
which are as follows: (1) private respondent had been inactive and unemployed for five
years prior to his employment with petitioners; and (2) developments in ship technology,
equipment and damage control measures, during the five years he was unemployed,
gravely affected his expertise. Petitioners failed to specify these alleged advanced
equipment and measures.Neither did they explain that the instances where private
respondent allegedly endangered the ship and its crew involved any of these advanced
equipment and measures. The Court sees no justification to depart from the well-settled
rule that the factual findings of quasi-judicial agencies like the Respondent Commission,
which have acquired expertise in the matters entrusted to their jurisdiction, are accorded
by the Supreme Court not only respect but even finality if they are supported by
substantial evidence, or that amount of relevant evidence which a reasonable mind
would accept as adequate to justify a conclusion. [31]

Petitioners, in our view, failed to rebut the following observations of the Respondent
Commission: [32]

After perusing the records of this case, we arrived at the conclusion that the
Honorable POEA Administrator committed no reversible error in finding that
the dismissal of the complainant herein was illegal and violative of the contract
of employment. [Petitioners] allegation that [private respondent] was validly
terminated because of inefficiency on the basis of their consultants report
would not merit [o]ur judicial approval because of the following reasons:

First, it was [petitioners] themselves who hired and contracted the services of
[private respondent], presumably after considering his years of experience
and records of performance, otherwise, it would not have entered into a one
year contract of employment with [private respondent]. It is highly unthinkable
that [a] company like them would be so naive as to be hoodwink[ed] into hiring
somebody who is not an expert and does not know anything. Not if [w]e are to
consider that they ply international routes and capable of offering such
princely benefits as they did to [private respondent].

Second, the report of their British consultant is suspect to being one made out
of vengeance, what with the altercation that transpired between them
immediately prior to the preparation of the report. xxxx But more importantly,
the detailed report (See, p. 125 of Rollo), said consultant[s report] was to [o]ur
mind substantially rebutted by complainant one after the other in his position
paper dated October 2, 1987 (See, pp. 109 to 112 of Rollo). As such, the
same could not have carried much weight. There is no question therefore that
complainant was dismissed without any justifiable cause.

Due process, the second element for a valid dismissal, requires notice and hearing.
Before the employee can be dismissed under Article 282, the Code requires the
[33]

service of a written notice containing a statement of the cause(s) of termination and

giving said employee ample opportunity to be heard and to defend himself. A notice of
termination in writing is further required if the employees dismissal is decided upon.
The employer must furnish the worker with two written notices before termination of
[34]

employment can be legally effected: (1) notice which apprises the employee of the
particular acts or omissions for which his dismissal is sought and (2) subsequent notice
which informs the employee of the employers decision to dismiss him. The twin
requirements of notice and hearing constitute the essential elements of due process,
and neither of these elements can be eliminated without running afoul of the
constitutional guaranty. [35]

Using these legal criteria, we hold that private respondent was illegally
dismissed. No notice was ever given to him prior to his dismissal. This fact alone
disproves petitioners allegation that private respondent was given fair warning and
enough opportunity to explain his side [regarding] the incidents that led to his
dismissal. These requisites cannot be replaced as they are not mere technicalities, but
requirements of due process to which every employee is entitled to ensure that the
employers prerogative to dismiss is not exercised arbitrarily.
[36]

Illegally dismissed workers are entitled to the payment of their salaries

corresponding to the unexpired portion of their employment where the employment is
for a definite period. Conformably, the administrator and the Respondent Commission
[37]

properly awarded private respondent salaries for the period beginning April 9, 1987, the
date of his illegal dismissal, until February 18, 1988, the expiration of his contract.

WHEREFORE, the petition is hereby DISMISSED. The challenged Decision and

Resolution are AFFIRMED. Costs against petitioners.

SO ORDERED.