LABOR STANDARDS (SY 2016-2017)

JHORIZALDY UY, G.R. No. 174631

Petitioner,
Present:

CORONA, C.J.,
Chairperson,
- versus - LEONARDO-DE CASTRO,
BERSAMIN,
DEL CASTILLO, and
VILLARAMA, JR., JJ.

CENTRO CERAMICA CORPORATION AND/OR Promulgated:

RAMONITA Y. SY and MILAGROS U. GARCIA,
Respondents. October 19, 2011
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

VILLARAMA, JR., J.:

Before us is a petition for review on certiorari under Rule 45 assailing the Decision[1] dated April 21, 2006 and
Resolution[2] dated September 7, 2006 of the Court of Appeals (CA) in CA-G.R. SP No. 88061. The CA annulled and set aside
the Decision[3] dated July 29, 2004 rendered by the National Labor Relations Commission (NLRC) in NLRC NCR CA No.
035557-03 which reversed the Labor Arbiters ruling that petitioner was not illegally dismissed.
Factual Antecedents
Petitioner Jhorizaldy Uy was hired by respondent Centro Ceramica Corporation as full-time sales executive on March
21, 1999 under probationary employment for six months. He became a regular employee on May 1, 2000 with monthly salary
of P7,000.00 and P1,500.00 transportation allowance, plus commission.
On March 18, 2002, petitioner filed a complaint for illegal dismissal against the respondent company, its President Ramonita
Y. Sy (Sy) and Vice-President Milagros Uy-Garcia (Garcia).
Petitioner alleged that his predicament began when former VP Garcia was rehired by respondent company in the last quarter
of 2001. Certain incidents involving longtime clients led to a strained working relationship between him and Garcia. On
February 19, 2002 after their weekly sales meeting, he was informed by his superior, Sales Supervisor Richard Agcaoili, that
he (petitioner) was to assume a new position in the marketing department, to which he replied that he will think it over. His
friends had warned him to be careful saying mainit ka kay Ms. Garcia. That same day, he was summoned by Sy and Garcia
for a closed-door meeting during which Sy informed him of the termination of his services due to insubordination and advised
him to turn over his samples and files immediately. Sy even commented that member ka pa naman ng [S]ingles for [C]hrist
pero napakatigas naman ng ulo mo. On February 21, 2002, he was summoned again by Sy but prior to this he was already
informed by Agcaoili that the spouses Sy will give him all that is due to him plus goodwill money to settle everything. However,
during his meeting with Sy, he asked for his termination paper and thereupon Sy told him that If thats what you want I will give
it to you. She added that pag-isipan mo ang gagawin mo dahil kilala mo naman kami we are powerful. [4]
Petitioner further narrated that on February 22, 2002, he turned over company samples, accounts and receivables to
Agcaoili.Thereafter, he did not report for work anymore. But on March 6, 2002, an employee of respondent company
presented to him at his apartment the following memorandum:
MEMO OF NOTICE OF CHARGES

MEMORANDUM:

TO: JHORIZALDY B. UY
FROM: RAMONITA Y. SY
RE: FAILURE TO MEET QUOTA FOR SALES EXECUTIVE
DATE: February 21, 2002

Records show that you have failed to meet the quota for sales executives, set for the period from 1999 to
2001 in violation of your contract of employment.

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 In view of the foregoing, please explain in writing within twenty[-]four (24) hours from receipt hereof, why the
company should not terminate your contract of employment. [5]
He did not receive said memo because it was not written on the company stationery and besides he had already been
dismissed. As to his alleged low output, he was surprised considering that last January 2002, he was informed by Agcaoili that
management was satisfied with his performance and he ranked second to the top performer, Edwin I. Hirang. By that time, all
of the sales people of the company could not meet the P1.5 Million sales quota, so respondents are clearly zeroing in on him.
Finally, on March 13, 2002, respondents sent him another memo, which reads:
MEMO OF NOTICE OF CHARGES

INTER-OFFICE MEMORANDUM NO. 2:

TO: JHORIZALDY B. UY
THRU: RICHARD B. AGCAOILI
FROM: RAMONITA Y. SY
RE: NOTICE OF CHARGE OF ABSENCE WITHOUT LEAVE
DATE: March 13, 2002
Records show that since February 22, 2002, to date, you have failed to report for work, without informing
your employer of the reason therefor and without securing proper leave in violation of your contract of
employment and existing company rules and regulations.Further, you have refused to receive any of your
monetary entitlements such as salary, commission and other amounts due to you despite notice that the
same are available to you for payment.

Further, to this date, you have not submitted any explanation in writing in response to our Memo dated
February 21, 2002, requiring you to explain your failure to meet your quota as Sales Executive.

In view of the foregoing, please explain in writing twenty four (24) hours from receipt hereof, why the
company should not terminate your contract of employment for serious violations of your employment
contract as indicated above.[6]
He referred the above letter to his counsel who sent the following letter-reply:
MS. RAMONITA Y. SY
Centro Ceramica Corporation
225 EDSA, East Greenhills
Mandaluyong City

We are writing you in behalf of Mr. Jhorizaldy B. Uy who used to be a Sales Executive of your firm.

On February 19, 2002, you informed him that from Sales Executive he was to assume a new position
in the marketing department. He refused and when he later said that pag-iisipan ko pa you charged him with
insubordination. Your Ms. Nita Garcia even lamented in this wise single (for Christ) ka pa naman. Right then
you terminated his services and was directed to turn over everything that he had which was company owned
and it was on February 22, 2002 that the turn over was made.

On or about March 6, 2002 an employee of your company saw him in his apartment giving him a
memorandum to explain his alleged failure to meet the quota as Sales Executive. He admits with c[a]ndor
that he did not receive the said memorandum because it was written not on the company stationary. Just the
same the contents of the said letter has bec[o]me irrelevant because he has been already dismissed as of
February 19, 2002 and as regards the low output he says that all of the sales people could not meet the
quota and why zero in on him.

Then on Mach 13, 2002 you sent him a memorandum to explain in writing within twenty four (24)
hours why he should not be dismissed for his alleged absence without leave.

You must have been advised by someone that your dismissal of Mr. Uy on February 19, 2002 is
doubly illegal, i.e., for lack of due process and sufficient cause and the March 13, 2002 memorandum is to
make up for such lapse so that if Mr. Uy files a case of illegal dismissal, you can conveniently say that he
violated his contract of employment and that he was on absence without leave. Nice move, but it may not be
nice later on.
x x x x[7]

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For his illegal termination, petitioner asserted that he is entitled to his unpaid commission, tax refund, back wages and
reinstatement.
On the other hand, respondents denied dismissing petitioner. They countered that petitioners poor sales performance did not
improve even after he was regularized. On February 18, 2002, management met with the Sales Group on a per agent basis to
discuss sales performance, possible salary realignment and revamp of the Sales Group. Agcaoili relayed to petitioner the poor
assessment of his sales performance and the possibility that he will be transferred to another department although there was
yet no official decision on the matter. Petitioner then told Agcaoili that he was aware of the problem and his possible
termination, prompting the latter to convince the former to consider voluntarily resigning from the company rather than be
terminated. The next day, February 19, 2002, petitioner talked anew to Agcaoili and informed the latter that he will just resign
from the company and sought an appointment with Sy. When petitioner inquired how much he will get if he will resign, Sy
advised him that he would get salaries and commissions to which he is legally entitled; hence, for items sold and already
delivered, he will be receiving the commission in full, but for those sold but yet to be delivered, as per company policy, he will
receive the commissions only upon delivery of the items. Upon hearing this, petitioner suddenly got mad and said that if that is
the case, the company president should just terminate him and walked out.Petitioner was given a chance, through the two
memos issued to him, to explain his failure to meet the prescribed sales quota and his failure to report for work without
informing the company of the reason therefor. But he never submitted his explanations to his violations of the contract of
employment, and abandoned his job which is another ground for terminating his employment. While it would appear that
petitioner aimed to secure his alleged money claims from the respondents, this does not justify abandonment of his work as
respondents never had the intention of terminating his services. Respondents maintained that petitioner voluntarily left his
workplace and refused to report for work as in fact he indicated to his sales supervisor that he will just resign; however, he
never submitted a letter of resignation.[8]
Respondents also denied the claims of petitioner regarding an alleged souring of his relations with Garcia, as in fact it was
petitioner who clearly had a personal grudge against her and not the other way around. The alleged incidents with client
actually showed it was petitioner who was discourteous and abusive. There was likewise no reason for respondent Sy to say
they were powerful because petitioner did not at all threaten to sue or do something to their prejudice. To refute petitioners
unfounded allegations, respondents presented the affidavits of the following: (1) co-employee Rommel Azarraga who admitted
he was the person who warned petitioner to be careful and told him mainit ka kay Mrs. Garcia and explained that he only
made such statement in order to scare petitioner and convince him to change his attitude; the truth is that Mrs. Garcia had not
spoken to him about harbouring any ill feelings towards petitioner and neither does he know of any incident or circumstance
which may give rise to such ill feeling of Mrs. Garcia towards petitioner; (2) Richard Agcaoili who corroborated the respondents
claims, denying that petitioner was terminated due to insubordination; he further denied having told petitioner that
management was satisfied with his performance, the truth being that while petitioner may have ranked second to the top
performer, there was actually only two remaining senior sales agents while the rest have more or less six months experience;
considering the number of years of his service to the company, petitioner should have improved as against other agents most
of whom were newly-hired and still under probation; and (3) Arnulfo Merecido, respondent companys employee (warehouse
helper) who claimed that he had a fistfight with petitioner sometime in June 2000 which arose from the latters insulting remarks
regarding his family.[9]
Labor Arbiters Ruling
In his decision[10] dated April 8, 2003, Labor Arbiter Elias H. Salinas dismissed petitioners complaint on the basis of
his finding that it was petitioner who opted not to report for work since February 22, 2002, after offering to resign (as told to his
supervisor) because he could not accept his possible transfer to another department.
NLRCs Ruling
Petitioner appealed to the NLRC which reversed the Labor Arbiters ruling. The NLRC found that the dismissal of petitioner was
made under questionable circumstances, thus giving weight to petitioners assertion that he was being singled out
notwithstanding that all sales personnel similarly could not meet the P1.5 million monthly sales quota. Such finding is
reinforced by the fact that no sanction was imposed on petitioner or any other employee for the supposed failure to meet the
quota, thereby creating the impression that the situation was tolerated by the respondents. The NLRC thus decreed:
WHEREFORE, premises considered, the Decision dated April 8, 2003 is set aside and reversed. A
new one is entered finding complainant to have been illegally dismissed and thus entitled to reinstatement
with backwages. Respondent Centro Ceramica Corporation is hereby ordered to pay complainant his
backwages reckoned from the date of his dismissal on February 19, 2002 up to the date of the promulgation
of this decision. As reinstatement is no longer feasible, complainant should instead be paid separation pay
equivalent to one half (1/2) month pay for every year of service. In addition, respondents company should
pay complainant his unpaid commission in the amount of P16,581.00.
All other claims are dismissed for lack of merit.
SO ORDERED.[11]
Court of Appeals Ruling

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Respondents elevated the case to the CA which reversed the NLRC and dismissed petitioners complaint. According to the CA,
petitioner by his own account had admitted that it was he who asked for his dismissal when he narrated that during his
meeting with Sy, he had asked for his termination paper and she threatened to do so if that was what he wanted. It also noted
the affidavit of Agcaoili who attested that petitioner was merely informed of the decision to transfer him to another department,
which is not denied by the petitioner; said witness also said that the turnover of company documents and files was voluntary
on the part of petitioner who expressed desire to resign from the company. Another statement considered by the CA is that
made by witness Azarraga who explained that he only mentioned the name of Ms. Garcia to petitioner when he warned the
latter to be careful, simply because she is a member of the Couples for Christ who may have an influence over petitioner who
is a member of the Singles for Christ. As to the memos sent by the company to petitioners residence, this shows that it has not
yet terminated the employment of petitioner. Thus, the CA held that the evidence on record supports the Labor Arbiters finding
that petitioner informally severed the employment relationship as manifested by his voluntary transfer of his accountabilities to
his supervisor and thereafter his act of not reporting for work anymore.
Petitioners motion for reconsideration having been denied, the present petition was filed in this Court.
Issue
The sole issue to be addressed is whether petitioner was dismissed by the respondents or voluntarily severed his employment
by abandoning his job.
Arguments of the Parties
Petitioner assails the CAs misappreciation of the facts, completely relying on respondents allegations particularly on
what transpired during the meeting with respondents Sy and Garcia, of which the appellate court made a twisted interpretation
of their conversation. Hence, instead of decreeing petitioners illegal termination based on Sys verbal dismissal without just
cause and due process, the CA proceeded to conclude that petitioner voluntarily and informally severed his relation with the
company. As to the affidavit of Agcaoili, his statement that he merely informed petitioner of the decision to transfer him to
another department is of no moment because what matters is the action of Sy who dismissed petitioner outright. Moreover,
Agcaoili, being under the employ of respondents, would logically be biased and he would naturally tend to protect the company
by his statements regarding petitioners case. On the other hand, Azarragas confusing and inconsistent statements only
confirmed that Garcia indeed had a grudge against petitioner, as he could not give a rational explanation for warning petitioner
to be careful with Garcia.
Petitioner further contends that his act of turning over his accountabilities to his supervisor cannot be considered voluntary on
his part as it was done by him knowing that he was already terminated and upon the specific instructions of Sy and
Garcia. The CA therefore erred in relying on the unbelievable submission of respondents that such transfer of company
documents and samples was indicative of petitioners desire to resign. It failed to see that petitioners reaction to his impending
transfer to another department (pag-iisipan ko pa) was due to his not coming to terms with Garcia and aware of the warning
earlier given by his friends. Under this scenario, the animosity between petitioner and Garcia was evident such that Garcia
eventually prevailed upon Sy to terminate petitioners services. Unfortunately, it was on the very same day that petitioner was
verbally terminated by Sy on the ground of insubordination and ordered to immediately turn over his files and samples. It was
on February 21, 2002 that Agcaoili told petitioner that the company will give him all that is due him plus goodwill money, and in
a meeting with Sy he had asked for his termination paper because he was in fact already terminated on February 19, 2002 but
she responded by saying that if that was what he wanted she will give it to him and even threatened him to think because
respondents are powerful.
In their Comment, respondents assert that the CA committed no reversible error in concluding that petitioner was not illegally
terminated. They stress that the evidence clearly established that petitioner was not dismissed but required merely to explain
why he failed to report for work after meeting the company president. As to petitioners act of turning over his accountabilities,
respondents argue that this cannot be considered proof of his illegal dismissal because it was done voluntarily in line with his
proposed resignation. Respondent company was about to conduct its investigation on petitioner who went AWOL since
February 19, 2002 but then he refused to accept the memos sent to him, thus confirming categorically that respondents were
investigating his failure to report for work and giving him all the opportunity to explain his absence.
The Courts Ruling
We grant the petition.
As a general rule, only questions of law may be allowed in a petition for review on certiorari.[12]Considering, however, that the
Labor Arbiters findings were reversed by the NLRC, whose Decision was in turn overturned by the CA, reinstating the Labor
Arbiters Decision, it behooves the Court to reexamine the records and resolve the conflicting rulings. [13]
Scrutinizing the records, we find that the NLRCs finding of illegal dismissal is supported by the totality of evidence and more
consistent with logic and ordinary human experience than the common finding of the CA and Labor Arbiter that petitioner
informally severed his employment relationship with the company. It hardly convinces us that after declining his supposed
transfer to another department as per the information relayed to him by his supervisor, petitioner would readily turn over his
files and samples unless something critical indeed took place in his subsequent closed-door meeting with Sy and Garcia. As
correctly pointed out by petitioner, it is irrelevant whether or not he had earlier inquired from his supervisor what he will receive
if he offers instead to resign upon being told of his impending transfer, for what matters is the action of Sy on his employment
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status. If ever petitioner momentarily contemplated resignation and such was the impression he conveyed in his talk with his
supervisor prior to the meeting with Sy, such is borne by circumstances indicating Garcias antagonism towards petitioner. In
any event, whether such perception of a strained working relationship with Garcia was mistaken or not is beside the point. The
crucial factor is the verbal order directly given by Sy, the company president, for petitioner to immediately turn over his
accountabilities. Notably, Sy got irked when petitioner asked for his termination paper. Petitioner apparently wanted to
ascertain whether such summary dismissal was official, and it was well within his right to demand that he be furnished with a
written notice in order to apprise him of the real ground for his termination.
Contrary to respondents theory that petitioners act of turning over the company files and samples is proof of his voluntary
informal resignation rather than of the summary dismissal effected by management, no other plausible explanation can be
made of such immediate turn over except that petitioner directly confirmed from the company president herself that he was
already being dismissed. The subsequent memos sent to petitioners residence after he did not anymore report for work only
reinforce the conclusion that the belated written notice of the charge against him his alleged failure to meet the prescribed
sales quota was an afterthought on the part of respondents who may have realized that they failed to observe due process in
terminating him. That respondents would still require a written explanation for petitioners poor sales performance after the
latter already complied with Sys directive to turn over all his accountabilities is simply inconsistent with their claim that
petitioner offered to resign and voluntarily relinquished possession of company files and samples when told of his impending
transfer. In other words, petitioner was not given any opportunity to defend himself from whatever charges hurled by
management against him, such as poor sales performance as relayed to him by his supervisor, when Sy unceremoniously
terminated him which must have shocked him considering that his supervisor earlier advised that he would just be transferred
to another department. Under this scenario, petitioners decision not to report for work anymore was perfectly understandable,
as the sensible reaction of an employee fired by no less than the company president. It was indeed a classic case of dismissal
without just cause and due process, which is proscribed under our labor laws.
As to the affidavits submitted by the respondents, these are at best self-serving having been executed by employees beholden
to their employer and which evidence by themselves did not refute petitioners main cause of action -- the fact of his summary
dismissal on February 19, 2002. Respondents effort to present the case as one of an erring employee about to be investigated
for poor sales performance must likewise fail. The NLRC duly noted the discriminatory treatment accorded to petitioner when it
declared that there is no evidence at all that other sales personnel who failed to meet the prescribed sales quota were similarly
reprimanded or penalized. Incidentally, the question may be asked if petitioner whose performance was assessed by
management as poor yet admittedly ranked second to the top sales agent of the company, why was it that no evidence was
submitted by respondents to show the comparative sales performance of all sales agents? Given the strained working
relationship with Garcia, or at least a perception of such gap on the part of petitioner, the latter could not have been properly
informed of the actual ground for his dismissal. But more importantly, respondents terminated petitioner first and only belatedly
sent him written notices of the charge against him.Fairness requires that dismissal, being the ultimate penalty that can be
meted out to an employee, must have a clear basis. Any ambiguity in the ground for the termination of an employee should be
interpreted against the employer, who ordained such ground in the first place. [14]
Resignation is defined asthe voluntary act of employees who are compelled by personal reasons to disassociate themselves
from their employment. It must be done with the intention of relinquishing an office, accompanied by the act of
abandonment.[15] In this case, the evidence on record suggests that petitioner did not resign; he was orally dismissed by Sy. It
is this lack of clear, valid and legal cause, not to mention due process, that made his dismissal illegal, warranting
reinstatement and the award of backwages.[16]Moreover, the filing of a complaint for illegal dismissal just three weeks later is
difficult to reconcile with voluntary resignation.Had petitioner intended to voluntarily relinquish his employment after being
unceremoniously dismissed by no less than the company president, he would not have sought redress from the NLRC and
vigorously pursued this case against the respondents.[17]
When there is no showing of a clear, valid and legal cause for the termination of employment, the law considers it a
case of illegal dismissal. Furthermore, Article 4 of the Labor Code expresses the basic principle that all doubts in the
interpretation and implementation of the Labor Code should be interpreted in favor of the workingman. This principle has been
extended by jurisprudence to cover doubts in the evidence presented by the employer and the employee.[18] Thus we have
held that if the evidence presented by the employer and the employee are in equipoise, the scales of justice must be tilted in
favor of the latter.[19]Accordingly, the NLRCs finding of illegal dismissal must be upheld.
However, the award of back wages and separation pay in lieu of reinstatement should be modified. Under the
doctrine of strained relations, the payment of separation pay has been considered an acceptable alternative to reinstatement
when the latter option is no longer desirable or viable.[20] Under the facts established, petitioner is entitled to the payment of full
back wages, inclusive of allowances, and other benefits or their monetary equivalent, computed from the date of his dismissal
on February 19, 2002 up to the finality of this decision, and separation pay in lieu of reinstatement equivalent to one
month salary for every year of service, computed from the time of his engagement by respondents on March 21, 1999 up to
the finality of this decision.[21]
WHEREFORE, the petition for review on certiorari is GRANTED. The Decision dated April 21, 2006 and Resolution
dated September 7, 2006 of the Court of Appeals in CA-G.R. SP No. 88061 are SET ASIDE. The Decision dated July 29,

5
2004 of the National Labor Relations Commission in NLRC NCR CA No. 035557-03 is REINSTATED and AFFIRMED WITH
MODIFICATIONS in that in addition to the unpaid commission of P16,581.00, respondent Centro Ceramica Corporation is
hereby ordered to pay petitioner Jhorizaldy Uy his full back wages, inclusive of allowances, and other benefits or their
monetary equivalent, computed from the date of his dismissal on February 19, 2002 up to the finality of this decision, and
separation pay in lieu of reinstatement equivalent to one monthsalary for every year of service, computed from the time of his
engagement by respondent corporation on March 21, 1999 up to the finality of this decision.
No pronouncement as to costs.
SO ORDERED.

CARLOS C. DE CASTRO, G.R. No. 165153

Petitioner,
Present:

QUISUMBING, J., Chairperson,

CARPIO MORALES,
- versus - TINGA,
VELASCO, JR., and
BRION, JJ.

LIBERTY BROADCASTING NETWORK, INC. and EDGARDO QUIOGUE, Promulgated:

Respondents.
September 23, 2008

x-------------------------------------------------------------------------------------- x
DECISION

BRION, J.:

Before us is the Petition for Review on Certiorari[1] filed by petitioner Carlos C. de Castro (petitioner) to annul, reverse and/or
set aside the Decision[2] dated May 25, 2004 and the Resolution[3] dated August 30, 2004 of the Former Special Third Division
of the Court of Appeals (CA) in CA-G.R. SP No. 79207 entitled Liberty Broadcasting Network, Inc. and Edgardo B. Quiogue v.
National Labor Relations Commission and Carlos C. de Castro.

FACTUAL BACKGROUND

The facts of the case as gathered from the records are briefly summarized below.

The petitioner commenced his employment with respondent Liberty Broadcasting Network, Inc. (respondent company) as
Building Administrator on August 7, 1995. On May 16, 1996, the respondent company, through its HRM Senior Manager
(Personnel Manager) Bernard Mandap, sent a notice to the petitioner requiring him to explain within forty-eight (48) hours why
he should not be made liable for violation of the Company Code of Conduct for acts constituting serious misconduct, fraud and
willful breach of the trust reposed in him as a managerial employee. [4]

In his answer, the petitioner denied the allegations against him contained in the affidavits of respondents witnesses, Vicente
Niguidula (Niguidula) and Gil Balais (Balais).[5] The petitioner labeled all of the respondents accusations as completely
baseless and sham, designed to protect Niguidula and Balais who were the favorite boys of respondent Edgardo Quiogue
(Quiogue), the Executive Vice President of the respondent company. At the petitioners request, the respondent company
scheduled a formal hearing at 2:00 p.m. of May 28, 1996. However, the petitioner sent a notice that he would not participate
when he learned through his wife that criminal cases for estafa and qualified theft had been filed against him at the Makati
Prosecutors Office. He felt that the hearing was a moro-moro investigation. On May 24, 1996, the respondent company further
charged the petitioner with Violation of Company Code of Conduct, based on the affidavits of Balais, Cristino Samarita
(Samarita), and Jose Aying (Aying).[6]

On May 31, 1996, the respondent company issued a Notice of Dismissal to the petitioner based on the following grounds: [7]
1. Soliciting and/or receiving money for his own benefit from suppliers/dealers/traders Aying and Samarita,
representing commissions for job contracts involving the repair, reconditioning and replacement of parts of

6
 the airconditioning units at the companys Antipolo Station, as well as the installation of fire exits at the
Technology Centre;

2. Diversion of company funds by soliciting and receiving on different occasions a total of P14,000.00 in
commissions from Aying for a job contract in the companys Antipolo Station;

3. Theft of company property involving the unauthorized removal of one gallon of Delo oil from the company
storage room;

4. Disrespect/discourtesy towards a co-employee, for using offensive language against Niguidula;

5. Disorderly behavior, for challenging Niguidula to a fight during working hours within company premises,
thereby creating a disturbance that interrupted the normal flow of activities in the company;

6. Threat and coercion, for threatening to inflict bodily harm on the person of Niguidula and for coercing
Balais, a subordinate, into soliciting money in his (the petitioners) behalf from suppliers/contractors;

7. Abuse of authority, for instructing Balais to collect commissions from Aying and Samarita, and for
requiring Raul Pacaldo (Pacaldo) to exact 2%-5% of the price of the contracts awarded to suppliers; and

8. Slander, for uttering libelous statements against Niguidula.

The petitioner filed a complaint for illegal dismissal against the respondents with the National Labor Relations Commission
(NLRC) Arbitration Branch in the National Capital Region. At the arbitration, he denied committing the offenses charged. He
maintained that: he could not encourage solicitation of commissions from suppliers considering that he was quite new in the
company; the accusations are belated because the imputed acts happened in 1995; the one gallon of Delo oil he allegedly
carted away was at the room of Balais at the time, which circumstance he immediately relayed to Mandap; the affidavits of
Niguidula and Balais are not reliable because he had altercations with them; in the first week of May 1996, he reprimanded
Balais for incurring unnecessary overtime work, which Balais resented; on May 9, 1996, Niguidula verbally assaulted and
challenged him to a fight, which he reported to respondent Quiogue and to the Makati Police. Attached to the petitioners
position paper were the affidavits[8] of Aying and Ronalisa O. Rosana, a telephone operator of the company.

On April 30, 1999, Labor Arbiter Felipe Pati rendered a Decision in the petitioners favor, holding the respondent company
liable for illegal dismissal.[9] Arbiter Pati disbelieved the affidavits of Niguidula, Balais, Pacaldo, Samarita, and Aying in view of
the circumstances prior to their execution. The Arbiter noted that Niguidula and Balais had altercations with petitioner prior to
the issuance of the notice of violation to the latter; the affidavit of Samarita showed that it was not petitioner who personally
asked commission from him but Balais; Ayings credibility had been placed in serious doubt because he recanted his previous
affidavit and issued another stating that the petitioner did not actually ask commission from him; and Pacaldos affidavit should
not also be believed because he was a subordinate of Niguidula who had an ax to grind against the petitioner.

On appeal, the NLRC reversed the Labor Arbiters decision and adopted the findings of Labor Arbiter Tamayo who had
reviewed the appeal on the NLRCs instructions.[10] It ruled that Arbiter Pati erred in disregarding the affidavits of the
respondents witnesses.

The petitioner filed a motion for reconsideration which the NLRC granted in a Resolution promulgated on September 20,
2002.[11]The NLRC held that the charges against petitioner were never really substantiated other than by the bare allegations
in the affidavits of witnesses who were the companys employees and who had altercations with petitioner prior to the
execution of their affidavits.

The NLRC turned down the motion for reconsideration that the respondent company subsequently filed. [12] The respondent
company thus elevated the case to the CA via a petition for certiorari under Rule 65 of the Rules of Court. The CA granted the
petition in its Decision promulgated on May 25, 2004,[13] thereby effectively confirming the validity of the petitioners dismissal.
The appellate court found that the NLRC gravely abused its discretion when it disregarded the affidavits of all the respondents
witnesses, particularly those of Balais, Samarita, Niguidula, and Pacaldo who were one in saying that the petitioner demanded
commissions from the companys job contractors. The CA observed that it could not have been possible that Balais and
Niguidula (who had previous altercations with the petitioner), and Samarita (who did not previously know Quiogue) all
committed perjury to execute respondent Quiogues scheme of removing the petitioner from the company.

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The petitioner moved but failed to secure a reconsideration of the CA Decision; hence, he came to us through the present
petition.
THE PETITION
The petitioner submits that the CA erred when it acted as a trial court and interfered without sufficient basis with the NLRCs
findings. Citing our ruling in Cosmos Bottling Corporation v. NLRC, et al., [14] he points out that factual findings of the NLRC,
particularly when they coincide with those of the Labor Arbiter, are accorded respect and finality and should not be disturbed if
they are supported by substantial evidence.

The petitioner points out, too, that Rule 65 of the Rules of Court finds full application only when an administrative tribunal has
acted with grave abuse of discretion amounting to lack of or in excess of jurisdiction, or when such finding is not supported by
the evidence. He argues that the respondent company failed to raise any jurisdictional question of jurisdiction or grave abuse
of discretion before the CA. What the respondent company effectively sought from the CA, citing our ruling in Flores v.
NLRC,[15]was a judicial re-evaluation of the adequacy or inadequacy of the evidence on record an improper exercise of power
outside the scope of the extraordinary writ of certiorari.

The petitioner further argues that the CA erred when it substituted its judgment for that of the Labor Arbiter and the NLRC who
were the triers of facts who had the opportunity to review the evidence extensively.

The petitioner theorizes that his termination from employment was a hatchet job maliciously concocted by the respondents,
with Quiogue at the helm. He had offended Quiogue when he questioned the latters award of the fire exit contract to Samarita;
as a result, Quiogue fabricated charges against him, using his underlings Niguidula and Balais. He particularly questions the
charge that he conspired with his fellow managers (such as Niguidula, Pacaldo and even Personnel Manager Mandap) in
December 1995, and asks why his investigation and the supporting evidence came only in May 1996.

The petitioner likewise cites Ayings change of statement as evidence that the respondents charges have been
concoctions. He belies that he slandered and challenged Niguidula to a fight; it was in fact Niguidula who had defamed him.
He stresses that he complained in writing to respondent Quiogue about the incident immediately after it happened, copy
furnished B. P. Mandap, F. A. Domingo and R. M. Moreno, the Personnel Manager, Head of Human Relations and President
of the company, respectively. He likewise reported the matter to the police and to the barangay covering the workplace, and
lodged a complaint for grave oral defamation against Niguidula before the Makati Prosecutors Office. His co-employee,
Ronalisa Rosana, corroborated all these allegations. He points out that Niguidula never reported the incident to Quiogue or to
anyone for that matter, thus, proving the falsity of his (Niguidulas) complaint.

Finally, the petitioner draws attention to Quiogues failure to act on his complaint against Niguidula, only to resurrect it under
the Notice of Violation served on him on May 16, 1996.[16] This time, however, Niguidula was already the victim. As to the
notice of violation itself, the petitioner laments that although he was given 48 hours to explain, Quiogue, in bad faith,
immediately filed complaints for estafa and qualified theft against him. Mandap even went to his residence and warned his wife
not to file charges against the company, or else, Quiogue would file cases against him in the regular courts.

THE CASE FOR THE RESPONDENTS

The respondents submit that the CA correctly ruled as the NLRC committed grave abuse of discretion when it flip-flopped in its
factual findings. They further stress that the positive testimonies of Balais, Pacaldo, and Samarita should be given credence
over the negative testimony of the petitioner. Even granting that the testimony of Niguidula was tainted with malice and bad
faith, the affidavit of Balais should stand because no evidence supports the petitioners claim that Balais also had altercations
with him before he (Balais) executed his two affidavits.

With respect to the testimony of Samarita, the respondents point out that Samarita stated in no uncertain terms that he was
forced to increase his quotation for the construction of the company fire exits from P70,091.00 to P87,000.00 because the
petitioner had asked for commissions. The petitioner failed to rebut this. They brush aside the insinuation that Samarita and
Pacaldo suffer from bias as the petitioner failed to show by evidence that their personal interests led them to favor the
company.

The respondents lastly maintain that petitioners claim that Quiogue orchestrated the petitioners dismissal after he (the
petitioner) questioned Quiogues award of a contract to Samarita Enterprises for a questionable price is not supported by
evidence. They reiterate the gravity of the charges the petitioner faces; they constitute serious misconduct and fraud or willful
breach of trust reposed in him by his employer and are just causes for termination of employment under Article 282 of the
Labor Code, as well as serious breaches of company rules and the trust reposed in him by the respondent company.

8
 OUR RULING
As a rule, and as recently held in Rudy A. Palecpec, Jr. v. Hon. Corazon C. Davis, et al.[17] (a 2007 case), this Court is
not a trier of facts and can review a Rule 45 petition only on questions of law. We wade, however, into questions of facts when
there are substantial conflicts in the factual findings of the CA, on the one hand, and the trial court or government agency
concerned, on the other. This is precisely the situation that we have before us since the NLRC and the CA have diametrically
opposed factual findings leading to differing conclusions. Hence, we are left with no option but to undertake a review of the facts
in this Rule 45 case.
We find the petition meritorious. To our mind, the CA erred in the appreciation of the evidence surrounding
petitioners termination from employment. The cited grounds are at best doubtful under the proven surrounding circumstances,
and should have been interpreted in the petitioners favor pursuant to Article 4 of the Labor Code.
1. The petitioner had not stayed long in the company and had not even passed his probationary period when the acts
charged allegedly took place.[18] This fact carries several significant implications. First, being new, his natural motivation was to
make an early positive impression on his employer. Thus, it is believable that as building administrator, he diligently, zealously,
and faithfully performed his tasks, working in excess of eight hours per day to maintain the company buildings and facilities in
excellent shape; he even lent the company his personal tools and equipment to facilitate urgent repairs and maintenance work
on company properties.[19] Second, because of his natural motivation as a new employee and his lack of awareness of the
dynamics of relationships within the company, he must have been telling the truth when he said that he objected to the way the
contract for the installation of fire escapes was awarded to Samarita. Third, his being new somehow rendered doubtful the
charge that he had already encouraged solicitation of commission from suppliers, especially if considered with the timing of the
charges against him and the turnaround of witness Ayings testimony.
2. The relationships within the company at the time the charges were filed showed that he was a stranger who might
not have known the dynamics of company inter-relationships and might have stepped on the wrong toes in the course of
performing his duties.
Respondent Quiogue was the Executive Vice-President of the company,[20] a very powerful official with a lot of say in
company operations. Since Samarita was doing the fabrication of steel balusters for Quiogues home in New Manila, Quezon
City,[21] there is a lot of hidden dynamics in their relationship and it is not surprising that Samarita testified against the
petitioner. Both Samarita and Quioque have motives to resent the petitioners comments about the irregular award of a contract
to Samarita.
Mandap, as Personnel Manager, is a subordinate of Quiogue. The proposal to secure commissions from company
suppliers reportedly took place in a very public gathering a drinking session in his house. Why Mandap did not take immediate
action when he knew of the alleged plan as early as December 1995 was never explained although the petitioner raised the
issue squarely.[22] The time gap from December 1995 to May 1996 is an incredibly long time under the evidence available and
can be accounted for only by the fact that there was no intention to terminate the services of the petitioner in December; the
motivation and the scheme to do this came only sometime in April - May 1996 as the discussions below will show.
Niguidula, as Purchasing Manager, occupies a position that deals with supplies and suppliers. He, not the petitioner, is
one who might be expected to be in the middle of all the actions regarding supply deals. He would not welcome a new and over-
zealous building administrator since the building facilities generate the need for supplies and the building administrator is the
end-user who can see how supplies are procured and used. It is significant that Niguidula and the petitioner had a dispute
regarding the accounting of company items and had a near-fight that interrupted the normal flow of activities in the company.[23]
Pacaldo, a Purchasing Officer and a subordinate of Niguidula, under usual conditions would side with Niguidula. He
and Niguidula, not the petitioner, occupy the positions critical in the purchase of supplies for the company and were the people
who could exact commissions from suppliers.
Balais is an air-con maintenance man whom petitioner reprimanded for unauthorized overtime work on an air-
conditioning unit; for failure to monitor a newly overhauled compressor unit contrary to standard practice; and for over-pricing
his purchases; and thus, Balais had every reason to testify against the petitioner. [24]
As already mentioned, Aying the contractor who had earlier testified against the petitioner recanted his earlier
statement that petitioner asked for commissions from him. [25] Aying, in his second statement, exonerated the petitioner.[26] This
turnaround by itself is significant, more so if considered with other circumstances,[27] particularly the possibility that the charges
might have been orchestrated owing to the confluence of the people who were allied against the petitioner, their respective
motivations and the timing of events.
3. The timing of the filing of charges was, as the petitioner pointed out, unusual. Indeed, if the proposal to solicit
commissions had transpired in December, the charges were quite late when they came in May. Interestingly, it was in April
1996 that the petitioner questioned the soundness of respondent Quiogues decision to award the fabrication and installation of
six (6) units of fire escape to Samarita Enterprises without observing company procedure of requiring at least three quotations
from suppliers and contractors.[28]The petitioner reprimanded air-con maintenance man Balais sometime in the first week of May
1996 for unnecessary overtime work and the two had a verbal altercation, an incident that the petitioner reported to
Quiogue.[29] On May 9, 1996, petitioner also had an altercation with Niguidula, the companys Purchasing Manager, who verbally
assaulted, slandered, and challenged him to a fight, another incident which he likewise reported to Quiogue and to the Makati
9
Police.[30] All these strangely coincided with the time the charges were filed. The respondents never successfully accounted for
the coincidences.

All these considerations, to our mind, render the cited causes for the petitioners dismissal tenuous as the evidence
supporting these grounds come from highly suspect sources: they come either from people who harbor resentment against the
petitioner; those whose positions have inherent conflict points with that of the petitioner; or from people with business dealings
with the company. Thus, it was not surprising for the NLRC to observe:

From the above, the Commission believes that the Motion for Reconsideration should be granted.
Respondents charges against complainant were never substantiated by any evidence other than the
barefaced allegations in the affidavits of respondents witnesses who are employees of the company and
who had an altercation with complainant prior to the execution of their affidavits and charges. The other
witnesses are contractors having business deals with respondent company and in fact, Jose Aying has
made a turn around and denied the complainant has been asking commission from him.

Under the circumstances, we join the NLRC in concluding that the employer failed to prove a just cause for the
termination of the petitioners employment a burden the company, as employer, carries under the Labor
Code[31] and the CA erred when it saw grave abuse of discretion in the NLRCs ruling. The evidentiary situation, at the very least,
brings to the fore the dictum we stated in Prangan v. NLRC[32] and in Nicario v. NLRC[33] that if doubts exist between the
evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter. It is a time-
honored rule in controversies between a laborer and his master, doubts reasonably arising from the evidence, or in the
interpretation of agreements and writing should be resolved in the formers favor.

WHEREFORE, premises considered, we hereby GRANT the petition. Accordingly, we REVERSE and SET ASIDE the
Decision and Resolution of the CA promulgated on May 25, 2004 and August 30, 2004, respectively, and REINSTATE in all
respects the Resolution of the National Labor Relations Commission dated September 20, 2002. Costs against the
respondents.

SO ORDERED.

MANOLO A. PEAFLOR, G.R. No. 177114

Petitioner,

Present:
- versus -
CARPIO, J., Chairperson,
BRION,
DEL CASTILLO,
OUTDOOR CLOTHING MANUFACTURING CORPORATION, NATHANIEL ABAD, and
T. SYFU, President, MEDYLENE M. DEMOGENA, Finance Manager, and PEREZ, JJ.
PAUL U. LEE, Chairman,
Respondents.
Promulgated:

January 21, 2010

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

DECISION
BRION, J.:

Petitioner Manolo A. Peaflor (Peaflor) seeks the reversal of the Court of Appeals (CA) decision[1] dated December 29,
2006and its resolution[2] dated March 14, 2007, through the present petition for review on certiorari filed under Rule 45 of the
Rules of Court. The assailed CA decision affirmed the September 24, 2002 decision[3] of the National Labor Relations
Commission (NLRC) that in turn reversed the August 15, 2001 decision[4] of the Labor Arbiter.[5]

THE FACTUAL ANTECEDENTS

10
Peaflor was hired on September 2, 1999 as probationary Human Resource Department (HRD) Manager of respondent Outdoor
Clothing Manufacturing Corporation (Outdoor Clothing or the company). As HRD head, Peaflor was expected to (1) secure and
maintain the right quality and quantity of people needed by the company; (2) maintain the harmonious relationship between the
employees and management in a role that supports organizational goals and individual aspirations; and (3) represent the
company in labor cases or proceedings. Two staff members were assigned to work with him to assist him in undertaking these
functions.

Peaflor claimed that his relationship with Outdoor Clothing went well during the first few months of his employment; he
designed and created the companys Policy Manual, Personnel Handbook, Job Expectations, and Organizational Set-Up during
this period. His woes began when the companys Vice President for Operations, Edgar Lee (Lee), left the company after a big
fight between Lee and Chief Corporate Officer Nathaniel Syfu (Syfu). Because of his close association with Lee, Peaflor
claimed that he was among those who bore Syfus ire.

When Outdoor Clothing began undertaking its alleged downsizing program due to negative business returns, Peaflor alleged
that his department had been singled out. On the pretext of retrenchment, Peaflors two staff members were dismissed, leaving
him as the only member of Outdoor Clothings HRD and compelling him to perform all personnel-related work. He worked as a
one-man department, carrying out all clerical, administrative and liaison work; he personally went to various government offices
to process the companys papers.

When an Outdoor Clothing employee, Lynn Padilla (Padilla), suffered injuries in a bombing incident, the company
required Peaflor to attend to her hospitalization needs; he had to work outside office premises to undertake this task. As he
was acting on the companys orders, Peaflor considered himself to be on official business, but was surprised when the
company deducted six days salary corresponding to the time he assisted Padilla. According to Finance Manager Medylene
Demogena (Demogena), he failed to submit his trip ticket, but Peaflor belied this claim as a trip ticket was required only when a
company vehicle was used and he did not use any company vehicle when he attended to his off-premises work.[6]

After Peaflor returned from his field work on March 13, 2000, his officemates informed him that while he was away, Syfu had
appointed Nathaniel Buenaobra (Buenaobra) as the new HRD Manager. This information was confirmed by Syfus
memorandum of March 10, 2000 to the entire office stating that Buenaobra was the concurrent HRD and Accounting
Manager.[7] Peaflor was surprised by the news; he also felt betrayed and discouraged. He tried to talk to Syfu to clarify the
matter, but was unable to do so.Peaflor claimed that under these circumstances, he had no option but to resign. He submitted
a letter to Syfu declaring his irrevocable resignation from his employment with Outdoor Clothing effective at the close of office
hours on March 15, 2000.[8]

Peaflor then filed a complaint for illegal dismissal with the labor arbiter, claiming that he had been constructively dismissed. He
included in his complaint a prayer for reinstatement and payment of backwages, illegally deducted salaries, damages,
attorneys fees, and other monetary claims.

Outdoor Clothing denied Peaflors allegation of constructive dismissal. It posited instead that Peaflor had voluntarily resigned
from his work. Contrary to Peaflors statement that he had been dismissed from employment upon Syfus appointment of
Buenaobra as the new HRD Manager on March 10, 2000, Peaflor had in fact continued working for the company until his
resignation on March 15, 2000. The company cited as evidence the security report that Peaflor himself prepared and signed
on March 13, 2000.[9]

Outdoor Clothing disclaimed liability for any of Peaflors monetary claims. Since Peaflor had voluntarily resigned,
Outdoor Clothing alleged that he was not entitled to any backwages and damages. The company likewise denied making any
illegal deduction from Peaflors salary; while deductions were made, they were due to Peaflors failure to report for work during
the dates the company questioned. As a probationary employee, he was not yet entitled to any leave credit that would offset
his absences.

In his August 15, 2001 decision, the labor arbiter found that Peaflor had been illegally dismissed. [10] Outdoor Clothing was
consequently ordered to reinstate Peaflor to his former or to an equivalent position, and to pay him his illegally deducted salary
for six days, proportionate 13th month pay, attorneys fees, moral and exemplary damages.

Outdoor Clothing appealed the labor arbiters decision with the NLRC. It insisted that Peaflor had not been constructively
dismissed, claiming that Peaflor tendered his resignation on March 1, 2000 because he saw no future with the corporation due
11
to its dire financial standing. Syfu alleged that he was compelled to appoint Buenaobra as concurrent HRD Manager through a
memorandum dated March 1, 2000 to cover the position that Peaflor would soon vacate. [11] The appointment was also made to
address the personnel matters that had to be taken cared of while Peaflor was on unauthorized leave. Incidentally, Outdoor
Clothing alleged that Peaflor had already been given two notices, on March 6 and 11, 2000 (absence without official leave
memoranda or the AWOL memoranda), for his unauthorized absences. In a memorandum dated March 3, 2000 addressed to
Syfu, Buenaobra accepted the appointment.[12]

Peaflor contested Syfus March 1, 2000 memorandum, Buenaobras March 3, 2000 memorandum, and the AWOL memoranda,
claiming these pieces of evidence were fabricated and were never presented before the labor arbiter. He pointed out that
nothing in this resignation letter indicated that it was submitted to and received by Syfu on March 1, 2000. He claimed that it
was submitted on March 15, 2000, the same date he made his resignation effective. The AWOL memoranda could not be
relied on, as he was never furnished copies of these. Moreover, he could not be on prolonged absence without official leave, as
his residence was just a few meters away from the office.
The NLRC apparently found Outdoor Clothings submitted memoranda sufficient to overturn the labor arbiters decision. [13] It
characterized Peaflors resignation as a response, not to the allegedly degrading and hostile treatment that he was subjected to
by Syfu, but to Outdoor Clothings downward financial spiral. Buenaobras appointment was made only after Peaflor had
submitted his resignation letter, and this was made to cover the vacancy Peaflors resignation would create. Thus, Peaflor was
not eased out from his position as HRD manager. No malice likewise was present in the companys decision to dismiss Peaflors
two staff members; the company simply exercised its management prerogative to address the financial problems it
faced. Peaflor, in fact, drafted the dismissal letters of his staff members. In the absence of any illegal dismissal, no basis
existed for the monetary awards the labor arbiter granted.

Peaflor anchored his certiorari petition with the CA on the claim that the NLRC decision was tainted with grave abuse of
discretion, although he essentially adopted the same arguments he presented before the labor arbiter and the NLRC.

In a decision dated December 29, 2006,[14] the CA affirmed the NLRCs decision, stating that Peaflor failed to present
sufficient evidence supporting his claim that he had been constructively dismissed. The CA ruled that Peaflors resignation was
knowingly and voluntarily made. Accordingly, it dismissed Peaflors certiorari petition. It likewise denied the motion for
reconsideration that Peaflor subsequently filed. [15] Faced with these CA actions, Peaflor filed with us the present petition for
review on certiorari.

THE PARTIES ARGUMENTS

Peaflor insists that, contrary to the findings of the NLRC and the CA, he had been constructively dismissed from his
employment with Outdoor Clothing. He alleges that the dismissal of his two staff members, the demeaning liaison work he had
to perform as HRD Manager, the salary deduction for his alleged unauthorized absences, and the appointment of Buenaobra
as the new HRD manager even before he tendered his resignation, were clear acts of discrimination that made his continued
employment with the Outdoor Clothing unbearable. He was thus forced to resign.

Outdoor Clothing claims that Peaflor voluntarily resigned from his work and his contrary allegations were all
unsubstantiated.The HRD was not singled out for retrenchment, but was simply the first to lose its staff members because the
company had to downsize. Thus, all HRD work had to be performed by Peaflor. Instead of being grateful that he was not
among those immediately dismissed due to the companys retrenchment program, Peaflor unreasonably felt humiliated in
performing work that logically fell under his department; insisted on having a full staff complement; absented himself from work
without official leave; and demanded payment for his unauthorized absences.

THE ISSUE and THE COURTS RULING

The Court finds the petition meritorious.

A preliminary contentious issue is Outdoor Clothings argument that we should dismiss the petition outright because it raises
questions of facts, not the legal questions that should be raised in a Rule 45 petition. [16]

We see no merit in this argument as the rule that a Rule 45 petition deals only with legal issues is not an absolute
rule; it admits of exceptions. In the labor law setting, we wade into factual issues when conflict of factual findings exists among
the labor arbiter, the NLRC, and the CA. This is the exact situation that obtains in the present case since the labor arbiter
found facts supporting the conclusion that there had been constructive dismissal, while the NLRCs and the CAs factual
findings contradicted the labor arbiters findings. [17] Under this situation, the conflicting factual findings below are not binding on
us, and we retain the authority to pass on the evidence presented and draw conclusions therefrom. [18]
12
 The petition turns on the question of whether Peaflors undisputed resignation was a voluntary or a forced one, in the
latter case making it a constructive dismissal equivalent to an illegal dismissal. A critical fact necessary in resolving this issue
is whether Peaflor filed his letter of resignation before or after the appointment of Buenaobra as the new/concurrent
HRD manager. This question also gives rise to the side issue of when Buenaobras appointment was made. If the resignation
letter was submitted beforeSyfus appointment of Buenaobra as new HRD manager, little support exists for Peaflors allegation
that he had been forced to resign due to the prevailing abusive and hostile working environment. Buenaobras appointment
would then be simply intended to cover the vacancy created by Peaflors resignation. On the other hand, if the resignation letter
was submitted after the appointment of Buenaobra, then factual basis exists indicating that Peaflor had been constructively
dismissed as his resignation was a response to the unacceptable appointment of another person to a position he still
occupied.

The question of when Peaflor submitted his resignation letter arises because this letter undisputably made was
undated. Despite Peaflors claim of having impressive intellectual and academic credentials, [19] his resignation letter, for some
reason, was undated.Thus, the parties have directly opposing claims on the matter. Peaflor claims that he wrote and filed the
letter on the same date he made his resignation effective March 15, 2000. Outdoor Clothing, on the other hand, contends that
the letter was submitted on March 1, 2000, for which reason Syfu issued a memorandum of the same date appointing
Buenaobra as the concurrent HRD manager; Syfus memorandum cited Peaflors intention to resign so he could devote his time
to teaching. The company further cites in support of its case Buenaobras March 3, 2000 memorandum accepting his
appointment. Another piece of evidence is the Syfu memorandum of March 10, 2000, which informed the office of the
appointment of Buenaobra as the concurrent Head of HRD the position that Peaflor occupied. Two other memoranda are
alleged to exist, namely, the AWOL memoranda of March 6 and 11, 2000, allegedly sent to Penaflor.

Several reasons arising directly from these pieces of evidence lead us to conclude that Peaflor did indeed submit his
resignation letter on March, 15, 2000, i.e., on the same day that it was submitted.

First, we regard the Syfu memorandum of March 1, 2000 and the memorandum of Buenaobra of March 3,
2000 accepting the position of HRD Head to be highly suspect. In our view, these memoranda, while dated, do not constitute
conclusive evidence of their dates of preparation and communication. Surprisingly, Peaflor was never informed about these
memoranda when they directly concerned him, particularly the turnover of responsibilities to Buenaobra if indeed Peaflor had
resigned on March 1, 2000 and a smooth turnover to Buenaobra was intended. Even the recipients of these communications
do not appear to have signed for and dated their receipt. The AWOL memoranda, to be sure, should have been presented with
proof of service if they were to have any binding effect on Peaflor.

Second,we find it surprising that these pieces of evidence pointing to a March 1, 2000 resignation specifically,
Syfus March 1, 2000 memorandum to Buenaobra about Penaflors resignation and Buenaobras own acknowledgment and
acceptance were only presented to the NLRC on appeal, not before the labor arbiter. The matter was not even mentioned in
the companys position paper filed with the labor arbiter. [20] While the presentation of evidence at the NLRC level on appeal is
not unheard of in labor cases,[21]still sufficient explanation must be adduced to explain why this irregular practice should be
allowed. In the present case, Outdoor Clothing totally failed to explain the reason for its omission. This failure, to us, is
significant, as these were the clinching pieces of evidence that allowed the NLRC to justify the reversal of the labor arbiters
decision.
Third, the circumstances and other evidence surrounding Peaflors resignation support his claim that he was
practically compelled to resign from the company.

Foremost among these is the memorandum of March 10, 2000 signed by Syfu informing the whole office (To: All
concerned) about the designation of Buenaobra as concurrent Accounting and HRD Manager. In contrast with the suspect
memoranda we discussed above, this memorandum properly bore signatures acknowledging receipt and dates of receipt by at
least five company officials, among them the readable signature of Demogene and one Agbayani; three of them acknowledged
receipt on March 13, 2000, showing that indeed it was only on that day that the appointment of Buenaobra to the HRD position
was disclosed. This evidence is fully consistent with Peaflors position that it was only in the afternoon of March 13, 2000 that
he was told, informally at that, that Buenaobra had taken over his position. It explains as well why as late as March 13, 2000,
Peaflor still prepared and signed a security report, [22] and is fully consistent with his position that on that day he was still
working on the excuse letter of certain sales personnel of the company. [23]

We note that the company only belatedly questioned the motivation that Peaflor cited for his discriminatory
treatment, i.e., that he was caught in the bitter fight between Syfu and Lee, then Vice President for Operations, that led the
latter to leave the company.[24] After Lee left, Peaflor alleged that those identified with Lee were singled out for adverse
treatment, citing in this regard the downsizing of HRD that occurred on or about this time and which resulted in his one-man
13
HRD operation. We say this downsizing was only alleged as the company totally failed despite Penaflors claim of
discriminatory practice to adduce evidence showing that there had indeed been a legitimate downsizing. Other than its bare
claim that it was facing severe financial problems, Outdoor Clothing never presented any evidence to prove both the reasons
for its alleged downsizing and the fact of such downsizing. No evidence was ever offered to rebut Peaflors claim that his staff
members were dismissed to make his life as HRD Head difficult. To be sure, Peaflors participation in the termination of his
staff members employment cannot be used against him, as the termination of employment was a management decision that
Peaflor, at his level, could not have effectively contested without putting his own job on the line.

Peaflors own service with the company deserves close scrutiny. He started working for the company on September 2,
1999 so that by March 1, 2000, his probationary period would have ended and he would have become a regular employee.
We find it highly unlikely that Peaflor would resign on March 1, 2000 and would then simply leave given his undisputed record
of having successfully worked within his probationary period on the companys Policy Manual, Personnel Handbook, Job
Expectations, and Organizational Set-up. It does not appear sound and logical to us that an employee would tender his
resignation on the very same day he was entitled by law to be considered a regular employee, especially when a downsizing
was taking place and he could have availed of its benefits if he would be separated from the service as a regular employee. It
was strange, too, that he would submit his resignation on March 1, 2000 and keep completely quiet about this development
until its effective date on March 15, 2000. In the usual course, the turnover alone of responsibilities and work loads to the
successor in a small company would have prevented the matter from being completely under wraps for 10 days before any
announcement was ever made. That Peaflor was caught by surprise by the turnover of his post to Buenaobra is in fact
indicated by the companys own evidence that Peaflor still submitted a security report on March 13, 2000. On the whole,
Peaflors record with the company is not that of a company official who would simply and voluntarily tender a precipitate
resignation on the excuse that he would devote his time to teaching a lame excuse at best considering that March is the month
the semester usually ends and is two or three months away from the start of another school year.

In our view, it is more consistent with human experience that Peaflor indeed learned of the appointment of Buenaobra
only on March 13, 2000 and reacted to this development through his resignation letter after realizing that he would only face
hostility and frustration in his working environment. Three very basic labor law principles support this conclusion and militate
against the companys case.

The first is the settled rule that in employee termination disputes, the employer bears the burden of proving that the
employees dismissal was for just and valid cause. [25] That Peaflor did indeed file a letter of resignation does not help the
companys case as, other than the fact of resignation, the company must still prove that the employee voluntarily
resigned.[26] There can be no valid resignation where the act was made under compulsion or under circumstances
approximating compulsion, such as when an employees act of handing in his resignation was a reaction to circumstances
leaving him no alternative but to resign.[27] In sum, the evidence does not support the existence of voluntariness in Peaflors
resignation.

Another basic principle is that expressed in Article 4 of the Labor Code that all doubts in the interpretation and
implementation of the Labor Code should be interpreted in favor of the workingman. This principle has been extended by
jurisprudence to cover doubts in the evidence presented by the employer and the employee. [28] As shown above, Peaflor has,
at very least, shown serious doubts about the merits of the companys case, particularly in the appreciation of the clinching
evidence on which the NLRC and CA decisions were based. In such contest of evidence, the cited Article 4 compels us to rule
in Peaflors favor.Thus, we find that Peaflor was constructively dismissed given the hostile and discriminatory working
environment he found himself in, particularly evidenced by the escalating acts of unfairness against him that culminated in the
appointment of another HRD manager without any prior notice to him. Where no less than the companys chief corporate
officer was against him, Peaflor had no alternative but to resign from his employment. [29]

Last but not the least, we have repeatedly given significance in abandonment and constructive dismissal cases to the
employees reaction to the termination of his employment and have asked the question: is the complaint against the employer
merely a convenient afterthought subsequent to an abandonment or a voluntary resignation? We find from the records that
Peaflor sought almost immediate official recourse to contest his separation from service through a complaint for illegal
dismissal.[30] This is not the act of one who voluntarily resigned; his immediate complaints characterize him as one who deeply
felt that he had been wronged.
WHEREFORE, we GRANT the petitioners petition for review on certiorari, and REVERSE the decision and resolution
of the Court of Appeals in CA-G.R. SP No. 87865 promulgated on December 29, 2006 and March 14, 2007,
respectively. We REINSTATE the decision of the labor arbiter dated August 15, 2001, with the MODIFICATION that, due to
the strained relations between the parties, respondents are additionally ordered to pay separation pay equivalent to the
petitioners one months salary.
14
 Costs against the respondents.

SO ORDERED.

NORKIS FREE AND G.R. No. 157098

INDEPENDENT
WORKERS UNION, Present:
Petitioner,
Panganiban, J.,
Chairman,
Sandoval-Gutierrez,
- versus - Corona,
Carpio Morales, and
Garcia, JJ

NORKIS TRADING COMPANY, Promulgated:

INC. ,
Respondent. JUNE 30, 2005
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --- -- -- -- -- -- x

DECISION

PANGANIBAN, J.:

W age Order No. ROVII-06, issued by the Regional Tripartite Wages and Productivity Board (RTWPB),
merely fixed a new minimum wage rate for private sector employees in Region VII; hence, respondent cannot
be compelled to grant an across-the-board increase to its employees who, at the time of the promulgation of the Wage
Order, were already being paid more than the existing minimum wage.

The Case

Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to set aside the July 30, 2002
Decision[2]
and the January 16, 2003 Resolution[3] of the Court of Appeals (CA) in CA-GR SP No. 54611. The disposition of the
assailed Decision reads as follows:

ACCORDINGLY, We GRANT the instant petition for certiorari. The Decision of public respondent
Voluntary Arbitrator in VA Case No. 374-VII-09-014-98E dated July 8, 1999, and Order dated August 13,
1999, denying petitioners Motion for Reconsideration, are hereby SET ASIDE. Petitioner is hereby declared
to have lawfully complied with Wage Order No. ROVII-06. No pronouncement as to costs.[4]

The Decision[5] of Voluntary Arbitrator Perfecto R. de los Reyes III,[6] reversed by the CA, disposed as follows:

WHEREFORE, premises considered, this Office hereby decides in favor of Complainant. Respondent is hereby
ordered to grant its employees the amount of increases granted under RTWPB Wage Order ROVII-06 in an
across-the-board manner retroactive to the dates provided for under the said Wage Order. [7]

The January 16, 2003 Resolution denied petitioners Motion for Reconsideration.

15
 The Facts

The CA summarized the undisputed factual antecedents as follows:

The instant case arose as a result of the issuance of Wage Order No. ROVII-06 by the Regional
Tripartite Wages and Productivity Board (RTWPB) increasing the minimum daily wage by P10.00, effective
October 1, 1998.

Prior to said issuance, herein parties entered into a Collective Bargaining Agreement (CBA)
effective from August 1, 1994 to July 31, 1999.

Sec. 1. Salary Increase. The Company shall grant a FIFTEEN (P15.00) PESOS
per day increase to all its regular or permanent employees effective August 1, 1994.

Sec. 2. Minimum Wage Law Amendment. In the event that a law is enacted
increasing minimum wage, an across-the-board increase shall be granted by the
company according to the provisions of the law.

On January 27, 1998, a re-negotiation of the CBA was terminated and pursuant to which a
Memorandum of Agreement was forged between the parties. It was therein stated that petitioner shall grant
a salary increase to all regular and permanent employees as follows:

Ten (10) pesos per day increase effective August 1, 1997; Ten (10) pesos per day
increase effective August 1, 1998.

Pursuant to said Memorandum of Agreement, the employees received wage increases of P10.00
per day effective August 1, 1997 and P10.00 per day effective August 1, 1998. As a result, the
agreed P10.00 re-negotiated salary increase effectively raised the daily wage of the employees to P165.00
retroactive August 1, 1997; and another increase of P10.00, effective August 1, 1998, raising the
employees[] daily wage to P175.00.

On March 10, 1998, the Regional Tripartite Wage Productivity Board (RTWPB) of Region VII
issued Wage Order ROVII-06 which established the minimum wage of P165.00, by mandating a wage
increase of five (P5.00) pesos per day beginning April 1, 1998, thereby raising the daily minimum wage
to P160.00 and another increase of five (P5.00) pesos per day beginning October 1, 1998, thereby raising
the daily minimum wage to P165.00 per day.

In accordance with the Wage Order and Section 2, Article XII of the CBA, [petitioner] demanded an
across-the-board increase. [Respondent], however, refused to implement the Wage Order, insisting that
since it has been paying its workers the new minimum wage of P165.00 even before the issuance of the
Wage Order, it cannot be made to comply with said Wage Order.

Thus, [respondent] argued that long before the passage of Wage Order ROVII-06 on March 10,
1998, and by virtue of the Memorandum of Agreement it entered with herein [petitioner], [respondent] was
already paying its employees a daily wage of P165.00 per day retroactive on August 1, 1997, while the
minimum wage at that time was still P155.00 per day. On August 1, 1998, [respondent] again granted an
increase from P165.00 per day to P175.00, so that at the time of the effectivity of Wage Order No. 06 on
October 1, 1998 prescribing the new minimum wage ofP165.00 per day, [respondents] employees were
already receiving P175.00 per day.

For failure of the parties to settle this controversy, a preventive mediation complaint was filed by
herein [petitioner] before the National Conciliation and Mediation Board, pursuant to which the parties
selected public respondent Voluntary Arbitrator to decide said controversy.

Submitted for arbitral resolution is the sole issue of whether or not [respondent] has complied with
Wage Order No. ROVII-06, in relation to the CBA provision mandating an across-the-board increase in case
of the issuance of a Wage Order.

16
 In his decision, public respondent arbitrator found herein [respondent] not to have complied with the
wage order, through the following dispositions:

The CBA provision in question (providing for an across-the-board increase in case of a

wage order) is worded and couched in a vague and unclear manner.

x x x In order to judge the intention of the contracting parties, their contemporaneous and
subsequent acts shall be principally considered (Art. 1371, New Civil Code). Thus, this
Office x x x required the parties to submit additional evidence in order to be able to know
and interpret the parties working intent and application of Wage Order No. 06 issued by
the Regional Tripartite Wages and Productivity Board, Regional Office VII in relation to
Section 2, Article XII provided for in the parties[] existing CBA.

x x x Viewed from the foregoing facts and evidence, the working intent and application of
RTWPB Wage Order ROVII-06 in relation to Section 2, Article XII of the parties[] existing
CBA is clearly established. The evidence submitted by the parties, all point to the fact that
their true intention on how to implement existing wage orders is to grant such wage orders
in an across-the-board manner in relation to the provisions of Section 2, Article XII of their
existing CBA. Respondent in this case [has] failed to comply with its contractual obligation
of implementing the increase under RTWPB Wage Order ROVII-06 in an across-the-board
manner as provided in Section 2, Article XII of its CBA with [petitioner].

x x x x x x x x x[8]

Respondent elevated the case to the CA via a Petition for Certiorari and Prohibition under Rule 65 of the Rules of Court.

Ruling of the Court of Appeals

The CA noted that the grant of an across-the-board increase, provided under Section 2 of Article XII of the CBA, was
qualified by the phrase according to the provisions of the law. It thus stressed the necessity of determining the import of Wage
Order No. ROVII-06, the law involved in the present controversy. Taking into consideration the opinion of the RTWPB, Region
VII, the appellate court held that respondent had sufficiently complied with Wage Order No. ROVII-06. The Board had opined
that since adjustments granted are only to raise the minimum wage or the floor wage as a matter of policy, x x x wages
granted over the above amount set by this Board is deemed a compliance.

The CA added that the policy and intent of the Wage Order was to cushion the impact of the regional economic crisis
upon both the workers and the employers, not to enrich the employees at the expense of the employers. Further, it held that to
compel respondent to grant an across-the-board wage increase, notwithstanding that it was already paying salaries to its
employees above the minimum wage, would be to penalize generous employers and effectively make them wait for the
passage of a new wage order before granting any increase. This would be counter-productive [insofar] as securing the
interests of labor is concerned.[9]

The appellate court said that the Wage Order exempted from compliance those enterprises already paying salaries
equal to or more than the prescribed minimum wage; thus, the Order effectively made the previous voluntary increases given
by respondent to its employees creditable against the law-mandated increase. Consequently, there was no need for the
Collective Bargaining Agreement (CBA) to provide expressly for such creditability.

Finally, the CA sustained respondents explanation that the across-the-board increases provided in the CBA was
required only when a minimum wage law caused a distortion in the wage structure.

Hence, this Petition.[10]

Issues

17
In its Memorandum, petitioner submits the following issues for our consideration:

I. Whether or not the Honorable Court of Appeals gravely abused its discretion in setting aside the decision
and resolution of the honorable voluntary arbitrator[.]

II. Whether or not the Honorable Court of Appeals gravely abused its discretion in considering the
Supplemental Memorandum of respondent and giving merit to evidence presented for the first time
on appeal and filed after the lapse of the non[-]extendible period of time to file memorandum and
despite an extension granted to respondent[.]

III. Whether or not the Honorable Court of Appeals gravely abused its discretion in disregarding
established jurisprudence on statutory construction.[11]

The main issue is whether respondent violated the CBA in its refusal to grant its employees an across-the-board
increase as a result of the passage of Wage Order No. ROVII-06. Also raised is the procedural issue relating to the propriety
of the admission by the CA of RTWPBs letter-opinion, which was attached to respondents Supplemental Memorandum
submitted to that court on August 30, 2000, beyond the July 17, 2000 extended deadline.

The Courts Ruling

The Petition lacks merit.

Main Issue:
Effect of Wage Order No. ROVII-06
on the Parties CBA

Petitioner insists that respondent should have granted to the employees the increase stated in Wage Order No.
ROVII-06. In addition to the increases both parties had mutually agreed upon, the CBA supposedly imposed upon respondent
the obligation to implement the increases mandated by law without any condition or qualification. To support its claim,
petitioner repeatedly invokes Section 2 of Article XII of the CBA, which reads:

SECTION 2. Minimum Wage Law Amendment. In the event that a law is enacted increasing minimum
wage, an across-the-board increase shall be granted by the Company according to the provisions of the
law.

Interestingly, petitioner disregards altogether in its argument the qualifying phrase according to the provisions of the
law and merely focuses its attention on the across-the-board increase clause. Given the entire sentence, it is clear that the
above-quoted CBA provision does not support the unyielding view of petitioner that the issuance of Wage Order No. ROVII-06
entitles its members to an across-the-board increase, absolutely and without any condition.

Stipulations in a contract must be read together,[12] not in isolation from one another. When the terms of its clauses
are clear and leave no room for doubt as to the intention of the contracting parties, it would not be necessary to interpret those
terms, whose literal meanings should prevail.[13]

The CA correctly observed that the import of Wage Order No. ROVII-06 should be considered in the implementation
of the government-decreed increase. The present Petition makes no denial or refutation of this finding, but merely an averment
of the silence of the CBA on the creditability of increases provided under the Agreement against those in the minimum wage
under a wage order. It insists that the parties intended no such creditability; otherwise, they would have expressly stated such
intent in the CBA.

We hold that the issue here is not about creditability, but the applicability of Wage Order No. ROVII-06 to respondents
employees. The Wage Order was intended to fix a new minimum wage only, not to grant across-the-board wage increases to
all employees in Region VII. The intent of the Order is indicated in its title, Establishing New Minimum Wage Rates, as well as

18
in its preamble: the purpose, reason or justification for its enactment was to adjust the minimum wage of workers to cushion
the impact brought about by the latest economic crisis not only in the Philippines but also in the Asian region.
In Cagayan Sugar Milling Company v. Secretary of Labor and Employment [14] and Manila Mandarin Employees
Union v. NLRC,[15] the Wage Orders that were the subjects of those cases were substantially and similarly worded as Wage
Order No. ROVII-06. In those cases, this Court construed the Orders along the same line that it follows now: as providing for
an increase in the prevailing statutory minimum wage rates of workers. No across-the-board increases were granted.
Parenthetically, there are two methods of adjusting the minimum wage. In Employers Confederation of the Phils. v.
National Wages and Productivity Commission,[16] these were identified as the floor wage and the salary-ceiling methods. The
floor wage method involves the fixing of a determinate amount to be added to the prevailing statutory minimum wage rates. On
the other hand, in the salary-ceiling method, the wage adjustment was to be applied to employees receiving a certain
denominated salary ceiling. In other words, workers already being paid more than the existing minimum wage (up to a certain
amount stated in the Wage Order) are also to be given a
wage increase.
A cursory reading of the subject Wage Order convinces us that the intention of the Regional Board of Region VII was to prescribe
a minimum or floor wage; not to determine a salary ceiling. Had the latter been its intention, the Board would have expressly provided
accordingly. The text of Sections 2 and 3 of the Order states:

Section 2. AMOUNT AND MANNER OF INCREASE. Upon the effectivity of this Order, the daily minimum wage rates
for all the workers and employees in the private sector shall be increased by Ten Pesos (P10.00) per day to be given in
the following manner:

i. Five Pesos (P5.00) per day effective April 1, 1998, and

ii. Additional Five Pesos (P5.00) per day effective October 1, 1998.

Section 3. UNIFORM WAGE RATE PER AREA CLASSIFICATION. To effect a uniform wage rate pursuant to Section
1 hereof, the prescribed minimum wage after full implementation of this Order for each area classification shall be as
follows:
Area Classification Non-Agriculture Sector Agriculture Sector
Class A 165.00 150.00
Class B 155.00 140.00
Class C 145.00 130.00
Class D 135.00 120.00

These provisions show that the prescribed minimum wage after full implementation of the P10 increase in the Wage
Order is P165 for Class A private non-agriculture sectors. It would be reasonable and logical, therefore, to infer that those
employers already paying their employees more than P165 at the time of the issuance of the Order are sufficiently complying
with the Order.
Further supporting this construction of Wage Order No. ROVII-06 is the opinion of its drafter, the RTWPB Region VII.
In its letter-opinion[17] answering respondents queries, the Board gave a similar interpretation of the essence of the Wage
Order: to fix a new floor wage or to upgrade the wages of the employees receiving lower than the minimum wage set by the
Order.
Notably, the RTWPB was interpreting only its own issuance, not a statutory provision. The best authority to construe
a rule or an issuance is its very source,[18] in this case the RTWPB. Without a doubt, the Board, like any other executive
agency, has the authority to interpret its own rules and issuances; any phrase contained in its interpretation becomes a part of
those rules or issuances themselves.[19] Therefore, it was proper for the CA to consider the letter dated June 13, 2000, written
by the RTWPB to explain the
scope and import of the latters own Order, as such interpretation is deemed a part of the Order itself. That the letter was
belatedly submitted to that Court is not fatal in the determination of this particular case.
We cannot sustain petitioner, even if we assume that its contention is right and that the implementation of any
government-decreed increase under the CBA is absolute. The CBA is no ordinary contract, but one impressed with public
interest.[20] Therefore, it is subject to special orders on wages, [21] such as those issued by the RTWPB. Capitol Wireless v.
Bate[22] is squarely in point. The union in that case claimed that all government-mandated increases in salaries should be
granted to all employees across-the-board without any qualification whatsoever, pursuant to the CBA provision that any
government-mandated wage increases should be over and above the benefits granted in the CBA. The Court denied such
claim and held that the provisions of the Agreement should be read in harmony with the Wage Orders. Applying that ruling to
the present case, we hold that the implementation of a wage increase for respondents employees should be controlled by the
stipulations of Wage Order No. ROVII-06.

19
 At the risk of being repetitive, we stress that the employees are not entitled to the claimed salary increase, simply
because they are not within the coverage of the Wage Order, as they were already receiving salaries greater than the
minimum wage fixed by the Order. Concededly, there is an increase necessarily resulting from raising the minimum wage
level, but not across-the-board. Indeed, a double burden cannot be imposed upon an employer except by clear provision of
law.[23] It would be unjust, therefore, to interpret Wage Order No. ROVII-06 to mean that respondent should grant an across-
the-board increase. Such interpretation of the Order is not sustained by its text.[24]
In the resolution of labor cases, this Court has always been guided by the State policy enshrined in the Constitution:
social justice[25] and the protection of the working class.[26] Social justice does not, however, mandate that every dispute should
be automatically decided in favor of labor. In every case, justice is to be granted to the deserving and dispensed in the light of
the established facts and the applicable law and doctrine.[27]

WHEREFORE, the Petition is DENIED, and the assailed Decision and Resolution AFFIRMED. Costs against petitioner.

SO ORDERED.

G.R. No. 191740 February 11, 2013

SUSANA R. SY, Petitioner,
vs.
PHILIPPINE TRANSMARINE CARRIERS, INC., and/or SSC SHIP MANAGEMENT PTE., LTD., Respondents.
DECISION
PERALTA, J.:
Assailed in this petition for review on certiorari are the Decision 1 dated September 17, 2009 and the Resolution2dated
February 26, 2010 of the Court of Appeals issued in CA-G.R. SP No. 107379.
The antecedent facts are as follows:
On June 23, 2003, Alfonso N. Sy (Sy) was hired by respondent Philippine Transmarine Carriers Incorporated for and in behalf
of its foreign principal, co-respondent SSC Ship Management Pte. Ltd. In their contract of employment Sy was assigned to
work as Able Seaman (AB) on board the vessel M/V Chekiang for the duration of ten months, with a basic monthly salary of
US$512.00. Considered incorporated in AB Sy's Philippine Overseas Employment Administration-Standard Employment
Contract (POEA-SEC) is a set of standard provisions established and implemented by the POEA, called the Amended
Standard Terms and Conditions Governing the Employment of Filipino Seafarers on Board Ocean-Going Vessels.
On October 1, 2005, while the vessel was at the Port of Jakarta, Indonesia, AB Sy went on shore leave and left the vessel at
about 1300 hours. At 1925 hours, the vessel's agent from Jardine received an advice from the local police that one of the
vessel's crew members died ashore. At 1935 hours, the agent advised the vessel's master, Capt. Norman C. Marquez, about
the incident. At 2050 hrs., Capt. Marquez and his 3 crew members went to Cipto Mangunkusumo Hospital where they
confirmed the cadaver to be that of AB Sy.3
Based on the initial investigation conducted by the local police, AB Sy was riding on a motorcycle when he stopped the driver
to urinate at the riverside of the road. Since AB Sy had not returned after a while, the motorcycle driver went to look for him at
the riverside, but the former was nowhere to be found. 4 At 1830 hrs., AB Sy's corpse was found.5 A forensic pathologist
certified that AB Sy's death was an accident due to drowning, and that there was "alcohol 20mg%" in his urine.6
AB Sy's body was repatriated to the Philippines. On October 8, 2005, the Medico-Legal Officer of the National Bureau of
Investigation (NBI) conducted a post-mortem examination on AB Sy's body and certified that the cause of death was Asphyxia
by drowning.7
Petitioner Susana R. Sy, widow of AB Sy, demanded from respondents payment of her husband's death benefits and
compensation. Respondents denied such claim, since AB Sy's death occurred while he was on a shore leave, hence, his
death was not work-related and, therefore, not compensable. As her repeated demands were denied, petitioner filed, on March
1, 2006, a complaint against respondents for death benefits, burial assistance, moral and exemplary damages, and attorney's
fees.
On August 28, 2007, the Labor Arbiter (LA) rendered a Decision, 8 the dispositive portion of which reads:
WHEREFORE, premises considered, respondent is ordered to pay complainant the Philippine Currency equivalent to Fifty
Thousand US Dollars (US$50,000.00) as death benefit and an additional amount of Philippine Currency equivalent to One
Thousand U.S. Dollars (US$1,000.00) as burial expenses at the exchange rate prevailing at the time of payment.
SO ORDERED.9
The LA found that AB Sy was still under the respondents' employ at the time he drowned although he was on shore leave; that
while on shore leave, he was still under the control and supervision of the master or captain of the vessel as it was provided
under Section 13 of the Contract that the seafarer before taking a shore leave must secure the consent of the master of the
vessel; and his leave was conditioned on "considerations of operations and safety" of the vessel; that another indication that a
seafarer is considered to be doing work-related functions even when on shore leave is found in subparagraph 4, paragraph B,

20
Section 1 of the Contract where the duties of the seafarer are not limited to his stay while on board, but extend to his stay
ashore.
The LA then ruled that since AB Sy was doing work-related functions during the term of his contract, only a finding that his
death was selfinflicted or attributable to him would bar the payment of death benefits. It found that respondents evidence,
which consisted of the Indonesia Police Autopsy Report, stating that the cause of death was drowning, did not establish the
circumstance of death which would show that the death was the result of AB Sy's willful act on his own life; that there were
traces of alcohol in his blood did not make him "intoxicated" as there was no proof that he was; and granting that he was
intoxicated, such was accidental drowning and not an intentional taking of his own life.
Respondents filed their appeal with the National Labor Relations Commission (NLRC), reiterating that AB Sy's death was not
work-related, hence, there was no basis for the LA's award. Petitioner also filed her appeal claiming that she was entitled to
attorney's fees as well as moral and exemplary damages.
On October 17, 2008, the NLRC rendered its Resolution,10 the decretal portion of which reads:
WHEREFORE, premises considered, Respondent's appeal is DISMISSED for lack of merit, while Complainant's appeal is
partly GRANTED. The Labor Arbiter's assailed decision in the above-entitled case is hereby MODIFIED.
In addition to the award of FIFTY THOUSAND U.S. DOLLARS (US$50,000.00) as death benefits and ONE THOUSAND U.S.
DOLLARS (US$1,000.00) as burial expenses, Respondents are jointly and severally liable to Complainant for attorney's fees
equivalent to ten percent (10% ) of her total monetary award, to be paid in Philippine Currency equivalent to the exchange rate
prevailing during the time of payment.11
The NLRC affirmed the LA's finding that AB Sy's death was compensable, saying that if not for his employment with
respondents, he would have been in some other place and would not have been enjoying any employment benefit of shore
leave in Jakarta, Indonesia on that fateful day; that if not for said employment, he would not have gone to the riverside and
urinate, and would not have accidentally fallen into the river and drowned. It found petitioner entitled to an award of attorney's
fees, since she was constrained to hire the services of a lawyer to protect her rights but found no basis for the grant of moral
and exemplary damages.
Respondents filed their Motion for Reconsideration, which the NLRC denied in a Resolution 12 dated December 8, 2008.
Respondents filed a petition for certiorari with the CA to which petitioner was required to file her Comment, but failed to do so.
In the meantime, petitioner moved for the execution of the NLRC Resolution. On March 5, 2009, petitioner executed an
Affidavit13 stating that she had received from respondents the sum of two million six hundred ninety-one thousand one hundred
seventy-three pesos and 10/100 (P2,691,173.10) as conditional payment of all her claims against respondents; and that the
payment was made to prevent further execution proceedings she initiated with the NLRC and without prejudice to
respondents' petition then pending with the CA.
On September 17, 2009, the CA rendered its assailed Decision, the dispositive portion of which reads:
WHEREFORE, the petition is hereby GRANTED. The NLRC's Decision dated October 17, 2008 and Resolution dated
December 8, 2008 in NLRC LAC No. 10-000256-07 are hereby REVERSED.
Accordingly, the complaint in NLRC NCR OFW Case No. (M) 06- 03-00821-00 is hereby dismissed.
The application for issuance of a temporary restraining order and/or preliminary mandatory injunction is hereby declared moot
and academic.
The private respondent, Susana R. Sy, is hereby ordered to return to the petitioners the full amount of Two Million Six Hundred
Ninety-One Thousand One Hundred Seventy-Three pesos and 10/100 (P2,691,173.10) pursuant to her undertaking in the
Conditional Satisfaction of Judgment with Urgent Motion to Cancel Appeal Bond dated March 5, 2009 and Affidavit executed
by her also on March 5, 2009.14
In reversing the NLRC, the CA found AB Sy's death not work-related based on the following evidence, to wit: (1) AB Sy was on
a shore leave at the time of the incident; (2) he was found dead by the police authorities in Indonesia and upon autopsy, the
cause of death was established as drowning; (3) he was intoxicated when he died due to traces of alcohol in his urine; and (4)
the Philippine government authorities, namely, the Department of Foreign Affairs and the NBI, confirmed the cause of his
death was drowning. The CA said that under Section 20 (A) of POEA Memorandum Circular No. 9, series of 2000, it was not
sufficient to establish that AB Sy's death had occurred during the term of his contract, but there must be a causal connection
between his death and the work for which he had been contracted. In this case, when AB Sy died, he was on a shore leave
and left the vessel, and his death neither occurred at his workplace nor while performing an act within the scope of his
employment.
Petitioner filed her Motion for Reconsideration, which the CA denied in a Resolution dated February 26, 2010.
Hence, this petition where the sole issue raised is:
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN
GRANTING RESPONDENTS' PETITION FOR CERTIORARI AND DENYING PETITIONER'S MOTION FOR
RECONSIDERATION BY REVERSING AND SETTING ASIDE THE NATIONAL LABOR RELATIONS [COMMISSION'S]
DECISION IN AWARDING DEATH BENEFITS UNDER THE POEA STANDARD CONTRACT 15
We find the petition devoid of merit.

21
The terms and conditions of a seafarer's employment is governed by the provisions of the contract he signs with the employer
at the time of his hiring, and deemed integrated in his contract is a set of standard provisions set and implemented by the
POEA, called the Standard Terms and Conditions Governing the Employment of Filipino Seafarers on Board Ocean-Going
Vessels, which provisions are considered to be the minimum requirements acceptable to the government for the employment
of Filipino seafarers on board foreign ocean-going vessels.16The issue raised of whether petitioner is entitled to death
compensation benefits from respondents is best resolved by the provisions of their Employment Contract which incorporated
the 2000 Standard Terms and Conditions Governing the Employment of Filipino Seafarers on Board Ocean-Going
Vessels.17 Section 20 (A) of the Contract provides:
SECTION 20. COMPENSATION AND BENEFITS
A. COMPENSATION AND BENEFITS FOR DEATH
1. In the case of work-related death of the seafarer during the term of his contract, the employer shall pay his beneficiaries the
Philippine Currency equivalent to the amount of Fifty Thousand US dollars (US$50,000) and an additional amount of Seven
Thousand US dollars (US$7,000) to each child under the age of twenty-one (21) but not exceeding four (4) children, at the
exchange rate prevailing during the time of payment.
x x x.
Clearly, to be entitled for death compensation benefits from the employer, the death of the seafarer (1) must be work-related;
and (2) must happen during the term of the employment contract. Under the Amended POEA Contract, work-relatedness is
now an important requirement. The qualification that death must be work-related has made it necessary to show a causal
connection between a seafarers work and his death to be compensable.
Under the 2000 POEA Amended Employment Contract, work-related injury is defined as an injury(ies) resulting in disability or
death arising out of and in the course of employment. Thus, there is a need to show that the injury resulting to disability or
death must arise (1) out of employment, and (2) in the course of employment.
In Iloilo Dock & Engineering Co. v. Workmen's Compensation Commission,18 we explained the phrase "arising out of and in
the course of employment" in this wise:
x x x The two components of the coverage formula "arising out of" and "in the course of employment" are said to be
separate tests which must be independently satisfied; however, it should not be forgotten that the basic concept of
compensation coverage is unitary, not dual, and is best expressed in the word, "work-connection," because an
uncompromising insistence on an independent application of each of the two portions of the test can, in certain cases, exclude
clearly work-connected injuries. The words "arising out of" refer to the origin or cause of the accident, and are descriptive of its
character, while the words "in the course of" refer to the time, place and circumstances under which the accident takes place.
As a matter of general proposition, an injury or accident is said to arise "in the course of employment" when it takes place
within the period of the employment, at a place where the employee reasonably may be, and while he is fulfilling his duties or
is engaged in doing something incidental thereto.19
AB Sy was hired as a seaman on board M/V Chekiang on June 23, 2005 and was found dead on October 1, 2005, with
drowning as the cause of death. Notably, at the time of the accident, AB Sy was on shore leave and there was no showing that
he was doing an act in relation to his duty as a seaman or engaged in the performance of any act incidental thereto. It was not
also established that, at the time of the accident, he was doing work which was ordered by his superior ship officers to be done
for the advancement of his employer's interest. On the contrary, it was established that he was on shore leave when he
drowned and because of the 20% alcohol found in his urine upon autopsy of his body, it can be safely presumed that he just
came from a personal social function which was not related at all to his job as a seaman. Consequently, his death could not be
considered work-related to be compensable.
Petitioner argues that AB Sy's death happened in the course of employment, because if not for his employment he could be
somewhere else and was not on shore leave; and that he would not be in the riverside of Jakarta, Indonesia and had not
answered the call of nature and fell into the river and drowned.
We are not persuaded.
While AB Sy's employment relationship with respondents did not stop but continues to be in force even when he was on shore
leave, their contract clearly provides that it is not enough that death occurred during the term of the employment contract, but
must be work-related to be compensable. There is a need to show the connection of AB Sy's death with the performance of his
duty as a seaman. As we found, AB Sy was not in the performance of his duty as a seaman, but was doing an act for his own
personal benefit at the time of the accident. The cause of AB Sys death at the time he was on shore leave which was
drowning, was not brought about by a risk which was only peculiar to his employment as a seaman. In fact, he was in no
different circumstance with other people walking along the riverside who might also drown if no due care to ones safety is
exercised. Petitioner failed to establish by substantial evidence her right to the entitlement of the benefits provided by law.
Petitioners claim that AB Sys death was by accident, thus not willfully done which would negate compensability, has no
relevance in this case based on our aforementioned disquisition.
While we commiserate with petitioner, we cannot grant her claim for death compensation benefits in the absence of substantial
evidence to prove her entitlement thereto, since to do so will cause an injustice to the employer. Otherwise stated, while it is
true that labor contracts are impressed with public interest and the provisions of the POEA-SEC must be construed logically
22
and liberally in favor of Filipino seaman in the pursuit of their employment on board ocean-going vessels, still the rule is that
justice is in every case for the deserving to be dispensed with in the light of established facts, the applicable law, and existing
jurisprudence.20
WHERFORE, the petition is DENIED. The Decision dated September 17, 2009 and the Resolution dated February 26, 2010 of
the Court of Appeals are hereby AFFIRMED.
SO ORDERED.

G.R. No. 211497, March 18, 2015

HOCHENG PHILIPPINES CORPORATION, Petitioner, v. ANTONIO M. FARRALES, Respondent.
DECISION
REYES, J.:
Before this Court on Petition for Review on Certiorari1 is the Decision2 dated October 17, 2013 of the Court of Appeals (CA) in
CA-G.R. SP No. 125103, which reversed the Decision3 dated February 29, 2012 and Resolution4 dated May 7, 2012 of the
National Labor Relations Commission (NLRC) in NLRC LAC No. 08-002249-11, and reinstated with modifications the
Decision5 dated April 29, 2011 of the Labor Arbiter (LA) in NLRC Case No. RAB-IV-03-00618-10-C, which found that
respondent Antonio M. Farrales (Farrales) was illegally dismissed by Hocheng Philippines Corporation (HPC). The fallo of the
appellate decision reads:
WHEREFORE, premises considered, the Decision of the Labor Arbiter dated April 29, 2011 in NLRC Case No. RAB-IV-03-
00618-10-C is reinstated with modifications. Private respondent Hocheng Philippines Corporation is liable to pay [Farrales]
the following:
(1) Full backwages from date of dismissal on February 15, 2010 until date of decision equivalent to P276,466.67;
(2) Separation pay of one (1) month salary per year of service for a period of twelve years equivalent to P228,800.00;
(3) Appraisal year-end bonus in the sum of P11,000.00; and,
(4) Attorneys fees equivalent to 10% of the total award.

SO ORDERED.
The Facts

Farrales was first employed by HPC on May 12, 1998 as Production Operator, followed by promotions as (1) Leadman in
2004, (2) Acting Assistant Unit Chief in 2007, and (3) Assistant Unit Chief of Production in 2008, a supervisory position with a
monthly salary of ?17,600.00. He was a consistent recipient of citations for outstanding performance, as well as appraisal and
year-end bonuses.7

On December 2, 2009, a report reached HPC management that a motorcycle helmet of an employee, Reymar Solas
(Reymar), was stolen at the parking lot within its premises on November 27, 2009. On December 3, 2009, Security Officer
Francisco Paragas III confirmed a video sequence recorded on closed-circuit television (CCTV) around 3:00 p.m. on
November 27, 2009 showing Farrales taking the missing helmet from a parked motorcycle, to wit:
a. At around 3:07:44, [Farrales] was seen walking towards the motorcycle parking lot;chanrobleslaw
b. At around 3:08:47, [Farrales] walked back towards the pedestrian gate of the company, passing by the motorcycle
parking lot;chanrobleslaw
c. At around 3:08:51, [Farrales] walked back towards the motorcycle parking lot and returned to the pedestrian
gate;chanrobleslaw
d. At around 3:09:10, [Farrales] called on the person of Andy Lopega and instructed him to get the helmet he was
pointing at; [and]
e. At around 3:09:30, Andy gave the helmet to [Farrales]. 8
Later that day, HPC sent Farrales a notice to explain his involvement in the alleged theft. The investigation was supported by
the employees union, ULO-Hocheng.9Below is Farrales explanation, as summarized by the CA:
On November 27, 2009, [Farrales] borrowed a helmet from his co-worker Eric Libutan (Eric) since they reside in the
same barangay. They agreed that Eric could get it at the house of [Farrales] or the latter could return it the next time that they
will see each other. Eric told him that his motorcycle was black in color. As there were many motorcycles with helmets, he
asked another employee, Andy Lopega (Andy) who was in the parking area where he could find Erics helmet. Andy handed
over to him the supposed helmet which he believed to be owned by Eric, then he went home.

On November 28, 2009, at around 6 oclock in the morning, he saw Eric at their barangay and told him to get the helmet. But
Eric was in a rush to go to work, he did not bother to get it.

In the morning of December 3, 2009, upon seeing Eric in the workplace, [Farrales] asked him why he did not get the helmet
from his house. Eric told him that, Hindi po sa akin yung nakuha nyong helmet. [Farrales] was shocked and he immediately

23
phoned the HPCs guard to report the situation that he mistook the helmet which he thought belonged to Eric. After several
employees were asked as to the ownership of the helmet, he finally found the owner thereof, which is Jun Reyess (Jun)
nephew, Reymar, who was with him on November 27, 2009. [Farrales] promptly apologized to Jun and undertook to return the
helmet the following day and explained that it was an honest mistake. These all happened in the morning of December 3,
2009; [Farrales] did not know yet that HPC will send a letter demanding him to explain. 10
A hearing was held on December 10, 2009 at 1:00 p.m. Present were Farrales, Eric Libutan (Eric), Andy Lopega (Andy), Jun
Reyes, Antonio Alinda, a witness, and Rolando Garciso, representing ULO-Hocheng. From Andy it was learned that at the
time of the alleged incident, he was already seated on his motorcycle and about to leave the company compound when
Farrales approached and asked him to hand to him a yellow helmet hanging from a motorcycle parked next to him. When
Andy hesitated, Farrales explained that he owned it, and so Andy complied. But Eric had specifically told Farrales that his
helmet was colored red and black and his motorcycle was a black Honda XRM-125 with plate number 8746-DI, parked near
the perimeter fence away from the walkway to the pedestrian gate. The CCTV showed Farrales instructing Andy to fetch a
yellow helmet from a blue Rossi 110 motorcycle with plate number 3653-DN parked in the middle of the parking lot, opposite
the location given by Eric. Farrales in his defense claimed he could no longer remember the details of what transpired that
time, nor could he explain why he missed Erics specific directions. 11

On February 15, 2010, the HPC issued a Notice of Termination 12 to Farrales dismissing him for violation of Article 69, Class A,
Item No. 29 of the HPC Code of Discipline, which provides that stealing from the company, its employees and officials, or
from its contractors, visitors or clients, is akin to serious misconduct and fraud or willful breach by the employee of the
trust reposed in him by his employer or duly authorized representative, which are just causes for termination of
employment under Article 282 of the Labor Code.

On March 25, 2010, Farrales filed a complaint for illegal dismissal, non-payment of appraisal and mid-year bonuses, service
incentive leave pay and 13th month pay. He also prayed for reinstatement, or in lieu thereof, separation pay with full
backwages, plus moral and exemplary damages and attorneys fees. During the mandatory conference, HPC paid Farrales
?10,914.51, representing his 13th month pay for the period of January to February 2010 and vacation leave/sick leave
conversion. Farrales agreed to waive his claim for incentive bonus. 13

On April 29, 2011, the LA ruled in favor of Farrales,14 the fallo of which is as follows:
WHEREFORE, PREMISES CONSIDERED, all the respondents Hocheng Phils. Corporation, Inc. Sam Chen[g] and Judy
Geregale are found guilty of illegal dismissal and ordered jointly and severally to pay complainant the following:
1. Full backwages from date of dismissal on February 15, 2010 until date of decision equivalent to P276,466.67.

2. Separation pay of one (1) month salary per year of service for a period of twelve years equivalent to P228,800.00.

3. Appraisal year-end bonus in the sum of P11,000.00.

4. Moral damages in the sum of P200,000.00.

5. Exemplary damages in the sum of P100,000.00.

6. 10% of all sums owing as attorneys fees or the amount of P81,626.67.

SO ORDERED.15
On appeal by HPC,16 the NLRC reversed the LA,17 and denied Farrales motion for reconsideration, finding substantial
evidence of just cause to terminate Farrales.18

On petition for certiorari to the CA,19 Farrales sought to refute the NLRCs factual finding that he committed theft, as well as to
question NLRCs jurisdiction over HPCs appeal for non-payment of appeal fees. But the CA found that HPC was able to
perfect its appeal by posting a bond equivalent to the monetary award of ?897,893.37 and paying the appeal fees by postal
money order in the amount of ?520.00.20

Concerning the substantive issues, the appellate court agreed with the LA that Farrales act of taking Reymars helmet did not
amount to theft, holding that HPC failed to prove that Farrales conduct was induced by a perverse and wrongful intent to gain,
in light of the admission of Eric that he did let Farrales borrow one of his two helmets, only that Farrales mistook Reymars
helmet as the one belonging to him.
Petition for Review to the Supreme Court

24
In this petition, HPC raises the following grounds for this Courts review:
A. THE HONORABLE [CA] PLAINLY ERRED AND ACTED CONTRARY TO EXISTING LAW AND JURISPRUDENCE
IN REVERSING THE DECISION OF THE [NLRC] AND DECLARING ILLEGAL THE DISMISSAL FOR [HPCs]
ALLEGED FAILURE TO PROVE THE EXISTENCE OF JUST CAUSE.
1. THERE IS SUBSTANTIAL EVIDENCE TO SHOW THAT [FARRALES] COMMITTED THEFT IN [HPCs]
PREMISES.

2. THEFT IS A JUST CAUSE FOR TERMINATION.

3. BY COMMITTING THEFT, [FARRALES], BEING A SUPERVISORIAL EMPLOYEE, FORFEITED THE

TRUST REPOSED IN HIM BY [HPC], THUS RENDERING HIM DISMISSIBLE FOR LOSS OF
CONFIDENCE.
B. IN DECLARING ILLEGAL THE DISMISSAL OF [FARRALES], THE HONORABLE [CA] VIOLATED DOCTRINES
LAID DOWN BY THE SUPREME COURT.
1. COURTS CANNOT SUBSTITUTE THEIR JUDGMENT FOR THAT OF THE MANAGEMENT.

2. COURTS MUST ACCORD DUE RESPECT TO THE FINDINGS OF ADMINISTRATIVE AGENCIES.21

Chiefly, HPC insists that since the complaint below involves an administrative case, only substantial evidence, not proof of
guilt beyond reasonable doubt, is required to prove the guilt of Farrales; 22 that what the CA has done is substitute its judgment
for that of the NLRC, which is vested with statutory duty to make factual determinations based on the evidence on record. 23
Ruling of the Court

The Court resolves to deny the petition.

To validly dismiss an employee, the law requires the employer to prove the existence of any of the valid or authorized
causes,24 which, as enumerated in Article 282 of the Labor Code, are: (a) serious misconduct or willful disobedience by the
employee of the lawful orders of his employer or the latters 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
his 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.25 As a supervisorial employee, Farrales is admittedly subject to stricter rules of trust and confidence, and thus
pursuant to its management prerogative HPC enjoys a wider latitude of discretion to assess his continuing trustworthiness,
than if he were an ordinary rank-and-file employee.26 HPC therefore insists that only substantial proof of Farrales guilt for theft
is needed to establish the just causes to dismiss him, as the NLRC lengthily asserted in its decision.

Article 4 of the Labor Code mandates that all doubts in the implementation and interpretation of the provisions thereof shall be
resolved in favor of labor. Consistent with the States avowed policy to afford protection to labor, as Article 3 of the Labor Code
and Section 3, Article XIII of the 1987 Constitution have enunciated, particularly in relation to the workers security of tenure,
the Court held that [t]o be lawful, the cause for termination must be a serious and grave malfeasance to justify the deprivation
of a means of livelihood. This is merely in keeping with the spirit of our Constitution and laws which lean over backwards in
favor of the working class, and mandate that every doubt must be resolved in their favor. 27 Moreover, the penalty imposed on
the erring employee ought to be proportionate to the offense, taking into account its nature and surrounding circumstances.

The Court has always taken care, therefore, that the employer does not invoke any baseless justification, much less
management prerogative, as a subterfuge by which to rid himself of an undesirable worker,28 and thus in exceptional cases the
Court has never hesitated to delve into the NLRCs factual conclusions where evidence was found insufficient to support them,
or too much was deduced from the bare facts submitted by the parties, or the LA and the NLRC came up with conflicting
positions, as is true in this case.29

As aptly pointed out by the LA, while HPC has the onus probandi that the taking of Reymars helmet by Farrales was with
intent to gain, it failed to discharge this burden, as shown by the following circumstances: Farrales sought and obtained the
permission of Eric, his co-employee as well as barangay co-resident, to borrow his helmet; at the parking lot, Farrales asked
another employee, Andy, to fetch a yellow helmet from one of the parked motorcycles, mistakenly thinking it belonged to Eric
(whom he knew owned two helmets); the following day, November 28, Farrales asked Eric why he had not dropped by his
house to get his helmet, and Eric replied that Farrales got the wrong helmet because he still had his other helmet with him;
Farrales immediately sought the help of the company guards to locate the owner of the yellow helmet, who turned out to be
Reymar; Farrales apologized to Reymar for his mistake, and his apology was promptly accepted.30 All these circumstances
25
belie HPCs claim that Farrales took Reymars helmet with intent to gain, the LA said.

In ruling that Farrales dismissal by HPC was attended with utmost malice and bad faith as to justify an award of moral and
exemplary damages and attorneys fees, the LA stated that [i]t is succinctly clear that [the] respondents [therein] tried to blow
out of proportions the indiscretion of [Farrales] for reasons known only to them, and moreover, [f]inding that the dismissal on
the ground of theft is unavailing, [the] respondents [therein] immediately offered [Farrales] his former position when he filed
[his] complaint. What does this act of [the] respondents [therein] speak [of]? 31

On the other hand, the NLRC found that Farrales lied, first, when he told Andy, then already astride his motorbike at the
parking area and about to leave the company premises, that the yellow helmet belonged to him, 32 and second, when he
claimed that Eric was his neighbor, although they were not. It ruled as doubtful Farrales hazy recollection about what
happened that afternoon at the parking lot, since he could not even give a description of the motorcycle from which he took the
yellow helmet. These circumstances, the NLRC determined, comprise substantial proof belying Farrales claim of good faith.
As a supervisory employee, he held a position of high responsibility in the company making him accountable to stricter rules of
trust and confidence than an ordinary employee, and under Article 282 of the Labor Code, he is guilty of a serious misconduct
and a willful breach of trust. The NLRC went on to cite a settled policy that in trying to protect the rights of labor, the law does
not authorize the oppression or self-destruction of the employer. Management also has its own rights, which as such, are
entitled to respect and enforcement in the interest of simple fair play. 33

But the Court agrees with the CA that Farrales committed no serious or willful misconduct or disobedience to warrant his
dismissal. It is not disputed that Farrales lost no time in returning the helmet to Reymar the moment he was apprised of his
mistake by Eric, which proves, according to the CA, that he was not possessed of a depravity of conduct as would justify
HPCs claimed loss of trust in him. Farrales immediately admitted his error to the company guard and sought help to find the
owner of the yellow helmet, and this, the appellate court said, only shows that Farrales did indeed mistakenly think that the
helmet he took belonged to Eric.

It is not, then, difficult to surmise that when Farrales told Andy that the yellow helmet was his, his intent was not to put up a
pretence of ownership over it and thus betray his intent to gain, as the NLRC held, but rather simply to assuage Andys
reluctance to heed his passing request to reach for the helmet for him; Andy, it will be recalled, was at that moment already
seated in his motorbike and about to drive out when Farrales made his request. As to Farrales claim that he and Eric were
neighbors, suffice it to say that as the CA noted, they resided in the same barangay, and thus, loosely, were neighbors.

The CA also pointed out that although the alleged theft occurred within its premises, HPC was not prejudiced in any way by
Farrales conduct since the helmet did not belong to it but to Reymar. In light of Article 69, Class A, Item No. 29 of the HPC
Code of Discipline, this observation may be irrelevant, although it may be that the LA regarded it as proving HPCs bad faith.

Theft committed by an employee against a person other than his employer, if proven by substantial evidence, is a cause
analogous to serious misconduct.34 Misconduct is improper or wrong conduct, it is the transgression of some established and
definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error
in judgment. The misconduct to be serious must be of such grave and aggravated character and not merely trivial or
unimportant. Such misconduct, however serious, must, nevertheless, be in connection with the employees work to constitute
just cause for his separation.35

But where there is no showing of a clear, valid and legal cause for termination of employment, the law considers the case a
matter of illegal dismissal.36 If doubts exist between the evidence presented by the employer and that of the employee, the
scales of justice must be tilted in favor of the latter. The employer must affirmatively show rationally adequate evidence that
the dismissal was for a justifiable cause.37

Nonetheless, the Court agrees with the CAs dismissal of the award of moral and exemplary damages for lack of merit. There
is no satisfactory proof that the concerned officers of HPC acted in bad faith or with malice in terminating Farrales.
Notwithstanding the LAs assertion to this effect, Farrales bare allegations of bad faith deserve no credence, and neither is the
mere fact that he was illegally dismissed sufficient to prove bad faith on the part of HPCs officers. 38 But concerning the award
of attorneys fees, Farrales was dismissed for a flimsy charge, and he was compelled to litigate to secure what is due him
which HPC unjustifiably withheld.

WHEREFORE, premises considered, the petition for review is DENIED.

SO ORDERED.

26
G.R. No. 201298 February 5, 2014
RAUL C. COSARE, Petitioner,
vs.
BROADCOM ASIA, INC. and DANTE AREVALO, Respondents.
DECISION
REYES, J.:
Before the Court is a petition for review on certiorari 1 under Rule 45 of the Rules of Court, which assails the Decision 2 dated
November 24, 2011 and Resolution3 dated March 26, 2012 of the Court of Appeals (CA) in CA-G.R. SP. No. 117356, wherein
the CA ruled that the Regional Trial Court (RTC), and not the Labor Arbiter (LA), had the jurisdiction over petitioner Raul C.
Cosare's (Cosare) complaint for illegal dismissal against Broadcom Asia, Inc. (Broadcom) and Dante Arevalo (Arevalo), the
President of Broadcom (respondents).
The Antecedents
The case stems from a complaint4 for constructive dismissal, illegal suspension and monetary claims filed with the National
Capital Region Arbitration Branch of the National Labor Relations Commission (NLRC) by Cosare against the respondents.
Cosare claimed that sometime in April 1993, he was employed as a salesman by Arevalo, who was then in the business of
selling broadcast equipment needed by television networks and production houses. In December 2000, Arevalo set up the
company Broadcom, still to continue the business of trading communication and broadcast equipment. Cosare was named an
incorporator of Broadcom, having been assigned 100 shares of stock with par value of P1.00 per share.5 In October 2001,
Cosare was promoted to the position of Assistant Vice President for Sales (AVP for Sales) and Head of the Technical
Coordination, having a monthly basic net salary and average commissions of P18,000.00 and P37,000.00, respectively.6
Sometime in 2003, Alex F. Abiog (Abiog) was appointed as Broadcoms Vice President for Sales and thus, became Cosares
immediate superior. On March 23, 2009, Cosare sent a confidential memo 7 to Arevalo to inform him of the following anomalies
which were allegedly being committed by Abiog against the company: (a) he failed to report to work on time, and would
immediately leave the office on the pretext of client visits; (b) he advised the clients of Broadcom to purchase camera units
from its competitors, and received commissions therefor; (c) he shared in the "under the-table dealings" or "confidential
commissions" which Broadcom extended to its clients personnel and engineers; and (d) he expressed his complaints and
disgust over Broadcoms uncompetitive salaries and wages and delay in the payment of other benefits, even in the presence
of office staff. Cosare ended his memo by clarifying that he was not interested in Abiogs position, but only wanted Arevalo to
know of the irregularities for the corporations sake.
Apparently, Arevalo failed to act on Cosares accusations. Cosare claimed that he was instead called for a meeting by Arevalo
on March 25, 2009, wherein he was asked to tender his resignation in exchange for "financial assistance" in the amount
of P300,000.00.8 Cosare refused to comply with the directive, as signified in a letter 9dated March 26, 2009 which he sent to
Arevalo.
On March 30, 2009, Cosare received from Roselyn Villareal (Villareal), Broadcoms Manager for Finance and Administration, a
memo10 signed by Arevalo, charging him of serious misconduct and willful breach of trust, and providing in part:
1. A confidential memo was received from the VP for Sales informing me that you had directed, or at the very least
tried to persuade, a customer to purchase a camera from another supplier. Clearly, this action is a gross and willful
violation of the trust and confidence this company has given to you being its AVP for Sales and is an attempt to
deprive the company of income from which you, along with the other employees of this company, derive your salaries
and other benefits. x x x.
2. A company vehicle assigned to you with plate no. UNV 402 was found abandoned in another place outside of the
office without proper turnover from you to this office which had assigned said vehicle to you. The vehicle was found to
be inoperable and in very bad condition, which required that the vehicle be towed to a nearby auto repair shop for
extensive repairs.
3. You have repeatedly failed to submit regular sales reports informing the company of your activities within and
outside of company premises despite repeated reminders. However, it has been observed that you have been both
frequently absent and/or tardy without proper information to this office or your direct supervisor, the VP for Sales Mr.
Alex Abiog, of your whereabouts.
4. You have been remiss in the performance of your duties as a Sales officer as evidenced by the fact that you have
not recorded any sales for the past immediate twelve (12) months. This was inspite of the fact that my office decided
to relieve you of your duties as technical coordinator between Engineering and Sales since June last year so that you
could focus and concentrate [on] your activities in sales. 11
Cosare was given forty-eight (48) hours from the date of the memo within which to present his explanation on the charges. He
was also "suspended from having access to any and all company files/records and use of company assets effective
immediately."12 Thus, Cosare claimed that he was precluded from reporting for work on March 31, 2009, and was instead
instructed to wait at the offices receiving section. Upon the specific instructions of Arevalo, he was also prevented by Villareal
from retrieving even his personal belongings from the office.
27
On April 1, 2009, Cosare was totally barred from entering the company premises, and was told to merely wait outside the
office building for further instructions. When no such instructions were given by 8:00 p.m., Cosare was impelled to seek the
assistance of the officials of Barangay San Antonio, Pasig City, and had the incident reported in the barangay blotter. 13
On April 2, 2009, Cosare attempted to furnish the company with a Memo 14 by which he addressed and denied the accusations
cited in Arevalos memo dated March 30, 2009. The respondents refused to receive the memo on the ground of late filing,
prompting Cosare to serve a copy thereof by registered mail. The following day, April 3, 2009, Cosare filed the subject labor
complaint, claiming that he was constructively dismissed from employment by the respondents. He further argued that he was
illegally suspended, as he placed no serious and imminent threat to the life or property of his employer and co-employees.15
In refuting Cosares complaint, the respondents argued that Cosare was neither illegally suspended nor dismissed from
employment. They also contended that Cosare committed the following acts inimical to the interests of Broadcom: (a) he failed
to sell any broadcast equipment since the year 2007; (b) he attempted to sell a Panasonic HMC 150 Camera which was to be
sourced from a competitor; and (c) he made an unauthorized request in Broadcoms name for its principal, Panasonic USA, to
issue an invitation for Cosares friend, one Alex Paredes, to attend the National Association of Broadcasters Conference in
Las Vegas, USA.16 Furthermore, they contended that Cosare abandoned his job17 by continually failing to report for work
beginning April 1, 2009, prompting them to issue on April 14, 2009 a memorandum18 accusing Cosare of absence without
leave beginning April 1, 2009.
The Ruling of the LA
On January 6, 2010, LA Napoleon M. Menese (LA Menese) rendered his Decision19 dismissing the complaint on the ground of
Cosares failure to establish that he was dismissed, constructively or otherwise, from his employment. For the LA, what
transpired on March 30, 2009 was merely the respondents issuance to Cosare of a show-cause memo, giving him a chance
to present his side on the charges against him. He explained:
It is obvious that [Cosare] DID NOT wait for respondents action regarding the charges leveled against him in the show-cause
memo. What he did was to pre-empt that action by filing this complaint just a day after he submitted his written explanation.
Moreover, by specifically seeking payment of "Separation Pay" instead of reinstatement, [Cosares] motive for filing this case
becomes more evident.20
It was also held that Cosare failed to substantiate by documentary evidence his allegations of illegal suspension and non-
payment of allowances and commissions.
Unyielding, Cosare appealed the LA decision to the NLRC.
The Ruling of the NLRC
On August 24, 2010, the NLRC rendered its Decision21 reversing the Decision of LA Menese. The dispositive portion of the
NLRC Decision reads:
WHEREFORE, premises considered, the DECISION is REVERSED and the Respondents are found guilty of Illegal
Constructive Dismissal. Respondents BROADCOM ASIA, INC. and Dante Arevalo are ordered to pay [Cosares] backwages,
and separation pay, as well as damages, in the total amount of P1,915,458.33, per attached Computation.
SO ORDERED.22
In ruling in favor of Cosare, the NLRC explained that "due weight and credence is accorded to [Cosares] contention that he
was constructively dismissed by Respondent Arevalo when he was asked to resign from his employment."23 The fact that
Cosare was suspended from using the assets of Broadcom was also inconsistent with the respondents claim that Cosare
opted to abandon his employment.
Exemplary damages in the amount of P100,000.00 was awarded, given the NLRCs finding that the termination of Cosares
employment was effected by the respondents in bad faith and in a wanton, oppressive and malevolent manner. The claim for
unpaid commissions was denied on the ground of the failure to include it in the prayer of pleadings filed with the LA and in the
appeal.
The respondents motion for reconsideration was denied.24 Dissatisfied, they filed a petition for certiorari with the CA founded
on the following arguments: (1) the respondents did not have to prove just cause for terminating the employment of Cosare
because the latters complaint was based on an alleged constructive dismissal; (2) Cosare resigned and was thus not
dismissed from employment; (3) the respondents should not be declared liable for the payment of Cosares monetary claims;
and (4) Arevalo should not be held solidarily liable for the judgment award.
In a manifestation filed by the respondents during the pendency of the CA appeal, they raised a new argument, i.e., the case
involved an intra-corporate controversy which was within the jurisdiction of the RTC, instead of the LA.25 They argued that the
case involved a complaint against a corporation filed by a stockholder, who, at the same time, was a corporate officer.
The Ruling of the CA
On November 24, 2011, the CA rendered the assailed Decision 26 granting the respondents petition. It agreed with the
respondents contention that the case involved an intra-corporate controversy which, pursuant to Presidential Decree No. 902-
A, as amended, was within the exclusive jurisdiction of the RTC. It reasoned:
Record shows that [Cosare] was indeed a stockholder of [Broadcom], and that he was listed as one of its directors. Moreover,
he held the position of [AVP] for Sales which is listed as a corporate office. Generally, the president, vice-president, secretary
or treasurer are commonly regarded as the principal or executive officers of a corporation, and modern corporation statutes
28
usually designate them as the officers of the corporation. However, it bears mentioning that under Section 25 of the
Corporation Code, the Board of Directors of [Broadcom] is allowed to appoint such other officers as it may deem necessary.
Indeed, [Broadcoms] By-Laws provides:
Article IV
Officer
Section 1. Election / Appointment Immediately after their election, the Board of Directors shall formally organize by electing
the President, the Vice-President, the Treasurer, and the Secretary at said meeting.
The Board, may, from time to time, appoint such other officers as it may determine to be necessary or proper. x x x
We hold that [the respondents] were able to present substantial evidence that [Cosare] indeed held a corporate office, as
evidenced by the General Information Sheet which was submitted to the Securities and Exchange Commission (SEC) on
October 22, 2009.27 (Citations omitted and emphasis supplied)
Thus, the CA reversed the NLRC decision and resolution, and then entered a new one dismissing the labor complaint on the
ground of lack of jurisdiction, finding it unnecessary to resolve the main issues that were raised in the petition. Cosare filed a
motion for reconsideration, but this was denied by the CA via the Resolution 28 dated March 26, 2012. Hence, this petition.
The Present Petition
The pivotal issues for the petitions full resolution are as follows: (1) whether or not the case instituted by Cosare was an intra-
corporate dispute that was within the original jurisdiction of the RTC, and not of the LAs; and (2) whether or not Cosare was
constructively and illegally dismissed from employment by the respondents.
The Courts Ruling
The petition is impressed with merit.
Jurisdiction over the controversy
As regards the issue of jurisdiction, the Court has determined that contrary to the ruling of the CA, it is the LA, and not the
regular courts, which has the original jurisdiction over the subject controversy. An intra-corporate controversy, which falls
within the jurisdiction of regular courts, has been regarded in its broad sense to pertain to disputes that involve any of the
following relationships: (1) between the corporation, partnership or association and the public; (2) between the corporation,
partnership or association and the state in so far as its franchise, permit or license to operate is concerned; (3) between the
corporation, partnership or association and its stockholders, partners, members or officers; and (4) among the stockholders,
partners or associates, themselves.29 Settled jurisprudence, however, qualifies that when the dispute involves a charge of
illegal dismissal, the action may fall under the jurisdiction of the LAs upon whose jurisdiction, as a rule, falls termination
disputes and claims for damages arising from employer-employee relations as provided in Article 217 of the Labor Code.
Consistent with this jurisprudence, the mere fact that Cosare was a stockholder and an officer of Broadcom at the time the
subject controversy developed failed to necessarily make the case an intra-corporate dispute.
In Matling Industrial and Commercial Corporation v. Coros,30 the Court distinguished between a "regular employee" and a
"corporate officer" for purposes of establishing the true nature of a dispute or complaint for illegal dismissal and determining
which body has jurisdiction over it. Succinctly, it was explained that "[t]he determination of whether the dismissed officer was a
regular employee or corporate officer unravels the conundrum" of whether a complaint for illegal dismissal is cognizable by the
LA or by the RTC. "In case of the regular employee, the LA has jurisdiction; otherwise, the RTC exercises the legal authority to
adjudicate.31
Applying the foregoing to the present case, the LA had the original jurisdiction over the complaint for illegal dismissal because
Cosare, although an officer of Broadcom for being its AVP for Sales, was not a "corporate officer" as the term is defined by
law. We emphasized in Real v. Sangu Philippines, Inc.32 the definition of corporate officers for the purpose of identifying an
intra-corporate controversy. Citing Garcia v. Eastern Telecommunications Philippines, Inc., 33 we held:
" Corporate officers in the context of Presidential Decree No. 902-A are those officers of the corporation who are given that
character by the Corporation Code or by the corporations by-laws. There are three specific officers whom a corporation must
have under Section 25 of the Corporation Code. These are the president, secretary and the treasurer. The number of officers
is not limited to these three. A corporation may have such other officers as may be provided for by its by-laws like, but not
limited to, the vice-president, cashier, auditor or general manager. The number of corporate officers is thus limited by law and
by the corporations by-laws."34 (Emphasis ours)
In Tabang v. NLRC,35 the Court also made the following pronouncement on the nature of corporate offices:
It has been held that an "office" is created by the charter of the corporation and the officer is elected by the directors and
stockholders. On the other hand, an "employee" usually occupies no office and generally is employed not by action of the
directors or stockholders but by the managing officer of the corporation who also determines the compensation to be paid to
such employee.36 (Citations omitted)
As may be deduced from the foregoing, there are two circumstances which must concur in order for an individual to be
considered a corporate officer, as against an ordinary employee or officer, namely: (1) the creation of the position is under the
corporations charter or by-laws; and (2) the election of the officer is by the directors or stockholders. It is only when the officer
claiming to have been illegally dismissed is classified as such corporate officer that the issue is deemed an intra-corporate
dispute which falls within the jurisdiction of the trial courts.
29
To support their argument that Cosare was a corporate officer, the respondents referred to Section 1, Article IV of Broadcoms
by-laws, which reads:
ARTICLE IV
OFFICER
Section 1. Election / Appointment Immediately after their election, the Board of Directors shall formally organize by electing
the President, the Vice-President, the Treasurer, and the Secretary at said meeting.
The Board may, from time to time, appoint such other officers as it may determine to be necessary or proper. Any two (2) or
more compatible positions may be held concurrently by the same person, except that no one shall act as President and
Treasurer or Secretary at the same time.37 (Emphasis ours)
This was also the CAs main basis in ruling that the matter was an intra-corporate dispute that was within the trial courts
jurisdiction.
The Court disagrees with the respondents and the CA. As may be gleaned from the aforequoted provision, the only officers
who are specifically listed, and thus with offices that are created under Broadcoms by-laws are the following: the President,
Vice-President, Treasurer and Secretary. Although a blanket authority provides for the Boards appointment of such other
officers as it may deem necessary and proper, the respondents failed to sufficiently establish that the position of AVP for Sales
was created by virtue of an act of Broadcoms board, and that Cosare was specifically elected or appointed to such position by
the directors. No board resolutions to establish such facts form part of the case records. Further, it was held in Marc II
Marketing, Inc. v. Joson38 that an enabling clause in a corporations by-laws empowering its board of directors to create
additional officers, even with the subsequent passage of a board resolution to that effect, cannot make such position a
corporate office. The board of directors has no power to create other corporate offices without first amending the corporate by-
laws so as to include therein the newly created corporate office.39 "To allow the creation of a corporate officer position by a
simple inclusion in the corporate by-laws of an enabling clause empowering the board of directors to do so can result in the
circumvention of that constitutionally well-protected right [of every employee to security of tenure]." 40
The CAs heavy reliance on the contents of the General Information Sheets 41, which were submitted by the respondents during
the appeal proceedings and which plainly provided that Cosare was an "officer" of Broadcom, was clearly misplaced. The said
documents could neither govern nor establish the nature of the office held by Cosare and his appointment thereto.
Furthermore, although Cosare could indeed be classified as an officer as provided in the General Information Sheets, his
position could only be deemed a regular office, and not a corporate office as it is defined under the Corporation Code.
Incidentally, the Court noticed that although the Corporate Secretary of Broadcom, Atty. Efren L. Cordero, declared under oath
the truth of the matters set forth in the General Information Sheets, the respondents failed to explain why the General
Information Sheet officially filed with the Securities and Exchange Commission in 2011 and submitted to the CA by the
respondents still indicated Cosare as an AVP for Sales, when among their defenses in the charge of illegal dismissal, they
asserted that Cosare had severed his relationship with the corporation since the year 2009.
Finally, the mere fact that Cosare was a stockholder of Broadcom at the time of the cases filing did not necessarily make the
action an intra- corporate controversy. "Not all conflicts between the stockholders and the corporation are classified as intra-
corporate. There are other facts to consider in determining whether the dispute involves corporate matters as to consider them
as intra-corporate controversies."42 Time and again, the Court has ruled that in determining the existence of an intra-corporate
dispute, the status or relationship of the parties and the nature of the question that is the subject of the controversy must be
taken into account.43 Considering that the pending dispute particularly relates to Cosares rights and obligations as a regular
officer of Broadcom, instead of as a stockholder of the corporation, the controversy cannot be deemed intra-corporate. This is
consistent with the "controversy test" explained by the Court in Reyes v. Hon. RTC, Br. 142, 44 to wit:
Under the nature of the controversy test, the incidents of that relationship must also be considered for the purpose of
ascertaining whether the controversy itself is intra-corporate. The controversy must not only be rooted in the existence of an
intra-corporate relationship, but must as well pertain to the enforcement of the parties correlative rights and obligations under
the Corporation Code and the internal and intra-corporate regulatory rules of the corporation. If the relationship and its
incidents are merely incidental to the controversy or if there will still be conflict even if the relationship does not exist, then no
intra-corporate controversy exists.45 (Citation omitted)
It bears mentioning that even the CAs finding46 that Cosare was a director of Broadcom when the dispute commenced was
unsupported by the case records, as even the General Information Sheet of 2009 referred to in the CA decision to support
such finding failed to provide such detail.
All told, it is then evident that the CA erred in reversing the NLRCs ruling that favored Cosare solely on the ground that the
dispute was an intra-corporate controversy within the jurisdiction of the regular courts.
The charge of constructive dismissal
Towards a full resolution of the instant case, the Court finds it appropriate to rule on the correctness of the NLRCs ruling
finding Cosare to have been illegally dismissed from employment.
In filing his labor complaint, Cosare maintained that he was constructively dismissed, citing among other circumstances the
charges that were hurled and the suspension that was imposed against him via Arevalos memo dated March 30, 2009. Even
prior to such charge, he claimed to have been subjected to mental torture, having been locked out of his files and records and
30
disallowed use of his office computer and access to personal belongings. 47 While Cosare attempted to furnish the respondents
with his reply to the charges, the latter refused to accept the same on the ground that it was filed beyond the 48-hour period
which they provided in the memo.
Cosare further referred to the circumstances that allegedly transpired subsequent to the service of the memo, particularly the
continued refusal of the respondents to allow Cosares entry into the companys premises. These incidents were cited in the
CA decision as follows:
On March 31, 2009, [Cosare] reported back to work again. He asked Villareal if he could retrieve his personal belongings, but
the latter said that x x x Arevalo directed her to deny his request, so [Cosare] again waited at the receiving section of the
office. On April 1, 2009, [Cosare] was not allowed to enter the office premises. He was asked to just wait outside of the Tektite
(PSE) Towers, where [Broadcom] had its offices, for further instructions on how and when he could get his personal
belongings. [Cosare] waited until 8 p.m. for instructions but none were given. Thus, [Cosare] sought the assistance of the
officials of Barangay San Antonio, Pasig who advised him to file a labor or replevin case to recover his personal belongings. x
x x.48 (Citation omitted)
It is also worth mentioning that a few days before the issuance of the memo dated March 30, 2009, Cosare was allegedly
summoned to Arevalos office and was asked to tender his immediate resignation from the company, in exchange for a
financial assistance of P300,000.00.49 The directive was said to be founded on Arevalos choice to retain Abiogs employment
with the company.50 The respondents failed to refute these claims.
Given the circumstances, the Court agrees with Cosares claim of constructive and illegal dismissal. "[C]onstructive dismissal
occurs when there is cessation of work because continued employment is rendered impossible, unreasonable, or unlikely as
when there is a demotion in rank or diminution in pay or when a clear discrimination, insensibility, or disdain by an employer
becomes unbearable to the employee leaving the latter with no other option but to quit." 51 In Dimagan v. Dacworks United,
Incorporated,52 it was explained:
The test of constructive dismissal is whether a reasonable person in the employees position would have felt compelled to give
up his position under the circumstances. It is an act amounting to dismissal but is made to appear as if it were not.
Constructive dismissal is therefore a dismissal in disguise. The law recognizes and resolves this situation in favor of
employees in order to protect their rights and interests from the coercive acts of the employer. 53 (Citation omitted)
It is clear from the cited circumstances that the respondents already rejected Cosares continued involvement with the
company. Even their refusal to accept the explanation which Cosare tried to tender on April 2, 2009 further evidenced the
resolve to deny Cosare of the opportunity to be heard prior to any decision on the termination of his employment. The
respondents allegedly refused acceptance of the explanation as it was filed beyond the mere 48-hour period which they
granted to Cosare under the memo dated March 30, 2009. However, even this limitation was a flaw in the memo or notice to
explain which only further signified the respondents discrimination, disdain and insensibility towards Cosare, apparently
resorted to by the respondents in order to deny their employee of the opportunity to fully explain his defenses and ultimately,
retain his employment. The Court emphasized in King of Kings Transport, Inc. v. Mamac 54 the standards to be observed by
employers in complying with the service of notices prior to termination:
[T]he first written notice to be served on the employees should contain the specific causes or grounds for termination against
them, and a directive that the employees are given the opportunity to submit their written explanation within a reasonable
period. "Reasonable opportunity" under the Omnibus Rules means every kind of assistance that management must accord to
the employees to enable them to prepare adequately for their defense. This should be construed as a period of at least five (5)
calendar days from receipt of the notice to give the employees an opportunity to study the accusation against them, consult a
union official or lawyer, gather data and evidence, and decide on the defenses they will raise against the complaint. Moreover,
in order to enable the employees to intelligently prepare their explanation and defenses, the notice should contain a detailed
narration of the facts and circumstances that will serve as basis for the charge against the employees. A general description of
the charge will not suffice. Lastly, the notice should specifically mention which company rules, if any, are violated and/or which
among the grounds under Art. 282 is being charged against the employees. 55 (Citation omitted, underscoring ours, and
emphasis supplied)
In sum, the respondents were already resolute on a severance of their working relationship with Cosare, notwithstanding the
facts which could have been established by his explanations and the respondents full investigation on the matter. In addition
to this, the fact that no further investigation and final disposition appeared to have been made by the respondents on Cosares
case only negated the claim that they actually intended to first look into the matter before making a final determination as to
the guilt or innocence of their employee. This also manifested from the fact that even before Cosare was required to present
his side on the charges of serious misconduct and willful breach of trust, he was summoned to Arevalos office and was asked
to tender his immediate resignation in exchange for financial assistance.
The clear intent of the respondents to find fault in Cosare was also manifested by their persistent accusation that Cosare
abandoned his post, allegedly signified by his failure to report to work or file a leave of absence beginning April 1, 2009. This
was even the subject of a memo56 issued by Arevalo to Cosare on April 14, 2009, asking him to explain his absence within 48
hours from the date of the memo. As the records clearly indicated, however, Arevalo placed Cosare under suspension
beginning March 30, 2009. The suspension covered access to any and all company files/records and the use of the assets of
31
the company, with warning that his failure to comply with the memo would be dealt with drastic management action. The
charge of abandonment was inconsistent with this imposed suspension. "Abandonment is the deliberate and unjustified refusal
of an employee to resume his employment. To constitute abandonment of work, two elements must concur: (1) the employee
must have failed to report for work or must have been absent without valid or justifiable reason; and (2) there must have been
a clear intention on the part of the employee to sever the employer- employee relationship manifested by some overt
act."57 Cosares failure to report to work beginning April 1, 2009 was neither voluntary nor indicative of an intention to sever
his employment with Broadcom. It was illogical to be requiring him to report for work, and imputing fault when he failed to do
so after he was specifically denied access to all of the companys assets. As correctly observed by the NLRC:
[T]he Respondent[s] had charged [Cosare] of abandoning his employment beginning on April 1, 2009. However[,] the show-
cause letter dated March 3[0], 2009 (Annex "F", ibid) suspended [Cosare] from using not only the equipment but the "assets"
of Respondent [Broadcom]. This insults rational thinking because the Respondents tried to mislead us and make [it appear]
that [Cosare] failed to report for work when they had in fact had [sic] placed him on suspension. x x x. 58
Following a finding of constructive dismissal, the Court finds no cogent reason to modify the NLRC's monetary awards in
Cosare's favor. In Robinsons Galleria/Robinsons Supermarket Corporation v. Ranchez,59 the Court reiterated that an illegally
or constructively dismissed employee is entitled to: (1) either reinstatement, if viable, or separation pay, if reinstatement is no
longer viable; and (2) backwages.60 The award of exemplary damages was also justified given the NLRC's finding that the
respondents acted in bad faith and in a wanton, oppressive and malevolent manner when they dismissed Cosare. It is also by
reason of such bad faith that Arevalo was correctly declared solidarily liable for the monetary awards.
WHEREFORE, the petition is GRANTED. The Decision dated November 24, 2011 and Resolution dated March 26, 2012 of
the Court of Appeals in CA-G.R. SP. No. 117356 are SET ASIDE. The Decision dated August 24, 2010 of the National Labor
Relations Commission in favor of petitioner Raul C. Cosare is AFFIRMED.
SO ORDERED.

AVELINA F. SAGUN, G.R. No. 179242

Petitioner,
Present:

- versus - CARPIO, J.,

Chairperson,
NACHURA,
PERALTA,
ABAD, and
SUNACE INTERNATIONAL MANAGEMENT SERVICES, MENDOZA, JJ.
INC.,
Respondent. Promulgated:

February 23, 2011

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

RESOLUTION

NACHURA, J.:
This is a Petition for Review on certiorari under Rule 45 of the Rules of Court, seeking to reverse and set aside the Court of
Appeals (CA) Decision[1] dated March 23, 2007 and Resolution[2] dated August 16, 2007 in CA-G.R. SP No. 89298.

The case arose from a complaint for alleged violation of Article 32 and Article 34(a) and (b) of the Labor Code, as amended,
filed by petitioner Avelina F. Sagun against respondent Sunace International Management Services, Inc. and the latters surety,
Country Bankers Insurance Corporation, before the Philippine Overseas Employment Administration (POEA). The case was
docketed as POEA Case No. RV 00-03-0261.[3]

Petitioner claimed that sometime in August 1998, she applied with respondent for the position of caretaker in Taiwan. In
consideration of her placement and employment, petitioner allegedly paid P30,000.00 cash, P10,000.00 in the form of a
promissory note, and NT$60,000.00 through salary deduction, in violation of the prohibition on excessive placement fees. She
also claimed that respondent promised to employ her as caretaker but, at the job site, she worked as a domestic helper and, at
the same time, in a poultry farm.[4]

Respondent, however, denied petitioners allegations and maintained that it only collected P20,840.00, the amount authorized
by the POEA and for which the corresponding official receipt was issued. It also stressed that it did not furnish or publish any
32
false notice or information or document in relation to recruitment or employment as it was duly received, passed upon, and
approved by the POEA.[5]

On December 27, 2001, POEA Administrator Rosalinda Dimapilis-Baldoz dismissed[6] the complaint for lack of merit.
Specifically, the POEA Administrator found that petitioner failed to establish facts showing a violation of Article 32, since it was
proven that the amount received by respondent as placement fee was covered by an official receipt; or of Article 34(a) as it
was not shown that respondent charged excessive fees; and of Article 34(b) simply because respondent processed petitioners
papers as caretaker, the position she applied and was hired for.

Aggrieved, petitioner filed a Motion for Reconsideration [7] with the Office of the Secretary of Labor. The Secretary treated the
motion as a Petition for Review. On January 13, 2004, then Secretary of Labor Patricia A. Sto. Tomas partially
granted[8]petitioners motion, the pertinent portion of which reads:

WHEREFORE, premises considered, the Motion for Reconsideration, herein treated as a petition for review,
is PARTIALLY GRANTED. The Order dated December 27, 2001 of the POEA Administrator is partially
MODIFIED, and SUNACE International Management Services, Inc. is held liable for collection of excessive
placement fee in violation of Article 34 (a) of the Labor Code, as amended. The penalty of suspension of its
license for two (2) months, or in lieu thereof, the penalty of fine in the amount of Twenty Thousand Pesos
(P20,000.00) is hereby imposed upon SUNACE. Further, SUNACE and its surety, Country Bankers
Insurance Corporation, are ordered to refund the petitioner the amounts of Ten Thousand Pesos
(P10,000.00) and NT$65,000.00, representing the excessive placement fee exacted from her.

SO ORDERED.[9]

On appeal by respondent, the Office of the President (OP) affirmed[10] the Order of the Secretary of Labor. In resolving the
case for petitioner, the OP emphasized the States policy on the full protection to labor, local and overseas, organized and
unorganized. It also held that it was impossible for respondent to have extended a loan to petitioner since it was not in the
business of lending money. It likewise found it immaterial that no evidence was presented to show the overcharging since the
issuance of a receipt could not be expected.

Respondents motion for reconsideration was denied in an Order [11] dated March 21, 2005, which prompted respondent to
elevate the matter to the CA via a petition for review under Rule 43 of the Rules of Court.

On March 23, 2007, the CA decided in favor of respondent, disposing, as follows:

WHEREFORE, premises considered, the instant petition is GRANTED and the decision of the Office of the
President dated 07 January 2005 is REVERSED and SET ASIDE for lack of sufficient evidence. The Order
of the POEA Administrator dismissing the complaint of respondent for violation of Article 34(a) and (b) of the
Labor Code is hereby AFFIRMED.

SO ORDERED.[12]

The appellate court reversed the rulings of the Secretary of Labor and the OP mainly because their conclusions were
based not on evidence but on speculation, conjecture, possibilities, and probabilities.
Hence, this petition filed by petitioner, raising the sole issue of:

WHETHER THE COURT OF APPEALS ERRED IN GRANTING THE RESPONDENTS PETITION FOR
REVIEW REVERSING THE DECISION AND ORDER [OF THE] OFFICE OF THE PRESIDENT.[13]

The petition is without merit.

Respondent was originally charged with violation of Article 32 and Article 34(a) and (b) of the Labor Code, as
amended. The pertinent provisions read:

ART. 32. Fees to be Paid by Workers. - Any person applying with a private fee charging
employment agency for employment assistance shall not be charged any fee until he has obtained
employment through its efforts or has actually commenced employment. Such fee shall be always covered

33
 with the appropriate receipt clearly showing the amount paid. The Secretary of Labor shall promulgate a
schedule of allowable fees.

ART. 34. Prohibited Practices. - It shall be unlawful for any individual, entity, licensee, or holder of
authority:

(a) To charge or accept, directly or indirectly, any amount greater than that specified in
the schedule of allowable fees prescribed by the Secretary of Labor; or to make a worker pay any amount
greater than that actually received by him as a loan or advance;

(b) To furnish or publish any false notice or information or document in relation to

recruitment or employment.

The POEA, the Secretary of Labor, the OP, and the CA already absolved respondent of liability under Articles 32 and 34(b).
As no appeal was interposed by petitioner when the Secretary of Labor freed respondent of said liabilities, the only issue left
for determination is whether respondent is liable for collection of excess placement fee defined in Article 34(a) of the Labor
Code, as amended.

Although initially, the POEA dismissed petitioners complaint for lack of merit, the Secretary of Labor and the OP reached a
different conclusion. On appeal to the CA, the appellate court, however, reverted to the POEA conclusion. Following this turn
of events, we are constrained to look into the records of the case and weigh anew the evidence presented by the parties.
We find and so hold that the POEA and the CA are correct in dismissing the complaint for illegal exaction filed by petitioner
against respondent.

In proceedings before administrative and quasi-judicial agencies, the quantum of evidence required to establish a fact
is substantial evidence, or that level of relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion.[14]

In this case, are the pieces of evidence presented by petitioner substantial to show that respondent collected from her
more than the allowable placement fee? We answer in the negative.

To show the amount it collected as placement fee from petitioner, respondent presented an acknowledgment receipt
showing that petitioner paid and respondent received P20,840.00. This notwithstanding, petitioner claimed that she paid more
than this amount. In support of her allegation, she presented a photocopy of a promissory note she executed, and testified on
the purported deductions made by her foreign employer. In the promissory note, petitioner promised to pay respondent the
amount of P10,000.00 that she borrowed for only two weeks.[15] Petitioner also explained that her foreign employer deducted
from her salary a total amount of NT$60,000.00. She claimed that the P10,000.00 covered by the promissory note was never
obtained as a loan but as part of the placement fee collected by respondent. Moreover, she alleged that the salary deductions
made by her foreign employer still formed part of the placement fee collected by respondent.

We are inclined to give more credence to respondents evidence, that is, the acknowledgment receipt showing the
amount paid by petitioner and received by respondent. A receipt is a written and signed acknowledgment that money or goods
have been delivered.[16] Although a receipt is not conclusive evidence, an exhaustive review of the records of this case fails to
disclose any other evidence sufficient and strong enough to overturn the acknowledgment embodied in respondents receipt as
to the amount it actually received from petitioner. Having failed to adduce sufficient rebuttal evidence, petitioner is bound by
the contents of the receipt issued by respondent. The subject receipt remains as the primary or best evidence. [17]

The promissory note presented by petitioner cannot be considered as adequate evidence to show the excessive
placement fee. It must be emphasized that a promissory note is a solemn acknowledgment of a debt and a formal commitment
to repay it on the date and under the conditions agreed upon by the borrower and the lender. A person who signs such an
instrument is bound to honor it as a legitimate obligation duly assumed by him through the signature he affixes thereto as a
token of his good faith.[18] Moreover, as held by the CA, the fact that respondent is not a lending company does not preclude it
from extending a loan to petitioner for her personal use. As for the deductions purportedly made by petitioners foreign
employer, we reiterate the findings of the CA that there is no single piece of document or receipt showing that deductions have
in fact been made, nor is there any proof that these deductions from the salary formed part of the subject placement fee.[19]

At this point, we would like to emphasize the well-settled rule that the factual findings of quasi-judicial agencies, like
the POEA, which have acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not
34
only respect, but at times even finality if such findings are supported by substantial evidence. [20] While the Constitution is
committed to the policy of social justice and to the protection of the working class, it should not be presumed that every dispute
will automatically be decided in favor of labor.[21]

To be sure, mere general allegations of payment of excessive placement fees cannot be given merit as the charge of illegal
exaction is considered a grave offense which could cause the suspension or cancellation of the agencys license. They should
be proven and substantiated by clear, credible, and competent evidence. [22]

WHEREFORE, premises considered, the petition is DENIED for lack of merit. The Court of Appeals Decision dated March 23,
2007 and Resolution dated August 16, 2007 in CA-G.R. SP No. 89298 are AFFIRMED.

SO ORDERED.

G.R. No. 197528 September 5, 2012

PERT/CPM MANPOWER EXPONENT CO., INC., Petitioner,
vs.
ARMANDO A. VINUY A, LOUIE M. ORDOVEZ, ARSENIO S. LUMANTA,. JR., ROBELITO S. ANIPAN, VIRGILIO R.
ALCANTARA, MARINO M. ERA, SANDY 0. ENJAMBRE and NOEL T. LADEA, Respondents.
DECISION
BRION, J.:
We resolve the present petition for review on certiorari1 assailing the decision2 dated May 9, 2011 and the resolution3dated
June 23, 2011 of the Court of Appeals (CA) in CA-G.R. SP No. 114353.
The Antecedents
On March 5, 2008, respondents Armando A. Vinuya, Louie M. Ordovez, Arsenio S. Lumanta, Jr., Robelito S. Anipan, Virgilio
R. Alcantara, Marino M. Era, Sandy O. Enjambre and Noel T. Ladea (respondents) filed a complaint for illegal dismissal
against the petitioner Pert/CPM Manpower Exponent Co., Inc. (agency), and its President Romeo P. Nacino.
The respondents alleged that the agency deployed them between March 29, 2007 and May 12, 2007 to work as aluminum
fabricator/installer for the agencys principal, Modern Metal Solution LLC/MMS Modern Metal Solution LLC (Modern Metal) in
Dubai, United Arab Emirates.
The respondents employment contracts,4 which were approved by the Philippine Overseas Employment Administration
(POEA), provided for a two-year employment, nine hours a day, salary of 1,350 AED with overtime pay, food allowance, free
and suitable housing (four to a room), free transportation, free laundry, and free medical and dental services. They each paid
a P 15,000.00 processing fee.5
On April 2, 2007, Modern Metal gave the respondents, except Era, appointment letters 6 with terms different from those in the
employment contracts which they signed at the agencys office in the Philippines. Under the letters of appointment, their
employment was increased to three years at 1,000 to 1,200 AED and food allowance of 200 AED.
The respondents claimed that they were shocked to find out what their working and living conditions were in Dubai. They were
required to work from 6:30 a.m. to 6:30 p.m., with a break of only one hour to one and a half hours. When they rendered
overtime work, they were most of the time either underpaid or not paid at all. Their housing accommodations were cramped
and were shared with 27 other occupants. The lodging house was in Sharjah, which was far from their jobsite in Dubai, leaving
them only three to four hours of sleep a day because of the long hours of travel to and from their place of work; there was no
potable water and the air was polluted.
When the respondents received their first salaries (at the rates provided in their appointment letters and with deductions for
placement fees) and because of their difficult living and working conditions, they called up the agency and complained about
their predicament. The agency assured them that their concerns would be promptly addressed, but nothing happened.
On May 5, 2007, Modern Metal required the respondents to sign new employment contracts, 7 except for Era who was made to
sign later. The contracts reflected the terms of their appointment letters. Burdened by all the expenses and financial
obligations they incurred for their deployment, they were left with no choice but to sign the contracts. They raised the matter
with the agency, which again took no action.
On August 5, 2007, despondent over their unbearable living and working conditions and by the agencys inaction, the
respondents expressed to Modern Metal their desire to resign. Out of fear, as they put it, that Modern Metal would not give
them their salaries and release papers, the respondents, except Era, cited personal/family problems for their resignation.8 Era
mentioned the real reason "because I dont (sic) want the company policy" 9 for his resignation.
It took the agency several weeks to repatriate the respondents to the Philippines. They all returned to Manila in September
2007. Except for Ordovez and Enjambre, all the respondents shouldered their own airfare.
For its part, the agency countered that the respondents were not illegally dismissed; they voluntarily resigned from their
employment to seek a better paying job. It claimed that the respondents, while still working for Modern Metal, applied with

35
another company which offered them a higher pay. Unfortunately, their supposed employment failed to materialize and they
had to go home because they had already resigned from Modern Metal.
The agency further alleged that the respondents even voluntarily signed affidavits of quitclaim and release after they resigned.
It thus argued that their claim for benefits, under Section 10 of Republic Act No. (R.A.) 8042, damages and attorneys fees is
unfounded.
The Compulsory Arbitration Rulings
On April 30, 2008, Labor Arbiter Ligerio V. Ancheta rendered a Decision 10 dismissing the complaint, finding that the
respondents voluntarily resigned from their jobs. He also found that four of them Alcantara, Era, Anipan and Lumanta even
executed a compromise agreement (with quitclaim and release) before the POEA. He considered the POEA recourse a case
of forum shopping.
The respondents appealed to the National Labor Relations Commission (NLRC). They argued that the labor arbiter committed
serious errors in (1) admitting in evidence the quitclaims and releases they executed in Dubai, which were mere photocopies
of the originals and which failed to explain the circumstances behind their execution; (2) failing to consider that the
compromise agreements they signed before the POEA covered only the refund of their airfare and not all their money claims;
and (3) ruling that they violated the rule on non-forum shopping.
On May 12, 2009, the NLRC granted the appeal.11 It ruled that the respondents had been illegally dismissed. It anchored its
ruling on the new employment contracts they were made to sign in Dubai. It stressed that it is illegal for an employer to require
its employees to execute new employment papers, especially those which provide benefits that are inferior to the POEA-
approved contracts.
The NLRC rejected the quitclaim and release executed by the respondents in Dubai. It believed that the respondents executed
the quitclaim documents under duress as they were afraid that they would not be allowed to return to the Philippines if they did
not sign the documents. Further, the labor tribunal disagreed with the labor arbiters opinion that the compromise agreement
they executed before the POEA had effectively foreclosed the illegal dismissal complaint before the NLRC and that the
respondents had been guilty of forum shopping. It pointed out that the POEA case involved pre-deployment issues; whereas,
the complaint before the NLRC is one for illegal dismissal and money claims arising from employment.
Consequently, the NLRC ordered the agency, Nacino and Modern Metal to pay, jointly and severally, the respondents, as
follows:
WHEREFORE, the Decision dated 30 April 2008 is hereby REVERSED and SET ASIDE, a new Decision is hereby issued
ordering the respondents PERT/CPM MANPOWER EXPONENTS CO., INC., ROMEO NACINO, and MODERN METAL
SOLUTIONS, INC. to jointly and severally, pay the complainants the following:
Salary for
the
unexpired
Underpaid Placement Exemplary
Employee portion of
Salary fee Damages
the contract
(1350 x 6
months)

Vinuya,
150 x 6 = 900 AED USD 400 8100 AED P 20,000.00
ARMANDO

Alcantara
150 X 4 = 600 AED USD 400 8100 AED P 20,000.00
VIRGILIO

Era,
350 x 4 = 1400 AED USD 400 8100 AED P 20,000.00
MARINO

Ladea,
150 x 5 = 750 AED USD 400 8100 AED P 20,000.00
NOEL

Ordovez,
250 X 3 = 750 AED USD 400 8100 AED P 20,000.00
LOUIE

Anipan,
150 x 4 = 600 AED USD 400 8100 AED P 20,000.00
ROBELITO

Enjambre,
150 x 4 = 600 AED USD 400 8100 AED P 20,000.00
SANDY

36
 Lumanta,
250 x 5 = 1250 AED USD 400 8100 AED P 20,000.00
ARSENIO

TOTAL: 6,850 AED US$3,200 64,800 AED P 400,000.00

or their peso equivalent at the time of actual payment plus attorneys fees equivalent to 10% of the judgment award. 12
The agency moved for reconsideration, contending that the appeal was never perfected and that the NLRC gravely abused its
discretion in reversing the labor arbiters decision.The respondents, on the other hand, moved for partial reconsideration,
maintaining that their salaries should have covered the unexpired portion of their employment contracts, pursuant to the
Courts ruling in Serrano v. Gallant Maritime Services, Inc.13
The NLRC denied the agencys motion for reconsideration, but granted the respondents motion. 14 It sustained the
respondents argument that the award needed to be adjusted, particularly in relation to the payment of their salaries,
consistent with the Courts ruling in Serrano. The ruling declared unconstitutional the clause, "or for three (3) months for every
year of the unexpired term, whichever is less," in Section 10, paragraph 5, of R.A. 8042, limiting the entitlement of illegally
dismissed overseas Filipino workers to their salaries for the unexpired term of their contract or three months, whichever is less.
Accordingly, it modified its earlier decision and adjusted the respondents salary entitlement based on the following matrix:

Unexpired
Duration of
Employee Departure date Date dismissed portion of
Contract
contract

Vinuya, 19 months
2 years 29 March 2007 8 August 2007
ARMANDO and 21 days

Alcantara, 20 months
2 years 3 April 2007 8 August 2007
VIRGILIO and 5 days

Era, 21 months
2 years 12 May 2007 8 August 2007
MARINO and 4 days

Ladea, 19 months
2 years 29 March 2007 8 August 2007
NOEL and 21 days

Ordovez, 21 months
2 years 3 April 2007 26 July 2007
LOUIE and 23 days

Anipan, 20 months
2 years 3 April 2007 8 August 2007
ROBELITO and 5 days

Enjambre, 20 months
2 years 29 March 2007 26 July 2007
SANDY and 3 days

Lumanta, 19 months
2 years 29 March 2007 8 August 2007
ARSENIO and 21 days15

Again, the agency moved for reconsideration, reiterating its earlier arguments and, additionally, questioning the application of
the Serrano ruling in the case because it was not yet final and executory. The NLRC denied the motion, prompting the agency
to seek recourse from the CA through a petition for certiorari.
The CA Decision
37
The CA dismissed the petition for lack of merit.16 It upheld the NLRC ruling that the respondents were illegally dismissed. It
found no grave abuse of discretion in the NLRCs rejection of the respondents resignation letters, and the accompanying
quitclaim and release affidavits, as proof of their voluntary termination of employment.
The CA stressed that the filing of a complaint for illegal dismissal is inconsistent with resignation. Moreover, it found nothing in
the records to substantiate the agencys contention that the respondents resignation was of their own accord; on the contrary,
it considered the resignation letters "dubious for having been lopsidedly-worded to ensure that the petitioners (employers) are
free from any liability."17
The appellate court likewise refused to give credit to the compromise agreements that the respondents executed before the
POEA. It agreed with the NLRCs conclusion that the agreements pertain to the respondents charge of recruitment violations
against the agency distinct from their illegal dismissal complaint, thus negating forum shopping by the respondents.
Lastly, the CA found nothing legally wrong in the NLRC correcting itself (upon being reminded by the respondents), by
adjusting the respondents salary award on the basis of the unexpired portion of their contracts, as enunciated in the Serrano
case.
The agency moved for, but failed to secure, a reconsideration of the CA decision. 18
The Petition
The agency is now before the Court seeking a reversal of the CA dispositions, contending that the CA erred in:
1. affirming the NLRCs finding that the respondents were illegally dismissed;
2. holding that the compromise agreements before the POEA pertain only to the respondents charge of recruitment
violations against the agency; and
3. affirming the NLRCs award to the respondents of their salaries for the unexpired portion of their employment
contracts, pursuant to the Serrano ruling.
The agency insists that it is not liable for illegal dismissal, actual or constructive. It submits that as correctly found by the labor
arbiter, the respondents voluntarily resigned from their jobs, and even executed affidavits of quitclaim and release; the
respondents stated family concerns for their resignation. The agency posits that the letters were duly proven as they were
written unconditionally by the respondents. It, therefore, assails the conclusion that the respondents resigned under duress or
that the resignation letters were dubious.
The agency raises the same argument with respect to the compromise agreements, with quitclaim and release, it entered into
with Vinuya, Era, Ladea, Enjambre, Ordovez, Alcantara, Anipan and Lumanta before the POEA, although it submitted
evidence only for six of them. Anipan, Lumanta, Vinuya and Ladea signing one document; 19Era20 and Alcantara21 signing a
document each. It points out that the agreement was prepared with the assistance of POEA Conciliator Judy Santillan, and
was duly and freely signed by the respondents; moreover, the agreement is not conditional as it pertains to all issues involved
in the dispute between the parties.
On the third issue, the agency posits that the Serrano ruling has no application in the present case for three reasons. First, the
respondents were not illegally dismissed and, therefore, were not entitled to their money claims. Second, the respondents filed
the complaint in 2007, while the Serrano ruling came out on March 24, 2009. The ruling cannot be given retroactive
application. Third, R.A. 10022, which was enacted on March 8, 2010 and which amended R.A. 8042, restored the subject
clause in Section 10 of R.A. 8042, declared unconstitutional by the Court.
The Respondents Position
In their Comment (to the Petition) dated September 28, 2011,22 the respondents ask the Court to deny the petition for lack of
merit. They dispute the agencys insistence that they resigned voluntarily. They stand firm on their submission that because of
their unbearable living and working conditions in Dubai, they were left with no choice but to resign. Also, the agency never
refuted their detailed narration of the reasons for giving up their employment.
The respondents maintain that the quitclaim and release affidavits, 23 which the agency presented, betray its desperate attempt
to escape its liability to them. They point out that, as found by the NLRC, the affidavits are ready-made documents; for
instance, in Lumantas24 and Eras25 affidavits, they mentioned a certain G & A International Manpower as the agency which
recruited them a fact totally inapplicable to all the respondents. They contend that they had no choice but to sign the
documents; otherwise, their release papers and remaining salaries would not be given to them, a submission which the
agency never refuted.
On the agencys second line of defense, the compromise agreement (with quitclaim and release) between the respondents
and the agency before the POEA, the respondents argue that the agreements pertain only to their charge of recruitment
violations against the agency. They add that based on the agreements, read and considered entirely, the agency was
discharged only with respect to the recruitment and pre-deployment issues such as excessive placement fees, non-issuance
of receipts and placement misrepresentation, but not with respect to post-deployment issues such as illegal dismissal, breach
of contract, underpayment of salaries and underpayment and nonpayment of overtime pay. The respondents stress that the
agency failed to controvert their contention that the agreements came about only to settle their claim for refund of their airfare
which they paid for when they were repatriated.
Lastly, the respondents maintain that since they were illegally dismissed, the CA was correct in upholding the NLRCs award
of their salaries for the unexpired portion of their employment contracts, as enunciated in Serrano. They point out that the
38
Serrano ruling is curative and remedial in nature and, as such, should be given retroactive application as the Court declared in
Yap v. Thenamaris Ships Management.26 Further, the respondents take exception to the agencys contention that the Serrano
ruling cannot, in any event, be applied in the present case in view of the enactment of R.A. 10022 on March 8, 2010,
amending Section 10 of R.A. 8042. The amendment restored the subject clause in paragraph 5, Section 10 of R.A. 8042 which
was struck down as unconstitutional in Serrano.
The respondents maintain that the agency cannot raise the issue for the first time before this Court when it could have raised it
before the CA with its petition for certiorari which it filed on June 8, 2010;27 otherwise, their right to due process will be violated.
The agency, on the other hand, would later claim that it is not barred by estoppel with respect to its reliance on R.A. 10022 as
it raised it before the CA in CA-G.R. SP No. 114353.28 They further argue that RA 10022 cannot be applied in their case, as
the law is an amendatory statute which is, as a rule, prospective in application, unless the contrary is provided.29 To put the
issue to rest, the respondents ask the Court to also declare unconstitutional Section 7 of R.A. 10022.
Finally, the respondents submit that the petition should be dismissed outright for raising only questions of fact, rather than of
law.
The Courts Ruling
The procedural question
We deem it proper to examine the facts of the case on account of the divergence in the factual conclusions of the labor arbiter
on the one hand, and, of the NLRC and the CA, on the other.30 The arbiter found no illegal dismissal in the respondents loss
of employment in Dubai because they voluntarily resigned; whereas, the NLRC and the CA adjudged them to have been
illegally dismissed because they were virtually forced to resign.
The merits of the case
We find no merit in the petition. The CA committed no reversible error and neither did it commit grave abuse of
discretion in affirming the NLRCs illegal dismissal ruling.
The agency and its principal, Modern Metal, committed flagrant violations of the law on overseas employment, as well as basic
norms of decency and fair play in an employment relationship, pushing the respondents to look for a better employment and,
ultimately, to resign from their jobs.
First. The agency and Modern Metal are guilty of contract substitution. The respondents entered into a POEA-approved two-
year employment contract,31 with Modern Metal providing among others, as earlier discussed, for a monthly salary of 1350
AED. On April 2, 2007, Modern Metal issued to them appointment letters 32 whereby the respondents were hired for a longer
three-year period and a reduced salary, from 1,100 AED to 1,200 AED, among other provisions. Then, on May 5, 2007, they
were required to sign new employment contracts33 reflecting the same terms contained in their appointment letters, except that
this time, they were hired as "ordinary laborer," no longer aluminum fabricator/installer. The respondents complained with the
agency about the contract substitution, but the agency refused or failed to act on the matter.
The fact that the respondents contracts were altered or substituted at the workplace had never been denied by the agency.
On the contrary, it admitted that the contract substitution did happen when it argued, "as to their claim for underpayment of
salary, their original contract mentioned 1350 AED monthly salary, which includes allowance while in their Appointment
Letters, they were supposed to receive 1,300 AED. While there was a difference of 50 AED monthly, the same could no longer
be claimed by virtue of their Affidavits of Quitclaims and Desistance." 34
Clearly, the agency and Modern Metal committed a prohibited practice and engaged in illegal recruitment under the law. Article
34 of the Labor Code provides:
Art. 34. Prohibited Practices. It shall be unlawful for any individual, entity, licensee, or holder of authority:
xxxx
(i) To substitute or alter employment contracts approved and verified by the Department of Labor from the time of actual
signing thereof by the parties up to and including the periods of expiration of the same without the approval of the Secretary of
Labor.
Further, Article 38 of the Labor Code, as amended by R.A. 8042, 35 defined "illegal recruitment" to include the following act:
(i) To substitute or alter to the prejudice of the worker, employment contracts approved and verified by the Department of
Labor and Employment from the time of actual signing thereof by the parties up to and including the period of the expiration of
the same without the approval of the Department of Labor and Employment.
Second. The agency and Modern Metal committed breach of contract. Aggravating the contract substitution imposed upon
them by their employer, the respondents were made to suffer substandard (shocking, as they put it) working and living
arrangements. Both the original contracts the respondents signed in the Philippines and the appointment letters issued to them
by Modern Metal in Dubai provided for free housing and transportation to and from the jobsite. The original contract mentioned
free and suitable housing.36 Although no description of the housing was made in the letters of appointment except:
"Accommodation: Provided by the company," it is but reasonable to think that the housing or accommodation would be
"suitable."
As earlier pointed out, the respondents were made to work from 6:30 a.m. to 6:30 p.m., with a meal break of one to one and a
half hours, and their overtime work was mostly not paid or underpaid. Their living quarters were cramped as they shared them
with 27 other workers. The lodging house was in Sharjah, far from the jobsite in Dubai, leaving them only three to four hours of
39
sleep every workday because of the long hours of travel to and from their place of work, not to mention that there was no
potable water in the lodging house which was located in an area where the air was polluted. The respondents complained with
the agency about the hardships that they were suffering, but the agency failed to act on their reports. Significantly, the agency
failed to refute their claim, anchored on the ordeal that they went through while in Modern Metals employ.
Third. With their original contracts substituted and their oppressive working and living conditions unmitigated or unresolved,
the respondents decision to resign is not surprising. They were compelled by the dismal state of their employment to give up
their jobs; effectively, they were constructively dismissed. A constructive dismissal or discharge is "a quitting because
continued employment is rendered impossible, unreasonable or unlikely, as, an offer involving a demotion in rank and a
diminution in pay."37
Without doubt, the respondents continued employment with Modern Metal had become unreasonable. A reasonable mind
would not approve of a substituted contract that pays a diminished salary from 1350 AED a month in the original contract to
1,000 AED to 1,200 AED in the appointment letters, a difference of 150 AED to 250 AED (not just 50 AED as the agency
claimed) or an extended employment (from 2 to 3 years) at such inferior terms, or a "free and suitable" housing which is hours
away from the job site, cramped and crowded, without potable water and exposed to air pollution.
We thus cannot accept the agencys insistence that the respondents voluntarily resigned since they personally prepared their
resignation letters38 in their own handwriting, citing family problems as their common ground for resigning. As the CA did, we
find the resignation letters "dubious,"39 not only for having been lopsidedly worded to ensure that the employer is rendered free
from any liability, but also for the odd coincidence that all the respondents had, at the same time, been confronted with urgent
family problems so that they had to give up their employment and go home. The truth, as the respondents maintain, is that
they cited family problems as reason out of fear that Modern Metal would not give them their salaries and their release papers.
Only Era was bold enough to say the real reason for his resignation to protest company policy.
We likewise find the affidavits40of quitclaim and release which the respondents executed suspect. Obviously, the affidavits
were prepared as a follow through of the respondents supposed voluntary resignation. Unlike the resignation letters, the
respondents had no hand in the preparation of the affidavits. They must have been prepared by a representative of Modern
Metal as they appear to come from a standard form and were apparently introduced for only one purpose to lend credence
to the resignation letters. In Modern Metals haste, however, to secure the respondents affidavits, they did not check on the
model they used. Thus, Lumantas affidavit41mentioned a G & A International Manpower as his recruiting agency, an entity
totally unknown to the respondents; the same thing is true for Eras affidavit. 42 This confusion is an indication of the employers
hurried attempt to avoid liability to the respondents.
The respondents position is well-founded. The NLRC itself had the same impression, which we find in order and hereunder
quote:
The acts of respondents of requiring the signing of new contracts upon reaching the place of work and requiring employees to
sign quitclaims before they are paid and repatriated to the Philippines are all too familiar stories of despicable labor practices
which our employees are subjected to abroad. While it is true that quitclaims are generally given weight, however, given the
facts of the case, We are of the opinion that the complainants-appellants executed the same under duress and fear that they
will not be allowed to return to the Philippines.43
Fourth. The compromise agreements (with quitclaim and release)44 between the respondents and the agency before the
POEA did not foreclose their employer-employee relationship claims before the NLRC. The respondents, except Ordovez and
Enjambre, aver in this respect that they all paid for their own airfare when they returned home 45 and that the compromise
agreements settled only their claim for refund of their airfare, but not their other claims.46 Again, this submission has not been
refuted or denied by the agency.
On the surface, the compromise agreements appear to confirm the agencys position, yet a closer examination of the
documents would reveal their true nature. Copy of the compromise agreement is a standard POEA document, prepared in
advance and readily made available to parties who are involved in disputes before the agency, such as what the respondents
filed with the POEA ahead (filed in 2007) of the illegal dismissal complaint before the NLRC (filed on March 5, 2008).
Under the heading "Post-Deployment," the agency agreed to pay Era47 and Alcantara48 P 12,000.00 each, purportedly in
satisfaction of the respondents claims arising from overseas employment, consisting of unpaid salaries, salary differentials
and other benefits, including money claims with the NLRC. The last document was signed by (1) Anipan, (2) Lumanta, (3)
Ladea, (4) Vinuya, (5) Jonathan Nangolinola, and (6) Zosimo Gatchalian (the last four signing on the left hand side of the
document; the last two were not among those who filed the illegal dismissal complaint). 49
The agency agreed to pay them a total of P 72,000.00. Although there was no breakdown of the entitlement for each of the six,
but guided by the compromise agreement signed by Era and Alcantara, we believe that the agency paid them P 12,000.00
each, just like Era and Alcantara.
The uniform insubstantial amount for each of the signatories to the agreement lends credence to their contention that the
settlement pertained only to their claim for refund of the airfare which they shouldered when they returned to the Philippines.
The compromise agreement, apparently, was intended by the agency as a settlement with the respondents and others with
similar claims, which explains the inclusion of the two (Nangolinola and Gatchalian) who were not involved in the case with the
NLRC. Under the circumstances, we cannot see how the compromise agreements can be considered to have fully settled the
40
respondents claims before the NLRC illegal dismissal and monetary benefits arising from employment. We thus find no
reversible error nor grave abuse of discretion in the rejection by the NLRC and the CA of said agreements.
Fifth. The agencys objection to the application of the Serrano ruling in the present case is of no moment. Its argument that the
ruling cannot be given retroactive effect, because it is curative and remedial, is untenable. It points out, in this respect, that the
respondents filed the complaint in 2007, while the Serrano ruling was handed down in March 2009. The issue, as the
respondents correctly argue, has been resolved in Yap v. Thenamaris Ships Management, 50 where the Court sustained the
retroactive application of the Serrano ruling which declared unconstitutional the subject clause in Section 10, paragraph 5 of
R.A. 8042, limiting to three months the payment of salaries to illegally dismissed Overseas Filipino Workers.
Undaunted, the agency posits that in any event, the Serrano ruling has been nullified by R.A. No. 10022, entitled "An Act
Amending Republic Act No. 8042, Otherwise Known as the Migrant Workers and Overseas Filipinos Act of 1995, As
Amended, Further Improving the Standard of Protection and Promotion of the Welfare of Migrant Workers, Their Families and
Overseas Filipinos in Distress, and For Other Purposes." 51 It argues that R.A. 10022, which lapsed into law (without the
Signature of the President) on March 8, 2010, restored the subject clause in the 5th paragraph, Section 10 of R.A. 8042. The
amendment, contained in Section 7 of R.A. 10022, reads as follows:
In case of termination of overseas employment without just, valid or authorized cause as defined by law or contract, or any
unauthorized deductions from the migrant workers salary, the worker shall be entitled to the full reimbursement "of" his
placement fee and the deductions made with interest at twelve percent (12%) per annum, plus his salaries for the unexpired
portion of his employment contract or for three (3) months for every year of the unexpired term, whichever is less. 52 (emphasis
ours)
This argument fails to persuade us. Laws shall have no retroactive effect, unless the contrary is provided. 53 By its very nature,
the amendment introduced by R.A. 10022 restoring a provision of R.A. 8042 declared unconstitutional cannot be given
retroactive effect, not only because there is no express declaration of retroactivity in the law, but because retroactive
application will result in an impairment of a right that had accrued to the respondents by virtue of the Serrano ruling -
entitlement to their salaries for the unexpired portion of their employment contracts.
All statutes are to be construed as having only a prospective application, unless the purpose and intention of the legislature to
give them a retrospective effect are expressly declared or are necessarily implied from the language used. 54 We thus see no
reason to nullity the application of the Serrano ruling in the present case. Whether or not R.A. 1 0022 is constitutional is not for
us to rule upon in the present case as this is an issue that is not squarely before us. In other words, this is an issue that awaits
its proper day in court; in the meanwhile, we make no pronouncement on it.
WHEREFORE, premises considered, the petition is DENIED. The assailed Decision dated May 9, 2011 and the Resolution
dated June 23, 2011 of the Court of Appeals in CA-G.R. SP No. 114353 are AFFIRMED. Let this Decision be brought to the
attention of the Honorable Secretary of Labor and Employment and the Administrator of the Philippine Overseas Employment
Administration as a black mark in the deployment record of petitioner Pert/CPM Manpower Exponent Co., Inc., and as a record
that should be considered in any similar future violations.
Costs against the petitioner.
SO ORDERED.

G.R. No. 177498 January 18, 2012

STOLT-NIELSEN TRANSPORTATION GROUP, INC. AND CHUNG GAI SHIP MANAGEMENT, Petitioners,
vs.
SULPECIO MEDEQUILLO, JR., Respondent.
DECISION
PEREZ, J.:
Before the Court is a Petition for Review on Certiorari1 of the Decision2 of the First Division of the Court of Appeals in CA-G.R.
SP No. 91632 dated 31 January 2007, denying the petition for certiorari filed by Stolt-Nielsen Transportation Group, Inc. and
Chung Gai Ship Management (petitioners) and affirming the Resolution of the National Labor Relations Commission (NLRC).
The dispositive portion of the assailed decision reads:
WHEREFORE, the petition is hereby DENIED. Accordingly, the assailed Decision promulgated on February 28, 2003 and the
Resolution dated July 27, 2005 are AFFIRMED.3
The facts as gathered by this Court follow:
On 6 March 1995, Sulpecio Madequillo (respondent) filed a complaint before the Adjudication Office of the Philippine
Overseas Employment Administration (POEA) against the petitioners for illegal dismissal under a first contract and for failure
to deploy under a second contract. In his complaint-affidavit,4 respondent alleged that:
1. On 6 November 1991(First Contract), he was hired by Stolt-Nielsen Marine Services, Inc on behalf of its principal
Chung-Gai Ship Management of Panama as Third Assistant Engineer on board the vessel "Stolt Aspiration" for a
period of nine (9) months;
2. He would be paid with a monthly basic salary of $808.00 and a fixed overtime pay of $404.00 or a total of $1,212.00
per month during the employment period commencing on 6 November 1991;
41
 3. On 8 November 1991, he joined the vessel MV "Stolt Aspiration";
4. On February 1992 or for nearly three (3) months of rendering service and while the vessel was at Batangas, he was
ordered by the ships master to disembark the vessel and repatriated back to Manila for no reason or explanation;
5. Upon his return to Manila, he immediately proceeded to the petitioners office where he was transferred employment
with another vessel named MV "Stolt Pride" under the same terms and conditions of the First Contract;
6. On 23 April 1992, the Second Contract was noted and approved by the POEA;
7. The POEA, without knowledge that he was not deployed with the vessel, certified the Second Employment Contract
on 18 September 1992.
8. Despite the commencement of the Second Contract on 21 April 1992, petitioners failed to deploy him with the vessel
MV "Stolt Pride";
9. He made a follow-up with the petitioner but the same refused to comply with the Second Employment Contract.
10. On 22 December 1994, he demanded for his passport, seamans book and other employment documents. However,
he was only allowed to claim the said documents in exchange of his signing a document;
11. He was constrained to sign the document involuntarily because without these documents, he could not seek
employment from other agencies.
He prayed for actual, moral and exemplary damages as well as attorneys fees for his illegal dismissal and in view of the
Petitioners bad faith in not complying with the Second Contract.
The case was transferred to the Labor Arbiter of the DOLE upon the effectivity of the Migrant Workers and Overseas Filipinos
Act of 1995.
The parties were required to submit their respective position papers before the Labor Arbiter. However, petitioners failed to
submit their respective pleadings despite the opportunity given to them.5
On 21 July 2000, Labor Arbiter Vicente R. Layawen rendered a judgment 6 finding that the respondent was constructively
dismissed by the petitioners. The dispositive portion reads:
WHEREFORE, premises considered, judgment is hereby rendered, declaring the respondents guilty of constructively
dismissing the complainant by not honoring the employment contract. Accordingly, respondents are hereby ordered jointly and
solidarily to pay complainant the following:
1. $12,537.00 or its peso equivalent at the time of payment. 7
The Labor Arbiter found the first contract entered into by and between the complainant and the respondents to have been
novated by the execution of the second contract. In other words, respondents cannot be held liable for the first contract but are
clearly and definitely liable for the breach of the second contract. 8 However, he ruled that there was no substantial evidence to
grant the prayer for moral and exemplary damages.9
The petitioners appealed the adverse decision before the National Labor Relations Commission assailing that they were
denied due process, that the respondent cannot be considered as dismissed from employment because he was not even
deployed yet and the monetary award in favor of the respondent was exorbitant and not in accordance with law. 10
On 28 February 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter. The dispositive portion reads:
WHEREFORE, premises considered, the decision under review is hereby, MODIFIED BY DELETING the award of overtime
pay in the total amount of Three Thousand Six Hundred Thirty Six US Dollars (US $3,636.00).
In all other respects, the assailed decision so stands as, AFFIRMED.11
Before the NLRC, the petitioners assailed that they were not properly notified of the hearings that were conducted before the
Labor Arbiter. They further alleged that after the suspension of proceedings before the POEA, the only notice they received
was a copy of the decision of the Labor Arbiter.12
The NLRC ruled that records showed that attempts to serve the various notices of hearing were made on petitioners counsel
on record but these failed on account of their failure to furnish the Office of the Labor Arbiter a copy of any notice of change of
address. There was also no evidence that a service of notice of change of address was served on the POEA.13
The NLRC upheld the finding of unjustified termination of contract for failure on the part of the petitioners to present evidence
that would justify their non-deployment of the respondent.14 It denied the claim of the petitioners that the monetary award
should be limited only to three (3) months for every year of the unexpired term of the contract. It ruled that the factual incidents
material to the case transpired within 1991-1992 or before the effectivity of Republic Act No. 8042 or the Migrant Workers and
Overseas Filipinos Act of 1995 which provides for such limitation.15
However, the NLRC upheld the reduction of the monetary award with respect to the deletion of the overtime pay due to the
non-deployment of the respondent.16
The Partial Motion for Reconsideration filed by the petitioners was denied by the NLRC in its Resolution dated 27 July 2005. 17
The petitioners filed a Petition for Certiorari before the Court of Appeals alleging grave abuse of discretion on the part of NLRC
when it affirmed with modification the ruling of the Labor Arbiter. They prayed that the Decision and Resolution promulgated by
the NLRC be vacated and another one be issued dismissing the complaint of the respondent.
Finding no grave abuse of discretion, the Court of Appeals AFFIRMED the Decision of the labor tribunal.
The Courts Ruling
The following are the assignment of errors presented before this Court:
42
 I.
THE COURT A QUO ERRED IN FINDING THAT THE SECOND CONTRACT NOVATED THE FIRST CONTRACT.
1. THERE WAS NO NOVATION OF THE FIRST CONTRACT BY THE SECOND CONTRACT; THE ALLEGATION OF
ILLEGAL DISMISSAL UNDER THE FIRST CONTRACT MUST BE RESOLVED SEPARATELY FROM THE
ALLEGATION OF FAILURE TO DEPLOY UNDER THE SECOND CONTRACT.
2. THE ALLEGED ILLEGAL DISMISSAL UNDER THE FIRST CONTRACT TRANSPIRED MORE THAN THREE (3)
YEARS AFTER THE CASE WAS FILED AND THEREFORE HIS CASE SHOULD HAVE BEEN DISMISSED FOR
BEING BARRED BY PRESCRIPTION.
II.
THE COURT A QUO ERRED IN RULING THAT THERE WAS CONSTRUCTIVE DISMISSAL UNDER THE SECOND
CONTRACT.
1. IT IS LEGALLY IMPOSSIBLE TO HAVE CONSTRUCTIVE DISMISSAL WHEN THE EMPLOYMENT HAS NOT YET
COMMENCED.
2. ASSUMING THERE WAS OMISSION UNDER THE SECOND CONTRACT, PETITIONERS CAN ONLY BE FOUND
AS HAVING FAILED IN DEPLOYING PRIVATE RESPONDENT BUT WITH VALID REASON.
III.
THE COURT A QUO ERRED IN FAILING TO FIND THAT EVEN ASSUMING THERE WAS BASIS FOR HOLDING
PETITIONER LIABLE FOR "FAILURE TO DEPLOY" RESPONDENT, THE POEA RULES PENALIZES SUCH OMISSION
WITH A MERE "REPRIMAND."18
The petitioners contend that the first employment contract between them and the private respondent is different from and
independent of the second contract subsequently executed upon repatriation of respondent to Manila.
We do not agree.
Novation is the extinguishment of an obligation by the substitution or change of the obligation by a subsequent one which
extinguishes or modifies the first, either by changing the object or principal conditions, or, by substituting another in place of
the debtor, or by subrogating a third person in the rights of the creditor. In order for novation to take place, the concurrence of
the following requisites is indispensable:
1. There must be a previous valid obligation,
2. There must be an agreement of the parties concerned to a new contract,
3. There must be the extinguishment of the old contract, and
4. There must be the validity of the new contract.19
In its ruling, the Labor Arbiter clarified that novation had set in between the first and second contract. To quote:
xxx [T]his office would like to make it clear that the first contract entered into by and between the complainant and the
respondents is deemed to have been novated by the execution of the second contract. In other words, respondents cannot be
held liable for the first contract but are clearly and definitely liable for the breach of the second contract. 20
This ruling was later affirmed by the Court of Appeals in its decision ruling that:
Guided by the foregoing legal precepts, it is evident that novation took place in this particular case. The parties impliedly
extinguished the first contract by agreeing to enter into the second contract to placate Medequillo, Jr. who was unexpectedly
dismissed and repatriated to Manila. The second contract would not have been necessary if the petitioners abided by the
terms and conditions of Madequillo, Jr.s employment under the first contract. The records also reveal that the 2nd contract
extinguished the first contract by changing its object or principal. These contracts were for overseas employment aboard
different vessels. The first contract was for employment aboard the MV "Stolt Aspiration" while the second contract involved
working in another vessel, the MV "Stolt Pride." Petitioners and Madequillo, Jr. accepted the terms and conditions of the
second contract. Contrary to petitioners assertion, the first contract was a "previous valid contract" since it had not yet been
terminated at the time of Medequillo, Jr.s repatriation to Manila. The legality of his dismissal had not yet been resolved with
finality. Undoubtedly, he was still employed under the first contract when he negotiated with petitioners on the second contract.
As such, the NLRC correctly ruled that petitioners could only be held liable under the second contract. 21
We concur with the finding that there was a novation of the first employment contract.
We reiterate once more and emphasize the ruling in Reyes v. National Labor Relations Commission,22 to wit:
x x x [F]indings of quasi-judicial bodies like the NLRC, and affirmed by the Court of Appeals in due course, are conclusive on
this Court, which is not a trier of facts.
xxxx
x x x Findings of fact of administrative agencies and quasi-judicial bodies, which have acquired expertise because
their jurisdiction is confined to specific matters, are generally accorded not only respect, but finality when affirmed
by the Court of Appeals. Such findings deserve full respect and, without justifiable reason, ought not to be altered, modified
or reversed.(Emphasis supplied)23
With the finding that respondent "was still employed under the first contract when he negotiated with petitioners on the second
contract",24 novation became an unavoidable conclusion.

43
Equally settled is the rule that factual findings of labor officials, who are deemed to have acquired expertise in matters within
their jurisdiction, are generally accorded not only respect but even finality by the courts when supported by substantial
evidence, i.e., the amount of relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion.25 But these findings are not infallible. When there is a showing that they were arrived at arbitrarily or in disregard of
the evidence on record, they may be examined by the courts. 26 In this case, there was no showing of any arbitrariness on the
part of the lower courts in their findings of facts. Hence, we follow the settled rule.
We need not dwell on the issue of prescription. It was settled by the Court of Appeals with its ruling that recovery of damages
under the first contract was already time-barred. Thus:
Accordingly, the prescriptive period of three (3) years within which Medequillo Jr. may initiate money claims under the 1st
contract commenced on the date of his repatriation. xxx The start of the three (3) year prescriptive period must therefore be
reckoned on February 1992, which by Medequillo Jr.s own admission was the date of his repatriation to Manila. It was at this
point in time that Medequillo Jr.s cause of action already accrued under the first contract. He had until February 1995 to
pursue a case for illegal dismissal and damages arising from the 1st contract. With the filing of his Complaint-Affidavit on
March 6, 1995, which was clearly beyond the prescriptive period, the cause of action under the 1st contract was already time-
barred.27
The issue that proceeds from the fact of novation is the consequence of the non-deployment of respondent.
The petitioners argue that under the POEA Contract, actual deployment of the seafarer is a suspensive condition for the
commencement of the employment.28 We agree with petitioners on such point. However, even without actual deployment, the
perfected contract gives rise to obligations on the part of petitioners.
A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something
or to render some service.29 The contracting parties may establish such stipulations, clauses, terms and conditions as they
may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. 30
The POEA Standard Employment Contract provides that employment shall commence "upon the actual departure of the
seafarer from the airport or seaport in the port of hire." 31 We adhere to the terms and conditions of the contract so as to credit
the valid prior stipulations of the parties before the controversy started. Else, the obligatory force of every contract will be
useless. Parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences
which, according to their nature, may be in keeping with good faith, usage and law. 32
Thus, even if by the standard contract employment commences only "upon actual departure of the seafarer", this does not
mean that the seafarer has no remedy in case of non-deployment without any valid reason. Parenthetically, the contention of
the petitioners of the alleged poor performance of respondent while on board the first ship MV "Stolt Aspiration" cannot be
sustained to justify the non-deployment, for no evidence to prove the same was presented.33
We rule that distinction must be made between the perfection of the employment contract and the commencement of the
employer-employee relationship. The perfection of the contract, which in this case coincided with the date of execution thereof,
occurred when petitioner and respondent agreed on the object and the cause, as well as the rest of the terms and conditions
therein. The commencement of the employer-employee relationship, as earlier discussed, would have taken place had
petitioner been actually deployed from the point of hire. Thus, even before the start of any employer-employee relationship,
contemporaneous with the perfection of the employment contract was the birth of certain rights and obligations, the breach of
which may give rise to a cause of action against the erring party. Thus, if the reverse had happened, that is the seafarer failed
or refused to be deployed as agreed upon, he would be liable for damages.34
Further, we do not agree with the contention of the petitioners that the penalty is a mere reprimand.
The POEA Rules and Regulations Governing Overseas Employment 35 dated 31 May 1991 provides for the consequence and
penalty against in case of non-deployment of the seafarer without any valid reason. It reads:
Section 4. Workers Deployment. An agency shall deploy its recruits within the deployment period as indicated below:
xxx
b. Thirty (30) calendar days from the date of processing by the administration of the employment contracts of seafarers.
Failure of the agency to deploy a worker within the prescribed period without valid reasons shall be a cause
for suspension or cancellation of license or fine. In addition, the agency shall return all documents at no cost to the
worker.(Emphasis and underscoring supplied)
The appellate court correctly ruled that the penalty of reprimand 36 provided under Rule IV, Part VI of the POEA Rules and
Regulations Governing the Recruitment and Employment of Land-based Overseas Workers is not applicable in this case. The
breach of contract happened on February 1992 and the law applicable at that time was the 1991 POEA Rules and Regulations
Governing Overseas Employment. The penalty for non-deployment as discussed is suspension or cancellation of license or
fine.
Now, the question to be dealt with is how will the seafarer be compensated by reason of the unreasonable non-deployment of
the petitioners?
The POEA Rules Governing the Recruitment and Employment of Seafarers do not provide for the award of damages to be
given in favor of the employees. The claim provided by the same law refers to a valid contractual claim for compensation or
benefits arising from employer-employee relationship or for any personal injury, illness or death at levels provided for within
44
the terms and conditions of employment of seafarers. However, the absence of the POEA Rules with regard to the payment of
damages to the affected seafarer does not mean that the seafarer is precluded from claiming the same. The sanctions
provided for non-deployment do not end with the suspension or cancellation of license or fine and the return of all documents
at no cost to the worker. As earlier discussed, they do not forfend a seafarer from instituting an action for damages against the
employer or agency which has failed to deploy him.37
We thus decree the application of Section 10 of Republic Act No. 8042 (Migrant Workers Act) which provides for money claims
by reason of a contract involving Filipino workers for overseas deployment.lavvphil The law provides:
Sec. 10. Money Claims. Notwithstanding any provision of law to the contrary, the Labor Arbiters of the National Labor
Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and decide, within ninety (90) calendar
days after the filing of the complaint, the claims arising out of an employer-employee relationship or by virtue of any law or
contract involving Filipino workers for overseas deployment including claims for actual, moral, exemplary and other forms of
damages. x x x (Underscoring supplied)
Following the law, the claim is still cognizable by the labor arbiters of the NLRC under the second phrase of the provision.
Applying the rules on actual damages, Article 2199 of the New Civil Code provides that one is entitled to an adequate
compensation only for such pecuniary loss suffered by him as he has duly proved. Respondent is thus liable to pay petitioner
actual damages in the form of the loss of nine (9) months worth of salary as provided in the contract. 38 This is but proper
because of the non-deployment of respondent without just cause.
WHEREFORE, the appeal is DENIED. The 31 January 2007 Decision of the Court of Appeals in CA-G.R. SP. No. 91632 is
hereby AFFIRMED. The Petitioners are hereby ordered to pay Sulpecio Medequillo, Jr., the award of actual damages
equivalent to his salary for nine (9) months as provided by the Second Employment Contract.
SO ORDERED.

G.R. No. 175558 February 8, 2012

SKIPPERS UNITED PACIFIC, INC. and SKIPPERS MARITIME SERVICES, INC., LTD., Petitioners,
vs.
NATHANIEL DOZA, NAPOLEON DE GRACIA, ISIDRO L. LATA, and CHARLIE APROSTA, Respondents.
DECISION
CARPIO, J.:
The Case
This is a Petition for Review under Rule 45 assailing the 5 July 2006 Decision 1 and 7 November 2006 Resolution2of the Court
of Appeals in CA-G.R. SP No. 88148.3
This arose from consolidated labor case4 filed by seafarers Napoleon De Gracia (De Gracia), Isidro L. Lata (Lata), Charlie
Aprosta (Aprosta), and Nathaniel Doza (Doza) against local manning agency Skippers United Pacific, Inc. and its foreign
principal, Skippers Maritime Services, Inc., Ltd. (Skippers) for unremitted home allotment for the month of December 1998,
salaries for the unexpired portion of their employment contracts, moral damages, exemplary damages, and attorneys fees.
Skippers, on the other hand, answered with a claim for reimbursement of De Gracia, Aprosta and Latas repatriation expenses,
as well as award of moral damages and attorneys fees.
De Gracia, Lata, Aprosta and Dozas (De Gracia, et al.) claims were dismissed by the Labor Arbiter for lack of merit. 5 The
Labor Arbiter also dismissed Skippers claims.6 De Gracia, et al. appealed7 the Labor Arbiters decision with the National Labor
Relations Commission (NLRC), but the First Division of the NLRC dismissed the appeal for lack of merit. 8 Doza, et al.s Motion
for Reconsideration was likewise denied by the NLRC,9 so they filed a Petition for Certiorari with the Court of Appeals (CA). 10
The CA granted the petition, reversed the Labor Arbiter and NLRC Decisions, and awarded to De Gracia, Lata and Aprosta
their unremitted home allotment, three months salary each representing the unexpired portion of their employment contracts
and attorneys fees.11 No award was given to Doza for lack of factual basis.12 The CA denied Skippers Motion for Partial
Reconsideration.13 Hence, this Petition.
The Facts
Skippers United Pacific, Inc. deployed, in behalf of Skippers, De Gracia, Lata, and Aprosta to work on board the vessel MV
Wisdom Star, under the following terms and conditions:

Name : Napoleon O. De Gracia

Position : 3rd Engineer

Contract Duration : 10 months

Basic Monthly Salary : US$800.00

Contract Date : 17 July 199814

45
 Name : Isidro L. Lata

Position : 4th Engineer

Contract Duration : 12 months

Basic Monthly Salary : US$600.00

Contract Date : 17 April 199815

Name : Charlie A. Aprosta

Position : Third Officer

Contract Duration : 12 months

Basic Monthly Salary : US$600.00

Contract Date : 17 April 199816

Paragraph 2 of all the employment contracts stated that: "The terms and conditions of the Revised Employment Contract
Governing the Employment of All Seafarers approved per Department Order No. 33 and Memorandum Circular No. 55, both
series of 1996 shall be strictly and faithfully observed." 17 No employment contract was submitted for Nathaniel Doza.
De Gracia, et al. claimed that Skippers failed to remit their respective allotments for almost five months, compelling them to air
their grievances with the Romanian Seafarers Free Union.18 On 16 December 1998, ITF Inspector Adrian Mihalcioiu of the
Romanian Seafarers Union sent Captain Savvas of Cosmos Shipping a fax letter, relaying the complaints of his crew, namely:
home allotment delay, unpaid salaries (only advances), late provisions, lack of laundry services (only one washing machine),
and lack of maintenance of the vessel (perforated and unrepaired deck). 19 To date, however, Skippers only failed to remit the
home allotment for the month of December 1998.20 On 28 January 1999, De Gracia, et al. were unceremoniously discharged
from MV Wisdom Stars and immediately repatriated.21 Upon arrival in the Philippines, De Gracia, et al. filed a complaint for
illegal dismissal with the Labor Arbiter on 4 April 1999 and prayed for payment of their home allotment for the month of
December 1998, salaries for the unexpired portion of their contracts, moral damages, exemplary damages, and attorneys
fees.22
Skippers, on the other hand, claims that at around 2:00 a.m. on 3 December 1998, De Gracia, smelling strongly of alcohol,
went to the cabin of Gabriel Oleszek, Master of MV Wisdom Stars, and was rude, shouting noisily to the master. 23 De Gracia
left the masters cabin after a few minutes and was heard shouting very loudly somewhere down the corridors.24 This incident
was evidenced by the Captains Report sent via telex to Skippers on said date. 25
Skippers also claims that at 12:00 noon on 22 January 1999, four Filipino seafarers, namely Aprosta, De Gracia, Lata and
Doza, arrived in the masters cabin and demanded immediate repatriation because they were not satisfied with the ship. 26 De
Gracia, et al. threatened that they may become crazy any moment and demanded for all outstanding payments due to
them.27 This is evidenced by a telex of Cosmoship MV Wisdom to Skippers, which however bears conflicting dates of 22
January 1998 and 22 January 1999.28
Skippers also claims that, due to the disembarkation of De Gracia, et al., 17 other seafarers disembarked under abnormal
circumstsances.29 For this reason, it was suggested that Polish seafarers be utilized instead of Filipino seamen. 30 This is again
evidenced by a fax of Cosmoship MV Wisdom to Skippers, which bears conflicting dates of 24 January 1998 and 24 January
1999.31
Skippers, in its Position Paper, admitted non-payment of home allotment for the month of December 1998, but prayed for the
offsetting of such amount with the repatriation expenses in the following manner: 32
Seafarer Repatriation Expense Home Allotment Balance

De Gracia US$1,340.00 US$900.00 US$440.00

Aprosta US$1,340.00 US$600.00 US$740.00

Lata US$1,340.00 US$600.00 US$740.00

Since De Gracia, et al. pre-terminated their contracts, Skippers claims they are liable for their repatriation expenses 33 in
accordance with Section 19(G) of Philippine Overseas Employment Administration (POEA) Memorandum Circular No. 55,
series of 1996 which states:

46
G. A seaman who requests for early termination of his contract shall be liable for his repatriation cost as well as the
transportation cost of his replacement. The employer may, in case of compassionate grounds, assume the transportation cost
of the seafarers replacement.
Skippers also prayed for payment of moral damages and attorneys fees.34
The Decision of the Labor Arbiter
The Labor Arbiter rendered his Decision on 18 February 2002, with its dispositive portion declaring:
WHEREFORE, judgment is hereby rendered dismissing herein action for lack of merit. Respondents claim for reimbursement
of the expenses they incurred in the repatriation of complainant Nathaniel Doza is likewise dismissed.
SO ORDERED.35
The Labor Arbiter dismissed De Gracia, et al.s complaint for illegal dismissal because the seafarers voluntarily pre-terminated
their employment contracts by demanding for immediate repatriation due to dissatisfaction with the ship. 36 The Labor Arbiter
held that such voluntary pre-termination of employment contract is akin to resignation,37 a form of termination by employee of
his employment contract under Article 285 of the Labor Code. The Labor Arbiter gave weight and credibility to the telex of the
master of the vessel to Skippers, claiming that De Gracia, et al. demanded for immediate repatriation.38 Due to the absence of
illegal dismissal, De Gracia, et. al.s claim for salaries representing the unexpired portion of their employment contracts was
dismissed.39
The Labor Arbiter also dismissed De Gracia et al.s claim for home allotment for December 1998. 40 The Labor Arbiter
explained that payment for home allotment is "in the nature of extraordinary money where the burden of proof is shifted to the
worker who must prove he is entitled to such monetary benefit." 41 Since De Gracia, et al. were not able to prove their
entitlement to home allotment, such claim was dismissed.42
Lastly, Skippers claim for reimbursement of repatriation expenses was likewise denied, since Article 19(G) of POEA
Memorandum Circular No. 55, Series of 1996 allows the employer, in case the seafarer voluntarily pre-terminates his contract,
to assume the repatriation cost of the seafarer on compassionate grounds. 43
The Decision of the NLRC
The NLRC, on 28 October 2002, dismissed De Gracia, et al.s appeal for lack of merit and affirmed the Labor Arbiters
decision.44 The NLRC considered De Gracia, et al.s claim for home allotment for December 1998 unsubstantiated, since
home allotment is a benefit which De Gracia, et al. must prove their entitlement to. 45 The NLRC also denied the claim for illegal
dismissal because De Gracia, et al. were not able to refute the telex received by Skippers from the vessels master that De
Gracia, et al. voluntarily pre-terminated their contracts and demanded immediate repatriation due to their dissatisfaction with
the ships operations.46
The Decision of the Court of Appeals
The CA, on 5 July 2006, granted De Gracia, et al.s petition and reversed the decisions of the Labor Arbiter and NLRC, its
dispositive portion reading as follows:
WHEREFORE, the instant petition for certiorari is GRANTED. The Resolution dated October 28, 2002 and the Order dated
August 31, 2004 rendered by the public respondent NLRC are ANNULLED and SET ASIDE. Let another judgment be entered
holding private respondents jointly and severally liable to petitioners for the payment of:
1. Unremitted home allotment pay for the month of December, 1998 or the equivalent thereof in Philippine pesos:
a. De Gracia = US$900.00
b. Lata = US$600.00
c. Aprosta = US$600.00
2. Salary for the unexpired portion of the employment contract or for 3 months for every year of the unexpired term,
whichever is less, or the equivalent thereof in Philippine pesos:
a. De Gracia = US$2,400.00
b. Lata = US$1,800.00
c. Aprosta = US$1,800.00
3. Attorneys fees and litigation expenses equivalent to 10% of the total claims.
SO ORDERED.47
The CA declared the Labor Arbiter and NLRC to have committed grave abuse of discretion when they relied upon the telex
message of the captain of the vessel stating that De Gracia, et al. voluntarily pre-terminated their contracts and demanded
immediate repatriation.48 The telex message was "a self-serving document that does not satisfy the requirement of substantial
evidence, or that amount of relevant evidence which a reasonable mind might accept as adequate to justify the conclusion that
petitioners indeed voluntarily demanded their immediate repatriation." 49 For this reason, the repatriation of De Gracia, et al.
prior to the expiration of their contracts showed they were illegally dismissed from employment. 50
In addition, the failure to remit home allotment pay was effectively admitted by Skippers, and prayed to be offset from the
repatriation expenses.51 Since there is no proof that De Gracia, et al. voluntarily pre-terminated their contracts, the repatriation
expenses are for the account of Skippers, and cannot be offset with the home allotment pay for December 1998. 52

47
No relief was granted to Doza due to lack of factual basis to support his petition. 53 Attorneys fees equivalent to 10% of the
total claims was granted since it involved an action for recovery of wages or where the employee was forced to litigate and
incur expenses to protect his rights and interest.54
The Issues
Skippers, in its Petition for Review on Certiorari, assigned the following errors in the CA Decision:
a) The Court of Appeals seriously erred in not giving due credence to the masters telex message showing that the
respondents voluntarily requested to be repatriated.
b) The Court of Appeals seriously erred in finding petitioners liable to pay backwages and the alleged unremitted
home allotment pay despite the finding of the Labor Arbiter and the NLRC that the claims are baseless.
c) The Court of Appeals seriously erred in awarding attorneys fees in favor of respondents despite its findings that
the facts attending in this case do not support the claim for moral and exemplary damages. 55
The Ruling of this Court
We deny the petition and affirm the CA Decision, but modify the award.
For a workers dismissal to be considered valid, it must comply with both procedural and substantive due process. The legality
of the manner of dismissal constitutes procedural due process, while the legality of the act of dismissal constitutes substantive
due process.56
Procedural due process in dismissal cases consists of the twin requirements of notice and hearing. The employer must furnish
the employee with two written notices before the termination of employment can be effected: (1) the first notice apprises the
employee of the particular acts or omissions for which his dismissal is sought; and (2) the second notice informs the employee
of the employers decision to dismiss him. Before the issuance of the second notice, the requirement of a hearing must be
complied with by giving the worker an opportunity to be heard. It is not necessary that an actual hearing be conducted. 57
Substantive due process, on the other hand, requires that dismissal by the employer be made under a just or authorized cause
under Articles 282 to 284 of the Labor Code.
In this case, there was no written notice furnished to De Gracia, et al. regarding the cause of their dismissal. Cosmoship
furnished a written notice (telex) to Skippers, the local manning agency, claiming that De Gracia, et al. were repatriated
because the latter voluntarily pre-terminated their contracts. This telex was given credibility and weight by the Labor Arbiter
and NLRC in deciding that there was pre-termination of the employment contract "akin to resignation" and no illegal dismissal.
However, as correctly ruled by the CA, the telex message is "a biased and self-serving document that does not satisfy the
requirement of substantial evidence." If, indeed, De Gracia, et al. voluntarily pre-terminated their contracts, then De Gracia, et
al. should have submitted their written resignations.
Article 285 of the Labor Code recognizes termination by the employee of the employment contract by "serving written notice
on the employer at least one (1) month in advance." Given that provision, the law contemplates the requirement of a written
notice of resignation. In the absence of a written resignation, it is safe to presume that the employer terminated the seafarers.
In addition, the telex message relied upon by the Labor Arbiter and NLRC bore conflicting dates of 22 January 1998 and 22
January 1999, giving doubt to the veracity and authenticity of the document. In 22 January 1998, De Gracia, et al. were not
even employed yet by the foreign principal. For these reasons, the dismissal of De Gracia, et al. was illegal.
On the issue of home allotment pay, Skippers effectively admitted non-remittance of home allotment pay for the month of
December 1998 in its Position Paper. Skippers sought the repatriation expenses to be offset with the home allotment pay.
However, since De Gracia, et al.s dismissal was illegal, their repatriation expenses were for the account of Skippers and could
not be offset with the home allotment pay.
Contrary to the claim of the Labor Arbiter and NLRC that the home allotment pay is in "the nature of extraordinary money
where the burden of proof is shifted to the worker who must prove he is entitled to such monetary benefit," Section 8 of POEA
Memorandum Circular No. 55, series of 1996, states that the allotment actually constitutes at least eighty percent (80%) of
the seafarers salary:
The seafarer is required to make an allotment which is payable once a month to his designated allottee in the Philippines
through any authorized Philippine bank. The master/employer/agency shall provide the seafarer with facilities to do so at no
expense to the seafarer. The allotment shall be at least eighty percent (80%) of the seafarers monthly basic salary including
backwages, if any. (Emphasis supplied)
Paragraph 2 of the employment contracts of De Gracia, Lata and Aprosta incorporated the provisions of above Memorandum
Circular No. 55, series of 1996, in the employment contracts. Since said memorandum states that home allotment of seafarers
actually constitutes at least eighty percent (80%) of their salary, home allotment pay is not in the nature of an extraordinary
money or benefit, but should actually be considered as salary which should be paid for services rendered. For this reason,
such non-remittance of home allotment pay should be considered as unpaid salaries, and Skippers shall be liable to pay the
home allotment pay of De Gracia, et al. for the month of December 1998.
Damages
As admitted by Skippers in its Position Paper, the home allotment pay for December 1998 due to De Gracia, Lata and Aprosta
is:

48
 Seafarer Home Allotment Pay

De Gracia US$900.00

Aprosta US$600.00

Lata US$600.00
The monthly salary of De Gracia, according to his employment contract, is only US$800.00. However, since Skippers admitted
in its Position Paper a higher home allotment pay for De Gracia, we award the higher amount of home allotment pay for De
Gracia in the amount of US$900.00. Since the home allotment pay can be considered as unpaid salaries, the peso equivalent
of the dollar amount should be computed using the prevailing rate at the time of termination since it was due and demandable
to De Gracia, et al. on 28 January 1999.
Section 10 of Republic Act No. 8042 (Migrant Workers Act) provides for money claims in cases of unjust termination of
employment contracts:
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.
The Migrant Workers Act provides that salaries for the unexpired portion of the employent contract or three (3) months for
every year of the unexpired term, whichever is less, shall be awarded to the overseas Filipino worker, in cases of illegal
dismissal. However, in 24 March 2009, Serrano v. Gallant Maritime Services and Marlow Navigation Co. Inc.,58 the Court, in
an En Banc Decision, declared unconstitutional the clause "or for three months for every year of the unexpired term, whichever
is less" and awarded the entire unexpired portion of the employment contract to the overseas Filipino worker.
On 8 March 2010, however, Section 7 of Republic Act No. 10022 (RA 10022) amended Section 10 of the Migrant Workers Act,
and once again reiterated the provision of awarding the unexpired portion of the employent contract or three (3) months for
every year of the unexpired term, whichever is less.
Nevertheless, since the termination occurred on January 1999 before the passage of the amendatory RA 10022, we shall
apply RA 8042, as unamended, without touching on the constitutionality of Section 7 of RA 10022.
The declaration in March 2009 of the unconstitutionality of the clause "or for three months for every year of the unexpired term,
whichever is less" in RA 8042 shall be given retroactive effect to the termination that occurred in January 1999 because an
unconstitutional clause in the law confers no rights, imposes no duties and affords no protection. The unconstitutional
provision is inoperative, as if it was not passed into law at all.59
As such, we compute the claims as follows:
Seafarer Contract Term Contract Date Repatriation Date Unexpired Term Monthly Salary Total Claims

De Gracia 10 months 17 Jul. 1998 28 Jan. 1999 3 months & 20 days US$800 US$2933.34

Lata 12 months 17 Apr. 1998 28 Jan. 1999 2 months & 20 days US$600 US$1600

Aprosta 12 months 17 Apr. 1998 28 Jan. 1999 2 months & 20 days US$600 US$1600
Given the above computation, we modify the CAs imposition of award, and grant to De Gracia, et al. salaries representing the
unexpired portion of their contracts, instead of salaries for three (3) months.
Article 2219 of the Civil Code of the Philippines provides for recovery of moral damages in certain cases:
Art. 2219. Moral damages may be recovered in the following and analogous cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;
(9) Acts mentioned in Article 309;
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.
The parents of the female seduced, abducted, raped, or abused, referred to in No. 3 of this article, may also recover moral
damages.
The spouse, descendants, ascendants, and brothers and sisters may bring the action mentioned in No. 9 of this article, in the
order named.
Article 2229 of the Civil Code, on the other hand, provides for recovery of exemplary damages:
49
Art. 2229. Exemplary or corrective damages are imposed, by way of example or correction for the public good, in addition to
the moral, temperate, liquidated or compensatory damages.
In this case, we agree with the CA in not awarding moral and exemplary damages for lack of factual basis.
Lastly, Article 2208 of the Civil Code provides for recovery of attorneys fees and expenses of litigation:
Art. 2208. In the absence of stipulation, attorneys fees and expenses of litigation, other than judicial costs, cannot be
recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendants act or omission has compelled the plaintiff to litigate with third persons or to incur expenses
to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs plainly valid, just and
demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;
(8) In actions for indemnity under workmens compensation and employers liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that attorneys fees and expenses of litigation
should be recovered.
In all cases, the attorneys fees and expenses of litigation must be reasonable.
Article 111 of the Labor Code provides for a maximum award of attorneys fees in cases of recovery of wages:
Art. 111. Attorneys fees.
a. In cases of unlawful withholding of wages, the culpable party may be assessed attorneys fees equivalent to ten
percent of the amount of wages recovered.
b. It shall be unlawful for any person to demand or accept, in any judicial or administrative proceedings for the
recovery of wages, attorneys fees which exceed ten percent of the amount of wages recovered.
Since De Gracia, et al. had to secure the services of the lawyer to recover their unpaid salaries and protect their interest, we
agree with the CAs imposition of attorneys fees in the amount of ten percent (10%) of the total claims.
WHEREFORE, we AFFIRM the Decision of the Court of Appeals dated 5 July 2006 with MODIFICATION. Petitioners Skippers
United Pacific, Inc. and Skippers Maritime Services Inc., Ltd. are jointly and severally liable for payment of the following:
1) Unremitted home allotment pay for the month of December 1998 in its equivalent rate in Philippine Pesos at the
time of termination on 28 January 1999:
a. De Gracia = US$900.00
b. Lata = US$600.00
c. Aprosta = US$600.00
2) Salary for the unexpired portion of the employment contract or its current equivalent in Philippine Pesos:
a. De Gracia = US$2,933.34
b. Lata = US$1,600.00
c. Aprosta = US$1,600.00
3) Attorneys fees and litigation expenses equivalent to 10% of the total claims.
SO ORDERED.

G.R. No. 194362 June 26, 2013

PHILIPPINE HAMMONIA SHIP AGENCY, INC. (NOW KNOWN AS BSM CREW SERVICE CENTRE PHILIPPINES, INC.)
AND DORCHESTER MARINE LTD., PETITIONERS,
vs.
EULOGIO V. DUMADAG, RESPONDENT.
DECISION
BRION, J.:
We resolve the petition for review on certiorari1 seeking to nullify the decision2 dated August 31, 2010 and the
resolution3 dated November 2, 2010 of the Court of Appeals (CA) in CA-G.R. SP No. 111582.
The Antecedents
On February 12, 2007, the Philippine Hammonia Ship Agency, Inc. (now known as BSM Crew Service Centre Philippines,
Inc.), in behalf of its principal, Dorchester Marine Ltd. (petitioners), hired respondent Eulogio V. Dumadag for four months as
Able Bodied Seaman for the vessel Al Hamra, pursuant to the Philippine Overseas Employment Administration Standard
Employment Contract (POEA-SEC). Dumadag was to receive a monthly salary of US$558.00, plus other benefits. Before he
boarded the vessel Al Hamra, Dumadag underwent a pre-employment medical examination and was declared fit to work.

50
Sometime in May 2007, while on board the vessel, Dumadag complained of difficulty in sleeping and changes in his body
temperature. On May 18, 2007, a physician at the Honmoku Hospital in Yokohama, Japan examined him. He also underwent
ultra-sonographic, blood and ECG examinations and was found to be normal and "fit for duty," but was advised to have bed
rest for two to three days.4 Thereafter, Dumadag complained of muscle stiffness in his entire body. On June 20, 2007, he was
again subjected to blood tests, urinalysis and uric laboratory procedures in Japan. He was found "fit for light duty for 5-7
days."5
On July 19, 2007, his contract completed, Dumadag returned to the Philippines. Allegedly, upon his request, the agency
referred him to the company-designated physician, Dr. Wilanie Romero-Dacanay of the Metropolitan Medical Center (MMC),
for medical examination. At the MMC, Dumadag underwent baseline laboratory tests revealing "normal complete blood count,
creatinine, sodium, potassium, calcium and elevated creatinine kinase." 6He was also subjected to thyroid function tests that
likewise showed normal results. Further, he underwent psychological tests and treatment. He was assessed on August 6,
2007 to have "Adjustment Disorder with Mixed Anxiety and Depressed Mood," "Hypercreatinine Phospokinase," and "right
Carpal Tunnel Syndrome."7 He was subsequently declared "fit to resume sea duties as of November 6, 2007" by the company-
designated specialist.8The petitioners shouldered Dumadags medical expenses, professional fees and physical therapy
sessions with the company-designated physician.
Dumadag was not rehired by the petitioners. He claimed that he applied for employment with other manning agencies, but was
unsuccessful.
On December 5, 2007, Dumadag consulted Dr. Frederic F. Diyco, an orthopedic surgeon at the Philippine Orthopedic Center,
who certified that he was suffering from Carpal Tunnel Syndrome of the right wrist. Dr. Diyco gave him a temporary partial
disability assessment.9 On January 8, 2008, Dumadag saw Dr. Ma. Ciedelle M.N. Paez-Rogacion, specializing in family
medicine and psychiatry. Dr. Rogacion evaluated him to be suffering from minor depression. 10
On March 8, 2008, Dumadag again sought medical advice from Dr. Ariel C. Domingo, a family health and acupuncture
physician. Dr. Domingo found him to be still suffering from adjustment disorder, with mixed anxiety and in a depressed mood,
hypercreatinine phospokinase and carpal tunnel syndrome. He assessed Dumadag to be "unfit to work."11 Further, or on April
13, 2008, Dumadag consulted Dr. Nicanor F. Escutin, an orthopedic surgeon, who certified that he had generalized muscular
weakness and that "he cannot perform nor function fully all his previous activities." 12 Dr. Escutin declared Dumadag unfit for
sea duty in whatever capacity and gave him a permanent total disability assessment. 13
After his consultations with the four physicians, Dumadag filed a claim for permanent total disability benefits, reimbursement of
medical expenses, sickness allowance and attorneys fees against the petitioners.
The Compulsory Arbitration Decisions
In a decision dated February 27, 2009,14 Labor Arbiter (LA) Eduardo J. Carpio found merit in the complaint and ordered the
petitioners, jointly and severally, to pay Dumadag US$82,500.00 in permanent total disability benefits, plus 10% attorneys
fees. LA Carpio declared:
The assessment of the company physician is highly doubtful in the face of the continuing inability of complainant to work for
more than a year already, coupled with the fact that his own designated physicians have found that complainant was far from
being "fit" to return to his work as Able-bodied seaman. Despite the company doctors claim, complainant was found by his
physicians to be still suffering from depression and had muscle damage on his upper and lower extremities, resulting in pain in
his right hand and generalized muscle weakness, for which reason he was declared unfit for sea duty. In contrast to the said
findings, the company doctor failed to substantiate her conclusion that complainant is "fit to work." 15
LA Carpio noted that the petitioners suddenly stopped rehiring Dumadag despite the fact that they had continuously employed
him for at least fifteen (15) times for the last 15 years. He viewed this as the most convincing proof that Dumadags inability to
work was due to the illness he contracted in the course of his last employment.
On appeal by the petitioners, the National Labor Relations Commission (NLRC), in a resolution dated July 30, 2009, affirmed
LA Carpios decision.16 On September 28, 2009, it denied the petitioners motion for reconsideration. 17 The petitioners then
elevated the case to the CA through a petition for certiorari under Rule 65 of the Rules of Court, contending that the NLRC
gravely abused its discretion in disregarding the "fit-to-work" assessment of the company-designated physician.
The Assailed CA Decision
The CA denied the petition in its decision of August 31, 2010. 18 It upheld the NLRC rulings in toto. It found no grave abuse of
discretion on the part of the NLRC when it sustained LA Carpios award of permanent total disability benefits to Dumadag on
the basis of the findings of the physicians of his choice. Also, as LA Carpio and the NLRC did, it noted that Dumadag was not
rehired by the petitioners after he was declared fit to work by the company-designated physician and neither was he able to
secure employment through other manning agencies.
The petitioners moved for reconsideration, but the CA denied the motion in its resolution of November 2, 2010. 19Hence, the
petition.
The Petition
The petitioners contend that the CA committed serious errors and grave abuse of discretion in: (1) ruling that Dumadag is
entitled to permanent total disability benefits based solely on the findings of his personal physicians; (2) disregarding the
procedure in the POEA-SEC in disputing the assessment of the company-designated physician; (3) adopting the NLRC ruling
51
that the non-rehiring of Dumadag is proof that his inability to work was due to the illness he contracted during his last
employment; and (4) affirming the award of attorneys fees despite the fact that their denial of his claim was in good faith and
based on just and valid grounds.
The petitioners stress, with respect to the first assignment of error, that under Section 20(B)(2) of the POEA-SEC and under
the parties Collective Bargaining Agreement (CBA), it is the company-designated physician who determines the seafarers
degree of disability or his fitness to work. They point out in this respect that not only is the company-designated physician
entrusted with the task of assessing the seafarers fitness to work or the degree of his disability, but more importantly, he or
she is the one who examines and treats the seafarer, thus lending accuracy to his or her evaluation.
The petitioners question the CAs reliance on HFS Philippines, Inc. v. Pilar20 in affirming Dumadags award based solely on the
findings of his physicians. They maintain that although the Courts ruling in HFS Philippinesrecognized the prerogative of the
seafarer to dispute the company-designated physicians report by seasonably consulting another doctor, the contrary medical
report shall be evaluated first by the labor tribunal and the court based on its inherent merit. The CA, the petitioners point out,
failed to evaluate the merit of the reports of Dumadags physicians.
The petitioners argue that a careful analysis of the reports presented by both parties would readily show that the company-
designated physicians report deserves more credence as these physicians arrived at their results after extensive examination
and treatment of Dumadag. On the other hand, an evaluation of the reports of Dumadags doctors reveals that they were
inaccurate and unreliable as they were mere reiterations of the company-designated doctors diagnoses.
On a related matter, the petitioners fault the CA in disregarding the procedure in the POEA-SEC in the resolution of disability
claims vis-a-vis the seafarers disability rating or fitness to work. Citing Vergara v. Hammonia Maritime Services, Inc.,21 they
posit that although Dumadag has the right to contest the assessment of the company-designated physician, the findings of his
doctors are not binding as the POEA-SEC and even the parties CBA expressly provide that the parties may agree to consult a
third doctor whose opinion shall be binding on them. They submit that since Dumadag failed to observe the procedure, the
finding of the company specialist that he is fit to work should be upheld.
With respect to Dumadags non-hiring, the petitioners submit that the CA gravely abused its discretion when it held that the
fact that they did not rehire him is the most convincing proof that his inability to work was due to his illness. They contend that
being a seafarer, Dumadag is a contractual employee whose employment is terminated upon the contracts expiration; his
non-rehiring should not be taken against them as it is their prerogative to hire or not to hire him. Moreover, Dumadag did not
present any evidence to establish his allegation that he was not rehired because of his illness; neither was there a showing
that he was deprived of the opportunity to work.
Finally, the petitioners lament the CAs award of attorneys fees to Dumadag, arguing that the denial of his claim was in good
faith and based on valid grounds.
The Case for Dumadag
As required by the Court,22 Dumadag filed his Comment on the petition on April 25, 2011, 23 praying that the petition be
dismissed on the following grounds: (1) it raises only questions of fact, in violation of Rule 45 of the Rules of Court; and (2) the
CAs award of disability benefits to him is in accord with the evidence.
Dumadag submits that inasmuch as the petition involves an inquiry into the findings of four independent physicians which
formed the basis of the rulings of the LA, the NLRC and the CA, it is clear that the petitioners are raising solely factual issues
which is not allowed in an appeal by certiorari. He avers that should the Court review the facts of the case nonetheless, the
petition must fail for lack of merit. He argues that the CA committed no error in upholding the medical opinions of his chosen
physicians over the biased and erroneous certification of the company-designated physician.
He bewails the petitioners attempt to discredit the medical certificates issued by the physicians he consulted. He stresses
that the real test that should be applied in his case is whether he had lost his earning capacity due to his injury while employed
with the petitioners. He laments that while the company doctor peremptorily declared that he was fit to resume sea duties as of
November 6, 2007, he was never again able to have himself employed as a seaman in any capacity.
Dumadag argues that the opinion of the company doctor is not binding and cannot be the sole basis of whether he is entitled
to disability benefits or not, especially considering that the opinions of company physicians are generally self-serving and
biased in favor of the company. Further, he maintains that the mere fact that there is no "third opinion" from a doctor appointed
by the parties does not automatically mean that the opinion of the company doctor will prevail over that of his chosen
physicians. He insists that in case of discrepancy between the certification of the company-designated physician and that of
the seamans doctor, the finding favorable to the seaman should be followed as the Court emphasized in HFS Philippines, Inc.
v. Pilar.24 He adds that as a result of his injury, he has become disabled, such that he could not find gainful employment
almost four years after his last disembarkation.
Lastly, Dumadag argues that he is entitled to attorneys fees as he was compelled to litigate because of the petitioners refusal
to heed his demand for disability benefits.
Our Ruling
The procedural issue
Dumadag asks that the petition be dismissed outright for raising only questions of fact and not of law, in violation of the rules. 25

52
We find Dumadags position untenable. For a question to be one of law, it must not involve an examination of the probative
value of the evidence presented by the parties or any of them. Otherwise stated, there is a question of law when the issue
arises as to what the law is on a certain state of facts; there is a question of fact when the issue involves the truth or falsehood
of alleged facts.26 In the present case, the controversy arises not from the findings made by Dumadags physicians which
contradict the fit-to-work certification of the company-designated physician; it arises from the application of the law and
jurisprudence on the conflicting assessments of the two sets of physicians. We thus find no procedural obstacle in our review
of the case.
Fit-to-work assessment of the
company-designated physician
versus unfit-to-work certification of
the seafarers chosen physicians
We are confronted, once again, with the question of whose disability assessment should prevail in a maritime disability claim
the fit-to-work assessment of the company-designated physician or the contrary opinion of the seafarers chosen physicians
that he is no longer fit to work. A related question immediately follows how are the conflicting assessments to be resolved?
In Vergara v. Hammonia Maritime Services, Inc.,27 the Court said: "the Department of Labor and Employment (DOLE), through
the POEA, has simplified the determination of liability for work-related death, illness or injury in the case of Filipino seamen
working on foreign ocean-going vessels. Every seaman and the vessel owner (directly or represented by a local manning
agency) are required to execute the POEA Standard Employment Contract as a condition sine qua non prior to the
deployment for overseas work. The POEA Standard Employment Contract is supplemented by the CBA between the owner of
the vessel and the covered seaman."28
In this case, Dumadag and the petitioners entered into a contract in accordance with the POEA-SEC. They also had a CBA.
Dumadags claim for disability compensation could have been resolved bilaterally had the parties observed the procedure laid
down in the POEA-SEC and in their CBA.
Section 20(B)(3) of the POEA-SEC provides:
Upon sign-off from the vessel for medical treatment, the seafarer is entitled to sickness allowance equivalent to his basic wage
until he is declared fit to work or the degree of permanent disability has been assessed by the company-designated physician
but in no case shall this period exceed one hundred twenty (120) days.
xxxx
If a doctor appointed by the seafarer disagrees with the assessment, a third doctor may be agreed jointly between the
Employer and the seafarer. The third doctors decision shall be final and binding on both parties. [emphasis ours]
On the other hand, the CBA between the Associated Marine Officers and Seamens Union of the Philippines and Dumadags
employer, the Dorchester Marine Ltd.,29 states:
The degree of disability which the employer, subject to this Agreement, is liable to pay shall be determined by a doctor
appointed by the Employer. If a doctor appointed by the seafarer and his Union disagrees with the assessment, a third
doctor may be agreed jointly between the Employer and the Seafarer and his Union, and the third doctors decision
shall be final and binding on both parties.30 (emphasis ours)
The POEA-SEC and the CBA govern the employment relationship between Dumadag and the petitioners. The two instruments
are the law between them. They are bound by their terms and conditions, particularly in relation to this case, the mechanism
prescribed to determine liability for a disability benefits claim. In Magsaysay Maritime Corp. v. Velasquez,31 the Court said:
"The POEA Contract, of which the parties are both signatories, is the law between them and as such, its provisions bind
both of them." Dumadag, however, pursued his claim without observing the laid-out procedure. He consulted physicians of
his choice regarding his disability after Dr. Dacanay, the company-designated physician, issued her fit-to-work certification for
him. There is nothing inherently wrong with the consultations as the POEA-SEC and the CBA allow him to seek a second
opinion. The problem only arose when he pre-empted the mandated procedure by filing a complaint for permanent disability
compensation on the strength of his chosen physicians opinions, without referring the conflicting opinions to a third doctor for
final determination.
Dumadags non-compliance with the mandated procedure under the POEA-SEC and the CBA militates against his
claim
The filing of the complaint constituted a breach of Dumadags contractual obligation to have the conflicting assessments of his
disability referred to a third doctor for a binding opinion. The petitioners could not have possibly caused the non-referral to a
third doctor because they were not aware that Dumadag secured separate independent opinions regarding his disability. Thus,
the complaint should have been dismissed, for without a binding third opinion, the fit-to-work certification of the company-
designated physician stands, pursuant to the POEA-SEC and the CBA. As it turned out, however, the LA and the NLRC relied
on the assessments of Dumadags physicians that he was unfit for sea duty, and awarded him permanent total disability
benefits.
We find the rulings of the labor authorities seriously flawed as they were rendered in total disregard of the law between
the parties the POEA-SEC and the CBA on the prescribed procedure for the determination of disability compensation
claims, particularly with respect to the resolution of conflicting disability assessments of the company-designated physician
53
and Dumadags physicians, without saying why it was disregarded or ignored; it was as if the POEA-SEC and the CBA did not
exist. This is grave abuse of discretion, considering that, as labor dispute adjudicators, the LA and the NLRC are
expected to uphold the law. For affirming the labor tribunals, the CA committed the same jurisdictional error.
As we earlier stressed, Dumadag failed to comply with the requirement under the POEA-SEC and the CBA to have the
conflicting assessments of his disability determined by a third doctor as was his duty.32 He offered no reason that could have
prevented him from following the procedure. Before he filed his complaint, or between July 19, 2007, when he came
home upon completion of his contract, and November 6, 2007, when Dr. Dacanay declared him fit to work, he had been under
examination and treatment (with the necessary medical procedures) by the company specialists. All the while, the petitioners
shouldered his medical expenses, professional fees and costs of his therapy sessions. In short, the petitioners attended to his
health condition despite the expiration of his contract. We, therefore, find it puzzling why Dumadag did not bring to the
petitioners attention the contrary opinions of his doctors and suggest that they seek a third opinion.
Whatever his reasons might have been, Dumadags disregard of the conflict-resolution procedure under the POEA-SEC and
the CBA cannot and should not be tolerated and allowed to stand, lest it encourage a similar defiance. We stress in this
respect that we have yet to come across a case where the parties referred conflicting assessments of a seafarers disability to
a third doctor since the procedure was introduced by the POEA-SEC in 2000 whether the Courts ruling in a particular case
upheld the assessment of the company-designated physician, as in Magsaysay Maritime Corporation v. National Labor
Relations Commission (Second Division)33and similar other cases, or sustained the opinion of the seafarers chosen physician
as in HFS Philippines, Inc. v. Pilar,34 cited by the CA, and other cases similarly resolved. The third-doctor-referral provision of
the POEA-SEC, it appears to us, has been honored more in the breach than in the compliance. This is unfortunate considering
that the provision is intended to settle disability claims voluntarily at the parties level where the claims can be resolved more
speedily than if they were brought to court.
Given the circumstances under which Dumadag pursued his claim, especially the fact that he caused the non-referral to a third
doctor, Dr. Dacanays fit-to-work certification must be upheld. In Santiago v. Pacbasin Ship Management, Inc.,35 the Court
declared: "[t]here was no agreement on a third doctor who shall examine him anew and whose finding shall be final and
binding. x x x [T]his Court is left without choice but to uphold the certification made by Dr. Lim with respect to Santiagos
disability."
On a different plane, Dumadag cannot insist that the "favorable" reports of his physicians be chosen over the certification of
the company-designated physician, especially if we were to consider that the physicians he consulted examined him for only a
day (or shorter) on four different dates between December 5, 2007 and April 13, 2008. Moreover, we point out that they merely
relied on the same medical history, diagnoses and analyses provided by the company-designated specialists. Under the
circumstances, we cannot simply say that their findings are more reliable than the conclusions of the company-designated
physicians.
Finally, we find the pronouncement that Dumadags non-hiring by the petitioners as the most convincing proof of his illness or
disability without basis. There is no evidence on record showing that he sought re-employment with the petitioners or that it
was a matter of course for the petitioners to re-hire him after the expiration of his contract. Neither is there evidence on
Dumadags claim that he applied with other manning agencies, but was turned down due to his illness.
All told, we find the petition meritorious.
WHEREFORE, premises considered, we hereby GRANT the petition and SET ASIDE the assailed decision and resolution of
the Court of Appeals. The complaint is hereby DISMISSED. Costs against respondent Eulogio V. Dumadag.
SO ORDERED.

G.R. No. 205153, September 09, 2015

PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. SUZETTE ARNAIZ A.K.A. "BABY ROSAL", Accused-Appellants.
DECISION
VILLARAMA, JR., J.:
On appeal is the June 25, 2012 Decision1 of the Court of Appeals (CA) in CA-G.R. CR.-H.C. No. 04762 affirming the
conviction of appellant Suzette Arnaiz a.k.a. "Baby Rosal" for illegal recruitment in large scale and two counts of estafa.
Facts

In Criminal Case No. 02-199399, appellant Suzette Arnaiz, Ruel P. Garcia and Chita Lorenzo were charged with the crime of
illegal recruitment committed in large scale and by a syndicate. In Criminal Case No. 02-199404, appellant and her two co-
accused were charged with estafa. In Criminal Case No. 02-199406, appellant and her two co-accused were also charged
with estafa.

Appellant pleaded not guilty to the charges against her. Trial on the merits ensued.

Prosecution witness Edenelda Cayetano testified that she learned that appellant was recruiting workers for Australia. On
December 16, 1999, Cayetano gave appellant P30,000 for the processing of her papers. She gave another P40,000 on
54
January 19, 2000, P30,000 on February 4, 2000, and $500 on March 8, 2000. However, she was not able to leave for
Australia. She then confronted appellant, who tried to refund the amount by issuing a check for P175,000. Unfortunately,
Cayetano was not able to recover her money since the account was already closed. 2

Witness Napoleon Bunuan testified that in June 2000, he went to appellant's travel agency, Florida Travel and Tours located in
Manila after learning that it was recruiting factory workers for South Korea. On June 6, 2000, Bunuan gave appellant P45,000
believing that he will be deployed soon. On June 19, 2000, he gave appellant another P25,000 for which he was issued a
receipt, even though he had no employment contract. Bunuan again paid P20,000 but this time he was not given a receipt.
After paying a total of P90,000, Bunuan discovered that appellant sent 26 persons to Korea but all were sent back to the
Philippines. He went to appellant's office only to find out that it was already padlocked. 3

Another witness, Flerminio Cantor, Jr., testified that he went to appellant's office sometime in May 2000 to apply as a factory
worker in Korea. He gave appellant the total amount of P110,000 evidenced by cash vouchers. When he arrived in Korea, he
was sent back by the Immigration Officer after confirming that his visa and passport were fake. Cantor, Jr. reported back to
appellant, who promised that she will change Cantor, Jr.'s name in the passport. He later found out that appellant was arrested
by the National Bureau of Investigation.4

During trial, all the complainants identified appellant in open court as Suzette Arnaiz also known as Baby/Rosita Rosal to
whom they gave their money.5

The Labor and Employment Officer of the Philippine Overseas Employment Administration (POEA), Mildred N. Versoza,
confirmed that based on the records of their office, appellant and Florida Travel and Tours were not licensed to recruit workers
for deployment abroad.6

On the other hand, appellant testified that her office was only a travel agency and they only processed the issuance of visas in
the different embassies in the Philippines. She claimed that Bunuan went to her office in June 2000 with Julie Landicho, and it
was Landicho who recruited Bunuan and assisted him in getting a visa from their office. Appellant averred that Bunuan went to
their office with Cantor, Jr. who said that his brother in Korea instructed him to get a Korean visa. Two weeks later, Bunuan
and Cantor, Jr. were able to get their visas after paying P65,000, covering the airfare, consultancy and visa assistance fees.
The two were able to leave for Korea but were held at the airport. Appellant claimed that she was able to refund Bunuan and
Cantor, Jr. the amount of P135,000 each.7 She asserted that the signature appearing on the voucher was that of her secretary
Suzette Arnaiz who is now residing abroad, and insisted that her name is Rosita Rosal. 8

In its Decision,9 the Regional Trial Court (RTC) found appellant guilty of illegal recruitment in large scale in Criminal Case No.
02-199399. Appellant was sentenced to life imprisonment and ordered to pay a fine of P500,000. The RTC also found
appellant guilty of estafa in Criminal Case No. 02-199404 and sentenced her to an indeterminate penalty of 4 years and 2
months of prision correccional as minimum, to 14 years of reclusion temporal as maximum. She was ordered to pay the
amount of P70,000 as payment for the sums paid by Bunuan. The RTC likewise found appellant guilty of estafain Criminal
Case No. 02-199406 and sentenced her to an indeterminate penalty of 4 years and 2 months of prision correccional as
minimum, to 15 years of reclusion temporal as maximum. She was ordered to pay Cantor, Jr. the amount of P100,000.

The RTC held that the prosecution was able to establish that appellant undertook recruitment activities and promised
employment abroad to the complainants without a valid license or authority to engage in recruitment and placement of
workers.

On the estafa charges, the RTC noted the elements of the crime of estafa under Article 315(2)(a) of the Revised Penal Code,
as amended, and held that appellant, by her false pretenses that she can deploy the complainants for work abroad, was able
to induce them to part with their money which caused them damage. We note, however, that the fallo of the RTC Decision
convicted appellant of two counts of estafa under Article 315(1)(b) of the Revised Penal Code, as amended.

Appellant appealed to the CA.

The CA denied the appeal and affirmed the conviction of appellant for illegal recruitment in large scale and two counts
of estafa. However, it reduced the penalty of imprisonment imposed in Criminal Case No. 02-199404 to an indeterminate
penalty of 6 months and 1 day of prision correccional as minimum, to 10 years of prision mayor as maximum. Appellant was
also ordered to refund to Bunuan the reduced amount of P45,000.

In affirming appellant's conviction for illegal recruitment in large scale, the CA cited the testimonies of the complainants that
55
appellant led them to believe that she had the power to send them to work in Korea and Australia. They were required to
submit their bio-data and passports. They were also asked to give substantial amounts of money on several occasions for the
processing of their visas and other documents necessary for deployment. Still, they were not able to leave the country and
work abroad. Efforts to have their money refunded also failed, said the CA.

On the estafa charges, the CA ruled that the elements of estafa under Article 315(2)(a) of the Revised Penal Code, as
amended, were present. The CA again noted the clear and categorical testimonies of the complainants that they were made to
believe that appellant had the authority to send them to work in Australia and Korea, for which reason they gave her
substantial amounts of money.

Hence, this appeal.

Issue

The essential issue is whether appellant's guilt was proven beyond reasonable doubt.
Our Ruling

We rule in the affirmative. The appeal lacks merit.

Section 6 of Republic Act No. 8042 (RA 8042) defines illegal recruitment as follows:
SEC. 6. Definition. - For purposes of this Act, illegal recruitment shall mean any act of canvassing, enlisting, contracting,
transporting, utilizing, hiring, or procuring workers and includes referring, contract services, promising or advertising for
employment abroad, whether for profit or not, when undertaken by a non-licensee or non-holder of authority contemplated
under Article 13(f) of Presidential Decree No. 442, as amended, otherwise known as the Labor Code of the Philippines:
Provided, That any such non-licensee or non-holder who, in any manner, offers or promises for a fee employment abroad to
two or more persons shall be deemed so engaged. It shall likewise include the following acts, whether committed by any
person, whether a non-licensee, non-holder, licensee or holder of authority:

xxxx

(m) Failure to reimburse expenses incurred by the worker in connection with his documentation and processing for purposes
of deployment, in cases where the deployment does not actually take place without the worker's fault. Illegal recruitment when
committed by a syndicate or in large scale shall be considered an offense involving economic sabotage.

Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3) or more persons conspiring or
confederating with one another. It is deemed committed in large scale if committed against three (3) or more persons
individually or as a group.
To constitute illegal recruitment in large scale, three elements must concur: (a) the offender has no valid license or authority
required by law to enable him to lawfully engage in recruitment and placement of workers; (b) the offender undertakes any of
the activities within the meaning of "recruitment and placement" under Article 13(b) of the Labor Code, or any of the prohibited
practices under Article 34 of the said Code (now Section 6 of RA 8042); and (c) the offender committed the same against three
or more persons, individually or as a group.10

Article 13(b) of the Labor Code defines recruitment and placement as "any act of canvassing, enlisting, contracting,
transporting, utilizing, hiring or procuring workers; and includes referrals, contract services, promising or advertising for
employment, locally or abroad, whether for profit or not." In the simplest terms, illegal recruitment is committed by persons
who, without authority from the government, give the impression that they have the power to send workers abroad for
employment purposes.11

The elements of illegal recruitment in large scale were proven in this case. One, appellant has no valid license or authority to
engage in recruitment and placement of workers. The Labor and Employment Officer of the POEA, Mildred N. Versoza,
confirmed that based on the records of their office, appellant and Florida Travel and Tours were not licensed to recruit workers
for deployment abroad. Two, appellant clearly engaged in recruitment activities and promised employment abroad to the
complainants as proven by their testimonies. Three, appellant committed illegal recruitment against three persons.

Thus, we uphold appellant's conviction for illegal recruitment in large scale. We also agree with the RTC and CA in imposing
the penalty of life imprisonment and ordering appellant to pay a fine of P500,000 for being in conformity with Section 7 12 of RA
8042.

56
Appellant insists on the veracity of her own testimony in claiming that the prosecution failed to prove that she is guilty of illegal
recruitment in large scale. Her testimony, however, was rejected by the RTC which found the testimonies of the complainants
credible and truthful.13 Settled is the rule that the findings and conclusion of the trial court on the credibility of witnesses are
entitled to great respect because the trial courts have the advantage of observing the demeanor of witnesses as they
testify.14 The CA likewise believed the complainants' testimonies and found them to be clear and categorical. 15 The
determination by the trial court of the credibility of witnesses, when affirmed by the appellate court, as in this case, is accorded
full weight and credit as well as great respect, if not conclusive effect.16

We also agree with the CA that appellant is guilty of two counts of estafa under Article 315(2)(a) of the Revised Penal Code,
as amended. It is settled that a person may be charged and convicted separately of illegal recruitment under RA 8042, in
relation to the Labor Code, and estafa under Article 315(2)(a) of the Revised Penal Code.17 Article 315(2)(a) of the Revised
Penal Code, as amended, defines estafa as:
ART. 315. Swindling (estafa). - Any person who shall defraud another by any of the means mentioned hereinbelow x x x:

xxxx

2. By means of any of the following false pretenses or fraudulent acts executed prior to or simultaneously with the commission
of the fraud:

(a) By using a fictitious name, or falsely pretending to possess power, influence, qualifications, property, credit, agency,
business or imaginary transactions; or by means of other similar deceits.
The elements of estafa are: (a) that the accused defrauded another by abuse of confidence or by means of deceit, and (b) that
damage or prejudice capable of pecuniary estimation is caused to the offended party or third person. 18 These elements were
proven in this case. By means of deceit, appellant made complainants believe that she had the proper authority to send them
to work in Australia and Korea, for which reason they gave her substantial amounts of money. Appellant clearly misled the
complainants who believed she had the power to send them to work in Australia and Korea. They were required to submit their
bio-data and passports, and were asked to give substantial amounts of money for the processing of their visas and other
documents necessary for deployment. Efforts to recover their money after they were not deployed for the promised work
abroad failed resulting to monetary damages on their part.

The penalty for estafa depends on the amount defrauded. Per Article 315 of the Revised Penal Code:
ART. 315. Swindling (estafa). - Any person who shall defraud another by any of the means mentioned hereinbelow shall be
punished by:

1st. The penalty of prision correccional in its maximum period to prision mayor in its minimum period, if the amount of the fraud
is over 12,000 pesos but does not exceed 22,000 pesos; and if such amount exceeds the latter sum, the penalty provided in
this paragraph shall be imposed in its maximum period, adding one year for each additional 10,000 pesos; but the total penalty
which may be imposed shall not exceed twenty years. In such cases, and in connection with the accessory penalties which
may be imposed and for the purpose of the other provisions of this Code, the penalty shall be termed prision
mayor or reclusion temporal, as the case may be.
The prescribed penalty for estafa under Article 315 of the Revised Penal Code, when the amount of fraud is over P12,000 but
not exceeding P22,000, is prision correccional maximum to prision mayorminimum (i.e., from 4 years, 2 months, and 1 day to
8 years). Under the Indeterminate Sentence Law, the minimum term shall be within the range of the penalty next lower to that
prescribed by the Revised Penal Code, or anywhere within prision correccional minimum and medium (i.e., from 6 months and
1 day to 4 years and 2 months).19

The maximum term under the Indeterminate Sentence Law shall be that which, in view of attending circumstances, could be
properly imposed under the rules of the Revised Penal Code. To compute the minimum, medium, and maximum periods of the
prescribed penalty for estafa when the amount of fraud exceeds P12,000, the time included in prision correccional maximum
to prision mayor minimum shall be divided into three equal portions, with each portion forming a period. Following this
computation, the minimum period for prision correccional maximum to prision mayor minimum is from 4 years, 2 months and 1
day to 5 years, 5 months and 10 days; the medium period is from 5 years, 5 months and 11 days to 6 years, 8 months and 20
days; and the maximum period is from 6 years, 8 months and 21 days to 8 years. Any incremental penalty (i.e., one year for
every P10,000 in excess of P22,000) shall thus be added to anywhere from 6 years, 8 months and 21 days to 8 years, at the
discretion of the court, provided that the total penalty does not exceed 20 years. 20

Based on the foregoing discussion, the RTC and the CA correctly sentenced appellant to suffer an indeterminate penalty of 4
years and 2 months of prision correccional as minimum to 15 years of reclusion temporal as maximum in Criminal Case No.

57
02-199406. The CA was also correct in imposing an indeterminate penalty of 6 months and 1 day of prision correccional as
minimum to 10 years of prision mayor as maximum in Criminal Case No. 02-199404.

Interest at the rate of 6% per annum shall also be paid by appellant to Bunuan and Cantor, Jr. from the time the Informations
(February 8, 2002) were filed until the amounts paid by them are fully paid. 21

WHEREFORE, we DISMISS the appeal. We AFFIRM with MODIFICATIONS the Decision dated June 25, 2012 of the Court
of Appeals in CA-G.R. CR.-H.C. No. 04762 to read as follows:
1. In Criminal Case No. 02-199399, appellant Suzette Arnaiz a.k.a. "Baby Rosal" is found guilty beyond reasonable
doubt of the crime of illegal recruitment in large scale and is hereby sentenced to suffer the penalty of life
imprisonment and to pay a fine of P500,000.
2. In Criminal Case No. 02-199404, appellant Suzette Arnaiz a.k.a. "Baby Rosal" is found guilty beyond reasonable
doubt of the crime of estafa under Article 315(2)(a) of the Revised Penal Code, as amended, and is hereby
sentenced to suffer an indeterminate penalty of 6 months and 1 day of prision correccional as minimum to 10 years
of prision mayor as maximum. Appellant is further ordered to indemnify Napoleon R. Bunuan in the amount of
P45,000 as actual damages, with legal interest of 6% per annum computed from the filing of the Information, i.e.,
February 8, 2002, until the amount is fully paid.
3. In Criminal Case No. 02-199406, appellant Suzette Arnaiz a.k.a. "Baby Rosal" is found guilty beyond reasonable
doubt of the crime of estafa under Article 315(2)(a) of the Revised Penal Code, as amended, and is hereby
sentenced to suffer an indeterminate penalty of 4 years and 2 months of prision correccional as minimum to 15 years
of reclusion temporal as maximum. Appellant is further ordered to indemnify Herminio Cantor, Jr. in the amount of
P100,000 as actual damages, with legal interest of 6% per annum computed from the filing of the Information, i.e.,
February 8, 2002, until the amount is fully paid.
With costs against the appellant.

SO ORDERED.ch
G.R. No. 208686 July 1, 2015
PEOPLE OF THE PHILIPPINES, Appellee,
vs.
ALELIE TOLENTINO a.k.a. "Alelie Tolentino y Hernandez," Appellant.
DECISION
CARPIO, J.:
This is an appeal from the 29 November 2012 Decision1 of the Court of Appeals in CA-G.R. CR-HC No. 04558, affirming the
trial court's decision, finding appellant Alelie Tolentino (appellant) guilty beyond reasonable doubt of illegal recruitment and
estafa.
The Facts
Appellant was charged with illegal recruitment and five (5) counts of estafa under Article 315, paragraph 2(a) of the Revised
Penal Code. The Informations against appellant read:
CRIM. CASE NO. 02-755
The undersigned Assistant City Prosecutor accuses ALELIE TOLENTINO of the crime of Illegal Recruitment committed as
follows:
That on or about [or sometime in] the last week of August, 2001 and 1st week of November, 2001 and thereafter, in the City of
Muntinlupa, Philippines and within the jurisdiction of this Honorable Court, the above-named accused jointly with NARCISA
SANTOS did then and there willfully, unlawfully and feloniously advertise for employment, enlist, contract and promise
employment to the following persons: LEDERLE PANESA, ORLANDO LAYOSO, JIMMY LEJOS, MARCELINO LEJOS and
DONNA MAGBOO for a fee without first securing license and/or permit from the government agency concerned.
Contrary to law.2
CRIM. CASE NO. 02-756
The undersigned Assistant City Prosecutor accuses ALELIE TOLENTINO of the crime of Estafa under Art. 315 Par. 2(a) of the
Revised Penal Code, as amended, committed as follows:
That on or about or sometime in the first week of August 2001 and thereafter, in the City of Muntinlupa, Philippines and within
the jurisdiction of this Honorable Court, the above-named accused, by means of deceit, fraudulent acts and false pretenses
executed prior to or simultaneously with the commission of the fraud, did [then] and there willfully, unlawfully and feloniously
defraud one LEDERLE PANESA, in the following manner: accused represented to the said complainant that she could secure
work for the said complainant at Korea and she is capable of processing the travel visa and other documents for her travel and
employment at Korea and demanded from the said complainant to pay the amount of P75,000.00 as placement fee; accused
well knew that such representations were false and made only to induce complainant to part with her money as in fact
complainant gave and delivered the amount of P15,000.00 as partial payment to the accused; and accused once in
58
possession of the said amount, did then and there willfully, unlawfully and feloniously misappropriate, misapply and convert
the same to her own personal use and benefit to the damage and prejudice of the said complainant in the amount
of P15,000.00.
Contrary to law.3
CRIM. CASE NO. 02-757
The undersigned Assistant City Prosecutor accuses ALELIE TOLENTINO of the crime of Estafa under Art. 315 Par. 2(a) of the
Revised Penal Code, as amended, committed as follows:
That on or about or sometime in the first week of November, 2001 and thereafter, in the City of Muntinlupa, Philippines and
within the jurisdiction of this Honorable Court, the above-named accused conspiring and confederating with NARCISA
SANTOS, and both of them mutually helping and aiding one another, by means of deceit, fraudulent acts and false pretenses
executed prior to or simultaneously with the commission of the fraud, did [then] and there willfully, unlawfully and feloniously
defraud one ORLANDO LAYOSO, in the following manner: accused represented to the said complainant that she could
secure work for the said complainant at Korea and she is capable of processing the travel visa and other documents for [his]
travel and employment at Korea and demanded from the said complainant to pay the amount of P80,000.00 as placement fee;
accused well knew that such representations were false and made only to induce complainant to part with [his] money as in
fact complainant gave and delivered the amount of P35,000.00 as partial payment to the accused; and accused once in
possession of the said amount, did then and there willfully, unlawfully and feloniously misappropriate, misapply and convert
the same to her own personal use and benefit to the damage and prejudice of the said complainant in the amount
of P35,000.00.
Contrary to law.4
CRIM. CASE NO. 02-758
The undersigned Assistant City Prosecutor accuses ALELIE TOLENTINO of the crime of Estafa under Art. 315 Par. 2(a) of the
Revised Penal Code, as amended, committed as follows:
That on or about or sometime in the first week of November, 2001 and thereafter, in the City of Muntinlupa, Philippines and
within the jurisdiction of this Honorable Court, the above-named accused conspiring and confederating with NARCISA
SANTOS, and both of them mutually helping and aiding one another, by means of deceit, fraudulent acts and false pretenses
executed prior to or simultaneously with the commission of the fraud, did [then] and there willfully, unlawfully and feloniously
defraud one DONNA MAGBOO, in the following manner: accused represented to the said complainant that she could secure
work for the said complainant at Korea and she is capable of processing the travel visa and other documents for her travel and
employment at Korea and demanded from the said complainant to pay the amount of P80,000.00 as placement fee; accused
well knew that such representations were false and made only to induce complainant to part with her money as in fact
complainant gave and delivered the amount of P35,000.00 as partial payment to the accused; and accused once in
possession of the said amount, did then and there willfully, unlawfully and feloniously misappropriate, misapply and convert
the same to her own personal use and benefit to the damage and prejudice of the said complainant in the amount
of P35,000.00.
Contrary to law.5
CRIM. CASE NO. 02-759
The undersigned Assistant City Prosecutor accuses ALELIE TOLENTINO of the crime of Estafa under Art. 315 Par. 2(a) of the
Revised Penal Code, as amended, committed as follows: That on or about or sometime in the first week of November, 2001
and thereafter, in the City of Muntinlupa, Philippines and within the jurisdiction of this Honorable Court, the above-named
accused conspiring and confederating with NARCISA SANTOS, and both of them mutually helping and aiding one another, by
means of deceit, fraudulent acts and false pretenses executed prior to or simultaneously with the commission of the fraud, did
[then] and there willfully, unlawfully and feloniously defraud one JIMMY LEJOS, in the following manner: accused represented
to the said complainant that she could secure work for the said complainant at Korea and she is capable of processing the
travel visa and other documents for [his] travel and employment at Korea and demanded from the said complainant to pay the
amount of P80,000.00 as placement fee; accused well knew that such representations were false and made only to induce
complainant to part with [his] money as in fact complainant gave and delivered the amount of P35,000.00 as partial payment to
the accused; and accused once in possession of the said amount, did then and there willfully, unlawfully and feloniously
misappropriate, misapply and convert the same to her own personal use and benefit to the damage and prejudice of the said
complainant in the amount of P35,000.00.
Contrary to law.6
CRIM. CASE NO. 02-760
The undersigned Assistant City Prosecutor accuses ALELIE TOLENTINO of the crime of Estafa under Art. 315 Par. 2(a) of the
Revised Penal Code, as amended, committed as follows:
That on or about or sometime in the first week of November, 2001 and thereafter, in the City of Muntinlupa, Philippines and
within the jurisdiction of this Honorable Court, the above-named accused conspiring and confederating with NARCISA
SANTOS, and both of them mutually helping and aiding one another, by means of deceit, fraudulent acts and false pretenses
executed prior to or simultaneously with the commission of the fraud, did [then] and there willfully, unlawfully and feloniously
59
defraud one MARCELINO LEJOS, in the following manner: accused represented to the said complainant that she could
secure work for the said complainant at Korea and she is capable of processing the travel visa and other documents for [his]
travel and employment at Korea and demanded from the said complainant to pay the amount of P80,000.00 as placement fee;
accused well knew that such representations were false and made only to induce complainant to part with [his] money as in
fact complainant gave and delivered the amount of P20,000.00 as partial payment to the accused; and accused once in
possession of the said amount, did then and there willfully, unlawfully and feloniously misappropriate, misapply and convert
the same to her own personal use and benefit to the damage and prejudice of the said complainant in the amount
of P20,000.00.
Contrary to law.7
Private complainants Orlando Layoso, Donna Magboo, Jimmy Lejos, and Marcelino Lejos 8 alleged that sometime in the first
week of November 2001, they had a meeting with appellant Alelie Tolentino (appellant) in her office at the 3rd floor, Arevalo
Building, Alabang, Muntinlupa City. Appellant told them the procedure for overseas employment and offered them assistance
to find work abroad for a fee of P80,000. Appellant showed them pictures of those she allegedly helped find work abroad and
told them that they would be earning $630 monthly as factory workers in Korea. When asked about her license to recruit
overseas workers, appellant told private complainants that she would show it to them at some other time. On 14 November
2001, private complainants again met with appellant at her office and each of them gave appellant P20,000 as partial payment
of the agreed fee, which included expenses for medical examination and processing of their documents for work in Korea.
Appellant promised to secure their visas and employment contracts within three months.
On 30 January 2002, private complainants met with appellant, who was accompanied by a certain Narcisa Santos, at Wendys
in Arquiza Street, Manila for signing of contract. However, the names written on the employment contracts were not private
complainants names. Appellant explained that the contracts were supposedly for other applicants who sought her services but
later backed out. Appellant assured them that original contracts bearing their names would subsequently be provided. Private
complainants signed the contracts and paid P15,000 each as their second partial payment.
On 7 February 2002, private complainants received information that the Criminal Investigation and Detection Group arrested
appellant for illegal recruitment. When private complainants confronted appellant at the Manila City Hall where she was held,
they demanded the return of their payments amounting to P35,000 each, except for Marcelino Lejos whose total payment only
amounted to P20,000. Appellant denied the charges against her and promised them that they would get their money back.
Subsequently, private complainants were able to secure a certification from the Philippine Overseas Employment
Administration (POEA) that appellant was not licensed to recruit workers for overseas employment.
Another complainant, Lederle Panesa, alleged that in August 2001, she met with appellant, who offered her work in Korea for
a placement fee of P75,000. On 7 September 2001, Panesa gave appellant P15,000 as initial payment. Appellant assured
Panesa that she would be leaving for Korea on the second week of November 2001 and that the balance of the placement fee
could be paid upon her receipt of the visa. However, after said meeting, Panesa no longer heard from appellant, which
prompted Panesa to visit appellants office. Appellant informed Panesa that there were no job openings in Korea at that time.
Appellant offered Panesa employment in other countries such as Malaysia and Palau, but Panesa refused the offer and
demanded the return of her money. Nevertheless, appellant was able to persuade Panesa to wait until December 2001.
Appellant never contacted Panesa thereafter. On 7 February 2002,Panesa was informed that appellant was apprehended for
illegal recruitment. Panesa proceeded to the Office of the City Prosecutor in Manila, but failed to confront appellant. It was only
then that Panesa learned about appellant not being authorized by the POEA to recruit workers for overseas employment.
For the defense, appellant was presented as the lone witness. Appellant denied the charges against her. She testified that she
was introduced to private complainants by a certain Cezar Manonson and that the owner of the office she is renting is her
relative. Private complainants allegedly sought her help regarding possible work in Korea and that she merely explained the
procedure for overseas employment to them. She was hesitant to help them because she does not recruit workers as she
herself was also applying for work as factory worker through Narcisa Santos. She admitted having received money from
private complainants and issuing receipts for the payments, upon instructions from Narcisa Santos. She confirmed her
signature on the petty cash vouchers she issued to private complainants, evidencing their payments. She testified that she
gave the payments to Narcisa Santos. However, she admitted that she does not have proof that she indeed turned over the
money to Narcisa Santos.
On 9 June 2010, the trial court rendered a decision, the dispositive portion of which reads: WHEREFORE, the Court finds
accused Alelie (also known as Alelie Tolentino) guilty beyond reasonable doubt of the offense of large scale illegal recruitment,
which constitutes economic sabotage in Criminal Case Case No. 02-755 and sentences her to life imprisonment and to pay a
fine of P500,000.00; and five counts of estafa under Article 315 2(a) of the Revised Penal Code, as amended, in the following
criminal cases and sentences her, as follows:
In Criminal Case No. 02-756, an indeterminate penalty of six months of arresto mayor in its maximum to four years two
months and one day of prision correccional in its maximum as the maximum period, and to pay the private complainant the
amount of P5,000.00 as and for moral damages. Accused is further ordered to return the amount of P15,000.00 she illegally
collected from the private complainant.

60
In Criminal Case Nos. 02-757, 02-758 and 02-759, an indeterminate penalty [of] six months of arresto mayor in its maximum to
twelve years of prision mayor in its maximum, and to pay the private complainants individually each in the amount
of P15,000.00 as and for moral damages. Accused is further ordered to return the amount of P35,000.00 she illegally collected
each from the private complainants.
In Criminal Case No. 02-760, an indeterminate penalty of six months of arresto mayor in its maximum as the minimum period
to six years and one day of prision mayor in its minimum as the maximum period, and to pay the private complainant the
amount of P8,000.00 as and for moral damages. Accused is further ordered to return the amount of P20,000.00 she illegally
collected from the private complainant.
Her full period of preventive imprisonment shall be credited in her favor in accordance with Article 29 of the Revised Penal
Code.
SO ORDERED.9
The Ruling of the Court of Appeals
On appeal, the Court of Appeals affirmed the trial courts decision. The Court of Appeals held that the prosecution adequately
proved that appellant engaged in illegal recruitment in large scale. The Court of Appeals noted that appellant admitted that she
had no authority or valid license to engage in recruitment and placement of workers. The testimonies and the documentary
evidence submitted by the prosecution showed that appellant led complainants to believe that she had the power or ability to
send private complainants to Korea to work as factory workers and that the latter were convinced to give their payment to
appellant in order to be employed. Appellant even issued petty cash vouchers acknowledging receipt of private complainants
payment and she made them sign Trainee Agreements, which were purportedly their contract with their Korean employer.
Based on the facts and evidence presented, the Court of Appeals concluded that appellant clearly engaged in illegal
recruitment activities. Appellants claim that it was Narcisa Santos who recruited the private complainants and who profited
from the illegal transaction was disregarded by the Court of Appeals for lack of evidence. The Court of Appeals noted that it
was appellant who dealt directly with private complainants.
On the charge of estafa, the Court of Appeals likewise upheld appellants conviction for said crime. The evidence presented to
prove appellants liability for illegal recruitment also established her liability for estafa. The Court of Appeals ruled that a person
may be charged and convicted separately of illegal recruitment under Republic Act No. 8042 (RA 8042) in relation to the Labor
Code, and estafa under Article 315, paragraph 2(a) of the Revised Penal Code.
Hence, this appeal.
The Court's Ruling
We find the appeal without merit. The Court of Appeals was correct in affirming the ruling of the trial court that the appellants
guilt of the crimes she was accused of was clearly established by the witnesses and the evidence of the prosecution.
Illegal Recruitment in Large Scale
Article 13(b) of the Labor Code defines recruitment and placement as "any act of canvassing, enlisting, contracting,
transporting, utilizing, hiring or procuring workers, and includes referrals, contract services, promising or advertising for
employment, locally or abroad, whether for profit or not."
Illegal recruitment, on the other hand is defined under Article 38 of the Labor Code as follows: ART. 38. Illegal Recruitment
(a) Any recruitment activities, including the prohibited practices enumerated under Article 34of this Code, to be
undertaken by non-licensees or non-holders of authority shall be deemed illegal and punishable under Article 39 of
this Code. The Department of Labor and Employment or any law enforcement officer may initiate complaints under
this Article.
(b) Illegal recruitment when committed by a syndicate or in large scale shall be considered an offense involving
economic sabotage and shall be penalized in accordance with Article 39 hereof. Illegal recruitment is deemed
committed by a syndicate if carried out by a group of three (3) or more persons conspiring and/or confederating with
one another in carrying out any unlawful or illegal transaction, enterprise or scheme defined under the first paragraph
hereof. Illegal recruitment is deemed committed in large scale if committed against three (3) or more persons
individually or as a group.
(c) The Secretary of Labor and Employment or his duly authorized representatives shall have the power to cause the
arrest and detention of such non-licensee or non-holder of authority if after investigation it is determined that his
activities constitute a danger to national security and public order or will lead to further exploitation of job-seekers.
The Secretary shall order the search of the office or premises and seizure of documents, paraphernalia, properties
and other implements used in illegal recruitment activities and the closure of companies, establishments and entities
found to be engaged in the recruitment of workers for overseas employment, without having been licensed or
authorized to do so. (Emphases supplied)
Illegal recruitment, as defined under Article 38 of the Labor Code, encompasses recruitment activities for both local and
overseas employment. However, illegal recruitment under this article is limited to recruitment activities undertaken by non-
licensees or non-holders of authority.10 Thus, under the Labor Code, to constitute illegal recruitment in large scale, three
elements must concur:

61
 1. The accused undertook any recruitment activity defined under Art. 13 (b) or any prohibited practice enumerated
under Art. 34 of the Labor Code.
2. He did not have the license or the authority to lawfully engage in the recruitment and placement of workers.
3. He committed the same against three or more persons, individually or as a group. 11
RA 8042,12 otherwise known as the "Migrant Workers and Overseas Filipinos Act of 1995," established a higher standard of
protection and promotion of the welfare of the migrant workers, their families and overseas Filipinos in distress. RA 8042 also
broadened the concept of illegal recruitment for overseas employment and increased the penalties, especially for Illegal
Recruitment in Large Scale and Illegal Recruitment Committed by a Syndicate, which are considered offenses involving
economic sabotage.13 Part II of RA 8042 defines and penalizes illegal recruitment for employment abroad, whether undertaken
by a non-licensee or non-holder of authority or by a licensee or holder of authority.
Section 6 of RA 8042 provides for the definition of illegal recruitment, while Section 7 enumerates the penalties therefor, thus:
SEC. 6. Definition. For purposes of this Act, illegal recruitment shall mean any act of canvassing, enlisting, contracting,
transporting, utilizing, hiring, or procuring workers and includes referring, contract services, promising or advertising for
employment abroad, whether for profit or not, when undertaken by a non-licensee or non-holder of authority contemplated
under Article 13(f) of Presidential Decree No. 442, as amended, otherwise known as the Labor Code of the Philippines:
Provided, That any such non-licensee or non-holder who, in any manner, offers or promises for a fee employment abroad for
two or more persons shall be deemed so engaged. It shall likewise include the following acts, whether committed by any
person, whether a non-licensee, non-holder, licensee or holder of authority:
(a) To charge or accept directly or indirectly any amount greater than that specified in the schedule of allowable fees
prescribed by the Secretary of Labor and Employment, or to make a worker pay any amount greater than that
actually received by him as a loan or advance;
(b) To furnish or publish any false notice or information or document in relation to recruitment or employment;
(c) To give any false notice, testimony, information or document or commit any act of misrepresentation for the
purpose of securing a license or authority under the Labor Code;
(d) To induce or attempt to induce a worker already employed to quit his employment in order to offer him another
unless the transfer is designed to liberate a worker from oppressive terms and conditions of employment;
(e) To influence or attempt to influence any person or entity not to employ any worker who has not applied for
employment through his agency;
(f) To engage in the recruitment or placement of workers in jobs harmful to public health or morality or to the dignity of
the Republic of the Philippines;
(g) To obstruct or attempt to obstruct inspection by the Secretary of Labor and Employment or by his duly authorized
representative;
(h) To fail to submit reports on the status of employment, placement vacancies, remittance of foreign exchange
earnings, separation from jobs, departures and such other matters or information as may be required by the
Secretary of Labor and Employment;
(i) To substitute or alter to the prejudice of the worker, employment contracts approved and verified by the
Department of Labor and Employment from the time of actual signing thereof by the parties up to and including the
period of the expiration of the same without the approval of the Department of Labor and Employment;
(j) For an officer or agent of a recruitment or placement agency to become an officer or member of the Board of any
corporation engaged in travel agency or to be engaged directly or indirectly in the management of a travel agency;
(k) To withhold or deny travel documents from applicant workers before departure for monetary or financial
considerations other than those authorized under the Labor Code and its implementing rules and regulations;
(l) Failure to actually deploy without valid reason as determined by the Department of Labor and Employment; and
(m) Failure to reimburse expenses incurred by the worker in connection with his documentation and processing for
purposes of deployment, in cases where the deployment does not actually take place without the workers fault.
Illegal recruitment when committed by a syndicate or in large scale shall be considered an offense involving
economic sabotage.
Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3) or more persons conspiring or
confederating with one another. It is deemed committed in large scale if committed against three (3) or more persons
individually or as a group.
The persons liable for the above offenses are the principals, accomplices and accessories. In case of juridical persons, the
officers having control, management or direction of their business shall be liable.
SEC. 7. Penalties.
(a) Any person found guilty of illegal recruitment shall suffer the penalty of imprisonment of not less than six (6) years
and one (1) day but not more than twelve (12) years and a fine of not less than Two hundred thousand pesos
(P200,000.00) nor more than Five hundred thousand pesos (P500,000.00).

62
 (b) The penalty of life imprisonment and a fine of not less than Five hundred thousand pesos (P500,000.00) nor more
than One million pesos (P1,000,000.00) shall be imposed if illegal recruitment constitutes economic sabotage as
defined herein.
Provided, however, That the maximum penalty shall be imposed If the person illegally recruited is less than eighteen (18)
years of age or committed by a non-licensee or non-holder of authority. (Emphases supplied)
Unlike illegal recruitment as defined under the Labor Code which is limited to recruitment activities undertaken by non-
licensees or non-holders of authority, under Article 6 of RA 8042, illegal recruitment (for overseas employment) may be
committed not only by non-licensees or non-holders of authority but also by licensees or holders of authority. Article 6
enumerates thirteen acts or practices [(a) to (m)] which constitute illegal recruitment, whether committed by any person,
whether a non-licensee, non-holder, licensee or holder of authority. Except for the last two acts [(l) and (m)] on the list under
Article 6 of RA8042, the first eleven acts or practices are also listed in Article 34 14 of the Labor Code under the heading
"Prohibited practices." Thus, under Article 34 of the Labor Code, it is unlawful for any individual, entity, licensee or holder of
authority to engage in any of the enumerated prohibited practices, but such acts or practices do not constitute illegal
recruitment when undertaken by a licensee or holder of authority. However, under Article 38(A) of the Labor Code, when a
non-licensee or non-holder of authority undertakes such "prohibited practices," he or she is liable for illegal recruitment. RA
8042 broadened the definition of illegal recruitment for overseas employment by including thirteen acts or practices which now
constitute as illegal recruitment, whether committed by a non-licensee, non-holder, licensee or holder of authority.
Under RA 8042, a non-licensee or non-holder of authority commits illegal recruitment for overseas employment in two ways:
(1) by any act of canvassing, enlisting, contracting, transporting, utilizing, hiring, or procuring workers, and includes referring,
contract services, promising or advertising for employment abroad, whether for profit or not; and (2) by undertaking any of the
acts enumerated under Section 6 of RA 8042. On the other hand, a licensee or holder of authority is also liable for illegal
recruitment for overseas employment when he or she undertakes any of the thirteen acts or practices [(a) to (m)] listed under
Section 6 of RA 8042. To constitute illegal recruitment in large scale, the offense of illegal recruitment must be committed
against three or more persons, individually or as a group.
In this case, the prosecution sufficiently proved that appellant engaged in large-scale illegal recruitment.
First, appellant is a non-licensee or non-holder of authority. Part of the evidence submitted by the prosecution is a POEA
Certification15 dated 10 March 2003, stating that appellant is not licensed by the POEA to recruit workers for overseas
employment. Appellant admitted that she has no valid license or authority required by law to lawfully engage in recruitment
and placement of workers.
Second, despite the absence of a license or authority to undertake recruitment activities, appellant gave the impression that
she has the power or ability to secure work for private complainants in Korea. Private complainants Orlando Layoso, Donna
Magboo, and Jimmy Lejos all testified that appellant promised them work as factory workers in Korea and induced them to pay
placement fees, which included the expenses for medical examination and the processing of their documents for work in
Korea. Appellant even showed pictures of previous applicants, whom she allegedly helped find work abroad. Appellant also
explained to them the procedure for overseas employment and promised them that she would secure their visas and
employment contracts within three months. The testimonies of Orlando Layoso, Donna Magboo, and Jimmy Lejos were
corroborated by private respondents Marcelino Lejos and Lederle Panesa, whose Affidavits of Complaint were adopted as
their direct testimonies.
This Court has held in several cases that an accused who represents to others that he could send workers abroad for
employment, even without the authority or license to do so, commits illegal recruitment. 16
Third, there are at least three victims in this case which makes appellant liable for large-scale illegal recruitment.
Appellant denies that she gave private complainants the distinct impression that she had the power or ability to send them
abroad for work. She insists that she herself had been applying then as a factory worker in Korea through Narcisa Santos, who
had previously deployed her as domestic helper in Hongkong. Although appellant admits having received payments from
private complainants and issuing receipts, she submits that she did so only upon the instructions of Narcisa Santos, to whom
she turned over the money collected from private complainants.
The Court is not swayed by appellants contentions. As found by the trial court and the appellate court, it was clearly
established that appellant dealt directly with the private complainants: she explained to them the procedure for overseas
employment; she charged them placement fees to cover their medical examination and the processing of their travel
documents; she issued petty cash vouchers with her signature, acknowledging receipts of their payments; she promised the
eventual release of their visas and employment contracts; and she made them sign Trainee Agreements, purportedly their
contract with their Korean employer. Clearly, appellant, despite being a non-licensee or non-holder of authority, engaged in
recruitment activities, making her liable for illegal recruitment.
Well-settled is the rule that the trial court, having the opportunity to observe the witnesses and their demeanor during the trial,
can best assess the credibility of the witnesses and their testimonies.17 Appellants mere denial cannot prevail over the positive
and categorical testimonies of the complainants.18 The trial courts findings are accorded great respect unless the trial court
has overlooked or misconstrued some substantial facts, which if considered might affect the result of the case.19 Furthermore,
factual findings of the trial court, when affirmed by the Court of Appeals, are deemed binding and conclusive. 20
63
Thus, we affirm the finding of both the trial court and the appellate court that appellant is guilty beyond reasonable doubt of
illegal recruitment in large scale. However, we modify the penalty imposed.
The penalty imposed by the trial court in this case for large-scale illegal recruitment, which constitutes economic sabotage, is
life imprisonment and a fine of P500,000. Section 7 of RA 8042 provides that the penalty of life imprisonment and a fine of not
less than P500,000 nor more than P1,000,000 shall be imposed if illegal recruitment constitutes economic sabotage. Said
article further provides that the maximum penalty shall be imposed if committed by a non-licensee or non-holder of authority.
Thus, the proper penalty in this case is life imprisonment and a fine of P1,000,000.
Estafa
We likewise affirm appellants conviction for five counts of estafa under Article 315(2)(a) of the Revised Penal Code. It is
settled that a person, for the same acts, may be convicted separately for illegal recruitment under RA 8042 (or the Labor
Code), and estafa under Article 315(2)(a)21 of the Revised Penal Code.22
The elements of estafa are: (1) the accused defrauded another by abuse of confidence or by means of deceit; and (2) the
offended party or a third party suffered damage or prejudice capable of pecuniary estimation. 23 In this case, the prosecution
proved beyond reasonable doubt that appellant deceived private complainants into believing that she had the authority and
capability to send them to Korea for employment, despite her not being licensed by the POEA to recruit workers for overseas
employment. She even showed them pictures of past applicants whom she allegedly sent abroad for work. She also assured
them that she would be able to secure their visas and employment contracts once they pay the placement fee. Because of the
assurances given by appellant, private complainants paid appellant a portion of the agreed placement fee, for which appellant
issued petty cash vouchers24 with her signature, evidencing her receipt of the payments. Clearly, these acts of appellant
constitute estafa punishable under Article 315 (2)(a) of the Revised Penal Code.
The penalty for estafa depends on the amount defrauded. Article 315 of the Revised Penal Code provides:
ART. 315. Swindling (estafa). Any person who shall defraud another by any of the means mentioned hereinbelow shall be
punished by:
1st. The penalty of prision correccional in its maximum period to prision mayor in its minimum period, if the amount of the fraud
is over 12,000 pesos but does not exceed 22,000 pesos, and if such amount exceeds the latter sum, the penalty provided in
this paragraph shall be imposed in its maximum period, adding one year for each additional 10,000 pesos; but the total penalty
which may be imposed shall not exceed twenty years. In such cases, and in connection with the accessory penalties which
may be imposed and for the purpose of the other provisions of this Code, the penalty shall be termed prision mayor or
reclusion temporal, as the case may be;
xxxx
Thus, when the amount of fraud is over P12,000 but not exceeding P22,000, the penalty imposed is prision correccional in its
maximum period to prision mayor in its minimum period, i.e., from 4 years, 2 months and 1 day to 8 years. Under the
Indeterminate Sentence Law, the minimum term shall be within the range of the penalty next lower to that prescribed by the
Revised Penal Code, which is prision correccional in its minimum to medium period. The time included in this penalty is from 6
months and 1 day to 4 years and 2 months.
When the amount of fraud exceeds P22,000, the penalty shall be imposed in its maximum period, and adding one year for
every P10,000 in excess of P22,000. But, the total penalty imposed should not exceed 20 years. The maximum term under the
Indeterminate Sentence Law is that which, in view of the attending circumstances, could be properly imposed under the
Revised Penal Code. The range of penalty under Article 315 is composed of only two periods. To compute the maximum
period of the indeterminate sentence, the total number of years included in the two periods should be divided into three equal
portions, with each portion forming a period. Following this computation, the minimum, medium, and maximum periods of the
prescribed penalty are:
1. Minimum Period 4 years, 2 months and 1 day to 5 years, 5 months and 10 days;
2. Medium Period 5 years, 5 months and 11 days to 6 years, 8 months and 20 days;
3. Maximum Period 6 years, 8 months and 21 days to 8 years.
Any incremental penalty, i.e. one year for every P10,000 in excess of P22,000, shall be added to anywhere from6 years, 8
months and 21 days to 8 years, at the courts discretion, provided the total penalty does not exceed 20 years. 25
We find that the penalty imposed by the trial court, and affirmed by the appellate court, is not in accord with the penalty
prescribed. The trial court erroneously imposed the minimum period of "six months of arresto mayor in its maximum." Hence,
we modify the penalty imposed on the five counts of estafa and we delete the moral damages awarded for having no basis in
law. Considering the number of victims defrauded, we find that a minimum period of 2 years of prision correccional is
appropriate.
In Criminal Case No. 02-756, where the amount defrauded is P15,000, and in the absence of any mitigating or aggravating
circumstance, the maximum term shall be taken from the medium period of the penalty prescribed (i.e. 5 years, 5 months and
11 days to 6 years, 8 months and 20 days). Appellant should be sentenced to 2 years of prision correccional as minimum to 6
years and 1 day of prision mayor as maximum.
In Criminal Case Nos. 02-757, 02-758, and 02-759, where the amount defrauded is P35,000 each, the maximum period
(anywhere from 6 years, 8 months and 21 days to 8 years) shall be imposed, plus the incremental penalty of one year
64
(additional 1 year imprisonment for the P10,000 in excess of P22,000). We fix the maximum term at 7 years of prision mayor.
Adding the incremental penalty of 1 year to the maximum term, appellant should be sentenced in each of these cases to 2
years of prision correccional as minimum to 8 years of prision mayor as maximum.
In Criminal Case No. 02-760, where the amount defrauded is P20,000, appellant should be sentenced to 2 years of prision
correccional as minimum to 6 years and 1 day of prision mayor as maximum.
Furthermore, appellant should indemnify private complainants for the amounts paid to her, with legal interest at the rate of 6%
per annum, from the time of demand, which shall be deemed as the same day the Informations were filed against appellant,
until the amounts are fully paid.26 WHEREFORE, we AFFIRM WITH MODIFICATIONS the Decision dated 29 November 2012
of the Court of Appeals in CA-G.R. CRHC No. 04558 to read as follows:
1. In Criminal Case No. 02-755, appellant Alelie Tolentino is found GUILTY beyond reasonable doubt of illegal
recruitment in large scale, constituting economic sabotage, as defined and penalized in Section 6 and Section 7(b) of
RA 8042. She is sentenced to suffer the penalty of life imprisonment and is ordered to pay a fine of One Million Pesos
(P1,000,000).
2. In Criminal Case No. 02-756, appellant Alelie Tolentino is found GUILTY beyond reasonable doubt of estafa, as
defined and penalized in Article 315(2)(a) of the Revised Penal Code. She is sentenced to suffer the indeterminate
penalty of 2 years of prision correccional as minimum to 6 years and 1 day of prision mayor as maximum. She is
ordered to indemnify private complainant Lederle Panesa in the amount of Fifteen Thousand Pesos (P15,000) as
actual damages, with legal interest of six percent (6%) per annum from 28 June 2002, until the said amount is fully
paid.
3. In Criminal Case No. 02-757, appellant Alelie Tolentino is found GUILTY beyond reasonable doubt of estafa, as
defined and penalized in Article 315(2)(a) of the Revised Penal Code. She is sentenced to suffer the indeterminate
penalty of 2 years of prision correccional as minimum to 8 years of prision mayor as maximum. She is ordered to
indemnify private complainant Orlando Layoso in the amount of Thirty Five Thousand Pesos (P35,000) as actual
damages, with legal interest of six percent (6%) per annum from 28 June 2002, until the said amount is fully paid.
4. In Criminal Case No. 02-758,appellant Alelie Tolentino is found GUILTY beyond reasonable doubt of estafa, as
defined and penalized in Article 315(2)(a) of the Revised Penal Code. She is sentenced to suffer the indeterminate
penalty of 2 years of prision correccional as minimum to 8 years of prision mayor as maximum. She is ordered to
indemnify private complainant Donna Magboo in the amount of Thirty Five Thousand Pesos (P35,000) as actual
damages, with legal interest of six percent (6%) per annum from 28 June 2002, until the said amount is fully paid.
5. In Criminal Case No. 02-759, appellant Alelie Tolentino is found GUILTY beyond reasonable doubt of estafa, as
defined and penalized in Article 315(2)(a) of the Revised Penal Code. She is sentenced to suffer the indeterminate
penalty of 2 years of prision correccional as minimum to 8 years of prision mayor as maximum. She is ordered to
indemnify private complainant Jimmy Lejos in the amount of Thirty Five Thousand Pesos (P35,000) as actual
damages, with legal interest of six percent (6%) per annum from 28 June 2002, until the said amount is fully paid.
6. In Criminal Case No. 02-760, appellant Alelie Tolentino is found GUILTY beyond reasonable doubt of estafa, as
defined and penalized in Article 315(2)(a) of the Revised Penal Code. She is sentenced to suffer the indeterminate
penalty of 2 years of prision correccional as minimum to 6 years and 1 day of prision mayor as maximum. She is
ordered to indemnify private complainant Marcelino Lejos in the amount of Twenty Thousand Pesos (P20,000) as
actual damages, with legal interest of six percent (6%) per annum from 28 June 2002, until the said amount is fully
paid.
SO ORDERED.

G.R. No. 207811, June 01, 2016

PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. DELIA MOLINA Y CABRAL, Accused-Appellants.
DECISION
PERALTA, J.:
This is an appeal from the Decision1 dated December 14, 2012 of the Court of Appeals (CA) affirming with modification the
Decision2 dated May 31, 2010 of the Regional Trial Court (RTC), Branch 143, Makati City, in two cases, Criminal Case No. 07-
1399 and Criminal Case No. 07-3108 against appellant Delia Molina for the crimes of illegal recruitment in a large scale and
illegal recruitment, respectively.

The facts follow.

Three informations were filed against appellant alleging the following:

In Criminal Case No. 07-1399 for illegal recruitment in a large scale:

65
That in or about and sometime between the months of April 2006 and June 2006, in the City of Makati, Philippines and within
the jurisdiction of this Honorable Court, the above-named accused, being authorized by the Department of Labor and
Employment to recruit workers for overseas employment, did then and there willfully, unlawfully and feloniously recruit and
promise complainant, namely:

Anthony Galiste: P75,000.00

Romulo Nones: P75,000.00

Elisa Escobar: P75,000.00

Geraldine Cario: P75,000.00

Diony Aragaon: P75,000.00

Maribel Rosimo: P75,000.00

Gilbert Rosimo: P75,000.00

EricValdez: P75,000.00

for overseas job placement and in consideration of said promise, said complainants paid and delivered to accused sums of
money as placement/processing fees and having failed to actually deploy said complainants without any valid reason and
without the latter's fault, the said accused failed to reimburse the expenses incurred by the said private complainants in
connection with the documentation and processing of their papers for purposes of their deployment, to the damage and
prejudice of the above-named complainants.

Contrary to law.
In Criminal Case No. 07-3108 for illegal recruitment in a large scale with another accused Vincent Zulueta (the case against
the latter was sent to the archives as he was at large):

That in or about the months of April and May 2006, in the City of Makati, Metro Manila, Philippines, a place within the
jurisdiction of this Honorable Court, the above-named accused, conspiring and confederating together and both of them
mutually helping and aiding one another, did then and there willfully, unlawfully, and feloniously recruit and promise
employment/job placement to RICHARD COLLAMAR, CAROL COLLAMAR, and CECILLE M. BARTOLOME as factory
workers in Korea, and in consideration of said promise collected from complainants the total amount of P225,000.00 as
placement/processing fees and both accused despite receipt of the fees from complainants failed to actually deploy said
complainants without valid reasons and without the workers' fault, and despite demand to reimburse expenses to said
complainants, thus, in large scale amounting to economic sabotage.

Contrary to law.
In Criminal Case No. 08-066 for illegal recruitment:

That in or about the period from April to June 2006, in the City of Makati, Philippines and within the jurisdiction of this
Honorable Court, the above-named accused, being then authorized by the Philippine Overseas Employment Administration to
recruit workers for overseas employment, did then and there willfully, unlawfully and feloniously recruit and promise
complainants ROSEMARIE A. RESPUETO and LEO JOHN M. ALDAY overseas employment as factory workers in South
Korea, and in consideration of said promise, complainants paid and delivered to accused sums of money as
placement/processing fees, and having failed to actually deploy complainants without any valid reason and without the latter's
fault, the accused failed to reimburse the expenses incurred by complainants in connection with the documentation and
processing of their papers for purposes of deployment, in violation of the aforecited law.

Contrary to law.
At the respective arraignment of the cases mentioned above, appellant pleaded not guilty to each of the charges. Thereafter,
trial on the merits ensued.

The following are the factual findings of the CA based on the trial conducted in the RTC:

66
Re: Criminal Case Number 07-1399.

The following persons testified for the prosecution: Elisa Escobar (hereafter, "Escobar"); Geraldine Cario (hereafter,
"Cario"); and Diony Aragon (hereafter, "Aragon"). The evidence for the Prosecution is summarized thus: sometime in April
2006, Escobar went to the office of the Southern Cohabite Landbase Management Corporation (hereafter, "SCLMC") located
at Makati City to meet Zulueta, an agent of the SCLMC. Zulueta introduced Escobar to accused-appellant. Accused-appellant
told Escobar she will be employed as a factory worker in Korea within 3 months from payment of the P75,000.00 placement
fee. Escobar tendered the said amount to Zulueta at the SCLMC office evidenced by the cash voucher dated 28 April 2006
signed by SCLAMCOR (Southern Cotabato Landbase Management Corporation). The cash voucher acknowledged receipt of
the P75,000.00 from Escobar. It also stated that the P75,000.00 was for payment of the processing fee for Korea. A month
after paying the placement fee, SCLMC informed Escobar she had to undergo Korean Language Training. Escobar complied.
When Escobar did not hear from accused-appellant for another month, she decided to withdraw her placement fee. Accused-
appellant failed to return her money, thus Escobar filed the suit for illegal recruitment.

Cario testified she came to know accused-appellant sometime in April 2006, when Zulueta brought her to the office of the
SCLMC at Makati City. Zulueta and accused-appellant told Cario she will be employed as a factory worker in Korea within 3
months from payment of the P75,000.00 placement fee. Cario tendered the said amount to Zulueta at the SCLMC office
evidenced by the cash voucher dated 28 April 2006 signed by SCLAMCOR. The cash voucher acknowledged receipt of the
P75,000.00 from Cario. It also stated that the P75,000.00 was for payment of the processing fee for Korea. Accused-
appellant was beside Zulueta when the latter gave the cash voucher to Cario. Cario was then asked to submit a medical
examination and undergo Korean Language Training to expedite her application. Three months after complying with the
requirements, Cario was still not deployed for employment abroad. Cario then filed this case against accused-appellant.

Sometime in 2006, Aragon was convinced by his friends to apply at the SCLMC. Zulueta brought him to the SCLMC office.
Zulueta introduced Aragon to the accused-appellant. Accused-appellant told Aragon he will be employed as a factory worker in
Korea within 3 months from payment of the P75,000.00 placement fee. Aragon tendered the said amount to Zulueta at the
SCLMC office evidenced by the cash voucher acknowledged receipt of the P75,000.00 from Aragon. It also stated that the
P75,000.00 was for payment of the processing fee for Korea. Three months after paying the placement fee, Aragon was not
deployed for Korea. Aragon then asked accused-appellant to return his P75,000.00. Accused-appellant told Aragon she would
give him P50,000.00, while Zulueta will give him P25,000.00. Aragon filed the case because accused-appellant failed to return
the P75,000.00.3

Re: Criminal Case Number 07-3108

Cecille Bartolome (hereafter, "Bartolome") testified for the prosecution. The evidence of the Prosecution is summarized, thus:
Bartolome met accused-appellant at the SCLMC office on 27 April 2006. In the office, accused-appellant and Zulueta told
Bartolome and her companions (namely Carol Collamar, Sosen Fernandez, and Michelle Fernandez) they would be deployed
to Korea as factory workers within three months from payment of the P75,000.00 placement fee each. Bartolome tendered the
said amount to Zulueta at the SCLMC office evidenced by the cash voucher acknowledged receipt of the P75,000.00 from
Bartolome. It also stated that the P75,000.00 was for payment of the processing fee for Korea. In July 2006, Bartolome and
her companions went back to the SCLMC office to inquire about the progress of their application. Accused-appellant told
Bartolome to wait. Bartolome was still not employed by November 2006, so she decided to withdraw her money from accused-
appellant. Accused-appellant did not return the P75,000.00, so Bartolome reported the matter to the National Bureau of
Investigation (hereafter, "NBI"). The NBI arrested accused-appellant on 5 January 2007. Accused-appellant issued PNB check
number 7381 in favor of Bartolome. The check bounced for being drawn against a closed account. 4

Re: Criminal Case Number 08-066

Leo John Alday (hereafter, "Alday") and Rosemarie Respueto (hereafter, "Respueto") testified for the Prosecution. The
evidence of the Prosecution is summarized, thus: sometime in April 2006, Alday went to the SCLMC to look for employment
abroad. At the SCLMC office, Alday met with Rolando Salilin (hereafter, "Salilin"), an agent of the SCLMC. Salilin promised
Alday he will be employed as factory worker in Korea with a monthly salary of P80,000.00. Alday paid the placement fee of
P75,000.00. A month after paying the placement fee, Alday was still not deployed for employment abroad. Alday thus filed this
case against accused-appellant.

Respuesto testified in May 2006, he went to the SCLMC to look for employment abroad. At the SCLMC office, Respuesto met
with Loreta Gasi (hereafter, "Gasi"), an agent of the SCLMC. Gasi promised Respuesto she will be employed as factory
worker in Korea with a monthly salary of P80,000.00. Respueto paid the placement fee of P90,000.00. Two months after
67
paying the placement fee, Respueto was still not deployed for employment abroad. In August 2006, Repuesto decided to
withdraw her money. Respuesto filed this case when accused-appellant failed to return her
money.5ChanRoblesVirtualawlibrary
On the other hand, accused-appellant denied all the allegations against her and presented the following defense:

The SCLMC is a recruitment agency, registered with the Securities and Exchange Commission (SEC) and the Philippine
Overseas Employment Administration (POEA). Accused-appellant is the President of the SCLMC. The SCLMC employed only
three staff members, i.e. Amelita Plabay (secretary), Pedrito and Leonora (liaison officers). Zulueta is not connected with the
SCLMC but he was at the SCLMC office because he tried to convince accused-appellant to be a distributor of Presense Green
Tea. Accused-appellant denied all the allegations against her. She denied meeting all of the private complainants prior to the
filing of the case. She added SCLMC could not have conducted recruitment activities in April and May 2006 because its
license to conduct business was temporarily suspended by the POEA during that period. The suspension was lifted on July 31,
2006. Accused-appellant surmised private complainants filed cases against her upon the prodding of Alan Basa. She testified
when she was arrested by the NBI, Alan Basa asked her for P300,000.00, in exchange for the dropping of the complaints
against her. When accused-appellant refused to give Alan Basa the money, the latter made sure complainants filed the cases
against her.

The RTC, on May 31, 2010, promulgated the Decision convicting accused-appellant in Criminal Case No. 07-1399 for large
scale illegal recruitment and Criminal Case Number 07-3108 for illegal recruitment. Accused-appellant was, however,
acquitted in Criminal Case No. 08-066. The dispositive portion of the said Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered finding accused DELIA MOLINA Y CABRA GUILTY
beyond reasonable doubt of the crimes charged and she is hereby sentenced as follows:

a. In Crim. Case No. 07-1399, she is sentenced to suffer life imprisonment, to pay a fine of Five Hundred Thousand Pesos
(Php 500,000.00), without subsidiary imprisonment in case of insolvency, and to indemnify the offended party Elisa Escobar,
Geraldine Cario, and Diony Castillo Aragon the amount of Seventy-Five Thousand Pesos (Php 75,000.00) each as actual
damages and the costs;

b. In Criminal Case No. 07-3108, to suffer the indeterminate penalty of SIX (6) MONTHS and ONE (1) DAY of prision
correccional, as minimum, to SEVEN (7) YEARS, EIGHT (8) MONTHS and TWENTY-ONE (21) DAYS of prision mayor as
maximum and to indemnify the offended party Cecille Bartolome the amount of Seventy- Five Thousand Pesos (Php
75,000.00) and the costs;

In Criminal Case No. 08-066, she is hereby ACQUITTED for insufficiency of evidence.

SO ORDERED.
Accused-appellant filed an appeal before the CA and the latter, on December 14, 2012, rendered a Decision affirming the RTC
with modification, the dispositive portion of which reads, as follows:

WHEREFORE, the assailed Decision convicting accused-appellant in Criminal Case Number 07-1399 (for large scale illegal
recruitment) and Criminal Case Number 07-3108 (for illegal recruitment) is AFFIRMED with Modification:

1. Criminal Case Number 07-1399 (for large scale illegal recruitment): accused-appellant is sentenced to life imprisonment,
pay a fine of P500,000.00 without subsidiary imprisonment in case of insolvency, and to indemnify the offended party Elisa
Escobar, Geraldine Cario, and Fiony Castillo Aragon the amount of P75,000.00 each as actual damages, and the costs;

2. In Criminal Case Number 07-3108 (for illegal recruitment), accused-appellant is sentenced to imprisonment of six (6) years
and one (1) day as minimum to 12 years as maximum, and to pay a fine of P200,000.00 without subsidiary imprisonment in
case of insolvency, and to indemnify Bartolome the amount of P75,000.00, and the costs.

SO ORDERED.
Hence, the present appeal.

Accused-appellant insists that the prosecution failed to prove the elements of the crime charged and that her guilt has not
been proven beyond reasonable doubt.

The appeal must fail.

68
All the elements of the crime of illegal recruitment-in large scale are present, namely: (1) the offender has no valid license or
authority required by law to enable him to lawfully engage in recruitment and placement of workers; (2) the offender
undertakes any of the activities within the meaning of "recruitment and placement" under Article 13 (b)6 of the Labor Code, or
any of the prohibited practices enumerated under Article 34 of the said Code (now Section 6 of R.A. 8042); and (3) the
offender committed the same against three (3) or more persons, individually or as a group. More importantly, all the said
elements have been established beyond reasonable doubt.

It was accused-appellant herself who testified that SCLMC did not have authority to operate its business on April and May,
2006, covering the dates that are alleged in the Informations filed against her, proving that the first element of the crime is
present. She claimed the SCLMC's license was temporarily suspended by the POEA. during the alleged date when the crimes
were committed and that the suspension was lifted on July 31, 2006. Accused-appellant further admitted that the SCLMC had
no authority to recruit workers for Korea because it had no job order to do so, thus:

Atty. Tacorda: I noticed, Madam Witness, that this Job Order are all for Malaysia. Do you have any job order for Korea?

Witness: We don't have Job Order from Korea, ma'am.

Atty. Tacorda: Have you ever had job order from Korea before July 2006?

Witness: We don't have job order from Korea because only 7 agencies are allowed to deploy workers to Korea.

Atty. Tacorda: So are you saying that Southern Cotabato Landbase Management Corporation is not allowed to recruit workers
from Korea for purposes of overseas employment?

Witness: Yes, ma'am.7ChanRoblesVirtualawlibrary

Without any authority, accused-appellant still engaged in recruitment activities by offering and promising jobs, and collecting
placement fees as testified to by private complainants Escobar, Cario and Aragon. 8 Thus, the second element of the crime is
present. Article 13, par. (b) of the Labor Code, reads as follows:

(b) "Recruitment and placement" refers to any act of canvassing, enlisting, contracting, transporting, utilizing, hiring, or
procuring workers, and includes referrals, contract services, promising and 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.
In this case, the prosecution was able to prove that accused-appellant was engaged in the recruitment and placement of the
private complainant as the accused was the one who told the private complainants that they will be sent to Korea as factory
workers within three months from payment of the placement fees and that the placement fees were made in the office of the
SCLMC in the presence of the accused-appellant or on her instruction.

Anent the third element, accused-appellant committed the illegal recruitment against three or more persons, namely, Anthony
Galiste, Romulo Nones, Elisa Escobar, Geraldine Cario, Diony Aragon, Maribel Rosimo, Gilbert Rosimo and Eric Valdez.

Petitioner was also properly found guilty of the crime of simple illegal recruitment, there being one complainant and the
concurrence of the two essential elements of illegal recruitment, to wit:

(a) the accused-appellant had no valid license or authority required by law to enable her to lawfully engage in recruitment and
placement of workers per her testimony that SCLMC did not have authority to operate its business on April and May 2006 as
its license was temporarily suspended by the POBA at that particular time. 9 Accused-appellant further testified that SCLMC
had no authority to recruit workers for Korea because it had no job order for that purpose.10

(b) the accused-appellant engaged in recruitment and placement of private complainant Bartolome when she told the, latter
that she will be sent to Korea as a factory worker after payment of the placement fee11 which private complainant Bartolome
paid in the office of the SCLMC in the presence of accused-appellant.12ChanRoblesVirtualawlibrary
Furthermore, it is worthy to emphasize that under Section 6 13 of Republic Act No. 8042, illegal recruitment is defined as
including any person, whether a non-licensee, non-holder, licensee or holder of authority. Thus, the contention of accused-
appellant that she was a holder of a license to operate as a recruiter during the alleged period when the crimes were
committed does not matter because she was still performing an act considered to be an illegal recruitment by failing to
reimburse the expenses incurred by the private complainants. Under Section 6 (m) of R.A. No. 8042, failure to reimburse
69
expenses incurred by the workers in connection with his documentation and processing for purposes of deployment, in cases
where the deployment does not actually take place without the worker's fault, is considered as performing illegal recruitment.

It must also be noted that accused-appellant's defense of denial cannot overcome the positive testimonies of the witnesses
presented by the prosecution. As is well-settled in this jurisdiction, greater weight is given to the positive identification of the
accused by the prosecution witnesses than the accused's denial and explanation concerning the commission of the crime. 14

The CA was also correct in modifying the penalty imposed by the RTC in Criminal Case No. 07-3108. The RTC mistakenly
imposed the indeterminate penalty of six (6) months and one (1) day of prision correccional, as minimum, to seven (7) years,
eight (8) months and twenty-one (21) days of prision mayor as maximum. Under Section 7 (a) of R.A. No. 8042, a person
found guilty of illegal recruitment shall suffer the penalty of imprisonment of not less than six (6) years and one (1) day but not
more than twelve (12) years, and a fine of not less than two hundred thousand pesos (P200,000.00) nor more than five
hundred thousand pesos (P500,000.00). Thus, the penalty of imprisonment of six (6) years and one (1) day, as minimum, to
twelve (12) years as maximum, and the payment of a fine of two hundred thousand pesos (P200,000.00) as imposed by the
CA is more in accordance with the law penalizing the crime of simple illegal recruitment.chanrobleslaw

WHEREFORE, the appeal is DISMISSED and the CA Decision

dated December 14, 2012 of the Court of Appeals, affirming with modification the Decision dated May 31, 2010 of the
Regional Trial Court, Branch 143, Makati City, in Criminal Case No. 07-1399 and Criminal Case No. 07-3108, against
appellant Delia Molina for the crimes of illegal recruitment in a large scale and illegal recruitment, respectively, is AFFIRMED.

SO ORDERED.

G.R. No. 186475 June 26, 2013

POSEIDON INTERNATIONAL MARITIME SERVICES, INC., Petitioner,
vs.
TITO R. TAMALA, FELIPE S. SAURIN, JR., ARTEMIO A. BO-OC and JOEL S. FERNANDEZ, Respondents.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari1 the challenge to the September 30, 2008 Decision2 and the February 11,
20093 Resolution of the Court of Appeals (CA) in CA-G.R. SP No. 98783. These CA rulings set aside the December 29, 2006
and February 12, 2007 Resolutions4 of the National Labor Relations Commission (NLRC) in NLRC CA No. 049479-06. The
NLRC, in turn, affirmed in toto the May 2006 Decision 5 of the labor arbiter (LA) dismissing the complaint for illegal termination
of employment filed by respondents Tito R. Tamala, Felipe S. Saurin, Jr., Artemio A. Bo-oc and Joel S. Fernandez against
petitioner Poseidon International Maritime Services, Inc. (Poseidon), and its principal, Van Doorn Fishing Pty, Ltd. (Van
Doorn).
The Factual Antecedents
In 2004, Poseidon hired the respondents, in behalf of Van Doorn, to man the fishing vessels of Van Doorn and those of its
partners Dinko Tuna Farmers Pty. Ltd. (Dinko) and Snappertuna Cv. Lda. (Snappertuna) - at the coastal and offshore area
of Cape Verde Islands. The respondents contracting dates, positions, vessel assignments, duration of the contract, basic
monthly salaries, guaranteed overtime pay and vacation leave pay, as reflected in their approved contracts, 6 are summarized
below:
Artemio A. Joel S. Felipe S. Tito R.
Bo-oc Fernandez Saurin, Jr. Tamala

Date June 1, 2004 June 24, 2004 July 19, 20047 October 20,
Contracted 2004

Position Third Engineer Chief Mate Third Engineer Ordinary

Seaman

Vessel M/V "Lukoran M/V "Lukoran M/V "Lukoran M/V

Assignment DVA" DVA" Cetriri" "Lukoran
DVA"

Contract Twelve (12) Twelve (12) Twelve (12) Twelve (12)

Duration months months months months

70
 Basic
Monthly US$800.00 US$1,120.00 US$800.00 US$280.00
Salary

Guaranteed US$240.00/mo US$336.00/mo US$240.00/mo US$84.00/mo

Overtime
Pay

Vacation US$66.66 US$93.33 US$66.66 US$23.33

Leave Pay
The fishing operations for which the respondents were hired started on September 17, 2004. On November 20, 2004, the
operations abruptly stopped and did not resume. On May 25, 2005, before the respondents disembarked from the vessels,
Goran Ekstrom of Snappertuna (the respondents immediate employer on board the fishing vessels) and the respondents
executed an agreement (May 25, 2005 agreement) regarding the respondents salaries. 8 The agreement provided that the
respondents would get the full or 100% of their unpaid salaries for the unexpired portion of their pre-terminated contract in
accordance with Philippine laws. The respective amounts the respondents would receive per the May 25, 2005 agreement are:
Artemio A. Bo-oc US$6,047.99

Joel S. Fernandez US$7,767.90

Felipe S. Saurin, Jr. US$6,647.99

Tito R. Tamala US$7,047.99

On May 26, 2005, however, Poseidon and Van Doorn, with Goran of Snappertuna and Dinko Lukin of Dinko, entered into
another agreement (letter of acceptance) reducing the previously agreed amount to 50% of the respondents unpaid salaries
(settlement pay) for the unexpired portion of their contract. 9 On May 28, 2005, the respondents arrived in Manila. On June 10,
2005, the respondents received the settlement pay under their letter of acceptance. The respondents then signed a waiver and
quitclaim10 and the corresponding cash vouchers.11
On November 16, 2005, the respondents filed a complaint 12 before the Labor Arbitration Branch of the NLRC, National Capital
Region for illegal termination of employment with prayer for the payment of their salaries for the unexpired portion of their
contracts; and for non-payment of salaries, overtime pay and vacation leave pay. 13 The respondents also prayed for moral and
exemplary damages and attorneys fees.
The respondents anchored their claim on their May 25, 2005 agreement with Goran, and contended that their subsequent
execution of the waiver and quitclaim in favor of Poseidon and Van Doorn should not be given weight nor allowed to serve as
a bar to their claim. The respondents alleged that their dire need for cash for their starving families compelled and unduly
influenced their decision to sign their respective waivers and quitclaims. In addition, the complicated language employed in the
document rendered it highly suspect.
In their position paper,14 Poseidon and Van Doorn argued that the respondents had no cause of action to collect the remaining
50% of their unpaid wages. To Poseidon and Van Doorn, the respondents voluntary and knowing agreement to the settlement
pay, which they confirmed when they signed the waivers and quitclaims, now effectively bars their claim. Poseidon and Van
Doorn submitted before the LA the signed letter of acceptance, the waiver and quitclaim, and the cash vouchers to support
their stance.
In a Decision15 dated May 2006, the LA dismissed the respondents complaint for lack of merit, declaring as valid and binding
their waivers and quitclaims. The LA explained that while quitclaims executed by employees are generally frowned upon and
do not bar them from recovering the full measure of what is legally due, excepted from this rule are the waivers knowingly and
voluntarily agreed to by the employees, such as the waivers assailed by the respondents. Citing jurisprudence, the LA added
that the courts should respect, as the law between the parties, those legitimate waivers and quitclaims that represent voluntary
and reasonable settlement of employees claims. In the respondents case, this pronouncement holds more weight, as they
understood fully well the contents of their waivers and knew the consequences of their acts.
The LA did not give probative weight to the May 25, 2005 agreement considering that the entities which contracted the
respondents services - Poseidon and Van Doorn did not actively participate. Moreover, the LA noted that the respondents
signed letter of acceptance superseded this agreement. The LA likewise considered the respondents belated filing of the
complaint as a mere afterthought.
Finally, the LA dismissed the issue of illegal dismissal, noting that the respondents already abandoned this issue in their
pleadings. The respondents appealed16 the LAs decision before the NLRC.
The Ruling of the NLRC
By Resolution17 dated December 29, 2006, the NLRC affirmed in toto the LAs decision. As the LA did, the NLRC ruled that the
respondents knowing and voluntary acquiescence to the settlement and their acceptance of the payments made bind them
and effectively bar their claims. The NLRC also regarded the amounts the respondents received as settlement pay to be
71
reasonable; despite the cessation of the fishing operations, the respondents were still paid their full wages from December
2004 to January 2005 and 50% of their wages from February 2005 until their repatriation in May 2005.
On February 12, 2007, the NLRC denied18 the respondents motion for reconsideration,19 prompting them to file with the CA a
petition for certiorari20 under Rule 65 of the Rules of Court.
The Ruling of the CA
In its September 30, 2008 Decision,21 the CA granted the respondents petition and ordered Poseidon and Van Doorn to pay
the respondents the amounts tabulated below, representing the difference between the amounts they were entitled to receive
under the May 25, 2005 agreement and the amounts that they received as settlement pay:
Artemio A. Bo-oc US$3,705.00

Joel S. Fernandez US$4,633.57

Felipe S. Saurin, Jr. US$4,008.62

Tito R. Tamala US$4,454.20

In setting aside the NLRCs ruling, the CA considered the waivers and quitclaims invalid and highly suspicious. The CA noted
that the respondents in fact questioned in their pleadings the letters due execution. In contrast with the NLRC, the CA
observed that the respondents were coerced and unduly influenced into accepting the 50% settlement pay and into signing the
waivers and quitclaims because of their financial distress. The CA moreover considered the amounts stated in the May 25,
2005 agreement with Goran to be more reasonable and in keeping with Section 10 of Republic Act (R.A.) No. 8042 or the
Migrant Workers and Overseas Filipinos Act of 1995.
The CA also pointed out with emphasis that the pre-termination of the respondents employment contract was simply the result
of Van Doorns decision to stop its operations.
Finally, the CA did not consider the respondents complaint as a mere afterthought; the respondents are precisely given under
the Labor Code a three-year prescriptive period to allow them to institute such actions.
Poseidon filed the present petition after the CA denied its motion for Reconsideration 22 in the CAs February 11, 2009
Resolution.23
The Petition
Poseidons petition argues that the labor tribunals findings are not only binding but are fully supported by evidence. Poseidon
contends that the CAs application of Section 10 of R.A. No. 8042 to justify the amounts it awarded to the respondents is
misplaced, as the respondents never raised the issue of illegal dismissal before the NLRC and the CA. It claims that the
respondents, in assailing the NLRC ruling before the CA, mainly questioned the validity of the waivers and quitclaims they
signed and their binding effect on them. While the respondents raised the issue of illegal dismissal before the LA, they
eventually abandoned it in their pleadings a matter the LA even pointed out in her May 2006 Decision.
Poseidon further argues that the NLRC did not exceed its jurisdiction nor gravely abuse its discretion in deciding the case in its
favor, pointing out that the respondents raised issues pertaining to mere errors of judgment before the CA. Thus, as matters
stood, these issues did not call for the grant of a writ of certiorari as this prerogative writ is limited to the correction of errors of
jurisdiction committed through grave abuse of discretion, not errors of judgment.
Finally, Poseidon maintains that it did not illegally dismiss the respondents. Highlighting the CAs observation and the
respondents own admission in their various pleadings, Poseidon reiterates that it simply ceased its fishing operations as a
business decision in the exercise of its management prerogative.
The Case for the Respondents
The respondents point out in their comment24 that the petition raises questions of fact, which are not proper for a Rule 45
petition. They likewise point out that the petition did not specifically set forth the grounds as required under Rule 45 of the
Rules of Court. On the merits, and relying on the CA ruling, the respondents argue that Poseidon dismissed them without a
valid cause and without the observance of due process.
The Issues
At the core of this case are the validity of the respondents waivers and quitclaims and the issue of whether these should bar
their claim for unpaid salaries. At the completely legal end is the question of whether Section 10 of R.A. No. 8042 applies to
the respondents claim.
The Courts Ruling
We resolve to partly GRANT the petition.
Preliminary considerations
The settled rule is that a petition for review on certiorari under Rule 45 is limited to the review of questions of law, 25 i.e., to legal
errors that the CA may have committed in its decision,26 in contrast with the review for jurisdictional errors that we undertake in
original certiorari actions under Rule 65.27 In reviewing the legal correctness of a CA decision rendered under Rule 65 of the
Rules of Court, we examine the CA decision from the prism of whether it correctly determined the presence or absence of
grave abuse of discretion in the NLRC decision before it, and not strictly on the basis of whether the NLRC decision under

72
review is intrinsically correct.28 In other words, we have to be keenly aware that the CA undertook a Rule 65 review, not a
review on appeal, of the NLRC decision challenged before it. 29
Viewed in this light, we do not re-examine the factual findings of the NLRC and the CA, nor do we substitute our own judgment
for theirs,30 as their findings of fact are generally conclusive on this Court. We cannot touch on factual questions "except in the
course of determining whether the CA correctly ruled in determining whether or not the NLRC committed grave abuse of
discretion in considering and appreciating the factual [issues before it]." 31
On the Merits of the Case
The core issue decided by the tribunals below is the validity of the respondents waivers and quitclaims. The CA set aside the
NLRC ruling for grave abuse of discretion; the CA essentially found the waivers and quitclaims unreasonable and involuntarily
executed, and could not have superseded the May 25, 2005 agreement. In doing so, and in giving weight to the May 25, 2005
agreement, the CA found justification under Section 10 of R.A. No. 8042.
The respondents are not entitled to
the unpaid portion of their salaries
under Section 10 of R.A. No. 8042
The application of Section 10 of R.A. No. 8042 presumes a finding of illegal dismissal. The pertinent portion of Section 10 of
R.A. No. 8042 reads:
SEC. 10. MONEY CLAIMS. x x x
xxxx
In case of termination of overseas employment without just, valid or authorized cause as defined by law or contract. [emphasis
and italics ours]
A plain reading of this provision readily shows that it applies only to cases of illegal dismissal or dismissal without any just,
authorized or valid cause and finds no application in cases where the overseas Filipino worker was not illegally
dismissed.32 We found the occasion to apply this rule in International Management Services v. Logarta, 33where we held that
Section 10 of R.A. No. 8042 applies only to an illegally dismissed overseas contract worker or a worker dismissed from
overseas employment without just, valid or authorized cause.34
Whether the respondents in the present case were illegally dismissed is a question we resolve in the negative for three
reasons.
First, the respondents references to illegal dismissal in their several pleadings were mere cursory declarations rather than a
definitive demand for redress. The LAs May 2006 Decision clearly enunciated this point when she dismissed the respondents
claim of illegal dismissal "as complainants themselves have lost interest to pursue the same." 35
Second, the respondents, in their motion for reconsideration filed before the NLRC, positively argued that the fishing
operations for which they were hired ceased as a result of the business decision of Van Doorn and of its partners;36 thus,
negating by omission any claim for illegal dismissal.
Third, the CA, in its assailed decision, likewise made the very same inference that the fishing operations ceased as a result
of a business decision of Van Doorn and of its partners. In other words, the manner of dismissal was not a contested issue;
the records clearly showed that the respondents employment was terminated because Van Doorn and its partners simply
decided to stop their fishing operations in the exercise of their management prerogative, which prerogative even our labor laws
recognize.
We confirm in this regard that, by law and subject to the States corollary right to review its determination,37management has
the right to regulate the business and control its every aspect.38 Included in this management right is the freedom to close or
cease its operations for any reason, as long as it is done in good faith and the employer faithfully complies with the substantive
and procedural requirements laid down by law and jurisprudence. 39 Article 283 of our Labor Code provides:
Art. 283. Closure of establishment and reduction of personnel. - The employer may also terminate the employment of any
employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions
of this Title, by serving a written notice on the workers and the [Department of Labor and Employment] at least one (1) month
before the intended date thereof. x x x In case of retrenchment to prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall
be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered as one (1) whole year. [Italics, underscores and emphases ours]
This provision applies in the present case as under the contract the employer and the workers signed and submitted to the
Philippine Overseas Employment Agency (POEA), the Philippine labor law expressly applies.
This legal reality is reiterated under Section 18-B, paragraph 2,40 in relation with Section 2341 of the POEA Standard
Employment Contract (POEA-SEC) (which is deemed written into every overseas employment contract) which recognizes the
validity of the cessation of the business operations as a valid ground for the termination of an overseas employment. This
recognition is subject to compliance with the following requisites:
1. The decision to close or cease operations must be bona fide in character;

73
 2. Service of written notice on the affected employees and on the Department of Labor and Employment (DOLE) at
least one (1) month prior to the effectivity of the termination; and
3. Payment to the affected employees of termination or separation pay equivalent to one (1) month pay or at least
one-half (1/2) month pay for every year of service, whichever is higher. 42
We are sufficiently convinced, based on the records, that Van Doorns termination of the respondents employment arising
from the cessation of its fishing operations complied with the above requisites and is thus valid.
We observe that the records of the case do not show that Van Doorn ever intended to defeat the respondents rights under our
labor laws when it undertook its decision to close its fishing operations on November 20, 2004. From this date until six months
after, the undertaking was at a complete halt. That Van Doorn and its partners might have suffered losses during the six-month
period is not entirely remote. Yet, Van Doorn did not immediately repatriate the respondents or hire another group of seafarers
to replace the respondents in a move to resume its fishing operations. Quite the opposite, the respondents, although they were
no longer rendering any service or doing any work, still received their full salary for November 2004 up to January 2005. In
fact, from February 2005 until they were repatriated to the Philippines in May 2005, the respondents still received wages, albeit
half of their respective basic monthly salary rate. Had Van Doorn intended to stop its fishing operations simply to terminate the
respondents employment, it would have immediately repatriated the respondents to the Philippines soon after, in order that it
may hire other seafarers to replace them a possibility that did not take place.
Considering therefore the absence of any indication that Van Doorn stopped its fishing operations to circumvent the protected
rights of the respondents, our courts have no basis to question the reason that might have impelled Van Doorn to reach its
closure decision.43
In sum, since Poseidon ceased its fishing operations in the valid exercise of its management prerogative, Section 10 of R.A.
No. 8042 finds no application. Consequently, we find that the CA erroneously imputed grave abuse of discretion on the part of
the NLRC in not applying Section 10 of R.A. No. 8042 and in awarding the respondents the unpaid portion of their full salaries.
The waivers and quitclaims signed by
the respondents are valid and
binding
We cannot support the CAs act of giving greater evidentiary weight to the May 25, 2005 agreement over the respondents
waivers and quitclaims; not only do we find the latter documents to be reasonable and duly executed, we also find that they
superseded the May 25, 2005 agreement.
Generally, this Court looks with disfavor at quitclaims executed by employees for being contrary to public policy. 44Where the
person making the waiver, however, has done so voluntarily, with a full understanding of its terms and with the payment of
credible and reasonable consideration, we have no option but to recognize the transaction to be valid and binding. 45
We find the requisites for the validity of the respondents quitclaim present in this case. We base this conclusion on the
following observations:
First, the respondents acknowledged in their various pleadings, as well as in the very document denominated as "waiver and
quitclaim," that they voluntarily signed the document after receiving the agreed settlement pay.
Second, the settlement pay is reasonable under the circumstances, especially when contrasted with the amounts to which
they were respectively entitled to receive as termination pay pursuant to Section 23 of the POEA-SEC and Article 283 of the
Labor Code. The comparison of these amounts is tabulated below:

Settlement Pay Termination Pay

Joel S. Fernandez US$3134.33 US$1120.00

Artemio A. Bo-oc US$2342.37 US$800.00

Felipe S. Saurin, Jr. US$2639.37 US$800.00

Tito R. Tamala US$2593.79 US$280.00

Thus, the respondents undeniably received more than what they were entitled to receive under the law as a result of the
cessation of the fishing operations.
Third, the contents of the waiver and quitclaim are clear, unequivocal and uncomplicated so that the respondents could fully
understand the import of what they were signing and of its consequences. 46 Nothing in the records shows that what they
received was different from what they signed for.
Fourth, the respondents are mature and intelligent individuals, with college degrees, and are far from the naive and unlettered
individuals they portrayed themselves to be.
Fifth, while the respondents contend that they were coerced and unduly influenced in their decision to accept the settlement
pay and to sign the waivers and quitclaims, the records of the case do not support this claim. The respondents claims that
they were in "dire need for cash" and that they would not be paid anything if they would not sign do not constitute the coercion
nor qualify as the undue influence contemplated by law sufficient to invalidate a waiver and quitclaim, 47 particularly in the
74
circumstances attendant in this case. The records show that the respondents, along with their other fellow seafarers, served
as each others witnesses when they agreed and signed their respective waivers and quitclaims.
Sixth, the respondents voluntary and knowing conformity to the settlement pay was proved not only by the waiver and
quitclaim, but by the letters of acceptance and the vouchers evidencing payment. With these documents on record, the burden
shifts to the respondents to prove coercion and undue influence other than through their bare self-serving claims. No such
evidence appeared on record at any stage of the proceedings.
In these lights and in the absence of any evidence showing that fraud, deception or misrepresentation attended the execution
of the waiver and quitclaim, we are sufficiently convinced that a valid transaction took place. Consequently, we find that the CA
erroneously imputed grave abuse of discretion in misreading the submitted evidence, and in relying on the May 25, 2005
agreement and on Section 10 of R.A. No. 8042.
The respondents are entitled to
nominal damages for failure of Van
Doorn to observe the procedural
requisites for the termination of
employment under Article 283 of the
Labor Code
As a final note, we observe that while Van Doorn has a just and valid cause to terminate the respondents employment, it
failed to meet the requisite procedural safeguards provided under Article 283 of the Labor Code. In the termination of
employment under Article 283, Van Doorn, as the employer, is required to serve a written notice to the respondents and to the
DOLE of the intended termination of employment at least one month prior to the cessation of its fishing operations. Poseidon
could have easily filed this notice, in the way it represented Van Doorn in its dealings in the Philippines. While this omission
does not affect the validity of the termination of employment, it subjects the employer to the payment of indemnity in the form
of nominal damages.48
Consistent with our ruling in Jaka Food Processing Corporation v. Pacot, 49 we deem it proper to award the respondents
nominal damages in the amount of P30,000.00 as indemnity for the violation of the required statutory procedures. Poseidon
shall be solidarily liable to the respondents for the payment of these damages.50
WHEREFORE, in view of these considerations, we hereby GRANT in PART the petition and accordingly REVERSE and SET
ASIDE the Decision dated September 30, 2008 and the Resolution dated February 11, 2009 of the Court of Appeals in CA-
G.R. SP No. 98783. We REINSTATE the Resolution dated December 29, 2006 of the National Labor Relations Commission
with the MODIFICATION that petitioner Poseidon International Maritime Services, Inc. is ordered to pay each of the
respondents nominal damages in the amount of P30,000.00. Costs against the respondents.
SO ORDERED.

G.R. No. 169207 March 25, 2010

WPP MARKETING COMMUNICATIONS, INC., JOHN STEEDMAN, MARK WEBSTER, and NOMINADA
LANSANG, Petitioners,
vs.
JOCELYN M. GALERA, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 169239
JOCELYN M. GALERA, Petitioner,
vs.
WPP MARKETING COMMUNICATIONS, INC., JOHN STEEDMAN, MARK WEBSTER, and NOMINADA
LANSANG, Respondents.
DECISION
CARPIO, Acting C.J.:
The Case
G.R. Nos. 169207 and 169239 are petitions for review1 assailing the Decision2 promulgated on 14 April 2005 as well as the
Resolution3 promulgated on 1 August 2005 of the Court of Appeals (appellate court) in CA-G.R. SP No. 78721. The appellate
court granted and gave due course to the petition filed by Jocelyn M. Galera (Galera). The appellate courts decision reversed
and set aside that of the National Labor Relations Commission (NLRC), and directed WPP Marketing Communications, Inc.
(WPP) to pay Galera backwages, separation pay, unpaid housing benefit, unpaid personal and accident insurance benefits,
cash value under the companys pension plan, 30 days paid holiday benefit, moral damages, exemplary damages, 10% of the
total judgment award as attorneys fees, and costs of the suit.
The Facts
The appellate court narrated the facts as follows:
Petitioner is Jocelyn Galera (GALERA), a [sic] American citizen who was recruited from the United States of America by
private respondent John Steedman, Chairman-WPP Worldwide and Chief Executive Officer of Mindshare, Co., a corporation
75
based in Hong Kong, China, to work in the Philippines for private respondent WPP Marketing Communications, Inc. (WPP), a
corporation registered and operating under the laws of Philippines. GALERA accepted the offer and she signed an
Employment Contract entitled "Confirmation of Appointment and Statement of Terms and Conditions" (Annex B to Petition for
Certiorari). The relevant portions of the contract entered into between the parties are as follows:
Particulars:

Name : Jocelyn M. Galera

Address : 163 Mediterranean Avenue

Hayward, CA 94544

Position : Managing Director

Mindshare Philippines

Annual Salary : Peso 3,924,000

Start Date : 1 September 1999

Commencement Date : 1 September 1999

(for continuous service)

Office : Mindshare Manila

6. Housing Allowance
The Company will provide suitable housing in Manila at a maximum cost (including management fee and other
associated costs) of Peso 576,000 per annum.
7. Other benefits.
The Company will provide you with a fully maintained company car and a driver.
The Company will continue to provide medical, health, life and personal accident insurance plans, to an amount not
exceeding Peso 300,000 per annum, in accordance with the terms of the respective plans, as provided by JWT
Manila.
The Company will reimburse you and your spouse one way business class air tickets from USA to Manila and the
related shipping and relocation cost not exceeding US$5,000 supported by proper documentation. If you leave the
Company within one year, you will reimburse the Company in full for all costs of the initial relocation as described
therein.
You will participate in the JWT Pension Plan under the terms of this plan, the Company reserves the right to transfer
this benefit to a Mindshare Pension Plan in the future, if so required.
8. Holidays
You are entitled to 20 days paid holiday in addition to public holidays per calendar year to be taken at times agreed
with the Company. Carry-over of unused accrued holiday entitlement into a new holiday year will not normally be
allowed. No payment will be made for holidays not taken. On termination of your employment, unless you have been
summarily dismissed, you will be entitled to receive payment for unused accrued holiday pay. Any holiday taken in
excess of your entitlement shall be deducted from your final salary payment.
9. Leave Due to Sickness or Injury
The maximum provision for sick leave is 15 working days per calendar year.
12. Invention/Know-How
Any discovery, invention, improvement in procedure, trademark, trade name, designs, copyrights or get-ups made,
discovered or created by you during the continuance of your employment hereunder relating to the business of the
Company shall belong to and shall be the absolute property of the Company. If required to do so by the Company
(whether during or after the termination of your employment) you shall at the expense of the company execute all
instruments and do all things necessary to vest in ownership for all other rights, title and interests (including any
registered rights therein) in such discovery, invention, improvement in procedure, trademark, trade name, design,
copyright or get-up in the Company (or its Nominee) absolutely and as sole beneficial owner.
14. Notice.
The first three months of your employment will be a trial period during which either you or the Company may
terminate your employment on one weeks notice. If at the end of that period, the Company is satisfied with your
performance, you will become a permanent employee. Thereafter you will give Company and the Company will give
you three months notice of termination of employment. The above is always subject to the following: (1) the
Companys right to terminate the contract of employment on no or short notice where you are in breach of contract;
(2) your employment will at any event cease without notice on your retirement date when you are 60 years of age.
76
 SIGNED JOCELYN M. GALERA 8-16-99
Date of Birth [sic] 12-25-55
Employment of GALERA with private respondent WPP became effective on September 1, 1999 solely on the instruction of the
CEO and upon signing of the contract, without any further action from the Board of Directors of private respondent WPP.
Four months had passed when private respondent WPP filed before the Bureau of Immigration an application for petitioner
GALERA to receive a working visa, wherein she was designated as Vice President of WPP. Petitioner alleged that she was
constrained to sign the application in order that she could remain in the Philippines and retain her employment.
Then, on December 14, 2000, petitioner GALERA alleged she was verbally notified by private respondent STEEDMAN that
her services had been terminated from private respondent WPP. A termination letter followed the next day. 4
On 3 January 2001, Galera filed a complaint for illegal dismissal, holiday pay, service incentive leave pay, 13th month pay,
incentive plan, actual and moral damages, and attorneys fees against WPP and/or John Steedman (Steedman), Mark
Webster (Webster) and Nominada Lansang (Lansang). The case was docketed as NLRC NCR Case No. 30-01-00044-01.
The Labor Arbiters Ruling
In his Decision dated 31 January 2002, Labor Arbiter Edgardo M. Madriaga (Arbiter Madriaga) held WPP, Steedman, Webster,
and Lansang liable for illegal dismissal and damages. Arbiter Madriaga stated that Galera was not only illegally dismissed but
was also not accorded due process. Arbiter Madriaga explained, thus:
[WPP] failed to observe the two-notice rule. [WPP] through respondent Steedman for a five (5) minute meeting on December
14, 2000 where she was verbally told that as of that day, her employment was being terminated. [WPP] did not give [Galera]
an opportunity to defend herself and explain her side. [Galera] was even prohibited from reporting for work that day and was
told not to report for work the next day as it would be awkward for her and respondent Steedman to be in the same premises
after her termination. [WPP] only served [Galera] her written notice of termination only on 15 December 2001, one day after
she was verbally apprised thereof.
The law mandates that the dismissal must be properly done otherwise, the termination is gravely defective and may be
declared unlawful as we hereby hold [Galeras] dismissal to be illegal and unlawful. 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 and the burden is
on the employer to prove that the termination was for a valid or authorized cause. The law mandates that both the substantive
and procedural aspects of due process should be observed. The facts clearly show that respondents were remiss on both
aspects. Perforce, the dismissal is void and unlawful.
xxxx
Considering the work performance and achievements of [Galera] for the year 2000, we do not find any basis for the alleged
claim of incompetence by herein respondents. Had [Galera] been really incompetent, she would not have been able to
generate enormous amounts [sic] of revenues and business for [WPP]. She also appears to be well liked as a leader by her
subordinates, who have come forth in support of [Galera]. These facts remain undisputed by respondents.
A mans job being a property right duly protected by our laws, an employer who deprives an employee [of] the right to defend
himself is liable for damages consistent with Article 32 of the Civil Code. To allow an employer to terminate the employment of
his worker based merely on allegations without proof places the [employee] in an uncertain situation. The unflinching rule in
illegal dismissal cases is that the employer bears the burden of proof.
In the instant case, respondents have not been able to muster evidence to counter [Galeras] allegations. [Galeras] allegations
remain and stand absent proof from respondents rebutting them. Hence, our finding of illegal dismissal against respondents
who clearly have conspired in bad faith to deprive [Galera] of her right to substantive and procedural due process. 5
The dispositive portion of Arbiter Madriagas decision reads as follows:
WHEREFORE, premises considered, we hereby hold herein respondents liable for illegal dismissal and damages, and award
to [Galera], by virtue of her expatriate status, the following:
a. Reinstatement without loss of seniority rights.
b. Backwages amounting to $120,000 per year at P50.00 to US $1 exchange rate, 13th month pay, transportation
and housing benefits.
c. Remuneration for business acquisitions amounting to Two Million Eight Hundred Fifty Thousand Pesos
(P2,850,000.00) and Media Plowback Incentive equivalent to Three Million Pesos (P3,000,000.00) or a total of not
less than One Hundred Thousand US Dollars ($100,000.00).
d. US Tax Protection of up to 35% coverage equivalent to Thirty Eight Thousand US Dollars ($38,000).
e. Moral damages including implied defamation and punitive damages equivalent to Two Million Dollars
(US$2,000,000.00).
f. Exemplary damages equivalent to One Million Dollars ($1,000,000.00).
g. Attorneys fees of 10% of the total award herein.
SO ORDERED.6
The Ruling of the NLRC

77
The First Division of the NLRC reversed the ruling of Arbiter Madriaga. In its Decision 7 promulgated on 19 February 2003, the
NLRC stressed that Galera was WPPs Vice-President, and therefore, a corporate officer at the time she was removed by the
Board of Directors on 14 December 2000. The NLRC stated thus:
It matters not that her having been elected by the Board to an added position of being a member of the Board of Directors did
not take effect as her May 31, 2000 election to such added position was conditioned to be effective upon approval by SEC of
the Amended By-Laws, an approval which took place only in February 21, 2001, i.e., after her removal on December 14, 2000.
What counts is, at the time of her removal, she continued to be WPPs Vice-President, a corporate officer, on hold over
capacity.
Ms. Galeras claim that she was not a corporate officer at the time of her removal because her May 31, 2000 election as Vice
President for Media, under WPPs Amended By-Laws, was subject to the approval by the Securities and Exchange
Commission and that the SEC approved the Amended By-Laws only in February 2001. Such claim is unavailing. Even if Ms.
Galeras subsequent election as Vice President for Media on May 31, 2000 was subject to approval by the SEC, she continued
to hold her previous position as Vice President under the December 31, 1999 election until such time that her successor is
duly elected and qualified. It is a basic principle in corporation law, which principle is also embodied in WPPs by-laws, that a
corporate officer continues to hold his position as such until his successor has been duly elected and qualified. When Ms.
Galera was elected as Vice President on December 31, 1999, she was supposed to have held that position until her successor
has been duly elected and qualified. The record shows that Ms. Galera was not replaced by anyone. She continued to be Vice
President of WPP with the same operational title of Managing Director for Mindshare and continued to perform the same
functions she was performing prior to her May 31, 2000 election.
In the recent case of Dily Dany Nacpil v. International Broadcasting Corp., the definition of corporate officer for purposes of
intra-corporate controversy was even broadened to include a Comptroller/Assistant Manager who was appointed by the
General Manager, and whose appointment was later approved by the Board of Directors. In this case, the position of
comptroller was not even expressly mentioned in the By-Laws of the corporation, and yet, the Supreme Court found him to be
a corporate officer. The Court ruled that
(since) petitioners appointment as comptroller required the approval and formal action of IBCs Board of Directors to become
valid, it is clear therefore that petitioner is a corporate officer whose dismissal may be the subject of a controversy cognizable
by the SEC... Had the petitioner been an ordinary employee, such board action would not have been required.
Such being the case, the imperatives of law require that we hold that the Arbiter below had no jurisdiction over Galeras case
as, again, she was a corporate officer at the time of her removal.
WHEREFORE, the appeals of petitioner from the Decision of Labor Arbiter Edgardo Madriaga dated January 31, 2002 and his
Order dated March 21, 2002, respectively, are granted. The January 31, 2002 decision of the Labor Arbiter is set aside for
being null and void and the temporary restraining order we issued on April 24, 2002 is hereby made permanent. The complaint
of Jocelyn Galera is dismissed for lack of jurisdiction.
SO ORDERED.8
In its Resolution9 promulgated on 4 June 2003, the NLRC further stated:
We are fully convinced that this is indeed an intra-corporate dispute which is beyond the labor arbiters jurisdiction. These
consolidated cases clearly [involve] the relationship between a corporation and its officer and is properly within the definition of
an intra-corporate relationship which, under P.D. No. 902-A, is within the jurisdiction of the SEC (now the commercial courts).
Such being the case, We are constrained to rule that the Labor Arbiter below had no jurisdiction over Ms. Galeras complaint
for illegal dismissal.
WHEREFORE, the motion for reconsideration filed by Ms. Galera is hereby denied for lack of merit. We reiterate our February
19, 2003 Decision setting aside the Labor Arbiters Decision dated January 31, 2002 for being null and void.
SO ORDERED.10
Galera assailed the NLRCs decision and resolution before the appellate court and raised a lone assignment of error.
The National Labor Relations Commission acted with grave abuse of discretion amounting to lack or excess of jurisdiction
when it reversed the decision of the Labor Arbiter not on the merits but for alleged lack of jurisdiction. 11
The Decision of the Appellate Court
The appellate court reversed and set aside the decision of the NLRC. The appellate court ruled that the NLRCs dismissal of
Galeras appeal is not in accord with jurisprudence. A person could be considered a "corporate officer" only if appointed as
such by a corporations Board of Directors, or if pursuant to the power given them by either the Articles of Incorporation or the
By-Laws.12
The appellate court explained:
A corporation, through its board of directors, could only act in the manner and within the formalities, if any, prescribed by its
charter or by the general law. If the action of the Board is ultra vires such is motu proprio void ab initio and without legal effect
whatsoever. The by-laws of a corporation are its own private laws which substantially have the same effect as the laws of the
corporation. They are, in effect, written into the charter. In this sense, they beome part of the fundamental law of the
corporation with which the corporation and its directors and officers must comply.

78
Even if petitioner GALERA had been appointed by the Board of Directors on December 31, 1999, private respondent WPPs
By-Laws provided for only one Vice-President, a position already occupied by private respondent Webster. The same defect
also stains the Board of Directors appointment of petitioner GALERA as a Director of the corporation, because at that time the
By-Laws provided for only five directors. In addition, the By-laws only empowered the Board of Directors to appoint a general
manager and/or assistant general manager as corporate officers in addition to a chairman, president, vice-president and
treasurer. There is no mention of a corporate officer entitled "Managing Director."
Hence, when the Board of Directors enacted the Resolutions of December 31, 1999 and May 31, 2000, it exceeded its
authority under the By-Laws and are, therefore, ultra vires. Although private respondent WPP sought to amend these defects
by filing Amended By-Laws with the Securities and Exchange Commission, they did not validate the ultra vires resolutions
because the Amended By-Laws did not take effect until February 16, 2001, when it was approved by the SEC. Since by-laws
operate only prospectively, they could not validate the ultra viresresolutions.13
The dispositive portion of the appellate courts decision reads:
WHEREFORE, the petition is hereby GRANTED and GIVEN DUE COURSE. The assailed Decision of the National Labor
Relations Commission is hereby REVERSED and SET ASIDE and a new one is entered DIRECTING private respondent WPP
MARKETING COMMUNICATIONS, INC. to:
1. Pay [Galera] backwages at the peso equivalent of US$120,000.00 per annum plus three months from her
summary December 14, 2000 dismissal up to March 14, 2001 because three months notice is required under the
contract, plus 13th month pay, bonuses and general increases to which she would have been normally entitled, had
she not been dismissed and had she not been forced to stop working, including US tax protection of up to 35%
coverage which she had been enjoying as an expatriate;
2. Pay x x x GALERA the peso equivalent of US$185,000.00 separation pay (1 years);
3. Pay x x x GALERA any unpaid housing benefit for the 18 months of her employment in the service to the
Company as an expatriate in Manila, Philippines at the rate of P576,000 per year; unpaid personal and accident
insurance benefits for premiums at the rate of P300,000.00 per year; whatever cash value in the JWT Pension Plan;
and thirty days paid holiday benefit under the contract for the 1 calendar years with the Company;
4. Pay x x x GALERA the reduced amount of PhP2,000,000.00 as moral damages;
5. Pay [Galera] the reduced amount of PhP1,000,000.00 as exemplary damages;
6. Pay [Galera] an amount equivalent to 10% of the judgment award as attorneys fees;
7. Pay the cost of the suit.
SO ORDERED.14
Respondents filed a motion for reconsideration on 5 May 2005. Galera filed a motion for partial reconsideration and/or
clarification on the same date. The appellate court found no reason to revise or reverse its previous decision and subsequently
denied the motions in a Resolution promulgated on 1 August 2005.15
The Issues
WPP, Steedman, Webster, and Lansang raised the following grounds in G.R. No. 169207:
I. The Court of Appeals seriously erred in ruling that the NLRC has jurisdiction over [Galeras] complaint because she
was not an employee. [Galera] was a corporate officer of WPP from the beginning of her term until her removal from
office.
II. Assuming arguendo that the Court of Appeals correctly ruled that the NLRC has jurisdiction over [Galeras]
complaint, it should have remanded the case to the Labor Arbiter for reception of evidence on the merits of the case.
III. [Galera] is an alien, hence, can never attain a regular or permanent working status in the Philippines.
IV. [Galera] is not entitled to recover backwages, other benefits and damages from WPP. 16
On the other hand, in G.R. No. 169239, Galera raised the following grounds in support of her petition:
The CA decision should be consistent with Article 279 of the Labor Code and applicable jurisprudence, that full backwages
and separation pay (when in lieu of reinstatement), should be reckoned from time of dismissal up to time of reinstatement (or
payment of separation pay, in case separation instead of reinstatement is awarded).
Accordingly, petitioner Galera should be awarded full backwages and separation pay for the period from 14 December 2000
until the finality of judgment by the respondents, or, at the very least, up to the promulgation date of the CA decision.
The individual respondents Steedman, Webster and Lansang must be held solidarily liable with respondent WPP for the
wanton and summary dismissal of petitioner Galera, to be consistent with law and jurisprudence as well as the specific finding
of the CA of bad faith on the part of respondents.17
This Court ordered the consolidation of G.R. Nos. 169207 and 169239 in a resolution dated 16 January 2006. 18
The Ruling of the Court
In its consolidated comment, the Office of the Solicitor General (OSG) recommended that (A) the Decision dated 14 April 2005
of the appellate court finding (1) Galera to be a regular employee of WPP; (2) the NLRC to have jurisdiction over the present
case; and (3) WPP to have illegally dismissed Galera, be affirmed; and (B) the case remanded to the Labor Arbiter for the
computation of the correct monetary award. Despite the OSGs recommendations, we see that Galeras failure to seek an

79
employment permit prior to her employment poses a serious problem in seeking relief before this Court. Hence, we settle the
various issues raised by the parties for the guidance of the bench and bar.
Whether Galera is an Employee or a Corporate Officer
Galera, on the belief that she is an employee, filed her complaint before the Labor Arbiter. On the other hand, WPP,
Steedman, Webster and Lansang contend that Galera is a corporate officer; hence, any controversy regarding her dismissal is
under the jurisdiction of the Regional Trial Court. We agree with Galera.
Corporate officers are given such character either by the Corporation Code or by the corporations by-laws. Under Section 25
of the Corporation Code, the corporate officers are the president, secretary, treasurer and such other officers as may be
provided in the by-laws.19 Other officers are sometimes created by the charter or by-laws of a corporation, or the board of
directors may be empowered under the by-laws of a corporation to create additional offices as may be necessary.
An examination of WPPs by-laws resulted in a finding that Galeras appointment as a corporate officer (Vice-President with
the operational title of Managing Director of Mindshare) during a special meeting of WPPs Board of Directors is an
appointment to a non-existent corporate office. WPPs by-laws provided for only one Vice-President. At the time of Galeras
appointment on 31 December 1999, WPP already had one Vice-President in the person of Webster. Galera cannot be said to
be a director of WPP also because all five directorship positions provided in the by-laws are already occupied. Finally, WPP
cannot rely on its Amended By-Laws to support its argument that Galera is a corporate officer. The Amended By-Laws
provided for more than one Vice-President and for two additional directors. Even though WPPs stockholders voted for the
amendment on 31 May 2000, the SEC approved the amendments only on 16 February 2001. Galera was dismissed on 14
December 2000. WPP, Steedman, Webster, and Lansang did not present any evidence that Galeras dismissal took effect
with the action of WPPs Board of Directors.1avvphi1
The appellate court further justified that Galera was an employee and not a corporate officer by subjecting WPP and Galeras
relationship to the four-fold test: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employers power to control the employee with respect to the means and methods by which the work is
to be accomplished. The appellate court found:
x x x Sections 1 and 4 of the employment contract mandate where and how often she is to perform her work; sections 3, 5, 6
and 7 show that wages she receives are completely controlled by x x x WPP; and sections 10 and 11 clearly state that she is
subject to the regular disciplinary procedures of x x x WPP.
Another indicator that she was a regular employee and not a corporate officer is Section 14 of the contract, which clearly
states that she is a permanent employee not a Vice-President or a member of the Board of Directors.
xxxx
Another indication that the Employment Contract was one of regular employment is Section 12, which states that the rights to
any invention, discovery, improvement in procedure, trademark, or copyright created or discovered by petitioner GALERA
during her employment shall automatically belong to private respondent WPP. Under Republic Act 8293, also known as the
Intellectual Property Code, this condition prevails if the creator of the work subject to the laws of patent or copyright is an
employee of the one entitled to the patent or copyright.
Another convincing indication that she was only a regular employee and not a corporate officer is the disciplinary procedure
under Sections 10 and 11 of the Employment Contract, which states that her right of redress is through Mindshares Chief
Executive Officer for the Asia-Pacific. This implies that she was not under the disciplinary control of private respondent WPPs
Board of Directors (BOD), which should have been the case if in fact she was a corporate officer because only the Board of
Directors could appoint and terminate such a corporate officer.
Although petitioner GALERA did sign the Alien Employment Permit from the Department of Labor and Employment and the
application for a 9(g) visa with the Bureau of Immigration both of which stated that she was private respondents WPP Vice
President these should not be considered against her. Assurming arguendo that her appointment as Vice-President was a
valid act, it must be noted that these appointments occurred afater she was hired as a regular employee. After her
appointments, there was no appreciable change in her duties. 20
Whether the Labor Arbiter and the NLRC
have jurisdiction over the present case
Galera being an employee, then the Labor Arbiter and the NLRC have jurisdiction over the present case. Article 217 of the
Labor Code provides:
Jurisdiction of Labor Arbiters and the Commission. (a) Except as otherwise provided under this Code, the Labor Arbiters
shall have original and exclusive jurisdiction to hear and decide x x x 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;

80
 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 other 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.
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.
(c) Cases arising from the interpretation of collective bargaining agreements and those arising from the
interpretation or enforcement of company personnel policies shall be disposed of by the Labor Arbiter by
referring the same to the grievance machinery and voluntary arbitration as may be provided in said
agreements.
In contrast, Section 5.2 of Republic Act No. 8799, or the Securities Regulation Code, states:
The Commissions jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is hereby
transferred to the courts of general jurisdiction or the appropriate Regional Trial Court: Provided, That the Supreme Court in
the exercise of its authority may designate the Regional Trial Court branches that shall exercise jurisdiction over these cases.
The Commission shall retain jurisdiction over pending cases involving intra-corporate disputes submitted for final resolution
which should be resolved within one year from the enactment of this Code. The Commission shall retain jurisdiction over
pending suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally disposed.
The pertinent portions of Section 5 of Presidential Decree No. 902-A, mentioned above, states:
b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members
or associates; between any or all of them and the corporation, partnership or association of which they are
stockholders, members or associates, respectively; and between such corporation, partnership or association and the
state insofar as it concerns their individual franchise or right to exist as such entity;
c) Controversies in the election or appointments of directors, trustees, officers or managers of such corporations,
partnerships or associations.
Whether WPP illegally dismissed Galera
WPPs dismissal of Galera lacked both substantive and procedural due process.
Apart from Steedmans letter dated 15 December 2000 to Galera, WPP failed to prove any just or authorized cause for
Galeras dismissal. Steedmans letter to Galera reads:
The operations are currently in a shamble. There is lack of leadership and confidence in your abilities from within, our agency
partners and some clients.
Most of the staff I spoke with felt they got more guidance and direction from Minda than yourself. In your role as Managing
Director, that is just not acceptable.
I believe your priorities are mismanaged. The recent situation where you felt an internal strategy meeting was more important
than a new business pitch is a good example.
You failed to lead and advise on the two new business pitches. In both cases, those involved sort (sic) Mindas input. As I
discussed with you back in July, my directive was for you to lead and review all business pitches. It is obvious [that] confusion
existed internally right up until the day of the pitch.
The quality output is still not to an acceptable standard, which was also part of my directive that you needed to focus on back
in July.
I do not believe you understand the basic skills and industry knowledge required to run a media special operation. 21
WPP, Steedman, Webster, and Lansang, however, failed to substantiate the allegations in Steedmans letter. Galera, on the
other hand, presented documentary evidence22 in the form of congratulatory letters, including one from Steedman, which
contents are diametrically opposed to the 15 December 2000 letter.
The law further requires that the employer must furnish the worker sought to be dismissed with two written notices before
termination of 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) the subsequent notice which informs the employee of the employers decision to
dismiss him. Failure to comply with the requirements taints the dismissal with illegality. 23 WPPs acts clearly show that Galeras
dismissal did not comply with the two-notice rule.
Whether Galera is entitled to the monetary award
WPP, Steedman, Webster, and Lansang argue that Galera is not entitled to backwages because she is an alien. They further
state that there is no guarantee that the Bureau of Immigration and the Department of Labor and Employment will continue to
grant favorable rulings on the applications for a 9(g) visa and an Alien Employment Permit after the expiry of the validity of
Galeras documents on 31 December 2000. WPPs argument is a circular argument, and assumes what it attempts to prove.
Had WPP not dismissed Galera, there is no doubt in our minds that WPP would have taken action for the approval of
documents required for Galeras continued employment.
This is Galeras dilemma: Galera worked in the Philippines without a proper work permit but now wants to claim employees
benefits under Philippine labor laws.
81
Employment of GALERA with private respondent WPP became effective on September 1, 1999 solely on the instruction
of the CEO and upon signing of the contract, without any further action from the Board of Directors of private respondent WPP.
Four months had passed when private respondent WPP filed before the Bureau of Immigration an application for
petitioner GALERA to receive a working visa, wherein she was designated as Vice President of WPP. Petitioner alleged
that she was constrained to sign the application in order that she could remain in the Philippines and retain her employment. 24
The law and the rules are consistent in stating that the employment permit must be acquired prior to employment. The Labor
Code states: "Any alien seeking admission to the Philippines for employment purposes and any domestic or foreign employer
who desires to engage an alien for employment in the Philippines shall obtain an employment permit from the Department of
Labor."25 Section 4, Rule XIV, Book 1 of the Implementing Rules and Regulations provides:
Employment permit required for entry. No alien seeking employment, whether as a resident or non-resident, may enter the
Philippines without first securing an employment permit from the Ministry. If an alien enters the country under a non-working
visa and wishes to be employed thereafter, he may only be allowed to be employed upon presentation of a duly approved
employment permit.
Galera cannot come to this Court with unclean hands. To grant Galeras prayer is to sanction the violation of the Philippine
labor laws requiring aliens to secure work permits before their employment. We hold that the status quo must prevail in the
present case and we leave the parties where they are. This ruling, however, does not bar Galera from seeking relief from other
jurisdictions.
WHEREFORE, we PARTIALLY GRANT the petitions in G.R. Nos. 169207 and 169239. We SET ASIDE the Decision of the
Court of Appeals promulgated on 14 April 2005 as well as the Resolution promulgated on 1 August 2005 in CA-G.R. SP No.
78721.
SO ORDERED.

G.R. No. 191455 March 12, 2014

DREAMLAND HOTEL RESORT and WESTLEY J. PRENTICE, Petitioners,
vs.
STEPHEN B. JOHNSON, Respondent.
DECISION
REYES, J.:
Before the Court is a Petition for Review on Certiorari 1 assailing the December 14, 20092 and February 11, 20103Resolutions
of the Court of Appeals (CA) in CA-G.R. SP No. 111693 which dismissed outright the petition for certiorari on technical
grounds.
Dreamland Hotel Resort (Dreamland) and its President, Westley J. Prentice (Prentice) (petitioners) alleged the following facts
in the instant petition:
9. Dreamland is a corporation duly registered with the Securities and Exchange Commission on January 15, 2003 to exist for a
period of fifty [50] years with registration number SEC A 1998-6436. Prentice is its current President and Chief Executive
Officer. It is engaged in the hotel, restaurant and allied businesses. Dreamland is presently undertaking operations of its
business at National Highway, Sto. Tomas, Matain Subic, Zambales, 2209.
10. Respondent Stephen B. Johnson is an Australian citizen who came to the Philippines as a businessman/investor without
the authority to be employed as the employee/officer of any business as he was not able to secure his Alien Employment
Permit ["AEP" for brevity], which fact was duly supported by the Certification dated March 14, 2008 of the Department of Labor
and Employment ["DOLE" for brevity] Regional Director, Regional Office No. III, San Fernando City, Pampanga,
x x x.
11. As a fellow Australian citizen, Johnson was able to convince Prentice to accept his offer to invest in Dreamland and at the
same time provide his services as Operations Manager of Dreamland with a promise that he will secure an AEP and Tax
Identification Number ["TIN" for brevity] prior to his assumption of work.
12. Sometime on June 21, 2007, Prentice and Johnson entered into an Employment Agreement, which stipulates among
others, that the [sic] Johnson shall serve as Operations Manager of Dreamland from August 1, 2007 and shall serve as such
for a period of three (3) years.
13. Before entering into the said agreement[,] Prentice required the submission of the AEP and TIN from Johnson. Johnson
promised that the same shall be supplied within one (1) month from the signing of the contract because the application for the
TIN and AEP were still under process. Thus[,] it was agreed that the efficacy of the said agreement shall begin after one (1)
month or on August 1, 2007. x x x.
14. On or about October 8, 2007, Prentice asked on several occasions the production of the AEP and TIN from Johnson.
Johnson gave excuses and promised that he is already in possession of the requirements. Believing the word of Johnson,
Dreamland commenced a dry run of its operations.
15. Johnson worked as a hotel and resort Operations Manager only at that time. He worked for only about three (3) weeks
until he suddenly abandoned his work and subsequently resigned as Operations Manager starting November 3, 2007. He
never reported back to work despite several attempts of Prentice to clarify his issues. x x x. 4
82
On the other hand, respondent Stephen B. Johnson (Johnson) averred that:
4. There is also no truth to the allegation that it was [Johnson] who "offered" and "convinced" petitioner Prentice to "invest" in
and provide his services to petitioner Dreamland Hotel Resort x x x. The truth of the matter is that it was petitioners who
actively advertised for a resort manager for Dreamland Hotel. x x x
5. It was in response to these advertisements that private respondent Johnson contacted petitioners to inquire on the terms for
employment offered. It was Prentice who offered employment and convinced Johnson to give out a loan, purportedly so the
resort can be completed and operational by August 2007. Believing the representations of petitioner Prentice, private
respondent Johnson accepted the employment as Resort Manager and loaned money to petitioners [consisting of] his
retirement pay in the amount of One Hundred Thousand US Dollars (USD 100,000.00) to finish construction of the resort. x x
x.
6. From the start of August 2007, as stipulated in the Employment Agreement, respondent Johnson already reported for work.
It was then that he found out to his dismay that the resort was far from finished. However, he was instructed to supervise
construction and speak with potential guests. He also undertook the overall preparation of the guestrooms and staff for the
opening of the hotel, even performing menial tasks (i.e. inspected for cracked tiles, ensured proper grout installation, proper
lighting and air-conditioning unit installation, measured windows for curtain width and showers for shower curtain rods,
unloaded and installed mattresses, beddings, furniture and appliances and even ironed and hung guest room curtains).
xxxx
8. As [Johnson] remained unpaid since August 2007 and he has loaned all his money to petitioners, he asked for his salary
after the resort was opened in October 2007 but the same was not given to him by petitioners. [Johnson] became very
alarmed with the situation as it appears that there was no intention to pay him his salary, which he now depended on for his
living as he has been left penniless. He was also denied the benefits promised him as part of his compensation such as
service vehicles, meals and insurance.
9. [Johnson] was also not given the authority due to him as resort manager. Prentice countermanded his orders to the staff at
every opportunity. Worse, he would even be berated and embarrassed in front of the staff. Prentice would go into drunken tiffs,
even with customers and [Johnson] was powerless to prohibit Prentice. It soon became clear to him that he was only used for
the money he loaned and there was no real intention to have him as resort manager of Dreamland Hotel.
10. Thus, on November 3, 2007, after another embarrassment was handed out by petitioner Prentice in front of the staff, which
highlighted his lack of real authority in the hotel and the disdain for him by petitioners, respondent Johnson was forced to
submit his resignation, x x x. In deference to the Employment Agreement signed, [Johnson] stated that he was willing to
continue work for the three month period stipulated therein.
11. However, in an SMS or text message sent by Prentice to [Johnson] on the same day at around 8:20 pm, he was informed
that " I consider [yo]ur resignation as immediate". Despite demand, petitioners refused to pay [Johnson] the salaries and
benefits due him.5
On January 31, 2008, Johnson filed a Complaint for illegal dismissal and non-payment of salaries, among others, against the
petitioners.
On May 23, 2008, the Labor Arbiter (LA) rendered a Decision 6 dismissing Johnsons complaint for lack of merit with the finding
that he voluntarily resigned from his employment and was not illegally dismissed. We quote:
There [is] substantial evidence on record that [Johnson] indeed resigned voluntarily from his position by his mere act of
tendering his resignation and immediately abandoned his work as Operations Manager from the time that he filed said
resignation letter on November 3, 2007 and never returned to his work up to the filing of this case. Evidence on record also
show that [Johnson] only served as Operations Manager for a period of three (3) weeks after which he tendered his voluntary
resignation and left his job. This fact was not denied or questioned by him. His claim that there was breach of employment
contract committed by the respondents and that he was not refunded his alleged investment with the respondent Dreamland
Hotel and Resort were not properly supported with substantial evidence and besides these issues are not within the ambit of
jurisdiction of this Commission.
There being competent, concrete and substantial evidence to confirm the voluntary resignation of [Johnson] from his
employment, there was no illegal dismissal committed against him and for him to be entitled to reinstatement to his former
position and backwages.
xxxx
WHEREFORE, premises considered, let this case be as it is hereby ordered DISMISSED for lack of merit.
All the money claims of the complainant are likewise ordered dismissed for lack of legal basis.
SO ORDERED.7
Dissatisfied, Johnson appealed to the National Labor Relations Commission (NLRC). The NLRC rendered its Decision 8 on
April 30, 2009, the dispositive portion of which reads:
WHEREFORE, the decision appeared from is hereby REVERSED. Respondent Wes[t]ley Prentice and/or Dreamland Resort
& Hotel, Inc[.] are hereby ordered to pay [Johnson] the following:
1. Backwages computed at [P]60,000.00 monthly from November
3, 2007 up to the finality of this decision;
83
 2. Separation pay equivalent to one months salary, or [P]60,000.00;
3. Unpaid salaries from August 1, 2007 to November 1, 2007 amounting to a total of [P]172,800.00.
SO ORDERED.9
The NLRC also noted the following:
Insofar as the charge of abandonment against [Johnson] is concerned, it is significant that the contention that [Johnson]
received a total of [P]172,000.00 from the [petitioners] since July 2007 is not supported by the evidence x x x submitted by the
[petitioners]. Except for a promissory note x x x for [P]2,200.00, the pieces of evidence in question do not bear [Johnsons]
signature, and do not therefore constitute proof of actual receipt by him of the amounts stated therein. Thus, based on the
evidence and on the admission by [Johnson] that he received the amount of [P]5,000.00 from the [petitioners], it appears that
[Johnson] received a total of only [P]7,200.00 from the [petitioners]. Since based on the Employment Agreement, his
employment commenced on August 1, 2007, it follows that as of November 3, 2007, when he tendered his resignation, the
[petitioners] had failed to pay him a total of [P]172,800.00 representing his unpaid salaries for three months ([P]60,000.00 x 3
mos. = [P]180,000.00 [P]7,200 = [P]172,800.00). Even the most reasonable employee would consider quitting his job after
working for three months and receiving only an insignificant fraction of his salaries. There was, therefore, not an abandonment
of employment nor a resignation in the real sense, but a constructive dismissal, which is defined as an involuntary resignation
resorted to when continued employment is rendered impossible, unreasonable or unlikely x x x. Consequently, [Johnson] is
entitled to reinstatement with full backwages. However, due to the strained relation between the parties, which renders his
reinstatement inadvisable, separation pay may be awarded in lieu of reinstatement. 10
Consequently, the petitioners elevated the NLRC decision to the CA by way of Petition for Certiorari with Prayer for the
Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction under Rule 47.
In the assailed Resolution11 dated December 14, 2009, the CA dismissed the petition for lack of proof of authority and affidavit
of service of filing as required by Section 13 of the 1997 Rules of Procedure. The subsequent motion for reconsideration filed
by the petitioners was likewise denied by the CA in a Resolution 12 dated February 11, 2010.
Undaunted, the petitioners filed before this Court the present Petition for Review on Certiorari, raising the following issues, viz:
A.
THE HONORABLE [CA] COMMITTED A REVERSIBLE ERROR IN PROMULGATING ITS FIRST RESOLUTION
(DECEMBER 14, 2009) WHICH OUTRIGHTLY DISMISSED PETITIONERS PETITION FOR CERTIORARI.
B.
THE HONORABLE [CA] COMMITTED A REVERSIBLE ERROR IN PROMULGATING ITS SECOND RESOLUTION
(FEBRUARY 11, 2010) WHICH DENIED FOR LACK OF MERIT PETITIONERS MOTION FOR
RECONSIDERATION.
C.
THE HONORABLE [CA] COMMITTED A REVERSIBLE ERROR IN NOT GIVING DUE CONSIDERATION TO THE
MERITS OF THE PETITIONERS PETITION AND IN NOT GRANTING THEIR PRAYER FOR TEMPORARY
RESTRAINING ORDER[.]13
The petition is partially granted.
At its inception, the Court takes note of the Resolutions dated December 14, 2009 and February 11, 2010 of the CA dismissing
the Petition for Certiorari due to the following infirmities:
1. The affiant has no proof of authority to file the petition in behalf of petitioner Dreamland.
2. The petition has no appended affidavit of service to show proof of service of filing as required by Sec. 13 of the
1997 Rules of Civil Procedure.14
To justify their stance that the CA should have considered the merits of the case, instead of dismissing merely on procedural
grounds, the petitioners cited numerous cases wherein the Court has decided to waive the strict application of the Rules in the
interest of substantial justice.15 While "[u]tter disregard of [the rules of procedure] cannot justly be rationalized by harking on
the policy of liberal construction,"16 the Court recognizes badges of inequity present in the case at bar, which would be
seemingly branded with approval should the Court turn a blind eye and dismiss this petition on procedural grounds alone.
"While it is desirable that the Rules of Court be faithfully observed, courts should not be so strict about procedural lapses that
do not really impair the proper administration of justice. If the rules are intended to ensure the proper and orderly conduct of
litigation, it is because of the higher objective they seek which are the attainment of justice and the protection of substantive
rights of the parties. Thus, the relaxation of procedural rules, or saving a particular case from the operation of technicalities
when substantial justice requires it, as in the instant case, should no longer be subject to cavil." 17
Time and again, this Court has emphasized that procedural rules should be treated with utmost respect and due regard, since
they are designed to facilitate the adjudication of cases to remedy the worsening problem of delay in the resolution of rival
claims and in the administration of justice. "From time to time, however, we have recognized exceptions to the Rules but only
for the most compelling reasons where stubborn obedience to the Rules would defeat rather than serve the ends of
justice."18 "It is true that procedural rules may be waived or dispensed with in the interest of substantial justice." 19
Brushing aside technicalities, in the utmost interest of substantial justice and taking into consideration the varying and
conflicting factual deliberations by the LA and the NLRC, the Court shall now delve into the merits of the case.
84
The petitioners contend that the employment of Johnson as operations manager commenced only on October 8, 2007 and not
on August 1, 2007. However, the employment contract categorically stated that the "term of employment shall commence on
[August 1, 2007]." Furthermore, the factual allegations of Johnson that he actually worked from August 1, 2007 were neither
sufficiently rebutted nor denied by the petitioners. As Johnson has specifically set forth in his reply before the LA:
Although the resort did not open until approximately 8th October 2007, [Johnsons] employment began, as per Employment
Agreement, on 1st August 2007. During the interim period[, Johnson] was frequently instructed by [Prentice] to supervise the
construction staff and speak with potential future guests who visited the site out of curiosity. Other duties carried out by
[Johnson] prior to [the] opening included the overall preparation of the guest rooms for eventual occupation ensuring cracked
tiles were replaced, ensuring grout was properly installed between tiles, ensuring all lighting and air conditioning [were]
functioning, measuring windows for curtain width, measuring showers for shower curtain rods and installing shower curtains.
Other duties included the unloading, carrying and installation of mattresses, bedding[s], TVs, refrigerators and other
furnishings and ironing curtains x x x.20
Notably, it was only in their Motion for Reconsideration 21 of the NLRC decision where the petitioners belatedly disagreed that
Johnson performed the abovementioned tasks and argued that had Johnson done the tasks he enumerated, those were tasks
foreign and alien to his position as operations manager and [were done] without their knowledge and consent. 22
Nevertheless, Prentice did not deny that he ordered Johnson to speak with potential guests of the hotel. In fact, the petitioners
admitted and submitted documents23 which showed that Johnson has already taken his residence in the hotel as early as July
2007a part of Johnsons remuneration as the hotel operations manager. In presenting such documents, the petitioners
would want to impress upon the Court that their act of accommodating Johnson was merely due to his being a fellow
Australian national.
As it could not be determined with absolute certainty whether or not Johnson rendered the services he mentioned during the
material time, doubt must be construed in his favor for the reason that "the consistent rule is that if doubt exists between the
evidence presented by the employer and that by the employee, the scales of justice must be tilted in favor of the latter."24 What
is clear upon the records is that Johnson had already taken his place in the hotel since July 2007.
For the petitioners failure to disprove that Johnson started working on August 1, 2007, as stated on the employment contract,
payment of his salaries on said date, even prior to the opening of the hotel is warranted.
The petitioners also maintain that they have paid the amount of P7,200.00 to Johnson for his three weeks of service from
October 8, 2007 until November 3, 2007, the date of Johnsons resignation, 25 which Johnson did not controvert. Even so, the
amount the petitioners paid to Johnson as his three-week salary is significantly deficient as Johnsons monthly salary as
stipulated in their contract is P60,000.0026. Thus, the amount which Johnson should have been paid is P45,000.00 and
not P7,200.00. In light of this deficiency, there is more reason to believe that the petitioners withheld the salary of Johnson
without a valid reason. If they indeed believed that Johnson deserves to be paid only for three-week worth of service as
operations manager, then they should still have paid him the amount due for three weeks of work rendered.
Another argument posited by the petitioners is that the employment contract executed by the parties is inefficacious because
the employment contract is subject to the presentation of Johnson of his Alien Employment Permit (AEP) and Tax
Identification Number (TIN).
Again, this statement is wanting of merit.
Johnson has adduced proof that as a permanent resident, he is exempted from the requirement of securing an AEP as
expressed under Department Order No. 75-06, Series of 2006 of the Department of Labor and Employment (DOLE), which we
quote:
Rule I- Coverage and Exemption
xxxx
2. Exemption. The following categories of foreign nationals are exempt from securing an employment permit:
xxxx
2.7 Resident foreign nationals
Furthermore, Johnson submitted a Certification27 from DOLE Regional Office III, stating that he is exempted from securing an
AEP as a holder of Permanent Resident Visa. Consequently, the condition imposed upon Johnsons employment, if there is
any, is in truth without effect to its validity.
Anent the requirement of securing a TIN to make the contract of employment efficacious, records show that Johnson secured
his TIN only on December 200728 after his resignation as operations manager. Nevertheless, this does not negate the fact that
the contract of employment had already become effective even prior to such date.
In addition to the foregoing, there is no stipulation in the employment contract itself that the same shall only be effective upon
the submission of AEP and TIN. The petitioners did not present any proof to support this agreement prior to the execution of
the employment contract. In the case of Ortaez v. CA29, the Court held:
Spoken words could be notoriously unreliable unlike a written contract which speaks of a uniform language. Thus, under the
general rule in Section 9 of Rule 130 of the Rules of Court, when the terms of an agreement were reduced to writing, as in this
case, it is deemed to contain all the terms agreed upon and no evidence of such terms can be admitted other than the
contents thereof. x x x.30 (Citations omitted)
85
As regards the NLRC findings that Johnson was constructively dismissed and did not abandon his work, the Court is in
consonance with this conclusion with the following basis:
Even the most reasonable employee would consider quitting his job after working for three months and receiving only an
insignificant fraction of his salaries. There was, therefore, not an abandonment of employment nor a resignation in the real
sense, but a constructive dismissal, which is defined as an involuntary resignation resorted to when continued employment is
rendered impossible, unreasonable or unlikely x x x. 31
The petitioners aver that considering that Johnson tendered his resignation and abandoned his work, it is his burden to prove
that his resignation was not voluntary on his part.32
With this, the Court brings to mind its earlier ruling in the case of SHS Perforated Materials, Inc. v. Diaz 33 where it held that:
"There is constructive dismissal if an act of clear discrimination, insensibility, or disdain by an employer becomes so
unbearable on the part of the employee that it would foreclose any choice by him except to forego his continued employment.
It exists where there is cessation of work because continued employment is rendered impossible, unreasonable or unlikely, as
an offer involving a demotion in rank and a diminution in pay."34
It is impossible, unreasonable or unlikely that any employee, such as Johnson would continue working for an employer who
does not pay him his salaries. Applying the Courts pronouncement in Duldulao v. CA 35, the Court construes that the act of the
petitioners in not paying Johnson his salaries for three months has become unbearable on the latters part that he had no
choice but to cede his employment with them. The Court quotes the pertinent sections of Johnsons resignation letter which
reflects the real reason why he was resigning as operations manager of the hotel:
I hereby tender my resignation to you, Mr[.] Wes Prentice, Dreamland Resort, Subic, Zambales, Philippines.
Since joining Dreamland Resort & Hotel over three months ago I have put my heart and soul into the business. I have donated
many hours of my personal time. I have frequently worked seven days a week and twelve to thirteen hours a day. I am now
literally penniless, due totally to the fact that I have lent you and your resort/hotel well over $200,000AU (approx 8million
pesos) and your non-payment of wages to me from 1st August 2007 as per Employment Agreement. x x x. 36 (Emphasis and
underscoring ours)
The above preceding statement only goes to show that while it was Johnson who tendered his resignation, it was due to the
petitioners acts that he was constrained to resign. The petitioners cannot expect Johnson to tolerate working for them without
any compensation.
Since Johnson was constructively dismissed, he was illegally dismissed. As to the reliefs granted to an employee who is
illegally dismissed, Golden Ace Builders v. Talde 37 referring to Macasero v. Southern Industrial Gases Philippines 38 is
instructive:
Thus, an illegally dismissed employee is entitled to two reliefs: backwages and reinstatement. The two reliefs provided are
separate and distinct. In instances where reinstatement is no longer feasible because of strained relations between the
employee and the employer, separation pay is granted. In effect, an illegally dismissed employee is entitled to either
reinstatement, if viable, or separation pay if reinstatement is no longer viable, and backwages.
The normal consequences of respondents illegal dismissal, then, are reinstatement without loss of seniority rights, and
payment of backwages computed from the time compensation was withheld up to the date of actual reinstatement. Where
reinstatement is no longer viable as an option, separation pay equivalent to one (1) month salary for every year of service
should be awarded as an alternative. The payment of separation pay is in addition to payment of backwages. 39 (Emphasis and
underscoring supplied)
The case of Golden Ace further provides:
"The accepted doctrine is that separation pay may avail in lieu of reinstatement if reinstatement is no longer practical or in the
best interest of the parties. Separation pay in lieu of reinstatement may likewise be awarded if the employee decides not to be
reinstated." x x x
Under the doctrine of strained relations, the payment of separation pay is considered an acceptable alternative to
reinstatement when the latter option is no longer desirable or viable. On one hand, such payment liberates the employee from
what could be a highly oppressive work environment. On the other hand, it releases the employer from the grossly
unpalatable obligation of maintaining in its employ a worker it could no longer trust. 40
In the present case, the NLRC found that due to the strained relations between the parties, separation pay is to be awarded to
Johnson in lieu of his reinstatement.
The NLRC held that Johnson is entitled to backwages from November 3, 2007 up to the finality of the decision; separation pay
equivalent to one month salary; and unpaid salaries from August 1, 2007 to November 1, 2007 amounting to a total
of P172,800.00.41
While the Court agrees with the NLRC that the award of separation pay and unpaid salaries is warranted, the Court does not
lose sight of the fact that the employment contract states that Johnson's employment is for a term of three years.
Accordingly, the award of backwages should be computed from November 3, 2007 to August 1, 2010 - which is three years
from August 1, 2007. Furthermore, separation pay is computed from the commencement of employment up to the time of
termination, including the imputed service for which the employee is entitled to backwages. 42 As one-month salary is awarded

86
as separation pay for every year of service, including imputed service, Johnson should be paid separation pay equivalent to
his three-month salary for the three-year contract.
WHEREFORE, the Resolutions dated December 14, 2009 and February 11, 2010 of the Court of Appeals in CA-G.R. SP No.
111693 are hereby SET ASIDE. The Decision of the NLRC dated April 30, 2009 in NLRC LAC No. 07-002711-08 is
REINSTATED and AFFIRMED with MODIFICATIONS in the computation of backwages and separation pay. Dreamland Hotel
Resort and Westley Prentice are ORDERED to PAY Stephen Johnson backwages of P60,000.00 per month which should be
computed from November 3, 2007 to August 1, 2010 less the P.7,200.00 already paid to him. Likewise, separation pay
of P180.000.00, representing Stephen Johnson's three-year contract should be awarded.
SO ORDERED.

G.R. No. 187320 January 26, 2011

ATLANTA INDUSTRIES, INC. and/or ROBERT CHAN, Petitioners,
vs.
APRILITO R. SEBOLINO, KHIM V. COSTALES, ALVIN V. ALMOITE, and JOSEPH S. SAGUN, Respondents.
DECISION
BRION, J.:
For resolution is the petition for review on certiorari1 assailing the decision2 and the resolution3 of the Court of Appeals (CA)
rendered on November 4, 2008 and March 25, 2009, respectively, in CA-G.R. SP. No. 99340.4
The Antecedents
The facts are summarized below.
In the months of February and March 2005, complainants Aprilito R. Sebolino, Khim V. Costales, Alvin V. Almoite, Joseph S.
Sagun, Agosto D. Zao, Domingo S. Alegria, Jr., Ronie Ramos, Edgar Villagomez, Melvin Pedregoza, Teofanes B. Chiong,
Jr., Leonardo L. dela Cruz, Arnold A. Magalang, and Saturnino M. Mabanag filed several complaints for illegal dismissal,
regularization, underpayment, nonpayment of wages and other money claims, as well as claims for moral and exemplary
damages and attorneys fees against the petitioners Atlanta Industries, Inc. (Atlanta) and its President and Chief Operating
Officer Robert Chan. Atlanta is a domestic corporation engaged in the manufacture of steel pipes.
The complaints were consolidated and were raffled to Labor Arbiter Daniel Cajilig, but were later transferred to Labor Arbiter
Dominador B. Medroso, Jr.
The complainants alleged that they had attained regular status as they were allowed to work with Atlanta for more than six (6)
months from the start of a purported apprenticeship agreement between them and the company. They claimed that they were
illegally dismissed when the apprenticeship agreement expired.
In defense, Atlanta and Chan argued that the workers were not entitled to regularization and to their money claims because
they were engaged as apprentices under a government-approved apprenticeship program. The company offered to hire them
as regular employees in the event vacancies for regular positions occur in the section of the plant where they had trained.
They also claimed that their names did not appear in the list of employees (Master List) 5 prior to their engagement as
apprentices.
On May 24, 2005, dela Cruz, Magalang, Zao and Chiong executed a Pagtalikod at Pagwawalang Saysay before Labor
Arbiter Cajilig.
The Compulsory Arbitration Rulings
On April 24, 2006, Labor Arbiter Medroso dismissed the complaint with respect to dela Cruz, Magalang, Zao and Chiong, but
found the termination of service of the remaining nine to be illegal.6 Consequently, the arbiter awarded the dismissed workers
backwages, wage differentials, holiday pay and service incentive leave pay amounting to P1,389,044.57 in the aggregate.
Atlanta appealed to the National Labor Relations Commission (NLRC). In the meantime, or on October 10, 2006, Ramos,
Alegria, Villagomez, Costales and Almoite allegedly entered into a compromise agreement with Atlanta. 7The agreement
provided that except for Ramos, Atlanta agreed to pay the workers a specified amount as settlement, and to acknowledge
them at the same time as regular employees.
On December 29, 2006,8 the NLRC rendered a decision, on appeal, modifying the ruling of the labor arbiter, as follows: (1)
withdrawing the illegal dismissal finding with respect to Sagun, Mabanag, Sebolino and Pedregoza; (2) affirming the dismissal
of the complaints of dela Cruz, Zao, Magalang and Chiong; (3) approving the compromise agreement entered into by
Costales, Ramos, Villagomez, Almoite and Alegria, and (4) denying all other claims.
Sebolino, Costales, Almoite and Sagun moved for the reconsideration of the decision, but the NLRC denied the motion in its
March 30, 20079 resolution. The four then sought relief from the CA through a petition for certiorari under Rule 65 of the Rules
of Court. They charged that the NLRC committed grave abuse of discretion in: (1) failing to recognize their prior employment
with Atlanta; (2) declaring the second apprenticeship agreement valid; (3) holding that the dismissal of Sagun, Mabanag,
Sebolino and Melvin Pedregoza is legal; and (4) upholding the compromise agreement involving Costales, Ramos,
Villagomez, Almoite and Alegria.
The CA Decision
The CA granted the petition based on the following findings: 10
87
 1. The respondents were already employees of the company before they entered into the first and second
apprenticeship agreements Almoite and Costales were employed as early as December 2003 and, subsequently,
entered into a first apprenticeship agreement from May 13, 2004 to October 12, 2004; before this first agreement
expired, a second apprenticeship agreement, from October 9, 2004 to March 8, 2005 was executed. The same is true
with Sebolino and Sagun, who were employed by Atlanta as early as March 3, 2004. Sebolino entered into his first
apprenticeship agreement with the company from March 20, 2004 to August 19, 2004, and his second apprenticeship
agreement from August 20, 2004 to January 19, 2005. Sagun, on the other hand, entered into his first agreement
from May 28, 2004 to October 8, 2004, and the second agreement from October 9, 2004 to March 8, 2005.
2. The first and second apprenticeship agreements were defective as they were executed in violation of the law and
the rules.11 The agreements did not indicate the trade or occupation in which the apprentice would be trained; neither
was the apprenticeship program approved by the Technical Education and Skills Development Authority (TESDA).
3. The positions occupied by the respondents machine operator, extruder operator and scaleman are usually
necessary and desirable in the manufacture of plastic building materials, the companys main business. Costales,
Almoite, Sebolino and Sagun were, therefore, regular employees whose dismissals were illegal for lack of a just or
authorized cause and notice.
4. The compromise agreement entered into by Costales and Almoite, together with Ramos, Villagomez and Alegria,
was not binding on Costales and Almoite because they did not sign the agreement.
The petitioners themselves admitted that Costales and Almoite were initially planned to be a part of the compromise
agreement, but their employment has been regularized as early as January 11, 2006; hence, the company did not pursue their
inclusion in the compromise agreement.12
The CA faulted the NLRC for failing to appreciate the evidence regarding the respondents prior employment with Atlanta. The
NLRC recognized the prior employment of Costales and Almoite on Atlantas monthly report for December 2003 for the CPS
Department/Section dated January 6, 2004.13 This record shows that Costales and Almoite were assigned to the companys
first shift from 7:00 a.m. to 3:00 p.m. The NLRC ignored Sebolino and Saguns prior employment under the companys
Production and Work Schedule for March 7 to 12, 2005 dated March 3, 2004, 14 as they had been Atlantas employees as early
as March 3, 2004, with Sebolino scheduled to work on March 7-12, 2005 at 7:00 a.m. to 7:00 p.m., while Sagun was
scheduled to work for the same period but from 7:00 p.m. to 7:00 a.m. The CA noted that Atlanta failed to challenge the
authenticity of the two documents before it and the labor authorities.
Atlanta and Chan moved for reconsideration, but the CA denied the motion in a resolution rendered on March 25,
2009.15 Hence, the present petition.
The Petition
Atlanta seeks a reversal of the CA decision, contending that the appellate court erred in (1) concluding that Costales, Almoite,
Sebolino and Sagun were employed by Atlanta before they were engaged as apprentices; (2) ruling that a second
apprenticeship agreement is invalid; (3) declaring that the respondents were illegally dismissed; and (4) disregarding the
compromise agreement executed by Costales and Almoite. It submits the following arguments:
First. The CAs conclusion that the respondent workers were company employees before they were engaged as apprentices
was primarily based on the Monthly Report16 and the Production and Work Schedule for March 7-12, 2005,17 in total disregard
of the Master List18 prepared by the company accountant, Emelita M. Bernardo. The names of Costales, Almoite, Sebolino and
Sagun do not appear as employees in the Master List which "contained the names of all the persons who were employed by
and at petitioner."19
Atlanta faults the CA for relying on the Production and Work Schedule and the Monthly Report which were not sworn to, and in
disregarding the Master List whose veracity was sworn to by Bernardo and by Alex Go who headed the companys accounting
division. It maintains that the CA should have given more credence to the Master List.
Second. In declaring invalid the apprenticeship agreements it entered into with the respondent workers, the CA failed to
recognize the rationale behind the law on apprenticeship. It submits that under the law,20 apprenticeship agreements are valid,
provided they do not exceed six (6) months and the apprentices are paid the appropriate wages of at least 75% of the
applicable minimum wage.
The respondents initially executed a five-month apprenticeship program with Atlanta, at the end of which, they "voluntarily and
willingly entered into another apprenticeship agreement with the petitioner for the training of a second skill"21 for five months;
thus, the petitioners committed no violation of the apprenticeship period laid down by the law.
Further, the apprenticeship agreements, entered into by the parties, complied with the requisites under Article 62 of the Labor
Code; the companys authorized representative and the respondents signed the agreements and these were ratified by the
companys apprenticeship committee. The apprenticeship program itself was approved and certified by the TESDA. 22 The CA,
thus, erred in overturning the NLRCs finding that the apprenticeship agreements were valid.
Third. There was no illegal dismissal as the respondent workers tenure ended with the expiration of the apprenticeship
agreement they entered into. There was, therefore, no regular employer-employee relationship between Atlanta and the
respondent workers.
The Case for Costales, Almoite, Sebolino and Sagun
88
 In a Comment filed on August 6, 2009,23 Costales, Almoite, Sebolino and Sagun pray for a denial of the petition for being
procedurally defective and for lack of merit.
The respondent workers contend that the petition failed to comply with Section 4, Rule 45 of the Rules of Court which requires
that the petition be accompanied by supporting material portions of the records. The petitioners failed to attach to the petition a
copy of the Production and Work Schedule despite their submission that the CA relied heavily on the document in finding the
respondent workers prior employment with Atlanta. They also did not attach a copy of the compromise agreement purportedly
executed by Costales and Almoite. For this reason, the respondent workers submit that the petition should be dismissed.
The respondents posit that the CA committed no error in holding that they were already Atlantas employees before they were
engaged as apprentices, as confirmed by the companys Production and Work Schedule. 24They maintain that the Production
and Work Schedule meets the requirement of substantial evidence as the petitioners failed to question its authenticity. They
point out that the schedule was prepared by Rose A. Quirit and approved by Adolfo R. Lope, head of the companys PE/Spiral
Section. They argue that it was highly unlikely that the head of a production section of the company would prepare and assign
work to the complainants if the latter had not been company employees.
The respondent workers reiterate their mistrust of the Master List25 as evidence that they were not employees of the company
at the time they became apprentices. They label the Master List as "self-serving, dubious and even if considered as authentic,
its content contradicts a lot of petitioners claim and allegations,"26 thus -
1. Aside from the fact that the Master List is not legible, it contains only the names of inactive employees. Even those
found by the NLRC to have been employed in the company (such as Almoite, Costales and Sagun) do not appear in
the list. If Costales and Almoite had been employed with Atlanta since January 11, 2006, as the company
claimed,27 their names would have been in the list, considering that the Master List accounts for all employees "as of
May 2006" the notation carried on top of each page of the document.
2. There were no entries of employees hired or resigned in the years 2005 and 2006 despite the "as of May 2006"
notation; several pages making up the Master List contain names of employees for the years 1999 - 2004.
3. The fact that Atlanta presented the purported Master List instead of the payroll raised serious doubts on the
authenticity of the list.
In sum, the respondent workers posit that the presentation of the Master List revealed the "intention of the herein petitioner[s]
to perpetually hide the fact of [their] prior employment." 28
On the supposed apprenticeship agreements they entered into, Costales, Almoite, Sebolino and Sagun refuse to accept the
agreements validity, contending that the companys apprenticeship program is merely a ploy "to continually deprive [them] of
their rightful wages and benefits which are due them as regular employees."29 They submit the following "indubitable facts and
ratiocinations:"30
1. The apprenticeship agreements were submitted to TESDA only in 2005 (with dates of receipt on "1/4/05" &
"2/22/05"31 ), when the agreements were supposed to have been executed in April or May 2004. Thus, the
submission was made long after the starting date of the workers apprenticeship or even beyond the agreements
completion/termination date, in violation of Section 23, Rule VI, Book II of the Labor Code.
2. The respondent workers were made to undergo apprenticeship for occupations different from those allegedly
approved by TESDA. TESDA approved Atlantas apprenticeship program on "Plastic Molder" 32and not for extrusion
molding process, engineering, pelletizing process and mixing process.
3. The respondents were already skilled workers prior to the apprenticeship program as they had been employed and
made to work in the different job positions where they had undergone training. Sagun and Sebolino, together with
Mabanag, Pedregoza, dela Cruz, Chiong, Magalang and Alegria were even given production assignments and work
schedule at the PE/Spiral Section from May 11, 2004 to March 23, 2005, and some of them were even assigned to
the 3:00 p.m. 11:00 p.m. and graveyard shifts (11:00 p.m. 7:00 a.m.) during the period.33
4. The respondent workers were required to continue as apprentices beyond six months. The TESDA certificate of
completion indicates that the workers apprenticeship had been completed after six months. Yet, they were suffered
to work as apprentices beyond that period.
Costales, Almoite, Sebolino and Sagun resolutely maintain that they were illegally dismissed, as the reason for the termination
of their employment notice of the completion of the second apprenticeship agreement did not constitute either a just or
authorized cause under Articles 282 and 283 of the Labor Code.
Finally, Costales and Almoite refuse to be bound by the compromise agreement 34 that Atlanta presented to defeat the two
workers cause of action. They claim that the supposed agreement is invalid as against them, principally because they did not
sign it.
The Courts Ruling
The procedural issue
The respondent workers ask that the petition be dismissed outright for the petitioners failure to attach to the petition a copy of
the Production and Work Schedule and a copy of the compromise agreement Costales and Almoite allegedly entered into
material portions of the record that should accompany and support the petition, pursuant to Section 4, Rule 45 of the Rules of
Court.
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In Mariners Polytechnic Colleges Foundation, Inc. v. Arturo J. Garchitorena 35 where the Court addressed essentially the same
issue arising from Section 2(d), Rule 42 of the Rules of Court, 36 we held that the phrase "of the pleadings and other material
portions of the record xxx as would support the allegation of the petition clearly contemplates the exercise of discretion on the
part of the petitioner in the selection of documents that are deemed to be relevant to the petition. The crucial issue to consider
then is whether or not the documents accompanying the petition sufficiently supported the allegations therein." 37
As in Mariners, we find that the documents attached to the petition sufficiently support the petitioners allegations. The
accompanying CA decision38 and resolution,39 as well as those of the labor arbiter40 and the NLRC,41referred to the parties
position papers and even to their replies and rejoinders. Significantly, the CA decision narrates the factual antecedents,
defines the complainants cause of action, and cites the arguments, including the evidence the parties adduced. If any, the
defect in the petition lies in the petitioners failure to provide legible copies of some of the material documents mentioned,
especially several pages in the decisions of the labor arbiter and of the NLRC. This defect, however, is not fatal as the
challenged CA decision clearly summarized the labor tribunals rulings. We, thus, find no procedural obstacle in resolving the
petition on the merits.
The merits of the case
We find no merit in the petition. The CA committed no reversible error in nullifying the NLRC decision 42 and in affirming the
labor arbiters ruling,43 as it applies to Costales, Almoite, Sebolino and Sagun. Specifically, the CA correctly ruled that the four
were illegally dismissed because (1) they were already employees when they were required to undergo apprenticeship and (2)
apprenticeship agreements were invalid.
The following considerations support the CA ruling.
First. Based on company operations at the time material to the case, Costales, Almoite, Sebolino and Sagun were already
rendering service to the company as employees before they were made to undergo apprenticeship. The company itself
recognized the respondents status through relevant operational records in the case of Costales and Almoite, the CPS
monthly report for December 200344 which the NLRC relied upon and, for Sebolino and Sagun, the production and work
schedule for March 7 to 12, 200545 cited by the CA.
Under the CPS monthly report, Atlanta assigned Costales and Almoite to the first shift (7:00 a.m. to 3:00 p.m.) of the Sections
work. The Production and Work Schedules, in addition to the one noted by the CA, showed that Sebolino and Sagun were
scheduled on different shifts vis--vis the production and work of the companys PE/Spiral Section for the periods July 5-10,
2004;46 October 25-31, 2004;47 November 8-14, 2004;48 November 16-22, 2004;49 January 3-9, 2005;50 January 10-15,
2005;51 March 7-12, 200552 and March 17-23, 2005.53
We stress that the CA correctly recognized the authenticity of the operational documents, for the failure of Atlanta to raise a
challenge against these documents before the labor arbiter, the NLRC and the CA itself. The appellate court, thus, found the
said documents sufficient to establish the employment of the respondents before their engagement as apprentices.
Second. The Master List54 (of employees) that the petitioners heavily rely upon as proof of their position that the respondents
were not Atlantas employees, at the time they were engaged as apprentices, is unreliable and does not inspire belief.
The list, consisting of several pages, is hardly legible. It requires extreme effort to sort out the names of the employees listed,
as well as the other data contained in the list. For this reason alone, the list deserves little or no consideration. As the
respondents also pointed out, the list itself contradicts a lot of Atlantas claims and allegations, thus: it lists only the names of
inactive employees; even the names of those the NLRC found to have been employed by Atlanta, like Costales and Almoite,
and those who even Atlanta claims attained regular status on January 11, 2006, 55 do not appear in the list when it was
supposed to account for all employees "as of May 6, 2006." Despite the "May 6, 2006" cut off date, the list contains no entries
of employees who were hired or who resigned in 2005 and 2006. We note that the list contains the names of employees from
1999 to 2004.
We cannot fault the CA for ignoring the Master List even if Bernardo, its head office accountant, swore to its correctness and
authenticity.56 Its substantive unreliability gives it very minimal probative value. Atlanta would have been better served, in
terms of reliable evidence, if true copies of the payroll (on which the list was based, among others, as Bernardo claimed in her
affidavit) were presented instead.
Third. The fact that Costales, Almoite, Sebolino and Sagun were already rendering service to the company when they were
made to undergo apprenticeship (as established by the evidence) renders the apprenticeship agreements irrelevant as far as
the four are concerned. This reality is highlighted by the CA finding that the respondents occupied positions such as machine
operator, scaleman and extruder operator - tasks that are usually necessary and desirable in Atlantas usual business or trade
as manufacturer of plastic building materials.57 These tasks and their nature characterized the four as regular employees
under Article 280 of the Labor Code. Thus, when they were dismissed without just or authorized cause, without notice, and
without the opportunity to be heard, their dismissal was illegal under the law.58
Even if we recognize the companys need to train its employees through apprenticeship, we can only consider the first
apprenticeship agreement for the purpose. With the expiration of the first agreement and the retention of the employees,
Atlanta had, to all intents and purposes, recognized the completion of their training and their acquisition of a regular employee
status. To foist upon them the second apprenticeship agreement for a second skill which was not even mentioned in the

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agreement itself,59 is a violation of the Labor Codes implementing rules60 and is an act manifestly unfair to the employees, to
say the least. This we cannot allow.
Fourth. The compromise agreement61 allegedly entered into by Costales and Almoite, together with Ramos, Villagomez and
Alegria, purportedly in settlement of the case before the NLRC, is not binding on Costales and Almoite because they did not
sign it. The company itself admitted62 that while Costales and Almoite were initially intended to be a part of the agreement, it
did not pursue their inclusion "due to their regularization as early as January 11, 2006." 63
WHEREFORE, premises considered, we hereby DENY the petition for lack of merit. The assailed decision and resolution of
the Court of Appeals are AFFIRMED. Costs against the petitioner Atlanta Industries, Inc.
SO ORDERED.

G.R. No. 122917 July 12, 1999

MARITES BERNARDO, ELVIRA GO DIAMANTE, REBECCA E. DAVID, DAVID P. PASCUAL, RAQUEL ESTILLER,
ALBERT HALLARE, EDMUND M. CORTEZ, JOSELITO O. AGDON GEORGE P. LIGUTAN JR., CELSO M. YAZAR, ALEX
G. CORPUZ, RONALD M. DELFIN, ROWENA M. TABAQUERO, CORAZON C. DELOS REYES, ROBERT G. NOORA,
MILAGROS O. LEQUIGAN, ADRIANA F. TATLONGHARI, IKE CABANDUCOS, COCOY NOBELLO, DORENDA
CANTIMBUHAN, ROBERT MARCELO, LILIBETH Q. MARMOLEJO, JOSE E. SALES, ISABEL MAMAUAG, VIOLETA G.
MONTES, ALBINO TECSON, MELODY V. GRUELA, BERNADETH D. AGERO, CYNTHIA DE VERA, LANI R. CORTEZ,
MA. ISABEL B. CONCEPCION, DINDO VALERIO, ZENAIDA MATA, ARIEL DEL PILAR, MARGARET CECILIA CANOZA,
THELMA SEBASTIAN, MA. JEANETTE CERVANTES, JEANNIE RAMIL, ROZAIDA PASCUAL, PINKY BALOLOA,
ELIZABETH VENTURA, GRACE S. PARDO and TIMOSA, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and FAR EAST BANK AND TRUST COMPANY, respondents.

PANGANIBAN, J.:
The Magna Carta for Disabled Persons mandates that qualified disabled persons be granted the same terms and conditions of
employment as qualified able-bodied employees. Once they have attained the status of regular workers, they should be
accorded all the benefits granted by law, notwithstanding written or verbal contracts to the contrary. This treatments is rooted
not merely on charity or accomodation, but on justice for all.
The Case
Challenged in the Petition for Certiorari 1 before us is the June 20, 1995 Decision 2 of the National Labor Relations
Commission (NLRC), 3 which affirmed the August, 22 1994 ruling of Labor Arbiter Cornelio L. Linsangan. The labor arbiter's
Decision disposed as follows: 4
WHEREFORE, judgment is hereby rendered dismissing the above-mentioned complaint for lack of merit.
Also assailed is the August 4, 1995 Resolution 5 of the NLRC, which denied the Motion for Reconsideration.
The Facts
The facts were summarized by the NLRC in this wise: 6
Complainants numbering 43 (p. 176, Records) are deaf-mutes who were hired on various periods from 1988
to 1993 by respondent Far East Bank and Trust Co. as Money Sorters and Counters through a uniformly
worded agreement called "Employment Contract for Handicapped Workers". (pp. 68 & 69, Records) The full
text of said agreement is quoted below:
EMPLOYMENT CONTRACT FOR
HANDICAPPED WORKERS
This Contract, entered into by and between:
FAR EAST BANK AND TRUST COMPANY, a universal banking corporation duly
organized and existing under and by virtue of the laws of the Philippines, with business
address at FEBTC Building, Muralla, Intramuros, Manila, represented herein by its
Assistant Vice President, MR. FLORENDO G. MARANAN, (hereinafter referred to as the
"BANK");
-and-
, years old, of legal age, , and residing at (hereinafter
referred to as the ("EMPLOYEE").
WITNESSETH : That
WHEREAS, the BANK, cognizant of its social responsibility, realizes that there is a need
to provide disabled and handicapped persons gainful employment and opportunities to
realize their potentials, uplift their socio-economic well being and welfare and make them
productive, self-reliant and useful citizens to enable them to fully integrate in the
mainstream of society;

91
WHEREAS, there are certain positions in the BANK which may be filled-up by disabled
and handicapped persons, particularly deaf-mutes, and the BANK ha[s] been approached
by some civic-minded citizens and authorized government agencies [regarding] the
possibility of hiring handicapped workers for these positions;
WHEREAS, the EMPLOYEE is one of those handicapped workers who [were]
recommended for possible employment with the BANK;
NOW, THEREFORE, for and in consideration of the foregoing premises and in
compliance with Article 80 of the Labor Code of the Philippines as amended, the BANK
and the EMPLOYEE have entered into this Employment Contract as follows:
1. The BANK agrees to employ and train the EMPLOYEE, and the EMPLOYEE agrees to
diligently and faithfully work with the BANK, as Money Sorter and Counter.
2. The EMPLOYEE shall perform among others, the following duties and responsibilities:
i. Sort out bills according to color;
ii. Count each denomination per hundred, either
manually or with the aid of a counting machine;
iii. Wrap and label bills per hundred;
iv. Put the wrapped bills into bundles; and
v. Submit bundled bills to the bank teller for
verification.
3. The EMPLOYEE shall undergo a training period of one (1) month, after which the
BANK shall determine whether or not he/she should be allowed to finish the remaining
term of this Contract.
4. The EMPLOYEE shall be entitled to an initial compensation of P118.00 per day, subject
to adjustment in the sole judgment of the BANK, payable every 15th and end of the
month. .nt
5. The regular work schedule of the EMPLOYEE shall be five (5) days per week, from
Mondays thru Fridays, at eight (8) hours a day. The EMPLOYEE may be required to
perform overtime work as circumstance may warrant, for which overtime work he/she
[shall] be paid an additional compensation of 125% of his daily rate if performed during
ordinary days and 130% if performed during Saturday or [a] rest day.
6. The EMPLOYEE shall likewise be entitled to the following benefits:
i. Proportionate 13th month pay based on his basic
daily wage.
ii. Five (5) days incentive leave.
iii. SSS premium payment.
7. The EMPLOYEE binds himself/herself to abide [by] and comply with all the BANK Rules
and Regulations and Policies, and to conduct himself/herself in a manner expected of all
employees of the BANK.
8. The EMPLOYEE acknowledges the fact that he/she had been employed under a
special employment program of the BANK, for which reason the standard hiring
requirements of the BANK were not applied in his/her case. Consequently, the
EMPLOYEE acknowledges and accepts the fact that the terms and conditions of the
employment generally observed by the BANK with respect to the BANK's regular
employee are not applicable to the EMPLOYEE, and that therefore, the terms and
conditions of the EMPLOYEE's employment with the BANK shall be governed solely and
exclusively by this Contract and by the applicable rules and regulations that the
Department of Labor and Employment may issue in connection with the employment
of disabled and handicapped workers. More specifically, the EMPLOYEE hereby
acknowledges that the provisions of Book Six of the Labor Code of the Philippines as
amended, particularly on regulation of employment and separation pay are not applicable
to him/her.
9. The Employment Contract shall be for a period of six (6) months or from to
unless earlier terminated by the BANK for any just or reasonable cause. Any continuation
or extension of this Contract shall be in writing and therefore this Contract will
automatically expire at the end of its terms unless renewed in writing by the BANK.
IN WITNESS WHEREOF, the parties, have hereunto affixed their signature[s] this
day of , at Intramuros, Manila, Philippines.

92
 In 1988, two (2) deaf-mutes were hired under this Agreement; in 1989 another two (2); in 1990, nineteen
(19); in 1991 six (6); in 1992, six (6) and in 1993, twenty-one (21). Their employment[s] were renewed every
six months such that by the time this case arose, there were fifty-six (56) deaf-mutes who were employed by
respondent under the said employment agreement. The last one was Thelma Malindoy who was employed
in 1992 and whose contract expired on July 1993.
xxx xxx xxx
Disclaiming that complainants were regular employees, respondent Far East Bank and Trust Company
maintained that complainants who are a special class of workers the hearing impaired employees were
hired temporarily under [a] special employment arrangement which was a result of overtures made by some
civic and political personalities to the respondent Bank; that complainant[s] were hired due to "pakiusap"
which must be considered in the light of the context career and working environment which is to maintain
and strengthen a corps of professionals trained and qualified officers and regular employees who are
baccalaureate degree holders from excellent schools which is an unbending policy in the hiring of regular
employees; that in addition to this, training continues so that the regular employee grows in the corporate
ladder; that the idea of hiring handicapped workers was acceptable to them only on a special arrangement
basis; that it was adopted the special program to help tide over a group of workers such as deaf-mutes like
the complainants who could do manual work for the respondent Bank; that the task of counting and sorting
of bills which was being performed by tellers could be assigned to deaf-mutes that the counting and sorting
of money are tellering works which were always logically and naturally part and parcel of the tellers' normal
functions; that from the beginning there have been no separate items in the respondent Bank plantilla for
sortes or counters; that the tellers themselves already did the sorting and counting chore as a regular
feature and integral part of their duties (p. 97, Records); that through the "pakiusap" of Arturo Borjal, the
tellers were relieved of this task of counting and sorting bills in favor of deaf-mutes without creating new
positions as there is no position either in the respondent or in any other bank in the Philippines which deals
with purely counting and sorting of bills in banking operations.
Petitioners specified when each of them was hired and dimissed, viz: 7
NAME OF PETITIONER WORKPLACE Date Hired Date Dismissed
1. MARITES BERNARDO Intramuros 12-Nov-90 17-Nov-93
2. ELVIRA GO DIAMANTE Intramuros 24-Jan-90 11-Jan-94
3. REBECCA E. DAVID Intramuros 16-Apr-90 23-Oct-93
4. DAVID P. PASCUAL Bel-Air 15-Oct-88 21-Nov-94
5. RAQUEL ESTILLER Intramuros 2-Jul-92 4-Jan-94
6. ALBERT HALLARE West 4-Jan-91 9-Jan-94
7. EDMUND M. CORTEZ Bel-Air 15-Jan-91 3-Dec-93
8. JOSELITO O. AGDON Intramuros 5-Nov-90 17-Nov-93
9. GEORGE P. LIGUTAN JR. Intramuros 6-Sep-89 19-Jan-94
10. CELSO M. YAZAR Intramuros 8-Feb-93 8-Aug-93
11. ALEX G. CORPUZ Intramuros 15-Feb-93 15-Aug-93
12. RONALD M. DELFIN Intramuros 22-Feb-93 22-Aug-93
13. ROWENA M. TABAQUERO Intramuros 22-Feb-93 22-Aug-93
14. CORAZON C. DELOS REYES Intramuros 8-Feb-93 8-Aug-93
15. ROBERT G. NOORA Intramuros 15-Feb-93 15-Aug-93
16. MILAGROS O. LEQUIGAN Intramuros 1-Feb-93 1-Aug-93
17. ADRIANA F. TATLONGHARI Intramuros 22-Jan-93 22-Jul-93
18. IKE CABUNDUCOS Intramuros 24-Feb-93 24-Aug-93
19. COCOY NOBELLO Intramuros 22-Feb-93 22-Aug-93
20. DORENDA CATIMBUHAN Intramuros 15-Feb-93 15-Aug-93
21. ROBERT MARCELO West 31 JUL 93 8 1-Aug-93
22. LILIBETH Q. MARMOLEJO West 15-Jun-90 21-Nov-93
23. JOSE E. SALES West 6-Aug-92 12-Oct-93
24. ISABEL MAMAUAG West 8-May-92 10-Nov-93

93
 25. VIOLETA G. MONTES Intramuros 2-Feb-90 15-Jan-94
26. ALBINO TECSON Intramuros 7-Nov-91 10-Nov-93
27. MELODY B. GRUELA West 28-Oct-91 3-Nov-93
28. BERNADETH D. AGERO West 19-Dec-90 27-Dec-93
29. CYNTHIA DE VERA Bel-Air 26-Jun-90 3-Dec-93
30. LANI R. CORTEZ Bel-Air 15-Oct-88 10-Dec-93
31. MARIA ISABEL B.CONCEPCION West 6-Sep-90 6-Feb-94
32. DINDO VALERIO Intramuros 30-May-93 30-Nov-93
33. ZENAIDA MATA Intramuros 10-Feb-93 10-Aug-93
34. ARIEL DEL PILAR Intramuros 24-Feb-93 24-Aug-93
35. MARGARET CECILIA CANOZA Intramuros 27-Jul-90 4-Feb-94
36. THELMA SEBASTIAN Intramuros 12-Nov-90 17-Nov-93
37. MA. JEANETTE CERVANTES West 6-Jun-92 7-Dec-93
38. JEANNIE RAMIL Intramuros 23-Apr-90 12-Oct-93
39. ROZAIDA PASCUAL Bel-Air 20-Apr-89 29-Oct-93
40. PINKY BALOLOA West 3-Jun-91 2-Dec-93
41. ELIZABETH VENTURA West 12-Mar-90 FEB 94 [sic]
42. GRACE S. PARDO West 4-Apr-90 13-Mar-94
43. RICO TIMOSA Intramuros 28-Apr-93 28-Oct-93
As earlier noted, the labor arbiter and, on appeal, the NLRC ruled against herein petitioners. Hence, this recourse to this
Court. 9
The Ruling of the NLRC
In affirming the ruling of the labor arbiter that herein petitioners could not be deemed regular employees under Article 280 of
the Labor Code, as amended, Respondent Commission ratiocinated as follows:
We agree that Art. 280 is not controlling herein. We give due credence to the conclusion that complainants
were hired as an accommodation to [the] recommendation of civic oriented personalities whose
employment[s] were covered by . . . Employment Contract[s] with special provisions on duration of contract
as specified under Art. 80. Hence, as correctly held by the Labor Arbiter a quo, the terms of the contract
shall be the law between the parties. 10
The NLRC also declared that the Magna Carta for Disabled Persons was not applicable, "considering the prevailing
circumstances/milieu of the case."
Issues
In their Memorandum, petitioners cite the following grounds in support of their cause:
I. The Honorable Commission committed grave abuse of discretion in holding that the petitioners money
sorters and counters working in a bank were not regular employees.
II. The Honorable Commission committed grave abuse of discretion in holding that the employment
contracts signed and renewed by the petitioners which provide for a period of six (6) months were
valid.
III. The Honorable Commission committed grave abuse of discretion in not applying the provisions of the
Magna Carta for the Disabled (Republic Act No. 7277), on proscription against discrimination against
disabled persons. 11
In the main, the Court will resolve whether petitioners have become regular employees.
This Court's Ruling
The petition is meritorious. However, only the employees, who worked for more than six months and whose contracts were
renewed are deemed regular. Hence, their dismissal from employement was illegal.
Preliminary Matter:
Propriety of Certiorari
Respondent Far East Bank and Trust Company argues that a review of the findings of facts of the NLRC is not allowed in a
petition for certiorari. Specifically, it maintains that the Court cannot pass upon the findings of public respondent that
petitioners were not regular employees.
True, the Court, as a rule, does not review the factual findings of public respondents in a certiorari proceeding. In resolving
whether the petitioners have become regular employees, we shall not change the facts found by the public respondent. Our

94
task is merely to determine whether the NLRC committed grave abuse of discretion in applying the law to the established
facts, as above-quoted from the assailed Decision.
Main Issue
Are Petitioners Regular Employee?
Petitioners maintain that they should be considered regular employees, because their task as money sorters and counters was
necessary and desirable to the business of respondent bank. They further allege that their contracts served merely to preclude
the application of Article 280 and to bar them from becoming regular employees.
Private respondent, on the other hand, submits that petitioners were hired only as "special workers and should not in any way
be considered as part of the regular complement of the Bank." 12 Rather, they were "special" workers under Article 80 of the
Labor Code. Private respondent contends that it never solicited the services of petitioners, whose employment was merely an
"accommodation" in response to the requests of government officials and civic-minded citizens. They were told from the start,
"with the assistance of government representatives," that they could not become regular employees because there were no
plantilla positions for "money sorters," whose task used to be performed by tellers. Their contracts were renewed several
times, not because of need "but merely for humanitarian reasons." Respondent submits that "as of the present, the "special
position" that was created for the petitioners no longer exist[s] in private respondent [bank], after the latter had decided not to
renew anymore their special employment contracts."
At the outset, let it be known that this Court appreciates the nobility of private respondent's effort to provide employment to
physically impaired individuals and to make them more productive members of society. However, we cannot allow it to elude
the legal consequences of that effort, simply because it now deems their employment irrelevant. The facts, viewed in light of
the Labor Code and the Magna Carta for Disabled Persons, indubitably show that the petitioners, except sixteen of them,
should be deemed regular employees. As such, they have acquired legal rights that this Court is duty-bound to protect and
uphold, not as a matter of compassion but as a consequence of law and justice.
The uniform employment contracts of the petitioners stipulated that they shall be trained for a period of one month, after which
the employer shall determine whether or not they should be allowed to finish the 6-month term of the contract. Furthermore,
the employer may terminate the contract at any time for a just and reasonable cause. Unless renewed in writing by the
employer, the contract shall automatically expire at the end of the term. .nt
According to private respondent, the employment contracts were prepared in accordance with Article 80 of the Labor code,
which provides;
Art. 80. Employment agreement. Any employer who employs handicapped workers shall enter into an
employment agreement with them, which agreement shall include:
(a) The names and addresses of the handicapped workers to be employed;
(b) The rate to be paid the handicapped workers which shall be not less than seventy five
(75%) per cent of the applicable legal minimum wage;
(c) The duration of employment period; and
(d) The work to be performed by handicapped workers.
The employment agreement shall be subject to inspection by the Secretary of Labor or his duly authorized
representatives.
The stipulations in the employment contracts indubitably conform with the aforecited provision. Succeeding events and the
enactment of RA No. 7277 (the Magna Carta for Disabled Persons), 13 however, justify the application of Article 280 of the
Labor Code.
Respondent bank entered into the aforesaid contract with a total of 56 handicapped workers and renewed the contracts of 37
of them. In fact, two of them worked from 1988 to 1993. Verily, the renewal of the contracts of the handicapped workers and
the hiring of others lead to the conclusion that their tasks were beneficial and necessary to the bank. More important, these
facts show that they were qualified to perform the responsibilities of their positions. In other words, their disability did not
render them unqualified or unfit for the tasks assigned to them.
In this light, the Magna Carta for Disabled Persons mandates that a qualified disabled employee should be given the same
terms and conditions of employment as a qualified able-bodied person. Section 5 of the Magna Carta provides:
Sec. 5. Equal Opportunity for Employment. No disabled person shall be denied access to opportunities
for suitable employment. A qualified disabled employee shall be subject to the same terms and conditions of
employment and the same compensation, privileges, benefits, fringe benefits, incentives or allowances as a
qualified able bodied person.
The fact that the employees were qualified disabled persons necessarily removes the employment contracts from the ambit of
Article 80. Since the Magna Carta accords them the rights of qualified able-bodied persons, they are thus covered by Article
280 of the Labor Code, which provides:
Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be
regular where the employee has been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer, except where the employment has been fixed for a
95
 specific project or undertaking the completion or termination of which has been determined at the time of the
engagement of the employee or where the work or services to be performed is seasonal in nature and the
employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided,
That, any employee who has rendered at least one year of service, whether such service is continuous or
broken, shall be considered as regular employee with respect to the activity in which he is employed and his
employment shall continue while such activity exists.
The test of whether an employee is regular was laid down in De Leon v. NLRC, 14 in which this Court held:
The primary standard, therefore, of determining regular employment is the reasonable connection between
the particular activity performed by the employee in relation to the usual trade or business of the employer.
The test is whether the former is usually necessary or desirable in the usual business or trade of the
employer. The connection can be determined by considering the nature of the work performed and its
relation to the scheme of the particular business or trade in its entirety. Also if the employee has been
performing the job for at least one year, even if the performance is not continuous and merely intermittent,
the law deems repeated and continuing need for its performance as sufficient evidence of the necessity if
not indispensibility of that activity to the business. Hence, the employment is considered regular, but only
with respect to such activity, and while such activity exist.
Without a doubt, the task of counting and sorting bills is necessary and desirable to the business of respondent bank. With the
exception of sixteen of them, petitioners performed these tasks for more than six months. Thus, the following twenty-seven
petitioners should be deemed regular employees: Marites Bernardo, Elvira Go Diamante, Rebecca E. David, David P.
Pascual, Raquel Estiller, Albert Hallare, Edmund M. Cortez, Joselito O. Agdon, George P. Ligutan Jr., Lilibeth Q. Marmolejo,
Jose E. Sales, Isabel Mamauag, Violeta G. Montes, Albino Tecson, Melody V. Gruela, Bernadeth D. Agero, Cynthia de Vera,
Lani R. Cortez, Ma. Isabel B. Concepcion, Margaret Cecilia Canoza, Thelma Sebastian, Ma. Jeanette Cervantes, Jeannie
Ramil, Rozaida Pascual, Pinky Baloloa, Elizabeth Ventura and Grace S. Pardo.
As held by the Court, "Articles 280 and 281 of the Labor Code put an end to the pernicious practice of making permanent
casuals of our lowly employees by the simple expedient of extending to them probationary appointments, ad infinitum." 15 The
contract signed by petitioners is akin to a probationary employment, during which the bank determined the employees' fitness
for the job. When the bank renewed the contract after the lapse of the six-month probationary period, the employees thereby
became regular employees. 16 No employer is allowed to determine indefinitely the fitness of its employees.
As regular employees, the twenty-seven petitioners are entitled to security of tenure; that is, their services may be terminated
only for a just or authorized cause. Because respondent failed to show such cause, 17 these twenty-seven petitioners are
deemed illegally dismissed and therefore entitled to back wages and reinstatement without loss of seniority rights and other
privileges. 18 Considering the allegation of respondent that the job of money sorting is no longer available because it has been
assigned back to the tellers to whom it originally belonged, 18 petitioners are hereby awarded separation pay in lieu of
reinstatement. 20
Because the other sixteen worked only for six months, they are not deemed regular employees and hence not entitled to the
same benefits.
Applicability of the
Brent Ruling
Respondent bank, citing Brent School v. Zamora 21 in which the Court upheld the validity of an employment contract with a
fixed term, argues that the parties entered into the contract on equal footing. It adds that the petitioners had in fact an
advantage, because they were backed by then DSWD Secretary Mita Pardo de Tavera and Representative Arturo Borjal.
We are not persuaded. The term limit in the contract was premised on the fact that the petitioners were disabled, and that the
bank had to determine their fitness for the position. Indeed, its validity is based on Article 80 of the Labor Code. But as noted
earlier, petitioners proved themselves to be qualified disabled persons who, under the Magna Carta for Disabled Persons, are
entitled to terms and conditions of employment enjoyed by qualified able-bodied individuals; hence, Article 80 does not apply
because petitioners are qualified for their positions. The validation of the limit imposed on their contracts, imposed by reason
of their disability, was a glaring instance of the very mischief sought to be addressed by the new law.
Moreover, it must be emphasized that a contract of employment is impressed with public interest. 22 Provisions of applicable
statutes are deemed written into the contract, and the "parties are not at liberty to insulate themselves and their relationships
from the impact of labor laws and regulations by simply contracting with each other." 23 Clearly, the agreement of the parties
regarding the period of employment cannot prevail over the provisions of the Magna Carta for Disabled Persons, which
mandate that petitioners must be treated as qualified able-bodied employees.
Respondent's reason for terminating the employment of petitioners is instructive. Because the Bangko Sentral ng Pilipinas
(BSP) required that cash in the bank be turned over to the BSP during business hours from 8:00 a.m. to 5:00 p.m., respondent
resorted to nighttime sorting and counting of money. Thus, it reasons that this task "could not be done by deaf mutes because
of their physical limitations as it is very risky for them to travel at night." 24 We find no basis for this argument. Travelling at

96
night involves risks to handicapped and able-bodied persons alike. This excuse cannot justify the termination of their
employment.
Other Grounds Cited by Respondent
Respondent argues that petitioners were merely "accommodated" employees. This fact does not change the nature of their
employment. As earlier noted, an employee is regular because of the nature of work and the length of service, not because of
the mode or even the reason for hiring them.
Equally unavailing are private respondent's arguments that it did not go out of its way to recruit petitioners, and that its plantilla
did not contain their positions. In L. T. Datu v. NLRC, 25 the Court held that "the determination of whether employment is
casual or regular does not depend on the will or word of the employer, and the procedure of hiring . . . but on the nature of the
activities performed by the employee, and to some extent, the length of performance and its continued existence."
Private respondent argues that the petitioners were informed from the start that they could not become regular employees. In
fact, the bank adds, they agreed with the stipulation in the contract regarding this point. Still, we are not persuaded. The well-
settled rule is that the character of employment is determined not by stipulations in the contract, but by the nature of the work
performed. 26 Otherwise, no employee can become regular by the simple expedient of incorporating this condition in the
contract of employment.
In this light, we iterate our ruling in Romares v. NLRC: 27
Art. 280 was emplaced in our statute books to prevent the circumvention of the employee's right to be
secure in his tenure by indiscriminately and completely ruling out all written and oral agreements
inconsistent with the concept of regular employment defined therein. Where an employee has been engaged
to perform activities which are usually necessary or desirable in the usual business of the employer, such
employee is deemed a regular employee and is entitled to security of tenure notwithstanding the contrary
provisions of his contract of employment.
xxx xxx xxx
At this juncture, the leading case of Brent School, Inc. v. Zamora proves instructive. As reaffirmed in
subsequent cases, this Court has upheld the legality of fixed-term employment. It ruled that the decisive
determinant in "term employment" should not be the activities that the employee is called upon to perform
but the day certain agreed upon the parties for the commencement and termination of their employment
relationship. But this Court went on to say that where from the circumstances it is apparent that the periods
have been imposed to preclude acquisition of tenurial security by the employee, they should be struck down
or disregarded as contrary to public policy and morals.
In rendering this Decision, the Court emphasizes not only the constitutional bias in favor of the working class, but also the
concern of the State for the plight of the disabled. The noble objectives of Magna Carta for Disabled Persons are not based
merely on charity or accommodation, but on justice and the equal treatment of qualifiedpersons, disabled or not. In the present
case, the handicap of petitioners (deaf-mutes) is not a hindrance to their work. The eloquent proof of this statement is the
repeated renewal of their employment contracts. Why then should they be dismissed, simply because they are physically
impaired? The Court believes, that, after showing their fitness for the work assigned to them, they should be treated and
granted the same rights like any other regular employees.
In this light, we note the Office of the Solicitor General's prayer joining the petitioners' cause. 28
WHEREFORE, premises considered, the Petition is hereby GRANTED. The June 20, 1995 Decision and the August 4, 1995
Resolution of the NLRC are REVERSED and SET ASIDE. Respondent Far East Bank and Trust Company is hereby
ORDERED to pay back wages and separation pay to each of the following twenty-seven (27) petitioners, namely, Marites
Bernardo, Elvira Go Diamante, Rebecca E. David, David P. Pascual, Raquel Estiller, Albert Hallare, Edmund M. Cortez,
Joselito O. Agdon, George P. Ligutan Jr., Liliberh Q. Marmolejo, Jose E. Sales, Isabel Mamauag, Violeta G. Montes, Albino
Tecson, Melody V. Gruela, Bernadeth D. Agero, Cynthia de Vera, Lani R. Cortez, Ma. Isabel B. Concepcion, Margaret Cecilia
Canoza, Thelma Sebastian, Ma. Jeanette Cervantes, Jeannie Ramil, Rozaida Pascual, Pinky Baloloa, Elizabeth Ventura and
Grace S. Pardo. The NLRC is hereby directed to compute the exact amount due each of said employees, pursuant to existing
laws and regulations, within fifteen days from the finality of this Decision. No costs. .nt
SO ORDERED.

G.R. No. 187698 August 9, 2010

RODOLFO J. SERRANO, Petitioner,
vs.
SEVERINO SANTOS TRANSIT and/or SEVERINO SANTOS, Respondents.
DECISION
CARPIO MORALES, J.:
Petitioner Rodolfo J. Serrano was hired on September 28, 1992 as bus conductor by respondent Severino Santos Transit, a
bus company owned and operated by its co-respondent Severino Santos.

97
After 14 years of service or on July 14, 2006, petitioner applied for optional retirement from the company whose representative
advised him that he must first sign the already prepared Quitclaim before his retirement pay could be released. As petitioners
request to first go over the computation of his retirement pay was denied, he signed the Quitclaim on which he wrote "U.P."
(under protest) after his signature, indicating his protest to the amount of P75,277.45 which he received, computed by the
company at 15 days per year of service.
Petitioner soon after filed a complaint1 before the Labor Arbiter, alleging that the company erred in its computation since under
Republic Act No. 7641, otherwise known as the Retirement Pay Law, his retirement pay should have been computed at 22.5
days per year of service to include the cash equivalent of the 5-day service incentive leave (SIL) and 1/12 of the 13th month pay
which the company did not.
The company maintained, however, that the Quitclaim signed by petitioner barred his claim and, in any event, its computation
was correct since petitioner was not entitled to the 5-day SIL and pro-rated 13th month pay for, as a bus conductor, he was
paid on commission basis. Respondents, noting that the retirement differential pay amounted to only P1,431.15, explained that
in the computation of petitioners retirement pay, five months were inadvertently not included because some index cards
containing his records had been lost.
By Decision2 of February 15, 2007, Labor Arbiter Cresencio Ramos, Jr. ruled in favor of petitioner, awarding him P116,135.45
as retirement pay differential, and 10% of the total monetary award as attorneys fees. In arriving at such computation, the
Labor Arbiter ratiocinated:
In the same Labor Advisory on Retirement Pay Law, it was likewise decisively made clear that "the law expanded the concept
of "one-half month salary" from the usual one-month salary divided by two", to wit:
B. COMPUTATION OF RETIREMENT PAY
A covered employee who retires pursuant to RA 7641 shall be entitled to retirement pay equivalent to at least one-half (1/12)
month salary for every year of service, a fraction of at least six (6) months being considered as one whole year.
The law is explicit that "one-half month salary shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the
cash equivalent of not more than five (5) days service incentive leaves" unless the parties provide for broader
inclusions. Evidently, the law expanded the concept of "one-half month salary" from the usual one-month salary divided by
two.
The retirement pay is equal to half-months pay per year of service. But "half-months pay" is "expanded" because it means not
just the salary for 15 days but also one-twelfth of the 13th-month pay and the cash value of five-day service incentive
leave. THIS IS THE MINIMUM. The retirement pay package can be improved upon by voluntary company policy, or particular
agreement with the employee, or through a collective bargaining agreement." (The Labor Code with Comments and Cases,
C.A. Azcunea, Vol. II, page 765, Fifth Edition 2004).
Thus, having established that 22.5 days pay per year of service is the correct formula in arriving at the complete retirement
pay of complainant and inasmuch as complainants daily earning is based on commission earned in a day, which varies each
day, the next critical issue that needs discernment is the determination of what is a fair and rational amount of daily earning of
complainant to be used in the computation of his retirement pay.
While complainant endeavored to substantiate his claim that he earned average daily commission of P700.00, however, the
documents he presented are not complete, simply representative copies, therefore unreliable. On the other haNd, while
respondents question complainants use of P700.00 (daily income) as basis in determining the latters correct retirement pay,
however it does not help their defense that they did not present a single Conductors Trip Report to contradict the claim of
complainant. Instead, respondents adduced a handwritten summary of complainants monthly income from 1993 until June
2006. It must be noted also that complainant did not contest the amounts stated on the summary of his monthly income as
reported by respondents. Given the above considerations, and most importantly that complainant did not dispute the figures
stated in that document, we find it logical, just and equitable for both parties to rely on the summary of monthly income
provided by respondent, thus, we added complainants monthly income from June 2005 until June 2006 or the last twelve
months and we arrived at P189,591.30) and we divided it by twelve (12) to arrive at complainants average monthly earning
of P15,799.28. Thereafter, the average monthly of P15,799.28 is divided by twenty-six (26) days, the factor commonly used in
determining the regular working days in a month, to arrive at his average daily income of P607.66. Finally, P607.66 (average
daily income) x 22.5 days = P13,672.35 x 14 (length of service) = P191,412.90 (COMPLETE RETIREMENT PAY). However,
inasmuch as complainant already received P75,277.45, the retirement differential pay due him is P116,135.45 (P191,412.90
P75,277.45). (underscoring partly in the original and partly supplied)
The National Labor Relations Commission (NLRC) to which respondents appealed reversed the Labor Arbiters ruling and
dismissed petitioners complaint by Decision3 dated April 23, 2008. It, however, ordered respondents to pay retirement
differential in the amount of P2,365.35.
Citing R & E Transport, Inc. v. Latag,4 the NLRC held that since petitioner was paid on purely commission basis, he was
excluded from the coverage of the laws on 13th month pay and SIL pay, hence, the 1/12 of the 13th month pay and the 5-day
SIL should not be factored in the computation of his retirement pay.
Petitioners motion for reconsideration having been denied by Resolution5 of June 27, 2008, he appealed to the Court of
Appeals.
98
By the assailed Decision6 of February 11, 2009, the appellate court affirmed the NLRCs ruling, it merely holding that it was
based on substantial evidence, hence, should be respected.
Petitioners motion for reconsideration was denied, hence, the present petition for review on certiorari.
The petition is meritorious.
Republic Act No. 7641 which was enacted on December 9, 1992 amended Article 287 of the Labor Code by providing for
retirement pay to qualified private sector employees in the absence of any retirement plan in the establishment. The pertinent
provision of said law reads:
Section 1. Article 287 of Presidential Decree No. 442, as amended, otherwise known as the Labor Code of the Philippines, is
hereby amended to read as follows:
xxxx
In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment,
an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby
declared the compulsory retirement age, who has served at least five (5) yearsin the said establishment, may retire
and shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a
fraction of at least six (6) months being considered as one whole year.
Unless the parties provide for broader inclusions, the term one-half (1/2) month salary shall mean fifteen (15) days
plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five (5) days of service
incentive leaves.
Retail, service and agricultural establishments or operations employing not more than (10) employees or workers are
exempted from the coverage of this provision.
x x x x (emphasis and underscoring supplied)
Further, the Implementing Rules of said law provide:
RULE II
Retirement Benefits
SECTION 1.
General Statement on Coverage. This Rule shall apply to all employees in the private sector, regardless of their
position, designation or status and irrespective of the method by which their wages are paid, except to those
specifically exempted under Section 2 hereof. As used herein, the term "Act" shall refer to Republic Act No. 7641 which
took effect on January 7, 1993.
SECTION 2
Exemptions. This Rule shall not apply to the following employees:
2.1 Employees of the National Government and its political subdivisions, including Government-owned and/or controlled
corporations, if they are covered by the Civil Service Law and its regulations.
2.2 Domestic helpers and persons in the personal service of another.
2.3 Employees of retail, service and agricultural establishment or operations regularly employing not more than ten
(10) employees. As used in this sub-section;
xxxx
SECTION 5
Retirement Benefits.
5.1 In the absence of an applicable agreement or retirement plan, an employee who retires pursuant to the Act shall be
entitled to retirement pay equivalent to at least one-half () month salary for every year of service, a fraction of at least six (6)
months being considered as one whole year.
5.2 Components of One-half () Month Salary. For the purpose of determining the minimum retirement pay due an
employee under this Rule, the term "one-half month salary" shall include all of the following:
(a) Fifteen (15) days salary of the employee based on his latest salary rate. As used herein, the term "salary"
includes all remunerations paid by an employer to his employees for services rendered during normal
working days and hours, whether such payments are fixed or ascertained on a time, task, piece of
commission basis, or other method of calculating the same, and includes the fair and reasonable value, as
determined by the Secretary of Labor and Employment, of food, lodging or other facilities customarily furnished by the
employer to his employees. The term does not include cost of living allowances, profit-sharing payments and other
monetary benefits which are not considered as part of or integrated into the regular salary of the employees.
(b) The cash equivalent of not more than five (5) days of service incentive leave;
(c) One-twelfth of the 13th month pay due the employee.
(d) All other benefits that the employer and employee may agree upon that should be included in the computation of
the employees retirement pay.
x x x x (emphasis supplied)
Admittedly, petitioner worked for 14 years for the bus company which did not adopt any retirement scheme. Even if petitioner
as bus conductor was paid on commission basis then, he falls within the coverage of R.A. 7641 and its implementing rules. As
99
thus correctly ruled by the Labor Arbiter, petitioners retirement pay should include the cash equivalent of the 5-day SIL
and 1/12 of the 13th month pay.
The affirmance by the appellate court of the reliance by the NLRC on R & E Transport, Inc. is erroneous. In said case, the
Court held that a taxi driver paid according to the "boundary system" is not entitled to the 13th month and the SIL pay, hence,
his retirement pay should be computed on the sole basis of his salary.
For purposes, however, of applying the law on SIL, as well as on retirement, the Court notes that there is a difference between
drivers paid under the "boundary system" and conductors who are paid on commission basis.
In practice, taxi drivers do not receive fixed wages. They retain only those sums in excess of the "boundary" or fee they pay to
the owners or operators of the vehicles.7 Conductors, on the other hand, are paid a certain percentage of the bus earnings for
the day.
It bears emphasis that under P.D. 851 or the SIL Law, the exclusion from its coverage of workers who are paid on a purely
commission basis is only with respect to field personnel. The more recent case of Auto Bus Transport Systems, Inc., v.
Bautista8 clarifies that an employee who is paid on purely commission basis is entitled to SIL:
A careful perusal of said provisions of law will result in the conclusion that the grant of service incentive leave has been
delimited by the Implementing Rules and Regulations of the Labor Code to apply only to those employees not explicitly
excluded by Section 1 of Rule V. According to the Implementing Rules, Service Incentive Leave shall not apply to
employees classified as "field personnel." The phrase "other employees whose performance is unsupervised by the
employer" must not be understood as a separate classification of employees to which service incentive leave shall not be
granted. Rather, it serves as an amplification of the interpretation of the definition of field personnel under the Labor Code as
those "whose actual hours of work in the field cannot be determined with reasonable certainty."
The same is true with respect to the phrase "those who are engaged on task or contract basis, purely commission
basis." Said phrase should be related with "field personnel," applying the rule on ejusdem generis that general and
unlimited terms are restrained and limited by the particular terms that they follow. Hence, employees engaged on task or
contract basis or paid on purely commission basis are not automatically exempted from the grant of service incentive
leave, unless, they fall under the classification of field personnel.
xxxx
According to Article 82 of the Labor Code, "field personnel" shall refer to non-agricultural employees who regularly
perform their duties away from the principal place of business or branch office of the employer and whose actual
hours of work in the field cannot be determined with reasonable certainty. This definition is further elaborated in
the Bureau of Working Conditions (BWC), Advisory Opinion to Philippine Technical-Clerical Commercial Employees
Association which states that:
As a general rule, [field personnel] are those whose performance of their job/service is not supervised by the employer or his
representative, the workplace being away from the principal office and whose hours and days of work cannot be determined
with reasonable certainty; hence, they are paid specific amount for rendering specific service or performing specific work. If
required to be at specific places at specific times, employees including drivers cannot be said to be field personnel
despite the fact that they are performing work away from the principal office of the employee.
x x x x (emphasis, italics and underscoring supplied)
WHEREFORE, the petition is GRANTED. The Court of Appeals Decision of February 11, 2009 and Resolution of April 28,
2009 are REVERSED and SET ASIDE and the Labor Arbiters Decision dated February 15, 2007 is REINSTATED.
SO ORDERED.

G.R. No. 156367 May 16, 2005

AUTO BUS TRANSPORT SYSTEMS, INC., petitioner,
vs.
ANTONIO BAUTISTA, respondent.
DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari assailing the Decision1 and Resolution2 of the Court of Appeals affirming the
Decision3 of the National Labor Relations Commission (NLRC). The NLRC ruling modified the Decision of the Labor Arbiter
(finding respondent entitled to the award of 13th month pay and service incentive leave pay) by deleting the award of
13th month pay to respondent.
THE FACTS
Since 24 May 1995, respondent Antonio Bautista has been employed by petitioner Auto Bus Transport Systems, Inc.
(Autobus), as driver-conductor with travel routes Manila-Tuguegarao via Baguio, Baguio- Tuguegarao via Manila and Manila-
Tabuk via Baguio. Respondent was paid on commission basis, seven percent (7%) of the total gross income per travel, on a
twice a month basis.

100
On 03 January 2000, while respondent was driving Autobus No. 114 along Sta. Fe, Nueva Vizcaya, the bus he was driving
accidentally bumped the rear portion of Autobus No. 124, as the latter vehicle suddenly stopped at a sharp curve without
giving any warning.
Respondent averred that the accident happened because he was compelled by the management to go back to Roxas,
Isabela, although he had not slept for almost twenty-four (24) hours, as he had just arrived in Manila from Roxas, Isabela.
Respondent further alleged that he was not allowed to work until he fully paid the amount of P75,551.50, representing thirty
percent (30%) of the cost of repair of the damaged buses and that despite respondents pleas for reconsideration, the same
was ignored by management. After a month, management sent him a letter of termination.
Thus, on 02 February 2000, respondent instituted a Complaint for Illegal Dismissal with Money Claims for nonpayment of
13th month pay and service incentive leave pay against Autobus.
Petitioner, on the other hand, maintained that respondents employment was replete with offenses involving reckless
imprudence, gross negligence, and dishonesty. To support its claim, petitioner presented copies of letters, memos, irregularity
reports, and warrants of arrest pertaining to several incidents wherein respondent was involved.
Furthermore, petitioner avers that in the exercise of its management prerogative, respondents employment was terminated
only after the latter was provided with an opportunity to explain his side regarding the accident on 03 January 2000.
On 29 September 2000, based on the pleadings and supporting evidence presented by the parties, Labor Arbiter Monroe C.
Tabingan promulgated a Decision,4 the dispositive portion of which reads:
WHEREFORE, all premises considered, it is hereby found that the complaint for Illegal Dismissal has no leg to stand
on. It is hereby ordered DISMISSED, as it is hereby DISMISSED.
However, still based on the above-discussed premises, the respondent must pay to the complainant the following:
a. his 13th month pay from the date of his hiring to the date of his dismissal, presently computed at
P78,117.87;
b. his service incentive leave pay for all the years he had been in service with the respondent, presently
computed at P13,788.05.
All other claims of both complainant and respondent are hereby dismissed for lack of merit. 5
Not satisfied with the decision of the Labor Arbiter, petitioner appealed the decision to the NLRC which rendered its decision
on 28 September 2001, the decretal portion of which reads:
[T]he Rules and Regulations Implementing Presidential Decree No. 851, particularly Sec. 3 provides:
"Section 3. Employers covered. The Decree shall apply to all employers except to:
xxx xxx xxx
e) employers of those who are paid on purely commission, boundary, or task basis, performing a specific
work, irrespective of the time consumed in the performance thereof. xxx."
Records show that complainant, in his position paper, admitted that he was paid on a commission basis.
In view of the foregoing, we deem it just and equitable to modify the assailed Decision by deleting the award of
13th month pay to the complainant.

WHEREFORE, the Decision dated 29 September 2000 is MODIFIED by deleting the award of 13th month pay. The
other findings are AFFIRMED.6
In other words, the award of service incentive leave pay was maintained. Petitioner thus sought a reconsideration of this
aspect, which was subsequently denied in a Resolution by the NLRC dated 31 October 2001.
Displeased with only the partial grant of its appeal to the NLRC, petitioner sought the review of said decision with the Court of
Appeals which was subsequently denied by the appellate court in a Decision dated 06 May 2002, the dispositive portion of
which reads:
WHEREFORE, premises considered, the Petition is DISMISSED for lack of merit; and the assailed Decisionof
respondent Commission in NLRC NCR CA No. 026584-2000 is hereby AFFIRMED in toto. No costs.7
Hence, the instant petition.
ISSUES
1. Whether or not respondent is entitled to service incentive leave;
2. Whether or not the three (3)-year prescriptive period provided under Article 291 of the Labor Code, as amended, is
applicable to respondents claim of service incentive leave pay.
RULING OF THE COURT
The disposition of the first issue revolves around the proper interpretation of Article 95 of the Labor Code vis--visSection 1(D),
Rule V, Book III of the Implementing Rules and Regulations of the Labor Code which provides:
Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE
(a) Every employee who has rendered at least one year of service shall be entitled to a yearly service
incentive leave of five days with pay.
Book III, Rule V: SERVICE INCENTIVE LEAVE
SECTION 1. Coverage. This rule shall apply to all employees except:

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(d) Field personnel and other employees whose performance is unsupervised by the employer including
those who are engaged on task or contract basis, purely commission basis, or those who are paid in a fixed
amount for performing work irrespective of the time consumed in the performance thereof; . . .
A careful perusal of said provisions of law will result in the conclusion that the grant of service incentive leave has been
delimited by the Implementing Rules and Regulations of the Labor Code to apply only to those employees not explicitly
excluded by Section 1 of Rule V. According to the Implementing Rules, Service Incentive Leave shall not apply to employees
classified as "field personnel." The phrase "other employees whose performance is unsupervised by the employer" must not
be understood as a separate classification of employees to which service incentive leave shall not be granted. Rather, it
serves as an amplification of the interpretation of the definition of field personnel under the Labor Code as those "whose actual
hours of work in the field cannot be determined with reasonable certainty." 8
The same is true with respect to the phrase "those who are engaged on task or contract basis, purely commission basis." Said
phrase should be related with "field personnel," applying the rule on ejusdem generis that general and unlimited terms are
restrained and limited by the particular terms that they follow. 9 Hence, employees engaged on task or contract basis or paid on
purely commission basis are not automatically exempted from the grant of service incentive leave, unless, they fall under the
classification of field personnel.
Therefore, petitioners contention that respondent is not entitled to the grant of service incentive leave just because he was
paid on purely commission basis is misplaced. What must be ascertained in order to resolve the issue of propriety of the grant
of service incentive leave to respondent is whether or not he is a field personnel.
According to Article 82 of the Labor Code, "field personnel" shall refer to non-agricultural employees who regularly perform
their duties away from the principal place of business or branch office of the employer and whose actual hours of work in the
field cannot be determined with reasonable certainty. This definition is further elaborated in the Bureau of Working Conditions
(BWC), Advisory Opinion to Philippine Technical-Clerical Commercial Employees Association10 which states that:
As a general rule, [field personnel] are those whose performance of their job/service is not supervised by the
employer or his representative, the workplace being away from the principal office and whose hours and days of work
cannot be determined with reasonable certainty; hence, they are paid specific amount for rendering specific service
or performing specific work. If required to be at specific places at specific times, employees including drivers cannot
be said to be field personnel despite the fact that they are performing work away from the principal office of the
employee. [Emphasis ours]
To this discussion by the BWC, the petitioner differs and postulates that under said advisory opinion, no employee would ever
be considered a field personnel because every employer, in one way or another, exercises control over his employees.
Petitioner further argues that the only criterion that should be considered is the nature of work of the employee in that, if the
employees job requires that he works away from the principal office like that of a messenger or a bus driver, then he is
inevitably a field personnel.
We are not persuaded. At this point, it is necessary to stress that the definition of a "field personnel" is not merely concerned
with the location where the employee regularly performs his duties but also with the fact that the employees performance is
unsupervised by the employer. As discussed above, field personnel are those who regularly perform their duties away from the
principal place of business of the employer and whose actual hours of work in the field cannot be determined with reasonable
certainty. Thus, in order to conclude whether an employee is a field employee, it is also necessary to ascertain if actual hours
of work in the field can be determined with reasonable certainty by the employer. In so doing, an inquiry must be made as to
whether or not the employees time and performance are constantly supervised by the employer.
As observed by the Labor Arbiter and concurred in by the Court of Appeals:
It is of judicial notice that along the routes that are plied by these bus companies, there are its inspectors assigned at
strategic places who board the bus and inspect the passengers, the punched tickets, and the conductors reports.
There is also the mandatory once-a-week car barn or shop day, where the bus is regularly checked as to its
mechanical, electrical, and hydraulic aspects, whether or not there are problems thereon as reported by the driver
and/or conductor. They too, must be at specific place as [sic] specified time, as they generally observe prompt
departure and arrival from their point of origin to their point of destination. In each and every depot, there is always
the Dispatcher whose function is precisely to see to it that the bus and its crew leave the premises at specific times
and arrive at the estimated proper time. These, are present in the case at bar. The driver, the complainant herein,
was therefore under constant supervision while in the performance of this work. He cannot be considered a field
personnel.11
We agree in the above disquisition. Therefore, as correctly concluded by the appellate court, respondent is not a field
personnel but a regular employee who performs tasks usually necessary and desirable to the usual trade of petitioners
business. Accordingly, respondent is entitled to the grant of service incentive leave.
The question now that must be addressed is up to what amount of service incentive leave pay respondent is entitled to.
The response to this query inevitably leads us to the correlative issue of whether or not the three (3)-year prescriptive period
under Article 291 of the Labor Code is applicable to respondents claim of service incentive leave pay.
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Article 291 of the Labor Code states that all money claims arising from employer-employee relationship shall be filed within
three (3) years from the time the cause of action accrued; otherwise, they shall be forever barred.
In the application of this section of the Labor Code, the pivotal question to be answered is when does the cause of action for
money claims accrue in order to determine the reckoning date of the three-year prescriptive period.
It is settled jurisprudence that a cause of action has three elements, to wit, (1) a right in favor of the plaintiff by whatever
means and under whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect or not to
violate such right; and (3) an act or omission on the part of such defendant violative of the right of the plaintiff or constituting a
breach of the obligation of the defendant to the plaintiff.12
To properly construe Article 291 of the Labor Code, it is essential to ascertain the time when the third element of a cause of
action transpired. Stated differently, in the computation of the three-year prescriptive period, a determination must be made as
to the period when the act constituting a violation of the workers right to the benefits being claimed was committed. For if the
cause of action accrued more than three (3) years before the filing of the money claim, said cause of action has already
prescribed in accordance with Article 291.13
Consequently, in cases of nonpayment of allowances and other monetary benefits, if it is established that the benefits being
claimed have been withheld from the employee for a period longer than three (3) years, the amount pertaining to the period
beyond the three-year prescriptive period is therefore barred by prescription. The amount that can only be demanded by the
aggrieved employee shall be limited to the amount of the benefits withheld within three (3) years before the filing of the
complaint.14
It is essential at this point, however, to recognize that the service incentive leave is a curious animal in relation to other
benefits granted by the law to every employee. In the case of service incentive leave, the employee may choose to either use
his leave credits or commute it to its monetary equivalent if not exhausted at the end of the year.15 Furthermore, if the
employee entitled to service incentive leave does not use or commute the same, he is entitled upon his resignation or
separation from work to the commutation of his accrued service incentive leave. As enunciated by the Court in Fernandez v.
NLRC:16
The clear policy of the Labor Code is to grant service incentive leave pay to workers in all establishments, subject to
a few exceptions. Section 2, Rule V, Book III of the Implementing Rules and Regulations provides that "[e]very
employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave of five
days with pay." Service incentive leave is a right which accrues to every employee who has served "within 12
months, whether continuous or broken reckoned from the date the employee started working, including authorized
absences and paid regular holidays unless the working days in the establishment as a matter of practice or policy, or
that provided in the employment contracts, is less than 12 months, in which case said period shall be considered as
one year." It is also "commutable to its money equivalent if not used or exhausted at the end of the year." In other
words, an employee who has served for one year is entitled to it. He may use it as leave days or he may collect its
monetary value. To limit the award to three years, as the solicitor general recommends, is to unduly restrict such
right.17 [Italics supplied]
Correspondingly, it can be conscientiously deduced that the cause of action of an entitled employee to claim his service
incentive leave pay accrues from the moment the employer refuses to remunerate its monetary equivalent if the employee did
not make use of said leave credits but instead chose to avail of its commutation. Accordingly, if the employee wishes to
accumulate his leave credits and opts for its commutation upon his resignation or separation from employment, his cause of
action to claim the whole amount of his accumulated service incentive leave shall arise when the employer fails to pay such
amount at the time of his resignation or separation from employment.
Applying Article 291 of the Labor Code in light of this peculiarity of the service incentive leave, we can conclude that the three
(3)-year prescriptive period commences, not at the end of the year when the employee becomes entitled to the commutation of
his service incentive leave, but from the time when the employer refuses to pay its monetary equivalent after demand of
commutation or upon termination of the employees services, as the case may be.
The above construal of Art. 291, vis--vis the rules on service incentive leave, is in keeping with the rudimentary principle that
in the implementation and interpretation of the provisions of the Labor Code and its implementing regulations, the
workingmans welfare should be the primordial and paramount consideration. 18 The policy is to extend the applicability of the
decree to a greater number of employees who can avail of the benefits under the law, which is in consonance with the avowed
policy of the State to give maximum aid and protection to labor. 19
In the case at bar, respondent had not made use of his service incentive leave nor demanded for its commutation until his
employment was terminated by petitioner. Neither did petitioner compensate his accumulated service incentive leave pay at
the time of his dismissal. It was only upon his filing of a complaint for illegal dismissal, one month from the time of his
dismissal, that respondent demanded from his former employer commutation of his accumulated leave credits. His cause of
action to claim the payment of his accumulated service incentive leave thus accrued from the time when his employer
dismissed him and failed to pay his accumulated leave credits.
Therefore, the prescriptive period with respect to his claim for service incentive leave pay only commenced from the time the
employer failed to compensate his accumulated service incentive leave pay at the time of his dismissal. Since respondent had
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filed his money claim after only one month from the time of his dismissal, necessarily, his money claim was filed within the
prescriptive period provided for by Article 291 of the Labor Code.
WHEREFORE, premises considered, the instant petition is hereby DENIED. The assailed Decision of the Court of Appeals in
CA-G.R. SP. No. 68395 is hereby AFFIRMED. No Costs.
SO ORDERED.

G.R. No. 195466 July 2, 2014

ARIEL L. DAVID, doing business under the name and style "YIELS HOG DEALER," Petitioner,
vs.
JOHN G. MACASIO, Respondent.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari1 the challenge to the November 22, 2010 decision 2 and the January 31, 2011
resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 116003. The CA decision annulled and set aside the May 26, 2010
decision4 of the National Labor Relations Commission (NLRC)5 which, in turn, affirmed the April 30, 2009 Decision6 of the
Labor Arbiter (LA). The LA's decision dismissed respondent John G. Macasio's monetary claims.
The Factual Antecedents
In January 2009, Macasio filed before the LA a complaint7 against petitioner Ariel L. David, doing business under the name
and style "Yiels Hog Dealer," for non-payment of overtime pay, holiday pay and 13th month pay. He also claimed payment for
moral and exemplary damages and attorneys fees. Macasio also claimed payment for service incentive leave (SIL). 8
Macasio alleged9 before the LA that he had been working as a butcher for David since January 6, 1995. Macasio claimed that
David exercised effective control and supervision over his work, pointing out that David: (1) set the work day, reporting time
and hogs to be chopped, as well as the manner by which he was to perform his work; (2) daily paid his salary of P700.00,
which was increased from P600.00 in 2007, P500.00 in 2006 and P400.00 in 2005; and (3) approved and disapproved his
leaves. Macasio added that David owned the hogs delivered for chopping, as well as the work tools and implements; the latter
also rented the workplace. Macasio further claimed that David employs about twenty-five (25) butchers and delivery drivers.
In his defense,10 David claimed that he started his hog dealer business in 2005 and that he only has ten employees. He
alleged that he hired Macasio as a butcher or chopper on "pakyaw" or task basis who is, therefore, not entitled to overtime
pay, holiday pay and 13th month pay pursuant to the provisions of the Implementing Rules and Regulations (IRR) of the Labor
Code. David pointed out that Macasio: (1) usually starts his work at 10:00 p.m. and ends at 2:00 a.m. of the following day or
earlier, depending on the volume of the delivered hogs; (2) received the fixed amount of P700.00 per engagement, regardless
of the actual number of hours that he spent chopping the delivered hogs; and (3) was not engaged to report for work and,
accordingly, did not receive any fee when no hogs were delivered.
Macasio disputed Davids allegations.11 He argued that, first, David did not start his business only in 2005. He pointed to the
Certificate of Employment12 that David issued in his favor which placed the date of his employment, albeit erroneously, in
January 2000. Second, he reported for work every day which the payroll or time record could have easily proved had David
submitted them in evidence.
Refuting Macasios submissions,13 David claims that Macasio was not his employee as he hired the latter on "pakyaw" or task
basis. He also claimed that he issued the Certificate of Employment, upon Macasios request, only for overseas employment
purposes. He pointed to the "Pinagsamang Sinumpaang Salaysay," 14 executed by Presbitero Solano and Christopher (Antonio
Macasios co-butchers), to corroborate his claims.
In the April 30, 2009 decision,15 the LA dismissed Macasios complaint for lack of merit. The LA gave credence to Davids
claim that he engaged Macasio on "pakyaw" or task basis. The LA noted the following facts to support this finding: (1) Macasio
received the fixed amount of P700.00 for every work done, regardless of the number of hours that he spent in completing the
task and of the volume or number of hogs that he had to chop per engagement; (2) Macasio usually worked for only four
hours, beginning from 10:00 p.m. up to 2:00 a.m. of the following day; and (3) the P700.00 fixed wage far exceeds the then
prevailing daily minimum wage of P382.00. The LA added that the nature of Davids business as hog dealer supports this
"pakyaw" or task basis arrangement.
The LA concluded that as Macasio was engaged on "pakyaw" or task basis, he is not entitled to overtime, holiday, SIL and
13th month pay.
The NLRCs Ruling
In its May 26, 2010 decision,16 the NLRC affirmed the LA ruling.17 The NLRC observed that David did not require Macasio to
observe an eight hour work schedule to earn the fixed P700.00 wage; and that Macasio had been performing a non-time work,
pointing out that Macasio was paid a fixed amount for the completion of the assigned task, irrespective of the time consumed
in its performance. Since Macasio was paid by result and not in terms of the time that he spent in the workplace, Macasio is
not covered by the Labor Standards laws on overtime, SIL and holiday pay, and 13th month pay under the Rules and
Regulations Implementing the 13th month pay law.18

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Macasio moved for reconsideration19 but the NLRC denied his motion in its August 11, 2010 resolution,20prompting Macasio to
elevate his case to the CA via a petition for certiorari.21
The CAs Ruling
In its November 22, 2010 decision,22 the CA partly granted Macasios certiorari petition and reversed the NLRCs ruling for
having been rendered with grave abuse of discretion.
While the CA agreed with the LAand the NLRC that Macasio was a task basis employee, it nevertheless found Macasio
entitled to his monetary claims following the doctrine laid down in Serrano v. Severino Santos Transit. 23The CA explained that
as a task basis employee, Macasio is excluded from the coverage of holiday, SIL and 13th month pay only if he is likewise a
"field personnel." As defined by the Labor Code, a "field personnel" is one who performs the work away from the office or
place of work and whose regular work hours cannot be determined with reasonable certainty. In Macasios case, the elements
that characterize a "field personnel" are evidently lacking as he had been working as a butcher at Davids "Yiels Hog Dealer"
business in Sta. Mesa, Manila under Davids supervision and control, and for a fixed working schedule that starts at 10:00 p.m.
Accordingly, the CA awarded Macasios claim for holiday, SIL and 13th month pay for three years, with 10% attorneys fees on
the total monetary award. The CA, however, denied Macasios claim for moral and exemplary damages for lack of basis.
David filed the present petition after the CA denied his motion for reconsideration 24 in the CAs January 31, 2011 resolution.25
The Petition
In this petition,26 David maintains that Macasios engagement was on a "pakyaw" or task basis. Hence, the latter is excluded
from the coverage of holiday, SIL and 13th month pay. David reiterates his submissions before the lower tribunals27 and adds
that he never had any control over the manner by which Macasio performed his work and he simply looked on to the "end-
result." He also contends that he never compelled Macasio to report for work and that under their arrangement, Macasio was
at liberty to choose whether to report for work or not as other butchers could carry out his tasks. He points out that Solano and
Antonio had, in fact, attested to their (David and Macasios) established "pakyawan" arrangement that rendered a written
contract unnecessary. In as much as Macasio is a task basis employee who is paid the fixed amount of P700.00 per
engagement regardless of the time consumed in the performance David argues that Macasio is not entitled to the benefits
he claims. Also, he posits that because he engaged Macasio on "pakyaw" or task basis then no employer-employee
relationship exists between them.
Finally, David argues that factual findings of the LA, when affirmed by the NLRC, attain finality especially when, as in this case,
they are supported by substantial evidence. Hence, David posits that the CA erred in reversing the labor tribunals findings and
granting the prayed monetary claims.
The Case for the Respondent
Macasio counters that he was not a task basis employee or a "field personnel" as David would have this Court believe. 28 He
reiterates his arguments before the lower tribunals and adds that, contrary to Davids position, the P700.00 fee that he was
paid for each day that he reported for work does not indicate a "pakyaw" or task basis employment as this amount was paid
daily, regardless of the number or pieces of hogs that he had to chop. Rather, it indicates a daily-wage method of payment and
affirms his regular employment status. He points out that David did not allege or present any evidence as regards the quota or
number of hogs that he had to chop as basis for the "pakyaw" or task basis payment; neither did David present the time record
or payroll to prove that he worked for less than eight hours each day. Moreover, David did not present any contract to prove
that his employment was on task basis. As David failed to prove the alleged task basis or "pakyawan" agreement, Macasio
concludes that he was Davids employee. Procedurally, Macasio points out that Davids submissions in the present petition
raise purely factual issues that are not proper for a petition for review on certiorari. These issues whether he (Macasio) was
paid by result or on "pakyaw" basis; whether he was a "field personnel"; whether an employer-employee relationship existed
between him and David; and whether David exercised control and supervision over his work are all factual in nature and are,
therefore, proscribed in a Rule 45 petition. He argues that the CAs factual findings bind this Court, absent a showing that such
findings are not supported by the evidence or the CAs judgment was based on a misapprehension of facts. He adds that the
issue of whether an employer-employee relationship existed between him and David had already been settled by the LA 29 and
the NLRC30 (as well as by the CA per Macasios manifestation before this Court dated November 15, 2012), 31 in his favor, in
the separate illegal case that he filed against David.
The Issue
The issue revolves around the proper application and interpretation of the labor law provisions on holiday, SIL and 13th month
pay to a worker engaged on "pakyaw" or task basis. In the context of the Rule 65 petition before the CA, the issue is whether
the CA correctly found the NLRC in grave abuse of discretion in ruling that Macasio is entitled to these labor standards
benefits.
The Courts Ruling
We partially grant the petition.
Preliminary considerations: the Montoya ruling and the factual-issue-bar rule
In this Rule 45 petition for review on certiorari of the CAs decision rendered under a Rule 65 proceeding, this Courts power of
review is limited to resolving matters pertaining to any perceived legal errors that the CA may have committed in issuing the
assailed decision. This is in contrast with the review for jurisdictional errors, which we undertake in an original certiorari action.
105
In reviewing the legal correctness of the CA decision, we examine the CA decision based on how it determined the presence
or absence of grave abuse of discretion in the NLRC decision before it and not on the basis of whether the NLRC decision on
the merits of the case was correct.32 In other words, we have to be keenly aware that the CA undertook a Rule 65 review, not
a review on appeal, of the NLRC decision challenged before it. 33
Moreover, the Courts power in a Rule 45 petition limits us to a review of questions of law raised against the assailed CA
decision.34
In this petition, David essentially asks the question whether Macasio is entitled to holiday, SIL and 13th month pay. This one
is a question of law. The determination of this question of law however is intertwined with the largely factual issue of whether
Macasio falls within the rule on entitlement to these claims or within the exception. In either case, the resolution of this factual
issue presupposes another factual matter, that is, the presence of an employer-employee relationship between David and
Macasio.
In insisting before this Court that Macasio was not his employee, David argues that he engaged the latter on "pakyaw" or task
basis. Very noticeably, David confuses engagement on "pakyaw" or task basis with the lack of employment relationship.
Impliedly, David asserts that their "pakyawan" or task basis arrangement negates the existence of employment relationship.
At the outset, we reject this assertion of the petitioner. Engagement on "pakyaw" or task basis does not characterize the
relationship that may exist between the parties, i.e., whether one of employment or independent contractorship. Article 97(6) of
the Labor Code defines wages as "xxx the remuneration or earnings, however designated, capable of being expressed in
terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the
same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or
to be done, or for services rendered or to be rendered[.]" 35 In relation to Article 97(6), Article 10136 of the Labor Code speaks
of workers paid by results or those whose pay is calculated in terms of the quantity or quality of their work output which
includes "pakyaw" work and other non-time work.
More importantly, by implicitly arguing that his engagement of Macasio on "pakyaw" or task basis negates employer-employee
relationship, David would want the Court to engage on a factual appellate review of the entire case to determine the presence
or existence of that relationship. This approach however is not authorized under a Rule 45 petition for review of the CA
decision rendered under a Rule 65 proceeding.
First, the LA and the NLRC denied Macasios claim not because of the absence of an employer-employee but because of its
finding that since Macasio is paid on pakyaw or task basis, then he is not entitled to SIL, holiday and 13th month pay. Second,
we consider it crucial, that in the separate illegal dismissal case Macasio filed with the LA, the LA, the NLRC and the CA
uniformly found the existence of an employer-employee relationship.37
In other words, aside from being factual in nature, the existence of an employer-employee relationship is in fact a non-issue in
this case. To reiterate, in deciding a Rule 45 petition for review of a labor decision rendered by the CA under 65, the narrow
scope of inquiry is whether the CA correctly determined the presence or absence of grave abuse of discretion on the part of
the NLRC. In concrete question form, "did the NLRC gravely abuse its discretion in denying Macasios claims simply because
he is paid on a non-time basis?"
At any rate, even if we indulge the petitioner, we find his claim that no employer-employee relationship exists baseless.
Employing the control test,38 we find that such a relationship exist in the present case.
Even a factual review shows that Macasio is Davids employee
To determine the existence of an employer-employee relationship, four elements generally need to be considered, namely: (1)
the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to
control the employees conduct. These elements or indicators comprise the so-called "four-fold" test of employment
relationship. Macasios relationship with David satisfies this test.
First, David engaged the services of Macasio, thus satisfying the element of "selection and engagement of the employee."
David categorically confirmed this fact when, in his "Sinumpaang Salaysay," he stated that "nag apply po siya sa akin at
kinuha ko siya na chopper[.]"39 Also, Solano and Antonio stated in their "Pinagsamang Sinumpaang Salaysay"40 that "[k]ami
po ay nagtratrabaho sa Yiels xxx na pag-aari ni Ariel David bilang butcher" and "kilalanamin si xxx Macasio na isa ring butcher
xxx ni xxx David at kasama namin siya sa aming trabaho."
Second, David paid Macasios wages.Both David and Macasio categorically stated in their respective pleadings before the
lower tribunals and even before this Court that the former had been paying the latter P700.00 each day after the latter had
finished the days task. Solano and Antonio also confirmed this fact of wage payment in their "Pinagsamang Sinumpaang
Salaysay."41 This satisfies the element of "payment of wages."
Third, David had been setting the day and time when Macasio should report for work. This power to determine the work
schedule obviously implies power of control. By having the power to control Macasios work schedule, David could regulate
Macasios work and could even refuse to give him any assignment, thereby effectively dismissing him.
And fourth, David had the right and power to control and supervise Macasios work as to the means and methods of
performing it. In addition to setting the day and time when Macasio should report for work, the established facts show that
David rents the place where Macasio had been performing his tasks. Moreover, Macasio would leave the workplace only after

106
he had finished chopping all of the hog meats given to him for the days task. Also, David would still engage Macasios
services and have him report for work even during the days when only few hogs were delivered for butchering.
Under this overall setup, all those working for David, including Macasio, could naturally be expected to observe certain rules
and requirements and David would necessarily exercise some degree of control as the chopping of the hog meats would be
subject to his specifications. Also, since Macasio performed his tasks at Davids workplace, David could easily exercise control
and supervision over the former. Accordingly, whether or not David actually exercised this right or power to control is beside
the point as the law simply requires the existence of this power to control 4243 or, as in this case, the existence of the right and
opportunity to control and supervise Macasio.44
In sum, the totality of the surrounding circumstances of the present case sufficiently points to an employer-employee
relationship existing between David and Macasio.
Macasio is engaged on "pakyaw" or task basis
At this point, we note that all three tribunals the LA, the NLRC and the CA found that Macasio was engaged or paid on
"pakyaw" or task basis. This factual finding binds the Court under the rule that factual findings of labor tribunals when
supported by the established facts and in accord with the laws, especially when affirmed by the CA, is binding on this Court.
A distinguishing characteristic of "pakyaw" or task basis engagement, as opposed to straight-hour wage payment, is the non-
consideration of the time spent in working. In a task-basis work, the emphasis is on the task itself, in the sense that payment is
reckoned in terms of completion of the work, not in terms of the number of time spent in the completion of work. 45 Once the
work or task is completed, the worker receives a fixed amount as wage, without regard to the standard measurements of time
generally used in pay computation.
In Macasios case, the established facts show that he would usually start his work at 10:00 p.m. Thereafter, regardless of the
total hours that he spent at the workplace or of the total number of the hogs assigned to him for chopping, Macasio would
receive the fixed amount of P700.00 once he had completed his task. Clearly, these circumstances show a "pakyaw" or task
basis engagement that all three tribunals uniformly found.
In sum, the existence of employment relationship between the parties is determined by applying the "four-fold" test;
engagement on "pakyaw" or task basis does not determine the parties relationship as it is simply a method of pay
computation. Accordingly, Macasio is Davids employee, albeit engaged on "pakyaw" or task basis.
As an employee of David paid on pakyaw or task basis, we now go to the core issue of whether Macasio is entitled to holiday,
13th month, and SIL pay.
On the issue of Macasios entitlement to holiday, SIL and 13th month pay
The LA dismissed Macasios claims pursuant to Article 94 of the Labor Code in relation to Section 1, Rule IV of the IRR of the
Labor Code, and Article 95 of the Labor Code, as well as Presidential Decree (PD) No. 851. The NLRC, on the other hand,
relied on Article 82 of the Labor Code and the Rules and Regulations Implementing PD No. 851. Uniformly, these provisions
exempt workers paid on "pakyaw" or task basis from the coverage of holiday, SIL and 13th month pay.
In reversing the labor tribunals rulings, the CA similarly relied on these provisions, as well as on Section 1, Rule V of the IRR
of the Labor Code and the Courts ruling in Serrano v. Severino Santos Transit. 46 These labor law provisions, when read
together with the Serrano ruling, exempt those engaged on "pakyaw" or task basis only if they qualify as "field personnel."
In other words, what we have before us is largely a question of law regarding the correct interpretation of these labor code
provisions and the implementing rules; although, to conclude that the worker is exempted or covered depends on the facts and
in this sense, is a question of fact: first, whether Macasio is a "field personnel"; and second, whether those engaged on
"pakyaw" or task basis, but who are not "field personnel," are exempted from the coverage of holiday, SIL and 13th month pay.
To put our discussion within the perspective of a Rule 45 petition for review of a CA decision rendered under Rule 65 and
framed in question form, the legal question is whether the CA correctly ruled that it was grave abuse of discretion on the part
of the NLRC to deny Macasios monetary claims simply because he is paid on a non-time basis without determining whether
he is a field personnel or not.
To resolve these issues, we need tore-visit the provisions involved.
Provisions governing SIL and holiday pay
Article 82 of the Labor Code provides the exclusions from the coverage of Title I, Book III of the Labor Code - provisions
governing working conditions and rest periods.
Art. 82. Coverage. The provisions of [Title I] shall apply to employees in all establishments and undertakings whether for
profit or not, but not to government employees, managerial employees, field personnel, members of the family of the employer
who are dependent on him for support, domestic helpers, persons in the personal service of another, and workers who are
paid by results as determined by the Secretary of Labor in appropriate regulations.
xxxx
"Field personnel" shall refer to non-agricultural employees who regularly perform their duties away from the principal place of
business or branch office of the employer and whose actual hours of work in the field cannot be determined with reasonable
certainty. [emphases and underscores ours]
Among the Title I provisions are the provisions on holiday pay (under Article 94 of the Labor Code) and SIL pay (under Article
95 of the Labor Code). Under Article 82,"field personnel" on one hand and "workers who are paid by results" on the other
107
hand, are not covered by the Title I provisions. The wordings of Article82 of the Labor Code additionally categorize workers
"paid by results" and "field personnel" as separate and distinct types of employees who are exempted from the Title I
provisions of the Labor Code.
The pertinent portion of Article 94 of the Labor Code and its corresponding provision in the IRR 47 reads:
Art. 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wage during regular holidays, except in retail and
service establishments regularly employing less than (10) workers[.] [emphasis ours]
xxxx
SECTION 1. Coverage. This Rule shall apply to all employees except:
xxxx
(e)Field personnel and other employees whose time and performance is unsupervised by the employer including those who
are engaged on task or contract basis, purely commission basis, or those who are paid a fixed amount for performing work
irrespective of the time consumed in the performance thereof. [emphases ours]
On the other hand, Article 95 of the Labor Code and its corresponding provision in the IRR48 pertinently provides:
Art. 95. Right to service incentive. (a) Every employee who has rendered at least one year of service shall be entitled to a
yearly service incentive leave of five days with pay.
(b) This provision shall not apply to those who are already enjoying the benefit herein provided, those enjoying vacation leave
with pay of at least five days and those employed in establishments regularly employing less than ten employees or in
establishments exempted from granting this benefit by the Secretary of Labor and Employment after considering the viability or
financial condition of such establishment. [emphases ours]
xxxx
Section 1. Coverage. This rule shall apply to all employees except:
xxxx
(e) Field personnel and other employees whose performance is unsupervised by the employer including those who are
engaged on task or contract basis, purely commission basis, or those who are paid a fixed amount for performing work
irrespective of the time consumed in the performance thereof. [emphasis ours]
Under these provisions, the general rule is that holiday and SIL pay provisions cover all employees. To be excluded from their
coverage, an employee must be one of those that these provisions expressly exempt, strictly in accordance with the
exemption. Under the IRR, exemption from the coverage of holiday and SIL pay refer to "field personnel and other employees
whose time and performance is unsupervised by the employer including those who are engaged on task or contract basis[.]"
Note that unlike Article 82 of the Labor Code, the IRR on holiday and SIL pay do not exclude employees "engaged on task
basis" as a separate and distinct category from employees classified as "field personnel." Rather, these employees are
altogether merged into one classification of exempted employees.
Because of this difference, it may be argued that the Labor Code may be interpreted to mean that those who are engaged on
task basis, per se, are excluded from the SIL and holiday payment since this is what the Labor Code provisions, in contrast
with the IRR, strongly suggest. The arguable interpretation of this rule may be conceded to be within the discretion granted to
the LA and NLRC as the quasi-judicial bodies with expertise on labor matters.
However, as early as 1987 in the case of Cebu Institute of Technology v. Ople 49 the phrase "those who are engaged on task
or contract basis" in the rule has already been interpreted to mean as follows:
[the phrase] should however, be related with "field personnel" applying the rule on ejusdem generis that general and unlimited
terms are restrained and limited by the particular terms that they follow xxx Clearly, petitioner's teaching personnel cannot be
deemed field personnel which refers "to non-agricultural employees who regularly perform their duties away from the principal
place of business or branch office of the employer and whose actual hours of work in the field cannot be determined with
reasonable certainty. [Par. 3, Article 82, Labor Code of the Philippines]. Petitioner's claim that private respondents are not
entitled to the service incentive leave benefit cannot therefore be sustained.
In short, the payment of an employee on task or pakyaw basis alone is insufficient to exclude one from the coverage of SIL
and holiday pay. They are exempted from the coverage of Title I (including the holiday and SIL pay) only if they qualify as "field
personnel." The IRR therefore validly qualifies and limits the general exclusion of "workers paid by results" found in Article 82
from the coverage of holiday and SIL pay. This is the only reasonable interpretation since the determination of excluded
workers who are paid by results from the coverage of Title I is "determined by the Secretary of Labor in appropriate
regulations."
The Cebu Institute Technology ruling was reiterated in 2005 in Auto Bus Transport Systems, Inc., v. Bautista:
A careful perusal of said provisions of law will result in the conclusion that the grant of service incentive leave has been
delimited by the Implementing Rules and Regulations of the Labor Code to apply only to those employees not explicitly
excluded by Section 1 of Rule V. According to the Implementing Rules, Service Incentive Leave shall not apply to employees
classified as "field personnel." The phrase "other employees whose performance is unsupervised by the employer" must not
be understood as a separate classification of employees to which service incentive leave shall not be granted. Rather, it
serves as an amplification of the interpretation of the definition of field personnel under the Labor Code as those "whose actual
hours of work in the field cannot be determined with reasonable certainty."
108
The same is true with respect to the phrase "those who are engaged on task or contract basis, purely commission basis." Said
phrase should be related with "field personnel," applying the rule on ejusdem generis that general and unlimited terms are
restrained and limited by the particular terms that they follow.
The Autobus ruling was in turn the basis of Serrano v. Santos Transit which the CA cited in support of granting Macasios
petition.
In Serrano, the Court, applying the rule on ejusdem generis 50 declared that "employees engaged on task or contract basis xxx
are not automatically exempted from the grant of service incentive leave, unless, they fall under the classification of field
personnel."51 The Court explained that the phrase "including those who are engaged on task or contract basis, purely
commission basis" found in Section 1(d), Rule V of Book III of the IRR should not be understood as a separate classification of
employees to which SIL shall not be granted. Rather, as with its preceding phrase - "other employees whose performance is
unsupervised by the employer" - the phrase "including those who are engaged on task or contract basis" serves to amplify the
interpretation of the Labor Code definition of "field personnel" as those "whose actual hours of work in the field cannot be
determined with reasonable certainty."
In contrast and in clear departure from settled case law, the LA and the NLRC still interpreted the Labor Code provisions and
the IRR as exempting an employee from the coverage of Title I of the Labor Code based simply and solely on the mode of
payment of an employee. The NLRCs utter disregard of this consistent jurisprudential ruling is a clear act of grave abuse of
discretion.52 In other words, by dismissing Macasios complaint without considering whether Macasio was a "field personnel" or
not, the NLRC proceeded based on a significantly incomplete consideration of the case. This action clearly smacks of grave
abuse of discretion.
Entitlement to holiday pay
Evidently, the Serrano ruling speaks only of SIL pay. However, if the LA and the NLRC had only taken counsel from Serrano
and earlier cases, they would have correctly reached a similar conclusion regarding the payment of holiday pay since the rule
exempting "field personnel" from the grant of holiday pay is identically worded with the rule exempting "field personnel" from
the grant of SIL pay. To be clear, the phrase "employees engaged on task or contract basis "found in the IRR on both SIL pay
and holiday pay should be read together with the exemption of "field personnel."
In short, in determining whether workers engaged on "pakyaw" or task basis" is entitled to holiday and SIL pay, the presence
(or absence) of employer supervision as regards the workers time and performance is the key: if the worker is simply engaged
on pakyaw or task basis, then the general rule is that he is entitled to a holiday pay and SIL pay unless exempted from the
exceptions specifically provided under Article 94 (holiday pay) and Article95 (SIL pay) of the Labor Code. However, if the
worker engaged on pakyaw or task basis also falls within the meaning of "field personnel" under the law, then he is not entitled
to these monetary benefits.
Macasio does not fall under the classification of "field personnel"
Based on the definition of field personnel under Article 82, we agree with the CA that Macasio does not fall under the definition
of "field personnel." The CAs finding in this regard is supported by the established facts of this case: first, Macasio regularly
performed his duties at Davids principal place of business; second, his actual hours of work could be determined with
reasonable certainty; and, third, David supervised his time and performance of duties. Since Macasio cannot be considered a
"field personnel," then he is not exempted from the grant of holiday, SIL pay even as he was engaged on "pakyaw" or task
basis.
Not being a "field personnel," we find the CA to be legally correct when it reversed the NLRCs ruling dismissing Macasios
complaint for holiday and SIL pay for having been rendered with grave abuse of discretion.
Entitlement to 13th month pay
With respect to the payment of 13th month pay however, we find that the CA legally erred in finding that the NLRC gravely
abused its discretion in denying this benefit to Macasio.
The governing law on 13th month pay is PD No. 851.53
As with holiday and SIL pay, 13th month pay benefits generally cover all employees; an employee must be one of those
expressly enumerated to be exempted. Section 3 of the Rules and Regulations Implementing P.D. No. 851 54 enumerates the
exemptions from the coverage of 13th month pay benefits. Under Section 3(e), "employers of those who are paid on xxx task
basis, and those who are paid a fixed amount for performing a specific work, irrespective of the time consumed in the
performance thereof"55 are exempted.
Note that unlike the IRR of the Labor Code on holiday and SIL pay, Section 3(e) of the Rules and Regulations Implementing
PD No. 851 exempts employees "paid on task basis" without any reference to "field personnel." This could only mean that
insofar as payment of the 13th month pay is concerned, the law did not intend to qualify the exemption from its coverage with
the requirement that the task worker be a "field personnel" at the same time.
WHEREFORE, in light of these considerations, we hereby PARTIALLY GRANT the petition insofar as the payment of 13th
month pay to respondent is concerned. In all other aspects, we AFFIRM the decision dated November 22, 2010 and the
resolution dated January 31, 2011 of the Court of Appeals in CA-G.R. SP No. 116003.
SO ORDERED.

109
G.R. No. 175869
ROBINA FARMS CEBU/UNIVERSAL ROBINA CORPORATION, Petitioner,
vs.
ELIZABETH VILLA, Respondent.
DECISION
BERSAMIN, J.:
The employer appeals the decision promulgated on September 27, 2006, 1 whereby the Court of Appeals (CA) dismissed its
petition for certiorari and affirmed with modification the adverse decision of the National Labor Relations Commission (NLRC)
declaring it liable for the illegal dismissal of respondent employee.
Antecedents
Respondent Elizabeth Villa brought against the petitioner her complaint for illegal suspension, illegal dismissal, nonpayment of
overtime pay, and nonpayment of service incentive leave pay in the Regional Arbitration Branch No. VII of the NLRC in Cebu
City.
In her verified position paper, 2 Villa averred that she had been employed by petitioner Robina Farms as sales clerk since
August 1981; that in the later part of 2001, the petitioner had enticed her to avail herself of the company's special retirement
program; that on March 2, 2002, she had received a memorandum from Lily Ngochua requiring her to explain her failure to
issue invoices for unhatched eggs in the months of January to February 2002; that she had explained that the invoices were
not delivered on time because the delivery receipts were delayed and overlooked; that despite her explanation, she had been
suspended for 10 days from March 8, 2012 until March 19, 2002; that upon reporting back to work, she had been advised to
cease working because her application for retirement had already been approved; that she had been subsequently informed
that her application had been disapproved, and had then been advised to tender her resignation with a request for financial
assistance; that she had manifested her intention to return to work but the petitioner had confiscated her gate pass; and that
she had since then been prevented from entering the company premises and had been replaced by another employee.
The petitioner admitted that Villa had been its sales clerk at Robina Farms. It stated that on December 12, 2001, she had
applied for retirement under the special privilege program offered to its employees in Bulacan and Anti polo who had served
for at least 10 years; that in February 2002, her attention had been called by Anita Gabatan of the accounting department to
explain her failure to issue invoices for the unhatched eggs for the month of February; that she had explained that she had
been busy; that Gabatan had referred the matter to Florabeth Zanoria who had in turn relayed the matter to Ngochua; and that
the latter had then given Villa the chance to explain, which she did.
The petitioner added that after the administrative hearing Villa was found to have violated the company rule on the timely
issuance of the invoices that had resulted in delay in the payment of buyers considering that the payment had depended upon
the receipt of the invoices; that she had been suspended from her employment as a consequence; that after serving the
suspension, she had returned to work and had followed up her application for retirement with Lucina de Guzman, who had
then informed her that the management did not approve the benefits equivalent to 86% of her salary rate applied for, but only
Yz month for every year of service; and that disappointed with the outcome, she had then brought her complaint against the
petitioners.3
Ruling of the Labor Arbiter
On April 21, 2003, Labor Arbiter Violeta Ortiz-Bantug rendered her Decision4 finding that Villa had not been dismissed from
employment, holding thusly:
Complainant's application, insofar the benefits are concerned, was not approved which means that while her application for
retirement was considered, management was willing to give her retirement benefits equivalent only to half-month pay for every
year of service and not 86% of her salary for every year of service as mentioned in her application. Mrs. De Guzman
suggested that if she wanted to pursue her supposed retirement despite thereof, she should submit a resignation letter and
include therein a request for financial assistance. We do not find anything illegal or violative in the suggestion made by Mrs.
De Guzman. There was no compulsion since the choice was left entirely to the complainant whether to pursue it or not. 5
Although ordering Villa's reinstatement, the Labor Arbiter denied her claim for backwages and overtime pay because she had
not adduced evidence of the overtime work actually performed. The Labor Arbiter declared that Villa was entitled to service
incentive leave pay for the period of the last three years counted from the filing of her complaint because the petitioner did not
refute her claim thereon. Thus, the Labor Arbiter disposed as follows:
WHEREFORE, premises considered, judgment is hereby rendered ordering respondents ROBINA FARMS CEBU (a Division
of UNIVERSAL ROBINA CORPORATION) and LILY NGOCHUA to REINSTATE complainant to her former position without
loss of seniority rights and privileges within ten (10) days from receipt of this decision but without payment of backwages.
Respondents are also ordered to pay complainant SEVEN THOUSAND ONE HUNDRED NINETY FOUR PESOS (P7, 194.00)
as service incentive leave pay benefits.
The other claims are dismissed for lack of merit.
SO ORDERED.6
The parties respectively appealed to the NLRC.
Judgment of the NLRC

110
On February 23, 2005, the NLRC rendered its judgment dismissing the appeal by the petitioner but granting that of Villa,7 to
wit:
WHEREFORE, premises considered, the appeal of respondents is hereby DISMISSED for non-perfection while the appeal of
complainant is hereby GRANTED. The decision of the Labor Arbiter is REVERSED and SET ASIDEand a new
one ENTERED declaring complainant to have been illegally dismissed. Consequently, respondents arc hereby directed to
immediately reinstate complainant to her former position without loss of seniority rights and other privileges within ten (10)
days from receipt of this decision and to pay complainant the following sums, to wit:
1. Backwages P119,900.00
2. SILP P 7,194.00
3. Overtime Pay P 3,445.00

Total P130,539.00
4. Attorney's fees (10%) 13,053.90
Grand Total P143,592.91
SO ORDERED.8
According to the NLRC, the petitioner's appeal was fatally defective and was being dismissed outright because it lacked the
proper verification and certificate of non-forum shopping. The NLRC held the petitioner liable for the illegal dismissal of Villa,
observing that because Villa's retirement application had been subject to the approval of the management, her act of applying
therefor did not indicate her voluntary intention to sever her employment relationship but only her opting to retire by virtue of
her having qualified under the plan; that upon informing her about the denial of her application, the petitioner had advised her
to tender her resignation and to request for financial assistance; that although she had signified her intention to return to work,
the petitioner had prevented her from doing so by confiscating her gate pass and informing her that she had already been
replaced by another employee; and that the petitioner neither disputed her allegations thereon, nor adduced evidence to
controvert the same.9
After the denial of its motion for reconsideration, 10 the petitioner filed a petition for certiorari in the CA.
Decision of the CA
The petitioner alleged in its petition for certiorari the following jurisdictional errors of the NLRC, to wit:
I
PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR IN
EXCESS OF JURISDICTION WHEN IT DISMISSED PETITIONERS APPEAL MEMORANDUM ON A MERE
TECHNICALITY AND NOT RESOLVE IT ON THE MERITS.
II.
PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR IN
EXCESS OF JURISDICTION WHEN IT DID NOT DISMISS PRIVATE RESPONDENT'S MEMORANDUM ON
APPEAL EVEN THOUGH IT LACKED THE PROPER VERIFICATION AND PROCEEDED TO RESOLVE HER
APPEAL ON THE MERITS.
III.
PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR IN
EXCESS OF JURISDICTION WHEN IT RULED THAT THERE WAS ILLEGAL DISMISSAL AND THAT PRIVATE
RESPONDENT BE IMMEDIATELY REINSTATED WITHOUT LOSS OF SENIORITY RIGHTS.
IV.
PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR IN
EXCESS OF JURISDICTION WHEN IT DIRECTED PETITIONERS INCLUDING PETITIONER LILY NGOCHUA TO
PAY PRIVATE RESPONDENT BACKWAGES, SERVICE INCENTIVE LEAVE PAY, OVERTIME PAY AND
ATTORNEY'S FEES. 11
On September 27, 2006, the CA promulgated its assailed decision dismissing the petition for certiorari, 12decreeing as follows:
WHEREFORE, premises considered, the instant petition is hereby ordered DISMISSED for lack of merit. The assailed
decision is AFFIRMED with MODIFICATION, in that petitioner Lily Ngochua should not be held liable with petitioner
corporation. The other aspects of the assailed decision remains. Consequently, the prayer for a temporary restraining order
and/or preliminary injunction is NOTED.
SO ORDERED. 13
The CA treated the petitioner's appeal as an unsigned pleading because the petitioner did not present proof showing that
Florabeth P. Zanoria, its Administrative Officer and Chief Accountant who had signed the verification, had been authorized to
sign and file the appeal. It opined that the belated submission of the secretary's certificate showing the authority of Bienvenido
S. Bautista to represent the petitioner, and the special power of attorney executed by Bautista to authorize Zanoria to
represent the petitioner did not cure the defect. It upheld the finding of the NLRC that the petitioner had illegally dismissed

111
Villa. It deemed the advice by Ngochua and de Guzman for Villa to resign and to request instead for financial assistance was a
strong and unequivocal indication of the petitioner's desire to sever the employer-employee relationship with Villa.
The CA later denied the motion for reconsideration. 14
Issues
Hence, this appeal in which the petitioner submits that:
I
THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED WHEN IT DID NOT RULE THAT THERE WAS NO
VERIFICATION ATTACHED TO RESPONDENT VILLA'S NOTICE OF APPEAL AND MEMORANDUM ON APPEAL DATED
MAY 29, 2003 AND THAT IT WAS AN UNSIGNED PLEADING AND WITHOUT LEGAL EFFECT, MOREOVER, IT
COMMITTED UNFAIR TREATMENT
II
THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED WHEN IT DID NOT RULE THAT THE NATIONAL LABOR
RELATIONS COMMISSION FOURTH DIVISION HAD NO JURISDICTION TO REVERESE AND SET ASIDE THE DECISION
OF THE LABOR ARBITER DA TED APRIL 21, 2003 WHICH HAD ALREA[D]Y BECOME FINAL AND IMMUTABLE AS r AR
AS RESPONDENT IS CONCERNED
III
THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED WHEN IT COMMITTED MISAPPREHENSION OF THE
FACTS AND ISSUED ITS DECISION AND RESOLUTION CONTRARY TO THE EVIDENCE ON RECORD AND FINDINGS
OF THE LABOR ARBITER. 15
Ruling of the Court
The appeal lacks merit.
The petitioner prays that Villa's appeal should be treated as an unsigned pleading because she had accompanied her appeal
with the same verification attached to her position paper.
The petitioner cannot be sustained. The NLRC justifiably gave due course to Villa's appeal.
Section 4(a), Rule VI of the Amended NLRC Rules of Procedure requires an appeal to be verified by the appellant herself. The
verification is a mere formal requirement intended to secure and to give assurance that the matters alleged in the pleading are
true and correct. The requirement is complied with when one who has the ample knowledge to swear to the truth of the
allegations in the complaint or petition signs the verification, or when the matters contained in the petition have been alleged in
good faith or are true and correct. 16 Being a mere formal requirement, the courts may even simply order the correction of
improperly verified pleadings, or act on the same upon waiving the strict compliance with the rules of procedure. 17 It is the
essence of the NLRC Rules of Procedure to extend to every party-litigant the amplest opportunity for the proper and just
determination of his cause, free from the constraints of technicalities. 18 Accordingly, the substantial compliance with the
procedural rules is appreciated in favor of Villa.
We cannot rule in the same way for the petitioner. For one, it belatedly submitted proof of Zanoria' s authority to verify the
pleading for the petitioner. Also, it did not submit the certification of non-forum shopping at the time of the filing of the appeal.
The filing of the certification with the initiatory pleading was mandatory, and the failure to do so could not be cured by a later
submission. 19 The non-submission of the certification, being a ground for dismissal, was fatal to the petition. There is no
question that the non-compliance with the requirement for the certification, or a defect in the certification, would not be cured
by the subsequent submission or the correction of the certification, except in cases of substantial compliance or upon
compelling reasons.20 Accordingly, the dismissal of the petitioner's appeal cannot be reversed or undone.
The petitioner next submits that the CA erred in holding that Villa had been illegally dismissed; that it had no intention to
terminate her; that de Guzman had merely suggested to her that she should be filing the letter of resignation with the request
for financial assistance because the management had disapproved her application for the 86% salary rate as basis for her
retirement benefits; that it was Villa who had the intention to sever the employer-employee relationship because she had kept
on following up her application for retirement; that she had prematurely filed the complaint for illegal dismissal; that she had
voluntarily opted not to report to her work; and that she had not presented proof showing that it had prevented her from
working and entering its premises.21
The petitioner's submissions are bereft of merit.
We note that the CA and the NLRC agreed on their finding that the petitioner did not admit Villa back to work after the
completion of her 10-day suspension. In that regard, the CA observed:
It is undeniable that private respondent was suspended for ten (10) days beginning March 8, 2002 to March 19, 2002.
Ordinarily, after an employee [has] served her suspension, she should be admitted back to work and to continue to receive
compensation for her services. In the case at bar, it is clear that private respondent was not admitted immediately after
her suspension. Records show that when private respondent reported back after her suspension, she was advised by Lucy
de Guzman not to report back anymore as her application was approved, which was latter [sic] on disapproved. It is at this
point that, said Lucy de Guzman had advised private respondent to tender a resignation letter with request for financial
assistance. Not only Lucy De Guzman has advised her to tender her resignation letter. The letter of petitioner Lily Ngochua
dated April 11, 2002 to private respondent which reads:
112
"As explained by Lucy de Guzman xxx your request for special retirement with financial assistance of 86%/year of service has
not been approved. Because this offer was for employees working in operations department and not in Adm. & Sales.
"However, as per Manila Office, you can be given financial assistance of V2 per year of service if you tender letter of
resignation with request for financial assistance."
shows that petitioner Lily Ngochua has also advised private respondent to the same. These acts are strong indication that
petitioners wanted to severe [sic] the employer-employee relationship between them and that of private respondent. This is
buttressed by the fact that when private respondent signified her intention to return back to work after learning of the
disapproval of her application, she was prevented to enter the petitioner's premises by confiscating her ID and informing her
that a new employee has already replaced her.
It should be noted that when private respondent averred this statement in her position paper submitted before the Labor
Arbiter petitioners did not refute the same. Neither did they contest this allegation in their supposed Appeal Memorandum nor
in their Motion for Reconsideration of the assailed decision of public respondent. Basic is the rule that matters not controverted
are deemed admitted. To contest this allegation at this point of proceeding is not allowed for it is a settled rule that matters,
theories or arguments not brought out in the original proceedings cannot be considered on review or appeal where they arc
raised for the first time. To consider the alleged facts and arguments raised belatedly would amount to trampling on the basic
principles of fair play, justice and due process.22
Neither did Villa's application for early retirement manifest her intention to sever the employer-employee relationship. Although
she applied for early retirement, she did so upon the belief that she would receive a higher benefit based on the petitioner's
offer. As such, her consent to be retired could not be fairly deemed to have been knowingly and freely given.
Retirement is the result of a bilateral act of both the employer and the employee based on their voluntaryagreement that upon
reaching a certain age, the employee agrees to sever his employment. 23 The difficulty in the case of Villa arises from
determining whether the retirement was voluntary or involuntary. The line between the two is thin but it is one that the Court
has drawn. On one hand, voluntary retirement cuts the employment ties leaving no residual employer liability; on the other,
involuntary retirement amounts to a discharge, rendering the employer liable for termination without cause. The employee's
intent is decisive. In determining such intent, the relevant parameters to consider are the fairness of the process governing the
retirement decision, the payment of stipulated benefits, and the absence of badges of intimidation or coercion. 24
In case of early retirement programs, the offer of benefits must be certain while the acceptance to be retired should be
absolute.25 The acceptance by the employees contemplated herein must be explicit, voluntary, free and
uncompelled.26 In Jaculbe v. Silliman University, 27 we elucidated that:
[A]n employer is free to impose a retirement age less than 65 for as long as it has the employees' consent. Stated
conversely, employees are free to accept the employer's offer to lower the retirement age if they feel they can get a
better deal with the retirement plan presented by the employer. Thus, having terminated petitioner solely on the basis
of a provision of a retirement plan which was not freely assented to by her, respondent was guilty of illegal
dismissal.28 (bold emphasis supplied)
Under the circumstances, the CA did not err in declaring the petitioner guilty of illegal dismissal for violating Article 28229 of
the Labor Code and the twin notice rule.30
The petitioner posits that the CA erroneously affirmed the giving of overtime pay and service incentive leave pay to Villa; that
she did not adduce proof of her having rendered actual ove1iime work; that she had not been authorized to render overtime
work; and that her availment of vacation and sick leaves that had been paid precluded her claiming the service incentive leave
pay.
We partly agree with the petitioner's position.
Firstly, entitlement to overtime pay must first be established by proof that the overtime work was actually performed before the
employee may properly claim the benefit.31 The burden of proving entitlement to overtime pay rests on the employee because
the benefit is not incurred in the normal course of business. 32 Failure to prove such actual performance transgresses the
principles of fair play and equity.
And, secondly, the NLRC's reliance on the daily time records (DTRs) showing that Villa had stayed in the company's premises
beyond eight hours was misplaced. The DTRs did not substantially prove the actual performance of overtime work. The
petitioner correctly points out that any employee could render overtime work only when there was a prior authorization therefor
by the management.33 Without the prior authorization, therefore, Villa could not validly claim having performed work beyond
the normal hours of work. Moreover, Section 4(c), Rule I, Book III of the Omnibus Rules Implementing the Labor
Code relevantly states as follows:
Section 4. Principles in determining hours worked. The following general principles shall govern in determining whether the
time spent by an employee is considered hours worked for purposes of this Rule:
(a) x x x.
(b) x x x.
(c) If the work performed was necessary, or it benefited the employer, or the employee could not abandon his work at
the end of his normal working hours because he had no replacement, all time spent for such work shall be

113
 considered as hours worked, if the work was with the knowledge of his employer or immediate
supervisor. (bold emphasis supplied)
(d) x x x.
We uphold the grant of service incentive leave pay.
Although the grant of vacation or sick leave with pay of at least five days could be credited as compliance with the duty to pay
service incentive leave,34 the employer is still obliged to prove that it fully paid the accrued service incentive leave pay to the
employee.
The Labor Arbiter originally awarded the service incentive leave pay because the petitioner did not present proof showing that
Villa had been justly paid.35 The petitioner submitted the affidavits of Zanoria explaining the payment of service incentive leave
after the Labor Arbiter had rendered her decision.36 But that was not enough, for evidence should be presented in the
proceedings before the Labor Arbiter, not after the rendition of the adverse decision by the Labor Arbiter or during appeal.
Such a practice of belated presentation cannot be tolerated because it defeats the speedy administration of justice in matters
concerning the poor workers. 37
WHEREFORE, the Court DENIES the petition for review on certiorari for lack of merit; AFFIRMS the decision promulgated on
September 27, 2006 by the Court of Appeals, with the MODIFICATION that the award of overtime pay in favor of respondent
Elizabeth Villa is DELETED; and ORDERS the petitioner to pay the costs of suit.
SO ORDERED.

G.R. No. 194352 January 30, 2013

MAXICARE PCIB CIGNA HEALTHCARE (now MAXICARE HEALTHCARE CORPORATION), ERIC S. NUBLA, JR. M.D.
and RUTH A. ASIS, M.D., Petitioners,
vs.
MARIAN BRIGITTE A. CONTRERAS, M.D., Respondent.
DECISION
MENDOZA, J.:
Challenged in this petition are the January 28, 2010 Decision1 of the Court of Appeals (CA) and its October 27, 2010
Resolution,2 in CA-G.R. SP No. 101066, which affirmed the March 16, 2007 Decision3 and June 29, 2007 Resolution4 of the
National Labor Relations Com;nission (NLRC), reversing the decision 5 of the Labor Arbiter (LA) in this illegal dismissal case,
entitled "Marian Brigitte Contreras v. A1axiCare PCJB CJGNA Health Care, et. al."
The Facts
Sometime in March 2003, Maxicare Healthcare Corporation (Maxicare) hired Dr. Marian Brigitte A. Contreras (Dr. Contreras)
as a retainer doctor at the Philippine National Bank (PNB) Head Office, Macapagal Avenue, Roxas Boulevard, Manila. Under
their verbal agreement, Dr. Contreras would render medical services for one year at P250.00 per hour. Her retainer fee would
be paid every 15th and 30th of each month based on her work schedule which was every Tuesday, Thursday and Friday from
6:00 oclock in the morning to 5:00 oclock in the afternoon.6
The controversy started when, on July 3, 2003, Dr. Ruth A. Asis, Maxicares medical specialist on Corporate Accounts,
informed Dr. Contreras that she was going to be transferred to another account after a month. On August 4, 2003, the Service
Agreement between Dr. Contreras and Dr. Eric S. Nubla, Maxicares Vice-President for Medical Services, was executed,
effecting the transfer of the former to Maybank Philippines (Maybank) for a period of four (4) months, from August 5, 2003 to
November 29, 2003, with a retainer fee of P168.00 per hour.
Dr. Contreras reported to Maybank for one (1) day only. On August 8, 2003, she filed a complaint before the LA claiming that
she was constructively dismissed. Maxicare, on the other hand, insisted that there was no constructive dismissal.
Ruling of the Labor Arbiter
On November 29, 2005, the LA rendered a decision dismissing the complaint of Dr. Contreras for lack of merit. The pertinent
portions of the LAs ruling read:
If indeed complainant was forced to sign the contract of August 4, 2003, she could not have reported to that assignment under
it in the first place. In reporting so, she not only ratified the contract of service she signed but also waived all her rights under
their previous agreement she is supposed to be entitled to enforce. It may be that there present under the circumstance of a
breach of contractual obligation under the previous undertaking which partakes the nature of constructive dismissal based on
evidence at hand. At that then, complainant should have at such point ventilated the matter before this forum. She did not.
Instead, she proceeded to sign or execute the questioned Service Agreement with the respondent under the terms and
conditions therein stated. To a professional like her, a Doctor, complainant should have refused as she is at liberty, in refusing
to sign even if what she claimed there appears a threat of dismissal. In this case, she even confirmed what she signed by
reporting to duty thereafter. And only after examining what she signed that she realized she thought of initiating the present
complaint. In this regard, absent any showing that she was forced to execute the disputed service agreement of August 4,
2003, complainants complaint for constructive dismissal can hardly be sustained by a later change of heart.
Finding substantial basis to support the validity of the Service Agreement of August 4, 2003 entered into by the parties, the
present complaint for constructive dismissal must necessarily fail. Consequent claim as relief therefor has no basis. 7
114
 Ruling of the NLRC
On March 16, 2007, upon appeal, the NLRC rendered a decision8 reversing and setting aside the LAs decision. It declared
that Dr. Contreras was illegally dismissed and ordered her reinstatement to her former or substantially equivalent position and
the payment of her backwages.
The NLRC explained that the "execution of a Service Agreement for another retainership with lower salary does not negate
constructive dismissal arising from the termination of complainants PNB retainership without either just or authorized cause
but simply is anchored on alleged complaints which even Dr. Eric Nubla recognize to be fictitious." 9 Dr. Contreras signed the
Service Agreement on August 4, 2003, and later repudiated it with a notice to Maxicare that she could not go on serving under
such a disadvantageous situation. The disadvantage she was referring to was the disparity in remuneration between the PNB
retainership with 250.00 per hour and that of Maybank with 168.00 per hour. The clear economic prejudice validated her
claim of having reservation on the Service Agreement prior to her signature. She signed the new agreement because it, being
a contract of adhesion, gave her no realistic chance to haggle for her job. Thus, the NLRC disposed:
WHEREFORE, premises considered, the Decision appealed from is hereby REVERSED and SET ASIDE and a new one
entered declaring complainant was illegally dismissed. Accordingly, respondents are hereby ordered to reinstate complainant
to her former or substantially equivalent position and to pay her backwages from the time her PNB retainership was terminated
until the finality of this Decision.
SO ORDERED.10
Ruling of the Court of Appeals
On January 28, 2010, the CA affirmed the conclusions reached by the NLRC.
On the issue regarding the existence or non-existence of an employer-employee relationship, the CA ruled that Maxicare could
not raise the said issue for the first time on appeal. Nonetheless, the CA ruled that the records showed that there existed an
employer-employee relationship between Maxicare and Dr. Contreras for the following reasons: 1] Maxicare exercised
significant control in her hiring and the conduct of her work; 2] Maxicare was the one who engaged her services; 3] Maxicare
determined and prepared her work assignments, like attending to PNB members needing medical consultation and performing
such other duties as may be assigned by
Maxicare to her from time to time; 4] Maxicare determined her specific work schedules, which was for her to render services
from 1:00 to 5:00 oclock in the afternoon "every Tuesday and Thursday;" 11 and 5] Maxicare prescribed the conditions of work
for her, which were a) that she had to abide by the company rules and regulations, b) that she would keep inviolate all
company records, documents, and properties and from disclosing or reproducing these records and documents to anyone
without proper authority, c) that she had to surrender upon request for, or upon termination of her services, such records,
documents, and properties to Maxicare; d) that Maxicare, through its Customer Care coordinator, Ms. Cecile Samonte, would
monitor her work; and e) that she was compensated not according to the result of her efforts, but according to the amount of
time she spent at the PNB clinic.12
The CA added that Maxicare impliedly admitted that an employer-employee relationship existed between both parties by
arguing that she was not constructively dismissed. Hence, Maxicare was estopped from questioning her status as its
employee.13
On the issue of whether or not Dr. Contreras was constructively dismissed, the CA ruled that her transfer to Maybank, which
resulted in a diminution of her salary, was prejudicial to her interest and amounted to a constructive dismissal. It stated that
Maxicare, as employer, had the burden of proving that not only was her transfer made for valid or legitimate grounds, such as
genuine business necessity, but also that such transfer was not unreasonable, inconvenient, or prejudicial to her. 14
Maxicare filed a motion for reconsideration but it was denied by the CA in its Resolution, 15 dated October 27, 2010.
Not in conformity with the adverse decision, Maxicare filed this petition anchored on the following
GROUNDS
I
THE COURT OF APPEALS, IN RENDERING THE ASSAILED DECISION, ERRONEOUSLY SET ASIDE, EVEN
CONTRADICTED, A PLETHORA OF JURISPRUDENCE THAT LACK OR ABSENCE OF JURISDICTION MAY BE
RAISED FOR THE FIRST TIME EVEN ON APPEAL.
II
THE COURT OF APPEALS MISAPPLIED THE 4-TIERED TEST TO DETERMINE THE EXISTENCE OF
EMPLOYER-EMPLOYEE RELATIONSHIP WITHOUT CONCRETE BASIS.16
Maxicares position
Maxicare argues that questions on jurisdiction "may be raised at any stage of the proceedings, even on appeal, and the right
to do so is not lost by waiver or by estoppel." Maxicare likewise asserts that "if the issue on jurisdiction may be resolved by an
appellate tribunal motu propio when the same has not been raised in the courts below, with more reason that the same should
be allowed to be considered and decided upon by the appellate court when, as in the present petition, the said issue has been
raised in the pleadings before the appellate court."17

115
Considering that Dr. Contreras submitted evidence to support not only her claim of constructive dismissal but also the
existence of an employer-employee relationship, its act of raising said issue should be sufficient ground for the CA to consider
and rule on the issue of jurisdiction.18
Maxicare claims that there could have been no employer-employee relationship arising from the oral medical retainership
agreement between the parties. It contends that it could not have effectively exercised control over the means and method
adopted by Dr. Contreras in accomplishing her work as a medical retainer; that it did not determine the manner in which she
conducted physical examination, immunized, diagnosed, or treated her patients; that Dr. Contreras confirmed that it paid her
retainer fees and deducted only 10% "withholding tax payable-expanded;" that she was not in the list of Maxicares payroll;
and that Maxicare did not deduct SSS contributions from the retainer fees that Dr. Contreras received. Hence, the above
circumstances disprove the presence of employer-employee relationship. On the contrary, they strongly indicate a case of an
independent contractor.19
Maxicare went on further by stating that Dr. Contreras was an independent contractor because she rendered services for a
few hours a week, giving her free time to pursue her private practice as a physician and that upon the terms of their
agreement, either party could terminate the arrangement upon one months advance notice. 20
Finally, Maxicare contends that Dr. Contreras is a highly educated person who freely, willingly and voluntarily signed the new
Medical Retainership Agreement.21 Therefore, there is no truth to her claim that she was forced to sign said agreement. 22
Dr. Contrerass position
On the other hand, Dr. Contreras basically counters that Maxicare did not raise the issue of the existence of an employer-
employee relationship before the LA. It also did not question such point in the NLRC. Maxicare brought up the matter for the
first time only in the CA.
The Courts Ruling
The petition has no merit at all.
As a rule, a party who deliberately adopts a certain theory upon which the case is tried and decided by the lower court, will not
be permitted to change theory on appeal. Points of law, theories, issues and arguments not brought to the attention of the
lower court need not be, and ordinarily will not be, considered by a reviewing court, as these cannot be raised for the first time
at such late stage. It would be unfair to the adverse party who would have no opportunity to present further evidence material
to the new theory, which it could have done had it been aware of it at the time of the hearing before the trial court. To permit
Maxicare in this case to change its theory on appeal would thus be unfair to Dr. Contreras, and would offend the basic rules of
fair play, justice and due process.
Indeed, Maxicare is already estopped from belatedly raising the issue of lack of jurisdiction considering that it has actively
participated in the proceedings before the LA and the NLRC. The Court has consistently held that "while jurisdiction may be
assailed at any stage, a partys active participation in the proceedings before a court without jurisdiction will estop such party
from assailing the lack of it." It is an undesirable practice of a party to participate in the proceedings, submit his case for
decision and then accept the judgment, if favorable, but attack it for lack of jurisdiction, when adverse. 23
In the case at bench, it may be recalled that Dr. Contreras filed a complaint for illegal dismissal against Maxicare before the
LA. Maxicare was given the chance to defend its case before the LA. In fact, the LA decision favored Maxicare when it ruled
that there was no illegal dismissal. On appeal, however, the NLRC reversed and set aside the LAs decision and ordered Dr.
Contrerass reinstatement with payment of backwages. Upon the denial of its motion for reconsideration, Maxicare elevated its
case to the CA raising the issue of jurisdiction for the first time.
Undeniably, Maxicare never questioned the LAs jurisdiction from the very beginning and never raised the issue of employer-
employee relationship throughout the LA proceedings. Surely, Maxicare is not unaware of Article 217 of the Labor Code which
enumerates the cases where the LA has exclusive and original jurisdiction. Maxicare definitely knows the basic rule that the
LA can exercise jurisdiction over cases only when there is an employer-employee relationship between the parties in dispute.
If Maxicare was of the position that there was no employer-employee relationship existing between Maxicare and Dr.
Contreras, it should have questioned the jurisdiction of the LA right away. Surprisingly, it never did. Instead, it actively
participated in the LA proceedings without bringing to the LAs attention the issue of employer-employee relationship.
On appeal before the NLRC, the subject issue was never raised either. Maxicare only raised the subject issue for the first time
when it filed a petition in the CA challenging the adverse decision of the NLRC. It is, therefore, estopped from assailing the
jurisdiction of the LA and the NLRC.
It is true that questions of jurisdiction may be raised at any stage. It is also true, however, that in the interest of fairness,
questions challenging the jurisdiction of courts will not be tolerated if the party questioning such jurisdiction actively
participates in the court proceedings and allows the court to pass judgment on the case, and then questions the propriety of
said judgment after getting an unfavorable decision. It must be noted that Maxicare had two (2) chances of raising the issue of
jurisdiction: first, in the LA level and second, in the NLRC level. Unfortunately, it remained silent on the issue of jurisdiction
while actively participating in both tribunals. It was definitely too late for Maxicare to open up the issue of jurisdiction in the CA.
The Court cannot tolerate this kind of procedural strategy on Maxicares part because it would be unfair to Dr. Contreras who
would no longer be able to present further evidence material to the new issue raised on appeal. Maxicares lapse in procedure

116
has proved fatal to its cause and therefore, it should suffer the consequences. The Court has been consistent in its ruling in a
long line of cases, the latest of which is Duty Free Philippines Services, Inc., v. Manolito Q. Tria, 24 where it was written:
It was only in petitioners Petition for Certiorari before the CA did it impute liability on DFP as respondents direct employer and
as the entity who conducted the investigation and initiated respondents termination proceedings. Obviously, petitioner
changed its theory when it elevated the NLRC decision to the CA. The appellate court, therefore, aptly refused to consider the
new theory offered by petitioner in its petition. As the object of the pleadings is to draw the lines of battle, so to speak, between
the litigants, and to indicate fairly the nature of the claims or defenses of both parties, a party cannot subsequently take a
position contrary to, or inconsistent, with its pleadings. It is a matter of law that when a party adopts a particular theory and the
case is tried and decided upon that theory in the court below, he will not be permitted to change his theory on appeal. The
case will be reviewed and decided on that theory and not approached and resolved from a different point of view.
The review of labor cases is confined to questions of jurisdiction or grave abuse of discretion. The alleged absence of
employer-employee relationship cannot be raised for the first time on appeal. The resolution of this issue requires the
admission and calibration of evidence and the LA and the NLRC did not pass upon it in their decisions. We cannot permit
petitioner to change its theory on appeal. It would be unfair to the adverse party who would have no more opportunity to
present further evidence, material to the new theory, which it could have done had it been aware earlier of the new theory
before the LA and the NLRC. More so in this case as the supposed employer of respondent which is DFP was not and is not a
party to the present case.
In Pamplona Plantation Company v. Acosta, petitioner therein raised for the first time in its appeal to the NLRC that
respondents therein were not its employees but of another company. In brushing aside this defense, the Court held:
x x x Petitioner is estopped from denying that respondents worked for it. In the first place, it never raised this defense in the
proceedings before the Labor Arbiter. Notably, the defense it raised pertained to the nature of respondents' employment, i.e.,
whether they are seasonal employees, contractors, or worked under the pakyaw system. Thus, in its Position Paper, petitioner
alleged that some of the respondents are coconut filers and copra hookers or sakadors; some are seasonal employees who
worked as scoopers or lugiteros; some are contractors; and some worked under the pakyaw system. In support of these
allegations, petitioner even presented the company's payroll which will allegedly prove its allegations.
By setting forth these defenses, petitioner, in effect, admitted that respondents worked for it, albeit in different capacities. Such
allegations are negative pregnant - denials pregnant with the admission of the substantial facts in the pleading responded to
which are not squarely denied, and amounts to an acknowledgment that respondents were indeed employed by petitioner.
Also in Telephone Engineering & Service Co., Inc. v. WCC, et al., the Court held that the lack of employer-employee
relationship is a matter of defense that the employer should properly raise in the proceedings below. The determination of this
relationship involves a finding of fact, which is conclusive and binding and not subject to review by this Court.
In this case, petitioner insisted that respondent was dismissed from employment for cause and after the observance of the
proper procedure for termination. Consequently, petitioner cannot now deny that respondent is its employee. While indeed,
jurisdiction cannot be conferred by acts or omission of the parties, petitioner's belated denial that it is the employer of
respondent is obviously an afterthought, a devise to defeat the law and evade its obligations.
It is a fundamental rule of procedure that higher courts are precluded from entertaining matters neither alleged in the pleadings
nor raised during the proceedings below, but ventilated for the first time only in a motion for reconsideration or on appeal.
Petitioner is bound by its submissions that respondent is its employee and it should not be permitted to change its theory.
Such change of theory cannot be tolerated on appeal, not due to the strict application of procedural rules, but as a matter of
fairness. [Emphases supplied]
WHEREFORE, the petition is DENIED.
SO ORDERED.

G.R. No. 196426 August 15, 2011

MARTICIO SEMBLANTE and DUBRICK PILAR, Petitioners,
vs.
COURT OF APPEALS, 19th DIVISION, now SPECIAL FORMER 19th DIVISION, GALLERA DE MANDAUE / SPOUSES
VICENTE and MARIA LUISA LOOT, Respondents.
DECISION
VELASCO, JR., J.:
Before Us is a Petition for Review on Certiorari under Rule 45, assailing and seeking to set aside the Decision 1and
Resolution2 dated May 29, 2009 and February 23, 2010, respectively, of the Court of Appeals (CA) in CA-G.R. SP No. 03328.
The CA affirmed the October 18, 2006 Resolution3 of the National Labor Relations Commission (NLRC), Fourth Division (now
Seventh Division), in NLRC Case No. V-000673-2004.
Petitioners Marticio Semblante (Semblante) and Dubrick Pilar (Pilar) assert that they were hired by respondents-spouses
Vicente and Maria Luisa Loot, the owners of Gallera de Mandaue (the cockpit), as the official masiador and sentenciador,
respectively, of the cockpit sometime in 1993.

117
As the masiador, Semblante calls and takes the bets from the gamecock owners and other bettors and orders the start of the
cockfight. He also distributes the winnings after deducting the arriba, or the commission for the cockpit. Meanwhile, as the
sentenciador, Pilar oversees the proper gaffing of fighting cocks, determines the fighting cocks physical condition and
capabilities to continue the cockfight, and eventually declares the result of the cockfight. 4
For their services as masiador and sentenciador, Semblante receives PhP 2,000 per week or a total of PhP 8,000 per month,
while Pilar gets PhP 3,500 a week or PhP 14,000 per month. They work every Tuesday, Wednesday, Saturday, and Sunday
every week, excluding monthly derbies and cockfights held on special holidays. Their working days start at 1:00 p.m. and last
until 12:00 midnight, or until the early hours of the morning depending on the needs of the cockpit. Petitioners had both been
issued employees identification cards5 that they wear every time they report for duty. They alleged never having incurred any
infraction and/or violation of the cockpit rules and regulations.
On November 14, 2003, however, petitioners were denied entry into the cockpit upon the instructions of respondents, and
were informed of the termination of their services effective that date. This prompted petitioners to file a complaint for illegal
dismissal against respondents.
In answer, respondents denied that petitioners were their employees and alleged that they were associates of respondents
independent contractor, Tomas Vega. Respondents claimed that petitioners have no regular working time or day and they are
free to decide for themselves whether to report for work or not on any cockfighting day. In times when there are few cockfights
in Gallera de Mandaue, petitioners go to other cockpits in the vicinity. Lastly, petitioners, so respondents assert, were only
issued identification cards to indicate that they were free from the normal entrance fee and to differentiate them from the
general public.6
In a Decision dated June 16, 2004, Labor Arbiter Julie C. Rendoque found petitioners to be regular employees of respondents
as they performed work that was necessary and indispensable to the usual trade or business of respondents for a number of
years. The Labor Arbiter also ruled that petitioners were illegally dismissed, and so ordered respondents to pay petitioners
their backwages and separation pay.7
Respondents counsel received the Labor Arbiters Decision on September 14, 2004. And within the 10-day appeal period, he
filed the respondents appeal with the NLRC on September 24, 2004, but without posting a cash or surety bond equivalent to
the monetary award granted by the Labor Arbiter.8
It was only on October 11, 2004 that respondents filed an appeal bond dated October 6, 2004. Hence, in a Resolution 9 dated
August 25, 2005, the NLRC denied the appeal for its non-perfection.
Subsequently, however, the NLRC, acting on respondents Motion for Reconsideration, reversed its Resolution on the
postulate that their appeal was meritorious and the filing of an appeal bond, albeit belated, is a substantial compliance with the
rules. The NLRC held in its Resolution of October 18, 2006 that there was no employer-employee relationship between
petitioners and respondents, respondents having no part in the selection and engagement of petitioners, and that no separate
individual contract with respondents was ever executed by petitioners. 10
Following the denial by the NLRC of their Motion for Reconsideration, per Resolution dated January 12, 2007, petitioners went
to the CA on a petition for certiorari. In support of their petition, petitioners argued that the NLRC gravely abused its discretion
in entertaining an appeal that was not perfected in the first place. On the other hand, respondents argued that the NLRC did
not commit grave abuse of discretion, since they eventually posted their appeal bond and that their appeal was so meritorious
warranting the relaxation of the rules in the interest of justice. 11
In its Decision dated May 29, 2009, the appellate court found for respondents, noting that referees and bet-takers in a
cockfight need to have the kind of expertise that is characteristic of the game to interpret messages conveyed by mere
gestures. Hence, petitioners are akin to independent contractors who possess unique skills, expertise, and talent to distinguish
them from ordinary employees. Further, respondents did not supply petitioners with the tools and instrumentalities they
needed to perform work. Petitioners only needed their unique skills and talents to perform their job as masiador and
sentenciador.12 The CA held:
In some circumstances, the NLRC is allowed to be liberal in the interpretation of the rules in deciding labor cases. In this case,
the appeal bond was filed, although late. Moreover, an exceptional circumstance obtains in the case at bench which warrants
a relaxation of the bond requirement as a condition for perfecting the appeal. This case is highly meritorious that propels this
Court not to strictly apply the rules and thus prevent a grave injustice from being done.
As elucidated by the NLRC, the circumstances obtaining in this case wherein no actual employer-employee exists between the
petitioners and the private respondents [constrain] the relaxation of the rules. In this regard, we find no grave abuse
attributable to the administrative body.
xxxx
Petitioners are duly licensed "masiador" and "sentenciador" in the cockpit owned by Lucia Loot. Cockfighting, which is a part of
our cultural heritage, has a peculiar set of rules. It is a game based on the fighting ability of the game cocks in the cockpit. The
referees and bet-takers need to have that kind of expertise that is characteristic of the cockfight gambling who can interpret the
message conveyed even by mere gestures. They ought to have the talent and skill to get the bets from numerous cockfighting
aficionados and decide which cockerel to put in the arena. They are placed in that elite spot where they can control the game
and the crowd. They are not given salaries by cockpit owners as their compensation is based on the "arriba". In fact, they can
118
offer their services everywhere because they are duly licensed by the GAB. They are free to choose which cockpit arena to
enter and offer their expertise. Private respondents cannot even control over the means and methods of the manner by which
they perform their work. In this light, they are akin to independent contractors who possess unique skills, expertise and talent
to distinguish them from ordinary employees.
Furthermore, private respondents did not supply petitioners with the tools and instrumentalities they needed to perform their
work. Petitioners only needed their talent and skills to be a "masiador" and "sentenciador". As such, they had all the tools they
needed to perform their work. (Emphasis supplied.)
The CA refused to reconsider its Decision. Hence, petitioners came to this Court, arguing in the main that the CA committed a
reversible error in entertaining an appeal, which was not perfected in the first place.
Indeed, the posting of a bond is indispensable to the perfection of an appeal in cases involving monetary awards from the
Decision of the Labor Arbiter.13 Article 223 of the Labor Code provides:
Article 223. Appeal. Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to the
Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders. Such
appeal may be entertained only on any of the following grounds:
xxxx
In case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon the posting of a
cash or surety bond issued by a reputable bonding company duly accredited by the Commission in the amount equivalent to
the monetary award in the judgment appealed from. (Emphasis supplied.)
Time and again, however, this Court, considering the substantial merits of the case, has relaxed this rule on, and excused the
late posting of, the appeal bond when there are strong and compelling reasons for the liberality, 14such as the prevention of
miscarriage of justice extant in the case15 or the special circumstances in the case combined with its legal merits or the
amount and the issue involved.16 After all, technical rules cannot prevent courts from exercising their duties to determine and
settle, equitably and completely, the rights and obligations of the parties.17 This is one case where the exception to the general
rule lies.
While respondents had failed to post their bond within the 10-day period provided above, it is evident, on the other hand, that
petitioners are NOT employees of respondents, since their relationship fails to pass muster the four-fold test of employment
We have repeatedly mentioned in countless decisions: (1) the selection and engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the power to control the employees conduct, which is the most important
element.18 1avvphi1
As found by both the NLRC and the CA, respondents had no part in petitioners selection and management; 19petitioners
compensation was paid out of the arriba (which is a percentage deducted from the total bets), not by petitioners; 20 and
petitioners performed their functions as masiador and sentenciador free from the direction and control of respondents. 21 In the
conduct of their work, petitioners relied mainly on their "expertise that is characteristic of the cockfight gambling,"22 and were
never given by respondents any tool needed for the performance of their work. 23
Respondents, not being petitioners employers, could never have dismissed, legally or illegally, petitioners, since respondents
were without power or prerogative to do so in the first place. The rule on the posting of an appeal bond cannot defeat the
substantive rights of respondents to be free from an unwarranted burden of answering for an illegal dismissal for which they
were never responsible.1avvphi1
Strict implementation of the rules on appeals must give way to the factual and legal reality that is evident from the records of
this case.24 After all, the primary objective of our laws is to dispense justice and equity, not the contrary.
WHEREFORE, We DENY this petition and AFFIRM the May 29, 2009 Decision and February 23, 2010 Resolution of the CA,
and the October 18, 2006 Resolution of the NLRC.
SO ORDERED.

G.R. No. 126297 January 31, 2007

PROFESSIONAL SERVICES, INC., Petitioner,
vs.
NATIVIDAD and ENRIQUE AGANA, Respondents.
x-----------------------x
G.R. No. 126467 January 31, 2007
NATIVIDAD (Substituted by her children MARCELINO AGANA III, ENRIQUE AGANA, JR., EMMA AGANA ANDAYA,
JESUS AGANA, and RAYMUND AGANA) and ENRIQUE AGANA, Petitioners,
vs.
JUAN FUENTES, Respondent.
x- - - - - - - - - - - - - - - - - - - -- - - - x
G.R. No. 127590 January 31, 2007

119
MIGUEL AMPIL, Petitioner,
vs.
NATIVIDAD AGANA and ENRIQUE AGANA, Respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Hospitals, having undertaken one of mankinds most important and delicate endeavors, must assume the grave responsibility
of pursuing it with appropriate care. The care and service dispensed through this high trust, however technical, complex and
esoteric its character may be, must meet standards of responsibility commensurate with the undertaking to preserve and
protect the health, and indeed, the very lives of those placed in the hospitals keeping.1
Assailed in these three consolidated petitions for review on certiorari is the Court of Appeals Decision 2 dated September 6,
1996 in CA-G.R. CV No. 42062 and CA-G.R. SP No. 32198 affirming with modification the Decision3 dated March 17, 1993 of
the Regional Trial Court (RTC), Branch 96, Quezon City in Civil Case No. Q-43322 and nullifying its Order dated September
21, 1993.
The facts, as culled from the records, are:
On April 4, 1984, Natividad Agana was rushed to the Medical City General Hospital (Medical City Hospital) because of
difficulty of bowel movement and bloody anal discharge. After a series of medical examinations, Dr. Miguel Ampil, petitioner in
G.R. No. 127590, diagnosed her to be suffering from "cancer of the sigmoid."
On April 11, 1984, Dr. Ampil, assisted by the medical staff4 of the Medical City Hospital, performed an anterior resection
surgery on Natividad. He found that the malignancy in her sigmoid area had spread on her left ovary, necessitating the
removal of certain portions of it. Thus, Dr. Ampil obtained the consent of Natividads husband, Enrique Agana, to permit Dr.
Juan Fuentes, respondent in G.R. No. 126467, to perform hysterectomy on her.
After Dr. Fuentes had completed the hysterectomy, Dr. Ampil took over, completed the operation and closed the incision.
However, the operation appeared to be flawed. In the corresponding Record of Operation dated April 11, 1984, the attending
nurses entered these remarks:
"sponge count lacking 2
"announced to surgeon searched (sic) done but to no avail continue for closure."
On April 24, 1984, Natividad was released from the hospital. Her hospital and medical bills, including the doctors fees,
amounted to P60,000.00.
After a couple of days, Natividad complained of excruciating pain in her anal region. She consulted both Dr. Ampil and Dr.
Fuentes about it. They told her that the pain was the natural consequence of the surgery. Dr. Ampil then recommended that
she consult an oncologist to examine the cancerous nodes which were not removed during the operation.
On May 9, 1984, Natividad, accompanied by her husband, went to the United States to seek further treatment. After four
months of consultations and laboratory examinations, Natividad was told she was free of cancer. Hence, she was advised to
return to the Philippines.
On August 31, 1984, Natividad flew back to the Philippines, still suffering from pains. Two weeks thereafter, her daughter
found a piece of gauze protruding from her vagina. Upon being informed about it, Dr. Ampil proceeded to her house where he
managed to extract by hand a piece of gauze measuring 1.5 inches in width. He then assured her that the pains would soon
vanish.
Dr. Ampils assurance did not come true. Instead, the pains intensified, prompting Natividad to seek treatment at the
Polymedic General Hospital. While confined there, Dr. Ramon Gutierrez detected the presence of another foreign object in her
vagina -- a foul-smelling gauze measuring 1.5 inches in width which badly infected her vaginal vault. A recto-vaginal fistula had
formed in her reproductive organs which forced stool to excrete through the vagina. Another surgical operation was needed to
remedy the damage. Thus, in October 1984, Natividad underwent another surgery.
On November 12, 1984, Natividad and her husband filed with the RTC, Branch 96, Quezon City a complaint for damages
against the Professional Services, Inc. (PSI), owner of the Medical City Hospital, Dr. Ampil, and Dr. Fuentes, docketed as Civil
Case No. Q-43322. They alleged that the latter are liable for negligence for leaving two pieces of gauze inside Natividads
body and malpractice for concealing their acts of negligence.
Meanwhile, Enrique Agana also filed with the Professional Regulation Commission (PRC) an administrative complaint for
gross negligence and malpractice against Dr. Ampil and Dr. Fuentes, docketed as Administrative Case No. 1690. The PRC
Board of Medicine heard the case only with respect to Dr. Fuentes because it failed to acquire jurisdiction over Dr. Ampil who
was then in the United States.
On February 16, 1986, pending the outcome of the above cases, Natividad died and was duly substituted by her above-named
children (the Aganas).
On March 17, 1993, the RTC rendered its Decision in favor of the Aganas, finding PSI, Dr. Ampil and Dr. Fuentes liable for
negligence and malpractice, the decretal part of which reads:
WHEREFORE, judgment is hereby rendered for the plaintiffs ordering the defendants PROFESSIONAL SERVICES, INC., DR.
MIGUEL AMPIL and DR. JUAN FUENTES to pay to the plaintiffs, jointly and severally, except in respect of the award for
exemplary damages and the interest thereon which are the liabilities of defendants Dr. Ampil and Dr. Fuentes only, as follows:
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 1. As actual damages, the following amounts:
a. The equivalent in Philippine Currency of the total of US$19,900.00 at the rate of P21.60-US$1.00, as
reimbursement of actual expenses incurred in the United States of America;
b. The sum of P4,800.00 as travel taxes of plaintiffs and their physician daughter;
c. The total sum of P45,802.50, representing the cost of hospitalization at Polymedic Hospital, medical fees,
and cost of the saline solution;
2. As moral damages, the sum of P2,000,000.00;
3. As exemplary damages, the sum of P300,000.00;
4. As attorneys fees, the sum of P250,000.00;
5. Legal interest on items 1 (a), (b), and (c); 2; and 3 hereinabove, from date of filing of the complaint until full
payment; and
6. Costs of suit.
SO ORDERED.
Aggrieved, PSI, Dr. Fuentes and Dr. Ampil interposed an appeal to the Court of Appeals, docketed as CA-G.R. CV No. 42062.
Incidentally, on April 3, 1993, the Aganas filed with the RTC a motion for a partial execution of its Decision, which was granted
in an Order dated May 11, 1993. Thereafter, the sheriff levied upon certain properties of Dr. Ampil and sold them for
P451,275.00 and delivered the amount to the Aganas.
Following their receipt of the money, the Aganas entered into an agreement with PSI and Dr. Fuentes to indefinitely suspend
any further execution of the RTC Decision. However, not long thereafter, the Aganas again filed a motion for an alias writ of
execution against the properties of PSI and Dr. Fuentes. On September 21, 1993, the RTC granted the motion and issued the
corresponding writ, prompting Dr. Fuentes to file with the Court of Appeals a petition for certiorari and prohibition, with prayer
for preliminary injunction, docketed as CA-G.R. SP No. 32198. During its pendency, the Court of Appeals issued a
Resolution5 dated October 29, 1993 granting Dr. Fuentes prayer for injunctive relief.
On January 24, 1994, CA-G.R. SP No. 32198 was consolidated with CA-G.R. CV No. 42062.
Meanwhile, on January 23, 1995, the PRC Board of Medicine rendered its Decision 6 in Administrative Case No. 1690
dismissing the case against Dr. Fuentes. The Board held that the prosecution failed to show that Dr. Fuentes was the one who
left the two pieces of gauze inside Natividads body; and that he concealed such fact from Natividad.
On September 6, 1996, the Court of Appeals rendered its Decision jointly disposing of CA-G.R. CV No. 42062 and CA-G.R.
SP No. 32198, thus:
WHEREFORE, except for the modification that the case against defendant-appellant Dr. Juan Fuentes is hereby DISMISSED,
and with the pronouncement that defendant-appellant Dr. Miguel Ampil is liable to reimburse defendant-appellant Professional
Services, Inc., whatever amount the latter will pay or had paid to the plaintiffs-appellees, the decision appealed from is hereby
AFFIRMED and the instant appeal DISMISSED.
Concomitant with the above, the petition for certiorari and prohibition filed by herein defendant-appellant Dr. Juan Fuentes in
CA-G.R. SP No. 32198 is hereby GRANTED and the challenged order of the respondent judge dated September 21, 1993, as
well as the alias writ of execution issued pursuant thereto are hereby NULLIFIED and SET ASIDE. The bond posted by the
petitioner in connection with the writ of preliminary injunction issued by this Court on November 29, 1993 is hereby cancelled.
Costs against defendants-appellants Dr. Miguel Ampil and Professional Services, Inc.
SO ORDERED.
Only Dr. Ampil filed a motion for reconsideration, but it was denied in a Resolution7 dated December 19, 1996.
Hence, the instant consolidated petitions.
In G.R. No. 126297, PSI alleged in its petition that the Court of Appeals erred in holding that: (1) it is estopped from raising the
defense that Dr. Ampil is not its employee; (2) it is solidarily liable with Dr. Ampil; and (3) it is not entitled to its counterclaim
against the Aganas. PSI contends that Dr. Ampil is not its employee, but a mere consultant or independent contractor. As
such, he alone should answer for his negligence.
In G.R. No. 126467, the Aganas maintain that the Court of Appeals erred in finding that Dr. Fuentes is not guilty of negligence
or medical malpractice, invoking the doctrine of res ipsa loquitur. They contend that the pieces of gauze are prima facie proofs
that the operating surgeons have been negligent.
Finally, in G.R. No. 127590, Dr. Ampil asserts that the Court of Appeals erred in finding him liable for negligence and
malpractice sans evidence that he left the two pieces of gauze in Natividads vagina. He pointed to other probable causes,
such as: (1) it was Dr. Fuentes who used gauzes in performing the hysterectomy; (2) the attending nurses failure to properly
count the gauzes used during surgery; and (3) the medical intervention of the American doctors who examined Natividad in
the United States of America.
For our resolution are these three vital issues: first, whether the Court of Appeals erred in holding Dr. Ampil liable for
negligence and malpractice; second, whether the Court of Appeals erred in absolving Dr. Fuentes of any liability; and third,
whether PSI may be held solidarily liable for the negligence of Dr. Ampil.
I - G.R. No. 127590
Whether the Court of Appeals Erred in Holding Dr. Ampil
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Liable for Negligence and Malpractice.
Dr. Ampil, in an attempt to absolve himself, gears the Courts attention to other possible causes of Natividads detriment. He
argues that the Court should not discount either of the following possibilities: first, Dr. Fuentes left the gauzes in Natividads
body after performing hysterectomy; second, the attending nurses erred in counting the gauzes; and third, the American
doctors were the ones who placed the gauzes in Natividads body.
Dr. Ampils arguments are purely conjectural and without basis. Records show that he did not present any evidence to prove
that the American doctors were the ones who put or left the gauzes in Natividads body. Neither did he submit evidence to
rebut the correctness of the record of operation, particularly the number of gauzes used. As to the alleged negligence of Dr.
Fuentes, we are mindful that Dr. Ampil examined his (Dr. Fuentes) work and found it in order.
The glaring truth is that all the major circumstances, taken together, as specified by the Court of Appeals, directly point to Dr.
Ampil as the negligent party, thus:
First, it is not disputed that the surgeons used gauzes as sponges to control the bleeding of the patient during the
surgical operation.
Second, immediately after the operation, the nurses who assisted in the surgery noted in their report that the sponge
count (was) lacking 2; that such anomaly was announced to surgeon and that a search was done but to no avail
prompting Dr. Ampil to continue for closure x x x.
Third, after the operation, two (2) gauzes were extracted from the same spot of the body of Mrs. Agana where the
surgery was performed.
An operation requiring the placing of sponges in the incision is not complete until the sponges are properly removed, and it is
settled that the leaving of sponges or other foreign substances in the wound after the incision has been closed is at least prima
facie negligence by the operating surgeon.8 To put it simply, such act is considered so inconsistent with due care as to raise
an inference of negligence. There are even legions of authorities to the effect that such act is negligence per se.9
Of course, the Court is not blind to the reality that there are times when danger to a patients life precludes a surgeon from
further searching missing sponges or foreign objects left in the body. But this does not leave him free from any obligation.
Even if it has been shown that a surgeon was required by the urgent necessities of the case to leave a sponge in his patients
abdomen, because of the dangers attendant upon delay, still, it is his legal duty to so inform his patient within a reasonable
time thereafter by advising her of what he had been compelled to do. This is in order that she might seek relief from the effects
of the foreign object left in her body as her condition might permit. The ruling in Smith v. Zeagler 10 is explicit, thus:
The removal of all sponges used is part of a surgical operation, and when a physician or surgeon fails to remove a sponge he
has placed in his patients body that should be removed as part of the operation, he thereby leaves his operation uncompleted
and creates a new condition which imposes upon him the legal duty of calling the new condition to his patients attention, and
endeavoring with the means he has at hand to minimize and avoid untoward results likely to ensue therefrom.
Here, Dr. Ampil did not inform Natividad about the missing two pieces of gauze. Worse, he even misled her that the pain she
was experiencing was the ordinary consequence of her operation. Had he been more candid, Natividad could have taken the
immediate and appropriate medical remedy to remove the gauzes from her body. To our mind, what was initially an act of
negligence by Dr. Ampil has ripened into a deliberate wrongful act of deceiving his patient.
This is a clear case of medical malpractice or more appropriately, medical negligence. To successfully pursue this kind of
case, a patient must only prove that a health care provider either failed to do something which a reasonably prudent health
care provider would have done, or that he did something that a reasonably prudent provider would not have done; and that
failure or action caused injury to the patient.11 Simply put, the elements are duty, breach, injury and proximate causation. Dr,
Ampil, as the lead surgeon, had the duty to remove all foreign objects, such as gauzes, from Natividads body before closure
of the incision. When he failed to do so, it was his duty to inform Natividad about it. Dr. Ampil breached both duties. Such
breach caused injury to Natividad, necessitating her further examination by American doctors and another surgery. That Dr.
Ampils negligence is the proximate cause12 of Natividads injury could be traced from his act of closing the incision despite the
information given by the attending nurses that two pieces of gauze were still missing. That they were later on extracted from
Natividads vagina established the causal link between Dr. Ampils negligence and the injury. And what further aggravated
such injury was his deliberate concealment of the missing gauzes from the knowledge of Natividad and her family.
II - G.R. No. 126467
Whether the Court of Appeals Erred in Absolving
Dr. Fuentes of any Liability
The Aganas assailed the dismissal by the trial court of the case against Dr. Fuentes on the ground that it is contrary to the
doctrine of res ipsa loquitur. According to them, the fact that the two pieces of gauze were left inside Natividads body is a
prima facie evidence of Dr. Fuentes negligence.
We are not convinced.
Literally, res ipsa loquitur means "the thing speaks for itself." It is the rule that the fact of the occurrence of an injury, taken with
the surrounding circumstances, may permit an inference or raise a presumption of negligence, or make out a plaintiffs prima
facie case, and present a question of fact for defendant to meet with an explanation. 13 Stated differently, where the thing which
caused the injury, without the fault of the injured, is under the exclusive control of the defendant and the injury is such that it
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should not have occurred if he, having such control used proper care, it affords reasonable evidence, in the absence of
explanation that the injury arose from the defendants want of care, and the burden of proof is shifted to him to establish that
he has observed due care and diligence.14
From the foregoing statements of the rule, the requisites for the applicability of the doctrine of res ipsa loquitur are: (1) the
occurrence of an injury; (2) the thing which caused the injury was under the control and management of the defendant; (3) the
occurrence was such that in the ordinary course of things, would not have happened if those who had control or management
used proper care; and (4) the absence of explanation by the defendant. Of the foregoing requisites, the most instrumental is
the "control and management of the thing which caused the injury." 15
We find the element of "control and management of the thing which caused the injury" to be wanting. Hence, the doctrine of
res ipsa loquitur will not lie.
It was duly established that Dr. Ampil was the lead surgeon during the operation of Natividad. He requested the assistance of
Dr. Fuentes only to perform hysterectomy when he (Dr. Ampil) found that the malignancy in her sigmoid area had spread to
her left ovary. Dr. Fuentes performed the surgery and thereafter reported and showed his work to Dr. Ampil. The latter
examined it and finding everything to be in order, allowed Dr. Fuentes to leave the operating room. Dr. Ampil then resumed
operating on Natividad. He was about to finish the procedure when the attending nurses informed him that two pieces of gauze
were missing. A "diligent search" was conducted, but the misplaced gauzes were not found. Dr. Ampil then directed that the
incision be closed. During this entire period, Dr. Fuentes was no longer in the operating room and had, in fact, left the hospital.
Under the "Captain of the Ship" rule, the operating surgeon is the person in complete charge of the surgery room and all
personnel connected with the operation. Their duty is to obey his orders.16 As stated before, Dr. Ampil was the lead surgeon.
In other words, he was the "Captain of the Ship." That he discharged such role is evident from his following conduct: (1) calling
Dr. Fuentes to perform a hysterectomy; (2) examining the work of Dr. Fuentes and finding it in order; (3) granting Dr. Fuentes
permission to leave; and (4) ordering the closure of the incision. To our mind, it was this act of ordering the closure of the
incision notwithstanding that two pieces of gauze remained unaccounted for, that caused injury to Natividads body. Clearly,
the control and management of the thing which caused the injury was in the hands of Dr. Ampil, not Dr. Fuentes.
In this jurisdiction, res ipsa loquitur is not a rule of substantive law, hence, does not per se create or constitute an independent
or separate ground of liability, being a mere evidentiary rule. 17 In other words, mere invocation and application of the doctrine
does not dispense with the requirement of proof of negligence. Here, the negligence was proven to have been committed by
Dr. Ampil and not by Dr. Fuentes.
III - G.R. No. 126297
Whether PSI Is Liable for the Negligence of Dr. Ampil
The third issue necessitates a glimpse at the historical development of hospitals and the resulting theories concerning their
liability for the negligence of physicians.
Until the mid-nineteenth century, hospitals were generally charitable institutions, providing medical services to the lowest
classes of society, without regard for a patients ability to pay.18 Those who could afford medical treatment were usually treated
at home by their doctors.19 However, the days of house calls and philanthropic health care are over. The modern health care
industry continues to distance itself from its charitable past and has experienced a significant conversion from a not-for-profit
health care to for-profit hospital businesses. Consequently, significant changes in health law have accompanied the business-
related changes in the hospital industry. One important legal change is an increase in hospital liability for medical malpractice.
Many courts now allow claims for hospital vicarious liability under the theories of respondeat superior, apparent authority,
ostensible authority, or agency by estoppel. 20
In this jurisdiction, the statute governing liability for negligent acts is Article 2176 of the Civil Code, which reads:
Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-
delict and is governed by the provisions of this Chapter.
A derivative of this provision is Article 2180, the rule governing vicarious liability under the doctrine of respondeat superior,
thus:
ART. 2180. The obligation imposed by Article 2176 is demandable not only for ones own acts or omissions, but also for those
of persons for whom one is responsible.
x x x x x x
The owners and managers of an establishment or enterprise are likewise responsible for damages caused by their employees
in the service of the branches in which the latter are employed or on the occasion of their functions.
Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their
assigned tasks even though the former are not engaged in any business or industry.
x x x x x x
The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the
diligence of a good father of a family to prevent damage.
A prominent civilist commented that professionals engaged by an employer, such as physicians, dentists, and pharmacists,
are not "employees" under this article because the manner in which they perform their work is not within the control of the
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latter (employer). In other words, professionals are considered personally liable for the fault or negligence they commit in the
discharge of their duties, and their employer cannot be held liable for such fault or negligence. In the context of the present
case, "a hospital cannot be held liable for the fault or negligence of a physician or surgeon in the treatment or operation of
patients."21
The foregoing view is grounded on the traditional notion that the professional status and the very nature of the physicians
calling preclude him from being classed as an agent or employee of a hospital, whenever he acts in a professional
capacity.22 It has been said that medical practice strictly involves highly developed and specialized knowledge, 23 such that
physicians are generally free to exercise their own skill and judgment in rendering medical services sans
interference.24 Hence, when a doctor practices medicine in a hospital setting, the hospital and its employees are deemed to
subserve him in his ministrations to the patient and his actions are of his own responsibility. 25
The case of Schloendorff v. Society of New York Hospital 26 was then considered an authority for this view. The "Schloendorff
doctrine" regards a physician, even if employed by a hospital, as an independent contractor because of the skill he exercises
and the lack of control exerted over his work. Under this doctrine, hospitals are exempt from the application of the respondeat
superior principle for fault or negligence committed by physicians in the discharge of their profession.
However, the efficacy of the foregoing doctrine has weakened with the significant developments in medical care. Courts came
to realize that modern hospitals are increasingly taking active role in supplying and regulating medical care to patients. No
longer were a hospitals functions limited to furnishing room, food, facilities for treatment and operation, and attendants for its
patients. Thus, in Bing v. Thunig,27 the New York Court of Appeals deviated from the Schloendorff doctrine, noting that modern
hospitals actually do far more than provide facilities for treatment. Rather, they regularly employ, on a salaried basis, a large
staff of physicians, interns, nurses, administrative and manual workers. They charge patients for medical care and treatment,
even collecting for such services through legal action, if necessary. The court then concluded that there is no reason to
exempt hospitals from the universal rule of respondeat superior.
In our shores, the nature of the relationship between the hospital and the physicians is rendered inconsequential in view of our
categorical pronouncement in Ramos v. Court of Appeals 28 that for purposes of apportioning responsibility in medical
negligence cases, an employer-employee relationship in effect exists between hospitals and their attending and visiting
physicians. This Court held:
"We now discuss the responsibility of the hospital in this particular incident. The unique practice (among private hospitals) of
filling up specialist staff with attending and visiting "consultants," who are allegedly not hospital employees, presents problems
in apportioning responsibility for negligence in medical malpractice cases. However, the difficulty is more apparent than real.
In the first place, hospitals exercise significant control in the hiring and firing of consultants and in the conduct of their work
within the hospital premises. Doctors who apply for consultant slots, visiting or attending, are required to submit proof of
completion of residency, their educational qualifications, generally, evidence of accreditation by the appropriate board
(diplomate), evidence of fellowship in most cases, and references. These requirements are carefully scrutinized by members
of the hospital administration or by a review committee set up by the hospital who either accept or reject the application. x x x.
After a physician is accepted, either as a visiting or attending consultant, he is normally required to attend clinico-pathological
conferences, conduct bedside rounds for clerks, interns and residents, moderate grand rounds and patient audits and perform
other tasks and responsibilities, for the privilege of being able to maintain a clinic in the hospital, and/or for the privilege of
admitting patients into the hospital. In addition to these, the physicians performance as a specialist is generally evaluated by a
peer review committee on the basis of mortality and morbidity statistics, and feedback from patients, nurses, interns and
residents. A consultant remiss in his duties, or a consultant who regularly falls short of the minimum standards acceptable to
the hospital or its peer review committee, is normally politely terminated.
In other words, private hospitals, hire, fire and exercise real control over their attending and visiting consultant staff. While
consultants are not, technically employees, x x x, the control exercised, the hiring, and the right to terminate consultants all
fulfill the important hallmarks of an employer-employee relationship, with the exception of the payment of wages. In assessing
whether such a relationship in fact exists, the control test is determining. Accordingly, on the basis of the foregoing, we rule
that for the purpose of allocating responsibility in medical negligence cases, an employer-employee relationship in effect exists
between hospitals and their attending and visiting physicians. "
But the Ramos pronouncement is not our only basis in sustaining PSIs liability. Its liability is also anchored upon the agency
principle of apparent authority or agency by estoppel and the doctrine of corporate negligence which have gained acceptance
in the determination of a hospitals liability for negligent acts of health professionals. The present case serves as a perfect
platform to test the applicability of these doctrines, thus, enriching our jurisprudence.
Apparent authority, or what is sometimes referred to as the "holding
out" theory, or doctrine of ostensible agency or agency by estoppel,29 has its origin from the law of agency. It imposes liability,
not as the result of the reality of a contractual relationship, but rather because of the actions of a principal or an employer in
somehow misleading the public into believing that the relationship or the authority exists. 30 The concept is essentially one of
estoppel and has been explained in this manner:
"The principal is bound by the acts of his agent with the apparent authority which he knowingly permits the agent to assume, or
which he holds the agent out to the public as possessing. The question in every case is whether the principal has by his
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voluntary act placed the agent in such a situation that a person of ordinary prudence, conversant with business usages and
the nature of the particular business, is justified in presuming that such agent has authority to perform the particular act in
question.31
The applicability of apparent authority in the field of hospital liability was upheld long time ago in Irving v. Doctor Hospital of
Lake Worth, Inc.32 There, it was explicitly stated that "there does not appear to be any rational basis for excluding the concept
of apparent authority from the field of hospital liability." Thus, in cases where it can be shown that a hospital, by its actions, has
held out a particular physician as its agent and/or employee and that a patient has accepted treatment from that physician in
the reasonable belief that it is being rendered in behalf of the hospital, then the hospital will be liable for the physicians
negligence.
Our jurisdiction recognizes the concept of an agency by implication or estoppel. Article 1869 of the Civil Code reads:
ART. 1869. Agency may be express, or implied from the acts of the principal, from his silence or lack of action, or his failure to
repudiate the agency, knowing that another person is acting on his behalf without authority.
In this case, PSI publicly displays in the lobby of the Medical City Hospital the names and specializations of the physicians
associated or accredited by it, including those of Dr. Ampil and Dr. Fuentes. We concur with the Court of Appeals conclusion
that it "is now estopped from passing all the blame to the physicians whose names it proudly paraded in the public directory
leading the public to believe that it vouched for their skill and competence." Indeed, PSIs act is tantamount to holding out to
the public that Medical City Hospital, through its accredited physicians, offers quality health care services. By accrediting Dr.
Ampil and Dr. Fuentes and publicly advertising their qualifications, the hospital created the impression that they were its
agents, authorized to perform medical or surgical services for its patients. As expected, these patients, Natividad being one of
them, accepted the services on the reasonable belief that such were being rendered by the hospital or its employees, agents,
or servants. The trial court correctly pointed out:
x x x regardless of the education and status in life of the patient, he ought not be burdened with the defense of absence of
employer-employee relationship between the hospital and the independent physician whose name and competence are
certainly certified to the general public by the hospitals act of listing him and his specialty in its lobby directory, as in the case
herein. The high costs of todays medical and health care should at least exact on the hospital greater, if not broader, legal
responsibility for the conduct of treatment and surgery within its facility by its accredited physician or surgeon, regardless of
whether he is independent or employed."33
The wisdom of the foregoing ratiocination is easy to discern. Corporate entities, like PSI, are capable of acting only through
other individuals, such as physicians. If these accredited physicians do their job well, the hospital succeeds in its mission of
offering quality medical services and thus profits financially. Logically, where negligence mars the quality of its services, the
hospital should not be allowed to escape liability for the acts of its ostensible agents.
We now proceed to the doctrine of corporate negligence or corporate responsibility.
One allegation in the complaint in Civil Case No. Q-43332 for negligence and malpractice is that PSI as owner, operator and
manager of Medical City Hospital, "did not perform the necessary supervision nor exercise diligent efforts in the supervision of
Drs. Ampil and Fuentes and its nursing staff, resident doctors, and medical interns who assisted Drs. Ampil and Fuentes in the
performance of their duties as surgeons."34 Premised on the doctrine of corporate negligence, the trial court held that PSI is
directly liable for such breach of duty.
We agree with the trial court.
Recent years have seen the doctrine of corporate negligence as the judicial answer to the problem of allocating hospitals
liability for the negligent acts of health practitioners, absent facts to support the application of respondeat superior or apparent
authority. Its formulation proceeds from the judiciarys acknowledgment that in these modern times, the duty of providing
quality medical service is no longer the sole prerogative and responsibility of the physician. The modern hospitals have
changed structure. Hospitals now tend to organize a highly professional medical staff whose competence and performance
need to be monitored by the hospitals commensurate with their inherent responsibility to provide quality medical care. 35
The doctrine has its genesis in Darling v. Charleston Community Hospital. 36 There, the Supreme Court of Illinois held that "the
jury could have found a hospital negligent, inter alia, in failing to have a sufficient number of trained nurses attending the
patient; failing to require a consultation with or examination by members of the hospital staff; and failing to review the
treatment rendered to the patient." On the basis of Darling, other jurisdictions held that a hospitals corporate negligence
extends to permitting a physician known to be incompetent to practice at the hospital. 37 With the passage of time, more duties
were expected from hospitals, among them: (1) the use of reasonable care in the maintenance of safe and adequate facilities
and equipment; (2) the selection and retention of competent physicians; (3) the overseeing or supervision of all persons who
practice medicine within its walls; and (4) the formulation, adoption and enforcement of adequate rules and policies that
ensure quality care for its patients.38 Thus, in Tucson Medical Center, Inc. v. Misevich,39 it was held that a hospital, following
the doctrine of corporate responsibility, has the duty to see that it meets the standards of responsibilities for the care of
patients. Such duty includes the proper supervision of the members of its medical staff. And in Bost v. Riley,40 the court
concluded that a patient who enters a hospital does so with the reasonable expectation that it will attempt to cure him. The
hospital accordingly has the duty to make a reasonable effort to monitor and oversee the treatment prescribed and
administered by the physicians practicing in its premises.
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In the present case, it was duly established that PSI operates the Medical City Hospital for the purpose and under the concept
of providing comprehensive medical services to the public. Accordingly, it has the duty to exercise reasonable care to protect
from harm all patients admitted into its facility for medical treatment. Unfortunately, PSI failed to perform such duty. The
findings of the trial court are convincing, thus:
x x x PSIs liability is traceable to its failure to conduct an investigation of the matter reported in the nota bene of the count
nurse. Such failure established PSIs part in the dark conspiracy of silence and concealment about the gauzes. Ethical
considerations, if not also legal, dictated the holding of an immediate inquiry into the events, if not for the benefit of the patient
to whom the duty is primarily owed, then in the interest of arriving at the truth. The Court cannot accept that the medical and
the healing professions, through their members like defendant surgeons, and their institutions like PSIs hospital facility, can
callously turn their backs on and disregard even a mere probability of mistake or negligence by refusing or failing to investigate
a report of such seriousness as the one in Natividads case.
It is worthy to note that Dr. Ampil and Dr. Fuentes operated on Natividad with the assistance of the Medical City Hospitals
staff, composed of resident doctors, nurses, and interns. As such, it is reasonable to conclude that PSI, as the operator of the
hospital, has actual or constructive knowledge of the procedures carried out, particularly the report of the attending nurses that
the two pieces of gauze were missing. In Fridena v. Evans, 41 it was held that a corporation is bound by the knowledge
acquired by or notice given to its agents or officers within the scope of their authority and in reference to a matter to which their
authority extends. This means that the knowledge of any of the staff of Medical City Hospital constitutes knowledge of PSI.
Now, the failure of PSI, despite the attending nurses report, to investigate and inform Natividad regarding the missing gauzes
amounts to callous negligence. Not only did PSI breach its duties to oversee or supervise all persons who practice medicine
within its walls, it also failed to take an active step in fixing the negligence committed. This renders PSI, not only vicariously
liable for the negligence of Dr. Ampil under Article 2180 of the Civil Code, but also directly liable for its own negligence under
Article 2176. In Fridena, the Supreme Court of Arizona held:
x x x In recent years, however, the duty of care owed to the patient by the hospital has expanded. The emerging trend is to
hold the hospital responsible where the hospital has failed to monitor and review medical services being provided within its
walls. See Kahn Hospital Malpractice Prevention, 27 De Paul . Rev. 23 (1977).
Among the cases indicative of the emerging trend is Purcell v. Zimbelman, 18 Ariz. App. 75,500 P. 2d 335 (1972). In Purcell,
the hospital argued that it could not be held liable for the malpractice of a medical practitioner because he was an independent
contractor within the hospital. The Court of Appeals pointed out that the hospital had created a professional staff whose
competence and performance was to be monitored and reviewed by the governing body of the hospital, and the court held that
a hospital would be negligent where it had knowledge or reason to believe that a doctor using the facilities was employing a
method of treatment or care which fell below the recognized standard of care.
Subsequent to the Purcell decision, the Arizona Court of Appeals held that a hospital has certain inherent responsibilities
regarding the quality of medical care furnished to patients within its walls and it must meet the standards of responsibility
commensurate with this undertaking. Beeck v. Tucson General Hospital, 18 Ariz. App. 165, 500 P. 2d 1153 (1972). This court
has confirmed the rulings of the Court of Appeals that a hospital has the duty of supervising the competence of the doctors on
its staff. x x x.
x x x x x x
In the amended complaint, the plaintiffs did plead that the operation was performed at the hospital with its knowledge, aid, and
assistance, and that the negligence of the defendants was the proximate cause of the patients injuries. We find that such
general allegations of negligence, along with the evidence produced at the trial of this case, are sufficient to support the
hospitals liability based on the theory of negligent supervision."
Anent the corollary issue of whether PSI is solidarily liable with Dr. Ampil for damages, let it be emphasized that PSI, apart
from a general denial of its responsibility, failed to adduce evidence showing that it exercised the diligence of a good father of
a family in the accreditation and supervision of the latter. In neglecting to offer such proof, PSI failed to discharge its burden
under the last paragraph of Article 2180 cited earlier, and, therefore, must be adjudged solidarily liable with Dr. Ampil.
Moreover, as we have discussed, PSI is also directly liable to the Aganas.
One final word. Once a physician undertakes the treatment and care of a patient, the law imposes on him certain obligations.
In order to escape liability, he must possess that reasonable degree of learning, skill and experience required by his
profession. At the same time, he must apply reasonable care and diligence in the exercise of his skill and the application of his
knowledge, and exert his best judgment.
WHEREFORE, we DENY all the petitions and AFFIRM the challenged Decision of the Court of Appeals in CA-G.R. CV No.
42062 and CA-G.R. SP No. 32198.
Costs against petitioners PSI and Dr. Miguel Ampil.
SO ORDERED.

126
G.R. No. 176484 November 25, 2008
CALAMBA MEDICAL CENTER, INC., petitioner
vs.
NATIONAL LABOR RELATIONS COMMISSION, RONALDO LANZANAS AND MERCEDITHA*LANZANAS, respondents.
DECISION
CARPIO MORALES, J.:
The Calamba Medical Center (petitioner), a privately-owned hospital, engaged the services of medical doctors-spouses
Ronaldo Lanzanas (Dr. Lanzanas) and Merceditha Lanzanas (Dr. Merceditha) in March 1992 and August 1995, respectively,
as part of its team of resident physicians. Reporting at the hospital twice-a-week on twenty-four-hour shifts, respondents were
paid a monthly "retainer" of P4,800.00 each.1 It appears that resident physicians were also given a percentage share out of
fees charged for out-patient treatments, operating room assistance and discharge billings, in addition to their fixed monthly
retainer.2
The work schedules of the members of the team of resident physicians were fixed by petitioner's medical director Dr. Raul
Desipeda (Dr. Desipeda). And they were issued identification cards3 by petitioner and were enrolled in the Social Security
System (SSS).4 Income taxes were withheld from them.5
On March 7, 1998, Dr. Meluz Trinidad (Dr. Trinidad), also a resident physician at the hospital, inadvertently overheard a
telephone conversation of respondent Dr. Lanzanas with a fellow employee, Diosdado Miscala, through an extension
telephone line. Apparently, Dr. Lanzanas and Miscala were discussing the low "census" or admission of patients to the
hospital.6
Dr. Desipeda whose attention was called to the above-said telephone conversation issued to Dr. Lanzanas a Memorandum of
March 7, 1998 reading:
As a Licensed Resident Physician employed in Calamba Medical Center since several years ago, the hospital
management has committed upon you utmost confidence in the performance of duties pursuant thereto. This is the
reason why you were awarded the privilege to practice in the hospital and were entrusted hospital functions to serve
the interest of both the hospital and our patients using your capability for independent judgment.
Very recently though and unfortunately, you have committed acts inimical to the interest of the hospital, the details of
which are contained in the hereto attached affidavit of witness.
You are therefore given 24 hours to explain why no disciplinary action should be taken against you.
Pending investigation of your case, you are hereby placed under 30-days [sic] preventive suspension
effective upon receipt hereof.7 (Emphasis, italics and underscoring supplied)
Inexplicably, petitioner did not give respondent Dr. Merceditha, who was not involved in the said incident, any work schedule
after sending her husband Dr. Lanzanas the memorandum, 8 nor inform her the reason therefor, albeit she was later informed
by the Human Resource Department (HRD) officer that that was part of petitioner's cost-cutting measures.9
Responding to the memorandum, Dr. Lanzanas, by letter of March 9, 1998, 10 admitted that he spoke with Miscala over the
phone but that their conversation was taken out of context by Dr. Trinidad.
On March 14, 1998,11 the rank-and-file employees union of petitioner went on strike due to unresolved grievances over terms
and conditions of employment.12
On March 20, 1998, Dr. Lanzanas filed a complaint for illegal suspension 13 before the National Labor Relations Commission
(NLRC)-Regional Arbitration Board (RAB) IV. Dr. Merceditha subsequently filed a complaint for illegal dismissal. 14
In the meantime, then Sec. Cresenciano Trajano of the Department of Labor and Employment (DOLE) certified the labor
dispute to the NLRC for compulsory arbitration and issued on April 21, 1998 return-to-work Order to the striking union officers
and employees of petitioner pending resolution of the labor dispute.15
In a memorandum16 of April 22, 1998, Dr. Desipeda echoed the April 22, 1998 order of the Secretary of Labor directing all
union officers and members to return-to-work "on or April 23, 1998, except those employees that were already terminated or
are serving disciplinary actions." Dr. Desipeda thus ordered the officers and members of the union to "report for work as soon
as possible" to the hospital's personnel officer and administrator for "work scheduling, assignments and/or re-assignments."
Petitioner later sent Dr. Lanzanas a notice of termination which he received on April 25, 1998, indicating as grounds therefor
his failure to report back to work despite the DOLE order and his supposed role in the striking union, thus:
On April 23, 1998, you still did not report for work despite memorandum issued by the CMC Medical Director
implementing the Labor Secretary's ORDER. The same is true on April 24, 1998 and April 25, 1998,--you still did not
report for work [sic].
You are likewise aware that you were observed (re: signatories [sic] to the Saligang Batas of BMCMC-UWP) to be
unlawfully participating as member in the rank-and-file union's concerted activities despite knowledge that your
position in the hospital is managerial in nature (Nurses, Orderlies, and staff of the Emergency Room carry out your
orders using your independent judgment) which participation is expressly prohibited by the New Labor Code and
which prohibition was sustained by the Med-Arbiter's ORDER dated February 24, 1998. (Emphasis and italics in the
original; underscoring partly in the original and partly supplied)

127
 For these reasons as grounds for termination, you are hereby terminated for cause from employment
effective today, April 25, 1998, without prejudice to further action for revocation of your license before the Philippine
[sic] Regulations [sic] Commission.17 (Emphasis and underscoring supplied)
Dr. Lanzanas thus amended his original complaint to include illegal dismissal. 18 His and Dr. Merceditha's complaints were
consolidated and docketed as NLRC CASE NO. RAB-IV-3-9879-98-L.
By Decision19 of March 23, 1999, Labor Arbiter Antonio R. Macam dismissed the spouses' complaints for want of jurisdiction
upon a finding that there was no employer-employee relationship between the parties, the fourth requisite or the "control test"
in the determination of an employment bond being absent.
On appeal, the NLRC, by Decision20 of May 3, 2002, reversed the Labor Arbiter's findings, disposing as follows:
WHEREFORE, the assailed decision is set aside. The respondents are ordered to pay the complainants their full
backwages; separation pay of one month salary for every year of service in lieu of reinstatement; moral damages
of P500,000.00 each; exemplary damages of P250,000.00 each plus ten percent (10%) of the total award as
attorney's fees.
SO ORDERED.21
Petitioner's motion for reconsideration having been denied, it brought the case to the Court of Appeals on certiorari.
The appellate court, by June 30, 2004 Decision,22 initially granted petitioner's petition and set aside the NLRC ruling. However,
upon a subsequent motion for reconsideration filed by respondents, it reinstated the NLRC decision in an Amended
Decision23 dated September 26, 2006 but tempered the award to each of the spouses of moral and exemplary damages
to P100,000.00 and P50,000.00, respectively and omitted the award of attorney's fees.
In finding the existence of an employer-employee relationship between the parties, the appellate court held:
x x x. While it may be true that the respondents are given the discretion to decide on how to treat the petitioner's
patients, the petitioner has not denied nor explained why its Medical Director still has the direct supervision and
control over the respondents. The fact is the petitioner's Medical Director still has to approve the schedule of
duties of the respondents. The respondents stressed that the petitioner's Medical Director also issues instructions
or orders to the respondents relating to the means and methods of performing their duties, i.e. admission of
patients, manner of characterizing cases, treatment of cases, etc., and may even overrule, review or revise the
decisions of the resident physicians. This was not controverted by the petitioner. The foregoing factors taken
together are sufficient to constitute the fourth element, i.e. control test, hence, the existence of the employer-
employee relationship. In denying that it had control over the respondents, the petitioner alleged that the respondents
were free to put up their own clinics or to accept other retainership agreement with the other hospitals. But, the
petitioner failed to substantiate the allegation with substantial evidence. (Emphasis and underscoring supplied) 24
The appellate court thus declared that respondents were illegally dismissed.
x x x. The petitioner's ground for dismissing respondent Ronaldo Lanzanas was based on his alleged participation in
union activities, specifically in joining the strike and failing to observe the return-to-work order issued by the Secretary
of Labor. Yet, the petitioner did not adduce any piece of evidence to show that respondent Ronaldo indeed
participated in the strike. x x x.
In the case of respondent Merceditha Lanzanas, the petitioner's explanation that "her marriage to complainant
Ronaldo has given rise to the presumption that her sympat[hies] are likewise with her husband" as a ground for her
dismissal is unacceptable. Such is not one of the grounds to justify the termination of her
employment.25 (Underscoring supplied)
The fallo of the appellate court's decision reads:
WHEREFORE, the instant Motion for Reconsideration is GRANTED, and the Court's decision dated June 30, 2004,
is SET ASIDE. In lieu thereof, a new judgment is entered, as follows:
WHEREFORE, the petition is DISMISSED. The assailed decision dated May 3, 2002 and order dated
September 24, 2002 of the NLRC in NLRC NCR CA No. 019823-99 are AFFIRMED with the
MODIFICATION that the moral and exemplary damages are reduced to P100,000.00 each and P50,000.00
each, respectively.
SO ORDERED.26 (Emphasis and italics in the original; underscoring supplied)
Preliminarily, the present petition calls for a determination of whether there exists an employer-employee
relationship27 between petitioner and the spouses-respondents.
Denying the existence of such relationship, petitioner argues that the appellate court, as well as the NLRC, overlooked its
twice-a-week reporting arrangement with respondents who are free to practice their profession elsewhere the rest of the week.
And it invites attention to the uncontroverted allegation that respondents, aside from their monthly retainers, were entitled to
one-half of all suturing, admitting, consultation, medico-legal and operating room assistance fees.28 These circumstances, it
stresses, are clear badges of the absence of any employment relationship between them.
This Court is unimpressed.
Under the "control test," an employment relationship exists between a physician and a hospital if the hospital controls both the
means and the details of the process by which the physician is to accomplish his task. 29
128
Where a person who works for another does so more or less at his own pleasure and is not subject to definite hours or
conditions of work, and is compensated according to the result of his efforts and not the amount thereof, the element of control
is absent.30
As priorly stated, private respondents maintained specific work-schedules, as determined by petitioner through its medical
director, which consisted of 24-hour shifts totaling forty-eight hours each week and which were strictly to be observed under
pain of administrative sanctions.
That petitioner exercised control over respondents gains light from the undisputed fact that in the emergency room, the
operating room, or any department or ward for that matter, respondents' work is monitored through its nursing supervisors,
charge nurses and orderlies. Without the approval or consent of petitioner or its medical director, no operations can be
undertaken in those areas. For control test to apply, it is not essential for the employer to actually supervise the performance
of duties of the employee, it being enough that it has the right to wield the power.31
With respect to respondents' sharing in some hospital fees, this scheme does not sever the employment tie between them and
petitioner as this merely mirrors additional form or another form of compensation or incentive similar to what commission-
based employees receive as contemplated in Article 97 (f) of the Labor Code, thus:
"Wage" paid to any employee shall mean the remuneration or earning, however designated, capable of being
expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or
other method of calculating the same, which is payable by an employer to an employee under a written or
unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and
includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee. x x x (Emphasis and underscoring supplied),
Respondents were in fact made subject to petitioner-hospital's Code of Ethics,32 the provisions of which cover administrative
and disciplinary measures on negligence of duties, personnel conduct and behavior, and offenses against persons, property
and the hospital's interest.
More importantly, petitioner itself provided incontrovertible proof of the employment status of respondents, namely, the
identification cards it issued them, the payslips 33 and BIR W-2 (now 2316) Forms which reflect their status as employees, and
the classification as "salary" of their remuneration. Moreover, it enrolled respondents in the SSS and Medicare (Philhealth)
program. It bears noting at this juncture that mandatory coverage under the SSS Law34 is premised on the existence of an
employer-employee relationship,35 except in cases of compulsory coverage of the self-employed. It would be preposterous for
an employer to report certain persons as employees and pay their SSS premiums as well as their wages if they are not its
employees.36
And if respondents were not petitioner's employees, how does it account for its issuance of the earlier-quoted March 7, 1998
memorandum explicitly stating that respondent is "employed" in it and of the subsequent termination letter indicating
respondent Lanzanas' employment status.
Finally, under Section 15, Rule X of Book III of the Implementing Rules of the Labor Code, an employer-employee relationship
exists between the resident physicians and the training hospitals, unless there is a training agreement between them, and the
training program is duly accredited or approved by the appropriate government agency. In respondents' case, they were not
undergoing any specialization training. They were considered non-training general practitioners,37 assigned at the emergency
rooms and ward sections.
Turning now to the issue of dismissal, the Court upholds the appellate court's conclusion that private respondents were
illegally dismissed.
Dr. Lanzanas was neither a managerial nor supervisory employee but part of the rank-and-file. This is the import of the
Secretary of Labor's Resolution of May 22, 1998 in OS A-05-15-98 which reads:
xxxx
In the motion to dismiss it filed before the Med-Arbiter, the employer (CMC) alleged that 24 members of petitioner are
supervisors, namely x x x Rolando Lanzonas [sic] x x x.
A close scrutiny of the job descriptions of the alleged supervisors narrated by the employer only proves that except
for the contention that these employees allegedly supervise, they do not however recommend any managerial
action. At most, their job is merely routinary in nature and consequently, they cannot be considered supervisory
employees.
They are not therefore barred from membership in the union of rank[-]and[-]file, which the petitioner [the union]
is seeking to represent in the instant case.38 (Emphasis and underscoring supplied)
xxxx
Admittedly, Dr. Lanzanas was a union member in the hospital, which is considered indispensable to the national interest. In
labor disputes adversely affecting the continued operation of a hospital, Article 263(g) of the Labor Code provides:
ART. 263. STRIKES, PICKETING, AND LOCKOUTS.
xxxx
(g) x x x x

129
 x x x x. In labor disputes adversely affecting the continued operation of such hospitals, clinics or medical
institutions, it shall be the duty of the striking union or locking-out employer to provide and maintain an effective
skeletal workforce of medical and other health personnel, whose movement and services shall be unhampered and
unrestricted, as are necessary to insure the proper and adequate protection of the life and health of its patients, most
especially emergency cases, for the duration of the strike or lockout. In such cases, the Secretary of Labor and
Employment is mandated to immediately assume, within twenty-four hours from knowledge of the occurrence of such
strike or lockout, jurisdiction over the same or certify to the Commission for compulsory arbitration. For this purpose,
the contending parties are strictly enjoined to comply with such orders, prohibitions and/or injunctions as
are issued by the Secretary of Labor and Employment or the Commission, under pain of immediate
disciplinary action, including dismissal or loss of employment status or payment by the locking-out
employer of backwages, damages and other affirmative relief, even criminal prosecution against either or
both of them.
x x x x (Emphasis and underscoring supplied)
An assumption or certification order of the DOLE Secretary automatically results in a return-to-work of all striking workers,
whether a corresponding return-to-work order had been issued.39 The DOLE Secretary in fact issued a return-to-work Order,
failing to comply with which is punishable by dismissal or loss of employment status.40
Participation in a strike and intransigence to a return-to-work order must, however, be duly proved in order to justify immediate
dismissal in a "national interest" case. As the appellate court as well as the NLRC observed, however, there is nothing in the
records that would bear out Dr. Lanzanas' actual participation in the strike. And the medical director's Memorandum 41 of April
22, 1998 contains nothing more than a general directive to all union officers and members to return-to-work. Mere membership
in a labor union does not ipso facto mean participation in a strike.
Dr. Lanzanas' claim that, after his 30-day preventive suspension ended on or before April 9, 1998, he was never given any
work schedule42 was not refuted by petitioner. Petitioner in fact never released any findings of its supposed investigation into
Dr. Lanzanas' alleged "inimical acts."
Petitioner thus failed to observe the two requirements,before dismissal can be effected notice and hearing which
constitute essential elements of the statutory process; the first to apprise the employee of the particular acts or omissions for
which his dismissal is sought, and the second to inform the employee of the employer's decision to dismiss him.43 Non-
observance of these requirements runs afoul of the procedural mandate. 44
The termination notice sent to and received by Dr. Lanzanas on April 25, 1998 was the first and only time that he was apprised
of the reason for his dismissal. He was not afforded, however, even the slightest opportunity to explain his side. His was a
"termination upon receipt" situation. While he was priorly made to explain on his telephone conversation with Miscala, 45 he
was not with respect to his supposed participation in the strike and failure to heed the return-to-work order.
As for the case of Dr. Merceditha, her dismissal was worse, it having been effected without any just or authorized cause and
without observance of due process. In fact, petitioner never proferred any valid cause for her dismissal except its view that
"her marriage to [Dr. Lanzanas] has given rise to the presumption that her sympath[y] [is] with her husband; [and that when
[Dr. Lanzanas] declared that he was going to boycott the scheduling of their workload by the medical doctor, he was presumed
to be speaking for himself [and] for his wife Merceditha." 46
Petitioner's contention that Dr. Merceditha was a member of the union or was a participant in the strike remained just that. Its
termination of her employment on the basis of her conjugal relationship is not analogous to
any of the causes enumerated in Article 28247 of the Labor Code. Mere suspicion or belief, no matter how strong, cannot
substitute for factual findings carefully established through orderly procedure. 48
The Court even notes that after the proceedings at the NLRC, petitioner never even mentioned Dr. Merceditha's case. There is
thus no gainsaying that her dismissal was both substantively and procedurally infirm.
Adding insult to injury was the circulation by petitioner of a "watchlist" or "watch out list" 49 including therein the names of
respondents. Consider the following portions of Dr. Merceditha's Memorandum of Appeal:
3. Moreover, to top it all, respondents have circulated a so called "Watch List" to other hospitals, one of which [was]
procured from Foothills Hospital in Sto. Tomas, Batangas [that] contains her name. The object of the said list is
precisely to harass Complainant and malign her good name and reputation. This is not only unprofessional, but runs
smack of oppression as CMC is trying permanently deprived [sic] Complainant of her livelihood by ensuring that she
is barred from practicing in other hospitals.
4. Other co-professionals and brothers in the profession are fully aware of these "watch out" lists and as such, her
reputation was not only besmirched, but was damaged, and she suffered social humiliation as it is of public
knowledge that she was dismissed from work. Complainant came from a reputable and respected family, her father
being a retired full Colonel in the Army, Col. Romeo A. Vente, and her brothers and sisters are all professionals, her
brothers, Arnold and Romeo Jr., being engineers. The Complainant has a family protection [sic] to protect. She
likewise has a professional reputation to protect, being a licensed physician. Both her personal and professional
reputation were damaged as a result of the unlawful acts of the respondents. 50

130
While petitioner does not deny the existence of such list, it pointed to the lack of any board action on its part to initiate such
listing and to circulate the same, viz:
20. x x x. The alleged watchlist or "watch out list," as termed by complainants, were merely lists obtained by one Dr.
Ernesto Naval of PAMANA Hospital. Said list was given by a stockholder of respondent who was at the same
time a stockholder of PAMAN[A] Hospital. The giving of the list was not a Board action.51 (Emphasis and
underscoring supplied)
The circulation of such list containing names of alleged union members intended to prevent employment of workers for union
activities similarly constitutes unfair labor practice, thereby giving a right of action for damages by the employees prejudiced.52
A word on the appellate court's deletion of the award of attorney's fees. There being no basis advanced in deleting it, as
exemplary damages were correctly awarded,53 the award of attorney's fees should be reinstated.
WHEREFORE, the Decision of the Court of Appeals in CA-G.R. SP No. 75871 is AFFIRMED with MODIFICATION in that the
award by the National Labor Relations Commission of 10% of the total judgment award as attorney's fees is reinstated. In all
other aspects, the decision of the appellate court is affirmed.
SO ORDERED.

G.R. No. 167622 November 7, 2008

GREGORIO V. TONGKO, petitioner
vs.
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and RENATO A. VERGEL DE DIOS, respondents.
DECISION
VELASCO, JR., J.:
The Case
This Petition for Review on Certiorari under Rule 45 seeks the reversal of the March 29, 2005 Decision 1 of the Court of
Appeals (CA) in CA-G.R. SP No. 88253, entitled The Manufacturers Life Insurance Co. (Phils.), Inc. v. National Labor
Relations Commission and Gregorio V. Tongko. The assailed decision set aside the Decision dated September 27, 2004 and
Resolution dated December 16, 2004 rendered by the National Labor Relations Commission (NLRC) in NLRC NCR CA No.
040220-04.
The Facts
Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) is a domestic corporation engaged in life insurance business. Renato
A. Vergel De Dios was, during the period material, its President and Chief Executive Officer. Gregorio V. Tongko started his
professional relationship with Manulife on July 1, 1977 by virtue of a Career Agent's Agreement 2 (Agreement) he executed
with Manulife.
In the Agreement, it is provided that:
It is understood and agreed that the Agent is an independent contractor and nothing contained herein shall be
construed or interpreted as creating an employer-employee relationship between the Company and the Agent.
xxxx
a) The Agent shall canvass for applications for Life Insurance, Annuities, Group policies and other products offered
by the Company, and collect, in exchange for provisional receipts issued by the Agent, money due or to become due
to the Company in respect of applications or policies obtained by or through the Agent or from policyholders allotted
by the Company to the Agent for servicing, subject to subsequent confirmation of receipt of payment by the Company
as evidenced by an Official Receipt issued by the Company directly to the policyholder.
xxxx
The Company may terminate this Agreement for any breach or violation of any of the provisions hereof by the Agent
by giving written notice to the Agent within fifteen (15) days from the time of the discovery of the breach. No waiver,
extinguishment, abandonment, withdrawal or cancellation of the right to terminate this Agreement by the Company
shall be construed for any previous failure to exercise its right under any provision of this Agreement.
Either of the parties hereto may likewise terminate his Agreement at any time without cause, by giving to the other
party fifteen (15) days notice in writing. x x x
In 1983, Tongko was named as a Unit Manager in Manulife's Sales Agency Organization. In 1990, he became a Branch
Manager. As the CA found, Tongko's gross earnings from his work at Manulife, consisting of commissions, persistency
income, and management overrides, may be summarized as follows:
January to December 10, 2002 - P 865,096.07

2001 - 6,214,737.11

2000 - 8,003,180.38

131
 1999 - 6,797,814.05

1998 - 4,805,166.34

1997 - 2,822,620.003
The problem started sometime in 2001, when Manulife instituted manpower development programs in the regional sales
management level. Relative thereto, De Dios addressed a letter dated November 6, 2001 4 to Tongko regarding an October 18,
2001 Metro North Sales Managers Meeting. In the letter, De Dios stated:
The first step to transforming Manulife into a big league player has been very clear - to increase the number of agents
to at least 1,000 strong for a start. This may seem diametrically opposed to the way Manulife was run when you first
joined the organization. Since then, however, substantial changes have taken place in the organization, as these
have been influenced by developments both from within and without the company.
xxxx
The issues around agent recruiting are central to the intended objectives hence the need for a Senior Managers'
meeting earlier last month when Kevin O'Connor, SVP - Agency, took to the floor to determine from our senior
agency leaders what more could be done to bolster manpower development. At earlier meetings, Kevin had
presented information where evidently, your Region was the lowest performer (on a per Manager basis) in terms of
recruiting in 2000 and, as of today, continues to remain one of the laggards in this area.
While discussions, in general, were positive other than for certain comments from your end which were perceived to
be uncalled for, it became clear that a one-on-one meeting with you was necessary to ensure that you and
management, were on the same plane. As gleaned from some of your previous comments in prior meetings (both in
group and one-on-one), it was not clear that we were proceeding in the same direction.
Kevin held subsequent series of meetings with you as a result, one of which I joined briefly. In those subsequent
meetings you reiterated certain views, the validity of which we challenged and subsequently found as having no
basis.
With such views coming from you, I was a bit concerned that the rest of the Metro North Managers may be a bit
confused as to the directions the company was taking. For this reason, I sought a meeting with everyone in your
management team, including you, to clear the air, so to speak.
This note is intended to confirm the items that were discussed at the said Metro North Region's Sales Managers
meeting held at the 7/F Conference room last 18 October.
xxxx
Issue # 2: "Some Managers are unhappy with their earnings and would want to revert to the position of agents."
This is an often repeated issue you have raised with me and with Kevin. For this reason, I placed the issue on the
table before the rest of your Region's Sales Managers to verify its validity. As you must have noted, no Sales
Manager came forward on their own to confirm your statement and it took you to name Malou Samson as a source of
the same, an allegation that Malou herself denied at our meeting and in your very presence.
This only confirms, Greg, that those prior comments have no solid basis at all. I now believe what I had thought all
along, that these allegations were simply meant to muddle the issues surrounding the inability of your Region to meet
its agency development objectives!
Issue # 3: "Sales Managers are doing what the company asks them to do but, in the process, they earn less."
xxxx
All the above notwithstanding, we had your own records checked and we found that you made a lot more money in
the Year 2000 versus 1999. In addition, you also volunteered the information to Kevin when you said that you
probably will make more money in the Year 2001 compared to Year 2000. Obviously, your above statement about
making "less money" did not refer to you but the way you argued this point had us almost believing that you were
spouting the gospel of truth when you were not. x x x
xxxx
All of a sudden, Greg, I have become much more worried about your ability to lead this group towards the new
direction that we have been discussing these past few weeks, i.e., Manulife's goal to become a major agency-led
distribution company in the Philippines. While as you claim, you have not stopped anyone from recruiting, I have
never heard you proactively push for greater agency recruiting. You have not been proactive all these years when it
comes to agency growth.
xxxx
I cannot afford to see a major region fail to deliver on its developmental goals next year and so, we are making the
following changes in the interim:

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 1. You will hire at your expense a competent assistant who can unload you of much of the routine tasks
which can be easily delegated. This assistant should be so chosen as to complement your skills and help
you in the areas where you feel "may not be your cup of tea".
You have stated, if not implied, that your work as Regional Manager may be too taxing for you and for your
health. The above could solve this problem.
xxxx
2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the North Star Branch
(NSB) in autonomous fashion. x x x
I have decided to make this change so as to reduce your span of control and allow you to concentrate more
fully on overseeing the remaining groups under Metro North, your Central Unit and the rest of the Sales
Managers in Metro North. I will hold you solely responsible for meeting the objectives of these remaining
groups.
xxxx
The above changes can end at this point and they need not go any further. This, however, is entirely dependent upon
you. But you have to understand that meeting corporate objectives by everyone is primary and will not be
compromised. We are meeting tough challenges next year and I would want everybody on board. Any resistance or
holding back by anyone will be dealt with accordingly.
Subsequently, De Dios wrote Tongko another letter dated December 18, 2001, 5 terminating Tongko's services, thus:
It would appear, however, that despite the series of meetings and communications, both one-on-one meetings
between yourself and SVP Kevin O'Connor, some of them with me, as well as group meetings with your Sales
Managers, all these efforts have failed in helping you align your directions with Management's avowed agency growth
policy.
xxxx
On account thereof, Management is exercising its prerogative under Section 14 of your Agents Contract as we are
now issuing this notice of termination of your Agency Agreement with us effective fifteen days from the date of this
letter.
Therefrom, Tongko filed a Complaint dated November 25, 2002 with the NLRC against Manulife for illegal dismissal. The case,
docketed as NLRC NCR Case No. 11-10330-02, was raffled to Labor Arbiter Marita V. Padolina.
In the Complaint, Tongko, in a bid to establish an employer-employee relationship, alleged that De Dios gave him specific
directives on how to manage his area of responsibility in the latter's letter dated November 6, 2001. He further claimed that
Manulife exercised control over him as follows:
Such control was certainly exercised by respondents over the herein complainant. It was Manulife who hired,
promoted and gave various assignments to him. It was the company who set objectives as regards productions,
recruitment, training programs and all activities pertaining to its business. Manulife prescribed a Code of Conduct
which would govern in minute detail all aspects of the work to be undertaken by employees, including the sales
process, the underwriting process, signatures, handling of money, policyholder service, confidentiality, legal and
regulatory requirements and grounds for termination of employment. The letter of Mr. De Dios dated 06 November
2001 left no doubt as to who was in control. The subsequent termination letter dated 18 December 2001 again
established in no uncertain terms the authority of the herein respondents to control the employees of Manulife.
Plainly, the respondents wielded control not only as to the ends to be achieved but the ways and means of attaining
such ends.6
Tongko bolstered his argument by citing Insular Life Assurance Co., Ltd. v. NLRC (4th Division)7 and Great Pacific Life
Assurance Corporation v. NLRC,8 which Tongko claimed to be similar to the instant case.
Tongko further claimed that his dismissal was without basis and that he was not afforded due process. He also cited the
Manulife Code of Conduct by which his actions were controlled by the company.
Manulife then filed a Position Paper with Motion to Dismiss dated February 27, 2003, 9 in which it alleged that Tongko is not its
employee, and that it did not exercise "control" over him. Thus, Manulife claimed that the NLRC has no jurisdiction over the
case.
In a Decision dated April 15, 2004, Labor Arbiter Marita V. Padolina dismissed the complaint for lack of an employer-employee
relationship. Padolina found that applying the four-fold test in determining the existence of an employer-employee relationship,
none was found in the instant case. The dispositive portion thereof states:
WHEREFORE, premises considered, judgment is hereby rendered DISMISSING the instant complaint for lack of
jurisdiction, there being no employer-employee relationship between the parties.
SO ORDERED.
Tongko appealed the arbiter's Decision to the NLRC which reversed the same and rendered a Decision dated September 27,
2004 finding Tongko to have been illegally dismissed.

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The NLRC's First Division, while finding an employer-employee relationship between Manulife and Tongko applying the four-
fold test, held Manulife liable for illegal dismissal. It further stated that Manulife exercised control over Tongko as evidenced by
the letter dated November 6, 2001 of De Dios and wrote:
The above-mentioned letter shows the extent to which respondents controlled complainant's manner and means of
doing his work and achieving the goals set by respondents. The letter shows how respondents concerned themselves
with the manner complainant managed the Metro North Region as Regional Sales Manager, to the point that
respondents even had a say on how complainant interacted with other individuals in the Metro North Region. The
letter is in fact replete with comments and criticisms on how complainant carried out his functions as Regional Sales
Manager.
More importantly, the letter contains an abundance of directives or orders that are intended to directly affect
complainant's authority and manner of carrying out his functions as Regional Sales Manager. 10 x x x
Additionally, the First Division also ruled that:
Further evidence of [respondents'] control over complainant can be found in the records of the case. [These] are the
different codes of conduct such as the Agent Code of Conduct, the Manulife Financial Code of Conduct, and the
Manulife Financial Code of Conduct Agreement, which serve as the foundations of the power of control wielded by
respondents over complainant that is further manifested in the different administrative and other tasks that he is
required to perform. These codes of conduct corroborate and reinforce the display of respondents' power of control in
their 06 November 2001 Letter to complainant.11
The fallo of the September 27, 2004 Decision reads:
WHEREFORE, premises considered, the appealed Decision is hereby reversed and set aside. We find complainant
to be a regular employee of respondent Manulife and that he was illegally dismissed from employment by
respondents.
In lieu of reinstatement, respondent Manulife is hereby ordered to pay complainant separation pay as above set forth.
Respondent Manulife is further ordered to pay complainant backwages from the time he was dismissed on 02
January 2002 up to the finality of this decision also as indicated above.
xxxx
All other claims are hereby dismissed for utter lack of merit.
From this Decision, Manulife filed a motion for reconsideration which was denied by the NLRC First Division in a Resolution
dated December 16, 2004.12
Thus, Manulife filed an appeal with the CA docketed as CA-G.R. SP No. 88253. Thereafter, the CA issued the assailed
Decision dated March 29, 2005, finding the absence of an employer-employee relationship between the parties and deeming
the NLRC with no jurisdiction over the case. The CA arrived at this conclusion while again applying the four-fold test. The CA
found that Manulife did not exercise control over Tongko that would render the latter an employee of Manulife. The dispositive
portion reads:
WHEREFORE, premises considered, the present petition is hereby GRANTED and the writ prayed for accordingly
GRANTED. The assailed Decision dated September 27, 2004 and Resolution dated December 16, 2004 of the
National Labor Relations Commission in NLRC NCR Case No. 00-11-10330-2002 (NLRC NCR CA No. 040220-04)
are hereby ANNULLED and SET ASIDE. The Decision dated April 15, 2004 of Labor Arbiter Marita V. Padolina is
hereby REINSTATED.
Hence, Tongko filed this petition and presented the following issues:
A
The Court of Appeals committed grave abuse of discretion in granting respondents' petition for certiorari.
B
The Court of Appeals committed grave abuse of discretion in annulling and setting aside the Decision dated
September 27, 2004 and Resolution dated December 16, 2004 in finding that there is no employer-employee
relationship between petitioner and respondent.
C
The Court of Appeals committed grave abuse of discretion in annulling and setting aside the Decision dated
September 27, 2004 and Resolution dated December 16, 2004 which found petitioner to have been illegally
dismissed and ordered his reinstatement with payment of backwages.13
Restated, the issues are: (1) Was there an employer-employee relationship between Manulife and Tongko? and (2) If yes, was
Manulife guilty of illegal dismissal?
The Court's Ruling
This petition is meritorious.
Tongko Was An Employee of Manulife
The basic issue of whether or not the NLRC has jurisdiction over the case resolves itself into the question of whether an
employer-employee relationship existed between Manulife and Tongko. If no employer-employee relationship existed between
the two parties, then jurisdiction over the case properly lies with the Regional Trial Court.
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In the determination of whether an employer-employee relationship exists between two parties, this Court applies the four-fold
test to determine the existence of the elements of such relationship. In Pacific Consultants International Asia, Inc. v.
Schonfeld, the Court set out the elements of an employer-employee relationship, thus:
Jurisprudence is firmly settled that whenever the existence of an employment relationship is in dispute, four elements
constitute the reliable yardstick: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer's power to control the employee's conduct. It is the so-called "control test"
which constitutes the most important index of the existence of the employer-employee relationship that is, whether
the employer controls or has reserved the right to control the employee not only as to the result of the work to be
done but also as to the means and methods by which the same is to be accomplished. Stated otherwise, an
employer-employee relationship exists where the person for whom the services are performed reserves the right to
control not only the end to be achieved but also the means to be used in reaching such end. 14
The NLRC, for its part, applied the four-fold test and found the existence of all the elements and declared Tongko an employee
of Manulife. The CA, on the other hand, found that the element of control as an indicator of the existence of an employer-
employee relationship was lacking in this case. The NLRC and the CA based their rulings on the same findings of fact but
differed in their interpretations.
The NLRC arrived at its conclusion, first, on the basis of the letter dated November 6, 2001 addressed by De Dios to Tongko.
According to the NLRC, the letter contained "an abundance of directives or orders that are intended to directly affect
complainant's authority and manner of carrying out his functions as Regional Sales Manager." It enumerated these "directives"
or "orders" as follows:
1. You will hire at your expense a competent assistant who can unload you of much of the routine tasks which can be
easily delegated. x x x
xxxx
This assistant should be hired immediately.
2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the North Star Branch (NSB) in
autonomous fashion x x x.
xxxx
I have decided to make this change so as to reduce your span of control and allow you to concentrate more fully on
overseeing the remaining groups under Metro North, your Central Unit and the rest of the Sales Managers in Metro
North. x x x
3. Any resistance or holding back by anyone will be dealt with accordingly.
4. I have been straightforward in this my letter and I know that we can continue to work together but it will have to
be on my terms. Anything else is unacceptable!
The NLRC further ruled that the different codes of conduct that were applicable to Tongko served as the foundations of the
power of control wielded by Manulife over Tongko that is further manifested in the different administrative and other tasks that
he was required to perform.
The NLRC also found that Tongko was required to render exclusive service to Manulife, further bolstering the existence of an
employer-employee relationship.
Finally, the NLRC ruled that Tongko was integrated into a management structure over which Manulife exercised control,
including the actions of its officers. The NLRC held that such integration added to the fact that Tongko did not have his own
agency belied Manulife's claim that Tongko was an independent contractor.
The CA, however, considered the finding of the existence of an employer-employee relationship by the NLRC as far too
sweeping having as its only basis the letter dated November 6, 2001 of De Dios. The CA did not concur with the NLRC's ruling
that the elements of control as pointed out by the NLRC are "sufficient indicia of control that negates independent
contractorship and conclusively establish an employer-employee relationship between"15 Tongko and Manulife. The CA ruled
that there is no employer-employee relationship between Tongko and Manulife.
An impasse appears to have been reached between the CA and the NLRC on the sole issue of control over an employee's
conduct. It bears clarifying that such control not only applies to the work or goal to be done but also to the means and methods
to accomplish it.16 In Sonza v. ABS-CBN Broadcasting Corporation, we explained that not all forms of control would establish
an employer-employee relationship, to wit:
Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the
services being rendered may be accorded the effect of establishing an employer-employee relationship. The facts of
this case fall squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be employed
in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the
use of such means. The first, which aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the means used to achieve
it.17 (Emphasis supplied.)

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We ruled in Insular Life Assurance Co., Ltd. v. NLRC (Insular) that:
It is, therefore, usual and expected for an insurance company to promulgate a set of rules to guide its commission
agents in selling its policies that they may not run afoul of the law and what it requires or prohibits. Of such a
character are the rules which prescribe the qualifications of persons who may be insured, subject insurance
applications to processing and approval by the Company, and also reserve to the Company the determination of the
premiums to be paid and the schedules of payment. None of these really invades the agent's contractual prerogative
to adopt his own selling methods or to sell insurance at his own time and convenience, hence cannot justifiably be
said to establish an employer-employee relationship between him and the company.18
Hence, we ruled in Insular that no employer-employee relationship existed therein. However, such ruling was tempered with
the qualification that had there been evidence that the company promulgated rules or regulations that effectively controlled or
restricted an insurance agent's choice of methods or the methods themselves in selling insurance, an employer-employee
relationship would have existed. In other words, the Court in Insular in no way definitively held that insurance agents are not
employees of insurance companies, but rather made the same a case-to-case basis. We held:
The respondents limit themselves to pointing out that Basiao's contract with the Company bound him to observe and
conform to such rules and regulations as the latter might from time to time prescribe. No showing has been made
that any such rules or regulations were in fact promulgated, much less that any rules existed or were issued
which effectively controlled or restricted his choice of methods or the methods themselves of selling
insurance. Absent such showing, the Court will not speculate that any exceptions or qualifications were
imposed on the express provision of the contract leaving Basiao "... free to exercise his own judgment as to
the time, place and means of soliciting insurance."19 (Emphasis supplied.)
There is no conflict between our rulings in Insular and in Great Pacific Life Assurance Corporation. We said in the latter case:
[I]t cannot be gain said that Grepalife had control over private respondents' performance as well as the result of their
efforts. A cursory reading of their respective functions as enumerated in their contracts reveals that the
company practically dictates the manner by which their jobs are to be carried out. For instance, the District
Manager must properly account, record and document the company's funds spot-check and audit the work of the
zone supervisors, conserve the company's business in the district through reinstatements', follow up the submission
of weekly remittance reports of the debit agents and zone supervisors, preserve company property in good condition,
train understudies for the position of district manager, and maintain his quota of sales (the failure of which is a ground
for termination). On the other hand, a zone supervisor must direct and supervise the sales activities of the debit
agents under him, conserve company property through "reinstatements", undertake and discharge the functions of
absentee debit agents, spot-check the records of debit agents, and insure proper documentation of sales and
collections by the debit agents.20 (Emphasis supplied.)
Based on the foregoing cases, if the specific rules and regulations that are enforced against insurance agents or managers are
such that would directly affect the means and methods by which such agents or managers would achieve the objectives set by
the insurance company, they are employees of the insurance company.
In the instant case, Manulife had the power of control over Tongko that would make him its employee. Several factors
contribute to this conclusion.
In the Agreement dated July 1, 1977 executed between Tongko and Manulife, it is provided that:
The Agent hereby agrees to comply with all regulations and requirements of the Company as herein provided as well
as maintain a standard of knowledge and competency in the sale of the Company's products which satisfies those set
by the Company and sufficiently meets the volume of new business required of Production Club membership. 21
Under this provision, an agent of Manulife must comply with three (3) requirements: (1) compliance with the regulations and
requirements of the company; (2) maintenance of a level of knowledge of the company's products that is satisfactory to the
company; and (3) compliance with a quota of new businesses.
Among the company regulations of Manulife are the different codes of conduct such as the Agent Code of Conduct, Manulife
Financial Code of Conduct, and Manulife Financial Code of Conduct Agreement, which demonstrate the power of control
exercised by the company over Tongko. The fact that Tongko was obliged to obey and comply with the codes of conduct was
not disowned by respondents.
Thus, with the company regulations and requirements alone, the fact that Tongko was an employee of Manulife may already
be established. Certainly, these requirements controlled the means and methods by which Tongko was to achieve the
company's goals.
More importantly, Manulife's evidence establishes the fact that Tongko was tasked to perform administrative duties that
establishes his employment with Manulife.
In its Comment (Re: Petition for Review dated 15 April 2005) dated August 5, 2005, Manulife attached affidavits of its agents
purportedly to support its claim that Tongko, as a Regional Sales Manager, did not perform any administrative functions. An
examination of these affidavits would, however, prove the opposite.
In an Affidavit dated April 28, 2003,22 John D. Chua, a Regional Sales Manager of Manulife, stated:

136
 4. On September 1, 1996, my services were engaged by Manulife as an Agency Regional Sales Manager ("RSM") for
Metro South Region pursuant to an Agency Contract. As such RSM, I have the following functions:
1. Refer and recommend prospective agents to Manulife
2. Coach agents to become productive
3. Regularly meet with, and coordinate activities of agents affiliated to my region.
While Amada Toledo, a Branch Manager of Manulife, stated in her Affidavit dated April 29, 2003 23that:
3. In January 1997, I was assigned as a Branch Manager ("BM") of Manulife for the Metro North Sector;
4. As such BM, I render the following services:
a. Refer and recommend prospective agents to Manulife;
b. Train and coordinate activities of other commission agents;
c. Coordinate activities of Agency Managers who, in turn, train and coordinate activites of other commission
agents;
d. Achieve agreed production objectives in terms of Net Annualized Commissions and Case Count and
recruitment goals; and
e. Sell the various products of Manulife to my personal clients.
While Ma. Lourdes Samson, a Unit Manager of Manulife, stated in her Affidavit dated April 28, 2003 24that:
3. In 1977, I was assigned as a Unit Manager ("UM") of North Peaks Unit, North Star Branch, Metro North Region;
4. As such UM, I render the following services:
a. To render or recommend prospective agents to be licensed, trained and contracted to sell Manulife
products and who will be part of my Unit;
b. To coordinate activities of the agents under my Unit in their daily, weekly and monthly selling activities,
making sure that their respective sales targets are met;
c. To conduct periodic training sessions for my agents to further enhance their sales skills.
d. To assist my agents with their sales activities by way of joint fieldwork, consultations and one-on- one
evaluation and analysis of particular accounts.
e. To provide opportunities to motivate my agents to succeed like conducting promos to increase sales
activities and encouraging them to be involved in company and industry activities.
f. To provide opportunities for professional growth to my agents by encouraging them to be a member of the
LUCAP (Life Underwriters Association of the Philippines).
A comparison of the above functions and those contained in the Agreement with those cited in Great Pacific Life Assurance
Corporation25 reveals a striking similarity that would more than support a similar finding as in that case. Thus, there was an
employer-employee relationship between the parties.
Additionally, it must be pointed out that the fact that Tongko was tasked with recruiting a certain number of agents, in addition
to his other administrative functions, leads to no other conclusion that he was an employee of Manulife.
In his letter dated November 6, 2001, De Dios harped on the direction of Manulife of becoming a major agency-led distribution
company whereby greater agency recruitment is required of the managers, including Tongko. De Dios made it clear that agent
recruitment has become the primary means by which Manulife intends to sell more policies. More importantly, it is Tongko's
alleged failure to follow this principle of recruitment that led to the termination of his employment with Manulife. With this, it is
inescapable that Tongko was an employee of Manulife.
Tongko Was Illegally Dismissed
In its Petition for Certiorari dated January 7, 200526 filed before the CA, Manulife argued that even if Tongko is considered as
its employee, his employment was validly terminated on the ground of gross and habitual neglect of duties, inefficiency, as well
as willful disobedience of the lawful orders of Manulife. Manulife stated:
In the instant case, private respondent, despite the written reminder from Mr. De Dios refused to shape up and
altogether disregarded the latter's advice resulting in his laggard performance clearly indicative of his willful
disobedience of the lawful orders of his superior. x x x
xxxx
As private respondent has patently failed to perform a very fundamental duty, and that is to yield obedience to all
reasonable rules, orders and instructions of the Company, as well as gross failure to reach at least minimum quota,
the termination of his engagement from Manulife is highly warranted and therefore, there is no illegal dismissal to
speak of.
It is readily evident from the above-quoted portions of Manulife's petition that it failed to cite a single iota of evidence to support
its claims. Manulife did not even point out which order or rule that Tongko disobeyed. More importantly, Manulife did not point
out the specific acts that Tongko was guilty of that would constitute gross and habitual neglect of duty or disobedience.
Manulife merely cited Tongko's alleged "laggard performance," without substantiating such claim, and equated the same to
disobedience and neglect of duty.
We cannot, therefore, accept Manulife's position.
In Quebec, Sr. v. National Labor Relations Commission, we ruled that:

137
 When 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 and the burden is on the employer to prove that the termination was for a valid or
authorized cause. This burden of proof appropriately lies on the shoulders of the employer and not on the employee
because a worker's job has some of the characteristics of property rights and is therefore within the constitutional
mantle of protection. 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 laws.
Apropos thereto, Art. 277, par. (b), of the Labor Code mandates in explicit terms that the burden of proving the
validity of the termination of employment rests on the employer. Failure to discharge this evidential burden would
necessarily mean that the dismissal was not justified, and, therefore, illegal. 27
We again ruled in Times Transportation Co., Inc. v. National Labor Relations Commission that:
The law mandates that the burden of proving the validity of the termination of employment rests with the employer.
Failure to discharge this evidentiary burden would necessarily mean that the dismissal was not justified, and,
therefore, illegal. Unsubstantiated suspicions, accusations and conclusions of employers do not provide for legal
justification for dismissing employees. In case of doubt, such cases should be resolved in favor of labor, pursuant to
the social justice policy of our labor laws and Constitution.28
This burden of proof was clarified in Community Rural Bank of San Isidro (N.E.), Inc. v. Paez to mean substantial evidence, to
wit:
The Labor Code provides that an employer may terminate the services of an employee for just cause and this must
be supported by substantial evidence. The settled rule in administrative and quasi-judicial proceedings is that proof
beyond reasonable doubt is not required in determining the legality of an employer's dismissal of an employee, and
not even a preponderance of evidence is necessary as substantial evidence is considered sufficient. Substantial
evidence is more than a mere scintilla of evidence or relevant evidence as a reasonable mind might accept as
adequate to support a conclusion, even if other minds, equally reasonable, might conceivably opine otherwise. 29
Here, Manulife failed to overcome such burden of proof. It must be reiterated that Manulife even failed to identify the specific
acts by which Tongko's employment was terminated much less support the same with substantial evidence. To repeat, mere
conjectures cannot work to deprive employees of their means of livelihood. Thus, it must be concluded that Tongko was
illegally dismissed.
Moreover, as to Manulife's failure to comply with the twin notice rule, it reasons that Tongko not being its employee is not
entitled to such notices. Since we have ruled that Tongko is its employee, however, Manulife clearly failed to afford Tongko
said notices. Thus, on this ground too, Manulife is guilty of illegal dismissal. In Quebec, Sr., we also stated:
Furthermore, not only does our legal system dictate that the reasons for dismissing a worker must be pertinently
substantiated, it also mandates that the manner of dismissal must be properly done, otherwise, the termination itself
is gravely defective and may be declared unlawful.30
For breach of the due process requirements, Manulife is liable to Tongko in the amount of PhP 30,000 as indemnity in the form
of nominal damages.31
Finally, Manulife raises the issue of the correctness of the computation of the award to Tongko made by the NLRC by claiming
that Songco v. National Labor Relations Commission32 is inapplicable to the instant case, considering that Songco was
dismissed on the ground of retrenchment.
An examination of Songco reveals that it may be applied to the present case. In that case, Jose Songco was a salesman of
F.E. Zuellig (M), Inc. which terminated the services of Songco on the ground of retrenchment due to financial losses. The issue
raised to the Court, however, was whether commissions are considered as part of wages in order to determine separation pay.
Thus, the fact that Songco was dismissed due to retrenchment does not hamper the application thereof to the instant case.
What is pivotal is that we ruled in Songco that commissions are part of wages for the determination of separation pay.
Article 279 of the Labor Code on security of tenure pertinently provides that:
In cases of regular employment the employer shall not terminate the services of an employee except for a just cause
or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time
of his actual reinstatement.
In Triad Security & Allied Services, Inc. v. Ortega, Jr. (Triad), we thus stated that an illegally dismissed employee shall be
entitled to backwages and separation pay, if reinstatement is no longer viable:
As the law now stands, an illegally dismissed employee is entitled to two reliefs, namely: backwages and
reinstatement. These are separate and distinct from each other. However, separation pay is granted where
reinstatement is no longer feasible because of strained relations between the employee and the employer. In effect,
an illegally dismissed employee is entitled to either reinstatement, if viable, or separation pay if reinstatement is no
longer viable and backwages.33
Taking into consideration the cases of Songco and Triad, we find correct the computation of the NLRC that the monthly gross
wage of Tongko in 2001 was PhP 518,144.76. For having been illegally dismissed, Tongko is entitled to reinstatement with full
138
backwages under Art. 279 of the Labor Code. Due to the strained relationship between Manulife and Tongko, reinstatement,
however, is no longer advisable. Thus, Tongko will be entitled to backwages from January 2, 2002 (date of dismissal) up to the
finality of this decision. Moreover, Manulife will pay Tongko separation pay of one (1) month salary for every year of service
that is from 1977 to 2001 amounting to PhP 12,435,474.24, considering that reinstatement is not feasible. Tongko shall also
be entitled to an award of attorney's fees in the amount of ten percent (10%) of the aggregate amount of the above awards.
WHEREFORE, the petition is hereby GRANTED. The assailed March 29, 2005 Decision of the CA in CA-G.R. SP No. 88253
is REVERSED and SET ASIDE. The Decision dated September 27, 2004 of the NLRC is REINSTATED with the following
modifications:
Manulife shall pay Tongko the following:
(1) Full backwages, inclusive of allowances and other benefits or their monetary equivalent from January 2, 2002 up
to the finality of this Decision;
(2) Separation pay of one (1) month salary for every year of service from 1977 up to 2001 amounting to PhP
12,435,474.24;
(3) Nominal damages of PhP 30,000 as indemnity for violation of the due process requirements; and
(4) Attorney's fees equivalent to ten percent (10%) of the aforementioned backwages and separation pay.
Costs against respondent Manulife.
SO ORDERED.

G.R. No. 167622 June 29, 2010

GREGORIO V. TONGKO, Petitioner,
vs.
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and RENATO A. VERGEL DE DIOS,Respondents.
RESOLUTION
BRION, J.:
This resolves the Motion for Reconsideration1 dated December 3, 2008 filed by respondent The Manufacturers Life Insurance
Co. (Phils.), Inc. (Manulife) to set aside our Decision of November 7, 2008. In the assailed decision, we found that an
employer-employee relationship existed between Manulife and petitioner Gregorio Tongko and ordered Manulife to pay
Tongko backwages and separation pay for illegal dismissal.
The following facts have been stated in our Decision of November 7, 2008, now under reconsideration, but are repeated,
simply for purposes of clarity.
The contractual relationship between Tongko and Manulife had two basic phases. The first or initial phase began on July 1,
1977, under a Career Agents Agreement (Agreement) that provided:
It is understood and agreed that the Agent is an independent contractor and nothing contained herein shall be construed or
interpreted as creating an employer-employee relationship between the Company and the Agent.
xxxx
a) The Agent shall canvass for applications for Life Insurance, Annuities, Group policies and other products offered by the
Company, and collect, in exchange for provisional receipts issued by the Agent, money due to or become due to the Company
in respect of applications or policies obtained by or through the Agent or from policyholders allotted by the Company to the
Agent for servicing, subject to subsequent confirmation of receipt of payment by the Company as evidenced by an Official
Receipt issued by the Company directly to the policyholder.
xxxx
The Company may terminate this Agreement for any breach or violation of any of the provisions hereof by the Agent by giving
written notice to the Agent within fifteen (15) days from the time of the discovery of the breach. No waiver, extinguishment,
abandonment, withdrawal or cancellation of the right to terminate this Agreement by the Company shall be construed for any
previous failure to exercise its right under any provision of this Agreement.
Either of the parties hereto may likewise terminate his Agreement at any time without cause, by giving to the other party fifteen
(15) days notice in writing.2
Tongko additionally agreed (1) to comply with all regulations and requirements of Manulife, and (2) to maintain a standard of
knowledge and competency in the sale of Manulifes products, satisfactory to Manulife and sufficient to meet the volume of the
new business, required by his Production Club membership. 3
The second phase started in 1983 when Tongko was named Unit Manager in Manulifes Sales Agency Organization. In 1990,
he became a Branch Manager. Six years later (or in 1996), Tongko became a Regional Sales Manager. 4
Tongkos gross earnings consisted of commissions, persistency income, and management overrides. Since the beginning,
Tongko consistently declared himself self-employed in his income tax returns. Thus, under oath, he declared his gross
business income and deducted his business expenses to arrive at his taxable business income. Manulife withheld the
corresponding 10% tax on Tongkos earnings.5

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In 2001, Manulife instituted manpower development programs at the regional sales management level. Respondent Renato
Vergel de Dios wrote Tongko a letter dated November 6, 2001 on concerns that were brought up during the October 18, 2001
Metro North Sales Managers Meeting. De Dios wrote:
The first step to transforming Manulife into a big league player has been very clear to increase the number of agents to at
least 1,000 strong for a start. This may seem diametrically opposed to the way Manulife was run when you first joined the
organization. Since then, however, substantial changes have taken place in the organization, as these have been influenced
by developments both from within and without the company.
xxxx
The issues around agent recruiting are central to the intended objectives hence the need for a Senior Managers meeting
earlier last month when Kevin OConnor, SVP-Agency, took to the floor to determine from our senior agency leaders what
more could be done to bolster manpower development. At earlier meetings, Kevin had presented information where evidently,
your Region was the lowest performer (on a per Manager basis) in terms of recruiting in 2000 and, as of today, continues to
remain one of the laggards in this area.
While discussions, in general, were positive other than for certain comments from your end which were perceived to be
uncalled for, it became clear that a one-on-one meeting with you was necessary to ensure that you and management, were on
the same plane. As gleaned from some of your previous comments in prior meetings (both in group and one-on-one), it was
not clear that we were proceeding in the same direction.
Kevin held subsequent series of meetings with you as a result, one of which I joined briefly. In those subsequent meetings you
reiterated certain views, the validity of which we challenged and subsequently found as having no basis.
With such views coming from you, I was a bit concerned that the rest of the Metro North Managers may be a bit confused as to
the directions the company was taking. For this reason, I sought a meeting with everyone in your management team, including
you, to clear the air, so to speak.
This note is intended to confirm the items that were discussed at the said Metro North Regions Sales Managers meeting held
at the 7/F Conference room last 18 October.
xxxx
Issue # 2: "Some Managers are unhappy with their earnings and would want to revert to the position of agents."
This is an often repeated issue you have raised with me and with Kevin. For this reason, I placed the issue on the table before
the rest of your Regions Sales Managers to verify its validity. As you must have noted, no Sales Manager came forward on
their own to confirm your statement and it took you to name Malou Samson as a source of the same, an allegation that Malou
herself denied at our meeting and in your very presence.
This only confirms, Greg, that those prior comments have no solid basis at all. I now believe what I had thought all along, that
these allegations were simply meant to muddle the issues surrounding the inability of your Region to meet its agency
development objectives!
Issue # 3: "Sales Managers are doing what the company asks them to do but, in the process, they earn less."
xxxx
All the above notwithstanding, we had your own records checked and we found that you made a lot more money in the Year
2000 versus 1999. In addition, you also volunteered the information to Kevin when you said that you probably will make more
money in the Year 2001 compared to Year 2000. Obviously, your above statement about making "less money" did not refer to
you but the way you argued this point had us almost believing that you were spouting the gospel of truth when you were not. x
xx
xxxx
All of a sudden, Greg, I have become much more worried about your ability to lead this group towards the new direction that
we have been discussing these past few weeks, i.e., Manulifes goal to become a major agency-led distribution company in
the Philippines. While as you claim, you have not stopped anyone from recruiting, I have never heard you proactively push for
greater agency recruiting. You have not been proactive all these years when it comes to agency growth.
xxxx
I cannot afford to see a major region fail to deliver on its developmental goals next year and so, we are making the following
changes in the interim:
1. You will hire at your expense a competent assistant who can unload you of much of the routine tasks which can be easily
delegated. This assistant should be so chosen as to complement your skills and help you in the areas where you feel "may not
be your cup of tea."
You have stated, if not implied, that your work as Regional Manager may be too taxing for you and for your health. The above
could solve this problem.
xxxx
2. Effective immediately, Kevin and the rest of the Agency Operations will deal with the North Star Branch (NSB) in
autonomous fashion. x x x

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I have decided to make this change so as to reduce your span of control and allow you to concentrate more fully on
overseeing the remaining groups under Metro North, your Central Unit and the rest of the Sales Managers in Metro North. I will
hold you solely responsible for meeting the objectives of these remaining groups.
xxxx
The above changes can end at this point and they need not go any further. This, however, is entirely dependent upon you. But
you have to understand that meeting corporate objectives by everyone is primary and will not be compromised. We are
meeting tough challenges next year, and I would want everybody on board. Any resistance or holding back by anyone will be
dealt with accordingly.6
Subsequently, de Dios wrote Tongko another letter, dated December 18, 2001, terminating Tongkos services:
It would appear, however, that despite the series of meetings and communications, both one-on-one meetings between
yourself and SVP Kevin OConnor, some of them with me, as well as group meetings with your Sales Managers, all these
efforts have failed in helping you align your directions with Managements avowed agency growth policy.
xxxx
On account thereof, Management is exercising its prerogative under Section 14 of your Agents Contract as we are now issuing
this notice of termination of your Agency Agreement with us effective fifteen days from the date of this letter. 7
Tongko responded by filing an illegal dismissal complaint with the National Labor Relations Commission (NLRC) Arbitration
Branch. He essentially alleged despite the clear terms of the letter terminating his Agency Agreement that he was
Manulifes employee before he was illegally dismissed.8
Thus, the threshold issue is the existence of an employment relationship. A finding that none exists renders the question of
illegal dismissal moot; a finding that an employment relationship exists, on the other hand, necessarily leads to the need to
determine the validity of the termination of the relationship.
A. Tongkos Case for Employment Relationship
Tongko asserted that as Unit Manager, he was paid an annual over-rider not exceeding P50,000.00, regardless of production
levels attained and exclusive of commissions and bonuses. He also claimed that as Regional Sales Manager, he was given a
travel and entertainment allowance of P36,000.00 per year in addition to his overriding commissions; he was tasked with
numerous administrative functions and supervisory authority over Manulifes employees, aside from merely selling policies and
recruiting agents for Manulife; and he recommended and recruited insurance agents subject to vetting and approval by
Manulife. He further alleges that he was assigned a definite place in the Manulife offices when he was not in the field at the
3rd Floor, Manulife Center, 108 Tordesillas corner Gallardo Sts., Salcedo Village, Makati City for which he never paid any
rental. Manulife provided the office equipment he used, including tables, chairs, computers and printers (and even office
stationery), and paid for the electricity, water and telephone bills. As Regional Sales Manager, Tongko additionally asserts that
he was required to follow at least three codes of conduct.9
B. Manulifes Case Agency Relationship with Tongko
Manulife argues that Tongko had no fixed wage or salary. Under the Agreement, Tongko was paid commissions of varying
amounts, computed based on the premium paid in full and actually received by Manulife on policies obtained through an
agent. As sales manager, Tongko was paid overriding sales commission derived from sales made by agents under his
unit/structure/branch/region. Manulife also points out that it deducted and withheld a 10% tax from all commissions Tongko
received; Tongko even declared himself to be self-employed and consistently paid taxes as suchi.e., he availed of tax
deductions such as ordinary and necessary trade, business and professional expenses to which a business is entitled.
Manulife asserts that the labor tribunals have no jurisdiction over Tongkos claim as he was not its employee as characterized
in the four-fold test and our ruling in Carungcong v. National Labor Relations Commission.10
The Conflicting Rulings of the Lower Tribunals
The labor arbiter decreed that no employer-employee relationship existed between the parties. However, the NLRC reversed
the labor arbiters decision on appeal; it found the existence of an employer-employee relationship and concluded that Tongko
had been illegally dismissed. In the petition for certiorari with the Court of Appeals (CA), the appellate court found that the
NLRC gravely abused its discretion in its ruling and reverted to the labor arbiters decision that no employer-employee
relationship existed between Tongko and Manulife.
Our Decision of November 7, 2008
In our Decision of November 7, 2008, we reversed the CA ruling and found that an employment relationship existed between
Tongko and Manulife. We concluded that Tongko is Manulifes employee for the following reasons:
1. Our ruling in the first Insular11 case did not foreclose the possibility of an insurance agent becoming an employee
of an insurance company; if evidence exists showing that the company promulgated rules or regulations that
effectively controlled or restricted an insurance agents choice of methods or the methods themselves in selling
insurance, an employer-employee relationship would be present. The determination of the existence of an employer-
employee relationship is thus on a case-to-case basis depending on the evidence on record.
2. Manulife had the power of control over Tongko, sufficient to characterize him as an employee, as shown by the
following indicators:

141
 2.1 Tongko undertook to comply with Manulifes rules, regulations and other requirements, i.e., the different
codes of conduct such as the Agent Code of Conduct, the Manulife Financial Code of Conduct, and the
Financial Code of Conduct Agreement;
2.2 The various affidavits of Manulifes insurance agents and managers, who occupied similar positions as
Tongko, showed that they performed administrative duties that established employment with Manulife;12 and
2.3 Tongko was tasked to recruit some agents in addition to his other administrative functions. De Dios
letter harped on the direction Manulife intended to take, viz., greater agency recruitment as the primary
means to sell more policies; Tongkos alleged failure to follow this directive led to the termination of his
employment with Manulife.
The Motion for Reconsideration
Manulife disagreed with our Decision and filed the present motion for reconsideration on the following GROUNDS:
1. The November 7[, 2008] Decision violates Manulifes right to due process by: (a) confining the review only to the
issue of "control" and utterly disregarding all the other issues that had been joined in this case; (b) mischaracterizing
the divergence of conclusions between the CA and the NLRC decisions as confined only to that on "control"; (c)
grossly failing to consider the findings and conclusions of the CA on the majority of the material evidence, especially
[Tongkos] declaration in his income tax returns that he was a "business person" or "self-employed"; and (d) allowing
[Tongko] to repudiate his sworn statement in a public document.
2. The November 7[, 2008] Decision contravenes settled rules in contract law and agency, distorts not only the legal
relationships of agencies to sell but also distributorship and franchising, and ignores the constitutional and policy
context of contract law vis--vis labor law.
3. The November 7[, 2008] Decision ignores the findings of the CA on the three elements of the four-fold test other
than the "control" test, reverses well-settled doctrines of law on employer-employee relationships, and grossly
misapplies the "control test," by selecting, without basis, a few items of evidence to the exclusion of more material
evidence to support its conclusion that there is "control."
4. The November 7[, 2008] Decision is judicial legislation, beyond the scope authorized by Articles 8 and 9 of the Civil
Code, beyond the powers granted to this Court under Article VIII, Section 1 of the Constitution and contravenes
through judicial legislation, the constitutional prohibition against impairment of contracts under Article III, Section 10 of
the Constitution.
5. For all the above reasons, the November 7[, 2008] Decision made unsustainable and reversible errors, which
should be corrected, in concluding that Respondent Manulife and Petitioner had an employer-employee relationship,
that Respondent Manulife illegally dismissed Petitioner, and for consequently ordering Respondent Manulife to pay
Petitioner backwages, separation pay, nominal damages and attorneys fees. 13
THE COURTS RULING
A. The Insurance and the Civil Codes;
the Parties Intent and Established
Industry Practices
We cannot consider the present case purely from a labor law perspective, oblivious that the factual antecedents were set in
the insurance industry so that the Insurance Code primarily governs. Chapter IV, Title 1 of this Code is wholly devoted to
"Insurance Agents and Brokers" and specifically defines the agents and brokers relationship with the insurance company and
how they are governed by the Code and regulated by the Insurance Commission.
The Insurance Code, of course, does not wholly regulate the "agency" that it speaks of, as agency is a civil law matter
governed by the Civil Code. Thus, at the very least, three sets of laws namely, the Insurance Code, the Labor Code and the
Civil Code have to be considered in looking at the present case. Not to be forgotten, too, is the Agreement (partly
reproduced on page 2 of this Dissent and which no one disputes) that the parties adopted to govern their relationship for
purposes of selling the insurance the company offers. To forget these other laws is to take a myopic view of the present case
and to add to the uncertainties that now exist in considering the legal relationship between the insurance company and its
"agents."
The main issue of whether an agency or an employment relationship exists depends on the incidents of the relationship. The
Labor Code concept of "control" has to be compared and distinguished with the "control" that must necessarily exist in a
principal-agent relationship. The principal cannot but also have his or her say in directing the course of the principal-agent
relationship, especially in cases where the company-representative relationship in the insurance industry is an agency.
a. The laws on insurance and agency
The business of insurance is a highly regulated commercial activity in the country, in terms particularly of who can be in the
insurance business, who can act for and in behalf of an insurer, and how these parties shall conduct themselves in the
insurance business. Section 186 of the Insurance Code provides that "No person, partnership, or association of persons shall
transact any insurance business in the Philippines except as agent of a person or corporation authorized to do the business of
insurance in the Philippines." Sections 299 and 300 of the Insurance Code on Insurance Agents and Brokers, among other
provisions, provide:
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Section 299. No insurance company doing business in the Philippines, nor any agent thereof, shall pay any commission or
other compensation to any person for services in obtaining insurance, unless such person shall have first procured from the
Commissioner a license to act as an insurance agent of such company or as an insurance broker as hereinafter provided.
No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement of applications for
insurance, or receive for services in obtaining insurance, any commission or other compensation from any insurance company
doing business in the Philippines or any agent thereof, without first procuring a license so to act from the Commissioner x x x
The Commissioner shall satisfy himself as to the competence and trustworthiness of the applicant and shall have the right to
refuse to issue or renew and to suspend or revoke any such license in his discretion.1avvphi1.net
Section 300. Any person who for compensation solicits or obtains insurance on behalf of any insurance company or transmits
for a person other than himself an application for a policy or contract of insurance to or from such company or offers or
assumes to act in the negotiating of such insurance shall be an insurance agent within the intent of this section and shall
thereby become liable to all the duties, requirements, liabilities and penalties to which an insurance agent is subject.
The application for an insurance agents license requires a written examination, and the applicant must be of good moral
character and must not have been convicted of a crime involving moral turpitude.14 The insurance agent who collects
premiums from an insured person for remittance to the insurance company does so in a fiduciary capacity, and an insurance
company which delivers an insurance policy or contract to an authorized agent is deemed to have authorized the agent to
receive payment on the companys behalf.15 Section 361 further prohibits the offer, negotiation, or collection of any amount
other than that specified in the policy and this covers any rebate from the premium or any special favor or advantage in the
dividends or benefit accruing from the policy.
Thus, under the Insurance Code, the agent must, as a matter of qualification, be licensed and must also act within the
parameters of the authority granted under the license and under the contract with the principal. Other than the need for a
license, the agent is limited in the way he offers and negotiates for the sale of the companys insurance products, in his
collection activities, and in the delivery of the insurance contract or policy. Rules regarding the desired results (e.g., the
required volume to continue to qualify as a company agent, rules to check on the parameters on the authority given to the
agent, and rules to ensure that industry, legal and ethical rules are followed) are built-in elements of control specific to an
insurance agency and should not and cannot be read as elements of control that attend an employment relationship governed
by the Labor Code.
On the other hand, the Civil Code defines an agent as a "person [who] binds himself to render some service or to do
something in representation or on behalf of another, with the consent or authority of the latter." 16 While this is a very broad
definition that on its face may even encompass an employment relationship, the distinctions between agency and employment
are sufficiently established by law and jurisprudence.
Generally, the determinative element is the control exercised over the one rendering service. The employer controls the
employee both in the results and in the means and manner of achieving this result. The principal in an agency relationship, on
the other hand, also has the prerogative to exercise control over the agent in undertaking the assigned task based on the
parameters outlined in the pertinent laws.
Under the general law on agency as applied to insurance, an agency must be express in light of the need for a license and for
the designation by the insurance company. In the present case, the Agreement fully serves as grant of authority to Tongko as
Manulifes insurance agent.17 This agreement is supplemented by the companys agency practices and usages, duly accepted
by the agent in carrying out the agency.18 By authority of the Insurance Code, an insurance agency is for compensation, 19 a
matter the Civil Code Rules on Agency presumes in the absence of proof to the contrary. 20 Other than the compensation, the
principal is bound to advance to, or to reimburse, the agent the agreed sums necessary for the execution of the agency. 21 By
implication at least under Article 1994 of the Civil Code, the principal can appoint two or more agents to carry out the same
assigned tasks,22 based necessarily on the specific instructions and directives given to them.
With particular relevance to the present case is the provision that "In the execution of the agency, the agent shall act in
accordance with the instructions of the principal." 23 This provision is pertinent for purposes of the necessary control that the
principal exercises over the agent in undertaking the assigned task, and is an area where the instructions can intrude into the
labor law concept of control so that minute consideration of the facts is necessary. A related article is Article 1891 of the Civil
Code which binds the agent to render an account of his transactions to the principal.
B. The Cited Case
The Decision of November 7, 2008 refers to the first Insular and Grepalife cases to establish that the company rules and
regulations that an agent has to comply with are indicative of an employer-employee relationship.24 The Dissenting Opinions of
Justice Presbitero Velasco, Jr. and Justice Conchita Carpio Morales also cite Insular Life Assurance Co. v. National Labor
Relations Commission (second Insular case)25 to support the view that Tongko is Manulifes employee. On the other hand,
Manulife cites the Carungcong case and AFP Mutual Benefit Association, Inc. v. National Labor Relations Commission
(AFPMBAI case)26 to support its allegation that Tongko was not its employee.
A caveat has been given above with respect to the use of the rulings in the cited cases because none of them is on all fours
with the present case; the uniqueness of the factual situation of the present case prevents it from being directly and readily

143
cast in the mold of the cited cases. These cited cases are themselves different from one another; this difference underscores
the need to read and quote them in the context of their own factual situations.
The present case at first glance appears aligned with the facts in the Carungcong, the Grepalife, and the second Insular Life
cases. A critical difference, however, exists as these cited cases dealt with the proper legal characterization of a subsequent
management contract that superseded the original agency contract between the insurance company and its agent.
Carungcong dealt with a subsequent Agreement making Carungcong a New Business Manager that clearly superseded the
Agreement designating Carungcong as an agent empowered to solicit applications for insurance. The Grepalife case, on the
other hand, dealt with the proper legal characterization of the appointment of the Ruiz brothers to positions higher than their
original position as insurance agents. Thus, after analyzing the duties and functions of the Ruiz brothers, as these were
enumerated in their contracts, we concluded that the company practically dictated the manner by which the Ruiz brothers were
to carry out their jobs. Finally, the second Insular Life case dealt with the implications of de los Reyes appointment as acting
unit manager which, like the subsequent contracts in the Carungcong and the Grepalife cases, was clearly defined under a
subsequent contract. In all these cited cases, a determination of the presence of the Labor Code element of control was made
on the basis of the stipulations of the subsequent contracts.
In stark contrast with the Carungcong, the Grepalife, and the second Insular Life cases, the only contract or document extant
and submitted as evidence in the present case is the Agreement a pure agency agreement in the Civil Code context similar
to the original contract in the first Insular Life case and the contract in the AFPMBAI case. And while Tongko was later on
designated unit manager in 1983, Branch Manager in 1990, and Regional Sales Manager in 1996, no formal contract
regarding these undertakings appears in the records of the case. Any such contract or agreement, had there been any, could
have at the very least provided the bases for properly ascertaining the juridical relationship established between the parties.
These critical differences, particularly between the present case and the Grepalife and the second Insular Life cases, should
therefore immediately drive us to be more prudent and cautious in applying the rulings in these cases.
C. Analysis of the Evidence
c.1. The Agreement
The primary evidence in the present case is the July 1, 1977 Agreement that governed and defined the parties relations until
the Agreements termination in 2001. This Agreement stood for more than two decades and, based on the records of the case,
was never modified or novated. It assumes primacy because it directly dealt with the nature of the parties relationship up to
the very end; moreover, both parties never disputed its authenticity or the accuracy of its terms.
By the Agreements express terms, Tongko served as an "insurance agent" for Manulife, not as an employee. To be sure, the
Agreements legal characterization of the nature of the relationship cannot be conclusive and binding on the courts; as the
dissent clearly stated, the characterization of the juridical relationship the Agreement embodied is a matter of law that is for the
courts to determine. At the same time, though, the characterization the parties gave to their relationship in the Agreement
cannot simply be brushed aside because it embodies their intent at the time they entered the Agreement, and they were
governed by this understanding throughout their relationship. At the very least, the provision on the absence of employer-
employee relationship between the parties can be an aid in considering the Agreement and its implementation, and in
appreciating the other evidence on record.
The parties legal characterization of their intent, although not conclusive, is critical in this case because this intent is not illegal
or outside the contemplation of law, particularly of the Insurance and the Civil Codes. From this perspective, the provisions of
the Insurance Code cannot be disregarded as this Code (as heretofore already noted) expressly envisions a principal-agent
relationship between the insurance company and the insurance agent in the sale of insurance to the public.1awph!1 For this
reason, we can take judicial notice that as a matter of Insurance Code-based business practice, an agency relationship
prevails in the insurance industry for the purpose of selling insurance. The Agreement, by its express terms, is in accordance
with the Insurance Code model when it provided for a principal-agent relationship, and thus cannot lightly be set aside nor
simply be considered as an agreement that does not reflect the parties true intent. This intent, incidentally, is reinforced by the
system of compensation the Agreement provides, which likewise is in accordance with the production-based sales
commissions the Insurance Code provides.
Significantly, evidence shows that Tongkos role as an insurance agent never changed during his relationship with Manulife. If
changes occurred at all, the changes did not appear to be in the nature of their core relationship. Tongko essentially remained
an agent, but moved up in this role through Manulifes recognition that he could use other agents approved by Manulife, but
operating under his guidance and in whose commissions he had a share. For want of a better term, Tongko perhaps could be
labeled as a "lead agent" who guided under his wing other Manulife agents similarly tasked with the selling of Manulife
insurance.
Like Tongko, the evidence suggests that these other agents operated under their own agency agreements. Thus, if Tongkos
compensation scheme changed at all during his relationship with Manulife, the change was solely for purposes of crediting him
with his share in the commissions the agents under his wing generated. As an agent who was recruiting and guiding other
insurance agents, Tongko likewise moved up in terms of the reimbursement of expenses he incurred in the course of his lead
agency, a prerogative he enjoyed pursuant to Article 1912 of the Civil Code. Thus, Tongko received greater reimbursements

144
for his expenses and was even allowed to use Manulife facilities in his interactions with the agents, all of whom were, in the
strict sense, Manulife agents approved and certified as such by Manulife with the Insurance Commission.
That Tongko assumed a leadership role but nevertheless wholly remained an agent is the inevitable conclusion that results
from the reading of the Agreement (the only agreement on record in this case) and his continuing role thereunder as sales
agent, from the perspective of the Insurance and the Civil Codes and in light of what Tongko himself attested to as his role as
Regional Sales Manager. To be sure, this interpretation could have been contradicted if other agreements had been submitted
as evidence of the relationship between Manulife and Tongko on the latters expanded undertakings. In the absence of any
such evidence, however, this reading based on the available evidence and the applicable insurance and civil law provisions
must stand, subject only to objective and evidentiary Labor Code tests on the existence of an employer-employee
relationship.
In applying such Labor Code tests, however, the enforcement of the Agreement during the course of the parties relationship
should be noted. From 1977 until the termination of the Agreement, Tongkos occupation was to sell Manulifes insurance
policies and products. Both parties acquiesced with the terms and conditions of the Agreement. Tongko, for his part, accepted
all the benefits flowing from the Agreement, particularly the generous commissions.
Evidence indicates that Tongko consistently clung to the view that he was an independent agent selling Manulife insurance
products since he invariably declared himself a business or self-employed person in his income tax returns. This consistency
with, and action made pursuant to the Agreement were pieces of evidence that were never mentioned nor considered
in our Decision of November 7, 2008. Had they been considered, they could, at the very least, serve as Tongkos
admissions against his interest. Strictly speaking, Tongkos tax returns cannot but be legally significant because he certified
under oath the amount he earned as gross business income, claimed business deductions, leading to his net taxable income.
This should be evidence of the first order that cannot be brushed aside by a mere denial. Even on a laymans view that is
devoid of legal considerations, the extent of his annual income alone renders his claimed employment status doubtful. 27
Hand in hand with the concept of admission against interest in considering the tax returns, the concept of estoppel a legal
and equitable concept28 necessarily must come into play. Tongkos previous admissions in several years of tax returns as an
independent agent, as against his belated claim that he was all along an employee, are too diametrically opposed to be simply
dismissed or ignored. Interestingly, Justice Velascos dissenting opinion states that Tongko was forced to declare himself a
business or self-employed person by Manulifes persistent refusal to recognize him as its employee. 29 Regrettably, the
dissent has shown no basis for this conclusion, an understandable omission since no evidence in fact exists on this
point in the records of the case. In fact, what the evidence shows is Tongkos full conformity with, and action as, an
independent agent until his relationship with Manulife took a bad turn.
Another interesting point the dissent raised with respect to the Agreement is its conclusion that the Agreement negated any
employment relationship between Tongko and Manulife so that the commissions he earned as a sales agent should not be
considered in the determination of the backwages and separation pay that should be given to him. This part of the dissent is
correct although it went on to twist this conclusion by asserting that Tongko had dual roles in his relationship with Manulife; he
was an agent, not an employee, in so far as he sold insurance for Manulife, but was an employee in his capacity as a
manager. Thus, the dissent concluded that Tongkos backwages should only be with respect to his role as Manulifes
manager.
The conclusion with respect to Tongkos employment as a manager is, of course, unacceptable for the legal, factual and
practical reasons discussed in this Resolution. In brief, the factual reason is grounded on the lack of evidentiary support of
the conclusion that Manulife exercised control over Tongko in the sense understood in the Labor Code. The legal reason,
partly based on the lack of factual basis, is the erroneous legal conclusion that Manulife controlled Tongko and was thus its
employee. The practical reason, on the other hand, is the havoc that the dissents unwarranted conclusion would cause the
insurance industry that, by the laws own design, operated along the lines of principal-agent relationship in the sale of
insurance.
c.2. Other Evidence of Alleged Control
A glaring evidentiary gap for Tongko in this case is the lack of evidence on record showing that Manulife ever exercised
means-and-manner control, even to a limited extent, over Tongko during his ascent in Manulifes sales ladder. In 1983,
Tongko was appointed unit manager. Inexplicably, Tongko never bothered to present any evidence at all on what this
designation meant. This also holds true for Tongkos appointment as branch manager in 1990, and as Regional Sales
Manager in 1996. The best evidence of control the agreement or directive relating to Tongkos duties and responsibilities
was never introduced as part of the records of the case. The reality is, prior to de Dios letter, Manulife had practically left
Tongko alone not only in doing the business of selling insurance, but also in guiding the agents under his wing. As discussed
below, the alleged directives covered by de Dios letter, heretofore quoted in full, were policy directions and targeted results
that the company wanted Tongko and the other sales groups to realign with in their own selling activities. This is the reality that
the parties presented evidence consistently tells us.
What, to Tongko, serve as evidence of labor law control are the codes of conduct that Manulife imposes on its agents in the
sale of insurance. The mere presentation of codes or of rules and regulations, however, is not per se indicative of labor law
control as the law and jurisprudence teach us.
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As already recited above, the Insurance Code imposes obligations on both the insurance company and its agents in the
performance of their respective obligations under the Code, particularly on licenses and their renewals, on the representations
to be made to potential customers, the collection of premiums, on the delivery of insurance policies, on the matter of
compensation, and on measures to ensure ethical business practice in the industry.
The general law on agency, on the other hand, expressly allows the principal an element of control over the agent in a manner
consistent with an agency relationship. In this sense, these control measures cannot be read as indicative of labor law control.
Foremost among these are the directives that the principal may impose on the agent to achieve the assigned tasks, to the
extent that they do not involve the means and manner of undertaking these tasks. The law likewise obligates the agent to
render an account; in this sense, the principal may impose on the agent specific instructions on how an account shall be
made, particularly on the matter of expenses and reimbursements. To these extents, control can be imposed through rules
and regulations without intruding into the labor law concept of control for purposes of employment.
From jurisprudence, an important lesson that the first Insular Life case teaches us is that a commitment to abide by the rules
and regulations of an insurance company does not ipso facto make the insurance agent an employee. Neither do guidelines
somehow restrictive of the insurance agents conduct necessarily indicate "control" as this term is defined in
jurisprudence. Guidelines indicative of labor law "control," as the first Insular Life case tells us, should not merely
relate to the mutually desirable result intended by the contractual relationship; they must have the nature of
dictating the means or methods to be employed in attaining the result, or of fixing the methodology and of binding or
restricting the party hired to the use of these means. In fact, results-wise, the principal can impose production quotas and can
determine how many agents, with specific territories, ought to be employed to achieve the companys objectives. These are
management policy decisions that the labor law element of control cannot reach. Our ruling in these respects in the first Insular
Life case was practically reiterated in Carungcong. Thus, as will be shown more fully below, Manulifes codes of conduct, 30 all
of which do not intrude into the insurance agents means and manner of conducting their sales and only control them as to the
desired results and Insurance Code norms, cannot be used as basis for a finding that the labor law concept of control existed
between Manulife and Tongko.
The dissent considers the imposition of administrative and managerial functions on Tongko as indicative of labor law control;
thus, Tongko as manager, but not as insurance agent, became Manulifes employee. It drew this conclusion from what the
other Manulife managers disclosed in their affidavits (i.e., their enumerated administrative and managerial functions) and after
comparing these statements with the managers in Grepalife. The dissent compared the control exercised by Manulife over its
managers in the present case with the control the managers in the Grepalife case exercised over their employees by
presenting the following matrix:31
Duties of Manulifes Manager Duties of Grepalifes Managers/Supervisors

- to render or recommend prospective agents to be - train understudies for the position of district manager
licensed, trained and contracted to sell Manulife
products and who will be part of my Unit

- to coordinate activities of the agents under [the - properly account, record and document the companys
managers] Unit in [the agents] daily, weekly and funds, spot-check and audit the work of the zone
monthly selling activities, making sure that their supervisors, x x x follow up the submission of weekly
respective sales targets are met; remittance reports of the debit agents and zone
- to conduct periodic training sessions for [the] supervisors
agents to further enhance their sales skill; and - direct and supervise the sales activities of the debit
- to assist [the] agents with their sales activities by agents under him, x x x undertake and discharge the
way of joint fieldwork, consultations and one-on-one functions of absentee debit agents, spot-check the
evaluation and analysis of particular accounts record of debit agents, and insure proper documentation
of sales and collections of debit agents.
Aside from these affidavits however, no other evidence exists regarding the effects of Tongkos additional roles in Manulifes
sales operations on the contractual relationship between them.
To the dissent, Tongkos administrative functions as recruiter, trainer, or supervisor of other sales agents constituted a
substantive alteration of Manulifes authority over Tongko and the performance of his end of the relationship with Manulife. We
could not deny though that Tongko remained, first and foremost, an insurance agent, and that his additional role as Branch
Manager did not lessen his main and dominant role as insurance agent; this role continued to dominate the relations between
Tongko and Manulife even after Tongko assumed his leadership role among agents. This conclusion cannot be denied
because it proceeds from the undisputed fact that Tongko and Manulife never altered their July 1, 1977 Agreement, a
distinction the present case has with the contractual changes made in the second Insular Life case. Tongkos results-based
commissions, too, attest to the primacy he gave to his role as insurance sales agent.
The dissent apparently did not also properly analyze and appreciate the great qualitative difference that exists between:

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 the Manulife managers role is to coordinate activities of the agents under the managers Unit in the agents daily,
weekly, and monthly selling activities, making sure that their respective sales targets are met.
the District Managers duty in Grepalife is to properly account, record, and document the company's funds, spot-
check and audit the work of the zone supervisors, conserve the company's business in the district through
"reinstatements," follow up the submission of weekly remittance reports of the debit agents and zone supervisors,
preserve company property in good condition, train understudies for the position of district managers, and maintain
his quota of sales (the failure of which is a ground for termination).
the Zone Supervisors (also in Grepalife) has the duty to direct and supervise the sales activities of the debit
agents under him, conserve company property through "reinstatements," undertake and discharge the functions of
absentee debit agents, spot-check the records of debit agents, and insure proper documentation of sales and
collections by the debit agents.
These job contents are worlds apart in terms of "control." In Grepalife, the details of how to do the job are specified and pre-
determined; in the present case, the operative words are the "sales target," the methodology being left undefined except to the
extent of being "coordinative." To be sure, a "coordinative" standard for a manager cannot be indicative of control; the
standard only essentially describes what a Branch Manager is the person in the lead who orchestrates activities within the
group. To "coordinate," and thereby to lead and to orchestrate, is not so much a matter of control by Manulife; it is simply a
statement of a branch managers role in relation with his agents from the point of view of Manulife whose business Tongkos
sales group carries.
A disturbing note, with respect to the presented affidavits and Tongkos alleged administrative functions, is the selective
citation of the portions supportive of an employment relationship and the consequent omission of portions leading to the
contrary conclusion. For example, the following portions of the affidavit of Regional Sales Manager John Chua, with
counterparts in the other affidavits, were not brought out in the Decision of November 7, 2008, while the other portions
suggesting labor law control were highlighted. Specifically, the following portions of the affidavits were not brought out: 32
1.a. I have no fixed wages or salary since my services are compensated by way of commissions based on the
computed premiums paid in full on the policies obtained thereat;
1.b. I have no fixed working hours and employ my own method in soliticing insurance at a time and place I see fit;
1.c. I have my own assistant and messenger who handle my daily work load;
1.d. I use my own facilities, tools, materials and supplies in carrying out my business of selling insurance;
xxxx
6. I have my own staff that handles the day to day operations of my office;
7. My staff are my own employees and received salaries from me;
xxxx
9. My commission and incentives are all reported to the Bureau of Internal Revenue (BIR) as income by a self-
employed individual or professional with a ten (10) percent creditable withholding tax. I also remit monthly for
professionals.
These statements, read with the above comparative analysis of the Manulife and the Grepalife cases, would have readily
yielded the conclusion that no employer-employee relationship existed between Manulife and Tongko.
Even de Dios letter is not determinative of control as it indicates the least amount of intrusion into Tongkos exercise of his
role as manager in guiding the sales agents. Strictly viewed, de Dios directives are merely operational guidelines on how
Tongko could align his operations with Manulifes re-directed goal of being a "big league player." The method is to expand
coverage through the use of more agents. This requirement for the recruitment of more agents is not a means-and-method
control as it relates, more than anything else, and is directly relevant, to Manulifes objective of expanded business operations
through the use of a bigger sales force whose members are all on a principal-agent relationship. An important point to note
here is that Tongko was not supervising regular full-time employees of Manulife engaged in the running of the insurance
business; Tongko was effectively guiding his corps of sales agents, who are bound to Manulife through the same Agreement
that he had with Manulife, all the while sharing in these agents commissions through his overrides. This is the lead agent
concept mentioned above for want of a more appropriate term, since the title of Branch Manager used by the parties is really a
misnomer given that what is involved is not a specific regular branch of the company but a corps of non-employed agents,
defined in terms of covered territory, through which the company sells insurance. Still another point to consider is that Tongko
was not even setting policies in the way a regular company manager does; company aims and objectives were simply relayed
to him with suggestions on how these objectives can be reached through the expansion of a non-employee sales force.
Interestingly, a large part of de Dios letter focused on income, which Manulife demonstrated, in Tongkos case, to be
unaffected by the new goal and direction the company had set. Income in insurance agency, of course, is dependent on
results, not on the means and manner of selling a matter for Tongko and his agents to determine and an area into which
Manulife had not waded. Undeniably, de Dios letter contained a directive to secure a competent assistant at Tongkos own
expense. While couched in terms of a directive, it cannot strictly be understood as an intrusion into Tongkos method of
operating and supervising the group of agents within his delineated territory. More than anything else, the "directive" was a
signal to Tongko that his results were unsatisfactory, and was a suggestion on how Tongkos perceived weakness in delivering
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results could be remedied. It was a solution, with an eye on results, for a consistently underperforming group; its obvious intent
was to save Tongko from the result that he then failed to grasp that he could lose even his own status as an agent, as he in
fact eventually did.
The present case must be distinguished from the second Insular Life case that showed the hallmarks of an employer-
employee relationship in the management system established. These were: exclusivity of service, control of assignments and
removal of agents under the private respondents unit, and furnishing of company facilities and materials as well as capital
described as Unit Development Fund. All these are obviously absent in the present case. If there is a commonality in these
cases, it is in the collection of premiums which is a basic authority that can be delegated to agents under the Insurance Code.
As previously discussed, what simply happened in Tongkos case was the grant of an expanded sales agency role that
recognized him as leader amongst agents in an area that Manulife defined. Whether this consequently resulted in the
establishment of an employment relationship can be answered by concrete evidence that corresponds to the
following questions:
as lead agent, what were Tongkos specific functions and the terms of his additional engagement;
was he paid additional compensation as a so-called Area Sales Manager, apart from the commissions he received
from the insurance sales he generated;
what can be Manulifes basis to terminate his status as lead agent;
can Manulife terminate his role as lead agent separately from his agency contract; and
to what extent does Manulife control the means and methods of Tongkos role as lead agent?
The answers to these questions may, to some extent, be deduced from the evidence at hand, as partly discussed above. But
strictly speaking, the questions cannot definitively and concretely be answered through the evidence on record. The concrete
evidence required to settle these questions is simply not there, since only the Agreement and the anecdotal affidavits have
been marked and submitted as evidence.
Given this anemic state of the evidence, particularly on the requisite confluence of the factors determinative of the existence of
employer-employee relationship, the Court cannot conclusively find that the relationship exists in the present case, even if
such relationship only refers to Tongkos additional functions. While a rough deduction can be made, the answer will not be
fully supported by the substantial evidence needed.
Under this legal situation, the only conclusion that can be made is that the absence of evidence showing Manulifes control
over Tongkos contractual duties points to the absence of any employer-employee relationship between Tongko and Manulife.
In the context of the established evidence, Tongko remained an agent all along; although his subsequent duties made him a
lead agent with leadership role, he was nevertheless only an agent whose basic contract yields no evidence of means-and-
manner control.
This conclusion renders unnecessary any further discussion of the question of whether an agent may simultaneously assume
conflicting dual personalities. But to set the record straight, the concept of a single person having the dual role of agent and
employee while doing the same task is a novel one in our jurisprudence, which must be viewed with caution especially when it
is devoid of any jurisprudential support or precedent. The quoted portions in Justice Carpio-Morales dissent,33 borrowed from
both the Grepalife and the second Insular Life cases, to support the duality approach of the Decision of November 7, 2008, are
regrettably far removed from their context i.e., the cases factual situations, the issues they decided and the totality of the
rulings in these cases and cannot yield the conclusions that the dissenting opinions drew.
The Grepalife case dealt with the sole issue of whether the Ruiz brothers appointment as zone supervisor and district
manager made them employees of Grepalife. Indeed, because of the presence of the element of control in their contract of
engagements, they were considered Grepalifes employees. This did not mean, however, that they were simultaneously
considered agents as well as employees of Grepalife; the Courts ruling never implied that this situation existed insofar as the
Ruiz brothers were concerned. The Courts statement the Insurance Code may govern the licensing requirements and other
particular duties of insurance agents, but it does not bar the application of the Labor Code with regard to labor standards and
labor relations simply means that when an insurance company has exercised control over its agents so as to make them
their employees, the relationship between the parties, which was otherwise one for agency governed by the Civil Code and the
Insurance Code, will now be governed by the Labor Code. The reason for this is simple the contract of agency has been
transformed into an employer-employee relationship.
The second Insular Life case, on the other hand, involved the issue of whether the labor bodies have jurisdiction over an illegal
termination dispute involving parties who had two contracts first, an original contract (agency contract), which was
undoubtedly one for agency, and another subsequent contract that in turn designated the agent acting unit manager (a
management contract). Both the Insular Life and the labor arbiter were one in the position that both were agency contracts.
The Court disagreed with this conclusion and held that insofar as the management contract is concerned, the labor arbiter has
jurisdiction. It is in this light that we remanded the case to the labor arbiter for further proceedings. We never said in this case
though that the insurance agent had effectively assumed dual personalities for the simple reason that the agency contract has
been effectively superseded by the management contract. The management contract provided that if the appointment was

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terminated for any reason other than for cause, the acting unit manager would be reverted to agent status and assigned to any
unit.
The dissent pointed out, as an argument to support its employment relationship conclusion, that any doubt in the existence of
an employer-employee relationship should be resolved in favor of the existence of the relationship. 34This observation,
apparently drawn from Article 4 of the Labor Code, is misplaced, as Article 4 applies only when a doubt exists in the
"implementation and application" of the Labor Code and its implementing rules; it does not apply where no doubt exists as in a
situation where the claimant clearly failed to substantiate his claim of employment relationship by the quantum of evidence the
Labor Code requires.
On the dissents last point regarding the lack of jurisprudential value of our November 7, 2008 Decision, suffice it to state that,
as discussed above, the Decision was not supported by the evidence adduced and was not in accordance with controlling
jurisprudence. It should, therefore, be reconsidered and abandoned, but not in the manner the dissent suggests as the
dissenting opinions are as factually and as legally erroneous as the Decision under reconsideration.
In light of these conclusions, the sufficiency of Tongkos failure to comply with the guidelines of de Dios letter, as a ground for
termination of Tongkos agency, is a matter that the labor tribunals cannot rule upon in the absence of an employer-employee
relationship. Jurisdiction over the matter belongs to the courts applying the laws of insurance, agency and contracts.
WHEREFORE, considering the foregoing discussion, we REVERSE our Decision of November 7, 2008, GRANTManulifes
motion for reconsideration and, accordingly, DISMISS Tongkos petition. No costs.
SO ORDERED.

G.R. No. 151827. April 29, 2005

JOSEFINA BENARES, Petitioners,
vs.
Jaime pancho, Rodolfo pancho, jr., joselito medalla, paquito magallanes, Alicia magallanes, evelyn magallanes,
violeta villacampa, maritess pancho, rogelio pancho and arnolfo pancho, Respondents.
DECISION
Tinga, J.:
Assailed in this Petition for Review on Certiorari1 is the Decision2 of the Court of Appeals which affirmed the National Labor
Relations Commissions (NLRC) decision3 holding that respondents were illegally dismissed and ordering petitioner to pay
respondents separation pay, backwages, 13th month pay, Cost of Living Allowance (COLA), emergency relief allowance
(ERA), salary differentials and attorneys fees. The NLRC reversed the Labor Arbiters finding that respondents failed to lay
down the facts and circumstances surrounding their dismissal and to prove their entitlement to monetary awards. 4
The antecedents, as narrated by the NLRC, follow.
Complainants alleged to have started working as sugar farm workers on various dates, to wit:
1. Jaime Pancho November 15, 1964
2. Rodolfo Pancho, Jr. February 1, 1975
3. Joselito Medalla November 15, 1964
4. Paquito Magallanes March 10, 1973
5. Felomino Magallanes November 15, 1964
6. Alicia Magallanes January 15, 1964
7. Evelyn Magallanes January 1, 1974
8. Violeta Villacampa December 1, 1979
9. Maritess Pancho December 15, 1985
10. Rogelio Pancho December 1, 1979
11. Arnolfo Pancho February 1, 1975
Respondent Hda. Maasin II is a sugar cane plantation located in Murcia, Negros Occidental with an area of 12-24 has.
planted, owned and managed by Josefina Benares, individual co-respondent.
On July 24, 1991, complainants thru counsel wrote the Regional Director of the Department of Labor and Employment,
Bacolod City for intercession particularly in the matter of wages and other benefits mandated by law.
On September 24, 1991, a routine inspection was conducted by personnel of the Bacolod District Office of the Department of
Labor and Employment. Accordingly, a report and recommendation was made, hence, the endorsement by the Regional
Director of the instant case to the Regional Arbitration Branch, NLRC, Bacolod City for proper hearing and disposition.
On October 15, 1991, complainants alleged to have been terminated without being paid termination benefits by respondent in
retaliation to what they have done in reporting to the Department of Labor and Employment their working conditions viz-a-viz
(sic) wages and other mandatory benefits.
On July 14, 1992, notification and summons were served to the parties wherein complainants were directed to file a formal
complaint.
On July 28, 1992, a formal complaint was filed for illegal dismissal with money claims.

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From the records, summons and notices of hearing were served to the parties and apparently no amicable settlement was
arrived, hence, the parties were directed to file their respective position papers.
On January 22, 1993, complainant submitted their position paper, while respondent filed its position paper on June 21, 1993.
On March 17, 1994, complainants filed their reply position paper and affidavit. Correspondingly, a rejoinder was filed by
respondent on May 16, 1994.
On August 17, 1994, from the Minutes of the scheduled hearing, respondent failed to appear, and that the Office will evaluate
the records of the case whether to conduct a formal trial on the merits or not, and that the corresponding order will be issued.
On January 16, 1996, the Labor Arbiter issued an order to the effect that the case is now deemed submitted for resolution.
On April 30, 1998, the Labor Arbiter a quo issued the assailed decision dismissing the complaint for lack of merit.
On June 26, 1998, complainants not satisfied with the aforecited ruling interposed the instant appeal anchored on the ground
that:
THE HONORABLE LABOR ARBITER GRAVELY ABUSED ITS DISCRETION AND SERIOUSLY ERRED IN HOLDING THAT
THE COMPLAINANTS FAILED TO DISCUSS THE FACTS AND CIRCUMSTANCES SURROUNDING THEIR DISMISSAL,
HENCE, THERE IS NO DISMISSAL TO SPEAK OF AND THAT COMPLAINANTS FAILED TO ALLEGE AND PROVE THAT
THEIR CLAIMS ARE VALID, HENCE THE DISMISSAL OF THEIR COMPLAINT WOULD CAUSE GRAVE AND
IRREPARABLE DAMAGE TO HEREIN COMPLAINANTS.5
The NLRC held that respondents attained the status of regular seasonal workers of Hda. Maasin II having worked therein from
1964-1985. It found that petitioner failed to discharge the burden of proving that the termination of respondents was for a just
or authorized cause. Hence, respondents were illegally dismissed and should be awarded their money claims.
Petitioners motion for reconsideration6 dated May 12, 1999 was denied in the resolution 7 dated October 29, 1999.
The Court of Appeals affirmed the NLRCs ruling, with the modification that the backwages and other monetary benefits shall
be computed from the time compensation was withheld in accordance with Article 279 of the Labor Code, as amended by
Republic Act No. 6715.
In its Resolution8 dated November 28, 2001, the appellate court denied petitioners motion for reconsideration for lack of merit.
Petitioner is now before this Court averring that the Court of Appeals erred in affirming the decision of the NLRC. While
petitioner concedes that the factual findings of the NLRC are generally binding on the appellate court, petitioner insists that the
findings of the NLRC are vague and contradictory, thereby necessitating review.
According to petitioner, the fact that she was able to present sufficient proof to rebut the claim of illegal dismissal should be
considered in light of the NLRCs admission that there are gray areas in the case which require clarification. Petitioner avers
that the NLRC should have at least remanded the case to the labor arbiter to thresh out these gray areas. She further claims
that the NLRC was overly zealous in awarding COLA and ERA despite the fact that respondents did not even pray for these
awards in their complaint. She also questions the NLRCs general statement to the effect that the payroll she submitted is not
convincing asserting that she submitted 235 sets of payroll, not just one, and that the NLRC did not even bother to explain why
it found the payroll unconvincing.
Respondents filed a Comment9 dated May 10, 2002 alleging that petitioner failed to submit certified true copies of the assailed
decisions and resolutions, and that the petition lacks proof of service and raises questions of fact.
In her Reply to Comment10 dated September 17, 2002, petitioner points out that the Rules of Court do not require that all
copies of the petition contain certified true copies of the questioned decisions and resolutions. Further, all copies of the petition
filed with the Court contain an affidavit of service. Respondents copy does not have an affidavit of service because the sworn
declaration can not be executed before service of the petition is actually made. Petitioner also maintains that the rule on
review of findings of fact by the Supreme Court admits of certain exceptions such as when the conclusions arrived at are
grounded entirely on speculation, surmises and conjectures as in this case.
The petition was given due course and the parties were required to submit their respective memoranda in
the Resolution11 dated March 3, 2003. Petitioner filed a Manifestation and Compliance12 dated April 22, 2003 adopting the
allegations in her Petition for Review on Certiorari and Reply to Comment as her memorandum. For their part, respondents
filed a Memoranda For Private Respondents13 dated May 7, 2003 alleging that the Court of Appeals correctly relied upon the
factual findings of the NLRC after having found the same to be supported by substantial evidence. They insist that they are
regular seasonal employees of the sugar plantation. As such, petitioner has the burden of proving that their dismissal was for a
just or authorized cause.
As regards the contention that the NLRC erroneously awarded COLA and ERA, respondents cite Osias Academy v.
DOLE,14 which provides that the NLRC can extend monetary awards even if these are not prayed for if the monetary benefits
are statutory grants intended to alleviate the laborers plight like the COLA and ERA.
The main question raised by the present petition is whether respondents are regular employees of Hacienda Maasin and thus
entitled to their monetary claims. Related to this is the issue of whether respondents were illegally terminated.
This case presents a good opportunity to reiterate the Courts rulings on the subject of seasonal employment. The Labor Code
defines regular and casual employment, viz:
Art. 280. REGULAR AND CASUAL EMPLOYMENT.The provisions of written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been
150
engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except
where the employment has been fixed for a specific project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the work or service to be performed is seasonal in nature
and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee
who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity in which he is employed and his employment shall continue while such activity exists.
The law provides for three kinds of employees: (1) regular employees or those who have been engaged to perform activities
which are usually necessary or desirable in the usual business or trade of the employer; (2) project employees or those whose
employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined
at the time of the engagement of the employee or where the work or service to be performed is seasonal in nature and the
employment is for the duration of the season; and (3) casual employees or those who are neither regular nor project
employees.15
In Mercado v. NLRC,16 the Court ruled that seasonal workers do not become regular employees by the mere fact that they
have rendered at least one year of service, whether continuous or broken, because the proviso in the second paragraph of
Article 280 demarcates as "casual" employees, all other employees who do not fall under the definition of the preceding
paragraph. It deems as regular employees those "casual" employees who have rendered at least one year of service
regardless of the fact that such service may be continuous or broken.
The factual circumstances obtaining in the Mercado case, however, are peculiar. In that case, the workers were engaged to do
a particular phase of agricultural work necessary for rice and/or sugarcane production, after which they would be free to render
services to other farm workers who need their services.
In contrast, in the case of Hacienda Fatima v. National Federation of Sugarcane Workers-Food and General
Trade,17 respondents performed the same tasks for petitioners every season for several years. Thus, they were considered the
latters regular employees for their respective tasks. The fact that they do not work continuously for one whole year but only for
the duration of the season does not detract from considering them in regular employment since in a litany of cases this Court
has already settled that seasonal workers who are called to work from time to time and are temporarily laid off during off-
season are not separated from service in that period, but merely considered on leave until re-employed.18
Citing jurisprudence, the Court, in Hacienda Fatima, condensed the rule that the primary standard for determining regular
employment is the reasonable connection between the particular activity performed by the employee vis--vis the usual trade
or business of the employer. This connection can be determined by considering the nature of the work performed and its
relation to the scheme of the particular business or trade in its entirety. If the employee has been performing the job for at least
a year, even if the performance is not continuous and merely intermittent, the law deems repeated and continuing need for its
performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the
employment is considered regular, but only with respect to such activity and while such activity exists. 19
In this case, petitioner argues that respondents were not her regular employees as they were merely "pakiao" workers who did
not work continuously in the sugar plantation. They performed such tasks as weeding, cutting and loading canes, planting
cane points, fertilizing, cleaning the drainage, etc. These functions allegedly do not require respondents daily presence in the
sugarcane field as it is not everyday that one weeds, cuts canes or applies fertilizer. In support of her allegations, petitioner
submitted "cultivo" and milling payrolls.
The probative value of petitioners evidence, however, has been passed upon by the labor arbiter, the NLRC and the Court of
Appeals. Although the labor arbiter dismissed respondents complaint because their "position paper is completely devoid of
any discussion about their alleged dismissal, much less of the probative facts thereof," 20 the ground for the dismissal of the
complaint implies a finding that respondents are regular employees.
The NLRC was more unequivocal when it pronounced that respondents have acquired the status of regular seasonal
employees having worked for more than one year, whether continuous or broken in petitioners hacienda.
According to petitioner, however, the NLRCs conclusion is highly suspect considering its own admission that there are "gray
areas which requires (sic) clarification." She alleges that despite these gray areas, the NLRC "chose not to remand the case to
the Labor Arbiter.as this would unduly prolong the agony of the complainants in particular." 21
Petitioner perhaps wittingly omitted mention that the NLRC "opted to appreciate the merits of the instant case based on
available documents/pleadings."22 That the NLRC chose not to remand the case to the labor arbiter for clarificatory
proceedings and instead decided the case on the basis of the evidence then available to it is a judgment call this Court shall
not interfere with in the absence of any showing that the NLRC abused its discretion in so doing.
The Court of Appeals, in fact, found no such grave abuse of discretion on the part of the NLRC. Accordingly, it dismissed the
petition for certiorari and affirmed with modification the findings of the NLRC. It is well to note at this point that in quasi-judicial
proceedings, the quantum of evidence required to support the findings of the NLRC is only substantial evidence or that amount
of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. 23
The issue, therefore, of whether respondents were regular employees of petitioner has been adequately dealt with. The labor
arbiter, the NLRC and the Court of Appeals have similarly held that respondents were regular employees of petitioner. Since it
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is a settled rule that the factual findings of quasi-judicial agencies which have acquired expertise in the matters entrusted to
their jurisdiction are accorded by this Court not only respect but even finality, 24 we shall no longer disturb this finding.
Petitioner next underscores the NLRC decisions mention of the "payroll" she presented despite the fact that she allegedly
presented 235 sets of payroll, not just one payroll. This circumstance does not in itself evince any grave abuse of discretion on
the part of the NLRC as it could well have been just an innocuous typographical error.
Verily, the NLRCs decision, affirmed as it was by the Court of Appeals, appears to have been arrived at after due
consideration of the evidence presented by both parties.
We also find no reason to disturb the finding that respondents were illegally terminated. When there is no showing of clear,
valid and legal cause for the termination of employment, the law considers the matter a case of illegal dismissal and the
burden is on the employer to prove that the termination was for a just or authorized cause. 25 In this case, as found both by the
NLRC and the Court of Appeals, petitioner failed to prove any such cause for the dismissal of respondents.
WHEREFORE, the instant petition is DENIED. The assailed Decision and Resolution of the Court of Appeals respectively
dated June 29, 2001 and November 28, 2001 are hereby AFFIRMED. Costs against petitioner.
SO ORDERED.

G.R. No. 170087 August 31, 2006

ANGELINA FRANCISCO, Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO ACEDO,
DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court seeks to annul and set aside the Decision and
Resolution of the Court of Appeals dated October 29, 2004 1 and October 7, 2005, 2 respectively, in CA-G.R. SP No. 78515
dismissing the complaint for constructive dismissal filed by herein petitioner Angelina Francisco. The appellate court reversed
and set aside the Decision of the National Labor Relations Commission (NLRC) dated April 15, 2003, 3 in NLRC NCR CA No.
032766-02 which affirmed with modification the decision of the Labor Arbiter dated July 31, 2002, 4 in NLRC-NCR Case No.
30-10-0-489-01, finding that private respondents were liable for constructive dismissal.
In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as Accountant and
Corporate Secretary and was assigned to handle all the accounting needs of the company. She was also designated as
Liaison Officer to the City of Makati to secure business permits, construction permits and other licenses for the initial operation
of the company. 5
Although she was designated as Corporate Secretary, she was not entrusted with the corporate documents; neither did she
attend any board meeting nor required to do so. She never prepared any legal document and never represented the company
as its Corporate Secretary. However, on some occasions, she was prevailed upon to sign documentation for the company. 6
In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry Nino as accountant in lieu of petitioner.
As Acting Manager, petitioner was assigned to handle recruitment of all employees and perform management administration
functions; represent the company in all dealings with government agencies, especially with the Bureau of Internal Revenue
(BIR), Social Security System (SSS) and in the city government of Makati; and to administer all other matters pertaining to the
operation of Kasei Restaurant which is owned and operated by Kasei Corporation. 7
For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her salary was P27,500.00 plus
P3,000.00 housing allowance and a 10% share in the profit of Kasei Corporation. 8
In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she was required to sign a
prepared resolution for her replacement but she was assured that she would still be connected with Kasei Corporation.
Timoteo Acedo, the designated Treasurer, convened a meeting of all employees of Kasei Corporation and announced that
nothing had changed and that petitioner was still connected with Kasei Corporation as Technical Assistant to Seiji Kamura and
in charge of all BIR matters. 9
Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up to September 2001 for a total
reduction of P22,500.00 as of September 2001. Petitioner was not paid her mid-year bonus allegedly because the company
was not earning well. On October 2001, petitioner did not receive her salary from the company. She made repeated follow-ups
with the company cashier but she was advised that the company was not earning well. 10
On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers but she was informed that she is
no longer connected with the company. 11
Since she was no longer paid her salary, petitioner did not report for work and filed an action for constructive dismissal before
the labor arbiter.
Private respondents averred that petitioner is not an employee of Kasei Corporation. They alleged that petitioner was hired in
1995 as one of its technical consultants on accounting matters and act concurrently as Corporate Secretary. As technical
consultant, petitioner performed her work at her own discretion without control and supervision of Kasei Corporation. Petitioner
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had no daily time record and she came to the office any time she wanted. The company never interfered with her work except
that from time to time, the management would ask her opinion on matters relating to her profession. Petitioner did not go
through the usual procedure of selection of employees, but her services were engaged through a Board Resolution
designating her as technical consultant. The money received by petitioner from the corporation was her professional fee
subject to the 10% expanded withholding tax on professionals, and that she was not one of those reported to the BIR or SSS
as one of the companys employees. 12
Petitioners designation as technical consultant depended solely upon the will of management. As such, her consultancy may
be terminated any time considering that her services were only temporary in nature and dependent on the needs of the
corporation.
To prove that petitioner was not an employee of the corporation, private respondents submitted a list of employees for the
years 1999 and 2000 duly received by the BIR showing that petitioner was not among the employees reported to the BIR, as
well as a list of payees subject to expanded withholding tax which included petitioner. SSS records were also submitted
showing that petitioners latest employer was Seiji Corporation. 13
The Labor Arbiter found that petitioner was illegally dismissed, thus:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. finding complainant an employee of respondent corporation;
2. declaring complainants dismissal as illegal;
3. ordering respondents to reinstate complainant to her former position without loss of seniority rights and jointly and severally
pay complainant her money claims in accordance with the following computation:
a. Backwages 10/2001 07/2002 275,000.00
(27,500 x 10 mos.)
b. Salary Differentials (01/2001 09/2001) 22,500.00
c. Housing Allowance (01/2001 07/2002) 57,000.00
d. Midyear Bonus 2001 27,500.00
e. 13th Month Pay 27,500.00
f. 10% share in the profits of Kasei
Corp. from 1996-2001 361,175.00
g. Moral and exemplary damages 100,000.00
h. 10% Attorneys fees 87,076.50
P957,742.50
If reinstatement is no longer feasible, respondents are ordered to pay complainant separation pay with additional backwages
that would accrue up to actual payment of separation pay.
SO ORDERED. 14
On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter, the dispositive portion of which
reads:
PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as follows:
1) Respondents are directed to pay complainant separation pay computed at one month per year of service in addition to full
backwages from October 2001 to July 31, 2002;
2) The awards representing moral and exemplary damages and 10% share in profit in the respective accounts of P100,000.00
and P361,175.00 are deleted;
3) The award of 10% attorneys fees shall be based on salary differential award only;
4) The awards representing salary differentials, housing allowance, mid year bonus and 13th month pay are AFFIRMED.
SO ORDERED. 15
On appeal, the Court of Appeals reversed the NLRC decision, thus:
WHEREFORE, the instant petition is hereby GRANTED. The decision of the National Labor Relations Commissions dated
April 15, 2003 is hereby REVERSED and SET ASIDE and a new one is hereby rendered dismissing the complaint filed by
private respondent against Kasei Corporation, et al. for constructive dismissal.
SO ORDERED. 16
The appellate court denied petitioners motion for reconsideration, hence, the present recourse.
The core issues to be resolved in this case are (1) whether there was an employer-employee relationship between petitioner
and private respondent Kasei Corporation; and if in the affirmative, (2) whether petitioner was illegally dismissed.
Considering the conflicting findings by the Labor Arbiter and the National Labor Relations Commission on one hand, and the
Court of Appeals on the other, there is a need to reexamine the records to determine which of the propositions espoused by
the contending parties is supported by substantial evidence. 17
We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, there has been no uniform test to determine the existence of
an employer-employee relation. Generally, courts have relied on the so-called right of control test where the person for whom
the services are performed reserves a right to control not only the end to be achieved but also the means to be used in
reaching such end. In addition to the standard of right-of-control, the existing economic conditions prevailing between the
153
parties, like the inclusion of the employee in the payrolls, can help in determining the existence of an employer-employee
relationship.
However, in certain cases the control test is not sufficient to give a complete picture of the relationship between the parties,
owing to the complexity of such a relationship where several positions have been held by the worker. There are instances
when, aside from the employers power to control the employee with respect to the means and methods by which the work is
to be accomplished, economic realities of the employment relations help provide a comprehensive analysis of the true
classification of the individual, whether as employee, independent contractor, corporate officer or some other capacity.
The better approach would therefore be to adopt a two-tiered test involving: (1) the putative employers power to control the
employee with respect to the means and methods by which the work is to be accomplished; and (2) the underlying economic
realities of the activity or relationship.
This two-tiered test would provide us with a framework of analysis, which would take into consideration the totality of
circumstances surrounding the true nature of the relationship between the parties. This is especially appropriate in this case
where there is no written agreement or terms of reference to base the relationship on; and due to the complexity of the
relationship based on the various positions and responsibilities given to the worker over the period of the latters employment.
The control test initially found application in the case of Viaa v. Al-Lagadan and Piga, 19 and lately in Leonardo v. Court of
Appeals, 20 where we held that there is an employer-employee relationship when the person for whom the services are
performed reserves the right to control not only the end achieved but also the manner and means used to achieve that end.
In Sevilla v. Court of Appeals, 21 we observed the need to consider the existing economic conditions prevailing between the
parties, in addition to the standard of right-of-control like the inclusion of the employee in the payrolls, to give a clearer picture
in determining the existence of an employer-employee relationship based on an analysis of the totality of economic
circumstances of the worker.
Thus, the determination of the relationship between employer and employee depends upon the circumstances of the whole
economic activity, 22 such as: (1) the extent to which the services performed are an integral part of the employers business;
(2) the extent of the workers investment in equipment and facilities; (3) the nature and degree of control exercised by the
employer; (4) the workers opportunity for profit and loss; (5) the amount of initiative, skill, judgment or foresight required for
the success of the claimed independent enterprise; (6) the permanency and duration of the relationship between the worker
and the employer; and (7) the degree of dependency of the worker upon the employer for his continued employment in that
line of business. 23
The proper standard of economic dependence is whether the worker is dependent on the alleged employer for his continued
employment in that line of business. 24 In the United States, the touchstone of economic reality in analyzing possible
employment relationships for purposes of the Federal Labor Standards Act is dependency. 25By analogy, the benchmark of
economic reality in analyzing possible employment relationships for purposes of the Labor Code ought to be the economic
dependence of the worker on his employer.
By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation because she was under the
direct control and supervision of Seiji Kamura, the corporations Technical Consultant. She reported for work regularly and
served in various capacities as Accountant, Liaison Officer, Technical Consultant, Acting Manager and Corporate Secretary,
with substantially the same job functions, that is, rendering accounting and tax services to the company and performing
functions necessary and desirable for the proper operation of the corporation such as securing business permits and other
licenses over an indefinite period of engagement.
Under the broader economic reality test, the petitioner can likewise be said to be an employee of respondent corporation
because she had served the company for six years before her dismissal, receiving check vouchers indicating her
salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as deductions and Social Security contributions
from August 1, 1999 to December 18, 2000. 26 When petitioner was designated General Manager, respondent corporation
made a report to the SSS signed by Irene Ballesteros. Petitioners membership in the SSS as manifested by a copy of the
SSS specimen signature card which was signed by the President of Kasei Corporation and the inclusion of her name in the
on-line inquiry system of the SSS evinces the existence of an employer-employee relationship between petitioner and
respondent corporation. 27
It is therefore apparent that petitioner is economically dependent on respondent corporation for her continued employment in
the latters line of business.
In Domasig v. National Labor Relations Commission, 28 we held that in a business establishment, an identification card is
provided not only as a security measure but mainly to identify the holder thereof as a bona fide employee of the firm that
issues it. Together with the cash vouchers covering petitioners salaries for the months stated therein, these matters constitute
substantial evidence adequate to support a conclusion that petitioner was an employee of private respondent.
We likewise ruled in Flores v. Nuestro 29 that a corporation who registers its workers with the SSS is proof that the latter were
the formers employees. The coverage of Social Security Law is predicated on the existence of an employer-employee
relationship.
Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established that petitioner never acted as
Corporate Secretary and that her designation as such was only for convenience. The actual nature of petitioners job was as
154
Kamuras direct assistant with the duty of acting as Liaison Officer in representing the company to secure construction permits,
license to operate and other requirements imposed by government agencies. Petitioner was never entrusted with corporate
documents of the company, nor required to attend the meeting of the corporation. She was never privy to the preparation of
any document for the corporation, although once in a while she was required to sign prepared documentation for the
company. 30
The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5, 2001 affidavit has been allegedly
withdrawn by Kamura himself from the records of the case. 31 Regardless of this fact, we are convinced that the allegations in
the first affidavit are sufficient to establish that petitioner is an employee of Kasei Corporation.
Granting arguendo, that the second affidavit validly repudiated the first one, courts do not generally look with favor on any
retraction or recanted testimony, for it could have been secured by considerations other than to tell the truth and would make
solemn trials a mockery and place the investigation of the truth at the mercy of unscrupulous witnesses. 32 A recantation does
not necessarily cancel an earlier declaration, but like any other testimony the same is subject to the test of credibility and
should be received with caution. 33
Based on the foregoing, there can be no other conclusion that petitioner is an employee of respondent Kasei Corporation. She
was selected and engaged by the company for compensation, and is economically dependent upon respondent for her
continued employment in that line of business. Her main job function involved accounting and tax services rendered to
respondent corporation on a regular basis over an indefinite period of engagement. Respondent corporation hired and
engaged petitioner for compensation, with the power to dismiss her for cause. More importantly, respondent corporation had
the power to control petitioner with the means and methods by which the work is to be accomplished.
The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a month from January to September
2001. This amounts to an illegal termination of employment, where the petitioner is entitled to full backwages. Since the
position of petitioner as accountant is one of trust and confidence, and under the principle of strained relations, petitioner is
further entitled to separation pay, in lieu of reinstatement. 34
A diminution of pay is prejudicial to the employee and amounts to constructive dismissal. Constructive dismissal is an
involuntary resignation resulting in cessation of work resorted to when continued employment becomes impossible,
unreasonable or unlikely; when there is a demotion in rank or a diminution in pay; or when a clear discrimination, insensibility
or disdain by an employer becomes unbearable to an employee. 35 In Globe Telecom, Inc. v. Florendo-Flores, 36 we ruled that
where an employee ceases to work due to a demotion of rank or a diminution of pay, an unreasonable situation arises which
creates an adverse working environment rendering it impossible for such employee to continue working for her employer.
Hence, her severance from the company was not of her own making and therefore amounted to an illegal termination of
employment.
In affording full protection to labor, this Court must ensure equal work opportunities regardless of sex, race or creed. Even as
we, in every case, attempt to carefully balance the fragile relationship between employees and employers, we are mindful of
the fact that the policy of the law is to apply the Labor Code to a greater number of employees. This would enable employees
to avail of the benefits accorded to them by law, in line with the constitutional mandate giving maximum aid and protection to
labor, promoting their welfare and reaffirming it as a primary social economic force in furtherance of social justice and national
development.
WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals dated October 29, 2004 and
October 7, 2005, respectively, in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE. The Decision of the National Labor
Relations Commission dated April 15, 2003 in NLRC NCR CA No. 032766-02, is REINSTATED. The case is REMANDED to
the Labor Arbiter for the recomputation of petitioner Angelina Franciscos full backwages from the time she was illegally
terminated until the date of finality of this decision, and separation pay representing one-half month pay for every year of
service, where a fraction of at least six months shall be considered as one whole year.
SO ORDERED.

G.R. No. 189255 June 17, 2015

JESUS G. REYES, Petitioner,
vs.
GLAUCOMA RESEARCH FOUNDATION, INC., EYE REFERRAL CENTER and MANUEL B. AGULTO,Respondents.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari seeking to reverse and set aside the Decision 1 and Resolution2 of the
Court of Appeals (CA), dated April 20, 2009 and August 25, 2009, respectively, in CA-G.R. SP No. 104261. The assailed CA
Decision annulled the Decision of the National Labor Relations Commission (NLRC) in NLRC NCR Case No. 05-0441-05 and
reinstated the Decision of the Labor Arbiter (LA) in the same case, while the CA Resolution denied petitioner's motion for
reconsideration.
The instant petition arose from a complaint for illegal dismissal filed by petitioner against respondents with the NLRC, National
Capital Region, Quezon City. Petitioner alleged that: on August 1, 2003, he was hired by respondent corporation as
155
administrator of the latter's Eye Referral Center (ERC); he performed his duties as administrator and continuously received his
monthly salary of P20,000.00 until the end of January 2005; beginning February 2005, respondent withheld petitioner's salary
without notice but he still continued to report for work; on April 11, 2005, petitioner wrote a letter to respondent Manuel Agulto
(Agulto), who is the Executive Director of respondent corporation, informing the latter that he has not been receiving his
salaries since February 2005 as well as his 14th month pay for 2004; petitioner did not receive any response from Agulto; on
April 21, 2005, petitioner was informed by the Assistant to the Executive Director as well as the Assistant Administrative
Officer, that he is no longer the Administrator of the ERC; subsequently, petitioners office was padlocked and closed without
notice; he still continued to report for work but on April 29, 2005 he was no longer allowed by the security guard on duty to
enter the premises of the ERC.
On their part, respondents contended that: upon petitioner's representation that he is an expert incorporate organizational
structure and management affairs, they engaged his services as a consultant or adviser in the formulation of an updated
organizational set-up and employees' manual which is compatible with their present condition; based on his claim that there is
a need for an administrator for the ERC, he later designated himself as such on a trial basis; there is no employer-employee
relationship between them because respondents had no control over petitioner in terms of working hours as he reports for
work at anytime of the day and leaves as he pleases; respondents also had no control as to the manner in which he performs
his alleged duties as consultant; he became overbearing and his relationship with the employees and officers of the company
soured leading to the filing of three complaints against him; petitioner was not dismissed as he was the one who voluntarily
severed his relations with respondents. On January 20, 2006, the LA assigned to the case rendered a Decision 3dismissing
petitioner's complaint. The LA held, among others, that petitioner failed to establish that the elements of an employer-
employee relationship existed between him and respondents because he was unable to show that he was, in fact, appointed
as administrator of the ERC and received salaries as such; he also failed to deny that during his stint with respondents, he
was, at the same time, a consultant of various government agencies such as the Manila International Airport Authority, Manila
Intercontinental Port Authority, Anti-Terrorist Task Force for Aviation and Air Transportation Sector; his actions were neither
supervised nor controlled by the management of the ERC; petitioner, likewise, did not observe working hours by reporting for
work and leaving therefrom as he pleased; and, he was receiving allowances, not salaries, as a consultant.
On appeal, the NLRC reversed and set aside the Decision of the LA. The NLRC declared petitioner as respondents'
employee, that he was illegally dismissed and ordered respondents to reinstate him to his former position without loss of
seniority rights and privileges with full backwages. The NLRC held that the basis upon which the conclusion of the LA was
drawn lacked support; that it was incumbent for respondents to discharge the burden of proving that petitioner's dismissal was
for cause and effected after due process was observed; and, that respondents failed to discharge this burden. 4
Respondents filed a motion for reconsideration, but it was denied by the NLRC in its Resolution 5 dated May 30, 2008.
Respondents then filed a Petition for Certiorari6 with the CA.
In its assailed Decision, the CA annulled and set aside the judgment of the NLRC and reinstated the Decision of the LA. The
CA held that the LA was correct in ruling that, under the control test and the economic reality test, no employer-employee
relationship existed between respondents and petitioner.
Petitioner filed a motion for reconsideration, but the CA denied it in its Resolution dated August 25, 2009.
Hence, the present petition for review on certiorari based on the following grounds:
I
THE HONORABLE COURT OF APPEALS ERRED AND ABUSED ITS DISCRETION IN NOT DISMISSING RESPONDENTS'
PETITION FOR CERTIORARI ON THE GROUND THAT RESPONDENTS SUBMITTED A VERIFICATION THATFAILS TO
COMPLY WITH THE 2004 RULES ON NOTARIAL PRACTICE.
II
THE HONORABLE COURT OF APPEALS ERRED AND ABUSED ITS DISCRETION IN RULING THATNO EMPLOYER-
EMPLOYEE RELATIONSHIP EXISTS BETWEEN RESPONDENTS AND PETITIONER.7
As to the first ground, petitioner contends that respondents' petition for certiorari filed with the CA should have been dismissed
on the ground that it was improperly verified because the jurat portion of the verification states only the community tax
certificate number of the affiant as evidence of her identity. Petitioner argues that under the 2004 Rules on Notarial Practice,
as amended by a Resolution8 of this Court, dated February 19, 2008, a community tax certificate is not among those
considered as competent evidence of identity.
The Court does not agree.
This Court has already ruled that competent evidence of identity is not required in cases where the affiant is personally known
to the notary public.9
Thus, in Jandoquile v. Revilla, Jr.,10 this Court held that:
If the notary public knows the affiants personally, he need not require them to show their valid identification cards. This rule is
supported by the definition of a "jurat" under Section 6, Rule II of the 2004 Rules on Notarial Practice. A "jurat" refers to an act
in which an individual on a single occasion: (a) appears in person before the notary public and presents an instrument or
document; (b) is personally known to the notary public or identified by the notary public through competent evidence of

156
identity; (c) signs the instrument or document in the presence of the notary; and (d) takes an oath or affirmation before the
notary public as to such instrument or document.11
Also, Section 2(b), Rule IV of the 2004 Rules on Notarial Practice provides as follows:
SEC. 2. Prohibitions
(a) x x x
(b) A person shall not perform a notarial act if the person involved as signatory to the instrument or document
(1) is not in the notary's presence personally at the time of the notarization; and
(2) is not personally known to the notary public or otherwise identified by the notary public through
competent evidence of identity as defined by these Rules.
Moreover, Rule II, Section 6 of the same Rules states that:
SEC 6. Jurat. "Jurat" refers to an act in which an individual on a single occasion:
(a) appears in person before the notary public and presents an instrument or document;
(b) is personally known to the notary public or identified by the notary public through competent evidence of identity
as defined by these Rules;
(c) signs the instrument or document in the presence of the notary; and
(d) takes an oath or affirmation before the notary public as to such instrument or document.
In legal hermeneutics, "or" is a disjunctive that expresses an alternative or gives a choice of one among two or more
things.12 The word signifies disassociation and independence of one thing from another thing in an enumeration. 13
Thus, as earlier stated, if the affiant is personally known to the notary public, the latter need not require the former to show
evidence of identity as required under the 2004 Rules on Notarial Practice, as amended.
Applying the above rule to the instant case, it is undisputed that the attorney-in-fact of respondents who executed the
verification and certificate against forum shopping, which was attached to respondents' petition filed with the CA, is personally
known to the notary public before whom the documents were acknowledged. Both attorney-in-fact and the notary public hold
office at respondents' place of business and the latter is also the legal counsel of respondents.
In any event, this Court's disquisition in the fairly recent case of Heirs of Amada Zaulda v. Isaac Zaulda14regarding the import
of procedural rules vis--vis the substantive rights of the parties, is instructive, to wit:
[G]ranting, arguendo, that there was non-compliance with the verification requirement, the rule is that courts should not be so
strict about procedural lapses which do not really impair the proper administration of justice. After all, the higher objective of
procedural rule is to ensure that the substantive rights of the parties are protected. Litigations should, as much as possible, be
decided on the merits and not on technicalities. Every party-litigant must be afforded ample opportunity for the proper and just
determination of his case, free from the unacceptable plea of technicalities.
In Coca-Cola Bottlers v. De la Cruz, where the verification was marred only by a glitch in the evidence of the identity of the
affiant, the Court was of the considered view that, in the interest of justice, the minor defect can be overlooked and should not
defeat the petition.
The reduction in the number of pending cases is laudable, but if it would be attained by precipitate, if not preposterous,
application of technicalities, justice would not be served. The law abhors technicalities that impede the cause of justice. The
court's primary duty is to render or dispense justice. "It is a more prudent course of action for the court to excuse a technical
lapse and afford the parties a review of the case on appeal rather than dispose of the case on technicality and cause a grave
injustice to the parties, giving a false impression of speedy disposal of cases while actually resulting in more delay, if not
miscarriage of justice."
What should guide judicial action is the principle that a party-litigant should be given the fullest opportunity to establish the
merits of his complaint or defense rather than for him to lose life, liberty, honor, or property on technicalities. The rules of
procedure should be viewed as mere tools designed to facilitate the attainment of justice. Their strict and rigid application,
which would result in technicalities that tend to frustrate rather than promote substantial justice, must always be eschewed. At
this juncture, the Court reminds all members of the bench and bar of the admonition in the often-cited case of Alonso v.
Villamor:
Lawsuits, unlike duels, are not to be won by a rapier's thrust. Technicality, when it deserts its proper office as an aid to justice
and becomes its great hindrance and chief enemy, deserves scant consideration from courts. There should be no vested
rights in technicalities.15
Anent the second ground, petitioner insists that, based on evidence on record, an employer-employee relationship exists
between him and respondents.
The Court is not persuaded.
It is a basic rule of evidence that each party must prove his affirmative allegation.16 If he claims a right granted by law, he must
prove his claim by competent evidence, relying on the strength of his own evidence and not upon the weakness of that of his
opponent.17 The test for determining on whom the burden of proof lies is found in the result of an inquiry as to which party
would be successful if no evidence of such matters were given.18 In an illegal dismissal case, the onus probandi rests on the
employer to prove that its dismissal of an employee was for a valid cause.19 However, before a case for illegal dismissal can
prosper, an employer-employee relationship must first be established.20 Thus, in filing a complaint before the LA for illegal
157
dismissal, based on the premise that he was an employee of respondents, it is incumbent upon petitioner to prove the
employer-employee relationship by substantial evidence.21
In regard to the above discussion, the issue of whether or not an employer-employee relationship existed between petitioner
and respondents is essentially a question of fact.22 The factors that determine the issue include who has the power to select
the employee, who pays the employees wages, who has the power to dismiss the employee, and who exercises control of the
methods and results by which the work of the employee is accomplished. 23 Although no particular form of evidence is required
to prove the existence of the relationship, and any competent and relevant evidence to prove the relationship may be admitted,
a finding that the relationship exists must nonetheless rest on substantial evidence, which is that amount of relevant evidence
that a reasonable mind might accept as adequate to justify a conclusion. 24
Generally, the Court does not review factual questions, primarily because the Court is not a trier of facts. 25However, where,
like here, there is a conflict between the factual findings of the LA and the CA, on one hand, and those of the NLRC, on the
other, it becomes proper for the Court, in the exercise of its equity jurisdiction, to review and re-evaluate the factual issues and
to look into the records of the case and re-examine the questioned findings.26
Etched in an unending stream of cases are four standards in determining the existence of an employer-employee relationship,
namely: (a) the manner of selection and engagement of the putative employee; (b) the mode of payment of wages; (c) the
presence or absence of power of dismissal; and, (d) the presence or absence of control of the putative employees conduct.
Most determinative among these factors is the so-called "control test."27
Indeed, the power of the employer to control the work of the employee is considered the most significant determinant of the
existence of an employer-employee relationship.28 This test is premised on whether the person for whom the services are
performed reserves the right to control both the end achieved and the manner and means used to achieve that end. 29
In the present case, petitioner contends that, as evidence of respondents' supposed control over him, the organizational plans
he has drawn were subject to the approval of respondent corporation's Board of Trustees. However, the Court agrees with the
disquisition of the CA on this matter, to wit:
[Respondents'] power to approve or reject the organizational plans drawn by [petitioner] cannot be the control contemplated in
the "control test." It is but logical that one who commissions another to do a piece of work should have the right to accept or
reject the product. The important factor to consider in the "control test" is still the element of control over how the work itself is
done, not just the end result thereof.
Well settled is the rule that where a person who works for another performs his job more or less at his own pleasure, in the
manner he sees fit, not subject to definite hours or conditions of work, and is compensated according to the result of his efforts
and not the amount thereof, no employer-employee relationship exists.30
What was glaring in the present case is the undisputed fact that petitioner was never subject to definite working hours. He
never denied that he goes to work and leaves therefrom as he pleases.31 In fact, on December 1-31, 2004, he went on leave
without seeking approval from the officers of respondent company. On the contrary, his letter 32 simply informed respondents
that he will be away for a month and even advised them that they have the option of appointing his replacement during his
absence. This Court has held that there is no employer-employee relationship where the supposed employee is not subject to
a set of rules and regulations governing the performance of his duties under the agreement with the company and is not
required to report for work at any time, nor to devote his time exclusively to working for the company. 33
In this regard, this Court also agrees with the ruling of the CA that:
Aside from the control test, the Supreme Court has also used the economic reality test in determining whether an employer-
employee relationship exists between the parties. Under this test, the economic realities prevailing within the activity or
between the parties are examined, taking into consideration the totality of circumstances surrounding the true nature of the
relationship between the parties. This is especially appropriate when, as in this case, there is no written agreement or contract
on which to base the relationship. In our jurisdiction, the benchmark of economic reality in analyzing possible employment
relationships for purposes of applying the Labor Code ought to be the economic dependence of the worker on his employer. In
the instant case, as shown by the resume of [petitioner], he concurrently held consultancy positions with the Manila
International Airport Authority (from 04 March 2001 to September 2003 and from 01 November 2004 up to the present) and
the Anti-Terrorist Task Force for Aviation and Air Transportation Sector (from 16 April 2004 to 30 June 2004) during his stint
with the Eye Referral Center (from 01 August 2003 to 29 April 2005). Accordingly, it cannot be said that the [petitioner] was
wholly dependent on [respondent] company.34
In bolstering his contention that there was an employer-employee relationship, petitioner draws attention to the pay slips he
supposedly received from respondent corporation. However, he does not dispute the findings of the CA that there are no
deductions for SSS and withholding tax from his compensation, which are the usual deductions from employees' salaries.
Thus, the alleged pay slips may not be treated as competent evidence of petitioner's claim that he is respondents' employee.
In addition, the designation of the payments to petitioner as salaries, is not determinative of the existence of an employer-
employee relationship.35 Salary is a general term defined as a remuneration for services given. 36Evidence of this fact, in the
instant case, was the cash voucher issued in favor of petitioner where it was stated therein that the amount of P20,000.00 was
given as petitioner's allowance for the month of December 2004, although it appears from the pay slip that the said amount
was his salary for the same period.
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Additional evidence of the fact that petitioner was hired as a consultant and not as an employee of respondent corporation are
affidavits to this effect which were executed by Roy Oliveres 37 and Aurea Luz Esteva,38 who are Medical Records Custodian
and Administrative Officer, respectively, of respondent corporation. Petitioner insists in its objection of the use of these
affidavits on the ground that they are, essentially, hearsay. However, this Court has ruled that although the affiants had not
been presented to affirm the contents of their affidavits and be cross-examined, their affidavits may be given evidentiary value;
the argument that such affidavits were hearsay was not persuasive.39 Likewise, this Court ruled that it was not necessary for
the affiants to appear and testify and be cross-examined by counsel for the adverse party.40 To require otherwise would be to
negate the rationale and purpose of the summary nature of the proceedings mandated by the Rules and to make mandatory
the application of the technical rules of evidence.41
These affidavits are corroborated by evidence, as discussed above, showing that petitioner has no definite working hours and
is not subject to the control of respondents.
Lastly, the Court does not agree with petitioner's insistence that his being hired as respondent corporation's administrator and
his designation as such in intra-company correspondence proves that he is an employee of the corporation. The fact alone
that petitioner was designated as an administrator does not necessarily mean that he is an employee of respondents. Mere
title or designation in a corporation will not, by itself, determine the existence of an employer-employee relationship.42 In this
regard, even the identification card which was issued to petitioner is not an adequate proof of petitioner's claim that he is
respondents' employee. In addition, petitioners designation as an administrator neither disproves respondents' contention that
he was engaged only as a consultant.
As a final point, it bears to reiterate that while the Constitution is committed to the policy of social justice and the protection of
the working class, it should not be supposed that every labor dispute will be automatically decided in favor of
labor.43 Management also has its rights which are entitled to respect and enforcement in the interest of simple fair play.44 Out
of its concern for the less privileged in life, the Court has inclined, more often than not, toward the worker and upheld his cause
in his conflicts with the employer.45 Such favoritism, however, has not blinded the Court to the rule that justice is in every case
for the deserving, to be dispensed in the light of the established facts and the applicable law and doctrine.46
WHEREFORE, the instant petition is DENIED. The Decision and Resolution of the Court of Appeals, dated April 20, 2009 and
August 25, 2009, respectively, in CA-G.R. SP No. 104261, are AFFIRMED.
SO ORDERED.

G.R. No. 147816 May 9, 2003

EFREN P. PAGUIO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, METROMEDIA TIMES CORPORATION, ROBINA Y. GOKONGWEI,
LIBERATO GOMEZ, JR., YOLANDA E. ARAGON, FREDERICK D. GO and ALDA IGLESIA,respondents.
VITUG, J.:
On 22 June 1992, respondent Metromedia Times Corporation entered, for the fifth time, into an agreement with petitioner
Efren P. Paguio, appointing the latter to be an account executive of the firm.1 Again, petitioner was to solicit advertisements for
"The Manila Times," a newspaper of general circulation, published by respondent company. Petitioner, for his efforts, was to
receive compensation consisting of a 15% commission on direct advertisements less withholding tax and a 10% commission
on agency advertisements based on gross revenues less agency commission and the corresponding withholding tax. The
commissions, released every fifteen days of each month, were to be given to petitioner only after the clients would have paid
for the advertisements. Apart from commissions, petitioner was also entitled to a monthly allowance of P2,000.00 as long as
he met the P30,000.00-monthly quota. Basically, the contentious points raised by the parties had something to do with the
following stipulations of the agreement; viz:
"12. You are not an employee of the Metromedia Times Corporation nor does the company have any obligations
towards anyone you may employ, nor any responsibility for your operating expenses or for any liability you may incur.
The only rights and obligations between us are those set forth in this agreement. This agreement cannot be amended
or modified in any way except with the duly authorized consent in writing of both parties.
"13. Either party may terminate this agreement at any time by giving written notice to the other, thirty (30) days prior
to effectivity of termination."2
On 15 August 1992, barely two months after the renewal of his contract, petitioner received the following notice from
respondent firm -
"Dear Mr. Paguio,
"Please be advised of our decision to terminate your services as Account Executive of Manila Times effective
September 30, 1992.
"This is in accordance with our contract signed last July 1, 1992." 3
Apart from vague allegations of misconduct on which he was not given the opportunity to defend himself, i.e., pirating clients
from his co-executives and failing to produce results, no definite cause for petitioner's termination was given. Aggrieved,
petitioner filed a case before the labor arbiter, asking that his dismissal be declared unlawful and that his reinstatement, with
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entitlement to backwages without loss of seniority rights, be ordered. Petitioner also prayed that respondent company officials
be held accountable for acts of unfair labor practice, for P500,000.00 moral damages and for P200,000.00 exemplary
damages.
In their defense, respondent Metromedia Times Corporation asserted that it did not enter into any agreement with petitioner
outside of the contract of services under Articles 1642 and 1644 of the Civil Code of the Philippines. 4Asserting their right to
terminate the contract with petitioner, respondents pointed to the last provision thereof stating that both parties could opt to
end the contract provided that either party would serve, thirty days prior to the intended date of termination, the corresponding
notice to the other.
The labor arbiter found for petitioner and declared his dismissal illegal. The arbiter ordered respondent Metromedia Times
Corporation and its officers to reinstate petitioner to his former position, without loss of seniority rights, and to pay him his
commissions and other remuneration accruing from the date of dismissal on 15 August 1992 up until his reinstatement. He
likewise adjudged that Liberato I. Gomez, general manager of respondent corporation, be held liable to petitioner for moral
damages in the amount of P20,000.00.
On appeal, the National Labor Relations Commission (NLRC) reversed the ruling of the labor arbiter and declared the
contractual relationship between the parties as being for a fixed-term employment. The NLRC declared a fixed-term
employment to be lawful as long as "it was agreed upon knowingly and voluntarily by the parties, without any force, duress or
improper pressure being brought to bear upon the worker and absent any other circumstances vitiating his consent." 5 The
finding of the NLRC was primarily hinged on the assumption that petitioner, on account of his educated stature, having indeed
personally prepared his pleadings without the aid of counsel, was an unlikely victim of a lopsided contract. Rejecting the
assertion of petitioner that he was a regular employee, the NLRC held: "The decisive determinant would not be the activities
that the employee (was) called upon to perform but rather, the day certain agreed upon by the parties for the commencement
and termination of their employment relationship, a day certain being understood to be that which (would) necessarily come,
although it (might) not be known when."6
Petitioner appealed the ruling of the NLRC before the Court of Appeals which upheld in toto the findings of the commission. In
his petition for review on certiorari, petitioner raised the following issues for resolution:
"WHETHER OR NOT PETITIONER'S CONTRACT WITH PRIVATE RESPONDENT'S COMPANY IS FOR A FIXED
PERIOD.
"WHETHER OR NOT PETITIONER'S DISMISSAL IS LEGAL.
"WHETHER OR NOT PETITIONER IS ENTITLED TO BACKWAGES AND MORAL DAMAGES."7
The crux of the matter would entail the determination of the nature of contractual relationship between petitioner and
respondent company - was it or was it not one of regular employment?
A "regular employment," whether it is one or not, is aptly gauged from the concurrence, or the non-concurrence, of the
following factors - a) the manner of selection and engagement of the putative employee, b) the mode of payment of wages, c)
the presence or absence of the power of dismissal; and d) the presence or absence of the power to control the conduct of the
putative employee or the power to control the employee with respect to the means or methods by which his work is to be
accomplished.8 The "control test" assumes primacy in the overall consideration. Under this test, an employment relation
obtains where work is performed or services are rendered under the control and supervision of the party contracting for the
service, not only as to the result of the work but also as to the manner and details of the performance desired.9
An indicum of regular employment, rightly taken into account by the labor arbiter, was the reservation by respondent
Metromedia Times Corporation not only of the right to control the results to be achieved but likewise the manner and the
means used in reaching that end.10 Metromedia Times Corporation exercised such control by requiring petitioner, among other
things, to submit a daily sales activity report and also a monthly sales report as well. Various solicitation letters would indeed
show that Robina Gokongwei, company president, Alda Iglesia, the advertising manager, and Frederick Go, the advertising
director, directed and monitored the sales activities of petitioner.
The Labor Code, in Article 280 thereof, provides:
"ART. 280. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding
and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the
employee has been engaged to perform activities which are usually necessary or desirable in the usual business or
trade of the employer, except where the employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the engagement of the employee or where the
work or services to be performed is seasonal in nature and the employment is for the duration of the season.
"An employment shall be deemed to be casual if it is not covered by the proceeding paragraph: Provided, That, any
employee who has rendered at least one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which he is employed and his employment shall continue
while such activity exists."
Thus defined, a regular employee is one who is engaged to perform activities which are necessary and desirable in the usual
business or trade of the employer as against those which are undertaken for a specific project or are seasonal. Even in these
latter cases, where such person has rendered at least one year of service, regardless of the nature of the activity performed or
160
of whether it is continuous or intermittent, the employment is considered regular as long as the activity exists, it not being
indispensable that he be first issued a regular appointment or be formally declared as such before acquiring a regular status. 11
That petitioner performed activities which were necessary and desirable to the business of the employer, and that the same
went on for more than a year, could hardly be denied. Petitioner was an account executive in soliciting advertisements, clearly
necessary and desirable, for the survival and continued operation of the business of respondent corporation. Robina
Gokongwei, its President, herself admitted that the income generated from paid advertisements was the lifeblood of the
newspaper's existence. Implicitly, respondent corporation recognized petitioner's invaluable contribution to the business when
it renewed, not just once but five times, its contract with petitioner.
Respondent company cannot seek refuge under the terms of the agreement it has entered into with petitioner. The law, in
defining their contractual relationship, does so, not necessarily or exclusively upon the terms of their written or oral contract,
but also on the basis of the nature of the work petitioner has been called upon to perform. 12 The law affords protection to an
employee, and it will not countenance any attempt to subvert its spirit and intent. A stipulation in an agreement can be ignored
as and when it is utilized to deprive the employee of his security of tenure. 13 The sheer inequality that characterizes employer-
employee relations, where the scales generally tip against the employee, often scarcely provides him real and better options.
The real question that should thus be posed is whether or not petitioner has been justly dismissed from service. A lawful
dismissal must meet both substantive and procedural requirements; in fine, the dismissal must be for a just or authorized
cause and must comply with the rudimentary due process of notice and hearing. It is not shown that respondent company has
fully bothered itself with either of these requirements in terminating the services of petitioner. The notice of termination recites
no valid or just cause for the dismissal of petitioner nor does it appear that he has been given an opportunity to be heard in his
defense.
The evidence, however, found by the appellate court is wanting that would indicate bad faith or malice on the part of
respondents, particularly by respondent Liberato I. Gomez, and the award of moral damages must thus be deleted.
WHEREFORE, the instant petition is GRANTED. The decision of the Court of Appeals in C.A. G.R. SP No. 527773 and that of
the National Labor Relations Commission are hereby SET ASIDE and that of the Labor Arbiter is REINSTATED except with
respect to the P20,000.00 moral damages adjudged against respondent Liberato I. Gomez which award is deleted.
SO ORDERED.

G.R. No. 129315 October 2, 2000

OSIAS I. CORPORAL, SR., PEDRO TOLENTINO, MANUEL CAPARAS, ELPIDIO LACAP, SIMPLICIO PEDELOS,
PATRICIA NAS, and TERESITA FLORES, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LAO ENTENG COMPANY, INC. and/or TRINIDAD LAO
ONG,respondents.
DECISION
QUISUMBING, J.:
This special civil action for certiorari seeks the review of the Resolution dated October 17, 1996 of public respondent National
Labor Relations Commission (First Division),1 in NLRC NCR Case No. 00-04-03163-95, and the Resolution dated March 5,
1997 denying the motion for reconsideration. The aforecited October 17th Resolution affirmed the Decision dated September
28, 1996 of Labor Arbiter Potenciano S. Caizares dismissing the petitioners' complaint for illegal dismissal and declaring that
petitioners are not regular employees of private respondent Lao Enteng Company, Inc..
The records of the case show that the five male petitioners, namely, Osias I. Corporal, Sr., Pedro Tolentino, Manuel Caparas,
Elpidio Lacap, and Simplicio Pedelos worked as barbers, while the two female petitioners, Teresita Flores and Patricia Nas
worked as manicurists in New Look Barber Shop located at 651 P. Paterno Street, Quiapo, Manila owned by private
respondent Lao Enteng Co. Inc.. Petitioner Nas alleged that she also worked as watcher and marketer of private respondent.
Petitioners claim that at the start of their employment with the New Look Barber Shop, it was a single proprietorship owned
and managed by Mr. Vicente Lao. In or about January 1982, the children of Vicente Lao organized a corporation which was
registered with the Securities and Exchange Commission as Lao Enteng Co. Inc. with Trinidad Ong as President of the said
corporation. Upon its incorporation, the respondent company took over the assets, equipment, and properties of the New Look
Barber Shop and continued the business. All the petitioners were allowed to continue working with the new company until April
15, 1995 when respondent Trinidad Ong informed them that the building wherein the New Look Barber Shop was located had
been sold and that their services were no longer needed. 2
On April 28, 1995, petitioners filed with the Arbitration Branch of the NLRC, a complaint for illegal dismissal, illegal deduction,
separation pay, non-payment of 13th month pay, and salary differentials. Only petitioner Nas asked for payment of salary
differentials as she alleged that she was paid a daily wage of P25.00 throughout her period of employment. The petitioners
also sought the refund of the P1.00 that the respondent company collected from each of them daily as salary of the sweeper of
the barber shop.
Private respondent in its position paper averred that the petitioners were joint venture partners and were receiving fifty percent
commission of the amount charged to customers. Thus, there was no employer-employee relationship between them and
161
petitioners. And assuming arguendo, that there was an employer-employee relationship, still petitioners are not entitled to
separation pay because the cessation of operations of the barber shop was due to serious business losses.
Respondent Trinidad Lao Ong, President of respondent Lao Enteng Co. Inc., specifically stated in her affidavit dated
September 06, 1995 that Lao Enteng Company, Inc. did not take over the management of the New Look Barber Shop, that
after the death Lao Enteng petitioner were verbally informed time and again that the partnership may fold up anytime because
nobody in the family had the time to be at the barber shop to look after their interest; that New Look Barber Shop had always
been a joint venture partnership and the operation and management of the barber shop was left entirely to petitioners; that her
father's contribution to the joint venture included the place of business, payment for utilities including electricity, water, etc.
while petitioners as industrial partners, supplied the labor; and that the barber shop was allowed to remain open up to April
1995 by the children because they wanted to give the partners a chance at making it work. Eventually, they were forced to
close the barber shop because they continued to lose money while petitioners earned from it. Trinidad also added that private
respondents had no control over petitioners who were free to come and go as they wished. Admittedly too by petitioners they
received fifty percent to sixty percent of the gross paid by customers. Trinidad explained that some of the petitioners were
allowed to register with the Social Security System as employees of Lao Enteng Company, Inc. only as an act of
accommodation. All the SSS contributions were made by petitioners. Moreover, Osias Corporal, Elpidio Lacap and Teresita
Flores were not among those registered with the Social Security System. Lastly, Trinidad avers that without any employee-
employer relationship petitioners claim for 13th month pay and separation pay have no basis in fact and in law.3
In a Decision dated September 28, 1995, Labor Arbiter Potenciano S. Caizares, Jr. ordered the dismissal of the complaint on
the basis of his findings that the complainants and the respondents were engaged in a joint venture and that there existed no
employer-employee relation between them. The Labor Arbiter also found that the barber shop was closed due to serious
business losses or financial reverses and consequently declared that the law does not compel the establishment to pay
separation pay to whoever were its employees.4
On appeal, NLRC affirmed the said findings of the Labor Arbiter and dismissed the complaint for want of merit, ratiocinating
thus:
Indeed, complainants failed to show the existence of employer-employee relationship under the fourway test established by
the Supreme Court. It is a common practice in the Barber Shop industry that barbers supply their own scissors and razors and
they split their earnings with the owner of the barber shop. The only capital of the owner is the place of work whereas the
barbers provide the skill and expertise in servicing customers. The only control exercised by the owner of the barber shop is to
ascertain the number of customers serviced by the barber in order to determine the sharing of profits. The barbers maybe
characterized as independent contractors because they are under the control of the barber shop owner only with respect to the
result of the work, but not with respect to the details or manner of performance. The barbers are engaged in an independent
calling requiring special skills available to the public at large.5
Its motion for reconsideration denied in the Resolution 6 dated March 5, 1997, petitioners filed the instant petition assigning that
the NLRC committed grave abuse of discretion in:
I. ARBITRARILY DISREGARDING SUBSTANTIAL EVIDENCE PROVING THAT PETITIONERS WERE
EMPLOYEES OF RESPONDENT COMPANY IN RULING THAT PETITIONERS WERE INDEPENDENT
CONTRACTORS.
II. NOT HOLDING THAT PETITIONERS WERE ILLEGALLY DISMISSED AND IN NOT AWARDING THEIR MONEY
CLAIMS.7
Petitioners principally argue that public respondent NLRC gravely erred in declaring that the petitioners were independent
contractors. They contend that they were employees of the respondent company and cannot be considered as independent
contractors because they did not carry on an independent business. They did not cut hair, manicure, and do their work in their
own manner and method. They insist they were not free from the control and direction of private respondents in all matters,
and their services were engaged by the respondent company to attend to its customers in its barber shop. Petitioners also
stated that, individually or collectively, they do not have substantial capital nor investments in tools, equipments, work
premises and other materials necessary in the conduct of the barber shop. What the barbers owned were merely combs,
scissors, and razors, while the manicurists owned only nail cutters, nail polishes, nippers and cuticle removers. By no standard
can these be considered "substantial capital" necessary to operate a barbers shop.
Finally, petitioners fault the NLRC for arbitrarily disregarding substantial evidence on record showing that petitioners Pedro
Tolentino, Manuel Caparas, Simplicio Pedelos, and Patricia Nas were registered with the Social Security System as regular
employees of the respondent company. The SSS employment records in common show that the employer's ID No. of Vicente
Lao/Barber and Pawn Shop was 03-0606200-1 and that of the respondent company was 03-8740074-7. All the foregoing
entries in the SSS employment records were painstakingly detailed by the petitioners in their position paper and in their
memorandum appeal but were arbitrarily ignored first by the Labor Arbiter and then by the respondent NLRC which did not
even mention said employment records in its questioned decision.
We found petition is impressed with merit.
In our view, this case is an exception to the general rule that findings of facts of the NLRC are to be accorded respect and
finality on appeal. We have long settled that this Court will not uphold erroneous conclusions unsupported by substantial
162
evidence.8 We must also stress that where the findings of the NLRC contradict those of the labor arbiter, the Court, in the
exercise of its equity jurisdiction, may look into the records of the case and reexamine the questioned findings. 9
The issues raised by petitioners boil down to whether or not an employer-employee relationship existed between petitioners
and private respondent Lao Enteng Company, Inc. The Labor Arbiter has concluded that the petitioners and respondent
company were engaged in a joint venture. The NLRC concluded that the petitioners were independent contractors.
The Labor Arbiter's findings that the parties were engaged in a joint venture is unsupported by any documentary evidence. It
should be noted that aside from the self-serving affidavit of Trinidad Lao Ong, there were no other evidentiary documents, nor
written partnership agreements presented. We have ruled that even the sharing of proceeds for every job of petitioners in the
barber shop does not mean they were not employees of the respondent company. 10
Petitioner aver that NLRC was wrong when it concluded that petitioners were independent contractors simply because they
supplied their own working implements, shared in the earnings of the barber shop with the owner and chose the manner of
performing their work. They stressed that as far as the result of their work was concerned the barber shop owner controlled
them.
An independent contractor is one who undertakes "job contracting", i.e., a person who (a) carries on an independent business
and undertakes the contract work on his own account under his own responsibility according to his own manner and method,
free from the control and direction of his employer or principal in all matters connected with the performance of the work
except as to the results thereof, and (b) has substantial capital or investment in the form of tools, equipment, machineries,
work premises, and other materials which are necessary in the conduct of the business. 11
Juxtaposing this provision vis--vis the facts of this case, we are convinced that petitioners are not "independent contractors".
They did not carry on an independent business. Neither did they undertake cutting hair and manicuring nails, on their own as
their responsibility, and in their own manner and method. The services of the petitioners were engaged by the respondent
company to attend to the needs of its customers in its barber shop. More importantly, the petitioners, individually or
collectively, did not have a substantial capital or investment in the form of tools, equipment, work premises and other materials
which are necessary in the conduct of the business of the respondent company. What the petitioners owned were only combs,
scissors, razors, nail cutters, nail polishes, the nippers - nothing else. By no standard can these be considered substantial
capital necessary to operate a barber shop. From the records, it can be gleaned that petitioners were not given work
assignments in any place other than at the work premises of the New Look Barber Shop owned by the respondent company.
Also, petitioners were required to observe rules and regulations of the respondent company pertaining, among other things,
observance of daily attendance, job performance, and regularity of job output. The nature of work performed by were clearly
directly related to private respondent's business of operating barber shops. Respondent company did not dispute that it owned
and operated three (3) barber shops. Hence, petitioners were not independent contractors.
Did an employee-employer relationship exist between petitioners and private respondent? The following elements must be
present for an employer-employee relationship to exist: (1) the selection and engagement of the workers; (2) power of
dismissal; (3) the payment of wages by whatever means; and (4) the power to control the worker's conduct, with the latter
assuming primacy in the overall consideration. Records of the case show that the late Vicente Lao engaged the services of the
petitioners to work as barbers and manicurists in the New Look Barber Shop, then a single proprietorship owned by him; that
in January 1982, his children organized a corporation which they registered with the Securities and Exchange Commission as
Lao Enteng Company, Inc.; that upon its incorporation, it took over the assets, equipment, and properties of the New Look
Barber Shop and continued the business; that the respondent company retained the services of all the petitioners and
continuously paid their wages. Clearly, all three elements exist in petitioners' and private respondent's working arrangements.
Private respondent claims it had no control over petitioners. The power to control refers to the existence of the power and not
necessarily to the actual exercise thereof, nor is it essential for the employer to actually supervise the performance of duties of
the employee. It is enough that the employer has the right to wield that power. 12 As to the "control test", the following facts
indubitably reveal that respondent company wielded control over the work performance of petitioners, in that: (1) they worked
in the barber shop owned and operated by the respondents; (2) they were required to report daily and observe definite hours
of work; (3) they were not free to accept other employment elsewhere but devoted their full time working in the New Look
Barber Shop for all the fifteen (15) years they have worked until April 15, 1995; (4) that some have worked with respondents
as early as in the 1960's; (5) that petitioner Patricia Nas was instructed by the respondents to watch the other six (6)
petitioners in their daily task. Certainly, respondent company was clothed with the power to dismiss any or all of them for just
and valid cause. Petitioners were unarguably performing work necessary and desirable in the business of the respondent
company.
While it is no longer true that membership to SSS is predicated on the existence of an employee-employer relationship since
the policy is now to encourage even the self-employed dressmakers, manicurists and jeepney drivers to become SSS
members, we could not agree with private respondents that petitioners were registered with the Social Security System as
their employees only as an accommodation. As we have earlier mentioned private respondent showed no proof to their claim
that petitioners were the ones who solely paid all SSS contributions. It is unlikely that respondents would report certain
persons as their workers, pay their SSS premium as well as their wages if it were not true that they were indeed their
employees.13
163
Finally, we agree with the labor arbiter that there was sufficient evidence that the barber shop was closed due to serious
business losses and respondent company closed its barber shop because the building where the barber shop was located
was sold. An employer may adopt policies or changes or adjustments in its operations to insure profit to itself or protect
investment of its stockholders. In the exercise of such management prerogative, the employer may merge or consolidate its
business with another, or sell or dispose all or substantially all of its assets and properties which may bring about the dismissal
or termination of its employees in the process.14
Prescinding from the above, we hold that the seven petitioners are employees of the private respondent company; as such,
they are to be accorded the benefits provided under the Labor Code, specifically Article 283 which mandates the grant of
separation pay in case of closure or cessation of employer's business which is equivalent to one (1) month pay for every year
of service.15 Likewise, they are entitled to the protection of minimum wage statutes. Hence, the separation pay due them may
be computed on the basis of the minimum wage prevailing at the time their services were terminated by the respondent
company. The same is true with respect to the 13th month pay. The Revised Guidelines on the Implementation of the 13th
Month Pay Law states that "all rank and file employees are now entitled to a 13th month pay regardless of the amount of basic
salary that they receive in a month. Such employees are entitled to the benefit regardless of their designation or employment
status, and irrespective of the method by which their wages are paid, provided that they have worked for at least one (1)
month during a calendar year" and so all the seven (7) petitioners who were not paid their 13th month pay must be paid
accordingly.16
Anent the other claims of the petitioners, such as the P10,000.00 as penalty for non-compliance with procedural process;
P10,000.00 as moral damages; refund of P1.00 per day paid to the sweeper; salary differentials for petitioner Nas; attorney's
fees), we find them without basis.
IN VIEW WHEREOF, the petition is GRANTED. The public respondent's Decision dated October 17, 1996 and Resolution
dated March 05, 1997 are SET ASIDE. Private respondents are hereby ordered to pay, severally and jointly, the seven (7)
petitioners their (1) 13th month pay and (2) separation pay equivalent to one month pay for every year of service, to be
computed at the then prevailing minimum wage at the time of their actual termination which was April 15, 1995.
Costs against private respondents.
SO ORDERED.

G.R. No. 165881 April 19, 2006

OSCAR VILLAMARIA, JR. Petitioner,
vs.
COURT OF APPEALS and JERRY V. BUSTAMANTE, Respondents
DECISION
CALLEJO, SR., J.:
Before us is a Petition for Review on Certiorari under Rule 65 of the Revised Rules of Court assailing the Decision 1 and
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 78720 which set aside the Resolution3of the National Labor
Relations Commission (NLRC) in NCR-30-08-03247-00, which in turn affirmed the Decision4of the Labor Arbiter dismissing the
complaint filed by respondent Jerry V. Bustamante.
Petitioner Oscar Villamaria, Jr. was the owner of Villamaria Motors, a sole proprietorship engaged in assembling passenger
jeepneys with a public utility franchise to operate along the Baclaran-Sucat route. By 1995, Villamaria stopped assembling
jeepneys and retained only nine, four of which he operated by employing drivers on a "boundary basis." One of those drivers
was respondent Bustamante who drove the jeepney with Plate No. PVU-660. Bustamante remitted P450.00 a day to
Villamaria as boundary and kept the residue of his daily earnings as compensation for driving the vehicle. In August 1997,
Villamaria verbally agreed to sell the jeepney to Bustamante under the "boundary-hulog scheme," where Bustamante would
remit to Villarama P550.00 a day for a period of four years; Bustamante would then become the owner of the vehicle and
continue to drive the same under Villamarias franchise. It was also agreed that Bustamante would make a downpayment of
P10,000.00.
On August 7, 1997, Villamaria executed a contract entitled "Kasunduan ng Bilihan ng Sasakyan sa Pamamagitan ng
Boundary-Hulog"5 over the passenger jeepney with Plate No. PVU-660, Chassis No. EVER95-38168-C and Motor No. SL-
26647. The parties agreed that if Bustamante failed to pay the boundary-hulog for three days, Villamaria Motors would hold on
to the vehicle until Bustamante paid his arrears, including a penalty of P50.00 a day; in case Bustamante failed to remit the
daily boundary-hulog for a period of one week, the Kasunduan would cease to have legal effect and Bustamante would have
to return the vehicle to Villamaria Motors.
Under the Kasunduan, Bustamante was prohibited from driving the vehicle without prior authority from Villamaria Motors.
Thus, Bustamante was authorized to operate the vehicle to transport passengers only and not for other purposes. He was also
required to display an identification card in front of the windshield of the vehicle; in case of failure to do so, any fine that may
be imposed by government authorities would be charged against his account. Bustamante further obliged himself to pay for
the cost of replacing any parts of the vehicle that would be lost or damaged due to his negligence. In case the vehicle
sustained serious damage, Bustamante was obliged to notify Villamaria Motors before commencing repairs. Bustamante was
164
not allowed to wear slippers, short pants or undershirts while driving. He was required to be polite and respectful towards the
passengers. He was also obliged to notify Villamaria Motors in case the vehicle was leased for two or more days and was
required to attend any meetings which may be called from time to time. Aside from the boundary-hulog, Bustamante was also
obliged to pay for the annual registration fees of the vehicle and the premium for the vehicles comprehensive insurance.
Bustamante promised to strictly comply with the rules and regulations imposed by Villamaria for the upkeep and maintenance
of the jeepney.
Bustamante continued driving the jeepney under the supervision and control of Villamaria. As agreed upon, he made daily
remittances of P550.00 in payment of the purchase price of the vehicle. Bustamante failed to pay for the annual registration
fees of the vehicle, but Villamaria allowed him to continue driving the jeepney.
In 1999, Bustamante and other drivers who also had the same arrangement with Villamaria Motors failed to pay their
respective boundary-hulog. This prompted Villamaria to serve a "Paalala,"6 reminding them that under the Kasunduan, failure
to pay the daily boundary-hulog for one week, would mean their respective jeepneys would be returned to him without any
complaints. He warned the drivers that the Kasunduan would henceforth be strictly enforced and urged them to comply with
their obligation to avoid litigation.
On July 24, 2000, Villamaria took back the jeepney driven by Bustamante and barred the latter from driving the vehicle.
On August 15, 2000, Bustamante filed a Complaint7 for Illegal Dismissal against Villamaria and his wife Teresita. In his
Position Paper,8 Bustamante alleged that he was employed by Villamaria in July 1996 under the boundary system, where he
was required to remit P450.00 a day. After one year of continuously working for them, the spouses Villamaria presented the
Kasunduan for his signature, with the assurance that he (Bustamante) would own the jeepney by March 2001 after paying
P550.00 in daily installments and that he would thereafter continue driving the vehicle along the same route under the same
franchise. He further narrated that in July 2000, he informed the Villamaria spouses that the surplus engine of the jeepney
needed to be replaced, and was assured that it would be done. However, he was later arrested and his drivers license was
confiscated because apparently, the replacement engine that was installed was taken from a stolen vehicle. Due to
negotiations with the apprehending authorities, the jeepney was not impounded. The Villamaria spouses took the jeepney from
him on July 24, 2000, and he was no longer allowed to drive the vehicle since then unless he paid them P70,000.00.
Bustamante prayed that judgment be rendered in his favor, thus:
WHEREFORE, in the light of the foregoing, it is most respectfully prayed that judgment be rendered ordering the respondents,
jointly and severally, the following:
1. Reinstate complainant to his former position without loss of seniority rights and execute a Deed of Sale in favor of
the complainant relative to the PUJ with Plate No. PVU-660;
2. Ordering the respondents to pay backwages in the amount of P400.00 a day and other benefits computed from
July 24, 2000 up to the time of his actual reinstatement;
3. Ordering respondents to return the amount of P10,000.00 and P180,000.00 for the expenses incurred by the
complainant in the repair and maintenance of the subject jeep;
4. Ordering the respondents to refund the amount of One Hundred (P100.00) Pesos per day counted from August 7,
1997 up to June 2000 or a total of P91,200.00;
5. To pay moral and exemplary damages of not less than P200,000.00;
6. Attorneys fee[s] of not less than 10% of the monetary award.
Other just and equitable reliefs under the premises are also being prayed for.9
In their Position Paper,10 the spouses Villamaria admitted the existence of the Kasunduan, but alleged that Bustamante failed
to pay the P10,000.00 downpayment and the vehicles annual registration fees. They further alleged that Bustamante
eventually failed to remit the requisite boundary-hulog of P550.00 a day, which prompted them to issue the Paalaala. Instead
of complying with his obligations, Bustamante stopped making his remittances despite his daily trips and even brought the
jeepney to the province without permission. Worse, the jeepney figured in an accident and its license plate was confiscated;
Bustamante even abandoned the vehicle in a gasoline station in Sucat, Paraaque City for two weeks. When the security
guard at the gasoline station requested that the vehicle be retrieved and Teresita Villamaria asked Bustamante for the keys,
Bustamante told her: "Di kunin ninyo." When the vehicle was finally retrieved, the tires were worn, the alternator was gone,
and the battery was no longer working.
Citing the cases of Cathedral School of Technology v. NLRC11 and Canlubang Security Agency Corporation v. NLRC,12 the
spouses Villamaria argued that Bustamante was not illegally dismissed since the Kasunduan executed on August 7, 1997
transformed the employer-employee relationship into that of vendor-vendee. Hence, the spouses concluded, there was no
legal basis to hold them liable for illegal dismissal. They prayed that the case be dismissed for lack of jurisdiction and patent
lack of merit.
In his Reply,13 Bustamante claimed that Villamaria exercised control and supervision over the conduct of his employment. He
maintained that the rulings of the Court in National Labor Union v. Dinglasan, 14 Magboo v. Bernardo,15 and Citizen's League of
Free Workers v. Abbas16 are germane to the issue as they define the nature of the owner/operator-driver relationship under
the boundary system. He further reiterated that it was the Villamaria spouses who presented the Kasunduan to him and that
he conformed thereto only upon their representation that he would own the vehicle after four years. Moreover, it appeared that
165
the Paalala was duly received by him, as he, together with other drivers, was made to affix his signature on a blank piece of
paper purporting to be an "attendance sheet."
On March 15, 2002, the Labor Arbiter rendered judgment 17 in favor of the spouses Villamaria and ordered the complaint
dismissed on the following ratiocination:
Respondents presented the contract of Boundary-Hulog, as well as the PAALALA, to prove their claim that complainant
violated the terms of their contract and afterwards abandoned the vehicle assigned to him. As against the foregoing, [the]
complaints (sic) mere allegations to the contrary cannot prevail.
Not having been illegally dismissed, complainant is not entitled to damages and attorney's fees. 18
Bustamante appealed the decision to the NLRC,19 insisting that the Kasunduan did not extinguish the employer-employee
relationship between him and Villamaria. While he did not receive fixed wages, he kept only the excess of the boundary-hulog
which he was required to remit daily to Villamaria under the agreement. Bustamante maintained that he remained an
employee because he was engaged to perform activities which were necessary or desirable to Villamarias trade or business.
The NLRC rendered judgment20 dismissing the appeal for lack of merit, thus:
WHEREFORE, premises considered, complainant's appeal is hereby DISMISSED for reasons not stated in the Labor Arbiter's
decision but mainly on a jurisdictional issue, there being none over the subject matter of the controversy. 21
The NLRC ruled that under the Kasunduan, the juridical relationship between Bustamante and Villamaria was that of vendor
and vendee, hence, the Labor Arbiter had no jurisdiction over the complaint. Bustamante filed a Motion for Reconsideration,
which the NLRC resolved to deny on May 30, 2003.22
Bustamante elevated the matter to the CA via Petition for Certiorari, alleging that the NLRC erred
I
IN DISMISSING PETITIONERS APPEAL "FOR REASON NOT STATED IN THE LABOR ARBITERS DECISION, BUT
MAINLY ON JURISDICTIONAL ISSUE;"
II
IN DISREGARDING THE LAW AND PREVAILING JURISPRUDENCE WHEN IT DECLARED THAT THE RELATIONSHIP
WHICH WAS ESTABLISHED BETWEEN PETITIONER AND THE PRIVATE RESPONDENT WAS DEFINITELY A MATTER
WHICH IS BEYOND THE PROTECTIVE MANTLE OF OUR LABOR LAWS.23
Bustamante insisted that despite the Kasunduan, the relationship between him and Villamaria continued to be that of
employer-employee and as such, the Labor Arbiter had jurisdiction over his complaint. He further alleged that it is common
knowledge that operators of passenger jeepneys (including taxis) pay their drivers not on a regular monthly basis but on
commission or boundary basis, or even the boundary-hulog system. Bustamante asserted that he was dismissed from
employment without any lawful or just cause and without due notice.
For his part, Villamaria averred that Bustamante failed to adduce proof of their employer-employee relationship. He further
pointed out that the Dinglasan case pertains to the boundary system and not the boundary-hulog system, hence inapplicable
in the instant case. He argued that upon the execution of the Kasunduan, the juridical tie between him and Bustamante was
transformed into a vendor-vendee relationship. Noting that he was engaged in the manufacture and sale of jeepneys and not
in the business of transporting passengers for consideration, Villamaria contended that the daily fees which Bustmante paid
were actually periodic installments for the the vehicle and were not the same fees as understood in the boundary system. He
added that the boundary-hulog plan was basically a scheme to help the driver-buyer earn money and eventually pay for the
unit in full, and for the owner to profit not from the daily earnings of the driver-buyer but from the purchase price of the unit
sold. Villamaria further asserted that the apparently restrictive conditions in the Kasunduan did not mean that the means and
method of driver-buyers conduct was controlled, but were mere ways to preserve the vehicle for the benefit of both parties:
Villamaria would be able to collect the agreed purchase price, while Bustamante would be assured that the vehicle would still
be in good running condition even after four years. Moreover, the right of vendor to impose certain conditions on the buyer
should be respected until full ownership of the property is vested on the latter. Villamaria insisted that the parallel
circumstances obtaining in Singer Sewing Machine Company v. Drilon 24 has analogous application to the instant issue.
In its Decision25 dated August 30, 2004, the CA reversed and set aside the NLRC decision. The fallo of the decision reads:
UPON THE VIEW WE TAKE IN THIS CASE, THUS, the impugned resolutions of the NLRC must be, as they are hereby are,
REVERSED AND SET ASIDE, and judgment entered in favor of petitioner:
1. Sentencing private respondent Oscar Villamaria, Jr. to pay petitioner Jerry Bustamante separation pay computed
from the time of his employment up to the time of termination based on the prevailing minimum wage at the time of
termination; and,
2. Condemning private respondent Oscar Villamaria, Jr. to pay petitioner Jerry Bustamante back wages computed
from the time of his dismissal up to March 2001 based on the prevailing minimum wage at the time of his dismissal.
Without Costs.
SO ORDERED.26
The appellate court ruled that the Labor Arbiter had jurisdiction over Bustamantes complaint. Under the Kasunduan, the
relationship between him and Villamaria was dual: that of vendor-vendee and employer-employee. The CA ratiocinated that
Villamarias exercise of control over Bustamantes conduct in operating the jeepney is inconsistent with the formers claim that
166
he was not engaged in the transportation business. There was no evidence that petitioner was allowed to let some other
person drive the jeepney.
The CA further held that, while the power to dismiss was not mentioned in the Kasunduan, it did not mean that Villamaria
could not exercise it. It explained that the existence of an employment relationship did not depend on how the worker was paid
but on the presence or absence of control over the means and method of the employees work. In this case, Villamarias
directives (to drive carefully, wear an identification card, don decent attire, park the vehicle in his garage, and to inform him
about provincial trips, etc.) was a means to control the way in which Bustamante was to go about his work. In view of
Villamarias supervision and control as employer, the fact that the "boundary" represented installment payments of the
purchase price on the jeepney did not remove the parties employer-employee relationship.
While the appellate court recognized that a weeks default in paying the boundary-hulog constituted an additional cause for
terminating Bustamantes employment, it held that the latter was illegally dismissed. According to the CA, assuming that
Bustamante failed to make the required payments as claimed by Villamaria, the latter nevertheless failed to take steps to
recover the unit and waited for Bustamante to abandon it. It also pointed out that Villamaria neither submitted any police report
to support his claim that the vehicle figured in a mishap nor presented the affidavit of the gas station guard to substantiate the
claim that Bustamante abandoned the unit.
Villamaria received a copy of the decision on September 8, 2004, and filed, on September 17, 2004, a motion for
reconsideration thereof. The CA denied the motion in a Resolution27 dated November 2, 2004, and Villamaria received a copy
thereof on November 8, 2004.
Villamaria, now petitioner, seeks relief from this Court via petition for review on certiorari under Rule 65 of the Rules of Court,
alleging that the CA committed grave abuse of its discretion amounting to excess or lack of jurisdiction in reversing the
decision of the Labor Arbiter and the NLRC. He claims that the CA erred in ruling that the juridical relationship between him
and respondent under the Kasunduan was a combination of employer-employee and vendor-vendee relationships. The terms
and conditions of the Kasunduan clearly state that he and respondent Bustamante had entered into a conditional deed of sale
over the jeepney; as such, their employer-employee relationship had been transformed into that of vendor-vendee. Petitioner
insists that he had the right to reserve his title on the jeepney until after the purchase price thereof had been paid in full.
In his Comment on the petition, respondent avers that the appropriate remedy of petitioner was an appeal via a petition for
review on certiorari under Rule 45 of the Rules of Court and not a special civil action of certiorari under Rule 65. He argues
that petitioner failed to establish that the CA committed grave abuse of its discretion amounting to excess or lack of jurisdiction
in its decision, as the said ruling is in accord with law and the evidence on record.
Respondent further asserts that the Kasunduan presented to him by petitioner which provides for a boundary-hulog scheme
was a devious circumvention of the Labor Code of the Philippines. Respondent insists that his juridical relationship with
petitioner is that of employer-employee because he was engaged to perform activities which were necessary or desirable in
the usual business of petitioner, his employer.
In his Reply, petitioner avers that the Rules of Procedure should be liberally construed in his favor; hence, it behooves the
Court to resolve the merits of his petition.
We agree with respondents contention that the remedy of petitioner from the CA decision was to file a petition for review on
certiorari under Rule 45 of the Rules of Court and not the independent action of certiorari under Rule 65. Petitioner had 15
days from receipt of the CA resolution denying his motion for the reconsideration within which to file the petition under Rule
45.28 But instead of doing so, he filed a petition for certiorari under Rule 65 on November 22, 2004, which did not, however,
suspend the running of the 15-day reglementary period; consequently, the CA decision became final and executory upon the
lapse of the reglementary period for appeal. Thus, on this procedural lapse, the instant petition stands to be dismissed.29
It must be stressed that the recourse to a special civil action under Rule 65 of the Rules of Court is proscribed by the remedy
of appeal under Rule 45. As the Court elaborated in Tomas Claudio Memorial College, Inc. v. Court of Appeals: 30
We agree that the remedy of the aggrieved party from a decision or final resolution of the CA is to file a petition for review on
certiorari under Rule 45 of the Rules of Court, as amended, on questions of facts or issues of law within fifteen days from
notice of the said resolution. Otherwise, the decision of the CA shall become final and executory. The remedy under Rule 45 of
the Rules of Court is a mode of appeal to this Court from the decision of the CA. It is a continuation of the appellate process
over the original case. A review is not a matter of right but is a matter of judicial discretion. The aggrieved party may, however,
assail the decision of the CA via a petition for certiorari under Rule 65 of the Rules of Court within sixty days from notice of the
decision of the CA or its resolution denying the motion for reconsideration of the same. This is based on the premise that in
issuing the assailed decision and resolution, the CA acted with grave abuse of discretion, amounting to excess or lack of
jurisdiction and there is no plain, speedy and adequate remedy in the ordinary course of law. A remedy is considered plain,
speedy and adequate if it will promptly relieve the petitioner from the injurious effect of the judgment and the acts of the lower
court.
The aggrieved party is proscribed from filing a petition for certiorari if appeal is available, for the remedies of appeal and
certiorari are mutually exclusive and not alternative or successive. The aggrieved party is, likewise, barred from filing a petition
for certiorari if the remedy of appeal is lost through his negligence. A petition for certiorari is an original action and does not
interrupt the course of the principal case unless a temporary restraining order or a writ of preliminary injunction has been
167
issued against the public respondent from further proceeding. A petition for certiorari must be based on jurisdictional grounds
because, as long as the respondent court acted within its jurisdiction, any error committed by it will amount to nothing more
than an error of judgment which may be corrected or reviewed only by appeal. 31
However, we have also ruled that a petition for certiorari under Rule 65 may be considered as filed under Rule 45,
conformably with the principle that rules of procedure are to be construed liberally, provided that the petition is filed within the
reglementary period under Section 2, Rule 45 of the Rules of Court, and where valid and compelling circumstances warrant
that the petition be resolved on its merits.32 In this case, the petition was filed within the reglementary period and petitioner has
raised an issue of substance: whether the existence of a boundary-hulog agreement negates the employer-employee
relationship between the vendor and vendee, and, as a corollary, whether the Labor Arbiter has jurisdiction over a complaint
for illegal dismissal in such case.
We resolve these issues in the affirmative.
The rule is that, the nature of an action and the subject matter thereof, as well as, which court or agency of the government
has jurisdiction over the same, are determined by the material allegations of the complaint in relation to the law involved and
the character of the reliefs prayed for, whether or not the complainant/plaintiff is entitled to any or all of such reliefs. 33 A prayer
or demand for relief is not part of the petition of the cause of action; nor does it enlarge the cause of action stated or change
the legal effect of what is alleged.34 In determining which body has jurisdiction over a case, the better policy is to consider not
only the status or relationship of the parties but also the nature of the action that is the subject of their controversy.35
Article 217 of the Labor Code, as amended, vests on the Labor Arbiter exclusive original jurisdiction only over the following:
x x x (a) Except as otherwise provided under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear
and decide, within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even
in the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file involving wage, rates of pay,
hours of work, and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations;
5. Cases arising from violation of Article 264 of this Code, including questions involving the legality of strikes and
lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims,
arising from employer-employee relationship, 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.
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.
(c) Cases arising from the interpretation or implementation of collective bargaining agreements, and those
arising from the interpretation or enforcement of company personnel policies shall be disposed of by the
Labor Arbiter by referring the same to the grievance machinery and voluntary arbitration as may be provided
in said agreements.
In the foregoing cases, an employer-employee relationship is an indispensable jurisdictional requisite.36 The jurisdiction of
Labor Arbiters and the NLRC under Article 217 of the Labor Code is limited to disputes arising from an employer-employee
relationship which can only be resolved by reference to the Labor Code, other labor statutes or their collective bargaining
agreement.37 Not every dispute between an employer and employee involves matters that only the Labor Arbiter and the
NLRC can resolve in the exercise of their adjudicatory or quasi-judicial powers. Actions between employers and employees
where the employer-employee relationship is merely incidental is within the exclusive original jurisdiction of the regular
courts.38 When the principal relief is to be granted under labor legislation or a collective bargaining agreement, the case falls
within the exclusive jurisdiction of the Labor Arbiter and the NLRC even though a claim for damages might be asserted as an
incident to such claim.39
We agree with the ruling of the CA that, under the boundary-hulog scheme incorporated in the Kasunduan, a dual juridical
relationship was created between petitioner and respondent: that of employer-employee and vendor-vendee. The Kasunduan
did not extinguish the employer-employee relationship of the parties extant before the execution of said deed.
As early as 1956, the Court ruled in National Labor Union v. Dinglasan40 that the jeepney owner/operator-driver relationship
under the boundary system is that of employer-employee and not lessor-lessee. This doctrine was affirmed, under similar
factual settings, in Magboo v. Bernardo41 and Lantaco, Sr. v. Llamas,42 and was analogously applied to govern the
relationships between auto-calesa owner/operator and driver,43 bus owner/operator and conductor,44 and taxi owner/operator
and driver.45
The boundary system is a scheme by an owner/operator engaged in transporting passengers as a common carrier to primarily
govern the compensation of the driver, that is, the latters daily earnings are remitted to the owner/operator less the excess of
the boundary which represents the drivers compensation. Under this system, the owner/operator exercises control and
supervision over the driver. It is unlike in lease of chattels where the lessor loses complete control over the chattel leased but
168
the lessee is still ultimately responsible for the consequences of its use. The management of the business is still in the hands
of the owner/operator, who, being the holder of the certificate of public convenience, must see to it that the driver follows the
route prescribed by the franchising and regulatory authority, and the rules promulgated with regard to the business operations.
The fact that the driver does not receive fixed wages but only the excess of the "boundary" given to the owner/operator is not
sufficient to change the relationship between them. Indubitably, the driver performs activities which are usually necessary or
desirable in the usual business or trade of the owner/operator.46
Under the Kasunduan, respondent was required to remit P550.00 daily to petitioner, an amount which represented the
boundary of petitioner as well as respondents partial payment (hulog) of the purchase price of the jeepney.
Respondent was entitled to keep the excess of his daily earnings as his daily wage. Thus, the daily remittances also had a
dual purpose: that of petitioners boundary and respondents partial payment (hulog) for the vehicle. This dual purpose was
expressly stated in the Kasunduan. The well-settled rule is that an obligation is not novated by an instrument that expressly
recognizes the old one, changes only the terms of payment, and adds other obligations not incompatible with the old
provisions or where the new contract merely supplements the previous one. 47 The two obligations of the respondent to remit
to petitioner the boundary-hulog can stand together.
In resolving an issue based on contract, this Court must first examine the contract itself, keeping in mind that when the terms
of the agreement are clear and leave no doubt as to the intention of the contracting parties, the literal meaning of its
stipulations shall prevail.48 The intention of the contracting parties should be ascertained by looking at the words used to
project their intention, that is, all the words, not just a particular word or two or more words standing alone. The various
stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of
them taken jointly.49 The parts and clauses must be interpreted in relation to one another to give effect to the whole. The legal
effect of a contract is to be determined from the whole read together. 50
Under the Kasunduan, petitioner retained supervision and control over the conduct of the respondent as driver of the jeepney,
thus:
Ang mga patakaran, kaugnay ng bilihang ito sa pamamagitan ng boundary hulog ay ang mga sumusunod:
1. Pangangalagaan at pag-iingatan ng TAUHAN NG IKALAWANG PANIG ang sasakyan ipinagkatiwala sa kanya ng
TAUHAN NG UNANG PANIG.
2. Na ang sasakyan nabanggit ay gagamitin lamang ng TAUHAN NG IKALAWANG PANIG sa paghahanapbuhay
bilang pampasada o pangangalakal sa malinis at maayos na pamamaraan.
3. Na ang sasakyan nabanggit ay hindi gagamitin ng TAUHAN NG IKALAWANG PANIG sa mga bagay na
makapagdudulot ng kahihiyan, kasiraan o pananagutan sa TAUHAN NG UNANG PANIG.
4. Na hindi ito mamanehohin ng hindi awtorisado ng opisina ng UNANG PANIG.
5. Na ang TAUHAN NG IKALAWANG PANIG ay kinakailangang maglagay ng ID Card sa harap ng windshield upang
sa pamamagitan nito ay madaliang malaman kung ang nagmamaneho ay awtorisado ng VILLAMARIA MOTORS o
hindi.
6. Na sasagutin ng TAUHAN NG IKALAWANG PANIG ang [halaga ng] multa kung sakaling mahuli ang sasakyang ito
na hindi nakakabit ang ID card sa wastong lugar o anuman kasalanan o kapabayaan.
7. Na sasagutin din ng TAUHAN NG IKALAWANG PANIG ang materyales o piyesa na papalitan ng nasira o nawala
ito dahil sa kanyang kapabayaan.
8. Kailangan sa VILLAMARIA MOTORS pa rin ang garahe habang hinuhulugan pa rin ng TAUHAN NG IKALAWANG
PANIG ang nasabing sasakyan.
9. Na kung magkaroon ng mabigat na kasiraan ang sasakyang ipinagkaloob ng TAUHAN NG UNANG PANIG, ang
TAUHAN NG IKALAWANG PANIG ay obligadong itawag ito muna sa VILLAMARIA MOTORS bago ipagawa sa alin
mang Motor Shop na awtorisado ng VILLAMARIA MOTORS.
10. Na hindi pahihintulutan ng TAUHAN NG IKALAWANG PANIG sa panahon ng pamamasada na ang
nagmamaneho ay naka-tsinelas, naka short pants at nakasando lamang. Dapat ang nagmamaneho ay laging nasa
maayos ang kasuotan upang igalang ng mga pasahero.
11. Na ang TAUHAN NG IKALAWANG PANIG o ang awtorisado niyang driver ay magpapakita ng magandang asal
sa mga pasaheros at hindi dapat magsasalita ng masama kung sakali man may pasaherong pilosopo upang
maiwasan ang anumang kaguluhan na maaaring kasangkutan.
12. Na kung sakaling hindi makapagbigay ng BOUNDARY HULOG ang TAUHAN NG IKALAWANG PANIG sa loob
ng tatlong (3) araw ay ang opisina ng VILLAMARIA MOTORS ang may karapatang mangasiwa ng nasabing
sasakyan hanggang matugunan ang lahat ng responsibilidad. Ang halagang dapat bayaran sa opisina ay may
karagdagang multa ng P50.00 sa araw-araw na ito ay nasa pangangasiwa ng VILLAMARIA MOTORS.
13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay ng BOUNDARY HULOG sa loob ng
isang linggo ay nangangahulugan na ang kasunduang ito ay wala ng bisa at kusang ibabalik ng TAUHAN NG
IKALAWANG PANIG ang nasabing sasakyan sa TAUHAN NG UNANG PANIG.
14. Sasagutin ng TAUHAN NG IKALAWANG PANIG ang bayad sa rehistro, comprehensive insurance taon-taon at
kahit anong uri ng aksidente habang ito ay hinuhulugan pa sa TAUHAN NG UNANG PANIG.
169
 15. Na ang TAUHAN NG IKALAWANG PANIG ay obligadong dumalo sa pangkalahatang pagpupulong ng
VILLAMARIA MOTORS sa tuwing tatawag ang mga tagapangasiwa nito upang maipaabot ang anumang mungkahi
sa ikasusulong ng samahan.
16. Na ang TAUHAN NG IKALAWANG PANIG ay makikiisa sa lahat ng mga patakaran na magkakaroon ng
pagbabago o karagdagan sa mga darating na panahon at hindi magiging hadlang sa lahat ng mga balakin ng
VILLAMARIA MOTORS sa lalo pang ipagtatagumpay at ikakatibay ng Samahan.
17. Na ang TAUHAN NG IKALAWANG PANIG ay hindi magiging buwaya sa pasahero upang hindi kainisan ng
kapwa driver at maiwasan ang pagkakasangkot sa anumang gulo.
18. Ang nasabing sasakyan ay hindi kalilimutang siyasatin ang kalagayan lalo na sa umaga bago pumasada, at sa
hapon o gabi naman ay sisikapin mapanatili ang kalinisan nito.
19. Na kung sakaling ang nasabing sasakyan ay maaarkila at aabutin ng dalawa o higit pang araw sa lalawigan ay
dapat lamang na ipagbigay alam muna ito sa VILLAMARIA MOTORS upang maiwasan ang mga anumang suliranin.
20. Na ang TAUHAN NG IKALAWANG PANIG ay iiwasan ang pakikipag-unahan sa kaninumang sasakyan upang
maiwasan ang aksidente.
21. Na kung ang TAUHAN NG IKALAWANG PANIG ay mayroon sasabihin sa VILLAMARIA MOTORS mabuti man or
masama ay iparating agad ito sa kinauukulan at iwasan na iparating ito kung [kani-kanino] lamang upang maiwasan
ang anumang usapin. Magsadya agad sa opisina ng VILLAMARIA MOTORS.
22. Ang mga nasasaad sa KASUNDUAN ito ay buong galang at puso kong sinasang-ayunan at buong sikap na
pangangalagaan ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan at gagamitin lamang ito sa
paghahanapbuhay at wala nang iba pa.51
The parties expressly agreed that petitioner, as vendor, and respondent, as vendee, entered into a contract to sell the jeepney
on a daily installment basis of P550.00 payable in four years and that petitioner would thereafter become its owner. A contract
is one of conditional sale, oftentimes referred to as contract to sell, if the ownership or title over the
property sold is retained by the vendor, and is not passed to the vendee unless and until there is full payment of the purchase
price and/or upon faithful compliance with the other terms and conditions that may lawfully be stipulated. 52 Such payment or
satisfaction of other preconditions, as the case may be, is a positive suspensive condition, the failure of which is not a breach
of contract, casual or serious, but simply an event that would prevent the obligation of the vendor to convey title from acquiring
binding force.53 Stated differently, the efficacy or obligatory force of the vendor's obligation to transfer title is subordinated to
the happening of a future and uncertain event so that if the suspensive condition does not take place, the parties would stand
as if the conditional obligation had never existed. 54 The vendor may extrajudicially terminate the operation of the contract,
refuse conveyance, and retain the sums or installments already received, where such rights are expressly provided for. 55
Under the boundary-hulog scheme, petitioner retained ownership of the jeepney although its material possession was vested
in respondent as its driver. In case respondent failed to make his P550.00 daily installment payment for a week, the agreement
would be of no force and effect and respondent would have to return the jeepney to petitioner; the employer-employee
relationship would likewise be terminated unless petitioner would allow respondent to continue driving the jeepney on a
boundary basis of P550.00 daily despite the termination of their vendor-vendee relationship.
The juridical relationship of employer-employee between petitioner and respondent was not negated by the foregoing
stipulation in the Kasunduan, considering that petitioner retained control of respondents conduct as driver of the vehicle. As
correctly ruled by the CA:
The exercise of control by private respondent over petitioners conduct in operating the jeepney he was driving is inconsistent
with private respondents claim that he is, or was, not engaged in the transportation business; that, even if petitioner was
allowed to let some other person drive the unit, it was not shown that he did so; that the existence of an employment relation is
not dependent on how the worker is paid but on the presence or absence of control over the means and method of the work;
that the amount earned in excess of the "boundary hulog" is equivalent to wages; and that the fact that the power of dismissal
was not mentioned in the Kasunduan did not mean that private respondent never exercised such power, or could not exercise
such power.
Moreover, requiring petitioner to drive the unit for commercial use, or to wear an identification card, or to don a decent attire, or
to park the vehicle in Villamaria Motors garage, or to inform Villamaria Motors about the fact that the unit would be going out to
the province for two days of more, or to drive the unit carefully, etc. necessarily related to control over the means by which the
petitioner was to go about his work; that the ruling applicable here is not Singer Sewing Machine but National Labor Union
since the latter case involved jeepney owners/operators and jeepney drivers, and that the fact that the "boundary" here
represented installment payment of the purchase price on the jeepney did not withdraw the relationship from that of employer-
employee, in view of the overt presence of supervision and control by the employer. 56
Neither is such juridical relationship negated by petitioners claim that the terms and conditions in the Kasunduan relative to
respondents behavior and deportment as driver was for his and respondents benefit: to insure that respondent would be able
to pay the requisite daily installment of P550.00, and that the vehicle would still be in good condition despite the lapse of four
years. What is primordial is that petitioner retained control over the conduct of the respondent as driver of the jeepney.

170
Indeed, petitioner, as the owner of the vehicle and the holder of the franchise, is entitled to exercise supervision and control
over the respondent, by seeing to it that the route provided in his franchise, and the rules and regulations of the Land
Transportation Regulatory Board are duly complied with. Moreover, in a business establishment, an identification card is
usually provided not just as a security measure but to mainly identify the holder thereof as a bona fide employee of the firm
who issues it.57
As respondents employer, it was the burden of petitioner to prove that respondents termination from employment was for a
lawful or just cause, or, at the very least, that respondent failed to make his daily remittances of P550.00 as boundary.
However, petitioner failed to do so. As correctly ruled by the appellate court:
It is basic of course that termination of employment must be effected in accordance with law. The just and authorized causes
for termination of employment are enumerated under Articles 282, 283 and 284 of the Labor Code.
Parenthetically, given the peculiarity of the situation of the parties here, the default in the remittance of the boundary hulog for
one week or longer may be considered an additional cause for termination of employment. The reason is because the
Kasunduan would be of no force and effect in the event that the purchaser failed to remit the boundary hulog for one week.
The Kasunduan in this case pertinently stipulates:
13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay ng BOUNDARY HULOG sa loob ng isang linggo
ay NANGANGAHULUGAN na ang kasunduang ito ay wala ng bisa at kusang ibabalik ng TAUHAN NG IKALAWANG PANIG
ang nasabing sasakyan sa TAUHAN NG UNANG PANIG na wala ng paghahabol pa.
Moreover, well-settled is the rule that, the employer has the burden of proving that the dismissal of an employee is for a just
cause. The failure of the employer to discharge this burden means that the dismissal is not justified and that the employee is
entitled to reinstatement and back wages.
In the case at bench, private respondent in his position paper before the Labor Arbiter, alleged that petitioner failed to pay the
miscellaneous fee of P10,000.00 and the yearly registration of the unit; that petitioner also stopped remitting the "boundary
hulog," prompting him (private respondent) to issue a "Paalala," which petitioner however ignored; that petitioner even brought
the unit to his (petitioners) province without informing him (private respondent) about it; and that petitioner eventually
abandoned the vehicle at a gasoline station after figuring in an accident. But private respondent failed to substantiate these
allegations with solid, sufficient proof. Notably, private respondents allegation viz, that he retrieved the vehicle from the gas
station, where petitioner abandoned it, contradicted his statement in the Paalala that he would enforce the provision (in the
Kasunduan) to the effect that default in the remittance of the boundary hulog for one week would result in the forfeiture of the
unit. The Paalala reads as follows:
"Sa lahat ng mga kumukuha ng sasakyan
"Sa pamamagitan ng BOUNDARY HULOG
"Nais ko pong ipaalala sa inyo ang Kasunduan na inyong pinirmahan particular na ang paragrapo 13 na nagsasaad na kung
hindi kayo makapagbigay ng Boundary Hulog sa loob ng isang linggo ay kusa ninyong ibabalik and nasabing sasakyan na
inyong hinuhulugan ng wala ng paghahabol pa.
"Mula po sa araw ng inyong pagkatanggap ng Paalala na ito ay akin na pong ipatutupad ang nasabing Kasunduan kayat
aking pinaaalala sa inyong lahat na tuparin natin ang nakalagay sa kasunduan upang maiwasan natin ito.
"Hinihiling ko na sumunod kayo sa hinihingi ng paalalang ito upang hindi na tayo makaabot pa sa korte kung sakaling hindi
ninyo isasauli ang inyong sasakyan na hinuhulugan na ang mga magagastos ay kayo pa ang magbabayad sapagkat ang hindi
ninyo pagtupad sa kasunduan ang naging dahilan ng pagsampa ng kaso.
"Sumasainyo
"Attendance: 8/27/99
"(The Signatures appearing herein
include (sic) that of petitioners) (Sgd.)
OSCAR VILLAMARIA, JR."
If it were true that petitioner did not remit the boundary hulog for one week or more, why did private respondent not forthwith
take steps to recover the unit, and why did he have to wait for petitioner to abandon it?1avvphil.net
On another point, private respondent did not submit any police report to support his claim that petitioner really figured in a
vehicular mishap. Neither did he present the affidavit of the guard from the gas station to substantiate his claim that petitioner
abandoned the unit there.58
Petitioners claim that he opted not to terminate the employment of respondent because of magnanimity is negated by his
(petitioners) own evidence that he took the jeepney from the respondent only on July 24, 2000.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The decision of the Court of Appeals in CA-G.R. SP No. 78720
is AFFIRMED. Costs against petitioner.
SO ORDERED.

171
G.R. No. 119268 February 23, 2000
ANGEL JARDIN, DEMETRIO CALAGOS, URBANO MARCOS, ROSENDO MARCOS, LUIS DE LOS ANGELES, JOEL
ORDENIZA and AMADO CENTENO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC) and GOODMAN TAXI (PHILJAMA INTERNATIONAL,
INC.) respondents.
QUISUMBING, J.:
This special civil action for certiorari seeks to annul the decision1 of public respondent promulgated on October 28, 1994, in
NLRC NCR CA No. 003883-92, and its resolution2 dated December 13, 1994 which denied petitioners motion for
reconsideration.
Petitioners were drivers of private respondent, Philjama International Inc., a domestic corporation engaged in the operation of
"Goodman Taxi." Petitioners used to drive private respondent's taxicabs every other day on a 24-hour work schedule under
the boundary system. Under this arrangement, the petitioners earned an average of P400.00 daily. Nevertheless, private
respondent admittedly regularly deducts from petitioners, daily earnings the amount of P30.00 supposedly for the washing of
the taxi units. Believing that the deduction is illegal, petitioners decided to form a labor union to protect their rights and
interests.
Upon learning about the plan of petitioners, private respondent refused to let petitioners drive their taxicabs when they
reported for work on August 6, 1991, and on succeeding days. Petitioners suspected that they were singled out because they
were the leaders and active members of the proposed union. Aggrieved, petitioners filed with the labor arbiter a complaint
against private respondent for unfair labor practice, illegal dismissal and illegal deduction of washing fees. In a decision3 dated
August 31, 1992, the labor arbiter dismissed said complaint for lack of merit.
On appeal, the NLRC (public respondent herein), in a decision dated April 28, 1994, reversed and set aside the judgment of
the labor arbiter. The labor tribunal declared that petitioners are employees of private respondent, and, as such, their dismissal
must be for just cause and after due process. It disposed of the case as follows:
WHEREFORE, in view of all the foregoing considerations, the decision of the Labor Arbiter appealed from is hereby
SET ASIDE and another one entered:
1. Declaring the respondent company guilty of illegal dismissal and accordingly it is directed to reinstate the
complainants, namely, Alberto A. Gonzales, Joel T. Morato, Gavino Panahon, Demetrio L. Calagos, Sonny M.
Lustado, Romeo Q. Clariza, Luis de los Angeles, Amado Centino, Angel Jardin, Rosendo Marcos, Urbano Marcos,
Jr., and Joel Ordeniza, to their former positions without loss of seniority and other privileges appertaining thereto; to
pay the complainants full backwages and other benefits, less earnings elsewhere, and to reimburse the drivers the
amount paid as washing charges; and
2. Dismissing the charge of unfair [labor] practice for insufficiency of evidence.
SO ORDERED.4
Private respondent's first motion for reconsideration was denied. Remaining hopeful, private respondent filed another motion
for reconsideration. This time, public respondent, in its decision 5 dated October 28, 1994, granted aforesaid second motion for
reconsideration. It ruled that it lacks jurisdiction over the case as petitioners and private respondent have no employer-
employee relationship. It held that the relationship of the parties is leasehold which is covered by the Civil Code rather than the
Labor Code, and disposed of the case as follows:
VIEWED IN THE LIGHT OF ALL THE FOREGOING, the Motion under reconsideration is hereby given due course.
Accordingly, the Resolution of August 10, 1994, and the Decision of April 28, 1994 are hereby SET ASIDE. The
Decision of the Labor Arbiter subject of the appeal is likewise SET ASIDE and a NEW ONE ENTERED dismissing the
complaint for lack of jurisdiction.
No costs.
SO ORDERED.6
Expectedly, petitioners sought reconsideration of the labor tribunal's latest decision which was denied. Hence, the instant
petition.
In this recourse, petitioners allege that public respondent acted without or in excess of jurisdiction, or with grave abuse of
discretion in rendering the assailed decision, arguing that:
I
THE NLRC HAS NO JURISDICTION TO ENTERTAIN RESPONDENT'S SECOND MOTION FOR RECONSIDERATION
WHICH IS ADMITTEDLY A PLEADING PROHIBITED UNDER THE NLRC RULES, AND TO GRANT THE SAME ON
GROUNDS NOT EVEN INVOKED THEREIN.
II
THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES IS ALREADY A SETTLED
ISSUE CONSTITUTING RES JUDICATA, WHICH THE NLRC HAS NO MORE JURISDICTION TO REVERSE, ALTER OR
MODIFY.
III
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IN ANY CASE, EXISTING JURISPRUDENCE ON THE MATTER SUPPORTS THE VIEW THAT PETITIONERS-TAXI
DRIVERS ARE EMPLOYEES OF RESPONDENT TAXI COMPANY.7
The petition is impressed with merit.
The phrase "grave abuse of discretion amounting to lack or excess of jurisdiction" has settled meaning in the jurisprudence of
procedure. It means such capricious and whimsical exercise of judgment by the tribunal exercising judicial or quasi-judicial
power as to amount to lack of power.8 In labor cases, this Court has declared in several instances that disregarding rules it is
bound to observe constitutes grave abuse of discretion on the part of labor tribunal.
In Garcia vs. NLRC,9 private respondent therein, after receiving a copy of the labor arbiter's decision, wrote the labor arbiter
who rendered the decision and expressed dismay over the judgment. Neither notice of appeal was filed nor cash or surety
bond was posted by private respondent. Nevertheless, the labor tribunal took cognizance of the letter from private respondent
and treated said letter as private respondent's appeal. In a certiorari action before this Court, we ruled that the labor tribunal
acted with grave abuse of discretion in treating a mere letter from private respondent as private respondent's appeal in clear
violation of the rules on appeal prescribed under Section 3(a), Rule VI of the New Rules of Procedure of NLRC.
In Philippine Airlines Inc. vs. NLRC,10 we held that the labor arbiter committed grave abuse of discretion when he failed to
resolve immediately by written order a motion to dismiss on the ground of lack of jurisdiction and the supplemental motion to
dismiss as mandated by Section 15 of Rule V of the New Rules of Procedure of the NLRC.
In Unicane Workers Union-CLUP vs. NLRC,11 we held that the NLRC gravely abused its discretion by allowing and deciding
an appeal without an appeal bond having been filed as required under Article 223 of the Labor Code.
In Maebo vs. NLRC,12 we declared that the labor arbiter gravely abused its discretion in disregarding the rule governing
position papers. In this case, the parties have already filed their position papers and even agreed to consider the case
submitted for decision, yet the labor arbiter still admitted a supplemental position paper and memorandum, and by taking into
consideration, as basis for his decision, the alleged facts adduced therein and the documents attached thereto.
In Gesulgon vs. NLRC,13 we held that public respondent gravely abused its discretion in treating the motion to set aside
judgment and writ of execution as a petition for relief of judgment. In doing so, public respondent had, without sufficient basis,
extended the reglementary period for filing petition for relief from judgment contrary to prevailing rule and case law.
In this case before us, private respondent exhausted administrative remedy available to it by seeking reconsideration of public
respondent's decision dated April 28, 1994, which public respondent denied. With this motion for reconsideration, the labor
tribunal had ample opportunity to rectify errors or mistakes it may have committed before resort to courts of justice can be
had.14 Thus, when private respondent filed a second motion for reconsideration, public respondent should have forthwith
denied it in accordance with Rule 7, Section 14 of its New Rules of Procedure which allows only one motion for
reconsideration from the same party, thus:
Sec. 14. Motions for Reconsideration. Motions for reconsideration of any order, resolution or decision of the
Commission shall not be entertained except when based on palpable or patent errors, provided that the motion is
under oath and filed within ten (10) calendar days from receipt of the order, resolution or decision with proof of
service that a copy of the same has been furnished within the reglementary period the adverse party and provided
further, that only one such motion from the same party shall be entertained. [Emphasis supplied]
The rationale for allowing only one motion for reconsideration from the same party is to assist the parties in obtaining an
expeditious and inexpensive settlement of labor cases. For obvious reasons, delays cannot be countenanced in the resolution
of labor disputes. The dispute may involve no less than the livelihood of an employee and that of his loved ones who are
dependent upon him for food, shelter, clothing, medicine, and education. It may as well involve the survival of a business or an
industry.15
As correctly pointed out by petitioner, the second motion for reconsideration filed by private respondent is indubitably a
prohibited pleading16 which should have not been entertained at all. Public respondent cannot just disregard its own rules on
the pretext of "satisfying the ends of justice",17 especially when its disposition of a legal controversy ran afoul with a clear and
long standing jurisprudence in this jurisdiction as elucidated in the subsequent discussion. Clearly, disregarding a settled legal
doctrine enunciated by this Court is not a way of rectifying an error or mistake. In our view, public respondent gravely abused
its discretion in taking cognizance and granting private respondent's second motion for reconsideration as it wrecks the orderly
procedure in seeking reliefs in labor cases.
But, there is another compelling reason why we cannot leave untouched the flip-flopping decisions of the public respondent.
As mentioned earlier, its October 28, 1994 judgment is not in accord with the applicable decisions of this Court. The labor
tribunal reasoned out as follows:
On the issue of whether or not employer-employee relationship exists, admitted is the fact that complainants are taxi
drivers purely on the "boundary system". Under this system the driver takes out his unit and pays the owner/operator
a fee commonly called "boundary" for the use of the unit. Now, in the determination the existence of employer-
employee relationship, the Supreme Court in the case of Sara, et al., vs. Agarrado, et al. (G.R. No. 73199, 26
October 1988) has applied the following four-fold test: "(1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the power of control the employees conduct."

173
 "Among the four (4) requisites", the Supreme Court stresses that "control is deemed the most important that the other
requisites may even be disregarded". Under the control test, an employer-employee relationship exists if the
"employer" has reserved the right to control the "employee" not only as to the result of the work done but also as to
the means and methods by which the same is to be accomplished. Otherwise, no such relationship exists. (Ibid.)
Applying the foregoing parameters to the case herein obtaining, it is clear that the respondent does not pay the
drivers, the complainants herein, their wages. Instead, the drivers pay a certain fee for the use of the vehicle. On the
matter of control, the drivers, once they are out plying their trade, are free to choose whatever manner they conduct
their trade and are beyond the physical control of the owner/operator; they themselves determine the amount of
revenue they would want to earn in a day's driving; and, more significantly aside from the fact that they pay for the
gasoline they consume, they likewise shoulder the cost of repairs on damages sustained by the vehicles they are
driving.
Verily, all the foregoing attributes signify that the relationship of the parties is more of a leasehold or one that is
covered by a charter agreement under the Civil Code rather than the Labor Code. 18
The foregoing ratiocination goes against prevailing jurisprudence.
In a number of cases decided by this Court,19 we ruled that the relationship between jeepney owners/operators on one hand
and jeepney drivers on the other under the boundary system is that of employer-employee and not of lessor-lessee. We
explained that in the lease of chattels, the lessor loses complete control over the chattel leased although the lessee cannot be
reckless in the use thereof, otherwise he would be responsible for the damages to the lessor. In the case of jeepney
owners/operators and jeepney drivers, the former exercise supervision and control over the latter. The management of the
business is in the owner's hands. The owner as holder of the certificate of public convenience must see to it that the driver
follows the route prescribed by the franchising authority and the rules promulgated as regards its operation. Now, the fact that
the drivers do not receive fixed wages but get only that in excess of the so-called "boundary" they pay to the owner/operator is
not sufficient to withdraw the relationship between them from that of employer and employee. We have applied by analogy the
abovestated doctrine to the relationships between bus owner/operator and bus conductor, 20 auto-calesa owner/operator and
driver,21 and recently between taxi owners/operators and taxi drivers. 22 Hence, petitioners are undoubtedly employees of
private respondent because as taxi drivers they perform activities which are usually necessary or desirable in the usual
business or trade of their employer.
As consistently held by this Court, termination of employment must be effected in accordance with law. The just and
authorized causes for termination of employment are enumerated under Articles 282, 283 and 284 of the Labor Code. The
requirement of notice and hearing is set-out in Article 277 (b) of the said Code. Hence, petitioners, being employees of private
respondent, can be dismissed only for just and authorized cause, and after affording them notice and hearing prior to
termination. In the instant case, private respondent had no valid cause to terminate the employment of petitioners. Neither
were there two (2) written notices sent by private respondent informing each of the petitioners that they had been dismissed
from work. These lack of valid cause and failure on the part of private respondent to comply with the twin-notice requirement
underscored the illegality surrounding petitioners' dismissal.
Under the law, an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority
rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement. 23 It
must be emphasized, though, that recent judicial pronouncements24 distinguish between employees illegally dismissed prior to
the effectivity of Republic Act No. 6715 on March 21, 1989, and those whose illegal dismissals were effected after such date.
Thus, employees illegally dismissed prior to March 21, 1989, are entitled to backwages up to three (3) years without deduction
or qualification, while those illegally dismissed after that date are granted full backwages inclusive of allowances and other
benefits or their monetary equivalent from the time their actual compensation was withheld from them up to the time of their
actual reinstatement. The legislative policy behind Republic Act No. 6715 points to "full backwages" as meaning exactly
that, i.e., without deducting from backwages the earnings derived elsewhere by the concerned employee during the period of
his illegal dismissal. Considering that petitioners were terminated from work on August 1, 1991, they are entitled to full
backwages on the basis of their last daily earnings.
With regard to the amount deducted daily by private respondent from petitioners for washing of the taxi units, we view the
same as not illegal in the context of the law. We note that after a tour of duty, it is incumbent upon the driver to restore the unit
he has driven to the same clean condition when he took it out. Car washing after a tour of duty is indeed a practice in the taxi
industry and is in fact dictated by fair play.25 Hence, the drivers are not entitled to reimbursement of washing charges. .nt
WHEREFORE, the instant petition is GRANTED. The assailed DECISION of public respondent dated October 28, 1994, is
hereby SET ASIDE. The DECISION of public respondent dated April 28, 1994, and its RESOLUTION dated December 13,
1994, are hereby REINSTATED subject to MODIFICATION. Private respondent is directed to reinstate petitioners to their
positions held at the time of the complained dismissal. Private respondent is likewise ordered to pay petitioners their full
backwages, to be computed from the date of dismissal until their actual reinstatement. However, the order of public
respondent that petitioners be reimbursed the amount paid as washing charges is deleted. Costs against private respondents.
SO ORDERED.
174
G.R. No. 117495 May 29, 1997
NELLY ACTA MARTINEZ, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, DOMINADOR CORRO, PASTOR CORRO, CELESTINO CORRO, LUIS
CORRO, EREBERTO CORRO, JAIME CRUZ, WENCESLAO, DELVO, GREGORIO DELVO, HERMEJIAS COLIBAO, JOSE
OGANA and ALONSO ALBAO, respondents.
BELLOSILLO, J.:
RAUL MARTINEZ was operator of two (2) taxicab units under the business name PAMA TX and two (2) additional units under
the name P. J. TIGER TX. Private respondents Dominador Corro, Pastor Corro, Celestino Corro, Luis Corro, Ereberto Corro,
Jaime Cruz, Wenceslao Delve, Gregorio Delvo, Hermejias Colibao, Jose Ogana and Alonso Albao worked for him as drivers.
On 18 March 1992 Raul Martinez died leaving behind his mother, petitioner Nelly Acta Martinez, as his sole heir.
On 14 July 1992 private respondents lodged a complaint against Raul Martinez and petitioner Nelly Acta Martinez before the
Labor Arbiter for violation of P. D. 851 1 and illegal dismissal. They alleged that they have been regular drivers of Raul
Martinez since 20 October 1989 earning no less than P400.00 per day driving twenty-four (24) hours every other day. For the
duration of employment, not once did they receive a 13th month pay. After the death of Raul Martinez, petitioner took over the
management and operation of the business. On or about 22 June 1992 she informed them that because of difficulty in
maintaining the business, she was selling the units together with the corresponding franchises. However, petitioner did not
proceed with her plan; instead, she assigned the units to other drivers.
Petitioner traversed the claim for 13th month pay by contending that it was personal and therefore did not survive the death of
her son. Besides, private respondents were not entitled thereto as Sec. 3, par. (e), of the Rules and Regulations Implementing
P. D. 851 is explicit that employers of those who are paid on purely boundary basis are not covered therein. The relationship
between her son and private respondents was not that of employer-employee but of lessor-lessee. The operation of the
business ceased upon the death of her son and that she did not continue the business because she did not know how to run it.
On 30 August 1993 the Labor Arbiter dismissed the complaint on the following grounds: (a) private respondents' claims being
personal were extinguished upon the death of Raul Martinez; (b) petitioner was a mere housewife who did not possess the
required competence to manage the business; and, (c) private respondents were not entitled to 13th month pay because the
existence of employer-employee relationship was doubtful on account of the boundary system adopted by the parties. 2
However, respondent National Labor Relations Commission viewed the case differently. According to NLRC, (a) private
respondents were regular drivers because payment of wages, which is one of the essential requisites for the existence of
employment relation, may either be fixed, on commission, boundary, piece-rate or task basis; (b) the management of the
business passed on to petitioner who even replaced private respondents with a new set of drivers; and, (c) the claims of
private respondents survived the death of Raul Martinez considering that the business did not cease operation outright but
continued presumably, in the absence of proof of sale, up to the moment. As regards the claim for 13th month pay, NLRC
upheld the stand of petitioner based on the express provision of P. D. 851 as reiterated in the revised guidelines on the
implementation thereof. On 28 January 1994 respondent NLRC thus set aside the appealed decision, and as alternative to
reinstatement, ordered petitioner to grant respondents separation pay equivalent to one (1) month salary for every year of
service a fraction of six (6) months being considered as one (1) whole year. 3 On 30 September 1994 the motion for
reconsideration was denied. 4Hence, this recourse of petitioner.
On 11 October 1995 the Court issued a temporary restraining order enjoining the execution of the assailed decision of
respondent NLRC. Petitioner imputes grave abuse of discretion on respondent NLRC in reversing the decision of the Labor
Arbiter.
Petitioner argues that respondent NLRC acted as a probate court when it assumed jurisdiction over the estate of a deceased
person, pronounced her legally entitled to succeed the deceased and ordered her to pay the money claim of private
respondents. Moreover, petitioner argues that the claims of private respondents were personal to her son and thus were
abated by his death.
Petitioner's arguments are well-taken. The claim for 13th month pay pertains to the personal obligation of Raul Martinez which
did not survive his death. The rule is settled that unless expressly assumed, labor contracts are not enforceable against the
transferee of an enterprise. In the present case, petitioner does not only disavow that she continued the operation of the
business of her son but also disputes the existence of labor contracts between her son and private respondents. The reason
for the rule is that labor contracts are in personam, 5 and that claims for backwages earned from the former employer cannot
be filed against the new owners of an enterprise. 6 Nor is the new operator of a business liable for claims for retirement pay of
employees. 7 Thus the claim of private respondents should have been filed instead in the intestate proceedings involving the
estate of Raul Martinez in accordance with Sec. 5, Rule 86, of the Rules of Court which provides in part
Sec. 5. Claims which must be filed under the notice. If not filed, barred; exceptions. All claims for money
against the decedent, arising from contract, express or implied, whether the same be due, not due, or
contingent, all claims for funeral expenses and expenses for the last sickness of the decedent, and judgment
for money against the decedent, must be filed within the time limited in the notice; otherwise they are barred
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 forever, except that they may be set forth as counterclaims in any action that the executor or administrator
may bring against the claimants . . .
Under this rule, upon the death of the defendant, a testate or intestate proceeding shall be instituted in the proper
court wherein all his creditors must appear and file their claims which shall be paid proportionately out of the property
left by the deceased. The objective is to avoid duplicity of procedures. Hence, the ordinary actions must be taken out
from the ordinary courts. Conformably with Art. 110 of the Labor Code, money claims of laborers enjoy preference
over claims of other creditors in case of bankruptcy or liquidation of the employer's business. 8
Petitioner also insists on the absence of employer-employee relationship between her son and private respondents because
there is no evidence that her son paid a single centavo by way of wages to private respondents; rather, they were governed by
the boundary system. Neither is there such relationship between her and private respondents because she did not continue
the operation of the business which ceased upon the death of her son.
As early as 3 March 1956, in National Labor Union v. Dinglasan, 9 this Court ruled that the relationship between jeepney
owners/operators on one hand and jeepney drivers on the other under the boundary system is that of employer-employee and
not of lessor-lessee. Therein we explained that in the lease of chattels the lessor loses complete control over the chattel
leased although the lessee cannot be reckless in the use thereof, otherwise he would be responsible for the damages to the
lessor. In the case of jeepney owners/operators and jeepney drivers, the former exercise supervision and control over the
latter. The fact that the drivers do not receive fixed wages but get only that in excess of the so-called "boundary" they pay to
the owner/operator is not sufficient to withdraw the relationship between them from that of employer and employee. The
doctrine is applicable by analogy to the present case. Thus, private respondents were employees of Raul Martinez because
they had been engaged to perform activities which were usually necessary or desirable in the usual business or trade of the
employer. 10 The records show that private respondents had been employed since 20 October 1989 except for Ogana, the
Delvos, Albao and Colibao who were employed on later dates. 11
Hence, these questions arise: Do private respondents, being then employees of Raul Martinez, necessarily continue to be
employees of the petitioner as the new operator of the business? In the affirmative, were they illegally dismissed?
The factual findings of quasi-judicial agencies such as respondent NLRC, which have acquired expertise in the matters
entrusted to their jurisdiction, are accorded by this Court not only respect but also finality if they are supported by substantial
evidence, or that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. 12 As
respondent NLRC found
The facts of the case will readily show that before respondent taxi owner Raul Martinez died, he became
bedridden and the management of his taxi business passed on to his mother who was his only surviving
heir. It will also be noted that despite the information given by the mother that she will sell the business and
extend separation benefits to complainants, no such thing occurred. Instead, she replaced complainants
with a new set of drivers (See Complainants' Position paper, p. 25, Record). 13
The above findings, however, were culled from mere allegations in private respondents' position paper. But mere
allegation is not evidence. 14 It is a basic rule in evidence that each party must prove his affirmative
allegation. 15 In Opulencia Ice Plant and Storage v. NLRC 16 we ruled that no particular form of evidence is required to
prove the existence of an employer-employee relationship. Any competent and relevant evidence to prove the
relationship may be admitted. In that case, the relationship was sufficiently proved by testimonial evidence. In the
present case, however, private respondents simply assumed the continuance of an employer-employee relationship
between them and petitioner, when she took over the operation of the business after the death of her son Raul
Martinez, without any supporting evidence. Consequently, we cannot sustain for lack of basis the factual finding of
respondent NLRC on the existence of employer-employee relationship between petitioner and private respondents.
Clearly, such finding emanates from grave abuse of discretion. With this conclusion, consideration of the issue on
illegal dismissal becomes futile and irrelevant.
WHEREFORE, the petition is GRANTED. The Decision of respondent National Labor Relations Commission dated 28 January
1994 ordering petitioner Nelly Acta Martinez to grant respondents separation pay as well as its Order of 30 September 1994
denying reconsideration is SET ASIDE. The Decision of the Labor Arbiter dated 30 August 1993 dismissing the complaint is
REINSTATED.
The temporary restraining order issued on 11 October 1995 is made PERMANENT.
SO ORDERED.

G.R. No. 192473 October 11, 2010

S.I.P. FOOD HOUSE and MR. and MRS. ALEJANDRO PABLO, Petitioners,
vs.
RESTITUTO BATOLINA, ALMER CALUMPISAN, ARIES MALGAPO, ARMANDO MALGAPO, FLORDELIZA MATIAS,
PERCIVAL MATIAS, ARWIN MIRANDA, LOPE MATIAS, RAMIL MATIAS, ALLAN STA. INES,Respondents.
DECISION
BRION, J.:

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We resolve the present petition for review on certiorari1 which seeks to nullify the decision2 and resolution3 of the Court of
Appeals (CA), promulgated on November 27, 2009 and May 31, 2010, respectively, in CA-G.R. SP No. 101651.4
The Antecedents
The facts are laid out in the assailed CA Decision and are summarized below.
The GSIS Multi-Purpose Cooperative (GMPC) is an entity organized by the employees of the Government Service Insurance
System (GSIS). Incidental to its purpose, GMPC wanted to operate a canteen in the new GSIS Building, but had no capability
and expertise in this area. Thus, it engaged the services of the petitioner S.I.P. Food House (SIP), owned by the spouses
Alejandro and Esther Pablo, as concessionaire. The respondents Restituto Batolina and nine (9) others (the respondents)
worked as waiters and waitresses in the canteen.
In February 2004, GMPC terminated SIPs "contract as GMPC concessionaire," because of GMPCs decision "to take direct
investment in and management of the GMPC canteen;" SIPs continued refusal to heed GMPCs directives for service
improvement; and the alleged interference of the Pablos two sons with the operation of the canteen.5 The termination of the
concession contract caused the termination of the respondents employment, prompting them to file a complaint for illegal
dismissal, with money claims, against SIP and the spouses Pablo.
The Compulsory Arbitration Proceedings
The Parties Positions
The respondents alleged before the labor arbiter that they were SIP employees, who were illegally dismissed sometime in
February and March 2004. SIP did not implement Wage Order Nos. 5 to 11 for the years 1997 to 2004. They did not receive
overtime pay although they worked from 6:30 in the morning until 5:30 in the afternoon, or other employee benefits such as
service incentive leave, and maternity benefit (for their co-employee Flordeliza Matias). Their employee contributions were
also not remitted to the Social Security System.
To avoid liability, SIP argued that it operated the canteen in behalf of GMPC since it had no authority by itself to do so. The
respondents were not its employees, but GMPCs, as shown by their identification cards. It claimed that GMPC terminated its
concession and prevented it from having access to the canteen premises as GSIS personnel locked the place; GMPC then
operated the canteen on its own, absorbing the respondents for the purpose and assigning them to the same positions they
held with SIP. It maintained that the respondents were not dismissed, but were merely prevented by GMPC from performing
their functions. For this reason, SIP posited that the legal obligations that would arise under the circumstances have to be
shouldered by GMPC.
The Labor Arbiters Decision
Labor Arbiter Francisco A. Robles rendered a Decision on June 30, 2005 dismissing the complaint for lack of merit.6 He found
that the respondents were GMPCs employees, and not SIPs, as there existed a labor-only contracting relationship between
the two entities. The labor arbiter, however, opined that even if respondents were considered as SIPs employees, their
dismissal would still not be illegal because the termination of its contract to operate the canteen came as a surprise and was
against its will, rendering the canteens closure involuntary.
Arbiter Robles likewise denied the employees money claims. He ruled that SIP is not liable for unpaid salaries because it had
complied with the minimum statutory requirement and had extended better benefits than GMPC; although they were paid
only P160.00 to PP220.00 daily, the employees were provided with free board and lodging seven (7) days a week. Neither
were the respondents entitled to overtime pay as it was highly improbable that they regularly worked beyond eight (8) hours
every day for a canteen that closes after 5:30 p.m.
The respondents brought their case, on appeal, to the National Labor Relations Commission (NLRC).
The NLRC Ruling
In its Decision of August 30, 2007,7 the NLRC found that SIP was the respondents employer, but it sustained the labor
arbiters ruling that the employees were not illegally dismissed as the termination of SIPs concession to operate the canteen
constituted an authorized cause for the severance of employer-employee relations. Furthermore, the respondents admission
that they applied with GMPC when it terminated SIPs concession is an indication that they were employees of SIP and that
they were terminating their employment relationship with it. As the labor arbiter did, the NLRC regarded the closure of SIPs
canteen operations involuntary, thus, negating the employees entitlement to separation pay. 8
For failure of SIP to present proof of compliance with the law on the minimum wage, 13th month pay, and service incentive
leave, the NLRC awarded the respondents a total of P952,865.53 in salary and 13th month pay differentials and service
incentive leave pay.9 The NLRC, however, denied the employees claim for overtime pay, holding that the respondents failed
to present evidence that they rendered two hours overtime work every day of their employment with SIP.
SIP moved for, but failed to secure, a reconsideration of the NLRC decision. It then elevated the case to the CA through a
petition for certiorari charging the NLRC with grave abuse of discretion in rendering the assailed decision. Essentially, SIP
argued that the NLRC erred in declaring that it was the respondents employer who is liable for their money claims despite its
being a labor-only contractor of GMPC.
The CA Decision
In its Decision promulgated on November 27, 2009,10 the CA granted the petition in part. While it affirmed the award, it found
merit in SIPs objection to the NLRC computation and assumption that a month had twenty-six (26) working days, instead of
177
twenty (20) working days. The CA recognized that in a government agency such as the GSIS, there are only 20 official
business days in a month. It noted that the respondents presented no evidence that the employees worked even outside
official business days and hours. It accordingly remanded the case for a recomputation of the award.
Finding substantial evidence in the records supporting the NLRC conclusions, the CA brushed aside SIPs argument that it
could not have been the employer of the respondents because it was a mere labor-only contractor of GMPC. It sustained the
NLRCs findings that SIP was the respondents employer.
SIP moved for reconsideration, but the CA denied the motion on May 31, 2010. 11 Hence, the present petition.
The Petition
SIP seeks a reversal of the appellate courts ruling that it was the employer of the respondents, claiming that it was merely a
labor-only contractor of GMPC.
It insists that it could not be the respondents employer as it was not allowed to operate a canteen in the GSIS building. It was
the GMPC who had the authority to undertake the operation. GMPC only engaged SIPs services because GMPC had no
capability or competence in the area. SIP points out that GMPC assumed responsibility for its acts in operating the canteen; all
businesses it transacted were under GMPCs name, as well as the business registration and other permits of the canteen,
sales receipts and vouchers for food purchased from the canteen; the employees were issued individual ID cards by GMPC. In
sum, SIP contends that its arrangement with GMPC was one of contractor/subcontractor governed by Article 106 of the Labor
Code. Lastly, it submits that it was not registered with the Department of Labor and Employment as an independent contractor
and, therefore, it is presumed to be a labor-only contractor.
The Respondents Comment
Without being required by the Court, the respondents filed their comment to SIPs petition on August 3, 2010.12 They
question the propriety of the petition for review on certiorari raising only questions of fact and not of law as required by Rule 45
of the Rules of Court. This notwithstanding, they submit that the CA committed no error in upholding the NLRCs findings of
facts which established that SIP was the real employer of Batolina and the other complainants. Thus, SIP was liable to them
for their statutory benefits, although it was not made to answer for their lost employment due to the involuntary nature of the
canteens closure.
The respondents pray that the petition be dismissed for lack of merit.
The Courts Ruling
We first resolve the alleged impropriety of the petition.13 While it is the general rule that the Court may not review factual
findings of the CA, we deem it proper to depart from the rule and examine the facts of the case in view of the conflicting factual
findings of the labor arbiter, on one hand, and the NLRC and the CA, on the other.14 We, therefore, hold the respondents
position on this point unmeritorious.
We now consider the merits of the case.
The employer-employee relationship issue
We affirm the CA ruling that SIP was the respondents employer. The NLRC decision, which the CA affirmed, states:
Respondents have been the concessionaire of GMPC canteen for nine (9) years (Annex "A" of Complainants Sur-
Rejoinder., Records, 302). During this period, complainants were employed at the said canteen (Sinumpaang Salaysay of
complainants, Records, p. 156). On February 29, 2004, respondents concession with GMPC was terminated (Annex "C" of
Respondents Answer and Position Paper, Records, p. 77). When respondents were prevented from entering the premises as
a result of the termination of their concession, they sent a protest letter dated April 14, 2004 to GMPC thru their counsel.
Pertinent portion of the letter:
We write this letter in behalf of our client Mr. & Mrs. Alejandro C. Pablo, the concessionaires who used to occupy and/or rent
the area for a cafeteria/canteen at the 2nd Floor of the GSIS Building for the past several years.
Last March 12, 2004, without any court writ or order, and with the aid of your armed agents, you physically barred our clients &
their employees/helpers from entering the said premises and from performing their usual duties of serving the food
requirements of GSIS personnel and others.
Clearly, no less than respondents, thru their counsel, admitted that complainants herein were their employees.
That complainants were employees of respondents is further bolstered by the fact that respondents do not deny that they were
the ones who paid complainants salary. When complainants charged them of underpayment, respondents even interposed the
defense of file (sic) board and lodging given to complainants.
Furthermore, these IDs issued to complainants bear the signature of respondent Alejandro C. Pablo (Annexes "J", "K", "M" to
"M-2" of complainants Reply. . ., Records, pp. 285 to 290). Likewise, the memoranda issued to complainants regarding their
absences without leave were signed by respondent Alejandro C. Pablo (Annexes A, C, E, & G, Ibid., Records, pp. 274, 276,
279, 282). All these pieces of evidence clearly show that respondents are the employer of complainants. (Rollo, pp. 87-88.)
xxxx
The CA ruled out SIPs claim that it was a labor-only contractor or a mere agent of GMPC. We agree with the CA; SIP and its
proprietors could not be considered as mere agents of GMPC because they exercised the essential elements of an
employment relationship with the respondents such as hiring, payment of wages and the power of control, not to mention that
SIP operated the canteen on its own account as it paid a fee for the use of the building and for the privilege of running the
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canteen. The fact that the respondents applied with GMPC in February 2004 when it terminated its contract with SIP, is
another clear indication that the two entities were separate and distinct from each other. We thus see no reason to disturb
the CAs findings.
The respondentss money claims
We likewise affirm the CA ruling on the monetary award to Batolina and the other complainants.1avvp++i1 The free board and
lodging SIP furnished the employees cannot operate as a set-off for the underpayment of their wages. We held in Mabeza v.
National Labor Relations Commission15 that the employer cannot simply deduct from the employees wages the value of the
board and lodging without satisfying the following requirements: (1) proof that such facilities are customarily furnished by the
trade; (2) voluntary acceptance in writing by the employees of the deductible facilities; and (3) proof of the fair and reasonable
value of the facilities charged. As the CA aptly noted, it is clear from the records that SIP failed to comply with these
requirements.
On the collateral issue of the proper computation of the monetary award, we also find the CA ruling to be in order. Indeed, in
the absence of evidence that the employees worked for 26 days a month, no need exists to recompute the award for the
respondents who were "explicitly claiming for their salaries and benefits for the services rendered from Monday to Friday or 5
days a week or a total of 20 days a month."16
In light of the foregoing, we find no merit in the petition.
WHEREFORE, premises considered, we hereby DISMISS the petition for lack of merit. The assailed decision and resolution of
the Court of Appeals in CA-G.R. SP No. 101651, are AFFIRMED.
SO ORDERED.

G.R. NO. 156225 January 29, 2008

LETRAN CALAMBA FACULTY and EMPLOYEES ASSOCIATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and COLEGIO DE SANJUAN DE LETRAN CALAMBA, INC.,respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Assailed in the present Petition for Review on Certiorari under Rule 45 of the Rules of Court is the Decision1 of the Court of
Appeals (CA) promulgated on May 14, 2002 in CA-G.R. SP No. 61552 dismissing the special civil action for certiorari filed
before it; and the Resolution2 dated November 28, 2002, denying petitioner's Motion for Reconsideration.
The facts of the case are as follows:
On October 8, 1992, the Letran Calamba Faculty and Employees Association (petitioner) filed with Regional Arbitration Branch
No. IV of the National Labor Relations Commission (NLRC) a Complaint 3 against Colegio de San Juan de Letran, Calamba,
Inc. (respondent) for collection of various monetary claims due its members. Petitioner alleged in its Position Paper that:
xxxx
2) [It] has filed this complaint in behalf of its members whose names and positions appear in the list hereto attached
as Annex "A".
3) In the computation of the thirteenth month pay of its academic personnel, respondent does not include as basis
therefor their compensation for overloads. It only takes into account the pay the faculty members receive for their
teaching loads not exceeding eighteen (18) units. The teaching overloads are rendered within eight (8) hours a day.
4) Respondent has not paid the wage increases required by Wage Order No. 5 to its employees who qualify
thereunder.
5) Respondent has not followed the formula prescribed by DECS Memorandum Circular No. 2 dated March 10, 1989
in the computation of the compensation per unit of excess load or overload of faculty members. This has resulted in
the diminution of the compensation of faculty members.
6) The salary increases due the non-academic personnel as a result of job grading has not been given. Job grading
has been an annual practice of the school since 1980; the same is done for the purpose of increasing the salaries of
non-academic personnel and as the counterpart of the ranking systems of faculty members.
7) Respondent has not paid to its employees the balances of seventy (70%) percent of the tuition fee increases for
the years 1990, 1991 and 1992.
8) Respondent has not also paid its employees the holiday pay for the ten (10) regular holidays as provided for in
Article 94 of the Labor Code.
9) Respondent has refused without justifiable reasons and despite repeated demands to pay its obligations
mentioned in paragraphs 3 to 7 hereof.
x x x x4
The complaint was docketed as NLRC Case No. RAB-IV-10-4560-92-L.
On January 29, 1993, respondent filed its Position Paper denying all the allegations of petitioner.
On March 10, 1993, petitioner filed its Reply.

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Prior to the filing of the above-mentioned complaint, petitioner filed a separate complaint against the respondent for money
claims with Regional Office No. IV of the Department of Labor and Employment (DOLE).
On the other hand, pending resolution of NLRC Case No. RAB-IV-10-4560-92-L, respondent filed with Regional Arbitration
Branch No. IV of the NLRC a petition to declare as illegal a strike staged by petitioner in January 1994.
Subsequently, these three cases were consolidated. The case for money claims originally filed by petitioner with the DOLE
was later docketed as NLRC Case No. RAB-IV-11-4624-92-L, while the petition to declare the subject strike illegal filed by
respondent was docketed as NLRC Case No. RAB-IV-3-6555-94-L.
On September 28, 1998, the Labor Arbiter (LA) handling the consolidated cases rendered a Decision with the following
dispositive portion:
WHEREFORE, premises considered, judgment is hereby rendered, as follows:
1. The money claims cases (RAB-IV-10-4560-92-L and RAB-IV-11-4624-92-L) are hereby dismissed for lack of merit;
2. The petition to declare strike illegal (NLRC Case No. RAB-IV-3-6555-94-L) is hereby dismissed, but the officers of
the Union, particularly its President, Mr. Edmundo F. Marifosque, Sr., are hereby reprimanded and sternly warned
that future conduct similar to what was displayed in this case will warrant a more severe sanction from this Office.
SO ORDERED.5
Both parties appealed to the NLRC.
On July 28, 1999, the NLRC promulgated its Decision6 dismissing both appeals. Petitioner filed a Motion for
Reconsideration7 but the same was denied by the NLRC in its Resolution8 dated June 21, 2000.
Petitioner then filed a special civil action for certiorari with the CA assailing the above-mentioned NLRC Decision and
Resolution.
On May 14, 2002, the CA rendered the presently assailed judgment dismissing the petition.
Petitioner filed a Motion for Reconsideration but the CA denied it in its Resolution promulgated on November 28, 2002.
Hence, herein petition for review based on the following assignment of errors:
I
THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE FACTUAL FINDINGS OF THE NATIONAL
LABOR RELATIONS COMMISSION CANNOT BE REVIEWED IN CERTIORARI PROCEEDINGS.
II
THE COURT OF APPEALS GRAVELY ERRED IN REFUSING TO RULE SQUARELY ON THE ISSUE OF
WHETHER OR NOT THE PAY OF FACULTY MEMBERS FOR TEACHING OVERLOADS SHOULD BE INCLUDED
AS BASIS IN THE COMPUTATION OF THEIR THIRTEENTH MONTH PAY.
III
THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE DECISION OF THE NATIONAL LABOR
RELATIONS COMMISSION IS SUPPORTED BY SUBSTANTIAL EVIDENCE AND IN NOT GRANTING
PETITIONER'S MONETARY CLAIMS.9
Citing Agustilo v. Court of Appeals,10 petitioner contends that in a special civil action for certiorari brought before the CA, the
appellate court can review the factual findings and the legal conclusions of the NLRC.
As to the inclusion of the overloads of respondent's faculty members in the computation of their 13th-month pay, petitioner
argues that under the Revised Guidelines on the Implementation of the 13th-Month Pay Law, promulgated by the Secretary of
Labor on November 16, 1987, the basic pay of an employee includes remunerations or earnings paid by his employer for
services rendered, and that excluded therefrom are the cash equivalents of unused vacation and sick leave credits, overtime,
premium, night differential, holiday pay and cost-of-living allowances. Petitioner claims that since the pay for excess loads or
overloads does not fall under any of the enumerated exclusions and considering that the said overloads are being performed
within the normal working period of eight hours a day, it only follows that the overloads should be included in the computation
of the faculty members' 13th-month pay.
To support its argument, petitioner cites the opinion of the Bureau of Working Conditions of the DOLE that payment of
teaching overload performed within eight hours of work a day shall be considered in the computation of the 13th-month pay.11
Petitioner further contends that DOLE-DECS-CHED-TESDA Order No. 02, Series of 1996 (DOLE Order) which was relied
upon by the LA and the NLRC in their respective Decisions cannot be applied to the instant case because the DOLE Order
was issued long after the commencement of petitioner's complaints for monetary claims; that the prevailing rule at the time of
the commencement of petitioner's complaints was to include compensations for overloads in determining a faculty member's
13th-month pay; that to give retroactive application to the DOLE Order issued in 1996 is to deprive workers of benefits which
have become vested and is a clear violation of the constitutional mandate on protection of labor; and that, in any case, all
doubts in the implementation and interpretation of labor laws, including implementing rules and regulations, should be resolved
in favor of labor.
Lastly, petitioner avers that the CA, in concluding that the NLRC Decision was supported by substantial evidence, failed to
specify what constituted said evidence. Thus, petitioner asserts that the CA acted arbitrarily in affirming the Decision of the
NLRC.

180
In its Comment, respondent contends that the ruling in Agustilo is an exception rather than the general rule; that the general
rule is that in a petition for certiorari, judicial review by this Court or by the CA in 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 only to
issues of jurisdiction or grave abuse of discretion amounting to lack of jurisdiction; that before a party may ask that the CA or
this Court review the factual findings of the NLRC, there must first be a convincing argument that the NLRC acted in a
capricious, whimsical, arbitrary or despotic manner; and that in its petition for certiorari filed with the CA, herein petitioner failed
to prove that the NLRC acted without or in excess of jurisdiction or with grave abuse of discretion.
Respondent argues that Agustilo is not applicable to the present case because in the former case, the findings of fact of the
LA and the NLRC are at variance with each other; while in the present case, the findings of fact and conclusions of law of the
LA and the NLRC are the same.
Respondent also avers that in a special civil action for certiorari, the discretionary power to review factual findings of the NLRC
rests upon the CA; and that absent any findings by the CA of the need to resolve any unclear or ambiguous factual findings of
the NLRC, the grant of the writ of certiorari is not warranted.
Further, respondent contends that even granting that the factual findings of the CA, NLRC and the LA may be reviewed in the
present case, petitioner failed to present valid arguments to warrant the reversal of the assailed decision.
Respondent avers that the DOLE Order is an administrative regulation which interprets the 13th-Month Pay Law (P.D. No.
851) and, as such, it is mandatory for the LA to apply the same to the present case.
Moreover, respondent contends that the Legal Services Office of the DOLE issued an opinion dated March 4, 1992, 12 that
remunerations for teaching in excess of the regular load, which includes overload pay for work performed within an eight-hour
work day, may not be included as part of the basic salary in the computation of the 13th-month pay unless this has been
included by company practice or policy; that petitioner intentionally omitted any reference to the above-mentioned opinion of
the Legal Services Office of the DOLE because it is fatal to its cause; and that the DOLE Order is an affirmation of the opinion
rendered by the said Office of the DOLE.
Furthermore, respondent claims that, contrary to the asseveration of petitioner, prior to the issuance of the DOLE Order, the
prevailing rule is to exclude excess teaching load, which is akin to overtime, in the computation of a teacher's basic salary and,
ultimately, in the computation of his 13th-month pay.
As to respondent's alleged non-payment of petitioner's consolidated money claims, respondent contends that the findings of
the LA regarding these matters, which were affirmed by the NLRC and the CA, have clear and convincing factual and legal
bases to stand on.
The Courts Ruling
The Court finds the petition bereft of merit.
As to the first and third assigned errors, petitioner would have this Court review the factual findings of the LA as affirmed by
the NLRC and the CA, to wit.
With respect to the alleged non-payment of benefits under Wage Order No. 5, this Office is convinced that after the
lapse of the one-year period of exemption from compliance with Wage Order No. 5 (Exhibit "1-B), which exemption
was granted by then Labor Minister Blas Ople, the School settled its obligations to its employees, conformably with
the agreement reached during the management-employees meeting of June 26, 1985 (Exhibits "4-B" up to "4-D",
also Exhibit "6-x-1"). The Union has presented no evidence that the settlement reached during the June 26, 1985
meeting was the result of coercion. Indeed, what is significant is that the agreement of June 26, 1985 was signed by
Mr. Porferio Ferrer, then Faculty President and an officer of the complaining Union. Moreover, the samples from the
payroll journal of the School, identified and offered in evidence in these cases (Exhibits "1-C" and 1-D"), shows that
the School paid its employees the benefits under Wage Order No. 5 (and even Wage Order No. 6) beginning June
16, 1985.
Under the circumstances, therefore, the claim of the Union on this point must likewise fail.
The claim of the Union for salary differentials due to the improper computation of compensation per unit of excess
load cannot hold water for the simple reason that during the Schoolyears in point there were no classes from June 1-
14 and October 17-31. This fact was not refuted by the Union. Since extra load should be paid only when actually
performed by the employees, no salary differentials are due the Union members.
The non-academic members of the Union cannot legally insist on wage increases due to "Job Grading". From the
records it appears that "Job Grading" is a system adopted by the School by which positions are classified and
evaluated according to the prescribed qualifications therefor. It is akin to a merit system whereby salary increases are
made dependent upon the classification, evaluation and grading of the position held by an employee.
The system of Job Grading was initiated by the School in Schoolyear 1989-1990. In 1992, just before the first of the
two money claims was filed, a new Job Grading process was initiated by the School.
Under the circumstances obtaining, it cannot be argued that there were repeated grants of salary increases due to
Job Grading to warrant the conclusion that some benefit was granted in favor of the non-academic personnel that
could no longer be eliminated or banished under Article 100 of the Labor Code. Since the Job Grading exercises of

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 the School were neither consistent nor for a considerable period of time, the monetary claims attendant to an
increase in job grade are non-existent.
The claim of the Union that its members were not given their full share in the tuition fee increases for the Schoolyears
1989-1990, 1990-1991 and 1991-1992 is belied by the evidence presented by the School which consists of the
unrefuted testimony of its Accounting Coordinator, Ms. Rosario Manlapaz, and the reports extrapolated from the
journals and general ledgers of the School (Exhibits "2", "2-A" up to "2-G"). The evidence indubitably shows that in
Schoolyear 1989-1990, the School incurred a deficit of P445,942.25, while in Schoolyears 1990-1991 and 1991-
1992, the School paid out, 91% and 77%, respectively, of the increments in the tuition fees collected.
As regards the issue of non-payment of holiday pay, the individual pay records of the School's employees, a sample
of which was identified and explained by Ms. Rosario Manlapaz (Exhibit "3"), shows that said School employees are
paid for all days worked in the year. Stated differently, the factor used in computing the salaries of the employees is
365, which indicates that their regular monthly salary includes payment of wages during all legal holidays. 13
This Court held in Odango v. National Labor Relations Commission14 that:
The appellate courts jurisdiction to review a decision of the NLRC in a petition for certiorari is confined to issues of
jurisdiction or grave abuse of discretion. An extraordinary remedy, a petition for certiorari is available only and
restrictively in truly exceptional cases. The sole office of the writ of certiorari is the correction of errors of jurisdiction
including the commission of grave abuse of discretion amounting to lack or excess of jurisdiction. It does not include
correction of the NLRCs evaluation of the evidence or of its factual findings. Such findings are generally accorded not
only respect but also finality. A party assailing such findings bears the burden of showing that the tribunal acted
capriciously and whimsically or in total disregard of evidence material to the controversy, in order that the
extraordinary writ of certiorari will lie.15
In the instant case, the Court finds no error in the ruling of the CA that since nowhere in the petition is there any acceptable
demonstration that the LA or the NLRC acted either with grave abuse of discretion or without or in excess of its jurisdiction, the
appellate court has no reason to look into the correctness of the evaluation of evidence which supports the labor tribunals'
findings of fact.
Settled is the rule that the findings of the LA, when affirmed by the NLRC and the CA, are binding on the Supreme Court,
unless patently erroneous.16 It is not the function of the Supreme Court to analyze or weigh all over again the evidence already
considered in the proceedings below.17 In a petition for review on certiorari, this Courts jurisdiction is limited to reviewing
errors of law in the absence of any showing that the factual findings complained of are devoid of support in the records or are
glaringly erroneous.18 Firm is the doctrine that this Court is not a trier of facts, and this applies with greater force in labor
cases.19 Findings of fact of administrative agencies and quasi-judicial bodies, which have acquired expertise because their
jurisdiction is confined to specific matters, are generally accorded not only great respect but even finality. 20 They are binding
upon this Court unless there is a showing of grave abuse of discretion or where it is clearly shown that they were arrived at
arbitrarily or in utter disregard of the evidence on record. 21 We find none of these exceptions in the present case.
In petitions for review on certiorari like the instant case, the Court invariably sustains the unanimous factual findings of the LA,
the NLRC and the CA, specially when such findings are supported by substantial evidence and there is no cogent basis to
reverse the same, as in this case.22
The second assigned error properly raises a question of law as it involves the determination of whether or not a teacher's
overload pay should be considered in the computation of his or her 13th-month pay. In resolving this issue, the Court is
confronted with conflicting interpretations by different government agencies.
On one hand is the opinion of the Bureau of Working Conditions of the DOLE dated December 9, 1991, February 28, 1992
and November 19, 1992 to the effect that if overload is performed within a teacher's normal eight-hour work per day, the
remuneration that the teacher will get from the additional teaching load will form part of the basic wage.23
This opinion is affirmed by the Explanatory Bulletin on the Inclusion of Teachers' Overload Pay in the 13th-Month Pay
Determination issued by the DOLE on December 3, 1993 under then Acting DOLE Secretary Cresenciano B. Trajano.
Pertinent portions of the said Bulletin read as follows:
1. Basis of the 13th-month pay computation
The Revised Implementing Guidelines of the 13th-Month Pay Law (P.D. 851, as amended) provides that an
employee shall be entitled to not less than 1/12 of the total basic salary earned within a calendar year for the purpose
of computing such entitlement. The basic wage of an employee shall include:
"x x x all remunerations or earnings paid by his employer for services rendered but do not include allowances or
monetary benefits which are not considered or integrated as part of the regular or basic salary, such as the cash
equivalent of unused vacation and sick leave credits, overtime, premium, night differential and holiday pay, and cost-
of-living allowances. However, these salary-related benefits should be included as part of the basic salary in the
computation of the 13th month pay if by individual or collective agreement, company practice or policy, the same are
treated as part of the basic salary of the employees."
Basic wage is defined by the Implementing Rules of RA 6727 as follows:

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 "Basic Wage" means all remuneration or earnings paid by an employer to a worker for services rendered
on normal working days and hours but does not include cost of living allowances, 13th-month pay or other monetary
benefits which are not considered as part of or integrated into the regular salary of the workers xxx.
The foregoing definition was based on Article 83 of the Labor Code which provides that "the normal hours of work of
any employee shall not exceed eight (8) hours a day." This means that the basic salary of an employee for the
purpose of computing the 13th-month pay shall include all remunerations or earnings paid by an employer for
services rendered during normal working hours.
2. Overload work/pay
Overload on the other hand means "the load in excess of the normal load of private school teachers as prescribed by
the Department of Education, Culture and Sports (DECS) or the policies, rules and standards of particular private
schools." In recognition of the peculiarities of the teaching profession, existing DECS and School Policies and
Regulations for different levels of instructions prescribe a regular teaching load, the total actual teaching or classroom
hours of which a teacher can generally perform in less than eight (8) hours per working day. This is because teaching
may also require the teacher to do additional work such as handling an advisory class, preparation of lesson plans
and teaching aids, evaluation of students and other related activities. Where, however a teacher is engaged to
undertake actual additional teaching work after completing his/her regular teaching load, such additional work is
generally referred to as overload. In short, additional work in excess of the regular teaching load is overload
work. Regular teaching load and overload work, if any, may constitute a teacher's working day.
Where a teacher is required to perform such overload within the eight (8) hours normal working day, such
overload compensation shall be considered part of the basic pay for the purpose of computing the teacher's
13th-month pay. "Overload work" is sometimes misunderstood as synonymous to "overtime work" as this term is
used and understood in the Labor Code. These two terms are not the same because overtime work is work rendered
in excess of normal working hours of eight in a day (Art. 87, Labor Code). Considering that overload work may be
performed either within or outside eight hours in a day, overload work may or may not be overtime work.
3. Concluding Statement
In the light of the foregoing discussions, it is the position of this Department that all basic salary/wage representing
payments earned for actual work performed during or within the eight hours in a day, including payments for overload
work within eight hours, form part of basic wage and therefore are to be included in the computation of 13th-month
pay mandated by PD 851, as amended.24 (Underscoring supplied)
On the other hand, the Legal Services Department of the DOLE holds in its opinion of March 4, 1992 that remunerations for
teaching in excess of the regular load shall be excluded in the computation of the 13th-month pay unless, by school policy, the
same are considered as part of the basic salary of the qualified teachers. 25
This opinion is later affirmed by the DOLE Order, pertinent portions of which are quoted below:
xxxx
2. In accordance with Article 83 of the Labor Code of the Philippines, as amended, the normal hours of work of school
academic personnel shall not exceed eight (8) hours a day. Any work done in addition to the eight (8) hours daily
work shall constitute overtime work.
3. The normal hours of work of teaching or academic personnel shall be based on their normal or regular teaching
loads. Such normal or regular teaching loads shall be in accordance with the policies, rules and standards prescribed
by the Department of Education, Culture and Sports, the Commission on Higher Education and the Technical
Education and Skills Development Authority. Any teaching load in excess of the normal or regular teaching load
shall be considered as overload. Overload partakes of the nature of temporary extra assignment and
compensation therefore shall be considered as an overload honorarium if performed within the 8-hour work
period and does not form part of the regular or basic pay. Overload performed beyond the eight-hour daily work is
overtime work.26 (Emphasis supplied)
It was the above-quoted DOLE Order which was used by the LA as basis for ruling against herein petitioner.
The petitioners claim that the DOLE Order should not be made to apply to the present case because said Order was issued
only in 1996, approximately four years after the present case was initiated before the Regional Arbitration Branch of the NLRC,
is not without basis. The general rule is that administrative rulings and circulars shall not be given retroactive effect.27
Nevertheless, it is a settled rule that when an administrative or executive agency renders an opinion or issues a
statement of policy, it merely interprets a pre-existing law and the administrative interpretation is at best advisory for
it is the courts that finally determine what the law means.28
In the present case, while the DOLE Order may not be applicable, the Court finds that overload pay should be excluded from
the computation of the 13th-month pay of petitioner's members.
In resolving the issue of the inclusion or exclusion of overload pay in the computation of a teacher's 13th-month pay, it is
decisive to determine what "basic salary" includes and excludes.
In this respect, the Court's disquisition in San Miguel Corporation v. Inciong29 is instructive, to wit:

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 Under Presidential Decree 851 and its implementing rules, the basic salary of an employee is used as the basis in the
determination of his 13th month pay. Any compensations or remunerations which are deemed not part of the basic
pay is excluded as basis in the computation of the mandatory bonus.
Under the Rules and Regulations Implementing Presidential Decree 851, the following compensations are deemed
not part of the basic salary:
a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter of Instruction No. 174;
b) Profit sharing payments;
c) All allowances and monetary benefits which are not considered or integrated as part of the regular basic salary of
the employee at the time of the promulgation of the Decree on December 16, 1975.
Under a later set of Supplementary Rules and Regulations Implementing Presidential Decree 851 issued by the then
Labor Secretary Blas Ople, overtime pay, earnings and other remunerations are excluded as part of the basic salary
and in the computation of the 13th-month pay.
The exclusion of cost-of-living allowances under Presidential Decree 525 and Letter of Instruction No. 174 and profit
sharing payments indicate the intention to strip basic salary of other payments which are properly considered as
"fringe" benefits. Likewise, the catch-all exclusionary phrase "all allowances and monetary benefits which are not
considered or integrated as part of the basic salary" shows also the intention to strip basic salary of any and all
additions which may be in the form of allowances or "fringe" benefits.
Moreover, the Supplementary Rules and Regulations Implementing Presidential Decree 851 is even more emphatic
in declaring that earnings and other remunerations which are not part of the basic salary shall not be included in the
computation of the 13th-month pay.
While doubt may have been created by the prior Rules and Regulations Implementing Presidential Decree 851 which
defines basic salary to include all remunerations or earnings paid by an employer to an employee, this cloud is
dissipated in the later and more controlling Supplementary Rules and Regulations which categorically, exclude from
the definition of basic salary earnings and other remunerations paid by employer to an employee. A cursory perusal
of the two sets of Rules indicates that what has hitherto been the subject of a broad inclusion is now a subject of
broad exclusion. The Supplementary Rules and Regulations cure the seeming tendency of the former rules to include
all remunerations and earnings within the definition of basic salary.
The all-embracing phrase "earnings and other remunerations" which are deemed not part of the basic salary includes
within its meaning payments for sick, vacation, or maternity leaves, premium for works performed on rest days and
special holidays, pay for regular holidays and night differentials. As such they are deemed not part of the basic salary
and shall not be considered in the computation of the 13th-month pay. If they were not so excluded, it is hard to find
any "earnings and other remunerations" expressly excluded in the computation of the 13 th-month pay. Then the
exclusionary provision would prove to be idle and with no purpose.
This conclusion finds strong support under the Labor Code of the Philippines. To cite a few provisions:
"Art. 87 Overtime work. Work may be performed beyond eight (8) hours a day provided that the employee is paid
for the overtime work, additional compensation equivalent to his regular wage plus at least twenty-five (25%) percent
thereof."
It is clear that overtime pay is an additional compensation other than and added to the regular wage or basic salary,
for reason of which such is categorically excluded from the definition of basic salary under the Supplementary Rules
and Regulations Implementing Presidential Decree 851.
In Article 93 of the same Code, paragraph
"c.) work performed on any special holiday shall be paid an additional compensation of at least thirty percent (30%) of
the regular wage of the employee."
It is likewise clear that premium for special holiday which is at least 30% of the regular wage is an additional
compensation other than and added to the regular wage or basic salary. For similar reason it shall not be considered
in the computation of the 13th -month pay.30
In the same manner that payment for overtime work and work performed during special holidays is considered as additional
compensation apart and distinct from an employee's regular wage or basic salary, an overload pay, owing to its very nature
and definition, may not be considered as part of a teacher's regular or basic salary, because it is being paid for additional work
performed in excess of the regular teaching load.
The peculiarity of an overload lies in the fact that it may be performed within the normal eight-hour working day. This is the
only reason why the DOLE, in its explanatory bulletin, finds it proper to include a teacher's overload pay in the determination of
his or her 13th-month pay. However, the DOLE loses sight of the fact that even if it is performed within the normal eight-hour
working day, an overload is still an additional or extra teaching work which is performed after the regular teaching load has
been completed. Hence, any pay given as compensation for such additional work should be considered as extra and not
deemed as part of the regular or basic salary.
Moreover, petitioner failed to refute private respondent's contention that excess teaching load is paid by the hour, while the
regular teaching load is being paid on a monthly basis; and that the assignment of overload is subject to the availability of
184
teaching loads. This only goes to show that overload pay is not integrated with a teacher's basic salary for his or her regular
teaching load. In addition, overload varies from one semester to another, as it is dependent upon the availability of extra
teaching loads. As such, it is not legally feasible to consider payments for such overload as part of a teacher's regular or basic
salary. Verily, overload pay may not be included as basis for determining a teacher's 13th-month pay.
WHEREFORE, the instant petition is DENIED. The assailed Decision and Resolution of the Court of Appeals are AFFIRMED.
SO ORDERED.

G.R. No. 153510 February 13, 2008

R.B. MICHAEL PRESS and ANNALENE REYES ESCOBIA, petitioners,
vs.
NICASIO C. GALIT, respondent.
DECISION
VELASCO, JR., J.:
The Case
Year in, year out, a copious number of illegal dismissal cases reach the Court of Appeals (CA) and eventually end up with this
Court. This petition for review under Rule 45 registered by petitioners R.B. Michael Press and Annalene Reyes Escobia
against their former machine operator, respondent Nicasio C. Galit, is among them. It assails the November 14, 2001 Decision
of the CA in CA-G.R. SP No. 62959, finding the dismissal of respondent illegal. Likewise challenged is the May 7, 2002
Resolution denying reconsideration.
The Facts
On May 1, 1997, respondent was employed by petitioner R.B. Michael Press as an offset machine operator, whose work
schedule was from 8:00 a.m. to 5:00 p.m., Mondays to Saturdays, and he was paid PhP 230 a day. During his employment,
Galit was tardy for a total of 190 times, totaling to 6,117 minutes, and was absent without leave for a total of nine and a half
days.
On February 22, 1999, respondent was ordered to render overtime service in order to comply with a job order deadline, but he
refused to do so. The following day, February 23, 1999, respondent reported for work but petitioner Escobia told him not to
work, and to return later in the afternoon for a hearing. When he returned, a copy of an Office Memorandum was served on
him, as follows:
To : Mr. Nicasio Galit
From : ANNALENE REYES-ESCOBIA
Re : WARNING FOR DISMISSAL; NOTICE OF HEARING
This warning for dismissal is being issued for the following offenses:
(1) habitual and excessive tardiness
(2) committing acts of discourtesy, disrespect in addressing superiors
(3) failure to work overtime after having been instructed to do so
(4) Insubordination - willfully disobeying, defying or disregarding company authority
The offenses youve committed are just causes for termination of employment as provided by the Labor Code. You
were given verbal warnings before, but there had been no improvement on your conduct.
Further investigation of this matter is required, therefore, you are summoned to a hearing at 4:00 p.m. today. The
hearing wills determine your employment status with this company.
(SGD) ANNALENE REYES-ESCOBIA
Manager1
On February 24, 1999, respondent was terminated from employment. The employer, through petitioner Escobia, gave him his
two-day salary and a termination letter, which reads:
February 24, 1999
Dear Mr. Nicasio Galit,
I am sorry to inform you that your employment with this company has been terminated effective today, February 24,
1999. This decision was not made without a thorough and complete investigation.
You were given an office memo dated February 23, 1999 warning you of a possible dismissal. You were given a
chance to defend yourself on a hearing that was held in the afternoon of the said date.
During the hearing, Mrs. Rebecca Velasquez and Mr. Dennis Reyes, were present in their capacity as Production
Manager and Supervisor, respectively.
Your admission to your offenses against the company and the testimonies from Mrs. Velasquez and Mr. Reyes
justified your dismissal from this company,
Please contact Ms. Marly Buita to discuss 13th-Month Pay disbursements.
Cordially,
(SGD) Mrs. Annalene Reyes-Escobia2

185
Respondent subsequently filed a complaint for illegal dismissal and money claims before the National Labor Relations
Commission (NLRC) Regional Arbitration Branch No. IV, which was docketed as NLRC Case No. RAB IV-2-10806-99-C. On
October 29, 1999, the labor arbiter rendered a Decision,
WHEREFORE, premises considered, there being a finding that complainant was illegally dismissed, respondent RB
MICHAEL PRESS/Annalene Reyes-Escobia is hereby ordered to reinstate complainant to his former position without
loss of seniority rights and other benefits, and be paid his full backwages computed from the time he was illegally
dismissed up to the time of his actual reimbursement.
All other claims are DISMISSED for lack of evidence.
SO ORDERED.3
On January 3, 2000, petitioners elevated the case to the NLRC and their appeal was docketed as NLRC NCR CA No. 022433-
00. In the April 28, 2000 Decision, the NLRC dismissed the appeal for lack of merit.
Not satisfied with the ruling of the NLRC, petitioners filed a Petition for Certiorari with the CA. On November 14, 2001, the CA
rendered its judgment affirming with modification the NLRCs Decision, thus:
WHEREFORE, the petition is DISMISSED for lack of merit. The Decision of public respondent is accordingly modified
in that the basis of the computation of the backwages, 13 th month pay and incentive pay should be respondents daily
wage of P230.00; however, backwages should be computed from February 22, 1999 up to the finality of this decision,
plus the 13th month and service incentive leave pay.4
The CA found that it was not the tardiness and absences committed by respondent, but his refusal to render overtime work on
February 22, 1999 which caused the termination of his employment. It ruled that the time frame in which respondent was
afforded procedural due process is dubitable; he could not have been afforded ample opportunity to explain his side and to
adduce evidence on his behalf. It further ruled that the basis for computing his backwages should be his daily salary at the
time of his dismissal which was PhP 230, and that his backwages should be computed from the time of his dismissal up to the
finality of the CAs decision.
On December 3, 2001, petitioners asked for reconsideration 5 but was denied in the CAs May 7, 2002 Resolution.
Persistent, petitioners instituted the instant petition raising numerous issues which can be summarized, as follows: first,
whether there was just cause to terminate the employment of respondent, and whether due process was observed in the
dismissal process; and second, whether respondent is entitled to backwages and other benefits despite his refusal to be
reinstated.
The Courts Ruling
It is well settled that findings of fact of quasi-judicial agencies, like the NLRC, are accorded not only respect but even finality if
the findings are supported by substantial evidence. This is especially so when such findings of the labor arbiter were affirmed
by the CA.6 However, this is not an iron-clad rule. Though the findings of fact by the labor arbiter may have been affirmed and
adopted by the NLRC and the CA as in this case, it cannot divest the Court of its authority to review the findings of fact of the
lower courts or quasi-judicial agencies when it sees that justice has not been served, more so when the lower courts or quasi-
judicial agencies findings are contrary to the evidence on record or fail to appreciate relevant and substantial evidence
presented before it.7
Petitioners aver that Galit was dismissed due to the following offenses: (1) habitual and excessive tardiness; (2) commission of
discourteous acts and disrespectful conduct when addressing superiors; (3) failure to render overtime work despite instruction
to do so; and (4) insubordination, that is, willful disobedience of, defiance to, or disregard of company authority. 8 The foregoing
charges may be condensed into: (1) tardiness constituting neglect of duty; (2) serious misconduct; and (3) insubordination or
willful disobedience.
Respondents tardiness cannot be considered condoned by petitioners
Habitual tardiness is a form of neglect of duty. Lack of initiative, diligence, and discipline to come to work on time everyday
exhibit the employees deportment towards work. Habitual and excessive tardiness is inimical to the general productivity and
business of the employer. This is especially true when the tardiness and/or absenteeism occurred frequently and repeatedly
within an extensive period of time.
In resolving the issue on tardiness, the labor arbiter ruled that petitioners cannot use respondents habitual tardiness and
unauthorized absences to justify his dismissal since they had already deducted the corresponding amounts from his salary.
Furthermore, the labor arbiter explained that since respondent was not subjected to any admonition or penalty for tardiness,
petitioners then had condoned the offense or that the infraction is not serious enough to merit any penalty. The CA then
supported the labor arbiters ruling by ratiocinating that petitioners cannot draw on respondents habitual tardiness in order to
dismiss him since there is no evidence which shows that he had been warned or reprimanded for his excessive and habitual
tardiness.
We find the ruling incorrect.
The mere fact that the numerous infractions of respondent have not been immediately subjected to sanctions cannot be
interpreted as condonation of the offenses or waiver of the company to enforce company rules. A waiver is a voluntary and
intentional relinquishment or abandonment of a known legal right or privilege. 9 It has been ruled that "a waiver to be valid and
effective must be couched in clear and unequivocal terms which leave no doubt as to the intention of a party to give up a right
186
or benefit which legally pertains to him."10 Hence, the management prerogative to discipline employees and impose
punishment is a legal right which cannot, as a general rule, be impliedly waived.
In Cando v. NLRC,11 the employee did not report for work for almost five months when he was charged for absenteeism. The
employee claimed that such absences due to his handling of union matters were condoned. The Court held that the employee
did not adduce proof to show condonation coupled with the fact that the company eventually instituted the administrative
complaint relating to his company violations.
Thus it is incumbent upon the employee to adduce substantial evidence to demonstrate condonation or waiver on the part of
management to forego the exercise of its right to impose sanctions for breach of company rules.
In the case at bar, respondent did not adduce any evidence to show waiver or condonation on the part of petitioners. Thus the
finding of the CA that petitioners cannot use the previous absences and tardiness because respondent was not subjected to
any penalty is bereft of legal basis. In the case of Filipio v. The Honorable Minister Blas F. Ople,12 the Court, quoting then
Labor Minister Ople, ruled that past infractions for which the employee has suffered the corresponding penalty for each
violation cannot be used as a justification for the employees dismissal for that would penalize him twice for the same offense.
At most, it was explained, "these collective infractions could be used as supporting justification to a subsequent similar
offense." In contrast, the petitioners in the case at bar did not impose any punishment for the numerous absences and
tardiness of respondent. Thus, said infractions can be used collectively by petitioners as a ground for dismissal.
The CA however reasoned out that for respondents absences, deductions from his salary were made and hence to allow
petitioners to use said absences as ground for dismissal would amount to "double jeopardy."
This postulation is incorrect.
Respondent is admittedly a daily wage earner and hence is paid based on such arrangement. For said daily paid workers, the
principle of "a days pay for a days work" is squarely applicable. Hence it cannot be construed in any wise that such
nonpayment of the daily wage on the days he was absent constitutes a penalty.
Insubordination or willful disobedience
While the CA is correct that the charge of serious misconduct was not substantiated, the charge of insubordination however is
meritorious.
For willful disobedience to be a valid cause for dismissal, these two elements must concur: (1) the employees assailed
conduct must have been willful, that is, characterized by a wrongful and perverse attitude; and (2) the order violated must have
been reasonable, lawful, made known to the employee, and must pertain to the duties which he had been engaged to
discharge.13
In the present case, there is no question that petitioners order for respondent to render overtime service to meet a production
deadline complies with the second requisite. Art. 89 of the Labor Code empowers the employer to legally compel his
employees to perform overtime work against their will to prevent serious loss or damage:
Art. 89. EMERGENCY OVERTIME WORK
Any employee may be required by the employer to perform overtime work in any of the following cases:
xxxx
(c) When there is urgent work to be performed on machines, installations, or equipment, in order to avoid serious loss
or damage to the employer or some other cause of similar nature;
xxxx
In the present case, petitioners business is a printing press whose production schedule is sometimes flexible and varying. It is
only reasonable that workers are sometimes asked to render overtime work in order to meet production deadlines.
Dennis Reyes, in his Affidavit dated May 3, 1999, stated that in the morning of February 22, 1999, he approached and asked
respondent to render overtime work so as to meet a production deadline on a printing job order, but respondent refused to do
so for no apparent reason. Respondent, on the other hand, claims that the reason why he refused to render overtime work
was because he was not feeling well that day.
The issue now is, whether respondents refusal or failure to render overtime work was willful; that is, whether such refusal or
failure was characterized by a wrongful and perverse attitude. In Lakpue Drug Inc. v. Belga, willfulness was described as
"characterized by a wrongful and perverse mental attitude rendering the employees act inconsistent with proper
subordination."14 The fact that respondent refused to provide overtime work despite his knowledge that there is a production
deadline that needs to be met, and that without him, the offset machine operator, no further printing can be had, shows his
wrongful and perverse mental attitude; thus, there is willfulness.
Respondents excuse that he was not feeling well that day is unbelievable and obviously an afterthought. He failed to present
any evidence other than his own assertion that he was sick. Also, if it was true that he was then not feeling well, he would have
taken the day off, or had gone home earlier, on the contrary, he stayed and continued to work all day, and even tried to go to
work the next day, thus belying his excuse, which is, at most, a self-serving statement.
After a re-examination of the facts, we rule that respondent unjustifiably refused to render overtime work despite a valid order
to do so. The totality of his offenses against petitioner R.B. Michael Press shows that he was a difficult employee. His refusal
to render overtime work was the final straw that broke the camels back, and, with his gross and habitual tardiness and
absences, would merit dismissal from service.
187
Due process: twin notice and hearing requirement
On the issue of due process, petitioners claim that they had afforded respondent due process. Petitioners maintain that they
had observed due process when they gave respondent two notices and that they had even scheduled a hearing where he
could have had explained his side and defended himself.
We are not persuaded.
We held in Agabon v. NLRC:
Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must give the employee
two written notices and a hearing or opportunity to be heard if requested by the employee before terminating the
employment: a notice specifying the grounds for which dismissal is sought a hearing or an opportunity to be heard
and after hearing or opportunity to be heard, a notice of the decision to dismiss; and (2) if the dismissal is based on
authorized causes under Articles 283 and 284, the employer must give the employee and the Department of Labor
and Employment written notices 30 days prior to the effectivity of his separation. 15
Under the twin notice requirement, the employees must be given two (2) notices before his employment could be terminated:
(1) a first notice to apprise the employees of their fault, and (2) a second notice to communicate to the employees that their
employment is being terminated. Not to be taken lightly of course is the hearing or opportunity for the employee to defend
himself personally or by counsel of his choice.
In King of Kings Transport v. Mamac,16 we had the occasion to further elucidate on the procedure relating to the twin notice
and hearing requirement, thus:
(1) The first written notice to be served on the employees should contain the specific causes or grounds for
termination against them, and a directive that the employees are given the opportunity to submit their written
explanation within a reasonable period. "Reasonable opportunity" under the Omnibus Rules means every kind of
assistance that management must accord to the employees to enable them to prepare adequately for their defense.
This should be construed as a period of at least five (5) calendar days from receipt of the notice to give the
employees an opportunity to study the accusation against them, consult a union official or lawyer, gather data and
evidence, and decide on the defenses they will raise against the complaint. Moreover, in order to enable the
employees to intelligently prepare their explanation and defenses, the notice should contain a detailed narration of
the facts and circumstances that will serve as basis for the charge against the employees. A general description of
the charge will not suffice. Lastly, the notice should specifically mention which company rules, if any, are violated
and/or which among the grounds under Art. 282 is being charged against the employees.
(2) After serving the first notice, the employers should schedule and conduct a hearing or conferencewherein the
employees will be given the opportunity to: (1) explain and clarify their defenses to the charge against them; (2)
present evidence in support of their defenses; and (3) rebut the evidence presented against them by the
management. During the hearing or conference, the employees are given the chance to defend themselves
personally, with the assistance of a representative or counsel of their choice. Moreover, this conference or hearing
could be used by the parties as an opportunity to come to an amicable settlement.
(3) After determining that termination of employment is justified, the employers shall serve the employees a written
notice of termination indicating that: (1) all circumstances involving the charge against the employees have been
considered; and (2) grounds have been established to justify the severance of their employment.
In addition, if the continued employment poses a serious and imminent threat to the life or property of the employers or of
other employees like theft or physical injuries, and there is a need for preventive suspension, 17the employers can immediately
suspend the erring employees for a period of not more than 30 days. Notwithstanding the suspension, the employers are
tasked to comply with the twin notice requirement under the law. The preventive suspension cannot replace the required
notices.18 Thus, there is still a need to comply with the twin notice requirement and the requisite hearing or conference to
ensure that the employees are afforded due process even though they may have been caught in flagrante or when the
evidence of the commission of the offense is strong.
On the surface, it would seem that petitioners observed due process (twin notice and hearing requirement): On February 23,
1999 petitioner notified respondent of the hearing to be conducted later that day. On the same day before the hearing,
respondent was furnished a copy of an office memorandum which contained a list of his offenses, and a notice of a scheduled
hearing in the afternoon of the same day. The next day, February 24, 1999, he was notified that his employment with petitioner
R.B. Michael Press had been terminated.
A scrutiny of the disciplinary process undertaken by petitioners leads us to conclude that they only paid lip service to the due
process requirements.
The undue haste in effecting respondents termination shows that the termination process was a mere simulationthe
required notices were given, a hearing was even scheduled and held, but respondent was not really given a real opportunity to
defend himself; and it seems that petitioners had already decided to dismiss respondent from service, even before the first
notice had been given.
Anent the written notice of charges and hearing, it is plain to see that there was merely a general description of the claimed
offenses of respondent. The hearing was immediately set in the afternoon of February 23, 1999the day respondent received
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the first notice. Therefore, he was not given any opportunity at all to consult a union official or lawyer, and, worse, to prepare
for his defense.
Regarding the February 23, 1999 afternoon hearing, it can be inferred that respondent, without any lawyer or friend to counsel
him, was not given any chance at all to adduce evidence in his defense. At most, he was asked if he did not agree to render
overtime work on February 22, 1999 and if he was late for work for 197 days. He was never given any real opportunity to
justify his inability to perform work on those days. This is the only explanation why petitioners assert that
respondent admitted all the charges.
In the February 24, 1999 notice of dismissal, petitioners simply justified respondents dismissal by citing his admission of the
offenses charged. It did not specify the details surrounding the offenses and the specific company rule or Labor Code
provision upon which the dismissal was grounded.
In view of the infirmities in the proceedings, we conclude that termination of respondent was railroaded in serious breach of his
right to due process. And as a consequence of the violation of his statutory right to due process and following Agabon,
petitioners are liable jointly and solidarily to pay nominal damages to the respondent in the amount of PhP 30,000.19
WHEREFORE, premises considered, the November 14, 2001 CA Decision in CA-G.R. SP No. 62959, the April 28, 2000
Decision of the NLRC in NLRC NCR CA No. 022433-00, and the October 29, 1999 Decision of the Labor Arbiter in NLRC
Case No. RAB IV-2-10806-99-C are hereby REVERSED and SET ASIDE. The Court declares respondents dismissal from
employment VALID and LEGAL. Petitioners are, however, ordered jointly and solidarily to pay respondent nominal damages
in the amount of PhP 30,000 for violation of respondents right to due process.
No costs.
SO ORDERED.

G.R. No. 173357 February 13, 2013

ROWENA DE LEON CRUZ, Petitioner,
vs.
BANK OF THE PHILIPPINE ISLANDS, Respondents.
DECISION
PERALTA, J.:
This is a petition for review on certiorari 1 of the Court of Appeals' Decision2 dated April 27. 2006 in CA-G.R. SP No. 92202,
and its Resolution dated .July 13, 2006, denying petitioner's motion for reconsideration.
The Court of Appeals affirmed the Decision of the National Labor Relations Commission (NLRC), dated January 31, 2005,
which reversed and set aside the Decision of the Labor Arbiter finding the dismissal of petitioner Rowena de Leon Cruz to he
illegal. The NLRC dismissed petitioners Complaint for lack of merit.
The facts are as follows:
Petitioner was hired by Far East Bank and Trust Company (FEBTC) in 1989. Upon the merger of FEBTC with respondent
Bank of the Philippine Islands (BPI) in April 2000, petitioner automatically became an employee of respondent. Petitioner held
the position of Assistant Branch Manager of the BPI Ayala Avenue Branch in Makati City, and she was in charge of the
Trading Section.
On July 12, 2002, after 13 years of continuous service, respondent terminated petitioner on grounds of gross negligence and
breach of trust. Petitioner's dismissal was brought about by the fraud perpetrated against three depositors, namely, Geoffrey L.
Uymatiao, Maybel Caluag and Evelyn G. Avila, in respondent's Ayala Avenue Branch.
The fraud committed against Uymatiao, Caluag and Avila was narrated by the NLRC and the Court of Appeals as follows:
On June 2, 1997, Geoffrey Uymatiao deposited US$29,592.30 under a U.S. Dollar Certificate of Deposit (USD CD) with
respondent's Ayala Avenue Branch. As shown on the USD CD, it was supposed to mature a month after its issuance or on
July 2, 1997. Since the USD CD was not presented by Uymatiao for redemption on July 2, 1997, it was automatically rolled
over on a monthly basis by the bank with a new USD CD being issued for each rolled-over USD CD, and the rolled-over USD
CD was kept by the bank.
On June 21, 2000, Uymatiao's USD CD, with due date on June 27, 2000, was pre-terminated and the proceeds thereof,
amounting to US$34,358.03, was credited to an account opened in the name of Uymatiao by means of an Instruction Sheet.
However, it was not Uymatiao who pre-terminated the last USD CD, as the prior USD CD was still in his possession. When
Uymatiao discovered the fraud, he immediately wrote respondent a letter complaining that he was not the one who pre-
terminated the account. Upon investigation, it turned out that Uymatiao's signature was forged and intercalated in the records
of BPI Ayala Avenue Branch. Moreover, it was petitioner who approved the pre-termination of Uymatiao's USD CD and the
withdrawal of the proceeds thereof.
Uymatiao also had a U.S. Dollar Savings Account. For a time, his savings account was dormant. However, on June 23, 2003,
the account was reactivated, without Uymatiao's consent, through an alleged Instruction Sheet bearing the forged signature of
Uymatiao and a spurious passbook. On the same date that it was reactivated, the amount of US$15,000.00 was withdrawn.
On July 7, 2002, the amount of US$3,500.00 was again withdrawn from Uymatiao's account.

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Uymatiao complained about the illegal withdrawal. An investigation revealed that the Letter of Instruction, which was used to
reactivate the account, was a forgery. Moreover, it was found that petitioner was the one who approved the reactivation and
withdrawal of money from Uymatiao's account.
The second defrauded depositor, Maybel Caluag, deposited US$5,848.30 under a USD CD, which was supposed to mature
on February 11, 2000. The automatic roll-over of Caluag's USD CD would have continued, but on July 24, 2000, the same was
pre-terminated and the proceeds thereof, amounting to US$6,006.58, was credited to an account opened in the name of
Caluag by means of an Instruction Sheet. The amount was subsequently withdrawn.
On July 28, 2000, Caluag discovered the fraud and complained that she did not pre-terminate her USD CD. She said that she
was in Japan on July 24, 2000 and she did not authorize anyone to pre-terminate her account. She presented the original
certificate of deposit issued to her to prove that she did not have her account pre-terminated. Upon investigation, it was found
that petitioner was the one who approved the pre-termination of Caluag's account.
The third defrauded depositor, Evelyn Avila, had a balance of US$20,575.12 in her U.S. Dollar Savings Account as of March
31, 2000. On July 27, 2000, it was made to appear that Avila withdrew the balance from her account. On February 28, 2001,
Avila discovered the illegal withdrawal and complained to respondent about it. She said that she was in Australia on July 27,
2000 when the withdrawal from her account was made. An investigation later showed that it was petitioner who approved the
withdrawal from Avila's account.
On April 19, 2002, BPI Vice-President Edwin S. Ragos issued a memorandum3 directing petitioner to explain within 24 hours
the aforementioned unauthorized pre-terminations/withdrawals of US dollar deposits at the BPI Ayala Avenue Branch.
In petitioner's reply,4 she asserted that she followed the bank procedure/policy on pre-termination of accounts, opening of
transitory accounts and reactivation of dormant accounts. She explained that upon verifying the authenticity of the signatures
of the depositors involved, she approved the withdrawals from certain accounts of these clients. With regard to the pre-
termination of Uymatiao's USD CD, petitioner claimed that the Trader presented to her what she believed was an original and
genuine client copy of the certificate of deposit, the surrender of which caused the issuance of a new USD CD.
Moreover, petitioner stated that at the time the alleged fraudulent transactions took place, she was not yet an Assistant
Manager, but only a Cash II Officer of the branch, still operating under the FEBTC set-up. As such, she was in charge of
overseeing and supervising all the transactions in the Trading Section, among other departments. Hence, her responsibilities
required her only to bring out signature card files from the vault to the Trading Section and to ensure that these files were
returned to the vault at the close of banking hours.
On May 22, 2002, an administrative hearing was held to give petitioner an opportunity to explain her side of the controversy.
On July 10, 2002, a notice of termination5 was issued informing petitioner of her dismissal effective July 12, 2002 on grounds
of gross negligence and breach of trust for the following acts: (1) allowing the issuance of USD CDs under the bank's
safekeeping to an impostor without valid consideration; (2) allowing USD CD pre-terminations based on such irregularly
released certificates; and (3) allowing withdrawals by third parties from clients' accounts, which resulted in prejudice to the
bank.
Petitioner filed an appeal before BPI President Xavier Loinaz, but her appeal was denied.
The aforementioned incidents of fraud resulted in the dismissal of three officers, including petitioner, one trader; the
suspension of two officers and one trader, and the reprimand of one teller.6
Thereafter, petitioner filed a Complaint for illegal dismissal against respondent and its officers with the Arbitral Office of the
NLRC.
In her Position Paper, petitioner alleged that her employment record as an officer and staff had always been beyond par and
was not tainted with any fraud or anomaly. When the incidents took place, she was barely two months as Service Officer of the
Ayala Avenue Branch's Trading Section, and she was hardly familiar with any bank client, not to mention the enormous
volume of transactions handled by the said BPI branch. Being new in her position, she had yet to adjust to the system in place.
Nonetheless, she followed the policies and procedural control prior to affixing her initials as approving authority; hence,
petitioner asserted that her dismissal was grossly disproportionate as a penalty.
In respondent's Position Paper, respondent asserted that petitioner's dismissal is legal; hence, petitioner has no cause of
action against it. Respondent stated that there is no question that the fraudulent incidents, which affected its three depositors,
namely, Uymatiao, Caluag and Avila, happened in its Ayala Avenue Branch, and that the fraudulent transactions were
approved by petitioner as borne out by her signature on the documents allowing the pre-termination of certificates of dollar
deposits and allowing the withdrawal of dollar deposits from the respective savings account of the affected depositors.
Respondent stated that in giving the aforementioned unauthorized pre-termination and withdrawal transactions her seal of
approval, petitioner neglected to perform one, if not the most, basic banking requirement integral to these transactions, which
is to see to it that the persons who effected the pre-termination and cancellation of the USD CDs and who made the
withdrawals from the U.S. dollar savings deposits and received the proceeds thereof were really the depositors themselves,
namely, Uymatiao, Caluag and Avila. According to respondent, as it happened, respondent never exerted any effort to require
such persons to produce satisfactory identification, which was the reason the aforementioned incidents of fraud were
successfully carried out. If it had been her own money that was involved, petitioner would have asked for more than what was
expected of her in this case, which was simply to ask for satisfactory identification from the respective person effecting the pre-
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termination of the certificate of deposit and making the withdrawal. Hence, respondent submitted that petitioner's dismissal on
grounds of gross negligence and breach of trust, resulting in the substantial monetary loss to respondent in the sum of
US$81,492.39, which it reimbursed to the affected depositors, is legal and valid.
In a Decision7 dated April 1, 2004, the Labor Arbiter held that the dismissal of petitioner was illegal. The dispositive portion of
the decision reads:
WHEREFORE, decision is hereby rendered declaring the dismissal of complainant Rowena Cruz illegal such that respondent
Bank of the Philippine Islands is hereby ordered to reinstate her to her former or substantially equivalent position without loss
of seniority rights and other privileges and to pay her backwages and attorney's fees in the amount of SIX HUNDRED
THIRTY-NINE THOUSAND ONE HUNDRED EIGHTY-SIX PESOS AND 16/100 (P639,186.16).8
The Labor Arbiter held that petitioner cannot be considered a managerial employee, and that her dismissal on grounds of
gross negligence and breach of trust was unjustified.
On appeal, the NLRC reversed and set aside the Decision of the Labor Arbiter, and it entered a new decision dismissing
petitioner's Complaint for lack of merit.9
The NLRC stated that the evidence showed that the pre-termination of the accounts of the depositors involved and the
withdrawal of money from such accounts were with the approval of petitioner. A stamp of approval given by a bank officer,
especially in sensitive transactions like pre-termination of accounts and withdrawal of money, means that the corresponding
documents are in order and the validity of such documents had been verified. Otherwise, there would be no integrity in the
approval of these transactions, considering that approval is the last act that would give effect to the transactions involved.
According to the NLRC, the banking industry is such a sensitive one that the trust given by a bank's depositors must be
protected at all times even by the lowest-ranking employee. As petitioner's signature appeared in the documents showing her
approval of the pre-termination of the accounts of the depositors involved and the withdrawal of money from their accounts,
the NLRC reversed the decision of the Labor Arbiter and ruled that petitioner's dismissal was for a valid cause.
Petitioner filed a petition for certiorari with the Court of Appeals, alleging that the NLRC acted with grave abuse of discretion
amounting to lack or excess of jurisdiction for the following: (1) Failing to consider with great respect and finality the factual
findings of the Labor Arbiter that petitioner followed all the policies and procedures in place and, hence, is not remiss in her
duties; (2) concluding that mere approval of the transactions by petitioner in itself was a valid cause for dismissal; (3)
concluding that petitioner could not be exculpated from liability by claiming that it is not incumbent upon her to call the
depositors to personally appear before her and confirm their signatures when such is not required of petitioner; (4) not holding
that the petitioner could not have committed gross negligence at the time the questioned transactions occurred, as she was
not an Assistant Manager and her duties were that of a Cash II Officer; (5) not holding that there was insufficient factual and
legal basis to terminate petitioner's employment; (6) ignoring the fundamental rule that all doubts must be resolved in favor of
labor; (7) not affirming the award of backwages; and (8) not affirming the award of attorney's fees.10
On April 27, 2006, the Court of Appeals rendered a Decision,11 the dispositive portion of which reads:
WHEREFORE, premises considered, the Petition is hereby DENIED and is accordingly DISMISSED. No costs.12
The Court of Appeals disagreed with petitioner's submission, in gist, that her termination was grossly disproportionate to the
omission she committed. It stressed that petitioner was holding a highly confidential position, as Assistant Branch Manager, in
the banking industry, which required extraordinary diligence among its employees. If petitioner was still unfamiliar with the
terrain of her position, she should not have accepted it.
The Court of Appeals stated that petitioner is a managerial employee whose continuous employment is dependent on the trust
and confidence reposed on her by respondent. After the incident wherein respondent lost thousands of U.S. dollars, it could
not be expected that the trust and confidence petitioner was previously enjoying could still be extended by respondent. Hence,
the Court of Appeals held that petitioner's dismissal based on the ground of loss of trust and confidence was a valid exercise
of management prerogative.
Petitioner's motion for reconsideration was denied by the Court of Appeals in a Resolution13 dated July 13, 2006.
Petitioner filed this petition, and raised in her Memorandum the following issues:
I
WHETHER OR NOT THE FINDINGS OF FACT OF LABOR ARBITER LEDA ARE TO BE GIVEN MORE WEIGHT
AND RESPECT GIVEN THE DOCTRINE LAID DOWN THAT THOSE FINDINGS OF FACT OF THE LABOR
ARBITER, IN THE ABSENCE OF ANY FINDING OF ABUSE OF DISCRETION, ARE NOT TO BE DISTURBED ON
APPEAL.
II
WHETHER OR NOT THE EVIDENCE SUBMITTED BY RESPONDENT BANK IS SUBSTANTIAL IN CHARACTER
TO WARRANT THE DISMISSAL OF THE PETITIONER, GIVEN THE ELEMENTARY RULES IN LABOR THAT
DOUBTS ARE TO BE RESOLVED IN FAVOR OF LABOR AND THE BURDEN OF PROOF THAT DISMISSAL IS
FOR JUST CAUSE RESTS UPON THE EMPLOYER AND NOT ON THE WEAKNESS OF THE EVIDENCE FOR
THE EMPLOYEE.
III

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 WHETHER OR NOT THE PENALTY OF DISMISSAL IS DISPROPORTIONATE TO OR IS IT COMMENSURATE TO
THE ACTS ATTRIBUTED TO THE [PETITIONER] IN THE PERFORMANCE OF HER DUTIES.14
Petitioner contends that the factual finding of the Labor Arbiter is to be respected and given credence on appeal in the
absence of abuse of discretion.
As the decision of the Labor Arbiter has been appealed to the NLRC, the NLRC has the power to review the factual finding
and resolution of the Labor Arbiter. It is a settled rule that only errors of law are generally reviewed by this Court in petitions for
review on certiorari of the decisions of the Court of Appeals.15 However, an exception to this rule is when the findings of the
NLRC, as affirmed by the Court of Appeals, contradict those of the Labor Arbiter.16 In this case, the Labor Arbiter found that
petitioner was illegally dismissed, while the NLRC reversed the finding of the Labor Arbiter, which reversal was affirmed by the
Court of Appeals. In view of the discordance between the findings of the Labor Arbiter, on one hand, and the NLRC and the
Court of Appeals, on the other, there is a need for the Court, in the exercise of its equity jurisdiction, to review the factual
findings and the conclusions based on the said findings.17
After a review of the records of the case, the Court agrees with the findings of the Court of Appeals and the NLRC that
petitioner's dismissal was for a valid cause.
Respondent dismissed petitioner from her employment on grounds of gross negligence and breach of trust reposed on her by
respondent under Article 282 (b) and (c) of the Labor Code.
Gross negligence connotes want or absence of or failure to exercise slight care or diligence, or the entire absence of care. 18 It
evinces a thoughtless disregard of consequences without exerting any effort to avoid them. 19 On the other hand, the basic
premise for dismissal on the ground of loss of confidence is that the employees concerned hold a position of trust and
confidence.20 It is the breach of this trust that results in the employer's loss of confidence in the employee.21
In this case, respondent avers that petitioner held the position of Assistant Manager in its Ayala Avenue Branch. However,
petitioner contends that her position was only Cash II Officer.
The test of "supervisory" or "managerial status" depends on whether a person possesses authority to act in the interest of his
employer and whether such authority is not merely routinary or clerical in nature, but requires the use of independent
judgment.22
In respondent's Position Paper23 before the NLRC and its Memorandum,24 respondent stated that the responsibility of
petitioner, among others, were as follows: (1) to maintain the integrity of the signature card files of certificates of deposits
and/or detect spurious signature cards in the same files; (2) to ensure that releases of original CDS are done only against valid
considerations and made only to the legitimate depositors or their duly authorized representatives; (3) to approve payments or
withdrawals of deposits by clients to ensure that such withdrawals are valid transactions of the bank; and (4) to supervise the
performance of certain rank-and-file employees of the branch.
Petitioner holds a managerial status since she is tasked to act in the interest of her employer as she exercises independent
judgment when she approves pre-termination of USD CDs or the withdrawal of deposits. In fact, petitioner admitted the
exercise of independent judgment when she explained that as regards the pre-termination of the USD CDs of Uymatiao and
Caluag, the transactions were approved on the basis of her independent judgment that the signatures in all the documents
presented to her by the traders matched, as shown in her reply25 dated April 23, 2002 to respondent's memorandum asking
her to explain the unauthorized preterminations/withdrawals of U.S. dollar deposits in the BPI Ayala Avenue Branch.
Petitioner contends that respondent failed to submit substantial evidence to warrant a conclusion that she committed acts
amounting to willful breach of trust and gross negligence. Petitioner submits that although she approved the fraudulent pre-
termination of the accounts involved as well as the withdrawal of money from the accounts, before she affixed her signature on
the questioned transactions, she followed office procedures by requiring the presentation of the original certificate on file with
the branch bearing the client's signatures as proof that he holds the original in his possession, withdrawal slips, which when
matched by her (petitioner) with the signature card on file with the branch, were found to be all the same. Hence, all required
signatures matched before she (petitioner) gave her approval. According to petitioner, per respondent's policy, the signature
card on file is the most exacting requirement in branch operations; hence, even when an identification card is required from the
bank's client, the basis of approval would still be the signature card on file with the branch. Moreover, petitioner reasons that
she was barely two months with the BPI Ayala Avenue Branch when the questioned transactions occurred. She asserts that
she had no participation in the insertion of spurious signature cards which was done prior to her designation as Cash II Officer
of the Ayala Avenue Branch.
Respondent counters that investigation disclosed that in approving the respective pre-termination transactions of Uymatiao
and Caluag, no sincere effort was made by petitioner to properly identify the person or persons presenting the certificates of
deposit for pre-termination. In other words, petitioner did not see to it that it was really Uymatiao or Caluag who was pre-
terminating his/her USD CD. Neither did petitioner require that the original certificates of time deposit, which were supposed to
be in the possession of Uymatiao and Caluag, be surrendered in exchange for the rolled-over certificates which were pre-
terminated.
The Court notes that petitioner admitted that she did not call the depositors to appear before her, although she performed
other procedures to determine whether the subject transactions were with the depositors' authorization.26 Petitioner did not
determine if it was really Uymatiao and Caluag who were pre-terminating their respective USD CD, as she based the
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identification of the said clients from their matching signatures on the original certificate on file with the branch, withdrawal slips
and signature cards. Moreover, as stated by respondent, petitioner did not require that the original certificates of time deposit
in the possession of Uymatiao and Caluag be surrendered to the bank when the rolled-over certificates were pre-terminated. If
petitioner took the precaution to identify that it was really Uymatiao and Caluag who were pre-terminating their respective USD
CD, and required that Uymatiao and Calaug surrender their respective original certificates of time deposit in their possession
upon pre-termination of the rolled-over certificates, the fraud could have been averted.
In that regard, petitioner was remiss in the performance of her duty to approve the pre-termination of certificates of deposits by
legitimate depositors or their duly-authorized representatives, resulting in prejudice to the bank, which reimbursed the
monetary loss suffered by the affected clients. Hence, respondent was justified in dismissing petitioner on the ground of
breach of trust. As long as there is some basis for such loss of confidence, such as when the employer has reasonable ground
to believe that the employee concerned is responsible for the purported misconduct, and the nature of his participation therein
renders him unworthy of the trust and confidence demanded of his position, a managerial employee may be dismissed. 27
Bristol Myers Squibb (Phils). Inc. v. Baban28 reiterated:
x x x [A]s a general rule. employers are allowed a wider latitude of discretion in terminating the services of employees who
perform functions by which their nature require the employer's full trust and confidence. Mere existence of basis for believing
that the employee has breached the trust and confidence of the employer is sufficient and does not require proof beyond
reasonable doubt. Thus. when an employee has been guilty of breach of trust or his employer has ample reason to distrust
him. a labor tribunal cannot deny the employer the authority to dismiss him.29
In fine, the dismissal of petitioner on the ground of breach of trust or loss of trust and confidence is upheld.
WHEREFORE, the petition is DENIED. The Court of Appeals Decision dated April 27, 2006 in CA-G.R. SP No. 92202, and its
Resolution dated July 13, 2006 are hereby AFFIRMED.
No costs.
SO ORDERED.

G.R. No. 184517 October 8, 2013

SME BANK INC., ABELARDO P. SAMSON, OLGA SAMSON and AURELIO VILLAFLOR, JR., Petitioners,
vs.
PEREGRIN T. DE GUZMAN,EDUARDO M. AGUSTIN, JR., ELICERIO GASPAR, , RICARDO GASPAR JR., EUFEMIA
ROSETE, FIDEL ESPIRITU, SIMEONESPIRITU, JR., and LIBERATO MANGOBA, Respondents.
x-----------------------x
G.R. No. 186641
SME BANK INC., ABELARDO P. SAMSON, OLGA SAMSON and AURELIO VILLAFLOR, JR., Petitioners,
vs.
ELICERIO GASPAR, RICARDO GASPAR, JR., EUFEMIA ROSETE, FIDEL ESPIRITU, SIMEONESPIRITU, JR., and
LIBERATO MANGOBA, Respondents.
DECISION
SERENO, CJ.:
Security of tenure is a constitutionally guaranteed right.1 Employees may not be terminated from their regular employment
except for just or authorized causes under the Labor Code 2 and other pertinent laws. A mere change in the equity composition
of a corporation is neither a just nor an authorized cause that would legally permit the dismissal of the corporations employees
en masse.
Before this Court are consolidated Rule 45 Petitions for Review on Certiorari 3 assailing the Decision4 and Resolution5 of the
Court of Appeals(CA) in CA-G.R. SP No. 97510 and its Decision6 and Resolution7 in CA-G.R. SP No. 97942.
The facts of the case are as follows:
Respondent employees Elicerio Gaspar (Elicerio), Ricardo Gaspar, Jr.(Ricardo), Eufemia Rosete (Eufemia), Fidel Espiritu
(Fidel), Simeon Espiritu, Jr. (Simeon, Jr.), and Liberato Mangoba (Liberato) were employees of Small and Medium Enterprise
Bank, Incorporated (SME Bank).Originally, the principal shareholders and corporate directors of the bank were Eduardo M.
Agustin, Jr. (Agustin) and Peregrin de Guzman, Jr. (De Guzman).
In June 2001, SME Bank experienced financial difficulties. To remedy the situation, the bank officials proposed its sale to
Abelardo Samson(Samson).8
Accordingly, negotiations ensued, and a formal offer was made to Samson. Through his attorney-in-fact, Tomas S. Gomez IV,
Samson then sent formal letters (Letter Agreements) to Agustin and De Guzman, demanding the following as preconditions for
the sale of SME Banks shares of stock:
4. You shall guarantee the peaceful turn over of all assets as well as the peaceful transition of management of the bank and
shall terminate/retire the employees we mutually agree upon, upon transfer of shares in favor of our groups nominees;
xxxx

193
7. All retirement benefits, if any of the above officers/stockholders/board of directors are hereby waived upon consummation
[sic] of the above sale. The retirement benefits of the rank and file employees including the managers shall be honored by the
new management in accordance with B.R. No. 10, S. 1997. 9
Agustin and De Guzman accepted the terms and conditions proposed by Samson and signed the conforme portion of the
Letter Agreements.10
Simeon Espiritu (Espiritu), then the general manager of SME Bank, held a meeting with all the employees of the head office
and of the Talaveraand Muoz branches of SME Bank and persuaded them to tender their resignations, 11 with the promise
that they would be rehired upon reapplication. His directive was allegedly done at the behest of petitioner Olga Samson. 12
Relying on this representation, Elicerio,13 Ricardo,14 Fidel,15 Simeon, Jr.,16 and Liberato17 tendered their resignations dated 27
August 2001. As for Eufemia, the records show that she first tendered a resignation letter dated27 August 2001, 18 and then a
retirement letter dated September 2001.19
Elicerio,20 Ricardo,21 Fidel,22 Simeon, Jr.,23 and Liberato24 submitted application letters on 11 September 2001. Both the
resignation letters and copies of respondent employees application letters were transmitted by Espiritu to Samsons
representative on 11 September 2001.25
On 11 September 2001, Agustin and De Guzman signified their conformity to the Letter Agreements and sold 86.365% of the
shares of stock of SME Bank to spouses Abelardo and Olga Samson. Spouses Samson then became the principal
shareholders of SME Bank, while Aurelio Villaflor, Jr. was appointed bank president. As it turned out, respondent employees,
except for Simeon, Jr.,26 were not rehired. After a month in service, Simeon, Jr. again resigned on October 2001. 27
Respondent-employees demanded the payment of their respective separation pays, but their requests were denied.
Aggrieved by the loss of their jobs, respondent employees filed a Complaint before the National Labor Relations Commission
(NLRC) Regional Arbitration Branch No. III and sued SME Bank, spouses Abelardo and Olga Samson and Aurelio Villaflor
(the Samson Group) for unfair labor practice; illegal dismissal; illegal deductions; underpayment; and nonpayment of
allowances, separation pay and 13th month pay.28 Subsequently, they amended their Complaint to include Agustin and De
Guzman as respondents to the case.29
On 27 October 2004, the labor arbiter ruled that the buyer of an enterprise is not bound to absorb its employees, unless there
is an express stipulation to the contrary. However, he also found that respondent employees were illegally dismissed, because
they had involuntarily executed their resignation letters after relying on representations that they would be given their
separation benefits and rehired by the new management. Accordingly, the labor arbiter decided the case against Agustin and
De Guzman, but dismissed the Complaint against the Samson Group, as follows:
WHEREFORE, premises considered, judgment is hereby rendered ordering respondents Eduardo Agustin, Jr. and Peregrin
De Guzman to pay complainants separation pay in the total amount of P339,403.00 detailed as follows:
Elicerio B. Gaspar = P 5,837.00
Ricardo B. Gaspar, Jr. = P11,674.00
Liberato B. Mangoba = P64,207.00
Fidel E. Espiritu = P29,185.00
Simeon B. Espiritu, Jr. = P26,000.00
Eufemia E. Rosete = P202,510.00
All other claims including the complaint against Abelardo Samson, Olga Samson and Aurelio Villaflor are hereby DISMISSED
for want of merit.
SO ORDERED.30
Dissatisfied with the Decision of the labor arbiter, respondent employees, Agustin and De Guzman brought separate appeals
to the NLRC. Respondent employees questioned the labor arbiters failure to award backwages, while Agustin and De
Guzman contended that they should not be held liable for the payment of the employees claims.
The NLRC found that there was only a mere transfer of shares and therefore, a mere change of management from Agustin
and De Guzman to the Samson Group. As the change of management was not a valid ground to terminate respondent bank
employees, the NLRC ruled that they had indeed been illegally dismissed. It further ruled that Agustin, De Guzman and the
Samson Group should be held jointly and severally liable for the employees separation pay and backwages, as follows:
WHEREFORE, premises considered, the Decision appealed from is hereby MODIFIED. Respondents are hereby Ordered to
jointly and severally pay the complainants backwages from 11 September 2001 until the finality of this Decision, separation
pay at one month pay for every year of service, P10,000.00 and P5,000.00 moral and exemplary damages, and five (5%)
percent attorneys fees.
Other dispositions are AFFIRMED
SO ORDERED.31
On 28 November 2006, the NLRC denied the Motions for Reconsideration filed by Agustin, De Guzman and the Samson
Group.32
Agustin and De Guzman filed a Rule 65 Petition for Certiorari with the CA, docketed as CA-G.R. SP No. 97510. The Samson
Group likewise filed a separate Rule 65 Petition for Certiorari with the CA, docketed as CA-G.R. SP No. 97942. Motions to
consolidate both cases were not acted upon by the appellate court.
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On 13 March 2008, the CA rendered a Decision in CA-G.R. SP No.97510 affirming that of the NLRC. The fallo of the CA
Decision reads:
WHEREFORE, in view of the foregoing, the petition is DENIED. Accordingly, the Decision dated May 8, 2006, and Resolution
dated November 28, 2006 of the National Labor Relations Commission in NLRC NCR CA No. 043236-05 (NLRC RAB III-07-
4542-02) are hereby AFFIRMED.
SO ORDERED.33
Subsequently, CA-G.R. SP No. 97942 was disposed of by the appellate court in a Decision dated 15 January 2008, which
likewise affirmed that of the NLRC. The dispositive portion of the CA Decision states:
WHEREFORE, premises considered, the instant Petition for Certiorari is denied, and the herein assailed May 8, 2006 Decision
and November 28, 2006 Resolution of the NLRC are hereby AFFIRMED.
SO ORDERED.34
The appellate court denied the Motions for Reconsideration filed by the parties in Resolutions dated 1 September 2008 35 and
19 February 2009.36
The Samson Group then filed two separate Rule 45 Petitions questioning the CA Decisions and Resolutions in CA-G.R. SP
No. 97510 and CA-G.R. SP No. 97942. On 17 June 2009, this Court resolved to consolidate both Petitions. 37
THE ISSUES
Succinctly, the parties are asking this Court to determine whether respondent employees were illegally dismissed and, if so,
which of the parties are liable for the claims of the employees and the extent of the reliefs that may be awarded to these
employees.
THE COURTS RULING
The instant Petitions are partly meritorious.
I
Respondent employees were illegally dismissed.
As to Elicerio Gaspar, Ricardo Gaspar, Jr., Fidel Espiritu, Eufemia Rosete and Liberato Mangoba
The Samson Group contends that Elicerio, Ricardo, Fidel, and Liberato voluntarily resigned from their posts, while Eufemia
retired from her position. As their resignations and retirements were voluntary, they were not dismissed from their
employment.38 In support of this argument, it presented copies of their resignation and retirement letters, 39 which were
couched in terms of gratitude.
We disagree. While resignation letters containing words of gratitude may indicate that the employees were not coerced into
resignation,40 this fact alone is not conclusive proof that they intelligently, freely and voluntarily resigned. To rule that
resignation letters couched in terms of gratitude are, by themselves, conclusive proof that the employees intended to
relinquish their posts would open the floodgates to possible abuse. In order to withstand the test of validity, resignations must
be made voluntarily and with the intention of relinquishing the office, coupled with an act of relinquishment. 41 Therefore, in
order to determine whether the employees truly intended to resign from their respective posts, we cannot merely rely on the
tenor of the resignation letters, but must take into consideration the totality of circumstances in each particular case.
Here, the records show that Elicerio, Ricardo, Fidel, and Liberato only tendered resignation letters because they were led to
believe that, upon reapplication, they would be reemployed by the new management. 42 As it turned out, except for Simeon, Jr.,
they were not rehired by the new management. Their reliance on the representation that they would be reemployed gives
credence to their argument that they merely submitted courtesy resignation letters because it was demanded of them, and that
they had no real intention of leaving their posts. We therefore conclude that Elicerio, Ricardo, Fidel, and Liberato did not
voluntarily resign from their work; rather, they were terminated from their employment.
As to Eufemia, both the CA and the NLRC discussed her case together with the cases of the rest of respondent-employees.
However, a review of the records shows that, unlike her co-employees, she did not resign; rather, she submitted a letter
indicating that she was retiring from her former position. 43
The fact that Eufemia retired and did not resign, however, does not change our conclusion that illegal dismissal took place.
Retirement, like resignation, should be an act completely voluntary on the part of the employee. If the intent to retire is not
clearly established or if the retirement is involuntary, it is to be treated as a discharge.44
In this case, the facts show that Eufemias retirement was not of her own volition. The circumstances could not be more telling.
The facts show that Eufemia was likewise given the option to resign or retire in order to fulfill the precondition in the Letter
Agreements that the seller should "terminate/retire the employees [mutually agreed upon] upon transfer of shares" to the
buyers.45 Thus, like her other co-employees, she first submitted a letter of resignation dated 27 August 2001. 46 For one reason
or another, instead of resigning, she chose to retire and submitted a retirement letter to that effect. 47 It was this letter that was
subsequently transmitted to the representative of the Samson Group on 11 September 2001. 48
In San Miguel Corporation v. NLRC,49 we have explained that involuntary retirement is tantamount to dismissal, as employees
can only choose the means and methods of terminating their employment, but are powerless as to the status of their
employment and have no choice but to leave the company. This rule squarely applies to Eufemias case. Indeed, she could
only choose between resignation and retirement, but was made to understand that she had no choice but to leave SME Bank.
Thus, we conclude that, similar to her other co-employees, she was illegally dismissed from employment.
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The Samson Group further argues50 that, assuming the employees were dismissed, the dismissal is legal because cessation
of operations due to serious business losses is one of the authorized causes of termination under Article 283 of the Labor
Code.51
Again, we disagree.
The law permits an employer to dismiss its employees in the event of closure of the business establishment. 52However, the
employer is required to serve written notices on the worker and the Department of Labor at least one month before the
intended date of closure.53 Moreover, the dismissed employees are entitled to separation pay, except if the closure was due to
serious business losses or financial reverses.54 However, to be exempt from making such payment, the employer must justify
the closure by presenting convincing evidence that it actually suffered serious financial reverses. 55
In this case, the records do not support the contention of SME Bank that it intended to close the business establishment. On
the contrary, the intention of the parties to keep it in operation is confirmed by the provisions of the Letter Agreements
requiring Agustin and De Guzman to guarantee the "peaceful transition of management of the bank" and to appoint "a
manager of [the Samson Groups] choice x x x to oversee bank operations."
Even assuming that the parties intended to close the bank, the records do not show that the employees and the Department of
Labor were given written notices at least one month before the dismissal took place. Moreover, aside from their bare
assertions, the parties failed to substantiate their claim that SME Bank was suffering from serious financial reverses.
In fine, the argument that the dismissal was due to an authorized cause holds no water.
Petitioner bank also argues that, there being a transfer of the business establishment, the innocent transferees no longer have
any obligation to continue employing respondent employees,56 and that the most that they can do is to give preference to the
qualified separated employees; hence, the employees were validly dismissed. 57
The argument is misleading and unmeritorious. Contrary to petitioner banks argument, there was no transfer of the business
establishment to speak of, but merely a change in the new majority shareholders of the corporation.
There are two types of corporate acquisitions: asset sales and stock sales.58 In asset sales, the corporate entity59 sells all or
substantially all of its assets60 to another entity. In stock sales, the individual or corporate shareholders 61 sell a controlling
block of stock62 to new or existing shareholders.
In asset sales, the rule is that the seller in good faith is authorized to dismiss the affected employees, but is liable for the
payment of separation pay under the law.63 The buyer in good faith, on the other hand, is not obliged to absorb the employees
affected by the sale, nor is it liable for the payment of their claims. 64 The most that it may do, for reasons of public policy and
social justice, is to give preference to the qualified separated personnel of the selling firm. 65
In contrast with asset sales, in which the assets of the selling corporation are transferred to another entity, the transaction in
stock sales takes place at the shareholder level. Because the corporation possesses a personality separate and distinct from
that of its shareholders, a shift in the composition of its shareholders will not affect its existence and continuity. Thus,
notwithstanding the stock sale, the corporation continues to be the employer of its people and continues to be liable for the
payment of their just claims. Furthermore, the corporation or its new majority share holders are not entitled to lawfully dismiss
corporate employees absent a just or authorized cause.
In the case at bar, the Letter Agreements show that their main object is the acquisition by the Samson Group of 86.365% of
the shares of stock of SME Bank.66 Hence, this case involves a stock sale, whereby the transferee acquires the controlling
shares of stock of the corporation. Thus, following the rule in stock sales, respondent employees may not be dismissed except
for just or authorized causes under the Labor Code.
Petitioner bank argues that, following our ruling in Manlimos v. NLRC, 67 even in cases of stock sales, the new owners are
under no legal duty to absorb the sellers employees, and that the most that the new owners may do is to give preference to
the qualified separated employees.68 Thus, petitioner bank argues that the dismissal was lawful.
We are not persuaded.
Manlimos dealt with a stock sale in which a new owner or management group acquired complete ownership of the corporation
at the shareholder level.69 The employees of the corporation were later "considered terminated, with their conformity"70 by the
new majority shareholders. The employees then re-applied for their jobs and were rehired on a probationary basis. After about
six months, the new management dismissed two of the employees for having abandoned their work, and it dismissed the rest
for committing "acts prejudicial to the interest of the new management." 71 Thereafter, the employees sought reinstatement,
arguing that their dismissal was illegal, since they "remained regular employees of the corporation regardless of the change of
management."72
In disposing of the merits of the case, we upheld the validity of the second termination, ruling that "the parties are free to renew
the contract or not [upon the expiration of the period provided for in their probationary contract of employment]." 73 Citing our
pronouncements in Central Azucarera del Danao v. Court of Appeals, 74 San Felipe Neri School of Mandaluyong, Inc. v.
NLRC,75 and MDII Supervisors & Confidential Employees Association v. Presidential Assistant on Legal Affairs, 76 we likewise
upheld the validity of the employees first separation from employment, pronouncing as follows:
A change of ownership in a business concern is not proscribed bylaw. In Central Azucarera del Danao vs. Court of Appeals,
this Court stated:

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There can be no controversy for it is a principle well-recognized, that it is within the employers legitimate sphere of
management control of the business to adopt economic policies or make some changes or adjustments in their organization or
operations that would insure profit to itself or protect the investment of its stockholders. As in the exercise of such
management prerogative, the employer may merge or consolidate its business with another, or sellor dispose all or
substantially all of its assets and properties which may bring about the dismissal or termination of its employees in the
process. Such dismissal or termination should not however be interpreted in such a manner as to permit the employer to
escape payment of termination pay. For such a situation is not envisioned in the law. It strikes at the very concept of social
justice.
In a number of cases on this point, the rule has been laid down that the sale or disposition must be motivated by good faith as
an element of exemption from liability. Indeed, an innocent transferee of a business establishment has no liability to the
employees of the transfer or to continue employer them. Nor is the transferee liable for past unfair labor practices of the
previous owner, except, when the liability therefor is assumed by the new employer under the contract of sale, or when liability
arises because of the new owners participation in thwarting or defeating the rights of the employees.
Where such transfer of ownership is in good faith, the transferee is under no legal duty to absorb the transferors employees
as there is no law compelling such absorption. The most that the transferee may do, for reasons of public policy and social
justice, is to give preference to the qualified separated employees in the filling of vacancies in the facilities of the purchaser.
Since the petitioners were effectively separated from work due to a bona fide change of ownership and they were accordingly
paid their separation pay, which they freely and voluntarily accepted, the private respondent corporation was under no
obligation to employ them; it may, however, give them preference in the hiring. x x x. (Citations omitted)
We take this opportunity to revisit our ruling in Manlimos insofar as it applied a doctrine on asset sales to a stock sale case.
Central Azucarera del Danao, San Felipe Neri School of Mandaluyong and MDII Supervisors &Confidential Employees
Association all dealt with asset sales, as they involved a sale of all or substantially all of the assets of the corporation. The
transactions in those cases were not made at the shareholder level, but at the corporate level. Thus, applicable to those cases
were the rules in asset sales: the employees may be separated from their employment, but the seller is liable for the payment
of separation pay; on the other hand, the buyer in good faith is not required to retain the affected employees in its service, nor
is it liable for the payment of their claims.
The rule should be different in Manlimos, as this case involves a stock sale. It is error to even discuss transfer of ownership of
the business, as the business did not actually change hands. The transfer only involved a change in the equity composition of
the corporation. To reiterate, the employees are not transferred to a new employer, but remain with the original corporate
employer, notwithstanding an equity shift in its majority shareholders. This being so, the employment status of the employees
should not have been affected by the stock sale. A change in the equity composition of the corporate shareholders should not
result in the automatic termination of the employment of the corporations employees. Neither should it give the new majority
shareholders the right to legally dismiss the corporations employees, absent a just or authorized cause.
The right to security of tenure guarantees the right of employees to continue in their employment absent a just or authorized
cause for termination. This guarantee proscribes a situation in which the corporation procures the severance of the
employment of its employees who patently still desire to work for the corporation only because new majority stockholders
and a new management have come into the picture. This situation is a clear circumvention of the employees constitutionally
guaranteed right to security of tenure, an act that cannot be countenanced by this Court.
It is thus erroneous on the part of the corporation to consider the employees as terminated from their employment when the
sole reason for so doing is a change of management by reason of the stock sale. The conformity of the employees to the
corporations act of considering them as terminated and their subsequent acceptance of separation pay does not remove the
taint of illegal dismissal. Acceptance of separation pay does not bar the employees from subsequently contesting the legality
of their dismissal, nor does it estop them from challenging the legality of their separation from the service. 77
We therefore see it fit to expressly reverse our ruling in Manlimos insofar as it upheld that, in a stock sale, the buyer in good
faith has no obligation to retain the employees of the selling corporation; and that the dismissal of the affected employees is
lawful, even absent a just or authorized cause.
As to Simeon Espiritu, Jr.
The CA and the NLRC discussed the case of Simeon, Jr. together with that of the rest of respondent-employees. However, a
review of the records shows that the conditions leading to his dismissal from employment are different. We thus discuss his
circumstance separately.
The Samson Group contends that Simeon, Jr., likewise voluntarily resigned from his post. 78 According to them, he had
resigned from SME Bank before the share transfer took place.79
Upon the change of ownership of the shares and the management of the company, Simeon, Jr. submitted a letter of
application to and was rehired by the new management.80 However, the Samson Group alleged that for purely personal
reasons, he again resigned from his employment on 15 October 2001.81
Simeon, Jr., on the other hand, contends that while he was reappointed by the new management after his letter of application
was transmitted, he was not given a clear position, his benefits were reduced, and he suffered a demotion in rank. 82 These
allegations were not refuted by the Samson Group.
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We hold that Simeon, Jr. was likewise illegally dismissed from his employment.
Similar to our earlier discussion, we find that his first courtesy resignation letter was also executed involuntarily. Thus, it cannot
be the basis of a valid resignation; and thus, at that point, he was illegally terminated from his employment. He was, however,
rehired by SME Bank under new management, although based on his allegations, he was not reinstated to his former position
or to a substantially equivalent one.83 Rather, he even suffered a reduction in benefits and a demotion in rank. 84 These led to
his submission of another resignation letter effective 15 October 2001. 85
We rule that these circumstances show that Simeon, Jr. was constructively dismissed. In
Peaflor v. Outdoor Clothing Manufacturing Corporation,86 we have defined constructive dismissal as follows:
Constructive dismissal is an involuntary resignation by the employee due to the harsh, hostile, and unfavorable conditions set
by the employer and which arises when a clear discrimination, insensibility, or disdain by an employer exists and has become
unbearable to the employee.87
Constructive dismissal exists where there is cessation of work, because "continued employment is rendered impossible,
unreasonable or unlikely, as an offer involving a demotion in rank or a diminution in pay" and other benefits. 88
These circumstances are clearly availing in Simeon, Jr.s case. He was made to resign, then rehired under conditions that
were substantially less than what he was enjoying before the illegal termination occurred. Thus, for the second time, he
involuntarily resigned from his employment. Clearly, this case is illustrative of constructive dismissal, an act prohibited under
our labor laws.
II
SME Bank, Eduardo M. Agustin, Jr. and Peregrin de Guzman, Jr. are liable for illegal dismissal.
Having ruled on the illegality of the dismissal, we now discuss the issue of liability and determine who among the parties are
liable for the claims of the illegally dismissed employees.
The settled rule is that an employer who terminates the employment of its employees without lawful cause or due process of
law is liable for illegal dismissal.89
None of the parties dispute that SME Bank was the employer of respondent employees. The fact that there was a change in
the composition of its shareholders did not affect the employer-employee relationship between the employees and the
corporation, because an equity transfer affects neither the existence nor the liabilities of a corporation. Thus, SME Bank
continued to be the employer of respondent employees notwithstanding the equity change in the corporation. This outcome is
in line with the rule that a corporation has a personality separate and distinct from that of its individual shareholders or
members, such that a change in the composition of its shareholders or members would not affect its corporate liabilities.
Therefore, we conclude that, as the employer of the illegally dismissed employees before and after the equity transfer,
petitioner SME Bank is liable for the satisfaction of their claims.
Turning now to the liability of Agustin, De Guzman and the Samson Group for illegal dismissal, at the outset we point out that
there is no privity of employment contracts between Agustin, De Guzman and the Samson Group, on the one hand, and
respondent employees on the other. Rather, the employment contracts were between SME Bank and the employees.
However, this fact does not mean that Agustin, De Guzman and the Samson Group may not be held liable for illegal dismissal
as corporate directors or officers. In Bogo-Medellin Sugarcane Planters Association, Inc. v. NLRC,90 we laid down the rule as
regards the liability of corporate directors and officers in illegal dismissal cases, as follows:
Unless they have exceeded their authority, corporate officers are, as a general rule, not personally liable for their official acts,
because a corporation, by legal fiction, has a personality separate and distinct from its officers, stockholders and members.
However, this fictional veil may be pierced whenever the corporate personality is used as a means of perpetuating a fraud or
an illegal act, evading an existing obligation, or confusing a legitimate issue. In cases of illegal dismissal, corporate directors
and officers are solidarily liable with the corporation, where terminations of employment are done with malice or in bad
faith.91 (Citations omitted)
Thus, in order to determine the respective liabilities of Agustin, De Guzman and the Samson Group under the afore-quoted
rule, we must determine, first, whether they may be considered as corporate directors or officers; and, second, whether the
terminations were done maliciously or in bad faith.
There is no question that both Agustin and De Guzman were corporate directors of SME Bank. An analysis of the facts
likewise reveals that the dismissal of the employees was done in bad faith. Motivated by their desire to dispose of their shares
of stock to Samson, they agreed to and later implemented the precondition in the Letter Agreements as to the termination or
retirement of SME Banks employees. However, instead of going through the proper procedure, the bank manager induced
respondent employees to resign or retire from their respective employments, while promising that they would be rehired by the
new management. Fully relying on that promise, they tendered courtesy resignations or retirements and eventually found
themselves jobless. Clearly, this sequence of events constituted a gross circumvention of our labor laws and a violation of the
employees constitutionally guaranteed right to security of tenure. We therefore rule that, as Agustin and De Guzman are
corporate directors who have acted in bad faith, they may be held solidarily liable with SME Bank for the satisfaction of the
employees lawful claims.
As to spouses Samson, we find that nowhere in the records does it appear that they were either corporate directors or officers
of SME Bank at the time the illegal termination occurred, except that the Samson Group had already taken over as new
198
management when Simeon, Jr. was constructively dismissed. Not being corporate directors or officers, spouses Samson were
not in legal control of the bank and consequently had no power to dismiss its employees.
Respondent employees argue that the Samson Group had already taken over and conducted an inventory before the
execution of the share purchase agreement.92 Agustin and De Guzman likewise argued that it was at Olga Samsons behest
that the employees were required to resign from their posts. 93 Even if this statement were true, it cannot amount to a finding
that spouses Samson should be treated as corporate directors or officers of SME Bank. The records show that it was Espiritu
who asked the employees to tender their resignation and or retirement letters, and that these letters were actually tendered to
him.94 He then transmitted these letters to the representative of the Samson Group.95 That the spouses Samson had to ask
Espiritu to require the employees to resign shows that they were not in control of the corporation, and that the former
shareholders through Espiritu were still in charge thereof. As the spouses Samson were neither corporate officers nor
directors at the time the illegal dismissal took place, we find that there is no legal basis in the present case to hold them in their
personal capacities solidarily liable with SME Bank for illegally dismissing respondent employees, without prejudice to any
liabilities that may have attached under other provisions of law.
Furthermore, even if spouses Samson were already in control of the corporation at the time that Simeon, Jr. was constructively
dismissed, we refuse to pierce the corporate veil and find them liable in their individual steads. There is no showing that his
constructive dismissal amounted to more than a corporate act by SME Bank, or that spouses Samson acted maliciously or in
bad faith in bringing about his constructive dismissal.
Finally, as regards Aurelio Villaflor, while he may be considered as a corporate officer, being the president of SME Bank, the
records are bereft of any evidence that indicates his actual participation in the termination of respondent employees. Not
having participated at all in the illegal act, he may not be held individually liable for the satisfaction of their claims.
III
Respondent employees are entitled to separation pay, full backwages, moral damages, exemplary damages and attorneys
fees.
The rule is that illegally dismissed employees are entitled to (1) either reinstatement, if viable, or separation pay if
reinstatement is no longer viable; and (2) backwages.96
Courts may grant separation pay in lieu of reinstatement when the relations between the employer and the employee have
been so severely strained; when reinstatement is not in the best interest of the parties; when it is no longer advisable or
practical to order reinstatement; or when the employee decides not to be reinstated. 97 In this case, respondent employees
expressly pray for a grant of separation pay in lieu of reinstatement. Thus, following a finding of illegal dismissal, we rule that
they are entitled to the payment of separation pay equivalent to their one-month salary for every year of service as an
alternative to reinstatement.
Respondent employees are likewise entitled to full backwages notwithstanding the grant of separation pay. In Santos v.
NLRC,98 we explained that an award of backwages restores the income that was lost by reason of the unlawful dismissal,
while separation pay "provides the employee with 'the wherewithal during the period that he is looking for another
employment."99 Thus, separation pay is a proper substitute only for reinstatement; it is not an adequate substitute for both
reinstatement and backwages.100 Hence, respondent employees are entitled to the grant of full backwages in addition to
separation pay.
As to moral damages, exemplary damages and attorney's fees, we uphold the appellate court's grant thereof based on our
finding that the forced resignations and retirement were fraudulently done and attended by bad faith.
WHEREFORE, premises considered, the instant Petitions for Review are PARTIALLY GRANTED.
The assailed Decision and Resolution of the Court of Appeals in CA G.R. SP No. 97510 dated 13 March 2008 and 1
September 2008,respectively, are hereby REVERSED and SET ASIDE insofar as it held Abelardo P. Samson, Olga Samson
and Aurelio Villaflor, Jr. solidarily liable for illegal dismissal.
The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 97942 dated 15 January 2008 and 19
February 2009,respectively, are likewise REVERSED and SETASIDE insofar as it held Abelardo P. Samson, Olga Samson
and Aurelio Villaflor, Jr. solidarily liable for illegal dismissal.
We REVERSE our ruling in Manlimos v. NLRC insofar as it upheld that, in a stock sale, the buyer in good faith has no
obligation to retain the employees of the selling corporation, and that the dismissal of the affected employees is lawful even
absent a just or authorized cause.
SO ORDERED.

G.R. No. 202047, June 08, 2016

LIGHT RAIL TRANSIT AUTHORITY, Petitioner, v. NOEL B. PILI, MEDEL I. LIRIO, RODERICK B. JAMON, VICTORINO A.
MACHICA, RONNIE C. VALORIA, VIRGILIO M. FLORES, RENATO C. PALMA, ANGELITO V. GUINTO, RAMIRO M.
FELICIANO, ENRIQUE L. CIUBAL, ELMER P. TABIGAN, VENANCIO T. MADRIA, MAXIMO M. VITANGCOL, RODOLFO
L. PAGUIO, ARNEL F. MAGSALIN, JULIANA N. DOLOR, NOEL C. CRUZ, SANDY C. JARILLA, BERTITO I. SERVIDAD,
ALAN R. CORPUZ, ROBERT D. PABLO, ROBERT H. MONTEREY, HENRY L. LIAO, ROLANDO C. CEBANICO,
VELIENTE S. FANTASTICO, MA. EMILIAN S. CRUZ, EDGARDO G. GAMBAYAN, GERARDO M. RUMBAWA, DANTE D.

199
PALOMARA, MA. TERESA B. DE LOS REYES, JOSE ALLAN S. PACIFICO, RESTITUTO R. MALAPO, EARL G.
PONGCO, LUCILO C. DEL MONTE, RUEL F. MAGBALANA, MARLYN V. VILLANUEVA, JUDITH C. BANEZ, GERMAN N.
DE LUNA, FREDERICK B. DEL CORRO, CLODUALDO B. PASIOLAN, ROLANDO I. NAVARRO, AND PACIANO J.
VILLANUEVA,* Respondents.
DECISION
CARPIO, ACTING C.J.:
The Case

This is a petition for review on certiorari under Rule 45 of the Rules of Court. Petitioner Light Rail Transit Authority (LRTA)
challenges the 1 June 2011 Decision1 and 23 May 2012 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 107593
which set aside the 24 June 2008 Resolution3 of the National Labor Relations Commission (NLRC) and reinstated the 27
October 2005 Decision4 of the Labor Arbiter.
The Facts

LRTA is a government-owned and controlled corporation created under Executive Order (EO) No. 603 5 for the "construction,
operation, maintenance, and/or lease of light rail transit systems in the Philippines." 6 It entered into a ten-year operations and
management agreement (Agreement) with Meralco Transit Organization, Inc. (MTOI) from 8 June 1984 to 8 June 1994. MTOI,
a corporation organized under the Corporation Code, hired its own employees and thereafter entered into collective bargaining
agreements (CBAs) with the unions of its employees. However, on 7 April 1989, the Commission on Audit declared the
Agreement between LRTA and MTOI void. As a result, on 9 June 1989, LRTA purchased all the shares of stock of MTOI and
renamed MTOI to Metro Transit Organization, Inc. (Metro) and formally declared Metro as its wholly-owned subsidiary.

The Agreement between LRTA and Metro expired on 8 June 1994, and was thereafter extended on a month-to-month basis.
On 25 July 2000, the union of rank-and-file employees of Metro staged a strike over a bargaining deadlock which resulted in
the paralysis in the operations of Metro. On 31 July 2000, the Agreement expired when LRTA decided no longer to renew. On
30 September 2000, Metro ceased its operations.

Respondents7 were employees of Metro who have been terminated upon the expiration of the Agreement. While the rest of
the respondents filed cases involving purely monetary claims in the form of separation pays, balances of separation pays, and
other unpaid claims, respondent Noel B. Pili (Pili), in addition to his monetary claims, alleged that he was illegally dismissed.

Pili was employed by Metro on 29 November 1984, and was holding the position of Liaison Assistant when he was dismissed
on 30 September 2000, when Metro stopped its operations. He received the first fifty percent (50%) of his separation pay in
accordance with the CBA with Metro. On 29 May 2003, he received the amount of P63,l 17.65 as financial assistance for
which he was compelled to execute a Release, Waiver and Quitclaim. Based on the foregoing, Pili argues that his dismissal
was illegal and violative of his security of tenure. He alleges that the mere fact of the expiration of the Agreement was not
sufficient to justify his dismissal. He also claims that the Release, Waiver and Quitclaim he executed does not bar him from
demanding the benefits to which he is legally entitled to or from contesting the legality of his dismissal.

On the other hand, the rest of the respondents filed cases for purely monetary claims. They assert that under Article 4.05 of
the Agreement, LRTA contractually bound itself to shoulder and provide all "Operating Expenses" of Metro. Operating
Expenses is defined in the Agreement as:

x x x all salaries, wages and fringe benefits (both direct and indirect) up to the rank of Manager, and a lump sum amount to be
determined annually as top Management compensation (above the rank of Manager up to the
President).8ChanRoblesVirtualawlibrary
The respondents, except Pili, further allege that LRTA sanctioned and approved all the CBAs Metro entered with its
employees; that LRTA and Metro jointly declared the continued implementation of the Agreement; and that there would be no
interruption in the employment of the employees of the former MTOI (now Metro). On 17 November 1997, LRTA approved the
severance pay of the employees of Metro amounting to one and a half months salary per year of service. They claim that this
shows that the LRTA bound itself solidarity liable with Metro.

On 28 July 2000, the Board of Directors of LRTA issued Resolution No. 00-44 where LRTA officially assumed the obligation to
ensure that the Metro Inc. Employees Retirement Fund is updated and that it fully covers all retirement benefits payable to the
employees of Metro. Based on the foregoing, the respondents - except Pili - argue that the LRTA is liable for their monetary
claims.

LRTA, on the other hand, argues that NLRC cannot exercise jurisdiction over it as it is a government-owned and controlled
200
corporation, and that only the Civil Service Commission (CSC) can take cognizance of the matter. Further, LRTA maintains
that it has a separate legal personality from Metro, and thus there can be no illegal dismissal and no basis for the monetary
claims of the employees of Metro.
The Ruling of the Labor Arbiter

On 27 October 2005, Labor Arbiter Catalino R. Laderas rendered his Decision in favor of Pili and the rest of the respondents.
The Labor Arbiter found that Pili was illegally dismissed and that LRTA was solidarity liable with Metro for the monetary claims.
The dispositive portion of the Decision states:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Ordering the respondents Metro Transit Organization and LRTA to pay complainant Noel Pili jointly and severally the
amount of P379,710 representing backwages for eight (8) months and balance of his separation pay plus ten [sic] (10%) of the
monetary award as attorney's fee.

a. unpaid wages/salaries for August and September 2000 of:

P31,848.00 to Arnel F. Magsalin

P31,548.00 to Angelito V. Guinto

P30,928.00 to Enrique L. Ciubal

P31,538.00 to Ronnie C. Valoria

P31,046.00 to Maximo M. Vitangcol

P31,046.00 to Ramiro M. Feliciano

P31,538.00 to Virgilio M. Flores

P31,046.00 to Vena[n]cio T. Madria

P30,906.00 to Ruel F. Magbalana

P30,728.00 to Renato C. Palima

P28,004.00 to Victorino A. Machica

P27,804.00 to Rodolfo L. Paguio

P21,136.00 to Roderick B. Jamon

P18,170.00 to Elmer P. Tabigan

b. unpaid 13th month and earned leave benefits of:

P42,097.68 to Angelito V. Guinto

P25,749.91 to Enrique L. Ciubal

P36,138.16 to Ronnie C. Valoria

P36,178.90 to Ramiro M. Feliciano

P39,400.82 to Virgilio M. Flores

P28,015.96 to Vena[n]cio T. Madria

201
 P45,626.15 to Renato C. Palima

P31,948.09 to Victorino A. Machica

P15,381.08 to Roderick B. Jamon

c. unpaid hazard pays for August and September 2000 of:

P1,400.00 to Arnel F. Magsalin

P1,400.00 to Angelito V. Guinto

P1,400.00 to Enrique L. Ciubal

P1,400.00 to Ronnie C. Valoria

P1,400.00 to Maximo M. Vitangcol

P1,400.00 to Ramiro M. Feliciano

P1,400.00 to Virgilio M. Flores

P1,400.00 to Vena[n]cio T. Madria

P1,400.00 to Ruel F. Magbalana

P1,400.00 to Renato C. Palima

P1,400.00 to Victorino A. Machica

P1,400.00 to Rodolfo L. Paguio

P1,400.00 to Roderick B. Jamon

P1,400.00 to Elmer P. Tabigan

d. amounts of unsupplied rice subsidiaries for August and September 2000 of:

P2,000.00 to Arnel F. Magsalin

P2,000.00 to Angelito V. Guinto

P2,000.00 to Enrique L. Ciubal

P2,000.00 to Ronnie C. Valoria

P2,000.00 to Maximo M. Vitangcol

P2,000.00 to Ramiro M. Feliciano

P2,000.00 to Virgilio M. Flores

P2,000.00 to Vena[n]cio T. Madria

P2,000.00 to Ruel F. Magbalana

P2,000.00 to Renato C. Palima

202
 P2,000.00 to Victorino A. Machica

P2,000.00 to Rodolfo L. Paguio

P2,000.00 to Roderick B. Jamon

P2,000.00 to Elmer P. Tabigan

e. reimbursement for over deductions for settled accountabilities and/or 10% retention from the first fifty percent (50%)
separation pay of:

P45,557.33 to Ma. Theresa B. Delos Reyes

P 8,471.82 to Roberto H. Monterey

P 8,994.75 to Edgardo G. Gambayan

f. Fifty percent (50%) balance of separation pay of:

P455,473.32 to Ma. Theresa B. Delos Reyes

P294,703.50 to Juliana N. Dolor

P198,428.25 to Roberto H. Monterey

P201,429.92 to Rolando C. Cebanico

P193.301.85 to Edgardo G. Gambayan

P281,203.02 to Rolando I. Navarro

P189,300.00 to Jose Allan S. Pacifico

P212,148.00 to Lucilo C. Del Monte

P184,884.00 to Earl G. Ponco

P188,640.00 to Allan R. Corpuz

P188,520.00 to Ma. Emilian S. Cruz

P236.748.00 to German N. De Luna

P186,396.00 to Robert D. Pablo

P236,808.00 to Frederick B. Del Corro

P186,648.00 to Medel I. Lirio

P242,628.00 to Paciano J. Villavieja, Jr.

P224,376.00 to Noel C. Cruz

P179.061.58 to V[e]liente S. Fantastico

P185/786.68 to Sandy C. Jarilla

P204,556.18 to Dante D. Palomara

203
 P177,686.46 to Henry L. Liao

P107,383.32 to Bertito I. Servidad

P105,592.08 to Gerardo M. Rumbawa

P 91,719.00 to Clodualdo B. Pasiolan

P 74,550.00 to Judith C. Banez

P 53,866.71 to Marlyn V. Villanueva

P 51,035.63 to Restituto R. Malapo

with legal interests thereon from June 1, 2001 until actually and fully paid; and

g. severance pays of:

P406,062.00 to Arnel F. Magsalin

P378,576.00 to Angelito V. Guinto

P371.136.00 to Enrique L. Ciubal

P378,456.00 to Ronnie C. Valoria

P372,552.00 to Maximo M. Vitangcol

P359,978.37 to Ramiro M. Feliciano

P365,683.11 to Virgilio M. Flores

P358.581.30 to Vena[n]cio T. Madria

P356,964.30 to Ruel F. Magbalana

P345,690.00 to Renato C. Palima

P213,600.51 to Victorino A. Machica

P194,558.49 to Rodolfo L. Paguio

P 79,260.00 to Roderick B. Jamon

P 60,760.73 to Elmer P. Tabigan

with legal interest thereon from October 1, 2000 until actually and fully paid.

Respondents are further ordered to pay solidarity to complainants an amount equivalent to ten percent (10%) of the total
awards, as and by way of attorney's fees.

Other claims dismissed.

SO ORDERED.9ChanRoblesVirtualawlibrary
On 5 December 2005, LRTA appealed to the NLRC. LRTA averred that the Labor Arbiter acted with grave abuse of discretion
in (1) taking cognizance of the case against LRTA despite the fact that it is a government-owned and controlled corporation
with an original charter; (2) holding LRTA guilty of illegal dismissal despite the lack of employer-employee relationship between
LRTA and Pili; and (3) awarding separation pay and other benefits to the respondents despite the utter lack of factual and
legal basis.10
204
 The Ruling of the NLRC

On 24 June 2008, the NLRC found that there was no illegal dismissal as Pili's dismissal was valid on account of the
termination of the Agreement between Metro and LRTA.11 The NLRC issued a Resolution modifying in part the Decision of the
Labor Arbiter, to wit:

WHEREFORE, premises considered the separate appeals are partly GRANTED and the Decision dated 27 October 2005 is
MODIFIED deleting the finding of illegal dismissal and award of backwages to complainant-appellee Pili, ordering
respondents-appellants METRO and LRTA to pay complainant-appellee Pili the balance of his separation pay in the amount of
P165,398.35 plus ten percent (10%) of the award as attorney's fees and affirming the monetary awards in the appealed
Decision in its entirety including the 10% attorney's fees to complainants-appellees Lirio, et al.

SO ORDERED.12ChanRoblesVirtualawlibrary
The Motion for Partial Reconsideration13 filed by LRTA was denied by the NLRC. Thereafter, LRTA filed a petition
for certiorari under Rule 65 before the CA on 10 November 2008.14
The Ruling of the CA

In a Decision dated 1 June 2011, the CA set aside the Resolution of the NLRC and reinstated the 27 October 2005 Decision of
the Labor Arbiter in toto.15 The CA found that Pili was illegally dismissed as the expiration of the Agreement between LRTA
and Metro was not a valid ground to terminate Pili's employment. The CA held:

Indeed, and as stated above, Article 283 allows an employer to terminate the services of his employees in case of closure of
business as a result of grave financial losses. But the employer must comply with the clearance or report required under the
Labor Code and its implementing rules before the employment of the employees.

Nevertheless, employers who contemplate terminating the services of their workers cannot be so arbitrary and ruthless as to
find flimsy excuses for their decisions. Thus must be so, considering that the dismissal of an employee from work involves not
only the loss of his position but more important, his means of livelihood.

xxxx

In the case at bar, private respondent Pili's employment was terminated on account of the expiration of the management
contract between petitioner LRTA and Metro. Such cause for termination of employment is not within the contemplation of
Article 283. Further, there is no indication that Metro was closing shop after the termination of its management contract with
petitioner LRTA. Much less, it was not proved that Metro was closing its business due to financial losses or business reverses.
Thus, the termination of Pili's employment by Metro cannot be justified and, therefore, illegal. 16ChanRoblesVirtualawlibrary
In a Resolution dated 23 May 2012, the CA denied the Motion for Reconsideration 17 filed by LRTA. Hence, this petition.
The Issues

In this petition, the LRTA seeks a reversal of the decision of the CA, and raises the following arguments:

A. THE HONORABLE COURT OF APPEALS DECIDED A QUESTION OF LAW NOT IN ACCORD WITH THE APPLICABLE
DECISION OF THIS HONORABLE COURT ON THE LACK OF JURISDICTION OF THE LABOR ARBITER AND THE
NATIONAL LABOR RELATIONS COMMISSION OVER PETITIONER AND THE LABOR COMPLAINTS AGAINST
PETITIONER; and

B. ASSUMING ARGUENDO THAT THE LABOR ARBITER AND THE NLRC HAVE SUCH JURISDICTION, THE
HONORABLE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH THE APPLICABLE
LAW AND DECISIONS OF THIS HONORABLE COURT ON ARTICLE[S] 106 AND 107 OF THE LABOR CODE GOVERNING
THE EXTENT OF LIABILITIES OF INDIRECT EMPLOYERS.18ChanRoblesVirtualawlibrary
The Ruling of the Court

The petition has no merit.

Jurisdiction of the NLRC over LRTA - Monetary Claims

We find error with the NLRC taking cognizance of the cases against Metro and LRTA as far as the monetary claims are
concerned. This is despite the fact that LRTA is a government-owned and controlled corporation with an original charter.
205
All of the respondents allege that they were employed by Metro. Thus, there is no real issue as far as the employer-employee
relationship is concerned - the respondents themselves do not claim to be employed by LRTA. While Pili claims that LRTA
should also be considered his true employer based on the doctrine of piercing the corporate veil, this argument, as discussed
below is baseless and erroneous. The employees were employed solely by Metro as Metro and LRTA each maintained their
separate juridical personalities. We have already consistently recognized, in clear and categorical terms, that LRTA, even after
it purchased all the shares of stock of Metro, maintained and continued to have its separate and juridical
personality.19 Nonetheless, the argument of LRTA that only the CSC may exercise jurisdiction over it - even for monetary
claims, must necessarily fail.

The NLRC acquired jurisdiction over LRTA not because of the employer-employee relationship of the respondents and LRTA
(because there is none) but rather because LRTA expressly assumed the monetary obligations of Metro to its employees. In
the Agreement, LRTA was obligated to reimburse Metro for the latter's Operating Expenses which included the salaries,
wages and fringe benefits of certain employees of Metro. Moreover, the Board of Directors of LRTA issued Resolution No. 00-
44 where again, LRTA assumed the monetary obligations of Metro more particularly to update the Metro Inc. Employees
Retirement Fund and to ensure that it fully covers all the retirement benefits payable to the employees of Metro.

It is clear from the foregoing, and it is also not denied by LRTA, that it has assumed the monetary obligations of Metro to its
employees. As such, the NLRC may exercise jurisdiction over LRTA on the issue of the monetary obligations. To repeat,
NLRC can exercise jurisdiction over LRTA not because of the existence of any employer-employee relationship between
LRTA and the respondents, but rather because LRTA clearly assumed voluntarily the monetary obligations of Metro to its
employees. We therefore find no error on the part of NLRC when it exercised jurisdiction over LRTA which solidarity obligated
itself to pay the monetary obligations of Metro.

Jurisdiction of the NLRC over LRTA - Illegal Dismissal

However, as far as the claim of illegal dismissal is concerned, we find that NLRC cannot exercise jurisdiction over LRTA. The
NLRC and Labor Arbiter erred when it took cognizance of such matter.

In Hugo v. LRTA,20 we have already addressed the issue of jurisdiction in relation to illegal dismissal complaints. In the said
case, the employees of Metro filed an illegal dismissal and unfair labor practice complaint against Metro and LRTA. We held
that the Labor Arbiter and NLRC did not have jurisdiction over LRTA, to wit:

The Labor Arbiter and the NLRC do not have jurisdiction over LRTA. Petitioners themselves admitted in their complaint that
LRTA "is a government agency organized and existing pursuant to an original charter (Executive Order No. 603)" and that they
are employees of METRO.21 (Emphasis and underscoring in the original)
Pili admits that he was employed by Metro. However, in the same breath, he argues that the doctrine of piercing the corporate
veil should be applied and LRTA should also be considered his employer. We find this argument untenable. Pili cannot claim
to be employed by LRTA merely on the bare allegation that the corporate veil must be pierced based on LRTA's ownership of
the shares of stock of Metro. This Court has already rejected such proposition - there is no sufficient evidence to support the
application of the doctrine of piercing the corporate veil and LRTA, even after it purchased all the shares of stock of Metro,
maintained and continued to have its separate juridical personality. 22

Worse, if LRTA was his true employer, as he claims, it is CSC which would have jurisdiction to hear his complaint against
LRTA. LRTA is a government-owned and controlled corporation - any allegation of illegal dismissal against it by its employees
should have been brought to the CSC. However, the fact remains that Pili was an employee of Metro alone - the Labor Arbiter
and NLRC could not have acquired jurisdiction over LRTA insofar as the illegal dismissal complaint is concerned.

Monetary Claims of the Former Employees of Metro

The respondents, except Pili, all have purely monetary claims against LRTA. They all anchor their claims on the Agreement,
more particularly the definition of Operating Expenses in relation to Article 4.05.1 thereof, which states that LRTA shall
reimburse Metro for the latter's Operating Expenses. Moreover, LRTA's Resolution No. 00-44 provides that LRTA assumes the
obligation to ensure full payment of the retirement/separation pay of the employees of Metro. LRTA had already paid the first
fifty percent (50%) of the separation pay to some of the employees of Metro. Therefore, the respondents, except Pili, are
merely claiming their unpaid balance, or the unpaid separation pay, unpaid wages and other benefits which have accrued
during their employment with Metro.

206
This Court has already resolved this very issue on the monetary claims of the employees of Metro as against LRTA. In LRTA
v. Mendoza,23 we found that LRTA is liable for the monetary claims of the employees of Metro. The respondents in the said
case were employees of Metro who, similar to the respondents in this case, have been separated due to the expiration of the
Agreement between LRTA and Metro. We held:

First. LRTA obligated itself to fund METRO'S retirement fund to answer for the retirement or severance/resignation of METRO
employees as part of METRO'S "operating expenses." Under Article 4.05.1 of the O & M agreement between LRTA and
Metro, "The Authority shall reimburse METRO for x x x OPERATING EXPENSES x x x." In the letter to LRTA dated July 12,
2001, the Acting Chairman of the METRO Board of Directors at the time, Wilfredo Trinidad, reminded LRTA that funding
provisions for the retirement fund have always been considered operating expenses of Metro. The coverage of operating
expenses to include provisions for the retirement fund has never been denied by LRTA.

xxxx

The clear language of Resolution No. 00-44, to our mind, established the LRTA's obligation for the 50% unpaid balance of the
respondents' separation pay. Without doubt, it bound itself to provide the necessary funding to METRO'S Employee
Retirement Fund to fully compensate the employees who had been involuntary retired by the cessation of operations of
METRO. This is not at all surprising considering that METRO was a wholly owned subsidiary of the LRTA.

Second. Even on the assumption that the LRTA did not obligate itself to fully cover the separation benefits of the respondents
and others similarly situated, it still cannot avoid liability for the respondents' claim. It is solidarity [sic] liable as an indirect
employer under the law for the respondents' separation pay. This liability arises from the O & M agreement it had with
METRO, which created a principal-job contractor relationship between them, an arrangement it admitted when it argued before
the CA that METRO was an independent job contractor who, it insinuated, should be solely responsible for the respondents'
claim.24ChanRoblesVirtualawlibrary
Thus, based on (1) the Agreement where LRTA bound itself to be liable for the Operating Expenses of Metro; (2) Resolution
No. 00-44 which contained LRTA's declaration to bind itself for the payment of the separation pay of Metro's employees; and
(3) the solidary liability of an indirect employer under Articles 107 25 and 10926 of the Labor Code and Department Order No.
18-02, s. 2002 (which implements Articles 106-109 of the Labor Code),27 we found LRTA liable for the monetary claims of the
respondents therein.

Accordingly, we find that the application of the doctrine of stare decisis is in order. The doctrine of stare decisis et non quieta
movere means "to adhere to precedents, and not to unsettle things which are established."28 Under this doctrine, when this
Court has once laid down a principle of law as applicable to a certain state of facts, it will adhere to that principle, and apply it
to all future cases, where facts are substantially the same; regardless of whether the parties and property are the same. 29

The basic facts in this petition are the same as those in the case of LRTA v. Mendoza.30 Thus, we find that LRTA is solidarity
liable for the monetary claims of respondents, in light of this Court's findings in said case. It is the duty of the Court to apply the
previous ruling in LRTA v. Mendoza31 in accordance with the doctrine of stare decisis. Once a case has been decided one
way, any other case involving exactly the same point at issue, as in the present case, should be decided in the same
manner.32

We find no reversible error in the CA ruling, insofar as the monetary claims are concerned.chanrobleslaw

WHEREFORE, we DENY the petition.

SO ORDERED.cralawlawlibrary

G.R. No. 217575, June 15, 2016

SOUTH COTABATO COMMUNICATIONS CORPORATION AND GAUVAIN J. BENZONAN, Petitioners, v. HON. PATRICIA
STO. TOMAS, SECRETARY OF LABOR AND EMPLOYMENT, ROLANDO FABRIGAR, MERLYN VELARDE, VINCE
LAMBOC, FELIPE GALINDO, LEONARDO MIGUEL, JULIUS RUBIN, EDEL RODEROS, MERLYN COLIAO, AND EDGAR
JOPSON, Respondents.
DECISION
VELASCO JR., J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to reverse and set aside the
Decision1 dated November 28, 2014 and Resolution dated March 5, 2015 of the Court of Appeals (CA) in CA-G.R. SP No.

207
00179-MIN, affirming the Orders dated November 8, 2004 and February 24, 2005 issued by the Secretary of Labor and
Employment.
Factual Antecedents
On January 19, 2004, the Department of Labor and Employment Region-XII (DOLE) conducted a Complaint Inspection2 at the
premises of DXCP Radio Station, which is owned by petitioner South Cotabato Communications Corporation. The inspection
yielded a finding of violation of labor standards provisions of the Labor Code involving the nine (9) private respondents, such
as:
1. Underpayment of Wages
2. Underpayment of 13th Month Pay
3. Non-payment of the five (5) days Service Incentive Leave Pay
4. Non-payment of Rest Day Premium Pay
5. Non-payment of the Holiday Premium Pay
6. Non-remittance of SSS Contributions
7. Some employees are paid on commission basis aside from their allowance[s] 3
Consequently, the DOLE issued a Notice of Inspection Result directing petitioner corporation and/or its president, petitioner
Gauvain J. Benzonan (Benzonan), to effect restitution and/or correction of the alleged violations within five (5) days from
notice. Due to petitioners' failure to comply with its directive, the DOLE scheduled on March 3, 2004 a Summary Investigation
at its Regional Office No. XII, Provincial Extension Office, in General Santos City. However, petitioners failed to appear despite
due notice. Another hearing was scheduled on April 1, 2004 wherein petitioners' counsel, Atty. Thomas Jacobo (Atty. Jacobo),
failed to attend due to an alleged conflict in schedule. Instead, his secretary, Nona Gido, appeared on his behalf to request a
resetting, which the DOLE Hearing Officer denied.4 Thus, in an Order dated May 20, 2004, the DOLE Region-XII OIC Regional
Director (DOLE Regional Director) directed petitioners to pay private respondents the total amount of P759,752, representing
private respondents' claim for wage differentials, 13th month pay differentials, service incentive leave pay, holiday premium
pay, and rest day premium Pay-Therefrom, petitioners appealed to the Secretary of Labor, raising two grounds: (1) denial of
due process; and (2) lack of factual and legal basis of the assailed Order.

The denial of due process was predicated on the refusal of the Hearing Officer to reset the hearing set on April 1, 2004, which
thus allegedly deprived petitioners the opportunity to present their evidence. Likewise, petitioners asserted that the Order of
the Regional Director does not state that an employer-employee relationship exists between petitioners and private
respondents, which is necessary to confer jurisdiction to the DOLE over the alleged violations.

In an Order5 dated November 8, 2004, the Secretary of Labor affirmed the findings of the DOLE Regional Director on the
postulate that petitioners failed to question, despite notice of hearing, the noted violations or to submit any proof of compliance
therewith. And in view of petitioners' failure to present their evidence before the Regional Director, the Secretary of Labor
adopted the findings of the Labor Inspector and considered the interviews conducted as substantial evidence. The Secretary
of Labor likewise sustained what is considered as the straight computation method adopted by the Regional Office as regards
the monetary claims of private respondents,6 thus:
WHEREFORE, presmises considered, the appeal by DXCP Radio Station and Engr. Gauvain Benzonan is
hereby DISMISSED for lack of merit. The Order dated May [20], 2004 of the Regional Director, directing appellants to pay the
nine (9) appellees the aggregate amount of Seven Hundred Fifty Nine Thousand Seven Hundred Fifty Two Pesos
(Php759,752.00), representing their claims for wage differentials, 13 th month pay differentials, service incentive leave pay,
holiday pay premium and rest day premium, is AFFIRMED.

SO ORDERED.
Petitioners moved for, but was denied, reconsideration of the Secretary of Labor's Order.

Petitioners elevated the case to the Court of Appeals (CA) via a Petition for Certiorari under Rule 65 of the Rules of Court. By
a Resolution7 dated July 20, 2005, the CA dismissed the petition owing to procedural infirmities because petitioners failed to
attach a Secretary's Certificate evidencing the authority of petitioner Benzonan, as President, to sign the petition. On
appeal,8 this Court remanded the case back to the CA for determination on the merits. 9ChanRoblesVirtualawlibrary
Ruling of the Court of Appeals

In its Decision dated November 28, 2014 in CA-G.R. SP No. 00179-MIN, the CA upheld the Secretary of Labor, holding that
petitioners cannot claim denial of due process, their failure to present evidence being attributed to their negligence.

Petitioners moved for the reconsideration of the Decision, grounded on similar arguments raised before the Secretary of
Labor, citing in addition, the pronouncement of the National Labor Relations Commission (NLRC) in the related case of NLRC
No. MAC-01-010053-2008 entitled Rolando Fabrigar, et. al. v. DXCP Radio Station, et. al. There, the NLRC held that no

208
employer-employee relationship exists between petitioners and private respondents Rolando Fabrigar (Fabrigar), Edgar
Jopson (Jopson), and Merlyn Velarde (Velarde). For clarity, two separate actions were instituted by private respondents
Fabrigar, Jopson, and Velarde against petitioners: the first, for violation of labor standards provisions with the DOLE; and the
second, for illegal dismissal filed with the NLRC. The latter case arose from the three respondents' claim of constructive
dismissal effected by petitioners following the inspection by the DOLE. In ruling for petitioners, the NLRC, in its
Resolution10 dated April 30, 2008, declared that there is no employer-employee relationship between the parties, thus negating
the notion of constructive dismissal.

The CA denied petitioners' motion for reconsideration in its Resolution dated March 5, 2014. Hence, this petition.

Petitioners presently seek the reversal of the CA's Decision and Resolution and ascribe the following errors to the court a quo:
I. The [CA] did not completely and properly dispose of the case pending before it as it never resolved all justiciable
issues raised x x x, particularly, that the determination of presence or absence of employer-employee relationship is
indispensable in the resolution of this case as jurisdiction is dependent upon it.
II. There is [no] single basis, either factual or legal, for the issuance of the May 20, 2004 Order of the Regional Director
x x x against the petitioners as it was issued relying merely on pure allegations and without any substantial proof on
the part of the claimants, contrary to law and jurisprudence.
III. The [CA] gravely erred in ruling that the Secretary of Labor x x x did not act in a whimsical and capricious manner or
with grave abuse of discretion tantamount to lack or excess of jurisdiction in affirming the Order of the [Regional
Director] despite the glaring fact that no evidence were submitted by private respondents as to the basis of [their]
claim and nature of their employment.
IV. The [CA] erred in ruling that the Secretary of Labor x x x did not deny [petitioners their] right to due process in
affirming the x x x Order of [the] Regional Director x x x notwithstanding [the evidence] submitted before her [that
there] exist no employer- employee relation [ship] among the parties and that the [DOLE] has no jurisdiction over the
case.11
In the matter of denial of due process, petitioners maintain that they were prevented from presenting evidence to prove that
private respondents are not their employees when the Regional Director submitted the case for resolution without affording
them an opportunity to ventilate their case or rebut the findings of the inspection. In addition, petitioners assail the Order of the
Regional Director for want of factual and legal basis, particularly the lack of categorical finding on the existence of an
employer-employee relationship between the partiesan element which petitioners insist is a prerequisite for the exercise of
the DOLE'S jurisdiction,12 following People's Broadcasting (Bombo Radyo, Phils., Inc.) v. The Secretary of Labor and
Employment, et al.13 Petitioners likewise note that the November 8, 2004 Order of the DOLE Secretary denying petitioner's
appeal, as well as the Decision of the CA, is silent on the employer-employee relationship issue, which further suggests that
no real and proper determination of the existence of such relationship was ever made by these tribunals.

In its Comment, the DOLE counters that the results of the interviews conducted in the premises of DXCP in the course of its
inspection constitute substantial evidence that served as basis for the monetary awards to private
respondents.14ChanRoblesVirtualawlibrary

From the foregoing, the issue for the resolution can be reduced into the question of whether the CA erred in upholding the
November 8, 2004 Order of the Secretary of Labor, which in turn affirmed the May 20, 2004 Order of the Regional Director.
Inextricably linked to the resolution of the said issue is a determination of whether an employer-employee relationship had
sufficiently been established between the parties as to warrant the assumption of jurisdiction by the DOLE and issuance of the
said May 20, 2004 and November 8, 2004 Orders.
The Court's Ruling

Petitioners were not denied due process

Petitioners' claim of denial of due process deserves scant consideration. The essence of due process, jurisprudence teaches,
is simply an opportunity to be heard, or, as applied to administrative proceedings, an opportunity to explain one's side or an
opportunity to seek a reconsideration of the action or ruling complained of. 15 As long as the parties are, in fine, given the
opportunity to be heard before judgment is rendered, the demands of due process are sufficiently
met.16ChanRoblesVirtualawlibrary

That petitioners were given ample opportunity to present their evidence before the Regional Director is indisputable. They
were notified of the summary investigations conducted on March 3, 2004 and April 1, 2004, both of which they failed to attend.
To justify their non-appearance, petitioners claim they requested a resetting of the April 1, 2004 hearing due to the
unavailability of their counsel.17However, no such explanation was proffered as to why they failed to attend the first hearing. At
209
any rate, it behooved the petitioners to ensure that they, as well as their counsel, would be available on the dates set for the
summary investigation as this would enable them to prove their claim of non-existence of an employer-employee relationship.
Clearly, their own negligence did them in. Their lament that they have been deprived of due process is specious.

This thus brings to the fore the issues of whether the Orders of the Regional Director and Secretary of Labor are supported by
factual and legal basis, and, concomitantly, whether an employer-employee relationship was sufficiently established between
petitioners and private respondents as to warrant the exercise by the DOLE of jurisdiction.

At the outset, the determination as to whether such employer-employee relationship was, indeed, established requires an
examination of facts. It is a well-settled rule that findings of fact of quasi-judicial agencies are accorded great respect, even
finality, by this Court. This proceeds from the general rule that this Court is not a trier of facts, as questions of fact are
contextually for the labor tribunals to resolve, and only errors of law are generally reviewed in petitions for review on certiorari
criticizing the decisions of the CA.18ChanRoblesVirtualawlibrary

The findings of fact should, however, be supported by substantial evidence from which the said tribunals can make their own
independent evaluation of the facts. In labor cases, as in other administrative and quasi-judicial proceedings, the quantum of
proof necessary is substantial evidence, or such amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion.19 Although no particular form of evidence is required to prove the existence of an employer-
employee relationship, and any competent and relevant evidence to prove the relationship may be admitted, 20 a finding that
the relationship exists must nonetheless rest on substantial evidence.21ChanRoblesVirtualawlibrary

In addition, the findings of fact tainted with grave abuse of discretion will not be upheld. This Court will not hesitate to set aside
the labor tribunal's findings of fact when it is clearly shown that they were arrived at arbitrarily or in disregard of the evidence
on record or when there is showing of fraud or error of law. 22ChanRoblesVirtualawlibrary

This case clearly falls under the exception. After a careful review of this case, the Court finds that the DOLE failed to establish
its jurisdiction over the case.

The assailed May 20, 2004 Order of the Regional Director and November 8, 2004 Order of the Secretary of Labor were issued
pursuant to Article 128 of the Labor Code, to wit:
ART. 128. Visitorial and enforcement power. - (a) The Secretary of Labor and Employment or his duly authorized
representatives, including labor regulation officers, shall have access to employer's records and premises at any time of the
day or night whenever work is being undertaken therein, and the right to copy therefrom, to question any employee and
investigate any fact, condition or matter which may be necessary to determine violations or which may aid in the enforcement
of this Code and of any labor law, wage order or rules and regulations issued pursuant thereto.

(b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the relationship of
employer-employee still exists, the Secretary of Labor and Employment or his duly authorized representatives shall have the
power to issue compliance orders to give effect to the labor standards provisions of this Code and other labor legislation based
on the findings of labor employment and enforcement officers or industrial safety engineers made in the course of inspection.
The Secretary or his duly authorized representatives shall issue writs of execution to the appropriate authority for the
enforcement of their orders, except in cases where the employer contests the findings of the labor employment and
enforcement officer and raises issues supported by documentary proofs which were not considered in the course of
inspection. (As amended by Republic Act No. 7730, June 2, 1994). x x x
Under the aforequoted provision, the Secretary of Labor, or any of his or her authorized representatives, is granted visitorial
and enforcement powers for the purpose of determining violations of, and enforcing, the Labor Code and any labor law, wage
order, or rules and regulations issued pursuant thereto. Indispensable to the DOLE'S exercise of such power is the existence
of an actual employer-employee relationship between the parties.

The power of the DOLE to determine the existence of an employer-employee relationship between petitioners and private
respondents in order to carry out its mandate under Article 128 has been established beyond cavil in Bombo Radyo,23 thus:
It can be assumed that the DOLE in the exercise of its visitorial and enforcement power somehow has to make a
determination of the existence of an employer-employee relationship. Such prerogatival determination, however, cannot
be coextensive with the visitorial and enforcement power itself. Indeed, such determination is merely preliminary, incidental
and collateral to the DOLE'S primary function of enforcing labor standards provisions. The determination of the existence of
employer-employee relationship is still primarily lodged with the NLRC. This is the meaning of the clause "in cases where the
relationship of employer-employee still exists" in Art. 128 (b).

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Thus, before the DOLE may exercise its powers under Article 128, two important questions must be resolved: (1) Does the
employer-employee relationship still exist, or alternatively, was there ever an employer-employee relationship to speak of; and
(2) Are there violations of the Labor Code or of any labor law?

The existence of an employer-employee relationship is a statutory prerequisite to and a limitation on the power of the
Secretary of Labor, one which the legislative branch is entitled to impose. The rationale underlying this limitation is to
eliminate the prospect of competing conclusions of the Secretary of Labor and the NLR.C, on a matter fraught with questions
of fact and law, which is best resolved by the quasi-judicial body, which is the NRLC, rather than an administrative official of
the executive branch of the government. If the Secretary of Labor proceeds to exercise his visitorial and enforcement powers
absent the first requisite, as the dissent proposes, his office confers jurisdiction on itself which it cannot otherwise acquire.
(emphasis ours)
The foregoing ruling was further reiterated and clarified in the resolution of the reconsideration of the same case, wherein the
jurisdiction of the DOLE was delineated vis-a-vis the NLRC where the employer-employee relationship between the parties is
at issue:
No limitation in the law was placed upon the power of the DOLE to determine the existence of an employer-employee
relationship. No procedure was laid down where the DOLE would only make a preliminary finding, that the power was primarily
held by the NLRC. The law did not say that the DOLE would first seek the NLRC's determination of the existence of an
employer-employee relationship, or that should the existence of the employer-employee relationship be disputed, the DOLE
would refer the matter to the NLRC. The DOLE must have the power to determine whether or not an employer-employee
relationship exists, and from there to decide whether or not to issue compliance orders in accordance with Art. 128(b)
of the Labor Code, as amended by RA 7730.

The DOLE, in determining the existence of an employer-employee relationship, has a ready set of guidelines to
follow, the same guide the courts themselves use. The elements to determine the existence of an employment
relationship are: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; (4) the employer's power to control the employee's conduct. The use of this test is not solely limited to the
NLRC. The DOLE Secretary, or his or her representatives, can utilize the same test, even in the course of inspection, making
use of the same evidence that would have been presented before the NLRC. (emphasis ours)
Like the NLRC, the DOLE has the authority to rule on the existence of an employer-employee relationship between the parties,
considering that the existence of an employer-employee relationship is a condition sine qua non for the exercise of its visitorial
power. Nevertheless, it must be emphasized that without an employer-employee relationship, or if one has already been
terminated, the Secretary of Labor is without jurisdiction to determine if violations of labor standards provision had in fact been
committed,24 and to direct employers to comply with their alleged violations of labor standards.

The Orders of the Regional Director and the Secretary of Labor do not contain clear and distinct factual basis
necessary to establish the jurisdiction of the DOLE and to justify the monetary awards to private respondents

For expediency, the May 20, 2004 Order of the Regional Director is pertinently reproduced hereunder:
ORDER

This refers to the Complaint Inspection conducted at DXCP Radio Station and/or Engr. Gauvain Benzonan, President, located
at NH Lagao Road, General Santos City on January 19, 2004 pursuant to Inspection Authority No. R1201-0401-CI-052 which
resulted to the discovery of the Labor Standards violations, namely:
1. Underpayment of Wages
2. Underpayment of 13th Month Pay
3. Non-payment of the five (5) days Service Incentive Leave Pay
4. Non-payment of Rest Day Premium Pay
5. Non-payment of the Holiday Premium Pay
6. Non-remittance of SSS Contributions
7. Some employees are paid on commission basis aside from their allowance[s]
Proceeding from the conduct of such inspection was the issuance of the Notice of Inspection Result requiring the respondent
DXCP Radio Station and/or Engr. Gauvain Benzonan, President, to effect restitution and/or correction of the noted violations
at the plant/company level within five (5) calendar days from notice thereof. But, Engr. Gauvain Benzonan failed to do so.

On March 3, 2004, a summary investigation was conducted at the [DOLE], Regional Office No. XII, Provincial Extension
Office, General Santos City. In that scheduled Summary Investigation, only complainants appeared, assisted by Mr. Fred
Huervana, National President of the Philippine Organization of Labor Unions, x x x while respondent failed to appear despite
due notice.
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On April 1, 2004, another Summary Investigation was conducted x x x [There] complainants appeared, x x x while respondent
was represented by Ms. Nona Gido, Secretary of Atty. Thomas Jacobo, counsel for the respondent. During the deliberation,
Ms. Nona Gido manifested that her presence in that scheduled summary investigation was to request for the re-scheduling of
such hearing, however, such request was denied. Mr. Fred Huervana declared that as he gleaned from the Notice of
Inspection Result issued by the labor inspector, the Non-payment of the Provisional Emergency Relief Allowance (PERA) was
not included from among the discovered violations, hence he requested that it should be included in the computation. Such
request was denied x x x. Further, Mr. Fred Huervana, declared that this case be submitted for decision based on the merit of
the case.

Failure of the parties to reach a final settlement prompted this Office to compute the entitlements of the seven (7) affected
workers for their salary differential, underpayment of 13th month pay, non-payment of the five (5) days service incentive leave
pay, non-payment of holiday premium pay and non-payment of rest day premium pay in the total amount of SEVEN
HUNDRED FIFTY NINE THOUSAND SEVEN HUNDRED FIFTY TWO PESOS (P759,752.00) x x x.25
In determining the existence of an employer-employee relationship, Bombo Radyo specifies the guidelines or indicators used
by courts, i.e. (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and
(4) the employer's power to control the employee's conduct. The DOLE Secretary, or his or her representatives, can utilize the
same test, even in the course of inspection, making use of the same evidence that would have been presented before the
NLRC.26ChanRoblesVirtualawlibrary

As can be gleaned from the above-quoted Order, the Regional Director merely noted the discovery of violations of labor
standards provisions in the course of inspection of the DXCP premises. No such categorical determination was made on the
existence of an employer-employee relationship utilizing any of the guidelines set forth. In a word, the Regional Director had
presumed, not demonstrated, the existence of the relationship. Of particular note is the DOLE'S failure to show that petitioners,
thus, exercised control over private respondents' conduct in the workplace. The power of the employee to control the work of
the employee, or the control test, is considered the most significant determinant of the existence of an employer-employee
relationship.27ChanRoblesVirtualawlibrary

Neither did the Orders of the Regional Director and Secretary of Labor state nor make reference to any concrete evidence to
support a finding of an employer-employee relationship and justify the monetary awards to private respondents. Substantial
evidence, such as proofs of employment, clear exercise of control, and the power to dismiss that prove such relationship and
that petitioners committed the labor laws violations they were adjudged to have committed, are grossly absent in this case.
Furthermore, the Orders dated May 20, 2004 and November 8, 2004 do not even allude to the substance of the interviews
during the inspection that became the basis of the finding of an employer-employee relationship.

The Secretary of Labor adverts to private respondents' allegation in their Reply28 to justify their status as employees of
petitioners. The proffered justification falls below the quantum of proof necessary to establish such fact as allegations can
easily be concocted and manufactured. Private respondents' allegations are inadequate to support a conclusion absent other
concrete proof that would support or corroborate the same. Mere allegation, without more, is not evidence and is not
equivalent to proof.29 Hence, private respondents' allegations, essentially self-serving statements as they are and devoid
under the premises of any evidentiary weight, can hardly be taken as the substantial evidence contemplated for the DOLE'S
conclusion that they are employees of petitioners.

In a similar vein, the use of the straight computation method in awarding the sum of P759,752 to private respondents, without
reference to any other evidence other than the interviews conducted during the inspection, is highly telling that the DOLE failed
to consider evidence in arriving at its award and leads this Court to conclude that such amount was arrived at arbitrarily.

It is quite implausible for the nine (9) private respondents to be entitled to uniform amounts of Service Incentive Leave (SIL)
pay, holiday pay premium, and rest day premium pay for three (3) years, without any disparity in the amounts due them since
entitlement to said benefits would largely depend on the actual rest days and holidays worked and amount of remaining leave
credits in a year. Whoever claims entitlement to the benefits provided by law should establish his or her right thereto. 30 The
burden of proving entitlement to overtime pay and premium pay for holidays and rest days lies with the employee because
these are not incurred in the normal course of business.31 In the case at bar, evidence pointing not only to the existence of an
employer-employee relationship between the petitioners and private respondents but also to the latter's entitlement to these
benefits are miserably lacking.

It may be that petitioners have failed to refute the allegation that private respondents were employees of DXCP. Nevertheless,
it was incumbent upon private respondents to prove their allegation that they were, indeed, under petitioners' employ and that
212
the latter violated their labor rights. A person who alleges a fact has the onus of proving it and the proof should be clear,
positive and convincing.32 Regrettably, private respondents failed to discharge this burden. The pronouncement in Bombyo
Radyo that the determination by the DOLE of the existence of an employer-employee relationship must be respected should
not be construed so as to dispense with the evidentiary requirement when called for.

It cannot be stressed enough that the existence of an employer-employee relationship between the parties is essential to
confer jurisdiction of the case to the DOLE. Without such express finding, the DOLE cannot assume to have jurisdiction to
resolve the complaints of private respondents as jurisdiction in that instance lies with the NLRC.33ChanRoblesVirtualawlibrary

The Orders of the Regional Director and Secretary of Labor do not comply with Article VIII, Section 16 of the
Constitution

As a necessary corollary to the foregoing considerations, another well-grounded reason exists to set aside the May 20, 2004
Order of the Regional Director and November 8, 2004 Order of the Secretary of Labor. The said Orders contravene Article VIII,
Section 14 of the Constitution, which requires courts to express clearly and distinctly the facts and law on which decisions are
based, to wit:
Section 14. No decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law
on which it is based.

No petition for review or motion for reconsideration of a decision of the court shall be refused due course or denied without
stating the legal basis therefor.
As stressed by this Court in San Jose v. NLRC,34 faithful compliance by the courts and quasi-judicial bodies, such as the
DOLE, with Art. VIII, Sec. 14 is a vital element of due process as it enables the parties to know how decisions are arrived at as
well as the legal reasoning behind them. Thus:
This Court has previously held that judges and arbiters should draw up their decisions and resolutions with due care, and
make certain that they truly and accurately reflect their conclusions and their final dispositions. A decision should faithfully
comply with Section 14, Article VIII of the Constitution which provides that no decision shall be rendered by any court without
expressing therein clearly and distinctly the facts of the case and the law on which it is based. If such decision had to be
completely overturned or set aside, upon the modified decision, such resolution or decision should likewise state the factual
and legal foundation relied upon. The reason for this is obvious: aside from being required by the Constitution, the court should
be able to justify such a sudden change of course; it must be able to convincingly explain the taking back of its solemn
conclusions and pronouncements in the earl indecision. The same thing goes for the findings of fact made by the NLRC, as it
is a settled rule that such findings are entitled to great respect and even finality when supported by substantial evidence;
otherwise, they shall be struck down for being whimsical and capricious and arrived at with grave abuse of discretion. It is a
requirement of due process and fair play that the parties to a litigation be informed of how it was decided, with an explanation
of the factual and legal reasons that led to the conclusions of the court. A decision that does not clearly and distinctly state the
facts and the law on which it is based leaves the parties in the dark as to how it was reached and is especially prejudicial to
the losing party, who is unable to pinpoint the possible errors of the court for review by a higher tribunal. x x x
To this end, University of the Philippines v. Hon. Dizon35 instructs that the Constitution and the Rules of Court require not only
that a decision should state the ultimate facts but also that it should specify the supporting evidentiary facts, for they are what
are called the findings of fact. A decision that does not clearly and distinctly state the facts and the law on which it is based
leaves the parties in the dark as to how it was reached and is especially prejudicial to the losing party, who is unable to
pinpoint the possible errors of the court (or quasi-judicial body) for review by a higher tribunal.36ChanRoblesVirtualawlibrary

Accordingly, this Court will not hesitate to strike down decisions rendered not hewing to the Constitutional directive, as it did to
a Decision rendered by the NLRC in Anino, et al. v. Hinatuan Mining Corporation37 for non-observance of the said
requirement:
In the present case, the NLRC was definitely wanting in the observance of the aforesaid constitutional requirement. Its
assailed five-page Decision consisted of about three pages of quotation from the labor arbiter's decision, including the
dispositive portion, and barely a page (two short paragraphs of two sentences each) of its own discussion of its reasons for
reversing the arbiter's findings. It merely raised a doubt on the motive of the complaining employees and took "judicial notice
that in one area of Mindanao, the mining industry suffered economic difficulties." In affirming peremptorily the validity of private
respondents' retrenchment program, it surmised that "[i]f small mining cooperatives experienced the same fate, what more
with those highly mechanized establishments."
The Court is not unmindful of the State's policy to zealously safeguard the rights of our workers, as no less than the
Constitution itself mandates the State to afford full protection to labor. Nevertheless, it is equally true that the law, in protecting
the rights of the laborer, authorizes neither oppression nor self-destruction of the employer.38 The constitutional policy to
provide full protection to labor is not meant to be a sword to oppress employers.39 Certainly, an employer cannot be made to
213
answer for claims that have neither been sufficiently proved nor substantiated.

WHEREFORE, the petition is GRANTED. The Decision dated November 28, 2014 and Resolution dated March 5, 2015 of the
Court of Appeals in CA-G.R. SP No. 00179-MIN are accordingly REVERSED and SET ASIDE. The Order of the then
Secretary of Labor and Employment dated November 8, 2004 denying petitioners' appeal and the Order of the Regional
Director, DOLE Regional Office No. XII, dated May 20, 2004, are ANNULLED, without prejudice to whatever right or cause of
action private respondents may have against petitioners.

SO ORDERED.

G.R. No. 202015, July 13, 2016

ANTONIO VALEROSO AND ALLAN LEGATONA, Petitioners, v. SKYCABLE CORPORATION, Respondent.
DECISION
DEL CASTILLO, J.:
By this Petition for Review on Certiorari,1 Antonio Valeroso and Allan Legatona (petitioners) assail the November 11, 2011
Decision2 and May 18, 2012 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 116296, which reversed the May 24,
2010 Decision4 of the National Labor Relations Commission (NLRC) and consequently dismissed their Complaint for illegal
dismissal and money claims against Skycable Corporation (respondent).

Antecedent Facts

This case arose from a Complaint5 for illegal dismissal, non-payment of 13th month pay, separation pay and illegal deduction
filed by petitioners against respondent on February 25, 2009 before the Labor Arbiter, docketed as NLRC NCR Case No. 02-
03439-09. The Complaint was subsequently amended to include regularization and payment of moral and exemplary damages
as additional causes of action.6ChanRoblesVirtualawlibrary

Petitioners Valeroso and Legatona alleged that they started working on November 1, 1998 and July 13,1998, respectively, as
account executives tasked to solicit cable subscriptions for respondent, as evidenced by Certifications 7 issued by Michael T.
De la Cuesta (De la Cuesta), respondent's Sales Territory Manager. As shown in their payslips 8 for the years 2001 to 2006,
they received commissions ranging from P15,000.00 to 530,000.00 each upon reaching a specific quota every month and an
allowance of P6,500.00 to P7,000.00 per month. From being direct hires of respondent, they were transferred on January 1,
2007 to Skill Plus Manpower Services sans any agreement for their transfer. In February 2009, they were informed that their
commissions would be reduced due to the introduction of prepaid cards sold to cable subscribers resulting in lower monthly
cable subscriptions. Dismayed, they notified their manager, Marlon Pasta (Pasta), of their intention to file a labor case with the
NLRC, which they did on February 25, 2009. Pasta then informed them that they will be dropped from the roster of its account
executives, which act, petitioners claimed, constitutes unfair labor practice.

Further, petitioners claimed that they did not receive 13 th month pay for 2006 and were underpaid of such benefit for the years
2007 and 2008; and that in January 2008, petitioner Legatona signed a Release and Quitclaim 9 in consideration of the amount
of P25,000.00 as loyalty bonus from respondent.

Respondent, on the other hand, claimed that it did not terminate the services of petitioners for there was never an employer-
employee relationship to begin with. It averred that in 1998, respondent (then Central CATV, Inc.) engaged petitioners as
independent contractors under a Sales Agency Agreement.10 In 2007, respondents decided to streamline its operations and
instead of contracting with numerous independent account executives such as petitioners, respondent engaged the services of
an independent contractor, Armada Resources & Marketing Solutions, Inc. (Armada, for brevity; formerly Skill Plus Manpower
Services) under a Sales Agency Agreement.11 As a result, petitioners' contracts were terminated but they, together with other
sales account executives, were referred for transfer to Armada. Petitioners then became employees of Armada. In 2009,
respondent and Armada again entered into a Sales Agency Agreement,12 wherein petitioners were again tasked to solicit
accounts/ generate sales for respondent.
Respondent insisted that in hiring petitioners and Armada as independent contractors, it engaged in legitimate job contracting
where no employer-employee relation exists between them. In an affidavit, 13 De la Cuesta stated that the certifications he
issued are not employment certifications but are mere accommodations, requested by petitioners themselves, for their credit
card and loan applications. Moreover, Armada's President, Francisco Navasa (Navasa), in his affidavit, 14 verified that Armada
is an independent contractor which selected and engaged the services of petitioners, paid their compensation, exercised the
power to control their conduct and discipline or dismiss them. Therefore, when petitioners filed their Complaint in February
2009, they were employees of Armada and as such, had no cause of action against respondent.

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Petitioners, however, assailed the allegation that they were employees of Armada, claiming that they were directly hired, paid
and dismissed by respondent. They cited the following as indicators that they are under the direct control and supervision of
respondent: 1) respondent's officers supervise their area of work, monitor them daily, update them of new promos and
installations they need to work on, inform them of meetings and penalize them for non-attendance, ask them to train new
agents/account executives, and inform them of new prices and expiration dates of product promos; 2) respondent's
supervisors delegate to them authority to investigate, campaign against and legalize unlawful cable connections; 3)
respondent's supervisors monitor their quota production and impose guaranteed charges as penalty for failing to meet their
quota; and 4) respondent consistently gives trophies to award them of their outstanding performance.

Ruling of the Labor Arbiter

In a Decision15 dated August 26, 2009, the Labor Arbiter dismissed the Complaint since petitioners failed to establish by
substantial evidence that respondent was their employer. The Labor Arbiter observed that petitioners failed to identify and
specify the person who allegedly hired them, paid their wages and exercised supervision and control over the manner and
means of performing their work. There was neither any evidence to prove that Pasta, who allegedly dismissed them, is an
officer of respondent with an authority to dismiss them. The dispositive portion of the Decision reads:
WHEREFORE, premises considered, the complaint filed in the instant case is dismissed as discussed in the body hereof.

SO ORDERED.16

Ruling of the National Labor Relations Commission

Petitioners filed an appeal with the NLRC attributing reversible error on the Labor Arbiter in dismissing their Complaint on the
ground of no employer-employee relationship.

In a Decision17 dated May 24, 2010, the NLRC reversed the Labor Arbiter's ruling. It found that petitioners are regular
employees of respondent having performed their job as account executives for more than one year, even if not continuous and
merely intermittent, and considering the indispensability and continuing need of petitioners' tasks to the business. The NLRC
observed that there was no evidence that petitioners have substantial capitalization or investment to consider them as
independent contractors. On the other hand, the certifications and the payslips presented by petitioners constitute substantial
evidence of employer-employee relationship. The NLRC held that upon termination of the Sales Agency Agreement with
Armada in 2009, petitioners were considered dismissed without just cause and due process. The dispositive portion of the
NLRC Decision reads:
WHEREFORE, premises considered, the instant appeal is GRANTED and the assailed Decision of Labor Arbiter Gaudencio
P. Demaisip, Jr. dated August 26, 2009, is REVERSED and SET ASIDE, and a new one entered declaring complainants to
have been illegally dismissed. Accordingly, respondent Skycable Corporation/Central CATV Inc. is hereby directed to
immediately reinstate complainants to their former positionfs] and to pay each of the complainants their full backwages
reckoned from February 25,2009 up to the actual payroll reinstatement, (tentatively computed at P607,200.00), in addition to
the amount of P58,500.00 representing 13th month pay differentials and pro-ratal 3th month pay for 2009.

SO ORDERED.18

With the NLRC s ruling in favor of petitioners, respondent filed a motion for reconsideration. This motion was, however, denied
by the NLRC in its Resolution19 of July 27, 2010.

Riding of the Court of Appeals

Respondent filed a Petition for Certiorari20 with the CA, attributing grave abuse of discretion on the part of the NLRC in holding
it liable for the alleged illegal dismissal of petitioners.

The CA rendered a Decision21 on November 11, 2011 granting respondent's Petition for Certiorari and reversing the NLRC
Decision. The CA sustained the Labor Arbiter's finding that there was no evidence to substantiate the bare allegation of
employer-employee relationship between the parties. The dispositive portion of the CA Decision reads:
WHEREFORE, premises considered, the instant petition is GRANTED and the Decision dated May 24, 2010 of the National
Labor Relations Commission in NLRC NCR Case No. 02-03439-09 is hereby REVERSED and SET ASIDE.

SO ORDERED.22

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Petitioners moved for reconsideration which was denied by the CA in its Resolution 23 dated May 18, 2012.
Issues

Hence, this Petition raising the following issues:

I.

WHETHER THE COURT OF APPEALS GRAVELY ERRED IN RENDERING ITS DECISION DATED NOVEMBER 11, 2011.
II.

WHETHER THE PETITIONERS WERE RESPONDENT'S REGULAR EMPLOYEES, WHOSE DISMISSAL FROM
EMPLOYMENT WAS ILLEGAL.24

Petitioners maintain that respondent failed to discharge the burden of disproving the employer-employee relationship through
competent evidence of independent contractorship. They assert that the nature of their work and length of service with
respondent made them regular employees as defined in Article 28025 of the Labor Code. Consequently, the CA gravely erred
in dismissing their Complaint for illegal dismissal against respondent.
Our Ruling

The Petition has no merit.

The pivotal issue to be resolved in this case is whether petitioners were employees of respondent.

Well-entrenched is the doctrine that the existence of an employer-employee relationship is ultimately a question of fact and
that the findings thereon by the Labor Arbiter and NLRC shall be accorded not only respect but even finality when supported
by substantial evidence.26 However, considering the conflicting findings of fact by the Labor Arbiter, the NLRC and the CA, the
Court is impelled to re-examine the records and resolve this factual issue.

To prove the claim of an employer-employee relationship, the following should be established by competent evidence: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employer's
power to control the employee with respect to the means and methods by which the work is to be accomplished. 27 Among the
four, the most determinative factor in ascertaining the existence of employer-employee relationship is the "right of control
test."28 Under this control test, the person for whom the services are performed reserves the right to control not only the end to
be achieved, but also the means by which such end is reached. 29ChanRoblesVirtualawlibrary

We rule that an employer-employee relationship is absent in this case. The evidence presented by petitioners did not prove
their claim that they were employees of respondent. The certifications issued by De la Cuesta are not competent evidence of
employer-employee relation as these merely certified that respondent had engaged the services of petitioners without
specifying the true nature of such engagement. These documents did not certify that petitioners were employees but were only
issued to accommodate petitioners' request for loan applications, which fact was not refuted by petitioners. As for the payslips
presented, it appears that only the payslips for the years 2001 to 2006 were submitted. No payslips for the years material to
this case (2007 to 2009) were submitted. It is undisputed that petitioners were transferred to Armada in 2007, thus, we cannot
give much credence to the payslips issued before this period.

We, further, find no merit in petitioners' assertion that respondent's control over them was demonstrated. "[Guidelines
indicative of labor law 'control' do not merely relate to the mutually desirable result intended by the contractual relationship;
they must have the nature of dictating the means and methods to be employed in attaining the result."30 Here, we find that
respondent's act of regularly updating petitioners of new promos, new price listings, meetings and trainings of new account
executives; imposing quotas and penalties; and giving commendations for meritorious performance do not pertain to the
means and methods of how petitioners were to perform and accomplish their task of soliciting cable subscriptions. At most,
these indicate that respondent regularly monitors the result of petitioners' work but in no way dictate upon them the manner in
which they should perform their duties. Absent any intrusion by respondent into the means and manner of conducting
petitioners' tasks, bare assertion that petitioners' work was supervised and monitored does not suffice to establish employer-
employee relationship.

Reliance by petitioners on the case of Francisco v. National Labor Relations Commission31 is misplaced. In that case, the
Court adopted a two-tiered test in order to determine the true relationship between the employer and employee. This two-
tiered test, which involves: "(1) the putative employer's power to control the employee with respect to the means and methods
216
by which the work is to be accomplished; and (2) the underlying economic realities of the activity or relationship," has been
made especially appropriate in cases where there is no written agreement to base the relationship on and where the various
tasks performed by the worker brings complexity to the relationship with the employer. 32 Thus, in addition to the control test,
the totality of the economic circumstances of the worker is taken into light to determine the existence of employment
relationship.

In the present case, there is a written contract, i.e., the Sales Agency Agreement, which served as the primary evidence of the
nature of the parties' relationship. In this duly executed and signed agreement, petitioners and respondent unequivocally
agreed that petitioners' services were to be engaged on an agency basis as sales account executives and that no employer-
employee relationship is created but an independent contractorship. It is therefore clear that the intention at the time of the
signing of the agreement is not to be bound by an employer-employee relationship. At any rate, even if we are to apply the
two-tiered test pronounced in the Francisco case, there can still be no employer-employee relationship since, as discussed,
the element of control is already absent.

Indeed, "[t]he presence of [the] power of control is indicative of an employment relationship while the absence thereof is
indicative of independent contractorship." 33 Moreover, evidence on record reveal the existence of independent contractorship
between the parties. As mentioned, the Sales Agency Agreement provided the primary evidence of such relationship. "While
the existence of employer-employee relationship is a matter of law, the characterization made by the parties in their contract
as to the nature of their juridical relationship cannot be simply ignored, particularly in this case where the parties' written
contract unequivocally states their intention"34 to be strictly bound by independent contractorship. Petitioner Legatona, in fact,
in his Release and Quitclaim, acknowledged that he was performing sales activities as sales agent/independent contractor and
not an employee of respondent. In the same token, De la Cuesta and Navasa, made sworn testimonies that petitioners are
employees of Armada which is an independent contractor engaged to provide marketing services for respondent.

Neither can we subscribe to petitioners' contention that they are considered regular employees of respondent for they perform
functions necessary and desirable to the business operation of respondent in consonance with Article 280 of the Labor Code.
We have held that "Article 280 is not the yardstick for determining the existence of an employment relationship because it
merely distinguishes between two kinds of employees, i.e., regular employees and casual employees, for purposes of
determining [their rights] to certain benefits, [such as] to join or form a union, or to security of tenure. Article 280 does not apply
where the existence of an employment relationship is in dispute," 35 as in this case.

Evidently, the legal relation of petitioners as sales account executives to respondent can be that of an independent contractor.
There was no showing that respondent had control with respect to the details of how petitioners must conduct their sales
activity of soliciting cable subscriptions from the public. In the case of Abante, Jr. v. Lamadrid Bearing & Parts
Corporation,36 Empermaco Abante, Jr., a commission salesman who pursued his selling activities without interference or
supervision from respondent company and relied on his own resources to perform his functions, was held to be an
independent contractor. Similarly, in Sandigan Savings & Loan Bank, Inc. v. National Labor Relations Commission,37 Anita
Javier was also held to be an independent contractor as the Court found that Sandigan Realty Development Corporation had
no control over her conduct as a realty sales agent since its only concern or interest was in the result of her work and not in
how it was achieved.

All told, we sustain the CA's factual findings and conclusion and accordingly, find no cogent reason to overturn the dismissal of
petitioners' Complaint against respondent.

WHEREFORE, the Petition is DENIED. The November 11, 2011 Decision and May 18, 2012 Resolution of the Court of
Appeals in CA-G.R. SP No. 116296 are AFFIRMED.

SO ORDERED.

[ G.R. No. 220978, July 05, 2016 ]

CENTURY PROPERTIES, INC., PETITIONER, VS. EDWIN J. BABIANO AND EMMA B. CONCEPCION, RESPONDENTS.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari[1] are the Decision[2] dated April 8, 2015 and the Resolution[3]dated October 12,
2015 of the Court of Appeals (CA) in CA-G.R. SP No. 132953, which affirmed, with modification the Decision[4] dated June 25,
2013 and the Resolution[5] dated October 16, 2013 of the National Labor Relations Commission (NLRC) in NLRC LAC No. 05-
001615-12, and ordered petitioner Century Properties, Inc. (CPI) to pay respondents Edwin J. Babiano (Babiano) and Emma

217
B. Concepcion (Concepcion; collectively, respondents) unpaid commissions in the amounts of P889,932.42 and P591,953.05,
respectively.
The Facts

On October 2, 2002, Babiano was hired by CPI as Director of Sales, and was eventually[6] appointed as Vice President for
Sales effective September 1, 2007. As CPFs Vice President for Sales, Babiano was remunerated with, inter alia, the following
benefits: (a) monthly salary of P70,000.00; (b) allowance of P50,000.00; and (c) 0.5% override commission for completed
sales. His employment contract[7] also contained a "Confidentiality of Documents and Non-Compete Clause"[8] which, among
others, barred him from disclosing confidential information, and from working in any business enterprise that is in direct
competition with CPI "while [he is] employed and for a period of one year from date of resignation or termination from [CPI]."
Should Babiano breach any of the terms thereof, his "forms of compensation, including commissions and incentives will be
forfeited."[9]

During the same period, Concepcion was initially hired as Sales Agent by CPI and was eventually [10] promoted as Project
Director on September 1, 2007.[11] As such, she signed an employment agreement, denominated as "Contract of Agency for
Project Director"[12] which provided, among others, that she would directly report to Babiano, and receive, a monthly subsidy of
P60,000.00, 0.5% commission, and cash incentives.[13] On March 31, 2008, Concepcion executed a similar contract [14] anew
with CPI in which she would receive a monthly subsidy of P50,000.00, 0.5% commission, and cash incentives as per company
policy. Notably, it was stipulated in both contracts that no employer-employee relationship exists between Concepcion and
CPI.[15]

After receiving reports that Babiano provided a competitor with information regarding CPFs marketing strategies, spread false
information regarding CPI and its projects, recruited CPI's personnel to join the competitor, and for being absent without official
leave (AWOL) for five (5) days, CPI, through its Executive Vice President for Marketing and Development, Jose Marco R.
Antonio (Antonio), sent Babiano a Notice to Explain[16] on February 23, 2009 directing him to explain why he should not be
charged with disloyalty, conflict of interest, and breach of trust and confidence for his actuations. [17]

On February 25, 2009, Babiano tendered[18] his resignation and revealed that he had been accepted as Vice President of First
Global BYO Development Corporation (First Global), a competitor of CPI.[19] On March 3, 2009, Babiano was served a Notice
of Termination[20] for: (a) incurring AWOL; (b) violating the "Confidentiality of Documents and Non-Compete Clause" when he
joined a competitor enterprise while still working for CPI and provided such competitor enterprise information regarding CPFs
marketing strategies; and (c) recruiting CPI personnel to join a competitor.[21]

On the other hand, Concepcion resigned as CPFs Project Director through a letter [22] dated February 23, 2009, effective
immediately.

On August 8, 2011, respondents filed a complaint[23] for non-payment of commissions and damages against CPI and Antonio
before the NLRC, docketed as NLRC Case No. NCR-08-12029-11, claiming that their repeated demands for the payment and
release of their commissions remained unheeded.[24]

For its part, CPI maintained[25] that Babiano is merely its agent tasked with selling its projects. Nonetheless, he was afforded
due process in the termination of his employment which was based on just causes.[26] It also claimed to have validly withheld
Babiano's commissions, considering that they were deemed forfeited for violating the "Confidentiality of Documents and Non-
Compete Clause."[27] On Concepcion's money claims, CPI asserted that the NLRC had no jurisdiction to hear the same
because there was no employer-employee relations between them, and thus, she should have litigated the same in an
ordinary civil action.[28]
The LA Ruling
In a Decision[29] dated March 19, 2012, the Labor Arbiter (LA) ruled in CPI's favor and, accordingly, dismissed the complaint for
lack of merit.[30]

The LA found that: (a) Babiano's acts of providing information on CPI's marketing strategies to the competitor and spreading
false information about CPI and its projects are blatant violations of the "Confidentiality of Documents and Non-Compete
Clause" of his employment contract, thus, resulting in the forfeiture of his unpaid commissions in accordance with the same
clause;[31] and (b) it had no jurisdiction over Concepcion's money claim as she was not an employee but a mere agent of CPI,
as clearly stipulated in her engagement contract with the latter. [32]

Aggrieved, respondents appealed[33] to the NLRC.

The NLRC Ruling

218
In a Decision[34] dated June 25, 2013, the NLRC reversed and set aside the LA ruling, and entered a new one ordering CPI to
pay Babiano and Concepcion the amounts of P685,211.76 and P470,754.62, respectively, representing their commissions
from August 9, 2008 to August 8, 2011, as well as 10% attorney's fees of the total monetary awards.[35]

While the NLRC initially concurred with the LA that Babiano's acts constituted just cause which would warrant the termination
of his employment from CPI, it, however, ruled that the forfeiture of all earned commissions of Babiano under the
"Confidentiality of Documents and Non-Compete Clause" is confiscatory and unreasonable and hence, contrary to law and
public policy.[36] In this light, the NLRC held that CPI could not invoke such clause to avoid the payment of Babiano's
commissions since he had already earned those monetary benefits and, thus, should have been released to him. However,
the NLRC limited the grant of the money claims in light of Article 291 (now Article 306) [37] of the Labor Code which provides for
a prescriptive period of three (3) years. Consequently, the NLRC awarded unpaid commissions only from August 9, 2008 to
August 8, 2011 i.e., which was the date when the complaint was filed. [38] Meanwhile, contrary to the LA's finding, the NLRC
ruled that Concepcion was CPI's employee, considering that CPI: (a) repeatedly hired and promoted her since 2002; (b) paid
her wages despite referring to it as "subsidy"; and (c) exercised the power of dismissal and control over her. [39] Lastly, the
NLRC granted respondents' claim for attorney's fees since they were forced to litigate and incurred expenses for the protection
of their rights and interests.[40]

Respondents did not assail the NLRC findings. In contrast, only CPI moved for reconsideration, [41] which the NLRC denied in a
Resolution[42] dated October 16, 2013. Aggrieved, CPI filed a petition for certiorari[43] before the CA.
The CA Ruling

In a Decision[44] dated April 8, 2015, the CA affirmed the NLRC ruling with modification increasing the award of unpaid
commissions to Babiano and Concepcion in the amounts of P889,932.42 and P591.953.05, respectively, and imposing
interest of six percent (6%) per annum on all monetary awards from the finality of its decision until fully paid. [45]

The CA held that Babiano properly instituted his claim for unpaid commissions before the labor tribunals as it is a money claim
arising from an employer-employee relationship with CPI. In this relation, the CA opined that CPI cannot withhold such unpaid
commissions on the ground of Babiano's alleged breach of the "Confidentiality of Documents and Non-Compete Clause"
integrated in the latter's employment contract, considering that such clause referred to acts done after the cessation of the
employer-employee relationship or to the "post-employment" relations of the parties. Thus, any such supposed breach thereof
is a civil law dispute that is best resolved by the regular courts and not by labor tribunals. [46]

Similarly, the CA echoed the NLRC's finding that there exists an employer-employee relationship between Concepcion and
CPI, because the latter exercised control over the performance of her duties as Project Director which is indicative of an
employer-employee relationship. Necessarily therefore, CPI also exercised control over Concepcion's duties in recruiting,
training, and developing directors of sales because she was supervised by Babiano in the performance of her functions. The
CA likewise observed the presence of critical factors which were indicative of an employer-employee relationship with CPI,
such as: (a) Concepcion's receipt of a monthly salary from CPI; and (b) that she performed tasks besides selling CPI
properties. To add, the title of her contract which was referred to as "Contract of Agency for Project Director" was not binding
and conclusive, considering that the characterization of the juridical relationship is essentially a matter of law that is for the
courts to determine, and not the parties thereof. Moreover, the totality of evidence sustains a finding of employer-employee
relationship between CPI and Concepcion.[47]

Further, the CA held that despite the NLRC's proper application of the three (3)-year prescriptive period under Article 291 of
the Labor Code, it nonetheless failed to include all of respondents' earned commissions during that time - i.e., August 9, 2008
to August 8, 2011 - thus, necessitating the increase in award of unpaid commissions in respondents' favor. [48]

Undaunted, CPI sought for reconsideration,[49] which was, however, denied in a Resolution[50] dated October 12, 2015; hence,
this petition.
The Issue Before the Court

The core issue for the Court's resolution is whether or not the CA erred in denying CPI's petition for certiorari, thereby holding
it liable for the unpaid commissions of respondents.
The Court's Ruling

The petition is partly meritorious.

I.

219
Article 1370 of the Civil Code provides that "[i]f the terms of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulations shall control."[51] In Norton Resources and Development Corporation
v. All Asia Bank Corporation,[52] the Court had the opportunity to thoroughly discuss the said rule as follows:
The rule is that where the language of a contract is plain and unambiguous, its meaning should be determined
without reference to extrinsic facts or aids. The intention of the parties must be gathered from that language, and from that
language alone. Stated differently, where the language of a written contract is clear and unambiguous, the contract
must be taken to mean that which, on its face, it purports to mean, unless some good reason can be assigned to
show that the words should be understood in a different sense. Courts cannot make for the parties better or more
equitable agreements than they themselves have been satisfied to make, or rewrite contracts because they operate harshly or
inequitably as to one of the parties, or alter them for the benefit of one party and to the detriment of the other, or by
construction, relieve one of the parties from the terms which he voluntarily consented to, or impose on him those which he did
not.[53] (Emphases and underscoring supplied)
Thus, in the interpretation of contracts, the Court must first determine whether a provision or stipulation therein is ambiguous.
Absent any ambiguity, the provision on its face will be read as it is written and treated as the binding law of the parties to the
contract.[54]

In the case at bar, CPI primarily invoked the "Confidentiality of Documents and Non-Compete Clause" found in Babiano's
employment contract[55] to justify the forfeiture of his commissions, viz.:
Confidentiality of Documents and Non-Compete Clause

All records and documents of the company and all information pertaining to its business or affairs or that of its affiliated
companies are confidential and no unauthorized disclosure or reproduction or the same will be made by you any time during or
after your employment.

And in order to ensure strict compliance herewith, you shall not work for whatsoever capacity, either as an employee,
agent or consultant with any person whose business is in direct competition with the company while you are
employed and for a period of one year from date of resignation or termination from the company.

In the event the undersigned breaches any term of this contract, the undersigned agrees and acknowledges that damages
may not be an adequate remedy and that in addition to any other remedies available to the Company at law or in equity, the
Company is entitled to enforce its rights hereunder by way of injunction, restraining order or other relief to enjoin any breach or
default of this contract.

The undersigned agrees to pay all costs, expenses and attorney's fees incurred by the Company in connection with the
enforcement of the obligations of the undersigned. The undersigned also agrees to .pay the Company all profits, revenues and
income or benefits derived by or accruing to the undersigned resulting from the undersigned's breach of the obligations
hereunder. This Agreement shall be binding upon the undersigned, all employees, agents, officers, directors, shareholders,
partners and representatives of the undersigned and all heirs, successors and assigns of the foregoing.

Finally, if undersigned breaches any terms of this contract, forms of compensation including commissions and
incentives will be forfeited.[56] (Emphases and underscoring supplied)
Verily, the foregoing clause is not only clear and unambiguous in stating that Babiano is barred to "work for whatsoever
capacity x x x with any person whose business is in direct competition with [CPI] while [he is] employed and for a period of one
year from date of [his] resignation or termination from the company," it also expressly provided in no uncertain terms that
should Babiano "[breach] any term of [the employment contract], forms of compensation including commissions and incentives
will be forfeited." Here, the contracting parties - namely Babiano on one side, and CPI as represented by its COO-Vertical,
John Victor R. Antonio, and Director for Planning and Controls, Jose Carlo R. Antonio, on the other -indisputably wanted the
said clause to be effective even during the existence of the employer-employee relationship between Babiano and CPI,
thereby indicating their intention to be bound by such clause by affixing their respective signatures to the employment contract.
More significantly, as CPFs Vice President for Sales, Babiano held a highly sensitive and confidential managerial position as
he "was tasked, among others, to guarantee the achievement of agreed sales targets for a project and to ensure that his team
has a qualified and competent manpower resources by conducting recruitment activities, training sessions, sales rallies,
motivational activities, and evaluation programs."[57] Hence, to allow Babiano to freely move to direct competitors during and
soon after his employment with CPI would make the latter's trade secrets vulnerable to exposure, especially in a highly
competitive marketing environment. As such, it is only reasonable that CPI and Babiano agree on such stipulation in the
latter's employment contract in order to afford a fair and reasonable protection to CPI. [58] Indubitably, obligations arising from
contracts, including employment contracts, have the force of law between the contracting parties and should be complied with
220
in good faith.[59]Corollary thereto, parties are bound by the stipulations, clauses, terms, and conditions they have agreed to,
provided that these stipulations, clauses, terms, and conditions are not contrary to law, morals, public order or public
policy,[60] as in this case.

Therefore, the CA erred in limiting the "Confidentiality of Documents and Non-Compete Clause" only to acts done after the
cessation of the employer-employee relationship or to the "post-employment" relations of the parties. As clearly stipulated, the
parties wanted to apply said clause during the pendency of Babiano's employment, and CPI correctly invoked the same before
the labor tribunals to resist the former's claim for unpaid commissions on account of his breach of the said clause while the
employer-employee relationship between them still subsisted. Hence, there is now a need to determine whether or not
Babiano breached said clause while employed by CPI, which would then resolve the issue of his entitlement to his unpaid
commissions.

A judicious review of the records reveals that in his resignation letter [61] dated February 25, 2009, Babiano categorically
admitted to CPI Chairman Jose Antonio that on February 12, 2009, he sought employment from First Global, and five (5) days
later, was admitted thereto as vice president. From the foregoing, it is evidently clear that when he sought and eventually
accepted the said position with First Global, he was still employed by CPI as he has not formally resigned at that time.
Irrefragably, this is a glaring violation of the "Confidentiality of Documents and Non-Compete Clause" in his employment
contract with CPI, thus, justifying the forfeiture of his unpaid commissions.
II.

Anent the nature of Concepcion's engagement, based on case law, the presence of the following elements evince the
existence of an employer-employee relationship: (a) the power to hire, i.e., the selection and engagement of the employee; (b)
the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee's conduct, or the so
called "control test." The control test is commonly regarded as the most important indicator of the presence or absence of an
employer-employee relationship.[62] Under this test, an employer-employee relationship exists where the person for whom the
services are performed reserves the right to control not only the end achieved, but also the manner and means to be used in
reaching that end.[63]

Guided by these parameters, the Court finds that Concepcion was an employee of CPI considering that: (a) CPI continuously
hired and promoted Concepcion from October 2002 until her resignation on February 23, 2009, [64]thus, showing that CPI
exercised the power of selection and engagement over her person and that she performed functions that were necessary and
desirable to the business of CPI; (b) the monthly "subsidy" and cash incentives that Concepcion was receiving from CPI are
actually remuneration in the concept of wages as it was regularly given to her on a monthly basis without any qualification,
save for the "complete submission of documents on what is a sale policy"; [65] (c) CPI had the power to discipline or even
dismiss Concepcion as her engagement contract with CPI expressly conferred upon the latter "the right to discontinue [her]
service anytime during the period of engagement should [she] fail to meet the performance standards," [66] among others, and
that CPI actually exercised such power to dismiss when it accepted and approved Concepcion's resignation letter; and most
importantly, (d) as aptly pointed out by the CA, CPI possessed the power of control over Concepcion because in the
performance of her duties as Project Director - particularly in the conduct of recruitment activities, training sessions, and skills
development of Sales Directors - she did not exercise independent discretion thereon, but was still subject to the direct
supervision of CPI, acting through Babiano.[67]

Besides, while the employment agreement of Concepcion was denominated as a "Contract of Agency for Project Director," it
should be stressed that the existence of employer-employee relations could not be negated by the mere expedient of
repudiating it in a contract. In the case of Insular Life Assurance Co., Ltd. v. NLRC,[68] it was ruled that one's employment
status is defined and prescribed by law, and not by what the parties say it should be, viz.:
It is axiomatic that the existence of an employer-employee relationship cannot be negated by expressly repudiating it in the
management contract and providing therein that the "employee" is an independent contractor when the terms of the
agreement clearly show otherwise. For, the employment status of a person is defined and prescribed by law and not by
what the parties say it should be. In determining the status of the management contract, the "four-fold test" on employment
earlier mentioned has to be applied.[69] (Emphasis and underscoring supplied)
Therefore, the CA correctly ruled that since there exists an employer-employee relationship between Concepcion and CPI, the
labor tribunals correctly assumed jurisdiction over her money claims.
III.

Finally, CPI contends that Concepcion's failure to assail the NLRC ruling awarding her the amount of P470,754.62
representing unpaid commissions rendered the same final and binding upon her. As such, the CA erred in increasing her
monetary award to P591,953.05.[70]
221
The contention lacks merit.

As a general rule, a party who has not appealed cannot obtain any affirmative relief other than the one granted in the appealed
decision. However, jurisprudence admits an exception to the said rule, such as when strict adherence thereto shall result in the
impairment of the substantive rights of the parties concerned. In Global Resource for Outsourced Workers, Inc. v. Velasco:[71]
Indeed, a party who has failed to appeal from a judgment is deemed to have acquiesced to it and can no longer obtain from
the appellate court any affirmative relief other than what was already granted under said judgment. However, when strict
adherence to such technical rule will impair a substantive right, such as that of an illegally dismissed employee to
monetary compensation as provided by law, then equity dictates that the Court set aside the rule to pave the way for
a full and just adjudication of the case.[72] (Emphasis and underscoring supplied)

In the present case, the CA aptly pointed out that the NLRC failed to account for all the unpaid commissions due to
Concepcion for the period of August 9, 2008 to August 8, 2011. [73] Indeed, Concepcion's right to her earned commissions is a
substantive right which cannot be impaired by an erroneous computation of what she really is entitled to. Hence, following the
dictates of equity and in order to arrive at a complete and just resolution of the case, and avoid a piecemeal dispensation of
justice over the same, the CA correctly recomputed Concepcion's unpaid commissions, notwithstanding her failure to seek a
review of the NLRC's computation of the same.

In sum, the Court thus holds that the commissions of Babiano were properly forfeited for violating the "Confidentiality of
Documents and Non-Compete Clause." On.the other hand, CPI remains liable for the unpaid commissions of Concepcion in
the sum of P591,953.05.

WHEREFORE, the petition is PARTLY GRANTED. The Decision dated April 8, 2015 and the Resolution dated October 12,
2015 of the Court of Appeals (CA) in CA-G.R. SP No. 132953 are hereby MODIFIED in that the commissions of respondent
Edwin J. Babiano are deemed FORFEITED. The rest of the CA Decision stands.

SO ORDERED.

G.R. No. 172295 December 23, 2008

LILIA P. LABADAN, petitioner,
vs.
FOREST HILLS ACADEMY/NAOMI CABALUNA and PRESIDING COMISSIONER SALIC B. DUMARPA, COMMISSIONER
PROCULO T. SARMEN, COMMISSIONER NOVITO C. CAGAYAN, respondents.
DECISION
CARPIO MORALES, J.:
Lilian L. Labadan (petitioner) was hired by private respondent Forest Hills Mission Academy (Forest Hills) in July 1989 as an
elementary school teacher. From 1990 up to 2002, petitioner was registrar and secondary school teacher.
On August 18, 2003, petitioner filed a complaint1 against respondent Forest Hills and its administrator respondent Naomi
Cabaluna for illegal dismissal, non-payment of overtime pay, holiday pay, allowances, 13 th month pay, service incentive leave,
illegal deductions, and damages.
In her Position Paper,2 petitioner alleged that she was allowed to go on leave from Forest Hills, and albeit she had exceeded
her approved leave period, its extension was impliedly approved by the school principal because she received no warning or
reprimand and was in fact retained in the payroll up to 2002. 3
Petitioner further alleged that since 1990, tithes to the Seventh Day Adventist church have been illegally deducted from her
salary; and she was not paid overtime pay for overtime service, 13 th month pay, five days service incentive leave pay, and
holiday pay; and that her SSS contributions have not been remitted.
Claiming that strained relations between her and Forest Hill have rendered reinstatement not feasible, petitioner prayed for
separation pay in lieu of reinstatement.
In its Position Paper,4 Forest Hills claimed as follows: In July 2001, petitioner was permitted to go on leave for two weeks but
did not return for work after the expiration of the period. Despite petitioners undertaking to report "soon," she never did even
until the end of School Year 2001-2002. It thus hired a temporary employee to accomplish the needed reports. When she
finally returned for work, classes for the School Year 2002-2003 were already on-going.
To belie petitioners claim that she was dismissed, Forest Hills submitted a list of faculty members and staff from School Year
1998-1999 up to School Year 2001 to 2002 which included her name. 5
With regard to the charge for illegal deduction, Forest Hills claimed that the Seventh Day Adventist Church requires its
members to pay tithes equivalent to 10% of their salaries, and petitioner was hired on account of her being a member thereof,
and petitioner never questioned the deduction of the tithe from her salary.
222
With regard to the charge for non-payment of overtime pay, holiday pay, and allowances, Forest Hills noted that petitioner
proffered no evidence to support the same.
The Labor Arbiter decided in favor of petitioner, disposing as follows:
WHEREFORE, judgment is hereby rendered:
1. Finding respondents Forest Hills Academy and/or Naomi Cabaluna guilty of illegally dismissing the complainant;
2. Directing respondent to pay complainant Lilia P. Labadan the total amount of P152,501.02 representing her
monetary award x x x.
Complainants other claim[s] are hereby dismissed for lack of merit and/or failure to substantiate.
SO ORDERED.6
The National Labor Relations Commission (NLRC), finding the Labor Arbiter to have misappreciated the facts of the case,
reversed and set aside his decision and dismissed petitioners complaint by Resolution of June 30, 2005.7
On petitioners Petition for Certiorari,8 the Court of Appeals, by Resolution9 of December 15, 2005, dismissed the petition for
deficient amount of appellate docket fee, non-attachment of Affidavit of Service, absence of written explanation why the
petition was filed through registered mail instead of through personal service, and non-attachment of copies of the Complaint
and the Answer filed before the Labor Arbiter. Petitioners Motion for Reconsideration having been denied,10 she filed the
present Petition for Review on Certiorari,11 faulting the Court of Appeals
x x x IN DISMISSING THE PETITION ON THE GROUND OF TECHNICALITIES[;]
x x x IN NOT DECIDING ON THE MERITS WHETHER OR NOT HONORABLE COMMISSIONERS OF THE
5TH DIVISION HAVE COMMITTED AN ACT OF GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION:
A. IN REVERSING THE FINDINGS OF THE EXECUTIVE LABOR ARBITER THAT HEREIN PETITIONER-
COMPLAINANT WAS NOT DISMISSED FROM HER WORK AS A TEACHER and AT THE SAME TIME
THE REGISTRAR;
B. IN FINDING THAT BY A PROLONGED ABSENCE OF ONE YEAR MORE OR LESS, PETITIONER
WAIVED HER 13TH MONTH PAY AND SERVICE INCENTIVE LEAVES AS SHE FAILED TO STATE
SUCH CLAIMS IN HER AFFIDAVIT THAT WAS ATTACHED [TO] HER POSITION PAPER, and;
C. THAT THE DECISION/RESOLUTION RENDERED BY THE HONORABLE COMMISSIONERS OF THE
5TH DIVISION WAS TAINTED WITH GRAVE ABUSE OF DISCRETION AS IT WAS INCOMPLETE AND
UNLAWFUL[.]12 (Italics and emphasis in the original)
Non-payment of docket fee at the time of the filing of a petition does not automatically call for its dismissal as long as the fee is
paid within the applicable prescriptive or reglementary period. 13 While petitioner paid the P30 deficient amount of the docket
fee on February 7, 2006,14 it was beyond the 60-day period for filing the petition for certiorari. Nevertheless, the Court, in the
interest of substantial justice, brushes aside this and the other technicalities cited by the Court of Appeals in its Resolution of
December 15, 200515 and, instead of remanding the case to the appellate court, now hereby decides the case on the merits.
While in cases of illegal dismissal, the employer bears the burden of proving that the dismissal is for a valid or authorized
cause, the employee must first establish by substantial evidence the fact of dismissal. 16
The records do not show that petitioner was dismissed from the service. They in fact show that despite petitioners absence
from July 2001 to March 2002 which, by her own admission, exceeded her approved leave, 17 she was still considered a
member of the Forest Hills faculty18 which retained her in its payroll.19
Petitioner argues, however, that she was constructively dismissed when Forest Hills merged her class with another "so much
that when she reported back to work, she has no more claims to hold and no more work to do."20
Petitioner, however, failed to refute Forest Hills claim that when she expressed her intention to resume teaching, classes were
already ongoing for School Year 2002-2003. It bears noting that petitioner simultaneously held the positions of secondary
school teacher and registrar and, as the NLRC noted, she could have resumed her work as registrar had she really wanted to
continue working with Forest Hills.21
Petitioners affidavit and those of her former colleagues,22 which she attached to her Position Paper, merely attested that she
was dismissed from her job without valid cause, but gave no particulars on when and how she was dismissed.
There being no substantial proof that petitioner was dismissed, she is not entitled to separation pay or backwages.
Respecting petitioners claim for holiday pay, Forest Hills contends that petitioner failed to prove that she actually worked
during specific holidays. Article 94 of the Labor Code provides, however, that
(a) Every worker shall be paid his regular daily wage during regular holidays, except in retail and service
establishments regularly employing less than ten (10) workers;
(b) The employer may require an employee to work on any holiday but such employee shall be paid a compensation
equivalent to twice his regular rate[.]
The provision that a worker is entitled to twice his regular rate if he is required to work on a holiday implies that the provision
entitling a worker to his regular rate on holidays applies even if he does not work.
The petitioner is likewise entitled to service incentive leave under Article 95 of the Labor Code which provides that

223
 (a) Every employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave
of five days with pay.
(b) This provision shall not apply to those who are already enjoying the benefit herein provided, those enjoying
vacation leave with pay of at least five days and those employed in establishments regularly employing less than ten
employees or in establishment exempted from granting this benefit by the Secretary of Labor after considering the
viability or financial condition of such establishment.
x x x x,
and to 13th month pay under Presidential Decree No. 851.23
As for petitioners claims for overtime pay, it must be denied, for other than the uncorroborated affidavits of her colleagues,
there is no concrete proof that she is entitled thereto.24 And so must her claim for allowances, no proof to her entitlement
thereto having been presented
On the deduction of 10% tithe, Article 113 of the Labor Code instructs:
ART. 113. No employer, in his own behalf or in behalf of any person, shall make any deduction from the wages of his
employees, except:
(a) In cases where the worker is insured with his consent by the employer, and the deduction is to
recompense the employer for the amount paid by him as premium on the insurance;
(b) For union dues, in cases where the right of the worker or his union to check-off has been recognized by
the employer or authorized in writing by the individual worker concerned; and
(c) In cases where the employer is authorized by law or regulations issued by the Secretary of Labor,
as does Rule VIII, Section 10 of the Rules Implementing Book III of the Labor Code reading:
SEC. 10. Deductions from the wages of the employees may be made by the employer in any of the following cases:
(a) When the deductions are authorized by law, including deductions for the insurance premiums advanced
by the employer in behalf of the employee as well as union dues where the right to check-off has been
recognized by the employer or authorized in writing by the individual employee himself;
(b) When the deductions are with the written authorization of the employees for payment to a third person
and the employer agrees to do so, provided that the latter does not receive any pecuniary benefit, directly or
indirectly, from the transaction. (Emphasis and underscoring supplied)
In the absence then of petitioners written conformity to the deduction of the 10% tithe from her salary, the deduction made by
Forest Hills was illegal.
Finally, on petitioners claim that Forest Hills did not remit her SSS contributions, Villar v. National Labor Relations
Commission25 enlightens:
x x x [T]he burden of proving payment of monetary claims rests on the employer. x x x
xxxx
The reason for the rule is that the pertinent personnel files, payrolls, records, remittances and other similar
documents which will show that overtime, differentials, service incentive leave and other claims of workers have
been paid are not in the possession of the worker but in the custody and absolute control of the
employer.26 (Underscoring supplied)
Forest Hills having glossed over this claim, the same must be granted.
Finally, insofar as petitioner was compelled to litigate her money claims, an award of attorneys fees equivalent to 10% of the
final judgment award is in order.27
WHEREFORE, the Court of Appeals Resolution of December 15, 2005 is SET ASIDE. The petition is GRANTEDinsofar as
petitioners claims for illegal deductions, holiday pay, service incentive leave pay, 13 th month pay, and non-remittance of SSS
contributions are concerned. Respondents are accordingly ORDERED to refund to petitioner the amount of the illegal
deductions from her salary; to pay her holiday pay, service incentive leave pay, and 13 th month pay; to remit her contributions
to the SSS; and to pay her attorneys fees equivalent to 10% of the final judgment award. The case is
accordingly REMANDED to the Labor Arbiter for computation of the amount of such money claims.
SO ORDERED.

G.R. No. 114734 March 31, 2000

VIVIAN Y. IMBUIDO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, INTERNATIONAL INFORMATION SERVICES, INC. and GABRIEL
LIBRANDO, respondents.
BUENA, J.:
This special civil action for certiorari seeks to set aside the Decision1 of the National Labor Relations Commission (NLRC)
promulgated on September 27, 1993 and its Order dated January 11, 1994, which denied petitioner's motion for
reconsideration.

224
Petitioner was employed as a data encoder by private respondent International Information Services, Inc., a domestic
corporation engaged in the business of data encoding and keypunching, from August 26, 1988 until October 18, 1991 when
her services were terminated. From August 26, 1988 until October 18, 1991, petitioner entered into thirteen (13) separate
employment contracts with private respondent, each contract lasting only far a period of three (3) months. Aside from the basic
hourly rate, specific job contract number and period of employment, each contract contains the following terms and conditions:
a. This Contract is for a specific project/job contract only and shall be effective for the period covered as above-
mentioned unless sooner terminated when the job contract is completed earlier or withdrawn by client, or when
employee is dismissed for just and lawful causes provided by law. The happening of any of these events will
automatically terminate this contract of employment.
b. Subject shall abide with the Company's rules and regulations for its employees attached herein to form an integral
part hereof.
c. The nature of your job may require you to render overtime work with pay so as not to disrupt the Company's
commitment of scheduled delivery dates made on said job contract. 2
In September 1991, petitioner and twelve (12) other, employees of private respondent allegedly agreed to the filing of a
petition for certification election involving the rank-and-file employees of private respondent.3 Thus, on October 8, 1991, Lakas
Manggagawa sa Pilipinas (LAKAS) filed a petition for certification election with the Bureau of Labor Relations (BLR), docketed
as NCR-OD-M-9110-128.4
Subsequently, on October 18, 1991, petitioner received a termination letter from Edna Kasilag, Administrative Officer of private
respondent, allegedly "due to low volume of work."5
Thus, on May 25, 1992, petitioner filed a complaint for illegal dismissal with prayer for service incentive leave pay and 13th
month differential pay, with the National Labor Relations Commission, National Capital Region, Arbitration Branch, docketed
as NLRC-NCR Case No. 05-02912-92.6
In her position paper dated August 3, 1992 and filed before labor arbiter Raul T. Aquino, petitioner alleged that her
employment was terminated not due to the alleged low volume of work but because she "signed a petition for certification
election among the rank and file employees of respondents," thus charging private respondent with committing unfair labor
practices. Petitioner further complained of non-payment of service incentive leave benefits and underpayment of 13th month
pay.7
On the other hand, private respondent, in its position paper filed on July 16, 1992, maintained that it had valid reasons to
terminate petitioner's employment and disclaimed any knowledge of the existence or formation of a union among its rank-and-
file employees at the time petitioner's services were terminated. 8 Private respondent stressed that its business ". . . relies
heavily on companies availing of its services. Its retention by client companies with particular emphasis on data encoding is on
a project to project basis,"9 usually lasting for a period of "two (2) to five (5) months." Private respondent further argued that
petitioner's employment was for a "specific project with a specified period of engagement." According to private respondent, ".
. . the certainty of the expiration of complainant's engagement has been determined at the time of their (sic) engagement (until
27 November 1991) or when the project is earlier completed or when the client withdraws," as provided in the contract. 10 "The
happening of the second event [completion of the project] has materialized, thus, her contract of employment is deemed
terminated per the Brent School ruling." 11 Finally, private respondent averred that petitioner's "claims for non-payment of
overtime time (sic) and service incentive leave [pay] are without factual and legal basis." 12
In a decision dated August 25, 1992, labor arbiter Raul T. Aquino, ruled in favor of petitioner, and accordingly ordered her
reinstatement without loss of seniority rights and privileges, and the payment of backwages and service incentive leave pay.
The dispositive part of the said decision reads:
WHEREFORE, responsive to the foregoing, judgment is hereby rendered ordering respondents to immediately
reinstate complainant [petitioner herein] as a regular employee to her former position without loss of seniority rights
and privileges and to pay backwages from the time of dismissal up to the date of this decision, the same to continue
until complainant ['s] [petitioner herein] actual reinstatement from (sic) the service. Respondents are likewise ordered
to pay complainant [petitioner herein] service incentive leave pay computed as follows:
Backwages:
10/18/91 - 8/25/92 = 10.23 mos.
P118.00 x 26 x 10.23 mos. = P31, 385.64
Service Incentive Leave Pay

1989 = P89.00 x 5 days = P445.00

1990 = 106 x 5 days = P530.00

1991 = 118 x 5 days = P590.00

225
 P 1,565.00

Total P 32,950.64
==========
SO ORDERED. 13
In his decision, the labor arbiter found petitioner to be a regular employee, ruling that "[e]ven if herein complainant [petitioner
herein] had been obstensively (sic) hired for a fixed period or for a specific undertaking, she should be considered as [a]
regular employee of the respondents in conformity with the provisions (sic) laid down under Article 280 of the Labor
Code," 14 after finding that ". . . [i]t is crystal clear that herein complainant [petitioner herein] performed a job which are (sic)
usually necessary or desirable in the usual business of respondent [s]." 15The labor arbiter further denounced ". . . the purpose
behind the series of contracts which respondents required complainant to execute as a condition of employment was to evade
the true intent and spirit of the labor laws for the workingmen . . . ." 16 Furthermore, the labor arbiter concluded that petitioner
was illegally dismissed because the alleged reason for her termination, that is, low volume of work, is "not among the just
causes for termination recognized by law," 17 hence, he ordered her immediate reinstatement without loss of seniority rights
and with full backwages. With regard to the service incentive leave pay, the labor arbiter decided ". . . to grant the same for
failure of the respondents to fully controvert said claims." 18 Lastly, the labor arbiter rejected petitioner's claim for 13th month
pay ". . . since complainant [petitioner herein] failed to fully substantiate and argued (sic) the same." 19
On appeal, the NLRC reversed the decision of the labor arbiter in a decision 20 promulgated on September 27, 1993, the
dispositive part of which reads:
WHEREFORE, the appealed decision is hereby set aside. The complaint for illegal dismissal is hereby dismissed for
being without merit. Complainant's [petitioner herein] claim for service incentive leave pay is hereby remanded for
further arbitration.
SO ORDERED. 21
The NLRC ruled that "[t]here is no question that the complainant [petitioner herein], viewed in relation to said Article 280 of the
[Labor] Code, is a regular employee judging from the function and/or work for which she was hired. . . . But this does not
necessarily mean that the complainant [petitioner herein] has to be guaranteed a tenurial security beyond the period for which
she was hired." 22 The NLRC held that ". . . the complainant [petitioner herein], while hired as a regular worker, is statutorily
guaranteed, in her tenurial security, only up to the time the specific project for which she was hired is completed." 23 Hence,
the NLRC concluded that "[w]ith the specific project "at RCBC 014" admittedly completed, the complainant [petitioner herein]
has therefore no valid basis in charging illegal dismissal for her concomittant (sic) dislocation." 24
In an Order dated January 11, 1994, the NLRC denied petitioner's motion for reconsideration. 25
In this petition for certiorari, petitioner, for and in her behalf, argues that (1) the public respondent "committed grave abuse of
discretion when it ignored the findings of Labor Arbiter Raul Aquino based on the evidence presented directly before him, and
when it made findings of fact that are contrary to or not supported by evidence," 26 (2) "[p]etitioner was a "regular employee,"
NOT a "project employee" as found by public respondent NLRC," 27 (3) "[t]he termination of petition (sic) was tainted with
unfair labor practice," 28 and (4) the public respondent "committed grave abuse of discretion in remanding the awarded service
incentive leave pay for further arbitration." 29
The petition is impressed with merit.
We agree with the findings of the NLRC that petitioner is a project employee. The principal test for determining whether an
employee is a project employee or a regular employee is whether the project employee was assigned to carry out a specific
project or undertaking, the duration and scope of which were specified at the time the employee was engaged for that
project. 30 A project employee is one whose employment has been fixed for a specific project or undertaking, the completion or
termination of which has been determined at the time of the engagement of the employee or where the work or service to be
performed is seasonal in nature and the employment is for the duration of the season. 31 In the instant case, petitioner was
engaged to perform activities which were usually necessary or desirable in the usual business or trade of the employer, as
admittedly, petitioner worked as a data encoder for private respondent, a corporation engaged in the business of data
encoding and keypunching, and her employment was fixed for a specific project or undertaking the completion or termination
of which had been determined at the time of her engagement, as may be observed from the series of employment
contracts 32 between petitioner and private respondent, all of which contained a designation of the specific job contract and a
specific period of employment. .nt
However, even as we concur with the NLRC's findings that petitioner is a project employee, we have reached a different
conclusion. In the recent case of Maraguinot, Jr. vs. NLRC, 33 we held that "[a] project employee or a member of a work pool
may acquire the status of a regular employee when the following concur:
1) There is a continuous rehiring of project employees even after [the] cessation of a project; 34 and
2) The tasks performed by the alleged "project employee" are vital, necessary and indispensable to the
usual business or trade of the employer. 35

226
The evidence on record reveals that petitioner was employed by private respondent as a data encoder, performing activities
which are usually necessary or desirable in the usual business or trade of her employer, continuously for a period of more than
three (3) years, from August 26, 1988 to October 18, 1991 36 and contracted for a total of thirteen (13) successive projects. We
have previously ruled that "[h]owever, the length of time during which the employee was continuously re-hired is not
controlling, but merely serves as a badge of regular employment." 37 Based on the foregoing, we conclude that petitioner has
attained the status of a regular employee of private respondent.
At this point, we reiterate with emphasis that:
xxx xxx xxx
At this time, we wish to allay any fears that this decision unduly burdens an employer by imposing a duty to re-hire a
project employee even after completion of the project for which he was hired. The import of this decision is not to
impose a positive and sweeping obligation upon the employer to re-hire project employees. What this decision merely
accomplishes is a judicial recognition of the employment status of a project or work pool employee in accordance with
what is fait accompli, i.e., the continuous re-hiring by the employer of project or work pool employees who perform
tasks necessary or desirable to the employer's usual business or trade. Let it not be said that this decision "coddles"
labor, for as Lao 38 has ruled, project or work pool employees who have gained the status of regular employees are
subject to the "no work-no pay" principle, to repeat:
A work pool may exist although the workers in the pool do not receive salaries and are free to seek other employment
during temporary breaks in the business, provided that the worker shall be available when called to report for a
project. Although primarily applicable to regular seasonal workers, this set-up can likewise be applied to project
workers insofar as the effect of temporary cessation of work is concerned. This is beneficial to both the employer and
employee for it prevents the unjust situation of "coddling labor at the expense of capital" and at the same time
enables the workers to attain the status of regular employees.
The Court's ruling here is meant precisely to give life to the constitutional policy of strengthening the labor sector, but,
we stress, not at the expense of management. Lest it be misunderstood, this ruling does not mean that simply
because an employee is a project or work pool employee even outside the construction industry, he is deemed, ipso
jure, a regular employee. All that we hold today is that once a project or work pool employee has been: (1)
continuously, as opposed to intermittently, re-hired by the same employer for the same tasks or nature of tasks; and
(2) these tasks are vital, necessary and indispensable to the usual business or trade of the employer, then the
employee must be deemed a regular employee, pursuant to Article 280 of the Labor Code and jurisprudence. To rule
otherwise would allow circumvention of labor laws in industries not falling within the ambit of Policy Instruction
No. Policy Department Order No. 19, hence allowing the prevention of acquisition of tenurial security by project or
work pool employees who have already gained the status of regular employees by the employer's
conduct. 39 (emphasis supplied)
Being a regular employee, petitioner is entitled to security of tenure and could only be dismissed for a just or authorized cause,
as provided in Article 279 of the Labor Code, as amended:
Art. 279. Security of Tenure - In cases of regular employment, the employer shall not terminate the services of an
employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work
shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual reinstatement.
The alleged causes of petitioner's dismissal (low volume of work and belatedly, completion of project) are not valid causes for
dismissal under Articles 282 and 283 of the Labor Code. Thus, petitioner is entitled to reinstatement without loss of seniority
rights and other privileges, and to her full backwages, inclusive of allowances, and to her other benefits or their monetary
equivalent computed from the time her compensation was withheld from her up to the time of her actual reinstatement.
However, complying with the principles of "suspension of work" and "no work, no pay" between the end of one project and the
start of a new one, in computing petitioner's backwages, the amounts corresponding to what could have been earned during
the periods from the date petitioner was dismissed until her reinstatement when private respondent was not undertaking any
project, should be deducted.
With regard to petitioner's claim for service incentive leave pay, we agree with the labor arbiter that petitioner is entitled to
service incentive leave pay, as provided in Article 95 of the Labor Code, which reads:
Art. 95 - Right to service incentive leave -
(a) Every employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave
of five days with pay.
xxx xxx xxx
Having already worked for more than three (3) years at the time of her unwarranted dismissal, petitioner is
undoubtedly entitled to service incentive leave benefits, computed from 1989 until the date of her actual
reinstatement. As we ruled in the recent case of Fernandez vs. NLRC, 40 "[s]ince a service incentive leave is clearly
demandable after one year of service - whether continuous or broken - or its equivalent period, and it is one of the
227
 "benefits" which would have accrued if an employee was not otherwise illegally dismissed, it is fair and legal that its
computation should be up to the date of reinstatement as provided under Section [Article] 279 of the Labor Code, as
amended, which reads:
Art. 279. Security of Tenure. - An employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the time his compensation is withheld from him up to the time of
his actual reinstatement." (emphasis supplied).
WHEREFORE, the instant petition is GRANTED. The assailed decision of the National Labor Relations Commission in NLRC
NCR CA No. 003845-92 dated September 27, 1993, as well as its Order dated January 11, 1994, are hereby ANNULLED and
SET ASIDE for having been rendered with grave abuse of discretion, and the decision of the Labor Arbiter in NLRC NCR Case
No. 05-02912-92 is REINSTATED with MODIFICATION as above-stated, with regard to computation of back wages and
service incentive leave pay. .nt
SO ORDERED.

G.R. No. 168120 January 25, 2012

MANSION PRINTING CENTER and CLEMENT CHENG, Petitioners,
vs.
DIOSDADO BITARA, JR. Respondent.
DECISION
PEREZ, J.:
Before us is a petition for review on certiorari seeking to reverse and set aside the issuances of the Court of Appeals in CA-
GR. SP No. 70965, to wit: (a) the Decision1 dated 18 March 2004 granting the petition for certiorariunder Rule 65 of herein
respondent Diosdado Bitara, Jr.; and (b) the Resolution2 dated 10 May 2005 denying the petitioners Motion for
Reconsideration of the Decision. The assailed decision of the Court of Appeals reversed the findings of the National Labor
Relations Commission3 and the Labor Arbiter4 that respondent was validly dismissed from the service.
The Antecedents
Petitioner Mansion Printing Center is a single proprietorship registered under the name of its president and co-petitioner
Clement Cheng. It is engaged in the printing of quality self-adhesive labels, brochures, posters, stickers, packaging and the
like.5
Sometime in August 1998, petitioners engaged the services of respondent as a helper (kargador). Respondent was later
promoted as the companys sole driver tasked to pick-up raw materials for the printing business, collect account receivables
and deliver the products to the clients within the delivery schedules. 6
Petitioners aver that the timely delivery of the products to the clients is one of the foremost considerations material to the
operation of the business.7 It being so, they closely monitored the attendance of respondent. They noted his habitual tardiness
and absenteeism.
Thus, as early as 23 June 1999, petitioners issued a Memorandum 8 requiring respondent to submit a written explanation why
no administrative sanction should be imposed on him for his habitual tardiness.
Several months after, respondents attention on the matter was again called to which he replied:
29 NOV. 1999
MR. CLEMENT CHENG
SIR:
I UNDERSTAND MY TARDINESS WHATEVER REASON I HAVE AFFECTS SOMEHOW THE DELIVERY SCHEDULE OF
THE COMPANY, THUS DISCIPLINARY ACTION WERE IMPOSED TO ME BY THE MANAGEMENT. AND ON THIS END,
ACCEPT MY APOLOGIES AND REST ASSURED THAT I WILL COME ON TIME (ON OR BEFORE 8:30 AM) AND
WILLINGNESS TO EXTEND MY SERVICE AS A COMPANY DRIVER. WHATEVER HELP NEEDED. (sic)
RESPECTFULLY YOURS,
(SGD.) DIOSDADO BITARA, JR.9
Despite respondents undertaking to report on time, however, he continued to disregard attendance policies. His weekly time
record for the first quarter of the year 200010 revealed that he came late nineteen (19) times out of the forty-seven (47) times
he reported for work. He also incurred nineteen (19) absences out of the sixty-six (66) working days during the quarter. His
absences without prior notice and approval from March 11-16, 2000 were considered to be the most serious infraction of
all11 because of its adverse effect on business operations.
Consequently, Davis Cheng, General Manager of the company and son of petitioner Cheng, issued on 17 March 2000 another
Memorandum12 (Notice to Explain) requiring respondent to explain why his services should not be terminated. He personally
handed the Notice to Explain to respondent but the latter, after reading the directive, refused to acknowledge receipt
thereof.13 He did not submit any explanation and, thereafter, never reported for work.

228
On 21 March 2000, Davis Cheng personally served another Memorandum 14 (Notice of Termination) upon him informing him
that the company found him grossly negligent of his duties, for which reason, his services were terminated effective 1 April
2000.
On even date, respondent met with the management requesting for reconsideration of his termination from the service.
However, after hearing his position, the management decided to implement the 21 March 2000 Memorandum. Nevertheless,
the management, out of generosity, offered respondent financial assistance in the amount of P6,110.00 equivalent to his one
month salary. Respondent demanded that he be given the amount equivalent to two (2) months salary but the management
declined as it believed it would, in effect, reward respondent for being negligent of his duties. 15
On 27 April 2000, respondent filed a complaint16 for illegal dismissal against the petitioners before the Labor Arbiter. He
prayed for his reinstatement and for the payment of full backwages, legal holiday pay, service incentive leave pay, damages
and attorneys fees.17
In his Position Paper18 filed with the Labor Arbiter, respondent claimed that he took a leave of absence from March 17-23,
200019 due to an urgent family problem. He returned to work on 24 March 2000 20 but Davis Cheng allegedly refused him
admission because of his unauthorized absences.21 On 1 April 2000, respondent was summoned by Davis Cheng who
introduced him to a lawyer, who, in turn, informed him that he will no longer be admitted to work because of his 5-day
unauthorized absences. Respondent explained that he was compelled to immediately leave for the province on 17 March
200022 due to the urgency of the matter and his wife informed the office that he will be absent for a week. The management
found his explanation unacceptable and offered him an amount equivalent to his one (1) month salary as separation pay but
respondent refused the offer because he wanted to keep the job. 23 In his Reply to Respondents Position Paper,24 however,
respondent averred that he rejected the offer because he wanted an amount equivalent to one and a half months pay.
On 21 December 2000, the Labor Arbiter dismissed the complaint for lack of merit.25
On appeal to the National Labor Relations Commission (hereinafter referred to as the Commission), the findings of the Labor
Arbiter was AFFIRMED en toto. Thus, in its Resolution of 29 June 2001 in NLRC NCR CA No. 027871-01, the Commission
declared:
Upon Our review of the record of the case, We perceive no abuse of discretion as to compel a reversal. Appellant failed to
adduce convincing evidence to show that the Labor Arbiter in rendering the assailed decision has acted in a manner
inconsistent with the criteria set forth in the foregoing pronouncement.
Neither are we persuaded to disturb the factual findings of the Labor Arbiter a quo. The material facts as found are all in
accordance with the evidence presented during the hearing as shown by the record.
WHEREFORE, finding no cogent reason to modify, alter, much less reverse the decision appealed from, the same is
AFFIRMED en toto and the instant appeal DISMISSED for lack of merit. 26
It likewise denied respondents Motion for Reconsideration of the Resolution on 21 February 2002.27
Before the Court of Appeals, respondent sought the annulment of the Commissions Resolution dated 29 June 2001 and Order
dated 21 February 2002 on the ground that they were rendered with grave abuse of discretion and/or without or in excess of
jurisdiction.28
The Court of Appeals found for the respondent and reversed the findings of the Commission. The dispositive portion of its
Decision dated 18 March 2004 reads:
WHEREFORE, the petition is GRANTED. In lieu of the assailed Resolution and Order of the respondent NLRC, a NEW
DECISION is hereby rendered declaring petitioner Diosdado Bitara, Jr. to have been Illegally Dismissed and, thus, entitled to
the following:
1. Reinstatement or if no longer feasible, Separation Pay to be computed from the commencement of his employment in
August 1988 up to the time of his termination on April 1, 2000, including his imputed service from April 1, 2000 until
the finality of this decision, based on the salary rate prevailing at the said finality;
2. Backwages, inclusive of allowances and other benefits, computed from April 1, 2000 up to the finality of this decision,
without qualification or deduction; and
3. 5-day Service Incentive Leave Pay for every year of service from the commencement of his employment in August
1988 up to its termination on April 1, 2000.29
On 10 May 2005, the Court of Appeals denied respondents Motion for Reconsideration of the decision for lack of merit. 30
Hence, the instant petition.31
Issue
The core issue in this case is whether or not the Court of Appeals correctly found that the Commission acted without and/or in
excess of jurisdiction and with grave abuse of discretion amounting to lack or excess of jurisdiction (a) in upholding the
termination of respondents employment and (b) in affirming the denial of his claim for non-payment of holiday pay, service
incentive leave pay, moral and exemplary damages.
Our Ruling
The petition is meritorious.
The special civil action for certiorari seeks to correct errors of jurisdiction and not errors of judgment.32

229
xxx The raison detre for the rule is when a court exercises its jurisdiction, an error committed while so engaged does
not deprive it of the 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. xxx Hence, where the issue or
question involved affects the wisdom or legal soundness of the decision not the jurisdiction of the court to render
said decision the same is beyond the province of a special civil action for certiorari. xxx33
xxx [J]udicial review does not go as far as to evaluate the sufficiency of evidence upon which the Labor Arbiter and NLRC
based their determinations, the inquiry being limited essentially to whether or not said public respondents had acted without or
in excess of its jurisdiction or with grave abuse of discretion.34 The said rule directs us to merely determine whether there is
basis established on record to support the findings of a tribunal and such findings meet the required quantum of proof, which in
this case, is substantial evidence. Our deference to the expertise acquired by quasi-judicial agencies and the limited scope
granted to us in the exercise of certiorari jurisdiction restrain us from going so far as to probe into the correctness of a
tribunals evaluation of evidence, unless there is palpable mistake and complete disregard thereof in which case
certiorari would be proper.35
It is on the alleged lack of substantial evidence that the Court of Appeals found for the respondents, thereby reversing the
decision of the Commission.
We hold otherwise.
Upon examination of the documents presented by the parties, we are convinced that the finding of facts on which the
conclusions of the Commission and the Labor Arbiter were based was actually supported by substantial evidence "that
amount of relevant evidence as a reasonable mind might accept as adequate to support a conclusion, even if other minds,
equally reasonable, might conceivably opine otherwise."36 (Emphasis supplied.)
I
In order to validly dismiss an employee, the employer is required to observe both substantive and procedural aspects the
termination of employment must be based on a just or authorized cause of dismissal and the dismissal must be effected after
due notice and hearing.37
Substantive Due Process
We cannot agree with the Court of Appeals that the sole basis of the termination of respondents employment was his
absences from March 11-16, 2000.
Indeed, the Notice to Explain38 clearly stated:
We are seriously considering your termination from service, and for this reason you are directed to submit a written
explanation, within seventy-two hours from your receipt of this notice, why you should not be terminated from service for
failure to report for work without verbal or written notice or permission on March 11, 13, 14, 15 and 16, 2000. xxx (Emphasis
supplied.)
To give full meaning and substance to the Notice to Explain, however, the paragraph should be read together with its
preceding paragraph, to wit:
We have time and again, verbally and formally, called your attention to your negligence from your tardiness and your
frequent absences without any notice but still, you remain to ignore our reminder. As you know, we are in need of a
regular driver and your action greatly affected the operation of our company. (Emphasis supplied.)
Necessarily, he was considered for termination of employment because of his previous infractions capped by his recent
unauthorized absences from March 11-16, 2000.
That the recent absences were unauthorized were satisfactorily established by petitioners. Two (2) employees of the company
belied the claim of respondents wife Mary Ann Bitara that she called the office on 11 March 2000, and, through a certain
Delia, as allegedly later identified by respondent, informed petitioners that her husband would take a leave of absence for a
week because he went to the province.39
Delia Abalos, a "binder/finisher" of the company, stated in her Affidavit that she never received a call from respondent nor his
wife regarding his absences from March 11-16 and 17-23 during the month of March 2000.40On the other hand, Ritchie Distor,
a messenger of the company, narrated in his Affidavit that, upon instruction of the Management, he went to respondents
house on 13 March 2000 to require him to report for work. Instead of relaying the message to him, as respondent would have
it, the wife informed him that respondent had already left the house but that she did not know where he was going. 41
The Court of Appeals relied heavily on our ruling in Stellar Industrial Services, Inc. vs. NLRC,42 which is not on all fours with
the present case. In that case, the employer dismissed respondent for non-observance of company rules and regulations. On
the basis of the facts presented, this Court honored the questioned medical certificate justifying the absences he incurred. It
further ratiocinated:
xxx [P]rivate respondents absences, as already discussed, were incurred with due notice and compliance with company rules
and he had not thereby committed a "similar offense" as those he had committed in the past [to wit: gambling, for which he
was preventively suspended; habitual tardiness for which he received several warnings; and violation of company rules for
carrying three sacks of rice, for which he was required to explain.] xxx To refer to those earlier violations as added grounds for
dismissing him is doubly unfair to private respondent.43 (Emphasis supplied.)

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In the present case, however, petitioners have repeatedly called the attention of respondent concerning his habitual tardiness.
The Memorandum dated 23 June 1999 of petitioner Cheng required him to explain his tardiness. Also in connection with a
similar infraction, respondent even wrote petitioner Cheng a letter dated 29 November 1999 where he admitted that his
tardiness has affected the delivery schedules of the company, offered an apology, and undertook to henceforth report for duty
on time. Despite this undertaking, he continued to either absent himself from work or report late during the first quarter of
2000.
We, therefore, agree with the Labor Arbiters findings, to wit:
The imputed absence and tardiness of the complainant are documented. He faltered on his attendance 38 times of the 66
working days. His last absences on 11, 13, 14, 15 and 16 March 2000 were undertaken without even notice/permission from
management. These attendance delinquencies may be characterized as habitual and are sufficient justifications to terminate
the complainants employment.44
On this score, Valiao v. Court of Appeals45 is instructive:
xxx It bears stressing that petitioners absences and tardiness were not isolated incidents but manifested a pattern of
habituality. xxx The totality of infractions or the number of violations committed during the period of employment shall be
considered in determining the penalty to be imposed upon an erring employee. The offenses committed by him should not be
taken singly and separately but in their totality. Fitness for continued employment cannot be compartmentalized into tight little
cubicles of aspects of character, conduct, and ability separate and independent of each other.46
There is likewise no merit in the observation of the Court of Appeals that the petitioners themselves are not certain of the
official time of their employees after pointing out the seeming inconsistencies between the statement of the petitioners that
"there is no need for written rules since even the [respondent] is aware that his job starts from 8 am to 5 pm" 47 and its
Memorandum of 23 June 1999, where it was mentioned that respondents official time was from 8:30 a.m. to 5:30 p.m. On the
contrary, it was clearly stated in the Memorandum that the Management adjusted his official time from 8:00 a.m. to 5:00 p.m.
to 8:30 a.m. to 5:30 p.m. to hopefully solve the problem on his tardiness.48
Neither is there basis to hold that the company tolerates the offsetting of undertime with overtime services. The Weekly Time
Record relied upon by respondent does not conclusively confirm the alleged practice.
In Valiao,49 we defined gross negligence as "want of care in the performance of ones duties"50 and habitual neglect as
"repeated failure to perform ones duties for a period of time, depending upon the circumstances." 51These are not overly
technical terms, which, in the first place, are expressly sanctioned by the Labor Code of the Philippines, to wit:
ART. 282. Termination by employer. - An employer may terminate an employment for any of the following causes:
(a) xxx
(b) Gross and habitual neglect by the employee of his duties;
xxx
Clearly, even in the absence of a written company rule defining gross and habitual neglect of duties, respondents omissions
qualify as such warranting his dismissal from the service.
We cannot simply tolerate injustice to employers if only to protect the welfare of undeserving employees. As aptly put by then
Associate Justice Leonardo A. Quisumbing:
Needless to say, so irresponsible an employee like petitioner does not deserve a place in the workplace, and it is within the
managements prerogative xxx to terminate his employment. Even as the law is solicitous of the welfare of employees, it must
also protect the rights of an employer to exercise what are clearly management prerogatives. As long as the companys
exercise of those rights and prerogative is in good faith to advance its interest and not for the purpose of defeating or
circumventing the rights of employees under the laws or valid agreements, such exercise will be upheld. 52
And, in the words of then Associate Justice Ma. Alicia Austria-Martinez in Philippine Long Distance and Telephone Company,
Inc. v. Balbastro:53
While it is true that compassion and human consideration should guide the disposition of cases involving termination of
employment since it affects one's 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. The law in protecting the rights of the employees authorizes neither oppression nor self-destruction of the
employer.54 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 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. Justitia nemini neganda
est (Justice is to be denied to none).55
Procedural Due Process
Procedural due process entails compliance with the two-notice rule in dismissing an employee, to wit: (1) the employer must
inform the employee of the specific acts or omissions for which his dismissal is sought; and (2) after the employee has been
given the opportunity to be heard, the employer must inform him of the decision to terminate his employment. 56

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Respondent claimed that he was denied due process because the company did not observe the two-notice rule. He
maintained that the Notice of Explanation and the Notice of Termination, both of which he allegedly refused to sign, were
never served upon him.57
The Court of Appeals favored respondent and ruled in this wise:
Furthermore, We believe that private respondents failed to afford petitioner due process. The allegation of private respondents
that petitioner refused to sign the memoranda dated March 17 and 21, 2000 despite receipt thereof is not only lame but also
implausible. First, the said allegation is self-serving and unsubstantiated. Second, a prudent employer would simply not accept
such mere refusal, but would exert effort to observe the mandatory requirement of due process. We cannot accept the self-
serving claim of respondents that petitioner refused to sign both memoranda. Otherwise, We would be allowing employers to
do away with the mandatory twin-notice rule in the termination of employees. We find more credible the claim of petitioner that
he was illegally dismissed on April 1, 2000 when the lawyer of the company informed him, without prior notice and in
derogation of his right to due process, of his termination by offering him a 1-month salary as separation pay. The petitioners
immediate filing of a complaint for illegal dismissal on April 27, 2000 reinforced Our belief that petitioner was illegally dismissed
and was denied due process.58 (Emphasis in the original.)
We rule otherwise.
In Bughaw v. Treasure Island Industrial Corporation,59 this Court, in verifying the veracity of the allegation that respondent
refused to receive the Notice of Termination, essentially looked for the following: (1) affidavit of service stating the reason for
failure to serve the notice upon the recipient; and (2) a notation to that effect, which shall be written on the notice itself. 60 Thus:
xxx Bare and vague allegations as to the manner of service and the circumstances surrounding the same would not suffice. A
mere copy of the notice of termination allegedly sent by respondent to petitioner, without proof of receipt, or in the very least,
actual service thereof upon petitioner, does not constitute substantial evidence. It was unilaterally prepared by the petitioner
and, thus, evidently self-serving and insufficient to convince even an unreasonable mind.61
Davis Cheng, on the other hand, did both. First, he indicated in the notices the notation that respondent "refused to sign"
together with the corresponding dates of service. Second, he executed an Affidavit dated 29 July 2000 stating that: (1) he is
the General Manager of the company; (2) he personally served each notice upon respondent, when respondent went to the
office/factory on 17 March 2000 and 21 March 2000, respectively; and (3) on both occasions, after reading the contents of the
memoranda, respondent refused to acknowledge receipt thereof. We are, thus, convinced that the notices have been validly
served.
Premises considered, we find that respondent was accorded both substantive and procedural due process.
II
As to respondents monetary claims, petitioners did not deny respondents entitlement to service incentive leave pay as,
indeed, it is indisputable that he is entitled thereto. In Fernandez v. NLRC,62 this Court elucidated:
The clear policy of the Labor Code is to grant service incentive leave pay to workers in all establishments, subject to a few
exceptions. Section 2, Rule V, Book III of the Implementing Rules and Regulations 63 provides that "[e]very employee who has
rendered at least one year of service shall be entitled to a yearly service incentive leave of five days with pay." Service
incentive leave is a right which accrues to every employee who has served "within 12 months, whether continuous or broken
reckoned from the date the employee started working, including authorized absences and paid regular holidays unless the
working days in the establishment as a matter of practice or policy, or that provided in the employment contracts, is less than
12 months, in which case said period shall be considered as one year." 64 It is also "commutable to its money equivalent if not
used or exhausted at the end of the year."65 In other words, an employee who has served for one year is entitled to it. He may
use it as leave days or he may collect its monetary value. xxx66 (Emphasis supplied.)
Be that as it may, petitioners failed to establish by evidence that respondent had already used the service incentive leave
when he incurred numerous absences notwithstanding that employers have complete control over the records of the company
so much so that they could easily show payment of monetary claims against them by merely presenting vouchers or
payrolls,67 or any document showing the off-setting of the payment of service incentive leave with the absences, as
acknowledged by the absentee, if such is the company policy. Petitioners presented none.
We thus quote with approval the findings of the Court of Appeals on the following:
[P]rivate respondents bear the burden to prove that employees have received these benefits in accordance with law. It is
incumbent upon the employer to present the necessary documents to prove such claim. Although private respondents labored
to show that they paid petitioner his holiday pay, no similar effort was shown with regard to his service incentive leave pay. We
do not agree with the Labor Arbiters conclusion that petitioners service incentive leave pay has been used up by his
numerous absences, there being no proof to that effect. 68
As to the payment of holiday pay, we are convinced that respondent had already received the same based on the cash
vouchers on record.1avvphil
Accordingly, we affirm the ruling of the National Labor Relations Commission that the dismissal was valid. However,
respondent shall be entitled to the money equivalent of the five-day service incentive leave pay for every year of service from
the commencement of his employment in August 1988 up to its termination on 1 April 2000. The Labor Arbiter shall compute
the corresponding amount.
232
WHEREFORE, the Resolution dated 29 June 2001 and the Order dated 21 February 2002 of the National Labor Relations
Commission in NLRC NCR CASE No. 027871-01 are hereby REINSTATED with the MODIFICATION that petitioners
are ORDERED to pay respondent the money equivalent of the five-day service incentive leave for every year of service
covering his employment period from August 1988 to 1 April 2000. This case is hereby REMANDED to the Labor Arbiter for
the computation of respondents service incentive leave pay.
SO ORDERED.

G.R. No. 152427. August 9, 2005

INTEGRATED CONTRACTOR AND PLUMBING WORKS, INC., Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and GLEN SOLON, Respondent.
DECISION
QUISUMBING, J.:
This petition for review assails the Decision1 dated October 30, 2001 of the Court of Appeals and its Resolution2 dated
February 28, 2002 in CA-G.R. SP No. 60136, denying the petitioners motion for reconsideration for lack of merit. The decision
affirmed the National Labor Relations Commission (NLRC) which declared private respondent Glen Solon a regular employee
of the petitioner and awarded him 13th month pay, service incentive leave pay, reinstatement to his former position with full
backwages from the time his salary was withheld until his reinstatement.
Petitioner is a plumbing contractor. Its business depends on the number and frequency of the projects it is able to contract with
its clients.3
Private respondent Solon worked for petitioner. His employment records is as follows:
December 14, 1994 up to January 14, 1995 St. Charbel Warehouse
February 1, 1995 up to April 30, 1995 St. Charbel Warehouse
May 23, 1995 up to June 23, 1995 St. Charbel Warehouse
August 15, 1995 up to October 31, 1995 St. Charbel Warehouse
November 2, 1995 up to January 31, 1996 St. Charbel Warehouse
May 13, 1996 up to June 15, 1996 Ayala Triangle
August 27, 1996 up to November 30, 1996 St. Charbel Warehouse 4
July 14, 1997 up to November 1997 ICPWI Warehouse
November 1997 up to January 5, 1998 Cathedral Heights
January 6, 1998 Rockwell Center5
On February 23, 1998, while private respondent was about to log out from work, he was informed by the warehouseman that
the main office had instructed them to tell him it was his last day of work as he had been terminated. When private respondent
went to the petitioners office on February 24, 1998 to verify his status, he found out that indeed, he had been terminated. He
went back to petitioners office on February 27, 1998 to sign a clearance so he could claim his 13th month pay and tax
refunds. However, he had second thoughts and refused to sign the clearance when he read the clearance indicating he had
resigned. On March 6, 1998, he filed a complaint alleging that he was illegally dismissed without just cause and without due
process.6
In a Decision dated February 26, 1999, the Labor Arbiter ruled that private respondent was a regular employee and could only
be removed for cause. Petitioner was ordered to reinstate private respondent to his former position with full backwages from
the time his salary was withheld until his actual reinstatement, and pay him service incentive leave pay, and 13th month pay
for three years in the amount of P2,880 and P14,976, respectively.
Petitioner appealed to the National Labor Relations Commission (NLRC), which ruled:
WHEREFORE, prescinding from the foregoing and in the interest of justice, the decision of the Labor Arbiter is hereby
AFFIRMED with a MODIFICATION that the 13th month pay should be given only for the year 1997 and portion of 1998.
Backwages shall be computed from the time he was illegally dismissed up to the time of his actual reinstatement. Likewise,
service incentive leave pay for three (3) years is also awarded to appellee in the amount of P2,880.00.
SO ORDERED.7
Petitioners Motion for Reconsideration was denied.8
Petitioner appealed to the Court of Appeals, alleging that the NLRC committed grave abuse of discretion in finding that the
private respondent was a regular employee and in awarding 13th month pay, service incentive leave pay, and holiday pay to
the private respondent despite evidence of payment. The said petition was dismissed for lack of merit.9
Before us now, petitioner raises the following issues: (1) Whether the respondent is a project employee of the petitioner or a
regular employee; and (2) Whether the Court of Appeals erred seriously in awarding 13th month pay for the entire year of
1997 and service incentive leave pay to the respondent and without taking cognizance of the evidence presented by
petitioner.10

233
The petitioner asserts that the private respondent was a project employee. Thus, when the project was completed and private
respondent was not re-assigned to another project, petitioner did not violate any law since it was petitioners discretion to re-
assign the private respondent to other projects.11
Article 280 of the Labor Code states:
The provisions of written agreement of the contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a
specific project or undertaking the completion or termination of which has been determined at the time of the engagement of
the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of
the season (Italics supplied.)
We held in Tomas Lao Construction v. NLRC12 that the principal test in determining whether an employee is a "project
employee" or "regular employee," is, whether he is assigned to carry out a "specific project or undertaking," the duration (and
scope) of which are specified at the time the employee is engaged in the project. 13 "Project" refers to a particular job or
undertaking that is within the regular or usual business of the employer, but which is distinct and separate and identifiable from
the undertakings of the company. Such job or undertaking begins and ends at determined or determinable times. 14
In our review of the employment contracts of private respondent, we are convinced he was initially a project employee. The
services he rendered, the duration and scope of each project are clear indications that he was hired as a project employee.
We concur with the NLRC that while there were several employment contracts between private respondent and petitioner, in
all of them, private respondent performed tasks which were usually necessary or desirable in the usual business or trade of
petitioner. A review of private respondents work assignments patently showed he belonged to a work pool tapped from where
workers are and assigned whenever their services were needed. In a work pool, the workers do not receive salaries and are
free to seek other employment during temporary breaks in the business. They are like regular seasonal workers insofar as the
effect of temporary cessation of work is concerned. This arrangement is beneficial to both the employer and employee for it
prevents the unjust situation of "coddling labor at the expense of capital" and at the same time enables the workers to attain
the status of regular employees.15 Nonetheless, the pattern of re-hiring and the recurring need for his services are sufficient
evidence of the necessity and indispensability of such services to petitioners business or trade. 16
In Maraguinot, Jr. v. NLRC17 we ruled that once a project or work pool employee has been: (1) continuously, as opposed to
intermittently, re-hired by the same employer for the same tasks or nature of tasks; and (2) these tasks are vital, necessary
and indispensable to the usual business or trade of the employer, then the employee must be deemed a regular employee.
In this case, did the private respondent become a regular employee then?
The test to determine whether employment is regular or not is the reasonable connection between the particular activity
performed by the employee in relation to the usual business or trade of the employer. Also, if the employee has been
performing the job for at least one year, even if the performance is not continuous or merely intermittent, the law deems the
repeated and continuing need for its performance as sufficient evidence of the necessity, if not indispensability of that activity
to the business.18 Thus, we held that where the employment of project employees is extended long after the supposed project
has been finished, the employees are removed from the scope of project employees and are considered regular employees. 19
While length of time may not be the controlling test for project employment, it is vital in determining if the employee was hired
for a specific undertaking or tasked to perform functions vital, necessary and indispensable to the usual business or trade of
the employer. Here, private respondent had been a project employee several times over. His employment ceased to be
coterminous with specific projects when he was repeatedly re-hired due to the demands of petitioners business. 20 Where from
the circumstances it is apparent that periods have been imposed to preclude the acquisition of tenurial security by the
employee, they should be struck down as contrary to public policy, morals, good customs or public order. 21
Further, Policy Instructions No. 20 requires employers to submit a report of an employees termination to the nearest public
employment office every time his employment was terminated due to a completion of a project. The failure of the employer to
file termination reports is an indication that the employee is not a project employee. 22 Department Order No. 19 superseding
Policy Instructions No. 20 also expressly provides that the report of termination is one of the indications of project
employment.23 In the case at bar, there was only one list of terminated workers submitted to the Department of Labor and
Employment.24 If private respondent was a project employee, petitioner should have submitted a termination report for every
completion of a project to which the former was assigned.
Juxtaposing private respondents employment history, vis the requirements in the test to determine if he is a regular worker,
we are constrained to say he is.
As a regular worker, private respondent is entitled to security of tenure under Article 279 of the Labor Code 25 and can only be
removed for cause. We found no valid cause attending to private respondents dismissal and found also that his dismissal was
without due process.
Additionally, Article 277(b) of the Labor Code provides that
... Subject to the constitutional right of workers to security of tenure and their right to be protected against dismissal except for
a just and authorized cause and without prejudice to the requirement of notice under Article 283 of this Code, the employer
shall furnish the worker whose employment is sought to be terminated a written notice containing a statement of the causes for
234
termination and shall afford the latter ample opportunity to be heard and to defend himself with the assistance of his
representative if he so desires in accordance with company rules and regulations promulgated pursuant to guidelines set by
the Department of Labor and Employment
The failure of the petitioner to comply with these procedural guidelines renders its dismissal of private respondent, illegal. An
illegally dismissed employee is entitled to reinstatement with full backwages, inclusive of allowances, and to his other benefits
computed from the time his compensation was withheld from him up to the time of his actual reinstatement, pursuant to Article
279 of the Labor Code.
However, we note that the private respondent had been paid his 13th month pay for the year 1997. The Court of Appeals erred
in granting the same to him.
Article 95(a) of the Labor Code governs the award of service incentive leave. It provides that every employee who has
rendered at least one year of service shall be entitled to a yearly service incentive leave of five days with pay, and Section 3,
Rule V, Book III of the Implementing Rules and Regulations, defines the term "at least one year of service" to mean service
within 12 months, whether continuous or broken reckoned from the date the employee started working, including authorized
absences and paid regular holidays, unless the working days in the establishment as a matter of practice or policy, or that
provided in the employment contract is less than 12 months, in which case said period shall be considered as one year.
Accordingly, private respondents service incentive leave credits of five days for every year of service, based on the actual
service rendered to the petitioner, in accordance with each contract of employment should be computed up to the date of
reinstatement pursuant to Article 279 of the Labor Code.26
WHEREFORE, the assailed Decision dated October 30, 2001 and the Resolution dated February 28, 2002 of the Court of
Appeals in CA-G.R. SP No. 60136, are AFFIRMED with MODIFICATION. The petitioner is hereby ORDERED to (1) reinstate
the respondent with no loss of seniority rights and other privileges; and (2) pay respondent his backwages, 13th month pay for
the year 1998 and Service Incentive Leave Pay computed from the date of his illegal dismissal up to the date of his actual
reinstatement. Costs against petitioner.
SO ORDERED.

G.R. No. 151966 July 8, 2005

JPL MARKETING PROMOTIONS, Petitioner,
vs.
COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION, NOEL GONZALES, RAMON ABESA III and
FAUSTINO ANINIPOT, Respondents.
DECISION
Tinga, J.:
This is a petition for review of the Decision1 of the Court of Appeals in CA-G.R. SP No. 62631 dated 03 October 2001 and
its Resolution2 dated 25 January 2002 denying petitioners Motion for Reconsideration, affirming the Resolution of the National
Labor Relations Commission (NLRC), Second Division, dated 27 July 2000, awarding separation pay, service incentive leave
pay, and 13th month pay to private respondents.
JPL Marketing and Promotions (hereinafter referred to as "JPL") is a domestic corporation engaged in the business of
recruitment and placement of workers. On the other hand, private respondents Noel Gonzales, Ramon Abesa III and Faustino
Aninipot were employed by JPL as merchandisers on separate dates and assigned at different establishments in Naga City
and Daet, Camarines Norte as attendants to the display of California Marketing Corporation (CMC), one of petitioners clients.
On 13 August 1996, JPL notified private respondents that CMC would stop its direct merchandising activity in the Bicol
Region, Isabela, and Cagayan Valley effective 15 August 1996. 3 They were advised to wait for further notice as they would be
transferred to other clients. However, on 17 October 1996,4 private respondents Abesa and Gonzales filed before the National
Labor Relations Commission Regional Arbitration Branch (NLRC) Sub V complaints for illegal dismissal, praying for separation
pay, 13th month pay, service incentive leave pay and payment for moral damages. 5 Aninipot filed a similar case thereafter.
After the submission of pertinent pleadings by all of the parties and after some clarificatory hearings, the complaints were
consolidated and submitted for resolution. Executive Labor Arbiter Gelacio L. Rivera, Jr. dismissed the complaints for lack of
merit.6 The Labor Arbiter found that Gonzales and Abesa applied with and were employed by the store where they were
originally assigned by JPL even before the lapse of the six (6)-month period given by law to JPL to provide private
respondents a new assignment. Thus, they may be considered to have unilaterally severed their relation with JPL, and cannot
charge JPL with illegal dismissal.7 The Labor Arbiter held that it was incumbent upon private respondents to wait until they
were reassigned by JPL, and if after six months they were not reassigned, they can file an action for separation pay but not for
illegal dismissal.8 The claims for 13th month pay and service incentive leave pay was also denied since private respondents
were paid way above the applicable minimum wage during their employment. 9
Private respondents appealed to the NLRC. In its Resolution,10 the Second Division of the NLRC agreed with the Labor
Arbiters finding that when private respondents filed their complaints, the six-month period had not yet expired, and that CMCs
decision to stop its operations in the areas was beyond the control of JPL, thus, they were not illegally dismissed. However, it

235
found that despite JPLs effort to look for clients to which private respondents may be reassigned it was unable to do so, and
hence they are entitled to separation pay.11 Setting aside the Labor Arbiters decision, the NLRC ordered the payment of:
1. Separation pay, based on their last salary rate and counted from the first day of their employment with the respondent JPL
up to the finality of this judgment;
2. Service Incentive Leave pay, and 13th month pay, computed as in No.1 hereof. 12
Aggrieved, JPL filed a petition for certiorari under Rule 65 of the Rules of Court with the Court of Appeals, imputing grave
abuse of discretion on the part of the NLRC. It claimed that private respondents are not by law entitled to separation pay,
service incentive leave pay and 13th month pay.
The Court of Appeals dismissed the petition and affirmed in toto the NLRC resolution. While conceding that there was no
illegal dismissal, it justified the award of separation pay on the grounds of equity and social justice. 13 The Court of Appeals
rejected JPLs argument that the difference in the amounts of private respondents salaries and the minimum wage in the
region should be considered as payment for their service incentive leave and 13th month pay. 14 Notwithstanding the absence
of a contractual agreement on the grant of 13th month pay, compliance with the same is mandatory under the law. Moreover,
JPL failed to show that it was exempt from paying service incentive leave pay. JPL filed a motion for reconsideration of the
said resolution, but the same was denied on 25 January 2002. 15
In the instant petition for review, JPL claims that the Court of Appeals committed reversible error in rendering the
assailed Decision and Resolution.16 The instant case does not fall under any of the instances where separation pay is due, to
wit: installation of labor-saving devices, redundancy, retrenchment or closing or cessation of business operation, 17 or disease
of an employee whose continued employment is prejudicial to him or co-employees,18 or illegal dismissal of an employee but
reinstatement is no longer feasible.19 Meanwhile, an employee who voluntarily resigns is not entitled to separation unless
stipulated in the employment contract, or the collective bargaining agreement, or is sanctioned by established practice or
policy of the employer.20 It argues that private respondents good record and length of service, as well as the social justice
precept, are not enough to warrant the award of separation pay. Gonzales and Aninipot were employed by JPL for more than
four (4) years, while Abesa rendered his services for more than two (2) years, hence, JPL claims that such short period could
not have shown their worth to JPL so as to reward them with payment of separation pay. 21
In addition, even assuming arguendo that private respondents are entitled to the benefits awarded, the computation thereof
should only be from their first day of employment with JPL up to 15 August 1996, the date of termination of CMCs contract,
and not up to the finality of the 27 July 2000 resolution of the NLRC. 22 To compute separation pay, 13th month pay, and
service incentive leave pay up to 27 July 2000 would negate the findings of both the Court of Appeals and the NLRC that
private respondents were not unlawfully terminated.23 Additionally, it would be erroneous to compute service incentive leave
pay from the first day of their employment up to the finality of the NLRC resolution since an employee has to render at least
one (1) year of service before he is entitled to the same. Thus, service incentive leave pay should be counted from the second
year of service.24
On the other hand, private respondents maintain that they are entitled to the benefits being claimed as per the ruling of this
Court in Serrano v. NLRC, et al.25 They claim that their dismissal, while not illegal, was tainted with bad faith. 26 They allege
that they were deprived of due process because the notice of termination was sent to them only two (2) days before the actual
termination.27 Likewise, the most that JPL offered to them by way of settlement was the payment of separation pay of seven
(7) days for every year of service.28
Replying to private respondents allegations, JPL disagrees that the notice it sent to them was a notice of actual termination.
The said memo merely notified them of the end of merchandising for CMC, and that they will be transferred to other
clients.29 Moreover, JPL is not bound to observe the thirty (30)-day notice rule as there was no dismissal to speak of. JPL
counters that it was private respondents who acted in bad faith when they sought employment with another establishment,
without even the courtesy of informing JPL that they were leaving for good, much less tender their resignation. 30 In addition,
the offer of seven (7) days per year of service as separation pay was merely an act of magnanimity on its part, even if private
respondents are not entitled to a single centavo of separation pay.31
The case thus presents two major issues, to wit: whether or not private respondents are entitled to separation pay, 13th month
pay and service incentive leave pay, and granting that they are so entitled, what should be the reckoning point for computing
said awards.
Under Arts. 283 and 284 of the Labor Code, separation pay is authorized only in cases of dismissals due to any of these
reasons: (a) installation of labor saving devices; (b) redundancy; (c) retrenchment; (d) cessation of the employer's business;
and (e) when the employee is suffering from a disease and his continued employment is prohibited by law or is prejudicial to
his health and to the health of his co-employees. However, separation pay shall be allowed as a measure of social justice in
those cases where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral
character, but only when he was illegally dismissed.32 In addition, Sec. 4(b), Rule I, Book VI of the Implementing Rules to
Implement the Labor Code provides for the payment of separation pay to an employee entitled to reinstatement but the
establishment where he is to be reinstated has closed or has ceased operations or his present position no longer exists at the
time of reinstatement for reasons not attributable to the employer.

236
The common denominator of the instances where payment of separation pay is warranted is that the employee was dismissed
by the employer.33 In the instant case, there was no dismissal to speak of. Private respondents were simply not dismissed at
all, whether legally or illegally. What they received from JPL was not a notice of termination of employment, but a memo
informing them of the termination of CMCs contract with JPL. More importantly, they were advised that they were to be
reassigned. At that time, there was no severance of employment to speak of.
Furthermore, Art. 286 of the Labor Code allows the bona fide suspension of the operation of a business or undertaking for a
period not exceeding six (6) months, wherein an employee/employees are placed on the so-called "floating status." When that
"floating status" of an employee lasts for more than six months, he may be considered to have been illegally dismissed from
the service. Thus, he is entitled to the corresponding benefits for his separation, and this would apply to suspension either of
the entire business or of a specific component thereof.34
As clearly borne out by the records of this case, private respondents sought employment from other establishments even
before the expiration of the six (6)-month period provided by law. As they admitted in their comment, all three of them applied
for and were employed by another establishment after they received the notice from JPL. 35 JPL did not terminate their
employment; they themselves severed their relations with JPL. Thus, they are not entitled to separation pay.
The Court is not inclined in this case to award separation pay even on the ground of compassionate justice. The Court of
Appeals relied on the cases36 wherein the Court awarded separation pay to legally dismissed employees on the grounds of
equity and social consideration. Said cases involved employees who were actually dismissed by their employers, whether for
cause or not. Clearly, the principle applies only when the employee is dismissed by the employer, which is not the case in this
instance. In seeking and obtaining employment elsewhere, private respondents effectively terminated their employment with
JPL.
In addition, the doctrine enunciated in the case of Serrano37 cited by private respondents has already been abandoned by our
ruling in Agabon v. National Labor Relations Commission.38 There we ruled that an employer is liable to pay indemnity in the
form of nominal damages to a dismissed employee if, in effecting such dismissal, the employer failed to comply with the
requirements of due process. However, private respondents are not entitled to the payment of damages considering that there
was no violation of due process in this case. JPLs memo dated 13 August 1996 to private respondents is not a notice of
termination, but a mere note informing private respondents of the termination of CMCs contract and their re-assignment to
other clients. The thirty (30)-day notice rule does not apply.
Nonetheless, JPL cannot escape the payment of 13th month pay and service incentive leave pay to private respondents. Said
benefits are mandated by law and should be given to employees as a matter of right.
Presidential Decree No. 851, as amended, requires an employer to pay its rank and file employees a 13th month pay not later
than 24 December of every year. However, employers not paying their employees a 13th month pay or its equivalent are not
covered by said law.39 The term "its equivalent" was defined by the laws implementing guidelines as including Christmas
bonus, mid-year bonus, cash bonuses and other payment amounting to not less than 1/12 of the basic salary but shall not
include cash and stock dividends, cost-of-living-allowances and all other allowances regularly enjoyed by the employee, as
well as non-monetary benefits.40
On the other hand, service incentive leave, as provided in Art. 95 of the Labor Code, is a yearly leave benefit of five (5) days
with pay, enjoyed by an employee who has rendered at least one year of service. Unless specifically excepted, all
establishments are required to grant service incentive leave to their employees. The term "at least one year of service" shall
mean service within twelve (12) months, whether continuous or broken reckoned from the date the employee started
working.41 The Court has held in several instances that "service incentive leave is clearly demandable after one year of
service."42
Admittedly, private respondents were not given their 13th month pay and service incentive leave pay while they were under
the employ of JPL. Instead, JPL provided salaries which were over and above the minimum wage. The Court rules that the
difference between the minimum wage and the actual salary received by private respondents cannot be deemed as their 13th
month pay and service incentive leave pay as such difference is not equivalent to or of the same import as the said benefits
contemplated by law. Thus, as properly held by the Court of Appeals and by the NLRC, private respondents are entitled to the
13th month pay and service incentive leave pay.
However, the Court disagrees with the Court of Appeals ruling that the 13th month pay and service incentive leave pay should
be computed from the start of employment up to the finality of the NLRC resolution. While computation for the 13th month pay
should properly begin from the first day of employment, the service incentive leave pay should start a year after
commencement of service, for it is only then that the employee is entitled to said benefit. On the other hand, the computation
for both benefits should only be up to 15 August 1996, or the last day that private respondents worked for JPL. To extend the
period to the date of finality of the NLRC resolution would negate the absence of illegal dismissal, or to be more precise, the
want of dismissal in this case. Besides, it would be unfair to require JPL to pay private respondents the said benefits beyond
15 August 1996 when they did not render any service to JPL beyond that date. These benefits are given by law on the basis of
the service actually rendered by the employee, and in the particular case of the service incentive leave, is granted as a
motivation for the employee to stay longer with the employer. There is no cause for granting said incentive to one who has
already terminated his relationship with the employer.
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The law in protecting the rights of the employees authorizes neither oppression nor self-destruction of the employer. It should
be made clear that when the law tilts the scale of justice in favor of labor, it is but recognition of the inherent economic
inequality between labor and management. The intent is to balance the scale of justice; to put 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. Justitia nemini neganda est (Justice is to be
denied to none).43
WHEREFORE, the petition is GRANTED IN PART. The Decision and Resolution of the Court of Appeals in CA-G.R. SP No.
62631 are hereby MODIFIED. The award of separation pay is deleted. Petitioner is ordered to pay private respondents their
13th month pay commencing from the date of employment up to 15 August 1996, as well as service incentive leave pay from
the second year of employment up to 15 August 1996. No pronouncement as to costs.
SO ORDERED.

G.R. No. 171231 February 17, 2010

PNCC SKYWAY TRAFFIC MANAGEMENT AND SECURITY DIVISION WORKERS ORGANIZATION (PSTMSDWO),
represented by its President, RENE SORIANO, Petitioner,
vs.
PNCC SKYWAY CORPORATION, Respondent.
DECISION
PERALTA, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to set aside the
Decision1 and the Resolution2 of the Court of Appeals (CA) in CA-G.R. SP. No. 87069, which annulled and set aside the
Decision and Order of the Voluntary Arbitrator dated July 12, 2004 and August 11, 2004, respectively.
The factual antecedents are as follows:
Petitioner PNCC Skyway Corporation Traffic Management and Security Division Workers' Organization (PSTMSDWO) is a
labor union duly registered with the Department of Labor and Employment (DOLE). Respondent PNCC Skyway Corporation is
a corporation duly organized and operating under and by virtue of the laws of the Philippines.
On November 15, 2002, petitioner and respondent entered into a Collective Bargaining Agreement (CBA) incorporating the
terms and conditions of their agreement which included vacation leave and expenses for security license provisions.
The pertinent provisions of the CBA relative to vacation leave and sick leave are as follows:
ARTICLE VIII
VACATION LEAVE AND SICK LEAVE
Section 1. Vacation Leave.
[a] Regular Employees covered by the bargaining unit who have completed at least one [1] year of continuous service
shall be entitled to vacation leave with pay depending on the length of service as follows:
1-9 years of service - 15 working days
10-15 years of service - 16 working days
16-20 years of service - 17 working days
21-25 years of service - 18 working days
26 and above years of service - 19 working days.
[b] The company shall schedule the vacation leave of employees during the year taking into consideration
the request of preference of the employees.(emphasis supplied)
[c] Any unused vacation leave shall be converted to cash and shall be paid to the employees on the first week of
December each year."
ARTICLE XXI
Section 6. Security License All covered employees must possess a valid License [Security Guard License] issued by the
Chief, Philippine National Police or his duly authorized representative, to perform his duties as security guard. All expenses of
security guard in securing/renewing their licenses shall be for their personal account. Guards, securing/renewing their license
must apply for a leave of absence and/or a change of schedule. Any guard who fails to renew his security guard license should
be placed on forced leave until such time that he can present a renewed security license.
In a Memorandum dated December 29, 2003,3 respondent's Head of the Traffic Management and Security Department
(TMSD) published the scheduled vacation leave of its TMSD personnel for the year 2004. Thereafter, the Head of the TMSD
issued a Memorandum4 dated January 9, 2004 to all TMSD personnel. In the said memorandum, it was provided that:
SCHEDULED VACATION LEAVE WITH PAY.
The 17 days (15 days SVL plus 2-day-off) scheduled vacation leave (SVL) with pay for the year 2004 had been published for
everyone to take a vacation with pay which will be our opportunity to enjoy quality time with our families and perform our other
activities requiring our personal attention and supervision. Swapping of SVL schedule is allowed on a one-on-one basis by
submitting a written request at least 30 days before the actual schedule of SVL duly signed by the concerned parties.
However, the undersigned may consider the re-scheduling of the SVL upon the written request of concerned TMSD personnel
238
at least 30 days before the scheduled SVL. Re-scheduling will be evaluated taking into consideration the TMSDs operational
requirement.
Petitioner objected to the implementation of the said memorandum. It insisted that the individual members of the union have
the right to schedule their vacation leave. It opined that the unilateral scheduling of the employees' vacation leave was done to
avoid the monetization of their vacation leave in December 2004. This was allegedly apparent in the memorandum issued by
the Head HRD,5 addressed to all department heads, which provides:
FOR : All Dept. Heads
FROM : Head, HRD
SUBJECT : Leave Balances as of January 01, 2004
DATE : January 9, 2004
We are furnishing all the departments the leave balances of their respective staff as of January 01, 2004, so as to have them
monitor and program the schedule of such leave.
Please consider the leave credit they earned each month [1-2-0], one day and two hours in anticipation of the later schedule.
As we are targeting the zero conversion comes December 2004, it is suggested that the leave balances as of to date be given
preferential scheduling.
x x x.
Petitioner also demanded that the expenses for the required in-service training of its member security guards, as a
requirement for the renewal of their license, be shouldered by the respondent. However, the respondent did not accede to
petitioner's demands and stood firm on its decision to schedule all the vacation leave of petitioner's members.
Due to the disagreement between the parties, petitioner elevated the matter to the DOLE-NCMB for preventive mediation. For
failure to settle the issue amicably, the parties agreed to submit the issue before the voluntary arbitrator.
The voluntary arbitrator issued a Decision dated July 12, 2004, the dispositive portion of which reads:
WHEREFORE, premises all considered, declaring that:
a) The scheduling of all vacation leaves under Article VIII, Section 6, thereof, shall be under the discretion of the
union members entitled thereto, and the management to convert them into cash all the leaves which the management
compelled them to use.
b) To pay the expenses for the in-service-training of the company security guards, as a requirement for renewal of
licenses, shall not be their personal account but that of the company.
All other claims are dismissed for lack of merit.
SO ORDERED.6
Respondent filed a motion for reconsideration, which the voluntary arbitrator denied in the Order 7 dated August 11, 2004.
Aggrieved, on October 22, 2004, respondent filed a Petition for Certiorari with Prayer for Temporary Restraining Order and/or
Writ of Preliminary Injunction with the CA, and the CA rendered a Decision dated October 4, 2005, 8annulling and setting aside
the decision and order of the voluntary arbitrator. The CA ruled that since the provisions of the CBA were clear, the voluntary
arbitrator has no authority to interpret the same beyond what was expressly written.
Petitioner filed a motion for reconsideration, which the CA denied through a Resolution dated January 23, 2006.9Hence, the
instant petition assigning the following errors:
I
WITH ALL DUE RESPECT, THE HONORABLE PUBLIC RESPONDENT COURT OF APPEALS [THIRTEENTH DIVISION]
ERRED IN HOLDING THAT:
A) THE MANAGEMENT HAS THE SOLE DISCRETION TO SCHEDULE THE VACATION LEAVE OF HEREIN
PETITIONER.
B) THE MANAGEMENT IS NOT LIABLE FOR THE IN-SERVICE-TRAINING OF THE SECURITY GUARDS.
II
THE HONORABLE PUBLIC RESPONDENT ERRED IN OVERSEEING THE CONVERSION ASPECT OF THE UNUSED
LEAVE.
Before considering the merits of the petition, We shall first address the objection based on technicality raised by respondent.
Respondent alleged that the petition was fatally defective due to the lack of authority of its union president, Rene Soriano, to
sign the certification and verification against forum shopping on petitioner's behalf. It alleged that the authority of Rene Soriano
to represent the union was only conferred on June 30, 2006 by virtue of a board resolution,10 while the Petition for Review had
long been filed on February 27, 2006. Thus, Rene Soriano did not possess the required authority at the time the petition was
filed on February 27, 2006.
The petitioner countered that the Board Resolution11 dated June 30, 2006 merely reiterated the authority given to the union
president to represent the union, which was conferred as early as October 2005. The resolution provides in part that:
WHEREAS, in a meeting duly called for October 2005, the Union decided to file a Motion for Reconsideration and if the said
motion be denied, to file a petition before the Supreme Court. (Emphasis supplied)
Thus, the union president, representing the union, was clothed with authority to file the petition on February 27, 2006.

239
The purpose of requiring verification is to secure an assurance that the allegations in the petition have been made in good
faith; or are true and correct, not merely speculative. This requirement is simply a condition affecting the form of pleadings,
and non-compliance therewith does not necessarily render it fatally defective. Truly, verification is only a formal, not a
jurisdictional, requirement.
With respect to the certification of non-forum shopping, it has been held that the certification requirement is rooted in the
principle that a party-litigant shall not be allowed to pursue simultaneous remedies in different fora, as this practice is
detrimental to an orderly judicial procedure. However, this Court has relaxed, under justifiable circumstances, the rule requiring
the submission of such certification considering that, although it is obligatory, it is not jurisdictional. Not being jurisdictional, it
can be relaxed under the rule of substantial compliance. 12
In Cagayan Valley Drug Corporation v. Commissioner of Internal Revenue,13 We said that:
In a slew of cases, however, we have recognized the authority of some corporate officers to sign the verification and
certification against forum shopping. In Mactan-Cebu International Airport Authority v. CA, we recognized the authority of a
general manager or acting general manager to sign the verification and certificate against forum shopping; in Pfizer v. Galan,
we upheld the validity of a verification signed by an "employment specialist" who had not even presented any proof of her
authority to represent the company; in Novelty Philippines, Inc., v. CA, we ruled that a personnel officer who signed the petition
but did not attach the authority from the company is authorized to sign the verification and non-forum shopping certificate; and
in Lepanto Consolidated Mining Company v. WMC Resources International Pty. Ltd. (Lepanto), we ruled that the Chairperson
of the Board and President of the Company can sign the verification and certificate against non-forum shopping even without
the submission of the boards authorization.
In sum, we have held that the following officials or employees of the company can sign the verification and certification without
need of a board resolution: (1) the Chairperson of the Board of Directors, (2) the President of a corporation, (3) the General
Manager or Acting General Manager, (4) Personnel Officer, and (5) an Employment Specialist in a labor case.
While the above cases do not provide a complete listing of authorized signatories to the verification and certification required
by the rules, the determination of the sufficiency of the authority was done on a case to case basis. The rationale applied in the
foregoing cases is to justify the authority of corporate officers or representatives of the corporation to sign the verification or
certificate against forum shopping, being "in a position to verify the truthfulness and correctness of the allegations in the
petition."
In the case at bar, We rule that Rene Soriano has sufficient authority to sign the verification and certification against forum
shopping for the following reasons: First, the resolution dated June 30, 2006 was merely a reiteration of the authority given to
the Union President to file a case before this Court assailing the CBA violations committed by the management, which was
previously conferred during a meeting held on October 5, 2005. Thus, it can be inferred that even prior to the filing of the
petition before Us on February 27, 2006, the president of the union was duly authorized to represent the union and to file a
case on its behalf. Second, being the president of the union, Rene Soriano is in a position to verify the truthfulness and
correctness of the allegations in the petition. Third, assuming that Mr. Soriano has no authority to file the petition on February
27, 2006, the passing on June 30, 2006 of a Board Resolution authorizing him to represent the union is deemed a ratification
of his prior execution, on February 27, 2006, of the verification and certificate of non-forum shopping, thus curing any defects
thereof. Ratification in agency is the adoption or confirmation by one person of an act performed on his behalf by another
without authority.14
We now go to the merits of the case.
Petitioner insisted that their union members have the preference in scheduling their vacation leave. On the other hand,
respondent argued that Article VIII, Section 1 (b) gives the management the final say regarding the vacation leave schedule of
its employees. Respondent may take into consideration the employees' preferred schedule, but the same is not controlling.
Petitioner also requested the respondent to provide and/or shoulder the expenses for the in-service training of their members
as a requirement for the renewal of the security guards' license. Respondent did not accede to the union's request invoking the
CBA provision which states that all expenses of security guards in securing /renewing their license shall be for their personal
account. The petitioner further argued that any doubts or ambiguity in the interpretation of the CBA should be resolved in favor
of the laborer.
As to the issue on vacation leaves, the same has no merit.
The rule is that where the language of a contract is plain and unambiguous, its meaning should be determined without
reference to extrinsic facts or aids. The intention of the parties must be gathered from that language, and from that language
alone. Stated differently, where the language of a written contract is clear and unambiguous, the contract must be taken to
mean that which, on its face, it purports to mean, unless some good reason can be assigned to show that the words used
should be understood in a different sense.15
In the case at bar, the contested provision of the CBA is clear and unequivocal. Article VIII, Section 1 (b) of the CBA
categorically provides that the scheduling of vacation leave shall be under the option of the employer. The preference
requested by the employees is not controlling because respondent retains its power and prerogative to consider or to ignore
said request.

240
Thus, if the terms of a CBA are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its
stipulation shall prevail.16 In fine, the CBA must be strictly adhered to and respected if its ends have to be achieved, being the
law between the parties. In Faculty Association of Mapua Institute of Technology (FAMIT) v. Court of Appeals, 17 this Court
held that the CBA during its lifetime binds all the parties. The provisions of the CBA must be respected since its terms and
conditions constitute the law between the parties. The parties cannot be allowed to change the terms they agreed upon on the
ground that the same are not favorable to them.
As correctly found by the CA:
The words of the CBA were unequivocal when it provided that "The company shall schedule the vacation leave of employees
during the year taking into consideration the request of preference of the employees." The word shall in this instance connotes
an imperative command, there being nothing to show a different intention. The only concession given under the subject clause
was that the company should take into consideration the preferences of the employees in scheduling the vacations; but
certainly, the concession never diminished the positive right of management to schedule the vacation leaves in accordance
with what had been agreed and stipulated upon in the CBA.
There is, thus, no basis for the Voluntary Arbitrator to interpret the subject provision relating to the schedule of vacation leaves
as being subject to the discretion of the union members. There is simply nothing in the CBA which grants the union members
this right.
It must be noted the grant to management of the right to schedule vacation leaves is not without good reason. Indeed, if union
members were given the unilateral discretion to schedule their vacation leaves, the same may result in significantly crippling
the number of key employees of the petitioner manning the toll ways on holidays and other peak seasons, where union
members may wittingly or unwittingly choose to have a vacation. Put another way, the grant to management of the right to
schedule vacation leaves ensures that there would always be enough people manning and servicing the toll ways, which in
turn assures the public plying the same orderly and efficient toll way service.
Indeed, the multitude or scarcity of personnel manning the tollways should not rest upon the option of the employees, as the
public using the skyway system should be assured of its safety, security and convenience.
Although the preferred vacation leave schedule of petitioner's members should be given priority, they cannot demand, as a
matter of right, that their request be automatically granted by the respondent. If the petitioners were given the exclusive right to
schedule their vacation leave then said right should have been incorporated in the CBA. In the absence of such right and in
view of the mandatory provision in the CBA giving respondent the right to schedule the vacation leave of its employees,
compliance therewith is mandated by law.
In the grant of vacation leave privileges to an employee, the employer is given the leeway to impose conditions on the
entitlement to and commutation of the same, as the grant of vacation leave is not a standard of law, but a prerogative of
management.18 It is a mere concession or act of grace of the employer and not a matter of right on the part of the
employee.19 Thus, it is well within the power and authority of an employer to impose certain conditions, as it deems fit, on the
grant of vacation leaves, such as having the option to schedule the same.
Along that line, since the grant of vacation leave is a prerogative of the employer, the latter can compel its employees to
exhaust all their vacation leave credits. Of course, any vacation leave credits left unscheduled by the employer, or any
scheduled vacation leave that was not enjoyed by the employee upon the employer's directive, due to exigencies of the
service, must be converted to cash, as provided in the CBA. However, it is incorrect to award payment of the cash equivalent
of vacation leaves that were already used and enjoyed by the employees. By directing the conversion to cash of all utilized
and paid vacation leaves, the voluntary arbitrator has licensed unjust enrichment in favor of the petitioner and caused undue
financial burden on the respondent. Evidently, the Court cannot tolerate this.
It would seem that petitioner's goal in relentlessly arguing that its members preferred vacation leave schedule should be given
preference is not allowed to them to avail themselves of their respective vacation leave credits at all but, instead, to convert
these into cash.
In Cuajo v. Chua Lo Tan,20 We said that the purpose of a vacation leave is to afford a laborer a chance to get a much-needed
rest to replenish his worn-out energy and acquire a new vitality to enable him to efficiently perform his duties, and not merely
to give him additional salary and bounty.
This purpose is manifest in the Memorandum dated January 9, 2004 21 addressed to all TMSD Personnel which provides that:
SCHEDULED VACATION LEAVE WITH PAY
The 17 days (15 days SVL plus 2-Day-Off) scheduled vacation leave (SVL) with pay for the year 2004 had been published for
everyone to take a vacation with pay which will be our opportunity to enjoy quality time with our families and perform our
other activities requiring our personal attention and supervision.(Emphasis ours.)
Accordingly, the vacation leave privilege was not intended to serve as additional salary, but as a non-monetary benefit. To give
the employees the option not to consume it with the aim of converting it to cash at the end of the year would defeat the very
purpose of vacation leave.
Petitioner's contention that labor contracts should be construed in favor of the laborer is without basis and, therefore,
inapplicable to the present case. This rule of construction does not benefit petitioners because, as stated, there is here no
room for interpretation. Since the CBA is clear and unambiguous, its terms should be implemented as they are written.
241
This brings Us to the issue of who is accountable for the in-service training of the security guards. On this point, We find the
petition meritorious.
Although it is a rule that a contract freely entered into between the parties should be respected, since a contract is the law
between the parties, there are, however, certain exceptions to the rule, specifically Article 1306 of the Civil Code, which
provides:
The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided
they are not contrary to law, morals, good customs, public order, or public policy.
Moreover, the relations between capital and labor are not merely contractual. "They are so impressed with public interest that
labor contracts must yield to the common good x x x."22 The supremacy of the law over contracts is explained by the fact that
labor contracts are not ordinary contracts; they are imbued with public interest and therefore are subject to the police power of
the state.23 However, it should not be taken to mean that provisions agreed upon in the CBA are absolutely beyond the ambit
of judicial review and nullification. If the provisions in the CBA run contrary to law, public morals, or public policy, such
provisions may very well be voided.
In the present case, Article XXI, Section 6 of the CBA provides that "All expenses of security guards in securing /renewing their
licenses shall be for their personal account." A reading of the provision would reveal that it encompasses all possible expenses
a security guard would pay or incur in order to secure or renew his license. In-service training is a requirement for the renewal
of a security guards license.24 Hence, following the aforementioned CBA provision, the expenses for the same must be on the
personal account of the employee. However, the 1994 Revised Rules and Regulations Implementing Republic Act No. 5487
provides the following:
Section 17. Responsibility for Training and Progressive Development. It is the primary responsibility of all operators private
security agency and company security forces to maintain and upgrade the standards of efficiency, discipline, performance and
competence of their personnel. To attain this end, each duly licensed private security agency and company security force shall
establish a staff position for training and appoint a training officer whose primary functions are to determine the training needs
of the agency/guards in relation to the needs of the client/ market/ industry, and to supervise and conduct appropriate training
requirements. All private security personnel shall be re-trained at least once very two years.1avvphi1
Section 12. In service training. - a. To maintain and/or upgrade the standard of efficiency, discipline and competence of
security guards and detectives, company security force and private security agencies upon prior authority shall conduct-in-
service training at least two (2) weeks duration for their organic members by increments of at least two percent (2%) of their
total strength. Where the quality of training is better served by centralization, the CSFD Directors may activate a
training staff from local talents to assist. The cost of training shall be pro-rated among the participating
agencies/private companies. All security officer must undergo in-service training at least once every two (2) years preferably
two months before his or her birth month.
Since it is the primary responsibility of operators of company security forces to maintain and upgrade the standards of
efficiency, discipline, performance and competence of their personnel, it follows that the expenses to be incurred therein shall
be for the personal account of the company. Further, the intent of the law to impose upon the employer the obligation to pay
for the cost of its employees training is manifested in the aforementioned laws provision that Where the quality of training is
better served by centralization, the CFSD Directors may activate a training staff from local talents to assist. The cost of training
shall be pro-rated among the participating agencies/private companies. It can be gleaned from the said provision that cost of
training shall be pro-rated among participating agencies and companies if the training is best served by centralization. The law
mandates pro-rating of expenses because it would be impracticable and unfair to impose the burden of expenses suffered by
all participants on only one participating agency or company. Thus, it follows that if there is no centralization, there can be no
pro-rating, and the company that has its own security forces shall shoulder the entire cost for such training. If the intent of the
law were to impose upon individual employees the cost of training, the provision on the pro-rating of expenses would not have
found print in the law.
Further, petitioner alleged that prior to the inking of the CBA, it was the respondent company providing for the in-service
training of the guards.25 Respondent never controverted the said allegation and is thus deemed to have admitted the
same.26 Implicit from respondent's actuations was its acknowledgment of its legally mandated responsibility to shoulder the
expenses for in-service training.
WHEREFORE, the petition is PARTIALLY GRANTED. The Decision and Resolution of the Court of Appeals, dated October 4,
2005 and January 23, 2006, respectively, in CA-G.R. SP. No. 87069 is MODIFIED. The cost of in-service training of the
respondent company's security guards shall be at the expense of the respondent company. This case is remanded to the
voluntary arbitrator for the computation of the expenses incurred by the security guards for their in-service training, and
respondent company is directed to reimburse its security guards for the expenses incurred.
SO ORDERED.

242
G.R. No. 75510 October 27, 1987
RUFINA SORIANO, petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION and KINGLY COMMODITIES TRADERS AND MULTI-RESOURCES,
INC., respondents.
RESOLUTION

FELICIANO, J.:
Petitioner started working with respondent commodities trading Corporation in November 1977 as Investment Counselor and
eventually became Vice-President, Marketing. On 18 September 1984, petitioner was charged with allowing or failing to
supervise and monitor certain activities of investment counselors in her department, which included the signing of a contract
opening an account for a client by an investment counselor without authority from the client, transfers of funds from one
account to another without the knowledge and authority of the clients involved, unauthorized transactions in foreign currency
with clients of the respondent Corporation, unauthorized approval of leave for members of her department, and resulting in
loss of confidence in petitioner. Petitioner was preventively suspended and required to explain her acts or failure to act. Two
(2) days later, petitioner submitted her detailed answer or explanation. On 27 September, 1984, the Executive Vice-President
and General Manager of respondent Corporation found petitioner's written explanation unsatisfactory and notified petitioner
that the Corporation had lost confidence on her ability to discharge the functions of her office and accordingly terminated her
services.
Petitioner filed a complaint for illegal suspension and dismissal against respondent Corporation and Mr. Guil Rivera, Senior
Vice-President, and Mr. Richard Tan, Executive Vice-President and General Manager. She asked for reinstatement with
backwages, as well as moral and exemplary damages, medical expenses, attorney's fees and other litigation expenses.
On 8 July 1985, Labor Arbiter A.L Sevilla rendered a Decision requiring the respondent Corporation to pay petitioner: (1)
separation pay in the amount of P10,500.00; (2) six (6) months backwages in the amount of P120,000.00; (3) moral damages
in the amount of P500,000.00; (4) exemplary damages in the amount of P100,000.00; and (5) attorney's fees equivalent to
10% of the award.
On appeal by the private respondents, public respondent NLRC, in a Decision dated 10 March 1986, modified the Labor
Arbiter's award by deleting the award of moral and exemplary damages and requiring respondent Corporation to pay: (1)
separation pay amounting to P21,000.00; (2) three (3) months backwages without qualification and deduction amounting to
P9,000.00; and (3) 10% of the award as attorney's fees.
Both the Labor Arbiter and respondent NLRC found that because of the strained relations between petitioner and respondent
Corporation, reinstatement of petitioner was not feasible. Respondent Corporation had alleged that petitioner had immediately
found employment with Onapal Philippines Commodities, which had not been denied or refuted by petitioner. Because
respondent Corporation had failed to specify the definite date of her employment, respondent NLRC granted petitioner three
(3) months backwages without qualification and deduction.
In the present Petition for Certiorari, petitioner seeks the annulment of the Decision of respondent NLRC dated 10 March 1986
and the revival or reinstatement of the Decision of Iabor Arbiter Sevilla dated 8 July 1985.
Petitioner claims that respondent Corporation acted in bad faith in suspending and terminating her services. Petitioner asserts
that:
1. respondent Corporation had violated her right to due process by suspending her immediately without the
benefit of hearing. She argues that the notice of preventive suspension served her on 18 September 1986
was "living proof" that the corporation had already concluded she was guilty of the charges levelled against
her even before she could submit her written explanation.
2. the "true reason" for her "illegal dismissal" was the "personal grudge which Rivera harbored against her.
3. respondent Corporation's bad faith was also demonstrated in discrimination against her in relation to other
employees of the Corporation who had been in the past similarly charged with alleged infractions of the
corporation's rules. More specifically, petitioner asserts discrimination against herself consisting of the failure
of the respondent Corporation to dismiss the two (2) immediate supervisors of the investment counselor who
had carried out the unauthorized manipulations of clients' accounts in petitioner's department.
4. petitioner also charges respondent Corporation with having misrepresented the extent of her participation
in or the scope of her duties in respect of unauthorized acts and transactions of her subordinates in the
marketing department of respondent company.
The Court considers that petitioner has failed to show a grave abuse of discretion, or an act performed without or in excess of
jurisdiction, on the part of the respondent NLRC.
In respect of Item 1, preventive suspension does not in itself prove that the company had prejudged that petitioner was guilty
of the charges she was asked to answer and explain. Preventive suspension may be necessary for the protection of the
company, its operations and assets, pending investigation of the alleged malfeasance or misfeasance on the part of officers or
employees of the company and pending a decision on the part of the company (See Sec. 3 of Rule XIV, Book V, of the
243
Omnibus Rules Implementing the Labor Code). Considering the very senior and sensitive character of petitioner's position as
head of a Department, a fine position as distinguished from a staff or planning position, and considering the unauthorized
transactions then just discovered by the respondent Corporation, we do not believe that the preventive suspension was an
arbitrary and capricious act amounting to bad faith on the part of the respondent Corporation.
In respect of Item 2, the alleged personal motive behind petitioner's dismissal-personal envy or feelings of personal insecurity
on the part of Guil Rivera, Senior Vice-President, respondent NLRC found that petitioner had not sufficiently established her
assertion. Petitioner's assertion on this point appears no more than a conjecture or supposition and does not afford an
adequate basis for overturning respondent NLRC's finding on this point. Further, if petitioner had clearly proven such personal
ill-will on the part of Mr. Rivera, a serious question would arise as to whether the respondent Corporation (as distinguished
from Mr. Rivera) could be held liable at all for Mr. Rivera's acts in the absence of clear authorization for, or approval or
adoption of, such act by the respondent Corporation with knowledge of the personal malice on the part of Mr. Rivera.
In respect of Item 3, respondent NLRC's decision was silent. The Court believes, however, that respondent Corporation must
be accorded reasonable latitude in determining who among erring officers or employees should be punished by the company
and to what extent. In the instant case, respondent Corporation presumably found it was not necessary to terminate the
services also of the two (2) section heads in petitioner's department, who clearly are much lower in the corporate hierarchy
than petitioner.
With respect to the last and most important of the above listed items, the scope of petitioner's responsibility for the operations
of her department and the extent of her supervisory authority over her subordinates in the marketing department, respondent
NLRC set forth the following discussion and evaluation:
Appellants stressed the point that complainant, as vice president, marketing, is actually a department head
of one of the company's sales department (sic). As such, her basic function is the supervision and
monitoring the daily activities of her department and the employees she supervises (sic). By the nature of
the company's business, complainant as a department head should see to it that the clients' trust and
confidence in the company is upheld through above-board transactions, untainted relations, satisfactory
servicing and unquestioned integrity of its officers and staff, aside from the promotion of cordial employee
relations among her personnel through unbiased and uniform implementation of company policies affecting
employee benefits and welfare.
According to the appellants, the finding of the Labor Arbiter that 'complainant is not expected to keep an eye
or be aware of all day-to-day transactions of her workers particularly Investment Consultants in her
department' does not conform to the facts prevailing in this case.
In the Panemanglor case, which is the crucial point at issue, Panemanglor opened an account with the
respondent corporation on June 28, 1984 by depositing the amount of P50,000.00 through Sofia Nazareno,
investment counselor. Instead of the client signing the Customers Agreement, it was Nazareno who signed
the agreement and the signature card in the name of the client, which is highly irregular. Had she exercised
prudence in the supervision of her investment consultants, the irregularity could hate been earlier
detected. As a result, the sum of P25,000.00 from Panemanglor's account was transferred by Nazareno to
the account of Ramon Lopez, without the knowledge of Panemanglor on July 9, 1984. On July 13, 1984 the
said client withdrew the sum of P25,000.00 through a Payment Instruction Form that was approved by the
complainant. On August 6, 1964, the amount of P4,052.59 was transferred by Nazareno to the account of
Panemanglor from the account of Ramon Lopez. This transaction was with the approval of the complainant.
On September 3, 1984, Panemanglor demanded the payment of the balance of P25,000.00 from the
respondent company to close his account and the letter of Panemanglor was referred to complainant by
respondent Guil Rivera for necessary action. In her memorandum to senior vice president Guil
Rivera complainant confirmed the irregularity in the handling of the account of Panemanglor, but she failed
to take appropriate action against the erring employee which was within her power to discipline employees
under her supervision ater on February 4, 1985, a complaint was filed before the Securities and Exchange
Commission by Panemanglor for the recovery of the P25,000.00 plus damages against the respondent
corporation, contrary to her claim that the client will not file a recovery suit against the corporation since the
obligation was purely personal to Nazareno.
Respondents contend that complainant could have immediately discovered the unauthorized signature of
Sofia Nazareno that led to the illegal transfers of fund, had she followed the company procedure and
practice for her to be personally acquainted with new clients and her admission that she was not aware of
the complained acts has brought to light that she was remiss in her supervisory and monitoring function. On
top of this, she failed to institute disciplinary action
xxx xxx xxx
As head of one of the company's sales department (sic) and a managerial employee at that, complainant is
expected to monitor the daily activities of the investment counselors and the transactions of clients in her
department. As a matter of practice and procedure, complainant, as vice-president marketing, is always
244
 informed of new clients for her to be personally acquainted with the client. We agree with the appellants that
had the complainant adhered to this procedure, she could have immediately noticed the unauthorized
signature by Sofia Nazareno that enabled her to transfer funds from one account to another. Likewise, since
the complainant approved the payment instruction for P25,000.00 on July 13, 1984, the transfer of
P4,052.59 on August 6, 1984 from the account of Ramon Lopez to Panemanglor's account, and the
withdrawal of the transferred amount on August 7, 1984, she could have easily suspected that something
was irregular with the transaction Yet, it took several months before she knew of the anomaly and it took her
superior, respondent Guil Rivera, to bring the matter to her attention. Under the circumstances, it cannot be
truthfully said that complainant has not been without any fault whatsoever. For this reason, the basis for the
award of the moral and exemplary damages has not been suffiiciently or satisfactorily against the erring
employee. gently or satisfactorily established by the complainant. And besides the dismissal of the
complainant by the respondent was done in good faith. ... (Emphasis supplied)
Petitioner's argument that, because she was head of the entire marketing (sales) department, she could not be expected to
monitor the detailed or day-to-day acts and behaviour of the staff members of her department, does not address what appears
to be the thrust of the respondent NLRC's decision, And that is, that as head of the department, it was her responsibility to
adopt ways and means of keeping herself sufficiently informed of the activities of her staff members so as to prevent or at least
discover at an early stage, e.g., unauthorized or illegal transactions and manipulation of clients' accounts. On the one hand,
the above position taken by the respondent NLRC cannot be regarded as so obviously unreasonable and despotic as to
constitute a grave abuse of discretion, given the character of the business of a commodities trading company and the fact that
very substantial sums of money are handled daily by petitioner's department. Upon the other hand, petitioner's logic would
lead to the conclusion that the more senior the management position, the slighter the responsibility for malfeasance or
nonfeasance that can be laid upon the position holder; the chief executive officer of a corporation would effectively have, under
this logic, little or no responsibility at all.
Turning to the specific award made by respondent NLRC, the salary base properly used in computing the separation pay and
the backwages due to petitioner should include not just the basic salary but also the regular allowances that petitioner had
been receiving (See Santos v. National Labor Relations Commission G.R. No. 76721, 21 September 1987). In petitioner's
case, the base figure properly includes her: (a) basic salary of P3,000.00 a month; and (b) living allowance of P2,400 a month
(petitioner's Affidavit, dated 12 April 1985, Exhibit "G", Rollo, p. 105). The commissions also claimed by petitioner ("override
commission" plus "net deposit incentive") are not properly includible in such base figure since such commissions must be
earned by actual market transactions attributable to petitioner. Neither should "travels equivalent" [an unusual and unexplained
term; P10,000.00 a month] and "commission in trading personal clients" P3,000.00 a month] be included in such base figure.
Considering that the charge of bad faith on the part of private respondents was not proven, the respondent NLRC having, on
the contrary, made a finding that petitioner's dismissal was made in good faith there appears no real basis for the award of
attorney's fees (Art. 2208 5 Civil Code). This award should not exceed a nominal amount which we set at P1,500.00.
Thus, the appropriate computation would be:
A. Separationpay-P5,400.00/month 7 = P37,800.00 (in view of petitioner's seven (7) years of service)
B. Backwages-P5,400.00/month x 3 mos. = P16,200.00
Sub-Total P54,000.00
plus nominal attorney's fees 1,500.00
TOTAL P55,500.00
ACCORDINGLY, the Court Resolved to DISMISS the Petition for certiorari for lack of merit. The Decision of the respondent
NLRC dated 10 March 1986 is modified so as to award petitioner the following items: a) separation pay in the amount of
P37,800.00; b) backwages for three (3) months in the amount of P16,200.00; and c) attorney's fees of P1,500.00, making a
total of P55,500.00.
SO ORDERED.

G.R. No. L-50999 March 23, 1990

JOSE SONGCO, ROMEO CIPRES, and AMANCIO MANUEL, petitioners,
vs
NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION), LABOR ARBITER FLAVIO AGUAS, and F.E.
ZUELLIG (M), INC., respondents.
Raul E. Espinosa for petitioners.
Lucas Emmanuel B. Canilao for petitioner A. Manuel.
Atienza, Tabora, Del Rosario & Castillo for private respondent.

MEDIALDEA, J.:
This is a petition for certiorari seeking to modify the decision of the National Labor Relations Commission in NLRC Case No.
RB-IV-20840-78-T entitled, "Jose Songco and Romeo Cipres, Complainants-Appellants, v. F.E. Zuellig (M), Inc., Respondent-

245
Appellee" and NLRC Case No. RN- IV-20855-78-T entitled, "Amancio Manuel, Complainant-Appellant, v. F.E. Zuellig (M), Inc.,
Respondent-Appellee," which dismissed the appeal of petitioners herein and in effect affirmed the decision of the Labor Arbiter
ordering private respondent to pay petitioners separation pay equivalent to their one month salary (exclusive of commissions,
allowances, etc.) for every year of service.
The antecedent facts are as follows:
Private respondent F.E. Zuellig (M), Inc., (hereinafter referred to as Zuellig) filed with the Department of Labor (Regional Office
No. 4) an application seeking clearance to terminate the services of petitioners Jose Songco, Romeo Cipres, and Amancio
Manuel (hereinafter referred to as petitioners) allegedly on the ground of retrenchment due to financial losses. This application
was seasonably opposed by petitioners alleging that the company is not suffering from any losses. They alleged further that
they are being dismissed because of their membership in the union. At the last hearing of the case, however, petitioners
manifested that they are no longer contesting their dismissal. The parties then agreed that the sole issue to be resolved is the
basis of the separation pay due to petitioners. Petitioners, who were in the sales force of Zuellig received monthly salaries of at
least P40,000. In addition, they received commissions for every sale they made.
The collective Bargaining Agreement entered into between Zuellig and F.E. Zuellig Employees Association, of which
petitioners are members, contains the following provision (p. 71, Rollo):
ARTICLE XIV Retirement Gratuity
Section l(a)-Any employee, who is separated from employment due to old age, sickness, death or
permanent lay-off not due to the fault of said employee shall receive from the company a retirement gratuity
in an amount equivalent to one (1) month's salary per year of service. One month of salaryas used in this
paragraph shall be deemed equivalent to the salary at date of retirement; years of service shall be deemed
equivalent to total service credits, a fraction of at least six months being considered one year, including
probationary employment. (Emphasis supplied)
On the other hand, Article 284 of the Labor Code then prevailing provides:
Art. 284. Reduction of personnel. The termination of employment of any employee due to the installation
of labor saving-devices, redundancy, retrenchment to prevent losses, and other similar causes, shall entitle
the employee affected thereby to separation pay. In case of termination due to the installation of labor-
saving devices or redundancy, the separation pay shall be equivalent to one (1) month pay or to at least one
(1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and
other similar causes, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year. (Emphasis supplied)
In addition, Sections 9(b) and 10, Rule 1, Book VI of the Rules Implementing the Labor Code provide:
xxx
Sec. 9(b). Where the termination of employment is due to retrechment initiated by the employer to prevent
losses or other similar causes, or where the employee suffers from a disease and his continued employment
is prohibited by law or is prejudicial to his health or to the health of his co-employees, the employee shall be
entitled to termination pay equivalent at least to his one month salary, or to one-half month pay for every
year of service, whichever is higher, a fraction of at least six (6) months being considered as one whole
year.
xxx
Sec. 10. Basis of termination pay. The computation of the termination pay of an employee as provided
herein shall be based on his latest salary rate, unless the same was reduced by the employer to defeat the
intention of the Code, in which case the basis of computation shall be the rate before its deduction.
(Emphasis supplied)
On June 26,1978, the Labor Arbiter rendered a decision, the dispositive portion of which reads (p. 78, Rollo):
RESPONSIVE TO THE FOREGOING, respondent should be as it is hereby, ordered to pay the
complainants separation pay equivalent to their one month salary (exclusive of commissions, allowances,
etc.) for every year of service that they have worked with the company.
SO ORDERED.
The appeal by petitioners to the National Labor Relations Commission was dismissed for lack of merit.
Hence, the present petition.
On June 2, 1980, the Court, acting on the verified "Notice of Voluntary Abandonment and Withdrawal of Petition dated April 7,
1980 filed by petitioner Romeo Cipres, based on the ground that he wants "to abide by the decision appealed from" since he
had "received, to his full and complete satisfaction, his separation pay," resolved to dismiss the petition as to him.
The issue is whether or not earned sales commissions and allowances should be included in the monthly salary of petitioners
for the purpose of computation of their separation pay.
The petition is impressed with merit.

246
Petitioners' position was that in arriving at the correct and legal amount of separation pay due them, whether under the Labor
Code or the CBA, their basic salary, earned sales commissions and allowances should be added together. They cited Article
97(f) of the Labor Code which includes commission as part on one's salary, to wit;
(f) 'Wage' paid to any employee shall mean the remuneration or earnings, however designated, capable of
being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission
basis, or other method of calculating the same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be done, or for services rendered or to be
rendered, and includes the fair and reasonable value, as determined by the Secretary of Labor, of board,
lodging, or other facilities customarily furnished by the employer to the employee. 'Fair reasonable value'
shall not include any profit to the employer or to any person affiliated with the employer.
Zuellig argues that if it were really the intention of the Labor Code as well as its implementing rules to include commission in
the computation of separation pay, it could have explicitly said so in clear and unequivocal terms. Furthermore, in the definition
of the term "wage", "commission" is used only as one of the features or designations attached to the word remuneration or
earnings.
Insofar as the issue of whether or not allowances should be included in the monthly salary of petitioners for the purpose of
computation of their separation pay is concerned, this has been settled in the case of Santos v. NLRC, et al., G.R. No. 76721,
September 21, 1987, 154 SCRA 166, where We ruled that "in the computation of backwages and separation pay, account
must be taken not only of the basic salary of petitioner but also of her transportation and emergency living allowances." This
ruling was reiterated in Soriano v. NLRC, et al., G.R. No. 75510, October 27, 1987, 155 SCRA 124 and recently, in Planters
Products, Inc. v. NLRC, et al., G.R. No. 78524, January 20, 1989.
We shall concern ourselves now with the issue of whether or not earned sales commission should be included in the monthly
salary of petitioner for the purpose of computation of their separation pay.
Article 97(f) by itself is explicit that commission is included in the definition of the term "wage". It has been repeatedly declared
by the courts that where the law speaks in clear and categorical language, there is no room for interpretation or construction;
there is only room for application (Cebu Portland Cement Co. v. Municipality of Naga, G.R. Nos. 24116-17, August 22, 1968,
24 SCRA 708; Gonzaga v. Court of Appeals, G.R.No. L-2 7455, June 28,1973, 51 SCRA 381). A plain and unambiguous
statute speaks for itself, and any attempt to make it clearer is vain labor and tends only to obscurity. How ever, it may be
argued that if We correlate Article 97(f) with Article XIV of the Collective Bargaining Agreement, Article 284 of the Labor Code
and Sections 9(b) and 10 of the Implementing Rules, there appears to be an ambiguity. In this regard, the Labor Arbiter
rationalized his decision in this manner (pp. 74-76, Rollo):
The definition of 'wage' provided in Article 96 (sic) of the Code can be correctly be (sic) stated as a general
definition. It is 'wage ' in its generic sense. A careful perusal of the same does not show any indication that
commission is part of salary. We can say that commission by itself may be considered a wage. This is not
something novel for it cannot be gainsaid that certain types of employees like agents, field personnel and
salesmen do not earn any regular daily, weekly or monthly salaries, but rely mainly on commission earned.
Upon the other hand, the provisions of Section 10, Rule 1, Book VI of the implementing rules in conjunction
with Articles 273 and 274 (sic) of the Code specifically states that the basis of the termination pay due to one
who is sought to be legally separated from the service is 'his latest salary rates.
x x x.
Even Articles 273 and 274 (sic) invariably use 'monthly pay or monthly salary'.
The above terms found in those Articles and the particular Rules were intentionally used to express the
intent of the framers of the law that for purposes of separation pay they mean to be specifically referring to
salary only.
.... Each particular benefit provided in the Code and other Decrees on Labor has its own pecularities and
nuances and should be interpreted in that light. Thus, for a specific provision, a specific meaning is attached
to simplify matters that may arise there from. The general guidelines in (sic) the formation of specific rules
for particular purpose. Thus, that what should be controlling in matters concerning termination pay should be
the specific provisions of both Book VI of the Code and the Rules. At any rate, settled is the rule that in
matters of conflict between the general provision of law and that of a particular- or specific provision, the
latter should prevail.
On its part, the NLRC ruled (p. 110, Rollo):
From the aforequoted provisions of the law and the implementing rules, it could be deduced that wage is
used in its generic sense and obviously refers to the basic wage rate to be ascertained on a time, task, piece
or commission basis or other method of calculating the same. It does not, however, mean that commission,
allowances or analogous income necessarily forms part of the employee's salary because to do so would
lead to anomalies (sic), if not absurd, construction of the word "salary." For what will prevent the employee
from insisting that emergency living allowance, 13th month pay, overtime, and premium pay, and other

247
 fringe benefits should be added to the computation of their separation pay. This situation, to our mind, is not
the real intent of the Code and its rules.
We rule otherwise. The ambiguity between Article 97(f), which defines the term 'wage' and Article XIV of the Collective
Bargaining Agreement, Article 284 of the Labor Code and Sections 9(b) and 10 of the Implementing Rules, which mention the
terms "pay" and "salary", is more apparent than real. Broadly, the word "salary" means a recompense or consideration made
to a person for his pains or industry in another man's business. Whether it be derived from "salarium," or more fancifully from
"sal," the pay of the Roman soldier, it carries with it the fundamental idea of compensation for services rendered. Indeed, there
is eminent authority for holding that the words "wages" and "salary" are in essence synonymous (Words and Phrases, Vol. 38
Permanent Edition, p. 44 citing Hopkins vs. Cromwell, 85 N.Y.S. 839,841,89 App. Div. 481; 38 Am. Jur. 496). "Salary," the
etymology of which is the Latin word "salarium," is often used interchangeably with "wage", the etymology of which is the
Middle English word "wagen". Both words generally refer to one and the same meaning, that is, a reward or recompense for
services performed. Likewise, "pay" is the synonym of "wages" and "salary" (Black's Law Dictionary, 5th Ed.). Inasmuch as the
words "wages", "pay" and "salary" have the same meaning, and commission is included in the definition of "wage", the logical
conclusion, therefore, is, in the computation of the separation pay of petitioners, their salary base should include also their
earned sales commissions.
The aforequoted provisions are not the only consideration for deciding the petition in favor of the petitioners.
We agree with the Solicitor General that granting, in gratia argumenti, that the commissions were in the form of incentives or
encouragement, so that the petitioners would be inspired to put a little more industry on the jobs particularly assigned to them,
still these commissions are direct remuneration services rendered which contributed to the increase of income of Zuellig .
Commission is the recompense, compensation or reward of an agent, salesman, executor, trustees, receiver, factor, broker or
bailee, when the same is calculated as a percentage on the amount of his transactions or on the profit to the principal (Black's
Law Dictionary, 5th Ed., citing Weiner v. Swales, 217 Md. 123, 141 A.2d 749, 750). The nature of the work of a salesman and
the reason for such type of remuneration for services rendered demonstrate clearly that commission are part of petitioners'
wage or salary. We take judicial notice of the fact that some salesmen do not receive any basic salary but depend on
commissions and allowances or commissions alone, are part of petitioners' wage or salary. We take judicial notice of the fact
that some salesman do not received any basic salary but depend on commissions and allowances or commissions alone,
although an employer-employee relationship exists. Bearing in mind the preceeding dicussions, if we adopt the opposite view
that commissions, do not form part of wage or salary, then, in effect, We will be saying that this kind of salesmen do not
receive any salary and therefore, not entitled to separation pay in the event of discharge from employment. Will this not be
absurd? This narrow interpretation is not in accord with the liberal spirit of our labor laws and considering the purpose of
separation pay which is, to alleviate the difficulties which confront a dismissed employee thrown the the streets to face the
harsh necessities of life.
Additionally, in Soriano v. NLRC, et al., supra, in resolving the issue of the salary base that should be used in computing the
separation pay, We held that:
The commissions also claimed by petitioner ('override commission' plus 'net deposit incentive') are not
properly includible in such base figure since such commissions must be earned by actual market
transactions attributable to petitioner.
Applying this by analogy, since the commissions in the present case were earned by actual market transactions attributable to
petitioners, these should be included in their separation pay. In the computation thereof, what should be taken into account is
the average commissions earned during their last year of employment.
The final consideration is, 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 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; Manila Electric
Company v. NLRC, et al., G.R. No. 78763, July 12,1989), and Article 1702 of the Civil Code which provides that "in case of
doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer.
ACCORDINGLY, the petition is hereby GRANTED. The decision of the respondent National Labor Relations Commission is
MODIFIED by including allowances and commissions in the separation pay of petitioners Jose Songco and Amancio Manuel.
The case is remanded to the Labor Arbiter for the proper computation of said separation pay.
SO ORDERED.

G.R. No. 192558 February 15, 2012

BITOY JAVIER (DANILO P. JAVIER), Petitioner,
vs.
FLY ACE CORPORATION/FLORDELYN CASTILLO, Respondents.
DECISION
MENDOZA, J.:

248
This is a petition under Rule 45 of the Rules of Civil Procedure assailing the March 18, 2010 Decision 1 of the Court of
Appeals (CA) and its June 7, 2010 Resolution,2 in CA-G.R. SP No. 109975, which reversed the May 28, 2009 Decision 3 of the
National Labor Relations Commission (NLRC) in the case entitled Bitoy Javier v. Fly Ace/Flordelyn Castillo,4 holding that
petitioner Bitoy Javier (Javier) was illegally dismissed from employment and ordering Fly Ace Corporation (Fly Ace) to pay
backwages and separation pay in lieu of reinstatement.
Antecedent Facts
On May 23, 2008, Javier filed a complaint before the NLRC for underpayment of salaries and other labor standard benefits. He
alleged that he was an employee of Fly Ace since September 2007, performing various tasks at the respondents warehouse
such as cleaning and arranging the canned items before their delivery to certain locations, except in instances when he would
be ordered to accompany the companys delivery vehicles, as pahinante; that he reported for work from Monday to Saturday
from 7:00 oclock in the morning to 5:00 oclock in the afternoon; that during his employment, he was not issued an
identification card and payslips by the company; that on May 6, 2008, he reported for work but he was no longer allowed to
enter the company premises by the security guard upon the instruction of Ruben Ong (Mr. Ong), his superior;5 that after
several minutes of begging to the guard to allow him to enter, he saw Ong whom he approached and asked why he was being
barred from entering the premises; that Ong replied by saying, "Tanungin mo anak mo;" 6 that he then went home and
discussed the matter with his family; that he discovered that Ong had been courting his daughter Annalyn after the two met at
a fiesta celebration in Malabon City; that Annalyn tried to talk to Ong and convince him to spare her father from trouble but he
refused to accede; that thereafter, Javier was terminated from his employment without notice; and that he was neither given
the opportunity to refute the cause/s of his dismissal from work.
To support his allegations, Javier presented an affidavit of one Bengie Valenzuela who alleged that Javier was a stevedore
or pahinante of Fly Ace from September 2007 to January 2008. The said affidavit was subscribed before the Labor
Arbiter (LA).7
For its part, Fly Ace averred that it was engaged in the business of importation and sales of groceries. Sometime in December
2007, Javier was contracted by its employee, Mr. Ong, as extra helper on a pakyaw basis at an agreed rate of P 300.00 per
trip, which was later increased to P 325.00 in January 2008. Mr. Ong contracted Javier roughly 5 to 6 times only in a month
whenever the vehicle of its contracted hauler, Milmar Hauling Services, was not available. On April 30, 2008, Fly Ace no
longer needed the services of Javier. Denying that he was their employee, Fly Ace insisted that there was no illegal
dismissal.8 Fly Ace submitted a copy of its agreement with Milmar Hauling Services and copies of acknowledgment receipts
evidencing payment to Javier for his contracted services bearing the words, "daily manpower (pakyaw/piece rate pay)" and the
latters signatures/initials.
Ruling of the Labor Arbiter
On November 28, 2008, the LA dismissed the complaint for lack of merit on the ground that Javier failed to present proof that
he was a regular employee of Fly Ace. He wrote:
Complainant has no employee ID showing his employment with the Respondent nor any document showing that he received
the benefits accorded to regular employees of the Respondents. His contention that Respondent failed to give him said ID and
payslips implies that indeed he was not a regular employee of Fly Ace considering that complainant was a helper and that
Respondent company has contracted a regular trucking for the delivery of its products.
Respondent Fly Ace is not engaged in trucking business but in the importation and sales of groceries. Since there is a regular
hauler to deliver its products, we give credence to Respondents claim that complainant was contracted on "pakiao" basis.
As to the claim for underpayment of salaries, the payroll presented by the Respondents showing salaries of workers on
"pakiao" basis has evidentiary weight because although the signature of the complainant appearing thereon are not uniform,
they appeared to be his true signature.
xxxx
Hence, as complainant received the rightful salary as shown by the above described payrolls, Respondents are not liable for
salary differentials. 9
Ruling of the NLRC
On appeal with the NLRC, Javier was favored. It ruled that the LA skirted the argument of Javier and immediately concluded
that he was not a regular employee simply because he failed to present proof. It was of the view that a pakyaw-basis
arrangement did not preclude the existence of employer-employee relationship. "Payment by result x x x is a method of
compensation and does not define the essence of the relation. It is a mere method of computing compensation, not a basis for
determining the existence or absence of an employer-employee relationship.10" The NLRC further averred that it did not follow
that a worker was a job contractor and not an employee, just because the work he was doing was not directly related to the
employers trade or business or the work may be considered as "extra" helper as in this case; and that the relationship of an
employer and an employee was determined by law and the same would prevail whatever the parties may call it. In this case,
the NLRC held that substantial evidence was sufficient basis for judgment on the existence of the employer-employee
relationship. Javier was a regular employee of Fly Ace because there was reasonable connection between the particular
activity performed by the employee (as a "pahinante") in relation to the usual business or trade of the employer (importation,

249
sales and delivery of groceries). He may not be considered as an independent contractor because he could not exercise any
judgment in the delivery of company products. He was only engaged as a "helper."
Finding Javier to be a regular employee, the NLRC ruled that he was entitled to a security of tenure. For failing to present
proof of a valid cause for his termination, Fly Ace was found to be liable for illegal dismissal of Javier who was likewise entitled
to backwages and separation pay in lieu of reinstatement. The NLRC thus ordered:
WHEREFORE, premises considered, complainants appeal is partially GRANTED. The assailed Decision of the labor arbiter is
VACATED and a new one is hereby entered holding respondent FLY ACE CORPORATION guilty of illegal dismissal and non-
payment of 13th month pay. Consequently, it is hereby ordered to pay complainant DANILO "Bitoy" JAVIER the following:
1. Backwages -P 45,770.83
2. Separation pay, in lieu of reinstatement - 8,450.00
3. Unpaid 13th month pay (proportionate) - 5,633.33
TOTAL -P 59,854.16
All other claims are dismissed for lack of merit.
SO ORDERED.11
Ruling of the Court of Appeals
On March 18, 2010, the CA annulled the NLRC findings that Javier was indeed a former employee of Fly Ace and reinstated
the dismissal of Javiers complaint as ordered by the LA. The CA exercised its authority to make its own factual determination
anent the issue of the existence of an employer-employee relationship between the parties. According to the CA:
xxx
In an illegal dismissal case the onus probandi rests on the employer to prove that its dismissal was for a valid cause. However,
before a case for illegal dismissal can prosper, an employer-employee relationship must first be established. x x x it is
incumbent upon private respondent to prove the employee-employer relationship by substantial evidence.
xxx
It is incumbent upon private respondent to prove, by substantial evidence, that he is an employee of petitioners, but he failed
to discharge his burden. The non-issuance of a company-issued identification card to private respondent supports petitioners
contention that private respondent was not its employee. 12
The CA likewise added that Javiers failure to present salary vouchers, payslips, or other pieces of evidence to bolster his
contention, pointed to the inescapable conclusion that he was not an employee of Fly Ace. Further, it found that Javiers work
was not necessary and desirable to the business or trade of the company, as it was only when there were scheduled
deliveries, which a regular hauling service could not deliver, that Fly Ace would contract the services of Javier as an extra
helper. Lastly, the CA declared that the facts alleged by Javier did not pass the "control test."
He contracted work outside the company premises; he was not required to observe definite hours of work; he was not required
to report daily; and he was free to accept other work elsewhere as there was no exclusivity of his contracted service to the
company, the same being co-terminous with the trip only.13 Since no substantial evidence was presented to establish an
employer-employee relationship, the case for illegal dismissal could not prosper.
The petitioners moved for reconsideration, but to no avail.
Hence, this appeal anchored on the following grounds:
I.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER WAS NOT A
REGULAR EMPLOYEE OF FLY ACE.
II.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER IS NOT
ENTITLED TO HIS MONETARY CLAIMS.14
The petitioner contends that other than its bare allegations and self-serving affidavits of the other employees, Fly Ace has
nothing to substantiate its claim that Javier was engaged on a pakyaw basis. Assuming that Javier was indeed hired on
a pakyaw basis, it does not preclude his regular employment with the company. Even the acknowledgment receipts bearing
his signature and the confirming receipt of his salaries will not show the true nature of his employment as they do not reflect
the necessary details of the commissioned task. Besides, Javiers tasks as pahinante are related, necessary and desirable to
the line of business by Fly Ace which is engaged in the importation and sale of grocery items. "On days when there were no
scheduled deliveries, he worked in petitioners warehouse, arranging and cleaning the stored cans for delivery to
clients."15 More importantly, Javier was subject to the control and supervision of the company, as he was made to report to the
office from Monday to Saturday, from 7:00 oclock in the morning until 5:00 oclock in the afternoon. The list of deliverable
goods, together with the corresponding clients and their respective purchases and addresses, would necessarily have been
prepared by Fly Ace. Clearly, he was subjected to compliance with company rules and regulations as regards working hours,
delivery schedule and output, and his other duties in the warehouse.16
The petitioner chiefly relied on Chavez v. NLRC,17 where the Court ruled that payment to a worker on a per trip basis is not
significant because "this is merely a method of computing compensation and not a basis for determining the existence of
employer-employee relationship." Javier likewise invokes the rule that, "in controversies between a laborer and his master, x x
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x doubts reasonably arising from the evidence should be resolved in the formers favour. The policy is reflected is no less than
the Constitution, Labor Code and Civil Code."18
Claiming to be an employee of Fly Ace, petitioner asserts that he was illegally dismissed by the latters failure to observe
substantive and procedural due process. Since his dismissal was not based on any of the causes recognized by law, and was
implemented without notice, Javier is entitled to separation pay and backwages.
In its Comment,19 Fly Ace insists that there was no substantial evidence to prove employer-employee relationship. Having a
service contract with Milmar Hauling Services for the purpose of transporting and delivering company products to customers,
Fly Ace contracted Javier as an extra helper or pahinante on a mere "per trip basis." Javier, who was actually a loiterer in the
area, only accompanied and assisted the company driver when Milmar could not deliver or when the exigency of extra
deliveries arises for roughly five to six times a month. Before making a delivery, Fly Ace would turn over to the driver and
Javier the delivery vehicle with its loaded company products. With the vehicle and products in their custody, the driver and
Javier "would leave the company premises using their own means, method, best judgment and discretion on how to deliver,
time to deliver, where and [when] to start, and manner of delivering the products."20
Fly Ace dismisses Javiers claims of employment as baseless assertions. Aside from his bare allegations, he presented
nothing to substantiate his status as an employee. "It is a basic rule of evidence that each party must prove his affirmative
allegation. If he claims a right granted by law, he must prove his claim by competent evidence, relying on the strength of his
own evidence and not upon the weakness of his opponent."21 Invoking the case of Lopez v. Bodega City,22 Fly Ace insists that
in an illegal dismissal case, the burden of proof is upon the complainant who claims to be an employee. It is essential that an
employer-employee relationship be proved by substantial evidence. Thus, it cites:
In an illegal dismissal case, the onus probandi rests on the employer to prove that its dismissal of an employee was for a valid
cause. However, before a case for illegal dismissal can prosper, an employer-employee relationship must first be established.
Fly Ace points out that Javier merely offers factual assertions that he was an employee of Fly Ace, "which are unfortunately not
supported by proof, documentary or otherwise."23 Javier simply assumed that he was an employee of Fly Ace, absent any
competent or relevant evidence to support it. "He performed his contracted work outside the premises of the respondent; he
was not even required to report to work at regular hours; he was not made to register his time in and time out every time he
was contracted to work; he was not subjected to any disciplinary sanction imposed to other employees for company violations;
he was not issued a company I.D.; he was not accorded the same benefits given to other employees; he was not registered
with the Social Security System (SSS) as petitioners employee; and, he was free to leave, accept and engage in other means
of livelihood as there is no exclusivity of his contracted services with the petitioner, his services being co-terminus with the trip
only. All these lead to the conclusion that petitioner is not an employee of the respondents." 24
Moreover, Fly Ace claims that it had "no right to control the result, means, manner and methods by which Javier would perform
his work or by which the same is to be accomplished."25 In other words, Javier and the company driver were given a free hand
as to how they would perform their contracted services and neither were they subjected to definite hours or condition of work.
Fly Ace likewise claims that Javiers function as a pahinante was not directly related or necessary to its principal business of
importation and sales of groceries. Even without Javier, the business could operate its usual course as it did not involve the
business of inland transportation. Lastly, the acknowledgment receipts bearing Javiers signature and words "pakiao rate,"
referring to his earned salaries on a per trip basis, have evidentiary weight that the LA correctly considered in arriving at the
conclusion that Javier was not an employee of the company.
The Court affirms the assailed CA decision.
It must be noted that the issue of Javiers alleged illegal dismissal is anchored on the existence of an employer-employee
relationship between him and Fly Ace. This is essentially a question of fact. Generally, the Court does not review errors that
raise factual questions. However, when there is conflict among the factual findings of the antecedent deciding bodies like the
LA, the NLRC and the CA, "it is proper, in the exercise of Our equity jurisdiction, to review and re-evaluate the factual issues
and to look into the records of the case and re-examine the questioned findings."26 In dealing with factual issues in labor
cases, "substantial evidence that amount of relevant evidence which a reasonable mind might accept as adequate to justify
a conclusion is sufficient."27
As the records bear out, the LA and the CA found Javiers claim of employment with Fly Ace as wanting and deficient. The
Court is constrained to agree. Although Section 10, Rule VII of the New Rules of Procedure of the NLRC28 allows a relaxation
of the rules of procedure and evidence in labor cases, this rule of liberality does not mean a complete dispensation of proof.
Labor officials are enjoined to use reasonable means to ascertain the facts speedily and objectively with little regard to
technicalities or formalities but nowhere in the rules are they provided a license to completely discount evidence, or the lack of
it. The quantum of proof required, however, must still be satisfied. Hence, "when confronted with conflicting versions on factual
matters, it is for them in the exercise of discretion to determine which party deserves credence on the basis of evidence
received, subject only to the requirement that their decision must be supported by substantial evidence." 29 Accordingly, the
petitioner needs to show by substantial evidence that he was indeed an employee of the company against which he claims
illegal dismissal.
Expectedly, opposing parties would stand poles apart and proffer allegations as different as chalk and cheese. It is, therefore,
incumbent upon the Court to determine whether the party on whom the burden to prove lies was able to hurdle the same. "No
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particular form of evidence is required to prove the existence of such employer-employee relationship. Any competent and
relevant evidence to prove the relationship may be admitted.
Hence, while no particular form of evidence is required, a finding that such relationship exists must still rest on some
substantial evidence. Moreover, the substantiality of the evidence depends on its quantitative as well as
its qualitative aspects."30Although substantial evidence is not a function of quantity but rather of quality, the x x x
circumstances of the instant case demand that something more should have been proffered. Had there been other proofs of
employment, such as x x x inclusion in petitioners payroll, or a clear exercise of control, the Court would have affirmed the
finding of employer-employee relationship."31
In sum, the rule of thumb remains: the onus probandi falls on petitioner to establish or substantiate such claim by the requisite
quantum of evidence.32 "Whoever claims entitlement to the benefits provided by law should establish his or her right thereto x
x x."33 Sadly, Javier failed to adduce substantial evidence as basis for the grant of relief.
In this case, the LA and the CA both concluded that Javier failed to establish his employment with Fly Ace. By way of evidence
on this point, all that Javier presented were his self-serving statements purportedly showing his activities as an employee of
Fly Ace. Clearly, Javier failed to pass the substantiality requirement to support his claim. Hence, the Court sees no reason to
depart from the findings of the CA.
While Javier remains firm in his position that as an employed stevedore of Fly Ace, he was made to work in the company
premises during weekdays arranging and cleaning grocery items for delivery to clients, no other proof was submitted to fortify
his claim. The lone affidavit executed by one Bengie Valenzuela was unsuccessful in strengthening Javiers cause. In said
document, all Valenzuela attested to was that he would frequently see Javier at the workplace where the latter was also hired
as stevedore.34 Certainly, in gauging the evidence presented by Javier, the Court cannot ignore the inescapable conclusion
that his mere presence at the workplace falls short in proving employment therein. The supporting affidavit could have, to an
extent, bolstered Javiers claim of being tasked to clean grocery items when there were no scheduled delivery trips, but no
information was offered in this subject simply because the witness had no personal knowledge of Javiers employment status
in the company. Verily, the Court cannot accept Javiers statements, hook, line and sinker.
The Court is of the considerable view that on Javier lies the burden to pass the well-settled tests to determine the existence of
an employer-employee relationship, viz: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power to control the employees conduct. Of these elements, the most important criterion is
whether the employer controls or has reserved the right to control the employee not only as to the result of the work but also
as to the means and methods by which the result is to be accomplished. 35
In this case, Javier was not able to persuade the Court that the above elements exist in his case.1avvphi1 He could not submit
competent proof that Fly Ace engaged his services as a regular employee; that Fly Ace paid his wages as an employee, or
that Fly Ace could dictate what his conduct should be while at work. In other words, Javiers allegations did not establish that
his relationship with Fly Ace had the attributes of an employer-employee relationship on the basis of the above-mentioned
four-fold test. Worse, Javier was not able to refute Fly Aces assertion that it had an agreement with a hauling company to
undertake the delivery of its goods. It was also baffling to realize that Javier did not dispute Fly Aces denial of his services
exclusivity to the company. In short, all that Javier laid down were bare allegations without corroborative proof.
Fly Ace does not dispute having contracted Javier and paid him on a "per trip" rate as a stevedore, albeit on a pakyaw basis.
The Court cannot fail to note that Fly Ace presented documentary proof that Javier was indeed paid on a pakyaw basis per the
acknowledgment receipts admitted as competent evidence by the LA. Unfortunately for Javier, his mere denial of the
signatures affixed therein cannot automatically sway us to ignore the documents because "forgery cannot be presumed and
must be proved by clear, positive and convincing evidence and the burden of proof lies on the party alleging forgery." 36
Considering the above findings, the Court does not see the necessity to resolve the second issue presented.
One final note. The Courts decision does not contradict the settled rule that "payment by the piece is just a method of
compensation and does not define the essence of the relation." 37 Payment on a piece-rate basis does not negate regular
employment. "The term wage is broadly defined in Article 97 of the Labor Code as remuneration or earnings, capable of
being expressed in terms of money whether fixed or ascertained on a time, task, piece or commission basis. Payment by the
piece is just a method of compensation and does not define the essence of the relations. Nor does the fact that the petitioner
is not covered by the SSS affect the employer-employee relationship. However, in determining whether the relationship is that
of employer and employee or one of an independent contractor, each case must be determined on its own facts and all the
features of the relationship are to be considered."38 Unfortunately for Javier, the attendant facts and circumstances of the
instant case do not provide the Court with sufficient reason to uphold his claimed status as employee of Fly Ace.
While the Constitution is committed to the policy of social justice and the protection of the working class, it should not be
supposed that every labor dispute will be automatically decided in favor of labor. Management also has its rights which are
entitled to respect and enforcement in the interest of simple fair play. Out of its concern for the less privileged in life, the Court
has inclined, more often than not, toward the worker and upheld his cause in his conflicts with the employer. Such favoritism,
however, has not blinded the Court to the rule that justice is in every case for the deserving, to be dispensed in the light of the
established facts and the applicable law and doctrine. 39

252
WHEREFORE, the petition is DENIED. The March 18, 2010 Decision of the Court of Appeals and its June 7, 2010 Resolution,
in CA-G.R. SP No. 109975, are hereby AFFIRMED.
SO ORDERED.

G.R. No. 172161 March 2, 2011

SLL INTERNATIONAL CABLES SPECIALIST and SONNY L. LAGON, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, 4th DIVISION, ROLDAN LOPEZ, EDGARDO ZUIGA and DANILO
CAETE, Respondents.
DECISION
MENDOZA, J.:
Assailed in this petition for review on certiorari are the January 11, 2006 Decision 1 and the March 31, 2006 Resolution2 of the
Court of Appeals (CA), in CA-G.R. SP No. 00598 which affirmed with modification the March 31, 2004 Decision 3 and
December 15, 2004 Resolution4 of the National Labor Relations Commission (NLRC).The NLRC Decision found the
petitioners, SLL International Cables Specialist (SLL) and its manager, Sonny L. Lagon (petitioners), not liable for the illegal
dismissal of Roldan Lopez, Danilo Caete and Edgardo Zuiga (private respondents) but held them jointly and severally liable
for payment of certain monetary claims to said respondents.
A chronicle of the factual antecedents has been succinctly summarized by the CA as follows:
Sometime in 1996, and January 1997, private respondents Roldan Lopez (Lopez for brevity) and Danilo Caete (Caete for
brevity), and Edgardo Zuiga (Zuiga for brevity) respectively, were hired by petitioner Lagon as apprentice or trainee
cable/lineman. The three were paid the full minimum wage and other benefits but since they were only trainees, they did not
report for work regularly but came in as substitutes to the regular workers or in undertakings that needed extra workers to
expedite completion of work. After their training, Zuiga, Caete and Lopez were engaged as project employees by the
petitioners in their Islacom project in Bohol. Private respondents started on March 15, 1997 until December 1997. Upon the
completion of their project, their employment was also terminated. Private respondents received the amount of P145.00, the
minimum prescribed daily wage for Region VII. In July 1997, the amount of P145 was increased to P150.00 by the Regional
Wage Board (RWB) and in October of the same year, the latter was increased to P155.00. Sometime in March 1998, Zuiga
and Caete were engaged again by Lagon as project employees for its PLDT Antipolo, Rizal project, which ended sometime in
(sic) the late September 1998. As a consequence, Zuiga and Caetes employment was terminated. For this project, Zuiga
and Caete received only the wage of P145.00 daily. The minimum prescribed wage for Rizal at that time was P160.00.
Sometime in late November 1998, private respondents re-applied in the Racitelcom project of Lagon in Bulacan. Zuiga and
Caete were re-employed. Lopez was also hired for the said specific project. For this, private respondents received the wage
of P145.00. Again, after the completion of their project in March 1999, private respondents went home to Cebu City.
On May 21, 1999, private respondents for the 4th time worked with Lagons project in Camarin, Caloocan City with Furukawa
Corporation as the general contractor. Their contract would expire on February 28, 2000, the period of completion of the
project. From May 21, 1997-December 1999, private respondents received the wage of P145.00. At this time, the minimum
prescribed rate for Manila was P198.00. In January to February 28, the three received the wage of P165.00. The existing rate
at that time was P213.00.
For reasons of delay on the delivery of imported materials from Furukawa Corporation, the Camarin project was not completed
on the scheduled date of completion. Face[d] with economic problem[s], Lagon was constrained to cut down the overtime work
of its worker[s][,] including private respondents. Thus, when requested by private respondents on February 28, 2000 to work
overtime, Lagon refused and told private respondents that if they insist, they would have to go home at their own expense and
that they would not be given anymore time nor allowed to stay in the quarters. This prompted private respondents to leave
their work and went home to Cebu. On March 3, 2000, private respondents filed a complaint for illegal dismissal, non-payment
of wages, holiday pay, 13th month pay for 1997 and 1998 and service incentive leave pay as well as damages and attorneys
fees.
In their answers, petitioners admit employment of private respondents but claimed that the latter were only project
employees[,] for their services were merely engaged for a specific project or undertaking and the same were covered by
contracts duly signed by private respondents. Petitioners further alleged that the food allowance of P63.00 per day as well as
private respondents allowance for lodging house, transportation, electricity, water and snacks allowance should be added to
their basic pay. With these, petitioners claimed that private respondents received higher wage rate than that prescribed in
Rizal and Manila.
Lastly, petitioners alleged that since the workplaces of private respondents were all in Manila, the complaint should be filed
there. Thus, petitioners prayed for the dismissal of the complaint for lack of jurisdiction and utter lack of merit. (Citations
omitted.)
On January 18, 2001, Labor Arbiter Reynoso Belarmino (LA) rendered his decision5 declaring that his office had jurisdiction to
hear and decide the complaint filed by private respondents. Referring to Rule IV, Sec. 1 (a) of the NLRC Rules of Procedure
prevailing at that time,6 the LA ruled that it had jurisdiction because the "workplace," as defined in the said rule, included the
253
place where the employee was supposed to report back after a temporary detail, assignment or travel, which in this case was
Cebu.
As to the status of their employment, the LA opined that private respondents were regular employees because they were
repeatedly hired by petitioners and they performed activities which were usual, necessary and desirable in the business or
trade of the employer.
With regard to the underpayment of wages, the LA found that private respondents were underpaid. It ruled that the free board
and lodging, electricity, water, and food enjoyed by them could not be included in the computation of their wages because
these were given without their written consent.
The LA, however, found that petitioners were not liable for illegal dismissal. The LA viewed private respondents act of going
home as an act of indifference when petitioners decided to prohibit overtime work. 7
In its March 31, 2004 Decision, the NLRC affirmed the findings of the LA. In addition, the NLRC noted that not a single report
of project completion was filed with the nearest Public Employment Office as required
by the Department of Labor and Employment (DOLE) Department Order No. 19, Series of 1993.8 The NLRC later denied9 the
motion for reconsideration10 subsequently filed by petitioners.
When the matter was elevated to the CA on a petition for certiorari, it affirmed the findings that the private respondents were
regular employees. It considered the fact that they performed functions which were the regular and usual business of
petitioners. According to the CA, they were clearly members of a work pool from which petitioners drew their project
employees.
The CA also stated that the failure of petitioners to comply with the simple but compulsory requirement to submit a report of
termination to the nearest Public Employment Office every time private respondents employment was terminated was proof
that the latter were not project employees but regular employees.
The CA likewise found that the private respondents were underpaid. It ruled that the board and lodging, electricity, water, and
food enjoyed by the private respondents could not be included in the computation of their wages because these were given
without their written consent. The CA added that the private respondents were entitled to 13th month pay.
The CA also agreed with the NLRC that there was no illegal dismissal. The CA opined that it was the petitioners prerogative to
grant or deny any request for overtime work and that the private respondents act of leaving the workplace after their request
was denied was an act of abandonment.
In modifying the decision of the labor tribunal, however, the CA noted that respondent Roldan Lopez did not work in the
Antipolo project and, thus, was not entitled to wage differentials. Also, in computing the differentials for the period January and
February 2000, the CA disagreed in the award of differentials based on the minimum daily wage of P223.00, as the prevailing
minimum daily wage then was only P213.00. Petitioners sought reconsideration but the CA denied it in its March 31, 2006
Resolution.11
In this petition for review on certiorari,12 petitioners seek the reversal and setting aside of the CA decision anchored on this
lone:
GROUND/ASSIGNMENT OF ERROR
THE PUBLIC RESPONDENT NLRC COMMITTED A SERIOUS ERROR IN LAW IN AWARDING WAGE DIFFERENTIALS TO
THE PRIVATE COMPLAINANTS ON THE BASES OF MERE TECHNICALITIES, THAT IS, FOR LACK OF WRITTEN
CONFORMITY x x x AND LACK OF NOTICE TO THE DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE)[,] AND
THUS, THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING WITH MODIFICATION THE NLRC DECISION IN THE
LIGHT OF THE RULING IN THE CASE OF JENNY M. AGABON and VIRGILIO AGABON vs, NLRC, ET AL., GR NO. 158963,
NOVEMBER 17, 2004, 442 SCRA 573, [AND SUBSEQUENTLY IN THE CASE OF GLAXO WELLCOME PHILIPPINES, INC.
VS. NAGAKAKAISANG EMPLEYADO NG WELLCOME-DFA (NEW DFA), ET AL., GR NO. 149349, 11 MARCH 2005],
WHICH FINDS APPLICATION IN THE INSTANT CASE BY ANALOGY.13
Petitioners reiterated their position that the value of the facilities that the private respondents enjoyed should be included in the
computation of the "wages" received by them. They argued that the rulings in Agabon v. NLRC 14and Glaxo Wellcome
Philippines, Inc. v. Nagkakaisang Empleyado Ng Wellcome-DFA15 should be applied by analogy, in the sense that the lack of
written acceptance of the employees of the facilities enjoyed by them should not mean that the value of the facilities could not
be included in the computation of the private respondents "wages."
On November 29, 2006, the Court resolved to issue a Temporary Restraining Order (TRO) enjoining the public respondent
from enforcing the NLRC and CA decisions until further orders from the Court.
After a thorough review of the records, however, the Court finds no merit in the petition.
This petition generally involves factual issues, such as, whether or not there is evidence on record to support the findings of
the LA, the NLRC and the CA that private respondents were project or regular employees and that their salary differentials had
been paid. This calls for a re-examination of the evidence, which the Court cannot entertain. Settled is the rule that factual
findings of labor officials, who are deemed to have acquired expertise in matters within their respective jurisdiction, are
generally accorded not only respect but even finality, and bind the Court when supported by substantial evidence. It is not the
Courts function to assess and evaluate the evidence
all over again, particularly where the findings of both the Labor tribunals and the CA concur. 16
254
As a general rule, on payment of wages, a party who alleges payment as a defense has the burden of proving it. 17 Specifically
with respect to labor cases, the burden of proving payment of monetary claims rests on the employer, the rationale being that
the pertinent personnel files, payrolls, records, remittances and other similar documents which will show that overtime,
differentials, service incentive leave and other claims of workers have been paid are not in the possession of the worker but
in the custody and absolute control of the employer.18
In this case, petitioners, aside from bare allegations that private respondents received wages higher than the prescribed
minimum, failed to present any evidence, such as payroll or payslips, to support their defense of payment. Thus, petitioners
utterly failed to discharge the onus probandi.
Private respondents, on the other hand, are entitled to be paid the minimum wage, whether they are regular or non-regular
employees.
Section 3, Rule VII of the Rules to Implement the Labor Code 19 specifically enumerates those who are not covered by the
payment of minimum wage. Project employees are not among them.
On whether the value of the facilities should be included in the computation of the "wages" received by private respondents,
Section 1 of DOLE Memorandum Circular No. 2 provides that an employer may provide subsidized meals and snacks to his
employees provided that the subsidy shall not be less that 30% of the fair and reasonable value of such facilities. In such
cases, the employer may deduct from the wages of the employees not more than 70% of the value of the meals and snacks
enjoyed by the latter, provided that such deduction is with the written authorization of the employees concerned.
Moreover, before the value of facilities can be deducted from the employees wages, the following requisites must all be
attendant: first, proof must be shown that such facilities are customarily furnished by the trade; second, the provision of
deductible facilities must be voluntarily accepted in writing by the employee; and finally, facilities must be charged at
reasonable value.20 Mere availment is not sufficient to allow deductions from employees wages. 21
These requirements, however, have not been met in this case. SLL failed to present any company policy or guideline showing
that provisions for meals and lodging were part of the employees salaries. It also failed to provide proof of the employees
written authorization, much less show how they arrived at their valuations. At any rate, it is not even clear whether private
respondents actually enjoyed said facilities.
The Court, at this point, makes a distinction between "facilities" and "supplements." It is of the view that the food and lodging,
or the electricity and water allegedly consumed by private respondents in this case were not facilities but supplements. In the
case of Atok-Big Wedge Assn. v. Atok-Big Wedge Co.,22 the two terms were distinguished from one another in this wise:
"Supplements," therefore, constitute extra remuneration or special privileges or benefits given to or received by the
laborers over and above their ordinary earnings or wages. "Facilities," on the other hand, are items of expense necessary for
the laborer's and his family's existence and subsistence so that by express provision of law (Sec. 2[g]), they form part of the
wage and when furnished by the employer are deductible therefrom, since if they are not so furnished, the laborer would
spend and pay for them just the same.
In short, the benefit or privilege given to the employee which constitutes an extra remuneration above and over his basic or
ordinary earning or wage is supplement; and when said benefit or privilege is part of the laborers' basic wages, it is a facility.
The distinction lies not so much in the kind of benefit or item (food, lodging, bonus or sick leave) given, but in the purpose for
which it is given.23 In the case at bench, the items provided were given freely by SLL for the purpose of maintaining the
efficiency and health of its workers while they were working at their respective projects.1avvphi1
For said reason, the cases of Agabon and Glaxo are inapplicable in this case. At any rate, these were cases of dismissal with
just and authorized causes. The present case involves the matter of the failure of the petitioners to comply with the payment of
the prescribed minimum wage.
The Court sustains the deletion of the award of differentials with respect to respondent Roldan Lopez. As correctly pointed out
by the CA, he did not work for the project in Antipolo.
WHEREFORE, the petition is DENIED. The temporary restraining order issued by the Court on November 29, 2006 is
deemed, as it is hereby ordered, DISSOLVED.
SO ORDERED.

G.R. No. 157634 May 16, 2005

MAYON HOTEL & RESTAURANT, PACITA O. PO and/or JOSEFA PO LAM, petitioners,
vs.
ROLANDO ADANA, CHONA BUMALAY, ROGER BURCE, EDUARDO ALAMARES, AMADO ALAMARES, EDGARDO
TORREFRANCA, LOURDES CAMIGLA, TEODORO LAURENARIA, WENEFREDO LOVERES, LUIS GUADES, AMADO
MACANDOG, PATERNO LLARENA, GREGORIO NICERIO, JOSE ATRACTIVO, MIGUEL TORREFRANCA, and SANTOS
BROOLA, respondents.
DECISION
PUNO, J.:
This is a petition for certiorari to reverse and set aside the Decision issued by the Court of Appeals (CA) 1 in CA-G.R. SP No.
68642, entitled "Rolando Adana, Wenefredo Loveres, et. al. vs. National Labor Relations Commission (NLRC), Mayon Hotel &
255
Restaurant/Pacita O. Po, et al.," and the Resolution2 denying petitioners' motion for reconsideration. The assailed CA decision
reversed the NLRC Decision which had dismissed all of respondents' complaints, 3 and reinstated the Joint Decision of the
Labor Arbiter4 which ruled that respondents were illegally dismissed and entitled to their money claims.
The facts, culled from the records, are as follows:5
Petitioner Mayon Hotel & Restaurant is a single proprietor business registered in the name of petitioner Pacita O. Po,6 whose
mother, petitioner Josefa Po Lam, manages the establishment. 7 The hotel and restaurant employed about sixteen (16)
employees.
Records show that on various dates starting in 1981, petitioner hotel and restaurant hired the following people, all respondents
in this case, with the following jobs:8
1. Wenefredo Loveres Accountant and Officer-in-charge
2. Paterno Llarena Front Desk Clerk
3. Gregorio Nicerio Supervisory Waiter
4. Amado Macandog Roomboy
5. Luis Guades Utility/Maintenance Worker
6. Santos Broola Roomboy
7. Teodoro Laurenaria Waiter
8. Eduardo Alamares Roomboy/Waiter
9. Lourdes Camigla Cashier
10. Chona Bumalay Cashier
11. Jose Atractivo Technician
12. Amado Alamares Dishwasher and Kitchen Helper
13. Roger Burce Cook
14. Rolando Adana Waiter
15. Miguel Torrefranca Cook
16. Edgardo Torrefranca Cook
Due to the expiration and non-renewal of the lease contract for the rented space occupied by the said hotel and restaurant at
Rizal Street, the hotel operations of the business were suspended on March 31, 1997. 9 The operation of the restaurant was
continued in its new location at Elizondo Street, Legazpi City, while waiting for the construction of a new Mayon Hotel &
Restaurant at Pearanda Street, Legazpi City.10 Only nine (9) of the sixteen (16) employees continued working in the Mayon
Restaurant at its new site.11
On various dates of April and May 1997, the 16 employees filed complaints for underpayment of wages and other money
claims against petitioners, as follows:12
Wenefredo Loveres, Luis Guades, Amado Macandog and Jose Atractivo for illegal dismissal, underpayment of
wages, nonpayment of holiday and rest day pay; service incentive leave pay (SILP) and claims for separation pay
plus damages;
Paterno Llarena and Gregorio Nicerio for illegal dismissal with claims for underpayment of wages; nonpayment of
cost of living allowance (COLA) and overtime pay; premium pay for holiday and rest day; SILP; nightshift differential
pay and separation pay plus damages;
Miguel Torrefranca, Chona Bumalay and Lourdes Camigla for underpayment of wages; nonpayment of holiday and
rest day pay and SILP;
Rolando Adana, Roger Burce and Amado Alamares for underpayment of wages; nonpayment of COLA, overtime,
holiday, rest day, SILP and nightshift differential pay;
Eduardo Alamares for underpayment of wages, nonpayment of holiday, rest day and SILP and night shift differential
pay;
Santos Broola for illegal dismissal, underpayment of wages, overtime pay, rest day pay, holiday pay, SILP, and
damages;13 and
Teodoro Laurenaria for underpayment of wages; nonpayment of COLA and overtime pay; premium pay for holiday
and rest day, and SILP.
On July 14, 2000, Executive Labor Arbiter Gelacio L. Rivera, Jr. rendered a Joint Decision in favor of the employees. The
Labor Arbiter awarded substantially all of respondents' money claims, and held that respondents Loveres, Macandog and
Llarena were entitled to separation pay, while respondents Guades, Nicerio and Alamares were entitled to their retirement pay.
The Labor Arbiter also held that based on the evidence presented, Josefa Po Lam is the owner/proprietor of Mayon Hotel &
Restaurant and the proper respondent in these cases.
On appeal to the NLRC, the decision of the Labor Arbiter was reversed, and all the complaints were dismissed.

256
Respondents filed a motion for reconsideration with the NLRC and when this was denied, they filed a petition for certiorari with
the CA which rendered the now assailed decision.
After their motion for reconsideration was denied, petitioners now come to this Court, seeking the reversal of the CA decision
on the following grounds:
I. The Honorable Court of Appeals erred in reversing the decision of the National Labor Relations Commission
(Second Division) by holding that the findings of fact of the NLRC were not supported by substantial evidence despite
ample and sufficient evidence showing that the NLRC decision is indeed supported by substantial evidence;
II. The Honorable Court of Appeals erred in upholding the joint decision of the labor arbiter which ruled that private
respondents were illegally dismissed from their employment, despite the fact that the reason why private respondents
were out of work was not due to the fault of petitioners but to causes beyond the control of petitioners.
III. The Honorable Court of Appeals erred in upholding the award of monetary benefits by the labor arbiter in his joint
decision in favor of the private respondentS, including the award of damages to six (6) of the private respondents,
despite the fact that the private respondents have not proven by substantial evidence their entitlement thereto and
especially the fact that they were not illegally dismissed by the petitioners.
IV. The Honorable Court of Appeals erred in holding that Pacita Ong Po is the owner of the business establishment,
petitioner Mayon Hotel and Restaurant, thus disregarding the certificate of registration of the business establishment
ISSUED by the local government, which is a public document, and the unqualified admissions of complainants-
private respondents.14
In essence, the petition calls for a review of the following issues:
1. Was it correct for petitioner Josefa Po Lam to be held liable as the owner of petitioner Mayon Hotel & Restaurant,
and the proper respondent in this case?
2. Were respondents Loveres, Guades, Macandog, Atractivo, Llarena and Nicerio illegally dismissed?
3. Are respondents entitled to their money claims due to underpayment of wages, and nonpayment of holiday pay,
rest day premium, SILP, COLA, overtime pay, and night shift differential pay?
It is petitioners' contention that the above issues have already been threshed out sufficiently and definitively by the NLRC.
They therefore assail the CA's reversal of the NLRC decision, claiming that based on the ruling in Castillo v. NLRC,15 it is non
sequitur that the CA should re-examine the factual findings of both the NLRC and the Labor Arbiter, especially as in this case
the NLRC's findings are allegedly supported by substantial evidence.
We do not agree.
There is no denying that it is within the NLRC's competence, as an appellate agency reviewing decisions of Labor Arbiters, to
disagree with and set aside the latter's findings.16 But it stands to reason that the NLRC should state an acceptable cause
therefore, otherwise it would be a whimsical, capricious, oppressive, illogical, unreasonable exercise of quasi-judicial
prerogative, subject to invalidation by the extraordinary writ of certiorari.17 And when the factual findings of the Labor Arbiter
and the NLRC are diametrically opposed and this disparity of findings is called into question, there is, necessarily, a re-
examination of the factual findings to ascertain which opinion should be sustained. 18 As ruled in Asuncion v. NLRC,19
Although, it is a legal tenet that factual findings of administrative bodies are entitled to great weight and respect, we
are constrained to take a second look at the facts before us because of the diversity in the opinions of the Labor
Arbiter and the NLRC. A disharmony between the factual findings of the Labor Arbiter and those of the NLRC opens
the door to a review thereof by this Court.20
The CA, therefore, did not err in reviewing the records to determine which opinion was supported by substantial evidence.
Moreover, it is explicit in Castillo v. NLRC21 that factual findings of administrative bodies like the NLRC are affirmed only if
they are supported by substantial evidence that is manifest in the decision and on the records. As stated in Castillo:
[A]buse of discretion does not necessarily follow from a reversal by the NLRC of a decision of a Labor Arbiter. Mere
variance in evidentiary assessment between the NLRC and the Labor Arbiter does not automatically call for a full
review of the facts by this Court. The NLRC's decision, so long as it is not bereft of substantial support from the
records, deserves respect from this Court. As a rule, the original and exclusive jurisdiction to review a decision or
resolution of respondent NLRC in a petition for certiorari under Rule 65 of the Rules of Court does not include a
correction of its evaluation of the evidence but is confined to issues of jurisdiction or grave abuse of discretion. Thus,
the NLRC's factual findings, if supported by substantial evidence, are entitled to great respect and even
finality, unless petitioner is able to show that it simply and arbitrarily disregarded the evidence before it or had
misappreciated the evidence to such an extent as to compel a contrary conclusion if such evidence had been
properly appreciated. (citations omitted)22
After careful review, we find that the reversal of the NLRC's decision was in order precisely because it was not supported by
substantial evidence.
1. Ownership by Josefa Po Lam
The Labor Arbiter ruled that as regards the claims of the employees, petitioner Josefa Po Lam is, in fact, the owner of Mayon
Hotel & Restaurant. Although the NLRC reversed this decision, the CA, on review, agreed with the Labor Arbiter that
notwithstanding the certificate of registration in the name of Pacita Po, it is Josefa Po Lam who is the owner/proprietor of
257
Mayon Hotel & Restaurant, and the proper respondent in the complaints filed by the employees. The CA decision states in
part:
[Despite] the existence of the Certificate of Registration in the name of Pacita Po, we cannot fault the labor arbiter in
ruling that Josefa Po Lam is the owner of the subject hotel and restaurant. There were conflicting documents
submitted by Josefa herself. She was ordered to submit additional documents to clearly establish ownership of the
hotel and restaurant, considering the testimonies given by the [respondents] and the non-appearance and failure to
submit her own position paper by Pacita Po. But Josefa did not comply with the directive of the Labor Arbiter. The
ruling of the Supreme Court in Metropolitan Bank and Trust Company v. Court of Appeals applies to Josefa Po Lam
which is stated in this wise:
When the evidence tends to prove a material fact which imposes a liability on a party, and he has it in his
power to produce evidence which from its very nature must overthrow the case made against him if it is not
founded on fact, and he refuses to produce such evidence, the presumption arises that the evidence[,] if
produced, would operate to his prejudice, and support the case of his adversary.
Furthermore, in ruling that Josefa Po Lam is the real owner of the hotel and restaurant, the labor arbiter relied also on
the testimonies of the witnesses, during the hearing of the instant case. When the conclusions of the labor arbiter are
sufficiently corroborated by evidence on record, the same should be respected by appellate tribunals, since he is in a
better position to assess and evaluate the credibility of the contending parties. 23 (citations omitted)
Petitioners insist that it was error for the Labor Arbiter and the CA to have ruled that petitioner Josefa Po Lam is the owner of
Mayon Hotel & Restaurant. They allege that the documents they submitted to the Labor Arbiter sufficiently and clearly
establish the fact of ownership by petitioner Pacita Po, and not her mother, petitioner Josefa Po Lam. They contend that
petitioner Josefa Po Lam's participation was limited to merely (a) being the overseer; (b) receiving the month-to-month and/or
year-to-year financial reports prepared and submitted by respondent Loveres; and (c) visitation of the premises. 24 They also
put emphasis on the admission of the respondents in their position paper submitted to the Labor Arbiter, identifying petitioner
Josefa Po Lam as the manager, and Pacita Po as the owner.25 This, they claim, is a judicial admission and is binding on
respondents. They protest the reliance the Labor Arbiter and the CA placed on their failure to submit additional documents to
clearly establish ownership of the hotel and restaurant, claiming that there was no need for petitioner Josefa Po Lam to submit
additional documents considering that the Certificate of Registration is the best and primary evidence of ownership.
We disagree with petitioners. We have scrutinized the records and find the claim that petitioner Josefa Po Lam is merely the
overseer is not borne out by the evidence.
First. It is significant that only Josefa Po Lam appeared in the proceedings with the Labor Arbiter. Despite receipt of the Labor
Arbiter's notice and summons, other notices and Orders, petitioner Pacita Po failed to appear in any of the proceedings with
the Labor Arbiter in these cases, nor file her position paper. 26 It was only on appeal with the NLRC that Pacita Po signed the
pleadings.27 The apathy shown by petitioner Pacita Po is contrary to human experience as one would think that the owner of
an establishment would naturally be concerned when all her employees file complaints against her.
Second. The records of the case belie petitioner Josefa Po Lam's claim that she is merely an overseer. The findings of the
Labor Arbiter on this question were based on credible, competent and substantial evidence. We again quote the Joint Decision
on this matter:
Mayon Hotel and Restaurant is a [business name] of an enterprise. While [petitioner] Josefa Po Lam claims that it is
her daughter, Pacita Po, who owns the hotel and restaurant when the latter purchased the same from one Palanos in
1981, Josefa failed to submit the document of sale from said Palanos to Pacita as allegedly the sale was only verbal
although the license to operate said hotel and restaurant is in the name of Pacita which, despite our Order to Josefa
to present the same, she failed to comply (p. 38, tsn. August 13, 1998). While several documentary evidences were
submitted by Josefa wherein Pacita was named therein as owner of the hotel and restaurant (pp. 64, 65, 67 to 69;
vol. I, rollo)[,] there were documentary evidences also that were submitted by Josefa showing her ownership of said
enterprise (pp. 468 to 469; vol. II, rollo). While Josefa explained her participation and interest in the business as
merely to help and assist her daughter as the hotel and restaurant was near the former's store, the testimonies of
[respondents] and Josefa as well as her demeanor during the trial in these cases proves (sic) that Josefa Po Lam
owns Mayon Hotel and Restaurant. [Respondents] testified that it was Josefa who exercises all the acts and
manifestation of ownership of the hotel and restaurant like transferring employees from the Greatwall Palace
Restaurant which she and her husband Roy Po Lam previously owned; it is Josefa to whom the employees submits
(sic) reports, draws money for payment of payables and for marketing, attending (sic) to Labor Inspectors during
ocular inspections. Except for documents whereby Pacita Po appears as the owner of Mayon Hotel and Restaurant,
nothing in the record shows any circumstance or manifestation that Pacita Po is the owner of Mayon Hotel and
Restaurant. The least that can be said is that it is absurd for a person to purchase a hotel and restaurant in the very
heart of the City of Legazpi verbally. Assuming this to be true, when [petitioners], particularly Josefa, was directed to
submit evidence as to the ownership of Pacita of the hotel and restaurant, considering the testimonies of
[respondents], the former should [have] submitted the lease contract between the owner of the building where Mayon
Hotel and Restaurant was located at Rizal St., Legazpi City and Pacita Po to clearly establish ownership by the latter
258
 of said enterprise. Josefa failed. We are not surprised why some employers employ schemes to mislead Us in order
to evade liabilities. We therefore consider and hold Josefa Po Lam as the owner/proprietor of Mayon Hotel and
Restaurant and the proper respondent in these cases. 28
Petitioners' reliance on the rules of evidence, i.e., the certificate of registration being the best proof of ownership, is misplaced.
Notwithstanding the certificate of registration, doubts were cast as to the true nature of petitioner Josefa Po Lam's involvement
in the enterprise, and the Labor Arbiter had the authority to resolve this issue. It was therefore within his jurisdiction to require
the additional documents to ascertain who was the real owner of petitioner Mayon Hotel & Restaurant.
Article 221 of the Labor Code is clear: technical rules are not binding, and the application of technical rules of procedure may
be relaxed in labor cases to serve the demand of substantial justice. 29 The rule of evidence prevailing in court of law or equity
shall not be controlling in labor cases and it is the spirit and intention of the Labor Code that the Labor Arbiter shall use every
and all reasonable means to ascertain the facts in each case speedily and objectively and without regard to technicalities of
law or procedure, all in the interest of due process.30 Labor laws mandate the speedy administration of justice, with least
attention to technicalities but without sacrificing the fundamental requisites of due process. 31
Similarly, the fact that the respondents' complaints contained no allegation that petitioner Josefa Po Lam is the owner is of no
moment. To apply the concept of judicial admissions to respondents who are but lowly employees - would be to exact
compliance with technicalities of law that is contrary to the demands of substantial justice. Moreover, the issue of ownership
was an issue that arose only during the course of the proceedings with the Labor Arbiter, as an incident of determining
respondents' claims, and was well within his jurisdiction.32
Petitioners were also not denied due process, as they were given sufficient opportunity to be heard on the issue of
ownership.33 The essence of due process in administrative proceedings is simply an opportunity to explain one's side or an
opportunity to seek reconsideration of the action or ruling complained of. 34 And there is nothing in the records which would
suggest that petitioners had absolute lack of opportunity to be heard.35 Obviously, the choice not to present evidence was
made by petitioners themselves.36
But more significantly, we sustain the Labor Arbiter and the CA because even when the case was on appeal with the NLRC,
nothing was submitted to negate the Labor Arbiter's finding that Pacita Po is not the real owner of the subject hotel and
restaurant. Indeed, no such evidence was submitted in the proceedings with the CA nor with this Court. Considering that
petitioners vehemently deny ownership by petitioner Josefa Po Lam, it is most telling that they continue to withhold evidence
which would shed more light on this issue. We therefore agree with the CA that the failure to submit could only mean that if
produced, it would have been adverse to petitioners' case.37
Thus, we find that there is substantial evidence to rule that petitioner Josefa Po Lam is the owner of petitioner Mayon Hotel &
Restaurant.
2. Illegal Dismissal: claim for separation pay
Of the sixteen employees, only the following filed a case for illegal dismissal: respondents Loveres, Llarena, Nicerio,
Macandog, Guades, Atractivo and Broola.38
The Labor Arbiter found that there was illegal dismissal, and granted separation pay to respondents Loveres, Macandog and
Llarena. As respondents Guades, Nicerio and Alamares were already 79, 66 and 65 years old respectively at the time of the
dismissal, the Labor Arbiter granted retirement benefits pursuant to Article 287 of the Labor Code as amended. 39 The Labor
Arbiter ruled that respondent Atractivo was not entitled to separation pay because he had been transferred to work in the
restaurant operations in Elizondo Street, but awarded him damages. Respondents Loveres, Llarena, Nicerio, Macandog and
Guades were also awarded damages.40
The NLRC reversed the Labor Arbiter, finding that "no clear act of termination is attendant in the case at bar" and that
respondents "did not submit any evidence to that effect, but the finding and conclusion of the Labor Arbiter [are] merely based
on his own surmises and conjectures."41 In turn, the NLRC was reversed by the CA.
It is petitioners contention that the CA should have sustained the NLRC finding that none of the above-named respondents
were illegally dismissed, or entitled to separation or retirement pay. According to petitioners, even the Labor Arbiter and the
CA admit that when the illegal dismissal case was filed by respondents on April 1997, they had as yet no cause of action.
Petitioners therefore conclude that the filing by respondents of the illegal dismissal case was premature and should have been
dismissed outright by the Labor Arbiter.42 Petitioners also claim that since the validity of respondents' dismissal is a factual
question, it is not for the reviewing court to weigh the conflicting evidence. 43
We do not agree. Whether respondents are still working for petitioners is a factual question. And the records are unequivocal
that since April 1997, when petitioner Mayon Hotel & Restaurant suspended its hotel operations and transferred its restaurant
operations in Elizondo Street, respondents Loveres, Macandog, Llarena, Guades and Nicerio have not been permitted to work
for petitioners. Respondent Alamares, on the other hand, was also laid-off when the Elizondo Street operations closed, as
were all the other respondents. Since then, respondents have not been permitted to work nor recalled, even after the
construction of the new premises at Pearanda Street and the reopening of the hotel operations with the restaurant in this new
site. As stated by the Joint Decision of the Labor Arbiter on July 2000, or more than three (3) years after the complaint was
filed:44

259
 [F]rom the records, more than six months had lapsed without [petitioner] having resumed operation of the hotel. After
more than one year from the temporary closure of Mayon Hotel and the temporary transfer to another site of Mayon
Restaurant, the building which [petitioner] Josefa allege[d] w[h]ere the hotel and restaurant will be transferred has
been finally constructed and the same is operated as a hotel with bar and restaurant nevertheless, none of
[respondents] herein who were employed at Mayon Hotel and Restaurant which was also closed on April 30, 1998
was/were recalled by [petitioner] to continue their services...
Parenthetically, the Labor Arbiter did not grant separation pay to the other respondents as they had not filed an amended
complaint to question the cessation of their employment after the closure of Mayon Hotel & Restaurant on March 31, 1997. 45
The above factual finding of the Labor Arbiter was never refuted by petitioners in their appeal with the NLRC. It confounds us,
therefore, how the NLRC could have so cavalierly treated this uncontroverted factual finding by ruling that respondents have
not introduced any evidence to show that they were illegally dismissed, and that the Labor Arbiter's finding was based on
conjecture.46 It was a serious error that the NLRC did not inquire as to the legality of the cessation of employment. Article 286
of the Labor Code is clear there is termination of employment when an otherwise bona fide suspension of work exceeds six
(6) months.47 The cessation of employment for more than six months was patent and the employer has the burden of proving
that the termination was for a just or authorized cause.48
Moreover, we are not impressed by any of petitioners' attempts to exculpate themselves from the charges. First, in the
proceedings with the Labor Arbiter, they claimed that it could not be illegal dismissal because the lay-off was merely temporary
(and due to the expiration of the lease contract over the old premises of the hotel). They specifically invoked Article 286 of the
Labor Code to argue that the claim for separation pay was premature and without legal and factual basis. 49 Then, because the
Labor Arbiter had ruled that there was already illegal dismissal when the lay-off had exceeded the six-month period provided
for in Article 286, petitioners raise this novel argument, to wit:
It is the firm but respectful submission of petitioners that reliance on Article 286 of the Labor Code is misplaced,
considering that the reason why private respondents were out of work was not due to the fault of petitioners. The
failure of petitioners to reinstate the private respondents to their former positions should not likewise be attributable to
said petitioners as the private respondents did not submit any evidence to prove their alleged illegal dismissal. The
petitioners cannot discern why they should be made liable to the private respondents for their failure to be reinstated
considering that the fact that they were out of work was not due to the fault of petitioners but due to circumstances
beyond the control of petitioners, which are the termination and non-renewal of the lease contract over the subject
premises. Private respondents, however, argue in their Comment that petitioners themselves sought the application
of Article 286 of the Labor Code in their case in their Position Paper filed before the Labor Arbiter. In refutation,
petitioners humbly submit that even if they invoke Article 286 of the Labor Code, still the fact remains, and this bears
stress and emphasis, that the temporary suspension of the operations of the establishment arising from the non-
renewal of the lease contract did not result in the termination of employment of private respondents and, therefore,
the petitioners cannot be faulted if said private respondents were out of work, and consequently, they are not entitled
to their money claims against the petitioners.50
It is confounding how petitioners have fashioned their arguments. After having admitted, in effect, that respondents have been
laid-off since April 1997, they would have this Court excuse their refusal to reinstate respondents or grant them separation pay
because these same respondents purportedly have not proven the illegality of their dismissal.
Petitioners' arguments reflect their lack of candor and the blatant attempt to use technicalities to muddle the issues and defeat
the lawful claims of their employees. First, petitioners admit that since April 1997, when hotel operations were suspended
due to the termination of the lease of the old premises, respondents Loveres, Macandog, Llarena, Nicerio and Guades have
not been permitted to work. Second, even after six months of what should have been just a temporary lay-off, the same
respondents were still not recalled to work. As a matter of fact, the Labor Arbiter even found that as of the time when he
rendered his Joint Decision on July 2000 or more than three (3) years after the supposed "temporary lay-off," the
employment of all of the respondents with petitioners had ceased, notwithstanding that the new premises had been
completed and the same operated as a hotel with bar and restaurant. This is clearly dismissal or the permanent severance
or complete separation of the worker from the service on the initiative of the employer regardless of the reasons therefor. 51
On this point, we note that the Labor Arbiter and the CA are in accord that at the time of the filing of the complaint,
respondents had no cause of action to file the case for illegal dismissal. According to the CA and the Labor Arbiter, the lay-off
of the respondents was merely temporary, pending construction of the new building at Pearanda Street. 52
While the closure of the hotel operations in April of 1997 may have been temporary, we hold that the evidence on record belie
any claim of petitioners that the lay-off of respondents on that same date was merely temporary. On the contrary, we find
substantial evidence that petitioners intended the termination to be permanent. First, respondents Loveres, Macandog,
Llarena, Guades, Nicerio and Alamares filed the complaint for illegal dismissal immediately after the closure of the hotel
operations in Rizal Street, notwithstanding the alleged temporary nature of the closure of the hotel operations, and petitioners'
allegations that the employees assigned to the hotel operations knew about this beforehand. Second, in their position paper
submitted to the Labor Arbiter, petitioners invoked Article 286 of the Labor Code to assert that the employer-employee
relationship was merely suspended, and therefore the claim for separation pay was premature and without legal or factual
260
basis.53 But they made no mention of any intent to recall these respondents to work upon completion of the new
premises. Third,the various pleadings on record show that petitioners held respondents, particularly Loveres, as responsible
for mismanagement of the establishment and for abuse of trust and confidence. Petitioner Josefa Po Lam's affidavit on July
21, 1998, for example, squarely blamed respondents, specifically Loveres, Bumalay and Camigla, for abusing her leniency
and causing petitioner Mayon Hotel & Restaurant to sustain "continuous losses until it is closed." She then asserts that
respondents "are not entitled to separation pay for they were not terminated and if ever the business ceased to operate it was
because of losses."54 Again, petitioners make the same allegation in their memorandum on appeal with the NLRC, where they
alleged that three (3) years prior to the expiration of the lease in 1997, the operation of the Hotel had been sustaining
consistent losses, and these were solely attributed to respondents, but most especially due to Loveres's mismanagement and
abuse of petitioners' trust and confidence.55 Even the petition filed in this court made reference to the separation of the
respondents due to "severe financial losses and reverses," again imputing it to respondents' mismanagement.56 The
vehemence of petitioners' accusation of mismanagement against respondents, especially against Loveres, is inconsistent with
the desire to recall them to work. Fourth, petitioners' memorandum on appeal also averred that the case was filed "not
because of the business being operated by them or that they were supposedly not receiving benefits from the Labor Code
which is true, but because of the fact that the source of their livelihood, whether legal or immoral, was stopped on March
31, 1997, when the owner of the building terminated the Lease Contract." 57Fifth, petitioners had inconsistencies in their
pleadings (with the NLRC, CA and with this Court) in referring to the closure,58 i.e., in the petition filed with this court, they
assert that there is no illegal dismissal because there was "only a temporary cessation or suspension of operations of the hotel
and restaurant due to circumstances beyond the control of petitioners, and that is, the non-renewal of the lease
contract..."59 And yet, in the same petition, they also assert that: (a) the separation of respondents was due to severe financial
losses and reverses leading to the closure of the business; and (b) petitioner Pacita Po had to close shop and was
bankrupt and has no liquidity to put up her own building to house Mayon Hotel & Restaurant. 60 Sixth, and finally, the
uncontroverted finding of the Labor Arbiter that petitioners terminated all the other respondents, by not employing them when
the Hotel and Restaurant transferred to its new site on Pearanda Street.61 Indeed, in this same memorandum, petitioners
referred to all respondents as "former employees of Mayon Hotel & Restaurant." 62
These factors may be inconclusive individually, but when taken together, they lead us to conclude that petitioners really
intended to dismiss all respondents and merely used the termination of the lease (on Rizal Street premises) as a means by
which they could terminate their employees.
Moreover, even assuming arguendo that the cessation of employment on April 1997 was merely temporary,
it became dismissal by operation of law when petitioners failed to reinstate respondents after the lapse of six (6) months,
pursuant to Article 286 of the Labor Code.
We are not impressed by petitioners' claim that severe business losses justified their failure to reinstate respondents. The
evidence to prove this fact is inconclusive. But more important, serious business losses do not excuse the employer from
complying with the clearance or report required under Article 283 of the Labor Code and its implementing rules before
terminating the employment of its workers.63 In the absence of justifying circumstances, the failure of petitioners to observe the
procedural requirements set out under Article 284, taints their actuations with bad faith, especially since they claimed that they
have been experiencing losses in the three years before 1997. To say the least, if it were true that the lay-off was temporary
but then serious business losses prevented the reinstatement of respondents, then petitioners should have complied with the
requirements of written notice. The requirement of law mandating the giving of notices was intended not only to enable the
employees to look for another employment and therefore ease the impact of the loss of their jobs and the corresponding
income, but more importantly, to give the Department of Labor and Employment (DOLE) the opportunity to ascertain the verity
of the alleged authorized cause of termination.64
And even assuming that the closure was due to a reason beyond the control of the employer, it still has to accord its
employees some relief in the form of severance pay.65
While we recognize the right of the employer to terminate the services of an employee for a just or authorized cause, the
dismissal of employees must be made within the parameters of law and pursuant to the tenets of fair play.66 And in termination
disputes, the burden of proof is always on the employer to prove that the dismissal was for a just or authorized cause.67 Where
there is no showing of a clear, valid and legal cause for termination of employment, the law considers the case a matter of
illegal dismissal.68
Under these circumstances, the award of damages was proper. As a rule, moral damages are recoverable where the
dismissal of the employee was attended by bad faith or fraud or constituted an act oppressive to labor, or was done in a
manner contrary to morals, good customs or public policy.69 We believe that the dismissal of the respondents was attended
with bad faith and meant to evade the lawful obligations imposed upon an employer.
To rule otherwise would lead to the anomaly of respondents being terminated from employment in 1997 as a matter of fact, but
without legal redress. This runs counter to notions of fair play, substantial justice and the constitutional mandate that labor
rights should be respected. If doubts exist between the evidence presented by the employer and the employee, the scales of
justice must be tilted in favor of the latter the employer must affirmatively show rationally adequate evidence that the
dismissal was for a justifiable cause.70 It is a time-honored rule that in controversies between a laborer and his master, doubts
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reasonably arising from the evidence, or in the interpretation of agreements and writing should be resolved in the former's
favor.71 The policy is to extend the doctrine to a greater number of employees who can avail of the benefits under the law,
which is in consonance with the avowed policy of the State to give maximum aid and protection of labor.72
We therefore reinstate the Labor Arbiter's decision with the following modifications:
(a) Separation pay for the illegal dismissal of respondents Loveres, Macandog and Llarena; (Santos Broola cannot
be granted separation pay as he made no such claim);
(b) Retirement pay for respondents Guades, Nicerio, and Alamares, who at the time of dismissal were entitled to their
retirement benefits pursuant to Article 287 of the Labor Code as amended;73 and
(c) Damages for respondents Loveres, Macandog, Llarena, Guades, Nicerio, Atractivo, and Broola.
3. Money claims
The CA held that contrary to the NLRC's ruling, petitioners had not discharged the burden of proving that the monetary claims
of the respondents have been paid.74 The CA thus reinstated the Labor Arbiter's grant of respondents' monetary claims,
including damages.
Petitioners assail this ruling by repeating their long and convoluted argument that as there was no illegal dismissal, then
respondents are not entitled to their monetary claims or separation pay and damages. Petitioners' arguments are not only
tiring, repetitive and unconvincing, but confusing and confused entitlement to labor standard benefits is a separate and
distinct concept from payment of separation pay arising from illegal dismissal, and are governed by different provisions of the
Labor Code.
We agree with the CA and the Labor Arbiter. Respondents have set out with particularity in their complaint, position paper,
affidavits and other documents the labor standard benefits they are entitled to, and which they alleged that petitioners have
failed to pay them. It was therefore petitioners' burden to prove that they have paid these money claims. One who pleads
payment has the burden of proving it, and even where the employees must allege nonpayment, the general rule is that the
burden rests on the defendant to prove nonpayment, rather than on the plaintiff to prove non payment. 75 This petitioners failed
to do.
We also agree with the Labor Arbiter and the CA that the documents petitioners submitted, i.e., affidavits executed by some of
respondents during an ocular inspection conducted by an inspector of the DOLE; notices of inspection result and Facility
Evaluation Orders issued by DOLE, are not sufficient to prove payment. 76 Despite repeated orders from the Labor
Arbiter,77 petitioners failed to submit the pertinent employee files, payrolls, records, remittances and other similar documents
which would show that respondents rendered work entitling them to payment for overtime work, night shift differential,
premium pay for work on holidays and rest day, and payment of these as well as the COLA and the SILP documents which
are not in respondents' possession but in the custody and absolute control of petitioners.78 By choosing not to fully and
completely disclose information and present the necessary documents to prove payment of labor standard benefits due to
respondents, petitioners failed to discharge the burden of proof. 79 Indeed, petitioners' failure to submit the necessary
documents which as employers are in their possession, inspite of orders to do so, gives rise to the presumption that their
presentation is prejudicial to its cause.80 As aptly quoted by the CA:
[W]hen the evidence tends to prove a material fact which imposes a liability on a party, and he has it in his power to
produce evidence which from its very nature must overthrow the case made against him if it is not founded on fact,
and he refuses to produce such evidence, the presumption arises that the evidence, if produced, would operate to his
prejudice, and support the case of his adversary.81
Petitioners next claim that the cost of the food and snacks provided to respondents as facilities should have been included in
reckoning the payment of respondents' wages. They state that although on the surface respondents appeared to receive
minimal wages, petitioners had granted respondents other benefits which are considered part and parcel of their wages and
are allowed under existing laws.82 They claim that these benefits make up for whatever inadequacies there may be in
compensation.83 Specifically, they invoked Sections 5 and 6, Rule VII-A, which allow the deduction of facilities provided by the
employer through an appropriate Facility Evaluation Order issued by the Regional Director of the DOLE. 84 Petitioners also aver
that they give five (5) percent of the gross income each month as incentives. As proof of compliance of payment of minimum
wages, petitioners submitted the Notice of Inspection Results issued in 1995 and 1997 by the DOLE Regional Office.85
The cost of meals and snacks purportedly provided to respondents cannot be deducted as part of respondents' minimum
wage. As stated in the Labor Arbiter's decision:86
While [petitioners] submitted Facility Evaluation Orders (pp. 468, 469; vol. II, rollo) issued by the DOLE Regional
Office whereby the cost of meals given by [petitioners] to [respondents] were specified for purposes of considering
the same as part of their wages, We cannot consider the cost of meals in the Orders as applicable to [respondents].
[Respondents] were not interviewed by the DOLE as to the quality and quantity of food appearing in the applications
of [petitioners] for facility evaluation prior to its approval to determine whether or not [respondents] were indeed given
such kind and quantity of food. Also, there was no evidence that the quality and quantity of food in the Orders were
voluntarily accepted by [respondents]. On the contrary; while some [of the respondents] admitted that they were given
meals and merienda, the quality of food serve[d] to them were not what were provided for in the Orders and that it
was only when they filed these cases that they came to know about said Facility Evaluation Orders (pp. 100; 379[,]
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 vol. II, rollo; p. 40, tsn[,] June 19, 1998). [Petitioner] Josefa herself, who applied for evaluation of the facility (food)
given to [respondents], testified that she did not inform [respondents] concerning said Facility Evaluation Orders (p.
34, tsn[,] August 13, 1998).
Even granting that meals and snacks were provided and indeed constituted facilities, such facilities could not be deducted
without compliance with certain legal requirements. As stated in Mabeza v. NLRC,87 the employer simply cannot deduct the
value from the employee's wages without satisfying the following: (a) proof that such facilities are customarily furnished by the
trade; (b) the provision of deductible facilities is voluntarily accepted in writing by the employee; and (c) the facilities are
charged at fair and reasonable value. The records are clear that petitioners failed to comply with these requirements. There
was no proof of respondents' written authorization. Indeed, the Labor Arbiter found that while the respondents admitted that
they were given meals and merienda, the quality of food served to them was not what was provided for in the Facility
Evaluation Orders and it was only when they filed the cases that they came to know of this supposed Facility Evaluation
Orders.88 Petitioner Josefa Po Lam herself admitted that she did not inform the respondents of the facilities she had applied
for.89
Considering the failure to comply with the above-mentioned legal requirements, the Labor Arbiter therefore erred when he
ruled that the cost of the meals actually provided to respondents should be deducted as part of their salaries, on the ground
that respondents have availed themselves of the food given by petitioners. 90 The law is clear that mere availment is not
sufficient to allow deductions from employees' wages.
More important, we note the uncontroverted testimony of respondents on record that they were required to eat in the hotel and
restaurant so that they will not go home and there is no interruption in the services of Mayon Hotel & Restaurant. As ruled
in Mabeza, food or snacks or other convenience provided by the employers are deemed as supplements if they are granted
for the convenience of the employer. The criterion in making a distinction between a supplement and a facility does not so
much lie in the kind (food, lodging) but the purpose.91Considering, therefore, that hotel workers are required to work different
shifts and are expected to be available at various odd hours, their ready availability is a necessary matter in the operations of a
small hotel, such as petitioners' business.92 The deduction of the cost of meals from respondents' wages, therefore, should be
removed.
We also do not agree with petitioners that the five (5) percent of the gross income of the establishment can be considered as
part of the respondents' wages. We quote with approval the Labor Arbiter on this matter, to wit:
While complainants, who were employed in the hotel, receive[d] various amounts as profit share, the same cannot be
considered as part of their wages in determining their claims for violation of labor standard benefits. Although called
profit share[,] such is in the nature of share from service charges charged by the hotel. This is more explained by
[respondents] when they testified that what they received are not fixed amounts and the same are paid not on a
monthly basis (pp. 55, 93, 94, 103, 104; vol. II, rollo). Also, [petitioners] failed to submit evidence that the amounts
received by [respondents] as profit share are to be considered part of their wages and had been agreed by them prior
to their employment. Further, how can the amounts receive[d] by [respondents] be considered as profit share when
the same [are] based on the gross receipt of the hotel[?] No profit can as yet be determined out of the gross receipt of
an enterprise. Profits are realized after expenses are deducted from the gross income.
On the issue of the proper minimum wage applicable to respondents, we sustain the Labor Arbiter. We note that petitioners
themselves have admitted that the establishment employs "more or less sixteen (16) employees," 93therefore they are
estopped from claiming that the applicable minimum wage should be for service establishments employing 15 employees or
less.
As for petitioners repeated invocation of serious business losses, suffice to say that this is not a defense to payment of labor
standard benefits. The employer cannot exempt himself from liability to pay minimum wages because of poor financial
condition of the company. The payment of minimum wages is not dependent on the employer's ability to pay. 94
Thus, we reinstate the award of monetary claims granted by the Labor Arbiter.
4. Conclusion
There is no denying that the actuations of petitioners in this case have been reprehensible. They have terminated the
respondents' employment in an underhanded manner, and have used and abused the quasi-judicial and judicial processes to
resist payment of their employees' rightful claims, thereby protracting this case and causing the unnecessary clogging of
dockets of the Court. They have also forced respondents to unnecessary hardship and financial expense. Indeed, the
circumstances of this case would have called for exemplary damages, as the dismissal was effected in a wanton, oppressive
or malevolent manner,95 and public policy requires that these acts must be suppressed and discouraged. 96
Nevertheless, we cannot agree with the Labor Arbiter in granting exemplary damages of P10,000.00 each to all respondents.
While it is true that other forms of damages under the Civil Code may be awarded to illegally dismissed employees, 97 any
award of moral damages by the Labor Arbiter cannot be based on the Labor Code but should be grounded on the Civil
Code.98 And the law is clear that exemplary damages can only be awarded if plaintiff shows proof that he is entitled to moral,
temperate or compensatory damages.99
As only respondents Loveres, Guades, Macandog, Llarena, Nicerio, Atractivo and Broola specifically claimed damages from
petitioners, then only they are entitled to exemplary damages. sjgs1
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Finally, we rule that attorney's fees in the amount to P10,000.00 should be granted to each respondent. It is settled that in
actions for recovery of wages or where an employee was forced to litigate and incur expenses to protect his rights and
interest, he is entitled to an award of attorney's fees.100 This case undoubtedly falls within this rule.
IN VIEW WHEREOF, the petition is hereby DENIED. The Decision of January 17, 2003 of the Court of Appeals in CA-G.R. SP
No. 68642 upholding the Joint Decision of July 14, 2000 of the Labor Arbiter in RAB V Case Nos. 04-00079-97 and 04-00080-
97 is AFFIRMED, with the following MODIFICATIONS:
(1) Granting separation pay of one-half (1/2) month for every year of service to respondents Loveres, Macandog and
Llarena;
(2) Granting retirement pay for respondents Guades, Nicerio, and Alamares;
(3) Removing the deductions for food facility from the amounts due to all respondents;
(4) Awarding moral damages of P20,000.00 each for respondents Loveres, Macandog, Llarena, Guades, Nicerio,
Atractivo, and Broola;
(5) Deleting the award of exemplary damages of P10,000.00 from all respondents except Loveres, Macandog,
Llarena, Guades, Nicerio, Atractivo, and Broola; and
(6) Granting attorney's fees of P10,000.00 each to all respondents.
The case is REMANDED to the Labor Arbiter for the RECOMPUTATION of the total monetary benefits awarded and due to
the employees concerned in accordance with the decision. The Labor Arbiter is ORDERED to submit his compliance thereon
within thirty (30) days from notice of this decision, with copies furnished to the parties.
SO ORDERED.

G.R. No. 118506 April 18, 1997

NORMA MABEZA, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, PETER NG/HOTEL SUPREME, respondents.

KAPUNAN, J.:
This petition seeking the nullification of a resolution of public respondent National Labor Relations Commission dated April 28,
1994 vividly illustrates why courts should be ever vigilant in the preservation of the constitutionally enshrined rights of the
working class. Without the protection accorded by our laws and the tempering of courts, the natural and historical inclination of
capital to ride roughshod over the rights of labor would run unabated.
The facts of the case at bar, culled from the conflicting versions of petitioner and private respondent, are illustrative.
Petitioner Norma Mabeza contends that around the first week of May, 1991, she and her co-employees at the Hotel Supreme
in Baguio City were asked by the hotel's management to sign an instrument attesting to the latter's compliance with minimum
wage and other labor standard provisions of law. 1 The instrument provides: 2
JOINT AFFIDAVIT
We, SYLVIA IGANA, HERMINIGILDO AQUINO, EVELYN OGOY, MACARIA JUGUETA, ADELAIDA
NONOG, NORMA MABEZA, JONATHAN PICART and JOSE DIZON, all of legal ages (sic), Filipinos and
residents of Baguio City, under oath, depose and say:
1. That we are employees of Mr. Peter L. Ng of his Hotel Supreme situated at No. 416 Magsaysay Ave.,
Baguio City.
2. That the said Hotel is separately operated from the Ivy's Grill and Restaurant;
3. That we are all (8) employees in the hotel and assigned in each respective shifts;
4. That we have no complaints against the management of the Hotel Supreme as we are paid accordingly
and that we are treated well.
5. That we are executing this affidavit voluntarily without any force or intimidation and for the purpose of
informing the authorities concerned and to dispute the alleged report of the Labor Inspector of the
Department of Labor and Employment conducted on the said establishment on February 2, 1991.
IN WITNESS WHEREOF, we have hereunto set our hands this 7th day of May, 1991 at Baguio City,
Philippines.
(Sgd.) (Sgd.) (Sgd.)
SYLVIA IGAMA HERMINIGILDO AQUINO EVELYN OGOY
(Sgd.) (Sgd.) (Sgd.)
MACARIA JUGUETA ADELAIDA NONOG NORMA MABEZA.
(Sgd.) (Sgd.)
JONATHAN PICART JOSE DIZON
SUBSCRIBED AND SWORN to before me this 7th day of May, 1991, at Baguio City, Philippines.
Asst. City Prosecutor

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Petitioner signed the affidavit but refused to go to the City Prosecutor's Office to swear to the veracity and contents of the
affidavit as instructed by management. The affidavit was nevertheless submitted on the same day to the Regional Office of the
Department of Labor and Employment in Baguio City.
As gleaned from the affidavit, the same was drawn by management for the sole purpose of refuting findings of the Labor
Inspector of DOLE (in an inspection of respondent's establishment on February 2, 1991) apparently adverse to the private
respondent. 3
After she refused to proceed to the City Prosecutor's Office on the same day the affidavit was submitted to the Cordillera
Regional Office of DOLE petitioner avers that she was ordered by the hotel management to turn over the keys to her living
quarters and to remove her belongings from the hotel
premises. 4 According to her, respondent strongly chided her for refusing to proceed to the City Prosecutor's Office to attest to
the affidavit. 5 She thereafter reluctantly filed a leave of absence from her job which was denied by management. When she
attempted to return to work on May 10, 1991, the hotel's cashier, Margarita Choy, informed her that she should not report to
work and, instead, continue with her unofficial leave of absence. Consequently, on May 13, 1991, three days after her attempt
to return to work, petitioner filed a complaint for illegal dismissal before the Arbitration Branch of the National Labor Relations
Commission CAR Baguio City. In addition to her complaint for illegal dismissal, she alleged underpayment of wages, non-
payment of holiday pay, service incentive leave pay, 13th month pay, night differential and other benefits. The complaint was
docketed as NLRC Case No. RAB-CAR-05-0198-91 and assigned to Labor Arbiter Felipe P. Pati.
Responding to the allegations made in support of petitioner's complaint for illegal dismissal, private respondent Peter Ng
alleged before Labor Arbiter Pati that petitioner "surreptitiously left (her job) without notice to the management" 6 and that she
actually abandoned her work. He maintained that there was no basis for the money claims for underpayment and other
benefits as these were paid in the form of facilities to petitioner and the hotel's other employee. 7Pointing to the Affidavit of May
7, 1991, the private respondent asserted that his employees actually have no problems with management. In a supplemental
answer submitted eleven (11) months after the original complaint for illegal dismissal was filed, private respondent raised a
new ground, loss of confidence, which was supported by a criminal complaint for Qualified Theft he filed before the
prosecutor's office of the City of Baguio against petitioner on July 4, 1991. 8
On May 14, 1993, Labor Arbiter Pati rendered a decision dismissing petitioner's complaint on the ground of loss of confidence.
His disquisitions in support of his conclusion read as follows:
It appears from the evidence of respondent that complainant carted away or stole one (1) blanket, 1 piece
bedsheet, 1 piece thermos, 2 pieces towel (Exhibits "9", "9-A," "9-B," "9-C" and "10" pages 12-14 TSN,
December 1, 1992).
In fact, this was the reason why respondent Peter Ng lodged a criminal complaint against complainant for
qualified theft and perjury. The fiscal's office finding a prima facie evidence that complainant committed the
crime of qualified theft issued a resolution for its filing in court but dismissing the charge of perjury (Exhibit
"4" for respondent and Exhibit "B-7" for complainant). As a consequence, complainant was charged in court
for the said crime (Exhibit "5" for respondent and Exhibit "B-6" for the complainant).
With these pieces of evidence, complainant committed serious misconduct against her employer which is
one of the just and valid grounds for an employer to terminate an employee (Article 282 of the Labor Code
as amended). 9
On April 28, 1994, respondent NLRC promulgated its assailed
Resolution 10 affirming the Labor Arbiter's decision. The resolution substantially incorporated the findings of the Labor
Arbiter. 11 Unsatisfied, petitioner instituted the instant special civil action for certiorari under Rule 65 of the Rules of Court on
the following grounds: 12
1. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION
COMMITTED A PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN
ITS FAILURE TO CONSIDER THAT THE ALLEGED LOSS OF CONFIDENCE IS A FALSE CAUSE AND
AN AFTERTHOUGHT ON THE PART OF THE RESPONDENT-EMPLOYER TO JUSTIFY, ALBEIT
ILLEGALLY, THE DISMISSAL OF THE COMPLAINANT FROM HER EMPLOYMENT;
2. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION
COMMITTED A PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN
ADOPTING THE RULING OF THE LABOR ARBITER THAT THERE WAS NO UNDERPAYMENT OF
WAGES AND BENEFITS ON THE BASIS OF EXHIBIT "8" (AN UNDATED SUMMARY OF COMPUTATION
PREPARED BY ALLEGEDLY BY RESPONDENT'S EXTERNAL ACCOUNTANT) WHICH IS TOTALLY
INADMISSIBLE AS AN EVIDENCE TO PROVE PAYMENT OF WAGES AND BENEFITS;
3. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION
COMMITTED A PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF DISCRETION IN
FAILING TO CONSIDER THE EVIDENCE ADDUCED BEFORE THE LABOR ARBITER AS
CONSTITUTING UNFAIR LABOR PRACTICE COMMITTED BY THE RESPONDENT.

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The Solicitor General, in a Manifestation in lieu of Comment dated August 8, 1995 rejects private respondent's principal claims
and defenses and urges this Court to set aside the public respondent's assailed resolution. 13
We agree.
It is settled that in termination cases the employer bears the burden of proof to show that the dismissal is for just cause, the
failure of which would mean that the dismissal is not justified and the employee is entitled to reinstatement. 14
In the case at bar, the private respondent initially claimed that petitioner abandoned her job when she failed to return to work
on May 8, 1991. Additionally, in order to strengthen his contention that there existed sufficient cause for the termination of
petitioner, he belatedly included a complaint for loss of confidence, supporting this with charges that petitioner had stolen a
blanket, a bedsheet and two towels from the hotel. 15 Appended to his last complaint was a suit for qualified theft filed with the
Baguio City prosecutor's office.
From the evidence on record, it is crystal clear that the circumstances upon which private respondent anchored his claim that
petitioner "abandoned" her job were not enough to constitute just cause to sanction the termination of her services under
Article 283 of the Labor Code. For abandonment to arise, there must be concurrence of two things: 1) lack of intention to
work; 16 and 2) the presence of overt acts signifying the employee's intention not to work. 17
In the instant case, respondent does not dispute the fact that petitioner tried to file a leave of absence when she learned that
the hotel management was displeased with her refusal to attest to the affidavit. The fact that she made this attempt clearly
indicates not an intention to abandon but an intention to return to work after the period of her leave of absence, had it been
granted, shall have expired.
Furthermore, while absence from work for a prolonged period may suggest abandonment in certain instances, mere absence
of one or two days would not be enough to sustain such a claim. The overt act (absence) ought
to unerringly point to the fact that the employee has no intention to return to work, 18 which is patently not the case here. In
fact, several days after she had been advised to take an informal leave, petitioner tried to resume working with the hotel, to no
avail. It was only after she had been repeatedly rebuffed that she filed a case for illegal dismissal. These acts militate against
the private respondent's claim that petitioner abandoned her job. As the Solicitor General in his manifestation observed:
Petitioner's absence on that day should not be construed as abandonment of her job. She did not report
because the cashier told her not to report anymore, and that private respondent Ng did not want to see her
in the hotel premises. But two days later or on the 10th of May, after realizing that she had to clarify her
employment status, she again reported for work. However, she was prevented from working by private
respondents. 19
We now come to the second cause raised by private respondent to support his contention that petitioner was validly dismissed
from her job.
Loss of confidence as a just cause for dismissal was never intended to provide employers with a blank check for terminating
their employees. Such a vague, all-encompassing pretext as loss of confidence, if unqualifiedly given the seal of approval by
this Court, could readily reduce to barren form the words of the constitutional guarantee of security of tenure. Having this in
mind, loss of confidence should ideally apply only to cases involving employees occupying positions of trust and confidence or
to those situations where the employee is routinely charged with the care and custody of the employer's money or property. To
the first class belong managerial employees, i.e., those vested with the powers or prerogatives to lay down management
policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees or effectively recommend
such managerial actions; and to the second class belong cashiers, auditors, property custodians, etc., or those who, in the
normal and routine exercise of their functions, regularly handle significant amounts of money or property. Evidently, an
ordinary chambermaid who has to sign out for linen and other hotel property from the property custodian each day and who
has to account for each and every towel or bedsheet utilized by the hotel's guests at the end of her shift would not fall under
any of these two classes of employees for which loss of confidence, if ably supported by evidence, would normally apply.
Illustrating this distinction, this Court in Marina Port Services, Inc. vs. NLRC, 20has stated that:
To be sure, every employee must enjoy some degree of trust and confidence from the employer as that is
one reason why he was employed in the first place. One certainly does not employ a person he distrusts.
Indeed, even the lowly janitor must enjoy that trust and confidence in some measure if only because he is
the one who opens the office in the morning and closes it at night and in this sense is entrusted with the care
or protection of the employer's property. The keys he holds are the symbol of that trust and confidence.
By the same token, the security guard must also be considered as enjoying the trust and confidence of his
employer, whose property he is safeguarding. Like the janitor, he has access to this property. He too, is
charged with its care and protection.
Notably, however, and like the janitor again, he is entrusted only with the physical task of protecting that
property. The employer's trust and confidence in him is limited to that ministerial function. He is not
entrusted, in the Labor Arbiter's words, with the duties of safekeeping and safeguarding company policies,
management instructions, and company secrets such as operation devices. He is not privy to these
confidential matters, which are shared only in the higher echelons of management. It is the persons on such

266
 levels who, because they discharge these sensitive duties, may be considered holding positions of trust and
confidence. The security guard does not belong in such category. 21
More importantly, we have repeatedly held that loss of confidence should not be simulated in order to justify what would
otherwise be, under the provisions of law, an illegal dismissal. "It should not be used as a subterfuge for causes which are
illegal, improper and unjustified. It must be genuine, not a mere afterthought to justify an earlier action taken in bad faith." 22
In the case at bar, the suspicious delay in private respondent's filing of qualified theft charges against petitioner long after the
latter exposed the hotel's scheme (to avoid its obligations as employer under the Labor Code) by her act of filing illegal
dismissal charges against the private respondent would hardly warrant serious consideration of loss of confidence as a valid
ground for dismissal. Notably, the Solicitor General has himself taken a position opposite the public respondent and has
observed that:
If petitioner had really committed the acts charged against her by private respondents (stealing supplies of
respondent hotel), private respondents should have confronted her before dismissing her on that ground.
Private respondents did not do so. In fact, private respondent Ng did not raise the matter when petitioner
went to see him on May 9, 1991, and handed him her application for leave. It took private respondents 52
days or up to July 4, 1991 before finally deciding to file a criminal complaint against petitioner, in an obvious
attempt to build a case against her.
The manipulations of private respondents should not be countenanced. 23
Clearly, the efforts to justify petitioner's dismissal on top of the private respondent's scheme of inducing his employees to
sign an affidavit absolving him from possible violations of the Labor Code taints with evident bad faith and deliberate malice
petitioner's summary termination from employment.
Having said this, we turn to the important question of whether or not the dismissal by the private respondent of petitioner
constitutes an unfair labor practice.
The answer in this case must inevitably be in the affirmative.
The pivotal question in any case where unfair labor practice on the part of the employer is alleged is whether or not the
employer has exerted pressure, in the form of restraint, interference or coercion, against his employee's right to institute
concerted action for better terms and conditions of employment. Without doubt, the act of compelling employees to sign an
instrument indicating that the employer observed labor standards provisions of law when he might have not, together with the
act of terminating or coercing those who refuse to cooperate with the employer's scheme constitutes unfair labor practice. The
first act clearly preempts the right of the hotel's workers to seek better terms and conditions of employment through concerted
action.
We agree with the Solicitor General's observation in his manifestation that "[t]his actuation . . . is analogous to the situation
envisaged in paragraph (f) of Article 248 of the Labor Code" 24 which distinctly makes it an unfair labor practice "to dismiss,
discharge or otherwise prejudice or discriminate against an employee for having given or being about to give
testimony" 25 under the Labor Code. For in not giving positive testimony in favor of her employer, petitioner had reserved not
only her right to dispute the claim and proffer evidence in support thereof but also to work for better terms and conditions of
employment.
For refusing to cooperate with the private respondent's scheme, petitioner was obviously held up as an example to all of the
hotel's employees, that they could only cause trouble to management at great personal inconvenience. Implicit in the act of
petitioner's termination and the subsequent filing of charges against her was the warning that they would not only be deprived
of their means of livelihood, but also possibly, their personal liberty.
This Court does not normally overturn findings and conclusions of quasi-judicial agencies when the same are ably supported
by the evidence on record. However, where such conclusions are based on a misperception of facts or where they patently fly
in the face of reason and logic, we will not hesitate to set aside those conclusions. Going into the issue of petitioner's money
claims, we find one more salient reason in this case to set things right: the labor arbiter's evaluation of the money claims in this
case incredibly ignores existing law and jurisprudence on the matter. Its blatant one-sidedness simply raises the suspicion that
something more than the facts, the law and jurisprudence may have influenced the decision at the level of the Arbiter.
Labor Arbiter Pati accepted hook, line and sinker the private respondent's bare claim that the reason the monetary benefits
received by petitioner between 1981 to 1987 were less than minimum wage was because petitioner did not factor in the meals,
lodging, electric consumption and water she received during the period in her computations. 26 Granting that meals and
lodging were provided and indeed constituted facilities, such facilities could not be deducted without the employer complying
first with certain legal requirements. Without satisfying these requirements, the employer simply cannot deduct the value from
the employee's ages. First, proof must be shown that such facilities are customarily furnished by the trade. Second, the
provision of deductible facilities must be voluntarily accepted in writing by the employee. Finally, facilities must be charged at
fair and reasonable value. 27
These requirements were not met in the instant case. Private respondent "failed to present any company policy or guideline to
show that the meal and lodging . . . (are) part of the salary;" 28 he failed to provide proof of the employee's written
authorization; and, he failed to show how he arrived at the valuations. 29

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Curiously, in the case at bench, the only valuations relied upon by the labor arbiter in his decision were figures furnished by
the private respondent's own accountant, without corroborative evidence. On the pretext that records prior to the July 16, 1990
earthquake were lost or destroyed, respondent failed to produce payroll records, receipts and other relevant documents,
where he could have, as has been pointed out in the Solicitor General's manifestation, "secured certified copies thereof from
the nearest regional office of the Department of Labor, the SSS or the BIR." 30
More significantly, the food and lodging, or the electricity and water consumed by the petitioner were not facilities but
supplements. A benefit or privilege granted to an employee for the convenience of the employer is not a facility. The criterion
in making a distinction between the two not so much lies in the kind (food, lodging) but the purpose. 31 Considering, therefore,
that hotel workers are required to work different shifts and are expected to be available at various odd hours, their ready
availability is a necessary matter in the operations of a small hotel, such as the private respondent's hotel.
It is therefore evident that petitioner is entitled to the payment of the deficiency in her wages equivalent to the fullwage
applicable from May 13, 1988 up to the date of her illegal dismissal.
Additionally, petitioner is entitled to payment of service incentive leave pay, emergency cost of living allowance, night
differential pay, and 13th month pay for the periods alleged by the petitioner as the private respondent has never been able to
adduce proof that petitioner was paid the aforestated benefits.
However, the claims covering the period of October 1987 up to the time of filing the case on May 13, 1988 are barred by
prescription as P.D. 442 (as amended) and its implementing rules limit all money claims arising out of employer-employee
relationship to three (3) years from the time the cause of action accrues. 32
We depart from the settled rule that an employee who is unjustly dismissed from work normally should be reinstated without
loss of seniority rights and other privileges. Owing to the strained relations between petitioner and private respondent, allowing
the former to return to her job would only subject her to possible harassment and future embarrassment. In the instant case,
separation pay equivalent to one month's salary for every year of continuous service with the private respondent would be
proper, starting with her job at the Belfront Hotel.
In addition to separation pay, backwages are in order. Pursuant to R.A. 6715 and our decision in Osmalik Bustamante, et
al. vs. National Labor Relations Commission, 33 petitioner is entitled to full backwages from the time of her illegal dismissal up
to the date of promulgation of this decision without qualification or deduction.
Finally, in dismissal cases, the law requires that the employer must furnish the employee sought to be terminated from
employment with two written notices before the same may be legally effected. The first is a written notice containing a
statement of the cause(s) for dismissal; the second is a notice informing the employee of the employer's decision to terminate
him stating the basis of the dismissal. During the process leading to the second notice, the employer must give the employee
ample opportunity to be heard and defend himself, with the assistance of counsel if he so desires.
Given the seriousness of the second cause (qualified theft) of the petitioner's dismissal, it is noteworthy that the private
respondent never even bothered to inform petitioner of the charges against her. Neither was petitioner given the opportunity to
explain the loss of the articles. It was only almost two months after petitioner had filed a complaint for illegal dismissal, as an
afterthought, that the loss was reported to the police and added as a supplemental answer to petitioner's complaint. Clearly,
the dismissal of petitioner without the benefit of notice and hearing prior to her termination violated her constitutional right to
due process. Under the circumstance an award of One Thousand Pesos (P1,000.00) on top of payment of the deficiency in
wages and benefits for the period aforestated would be proper.
WHEREFORE, premises considered, the RESOLUTION of the National Labor Relations Commission dated April 24, 1994 is
REVERSED and SET ASIDE, with costs. For clarity, the economic benefits due the petitioner are hereby summarized as
follows:
1) Deficiency wages and the applicable ECOLA from May 13, 1988 up to the date of petitioner's illegal dismissal;
2) Service incentive leave pay; night differential pay and 13th month pay for the same period;
3) Separation pay equal to one month's salary for every year of petitioner's continuous service with the private respondent
starting with her job at the Belfront Hotel;
4) Full backwages, without qualification or deduction, from the date of petitioner's illegal dismissal up to the date of
promulgation of this decision pursuant to our ruling in Bustamante vs. NLRC. 34
5) P1,000.00.
ORDERED.

G.R. No. 204651 August 6, 2014

OUR HAUS REALTY DEVELOPMENT CORPORATION, Petitioner,
vs.
ALEXANDER PARIAN, JAY C. ERINCO, ALEXANDER CANLAS, BERNARD TENEDERO and JERRY
SABULAO, Respondents.
DECISION
BRION, J.:

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We resolve in this petition for review on certiorari1 the challenge to the May 7, 2012 decision2 and the November 27, 2012
resolution3 (assailed CA rulings) of the Court of Appeals (CA) in CA-G.R. SP No. 123273. These assailed CA rulings affirmed
the July 20, 2011 decision4 and the December 2, 2011 resolution5 (NLRC rulings) of the National Labor Relations Commission
(NLRC) in NLRC LAC No. 02-000489-11 (NLRC NCR Case No. 06-08544-10). The NLRC rulings in turn reversed and set
aside the December 10, 2010 decision6 of the labor arbiter (LA).
Factual Antecedents
Respondents Alexander Parian, Jay Erinco, Alexander Canlas, Jerry Sabulao and Bernardo Tenederowere all laborers
working for petitioner Our Haus Realty Development Corporation (Our Haus), a company engaged in the construction
business.The respondents respective employment records and daily wage rates from 2007 to 2010 are summarized in the
table7 below:
Years of Daily
Name Date Hired Year and Place of Assignment
Service Rate

Alexander M. October
10 years 2007-2010- Quezon City P353.50
Parian 1999

January 2008- Quezon City 2009- Antipolo 2010-

Jay C. Erinco 10 years P342.00
2000 Quezon City

Alexander R.
2005 5 years 2007-2010- Quezon City P312.00
Canlas

August 2008- Quezon City 2009- Antipolo 2010-

Jerry Q. Sabulao 10 years P342.00
1999 Quezon City

Bernardo N.
1994 16 years 2007-2010- Quezon City P383.50
Tenedero
Sometime in May 2010, Our Haus experienced financial distress. To alleviate its condition, Our Haus suspended some of its
construction projects and asked the affected workers, including the respondents, to take vacation leaves. 8
Eventually, the respondents were asked to report back to work but instead of doing so, they filed with the LA a complaint for
underpayment of their daily wages. They claimed that except for respondent Bernardo N. Tenedero, their wages were below
the minimum rates prescribed in the following wage orders from 2007 to 2010:
1. Wage Order No. NCR-13, which provides for a daily minimum wage rate of P362.00for the non-agriculture sector
(effective from August 28, 2007 until June 13, 2008); and
2. Wage Order No. NCR-14, which provides for a daily minimum wage rate of P382.00for the non-agriculture sector
(effective from June 14, 2008 until June 30, 2010).
The respondents also alleged thatOur Haus failed to pay them their holiday, service incentive leave (SIL), 13th month and
overtime pays.9
The Labor Arbitration Rulings
Before the LA, Our Haus primarily argued that the respondents wages complied with the laws minimum requirement. Aside
from paying the monetary amount of the respondents wages, Our Haus also subsidized their meals (3 times a day), and gave
them free lodging near the construction project they were assigned to.10 In determining the total amount of the respondents
daily wages, the value of these benefits should be considered, in line with Article 97(f)11 of the Labor Code.
Our Haus also rejected the respondents other monetary claims for lack of proof that they were entitled to it.12
On the other hand, the respondents argued that the value of their meals should not be considered in determining their wages
total amount since the requirements set under Section 413 of DOLE14 Memorandum Circular No. 215were not complied with.
The respondents pointed out that Our Haus never presented any proof that they agreed in writing to the inclusion of their
meals value in their wages.16 Also, Our Haus failed to prove that the value of the facilities it furnished was fair and
reasonable.17 Finally, instead of deducting the maximum amount of 70% of the value of the meals, Our Haus actually withheld
its full value (which was Php290.00 per week for each employee).18
The LA ruled in favor of Our Haus. He held that if the reasonable values of the board and lodging would be taken into account,
the respondents daily wages would meet the minimum wage rate.19 As to the other benefits, the LA found that the
respondents were not able to substantiate their claims for it. 20
The respondents appealed the LAs decision to the NLRC, which in turn, reversed it. Citing the case of Mayon Hotel &
Restaurant v. Adana,21 the NLRC noted that the respondents did not authorize Our Haus in writing to charge the values of
their board and lodging to their wages. Thus, the samecannot be credited.
The NLRC also ruled that the respondents are entitled to their respective proportionate 13th month payments for the year
2010 and SIL payments for at least three years,immediately preceding May 31, 2010, the date when the respondents leftOur

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Haus. However, the NLRC sustained the LAs ruling that the respondents were not entitled to overtime pay since the exact
dates and times when they rendered overtime work had not been proven. 22
Our Haus moved for the reconsideration23 of the NLRCs decision and submitted new evidence (the five kasunduans) to show
that the respondents authorized Our Haus in writing to charge the values of their meals and lodging to their wages.
The NLRC denied Our Haus motion, thus it filed a Rule 65 petition 24 with the CA. In its petition, Our Haus propounded a new
theory. It made a distinction between deduction and charging. A written authorization is only necessary if the facilitys value will
be deducted and will not be needed if it will merely be charged or included in the computation of wages.25 Our Haus claimed
that it did not actually deduct the values of the meals and housing benefits. It only considered these in computing the total
amount of wages paid to the respondents for purposes of compliance with the minimum wage law. Hence, the written
authorization requirement should not apply.
Our Haus also asserted that the respondents claim for SIL pay should be denied as this was not included in their pro
formacomplaint. Lastly, it questioned the respondentsentitlement to attorneys fees because they were not represented by a
private lawyer but by the Public Attorneys Office (PAO).
The CAs Ruling
The CA dismissed Our Haus certiorari petition and affirmed the NLRC rulings in toto. It found no real distinction between
deduction and charging,26 and ruled that the legal requirements before any deduction or charging can be made, apply to both.
Our Haus, however, failed to prove that it complied with any of the requirements laid down in Mabeza v. National Labor
Relations Commission.27 Accordingly, it cannot consider the values of its meal and housing facilities in the computation of the
respondents total wages.
Also, the CA ruled that since the respondents were able to allege non-payment of SIL in their position paper, and Our Haus, in
fact, opposed it in its various pleadings,28 then the NLRC properly considered it as part of the respondents causes of action.
Lastly, the CA affirmed the respondents entitlement to attorneys fees. 29
Our Haus filed a motion for reconsideration but the CA denied its motion, prompting it to file the present petition for review on
certiorari under Rule 45.
The Petition
Our Haus submits that the CA erred in ruling that the legal requirements apply without distinction whether the facilitys value
will be deducted or merely included in the computation of the wages. At any rate, it complied with the requirements for
deductibility of the value of the facilities. First, the five kasunduans executed by the respondents constitute the written
authorization for the inclusion of the board and lodgings values to their wages. Second, Our Haus only withheld the amount
of P290.00 which represents the foods raw value; the weekly cooking cost (cooks wage, LPG, water) at P239.40 per person
is a separate expense that Our Haus did not withhold from the respondents wages.30 This disproves the respondentsclaim
that it deducted the full amount of the meals value.
Lastly, the CA erred in ruling that the claim for SIL pay may still be granted though not raised in the complaint; and that the
respondents are entitled to an award of attorneys fees. 31
The Case for the Respondents
The respondents prayed for the denial of the petition.32 They maintained that the CA did not err inruling that the values of the
board and lodging cannot be deducted from their wages for failure to comply with the requirements set by law. 33 And though
the claim for SIL pay was not included in their pro forma complaint, they raised their claims in their position paper and Our
Haus had the opportunity to contradict it in its pleadings.34
Finally, under the PAO law, the availment of the PAOs legal services does not exempt its clients from an award of attorneys
fees.35
The Courts Ruling
We resolve to DENYthe petition.
The nature of a Rule 45 petition only questions of law
Basic is the rule that only questions of lawmay be raised in a Rule 45 petition. 36 However, in this case, weare confronted with
mixed questions of fact and law that are subsumed under the issue of whether Our Haus complied with the legal requirements
on the deductibility of the value of facilities. Strictly, factual issues cannot be considered under Rule 45 except in the course of
resolving if the CA correctly determined whether or not the NLRC committed grave abuse of discretion in considering and
appreciating the factual issues before it.37
In ruling for legal correctness, we have to view the CA decision in the same context that the petition for certiorariit ruled upon
was presented to it; we have to examine the CA decision from the prism of whether it correctly determined the presence or
absence of grave abuse of discretion in the NLRC decision before it, not on the basis of whether the NLRC decision, on the
merits of the case, was correct. In other words, we have to be keenly aware that the CA undertook a Rule 65 review, not a
review on appeal, of the NLRC decision challenged before it. This is the approach that should bebasic in a Rule 45 review of a
CA ruling in a labor case. In question form, the question to ask in the present case is: did the CA correctly determine that the
NLRC did not commit grave abuse of discretion in ruling on the case? 38 We rule that the CA correctly did.
No substantial distinction between deducting and charging a facilitys value from the employees wage; the legal requirements
for creditability apply to both
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To justify its non-compliance with the requirements for the deductibility of a facility, Our Haus asks us to believe that there is a
substantial distinction between the deduction and the charging of a facilitys value to the wages. Our Haus explains that in
deduction, the amount of the wage (which may already be below the minimum) would still be lessened by the facilitys value,
thus needing the employees consent. On the other hand, in charging, there is no reduction of the employees wage since the
facilitys value will just be theoretically added to the wage for purposes of complying with the minimum wage requirement.39
Our Haus argument is a vain attempt to circumvent the minimum wage law by trying to create a distinction where none exists.
In reality, deduction and charging both operate to lessen the actual take-home pay of an employee; they are two sides of the
same coin. In both, the employee receives a lessened amount because supposedly, the facilitys value, which is part of his
wage, had already been paid to him in kind. As there is no substantial distinction between the two, the requirements set by law
must apply to both.
As the CA correctly ruled, these requirements, as summarized in Mabeza, are the following:
a. proof must be shown thatsuch facilities are customarily furnished by the trade;
b. the provision of deductiblefacilities must be voluntarily accepted in writingby the employee; and
c. The facilities must be charged at fair and reasonable value. 40
We examine Our Haus compliance with each of these requirements in seriatim.
a. The facility must be customarily furnished by the trade
In a string of cases, we have concluded that one of the badges to show that a facility is customarily furnished by the trade is
the existence of a company policy or guideline showing that provisions for a facility were designated as part of the employees
salaries.41 To comply with this, Our Haus presented in its motion for reconsideration with the NLRC the joint sinumpaang
salaysayof four of its alleged employees. These employees averred that they were recipients of free lodging, electricity and
water, as well as subsidized meals from Our Haus.42
We agree with the NLRCs finding that the sinumpaang salaysay statements submitted by Our Haus are self-serving. For
one, Our Haus only produced the documents when the NLRC had already earlier determined that Our Haus failed to prove
that it was traditionally giving the respondents their board and lodging. This document did not state whether these benefits had
been consistently enjoyed by the rest of Our Haus employees. Moreover, the records reveal that the board and lodging were
given on a per project basis. Our Haus did not show if these benefits were also provided inits other construction projects, thus
negating its claimed customary nature. Even assuming the sinumpaang salaysay to be true, this document would still work
against Our Haus case. If Our Haus really had the practice of freely giving lodging, electricity and water provisions to its
employees, then Our Haus should not deduct its values from the respondents wages. Otherwise, this will run contrary to the
affiants claim that these benefits were traditionally given free of charge.
Apart from company policy, the employer may also prove compliance with the first requirement by showing the existence of an
industry-wide practice of furnishingthe benefits in question among enterprises engaged in the same line of business. If it were
customary among construction companies to provide board and lodging to their workers and treat their values as part of their
wages, we would have more reason to conclude that these benefits were really facilities.
However, Our Haus could not really be expected to prove compliance with the first requirement since the living
accommodation of workers in the construction industry is not simply a matter of business practice. Peculiar to the construction
business are the occupational safety and health (OSH) services which the law itself mandates employers to provide to their
workers. This isto ensure the humane working conditions of construction employees despite their constant exposure to
hazardous working environments. Under Section 16 of DOLE Department Order (DO) No. 13, series of 1998,43 employers
engaged in the construction business are required to providethe following welfare amenities:
16.1 Adequate supply of safe drinking water
16.2 Adequate sanitaryand washing facilities
16.3 Suitable living accommodation for workers, and as may be applicable, for their families
16.4 Separate sanitary, washing and sleeping facilitiesfor men and women workers. [emphasis ours]
Moreover, DOLE DO No. 56, series of 2005, which sets out the guidelines for the implementation ofDOLE DO No. 13,
mandates that the cost of the implementation of the requirements for the construction safety and health of workers, shall be
integrated to the overall project cost.44 The rationale behind this isto ensure that the living accommodation of the workers is not
substandard and is strictly compliant with the DOLEs OSH criteria.
As part of the project cost that construction companies already charge to their clients, the value of the housing of their workers
cannot be charged again to their employees salaries. Our Haus cannot pass the burden of the OSH costs of its construction
projects to its employees by deducting it as facilities. This is Our Haus obligation under the law.
Lastly, even if a benefit is customarily provided by the trade, it must still pass the purpose testset by jurisprudence. Under this
test, if a benefit or privilege granted to the employee is clearly for the employers convenience, it will not be considered as a
facility but a supplement.45 Here, careful consideration is given to the nature of the employers business in relation to the work
performed by the employee. This test is used to address inequitable situations wherein employers consider a benefit
deductible from the wages even if the factual circumstances show that it clearly redounds to the employers greater advantage.

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While the rules serve as the initial test in characterizing a benefit as a facility, the purpose test additionally recognizes that the
employer and the employee do not stand at the same bargaining positions on benefits that must or must not formpart of an
employees wage. In the ultimate analysis, the purpose test seeks to prevent a circumvention of the minimum wage law.
a1. The purpose test in jurisprudence
Under the law,46 only the value of the facilities may be deducted from the employees wages but not the value of supplements.
Facilities include articles or services for the benefit of the employee or his family but exclude tools of the trade or articles or
services primarily for the benefit of the employer or necessary to the conduct of the employers business. 47
The law also prescribes that the computation of wages shall exclude whatever benefits, supplementsor allowances given to
employees. Supplements are paid to employees on top of their basic pay and are free of charge. 48 Since it does not form part
of the wage, a supplements value may not be includedin the determination of whether an employer complied with the
prescribed minimum wage rates.
In the present case, the board and lodging provided by Our Haus cannot be categorized asfacilities but as supplements. In
SLL International Cables Specialist v. National Labor Relations Commission,49 this Court was confronted with the issue on the
proper characterization of the free board and lodging provided by the employer. We explained:
The Court, at this point, makes a distinction between "facilities" and "supplements". It is of the view that the food and lodging,
or the electricity and water allegedly consumed by private respondents in this case were not facilities but supplements. In the
case of Atok-Big Wedge Assn. v. Atok-Big Wedge Co., the two terms were distinguished from one another in this wise:
"Supplements", therefore, constitute extra remuneration or special privileges or benefits given to or received by the laborers
overand above their ordinary earnings or wages. "Facilities", on the other hand, are items of expense necessary for the
laborer's and his family's existence and subsistence so thatby express provision of law (Sec. 2[g]), they form part of the wage
and when furnished by the employer are deductible therefrom, since if they are not so furnished, the laborer would spend and
pay for them just the same.
In short, the benefit or privilege given to the employee which constitutes an extra remuneration above and over his basic or
ordinary earning or wage is supplement; and when said benefit or privilege is part of the laborers' basic wages, it is a facility.
The distinction lies not so much in the kind of benefit or item (food, lodging, bonus or sick leave) given, but in the purpose for
which it is given.In the case at bench, the items provided were given freely by SLLfor the purpose of maintaining the efficiency
and health of its workers while they were working attheir respective projects. 50
Ultimately, the real difference lies not on the kind of the benefit but on the purpose why it was given by the employer. If it is
primarily for the employees gain, then the benefit is a facility; if its provision is mainly for the employers advantage, then it is a
supplement. Again, this is to ensure that employees are protected in circumstances where the employer designates a benefit
as deductible from the wages even though it clearly works to the employers greater convenience or advantage.
Under the purpose test, substantial consideration must be given to the nature of the employers business inrelation to the
character or type of work performed by the employees involved.
Our Haus is engaged in the construction business, a laborintensive enterprise. The success of its projects is largely a function
of the physical strength, vitality and efficiency of its laborers. Its business will be jeopardized if its workers are weak, sickly,
and lack the required energy to perform strenuous physical activities. Thus, by ensuring that the workers are adequately and
well fed, the employer is actually investing on its business.
Unlike in office enterprises where the work is focused on desk jobs, the construction industry relies heavily and directly on the
physical capacity and endurance of its workers. This is not to say that desk jobs do not require muscle strength; wesimply
emphasize that in the construction business, bulk of the work performed are strenuous physical activities.
Moreover, in the construction business, contractors are usually faced with the problem ofmeeting target deadlines. More often
than not, work is performed continuously, day and night, in order to finish the project on the designated turn-over date. Thus, it
will be more convenient to the employer if itsworkers are housed near the construction site to ensure their ready availability
during urgent or emergency circumstances. Also, productivity issues like tardiness and unexpected absences would be
minimized. This observation strongly bears in the present case since three of the respondents are not residents of the National
Capital Region. The board and lodging provision might have been a substantial consideration in their acceptance of
employment in a place distant from their provincial residences.
Based on these considerations, we conclude that even under the purpose test, the subsidized meals and free lodging provided
by Our Haus are actually supplements. Although they also work to benefit the respondents, an analysis of the nature of these
benefits in relation to Our Haus business shows that they were given primarily for Our Haus greater convenience and
advantage. If weighed on a scale, the balance tilts more towards Our Haus side. Accordingly, their values cannot be
considered in computing the total amount of the respondents wages. Under the circumstances, the dailywages paid to the
respondents are clearly below the prescribed minimum wage rates in the years 2007-2010.
b. The provision of deductible facilities must be voluntarily accepted in writing by the employee
In Mayon Hotel, we reiterated that a facility may only be deducted from the wage if the employer was authorized in writingby
the concerned employee.51 As it diminishes the take-home pay of an employee, the deduction must be with his express
consent.

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Again, in the motion for reconsideration with the NLRC, Our Haus belatedly submitted five kasunduans, supposedly executed
by the respondents, containing their conformity to the inclusion of the values of the meals and housing to their total wages.
Oddly, Our Haus only offered these documents when the NLRC had already ruled that respondents did not accomplish any
written authorization, to allow deduction from their wages. These five kasunduans were also undated, making us wonder if
they had reallybeen executed when respondents first assumed their jobs.
Moreover, in the earlier sinumpaang salaysay by Our Haus four employees, it was not mentioned that they also executed a
kasunduanfor their board and lodging benefits. Because of these surrounding circumstances and the suspicious timing when
the five kasunduanswere submitted as evidence, we agree withthe CA that the NLRC committed no grave abuse of discretion
in disregarding these documents for being self serving.
c. The facility must be charged at a fair and reasonable value
Our Haus admitted that it deducted the amount of P290.00 per week from each of the respondents for their meals. But it now
submits that it did not actually withhold the entire amount as it did not figure in the computation the money it expended for the
salary of the cook, the water, and the LPG used for cooking, which amounts to P249.40 per week per person. From these, it
appears that the total meal expense per week for each person is P529.40,making Our Haus P290.00 deduction within the
70% ceiling prescribed by the rules.
However, Our Haus valuation cannotbe plucked out of thin air. The valuation of a facility must besupported by relevant
documents such as receipts and company records for it to be considered as fair and reasonable. In Mabeza, we noted:
Curiously, in the case at bench, the only valuations relied upon by the labor arbiter in his decision were figures furnished by
the private respondent's own accountant, without corroborative evidence.On the pretext that records prior to the July 16, 1990
earthquake were lost or destroyed, respondent failed to produce payroll records, receipts and other relevant documents,
where he could have, as has been pointedout in the Solicitor General's manifestation, "secured certified copies thereof from
the nearest regional office of the Department of Labor, the SSS or the BIR". 52 [emphasis ours]
In the present case, Our Haus never explained how it came up with the valuesit assigned for the benefits it provided; it merely
listed its supposed expenses without any supporting document. Since Our Haus is using these additional expenses (cooks
salary, water and LPG) to support its claim that it did not withhold the full amount of the meals value, Our Haus is burdened to
present evidence to corroborate its claim. The records however, are bereft of any evidence to support Our Haus meal
expense computation. Eventhe value it assigned for the respondents living accommodations was not supported by any
documentary evidence. Without any corroborative evidence, it cannot be said that Our Haus complied withthis third requisite.
A claim not raised in the pro forma complaint may still beraised in the position paper.
Our Haus questions the respondents entitlement to SIL pay by pointing out that this claim was not included in the pro forma
complaint filed with the NLRC. However, we agree with the CA that such omission does not bar the labor tribunals from
touching upon this cause of action since this was raised and discussed inthe respondents position paper. In Samar-Med
Distribution v. National Labor Relations Commission,53 we held:
Firstly, petitioners contention that the validity of Gutangs dismissal should not be determined because it had not been
included in his complaint before the NLRC is bereft of merit. The complaint of Gutang was a mere checklist of possible causes
of action that he might have against Roleda. Such manner of preparing the complaint was obviously designed to facilitate the
filing of complaints by employees and laborers who are thereby enabled to expediently set forth their grievances in a general
manner. But the non-inclusion in the complaint of the issue on the dismissal did not necessarily mean that the validity of the
dismissal could not be an issue.The rules of the NLRC require the submission of verified position papers by the parties should
they fail to agree upon an amicable settlement, and bar the inclusion of any cause of action not mentioned in the complaint or
position paper from the time of their submission by the parties. In view of this, Gutangs cause of action should be ascertained
not from a reading of his complaint alone but also from a consideration and evaluation of both his complaint and position
paper.54
The respondents entitlement to the other monetary benefits
Generally a party who alleges payment as a defense has the burden of proving it.Particularly in labor cases, the burden of
proving payment of monetary claims rests on the employeron the reasoning that the pertinent personnel files, payrolls,
records, remittances and other similar documents which will show that overtime, differentials, service incentive leave and
other claims of workers have been paid are not in the possession of the worker but in the custody and absolute control of
the employer.55
Unfortunately, records will disclose the absence of any credible document which will show that respondents had been paid
their 13th month pay, holiday and SIL pays. Our Haus merely presented a handwritten certification from its administrative
officer that its employees automatically become entitled to five days of service incentive leave as soon as they pass probation.
This certification was not even subscribed under oath. Our Haus could have at least submitted its payroll or copies of the pay
slips of respondents to show payment of these benefits. However, it failed to do so.
Respondents are entitled to attorneys fees.
Finally, we affirm that respondents are entitled to attorneys fees. Our Haus asserts that respondents availment of free legal
services from the PAO disqualifies them from such award. We find this untenable.

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It is settled that in actions for recovery of wages or where an employee was forced to litigate and, thus, incur expenses to
protect his rights and interest, the award of attorney's fees is legally and morally justifiable. 56Moreover, under the PAO Law or
Republic Act No. 9406, the costs of the suit, attorney's fees and contingent fees imposed upon the adversary of the PAO
clients after a successful litigation shall be deposited in the National Treasury as trust fund and shall be disbursed for special
allowances of authorized officials and lawyers of the PAO. 57
Thus, the respondents are still entitled to attorney's fees. The attorney's fees awarded to them shall be paid to the PAO. It
serves as a token recompense to the PAO for its provision of free legal services to litigants who have no means of hiring a
private lawyer.
WHEREFORE, in light of these considerations, we conclude that the Court of Appeals correctly found that the National Labor
Relations Commission did not abuse its discretion in its decision of July 20, 2011 and Resolution of December 2, 2011.
Consequently we DENY the petition and AFFIRM the Court of Appeals' decision dated May 7, 2012 and resolution dated
November 27, 2012 in CA-G.R. SP No. 123273. No costs.
SO ORDERED.

G.R. No. 108556 November 19, 1996

MANILA MANDARIN EMPLOYEES UNION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, Second Division, and the MANILA MANDARIN HOTEL,respondents.

NARVASA, C.J.:
The petitioner in this special civil action of certiorari seeks nullification of the September 11, 1992 Decision of the Second
Division of the National Labor Relations Commission reversing the judgment of the Labor Arbiter in NLRC NCR Case No. 10-
4335-86 and dismissing the case for lack of merit, as well as of the Commission's November 24, 1992 Resolution denying
reconsideration of said decision.
On October 30, 1986, the Manila Mandarin Employees Union (hereafter UNION), as exclusive bargaining agent of the rank-
and-file employees of the Manila Mandarin Hotel, Inc. (hereafter MANDARIN), filed with the NLRC Arbitration Branch a
complaint in its members' behalf to compel MANDARIN to pay the salary differentials of the individual employees concerned
because of wage distortions in their salary structure allegedly created by the upward revisions of the minimum wage pursuant
to various Presidential Decrees and Wage Orders, and the failure of MANDARIN to implement the corresponding increases in
the basic salary rate of newly-hired employees.
The relevant Presidential Decrees and Wage Orders were specified by the UNION as follows :
a. PD 1389, amending PD 928, mandating an increase in the statutory minimum wage by P3.00 spread out
over a period of three years, as follows: P1.00 starting July 1, 1978; P1.00 starting May 1, 1979; and P1.00
starting May 1, 1980.
b. PD 1614, providing that workers covered by PD 1389, whether agricultural or non-agricultural, should
receive an increase of P2.00 in their statutory minimum wage effective April 1, 1979, the same representing
an acceleration of the remaining increases under PD 1389; and that all non-agricultural workers in Metro
Manila shall receive a minimum wage of P12.00;
c. PD 1713, issued on August 18, 1980, providing an increase in the minimum daily wage rates and for
additional allowance; increasing the minimum daily wage rates by P1.00, and providing that all private
employers shall pay their employees with wages or salaries not exceeding P1,500.00 a month, an additional
mandatory living allowance of P60.00 a month for non-agricultural workers, P45.00 for plantation workers
and P30.00 a month for agricultural non-plantation workers;
d. PD 1751, issued on December 14, 1980, increasing the statutory daily minimum wages by integrating the
P4.00 mandatory allowance under PD 525 and PD 1123 into the basic pay of all covered workers;
e. Wage Order No. 1, issued on March 26, 1981, increasing the mandatory emergency living allowance of all
workers with salaries or wages of P1,500.00 a month by P2.00 a day for non-agricultural workers, P1.50 a
day for agricultural plantation workers, P1.00 a day for agricultural non-plantation workers, effective March
22, 1981;
f. Wage Order No. 2 issued on July 6, 1983 increasing the mandatory basic minimum wage and. living
allowance for non-agricultural and agricultural workers in the following manner:
1) For non-agricultural employees, receiving not more than P1,800.00 monthly, P1.00 a
day as minimum wage and P1.50 a day as cost of living allowance;
2) For plantation agricultural employees, P1.00 a day as minimum wage and P0.50 a day
as cost of living allowance subject to the same salary ceiling provided in the immediately
preceding section; and
3) For non-plantation agricultural employees, P1.00 a day as minimum wage; and

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 also, providing that effective October 1, 1983, the living allowance rates as adjusted in the preceding section
shall be further increased subject to the same salary ceiling, for non-agricultural employees, by P1.00.
g. Wage Order No. 3 issued November 7, 1983 increasing the statutory minimum wage rates for workers in
the private sector by P1.00 per day effective November 1, 1983, and also increasing the statutory wage
rates by P1.00 per day, effective December 1, 1983;
h. Wage Order No. 4 issued on May 1, 1984 increasing the statutory daily minimum wages, after integrating
the mandatory living allowance under PDs 1614, 1634, 1678 and 1713 into the basic pay of all covered
employees, effective May 1, 1984; after the integration, the minimum daily wage rate was increased by
P11.00 for non-agricultural workers.
i. Wage Order No. 5 issued on June 11, 1984 increasing the statutory daily minimum wage rates and living
allowances of workers in the private sector by P3.00 effective June 16, 1984 the minimum daily wage
rates became P35.00 for Metro Manila and P34.00 for outside Metro Manila; and
j. Wage order No. 6, effective November 1, 1984, increasing the statutory minimum wage rate by P2.00 per
day.
On January 15, 1987, the UNION filed its Position Paper amplifying the allegations of its complaint and setting forth the legal
bases of its demands against MANDARIN; and on March 25, 1987, it filed an Amended Complaint presenting an additional
claim for payment of salary differentials to the union members affected, allegedly resulting from underpayment of wages.
The Labor Arbiter eventually ruled in favor of the UNION, holding that there were in fact wage distortions entitling its members
to salary adjustments totalling P26,173,601.25 for 541 employees as well as underpayments amounting to
P1,978,296.18 for 182 employees. The dispositive portion of his decision reads: 1
WHEREFORE, judgment is hereby rendered ordering the respondent Hotel to pay the individual
complainants who are members of the respondent Union whose names appear on the respective
computations embodied in this Decision, the aggregate amount of P26,173,601.25 representing their salary
adjustments by way of correcting the wage distortions in their respective salary structure, for the period from
October 30, 1983 up to October 31, 1990, and continuously thereafter to pay the corresponding amounts
due them as such salary adjustments until the same are properly and finally restored in their basic monthly
rates; to pay the aggregate amount of P1,978,296.18 representing their salary differentials resulting from
underpayment of wages in violation of the minimum wage laws, Presidential Decrees and Wage Orders for
the period from March 25, 1984 up to October 31, 1990, and continuously thereafter to pay the
corresponding amounts due them as such salary differentials until the same are properly and finally restored
into their basic monthly rates.
Likewise, the respondent Hotel is ordered to pay an amount equivalent to ten percent (10%) of the total
awards granted to individual complainants, by way of and as attorney's fees.
On appeal, the Second Division of respondent Commission (composed of Commissioner Domingo H. Zapanta,ponente, and
Presiding Commissioner Edna Bonto-Perez) rendered the dispositions already referred to and now assailed setting aside
the Labor Arbiter's judgment and dismissing the UNION's complaint, and later denying the UNION'S motion for
reconsideration. 2
The principal issues raised in this Court are: (1) Whether or not the NLRC had jurisdiction to take cognizance of MANDARIN'S
appeal from the Labor Arbiter's decision; and (2) if so, whether or not it gravely abused its discretion in setting aside the Labor
Arbiter's judgment and dismissing the UNION'S complaint.
The issue of jurisdiction is grounded on the posited tardiness of private respondents' appeal from the Labor Arbiter's judgment
to the NLRC, and fatal defect in their supersedeas bond.
The UNION contends 3 that the records indubitably show that MANDARIN received on January 22, 1991 its copy of the Labor
Arbiter's Decision (of January 15, 1991), but filed its appeal and paid the appeal fee only on February 4, 1991, three (3) days
beyond the reglementary ten-day period for doing so. It also condemns as "anomalous" the certification of Deputy Executive
Clerk Gaudencio P. Demaisip, Jr., NLRC, to the effect that MANDARIN's lawyer had approached Hon. Domingo H. Zapanta, a
member of the Second Division, NLRC, "for assistance to have the appeal including the appeal fee in said case duly received
and acknowledged on February 1, 1991, at 4:40 P.M.;" and claims that the anomaly was aggravated when it was
Commissioner Zapanta who wrote the Decision for the Second Division 4 reversing the Labor Arbiter's judgment, as
aforesaid despite the UNION'S motion for his disqualification and/or inhibition. The UNION finally argues that MANDARIN'S
appeal was not only tardy but also fatally flawed in that its supersedeas bond had been issued by a surety company Plaridel
Surety & Insurance Company which had pending obligations and liabilities at the time, the Insurance Commissioner having
in fact issued a Cease-and-Desist Order against said company for issuing bonds of no little magnitude without authority; and
that moreover, the replacement bond of the Commonwealth Insurance Company subsequently filed by order of the NLRC
was just as defective because the latter company had an authorized maximum net retention level in the amount of only
P686,582.80, way below the monetary award subject of MANDARIN'S appeal to the Commission.

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The Court rules that respondent Commission acted correctly in accepting and acting on MANDARIN's appeal. The
circumstances attendant upon the filing of the appeal and supersedeas bond are clearly set forth in the Certification of Deputy
Executive Clerk Demaisip, Jr. 5 above mentioned, viz.:
This is to certify that when Atty. Godofredo Labay filed the appeal in NLRC NCR Case No. 10-4335-86
entitled Manila Mandarin Employees Union vs. Manila Mandarin on Friday, February 1, 1991, the Cashier
and the Docket Section, NCR, were not around, that no one would receive the pleadings and the appeal fee.
He therefore approached Commissioner Domingo H. Zapanta for assistance and to have the appeal
including the appeal bond in said case duly received on February 1, 1991 at 4:50 p.m.
With respect to the appeal fee, since no one was authorized to act as substitute for the Cashier of the NCR
for purposes of receiving the appeal fee and issuing a temporary receipt and/or official receipt therefor,
Commissioner Zapanta requested Atty. Gaudencio P. Demaisip, Jr. to receive said pleadings and allowed
Atty. Labay to pay the appeal fee on Monday, February 4, 1991.
This certification is issued upon request of Atty. Labay for whatever purpose it may serve him.
(SGD.) GAUDENCIO P.
DEMAISIP, JR.
Deputy Executive Clerk
Second Division
MANDARIN cannot be faulted for paying the appeal fee only on February 4, 1991. The fact is that on February 1, 1991, its
lawyer was in the NLRC premises, ready to pay said fee, but was unable to do so because the NLRC Cashier or any other
employee authorized to receive payment in his stead, was no longer around. This is why Commissioner Zapanta allowed
payment of the appeal fee to be made on the next business day, as in fact the appeal fee was paid on, February 4, 1991. This
Court has ruled that the failure to pay the appeal docketing fee within the reglementary period confers a directory, not a
mandatory, power to dismiss an appeal, to be exercised with circumspection in light of all the relevant facts. 6 In view of these
considerations, and the meritoriousness of MANDARIN's appeal as later pronounced by respondent NLRC the interest of
justice was quite evidently served when MANDARIN's appeal was given due course despite delayed payment of the docketing
fee.
The contention concerning MANDARIN's ostensibly defective appeal bond, issued by Plaridel Surety and Insurance Company,
deserves short shrift, too. The issuance of the bond antedated this court's resolution of January 15, 1992 to which the
attention of respondent NLRC had been invited by the UNION declaring said surety company to be of doubtful solvency.
More important, the issue was mooted when MANDARIN posted a new surety bond, through Commonwealth Insurance
Company, in compliance with the Order of the respondent Commission dated December 10, 1991. The UNION's contention
that this new bond was equally defective because the bonding company had an authorized maximum net retention level lower
than the sum of P30,967,087.17 involved in this dispute, is inconsequential, the new bonding company being duly accredited
by this Court and licensed by the Insurance Commission.
At any rate, this Court has invariably ruled that Article 223 of the Labor Code, requiring a bond in appeals involving monetary
awards, must be liberally construed, in line with the desired objective of resolving controversies on their merits. 7 The
circumstances under which the bond was filed in this case adequately justify such liberal application of the provision.
As to the alleged partiality of Commissioner Domingo Zapanta, the Court finds that his intervention on February 1, 1991 in the
matter of payment of the appeal docketing fee did not, in the circumstances already related, constitute impropriety or pre-
judgment of the case and a ground for his disqualification as a member of the Second Division to which the case was
thereafter raffled. Significantly, in its motion to inhibit, the UNION mentioned that the case was "assigned particularly to the late
Commissioner Rustico Diokno . . (but) that upon the latter's demise, the case was reassigned to Commissioner Domingo
Zapanta as the new ponente." 8 As Commissioner Zapanta had always been a member of the Second Division, the UNION's
motion for his inhibition, filed more than a year after the occurrence of the incident on which it was based, becomes suspect as
a mere afterthought. In any case, Commissioner Zapanta did inhibit himself from taking part in the resolution of the UNION'S
motion for reconsideration of the assailed decision of September 11, 1992, thus dispelling what doubts might linger about his
impartiality.
Coming now to the issue of wage distortion, prior to the effectivity on June 9, 1989 of Republic Act No. 6727 which, among
others, amended Article 124 (Standards/Criteria for Minimum Wage Fixing) of the Labor Code, the concept of 'wage distortion'
was relatively obscure. So it was observed by this Court in National Federation of Labor vs. NLRC, 9 a case involving the
same subject Wage Orders:
We note that neither the Wage Orders noted above, nor the Implementing Rules promulgated by the
Department of Labor and Employment, set forth a clear and specific notion of "wage distortion." What the
Wage Orders and the Implementing Rules did was simply to recognize that implementation of the Wage
Orders could result in a 'distortion of the wage structure' of an employer, and to direct the employer and the
union to negotiate with each other to correct the distortion. Thus, Section 6 of Wage Order No. 3, dated 7
November 1983, provided as follows:

276
 Sec. 6. Where the application of the minimum wage rate prescribed herein results
in distortions of the wage structure of an establishment, the employer and the union shall
negotiate to correct the distortions. Any dispute arising from wage distortions shall
be resolved through the grievance procedure under their collective bargaining agreement
or through conciliation.
"In case where there is no collective bargaining agreement or recognized labor
organization, the employer shall endeavor to correct such distortions in consultation with
their workers. Any dispute arising from wage distortions shall be resolved
through conciliation by the appropriate Regional Office of the Ministry of Labor and
Employment or through arbitration by the NLRC Arbitration Branch having jurisdiction over
the work-place." (Emphasis supplied)
It is therefore opportune to re-state the general principles enunciated in that case, summarized in Metro Transit Organization,
Inc. vs. NLRC, et al., 10 as follows:
(a) The concept of wage distortion assumes an existing grouping or classification of employees which
establishes distinctions among such employees on some relevant or legitimate basis. This classification is
reflected in a differing wage rate for each of the existing classes of employees.
(b) Wage distortions have often been the result of government- decreed increases in minimum wages. There
are, however, other causes of wage distortions, like the merger of two (2) companies (with differing
classification of employees and different wage rates) where the surviving company absorbs all the
employees of the dissolved corporation. (In the present Metro case, as already noted, the wage distortion
arose because the effectivity dates of wage increases given to each of the two (2) classes of employees
(rank-and-file and supervisory) had not been synchronized in their respective CBAs.).
(c) Should a wage distortion exist, there is no legal requirement that, in the rectification of that distortion by
re-adjustment of the wage rates of the differing classes of employees, the gap which had previously or
historically existed be restored in precisely the same amount. In other words, correction of a wage distortion
may be done by re-establishing a substantial or significant gap (as distinguished from the historical gap)
between the wage rates of the differing classes of employees.
(d) The re-establishment of a significant difference in wage rates may be the result of resort to grievance
procedures or collective bargaining negotiations.
It was only on June 9, 1989, upon the enactment of R.A. No. 6727 (Wage Rationalization Act, amending, among others, Article
124 of the Labor Code), 11 that the term "wage distortion" came to be explicitly defined as:
. . . a situation where an increase in prescribed wage rates results in the elimination or severe contraction of
Intentional quantitative differences in wage or salary rates between and among employee groups in an
establishment as to effectively obliterate the distinctions embodied in such wage structure based on skills,
length of service, or other logical bases of differentiation.
The same provision lays down the procedure to be followed where wage distortion arises from the implementation of a wage
increase prescribed by law or ordered by a Regional Wage Board, viz.:
Where the application of any prescribed wage increase by virtue of a law or wage order issued by any
Regional Board results in distortions of the wage structure within an establishment, the employer and the
union shall negotiate to correct the distortions. Any dispute arising from the wage distortions shall be
resolved through the grievance procedure under their collective bargaining agreement and, if it remains
unresolved, through voluntary arbitration. Unless otherwise agreed by the parties in writing, such dispute
shall be decided by the voluntary arbitrator or panel of voluntary arbitrators within ten (10) calendar days
from the time said dispute was referred to voluntary arbitration.
In cases where there are no collective agreements or recognized labor unions, the employers and workers
shall endeavor to correct such distortions. Any dispute arising therefrom shall be settled through the National
Conciliation and Mediation Board and, if it remains unresolved after ten (10) calendar days of conciliation,
shall be referred to the appropriate branch of the National Labor Relations Commission (NLRC). It shall be
mandatory for the NLRC to conduct continuous hearings and decide the dispute within twenty (20) calendar
days from the time said dispute is submitted for compulsory arbitration.
The pendency of a dispute arising from a wage distortion shall not in any way delay the applicability of any
increase in prescribed wage rates pursuant to the provisions of law or Wage Order.
The issue of whether or not a wage distortion exists as a consequence of the grant of a wage increase to certain employees, is
a question of fact; 12 and as a rule, factual findings in labor cases, where grounded on substantial evidence, are not
reviewed. 13 However, a disharmony such as exists here, between the factual findings of the Labor Arbiter and those of the
NLRC, opens the door to a review thereof by this Court. 14
The Labor Arbiter ruled that a wage distortion existed, and that "the only and logical way to correct . . . (it) in the salary
structure of the employees of respondent Hotel is to apply the corresponding increase made by way of revising upward the
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minimum wage or integration of the ECOLA into the basic wage as embodied in the various Presidential Decrees and Wage
Orders, across-the-board, so that employees whose salaries are above the minimum set by
law but who have already been long in the service will not be discriminated against." 15
On the other hand, respondent Commission declared in its decision 16 that there was no wage distortion arising from the
implementation of said Presidential Decrees and Wage Orders such as warranted across-the-board increases to all
employees:
On the issue of wage distortion, we have examined the various presidential decrees and wage orders
referred to by the complainant and in the Labor Arbiter's decision and we found nothing therein that would
justify the award of across-the-board increases to all employees. The apparent intention of the law is only to
upgrade the salaries or wages of the employees receiving lower than the minimum daily wage set therein.
For example, Section 1 of Wage Order No. 6 provides that "effective November 1, 1984, the statutory
minimum daily wage rates of workers in the private sector shall be increased by P2.00." Also, Section 1 of
Presidential Decree 1389 provides that "Presidential Decree 928 is hereby amended by increasing all
existing statutory minimum wages in the country by Three Pesos (P3.00) spread equally over a period of
three years, as follows: l) One Peso (P1.00) starting July 1, 1978; 2) One Peso (P1.00) starting May 1, 1979;
and One Peso (P1.00) starting May 1, 1980." Thus, it is clear that the presidential decrees and wage orders
merely provide for a floor wage to be observed by the employers in the private sector.
It indeed appears that the clear mandate of those issuances was merely to increase the prevailing minimum wages of
particular employee groups. There were no across-the-board increases to all employees; increases were required only as
regards those specified therein. 17 It was therefore incorrect for the UNION to claim that all its members became automatically
entitled to across-the-board increases upon the effectivity of the Decrees and Wage Orders in question. And even if there were
wage distortions, which is not the case here, the appropriate remedy thereunder prescribed is for the employer and the union
to "negotiate" to correct them; or, if the dispute be not thereby resolved, to thresh out the controversy through the grievance
procedure in the collective bargaining agreement, or through conciliation or arbitration.
A review of the records convinces this Court that respondent NLRC committed no grave abuse of discretion in holding that no
wage distortion was demonstrated by the UNION. It was, to be sure, incumbent on the UNION to prove by substantial
evidence its assertion of the existence of a wage distortion. This it failed to do. It presented no such evidence to establish, as
required by the law, what, if any, were the designed quantitative differences in wage or salary rates between employee groups,
and if there were any severe contractions or elimination of these quantitative differences.
The UNION's effort to prove wage distortion consisted only of the presentation of an unverified list of thirteen (13) employees
denominated a "Sample Comparison of Salary Rates Affected by Wage Distortion," 18 viz.:
SAMPLE COMPARISON OF SALARY RATES OF COMPLAINANTS AFFECTED BY WAGE DISTORTION
F&B DEFT.
Name Position Date Hired Basic Rate
(12/30/85)
1. Pablo Trinidad Waiter 9/1/78 P1,300
2. Eduardo Vito Waiter 10/16/80 P1,375
3. Camilo Sanchez Busboy 8/1/83 P954
4. Renato Solomon Busboy 7/19/84 P1,096
5. Buenconsejo Monico Busboy 4/15/85 P968
HOUSEKEEPING DEPT.
1. Ruben A. Rillo Linen Uniform Att. 6/19/76 P984
2. Hubert Malolot Linen Uniform Att. 1/16/80 P1,238
3. Aurelia Kilat Linen Uniform Att. 5/2/79 P1,272
4. Rogelio Molaco Cloakroom Attn. 9/1/80 P946
5. David Pineda Cloakroom Attn. 9/14/81 P1,194
6. Nemesio Matro Houseman Attn. 6/10/76 P1,142
7. Dom'go Sabano Houseman Attn. 3/8/82 P1,194
8. Renato Guina Houseman Attn. 8/24/81 P1,194
SUBMITTED:
(SGD.) ATTY. R.E. ESPINOSA
9/17/87.
The UNION'S Internal Vice-President, Arnulfo Castro, deposed that the employees named in this list were the "more or less
(13) persons found to have suffered wage distortion," 19 and the UNION pointed out that while these thirteen employees
occupied similar positions, they were receiving different rates of salary.
Respondent Commission however found that as explained by private respondents, such disparity was due simply to the fact
that the employees mentioned had been hired on different dates and were thus receiving different salaries; or that an
employee was hired initially at a position level carrying a hiring rate higher than the others; or that an employee failed to meet
278
the cut-off date in the grant of yearly CBA increase; or that the union did not get the correct data on salaries. The Commission
accepted as more accurate the data presented by MANDARIN respecting the same employees, to wit: 20
ANNEX"2"
F&B Dept.
NAME Position Date Hired Basic Rate
per Hotel Records as of 12/30/85
1. Pablo Trinidad Waiter 09/01/78 P1,302.00 *
2. Eduardo Vito Waiter 10/16/80 1,375.00 *
3. Camilo Sanchez Busboy 08/01/83 1,194.00
4. Renato Solomon Busboy 07/19/84 1,096.00
5. Buenconsejo Monico Busboy 04/15/85 968.00
Housekeeping Dept.
1. Ruben A. Rillo Linen Uniform Att. 06/19/76 1,417.00
2. Hubert Malolot Linen Uniform Att. 01/16/80 1,238.00
3. Aurelia Kilat Linen Uniform Att. 05/02/79 1,272.00
4. Rogelio Molaco Cloakroom Attn. 09/19/80 1,272.00
5. David Pineda Cloakroom Attn. 09/14/81 1,213.00
6. Nemesio Matro Houseman Attn. 06/10/77 1,342.00
7. Domingo Sabando Houseman Attn. 03/08/82 1,194.00
8. Renato Guina Houseman Attn. 08/24/81 1,194.00
* Vito was hired at a higher position with a higher hiring rate than that given to Trinidad, i.e. Vito was hired at
P366/mo. while Trinidad at P301/mo. Prior to hiring, Vito already worked as a waiter at the Metropolitan
Club.
The Court agrees that the claimed wage distortion was actually a result of the UNION'S failure to appreciate various
circumstances relating to the employment of the thirteen employees. For instance, while some of these employees mentioned
by UNION Vice-President Arnulfo Castro occupied the same or similar positions, they were hired by the Hotel on different
dates and at different salaries. As explained in part by MANDARIN:
With respect to the case of Pablo Trinidad and Eduardo Vito, while they were both occupying the position of
waiter in 1987, with monthly salaries of P2,044.00 and P2,217.00, respectively, a comparative study of the
records of these employees shows one of them was initially hired at a higher position level which naturally
carried a higher hiring rate. Trinidad was originally hired in 1978 as a mere Houseman at the Banquet
Department with a basic starting rate of P301.00 a month. On the other hand, Vito was originally hired in
1980 already a Busboy at the Food and Beverage Department with a starting salary of P366.00 a month.
Before he was hired at the Mandarin Hotel, Vito had already been working as Waiter at the Metropolitan
Club. Records also show that it was only after some time that Trinidad was promoted to Busboy but still with
the smaller Banquet Department. The headway in rate was carried by Vito although at some point in their
careers, these two employees achieved the same position as Waiter. Not long after, Vito was promoted to
Captain Waiter while Trinidad remained Waiter. There is therefore no reason to compare the renumeration
of these two employees as the circumstances attendant to their employment are different. 21
Respondent Commission correctly concluded that these did not represent cases of wage distortion contemplated by the law
(Article 124, Labor Code, as amended), i.e., a "situation where an increase in prescribed wage rates results in the elimination
or severe contraction of intentional quantitative differences in wage or salary rates between and among employees groups in
an establishment as to effectively obliterate the distinctions embodied in such wage structure based on skills, length of service,
or other logical basis of differentiation."
Moreover, even assuming arguendo that there was really a wage distortion, it was wrong for the Labor Arbiter, after first
acknowledging that some of the money claims had prescribed under Article 291 of the Labor
Code, 22 to nevertheless order the computation of salary differentials retroactive to the effective dates of PDs 1389, 1614,
1713, 1751 and Wage Orders Nos. 2, 3, 4, 5, and 6: in 1978, 1979, 1980, 1980, July 1983, November 1983, May 1984, June
1981 and November 1984, respectively. Clearly, five of these Decrees and Wage Orders took effect after the lapse of the
three-year prescriptive period for litigating claims for wage distortion differentials, the original complaint for wage distortion
having been filed on October 30, 1986 and the amended complaint for underpayment of wages, on March 25, 1987.
Consequently, the applicable cut-off dates, for purposes of prescription, were October 30, 1983 and March 25, 1984,
respectively.
Finally, the records show that the matter of wage distortion, actual or imputed under the various issuances up to Wage Order
No. 6, had been settled by the parties as early as July 30, 1985. On that day they executed a Compromise Agreement with the
assistance of the then Regional Director of the National Capital Region, Severo M. Pucan in which they affirmed that with the
implementation by MANDARIN of Wage Order Nos. 4 and 6 as well as P.D. 1634, the latter was "deemed for all legal and

279
purposes to have fully satisfied all its legal and contractual obligations to its employees under all presidential issuances on
wages." 23
The Compromise Agreement pertinently states:
1. That the respondent shall implement Wage Order No. 6 effective July 1, 1985, without prejudice to the
outcome of the application for exemption as distressed employer filed by said respondent with the National
Wage Council as regards benefits that might be due between November 1, 1985 and June 30, inclusive;
2. The the respondent shall also implement effective August 1, 1985 the integration of the P90.00 a month
cost of living allowance under P.D. 1634 into the basic wages of its employees as called for under Wage
Order No. 4 in accordance with the Guidelines contained in the Explanatory Bulletin issued by the Bureau of
Working Conditions on August 8, 1985;
3. That as soon as the respondent shall have complied with the above terms of this Compromise
Agreement, said respondent shall be deemed for all legal intents and purposes to have fully satisfied all the
legal and contractual obligations to its employees under all presidential issuances on wages, including Wage
Orders No. 4 and 6, and Article XI of the collective bargaining agreement.
The Labor Code recognizes the conclusiveness of compromises as a means to settle and end labor disputes. Article 227
provides that "(a)ny compromise settlement, including those involving labor standard laws, voluntarily agreed upon by the
parties with the assistance of the Bureau or the regional office of the Department of Labor, shall be final and binding upon the
parties. The National Labor Relations Commission or any court shall not assume jurisdiction over issues involved therein
except in case of non-compliance thereof or if there is prima facie evidence that the settlement was obtained through fraud,
misrepresentation or coercion." In Olaybar vs.
NLRC, 24 this Court had occasion, in a labor dispute, to apply the rule that compromises and settlements have the effect and
conclusiveness of res judicata upon the parties.
Thus, and again assuming arguendo the existence of a wage distortion, this was corrected under the "fully implemented"
Compromise Agreement; 25 and such correction having been explicitly acknowledged by the UNION, it is now estopped from
claiming that a distortion still subsists. In the same manner, when the UNION entered into a new collective bargaining
agreement with MANDARIN, providing for wage increases in 1987, it is deemed to have thereby settled any remaining
question of wage distortion, since the subject of wages and wage distortions were plainly and unavoidably an economic issue
and the proper subject of collective bargaining. 26
Neither did respondent Commission gravely abuse its discretion in ruling against the UNION on the issue of underpayment of
wages,
The UNION's theory was that since the employees of MANDARIN are paid on a monthly basis under the Group III category,
the applicable increase in daily wage must be multiplied by 365 and then divided by 12 to determine the equivalent monthly
rate. MANDARIN's position, on the other hand, was that it had consistently been using the multiplier 313, and not 365, for the
purpose of deriving salary related benefits of its employees who are paid by the month, excluding from 365, the 52 unpaid rest
days in a year. This appears to have been the consistent practice of MANDARIN, following the formula for daily paid
employees under Group II category as prepared by the Bureau of Labor Standards: 27
AR x 313 days = EMR

12
Where: 313 days = 303 actual working days a year
plus the paid 10 unworked regular
holidays.
Actual working days 303
10 legal holidays 10

Total No. of Days 313.
MANDARIN presented evidence of its practice regarding the use of the factor 313 in computing the monthly equivalent of the
minimum daily wages and other related benefits of its employees; i.e., Annexes 3 and 4 of its Supplemental Appeal dated
November 12, 1991. This was corroborated by the UNION's Internal Vice President, Arnulfo Castro, who admitted during
cross-examination that in his research and study, he found that the divisor used in arriving at the daily rate of the hotel
employees was 313 days, which meant that the days-off or rest days are not paid. 28 The admission confirms that the hotel
employees pertain Group II category under the Bureau of Labor Standards Guidelines for computing the equivalent monthly
minimum wage rates. 29 Thus, instead of multiplying the applicable minimum daily wage by 365 and dividing the result by 12 to
derive the applicable minimum monthly salary, the factor used is 313, composed of 303 actual working days and the 10
unworked but paid regular holidays in a year.
In his explanatory Bulletin on the payment of Holiday Pay Ref. No. 85-08 dated 6 November 1985 then Secretary
Augusto Sanchez of the Department of Labor and Employment, expatiating on the implications of the Chartered
Bank case, 30 stated:

280
 6. Monthly Paid Employees
Oftentime confusion arises from the different interpretations as to who is a monthly-paid employee. A
"monthly-paid employee" is one whose monthly salary includes payments for everyday of the month
although he does not regularly work on his rest days or Sundays and on regular and special holidays. Group
III in the above illustration covers monthly paid employees. Employees falling under Group I, II and IV are in
reality daily paid employees but whose daily rate is translated into its monthly equivalent. The fact, therefore,
that an employee is regularly paid a fixed monthly rate does not necessarily mean that he is a monthly-paid
employee as defined above. (Emphasis supplied)
As applied to the UNION, the-monthly equivalent of the minimum wage under the various Presidential Decrees and Wage
Orders based on the above formula should be as follows:
PD/WO NO. Effectivity Minimum Daily Equivalent
Wage Rate Monthly Rate
PD 1389 01 July 1978 P11.00 P286.96
PD 1614 1 March 1979 13.00 339.00
PD 1813 18 Aug. 1980 14.00 365.17
WO # 2 06 July 1983 19.00 495.58
WO # 3 01 Nov. 1983 20.00 521.67
WO # 4 01 May 1984 32.00 834.67
WO # 5 01 Nov. 1984 35.00 912.92
WO # 6 01 Nov. 1984 37.00 965.08
On the other hand, the monthly pay of the Hotel employees and hiring rate may be illustrated as follows:
PD/WO NO. Effectivity Equivalent Lowest Salary
Monthly Rate in the Hotel
PD 1389 01 July 1978 P286.92 P350.00
PD 1614 1 March 1979 339.08 411.00
PD 1813 18 Aug. 1980 365.17 562.00
WO # 2 06 July 1983 495.58 960.00
WO # 3 01 Nov. 1983 521.67 960.00
WO # 4 01 May 1984 834.67 960.00
WO # 5 01 Nov. 1984 912.92 960.00
WO # 6 01 Nov. 1984 965.080 1,015.00
A comparative analysis of the wages of the Hotel's employees from 1978 to 1984 vis a vis the minimum wages fixed by law for
the period reveals that at no time during the said period was there any underpayment of wages by the respondent Hotel. On
the contrary, the prevailing monthly salaries of the subject hotel employees appear to be over and above the minimum
amounts required under the applicable Presidential Decrees and Wage Orders.
WHEREFORE, the assailed Decision of respondent Commission promulgated on September 11, 1992 reversing the
judgment of the Labor Arbiter and dismissing the UNION'S complaint being based on substantial evidence and in accord
with applicable laws and jurisprudence, as well as said Commission's Resolution dated 24, 1992 denying reconsideration
are hereby AFFIRMED in toto.
SO ORDERED.

G.R. No. 103586 July 21, 1994

NATIONAL FEDERATION OF LABOR, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and FRANKLIN BAKER COMPANY OF THE PHILIPPINES (DAVAO
PLANT), respondents.
Jose Espinas for petitioner.
Siguion-Reyna, Montecillo & Ongsiako for private respondent.

FELICIANO, J.:
Between 1 November 1983 and 1 November 1984, Wage Orders Nos. 3, 4, 5 and 6 were promulgated by the then President
Ferdinand E. Marcos. Wage Order No. 3 became effective as of 1 November 1983; Wage Order No. 4, as of 1 May 1984;
Wage Order No. 5, as of 16 June 1984; and Wage Order No. 6 went into effect on 1 November 1984. All these Wage Orders
increased the statutory minimum wages of workers with differing increases being specified for agricultural plantation and non-
agricultural workers.
Before the effectivity of Wage Order No. 3, the wage rates of regular employees and of casual (or non-regular) employees of
private respondent Franklin Baker Company of the Philippines (Davao Plant) ("Company") were such that there was a positive

281
differential between the two (2) in the amount of P4.56. The effect of the implementation of the successive Wage Orders upon
the daily wage rates of these two (2) groups of employees was summarized by petitioner in the following table:
Effectivity Wage of Wage of Gap
Date Regulars Casuals
Before W.O. No. 3 P22.56 P18.00 P4.56
After W.O. No. 3 1 Nov. 1983 22.56 20.00 2.56
After W.O. No. 4 1 May 1984 32.64 31.00 1.64
After W.O. No. 5 16 June 1984 34.00 34.00 0.00 1
Upon the effectivity of Wage Order No. 5, grievance meetings were held by petitioner National Federation of Labor ("NFL")
and private respondent Company sometime in June 1984, addressing the impact which implementation of the various Wage
Orders had on the wage structure of the Company.
On 21 June 1984, all the casual or non-regular employees of private respondent Company (at least in its Davao Plant) were
"regularized," or converted into regular employees, pursuant to the request of petitioner NFL.
On 1 July 1984, the effectivity date of the 1984 Collective Bargaining Agreement between NFL and the Company, all regular
employees of the Company received an increase of P1.84 in their daily wage; the regular daily wage of the regular employees
thus became P35.84 as against P34.00 per day for non-regular employees.
As a result of the implementation of Wage Order No. 6, casual employees received an increase of their daily wage from
P34.00 to P36.00. At the same time, the Company unilaterally granted an across-the-board increase of P2.00 in the daily rate
of all regular employees, thus increasing their daily wage from P35.84 to P37.84. Further, on 1 July 1985, the anniversary date
of the increases under the CBA, all regular employees who were members of the collective bargaining unit got a raise of P1.76
in their basic daily wage, which pushed that daily wage from P37.84 to P39.60, as against the non-regular's basic wage of
P36.00 per day. Finally, by November 1987, the lowest paid regular employee had a basic daily rate of P64.64, or P10.64
more than the statutory minimum wage paid to a non-regular employee.
The development of the wage scales of the Company's employees after the effectivity date of Wage Order No. 5 is presented
in the following table:
Effectivity Wage of Wage of Gap
Date Regulars Casuals
After W.O. No. 5 16 June 1984 34.00 34.00 0.00
CBA Increase 1 July 1984 35.84 34.00 1.84
After W.O. No. 6 1 Nov. 1984 37.84 36.00 1.84
CBA Anniversary 1 July 1985 39.60 36.00 3.60
Increase
Meantime, while the above wage developments were unfolding, the Company experienced a work output slow down. The
Company directed some 205 workers to explain the reduction in their work output. The workers failed to comply and they were
accordingly issued notices of dismissal by the Company. As a response to its decreasing productivity levels, the Company
suspended operations on 16 August 1984. Operations were resumed on 14 September 1984; the Company, however, refused
to take back the 205 dismissed employees. Petitioner Union then went on strike alleging a lock-out on the part of the Company
and demanding rectification of the wage distortion. The case was certified by the Secretary of Labor to the National Labor
Relations Commission ("NLRC") for compulsory conciliation.
On 19 June 1985, the Union and the Company reached an agreement with respect to the lock-out issue. The agreement,
which was approved by the NLRC En Banc, granted the 205 employees "financial assistance" equivalent to thirty (30) days'
separation pay. This left unresolved only the wage distortion issue.
On 11 November 1987, the NLRC En Banc rendered a decision which in effect found the existence of wage distortion and
required the Company to pay a P1.00 wage increase effective 1 May 1984:
In the computation submitted by the Union, there is a need to restore the P2.56 gap between non-regulars
or "casuals" and "regular workers." This difference in the basic wage of these workers was existing at the
time of the conclusion of the collective bargaining agreement and before the implementation of Wage Orders
No. 4 & 5. The imprecise claim of respondent that there is P3.60 gap between non-regular and regulars may
not be sustained because as aforestated, this amount represents negotiated wage increase which should
not be considered covered and in compliance with the wage orders. Considering, however, the present
economic conditions and the outlay involved in correcting the distortion in the wages of respondent's
workers, this Commission, in the exercise of its arbitral powers, feels that an increase of P1.00 on the
present basic wage of regular workers would significantly rectify or minimize the distortion in the wage
structure of respondent company caused by the implementation of the various wage orders. Respondent is,
therefore, required to implement the P1.00 wage increase effective May 1, 1984 when Wage Order 4 took
effect. 2 (Emphasis supplied)
On motion for partial reconsideration filed by the Company, the above quoted portion of the NLRC En Banc'sdecision was
reconsidered and set aside by the NLRC Fifth Division. 3 The Fifth Division of the NLRC in effect found that while a wage

282
distortion did exist commencing 16 June 1984, the distortion persisted only for a total of fifteen (15) days and accordingly
required private respondent company to pay "a wage increase of P2.00 per day to all regular workers effective June 16, 1984
up to June 30, 1984 or a total of fifteen (15) days." 4 The rest of the decision of 11 November 1987 was left untouched.
In its decision dated 16 December 1991, the NLRC (Fifth Division) said:
. . . At the time Wage Order No. 4 was implemented on May 1, 1984, casual employees were increased to
P34.00 per day, placing them on equal salary footing with the regular employees who were likewise
receiving P34.00 per day. But effective July 1, 1984 when the 1984 CBA took effect, the regular employees
of the company admittedly received the basic wage of P35.84 or an increase of P1.84 as against the daily
wage of P34.00 of the casual employees.
Thus, the apparent wage distortion did not last long but only for 15 days, that is from June 16, 1984 when
Wage Order No. 5 took effect and lasted only up to June 30, 1984. From July 1, 1984, the regular
employees received an increase of P1.84 making their daily wage P35.84 as against the wage of casual
employees of P34.00 per day. And as rightly pointed out respondent-movant, the difference in the wage
scale between the two (2) groups of employees was maintained even after the implementation of Wage
Order No. 6 which took effect on November 1, 1984. 5 (Emphasis supplied)
The bottom line issue presented to the Court is thus whether or not, under the facts as summarized above, the NLRC (Fifth
Division) committed a grave abuse of discretion amounting to lack or excess of jurisdiction, when it concluded that the wage
distortion had ceased to exist, after 1 July 1984.
The principal contention of petitioner NFL is that a wage distortion in the wage structure of private respondent Company
continued to exist although a gap of P1.84 between the daily wage rate of regular employees and that of casual
employees had been re-established upon the effectivity of the CBA increase on 1 July 1984. The original claim of NFL was
that the initial prior to effectivity of Wage Order No. 3 differential of P4.56 in the wage rate of regular employees and that
of casual employees, should be re-created this time between the wage rates of the newly "regularized" employees (i.e., the
casual employees regularized by the Company on 21 June 1984) and the "old" regular employees (employees who, allegedly,
had been regular employees for at least three [3] years before the "regularization" of the casuals). 6 NFL stresses that seniority
is a valid basis of distinction between differing groups of employees, under the Labor Code.
We note that neither the Wage Orders noted above, nor the Implementing Rules promulgated by the Department of Labor and
Employment, set forth a clear and specific notion of "wage distortion." What the Wage Orders and the Implementing Rules did
was simply to recognize that implementation of the Wage Orders could result in a "distortion of the wage structure" of an
employer, and to direct the employer and the union to negotiate with each other to correct the distortion. Thus, Section 6 of
Wage Order No. 3, dated 7 November 1983, provided as follows:
Sec. 6. Where the application of the minimum wage rate prescribed herein results in distortions of the wage
structure of an establishment, the employer and the union shall negotiate to correct the distortions. Any
dispute arising from wage distortions shall be resolved through the grievance procedure under their
collective bargaining agreement or through conciliation.
In case where there is no collective bargaining agreement or recognized labor organization, the employer
shall endeavor to correct such distortions in consultation with their workers. Any dispute shall be resolved
through conciliation by the appropriate Regional Office of the Ministry of Labor and Employment or
through arbitration by the NLRC Arbitration Branch having jurisdiction over the work-place. 7 (Emphasis
supplied)
In its Resolution dated 11 November 1987, the NLRC En Banc provided some elaboration of the notion of wage distortion, in
the following terms:
Wage distortion presupposes a classification of positions and ranking of these positions at various levels.
One visualizes a hierarchy of positions with corresponding ranks basically in terms of wages and other
emoluments. Where a significant change occurs at the lowest level of positions in terms of basic wage
without a corresponding change in the other level in the hierarchy of positions, negating as a result thereof
the distinction between one level of position from the next higher level, and resulting in a disparity [should be
"parity"] between the lowest level [and] the next higher level or rank, between new entrants and old hires,
there exists a wage distortion.
The various issuances on wages anticipated this occurrence so that it had been commonly provided for in
these issuances that negotiations may be initiated for the purposes of correcting the resulting
distortion. 8 (Emphases and brackets supplied)
A statutory definition of "wage distortion" is now found in Article 124 of the Labor Code as amended by Republic Act. No. 6727
(dated 9 June 1989) which reads as follows:
Article 124. Standards/Criteria for Minimum Wage Fixing . . .
xxx xxx xxx
As used herein, a wage distortion shall mean a situation where an increase in prescribed wage rates results
in the elimination or severe contraction of intentional quantitative differences in wage or salary rates

283
 between and among employee groups in an establishment as to effectively obliterate the distinctions
embodied in such wage structure based on skills, length of service, or other logical bases of
differentiation. 9 (Emphasis supplied)
From the above quoted material, it will be seen that the concept of wage distortion assumes an existing grouping or
classification of employees which establishes distinctions among such employees on some relevant or legitimate basis. This
classification is reflected in a differing wage rate for each of the existing classes of employees. The wage distortion anticipated
in Wage Orders Nos. 3, 4, 5 and 6 was a "distortion" (or "compression") which ensued from the impact of those Wage Orders
upon the different wage rates of the several classes of employees. Thus distortion ensued where the result of implementation
of one or another of the several Wage Orders was the total elimination or the severe reduction of the differential or gap
existing between the wage rates of the differing classes of employees. 10
It is important to note that the remedy contemplated in the Wage Orders, and now in Article 124 of the Labor Code, for a wage
distortion consisted of negotiations between employer and employees for the rectification of the distortion by re-adjusting the
wage rates of the differing classes of employees. As a practical matter, this ordinarily meant a wage increase for one or more
of the affected classes of employees so that some gap or differential would be
re-established. There was no legal requirement that the historical gap which existed before the implementation of the Wage
Orders be restored in precisely the same form or amount.
Applying the above concept to the case at bar, we note that there did exist a two-fold classification of employees within the
private respondent Company: regular employees on the one hand and casual (or non-regular) employees on the other. As can
be seen from the figures referred to earlier, the differential between these two (2) classes of employees existing before Wage
Order No. 3 was reduced to zero upon the effectivity of Wage Order No. 5 on 16 June 1984. Obviously, distortion consisting
of complete elimination of the wage rate differential had occurred. It is equally clear, however, that fifteen (15) days later, on
1 July 1984, upon effectivity of the wage increase stipulated in the collective bargaining agreement between the parties, a gap
or differential of P1.84 was re-created. This restored differential persisted after the effectivity of Wage Order No. 6 on 1
November 1984. By operation of the same CBA, by 1 July 1985, the wage differential had grown to P3.60.
We believe and so hold that the re-establishment of a significant gap or differential between regular employees and casual
employees by operation of the CBA was more than substantial compliance with the requirements of the several Wage Orders
(and of Article 124 of the Labor Code). That this re-establishment of a significant differential was the result of collective
bargaining negotiations, rather than of a special grievance procedure, is not a legal basis for ignoring it. The NLRC En
Banc was in serious error when it disregarded the differential of P3.60 which had been restored by 1 July 1985 upon the
ground that such differential "represent[ed] negotiated wage increase[s] which should not be considered covered and in
compliance with the Wage Orders." 11 The Wage Orders referred to above had provided for the crediting of increases in wages
or allowances granted or paid by employers within a specified time against the statutorily prescribed increases in minimum
wages. 12 A similar provision recognizing crediting of increases in daily basic wage rates granted by employers pursuant to
collective bargaining agreements, is set out in Section 4(d) of R.A. No. 6727, a statute which sought to "rationalize wage policy
determination by establishing the mechanism and proper standards therefor ." In Apex Mining Company, Inc. v. National
Labor Relations Commission, 13the Supreme Court said:
It is important to note that the creditability provisions in Wage Orders Nos. 5 and 6 (as well as the parallel
provisions in Wage Orders Nos. 2, 3 and 4) are grounded in an important public policy. That public policy
may be seen to be the encouragement of employers to grant wage and allowance increases to their
employees higher than the minimum rates of increases prescribed by statute or administrative regulation.
To obliterate the creditability provisions in the Wage Orders through interpretation or otherwise, and to
compel employers simply to add legislated increases in salaries or allowances without regard to what is
already being paid, would be to penalize employers who grant their workers more than the statutorily
prescribed minimum rates of increases. Clearly, this would be counter-productive so far as securing the
interests of labor is concerned. The creditability provisions in the Wage Orders prevent the penalizing of
employers who are industry leaders and who do not wait for statutorily prescribed increases in salary or
allowances and pay their workers more than what the law or regulations require. 14 (Emphases in the
original)
We believe that the same public policy requires recognition and validation, as it were, of wage increases given by employers
either unilaterally or as a result of collective bargaining negotiations, in the effort to correct wage distortions.
We consider, still further, that the "regularization" of the casual or non-regular employees on 21 June 1984 which was
unilaterally effected by the Company (albeit upon the request of petitioner NFL), in conjunction with the coming into effect of
the increases in daily wage stipulated in the CBA, had the effect of rendering the whole problem of wage distortion
academic. The act of "regularization" eliminated the classification scheme in respect of which the wage distortion had existed.
Petitioner NFL's principal contention that the wage distortion persisted with respect to the "old" regular employees and the
"newly regularized" employees, is realistically a claim or demand that the classification of "regular" employees be broken down
into a sub-classification of "new regulars" and "old regulars." A basic problem with this contention is that, per the record of this
case and during the period of time here relevant, there was in fact no pre-existing sub-classification of regular employees into
284
"new regulars" and "old regulars" (i.e., on the basis of seniority or longevity) in the Company. It follows that, as pointed out by
the Solicitor-General, 15 no wage distortion within the meaning of Wage Orders Nos. 3 through 6 (and of Article 124 of the
Labor Code) continued beyond the "regularization" of the casual employees on
21 June 1984. It may be though here again the record is silent that the Company had some other sub-grouping of
regular employees on the basis, for instance, of the kind of functions discharged by employees (e.g., rank and file;
supervisory; middle management; senior management; highly technical, etc.).
The basic point which needs to be stressed is that whether or not a new or additional scheme of classification of employees for
compensation purposes should be established by the Company (and the legitimacy or viability of the bases of distinction there
embodied) is properly a matter for management judgment and discretion, and ultimately, perhaps, a subject matter for
bargaining negotiations between employer and employees. It is assuredly something that falls outside the concept of "wage
distortion." The Wage Orders and Article 124 as amended do not require the establishment of new classifications or sub-
classifications by the employer. The NLRC is not authorized unilaterally to impose, directly or indirectly, under the guise of
rectifying a "wage distortion," upon an employer a new scheme of classification of employees where none has been
established either by management decision or by collective bargaining.
We conclude that petitioner NFL has not shown any grave abuse of discretion amounting to lack of excess of jurisdiction on
the part of the NLRC in rendering its decision (through its Fifth Division) dated 16 December 1991.
WHEREFORE, the Petition for Certiorari is hereby DISMISSED for lack of merit. No pronouncement as to costs.
SO ORDERED.

G.R. No. 140689 February 17, 2004

BANKARD EMPLOYEES UNION-WORKERS ALLIANCE TRADE UNIONS, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and BANKARD, INC., respondents.
DECISION
CARPIO MORALES, J.:
The present Petition for Review on Certiorari under Rule 45 of the Rules of Court raises the issue of whether the unilateral
adoption by an employer of an upgraded salary scale that increased the hiring rates of new employees without increasing the
salary rates of old employees resulted in wage distortion within the contemplation of Article 124 of the Labor Code.
Bankard, Inc. (Bankard) classifies its employees by levels, to wit: Level I, Level II, Level III, Level IV, and Level V. On May 28,
1993, its Board of Directors approved a "New Salary Scale", made retroactive to April 1, 1993, for the purpose of making its
hiring rate competitive in the industrys labor market. The "New Salary Scale" increased the hiring rates of new employees, to
wit: Levels I and V by one thousand pesos (P1,000.00), and Levels II, III and IV by nine hundred pesos (P900.00).
Accordingly, the salaries of employees who fell below the new minimum rates were also adjusted to reach such rates under
their levels.
Bankards move drew the Bankard Employees Union-WATU (petitioner), the duly certified exclusive bargaining agent of the
regular rank and file employees of Bankard, to press for the increase in the salary of its old, regular employees.
Bankard took the position, however, that there was no obligation on the part of the management to grant to all its employees
the same increase in an across-the-board manner.
As the continued request of petitioner for increase in the wages and salaries of Bankards regular employees remained
unheeded, it filed a Notice of Strike on August 26, 1993 on the ground of discrimination and other acts of Unfair Labor Practice
(ULP).
A director of the National Conciliation and Mediation Board treated the Notice of Strike as a "Preventive Mediation Case"
based on a finding that the issues therein were "not strikeable".
Petitioner filed another Notice of Strike on October 8, 1993 on the grounds of refusal to bargain, discrimination, and other acts
of ULP - union busting. The strike was averted, however, when the dispute was certified by the Secretary of Labor and
Employment for compulsory arbitration.
The Second Division of the NLRC, by Order of May 31, 1995, finding no wage distortion, dismissed the case for lack of merit.
Petitioners motion for reconsideration of the dismissal of the case was, by Resolution of July 28, 1995, denied.
Petitioner thereupon filed a petition for certiorari before this Court, docketed as G.R. 121970. In accordance with its ruling
in St. Martin Funeral Homes v. NLRC,1 the petition was referred to the Court of Appeals which, by October 28, 1999, denied
the same for lack of merit.
Hence, the present petition which faults the appellate court as follows:
(1) It misapprehended the basic issues when it concluded that under Bankards new wage structure, the old salary
gaps between the different classification or level of employees were "still reflected" by the adjusted salary rates2; and
(2) It erred in concluding that "wage distortion does not appear to exist", which conclusion is manifestly contrary to
law and jurisprudence.3
Upon the enactment of R.A. No. 6727 (WAGE RATIONALIZATION ACT, amending, among others, Article 124 of the Labor
Code) on June 9, 1989, the term "wage distortion" was explicitly defined as:
285
... a situation where an increase in prescribed wage rates results in the elimination or severe contraction of intentional
quantitative differences in wage or salary rates between and among employee groups in an establishment as to effectively
obliterate the distinctions embodied in such wage structure based on skills, length of service, or other logical bases of
differentiation.4
Prubankers Association v. Prudential Bank and Trust Company 5 laid down the four elements of wage distortion, to wit: (1.) An
existing hierarchy of positions with corresponding salary rates; (2) A significant change in the salary rate of a lower pay class
without a concomitant increase in the salary rate of a higher one; (3) The elimination of the distinction between the two levels;
and (4) The existence of the distortion in the same region of the country.
Normally, a company has a wage structure or method of determining the wages of its employees. In a problem dealing with
"wage distortion," the basic assumption is that there exists a grouping or classification of employees that establishes
distinctions among them on some relevant or legitimate bases. 6
Involved in the classification of employees are various factors such as the degrees of responsibility, the skills and knowledge
required, the complexity of the job, or other logical basis of differentiation. The differing wage rate for each of the existing
classes of employees reflects this classification.
Petitioner maintains that for purposes of wage distortion, the classification is not one based on "levels" or "ranks" but on two
groups of employees, the newly hired and the old, in each and every level, and not between and among the different levels or
ranks in the salary structure.
Public respondent National Labor Relations Commission (NLRC) refutes petitioners position, however. It, through the Office of
the Solicitor General, essays in its Comment of April 12, 2000 as follows:
To determine the existence of wage distortion, the "historical" classification of the employees prior to the wage increase must
be established. Likewise, it must be shown that as between the different classification of employees, there exists a "historical"
gap or difference.
xxx
The classification preferred by petitioner is belied by the wage structure of private respondent as shown in the new salary
scale it adopted on May 28, 1993, retroactive to April 1, 1993, which provides, thus:

Hiring Minimum Maximum

Level From To From To From To

I 3,100 4,100 3,200 4,200 7,200 9,250

II 3,200 4,100 3,300 4,200 7,500 9,500

III 3,300 4,200 3,400 4,300 8,000 10,000

IV 3,500 4,400 3,600 4,500 8,500 10,500

V 3,700 4,700 3,800 4,800 9,000 11,000

Thus the employees of private respondent have been "historically" classified into levels, i.e. I to V, and not on the basis of
their length of service. Put differently, the entry of new employees to the company ipso facto place[s] them under any of the
levels mentioned in the new salary scale which private respondent adopted retroactive [to] April 1, 1993. Petitioner cannot
make a contrary classification of private respondents employees without encroaching upon recognized management
prerogative of formulating a wage structure, in this case, one based on level.7 (Emphasis and underscoring supplied)
The issue of whether wage distortion exists being a question of fact that is within the jurisdiction of quasi-judicial
tribunals,8 and it being a basic rule that findings of facts of quasi-judicial agencies, like the NLRC, are generally accorded not
only respect but at times even finality if they are supported by substantial evidence, as are the findings in the case at bar, they
must be respected. For these agencies have acquired expertise, their jurisdiction being confined to specific matters. 9
It is thus clear that there is no hierarchy of positions between the newly hired and regular employees of Bankard, hence, the
first element of wage distortion provided in Prubankers is wanting.lawphi1.nt
While seniority may be a factor in determining the wages of employees, it cannot be made the sole basis in cases where the
nature of their work differs.
Moreover, for purposes of determining the existence of wage distortion, employees cannot create their own independent
classification and use it as a basis to demand an across-the-board increase in salary.
As National Federation of Labor v. NLRC, et al.10 teaches, the formulation of a wage structure through the classification of
employees is a matter of management judgment and discretion.
[W]hether or not a new additional scheme of classification of employees for compensation purposes should be established by
the Company (and the legitimacy or viability of the bases of distinction there embodied) is properly a matter of management
judgment and discretion, and ultimately, perhaps, a subject matter for bargaining negotiations between employer and
286
employees. It is assuredly something that falls outside the concept of "wage distortion."11 (Emphasis and underscoring
supplied)
As did the Court of Appeals, this Court finds that the third element provided in Prubankers is also wanting. For, as the
appellate court explained:
In trying to prove wage distortion, petitioner union presented a list of five (5) employees allegedly affected by the said increase:

Pay of Old/ Pay of Newly Difference

Regular Employees Hired Employees

A. Prior to April 1, 1993

Level I P4,518.75 P3,100 P1,418.75

(Sammy Guce)

Level II P6,242.00 P3,200 P3,042.00

(Nazario Abello)

Level III P4,850.00 P3,300 P1,550.00

(Arthur Chavez)

Level IV P5,339.00 P3,500 P1,839.00

Melissa Cordero)

Level V P7,090.69 P3,700 P3,390.69

(Ma. Lourdes Dee)

B. Effective April 1, 1993

Level I P4,518.75 P4,100 P418.75

Sammy Guce)

Level II P6,242.00 P4,100 P2,142.00

(Nazario Abello)

Level III P4,850.00 P4,200 P650.00

(Arthur Chavez)

Level IV P5,330.00 P4,400 P939.00

(Melissa Cordero)

Level V P7,090.69 P4,700 P2,390.69

(Ma. Lourdes Dee)
Even assuming that there is a decrease in the wage gap between the pay of the old employees and the newly hired
employees, to Our mind said gap is not significant as to obliterate or result in severe contraction of the intentional quantitative
differences in the salary rates between the employee group. As already stated, the classification under the wage
structure is based on the rank of an employee, not on seniority. For this reason, ,wage distortion does not appear to
exist.12 (Emphasis and underscoring supplied)
Apart from the findings of fact of the NLRC and the Court of Appeals that some of the elements of wage distortion are absent,
petitioner cannot legally obligate Bankard to correct the alleged "wage distortion" as the increase in the wages and salaries of
the newly-hired was not due to a prescribed law or wage order.
The wordings of Article 124 are clear. If it was the intention of the legislators to cover all kinds of wage adjustments, then the
language of the law should have been broad, not restrictive as it is currently phrased:
Article 124. Standards/Criteria for Minimum Wage Fixing.
xxx
Where the application of any prescribed wage increase by virtue of a law or Wage Order issued by any Regional
Board results in distortions of the wage structure within an establishment, the employer and the union shall negotiate to
correct the distortions. Any dispute arising from the wage distortions shall be resolved through the grievance procedure under
their collective bargaining agreement and, if it remains unresolved, through voluntary arbitration.
x x x (Italics and emphasis supplied)

287
Article 124 is entitled "Standards/Criteria for Minimum Wage Fixing." It is found in CHAPTER V on "WAGE STUDIES,
WAGE AGREEMENTS AND WAGE DETERMINATION" which principally deals with the fixing of minimum wage. Article 124
should thus be construed and correlated in relation to minimum wage fixing, the intention of the law being that in the event of
an increase in minimum wage, the distinctions embodied in the wage structure based on skills, length of service, or other
logical bases of differentiation will be preserved.
If the compulsory mandate under Article 124 to correct "wage distortion" is applied to voluntary and unilateralincreases by the
employer in fixing hiring rates which is inherently a business judgment prerogative, then the hands of the employer would be
completely tied even in cases where an increase in wages of a particular group is justified due to a re-evaluation of the high
productivity of a particular group, or as in the present case, the need to increase the competitiveness of Bankards hiring rate.
An employer would be discouraged from adjusting the salary rates of a particular group of employees for fear that it would
result to a demand by all employees for a similar increase, especially if the financial conditions of the business cannot address
an across-the-board increase.
Petitioner cites Metro Transit Organization, Inc. v. NLRC13 to support its claim that the obligation to rectify wage distortion is
not confined to wage distortion resulting from government decreed law or wage order.
Reliance on Metro Transit is however misplaced, as the obligation therein to rectify the wage distortion was not by virtue of
Article 124 of the Labor Code, but on account of a then existing "company practice" that whenever rank-and-file employees
were paid a statutorily mandated salary increase, supervisory employees were, as a matter of practice, also paid the same
amount plus an added premium. Thus this Court held in said case:
We conclude that the supervisory employees, who then (i.e., on April 17, 1989) had, unlike the rank-and-file employees, no
CBA governing the terms and conditions of their employment, had the right to rely on the company practice of unilaterally
correcting the wage distortion effects of a salary increase given to the rank-and-file employees, by giving the supervisory
employees a corresponding salary increase plus a premium. . . . 14(Emphasis supplied)
Wage distortion is a factual and economic condition that may be brought about by different causes. In Metro Transit, the
reduction or elimination of the normal differential between the wage rates of rank-and-file and those of supervisory employees
was due to the granting to the former of wage increase which was, however, denied to the latter group of employees.
The mere factual existence of wage distortion does not, however, ipso facto result to an obligation to rectify it, absent a law or
other source of obligation which requires its rectification.
Unlike in Metro Transit then where there existed a "company practice," no such management practice is herein alleged to
obligate Bankard to provide an across-the-board increase to all its regular employees.
Bankards right to increase its hiring rate, to establish minimum salaries for specific jobs, and to adjust the rates of employees
affected thereby is embodied under Section 2, Article V (Salary and Cost of Living Allowance) of the parties Collective
Bargaining Agreement (CBA), to wit:
Section 2. Any salary increase granted under this Article shall be without prejudice to the right of the Company to establish
such minimum salaries as it may hereafter find appropriate for specific jobs, and to adjust the rates of the employees thereby
affected to such minimum salaries thus established.15 (Italics and underscoring supplied)
This CBA provision, which is based on legitimate business-judgment prerogatives of the employer, is a valid and legally
enforceable source of rights between the parties.
In fine, absent any indication that the voluntary increase of salary rates by an employer was done arbitrarily and illegally for the
purpose of circumventing the laws or was devoid of any legitimate purpose other than to discriminate against the regular
employees, this Court will not step in to interfere with this management prerogative. Employees are of course not precluded
from negotiating with its employer and lobby for wage increases through appropriate channels, such as through a CBA.
This Court, time and again, has shown concern and compassion to the plight of workers in adherence to the Constitutional
provisions on social justice and has always upheld the right of workers to press for better terms and conditions of employment.
It does not mean, however, that every dispute should be decided in favor of labor, for employers correspondingly have rights
under the law which need to be respected.
WHEREFORE, the present petition is hereby DENIED.
SO ORDERED.

G.R. No. 131247 January 25, 1999

PRUBANKERS ASSOCIATION, petitioner,
vs.
PRUDENTIAL BANK & TRUST COMPANY, respondent.

PANGANIBAN, J.:
Wage distortion presupposes an increase in the compensation of the lower ranks in an office hierarchy wirhout a
corresponding raise for higher-tiered employees in the same region of the country, resulting in the elimination or the severe
diminution of the distinction between the two groups. Such distortion does not arise when a wage order gives employees in
one branch of a bank higher compensation than that given to their counterparts in other regions occupying the same pay

288
scale, who are not covered by said wage order. In short, the implementation of wage orders in one region but not in others
does not in itself necessarily result in wage distortion.
The Case
Before us is a Petition for Review on Certiorari, challenging the November 6, 1997 Decision 1 of the Court of Appeals in CA-
GR SP No. 42525. The dispositive portion of the challenged Decision reads:
WHEREFORE, the petition is GRANTED. The assailed decision of the Voluntary Arbitration Committee
dated June 18, 1996 is hereby REVERSED and SET ASIDE for having been issued with grave abuse of
discretion tantamount to lack of or excess of jurisdiction, and a new judgment is rendered finding that no
wage distortion resulted from the petitioner's separate and regional implementation of Wage Order No. VII-
03 at its Cebu, Mabolo and P. del Rosario.
The June 18, 1996 Decision of the Voluntary Arbitration Commitee, 2 which the Court of Appeals reversed and set aside,
disposed as follows:
WHEREFORE, it is hereby ruled that the Bank's separate and regional implementation of Wage Order No.
VII-03 at its Cebu, Mabolo and P. del Rosario branches created a wage distortion in the Bank nationwide
which should be resolved in accordance with Art. 124 of the Labor Code. 3
The Facts
The facts of the case are summarized by the Court of Appeals thus:
On November 18, 1993, the Regional Tripartite Wages and Productivity Board of Region V issued Wage
Order No. RB 05-03 which provided for a Cost of Living Allowance (COLA) to workers in the private sector
who ha[d] rendered service for at least three (3) months before its effectivity, and for the same period
[t]hereafter, in the following categories: SEVENTEEN PESOS AND FIFTY CENTAVOS (P17.50) in the cities
of Naga and Legaspi; FIFTEEN PESOS AND FIFTY CENTAVOS (P15.50) in the municipalities of Tabaco,
Daraga, Pili and the city of Iriga; and TEN PESOS (P10.00) for all other areas in the Bicol Region.
Subsequently on November 23, 1993, the Regional Tripartite Wages and Productivity Board of Region VII
issued Wage Order No. RB VII-03, which directed the integration of the COLA mandated pursuant to Wage
Order No. RO VII-02-A into the basic pay of all workers. It also established an increase in the minimum
wage rates for all workers and and employees in the private sector as follows: by Ten Pesos (P10.00) in the
cities of Cebu, Mandaue and Lapulapu; Five Pesos (P5.00) in the municipalities of Compostela, Liloan,
Consolacion, Cordova, Talisay, Minglanilla, Naga and the cities of Davao, Toledo, Dumaguete, Bais,
Canlaon and Tagbilaran.
The petitioner then granted a COLA of P17.50 to its employees at its Naga Branch, the only branch covered
by Wage Order No. RB 5-03, and integrated the P150.00 per month COLA into the basic pay of its rank-and-
file employees at its Cebu, Mabolo and P. del Rosario branches, the branches covered by Wage Order No.
RB VII-03.
On June 7, 1994, respondent Prubankers Association wrote the petitioner requesting that the Labor
Management Committee be immediately convened to discuss and resolve the alleged wage distortion
created in the salary structure upon the implementation of the said wage orders. Respondent Association
then demanded in the Labor Management Committee meetings that the petitioner extend the application of
the wage orders to its employees outside Regions V and VII, claiming that the regional implementation of
the said orders created a wage distortion in the wage rates of petitioner's employees nationwide. As the
grievance could not be settled in the said meetings, the parties agreed to submit the matter to voluntary
arbitration. The Arbitration Committee formed for that purpose was composed of the following: public
respondent Froilan M. Bacungan as Chairman, with Attys. Domingo T. Anonuevo and Emerico O. de
Guzman as members. The issue presented before the Committee was whether or not the bank's separate
and regional implementation of Wage Order No. 5-03 at its Naga Branch and Wage Order No. VII-03 at its
Cebu, Mabolo and P. del Rosario branches, created a wage distortion in the bank nationwide.
The Arbitration Committee on June 18, 1996 rendered questioned decision. 4
Ruling of the Court of Appeals
In ruling that there was no wage distortion, the Court of Appeals held that the variance in the salary rates of employees in
different regions of the country was justified by RA 6727. It noted that "the underlying considerations in issuing the wage
orders are diverse, based on the distinctive situations and needs existing in each region. Hence, there is no basis to apply the
salary increases imposed by Wage Order No. VII-03 to employees outside of Region VII." Furthermore, the Court of Appeals
ruled that "the distinctions between each employee group in the region are maintained, as all employees were granted an
increase in minimum wage rate. 5
The Issues
In its Memorandum, petitioner raises the following issues: 6
I

289
 Whether or not the Court of Appeals departed from the usual course of judicial procedure when it
disregarded the factual findings of the Voluntary Arbitration Committee as to the existence of wage
distortion.
II
Whether or not the Court of Appeals committed grave error in law when it ruled that wage distortion exists
only within a region and not nationwide.
III
Whether or not the Court of Appeals erred in implying that the term "establishment" as used in Article 125 of
the Labor Code refers to the regional branches of the bank and not to the bank as a whole.
The main issue is whether or not a wage distortion resulted from respondent's implementation of the aforecited Wage Orders.
As a preliminary matter, we shall also take up the question of forum-shopping.
The Court's Ruling
The petition is devoid of merit. 7
Preliminary Issue: Forum-Shopping
Respondent asks for the dismissal of the petition because petitioner allegedly engaged in forum-shopping. It maintains that
petitioner failed to comply with Section 2 of Rule 42 of the Rules of Court, which requires that parties must certify under oath
that they have not commenced any other action involving the same issues in the Supreme Court, the Court of Appeals, or
different divisions thereof, or any other tribunal or agency; if there is such other action or proceeding, they must state the
status of the same; and if they should thereafter learn that a similar action or proceeding has been filed or is pending before
the said courts, they should promptly inform the aforesaid courts or any other tribunal or agency within five days therefrom.
Specifically, petitioner accuses respondent of failing to inform this Court of the pendency of NCMB-NCR-RVA-O4-012-97
entitled "In Re: Voluntary Arbitration between Prudential Bank and Prubankers Association" (hereafter referred to as "voluntary
arbitration case"), an action involving issues allegedly similar to those raised in the present controversy.
In its Reply, petitioner effectively admits that the voluntary arbitration case was already pending when it filed the present
petition. However, it claims no violation of the rule against forum-shopping, because there is no identity of causes of action and
issues between the two cases.
We sustain the respondent. The rule on forum-shopping was first included in Section 17 of the Interim Rules and Guidelines
issued by this Court on January 11, 1983, which imposed a sanction in this wise: "A violation of the rule shall constitute
contempt of court and shall be a cause for the summary dismissal of both petitions, without prejudice to the taking of
appropriate action against the counsel or party concerned." Thereafter, the Court restated the rule in Revised Circular No. 28-
91 and Administrative Circular No. 04-94. Ultimately, the rule was embodied in the 1997 amendments to the Rules of Court.
As explained by this Court in First Philippine International Bank v. Court of Appeals, 8 forum-shopping exists where the
elements of litis pendentia are present, and where a final judgment in one case will amount to res judicata in the other. Thus,
there is forum-shopping when, between an action pending before this Court and another one, there exist: "a) identity of parties,
or at least such parties as represent the same interests in both actions, b) identity of rights asserted and relief prayed for, the
relief being founded on the same facts, and c) the identity of the two preceding particulars is such that any judgement
rendered in the other action, will, regardless of which party is successful amount to res judicata in the action under
consideration; said requisites also constitutive of the requisites for auter action pendant or lis pendens." 9 Another case
elucidates the consequence of forum-shopping: "[W]here a litigant sues the same party against whom another action or
actions for the alleged violation of the same right and the enforcement of the same relief is/are still pending, the defense of litis
pendentia in one case is a bar to the others; and, a final judgment in one would constitute res judicata and thus would cause
the dismissal of the rest." 10
The voluntary arbitration case involved the issue of whether the adoption by the Bank of regionalized hiring rates was valid
and binding. On the other hand, the issue now on hand revolves around the existence of a wage distortion arising from the
Bank's separate and regional implementation of the two Wage Orders in the affected branches. A closer look would show that,
indeed, the requisites of forum-shopping are present.
First, there is identity of parties. Both cases are between the Bank and the Association acting on behalf of all its members.
Second, although the respective issues and reliefs prayed for in the two cases are stated differently, both actions boil down to
one single issue: the validity of the Bank's regionalization of its wage structure based on RA 6727. Even if the voluntary
arbitration case calls for striking, down the Bank's regionalized hiring scheme while the instant petition calls for the correction
of the alleged wage distortion caused by the regional implementation of Wage Order No. VII-03, the ultimate relief prayed for
in both cases is the maintenance of the Bank's national wage structure. Hence, the final disposition of one would constitute res
judicata in the other. Thus, forum-shopping is deemed to exist and, on this basis, the summary dismissal of both actions is
indeed warranted.
Nonetheless, we deem it appropriate to pass upon the main issue on its merit in view of its importance.
Main Issue: Wage Distortion
The statutory definition of wage distortion is found in Article 124 of the Labor Code, as amended by Republic Act No. 6727,
which reads:
290
 Art. 124. Standards/Criteria for Minimum Wage Fixing . . .
As used herein, a wage distortion shall mean a situation where an increase in prescribed wage results in the
elimination of severe contraction of intentional quantitative differences in wage or salary rates between and
among employee groups in an establishment as to effectively obliterate the distinctions embodied in such
wage structure based on skills, length of service, or other logical bases of differentiation.
Elaborating on this statutory definition, this Court ruled: "Wage distortion presupposes a classification of positions and ranking
of these positions at various levels. One visualizes a hierarchy of positions with corresponding ranks basically in terms of
wages and other emoluments. Where a significant change occurs at the lowest level of positions in terms of basic wage
without a corresponding change in the other level in the hierarchy of positions, negating as a result thereof the distinction
between one level of position from the next higher level, and resulting in a parity between the lowest level and the next higher
level or rank, between new entrants and old hires, there exists a wage distortion. . . . . The concept of a wage distortion
assumes an existing grouping or classification of employees which establishes distinctions among such employees on some
relevant or legitimate basis. This classification is reflected in a differing wage rate for each of the existing classes of
employees" 11
Wage distortion involves four elements:
1. An existing hierarchy of positions with corresponding salary rates
2. A significant change in the salary rate of a lower pay class without a concomitant increase in the salary
rate of a higher one
3. The elimination of the distinction between the two levels
4. The existence of the distortion in the same region of the country
In the present case, it is clear that no wage distortion resulted when respondent implemented the subject Wage Orders in the
covered branches. In the said branches, there was an increase in the salary rates of all pay classes. Furthermore, the
hierarchy of positions based on skills, lengh of service and other logical bases of differentiation was preserved. In other words,
the quantitative difference in compensation between different pay classes remained the same in all branches in the affected
region. Put differently, the distinction between Pay Class 1 and Pay Class 2, for example, was not eliminated as a result of the
implementation of the two Wage Orders in the said region. Hence, it cannot be said that there was a wage distortion.
Petitioner argues that a wage distortion exists, because the implementation of the two Wage Orders has resulted in the
discrepancy in the compensation of employees of similar pay classification in different regions. Hence, petitioner maintains
that, as a result of the two Wage Orders, the employees in the affected regions have higher compensation than their
counterparts of the same level in other regions. Several tables are presented by petitioner to illustrate that the employees in
the regions covered by the Wage Orders are receiving more than their counterparts in the same pay scale in other regions.
The Court is not persuaded. A wage parity between employees in different rungs, is not at issue here, but a wage
disparity between employees in the same rung but located in different regions of the country.
Contrary to petitioner's postulation, a disparity in wages between employees holding similar positions but in different regions
does not constitute wage distortion as contemplated by law. As previously enunciated, it is the hierarchy of positions and the
disparity of their corresponding wages and other emoluments that are sought to be preserved by the concept of wage
distortion. Put differently, a wage distortion arises when a wage order engenders wage parity between employees
in different rungs of the organizational ladder of the same establishment. It bears emphasis that wage distortion involves a
parity in the salary rates of different pay classes which, as a result, eliminates the distinction between the different ranks in the
same region.
Different Regional Wages
Mandated by RA 6727
Petitioner's claim of wage distortion must also be denied for one other reason. The difference in wages between employees in
the same pay scale in different regions is not the mischief sought to be banished by the law. In fact, Republic Act No. 6727
(the Wage Rationalization Act), recognizes "existing regional disparities in the cost of living." Section 2 of said law provides:
Sec 2. It is hereby declared the policy of the State to rationalize the fixing of minimum wages and to promote
productivity-improvement and gain-sharing measures to ensure a decent standard of living for the workers
and their families; to guarantee the rights of labor to its just share in the fruits of production; to enhance
employment generation in the countryside through industry dispersal; and to allow business and industry
reasonable returns on investment, expansion and growth.
The State shall promote collective bargaining as the primary mode of settling wages and other terms and
conditions of employment; and whenever necessary, the minimum wage rates shall be adjusted in a fair and
equitable manner, considering existing regional disparities in the cost of living and other socio-economic
factors and the national economic and social development plans.
RA 6727 also amended Article 124 of the Labor Code, thus:
Art. 124. Standards/Criteria for Minimum Wage Fixing. The regional minimum wages to be established by
the Regional Board shall be as nearly adequate as is economically feasible to maintain the minimum
standards of living necessary for the health, efficiency and general well-being of the employees within the
291
 frame work of the national economic and social development program. In the determination of such regional
minimum wages, the Regional Board shall, among other relevant factors, consider the following:
a. The demand for living wages;
b. Wage adjustment vis-a-vis the consumer price index;
c. The cost of living and changes or increases therein;
d. The needs of workers and their families;
e. The need to induce industries to invest in the countryside;
f. Improvements in standards of living;
g. The prevailing wage levels;
h. Fair return of the capital invested and capacity to pay of employers;
I. Effects on employment generation and family income; and
II. The equitable distribution of income and wealth along the imperatives of social and economic development.
From the above-quoted rationale of the law, as well as the criteria enumerated, a disparity in wages between employees with
similar positions in different regions is necessarily expected. In insisting that the employees of the same pay class in different
regions should receive the same compensation, petitioner has apparently misunderstood both the meaning of wage
distortion and the intent of the law to regionalize wage rates.
It must be understood that varying in each region of the country are controlling factors such as the cost of living; supply and
demand of basic goods, services and necessities; and the purchasing power of the peso. Other considerations underscore the
necessity of the law. Wages in some areas may be increased in order to prevent migration to the National Capital Region and,
hence, to decongest the metropolis. Therefore, what the petitioner herein bewails is precisely what the law provides in order to
achieve its purpose.
Petitioner claims that it "does not insist that the Regional Wage Boards created pursuant to RA 6727 do not have the authority
to issue wage orders based on the distinctive situations and needs existing in each region. So also, . . . it does not insist that
the [B]ank should not implement regional wage orders. Neither does it seek to penalize the Bank for following Wage Order VII-
03. . . . What it simply argues is that it is wrong for the Bank to peremptorily abandon a national wage structure and replace the
same with a regionalized structure in violation of the principle of equal pay for equal work. And, it is wrong to say that its act of
abandoning its national wage structure is mandated by law."
As already discussed above, we cannot sustain this argument. Petitioner contradicts itself in not objecting, on the one hand, to
the right of the regional wage boards to impose a regionalized wage scheme; while insisting, on the other hand, on a national
wage structure for the whole Bank. To reiterate, a uniform national wage structure is antithetical to the purpose of RA 6727.
The objective of the law also explains the wage disparity in the example cited by petitioner: Armae Librero, though only in Pay
Class 4 in Mabolo, was, as a result of the Wage Order, receiving more than Bella Cristobal, who was already in Pay Class 5 in
Subic. 12 RA 6727 recognizes that there are different needs for the different situations in different regions of the country. The
fact that a person is receiving more in one region does not necessarily mean that he or she is better off than a person
receiving less in another region. We must consider, among others, such factors as cost of living, fulfillment of national
economic goals, and standard of living. In any event, this Court, in its decisions, merely enforces the law. It has no power to
pass upon its wisdom or propriety.
Equal Pay for Equal Work
Petitioner also avers that the implementation of the Wage Order in only one region violates the equal-pay-for-equal-work
principle. This is not correct. At the risk of being repetitive, we stress that RA 6727 mandates that wages in every region must
be set by the particular wage board of that region, based on the prevailing situation therein. Necessarily, the wages in different
regions will not be uniform. Thus, under RA 6727, the minimum wage in Region 1 may be different from that in Region 13,
because the socioeconomic conditions in the two regions are different.
Meaning of "Establishment"
Petitioner further contends that the Court of Appeals erred in interpreting the meaning of "establishment" in relation to wage
distortion. It quotes the RA 6727 Implementing Rules, specifically Section 13 thereof which speaks of "workers working in
branches or agencies of establishments in or outside the National Capital Region." Petitioner infers from this that the regional
offices of the Bank do not themselves constitute, but are simply branches of, the establishment which is the whole bank. In
effect, petitioner argues that wage distortion covers the pay scales even of employees in different regions, and not only those
of employees in the same region or branch. We disagree.
Sec. 13 provides that the "minimum wage rates of workers working in branches or agencies of establishments in or outside the
National Capital Region shall be those applicable in the place where they are sanctioned" The last part of the sentence was
omitted by petitioner in its argument. Given the entire phrase, it is clear that the statutory provision does not support
petitioner's view that "establishment" includes all branches and offices in different regions.
Further negating petitioner's theory is NWPC Guideline No. 1 (S. 1992) entitled "Revised Guidelines on Exemption From
Compliance With the Prescribed Wage/Cost of Living Allowance Increases Granted by the Regional Tripartite Wages and
Productivity Board," which states that "establishment" "refers to an economic unit which engages in one or predominantly one
kind of economic activity with a single fixed location."

292
Management Practice
Petitioner also insists that the Bank has adopted a uniform wage policy, which has attained the status of an established
management practice; thus, it is estopped from implementing a wage order for a specific region only. We are not persuaded.
Said nationwide uniform wage policy of the Bank had been adopted prior to the enactment of RA 6727. After the passage of
said law, the Bank was mandated to regionalize its wage structure. Although the Bank implemented Wage Order Nos. NCR-01
and NCR-02 nationwide instead of regionally even after the effectivity of RA 6727, the Bank at the time was still uncertain
about how to follow the new law. In any event, that single instance cannot be constitutive of "management practice."
WHEREFORE, the petition is DENIED and the assailed Decision is AFFIRMED. Costs against petitioner. .nt
SO ORDERED.

G.R. No. 192601 June 3, 2013

PHILIPPINE JOURNALISTS, INC., Petitioner,
vs.
JOURNAL EMPLOYEES UNION (JEU), FOR ITS UNION MEMBER, MICHAEL ALFANTE, Respondents.
DECISION
BERSAMIN, J.:
The coverage of the term legal dependent as used in a stipulation in a collective bargaining agreement (CBA) granting funeral
or bereavement benefit to a regular employee for the death of a legal dependent, if the CBA is silent about it, is to be
construed as similar to the meaning that contemporaneous social legislations have set. This is because the terms of such
social legislations are deemed incorporated in or adopted by the CBA.
The decision of the Court of Appeals (CA) under review summarizes the factual and procedural antecedents, as follows:
Complainant Judith Pulido alleged that she was hired by respondent as proofreader on 10 January 1991; that she was
receiving a monthly basic salary of P-15,493.66 plus P-155.00 longevity pay plus other benefits provided by law and their
Collective Bargaining Agreement; that on 21 February 2003, as union president, she sent two letters to President Gloria
Arroyo, regarding their complaint of mismanagement being committed by PIJ executive; that sometime in May 2003, the union
was furnished with a letter by Secretary Silvestre Afable, Jr. head of Presidential Management Staff (PMS), endorsing their
letter-complaint to Ombudsman Simeon V. Marcelo; that respondents took offense and started harassments to complainant
union president; that on 30 May 2003, complainant received a letter from respondent Fundador Soriano, International Edition
managing editor, regarding complainants attendance record; that complainant submitted her reply to said memo on 02 June
2003; that on 06 June 2003, complainant received a memorandum of reprimand; that on 04 July 2003, complainant received
another memo from Mr. Soriano, for not wearing her company ID, which she replied the next day 05 July 2003; that on 04
August 2003, complainant again received a memo regarding complainants tardiness; that on 05 August 2003, complainant
received another memorandum asking her to explain why she should not be accused of fraud, which she replied to on 07
August 2003; and that on the same day between 3:00 to 4:00 P.M., Mr. Ernesto "Estong" San Agustin, a staff of HRD handed
her termination paper.
Complainant added that in her thirteen (13) years with the company and after so many changes in its management and
executives, she had never done anything that will cause them to issue a memorandum against her or her work attitude, more
so, reasons to terminate her services; that she got dismissed because she was the Union President who was very active in
defending and pursuing the rights of her union members, and in fighting against the abuses of respondent Corporate Officers;
and that she got the ire of respondents when the employees filed a complaint against the Corporate Officers before
Malacaang and which was later indorsed to the Office of the Ombudsman.
The second complainant Michael L. Alfante alleged that he started to work with respondents as computer technician at
Management Information System under manager Neri Torrecampo on 16 May 2000; that on 15 July 2001, he was regularized
receiving a monthly salary of P9,070.00 plus other monetary benefits; that sometime in 2001, Rico Pagkalinawan replaced
Torrecampo, which was opposed by complainant and three other co-employees; that Pagkalinawan took offense of their
objection; that on 22 October 2002, complainant Alfante received a memorandum from Pagkalinawan regarding his excessive
tardiness; that on 10 June 2003, complainant Alfante received a memorandum from Executive Vice-President Arnold Banares,
requiring him to explain his side on the evaluation of his performance submitted by manager Pagkalinawan; that one week
after complainant submitted his explanation, he was handed his notice of dismissal on the ground of "poor performance"; and
that complainant was dismissed effective 28 July 2003.
Complainant Alfante submitted that he was dismissed without just cause.
Respondents, in their position paper, averred that complainants Pulido and Alfante were dismissed for cause and with due
process.
With regard to complainant Pulido, respondents averred that in a memorandum dated 30 May 2003, directed complainant to
explain her habitual tardiness, at least 75 times from January to May of 2003. In a memorandum, dated 06 June 2003,
directed complainant to observe the 3 p.m. rule to avoid grammatical lapses, use of stale stories just to beat the 10:00 p.m.
deadline. In the same memorandum complainant was given the warning that any repeated violation of the rules shall be dealt
with more severely. Once again, in a memorandum, dated 04 August 2003, complainant Pulido was required to explain why no
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disciplinary action should be taken against her for habitual tardiness 18 times out of the 23 reporting days during the period
from 27 June 27 July 2003 and on 05 August 2003, complainant was directed to explain in writing why complainant should
not be administratively sanctioned for committing fraud or attempting to commit fraud against respondents. Respondents found
complainants explanations unsatisfactory. On 07 August 2003, respondents dismissed complainant Pulido for habitual
tardiness, gross insubordination, utter disrespect for superiors, and committing fraud or attempting to commit fraud which led
to the respondents loss of confidence upon complainant Pulido.
In case of complainant Alfante, respondents averred in defense that complainant was dismissed for "poor performance" after
an evaluation by his superior, and after being forewarned that complainant may be removed if there was no showing of
improvement in his skills and knowledge on current technology.
In both instances, respondents maintained that they did not commit any act of unfair labor practices; that they did not commit
acts tantamount to interfering, restraining, or coercing employees in the exercise of their right to self-organization.
Respondents deny liabilities as far as complainants monetary claims are concerned. Concerning violations of the provision on
wage distortion under Wage Order No. 9, respondents stressed that complainants were not affected since their salary is way
over the minimum wage.
With respect to the alleged non-adjustment of longevity pay and burial aid, respondent PJI pointed out that it complies with the
provisions of the CBA and that both complainants have not claimed for the burial aid.
Respondents put forward the information that the alleged nonpayment of rest days every Monday for the past three (3) years
is a matter that is still at issue in NLRC Case No. 02-0402973-93, which case is still pending before this Commission.
Respondents asserted that the respondents Arturo Dela Cruz, Bobby Capco, Arnold Banares, Ruby Ruiz-Bruno and Fundador
Soriano should not be held liable on account of complainants dismissal as they merely acted as agents of respondent PJI.1
Upon the foregoing backdrop, Labor Arbiter Corazon C. Borbolla rendered her decision on March 29, 2006, disposing thusly:
WHEREFORE, foregoing premises considered, judgment is hereby rendered, finding complainant Judith Pulido to have been
illegally dismissed. As such, she is entitled to reinstatement and backwages from 07 August 2003 up to her actual or payroll
reinstatement. To date, complainants backwages is P294,379.54.
Respondent Philippine Journalist, Inc. is hereby ordered to pay complainant Judith Pulido her backwages from 07 August
2003 up to her actual or payroll reinstatement and to reinstate her to her former position without loss of seniority right.
Respondent is further ordered to submit a report to this Office on complainants reinstatement ten (10) days from receipt of this
decision.
The charge of illegal dismissal by Michael Alfante is hereby dismissed for lack of merit.
The charge of unfair labor practice is dismissed for lack of basis.
SO ORDERED.2
Complainant Michael Alfante (Alfante), joined by his labor organization, Journal Employees Union (JEU), filed a partial appeal
in the National Labor Relations Commission (NLRC).3
In the meantime, on May 10, 2006, petitioner and Judith Pulido (Pulido), the other complainant, jointly manifested to the NLRC
that the decision of March 29, 2006 had been fully satisfied as to Pulido under the following terms, namely: (a) she would be
reinstated to her former position as editorial staffmember, or an equivalent position, without loss of seniority rights, effective
May 15, 2006; (b) she would go on maternity leave, and report to work after giving birth; (c) she would be entitled to
backwages of P130,000.00; and (d) she would execute the quitclaim and release on May 11, 2006 in favor of petitioner.4 This
left Alfante as the remaining complainant.
On January 31, 2007, the NLRC rendered its decision dismissing the partial appeal for lack of merit.
JEU and Alfante moved for the reconsideration of the decision, but the NLRC denied their motion on April 24, 2007.
Thereafter, JEU and Alfante assailed the decision of the NLRC before the CA on certiorari (C.A.-G.R. SP No. 99407).
On February 5, 2010, the CA promulgated its decision in C.A.-G.R. SP No. 99407,7 decreeing:
WHEREFORE, premises considered, the instant petition is PARTLY GRANTED.
The twin Resolutions dated January 31, 2007 and April 24, 2007, respectively, of the Third Division of the National Labor
Relations Commission (NLRC), in NLRC NCR CA No. 048785-06 (NLRC NCR Case No. 00-10-11413-04), are MODIFIED
insofar as the funeral or bereavement aid is concerned, which is hereby GRANTED, but only after submission of conclusive
proofs that the deceased is a parent, either father or mother, of the employees concerned, as well as the death certificate to
establish the fact of death of the deceased legal dependent.
The rest of the findings of fact and law in the assailed Resolutions are hereby AFFIRMED.
SO ORDERED.
Both parties moved for reconsideration, but the CA denied their respective motions for reconsideration on June 2, 2010.8
JEU and Alfante appealed to the Court (G.R. No. 192478) to challenge the CAs dispositions regarding the legality of: (a)
Alfantes dismissal; (b) the non-compliance with Minimum Wage Order No. 9; and (c) the non-payment of the rest day.9
On August 18, 2010, the Court denied due course to the petition in G.R. No. 192478 for failure of petitioners to sufficiently
show that the CA had committed any reversible error to warrant the Courts exercise of its discretionary appellate jurisdiction.10
The Court denied with finality JEU and Alfantes ensuing motion for reconsideration through the resolution of December 8,
2010.11 The entry of judgment in G.R. No. 192478 issued in due course on February 1, 2011. 12
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On its part, petitioner likewise appealed (G.R. No. 192601), seeking the review of the CAs disposition in the decision of
February 5, 2010 on the granting of the funeral and bereavement aid stipulated in the CBA.
In its petition for review, petitioner maintained that under Section 4, Article XIII of the CBA, funeral and bereavement aid
should be granted upon the death of a legal dependent of a regular employee; that consistent with the definition provided by
the Social Security System (SSS), the term legal dependent referred to the spouse and children of a married regular
employee, and to the parents and siblings, 18 years old and below, of a single regular employee; 13 that the CBA considered
the term dependents to have the same meaning as beneficiaries, as provided in Section 5, Article XIII of the CBA on the
payment of death benefits;14 that its earlier granting of claims for funeral and bereavement aid without regard to the foregoing
definition of the legal dependents of married or single regular employees did not ripen into a company policy whose unilateral
withdrawal would constitute a violation of Article 100 of the Labor Code, 15 the law disallowing the non-diminution of
benefits;16 that it had approved only four claims from 1999 to 2003 based on its mistaken interpretation of the term legal
dependents, but later corrected the same in 2000; 17 that the grant of funeral and bereavement aid for the death of an
employees legal dependent, regardless of the employees civil status, did not occur over a long period of time, was not
consistent and deliberate, and was partly due to its mistake in appreciating a doubtful question of law; and that its denial of
subsequent claims did not amount to a violation of the law against the non-diminution of benefits.18
In their comment,19 JEU and Alfante countered that the CBA was a bilateral contractual agreement that could not be
unilaterally changed by any party during its lifetime; and that the grant of burial benefits had already become a company
practice favorable to the employees, and could not anymore be reduced, diminished, discontinued or eliminated by petitioner.
Issue
In view of the entry of judgment issued in G.R. No. 192478, JEU and Alfantes submissions on the illegality of his dismissal,
the non-payment of his rest days, and the violation of Minimum Wage Order No. 9 shall no longer be considered and passed
upon.
The sole remaining issue is whether or not petitioners denial of respondents claims for funeral and bereavement aid granted
under Section 4, Article XIII of their CBA constituted a diminution of benefits in violation of Article 100 of the Labor Code.
Ruling
The petition for review lacks merit.
The nature and force of a CBA are delineated in Honda Phils., Inc. v. Samahan ng Malayang Manggagawa sa
Honda,20 thuswise:
A collective bargaining agreement (or CBA) refers to the negotiated contract between a legitimate labor organization and the
employer concerning wages, hours of work and all other terms and conditions of employment in a bargaining unit. As in all
contracts, the parties in a CBA may establish such stipulations, clauses, terms and conditions as they may deem convenient
provided these are not contrary to law, morals, good customs, public order or public policy. Thus, where the CBA is clear and
unambiguous, it becomes the law between the parties and compliance therewith is mandated by the express policy of the law.
Accordingly, the stipulations, clauses, terms and conditions of the CBA, being the law between the parties, must be complied
with by them. The literal meaning of the stipulations of the CBA, as with every other contract, control if they are clear and leave
no doubt upon the intention of the contracting parties.22
Here, a conflict has arisen regarding the interpretation of the term legal dependent in connection with the grant of funeral and
bereavement aid to a regular employee under Section 4, Article XIII of the CBA, 23 which stipulates as follows:
SECTION 4. Funeral/Bereavement Aid. The COMPANY agrees to grant a funeral/bereavement aid in the following instances:
a. Death of a regular employee in line of duty P50,000
b. Death of a regular employee not in line of duty P40,000
c. Death of legal dependent of a regular employee P15,000. (Emphasis supplied)
Petitioner insists that notwithstanding the silence of the CBA, the term legal dependent should follow the definition of it under
Republic Act (R.A.) No. 8282 (Social Security Law),24 so that in the case of a married regular employee, his or her legal
dependents include only his or her spouse and children, and in the case of a single regular employee, his or her legal
dependents include only his or her parents and siblings, 18 years old and below; and that the term dependents has the same
meaning as beneficiaries as used in Section 5, Article XIII of the CBA.
We cannot agree with petitioners insistence.
Social legislations contemporaneous with the execution of the CBA have given a meaning to the term legal dependent. First of
all, Section 8(e) of the Social Security Law provides that a dependent shall be the following, namely: (a) the legal spouse
entitled by law to receive support from the member; (b) the legitimate, legitimated, or legally adopted, and illegitimate child who
is unmarried, not gainfully employed and has not reached 21 of age, or, if over 21 years of age, is congenitally or while still a
minor has been permanently incapacitated and incapable of self-support, physically or mentally; and (c) the parent who is
receiving regular support from the member. Secondly, Section 4(f) of R.A. No. 7875, as amended by R.A. No.
9241,25 enumerates who are the legal dependents, to wit: (a) the legitimate spouse who is not a member; (b) the unmarried
and unemployed legitimate, legitimated, illegitimate, acknowledged children as appearing in the birth certificate; legally
adopted or step-children below 21 years of age; (c) children who are 21 years old and order but suffering from congenital
disability, either physical or mental, or any disability acquired that renders them totally dependent on the member of our
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support; and (d) the parents who are 60 years old or older whose monthly income is below an amount to be determined by the
Philippine Health Insurance Corporation in accordance with the guiding principles set forth in Article I of R.A. No. 7875. And,
thirdly, Section 2(f) of Presidential Decree No. 1146, as amended by R.A. No. 8291,dependent for support upon the member
or pensioner; (b) the legitimate, legitimated, legally adopted child, including the illegitimate child, who is unmarried, not
gainfully employed, not over the age of majority, or is over the age of majority but incapacitated and incapable of self-support
due to a mental or physical defect acquired prior to age of majority; and (c) the parents dependent upon the member for
support.
It is clear from these statutory definitions of dependent that the civil status of the employee as either married or single is not
the controlling consideration in order that a person may qualify as the employees legal dependent. What is rather decidedly
controlling is the fact that the spouse, child, or parent is actually dependent for support upon the employee. Indeed, the Court
has adopted this understanding of the term dependent in Social Security System v. De Los Santos,27 viz:
Social Security System v. Aguas is instructive in determining the extent of the required "dependency" under the SS Law. In
Aguas, the Court ruled that although a husband and wife are obliged to support each other, whether one is actually dependent
for support upon the other cannot be presumed from the fact of marriage alone.
Further, Aguas pointed out that a wife who left her family until her husband died and lived with other men, was not dependent
upon her husband for support, financial or otherwise, during the entire period.
Said the Court:
In a parallel case involving a claim for benefits under the GSIS law, the Court defined a dependent as "one who derives his or
her main support from another. Meaning, relying on, or subject to, someone else for support; not able to exist or sustain
oneself, or to perform anything without the will, power, or aid of someone else." It should be noted that the GSIS law likewise
defines a dependent spouse as "the legitimate spouse dependent for support upon the member or pensioner." In that case,
the Court found it obvious that a wife who abandoned the family for more than 17 years until her husband died, and lived with
other men, was not dependent on her husband for support, financial or otherwise, during that entire period. Hence, the Court
denied her claim for death benefits.
The obvious conclusion then is that a wife who is already separated de facto from her husband cannot be said to be
"dependent for support" upon the husband, absent any showing to the contrary. Conversely, if it is proved that the husband
and wife were still living together at the time of his death, it would be safe to presume that she was dependent on the husband
for support, unless it is shown that she is capable of providing for herself.
Considering that existing laws always form part of any contract, and are deemed incorporated in each and every
contract,28 the definition of legal dependents under the aforecited social legislations applies herein in the absence of a contrary
or different definition mutually intended and adopted by the parties in the CBA. Accordingly, the concurrence of a legitimate
spouse does not disqualify a child or a parent of the employee from being a legal dependent provided substantial evidence is
adduced to prove the actual dependency of the child or parent on the support of the employee.
In this regard, the differentiation among the legal dependents is significant only in the event the CBA has prescribed a
hierarchy among them for the granting of a benefit; hence, the use of the terms primary beneficiaries and secondary
beneficiaries for that purpose. But considering that Section 4, Article XIII of the CBA has not included that differentiation,
petitioner had no basis to deny the claim for funeral and bereavement aid of Alfante for the death of his parent whose death
and fact of legal dependency on him could be substantially proved.
Pursuant to Article 100 of the Labor Code, petitioner as the employer could not reduce, diminish, discontinue or eliminate any
benefit and supplement being enjoyed by or granted to its employees. This prohibition against the diminution of benefits is
founded on the constitutional mandate to protect the rights of workers and to promote their welfare and to afford labor full
protection.29 The application of the prohibition against the diminution of benefits presupposes that a company practice, policy
or tradition favorable to the employees has been clearly established; and that the payments made by the employer pursuant to
the practice, policy, or tradition have ripened into benefits enjoyed by them. 30 To be considered as a practice, policy or
tradition, however, the giving of the benefits should have been done over a long period of time, and must be shown to have
been consistent and deliberate.31 It is relevant to mention that we have not yet settled on the specific minimum number of
years as the length of time sufficient to ripen the practice, policy or tradition into a benefit that the employer cannot unilaterally
withdraw.32
The argument of petitioner that the grant of the funeral and bereavement benefit was not voluntary but resulted from its
mistaken interpretation as to who was considered a legal dependent of a regular employee deserves scant consideration. To
be sure, no doubtful or difficult question of law was involved inasmuch as the several cogent statutes existing at the time the
CBA was entered into already defined who were qualified as the legal dependents of another. Moreover, the voluntariness of
the grant of the benefit became even manifest from petitioners admission that, despite the memorandum it issued in 2000 33 in
order to "correct" the interpretation of the term legal dependent, it still approved in 2003 the claims for funeral and
bereavement aid of two employees, namely: (a) Cecille Bulacan, for the death of her father; and (b) Charito Cartel, for the
death of her mother, based on its supposedly mistaken interpretation. 34
It is further worthy to note that petitioner granted claims for funeral and bereavement aid as early as 1999, then issued a
memorandum in 2000 to correct its erroneous interpretation of legal dependent under Section 4, Article XIII of the CBA. This
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notwithstanding, the 2001-2004 CBA35 still contained the same provision granting funeral or bereavement aid in case of the
death of a legal dependent of a regular employee without differentiating the legal dependents according to the employee's civil
status as married or single. The continuity in the grant of the funeral and bereavement aid to regular employees for the death
of their legal dependents has undoubtedly ripened into a company policy. With that, the denial of Alfante's qualified claim for
such benefit pursuant to Section 4, Article XIII of the CBA violated the law prohibiting the diminution of benefits.
WHEREFORE, the Court AFFIRMS the decision promulgated on February 5, 201 0; and ORDERS petitioner to pay the costs
of suit.
SO ORDERED.

G.R. No. 175492 February 27, 2013

CARLOS L. OCTAVIO, Petitioner,
vs.
PIDLIPPINE LONG DISTANCE TELEPHONE COMPANY, Respondent.
DECISION
DEL CASTILLO, J.:
Every Collective Bargaining Agreement (CBA) shall provide a grievance machinery to which all disputes arising from its
implementation or interpretation will be subjected to compulsory negotiations. This essential feature of a CBA provides the
parties with a simple, inexpensive and expedient system of finding reasonable and acceptable solutions to disputes and helps
in the attainment of a sound and stable industrial peace.
Before us is a Petition for Review on Certiorari1 assailing the August 31, 2006 Decision2 of the Court of Appeals (CA) in CA-
G.R. SP No. 93578, which dismissed petitioner Carlos L. Octavio's (Octavio) Petition for Certiorari3assailing the September 30,
2005 Resolution4 of the National Labor Relations Commission (NLRC). Said NLRC Resolution affirmed the August 30, 2004
Decision5 of the Labor Arbiter which dismissed Octavio's Complaint for payment of salary increases against respondent
Philippine Long Distance Company (PLDT). Likewise assailed in this Petition is the November 15, 2006 Resolution 6 which
denied Octavios Motion for Reconsideration.7
Factual Antecedents
On May 28, 1999, PLDT and Gabay ng Unyon sa Telekominaksyon ng mga Superbisor (GUTS) entered into a CBA covering
the period January 1, 1999 to December 31, 2001 (CBA of 1999-2001). Article VI, Section I thereof provides:
Section 1. The COMPANY agrees to grant the following across-theboard salary increase during the three years covered by
this Agreement to all employees covered by the bargaining unit as of the given dates:
Effective January 1, 1999 10% of basic wage or P2,000.00 whichever is higher;
Effective January 1, 2000 11% of basic wage or P2,250.00 whichever is higher;
Effective January 1, 2001 12% of basic wage or P2,500.00 whichever is higher.8
On October 1, 2000, PLDT hired Octavio as Sales System Analyst I on a probationary status. He became a member of GUTS.
When Octavio was regularized on January 1, 2001, he was receiving a monthly basic salary of P10,000.00. On February 1,
2002, he was promoted to the position of Sales System Analyst 2 and his salary was increased to P13,730.00.
On May 31, 2002, PLDT and GUTS entered into another CBA covering the period January 1, 2002 to December 31, 2004
(CBA of 2002-2004) which provided for the following salary increases: 8% of basic wage or P2,000.00 whichever is higher for
the first year (2002); 10% of basic wage or P2,700.00 whichever is higher for the second year (2003); and, 10% of basic wage
or P2,400.00 whichever is higher for the third year (2004).9
Claiming that he was not given the salary increases of P2,500.00 effective January 1, 2001 and P2,000.00 effective January 1,
2002, Octavio wrote the President of GUTS, Adolfo Fajardo (Fajardo). 10 Acting thereon and on similar grievances from other
GUTS members, Fajardo wrote the PLDT Human Resource Head to inform management of the GUTS members claim for
entitlement to the across-the-board salary increases.11
Accordingly, the Grievance Committee convened on October 7, 2002 consisting of representatives from PLDT and GUTS. The
Grievance Committee, however, failed to reach an agreement. In effect, it denied Octavios demand for salary increases. The
Resolution (Committee Resolution), reads as follows:
October 7, 2002
UNION ISSUE :
1. Mr. Carlos L. Octavio, Sales System Analyst I, CCIM-Database, was promoted to S2 from S1 last
February 01, 2002. He claimed that the whole P2,000 (1st yr. GUTS-CBA increase) was not given to him.
2. He was hired as a probationary employee on October 01, 2000 and was regularized on January 01, 2001.
He claimed that Management failed to grant him the GUTS-CBA increase last January 2001.
MANAGEMENT POSITION :
Issue # 1:
A) Promotional Policy: adjustment of basic monthly salary to the minimum salary of the new position.
B) Mr. Octavios salary at the time of his promotion and before the conclusion of the GUTS CBA
was P10,000.00.
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 C) Upon the effectivity of his promotion on February 1, 2002, his basic monthly salary was adjusted
to P13,730.00, the minimum salary of the new position.
D) In June 2002, the GUTS-CBA was concluded and Mr. Octavios basic salary was recomputed to include
the P2,000.00 1st year increase retroactive January 2002. The resulting basic salary was P12,000.00.
E) Applying the above-mentioned policy, Mr. Octavios basic salary was adjusted to the minimum salary of
the new position, which is P13,730.00.
Issue # 2:
All regularized supervisory employees as of January 1 are not entitled to the GUTS CBA increase. However, as agreed with
GUTS in the grievance case of 18 personnel of International & Luzon Core Network Management Center, probationary
employees who were hired outside of PLDT and regularized as supervisors/management personnel on January 1, 2002 shall
be entitled to GUTS CBA. This decision shall be applied prospectively and all previous similar cases are not covered.
RESOLUTION :
After protracted deliberation of these issues, the committee failed to reach an agreement. Hence, Management position
deemed adopted.

MANAGEMENT UNION

_______(signed)_______ _______(signed)_______
WILFREDO A. GUADIA ADOLFO L.FAJARDO

_______(signed)_______ _______(signed)_______
ROSALINDA S. RUIZ CONFESOR A. ESPIRITU

_______(signed)_______ _______(signed)_______
ALEJANDRO C. FABIAN CHARLITO A. AREVALO12

Aggrieved, Octavio filed before the Arbitration Branch of the NLRC a Complaint for payment of said salary increases.
Ruling of the Labor Arbiter
Octavio claimed entitlement to salary increases per the CBAs of 1999-2001 and 2002-2004. He insisted that when he was
regularized as a supervisory employee on January 1, 2001, he became entitled to receive the across-the-board increase
of P2,500.00 as provided for under the CBA of 1999-2001 which took effect on January 1, 1999. Then pursuant to the CBA of
2002-2004, he should have received an additional increase of P2,000.00 apart from the merit increase of P3,730.00 which
was given him due to his promotion on February 1, 2002. However, PLDT unilaterally decided to deem as included in the
said P3,730.00 the P2,000.00 across-the-board increase for 2002 as stipulated in the CBA of 2002-2004. This, according to
Octavio, amounts to diminution of benefits. Moreover, Octavio averred that the CBA cannot be the subject of further
negotiation as it has the force of law between the parties. Finally, Octavio claimed that PLDT committed an act of unfair labor
practice because, while it granted the claim for salary increase of 18 supervisory employees who were regularized on January
1, 2002 and onwards, it discriminated against him by refusing to grant him the same salary increase. He thus prayed for an
additional award of damages and attorneys fees.
PLDT countered that the issues advanced by Octavio had already been resolved by the Union-Management Grievance
Committee when it denied his claims through the Committee Resolution. Moreover, the grant of across-the board salary
increase for those who were regularized starting January 1, 2002 and the exclusion thereto of those who were regularized on
January 1, 2001, do not constitute an act of unfair labor practice as would result in any discrimination or encourage or
discourage membership in a labor organization. In fact, when the Union-Management Grievance Committee came up with the
Committee Resolution, they considered the same as the most practicable and reasonable solution for both management and
union. At any rate, the said Committee Resolution had already become final and conclusive between the parties for failure of
Octavio to elevate the same to the proper forum. In addition, PLDT claimed that the NLRC has no jurisdiction to hear and
decide Octavios claims.
In a Decision dated August 30, 2004, the Labor Arbiter dismissed the Complaint of Octavio and upheld the Committee
Resolution.
Ruling of the National Labor Relations Commission
Upon Octavios appeal, the NLRC, in its September 30, 2005 Resolution, affirmed the Labor Arbiters Decision. It upheld the
Labor Arbiters finding that Octavios salary had already been adjusted in accordance with the provisions of the CBA. The
NLRC further ruled that it has no jurisdiction to decide the issues presented by Octavio, as the same involved the interpretation
and implementation of the CBA. According to it, Octavio should have brought his claim before the proper body as provided in
the 2002-2004 CBAs provision on grievance machinery and procedure.
Octavios Motion for Reconsideration was likewise dismissed by the NLRC in its November 21, 2005 Resolution. 13

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Ruling of the Court of Appeals
Octavio thus filed a Petition for Certiorari14 which the CA found to be without merit. In its August 31, 2006 Decision, 15 the CA
declared the Committee Resolution to be binding on Octavio, he being a member of GUTS, and because he failed to question
its validity and enforceability.
In his Motion for Reconsideration,16 Octavio disclaimed his alleged failure to question the Committee Resolution by
emphasizing that he filed a Complaint before the NLRC against PLDT. However, the CA denied Octavios Motion for
Reconsideration in its November 15, 2006 Resolution.17
Issues
Hence, Octavio filed this Petition raising the following issues for our consideration:
a. Whether x x x the employer and bargaining representative may amend the provisions of the collective bargaining
agreement without the consent and approval of the employees;
b. If so, whether the said agreement is binding [on] the employees;
c. Whether x x x merit increases may be awarded simultaneously with increases given in the Collective Bargaining
Agreement;
d. Whether x x x damages may be awarded to the employee for violation by the employer of its commitment under its
existing collective bargaining agreement.18
Octavio submits that the CA erred in upholding the Committee Resolution which denied his claim for salary increases but
granted the same request of 18 other similarly situated employees. He likewise asserts that both PLDT and GUTS had the
duty to strictly implement the CBA salary increases; hence, the Committee Resolution, which effectively resulted in the
modification of the CBAs provision on salary increases, is void.
Octavio also insists that PLDT is bound to grant him the salary increase of P2,000.00 for the year 2002 on top of the merit
increase given to him by reason of his promotion. It is his stance that merit increases are distinct and separate from across-
the-board salary increases provided for under the CBA.
Our Ruling
The Petition has no merit.
Under Article 26019 of the Labor Code, grievances arising from the interpretation or implementation of the parties CBA should
be resolved in accordance with the grievance procedure embodied therein. It also provides that all unsettled grievances shall
be automatically referred for voluntary arbitration as prescribed in the CBA.
In its Memorandum,20 PLDT set forth the grievance machinery and procedure provided under Article X of the CBA of 2002-
2004, viz:
Section 1. GRIEVANCE MACHINERY - there shall be a Union-Management Grievance Committee composed of three (3)
Union representatives designated by the UNION Board of Directors and three (3) Management representatives designated by
the company President. The committee shall act upon any grievance properly processed in accordance with the prescribed
procedure. The Union representatives to the Committee shall not lose pay for attending meetings where Management
representatives are in attendance.
Section 2. GRIEVANCE PROCEDURE - The parties agree that all disputes between labor and management may be settled
through friendly negotiations; that the parties have the same interest in the continuity of work until all points in dispute shall
have been discussed and settled; that an open conflict in any form involves losses to the parties; and that therefore, every
effort shall be exerted to avoid such an open conflict. In furtherance of these principles, the parties agree to observe the
following grievance procedures.
Step 1. Any employee (or group of employees) who believes that he has a justifiable grievance shall present the matter initially
to his division head, or if the division is involved in the grievance, to the company official next higher to the division head (the
local manager in the provincial exchanges) not later that fifteen (15) days after the occurrence of the incident giving rise to the
grievance. The initial presentation shall be made to the division head either by the aggrieved party himself or by the Union
Steward or by any Executive Officer of the Union who is not a member of the grievance panel. The initial presentation may be
made orally or in writing.
Step 2. Any party who is not satisfied with the resolution of the grievance at Step 1 may appeal in writing to the Union-
Management Grievance Committee within seven (7) days from the date of receipt of the department heads decision.
Step 3. If the grievance is not settled either because of deadlock or the failure of the committee to decide the matter,
the grievance shall be transferred to a Board of Arbitrators for the final decision. The Board shall be composed of three
(3) arbitrators, one to be nominated by the Union, another to be nominated by the Management, and the third to be selected
by the management and union nominees. The decision of the board shall be final and binding both the company and the Union
in accordance with law. Expenses of arbitration shall be divided equally between the Company and the Union. 21 (Emphasis
supplied)
Indisputably, the present controversy involves the determination of an employees salary increases as provided in the CBAs.
When Octavios claim for salary increases was referred to the Union-Management Grievance Committee, the clear intention of
the parties was to resolve their differences on the proper interpretation and implementation of the pertinent provisions of the
CBAs. And in accordance with the procedure prescribed therein, the said committee made up of representatives of both the
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union and the management convened. Unfortunately, it failed to reach an agreement. Octavios recourse pursuant to the CBA
was to elevate his grievance to the Board of Arbitrators for final decision. Instead, nine months later, Octavio filed a Complaint
before the NLRC.
It is settled that "when parties have validly agreed on a procedure for resolving grievances and to submit a dispute to voluntary
arbitration then that procedure should be strictly observed." 22 Moreover, we have held time and again that "before a party is
allowed to seek the intervention of the court, it is a precondition that he should have availed of all the means of administrative
processes afforded him. Hence, if a remedy within the administrative machinery can still be resorted to by giving the
administrative officer concerned every opportunity to decide on a matter that comes within his jurisdiction, then such remedy
should be exhausted first before the courts judicial power can be sought. The premature invocation of the courts judicial
intervention is fatal to ones cause of action."23 "The underlying principle of the rule on exhaustion of administrative remedies
rests on the presumption that when the administrative body, or grievance machinery, is afforded a chance to pass upon the
matter, it will decide the same correctly."24
By failing to question the Committee Resolution through the proper procedure prescribed in the CBA, that is, by raising the
same before a Board of Arbitrators, Octavio is deemed to have waived his right to question the same. Clearly, he departed
from the grievance procedure mandated in the CBA and denied the Board of Arbitrators the opportunity to pass upon a matter
over which it has jurisdiction. Hence, and as correctly held by the CA, Octavios failure to assail the validity and enforceability
of the Committee Resolution makes the same binding upon him. On this score alone, Octavios recourse to the labor tribunals
below, as well as to the CA, and, finally, to this Court, must therefore fail.
At any rate, Octavio cannot claim that the Committee Resolution is not valid, binding and conclusive as to him for being a
modification of the CBA in violation of Article 25325 of the Labor Code. It bears to stress that the said resolution is a product of
the grievance procedure outlined in the CBA itself. It was arrived at after the management and the union through their
respective representatives conducted negotiations in accordance with the CBA. On the other hand, Octavio never assailed the
competence of the grievance committee to take cognizance of his case. Neither did he question the authority or credibility of
the union representatives; hence, the latter are deemed to have properly bargained on his behalf since "unions are the agent
of its members for the purpose of securing just and fair wages and good working conditions." 26 In fine, it cannot be gainsaid
that the Committee Resolution is a modification of the CBA. Rather, it only provides for the proper implementation of the CBA
provision respecting salary increases.
Finally, Octavios argument that the denial of his claim for salary increases constitutes a violation of Article 10027of the Labor
Code is devoid of merit. Even assuming that there has been a diminution of benefits on his part, Article 100 does not prohibit a
union from offering and agreeing to reduce wages and benefits of the employees as the right to free collective bargaining
includes the right to suspend it.28 PLDT averred that one of the reasons why Octavios salary was recomputed as to include in
his salary of P13,730.00 the P2,000.00 increase for 2002 is to avoid salary distortion. At this point, it is well to emphasize that
bargaining should not be equated to an "adversarial litigation where rights and obligations are delineated and remedies
applied."29 Instead, it covers a process of finding a reasonable and acceptable solution to stabilize labor-management relations
to promote stable industrial peace.30 Clearly, the Committee Resolution was arrived at after considering the intention of both
PLDT and GUTS to foster industrial peace.
All told, we find no error on the part of the Labor Arbiter, the NLRC and the CA in unanimously upholding the validity and
enforceability of the Grievance Committee Resolution dated October 7, 2002.
WHEREFORE, the petition is DENIED. The August 31, 2006 Decision and November 15, 2006 Resolution of the Court of
Appeals in CA-G.R. SP No. 93578 are AFFIRMED.
SO ORDERED.

G.R. No. 198783 April 15, 2013

ROYAL PLANT WORKERS UNION, Petitioner,
vs.
COCA-COLA BOTTLERS PHILIPPINES, INC.-CEBU PLANT, Respondent.
DECISION
MENDOZA, J.:
Assailed in this petition is the May 24, 2011 Decision 1 and the September 2, 2011 Resolution2 of the Court of Appeals (CA) in
CA-G.R. SP No. 05200, entitled Coca-Cola Bottlers Philippines, Inc.-Cebu Plant v. Royal Plant Workers Union, which nullified
and set aside the June 11, 2010 Decision3 of the Voluntary Arbitration Panel (Arbitration Committee) in a case involving the
removal of chairs in the bottling plant of Coca-Cola Bottlers Philippines, Inc. (CCBPI).
The Factual and Procedural
Antecedents
The factual and procedural antecedents have been accurately recited in the May 24, 2011 CA decision as follows:
Petitioner Coca-Cola Bottlers Philippines, Inc. (CCBPI) is a domestic corporation engaged in the manufacture, sale and
distribution of softdrink products. It has several bottling plants all over the country, one of which is located in Cebu City. Under
the employ of each bottling plant are bottling operators. In the case of the plant in Cebu City, there are 20 bottling operators
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who work for its Bottling Line 1 while there are 12-14 bottling operators who man its Bottling Line 2. All of them are male and
they are members of herein respondent Royal Plant Workers Union (ROPWU).
The bottling operators work in two shifts. The first shift is from 8 a.m. to 5 p.m. and the second shift is from 5 p.m. up to the
time production operations is finished. Thus, the second shift varies and may end beyond eight (8) hours. However, the
bottling operators are compensated with overtime pay if the shift extends beyond eight (8) hours. For Bottling Line 1, 10
bottling operators work for each shift while 6 to 7 bottling operators work for each shift for Bottling Line 2.
Each shift has rotations of work time and break time. Prior to September 2008, the rotation is this: after two and a half (2 )
hours of work, the bottling operators are given a 30-minute break and this goes on until the shift ends. In September 2008 and
up to the present, the rotation has changed and bottling operators are now given a 30-minute break after one and one half (1
) hours of work.
In 1974, the bottling operators of then Bottling Line 2 were provided with chairs upon their request. In 1988, the bottling
operators of then Bottling Line 1 followed suit and asked to be provided also with chairs. Their request was likewise granted.
Sometime in September 2008, the chairs provided for the operators were removed pursuant to a national directive of
petitioner. This directive is in line with the "I Operate, I Maintain, I Clean" program of petitioner for bottling operators, wherein
every bottling operator is given the responsibility to keep the machinery and equipment assigned to him clean and safe. The
program reinforces the task of bottling operators to constantly move about in the performance of their duties and
responsibilities.
With this task of moving constantly to check on the machinery and equipment assigned to him, a bottling operator does not
need a chair anymore, hence, petitioners directive to remove them. Furthermore, CCBPI rationalized that the removal of the
chairs is implemented so that the bottling operators will avoid sleeping, thus, prevent injuries to their persons. As bottling
operators are working with machines which consist of moving parts, it is imperative that they should not fall asleep as to do so
would expose them to hazards and injuries. In addition, sleeping will hamper the efficient flow of operations as the bottling
operators would be unable to perform their duties competently.
The bottling operators took issue with the removal of the chairs. Through the representation of herein respondent, they
initiated the grievance machinery of the Collective Bargaining Agreement (CBA) in November 2008. Even after exhausting the
remedies contained in the grievance machinery, the parties were still at a deadlock with petitioner still insisting on the removal
of the chairs and respondent still against such measure. As such, respondent sent a Notice to Arbitrate, dated 16 July 2009, to
petitioner stating its position to submit the issue on the removal of the chairs for arbitration. Nevertheless, before submitting to
arbitration the issue, both parties availed of the conciliation/mediation proceedings before the National Conciliation and
Mediation Board (NCMB) Regional Branch No. VII. They failed to arrive at an amicable settlement.
Thus, the process of arbitration continued and the parties appointed the chairperson and members of the Arbitration
Committee as outlined in the CBA. Petitioner and respondent respectively appointed as members to the Arbitration Committee
Mr. Raul A. Kapuno, Jr. and Mr. Luis Ruiz while they both chose Atty. Alice Morada as chairperson thereof. They then
executed a Submission Agreement which was accepted by the Arbitration Committee on 01 October 2009. As contained in the
Submission Agreement, the sole issue for arbitration is whether the removal of chairs of the operators assigned at the
production/manufacturing line while performing their duties and responsibilities is valid or not.
Both parties submitted their position papers and other subsequent pleadings in amplification of their respective stands.
Petitioner argued that the removal of the chairs is valid as it is a legitimate exercise of management prerogative, it does not
violate the Labor Code and it does not violate the CBA it contracted with respondent. On the other hand, respondent espoused
the contrary view. It contended that the bottling operators have been performing their assigned duties satisfactorily with the
presence of the chairs; the removal of the chairs constitutes a violation of the Occupational Health and Safety Standards, the
policy of the State to assure the right of workers to just and humane conditions of work as stated in Article 3 of the Labor Code
and the Global Workplace Rights Policy.
Ruling of the Arbtration Committee
On June 11, 2010, the Arbitration Committee rendered a decision in favor of the Royal Plant Workers Union (the Union) and
against CCBPI, the dispositive portion of which reads, as follows:
Wherefore, the undersigned rules in favor of ROPWU declaring that the removal of the operators chairs is not valid. CCBPI is
hereby ordered to restore the same for the use of the operators as before their removal in 2008. 4
The Arbitration Committee ruled, among others, that the use of chairs by the operators had been a company practice for 34
years in Bottling Line 2, from 1974 to 2008, and 20 years in Bottling Line 1, from 1988 to 2008; that the use of the chairs by the
operators constituted a company practice favorable to the Union; that it ripened into a benefit after it had been enjoyed by it;
that any benefit being enjoyed by the employees could not be reduced, diminished, discontinued, or eliminated by the
employer in accordance with Article 100 of the Labor Code, which prohibited the diminution or elimination by the employer of
the employees benefit; and that jurisprudence had not laid down any rule requiring a specific minimum number of years before
a benefit would constitute a voluntary company practice which could not be unilaterally withdrawn by the employer.
The Arbitration Committee further stated that, although the removal of the chairs was done in good faith, CCBPI failed to
present evidence regarding instances of sleeping while on duty. There were no specific details as to the number of incidents of
sleeping on duty, who were involved, when these incidents happened, and what actions were taken. There was no evidence
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either of any accident or injury in the many years that the bottling operators used chairs. To the Arbitration Committee, it was
puzzling why it took 34 and 20 years for CCBPI to be so solicitous of the bottling operators safety that it removed their chairs
so that they would not fall asleep and injure themselves.
Finally, the Arbitration Committee was of the view that, contrary to CCBPIs position, line efficiency was the result of many
factors and it could not be attributed solely to one such as the removal of the chairs.
Not contented with the Arbitration Committees decision, CCBPI filed a petition for review under Rule 43 before the CA.
Ruling of the CA
On May 24, 2011, the CA rendered a contrasting decision which nullified and set aside the decision of the Arbitration
Committee. The dispositive portion of the CA decision reads:
WHEREFORE, premises considered, the petition is hereby GRANTED and the Decision, dated 11 June 2010, of the
Arbitration Committee in AC389-VII-09-10-2009D is NULLIFIED and SET ASIDE. A new one is entered in its stead
SUSTAINING the removal of the chairs of the bottling operators from the manufacturing/production line. 5
The CA held, among others, that the removal of the chairs from the manufacturing/production lines by CCBPI is within the
province of management prerogatives; that it was part of its inherent right to control and manage its enterprise effectively; and
that since it was the employers discretion to constantly develop measures or means to optimize the efficiency of its employees
and to keep its machineries and equipment in the best of conditions, it was only appropriate that it should be given wide
latitude in exercising it.
The CA stated that CCBPI complied with the conditions of a valid exercise of a management prerogative when it decided to
remove the chairs used by the bottling operators in the manufacturing/production lines. The removal of the chairs was solely
motivated by the best intentions for both the Union and CCBPI, in line with the "I Operate, I Maintain, I Clean" program for
bottling operators, wherein every bottling operator was given the responsibility to keep the machinery and equipment assigned
to him clean and safe. The program would reinforce the task of bottling operators to constantly move about in the performance
of their duties and responsibilities. Without the chairs, the bottling operators could efficiently supervise these machineries
operations and maintenance. It would also be beneficial for them because the working time before the break in each rotation
for each shift was substantially reduced from two and a half hours (2 ) to one and a half hours (1 ) before the 30-minute
break. This scheme was clearly advantageous to the bottling operators as the number of resting periods was increased.
CCBPI had the best intentions in removing the chairs because some bottling operators had the propensity to fall asleep while
on the job and sleeping on the job ran the risk of injury exposure and removing them reduced the risk.
The CA added that the decision of CCBPI to remove the chairs was not done for the purpose of defeating or circumventing the
rights of its employees under the special laws, the Collective Bargaining Agreement (CBA) or the general principles of justice
and fair play. It opined that the principles of justice and fair play were not violated because, when the chairs were removed,
there was a commensurate reduction of the working time for each rotation in each shift. The provision of chairs for the bottling
operators was never part of the CBAs contracted between the Union and CCBPI. The chairs were not provided as a benefit
because such matter was dependent upon the exigencies of the work of the bottling operators. As such, CCBPI could
withdraw this provision if it was not necessary in the exigencies of the work, if it was not contributing to the efficiency of the
bottling operators or if it would expose them to some hazards. Lastly, the CA explained that the provision of chairs to the
bottling operators cannot be covered by Article 100 of the Labor Code on elimination or diminution of benefits because the
employees benefits referred to therein mainly involved monetary considerations or privileges converted to their monetary
equivalent.
Disgruntled with the adverse CA decision, the Union has come to this Court praying for its reversal on the following
GROUNDS
I
THAT WITH DUE RESPECT, THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN HOLDING THAT A
PETITION FOR REVIEW UNDER RULE 43 OF THE RULES OF COURT IS THE PROPER REMEDY OF CHALLENGING
BEFORE SAID COURT THE DECISION OF THE VOLUNTARY ARBITRATOR OR PANEL OF VOLUNTARY ARBITRATORS
UNDER THE LABOR CODE.
II
THAT WITH DUE RESPECT, THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN NULLIFYING AND
SETTING ASIDE THE DECISION OF THE PANEL OF VOLUNTARY ARBITRATORS WHICH DECLARED AS NOT VALID
THE REMOVAL OF THE CHAIRS OF THE OPERATORS IN THE MANUFACTURING AND/OR PRODUCTION LINE.
In advocacy of its positions, the Union argues that the proper remedy in challenging the decision of the Arbitration Committee
before the CA is a petition for certiorari under Rule 65. The petition for review under Rule 43 resorted to by CCBPI should
have been dismissed for being an improper remedy. The Union points out that the parties agreed to submit the unresolved
grievance involving the removal of chairs to voluntary arbitration pursuant to the provisions of Article V of the existing CBA.
Hence, the assailed decision of the Arbitration Committee is a judgment or final order issued under the Labor Code of the
Philippines. Section 2, Rule 43 of the 1997 Rules of Civil Procedure, expressly states that the said rule does not cover cases
under the Labor Code of the Philippines. The judgments or final orders of the Voluntary Arbitrator or Panel of Voluntary
Arbitrators are governed by the provisions of Articles 260, 261, 262, 262-A, and 262-B of the Labor Code of the Philippines.
302
On the substantive aspect, the Union argues that there is no connection between CCBPIs "I Operate, I Maintain, I Clean"
program and the removal of the chairs because the implementation of the program was in 2006 and the removal of the chairs
was done in 2008. The 30-minute break is part of an operators working hours and does not make any difference. The
frequency of the break period is not advantageous to the operators because it cannot compensate for the time they are made
to stand throughout their working time. The bottling operators get tired and exhausted after their tour of duty even with chairs
around. How much more if the chairs are removed?
The Union further claims that management prerogatives are not absolute but subject to certain limitations found in law, a
collective bargaining agreement, or general principles of fair play and justice. The operators have been performing their
assigned duties and responsibilities satisfactorily for thirty (30) years using chairs. There is no record of poor performance
because the operators are sitting all the time. There is no single incident when the attention of an operator was called for
failure to carry out his assigned tasks. CCBPI has not submitted any evidence to prove that the performance of the operators
was poor before the removal of the chairs and that it has improved after the chairs were removed. The presence of chairs for
more than 30 years made the operators awake and alert as they could relax from time to time. There are sanctions for those
caught sleeping while on duty. Before the removal of the chairs, the efficiency of the operators was much better and there was
no recorded accident. After the removal of the chairs, the efficiency of the operators diminished considerably, resulting in the
drastic decline of line efficiency.
Finally, the Union asserts that the removal of the chairs constitutes violation of the Occupational Health and Safety Standards,
which provide that every company shall keep and maintain its workplace free from hazards that are likely to cause physical
harm to the workers or damage to property. The removal of the chairs constitutes a violation of the State policy to assure the
right of workers to a just and humane condition of work pursuant to Article 3 of the Labor Code and of CCBPIs Global
Workplace Rights Policy. Hence, the unilateral withdrawal, elimination or removal of the chairs, which have been in existence
for more than 30 years, constitutes a violation of existing practice.
The respondents position
CCBPI reiterates the ruling of the CA that a petition for review under Rule 43 of the Rules of Court was the proper remedy to
question the decision of the Arbitration Committee. It likewise echoes the ruling of the CA that the removal of the chairs was a
legitimate exercise of management prerogative; that it was done not to harm the bottling operators but for the purpose of
optimizing their efficiency and CCBPIs machineries and equipment; and that the exercise of its management prerogative was
done in good faith and not for the purpose of circumventing the rights of the employees under the special laws, the CBA or the
general principles of justice and fair play.
The Courts Ruling
The decision in this case rests on the resolution of two basic questions. First, is an appeal to the CA via a petition for review
under Rule 43 of the 1997 Rules of Civil Procedure a proper remedy to question the decision of the Arbitration Committee?
Second, was the removal of the bottling operators chairs from CCBPIs production/manufacturing lines a valid exercise of a
management prerogative?
The Court sustains the ruling of the CA on both issues.
Regarding the first issue, the Union insists that the CA erred in ruling that the recourse taken by CCBPI in appealing the
decision of the Arbitration Committee was proper. It argues that the proper remedy in challenging the decision of the Voluntary
Arbitrator before the CA is by filing a petition for certiorari under Rule 65 of the Rules of Court, not a petition for review under
Rule 43.
CCBPI counters that the CA was correct in ruling that the recourse it took in appealing the decision of the Arbitration
Committee to the CA via a petition for review under Rule 43 of the Rules of Court was proper and in conformity with the rules
and prevailing jurisprudence.
A Petition for Reviewunder Rule 43 is theproper remedy
CCBPI is correct. This procedural issue being debated upon is not novel. The Court has already ruled in a number of cases
that a decision or award of a voluntary arbitrator is appealable to the CA via a petition for review under Rule 43. The recent
case of Samahan Ng Mga Manggagawa Sa Hyatt (SAMASAH-NUWHRAIN) v. Hon. Voluntary Arbitrator Buenaventura C.
Magsalin and Hotel Enterprises of the Philippines6 reiterated the well-settled doctrine on this issue, to wit:
In the case of Samahan ng mga Manggagawa sa Hyatt-NUWHRAIN-APL v. Bacungan,7 we repeated the well-settled rule that
a decision or award of a voluntary arbitrator is appealable to the CA via petition for review under Rule 43. We held that:
"The question on the proper recourse to assail a decision of a voluntary arbitrator has already been settled in Luzon
Development Bank v. Association of Luzon Development Bank Employees, where the Court held that 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 (now embodied in Rule 43 of the 1997 Rules of Civil Procedure), just like
those of the quasi-judicial agencies, boards and commissions enumerated therein, and consistent with the original purpose to
provide a uniform procedure for the appellate review of adjudications of all quasi-judicial entities.
Subsequently, in Alcantara, Jr. v. Court of Appeals, and Nippon Paint Employees Union-Olalia v. Court of Appeals, the Court
reiterated the aforequoted ruling. In Alcantara, the Court held that notwithstanding Section 2 of Rule 43, the ruling in Luzon
Development Bank still stands. The Court explained, thus:
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The provisions may be new to the Rules of Court but it is far from being a new law. Section 2, Rules 42 of the 1997 Rules of
Civil Procedure, as presently worded, is nothing more but a reiteration of the exception to the exclusive appellate jurisdiction of
the Court of Appeals, as provided for in Section 9, Batas Pambansa Blg. 129, as amended by Republic Act No. 7902:
(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of Regional Trial Courts
and quasi-judicial agencies, instrumentalities, boards or commissions, including the Securities and Exchange Commission, the
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.
The Court took into account this exception in Luzon Development Bank but, nevertheless, held that the decisions of voluntary
arbitrators issued pursuant to the Labor Code do not come within its ambit x x x."
Furthermore, Sections 1, 3 and 4, Rule 43 of the 1997 Rules of Civil Procedure, as amended, provide:
"SECTION 1. Scope. - This Rule shall apply to appeals from judgments or final orders of the Court of Tax Appeals and from
awards, judgments, final orders or resolutions of or authorized by any quasi-judicial agency in the exercise of its quasi-judicial
functions. Among these agencies are the x x x, and voluntary arbitrators authorized by law.
xxxx
SEC. 3. Where to appeal. - An appeal under this Rule may be taken to the Court of Appeals within the period and in the
manner therein provided, whether the appeal involves questions of fact, of law, or mixed questions of fact and law.
SEC. 4. Period of appeal. - The appeal shall be taken within fifteen (15) days from notice of the award, judgment, final order or
resolution, or from the date of its last publication, if publication is required by law for its effectivity, or of the denial of petitioners
motion for new trial or reconsideration duly filed in accordance with the governing law of the court or agency a quo. x x x.
(Emphasis supplied.)
Hence, upon receipt on May 26, 2003 of the Voluntary Arbitrators Resolution denying petitioners motion for reconsideration,
petitioner should have filed with the CA, within the fifteen (15)-day reglementary period, a petition for review, not a petition for
certiorari.
On the second issue, the Union basically claims that the CCBPIs decision to unilaterally remove the operators chairs from the
production/manufacturing lines of its bottling plants is not valid because it violates some fundamental labor policies. According
to the Union, such removal constitutes a violation of the 1) Occupational Health and Safety Standards which provide that every
worker is entitled to be provided by the employer with appropriate seats, among others; 2) policy of the State to assure the
right of workers to a just and humane condition of work as provided for in Article 3 of the Labor Code; 8 3) Global Workplace
Rights Policy of CCBPI which provides for a safe and healthy workplace by maintaining a productive workplace and by
minimizing the risk of accident, injury and exposure to health risks; and 4) diminution of benefits provided in Article 100 of the
Labor Code.9
Opposing the Unions argument, CCBPI mainly contends that the removal of the subject chairs is a valid exercise of
management prerogative. The management decision to remove the subject chairs was made in good faith and did not intend
to defeat or circumvent the rights of the Union under the special laws, the CBA and the general principles of justice and fair
play.
Again, the Court agrees with CCBPI on the matter.
A Valid Exercise of Management Prerogative
The Court has held that management is free to regulate, according to its own discretion and judgment, all aspects of
employment, including hiring, work assignments, working methods, time, place, and manner of work, processes to be followed,
supervision of workers, working regulations, transfer of employees, work supervision, lay-off of workers, and discipline,
dismissal and recall of workers. The exercise of management prerogative, however, is not absolute as it must be exercised in
good faith and with due regard to the rights of labor.10
In the present controversy, it cannot be denied that CCBPI removed the operators chairs pursuant to a national directive and
in line with its "I Operate, I Maintain, I Clean" program, launched to enable the Union to perform their duties and
responsibilities more efficiently. The chairs were not removed indiscriminately. They were carefully studied with due regard to
the welfare of the members of the Union. The removal of the chairs was compensated by: a) a reduction of the operating hours
of the bottling operators from a two-and-one-half (2 )-hour rotation period to a one-and-a-half (1 ) hour rotation period; and
b) an increase of the break period from 15 to 30 minutes between rotations.
Apparently, the decision to remove the chairs was done with good intentions as CCBPI wanted to avoid instances of operators
sleeping on the job while in the performance of their duties and responsibilities and because of the fact that the chairs were not
necessary considering that the operators constantly move about while working. In short, the removal of the chairs was
designed to increase work efficiency. Hence, CCBPIs exercise of its management prerogative was made in good faith without
doing any harm to the workers rights.
The fact that there is no proof of any operator sleeping on the job is of no moment. There is no guarantee that such incident
would never happen as sitting on a chair is relaxing. Besides, the operators constantly move about while doing their job. The
ultimate purpose is to promote work efficiency.
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No Violation of Labor Laws
The rights of the Union under any labor law were not violated. There is no law that requires employers to provide chairs for
bottling operators. The CA correctly ruled that the Labor Code, specifically Article 132 11 thereof, only requires employers to
provide seats for women. No similar requirement is mandated for men or male workers. It must be stressed that all concerned
bottling operators in this case are men.
There was no violation either of the Health, Safety and Social Welfare Benefit provisions under Book IV of the Labor Code of
the Philippines. As shown in the foregoing, the removal of the chairs was compensated by the reduction of the working hours
and increase in the rest period. The directive did not expose the bottling operators to safety and health hazards.
The Union should not complain too much about standing and moving about for one and one-half (1 ) hours because studies
show that sitting in workplaces for a long time is hazardous to ones health. The report of VicHealth, Australia, 12 disclosed that
"prolonged workplace sitting is an emerging public health and occupational health issue with serious implications for the health
of our working population. Importantly, prolonged sitting is a risk factor for poor health and early death, even among those who
meet, or exceed, national13 activity guidelines." In another report,14 it was written:
Workers needing to spend long periods in a seated position on the job such as taxi drivers, call centre and office workers, are
at risk for injury and a variety of adverse health effects.
The most common injuries occur in the muscles, bones, tendons and ligaments, affecting the neck and lower back regions.
Prolonged sitting:
reduces body movement making muscles more likely to pull, cramp or strain when stretched suddenly, causes fatigue in the
back and neck muscles by slowing the blood supply and puts high tension on the spine, especially in the low back or neck,
and
causes a steady compression on the spinal discs that hinders their nutrition and can contribute to their premature
degeneration.
Sedentary employees may also face a gradual deterioration in health if they do not exercise or do not lead an otherwise
physically active life. The most common health problems that these employees experience are disorders in blood circulation
and injuries affecting their ability to move. Deep Vein Thrombosis (DVT), where a clot forms in a large vein after prolonged
sitting (eg after a long flight) has also been shown to be a risk.
Workers who spend most of their working time seated may also experience other, less specific adverse health effects.
Common effects include decreased fitness, reduced heart and lung efficiency, and digestive problems. Recent research has
identified too much sitting as an important part of the physical activity and health equation, and suggests we should focus on
the harm caused by daily inactivity such as prolonged sitting.
Associate professor David Dunstan leads a team at the Baker IDI in Melbourne which is specifically researching sitting and
physical activity. He has found that people who spend long periods of time seated (more than four hours per day) were at risk
of:
higher blood levels of sugar and fats,
larger waistlines, and
higher risk of metabolic syndrome
regardless of how much moderate to vigorous exercise they had.
In addition, people who interrupted their sitting time more often just by standing or with light activities such as housework,
shopping, and moving about the office had healthier blood sugar and fat levels, and smaller waistlines than those whose sitting
time was not broken up.
Of course, in this case, if the chairs would be returned, no risks would be involved because of the shorter period of working
time. The study was cited just to show that there is a health risk in prolonged sitting.
No Violation of the CBA
The CBA15 between the Union and CCBPI contains no provision whatsoever requiring the management to provide chairs for
the operators in the production/manufacturing line while performing their duties and responsibilities. On the contrary, Section 2
of Article 1 of the CBA expressly provides as follows:
Article I
SCOPE
SECTION 2. Scope of the Agreement. All the terms and conditions of employment of employees and workers within the
appropriate bargaining unit (as defined in Section 1 hereof) are embodied in this Agreement and the same shall govern the
relationship between the COMPANY and such employees and/or workers. On the other hand, all such benefits and/or
privileges as are not expressly provided for in this Agreement but which are now being accorded, may in the future be
accorded, or might have previously been accorded, to the employees and/or workers, shall be deemed as purely voluntary
acts on the part of the COMPANY in each case, and the continuance and repetition thereof now or in the future, no matter how
long or how often, shall not be construed as establishing an obligation on the part of the COMPANY. It is however understood
that any benefits that are agreed upon by and between the COMPANY and the UNION in the Labor-Management Committee
Meetings regarding the terms and conditions of employment outside the CBA that have general application to employees who
are similarly situated in a Department or in the Plant shall be implemented. [emphasis and underscoring supplied]
305
As can be gleaned from the aforecited provision, the CBA expressly provides that benefits and/or privileges, not expressly
given therein but which are presently being granted by the company and enjoyed by the employees, shall be considered as
purely voluntary acts by the management and that the continuance of such benefits and/or privileges, no matter how long or
how often, shall not be understood as establishing an obligation on the companys part. Since the matter of the chairs is not
expressly stated in the CBA, it is understood that it was a purely voluntary act on the part of CCBPI and the long practice did
not convert it into an obligation or a vested right in favor of the Union.
No Violation of the general principles
of justice and fair play
The Court completely agrees with the CA ruling that the removal of the chairs did not violate the general principles of justice
and fair play because the bottling operators working time was considerably reduced from two and a half (2 ) hours to just
one and a half (1 ) hours and the break period, when they could sit down, was increased to 30 minutes between rotations.
The bottling operators new work schedule is certainly advantageous to them because it greatly increases their rest period and
significantly decreases their working time. A break time of thirty (30) minutes after working for only one and a half (1 ) hours
is a just and fair work schedule.
No Violation of Article 100
of the Labor Code
The operators chairs cannot be considered as one of the employee benefits covered in Article 10016 of the Labor Code. In
the Courts view, the term "benefits" mentioned in the non-diminution rule refers to monetary benefits or privileges given to the
employee with monetary equivalents.
Such benefits or privileges form part of the employees wage, salary or compensation making them enforceable obligations.
This Court has already decided several cases regarding the non-diminution rule where the benefits or privileges involved in
those cases mainly concern monetary considerations or privileges with monetary equivalents. Some of these cases are:
Eastern Telecommunication Phils. Inc. v. Eastern Telecoms Employees Union,17 where the case involves the payment of 14th,
15th and 16th month bonuses; Central Azucarera De Tarlac v. Central Azucarera De Tarlac Labor Union-NLU,18 regarding the
13th month pay, legal/special holiday pay, night premium pay and vacation and sick leaves; TSPIC Corp. v. TSPIC Employees
Union,19 regarding salary wage increases; and American Wire and Cable Daily Employees Union vs. American Wire and
Cable Company, Inc.,20 involving service awards with cash incentives, premium pay, Christmas party with incidental benefits
and promotional increase.
In this regard, the Court agrees with the CA when it resolved the matter and wrote:
Let it be stressed that the aforequoted article speaks of non-diminution of supplements and other employee benefits.
Supplements arc privileges given to an employee which constitute as extra remuneration besides his or her basic ordinary
earnings and wages. From this definition, We can only deduce that the other employee benefits spoken of by Article 100
pertain only to those which are susceptible of monetary considerations. Indeed, this could only be the most plausible
conclusion because the cases tackling Article 100 involve mainly with monetary considerations or privileges converted to their
monetary equivalents.
xxxx
Without a doubt, equating the provision of chairs to the bottling operators Ds something within the ambit of "benefits'' in the
context of Article 100 of the Labor Code is unduly stretching the coverage of the law. The interpretations of Article 100 of the
Labor Code do not show even with the slightest hint that such provision of chairs for the bottling operators may be sheltered
under its mantle.21
Jurisprudence recognizes the exercise of management prerogatives. Labor Jaws also discourage interference with an
employer's judgment in the conduct of its business. For this reason, the Court often declines to interfere in legitimate business
decisions of employers. The law must protect not only the welfare of the employees, but also the right of the employers. 22
WHEREFORE, the petition is DENIED.
SO ORDERED.

G.R. No. 176985 April 1, 2013

RICARDO E. VERGARA, JR., Petitioner,
vs.
COCA-COLA BOTTLERS PHILIPPINES, INC., Respondent.
DECISION
PERALTA, J.:
Before Us is a petition for review on certiorari under Rule 45 of the Rules of Civil Procedure assailing the January 9, 2007
Decision1 and March 6, 2007 Resolution2 of the Court of Appeals (CA) in CA .. G.R. SP No. 94622, which affirmed the January
31, 2006 Decision3 and March 8, 2006 Resolution4 of the National Labor Relations Commission (NLRC) modifying the
September 30, 2003 Decision5 of the Labor Arbiter (LA) by deleting the sales management incentives in the computation of
petitioner's retirement benefits.

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Petitioner Ricardo E. Vergara, Jr. was an employee of respondent Coca-Cola Bottlers Philippines, Inc. from May 1968 until he
retired on January 31, 2002 as a District Sales Supervisor (DSS) for Las Pias City, Metro Manila. As stipulated in
respondents existing Retirement Plan Rules and Regulations at the time, the Annual Performance Incentive Pay of RSMs,
DSSs, and SSSs shall be considered in the computation of retirement benefits, as follows: Basic Monthly Salary + Monthly
Average Performance Incentive (which is the total performance incentive earned during the year immediately preceding 12
months) No. of Years in Service.6
Claiming his entitlement to an additional PhP474,600.00 as Sales Management Incentives (SMI)7 and to the amount of
PhP496,016.67 which respondent allegedly deducted illegally, representing the unpaid accounts of two dealers within his
jurisdiction, petitioner filed a complaint before the NLRC on June 11, 2002 for the payment of his "Full Retirement Benefits,
Merit Increase, Commission/Incentives, Length of Service, Actual, Moral and Exemplary Damages, and Attorneys Fees." 8
After a series of mandatory conference, both parties partially settled with regard the issue of merit increase and length of
service.9 Subsequently, they filed their respective Position Paper and Reply thereto dealing on the two remaining issues of
SMI entitlement and illegal deduction.
On September 30, 2003, the LA rendered a Decision10 in favor of petitioner, directing respondent to reimburse the amount
illegally deducted from petitioners retirement package and to integrate therein his SMI privilege. Upon appeal of respondent,
however, the NLRC modified the award and deleted the payment of SMI.
Petitioner then moved to partially execute the reimbursement of illegal deduction, which the LA granted despite respondents
opposition.11 Later, without prejudice to the pendency of petitioners petition for certiorari before the CA, the parties executed a
Compromise Agreement12 on October 4, 2006, whereby petitioner acknowledged full payment by respondent of the amount of
PhP496,016.67 covering the amount illegally deducted.
The CA dismissed petitioners case on January 9, 2007 and denied his motion for reconsideration two months thereafter.
Hence, this present petition to resolve the singular issue of whether the SMI should be included in the computation of
petitioners retirement benefits on the ground of consistent company practice. Petitioner insistently avers that many DSSs who
retired without achieving the sales and collection targets were given the average SMI in their retirement package.
We deny.
This case does not fall within any of the recognized exceptions to the rule that only questions of law are proper in a petition for
review on certiorari under Rule 45 of the Rules of Court. Settled is the rule that factual findings of labor officials, who are
deemed to have acquired expertise in matters within their respective jurisdiction, are generally accorded not only respect but
even finality, and bind us when supported by substantial evidence.13Certainly, it is not Our function to assess and evaluate the
evidence all over again, particularly where the findings of both the CA and the NLRC coincide.
In any event, even if this Court would evaluate petitioner's arguments on its supposed merits, We still find no reason to disturb
the CA ruling that affirmed the NLRC. The findings and conclusions of the CA show that the evidence and the arguments of
the parties had all been carefully considered and passed upon. There are no relevant and compelling facts to justify a different
resolution which the CA failed to consider as well as no factual conflict between the CA and the NLRC decisions.
Generally, employees have a vested right over existing benefits voluntarily granted to them by their employer. 14Thus, any
benefit and supplement being enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by the
employer.15 The principle of non-diminution of benefits is actually founded on the Constitutional mandate to protect the rights
of workers, to promote their welfare, and to afford them full protection.16 In turn, said mandate is the basis of Article 4 of the
Labor Code which states that "all doubts in the implementation and interpretation of this Code, including its implementing rules
and regulations, shall be rendered in favor of labor." 17
There is diminution of benefits when the following requisites are present: (1) the grant or benefit is founded on a policy or has
ripened into a practice over a long period of time; (2) the practice is consistent and deliberate; (3) the practice is not due to
error in the construction or application of a doubtful or difficult question of law; and (4) the diminution or discontinuance is done
unilaterally by the employer.18
To be considered as a regular company practice, the employee must prove by substantial evidence that the giving of the
benefit is done over a long period of time, and that it has been made consistently and deliberately. 19Jurisprudence has not laid
down any hard-and-fast rule as to the length of time that company practice should have been exercised in order to constitute
voluntary employer practice.20 The common denominator in previously decided cases appears to be the regularity and
deliberateness of the grant of benefits over a significant period of time. 21 It requires an indubitable showing that the employer
agreed to continue giving the benefit knowing fully well that the employees are not covered by any provision of the law or
agreement requiring payment thereof.22 In sum, the benefit must be characterized by regularity, voluntary and deliberate intent
of the employer to grant the benefit over a considerable period of time. 23
Upon review of the entire case records, We find no substantial evidence to prove that the grant of SMI to all retired DSSs
regardless of whether or not they qualify to the same had ripened into company practice. Despite more than sufficient
opportunity given him while his case was pending before the NLRC, the CA, and even to this Court, petitioner utterly failed to
adduce proof to establish his allegation that SMI has been consistently, deliberately and voluntarily granted to all retired DSSs
without any qualification or conditions whatsoever. The only two pieces of evidence that he stubbornly presented throughout
the entirety of this case are the sworn statements of Renato C. Hidalgo (Hidalgo) and Ramon V. Velazquez (Velasquez),
307
former DSSs of respondent who retired in 2000 and 1998, respectively. They claimed that the SMI was included in their
retirement package even if they did not meet the sales and collection qualifiers. 24 However, juxtaposing these with the
evidence presented by respondent would reveal the frailty of their statements.
The declarations of Hidalgo and Velazquez were sufficiently countered by respondent through the affidavits executed by
Norman R. Biola (Biola), Moises D. Escasura (Escasura), and Ma. Vanessa R. Balles (Balles). 25 Biola pointed out the various
stop-gap measures undertaken by respondent beginning 1999 in order to arrest the deterioration of its accounts receivables
balance, two of which relate to the policies on the grant of SMI and to the change in the management structure of respondent
upon its re-acquisition by San Miguel Corporation. Escasura represented that he has personal knowledge of the
circumstances behind the retirement of Hidalgo and Velazquez. He attested that contrary to petitioners claim, Hidalgo was in
fact qualified for the SMI. As for Velazquez, Escasura asserted that even if he (Velazquez) did not qualify for the SMI,
respondents General Manager in its Calamba plant still granted his (Velazquez) request, along with other numerous
concessions, to achieve industrial peace in the plant which was then experiencing labor relations problems. Lastly, Balles
confirmed that petitioner failed to meet the trade receivable qualifiers of the SMI. She also cited the cases of Ed Valencia
(Valencia) and Emmanuel Gutierrez (Gutierrez), both DSSs of respondent who retired on January 31, 2002 and December 30,
2002, respectively. She noted that, unlike Valencia, Gutierrez also did not receive the SMI as part of his retirement pay, since
he failed to qualify under the policy guidelines. The verity of all these statements and representations stands and holds true to
Us, considering that petitioner did not present any iota of proof to debunk the same.
Therefore, respondent's isolated act of including the SMI in the retirement package of Velazquez could hardly be classified as
a company practice that may be considered an enforceable obligation. To repeat, the principle against diminution of benefits is
applicable only if the grant or benefit is founded on an express policy or has ripened into a practice over a long period of time
which is consistent and deliberate; it presupposes that a company practice, policy and tradition favorable to the employees has
been clearly established; and that the payments made by the company pursuant to it have ripened into benefits enjoyed by
them.26 Certainly, a practice or custom is, as a general rule, not a source of a legally demandable or enforceable
right.27 Company practice, just like any other fact, habits, customs, usage or patterns of conduct, must be proven by the
offering party who must allege and establish specific, repetitive conduct that might constitute evidence of habit or company
practice.28
To close, We rule that petitioner could have salvaged his case had he step up to disprove respondents contention that he
miserably failed to meet the collection qualifiers of the SMI. Respondent argues that
An examination of the Companys aged trial balance reveals that petitioner did not meet the trade receivable qualifier. On the
contrary, the said trial balance reveals that petitioner had a large amount of uncollected overdue accounts. For the year 2001,
his percentage collection efficiency for current issuance was at an average of 13.5% a month as against the required 70%. For
the same, petitioners collection efficiency was at an average of 60.25% per month for receivables aged 1-30 days, which is
again, way below the required 90%. For receivables aged 31-60 days during said year, petitioners collection efficiency was at
an average of 56.17% per month, which is approximately half of the required 100%. Worse, for receivables over 60 days old,
petitioners average collection efficiency per month was a reprehensively low 14.10% as against the required 100%. 29
The above data was repeatedly raised by respondent in its Rejoinder (To Complainants Reply) before the LA, 30Memorandum
of Appeal31 and Opposition (To Complainant-Appellees Motion for Reconsideration)32 before the NLRC, and Comment (On
the Petition),33 Memorandum (For the Private Respondent),34 and Comment (On the Motion for Reconsideration)35 before the
CA. Instead of frontally rebutting the data, petitioner treated them with deafening silence; thus, reasonably and logically
implying lack of evidence to support the contrary.
WHEREFORE, the petition is DENIED. The January 9, 2007 Decision and March 6, 2007 Resolution of the Court of Appeals
in CA-G.R. SP No. 94622, which affirmed the January 31, 2006 Decision and March 8, 2006 Resolution of the NLRC deleting
the LA's inclusion of sales management incentives in the computation of petitioner's retirement benefits, is hereby AFFIRMED.
SO ORDERED.

G.R. No. 185556 March 28, 2011

SUPREME STEEL CORPORATION, Petitioner,
vs.
NAGKAKAISANG MANGGAGAWA NG SUPREME INDEPENDENT UNION (NMS-IND-APL), Respondent.
DECISION
NACHURA, J.:
This petition for review on certiorari assails the Court of Appeals (CA) Decision1 dated September 30, 2008, and Resolution
dated December 4, 2008, which affirmed the finding of the National Labor Relations Commission (NLRC) that petitioner
violated certain provisions of the Collective Bargaining Agreement (CBA).
Petitioner Supreme Steel Pipe Corporation is a domestic corporation engaged in the business of manufacturing steel pipes for
domestic and foreign markets. Respondent Nagkakaisang Manggagawa ng Supreme Independent Union is the certified
bargaining agent of petitioners rank-and-file employees. The CBA2 in question was executed by the parties to cover the period
from June 1, 2003 to May 31, 2008.
308
 The Case
On July 27, 2005, respondent filed a notice of strike with the National Conciliation and Mediation Board (NCMB) on the ground
that petitioner violated certain provisions of the CBA. The parties failed to settle their dispute. Consequently, the Secretary of
Labor certified the case to the NLRC for compulsory arbitration pursuant to Article 263(g) of the Labor Code.
Respondent alleged eleven CBA violations, delineated as follows:
A. Denial to four employees of the CBA- provided wage increase
Article XII, Section 1 of the CBA provides:
Section 1. The COMPANY shall grant a general wage increase, over and above to all employees, according to the following
schedule:
A. Effective June 1, 2003 P14.00 per working day;
B. Effective June 1, 2004 P12.00 per working day; and
C. Effective June 1, 2005 P12.00 per working day.3
Respondent alleged that petitioner has repeatedly denied the annual CBA increases to at least four individuals: Juan Nio,
Reynaldo Acosta, Rommel Talavera, and Eddie Dalagon. According to respondent, petitioner gives an anniversary increase to
its employees upon reaching their first year of employment. The four employees received their respective anniversary
increases and petitioner used such anniversary increase to justify the denial of their CBA increase for the year. 4
Petitioner explained that it has been the companys long standing practice that upon reaching one year of service, a wage
adjustment is granted, and, once wages are adjusted, the increase provided for in the CBA for that year is no longer
implemented. Petitioner claimed that this practice was not objected to by respondent as evidenced by the employees pay
slips.5
Respondent countered that petitioner failed to prove that, as a matter of company practice, the anniversary increase took the
place of the CBA increase. It contended that all employees should receive the CBA stipulated increase for the years 2003 to
2005.6
B. Contracting-out labor
Article II, Section 6 of the CBA provides:
Section 6. Prohibition of Contracting Out of Work of Members of Bargaining Unit. Thirty (30) days from the signing of this CBA,
contractual employees in all departments, except Warehouse and Packing Section, shall be phased out. Those contractual
employees who are presently in the workforce of the COMPANY shall no longer be allowed to work after the expiration of their
contracts without prejudice to being hired as probationary employees of the COMPANY. 7
Respondent claimed that, contrary to this provision, petitioner hired temporary workers for five months based on uniformly
worded employment contracts, renewable for five months, and assigned them to almost all of the
departments in the company. It pointed out that, under the CBA, temporary workers are allowed only in the Warehouse and
Packing Section; consequently, employment of contractual employees outside this section, whether direct or agency-hired,
was absolutely prohibited. Worse, petitioner never regularized them even if the position they occupied and the services they
performed were necessary and desirable to its business. Upon the expiration of their contracts, these workers would be
replaced with other workers with the same employment status. This scheme is a clear circumvention of the laws on regular
employment. 8
Respondent argued that the right to self-organization goes beyond the maintenance of union membership. It emphasized that
the CBA maintains a union shop clause which gives the regular employees 30 days within which to join respondent as a
condition for their continued employment. Respondent maintained that petitioners persistent refusal to grant regular status to
its employees, such as Dindo Buella, who is assigned in the Galvanizing Department, violates the employees right to self-
organization in two ways: (1) they are deprived of a representative for collective bargaining purposes; and (2) respondent is
deprived the right to expand its membership. Respondent contended that a unions strength lies in its number, which becomes
crucial especially during negotiations; after all, an employer will not bargain seriously with a union whose membership
constitutes a minority of the total workforce of the company. According to respondent, out of the 500 employees of the
company, only 147 are union members, and at least 60 employees would have been eligible for union membership had they
been recognized as regular employees.9
For its part, petitioner admitted that it hired temporary workers. It purportedly did so to cope with the seasonal increase of the
job orders from abroad. In order to comply with the job orders, petitioner hired the temporary workers to help the regular
workers in the production of steel pipes. Petitioner maintained that these workers do not affect respondents membership.
Petitioner claimed that it agreed to terminate these temporary employees on the condition that the regular employees would
have to perform the work that these employees were performing, but respondent refused. Respondents refusal allegedly
proved that petitioner was not contracting out the services being performed by union members. Finally, petitioner insisted that
the hiring of temporary workers is a management prerogative. 10
C. Failure to provide shuttle service
Petitioner has allegedly reneged on its obligation to provide shuttle service for its employees pursuant to Article XIV, Section 7
of the CBA, which provides:

309
Section 7. Shuttle Service. As per company practice, once the company vehicle used for the purpose has been
reconditioned.11
Respondent claimed that the company vehicle which would be used as shuttle service for its employees has not been
reconditioned by petitioner since the signing of the CBA on February 26, 2004.12 Petitioner explained that it is difficult to
implement this provision and simply denied that it has reneged on its obligation. 13
D. Refusal to answer for the medical expenses incurred by three employees
Respondent asserted that petitioner is liable for the expenses incurred by three employees who were injured while in the
company premises. This liability allegedly stems from Article VIII, Section 4 of the CBA which provides:
Section 4. The COMPANY agrees to provide first aid medicine and first aid service and consultation free of charge to all its
employees.14
According to respondent, petitioners definition of what constitutes first aid service is limited to the bare minimum of treating
injured employees while still within the company premises and referring the injured employee to the Chinese General Hospital
for treatment, but the travel expense in going to the hospital is charged to the employee. Thus, when Alberto Guevarra and
Job Canizares, union members, were injured, they had to pay P90.00 each for transportation expenses in going to the hospital
for treatment and going back to the company thereafter. In the case of Rodrigo Solitario, petitioner did not even shoulder the
cost of the first aid medicine, amounting to P2,113.00, even if he was injured during the company sportsfest, but the amount
was deducted, instead, from his salary. Respondent insisted that this violates the above cited provision of the CBA. 15
Petitioner insisted that it provided medicine and first aid assistance to Rodrigo Solitario.1avvphi1 It alleged that the latter
cannot claim hospitalization benefits under Article VIII, Section 116 of the CBA because he was not confined in a hospital.17
E. Failure to comply with the time-off with pay provision
Article II, Section 8 of the CBA provides:
Section 8. Time-Off with Pay. The COMPANY shall grant to the UNIONs duly authorized representative/s or to any employee
who are on duty, if summoned by the UNION to testify, if his/her presence is necessary, a paid time-off for the handling of
grievances, cases, investigations, labor-management conferences provided that if the venue of the case is outside Company
premises involving [the] implementation and interpretation of the CBA, two (2) representatives of the UNION who will attend
the said hearing shall be considered time-off with pay. If an employee on a night shift attends grievance on labor-related cases
and could not report for work due to physical condition, he may avail of union leave without need of the two (2) days prior
notice.18
Respondent contended that under the said provision, petitioner was obliged to grant a paid time-off to respondents duly
authorized representative or to any employee who was on duty, when summoned by respondent to testify or when the
employees presence was necessary in the grievance hearings, meetings, or investigations. 19
Petitioner admitted that it did not honor the claim for wages of the union officers who attended the grievance meetings
because these meetings were initiated by respondent itself. It argued that since the union officers
were performing their functions as such, and not as employees of the company, the latter should not be liable. Petitioner
further asserted that it is not liable to pay the wages of the union officers when the meetings are held beyond company time
(3:00 p.m.). It claimed that time-off with pay is allowed only if the venue of the meeting is outside company premises and the
meeting involves the implementation and interpretation of the CBA. 20
In reply, respondent averred that the above quoted provision does not make a qualification that the meetings should be held
during office hours (7:00 a.m. to 3:00 p.m.); hence, for as long as the presence of the employee is needed, time spent during
the grievance meeting should be paid.21
F. Visitors free access to company premises Respondent charged petitioner with violation of Article II, Section 7 of the CBA
which provides:
Section 7. Free Access to Company Premises. Local Union and Federation officers (subject to companys security measure)
shall be allowed during working hours to enter the COMPANY premises for the following reasons:
a. To investigate grievances that have arisen;
b. To interview Union Officers, Stewards and members during reasonable hours; and
c. To attend to any meeting called by the Management or the UNION. 22
G. Failure to comply with reporting time-off provision
Respondent maintained that a brownout is covered by Article XII, Section 3 of the CBA which states:
Section 3. Reporting Time-Off. The employees who have reported for work but are unable to continue working because of
emergencies such as typhoons, flood, earthquake, transportation strike, where the COMPANY is affected and in case of fire
which occurs in the block where the home of the employee is situated and not just across the street and serious illness of an
immediate member of the family of the employee living with him/her and no one in the house can bring the sick family member
to the hospital, shall be paid as follows:
a. At least half day if the work stoppage occurs within the first four (4) hours of work; and
b. A whole day if the work stoppage occurs after four (4) hours of work. 23

310
Respondent averred that petitioner paid the employees salaries for one hour only of the four-hour brownout that occurred on
July 25, 2005 and refused to pay for the remaining three hours. In defense, petitioner simply insisted that brownouts are not
included in the above list of emergencies.24
Respondent rejoined that, under the principle of ejusdem generis, brownouts or power outages come within the "emergencies"
contemplated by the CBA provision. Although brownouts were not specifically identified as one of the emergencies listed in the
said CBA provision, it cannot be denied that brownouts fall within the same kind or class of the enumerated emergencies.
Respondent maintained that the intention of the provision was to compensate the employees for occurrences which are
beyond their control, and power outage is one of such occurrences. It insisted that the list of emergencies is not an exhaustive
list but merely gives an idea as to what constitutes an actual emergency that is beyond the control of the employee. 25
H. Dismissal of Diosdado Madayag
Diosdado Madayag was employed as welder by petitioner. He was served a Notice of Termination dated March 14, 2005
which read:
Please consider this as a Notice of Termination of employment effective March 14, 2005 under Art. 284 of the Labor Code and
its Implementing Rules.
This is based on the medical certificate submitted by your attending physician, Lucy Anne E. Mamba, M.D., Jose R. Reyes
Memorial Medical Center dated March 7, 2005 with the following diagnosis:
Diabetes Mellitus Type 2
Please be guided accordingly.26
Respondent contended that Madayags dismissal from employment is illegal because petitioner failed to obtain a certification
from a competent public authority that his disease is of such nature or at such stage that it cannot be cured within six months
even after proper medical treatment. Petitioner also failed to prove that Madayags continued employment was prejudicial to
his health or that of his colleagues.27
Petitioner, on the other hand, alleged that Madayag was validly terminated under Art. 284 28 of the Labor Code and that his leg
was amputated by reason of diabetes, which disease is not work-related. Petitioner claimed that it was willing to pay Madayag
13 days for every year of service but respondent was asking for additional benefits.29
I. Denial of paternity leave benefit to two employees
Article XV, Section 2 of the CBA provides:
Section 2. Paternity Leave. As per law[,] [t]he Company shall, as much as possible, pay paternity leave within 2 weeks from
submission of documents.30
Petitioner admitted that it denied this benefit to the claimants for failure to observe the requirement provided in the
Implementing Rules and Regulations of Republic Act No. 8187 (Paternity Leave Act of 1995), that is, to notify the employer of
the pregnancy of their wives and the expected date of delivery.31
Respondent argued that petitioner is relying on technicalities by insisting that the denial was due to the two employees failure
to notify it of the pregnancy of their respective spouses. It maintained that the notification requirement runs counter to the spirit
of the law. Respondent averred that, on grounds of social justice, the oversight to notify petitioner should not be dealt with
severely by denying the two claimants this benefit. 32
J. Discrimination and harassment
According to respondent, petitioner was contemptuous over union officers for protecting the rights of union members. In an
affidavit executed by Chito Guadaa, union secretary, he narrated that Alfred Navarro, Officer-in-Charge of the Packing
Department, had been harsh in dealing with his fellow employees and would even challenge some workers to a fight. He
averred that Navarro had an overbearing attitude during work and grievance meetings. In November 2004, Navarro removed
Guadaa, a foreman, from his position and installed another foreman from another section. The action was allegedly brought
about by earlier grievances against Navarros abuse. Petitioner confirmed his transfer to another section in violation of Article
VI, Section 6 of the CBA,33 which states in part:
Section 6. Transfer of Employment. No permanent positional transfer outside can be effected by the COMPANY without
discussing the grounds before the Grievance Committee. All transfer shall be with advance notice of two (2) weeks. No
transfer shall interfere with the employees exercise of the right to self-organization.34
Respondent also alleged that Ariel Marigondon, union president, was also penalized for working for his fellow employees. One
time, Marigondon inquired from management about matters concerning tax discrepancies because it appeared that non-
taxable items were included as part of taxable income. Thereafter, Marigondon was transferred from one area of operation to
another until he was allegedly forced to accept menial jobs of putting control tags on steel pipes, a kind of job which did not
require his 16 years of expertise in examining steel pipes. 35
Edgardo Masangcay, respondents Second Vice President, executed an affidavit wherein he cited three instances when his
salary was withheld by petitioner. The first incident happened on May 28, 2005 when petitioner refused to give his salary to his
wife despite presentation of a proof of identification (ID) and letter of authorization. On June 18, 2005, petitioner also refused
to release his salary to Pascual Lazaro despite submission of a letter of authority and his ID and, as a result, he was unable to
buy medicine for his child who was suffering from asthma attack. The third instance happened on June 25, 2005 when his
salary was short of P450.00; this amount was however released the following week.36
311
Petitioner explained that the transfer of the employee from one department to another was the result of downsizing the
Warehouse Department, which is a valid exercise of management prerogative. In Guadaas case, Navarro denied that he
was being harsh but claimed that he merely wanted to stress some points. Petitioner explained that Guadaa was transferred
when the section where he was assigned was phased out due to the installation of new machines. Petitioner pointed out that
the other workers assigned in said section were also transferred. 37
For the petitioner, Emmanuel Mendiola, Production Superintendent, also executed an affidavit attesting that the allegation of
Ariel Marigondon, that he was harassed and was a victim of discrimination for being respondents President, had no basis.
Marigondon pointed out that after the job order was completed, he was reassigned to his original shift and group.38
Petitioner also submitted the affidavits of Elizabeth Llaneta Aguilar, disbursement clerk and hiring staff, and Romeo T. Sy,
Assistant Personnel Manager. Aguilar explained that she did not mean to harass Masangcay, but she merely wanted to make
sure that he would receive his salary. Affiant Sy admitted that he refused to release Masangcays salary to a woman who
presented herself as his (Masangcays) wife since nobody could attest to it. He claimed that such is not an act of harassment
but a precautionary measure to protect Masangcays interest. 39
K. Non-implementation of COLA in Wage Order Nos. RBIII-10 and 11
Respondent posited that any form of wage increase granted through the CBA should not be treated as compliance with the
wage increase given through the wage boards. Respondent claimed that, for a number of years, petitioner has complied with
Article XII, Section 2 of the CBA which provides:
Section 2. All salary increase granted by the COMPANY shall not be credited to any future contractual or legislated wage
increases. Both increases shall be implemented separate and distinct from the increases stated in this Agreement. It should be
understood by both parties that contractual salary increase are separate and distinct from legislated wage increases, thus the
increase brought by the latter shall be enjoyed also by all covered employees. 40
Respondent maintained that for every wage order that was issued in Region 3, petitioner never hesitated to comply and grant
a similar increase. Specifically, respondent cited petitioners compliance with Wage Order No. RBIII-10 and grant of the
mandated P15.00 cost of living allowance (COLA) to all its employees. Petitioner, however, stopped implementing it to non-
minimum wage earners on July 24, 2005. It contended that this violates Article 100 of the Labor Code which prohibits the
diminution of benefits already enjoyed by the workers and that such grant of benefits had already ripened into a company
practice.41
Petitioner explained that the COLA provided under Wage Order No. RBIII-10 applies to minimum wage earners only and that,
by mistake, it implemented the same across the board or to all its employees. After realizing its mistake, it stopped integrating
the COLA to the basic pay of the workers who were earning above the minimum wage. 42
The NLRCs Ruling
Out of the eleven issues raised by respondent, eight were decided in its favor; two (denial of paternity leave benefit and
discrimination of union members) were decided in favor of petitioner; while the issue on visitors free access to company
premises was deemed settled during the mandatory conference. The dispositive portion of the NLRC Decision dated March
30, 2007 reads:
WHEREFORE, Supreme Steel Pipe Corporation (the Company) is hereby ordered to:
1) implement general wage increase to Juan Nio, Eddie Dalagon and Rommel Talavera pursuant to the CBA in
June 2003, 2004 and 2005;
2) regularize workers Dindo Buella and 60 other workers and to respect CBA provision on contracting-out labor;
3) recondition the company vehicle pursuant to the CBA;
4) answer for expenses involved in providing first aid services including transportation expenses for this purpose, as
well as to reimburse Rodrigo Solitario the sum of P2,113.00;
5) pay wages of union members/officers who attended grievance meetings as follows:
1) D. Serenilla - P115.24375

2) D. Miralpes - P115.80625

3) E. Mallari - P108.7625

4) C. Cruz - P114.65313

5) J. Patalbo - P161.0625

6) J.J. Muoz - P111.19375

7) C. Guadaa - P56.94375

8) J. Patalbo - P161.0625

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 9) E. Mallari - P108.7625

10) C. Guadaa - P113.8875

11) A. Marigondon - P170.30625

12) A. Marigondon - P181.66

13) A. Marigondon - P181.66

14) E. Masangcay - P175.75

15) A. Marigondon - P181.66

16) E. Masangcay - P175.75

17) A. Marigondon - P181.66

18) F. Servano - P174.02

19) R. Estrella - P181.50

20) A. Marigondon - P181.66

6) pay workers their salary for the 3 hours of the 4 hour brownout as follows:
1) Alagon, Jr., Pedro - P130.0875

2) Aliwalas, Cristeto - P108.5625

3) Baltazar, Roderick - P 90.1875

4) Baez, Oliver - P 90.9375

5) Prucal, Eduardo - P126.015

6) Calimquin, Rodillo - P131.0362

7) Clave, Arturo - P125.64

8) Cadavero, Rey - P108.5625

9) De Leon, Romulo - P124.35

10) Lactao, Noli - P126.015

11) Layco, Jr., Dandino - P130.5375

12) Legaspi, Melencio - P127.63

13) Quiachon, Rogelio - P130.5525

14) Sacmar, Roberto - P108.9375

15) Tagle, Farian - P129.3375

16) Villavicencio, Victor - P126.015

17) Agra, Romale - P126.015

18) Basabe, Luis - P128.5575

19) Bornasal, Joel - P127.53

20) Casitas, Santiago - P128.5575

313
 21) Celajes, Bonifacio - P128.1825

22) Avenido, Jerry - P133.2487

23) Gagarin, Alfredo - P108.9375

24) Layson, Paulo - P131.745

25) Lledo, Asalem - P128.5575

26) Marigondon, Ariel - P131.745

27) Orcena, Sonnie - P126.015

28) Servano, Fernando - P126.015

29) Versola, Rodrigo - P126.015

7) reinstate Diosdado Madayag to his former position without loss of seniority rights and to pay full backwages and
other benefits from 14 March 2005, date of dismissal, until the date of this Decision; if reinstatement is impossible[,] to
pay separation pay of one month pay for every year of service in addition to backwages;
8) dismiss the claim for paternity leave for failure of claimants to observe the requirements;
9) dismiss the charge of harassment and discrimination for lack of merit; and to
10) continue to implement COLA under Wage Order Nos. [RBIII]-10 & 11 across the board.
The issue on Visitors Free Access to Company Premises is dismissed for being moot and academic after it was settled during
the scheduled conferences.
SO ORDERED.43
Forthwith, petitioner elevated the case to the CA, reiterating its arguments on the eight issues resolved by the NLRC in
respondents favor.
The CAs Ruling
On September 30, 2008, the CA rendered a decision dismissing the petition, thus:
WHEREFORE, premises considered, the present petition is hereby DENIED DUE COURSE and accordingly DISMISSED, for
lack of merit. The assailed Decision dated March 30, 2007 and Resolution dated April 28, 2008 of the National Labor Relations
Commission in NLRC NCR CC No. 000305-05 are hereby AFFIRMED.
With costs against the petitioner.
SO ORDERED.44
According to the CA, petitioner failed to show that the NLRC committed grave abuse of discretion in finding that it violated
certain provisions of the CBA. The NLRC correctly held that every employee is entitled to the wage increase under the CBA
despite receipt of an anniversary increase. The CA concluded that, based on the wording of the CBA, which uses the words
"general increase" and "over and above," it cannot be said that the parties have intended the anniversary increase to be given
in lieu of the CBA wage increase.45
The CA declared that the withdrawal of the COLA under Wage Order No. RBIII-10 from the employees who were not minimum
wage earners amounted to a diminution of benefits because such grant has already ripened into a company practice. It
pointed out that there was no ambiguity or doubt as to who were covered by the wage order. Petitioner, therefore, may not
invoke error or mistake in extending the COLA to all employees and such act can only be construed as "as a voluntary act on
the part of the employer."46 The CA opined that, considering the foregoing, the ruling in Globe Mackay Cable and Radio Corp.
v. NLRC47 clearly did not apply as there was no doubtful or difficult question involved in the present case. 48
The CA sustained the NLRCs interpretation of Art. VIII, Section 4 of the CBA as including the expenses for first aid medicine
and transportation cost in going to the hospital. The CA stressed that the CBA should be construed liberally rather than
narrowly and technically, and the courts must place a practical and realistic construction upon it, giving due consideration to
the context in which it was negotiated and the purpose which it intended to serve. 49
Based on the principle of liberal construction of the CBA, the CA likewise sustained the NLRCs rulings on the issues
pertaining to the shuttle service, time-off for attendance in grievance meetings/hearings, and time-off due to brownouts.50
The CA further held that management prerogative is not unlimited: it is subject to limitations found in law, a CBA, or the
general principles of fair play and justice. It stressed that the CBA provided such limitation on management prerogative to
contract-out labor, and compliance with the CBA is mandated by the express policy of the law. 51
Finally, the CA affirmed the NLRCs finding that Madayags dismissal was illegal. It emphasized that the burden to prove that
the employees disease is of such nature or at such stage that it cannot be cured within a period of six months rests on the
employer. Petitioner failed to submit a certification from a competent public authority attesting to such fact; hence, Madayags
dismissal is illegal.52

314
Petitioner moved for a reconsideration of the CAs decision. On December 4, 2008, the CA denied the motion for lack of
merit.53
Dissatisfied, petitioner filed this petition for review on certiorari, contending that the CA erred in finding that it violated certain
provisions of the CBA.
The Courts Ruling
The petition is partly meritorious.
It is a familiar and fundamental doctrine in labor law that the CBA is the law between the parties and compliance therewith is
mandated by the express policy of the law. If the terms of a CBA are clear and there is no doubt as to the intention of the
contracting parties, the literal meaning of its stipulation shall prevail. 54 Moreover, the CBA must be construed liberally rather
than narrowly and technically and the Court must place a practical and realistic construction upon it.55 Any doubt in the
interpretation of any law or provision affecting labor should be resolved in favor of labor.56
Upon these well-established precepts, we sustain the CAs findings and conclusions on all the issues, except the issue
pertaining to the denial of the COLA under Wage Order No. RBIII-10 and 11 to the employees who are not minimum wage
earners.
The wording of the CBA on general wage increase cannot be interpreted any other way: The CBA increase should be given to
all employees "over and above" the amount they are receiving, even if that amount already includes an anniversary increase.
Stipulations in a contract must be read together, not in isolation from one another. 57 Consideration of Article XIII, Section 2
(non-crediting provision), bolsters such interpretation. Section 2 states that "[a]ll salary increase granted by the company shall
not be credited to any future contractual or legislated wage increases." Clearly then, even if petitioner had already awarded an
anniversary increase to its employees, such increase cannot be credited to the "contractual" increase as provided in the CBA,
which is considered "separate and distinct."
Petitioner claims that it has been the company practice to offset the anniversary increase with the CBA increase. It however
failed to prove such material fact. Company practice, just like any other fact, habits, customs, usage or patterns of conduct
must be proven. The offering party must allege and prove specific, repetitive conduct that might constitute evidence of
habit,58 or company practice. Evidently, the pay slips of the four employees do not serve as sufficient proof.
Petitioners excuse in not providing a shuttle service to its employees is unacceptable. In fact, it can hardly be considered as
an excuse. Petitioner simply says that it is difficult to implement the provision. It relies on the fact that "no time element [is]
explicitly stated [in the CBA] within which to fulfill the undertaking." We cannot allow petitioner to dillydally in complying with its
obligation and take undue advantage of the fact that no period is provided in the CBA. Petitioner should recondition the
company vehicle at once, lest it be charged with and found guilty of unfair labor practice.
Petitioner gave a narrow construction to the wording of the CBA when it denied (a) reimbursement for the first-aid medicines
taken by Rodrigo Solitario when he was injured during the company sportsfest and the transportation cost incurred by Alberto
Guevara and Job Canizares in going to the hospital, (b) payment of the wages of certain employees during the time they spent
at the grievance meetings, and (c) payment of the employees wages during the brownout that occurred on July 25, 2002. As
previously stated, the CBA must be construed liberally rather than narrowly and technically. It is the duty of the courts to place
a practical and realistic construction upon the CBA, giving due consideration to the context in which it is negotiated and the
purpose which it is intended to serve. Absurd and illogical interpretations should be avoided. 59 A CBA, like any other contract,
must be interpreted according to the intention of the parties. 60
The CA was correct in pointing out that the concerned employees were not seeking hospitalization benefits under Article VIII,
Section 1 of the CBA, but under Section 4 thereof; hence, confinement in a hospital is not a prerequisite for the claim.
Petitioner should reimburse Solitario for the first aid medicines; after all, it is the duty of the employer to maintain first- aid
medicines in its premises.61 Similarly, Guevara and Canizares should also be reimbursed for the transportation cost incurred in
going to the hospital. The Omnibus Rules Implementing the Labor Code provides that, where the employer does not have an
emergency hospital in its premises, the employer is obliged to transport an employee to the nearest hospital or clinic in case of
emergency.62
We likewise agree with the CA on the issue of nonpayment of the time-off for attending grievance meetings. The intention of
the parties is obviously to compensate the employees for the time that they spend in a grievance meeting as the CBA
provision categorically states that the company will pay the employee "a paid time-off for handling of grievances,
investigations, labor-management conferences." It does not make a qualification that such meeting should be held during
office hours or within the company premises.
The employees should also be compensated for the time they were prevented from working due to the brownout. The CBA
enumerates some of the instances considered as "emergencies" and these are "typhoons, flood earthquake, transportation
strike." As correctly argued by respondent, the CBA does not exclusively enumerate the situations which are considered
"emergencies." Obviously, the key element of the provision is that employees "who have reported for work are unable to
continue working" because of the incident. It is therefore reasonable to conclude that brownout or power outage is considered
an "emergency" situation.

315
Again, on the issue of contracting-out labor, we sustain the CA. Petitioner, in effect, admits having hired "temporary"
employees, but it maintains that it was an exercise of management prerogative, necessitated by the increase in demand for its
product.
Indeed, jurisprudence recognizes the right to exercise management prerogative. Labor laws also discourage interference with
an employer's judgment in the conduct of its business. For this reason, the Court often declines to interfere in legitimate
business decisions of employers. The law must protect not only the welfare of employees, but also the right of
employers.63 However, the exercise of management prerogative is not unlimited. Managerial prerogatives are subject to
limitations provided by law, collective bargaining agreements, and general principles of fair play and justice. 64 The CBA is the
norm of conduct between the parties and, as previously stated, compliance therewith is mandated by the express policy of the
law.65
The CBA is clear in providing that temporary employees will no longer be allowed in the company except in the Warehouse
and Packing Section. Petitioner is bound by this provision. It cannot exempt itself from compliance by invoking management
prerogative. Management prerogative must take a backseat when faced with a CBA provision. If petitioner needed additional
personnel to meet the increase in demand, it could have taken measures without violating the CBA.
Respondent claims that the temporary employees were hired on five-month contracts, renewable for another five months. After
the expiration of the contracts, petitioner would hire other persons for the same work, with the same employment status.
Plainly, petitioners scheme seeks to prevent employees from acquiring the status of regular employees. But the Court has
already held that, where from the circumstances it is apparent that the periods of employment have been imposed to preclude
acquisition of security of tenure by the employee, they should be struck down or disregarded as contrary to public policy and
morals.66 The primary standard to determine a regular employment is the reasonable connection between the particular
activity performed by the employee in relation to the business or trade of the employer. The test is whether the former is
usually necessary or desirable in the usual business or trade of the employer. If the employee has been performing the job for
at least one year, even if the performance is not continuous or merely intermittent, the law deems the repeated and continuing
need for its performance as sufficient evidence of the necessity, if not indispensability, of that activity to the business of the
employer. Hence, the employment is also considered regular, but only with respect to such activity and while such activity
exists.67
We also uphold the CAs finding that Madayags dismissal was illegal. It is already settled that the burden to prove the validity
of the dismissal rests upon the employer. Dismissal based on Article 284 of the Labor Code is no different, thus:
The law is unequivocal: the employer, before it can legally dismiss its employee on the ground of disease, must adduce a
certification from a competent public authority that the disease of which its employee is suffering is of such nature or at such a
stage that it cannot be cured within a period of six months even with proper treatment.
xxxx
In Triple Eight Integrated Services, Inc. v. NLRC, the Court explains why the submission of the requisite medical certificate is
for the employers compliance, thus:
The requirement for a medical certificate under Article 284 of the Labor Code cannot be dispensed with; otherwise, it would
sanction the unilateral and arbitrary determination by the employer of the gravity or extent of the employees illness and thus
defeat the public policy on the protection of labor.
x x x x68
However, with respect to the issue of whether the COLA under Wage Order Nos. RBIII-10 and 11 should be implemented
across the board, we hold a different view from that of the CA. No diminution of benefits would result if the wage orders are not
implemented across the board, as no such company practice has been established.
Diminution of benefits is the unilateral withdrawal by the employer of benefits already enjoyed by the employees. There is
diminution of benefits when it is shown that: (1) the grant or benefit is founded on a policy or has ripened into a practice over a
long period of time; (2) the practice is consistent and deliberate; (3) the practice is not due to error in the construction or
application of a doubtful or difficult question of law; and (4) the diminution or discontinuance is done unilaterally by the
employer.69
To recall, the CA arrived at its ruling by relying on the fact that there was no ambiguity in the wording of the wage order as to
the employees covered by it. From this, the CA concluded that petitioner actually made no error or mistake, but acted
voluntarily, in granting the COLA to all its employees. It therefore took exception to the Globe Mackay case which, according to
it, applies only when there is a doubtful or difficult question involved.
The CA failed to note that Globe Mackay primarily emphasized that, for the grant of the benefit to be considered voluntary, "it
should have been practiced over a long period of time, and must be shown to have been consistent and deliberate."70 The fact
that the practice must not have been due to error in the construction or application of a doubtful or difficult question of law is a
distinct requirement.
The implementation of the COLA under Wage Order No. RBIII-10 across the board, which only lasted for less than a year,
cannot be considered as having been practiced "over a long period of time." While it is true that jurisprudence has not laid
down any rule requiring a specific minimum number of years in order for a practice to be considered as a voluntary act of the
employer, under existing jurisprudence on this matter, an act carried out within less than a year would certainly not qualify as
316
such. Hence, the withdrawal of the COLA Wage Order No. RBIII-10 from the salaries of non-minimum wage earners did not
amount to a "diminution of benefits" under the law.
There is also no basis in enjoining petitioner to implement Wage Order No. RBIII-11 across the board. Similarly, no proof was
presented showing that the implementation of wage orders across the board has ripened into a company practice. In the same
way that we required petitioner to prove the existence of a company practice when it alleged the same as defense, at this
instance, we also require respondent to show proof of the company practice as it is now the party claiming its existence.
Absent any proof of specific, repetitive conduct that might constitute evidence of the practice, we cannot give credence to
respondents claim. The isolated act of implementing a wage order across the board can hardly be considered a company
practice,71 more so when such implementation was erroneously made.
WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The CA Decision September 30, 2008 and
Resolution dated December 4, 2008 are AFFIRMED with MODIFICATION that the order for petitioner to continue
implementing Wage Order No. RBIII-10 and 11 across the board is SET ASIDE. Accordingly, item 10 of the NLRC Decision
dated March 30, 2007 is modified to read "dismiss the claim for implementation of Wage Order Nos. RBIII-10 and 11 to the
employees who are not minimum wage earners."
SO ORDERED.

G.R. No. 179593 September 14, 2011

UNIVERSITY OF THE EAST, Petitioner,
vs.
UNIVERSITY OF THE EAST EMPLOYEES' ASSOCIATION, Respondent.
DECISION
MENDOZA, J.:
Before the Court is a petition for review under Rule 45 of the Rules of Court assailing the February 26, 2007 Decision 1 and
September 5, 2007 Resolution2 of the Court of Appeals (CA), in CA-G.R. SP No. 90740, which set aside the February 28,
2005 Decision and May 31, 2005 Resolution of the National Labor Relations Commission (NLRC) in NLRC-NCR-00-04-05015-
99. The dispositive portion of the CA decision reads:
WHEREFORE, the instant petition is GRANTED. The Decision dated 28 February 2005 and Resolution dated 31 May 2005
rendered by the NLRC are SET ASIDE. The final resolutions dated 29 April 2004 and 24 August 2004 hereby REMAIN in
effect.
SO ORDERED.3
Facts of the Case
Petitioner University of the East (UE) is an educational institution duly organized and existing under Philippine laws. On the
other hand, respondent University of the East Employees Association (UEEA) is a duly registered labor union of the rank-and-
file employees of UE.
It appears from the records that prior to school year (SY) 1983-1984, the 70% incremental proceeds from tuition fee increases
as mandated by Presidential Decree No. 451 (P.D. No. 451), as amended, was distributed by UE in proportion to the average
number of academic and non-academic personnel. The distribution scheme became the subject of an Agreement4 dated
October 18, 1983 signed by the management, faculty association and respondent. 5 Starting SY 1994-1995, however, the 70%
incremental proceeds from the tuition fee increase was distributed by UE to its covered employees based on a new formula of
percentage of salary.
Not in conformity, UEEA, thru its president Ernesto C. Verceles (Verceles), sent a letter6 dated December 22, 1994 to then UE
President, Dr. Rosalina S. Cajucom (Dr. Cajucom), questioning the manner of distribution of the employees share in the 1994-
1995 tuition fee increase. The letter reads:
Dear President Cajucom:
This is with reference to the recent distribution of the employees share in the 1994-95 tuition fee increase.
We understand that the University unilaterally instituted a partial distribution of FIVE PERCENT (5%) only of the basic wage of
employees, faculty members and administration personnel.
This, to our mind, is quite irregular and unfair in view of the following considerations:
1.) We have all along instituted the practice of having a Tripartite Meeting where the three (3) sectors involved, i.e.
management, faculty and employees representatives go over the incremental proceeds that have been realized and
come to an agreement on the distribution of the share whether partial or total in nature;
2.) The accepted and traditional practice was that for every P 1.00 per share of faculty members based on the "full
load equivalent," management personnel and rank-and-file employees receive P 100.00 a month;
3.) Using as a basis 5% of the wages of University personnel entitled thereto besides being a departure from past
practices, creates that unfair situation where those who have higher salaries receive more to the prejudice of low
salaried employees and faculty members;
4.) There is an existing Tripartite Agreement, with a xerox copy attached hereto as ANNEX "A," clearly specifying the
agreed manner of distribution. Even [if] the May 17, 1994 letter to UE President Rosa[lina] Cajucom by then
317
 Secretary of Education, Culture and Sports Armand V. Fabella, states under the third paragraph thereof that the
discretion is vested upon the school authorities xxx," but, in the same breath, the Secretary qualifies the distribution
or manner of remittance thereof with the phrase "(except where it forms part of a collective bargaining agreement but
accrues to school personnel in any case) xxx." In this light, Article XX Section 5 of our past and current CBAs provide
succinctly that:
"The UNIVERSITY agrees to continue the implementation of all benefits hitherto enjoyed by the employees not embodied
herein and are the subject of communication between the UNIVERSITY and the ASSOCIATION provided they are not
inconsistent with the provisions of the Agreement or of the Labor Code. All other existing clauses, covenants, provisions
or agreements shall remain in force."
We, therefore, urge the University to rectify the aforementioned erroneous, unfair and irregular distribution instituted last
December 13, 1994.
We believe that you may have been misled by your staff in so arriving at such objectionable manner of distributing our tuition
fee shares. We therefore hope that in the spirit of the season, the University thru your good self would institute the necessary
correction, thereby affording our lower salaried employees and faculty members the means to have a more meaningful
Christmas celebration.
xxx
On February 23, 1995, UEEA sent another letter7 to the UE President reiterating its earlier objection to the distribution scheme
of the 70% incremental proceeds from the tuition fee increase and requested a tripartite conference among management,
faculty, administration, and rank-and-file representatives to address the issue.
On June 19, 1995, a tripartite meeting was held among the representatives of management, faculty union and UEEA. In the
said meeting, it was agreed that the distribution of the incremental proceeds would now be based on percentage of salary, and
not anymore on the average number of personnel. The Minutes 8 of the June 19, 1995 meeting was signed and attested to by
UEEA officers who attended.
On April 27, 1999, UEEA filed a complaint before the NLRC for non-payment/underpayment of the rank-and-file employees
share of the tuition fee increases against UE pursuant to P.D. No. 451, as amended, and Republic Act (R.A.) No. 6728
otherwise known as Government Assistance to Students and Teachers in Private Education Act.
In its position paper,9 UEEA alleged that starting SY 1994-1995, UE had been withholding from the rank-and-file employees a
sizeable portion of their share in the tuition fee increases as mandated by P.D. No. 451, as amended. It asserted that before
SY 1994-1995, shares of tuition fee increases were distributed proportionately among the management, faculty and rank-and-
file employees based on equal sharing or on a share-and-share alike basis. In SY 1994-1995, however, UE arbitrarily and
unilaterally distributed the tuition fee increase proceeds through percentage based on salaries, thereby reducing the shares of
the rank-and-file employees, while increasing those of the management personnel.
In its reply, 10 UE denied that the implementation of the new scheme in the distribution of the 70% incremental proceeds
derived from tuition fee increases starting SY 1994-1995 was made arbitrarily and/or unilaterally. It explained that the
distribution scheme was only implemented after inquiry from the Department of Education, Culture and
Sports (DECS) regarding the provision of R.A. No. 6728. DECS explained that the law was silent on the manner of the
distribution of the 70% incremental proceeds and stated that discretion in the distribution was vested in the school authorities.
What the law clearly required was that the incremental proceeds from the tuition fee increases should be allocated for the
payment of salaries/wages, allowances and other benefits of the teaching and non-teaching personnel except the
administrators who were principal stockholders of the school. Thus, UE insisted that it may distribute the entire 70%
incremental proceeds for an across-the-board salary increase, or for merit increase, or for allowances and other employment
benefits.
Furthermore, UE pointed out that the new distribution scheme was implemented after a tripartite meeting was held on June 19,
1995 among the representatives of the management, UE Faculty Association (UEFA) and the UEEA, wherein it was agreed
that for SY 1994-1995, the distribution of the incremental increase would be 9.96% of the salaries of the employees as of May
31, 1994. In fact, copies of the minutes of the meeting were distributed and signed by the participants. Hence, UEEA was
estopped from questioning the distribution scheme when it accepted the benefits.
Lastly, UE asserted that the claim of the UEEA was already barred since it was filed three (3) years from the time its supposed
cause of action accrued.
On September 4, 2002, Labor Arbiter Francisco A. Robles (LA) rendered a decision11 favoring UEEA, the fallo of which reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent University of the East, to pay the
members of University of the East Employees Association (UEEA) the amount of TWENTY-FIVE MILLION SEVEN HUNDRED
FORTY-NINE THOUSAND NINE HUNDRED NINETY-FIVE PESOS AND 40/100 (P25,749,995.40) representing the portions
of the tuition fee increases for the school year 1994-1995 and up to May 31, 2002 which were denied/withheld and/or lost by
the members of the aforesaid Union as a result of the disputed distribution scheme based on percentage of salary which was
arbitrarily and unilaterally adopted and implemented by the respondent. Furthermore, the respondent is hereby directed to
submit to this Office a report to show compliance to the order herein stated.
SO ORDERED.12
318
The LA ruled that the equal sharing distribution scheme in relation to the incremental proceeds from the tuition fee increases
had been adopted as a matter of policy by UE since 1983 and was made part of its collective bargaining agreement with the
UEEA. In addition, the LA noted that the existence of the said policy or practice in the university was made part of the tripartite
agreement dated October 18, 1983, among UE, UEFA and UEEA. There was no evidence on record that the said agreement
was superseded by another agreement between UE and UEEA. Furthermore, UEs reliance on the letter-reply of then DECS
Secretary Armand V. Fabella was misplaced as the law imposed a limitation on the extent of the discretionary authority given
to the school officials such as when the disposition had been agreed upon in a collective bargaining agreement. The LA
concluded that UE was legally bound to keep and maintain the established practice of distributing equally among its
employees the incremental proceeds from the tuition fee increases particularly in light of the aforesaid tripartite agreement
dated October 18, 1983 and the provisions of Article XX, Section 5 of the UE-UEEA collective bargaining agreement.
Undaunted, UE interposed an appeal before the NLRC. The NLRC, in its April 29, 2004 Resolution, 13 dismissed the appeal
and sustained the LA decision. UE filed a motion for reconsideration but it was denied in a resolution 14dated August 24, 2004
with a warning that no further motion for reconsideration shall be entertained.
Nonetheless, on September 20, 2004, UE filed a motion for leave to file and admit a second motion for reconsideration,
incorporating therein its second motion for reconsideration. UE alleged that the NLRC resolution was not valid for failure to
pass upon and consider the new and vital issues raised in its motion for reconsideration and for failure to comply with the
prescribed form for NLRC resolutions pursuant to Section 13, Rule VII, NLRC New Rules of Procedure. 15
On February 28, 2005, the NLRC gave due course to the second motion for reconsideration, reversed its earlier ruling and
declared valid the distribution of the 70% incremental proceeds from tuition fee increases based on the percentage of salary of
the covered employees.16http://sc.judiciary.gov.ph/jurisprudence/1998/oct1998/130473.htm - _edn8 Consequently, UEEA filed
a motion for reconsideration17 but it was denied in the NLRC Resolution18 dated May 31, 2005.
Aggrieved, UEEA filed a petition before the CA. The appellate court granted the petition and set aside the questioned decision
and resolution of the NLRC.19 The CA declared that since the second motion for reconsideration was a prohibited pleading, it
did not interrupt the running of the reglementary period. Therefore, the NLRC Resolution dated August 24, 2004 became final
and executory after ten (10) days from receipt of the copy thereof by the parties. Accordingly, the said resolution had attained
finality and could no longer be modified in any respect, even if the modification was meant to correct what was perceived to be
an erroneous conclusion of fact or law.
UE filed a motion for reconsideration of the CA decision but it was denied in a resolution 20 dated September 5, 2007. Hence,
this appeal, anchored on the following:
GROUNDS:
I
WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT DECLARED THAT PETITIONERS SECOND
MOTION FOR RECONSIDERATION IS A PROHIBITED PLEADING.
II
WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT HELD THAT THERE ARE "[NO]
EXTRAORDINARY PERSUASIVE REASONS" IN THE INSTANT CASE WARRANTING THE ALLOWANCE OF A
SECOND MOTION FOR RECONSIDERATION.
III
WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT RULED THAT THE ISSUANCE OF THE ENTRY
OF JUDGMENT DATED OCTOBER 15, 2004 IS NOT PREMATURE.
IV
WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT FOUND PETITIONER UNIVERSITYS MOTION
FOR RECONSIDERATION A "PRO FORMA" MOTION.
The issues for resolution are: (1) whether or not UEs second motion for reconsideration (MR) before the NLRC is a prohibited
pleading; and (2) whether or not the change in the scheme of distribution of the incremental proceeds from tuition fee increase
is a diminution of benefit.
UE argues that the CA erred in holding that the second MR was a prohibited pleading. It asserts that while a second MR is
generally a prohibited pleading, it may be allowed in meritorious cases. Section 14 of the NLRC rules cannot be construed as
to prevent the NLRC from relieving itself from patent errors in order to render justice. UE stresses that the technical rules of
procedure are not meant to frustrate but to facilitate justice.21
UE further contends that the Court in resolving the issue on the second MR should not be too dogmatic in its ruling. It
persuades the Court to adopt a complete and holistic view, taking into consideration the peculiar circumstances of the case as
well as the provisions on the liberal interpretation of the rules and the inherent power of the NLRC to amend and reverse its
findings and conclusions as may be necessary to render justice. 22
Petitioner further contends that there exist extraordinary persuasive reasons warranting the allowance of the second MR. First,
it argues that the complaint is a money claim arising from employer-employee relationship; hence, it prescribes in three (3)
years. Since the complaint was filed only on April 27, 1999, more than three (3) years from the alleged violation in 1994,
prescription has set in. Second, UE maintains that the distribution of tuition fee increase based on percentage of salary was

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not arbitrary and/or unilateral because the new distribution scheme was taken up and agreed upon in the tripartite meeting
held on June 19, 1995 and was adopted only after consultation with the DECS Secretary Armand Fabella. Third, the faculty
union, UE Faculty Association (UEFA), a party to the Agreement dated October 18, 1983, did not complain against the new
distribution scheme. Lastly, the new distribution scheme is in accordance with law. UE claims that the law and jurisprudence
are clear that a private educational institution has the discretion on the disposition of the 70% incremental proceeds from
tuition fee increase, with the only condition imposed that the proceeds should go to the salaries, wages and allowances and
other benefits of teachers and non-teaching personnel.23
Indeed, a second MR as a rule, is generally a prohibited
pleading.24http://www.supremecourt.gov.ph/resolutions/2006/july/122472.htm - _ftn The Court, however, does not discount
instances when it may authorize the suspension of the rules of procedure so as to allow the resolution of a second motion for
reconsideration, in cases of extraordinarily persuasive reasons 25 such as when the decision is a patent nullity.26
Time and again, the Court has upheld the theory that the rules of procedure are designed to secure and not to override
substantial justice.27 These are mere tools to expedite the decision or resolution of cases, hence, their strict and rigid
application which would result in technicalities that tend to frustrate rather than promote substantial justice must be avoided.28
On the second issue, after a careful review of the records and the arguments of the parties, the Court finds the position of the
petitioner meritorious.
The Court agrees with petitioner UE that the change in the distribution of the 70% incremental proceeds from tuition fee
increase from equal sharing to percentage of salaries is not a diminution of benefits. Its distribution to covered employees
based on equal sharing scheme cannot be considered to have ripened into a company practice that the respondents have a
right to demand.
Generally, employees have a vested right over existing benefits voluntarily granted to them by their employer, thus, said
benefits cannot be reduced, diminished, discontinued or eliminated by the latter. 29 This principle against diminution of benefits,
however, is applicable only if the grant or benefit is founded on an express policy or has ripened into a practice over a long
period of time which is consistent and deliberate.30 It does not contemplate the continuous grant of unauthorized or irregular
compensation but it presupposes that a company practice, policy and tradition favourable to the employees has been clearly
established; and that the payments made by the company pursuant to it have ripened into benefits enjoyed by them. 31 The test
or rationale of this rule on long practice requires an indubitable showing that the employer agreed to continue giving the
benefits knowing fully well that said employees are not covered by the law requiring payment thereof. 32 In sum, the benefit
must be characterized by regularity, voluntary and deliberate intent of the employer to grant the benefits over a significant
period of time.33
In the case at bench, contrary to UEEAs claim, the distribution of the 70% incremental proceeds based on equal sharing
scheme cannot be held to have ripened into a company practice that the respondents have a right to demand. Jurisprudence
is replete with the rule specifying a minimum number of years within which a company practice must be exercised in order to
constitute voluntary company practice.34 Even if UE had been continuously distributing the 70% incremental proceeds based
on equal sharing scheme to all its covered employees, the same could not have ripened into a vested right because such
grant would not have been characterized by a deliberate and voluntary act on the part of the petitioner.
As pronounced by the Court in the case of Globe Mackay Cable and Radio Corporation v. NLRC,35 the grant by an employer
of benefits through an erroneous application of the law due to absence of clear administrative guidelines is not considered a
voluntary act which cannot be unilaterally discontinued. Here, no vested rights accrued to respondents. R.A. No. 6728 simply
mandates that the 70% incremental proceeds arising from tuition fee increases should go to the payment of salaries, wages,
allowances, and other benefits of the teaching and non-teaching personnel except administrators who are principal
stockholders of the school.36 As to the manner of its distribution, however, the law is silent. The letter 37 of then DECS
Secretary Armand Fabella, correctly stated that the discretion on what distribution scheme to adopt is vested upon the school
authorities. In fact, the school can distribute the entire 70% for an across-the-board salary increase, for merit increase and/or
for allowances or other benefits. The only limitations provided are [1] the benefit must accrue to specific individual school
personnel; and [2] the benefit once given for a specific year cannot be revoked for that same year.
Neither can UEEA claim that the change in the distribution scheme from equal sharing to percentage of salary was done
peremptorily. Verceles wrote two (2) letters dated December 22, 1994 38 and February 23, 1995,39 to then UE President, Dr.
Cajucom, questioning the change in the distribution scheme from equal sharing to percentage of salary and requesting a
tripartite meeting to settle the issue.
Consequently, a tripartite meeting was held on June 19, 1995. The said meeting was attended by the representatives of the
management, UEFA and UEEA. From the minutes of the meeting, the tuition fee incremental proceeds for SY 1994-95 and the
manner of its distribution based on percentage of the salaries of the covered employees were discussed and UEEA
representatives, namely, Salvador Blancia and Miguel Teao, did not object. They even later signed the minutes of the
meeting to signify their conformity to it.
It was likewise erroneous for UEEA to rely on the October 18, 1983 Agreement 40 which provides:

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The University of the East, represented by its Chairman of the Board and Chief Executive Officer, the UE Faculty Association
(UEFA), represented by its President, and the UE Employees Association (UEEA), represented by its President , all assisted
by their respective panels, hereby mutually agree:
1. That in determining the allocation of the 60% incremental proceeds from the approved increase in school fees
effective school year 1982-83 among the three sectors (faculty, rank-and-file, and management personnel), the
formula used in previous years shall be followed namely, the allocation shall be in proportion to the average number
of academic and non-academic personnel in the service as of the start of the first and second semesters of the
school year 1982-83;
2. That the proposal of the UEEA, whereby the number of academic personnel is to be determined by using the "full
load equivalent", shall be adopted in allocating the 60% incremental proceeds from the approved increase in school
fees effective school year 1983-84.
Manila, October 18, 1983.
Clearly, the said agreement only pertains to the distribution of incremental proceeds for SY 1982-83. Besides, such agreement
is deemed superseded by another agreement taken up during tripartite meeting held on June 19, 1995.
The Court agrees with UE and holds that UEEAs right to question the distribution of the incremental proceeds for SY 1994-
1995 has already prescribed. Article 291 of the Labor Code provides that money claims arising from an employer-employee
relationship must be filed within three (3) years from the time the cause of action accrued. In the present case, the cause of
action accrued when the distribution of the incremental proceeds based on percentage of salary of the covered employees
was discussed in the tripartite meeting held on June 19, 1995. UEEA did not question the manner of its distribution and only
on April 27, 1999 did it file an action based therein. Hence, prescription had set in.
WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 90740
are REVERSED and SET ASIDE. The Decision of the National Labor Relations Commission dated February 28, 2005
is REINSTATED.
SO ORDERED.

G.R. No. 182114 April 5, 2010

GENESIS TRANSPORT SERVICE, INC. and RELY L. JALBUNA, Petitioners,
vs.
UNYON NG MALAYANG MANGGAGAWA NG GENESIS TRANSPORT (UMMGT), and JUAN TAROY,Respondents.
DECISION
CARPIO MORALES, J.:
Respondent Juan Taroy was hired on February 2, 1992 by petitioner Genesis Transport Service, Inc. (Genesis Transport) as
driver on commission basis at 9% of the gross revenue per trip.
On May 10, 2002, Taroy was, after due notice and hearing, terminated from employment after an accident on April 20, 2002
where he was deemed to have been driving recklessly.
Taroy thus filed on June 7, 2002 a complaint1 for illegal dismissal and payment of service incentive leave pay, claiming that he
was singled out for termination because of his union activities, other drivers who had met accidents not having been dismissed
from employment.
Taroy later amended2 his complaint to implead his herein co-respondent Unyon ng Malayang Manggagawa ng Genesis
Transport (the union) as complainant and add as grounds of his cause of action unfair labor practice (ULP), reimbursement of
illegal deductions on tollgate fees, and payment of service incentive leave pay.
Respecting the claim for refund of illegal deductions, Taroy alleged that in 1997, petitioner started deducting from his weekly
earnings an amount ranging from P160 to P900 representing toll fees, without his consent and written authorization as
required under Article 113 of the Labor Code and contrary to company practice; and that deductions were also taken from the
bus conductors earnings to thus result to double deduction.
Genesis Transport countered that Taroy committed several violations of company rules for which he was given warnings or
disciplined accordingly; that those violations, the last of which was the April 20, 2002 incident, included poor driving skills,
tardiness, gambling inside the premises, use of shabu, smoking while driving, insubordination and reckless driving; 3 and that
Taroys dismissal was on a valid cause and after affording him due process.
In support of its claim that Taroy was afforded due process, Genesis Transport cited his preventive suspension; the directive
for him to explain in writing4 his involvement in the April 20, 2002 accident; and the conduct of a hearing during which the
expert opinion of its Maintenance Department, as well as an independent entity the Columbian Motors Corporation,5 was
considered in the determination of whether the accident was due to his reckless driving or, as he contended, to faulty brakes.
Genesis Transport went on to claim that as the result of the investigation 6 showed that the cause of the accident was Taroys
reckless driving, and his immediate past infraction of company rules on January 25, 2001 smoking inside the bus already
merited a final warning,7 it validly terminated8 his employment.
By Decision9 of June 30, 2004, the Labor Arbiter found that Genesis Transport discharged the burden of proof that Taroys
dismissal was on a valid cause; that while Taroys past infractions can not be used against him, still, they showed habituality;
321
and that Genesis Transport complied with the twin requirements of notice and hearing, hence, Taroys dismissal was effected
with due process.
As to the charge of ULP, the Labor Arbiter ruled that the respondent union failed to prove that Taroys dismissal was due to his
union membership and/or activities.
On the claim for service incentive leave pay, the Labor Arbiter ruled that Taroy was not entitled thereto since he was a field
personnel paid on commission basis.
With respect to Taroys claim for refund, however, the Labor Arbiter ruled in his favor for if, as contended by Genesis
Transport, tollgate fees form part of overhead expense, why were not expenses for fuel and maintenance also charged to
overhead expense. The Labor Arbiter thus concluded that "it would appear that the tollgate fees are deducted from the gross
revenues and not from the salaries of drivers and conductors, but certainly the deduction thereof diminishes the take home
pay of the employees."
Thus, the Labor Arbiter disposed:
WHEREFORE, premises considered, judgment is hereby rendered dismissing instant complaint for illegal dismissal for lack of
merit. However, respondents are hereby ordered to refund to complainant the underpayment/differential due him as a result of
the deduction of the tollgate fees from the gross receipts. Actual computation shall be based on and limited to the evidence at
hand, which is in the amount of P5,273.16. For having been compelled to litigate, respondents are hereby also ordered to
pay complainant 10% attorneys fees. (underscoring supplied)
Both parties appealed to the National Labor Relations Commission (NLRC), petitioners questioning the order for them to
refund "underpayment" and pay attorneys fees, and respondents questioning the Labor Arbiters failure to pass on the
propriety of his preventive suspension, dismissal of his complaint for constructive dismissal and ULP, and failure to award him
service incentive leave pay.
By Resolution of December 29, 2005, the NLRC affirmed the Labor Arbiters decision with modification. It deleted the award to
Taroy of attorneys fees. It brushed aside Taroys claim of having been illegally suspended, it having been raised for the first
time on appeal.
The parties filed their respective motions for reconsideration which were denied.
On respondents appeal, the Court of Appeals, by the assailed Decision of August 24, 2007, partly granted the same, it ruling
that petitioner Genesis Transport violated Taroys statutory right to due process when he was preventively suspended for more
than thirty (30) days, in violation of the Implementing Rules and Regulations of the Labor Code.
The appellate court thus held Taroy to be entitled to nominal damages in the amount of P30,000. And it reinstated the Labor
Arbiters order for petitioners to refund Taroy "the underpayment."
Their motion for reconsideration having been denied by Resolution of March 13, 2008, petitioners filed the present recourse.
On the issue of refund of "underpayment," petitioners aver that cases of similar import involving also the respondent union
have been decided with finality in their favor by the NLRC, viz: UMMGT v. Genesis Transport Service, Inc. (NLRC RAB III
Case No. 04-518-03) and Reyes v. Genesis Transport Service, Inc. (NLRC CA No. 04862-04); and Santos v. Genesis
Transport Service, Inc. (NLRC CA No. 041869-04).
Petitioners thus pray that the Court accord respect to the rulings of the NLRC in the above-cited cases and apply the principle
of res judicata vis--vis the present case.
On the appellate courts award of nominal damages, petitioners reiterate that Taroy was not entitled thereto, his dismissal
having been based on a valid cause, and he was accorded due process.
Further, petitioners note that the issue of preventive suspension, on which the appellate court based its ruling that it violated
Taroys right to due process, was raised only on appeal to the NLRC, hence, it should not be considered.
Finally, petitioners assert that the delay in the service of the Notice of Dismissal (dated May 10, 2002, but received by Taroy
only on June 4, 2002) was due to Taroys premeditated refusal to acknowledge receipt thereof.
The petition is partly meritorious.
Absent proof that the NLRC cases cited by petitioners have attained finality, the Court may not consider them to constitute res
judicata on petitioners claim for refund of the "underpayment" due Taroy.
Neither may the Court take judicial notice of petitioners claim that the deduction of tollgate fees from the gross earnings of
drivers is an accepted and long-standing practice in the transportation industry. Expertravel & Tours, Inc. v. Court of
Appeals10 instructs:
Generally speaking, matters of judicial notice have three material requisites: (1) the matter must be one of common and
general knowledge; (2) it must be well and authoritatively settled and not doubtful or uncertain; and (3) it must be known to be
within the limits of the jurisdiction of the court. The principal guide in determining what facts may be assumed to be judicially
known is that of notoriety. Hence, it can be said that judicial notice is limited to facts evidenced by public records and facts of
general notoriety. Moreover, a judicially noticed fact must be one not subject to a reasonable dispute in that it is either: (1)
generally known within the territorial jurisdiction of the trial court; or (2) capable of accurate and ready determination by
resorting to sources whose accuracy cannot reasonably be questionable.
Things of "common knowledge," of which courts take judicial matters coming to the knowledge of men generally in the course
of the ordinary experiences of life, or they may be matters which are generally accepted by mankind as true and are capable
322
of ready and unquestioned demonstration. Thus, facts which are universally known, and which may be found in encyclopedias,
dictionaries or other publications, are judicially noticed, provided, they are of such universal notoriety and so generally
understood that they may be regarded as forming part of the common knowledge of every person. As the common knowledge
of man ranges far and wide, a wide variety of particular facts have been judicially noticed as being matters of common
knowledge. But a court cannot takejudicial notice of any fact which, in part, is dependent on the existence or non-existence of
a fact of which the court has no constructive knowledge. (emphasis supplied)
None of the material requisites for the Court to take judicial notice of a particular matter was established by petitioners.
Albeit the amounts representing tollgate fees were deducted from gross revenues and not directly from Taroys commissions,
the labor tribunal and the appellate court correctly held that the withholding of those amounts reduced the amount from which
Taroys 9% commission would be computed. Such a computation not only marks a change in the method of payment of
wages, resulting in a diminution of Taroys wages in violation of Article 113 vis--vis Article 100 of the Labor Code, as
amended. It need not be underlined that without Taroys written consent or authorization, the deduction is considered illegal.
Besides, the invocation of the rule on "company practice" is generally used with respect to the grant of additional benefits to
employees, not on issues involving diminution of benefits.
Respecting the issue of statutory due process, the Court holds that Taroys right thereto was not violated. Sections 8 and 9 of
Rule XXIII, Book V of the Implementing Rules and Regulations of the Labor Code provide:
Section 8. Preventive suspension. The employer may place the worker concerned under preventive suspension if his
continued employment poses a serious and imminent threat to the life or property of the employer or his co-workers.
xxxx
Section 9. Period of Suspension No preventive suspension shall last longer than thirty (30) days. The employer shall
thereafter reinstate the worker in his former or in a substantially equivalent position or the employer may extend the period of
suspension provided that during the period of extension, he pays the wages and other benefits due to the worker. In such
case, the worker shall not be bound to reimburse the amount paid to him during the extension if the employer decides, after
completion of the hearing, to dismiss the worker. (emphasis supplied)
To the appellate court, Genesis Transports act of "placing Taroy under preventive suspension for more than thirty (30)
days was a predetermined effort to dismiss [him] from employment, negating the argument that the delay in the service of the
notice of dismissal was not an issue and that the same was allegedly due to Taroys inaction to receive the same." Hence, the
appellate court concluded, while there was a just and valid cause for the termination of his services, his right to statutory due
process was violated to entitle him to nominal damages, following Agabon v. NLRC. 11
The propriety of Taroys preventive suspension was raised by respondents for the first time on appeal, however. The well-
settled rule, which also applies in labor cases, is that issues not raised below cannot be raised for the first time on appeal.
Points of law, theories, issues and arguments not brought to the attention of the lower court need not be, and ordinarily will not
be, considered by the reviewing court, as they cannot be raised for the first time at that late stage. Basic considerations of due
process impel the adoption of this rule.12
In any event, what the Rules require is that the employer act on the suspended workers status of employment within the 30-
day period by concluding the investigation either by absolving him of the charges, or meting the corresponding penalty if liable,
or ultimately dismissing him. If the suspension exceeds the 30-day period without any corresponding action on the part of the
employer, the employer must reinstate the employee or extend the period of suspension, provided the employees wages and
benefits are paid in the interim.
In the present case, petitioner company had until May 20, 2002 to act on Taroys case. It did by terminating him through a
notice dated May 10, 2002, hence, the 30-day requirement was not violated even if the termination notice was received only
on June 4, 2002, absent any showing that the delayed service of the notice on Taroy was attributable to Genesis Transport.
Taroys statutory due process not having been violated, he is not entitled to the award of nominal damages.
WHEREFORE, the challenged Court of Appeals Decision of August 24, 2007 and Resolution 13 of March 13, 2008 are
AFFIRMED, with the MODIFICATION that the award of nominal damages to respondent Juan Taroy is DELETED.
SO ORDERED.

G.R. No. 170734 May 14, 2008

ARCO METAL PRODUCTS, CO., INC., and MRS. SALVADOR UY, petitioners,
vs.
SAMAHAN NG MGA MANGGAGAWA SA ARCO METAL-NAFLU (SAMARM-NAFLU), respondent.
DECISION
TINGA, J.:
This treats of the Petition for Review1 of the Resolution2 and Decision3 of the Court of Appeals dated 9 December
2005 and 29 September 2005, respectively in CA-G.R. SP No. 85089 entitled
Samahan ng mga Manggagawa sa Arco Metal-NAFLU (SAMARM-NAFLU) v. Arco Metal Products Co., Inc.
and/or Mr. Salvador Uy/Accredited Voluntary Arbitrator Apron M. Mangabat,4 which ruled that the 13th month pay,
vacation leave and sick leave conversion to cash shall be paid in full to the employees of petitioner regardless of
323
the actual service they rendered within a year.
Petitioner is a company engaged in the manufacture of metal products, whereas respondent is the labor union of
petitioners rank and file employees. Sometime in December 2003, petitioner paid the 13 th month pay, bonus, and
leave encashment of three union members in amounts proportional to the service they actually rendered in a
year, which is less than a full twelve (12) months. The employees were:
1. Rante Lamadrid Sickness 27 August 2003 to 27 February 2004
2. Alberto Gamban Suspension 10 June 2003 to 1 July 2003
3. Rodelio Collantes Sickness August 2003 to February 2004
Respondent protested the prorated scheme, claiming that on several occasions petitioner did not prorate the
payment of the same benefits to seven (7) employees who had not served for the full 12 months. The payments
were made in 1992, 1993, 1994, 1996, 1999, 2003, and 2004. According to respondent, the prorated payment
violates the rule against diminution of benefits under Article 100 of the Labor Code. Thus, they filed a complaint
before the National Conciliation and Mediation Board (NCMB). The parties submitted the case for voluntary
arbitration.
The voluntary arbitrator, Apron M. Mangabat, ruled in favor of petitioner and found that the giving of the contested
benefits in full, irrespective of the actual service rendered within one year has not ripened into a practice. He
noted the affidavit of Joselito Baingan, manufacturing group head of petitioner, which states that the giving in full
of the benefit was a mere error. He also interpreted the phrase "for each year of service" found in the pertinent
CBA provisions to mean that an employee must have rendered one year of service in order to be entitled to the
full benefits provided in the CBA.5
Unsatisfied, respondent filed a Petition for Review6 under Rule 43 before the Court of Appeals, imputing serious
error to Mangabats conclusion. The Court of Appeals ruled that the CBA did not intend to foreclose the
application of prorated payments of leave benefits to covered employees. The appellate court found that
petitioner, however, had an existing voluntary practice of paying the aforesaid benefits in full to its employees,
thereby rejecting the claim that petitioner erred in paying full benefits to its seven employees. The appellate court
noted that aside from the affidavit of petitioners officer, it has not presented any evidence in support of its position
that it has no voluntary practice of granting the contested benefits in full and without regard to the service actually
rendered within the year. It also questioned why it took petitioner eleven (11) years before it was able to discover
the alleged error. The dispositive portion of the courts decision reads:
WHEREFORE, premises considered, the instant petition is hereby GRANTED and the Decision of
Accredited Voluntary Arbiter Apron M. Mangabat in NCMB-NCR Case No. PM-12-345-03, dated June
18, 2004 is hereby AFFIRMED WITH MODIFICATION in that the 13th month pay, bonus, vacation leave
and sick leave conversions to cash shall be paid to the employees in full, irrespective of the actual
service rendered within a year.7
Petitioner moved for the reconsideration of the decision but its motion was denied, hence this petition.
Petitioner submits that the Court of Appeals erred when it ruled that the grant of 13 th month pay, bonus, and leave
encashment in full regardless of actual service rendered constitutes voluntary employer practice and,
consequently, the prorated payment of the said benefits does not constitute diminution of benefits under Article
100 of the Labor Code.8
The petition ultimately fails.
First, we determine whether the intent of the CBA provisions is to grant full benefits regardless of service actually
rendered by an employee to the company. According to petitioner, there is a one-year cutoff in the entitlement to
the benefits provided in the CBA which is evident from the wording of its pertinent provisions as well as of the
existing law.
We agree with petitioner on the first issue. The applicable CBA provisions read:
ARTICLE XIV-VACATION LEAVE
Section 1. Employees/workers covered by this agreement who have rendered at least one (1) year of
service shall be entitled to sixteen (16) days vacation leave with pay for each year of service. Unused
leaves shall not be cumulative but shall be converted into its cash equivalent and shall become due and
payable every 1st Saturday of December of each year.
However, if the 1st Saturday of December falls in December 1, November 30 (Friday) being a holiday,
the management will give the cash conversion of leaves in November 29.
Section 2. In case of resignation or retirement of an employee, his vacation leave shall be paid
proportionately to his days of service rendered during the year.
ARTICLE XV-SICK LEAVE
Section 1. Employees/workers covered by this agreement who have rendered at least one (1) year of

324
 service shall be entitled to sixteen (16) days of sick leave with pay for each year of service. Unused sick
leave shall not be cumulative but shall be converted into its cash equivalent and shall become due and
payable every 1st Saturday of December of each year.
Section 2. Sick Leave will only be granted to actual sickness duly certified by the Company physician or
by a licensed physician.
Section 3. All commutable earned leaves will be paid proportionately upon retirement or separation.
ARTICLE XVI EMERGENCY LEAVE, ETC.
Section 1. The Company shall grant six (6) days emergency leave to employees covered by this
agreement and if unused shall be converted into cash and become due and payable on the 1 st Saturday
of December each year.
Section 2. Employees/workers covered by this agreement who have rendered at least one (1) year of
service shall be entitled to seven (7) days of Paternity Leave with pay in case the married employees
legitimate spouse gave birth. Said benefit shall be non-cumulative and non-commutative and shall be
deemed in compliance with the law on the same.
Section 3. Maternity leaves for married female employees shall be in accordance with the SSS Law plus
a cash grant of P1,500.00 per month.
xxx
ARTICLE XVIII- 13TH MONTH PAY & BONUS
Section 1. The Company shall grant 13th Month Pay to all employees covered by this agreement. The
basis of computing such pay shall be the basic salary per day of the employee multiplied by 30 and shall
become due and payable every 1st Saturday of December.
Section 2. The Company shall grant a bonus to all employees as practiced which shall be distributed on
the 2nd Saturday of December.
Section 3. That the Company further grants the amount of Two Thousand Five Hundred Pesos
(P2,500.00) as signing bonus plus a free CBA Booklet. 9 (Underscoring ours)
There is no doubt that in order to be entitled to the full monetization of sixteen (16) days of vacation and sick
leave, one must have rendered at least one year of service. The clear wording of the provisions does not allow
any other interpretation. Anent the 13th month pay and bonus, we agree with the findings of Mangabat that the
CBA provisions did not give any meaning different from that given by the law, thus it should be computed at 1/12
of the total compensation which an employee receives for the whole calendar year. The bonus is also equivalent
to the amount of the 13th month pay given, or in proportion to the actual service rendered by an employee within
the year.
On the second issue, however, petitioner founders.
As a general rule, in petitions for review under Rule 45, the Court, not being a trier of facts, does not normally
embark on a re-examination of the evidence presented by the contending parties during the trial of the case
considering that the findings of facts of the Court of Appeals are conclusive and binding on the Court. 10 The rule,
however, admits of several exceptions, one of which is when the findings of the Court of Appeals are contrary to
that of the lower tribunals. Such is the case here, as the factual conclusions of the Court of Appeals differ from
that of the voluntary arbitrator.
Petitioner granted, in several instances, full benefits to employees who have not served a full year, thus:
Name Reason Duration
1. Percival Bernas Sickness July 1992 to November 1992
2. Cezar Montero Sickness 21 Dec. 1992 to February 1993
3. Wilson Sayod Sickness May 1994 to July 1994

4. Nomer Becina Suspension 1 Sept. 1996 to 5 Oct. 1996

5. Ronnie Licuan Sickness 8 Nov. 1999 to 9 Dec. 1999
6. Guilbert Villaruel Sickness 23 Aug. 2002 to 4 Feb. 2003
7. Melandro Moque Sickness 29 Aug. 2003 to 30 Sept. 200311
Petitioner claims that its full payment of benefits regardless of the length of service to the company does not
constitute voluntary employer practice. It points out that the payments had been erroneously made and they
occurred in isolated cases in the years 1992, 1993, 1994, 1999, 2002 and 2003. According to petitioner, it was
only in 2003 that the accounting department discovered the error "when there were already three (3) employees
involved with prolonged absences and the error was corrected by implementing the pro-rata payment of benefits
pursuant to law and their existing CBA."12 It adds that the seven earlier cases of full payment of benefits went
325
unnoticed considering the proportion of one employee concerned (per year) vis vis the 170 employees of the
company. Petitioner describes the situation as a "clear oversight" which should not be taken against it. 13 To
further bolster its case, petitioner argues that for a grant of a benefit to be considered a practice, it should have
been practiced over a long period of time and must be shown to be consistent, deliberate and intentional, which is
not what happened in this case. Petitioner tries to make a case out of the fact that the CBA has not been modified
to incorporate the giving of full benefits regardless of the length of service, proof that the grant has not ripened
into company practice.
We disagree.
Any benefit and supplement being enjoyed by employees cannot be reduced, diminished, discontinued or
eliminated by the employer.14The principle of non-diminution of benefits is founded on the Constitutional mandate
to "protect the rights of workers and promote their welfare," 15 and "to afford labor full protection."16 Said mandate
in turn is the basis of Article 4 of the Labor Code which states that "all doubts in the implementation and
interpretation of this Code, including its implementing rules and regulations shall be rendered in favor of labor."
Jurisprudence is replete with cases which recognize the right of employees to benefits which were voluntarily
given by the employer and which ripened into company practice. Thus in Davao Fruits Corporation v. Associated
Labor Unions, et al.17 where an employer had freely and continuously included in the computation of the
13th month pay those items that were expressly excluded by the law, we held that the act which was favorable to
the employees though not conforming to law had thus ripened into a practice and could not be withdrawn,
reduced, diminished, discontinued or eliminated. In Sevilla Trading Company v. Semana,18 we ruled that the
employers act of including non-basic benefits in the computation of the 13th month pay was a voluntary act and
had ripened into a company practice which cannot be peremptorily withdrawn. Meanwhile in Davao Integrated
Port Stevedoring Services v. Abarquez,19 the Court ordered the payment of the cash equivalent of the unenjoyed
sick leave benefits to its intermittent workers after finding that said workers had received these benefits for almost
four years until the grant was stopped due to a different interpretation of the CBA provisions. We held that the
employer cannot unilaterally withdraw the existing privilege of commutation or conversion to cash given to said
workers, and as also noted that the employer had in fact granted and paid said cash equivalent of the unenjoyed
portion of the sick leave benefits to some intermittent workers.
In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had adopted a policy of freely, voluntarily and
consistently granting full benefits to its employees regardless of the length of service rendered. True, there were
only a total of seven employees who benefited from such a practice, but it was an established practice
nonetheless. Jurisprudence has not laid down any rule specifying a minimum number of years within which a
company practice must be exercised in order to constitute voluntary company practice.20 Thus, it can be six (6)
years,21 three (3) years,22 or even as short as two (2) years.23 Petitioner cannot shirk away from its responsibility
by merely claiming that it was a mistake or an error, supported only by an affidavit of its manufacturing group
head portions of which read:
5. 13th month pay, bonus, and cash conversion of unused/earned vacation leave, sick leave and
emergency leave are computed and paid in full to employees who rendered services to the company for
the entire year and proportionately to those employees who rendered service to the company for a
period less than one (1) year or twelve (12) months in accordance with the CBA provision relative
thereto.
6. It was never the intention much less the policy of the management to grant the aforesaid benefits to
the employees in full regardless of whether or not the employee has rendered services to the company
for the entire year, otherwise, it would be unjust and inequitable not only to the company but to other
employees as well.24
In cases involving money claims of employees, the employer has the burden of proving that the employees did
receive the wages and benefits and that the same were paid in accordance with law. 25
Indeed, if petitioner wants to prove that it merely erred in giving full benefits, it could have easily presented other
proofs, such as the names of other employees who did not fully serve for one year and thus were given prorated
benefits. Experientially, a perfect attendance in the workplace is always the goal but it is seldom achieved. There
must have been other employees who had reported for work less than a full year and who, as a consequence
received only prorated benefits. This could have easily bolstered petitioners theory of mistake/error, but sadly, no
evidence to that effect was presented.
IN VIEW HEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 85089 dated
29 September 2005 is and its Resolution dated 9 December 2005 are hereby AFFIRMED.
SO ORDERED.

326
G.R. No. 163419 February 13, 2008
TSPIC CORPORATION, petitioner,
vs.
TSPIC EMPLOYEES UNION (FFW), representing MARIA FE FLORES, FE CAPISTRANO, AMY DURIAS,1CLAIRE
EVELYN VELEZ, JANICE OLAGUIR, JERICO ALIPIT, GLEN BATULA, SER JOHN HERNANDEZ, RACHEL NOVILLAS,
NIMFA ANILAO, ROSE SUBARDIAGA, VALERIE CARBON, OLIVIA EDROSO, MARICRIS DONAIRE, ANALYN
AZARCON, ROSALIE RAMIREZ, JULIETA ROSETE, JANICE NEBRE, NIA ANDRADE, CATHERINE YABA, DIOMEDISA
ERNI,2 MARIO SALMORIN, LOIDA COMULLO,3 MARIE ANN DELOS SANTOS,4 JUANITA YANA, and SUZETTE
DULAY, respondents.
DECISION
VELASCO, JR., J.:
The path towards industrial peace is a two-way street. Fundamental fairness and protection to labor should always govern
dealings between labor and management. Seemingly conflicting provisions should be harmonized to arrive at an interpretation
that is within the parameters of the law, compassionate to labor, yet, fair to management.
In this Petition for Review on Certiorari under Rule 45, petitioner TSPIC Corporation (TSPIC) seeks to annul and set aside the
October 22, 2003 Decision5 and April 23, 2004 Resolution6 of the Court of Appeals (CA) in CA-G.R. SP No. 68616, which
affirmed the September 13, 2001 Decision7 of Accredited Voluntary Arbitrator Josephus B. Jimenez in National Conciliation
and Mediation Board Case No. JBJ-AVA-2001-07-57.
TSPIC is engaged in the business of designing, manufacturing, and marketing integrated circuits to serve the communication,
automotive, data processing, and aerospace industries. Respondent TSPIC Employees Union (FFW) (Union), on the other
hand, is the registered bargaining agent of the rank-and-file employees of TSPIC. The respondents, Maria Fe Flores, Fe
Capistrano, Amy Durias, Claire Evelyn Velez, Janice Olaguir, Jerico Alipit, Glen Batula, Ser John Hernandez, Rachel Novillas,
Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta
Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin, Loida Comullo, Marie Ann Delos
Santos, Juanita Yana, and Suzette Dulay, are all members of the Union.
In 1999, TSPIC and the Union entered into a Collective Bargaining Agreement (CBA) 8 for the years 2000 to 2004. The CBA
included a provision on yearly salary increases starting January 2000 until January 2002. Section 1, Article X of the CBA
provides, as follows:
Section 1. Salary/ Wage Increases.Employees covered by this Agreement shall be granted salary/wage increases
as follows:
a) Effective January 1, 2000, all employees on regular status and within the bargaining unit on or before said
date shall be granted a salary increase equivalent to ten percent (10%) of their basic monthly salary as of
December 31, 1999.
b) Effective January 1, 2001, all employees on regular status and within the bargaining unit on or before said
date shall be granted a salary increase equivalent to twelve (12%) of their basic monthly salary as of
December 31, 2000.
c) Effective January 1, 2002, all employees on regular status and within the bargaining unit on or before said
date shall be granted a salary increase equivalent to eleven percent (11%) of their basic monthly salary as
of December 31, 2001.
The wage salary increase of the first year of this Agreement shall be over and above the wage/salary increase,
including the wage distortion adjustment, granted by the COMPANY on November 1, 1999 as per Wage Order No.
NCR-07.
The wage/salary increases for the years 2001 and 2002 shall be deemed inclusive of the mandated minimum wage
increases under future Wage Orders, that may be issued after Wage Order No. NCR-07, and shall be considered as
correction of any wage distortion that may have been brought about by the said future Wage Orders. Thus the
wage/salary increases in 2001 and 2002 shall be deemed as compliance to future wage orders after Wage Order No.
NCR-07.
Consequently, on January 1, 2000, all the regular rank-and-file employees of TSPIC received a 10% increase in their salary.
Accordingly, the following nine (9) respondents (first group) who were already regular employees received the said increase in
their salary: Maria Fe Flores, Fe Capistrano, Amy Durias, Claire Evelyn Velez, Janice Olaguir, Jerico Alipit, Glen Batula, Ser
John Hernandez, and Rachel Novillas.9
The CBA also provided that employees who acquire regular employment status within the year but after the effectivity of a
particular salary increase shall receive a proportionate part of the increase upon attainment of their regular status. Sec. 2 of
the CBA provides:
SECTION 2. Regularization Increase.A covered daily paid employee who acquires regular status within the year
subsequent to the effectivity of a particular salary/wage increase mentioned in Section 1 above shall be granted a
salary/wage increase in proportionate basis as follows:
Regularization Period Equivalent Increase
327
 - 1st Quarter 100%
- 2nd Quarter 75%
- 3rd Quarter 50%
- 4th Quarter 25%
Thus, a daily paid employee who becomes a regular employee covered by this Agreement only on May 1, 2000, i.e.,
during the second quarter and subsequent to the January 1, 2000 wage increase under this Agreement, will be
entitled to a wage increase equivalent to seventy-five percent (75%) of ten percent (10%) of his basic pay. In the
same manner, an employee who acquires regular status on December 1, 2000 will be entitled to a salary increase
equivalent to twenty-five percent (25%) of ten percent (10%) of his last basic pay.
On the other hand, any monthly-paid employee who acquires regular status within the term of the Agreement shall be
granted regularization increase equivalent to 10% of his regular basic salary.
Then on October 6, 2000, the Regional Tripartite Wage and Productivity Board, National Capital Region, issued Wage Order
No. NCR-0810 (WO No. 8) which raised the daily minimum wage from PhP 223.50 to PhP 250 effective November 1, 2000.
Conformably, the wages of 17 probationary employees, namely: Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia
Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba,
Diomedisa Erni, Mario Salmorin, Loida Comullo, Marie Ann Delos Santos, Juanita Yana, and Suzette Dulay (second group),
were increased to PhP 250.00 effective November 1, 2000.
On various dates during the last quarter of 2000, the above named 17 employees attained regular employment 11and received
25% of 10% of their salaries as granted under the provision on regularization increase under Article X, Sec. 2 of the CBA.
In January 2001, TSPIC implemented the new wage rates as mandated by the CBA. As a result, the nine employees (first
group), who were senior to the above-listed recently regularized employees, received less wages.
On January 19, 2001, a few weeks after the salary increase for the year 2001 became effective, TSPICs Human Resources
Department notified 24 employees,12 namely: Maria Fe Flores, Janice Olaguir, Rachel Novillas, Fe Capistrano, Jerico Alipit,
Amy Durias, Glen Batula, Claire Evelyn Velez, Ser John Hernandez, Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia
Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba,
Diomedisa Erni, Mario Salmorin, Loida Comullo, and Marie Ann Delos Santos, that due to an error in the automated payroll
system, they were overpaid and the overpayment would be deducted from their salaries in a staggered basis, starting
February 2001. TSPIC explained that the correction of the erroneous computation was based on the crediting provision of Sec.
1, Art. X of the CBA.
The Union, on the other hand, asserted that there was no error and the deduction of the alleged overpayment from employees
constituted diminution of pay. The issue was brought to the grievance machinery, but TSPIC and the Union failed to reach an
agreement.
Consequently, TSPIC and the Union agreed to undergo voluntary arbitration on the solitary issue of whether or not the acts of
the management in making deductions from the salaries of the affected employees constituted diminution of pay.
On September 13, 2001, Arbitrator Jimenez rendered a Decision, holding that the unilateral deduction made by TSPIC violated
Art. 10013 of the Labor Code. The fallo reads:
WHEREFORE, in the light of the law on the matter and on the facts adduced in evidence, judgment is hereby
rendered in favor of the Union and the named individual employees and against the company, thereby ordering the
[TSPIC] to pay as follows:
1) to the sixteen (16) newly regularized employees named above, the amount of P12,642.24 a month or a
total of P113,780.16 for nine (9) months or P7,111.26 for each of them as well as an additional P12,642.24
(for all), or P790.14 (for each), for every month after 30 September 2001, until full payment, with legal
interests for every month of delay;
2) to the nine (9) who were hired earlier than the sixteen (16); also named above, their respective amount of
entitlements, according to the Unions correct computation, ranging from P110.22 per month (or P991.98 for
nine months) to P450.58 a month (or P4,055.22 for nine months), as well as corresponding monthly
entitlements after 30 September 2001, plus legal interests until full payment,
3) to Suzette Dulay, the amount of P608.14 a month (or P5,473.26), as well as corresponding monthly
entitlements after 30 September 2001, plus legal interest until full payment,
4) Attorneys fees equal to 10% of all the above monetary awards.
The claim for exemplary damages is denied for want of factual basis.
The parties are hereby directed to comply with their joint voluntary commitment to abide by this Award and thus,
submit to this Office jointly, a written proof of voluntary compliance with this DECISION within ten (10) days after the
finality hereof.
SO ORDERED.14
TSPIC filed a Motion for Reconsideration which was denied in a Resolution dated November 21, 2001.

328
Aggrieved, TSPIC filed before the CA a petition for review under Rule 43 docketed as CA-G.R. SP No. 68616. The appellate
court, through its October 22, 2003 Decision, dismissed the petition and affirmed in toto the decision of the voluntary arbitrator.
The CA declared TSPICs computation allowing PhP 287 as daily wages to the newly regularized employees to be correct,
noting that the computation conformed to WO No. 8 and the provisions of the CBA. According to the CA, TSPIC failed to
convince the appellate court that the deduction was a result of a system error in the automated payroll system. The CA
explained that when WO No. 8 took effect on November 1, 2000, the concerned employees were still probationary employees
who were receiving the minimum wage of PhP 223.50. The CA said that effective November 1, 2000, said employees should
have received the minimum wage of PhP 250. The CA held that when respondents became regular employees on November
29, 2000, they should be allowed the salary increase granted them under the CBA at the rate of 25% of 10% of their basic
salary for the year 2000; thereafter, the 12% increase for the year 2001 and the 10% increase for the year 2002 should also be
made applicable to them.15
TSPIC filed a Motion for Reconsideration which was denied by the CA in its April 23, 2004 Resolution.
TSPIC filed the instant petition which raises this sole issue for our resolution: Does the TSPICs decision to deduct the alleged
overpayment from the salaries of the affected members of the Union constitute diminution of benefits in violation of the Labor
Code?
TSPIC maintains that the formula proposed by the Union, adopted by the arbitrator and affirmed by the CA, was flawed,
inasmuch as it completely disregarded the "crediting provision" contained in the last paragraph of Sec. 1, Art. X of the CBA.
We find TSPICs contention meritorious.
A Collective Bargaining Agreement is the law between the parties
It is familiar and fundamental doctrine in labor law that the CBA is the law between the parties and they are obliged to comply
with its provisions.16 We said so in Honda Phils., Inc. v. Samahan ng Malayang Manggagawa sa Honda:
A collective bargaining agreement or CBA refers to the negotiated contract between a legitimate labor organization
and the employer concerning wages, hours of work and all other terms and conditions of employment in a bargaining
unit. As in all contracts, the parties in a CBA may establish such stipulations, clauses, terms and conditions as they
may deem convenient provided these are not contrary to law, morals, good customs, public order or public policy.
Thus, where the CBA is clear and unambiguous, it becomes the law between the parties and compliance therewith is
mandated by the express policy of the law. 17
Moreover, if the terms of a contract, as in a CBA, are clear and leave no doubt upon the intention of the contracting parties, the
literal meaning of their stipulations shall control.18 However, sometimes, as in this case, though the provisions of the CBA
seem clear and unambiguous, the parties sometimes arrive at conflicting interpretations. Here, TSPIC wants to credit the
increase granted by WO No. 8 to the increase granted under the CBA. According to TSPIC, it is specifically provided in the
CBA that "the salary/wage increase for the year 2001 shall be deemed inclusive of the mandated minimum wage increases
under future wage orders that may be issued after Wage Order No. 7." The Union, on the other hand, insists that the
"crediting" provision of the CBA finds no application in the present case, since at the time WO No. 8 was issued, the
probationary employees (second group) were not yet covered by the CBA, particularly by its crediting provision.
As a general rule, in the interpretation of a contract, the intention of the parties is to be pursued. 19 Littera necat spiritus vivificat.
An instrument must be interpreted according to the intention of the parties. It is the duty of the courts to place a practical and
realistic construction upon it, giving due consideration to the context in which it is negotiated and the purpose which it is
intended to serve.20 Absurd and illogical interpretations should also be avoided. Considering that the parties have
unequivocally agreed to substitute the benefits granted under the CBA with those granted under wage orders, the agreement
must prevail and be given full effect.
Paragraph (b) of Sec. 1 of Art. X of the CBA provides for the general agreement that, effective January 1, 2001, all employees
on regular status and within the bargaining unit on or before said date shall be granted a salary increase equivalent to twelve
(12%) of their basic monthly salary as of December 31, 2000. The 12% salary increase is granted to all employees who (1) are
regular employees and (2) are within the bargaining unit.
Second paragraph of (c) provides that the salary increase for the year 2000 shall not include the increase in salary granted
under WO No. 7 and the correction of the wage distortion for November 1999.
The last paragraph, on the other hand, states the specific condition that the wage/salary increases for the years 2001 and
2002 shall be deemed inclusive of the mandated minimum wage increases under future wage orders, that may be issued after
WO No. 7, and shall be considered as correction of the wage distortions that may be brought about by the said future wage
orders. Thus, the wage/salary increases in 2001 and 2002 shall be deemed as compliance to future wage orders after WO No.
7.
Paragraph (b) is a general provision which allows a salary increase to all those who are qualified. It, however, clashes with the
last paragraph which specifically states that the salary increases for the years 2001 and 2002 shall be deemed inclusive of
wage increases subsequent to those granted under WO No. 7. It is a familiar rule in interpretation of contracts that conflicting
provisions should be harmonized to give effect to all.21 Likewise, when general and specific provisions are inconsistent, the
specific provision shall be paramount to and govern the general provision. 22 Thus, it may be reasonably concluded that TSPIC
granted the salary increases under the condition that any wage order that may be subsequently issued shall be credited
329
against the previously granted increase. The intention of the parties is clear: As long as an employee is qualified to receive the
12% increase in salary, the employee shall be granted the increase; and as long as an employee is granted the 12% increase,
the amount shall be credited against any wage order issued after WO No. 7.
Respondents should not be allowed to receive benefits from the CBA while avoiding the counterpart crediting provision. They
have received their regularization increases under Art. X, Sec. 2 of the CBA and the yearly increase for the year 2001. They
should not then be allowed to avoid the crediting provision which is an accompanying condition.
Respondents attained regular employment status before January 1, 2001. WO No. 8, increasing the minimum wage, was
issued after WO No. 7. Thus, respondents rightfully received the 12% salary increase for the year 2001 granted in the CBA;
and consequently, TSPIC rightfully credited that 12% increase against the increase granted by WO No. 8.
Proper formula for computing the salaries for the year 2001
Thus, the proper computation of the salaries of individual respondents is as follows:
(1) With regard to the first group of respondents who attained regular employment status before the effectivity of WO No. 8,
the computation is as follows:
For respondents Jerico Alipit and Glen Batula:23
Wage rate before WO No. 8 PhP 234.67
Increase due to WO No. 8
setting the minimum wage at PhP 250.... 15.33
Total Salary upon effectivity of WO No. 8. PhP 250.00
Increase for 2001 (12% of 2000 salary)...... PhP 30.00
Less the wage increase under WO No. 8. 15.33
Total difference between the wage increase
for 2001 and the increase granted under WO No. 8.. PhP 14.67
Wage rate by December 2000. PhP 250.00
Plus total difference between the wage increase for 2001 and
the increase granted under WO No. 8.. 14.67
Total (Wage rate range beginning January 1, 2001) PhP 264.67
For respondents Ser John Hernandez and Rachel Novillas:24
Wage rate range before WO No. 8.. PhP 234.68
Increase due to WO No. 8
setting the minimum wage at PhP 250 15.32
Total Salary upon effectivity of WO No. 8. PhP 250.00
Increase for 2001 (12% of 2000 salary).. PhP 30.00
Less the wage increase under WO No. 8 15.32
Total difference between the wage increase
for 2001 and the increase granted under WO No. 8 PhP 14.68
Wage rate by December 2000. PhP 250.00
Plus total difference between the wage increase for 2001 and
the increase granted under WO No. 8 14.68
Total (Wage rate range beginning January 1, 2001) PhP 264.68
For respondents Amy Durias, Claire Evelyn Velez, and Janice Olaguir:25
Wage rate range before WO No. 8.. PhP 240.26
Increase due to WO No. 8
setting the minimum wage at PhP 250 9.74
Total Salary upon effectivity of WO No. 8. PhP 250.00
Increase for 2001 (12% of 2000 salary) PhP 30.00
Less the wage increase under WO No. 8 9.74
Total difference between the wage increase for 2001
and the increase granted under WO No. 8 PhP 20.26
Wage rate by December 2000 PhP 250.00
330
 Plus total difference between the wage increase for 2001 and
the increase granted under WO No. 8 20.26
Total (Wage rate range beginning January 1, 2001) PhP 270.26
For respondents Ma. Fe Flores and Fe Capistrano:26
Wage rate range before WO No. 8 PhP 245.85
Increase due to WO No. 8
setting the minimum wage at PhP 250.. 4.15
Total Salary upon effectivity of WO No. 8... PhP 250.00
Increase for 2001 (12% of 2000 salary) PhP 30.00
Less the wage increase under WO No. 8......... 4.15
Total difference between the wage increase for 2001
and the increase granted under WO No. 8 PhP 25.85
Wage rate by December 2000 PhP 250.00
Plus total difference between the wage increase for 2001 and
the increase granted under WO No. 8 25.85
Total (Wage rate range beginning January 1, 2001) PhP 275.85
(2) With regard to the second group of employees, who attained regular employment status after the implementation of WO
No. 8, namely: Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie
Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin, Loida Comullo, Marie
Ann Delos Santos, Juanita Yana, and Suzette Dulay, the proper computation of the salaries for the year 2001, in accordance
with the CBA, is as follows:
Compute the increase in salary after the implementation of WO No. 8 by subtracting the minimum wage before WO No. 8 from
the minimum wage per the wage order to arrive at the wage increase, thus:
Minimum Wage per Wage Order.. PhP 250.00
Wage rate before Wage Order.. 223.50
Wage Increase. PhP 26.50
Upon attainment of regular employment status, the employees salaries were increased by 25% of 10% of their basic salaries,
as provided for in Sec. 2, Art. X of the CBA, thus resulting in a further increase of PhP 6.25, for a total of PhP 256.25,
computed as follows:
Wage rate after WO No. 8. PhP 250.00
Regularization increase (25 % of 10% of basic salary) 6.25
Total (Salary for the end of year 2000). PhP 256.25
To compute for the increase in wage rates for the year 2001, get the increase of 12% of the employees salaries as of
December 31, 2000; then subtract from that amount, the amount increased in salaries as granted under WO No. 8 in
accordance with the crediting provision of the CBA, to arrive at the increase in salaries for the year 2001 of the recently
regularized employees. Add the result to their salaries as of December 31, 2000 to get the proper salary beginning January 1,
2001, thus:
Increase for 2001 (12% of 2000 salary)... PhP 30.75
Less the wage increase under WO No. 8. 26.50
Difference between the wage increase
for 2001 and the increase granted under WO No. 8 PhP 4.25
Wage rate after regularization increase... PhP 256.25
Plus total difference between the wage increase and
the increase granted under WO No. 8. 4.25
Total (Wage rate beginning January 1, 2001). PhP 260.50
With these computations, the crediting provision of the CBA is put in effect, and the wage distortion between the first and
second group of employees is cured. The first group of employees who attained regular employment status before the
implementation of WO No. 8 is entitled to receive, starting January 1, 2001, a daily wage rate within the range of PhP 264.67
to PhP 275.85, depending on their wage rate before the implementation of WO No. 8. The second group that attained regular

331
employment status after the implementation of WO No. 8 is entitled to receive a daily wage rate of PhP 260.50 starting
January 1, 2001.
Diminution of benefits
TSPIC also maintains that charging the overpayments made to the 16 respondents through staggered deductions from their
salaries does not constitute diminution of benefits.
We agree with TSPIC.
Diminution of benefits is the unilateral withdrawal by the employer of benefits already enjoyed by the employees. There is
diminution of benefits when it is shown that: (1) the grant or benefit is founded on a policy or has ripened into a practice over a
long period; (2) the practice is consistent and deliberate; (3) the practice is not due to error in the construction or application of
a doubtful or difficult question of law; and (4) the diminution or discontinuance is done unilaterally by the employer. 27
As correctly pointed out by TSPIC, the overpayment of its employees was a result of an error. This error was immediately
rectified by TSPIC upon its discovery. We have ruled before that an erroneously granted benefit may be withdrawn without
violating the prohibition against non-diminution of benefits. We ruled in Globe-Mackay Cable and Radio Corp. v. NLRC:
Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous application of the law.
Payment may be said to have been made by reason of a mistake in the construction or application of a "doubtful or
difficult question of law". (Article 2155, in relation to Article 2154 of the Civil Code). Since it is a past error that is being
corrected, no vested right may be said to have arisen nor any diminution of benefit under Article 100 of the Labor
Code may be said to have resulted by virtue of the correction. 28
Here, no vested right accrued to individual respondents when TSPIC corrected its error by crediting the salary increase for the
year 2001 against the salary increase granted under WO No. 8, all in accordance with the CBA.
Hence, any amount given to the employees in excess of what they were entitled to, as computed above, may be legally
deducted by TSPIC from the employees salaries. It was also compassionate and fair that TSPIC deducted the overpayment in
installments over a period of 12 months starting from the date of the initial deduction to lessen the burden on the overpaid
employees. TSPIC, in turn, must refund to individual respondents any amount deducted from their salaries which was in
excess of what TSPIC is legally allowed to deduct from the salaries based on the computations discussed in this Decision.
As a last word, it should be reiterated that though it is the states responsibility to afford protection to labor, this policy should
not be used as an instrument to oppress management and capital.29 In resolving disputes between labor and capital, fairness
and justice should always prevail. We ruled in Norkis Union v. Norkis Trading that in the resolution of labor cases, we have
always been guided by the State policy enshrined in the Constitution: social justice and protection of the working class. Social
justice does not, however, mandate that every dispute should be automatically decided in favor of labor. In any case, justice is
to be granted to the deserving and dispensed in the light of the established facts and the applicable law and doctrine. 30
WHEREFORE, premises considered, the September 13, 2001 Decision of the Labor Arbitrator in National Conciliation and
Mediation Board Case No. JBJ-AVA-2001-07-57 and the October 22, 2003 CA Decision in CA-G.R. SP No. 68616 are
hereby AFFIRMED with MODIFICATION. TSPIC is hereby ORDERED to pay respondents their salary increases in
accordance with this Decision, as follows:
Name of Employee Daily Wage No. of Working No. of Months Total Salary for
Rate Days in a Month in a Year 2001
Nimfa Anilao 260.5 26 12 81,276.00
Rose Subardiaga 260.5 26 12 81,276.00
Valerie Carbon 260.5 26 12 81,276.00
Olivia Edroso 260.5 26 12 81,276.00
Maricris Donaire 260.5 26 12 81,276.00
Analyn Azarcon 260.5 26 12 81,276.00
Rosalie Ramirez 260.5 26 12 81,276.00
Julieta Rosete 260.5 26 12 81,276.00
Janice Nebre 260.5 26 12 81,276.00
Nia Andrade 260.5 26 12 81,276.00
Catherine Yaba 260.5 26 12 81,276.00
Diomedisa Erni 260.5 26 12 81,276.00
Mario Salmorin 260.5 26 12 81,276.00
Loida Camullo 260.5 26 12 81,276.00
Marie Ann Delos Santos 260.5 26 12 81,276.00
Juanita Yana 260.5 26 12 81,276.00
Suzette Dulay 260.5 26 12 81,276.00

332
 Jerico Alipit 264.67 26 12 82,577.04
Glen Batula 264.67 26 12 82,577.04
Ser John Hernandez 264.68 26 12 82,580.16
Rachel Novillas 264.68 26 12 82,580.16
Amy Durias 270.26 26 12 84,321.12
Claire Evelyn Velez 270.26 26 12 84,321.12
Janice Olaguir 270.26 26 12 84,321.12
Maria Fe Flores 275.85 26 12 86,065.20
Fe Capistrano 275.85 26 12 86,065.20
The award for attorneys fees of ten percent (10%) of the total award is MAINTAINED.
SO ORDERED.

G.R. No. 152928 June 18, 2009

METROPOLITAN BANK and TRUST COMPANY, Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, FELIPE A. PATAG and BIENVENIDO C. FLORA, Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
In this petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, petitioner seeks to set aside and
annul the Decision1 dated December 13, 2001 and the Resolution2 dated April 9, 2002 rendered by the Court of Appeals (CA)
in CA-G.R. No. 63144.
The CA decision affirmed an earlier resolution3 of the National Labor Relations Commission (NLRC) dated March 31, 2000
which ruled in favor of herein respondents.
The factual antecedents are as follows:
Respondents Felipe Patag (Patag) and Bienvenido Flora (Flora) were former employees of petitioner Metropolitan Bank and
Trust Company (Metrobank). Both respondents availed of the banks compulsory retirement plan in accordance with the 1995
Officers Benefits Memorandum. At the time of his retirement on February 1, 1998, Patag was an Assistant Manager with a
monthly salary of P32,100.00. Flora was a Senior Manager with a monthly salary of P48,500.00 when he retired on April 1,
1998. Both of them received their respective retirement benefits computed at 185% of their gross monthly salary for every year
of service as provided under the said 1995 Memorandum. In all, Patag was fully paid the total amount of P1,957,782.71 while
Flora was paid the total amount of P3,042,934.29 in retirement benefits.
Early in 1998, Collective Bargaining Agreement (CBA) negotiations were on-going between Metrobank and its rank and file
employees for the period 1998-2000. Patag wrote a letter dated February 2, 19984 to the bank requesting that his retirement
benefits be computed at the new rate should there be an increase thereof in anticipation of possible changes in officers
benefits after the signing of the new CBA with the rank and file. Flora likewise wrote Metrobank in March 25, 1998, 5 requesting
the bank to use as basis in the computation of their retirement benefits the increased rate of 200% as embodied in the just
concluded CBA between the bank and its rank and file employees. Metrobank did not reply to their requests.
The records show that since the 1986-1988 CBA, and continuing with each CBA concluded thereafter with its rank and file
employees, Metrobank would issue a Memorandum granting similar or better benefits to its managerial employees or officers,
retroactive to January 1st of the first year of effectivity of the CBA. When the 1998-2000 CBA was approved, Metrobank, in line
with its past practice, issued on June 10, 1998, a Memorandum on Officers Benefits, which provided for improved benefits to
its officers (the 1998 Officers Benefits Memorandum). This Memorandum was signed by then Metrobank President Antonio S.
Abacan, Jr. Pertinently, the compulsory retirement benefit for officers was increased from 185% to 200% effective January 1,
1998, but with the condition that the benefits shall only be extended to those who remain in service as of June 15, 1998.6
On June 29, 1998, Flora again wrote a letter,7 asking Metrobank for a reconsideration of its condition that the new officers
benefits shall apply only to those officers still employed as of June 15, 1998. Metrobank denied this request on July 17, 1998.8
Consequently on August 31, 1998, Patag and Flora, through their counsel, wrote a letter to Metrobank demanding the
payment of their unpaid retirement benefits amounting to P284,150.00 and P448,050.00, respectively, representing the
increased benefits they should have received under the 1998 Officers Benefits Memorandum. 9
In its letter-reply dated September 17, 1998, Metrobanks First Vice-President Paul Lim, Jr. informed Patag and Flora of their
ineligibility to the improved officers benefits as they had already ceased their employment and were no longer officers of the
bank as of June 15, 1998.10
On September 25, 1998, Patag and Flora filed with the Labor Arbiter their consolidated complaint against Metrobank for
underpayment of retirement benefits and damages, asserting that pursuant to the 1998 Officers Benefits Memorandum, they
were entitled to additional retirement benefits. Patag, for his part, also claimed he was entitled to payment of his 1997 profit
share and 1998 structural adjustment.

333
On June 8, 1999, Labor Arbiter Geobel A. Bartolabac rendered a decision, 11 dismissing the complaint of Patag and Flora. As
expected, Patag and Flora filed an appeal with the NLRC. In a resolution12 dated March 31, 2000, the Third Division of the
NLRC partially granted the appeal and directed Metrobank to pay Patag and Flora their unpaid beneficial improvements under
the 1998 Officers Benefits Memorandum.
Aggrieved with the ruling of the NLRC, Metrobank elevated the matter to the CA by way of a petition for certiorari, docketed as
CA-G.R. No. 63144.
On December 13, 2001, the CA promulgated its assailed decision dismissing Metrobanks petition and affirming the resolution
of the NLRC. In so ruling, the CA declared:
Upon the other hand, the private respondents (Patag and Flora) evidence reveals that from 1986 to 1995, it has been the
practice of the petitioner (Metrobank) that whenever it enters and signs a new CBA with its rank and file employees, it likewise
issues a memorandum extending benefits to its officers which are higher or at least the same as those provided in the said
CBA for the rank and file employees effective every 1st of January of the year, without any condition that the officers-
beneficiaries should remain employees of the petitioner as of a certain date of a given year. xxx. Under the circumstances, the
same may be deemed to have ripened into company practice or policy which cannot be peremptorily withdrawn. 13
Petitioners subsequent motion for reconsideration was denied by the CA in its Resolution dated April 9, 2002.
Hence, the instant petition where Metrobank raised the following arguments:
I. THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN AFFIRMING THE NLRCS DECISION AND
RESOLUTION BY RULING THAT THE PRIVATE RESPONDENTS ARE ENTITLED TO THEIR BELATED CLAIM FOR
ADDITIONAL (RETIREMENT) BENEFITS EVEN AFTER THEY EFFECTIVELY CEASED THEIR EMPLOYMENT WITH
PETITIONER AND DESPITE THEIR UNQUALIFIED ACKNOWLEDGMENT AND RECEIPT OF THE PAYMENT IN FULL OF
THEIR RETIREMENT BENEFITS, CONTRARY TO LAW AS WELL AS OTHER LAWFUL ORDERS AND SETTLED
JURISPRUDENCE ON THE MATTER.14
II. THE HONORABLE COURT OF APPEALS FAVORABLE APPLICATION OF THE 1998 IMPROVED OFFICERS
(RETIREMENT) BENEFITS TO THE RESPONDENTS DESPITE THEIR NON-COMPLIANCE WITH THE REQUIREMENTS
OF ELIGIBILITY THERETO, IS PATENTLY CONTRARY TO LAW AND THE WELL-SETTLED JURISPRUDENCE ON THE
MATTER.15
III. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT RESPONDENTS ARE BARRED
BY ESTOPPEL FROM INSTITUTING THE ACTION AFTER HAVING UNQUALIFIEDLY ACKNOWLEDGED AND RECEIVED
THE FULL PAYMENT OF THEIR RETIREMENT BENEFITS.16
Petitioner contends that respondents Patag and Flora, having qualified for compulsory retirement under the 1995 Officers
Benefits Memorandum, cannot now claim to be eligible to higher retirement benefits under the 1998 Improved Benefits
Memorandum. In fact, according to petitioner, Patag and Flora had unqualifiedly received the full payment of their retirement
benefits. Also, the 1998 Improved Benefits Memorandum was issued after Patag and Flora compulsorily retired on February 1,
1998 and April 1, 1998, respectively, and there was an express condition in the 1998 Officers Benefits Memorandum that the
improved benefits shall apply only to officers who remain in service as of June 15, 1998.
From the facts, it is clear that the core issue hinges on whether respondents can still recover higher benefits under the 1998
Officers Benefits Memorandum despite the fact that they have compulsorily retired prior to the issuance of said memorandum
and did not meet the condition therein requiring them to be employed as of June 15, 1998.
The main issue in this case involves a question of fact. As a rule, the Supreme Court is not a trier of facts and this applies with
greater force in labor cases. Hence, factual findings of quasi-judicial bodies like the NLRC, particularly when they coincide with
those of the Labor Arbiter and if supported by substantial evidence, are accorded respect and even finality by this Court.
However, where the findings of the NLRC and the Labor Arbiter are contradictory, as in this case, the reviewing court may
delve into the records and examine for itself the questioned findings. 17
It is Metrobanks position that the CA and the NLRC erred when they recognized that there was an established company
practice or policy of granting improved benefits to its officers effective January 1 of the year and without any condition that the
officers should remain employees of Metrobank as of a certain date. Metrobank claims that although its officers were extended
the same as or higher benefits than those contained in its CBA with its rank and file employees from 1986 to 1997, the same
cannot be concluded to have ripened into a company practice since the provisions of the retirement plan itself and the law on
retirement should be controlling.
We do not agree.
To be considered a company practice, the giving of the benefits should have been done over a long period of time, and must
be shown to have been consistent and deliberate. The test or rationale of this rule on long practice requires an indubitable
showing that the employer agreed to continue giving the benefits knowing fully well that said employees are not covered by the
law requiring payment thereof.18
It was the NLRCs finding, as affirmed by the CA, that there is a company practice of paying improved benefits to petitioner
banks officers effective every January 1 of the same year the improved benefits are granted to rank and file employees in a
CBA. We find that the NLRCs and CAs factual conclusions were fully supported by substantial evidence on record.
Respondents were able to prove that for the period 1986-1997, Metrobank issued at least four (4) separate memoranda,
334
coinciding with the approval of four (4) different CBAs with the rank and file, wherein bank officers were granted benefits,
including retirement benefits, that were commensurate or superior to those provided for in Metrobanks CBA with its rank and
file employees. Respondents attached to their position paper filed with the Labor Arbiter copies of the CBAs that petitioner
entered into with its rank and file employees for the period 1986-1997 and also the various officers benefits memoranda
issued by the bank after each CBA signing. Respondents had no hand in the preparation of these officers benefits
memoranda for they appeared to be issuances of the bank alone, signed by its President or other proper officer. Thus,
petitioner cannot credibly argue that respondents claim of a company practice was baseless or self-serving.
The record further reveals that these improved officers benefits were always made to retroact effective every January 1 of the
year of issuance of said memoranda and without any condition regarding the term or date of employment. The condition that
the managerial employee or bank officer must still be employed by petitioner as of a certain date was imposed for the first time
in the 1998 Officers Benefits Memorandum.
In other words, for over a decade, Metrobank has consistently, deliberately and voluntarily granted improved benefits to its
officers, after the signing of each CBA with its rank and file employees, retroactive to January 1st of the same year as the
grant of improved benefits and without the condition that the officers should remain employees as of a certain date. This
undeniably indicates a unilateral and voluntary act on Metrobanks part, to give said benefits to its officers, knowing that such
act was not required by law or the company retirement plan.
With regard to the length of time the company practice should have been exercised to constitute voluntary employer practice
which cannot be unilaterally withdrawn by the employer, jurisprudence has not laid down any hard and fast rule. In the case of
Davao Fruits Corporation v. Associated Labor Unions,19 the company practice of including in the computation of the 13th-
month pay the maternity leave pay and cash equivalent of unused vacation and sick leave lasted for six (6) years. In another
case, Tiangco v. Leogardo, Jr.,20 the employer carried on the practice of giving a fixed monthly emergency allowance from
November 1976 to February 1980, or three (3) years and four (4) months. While in Sevilla Trading v. Semana, 21 the employer
kept the practice of including non-basic benefits such as paid leaves for unused sick leave and vacation leave in the
computation of their 13th-month pay for at least two (2) years. In all these cases, this Court held that the grant of these
benefits has ripened into company practice or policy which cannot be peremptorily withdrawn. The common denominator in
these cases appears to be the regularity and deliberateness of the grant of benefits over a significant period of time.
In the case at bar, petitioner Metrobank favorably adjusted its officers benefits, including retirement benefits, after the approval
of each CBA with the rank and file employees, to be effective every January 1st of the same year as the CBAs approval, and
without any condition regarding the date of employment of the officer, from 1986 to 1997 or for about eleven (11) years. This
constitutes voluntary employer practice which cannot be unilaterally withdrawn or diminished by the employer without violating
the spirit and intent of Art. 100 of the Labor Code, to wit:
Art. 100. Prohibition against elimination or diminution of benefits. Nothing in this Book shall be construed to eliminate or in
any way diminish supplements, or other employee benefits being enjoyed at the time of promulgation of this Code.
The condition that an officer must still be in the service of petitioner bank as of June 15, 1998 effectively reduced benefits of
employees who retired prior to the issuance of the 1998 Officers Benefits Memorandum despite the fact in the past no such
condition was imposed by the bank and previous retirees presumably enjoyed the higher benefits regardless of their date of
retirement as long as they were still employees of petitioner as of the January 1st effectivity date.
If it were true that notwithstanding the existence of the previous officers benefits memoranda (which all did not contain the
same condition as the 1998 memorandum) there was no company practice of granting the improved benefits to officers who
retired from the bank prior to the issuance of the officers benefits memorandum, it would have been simple enough for the
bank to prove this. A company as large and prestigious as petitioner would certainly have a comprehensive and efficient
system of keeping employee records. All it had to do was show some examples of past retirees over the period 1986 to 1997
who retired prior to the issuance of the relevant officers benefits memorandum but after the usual January 1st memorandum
effectivity date and whose retirement benefits were computed at the old rate and not at the improved rate. Unfathomably,
Metrobank presented no such evidence. Contrary to petitioners insistent view, the CA committed no error when it ruled that
petitioner failed to present convincing evidence to substantiate its claims.
Anent petitioners line of reasoning that it had no obligation under Article 287 of the Labor Code or the express terms of the
retirement plan to grant improved benefits to employees who are no longer in the service at the time of the grant, it appears to
us that petitioner is deliberately missing the point. Ordinarily, an employee would have no right to demand benefits that the
employer was not obligated by law or contract to give. However, it is the jurisprudential rule that where there is an established
employer practice of regularly, knowingly and voluntarily granting benefits to employees over a significant period of time,
despite the lack of a legal or contractual obligation on the part of the employer to do so, the grant of such benefits ripens into a
vested right of the employees and can no longer be unilaterally reduced or withdrawn by the employer. 22
With respect to petitioners argument that respondents should be deemed "estopped" from claiming additional benefits in view
of their "unqualified receipt" of their retirement benefits and other benefits, we find the same lacking in merit. There was
nothing in the receipts/vouchers signed by respondents to indicate that they acknowledged full receipt of all amounts due them
or that they are waiving their right to claim any deficiency in their benefits. Indeed, in this jurisdiction, even written, express
quitclaims, releases and waivers in labor cases may be invalidated under certain circumstances. As a rule, quitclaims, waivers
335
or releases are looked upon with disfavor and are commonly frowned upon as contrary to public policy and ineffective to bar
claims for the measure of a workers legal rights.23 In this case, respondents consistent acts of demanding the improved
benefits before and after their actual receipt of their partial benefits belie any intention to waive their legal right to demand the
deficiency in their benefits. Thus, we cannot accept petitioners view that there is estoppel or even implied waiver on the part of
respondents.
Finally, petitioner contends that the CAs ruling would result in unfair discrimination since there were at least twelve (12) other
retirees in 1998 similarly situated as respondents whose retirement benefits were computed at the old rate but who did not file
cases against Metrobank. Petitioner posits the view that the CA ruling would unlawfully grant greater benefits to respondents
vis a vis the other retirees who did not demand the improved benefits. This argument similarly deserves no credit. The right to
file a labor complaint or assert a cause of action against an employer is a personal right of each employee. It is most certainly
not dependent on whether or not other employees similarly situated would also file a case against the employer. If there are
other employees in the same boat as respondents who decided, for whatever reason, not to demand payment of the improved
benefits, that would be their prerogative and their own look out.1avvphi1 It should not prejudice respondents or ban them from
asserting their rights and pursuing their legal remedies against petitioner.
It is worth reiterating that the condition requiring bank officers to be still employed as of June 15, 1998 to be eligible to the
adjusted benefits, was included by Metrobank for the first time in the 1998 Officers Benefits Memorandum dated June 10,
1998.24 Significantly, petitioner took such action only after Patag and Flora wrote letters dated February 2, 1998 25 and March
25, 1998,26 respectively, requesting the bank to use as basis in the computation of their retirement benefits the increased rate
that might be granted with the signing of the 1998-2000 CBA between the bank and its rank and file employees. Thus, when
Metrobank opted to impose a new condition in its Officers Benefits Memorandum dated June 10, 1998, it already had
knowledge of respondents requests. Indeed, the imposition of the said condition shortly after respondents made their requests
is suspicious, to say the least. Such conduct on the part of Metrobank deserves no sympathy from this Court.
It is a time-honored rule that in controversies between a laborer and his master, doubts reasonably arising from the evidence
or in the interpretation of agreements and writings should be resolved in the formers favor. The policy is to extend the
applicability to a greater number of employees who can avail of the benefits under the law, which is in consonance with the
avowed policy of the State to give maximum aid and protection to labor. 27 This principle gives us even greater reason to affirm
the findings of the CA.
WHEREFORE, the petition for review is hereby DENIED. The assailed decision and resolution of the CA in CA-G.R. No.
63144 are hereby AFFIRMED.
SO ORDERED.

G.R. Nos. 174040-41 September 22, 2010

INSULAR HOTEL EMPLOYEES UNION-NFL, Petitioner,
vs.
WATERFRONT INSULAR HOTEL DAVAO, Respondent.
DECISION
PERALTA, J.:
Before this Court is a petition for review on certiorari,1 under Rule 45 of the Rules of Court, seeking to set aside the
Decision2 dated October 11, 2005, and the Resolution3 dated July 13, 2006 of the Court of Appeals (CA) in consolidated labor
cases docketed as CA-G.R. SP No. 83831 and CA-G.R. SP No. 83657. Said Decision reversed the Decision4 dated the April
5, 2004 of the Accredited Voluntary Arbitrator Rosalina L. Montejo (AVA Montejo).
The facts of the case, as culled from the records, are as follows:
On November 6, 2000, respondent Waterfront Insular Hotel Davao (respondent) sent the Department of Labor and
Employment (DOLE), Region XI, Davao City, a Notice of Suspension of Operations 5 notifying the same that it will suspend its
operations for a period of six months due to severe and serious business losses. In said notice, respondent assured the DOLE
that if the company could not resume its operations within the six-month period, the company would pay the affected
employees all the benefits legally due to them.
During the period of the suspension, Domy R. Rojas (Rojas), the President of Davao Insular Hotel Free Employees Union
(DIHFEU-NFL), the recognized labor organization in Waterfront Davao, sent respondent a number of letters asking
management to reconsider its decision.
In a letter6 dated November 8, 2000, Rojas intimated that the members of the Union were determined to keep their jobs and
that they believed they too had to help respondent, thus:
xxxx
Sir, we are determined to keep our jobs and push the Hotel up from sinking. We believe that we have to help in this (sic)
critical times. Initially, we intend to suspend the re-negotiations of our CBA. We could talk further on possible adjustments on
economic benefits, the details of which we are hoping to discuss with you or any of your emissaries. x x x 7
In another letter8 dated November 10, 2000, Rojas reiterated the Union's desire to help respondent, to wit:

336
We would like to thank you for giving us the opportunity to meet [with] your representatives in order for us to air our sentiments
and extend our helping hands for a possible reconsideration of the company's decision.
The talks have enabled us to initially come up with a suggestion of solving the high cost on payroll.
We propose that 25 years and above be paid their due retirement benefits and put their length of service to zero without loss
of status of employment with a minimum hiring rate.
Thru this scheme, the company would be able to save a substantial amount and reduce greatly the payroll costs without
affecting the finance of the families of the employees because they will still have a job from where they could get their income.
Moreover, we are also open to a possible reduction of some economic benefits as our gesture of sincere desire to help.
We are looking forward to a more fruitful round of talks in order to save the hotel. 9
In another letter10 dated November 20, 2000, Rojas sent respondent more proposals as a form of the Union's gesture of their
intention to help the company, thus:
1) Suspension of [the] CBA for ten years, No strike no lock-out shall be enforced.
2) Pay all the employees their benefits due, and put the length of service to zero with a minimum hiring rate. Payment
of benefits may be on a staggered basis or as available.
3) Night premium and holiday pays shall be according to law. Overtime hours rendered shall be offsetted as
practiced.
4) Reduce the sick leaves and vacation leaves to 15 days/15days.
5) Emergency leave and birthday off are hereby waived.
6) Duty meal allowance is fixed at P30.00 only. No more midnight snacks and double meal allowance. The cook
drinks be stopped as practiced.
7) We will shoulder 50% of the group health insurance and family medical allowance be reduced to 1,500.00 instead
of 3,000.00.
8) The practice of bringing home our uniforms for laundry be continued.
9) Fixed manning shall be implemented, the rest of manpower requirements maybe sourced thru WAP and casual
hiring. Manpower for fixed manning shall be 145 rank-and-file union members.
10) Union will cooperate fully on strict implementation of house rules in order to attain desired productivity and
discipline. The union will not tolerate problem members.
11) The union in its desire to be of utmost service would adopt multi-tasking for the hotel to be more competitive.
It is understood that with the suspension of the CBA renegotiations, the same existing CBA shall be adopted and that all
provisions therein shall remain enforced except for those mentioned in this proposal.
These proposals shall automatically supersede the affected provisions of the CBA. 11
In a handwritten letter12 dated November 25, 2000, Rojas once again appealed to respondent for it to consider their proposals
and to re-open the hotel. In said letter, Rojas stated that manpower for fixed manning shall be one hundred (100) rank-and-file
Union members instead of the one hundred forty-five (145) originally proposed.
Finally, sometime in January 2001, DIHFEU-NFL, through Rojas, submitted to respondent a Manifesto 13concretizing their
earlier proposals.
After series of negotiations, respondent and DIHFEU-NFL, represented by its President, Rojas, and Vice-Presidents, Exequiel
J. Varela Jr. and Avelino C. Bation, Jr., signed a Memorandum of Agreement14 (MOA) wherein respondent agreed to re-open
the hotel subject to certain concessions offered by DIHFEU-NFL in its Manifesto.
Accordingly, respondent downsized its manpower structure to 100 rank-and-file employees as set forth in the terms of the
MOA. Moreover, as agreed upon in the MOA, a new pay scale was also prepared by respondent.
The retained employees individually signed a "Reconfirmation of Employment" 15 which embodied the new terms and
conditions of their continued employment. Each employee was assisted by Rojas who also signed the document.
On June 15, 2001, respondent resumed its business operations.
On August 22, 2002, Darius Joves (Joves) and Debbie Planas, claiming to be local officers of the National Federation of Labor
(NFL), filed a Notice of Mediation16 before the National Conciliation and Mediation Board (NCMB), Region XI, Davao City. In
said Notice, it was stated that the Union involved was "DARIUS JOVES/DEBBIE PLANAS ET. AL, National Federation of
Labor." The issue raised in said Notice was the "Diminution of wages and other benefits through unlawful Memorandum of
Agreement."
On August 29, 2002, the NCMB called Joves and respondent to a conference to explore the possibility of settling the conflict.
In the said conference, respondent and petitioner Insular Hotel Employees Union-NFL (IHEU-NFL), represented by Joves,
signed a Submission Agreement17 wherein they chose AVA Alfredo C. Olvida (AVA Olvida) to act as voluntary arbitrator.
Submitted for the resolution of AVA Olvida was the determination of whether or not there was a diminution of wages and other
benefits through an unlawful MOA. In support of his authority to file the complaint, Joves, assisted by Atty. Danilo Cullo (Cullo),
presented several Special Powers of Attorney (SPA) which were, however, undated and unnotarized.
On September 2, 2002, respondent filed with the NCMB a Manifestation with Motion for a Second Preliminary
Conference,18 raising the following grounds:

337
 1) The persons who filed the instant complaint in the name of the Insular Hotel Employees Union-NFL have no
authority to represent the Union;
2) The individuals who executed the special powers of attorney in favor of the person who filed the instant complaint
have no standing to cause the filing of the instant complaint; and
3) The existence of an intra-union dispute renders the filing of the instant case premature. 19
On September 16, 2002, a second preliminary conference was conducted in the NCMB, where Cullo denied any existence of
an intra-union dispute among the members of the union. Cullo, however, confirmed that the case was filed not by the IHEU-
NFL but by the NFL. When asked to present his authority from NFL, Cullo admitted that the case was, in fact, filed by
individual employees named in the SPAs. The hearing officer directed both parties to elevate the aforementioned issues to
AVA Olvida.20
The case was docketed as Case No. AC-220-RB-11-09-022-02 and referred to AVA Olvida. Respondent again raised its
objections, specifically arguing that the persons who signed the complaint were not the authorized representatives of the
Union indicated in the Submission Agreement nor were they parties to the MOA. AVA Olvida directed respondent to file a
formal motion to withdraw its submission to voluntary arbitration.
On October 16, 2002, respondent filed its Motion to Withdraw. 21 Cullo then filed an Opposition22 where the same was
captioned:
NATIONAL FEDERATION OF LABOR
And 79 Individual Employees, Union Members,
Complainants,
-versus-
Waterfront Insular Hotel Davao,
Respondent.
In said Opposition, Cullo reiterated that the complainants were not representing IHEU-NFL, to wit:
xxxx
2. Respondent must have been lost when it said that the individuals who executed the SPA have no standing to
represent the union nor to assail the validity of Memorandum of Agreement (MOA). What is correct is that the
individual complainants are not representing the union but filing the complaint through their appointed attorneys-
in-fact to assert their individual rights as workers who are entitled to the benefits granted by law and stipulated in the
collective bargaining agreement.23
On November 11, 2002, AVA Olvida issued a Resolution24 denying respondent's Motion to Withdraw. On December 16, 2002,
respondent filed a Motion for Reconsideration25 where it stressed that the Submission Agreement was void because the Union
did not consent thereto. Respondent pointed out that the Union had not issued any resolution duly authorizing the individual
employees or NFL to file the notice of mediation with the NCMB.
Cullo filed a Comment/Opposition26 to respondent's Motion for Reconsideration. Again, Cullo admitted that the case was not
initiated by the IHEU-NFL, to wit:
The case was initiated by complainants by filling up Revised Form No. 1 of the NCMB duly furnishing respondent, copy of
which is hereto attached as Annex "A" for reference and consideration of the Honorable Voluntary Arbitrator. There is no
mention there of Insular Hotel Employees Union, but only National Federation of Labor (NFL). The one appearing at the
Submission Agreement was only a matter of filling up the blanks particularly on the question there of Union; which was filled
up with Insular Hotel Employees Union-NFL. There is nothing there that indicates that it is a complainant as the case is
initiated by the individual workers and National Federation of Labor, not by the local union. The local union was not included as
party-complainant considering that it was a party to the assailed MOA. 27
On March 18, 2003, AVA Olvida issued a Resolution28 denying respondent's Motion for Reconsideration. He, however, ruled
that respondent was correct when it raised its objection to NFL as proper party-complainant, thus:
Anent to the real complainant in this instant voluntary arbitration case, the respondent is correct when it raised objection to the
National Federation of Labor (NFL) and as proper party-complainants.
The proper party-complainant is INSULAR HOTEL EMPLOYEES UNION-NFL, the recognized and incumbent bargaining
agent of the rank-and-file employees of the respondent hotel. In the submission agreement of the parties dated August 29,
2002, the party complainant written is INSULAR HOTEL EMPLOYEES UNION-NFL and not the NATIONAL FEDERATION OF
LABOR and 79 other members.
However, since the NFL is the mother federation of the local union, and signatory to the existing CBA, it can represent the
union, the officers, the members or union and officers or members, as the case may be, in all stages of proceedings in courts
or administrative bodies provided that the issue of the case will involve labor-management relationship like in the case at bar.
The dispositive portion of the March 18, 2003 Resolution of AVA Olvida reads:
WHEREFORE, premises considered, the motion for reconsideration filed by respondent is DENIED. The resolution dated
November 11, 2002 is modified in so far as the party-complainant is concerned; thus, instead of "National Federation of Labor
and 79 individual employees, union members," shall be "Insular Hotel Employees Union-NFL et. al., as stated in the joint

338
submission agreement dated August 29, 2002. Respondent is directed to comply with the decision of this Arbitrator dated
November 11, 2002,
No further motion of the same nature shall be entertained.29
On May 9, 2003, respondent filed its Position Paper Ad Cautelam, 30 where it declared, among others, that the same was
without prejudice to its earlier objections against the jurisdiction of the NCMB and AVA Olvida and the standing of the persons
who filed the notice of mediation.
Cullo, now using the caption "Insular Hotel Employees Union-NFL, Complainant," filed a Comment31 dated June 5, 2003. On
June 23, 2003, respondent filed its Reply.32
Later, respondent filed a Motion for Inhibition33 alleging AVA Olvida's bias and prejudice towards the cause of the employees.
In an Order34 dated July 25, 2003, AVA Olvida voluntarily inhibited himself out of "delicadeza" and ordered the remand of the
case to the NCMB.
On August 12, 2003, the NCMB issued a Notice requiring the parties to appear before the conciliator for the selection of a new
voluntary arbitrator.
In a letter35 dated August 19, 2003 addressed to the NCMB, respondent reiterated its position that the individual union
members have no standing to file the notice of mediation before the NCMB. Respondent stressed that the complaint should
have been filed by the Union.
On September 12, 2003, the NCMB sent both parties a Notice36 asking them to appear before it for the selection of the new
voluntary arbitrator. Respondent, however, maintained its stand that the NCMB had no jurisdiction over the case.
Consequently, at the instance of Cullo, the NCMB approved ex parte the selection of AVA Montejo as the new voluntary
arbitrator.
On April 5, 2004, AVA Montejo rendered a Decision37 ruling in favor of Cullo, the dispositive portion of which reads:
WHEREOF, in view of the all the foregoing, judgment is hereby rendered:
1. Declaring the Memorandum of Agreement in question as invalid as it is contrary to law and public policy;
2. Declaring that there is a diminution of the wages and other benefits of the Union members and officers under the
said invalid MOA.
3. Ordering respondent management to immediately reinstate the workers wage rates and other benefits that they
were receiving and enjoying before the signing of the invalid MOA;
4. Ordering the management respondent to pay attorneys fees in an amount equivalent to ten percent (10%) of
whatever total amount that the workers union may receive representing individual wage differentials.
As to the other claims of the Union regarding diminution of other benefits, this accredited voluntary arbitrator is of the opinion
that she has no authority to entertain, particularly as to the computation thereof.
SO ORDERED.38
Both parties appealed the Decision of AVA Montejo to the CA. Cullo only assailed the Decision in so far as it did not
categorically order respondent to pay the covered workers their differentials in wages reckoned from the effectivity of the MOA
up to the actual reinstatement of the reduced wages and benefits. Cullos' petition was docketed as CA-G.R. SP No. 83831.
Respondent, for its part, questioned among others the jurisdiction of the NCMB. Respondent maintained that the MOA it had
entered into with the officers of the Union was valid. Respondent's petition was docketed as CA-G.R. SP No. 83657. Both
cases were consolidated by the CA.
On October 11, 2005, the CA rendered a Decision39 ruling in favor of respondent, the dispositive portion of which reads:
WHEREFORE, premises considered, the petition for review in CA-G.R. SP No. 83657 is hereby GRANTED, while the petition
in CA-G.R. SP No. 83831 is DENIED. Consequently, the assailed Decision dated April 5, 2004 rendered by AVA Rosalina L.
Montejo is hereby REVERSED and a new one entered declaring the Memorandum of Agreement dated May 8, 2001 VALID
and ENFORCEABLE. Parties are DIRECTED to comply with the terms and conditions thereof.
SO ORDERED.40
Aggrieved, Cullo filed a Motion for Reconsideration, which was, however, denied by the CA in a Resolution 41dated July 13,
2006.
Hence, herein petition, with Cullo raising the following issues for this Court's resolution, to wit:
I.
WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERRORS IN FINDING THAT THE
ACCREDITED VOLUNTARY ARBITRATOR HAS NO JURISDICTION OVER THE CASE SIMPLY BECAUSE THE NOTICE
OF MEDIATION DOES NOT MENTION THE NAME OF THE LOCAL UNION BUT ONLY THE AFFILIATE FEDERATION
THEREBY DISREGARDING THE SUBMISSION AGREEMENT DULY SIGNED BY THE PARTIES AND THEIR LEGAL
COUNSELS THAT MENTIONS THE NAME OF THE LOCAL UNION.
II.
WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR BY DISREGARDING
THE PROVISIONS OF THE CBA SIMPLY BECAUSE IT BELIEVED THE UNPROVEN ALLEGATIONS OF RESPONDENT
HOTEL THAT IT WAS SUFFERING FROM FINANCIAL CRISIS.
III.
339
THE HONORABLE COURT OF APPEALS MUST HAVE SERIOUSLY ERRED IN CONCLUDING THAT ARTICLE 100 OF
THE LABOR CODE APPLIES ONLY TO BENEFITS ENJOYED PRIOR TO THE ADOPTION OF THE LABOR CODE WHICH,
IN EFFECT, ALLOWS THE DIMINUTION OF THE BENEFITS ENJOYED BY EMPLOYEES FROM ITS ADOPTION
HENCEFORTH.42
The petition is not meritorious.
Anent the first error raised, Cullo argues that the CA erred when it overlooked the fact that before the case was submitted to
voluntary arbitration, the parties signed a Submission Agreement which mentioned the name of the local union and not only
NFL. Cullo, thus, contends that the CA committed error when it ruled that the voluntary arbitrator had no jurisdiction over the
case simply because the Notice of Mediation did not state the name of the local union thereby disregarding the Submission
Agreement which states the names of local union as Insular Hotel Employees Union-NFL.43
In its Memorandum,44 respondent maintains its position that the NCMB and Voluntary Arbitrators had no jurisdiction over the
complaint. Respondent, however, now also contends that IHEU-NFL is a non-entity since it is DIHFEU-NFL which is
considered by the DOLE as the only registered union in Waterfront Davao. 45 Respondent argues that the Submission
Agreement does not name the local union DIHFEU-NFL and that it had timely withdrawn its consent to arbitrate by filing a
motion to withdraw.
A review of the development of the case shows that there has been much confusion as to the identity of the party which filed
the case against respondent. In the Notice of Mediation46 filed before the NCMB, it stated that the union involved was
"DARIUS JOVES/DEBBIE PLANAS ET. AL., National Federation of Labor." In the Submission Agreement,47 however, it stated
that the union involved was "INSULAR HOTEL EMPLOYEES UNION-NFL."
Furthermore, a perusal of the records would reveal that after signing the Submission Agreement, respondent persistently
questioned the authority and standing of the individual employees to file the complaint. Cullo then clarified in subsequent
documents captioned as "National Federation of Labor and 79 Individual Employees, Union Members, Complainants" that the
individual complainants are not representing the union, but filing the complaint through their appointed attorneys-in-fact.48 AVA
Olvida, however, in a Resolution dated March 18, 2003, agreed with respondent that the proper party-complainant should be
INSULAR HOTEL EMPLOYEES UNION-NFL, to wit:
x x x In the submission agreement of the parties dated August 29, 2002, the party complainant written is INSULAR HOTEL
EMPLOYEES UNION-NFL and not the NATIONAL FEDERATION OF LABOR and 79 other members. 49
The dispositive portion of the Resolution dated March 18, 2003 of AVA Olvida reads:
WHEREFORE, premises considered, the motion for reconsideration filed by respondent is DENIED. The resolution dated
November 11, 2002, is modified in so far as the party complainant is concerned, thus, instead of "National Federation of Labor
and 79 individual employees, union members," shall be "Insular Hotel Employees Union-NFL et. al., as stated in the joint
submission agreement dated August 29, 2002. Respondent is directed to comply with the decision of this Arbitrator dated
November 11, 2002.50
After the March 18, 2003 Resolution of AVA Olvida, Cullo adopted "Insular Hotel Employees Union-NFL et. al., Complainant"
as the caption in all his subsequent pleadings. Respondent, however, was still adamant that neither Cullo nor the individual
employees had authority to file the case in behalf of the Union.
While it is undisputed that a submission agreement was signed by respondent and "IHEU-NFL," then represented by Joves
and Cullo, this Court finds that there are two circumstances which affect its validity: first, the Notice of Mediation was filed by a
party who had no authority to do so; second, that respondent had persistently voiced out its objection questioning the authority
of Joves, Cullo and the individual members of the Union to file the complaint before the NCMB.
Procedurally, the first step to submit a case for mediation is to file a notice of preventive mediation with the NCMB. It is only
after this step that a submission agreement may be entered into by the parties concerned.
Section 3, Rule IV of the NCMB Manual of Procedure provides who may file a notice of preventive mediation, to wit:
Who may file a notice or declare a strike or lockout or request preventive mediation. -
Any certified or duly recognized bargaining representative may file a notice or declare a strike or request for
preventive mediation in cases of bargaining deadlocks and unfair labor practices. The employer may file a notice or
declare a lockout or request for preventive mediation in the same cases. In the absence of a certified or duly recognized
bargaining representative, any legitimate labor organization in the establishment may file a notice, request preventive
mediation or declare a strike, but only on grounds of unfair labor practice.
From the foregoing, it is clear that only a certified or duly recognized bargaining agent may file a notice or request for
preventive mediation. It is curious that even Cullo himself admitted, in a number of pleadings, that the case was filed not by the
Union but by individual members thereof. Clearly, therefore, the NCMB had no jurisdiction to entertain the notice filed before it.
Even though respondent signed a Submission Agreement, it had, however, immediately manifested its desire to withdraw from
the proceedings after it became apparent that the Union had no part in the complaint. As a matter of fact, only four days had
lapsed after the signing of the Submission Agreement when respondent called the attention of AVA Olvida in a "Manifestation
with Motion for a Second Preliminary Conference"51 that the persons who filed the instant complaint in the name of Insular
Hotel Employees Union-NFL had no authority to represent the Union. Respondent cannot be estopped in raising the

340
jurisdictional issue, because it is basic that the issue of jurisdiction may be raised at any stage of the proceedings, even on
appeal, and is not lost by waiver or by estoppel.
In Figueroa v. People,52 this Court explained that estoppel is the exception rather than the rule, to wit:
Applying the said doctrine to the instant case, the petitioner is in no way estopped by laches in assailing the jurisdiction of the
RTC, considering that he raised the lack thereof in his appeal before the appellate court. At that time, no considerable period
had yet elapsed for laches to attach. True, delay alone, though unreasonable, will not sustain the defense of "estoppel by
laches" unless it further appears that the party, knowing his rights, has not sought to enforce them until the condition of the
party pleading laches has in good faith become so changed that he cannot be restored to his former state, if the rights be then
enforced, due to loss of evidence, change of title, intervention of equities, and other causes. In applying the principle of
estoppel by laches in the exceptional case of Sibonghanoy, the Court therein considered the patent and revolting inequity and
unfairness of having the judgment creditors go up their Calvary once more after more or less 15 years.The same, however,
does not obtain in the instant case.
We note at this point that estoppel, being in the nature of a forfeiture, is not favored by law. It is to be applied rarelyonly from
necessity, and only in extraordinary circumstances. The doctrine must be applied with great care and the equity must be
strong in its favor.When misapplied, the doctrine of estoppel may be a most effective weapon for the accomplishment of
injustice. x x x (Italics supplied.)53
The question to be resolved then is, do the individual members of the Union have the requisite standing to question the MOA
before the NCMB? On this note, Tabigue v. International Copra Export Corporation (INTERCO)54 is instructive:
Respecting petitioners thesis that unsettled grievances should be referred to voluntary arbitration as called for in the CBA, the
same does not lie.The pertinent portion of the CBA reads:
In case of any dispute arising from the interpretation or implementation of this Agreement or any matter affecting the relations
of Labor and Management, the UNION and the COMPANY agree to exhaust all possibilities of conciliation through the
grievance machinery. The committee shall resolve all problems submitted to it within fifteen (15) days after the problems
ha[ve] been discussed by the members. If the dispute or grievance cannot be settled by the Committee, or if the committee
failed to act on the matter within the period of fifteen (15) days herein stipulated, the UNION and the COMPANY agree to
submit the issue to Voluntary Arbitration. Selection of the arbitrator shall be made within seven (7) days from the date of
notification by the aggrieved party. The Arbitrator shall be selected by lottery from four (4) qualified individuals nominated by in
equal numbers by both parties taken from the list of Arbitrators prepared by the National Conciliation and Mediation Board
(NCMB). If the Company and the Union representatives within ten (10) days fail to agree on the Arbitrator, the NCMB shall
name the Arbitrator. The decision of the Arbitrator shall be final and binding upon the parties. However, the Arbitrator shall not
have the authority to change any provisions of the Agreement.The cost of arbitration shall be borne equally by the parties.
Petitioners have not, however, been duly authorized to represent the union. Apropos is this Courts pronouncement in Atlas
Farms, Inc. v. National Labor Relations Commission, viz:
x x x Pursuant to Article 260 of the Labor Code, the parties to a CBA shall name or designate their respective representatives
to the grievance machinery and if the grievance is unsettled in that level, it shall automatically be referred to the voluntary
arbitrators designated in advance by parties to a CBA. Consequently, only disputes involving the union and the company shall
be referred to the grievance machinery or voluntary arbitrators. (Emphasis and underscoring supplied.)55
If the individual members of the Union have no authority to file the case, does the federation to which the local union is
affiliated have the standing to do so? On this note, Coastal Subic Bay Terminal, Inc. v. Department of Labor and
Employment56 is enlightening, thus:
x x x A local union does not owe its existence to the federation with which it is affiliated. It is a separate and distinct voluntary
association owing its creation to the will of its members. Mere affiliation does not divest the local union of its own
personality, neither does it give the mother federation the license to act independently of the local union. It only gives
rise to a contract of agency, where the former acts in representation of the latter. Hence, local unions are considered principals
while the federation is deemed to be merely their agent. x x x 57
Based on the foregoing, this Court agrees with approval with the disquisition of the CA when it ruled that NFL had no authority
to file the complaint in behalf of the individual employees, to wit:
Anent the first issue, We hold that the voluntary arbitrator had no jurisdiction over the case. Waterfront contents that the Notice
of Mediation does not mention the name of the Union but merely referred to the National Federation of Labor (NFL) with which
the Union is affiliated. In the subsequent pleadings, NFL's legal counsel even confirmed that the case was not filed by the
union but by NFL and the individual employees named in the SPAs which were not even dated nor notarized.
Even granting that petitioner Union was affiliated with NFL, still the relationship between that of the local union and the labor
federation or national union with which the former was affiliated is generally understood to be that of agency, where the local is
the principal and the federation the agency. Being merely an agent of the local union, NFL should have presented its authority
to file the Notice of Mediation. While We commend NFL's zealousness in protecting the rights of lowly workers, We cannot,
however, allow it to go beyond what it is empowered to do.
As provided under the NCMB Manual of Procedures, only a certified or duly recognized bargaining representative and an
employer may file a notice of mediation, declare a strike or lockout or request preventive mediation. The Collective Bargaining
341
Agreement (CBA), on the other, recognizes that DIHFEU-NFL is the exclusive bargaining representative of all permanent
employees. The inclusion of the word "NFL" after the name of the local union merely stresses that the local union is NFL's
affiliate. It does not, however, mean that the local union cannot stand on its own. The local union owes its creation and
continued existence to the will of its members and not to the federation to which it belongs. The spring cannot rise higher than
its source, so to speak.58
In its Memorandum, respondent contends that IHEU-NFL is a non-entity and that DIHFEU-NFL is the only recognized
bargaining unit in their establishment. While the resolution of the said argument is already moot and academic given the
discussion above, this Court shall address the same nevertheless.
While the November 16, 2006 Certification59 of the DOLE clearly states that "IHEU-NFL" is not a registered labor organization,
this Court finds that respondent is estopped from questioning the same as it did not raise the said issue in the proceedings
before the NCMB and the Voluntary Arbitrators. A perusal of the records reveals that the main theory posed by respondent
was whether or not the individual employees had the authority to file the complaint notwithstanding the apparent non-
participation of the union. Respondent never put in issue the fact that DIHFEU-NFL was not the same as IHEU-NFL.
Consequently, it is already too late in the day to assert the same.
Anent the second issue raised by Cullo, the same is again without merit.
Cullo contends that respondent was not really suffering from serious losses as found by the CA. Cullo anchors his position on
the denial by the Wage Board of respondent's petition for exemption from Wage Order No. RTWPB-X1-08 on the ground that it
is a distressed establishment.60 In said denial, the Board ruled:
A careful analysis of applicant's audited financial statements showed that during the period ending December 31, 1999, it
registered retained earnings amounting to P8,661,260.00. Applicant's interim financial statements for the quarter ending
June 30, 2000 cannot be considered, as the same was not audited. Accordingly, this Board finds that applicant is not
qualified for exemption as a distressed establishment pursuant to the aforecited criteria. 61
In its Decision, the CA held that upholding the validity of the MOA would mean the continuance of the hotel's operation and
financial viability, to wit:
x x x We cannot close Our eyes to the impending financial distress that an employer may suffer should the terms of
employment under the said CBA continue.
If indeed We are to tilt the balance of justice to labor, then We would be inclined to favor for the nonce petitioner Waterfront.
To uphold the validity of the MOA would mean the continuance of the hotel's operation and financial viability. Otherwise, the
eventual permanent closure of the hotel would only result to prejudice of the employees, as a consequence thereof, will
necessarily lose their jobs.62
In its petition before the CA, respondent submitted its audited financial statements 63 which show that for the years 1998, 1999,
until September 30, 2000, its total operating losses amounted to P48,409,385.00. Based on the foregoing, the CA was not
without basis when it declared that respondent was suffering from impending financial distress. While the Wage Board denied
respondent's petition for exemption, this Court notes that the denial was partly due to the fact that the June 2000 financial
statements then submitted by respondent were not audited. Cullo did not question nor discredit the accuracy and authenticity
of respondent's audited financial statements. This Court, therefore, has no reason to question the veracity of the contents
thereof. Moreover, it bears to point out that respondent's audited financial statements covering the years 2001 to 2005 show
that it still continues to suffer losses.64
Finally, anent the last issue raised by Cullo, the same is without merit.
Cullo argues that the CA must have erred in concluding that Article 100 of the Labor Code applies only to benefits already
enjoyed at the time of the promulgation of the Labor Code.
Article 100 of the Labor Code provides:
PROHIBITION AGAINST ELIMINATION OR DIMINUTION OF BENEFITS- Nothing in this Book shall be construed to eliminate
or in any way diminish supplements, or other employee benefits being enjoyed at the time of the promulgation of this Code.
On this note, Apex Mining Company, Inc. v. NLRC65 is instructive, to wit:
Clearly, the prohibition against elimination or diminution of benefits set out in Article 100 of the Labor Code is specifically
concerned with benefits already enjoyed at the time of the promulgation of the Labor Code. Article 100 does not, in other
words, purport to apply to situations arising after the promulgation date of the Labor Code x x x. 66
Even assuming arguendo that Article 100 applies to the case at bar, this Court agrees with respondent that the same does not
prohibit a union from offering and agreeing to reduce wages and benefits of the employees. In Rivera v. Espiritu,67 this Court
ruled that the right to free collective bargaining, after all, includes the right to suspend it, thus:
A CBA is "a contract executed upon request of either the employer or the exclusive bargaining representative incorporating the
agreement reached after negotiations with respect to wages, hours of work and all other terms and conditions of employment,
including proposals for adjusting any grievances or questions arising under such agreement." The primary purpose of a CBA is
the stabilization of labor-management relations in order to create a climate of a sound and stable industrial peace. In
construing a CBA, the courts must be practical and realistic and give due consideration to the context in which it is negotiated
and the purpose which it is intended to serve.

342
The assailed PAL-PALEA agreement was the result of voluntary collective bargaining negotiations undertaken in the
light of the severe financial situation faced by the employer, with the peculiar and unique intention of not merely
promoting industrial peace at PAL, but preventing the latters closure. We find no conflict between said agreement and
Article 253-A of the Labor Code. Article 253-A has a two-fold purpose. One is to promote industrial stability and predictability.
Inasmuch as the agreement sought to promote industrial peace at PAL during its rehabilitation, said agreement satisfies the
first purpose of Article 253-A.1awphi1 The other is to assign specific timetables wherein negotiations become a matter of right
and requirement. Nothing in Article 253-A, prohibits the parties from waiving or suspending the mandatory timetables and
agreeing on the remedies to enforce the same.
In the instant case, it was PALEA, as the exclusive bargaining agent of PALs ground employees, that voluntarily entered into
the CBA with PAL. It was also PALEA that voluntarily opted for the 10-year suspension of the CBA. Either case was the
unions exercise of its right to collective bargaining. The right to free collective bargaining, after all, includes the right to
suspend it.68
Lastly, this Court is not unmindful of the fact that DIHFEU-NFL's Constitution and By-Laws specifically provides that "the
results of the collective bargaining negotiations shall be subject to ratification and approval by majority vote of the Union
members at a meeting convened, or by plebiscite held for such special purpose."69 Accordingly, it is undisputed that the MOA
was not subject to ratification by the general membership of the Union. The question to be resolved then is, does the non-
ratification of the MOA in accordance with the Union's constitution prove fatal to the validity thereof?
It must be remembered that after the MOA was signed, the members of the Union individually signed contracts denominated
as "Reconfirmation of Employment."70 Cullo did not dispute the fact that of the 87 members of the Union, who signed and
accepted the "Reconfirmation of Employment," 71 are the respondent employees in the case at bar. Moreover, it bears to
stress that all the employees were assisted by Rojas, DIHFEU-NFL's president, who even co-signed each contract.
Stipulated in each Reconfirmation of Employment were the new salary and benefits scheme. In addition, it bears to stress that
specific provisions of the new contract also made reference to the MOA. Thus, the individual members of the union cannot
feign knowledge of the execution of the MOA. Each contract was freely entered into and there is no indication that the same
was attended by fraud, misrepresentation or duress. To this Court's mind, the signing of the individual "Reconfirmation of
Employment" should, therefore, be deemed an implied ratification by the Union members of the MOA.
In Planters Products, Inc. v. NLRC,71 this Court refrained from declaring a CBA invalid notwithstanding that the same was not
ratified in view of the fact that the employees had enjoyed benefits under it, thus:
Under Article 231 of the Labor Code and Sec. 1, Rule IX, Book V of the Implementing Rules, the parties to a collective
[bargaining] agreement are required to furnish copies of the appropriate Regional Office with accompanying proof of
ratification by the majority of all the workers in a bargaining unit. This was not done in the case at bar. But we do not declare
the 1984-1987 CBA invalid or void considering that the employees have enjoyed benefits from it. They cannot receive benefits
under provisions favorable to them and later insist that the CBA is void simply because other provisions turn out not to the
liking of certain employees. x x x. Moreover, the two CBAs prior to the 1984-1987 CBA were not also formally ratified, yet the
employees are basing their present claims on these CBAs. It is iniquitous to receive benefits from a CBA and later on
disclaim its validity.72
Applied to the case at bar, while the terms of the MOA undoubtedly reduced the salaries and certain benefits previously
enjoyed by the members of the Union, it cannot escape this Court's attention that it was the execution of the MOA which paved
the way for the re-opening of the hotel, notwithstanding its financial distress. More importantly, the execution of the MOA
allowed respondents to keep their jobs. It would certainly be iniquitous for the members of the Union to sign new contracts
prompting the re-opening of the hotel only to later on renege on their agreement on the fact of the non-ratification of the MOA.
In addition, it bears to point out that Rojas did not act unilaterally when he negotiated with respondent's management. The
Constitution and By-Laws of DIHFEU-NFL clearly provide that the president is authorized to represent the union on all
occasions and in all matters in which representation of the union may be agreed or required. 73 Furthermore, Rojas was
properly authorized under a Board of Directors Resolution74 to negotiate with respondent, the pertinent portions of which read:
SECRETARY's CERTIFICATE
I, MA. SOCORRO LISETTE B. IBARRA, x x x, do hereby certify that, at a meeting of the Board of Directors of the DIHFEU-
NFL, on 28 Feb. 2001 with a quorum duly constituted, the following resolutions were unanimously approved:
RESOLVED, as it is hereby resolved that the Manifesto dated 25 Feb. 2001 be approved ratified and adopted;
RESOLVED, FURTHER, that Mr. Domy R. Rojas, the president of the DIHFEU-NFL, be hereby authorized to negotiate
with Waterfront Insular Hotel Davao and to work for the latter's acceptance of the proposals contained in DIHFEU-NFL
Manifesto; and
RESOLVED, FINALLY, that Mr. Domy R. Rojas is hereby authorized to sign any and all documents to implement, and
carry into effect, his foregoing authority.75
Withal, while the scales of justice usually tilt in favor of labor, the peculiar circumstances herein prevent this Court from
applying the same in the instant petition. Even if our laws endeavor to give life to the constitutional policy on social justice and
on the protection of labor, it does not mean that every labor dispute will be decided in favor of the workers. The law also
recognizes that management has rights which are also entitled to respect and enforcement in the interest of fair play. 76
343
WHEREFORE, premises considered, the petition is DENIED. The Decision dated October 11, 2005, and the Resolution dated
July 13, 2006 of the Court of Appeals in consolidated labor cases docketed as CA-G.R. SP No. 83831 and CA-G.R. SP No.
83657, are AFFIRMED.
SO ORDERED.

G.R. No. 188949 July 26, 2010

CENTRAL AZUCARERA DE TARLAC, Petitioner,
vs.
CENTRAL AZUCARERA DE TARLAC LABOR UNION-NLU, Respondent.
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Decision1dated May 28,
2009, and the Resolution2 dated July 28, 2009 of the Court of Appeals (CA) in CA-G.R. SP No. 106657.
The factual antecedents of the case are as follows:
Petitioner is a domestic corporation engaged in the business of sugar manufacturing, while respondent is a legitimate labor
organization which serves as the exclusive bargaining representative of petitioners rank-and-file employees. The controversy
stems from the interpretation of the term "basic pay," essential in the computation of the 13th-month pay.
The facts of this case are not in dispute. In compliance with Presidential Decree (P.D.) No. 851, petitioner granted its
employees the mandatory thirteenth (13th) - month pay since 1975. The formula used by petitioner in computing the 13th-
month pay was: Total Basic Annual Salary divided by twelve (12). Included in petitioners computation of the Total Basic
Annual Salary were the following: basic monthly salary; first eight (8) hours overtime pay on Sunday and legal/special holiday;
night premium pay; and vacation and sick leaves for each year. Throughout the years, petitioner used this computation until
2006.3
On November 6, 2004, respondent staged a strike. During the pendency of the strike, petitioner declared a temporary
cessation of operations. In December 2005, all the striking union members were allowed to return to work. Subsequently,
petitioner declared another temporary cessation of operations for the months of April and May 2006. The suspension of
operation was lifted on June 2006, but the rank-and-file employees were allowed to report for work on a fifteen (15) day-per-
month rotation basis that lasted until September 2006. In December 2006, petitioner gave the employees their 13th-month pay
based on the employees total earnings during the year divided by 12.4
Respondent objected to this computation. It averred that petitioner did not adhere to the usual computation of the 13th-month
pay. It claimed that the divisor should have been eight (8) instead of 12, because the employees worked for only 8 months in
2006. It likewise asserted that petitioner did not observe the company practice of giving its employees the guaranteed amount
equivalent to their one month pay, in instances where the computed 13th-month pay was less than their basic monthly pay.5
Petitioner and respondent tried to thresh out their differences in accordance with the grievance procedure as provided in their
collective bargaining agreement. During the grievance meeting, the representative of petitioner explained that the change in
the computation of the 13th-month pay was intended to rectify an error in the computation, particularly the concept of basic
pay which should have included only the basic monthly pay of the employees. 6
For failure of the parties to arrive at a settlement, respondent applied for preventive mediation before the National Conciliation
and Mediation Board. However, despite four (4) conciliatory meetings, the parties still failed to settle the dispute. On March 29,
2007, respondent filed a complaint against petitioner for money claims based on the alleged diminution of benefits/erroneous
computation of 13th-month pay before the Regional Arbitration Branch of the National Labor Relations Commission (NLRC).7
On October 31, 2007, the Labor Arbiter rendered a Decision8 dismissing the complaint and declaring that the petitioner had
the right to rectify the error in the computation of the 13th-month pay of its employees.9 The fallo of the Decision reads:
WHEREFORE, premises considered, the complaint filed by the complainants against the respondents should be DISMISSED
with prejudice for utter lack of merit.
SO ORDERED.10
Respondents filed an appeal. On August 14, 2008, the NLRC rendered a Decision 11 reversing the Labor Arbiter. The
dispositive portion of the Decision reads:
WHEREFORE, the decision appealed is reversed and set aside and respondent-appellee Central Azucarera de Tarlac is
hereby ordered to adhere to its established practice of granting 13th[-] month pay on the basis of gross annual basic which
includes basic pay, premium pay for work in rest days and special holidays, night shift differential and paid vacation and sick
leaves for each year.
Additionally, respondent-appellee is ordered to observe the guaranteed one[-]month pay by way of 13th month pay.
SO ORDERED. 12
Petitioner filed a motion for reconsideration. However, the same was denied in a Resolution dated November 27, 2008.
Petitioner then filed a petition for certiorari under Rule 65 of the Rules of Court before the CA. 13
On May 28, 2009, the CA rendered a Decision14 dismissing the petition, and affirming the decision and resolution of the NLRC,
viz.:
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WHEREFORE, the foregoing considered, the petition is hereby DISMISSED and the assailed August 14, 2008 Decision and
November 27, 2008 Resolution of the NLRC, are hereby AFFIRMED. No costs.
SO ORDERED.15
Aggrieved, petitioner filed the instant petition, alleging that the CA committed a reversible error in affirming the Decision of the
NLRC, and praying that the Decision of the Labor Arbiter be reinstated.
The petition is denied for lack of merit.
The 13th-month pay mandated by Presidential Decree (P.D.) No. 851 represents an additional income based on wage but not
part of the wage. It is equivalent to one-twelfth (1/12) of the total basic salary earned by an employee within a calendar year.
All rank-and-file employees, regardless of their designation or employment status and irrespective of the method by which their
wages are paid, are entitled to this benefit, provided that they have worked for at least one month during the calendar year. If
the employee worked for only a portion of the year, the 13th-month pay is computed pro rata.16
Petitioner argues that there was an error in the computation of the 13th-month pay of its employees as a result of its mistake in
implementing P.D. No. 851, an error that was discovered by the management only when respondent raised a question
concerning the computation of the employees
13th-month pay for 2006. Admittedly, it was an error that was repeatedly committed for almost thirty (30) years. Petitioner
insists that the length of time during which an employer has performed a certain act beneficial to the employees, does not
prove that such an act was not done in error. It maintains that for the claim of mistake to be negated, there must be a clear
showing that the employer had freely, voluntarily, and continuously performed the act, knowing that he is under no obligation
to do so. Petitioner asserts that such voluntariness was absent in this case. 17
The Rules and Regulations Implementing P.D. No. 851, promulgated on December 22, 1975, defines 13th-month pay and
basic salary as follows:
Sec. 2. Definition of certain terms. - As used in this issuance:
(a) "Thirteenth-month pay" shall mean one twelfth (1/12) of the basic salary of an employee within a calendar year;
(b) "Basic salary" shall include all remunerations or earnings paid by an employer to an employee for services
rendered but may not include cost-of-living allowances granted pursuant to Presidential Decree No. 525 or Letter of
Instructions No. 174, profit-sharing payments, and all allowances and monetary benefits which are not considered or
integrated as part of the regular or basic salary of the employee at the time of the promulgation of the Decree on
December 16, 1975.
On January 16, 1976, the Supplementary Rules and Regulations Implementing P.D. No. 851 was issued. The Supplementary
Rules clarifies that overtime pay, earnings, and other remuneration that are not part of the basic salary shall not be included in
the computation of the 13th-month pay.
On November 16, 1987, the Revised Guidelines on the Implementation of the 13th-Month Pay Law was issued. Significantly,
under this Revised Guidelines, it was specifically stated that the minimum 13th-month pay required by law shall not be less
than one-twelfth (1/12) of the total basic salary earned by an employee within a calendar year.1avvphi1
Furthermore, the term "basic salary" of an employee for the purpose of computing the 13th-month pay was interpreted to
include all remuneration or earnings paid by the employer for services rendered, but does not include allowances and
monetary benefits which are not integrated as part of the regular or basic salary, such as the cash equivalent of unused
vacation and sick leave credits, overtime, premium, night differential and holiday pay, and cost-of-living allowances. However,
these salary-related benefits should be included as part of the basic salary in the computation of the 13th-month pay if, by
individual or collective agreement, company practice or policy, the same are treated as part of the basic salary of the
employees.
Based on the foregoing, it is clear that there could have no erroneous interpretation or application of what is included in the
term "basic salary" for purposes of computing the 13th-month pay of employees. From the inception of P.D. No. 851 on
December 16, 1975, clear-cut administrative guidelines have been issued to insure uniformity in the interpretation, application,
and enforcement of the provisions of P.D. No. 851 and its implementing regulations.
As correctly ruled by the CA, the practice of petitioner in giving 13th-month pay based on the employees gross annual
earnings which included the basic monthly salary, premium pay for work on rest days and special holidays, night shift
differential pay and holiday pay continued for almost thirty (30) years and has ripened into a company policy or practice which
cannot be unilaterally withdrawn.
Article 100 of the Labor Code, otherwise known as the Non-Diminution Rule, mandates that benefits given to employees
cannot be taken back or reduced unilaterally by the employer because the benefit has become part of the employment
contract, written or unwritten. 18 The rule against diminution of benefits applies if it is shown that the grant of the benefit is
based on an express policy or has ripened into a practice over a long period of time and that the practice is consistent and
deliberate. Nevertheless, the rule will not apply if the practice is due to error in the construction or application of a doubtful or
difficult question of law. But even in cases of error, it should be shown that the correction is done soon after discovery of the
error.19
The argument of petitioner that the grant of the benefit was not voluntary and was due to error in the interpretation of what is
included in the basic salary deserves scant consideration. No doubtful or difficult question of law is involved in this case. The
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guidelines set by the law are not difficult to decipher. The voluntariness of the grant of the benefit was manifested by the
number of years the employer had paid the benefit to its employees. Petitioner only changed the formula in the computation of
the 13th-month pay after almost 30 years and only after the dispute between the management and employees erupted. This
act of petitioner in changing the formula at this time cannot be sanctioned, as it indicates a badge of bad faith.
Furthermore, petitioner cannot use the argument that it is suffering from financial losses to claim exemption from the coverage
of the law on 13th-month pay, or to spare it from its erroneous unilateral computation of the 13th-month pay of its employees.
Under Section 7 of the Rules and Regulations Implementing P.D. No. 851, distressed employers shall qualify for exemption
from the requirement of the Decree only upon prior authorization by the Secretary of Labor. 20 In this case, no such prior
authorization has been obtained by petitioner; thus, it is not entitled to claim such exemption.
WHEREFORE, the Decision dated May 28, 2009 and the Resolution dated July 28, 2009 of the Court of Appeals in CA-G.R.
SP No. 106657 are hereby AFFIRMED. Costs against petitioner.
SO ORDERED.

G.R. No. 185665 February 8, 2012

EASTERN TELECOMMUNICATIONS PHILIPPINES, INC., Petitioner,
vs.
EASTERN TELECOMS EMPLOYEES UNION, Respondent.
DECISION
MENDOZA, J.:
Before the Court is a petition for review on certiorari seeking modification of the June 25, 2008 Decision 1 of the Court of
Appeals (CA) and its December 12, 2008 Resolution,2 in CA-G.R. SP No. 91974, annulling the April 28, 2005 Resolution 3 of
the National Labor Relations Commission (NLRC) in NLRC-NCR-CC-000273-04 entitled "In the Matter of the Labor Dispute in
Eastern Telecommunications, Philippines, Inc."
The Facts
As synthesized by the NLRC, the facts of the case are as follows, viz:
Eastern Telecommunications Phils., Inc. (ETPI) is a corporation engaged in the business of providing telecommunications
facilities, particularly leasing international date lines or circuits, regular landlines, internet and data services, employing
approximately 400 employees.
Eastern Telecoms Employees Union (ETEU) is the certified exclusive bargaining agent of the companys rank and file
employees with a strong following of 147 regular members. It has an existing collecti[ve] bargaining agreement with the
company to expire in the year 2004 with a Side Agreement signed on September 3, 2001.
In essence, the labor dispute was a spin-off of the companys plan to defer payment of the 2003 14th, 15th and 16th month
bonuses sometime in April 2004. The companys main ground in postponing the payment of bonuses is due to allege
continuing deterioration of companys financial position which started in the year 2000. However, ETPI while postponing
payment of bonuses sometime in April 2004, such payment would also be subject to availability of funds.
Invoking the Side Agreement of the existing Collective Bargaining Agreement for the period 2001-2004 between ETPI and
ETEU which stated as follows:
"4. Employment Related Bonuses. The Company confirms that the 14th, 15th and 16th month bonuses (other than 13th month
pay) are granted."
The union strongly opposed the deferment in payment of the bonuses by filing a preventive mediation complaint with the
NCMB on July 3, 2003, the purpose of which complaint is to determine the date when the bonus should be paid.
In the conference held at the NCMB, ETPI reiterated its stand that payment of the bonuses would only be made in April 2004
to which date of payment, the union agreed. Thus, considering the agreement forged between the parties, the said agreement
was reduced to a Memorandum of Agreement. The union requested that the President of the company should be made a
signatory to the agreement, however, the latter refused to sign. In addition to such a refusal, the company made a sudden
turnaround in its position by declaring that they will no longer pay the bonuses until the issue is resolved through compulsory
arbitration.
The companys change in position was contained in a letter dated April 14, 2004 written to the union by Mr. Sonny Javier,
Vice-President for Human Resources and Administration, stating that "the deferred release of bonuses had been superseded
and voided due to the unions filing of the issue to the NCMB on July 18, 2003." He declared that "until the matter is resolved
in a compulsory arbitration, the company cannot and will not pay any bonuses to any and all union members."
Thus, on April 26, 2004, ETEU filed a Notice of Strike on the ground of unfair labor practice for failure of ETPI to pay the
bonuses in gross violation of the economic provision of the existing CBA.
On May 19, 2004, the Secretary of Labor and Employment, finding that the company is engaged in an industry considered vital
to the economy and any work disruption thereat will adversely affect not only its operation but also that of the other business
relying on its services, certified the labor dispute for compulsory arbitration pursuant to Article 263 (q) of the Labor Code as
amended.

346
Acting on the certified labor dispute, a hearing was called on July 16, 2004 wherein the parties have submitted that the issues
for resolution are (1) unfair labor practice and (2) the grant of 14th, 15th and 16th month bonuses for 2003, and 14th month
bonus for 2004. Thereafter, they were directed to submit their respective position papers and evidence in support thereof after
which submission, they agreed to have the case considered submitted for decision. 4
In its position paper,5 the Eastern Telecoms Employees Union (ETEU) claimed that Eastern Telecommunications Philippines,
Inc. (ETPI) had consistently and voluntarily been giving out 14th month bonus during the month of April, and 15th and 16th
month bonuses every December of each year (subject bonuses) to its employees from 1975 to 2002, even when it did not
realize any net profits. ETEU posited that by reason of its long and regular concession, the payment of these monetary
benefits had ripened into a company practice which could no longer be unilaterally withdrawn by ETPI. ETEU added that this
long-standing company practice had been expressly confirmed in the Side Agreements of the 1998-2001 and 2001-2004
Collective Bargaining Agreements (CBA)which provided for the continuous grant of these bonuses in no uncertain terms.
ETEU theorized that the grant of the subject bonuses is not only a company practice but also a contractual obligation of ETPI
to the union members.
ETEU contended that the unjustified and malicious refusal of the company to pay the subject bonuses was a clear violation of
the economic provision of the CBA and constitutes unfair labor practice (ULP). According to ETEU, such refusal was nothing
but a ploy to spite the union for bringing the matter of delay in the payment of the subject bonuses to the National Conciliation
and Mediation Board (NCMB). It prayed for the award of moral and exemplary damages as well as attorneys fees for the
unfair labor practice allegedly committed by the company.
On the other hand, ETPI in its position paper,6 questioned the authority of the NLRC to take cognizance of the case
contending that it had no jurisdiction over the issue which merely involved the interpretation of the economic provision of the
2001-2004 CBA Side Agreement. Nonetheless, it maintained that the complaint for nonpayment of 14th, 15th and 16th month
bonuses for 2003 and 14th month bonus for 2004 was bereft of any legal and factual basis. It averred that the subject bonuses
were not part of the legally demandable wage and the grant thereof to its employees was an act of pure gratuity and
generosity on its part, involving the exercise of management prerogative and always dependent on the financial performance
and realization of profits. It posited that it resorted to the discontinuance of payment of the bonuses due to the unabated huge
losses that the company had continuously experienced. It claimed that it had been suffering serious business losses since
2000 and to require the company to pay the subject bonuses during its dire financial straits would in effect penalize it for its
past generosity. It alleged that the non-payment of the subject bonuses was neither flagrant nor malicious and, hence, would
not amount to unfair labor practice.
Further, ETPI argued that the bonus provision in the 2001-2004 CBA Side Agreement was a mere affirmation that the
distribution of bonuses was discretionary to the company, premised and conditioned on the success of the business and
availability of cash. It submitted that said bonus provision partook of the nature of a "one-time" grant which the employees may
demand only during the year when the Side Agreement was executed and was never intended to cover the entire term of the
CBA. Finally, ETPI emphasized that even if it had an unconditional obligation to grant bonuses to its employees, the drastic
decline in its financial condition had already legally released it therefrom pursuant to Article 1267 of the Civil Code.
On April 28, 2005, the NLRC issued its Resolution dismissing ETEUs complaint and held that ETPI could not be forced to pay
the union members the 14th, 15th and 16th month bonuses for the year 2003 and the 14th month bonus for the year 2004
inasmuch as the payment of these additional benefits was basically a management prerogative, being an act of generosity and
munificence on the part of the company and contingent upon the realization of profits. The NLRC pronounced that ETPI may
not be obliged to pay these extra compensations in view of the substantial decline in its financial condition. Likewise, the
NLRC found that ETPI was not guilty of the ULP charge elaborating that no sufficient and substantial evidence was adduced to
attribute malice to the company for its refusal to pay the subject bonuses. The dispositive portion of the resolution reads:
WHEREFORE, premises considered, the instant complaint is hereby DISMISSED for lack of merit.
SO ORDERED.7
Respondent ETEU moved for reconsideration but the motion was denied by the NLRC in its Resolution dated August 31,
2005.
Aggrieved, ETEU filed a petition for certiorari8 before the CA ascribing grave abuse of discretion on the NLRC for disregarding
its evidence which allegedly would prove that the subject bonuses were part of the union members wages, salaries or
compensations. In addition, ETEU asserted that the NLRC committed grave abuse of discretion when it ruled that ETPI is not
contractually bound to give said bonuses to the union members.
In its assailed June 25, 2008 Decision, the CA declared that the Side Agreements of the 1998 and 2001 CBA created a
contractual obligation on ETPI to confer the subject bonuses to its employees without qualification or condition. It also found
that the grant of said bonuses has already ripened into a company practice and their denial would amount to diminution of the
employees benefits. It held that ETPI could not seek refuge under Article 1267 of the Civil Code because this provision would
apply only when the difficulty in fulfilling the contractual obligation was manifestly beyond the contemplation of the parties,
which was not the case therein. The CA, however, sustained the NLRC finding that the allegation of ULP was devoid of merit.
The dispositive portion of the questioned decision reads:

347
WHEREFORE, premises considered, the instant petition is GRANTED and the resolution of the National Labor Relations
Commission dated April 28, 2005 is hereby ANNULLED and SET ASIDE. Respondent Eastern Telecommunications
Philippines, Inc. is ordered to pay the members of petitioner their 14th, 15th and 16th month bonuses for the year 2003 and
14th month for the year 2004. The complaint for unfair labor practice against said respondent is DISMISSED.
SO ORDERED.9
ISSUES
Dissatisfied, ETPI now comes to this Court via Rule 45, raising the following errors allegedly committed by the CA, to wit:
I.
THE COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW WHEN IT ANNULLED AND SET ASIDE THE
R E S O L U T I O NS OF THE NLRC DISREGARDING THE WELL SETTLED RULE THAT A WRIT OF
CERTIORARI (UNDER RULE 65) ISSUES ONLY FOR CORRECTION OF ERRORS OF JURISDICTION OR
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION.
II.
THE COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW WHEN IT DISREGARDED THE RULE THAT
FINDINGS OF FACTS OF QUASI-JUDICIAL BODIES ARE ACCORDED FINALITY IF THEY ARE SUPPORTED
BY SUBSTANTIAL EVIDENCE CONSIDERING THAT THE CONCLUSIONS OF THE NLRC WERE BASED ON
SUBSTANTIAL AND OVERWHELMING EVIDENCE AND UNDISPUTED FACTS.
III.
IT WAS A GRAVE ERROR OF LAW FOR THE COURT OF APPEALS TO CONSIDER THAT THE BONUS GIVEN
BY EASTERN COMMUNICATIONS TO ITS EMPLOYEES IS NOT DEPENDENT ON THE REALIZATION OF
PROFITS.
IV.
THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW WHEN IT DISREGARDED THE
UNDISPUTED FACT THAT EASTERN COMMUNICATIONS IS SUFFERING FROM TREMENDOUS FINANCIAL
LOSSES, AND ORDERED EASTERN COMMUNICATIONS TO GRANT THE BONUSES REGARDLESS OF THE
FINANCIAL DISTRESS OF EASTERN COMMUNICATIONS.
V.
THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW WHEN IT ARRIVED AT THE CONCLUSION
THAT THE GRANT OF BONUS GIVEN BY EASTERN COMMUNICATIONS TO ITS EMPLOYEES HAS RIPENED
INTO A COMPANY PRACTICE.10
A careful perusal of the voluminous pleadings filed by the parties leads the Court to conclude that this case revolves around
the following core issues:
1. Whether or not petitioner ETPI is liable to pay 14th, 15th and 16th month bonuses for the year 2003 and 14th
month bonus for the year 2004 to the members of respondent union; and
2. Whether or not the CA erred in not dismissing outright ETEUs petition for certiorari.
ETPI insists that it is under no legal compulsion to pay 14th, 15th and 16th month bonuses for the year 2003 and 14th month
bonus for the year 2004 contending that they are not part of the demandable wage or salary and that their grant is conditional
based on successful business performance and the availability of company profits from which to source the same. To thwart
ETEUs monetary claims, it insists that the distribution of the subject bonuses falls well within the companys prerogative, being
an act of pure gratuity and generosity on its part. Thus, it can withhold the grant thereof especially since it is currently plagued
with economic difficulties and financial losses. It alleges that the companys fiscal situation greatly declined due to tremendous
and extraordinary losses it sustained beginning the year 2000. It claims that it cannot be compelled to act liberally and confer
upon its employees additional benefits over and above those mandated by law when it cannot afford to do so. It posits that so
long as the giving of bonuses will result in the financial ruin of an already distressed company, the employer cannot be forced
to grant the same.
ETPI further avers that the act of giving the subject bonuses did not ripen into a company practice arguing that it has always
been a contingent one dependent on the realization of profits and, hence, the workers are not entitled to bonuses if the
company does not make profits for a given year. It asseverates that the 1998 and 2001 CBA Side Agreements did not
contractually afford ETEU a vested property right to a perennial payment of the bonuses. It opines that the bonus provision in
the Side Agreement allows the giving of benefits only at the time of its execution. For this reason, it cannot be said that the
grant has ripened into a company practice. In addition, it argues that even if such traditional company practice exists, the CA
should have applied Article 1267 of the Civil Code which releases the obligor from the performance of an obligation when it
has become so difficult to fulfill the same.
It is the petitioners stance that the CA should have dismissed outright the respondent unions petition for certiorari alleging
that no question of jurisdiction whatsoever was raised therein but, instead, what was being sought was a judicial re-evaluation
of the adequacy or inadequacy of the evidence on record. It claims that the CA erred in disregarding the findings of the NLRC
which were based on substantial and overwhelming evidence as well as on undisputed facts. ETPI added that the CA court

348
should have refrained from tackling issues of fact and, instead, limited itself on issues of jurisdiction and grave abuse of
jurisdiction amounting to lack or excess of it.
The Courts Ruling
As a general rule, in petitions for review under Rule 45, the Court, not being a trier of facts, does not normally embark on a re-
examination of the evidence presented by the contending parties during the trial of the case considering that the findings of
facts of the CA are conclusive and binding on the Court. The rule, however, admits of several exceptions, one of which is
when the findings of the appellate court are contrary to those of the trial court or the lower administrative body, as the case
may be.11 Considering the incongruent factual conclusions of the CA and the NLRC, this Court finds Itself obliged to resolve it.
The pivotal question determinative of this controversy is whether the members of ETEU are entitled to the payment of 14th,
15th and 16th month bonuses for the year 2003 and 14th month bonus for year 2004.
After an assiduous assessment of the record, the Court finds no merit in the petition.
From a legal point of view, a bonus is a gratuity or act of liberality of the giver which the recipient has no right to demand as a
matter of right.12 The grant of a bonus is basically a management prerogative which cannot be forced upon the employer who
may not be obliged to assume the onerous burden of granting bonuses or other benefits aside from the employees basic
salaries or wages.13
A bonus, however, becomes a demandable or enforceable obligation when it is made part of the wage or salary or
compensation of the employee.14 Particularly instructive is the ruling of the Court in Metro Transit Organization, Inc. v. National
Labor Relations Commission,15 where it was written:
Whether or not a bonus forms part of wages depends upon the circumstances and conditions for its payment. If it is additional
compensation which the employer promised and agreed to give without any conditions imposed for its payment, such as
success of business or greater production or output, then it is part of the wage. But if it is paid only if profits are realized or if a
certain level of productivity is achieved, it cannot be considered part of the wage. Where it is not payable to all but only to
some employees and only when their labor becomes more efficient or more productive, it is only an inducement for efficiency,
a prize therefore, not a part of the wage.
The consequential question that needs to be settled, therefore, is whether the subject bonuses are demandable or not. Stated
differently, can these bonuses be considered part of the wage, salary or compensation making them enforceable obligations?
The Court believes so.
In the case at bench, it is indubitable that ETPI and ETEU agreed on the inclusion of a provision for the grant of 14th, 15th and
16th month bonuses in the 1998-2001 CBA Side Agreement,16 as well as in the 2001-2004 CBA Side Agreement,17 which was
signed on September 3, 2001. The provision, which was similarly worded, states:
Employment-Related Bonuses
The Company confirms that the 14th, 15th and 16th month bonuses (other than the 13th month pay) are granted.
A reading of the above provision reveals that the same provides for the giving of 14th, 15th and 16th month bonuses without
qualification. The wording of the provision does not allow any other interpretation. There were no conditions specified in the
CBA Side Agreements for the grant of the benefits contrary to the claim of ETPI that the same is justified only when there are
profits earned by the company. Terse and clear, the said provision does not state that the subject bonuses shall be made to
depend on the ETPIs financial standing or that their payment was contingent upon the realization of profits. Neither does it
state that if the company derives no profits, no bonuses are to be given to the employees. In fine, the payment of these
bonuses was not related to the profitability of business operations.
The records are also bereft of any showing that the ETPI made it clear before or during the execution of the Side Agreements
that the bonuses shall be subject to any condition. Indeed, if ETPI and ETEU intended that the subject bonuses would be
dependent on the company earnings, such intention should have been expressly declared in the Side Agreements or the
bonus provision should have been deleted altogether. In the absence of any proof that ETPIs consent was vitiated by fraud,
mistake or duress, it is presumed that it entered into the Side Agreements voluntarily, that it had full knowledge of the contents
thereof and that it was aware of its commitment under the contract. Verily, by virtue of its incorporation in the CBA Side
Agreements, the grant of 14th, 15th and 16th month bonuses has become more than just an act of generosity on the part of
ETPI but a contractual obligation it has undertaken. Moreover, the continuous conferment of bonuses by ETPI to the union
members from 1998 to 2002 by virtue of the Side Agreements evidently negates its argument that the giving of the subject
bonuses is a management prerogative.
From the foregoing, ETPI cannot insist on business losses as a basis for disregarding its undertaking. It is manifestly clear that
although it incurred business losses of P 149,068,063.00 in the year 2000, it continued to distribute 14th, 15th and 16th month
bonuses for said year. Notwithstanding such huge losses, ETPI entered into the 2001-2004 CBA Side Agreement on
September 3, 2001 whereby it contracted to grant the subject bonuses to ETEU in no uncertain terms. ETPI continued to
sustain losses for the succeeding years of 2001 and 2002 in the amounts of P 348,783,013.00 and P 315,474,444.00,
respectively. Still and all, this did not deter it from honoring the bonus provision in the Side Agreement as it continued to give
the subject bonuses to each of the union members in 2001 and 2002 despite its alleged precarious financial condition.
Parenthetically, it must be emphasized that ETPI even agreed to the payment of the 14th, 15th and 16th month bonuses for

349
2003 although it opted to defer the actual grant in April 2004. All given, business losses could not be cited as grounds for ETPI
to repudiate its obligation under the 2001-2004 CBA Side Agreement.
The Court finds no merit in ETPIs contention that the bonus provision confirms the grant of the subject bonuses only on a
single instance because if this is so, the parties should have included such limitation in the agreement. Nowhere in the Side
Agreement does it say that the subject bonuses shall be conferred once during the year the Side Agreement was signed. The
Court quotes with approval the observation of the CA in this regard:
ETPI argues that assuming the bonus provision in the Side Agreement of the 2001-2004 CBA entitles the union members to
the subject bonuses, it is merely in the nature of a "one-time" grant and not intended to cover the entire term of the CBA. The
contention is untenable. The bonus provision in question is exactly the same as that contained in the Side Agreement of the
1998-2001 CBA and there is no denying that from 1998 to 2001, ETPI granted the subject bonuses for each of those years.
Thus, ETPI may not now claim that the bonus provision in the Side Agreement of the 2001-2004 CBA is only a "one-time"
grant.18
ETPI then argues that even if it is contractually bound to distribute the subject bonuses to ETEU members under the Side
Agreements, its current financial difficulties should have released it from the obligatory force of said contract invoking Article
1267 of the Civil Code. Said provision declares:
Article 1267. When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor
may also be released therefrom, in whole or in part.
The Court is not persuaded.
The parties to the contract must be presumed to have assumed the risks of unfavorable developments. It is, therefore, only in
absolutely exceptional changes of circumstances that equity demands assistance for the debtor. 19 In the case at bench, the
Court determines that ETPIs claimed depressed financial state will not release it from the binding effect of the 2001-2004 CBA
Side Agreement.
ETPI appears to be well aware of its deteriorating financial condition when it entered into the 2001-2004 CBA Side Agreement
with ETEU and obliged itself to pay bonuses to the members of ETEU. Considering that ETPI had been continuously suffering
huge losses from 2000 to 2002, its business losses in the year 2003 were not exactly unforeseen or unexpected.
Consequently, it cannot be said that the difficulty in complying with its obligation under the Side Agreement was "manifestly
beyond the contemplation of the parties." Besides, as held in Central Bank of the Philippines v. Court of Appeals,20 mere
pecuniary inability to fulfill an engagement does not discharge a contractual obligation. Contracts, once perfected, are binding
between the contracting parties. Obligations arising therefrom have the force of law and should be complied with in good faith.
ETPI cannot renege from the obligation it has freely assumed when it signed the 2001-2004 CBA Side Agreement.
Granting arguendo that the CBA Side Agreement does not contractually bind petitioner ETPI to give the subject bonuses,
nevertheless, the Court finds that its act of granting the same has become an established company practice such that it has
virtually become part of the employees salary or wage. A bonus may be granted on equitable consideration when the giving of
such bonus has been the companys long and regular practice. In Philippine Appliance Corporation v. Court of Appeals,21 it
was pronounced:
To be considered a "regular practice," however, the giving of the bonus should have been done over a long period of time, and
must be shown to have been consistent and deliberate. The test or rationale of this rule on long practice requires an
indubitable showing that the employer agreed to continue giving the benefits knowing fully well that said employees are not
covered by the law requiring payment thereof.
The records show that ETPI, aside from complying with the regular 13th month bonus, has been further giving its employees
14th month bonus every April as well as 15th and 16th month bonuses every December of the year, without fail, from 1975 to
2002 or for 27 years whether it earned profits or not. The considerable length of time ETPI has been giving the special grants
to its employees indicates a unilateral and voluntary act on its part to continue giving said benefits knowing that such act was
not required by law. Accordingly, a company practice in favor of the employees has been established and the payments made
by ETPI pursuant thereto ripened into benefits enjoyed by the employees.
The giving of the subject bonuses cannot be peremptorily withdrawn by ETPI without violating Article 100 of the Labor Code:
Art. 100. Prohibition against elimination or diminution of benefits. Nothing in this Book shall be construed to eliminate or in
any way diminish supplements, or other employee benefits being enjoyed at the time of promulgation of this Code.
The rule is settled that any benefit and supplement being enjoyed by the employees cannot be reduced, diminished,
discontinued or eliminated by the employer. The principle of non-diminution of benefits is founded on the constitutional
mandate to protect the rights of workers and to promote their welfare and to afford labor full protection. 22
Interestingly, ETPI never presented countervailing evidence to refute ETEUs claim that the company has been continuously
paying bonuses since 1975 up to 2002 regardless of its financial state. Its failure to controvert the allegation, when it had the
opportunity and resources to do so, works in favor of ETEU. Time and again, it has been held that should doubts exist
between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter. 23
WHEREFORE, the petition is DENIED. The June 25, 2008 Decision of the Court of Appeals and its December 12, 2008
Resolution are AFFIRMED.
SO ORDERED.
350
G.R. No. 181806 March 12, 2014
WESLEYAN UNIVERSITY-PHILIPPINES, Petitioner,
vs.
WESLEYAN UNIVERSITY-PHILIPPINES FACULTY and STAFF ASSOCIATION, Respondent.
DECISION
DEL CASTILLO, J.:
A Collective Bargaining Agreement (CBA) is a contract entered into by an employer and a legitimate labor organization
concerning the terms and conditions of employment.1 Like any other contract, it has the force of law between the parties and,
thus, should be complied with in good faith.2 Unilateral changes or suspensions in the implementation of the provisions of the
CBA, therefore, cannot be allowed without the consent of both parties.
This Petition for Review on Certiorari3 under Rule 45 of the Rules of Court assails the September 25, 2007 Decision 4 and the
February 5, 2008 Resolution5 of the Court of Appeals (CA) in CA-G.R. SP No. 97053.
Factual Antecedents
Petitioner Wesleyan University-Philippines is a non-stock, non-profit educational institution duly organized and existing under
the laws of the Philippines.6 Respondent Wesleyan University-Philippines Faculty and Staff Association, on the other hand, is
a duly registered labor organization7 acting as the sole and exclusive bargaining agent of all rank-and-file faculty and staff
employees of petitioner.8
In December 2003, the parties signed a 5-year CBA9 effective June 1, 2003 until May 31, 2008.10
On August 16, 2005, petitioner, through its President, Atty. Guillermo T. Maglaya (Atty. Maglaya), issued a
Memorandum11 providing guidelines on the implementation of vacation and sick leave credits as well as vacation leave
commutation. The pertinent portions of the Memorandum read:
1. VACATION AND SICK LEAVE CREDITS
Vacation and sick leave credits are not automatic. They have to be earned. Monthly, a qualified employee earns an
equivalent of 1.25 days credit each for VL and SL. Vacation Leave and Sick Leave credits of 15 days become
complete at the cut off date of May 31 of each year. (Example, only a total of 5 days credit will be given to an
employee for each of sick leave [or] vacation leave, as of month end September, that is, 4 months from June to
September multiplied by 1.25 days). An employee, therefore, who takes VL or SL beyond his leave credits as of date
will have to file leave without pay for leaves beyond his credit.
2. VACATION LEAVE COMMUTATION
Only vacation leave is commuted or monetized to cash. Vacation leave commutation is effected after the second year
of continuous service of an employee. Hence, an employee who started working June 1, 2005 will get his
commutation on May 31, 2007 or thereabout.12
On August 25, 2005, respondents President, Cynthia L. De Lara (De Lara) wrote a letter 13 to Atty. Maglaya informing him that
respondent is not amenable to the unilateral changes made by petitioner. 14 De Lara questioned the guidelines for being
violative of existing practices and the CBA,15 specifically Sections 1 and 2, Article XII of the CBA, to wit:
ARTICLE XII
VACATION LEAVE AND SICK LEAVE
SECTION 1. VACATION LEAVE - All regular and non-tenured rank-and-file faculty and staff who are entitled to receive shall
enjoy fifteen (15) days vacation leave with pay annually.
1.1 All unused vacation leave after the second year of service shall be converted into cash and be paid to the entitled
employee at the end of each school year to be given not later than August 30 of each year.
SECTION 2. SICK LEAVE - All regular and non-tenured rank-and-file faculty and staff shall enjoy fifteen (15) days sick leave
with pay annually.16
On February 8, 2006, a Labor Management Committee (LMC) Meeting was held during which petitioner advised respondent to
file a grievance complaint on the implementation of the vacation and sick leave policy. 17 In the same meeting, petitioner
announced its plan of implementing a one-retirement policy,18 which was unacceptable to respondent.
Ruling of the Voluntary Arbitrator
Unable to settle their differences at the grievance level, the parties referred the matter to a Voluntary Arbitrator. During the
hearing, respondent submitted affidavits to prove that there is an established practice of giving two retirement benefits, one
from the Private Education Retirement Annuity Association (PERAA) Plan and another from the CBA Retirement Plan.
Sections 1, 2, 3 and 4 of Article XVI of the CBA provide:
ARTICLE XVI
SEPARATION, DISABILITY AND RETIREMENT PAY
SECTION 1. ELIGIBILITY FOR MEMBERSHIP - Membership in the Plan shall be automatic for all full-time, regular staff and
tenured faculty of the University, except the University President. Membership in the Plan shall commence on the first day of
the month coincident with or next following his statement of Regular/Tenured Employment Status.
SECTION 2. COMPULSORY RETIREMENT DATE - The compulsory retirement date of each Member shall be as follows:

351
 a. Faculty The last day of the School Year, coincident with his attainment of age sixty (60) with at least five (years)
of unbroken, credited service.
b. Staff Upon reaching the age of sixty (60) with at least five (5) years of unbroken, credited service.
SECTION 3. OPTIONAL RETIREMENT DATE - A Member may opt for an optional retirement prior to his compulsory
retirement. His number of years of service in the University shall be the basis of computing x x x his retirement benefits
regardless of his chronological age.
SECTION 4. RETIREMENT BENEFIT - The retirement benefit shall be a sum equivalent to 100% of the members final
monthly salary for compulsory retirement.
For optional retirement, the vesting schedule shall be:
x x x x19
On November 2, 2006, the Voluntary Arbitrator rendered a Decision20 declaring the one-retirement policy and the
Memorandum dated August 16, 2005 contrary to law. The dispositive portion of the Decision reads:
WHEREFORE, the following award is hereby made:
1. The assailed University guidelines on the availment of vacation and sick leave credits and vacation leave
commutation are contrary to law. The University is consequently ordered to reinstate the earlier scheme, practice or
policy in effect before the issuance of the said guidelines on August 16, 2005;
2. The "one retirement" policy is contrary to law and is hereby revoked and rescinded. The University is ordered x x x
to resume and proceed with the established practice of extending to qualified employees retirement benefits under
both the CBA and the PERAA Plan.
3. The other money claims are denied.21
Ruling of the Court of Appeals
Aggrieved, petitioner appealed the case to the CA via a Petition for Review under Rule 43 of the Rules of Court.
On September 25, 2007, the CA rendered a Decision22 finding the rulings of the Voluntary Arbitrator supported by substantial
evidence. It also affirmed the nullification of the one-retirement policy and the Memorandum dated August 16, 2005 on the
ground that these unilaterally amended the CBA without the consent of respondent. 23Thus:
WHEREFORE, the instant appeal is DISMISSED for lack of merit.
SO ORDERED.24
Petitioner moved for reconsideration but the same was denied by the CA in its February 5, 2008 Resolution. 25
Issues
Hence, this recourse by petitioner raising the following issues:
a.
Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrators ruling that the Affidavits
submitted by Respondent WU-PFSA are substantial evidence as defined by the rules and jurisprudence that would
substantiate that Petitioner WU-P has long been in the practice of granting its employees two (2) sets of Retirement Benefits.
b.
Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrators ruling that a university
practice of granting its employees two (2) sets of Retirement Benefits had already been established as defined by the law and
jurisprudence especially in light of the illegality and lack of authority of such alleged grant.
c.
Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrators ruling that it is incumbent
upon Petitioner WU-P to show proof that no Board Resolution was issued granting two (2) sets of Retirement Benefits.
d.
Whether x x x the [CA] committed grave and palpable error in revoking the 16 August 2005 Memorandum of Petitioner WU-P
for being contrary to extant policy.26
Petitioners Arguments
Petitioner argues that there is only one retirement plan as the CBA Retirement Plan and the PERAA Plan are one and the
same.27 It maintains that there is no established company practice or policy of giving two retirement benefits to its
employees.28 Assuming, without admitting, that two retirement benefits were released, 29 petitioner insists that these were done
by mere oversight or mistake as there is no Board Resolution authorizing their release. 30 And since these benefits are
unauthorized and irregular, these cannot ripen into a company practice or policy. 31 As to the affidavits submitted by
respondent, petitioner claims that these are self-serving declarations,32and thus, should not be given weight and credence.33
In addition, petitioner claims that the Memorandum dated August 16, 2005, which provides for the guidelines on the
implementation of vacation and sick leave credits as well as vacation leave commutation, is valid because it is in full accord
with existing policy.34
Respondents Arguments
Respondent belies the claims of petitioner and asserts that there are two retirement plans as the PERAA Retirement Plan,
which has been implemented for more than 30 years, is different from the CBA Retirement Plan. 35 Respondent further avers

352
that it has always been a practice of petitioner to give two retirement benefits 36and that this practice was established by
substantial evidence as found by both the Voluntary Arbitrator and the CA.37
As to the Memorandum dated August 16, 2005, respondent asserts that it is arbitrary and contrary to the CBA and existing
practices as it added qualifications or limitations which were not agreed upon by the parties. 38
Our Ruling
The Petition is bereft of merit.
The Non-Diminution Rule found in Article 10039 of the Labor Code explicitly prohibits employers from eliminating or reducing
the benefits received by their employees. This rule, however, applies only if the benefit is based on an express policy, a written
contract, or has ripened into a practice.40 To be considered a practice, it must be consistently and deliberately made by the
employer over a long period of time.41
An exception to the rule is when "the practice is due to error in the construction or application of a doubtful or difficult question
of law."42 The error, however, must be corrected immediately after its discovery; 43 otherwise, the rule on Non-Diminution of
Benefits would still apply.
The practice of giving two retirement
benefits to petitioners employees is
supported by substantial evidence.
In this case, respondent was able to present substantial evidence in the form of affidavits to support its claim that there are two
retirement plans. Based on the affidavits, petitioner has been giving two retirement benefits as early as 1997. 44 Petitioner, on
the other hand, failed to present any evidence to refute the veracity of these affidavits. Petitioners contention that these
affidavits are self-serving holds no water. The retired employees of petitioner have nothing to lose or gain in this case as they
have already received their retirement benefits. Thus, they have no reason to perjure themselves. Obviously, the only reason
they executed those affidavits is to bring out the truth. As we see it then, their affidavits, corroborated by the affidavits of
incumbent employees, are more than sufficient to show that the granting of two retirement benefits to retiring employees had
already ripened into a consistent and deliberate practice.
Moreover, petitioners assertion that there is only one retirement plan as the CBA Retirement Plan and the PERAA Plan are
one and the same is not supported by any evidence. There is nothing in Article XVI of the CBA to indicate or even suggest that
the "Plan" referred to in the CBA is the PERAA Plan. Besides, any doubt in the interpretation of the provisions of the CBA
should be resolved in favor of respondent. In fact, petitioners assertion is negated by the announcement it made during the
LMC Meeting on February 8, 2006 regarding its plan of implementing a "one-retirement plan." For if it were true that petitioner
was already implementing a one-retirement policy, there would have been no need for such announcement. Equally damaging
is the letter-memorandum45 dated May 11, 2006, entitled "Suggestions on the defenses we can introduce to justify the
abolition of double retirement policy," prepared by the petitioners legal counsel.
These circumstances, taken together, bolster the finding that the two-retirement policy is a practice. Thus, petitioner cannot,
without the consent of respondent, eliminate the two-retirement policy and implement a one-retirement policy as this would
violate the rule on non-diminution of benefits.
As a last ditch effort to abolish the two-retirement policy, petitioner contends that such practice is illegal or unauthorized and
that the benefits were erroneously given by the previous administration. No evidence, however, was presented by petitioner to
substantiate its allegations.
Considering the foregoing disquisition, we agree with the findings of the Voluntary Arbitrator, as affirmed by the CA, that there
is substantial evidence to prove that there is an existing practice of giving two retirement benefits, one under the PERAA Plan
and another under the CBA Retirement Plan.
The Memorandum dated August 16,
2005 is contrary to the existing CBA.
Neither do we find any reason to disturb the findings of the CA that the Memorandum dated August 16, 2005 is contrary to the
existing CBA.
Sections 1 and 2 of Article XII of the CBA provide that all covered employees are entitled to 15 days sick leave and 15 days
vacation leave with pay every year and that after the second year of service, all unused vacation leave shall be converted to
cash and paid to the employee at the end of each school year, not later than August 30 of each year.
The Memorandum dated August 16, 2005, however, states that vacation and sick leave credits are not automatic as leave
credits would be earned on a month-to-month basis. This, in effect, limits the available leave credits of an employee at the
start of the school year. For example, for the first four months of the school year or from June to September, an employee is
only entitled to five days vacation leave and five days sick leave. 46 Considering that the Memorandum dated August 16, 2005
imposes a limitation not agreed upon by the parties nor stated in the CBA, we agree with the CA that it must be struck down.
In closing, it may not be amiss to mention that when the provision of the CBA is clear, leaving no doubt on the intention of the
parties, the literal meaning of the stipulation shall govem. 47
However, if there is doubt in its interpretation, it should be resolved in favor of labor,48 as this is mandated by no less than the
Constitution.49

353
WHEREFORE, the Petition is hereby DENIED. The assailed September 25, 2007 Decision and the February 5, 2008
Resolution of the Court of Appeals in CA-G.R. SP No. 97053 are hereby AFFIRMED.
SO ORDERED.

G.R. No. 160827 June 18, 2014

NETLINK COMPUTER INCORPORATED, Petitioner,
vs.
ERIC DELMO, Respondent.
DECISION
BERSAMIN, J.:
In the absence of a written agreement between the employer and the employee that sales commissions shall be paid in a
foreign currency, the latter has the right to be paid in such foreign currency once the same has become an established
practice of the former. The rate of exchange at the time of payment, not the rate of exchange at the time of the sales, controls.
Antecedents
On November 3, 1991, Netlink Computer, Inc. Products and Services (Netlink) hired Eric S. Delmo (Delmo) as account
manager tasked to canvass and source clients and convince them to purchase the products and services of Netlink. Delmo
worked in the field most of the time. He and his fellow account managers were not required to accomplish time cards to record
their personal presence in the office of Netlink.1 He was able to generate sales worth P35,000,000.00, more or less, from
which he earned commissions amounting to P993,558.89 and US$7,588.30. He then requested payment of his commissions,
but Netlink refused and only gave him partial cash advances chargeable to his commissions. Later on, Netlink began to nitpick
and fault find, like stressing his supposed absences and tardiness. In order to force him to resign, Netlink issued several
memoranda detailing his supposed infractions of the companys attendance policy. Despite the memoranda, Delmo continued
to generate huge sales for Netlink.2
On November 28, 1996, Delmo was shocked when he was refused entry into the company premises by the security guard
pursuant to a memorandum to that effect. His personal belongings were still inside the company premises and he sought their
return to him. This incident prompted Delmo to file a complaint for illegal dismissal. 3
In its answer to Delmos complaint,Netlink countered that there were guidelines regarding company working time and its
utilization and how the employees time would be recorded. Allegedly, all personnel were required to use the bundy clock to
punch in and out in the morning, and in and out in the afternoon. Excepted from the rules were the company officers, and the
authorized personnel in the field project assignments. Netlink claimed that it would be losing on the business transactions
closed by Delmo due to the high costs of equipment, and in fact his biggest client had not yet paid. Netlink pointed out that
Delmo had becomevery lax in his obligations, with the other account managers eventually having outperformed him. Netlink
asserted that warning, reprimand, and suspension memoranda were given to employees who violated company rules and
regulations, but such actions were considered as a necessary management tool to instill discipline. 4
Ruling of the Labor Arbiter
On September 23, 1998, the Labor Arbiter ruled against Netlink and in favor of Delmo, to wit:
WHEREFORE, judgment is hereby rendered declaring complainant as illegally and unjustly dismissed and respondents are
ordered to reinstate complainant to his former position without loss of seniority rights with full backwages and other benefits
and respondents are hereby ordered to pay complainant as follows:
P161,000.00 - Backwages, basic pay and allowances from Nov. 1996 to Sept. 1998

15,000.00 - 13th month pay for 1996 to 1998

993,558.89 - unpaid commissions

P1,169,558.89 - Total

plus US$7,588.30 - unpaid commissions

plus 10% attorneys fees

The reinstatement aspect is immediately executory even pending appeal. In case reinstatement is no longer feasible,
complainant shall be paid separation pay of one-month pay for every year of service. All other claims are hereby dismissed.
SO ORDERED.5
Decision of the NLRC
On appeal, the National Labor Relations Commission (NLRC) modified the decision of the Labor Arbiter by setting aside the
backwages and reinstatement decreed by the Labor Arbiter due to the existence of valid and just causes for the termination of

354
Delmos employment, to wit: WHEREFORE, premises considered, the decision of the Labor Arbiter a quo is hereby SET
ASIDEand a new one ENTERED, ordering the respondents-appellantsto pay the following:
1. TWO THOUSAND PESOS (P2,000.00) as indemnity for failure to observe procedural due process;
2. Unpaid commission in the amount of P993,558.89;
3. US$7,588.30 as unpaid commission;
4. P15,000.00 representing the 13th month pay for 1996, 1997, and 1998;
5. 10% attorneys fees of the total amount awarded.
SO ORDERED.6
The NLRC denied the motion for reconsideration, after which Netlink filed a petition for certiorariin the CA.
Judgment of the CA
On May 9, 2003, the CA promulgated its assailed decision upholding the NLRCs ruling subject to modifications, 7viz:
In the present case, since the payment of the commission is made to depend on the future and uncertain event which is the
payment of the accounts by the persons who have transacted business with the petitioner, without payment by the former to
the latter, the obligation to pay the commission has not yet arisen.
The evidence on record shows that the ALCATEL, private respondents biggest client has not paid fully the amount it owes to
the petitioner as of March 10, 1998. (Rollo, pp. 101, 397, 398) The obligation therefore, on the part of the petitioner to pay the
private respondent for his commission for the said unpaid account has not yet arisen. Thus it is a grave abuse of discretion on
the part of the public respondent to make petitioner liable to the private respondent for the payment of the said commission,
when it is clear on the record, as We have discussed above, that the obligation therefor has not yet arisen.
Perusal of the records, likewise, show that petitioner failed to refute by evidence that the private respondent is not entitled to
the P993, 558.89 commission. Petitioner however claimed that since the amounts out of which the commission will be taken
has not yet been paid fully, petitioner must, likewise, not be made liable for the said commission. However, public respondent
committed grave abuse of discretion when it disregard the evidence on record which is not disputed by the private respondent
that out of the total commissions of the private respondent, petitioner has paid the petitioner in the amount of P216,799.45 in
the form of advance payment. (Rollo, p. 12)
In view of the foregoing discussions, therefore, the advance payment made by the petitioner in favorof the private respondent
in the amount of P216, 799.45 must be deducted to the P993, 558.89 unpaid commission of the private respondent. The
difference amounting to P776, 779.44 must likewise be deducted to the amount of P4, 066.19 which represents the amount
which the petitioner had admitted as the net commission payable to private respondent. The difference thereof amounting
to P772, 713.25 shall represent the unpaid commission which shall be payable to the private respondent by the petitioner upon
payment of the accounts out of which such commission shall be taken.
We, likewise, agree with the petitioner that the private respondent is not entitled to 13th month pay in the years 1997 and
1998. The order of the public respondent making the petitioner liable to the private respondent for the 13th month pay of the
latter in the years 1997 and 1998 is contrary to its findings that there are valid and just cause for the termination of the private
respondent from employment, although private respondent was not given his right to due process. (Rollo, pp. 32-33) The rule
applicable in the present case is the decision of the Supreme Court in the case of Sebuguero vs National Labor Relations
Commission [248 SCRA 532, 547 (1995)] where it was ruled that "where the dismissal of an employee is in fact for a just and
valid cause and is so proven to be but he is not accorded his right to due process,i.e., he was not furnished the twin
requirements of notice and the opportunityto be heard, the dismissal shall be upheld but the employer must be sanctioned for
non-compliance with the requirements of or for failureto observe due process." Hence, petitioner should not be made to pay
the 13th month pay to private respondent whose employment was terminated for cause but without due process in 1996.
xxxx
Thus, private respondent is entitled only to a 13th month pay computed pro-rata from January 1996 to November 1996 which
as properly computed by the petitioner amounts to P4, 584.00. (Rollo, p. 11)
With respect to the other arguments of the petitioner, this Court is not persuaded. Petitioner failed to refute by evidence that
private respondent is not entitled to the commissions payable in US dollars. Neither is there any reason for us to agree with
the petitioner that the computation of these commissions must be based on the value of [the] Peso in relation to a Dollar at the
time of sale. As properly observed by the Labor Arbiter a quo, viz: "Likewise the devaluation of the peso cannot be used as a
shield against the complainant because that should have been the lookout of the respondent company in providing for such a
clause that in case of devaluation, the price agreed upon should be at the exchange rate when the contract of sale had been
consummated. For the lack of foresight and inefficiency of the respondent company and as regards its contracts or
agreements with its clientele, the complainant should not be made to suffer." (Labor Arbiter Ricardo Olairez Decision,
September 23, 1998, pp. 11-12, Rollo,pp. 328-329) In this regardtherefore, We uphold the well settled rule that "the findings of
facts of the NLRC, particularly where the NLRC and the Labor Arbiter are in agreement, are deemed binding and conclusive
upon the Court." (Permex, Inc. vs National Labor Relations Commission, 323 SCRA 121, 126).
xxxx
WHEREFORE, premises considered, the assailed Resolutions are hereby AFFIRMED with MODIFICATION, ordering the
petitioner to pay the private respondent the following:
355
 1. TWO-THOUSAND PESOS (P2,000.00) as indemnity for failure to observe procedural due process;
2. P4,066.19 representing the unpaid commissions that have accrued in favor of the private respondent;
3. P776,779.44 payable to the private respondent upon payment of the accounts out of which the said amount will be
taken;
4. P4,584.00 representing the unpaid 13th month pay of the private respondent;
5. US$7,588.30 as unpaid commission;
6. 10% attorneys fees of the total amount awarded excluding the amount contained in the No.3 of this Order.
SO ORDERED.
Issues
Hence, this appeal.
Netlink submits that the CA committed a palpable and reversible error of law in not holding that the applicable exchange rate
for computing the US dollar commissions of Delmo should be the rates prevailing at the time when the sales were actually
generated, not the rates prevailing at the time of the payment; and in awarding attorneys fees.
In his comment,8 Delmo counters that because he had earned in US dollars it was only fair that his commissions be paid in US
dollars; that Netlink should not be allowed to flip-flop after it had paid commissions in US dollar on the sales generated by its
sales agents on US-dollar denominated transactions; and that attorneys fees were warranted because of the unanimous
finding that there was violation of procedural due process.
In its reply,9 Netlink maintains that the commissions of Delmo should be based on sales generated, actually paid by and
collected from the customers; that commissions must be paid on the basis of the conversion of the US dollar to the Philippine
peso at the time of sale; and that no cogent and justifiable reason existed for the award of attorneys fees.
To be considered for resolution are,therefore, the following, namely: (1) whether or not the payment of the commissions should
be in US dollars; and (2) whether or not the award ofattorneys fees was warranted.
Ruling of the Court
The appeal lacks merit.
As a general rule, all obligations shall be paid in Philippine currency. However, the contracting parties may stipulate that
foreign currencies may be used for settling obligations. This is pursuant to Republic Act No. 8183, 10which provides as follows:
Section 1. All monetary obligations shall be settled in the Philippine currency which is legal tender in the Philippines. However,
the parties may agree that the obligation ortransaction shall be settled in any other currency at the time of payment.
We remarked in C.F. Sharp & Co. v. Northwest Airlines, Inc.11 that the repeal of Republic Act No. 529 had the effect of
removing the prohibition on the stipulation of currency other than Philippine currency, such that obligations or transactions
could already be paid in the currency agreed upon by the parties. However, both Republic Act No. 529 and Republic Act No.
8183 did not stipulate the applicable rate of exchange for the conversion of foreign currency-incurred obligations to their peso
equivalent. It follows, therefore, that the jurisprudence established under Republic Act No. 529 with regard to the rate of
conversion remains applicable. In C.F. Sharp, the Court cited Asia World Recruitment,Inc. v. NLRC, 12 to the effect that the real
value of the foreign exchange-incurred obligation up to the date of itspayment should be preserved.
There was no written contract between Netlink and Delmo stipulating that the latters commissions would be paid in US dollars.
The absence of the contractual stipulation notwithstanding, Netlink was still liable to pay Delmo in US dollars because the
practice of paying its sales agents in US dollars for their US dollar-denominatedsales had become a company policy. This was
impliedly admitted by Netlink when it did not refute the allegation that the commissions earned by Delmo and its other sales
agents had been paid in US dollars. Instead of denying the allegation, Netlink only sought a declaration that the US dollar
commissions be paid using the exchange rate at the time of sale. The principle of non-diminution of benefits, which has been
incorporated in Article 10013 of the Labor Code, forbade Netlink from unilaterally reducing, diminishing, discontinuing or
eliminating the practice. Verily, the phrase "supplements, or other employee benefits" in Article 100 is construed to mean the
compensation and privileges received by an employee aside from regular salaries or wages.
With regard to the length of timethe company practice should have been observed to constitute a voluntary employer practice
that cannot be unilaterally reduced, diminished, discontinued or eliminated by the employer, we find that jurisprudence has not
laid down any rule requiring a specific mmimum number of years. In Davao Fruits Corporation v. Associated Labor
Unions,14 the company practice lasted for six years. In Davao Integrated Port Stevedoring Services v. Abarquez, 15 the
employer, for three years and nine months, approved the commutation to cash of the unenjoyed portion of the sick leave with
pay benefits of its intermittent workers. In Tiangco v. Leogardo, Jr., 16 the employer carried on the practice of giving a fixed
monthly emergency allowance from November 1976 to February 1980, or three years and four months. In Sevilla Trading
Company v. Semana, 17 the employer kept the practice of including non-basic benefits such as paid leaves for unused sick
leave and vacation in the computation of their 13th-month pay for at least two years.
With the payment of US dollar commissions having ripened into a company practice, there is no way that the commissions due
to Delmo were to be paid in US dollars or their equivalent in Philippine currency determined at the time of the sales. To rule
otherwise would be to cause an unjust diminution of the commissions due and owing to Delmo.
Finally, we affirm the following justification of the CA in granting attorney's fees to Delmo, viz: The award of attorney's fees
must, likewise, be upheld in line of (sic) the decision of the Supreme Court in the case of Consolidated Rural Bank (Cagayan
356
Valley), Inc. vs. National Labor Relations Commission, 301 SCRA 223, 235, where it was held that "in actions for recovery of
wages or where an employee was forced to litigate and thus incur expenses to protect her rights and interests, even if not so
claimed, an award of attorney's fees equivalent to ten percent (10%) of the total award is legally and morally justifiable. There
is no doubt that in the present case, the private respondent has incurred expenses for the protection and enforcement of his
right to his commissions.18
WHEREFORE, the Court DENIES the petition for review on certiorari; AFFIRMS the decision promulgated on May 9, 2003;
and ORDERS the petitioner to pay the costs of suit.
SO ORDERED

G.R. No. 179428 January 26, 2011

PRIMO E. CAONG, JR., ALEXANDER J. TRESQUIO, and LORIANO D. DALUYON, Petitioners,
vs.
AVELINO REGUALOS, Respondent.
DECISION
NACHURA, J.:
Is the policy of suspending drivers pending payment of arrears in their boundary obligations reasonable? The Court of Appeals
(CA) answered the question in the affirmative in its Decision 1 dated December 14, 2006 and Resolution dated July 16, 2007.
In this petition for review on certiorari, we take a second look at the issue and determine whether the situation at bar merits the
relaxation of the application of the said policy.
Petitioners Primo E. Caong, Jr. (Caong), Alexander J. Tresquio (Tresquio), and Loriano D. Daluyon (Daluyon) were employed
by respondent Avelino Regualos under a boundary agreement, as drivers of his jeepneys. In November 2001, they filed
separate complaints2 for illegal dismissal against respondent who barred them from driving the vehicles due to deficiencies in
their boundary payments.
Caong was hired by respondent in September 1998 and became a permanent driver sometime in 2000. In July 2001, he was
assigned a brand- new jeepney for a boundary fee of P550.00 per day. He was suspended on October 9-15, 2001 for failure to
remit the full amount of the boundary. Consequently, he filed a complaint for illegal suspension. Upon expiration of the
suspension period, he was readmitted by respondent, but he was reassigned to an older jeepney for a boundary fee
of P500.00 per day. He claimed that, on November 9, 2001, due to the scarcity of passengers, he was only able to
remit P400.00 to respondent. On November 11, 2001, he returned to work after his rest day, but respondent barred him from
driving because of the deficiency in the boundary payment. He pleaded with respondent but to no avail.3
Tresquio was employed by respondent as driver in August 1996. He became a permanent driver in 1997. In 1998, he was
assigned to drive a new jeepney for a boundary fee of P500.00 per day. On November 6, 2001, due to the scarcity of
passengers, he was only able to remit P450.00. When he returned to work on November 8, 2001 after his rest day, he was
barred by respondent because of the deficiency of P50.00. He pleaded with respondent but the latter was adamant. 4
On the other hand, Daluyon started working for respondent in March 1998. He became a permanent driver in July 1998. He
was assigned to a relatively new jeepney for a boundary fee of P500.00 per day. On November 7, 2001, due to the scarcity of
passengers, he was only able to pay P470.00 to respondent. The following day, respondent barred him from driving his
jeepney. He pleaded but to no avail.5
During the mandatory conference, respondent manifested that petitioners were not dismissed and that they could drive his
jeepneys once they paid their arrears. Petitioners, however, refused to do so.
Petitioners averred that they were illegally dismissed by respondent without just cause. They maintained that respondent did
not comply with due process requirements before terminating their employment, as they were not furnished notice apprising
them of their infractions and another informing them of their dismissal. Petitioners claimed that respondents offer during the
mandatory conference to reinstate them was an insincere afterthought as shown by the warning given by respondent that, if
they fail to remit the full amount of the boundary yet again, they will be barred from driving the jeepneys. Petitioners
questioned respondents policy of automatically dismissing the drivers who fail to remit the full amount of the boundary as it
allegedly (a) violates their right to due process; (b) does not constitute a just cause for dismissal; (c) disregards the reality that
there are days when they could not raise the full amount of the boundary because of the scarcity of passengers.
In his Position Paper, respondent alleged that petitioners were lessees of his vehicles and not his employees; hence, the
Labor Arbiter had no jurisdiction. He claimed that he noticed that some of his lessees, including petitioners, were not fully
paying the daily rental of his jeepneys. In a list which he attached to the Position Paper, it was shown that petitioners had
actually incurred arrears since they started working. The list showed that Caongs total arrears amounted to P10,315.00, that
of Tresquio was P10,760.00, while that of Daluyon was P6,890.00. He made inquiries and discovered that his lessees
contracted loans with third parties and used the income of the jeepneys in paying the loans. Thus, on November 4, 2001, he
gathered all the lessees in a meeting and informed them that, effective November 5, 2001, those who would fail to fully pay the
daily rental would not be allowed to rent a jeepney on the following day. He explained to them that the jeepneys were acquired
on installment basis, and that he was paying the monthly amortizations through the lease income. Most of the lessees
allegedly accepted the condition and paid their arrears. Petitioners, however, did not settle their arrears. Worse, their
357
remittances were again short of the required boundary fee. Petitioner Daluyons rent payment was short of P20.00 on
November 5, 2001 and P80.00 on November 7, 2001. On November 6, 2001, it was Tresquio who incurred an arrear
of P100.00. On November 7 and 9, 2001, petitioner Caong was in arrear of P50.00 and P100.00, respectively. Respondent
stressed that, during the mandatory conference, he manifested that he would renew his lease with petitioners if they would pay
the arrears they incurred during the said dates.6
On March 31, 2003, the Labor Arbiter decided the case in favor of respondent, thus:
WHEREFORE, judgment is hereby rendered, DISMISSING the above-entitled cases for lack of merit. However, respondent
Regualos is directed to accept back complainants Caong, Tresquio and Daluyon, as regular drivers of his passenger jeepneys,
after complainants have paid their respective arrearages they have incurred in the remittance of their respective boundary
payments, in the amount of P150.00, P100.00 and P100.00. Complainants, if still interested to work as drivers, are hereby
ordered to report to respondent Regualos within fifteen (15) days from the finality of this decision. Otherwise, failure to do so
means forfeiture of their respective employments.
Other claims of complainants are dismissed for lack of merit.
SO ORDERED.7
According to the Labor Arbiter, an employer-employee relationship existed between respondent and petitioners. The latter
were not dismissed considering that they could go back to work once they have paid their arrears. The Labor Arbiter opined
that, as a disciplinary measure, it is proper to impose a reasonable sanction on drivers who cannot pay their boundary
payments. He emphasized that respondent acquired the jeepneys on loan or installment basis and relied on the boundary
payments to comply with his monthly amortizations.8
Petitioners appealed the decision to the National Labor Relations Commission (NLRC). In its resolution 9 dated March 31,
2004, the NLRC agreed with the Labor Arbiter and dismissed the appeal. It also denied petitioners motion for
reconsideration.10
Forthwith, petitioners filed a petition for certiorari with the CA.
In its Decision11 dated December 14, 2006, the CA found no grave abuse of discretion on the part of the NLRC. According to
the CA, the employer-employee relationship of the parties has not been severed, but merely suspended when respondent
refused to allow petitioners to drive the jeepneys while there were unpaid boundary obligations. The CA pointed out that the
fact that it was within the power of petitioners to return to work is proof that there was no termination of employment. The
condition that petitioners should first pay their arrears only for the period of November 5-9, 2001 before they can be readmitted
to work is neither impossible nor unreasonable if their total unpaid boundary obligations and the need to sustain the financial
viability of the employers enterprisewhich would ultimately redound to the benefit of the employeesare taken into
consideration.12
The CA went on to rule that petitioners were not denied their right to due process. It pointed out that the case does not involve
a termination of employment; hence, the strict application of the twin-notice rule is not warranted. According to the CA, what is
important is that petitioners were given the opportunity to be heard. The meeting conducted by respondent on November 4,
2001 served as sufficient notice to petitioners. During the said meeting, respondent informed his employees, including
petitioners, to strictly comply with the policy regarding remittances and warned them that they would not be allowed to take out
the jeepneys if they did not remit the full amount of the boundary. 13
Dissatisfied, petitioners filed a motion for reconsideration, but the CA denied the motion in its Resolution dated July 16, 2007. 14
Petitioners are now before this Court resolutely arguing that they were illegally dismissed by respondent, and that such
dismissal was made in violation of the due process requirements of the law.
The petition is without merit.
In an action for certiorari, petitioner must prove not merely reversible error, but grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of respondent. Mere abuse of discretion is not enough. It must be shown that public
respondent exercised its power in an arbitrary or despotic manner by reason of passion or personal hostility, and this must be
so patent and so gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined or to
act at all in contemplation of law.15
As correctly held by the CA, petitioners failed to establish that the NLRC committed grave abuse of discretion in affirming the
Labor Arbiters ruling, which is supported by the facts on record.
It is already settled that the relationship between jeepney owners/operators and jeepney drivers under the boundary system is
that of employer-employee and not of lessor-lessee. The fact that the drivers do not receive fixed wages but only get the
amount in excess of the so-called "boundary" that they pay to the owner/operator is not sufficient to negate the relationship
between them as employer and employee.16
The Labor Arbiter, the NLRC, and the CA uniformly declared that petitioners were not dismissed from employment but merely
suspended pending payment of their arrears. Findings of fact of the CA, particularly where they are in absolute agreement with
those of the NLRC and the Labor Arbiter, are accorded not only respect but even finality, and are deemed binding upon this
Court so long as they are supported by substantial evidence.17
We have no reason to deviate from such findings. Indeed, petitioners suspension cannot be categorized as dismissal,
considering that there was no intent on the part of respondent to sever the employer-employee relationship between him and
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petitioners. In fact, it was made clear that petitioners could put an end to the suspension if they only pay their recent arrears.
As it was, the suspension dragged on for years because of petitioners stubborn refusal to pay. It would have been different if
petitioners complied with the condition and respondent still refused to readmit them to work. Then there would have been a
clear act of dismissal. But such was not the case. Instead of paying, petitioners even filed a complaint for illegal dismissal
against respondent.
Respondents policy of suspending drivers who fail to remit the full amount of the boundary was fair and reasonable under the
circumstances. Respondent explained that he noticed that his drivers were getting lax in remitting their boundary payments
and, in fact, herein petitioners had already incurred a considerable amount of arrears. He had to put a stop to it as he also
relied on these boundary payments to raise the full amount of his monthly amortizations on the jeepneys. Demonstrating their
obstinacy, petitioners, on the days immediately following the implementation of the policy, incurred deficiencies in their
boundary remittances.
It is acknowledged that an employer has free rein and enjoys a wide latitude of discretion to regulate all aspects of
employment, including the prerogative to instill discipline on his employees and to impose penalties, including dismissal, if
warranted, upon erring employees. This is a management prerogative. Indeed, the manner in which management conducts its
own affairs to achieve its purpose is within the managements discretion. The only limitation on the exercise of management
prerogative is that the policies, rules, and regulations on work-related activities of the employees must always be fair and
reasonable, and the corresponding penalties, when prescribed, commensurate to the offense involved and to the degree of the
infraction.18
Petitioners argue that the policy is unsound as it does not consider the times when passengers are scarce and the drivers are
not able to raise the amount of the boundary.
Petitioners concern relates to the implementation of the policy, which is another matter. A company policy must be
implemented in such manner as will accord social justice and compassion to the employee. In case of noncompliance with the
company policy, the employer must consider the surrounding circumstances and the reasons why the employee failed to
comply. When the circumstances merit the relaxation of the application of the policy, then its noncompliance must be excused.
In the present case, petitioners merely alleged that there were only few passengers during the dates in question. Such excuse
is not acceptable without any proof or, at least, an explanation as to why passengers were scarce at that time. It is simply a
bare allegation, not worthy of belief. We also find the excuse unbelievable considering that petitioners incurred the shortages
on separate days, and it appears that only petitioners failed to remit the full boundary payment on said dates.
Under a boundary scheme, the driver remits the "boundary," which is a fixed amount, to the owner/operator and gets to earn
the amount in excess thereof. Thus, on a day when there are many passengers along the route, it is the driver who actually
benefits from it. It would be unfair then if, during the times when passengers are scarce, the owner/operator will be made to
suffer by not getting the full amount of the boundary. Unless clearly shown or explained by an event that irregularly and
negatively affected the usual number of passengers within the route, the scarcity of passengers should not excuse the driver
from paying the full amount of the boundary.
Finally, we sustain the CAs finding that petitioners were not denied the right to due process. We thus quote with approval its
discussion on this matter:
Having established that the case at bench does not involve termination of employment, We find that the strict, even rigid,
application of the twin-notice rule is not warranted.
But the due process safeguards are nonetheless still available to petitioners.
Due process is not a matter of strict or rigid or formulaic process. The essence of due process is simply the 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. A formal or trial-type hearing is not at all times and in all instances
essential, as the due process requirements are satisfied where the parties are afforded fair and reasonable opportunity to
explain their side of the controversy at hand. x x x.
xxxx
In the case at bench, private respondent, upon finding that petitioners had consistently failed to remit the full amount of the
boundary, conducted a meeting on November 4, 2001 informing them to strictly comply with the policy regarding their
remittances and warned them to discontinue driving if they still failed to remit the full amount of the boundary.19
WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals Decision dated December 14, 2006 and
Resolution dated July 16, 2007 are AFFIRMED.
SO ORDERED.

G.R. No. 121348 March 9, 2000

ANGELITO P. DELES, JR., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, FIRST PHIL. INDUSTRIAL CORP. and/or FLAVIANO C.
SANTOS, respondents.
QUISUMBING, J.:

359
This special civil action for certiorari seeks to annul the decision promulgated on April 21, 1995, by public respondent in NLRC
NCR Case No. 00-04-02733-93 and its resolution dated May 31, 1995 which denied petitioner's motion for reconsideration.
Respondent company operates a pipeline system which transports petroleum products from the refineries by Caltex (Phil.) Inc.
and Shell (Phil.) Inc. in Batangas to terminal receiving facilities in Metro Manila. Petitioner was employed by respondent
company as shift supervisor. He was assigned at its joint terminal facility in Pandacan, Manila, where he was the highest
ranking officer at the terminal during his shift. His primary task was to oversee the entire pipeline operation in the terminal.
Admittedly, he was a member of the management team.1
On the night of March 19, 1993, petitioner was the shift supervisor on duty while Eduardo Yumul and Leonardo Espejon were
the assigned shift operator and gauger, respectively. During this shift, there was a scheduled delivery for Shell through
respondent company's pipeline of about 3,000 barrels of kerosene (KE), to be followed by a delivery of aviation turbine fuel
(AV). Forthwith, petitioner instructed his chief operator (Yumul) to effect a batch change 2 from the kerosene tank to the
aviation fuel tank when the joint terminal facility turbine meter registers 2,944 barrels of kerosene delivered. Apparently, Yumul
failed to execute correctly petitioner's order. Instead of effecting the batch change at the prescribed reading of 2,944 barrels,
Yumul caused the batch change when the reading already reached 3,341 barrels. Thus, about 397 barrels of the succeeding
batch of aviation turbine fuel went to the kerosene batch thereby downgrading the former. .nt
When informed of the incident, respondent company required petitioner to explain why he should not be charged
administratively for neglect of duty in view of his failure: (a) to witness the actual batch change cutting of S83-KE/S84-AV; (b)
to see to it that a batch change checklist was prepared and followed, and; (c) to see to it that a batch change report was
prepared. Concomitantly, petitioner was placed under preventive suspension pending the outcome of the investigation.
Similarly, Yumul and Espejon were asked to explain for having been remiss in their duties.
On March 30, 1993, respondent company conducted a joint formal investigation of the cases of the three aforementioned
personnel. The next day, respondent company found petitioner, Yumul and Espejon guilty as charged. Accordingly, private
respondent Flaviano Santos, respondent company's assistant vice president, informed petitioner that he was found to have
violated the section on Neglect of Duty of respondent company's Code of Discipline and for this violation he was meted the
penalty of three (3) months suspension. For their part, Yumul was meted the penalty of dismissal while Espejon was
suspended for one and a half months.
Believing that suspension for three months was too harsh, petitioner sought reconsideration of the penalty imposed.
Subsequently, he filed a complaint before the NLRC, questioning the legality of his suspension.
While petitioner was under suspension, respondent company received reports that petitioner allowed the entry of two "bar
girls" at the terminal at an unholy hour (4:00 A.M.) on February 23, 1993. This belied petitioner's previous claim that the two
female visitors are his relatives. Thus, respondent company required petitioner to explain in writing why he should not be held
liable for: (1) neglect of duty as he allowed unauthorized persons in a restricted area, and; (2) dishonesty as he
misrepresented to management that the two women are his relatives. Unfortunately, petitioner failed to submit his written
explanation. Nonetheless, respondent company conducted a formal inquiry on the matter which was attended by petitioner.
During the aforesaid proceeding, it was discovered that petitioner tampered with the automatic shutdown feature of
Gravitometer No. 5 at the terminal on March 19, 1993. Likewise, respondent company learned that petitioner opened the
terminal's motor operated valve (MOV #10) between 6:00 A.M. and 6:35 A.M. on said date which caused the gravitation of the
contents of Shell kerosene tank to aviation fuel tank.
The abovementioned gravitometer is equipped with a safety feature which triggers the automatic closure of the joint terminal
facility pressure control valve which in turn cause a shutdown of the pipeline operations. It prevents the entry of liquefied
petroleum gas (LPG) or a product mixture containing LPG, through the motor operated valve and onwards to the other product
tanks such as gasoline, kerosene, jet fuel and diesel fuel. Hence, by disabling the automatic shutdown feature of said
gravitometer, LPG could pass through the line to the gasoline tank undetected, and since the gasoline tank is not designed to
accommodate LPG, the possibility of an explosion is enhanced. 3
In view of these newly unearthed violations, respondent company again asked petitioner to explain why he should not be
administratively sanctioned for: (1) tampering with an operating equipment (MOV#IO), and; (2) tampering with the installation
of a safety device of gravitometer. Consequently, petitioner was placed under preventive suspension effective June 24, 1993,
pending the outcome of the probe on the latest charges against him. Meanwhile, on July 24, 1993, petitioner was reinstated in
the payroll.4
After conducting formal investigation, respondent company terminated the employment of petitioner. The termination letter
reads:
We have meticulously reviewed your records with particular indulgence, especially the records of the investigation
conducted by Management last July 23 and August 3, 1993 in connection with the reported tampering of the JTF
Gravinometer No. 5 (GR-5) and the opening of the two (2) MOVs last March 19, 1993.
We were appalled by your admission during the aforesaid investigation that you tampered with the JTF Gravinometer
No. 5 (GR-5) by taping the needle thereof to disable its shutdown feature.

360
 By your admitted act, you had exposed JTF, the Pandacan installations of Caltex and Shell, and the adjacent
communities to the danger of a major catastrophic tank explosions and untold loss of lives and unquantifiable
damage to properties.
Certainly, your act is punishable under Section 7.10 of our Code of Employees Discipline.
This and your other violations and breach of existing policies/regulations concerning safety and other as well as your
other established acts or omissions left us with no alternative but to terminate your services for loss of confidence
effective September 14, 1993.5
Having been dismissed, petitioner amended his complaint by including the charge of illegal dismissal with a claim for unpaid
wages.
In a decision6 dated May 30, 1994, Labor Arbiter Potenciano Canizares, Jr., dismissed petitioner's complaint for lack of merit.
On appeal, the NLRC upheld the labor arbiter's finding that petitioner's suspension for three months is a reasonable
disciplinary measure. The labor tribunal also ruled that respondent company has sufficient basis to lose its trust and
confidence on petitioner. However, it modified the decision of the labor arbiter by including therein an indemnity in an amount
equivalent to petitioner's one month salary for alleged failure of herein respondent company to strictly comply with due process
requirements prior to termination, thus:
WHEREFORE, the Decision dated May 30, 1994 is hereby MODIFIED. Respondent is hereby directed to indemnify
the petitioner the amount equivalent to his one (1) month salary or the amount of thirteen thousand three hundred
[pesos] (P13,300.00) for failure to comply strictly with due process prior to termination. 7
His motion for reconsideration having been denied, petitioner filed the instant petition, raising the following issues:
I
WHETHER OR NOT THE PUBLIC RESPONDENT NLRC GRAVELY ABUSED ITS DISCRETION WHEN IT
ACCEPTED AS TRUE, HOOK, LINE AND SINKER IN AFFIRMING THE DECISION OF THE LABOR ARBITER
BASED ON THE BARE AND SELF-SERVING ALLEGATIONS OF THE PRIVATE RESPONDENT'S FPIC AND IN
THRUSTING ASIDE THE ASSERTIONS, EVIDENCE, JURISPRUDENCE AND CONSTITUTIONAL MANDATES
FAVORABLE TO THE PETITIONER.
II
WHETHER OR NOT PUBLIC RESPONDENT NLRC GRAVELY ABUSED ITS DISCRETION IN IGNORING THAT
THE SEVERAL CUMULATIVE CHARGES BELATEDLY S[U]RFACED AFTER THE FILING OF ILLEGAL
DISMISSAL CASE BY THE PETITIONER AGAINST THE RESPONDENT IS AN OBVIOUS INDICATION THAT THE
SAME CAUGHT THE IRE OF THE PRIVATE RESPONDENT AND/OR APPARENT INSTANCE OF HARASSMENT.
III
WHETHER OR NOT THE PETITIONER WAS ILLEGALLY SUSPENDED AND DISMISSED.8
The issue for resolution now is whether or not public respondent committed grave abuse of discretion in affirming the decision
of the labor arbiter finding that petitioner's suspension is legal and that his dismissal is for valid and just cause on account of
loss of confidence.
First, regarding the legality of petitioner's suspension, we note that petitioner was found remiss in his duties in connection with
the wrong batch change operation on March 19, 1993. He contends though that his suspension for three months is too harsh,
whimsical and biased.9 In essence, he decries the penalty imposed on him which he considered too severe.
However, petitioner loses sight of the fact that the right of an employer to regulate all aspects of employment is well settled.
This right, aptly called management prerogative, gives employers the freedom to regulate, according to their discretion and
best judgment, all aspects of employment, including work assignment, working methods, processes to be followed, working
regulations, transfer of employees, work supervision, lay-off of workers and the discipline, dismissal and recall of workers. 10 In
general, management has the prerogative to discipline its employees and to impose appropriate penalties on erring workers
pursuant to company rules and regulations. Thus, we find petitioner's protestation unfounded. For, based on the record,
respondent company imposed said penalty pursuant to the Company Code of Discipline which the labor agencies find to be
fair and in accordance with law. In fact, the penalty for violating the provision on Neglect of Duty ranges from warning to
dismissal depending on the gravity of the offense.11 Respondent company explained that mishandling the delivery of highly
flammable petroleum products could result in enormous damage to properties and loss of lives at the terminal and surrounding
areas. Hence, it has to exercise extraordinary diligence in conducting its operations in view of the delicate nature of its
business. Considering the attendant circumstances, we are constrained to agree that the penalty of suspension first imposed
on petitioner is reasonable and appropriate as well as legally unassailable.
Next, petitioner challenges the legality of his dismissal from the service. He insists that respondent company has no ground to
lose trust and confidence on him to justify his dismissal. He vehemently denies tampering with the gravitometer, much less
admitting doing it. He also avers that it is inconceivable for him to do so since he was with his co-workers, Noel Valle and
Edgardo Yumul, at the time of said incident. Further, he claims that there is no reason for him to commit such transgression. 12
On its face, petitioner's contention would require the Court to delve into the findings of fact a quo. This we cannot do. In the
review of NLRC decisions through a special civil action for certiorari, we are confined only to issues of want of jurisdiction and
grave abuse of discretion on the part of the labor tribunal. We are precluded from inquiring unto the correctness of the
361
evaluation of that evidence that underpins the labor tribunal's conclusion on matters of fact. Nor could we re-examine the
evidence, re-evaluate the credibility of the witnesses, nor substitute our findings of fact for those of an administrative body
which has the authority and expertise in its specialized field. Arguably, there may even be an error in judgment. This however
is not within the ambit of the extraordinary remedy of certiorari.13
Nevertheless, in this case, we note that the labor arbiter used every reasonable means to ascertain the facts by giving the
parties ample opportunity to present evidence. After both parties were heard, they filed their respective affidavits, position
papers and memoranda. In our view, the labor arbiter properly found that despite considering these documentary evidence,
averments of Flaviano Santos in his affidavit indicting petitioner for tampering with the gravitometer and admitting the
wrongdoing14 stand on solid ground. Further, petitioner did not quite succeed to convince the respondent NLRC to rule
otherwise.
Now, it must be emphasized that loss of trust and confidence constitutes a valid ground for dismissing an employee. As
provided for in the Labor Code: "ART. 282. Termination by employer. An employer may terminate an employment for any of
the following causes: . . . (c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative. . . ." Of course, it must be stressed also that loss of confidence as a just cause for termination of
employment is premised on the fact that an employee concerned holds a position of trust and confidence. This situation holds
where an employee or official of the company is entrusted with responsibility involving delicate matters, such as the custody,
handling, or care and protection of the employer's property. In the case of company personnel occupying such positions of
responsibility, the Court has repeatedly held that loss of trust and confidence justifies termination. 15
As regards a managerial employee, moreover, mere existence of a basis for believing that such employee has breached the
trust of his employer would suffice for his dismissal. Proof beyond reasonable doubt is not required, it being sufficient that
there is some basis for such loss of confidence, such as when the employer has reasonable ground to believe that the
employee concerned is responsible for the purported misconduct, and the nature of his participation therein renders him
unworthy of the trust and confidence demanded by his position. 16
In the case at bar, petitioner, is tasked to perform key functions; he is bound by an exacting work ethic. He should have
realized that his position requires the full trust and confidence of his employer in every exercise of managerial discretion
insofar as the conduct of his employer's business is concerned. However, as found a quo, he committed acts which betrayed
the trust and confidence reposed on him by tampering with very sensitive equipment at the joint terminal facility. In doing so,
he exposed the terminal complex and the residents in adjacent communities to the danger of a major disaster that may be
caused by tank explosions and conflagration. Verily, he committed acts inimical to the interest of his employer which is
mandated by law to observe extraordinary diligence in its operations to ensure the safety of the public. Indeed, we are
constrained to conclude that petitioner's admitted infraction as well his past violation of safety regulations is more than
sufficient ground for respondent company to terminate the employment of petitioner.
In sum, public respondent NLRC could not be faulted for any grave abuse of discretion in ruling that petitioner's suspension is
legal and his dismissal well justified on the ground of loss of trust and confidence.
As regards the procedural aspect of petitioner's dismissal, it appears clear to us that petitioner was given ample opportunity to
present his side and to defend himself against the charges against him. Respondent company sent petitioner a letter dated
June 2, 1993, requiring him to answer the charges hurled against him. He participated in the formal investigation conducted by
respondent company on July 23 and August 3, 1993. After the investigation was concluded, petitioner was notified of his
dismissal. Under these attendant circumstances, we find no basis for public respondent's ruling that respondent company
breached legal procedure prior to termination. Consequently, the award of indemnity for non-observance of due process is
bereft of legal basis and must be deleted.
WHEREFORE, the instant petition is DENIED for lack of merit. The assailed decision of public respondent NLRC, which
upheld the Labor Arbiter's decision dismissing petitioner's complaint, is AFFIRMED with the MODIFICATION that the award of
indemnity in the amount equivalent to petitioner's one (1) month salary is DELETED. No pronouncement as to costs.
SO ORDERED. .n

G.R. No. 172044 February 06, 2013

CAVITE APPAREL, INCORPORATED and ADRIANO TIMOTEO, Petitioners,
vs.
MICHELLE MARQUEZ, Respondent.
DECISION
BRION, J.:
We resolve the petition for review on certiorari1filed by petitioners Cavite Apparel, Incorporated ( Cavite Apparel)and Adriano
Timoteo to nullify the decision2 dated January 23, 2006 and the resolution3 dated March 23, 2006 of the Court of Appeals
( CA) in C.A.-G.R. SP No. 89819 insofar as it affirmed the disposition4 of the National Labor Relations Commission (NLRC) in
NLRC CA No. 029726-01. The NLRC set aside the decision5 of Labor Arbiter (LA) Cresencio G. Ramos in NLRC NCR Case
No. RAB-IV-7-12613-00-C dismissing the complaint for illegal dismissal filed by respondent Michelle Marquez against the
petitioners.
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The Factual Antecedents
Cavite Apparel is a domestic corporation engaged in the manufacture of garments for export. On August 22, 1994, it hired
Michelle as a regular employee in its Finishing Department. Michelle enjoyed, among other benefits, vacation and sick leaves
of seven (7) days each per annum. Prior to her dismissal on June 8, 2000, Michelle committed the following infractions (with
their corresponding penalties):
a. First Offense: Absence without leave (AWOL) on December 6, 1999 written warning
b. Second Offense: AWOL on January 12, 2000 stern warning with three (3) days suspension
c. Third Offense: AWOL on April 27, 2000 suspension for six (6) days.6
On May 8, 2000, Michelle got sick and did not report for work. When she returned, she submitted a medical certificate. Cavite
Apparel, however, denied receipt of the certificate.7 Michelle did not report for work on May 15-27, 2000 due to illness. When
she reported back to work, she submitted the necessary medical certificates. Nonetheless, Cavite Apparel suspended Michelle
for six (6) days (June 1-7, 2000). When Michelle returned on June 8, 2000, Cavite Apparel terminated her employment for
habitual absenteeism.
On July 4, 2000, Michelle filed a complaint for illegal dismissal with prayer for reinstatement, backwages and attorneys fees
with the NLRC, Regional Arbitration Branch No. IV.
The LA Ruling
In a decision dated April 28, 2001,8 LA Ramos dismissed the complaint. He noted that punctuality and good attendance are
required of employees in the companys Finishing Department. For this reason, LA Ramos considered Michelles four
absences without official leave as habitual and constitutive of gross neglect of duty, a just ground for termination of
employment. LA Ramos also declared that due process had been observed in Michelles dismissal, noting that in each of her
absences, Cavite Apparel afforded Michelle an opportunity to explain her side and dismissed her only after her fourth absence.
LA Ramos concluded that Michelles dismissal was valid. 9
The NLRC Decision
On appeal by Michelle, the NLRC referred the case to Executive LA Vito C. Bose for review, hearing and report. 10Adopting LA
Boses report, the NLRC rendered a decision11 dated May 7, 2003 reversing LA Ramos decision. The NLRC noted that for
Michelles first three absences, she had already been penalized ranging from a written warning to six days suspension. These,
the NLRC declared, should have precluded Cavite Apparel from using Michelles past absences as bases to impose on her the
penalty of dismissal, considering her six years of service with the company. It likewise considered the penalty of dismissal too
severe. The NLRC thus concluded that Michelle had been illegally dismissed and ordered her reinstatement with
backwages.12 When the NLRC denied Cavite Apparels motion for reconsideration in a resolution 13 dated March 30, 2005,
Cavite Apparel filed a petition for certiorari with the CA to assail the NLRC ruling.
The CA Ruling
Cavite Apparel charged the NLRC with grave abuse of discretion when it set aside the LAs findings and ordered Michelles
reinstatement. It disagreed with the NLRCs opinion that Michells past infractions could no longer be used to justify her
dismissal since these infractions had already been penalized and the corresponding penalties had been imposed.
The CA found no grave abuse of discretion on the part of the NLRC and accordingly dismissed Cavite Apparels petition on
January 23, 2006.14 While it agreed that habitual absenteeism without official leave, in violation of company rules, is sufficient
reason to dismiss an employee, it nevertheless did not consider Michelles four absences as habitual. It especially noted that
Michelle submitted a medical certificate for her May 8, 2000 absence, and thus disregarded Cavite Apparels contrary
assertion. The CA explained that Michelles failure to attach a copy of the medical certificate in her initiatory pleading did not
disprove her claim.
The CA agreed with the NLRC that since Cavite Apparel had already penalized Michelle for her three prior absences, to
dismiss her for the same infractions and for her May 8, 2000 absence was unjust. Citing jurisprudence, The CA concluded that
her dismissal was too harsh, considering her six years of employment with Cavite Apparel; it was also a disproportionate
penalty as her fourth infraction appeared excusable.
In its March 23, 2006 resolution,15 the CA denied Cavite Apparels motion for reconsideration; hence, Cavite Apparels present
recourse.
The Petition
Cavite Apparel imputes grave abuse of discretion against the CA when:
1. it did not find that the NLRC committed grave abuse of disretion in setting aside the decision of the CA;
2. it failed to consider Michelles four (4) AWOLs over a period of six months, from December 1999 to May 2000,
habitual; and
3. it ruled that the series of violations of company rules committed by Michelle were already meted with the
corresponding penalties.16
Cavite Apparel argues that it is its prerogative to discipline its employees. It thus maintains that when Michelle, in patent
violation of the companys rules of discipline, deliberately, habitually, and without prior authorization and despite warning did
not report for work on May 8, 2000, she committed serious misconduct and gross neglect of duty. It submits that dismissal for

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violation of company rules and regulations is a dismissal for cause as the Court stressed in Northern Motors, Inc., v. National
Labor Union, et al.17
The Case for the Respondent
Michelle asserts that her dismissal was arbitrary and unreasonable. For one, she had only four absences in her six (6) years of
employment with Cavite Apparel. She explains that her absence on May 8, 2000 was justified as she was sick and had sick
leave benefits against which Cavite Apparel could have charged her absences. Also, it had already sanctioned her for the
three prior infractions. Under the circumstances, the penalty of dismissal for her fourth infraction was very harsh. Finally, as
the CA correctly noted, Cavite Apparel terminated her services on the fourth infraction, without affording her prior opportunity
to explain.
The Courts Ruling
The case poses for us the issue of whether the CA correctly found no grave abuse of discretion when the NLRC ruled that
Cavite Apparel illegally terminated Michelles employment.
We stress at the outset that, as a rule, the Court does not review questions of fact, but only questions of law in an appeal
by certiorari under Rule 45 of the Rules of Court.18 The Court is not a trier of facts and will not review the factual findings of the
lower tribunals as these are generally binding and conclusive.19 The rule though is not absolute as the Court may review the
facts in labor cases where the findings of the CA and of the labor tribunals are contradictory.20 Given the factual backdrop of
this case, we find sufficient basis for a review as the factual findings of the LA, on the one hand, and those of the CA and the
NLRC, on the other hand, are conflicting.
After a careful review of the merits of the case, particularly the evidence adduced, we find no reversible error committed by the
CA when it found no grave abuse of discretion in the NLRC ruling that Michelle had been illegally dismissed.
Michelles four absences were not habitual; "totality of infractions" doctrine not applicable
Cavite Apparel argues that Michelles penchant for incurring unauthorized and unexcused absences despite its warning
constituted gross and habitual neglect of duty prejudicial to its business operations. It insists that by going on absence without
official leave four times, Michelle disregarded company rules and regulations; if condoned, these violations would render the
rules ineffectual and would erode employee discipline.
Cavite Apparel disputes the CAs conclusion that Michelles four absences without official leave were not habitual since she
was able to submit a medical certificate for her May 8, 2000 absence. It asserts that, on the contrary, no evidence exists on
record to support this conclusion. It maintains that it was in the exercise of its management prerogative that it dismissed
Michelle; thus, it is not barred from dismissing her for her fourth offense, although it may have previously punished her for the
first three offenses. Citing the Courts ruling in Mendoza v. NLRC,21 it contends that the totality of Michelles infractions justifies
her dismissal.
We disagree and accordingly consider the companys position unmeritorious.
Neglect of duty, to be a ground for dismissal under Article 282 of the Labor Code, must be both gross and habitual. 22 Gross
negligence implies want of care in the performance of ones duties. Habitual neglect imparts repeated failure to perform ones
duties for a period of time, depending on the circumstances.23 Under these standards and the circumstances obtaining in the
case, we agree with the CA that Michelle is not guilty of gross and habitual neglect of duties.
Cavite Apparel faults the CA for giving credit to Michelles argument that she submitted a medical certificate to support her
absence on May 8, 2000; there was in fact no such submission, except for her bare allegations. It thus argues that the CA
erred in holding that since doubt exists between the evidence presented by the employee and that presented by the employer,
the doubt should be resolved in favor of the employee. The principle, it contends, finds no application in this case as Michelle
never presented a copy of the medical certificate. It insists that there was no evidence on record supporting Michelles claim,
thereby removing the doubt on her being on absence without official leave for the fourth time, an infraction punishable with
dismissal under the company rules and regulations.
Cavite Apparels position fails to convince us. Based on what we see in the records, there simply cannot be a case of gross
and habitual neglect of duty against Michelle. Even assuming that she failed to present a medical certificate for her sick leave
on May 8, 2000, the records are bereft of any indication that apart from the four occasions when she did not report for work,
Michelle had been cited for any infraction since she started her employment with the company in 1994. Four absences in her
six years of service, to our mind, cannot be considered gross and habitual neglect of duty, especially so since the absences
were spread out over a six-month period.
Michelles penalty of dismissal too harsh or not proportionate to the infractions she commited
Although Michelle was fully aware of the company rules regarding leaves of absence, and her dismissal might have been in
accordance with the rules, it is well to stress that we are not bound by such rules. In Caltex Refinery Employees Association v.
NLRC24 and in the subsequent case of Gutierrez v. Singer Sewing Machine Company,25 we held that "[e]ven when there exist
some rules agreed upon between the employer and employee on the subject of dismissal, x x x the same cannot preclude the
State from inquiring on whether [their] rigid application would work too harshly on the employee." This Court will not hesitate to
disregard a penalty that is manifestly disproportionate to the infraction committed.
Michelle might have been guilty of violating company rules on leaves of absence and employee discipline, still we find the
penalty of dismissal imposed on her unjustified under the circumstances. As earlier mentioned, Michelle had been in Cavite
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Apparels employ for six years, with no derogatory record other than the four absences without official leave in question, not to
mention that she had already been penalized for the first three absences, the most serious penalty being a six-day suspension
for her third absence on April 27, 2000.
While previous infractions may be used to support an employees dismissal from work in connection with a subsequent similar
offense,26 we cautioned employers in an earlier case that although they enjoy a wide latitude of discretion in the formulation of
work-related policies, rules and regulations, their directives and the implemtation of their policies must be fair and reasonable;
at the very least, penalties must be commensurate to the offense involved and to the degree of the infraction.27
As we earlier expressed, we do not consider Michelles dismissal to be commensurate to the four absences she incurred for
her six years of service with the company, even granting that she failed to submit on time a medical certificate for her May 8,
2000 absence. We note that she again did not report for work on May 15 to 27, 2000 due to illness. When she reported back
for work, she submitted the necessary medical certificates. The reason for her absence on May 8, 2000 due to illness and
not for her personal convenience all the more rendered her dismissal unreasonable as it is clearly disproportionate to the
infraction she committed.
Finally, we find no evidence supporting Cavite Apparels claim that Michelles absences prejudiced its operations; there is no
indication in the records of any damage it sustained because of Michelles absences. Also, we are not convinced that allowing
Michelle to remain in employment even after her fourth absence or the imposition of a lighter penalty would result in a
breakdown of discipline in the employee ranks. What the company fails to grasp is that, given the unreasonableness of
Michelles dismissal i.e., one made after she had already been penalized for her three previous absences, with the fourth
absence imputed to illness confirming the validity of her dismissal could possibly have the opposite effect. It could give rise
to belief that the company is heavy-handed and may only give rise to sentiments against it.
In fine, we hold that Cavite Apparel failed to discharge the burden of proving that Michelles dismissal was for a lawful
cause.28 We, therefore, find her to have been illegally dismissed.
As a final point, we reiterate that while we recognize managements prerogative to discipline its employees, the exercise of this
prerogative should at all times be reasonable and should be tempered with compassion and understanding. 29 Dismissal is the
ultimate penalty that can be imposed on an employee. Where a penalty less punitive may suffice, whatever missteps may be
committed by labor ought not to be visited with a consequence so severe for what is at stake is not merely the employees
position but his very livelihood and perhaps the life and subsistence of his family.30
WHEREFORE, premises considered, the petition is DENIED. The assailed January 23, 2006 decision and March 23, 2006
resolution of the Court of Appeals in CA-G.R. SP No. 89819 are AFFIRMED. Costs against Cavite Apparel, Incorporated.
SO ORDERED.
G.R. No. 181881 October 18, 2011

BRICCIO "Ricky" A. POLLO, Petitioner,

vs.
CHAIRPERSON KARINA CONSTANTINO-DAVID, DIRECTOR IV RACQUEL DE GUZMAN BUENSALIDA, DIRECTOR IV
LYDIA A. CASTILLO, DIRECTOR III ENGELBERT ANTHONY D. UNITE AND THE CIVIL SERVICE
COMMISSION, Respondents.
DECISION
VILLARAMA, JR., J.:
This case involves a search of office computer assigned to a government employee who was charged administratively and
eventually dismissed from the service. The employees personal files stored in the computer were used by the government
employer as evidence of misconduct.
Before us is a petition for review on certiorari under Rule 45 which seeks to reverse and set aside the Decision1dated October
11, 2007 and Resolution2 dated February 29, 2008 of the Court of Appeals (CA). The CA dismissed the petition for certiorari
(CA-G.R. SP No. 98224) filed by petitioner Briccio "Ricky" A. Pollo to nullify the proceedings conducted by the Civil Service
Commission (CSC) which found him guilty of dishonesty, grave misconduct, conduct prejudicial to the best interest of the
service, and violation of Republic Act (R.A.) No. 6713 and penalized him with dismissal.
The factual antecedents:
Petitioner is a former Supervising Personnel Specialist of the CSC Regional Office No. IV and also the Officer-in-Charge of the
Public Assistance and Liaison Division (PALD) under the "Mamamayan Muna Hindi Mamaya Na" program of the CSC.
On January 3, 2007 at around 2:30 p.m., an unsigned letter-complaint addressed to respondent CSC Chairperson Karina
Constantino-David which was marked "Confidential" and sent through a courier service (LBC) from a certain "Alan San
Pascual" of Bagong Silang, Caloocan City, was received by the Integrated Records Management Office (IRMO) at the CSC
Central Office. Following office practice in which documents marked "Confidential" are left unopened and instead sent to the
addressee, the aforesaid letter was given directly to Chairperson David.
The letter-complaint reads:

365
The Chairwoman
Civil Service Commission
Batasan Hills, Quezon City
Dear Madam Chairwoman,
Belated Merry Christmas and Advance Happy New Year!
As a concerned citizen of my beloved country, I would like to ask from you personally if it is just alright for an employee of your
agency to be a lawyer of an accused govt employee having a pending case in the csc. I honestly think this is a violation of law
and unfair to others and your office.
I have known that a person have been lawyered by one of your attorny in the region 4 office. He is the chief of the
Mamamayan muna hindi mamaya na division. He have been helping many who have pending cases in the Csc. The justice in
our govt system will not be served if this will continue. Please investigate this anomaly because our perception of your clean
and good office is being tainted.
Concerned Govt employee3
Chairperson David immediately formed a team of four personnel with background in information technology (IT), and issued a
memo directing them to conduct an investigation and specifically "to back up all the files in the computers found in the
Mamamayan Muna (PALD) and Legal divisions." 4After some briefing, the team proceeded at once to the CSC-ROIV office at
Panay Avenue, Quezon City. Upon their arrival thereat around 5:30 p.m., the team informed the officials of the CSC-ROIV,
respondents Director IV Lydia Castillo (Director Castillo) and Director III Engelbert Unite (Director Unite) of Chairperson
Davids directive.
The backing-up of all files in the hard disk of computers at the PALD and Legal Services Division (LSD) was witnessed by
several employees, together with Directors Castillo and Unite who closely monitored said activity. At around 6:00 p.m.,
Director Unite sent text messages to petitioner and the head of LSD, who were both out of the office at the time, informing
them of the ongoing copying of computer files in their divisions upon orders of the CSC Chair. The text messages received by
petitioner read:
"Gud p.m. This is Atty. Unite FYI: Co people are going over the PCs of PALD and LSD per instruction of the
Chairman. If you can make it here now it would be better."
"All PCs Of PALD and LSD are being backed up per memo of the chair."
"CO IT people arrived just now for this purpose. We were not also informed about this.
"We cant do anything about it its a directive from chair."
"Memo of the chair was referring to an anonymous complaint"; "ill send a copy of the memo via mms" 5
Petitioner replied also thru text message that he was leaving the matter to Director Unite and that he will just get a lawyer.
Another text message received by petitioner from PALD staff also reported the presence of the team from CSC main office:
"Sir may mga taga C.O. daw sa kuarto natin."6 At around 10:00 p.m. of the same day, the investigating team finished their
task. The next day, all the computers in the PALD were sealed and secured for the purpose of preserving all the files stored
therein. Several diskettes containing the back-up files sourced from the hard disk of PALD and LSD computers were turned
over to Chairperson David. The contents of the diskettes were examined by the CSCs Office for Legal Affairs (OLA). It was
found that most of the files in the 17 diskettes containing files copied from the computer assigned to and being used by the
petitioner, numbering about 40 to 42 documents, were draft pleadings or letters 7 in connection with administrative cases in the
CSC and other tribunals. On the basis of this finding, Chairperson David issued the Show-Cause Order8 dated January 11,
2007, requiring the petitioner, who had gone on extended leave, to submit his explanation or counter-affidavit within five days
from notice.
Evaluating the subject documents obtained from petitioners personal files, Chairperson David made the following
observations:
Most of the foregoing files are drafts of legal pleadings or documents that are related to or connected with administrative cases
that may broadly be lumped as pending either in the CSCRO No. IV, the CSC-NCR, the CSC-Central Office or other tribunals.
It is also of note that most of these draft pleadings are for and on behalves of parties, who are facing charges as respondents
in administrative cases. This gives rise to the inference that the one who prepared them was knowingly, deliberately and
willfully aiding and advancing interests adverse and inimical to the interest of the CSC as the central personnel agency of the
government tasked to discipline misfeasance and malfeasance in the government service. The number of pleadings so
prepared further demonstrates that such person is not merely engaged in an isolated practice but pursues it with seeming
regularity. It would also be the height of naivete or credulity, and certainly against common human experience, to believe that
the person concerned had engaged in this customary practice without any consideration, and in fact, one of the retrieved files
(item 13 above) appears to insinuate the collection of fees. That these draft pleadings were obtained from the computer
assigned to Pollo invariably raises the presumption that he was the one responsible or had a hand in their drafting or
preparation since the computer of origin was within his direct control and disposition. 9
Petitioner filed his Comment, denying that he is the person referred to in the anonymous letter-complaint which had no
attachments to it, because he is not a lawyer and neither is he "lawyering" for people with cases in the CSC. He accused CSC
officials of conducting a "fishing expedition" when they unlawfully copied and printed personal files in his computer, and
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subsequently asking him to submit his comment which violated his right against self-incrimination. He asserted that he had
protested the unlawful taking of his computer done while he was on leave, citing the letter dated January 8, 2007 in which he
informed Director Castillo that the files in his computer were his personal files and those of his sister, relatives, friends and
some associates and that he is not authorizing their sealing, copying, duplicating and printing as these would violate his
constitutional right to privacy and protection against self-incrimination and warrantless search and seizure. He pointed out that
though government property, the temporary use and ownership of the computer issued under a Memorandum of Receipt (MR)
is ceded to the employee who may exercise all attributes of ownership, including its use for personal purposes. As to the
anonymous letter, petitioner argued that it is not actionable as it failed to comply with the requirements of a formal complaint
under the Uniform Rules on Administrative Cases in the Civil Service (URACC). In view of the illegal search, the
files/documents copied from his computer without his consent is thus inadmissible as evidence, being "fruits of a poisonous
tree."10
On February 26, 2007, the CSC issued Resolution No. 070382 11 finding prima facie case against the petitioner and charging
him with Dishonesty, Grave Misconduct, Conduct Prejudicial to the Best Interest of the Service and Violation of R.A. No. 6713
(Code of Conduct and Ethical Standards for Public Officials and Employees). Petitioner was directed to submit his answer
under oath within five days from notice and indicate whether he elects a formal investigation. Since the charges fall under
Section 19 of the URACC, petitioner was likewise placed under 90 days preventive suspension effective immediately upon
receipt of the resolution. Petitioner received a copy of Resolution No. 070382 on March 1, 2007.
Petitioner filed an Omnibus Motion (For Reconsideration, to Dismiss and/or to Defer) assailing the formal charge as without
basis having proceeded from an illegal search which is beyond the authority of the CSC Chairman, such power pertaining
solely to the court. Petitioner reiterated that he never aided any people with pending cases at the CSC and alleged that those
files found in his computer were prepared not by him but by certain persons whom he permitted, at one time or another, to
make use of his computer out of close association or friendship. Attached to the motion were the affidavit of Atty. Ponciano R.
Solosa who entrusted his own files to be kept at petitioners CPU and Atty. Eric N. Estrellado, the latter being Atty. Solosas
client who attested that petitioner had nothing to do with the pleadings or bill for legal fees because in truth he owed legal fees
to Atty. Solosa and not to petitioner. Petitioner contended that the case should be deferred in view of the prejudicial question
raised in the criminal complaint he filed before the Ombudsman against Director Buensalida, whom petitioner believes had
instigated this administrative case. He also prayed for the lifting of the preventive suspension imposed on him. In its Resolution
No. 07051912 dated March 19, 2007, the CSC denied the omnibus motion. The CSC resolved to treat the said motion as
petitioners answer.
On March 14, 2007, petitioner filed an Urgent Petition 13 under Rule 65 of the Rules of Court, docketed as CA-G.R. SP No.
98224, assailing both the January 11, 2007 Show-Cause Order and Resolution No. 070382 dated February 26, 2007 as
having been issued with grave abuse of discretion amounting to excess or total absence of jurisdiction. Prior to this, however,
petitioner lodged an administrative/criminal complaint against respondents Directors Racquel D.G. Buensalida (Chief of Staff,
Office of the CSC Chairman) and Lydia A. Castillo (CSC-RO IV) before the Office of the Ombudsman, and a separate
complaint for disbarment against Director Buensalida.14
On April 17, 2007, petitioner received a notice of hearing from the CSC setting the formal investigation of the case on April 30,
2007. On April 25, 2007, he filed in the CA an Urgent Motion for the issuance of TRO and preliminary injunction.15 Since he
failed to attend the pre-hearing conference scheduled on April 30, 2007, the CSC reset the same to May 17, 2007 with
warning that the failure of petitioner and/or his counsel to appear in the said pre-hearing conference shall entitle the
prosecution to proceed with the formal investigation ex-parte.16 Petitioner moved to defer or to reset the pre-hearing
conference, claiming that the investigation proceedings should be held in abeyance pending the resolution of his petition by
the CA. The CSC denied his request and again scheduled the pre-hearing conference on May 18, 2007 with similar warning
on the consequences of petitioner and/or his counsels non-appearance.17 This prompted petitioner to file another motion in
the CA, to cite the respondents, including the hearing officer, in indirect contempt. 18
On June 12, 2007, the CSC issued Resolution No. 07113419 denying petitioners motion to set aside the denial of his motion to
defer the proceedings and to inhibit the designated hearing officer, Atty. Bernard G. Jimenez. The hearing officer was directed
to proceed with the investigation proper with dispatch.
In view of the absence of petitioner and his counsel, and upon the motion of the prosecution, petitioner was deemed to have
waived his right to the formal investigation which then proceeded ex parte.
On July 24, 2007, the CSC issued Resolution No. 071420,20 the dispositive part of which reads:
WHEREFORE, foregoing premises considered, the Commission hereby finds Briccio A. Pollo, a.k.a. Ricky A. Pollo GUILTY of
Dishonesty, Grave Misconduct, Conduct Prejudicial to the Best Interest of the Service and Violation of Republic Act 6713. He
is meted the penalty of DISMISSAL FROM THE SERVICE with all its accessory penalties, namely, disqualification to hold
public office, forfeiture of retirement benefits, cancellation of civil service eligibilities and bar from taking future civil service
examinations.21
On the paramount issue of the legality of the search conducted on petitioners computer, the CSC noted the dearth of
jurisprudence relevant to the factual milieu of this case where the government as employer invades the private files of an
employee stored in the computer assigned to him for his official use, in the course of initial investigation of possible
367
misconduct committed by said employee and without the latters consent or participation. The CSC thus turned to relevant
rulings of the United States Supreme Court, and cited the leading case of OConnor v. Ortega 22 as authority for the view that
government agencies, in their capacity as employers, rather than law enforcers, could validly conduct search and seizure in
the governmental workplace without meeting the "probable cause" or warrant requirement for search and seizure. Another
ruling cited by the CSC is the more recent case of United States v. Mark L. Simons 23 which declared that the federal agencys
computer use policy foreclosed any inference of reasonable expectation of privacy on the part of its employees. Though the
Court therein recognized that such policy did not, at the same time, erode the respondents legitimate expectation of privacy in
the office in which the computer was installed, still, the warrantless search of the employees office was upheld as valid
because a government employer is entitled to conduct a warrantless search pursuant to an investigation of work-related
misconduct provided the search is reasonable in its inception and scope.
With the foregoing American jurisprudence as benchmark, the CSC held that petitioner has no reasonable expectation of
privacy with regard to the computer he was using in the regional office in view of the CSC computer use policy which
unequivocally declared that a CSC employee cannot assert any privacy right to a computer assigned to him. Even assuming
that there was no such administrative policy, the CSC was of the view that the search of petitioners computer successfully
passed the test of reasonableness for warrantless searches in the workplace as enunciated in the aforecited authorities. The
CSC stressed that it pursued the search in its capacity as government employer and that it was undertaken in connection with
an investigation involving work-related misconduct, which exempts it from the warrant requirement under the Constitution. With
the matter of admissibility of the evidence having been resolved, the CSC then ruled that the totality of evidence adequately
supports the charges of grave misconduct, dishonesty, conduct prejudicial to the best interest of the service and violation of
R.A. No. 6713 against the petitioner. These grave infractions justified petitioners dismissal from the service with all its
accessory penalties.
In his Memorandum24 filed in the CA, petitioner moved to incorporate the above resolution dismissing him from the service in
his main petition, in lieu of the filing of an appeal via a Rule 43 petition. In a subsequent motion, he likewise prayed for the
inclusion of Resolution No. 07180025 which denied his motion for reconsideration.
By Decision dated October 11, 2007, the CA dismissed the petition for certiorari after finding no grave abuse of discretion
committed by respondents CSC officials. The CA held that: (1) petitioner was not charged on the basis of the anonymous letter
but from the initiative of the CSC after a fact-finding investigation was conducted and the results thereof yielded a prima facie
case against him; (2) it could not be said that in ordering the back-up of files in petitioners computer and later confiscating the
same, Chairperson David had encroached on the authority of a judge in view of the CSC computer policy declaring the
computers as government property and that employee-users thereof have no reasonable expectation of privacy in anything
they create, store, send, or receive on the computer system; and (3) there is nothing contemptuous in CSCs act of proceeding
with the formal investigation as there was no restraining order or injunction issued by the CA.
His motion for reconsideration having been denied by the CA, petitioner brought this appeal arguing that
I
THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED AND COMMITTED SERIOUS IRREGULARITY
AND BLATANT ERRORS IN LAW AMOUNTING TO GRAVE ABUSE OF DISCRETION WHEN IT RULED THAT
ANONYMOUS COMPLAINT IS ACTIONABLE UNDER E.O. 292 WHEN IN TRUTH AND IN FACT THE CONTRARY
IS EXPLICITLY PROVIDED UNDER 2nd PARAGRAPH OF SECTION 8 OF CSC RESOLUTION NO. 99-1936,
WHICH IS AN [AMENDMENT] TO THE ORIGINAL RULES PER CSC RESOLUTION NO. 94-0521;
II
THE HONORABLE COURT GRIEVOUSLY ERRED AND COMMITTED PALPABLE ERRORS IN LAW AMOUNTING
TO GRAVE ABUSE OF DISCRETION WHEN IT RULED THAT PETITIONER CANNOT INVOKE HIS RIGHT TO
PRIVACY, TO UNREASONABLE SEARCH AND SEIZURE, AGAINST SELF-INCRIMINATION, BY VIRTUE OF
OFFICE MEMORANDUM NO. 10 S. 2002, A MERE INTERNAL MEMORANDUM SIGNED SOLELY AND
EXCLUSIVELY BY RESPONDENT DAVID AND NOT BY THE COLLEGIAL COMMISSION CONSIDERING
THAT POLICY MATTERS INVOLVING SUB[S]TANTIAL RIGHTS CANNOT BE COVERED BY AN OFFICE
MEMORANDUM WHICH IS LIMITED TO PROCEDURAL AND ROUTINARY INSTRUCTION;
III
THE HONORABLE COURT GRAVELY ERRED AND COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT
RULED THAT MEMO SEARCH DATED JANUARY 3, 2007 AND THE TAKING OF DOCUMENTS IN THE EVENING
THEREOF FROM 7:00 TO 10:00 P.M. IS NOT GRAVE ABUSE OF DISCRETION LIMITING THE DEFINITION [OF]
GRAVE ABUSE OF DISCRETION TO ONE INVOLVING AND TAINTED WITH PERSONAL HOSTILITY. IT
LIKEWISE ERRED IN HOLDING THAT DATA STORED IN THE GOVERNMENT COMPUTERS ARE
GOVERNMENT PROPERTIES INCLUDING THE PERSONAL FILES WHEN THE CONTRARY IS PROVIDED
UNDER SECTION 14 OF OM. 10 s. 2002. AND GRIEVOUSLY ERRED STILL WHEN IT RULED THAT
RESPONDENT DAVID BY VIRTUE OF O.M. 10 DID NOT ENCROACH ON THE DUTIES AND FUNCTIONS OF A
JUDGE PURSUANT TO ARTICLE III, SECTION 2 OF THE 1987 PHILIPPINE CONSTITUTION;
IV
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 THE HONORABLE COURT ERRED WHEN IT FAILED TO CONSIDER ALL OTHER NEW ARGUMENTS,
ADDITIONAL EVIDENCE HEREUNTO SUBMITTED AS WELL AS ITS FAILURE TO EVALUATE AND TAKE
ACTION ON THE 2 MOTIONS TO ADMIT AND INCORPORATE CSC RESOLUTION NOS. 07-1420 DATED JULY
24, 2007 AND CSC RESOLUTION 07-1800 DATED SEPTEMBER 10, 2007. IT DID NOT RULE LIKEWISE ON THE
FOUR URGENT MOTION TO RESOLVE ANCILLARY PRAYER FOR TRO.26
Squarely raised by the petitioner is the legality of the search conducted on his office computer and the copying of his personal
files without his knowledge and consent, alleged as a transgression on his constitutional right to privacy.
The right to privacy has been accorded recognition in this jurisdiction as a facet of the right protected by the guarantee against
unreasonable search and seizure under Section 2, Article III of the 1987 Constitution,27 which provides:
Sec. 2. The right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and
seizures of whatever nature and for any purpose shall be inviolable, and no search warrant or warrant of arrest shall issue
except upon probable cause to be determined personally by the judge after examination under oath or affirmation of the
complainant and the witnesses he may produce, and particularly describing the place to be searched and the persons or
things to be seized.
The constitutional guarantee is not a prohibition of all searches and seizures but only of "unreasonable" searches and
seizures.28 But to fully understand this concept and application for the purpose of resolving the issue at hand, it is essential
that we examine the doctrine in the light of pronouncements in another jurisdiction. As the Court declared in People v. Marti 29 :
Our present constitutional provision on the guarantee against unreasonable search and seizure had its origin in the 1935
Charter which, worded as follows:
"The right of the people to be secure in their persons, houses, papers and effects against unreasonable searches and seizures
shall not be violated, and no warrants shall issue but upon probable cause, to be determined by the judge after examination
under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be
searched, and the persons or things to be seized." (Sec. 1[3], Article III)
was in turn derived almost verbatim from the Fourth Amendment to the United States Constitution. As such, the Court may
turn to the pronouncements of the United States Federal Supreme Court and State Appellate Courts which are considered
doctrinal in this jurisdiction.30
In the 1967 case of Katz v. United States,31 the US Supreme Court held that the act of FBI agents in electronically recording a
conversation made by petitioner in an enclosed public telephone booth violated his right to privacy and constituted a "search
and seizure". Because the petitioner had a reasonable expectation of privacy in using the enclosed booth to make a personal
telephone call, the protection of the Fourth Amendment extends to such area. In the concurring opinion of Mr. Justice Harlan, it
was further noted that the existence of privacy right under prior decisions involved a two-fold requirement: first, that a person
has exhibited an actual (subjective) expectation of privacy; and second, that the expectation be one that society is prepared to
recognize as reasonable (objective).32
In Mancusi v. DeForte33 which addressed the reasonable expectations of private employees in the workplace, the US
Supreme Court held that a union employee had Fourth Amendment rights with regard to an office at union headquarters that
he shared with other union officials, even as the latter or their guests could enter the office. The Court thus "recognized that
employees may have a reasonable expectation of privacy against intrusions by police."
That the Fourth Amendment equally applies to a government workplace was addressed in the 1987 case of OConnor v.
Ortega34 where a physician, Dr. Magno Ortega, who was employed by a state hospital, claimed a violation of his Fourth
Amendment rights when hospital officials investigating charges of mismanagement of the psychiatric residency program,
sexual harassment of female hospital employees and other irregularities involving his private patients under the state medical
aid program, searched his office and seized personal items from his desk and filing cabinets. In that case, the Court
categorically declared that "[i]ndividuals do not lose Fourth Amendment rights merely because they work for the government
instead of a private employer."35 A plurality of four Justices concurred that the correct analysis has two steps: first, because
"some government offices may be so open to fellow employees or the public that no expectation of privacy is reasonable", a
court must consider "[t]he operational realities of the workplace" in order to determine whether an employees Fourth
Amendment rights are implicated; and next, where an employee has a legitimate privacy expectation, an employers intrusion
on that expectation "for noninvestigatory, work-related purposes, as well as for investigations of work-related misconduct,
should be judged by the standard of reasonableness under all the circumstances." 36
On the matter of government employees reasonable expectations of privacy in their workplace, OConnor teaches:
x x x Public employees expectations of privacy in their offices, desks, and file cabinets, like similar expectations of employees
in the private sector, may be reduced by virtue of actual office practices and procedures, or by legitimate regulation. x x x The
employees expectation of privacy must be assessed in the context of the employment relation. An office is seldom a private
enclave free from entry by supervisors, other employees, and business and personal invitees. Instead, in many cases offices
are continually entered by fellow employees and other visitors during the workday for conferences, consultations, and other
work-related visits. Simply put, it is the nature of government offices that others such as fellow employees, supervisors,
consensual visitors, and the general public may have frequent access to an individuals office. We agree with JUSTICE
SCALIA that "[c]onstitutional protection against unreasonable searches by the government does not disappear merely
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because the government has the right to make reasonable intrusions in its capacity as employer," x x x but some government
offices may be so open to fellow employees or the public that no expectation of privacy is reasonable. x x x Given the
great variety of work environments in the public sector, the question of whether an employee has a reasonable
expectation of privacy must be addressed on a case-by-case basis.37 (Citations omitted; emphasis supplied.)
On the basis of the established rule in previous cases, the US Supreme Court declared that Dr. Ortegas Fourth Amendment
rights are implicated only if the conduct of the hospital officials infringed "an expectation of privacy that society is prepared to
consider as reasonable." Given the undisputed evidence that respondent Dr. Ortega did not share his desk or file cabinets with
any other employees, kept personal correspondence and other private items in his own office while those work-related files (on
physicians in residency training) were stored outside his office, and there being no evidence that the hospital had established
any reasonable regulation or policy discouraging employees from storing personal papers and effects in their desks or file
cabinets (although the absence of such a policy does not create any expectation of privacy where it would not otherwise exist),
the Court concluded that Dr. Ortega has a reasonable expectation of privacy at least in his desk and file cabinets. 38
Proceeding to the next inquiry as to whether the search conducted by hospital officials was reasonable, the OConnor plurality
decision discussed the following principles:
Having determined that Dr. Ortega had a reasonable expectation of privacy in his office, the Court of Appeals simply
concluded without discussion that the "searchwas not a reasonable search under the fourth amendment." x x x "[t]o hold that
the Fourth Amendment applies to searches conducted by [public employers] is only to begin the inquiry into the standards
governing such searches[W]hat is reasonable depends on the context within which a search takes place. x x x Thus, we
must determine the appropriate standard of reasonableness applicable to the search. A determination of the standard of
reasonableness applicable to a particular class of searches requires "balanc[ing] the nature and quality of the intrusion on the
individuals Fourth Amendment interests against the importance of the governmental interests alleged to justify the intrusion." x
x x In the case of searches conducted by a public employer, we must balance the invasion of the employees
legitimate expectations of privacy against the governments need for supervision, control, and the efficient operation
of the workplace.
xxxx
In our view, requiring an employer to obtain a warrant whenever the employer wished to enter an employees office, desk, or
file cabinets for a work-related purpose would seriously disrupt the routine conduct of business and would be unduly
burdensome. Imposing unwieldy warrant procedures in such cases upon supervisors, who would otherwise have no reason to
be familiar with such procedures, is simply unreasonable. In contrast to other circumstances in which we have required
warrants, supervisors in offices such as at the Hospital are hardly in the business of investigating the violation of criminal laws.
Rather, work-related searches are merely incident to the primary business of the agency. Under these circumstances, the
imposition of a warrant requirement would conflict with the "common-sense realization that government offices could not
function if every employment decision became a constitutional matter." x x x
xxxx
The governmental interest justifying work-related intrusions by public employers is the efficient and proper operation of the
workplace. Government agencies provide myriad services to the public, and the work of these agencies would suffer if
employers were required to have probable cause before they entered an employees desk for the purpose of finding a file or
piece of office correspondence. Indeed, it is difficult to give the concept of probable cause, rooted as it is in the criminal
investigatory context, much meaning when the purpose of a search is to retrieve a file for work-related reasons. Similarly, the
concept of probable cause has little meaning for a routine inventory conducted by public employers for the purpose of securing
state property. x x x To ensure the efficient and proper operation of the agency, therefore, public employers must be given
wide latitude to enter employee offices for work-related, noninvestigatory reasons.
We come to a similar conclusion for searches conducted pursuant to an investigation of work-related employee misconduct.
Even when employers conduct an investigation, they have an interest substantially different from "the normal need for law
enforcement." x x x Public employers have an interest in ensuring that their agencies operate in an effective and efficient
manner, and the work of these agencies inevitably suffers from the inefficiency, incompetence, mismanagement, or other
work-related misfeasance of its employees. Indeed, in many cases, public employees are entrusted with tremendous
responsibility, and the consequences of their misconduct or incompetence to both the agency and the public interest can be
severe. In contrast to law enforcement officials, therefore, public employers are not enforcers of the criminal law; instead,
public employers have a direct and overriding interest in ensuring that the work of the agency is conducted in a proper and
efficient manner. In our view, therefore, a probable cause requirement for searches of the type at issue here would
impose intolerable burdens on public employers. The delay in correcting the employee misconduct caused by the
need for probable cause rather than reasonable suspicion will be translated into tangible and often irreparable
damage to the agencys work, and ultimately to the public interest. x x x
xxxx
In sum, we conclude that the "special needs, beyond the normal need for law enforcement make theprobable-cause
requirement impracticable," x x x for legitimate, work-related noninvestigatory intrusions as well as investigations of
work-related misconduct. A standard of reasonableness will neither unduly burden the efforts of government employers to

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ensure the efficient and proper operation of the workplace, nor authorize arbitrary intrusions upon the privacy of public
employees. We hold, therefore, that public employer intrusions on the constitutionally protected privacy interests of
government employees for noninvestigatory, work-related purposes, as well as for investigations of work-related
misconduct, should be judged by the standard of reasonableness under all the circumstances. Under this
reasonableness standard, both the inception and the scope of the intrusion must be reasonable:
"Determining the reasonableness of any search involves a twofold inquiry: first, one must consider whether theaction was
justified at its inception, x x x ; second, one must determine whether the search as actually conducted was reasonably related
in scope to the circumstances which justified the interference in the first place," x x x
Ordinarily, a search of an employees office by a supervisor will be "justified at its inception" when there are
reasonable grounds for suspecting that the search will turn up evidence that the employee is guilty of work-related
misconduct, or that the search is necessary for a noninvestigatory work-related purposesuch as to retrieve a needed
file. x x x The search will be permissible in its scope when "the measures adopted are reasonably related to the
objectives of the search and not excessively intrusive in light of the nature of the [misconduct]." x x x39 (Citations
omitted; emphasis supplied.)
Since the District Court granted summary judgment without a hearing on the factual dispute as to the character of the search
and neither was there any finding made as to the scope of the search that was undertaken, the case was remanded to said
court for the determination of the justification for the search and seizure, and evaluation of the reasonableness of both the
inception of the search and its scope.
In OConnor the Court recognized that "special needs" authorize warrantless searches involving public employees for work-
related reasons. The Court thus laid down a balancing test under which government interests are weighed against the
employees reasonable expectation of privacy. This reasonableness test implicates neither probable cause nor the warrant
requirement, which are related to law enforcement.40
OConnor was applied in subsequent cases raising issues on employees privacy rights in the workplace. One of these cases
involved a government employers search of an office computer, United States v. Mark L. Simons 41where the defendant
Simons, an employee of a division of the Central Intelligence Agency (CIA), was convicted of receiving and possessing
materials containing child pornography. Simons was provided with an office which he did not share with anyone, and a
computer with Internet access. The agency had instituted a policy on computer use stating that employees were to use the
Internet for official government business only and that accessing unlawful material was specifically prohibited. The policy also
stated that users shall understand that the agency will periodically audit, inspect, and/or monitor the users Internet access as
deemed appropriate. CIA agents instructed its contractor for the management of the agencys computer network, upon initial
discovery of prohibited internet activity originating from Simons computer, to conduct a remote monitoring and examination of
Simons computer. After confirming that Simons had indeed downloaded pictures that were pornographic in nature, all the files
on the hard drive of Simons computer were copied from a remote work station. Days later, the contractors representative
finally entered Simons office, removed the original hard drive on Simons computer, replaced it with a copy, and gave the
original to the agency security officer. Thereafter, the agency secured warrants and searched Simons office in the evening
when Simons was not around. The search team copied the contents of Simons computer; computer diskettes found in
Simons desk drawer; computer files stored on the zip drive or on zip drive diskettes; videotapes; and various documents,
including personal correspondence. At his trial, Simons moved to suppress these evidence, arguing that the searches of his
office and computer violated his Fourth Amendment rights. After a hearing, the district court denied the motion and Simons
was found guilty as charged.
Simons appealed his convictions. The US Supreme Court ruled that the searches of Simons computer and office did not
violate his Fourth Amendment rights and the first search warrant was valid. It held that the search remains valid under the
OConnor exception to the warrant requirement because evidence of the crime was discovered in the course of an otherwise
proper administrative inspection. Simons violation of the agencys Internet policy happened also to be a violation of criminal
law; this does not mean that said employer lost the capacity and interests of an employer. The warrantless entry into Simons
office was reasonable under the Fourth Amendment standard announced in OConnor because at the inception of the search,
the employer had "reasonable grounds for suspecting" that the hard drive would yield evidence of misconduct, as the
employer was already aware that Simons had misused his Internet access to download over a thousand pornographic images.
The retrieval of the hard drive was reasonably related to the objective of the search, and the search was not excessively
intrusive. Thus, while Simons had a reasonable expectation of privacy in his office, he did not have such legitimate expectation
of privacy with regard to the files in his computer.
x x x To establish a violation of his rights under the Fourth Amendment, Simons must first prove that he had a legitimate
expectation of privacy in the place searched or the item seized. x x x And, in order to prove a legitimate expectation of privacy,
Simons must show that his subjective expectation of privacy is one that society is prepared to accept as objectively
reasonable. x x x
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x x x We conclude that the remote searches of Simons computer did not violate his Fourth Amendment rights because, in light
of the Internet policy, Simons lacked a legitimate expectation of privacy in the files downloaded from the Internet. Additionally,
we conclude that Simons Fourth Amendment rights were not violated by FBIS retrieval of Simons hard drive from his office.
Simons did not have a legitimate expectation of privacy with regard to the record or fruits of his Internet use in light
of the FBIS Internet policy. The policy clearly stated that FBIS would "audit, inspect, and/or monitor" employees use
of the Internet, including all file transfers, all websites visited, and all e-mail messages, "as deemed appropriate." x x
x This policy placed employees on notice that they could not reasonably expect that their Internet activity would be private.
Therefore, regardless of whether Simons subjectively believed that the files he transferred from the Internet were private, such
a belief was not objectively reasonable after FBIS notified him that it would be overseeing his Internet use. x x x Accordingly,
FBIS actions in remotely searching and seizing the computer files Simons downloaded from the Internet did not violate the
Fourth Amendment.
xxxx
The burden is on Simons to prove that he had a legitimate expectation of privacy in his office. x x x Here, Simons has
shown that he had an office that he did not share. As noted above, the operational realities of Simons workplace may have
diminished his legitimate privacy expectations. However, there is no evidence in the record of any workplace practices,
procedures, or regulations that had such an effect. We therefore conclude that, on this record, Simons possessed a
legitimate expectation of privacy in his office.
xxxx
In the final analysis, this case involves an employees supervisor entering the employees government office and retrieving a
piece of government equipment in which the employee had absolutely no expectation of privacy equipment that the
employer knew contained evidence of crimes committed by the employee in the employees office. This situation may be
contrasted with one in which the criminal acts of a government employee were unrelated to his employment. Here, there was a
conjunction of the conduct that violated the employers policy and the conduct that violated the criminal law. We consider that
FBIS intrusion into Simons office to retrieve the hard drive is one in which a reasonable employer might engage. x x
x42 (Citations omitted; emphasis supplied.)
This Court, in Social Justice Society (SJS) v. Dangerous Drugs Board43 which involved the constitutionality of a provision in
R.A. No. 9165 requiring mandatory drug testing of candidates for public office, students of secondary and tertiary schools,
officers and employees of public and private offices, and persons charged before the prosecutors office with certain offenses,
have also recognized the fact that there may be such legitimate intrusion of privacy in the workplace.
The first factor to consider in the matter of reasonableness is the nature of the privacy interest upon which the drug testing,
which effects a search within the meaning of Sec. 2, Art. III of the Constitution, intrudes. In this case, the office or workplace
serves as the backdrop for the analysis of the privacy expectation of the employees and the reasonableness of drug testing
requirement. The employees privacy interest in an office is to a large extent circumscribed by the companys work policies, the
collective bargaining agreement, if any, entered into by management and the bargaining unit, and the inherent right of the
employer to maintain discipline and efficiency in the workplace. Their privacy expectation in a regulated office environment is,
in fine, reduced; and a degree of impingement upon such privacy has been upheld. (Emphasis supplied.)
Applying the analysis and principles announced in OConnor and Simons to the case at bar, we now address the following
questions: (1) Did petitioner have a reasonable expectation of privacy in his office and computer files?; and (2) Was the search
authorized by the CSC Chair, the copying of the contents of the hard drive on petitioners computer reasonable in its inception
and scope?
In this inquiry, the relevant surrounding circumstances to consider include "(1) the employees relationship to the item seized;
(2) whether the item was in the immediate control of the employee when it was seized; and (3) whether the employee took
actions to maintain his privacy in the item." These factors are relevant to both the subjective and objective prongs of the
reasonableness inquiry, and we consider the two questions together. 44Thus, where the employee used a password on his
computer, did not share his office with co-workers and kept the same locked, he had a legitimate expectation of privacy and
any search of that space and items located therein must comply with the Fourth Amendment.45
We answer the first in the negative. Petitioner failed to prove that he had an actual (subjective) expectation of privacy either in
his office or government-issued computer which contained his personal files. Petitioner did not allege that he had a separate
enclosed office which he did not share with anyone, or that his office was always locked and not open to other employees or
visitors. Neither did he allege that he used passwords or adopted any means to prevent other employees from accessing his
computer files. On the contrary, he submits that being in the public assistance office of the CSC-ROIV, he normally would
have visitors in his office like friends, associates and even unknown people, whom he even allowed to use his computer which
to him seemed a trivial request. He described his office as "full of people, his friends, unknown people" and that in the past 22
years he had been discharging his functions at the PALD, he is "personally assisting incoming clients, receiving documents,
drafting cases on appeals, in charge of accomplishment report, Mamamayan Muna Program, Public Sector Unionism,
Correction of name, accreditation of service, and hardly had anytime for himself alone, that in fact he stays in the office as a
paying customer."46 Under this scenario, it can hardly be deduced that petitioner had such expectation of privacy that society
would recognize as reasonable.
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Moreover, even assuming arguendo, in the absence of allegation or proof of the aforementioned factual circumstances, that
petitioner had at least a subjective expectation of privacy in his computer as he claims, such is negated by the presence of
policy regulating the use of office computers, as in Simons.
Office Memorandum No. 10, S. 2002 "Computer Use Policy (CUP)" explicitly provides:
POLICY
1. The Computer Resources are the property of the Civil Service Commission and may be used only for legitimate
business purposes.
2. Users shall be permitted access to Computer Resources to assist them in the performance of their respective jobs.
3. Use of the Computer Resources is a privilege that may be revoked at any given time.
xxxx
No Expectation of Privacy
4. No expectation of privacy. Users except the Members of the Commission shall not have an expectation of privacy
in anything they create, store, send, or receive on the computer system.
The Head of the Office for Recruitment, Examination and Placement shall select and assign Users to handle the
confidential examination data and processes.
5. Waiver of privacy rights. Users expressly waive any right to privacy in anything they create, store, send, or receive
on the computer through the Internet or any other computer network. Users understand that the CSC may use
human or automated means to monitor the use of its Computer Resources.
6. Non-exclusivity of Computer Resources. A computer resource is not a personal property or for the exclusive use of
a User to whom a memorandum of receipt (MR) has been issued. It can be shared or operated by other
users. However, he is accountable therefor and must insure its care and maintenance.
xxxx
Passwords
12. Responsibility for passwords. Users shall be responsible for safeguarding their passwords for access to the
computer system. Individual passwords shall not be printed, stored online, or given to others. Users shall be
responsible for all transactions made using their passwords. No User may access the computer system with another
Users password or account.
13. Passwords do not imply privacy. Use of passwords to gain access to the computer system or to encode particular
files or messages does not imply that Users have an expectation of privacy in the material they create or receive on
the computer system. The Civil Service Commission has global passwords that permit access to all materials stored
on its networked computer system regardless of whether those materials have been encoded with a particular Users
password. Only members of the Commission shall authorize the application of the said global passwords.
x x x x47 (Emphasis supplied.)
The CSC in this case had implemented a policy that put its employees on notice that they have no expectation of privacy
in anything they create, store, send or receive on the office computers, and that the CSC may monitor the use of the
computer resources using both automated or human means. This implies that on-the-spot inspections may be done to ensure
that the computer resources were used only for such legitimate business purposes.
One of the factors stated in OConnor which are relevant in determining whether an employees expectation of privacy in the
workplace is reasonable is the existence of a workplace privacy policy. 48 In one case, the US Court of Appeals Eighth Circuit
held that a state university employee has not shown that he had a reasonable expectation of privacy in his computer files
where the universitys computer policy, the computer user is informed not to expect privacy if the university has a legitimate
reason to conduct a search. The user is specifically told that computer files, including e-mail, can be searched when the
university is responding to a discovery request in the course of litigation. Petitioner employee thus cannot claim a violation of
Fourth Amendment rights when university officials conducted a warrantless search of his computer for work-related
materials.49
As to the second point of inquiry on the reasonableness of the search conducted on petitioners computer, we answer in the
affirmative.
The search of petitioners computer files was conducted in connection with investigation of work-related misconduct prompted
by an anonymous letter-complaint addressed to Chairperson David regarding anomalies in the CSC-ROIV where the head of
the Mamamayan Muna Hindi Mamaya Na division is supposedly "lawyering" for individuals with pending cases in the CSC.
Chairperson David stated in her sworn affidavit:
8. That prior to this, as early as 2006, the undersigned has received several text messages from unknown sources adverting to
certain anomalies in Civil Service Commission Regional Office IV (CSCRO IV) such as, staff working in another government
agency, "selling" cases and aiding parties with pending cases, all done during office hours and involved the use of government
properties;
9. That said text messages were not investigated for lack of any verifiable leads and details sufficient to warrant an
investigation;

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10. That the anonymous letter provided the lead and details as it pinpointed the persons and divisions involved in the alleged
irregularities happening in CSCRO IV;
11. That in view of the seriousness of the allegations of irregularities happening in CSCRO IV and its effect on the integrity of
the Commission, I decided to form a team of Central Office staff to back up the files in the computers of the Public Assistance
and Liaison Division (PALD) and Legal Division;
x x x x50
A search by a government employer of an employees office is justified at inception when there are reasonable grounds for
suspecting that it will turn up evidence that the employee is guilty of work-related misconduct.51 Thus, in the 2004 case
decided by the US Court of Appeals Eighth Circuit, it was held that where a government agencys computer use policy
prohibited electronic messages with pornographic content and in addition expressly provided that employees do not have any
personal privacy rights regarding their use of the agency information systems and technology, the government employee had
no legitimate expectation of privacy as to the use and contents of his office computer, and therefore evidence found during
warrantless search of the computer was admissible in prosecution for child pornography. In that case, the defendant
employees computer hard drive was first remotely examined by a computer information technician after his supervisor
received complaints that he was inaccessible and had copied and distributed non-work-related e-mail messages throughout
the office. When the supervisor confirmed that defendant had used his computer to access the prohibited websites, in
contravention of the express policy of the agency, his computer tower and floppy disks were taken and examined. A formal
administrative investigation ensued and later search warrants were secured by the police department. The initial remote
search of the hard drive of petitioners computer, as well as the subsequent warrantless searches was held as valid under the
OConnor ruling that a public employer can investigate work-related misconduct so long as any search is justified at inception
and is reasonably related in scope to the circumstances that justified it in the first place. 52
Under the facts obtaining, the search conducted on petitioners computer was justified at its inception and scope. We quote
with approval the CSCs discussion on the reasonableness of its actions, consistent as it were with the guidelines established
by OConnor:
Even conceding for a moment that there is no such administrative policy, there is no doubt in the mind of the Commission that
the search of Pollos computer has successfully passed the test of reasonableness for warrantless searches in the workplace
as enunciated in the above-discussed American authorities. It bears emphasis that the Commission pursued the search in
its capacity as a government employer and that it was undertaken in connection with an investigation involving a
work-related misconduct, one of the circumstances exempted from the warrant requirement. At the inception of the search, a
complaint was received recounting that a certain division chief in the CSCRO No. IV was "lawyering" for parties having
pending cases with the said regional office or in the Commission. The nature of the imputation was serious, as it was
grievously disturbing. If, indeed, a CSC employee was found to be furtively engaged in the practice of "lawyering" for parties
with pending cases before the Commission would be a highly repugnant scenario, then such a case would have shattering
repercussions. It would undeniably cast clouds of doubt upon the institutional integrity of the Commission as a quasi-judicial
agency, and in the process, render it less effective in fulfilling its mandate as an impartial and objective dispenser of
administrative justice. It is settled that a court or an administrative tribunal must not only be actually impartial but must be seen
to be so, otherwise the general public would not have any trust and confidence in it.
Considering the damaging nature of the accusation, the Commission had to act fast, if only to arrest or limit any
possible adverse consequence or fall-out. Thus, on the same date that the complaint was received, a search was forthwith
conducted involving the computer resources in the concerned regional office. That it was the computers that were
subjected to the search was justified since these furnished the easiest means for an employee to encode and store
documents. Indeed, the computers would be a likely starting point in ferreting out incriminating evidence.
Concomitantly, the ephemeral nature of computer files, that is, they could easily be destroyed at a click of a button,
necessitated drastic and immediate action.Pointedly, to impose the need to comply with the probable cause requirement
would invariably defeat the purpose of the wok-related investigation.
Worthy to mention, too, is the fact that the Commission effected the warrantless search in an open and transparent manner.
Officials and some employees of the regional office, who happened to be in the vicinity, were on hand to observe the process
until its completion. In addition, the respondent himself was duly notified, through text messaging, of the search and the
concomitant retrieval of files from his computer.
All in all, the Commission is convinced that the warrantless search done on computer assigned to Pollo was not, in any way,
vitiated with unconstitutionality. It was a reasonable exercise of the managerial prerogative of the Commission as an employer
aimed at ensuring its operational effectiveness and efficiency by going after the work-related misfeasance of its employees.
Consequently, the evidence derived from the questioned search are deemed admissible.53
Petitioners claim of violation of his constitutional right to privacy must necessarily fail. His other argument invoking the privacy
of communication and correspondence under Section 3(1), Article III of the 1987 Constitution is also untenable considering the
recognition accorded to certain legitimate intrusions into the privacy of employees in the government workplace under the
aforecited authorities. We likewise find no merit in his contention that OConnor and Simons are not relevant because the
present case does not involve a criminal offense like child pornography. As already mentioned, the search of petitioners
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computer was justified there being reasonable ground for suspecting that the files stored therein would yield incriminating
evidence relevant to the investigation being conducted by CSC as government employer of such misconduct subject of the
anonymous complaint. This situation clearly falls under the exception to the warrantless requirement in administrative
searches defined in OConnor.
The Court is not unaware of our decision in Anonymous Letter-Complaint against Atty. Miguel Morales, Clerk of Court,
Metropolitan Trial Court of Manila54 involving a branch clerk (Atty. Morales) who was investigated on the basis of an
anonymous letter alleging that he was consuming his working hours filing and attending to personal cases, using office
supplies, equipment and utilities. The OCA conducted a spot investigation aided by NBI agents. The team was able to access
Atty. Morales personal computer and print two documents stored in its hard drive, which turned out to be two pleadings, one
filed in the CA and another in the RTC of Manila, both in the name of another lawyer. Atty. Morales computer was seized and
taken in custody of the OCA but was later ordered released on his motion, but with order to the MISO to first retrieve the files
stored therein. The OCA disagreed with the report of the Investigating Judge that there was no evidence to support the charge
against Atty. Morales as no one from the OCC personnel who were interviewed would give a categorical and positive
statement affirming the charges against Atty. Morales, along with other court personnel also charged in the same case. The
OCA recommended that Atty. Morales should be found guilty of gross misconduct. The Court En Banc held that while Atty.
Morales may have fallen short of the exacting standards required of every court employee, the Court cannot use the evidence
obtained from his personal computer against him for it violated his constitutional right against unreasonable searches and
seizures. The Court found no evidence to support the claim of OCA that they were able to obtain the subject pleadings with the
consent of Atty. Morales, as in fact the latter immediately filed an administrative case against the persons who conducted the
spot investigation, questioning the validity of the investigation and specifically invoking his constitutional right against
unreasonable search and seizure. And as there is no other evidence, apart from the pleadings, retrieved from the unduly
confiscated personal computer of Atty. Morales, to hold him administratively liable, the Court had no choice but to dismiss the
charges against him for insufficiency of evidence.
The above case is to be distinguished from the case at bar because, unlike the former which involved a personal computer of
a court employee, the computer from which the personal files of herein petitioner were retrieved is a government-issued
computer, hence government property the use of which the CSC has absolute right to regulate and monitor. Such relationship
of the petitioner with the item seized (office computer) and other relevant factors and circumstances under American Fourth
Amendment jurisprudence, notably the existence of CSC MO 10, S. 2007 on Computer Use Policy, failed to establish that
petitioner had a reasonable expectation of privacy in the office computer assigned to him.
Having determined that the personal files copied from the office computer of petitioner are admissible in the administrative
case against him, we now proceed to the issue of whether the CSC was correct in finding the petitioner guilty of the charges
and dismissing him from the service.
Well-settled is the rule that the findings of fact of quasi-judicial agencies, like the CSC, are accorded not only respect but even
finality if such findings are supported by substantial evidence. Substantial evidence is such amount of relevant evidence which
a reasonable mind might accept as adequate to support a conclusion, even if other equally reasonable minds might
conceivably opine otherwise.55
The CSC based its findings on evidence consisting of a substantial number of drafts of legal pleadings and documents stored
in his office computer, as well as the sworn affidavits and testimonies of the witnesses it presented during the formal
investigation. According to the CSC, these documents were confirmed to be similar or exactly the same content-wise with
those on the case records of some cases pending either with CSCRO No. IV, CSC-NCR or the Commission Proper. There
were also substantially similar copies of those pleadings filed with the CA and duly furnished the Commission. Further, the
CSC found the explanation given by petitioner, to the effect that those files retrieved from his computer hard drive actually
belonged to his lawyer friends Estrellado and Solosa whom he allowed the use of his computer for drafting their pleadings in
the cases they handle, as implausible and doubtful under the circumstances. We hold that the CSCs factual finding regarding
the authorship of the subject pleadings and misuse of the office computer is well-supported by the evidence on record, thus:
It is also striking to note that some of these documents were in the nature of pleadings responding to the orders, decisions or
resolutions of these offices or directly in opposition to them such as a petition for certiorari or a motion for reconsideration of
CSC Resolution. This indicates that the author thereof knowingly and willingly participated in the promotion or advancement of
the interests of parties contrary or antagonistic to the Commission. Worse, the appearance in one of the retrieved documents
the phrase, "Eric N. Estr[e]llado, Epal kulang ang bayad mo," lends plausibility to an inference that the preparation or drafting
of the legal pleadings was pursued with less than a laudable motivation. Whoever was responsible for these documents was
simply doing the same for the money a "legal mercenary" selling or purveying his expertise to the highest bidder, so to
speak.
Inevitably, the fact that these documents were retrieved from the computer of Pollo raises the presumption that he was the
author thereof. This is because he had a control of the said computer. More significantly, one of the witnesses, Margarita
Reyes, categorically testified seeing a written copy of one of the pleadings found in the case records lying on the table of the
respondent. This was the Petition for Review in the case of Estrellado addressed to the Court of Appeals. The said

375
circumstances indubitably demonstrate that Pollo was secretly undermining the interest of the Commission, his very own
employer.
To deflect any culpability, Pollo would, however, want the Commission to believe that the documents were the personal files of
some of his friends, including one Attorney Ponciano Solosa, who incidentally served as his counsel of record during the
formal investigation of this case. In fact, Atty. Solosa himself executed a sworn affidavit to this effect. Unfortunately, this
contention of the respondent was directly rebutted by the prosecution witness, Reyes, who testified that during her entire stay
in the PALD, she never saw Atty. Solosa using the computer assigned to the respondent. Reyes more particularly stated that
she worked in close proximity with Pollo and would have known if Atty. Solosa, whom she personally knows, was using the
computer in question. Further, Atty. Solosa himself was never presented during the formal investigation to confirm his sworn
statement such that the same constitutes self-serving evidence unworthy of weight and credence. The same is true with the
other supporting affidavits, which Pollo submitted.
At any rate, even admitting for a moment the said contention of the respondent, it evinces the fact that he was unlawfully
authorizing private persons to use the computer assigned to him for official purpose, not only once but several times gauging
by the number of pleadings, for ends not in conformity with the interests of the Commission. He was, in effect, acting as a
principal by indispensable cooperationOr at the very least, he should be responsible for serious misconduct for repeatedly
allowing CSC resources, that is, the computer and the electricity, to be utilized for purposes other than what they were officially
intended.
Further, the Commission cannot lend credence to the posturing of the appellant that the line appearing in one of the
documents, "Eric N. Estrellado, Epal kulang ang bayad mo," was a private joke between the person alluded to therein, Eric N.
Estrellado, and his counsel, Atty. Solosa, and not indicative of anything more sinister. The same is too preposterous to be
believed. Why would such a statement appear in a legal pleading stored in the computer assigned to the respondent, unless
he had something to do with it?56
Petitioner assails the CA in not ruling that the CSC should not have entertained an anonymous complaint since Section 8 of
CSC Resolution No. 99-1936 (URACC) requires a verified complaint:
Rule II Disciplinary Cases
SEC. 8. Complaint. - A complaint against a civil service official or employee shall not be given due course unless it is in writing
and subscribed and sworn to by the complainant. However, in cases initiated by the proper disciplining authority, the
complaint need not be under oath.
No anonymous complaint shall be entertained unless there is obvious truth or merit to the allegation thereinor supported
by documentary or direct evidence, in which case the person complained of may be required to comment.
xxxx
We need not belabor this point raised by petitioner. The administrative complaint is deemed to have been initiated by the CSC
itself when Chairperson David, after a spot inspection and search of the files stored in the hard drive of computers in the two
divisions adverted to in the anonymous letter -- as part of the disciplining authoritys own fact-finding investigation and
information-gathering -- found a prima facie case against the petitioner who was then directed to file his comment. As this
Court held in Civil Service Commission v. Court of Appeals 57 --
Under Sections 46 and 48 (1), Chapter 6, Subtitle A, Book V of E.O. No. 292 and Section 8, Rule II of Uniform Rules on
Administrative Cases in the Civil Service, a complaint may be initiated against a civil service officer or employee by the
appropriate disciplining authority, even without being subscribed and sworn to. Considering that the CSC, as the disciplining
authority for Dumlao, filed the complaint, jurisdiction over Dumlao was validly acquired. (Emphasis supplied.)
As to petitioners challenge on the validity of CSC OM 10, S. 2002 (CUP), the same deserves scant consideration. The alleged
infirmity due to the said memorandum order having been issued solely by the CSC Chair and not the Commission as a
collegial body, upon which the dissent of Commissioner Buenaflor is partly anchored, was already explained by Chairperson
David in her Reply to the Addendum to Commissioner Buenaflors previous memo expressing his dissent to the actions and
disposition of the Commission in this case. According to Chairperson David, said memorandum order was in fact exhaustively
discussed, provision by provision in the January 23, 2002 Commission Meeting, attended by her and former Commissioners
Erestain, Jr. and Valmores. Hence, the Commission En Banc at the time saw no need to issue a Resolution for the purpose
and further because the CUP being for internal use of the Commission, the practice had been to issue a memorandum
order.58 Moreover, being an administrative rule that is merely internal in nature, or which regulates only the personnel of the
CSC and not the public, the CUP need not be published prior to its effectivity.59
In fine, no error or grave abuse of discretion was committed by the CA in affirming the CSCs ruling that petitioner is guilty of
grave misconduct, dishonesty, conduct prejudicial to the best interest of the service, and violation of R.A. No. 6713. The
gravity of these offenses justified the imposition on petitioner of the ultimate penalty of dismissal with all its accessory
penalties, pursuant to existing rules and regulations.
WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated October 11, 2007 and Resolution dated
February 29, 2008 of the Court of Appeals in CA-G.R. SP No. 98224 are AFFIRMED.
With costs against the petitioner.
SO ORDERED.
376
G.R. No. 182848 October 5, 2011
EMIRATE SECURITY AND MAINTENANCE SYSTEMS, INC. and ROBERTO A. YAN, Petitioners,
vs.
GLENDA M. MENESE, Respondent.
DECISION
BRION, J.:
Before the Court is the petition for review on certiorari1 which assails the decision2 and the resolution3 of the Court of Appeals
(CA) rendered on February 28, 2008 and May 14, 2008, respectively, in CA-G.R. SP. No. 100073.4
The Antecedents
The facts of the case are summarized below.
On June 5, 2001, respondent Glenda M. Menese (Menese) filed a complaint for constructive dismissal; illegal reduction of
salaries and allowances; separation pay; refund of contribution to cash bond; overtime, holiday, rest day and premium pay;
damages; and attorneys fees against the petitioners, Emirate Security and Maintenance Systems, Inc. (agency) and its
General Manager, Robert A. Yan (Yan).
Menese alleged in the compulsory arbitration proceedings that on April 1, 1999, the agency engaged her services as payroll
and billing clerk. She was assigned to the agencys security detachment at the Philippine General Hospital (PGH). She was
given a monthly salary of P9,200.00 and an allowance of P2,500.00, for a total of P11,700.00 in compensation. Effective May
2001, her allowance was allegedly reduced to P1,500.00 without notice, and P100.00 was deducted from her salary every
month as her contribution to a cash bond which lasted throughout her employment. She was required to work seven (7) days a
week, from 8:00 a.m. to 5:00 p.m. She was also required to report for work on holidays, except on New Years Day and
Christmas. She claimed that she was never given overtime, holiday, rest day and premium pay.
Menese further alleged that on May 4, 2001, she started getting pressures from the agency for her to resign from her position
because it had been committed to a certain Amy Claro, a protge of Mrs. Violeta G. Dapula (Dapula) the new chief of the
Security Division of the University of the Philippines (UP) Manila and PGH. Menese raised the matter with Yan who told her
that the agency was in the process of establishing goodwill with Dapula, so it had to sacrifice her position to accommodate
Dapulas request to hire Claro.
Menese claimed that she was told not to worry because if she was still interested in working with the agency, she could still be
retained as a lady guard with a salary equivalent to the minimum wage. She would then be detailed to another detachment
because Dapula did not like to see her around anymore. If the offer was acceptable to her, she should report to the agencys
personnel officer for the issuance of the necessary duty detail order. Menese thought about the offer and soon realized that
she was actually being demoted in rank and salary. She eventually decided to decline the offer. She continued reporting to the
PGH detachment and performed her usual functions as if nothing happened.
Menese alleged that at this juncture, Claro reported at the agencys PGH detachment and performed the functions she was
doing. She bewailed that thereafter she continuously received harassment calls and letters. She was also publicly humiliated
and badly treated at the detachment. The agency, through Security Officer Alton Acab, prohibited her from using the office
computer. On May 18, 2001, Jose Dante Chan, the agencys PGH detachment commander, arrogantly told her to leave PGH.
Again on May 25, 2001, Chan shouted at her and told her to pack her things and to leave immediately, and not to return to the
detachment anymore; otherwise, she would be physically driven out of the office.
Still not satisfied with what they did, the petitioners allegedly withheld her salary for May 16-31, 2001. She claimed that the
petitioners dismissed her from the service without just cause and due process.
The petitioners, for their part, denied liability. They alleged that on May 8, 2001, Dapula informed the agency in
writing,5 through Yan, that she had been receiving numerous complaints from security guards and other agency employees
about Meneses unprofessional conduct. She told the petitioners that she was not tolerating Meneses negative work attitude
despite the fact that she is the wife of Special Police Major Divino Menese who is a member of the UP Manila police force, and
that as a matter of policy and out of delicadeza, she does not condone nepotism in her division.
On the basis of Dapulas letter, Yan sent Menese a memorandum dated May 16, 2001, 6 instructing her to report to the
agencys head office and, there and then, discussed with her Dapulas letter. Yan informed Menese that upon Dapulas
request, she would be transferred to another assignment which would not involve any demotion in rank or diminution in her
salary and other benefits. Although Menese said that she would think about the matter, the petitioners were surprised to
receive summons from the labor arbiter regarding the complaint.
The Compulsory Arbitration Rulings
In a decision dated March 14, 2002,7 Labor Arbiter Jovencio LL. Mayor, Jr. declared Menese to have been constructively
dismissed. He found the petitioners wanting in good faith in transferring Menese to another detachment as she would be
suffering a demotion in rank and a diminution in pay. Accordingly, he ordered the petitioners to immediately reinstate Menese
and, solidarily, to pay her full backwages of P83,443.75 (latest computation); P66,924.00 in monetary benefits; P50,000.00
and P20,000.00 in moral and exemplary damages, respectively; and attorneys fees of P15,036.74.
The petitioners appealed to the National Labor Relations Commission (NLRC). On September 30, 2003, the NLRC Second
Division issued a resolution8 granting the appeal and reversing the labor arbiters decision. It ruled that Menese was not
377
constructively dismissed but was merely transferred to another detachment. It opined that the transfer was a valid exercise of
the petitioners management prerogative. However, it ruled that despite Meneses refusal to accept the transfer, she cannot be
made liable for abandonment as her refusal was based on her honest belief that she was being constructively dismissed. The
NLRC ordered Menese, at her option, to immediately report to the agencys head office and the agency to accept her back to
work. It absolved Yan from liability, and deleted the award of backwages, overtime pay and damages.
On October 28, 2003, Menese filed a partial motion for reconsideration 9 of the NLRC resolution and later (on June 17, 2005), a
motion to recall the entry of judgment of October 31, 2003. On June 1, 2007, the NLRC rendered a resolution 10 setting aside
the entry of judgment and denying Meneses partial motion for reconsideration.
The Petition for Certiorari
Menese elevated her case to the CA through a petition for certiorari11 under Rule 65 of the Rules of Court. In the main, she
argued that the agency was in bad faith when it issued the memoranda dated May 16, 2001, 12 May 22, 200113 and May 28,
2001,14 ordering her transfer from the PGH detachment to the agencys head office. She posited that it was a ploy to create a
vacancy in the detachment to accommodate the entry of Claro, Dapulas protge. She regarded the transfer as a removal
from her position at PGH a constructive dismissal.
The agency, in rebuttal, posited that Menese was not illegally dismissed, but was merely transferred to its head office in
response to the request of the new head of the UP-PGH security division for the transfer. The action, it maintained, was a valid
exercise of its management prerogative. Thus, Menese was guilty of abandoning her employment when she refused to report
for work at her new posting.
The CA Decision
The CA granted the petition in its decision of February 28, 2008. 15 It set aside the assailed resolutions of the NLRC and
reinstated the March 14, 2002 decision of the labor arbiter.
As the labor arbiter did, the CA found Menese to have been constructively, and therefore illegally, dismissed. It noted that the
memoranda16 on Meneses transfer were prompted by Daculas letter, dated May 8, 2001, 17 to Yan, which contained
allegations on Meneses supposed unprofessional conduct and involvement in nepotism. It further noted that when Yan asked
Dapula in writing18 to provide the agency with documents/evidence that would support her allegations, she failed to do so. The
CA thus concluded that the reasons for Meneses transfer did not exist or that no substantial evidence was presented in that
regard.
The CA brushed aside the petitioners argument that it was their prerogative to transfer Menese from the agencys PGH
detachment to its head office at Ortigas Avenue, Mandaluyong City. Relying on applicable jurisprudence, the appellate court
pointed out that while it is the managements prerogative to transfer an employee from one office to another within the
business establishment, it is not without limitation. It must be exercised in such a way that there is no demotion in rank or
diminution in pay, benefits and other privileges. Otherwise, the transfer amounts to a constructive dismissal, as correctly
pointed out by the labor arbiter in his decision of March 14, 2002. 19 In this light, the CA held that the petitioners failed to prove
that Menese abandoned her employment.
The CA sustained all the other findings of the labor arbiter. On the whole, it ruled that the NLRC misappreciated the evidence
in the case. The petitioners moved for reconsideration, but the CA denied the motion in its resolution of May 14, 2008. 20
The Petitioners Case
Aside from the petition itself,21 the petitioners filed a reply to Meneses comment22 and a memorandum23 where they asked for
a reversal of the assailed CA rulings on the ground that the CA gravely erred in:
(1) Affirming the labor arbiters findings that Menese was constructively dismissed;
(2) Holding Yan solidarily liable with the agency for damages; and
(3) Sustaining the award of backwages, damages and attorneys fees, as well as overtime pay.
The petitioners insist that Menese was not illegally dismissed. They argue that it was Menese who deliberately and
unjustifiably refused to work despite several notices 24 to her after she was validly relieved from her current work assignment
due to a clients request. They maintain that since Menese chose not to return to work, she must be considered either to have
resigned from or to have abandoned her employment. They further maintain that nothing on record shows any positive or overt
act of the agency in dismissing Menese.
Moreover, the petitioners regard Meneses continued refusal to report to the agencys head office as an act of gross
insubordination constituting a just cause for termination under Article 282(a) of the Labor Code. They argue that under this
law, an employer may terminate an employment for serious misconduct or willful disobedience by the employee of the lawful
orders of his employer or his representative in connection with his work.
The petitioners posit that she is not entitled to reinstatement and backwages since she failed to comply with the reinstatement
option stated in the NLRC resolution. Neither is she entitled to overtime pay because she did not work beyond the eight (8)-
hour working period; her one (1) hour time off from twelve noon to 1:00 p.m. is not compensable. Neither is Menese entitled to
moral and exemplary damages because the evidence on record does not show any malice or bad faith on their part to justify
the award.
The petitioners likewise take exception to the award of attorneys fees as the labor arbiters decision and the NLRCs
resolution failed to state the justification for the award. They further contend that the CA gravely erred in upholding the labor
378
arbiters ruling that Yan is solidarily liable with the agency, as Yan was merely acting in his capacity as the agencys general
manager, and that there is no showing that Yan acted maliciously or in bad faith when he ordered Meneses transfer. They
also point out that Menese did not challenge before the CA the NLRC ruling absolving Yan from any liability.
The Case for Menese
By way of her comment25 and memorandum,26 Menese asks that the appeal be denied for lack of merit.
She claims that at the arbitration stage, the petitioners readily admitted the fact of her removal, manifesting in open session
their lack of interest to settle the case amicably as they have a strong evidence to support their defense of her dismissal for
cause. She observed during the hearing that the petitioners were very confident about their case, because according to them,
they had Dapulas letter asking for her immediate removal.27
Menese further claims that the petitioners realized that they did not have the necessary evidence, so Yan wrote Dapula a letter
asking her for proof of the complaints or grievances of the security guards against Menese.28Dapula did not produce or
present the evidence they asked for resulting in their failure to substantiate their defense of dismissal for cause. Menese
contends that the petitioners then revised their theory of the case and made it appear that she was not actually dismissed but
was merely transferred, purportedly in the exercise of their management prerogative.
She posits that her transfer was motivated by ill will and bad faith, as it was done to facilitate the entry of a favored applicant to
the PGH detachment. She intimates that the labor arbiter resolved the case correctly when he found her to have been
constructively or illegally dismissed. She bewails the NLRCs surprising reversal of the labor arbiters decision, but feels
vindicated when the CA set aside the NLRC ruling.
Menese submits that the CA is correct in nullifying the NLRCs reversal of her illegal dismissal case because the labor tribunal
closed its eyes to the fact that bad faith attended her transfer. She points out that the petitioners twin directives, vis--vis her
transfer upon which the NLRC based its ruling, "were both issued for a selfish and immoral purpose;" 29 the first, dated May 16,
2001,30 was issued for the purpose of creating a vacancy, and the second, dated May 22, 2001,31 was intended to cover up
the wrongdoing that was earlier committed. In other words, the directives were tainted with malice and ill will. On the matter of
Yans liability, Menese maintains that the NLRC committed a serious error in allowing him to get away with his wrongdoing
considering the injustice done to her as a result of her unceremonious dismissal.
In a different vein, Menese assails the NLRCs exclusion of the one-hour meal break as overtime work, for it erroneously
assumed that her employer had been giving its employees a 60 minute time-off for regular meals and that she was not
performing work during the period. She argues that this was not the actual practice in the workplace, contending that she
continued working even during the one-hour meal break.
Finally, Menese maintains that the CA correctly reinstated the labor arbiters award of attorneys fees and the imposition of
solidary liability on Yan and the agency. She posits that in her quest for justice because of her unceremonious dismissal, she
was constrained to engage the services of a counsel to handle her case.
The Courts Ruling
We deny the petition for lack of merit. The evidence of Meneses unwarranted, unjustified and, in her own language,
"unceremonious" dismissal is so glaring that to ignore it is to commit, as the NLRC did, grave abuse of discretion.
We note as a starting point that at the time material to the case, Menese ceased to be the agencys payroll and billing clerk at
its PGH detachment. The position was taken away from her as she had been transferred to the agencys main office on
Ortigas Avenue, Mandaluyong City, upon the request of Dapula, the new chief of the UP-PGH Security Division. The transfer
was to be carried out through a memorandum dated May 16, 2001 32 issued by Yan; a second memorandum dated May 22,
200133 issued by Personnel Officer Edwin J. Yabes, reminding Menese of Yans instruction for her to report to the main office;
and a third memorandum dated May 28, 2001,34also issued by Yabes informing Menese that it was her second notice to
assume her work detail at the main office. Yabes instructed her to report for work on May 30, 2001.
Citing Mendoza v. Rural Bank of Lucban,35 the petitioners argue that the transfer was undertaken in the exercise of
management prerogative in the pursuit of their legitimate interests. They submit that Menese refused to comply with the valid
transfer orders they issued, making her liable for abandonment and insubordination. They argue that nothing on record shows
that she was illegally dismissed as no dismissal had been imposed on her.
On a superficial consideration, the petitioners position looks unassailable as indeed an employer can regulate, generally
without restraint and according to its own discretion and judgment, every aspect of its business, including work assignments
and transfer of employees, subject only to limitations imposed by law. 36 This submission, however, glossed over or
suppressed a crucial factor in the present labor controversy. We refer to Dapulas letter to Yan in early May 2001, 37 asking for
Meneses transfer allegedly due to numerous complaints from security guards and co-workers regarding her
unprofessionalism and because of nepotism; Menese is the wife of a member of the UP Manila police force.
Had Yan inquired into Dapulas claim of Meneses alleged unprofessionalism, ideally through an administrative investigation,
he could have been provided with a genuine reason assuming proof of Dapulas accusation existed for Meneses
transfer or even for her dismissal, if warranted. That the agency did not get into the bottom of Dapulas letter before it
implemented Meneses transfer is indicative of the sheer absence of an objective justification for the transfer. The most that
the agency did was to write Dapula a letter, through Yan, asking her to provide documents/evidence in support of her request
for Meneses transfer.38 Significantly, Yans request came after the labor arbiters summons to Yan regarding Meneses
379
complaint. Dapula never responded to Yans letter and neither did she provide the evidence needed for the agencys defense
in the complaint.
As Menese noted, the petitioners did not submit as annex to the petition Yans letter to Dapula, and the reason appears to be
obvious they were trying to avoid calling attention to the absence of proof of Meneses alleged unprofessionalism and her
involvement in nepotism. Evidently, the basis for Dapulas request did not exist. We thus find credible Meneses contention
that her transfer was a ploy to remove her from the PGH detachment to accommodate the entry of Dapulas protge. In short,
the agency wanted to create a vacancy for Claro, the protge. Confronted with this clear intent of the petitioners, we cannot
see how Meneses transfer could be considered a valid exercise of management prerogative. As Menese rightly put it, her
transfer was arbitrarily done, motivated no less by ill will and bad faith.
In Blue Dairy Corporation v. NLRC,39 the Court stressed as a matter of principle that the managerial prerogative to transfer
personnel must be exercised without abuse of discretion, bearing in mind the basic elements of justice and fair play. Having
the right should not be confused with the manner in which that right is exercised. Thus, it should not be used as a subterfuge
by the employer to get rid of "an undesirable worker." Measured against this basic precept, the petitioners undoubtedly abused
their discretion or authority in transferring Menese to the agencys head office. She had become "undesirable" because she
stood in the way of Claros entry into the PGH detachment. Menese had to go, thus the need for a pretext to get rid of her. The
request of a client for the transfer became the overriding command that prevailed over the lack of basis for the transfer.
We cannot blame Menese for refusing Yans offer to be transferred.1avvphi1 Not only was the transfer arbitrary and done in
bad faith, it would also result, as Menese feared, in a demotion in rank and a diminution in pay. Although Yan informed
Menese that "based on the request of the client, she will be transferred to another assignment which however will not involve
any demotion in rank nor diminution in her salaries and other benefits," 40 the offer was such as to invite reluctance and
suspicion as it was couched in a very general manner. We find credible Meneses submission on this point, i.e., that under the
offered transfer: (1) she would hold the position of lady guard and (2) she would be paid in accordance with the statutory
minimum wage, or from P11,720.00 to P7,500.00.
In these lights, Meneses transfer constituted a constructive dismissal as it had no justifiable basis and entailed a demotion in
rank and a diminution in pay for her. For a transfer not to be considered a constructive dismissal, the employer must be able to
show that the transfer is for a valid reason, entails no diminution in the terms and conditions of employment, and must be
unreasonably inconvenient or prejudicial to the employee. If the employer fails to meet these standards, the employees
transfer shall amount, at the very least, to constructive dismissal. 41The petitioners, unfortunately for them, failed to come up to
these standards.
In declaring Meneses transfer to be in the valid exercise of the petitioners management prerogative, the NLRC grossly
misappreciated the evidence and, therefore, gravely abused its discretion in closing its eyes to the patent injustice committed
on Menese. It completely disregarded the obvious presence of bad faith in Meneses transfer. Labor justice demands that
Menese be awarded moral and exemplary damages 42 and, for having been constrained to litigate in order to protect her rights,
attorneys fees.43
Yans solidary liability
Yan had been aware all the time of the utter lack of a valid reason for Meneses transfer. He had been aware all the time that
Dapulas charges against Menese the ostensible reason for the transfer were nonexistent as Dapula failed to
substantiate the charges. He was very much a part of the flagrant and duplicitous move to get rid of Menese to give way to
Claro, Dapulas protge.
Based on the facts, Yan is as guilty as the agency in causing the transfer that was undertaken in bad faith and in a wanton and
oppressive manner. Thus, he should be solidarily liable with the agency for Meneses monetary awards.
The overtime pay award
While the labor arbiter declared that Meneses claim for overtime pay is unrebutted 44 and, indeed, nowhere in the petitioners
position paper did they controvert Meneses claim, we hold that the claim must still be substantiated. In Global Incorporated v.
Commissioner Atienza,45 a claim for overtime pay will not be granted for want of factual and legal basis. In this respect, the
records indicate that the labor arbiter granted Meneses claim for holiday pay, rest day and premium pay on the basis of
payrolls.46 There is no such proof in support of Meneses claim for overtime pay other than her contention that she worked
from 8:00 a.m. up to 5:00 p.m. She presented no evidence to show that she was working during the entire one hour meal
break. We thus find the NLRCs deletion of the overtime pay award in order.
Also, the NLRC noted that the award of P2,600.00 for the refund of the cash bond deposit is overstated and should be
adjusted to P600.00 only, as indicated by the payrolls. We likewise find the adjustment in order.
All told, except for the above clarifications on the overtime pay award and the refund of the cash bond deposit, we reiterate
and so declare the petition to be devoid of merit.
WHEREFORE, premises considered, except for the overtime pay award and the refund of deposit for the cash bond, the
petition is DENIED for lack of merit. The assailed decision and resolution of the Court of Appeals are AFFIRMED, with the
following modifications:
1) The deletion of the overtime pay award; and
2) Adjustment of the refund of the cash or surety bond deposit award from P2,500.00 to P600.00.
380
Costs against the petitioners.
SO ORDERED.

G.R. No. 198534 July 3, 2013

JENNY F. PECKSON, Petitioner,
vs.
ROBINSONS SUPERMARKET CORPORATION, JODY GADIA, ROENA SARTE, and RUBY ALEX,Respondents.
DECISION
REYES, J.:
For resolution is the Petition for Review on Certiorari1 of the Decision2 dated June 8, 2011 of the Court of Appeals (CA) in CA-
G.R. SP No. 109604 affirming the Decision3 dated February 25, 2009 of the National Labor Relations Commission (NLRC) in
NLRC NCR Case No. 00-11-09316-06/NLRC LAC No. 002020-07, which upheld the Dismissal4 by the Labor Arbiter (LA) on
May 30, 2007 of Jenny F. Peckson's (petitioner) complaint for constructive dismissal.
Antecedent Facts and Proceedings
The petitioner first joined the Robinsons Supermarket Corporation (RSC) as a Sales Clerk on November 3, 1987. On October
26, 2006, she was holding the position of Category Buyer when respondent Roena Sarte (Sarte), RSCs Assistant Vice-
President for Merchandising, reassigned her to the position of Provincial Coordinator, effective November 1, 2006. Claiming
that her new assignment was a demotion because it was non-supervisory and clerical in nature, the petitioner refused to turn
over her responsibilities to the new Category Buyer, or to accept her new responsibilities as Provincial Coordinator. Jody
Gadia (Gadia) and Ruby Alex (Alex) were impleaded because they were corporate officers of the RSC.
In a memorandum to the petitioner dated November 13, 2006,6 the RSC, through Sarte, demanded an explanation from her
within 48 hours for her refusal to accept her new assignment despite written and verbal demands. Sarte cited a company rule,
Offenses Subject to Disciplinary Action No. 4.07, which provided that "[d]isobedience, refusal or failure to do assigned task or
to obey superiors/officials orders/instructions, or to follow established procedures or practices without valid reason" would be
meted the penalty of suspension.
The petitioner ignored the 48-hour deadline to explain imposed by Sarte. On November 23, 2006, Sarte issued her another
memorandum,7 reiterating her demand to explain in writing within 48 hours why she persistently refused to assume her new
position, and warning her that this could be her final chance to present her side or be deemed to have waived her right to be
heard.
In her one-paragraph reply submitted on November 27, 2006,8 the petitioner stated that she could not accept the position of
Provincial Coordinator since she saw it as a demotion. As it turned out, however, on November 9, 2006, the petitioner had
already filed a complaint for constructive dismissal9 against RSC, Sarte, Gadia and Alex (respondents).
On November 30, 2006, Sarte issued an instruction to the petitioner to report to RSCs Metroeast Depot to help prepare all
shipping manifests for Cagayan de Oro and Bacolod, but as witnessed by RSC employees Raquel Torrechua and Alex, she
did not obey as instructed.10 Again on December 8, 2006, Sarte issued a similar instruction, citing the need for certain tasks
from the petitioner in preparation for the coming Christmas holidays, but the petitioner again refused to heed. 11
As culled from the assailed appellate court decision,12 the petitioner argued before the LA that the true organizational chart of
the RSC showed that the position of Category Buyer was one level above that of the Provincial Coordinator, and that
moreover, the job description of a Provincial Coordinator was largely clerical and did not require her to analyze stock levels
and order points, or source new local and international suppliers, or monitor stock level per store and recommend items for
replenishment, or negotiate better items and discounts from suppliers, duties which only a Category Buyer could perform. She
also claimed that she was instructed to file a courtesy resignation in exchange for a separation pay of one-half salary per year
of service.
The respondents in their position paper denied the correctness of the organizational chart presented by the petitioner. They
maintained that her transfer was not a demotion since the Provincial Coordinator occupied a "Level 5" position like the
Category Buyer, with the same work conditions, salary and benefits. But while both positions had no significant disparity in the
required skill, experience and aptitude, the position of Category Buyer demanded the traits of punctuality, diligence and
attentiveness because it is a frontline position in the day-to-day business operations of RSC which the petitioner,
unfortunately, did not possess.
The respondents also raised the petitioners record of habitual tardiness as far back as 1999, as well as poor performance
rating in 2005. In addition to her performance rating of "2.8" out of "4.0" in 2005 equivalent to "below expectation," the
petitioner was found to be tardy in June and July 2005, 13 times, and for the entire 2005, 57 times; that she was suspended
twice in 2006 for 20 instances of tardiness and absences from July to September 2006 alone. 13 We also note that the
petitioner was suspended for seven (7) days in September and October 2005 for deliberately violating a company policy after
she was seen having lunch with a company supplier.14
In her affidavit,15 respondent Sarte denied that the reassignment of the petitioner as Provincial Coordinator was motivated by a
desire to besmirch the name of the latter. She asserted that it was made in the exercise of management prerogative and

381
sound discretion, in view of the nsitive position occupied by the Category Buyer in RSCs daily operations, vis--vis the
petitioners "below expectation" performance rating and habitual tardiness.
In dismissing the petitioners complaint, the LA in its Decision 16 dated May 30, 2007 ruled that job reassignment or
classification is a strict prerogative of the employer, and that the petitioner cannot refuse her transfer from Category Buyer to
Provincial Coordinator since both positions commanded the same salary structure, high degree of responsibility and
impeccable honesty and integrity. Upholding the employers right not to retain an employee in a particular position to prevent
losses or to promote profitability, the LA found no showing of any illegal motive on the part of the respondents in reassigning
the petitioner. The transfer was dictated by the need for punctuality, diligence and attentiveness in the position of Category
Buyer, which the petitioner clearly lacked. Moreover, the LA ruled that her persistent refusal to accept her new position
amounted to insubordination, entitling the RSC to dismiss her from employment.
A month after the above ruling, or on June 22, 2007, the petitioner tendered her written "forced" resignation, 17wherein she
complained that she was being subjected to ridicule by clients and co-employees alike on account of her floating status since
the time she refused to accept her transfer. She likewise claimed that she was being compelled to accept the position of
Provincial Coordinator without due process.
On appeal, the NLRC in its Decision18 dated February 25, 2009 sustained the findings of the LA. It agreed that the lateral
transfer of the petitioner from Category Buyer to Provincial Coordinator was not a demotion amounting to constructive
dismissal, since both positions belonged to Job Level 5 and between them there is no significant disparity in terms of the
requirements of skill, experience and aptitude. Contrary to the petitioners assertion, the NLRC found that the position of
Provincial Coordinator is not a rank-and-file position but in fact requires the exercise of discretion and independent judgment,
as well as appropriate recommendations to management to ensure the faithful implementation of its policies and programs;
that it even exercises influence over the Category Buyer in that it includes performing a recommendatory function to guide the
Category Buyer in making decisions on the right assortment, price and quantity of the items, articles or merchandise to be sold
by the store.
The NLRC then reiterated the settled rule that management may transfer an employee from one office to another within the
business establishment, provided there is no demotion in rank or diminution of salary, benefits, and other privileges, and the
action is not motivated by discrimination or bad faith or effected as a form of punishment without sufficient cause. It ruled that
the respondents were able to show that the petitioners transfer was not unreasonable, inconvenient or prejudicial, but was
prompted by her failure to meet the demands of punctuality, diligence, and personal attention of the position of Category
Buyer; that management wanted to give the petitioner a chance to improve her work ethic, but her obstinate refusal to assume
her new position has prejudiced respondent RSC, even while she continued to receive her salaries and benefits as Provincial
Coordinator.
On petition for certiorari to the CA, the petitioner insisted that her transfer from Category Buyer to Provincial Coordinator was a
form of demotion without due process, and that the respondents unjustifiably depicted her as remiss in her duties, flawed in
her character, and unduly obstinate in her refusal to accept her new post.
In its Decision19 dated June 8, 2011, the CA found no basis to deviate from the oft-repeated tenet that the findings of fact and
conclusions of the NLRC when supported by substantial evidence are generally accorded not only great weight and respect
but even finality, and are thus deemed binding.20
Petition for Review in the Supreme Court
Now on petition for review to this Court, the petitioner maintains that her lateral transfer from Category Buyer to Provincial
Coordinator was a demotion amounting to constructive dismissal because her reassignment was not a valid exercise of
management prerogative, but was done in bad faith and without due process. She claims that the respondents manipulated
the facts to show that she was tardy; that they even surreptitiously drew up a new organizational chart of the Merchandising
Department of RSC, soon after she filed her complaint for illegal dismissal, to show that the position of Provincial Coordinator
belonged to Job Level 5 as the Category Buyer, and not one level below; that the company deliberately embarrassed her
when it cut off her email access; that they sent memoranda to her clients that she was no longer a Category Buyer, and to the
various Robinsons branches that she was now a Provincial Coordinator, while Milo Padilla (Padilla) was taking over her former
position as Category Buyer; that for seven (7) months, they placed her on floating status and subjected her to mockery and
ridicule by the suppliers and her co-employees; that not only was there no justification for her transfer, but the respondents
clearly acted in bad faith and with discrimination, insensibility and disdain to make her stay with the company intolerable for
her.
Our Ruling
We find no merit in the petition.
This Court has consistently refused to interfere with the exercise by management of its prerogative to regulate the employees
work assignments, the working methods and the place and manner of work.
As we all know, there are various laws imposing all kinds of burdens and obligations upon the employer in relation to his
employees, and yet as a rule this Court has always upheld the employers prerogative to regulate all aspects of employment
relating to the employees work assignment, the working methods and the place and manner of work. Indeed, labor laws
discourage interference with an employers judgment in the conduct of his business. 21
382
In Rural Bank of Cantilan, Inc. v. Julve,22 the Court had occasion to summarize the general jurisprudential guidelines affecting
the right of the employer to regulate employment, including the transfer of its employees:
Under the doctrine of management prerogative, every employer has the inherent right to regulate, according to his own
discretion and judgment, all aspects of employment, including hiring, work assignments, working methods, the time, place and
manner of work, work supervision, transfer of employees, lay-off of workers, and discipline, dismissal, and recall of employees.
The only limitations to the exercise of this prerogative are those imposed by labor laws and the principles of equity and
substantial justice.
While the law imposes many obligations upon the employer, nonetheless, it also protects the employers right to expect from
its employees not only good performance, adequate work, and diligence, but also good conduct and loyalty. In fact, the Labor
Code does not excuse employees from complying with valid company policies and reasonable regulations for their governance
and guidance.
Concerning the transfer of employees, these are the following jurisprudential guidelines: (a) a transfer is a movement from one
position to another of equivalent rank, level or salary without break in the service or a lateral movement from one position to
another of equivalent rank or salary; (b) the employer has the inherent right to transfer or reassign an employee for legitimate
business purposes; (c) a transfer becomes unlawful where it is motivated by discrimination or bad faith or is effected as a form
of punishment or is a demotion without sufficient cause; (d) the employer must be able to show that the transfer is not
unreasonable, inconvenient, or prejudicial to the employee. 23 (Citations omitted)
In Philippine Japan Active Carbon Corporation v. NLRC,24 it was held that the exercise of managements prerogative
concerning the employees work assignments is based on its assessment of the qualifications, aptitudes and competence of its
employees, and by moving them around in the various areas of its business operations it can ascertain where they will function
with maximum benefit to the company.
It is the employers prerogative, based on its assessment and perception of its employees qualifications, aptitudes, and
competence, to move them around in the various areas of its business operations in order to ascertain where they will function
with maximum benefit to the company. An employees right to security of tenure does not give him such a vested right in his
position as would deprive the company of its prerogative to change his assignment or transfer him where he will be most
useful. When his transfer is not unreasonable, nor inconvenient, nor prejudicial to him, and it does not involve a demotion in
rank or a diminution of his salaries, benefits, and other privileges, the employee may not complain that it amounts to a
constructive dismissal.25
As a privilege inherent in the employers right to control and manage its enterprise effectively, its freedom to conduct its
business operations to achieve its purpose cannot be denied. 26 We agree with the appellate court that the respondents are
justified in moving the petitioner to another equivalent position, which presumably would be less affected by her habitual
tardiness or inconsistent attendance than if she continued as a Category Buyer, a "frontline position" in the day-to-day
business operations of a supermarket such as Robinsons.
If the transfer of an employee is not unreasonable, or inconvenient, or prejudicial to him, and it does not involve a demotion in
rank or a diminution of his salaries, benefits and other privileges, the employee may not complain that it amounts to a
constructive dismissal.
As we have already noted, the respondents had the burden of proof that the transfer of the petitioner was not tantamount to
constructive dismissal, which as defined in Blue Dairy Corporation v. NLRC, 27 is a quitting because continued employment is
rendered impossible, unreasonable or unlikely, or an offer involving a demotion in rank and diminution of pay:
The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion, bearing in mind the
basic elements of justice and fair play. Having the right should not be confused with the manner in which that right is
exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an undesirable worker. In particular, the
employer must be able to show that the transfer is not unreasonable, inconvenient or prejudicial to the employee; nor does it
involve a demotion in rank or a diminution of his salaries, privileges and other benefits. Should the employer fail to overcome
this burden of proof, the employees transfer shall be tantamount to constructive dismissal, which has been defined as a
quitting because continued employment is rendered impossible, unreasonable or unlikely; as an offer involving a demotion in
rank and diminution in pay. Likewise, constructive dismissal exists when an act of clear discrimination, insensibility or disdain
by an employer has become so unbearable to the employee leaving him with no option but to forego with his continued
employment.
Thus, as further held in Philippine Japan Active Carbon Corporation, 28 when the transfer of an employee is not unreasonable,
or inconvenient, or prejudicial to him, and it does not involve a demotion in rank or a diminution of his salaries, benefits and
other privileges, the employee may not complain that it amounts to a constructive dismissal. 29
But like all other rights, there are limits to the exercise of managerial prerogative to transfer personnel, and on the employer is
laid the burden to show that the same is without grave abuse of discretion, bearing in mind the basic elements of justice and
fair play.30 Indeed, management prerogative may not be used as a subterfuge by the employer to rid himself of an undesirable
worker.31
Interestingly, although the petitioner claims that she was constructively dismissed, yet until the unfavorable decision of the LA
on May 30, 2007, for seven (7) months she continued to collect her salary while also adamantly refusing to heed the order of
383
Sarte to report to the Metroeast Depot. It was only on June 22, 2007, after the LAs decision, that she filed her "forced"
resignation. Her deliberate and unjustified refusal to assume her new assignment is a form of neglect of duty, and according to
the LA, an act of insubordination. We saw how the company sought every chance to hear her out on her grievances and how
she ignored the memoranda of Sarte asking her to explain her refusal to accept her transfer. All that the petitioner could say
was that it was a demotion and that her floating status embarrassed her before the suppliers and her co-employees.
The respondents have discharged the burden of proof that the transfer of the petitioner was not tantamount to constructive
dismissal.
In Jarcia Machine Shop and Auto Supply, Inc. v. NLRC,32 a machinist who had been employed with the petitioner company for
16 years was reduced to the service job of transporting filling materials after he failed to report for work for one (1) day on
account of an urgent family matter. This is one instance where the employees demotion was rightly held to be an unlawful
constructive dismissal because the employer failed to show substantial proof that the employees demotion was for a valid and
just cause:
In case of a constructive dismissal, the employer has the burden of proving that the transfer and demotion of an employee are
for valid and legitimate grounds such as genuine business necessity. Particularly, for a transfer not to be considered a
constructive dismissal, the employer must be able to show that such transfer is not unreasonable, inconvenient, or prejudicial
to the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and other benefits. Failure of
the employer to overcome this burden of proof, the employees demotion shall no doubt be tantamount to unlawful constructive
dismissal. x x x.33 (Citation omitted)
In the case at bar, we agree with the appellate court that there is substantial showing that the transfer of the petitioner from
Category Buyer to Provincial Coordinator was not unreasonable, inconvenient, or prejudicial to her. The petitioner failed to
dispute that the job classifications of Category Buyer and Provincial Coordinator are similar, or that they command a similar
salary structure and responsibilities. We agree with the NLRC that the Provincial Coordinators position does not involve mere
clerical functions but requires the exercise of discretion from time to time, as well as independent judgment, since the
Provincial Coordinator gives appropriate recommendations to management and ensures the faithful implementation of policies
and programs of the company. It even has influence over a Category Buyer because of its recommendatory function that
enables the Category Buyer to make right decisions on assortment, price and quantity of the items to be sold by the store. 34
We also cannot sustain the petitioners claim that she was not accorded due process and that the respondents acted toward
her with discrimination, insensibility, or disdain as to force her to forego her continued employment. In addition to verbal
reminders from Sarte, the petitioner was asked in writing twice to explain within 48 hours her refusal to accept her transfer. In
the first, she completely remained silent, and in the second, she took four (4) days to file a mere one-paragraph reply, wherein
she simply said that she saw the Provincial Coordinator position as a demotion, hence she could not accept it. Worse, she
may even be said to have committed insubordination when she refused to turn over her responsibilities to the new Category
Buyer, Padilla, and to assume her new responsibilities as Provincial Coordinator and report to the Metroeast Depot as
directed. This was precisely the reason why the petitioner was kept on floating status. To her discredit, her defiance
constituted a neglect of duty, or an act of insubordination, per the LA.
Neither can we consider tenable the petitioners contention that the respondents deliberately held her up to mockery and
ridicule when they cut off her email access, sent memoranda to her clients that she was no longer a Category Buyer, and to
the various Robinsons branches that she was now a Provincial Coordinator on floating status and that Padilla was taking over
her position as the new Category Buyer. It suffices to state that these measures are the logical steps to take for the petitioners
unjustified resistance to her transfer, and were not intended to subject her to public embarrassment.
Judicial review of labor cases does not go beyond the evaluation of the sufficiency of the evidence upon which labor officials
findings rest.
Finally, as reiterated in Acebedo Optical,35 this Court is not a trier of facts, and only errors of law are generally reviewed in
petitions for review on certiorari criticizing decisions of the CA. Questions of fact are not entertained, and in labor cases, this
doctrine applies with greater force.
Factual questions are for labor tribunals to resolve.36 Thus:
Judicial Review or labor cases does not go beyond the evaluation of the sufficiency of the evidence upon which its labor
officials' findings rest. As such, the findings of facts and conclusion of the NLRC are generally accorded not only great weight
and respect but even clothed with finality and deemed binding on this Court as long as they are supported by substantial
evidence. This Court finds no basis for deviating from said doctrine without any clear showing that the findings of the Labor
Arbiter, as affirmed by the NLRC, are bereft of substantiation. Particularly when passed upon and upheld by the Court of
Appeals, they are binding and conclusive upon the Supreme Court and will not normally be disturbed.
xxxx
As earlier stated, we find no basis for deviating from the oft espoused legal tenet that findings of facts and conclusion of the
labor arbiter are generally accorded not only great weight and respect but even clothed with finality and deemed binding on
this Court as long as they are supported by substantial evidence, without any clear showing that such findings of fact, as
affirmed by the NLRC, are bereft of substantiation. More so, when passed upon and upheld by the Com1 of Appeals, they are
binding and conclusive upon us and will not normally be disturbed; x x x.37 (Citations omitted)
384
It is our ruling, that the findings of fact and conclusion of the LA, as affirmed by the NLRC, are supported by substantial
evidence, as found by the CA.
WHEREFORE, the premises considered, the Decision of the Court of Appeals dated June 8, 2011 in CA-G.R. SP No. 109604
is AFFIRMED.
SO ORDERED.

G.R. No. 178125 March 18, 2013

THE ORCHARD GOLF AND COUNTRY CLUB, Petitioner,
vs.
AMELIA R. FRANCISCO, Respondent.
DECISION
DEL CASTILLO, J.:
Constructive dismissal occurs not when the employee ceases to report for work, but when the unwarranted acts of the
employer are committed to the end that the employee's continued employment shall become so intolerable. In these difficult
times, an employee may he left with no choice but to continue with his employment pespite abuses committed against him by
the employer, and even during the pendency of a labor dispute between them. This should not be taken against the employee.
Instead, we must share the burden of his plight, ever aware of the precept that necessitous men are not free men.
Assailed in this Petition for Review1 is the January 25, 2007 Decision2 of the Court of Appeals (CA) which dismissed the
Petition in CA-G.R. SP No. 80968 and affirmed the November 19, 2002 Resolution 3 of the National Labor Relations
Commission (NLRC). Likewise assailed is the May 23, 2007 CA Resolution4 denying petitioner's Motion for Reconsideration.
Factual Antecedents
Petitioner, The Orchard Golf and Country Club (the Club), operates and maintains two golf courses in Dasmarias, Cavite for
Club members and their guests. The Club likewise has a swimming pool, bowling alley, cinema, fitness center, courts for
tennis, badminton and basketball, restaurants, and function rooms.
On March 17, 1997, respondent Amelia R. Francisco (Francisco) was employed as Club Accountant, to head the Clubs
General Accounting Division and the four divisions under it, namely: 1) Revenue and Audit Division, 2) Billing/ Accounts
Receivable Division, 3) Accounts Payable Division, and 4) Fixed Assets Division. Each of these four divisions has its own
Supervisor and Assistant Supervisor. As General Accounting Division head, respondent reports directly to the Clubs Financial
Comptroller, Jose Ernilo P. Famy (Famy).
On May 18, 2000, Famy directed Francisco to draft a letter to SGV & Co. (SGV), the Clubs external auditor, inquiring about
the accounting treatment that should be accorded property that will be sold or donated to the Club. Francisco failed to prepare
the letter, even after Famys repeated verbal and written reminders, the last of which was made on June 22, 2000.
On June 27, 2000, Famy issued a memorandum5 requiring Franciscos written explanation, under pain of an insubordination
charge, relative to her failure to prepare the letter. Instead of complying with the memorandum, Francisco went to the Clubs
General Manager, Tomas B. Clemente III (Clemente), and personally explained to the latter that due to the alleged heavy
volume of work that needed her attention, she was unable to draft the letter. Clemente assured her that he would discuss the
matter with Famy personally. On this assurance, Francisco did not submit the required written explanation. For this reason,
Famy issued a June 29, 2000 memorandum6suspending Francisco without pay for a period of 15 days. The memorandum
reads, as follows:
Considering the fact that you did [sic] explain in writing within 24 hours from the date and time of my memorandum to you
dated June 27, 2000 the reason why you should not be charged with "Insubordination" as specified in Rule 5 Section 2a of our
handbook, it has been found that:
Findings: You willfully refused to carry out a legitimate and reasonable instruction of your Department Head.
Act/Offense: Insubordination
Under the circumstances and pursuant to the rules and regulations of the Club, you are hereby suspended for 15 working days
without pay. Effective dates of which shall be determined by the undersigned depending on the exigency of your work.
(Signed)
Nilo P. Famy7
On July 1, 2000, Famy issued another memorandum 8 informing Francisco that her suspension shall be effective from July 3 to
19, 2000. On July 3, 2000 Francisco wrote to the Clubs General and Administrative Manager, Ma. Irma Corazon A. Nuevo
(Nuevo), questioning Famys act of charging, investigating, and suspending her without coursing the same through the Clubs
Personnel Department. Pertinent portions of her memorandum to Nuevo read:
This has reference to the memoranda of the Financial Controller, Mr. Ernilo Famy of June 27, June 29 & July 1, 2000 x x x. I
would like to know under what authority x x x a department head could issue a memorandum and make decisions without the
intervention of the Personnel Department.
I believe that if ever a department head or superior has complaints against his subordinate then he has to course them through
the Personnel Department which will be the one to initiate and conduct an inquiry and investigation. A mere furnishing of the
memorandum to the Personnel Department does not substitute [sic] the actual authority and functions of the Personnel
385
Department because there will be no due process x x x. Nilo Famy decided on his own complaint without merit (sic) x x x. Also
I believe x x x Nilo Famy abuse [sic] his authority as superior with full disregard of the Personnel Department because he
acted as the complainant, the investigator and the judge, all by himself. For this I would like to file this complaint against him
for abuse of authority x x x.
x x x During our departmental meetings listed in his letter, I always made him aware of the lined-up priorities that need to be
given attention first and pending works which during the year-end audit by the auditors were put on hold and were not x x x
finished by the assigned staff. In fact, he commented that I should do something about the pending work. Also, if he really
feels [sic] the importance of that letter and [sic] cognizant of my present work load, then why did he went [sic] on leave from
June 23 until June 26. (his leave was cut because of the board meeting. His leave [sic] supposed to be until June 30) x x x.
Also, I would like to formally inform you that whenever we have some disagreement or he has dissatisfaction [sic] he is
creating [sic] a feeling of job insecurity; it is very easy for Mr. Nilo Famy to directly tell me and the staff to resign. The last time
we had a talk prior to this issue, he made it clear that he can transfer me to lower positions like the position of the cashier, cost
controller and the like. He is confident he can do it because he had done it to the former Club Accountant. What do you think is
the kind of authority you expect from him if you always hear these wordings [sic].9
That very same day, Nuevo replied,10 exonerating Famy and justifying the latters actions as falling within his power and
authority as department head. Nuevo said that Francisco was accorded due process when she was given the opportunity to
explain her side; that she deliberately ignored her superiors directive when she did not submit a written explanation, which act
constitutes insubordination; that Famy acted prudently though he did not course his actions through the Personnel
Department, for ultimately, he would decide the case; and that she was consulted by Famy and that she gave her assent to
Famys proposed actions, which he later carried out. Nuevo likewise brushed aside Franciscos accusation of abuse of
authority against Famy, and instead blamed Francisco for her predicament.
On July 5, 2000, Francisco wrote a letter11 to Clemente requesting an investigation into Famys possible involvement in the
commission in 1997 of alleged fraudulent and negligent acts relative to the questionable approval and release of Club checks
in payment of Bureau of Internal Revenue (BIR) taxes, in which her counter-signature though required was not obtained. Famy
belied Franciscos claims in a reply memorandum, saying the charges were baseless and intended to malign him.
On July 20, 2000, or a day after Franciscos period of suspension expired, Famy issued separate memoranda 12to Francisco
and Clemente informing them of Franciscos transfer, without diminution in salary and benefits, to the Clubs Cost Accounting
Section while the investigation on Famys alleged illegal activities is pending. Relevant portions of these memoranda state:
MEMORANDUM TO CLEMENTE
In view of the recent developments, i.e. the suspension of Ms. Amelia Francisco and her letter of July 5, 2000 x x x, I would
like to formally inform you that effective today, July 20, 2000, Ms. Francisco shall be temporarily given a new assignment in my
department pending the result of the investigation she lodged against the undersigned.
x x x. She shall remain directly reporting to the Financial Comptroller (Famy). 13
MEMORANDUM TO FRANCISCO
This is to inform you that effective today, July 20, 2000, Management has approved your temporary transfer of assignment
pending the completion of the investigation you lodged against the undersigned.
You shall be handling the Cost Accounting Section together with six (6) Accounting Staffs and shall remain reporting directly to
the undersigned.14
Yet again, in another memorandum15 dated August 1, 2000 addressed to Nuevo, Famy sought an investigation into
Franciscos alleged insubordination, this time for her alleged unauthorized change of day-off from July 30 to August 4, 2000,
and for being absent on said date (August 4, 2000) despite disapproval of her leave/offset application therefor. In an August 2,
2000 memorandum,16 Francisco was required to explain these charges. In another memorandum 17 dated August 5, 2000,
Francisco was asked to submit her explanation on the foregoing charges of insubordination, negligence, inefficiency and
violation of work standards relative to the unauthorized change of day-off and disapproved offset/ leave. To these, Francisco
replied on August 8, 2000 claiming that her presence on July 30, 2000 which was a Sunday and supposedly her day-off, was
nonetheless necessary because it was the Clubs scheduled month-end inventory, and she was assigned as one of the
officers-in-charge thereof. She added that her actions were in accord with past experience, where she would take a leave
during the first week of each month to make payments to Pag-Ibig, and Famy very well knew about this. She accused Famy of
waging a personal vendetta against her for her seeking an inquiry into claimed anomalies embodied in her July 5, 2000 letter.
She also took exception to her transfer to Cost Accounting Section, claiming that the same was humiliating and demeaning
and that it constituted constructive dismissal, and threatened to take legal action or seek assistance from Club members to
insure that Famys impropriety is investigated.18
On August 11, 2000, Francisco filed a Complaint for illegal dismissal against the Club, impleading Famy, Clemente and Nuevo
as additional respondents. The case was docketed as NLRC Case No. RAB-IV-812780-00-C. She prayed, among others, for
damages and attorneys fees.
On August 16, 2000, Francisco received another memorandum requiring her to explain why she should not be charged with
betrayal of company trust, allegedly for the act of one Ernie Yu, a Club member, who was seen distributing copies of
Franciscos letter to the Clubs Chairman of the Board of Directors.19 On August 18, 2000, Francisco submitted her written
386
explanation to the charges.20 On August 19, 2000, with the Club finding no merit in her explanation, Clemente handed her a
Notice of Disciplinary Action21 dated August 16, 2000 relative to her July 30, 2000 unauthorized change of day-off and her
August 4, 2000 unauthorized leave/absence. She was suspended for another fifteen days, or from August 21 to September 6,
2000.22
Francisco amended her illegal dismissal Complaint to one for illegal suspension. Meanwhile, she continued to report for work.
On September 7, 2000, or a day after serving her suspension, Francisco again received a September 6, 2000 memorandum
from Nuevo, duly noted and approved by Clemente, this time placing her on forced leave with pay for 30 days, or from
September 7, 2000 up to October 11, 2000, for the alleged reason that the case filed against her has strained her relationship
with her superiors.23 On even date, Francisco wrote a letter to Nuevo seeking clarification as to what case was filed against
her, to which Nuevo immediately sent a reply memorandum stating that the case referred to her alleged "betrayal of company
trust".24
After the expiration of her forced leave, or on October 12, 2000, Francisco reported back to work. This time she was handed
an October 11, 2000 memorandum25 from Clemente informing her that, due to strained relations between her and Famy and
the pending evaluation of her betrayal of company trust charge, she has been permanently transferred, without diminution of
benefits, to the Clubs Cost Accounting Section effective October 12, 2000. Notably, even as Clemente claimed in the
memorandum that Franciscos transfer was necessary on account of the strained relations between her and Famy, Franciscos
position at the Cost Accounting Section was to remain under Famys direct supervision. The pertinent portion of the
memorandum in this regard reads:
Because of the strained relationship between you and your department head, Mr. Ernilo Famy, we deem it necessary to
transfer you permanently to Cost Accounting effective October 12, 2000. You shall however continue to receive the same
benefits and shall remain under the supervision of Mr. Famy. x x x26
In an October 13, 2000 memorandum27 to Clemente, Francisco protested her permanent transfer, claiming that it was made in
bad faith. She also bewailed Clementes inaction on her July 5, 2000 letter charging Famy with irregularities relative to BIR tax
payments. Likewise, on account of her transfer, Francisco once more amended her Complaint to include illegal/constructive
dismissal. And in her prayer, she sought to be reinstated to her former position as Club Accountant.
On October 17, 2000, Clemente issued a memorandum 28 addressed to Francisco denying that her transfer was done in bad
faith, and affirming instead that it was made in the proper exercise of management prerogative. In addition, Clemente clarified
the matter of Famys alleged wrongdoing, thus:
Secondly, I would also like to correct your assumptions that the case of Mr. Famy has not yet been acted upon. For your
information, the Committee composed of Club members and myself tasked by the Board of Directors to investigate the case
and make the necessary recommendations has already concluded its investigation and has made its recommendations to the
Board. The Board, likewise, has acted on the Committees recommendation x x x the results of which have been given to Mr.
Famy. Whatever that decision was, it is a matter between the Board and Mr. Famy. 29
Ruling of the Labor Arbiter
After considering the parties respective Position Papers and evidence, Labor Arbiter Enrico Angelo C. Portillo issued a
Decision30 dated August 23, 2001 dismissing Franciscos Complaint for lack of merit. The Labor Arbiter noted the "belligerence
and animosity" between Francisco and Famy, making short shrift of Franciscos accusations against her superior and
dismissing them as nothing more than attempts to get back at Famy for his reproach at her failure to draft the SGV letter. The
Labor Arbiter further admonished Francisco, reminding her that
x x x A workplace is not a "bed of roses". While employers are expected to show respect and courtesy to its employees, words
and actions expectedly tend to get somewhat disrespectful, if not outright insulting, when work remains undone. Common
experience tells us that the scolding and trash talk bites harder as one climbs higher in the organization ladder commensurate
to the additional responsibility attached to the position. It is at these times, when the fact [sic] and professionalism of an
employee, particularly a managerial employee, is put to test. x x x31
The Labor Arbiter further upheld Franciscos two suspensions as valid exercises of the Clubs management prerogative,
justifying the measures taken as reasonable and necessary penalties for Franciscos failure to draft the SGV letter and her
taking a leave with full awareness yet in disregard of her superior Famys disapproval of her leave application. He added that
in the conduct of proceedings leading to the decision to suspend Francisco, the proper procedure was taken, and Francisco
was afforded ample opportunity to defend herself.
The Labor Arbiter likewise found Franciscos claim of constructive dismissal to be baseless. On the contrary, he found
Franciscos transfer as necessary and in furtherance of the Clubs interests. He also noted that the transfer was lateral, or to a
position of the same rank and pay scale based on the Clubs Organizational Chart.32 Both Club Accountant and Cost
Controller positions belonged to the same pay scale "9" and are rated as "Supervisor V".
Finally, the Labor Arbiter held that the fact that Francisco continued to report for work belies her claim of constructive
dismissal.
Ruling of the National Labor Relations Commission
On September 17, 2001, Francisco appealed the Labor Arbiters Decision to the NLRC, which took a contrary view. Thus, in its
November 19, 2002 Resolution,33 the NLRC held that while Franciscos suspensions were valid, her subsequent permanent
387
transfer on the ground of strained relations to the Clubs Cost Accounting Section as Cost Controller on October 12, 2000 was
without just cause. It resulted in Franciscos demotion, since the position of Cost Controller was merely of a supervisory
character, while the position of Club Accountant was of managerial rank. Besides, by admission of herein petitioner, Francisco
held the rank of "Manager 3" with her position as Club Accountant, while the Cost Controller is only a Supervisor position and
is precisely under the direct supervision and control of the Club Accountant.34 This unwarranted demotion, according to the
NLRC, is equivalent to constructive dismissal.
The NLRC added that strained relationship is not a valid ground for termination of employment under the Labor Code. It
ordered Franciscos reinstatement to her former position as Club Accountant and awarded her attorneys fees in the amount
of P50,000.00. However, the NLRC absolved Famy, Nuevo and Clemente of wrongdoing. It also held that Francisco was not
entitled to moral and exemplary damages because she failed to show proof that her constructive dismissal was attended by
bad faith. Thus, the NLRC held:
WHEREFORE, premises considered, Complainants appeal is partly GRANTED. The Labor Arbiters decision in the above-
entitled case is hereby MODIFIED. It is hereby declared that Complainants transfer resulted in a demotion in level/rank, which
is considered as illegal constructive dismissal. Respondent the Orchard Golf & Country Club, Inc. is hereby ordered to
immediately reinstate Complainant to her former position as Club Accountant without loss of seniority rights and other
privileges and to pay her attorneys fees in the amount of P50,000.00
SO ORDERED.35
Petitioner moved for reconsideration, to no avail. Francisco moved for partial reconsideration of the NLRCs Resolution with
respect to its ruling declaring her suspensions as valid and the denial of her claim for damages. Her motion was denied as
well.
Ruling of the Court of Appeals
Petitioner went up to the CA via Petition for Certiorari,36 while respondent Francisco no longer took issue with the denial of her
motion.
In its January 25, 2007 Decision, the CA sustained the NLRC ruling. It held that while petitioner had the right or prerogative to
transfer the respondent from one office to another within the Club, there should be no demotion in rank, salary, benefits and
other privileges. The CA added that the right may not be used arbitrarily to rid the employer of an undesirable worker. Proper
notification and an opportunity to be heard or contest the transfer must be given to the employee whose transfer is sought,
conditions which were not observed in Franciscos case. She was notified only of the Clubs decision to permanently transfer
her, without giving her the opportunity to contest the same. The CA characterized Franciscos permanent transfer as a
demotion in the guise of a lateral transfer.
The CA sustained as well the award of attorneys fees, saying that Francisco was forced to litigate and hire the services of
counsel to protect her rights.
Thus, the Petition for Certiorari was dismissed. Petitioner filed a Motion for Reconsideration, 37 which was subsequently denied.
Issues
Hence, this Petition raising the following issues:
I
WHETHER X X X THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED AND DECIDED A QUESTION
OF SUBSTANCE IN A MANNER NOT IN ACCORD WITH LAW AND WITH APPLICABLE DECISIONS OF THIS
HONORABLE COURT WHEN IT HELD THAT THE TRANSFER OF RESPONDENT FROM THE POSITION OF
CLUB ACCOUNTANT TO COST ACCOUNTANT WAS TANTAMOUNT TO A DEMOTION.
II
WHETHER X X X THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED AND DECIDED A QUESTION
OF SUBSTANCE IN A MANNER NOT IN ACCORD WITH LAW AND WITH APPLICABLE DECISIONS OF THIS
HONORABLE COURT WHEN IT AWARDED ATTORNEYS FEES TO RESPONDENT IN THE AMOUNT OF FIFTY
THOUSAND PESOS (P50,000.00).38
Petitioners Arguments
In seeking the annulment and setting aside of the CA Decision, petitioner insists that respondent Franciscos transfer did not
amount to a demotion, and that she suffered no diminution in rank, salary, benefits, and position because the position of Club
Accountant and Cost Controller/Accountant are of equal rank. Both positions belong to pay grade "9" and rated as "Supervisor
V"; a transfer from one of the positions to the other is merely a lateral transfer and within the prerogative of Club management.
Petitioner directs the Courts attention to its
Organizational Chart39 which should bolster its claim in this regard.
Petitioner adds that Franciscos transfer to the Cost Accounting Section was done in good faith, noting that the deteriorating
relationship between Famy and Francisco placed the Clubs business at risk. It had no choice but to address this problem in
order not to further jeopardize the Clubs day-to-day operations. Petitioner claims further that Franciscos transfer did not
prejudice her. She continues to report to Famy and receive the same benefits and privileges as the Club Accountant. It is of no
consequence that as Cost Controller, she has a lesser number of employees/staff (six) under her or that she is relegated to a

388
very small office space, as opposed to the position of Club Accountant, which has 32 employees under it and holds office at
the bigger offices reserved for use by the Clubs executives.
On the issue of constructive dismissal, petitioner claims that it did not commit any act which forced Francisco to quit; she
continues to be employed by the Club, and in fact continues to report for work.
Finally, petitioner argues that Francisco is not entitled to attorneys fees, in the absence of an award of exemplary damages
and in the wake of the NLRCs finding that she is not entitled to such damages. It believes that if no exemplary damages are
adjudged, then no attorneys fees may be awarded as well. It adds that Francisco could only blame herself for the fate she
suffered, knowing very well that she is not entitled to her claims; she should bear her own litigation expenses.
Respondents Arguments
Francisco insists that the issues raised in the Petition have been sufficiently addressed by the NLRC and the CA, and their
findings should bind the Court. Francisco stresses that petitioners own actions betrayed the fact that the position of Cost
Controller/Accountant is a mere Supervisor position and the same is directly under the supervision of the Club Accountant. A
reassignment from Club Accountant to Cost Controller is clearly an unwarranted demotion in rank. She adds that per the
Clubs latest actions, she has suffered not only a demotion in rank, but also a diminution in salary and benefits. Petitioner
illegally withheld her accrued salary differential, merit increases and productivity bonuses since 2001.
Our Ruling
The Petition lacks merit.
At the outset, it must be emphasized that Franciscos two suspensions, i.e., for her failure to draft the SGV letter and for being
absent without prior leave, is no longer at issue before this Court. Records show that after the NLRC declared the same as
valid in its November 19, 2002 Resolution, Francisco moved for reconsideration but to no avail. After the denial of her motion,
Francisco no longer brought the issue or appealed the same to the CA. Hence, the only issues for our resolution are the
propriety of Franciscos transfer to the position of Cost Controller and the award of attorneys fees.
There was constructive dismissal when Francisco was transferred to the Cost Accounting Section.
We agree with the NLRC and the CA that Franciscos transfer to the position of Cost Controller was without valid basis and
that it amounted to a demotion in rank. Hence, there was constructive dismissal.
Records show that when Francisco returned to work on July 20, 2000 fresh from her first suspension, she was
unceremoniously transferred by Famy, via his July 20, 2000 memorandum, to the Clubs Cost Accounting Section. Famy
stated the reason for her transfer:
This is to inform you that effective today, July 20, 2000, Management has approved your temporary transfer of assignment
pending the completion of the investigation you lodged against the undersigned.
x x x x40
His memorandum of even date to his superior Clemente reveals the same cause:
In view of the recent developments, i.e. the suspension of Ms. Amelia Francisco and her letter of July 5, 2000 x x x, I would
like to formally inform you that effective today, July 20, 2000, Ms. Francisco shall be temporarily given a new assignment in my
department pending the result of the investigation she lodged against the undersigned.
x x x x41
In other words, the cause of Franciscos temporary transfer on July 20, 2000 was her pending complaint against Famy.
And then again, on September 6, 2000, Nuevo issued another memorandum duly noted and approved by Clemente, and
personally delivered at Franciscos residence on September 7, 2000 informing her this time that she has been placed on
forced leave with pay for 30 days, or from September 7, 2000 up to October 11, 2000, for the reason that the case filed against
her has strained her relationship with her superiors.
And just when her forced leave expired on October 11, or on October 12, 2000, Francisco was once more handed an October
11, 2000 memorandum from Clemente informing her that, due to strained relations between her and Famy and pending
evaluation of her betrayal of company trust charge, she has been permanently transferred, without diminution of benefits, to
the Clubs Cost Accounting Section effective October 12, 2000.
The Court shares the CAs observation that when Francisco was placed on forced leave and transferred to the Cost
Accounting Section, not once was Francisco given the opportunity to contest these company actions taken against her. It has
also not escaped our attention that just when one penalty has been served by Francisco, another would instantaneously take
its place. And all these happened even while the supposed case against her, the alleged charge of "betrayal of company
trust", was still pending and remained unresolved. In fact, one of the memoranda was served even at Franciscos residence.
Not even the claim that her relations with her superiors have been strained could justify Franciscos transfer to Cost
Accounting Section. Indeed, it appears that her charge was never resolved. And if Famy, Nuevo and Clemente truly believed
that their relations with Francisco have been strained, then it puzzles the Court why, despite her transfer, she continues to
remain under Famys direct supervision. Such is the tenor of the memoranda relative to her temporary and subsequently,
permanent, transfer to the Cost Accounting Section:
JULY 20, 2000 MEMORANDUM OF FAMY TO CLEMENTE

389
In view of the recent developments, i.e. the suspension of Ms. Amelia Francisco and her letter of July 5, 2000 x x x, I would
like to formally inform you that effective today, July 20, 2000, Ms. Francisco shall be temporarily given a new assignment in my
department pending the result of the investigation she lodged against the undersigned.
x x x. She shall remain directly reporting to the Financial Comptroller (Famy). 42
JULY 20, 2000 MEMORANDUM OF FAMY TO FRANCISCO
This is to inform you that effective today, July 20, 2000, Management has approved your temporary transfer of assignment
pending the completion of the investigation you lodged against the undersigned.
You shall be handling the Cost Accounting Section together with six (6) Accounting Staffs and shall remain reporting directly to
the undersigned.43
OCTOBER 11, 2000 MEMORANDUM OF CLEMENTE TO FRANCISCO
Because of the strained relationship between you and your department head, Mr. Ernilo Famy, we deem it necessary to
transfer you permanently to Cost Accounting effective October 12, 2000. You shall however continue to receive the same
benefits and shall remain under the supervision of Mr. Famy. 44
Interestingly, Franciscos transfer was occasioned not by a past infraction or a present one which has just been committed, but
by her act of filing a complaint for impropriety against Famy.
For this reason, Franciscos July 20, 2000 temporary transfer and her October 12, 2000 permanent transfer to Cost
Accounting Section must be invalidated. For one, there was no valid reason to temporarily transfer Francisco to Cost
Accounting Section on July 20, 2000. She had already served her penalty for her failure to draft the SGV letter, through the 15-
day suspension period which she just completed on July 20, 2000. Secondly, the transfer was not even rooted in any new
infraction she is accused of committing. There was thus an absolute lack of basis for her July 20, 2000 temporary transfer.
As for her October 12, 2000 permanent transfer, the same is null and void for lack of just cause. Also, the transfer is a penalty
imposed on a charge that has not yet been resolved. Definitely, to punish one for an offense that has not been proved is truly
unfair; this is deprivation without due process. Finally, the Court sees no necessity for Franciscos transfer; on the contrary,
such transfer is outweighed by the need to secure her office and documents from Famys possible intervention on account of
the complaint she filed against him.
We also agree with the findings of the NLRC, as affirmed by the CA, that Franciscos transfer constituted a demotion, viz:
x x x We however, hold that Complainants transfer resulted to a demotion in her level/rank. The level of Club Accountant is
not "Supervisor V" but "Managerial-3" as indicated in the Notice of Personnel Action issued to Complainant on July 20, 2000,
signed by her immediate superior Jose Ernilo P. Famy, Department Head of Respondent company on July 10, 2000, and
approved by Tomas B. Clemente III, Acting GM & COOO on July 11, 2000 x x x. Obviously, the alleged August 15, 1998
Companys Organizational Chart showing the Club Accountant and the Cost Controller occupying the same job grade level,
which was attached to Respondents February 21, 2001 Reply x x x was never implemented, otherwise, the Department Head
and the Acting GM & COO would not have specifically indicated "Managerial-3" for Complainants position of Club Accountant
in the Notice of Personnel Action issued to Complainant on July 10, 2000 or two (2) years after the date of the alleged
Organizational Chart. Clearly, Complainant was a manager when she occupied the position of Club Accountant. However,
when management transferred her to the position of Cost Controller/Accountant, she was demoted to a mere supervisor.
Moreover, in Complainants December 3, 1997 Job Description as Club Accountant prepared by Jose Ernilo P. Famy and
approved by Ian Paul Gardner and Atty. Stellamar C. Flores of HR, it is specifically indicated therein that as Club Accountant,
Complainant directly supervises the Cost Controller x x x. Notably, Complainant was never issued any amendment to her
December 3, 1997 Job Description, which would have removed from her supervision the Cost Controller. In fact, Respondents
do not refute Complainants allegation that as Club Accountant, she was responsible for the rating of the Cost Controllers
performance for the years 1998 to 2000. It becomes clearer now that the alleged August 15, 1998 Companys Organizational
Chart showing the Club Accountant and the Cost Controller occupying the same job grade level, which was attached to
Respondents February 22, 2001 Reply x x x was, indeed, never implemented, otherwise, management would have issued
Complainannt an amendment to her December 3, 1997 Job Description effectively removing from her supervision the position
of Cost Controller/Accountant and management would not have let Complainant rate the performance of the Cost
Controller/Accountant for the years 1998 to 2000. It is obvious, therefore, that Complainants position of Club Accountant is
higher in level/rank than that of Cost Controller/Accountant. Patently, Complainants transfer from the position of Club
Accountant to the position of Cost Accountant resulted to her demotion in level/rank. Complainants transfer resulting to her
demotion is, therefore, tantamount to constructive dismissal. x x x45
The fact that Francisco continued to report for work does not necessarily suggest that constructive dismissal has not occurred,
nor does it operate as a waiver. Constructive dismissal occurs not when the employee ceases to report for work, but when the
unwarranted acts of the employer are committed to the end that the employees continued employment shall become so
intolerable. In these difficult times, an employee may be left with no choice but to continue with his employment despite
abuses committed against him by the employer, and even during the pendency of a labor dispute between them. This should
not be taken against the employee. Instead, we must share the burden of his plight, ever aware of the precept that necessitous
men are not free men.

390
"An employer is free to manage and regulate, according to his own discretion and judgment, all phases of employment, which
includes hiring, work assignments, working methods, time, place and manner of work, supervision of workers, working
regulations, transfer of employees, lay-off of workers, and the discipline, dismissal and recall of work. While the law recognizes
and safeguards this right of an employer to exercise what are clearly management prerogatives, such right should not be
abused and used as a tool of oppression against labor. The companys prerogatives must be exercised in good faith and with
due regard to the rights of labor. A priori, they are not absolute prerogatives but are subject to legal limits, collective bargaining
agreements and the general principles of fair play and justice. The power to dismiss an employee is a recognized prerogative
that is inherent in the employers right to freely manage and regulate his business. x x x. Such right, however, is subject to
regulation by the State, basically in the exercise of its paramount police power. Thus, the dismissal of employees must be
made within the parameters of the law and pursuant to the basic tenets of equity, justice and fair play. It must not be done
arbitrarily and without just cause."46
The award of attorneys fees is proper.
With respect to the award of attorneys fees, we find the same to be due and owing to respondent given the circumstances
prevailing in this case as well as the fact that this case has spanned the whole judicial process from the Labor Arbiter to the
NLRC, the CA and all the way up to this Court. Under Article 2208 of the Civil Code, attorneys fees and expenses of litigation
other than judicial costs may be recovered if the claimant is compelled to litigate with third persons or to incur expenses to
protect his interest by reason of an unjustified act or omission of the party from whom it is sought, 47 and where the courts
deem it just and equitable that attorneys fees and expenses of litigation should be recovered.
As for petitioners argument that in the absence of an award of exemplary damages, attorneys fees may not be granted, the
Court finds this unavailing. An award of attorneys fees is not predicated on a grant of exemplary damages. Given the
circumstances of this case, it is regretful that the Labor Arbiter and the NLRC failed to award moral and exemplary damages
prayed for by the respondent. But because respondent did not appeal the denial, the Court may no longer modify the ruling in
this regard.
Respondent is entitled to receive her accrued salary differential, merit increases and productivity bonuses since 2001.
Respondent raises the side issue pertaining to petitioners alleged withholding of her accrued salary differential, merit
increases and productivity bonuses since 2001.48 She claims that during the pendency of this case, petitioner effected salary
adjustments, merit increases and productivity bonuses to other employees. As proof, she submitted the Notice of Personnel
Action-Salary Adjustment49 of Arsenio Rodrigo Neyra, the former Cost Accountant which position she now occupies, and
pertinent portions of the Collective Bargaining Agreement.50She now seeks payment of these amounts.
Notably, petitioner does not refute its grant of salary increases, merit increases and productivity bonuses to other employees.
In its attempt to rebuff Franciscos claim, petitioner merely argues that the same should no longer be entertained because it
was never raised before the proceedings below.51
Interestingly, it never categorically denied that such salary increases, merit increases and productivity bonuses have indeed
been given to the other employees.
At this juncture, it must be stressed that "technical rules of procedure are not binding in labor cases. The application of
technical rules of procedure may be relaxed to serve the demands of substantial justice." 52 "It is more in keeping with the
objective of rendering substantial justice if we brush aside technical rules rather than strictly apply its literal reading. There
[being] no objective reason to further delay this case by insisting on a technicality when the controversy could now be
resolved."53 Moreover, "there is no need to remand this case to the Labor Arbiter for further proceedings, as the facts are clear
and complete on the basis of which a decision can be made."54 Based on the foregoing, we find no reason to deprive herein
respondent of the accrued salary differential, merit increases and productivity bonuses due her since 2001.
WHEREFORE, the Petition is DENIED for lack of merit. The January 25, 2007 Decision and May 23, 2007 Resolution of the
Court of Appeals in CA-G.R. SP No. 80968 are AFFIRMED. Petitioner, The Orchard Golf and Country Club, is ORDERED:
1. To immediately reinstate respondent Amelia R. Francisco to her former position as Club Accountant without loss of
seniority rights and other privileges;
2. Within 15 days from receipt of this Decision, to return and/or pay to the respondent, all her accrued salary
differential, merit increases and productivity bonuses due her, with 12o/o per annum interest 55 on outstanding
balance from finality of this Decision until full payment; and
3. Within the same period, to pay the respondent attorney's fees in the amount of P50,000.00.
SO ORDERED.

G.R. No. 159730 February 11, 2008

NORKIS TRADING CO., INC. and/or MANUEL GASPAR E. ALBOS, JR., petitioner,
vs.
MELVIN GNILO, respondent.**
DECISION
AUSTRIA-MARTINEZ, J.:

391
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to annul and set aside the
Decision1 dated June 20, 2003 and the Resolution2 dated August 25, 2003 of the Court of Appeals (CA) in CA G.R. SP No.
72568.
Melvin R. Gnilo (respondent) was initially hired by Norkis Trading Co., Inc. (petitioner Norkis) as Norkis Installment Collector
(NIC) in April 1988. Manuel Gaspar E. Albos, Jr. (petitioner Albos) is the Senior Vice-President of petitioner Norkis.
Respondent held various positions in the company until he was appointed as Credit and Collection Manager of Magna
Financial Services Group, Inc.-Legaspi Branch, petitioner Norkiss sister company, in charge of the areas of Albay and
Catanduanes with travel and transportation allowances and a service car.
A special audit team was conducted in respondent's office in Legaspi, Albay from March 13 to April 5, 2000 when it was found
out that respondent forwarded the monthly collection reports of the NICs under his supervision without checking the veracity of
the same. It appeared that the monthly collection highlights for the months of April to September 1999 submitted by
respondent to the top management were all overstated particularly the account handled by NIC Dennis Cadag, who made it
appear that the collection efficiency was higher than it actually was; and that the top management was misled into believing
that respondents area of responsibility obtained a favorable collection efficiency.
Respondent was then charged by petitioners' Inquiry Assistance Panel (Panel) with negligence of basic duties and
responsibilities resulting in loss of trust and confidence and laxity in directing and supervising his own subordinates. During the
investigation, respondent admitted that he was negligent for failing to regularly check the report of each NIC under his
supervision; that he only checked at random the NIC's monthly collection highlight reports; and that as a leader, he is
responsible for the actions of his subordinates. He however denied being lax in supervising his subordinates, as he imposed
discipline on them if the need arose.
On May 30, 2000, petitioner Norkis through its Human Resource Manager issued a memorandum 3 placing respondent under
15 days suspension without pay, travel and transportation allowance, effective upon receipt thereof. Respondent filed a letter
protesting his suspension and seeking a review of the penalty imposed.
Another memorandum4 dated June 30, 2000 was issued to respondent requiring him to report on July 5, 2000 to the head
office of petitioner Norkis in Mandaluyong City for a re-training or a possible new assignment without prejudice to his request
for a reconsideration or an appeal of his suspension. He was then assigned to the Marketing Division directly reporting to
petitioner Albos.
In a letter5 dated July 27, 2000, respondent requested petitioner Albos that he be assigned as Sales Engineer or to any
position commensurate with his qualifications. However, on July 28, 2000, respondent was formally appointed as Marketing
Assistant to petitioner Albos, which position respondent subsequently assumed.
However, on October 4, 2000, respondent filed with the Labor Arbiter (LA) a complaint for illegal suspension, constructive
dismissal, non-payment of allowance, vacation/sick leave, damages and attorney's fees against petitioners.
On March 30, 2001, the LA rendered his decision6 dismissing the complaint for lack of merit.
The LA found that the position of Credit and Collection Manager held by respondent involved a high degree of responsibility
requiring trust and confidence; that his failure to observe the required procedure in the preparation of reports, which resulted in
the overstated collection reports continuously for more than six months, was sufficient to breach the trust and confidence of
petitioners and was a valid ground for termination; that instead of terminating him, petitioners merely imposed a 15-day
suspension which was not illegal; and that petitioners exercised their inherent prerogative as an employer when they
appointed respondent as a Marketing Assistant.
Respondent appealed the LA decision to the National Labor Relations Commission (NLRC). In a Resolution 7dated January 29,
2002, the NLRC reversed the LA, the dispositive portion of which reads:
WHEREFORE, premises considered, complainant's appeal is partly GRANTED. The Labor Arbiter's decision in the
above-entitled case is REVERSED. It is hereby declared that complainant was constructively dismissed from his
employment. Respondent Norkis Trading Co., Inc is ordered to pay complainant the amount of P411,796.00 as
backwages and separation pay, plus ten percent (10%) thereof as attorney's fees. 8
In so ruling, the NLRC found that the 15-day suspension cannot be considered harsh and unconscionable as petitioners validly
exercised their management prerogative to impose discipline on an erring employee for negligence by submitting unreliable
and inaccurate reports for six consecutive months to the top management who used the reports in their planning and decision-
making activities, and thus caused damage or injury one way or another to petitioners. It however held that the transfer of
respondent from the position of Credit and Collection Manager to Marketing Assistant resulted in his demotion in rank from
Manager to a mere rank and file employee, which was tantamount to constructive dismissal and therefore illegal.
The NLRC ruled that respondent was constructively dismissed and therefore he was entitled to reinstatement and payment of
full backwages from the time he quit working on October 19, 2000 due to his demotion up to the time of his actual
reinstatement. However, it found that the parties' relationship was already strained on account of this case; thus, it ordered the
payment of respondents separation pay equivalent to his one-month salary for every year of service. It upheld the LA's
dismissal of respondent's prayer for damages for failure to submit substantial evidence to support the same, but awarded
attorney's fees.
Petitioners filed their Motion for Reconsideration while respondent filed his Motion for Reconsideration/Clarification.
392
On June 24, 2002, the NLRC issued another Resolution,9 the dispositive portion of which reads:
WHEREFORE, premises considered, respondents' [petitioners] motion for reconsideration is DENIED for lack of merit
while complainant's [respondent] motion for reconsideration is GRANTED. This Commission's January 29, 2002
Resolution in the above-entitled case is hereby AFFIRMED with the MODIFICATION that respondent Norkis Trading
Company, Inc. is ordered to pay complainant the adjusted amount of P444,739.38 as backwages, separation pay,
13th month pay and refund of provident fund contribution. 10
In granting respondent's motion for reconsideration, the NLRC found that petitioners admitted in their Rejoinder that they had
not paid respondent his 13th-month pay and that respondent had yet to make a written request for the refund of his provident
fund contribution; thus, respondent was entitled thereto and the provident fund contribution must also be returned to him.
Petitioners filed a petition for certiorari with the CA. Subsequently, they also filed a Motion for the Issuance of a Temporary
Restraining Order or a Writ of Preliminary Injunction, as respondent had filed a Motion for the Issuance of a Writ of Execution
with the NLRC.
On June 20, 2003, the CA rendered its assailed Decision denying the petition and affirming the NLRC Resolutions.
On August 25, 2003, the CA denied petitioners Motion for Reconsideration.
Hence, herein petition wherein petitioners assigned the following errors committed by the CA:
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN UPHOLDING THE ERRONEOUS FINDINGS OF
THE NLRC DESPITE THE FACT THAT THE NLRC OVERLOOKED, MISAPPRECIATED OR MISAPPLIED SOME
FACTS THAT WOULD HAVE AFFECTED THE RESULT OF THE CASE.
THE HONORABLE COURT OF APPEALS ACTED CONTRARY TO LAW AND JURISPRUDENCE WHEN IT HELD
THAT PRIVATE RESPONDENT WAS CONSTRUCTIVELY DISMISSED. 11
Petitioners contend that factual findings of quasi-judicial agencies, while generally accorded finality, may be reviewed by this
Court when the findings of the NLRC and the LA are contradictory; that in the exercise of its equity jurisdiction, this Court may
look into the records of the case to re-examine the questioned findings.
Petitioners claim that they were merely exercising their inherent prerogative as an employer when they appointed respondent
as Marketing Assistant to the Senior Vice-President for Marketing; that respondent's performance evaluations during the
previous years showed that he was weak in the financial aspect of operation, but was good in marketing; thus, he would
function with utmost efficiency and maximum benefit to the company in the Marketing Department; and that he had accepted
his appointment unconditionally.
Petitioners submit that the positions of Credit and Collection Manager and Marketing Assistant are co-equal and of the same
level of authority; that the scope of work of a Marketing Assistant is wider, since he has access to confidential informations and
has the chance to communicate directly with higher officers of the company; that his area of responsibility as Credit and
Collection Manager was limited to branches located in Legaspi City and Virac, Catanduanes; whereas as Marketing Assistant,
he is responsible for analyzing and coordinating all marketing information relevant to the company's motorcycles from all over
Luzon, and his reports are necessary for the planning and decision-making activities of petitioners' top management; and that
there is no demotion, since respondent's position is more encompassing and vital to the company and he is receiving the
same salary.
Petitioners also contend that they should not be adjudged to pay attorney's fees as they did not act in bad faith.
In his Comment, respondent states that it is not the function of this Court to analyze and weigh all over again the evidence
already considered in the proceedings below, as its jurisdiction is limited to reviewing errors of law; that the CA had not only
passed upon the legal/factual issues and arguments presented by the parties but had waded into the records and found out
that the findings of the NLRC were supported by substantial evidence. He informs this Court that he was able to enforce the
writ of execution issued by the NLRC and subsequently secured the release of the monetary award on November 14, 2003.
The parties thereafter filed their respective memoranda.
The issue for resolution is whether respondent's transfer from the position of Credit and Collection Manager to that of a
Marketing Assistant amounts to a constructive dismissal. This is a factual matter. Rule 45 of the Rules of Court provides that
only questions of law may be raised in a petition for review on certiorari. The raison d'etre is that the Court is not a trier of
facts. It is not to re-examine and re-evaluate the evidence on record. The general rule is that the factual findings of the NLRC,
as affirmed by the CA, are accorded high respect and finality unless the factual findings and conclusions of the LA clash with
those of the NLRC and the CA, as it appears in this case. Thus we have to review the records and the arguments of the
parties to resolve the factual issues and render substantial justice to the parties.12
Well-settled is the rule that it is the prerogative of the employer to transfer and reassign employees for valid reasons and
according to the requirement of its business.13 An owner of a business enterprise is given considerable leeway in managing
his business. Our law recognizes certain rights, collectively called management prerogative as inherent in the management of
business enterprises. We have consistently recognized and upheld the prerogative of management to transfer an employee
from one office to another within the business establishment, provided that there is no demotion in rank or diminution of his
salary, benefits and other privileges14 and the action is not motivated by discrimination, made in bad faith, or effected as a form
of punishment or demotion without sufficient cause.15 This privilege is inherent in the right of employers to control and manage
their enterprises effectively.16
393
The right of employees to security of tenure does not give them vested rights to their positions to the extent of depriving
management of its prerogative to change their assignments or to transfer them. Managerial prerogatives, however, are subject
to limitations provided by law, collective bargaining agreements, and general principles of fair play and justice. 17
The employer bears the burden of showing that the transfer is not unreasonable, inconvenient or prejudicial to the employee;
and does not involve a demotion in rank or a diminution of his salaries, privileges and other benefits. 18Should the employer fail
to overcome this burden of proof, the employees transfer shall be tantamount to constructive dismissal. 19
Constructive dismissal is defined as a quitting because continued employment is rendered impossible, unreasonable or
unlikely; when there is a demotion in rank or a diminution of pay. 20 Likewise, constructive dismissal exists when an act of clear
discrimination, insensibility or disdain by an employer becomes unbearable to the employee, leaving him with no option but to
forego his continued employment.21
A transfer is defined as a "movement from one position to another which is of equivalent rank, level or salary, without break in
service."22 Promotion, on the other hand, is the "advancement from one position to another with an increase in duties and
responsibilities as authorized by law, and usually accompanied by an increase in salary." 23 Conversely, demotion involves a
situation in which an employee is relegated to a subordinate or less important position constituting a reduction to a lower grade
or rank, with a corresponding decrease in duties and responsibilities, and usually accompanied by a decrease in salary. 24
In this case, while the transfer of respondent from Credit and Collection Manager to Marketing Assistant did not result in the
reduction of his salary, there was a reduction in his duties and responsibilities which amounted to a demotion tantamount to a
constructive dismissal as correctly held by the NLRC and the CA.
A comparison in the nature of work of these two positions shows a great difference. As Credit and Collection Manager,
respondent was clothed with all the duties and responsibilities of a managerial employee. He could devise and implement
action plans to meet his objectives and exercise independent judgment in resolving problem accounts. He had power and
control over NICs, Branch Control Officers (BCOs) and Cashiers under his supervision, and he provided them training in the
performance of their respective works. Further, he had the authority to ensure reserves in the NICs, BCOs and Cashiers in
case of expansion, reassignment and/or termination. There is no doubt that said position of Credit and Collection Manager
entails great duties and responsibilities and involves discretionary powers. In fact, even in petitioners pleadings, they
repeatedly stated that the position involved a high degree of responsibility requiring trust and confidence as it relates closely to
the financial interest of the company.
On the other hand, the work of a Marketing Assistant is clerical in nature, which does not involve the exercise of any
discretion. Such job entails mere data gathering on vital marketing informations relevant to petitioners' motorcycles and
making reports to his direct supervisor. He is a mere staff member in the office of the Senior Vice-President for Marketing.
While petitioners claim that the position of a Marketing Assistant covers a wide area as compared with the position of Credit
and Collection Manager, the latter is reposed with managerial duties in overseeing petitioners business in his assigned area,
unlike the former in which he merely collates raw data. These two positions are not of the same level of authority.
There is constructive dismissal when an employee's functions, which were originally supervisory in nature, were reduced; and
such reduction is not grounded on valid grounds such as genuine business necessity.25
We quote with approval the findings of the CA on the matter of respondent's demotion in his functions, thus:
x x x Studying minutely the proof proffered by both sides, our considered ruling is that there is more than the requisite
quantum of evidence in support of the NLRC's conclusion that indeed, private respondent was constructively
dismissed. This is evident, not only from the much reduced powers and prerogatives of the private respondent when
his position was changed from Credit and Collection Manager to Marketing Assistant to the Senior Vice President; the
variance in the duties between the two, as may be gleaned from the definition of functions made of record, in this
case, are glaring and indubitable. As Credit and Collection Manager, private respondent had the authority to "devise
and implement action plans x x x, manage and control the security and safety of collections and repossessed units x
x x, effectively supervise, teach and train BCO and cashiers x x x, discipline NIC's, BCO's and cashiers, x x x,"
among others. In other words, he was part of management, or was at the supervisory level, to say the least. On the
other hand, as Marketing Assistant to the Senior Vice President, private respondent was stripped of all management
and oversize wherewithal, and became an appendage of his immediate supervisor, confined to such mundane
functions as to "analyze monthly LTO data x x x, coordinate with Sales Engineers x x x, and make quarterly reports x
x x," give inputs on such dreary information such as prices of rice and copra, tobacco and gasoline, sources of
people's income, peace and order situation, prepare brochures, etc., which are humdrum clerical tasks requiring little
or no discretion. Worse, he lost all the people under him, and had no staff, and was relegated to a "mere rank and file
employee who had no one under his supervision and whose duties were merely routinary and clerical in nature which
did not require the use of independent judgment." 26
Moreover, petitioners failed to refute respondents claim that as Credit and Collection Manager, he was provided with a service
car which was no longer available to him as Marketing Assistant; thus, such was a reduction in his benefit.
There is also constructive dismissal when an act of clear discrimination, insensibility, or disdain by an employer becomes so
unbearable on the part of the employee as to foreclose any choice on his part except to resign from such employment. 27 As
aptly observed by the CA, to wit:
394
 While we may allow petitioners the leeway of disciplining its employees, which is why we uphold the finding of the
NLRC that the fifteen-day suspension of private respondent was legal and proper, We cannot countenance the
barbaric treatment suffered by the latter in the hands of his bosses. Undisputed it is that not only was private
respondent made to look like an idiot when he was not given work in his new assignment, but that he was humiliated
and debased when petitioner Albos, in a very uncouth manner, hurled expletives at the private respondent, calling
him bobo, gago and screaming putang ina mo in front of him, at the same time "crumpling (his) report" and throwing it
into his face. Such undignified and boorish deeds perpetrated against private respondent directly caused him to
forthwith leave the employ of petitioner corporation, which he served loyally for some twelve (12) years. 28
Respondents demotion in the nature of his functions coupled with petitioner Alboss act of insensibility no doubt amounts to
his constructive dismissal.
Anent petitioners' claim that respondent unconditionally accepted his formal appointment as Marketing Assistant on August 3,
2000, we note that in a letter dated July 27, 2000 addressed to petitioner Albos when he learned that he would be assigned as
a Marketing Assistant, respondent had expressed reservations on such assignment and asked that he instead be assigned as
Sales Engineer or to any position commensurate to his qualifications. Respondent could not be faulted for accepting the
position of a Marketing Assistant, since he did so and stayed put in order to compare and evaluate his position. However, he
experienced not only a demotion in his duties and responsibilities, an undignified treatment by his immediate superior, which
prompted him to file this case.
Petitioners argue that it is patently inimical to their interest if respondent would be maintained in the position of Credit and
Collection Manager, as he was negligent in the performance of his duties as such; that the 1999 incident was not the first time
that respondent forwarded to top management overstated collection reports, since three of the NICs under respondent's
supervision committed similar misrepresentations in 1997; and that it has been held that the mere existence of a basis for
believing that the supervisor or other personnel occupying positions of responsibility has breached the trust and confidence
reposed in him by his employer is a sufficient ground for dismissal.
While petitioners have the prerogative to transfer respondent to another position, such transfer should be done without
diminution of rank and benefits which has been shown to be present in respondent's case. He could have been transferred to
a job of managerial position and not to that of a Marketing Assistant. Moreover, petitioners failed to substantiate their claim
that respondent was weak in the financial aspect of operation, but he was good in marketing, as the performance evaluation
report relied upon by petitioners would not suffice. On the other hand, the evaluation report dated March 10, 1997 stated that
respondent's track records in sales and collection showed his potential for advancement and could be the basis for his
promotion to Marketing Manager.
We note that the alleged overstated collection reports of three NICs under respondent's supervision submitted in 1997, were
already mentioned in the IAP report of the 1999 incident for which respondent was meted the penalty of 15- day suspension
without salary, travel and transportation allowance; thus, the same could no longer be used to justify his transfer. Moreover,
respondent's demotion, which was a punitive action, was, in effect, a second penalty for the same negligent act of respondent.
Finally, we find no error committed by the NLRC in awarding attorney's fees. In San Miguel Corporation v. Aballa,29 we held
that in actions for recovery of wages or where an employee was forced to litigate and thus incur expenses to protect his rights
and interests, a maximum of 10% of the total monetary award by way of attorney's fees is justifiable under Article 111 of the
Labor Code,30 Section 8, Rule VIII, Book III of its Implementing Rules;31and paragraph 7, Article 2208 of the Civil Code.32 The
award of attorney's fees is proper and there need not be any showing that the employer acted maliciously or in bad faith when
it withheld the wages. There need only be a showing that the lawful wages were not paid accordingly. 33
WHEREFORE, the petition is DENIED. The Decision dated June 20, 2003 and the Resolution dated August 25, 2003 of the
Court of Appeals are AFFIRMED.
Costs against petitioners.
SO ORDERED.

G.R. No. 163091 October 6, 2010

COCA-COLA BOTTLERS PHILIPPINES, INC., Petitioner,
vs.
ANGEL U. DEL VILLAR, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
Petitioner Coca-Cola Bottlers Philippines, Inc. (the Company) filed this Petition for Review on Certiorari, under Rule 45 of the
Rules of Court, seeking the reversal of (1) the Decision1 dated October 30, 2003 of the Court of Appeals in CA-G.R. SP No.
53815, which reversed and set aside the Decision 2 dated February 26, 1999 of the National Labor Relations Commission
(NLRC) in NLRC CN. NCR-00-12-07634-96; and (2) the Resolution3 dated March 29, 2004 of the appellate court in the same
case, which denied for lack of merit the Motion for Reconsideration of the Company.
The antecedent facts are as follows:

395
The Company, one of the leading and largest manufacturers of beverages in the country, initially hired respondent Angel U.
del Villar (Del Villar) on May 1, 1990 as Physical Distribution Fleet Manager with a job grade of S-7 and monthly salary
of P50,000.00, aside from the use of a company car, gasoline allowance, and annual foreign travel, among other benefits. In
1992, as part of the reorganization of the Company, Del Villar became the Transportation Services Manager, under the
Business Logistic Directorate, headed by Director Edgardo I. San Juan (San Juan). As Transportation Services Manager, Del
Villar prepares the budget for the vehicles of the Company nationwide.
While serving as Transportation Services Manager, Del Villar submitted a Report dated January 4, 1996 to the Company
President, Natale J. Di Cosmo (Di Cosmo), detailing an alleged fraudulent scheme undertaken by certain Company officials in
conspiracy with local truck manufacturers, overpricing the trucks purchased by the Company by as much as P70,000.00 each.
In the same Report, Del Villar implicated San Juan and Jose L. Pineda, Jr. (Pineda), among other Company officials, as part of
the conspiracy. Pineda then served as the Executive Assistant in the Business Logistic Directorate in charge of the
Refrigeration Services of the Company.
In 1996, the Company embarked on a reorganization of the Business Logistic Directorate. As a result, the functions related to
Refrigeration were assigned to the Transportation Services Manager, which was renamed the Transportation and
Refrigeration Services Manager. Mr. Nathaniel L. Evangelista, the Physical Distribution Superintendent of the Zamboanga
Plant, was appointed the Corporate Transportation and Refrigeration Services Manager, replacing both Del Villar and Pineda,
who were in charge of the Transportation Services and Refrigeration Services of the Company, respectively. Pineda was then
appointed as the Corporate Purchasing and Materials Control Manager, while Del Villar as Pinedas Staff Assistant. These
new appointments took effect on May 1, 1996.4
On July 8, 1996, seven months after the submission of his Report on the fraudulent scheme of several company officials, Del
Villar received a Memorandum5 from San Juan. Through said Memorandum, San Juan informed Del Villar that (1) Del Villar
was designated as Staff Assistant to the Corporate Purchasing and Materials Control Manager, with a job grade of NS-VII; (2)
with Del Villars new assignment, he ceased to be entitled to the benefits accruing to an S-7 position under existing company
rules and policies; and (3) Del Villar was to turn over the vehicle assigned to him as Transportation Services Manager to
Pineda by July 10, 1996.
Although as the Staff Assistant of the Corporate Purchasing and Materials Control Manager, Del Villar continued to receive the
same salary as Transportation Services Manager, but his car and other privileges were withdrawn and he spent his time at his
new post sitting "at a desk with no meaningful work whatsoever." 6 Del Villar believed that he was demoted by the Company to
force him to resign. Unable to endure any further the harassment, Del Villar filed with the Arbitration Branch of the NLRC on
November 11, 1996 a complaint against the Company for illegal demotion and forfeiture of company privileges. Del Villar also
impleaded in his complaint Company President Di Cosmo, Vice-President and General Manager Jaime G. Oracion (Oracion),
Senior Vice-President and Human Resources Director Rosa Maria Chua (Chua), San Juan, and Pineda. The complaint was
docketed as NLRC CN. NCR-00-12-07634-96, assigned to Labor Arbiter Felipe Pati.
The Company failed to appear, despite due notice, at the scheduled preliminary conference before the NLRC Arbitration
Branch.
Del Villar filed his Position Paper, supported by his Complaint Affidavit.
The Company filed a Motion to Dismiss, instead of a position paper, praying for the dismissal of Del Villars complaint on the
ground that Del Villar had no cause of action. The Company reasoned that in appointing Del Villar as the Staff Assistant of the
Corporate Purchasing and Materials Control Manager, from his former position as Transportation Services Manager, the
Company was merely exercising its inherent management prerogative to transfer an employee from one position to another.
The Company also contended that Del Villar had no vested right to the privileges he previously enjoyed as Transportation
Services Manager. In an Order dated July 24, 1997, the Labor Arbiter deferred action on the Motion to Dismiss until after
submission by the Company of its Position Paper within 15 days from receipt of said order.
The Company filed on October 13, 1997 a Manifestation in which it stated that it was adopting its Motion to Dismiss as its
Position Paper.
Thereafter, NLRC CN. NCR-00-12-07634-96 was submitted for resolution.
On March 3, 1998, the Labor Arbiter rendered a Decision in Del Villars favor. The Labor Arbiter held that the allegations in Del
Villars complaint sufficiently presented a cause of action against the Company. The Company, in filing a Motion to Dismiss,
hypothetically admitted the truth of the facts alleged in the complaint, and the failure of the Company to deny or rebut Del
Villars allegations of bad faith on the part of the Company, gave rise to the presumption against the latter.
The Labor Arbiter proceeded to rule:
The issue as to whether or not [the Company] acted illegally in demoting [Del Villar] is, therefore, answered in the affirmative.
This office is inclined to believe and so holds that the reorganization of [the Company] appears to have been done sans the
necessary requisite of good faith, after [Del Villar] had filed his complaint to the company President detailing the scam
involving the purchase of the truck fleet of 1996.
[Del Villar] was not outrightly dismissed; instead, he was removed from his former position as Transportation Services
Manager, and demoted to Staff Assistant to the Corporate Purchasing and Materials Control Manager. Furthermore, as "Staff

396
Assistant" [Del Villar] allegedly receives his usual salary but his car privileges, gasoline allowances, and foreign travel were
withdrawn and he now sits at a desk "with no meaningful work whatsoever."
[Del Villar] appears to have been singled out or discriminated upon due to his having reported the 1996 truck scam, and his
present isolation can be seen as a punishment for acting in a righteous and forthright manner. Otherwise, as a "Staff
Assistant" [Del Villar] should have been given some meaningful or responsible work appurtenant to the job designation.
xxxx
This Office finds and so holds that in all the foregoing rulings, the concept of management prerogative is limited or otherwise
qualified. Procedurally and substantively, [the Company] through its named officers appears to have acted illegally and in bad
faith in its purported "reorganization", in demoting [Del Villar] and in removing [Del Villars] company privileges.
Had [Del Villar] resigned under the circumstances, he could be said to have been constructively discharged because a
constructive discharge is defined as "a quitting because continued employment is rendered impossible, unreasonable and
unlikely, as an offer involving demotion in rank and a diminution in pay". (Philippine Japan Active Carbon Corporation and
Tukuichi Satofuka vs. NLRC, G.R. 83239, Mar. 1989).7
For demoting Del Villar without justifiable cause, the Labor Arbiter ruled that the Company was liable for the following:
As a consequence of [the Companys] acts [Del Villar] suffered the effects of humiliation, a besmirched repurtation, serious
anxiety and sleepless nights which justify an award of moral damages.
In order to serve as an example to other companies who may be so inclined as to emulate [the Companys] act of punishing
their employees honesty and sense of fair play, [the Company] must per force be assessed exemplary damages.
In order to protect and vindicate his rights under the Labor Code, [Del Villar] was constrained to retain counsel for which [the
Company] should be assessed attorneys fees of not less than ten percent (10%) of the awarded sum.
In the matter of the unlawful withdrawal of [Del Villars] car, gasoline allowance and foreign travel by [the Company], it is
obligated to rectify the withdrawal of privileges by returning to [Del Villar] the said Toyota car, and if that is not possible, its
value as of the time said car was withdrawn including the value of the gasoline allowance and foreign travel due him.8
In the end, the Labor Arbiter decreed:
WHEREFORE, premises considered judgment is hereby rendered against [the Company and the impleaded Company
officials] and in favor of [Del Villar] ordering [the Company] to (1) reinstate [Del Villar] to his former job level; (2) to return the
car to [Del Villar] or to compensate [Del Villar] for the loss of his privileges such as the value of the Toyota car as of the time of
taking including the value of the gasoline allowance and the foreign travel due [Del Villar]; (3) indemnify [Del Villar] moral
damages of P1,000,000.00 Pesos and exemplary damages of P1,000,000.00 Pesos, aside from attorneys fees of 10% of
sums herein awarded.9
The Company expectedly appealed to the NLRC.
While the case was still pending appeal before the NLRC, Del Villar received a letter dated April 28, 1998, signed by one
Virgilio B. Jimeno for the Company, which read:
Dear Mr. Del Villar:
Presently, the Company is implementing various programs to ensure the accomplishment of its corporate goals and
objectives, and to increase the productivity of its workforce.
Since the various programs will affect some of its employees, the Company has initiated a special program called "Project
New Start". This program is intended to assist employees whose positions will be declared redundant with the implementation
of new distribution systems, utilization of improved operational processes and functional re-organizations.
Your position has been determined as no longer necessary due to the reorganization of the Business Logistics Directorate.
The Transportation and Refrigeration Services Department of the Technical Operations Directorate has absorbed your
function and our efforts to transfer you to a similar position within the organization have not been successful. Thus, you are
considered separated from [the Company] effective May 31, 1998.
Thank you for your kind understanding. We wish you success and Gods blessings in all your future undertakings. 10
In a Decision dated February 26, 1999, the NLRC reversed the Labor Arbiter, reasoning that:
Contrary to the Labor Arbiters pronouncement that [the Company] should have rebutted allegations of bad faith and malice,
we are more inclined to apply the presumption of good faith. Mere conclusions of fact and law should not be used as bases for
an automatic finding of bad faith. As it is, we do not even see any disclosure of the scam and his alleged demotion. If indeed
the so-called "great grandmother of Coca cola scams of 1996" were true, the logical consequence of such disclosure is for the
president of the company to dismiss the erring employees and officers for their highly irregular acts and not to penalize [Del
Villar] for making such disclosure. This is amply supported by the fact that the [the Company] conducted a thorough
investigation of the reported scam and even obtained the services of an independent auditor to determine whether the alleged
anomalous transactions were actually irregular and/or questionable. This manifests that [Del Villars] disclosure was taken
seriously contrary to his claims of discrimination. Accordingly, it cannot be said that the act of the [Company] was retaliatory or
penal in nature nor tainted with bad faith and/or malice. Otherwise, [the Company] would not have given grave attention to the
disclosure of [Del Villar].
On the issue of whether there was a demotion, we are of the view that it was improper to conclude that [Del Villars] movement
from the position of Transportation Services Manager to Staff Assistant to the Corporate Purchasing and Materials Control
397
Manager necessarily indicated a demotion. The records show that there was no diminution of salary. While it appears that his
transportation benefits were withheld, it does not follow that his position as Staff Assistant is inferior to that of a Transportation
Services Manager. We take notice of the fact that certain positions in a company involve traveling from one place to another,
hence the necessity to provide for a car, and related benefits like allowances for gasoline and maintenance. A company
cannot, however, be reasonably expected to provide the same benefits to an employee whose position for example, requires
that he stays in the office during working hours. Benefits, privileges and perquisites that attach to a certain position do not
provide sufficient bases for determining the superiority or inferiority of the position so held. 11
Hence, the NLRC concluded:
In fine We find that [Del Villar] was not demoted and that the [Company] has not acted in bad faith or with malice.
WHEREFORE, in view of the foregoing, the Decision dated March 3, 1998 rendered by Labor Arbiter Felipe R. Pati is hereby
REVERSED and SET ASIDE and a new one rendered DISMISSING the complaint for lack of merit. 12
Del Villar moved for the reconsideration of the foregoing NLRC Decision, but the NLRC denied such motion for lack of merit in
a Resolution dated April 26, 1999.13
Unsatisfied, Del Villar brought his case before the Court of Appeals via a Petition for Certiorari under Rule 65 of the Rules of
Court, docketed as CA-G.R. SP No. 53815.
On October 30, 2003, the Court of Appeals promulgated its Decision favoring Del Villar. According to the Court of Appeals, the
NLRC committed grave abuse of discretion by turning a blind eye on several indicia that clearly showed Del Villar was
demoted without any lawful reason: (1) the very nomenclature used by the Company designating Del Villars new job: from
Transportation Services Manager, Del Villar was suddenly designated as staff assistant to another manager; (2) the diminution
in the benefits being enjoyed by Del Villar prior to his transfer, such as the use of the company car, gasoline allowance, and
annual foreign travel; and (3) Del Villars new post in the Company did not require him to perform any meaningful work, a far
cry from his previous responsibilities as Transportation Services Manager which include the preparation of the budget of the
Company for all of its vehicles nationwide.
The Court of Appeals also made a finding of bad faith against the Company:
It is true that Labor Arbiters cannot dictate business owners on how to run their enterprises. Concededly, employers and their
managers have all the leeway to make the necessary adjustments in their organizations. But the prerogative is not absolute. It
must be accompanied by good faith. x x x.
xxxx
We have reasonable ground to believe that the reorganization theory poised by [the Company] was a mere afterthought. If
indeed [Del Villar] was a casualty of a valid reorganization, officials of [the Company] could have easily told him in the several
memos they issued to [Del Villar]. Edgardo San Juan, in a memo dated April 29, 1996, merely informed [Del Villar] the name of
his replacement as Transportation Services Manager (Rollo, p. 53). In his second memo dated May 8, 1996, San Juan
informed [Del Villar] that he would be "under the direct supervision of Mr. Jose L. Pineda, Jr. until an assignment, if any, would
have been determined" for [Del Villar].
Two (2) subsequent memos were received by [Del Villar] but still no hint on the reason behind his relief. Rosa Marie Chua, in a
memo dated June 11, 1996, simply ordered [Del Villar] to return the company car (Rollo, p. 56). Again, Chua sent a memo
dated June 17, 1996, telling [Del Villar] that the car was part of "perquisites" of a Transportation Services Manager and must
be returned as he was already relieved of his position (Rollo, 56).
In all four (4) memos, officials of [the Company] never once attributed to company reorganization as the reason behind [Del
Villars] relief as Transportation Services Manager. Instead, [the Company] waited for [Del Villar] to file a complaint before it
declared publicly its reason for relieving him from his post.
It is unfortunate enough for [the Company] to give San Juan, the very person charged by [Del Villar] of committing fraud
against the company, the free hand to deal with his accuser. And whatever remains of [the Companys] tattered claim to good
faith towards [Del Villar] evaporated by its absence of forthrightness to the latter. [The Companys] lack of candor clearly lends
support to a conclusion that [Del Villars] relief was occasioned by a reason alien to an alleged company reorganization. The
evidence presented by [Del Villar] tend to show that he was demoted, not because of company reorganization, but because of
his authorship of the report about the fraud being committed by certain officials of [the Company]. 14
Just like the Labor Arbiter, the Court of Appeals held the Company liable for the following but in reduced amounts:
Albeit We are inclined to reinstate the decision dated March 3, 1998 of the Labor Arbiter, We feel, however, that the amount of
moral and exemplary damages thereunder awarded to [Del Villar] to the tune of P1 million each was excessive. To Our mind,
the liability of [the Company] is mitigated when it continued providing [Del Villar] despite his demotion with the salary he was
receiving as Transportation Services Manager. The moral and exemplary damages should thus be reduced to the reasonable
amount of P500,000.00, for each item.15
The dispositive portion of the assailed Decision of the appellate court stated:
WHER[E]FORE, the instant petition is hereby GRANTED. Accordingly, the assailed Decision dated February 26, 1999 and
Resolution dated April 26, 1999 of the National Labor Relations Commission are hereby SET ASIDE. Subject to the
modification reducing to P500,000.00 the amount of moral damages and to P500,000.00 the amount of exemplary damages,
the decision dated March 3, 1998 of the Labor Arbiter is hereby REINSTATED.16
398
Del Villar filed on November 20, 2003 a Motion for Partial Reconsideration of the above-mentioned decision of the appellate
court, praying for the award of backwages to be reckoned from May 31, 1998, the day he had been dropped from the payroll.
The Company also moved for the reconsideration of the same judgment, asserting, among other arguments, that Del Villars
Petition for Certiorari in CA-G.R. SP No. 53815, was filed out of time and should have been dismissed.
In its Resolution dated March 29, 2004, the Court of Appeals denied the Motions for Reconsideration of both parties for lack of
merit.17
In this Petition for Review, the Company raises three grounds for consideration of this Court:
A. THE HONORABLE COURT OF APPEALS GAVE DUE COURSE TO THE PETITION DESPITE THE FACT THAT IT WAS
CLEARLY FILED BEYOND THE REGLEMENTARY PERIOD PRESCRIBED BY LAW.
B. THE HONORABLE COURT OF APPEALS GAVE DUE COURSE TO THE [Court of Appeals] PETITION DESPITE THE
FACT THAT [Del Villar] FAILED TO ESTABLISH THAT THE NATIONAL LABOR RELATIONS COMMISSION COMMITTED
GRAVE ABUSE OF DISCRETION IN RENDERING THE 26 FEBRUARY 1999 DECISION AND 26 APRIL 1999
RESOLUTION.
C. THE HONORABLE COURT OF APPEALS EFFECTIVELY DIRECTED [Del Villars] REINSTATEMENT TO HIS FORMER
JOB LEVEL DESPITE ITS IMPOSSIBILITY SINCE HE HAD ALREADY BEEN VALIDLY SEPARATED FROM SERVICE.18
The Company avers that the Court of Appeals erred in giving due course to Del Villars Petition for Certiorari in CA-G.R. SP
No. 53815 as the said remedy was filed out of time. Rule 65, Section 4 of the Rules of Court, as amended by Supreme Court
Circular No. 39-98 on September 1, 1998, provided:
Sec. 4. Where and when petition to be filed. The petition may be filed not later than sixty (60) days from notice of the
judgment, order or resolution sought to be assailed in the Supreme Court or, if it relates to the acts or omissions of a lower
court or of a corporation, board, officer or person, in the Regional Trial Court exercising jurisdiction over the territorial area as
defined by the Supreme Court. It may also be filed in the Court of Appeals whether or not the same is in aid of its appellate
jurisdiction, or in the Sandiganbayan if it is in aid of its jurisdiction. If it involves the acts or omissions of a quasi-judicial agency,
and unless otherwise provided by law or these Rules, the petition shall be filed in and cognizable only by the Court of Appeals.
If the petitioner had filed a motion for new trial or reconsideration in due time after notice of said judgment, order or resolution,
the period herein fixed shall be interrupted. If the motion is denied, the aggrieved party may file the petition within the
remaining period, but which shall not be less than five (5) days in any event, reckoned from notice of such denial. No
extension of time to file the petition shall be granted except for the most compelling reason and in no case to exceed fifteen
(15) days. (Emphases ours.)
The Company points out that Del Villar received a copy of the NLRC Decision dated February 26, 1999 on March 17, 1999.
Twelve days later, on March 29, 1999, Del Villar filed a Motion for Reconsideration, thus, interrupting the 60-day reglementary
period for filing a petition for certiorari. The NLRC denied Del Villars Motion for Reconsideration in a Resolution dated April 26,
1999, a copy of which Del Villar received on May 21, 1999. From May 21, 1999, Del Villar only had 48 days more, or until July
8, 1999, within which to file his petition for certiorari; but he only did so 60 days later, on July 20, 1999. Clearly, Del Villars
Petition for Certiorari in CA-G.R. SP No. 53815 was filed 12 days late and way beyond the reglementary period as provided
under the Rules of Court.
We do not agree.
While CA-G.R. SP No. 53815 was pending before the Court of Appeals, Section 4 of Rule 65 of the Rules of Court was
amended anew by Supreme Court Circular No. 56-2000, which took effect on September 1, 2000, to read:
Sec. 4. When and where petition filed. The petition shall be filed not later than sixty (60) days from notice of the judgment,
order or resolution. In case a motion for reconsideration or new trial is timely filed, whether such motion is required or not, the
sixty (60) day period shall be counted from notice of the denial of the said motion.
The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions of a lower court or of a corporation,
board, officer or person, in the Regional Trial Court exercising jurisdiction over the territorial area as defined by the Supreme
Court. It may also be filed in the Court of Appeals whether or not the same is in the aid of its appellate jurisdiction, or in the
Sandiganbayan if it is in aid of its appellate jurisdiction. If it involves the acts or omissions of a quasi-judicial agency, unless
otherwise provided by law or these rules, the petition shall be filed in and cognizable only by the Court of Appeals.
No extension of time to file the petition shall be granted except for compelling reason and in no case exceeding fifteen (15)
days. (Emphases ours.)
It is clear that under Supreme Court Circular No. 56-2000, in case a motion for reconsideration of the judgment, order, or
resolution sought to be assailed has been filed, the 60-day period to file a petition for certiorari shall be computed from notice
of the denial of such motion.
The crucial question now is whether Supreme Court Circular No. 56-2000 should be applied retroactively to Del Villars Petition
in CA-G.R. SP No. 53815.
We answer affirmatively. As we explained in Perez v. Hermano 19:
Under this amendment, the 60-day period within which to file the petition starts to run from receipt of notice of the denial of the
motion for reconsideration, if one is filed.

399
In Narzoles v. National Labor Relations Commission [G.R. No. 141959, 29 September 2000, 341 SCRA 533-538], we
described this latest amendment as curative in nature as it remedied the confusion brought about by Circular No. 39-98
because, "historically, i.e., even before the 1997 revision to the Rules of Civil Procedure, a party had a fresh period from
receipt of the order denying the motion for reconsideration to file a petition for certiorari." Curative statutes, which are enacted
to cure defects in a prior law or to validate legal proceedings which would otherwise be void for want of conformity with certain
legal requirements, by their very essence, are retroactive and, being a procedural rule, we held in Sps. Ma. Carmen and Victor
Javellana v. Hon. Presiding Judge Benito Legarda (G.R. No. 139067, 23 November 2004] that "procedural laws are construed
to be applicable to actions pending and undetermined at the time of their passage, and are deemed retroactive in that sense
and to that extent."20
In the instant case, Del Villar filed a Motion for Reconsideration of the NLRC Decision dated February 26, 1999. Del Villar
received a copy of the NLRC Resolution dated April 26, 1999, denying his Motion for Reconsideration, on May 21, 1999. As
already settled by jurisprudence, Del Villar had a fresh period of 60 days from May 21, 1999 within which to file his Petition for
Certiorari before the Court of Appeals. Keeping in mind the rule that in computing a period, the first day shall be excluded and
the last day included,21 exactly 60 days had elapsed from May 21, 1999 when Del Villar filed his Petition with the appellate
court on July 20, 1999. Hence, without a doubt, Del Villars Petition for Certiorari in CA-G.R. SP No. 53815 was seasonably
filed.
We now turn our attention to the merits of the case.
The Company asserts that the Court of Appeals should not have issued a writ of certiorari in Del Villars favor as there was no
grave abuse of discretion on the part of the NLRC in finding that Del Villar was not demoted and that the Company had not
acted in bad faith or with malice.
The issue of whether the Company, in transferring Del Villar from the position of Transportation Services Manager to Staff
Assistant to the Corporate Purchasing and Materials Control Manager, validly exercised its management prerogative or
committed constructive dismissal, is a factual matter. It is a settled rule that factual findings of labor officials, who are deemed
to have acquired expertise in matters within their respective jurisdictions, are generally accorded not only respect but even
finality. Moreover, in a petition for review on certiorari under Rule 45 of the Rules of Court, the Supreme Court reviews only
errors of law and not errors of facts. However, where there is divergence in the findings and conclusions of the NLRC, on the
one hand, from those of the Labor Arbiter and the Court of Appeals, on the other, the Court is constrained to examine the
evidence,22 to determine which findings and conclusion are more conformable with the evidentiary facts. Hence, in the instant
Petition, we embark on addressing not only the legal, but the factual issues as well.
Jurisprudence recognizes the exercise of management prerogative. For this reason, courts often decline to interfere in
legitimate business decisions of employers. In fact, labor laws discourage interference in employers judgment concerning the
conduct of their business.23
In the pursuit of its legitimate business interest, management has the prerogative to transfer or assign employees from one
office or area of operation to another provided there is no demotion in rank or diminution of salary, benefits, and other
privileges; and the action is not motivated by discrimination, made in bad faith, or effected as a form of punishment or
demotion without sufficient cause. The right of employees to security of tenure does not give them vested rights to their
positions to the extent of depriving management of its prerogative to change their assignments or to transfer them. 24
Managerial prerogatives, however, are subject to limitations provided by law, collective bargaining agreements, and general
principles of fair play and justice.25 In the case of Blue Dairy Corporation v. National Labor Relations Commission, 26 we
described in more detail the limitations on the right of management to transfer employees:
But, like other rights, there are limits thereto. The managerial prerogative to transfer personnel must be exercised without
grave abuse of discretion, bearing in mind the basic elements of justice and fair play. Having the right should not be confused
with the manner in which that right is exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an
undesirable worker. In particular, the employer must be able to show that the transfer is not unreasonable, inconvenient or
prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and other benefits.
Should the employer fail to overcome this burden of proof, the employees transfer shall be tantamount to constructive
dismissal, which has been defined as a quitting because continued employment is rendered impossible, unreasonable or
unlikely; as an offer involving a demotion in rank and diminution in pay. Likewise, constructive dismissal exists when an act of
clear discrimination, insensibility or disdain by an employer has become so unbearable to the employee leaving him with no
option but to forego with his continued employment.27
In the case at bar, there is no dispute that Del Villar was transferred by the Company from the position of Transportation
Services Manager to the position of Staff Assistant to the Corporate Purchasing and Materials Control Manager. The burden
thus falls upon the Company to prove that Del Villars transfer was not tantamount to constructive dismissal. After a careful
scrutiny of the records, we agree with the Labor Arbiter and the Court of Appeals that the Company failed to discharge this
burden of proof.
The Company and its officials attempt to justify the transfer of Del Villar by alleging his unsatisfactory performance as
Transportation Services Manager. In its Petition, the Company disclosed that:

400
4.1. As Transportation Services Manager, [Del Villar] displayed an utterly woeful performance. He was unable to submit basic
data as to type and brand of vehicles with highest/lowest maintenance cost as requested. [Del Villar] could not even update
the records of his office. He never complied with his commitments on submission of reports and his claims of the availability of
such reports were never substantiated.
4.2. [Del Villar] could not work with minimum or no supervision. His activities needed to be closely and constantly monitored by
his superiors. [Del Villar] lacked initiative and had to be constantly reminded of what to do. The work he performed and/or
submitted, more often than not, had to be redone. In his Performance and Potential Evaluation Sheet for 1995, [Del Villar]
merited a mediocre grade of 2 in a scale of one (1) to five (5), the latter number being the highest grade. Copies of the Affidavit
of Edgardo I. San Juan ["San Juan"], the Companys then Business Logistic Director, and respondents Performance and
Potential Evaluation Sheet for 1995 are attached as Annexes "B" and "C", respectively. 28
San Juan averred in his Affidavit that Del Villar was inept and incompetent as Transportation Services Manager; and was even
more unqualified to take over the new position of Transportation and Refrigeration Services Manager, which involved
additional functions related to Refrigeration. It was for this reason that Del Villar was transferred to the position of Staff
Assistant to the Corporate Purchasing and Materials Control Manager.
In his Counter-Affidavit submitted before the NLRC, Pineda, the Corporate Purchasing and Materials Control Manager,
claimed that:
3. As his evaluation would show, Mr. del Villar was not a well-motivated employee. He could not perform his job well and
promptly with minimum or no supervision and follow-up from his superiors. He repeatedly failed to observe the deadlines
which I set for the submission of his reports and often procrastinates. His work product likewise suffered from accuracy and
thoroughness. Despite several admonitions and guidance from me as his immediate superior, he simply refused to change his
work attitude.29
We are unconvinced. The dismal performance evaluations of Del Villar were prepared by San Juan and Pineda after Del Villar
already implicated his two superiors in his Report dated January 4, 1996 in an alleged fraudulent scheme against the
Company. More importantly, we give weight to the following instances establishing that Del Villar was not merely transferred
from the position of Transportation Services Manager to the position of Staff Assistant to the Corporate Purchasing and
Materials Control Manager; he was evidently demoted.
A transfer is a movement from one position to another which is of equivalent rank, level or salary, without break in service.
Promotion, on the other hand, is the advancement from one position to another with an increase in duties and responsibilities
as authorized by law, and usually accompanied by an increase in salary. Conversely, demotion involves a situation where an
employee is relegated to a subordinate or less important position constituting a reduction to a lower grade or rank, with a
corresponding decrease in duties and responsibilities, and usually accompanied by a decrease in salary. 30
First, as the Court of Appeals observed, Del Villars demotion is readily apparent in his new designation. Formerly, he
was the Transportation Services Manager; then he was made a Staff Assistant a subordinate to another
manager, particularly, the Corporate Purchasing and Materials Control Manager.
Second, the two posts are not of the same weight in terms of duties and responsibilities. Del Villars position as
Transportation Services Manager involved a high degree of responsibility, he being in charge of preparing the budget
for all of the vehicles of the Company nationwide. As Staff Assistant of the Corporate Purchasing and Materials
Control Manager, Del Villar contended that he was not assigned any meaningful work at all. The Company utterly
failed to rebut Del Villars contention. It did not even present, at the very least, the job description of such a Staff
Assistant. The change in the nature of work resulted in a degrading work condition and reduction of duties and
responsibility constitute a demotion in rank. In Globe Telecom, Inc. v. Florendo-Flores,31 we found that there was a
demotion in rank even when the respondent therein continued to enjoy the rank of a supervisor, but her function was
reduced to a mere house-to-house or direct sales agent.
Third, while Del Villars transfer did not result in the reduction of his salary, there was a diminution in his benefits. The
Company admits that as Staff Assistant of the Corporate Purchasing and Materials Control Manager, Del Villar could
no longer enjoy the use of a company car, gasoline allowance, and annual foreign travel, which Del Villar previously
enjoyed as Transportation Services Manager.
Fourth, it was not bad enough that Del Villar was demoted, but he was even placed by the Company under the
control and supervision of Pineda as the latters Staff Assistant. To recall, Pineda was one of the Company officials
who Del Villar accused of defrauding the Company in his Report dated January 4, 1996. It is not too difficult to
imagine that the working relations between Del Villar, the accuser, and Pineda, the accused, had been strained and
hostile. The situation would be more oppressive for Del Villar because of his subordinate position vis--vis Pineda.
Fifth, all the foregoing caused Del Villar inconvenience and prejudice, so unbearable for him that he was constrained
to seek remedy from the NLRC. The Labor Arbiter was correct in his observation that had Del Villar resigned
immediately after his "transfer," he could be said to have been constructively dismissed. There is constructive
dismissal when there is a demotion in rank and/or diminution in pay; or when a clear discrimination, insensibility or
disdain by an employer becomes unbearable to the employee. 32

401
 Eventually, however, the Company actually terminated Del Villars services effective May 31, 1998, as his position
was no longer necessary or was considered redundant due to the reorganization of the Business Logistic Directorate.
Redundancy is one of the authorized causes for the dismissal of an employee. It is governed by Article 283 of the Labor Code,
which reads:
ART. 283. Closure of establishment and reduction of personnel. The employer may also terminate the employment of
any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions
of this Title, by serving a written notice on the workers and the Department of Labor and Employment at least one (1) month
before the intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the
worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1)
month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or to at least one-half (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.
Redundancy, for purposes of the Labor Code, exists where the services of an employee are in excess of what is reasonably
demanded by the actual requirements of the enterprise. Succinctly put, a position is redundant where it is superfluous, and
superfluity of a position or positions may be the outcome of a number of factors, such as overhiring of workers, decreased
volume of business, or dropping of a particular product line or service activity previously manufactured or undertaken by the
enterprise.33
The determination that the employee's services are no longer necessary or sustainable and, therefore, properly terminable for
being redundant is an exercise of business judgment of the employer. The wisdom or soundness of this judgment is not
subject to discretionary review of the Labor Arbiter and the NLRC, provided there is no violation of law and no showing that it
was prompted by an arbitrary or malicious act. In other words, it is not enough for a company to merely declare that it has
become overmanned. It must produce adequate proof of such redundancy to justify the dismissal of the affected employees. 34
We mentioned in Panlilio v. National Labor Relations Commission35 that an employer may proffer "new staffing pattern,
feasibility studies/proposal, on the viability of the newly created positions, job description and the approval by the management
of the restructuring" as evidence of redundancy. We further explained in AMA Computer College Inc. v. Garcia 36 what
constitutes substantial evidence of redundancy:
ACC attempted to establish its streamlining program by presenting its new table of organization. ACC also submitted a
certification by its Human Resources Supervisor, Ma. Jazmin Reginaldo, that the functions and duties of many rank and file
employees, including the positions of Garcia and Balla as Library Aide and Guidance Assistant, respectively, are now being
performed by the supervisory employees. These, however, do not satisfy the requirement of substantial evidence that a
reasonable mind might accept as adequate to support a conclusion. As they are, they are grossly inadequate and mainly self-
serving. More compelling evidence would have been a comparison of the old and new staffing patterns, a description of the
abolished and newly created positions, and proof of the set business targets and failure to attain the same which necessitated
the reorganization or streamlining.37 (Emphases ours.)
In this case, other than its own bare and self-serving allegation that Del Villars position as Staff Assistant of Corporate
Purchasing and Materials Control Manager had already become redundant, no other evidence was presented by the
Company. Neither did the Company present proof that it had complied with the procedural requirement in Article 283 of prior
notice to the Department of Labor and Employment (DOLE) of the termination of Del Villars employment due to redundancy
one month prior to May 31, 1998. The notice to the DOLE would have afforded the labor department the opportunity to look
into and verify whether there is truth as to the claim of the Company that Del Villars position had become redundant "with the
implementation of new distribution systems, utilization of improved operational processes, and functional reorganization" of the
Company. Compliance with the required notices would have also established that the Company abolished Del Villars position
in good faith.38
Del Villars poor employee performance is irrelevant as regards the issue on redundancy.1avvphi1 Redundancy arises
because there is no more need for the employees position in relation to the whole business organization, and not because the
employee unsatisfactorily performed the duties and responsibilities required by his position.39
There being no authorized cause for the termination of Del Villars employment, then he was illegally dismissed.
An employee who is illegally dismissed is entitled to the twin reliefs of full backwages and reinstatement. If reinstatement is not
viable, separation pay is awarded to the employee. In awarding separation pay to an illegally dismissed employee, in lieu of
reinstatement, the amount to be awarded shall be equivalent to one month salary for every year of service. 40 Under Republic
Act No. 6715, employees who are illegally dismissed are entitled to full backwages, inclusive of allowances and other benefits
or their monetary equivalent, computed from the time their actual compensation was withheld from them up to the time of their
actual reinstatement but if reinstatement is no longer possible, the backwages shall be computed from the time of their illegal
termination up to the finality of the decision. We note that Del Villars reinstatement is no longer possible because the position
he previously occupied no longer exists, per San Juans Affidavit dated October 15, 1998.41 Also, Del Villar had already
received his separation pay sometime in October 1998. 42
402
Because of his unjustified dismissal, we likewise award in Del Villars favor moral and exemplary damages. Award of moral
and exemplary damages for an illegally dismissed employee is proper where the employee had been harrassed and arbitrarily
terminated by the employer. Moral damages may be awarded to compensate one for diverse injuries such as mental anguish,
besmirched reputation, wounded feelings, and social humiliation occasioned by the employers unreasonable dismissal of the
employee. We have consistently accorded the working class a right to recover damages for unjust dismissals tainted with bad
faith; where the motive of the employer in dismissing the employee is far from noble. The award of such damages is based not
on the Labor Code but on Article 220 of the Civil Code.43 These damages, however, are not intended to enrich the illegally
dismissed employee, such that, after deliberations, we find the amount of P100,000.00 for moral damages and P50,000.00 for
exemplary damages sufficient to assuage the sufferings experienced by Del Villar and by way of example or correction for the
public good.
WHEREFORE, premises considered, the instant petition is DENIED for lack of merit. The Decision dated October 30, 2003
and Resolution dated March 29, 2004 of the Court of Appeals in CA-G.R. SP No. 53815 are hereby AFFIRMED with the
following MODIFICATIONS: 1) the amount of backwages shall be computed from the date of Del Villars illegal dismissal until
the finality of this judgment; and 2) the amount of moral and exemplary damages are reduced to P100,000.00 and P50,000.00,
respectively. For this purpose, the case is hereby REMANDED to the Labor Arbiter for the computation of the amounts due
Angel U. del Villar.
SO ORDERED.

G.R. No. 151309 October 15, 2008

BISIG MANGGAGAWA SA TRYCO and/or FRANCISCO SIQUIG, as Union President, JOSELITO LARIO, VIVENCIO B.
BARTE, SATURNINO EGERA and SIMPLICIO AYA-AY, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, TRYCO PHARMA CORPORATION, and/or WILFREDO C.
RIVERA, respondents.
DECISION
NACHURA, J.:
This petition seeks a review of the Decision1 of the Court of Appeals (CA) dated July 24, 2001 and Resolution dated
December 20, 2001, which affirmed the finding of the National Labor Relations Commission (NLRC) that the petitioners'
transfer to another workplace did not amount to a constructive dismissal and an unfair labor practice.
The pertinent factual antecedents are as follows:
Tryco Pharma Corporation (Tryco) is a manufacturer of veterinary medicines and its principal office is located in Caloocan
City. Petitioners Joselito Lario, Vivencio Barte, Saturnino Egera and Simplicio Aya-ay are its regular employees, occupying
the positions of helper, shipment helper and factory workers, respectively, assigned to the Production Department. They are
members of Bisig Manggagawa sa Tryco (BMT), the exclusive bargaining representative of the rank-and-file employees.
Tryco and the petitioners signed separate Memorand[a] of Agreement 2 (MOA), providing for a compressed workweek
schedule to be implemented in the company effective May 20, 1996. The MOA was entered into pursuant to Department of
Labor and Employment Department Order (D.O.) No. 21, Series of 1990, Guidelines on the Implementation of Compressed
Workweek. As provided in the MOA, 8:00 a.m. to 6:12 p.m., from Monday to Friday, shall be considered as the regular working
hours, and no overtime pay shall be due and payable to the employee for work rendered during those hours. The MOA
specifically stated that the employee waives the right to claim overtime pay for work rendered after 5:00 p.m. until 6:12 p.m.
from Monday to Friday considering that the compressed workweek schedule is adopted in lieu of the regular workweek
schedule which also consists of 46 hours. However, should an employee be permitted or required to work beyond 6:12 p.m.,
such employee shall be entitled to overtime pay.
Tryco informed the Bureau of Working Conditions of the Department of Labor and Employment of the implementation of a
compressed workweek in the company.3
In January 1997, BMT and Tryco negotiated for the renewal of their collective bargaining agreement (CBA) but failed to arrive
at a new agreement.
Meantime, Tryco received the Letter dated March 26, 1997 from the Bureau of Animal Industry of the Department of
Agriculture reminding it that its production should be conducted in San Rafael, Bulacan, not in Caloocan City:
MR. WILFREDO C. RIVERA
President, Tryco Pharma Corporation
San Rafael, Bulacan
Subject: LTO as VDAP Manufacturer at San Rafael, Bulacan
Dear Mr. Rivera:
This is to remind you that your License to Operate as Veterinary Drug and Product Manufacturer is addressed at San
Rafael, Bulacan, and so, therefore, your production should be done at the above mentioned address only. Further,
production of a drug includes propagation, processing, compounding, finishing, filling, repacking, labeling, advertising,

403
 storage, distribution or sale of the veterinary drug product. In no instance, therefore, should any of the above be done
at your business office at 117 M. Ponce St., EDSA, Caloocan City.
Please be guided accordingly.
Thank you.
Very truly yours,
(sgd.)
EDNA ZENAIDA V. VILLACORTE, D.V.M.
Chief, Animal Feeds Standard Division4
Accordingly, Tryco issued a Memorandum5 dated April 7, 1997 which directed petitioner Aya-ay to report to the company's
plant site in Bulacan. When petitioner Aya-ay refused to obey, Tryco reiterated the order on April 18, 1997.6 Subsequently,
through a Memorandum7 dated May 9, 1997, Tryco also directed petitioners Egera, Lario and Barte to report to the
company's plant site in Bulacan.
BMT opposed the transfer of its members to San Rafael, Bulacan, contending that it constitutes unfair labor practice. In
protest, BMT declared a strike on May 26, 1997.
In August 1997, petitioners filed their separate complaints8 for illegal dismissal, underpayment of wages, nonpayment of
overtime pay and service incentive leave, and refusal to bargain against Tryco and its President, Wilfredo C. Rivera. In their
Position Paper,9 petitioners alleged that the company acted in bad faith during the CBA negotiations because it sent
representatives without authority to bind the company, and this was the reason why the negotiations failed. They added that
the management transferred petitioners Lario, Barte, Egera and Aya-ay from Caloocan to San Rafael, Bulacan to paralyze
the union. They prayed for the company to pay them their salaries from May 26 to 31, 1997, service incentive leave, and
overtime pay, and to implement Wage Order No. 4.
In their defense, respondents averred that the petitioners were not dismissed but they refused to comply with the
management's directive for them to report to the company's plant in San Rafael, Bulacan. They denied the allegation that they
negotiated in bad faith, stating that, in fact, they sent the Executive Vice-President and Legal Counsel as the company's
representatives to the CBA negotiations. They claim that the failure to arrive at an agreement was due to the stubbornness of
the union panel.
Respondents further averred that, long before the start of the negotiations, the company had already been planning to
decongest the Caloocan office to comply with the government policy to shift the concentration of manufacturing activities from
the metropolis to the countryside. The decision to transfer the company's production activities to San Rafael, Bulacan was
precipitated by the letter-reminder of the Bureau of Animal Industry.
On February 27, 1998, the Labor Arbiter dismissed the case for lack of merit. 10 The Labor Arbiter held that the transfer of the
petitioners would not paralyze or render the union ineffective for the following reasons: (1) complainants are not members of
the negotiating panel; and (2) the transfer was made pursuant to the directive of the Department of Agriculture.
The Labor Arbiter also denied the money claims, ratiocinating that the nonpayment of wages was justified because the
petitioners did not render work from May 26 to 31, 1997; overtime pay is not due because of the compressed workweek
agreement between the union and management; and service incentive leave pay cannot be claimed by the complainants
because they are already enjoying vacation leave with pay for at least five days. As for the claim of noncompliance with Wage
Order No. 4, the Labor Arbiter held that the issue should be left to the grievance machinery or voluntary arbitrator.
On October 29, 1999, the NLRC affirmed the Labor Arbiter's Decision, dismissing the case, thus:
PREMISES CONSIDERED, the Decision of February 27, 1998 is hereby AFFIRMED and complainants' appeal
therefrom DISMISSED for lack of merit. Complainants Joselito Lario, Vivencio Barte, Saturnino Egera and Simplicio
Aya-ay are directed to report to work at respondents' San Rafael Plant, Bulacan but without backwages.
Respondents are directed to accept the complainants back to work.
SO ORDERED.11
On December 22, 1999, the NLRC denied the petitioners' motion for reconsideration for lack of merit. 12
Left with no recourse, petitioners filed a petition for certiorari with the CA.
On July 24, 2001, the CA dismissed the petition for certiorari and ruled that the transfer order was a management prerogative
not amounting to a constructive dismissal or an unfair labor practice. The CA further sustained the enforceability of the MOA,
particularly the waiver of overtime pay in light of this Court's rulings upholding a waiver of benefits in exchange of other
valuable privileges. The dispositive portion of the said CA decision reads:
WHEREFORE, the instant petition is DISMISSED. The Decision of the Labor Arbiter dated February 27, 1998 and
the Decision and Resolution of the NLRC promulgated on October 29, 1999 and December 22, 1999, respectively, in
NLRC-NCR Case Nos. 08-05715-97, 08-06115-97 and 08-05920-97, are AFFIRMED.
SO ORDERED.13
The CA denied the petitioners' motion for reconsideration on December 20, 2001.14
Dissatisfied, petitioners filed this petition for review raising the following issues:
-A-

404
 THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE PATENTLY ERRONEOUS RULING OF
THE LABOR ARBITER AND THE COMMISSION THAT THERE WAS NO DISMISSAL, MUCH LESS ILLEGAL
DISMISSAL, OF THE INDIVIDUAL PETITIONERS.
-B-
THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING AND CONCLUDING THAT PRIVATE
RESPONDENTS COMMITTED ACTS OF UNFAIR LABOR PRACTICE.
-C-
THE COURT OF APPEALS ERRED IN NOT FINDING AND CONCLUDING THAT PETITIONERS ARE ENTITLED
TO THEIR MONEY CLAIMS AND TO DAMAGES, AS WELL AS LITIGATION COSTS AND ATTORNEY'S FEES.15
The petition has no merit.
We have no reason to deviate from the well-entrenched rule that findings of fact of labor officials, who are deemed to have
acquired expertise in matters within their respective jurisdiction, are generally accorded not only respect but even finality, and
bind us when supported by substantial evidence.16 This is particularly true when the findings of the Labor Arbiter, the NLRC
and the CA are in absolute agreement.17 In this case, the Labor Arbiter, the NLRC, and the CA uniformly agreed that the
petitioners were not constructively dismissed and that the transfer orders did not amount to an unfair labor practice. But if only
to disabuse the minds of the petitioners who have persistently pursued this case on the mistaken belief that the labor tribunals
and the appellate court committed grievous errors, this Court will go over the issues raised in this petition.
Petitioners mainly contend that the transfer orders amount to a constructive dismissal. They maintain that the letter of the
Bureau of Animal Industry is not credible because it is not authenticated; it is only a ploy, solicited by respondents to give them
an excuse to effect a massive transfer of employees. They point out that the Caloocan City office is still engaged in production
activities until now and respondents even hired new employees to replace them.
We do not agree.
We refuse to accept the petitioners' wild and reckless imputation that the Bureau of Animal Industry conspired with the
respondents just to effect the transfer of the petitioners. There is not an iota of proof to support this outlandish claim. Absent
any evidence, the allegation is not only highly irresponsible but is grossly unfair to the government agency concerned. Even as
this Court has given litigants and counsel a relatively wide latitude to present arguments in support of their cause, we will not
tolerate outright misrepresentation or baseless accusation. Let this be fair warning to counsel for the petitioners.
Furthermore, Tryco's decision to transfer its production activities to San Rafael, Bulacan, regardless of whether it was made
pursuant to the letter of the Bureau of Animal Industry, was within the scope of its inherent right to control and manage its
enterprise effectively. While the law is solicitous of the welfare of employees, it must also protect the right of an employer to
exercise what are clearly management prerogatives. The free will of management to conduct its own business affairs to
achieve its purpose cannot be denied.18
This prerogative extends to the management's right to regulate, according to its own discretion and judgment, all aspects of
employment, including the freedom to transfer and reassign employees according to the requirements of its
business.19 Management's prerogative of transferring and reassigning employees from one area of operation to another in
order to meet the requirements of the business is, therefore, generally not constitutive of constructive dismissal. 20 Thus, the
consequent transfer of Tryco's personnel, assigned to the Production Department was well within the scope of its management
prerogative.
When the transfer is not unreasonable, or inconvenient, or prejudicial to the employee, and it does not involve a demotion in
rank or diminution of salaries, benefits, and other privileges, the employee may not complain that it amounts to a constructive
dismissal.21 However, the employer has the burden of proving that the transfer of an employee is for valid and legitimate
grounds. The employer must show that the transfer is not unreasonable, inconvenient, or prejudicial to the employee; nor does
it involve a demotion in rank or a diminution of his salaries, privileges and other benefits. 22
Indisputably, in the instant case, the transfer orders do not entail a demotion in rank or diminution of salaries, benefits and
other privileges of the petitioners. Petitioners, therefore, anchor their objection solely on the ground that it would cause them
great inconvenience since they are all residents of Metro Manila and they would incur additional expenses to travel daily from
Manila to Bulacan.
The Court has previously declared that mere incidental inconvenience is not sufficient to warrant a claim of constructive
dismissal.23 Objection to a transfer that is grounded solely upon the personal inconvenience or hardship that will be caused to
the employee by reason of the transfer is not a valid reason to disobey an order of transfer. 24
Incidentally, petitioners cite Escobin v. NLRC25 where the Court held that the transfer of the employees therein was
unreasonable. However, the distance of the workplace to which the employees were being transferred can hardly compare to
that of the present case. In that case, the employees were being transferred from Basilan to Manila; hence, the Court noted
that the transfer would have entailed the separation of the employees from their families who were residing in Basilan and
accrual of additional expenses for living accommodations in Manila. In contrast, the distance from Caloocan to San Rafael,
Bulacan is not considerably great so as to compel petitioners to seek living accommodations in the area and prevent them
from commuting to Metro Manila daily to be with their families.

405
Petitioners, however, went further and argued that the transfer orders amounted to unfair labor practice because it would
paralyze and render the union ineffective.
To begin with, we cannot see how the mere transfer of its members can paralyze the union. The union was not deprived of the
membership of the petitioners whose work assignments were only transferred to another location.
More importantly, there was no showing or any indication that the transfer orders were motivated by an intention to interfere
with the petitioners' right to organize. Unfair labor practice refers to acts that violate the workers' right to organize. With the
exception of Article 248(f) of the Labor Code of the Philippines, the prohibited acts are related to the workers' right to self-
organization and to the observance of a CBA. Without that element, the acts, no matter how unfair, are not unfair labor
practices.26
Finally, we do not agree with the petitioners' assertion that the MOA is not enforceable as it is contrary to law. The MOA is
enforceable and binding against the petitioners. Where it is shown that the person making the waiver did so voluntarily, with
full understanding of what he was doing, and the consideration for the quitclaim is credible and reasonable, the transaction
must be recognized as a valid and binding undertaking.27
D.O. No. 21 sanctions the waiver of overtime pay in consideration of the benefits that the employees will derive from the
adoption of a compressed workweek scheme, thus:
The compressed workweek scheme was originally conceived for establishments wishing to save on energy costs,
promote greater work efficiency and lower the rate of employee absenteeism, among others. Workers favor the
scheme considering that it would mean savings on the increasing cost of transportation fares for at least one (1) day
a week; savings on meal and snack expenses; longer weekends, or an additional 52 off-days a year, that can be
devoted to rest, leisure, family responsibilities, studies and other personal matters, and that it will spare them for at
least another day in a week from certain inconveniences that are the normal incidents of employment, such as
commuting to and from the workplace, travel time spent, exposure to dust and motor vehicle fumes, dressing up for
work, etc. Thus, under this scheme, the generally observed workweek of six (6) days is shortened to five (5) days but
prolonging the working hours from Monday to Friday without the employer being obliged for pay overtime premium
compensation for work performed in excess of eight (8) hours on weekdays, in exchange for the benefits abovecited
that will accrue to the employees.
Moreover, the adoption of a compressed workweek scheme in the company will help temper any inconvenience that will be
caused the petitioners by their transfer to a farther workplace.
Notably, the MOA complied with the following conditions set by the DOLE, under D.O. No. 21, to protect the interest of the
employees in the implementation of a compressed workweek scheme:
1. The employees voluntarily agree to work more than eight (8) hours a day the total in a week of which shall not
exceed their normal weekly hours of work prior to adoption of the compressed workweek arrangement;
2. There will not be any diminution whatsoever in the weekly or monthly take-home pay and fringe benefits of the
employees;
3. If an employee is permitted or required to work in excess of his normal weekly hours of work prior to the adoption
of the compressed workweek scheme, all such excess hours shall be considered overtime work and shall be
compensated in accordance with the provisions of the Labor Code or applicable Collective Bargaining Agreement
(CBA);
4. Appropriate waivers with respect to overtime premium pay for work performed in excess of eight (8) hours a day
may be devised by the parties to the agreement.
5. The effectivity and implementation of the new working time arrangement shall be by agreement of the parties.
PESALA v. NLRC,28 cited by the petitioners, is not applicable to the present case. In that case, an employment contract
provided that the workday consists of 12 hours and the employee will be paid a fixed monthly salary rate that was above the
legal minimum wage. However, unlike the present MOA which specifically states that the employee waives his right to claim
overtime pay for work rendered beyond eight hours, the employment contract in that case was silent on whether overtime pay
was included in the payment of the fixed monthly salary. This necessitated the interpretation by the Court as to whether the
fixed monthly rate provided under the employment contract included overtime pay. The Court noted that if the employee is
paid only the minimum wage but with overtime pay, the amount is still greater than the fixed monthly rate as provided in the
employment contract. It, therefore, held that overtime pay was not included in the agreed fixed monthly rate.
Considering that the MOA clearly states that the employee waives the payment of overtime pay in exchange of a five-day
workweek, there is no room for interpretation and its terms should be implemented as they are written.
WHEREFORE, the petition is DENIED. The Court of Appeals Decision dated July 24, 2001 and Resolution dated December
20, 2001 are AFFIRMED.
SO ORDERED.

406
G.R. No. 168654 March 25, 2009
ZAYBER JOHN B. PROTACIO, Petitioner,
vs.
LAYA MANANGHAYA & CO. and/or MARIO T. MANANGHAYA, Respondents.
DECISION
TINGA, J.:
Before the Court is a petition for review on certiorari 1 under Rule 45 of the 1997 Rules of Civil Procedure, assailing the
decision2 and resolution3 of the Court of Appeals in CA-G.R. SP No. 85038. The Court of Appeals decision reduced the
monetary award granted to petitioner by the National Labor Relations Commission (NLRC) while the resolution denied
petitioners motion for reconsideration for lack of merit.
The following factual antecedents are matters of record.
Respondent KPMG Laya Mananghaya & Co. (respondent firm) is a general professional partnership duly organized under the
laws of the Philippines. Respondent firm hired petitioner Zayber John B. Protacio as Tax Manager on 01 April 1996. He was
subsequently promoted to the position of Senior Tax Manager. On 01 October 1997, petitioner was again promoted to the
position of Tax Principal.4
However, on 30 August 1999, petitioner tendered his resignation effective 30 September 1999. Then, on 01 December 1999,
petitioner sent a letter to respondent firm demanding the immediate payment of his 13th month pay, the cash commutation of
his leave credits and the issuance of his 1999 Certificate of Income Tax Withheld on Compensation. Petitioner sent to
respondent firm two more demand letters for the payment of his reimbursement claims under pain of the legal action. 5
Respondent firm failed to act upon the demand letters. Thus, on 15 December 1999, petitioner filed before the NLRC a
complaint for the non-issuance of petitioners W-2 tax form for 1999 and the non-payment of the following benefits: (1) cash
equivalent of petitioners leave credits in the amount of P55,467.60; (2) proportionate 13th month pay for the year 1999; (3)
reimbursement claims in the amount of P19,012.00; and (4) lump sum pay for the fiscal year 1999 in the amount
of P674,756.70. Petitioner also sought moral and exemplary damages and attorneys fees. Respondent Mario T. Managhaya
was also impleaded in his official capacity as respondent firms managing partner. 6
In his complaint,7 petitioner averred, inter alia, that when he was promoted to the position of Tax Principal in October 1997, his
compensation package had consisted of a monthly gross compensation of P60,000.00, a 13th month pay and a lump sum
payment for the year 1997 in the amount of P240,000.00 that was paid to him on 08 February 1998.
According to petitioner, beginning 01 October 1998, his compensation package was revised as follows: (a) monthly gross
compensation of P95,000.00, inclusive of nontaxable allowance; (b) 13th month pay; and (c) a lump sum amount in addition to
the aggregate monthly gross compensation. On 12 April 1999, petitioner received the lump sum amount of P573,000.00 for
the fiscal year ending 1998.8
Respondent firm denied it had intentionally delayed the processing of petitioners claims but alleged that the abrupt departure
of petitioner and three other members of the firms Tax Division had created problems in the determination of petitioners
various accountabilities, which could be finished only by going over voluminous documents. Respondents further averred that
they had been taken aback upon learning about the labor case filed by petitioner when all along they had done their best to
facilitate the processing of his claims.9
During the pendency of the case before the Labor Arbiter, respondent firm on three occasions sent check payments to
petitioner in the following amounts: (1) P71,250.00, representing petitioners 13th month pay; (2) P54,824.18, as payments for
the cash equivalent of petitioners leave credits and reimbursement claims; and (3) P10,762.57, for the refund of petitioners
taxes withheld on his vacation leave credits. Petitioners copies of his withholding tax certificates were sent to him along with
the check payments.10 Petitioner acknowledged the receipt of the 13th month pay but disputed the computation of the cash
value of his vacation leave credits and reimbursement claims. 11
On 07 June 2002, Labor Arbiter Eduardo J. Carpio rendered a decision,12 the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered ordering respondents to jointly and solidarily pay complainant the following:
P12,681.00 - representing the reimbursement claims of complainant;
P28,407.08 - representing the underpayment of the cash equivalent of the unused leave credits of complainant;
P573,000.00 - representing complainants 1999 year-end lump sum payment; and
10% of the total judgment awards way of attorneys fees.
SO ORDERED.13
The Labor Arbiter awarded petitioners reimbursement claims on the ground that respondent firms refusal to grant the same
was not so much because the claim was baseless but because petitioner had failed to file the requisite reimbursement forms.
He held that the formal defect was cured when petitioner filed several demand letters as well as the case before him.14
The Labor Arbiter held that petitioner was not fully paid of the cash equivalent of the leave credits due him because
respondent firm had erroneously based the computation on a basic pay of P61,000.00. He held that the evidence showed that
petitioners monthly basic salary was P95,000.00 inclusive of the other benefits that were deemed included and integrated in
the basic salary and that respondent firm had computed petitioners 13th month pay based on a monthly basic pay
of P95,000.00; thus, the cash commutation of the leave credits should also be based on this figure. 15
407
The Labor Arbiter also ruled that petitioner was entitled to a year-end payment of P573,000.00 on the basis of the company
policy of granting yearly lump sum payments to petitioner during all the years of service and that respondent firm had failed to
give petitioner the same benefit for the year 1999 without any explanation. 16
Aggrieved, respondent firm appealed to the NLRC. On 21 August 2003, the NLRC rendered a modified judgment, 17 the
dispositive portion of which states:
WHEREFORE, the Decision dated June 7, 2002 is hereby Affirmed with the modification that the complainant is only entitled
to receive P2,301.00 as reimbursement claims. The award of P12,681.00 representing the reimbursement claims of
complainant is set aside for lack of basis.
SO ORDERED.18
From the amount of P12,681.00 awarded by the Labor Arbiter as payment for the reimbursement claims, the NLRC lowered
the same to P2,301.00 representing the amount which remained unpaid.19 As regards the issues on the lump sum payments
and cash equivalent of the leave credits, the NLRC affirmed the findings of the Labor Arbiter.
Respondents filed a motion for reconsideration20 but the NLRC denied the motion for lack of merit.21 Hence, respondents
elevated the matter to the Court of Appeals via a petition for certiorari.22
In the assailed Decision dated 19 April 2005, the Court of Appeals further reduced the total money award to petitioner, to wit:
WHEREFORE, in the light of the foregoing, the assailed resolution of public respondent NLRC dated August 21, 2003 in
NLRC NCR Case No. 30-12-00927-99 (CA No. 032304-02) is hereby MODIFIED, ordering petitioner firm to pay private
respondent the following:
(1) P2,301.00 representing private respondents reimbursement claims;
(2) P9,802.83 representing the underpayment of the cash equivalent of private respondents unused leave credits;
(3) P10,000.00 attorneys fees.
SO ORDERED.23
Petitioner sought reconsideration. In the assailed Resolution dated 27 June 2005, the Court of Appeals denied petitioners
motion for reconsideration for lack of merit.
Hence, the instant petition, raising the following issues:
I.
WHETHER PUBLIC RESPONDENT COURT OF APPEALS SUMMARY DENIAL OF PETITIONERS MOTION FOR
RECONSIDERATION VIOLATES THE CONSTITUTIONAL REQUIREMENT THAT COURT DECISIONS MUST STATE THE
LEGAL AND FACTUAL BASIS [THEREOF].
II
WHETHER PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AND ACTED IN
WANTON EXCESS OF JURISDICTION IN TAKING COGNIZANCE OF [RESPONDENTS] PETITION FOR CERTIORARI
WHEN THE RESOLUTION THEREOF HINGES ON MERE EVALUATION OF EVIDENCE.
III.
WHETHER PUBLIC RESPONDENT COURT OF APPEALS WANTONLY ABUSED ITS DISCRETION IN EMPLOYING A
LARGER DIVISOR TO COMPUTE PETITIONERS DAILY SALARY RATE THEREBY DIMINISHING HIS BENEFITS, IN
[VIOLATION] OF THE LABOR CODE.
IV.
WHETHER PUBLIC RESPONDENT COURT OF APPEALS CAPRICIOUSLY ABUSED ITS DISCRETION IN REVERSING
THE [CONCURRING] FINDINGS OF BOTH LABOR ARBITER AND NLRC ON THE COMPENSABLE NATURE OF
PETITIONERS YEAR END [LUMP] SUM PLAY [sic] CLAIM.24
Before delving into the merits of the petition, the issues raised by petitioner adverting to the Constitution must be addressed.
Petitioner contends that the Court of Appeals resolution which denied his motion for reconsideration violated Article VIII,
Section 14 of the Constitution, which states:
Section 14. No decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law
on which it is based.
No petition for review or motion for reconsideration of a decision of the court shall be refused due course or denied without
stating the legal basis therefor.
Obviously, the assailed resolution is not a "decision" within the meaning of the Constitutional requirement. This mandate is
applicable only in cases "submitted for decision," i.e., given due course and after filing of briefs or memoranda and/or other
pleadings, as the case may be.25 The requirement is not applicable to a resolution denying a motion for reconsideration of the
decision. What is applicable is the second paragraph of the above-quoted Constitutional provision referring to "motion for
reconsideration of a decision of the court." The assailed resolution complied with the requirement therein that a resolution
denying a motion for reconsideration should state the legal basis of the denial. It sufficiently explained that after reading the
pleadings filed by the parties, the appellate court did not find any cogent reason to reverse itself.
Next, petitioner argues that the Court of Appeals erred in giving due course to the petition for certiorari when the resolution
thereof hinged on mere evaluation of evidence. Petitioner opines that respondents failed to make its case in showing that the
Labor Arbiter and the NLRC had exercised their discretion in an arbitrary and despotic manner.
408
As a general rule, in certiorari proceedings under Rule 65 of the Rules of Court, the appellate court does not assess and weigh
the sufficiency of evidence upon which the Labor Arbiter and the NLRC based their conclusion. The query in this proceeding is
limited to the determination of whether or not the NLRC acted without or in excess of its jurisdiction or with grave abuse of
discretion in rendering its decision. However, as an exception, the appellate court may examine and measure the factual
findings of the NLRC if the same are not supported by substantial evidence. 26 The Court has not hesitated to affirm the
appellate courts reversals of the decisions of labor tribunals if they are not supported by substantial evidence. 27
The Court is not unaware that the appellate court had reexamined and weighed the evidence on record in modifying the
monetary award of the NLRC. The Court of Appeals held that the amount of the year-end lump sum compensation was not
fully justified and supported by the evidence on record. The Court fully agrees that the lump sum award of P573,000.00 to
petitioner seemed to have been plucked out of thin air. Noteworthy is the fact that in his position paper, petitioner claimed that
he was entitled to the amount of P674,756.70.28 The variance between the claim and the amount awarded, with the record
bereft of any proof to support either amount only shows that the appellate court was correct in holding that the award was a
mere speculation devoid of any factual basis. In the exceptional circumstance as in the instant case, the Court finds no error in
the appellate courts review of the evidence on record.
After an assessment of the evidence on record, the Court of Appeals reversed the findings of the NLRC and the Labor Arbiter
with respect to the award of the year-end lump sum pay and the cash value of petitioners leave credits. The appellate court
held that while the lump sum payment was in the nature of a proportionate share in the firms annual income to which
petitioner was entitled, the payment thereof was contingent upon the financial position of the firm. According to the Court of
Appeals, since no evidence was adduced showing the net income of the firm for fiscal year ending 1999 as well as petitioners
corresponding share therein, the amount awarded by the labor tribunals was a baseless speculation and as such must be
deleted.29
On the other hand, the NLRC affirmed the Labor Arbiters award of the lump sum payment in the amount of P573,000.00 on
the basis that the payment thereof had become a company policy which could not be withdrawn arbitrarily. Furthermore, the
NLRC held that respondent firm had failed to controvert petitioners claim that he was responsible for generating
some P7,365,044.47 in cash revenue during the fiscal year ending 1999.
The evidence on record establishes that aside from the basic monthly compensation,30 petitioner received a yearly lump sum
amount during the first two years31 of his employment, with the payments made to him after the annual net incomes of the firm
had been determined. Thus, the amounts thereof varied and were dependent on the firms cash position and financial
performance.32 In one of the letters of respondent Mananghaya to petitioner, the amount was referred to as petitioners "share
in the incentive compensation program."33
While the amount was drawn from the annual net income of the firm, the distribution thereof to non-partners or employees of
the firm was not, strictly speaking, a profit-sharing arrangement between petitioner and respondent firm contrary to the Court
of Appeals finding. The payment thereof to non-partners of the firm like herein petitioner was discretionary on the part of the
chairman and managing partner coming from their authority to fix the compensation of any employee based on a share in the
partnerships net income.34 The distribution being merely discretionary, the year-end lump sum payment may properly be
considered as a year-end bonus or incentive. Contrary to petitioners claim, the granting of the year-end lump sum amount
was precisely dependent on the firms net income; hence, the same was payable only after the firms annual net income and
cash position were determined.
By definition, a "bonus" is a gratuity or act of liberality of the giver. It is something given in addition to what is ordinarily
received by or strictly due the recipient.35 A bonus is granted and paid to an employee for his industry and loyalty which
contributed to the success of the employers business and made possible the realization of profits.36 Generally, a bonus is not
a demandable and enforceable obligation. It is so only when it is made part of the wage or salary or compensation. When
considered as part of the compensation and therefore demandable and enforceable, the amount is usually fixed. If the amount
would be a contingent one dependent upon the realization of the profits, the bonus is also not demandable and enforceable. 37
In the instant case, petitioners claim that the year-end lump sum represented the balance of his total compensation package
is incorrect. The fact remains that the amounts paid to petitioner on the two occasions varied and were always dependent
upon the firms financial position.
Moreover, in Philippine Duplicators, Inc. v. NLRC,38 the Court held that if the bonus is paid only if profits are realized or a
certain amount of productivity achieved, it cannot be considered part of wages. If the desired goal of production is not
obtained, of the amount of actual work accomplished, the bonus does not accrue.39 Only when the employer promises and
agrees to give without any conditions imposed for its payment, such as success of business or greater production or output,
does the bonus become part of the wage.40
Petitioners assertion that he was responsible for generating revenues amounting to more than P7 million remains a mere
allegation in his pleadings. The records are absolutely bereft of any supporting evidence to substantiate the allegation.
The granting of a bonus is basically a management prerogative which cannot be forced upon the employer who may not be
obliged to assume the onerous burden of granting bonuses or other benefits aside from the employees basic salaries or
wages.41 Respondents had consistently maintained from the start that petitioner was not entitled to the bonus as a matter of
right. The payment of the year-end lump sum bonus based upon the firms productivity or the individual performance of its
409
employees was well within respondent firms prerogative. Thus, respondent firm was also justified in declining to give the
bonus to petitioner on account of the latters unsatisfactory performance.
Petitioner failed to present evidence refuting respondents allegation and proof that they received a number of complaints from
clients about petitioners "poor services." For purposes of determining whether or not petitioner was entitled to the year-end
lump sum bonus, respondents were not legally obliged to raise the issue of substandard performance with petitioner, unlike
what the Labor Arbiter had suggested. Of course, if what was in question was petitioners continued employment vis--vis the
allegations of unsatisfactory performance, then respondent firm was required under the law to give petitioner due process to
explain his side before instituting any disciplinary measure. However, in the instant case, the granting of the year-end lump
sum bonus was discretionary and conditional, thus, petitioner may not question the basis for the granting of a mere
privilege.1avvph!1
With regard to the computation of the cash equivalent of petitioners leave credits, the Court of Appeals used a base figure
of P71,250.00 representing petitioners monthly salary as opposed to P95,000.00 used by the Labor Arbiter and NLRC.
Meanwhile, respondents insist on a base figure of only P61,000.00, which excludes the advance incentive pay of P15,000.00,
transportation allowance of P15,000.00 and representation allowance of P4,000.00, which petitioner regularly received every
month. Because of a lower base figure (representing the monthly salary) used by the appellate court, the cash equivalent of
petitioners leave credits was lowered from P28,407.08 to P9,802.83.
The monthly compensation of P71,250.00 used as base figure by the Court of Appeals is totally without basis. As correctly
held by the Labor Arbiter and the NLRC, the evidence on record reveals that petitioner was receiving a monthly compensation
of P95,000.00 consisting of a basic salary of P61,000.00, advance incentive pay of P15,000.00, transportation allowance
of P15,000.00 and representation allowance of P4,000.00. These amounts totaling P95,000.00 are all deemed part of
petitioners monthly compensation package and, therefore, should be the basis in the cash commutation of the petitioners
leave credits. These allowances were customarily furnished by respondent firm and regularly received by petitioner on top of
the basic monthly pay of P61,000.00. Moreover, the Labor Arbiter noted that respondent firms act of paying petitioner a 13th
month-pay at the rate of P95,000.00 was an admission on its part that petitioners basic monthly salary was P95,000.00
The Court of Appeals, Labor Arbiter and NLRC used a 30-working day divisor instead of 26 days which petitioner insists. The
Court of Appeals relied on Section 2, Rule IV, Book III42 of the implementing rules of the Labor Code in using the 30-working
day divisor. The provision essentially states that monthly-paid employees are presumed to be paid for all days in the month
whether worked or not.
The provision has long been nullified in Insular Bank of Asia and American Employees Union (IBAAEU) v. Hon. Inciong, etc.,
et al.,43 where the Court ruled that the provision amended the Labor Codes provisions on holiday pay by enlarging the scope
of their exclusion.44 In any case, the provision is inapplicable to the instant case because it referred to the computation of
holiday pay for monthly-paid employees.
Petitioners claim that respondent firm used a 26-working day divisor is supported by the evidence on record. In a letter
addressed to
petitioner,45 respondents counsel expressly admitted that respondent used a 26-working day divisor. The Court is perplexed
why the tribunals below used a 30-day divisor when there was an express admission on respondents part that they used a 26-
day divisor in the cash commutation of leave credits. Thus, with a monthly compensation of P95,000.00 and using a 26-
working day divisor, petitioners daily rate is P3,653.85.46 Based on this rate, petitioners cash equivalent of his leave credits of
23.5 is P85,865.48.47 Since petitioner has already received the amount P46,009.67, a balance of P39,855.80 remains payable
to petitioner.
WHEREFORE, the instant petition for review on certiorari is PARTLY GRANTED. The Decision of the Court of Appeals in CA-
G.R. SP No. 85038 is AFFIRMED with the MODIFICATION that respondents are liable for the underpayment of the cash
equivalent of petitioners leave credits in the amount of P39,855.80.
SO ORDERED.

G.R. No. 85985 August 13, 1993

PHILIPPINE AIRLINES, INC. (PAL), petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ISABEL P. ORTIGUERRA and PHILIPPINE AIRLINES
EMPLOYEES ASSOCIATION (PALEA), respondents.
Solon Garcia for petitioner.
Adolpho M. Guerzon for respondent PALEA.

MELO, J.:
In the instant petition for certiorari, the Court is presented the issue of whether or not the formulation of a Code of Discipline
among employees is a shared responsibility of the employer and the employees.

410
On March 15, 1985, the Philippine Airlines, Inc. (PAL) completely revised its 1966 Code of Discipline. The Code was circulated
among the employees and was immediately implemented, and some employees were forthwith subjected to the disciplinary
measures embodied therein.
Thus, on August 20, 1985, the Philippine Airlines Employees Association (PALEA) filed a complaint before the National Labor
Relations Commission (NLRC) for unfair labor practice (Case No. NCR-7-2051-85) with the following remarks: "ULP with
arbitrary implementation of PAL's Code of Discipline without notice and prior discussion with Union by Management" (Rollo, p.
41). In its position paper, PALEA contended that PAL, by its unilateral implementation of the Code, was guilty of unfair labor
practice, specifically Paragraphs E and G of Article 249 and Article 253 of the Labor Code. PALEA alleged that copies of the
Code had been circulated in limited numbers; that being penal in nature the Code must conform with the requirements of
sufficient publication, and that the Code was arbitrary, oppressive, and prejudicial to the rights of the employees. It prayed that
implementation of the Code be held in abeyance; that PAL should discuss the substance of the Code with PALEA; that
employees dismissed under the Code be reinstated and their cases subjected to further hearing; and that PAL be declared
guilty of unfair labor practice and be ordered to pay damages (pp. 7-14, Record.)
PAL filed a motion to dismiss the complaint, asserting its prerogative as an employer to prescibe rules and regulations
regarding employess' conduct in carrying out their duties and functions, and alleging that by implementing the Code, it had not
violated the collective bargaining agreement (CBA) or any provision of the Labor Code. Assailing the complaint as
unsupported by evidence, PAL maintained that Article 253 of the Labor Code cited by PALEA reffered to the requirements for
negotiating a CBA which was inapplicable as indeed the current CBA had been negotiated.
In its reply to PAL's position paper, PALEA maintained that Article 249 (E) of the Labor Code was violated when PAL
unilaterally implemented the Code, and cited provisions of Articles IV and I of Chapter II of the Code as defective for,
respectively, running counter to the construction of penal laws and making punishable any offense within PAL's contemplation.
These provisions are the following:
Sec. 2. Non-exclusivity. This Code does not contain the entirety of the rules and regulations of the
company. Every employee is bound to comply with all applicable rules, regulations, policies, procedures and
standards, including standards of quality, productivity and behaviour, as issued and promulgated by the
company through its duly authorized officials. Any violations thereof shall be punishable with a penalty to be
determined by the gravity and/or frequency of the offense.
Sec. 7. Cumulative Record. An employee's record of offenses shall be cumulative. The penalty for an
offense shall be determined on the basis of his past record of offenses of any nature or the absence thereof.
The more habitual an offender has been, the greater shall be the penalty for the latest offense. Thus, an
employee may be dismissed if the number of his past offenses warrants such penalty in the judgment of
management even if each offense considered separately may not warrant dismissal. Habitual offenders or
recidivists have no place in PAL. On the other hand, due regard shall be given to the length of time between
commission of individual offenses to determine whether the employee's conduct may indicate occasional
lapses (which may nevertheless require sterner disciplinary action) or a pattern of incorrigibility.
Labor Arbiter Isabel P. Ortiguerra handling the case called the parties to a conference but they failed to appear at the
scheduled date. Interpreting such failure as a waiver of the parties' right to present evidence, the labor arbiter considered the
case submitted for decision. On November 7, 1986, a decision was rendered finding no bad faith on the part of PAL in
adopting the Code and ruling that no unfair labor practice had been committed. However, the arbiter held that PAL was "not
totally fault free" considering that while the issuance of rules and regulations governing the conduct of employees is a
"legitimate management prerogative" such rules and regulations must meet the test of "reasonableness, propriety and
fairness." She found Section 1 of the Code aforequoted as "an all embracing and all encompassing provision that makes
punishable any offense one can think of in the company"; while Section 7, likewise quoted above, is "objectionable for it
violates the rule against double jeopardy thereby ushering in two or more punishment for the same misdemeanor." (pp. 38-
39, Rollo.)
The labor arbiter also found that PAL "failed to prove that the new Code was amply circulated." Noting that PAL's assertion
that it had furnished all its employees copies of the Code is unsupported by documentary evidence, she stated that such
"failure" on the part of PAL resulted in the imposition of penalties on employees who thought all the while that the 1966 Code
was still being followed. Thus, the arbiter concluded that "(t)he phrase ignorance of the law excuses no one from compliance .
. . finds application only after it has been conclusively shown that the law was circulated to all the parties concerned and efforts
to disseminate information regarding the new law have been exerted. (p. 39, Rollo.) She thereupon disposed:
WHEREFORE, premises considered, respondent PAL is hereby ordered as follows:
1. Furnish all employees with the new Code of Discipline;
2. Reconsider the cases of employees meted with penalties under the New Code of Discipline and remand
the same for further hearing; and
3. Discuss with PALEA the objectionable provisions specifically tackled in the body of the decision.
All other claims of the complainant union (is) [are] hereby, dismissed for lack of merit.
SO ORDERED. (p. 40, Rollo.)

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PAL appealed to the NLRC. On August 19, 1988, the NLRC through Commissioner Encarnacion, with Presiding
Commissioner Bonto-Perez and Commissioner Maglaya concurring, found no evidence of unfair labor practice committed by
PAL and affirmed the dismissal of PALEA's charge. Nonetheless, the NLRC made the following observations:
Indeed, failure of management to discuss the provisions of a contemplated code of discipline which shall
govern the conduct of its employees would result in the erosion and deterioration of an otherwise
harmonious and smooth relationship between them as did happen in the instant case. There is no dispute
that adoption of rules of conduct or discipline is a prerogative of management and is imperative and
essential if an industry, has to survive in a competitive world. But labor climate has progressed, too. In the
Philippine scene, at no time in our contemporary history is the need for a cooperative, supportive and
smooth relationship between labor and management more keenly felt if we are to survive economically.
Management can no longer exclude labor in the deliberation and adoption of rules and regulations that will
affect them.
The complainant union in this case has the right to feel isolated in the adoption of the New Code of
Discipline. The Code of Discipline involves security of tenure and loss of employment a property right! It is
time that management realizes that to attain effectiveness in its conduct rules, there should be candidness
and openness by Management and participation by the union, representing its members. In fact, our
Constitution has recognized the principle of "shared responsibility" between employers and workers and has
likewise recognized the right of workers to participate in "policy and decision-making process affecting their
rights . . ." The latter provision was interpreted by the Constitutional Commissioners to mean participation in
"management"' (Record of the Constitutional Commission, Vol. II).
In a sense, participation by the union in the adoption of the code if conduct could have accelerated and
enhanced their feelings of belonging and would have resulted in cooperation rather than resistance to the
Code. In fact, labor-management cooperation is now "the thing." (pp. 3-4, NLRC Decision ff. p. 149, Original
Record.)
Respondent Commission thereupon disposed:
WHEREFORE, premises considered, we modify the appealed decision in the sense that the New Code of
Discipline should be reviewed and discussed with complainant union, particularly the disputed provisions [.]
(T)hereafter, respondent is directed to furnish each employee with a copy of the appealed Code of
Discipline. The pending cases adverted to in the appealed decision if still in the arbitral level, should be
reconsidered by the respondent Philippine Air Lines. Other dispositions of the Labor Arbiter are sustained.
SO ORDERED. (p. 5, NLRC Decision.)
PAL then filed the instant petition for certiorari charging public respondents with grave abuse of discretion in: (a) directing PAL
"to share its management prerogative of formulating a Code of Discipline"; (b) engaging in quasi-judicial legislation in ordering
PAL to share said prerogative with the union; (c) deciding beyond the issue of unfair labor practice, and (d) requiring PAL to
reconsider pending cases still in the arbitral level (p. 7, Petition; p. 8, Rollo.)
As stated above, the Principal issue submitted for resolution in the instant petition is whether management may be compelled
to share with the union or its employees its prerogative of formulating a code of discipline.
PAL asserts that when it revised its Code on March 15, 1985, there was no law which mandated the sharing of responsibility
therefor between employer and employee.
Indeed, it was only on March 2, 1989, with the approval of Republic Act No. 6715, amending Article 211 of the Labor Code,
that the law explicitly considered it a State policy "(t)o ensure the participation of workers in decision and policy-making
processes affecting the rights, duties and welfare." However, even in the absence of said clear provision of law, the exercise of
management prerogatives was never considered boundless. Thus, in Cruz vs. Medina (177 SCRA 565 [1989]) it was held that
management's prerogatives must be without abuse of discretion.
In San Miguel Brewery Sales Force Union (PTGWO) vs. Ople (170 SCRA 25 [1989]), we upheld the company's right to
implement a new system of distributing its products, but gave the following caveat:
So long as a company's management prerogatives are exercised in good faith for the advancement of the
employer's interest and not for the purpose of defeating or circumventing the rights of the employees under
special laws or under valid agreements, this Court will uphold them.
(at p. 28.)
All this points to the conclusion that the exercise of managerial prerogatives is not unlimited. It is circumscribed by limitations
found in law, a collective bargaining agreement, or the general principles of fair play and justice (University of Sto. Tomas vs.
NLRC, 190 SCRA 758 [1990]). Moreover, as enunciated in Abbott Laboratories (Phil.), vs. NLRC (154 713 [1987]), it must be
duly established that the prerogative being invoked is clearly a managerial one.
A close scrutiny of the objectionable provisions of the Code reveals that they are not purely business-oriented nor do they
concern the management aspect of the business of the company as in the San Miguel case. The provisions of the Code
clearly have repercusions on the employee's right to security of tenure. The implementation of the provisions may result in the
deprivation of an employee's means of livelihood which, as correctly pointed out by the NLRC, is a property right (Callanta, vs

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Carnation Philippines, Inc., 145 SCRA 268 [1986]). In view of these aspects of the case which border on infringement of
constitutional rights, we must uphold the constitutional requirements for the protection of labor and the promotion of social
justice, for these factors, according to Justice Isagani Cruz, tilt "the scales of justice when there is doubt, in favor of the
worker" (Employees Association of the Philippine American Life Insurance Company vs. NLRC, 199 SCRA 628 [1991] 635).
Verily, a line must be drawn between management prerogatives regarding business operations per se and those which affect
the rights of the employees. In treating the latter, management should see to it that its employees are at least properly
informed of its decisions or modes action. PAL asserts that all its employees have been furnished copies of the Code. Public
respondents found to the contrary, which finding, to say the least is entitled to great respect.
PAL posits the view that by signing the 1989-1991 collective bargaining agreement, on June 27, 1990, PALEA in effect,
recognized PAL's "exclusive right to make and enforce company rules and regulations to carry out the functions of
management without having to discuss the same with PALEA and much less, obtain the latter's conformity thereto" (pp. 11-12,
Petitioner's Memorandum; pp 180-181, Rollo.) Petitioner's view is based on the following provision of the agreement:
The Association recognizes the right of the Company to determine matters of management it policy and
Company operations and to direct its manpower. Management of the Company includes the right to
organize, plan, direct and control operations, to hire, assign employees to work, transfer employees from
one department, to another, to promote, demote, discipline, suspend or discharge employees for just cause;
to lay-off employees for valid and legal causes, to introduce new or improved methods or facilities or to
change existing methods or facilities and the right to make and enforce Company rules and regulations to
carry out the functions of management.
The exercise by management of its prerogative shall be done in a just reasonable, humane and/or lawful
manner.
Such provision in the collective bargaining agreement may not be interpreted as cession of employees' rights to participate in
the deliberation of matters which may affect their rights and the formulation of policies relative thereto. And one such mater is
the formulation of a code of discipline.
Indeed, industrial peace cannot be achieved if the employees are denied their just participation in the discussion of matters
affecting their rights. Thus, even before Article 211 of the labor Code (P.D. 442) was amended by Republic Act No. 6715, it
was already declared a policy of the State, "(d) To promote the enlightenment of workers concerning their rights and
obligations . . . as employees." This was, of course, amplified by Republic Act No 6715 when it decreed the "participation of
workers in decision and policy making processes affecting their rights, duties and welfare." PAL's position that it cannot be
saddled with the "obligation" of sharing management prerogatives as during the formulation of the Code, Republic Act No.
6715 had not yet been enacted (Petitioner's Memorandum, p. 44; Rollo, p. 212), cannot thus be sustained. While such
"obligation" was not yet founded in law when the Code was formulated, the attainment of a harmonious labor-management
relationship and the then already existing state policy of enlightening workers concerning their rights as employees demand no
less than the observance of transparency in managerial moves affecting employees' rights.
Petitioner's assertion that it needed the implementation of a new Code of Discipline considering the nature of its business
cannot be overemphasized. In fact, its being a local monopoly in the business demands the most stringent of measures to
attain safe travel for its patrons. Nonetheless, whatever disciplinary measures are adopted cannot be properly implemented in
the absence of full cooperation of the employees. Such cooperation cannot be attained if the employees are restive on
account, of their being left out in the determination of cardinal and fundamental matters affecting their employment.
WHEREFORE, the petition is DISMISSED and the questioned decision AFFIRMED. No special pronouncement is made as to
costs.
SO ORDERED.

G.R. No. 119205 April 15, 1998

SIME DARBY PILIPINAS, INC. petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (2ND DIVISION) and SIME DARBY SALARIED EMPLOYEES
ASSOCIATION (ALU-TUCP), respondents.

BELLOSILLO, J.:
Is the act of management in revising the work schedule of its employees and discarding their paid lunch break constitutive of
unfair labor practice?
Sime Darby Pilipinas, Inc., petitioner, is engaged in the manufacture of automotive tires, tubes and other rubber products.
Sime Darby Salaried Employees Association (ALU-TUCP), private respondent, is an association of monthly salaried
employees of petitioner at its Marikina factory. Prior to the present controversy, all company factory workers in Marikina
including members of private respondent union worked from 7:45 a.m. to 3:45 p.m. with a 30-minute paid "on call" lunch break.

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On 14 August 1992 petitioner issued a memorandum to all factory-based employees advising all its monthly salaried
employees in its Marikina Tire Plant, except those in the Warehouse and Quality Assurance Department working on shifts, a
change in work schedule effective 14 September 1992 thus
TO: ALL FACTORY-BASED EMPLOYEES
RE: NEW WORK SCHEDULE
Effective Monday, September 14, 1992, the new work schedule of the factory office will be as follows:
7:45 A.M. 4:45 P.M. (Monday to Friday)
7:45 A.M. 11:45 A.M. (Saturday).
Coffee break time will be ten minutes only anytime between:
9:30 A.M. 10:30 A.M. and
2:30 P.M. 3:30 P.M.
Lunch break will be between:
12:00 NN 1:00 P.M. (Monday to Friday).
Excluded from the above schedule are the Warehouse and QA employees who are on shifting. Their work and break
time schedules will be maintained as it is now. 1
Since private respondent felt affected adversely by the change in the work schedule and discontinuance of the 30-minute paid
"on call" lunch break, it filed on behalf of its members a complaint with the Labor Arbiter for unfair labor practice, discrimination
and evasion of liability pursuant to the resolution of this Court in Sime Darby International Tire Co., Inc. v. NLRC. 2 However,
the Labor Arbiter dismissed the complaint on the ground that the change in the work schedule and the elimination of the 30-
minute paid lunch break of the factory workers constituted a valid exercise of management prerogative and that the new work
schedule, break time and one-hour lunch break did not have the effect of diminishing the benefits granted to factory workers
as the working time did not exceed eight (8) hours.
The Labor Arbiter further held that the factory workers would be unjustly enriched if they continued to be paid during their
lunch break even if they were no longer "on call" or required to work during the break. He also ruled that the decision in the
earlier Sime Darby case 3 was not applicable to the instant case because the former involved discrimination of certain
employees who were not paid for their 30-minute lunch break while the rest of the factory workers were paid; hence, this Court
ordered that the discriminated employees be similarly paid the additional compensation for their lunch break.
Private respondent appealed to respondent National Labor Relations Commission (NLRC) which sustained the Labor Arbiter
and dismissed the appeal. 4 However, upon motion for reconsideration by private respondent, the NLRC, this time with two (2)
new commissioners replacing those who earlier retired, reversed its earlier decision of 20 April 1994 as well as the decision of
the Labor Arbiter. 5 The NLRC considered the decision of this Court in the Sime Darby case of 1990 as the law of the case
wherein petitioner was ordered to pay "the money value of these covered employees deprived of lunch and/or working time
breaks." The public respondent declared that the new work schedule deprived the employees of the benefits of a time-honored
company practice of providing its employees a 30-minute paid lunch break resulting in an unjust diminution of company
privileges prohibited by Art. 100 of the Labor Code, as amended. Hence, this petition alleging that public respondent
committed grave abuse of discretion amounting to lack or excess of jurisdiction: (a) in ruling that petitioner committed unfair
labor practice in the implementation of the change in the work schedule of its employees from 7:45 a.m. 3:45 p.m. to 7:45
a.m. 4:45 p.m. with one-hour lunch break from 12:00 nn to 1:00 p.m.; (b) in holding that there was diminution of benefits
when the 30-minute paid lunch break was eliminated; (c) in failing to consider that in the earlier Sime Darby case affirming the
decision of the NLRC, petitioner was authorized to discontinue the practice of having a 30-minute paid lunch break should it
decide to do so; and, (d) in ignoring petitioner's inherent management prerogative of determining and fixing the work schedule
of its employees which is expressly recognized in the collective bargaining agreement between petitioner and private
respondent.
The Office of the Solicitor General filed in a lieu of comment a manifestation and motion recommending that the petitioner be
granted, alleging that the 14 August 1992 memorandum which contained the new work schedule was not discriminatory of the
union members nor did it constitute unfair labor practice on the part of petitioner.
We agree, hence, we sustain petitioner. The right to fix the work schedules of the employees rests principally on their
employer. In the instant case petitioner, as the employer, cites as reason for the adjustment the efficient conduct of its
business operations and its improved production. 6 It rationalizes that while the old work schedule included a 30-minute paid
lunch break, the employees could be called upon to do jobs during that period as they were "on call." Even if denominated as
lunch break, this period could very well be considered as working time because the factory employees were required to work if
necessary and were paid accordingly for working. With the new work schedule, the employees are now given a one-hour lunch
break without any interruption from their employer. For a full one-hour undisturbed lunch break, the employees can freely and
effectively use this hour not only for eating but also for their rest and comfort which are conducive to more efficiency and better
performance in their work. Since the employees are no longer required to work during this one-hour lunch break, there is no
more need for them to be compensated for this period. We agree with the Labor Arbiter that the new work schedule fully
complies with the daily work period of eight (8) hours without violating the Labor Code. 7 Besides, the new schedule applies to
all employees in the factory similarly situated whether they are union members or not. 8

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Consequently, it was grave abuse of discretion for public respondent to equate the earlier Sime Darby case 9 with the facts
obtaining in this case. That ruling in the former case is not applicable here. The issue in that case involved the matter of
granting lunch breaks to certain employees while depriving the other employees of such breaks. This Court affirmed in that
case the NLRC's finding that such act of management was discriminatory and constituted unfair labor practice.
The case before us does not pertain to any controversy involving discrimination of employees but only the issue of whether the
change of work schedule, which management deems necessary to increase production, constitutes unfair labor practice. As
shown by the records, the change effected by management with regard to working time is made to apply to all factory
employees engaged in the same line of work whether or not they are members of private respondent union. Hence, it cannot
be said that the new scheme adopted by management prejudices the right of private respondent to self-organization.
Every business enterprise endeavors to increase its profits. In the process, it may devise means to attain that goal. Even as
the law is solicitous of the welfare of the employees, it must also protect the right of an employer to exercise what are clearly
management prerogatives. 10 Thus, management is free to regulate, according to its own discretion and judgment, all aspects
of employment, including hiring, work assignments, working methods, time, place and manner of work, processes to be
followed, supervision of workers, working regulations, transfer of employees, work supervision, lay off of workers and
discipline, dismissal and recall of workers. 11 Further, management retains the prerogative, whenever exigencies of the service
so require, to change the working hours of its employees. So long as such prerogative is exercised in good faith for the
advancement of the employer's interest and not for the purpose of defeating or circumventing the rights of the employees
under special laws or under valid agreements, this Court will uphold such exercise. 12
While the Constitution is committed to the policy of social justice and the protection of the working class, it should not be
supposed that every dispute will be automatically decided in favor of labor. Management also has rights which, as such, are
entitled to respect and enforcement in the interest of simple fair play. Although this Court has inclined more often than not
toward the worker and has upheld his cause in his conflicts with the employer, such favoritism has not blinded the Court to the
rule that justice is in every case for the deserving, to be dispensed in the light of the established facts and the applicable law
and doctrine. 13
WHEREFORE, the Petition is GRANTED. The Resolution of the National Labor Relations Commission dated 29 November
1994 is SET ASIDE and the decision of the Labor Arbiter dated 26 November 1993 dismissing the complaint against petitioner
for unfair labor practice is AFFIRMED.
SO ORDERED.

G.R. No. 160391. August 9, 2005

DUSIT HOTEL NIKKO and PHILIPPINE HOTELIERS, INC., Petitioners,
vs.
NATIONAL UNION OF WORKERS IN HOTEL, RESTAURANT AND ALLIED INDUSTRIES (NUWHRAIN) - DUSIT HOTEL
NIKKO CHAPTER and ROWENA AGONCILLO, Respondent.
DECISION
CALLEJO, SR., J.:
Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 72006 which
affirmed the Decision2 of the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 014111-97 finding Dusit
Hotel Nikko (Hotel) and Philippine Hoteliers, Inc. (PHI) of illegally terminating the employment services of respondent Rowena
Agoncillo.
The Case for Rowena Agoncillo
The PHI owned and operated the Dusit Hotel Nikko. Since March 1, 1984, Rowena Agoncillo was employed by the Hotel. After
some time, she was promoted as Supervisor of Outlet Cashiers and later promoted as Senior Front Office Cashier, with a
monthly salary of P14,600.00, inclusive of service charge.3 In January 1995, the Hotel decided to trim down the number of its
employees from the original count of 820 to 750.4
On February 21, 1996, the Hotel, through an Inter-Office Memorandum signed by the general manager of Dusit, Yoshikazu
Masuda, offered a Special Early Retirement Program (SERP) to all its employees. It was stated therein that the program was
intended to "provide employees financial benefits prior to prolonged renovation period and, at the same time, to enable
management to streamline the organization by eliminating redundant positions and having a more efficient and productive
manpower complement."5
In a Letter dated February 26, 1996 addressed to the Hotel, the National Union of Workers in Hotel, Restaurant and Allied
Industries, Hotel Nikko Manila Garden Chapter (Union), through its president, Mr. Reynaldo Rasing, sought "a commitment
from the management that the employees terminated due to redundancy will not be replaced by new employees; nor will their
positions be given to subcontractors, agencies or casual employees."
The Union received a Letter dated March 30, 1996 from Masuda confirming his earlier decision to separate 243 employees
from the Hotels services anchored on redundancy and that the separation of the said employees will take effect on April 30,
1996.6 Consequently, a total of 243 employees, including Agoncillo, 161 of whom were Union officers and members, were
separated from the Hotels employment. As a result, the membership of the Union was substantially reduced.
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On April 1, 1996, the Hotel wrote Regional Director Romeo Young of the Department of Labor and Employment (DOLE),
National Capital Region, informing him that the Hotel terminated the employment of 243 employees due to redundancy. On the
same day, Agoncillo was summoned by Hotel Comptroller Reynaldo Casacop, who gave her a letter of even date informing
the latter of her "separation from service due to redundancy effective close of office hours of April 30, 1996." 7
Casacop advised Agoncillo to just avail of the Hotel's SERP, as embodied in the inter-office memorandum of Masuda.8 He
informed her that she had the option to avail of the program and that, in the meantime, he will defer the processing of her
termination papers to give her time to decide. On April 3, 1996, Agoncillo finally told Casacop that she would not avail of the
SERP benefits. By then, she had decided to file a complaint for illegal dismissal against the Hotel.
Meanwhile, the Hotel temporarily closed operations because of the renovation thereof.
When news spread among the hotel employees that Agoncillo would contest her termination before the NLRC, she was
summoned by Personnel Manager Leticia Delarmente to a conference. The two met on May 21, 1996 in the presence of Willy
Dizon, who later became the Director for Personnel and Training of the Hotel. At the said meeting, Delarmente and Dizon
repeatedly asked Agoncillo to give back the original copy of the April 1, 1996 termination letter. Agoncillo told them that the
letter was already in the possession of her counsel. Agoncillo was relieved when she was given another letter of even date
stating that, by reason of her non-availment of the SERP, she was still considered an employee but on temporary lay-off due
to the ongoing renovation of the Hotel9 and that she will just be advised accordingly of her work schedule when the Hotel
reopens.10
But her relief was shortlived. Delarmente and Dizon offered to reinstate Agoncillo but not to her former position as Senior Front
Office Cashier. Agoncillo objected but informed them that she could accept the position of Reservation Clerk. 11 However, no
response was received.
Meanwhile, the Hotel hired six (6) Front Office Cashiers on October 1, 1996. 12 On October 21, 1996, Agoncillo received a
telegram from the Human Resources Department of the Hotel directing her to report to Dizon as soon as possible. 13 She was
told by Dizon that the Hotel was willing to reinstate her but as an Outlet Cashier. Dizon explained that the Hotel had already
hired new employees for the positions of Reservation Clerks. Agoncillo, however, pointed out that she was already an Outlet
Cashier Supervisor before her promotion as Senior Front Office Cashier and that if she accepted the position, it would be an
unjustified demotion on her part. Dizon, however, explained that the management wanted "new graduates" as "front
liners," i.e., new graduates who would occupy the front desks and other sections exposed to guests. On the other hand,
Agoncillo reiterated that she could accept the lower position of Reservation Clerk, but Dizon rejected the suggestion. Dizon
countered that Agoncillo could be reinstated as a Room Service Cashier "para nakatago." At this point, Agoncillo was irked by
the comments of Dizon and asked, "Bakit Sir, nakakaperhuwisyo ba ang physical appearance ko?" As to which Dizon replied,
"Kasi ikaw, nagpabaya ka sa katawan mo." The conversation between them transpired in the presence and within hearing
distance of other hotel employees, including Reynaldo Rasing, the president of the Union. 14
After Agoncillos meeting with Dizon on October 22, 1996, the latter kept on promising to find a suitable position for her. In
those meetings, Dizon always offered reinstatement to positions that do not require guest exposure like Linen Dispatcher at
the hotel basement or Secretary of Roomskeeping. When Agoncillo refused, Dizon just instructed her to return. Agoncillo had
no specific position or assigned task to perform.
On November 1, 1996, the Hotel resumed operations. On November 11, 1996, the Union filed a Notice of Strike for unfair
labor practice with the DOLE.15 On November 12, 1996, Agoncillo with the assistance of the Union, filed a Complaint against
the PHI and Dusit Hotel Nikko for illegal dismissal before the NLRC.
Meantime, the Secretary of Labor and Employment (SOLE) assumed jurisdiction over the dispute on November 29, 1996 after
the requisite strike- vote was conducted.16 The case was docketed as NCMB-NCR-NS-11-425-96.
On January 5, 1997, the Hotel published an advertisement in the newspaper Manila Bulletin inviting prospective applicants as
guest relations agents, bell service agents/valet parkers, housekeeping agents, and sales executives. The Hotel hired 135
additional employees, mostly on probationary and contractual bases. These new workers performed tasks according to the
reclassified positions under the new Job Code, in violation of the Collective Bargaining Agreement (CBA) between the Hotel
and the Union.17 A total of 215 workers replaced the previously dismissed employees, including Agoncillo.
The Case for the Hotel
The petitioner Hotel, formerly known as Hotel Nikko Manila Garden, was owned and managed by the PHI, a corporation
substantially owned by Japan Airlines (JAL). In November 1995, JAL formally turned over its majority shareholdings in PHI to a
Thai corporation, Dusit Thani Public Co., Ltd. (Dusit). This gave Dusit the managerial control over the Hotel, which was then
renamed Dusit Hotel Nikko.18
With the very stiff competition in the hotel industry in mind, Dusit has set a twofold objective, namely: (1) the total renovation of
the Hotel, where it had earmarked the amount of about P300,000,000.00; and (2) a complete reorganization of the Hotels
manpower complement. The renovation of the Hotel, which called for its closure, began on May 1, 1996 and ended six months
thereafter. On the other hand, the reorganization was done to standardize the Hotels organizational set-up with all Dusit
Hotels around the world and train the employees for their eventual deployment to its other chain of hotels. The reorganization
program started with a staff reduction program wherein employees were given the chance to voluntarily avail of the SERP. As

416
per its guidelines, the SERP is a one-time program offered by the Hotel to its regular employees who had at least one year of
service as of April 30, 1996, in order to achieve the following:
a.) realize optimum operational productivity and efficiency through a reorganization that will eliminate redundant position;
b.) reduce expenses of the company; and
c.) provide employees the opportunity to receive lump-sum benefits for their immediate use before the 6-month closure.19
Pursuant to the reorganization program, a reclassification of positions ensued upon resumption of the Hotels operation.
Consequently, the position of Agoncillo as Senior Front Office Cashier was abolished and a new position of Guest Services
Agent absorbing its functions was created. Considering that the new position requires skills in both reception and cashiering
operations, respondent Hotel deemed it necessary to transfer Agoncillo to another position as Outlet Cashier, which does not
require other skills aside from cashiering.20
The transfer of Agoncillo from Senior Front Office Cashier to Outlet Cashier does not entail any diminution of salary or rank.
Despite which, she vehemently refused the transfer and insisted that she be reinstated to her former position. Since Agoncillo
was not amenable to the said transfer, she did not assume her new position and since then had stopped reporting for work
despite the Hotels patient reminder to act on the contrary. Instead, she filed a complaint to question the prerogative of the
management to validly transfer her to another position as she considers the transfer an act of constructive dismissal
amounting to illegal termination and unfair labor practice in the form of union busting. 21
Proceedings before the Labor Arbiter, NLRC and the CA
On September 18, 1997, the Labor Arbiter rendered judgment dismissing the complaint for unfair labor practice and
constructive dismissal. The Labor Arbiter ruled that the reassignment of the complainant was done by management in the valid
exercise of management prerogative, and that management has not dismissed her in any way. 22 On October 27, 1997, the
complainant appealed the decision to the NLRC.
In the meantime, on January 6, 1998, the SOLE issued an Order in NCMB-NCR-NS-11-425-96 in favor of the Union.
The fallo of the Order reads:
WHEREFORE, judgment is hereby rendered:
1. Declaring the termination of 243 employees, including 161 Union officers and members on April 1, 1996, illegal;
2. Ordering the immediate reinstatement of the 243 employees, without loss of seniority rights and with full backwages and
benefits from the time of their termination until actual reinstatement, less the amounts received by them on account of the
Companys Special Early Retirement Program;
3. Declaring the Company guilty of unfair labor practice for:
a. implementing an illegal redundancy program in the guise of a Special Early Retirement Program, terminating in the process
243 employees, including 161 Union officers and members;
b. implementing a New Job and Wage Classification and Manning Standards, in violation of Article 1, Section VII of the parties
Collective Bargaining Agreement; and
c. violation of the CBA provisions on entry rates of new employees and rice subsidy for retained employees who were on duty
during the renovation of the Hotel.
4. Ordering the Company to cease and desist from further continuing with its commission of the unfair labor practice acts
herein complained of.
SO ORDERED.23
The respondents therein filed a motion for the reconsideration of the order but the SOLE denied the same. On March 10,
2000, the Union and the Hotel executed a Memorandum of Agreement (MOA) in which the Hotel agreed to pay P15,000.00 to
each member of the Union by way of amicable settlement of NCMB-NCR-NS-11-425-96 in addition to the redundancy pay
earlier paid to them and that they shall file with the DOLE a motion praying for the following:
a. Dismissal of the case with prejudice in regard to:
(i) illegal redundancy as to those who have received the settlement pay above and signed the Special Power of Attorney and
Release, Waiver and Quitclaim;
(ii) all ULP charges; and
b. Dismissal of the case without prejudice as to those who have not yet received the settlement pay. 24
However, the MOA was not submitted to the NLRC for its approval. Neither did Agoncillo receive any monetary benefits based
on the MOA.
After due proceedings, the NLRC rendered judgment on January 30, 2002, reversing the appealed decision of the Labor
Arbiter, dated September 18, 1997. The fallo of the decision reads:
WHEREFORE, the appealed decision is SET ASIDE. Judgment is hereby rendered ordering respondent to:
1. immediately reinstate complainant to her former or equivalent position without loss of seniority rights and benefits; and
2. to pay complainant full backwages computed from the time it was illegally withheld from her as a result of her illegal
dismissal up to the time she is actually reinstated.
SO ORDERED.25
The NLRC ruled that Agoncillo was illegally dismissed. It relied principally on the evidence of the complainant and the Order of
the SOLE dated January 6, 1998. The respondents filed a motion for reconsideration,26 which the NLRC denied. Hence, they
417
filed before the Court of Appeals a Petition for Certiorari with Very Urgent Prayer for the Issuance of a Temporary Restraining
Order and/or Writ of Preliminary Injunction,27 which is anchored on the following grounds, to wit:
I
WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION GRAVELY ERRED WHEN
IT RULED THAT PRIVATE RESPONDENT AGONCILLO WAS ILLEGALLY DISMISSSED CONSIDERING THAT, IN THE
FIRST PLACE, PRIVATE RESPONDENT AGONCILLO WAS NEVER DISMISSED, CONSTRUCTIVELY OR OTHERWISE;
II
CONTRARY TO THE RULING OF THE HONORABLE COMMISSION, PRIVATE RESPONDENT AGONCILLO'S TRANSFER
FROM THE POSITION OF SENIOR FRONT OFFICE CASHIER TO THE POSITION OF OUTLET CASHIER WAS A VALID
EXERCISE OF MANAGEMENT PREROGATIVE;
III
EVEN ASSUMING IN GRATIA ARGUMENTI THAT PRIVATE RESPONDENT AGONCILLO WAS INDEED SEPARATED
FROM THE HOTEL, HER SEPARATION DUE TO REDUNDANCY WAS VALID AND/OR LEGAL. CONTRARY TO THE
RULING OF THE HONORABLE COMMISSION, THE REDUNDANCY PROGRAM IMPLEMENTED BY THE HOTEL IS
VALID. FURTHERMORE, PRIVATE RESPONDENTS ARE BOUND BY THE COMPROMISE AGREEMENT BETWEEN THE
UNION AND THE HOTEL WHICH, AMONG OTHERS, RECOGNIZES THE VALIDITY OF THE SAID PROGRAM;
IV
CONSIDERING THE FOREGOING, THE PETITIONERS ARE NOT GUILTY OF UNFAIR LABOR PRACTICE. PRIVATE
RESPONDENT AGONCILLO, ON THE OTHER HAND, IS NOT ENTITLED TO REINSTATEMENT WITH FULL
BACKWAGES.28
On June 26, 2003, the CA rendered judgment dismissing the petition on the ground that no grave abuse of discretion was
committed by the respondents therein.
The petitioners motion for reconsideration29 was denied by the CA. They forthwith filed their petition for review alleging that:
THE HONORABLE COURT OF APPEALS ERRED IN RENDERING THE ASSAILED DECISION AND RESOLUTION,
HAVING DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN ACCORD WITH LAW AND THE APPLICABLE
DECISIONS OF THIS HONORABLE COURT, CONSIDERING THAT
I
THE NLRC GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT
RULED THAT RESPONDENT AGONCILLO WAS ILLEGALLY DISMISSED BECAUSE, IN THE FIRST PLACE, SHE WAS
NEVER DISMISSED, CONSTRUCTIVELY OR OTHERWISE.
II
RESPONDENT AGONCILLO'S TRANSFER FROM THE POSITION OF SENIOR FRONT OFFICE CASHIER TO THE
POSITION OF OUTLET CASHIER WAS A VALID EXERCISE OF MANAGEMENT PREROGATIVE.
III
EVEN ON THE ASSUMPTION THAT RESPONDENT AGONCILLO WAS INDEED SEPARATED FROM THE HOTEL, HER
SEPARATION DUE TO A REDUNDANCY PROGRAM WAS LEGAL. THE REDUNDANCY PROGRAM IMPLEMENTED BY
THE HOTEL IS LIKEWISE VALID. FURTHERMORE, RESPONDENTS ARE BOUND BY THE COMPROMISE AGREEMENT
BETWEEN THE UNION AND THE HOTEL WHICH, AMONG OTHERS, RECOGNIZES THE VALIDITY OF THE SAID
PROGRAM.
IV
IN LIGHT OF THE FOREGOING, THE PETITIONERS ARE NOT GUILTY OF ILLEGAL DISMISSAL, MUCH LESS UNFAIR
LABOR PRACTICE. HENCE, RESPONDENT AGONCILLO CANNOT BE ENTITLED TO REINSTATEMENT NOR TO FULL
BACKWAGES.30
The Court's Ruling
The petition is unmeritorious.
The issues for resolution are factual and Rule 45 of the Rules of Court provides that only questions of law may be raised in a
petition for review on certiorari. The raison detre is that the Court is not a trier of facts. It is not to reexamine and reevaluate
the evidence on record. Moreover, the factual findings of the NLRC, as affirmed by the CA, are accorded high respect and
finality unless the factual findings and conclusions of the Labor Arbiter clash with those of the NLRC and the CA in which case,
the Court will have to review the records and the arguments of the parties to resolve the factual issues and render substantial
justice to the parties.31
The petitioners reiterate their submission that respondent Agoncillo had never been dismissed; she was merely transferred to
another position, that of Outlet Cashier. She had been temporarily laid off because of the renovation of the hotel but she
remained as an employee of the hotel. Following the completion of the renovation of the hotel, she was offered the position of
outlet cashier; but she already filed her complaint before the Hotel was able to determine what position she could occupy
which was mutually acceptable. The petitioners aver that the transfer of the respondent to the position of Outlet Cashier was a
valid exercise of management prerogative based on its assessment of her qualification, aptitude and competence, absent any
showing to be contrary to law, morals or public policy, unreasonable, inconvenient and prejudicial to the employee. The
418
petitioners insist that the transfer of Agoncillo was pursuant to its objective of completely reorganizing its manpower
component. It did not entail any diminution in salary, benefits, privileges or job level. The petitioners also maintain that even if
the respondent was separated from the Hotel, it was justified to do so due to redundancy. The validity of the said program was
even recognized by the respondents in the MOA executed by petitioner Hotel and the respondent Union. The petitioners
maintain that the respondents are bound by the MOA.
The contentions are untenable. It is plain as day that the petitioners terminated the employment of respondent Agoncillo
effective April 30, 1996, as evidenced by their letter which reads:
April 1, 1996
Ms. Rowena Agoncillo
26 A. Soriano, B.F. Homes
Paraaque, Metro Manila
Dear Ms. Agoncillo:
We have recently conducted a study of the Hotels organizational structure and found the need to reorganize the same and
eliminate many positions that have become redundant.
As a result of such study, it was determined that your position as Senior Front Office Cashier is redundant. In this connection,
please be advised of your separation from service due to redundancy, effective close of office hours of April 30, 1996. You will
receive not later than April 30, 1996 the separation pay provided for under the law, plus the amount of P19,000.00.
We take this opportunity to thank you for your service to Hotel Nikko Manila Garden and extend to you our best wishes for
your next endeavors.
Very truly yours,
(Sgd.)
PEARL V. ARAGON
Director for Administration32
The letter of the petitioners terminating the employment of Agoncillo on the ground of redundancy was rejected by the Order of
the SOLE in NCMB-NCR-NS-11-425-96 where he ruled that the petitioners redundancy program was but a ploy, a
contrivance cunningly scripted by them to subvert the Union and unlawfully dismiss many of its employees. The SOLE
declared that, by their acts, the petitioners were guilty of unfair labor practice.
Redundancy exists when the service capability of the workforce is in excess of what is reasonably needed to meet the
demands of the business enterprise. A reasonably redundant position is one rendered superfluous by any number of factors,
such as overhiring of workers, decreased volume of business, dropping of a particular product line previously manufactured by
the company or phasing out of service activity priorly undertaken by the business. Among the requisites of a valid redundancy
program are: (1) the good faith of the employer in abolishing the redundant position; and (2) fair and reasonable criteria in
ascertaining what positions are to be declared redundant and accordingly abolished.33 As found by the SOLE, the NLRC and
the CA, the position of respondent Agoncillo was not abolished or declared redundant. In fact, the petitioners hired an entirely
new set of employees to perform the tasks of respondent Agoncillo, namely:
Don Vincent Hembrador - hired on October 1, 1996
Reynaldo Pajarito - hired on October 1, 1996
Eliza De Venecia - hired on October 1, 1996
Scarlet Galve - hired on October 1, 1996
Dheeny Laggui - hired on October 1, 1996
Eric Galos - hired on October 1, 1996
Carlota Pineda - hired on January 25, 199734
We agree with the contention of the petitioners that it is the prerogative of management to transfer an employee from one
office to another within the business establishment based on its assessment and perception of the employees qualification,
aptitude and competence, and in order to ascertain where he can function with the maximum benefit to the company.
However, this Court emphasized that:
But, like other rights, there are limits thereto. The managerial prerogative to transfer personnel must be exercised without
grave abuse of discretion, bearing in mind the basic elements of justice and fair play. Having the right should not be confused
with the manner in which that right is exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an
undesirable worker. In particular, the employer must be able to show that the transfer is not unreasonable, inconvenient or
prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and other benefits.
Should the employer fail to overcome this burden of proof, the employees transfer shall be tantamount to constructive
dismissal, which has been defined as a quitting because continued employment is rendered impossible, unreasonable or
unlikely; as an offer involving a demotion in rank and diminution in pay.35
There is constructive dismissal when there is a demotion in rank and/or diminution in pay; or when a clear discrimination,
insensibility or disdain by an employer becomes unbearable to the employee. 36
In the present case, the petitioners recalled the termination of respondent Agoncillo when they learned that she was going to
file a complaint against them with the NLRC for illegal dismissal. However, instead of reinstating her to her former position, she
419
was offered the position of Linen Dispatcher in the hotel basement or Secretary of the Roomskeeping Section, positions much
lower than that of a Supervisor of Outlet Cashiers which the respondent held before she was promoted as Senior Front Office
Cashier. With the said positions, the respondent would not certainly be receiving the same salary and other benefits as Senior
Front Office Cashier.
We agree with the ruling of the NLRC that the offers by the petitioners to transfer respondent Agoncillo to other positions were
made in bad faith, a ploy to stave off a suit for illegal dismissal. In fact, respondent Agoncillo had not been transferred to
another position at all.
Six months from the time the petitioners made offers to respondent Agoncillo, the latter never heard from the petitioners again.
While the hotel gave complainant Rowena Agoncillo a second letter advising her that she was still an employee who was
merely on temporary lay-off, the circumstances surrounding the issuance of such second letter is highly suspicious. To date,
complainant Agoncillos affidavit (Annex F) on the issuance of the second letter remains undisputed. It cannot be gainsaid that
the second letter was issued merely to entice complainant Agoncillo to return the termination letter. The said second letter did
not make mention of the termination letter. If, as claimed by the hotel, the second letter was a withdrawal of the first letter, why
was there no clear statement to this effect when it could have easily been done? Why was it also necessary for the hotels
officers to retrieve the termination letter that it had issued to complainant? What we can gather from here is that the hotel had
tried to cover its tracks in order to rectify an error. Certainly, good faith cannot be attributed on the part of the hotel in issuing
the second letter.37

Even assuming, for the sake of argument, that the hotel had a valid ground for dismissing [the] complainant and that it had
merely spared her such fate, the hotel is still guilty of illegal dismissal. Had the hotel made the transfer of complainant in good
faith and in the normal course of its operation, it would have been justified. In this case, however, the supposed transfer was
made only after complainant had been earlier terminated. Complainants statement in her affidavit that she was summoned by
the hotel after news of her plan to contest her dismissal circulated remains unrefuted. Furthermore, the hotel has not explained
why there was no official memorandum issued to complainant formally informing her of her "transfer". All these lead to only
one conclusion that the alleged transfer was not made in good faith as a valid exercise of management prerogative but was
intended as a settlement offer to complainant to prevent her from filing a case. 38
The offers made by the petitioners could not have the effect of validating an otherwise arbitrary dismissal.39
We reject the contention of the petitioners that respondent Agoncillo is bound by the MOA executed by the petitioners and
respondent Union. There is no denying the right of the Union and the petitioners under Article 227 of the Labor Code to enter
into and execute a compromise agreement with the assistance of the DOLE; and that such agreement is binding not only on
the Union generally but on its individual members. 40
However, a plain reading of the MOA will readily show that it is not binding on respondent Agoncillo. The MOA reads:
1. The Hotel shall pay the amount of P15,000.00 each to the members of the bargaining unit who are represented by the
Union in this case by way of amicable settlement of the case and in addition to the redundancy pay already earlier given to
such members.
2. For security purposes and an orderly proceeding, only claimants or their authorized representatives shall be allowed entry
into the premises of the Hotel accompanied by Union representative.
3. On the date of application and actual payment, the claimants shall execute sworn release, waiver and quitclaim as well as a
special power of attorney authorizing the Union president to amicably settle this case.
4. Unclaimed settlement pay after 15 April 2000 shall be turned over to the Union for its disposition on condition that the Union
shall take care of paying other claimants if any should show up to lay their claim thereafter.
5. Following the execution of this Agreement, the Union and the Hotel shall file a manifestation and motion with the DOLE,
attached this Agreement, praying for the following:
a. Dismissal of the case with prejudice in regard to:
(i.) illegal redundancy as to those who have received the settlement pay above and signed the Special Power of Attorney and
Release, Waiver and Quitclaim;
(ii.) all ULP charges; and
b. Dismissal of the case without prejudice as to those who have not yet received the settlement pay. 41
The Union executed the MOA in behalf of the members of the bargaining unit. There is no showing that Agoncillo is a member
of that unit. The MOA applies only to the members of the bargaining unit who agreed to the termination of their employment
based on redundancy and received redundancy pay. Agoncillo did not receive any redundancy pay or any monetary benefits
under the MOA or executed any deed or waiver or release in favor of the petitioners.
The MOA executed by the petitioners and the Union settled only the case of the parties before the SOLE for unfair labor
practice and for illegal redundancy. It did not settle the case between the petitioners and Agoncillo before the NLRC. This is
the reason why the MOA was never submitted by the parties therein to the NLRC for its approval. Although the petitioners
sought a reconsideration of the decision of the NLRC based, inter alia, on the MOA, the NLRC denied the said motion. Indeed,
the NLRC acted in accord with case law that:

420
First, even if a clear majority of the union members agreed to a settlement with the employer, the union has no authority to
compromise the individual claims of members who did not consent to such settlement. Rule 138, Section 23 of the 1964
Revised Rules of Court requires a special authority before an attorney may compromise his clients litigation. "The authority to
compromise cannot lightly be presumed and should be duly established by evidence."
In the case at bar, minority union members did not authorize the union to compromise their individual claims. Absent a
showing of the unions special authority to compromise the individual claims of private respondents for reinstatement and back
wages, there is no valid waiver of the aforesaid rights. As private respondents did not authorize the union to represent them in
the compromise settlement, they are not bound by the terms thereof.
Second, whether minority union members who did not consent to a compromise agreement are bound by the majority decision
approving a compromise settlement has been resolved in the negative.
In La Campana, we explicitly declared:
"Money claims due to laborers cannot be the object of settlement or compromise effected by a union or counsel without the
specific individual consent of each laborer concerned. The beneficiaries are the individual complainants themselves. The union
to which they belong can only assist them but cannot decide for them."
The case of La Campana was re-affirmed in the General Rubber case as follows:
"In the instant case, there is no dispute that private respondent has not ratified the Return-to-Work Agreement. It follows, and
we so hold, that private respondents cannot be held bound by the Return-to-Work Agreement. The waiver of money claims,
which in this case were accrued money claims, by workers and employees must be regarded as a personal right, that is, a
right that must be personally exercised. For a waiver thereof to be legally effective, the individual consent or ratification of the
workers or employees involved must be shown. Neither the officers nor the majority or the union had any authority to waive the
accrued rights pertaining to the dissenting minority members, even under a collective bargaining agreement which provided for
a union shop. The same considerations of public policy which impelled the Court to reach the conclusion it did in La
Campana, are equally compelling in the present case. The members of the union need the protective shield of this doctrine not
only vis--vis their employer but also, at times, vis-a-vis the management of their own union, and at other times even against
their own imprudence impecuniousness."
We have consistently ruled that "a compromise is governed by the basic principle that the obligations arising therefrom have
the force of law between the parties."
Consequently, private respondents may pursue their individual claims against petitioners before the Labor Arbiter.
The judgment of the Labor Arbiter based on the compromise agreement in question does not have the effect of res
judicata upon private respondent who did not agree thereto.
"A compromise, once approved by final orders of the court has the force of res judicata between the parties and should not be
disturbed except for vices of consent or forgery." A compromise is basically a contract perfected by mere consent. "Consent is
manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract."
A compromise agreement is not valid when a party in the case has not signed the same or when someone signs for and in
behalf of such party without authority to do so.
In SMI Fish Industries, Inc. vs. NLRC, this Court declared that where the compromise agreement was signed by only three of
the five respondents, the non-signatories cannot be bound by that amicable settlement. This is so as a compromise agreement
is a contract and cannot affect third persons who are not parties to it.
Private respondents were not parties to the compromise agreement. Hence, the judgment approving such agreement cannot
have the effect of res judicata upon them since the requirement of identity of parties is not satisfied. A judgment upon a
compromise agreement has all the force and effect of any other judgment, hence, conclusive only upon parties thereto and
their privies.42
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against the petitioners.
SO ORDERED.

G.R. No. 155421 July 7, 2004

ELMER M. MENDOZA, petitioner,
vs.
RURAL BANK OF LUCBAN, respondent.

DECISION
PANGANIBAN, J.:
The law protects both the welfare of employees and the prerogatives of management. Courts will not interfere with business
judgments of employers, provided they do not violate the law, collective bargaining agreements, and general principles of fair
play and justice. The transfer of personnel from one area of operation to another is inherently a managerial prerogative that
shall be upheld if exercised in good faith -- for the purpose of advancing business interests, not of defeating or circumventing
the rights of employees.
The Case

421
The Court applies these principles in resolving the instant Petition for Review1 under Rule 45 of the Rules of Court, assailing
the June 14, 2002 Decision2 and September 25, 2002 Resolution3 of the Court of Appeals (CA) in CA-GR SP No. 68030. The
assailed Decision disposed as follows:
"WHEREFORE, the petition for certiorari is hereby DISMISSED for lack of merit."4
The challenged Resolution denied petitioner's Motion for Reconsideration.
The Facts
On April 25, 1999, the Board of Directors of the Rural Bank of Lucban, Inc., issued Board Resolution Nos. 99-52 and 99-53,
which read:
"Board Res. No. 99-52
"'RESOLVED AS IT IS HEREBY RESOLVED' that in line with the policy of the bank to familiarize bank employees
with the various phases of bank operations and further strengthen the existing internal control system[,] all officers
and employees are subject to reshuffle of assignments. Moreover, this resolution does not preclude the transfer of
assignment of bank officers and employees from the branch office to the head office and vice-versa."
"Board Res. No. 95-53
"Pursuant to Resolution No. 99-52, the following branch employees are hereby reshuffled to their new assignments
without changes in their compensation and other benefits.
NAME OF EMPLOYEES PRESENT ASSIGNMENT NEW ASSIGNMENT

JOYCE V. ZETA Bank Teller C/A Teller

CLODUALDO ZAGALA C/A Clerk Actg. Appraiser

ELMER L. MENDOZA Appraiser Clerk-Meralco Collection

CHONA R. MENDOZA Clerk-Meralco Collection Bank Teller"5

In a letter dated April 30, 1999, Alejo B. Daya, the bank's board chairman, directed Briccio V. Cada, the manager of the bank's
Tayabas branch, to implement the reshuffle.6 The new assignments were to "be effective on May 1, 1999 without changes in
salary, allowances, and other benefits received by the aforementioned employees."7
On May 3, 1999, in an undated letter addressed to Daya, Petitioner Elmer Mendoza expressed his opinion on the reshuffle, as
follows:
"RE: The recent reshuffle of employees as per
Board Resolution dated April 25, 1999
"Dear Sir:
"This is in connection with the aforementioned subject matter and which the undersigned received on April 25, 1999.
"Needless to state, the reshuffling of the undersigned from the present position as Appraiser to Clerk-Meralco
Collection is deemed to be a demotion without any legal basis. Before this action on your part[,] the undersigned has
been besieged by intrigues due to [the] malicious machination of a certain public official who is bruited to be your
good friend. These malicious insinuations were baseless and despite the fact that I have been on my job as Appraiser
for the past six (6) years in good standing and never involved in any anomalous conduct, my being reshuffled to
[C]lerk-[M]eralco [C]ollection is a blatant harassment on your part as a prelude to my termination in due time. This will
constitute an unfair labor practice.
"Meanwhile, may I beseech your good office that I may remain in my position as Appraiser until the reason [for] my
being reshuffled is made clear.
"Your kind consideration on this request will be highly appreciated." 8
On May 10, 1999, Daya replied:
"Dear Mr. Mendoza,
"Anent your undated letter expressing your resentment/comments on the recent management's decision to reshuffle
the duties of bank employees, please be informed that it was never the intention (of management) to downgrade your
position in the bank considering that your due compensation as Bank Appraiser is maintained and no future reduction
was intended.
"Aside from giving bank employees a wider experience in various banking operations, the reshuffle will also afford
management an effective tool in providing the bank a sound internal control system/check and balance and a basis in
evaluating the performance of each employee. A continuing bankwide reshuffle of employees shall be made at the
discretion of management which may include bank officers, if necessary as expressed in Board Resolution No. 99-53,
dated April 25, 1999. Management merely shifted the duties of employees, their position title [may be] retained if
requested formally.
"Being a standard procedure in maintaining an effective internal control system recommended by the Bangko Sentral
ng Pilipinas, we believe that the conduct of reshuffle is also a prerogative of bank management." 9
422
On June 7, 1999, petitioner submitted to the bank's Tayabas branch manager a letter in which he applied for a leave of
absence from work:
"Dear Sir:
"I wish I could continue working but due to the ailment that I always feel every now and then, I have the honor to
apply for at least ten (10) days sick leave effective June 7, 1999.
"Hoping that this request [merits] your favorable and kind consideration and understanding." 10
On June 21, 1999, petitioner again submitted a letter asking for another leave of absence for twenty days effective on the
same date.11
On June 24, 1999, while on his second leave of absence, petitioner filed a Complaint before Arbitration Branch No. IV of the
National Labor Relations Commission (NLRC). The Complaint -- for illegal dismissal, underpayment, separation pay and
damages -- was filed against the Rural Bank of Lucban and/or its president, Alejo B. Daya; and its Tayabas branch manager,
Briccio V. Cada. The case was docketed as NLRC Case SRAB-IV-6-5862-99-Q.12
The labor arbiter's June 14, 2000 Decision upheld petitioner's claims as follows:
"WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Declaring respondents guilty of illegal dismissal.
2. Ordering respondents to reinstate complainant to his former position without loss of seniority rights with
full backwages from date of dismissal to actual reinstatement in the amount of P55,000.00 as of June 30,
2000.
3. Ordering the payment of separation pay if reinstatement is not possible in the amount of P30,000.00 in
addition to 13th month pay of P5,000.00 and the usual P10,000.00 annual bonus afforded the employees.
4. Ordering the payment of unpaid salary for the period covering July 1-30, 1999 in the amount of P5,000.00
5. Ordering the payment of moral damages in the amount of P50,000.00.
6. Ordering the payment of exemplary damages in the amount of P25,000.00
7. Ordering the payment of Attorney's fees in the amount of P18,000.00 which is 10% of the monetary
award."13
On appeal, the NLRC reversed the labor arbiter.14 In its July 18, 2001 Resolution, it held:
"We can conceive of no reason to ascribe bad faith or malice to the respondent bank for its implementation of its
Board Resolution directing the reshuffle of employees at its Tayabas branch to positions other than those they were
occupying. While at first the employees thereby affected would experience difficulty in adjusting to their new jobs, it
cannot be gainsaid that the objective for the reshuffle is noble, as not only would the employees obtain additional
knowledge, they would also be more well-rounded in the operations of the bank and thus help the latter further
strengthen its already existing internal control system.
"The only inconvenience, as [w]e see it, that the [petitioner] may have experienced is that from an appraiser he was
made to perform the work of a clerk in the collection of Meralco payments, which he may have considered as beneath
him and his experience, being a pioneer employee. But it cannot be discounted either that other employees at the
Tayabas branch were similarly reshuffled. The only logical conclusion therefore is that the Board Resolution was not
aimed solely at the [petitioner], but for all the other employees of the x x x bank as well. Besides, the complainant has
not shown by clear, competent and convincing evidence that he holds a vested right to the position of Appraiser. x x
x.
"How and by what manner a business concern conducts its affairs is not for this Commission to interfere with,
especially so if there is no showing, as in the case at bar, that the reshuffle was motivated by bad faith or ill-will. x x
x."15
After the NLRC denied his Motion for Reconsideration,16 petitioner brought before the CA a Petition for Certiorari 17 assailing
the foregoing Resolution.
Ruling of the Court of Appeals
Finding that no grave abuse of discretion could be attributed to the NLRC, the CA Decision ruled thus:
"The so-called 'harassment' which Mendoza allegedly experienced in the aftermath of the reshuffling of employees at
the bank is but a figment of his imagination as there is no evidence extant on record which substantiates the same.
His alleged demotion, the 'cold shoulder' stance, the things about his chair and table, and the alleged reason for the
harassment are but allegations bereft of proof and are perforce inadmissible as self-serving statements and can
never be considered repositories of truth nor serve as foundations of court decisions anent the resolution of the
litigants' rights.
"When Mendoza was reshuffled to the position of clerk at the bank, he was not demoted as there was no [diminution]
of his salary benefits and rank. He could even retain his position title, had he only requested for it pursuant to the
reply of the Chairman of the bank's board of directors to Mendoza's letter protesting the reshuffle. There is, therefore,
no cause to doubt the reasons which the bank propounded in support of its move to reshuffle its employees, viz:
1. to 'familiarize bank employees with the various phases of bank operations,' and
2. to 'further strengthen the existing internal control system' of the bank.
423
 "The reshuffling of its employees was done in good faith and cannot be made the basis of a finding of constructive
dismissal.
"The fact that Mendoza was no longer included in the bank's payroll for July 1 to 15, 1999 does not signify that the
bank has dismissed the former from its employ. Mendoza separated himself from the bank's employ when, on June
24, 1999, while on leave, he filed the illegal dismissal case against his employer for no apparent reason at all."18
Hence, this Petition.19
The Issues
Petitioner raises the following issues for our consideration:
"I. Whether or not the petitioner is deemed to have voluntarily separated himself from the service and/or abandoned
his job when he filed his Complaint for constructive and consequently illegal dismissal;
"II. Whether or not the reshuffling of private respondent'[s] employees was done in good faith and cannot be made as
the basis of a finding of constructive dismissal, even as the [petitioner's] demotion in rank is admitted by both parties;
"III. Whether or not the ruling in the landmark case of Ruben Serrano vs. NLRC [and Isetann Department Store (323
SCRA 445)] is applicable to the case at bar;
"IV. Whether or not the Court of Appeals erred in dismissing the petitioner's money claims, damages, and unpaid
salaries for the period July 1-30, 1999, although this was not disputed by the private respondent; and
"V. Whether or not the entire proceedings before the Honorable Court of Appeals and the NLRC are a nullity since
the appeal filed by private respondent before the NLRC on August 5, 2000 was on the 15th day or five (5) days
beyond the reglem[e]ntary period of ten (10) days as provided for by law and the NLRC Rules of Procedure." 20
In short, the main issue is whether petitioner was constructively dismissed from his employment.
The Court's Ruling
The Petition has no merit.
Main Issue:
Constructive Dismissal
Constructive dismissal is defined as an involuntary resignation resorted to when continued employment is rendered
impossible, unreasonable or unlikely; when there is a demotion in rank or a diminution of pay; or when a clear discrimination,
insensibility or disdain by an employer becomes unbearable to the employee.21 Petitioner argues that he was compelled to file
an action for constructive dismissal, because he had been demoted from appraiser to clerk and not given any work to do, while
his table had been placed near the toilet and eventually removed. 22 He adds that the reshuffling of employees was done in bad
faith, because it was designed primarily to force him to resign.23
Management Prerogative
to Transfer Employees
Jurisprudence recognizes the exercise of management prerogatives. For this reason, courts often decline to interfere in
legitimate business decisions of employers.24 Indeed, labor laws discourage interference in employers' judgments concerning
the conduct of their business.25 The law must protect not only the welfare of employees, but also the right of employers.
In the pursuit of its legitimate business interest, management has the prerogative to transfer or assign employees from one
office or area of operation to another -- provided there is no demotion in rank or diminution of salary, benefits, and other
privileges; and the action is not motivated by discrimination, made in bad faith, or effected as a form of punishment or
demotion without sufficient cause.26 This privilege is inherent in the right of employers to control and manage their enterprise
effectively.27 The right of employees to security of tenure does not give them vested rights to their positions to the extent of
depriving management of its prerogative to change their assignments or to transfer them. 28
Managerial prerogatives, however, are subject to limitations provided by law, collective bargaining agreements, and general
principles of fair play and justice.29 The test for determining the validity of the transfer of employees was explained in Blue
Dairy Corporation v. NLRC30 as follows:
"[L]ike other rights, there are limits thereto. The managerial prerogative to transfer personnel must be exercised
without grave abuse of discretion, bearing in mind the basic elements of justice and fair play. Having the right should
not be confused with the manner in which that right is exercised. Thus, it cannot be used as a subterfuge by the
employer to rid himself of an undesirable worker. In particular, the employer must be able to show that the transfer is
not unreasonable, inconvenient or prejudicial to the employee; nor does it involve a demotion in rank or a diminution
of his salaries, privileges and other benefits. Should the employer fail to overcome this burden of proof, the
employee's transfer shall be tantamount to constructive dismissal, which has been defined as a quitting because
continued employment is rendered impossible, unreasonable or unlikely; as an offer involving a demotion in rank and
diminution in pay. Likewise, constructive dismissal exists when an act of clear discrimination, insensibility or disdain
by an employer has become so unbearable to the employee leaving him with no option but to forego with his
continued employment."31
Petitioner's Transfer Lawful
The employer bears the burden of proving that the transfer of the employee has complied with the foregoing test. In the instant
case, we find no reason to disturb the conclusion of the NLRC and the CA that there was no constructive dismissal. Their
424
finding is supported by substantial evidence -- that amount of relevant evidence that a reasonable mind might accept as
justification for a conclusion.32
Petitioner's transfer was made in pursuit of respondent's policy to "familiarize bank employees with the various phases of bank
operations and further strengthen the existing internal control system"33 of all officers and employees. We have previously held
that employees may be transferred -- based on their qualifications, aptitudes and competencies -- to positions in which they
can function with maximum benefit to the company.34 There appears no justification for denying an employer the right to
transfer employees to expand their competence and maximize their full potential for the advancement of the establishment.
Petitioner was not singled out; other employees were also reassigned without their express consent.
Neither was there any demotion in the rank of petitioner; or any diminution of his salary, privileges and other benefits. This fact
is clear in respondent's Board Resolutions, the April 30, 1999 letter of Bank President Daya to Branch Manager Cada, and the
May 10, 1999 letter of Daya to petitioner.
On the other hand, petitioner has offered no sufficient proof to support his allegations. Given no credence by both lower
tribunals was his bare and self-serving statement that he had been positioned near the comfort room, made to work without a
table, and given no work assignment.35 Purely conjectural is his claim that the reshuffle of personnel was a harassment in
retaliation for an alleged falsification case filed by his relatives against a public official. 36 While the rules of evidence prevailing
in courts of law are not controlling in proceedings before the NLRC, 37 parties must nonetheless submit evidence to support
their contentions.
Secondary Issues:
Serrano v. NLRC Inapplicable
Serrano v. NLRC38 does not apply to the present factual milieu. The Court ruled therein that the lack of notice and hearing
made the dismissal of the employee ineffectual, but not necessarily illegal. 39 Thus, the procedural infirmity was remedied by
ordering payment of his full back wages from the time of his dismissal. 40 The absence of constructive dismissal in the instant
case precludes the application of Serrano. Because herein petitioner was not dismissed, then he is not entitled to his claimed
monetary benefits.
Alleged Nullity of NLRC
and CA Proceedings
Petitioner argues that the proceedings before the NLRC and the CA were void, since respondent's appeal before the NLRC
had allegedly been filed beyond the reglementary period.41 A careful scrutiny of his Petition for Review42 with the appellate
court shows that this issue was not raised there. Inasmuch as the instant Petition challenges the Decision of the CA, we
cannot rule on arguments that were not brought before it. This ruling is consistent with the due-process requirement that no
question shall be entertained on appeal, unless it has been raised in the court below. 43
WHEREFORE, this Petition is DENIED, and the June 14, 2002 Decision and the September 25, 2002 Resolution of the Court
of Appeals are AFFIRMED. Costs against petitioner.
SO ORDERED.

G.R. No. 181738 January 30, 2013

GENERAL MILLING CORPORATION, Petitioner,
vs.
VIOLETA L. VIAJAR, Respondent.
DECISION
REYES, J.:
This is a Petition1 for Review on Certiorari under Rule 45 of the Rules of Court filed by petitioner General Milling Corporation
(GMC), asking the Court to set aside the Decision2 dated September 21, 2007 and the Resolution3dated January 30, 2008 of
the Court of Appeals (CA) in CA-G.R. SP No. 01734; and to reinstate the Decision4dated October 28, 2005 and
Resolution5 dated January 31, 2006 of the National Labor Relations Commission (NLRC) in NLRC Case No. V-000416-05.
The antecedent facts are as follows:
GMC is a domestic corporation with principal office in Makati City and a manufacturing plant in Lapu-Lapu City.
In October 2003, GMC terminated the services of thirteen (13) employees for redundancy, including herein respondent, Violeta
Viajar (Viajar). GMC alleged that it has been gradually downsizing its Vismin (Visayas-Mindanao) Operations in Cebu where a
sizeable number of positions became redundant over a period of time.6
On December 2, 2003, Viajar filed a Complaint7 for Illegal Dismissal with damages against GMC, its Human Resource
Department (HRD) Manager, Johnny T. Almocera (Almocera), and Purchasing Manager, Joel Paulino before the Regional
Arbitration Branch (RAB) No. VII, NLRC, Cebu City.
In her Position Paper,8 Viajar alleged that she was employed by GMC on August 6, 1979 as Invoicing Clerk. Through the
years, the respondent held various positions in the company until she became Purchasing Staff.
On October 30, 2003, Viajar received a Letter-Memorandum dated October 27, 2003 from GMC, through Almocera, informing
her that her services were no longer needed, effective November 30, 2003 because her position as Purchasing Staff at the

425
Purchasing Group, Cebu Operations was deemed redundant. Immediately thereafter, the respondent consulted her immediate
superior at that time, Thaddeus Oyas, who told her that he too was shocked upon learning about it. 9
When Viajar reported for work on October 31, 2003, almost a month before the effectivity of her severance from the company,
the guard on duty barred her from entering GMCs premises. She was also denied access to her office computer and was
restricted from punching her daily time record in the bundy clock.10
On November 7, 2003, Viajar was invited to the HRD Cebu Office where she was asked to sign certain documents, which
turned out to be an "Application for Retirement and Benefits." The respondent refused to sign and sought clarification because
she did not apply for retirement and instead asserted that her services were terminated for alleged redundancy. Almocera told
her that her signature on the Application for Retirement and Benefits was needed to process her separation pay. The
respondent also claimed that between the period of July 4, 2003 and October 13, 2003, GMC hired fifteen (15) new employees
which aroused her suspicion that her dismissal was not necessary. 11 At the time of her termination, the respondent was
receiving the salary rate of P19,651.41 per month.12
For its part, the petitioner insisted that Viajars dismissal was due to the redundancy of her position. GMC reasoned out that it
was forced to terminate the services of the respondent because of the economic setbacks the company was suffering which
affected the companys profitability, and the continuing rise of its operating and interest expenditures. Redundancy was part of
the petitioners concrete and actual cost reduction measures. GMC also presented the required "Establishment Termination
Report" which it filed before the Department of Labor and Employment (DOLE) on October 28, 2003, involving thirteen (13) of
its employees, including Viajar. Subsequently, GMC issued to the respondent two (2) checks respectively amounting
to P440,253.02 and P21,211.35 as her separation pay.13
On April 18, 2005, the Labor Arbiter (LA) of the NLRC RAB No. VII, Cebu City, rendered a Decision, the decretal portion of
which reads:
WHEREFORE, foregoing considered, judgment is hereby rendered declaring that respondents acted in good faith in
terminating the complainant from the service due to redundancy of works, thus, complainants refusal to accept the payment of
her allowed separation pay and other benefits under the law is NOT JUSTIFIED both in fact and law, and so, therefore
complainants case for illegal dismissal against the herein respondents and so are complainants monetary claims are hereby
ordered DISMISSED for lack of merit.
SO ORDERED.14
The LA found that the respondent was properly notified on October 30, 2003 through a Letter-Memorandum dated October 27,
2003, signed by GMCs HRD Manager Almocera, that her position as Purchasing Staff had been declared redundant. It also
found that the petitioner submitted to the DOLE on October 28, 2003 the "Establishment Termination Report." The LA even
faulted the respondent for not questioning the companys action before the DOLE Regional Office, Region VII, Cebu City so as
to compel the petitioner to prove that Viajars position was indeed redundant. It ruled that the petitioner complied with the
requirements under Article 283 of the Labor Code, considering that the nation was then experiencing an economic downturn
and that GMC must adopt measures for its survival.15
Viajar appealed the aforesaid decision to the NLRC. On October 28, 2005, the NLRC promulgated its decision, the dispositive
portion of which reads:
WHEREFORE, premises considered, the Decision of the Labor Arbiter declaring the validity of complainants termination due
to redundancy is hereby AFFIRMED. Respondent General Milling Corporation is hereby ordered to pay complainants
separation pay in the amount of P461,464.37.
SO ORDERED.16
The NLRC, however, stated that it did not agree with the LA that Viajar should be faulted for failing to question the petitioners
declaration of redundancy before the DOLE Regional Office, Region VII, Cebu City. It was not imperative for Viajar to
challenge the validity of her termination due to redundancy.17 Notwithstanding, the NLRC affirmed the findings of the LA that
Viajars dismissal was legal considering that GMC complied with the requirements provided for under Article 283 of the Labor
Code and existing jurisprudence, particularly citing Asian Alcohol Corporation v. NLRC. 18 The NLRC further stated that Viajar
was aware of GMCs "reduction mode," as shown in the GMC Vismin Manpower Complement, as follows:
No. of Employees
Year Manpower Profile
Terminated (Redundancy)

2000 795

2001 782

2002 736 41

2003 721 24

2004 697 16

426
 2005 696 (As of June 2005) 0619
The NLRC stated that the characterization of positions as redundant is an exercise of the employers business judgment and
prerogative. It also ruled that the petitioner did not exercise this prerogative in bad faith and that the payment of separation pay
in the amount of P461,464.37 was in compliance with Article 283 of the Labor Code. 20
Respondent Viajar filed a Motion for Reconsideration which was denied by the NLRC in its Resolution dated January 31, 2006.
Undaunted, Viajar filed a petition for certiorari before the CA. In the now assailed Decision dated September 21, 2007, the CA
granted the petition, reversing the decision of the NLRC in the following manner:
WHEREFORE, premises considered, this Petition for Certiorari is GRANTED. The Decision, dated 28 October 2005, and
Resolution, dated 31 January 2006 respectively, of public respondent National Labor Relations Commission-Fourth Division,
Cebu City, in NLRC Case No. V-000416-05 (RAB VII-12-2495-03) are SET ASIDE. A new judgment is entered DECLARING
the dismissal ILLEGAL and ordering respondent to reinstate petitioner without loss of seniority rights and other privileges with
full backwages inclusive of allowances and other benefits computed from the time she was dismissed on 30 November 2003
up to the date of actual reinstatement. Further, moral and exemplary damages, in the amount of Fifty Thousand Pesos
([P]50,000.00) each; and attorneys fees equivalent to ten percent (10%) of the total monetary award, are awarded.
Costs against respondent.
SO ORDERED.21
Aggrieved by the reversal of the NLRC decision, GMC filed a motion for reconsideration. However, in its Resolution dated
January 30, 2008, the CA denied the same; hence, this petition.
The petitioner raises the following issues, to wit:
I. THE DECISION OF SEPTEMBER 21, 2007 AND THE RESOLUTION OF JANUARY 30, 2008 OF THE COURT OF
APPEALS ARE CONTRARY TO LAW AND ESTABLISHED JURISPRUDENCE.
II. THE DECISION OF SEPTEMBER 21, 2007 AND THE RESOLUTION OF JANUARY 30, 2008 OF THE COURT
OF APPEALS VIOLATE THE LAW AND ESTABLISHED JURISPRUDENCE ON THE OBSERVANCE OF RESPECT
AND FINALITY TO FACTUAL FINDINGS OF THE NATIONAL LABOR RELATIONS COMMISSION.
III. THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN ITS DECISION OF SEPTEMBER
21, 2007 AND RESOLUTION OF JANUARY 30, 2008 AS THE SAME ARE CONTRARY TO THE EVIDENCE ON
RECORD.22
The petition is denied.
The petitioner argues that the factual findings of the NLRC, affirming that of the LA must be accorded respect and finality as it
is supported by evidence on record. Both the LA and the NLRC found the petitioners evidence sufficient to terminate the
employment of respondent on the ground of redundancy. The evidence also shows that GMC has complied with the
procedural and substantive requirements for a valid termination. There was, therefore, no reason for the CA to disturb the
factual findings of the NLRC.23
The rule is that factual findings of quasi-judicial agencies such as the NLRC are generally accorded not only respect, but at
times, even finality because of the special knowledge and expertise gained by these agencies from handling matters falling
under their specialized jurisdiction.24 It is also settled that this Court is not a trier of facts and does not normally embark in the
evaluation of evidence adduced during trial.25 This rule, however, allows for exceptions. One of these exceptions covers
instances when the findings of fact of the trial court, or of the quasi-judicial agencies concerned, are conflicting or contradictory
with those of the CA. When there is a variance in the factual findings, it is incumbent upon the Court to re-examine the facts
once again.26
Furthermore, another exception to the general rule is when the said findings are not supported by substantial evidence or if on
the basis of the available facts, the inference or conclusion arrived at is manifestly erroneous. 27Factual findings of
administrative agencies are not infallible and will be set aside when they fail the test of arbitrariness.28 In the instant case, the
Court agrees with the CA that the conclusions arrived at by the LA and the NLRC are manifestly erroneous.
GMC claims that Viajar was validly dismissed on the ground of redundancy which is one of the authorized causes for
termination of employment. The petitioner asserts that it has observed the procedure provided by law and that the same was
done in good faith. To justify the respondents dismissal, the petitioner presented: (i) the notification Letter-Memorandum dated
October 27, 2003 addressed to the respondent which was received on October 30, 2003; 29 (ii) the "Establishment Termination
Report" as prescribed by the DOLE;30 (iii) the two (2) checks issued in the respondents name amounting to P440,253.02
and P21,211.35 as separation pay;31 and (iv) the list of dismissed employees as of June 6, 2006 to show that GMC was in a
"reduction mode."32 Both the LA and the NLRC found these sufficient to prove that the dismissal on the ground of redundancy
was done in good faith.
The Court does not agree.
Article 283 of the Labor Code provides that redundancy is one of the authorized causes for dismissal. It reads:
Article 283. Closure of establishment and reduction of personnel. The employer may also terminate the employment of any
employee due to the installment of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions

427
of this Title, by serving a written notice on the worker and the Ministry of Labor and Employment at least one (1) month before
the intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month
pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to serious business losses or reverses, the separation pay
shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1) whole year. (Emphasis supplied)
From the above provision, it is imperative that the employer must comply with the requirements for a valid implementation of
the companys redundancy program, to wit: (a) the employer must serve a written notice to the affected employees and the
DOLE at least one (1) month before the intended date of retrenchment; (b) the employer must pay the employees a separation
pay equivalent to at least one month pay or at least one month pay for every year of service, whichever is higher; (c) the
employer must abolish the redundant positions in good faith; and (d) the employer must set fair and reasonable criteria in
ascertaining which positions are redundant and may be abolished.33
In Smart Communications, Inc., v. Astorga,34 the Court held that:
The nature of redundancy as an authorized cause for dismissal is explained in the leading case of Wiltshire File Co., Inc. v.
National Labor Relations Commission, viz:
"x x x redundancy in an employers personnel force necessarily or even ordinarily refers to duplication of work. That no other
person was holding the same position that private respondent held prior to termination of his services does not show that his
position had not become redundant. Indeed, in any well organized business enterprise, it would be surprising to find
duplication of work and two (2) or more people doing the work of one person. We believe that redundancy, for purposes of the
Labor Code, exists where the services of an employee are in excess of what is reasonably demanded by the actual
requirements of the enterprise. Succinctly put, a position is redundant where it is superfluous, and superfluity of a position or
positions may be the outcome of a number of factors, such as overhiring of workers, decreased volume of business, or
dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise."
The characterization of an employees services as superfluous or no longer necessary and, therefore, properly terminable, is
an exercise of business judgment on the part of the employer. The wisdom and soundness of such characterization or
decision is not subject to discretionary review provided, of course, that a violation of law or arbitrary or malicious action is not
shown.35 (Emphasis supplied and citations omitted)
While it is true that the "characterization of an employees services as superfluous or no longer necessary and, therefore,
properly terminable, is an exercise of business judgment on the part of the employer," 36 the exercise of such judgment,
however, must not be in violation of the law, and must not be arbitrary or malicious. The Court has always stressed that a
company cannot simply declare redundancy without basis. To exhibit its good faith and that there was a fair and reasonable
criteria in ascertaining redundant positions, a company claiming to be over manned must produce adequate proof of the same.
We reiterate what was held in Caltex (Phils.), Inc. v. NLRC:37
In Asufrin, Jr. v. San Miguel Corporation, we ruled that it is not enough for a company to merely declare that it has become
overmanned (sic). It must produce adequate proof of such redundancy to justify the dismissal of the affected employees.
In Panlilio v. National Labor Relations Commission, we held that evidence must be presented to substantiate redundancy such
as but not limited to the new staffing pattern, feasibility studies/proposal, on the viability of the newly created positions, job
description and the approval by the management of the restructuring.38 (Emphasis supplied and citations omitted)
In the instant case, the Court agrees with the CA when it held that the petitioner failed to present substantial proof to support
GMCs general allegations of redundancy. As shown from the records, the petitioner simply presented as its evidence of good
faith and compliance with the law the notification letter to respondent Viajar;39 the "Establishment Termination Report" it
submitted to the DOLE Office;40 the two (2) checks issued in the respondents name amounting to P440,253.02
and P21,211.35;41 and the list of terminated employees as of June 6, 2006.42 We agree with the CA that these are not enough
proof for the valid termination of Viajars employment on the ground of redundancy.
The letter-memorandum which contains general allegations is not enough to convince this Court that Viajars termination of
employment due to redundancy was warranted under the circumstances. There is no showing that GMC made an evaluation
of the existing positions and their effect to the company. Neither did GMC exert efforts to present tangible proof that it was
experiencing business slow down or over hiring. The "Establishment Termination Report" it submitted to the DOLE Office did
not account for anything to justify declaring the positions redundant. The Court notes that the list of terminated employees
presented by GMC was a list taken as of June 6, 2006 or almost three years after the respondent was illegally dismissed and
almost a year after the LA promulgated its decision. While the petitioner had been harping that it was on a "reduction mode" of
its employees, it has not presented any evidence (such as new staffing pattern, feasibility studies or proposal, viability of newly
created positions, job description and the approval of the management of the restructuring,43audited financial documents like
balance sheets, annual income tax returns and others)44 which could readily show that the companys declaration of redundant
positions was justified. Such proofs, if presented, would suffice to show the good faith on the part of the employer or that this
business prerogative was not whimsically exercised in terminating respondents employment on the ground of redundancy.

428
Unfortunately, these are wanting in the instant case. The petitioner only advanced a self-serving general claim that it was
experiencing business reverses and that there was a need to reduce its manpower complement.
On the other hand, the respondent presented proof that the petitioner had been hiring new employees while it was firing the
old ones,45 negating the claim of redundancy. It must, however, be pointed out that in termination cases, like the one before
us, the burden of proving that the dismissal of the employees was for a valid and authorized cause rests on the employer. It
was incumbent upon the petitioner to show by substantial evidence that the termination of the employment of the respondent
was validly made and failure to discharge that duty would mean that the dismissal is not justified and therefore illegal.46
Furthermore, the Court cannot overlook the fact that Viajar was prohibited from entering the company premises even before
the effectivity date of termination; and was compelled to sign an "Application for Retirement and Benefits." These acts exhibit
the petitioners bad faith since it cannot be denied that the respondent was still entitled to report for work until November 30,
2003. The demand for her to sign the "Application for Retirement and Benefits" also contravenes the fact that she was
terminated due to redundancy. Indeed, there is a difference between voluntary retirement of an employee and forced
termination due to authorized causes.
In Quevedo v. Benguet Electric Cooperative, Incorporated, 47 this Court explained the difference between retirement and
termination due to redundancy, to wit:
While termination of employment and retirement from service are common modes of ending employment, they are mutually
exclusive, with varying juridical bases and resulting benefits. Retirement from service is contractual (i.e. based on the bilateral
agreement of the employer and employee), while termination of employment is statutory (i.e. governed by the Labor Code and
other related laws as to its grounds, benefits and procedure). The benefits resulting from termination vary, depending on the
cause. For retirement, Article 287 of the Labor Code gives leeway to the parties to stipulate above a floor of benefits.
xxxx
The line between voluntary and involuntary retirement is thin but it is one which this Court has drawn. Voluntary retirement
cuts employment ties leaving no residual employer liability; involuntary retirement amounts to a discharge, rendering the
employer liable for termination without cause. The employees intent is the focal point of analysis. In determining such intent,
the fairness of the process governing the retirement decision, the payment of stipulated benefits, and the absence of badges
of intimidation or coercion are relevant parameters.48 (Emphasis supplied and citations omitted)
Clearly, the instant case is not about retirement since the term has its peculiar meaning and is governed by Article 287 of the
Labor Code. Rather, this is a case of termination due to redundancy under Article 283 of the Labor Code. Thus, the demand of
GMC for the respondent to sign an "Application for Retirement and Benefits" is really suspect.
Finally, the Court agrees with the CA that the award of moral and exemplary damages is proper. The Court has awarded
moral damages in termination cases when bad faith, malice or fraud attend the employees dismissal or where the act
oppresses labor, or where it was done in a manner contrary to morals, good customs or public policy. 49 We quote with favor
the findings of the CA:
We also award moral and exemplary damages to petitioner. While it is true that good faith is presumed, the circumstances
surrounding the dismissal of petitioner negate its existence. Moral damages may be recovered only where the dismissal of the
employee was tainted by bad faith or fraud, or where it constituted an act oppressive to labor, and done in a manner contrary
to morals, good customs or public policy while exemplary damages are recoverable only if the dismissal was done in a
wanton, oppressive, or malevolent manner. To reiterate, immediately after receipt of her termination letter which was effective
on 30 November 2003, petitioner was no longer treated as an employee of respondent as early as the 31st of October 2003;
she was already barred from entering the company premises; she was deprived access to her office computer; and she was
excluded from the bandy [sic] clock. She was also made to sign documents, including an "APPLICATION FOR RETIREMENT
AND BENEFITS" in the guise of payment of her separation pay. When petitioner confronted her immediate superior regarding
her termination, the latters shock aggravated her confusion and suffering. She also learned about the employment of a
number of new employees, several of whom were even employed in her former department. Petitioner likewise suffered
mental torture brought about by her termination even though its cause was not clear and substantiated. 50 (Citations omitted)
WHEREFORE, the petition is DENIED. The Decision dated September 21, 2007 of the Court of Appeals, as well as its
Resolution dated January 30, 2008 in CA-G.R. SP No. 01734, are hereby AFFIRMED.
SO ORDERED.

G.R. No. 170054 January 21, 2013

GOYA, INC., Petitioner,
vs.
GOYA, INC. EMPLOYEES UNION-FFW, Respondent.
DECISION
PERALTA, J.:
This petition for review on certiorari under Rule 45 of the Rules of Civil Procedure seeks to reverse and set aside the June 16,
2005 Decision1 and October 12, 2005 Resolution2 of the Court of Appeals in CA-G.R. SP No. 87335, which sustained the
October 26, 2004 Decision3 of Voluntary Arbitrator Bienvenido E. Laguesma, the dispositive portion of which reads:
429
WHEREFORE, judgment is hereby rendered declaring that the Company is NOT guilty of unfair labor practice in engaging the
services of PESO.
The company is, however, directed to observe and comply with its commitment as it pertains to the hiring of casual employees
when necessitated by business circumstances.4
The facts are simple and appear to be undisputed.
Sometime in January 2004, petitioner Goya, Inc. (Company), a domestic corporation engaged in the manufacture, importation,
and wholesale of top quality food products, hired contractual employees from PESO Resources Development Corporation
(PESO) to perform temporary and occasional services in its factory in Parang, Marikina City. This prompted respondent Goya,
Inc. Employees UnionFFW (Union) to request for a grievance conference on the ground that the contractual workers do not
belong to the categories of employees stipulated in the existing Collective Bargaining Agreement (CBA). 5 When the matter
remained unresolved, the grievance was referred to the National Conciliation and Mediation Board (NCMB) for voluntary
arbitration.
During the hearing on July 1, 2004, the Company and the Union manifested before Voluntary Arbitrator (VA) Bienvenido E.
Laguesma that amicable settlement was no longer possible; hence, they agreed to submit for resolution the solitary issue of
"[w]hether or not the Company is guilty of unfair labor acts in engaging the services of PESO, a third party service provider,
under the existing CBA, laws, and jurisprudence." 6 Both parties thereafter filed their respective pleadings.
The Union asserted that the hiring of contractual employees from PESO is not a management prerogative and in gross
violation of the CBA tantamount to unfair labor practice (ULP). It noted that the contractual workers engaged have been
assigned to work in positions previously handled by regular workers and Union members, in effect violating Section 4, Article I
of the CBA, which provides for three categories of employees in the Company, to wit:
Section 4. Categories of Employees. The parties agree on the following categories of employees:
(a) Probationary Employee. One hired to occupy a regular rank-and-file position in the Company and is serving a
probationary period. If the probationary employee is hired or comes from outside the Company (non-Goya, Inc. employee), he
shall be required to undergo a probationary period of six (6) months, which period, in the sole judgment of management, may
be shortened if the employee has already acquired the knowledge or skills required of the job. If the employee is hired from the
casual pool and has worked in the same position at any time during the past two (2) years, the probationary period shall be
three (3) months.
(b) Regular Employee. An employee who has satisfactorily completed his probationary period and automatically granted
regular employment status in the Company.
(c) Casual Employee, One hired by the Company to perform occasional or seasonal work directly connected with the regular
operations of the Company, or one hired for specific projects of limited duration not connected directly with the regular
operations of the Company.
It was averred that the categories of employees had been a part of the CBA since the 1970s and that due to this provision, a
pool of casual employees had been maintained by the Company from which it hired workers who then became regular workers
when urgently necessary to employ them for more than a year. Likewise, the Company sometimes hired probationary
employees who also later became regular workers after passing the probationary period. With the hiring of contractual
employees, the Union contended that it would no longer have probationary and casual employees from which it could obtain
additional Union members; thus, rendering inutile Section 1, Article III (Union Security) of the CBA, which states:
Section 1. Condition of Employment. As a condition of continued employment in the Company, all regular rank-and-file
employees shall remain members of the Union in good standing and that new employees covered by the appropriate
bargaining unit shall automatically become regular employees of the Company and shall remain members of the Union in good
standing as a condition of continued employment.
The Union moreover advanced that sustaining the Companys position would easily weaken and ultimately destroy the former
with the latters resort to retrenchment and/or retirement of employees and not filling up the vacant regular positions through
the hiring of contractual workers from PESO, and that a possible scenario could also be created by the Company wherein it
could "import" workers from PESO during an actual strike.
In countering the Unions allegations, the Company argued that: (a) the law expressly allows contracting and subcontracting
arrangements through Department of Labor and Employment (DOLE) Order No. 18-02; (b) the engagement of contractual
employees did not, in any way, prejudice the Union, since not a single employee was terminated and neither did it result in a
reduction of working hours nor a reduction or splitting of the bargaining unit; and (c) Section 4, Article I of the CBA merely
provides for the definition of the categories of employees and does not put a limitation on the Companys right to engage the
services of job contractors or its management prerogative to address temporary/occasional needs in its operation.
On October 26, 2004, VA Laguesma dismissed the Unions charge of ULP for being purely speculative and for lacking in
factual basis, but the Company was directed to observe and comply with its commitment under the CBA. The VA opined:
We examined the CBA provision Section 4, Article I of the CBAallegedly violated by the Company and indeed the agreement
prescribes three (3) categories of employees in the Company and provides for the definition, functions and duties of each.
Material to the case at hand is the definition as regards the functions of a casual employee described as follows:

430
Casual Employee One hired by the COMPANY to perform occasional or seasonal work directly connected with the regular
operations of the COMPANY, or one hired for specific projects of limited duration not connected directly with the regular
operations of the COMPANY.
While the foregoing agreement between the parties did eliminate managements prerogative of outsourcing parts of its
operations, it serves as a limitation on such prerogative particularly if it involves functions or duties specified under the
aforequoted agreement. It is clear that the parties agreed that in the event that the Company needs to engage the services of
additional workers who will perform "occasional or seasonal work directly connected with the regular operations of the
COMPANY," or "specific projects of limited duration not connected directly with the regular operations of the COMPANY", the
Company can hire casual employees which is akin to contractual employees. If we note the Companys own declaration that
PESO was engaged to perform "temporary or occasional services" (See the Companys Position Paper, at p. 1), then it should
have directly hired the services of casual employees rather than do it through PESO.
It is evident, therefore, that the engagement of PESO is not in keeping with the intent and spirit of the CBA provision in
question. It must, however, be stressed that the right of management to outsource parts of its operations is not totally
eliminated but is merely limited by the CBA. Given the foregoing, the Companys engagement of PESO for the given purpose
is indubitably a violation of the CBA.7
While the Union moved for partial reconsideration of the VA Decision, 8 the Company immediately filed a petition for
review9 before the Court of Appeals (CA) under Rule 43 of the Revised Rules of Civil Procedure to set aside the directive to
observe and comply with the CBA commitment pertaining to the hiring of casual employees when necessitated by business
circumstances. Professing that such order was not covered by the sole issue submitted for voluntary arbitration, the Company
assigned the following errors:
THE HONORABLE VOLUNTARY ARBITRATOR EXCEEDED HIS POWER WHICH WAS EXPRESSLY GRANTED AND
LIMITED BY BOTH PARTIES IN RULING THAT THE ENGAGEMENT OF PESO IS NOT IN KEEPING WITH THE INTENT
AND SPIRIT OF THE CBA.10
THE HONORABLE VOLUNTARY ARBITRATOR COMMITTED A PATENT AND PALPABLE ERROR IN DECLARING THAT
THE ENGAGEMENT OF PESO IS NOT IN KEEPING WITH THE INTENT AND SPIRIT OF THE CBA.11
On June 16, 2005, the CA dismissed the petition. In dispensing with the merits of the controversy, it held:
This Court does not find it arbitrary on the part of the Hon. Voluntary Arbitrator in ruling that "the engagement of PESO is not in
keeping with the intent and spirit of the CBA." The said ruling is interrelated and intertwined with the sole issue to be resolved
that is, "Whether or not the Company is guilty of unfair labor practice in engaging the services of PESO, a third party service
provider, under existing CBA, laws, and jurisprudence." Both issues concern the engagement of PESO by the Company which
is perceived as a violation of the CBA and which constitutes as unfair labor practice on the part of the Company. This is easily
discernible in the decision of the Hon. Voluntary Arbitrator when it held:
x x x x While the engagement of PESO is in violation of Section 4, Article I of the CBA, it does not constitute unfair labor
practice as it (sic) not characterized under the law as a gross violation of the CBA. Violations of a CBA, except those which are
gross in character, shall no longer be treated as unfair labor practice. Gross violations of a CBA means flagrant and/or
malicious refusal to comply with the economic provisions of such agreement. x x x
Anent the second assigned error, the Company contends that the Hon. Voluntary Arbitrator erred in declaring that the
engagement of PESO is not in keeping with the intent and spirit of the CBA. The Company justified its engagement of
contractual employees through PESO as a management prerogative, which is not prohibited by law. Also, it further alleged
that no provision under the CBA limits or prohibits its right to contract out certain services in the exercise of management
prerogatives.
Germane to the resolution of the above issue is the provision in their CBA with respect to the categories of the employees:
xxxx
A careful reading of the above-enumerated categories of employees reveals that the PESO contractual employees do not fall
within the enumerated categories of employees stated in the CBA of the parties. Following the said categories, the Company
should have observed and complied with the provision of their CBA. Since the Company had admitted that it engaged the
services of PESO to perform temporary or occasional services which is akin to those performed by casual employees, the
Company should have tapped the services of casual employees instead of engaging PESO.
In justifying its act, the Company posits that its engagement of PESO was a management prerogative. It bears stressing that a
management prerogative refers to the right of the employer to regulate all aspects of employment, such as the freedom to
prescribe work assignments, working methods, processes to be followed, regulation regarding transfer of employees,
supervision of their work, lay-off and discipline, and dismissal and recall of work, presupposing the existence of employer-
employee relationship. On the basis of the foregoing definition, the Companys engagement of PESO was indeed a
management prerogative. This is in consonance with the pronouncement of the Supreme Court in the case of Manila Electric
Company vs. Quisumbing where it ruled that contracting out of services is an exercise of business judgment or management
prerogative.
This management prerogative of contracting out services, however, is not without limitation. In contracting out services, the
management must be motivated by good faith and the contracting out should not be resorted to circumvent the law or must not
431
have been the result of malicious arbitrary actions. In the case at bench, the CBA of the parties has already provided for the
categories of the employees in the Companysestablishment. These categories of employees particularly with respect to
casual employees serve as limitation to the Companys prerogative to outsource parts of its operations especially when hiring
contractual employees. As stated earlier, the work to be performed by PESO was similar to that of the casual employees. With
the provision on casual employees, the hiring of PESO contractual employees, therefore, is not in keeping with the spirit and
intent of their CBA. (Citations omitted)12
The Company moved to reconsider the CA Decision,13 but it was denied;14 hence, this petition.
Incidentally, on July 16, 2009, the Company filed a Manifestation 15 informing this Court that its stockholders and directors
unanimously voted to shorten the Companys corporate existence only until June 30, 2006, and that the three-year period
allowed by law for liquidation of the Companys affairs already expired on June 30, 2009. Referring to Gelano v. Court of
Appeals,16 Public Interest Center, Inc. v. Elma,17 and Atienza v. Villarosa,18 it urged Us, however, to still resolve the case for
future guidance of the bench and the bar as the issue raised herein allegedly calls for a clarification of a legal principle,
specifically, whether the VA is empowered to rule on a matter not covered by the issue submitted for arbitration.
Even if this Court would brush aside technicality by ignoring the supervening event that renders this case moot and
academic19 due to the permanent cessation of the Companys business operation on June 30, 2009, the arguments raised in
this petition still fail to convince Us.
We confirm that the VA ruled on a matter that is covered by the sole issue submitted for voluntary arbitration. Resultantly, the
CA did not commit serious error when it sustained the ruling that the hiring of contractual employees from PESO was not in
keeping with the intent and spirit of the CBA. Indeed, the opinion of the VA is germane to, or, in the words of the CA,
"interrelated and intertwined with," the sole issue submitted for resolution by the parties. This being said, the Companys
invocation of Sections 4 and 5, Rule IV20 and Section 5, Rule VI21of the Revised Procedural Guidelines in the Conduct of
Voluntary Arbitration Proceedings dated October 15, 2004 issued by the NCMB is plainly out of order.
Likewise, the Company cannot find solace in its cited case of Ludo & Luym Corporation v. Saornido. 22 In Ludo, the company
was engaged in the manufacture of coconut oil, corn starch, glucose and related products. In the course of its business
operations, it engaged the arrastre services of CLAS for the loading and unloading of its finished products at the wharf. The
arrastre workers deployed by CLAS to perform the services needed were subsequently hired, on different dates, as Ludos
regular rank-and-file employees. Thereafter, said employees joined LEU, which acted as the exclusive bargaining agent of the
rank-and-file employees. When LEU entered into a CBA with Ludo, providing for certain benefits to the employees (the amount
of which vary according to the length of service rendered), it requested to include in its members period of service the time
during which they rendered arrastre services so that they could get higher benefits. The matter was submitted for voluntary
arbitration when Ludo failed to act. Per submission agreement executed by both parties, the sole issue for resolution was the
date of regularization of the workers. The VA Decision ruled that: (1) the subject employees were engaged in activities
necessary and desirable to the business of Ludo, and (2) CLAS is a labor-only contractor of Ludo. It then disposed as follows:
(a) the complainants were considered regular employees six months from the first day of service at CLAS; (b) the
complainants, being entitled to the CBA benefits during the regular employment, were awarded sick leave, vacation leave, and
annual wage and salary increases during such period; (c) respondents shall pay attorneys fees of 10% of the total award; and
(d) an interest of 12% per annum or 1% per month shall be imposed on the award from the date of promulgation until fully
paid. The VA added that all separation and/or retirement benefits shall be construed from the date of regularization subject
only to the appropriate government laws and other social legislation. Ludo filed a motion for reconsideration, but the VA denied
it. On appeal, the CA affirmed in toto the assailed decision; hence, a petition was brought before this Court raising the issue,
among others, of whether a voluntary arbitrator can award benefits not claimed in the submission agreement. In denying the
petition, We ruled:
Generally, the arbitrator is expected to decide only those questions expressly delineated by the submission agreement.
Nevertheless, the arbitrator can assume that he has the necessary power to make a final settlement since arbitration is the
final resort for the adjudication of disputes. The succinct reasoning enunciated by the CA in support of its holding, that the
Voluntary Arbitrator in a labor controversy has jurisdiction to render the questioned arbitral awards, deserves our concurrence,
thus:
In general, the arbitrator is expected to decide those questions expressly stated and limited in the submission agreement.
However, since arbitration is the final resort for the adjudication of disputes, the arbitrator can assume that he has the power to
make a final settlement. Thus, assuming that the submission empowers the arbitrator to decide whether an employee was
discharged for just cause, the arbitrator in this instance can reasonably assume that his powers extended beyond giving a yes-
or-no answer and included the power to reinstate him with or without back pay.
In one case, the Supreme Court stressed that "xxx the Voluntary Arbitrator had plenary jurisdiction and authority to interpret
the agreement to arbitrate and to determine the scope of his own authority subject only, in a proper case, to the certiorari
jurisdiction of this Court. The Arbitrator, as already indicated, viewed his authority as embracing not merely the determination
of the abstract question of whether or not a performance bonus was to be granted but also, in the affirmative case, the amount
thereof.

432
By the same token, the issue of regularization should be viewed as two-tiered issue. While the submission agreement
mentioned only the determination of the date or regularization, law and jurisprudence give the voluntary arbitrator enough
leeway of authority as well as adequate prerogative to accomplish the reason for which the law on voluntary arbitration was
created speedy labor justice. It bears stressing that the underlying reason why this case arose is to settle, once and for all,
the ultimate question of whether respondent employees are entitled to higher benefits. To require them to file another action
for payment of such benefits would certainly undermine labor proceedings and contravene the constitutional mandate
providing full protection to labor.23
Indubitably, Ludo fortifies, not diminishes, the soundness of the questioned VA Decision. Said case reaffirms the plenary
jurisdiction and authority of the voluntary arbitrator to interpret the CBA and to determine the scope of his/her own authority.
Subject to judicial review, the leeway of authority as well as adequate prerogative is aimed at accomplishing the rationale of
the law on voluntary arbitration speedy labor justice. In this case, a complete and final adjudication of the dispute between
the parties necessarily called for the resolution of the related and incidental issue of whether the Company still violated the
CBA but without being guilty of ULP as, needless to state, ULP is committed only if there is gross violation of the agreement.
Lastly, the Company kept on harping that both the VA and the CA conceded that its engagement of contractual workers from
PESO was a valid exercise of management prerogative. It is confused. To emphasize, declaring that a particular act falls
within the concept of management prerogative is significantly different from acknowledging that such act is a valid exercise
thereof. What the VA and the CA correctly ruled was that the Companys act of contracting out/outsourcing is within the
purview of management prerogative. Both did not say, however, that such act is a valid exercise thereof. Obviously, this is due
to the recognition that the CBA provisions agreed upon by the Company and the Union delimit the free exercise of
management prerogative pertaining to the hiring of contractual employees. Indeed, the VA opined that "the right of the
management to outsource parts of its operations is not totally eliminated but is merely limited by the CBA," while the CA held
that "this management prerogative of contracting out services, however, is not without limitation. x x x These categories of
employees particularly with respect to casual employees serve as limitation to the Companys prerogative to outsource parts of
its operations especially when hiring contractual employees."
A collective bargaining agreement is the law between the parties:
It is familiar and fundamental doctrine in labor law that the CBA is the law between the parties and they are obliged to comply
with its provisions. We said so in Honda Phils., Inc. v. Samahan ng Malayang Manggagawa sa Honda:
A collective bargaining agreement or CBA refers to the negotiated contract between a legitimate labor organization and the
employer concerning wages, hours of work and all other terms and conditions of employment in a bargaining unit. As in all
contracts, the parties in a CBA may establish such stipulations, clauses, terms and conditions as they may deem convenient
provided these are not contrary to law, morals, good customs, public order or public policy. Thus, where the CBA is clear and
unambiguous, it becomes the law between the parties and compliance therewith is mandated by the express policy of the law.
Moreover, if the terms of a contract, as in a CBA, are clear and leave no doubt upon the intention of the contracting parties, the
literal meaning of their stipulations shall control. x x x.24
In this case, Section 4, Article I (on categories of employees) of the CBA between the Company and the Union must be read in
conjunction with its Section 1, Article III (on union security). Both are interconnected and must be given full force and effect.
Also, these provisions are clear and unambiguous. The terms are explicit and the language of the CBA is not susceptible to
any other interpretation. Hence, the literal meaning should prevail. As repeatedly held, the exercise of management
prerogative is not unlimited; it is subject to the limitations found in law, collective bargaining agreement or the general
principles of fair play and justice25 Evidently, this case has one of the restrictions- the presence of specific CBA provisions-
unlike in San Miguel Corporation Employees Union-PTGWO v. Bersamira,26 De Ocampo v. NLRC,27 Asian Alcohol
Corporation v. NLRC,28 and Serrano v. NLRC29cited by the Company. To reiterate, the CBA is the norm of conduct between
the parties and compliance therewith is mandated by the express policy of the law. 30
WHEREFORE, the petition is DENIED. The assailed June 16, 2005 Decision, as well as the October 12, 2005 Resolution of
the Court of Appeals, which sustained the October 26, 2004 Decision of the Voluntary Arbitrator, are hereby AFFIRMED.
SO ORDERED.

G.R. No. 162021 June 16, 2014

MEGA MAGAZINE PUBLICATIONS, INC., JERRY TIU, AND SARITA V. YAP, Petitioners,
vs.
MARGARET A. DEFENSOR, Respondent.
DECISION
BERSAMIN, J.:
In labor cases, the rules on the degree of proof are enforced not as stringently as in other cases in order to better serve the
higher ends of justice. This lenity is intended to afford to the employee every opportunity to level the playing field.
The Case
Being now assailed is the amended decision promulgated on November 19, 2003, 1 whereby the Court of Appeals (CA)
reconsidered its original disposition, and granted the petition for certiorari filed by respondent Margaret A. Defensor
433
(respondent) by annulling and setting aside the adverse resolutions dated July 31, 2002 and March 31, 2003 issued by the
National Labor Relations Commission (NLRC).
Antecedents
Petitioner Mega Magazine Publications, Inc. (MMPI) first employed the respondent as an Associate Publisher in 1996, and
later promoted her as a Group Publisher with a monthly salary of P60,000.00.2
In a memorandum dated February 25, 1999, the respondent proposed to MMPIs Executive Vice-President Sarita V. Yap
(Yap) year-end commissions for herself and a special incentive plan for the Sales Department. 3
The proposed schedule of the respondents commissions would be as follows:
1. MMPI Total revenue at P28-P29 M 0.05% outright commission
2. MMPI Total revenue at P30-P34 M 0.075% outright commission
3. MMPI Total revenue at P35-P38 M 0.1% outright commission
4. MMPI Total revenue at P39-P41 M 0.1% outright commission
5. MMPI Total revenue at P41M up 0.1% outright commission
while the proposed schedule of the special incentive plan would be the following:
1. MMPI Total revenue at P28-P29 M P5,000 each by year-end
2. MMPI Total revenue at P30-P34 M P7,000 each by year-end
3. MMPI Total revenue at P35-P38 M P8,500 each by year-end
4. MMPI Total revenue at P39-P41 M P10,000 each by year-end
5. MMPI Total revenue at P41M up P10,000 each by year-end Plus incentive trip abroad
Yap made marginal notes of her counter-proposals on her copy of the respondents memorandum dated February 25, 1999
itself,4 crossing out proposed items 1 and 2 from the schedule of the respondents commissions, and proposing instead that
outright commissions be at 0.1% of P35-P38 million in accordance with proposed item 3; and crossing out proposed items 1
and 2 from the schedule of the special incentive plan, and writing "start here" and "stet" in reference to item 3. Yap also wrote
on the memorandum: "Marge, if everything is ok w/ you, draft something for me to sign "; "You can also announce that at 5
M net for MMPI [acc to my computation, achievable if they only meet their month min. quota] we can declare 14th month pay
for entire company."5
The respondent sent another memorandum on April 5, 1999 setting out the 1999 advertisement sales, target and
commissions, and proposing that the schedule of her outright commissions should start at .05% of P34.5 million total revenue,
or P175,000.00;6 and further proposing that the special incentives be given when total revenues reached P35-P38 million.
On August 31, 1999, the respondent sent Yap a report on sales and sales targets. 7
On October 1999, the respondent tendered her letter of resignation effective at the end of December 1999. Yap accepted the
resignation.8 Before leaving MMPI, the respondent sent Yap another report on the sales and advertising targets for 1999. 9 On
December 8, 1999, Yap responded with a "formalization" of her approval of the 1999 special incentive scheme proposed by
the respondent through her memorandum dated February 25, 1999, 10 revising anew the schedule by starting commissions
at.05% of P35-P38 million gross advertising revenue (including barter), and the proposed special incentives at P35-P38 million
with P8,500.00 bonus.11
The respondent replied to Yap, pointing out that her memorandum dated April 5, 1999 had been the result of Yaps own
comments on the special incentive scheme she had proposed, and that she had assumed that Yap had been amenable to the
proposal when she did not receive any further reaction from the latter. 12
On May 2000, after the respondent had left the company, she filed a complaint for payment of bonus and incentive
compensation with damages,13 specifically demanding the payment ofP271,264.68 as sales commissions, P60,000.00 as 14th
month pay, and P8,500.00 as her share in the incentive scheme for the advertising and sales staff. 14
Ruling of the Labor Arbiter
In a decision dated February 5, 2001,15 the Labor Arbiter (LA) dismissed the respondents complaint, ruling that the
respondent had not presented any evidence showing that MMPI had agreed or committed to the terms proposed in her
memorandum of April 5, 1999; that even assuming that the petitioners had agreed to her terms, the table she had submitted
justifying a gross revenue of P36,216,624.07 was not an official account by MMPI;16and that the petitioners had presented a
1999 statement of income and deficit prepared by the auditing firm of Punongbayan & Araullo showing MMPIs gross revenue
for 1999 being only P31,947,677.00.17
Decision of the NLRC
The respondent appealed, but the NLRC denied the appeal for its lack of merit,18 with the NLRC concurring with the LAs ruling
that there had been no agreement between the petitioners and the respondent on the terms and conditions of the incentives
reached.
The respondent filed a motion for reconsideration and a supplement to the motion for reconsideration. In the supplement, she
included a motion to admit additional evidence (i.e., the affidavit of Lie Tabingo who had worked as a traffic clerk in the
Advertising Department of MMPI and had been in charge of keeping track of the advertisements placed with MMPI) on the
ground that such evidence had been "unavailable during the hearing as newly discovered evidence in a motion for new trial". 19
The NLRC denied the respondents motions for reconsideration. 20
434
 Judgment of the CA
The respondent brought a special civil action for certiorari in the CA.
In its decision promulgated on August 28, 2003,21 the CA dismissed the respondents petition for certiorari and upheld the
resolutions of the NLRC.
On motion for reconsideration by the respondent, however, the CA promulgated on November 19, 2003 its assailed amended
decision granting the motion for reconsideration and giving due course to the respondents petition for certiorari; annulling the
challenged resolutions of the NLRC; and remanding the case to the NLRC for the reception of additional evidence. The CA
opined that the NLRC had committed a grave abuse of discretion in finding that there had been no special incentive scheme
approved and implemented for 1999,22 and in disallowing the respondent from presenting additional evidence that was crucial
in establishing her claim about MMPIs gross revenue.23 The amended decision disposed as follows:
WHEREFORE, premises considered, the motion for reconsideration is hereby GRANTED. Our Decision of August 28, 2003 is
hereby RECONSIDERED AND SET ASIDE. A new judgment is hereby entered GIVING DUE COURSE to the petition and
GRANTING the writ prayed for. Accordingly, the challenged Resolutions of the NLRC in NLRC NCR 00-03-61361-00 (CA No.
028358-01) dated July 31, 2002 and March 31, 2003 are hereby ANNULLED and SET ASIDE. The case is hereby remanded
to the NLRC for reception of additional evidence on appeal as prayed for by petitioner and for proper proceedings in
accordance with Our disquisitions herein.
The denial of the claim for 14th month pay is sustained for lack of evidentiary basis.
No pronouncement as to costs.
SO ORDERED.24
The petitioners and the respondent sought reconsideration of the CAs amended decision, but the CA denied their motions
through the resolution promulgated on February 4, 2004.25
Issues
Hence, this appeal by petition for review on certiorari, with the petitioners urging that the CA erred in ruling that
I. RESPONDENT CAN INTRODUCE EVIDENCE THAT IS NOT NEWLY-DISCOVERED FOR THE FIRST TIME ON
APPEAL.
II. A [REMAND] OF THE CASETO THE NLRC FOR FURTHER RECEPTION OF EVIDENCE IS JUSTIFIED BY
REASON OF DEARTH OF EVIDENCE TO PROVE THAT TARGET GROSS SALES OR REVENUES
WEREACTUALLY MET AS TO ENTITLE RESPONDENT TO THE INCENTIVE BONUS FOR THE SUBJECT
PERIOD/YEAR.26
The petitioners argue that the circumstances of the case did not warrant the relaxation of the rules of procedure in order to
allow the submission of the memorandum and the affidavit of Tabingo to the LA and the NLRC. They contend that the
respondent had sought to introduce in the proceedings before the LA Tabingos memorandum dated December 10, 1999
addressed to the Accounting Department stating that the "gross revenue from all publications was P36,022,624.07, while net
revenue was P32,551,890.58";27 that Tabingos affidavit was meant to validate her memorandum; that such pieces of evidence
sought to prove that MMPIs target gross sales had been met, and would then entitle the respondent to her claims of
commissions and special incentives; that the LA actually considered but did not give any weight or value to Tabingos
memorandum in resolving the respondents claims; that any affidavit from Tabingo that the respondent intended to introduce
would be merely corroborative of the evidence already presented, like the table purportedly showing MMPIs gross revenue for
1999; and that such evidence was already considered by the NLRC in resolving the appeal. 28
The important issue is whether or not the respondent was entitled to the commissions and the incentive bonus being claimed.
Ruling
The appeal is partly meritorious.
The grant of a bonus or special incentive, being a management prerogative, is not a demandable and enforceable obligation,
except when the bonus or special incentive is made part of the wage, salary or compensation of the employee, 29 or is
promised by the employer and expressly agreed upon by the parties. 30 By its very definition, bonus is a gratuity or act of
liberality of the giver,31 and cannot be considered part of an employees wages if it is paid only when profits are realized or a
certain amount of productivity is achieved. If the desired goal of production or actual work is not accomplished, the bonus does
not accrue.
Due to the nature of the bonus or special incentive being a gratuity or act of liberality on the part of the giver, the respondent
could not validly insist on the schedule proposed in her memorandum of April 5, 1999 considering that the grant of the bonus
or special incentive remained a management prerogative. However, the Court agrees with the CAs ruling that the petitioners
had already exercised the management prerogative to grant the bonus or special incentive. At no instance did Yap flatly refuse
or reject the respondents request for commissions and the bonus or incentive. This is plain from the fact that Yap even
"bargained" with the respondent on the schedule of the rates and the revenues on which the bonus or incentive would be
pegged. What remained contested was only the schedule of the rates and the revenues. In her initial memorandum of
February 25, 1999, the respondent had suggested the following schedule, namely: (a) 0.05% outright commission on total
revenue of P28-P29 million; (b) 0.075% on P30-P34 million; (c) 0.1% on P35-P38 million; (d) 0.1% on P39-P41 million pesos;
and (f) 0.1% on P41 million or higher, but Yap had countered by revising the schedule to start at 0.1% as outright commissions
435
on a total revenue of P35-P38 million, and the special incentive bonus to start at revenues of P35-P38 million. Moreover, on
December 8, 1999, Yap sent to the respondent a memorandum entitled Re: Formalization of my handwritten approval of 1999
Incentive scheme dated 25 February 1999. Such actuations and actions by Yap indicated that, firstly, the petitioners had
already acceded to the grant of the special incentive bonus; and, secondly, the only issue still to be threshed out was at which
point and at what rate the respondents outright commissions and the special incentive bonus for the sales staff should be
given.
For sure, Yaps memorandum dated December 8, 1999, aside from being the petitioners categorical admission of the grant of
the commissions and the bonus or incentives, laid down the petitioners own schedule of the commissions and the bonus or
incentives,32 to wit:
Re: Formalization of my handwritten approval of 1999 incentive scheme dated 25 February 1999
1999 Incentive Scheme for Group Publisher

MMPI Gross Advertising Revenue P35-38 M .05%

(includes barter) P39-41 M .075%
P41 M up 1%
Commissionable ad revenue is net of advertising agency commission and absorbed production costs.1avvphi1Commission
will be paid in bartered goods and cash in direct proportion to percentage of cash and bartered goods revenue for the year.
This amount will be paid by January 30, 2000 if the documents (contracts, P.O.s) to support the gross revenue claim are in
order and submitted to Finance.
Group Incentive for Sale and Traffic Team

MMPI Gross Advertising Revenue P35-38 M P8,500.00 each

P39-41 M P10,000.00 each
P41 M up P10,000.00 each

+ incentive trip abroad

Concerning the remand of the case to the NLRC for reception of additional evidence at the instance of the respondent, we
hold that the CA committed a reversible error. Although, as a rule, the submission to the NLRC of additional evidence like
documents and affidavits is not prohibited, so that the NLRC may properly consider such evidence for the first time on
appeal,33 the circumstances of the case did not justify the application of the rule herein.
The additional evidence the respondent has sought to be admitted (i.e., Tabingos affidavit executed on October 14, 2002) was
already attached to the pleadings filed in the NLRC, and was part of the records thereat. Its introduction was apparently aimed
to rebut the petitioners claim that its gross revenue was only P31,947,677.00 and did not reach the minimum P35 million
necessary for the grant of the respondents outright commissions and the special incentive bonus for the sales staff (inclusive
of the respondent). Tabingos affidavit corroborated her memorandum to the Accounting Department dated December 10,
1999 stating that MMPIs revenue for 1999 was P36,216,624.07.34
Confronted with the conflicting claims on MMPIs gross revenue realized in 1999, the question is which evidence must be
given more weight?
The resolution of the question requires the re-examination and calibration of evidence.35 Such re-examination and calibration,
being of a factual nature, ordinarily lies beyond the purview of the Courts authority in this appeal. Yet, because the documents
are already before the Court, we hereby treat the situation as an exception in order to resolve the question promptly and finally
instead of still remanding the case to the CA for the reevaluation and calibration.
We start by observing that the degree of proof required in labor cases is not as stringent as in other types of cases. 36 This
liberal approach affords to the employee every opportunity to level the playing field in which her employer is pitted against her.
Here, on the one hand, were Tabingos memorandum and affidavit indicating that MMPIs revenues in 1999
totaled P36,216,624.07, and, on the other, the audit report showing MMPIs gross revenues amounting to only P31,947,677.00
in the same year. That the audit report was rendered by the auditing firm of Punongbayan & Araullo did not make it weightier
than Tabingos memorandum and affidavit, for only substantial evidence that amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion37 was required in labor adjudication. Moreover, whenever
the evidence presented by the employer and that by the employee are in equipoise, the scales of justice must tilt in favor of the
latter.38For purposes of determining whether or not the petitioners gross revenue reached the minimum target of P35 million,
therefore, Tabingos memorandum and affidavit sufficed to positively establish that it did, particularly considering that
Tabingos memorandum was made in the course of the performance of her official tasks as a traffic clerk of MMPI. In her
affidavit, too, Tabingo asserted that her issuance of the memorandum was pursuant to MMPIs year-end procedures, an
assertion that the petitioners did not refute. In any event, Tabingos categorical declaration in her affidavit that "[because] of
that achievement, as part of the Sales and Traffic Team of MMPI, in addition to my other bonuses that year, I
received P8,500.00 in gift certificates as my share in the Group Incentive for the Sales and Traffic Team for gross advertising
revenue of P35 to P38 million xxx,"39 aside from the petitioners not refuting it, was corroborated by the 1999 Advertising Target

436
sent by the respondent to Yap on December 2, 1999, in which the respondent reported a gross revenue of P36,216,624.07 as
of December 1, 1999.40
Accordingly, the Court concludes that the respondent was entitled to her 0.05% outright commissions and to the special
incentive bonus of P8,500.00 based on MMPI having reached the minimum target of P35 million in gross revenues paid in
"bartered goods and cash in direct proportion to percentage of cash and bartered goods revenue for the year," as provided in
Yaps memorandum of December 8, 1999.41
WHEREFORE, the Court REVERSES AND SETS ASIDE the amended decision promulgated on November 19, 2003;
ENTERS a new decision granting respondent Margaret A. Defensors claim for outright commissions in the amount of P
181,083 .12 and special incentive bonus of P8,500.00, or a total of 1!189,583.12; and DIRECTS petitioner Mega Magazine
Publications, Inc. to pay the costs of suit.
SO ORDERED.

G.R. No. 181490 April 23, 2014

MIRANT (PHILIPPINES) CORPORATION AND EDGARDO A. BAUTISTA, Petitioners,
vs.
JOSELITO A. CARO, Respondent.
DECISION
VILLARAMA, JR., J.:
At bar is a petition1 under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the Decision2 and
Resolution3 of the Court of Appeals (CA) dated June 26, 2007 and January 11, 2008, respectively, which reversed and set
aside the Decision4 of the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 046551-05 (NCR-00-03-
02511-05). The NLRC decision vacated and set aside the Decision 5 of the Labor Arbiter which found that respondent Joselito
A. Caro (Caro) was illegally dismissed by petitioner Mirant (Philippines) Corporation (Mirant).
Petitioner corporation is organized and operating under and by virtue of the laws of the Republic of the Philippines. It is a
holding company that owns shares in project companies such as Mirant Sual Corporation and Mirant Pagbilao Corporation
(Mirant Pagbilao) which operate and maintain power stations located in Sual, Pangasinan and Pagbilao, Quezon, respectively.
Petitioner corporation and its related companies maintain around 2,000 employees detailed in its main office and other sites.
Petitioner corporation had changed its name to CEPA Operations in 1996 and to Southern Company in 2001. In 2002,
Southern Company was sold to petitioner Mirant whose corporate parent is an Atlanta-based power producer in the United
States of America.6 Petitioner corporation is now known as Team Energy Corporation. 7
Petitioner Edgardo A. Bautista (Bautista) was the President of petitioner corporation when respondent was terminated from
employment.8
Respondent was hired by Mirant Pagbilao on January 3, 1994 as its Logistics Officer. In 2002, when Southern Company was
sold to Mirant, respondent was already a Supervisor of the Logistics and Purchasing Department of petitioner. At the time of
the severance of his employment, respondent was the Procurement Supervisor of Mirant Pagbilao assigned at petitioner
corporations corporate office. As Procurement Supervisor, his main task was to serve as the link between the Materials
Management Department of petitioner corporation and its staff, and the suppliers and service contractors in order to ensure
that procurement is carried out in conformity with set policies, procedures and practices. In addition, respondent was put
incharge of ensuring the timely, economical, safe and expeditious delivery of materials at the right quality and quantity to
petitioner corporations plant. Respondent was also responsible for guiding and overseeing the welfare and training needs of
the staff of the Materials Management Department. Due to the nature of respondents functions, petitioner corporation
considers his position as confidential.9
The antecedent facts follow:
Respondent filed a complaint10 for illegal dismissal and money claims for 13th and 14th month pay, bonuses and other
benefits, as well as the payment of moral and exemplary damages and attorneys fees. Respondent posits the following
allegations in his Position Paper:11
On January 3, 1994, respondent was hired by petitioner corporation as its Logistics Officer and was assigned at petitioner
corporations corporate office in Pasay City. At the time of the filing of the complaint, respondent was already a Supervisor at
the Logistics and Purchasing Department with a monthly salary of P39,815.00.
On November 3, 2004, petitioner corporation conducted a random drug test where respondent was randomly chosen among
its employees who would be tested for illegal drug use. Through an Intracompany Correspondence, 12 these employees were
informed that they were selected for random drug testing to be conducted on the same day that they received the
correspondence. Respondent was duly notified that he was scheduled to be tested after lunch on that day. His receipt of the
notice was evidenced by his signature on the correspondence.
Respondent avers that at around 11:30 a.m. of the same day, he received a phone call from his wifes colleague who informed
him that a bombing incident occurred near his wifes work station in Tel Aviv, Israel where his wife was then working as a
caregiver. Respondent attached to his Position Paper a Press Release13 of the Department of Foreign Affairs (DFA) in Manila

437
to prove the occurrence of the bombing incident and a letter14 from the colleague of his wife who allegedly gave him a phone
call from Tel Aviv.
Respondent claims that after the said phone call, he proceeded to the Israeli Embassy to confirm the news on the alleged
bombing incident. Respondent further claims that before he left the office on the day of the random drug test, he first informed
the secretary of his Department, Irene Torres (Torres), at around 12:30 p.m. that he will give preferential attention to the
emergency phone call that he just received. He also told Torres that he would be back at the office as soon as he has resolved
his predicament. Respondent recounts that he tried to contact his wife by phone but he could not reach her. He then had to go
to the Israeli Embassy to confirm the bombing incident. However, he was told by Eveth Salvador (Salvador), a lobby attendant
at the Israeli Embassy, that he could not be allowed entry due to security reasons.
On that same day, at around 6:15 p.m., respondent returned to petitioner corporations office. When he was finally able to
charge his cellphone at the office, he received a text message from Tina Cecilia (Cecilia), a member of the Drug Watch
Committee that conducted the drug test, informing him to participate in the said drug test. He immediately called up Cecilia to
explain the reasons for his failure to submit himself to the random drug test that day. He also proposed that he would submit to
a drug test the following day at his own expense. Respondent never heard from Cecilia again.
On November 8, 2004, respondent received a Show Cause Notice15 from petitioner corporation through Jaime Dulot (Dulot),
his immediate supervisor, requiring him to explain in writing why he should not be charged with "unjustified refusal to submit to
random drug testing." Respondent submitted his written explanation 16 on November 11, 2004. Petitioner corporation further
required respondent on December 14, 2004 to submit additional pieces of supporting documents to prove that respondent was
at the Israeli Embassy in the afternoon of November 3, 2004 and that the said bombing incident actually occurred. Respondent
requested for a hearing to explain that he could not submit proof that he was indeed present at the Israeli Embassy during the
said day because he was not allegedly allowed entry by the embassy due to security reasons. On January 3, 2005,
respondent submitted the required additional supporting documents. 17
On January 13, 2005, petitioner corporations Investigating Panel issued an Investigating Report 18 finding respondent guilty of
"unjustified refusal to submit to random drug testing" and recommended a penalty of four working weeks suspension without
pay, instead of termination, due to the presence of mitigating circumstances. In the same Report, the Investigating Panel also
recommended that petitioner corporation should review its policy on random drug testing, especially of the ambiguities cast by
the term "unjustified refusal."
On January 19, 2005, petitioner corporations Asst. Vice President for Material Management Department, George K. Lamela,
Jr. (Lamela), recommended19 that respondent be terminated from employment instead of merely being suspended. Lamela
argued that even if respondent did not outrightly refuse to take the random drug test, he avoided the same. Lamela averred
that "avoidance" was synonymous with "refusal."
On February 14, 2005, respondent received a letter20 from petitioner corporations Vice President for Operations, Tommy J.
Sliman (Sliman), terminating him on the same date. Respondent filed a Motion to Appeal 21 his termination on February 23,
2005. The motion was denied by petitioner corporation on March 1, 2005.
It is the contention of respondent that he was illegally dismissed by petitioner corporation due to the latters non-compliance
with the twin requirements of notice and hearing. He asserts that while there was a notice charging him of "unjustified refusal
to submit to random drug testing," there was no notice of hearing and petitioner corporations investigation was not the
equivalent of the "hearing" required under the law which should have accorded respondent the opportunity to be heard.
Respondent further asserts that he was illegally dismissed due to the following circumstances:
1. He signed the notice that he was randomly selected as a participant to the company drug testing;
2. Even the Investigating Panel was at a loss in interpreting the charge because it believed that the term "refusal" was
ambiguous, and therefore such doubt must be construed in his favor; and
3. He agreed to take the drug test the following day at his own expense, which he says was clearly not an indication
of evasion from the drug test.
Petitioner corporation counters with the following allegations:
On November 3, 2004, a random drug test was conducted on petitioner corporations employees at its Corporate Office at the
CTC Bldg. in Roxas Blvd., Pasay City. The random drug test was conducted pursuant to Republic Act No. 9165, otherwise
known as the "Comprehensive Dangerous Drugs Act of 2002." Respondent was randomly selected among petitioners
employees to undergo the said drug test which was to be carried out by Drug Check Philippines, Inc. 22
When respondent failed to appear at the scheduled drug test, Cecilia prepared an incident report addressed to Dulot, the
Logistics Manager of the Materials Management Department. 23 Since it was stated under petitioner corporations Mirant Drugs
Policy Employee Handbook to terminate an employee for "unjustified refusal to submit to a random drug test" for the first
offense, Dulot sent respondent a Show Cause Notice24 dated November 8, 2004, requiring him to explain why no disciplinary
action should be imposed for his failure to take the random drug test. Respondent, in a letter dated November 11, 2004,
explained that he attended to an emergency call from his wifes colleague and apologized for the inconvenience he had
caused. He offered to submit to a drug test the next day even at his expense. 25 Finding respondents explanation
unsatisfactory, petitioner corporation formed a panel to investigate and recommend the penalty to be imposed on
respondent.26 The Investigating Panel found respondents explanations as to his whereabouts on that day to be inconsistent,
438
and recommended that he be suspended for four weeks without pay. The Investigating Panel took into account that
respondent did not directly refuse to be subjected to the drug test and that he had been serving the company for ten years
without any record of violation of its policies. The Investigating Panel further recommended that the Mirant Drug Policy be
reviewed to clearly define the phrase "unjustified refusal to submit to random drug testing."27 Petitioner corporations Vice-
President for Operations, Sliman, however disagreed with the Investigating Panels recommendations and terminated the
services of respondent in accordance with the subject drug policy. Sliman likewise stated that respondents violation of the
policy amounted to willful breach of trust and loss of confidence. 28
A cursory examination of the pleadings of petitioner corporation would show that it concurs with the narration of facts of
respondent on material events from the time that Cecilia sent an electronic mail at about 9:23 a.m. on November 3, 2004 to all
employees of petitioner corporation assigned at its Corporate Office advising them of the details of the drug test up to the
time of respondents missing his schedule to take the drug test. Petitioner corporation and respondents point of disagreement,
however, is whether respondents proffered reasons for not being able to take the drug test on the scheduled day constituted
valid defenses that would have taken his failure to undergo the drug test out of the category of "unjustified refusal." Petitioner
corporation argues that respondents omission amounted to "unjustified refusal" to submit to the random drug test as he could
not proffer a satisfactory explanation why he failed to submit to the drug test:
1. Petitioner corporation is not convinced that there was indeed such a phone call at noon of November 3, 2004 as
respondent could not even tell who called him up.
2. Respondent could not even tell if he received the call via the landline telephone service at petitioner corporations
office or at his mobile phone.
3. Petitioner corporation was also of the opinion that granting there was such a phone call, there was no compelling
reason for respondent to act on it at the expense of his scheduled drug testing. Petitioner corporation principally
pointed out that the call merely stated that a bomb exploded near his wifes work station without stating that his wife
was affected. Hence, it found no point in confirming it with extraordinary haste and forego the drug test which would
have taken only a few minutes to accomplish. If at all, respondent should have undergone the drug testing first before
proceeding to confirm the news so as to leave his mind free from this obligation.
4. Petitioner corporation maintained that respondent could have easily asked permission from the Drug Watch
Committee that he was leaving the office since the place where the activity was conducted was very close to his work
station.29
To the mind of petitioners, they are not liable for illegal dismissal because all of these circumstances prove that respondent
really eluded the random drug test and was therefore validly terminated for cause after being properly accorded with due
process. Petitioners further argue that they have already fully settled the claim of respondent as evidenced by a Quitclaim
which he duly executed. Lastly, petitioners maintain that they are not guilty of unfair labor practice as respondents dismissal
was not intended to curtail his right to self-organization; that respondent is not entitled to the payment of his 13th and 14th
month bonuses and other incentives as he failed to show that he is entitled to these amounts according to company policy;
that respondent is not entitled to reinstatement, payment of full back wages, moral and exemplary damages and attorneys
fees due to his termination for cause.
In a decision dated August 31, 2005, Labor Arbiter Aliman D. Mangandog found respondent to have been illegally dismissed.
The Labor Arbiter also found that the quitclaim purportedly executed by respondent was not a bona fide quitclaim which
effectively discharged petitioners of all the claims of respondent in the case at bar. If at all, the Labor Arbiter considered the
execution of the quitclaim as a clear attempt on the part of petitioners to mislead its office into thinking that respondent no
longer had any cause of action against petitioner corporation. The decision stated, viz.:
WHEREFORE, premises considered, this Office finds respondents GUILTY of illegal dismissal, and hereby ordered to jointly
and severally reinstate complainant back to his former position without loss on seniority rights and benefits and to pay him his
backwages and other benefits from the date he was illegally dismissed up to the time he is actually reinstated, partially
computed as of this date in the amount of P258,797.50 (P39,815.00 x 6.5 mos.) plus his 13th and 14th month pay in the
amount of P43,132.91 or in the total amount of P301,930.41.
Respondents are also ordered to pay complainant the amount of P3,000,000.00 as and by way of moral and exemplary
damages, and to pay complainant the amount equivalent to ten percent (10%) of the total awards as and by way of attorneys
fees.
SO ORDERED.30
The Labor Arbiter stated that while petitioner corporation observed the proper procedure in the termination of an employee for
a purported authorized cause, such just cause did not exist in the case at bar. The decision did not agree with the conclusions
reached by petitioner corporations own Investigating Panel that while respondent did not refuse to submit to the questioned
drug test and merely "avoided" it on the designated day, "avoidance" and "refusal" are one and the same. It also held that the
terms "avoidance" and "refusal" are separate and distinct and that "the two words are not even synonymous with each
other."31 The Labor Arbiter considered as more tenable the stance of respondent that his omission merely resulted to a
"failure" to submit to the said drug test and not an "unjustified refusal." Even if respondents omission is to be considered as
refusal, the Labor Arbiter opined that it was not tantamount to "unjustified refusal" which constitutes as just cause for his
439
termination. Finally, the Labor Arbiter found that respondent was entitled to moral and exemplary damages and attorneys
fees.
On appeal to the NLRC, petitioners alleged that the decision of the Labor Arbiter was rendered with grave abuse of discretion
for being contrary to law, rules and established jurisprudence, and contained serious errors in the findings of facts which, if not
corrected, would cause grave and irreparable damage or injury to petitioners. The NLRC, giving weight and emphasis to the
inconsistencies in respondents explanations, considered his omission as "unjustified refusal" in violation of petitioner
corporations drug policy. Thus, in a decision dated May 31, 2006, the NLRC ruled, viz.:
x x x [Respondent] was duly notified as shown by copy of the notice x x x which he signed to acknowledge receipt thereof on
the said date. [Respondent] did not refute [petitioner corporations] allegation that he was also personally reminded of said
drug test on the same day by Ms. Cecilia of [petitioner corporations] drug watch committee. However, [respondent] was
nowhere to be found at [petitioner corporations] premises at the time when he was supposed to be tested. Due to his failure to
take part in the random drug test, an incident report x x x was prepared by the Drug Cause Notice x x x to explain in writing
why no disciplinary action should be taken against him for his unjustified refusal to submit to random drug test, a type D
offense punishable with termination. Pursuant to said directive, [respondent] submitted an explanation x x x on 11 November
2004, pertinent portions of which read:
"I was scheduled for drug test after lunch that day of November 3, 2004 as confirmed with Tina Cecilia. I was having my lunch
when a colleague of my wife abroad called up informing me that there was something wrong [that] happened in their
neighborhood, where a bomb exploded near her workstation. Immediately, I [left] the office to confirm said information but at
around 12:30 P.M. that day, I informed MS. IRENE TORRES, our Department Secretary[,] that I would be attending to this
emergency call. Did even [inform] her that Ill try to be back as soon as possible but unfortunately, I was able to return at 6:15
P.M. I didnt know that Tina was the one calling me on my cell that day. Did only receive her message after I charged my cell
at the office that night. I was able to call back Tina Cecilia later [that] night if its possible to have it (drug test) the next day.
My apology [for] any inconvenience to the Drug Watch Committee, that I forgot everything that day including my scheduled
drug test due to confusion of what had happened. It [was] not my intention not to undergo nor refuse to have a drug test
knowing well that its a company policy and its mandated by law."
In the course of the investigation, [respondent] was requested to present proof pertaining to the alleged call he received on 3
November 2004 from a colleague of his wife regarding the bomb explosion in Tel Aviv, his presence at the Israel Embassy
also on 3 November 2004. [Respondent], thereafter, submitted a facsimile which he allegedly received from his wife's
colleague confirming that she called and informed him of the bombing incident. However, a perusal of said facsimile x x x
reveals that the same cannot be given any probative value because, as correctly observed by [petitioners], it can barely be
read and upon inquiry with PLDT, the international area code of Israel which is 00972 should appear on the face of the
facsimile if indeed said facsimile originated from Israel. [Respondent] also could not present proof of his presence at the Israel
Embassy on said time and date. He instead provided the name of a certain Ms. Eveth Salvador of said embassy who could
certify that he was present thereat. Accordingly, Mr. Bailon, a member of the investigation panel, verified with Ms. Salvador
who told him that she is only the telephone operator of the Israel Embassy and that she was not in a position to validate
[respondents] presence at the Embassy. Mr. Bailon was then referred to a certain Ms. Aimee Zandueta, also of said embassy,
who confirmed that based on their records, [respondent] did not visit the embassy nor was he attended to by any member of
said embassy on 3 November 2004. Ms. Zandueta further informed Mr. Bailon that no bombing occurred in Tel Aviv on 3
November 2004 and that the only reported incident of such nature occurred on 1 November 2004. A letter x x x to this effect
was written by Consul Ziva Samech of the Embassy of Israel. A press release x x x of the Department of Foreign Affairs
confirm[ed] that the bombing occurred on 1 November 2004.
In his explanation, the [respondent] stated that the reason why he had to leave the office on 3 November 2004 was to verify an
information at the Israel Embassy of the alleged bombing incident on the same day. However, [petitioners] in their position
paper alleged that Ms. Torres of [petitioner] company received a text message from him at around 12:47 p.m. informing her
that he will try to be back since he had a lot of things to do and asking her if there was a signatory on that day. [Respondent]
did not deny sending said text messages to Ms. Torres in his reply and rejoinder x x x. He actually confirmed that he was
involved in the CIIS registration with all companies that was involved with [petitioner] company and worked on the registration
of [petitioner] companys vehicles with TRO.
It is also herein noted that [respondent] had initially reported to Ms. Torres that it was his mother in law who informed him
about the problem concerning his wife. However, in his written explanation x x x, the [respondent] stated that it was a friend of
his wife, whom he could not even identify, who informed him of the alleged bombing incident in Tel Aviv, Israel. [Respondent]
also did not deny receiving a cellphone call from Ms. Cecilia that day. He merely stated that he did not know that it was Ms.
Cecilia calling him up in a cellphone and it was only after he charged his cellphone at the office that night that he received her
message. In effect, [respondent] asserted that his cellphone battery was running low or drained. [Petitioners] were able to
refute [these] averments of [respondent] when they presented [respondents] Smart Billing Statement
x x x showing that he was able to make a cellphone call at 5:29 p.m. to [petitioner corporations] supplier, Mutico for a duration
of two (2) minutes.32

440
Given the foregoing facts, the NLRC stated that the offer of respondent to submit to another drug test the following day, even
at his expense, cannot operate to free him from liability. The NLRC opined that taking the drug test on the day following the
scheduled random drug test would affect both the integrity and the accuracy of the specimen which was supposed to be taken
from a randomly selected employee who was notified of his/her selection on the same day that the drug test was to be
administered. The NLRC further asserted that a drug test, conducted many hours or a day after the employee was notified,
would compromise its results because the employee may have possibly taken remedial measures to metabolize or eradicate
whatever drugs s/he may have ingested prior to the drug test.
The NLRC further stated that these circumstances have clearly established the falsity of respondents claims and found no
justifiable reason for respondent to refuse to submit to the petitioner corporations random drug test. While the NLRC
acknowledged that it was petitioner corporations own Investigating Panel that considered respondents failure to take the
required drug test as mere "avoidance" and not "unjustified refusal," it concluded that such finding was merely
recommendatory to guide top management on what action to take.
The NLRC also found that petitioner corporations denial of respondents motion to reconsider his termination was in order.
Petitioner corporations reasons for such denial are quoted in the NLRC decision, viz.:
"Your appeal is anchored on your claim that you responded to an emergency call from someone abroad informing you that a
bomb exploded near the work station of your wife making you unable to undergo the scheduled drug testing. This claim is
groundless taking into account the following:
We are not convinced that there was indeed that call which you claim to have received noon of November 3, 2004. On the
contrary, our belief is based on the fact that you could not tell who called you up or how the call got to you. If you forgot to ask
the name of the person who called you up, surely you would have known how the call came to you. You said you were having
lunch at the third floor of the CTC building when you received the call. There were only two means of communication available
to you then: the land line telephone service in your office and your mobile phone. If your claim were (sic) not fabricated, you
would be able to tell which of these two was used.
Granting that you indeed received that alleged call, from your own account, there was no compelling reason for you to act on it
at the expense of your scheduled drug testing. The call, as it were, merely stated that something wrong happened (sic) in their
neighborhood, where a bomb exploded near her workstation. Nothing was said if your wife was affected. There is no point in
confirming it with extraordinary haste and forego the drug test which would have taken only a few minutes to accomplish. If at
all, you should have undergone the drug testing first before proceeding to confirm the news so as to leave your mind free from
this obligation.
Additionally, if it was indeed necessary that you skip the scheduled drug testing to verify that call, why did you not ask
permission from the Drug Watch [C]ommittee that you were leaving? The place where the activity was being conducted was
very close to your workstation. It was absolutely within your reach to inform any of its members that you were attending to an
emergency call. Why did you not do so?
All this undisputedly proves that you merely eluded the drug testing. Your claim that you did not refuse to be screened carries
no value. Your act was a negation of your words." 33
The NLRC found that respondent was not only validly dismissed for cause he was also properly accorded his constitutional
right to due process as shown by the following succession of events:
1. On November 8, 2004, respondent was given a show-cause notice requiring him to explain in writing within three
days why no disciplinary action should be taken against him for violation of company policy on unjustified refusal to
submit to random drug testing a type D offense which results in termination.
2. Respondent submitted his explanation on November 11, 2004.
3. On December 9, 2004, respondent was given a notice of investigation 34 informing him of a meeting on December
13, 2004 at 9:00 a.m. In this meeting, respondent was allowed to explain his side, present his evidences and
witnesses, and confront the witnesses presented against him.
4. On February 14, 2005, respondent was served a letter of termination which clearly stated the reasons therefor. 35
The NLRC, notwithstanding its finding that respondent was dismissed for cause and with due process, granted financial
assistance to respondent on equitable grounds. It invoked the past decisions of this Court which allowed the award of financial
assistance due to factors such as long years of service or the Courts concern and compassion towards labor where the
infraction was not so serious. Thus, considering respondents 10 years of service with petitioner corporation without any record
of violation of company policies, the NLRC ordered petitioner corporation to pay respondent financial assistance equivalent to
one-half (1/2) month pay for every year of service in the amount of One Hundred Ninety-Nine Thousand Seventy-Five Pesos
(P199,075.00). The NLRC decision states thus:
WHEREFORE, the decision dated 31 August 2005 is VACATED and SET ASIDE. The instant complaint is dismissed for lack
of merit. However, respondent Mirant [Philippines] Corp. is ordered to pay complainant financial assistance in the amount of
one hundred ninety-nine thousand seventy five pesos (P199,075.00).
SO ORDERED.36
Respondent filed a motion for reconsideration,37 while petitioners filed a motion for partial reconsideration 38 of the NLRC
decision. In a Resolution39 dated June 30, 2006, the NLRC denied both motions.
441
In a petition for certiorari before the CA, respondent raised the following issues: whether the NLRC acted without or in excess
of its jurisdiction, or with grave abuse of discretion amounting to lack or excess of its jurisdiction when it construed that the
terms "failure," "avoidance," "refusal" and "unjustified refusal" have similar meanings; reversed the factual findings of the Labor
Arbiter; and held that respondent deliberately breached petitioners Anti-Drugs Policy.40 Respondent further argued before the
appellate court that his failure to submit himself to the random drug test was justified because he merely responded to an
emergency call regarding his wifes safety in Tel Aviv, and that such failure cannot be considered synonymous with
"avoidance" or "refusal" so as to mean "unjustified refusal" in order to be meted the penalty of termination. 41
The CA disagreed with the NLRC and ruled that it was immaterial whether respondent failed, refused, or avoided being tested.
To the appellate court, the singular fact material to this case was that respondent did not get himself tested in clear
disobedience of company instructions and policy. Despite such disobedience, however, the appellate court considered the
penalty of dismissal to be too harsh to be imposed on respondent, viz.:
x x x While it is a management prerogative to terminate its erring employee for willful disobedience, the Supreme Court has
recognized that such penalty is too harsh depending on the circumstances of each case. "There must be reasonable
proportionality between, on the one hand, the willful disobedience by the employee and, on the other hand, the penalty
imposed therefor" x x x.
In this case, [petitioner corporations] own investigating panel has revealed that the penalty of dismissal is too harsh to impose
on [respondent], considering that this was the first time in his 10-year employment that the latter violated its company policies.
The investigating panel even suggested that a review be had of the company policy on the term "unjustified refusal" to clearly
define what constitutes a violation thereof. The recommendation of the investigating panel is partially reproduced as follows:
"VII. Recommendation
However, despite having violated the company policy, the panel recommends 4 working weeks suspension without pay (twice
the company policys maximum of 2 working weeks suspension) instead of termination due to the following mitigating
circumstances.
1. Mr. Joselito A. Caro did not directly refuse to be subjected to the random drug test scheduled on November 3,
2004.
2. In the case of Mr. Joselito A. Caro, the two conditions for termination (Unjustified and Refusal) were not fully met
as he expressly agreed to undergo drug test.
3. Mr. Joselito A. Caro voluntarily offered himself to undergo drug test the following day at his own expense.
Doubling the maximum of 2 weeks suspension to 4 weeks is indicative of the gravity of the offense committed. The panel
believes that although mitigating factors partially offset reasons for termination, the 2 weeks maximum suspension is too
lenient penalty for such an offense.
The Panel also took into consideration that Mr. Joselito A. Caro has served the company for ten (10) years without any record
of violation of the company policies.
xxxx
The Panel also recommends that Management review the Mirant Drug Policy specifically Unjustified [R]efusal to submit to
random drug testing. The Panel believes that the term refusal casts certain ambiguities and should be clearly defined." 42
The CA however found that award of moral and exemplary damages is without basis due to lack of bad faith on the part of the
petitioner corporation which merely acted within its management prerogative. In its assailed Decision dated June 26, 2007, the
CA ruled, viz.:
IN VIEW OF ALL THE FOREGOING, the instant petition is GRANTED. The assailed Decision dated May 31, 2006 and
Resolution dated June 30, 2006 rendered by the National Labor Relations Commission (NLRC) in NLRC NCR CA No.
046551-05 (NCR-00-03-02511-05) are REVERSED and SET ASIDE. The Labor Arbiters Decision dated August 31, 2005 is
hereby REINSTATED with MODIFICATION by omitting the award of moral and exemplary damages as well as attorneys fees,
and that the petitioners salary equivalent to four (4) working weeks at the time he was terminated be deducted from his
backwages. No cost.
SO ORDERED.43
Petitioner moved for reconsideration. In its assailed Resolution dated January 11, 2008, the CA denied petitioners motion for
reconsideration for lack of merit. It ruled that the arguments in the motion for reconsideration were already raised in their past
pleadings.
In this instant Petition, petitioners raise the following grounds:
I. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT FAILED TO CONSIDER THAT:
A. THE PETITION FOR CERTIORARI FILED BY RESPONDENT CARO SHOULD HAVE BEEN SUMMARILY
DISMISSED CONSIDERING THAT IT LACKED THE REQUISITE VERIFICATION AND CERTIFICATION AGAINST
FORUM SHOPPING REQUIRED BY THE RULES OF COURT; OR
B. AT THE VERY LEAST, THE SAID PETITION FOR CERTIORARI FILED BY RESPONDENT CARO SHOULD
HAVE BEEN CONSIDERED MOOT SINCE RESPONDENT CARO HAD ALREADY PREVIOUSLY EXECUTED A
QUITCLAIM DISCHARGING THE PETITIONERS FROM ALL HIS MONETARY CLAIMS.

442
II. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR AND DECIDED QUESTIONS OF SUBSTANCE IN A
WAY NOT IN ACCORDANCE WITH LAW AND APPLICABLE DECISIONS OF THE HONORABLE COURT, CONSIDERING
THAT:
A. THE COURT OF APPEALS REVERSED THE DECISION DATED 31 MAY 2006 OF THE NLRC ON THE
GROUND THAT THERE WAS GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION NOTWITHSTANDING THE FACT THAT IT AFFIRMED THE NLRCS FINDINGS THAT
RESPONDENT CARO DELIBERATELY DISOBEYED PETITIONER MIRANTS ANTI-DRUGS POLICY.
B. THE PENALTY OF TERMINATION SHOULD HAVE BEEN SUSTAINED BY THE COURT OF APPEALS GIVEN
ITS POSITIVE FINDING THAT RESPONDENT CARO DELIBERATELY AND WILLFULLY DISOBEYED
PETITIONER MIRANTS ANTI-DRUGS POLICY.
C. IN INVALIDATING RESPONDENT CAROS DISMISSAL, THE COURT OF APPEALS SUBSTITUTED WITH ITS
OWN DISCRETION A CLEAR MANAGEMENT PREROGATIVE BELONGING ONLY TO PETITIONER MIRANT IN
THE INSTANT CASE.
D. THE WILLFUL AND DELIBERATE VIOLATION OF PETITIONER MIRANTS ANTI-DRUGS POLICY
AGGRAVATED RESPONDENT CAROS WRONGFUL CONDUCT WHICH JUSTIFIED HIS TERMINATION.
E. IN INVALIDATING RESPONDENT CAROS DISMISSAL, THE COURT OF APPEALS, IN EFFECT, BELITTLED
THE IMPORTANCE AND SERIOUSNESS OF PETITIONER MIRANTS ANTI-DRUGS POLICY AND
CONSEQUENTLY HAMPERED THE EFFECTIVE IMPLEMENTATION OF THE SAME.
F. THE EXISTENCE OF OTHER GROUNDS FOR CAROS DISMISSAL, SUCH AS WILLFUL DISOBEDIENCE AND
[LOSS] OF TRUST AND CONFIDENCE, JUSTIFIED HIS TERMINATION FROM EMPLOYMENT.
III. NONETHELESS, THE AWARD OF FINANCIAL ASSISTANCE IN FAVOR OF RESPONDENT CARO IS NOT
WARRANTED CONSIDERING THAT RESPONDENT CAROS WILLFUL AND DELIBERATE REFUSAL TO SUBJECT
HIMSELF TO PETITIONER MIRANTS DRUG TEST AND HIS SUBSEQUENT EFFORTS TO CONCEAL THE SAME
SHOWS HIS DEPRAVED MORAL CHARACTER.
IV. THE COURT OF APPEALS GRIEVOUSLY ERRED WHEN IT HELD PETITIONER BAUTISTA PERSONALLY LIABLE
FOR [RESPONDENT] CAROS UNFOUNDED CLAIMS CONSIDERING THAT, ASIDE FROM RESPONDENT CAROS
DISMISSAL BEING LAWFUL, PETITIONER BAUTISTA MERELY ACTED WITHIN THE SCOPE OF HIS FUNCTIONS IN
GOOD FAITH.44
We shall first rule on the issue raised by petitioners that the petition for certiorari filed by respondent with the CA should have
been summarily dismissed as it lacked the requisite verification and certification against forum shopping under Sections 4 and
5, Rule 7 of the Rules, viz.:
SEC. 4. Verification. Except when otherwise specifically required by law or rule, pleadings need not be under oath, verified
or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein are true and correct
of his knowledge and belief.
A pleading required to be verified which contains a verification based on "information and belief," or upon "knowledge,
information and belief," or lacks a proper verification, shall be treated as an unsigned pleading.
SEC. 5. Certification against forum shopping. The plaintiff or principal party shall certify under oath in the complaint or other
initiatory pleading asserting a claim for relief, or in a sworn certification annexed thereto and simultaneously filed therewith: (a)
that he has not theretofore commenced any action or filed any claim involving the same issues in any court, tribunal or quasi-
judicial agency and, to the best of his knowledge, no such other action or claim is pending therein; (b) if there is such other
pending action or claim, a complete statement of the present status thereof; and (c) if he should thereafter learn that the same
or similar action or claim has been filed or is pending, he shall report that fact within five (5) days therefrom to the court
wherein his aforesaid complaint or initiatory pleading has been filed.
Failure to comply with the foregoing requirements shall not be curable by mere amendment of the complaint or other initiatory
pleading but shall be cause for the dismissal of the case without prejudice, unless otherwise provided, upon motion and after
hearing. The submission of a false certification or noncompliance with any of the undertakings therein shall constitute indirect
contempt of court, without prejudice to the corresponding administrative and criminal actions. If the acts of the party or his
counsel clearly constitute willful and deliberate forum shopping, the same shall be ground for summary dismissal with
prejudice and shall constitute direct contempt, as well as a cause for administrative sanctions.
It is the contention of petitioners that due to respondents failure to subscribe the Verification and Certification of Non-Forum
Shopping before a Notary Public, the said verification and certification cannot be considered to have been made under oath.
Accordingly, such omission is fatal to the entire petition for not being properly verified and certified. The CA therefore erred
when it did not dismiss the petition.
This jurisdiction has adopted in the field of labor protection a liberal stance towards the construction of the rules of procedure
in order to serve the ends of substantial justice. This liberal construction in labor law emanates from the mandate that the
workingmans welfare should be the primordial and paramount consideration.45 Thus, if the rules of procedure will stunt courts
from fulfilling this mandate, the rules of procedure shall be relaxed if the circumstances of a case warrant the exercise of such
443
liberality. If we sustain the argument of petitioners in the case at bar that the petition for certiorari should have been dismissed
outright by the CA, the NLRC decision would have reached finality and respondent would have lost his remedy and denied his
right to be protected against illegal dismissal under the Labor Code, as amended.
It is beyond debate that petitioner corporations enforcement of its Anti-Drugs Policy is an exercise of its management
prerogative. It is also a conceded fact that respondent "failed" to take the random drug test as scheduled, and under the said
company policy, such failure metes the penalty of termination for the first offense. A plain, simple and literal application of the
said policy to the omission of respondent would have warranted his outright dismissal from employment if the facts were that
simple in the case at bar. Beyond debate the facts of this case are not and this disables the Court from permitting a
straight application of an otherwise prima facie straightforward rule if the ends of substantial justice have to be served.
It is the crux of petitioners argument that respondents omission amounted to "unjust refusal" because he could not sufficiently
support with convincing proof and evidence his defenses for failing to take the random drug test. For petitioners, the
inconsistencies in respondents explanations likewise operated to cast doubt on his real reasons and motives for not
submitting to the random drug test on schedule. In recognition of these inconsistencies and the lack of convincing proof from
the point of view of petitioners, the NLRC reversed the decision of the Labor Arbiter. The CA found the ruling of the Labor
Arbiter to be more in accord with the facts, law and existing jurisprudence.
We agree with the disposition of the appellate court that there was illegal dismissal in the case at bar.
While the adoption and enforcement by petitioner corporation of its Anti-Drugs Policy is recognized as a valid exercise of its
management prerogative as an employer, such exercise is not absolute and unbridled. Managerial prerogatives are subject to
limitations provided by law, collective bargaining agreements, and the general principles of fair play and justice. 46 In the
exercise of its management prerogative, an employer must therefore ensure that the policies, rules and regulations on work-
related activities of the employees must always be fair and reasonable and the corresponding penalties, when prescribed,
commensurate to the offense involved and to the degree of the infraction. 47 The Anti-Drugs Policy of Mirant fell short of these
requirements.
Petitioner corporations subject Anti-Drugs Policy fell short of being fair and reasonable.
First. The policy was not clear on what constitutes "unjustified refusal" when the subject drug policy prescribed that an
employees "unjustified refusal" to submit to a random drug test shall be punishable by the penalty of termination for the first
offense. To be sure, the term "unjustified refusal" could not possibly cover all forms of "refusal" as the employees resistance,
to be punishable by termination, must be "unjustified." To the mind of the Court, it is on this area where petitioner corporation
had fallen short of making it clear to its employees as well as to management as to what types of acts would fall under the
purview of "unjustified refusal." Even petitioner corporations own Investigating Panel recognized this ambiguity, viz.:
The Panel also recommends that Management review the Mirant Drug Policy specifically "Unjustified [R]efusal to submit to
random drug testing." The Panel believes that the term "refusal" casts certain ambiguities and should be clearly defined. 48
The fact that petitioner corporations own Investigating Panel and its Vice President for Operations, Sliman, differed in their
recommendations regarding respondents case are first-hand proof that there, indeed, is ambiguity in the interpretation and
application of the subject drug policy. The fact that petitioner corporations own personnel had to dissect the intended meaning
of "unjustified refusal" is further proof that it is not clear on what context the term "unjustified refusal" applies to. It is therefore
not a surprise that the Labor Arbiter, the NLRC and the CA have perceived the term "unjustified refusal" on different prisms
due to the lack of parameters as to what comes under its purview. To be sure, the fact that the courts and entities involved in
this case had to engage in semantics and come up with different constructions is yet another glaring proof that the subject
policy is not clear creating doubt that respondents dismissal was a result of petitioner corporations valid exercise of its
management prerogative.
It is not a mere jurisprudential principle, but an enshrined provision of law, that all doubts shall be resolved in favor of labor.
Thus, in Article 4 of the Labor Code, as amended, "[a]ll 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." In Article 1702 of the New
Civil Code, a similar provision states that "[i]n case of doubt, all labor legislation and all labor contracts shall be construed in
favor of the safety and decent living for the laborer." Applying these provisions of law to the circumstances in the case at bar, it
is not fair for this Court to allow an ambiguous policy to prejudice the rights of an employee against illegal dismissal. To hold
otherwise and sustain the stance of petitioner corporation would be to adopt an interpretation that goes against the very grain
of labor protection in this jurisdiction. As correctly stated by the Labor Arbiter, "when a conflicting interest of labor and capital
are weighed on the scales of social justice, the heavier influence of the latter must be counter-balanced by the sympathy and
compassion the law must accord the underprivileged worker."49
Second. The penalty of termination imposed by petitioner corporation upon respondent fell short of being reasonable.
Company policies and regulations are generally valid and binding between the employer and the employee unless shown to
be grossly oppressive or contrary to law50 as in the case at bar. Recognizing the ambiguity in the subject policy, the CA was
more inclined to adopt the recommendation of petitioner corporations own Investigating Panel over that of Sliman and the
NLRC. The appellate court succinctly but incisively pointed out, viz.:

444
x x x We find, as correctly pointed out by the investigating panel, that the [petitioner corporations] Anti-Drug Policy is
excessive in terminating an employee for his "unjustified refusal" to subject himself to the random drug test on first offense,
without clearly defining what amounts to an "unjustified refusal."
Thus, We find that the recommended four (4) working weeks suspension without pay as the reasonable penalty to be imposed
on [respondent] for his disobedience. x x x51 (Additional emphasis supplied.)
To be sure, the unreasonableness of the penalty of termination as imposed in this case is further highlighted by a fact admitted
by petitioner corporation itself: that for the ten-year period that respondent had been employed by petitioner corporation, he did
not have any record of a violation of its company policies.
As to the other issue relentlessly being raised by petitioner corporation that respondents petition for certiorari before the CA
should have been considered moot as respondent had already previously executed a quitclaim discharging petitioner
corporation from all his monetary claims, we cannot agree. Quitclaims executed by laborers are ineffective to bar claims for the
full measure of their legal rights,52 especially in this case where the evidence on record shows that the amount stated in the
quitclaim exactly corresponds to the amount claimed as unpaid wages by respondent under Annex A53 of his Reply54 filed with
the Labor Arbiter. Prima facie, this creates a false impression that respondents claims have already been settled by petitioner
corporation discharging the latter from all of respondents monetary claims. In truth and in fact, however, the amount paid
under the subject quitclaim represented the salaries of respondent that remained unpaid at the time of his termination not the
amounts being claimed in the case at bar.
We believe that this issue was extensively discussed by both the Labor Arbiter and the CA and we find no reversible error on
the disposition of this issue, viz.:
A review of the records show that the alluded quitclaim, which was undated and not even notarized although signed by the
petitioner, was for the amount of P59,630.05. The said quitclaim was attached as Annex 26 in the [petitioners] Position Paper
filed before the Labor Arbiter. As fully explained by [respondent] in his Reply filed with the Labor Arbiter, the amount stated
therein was his last pay due to him when he was terminated, not the amount representing his legitimate claims in this labor suit
x x x. To bolster his defense, [respondent] submitted the pay form issued to him by the [petitioner corporation], showing his net
pay at P59,630.05 exactly the amount stated in the quitclaim x x x. Then, too, as stated on the quitclaim itself, the intention of
the waiver executed by the [respondent] was to release [petitioner corporation] from any liability only on the said amount
representing [respondents] "full and final payment of [his] last salary/separation pay" x x x. It did not in any way waive
[respondents] right to pursue his legitimate claims regarding his dismissal in a labor suit. Thus, We gave no credence to
[petitioners] private defense that alleged quitclaim rendered the instant petition moot.55
Finally, the petition avers that petitioner Bautista should not be held personally liable for respondents dismissal as he acted in
good faith and within the scope of his official functions as then president of petitioner corporation. We agree with petitioners.
Both decisions of the Labor Arbiter and the CA did not discuss the basis of the personal liability of petitioner Bautista, and yet
the dispositive portion of the decision of the Labor Arbiter - which was affirmed by the appellate court - held him jointly and
severally liable with petitioner corporation, viz.:
WHEREFORE, premises considered, this Office finds respondents GUILTY of illegal dismissal, and hereby ordered to jointly
and severally reinstate complainant back to his former position without loss on seniority rights and benefits and to pay him his
backwages and other benefits from the date he was illegally dismissed up to the time he is actually reinstated, partially
computed as of this date in the amount of P258,797.50 (P39,815.00 x 6.5 mos.) plus his 13th and 14th month pay in the
amount of P43,132.91 or in the total amount of P301,930.41. Respondents are also ordered to pay complainant the amount
of P3,000,000.00 as and by way of moral and exemplary damages, and to pay complainant the amount equivalent to ten
percent (10%) of the total awards as and by way of attorney's fees.
SO ORDERED.56 (Emphasis supplied.)
A corporation has a personality separate and distinct from its officers and board of directors who may only be held personally
liable for damages if it is proven that they acted with malice or bad faith in the dismissal of an employee.57 Absent any
evidence on record that petitioner Bautista acted maliciously or in bad faith in effecting the termination of respondent, plus the
apparent lack of allegation in the pleadings of respondent that petitioner Bautista acted in such manner, the doctrine of
corporate fiction dictates that only petitioner corporation should be held liable for the illegal dismissal of respondent.
WHEREFORE, the petition for review on certiorari is DENIED. The assailed Decision dated June 26, 2007 and the Resolution
dated January 11, 2008 in CA-G.R. SP No. 96153 are AFFIRMED with the MODIFICATION that only petitioner corporation is
found GUILTY of the illegal dismissal of respondent Joselito A. Caro. Petitioner Edgardo A. Bautista is not held personally
liable as then President of petitioner corporation at the time of the illegal dismissal.
No pronouncement as to costs.
SO ORDERED.

G.R. No. 182255 June 15, 2015

445
PETRON CORPORATION, Petitioner,
vs.
ARMZ CABERTE, ANTONIO CABERTE, JR., MICHAEL SERVICIO,* ARIEL DEVELOS, ADOLFO GESTUPA, ARCHIE
PONTERAS, ARNOLD BLANCO, DANTE MARIANO,* VIRGILIO GALOROSA, and CAMILO TE,*Respondents.
DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari1 assails the November 14, 2007 Decision2 of the Court of Appeals (CA) in CA-G.R SP
No. 82356 which reversed the May 14, 2003 Decision 3 and November 27, 2003 Resolution4 of the National Labor Relations
Commission (NLRC) in NLRC Case No. V-000329-2002. The NLRC affirmed the March 7, 2002 Decision5 of the Labor Arbiter
dismissing the Complaints for illegal dismissal and payment of monetary claims filed by respondents Armz Caberte (Caberte),
Antonio Caberte, Jr. (Caberte Jr.), Michael Servicio (Servicio), Ariel Develos (Develos), Adolfo Gestupa (Gestupa), Archie
Ponteras (Ponteras), Arnold Blanco (Blanco), Dante Mariano (Mariano), Virgilio Galorosa (Galorosa) and Camilo Te (Te)
against petitioner Petron Corporation (Petron), ABC Contracting Services (ABC), and its owner Antonio B. Caberte, Sr.
(Caberte Sr.). Likewise assailed is the CA Resolution6 dated March 4, 2008 which denied Petrons Motion for Reconsideration.
Factual Antecedents
Petron is a domestic corporation engaged in the manufacture and distribution to the general public of various petroleum
products. In pursuance of its business, Petron owns and operates several bulk plants in the country for receiving, storing and
distributing its products.
On various dates from 1979 to 1998, respondents were hired to work at Petrons Bacolod Bulk Plant in San Patricio, Bacolod
City, Negros Occidental as LPG/Gasul fillers, maintenance crew, warehousemen, utility workers and tanker receiving crew.
For the periods from March 1, 1996 to February 28, 1999 and November 1, 1996 to June 30, 1999, Petron and ABC, a labor
contracting business owned and operated by Caberte Sr., entered into a Contract for Services 7 and a Contract for LPG
Assistance Services.8 Under both service contracts, ABC undertook to provide utility and maintenance services to Petron in its
Bacolod Bulk Plant.
Proceedings before the Labor Arbiter
On July 2, 1999, respondents Caberte,Caberte Jr., Servicio, Develos, Gestupa, Ponteras, Blanco and Mariano filed before the
Labor Arbiter a Complaint9 for illegal dismissal, underpayment of wages and non-payment of allowances, 13th month pay,
overtime pay, holiday pay, service incentive leave pay, moral and exemplary damages and attorneys fees against Petron,
ABC and Caberte Sr., docketed as NLRC RAB VI Case No. 06-07-10588-99. Subsequently, respondents Galorosa and Te
separately filed similar Complaints10 docketed as NLRC RAB VI Case No. 06-07-10675-99 and RAB Case No. 06-09-10785-
99, respectively. The three Complaints were consolidated in an Order 11 dated October 25, 1999 of the Labor Arbiter.
Respondents averred that even before Petron engaged ABC as contractor in 1996, most of them had already been working for
Petron for years. However, every time Petron engages a new contractor, it would designate such new contractor as their
employer. Despite such arrangement, Petron exercised control and supervision over their work, the performance of which is
necessary and desirable in its usual trade and business. Respondents added that ABC is a mere labor-only contractor which
had no substantial capital and investment, and had no control over the manner and method on how they accomplished their
work. Thus, Petron is their true employer. On July 1, 1999, however, Petron no longer allowed them to enter and work in the
premises of its Bacolod Bulk Plant. Hence, the complaints for illegal dismissal.
On the other hand, Petron asserted that ABC is an independent contractor which supplied the needed manpower for the
maintenance of its bulk handling premises and offices, as well as for tanker assistance in the receiving and re-filling of its LPG
products; that among the workers supplied by ABC were respondents, except Caberte Jr., who does not appear to be one of
those assigned by ABC to work for it; that it has no direct control and supervision over respondents who were tasked to
perform work required by the service contracts it entered into with ABC; and, that it cannot allow the continuous employment of
respondents beyond the expiration of the contracts with ABC. To prove the legitimacy and capacity of ABC as an independent
contractor, Petron submitted the following documents: (1) Contractors Pre-Qualification Statement;12 (2) Petrons Conflict of
Interest Policy signed by Caberte Sr., as proprietor of ABC;13 (3) ABCs Certificate of Registration issued by the Bureau of
Internal Revenue (BIR);14 (4) Value-Added Tax Return for the year 1995;15 (5) BIR Confirmation Receipt;16 (6) Caberte Sr.s
Tax Identification Number (TIN) issued by the BIR;17 (7) Caberte Sr.s Individual Income Tax Return for the years 199318 and
1994;19 (8) ABCs Audited Financial Statements for the years 1992,20 199321 and 1994;22 (9) ABCs Mayors Permit for the year
1995;23 and, (10) ABCs Certificate of Registration of Business Name issued by the Department of Trade and Industry
(DTI).24 In addition, it averred that ABC, as a contractor, had duly posted a performance bond25 and took out insurance
policies26 against liabilities. Petron likewise presented affidavits 27 of two Petron employees stating that respondents do not
perform activities related to Petrons business operation but only tasks which are intermittent and which can be contracted out.
Also submitted were affidavits28 of three former employees of ABC attesting to the fact that during their stint in Petron, they
used materials such as floor polisher, floor wax, broom, dustpan, cleaning rags and other equipment owned by ABC to
accomplish their tasks and that they worked under the supervision of Caberte Sr., through the latters designated overall
supervisor, respondent Caberte. Petron further revealed that ABC/Caberte Sr. has the power to hire and fire respondents and
was the one paying their wages.
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In a Decision29 dated March 7, 2002,Executive Labor Arbiter Danilo C. Acosta (LA Acosta) held that ABC is an independent
contractor that has substantial capital and that respondents were its employees. He likewise ruled that ABCs cessation of
operation is a force majeure that justifies respondents dismissal. Nonetheless, LA Acosta awarded respondents separation
pay based on the applicable minimum wage rate at the time of expiration of the contracts of service. He, however, denied the
claims for overtime pay and night shift differential pay for lack of merit. The dispositive portion of the Decision reads:
Conformably with the foregoing, respondent ABC is hereby ORDERED TO PAY EACH COMPLAINANT, namely,
complainants Antonio Caberte, Jr., Armz M. Caberte, Michael Servicio, Ariel Develos, Adolfo Gestupa, Archie Ponteras,
Arnold Blanco, Dante Mirano, Virgilio Galorosa and Camilo Te, separation pay of one month for every year of service.
All other claims and the claims against respondent PETRON are hereby ORDERED DISMISSED for lack of merit.
SO ORDERED.30
Proceedings before the National Labor Relations Commission
Respondents appealed to the NLRC where they insisted that they are regular employees of Petron since ABC is a labor-only
contractor.
In a Decision31 dated May 14, 2003,the NLRC affirmed the ruling of the Labor Arbiter after it found that ABC is not a mere
labor contractor but a legitimate independent contractor. In so ruling, the NLRC took into account the following: (1)
ABC/Caberte Sr. has the power of control over respondents as Caberte Sr. was the one controlling and supervising
respondents in their work. While Petron intervened at times, the same was limited to safety precautions due to the hazardous
nature of the products the workers were dealing with; (2) ABC possessed sufficient capital and equipment per the various
documents that Petron submitted showing the formers financial capability to maintain its status as an accredited contractor of
the latter. In fact, Caberte Sr. was even able to establish ABCs Bacolod City Office; and, (3) ABC/Caberte Sr. has the power
to hire and dismiss respondents. Hence, the dispositive portion of the Decision, viz: WHEREFORE, premises considered, this
appeal is DISMISSED and the decision of the Executive Labor Arbiter is AFFIRMED.
SO ORDERED.32
Respondents filed a Motion for Reconsideration which was, however, denied in the NLRC Resolution 33 dated November 27,
2003.
Proceedings before the Court of Appeals
Aggrieved, respondents filed a Petition for Certiorari34 before the CA ascribing upon the NLRC grave abuse of discretion
amounting to lack or in excess of jurisdiction in holding that they are not employees of Petron.
The CA, in a Decision35 dated November 14,2007, found merit in respondents Petition. It ruled that ABC is engaged in labor-
only contracting because: first, it did not have substantial capital or investment in the form of tools, equipment, implements,
machineries and work premises, actually and directly used in the performance or completion of the job it contracted out from
Petron; second, the work assigned to respondents were directly related to Petrons business; and, third, the nature of Petrons
business requires it to exercise control over the performance of respondents work. Consequently, the CA declared
respondents as Petrons regular employees. And since Petron did not comply with the requirements under the Labor Code
when it terminated their employment, respondents were illegally dismissed and therefore entitled to reinstatement without loss
of seniority rights and other privileges, with the alternative relief of separation pay in lieu of reinstatement, and to full
backwages, inclusive of allowances, and to other benefits or their monetary equivalent computed from the time compensation
was withheld up to the time of actual reinstatement. The CA, however, denied respondents claims for moral and exemplary
damages in the absence of bad faith in Petrons act of dismissing them but awarded respondents 10% attorneys fees for
having to litigate to protect their interests. The dispositive portion of the Decision reads:
WHEREFORE, in view of the foregoing, the decision of the National Labor Relations Commission dated May 14, 2003, in
NLRC Case No. V-000329-2002, affirming the March 7, 2002 Decision of Executive Labor Arbiter Danilo C. Acosta of the Sub-
Regional Arbitration Branch VI, Bacolod City, is hereby REVERSED.
Respondent Petron Corporation is ordered to reinstate Armz Caberte, Antonio Caberte, Jr., Michael Servicio, Ariel Develos,
Adolfo Gestupa, Archie Ponteras, Arnold Blanco, Dante Mirano, Virgilio Galorosa and Camilo Te to their former positions with
the same rights and benefits and the same salary rates as its regular employees.
Respondent Petron Corporation is likewise ordered to pay petitioners attorneys fees equivalent to ten percent (10%) of the
monetary award.
All other claims are dismissed for lack of merit.
Costs against private respondent Petron.
SO ORDERED.36
Petrons Motion for Reconsideration37 was denied by the CA in its Resolution38 dated March 4, 2008. Hence, this present
recourse.
Issues
Petron presents the following grounds for review:
X X X THE COURT OF APPEALS SERIOUSLY ERRED AND DECIDED A QUESTION OF SUBSTANCE IN A MANNER NOT
IN ACCORD WITH LAW AND WITH APPLICABLE JURISPRUDENCE IN FINDING THAT ABC CONTRACTING

447
SERVICESIS A MERE LABOR-ONLY CONTRACTOR AND IN HOLDING THAT RESPONDENTS ARE THUS REGULAR
EMPLOYEES OF THE COMPANY CONSIDERING THAT:
A. THERE IS A LEGITIMATE SERVICE CONTRACTING AGREEMENT BETWEEN THE COMPANY AND ABC
CONTRACTING SERVICES;
B. THE CONTRACTED SERVICES THAT RESPONDENTS PERFORMED ARE NOT DIRECTLY RELATED AND
NECESSARY OR DESIRABLE TO THE COMPANYS PRINCIPAL BUSINESS;
C. ABC CONTRACTING SERVICES CARRIES ON AN INDEPENDENT BUSINESS AND POSSESSES SUBSTANTIAL
CAPITAL AND INVESTMENT; AND
D. RESPONDENTS ARE EMPLOYEES OF ABC CONTRACTING SERVICES.39
Petron asserts that ABC, as an independent contractor, rendered janitorial, utility and LPG assistance services by virtue of
legitimate contracts entered into by and between them. As such, the services rendered by respondents were purely
maintenance and utility works which are not directly related, necessary and desirable to Petrons main business.
Petron likewise insists that ABC is not a labor-only contractor as it carries on an independent business and uses its own
equipment, tools, materials and supplies in the performance of its contracted services. Further, it asserts that ABC wielded and
exercised the power of selection or engagement, payment of wages, discipline or dismissal, and of control over respondents.
Our Ruling
The Petition has no merit.
Labor-only contracting and permissible
job contracting, defined; a contractor is
presumed by law to be a labor-only
contractor; anyone claiming the
supposed status of an independent
contractor bears the burden of proving
the same.
As defined under Article 106 of the Labor Code, labor-only contracting, a prohibited act, is an arrangement where the
contractor, who does not have substantial capital or investment in the form of tools, equipment, machineries, work premises,
among others, supplies workers to an employer and the workers recruited are performing activities which are directly related to
the principal business of such employer.
Permissible or legitimate job contracting or subcontracting, on the other hand, "refers to an arrangement whereby a principal
agrees to put out or farm out with the contractor or subcontractor the performance or completion of a specific job, work, or
service within a definite or predetermined period, regardless of whether such job, work, or service is to be performed or
completed within or outside the premises of the principal. A person is considered engaged in legitimate job contracting or
subcontracting if the following conditions concur: (a) the contractor carries on a distinct and independent business and
partakes the contract work on his account under his own responsibility according to his own manner and method, free from the
control and direction of his employer or principal in all matters connected with the performance of his work except as to the
results thereof; (b) the contractor has substantial capital or investment; and (c) the agreement between the principal and the
contractor or subcontractor assures the contractual employees entitlement to all labor and occupational safety and health
standards, free exercise of the right to self-organization, security of tenure, and social welfare benefits." 40
To determine whether a contractor is engaged in labor-only contracting or permissible job contracting, "the totality of the facts
and the surrounding circumstances of the case are to be considered." 41
Petron contends that the CA erred in ruling that ABC is a labor-only contractor since respondents failed to prove that ABC is
not an independent contractor. The contention, however, is incorrect. The law presumes a contractor to be a labor-only
contractor and the employees are not expected to prove the negative fact that the contractor is a labor-only contractor.42 Thus,
it is not respondents but Petron which bears the burden of establishing that ABC is not a labor-only contractor but a legitimate
independent contractor. As held in Alilin v. Petron Corporation, 43"where the principal is the one claiming that the contractor is a
legitimate contractor, the burden of proving the supposed status of the contractor rests on the principal."
Petron failed to overcome the
presumption that ABC is a labor-only
contractor.
Foremost, Petron banks on the contracts of services it entered into with ABC. It contends that the said contracts were
legitimate business transactions and were not only for the purpose of ABC providing manpower or labor-only to Petron, but
rather for specific services pertaining to janitorial, utility and LPG assistance.
Suffice it to state, however, that Petron cannot place reliance on the contracts it entered into with ABC since these are not
determinative of the true nature of the parties relationship. As held in Babas v. Lorenzo Shipping Corporation,44 the character
of the business, whether as labor-only contractor or as a job contractor, should be determined by the criteria set by statute and
the parties cannot dictate by the mere expedience of a unilateral declaration in a contract the character of their business.
Next, Petron endeavours to prove that ABC is a legitimate independent contractor.

448
To restate, a contractor is deemed to be a labor-only contractor if the following elements are present: (i) the contractor does
not have substantial capital or investment to actually perform the job, work or service under its own account and responsibility;
and (ii) the employees recruited, supplied or placed by such contractor are performing activities which are directly related to
the main business of the principal.45 Conversely, in proving that ABC is not a labor-only contractor, it is incumbent upon Petron
to show that ABC has substantial capital or investment and that respondents were performing activities which were not directly
related to Petrons principal business.
To show that ABC has substantial capital or investment, Petron submitted, among others, ABCs BIR Certificate of
Registration, VAT Return, BIR Confirmation Receipt, TIN, Individual Income Tax Return, Mayors Permit and DTI Certificate of
Registration. However, the Court observes that these documents are not conclusive evidence of ABCs financial capability. At
most, they merely show that ABC is engaged in business and licensed by the appropriate government agencies.
As for the financial statements presented, it appears that only the audited financial statements of ABC for the years 1992,
1993 and 1994 were submitted. As aptly observed by the CA, these documents cannot be given much credence considering
that the service contracts between Petron and ABC commenced in 1996 and ended in 1999. However, no audited financial
statements for the years material to this case (1996, 1997, 1998 and 1999) were submitted. Also, as per record, ABC was
obligated to submit to Petron at least once every two years its latest audited financial statements, among others, as a
requirement for the retention of its status as an accredited contractor of Petron. 46 If it is true that ABC continued to possess its
financial qualification after 1994, Petron should have presented ABCs financial statements for the said years which are
presumed to be in Petrons possession considering that they are part of the requirements that it itself set for its accredited
contractors.
Neither does the performance bond taken out by ABC serve as significant evidence of its substantial capital. As aptly
explained by the CA:
The performance bond posted by ABC Contracting Services likewise fails to convince us that the former has substantial capital
or investment inasmuch as it was not shown that the performance bond in the amount of P596,799.51 was enough to cover
not only payrolls, rentals and equipment but also possible damages to the equipment and to third parties and other contingent
liabilities. Moreover, this Court takes judicial notice that bonds of this nature are issued upon payment of a small percentage
as premium without necessarily requiring any guarantee.
If at all, the bond was a convenient smoke screen to disguise the real nature of ABCs employment as an agent of Petron.47
Anent substantial investment in the form of equipment, tools, implements, machineries and work premises, Petron likewise
failed to show that ABC possessed the same. Instead, what is evident in the records was that ABC had been renting a forklift
from Petron in order to carry out the job of respondents.48 This only shows that ABC does not own basic equipment needed in
the performance of respondents job. Similarly and again as correctly held by the CA, the fact that ABC leased a property for
the establishment of its Bacolod office is immaterial since it was not shown that it was used in the performance or completion
of the job contracted out. "Substantial capital or investment," under Section 5, Rule VIII-A, Book III of the Omnibus Rules
Implementing the Labor Code (Implementing Rules), as amended by Department Order No. 18-02,49 does not include those
which are not actually and directly used in the performance of the job contracted out.
Going now to the activities performed by respondents, Petron avers that the same were not necessary or desirable to its
principal business. In fact, the service contracts it entered into with ABC clearly referred to respondents functions as
maintenance and utility works only which are remote to its principal business of manufacturing and distributing petroleum
products.
The Court finds otherwise. Gestupa, Ponteras, Develos, Blanco and Mariano were LPG fillers and maintenance crew; Caberte
was an LPG operator supervisor; Te was a warehouseman and utility worker; and Servicio and Galorosa were tanker receiving
crew and utility workers. Undoubtedly, the work they rendered were directly related to Petrons main business, vital as they are
in the manufacture and distribution of petroleum products. Besides, some of the respondents were already working for Petron
even before it engaged ABC as a contractor in 1996. Albeit it was made to appear that they were under the different
contractors that Petron engaged over the years, respondents have been regularly performing the same tasks within the
premises of Petron. This "the repeated and continuing need for the performance of the job is sufficient evidence of the
necessity, if not indispensability of the activity to the business."50 What further militates against Petrons claim that ABC, as an
alleged independent contractor, is the true employer of respondents, is the fact that Petron has the power of control over
respondents in the performance of their work. It bears stressing that the power of control merely calls for the existence of the
right to control and not necessarily the exercise thereof. 51 Here, Petron admitted in its Position Paper that the supervision of a
Petron employee is required over LPG and tanker assistance jobs for inventory control and safety checking purposes. It
explained that due to the hazardous nature of its products, constant checking of the procedures in their handling is essential
considering the high possibility of fatal accidents. It also admitted that it was the one supplying the needed materials and
equipment in discharging these functions to better insure the integrity, quality and safety of its products.
From the foregoing, it is clear that Petron failed to discharge its burden of proving that ABC is not a labor-only contractor.
Consequently, and as warranted by the facts, the Court declares ABC as a mere labor-only contractor. "A finding that a
contractor is a labor-only contractor is equivalent to declaring that there is an employer-employee relationship between the
principal and the employees of the supposed contractor, and the labor-only contractor is considered as a mere agent of the
449
principal, the real employer."52 Accordingly in this case, Petron is declared to be the true employer of respondents who are
considered regular employees in view of the fact that they have been regularly performing activities which are necessary and
desirable to the usual business of Petron for a number of years.
Respondents, except Antonio Caberte, Jr., were illegally dismissed.
With respect to respondents dismissal, Petron claimed that the same sprang from the termination or conclusion of the service
contracts it entered into with ABC. As earlier held, respondents are considered regular employees. In cases of regular
employment, an employer may only terminate the services of an employee for just or authorized causes under the law. 53 As
the reason given by Petron for dismissing respondents does not constitute a just or authorized cause for termination, 54 the
latter are declared to have been illegally dismissed. Respondents are thus entitled to all the remedies of an illegally dismissed
employee, i.e., backwages and reinstatement, or if no longer feasible, separation pay. The CA is thus correct in ruling that
respondents are entitled to reinstatement without loss of seniority rights and other privileges. However, if reinstatement is no
longer feasible, respondents are entitled to receive separation pay equivalent to one month salary for every year of service. In
addition, respondents are entitled to full backwages from the time they were not allowed to work on July 1, 1999 up to actual
reinstatement or finality of this Decision as the case may be.
An exception must be taken, however, with respect to Caberte Jr. From the beginning, Petron disputes the fact he ever worked
for Petron. Therefore, before his case against Petron can prosper, Caberte Jr. must first establish that an employer-employee
relationship existed between them since it is basic that the issue of illegal dismissal is premised on the existence of such
relationship between the parties.55 Unfortunately, nowhere in the records does it show that he indeed worked for Petron.
Consequently, his complaint should be dismissed. WHEREFORE, the petition is DENIED. The November 14, 2007 Decision
and the March 4, 2008 Resolution of the Court of Appeals in CA-G.R. SP No. 82356 are MODIFIED in that: (1) the Complaint
of respondent Antonio Caberte, Jr. against petitioner Petron Corporation is dismissed; and (2) petitioner Petron Corporation is
ordered to reinstate all of the respondents, except for Antonio Caberte, Jr., to their former positions with the same rights and
benefits and the same salary rates as its regular employees, or if reinstatement is no longer feasible, to separation pay
equivalent to one month salary for every year of service and to pay them their full backwages from July 1, 1999 until actual
reinstatement or upon finality of this Decision as the case may be, as well as attorney's fees equivalent to 10% of the monetary
award, with costs against Petron Corporation.
SO ORDERED.

G.R. No. 201494 July 29, 2015

MARITES R. CUSAP, Petitioner,
vs.
ADIDAS PHILIPPINES, INC., (ADIDAS), PROMOTION RESOURCES & INTER-MARKETING EXPONENTS, INC. (PRIME)
and JC ATHLETES, INC. (JCA), Respondents.
DECISION
BRION, J.:
We resolve petitioner Marites R. Cusap's appeal1 from the September 21, 2011 decision2 and February 20, 2012 resolution3 of
the Court of Appeals in CA-G.R. SP No. 104725.
The Antecedents
On January 21, 2003, the petitioner and 27 other employees (complainants) filed a complaint for illegal dismissal4against the
respondents Adidas Philippines Inc. (Adidas) and Promotion Resources Inter-Marketing Exponents, Inc. (PRIME). The
complainants later amended the complaint to include JC Athletes, Inc. (JCA), as a respondent. 5They prayed for reinstatement
with back wages, separation pay (should reinstatement be no longer feasible), 13th month pay, service incentive leave pay,
and damages.
Through their "Magkasanib na Sinumpaang Salaysay," 6 the complainants alleged that they were regular employees of Adidas
after having worked as promo girls and stockmen at the company's various rented outlets for years, ranging from one year to
seven years; the earliest employed (June 1, 1995) was Nova Toque while the latest was Aquilino Banaag (September 21,
2000). The petitioner was hired on October 28, 1995. 7
The record shows that Adidas is engaged in the manufacture and marketing of different lines of shoes and other sporting
goods and apparel in the Philippines.8 After its contract with its former distributor, World Sports, Inc. (WOSJ) allegedly expired,
it contracted9 JCA to be its exclusive distributor nationwide for one year or from January 1, 2002 to December 31, 2002. In
turn, JCA entered into a Promotional Contract10 with PRIME to meet the promotional requirements in the distribution of Adidas
products. PRIME supposedly assigned the complainants to JCA for the purpose.
The complainants claimed that they were dismissed from employment on December 9, 2002, when the service contract
between PRIME and JCA was terminated. This notwithstanding, they argued that Adidas was their real employer, not PRIME
which, they believed, was merely a recruitment agency supplying Adidas with manpower. PRIME was being used, they further
claimed, to conceal the actual employment relationship between them and Adidas.
They pointed out that for the years that they were employed, they worked for Adidas, under the supervision and control of
Adidas and JCA personnel. They stressed that their work was related to and in pursuit of Adidas' principal business activity
450
(the marketing of its products), thereby making them regular employees of the company. This was their reason for demanding
their regularization by Adidas.
Further, the complainants maintained that JCA was a mere alter ego of Adidas and was being used to further muddle the
employment relationship between them and Adidas. JCA's actual role as a dummy (together with PRIME) for Adidas, the
complainants explained, was evidenced by the fact that JCA and Adidas occupied the same office. JCA took the place of
WOSI as distributor of Adidas products.
Elaborating on their "muddled" employment status in relation with Adidas, the complainants bewailed that JCA was
erroneously identified as "distributor" of Adidas products as no evidence showed that JCA purchased the Adidas products they
were selling.11 Under their supposed Distribution Agreement, the "Distributor shall purchase the Products only from Adidas or
any other sources expressly designated by Adidas and sell the Products in its own name and for its own account x x x. "12
The complainants asserted that the products they were selling at various outlets remained the property and under the control
of Adidas - it was Adidas that provided the warehouse where the products were stored, that leased the outlets from
department stores, and that provided regular training to them. 13 Also, the proceeds of the sales were directly deposited to the
bank account of Adidas. Moreover, their salaries and other monetary benefits supposedly paid by PRIME were charged to the
account of Adidas, as indicated in their payslips.14 They argued that if JCA purchased the products being sold and were
already its property, there was no point to still charge complainants' wages and benefits to the Adidas' account.
These circumstances, complainants stressed, confirmed their position that JCA and PRIME were only intermediaries of Adidas
and were used to conceal Adidas' identity as their real employer. To substantiate their assertion that PRIME was just an
intermediary of Adidas, they submitted documentary proof that it was not even a registered corporation, labor recruiter, or
agency when it supposedly entered into a contract with JCA; neither with the Securities and Exchange Commission 15 nor with
the Department of Trade and Industry.16 It was registered as a "job contractor/subcontractor" only on May 20, 2002.17 They
thus maintained that PRIME was just a labor-only contractor at the time it claimed it had employed them for its supposed
undertaking with JCA.
In defense, Adidas argued that in 2002, it amended its Articles of Incorporation 18 to enable it to engage in the retail business
without the need to contract the services of distributors such as JCA, following the approval by the Board of Investments of the
application of its mother company, Adidas Solomon AG, to operate as a foreign retailer in the country. As a consequence, it no
longer renewed its Distribution Agreement with JCA when it expired on December 31, 2002.
Necessarily, it maintained, the Promotion Contract between JCA and PRIME was also terminated, resulting in the
complainants' dismissal. However, for purposes of proper inventory, accounting and turnover of products, it agreed with JCA
for a hold-over period of three months ending March 31, 2003.
Also, Adidas turned down the complainants' demand for regularization as they were employees of PRIME. It claimed it was
PRIME who exercised control over their work; at most, the supervision it exercised over the complainants was only to provide
them guidelines in aid of their marketing work. It added that neither could it satisfy their money claims because they were
legally dismissed when their contracts with PRIME expired.
For its part, JCA prayed for the dismissal of the complaint as far as it was concerned in view of what it claimed - its valid job
contract with PRIME, the complainants' employer. It averred that it was PRIME who exercised the power to select, engage,
and dismiss the complainants, and who assumed the obligation to pay their wages. To bolster its position, JCA presented
quitclaim and release papers executed by some employees in favor of PRIME. 19
JCA added that whatever liability it had with the complainants was limited to satisfying their unpaid wages to the extent of the
work performed under its Promotion Contract with PRIME. However, PRIME's payment of its monetary obligations to the
complainants extinguished its liability towards them.
As its co-respondents did, PRIME denied liability, contending that it hired the complainants as contractual employees for its
project with JCA to promote Adidas products. It maintained that their employment was terminated when its contract with JCA
expired and was not renewed. Thus, the petitioner and the other complainants were not illegally dismissed and were not
therefore entitled to reinstatement and back wages. On the issue of its legal personality as an independent contractor, it
submitted certificates of registration from the DTI,20 DOLE,21 and SEC22 to establish that it had been in operation earlier than
May 20, 2002.
The Rulings on Compulsory Arbitration
In a decision23 dated February 23, 2004, Labor Arbiter (LA) Elias H. Salinas dismissed the complaint for lack of merit, holding
that PRIME was the complainants' employer as it was PRIME who hired them to work under its Promotions Contract with JCA.
LA Salinas found the complainants' dismissal valid in view of the termination and nonrenewal of the contract.
LA Salinas denied the complainants' money claims, finding that PRIME had shown that it paid their 13th month pay and
service incentive leave pay. However, for reasons of equity and humanitarian considerations, LA Salinas awarded the
petitioner and the complainants financial assistance of one-half month's salary for every year of service.
The petitioner and 15 of the other complainants appealed. The 15 however moved to withdraw their appeal, which the National
Labor Relations Commission (NLRC) granted in its decision24 of January 23, 2008, leaving only the petitioner to pursue the
case. Eventually, NLRC denied the appeal. It also denied the petitioner's motion for reconsideration, prompting her to seek

451
recourse from the CA through a petition for certiorari. She charged the NLRC with grave abuse of discretion in rejecting her
appeal and motion for reconsideration; as it was, she lamented, contrary to law and jurisprudence.
The CA Decision
Before the CA, the petitioner reiterated her position in compulsory arbitration that Adidas was her employer, not JCA or
PRIME, since the two entities were mere dummies/intermediaries or were labor-only contractors of Adidas. She insisted that
JCA and PRIME carried out - under their respective contracts - Adidas' merchandising activities using Adidas' premises and
equipment with PRIME' s purported employees working under the supervision and control of Adidas' personnel.
The CA 10th Division denied the petition in its September 21, 201125 decision and affirmed the assailed NLRC rulings as they
were not rendered with grave abuse of discretion. It held that the rulings were supported by evidence establishing PRIME to
be a "legitimate job contractor" as it possessed substantial capital to finance its promotions undertaking with JCA. The
evidence, the CA explained, consisted of remittances to Philhealth, SSS and Pag-ibig26 which showed that PRIME fulfilled its
obligations toward its employees under the government's welfare programs.
Applying the four-fold employer-employee relationship test,27 the CA found PRIME to be the complainants' and the petitioner's
employer as it was PRIME which (1) hired the complainants;28 (2) paid their wages;29 (3) dismissed them upon the expiration
of the contract for which they were hired; and (4) exercised control over them with respect to the conduct of the work to be
performed.30
Consequently, the CA brushed aside the random certificates of attendance in Adidas seminars 31 of some of the complainants
to prove that Adidas was their employer, agreeing with NLRC finding that the "certificates only establish the fact that
complainants attended the seminars for product knowledge, service quality, and retail service." 32
The petitioner moved for reconsideration of the CA decision, to no avail, as the CA denied the motion in its February 20, 2012
resolution.33
The Petition
The petitioner now asks this Court to reverse the CA rulings, contending that the appeals court seriously erred and gravely
abused its discretion when it held that she was an employee of PRIME, not of Adidas, and was validly dismissed, contrary to
law and applicable jurisprudence. Before the Court, the petitioner reiterates the arguments she presented to the CA,
particularly the following factual narration:
1. She applied at Adidas in its former address at Estrata 200, Emerald Avenue, Ortigas Center City. After the
interviews made by Ms. Cornelia Indon (Head Concession, World of Sports Inc.) and Mr. Enrique Victoria (Adidas
Sales Manager), they ordered her to proceed to the office of PRIME and from there she was given a letter of
introduction ("intro letter") addressed to the outlet where she was assigned.
2. She was assigned to different Adidas outlets and she, together with her co-employees, were supervised by Adidas
managers and supervisors Cornelia Indon, Sonny Niebres (Managing Director) and Philip Go (President). It was not
PRIME who supervised them; neither was it JCA.
3. The sales in the outlets were deposited directly to the bank account of Adidas and not to JCA or PRIME bank
accounts.
4. The products being sold and the tools she used in the performance of her duty were owned by Adidas. Adidas was
also the one that paid the rents in the stores where it has concessions.
5. She continued to work in different Adidas outlets for more than seven years.
The petitioner submits that Adidas, JCA and PRIME failed to refute the above narration or to present any evidence to the
contrary. Citing Lakas sa Industriya ng Kapatirang Haligi ng Alyansa-Pinagbuklod ng Manggawang Promo ng Burlingame v.
Burlingame Corporation,34 she argues that as promo girl, her work is directly related to Adidas' principal business or
operations, which makes her a regular employee of the company.
On the other hand, she points out, JCA and PRIME did not carry on an independent business or undertook the performance of
their service contracts according to their own manner and methods, free from the control and supervision of the principal
Adidas. The two entities, she insists, were mere labor-only contractors.
It is thus clear, the petitioner submits, that an employer-employee relationship existed between her and Adidas. Accordingly,
she prays that: (1) she be declared a regular employee of Adidas; (2) Adidas be ordered (a) to reinstate her with full back
wages or to pay her back wages and separation pay if reinstatement is no longer feasible; (b) to grant her moral and
exemplary damages, plus attorney's fees; and (3) JCA and PRIME be declared jointly and solidarily liable with Adidas for all
her other money claims.
The Case for the Respondents
In its Comment35 filed on June 7, 2012, Adidas asks for the dismissal of the petition, arguing principally that the petitioner
failed to present any cogent reason to reverse the CA factual conclusions upholding the labor tribunals' ruling that the
petitioner was an employee of PRIME and was not illegally dismissed.
To support its position, Adidas submits that the arguments relied upon by the petitioner are substantially identical with those
raised in her certiorari petition with the CA, which do not merit further consideration as they had already been correctly passed
upon by the appellate court. Adidas bewails the petitioner's repeated reference to her regular employment with it and not with
PRIME, "adducing in evidence only her self-serving Salaysay which simply stated her baseless claims."36 On the other hand, it
452
was able to present proof, together with JCA and PRIME, showing that PRIME was the petitioner's employer, it being, like
JCA, an independent and distinct business entity.
The respondents JCA and PRIME opted not to comment on the petition, despite being required by the Court to do so. 37
The Court's Ruling
We find merit in the petition based on the evidence on record.
The evidence relied upon by LA Salinas, the NLRC, and the CA was insufficient to support their conclusion that the petitioner
was an employee of PRIME. On the contrary, the evidence points to Adidas as the petitioner's and the complainants' real
employer.
PRIME is a labor-only contractor;
JCA an agent/intermediary of Adidas
One of the criteria the CA cited as a basis of its conclusion that PRIME was a legitimate job contractor was its possession of
"substantial capital to finance its undertakings,"38 yet it was silent on what these undertakings were. It merely said: "We
reached this conclusion based on records which showed PRIME has fulfilled its obligations towards its employees as regards
remittances to Philhealth, the SSS and Pag-ibig."39 The CA conclusion, to our mind, fell short of establishing that PRIME
satisfied the substantial-capital requirement for legitimate job contractors under the law and the rules.
Article 106 of the Labor Code provides that "There is 'labor-only' contracting where the person supplying workers to an
employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such person are performing activities which are directly related to the principal
business of the employer. In such cases, the person or intermediary shall be considered merely an agent of the employer who
shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him. (emphasis
supplied)
Sec. 5, Department Order No. 18-02, s. of 2002, implementing Articles 106 to 109 of the Labor Code, prohibits labor-only
contracting and defines it as "an arrangement where the contractor or sub-contractor merely recruits, supplies or places
workers to perform a job, work or service for a principal, and any of the following is present: (i) The contractor or subcontractor
does not have substantial capital or investment which relates to the job, work or service to be performed and the workers
recruited, supplied or placed by such contractor or sub-contractor are performing activities which are directly related to the
principal business of the employer; or (ii) the contractor does not exercise the right to control over the performance of the work
of the contractual employee. x x x 'substantial capital or investment' refers to capital stocks and subscribed capitalization in the
case of corporations, tools, equipment, implements, machineries and work premises, actually and directly used by the
contractor or subcontractor in the performance or completion of the job, work or service contracted out." (emphasis supplied)
Aside from PRIME's remittances of employee contributions to Philhealth, SSS, and Pag-ibig and the payment for the
complainants' and the petitioner's wages, we find no indication, except mostly general statements from Adidas, PRIME and
JCA, that PRIME possessed substantial capital or investment to operate as a legitimate job contractor or subcontractor.
According to Adidas, not only did PRIME have substantial capital or investment to run its own business operations
independent of its clients, it also has sufficient capability to control and supervise its employees. Yet it offered no proof to
substantiate its claim,40 other than its recognition of PRIME' s capability to fulfill its obligations towards its employees.
The same thing is true with PRIME. It likewise offered no proof of how or in what manner its purported substantial capital
financed its "promotional and inter-marketing business"41 with JCA, except to say that in the pursuit of its business operations,
"it has complied with all the requirements of law anent the rights, privileges and benefits of its employees." 42
For its part, JCA relied principally on its promotional contract with PRIME to avoid liability, saying that the terms of their service
agreement demonstrate the earmarks of an employer under the four-fold employer-employee relationship test.43 It also
presented no proof of how or in what manner PRIME carried out its undertaking under the contract; although like Adidas, it
acknowledged PRIME's payment of the petitioners' and the complainants' wages, and remittances to Philhealth, SSS, and
Pag-ibig.
While the payment of wages and workers' benefits is one of the determinants of an employer-employee relationship, we do not
find it a reliable basis in this case. In fact, a closer look at the payslips44 of PRIME's supposed employees reveals that the
complainants' salaries and benefits were under the account of Adidas,45giving credence to their claim that their compensation
was charged to Adidas. If indeed JCA and PRIME were an independent contractor and a subcontractor, respectively, why
would the name "ADIDAS" still appear on the payslips of PRIME's employees.
The answer lies in the fact that Adidas avoided being identified as the complainants' direct employer so that it would not have
to bear the consequences of the complainants' and the petitioner's regularization. Notably, the records show 46 that these
complainants and the petitioner were engaged not only in 2002, but much earlier; some were even hired in 1995, including the
petitioner, who started selling Adidas products on October 28, 1995. In fact, LA Salinas relied on the complainants' several
years of service of selling Adidas products in awarding financial assistance to them.
Under these circumstances, we have reason to believe that PRIME, the supposed JCA subcontractor, just assumed the act of
paying the complainants' wages and benefits on behalf of Adidas, indicating thereby that it was a mere agent of Adidas or a
labor-only contractor.47 In the light of the complete absence of proof that PRIME applied its "substantial capital or investment"
in performing the promotional job it contracted with JCA, we find credence in the petitioner's submission that the products she
453
was selling remained to be the property and under the control of Adidas; that it was Adidas who owned the warehouse where
they were stored; that leased the sales outlets from department stores; and that provided regular training to her and to the
other complainants. The record shows that this particular claim by the petitioner had not been disputed by either Adidas or
JCA.
Moreover, if in fact Adidas entered a distribution agreement with JCA, we wonder why the products the petitioner and the other
supposed "contractual employees" were selling were retained and remained to be under the control of Adidas, and also, why
the proceeds of the sales went into Adidas' bank account. The answer is because JCA itself is not an independent contractor.
It was merely an agent or intermediary of Adidas, despite the distribution agreement between them which they did not even
honor since, as required under Section 2.2 of the agreement,48the distributor shall purchase the Adidas products and sell them
in its own name and for its own account.
Although Adidas claims that by virtue of the agreement, JCA did not purchase but rather had in its custody and safekeeping
different Adidas products, for distribution to different sales outlets in the country,49 nowhere in the record does it appear that
the agreement had been amended to allow such arrangement. Neither has it been shown how or in what manner the
distribution was to be done. It was not also shown who managed and provided the storage places and the sales outlets for the
products.
Again, in the absence of evidence that JCA had the wherewithal to undertake its distribution agreement with Adidas, except to
enter into a promotions contract with PRIME, we find merit in the petitioner's contention that Adidas and JCA, at a time, held
office in the same address; and that Adidas provided the storage places and the outlets for the distribution of its products, not
PRIME or JCA. As the petitioner points out, formerly it was WOSI and later JCA which acted as agent of Adidas. The record
bears out her observations.
The petitioner performed activities
necessary to the principal business of Adidas
Thus, the petitioner and the complainants (who withdrew from the case) were performing activities that were necessary to
market the products that Adidas itself manufactured. They sold these products for several years, starting in June 1995 until
December 9, 2000. While Adidas explains that it amended its articles of incorporation in October 2002 to engage in retail, it
cannot be denied that in 1995 it was already in the retail business through its agents WOSI and JCA and labor-only contractor
PRIME. Thus, the petitioner had become an Adidas regular employee a long time before she was supposedly made a
"contractual employee" of PRIME. Adidas exercised control and supervision
over the performance of the petitioner's work
In the absence of evidence showing how or in what manner PRIME carried out its promotion work under its contract with JCA
and how it provided the necessary requirements for such undertaking (such as the maintenance of storage areas and
engagement of sales outlets), we likewise find merit in the petitioner's submission that it was Adidas who exercised control and
supervision over the petitioner's work performance, through its Sales Manager Sonny Niebres, its President Philip Go, and
even Cornelia Indon, head of the WOSI concession.
In sum, we hold that PRIME failed to satisfy the four-fold employer-employee relationship test,50 making it a labor-only
contractor under the law and the rules. Like JCA, it was merely an agent of Adidas, notwithstanding the quitclaims of some of
the complainants in its favor. Adidas, therefore, is petitioner's real employer who shall be responsible to her in the same
manner and extent as if she were directly employed by the company.51 In this light, we find the petitioner to have been illegally
dismissed, there being obviously no valid cause to and absent due process in her dismissal.
Consequently, the petitioner is entitled under the law52 to reinstatement, without loss of seniority rights and other privileges,
and with full back wages. Should reinstatement no longer be feasible, she shall be entitled to full back wages and separation
pay at one month's pay for every year of service. However, her claim for other monetary benefits is denied as she failed to
refute LA Salinas' ruling that she had been paid her 13th month pay and service incentive leave pay. Further, we find the
respondents to have shown bad faith in the petitioner's dismissal as it resulted from the prohibited labor-only contracting
arrangement imposed on her since October 28, 1995. Thus, the petitioner is also entitled to damages and to attorney's fees as
she was compelled to litigate to protect her rights. Under the circumstances, we deem an award to the petitioner of P50,000.00
each in moral and exemplary damages, plus ten percent attorney's fees reasonable, to be paid jointly and solidarily by Adidas,
PRIME, and JCA.
WHEREFORE, premises considered, the petition is GRANTED. The assailed decision and resolution of the Court of Appeals
are SET ASIDE. The respondent Adidas Philippines, Inc., is ORDERED to reinstate the petitioner Marites R. Cusap to her
former position without loss of seniority rights and other privileges, and to pay her back wages from her illegal dismissal on
December 9, 2002, up to her actual reinstatement; and should reinstatement no longer be feasible, to pay her back wages and
separation pay at one month's pay for every year of service.
Adidas Philippines, Inc., Promotion Resources & Inter-Marketing Exponents, Inc., and JC Athletes Inc., are ORDERED to pay
the petitioner, jointly and solidarily, moral damages of P50,000.00, exemplary damages of P50,000.00 and 10% of all the sums
due under this Decision as attorney's fees.
SO ORDERED.
G.R. No. 179256 July 10, 2013

454
FIRST PHILIPPINE INDUSTRIAL CORPORATION, PETITIONER,
vs.
RAQUEL M. CALIMBAS AND LUISA P. MAHILOM, RESPONDENTS.
DECISION
PERALTA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal of the Decision 1 dated
March 6, 2007 and Resolution2 dated August 16, 2007 of the Court of Appeals (CA) in CA-G.R. SP No. 90527.
The factual and procedural antecedents, as found by the CA, are as follows:
Private respondent First Philippine Industrial Corporation (FPIC) is a domestic corporation primarily engaged in the
transportation of petroleum products by pipeline. Upon the other hand, petitioners Raquel Calimbas and Luisa Mahilom were
engaged by De Guzman Manpower Services ("DGMS") to perform secretarial and clerical jobs for FPIC. [DGMS] is engaged
in the business of supplying manpower to render general clerical, building and grounds maintenance, and janitorial and utility
services.
On March 29, 1993, FPIC, represented by its Senior Vice-President and Head of Administration Department, Eustaquio
Generoso, Jr. entered into a Contract of Special Services with DGMS, represented by its Operations Manager, Manuel De
Guzman, wherein the latter agreed to undertake some aspects of building and grounds maintenance at FPICs premises,
offices and facilities, as well as to provide clerical and other utility services as may be required from time to time by FPIC. The
pertinent portions of the said Contract, which took effect on April 1, 1993, reads:
B. Terms of Payment
FIRST PARTY [FPIC] shall pay the SECOND PARTY [DGMS] a contract price for services rendered based on individual
timesheets prepared and submitted by the SECOND PARTY and duly authenticated by the FIRST PARTYs representative.
The SECOND PARTY shall bill the FIRST PARTY on a semi-monthly basis.
xxx
C. Other Terms and Conditions
SECOND PARTY shall undertake FIRST PARTYs projects only if covered by an approved Project Contract (Appendix-B)
which the FIRST PARTY will issue to the SECOND PARTY when the need arises. The Project Contract shall indicate the
scope of work to be done, duration and the manpower required to undertake the work. The composition of the workers to be
assigned to a specific undertaking shall be agreed upon between the FIRST PARTY and the SECOND PARTY;
SECOND PARTY shall assign to FIRST PARTY competent personnel to do what is required in accordance with the Project
Contract. FIRST PARTY shall have the right to request for replacement of an assigned personnel who is observed to be non-
productive or unsafe, and if confirmed by its own investigation and findings, SECOND PARTY shall replace such personnel;
SECOND PARTY shall provide the maintenance equipment and tools necessary to complete assigned works. Parties hereto
shall agree on the equipment, tools and supplies to be provided by SECOND PARTY prior to the start of assigned work;
SECOND PARTY shall be liable for loss and/or damage to SECOND PARTYs property, found caused by willful act or
negligence of SECOND PARTYs personnel; and
There shall be no employer-employee relationship between the FIRST PARTY, on the one hand, and the SECOND PARTY,
and the person who the SECOND PARTY may assign to perform the services called for, on the other. The SECOND PARTY
hereby acknowledges that no authority has been conferred upon it by the FIRST PARTY to hire any person in behalf of the
FIRST PARTY. The persons who (sic) the SECOND PARTY which hereby warrants full and faithful compliance with the
provisions of the Labor Code of the Philippines, as well as with all Presidential Decrees, Executive Orders, General Orders,
Letter of Instructions, Law Rules and Regulations pertaining to the employment of labor now existing. SECOND PARTY shall
assist and defend the FIRST PARTY in any suit or proceedings and shall hold the FIRST PARTY free and harmless from any
claims which the SECOND PARTYs employees may lodge against the FIRST PARTY.
xxxx
Pursuant to the said Contract, petitioner Raquel Calimbas and Luisa Mahilom were engaged by the DGMS to render services
to FPIC. Thereat, petitioner Calimbas was assigned as a department secretary at the Technical Services Department
beginning June 3, 1996, while petitioner Mahilom served as a clerk at the Money Movement Section of the Finance Division
starting February 13, 1996.
On June 21, 2001, FPIC, through its Human Resources Manager, Lorna Young, informed the petitioners that their services to
the company would no longer be needed by July 31, 2001 as a result of the "Pace-Setting" Study conducted by an outside
consultant. Accordingly, on July 9, 2001, Priscilla de Leon, Treasurer of DGMS, formally notified both the petitioners that their
respective work assignments in FPIC were no longer available to them effective July 31, 2001, citing the termination of the
Project Contract with FPIC as the main reason thereof. On August 3, 2001, petitioners Calimbas and Mahilom signed
quitclaims, releasing and discharging DGMS from whatever claims that they might have against it by virtue of their past
employment, upon receipt of the sums of P17,343.10 and P23,459.14, respectively.
Despite having executed the said quitclaims, the petitioners still filed on August 16, 2001 a Complaint against FPIC for illegal
dismissal and for the collection of monetary benefits, damages and attorneys fees, alleging that they were regular employees
of FPIC after serving almost five (5) years, and that they were dismissed without cause. The Complaint was docketed as
455
NLRC NCR Case No. 00-08-04331-01 and was raffled to Labor Arbiter Joel Lustria. After conducting three (3) mandatory
conferences, the parties failed to reach any amicable settlement; thus, they were required to submit their respective position
papers, together with their documentary evidence.
In their Position Paper, the petitioners posited that they were regular employees of FPIC for having served the same for almost
five (5) years, rendering services which were usually necessary or desirable in the usual business or trade of FPIC. They
claimed that they were illegally dismissed when they were relieved from their work assignments on July 31, 2001 without valid
and serious reasons therefor. The petitioners maintained and (sic) that their real employer was FPIC, and that DGMS was
merely its agent for having been engaged in prohibited labor-only contracting. The petitioners averred that DGMS did not have
substantial capital or investment by way of tools, equipment, machines, work places and other materials. They claimed that
they only used office equipment and materials owned by FPIC at its offices in Ortigas Center, Pasig City. DGMS never
exercised control over them in all matters related to the performance of their work. In fact, DGMS never maintained any
representative at the FPICs office to supervise or oversee their work. They insisted that their direct superiors, who were
managerial employees of FPIC, had control over them since the latter made sure that they always complied with the policies of
FPIC.
Upon the other hand, FPIC insisted in its Position Paper/ Motion to Dismiss that the Complaint should be dismissed
considering that the Labor Arbiter had no jurisdiction over the case because there was absolutely no employer-employee
relationship between it and the petitioners. FPIC claimed that the petitioners had never been its employees. FPIC insisted that
their true employer was DGMS considering that the petitioners were hired by DGMS and assigned them to the Company to
render services based on their Contract; that they received their wages and other benefits from DGMS; and that they executed
quitclaims in favor of DGMS. Also, FPIC submitted that the termination of the petitioners employment with their employer,
DGMS, was valid and lawful since they executed quitclaims with their employer. 3
On December 11, 2002, the Labor Arbiter rendered a Decision4 holding that respondents were regular employees of petitioner,
and that they were illegally dismissed when their employment was terminated without just or authorized cause. The fallo reads:
WHEREFORE, premises considered, let the judgment be, as it is hereby rendered, declaring complainants dismissal illegal,
and ordering the respondent, as follows:
1) To reinstate complainants to their former positions without loss of seniority rights and other privileges;
2) To pay complainants, Raquel M. Calimbas the amount of P131,555.19; and Luisa P. Mahilom, the amount
of P115,403.14 representing their full backwages, from the time their salaries were withheld from them up to the date
of their actual reinstatement;
3) To pay the complainants the amount equivalent to ten (10%) percent of the total judgment award, as and for
attorneys fees.
The amount received by complainants, Raquel M. Calimbas in the amount of P17,343.10, and Luisa P. Mahilom, the amount
of P23,459.14 under the quitclaims that they signed must be deducted from the awards herein made.
Other claims are hereby dismissed for lack of merit.
SO ORDERED.5
Aggrieved, petitioner elevated the case to the National Labor Relations Commission (NLRC).
On December 22, 2003, the NLRC dismissed petitioners appeal and upheld the Labor Arbiters decision.
Unsatisfied, petitioner filed a Motion for Reconsideration reiterating the arguments brought up in its Position Paper/ Motion to
Dismiss.
In a Resolution6 dated April 30, 2004, the NLRC reversed its decision dated December 22, 2003 and disposed of as follows:
After a second look, We observe that from the above-quoted issues, the Labor Arbiter assumed that complainants were
regular employees of PDIC (sic) which we find erroneous.
First, the Contract of Special Services was signed by FPIC and DGMS on March 29, 1993 which shows that complainants
employment in February and June 1996 was pursuant to said contract which belies their submission that their working paper
were forwarded by FPIC after directly employing them in February and June 1996.
Second, undisputed in FPICs statement that, capitalized at P75,000.00, DGMS serviced the manpower requirements of other
clients like the Makati Commercial Estate Association and the Philippine Transmarine Carrier which reinforces its being an
independent contractor.
Third, complainants realization that DGMS and not respondent FPIC, was their employer is shown by the fact that after they
were disengaged, they went to DGMS, which paid them the amount of P17,343. (sic) for Calimbas and P23,454.14 for
Mahilom.
We therefore find, again after a second look, at the records, that respondent First Philippine Industrial Corporation was not the
employer of complainants Calimbas and Mahilom and that it was the De Guzman Manpower Services which was later on
incorporated as De Guzman Manpower Corporation which was their employer. This finding, necessarily calls for the setting
aside of the decision of Labor Arbiter Lustria dated December 11, 2992 (sic) and Our decision promulgated on December 22,
2003.

456
WHEREFORE, as we reconsider our Decision promulgated December 22, 2003, we set aside the decision of Labor Arbiter
Joel A. Lustria dated December 11, 2002 and declare respondent First Pacific (sic) Industrial Corporation free from any liability
whatsoever.
SO ORDERED.7
Respondents sought reconsideration of the above resolution, but the same was denied in a Resolution8 dated April 20, 2005,
maintaining that:
We deny. We find no legal basis to deem DGMS a "labor-only contracting" entity as maintained by complainants. The fact that
DGMS had only a capitalization of P75,000.00, without an investment in tools, equipment, etc., does not necessarily constitute
the latter as labor-only contractor since it has shown its adequacy of resources, directly or indirectly, in the performance of
completion of the job, work or service contracted out, including operating costs, administrative costs such as training,
overhead and other costs as are necessary to enably (sic) DGMS to exercise control, supervision, or direction over its
employees in all aspects in performing or completing the job, work or services contracted out. In the case of New Golden City
Builders and Development Corp. et. al. vs. CA, et. al. (G.R. No. 154715), December 11, 2003), the Supreme Court reiterated
its ruling in Neri that not having investment in the form of tools or machineries does not automatically reduce the independent
contractor to be a labor-only contractor. Moreover, the court has taken judicial notice of the general practice adopted in several
government and private institution and industries of hiring independent contractors to perform special services.
Furthermore, the copy of payroll adduced on record persuade us that complainants received their wages from DGMS contrary
to their allegations that the contract consideration is by reimbursement of wages. The execution likewise by complainants
Calimbas and Mahilom of their respective quitclaim and release fortifies the fact of their belief that their actual employer is
DGMS and not respondent FPIC.
WHEREFORE, we deny the motion. We accordingly AFFIRM the Resolution dated April 30, 2004 in its entirety. No further
motion of the same nature shall be entertained.
SO ORDERED.9
Unfazed, respondents elevated the case before the CA.
On March 6, 2007, the CA reversed and set aside the NLRCs resolutions and held as follows:
WHEREFORE, the instant Petition is hereby GRANTED. The assailed Resolutions dated April 30, 2004 and April 20, 2005 of
the NLRC are REVERSED and SET ASIDE. The Decision dated December 22, 2003 of the NLRC, affirming the Decision
dated December 11, 2002 of the Labor Arbiter is hereby REINSTATED.
SO ORDERED.10
Petitioner filed a Motion for Reconsideration, but the same was denied in a Resolution dated August 16, 2007.
Hence, the present petition, wherein petitioner posits that:
I
THE COURT OF APPEALS COMMITTED GRIEVOUS ERROR IN NOT CONSIDERING AND APPLYING HERETO
PERTINENT LAW AND JURISPRUDENCE WHICH PROVIDE THAT THE EXISTENCE OF AN EMPLOYER-EMPLOYEE
RELATIONSHIP BETWEEN THE PARTIES MUST BE SUBSTANTIALLY ESTABLISHED AND NOT MERELY PRESUMED
TO EXIST.
II
THE COURT OF APPEALS COMMITTED GRIEVOUS ERROR IN REVERSING THE UPRIGHT AND JUDICIOUS RULING
OF THE NATIONAL LABOR RELATIONS COMMISSION WHICH FOUND THAT RESPONDENTS ARE NOT EMPLOYEES
OF PETITIONER AND THEREFORE WERE NOT ILLEGALLY DISMISSED AND AS SUCH ARE NOT ENTITLED TO THEIR
CLAIMS FOR REINSTATEMENT, BACKWAGES AND ATTORNEYS FEES.11
Simply, the issues are: (1) whether respondents are employees of petitioner; and (2) whether respondents were lawfully
dismissed from their employment.
Anent the first issue, Article 106 of the Labor Code pertinently provides:
Article 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the
performance of the formers work, the employees of the contractor and of the latters subcontractor, if any, shall be paid in
accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the
employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work
performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting-out of labor to protect the rights of
workers established under the Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only
contracting and job-contracting as well as differentiations within these types of contracting and determine who among the
parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed
by such person are performing activities which are directly related to the principal business of such employer. In such cases,
457
the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in
the same manner and extent as if the latter were directly employed by him.
In the same manner, Sections 8 and 9 of DOLE Department Order No. 10, Series of 1997, state:
Sec. 8. Job contracting. There is job contracting permissible under the Code if the following conditions are met:
(1)
The contractor carries on an independent business and undertakes the contract work on his own account under his own
responsibility according to his own manner and method, free from the control and direction of his employer or principal in all
matters connected with the performance of the work except as to the results thereof; and
(2)
The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other
materials which are necessary in the conduct of his business.
Sec. 9. Labor-only contracting.
(a)
Any person who undertakes to supply workers to an employer shall be deemed to be engaged in labor-only contracting where
such person:
(1)
Does not have substantial capital or investment in the form of tools, equipment, machineries, work premises and other
materials; and
(2)
The workers recruited and placed by such persons are performing activities which are directly related to the principal or
operations of the employer in which workers are habitually employed.
(b)
Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be considered merely
as an agent or intermediary of the employer who shall be responsible to the workers in the same manner and extent as if the
latter were directly employed by him.
(c)
For cases not falling under this Article, the Secretary of Labor shall determine through appropriate orders whether or not the
contracting out of labor is permissible in the light of the circumstances of each case and after considering the operating needs
of the employer and the rights of the workers involved. In such case, he may prescribe conditions and restrictions to insure the
protection and welfare of the workers.
Given the foregoing standards, we sustain the findings of the CA that respondents are petitioners employees and that DGMS
is engaged in labor-only contracting.
First, in Vinoya v. National Labor Relations Commission,12 this Court categorically stated that the actual paid-in capital
of P75,000.00 could not be considered as substantial capital. Thus, DGMSs actual paid-in capital in the amount of P75,000.00
does not constitute substantial capital essential to carry out its business as an independent job contractor. In spite of its bare
assertion that the Vinoya case does not apply in the present case, DGMS has not shown any serious and cogent reason to
disregard the ruling in the aforementioned case. Records likewise reveal that DGMS has no substantial equipment in the form
of tools, equipment and machinery. As a matter of fact, respondents were using office equipment and materials owned by
petitioner while they were rendering their services at its offices.
Second, petitioner exercised the power of control and supervision over the respondents. As aptly observed by the CA, "the
daily time records of respondents even had to be countersigned by the officials of petitioner to check whether they had worked
during the hours declared therein. Furthermore, the fact that DGMS did not assign representatives to supervise over
respondents work in petitioners company tends to disprove the independence of DGMS. It is axiomatic that the test to
determine the existence of independent contractorship is whether one claiming to be an independent contractor has
contracted to do the work according to his own methods and without being subjected to the control of the employer, except
only to the results of the work. Obviously, on this score alone, petitioner cannot rightly claim that DGMS was an independent
job contractor inasmuch as respondents were subjected to the control and supervision of petitioner while they were performing
their jobs."13
Third, also worth stressing are the points highlighted by respondents: (1) Respondents worked only at petitioners offices for
an uninterrupted period of five years, occupying the same position at the same department under the supervision of company
officials; (2) Three weeks ahead of the termination letters issued by DGMS, petitioners HR Manager Lorna Young notified
respondents, in a closed-door meeting, that their services to the company would be terminated by July 31, 2001; (3) In the
termination letters prepared by DGMS, it was even stressed that the said termination letters will formalize the verbal notice
given by petitioners HR Administration personnel; (4) The direct superiors of respondents were managerial employees of
petitioner, and had direct control over all the work-related activities of the latter. This control included the supervision of
respondents performance of their work and their compliance with petitioners company policies and procedures. DGMS, on
the other hand, never maintained any representative at the petitioners office to oversee the work of respondents. 14

458
All told, an employer-employee relationship exists between petitioner and respondents. And having served for almost five
years at petitioners company, respondents had already attained the status of regular employees.
As to the second issue, i.e., whether respondents were lawfully dismissed from their employment, this Court rules in the
negative.
Recently, in Skippers United Pacific, Inc. v. Daza,15 this Court held that for a workers dismissal to be considered valid, it must
comply with both procedural and substantive due process, viz.:
For a workers dismissal to be considered valid, it must comply with both procedural and substantive due process. The legality
of the manner of dismissal constitutes procedural due process, while the legality of the act of dismissal constitutes substantive
due process.
Procedural due process in dismissal cases consists of the twin requirements of notice and hearing. The employer must
furnish the employee with two written notices before the termination of employment can be effected: (1) the first notice
apprises the employee of the particular acts or omissions for which his dismissal is sought; and (2) the second notice informs
the employee of the employers decision to dismiss him. Before the issuance of the second notice, the requirement of a
hearing must be complied with by giving the worker an opportunity to be heard. It is not necessary that an actual hearing be
conducted.
Substantive due process, on the other hand, requires that dismissal by the employer be made under a just or authorized cause
under Articles 282 to 284 of the Labor Code.16
In the present case, petitioners failed to show any valid or just cause under the Labor Code on which it may justify the
termination of services of respondents. Also, apart from notifying that their services had already been terminated, petitioner
failed to comply with the rudimentary requirement of notifying respondents regarding the acts or omissions which led to the
termination of their services as well as giving them an ample opportunity to contest the legality of their dismissal. Having failed
to establish compliance with the requirements of termination of employment under the Labor Code, respondents dismissal is
tainted with illegality.
Resultantly, the CA correctly held that respondents are entitled to reinstatement without loss of seniority rights, and other
privileges and to their full backwages, inclusive of allowances and other benefits or their monetary equivalent, computed from
the time their compensation was withheld up to the time of their actual reinstatement. Considering that reinstatement is no
longer feasible, respondents are entitled instead to separation pay equivalent to one month salary for every year of service.
WHEREFORE, premises considered, the Petition for Review on Certiorari is DENIED. The Decision dated March 6, 2007 and
Resolution dated August 16, 2007 of the Court of Appeals in CA-G.R. SP No. 90527 are hereby AFFIRMED with
MODIFICATION that respondents shall be entitled to separation pay equivalent to one month salary for every year of service.
SO ORDERED.

G.R. No. 200094 June 10, 2013

BENIGNO M. VIGILLA, ALFONSO M. BONGOT, ROBERTO CALLESA, LINDA C. CALLO, NILO B. CAMARA, ADELIA T.
CAMARA, ADOLFO G. PINON, JOHN A. FERNANDEZ, FEDERICO A. CALLO, MAXIMA P. ARELLANO, JULITO B. COST
ALES, SAMSON F. BACHAR, EDWIN P. DAMO, RENA TO E. FERNANDEZ, GENARO F.CALLO, JIMMY C. ALETA, and
EUGENIO SALINAS, Petitioners,
vs.
PHILIPPINE COLLEGE OFCRIMINOLOGY INC. and/or GREGORY ALAN F. BAUTISTA, Respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the September 16, 2011 Decision 1 of the
Court of Appeals (CA), in CA-G.R. SP No. 120225, which affirmed the February 11, 2011 Resolution 2 and the April 28,
20113 Resolution of the National Labor Relations Commission (NLRC). The two NLRC resolutions affirmed with modifications
the July 30, 2010 Decision4 of the Labor Arbiter (LA) finding that (a) Metropolitan Building Services, Inc. (MBMSI) was a labor-
only contractor; (b) respondent Philippine College of Criminology Inc. (PCCr) was the petitioners real principal employer; and
(c) PCCr acted in bad faith in dismissing the petitioners. The NLRC, however, declared that the claims of the petitioners were
settled amicably because of the releases, waivers and quitclaims they had executed.
The Antecedents
PCCr is a non-stock educational institution, while the petitioners were janitors, janitresses and supervisor in the Maintenance
Department of PCCr under the supervision and control of Atty. Florante A. Seril (Atty. Seril), PCCrs Senior Vice President for
Administration. The petitioners, however, were made to understand, upon application with respondent school, that they were
under MBMSI, a corporation engaged in providing janitorial services to clients. Atty. Seril is also the President and General
Manager of MBMSI.
Sometime in 2008, PCCr discovered that the Certificate of Incorporation of MBMSI had been revoked as of July 2, 2003. On
March 16, 2009, PCCr, through its President, respondent Gregory Alan F. Bautista (Bautista), citing the revocation, terminated
the schools relationship with MBMSI, resulting in the dismissal of the employees or maintenance personnel under MBMSI,
except Alfonso Bongot (Bongot) who was retired.
459
In September, 2009, the dismissed employees, led by their supervisor, Benigno Vigilla (Vigilla), filed their respective
complaints for illegal dismissal, reinstatement, back wages, separation pay (for Bongot), underpayment of salaries, overtime
pay, holiday pay, service incentive leave, and 13th month pay against MBMSI, Atty. Seril, PCCr, and Bautista.
In their complaints, they alleged that it was the school, not MBMSI, which was their real employer because (a) MBMSIs
certification had been revoked; (b) PCCr had direct control over MBMSIs operations; (c) there was no contract between
MBMSI and PCCr; and (d) the selection and hiring of employees were undertaken by PCCr.
On the other hand, PCCr and Bautista contended that (a) PCCr could not have illegally dismissed the complainants because it
was not their direct employer; (b) MBMSI was the one who had complete and direct control over the complainants; and (c)
PCCr had a contractual agreement with MBMSI, thus, making the latter their direct employer.
On September 11, 2009, PCCr submitted several documents before LA Ronaldo Hernandez, including releases, waivers and
quitclaims in favor of MBMSI executed by the complainants to prove that they were employees of MBMSI and not PCCr. 5 The
said documents appeared to have been notarized by one Atty. Ramil Gabao. A portion of the releases, waivers and quitclaims
uniformly reads:
For and in consideration of the total amount of ______________, as and by way of separation pay due to the closure of the
Company brought about by serious financial losses, receipt of the total amount is hereby acknowledged, I _______________,
x x x forever release and discharge x x x METROPOLITAN BUILDING MAINTENANCE SERVICES, INC., of and from any and
all claims, demands, causes of actions, damages, costs, expenses, attorneys fees, and obligations of any nature whatsoever,
known or unknown, in law or in equity, which the undersigned has, or may hereafter have against the METROPOLITAN
BUILDING MAINTENANCE SERVICES, INC., whether administrative, civil or criminal, and whether or not arising out of or in
relation to my employment with the above company or third persons.6
Ruling of the Labor Arbiter
After due proceedings, the LA handed down his decision, finding that (a) PCCr was the real principal employer of the
complainants ; (b) MBMSI was a mere adjunct or alter ego/labor-only contractor; (c) the complainants were regular employees
of PCCr; and (d) PCCr/Bautista were in bad faith in dismissing the complainants.
The LA ordered the respondents (a) to reinstate petitioners except Bongot who was deemed separated/retired; (b) to pay their
full back wages from the date of their illegal dismissal until actual reinstatement (totaling P2,963,584.25); (c) to pay Bongots
separation or retirement pay benefit under the Labor Code (amounting to P254,010.00); (d) to pay their 3-year Service
Incentive Leave Pay (P4,245.60 each) except Vigilla (P5,141.40); (e) to pay all the petitioners moral and exemplary damages
in the combined amount of P150,000.00; and finally (f) to pay 10% of the total computable award as Attorneys Fees.
The LA explained that PCCr was actually the one which exercised control over the means and methods of the work of the
petitioners, thru Atty. Seril, who was acting, throughout the time in his capacity as Senior Vice President for Administration of
PCCr, not in any way or time as the supposed employer/general manager or president of MBMSI.
Despite the presentation by the respondents of the releases, waivers and quitclaims executed by petitioners in favor of
MBMSI, the LA did not touch on the validity and authenticity of the same. Neither did he discuss the effects of such releases,
waivers and quitclaims on petitioners claims.
Ruling of the NLRC
Not satisfied, the respondents filed an appeal before the NLRC. In its Resolution, dated February 11, 2011, the NLRC affirmed
the LAs findings. Nevertheless, the respondents were excused from their liability by virtue of the releases, waivers and
quitclaims executed by the petitioners. Specifically, the NLRC pointed out:
As Respondent MBMSI and Atty. Seril, together are found to be labor only contractor, they are solidarily liable with
Respondent PCCr and Gregory Alan F. Bautista for the valid claims of Complainants pursuant to Article 109 of the Labor Code
on the solidary liability of the employer and indirect employer. This liability, however, is effectively expunged by the acts of the
17 Complainants of executing Release, Waiver, and Quitclaims (pp. 170-184, Records) in favor of Respondent MBMSI. The
liability being joined, the release of one redounds to the benefit of the others, pursuant to Art. 1217 of the Civil Code, which
provides that "Payment made by one of the solidary debtors extinguishes the obligation. x x x." 7
In their motion for reconsideration, petitioners attached as annexes their affidavits denying that they had signed the releases,
waivers, and quitclaims. They prayed for the reinstatement in toto of the July 30, 2010 Decision of the LA. 8 MBMSI/Atty. Seril
also filed a motion for reconsideration9 questioning the declaration of the NLRC that he was solidarily liable with PCCr.
On April 28, 2011, NLRC modified its February 11, 2011 Resolution by affirming the July 30, 2010 Decision 10 of the LA only in
so far as complainants Ernesto B. Ayento and Eduardo B. Salonga were concerned. As for the other 17 complainants, the
NLRC ruled that their awards had been superseded by their respective releases, waivers and quitclaims.
The seventeen (17) complainants filed with the CA a petition for certiorari under Rule 65 faulting the NLRC with grave abuse of
discretion for absolving the respondents from their liability by virtue of their respective releases, waivers and quitclaims.
Ruling of the Court of Appeals
On September 16, 2011, the CA denied the petition and affirmed the two Resolutions of the NLRC, dated February 11, 2011
and April 28, 2011. The CA pointed out that based on the principle of solidary liability and Article 1217 11 of the New Civil Code,
petitioners respective releases, waivers and quitclaims in favor of MBMSI and Atty. Seril redounded to the benefit of the
respondents. The CA also upheld the factual findings of the NLRC as to the authenticity and due execution of the individual
460
releases, waivers and quitclaims because of the failure of petitioners to substantiate their claim of forgery and to overcome the
presumption of regularity of a notarized document. Petitioners motion for reconsideration was likewise denied by the CA in its
January 4, 2012 Resolution.
Hence, this petition under Rule 45 challenging the CA Decision anchored on the following
GROUNDS
The Hon. Court of Appeals COMMITTED REVERSIBLE ERRORS when:
A. IT CONSIDERED RESPONDENT METROPOLITAN BUILDING MAINTENANCE SERVICES, INC.S LIABILITY
AS SOLIDARY TO RESPONDENT PHILIPPINE COLLEGE OF CRIMINOLOGY, INC., WHEN IN FACT THERE IS
NO LEGAL BASIS TO THAT EFFECT.
B. IT DID NOT AFFIRM THE DECISION OF THE HON. LABOR ARBITER, DATED JULY 30, 2010, AS TO 17
PETITIONERS IN THIS CASE, DISREGARDING THE CORPORATION LAW AND JURISPRUDENCE OF THE
HON. SUPREME COURT IN SO FAR AS QUITLCLAIMS, RELEASE AND WAIVERS ARE CONCERNED IN LABOR
CASES.
C. IT AFFIRMED THE DECISION OF THE HON. NATIONAL LABOR RELATIONS COMMISSION, THAT THE 17
COMPLAINANTS HAVE SETTLED THEIR CLAIMS BY VIRTUE OF ALLEGED RELEASES, WAIVERS AND
QUITCLAIMS SIGNED BY THE COMPLAINANTS IN FAVOR OF METROPOLITAN BUILDING MAINTENANCE,
INC.
D. IT DID NOT TAKE INTO CONSIDERATION SUBSTANTIAL EVIDENCE OF PETITIONERS/COMPLAINANTS
DISPUTING THE ALLEGED WAIVERS, RELEASES AND QUITCLAIMS, INCLUDING THE ALLEGED
NOTARIZATION THEREOF.12
The petition fails.
The grounds cited by the petitioners boil down to this basic issue: whether or not their claims against the respondents were
amicably settled by virtue of the releases, waivers and quitclaims which they had executed in favor of MBMSI.
In resolving this case, the Court must consider three (3) important sub-issues, to wit:
(a) whether or not petitioners executed the said releases, waivers and quitclaims;
(b) whether or not a dissolved corporation can enter into an agreement such as releases, waivers and quitclaims
beyond the 3-year winding up period under Section 122 of the Corporation Code; and
(c) whether or not a labor-only contractor is solidarily liable with the employer.
The Releases, Waivers and
Quitclaims are Valid
Petitioners vehemently deny having executed any release, waiver or quitclaim in favor of MBMSI. They insist that PCCr forged
the documents just to evade their legal obligations to them, alleging that the contents of the documents were written by one
person, whom they identified as Reynaldo Chavez, an employee of PCCr, whose handwriting they were familiar with. 13
To begin with, their posture was just an afterthought. Petitioners had several opportunities to question the authenticity of the
said documents but did not do so. The records disclose that during the proceedings before the LA, PCCr submitted several
documents, including the subject releases, waivers and quitclaims executed on September 11, 2009 in favor of MBMSI, 14 but
petitioners never put their genuineness and due execution at issue. These were brought up again by the respondents in their
Memorandum of Appeal,15 but again petitioners did not bother to dispute them.
It was only after the NLRCs declaration in its February 11, 2011 Resolution that the claims of petitioners had been settled
amicably by virtue of the releases, waivers and quitclaims, that petitioners, in their motion for reconsideration, 16 denied having
executed any of these instruments. This passiveness and inconsistency of petitioners will not pass the scrutiny of this Court.
At any rate, it is quite apparent that this petition raises questions of fact inasmuch as this Court is being asked to revisit and
assess anew the factual findings of the CA and the NLRC regarding the validity, authenticity and due execution of the subject
releases, waivers and quitclaims.
Well-settled is the rule that this Court is not a trier of facts and this doctrine applies with greater force in labor cases. Questions
of fact are for the labor tribunals to resolve.17 Only errors of law are generally reviewed in petitions for review on certiorari
criticizing decisions of the CA. Moreover, findings of fact of quasi-judicial bodies like the NLRC, as affirmed by the CA, are
generally conclusive on this Court.18 Hence, as correctly declared by the CA, the following NLRC factual findings are binding
and conclusive on this Court:
We noted that the individual quitclaims, waivers and releases executed by the complainants showing that they received their
separation pay from MBMSI were duly notarized by a Notary Public. Such notarization gives prima facie evidence of their due
execution. Further, said releases, waivers, and quitclaims were not refuted nor disputed by complainants herein, thus, we have
no recourse but to uphold their due execution.19
Even if the Court relaxes the foregoing rule, there is still no reason to reverse the factual findings of the NLRC and the CA.
What is on record is only the self-serving allegation of petitioners that the releases, waivers and quitclaims were mere
forgeries. Petitioners failed to substantiate this allegation. As correctly found by the CA: "petitioners have not offered concrete
proof to substantiate their claim of forgery. Allegations are not evidence." 20

461
On the contrary, the records confirm that petitioners were really paid their separation pay and had executed releases, waivers
and quitclaims in return. In his motion for reconsideration of the February 11, 2011 Resolution of the NLRC, Atty. Seril,
President and General Manager of MBMSI, stated that the amount of 2,000,000.00 "was coursed by PCCr to me, to be
handed to the complainants, through its employee, Rey Chavez." 21
Petitioners requested the Court to take a look at such releases, waivers and quitclaims, particularly their contents and the
handwriting, but they failed to attach to the records copies of the said documents which they claimed to have been forged. The
petition is dismissible on this ground alone. The Rules of Court require the petition to be accompanied by such material
portions of the record as would support the petition.22 Failure to comply with the requirements regarding "the contents of and
the documents which should accompany the petition" is a ground for the dismissal of the appeal. 23
Moreover, mere unsubstantiated allegations of lack of voluntariness in executing the documents will not suffice to overcome
the presumption of authenticity and due execution of a duly notarized document. As correctly held by the NLRC, "such
notarization gives prima facie evidence of their due execution." 24
Petitioners contend that the alleged notarization of the releases, waivers and quitclaims by one Atty. Ramil Gabao did not take
place, because there were no records of such documents in the Notary Section of Manila. Thus, the prima facie evidence
thereof has been disputed.
The Court is not moved. Respondents should not be penalized for the failure of the notary public to submit his Notarial Report.
In Destreza v. Rinoza-Plazo,25 this Court stated that "the notarized deed of sale should be admitted as evidence despite the
failure of the Notary Public in submitting his notarial report to the notarial section of the RTC Manila." The Court expounded:
It is the swearing of a person before the Notary Public and the latters act of signing and affixing his seal on the deed that is
material and not the submission of the notarial report. Parties who appear before a notary public to have their documents
notarized should not be expected to follow up on the submission of the notarial reports. They should not be made to suffer the
consequences of the negligence of the Notary Public in following the procedures prescribed by the Notarial Law. 26
It would have been different if the notary public was not a lawyer or was not commissioned as such. In this regard, however,
petitioners offered no proof.
On the Revocation of MBMSIs
Certificate of Incorporation
Petitioners further argue that MBMSI had no legal personality to incur civil liabilities as it did not exist as a corporation on
account of the fact that its Certificate of Incorporation had been revoked on July 2, 2003. Petitioners ask this Court to exempt
MBMSI from its liabilities because it is no longer existing as a corporation.
The Court cannot accommodate the prayer of petitioners.
The executed releases, waivers and quitclaims are valid and binding notwithstanding the revocation of MBMSIs Certificate of
Incorporation. The revocation does not result in the termination of its liabilities. Section 12227 of the Corporation Code provides
for a three-year winding up period for a corporation whose charter is annulled by forfeiture or otherwise to continue as a body
corporate for the purpose, among others, of settling and closing its affairs.
Even if said documents were executed in 2009, six (6) years after MBMSIs dissolution in 2003, the same are still valid and
binding upon the parties and the dissolution will not terminate the liabilities incurred by the dissolved corporation pursuant to
Sections 122 and 14528 of the Corporation Code. In the case of Premiere Development Bank v. Flores, 29 the Court held that a
corporation is allowed to settle and close its affairs even after the winding up period of three (3) years. The Court wrote:
As early as 1939, this Court held that, although the time during which the corporation, through its own officers, may conduct
the liquidation of its assets and sue and be sued as a corporation is limited to three years from the time the period of
dissolution commences, there is no time limit within which the trustees must complete a liquidation placed in their hands. What
is provided in Section 122 of the Corporation Code is that the conveyance to the trustees must be made within the three-year
period. But it may be found impossible to complete the work of liquidation within the three-year period or to reduce disputed
claims to judgment. The trustees to whom the corporate assets have been conveyed pursuant to the authority of Section 122
may sue and be sued as such in all matters connected with the liquidation.
Furthermore, Section 145 of the Corporation Code clearly provides that "no right or remedy in favor of or against any
corporation, its stockholders, members, directors, trustees, or officers, nor any liability incurred by any such corporation,
stockholders, members, directors, trustees, or officers, shall be removed or impaired either by the subsequent dissolution of
said corporation." Even if no trustee is appointed or designated during the three-year period of the liquidation of the
corporation, the Court has held that the board of directors may be permitted to complete the corporate liquidation by continuing
as "trustees" by legal implication.30 [Emphases supplied; citations omitted]
A Labor-only Contractor is Solidarily
Liable with the Employer
The issue of whether there is solidary liability between the labor-only contractor and the employer is crucial in this case. If a
labor-only contractor is solidarily liable with the employer, then the releases, waivers and quitclaims in favor of MBMSI will
redound to the benefit of PCCr. On the other hand, if a labor-only contractor is not solidarily liable with the employer, the latter
being directly liable, then the releases, waivers and quitclaims in favor of MBMSI will not extinguish the liability of PCCr.

462
On this point, petitioners argue that there is no solidary liability to speak of in case of an existence of a labor-only contractor.
Petitioners contend that under Article 10631 of the Labor Code, a labor-only contractors liability is not solidary as it is the
employer who should be directly responsible to the supplied worker. They argue that Article 109 32 of the Labor Code (solidary
liability of employer/indirect employer and contractor/subcontractor) and Article 1217 of the New Civil Code (extinguishment of
solidary obligation) do not apply in this case. Hence, the said releases, waivers and quitclaims which they purportedly issued
in favor of MBMSI and Atty. Seril do not automatically release respondents from their liability.
Again, the Court disagrees.
The NLRC and the CA correctly ruled that the releases, waivers and quitclaims executed by petitioners in favor of MBMSI
redounded to the benefit of PCCr pursuant to Article 1217 of the New Civil Code. The reason is that MBMSI is solidarily liable
with the respondents for the valid claims of petitioners pursuant to Article 109 of the Labor Code.
As correctly pointed out by the respondents, the basis of the solidary liability of the principal with those engaged in labor-only
contracting is the last paragraph of Article 106 of the Labor Code, which in part provides: "In such cases labor-only contracting,
the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in
the same manner and extent as if the latter were directly employed by him."
Section 19 of Department Order No. 18-02 issued by the Department of Labor and Employment (DOLE), which was still in
effect at the time of the promulgation of the subject decision and resolution, interprets Article 106 of the Labor Code in this
wise:
Section 19. Solidary liability. The principal shall be deemed as the direct employer of the contractual employees and therefore,
solidarily liable with the contractor or subcontractor for whatever monetary claims the contractual employees may have against
the former in the case of violations as provided for in Sections 5 (LaborOnly contracting), 6 (Prohibitions), 8 (Rights of
Contractual Employees) and 16 (Delisting) of these Rules. In addition, the principal shall also be solidarily liable in case the
contract between the principal and contractor or subcontractor is preterminated for reasons not attributable to the fault of the
contractor or subcontractor. [Emphases supplied].
The DOLE recognized anew this solidary liability of the principal employer and the labor-only contractor when it issued
Department Order No. 18-A, series of 2011, which is the latest set of rules implementing Articles 106-109 of the Labor Code.
Section 27 thereof reads:
Section 27. Effects of finding of labor-only contracting and/or violation of Sections 7, 8 or 9 of the Rules. A finding by
competent authority of labor-only contracting shall render the principal jointly and severally liable with the contractor to the
latters employees, in the same manner and extent that the principal is liable to employees directly hired by him/her, as
provided in Article 106 of the Labor Code, as amended.
A finding of commission of any of the prohibited activities in Section 7, or violation of either Sections 8 or 9 hereof, shall render
the principal the direct employer of the employees of the contractor or subcontractor, pursuant to Article 109 of the Labor
Code, as amended. (Emphasis supplied.)
These legislative rules and regulations designed to implement a primary legislation have the force and effect of law. A rule is
binding on the courts so long as the procedure fixed for its promulgation is followed and its scope is within the statutory
authority granted by the legislature.33
Jurisprudence is also replete with pronouncements that a job-only contractor is solidarily liable with the employer. One of these
is the case of Philippine Bank of Communications v. NLRC34 where this Court explained the legal effects of a job-only
contracting, to wit:
Under the general rule set out in the first and second paragraphs of Article 106, an employer who enters into a contract with a
contractor for the performance of work for the employer, does not thereby create an employer-employees relationship between
himself and the employees of the contractor. Thus, the employees of the contractor remain the contractor's employees and his
alone. Nonetheless when a contractor fails to pay the wages of his employees in accordance with the Labor Code, the
employer who contracted out the job to the contractor becomes jointly and severally liable with his contractor to the employees
of the latter "to the extent of the work performed under the contract" as such employer were the employer of the contractor's
employees. The law itself, in other words, establishes an employer-employee relationship between the employer and the job
contractor's employees for a limited purpose, i.e., in order to ensure that the latter get paid the wages due to them.
A similar situation obtains where there is "labor only" contracting. The "labor-only" contractor-i.e "the person or intermediary" -
is considered "merely as an agent of the employer." The employer is made by the statute responsible to the employees of the
"labor only" contractor as if such employees had been directly employed by the employer. Thus, where "labor-only" contracting
exists in a given case, the statute itself implies or establishes an employer-employee relationship between the employer (the
owner of the project) and the employees of the "labor only" contractor, this time for a comprehensive purpose: "employer for
purposes of this Code, to prevent any violation or circumvention of any provision of this Code." The law in effect holds both the
employer and the "laboronly" contractor responsible to the latter's employees for the more effective safeguarding of the
employees' rights under the Labor Code.35 [Emphasis supplied].
The case of San Miguel Corporation v. MAERC Integrated Services, Inc. 36 also recognized this solidary liability between a
labor-only contractor and the employer. In the said case, this Court gave the distinctions between solidary liability in legitimate
job contracting and in labor-only contracting, to wit:
463
In legitimate job contracting, the law creates an employer-employee relationship for a limited purpose, i.e., to ensure that the
employees are paid their wages. The principal employer becomes jointly and severally liable with the job contractor only for
the payment of the employees' wages whenever the contractor fails to pay the same. Other than that, the principal employer is
not responsible for any claim made by the employees.
On the other hand, in labor-only contracting, the statute creates an employer-employee relationship for a comprehensive
purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the principal employer and
the latter is responsible to the employees of the labor-only contractor as if such employees had been directly employed by the
principal employer. The principal employer therefore becomes solidarily liable with the labor-only contractor for all the rightful
claims of the employees.37 [Emphases supplied; Citations omitted]
Recently, this Court reiterated this solidary liability of labor-only contractor in the case of 7K Corporation v. NLRC38 where it
was ruled that the principal employer is solidarily liable with the labor-only contractor for the rightful claims of the employees.
Conclusion
Considering that MBMSI, as the labor-only contractor, is solidarily liable with the respondents, as the principal employer, then
the NLRC and the CA correctly held that the respondents solidary liability was already expunged by virtue of the releases,
waivers and quitclaims executed by each of the petitioners in favor of MBMSI pursuant to Article 1217 of the Civil Code which
provides that "payment made by one of the solidary debtors extinguishes the obligation."
This Court has constantly applied the Civil Code provisions on solidary liability, specifically Articles 1217 and 1222, 39 to labor
cases. In Varorient Shipping Co., Inc. v. NLRC,40 this Court held:
The POEA Rules holds her, as a corporate officer, solidarily liable with the local licensed manning agency. Her liability is
inseparable from those of Varorient and Lagoa. If anyone of them is held liable then all of them would be liable for the same
obligation. Each of the solidary debtors, insofar as the creditor/s is/are concerned, is the debtor of the entire amount; it is only
with respect to his co-debtors that he/she is liable to the extent of his/her share in the obligation. Such being the case, the Civil
Code allows each solidary debtor, in actions filed by the creditor/s, to avail himself of all defenses which are derived from the
nature of the obligation and of those which are personal to him, or pertaining to his share [citing Section 1222 of the Civil
Code]. He may also avail of those defenses personally belonging to his co-debtors, but only to the extent of their share in the
debt. Thus, Varorient may set up all the defenses pertaining to Colarina and Lagoa; whereas Colarina and Lagoa are liable
only to the extent to which Varorient may be found liable by the court.
xxxx
If Varorient were to be found liable and made to pay pursuant thereto, the entire obligation would already be extinguished
[citing Article 1217 of the Civil Code] even if no attempt was made to enforce the judgment against Colarina. Because there
existed a common cause of action against the three solidary obligors, as the acts and omissions imputed against them are one
and the same, an ultimate finding that Varorient was not liable would, under these circumstances, logically imply a similar
exoneration from liability for Colarina and Lagoa, whether or not they interposed any defense. 41 [Emphases supplied]
In light of these conclusions, the Court holds that the releases, waivers and quitclaims executed by petitioners in favor of
MBMSI redounded to the respondents' benefit. The liabilities of the respondents to petitioners are now deemed extinguished.
The Court cannot allow petitioners to reap the benefits given to them by MBMSI in exchange for the releases, waivers and
quitclaims and, again, claim the same benefits from PCCr.
While it is the duty of the courts to prevent the exploitation of employees, it also behooves the courts to protect the sanctity of
contracts that do not contravene the law.42 The law in protecting the rights of the laborer authorizes neither oppression nor
self-destruction of the employer. While the Constitution is committed to the policy of social justice and the protection of the
working class, it should not be supposed that every labor dispute will be automatically decided in favor of labor. Management
also has its own rights, which, as such, are entitled to respect and enforcement in the interest of simple fair play. Out of its
concern for those with less privileges in life, the Court has inclined more often than not toward the worker and upheld his
cause in his conflicts with the employer. Such favoritism, however, has not blinded the Court to the rule that justice is in every
case for the deserving, to be dispensed in the light of the established facts and applicable law and doctrine. 43
WHEREFORE, the petition is DENIED.
SO ORDERED.

G.R. No. 160506 June 6, 2011

JOEB M. ALIVIADO, ARTHUR CORPUZ, ERIC ALIVIADO, MONCHITO AMPELOQUIO, ABRAHAM BASMAYOR,
JONATHAN MATEO, LORENZO PLATON, JOSE FERNANDO GUTIERREZ, ESTANISLAO BUENAVENTURA, LOPE
SALONGA, FRANZ DAVID, NESTOR IGNACIO, JULIO REY, RUBEN MARQUEZ, JR., MAXIMINO PASCUAL, ERNESTO
CALANAO, ROLANDO ROMASANTA, RHUEL AGOO, BONIFACIO ORTEGA, ARSENIO SORIANO, JR., ARNEL
ENDAYA, ROBERTO ENRIQUEZ, NESTOR BAQUILA, EDGARDO QUIAMBAO, SANTOS BACALSO, SAMSON BASCO,
ALADINO GREGORO, JR., EDWIN GARCIA, ARMANDO VILLAR, EMIL TAWAT, MARIO P. LIONGSON, CRESENTE J.
GARCIA, FERNANDO MACABENTE, MELECIO CASAPAO, REYNALDO JACABAN, FERDINAND SALVO, ALSTANDO
MONTOS, RAINER N. SALVADOR, RAMIL REYES, PEDRO G. ROY, LEONARDO P. TALLEDO, ENRIQUE F. TALLEDO,
WILLIE ORTIZ, ERNESTO SOYOSA, ROMEO VASQUEZ, JOEL BILLONES, ALLAN BALTAZAR, NOLI GABUYO,

464
EMMANUEL E. LABAN, RAMIR E. PIAT, RAUL DULAY, TADEO DURAN, JOSEPH BANICO, ALBERT LEYNES,
ANTONIO DACUNA, RENATO DELA CRUZ, ROMEO VIERNES, JR., ELAIS BASEO, WILFREDO TORRES, MELCHOR
CARDANO, MARIANO NARANIAN, JOHN SUMERGIDO, ROBERTO ROSALES, GERRY C. GATPO, GERMAN N.
GUEVARRA, GILBERT Y. MIRANDA, RODOLFO C. TOLEDO, ARNOLD D. LASTONA, PHILIP M. LOZA, MARIO N.
CULDAYON, ORLANDO P. JIMENEZ, FRED P. JIMENEZ, RESTITUTO C. PAMINTUAN, JR., ROLANDO J. DE ANDRES,
ARTUZ BUSTENERA, ROBERTO B. CRUZ, ROSEDY O. YORDAN, DENNIS DACASIN, ALEJANDRINO ABATON, and
ORLANDO S. BALANGUE, Petitioners,
vs.
PROCTER & GAMBLE PHILS., INC., and PROMM-GEM INC., Respondents.
DECISION
DEL CASTILLO, J.:
Labor laws expressly prohibit "labor-only" contracting. To prevent its circumvention, the Labor Code establishes an employer-
employee relationship between the employer and the employees of the labor-only contractor.
The instant petition for review assails the March 21, 2003 Decision 1 of the Court of Appeals (CA) in CA-G.R. SP No. 52082
and its October 20, 2003 Resolution2 denying the motions for reconsideration separately filed by petitioners and respondent
Procter & Gamble Phils. Inc. (P&G). The appellate court affirmed the July 27, 1998 Decision of the National Labor Relations
Commission (NLRC), which in turn affirmed the November 29, 1996 Decision 3 of the Labor Arbiter. All these decisions found
Promm-Gem, Inc. (Promm-Gem) and Sales and Promotions Services (SAPS) to be legitimate independent contractors and the
employers of the petitioners.
Factual Antecedents
Petitioners worked as merchandisers of P&G from various dates, allegedly starting as early as 1982 or as late as June 1991,
to either May 5, 1992 or March 11, 1993, more specifically as follows:
Name Date Employed Date Dismissed

1. Joeb M. Aliviado November, 1985 May 5, 1992

2. Arthur Corpuz 1988 March 11, 1993

3. Eric Aliviado 1985 March 11, 1993

4. Monchito Ampeloquio September, 1988 March 11, 1993

5. Abraham Basmayor[, Jr.] 1987 March 11, 1993

6. Jonathan Mateo May, 1988 March 11, 1993

7. Lorenzo Platon 1985 March 11, 1993

8. Jose Fernando Gutierrez 1988 May 5, 1992

9. Estanislao Buenaventura June, 1988 March 11, 1993

10. Lope Salonga 1982 March 11, 1993

11. Franz David 1989 March 11, 1993

12. Nestor Ignacio 1982 March 11, 1993

13. Julio Rey 1989 May 5, 1992

14. Ruben [Vasquez], Jr. 1985 May 5, 1992

15. Maximino Pascual 1990 May 5, 1992

16. Ernesto Calanao[, Jr.] 1987 May 5, 1992

17. Rolando Romasanta 1983 March 11, 1993

18. [Roehl] Agoo 1988 March 11, 1993

19. Bonifacio Ortega 1988 March 11, 1993

465
20. Arsenio Soriano, Jr. 1985 March 11, 1993

21. Arnel Endaya 1983 March 11, 1993

22. Roberto Enriquez December, 1988 March 11, 1993

23. Nestor [Es]quila 1983 May 5, 1992

24. Ed[g]ardo Quiambao 1989 March 11, 1993

25. Santos Bacalso 1990 March 11, 1993

26. Samson Basco 1984 March 11, 1993

27. Aladino Gregor[e], Jr. 1980 May 5, 1992

28. Edwin Garcia 1987 May 5, 1992

29. Armando Villar 1990 May 5, 1992

30. Emil Tawat 1988 March 11, 1993

31. Mario P. Liongson 1991 May 5, 1992

32. Cresente J. Garcia 1984 March 11, 1993

33. Fernando Macabent[a] 1990 May 5, 1992

34. Melecio Casapao 1987 March 11, 1993

35. Reynaldo Jacaban 1990 May 5, 1992

36. Ferdinand Salvo 1985 May 5, 1992

37. Alstando Montos 1984 March 11, 1993

38. Rainer N. Salvador 1984 May 5, 1992

39. Ramil Reyes 1984 March 11, 1993

40. Pedro G. Roy 1987

41. Leonardo [F]. Talledo 1985 March 11, 1993

42. Enrique [F]. Talledo 1988 March 11, 1993

43. Willie Ortiz 1987 May 5, 1992

44. Ernesto Soyosa 1988 May 5, 1992

45. Romeo Vasquez 1985 March 11, 1993

46. Joel Billones 1987 March 11, 1993

47. Allan Baltazar 1989 March 11, 1993

48. Noli Gabuyo 1991 March 11, 1993

49. Emmanuel E. Laban 1987 May 5, 1992

50. Ramir[o] E. [Pita] 1990 May 5, 1992

51. Raul Dulay 1988 May 5, 1992

52. Tadeo Duran[o] 1988 May 5, 1992

466
 53. Joseph Banico 1988 March 11, 1993

54. Albert Leynes 1990 May 5, 1992

55. Antonio Dacu[m]a 1990 May 5, 1992

56. Renato dela Cruz 1982

57. Romeo Viernes, Jr. 1986

58. El[ia]s Bas[c]o 1989

59. Wilfredo Torres 1986 May 5, 1992

60. Melchor Carda[]o 1991 May 5, 1992

61. [Marino] [Maranion] 1989 May 5, 1992

62. John Sumergido 1987 May 5, 1992

63. Roberto Rosales May, 1987 May 5, 1992

64. Gerry [G]. Gatpo November, 1990 March 11, 1993

65. German N. Guevara May, 1990 March 11, 1993

66. Gilbert Y. Miranda June, 1991 March 11, 1993

67. Rodolfo C. Toledo[, Jr.] May 14, 1991 March 11, 1993

68. Arnold D. [Laspoa] June 1991 March 11, 1993

69. Philip M. Loza March 5, 1992 March 11, 1993

70. Mario N. C[o]ldayon May 14, 1991 March 11, 1993

71. Orlando P. Jimenez November 6, 1992 March 11, 1993

72. Fred P. Jimenez September, 1991 March 11, 1993

73. Restituto C. Pamintuan, Jr. March 5, 1992 March 11, 1993

74. Rolando J. de Andres June, 1991 March 11, 1993

75. Artuz Bustenera[, Jr.] December, 1989 March 11, 1993

76. Roberto B. Cruz May 4, 1990 March 11, 1993

77. Rosedy O. Yordan June, 1991 May 5, 1992

78. Dennis Dacasin May. 1990 May 5, 1992

79. Alejandrino Abaton 1988 May 5, 1992

80. Orlando S. Balangue March, 1989 March 11, 19934

They all individually signed employment contracts with either Promm-Gem or SAPS for periods of more or less five months at
a time.5 They were assigned at different outlets, supermarkets and stores where they handled all the products of P&G. They
received their wages from Promm-Gem or SAPS.6
SAPS and Promm-Gem imposed disciplinary measures on erring merchandisers for reasons such as habitual absenteeism,
dishonesty or changing day-off without prior notice.7
P&G is principally engaged in the manufacture and production of different consumer and health products, which it sells on a
wholesale basis to various supermarkets and distributors. 8 To enhance consumer awareness and acceptance of the products,
P&G entered into contracts with Promm-Gem and SAPS for the promotion and merchandising of its products. 9

467
In December 1991, petitioners filed a complaint10 against P&G for regularization, service incentive leave pay and other
benefits with damages. The complaint was later amended11 to include the matter of their subsequent dismissal.
Ruling of the Labor Arbiter
On November 29, 1996, the Labor Arbiter dismissed the complaint for lack of merit and ruled that there was no employer-
employee relationship between petitioners and P&G. He found that the selection and engagement of the petitioners, the
payment of their wages, the power of dismissal and control with respect to the means and methods by which their work was
accomplished, were all done and exercised by Promm-Gem/SAPS. He further found that Promm-Gem and SAPS were
legitimate independent job contractors. The dispositive portion of his Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered Dismissing the above-entitled cases against respondent
Procter & Gamble (Phils.), Inc. for lack of merit.
SO ORDERED.12
Ruling of the NLRC
Appealing to the NLRC, petitioners disputed the Labor Arbiters findings. On July 27, 1998, the NLRC rendered a
Decision13 disposing as follows:
WHEREFORE, premises considered, the appeal of complainants is hereby DISMISSED and the decision appealed from
AFFIRMED.
SO ORDERED.14
Petitioners filed a motion for reconsideration but the motion was denied in the November 19, 1998 Resolution. 15
Ruling of the Court of Appeals
Petitioners then filed a petition for certiorari with the CA, alleging grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of the Labor Arbiter and the NLRC. However, said petition was also denied by the CA which disposed
as follows:
WHEREFORE, the decision of the National Labor Relations Commission dated July 27, 1998 is AFFIRMED with the
MODIFICATION that respondent Procter & Gamble Phils., Inc. is ordered to pay service incentive leave pay to petitioners.
SO ORDERED.16
Petitioners filed a motion for reconsideration but the motion was also denied. Hence, this petition.
Issues
Petitioners now come before us raising the following issues:
I.
WHETHER X X X THE HONORABLE COURT OF APPEALS HAS COMMITTED [A] REVERSIBLE ERROR WHEN
IT DID NOT FIND THE PUBLIC RESPONDENTS TO HAVE ACTED WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF OR IN EXCESS OF JURISDICTION IN RENDERING THE QUESTIONED JUDGMENT
WHEN, OBVIOUSLY, THE PETITIONERS WERE ABLE TO PROVE AND ESTABLISH THAT RESPONDENT
PROCTER & GAMBLE PHILS., INC. IS THEIR EMPLOYER AND THAT THEY WERE ILLEGALLY DISMISSED BY
THE FORMER.
II.
WHETHER X X X THE HONORABLE COURT OF APPEALS HAS COMMITTED [A] REVERSIBLE ERROR WHEN
IT DID NOT DECLARE THAT THE PUBLIC RESPONDENTS HAD ACTED WITH GRAVE ABUSE OF DISCRETION
WHEN THE LATTER DID NOT FIND THE PRIVATE RESPONDENTS LIABLE TO THE PETITIONERS FOR
PAYMENT OF ACTUAL, MORAL AND EXEMPLARY DAMAGES AS WELL AS LITIGATION COSTS AND
ATTORNEYS FEES.17
Simply stated, the issues are: (1) whether P&G is the employer of petitioners; (2) whether petitioners were illegally dismissed;
and (3) whether petitioners are entitled for payment of actual, moral and exemplary damages as well as litigation costs and
attorneys fees.
Petitioners Arguments
Petitioners insist that they are employees of P&G. They claim that they were recruited by the salesmen of P&G and were
engaged to undertake merchandising chores for P&G long before the existence of Promm-Gem and/or SAPS. They further
claim that when the latter had its so-called re-alignment program, petitioners were instructed to fill up application forms and
report to the agencies which P&G created.18
Petitioners further claim that P&G instigated their dismissal from work as can be gleaned from its letter 19 to SAPS dated
February 24, 1993, informing the latter that their Merchandising Services Contract will no longer be renewed.
Petitioners further assert that Promm-Gem and SAPS are labor-only contractors providing services of manpower to their client.
They claim that the contractors have neither substantial capital nor tools and equipment to undertake independent labor
contracting. Petitioners insist that since they had been engaged to perform activities which are necessary or desirable in the
usual business or trade of P&G, then they are its regular employees. 20
Respondents Arguments

468
On the other hand, P&G points out that the instant petition raises only questions of fact and should thus be thrown out as the
Court is not a trier of facts. It argues that findings of facts of the NLRC, particularly where the NLRC and the Labor Arbiter are
in agreement, are deemed binding and conclusive on the Supreme Court.
P&G further argues that there is no employment relationship between it and petitioners. It was Promm-Gem or SAPS that (1)
selected petitioners and engaged their services; (2) paid their salaries; (3) wielded the power of dismissal; and (4) had the
power of control over their conduct of work.
P&G also contends that the Labor Code neither defines nor limits which services or activities may be validly outsourced. Thus,
an employer can farm out any of its activities to an independent contractor, regardless of whether such activity is peripheral or
core in nature. It insists that the determination of whether to engage the services of a job contractor or to engage in direct
hiring is within the ambit of management prerogative.
At this juncture, it is worth mentioning that on January 29, 2007, we deemed as waived the filing of the Comment of Promm-
Gem on the petition.21 Also, although SAPS was impleaded as a party in the proceedings before the Labor Arbiter and the
NLRC, it was no longer impleaded as a party in the proceedings before the CA. 22 Hence, our pronouncements with regard to
SAPS are only for the purpose of determining the obligations of P&G, if any.
Our Ruling
The petition has merit.
As a rule, the Court refrains from reviewing factual assessments of lower courts and agencies exercising adjudicative
functions, such as the NLRC. Occasionally, however, the Court is constrained to wade into factual matters when there is
insufficient or insubstantial evidence on record to support those factual findings; or when too much is concluded, inferred or
deduced from the bare or incomplete facts appearing on record. 23 In the present case, we find the need to review the records
to ascertain the facts.
Labor-only contracting and job contracting
In order to resolve the issue of whether P&G is the employer of petitioners, it is necessary to first determine whether Promm-
Gem and SAPS are labor-only contractors or legitimate job contractors.
The pertinent Labor Code provision on the matter states:
ART. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the
performance of the formers work, the employees of the contractor and of the latters subcontractor, if any, shall be paid in
accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the
employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work
performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of
workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only
contracting and job contracting as well as differentiations within these types of contracting and determine who among the
parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed
by such person are performing activities which are directly related to the principal business of such employer. In such cases,
the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in
the same manner and extent as if the latter were directly employed by him. (Emphasis and underscoring supplied.)
Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by Department Order No. 18-
02,24 distinguishes between legitimate and labor-only contracting:
xxxx
Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists a trilateral relationship
under which there is a contract for a specific job, work or service between the principal and the contractor or subcontractor,
and a contract of employment between the contractor or subcontractor and its workers. Hence, there are three parties involved
in these arrangements, the principal which decides to farm out a job or service to a contractor or subcontractor, the contractor
or subcontractor which has the capacity to independently undertake the performance of the job, work or service, and the
contractual workers engaged by the contractor or subcontractor to accomplish the job[,] work or service.
xxxx
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For this purpose,
labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a principal, and any of the following elements are present:
i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or
service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal; or

469
 ii) [T]he contractor does not exercise the right to control over the performance of the work of the contractual
employee.
The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor Code, as amended.
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations, tools,
equipment, implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the
performance or completion of the job, work or service contracted out.
The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers are
performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that end.
x x x x (Underscoring supplied.)
Clearly, the law and its implementing rules allow contracting arrangements for the performance of specific jobs, works or
services. Indeed, it is management prerogative to farm out any of its activities, regardless of whether such activity is peripheral
or core in nature. However, in order for such outsourcing to be valid, it must be made to an independent contractor because
the current labor rules expressly prohibit labor-only contracting.
To emphasize, there is labor-only contracting when the contractor or sub-contractor merely recruits, supplies or places
workers to perform a job, work or service for a principal 25 and any of the following elements are present:
i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or
service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal; or
ii) The contractor does not exercise the right to control over the performance of the work of the contractualemployee.
(Underscoring supplied)
In the instant case, the financial statements26 of Promm-Gem show that it
has authorized capital stock of P1 million and a paid-in capital, or capital available for operations, of P500,000.00 as of
1990.27 It also has long term assets worth P432,895.28 and current assets of P719,042.32. Promm-Gem has also proven that
it maintained its own warehouse and office space with a floor area of 870 square meters. 28 It also had under its name three
registered vehicles which were used for its promotional/merchandising business. 29Promm-Gem also has other clients30 aside
from P&G.31 Under the circumstances, we find that Promm-Gem has substantial investment which relates to the work to be
performed. These factors negate the existence of the element specified in Section 5(i) of DOLE Department Order No. 18-02.
The records also show that Promm-Gem supplied its complainant-workers with the relevant materials, such as markers, tapes,
liners and cutters, necessary for them to perform their work. Promm-Gem also issued uniforms to them. It is also relevant to
mention that Promm-Gem already considered the complainants working under it as its regular, not merely contractual or
project, employees.32 This circumstance negates the existence of element (ii) as stated in Section 5 of DOLE Department
Order No. 18-02, which speaks of contractual employees. This, furthermore, negates on the part of Promm-Gem bad faith
and intent to circumvent labor laws which factors have often been tipping points that lead the Court to strike down the
employment practice or agreement concerned as contrary to public policy, morals, good customs or public order.33
Under the circumstances, Promm-Gem cannot be considered as a labor-only contractor. We find that it is a legitimate
independent contractor.
On the other hand, the Articles of Incorporation of SAPS shows that it has a paid-in capital of only P31,250.00. There is no
other evidence presented to show how much its working capital and assets are. Furthermore, there is no showing of
substantial investment in tools, equipment or other assets.
In Vinoya v. National Labor Relations Commission,34 the Court held that "[w]ith the current economic atmosphere in the
country, the paid-in capitalization of PMCI amounting to P75,000.00 cannot be considered as substantial capital and, as such,
PMCI cannot qualify as an independent contractor."35 Applying the same rationale to the present case, it is clear that SAPS
having a paid-in capital of only P31,250 - has no substantial capital. SAPS lack of substantial capital is underlined by the
records36 which show that its payroll for its merchandisers alone for one month would already total P44,561.00. It had 6-month
contracts with P&G.37 Yet SAPS failed to show that it could complete the 6-month contracts using its own capital and
investment. Its capital is not even sufficient for one months payroll. SAPS failed to show that its paid-in capital of P31,250.00
is sufficient for the period required for it to generate its needed revenue to sustain its operations independently. Substantial
capital refers to capitalization used in the performance or completion of the job, work or service contracted out. In the present
case, SAPS has failed to show substantial capital.
Furthermore, the petitioners have been charged with the merchandising and promotion of the products of P&G, an activity that
has already been considered by the Court as doubtlessly directly related to the manufacturing business, 38 which is the
principal business of P&G. Considering that SAPS has no substantial capital or investment and the workers it recruited are
performing activities which are directly related to the principal business of P&G, we find that the former is engaged in "labor-
only contracting".
"Where labor-only contracting exists, the Labor Code itself establishes an employer-employee relationship between the
employer and the employees of the labor-only contractor."39 The statute establishes this relationship for a comprehensive
purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the principal employer and

470
the latter is responsible to the employees of the labor-only contractor as if such employees had been directly employed by the
principal employer.40
Consequently, the following petitioners, having been recruited and supplied
by SAPS41 -- which engaged in labor-only contracting -- are considered as the employees of P&G: Arthur Corpuz, Eric
Aliviado, Monchito Ampeloquio, Abraham Basmayor, Jr., Jonathan Mateo, Lorenzo Platon, Estanislao Buenaventura, Lope
Salonga, Franz David, Nestor Ignacio, Jr., Rolando Romasanta, Roehl Agoo, Bonifacio Ortega, Arsenio Soriano, Jr., Arnel
Endaya, Roberto Enriquez, Edgardo Quiambao, Santos Bacalso, Samson Basco, Alstando Montos, Rainer N. Salvador, Pedro
G. Roy, Leonardo F. Talledo, Enrique F. Talledo, Joel Billones, Allan Baltazar, Noli Gabuyo, Gerry Gatpo, German Guevara,
Gilbert V. Miranda, Rodolfo C. Toledo, Jr., Arnold D. Laspoa, Philip M. Loza, Mario N. Coldayon, Orlando P. Jimenez, Fred
P. Jimenez, Restituto C. Pamintuan, Jr., Rolando J. De Andres, Artuz Bustenera, Jr., Roberto B. Cruz, Rosedy O. Yordan,
Orlando S. Balangue, Emil Tawat, Cresente J. Garcia, Melencio Casapao, Romeo Vasquez, Renato dela Cruz, Romeo
Viernes, Jr., Elias Basco and Dennis Dacasin.
The following petitioners, having worked under, and been dismissed by Promm-Gem, are considered the employees of
Promm-Gem, not of P&G: Wilfredo Torres, John Sumergido, Edwin Garcia, Mario P. Liongson, Jr., Ferdinand Salvo,
Alejandrino Abaton, Emmanuel A. Laban, Ernesto Soyosa, Aladino Gregore, Jr., Ramil Reyes, Ruben Vasquez, Jr., Maximino
Pascual, Willie Ortiz, Armando Villar, Jose Fernando Gutierrez, Ramiro Pita, Fernando Macabenta, Nestor Esquila, Julio Rey,
Albert Leynes, Ernesto Calanao, Roberto Rosales, Antonio Dacuma, Tadeo Durano, Raul Dulay, Marino Maranion, Joseph
Banico, Melchor Cardano, Reynaldo Jacaban, and Joeb Aliviado. 42
Termination of services
We now discuss the issue of whether petitioners were illegally dismissed. In cases of regular employment, the employer shall
not terminate the services of an employee except for a just 43 or authorized44 cause.
In the instant case, the termination letters given by Promm-Gem to its employees uniformly specified the cause of dismissal as
grave misconduct and breach of trust, as follows:
xxxx
This informs you that effective May 5, 1992, your employment with our company, Promm-Gem, Inc. has been terminated. We
find your expressed admission, that you considered yourself as an employee of Procter & Gamble Phils., Inc. and assailing
the integrity of the Company as legitimate and independent promotion firm, is deemed as an act of disloyalty prejudicial to the
interests of our Company: serious misconduct and breach of trust reposed upon you as employee of our Company which
[co]nstitute just cause for the termination of your employment.
x x x x45
Misconduct has been defined as improper or wrong conduct; the transgression of some established and definite rule of action,
a forbidden act, a dereliction of duty, unlawful in character implying wrongful intent and not mere error of judgment. The
misconduct to be serious must be of such grave and aggravated character and not merely trivial and unimportant. 46 To be a
just cause for dismissal, such misconduct (a) must be serious; (b) must relate to the performance of the employees duties;
and (c) must show that the employee has become unfit to continue working for the employer. 47
In other words, in order to constitute serious misconduct which will warrant the dismissal of an employee under paragraph (a)
of Article 282 of the Labor Code, it is not sufficient that the act or conduct complained of has violated some established rules
or policies. It is equally important and required that the act or conduct must have been performed with wrongful intent. 48 In the
instant case, petitioners-employees of Promm-Gem may have committed an error of judgment in claiming to be employees of
P&G, but it cannot be said that they were motivated by any wrongful intent in doing so. As such, we find them guilty of only
simple misconduct for assailing the integrity of Promm-Gem as a legitimate and independent promotion firm. A misconduct
which is not serious or grave, as that existing in the instant case, cannot be a valid basis for dismissing an employee.
Meanwhile, loss of trust and confidence, as a ground for dismissal, must be based on the willful breach of the trust reposed in
the employee by his employer. Ordinary breach will not suffice. A breach of trust is willful if it is done intentionally, knowingly
and purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or
inadvertently.49
Loss of trust and confidence, as a cause for termination of employment, is premised on the fact that the employee concerned
holds a position of responsibility or of trust and confidence. As such, he must be invested with confidence on delicate matters,
such as custody, handling or care and protection of the property and assets of the employer. And, in order to constitute a just
cause for dismissal, the act complained of must be work-related and must show that the employee is unfit to continue to work
for the employer.50 In the instant case, the petitioners-employees of Promm-Gem have not been shown to be occupying
positions of responsibility or of trust and confidence. Neither is there any evidence to show that they are unfit to continue to
work as merchandisers for Promm-Gem.
All told, we find no valid cause for the dismissal of petitioners-employees of Promm-Gem.
While Promm-Gem had complied with the procedural aspect of due process in terminating the employment of petitioners-
employees, i.e., giving two notices and in between such notices, an opportunity for the employees to answer and rebut the
charges against them, it failed to comply with the substantive aspect of due process as the acts complained of neither
constitute serious misconduct nor breach of trust. Hence, the dismissal is illegal.
471
With regard to the petitioners placed with P&G by SAPS, they were given no written notice of dismissal. The records show that
upon receipt by SAPS of P&Gs letter terminating their "Merchandising Services Contact" effective March 11, 1993, they in
turn verbally informed the concerned petitioners not to report for work anymore. The concerned petitioners related their
dismissal as follows:
xxxx
5. On March 11, 1993, we were called to a meeting at SAPS office. We were told by Mr. Saturnino A. Ponce that we should
already stop working immediately because that was the order of Procter and Gamble. According to him he could not do
otherwise because Procter and Gamble was the one paying us. To prove that Procter and Gamble was the one responsible in
our dismissal, he showed to us the letter51 dated February 24, 1993, x x x
February 24, 1993
Sales and Promotions Services
Armons Bldg., 142 Kamias Road,
Quezon City
Attention: Mr. Saturnino A. Ponce
President & General Manager
Gentlemen:
Based on our discussions last 5 and 19 February 1993, this formally informs you that we will not be renewing our
Merchandising Services Contract with your agency.
Please immediately undertake efforts to ensure that your services to the Company will terminate effective close of business
hours of 11 March 1993.
This is without prejudice to whatever obligations you may have to the company under the abovementioned contract.
Very truly yours,
(Sgd.)
EMMANUEL M. NON
Sales Merchandising III
6. On March 12, 1993, we reported to our respective outlet assignments. But, we were no longer allowed to work and we were
refused entrance by the security guards posted. According to the security guards, all merchandisers of Procter and Gamble
under S[APS] who filed a case in the Dept. of Labor are already dismissed as per letter of Procter and Gamble dated February
25, 1993. x x x52
Neither SAPS nor P&G dispute the existence of these circumstances. Parenthetically, unlike Promm-Gem which dismissed its
employees for grave misconduct and breach of trust due to disloyalty, SAPS dismissed its employees upon the initiation of
P&G. It is evident that SAPS does not carry on its own business because the termination of its contract with P&G automatically
meant for it also the termination of its employees services. It is obvious from its act that SAPS had no other clients and had no
intention of seeking other clients in order to further its merchandising business. From all indications SAPS, existed to cater
solely to the need of P&G for the supply of employees in the latters merchandising concerns only. Under the circumstances
prevailing in the instant case, we cannot consider SAPS as an independent contractor.
Going back to the matter of dismissal, it must be emphasized that the onus probandi to prove the lawfulness of the dismissal
rests with the employer.53 In termination cases, the burden of proof rests upon the employer to show that the dismissal is for
just and valid cause.54 In the instant case, P&G failed to discharge the burden of proving the legality and validity of the
dismissals of those petitioners who are considered its employees. Hence, the dismissals necessarily were not justified and are
therefore illegal.
Damages
We now go to the issue of whether petitioners are entitled to damages. Moral
and exemplary damages are recoverable where the dismissal of an employee was attended by bad faith or fraud or
constituted an act oppressive to labor or was done in a manner contrary to morals, good customs or public policy. 55
With regard to the employees of Promm-Gem, there being no evidence of bad faith, fraud or any oppressive act on the part of
the latter, we find no support for the award of damages.
As for P&G, the records show that it dismissed its employees through SAPS in a manner oppressive to labor. The sudden and
peremptory barring of the concerned petitioners from work, and from admission to the work place, after just a one-day verbal
notice, and for no valid cause bellows oppression and utter disregard of the right to due process of the concerned petitioners.
Hence, an award of moral damages is called for.
Attorneys fees may likewise be awarded to the concerned petitioners who were illegally dismissed in bad faith and were
compelled to litigate or incur expenses to protect their rights by reason of the oppressive acts56 of P&G.
Lastly, under Article 279 of the Labor Code, an employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges, inclusive of allowances, and other benefits or their monetary
equivalent from the time the compensation was withheld up to the time of actual reinstatement. 57Hence, all the petitioners,
having been illegally dismissed are entitled to reinstatement without loss of seniority rights and with full back wages and other
benefits from the time of their illegal dismissal up to the time of their actual reinstatement.1avvphi1

472
WHEREFORE, the petition is GRANTED. The Decision dated March 21, 2003 of the Court of Appeals in CA-G.R. SP No.
52082 and the Resolution dated October 20, 2003 are REVERSED and SET ASIDE. Procter & Gamble Phils., Inc. and
Promm-Gem, Inc. are ORDERED to reinstate their respective employees immediately without loss of seniority rights and with
full backwages and other benefits from the time of their illegal dismissal up to the time of their actual reinstatement. Procter &
Gamble Phils., Inc. is further ORDERED to pay each of those petitioners considered as its employees, namely Arthur Corpuz,
Eric Aliviado, Monchito Ampeloquio, Abraham Basmayor, Jr., Jonathan Mateo, Lorenzo Platon, Estanislao Buenaventura,
Lope Salonga, Franz David, Nestor Ignacio, Rolando Romasanta, Roehl Agoo, Bonifacio Ortega, Arsenio Soriano, Jr., Arnel
Endaya, Roberto Enriquez, Edgardo Quiambao, Santos Bacalso, Samson Basco, Alstando Montos, Rainer N. Salvador, Pedro
G. Roy, Leonardo F. Talledo, Enrique F. Talledo, Joel Billones, Allan Baltazar, Noli Gabuyo, Gerry Gatpo, German Guevara,
Gilbert Y. Miranda, Rodolfo C. Toledo, Jr., Arnold D. Laspoa, Philip M. Loza, Mario N. Coldayon, Orlando P. Jimenez, Fred
P. Jimenez, Restituto C. Pamintuan, Jr., Rolando J. De Andres, Artuz Bustenera, Jr., Roberto B. Cruz, Rosedy O. Yordan,
Orlando S. Balangue, Emil Tawat, Cresente J. Garcia, Melencio Casapao, Romeo Vasquez, Renato dela Cruz, Romeo
Viernes, Jr., Elias Basco and Dennis Dacasin, P25,000.00 as moral damages plus ten percent of the total sum as and for
attorneys fees.
Let this case be REMANDED to the Labor Arbiter for the computation, within 30 days from receipt of this Decision, of
petitioners backwages and other benefits; and ten percent of the total sum as and for attorneys fees as stated above; and for
immediate execution.
SO ORDERED.

G.R. No. 146408 February 29, 2008

PHILIPPINE AIRLINES, INC., petitioner,
vs.
ENRIQUE LIGAN, EMELITO SOCO, ALLAN PANQUE, JOLITO OLIVEROS, RICHARD GONCER, NONILON PILAPIL,
AQUILINO YBANEZ, BERNABE SANDOVAL, RUEL GONCER, VIRGILIO P. CAMPOS, JR., ARTHUR M. CAPIN, RAMEL
BERNARDES, LORENZO BUTANAS, BENSON CARESUSA, JEFFREY LLENOS, ROQUE PILAPIL, ANTONIO M.
PAREJA, CLEMENTE R. LUMAYNO, NELSON TAMPUS, ROLANDO TUNACAO, CHERRIE ALEGRES, BENEDICTO
AUXTERO, EDUARDO MAGDADARAUG, NELSON M. DULCE, and ALLAN BENTUZAL, respondents.
DECISION
CARPIO MORALES, J.:
Petitioner Philippine Airlines as Owner, and Synergy Services Corporation (Synergy) as Contractor, entered into an
Agreement1 on July 15, 1991 whereby Synergy undertook to "provide loading, unloading, delivery of baggage and cargo and
other related services to and from [petitioner]'s aircraft at the Mactan Station." 2
The Agreement specified the following "Scope of Services" of Contractor Synergy:
1.2 CONTRACTOR shall furnish all the necessary capital, workers, loading, unloading and delivery materials,
facilities, supplies, equipment and tools for the satisfactory performance and execution of the following services (the
Work):
a. Loading and unloading of baggage and cargo to and from the aircraft;
b. Delivering of baggage from the ramp to the baggage claim area;
c. Picking up of baggage from the baggage sorting area to the designated parked aircraft;
d. Delivering of cargo unloaded from the flight to cargo terminal;
e. Other related jobs (but not janitorial functions) as may be required and necessary;
CONTRACTOR shall perform and execute the aforementioned Work at the following areas located at
Mactan Station, to wit:
a. Ramp Area
b. Baggage Claim Area
c. Cargo Terminal Area, and
d. Baggage Sorting Area3 (Underscoring supplied)
And it expressly provided that Synergy was "an independent contractor and . . . that there w[ould] be no employer-employee
relationship between CONTRACTOR and/or its employees on the one hand, and OWNER, on the other." 4
On the duration of the Agreement, Section 10 thereof provided:
10. 1 Should at any time OWNER find the services herein undertaken by CONTRACTOR to be unsatisfactory, it shall
notify CONTRACTOR who shall have fifteen (15) days from such notice within which to improve the services. If
CONTRACTOR fails to improve the services under this Agreement according to OWNER'S specifications and
standards, OWNER shall have the right to terminate this Agreement immediately and without advance notice.
10.2 Should CONTRACTOR fail to improve the services within the period stated above or should
CONTRACTOR breach the terms of this Agreement and fail or refuse to perform the Work in such a manner as will
be consistent with the achievement of the result therein contracted for or in any other way fail to comply strictly with
any terms of this Agreement, OWNER at its option, shall have the right to terminate this Agreement and to make
473
 other arrangements for having said Work performed and pursuant thereto shall retain so much of the money held on
the Agreement as is necessary to cover the OWNER's costs and damages, without prejudice to the right of OWNER
to seek resort to the bond furnished by CONTRACTOR should the money in OWNER's possession be insufficient.
x x x x (Underscoring supplied)
Except for respondent Benedicto Auxtero (Auxtero), the rest of the respondents, who appear to have been assigned by
Synergy to petitioner following the execution of the July 15, 1991 Agreement, filed on March 3, 1992 complaints before the
NLRC Regional Office VII at Cebu City against petitioner, Synergy and their respective officials for underpayment, non-
payment of premium pay for holidays, premium pay for rest days, serviceincentive leave pay, 13th month pay and allowances,
and for regularization of employment status with petitioner, they claiming to be "performing duties for the benefit of [petitioner]
since their job is directly connected with [its] business x x x." 5
Respondent Auxtero had initially filed a complaint against petitioner and Synergy and their respective officials for regularization
of his employment status. Later alleging that he was, without valid ground, verbally dismissed, he filed a complaint against
petitioner and Synergy and their respective officials for illegal dismissal and reinstatement with full backwages.6
The complaints of respondents were consolidated.
By Decision7 of August 29, 1994, Labor Arbiter Dominador Almirante found Synergy an independent contractor and dismissed
respondents' complaint for regularization against petitioner, but granted their money claims. The fallo of the decision reads:
WHEREFORE, foregoing premises considered, judgment is hereby rendered as follows:
(1) Ordering respondents PAL and Synergy jointly and severally to pay all the complainants herein their 13th month
pay and service incentive leave benefits;
xxxx
(3) Ordering respondent Synergy to pay complainant Benedicto Auxtero a financial assistance in the amount of
P5,000.00.
The awards hereinabove enumerated in the aggregate total amount of THREE HUNDRED TWENTY-TWO
THOUSAND THREE HUNDRED FIFTY NINE PESOS AND EIGHTY SEVEN CENTAVOS (P322,359.87) are
computed in detail by our Fiscal Examiner which computation is hereto attached to form part of this decision.
The rest of the claims are hereby ordered dismissed for lack of merit.8 (Underscoring supplied)
On appeal by respondents, the NLRC, Fourth Division, Cebu City, vacated and set aside the decision of the Labor Arbiter by
Decision9 of January 5, 1996, the fallo of which reads:
WHEREFORE, the Decision of the Labor Arbiter Dominador A. Almirante, dated August 29, 1994, is hereby
VACATED and SET ASIDE and judgment is hereby rendered:
1. Declaring respondent Synergy Services Corporation to be a 'labor-only' contractor;
2. Ordering respondent Philippine Airlines to accept, as its regular employees, all the complainants, . . . and to give
each of them the salaries, allowances and other employment benefits and privileges of aregular employee under the
Collective Bargaining Agreement subsisting during the period of their employment;
xxxx
4. Declaring the dismissal of complainant Benedicto Auxtero to be illegal and ordering his reinstatement as helper
or utility man with respondent Philippine Airlines, with full backwages, allowances and other benefits and privileges
from the time of his dismissal up to his actual reinstatement; and
5. Dismissing the appeal of respondent Synergy Services Corporation, for lack of merit. 10 (Emphasis and
underscoring supplied)
Only petitioner assailed the NLRC decision via petition for certiorari before this Court.
By Resolution11 of January 25, 1999, this Court referred the case to the Court of Appeals for appropriate action and
disposition, conformably with St. Martin Funeral Homes v. National Labor Relations Commission which was promulgated on
September 16, 1998.
The appellate court, by Decision of September 29, 2000, affirmed the Decision of the NLRC.12 Petitioner's motion for
reconsideration having been denied by Resolution of December 21, 2000, 13 the present petition was filed, faulting the
appellate court
I.
. . . IN UPHOLDING THE NATIONAL LABOR RELATIONS COMMISSION DECISION WHICH IMPOSED THE
RELATIONSHIP OF EMPLOYER-EMPLOYEE BETWEEN PETITIONER AND THE RESPONDENTS HEREIN.
II.
. . . IN AFFIRMING THE RULING OF THE NATIONAL LABOR RELATIONS COMMISSION ORDERING THE
REINSTATEMENT OF RESPONDENT AUXTERO DESPITE THE ABSENCE [OF] ANY FACTUAL FINDINGIN THE
DECISION THAT PETITIONER ILLEGALLY TERMINATED HIS EMPLOYMENT.
III.
. . . [IN ANY EVENT IN] COMMITT[ING] A PATENT AND GRAVE ERROR IN UPHOLDING THE DECISION OF THE
NATIONAL LABOR RELATIONS COMMISSION WHICH COMPELLED THE PETITIONER TO EMPLOY THE

474
 RESPONDENTS AS REGULAR EMPLOYEES DESPITE THE FACT THAT THEIR SERVICES ARE IN EXCESS OF
PETITIONER COMPANY'S OPERATIONAL REQUIREMENTS.14 (Underscoring supplied)
Petitioner argues that the law does not prohibit an employer from engaging an independent contractor, like Synergy, which has
substantial capital in carrying on an independent business of contracting, to perform specific jobs.
Petitioner further argues that its contracting out to Synergy various services like janitorial, aircraft cleaning, baggage-handling,
etc., which are directly related to its business, does not make respondents its employees.
Petitioner furthermore argues that none of the four (4) elements of an employer-employee relationship between petitioner and
respondents, viz: selection and engagement of an employee, payment of wages, power of dismissal, and the power to control
employee's conduct, is present in the case.15
Finally, petitioner avers that reinstatement of respondents had been rendered impossible because it had reduced its personnel
due to heavy losses as it had in fact terminated its service agreement with Synergy effective June 30, 1998 16 as a cost-saving
measure.
The decision of the case hinges on a determination of whether Synergy is a mere job-only contractor or a legitimate contractor.
If Synergy is found to be a mere job-only contractor, respondents could be considered as regular employees of petitioner as
Synergy would then be a mere agent of petitioner in which case respondents would be entitled to all the benefits granted to
petitioner's regular employees; otherwise, if Synergy is found to be a legitimate contractor, respondents' claims against
petitioner must fail as they would then be considered employees of Synergy.
The statutory basis of legitimate contracting or subcontracting is provided in Article 106 of the Labor Code which reads:
ART. 106. CONTRACTOR OR SUBCONTRACTOR. - Whenever an employer enters into a contract with another
person for the performance of the former's work, the employees of the contractor and of the latter's subcontractor, if
any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this
Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the
extent of the work performed under the contract, in the same manner and extent that he is liable to employees
directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the
rights of workers established under the Code. In so prohibiting or restricting, he may make appropriate distinctions
between labor-only contracting and job contracting as well as differentiations within these types of contracting and
determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent
any violation or circumvention of any provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer does not have substantial
capital or investment in the form of tools, equipment, machineries, work premises, among others, AND the
workers recruited and placed by such person are performing activities which are directly related to the
principal business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the workers in the same manner
and extent as if the latter were directly employed by him. (Emphasis, capitalization and underscoring supplied)
Legitimate contracting and labor-only contracting are defined in Department Order (D.O.) No. 18-02, Series of 2002 (Rules
Implementing Articles 106 to 109 of the Labor Code, as amended) as follows:
Section 3. Trilateral relationship in contracting arrangements. In legitimate contracting, there exists a trilateral
relationship under which there is a contract for a specific job, work or service between the principal and the contractor
or subcontractor, and a contract of employment between the contractor or subcontractor and its workers. Hence,
there are three parties involved in these arrangements, the principal which decides to farm out a job or service to a
contractor or subcontractor, the contractor or subcontractor which has the capacity to independently undertake the
performance of the job, work or service, and the contractual workers engaged by the contractor or subcontractor to
accomplish the job, work or service. (Emphasis and underscoring supplied)
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For this
purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits,
supplies or places workers to perform a job, work or service for a principal, and any of the following elements are [sic]
present:
(i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work
or service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal; OR
(ii) The contractor does not exercise the right to control over the performance of the work of the contractual
employee. (Emphasis, underscoring and capitalization supplied)
"Substantial capital or investment" and the "right to control" are defined in the same Section 5 of the Department Order as
follows:

475
 "Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements, machineries and work premises, actually and directly used by the
contractor or subcontractor in the performance or completion of the job, work or service contracted out.
The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers
are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching
that end. (Emphasis and underscoring supplied)
From the records of the case, it is gathered that the work performed by almost all of the respondents - loading and unloading
of baggage and cargo of passengers - is directly related to the main business of petitioner. And the equipment used by
respondents as station loaders, such as trailers and conveyors, are owned by petitioner. 17
Petitioner asserts, however, that mere compliance with substantial capital requirement suffices for Synergy to be considered a
legitimate contractor, citing Neri v. National Labor Relations Commission.18 Petitioner's reliance on said case is misplaced.
In Neri, the Labor Arbiter and the NLRC both determined that Building Care Corporation had a capital stock of P1 million fully
subscribed and paid for.19 The corporation's status as independent contractor had in fact been previously confirmed in an
earlier case20 by this Court which found it to be serving, among others, a university, an international bank, a big local bank, a
hospital center, government agencies, etc."
In stark contrast to the case at bar, while petitioner steadfastly asserted before the Labor Arbiter and the NLRC that Synergy
has a substantial capital to engage in legitimate contracting, it failed to present evidence thereon. As the NLRC held:
The decision of the Labor Arbiter merely mentioned on page 5 of his decision that respondent SYNERGY has
substantial capital, but there is no showing in the records as to how much is that capital. Neither had respondents
shown that SYNERGY has such substantial capital. x x x21 (Underscoring supplied)
It was only after the appellate court rendered its challenged Decision of September 29, 2002 when petitioner, in its Motion for
Reconsideration of the decision, sought to prove, for the first time, Synergy's substantial capitalization by attaching
photocopies of Synergy's financial statements, e.g., balance sheets, statements of income and retained earnings, marked as
"Annexes 'A' - 'A-4.'"22
More significantly, however, is that respondents worked alongside petitioner's regular employees who were performing
identical work.23 As San Miguel Corporation v. Aballa24 and Dole Philippines, Inc. v. Esteva, et al.25teach, such is an indicium
of labor-only contracting.
For labor-only contracting to exist, Section 5 of D.O. No. 18-02 which requires any of two elements to be present is, for
convenience, re-quoted:
(i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or
service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal, OR
(ii) The contractor does not exercise the right to control over the performance of the work of the contractual
employee. (Emphasis and CAPITALIZATION supplied)
Even if only one of the two elements is present then, there is labor-only contracting.
The control test element under the immediately-quoted paragraph (ii), which was not present in the old Implementing Rules
(Department Order No. 10, Series of 1997),26 echoes the prevailing jurisprudential trend27elevating such element as a primary
determinant of employer-employee relationship in job contracting agreements.
One who claims to be an independent contractor has to prove that he contracted to do the work according to his own methods
and without being subject to the employer's control except only as to the results. 28
While petitioner claimed that it was Synergy's supervisors who actually supervised respondents, it failed to present evidence
thereon. It did not even identify who were the Synergy supervisors assigned at the workplace.
Even the parties' Agreement does not lend support to petitioner's claim, thus:
Section 6. Qualified and Experienced Worker: Owner's Right to Dismiss Workers.
CONTRACTOR shall employ capable and experienced workers and foremen to carry out the loading, unloading and
delivery Work as well as provide all equipment, loading, unloading and delivery equipment, materials, supplies and
tools necessary for the performance of the Work. CONTRACTOR shall upon OWNER'S request furnish the latter with
information regarding the qualifications of the former's workers, to prove their capability and experience. Contractor
shall require all its workers, employees, suppliers and visitors to comply with OWNER'S rules, regulations,
procedures and directives relative to the safety and security of OWNER'S premises, properties and
operations. For this purpose, CONTRACTOR shall furnish its employees and workers identification cards to
be countersigned by OWNER and uniforms to be approved by OWNER. OWNER may require CONTRACTOR
to dismiss immediately and prohibit entry into OWNER'S premises of any person employed therein by
CONTRACTOR who in OWNER'S opinion is incompetent or misconducts himself or does not comply with
OWNER'S reasonable instructions and requests regarding security, safety and other matters and such person shall
not again be employed to perform the services hereunder without OWNER'S permission. 29 (Underscoring partly in the
original and partly supplied; emphasis supplied)

476
Petitioner in fact admitted that it fixes the work schedule of respondents as their work was dependent on the frequency of
plane arrivals.30 And as the NLRC found, petitioner's managers and supervisors approved respondents' weekly work
assignments and respondents and other regular PAL employees were all referred to as "station attendants" of the cargo
operation and airfreight services of petitioner.31
Respondents having performed tasks which are usually necessary and desirable in the air transportation business of
petitioner, they should be deemed its regular employees and Synergy as a labor-only contractor.32
The express provision in the Agreement that Synergy was an independent contractor and there would be "no employer-
employee relationship between [Synergy] and/or its employees on one hand, and [petitioner] on the other hand" is not legally
binding and conclusive as contractual provisions are not valid determinants of the existence of such relationship. For it is
the totality of the facts and surrounding circumstances of the case 33which is determinative of the parties' relationship.
Respecting the dismissal on November 15, 199234 of Auxtero, a regular employee of petitioner who had been working as utility
man/helper since November 1988, it is not legally justified for want of just or authorized cause therefor and for non-compliance
with procedural due process. Petitioner's claim that he abandoned his work does not persuade. 35 The elements of
abandonment being (1) the failure to report for work or absence without valid or justifiable reason, and (2) a clear intention to
sever the employer-employee relationship manifested by some overt acts,36 the onus probandi lies with petitioner which,
however, failed to discharge the same.
Auxtero, having been declared to be a regular employee of petitioner, and found to be illegally dismissed from employment,
should be entitled to salary differential37 from the time he rendered one year of service until his dismissal, reinstatement plus
backwages until the finality of this decision.38 In view, however, of the long period of time39 that had elapsed since his
dismissal on November 15, 1992, it would be appropriate to award separation pay of one (1) month salary for each year of
service, in lieu of reinstatement.40
As regards the remaining respondents, the Court affirms the ruling of both the NLRC and the appellate court, ordering
petitioner to accept them as its regular employees and to give each of them the salaries, allowances and other employment
benefits and privileges of a regular employee under the pertinent Collective Bargaining Agreement.
Petitioner claims, however, that it has become impossible for it to comply with the orders of the NLRC and the Court of
Appeals, for during the pendency of this case, it was forced to reduce its personnel due to heavy losses caused by economic
crisis and the pilots' strike of June 5, 1998.41 Hence, there are no available positions where respondents could be placed.
And petitioner informs that "the employment contracts of all if not most of the respondents . . . were terminated by Synergy
effective 30 June 1998 when petitioner terminated its contract with Synergy." 42
Other than its bare allegations, petitioner presented nothing to substantiate its impossibility of compliance. In fact, petitioner
waived this defense by failing to raise it in its Memorandum filed on June 14, 1999 before the Court of Appeals. 43 Further, the
notice of termination in 1998 was in disregard of a subsisting temporary restraining order 44 to preserve the status quo, issued
by this Court in 1996 before it referred the case to the Court of Appeals in January 1999. So as to thwart the attempt to subvert
the implementation of the assailed decision, respondents are deemed to be continuously employed by petitioner, for purposes
of computing the wages and benefits due respondents.
Finally, it must be stressed that respondents, having been declared to be regular employees of petitioner, Synergy being a
mere agent of the latter, had acquired security of tenure. As such, they could only be dismissed by petitioner, the real
employer, on the basis of just or authorized cause, and with observance of procedural due process.
WHEREFORE, the Court of Appeals Decision of September 29, 2000 is AFFIRMED with MODIFICATION.
Petitioner PHILIPPINE AIRLINES, INC. is ordered to:
(a) accept respondents ENRIQUE LIGAN, EMELITO SOCO, ALLAN PANQUE, JOLITO OLIVEROS, RICHARD GONCER,
NONILON PILAPIL, AQUILINO YBANEZ, BERNABE SANDOVAL, RUEL GONCER, VIRGILIO P. CAMPOS, JR., ARTHUR M.
CAPIN, RAMEL BERNARDES, LORENZO BUTANAS, BENSON CARESUSA, JEFFREY LLENOS, ROQUE PILAPIL,
ANTONIO M. PAREJA, CLEMENTE R. LUMAYNO, NELSON TAMPUS, ROLANDO TUNACAO, CHERRIE ALEGRES,
EDUARDO MAGDADARAUG, NELSON M. DULCE and ALLAN BENTUZAL as its regular employees in their same or
substantially equivalent positions, and pay the wages and benefits due them as regular employees plus salary
differential corresponding to the difference between the wages and benefits given them and those granted to petitioner's
other regular employees of the same rank; and
(b) pay respondent BENEDICTO AUXTERO salary differential; backwages from the time of his dismissal until the finality of
this decision; and separation pay, in lieu of reinstatement, equivalent to one (1) month pay for every year of service until the
finality of this decision.
There being no data from which this Court may determine the monetary liabilities of petitioner, the case is REMANDED to the
Labor Arbiter solely for that purpose.
SO ORDERED.

477
G.R. No. 162868 July 14, 2008
RODOLFO D. GARCIA, Petitioner,
vs.
PHILIPPINE AIRLINES and/or CRISTINA W. TRINIDAD, Manager, Catering Operations, Respondents.
DECISION
REYES, R.T., J.:
WHO is the employer of petitioner respondent Philippine Airlines or the latters contractor, Stellar Industrial Services, Inc.?
The question has been adjudged previously and is now barred from being relitigated under the doctrine of res judicata, a rule
which pervades every well-regulated system of jurisprudence. It is founded upon two (2) grounds, namely: (1) public policy and
necessity which makes it to the interest of the State that there should be an end to litigation, interest reipublicae ut sit finis
litumi (sa kapakanan ng Estado ay kailangang magkaroon ng wakas ang kaso); and (2) the hardship on the individual that he
should be vexed twice for the same cause, memo debet bis vexari et eadem causa (sinuman ay di dapat bagabagin ng
makalawa sa iisang dahilan).1
The doctrine finds application in this petition for review on certiorari of the Decision 2 and Resolution3 of the Court of Appeals
(CA), absolving private respondent Philippine Airlines (PAL) of any liability for petitioner Rodolfo D. Garcias dismissal.
The Facts
Stellar Industrial Services, Inc. (Stellar) had a standing agreement to supply PAL with workers for janitorial and sanitation
functions. On August 2, 1976, petitioner was assigned by Stellar to PAL, where he was tasked to perform janitorial services at
the companys in-flight kitchen until January 24, 1990.
During the course of his employment, petitioner received a warning from Stellar for absences incurred. The Memorandum,
dated April 28, 1987, pertinently reads:
TO : GARCIA, Rodolfo
NUEDA, Ferdinand
FROM : Vice President Comptroller
SUBJECT : LAST WARNING
DATED : 28 April 1987
Our attention was called by our client Philippine Airlines Inflight Kitchen regarding your failure to report for work last April 17,
1987.
Your absences has (sic) caused inconvenience in the operation of our client. Let this serve as our last warning, any repetition
or violation of any
company rules and regulations will constrain us to terminate your services with us.
(SGD.) CARLOS P. CALLANGA4
On January 25, 1990, petitioner was transferred to PALs Catering Operations as a kitchen busboy in the sanitizing section.
In a Memorandum dated March 21, 1990, PAL, through Cristina W. Trinidad, then Manager of PALs Catering Operations,
requested Stellar for a replacement for petitioner.
TO : Mr. Oscar Lluz
Operations Manager Stellar Industrial Services
FROM : Manager-Catering Operations
SUBJECT : MR. RODOLFO GARCIA
We would like to request for the immediate replacement of Mr. Rodolfo Garcia.
He has failed to meet the performance requirement of a helper at Catering Operations.
Hereunder are the observations of his superiors from January 8 to the present.
01. Always late in completing assigned tasks.
02. Must be consistently prodded to meet deadlines.
03. Unable to identify and carry out work priorities and needs assistance from co-workers.
Worst of all, he was caught selling cigarettes while on duty.
We hope you will act on our request immediately.
(SGD.) CRISTINA W. TRINIDAD5
Consequently, in a letter dated March 28, 1990, Carlos P. Callanga, VP-Operations/Comptroller of Stellar, demanded from
petitioner a written explanation why no disciplinary action should be taken against him, in view of the following charges: (1)
poor performance/negligence of duty; and (2) selling of cigarettes while on duty. 6
Petitioner, in a letter-reply dated April 2, 1990, rendered an explanation in the following tenor:
April 2, 1990
Mr. Cesar Lluz
Operation Manager
Stellar Industrial Services
478
Cibeles Bldg., Ayala
Makati, Metro Manila
Dear Sir:
These are my answers to the charges against me as inscribed in a letter of MS. Cristina W. Trinidad dated March 21, 1990.
As to the allegation that I was always late in completing assigned task, this was not true because works in the Catering
Service has (sic) no ending due to the nature of PALs business.
As to the allegation that I must constantly (be) prodded to meet deadlines, (this) was not correct because of the above
reasons.
As to the allegation that I was not able to identify and carry out work priorities and needs assistance from co-workers was not
also (sic) correct because I always have a companion in the performance of my job because the nature of the work calls for it.
And as to the last allegation that I was caught selling cigarettes while on duty was not also tru (sic) because how can I sell
cigarettes when I was surrounded by heavy works and the mess in my hands while on duty will make them spoiled. The
cigarettes inside my pocket was (sic) only for my personal consumptions (sic).
I hope these answers will enlighten my case and I am looking forward that I will be given merit considering that I am connected
with the service for a period of fourteen (14) years without being apprehended/complained of misconduct unbecoming.
Yours truly,
(Sgd.)
RODOLFO GARCIA7
Dissatisfied with petitioners explanation, Stellar subsequently terminated his employment.
In 1992, petitioner filed a complaint for illegal dismissal against Stellar and Lluz, as well as PAL and Trinidad. The case,
docketed as NLRC Case No. 00-11-06556-92, was assigned to Labor Arbiter Emerson C. Tumanon.
It appears that sometime in 1988, Stellar employees assigned at PAL filed complaints for regularization against the air carrier.
One of the complainants against PAL was petitioner. These complaints, docketed as National Labor Relations Commission
(NLRC) NCR Case Nos. 00-11-04628-88, 00-12-05004-88, 00-01-00465-88, and 00-02-00828-89, were consolidated and
assigned to Labor Arbiter Jose De Vera of the NLRC.8
On March 31, 1992, Labor Arbiter De Vera rendered judgment 9 in favor of complainants, declaring the existence of an
employer-employee relationship between the Stellar employees and PAL. On appeal, the NLRC affirmed in toto the findings of
the Labor Arbiter.
PAL moved for reconsideration of the April 27, 1995 NLRC Decision. Acting on PALs motion, the NLRC, on September 25,
1996, reversed and set aside its own earlier findings, and declared complainants employees of Stellar, not of PAL. 10
On February 6, 1998, the aggrieved complainants lodged an appeal with this Court. However, via its Resolutions dated March
2, 199811 and April 22, 1998,12 this Court denied the same.
NLRC Ruling
On November 29, 1995, Labor Arbiter Tumanon rendered a decision13 in the illegal dismissal case in favor of petitioner, stating
thus:
WHEREFORE, premises considered, judgment is hereby rendered declaring the dismissal of complainant herein to be illegal
and unauthorized; consequently, ordering herein respondents jointly and severally without loss of seniority rights and
privileges and with full backwages counted from the date of his dismissal until actual reinstatement which up to the date of the
promulgation of this Decision has already amounted to TWO HUNDRED FORTY THOUSAND FOUR HUNDRED SEVENTY-
FIVE and 21/100 (P240,475.21) pesos, broken down as follows:
Backwages in the sum of P218,810.02;
13th Month pay in the sum of P18,234.16;
Service Incentive Leave pay in the sum of P3,431.03;
subject to adjustment if payroll or physical reinstatement is denied.
It appearing that complainant has been represented by counsel in the litigation of this case, said counsel is hereby awarded
the sum of ten (10%) percent of the total award as and for attorney's fees in the amount of TWENTY-FOUR THOUSAND
FORTY-SEVEN and 52/100 (P24,047.52) pesos, subject also for adjustment.
SO ORDERED.14
However, on appeal, the Third Division of the NLRC reversed Labor Arbiter Tumanon, holding that petitioner was "guilty of
gross and habitual neglect and was consequently terminated for cause and with due process."15 The NLRC declared that:
x x x respondent Stellar appears to be an independent job contractor and not merely a labor only contractor. Apart from the
fact that it has sufficient capitalization to the tune of more than a million pesos, its workers perform work that are not necessary
and desirable to the business of PAL. Simply stated, it is a job contractor for PALs messengerial and janitorial needs no more
no less. Hence, its employees are not of PAL.
ACCORDINGLY, premises considered, the decision appealed from is hereby SET ASIDE and this case DISMISSED for lack
of merits (sic).
SO ORDERED.16
Petitioners motion for reconsideration was denied by the NLRC in its October 8, 2004 Resolution. 17
479
 CA Disposition
On certiorari, the CA "modified" both the NLRC and the Labor Arbiter rulings, thus:
WHEREFORE, premises considered, the Petition is GRANTED and the assailed 27 August 2001 Resolution of respondent
Commission in NLRC NCR CA No. 010218-96 and the 29 November 1995 Decision of Labor Arbiter Emerson C. Tumanon in
NLRC NCR No. 00-11-06556-92 are hereby MODIFIED insofar as the pecuniary awards declared in the Labor Arbiters
Decision are the sole responsibility of private respondent Stellar, petitioner's direct employer.
SO ORDERED.18
In reality, however, the CA merely sustained the NLRC ruling that Stellar is an independent contractor. The CA observed:
However, it is only private respondent Stellar who is responsible to petitioner as the former is an independent contractor. The
issue whether or not Stellar is an independent contractor or merely engaged in labor-only contracting was already addressed
and settled by the Highest Magistrate in a related case entitled Phil. Airlines vs. NLRC, 298 SCRA 430 [2000], to wit:
"Aside from these stipulations in the service agreement, other pieces of evidence support the conclusion that STELLAR, not
PAL, was the employer of the individual private respondents. A contract of employment existed between STELLAR and the
individual private respondents, proving that it was said corporation which hired them. It was also STELLAR which dismissed
them, as evidenced by Complainant Parenas termination letter, which was signed by Carlos P. Callanga, vice president for
operations and comptroller of STELLAR. Likewise, they worked under STELLARs own supervisors, Rodel Pagsulingan,
Napoleon Parungao, and Renato Topacio. STELLAR even had its own collective bargaining agreement with its employees,
including the individual private respondents. Moreover, PAL had no power of control and dismissal power them (sic)." 19
Petitioner moved for partial reconsideration asking that PAL be made solidarily liable with Stellar. However, the CA denied his
motion in its Resolution dated March 17, 2004. Hence, this petition.
Issues
Petitioner submits the following assignment:
I.
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION IN ABSOLVING PAL FROM LIABILITY CONSIDERING THAT IT IS THE EMPLOYER OF PETITIONER
BECAUSE THE LATTER PERFORMED FUNCTIONS, DUTIES AND RESPONSIBILITIES NECESSARY AND DESIRABLE
TO ITS BUSINESS OPERATIONS.
II.
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION IN ABSOLVING PAL FROM LIABILITY CONSIDERING THAT IT IS THE EMPLOYER OF PETITIONER
BECAUSE IT IS PAL WHICH EXERCISED CONTROL OVER THE MEANS AND METHODS (BY WHICH) PETITIONER
PERFORMED HIS JOB AT ITS CATERING DEPARTMENT.
III.
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION IN ABSOLVING PAL FROM LIABILITY CONSIDERING THAT IT IS THE EMPLOYER OF PETITIONER
BECAUSE IT IS PAL WHICH ADOPTED RULES, REGULATIONS AND POLICIES REGARDING DISCIPLINE TO BE
FOLLOWED BY ITS EMPLOYEES AT ITS CATERING DEPARTMENT.20 (Underscoring supplied)
Simply stated, the essential issue is whether PAL is petitioners employer and solidarily liable with Stellar for illegal dismissal.
Our Ruling
Preliminarily, We note that the instant petition was filed beyond the requested extension period. Petitioner received a copy of
the CA March 17, 2004 Resolution on March 26, 2004. He had until April 10, 2004 to file this petition. He asked the Court that
he be allowed until April 25, 2004 to file the same,21 but failed to comply when he filed the petition only on April 26, 2004.
Nevertheless, inasmuch as the delay is not substantial, the greater interest of justice would be served if this petition is
adjudicated on its merits. Sound policy dictates that it is far better to dispose of cases on the merits, rather than on a
technicality as the latter approach may result in injustice.22
On its merits, however, We resolve to deny the petition.
The CA correctly found that PAL is not petitioners employer and cannot thus be held solidarily liable with Stellar for illegal
dismissal.
The issue on the existence of an employer-employee relationship between petitioner and PAL has long been resolved in the
case entitled Stellar Employees Association v. Philippine Airlines and Stellar Industrial Services, Inc.23 In that case, petitioner
joined other Stellar employees in filing complaints for regularization, money claims and damages against PAL before the
NLRC. The NLRC declared, on September 25, 1996, that no employer-employee relationship exists between PAL and the
Stellar employees, finding that:
We have re-examined the record of this case and have found that SISI assigned supervisors and timekeepers at PALs
premises where SEAs members performed their work. On the issue of SISIs capitalization, it cannot be denied that, per its
Amended Articles of Incorporation, it has an authorized capital stock of P1,000,000.00. SISI has a collective bargaining
agreement (CBA) with its employees, including SEAs members, under which complainants obtained substantial benefits.
xxxx
480
We must remember that this case is principally for regularization and relies primarily on the premise that SISI is a "labor-only"
contractor of PAL. With respect to the issue of whether or not SISI is a legitimate independent contractor, SEA admits that SISI
provides its employees with "soap, cleansers, mops, lawn mowers, brooms, dust pans," etc. More telling is SEAs admission
that SISI has several clients other than PAL. SEA tries to avoid the application of Neri, et al. vs. NRLC, et al., 224 SCRA 717
(July 23, 1993), by distinguishing SISIs janitorial operations from the other types of employees, like the station loaders.
This argument, however, falls flat on its face considering that SISI has substantial authorized capital in the amount of P1.0
Million, since this not limited to its janitorial department. This is evidenced by SISIs Amended Articles of Incorporation which is
a public document under the possession, supervision and control of the Securities and Exchange Commission and We can
even take judicial notice of this fact, despite SEAs declaration to the contrary.
We are aware of the standards used to determine a "labor-only" contractor. As SEA itself has pointed out, one such gauge is
the absence of substantial capital, citing Art. 106 of the Labor Code and Sec. 9, Rule VIII of its Implementing Rules. In view of
SISIs possession of substantial capital, it cannot be considered a "labor-only" contractor.
On the other hand, is SISI an independent contractor? We resolve this is in the affirmative after re-thinking our earlier
Resolution. Aside from its capital, it also maintains an independent business as admittedly shown by its diversified clientele
and the supervision and control as to the means of work as provided by its own timekeepers, foremen, etc.
We cannot subscribe to the position by SEA that the absence of premises, tools, equipment, etc. is anachronistic to SISIs
being an independent contractor. There is nothing novel about this since this has been succinctly ruled upon by the Supreme
Court in its Neri decision, supra. There, the High Court refined the definition of an independent contractor in the sense that it
need not possess both tools and equipment, on one hand, and substantial capitalization, on the other hand. Otherwise, as
observed by the Court, the legislator ought to have used the conjunctive "and," instead of "or."
Neither is the contention concerning the direct relation of complainants services to PALs operations relevant to the ultimate
determination of this case. In Neri, the Supreme Court cited the "general practice," even of government institutions, of
contracting out certain services, and, with the finding that BCC, the contractor there, was an independent one, also said
x x x There is even no need for it to refute petitioners contention that the activities are directly related to the principal business
of respondent bank.
xxxx
Viewed from a different standpoint, the workers have no contractual tie to PAL because SISI, as a legitimate independent
contractor, is their true employer. They applied and executed employment contracts with SISI, not PAL, although SEA argues
that its members were made to sign the application forms and employment contracts. What cannot be denied, however, is the
brazen and undisputed fact that SISI has a CBA with its employees, including SEAs members. SISIs employees derived
benefits under said CBA for the number of years it had been in force. The CBA is a clear admission of an employment
relationship with SISI. It is now too late in the day for them to deny such relationship.
xxxx
Because of the absence of a juridical tie with them, PALs instructions cannot be considered control under the four-fold test of
employment relationship. Going back to the Neri case, "x x x in legal contemplation, such instructions carry no more weight
than mere requests x x x."
xxxx
All told, We hereby rule that SISI is a legitimate independent contractor and is the true employer of the individual
complainants, not PAL.24 (Underscoring supplied)
Due to the failure to seasonably appeal or question the NLRC ruling,25 its factual and legal findings have attained finality.
Consequently, the holding that PAL is not petitioners employer constitutes res judicata on the same issue in this petition.
Res judicata literally means "a matter adjudged; a thing judicially acted upon or decided; a thing or matter settled by
judgment."26 Res judicata is, in fine, a rule of preclusion to the end that facts or issues settled by final judgment should not be
tried anew.27
The principle of res judicata in actions in personam is found in Section 49(b) and (c), Rule 39 of the Rules of Court which
provides:
Sec. 49. Effects of judgments. The effect of a judgment or final order rendered by a court or judge of the Philippines, having
jurisdiction to pronounce the judgment or order, may be as follows:
xxxx
(b) In other cases, the judgment or order is, with respect to the matter directly adjudged or as to any other matter that
could have been raised in relation thereto, conclusive between the parties and their successors-in-interest by title
subsequent to the commencement of the action or special proceeding, litigating for the same thing and under the
same title and in the same capacity;
(c) In any other litigation between the same parties or their successors-in-interest, that only is deemed to have been
adjudged in a former judgment which appears upon its face to have been so adjudged, or which was actually and
necessarily included therein or necessary thereto.1avvphi1
Res judicata has two (2) concepts. The first is "bar by prior judgment" under Rule 39, Section 47(b). This rule dictates that the
judgment or decree of a court of competent jurisdiction on the merits concludes the parties and their privies to the litigation and
481
constitutes a bar to a new action or suit involving the same cause of action either before the same or any other
tribunal.28 Stated otherwise, the judgment rendered in the first case is an absolute bar to the subsequent action since said
judgment is conclusive not only as to the matters offered and received to sustain that judgment but also as to any other matter
which might have been offered for that purpose and which could have been adjudged therein. 29
The second rule of res judicata is embodied in Rule 39, Section 47(c), and is known as "conclusiveness of judgment." It
provides that any right, fact, or matter in issue directly adjudicated or necessarily involved in the determination of an action
before a competent court in which a judgment or decree is rendered on the merits is conclusively settled by the judgment
therein and cannot again be litigated between the parties and their privies whether or not the claim or demand, purpose, or
subject matter of the two suits is the same. It refers to a situation where the judgment in the prior action operates as an
estoppel only as to the matters actually determined or which were necessarily included therein.30
The other elements being virtually the same, the fundamental difference between the rule of res judicata as a bar by former
judgment and as merely a rule on the conclusiveness of judgment is that, in the first, there is an identity in the cause of action
in both cases involved whereas, in the second, the cause of action in the first case is different from that in the second case.31
In this petition, res judicata in the concept of conclusiveness of judgment obtains. The concept is applicable here as there is
identity of parties and subject matter but not of causes of action.
First, there is identity of parties between the two (2) cases. Petitioner was one of complainants in the consolidated
regularization cases and he is also the same party who initiated this action. His denial of participation in the regularization
cases32 is negated by the records, as he was awarded wage differentials and CBA benefits by the Labor Arbiter in said
cases.33 In fact, records show that petitioner was awarded the amount of P34,886.00.34
Second, there is identity of subject matter, defined as the matter or thing with respect to which the controversy has arisen,
concerning which a wrong has been done.35 It is quite clear that the issue and subject matter resolved in the consolidated
regularization cases is the existence of an employer-employee relationship between petitioner and PAL. It is also the
primordial issue for resolution in the instant petition.
However, identity of causes of action is absent between the two (2) cases. Under the rules, a cause of action is defined as an
act or omission by which a party violates a right of another.36 In the regularization cases, the cause of action is the deprivation
of the status of a regular employee, while in this petition, the cause of action is the dismissal of an employee without just cause
under our labor laws.
Applying the rule on conclusiveness of judgment to this case, the parties are now precluded from relitigating the same issue of
the existence of an employment relationship between PAL and petitioner.
Although it does not have the same effect as bar by prior judgment which precludes subsequent actions, conclusiveness of
judgment operates as estoppel with respect to matters in issue or points controverted, on the determination of which the
finding or judgment was anchored.37
Where material facts or questions, which were in issue in a former action, were judicially determined, such facts are res
judicata.38 In Stilianopulos v. City of Legaspi,39 the Court held that "(w)hen a right or fact has been judicially tried and
determined by a court of competent jurisdiction or an opportunity for such trial has been given, the judgment of the court, as
long as it remains unreversed, should be conclusive upon the parties and those in privity with them. Clearly, there should be
an end to litigation by the same parties and their privies over a subject, once it is fully and fairly adjudicated."
Res judicata requires that stability be accorded to judgments. Controversies once decided on the merits shall remain in repose
for there should be an end to litigation which, without the doctrine, would be endless. 40 As We declared in Camara v. Court of
Appeals,41 both concepts of res judicata are:
x x x founded on the principle of estoppel, and are based on the salutary policy against unnecessary multiplicity of suits. Like
the splitting of causes of action, res judicata is in pursuance of such policy. Matters settled by a Courts final judgment should
not be litigated upon or invoked again. Relitigation of issues already settled merely burdens the Courts and the taxpayers,
creates uneasiness and confusion, and wastes valuable time and energy that could be devoted to worthier causes. As the
Roman maxim goes, Non bis in edem.42
The regularization cases initiated and participated in by petitioner are now final and executory, and the issues resolved in that
case should no longer be disturbed. Nothing is more settled in law than that when a judgment becomes final and executory it
becomes immutable and unalterable. The same may no longer be modified in any respect, even if the modification is meant to
correct what is perceived to be an erroneous conclusion of fact or law, and whether made by the highest court of the land. The
reason is grounded on the fundamental considerations of public policy and sound practice that, at the risk of occasional error,
the judgments or orders of courts must be final at some definite date fixed by law. 43
Verily, res judicata now bars petitioner from reopening, by way of this petition, the issue of the existence of an employer-
employee relationship between him and PAL. Otherwise, there will never be an end to litigation on the issue.
Nevertheless, petitioner insists that We again resolve the issue by looking at "evidentiary facts of employer-employee
relationship."44 At the same time, he maintains that he raises questions of law. 451avvphi1
Evidently, the issues raised by the petitioner pertain to factual matters. If We were to determine these factual issues, We shall
have to examine the documentary and testimonial evidence, as well as the factual allegations in the pleadings. In doing so,
We shall have to consider the following elements to determine the existence of an employment relationship: (a) the selection
482
and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to
control the employee with respect to the means and methods by which the work is to be accomplished. Of these elements, the
so-called "control test" is the most important.46
Obviously, an evaluation of the above-mentioned factual matters is embraced by the proscription found in Rule 45, Section 1
of the Rules of Court, which states that an appeal by certiorari to the Supreme Court "shall raise only questions of law which
must be distinctly set forth."
Petitioner asks Us to exempt him from the proscription considering the contrasting findings of the Labor Arbiter, on one hand,
and the NLRC and the CA on the other.
However, well-settled is the rule that conclusions and findings of fact by the lower courts or administrative bodies are entitled
to great weight on appeal and will not be disturbed except for strong and cogent reasons. The findings of the CA by itself,
which are supported by substantial evidence, are almost beyond the power of review by the Supreme Court. 47
We find no cogent reason to disturb the NLRC and the CA findings as these are supported by substantial evidence. On the
other hand, We cannot rely on the findings of the Labor Arbiter about the existence of an employer-employee relationship. His
decision48 fails to shed light on what specific findings of fact convinced him that Stellar is a labor-only contractor, and that PAL
is an employer of petitioner.
Moreover, even if We relax the rule, We notice an abject failure of the petitioner to attach to the petition and subsequent
pleadings, proof of these alleged facts of employment relationship. There is a patent dearth of evidence in the records to
convince Us that the following material allegations exist, namely: that petitioners duties were necessary and desirable to the
business of PAL; that PAL exercised control over the means and methods of his performance at the in-flight kitchen; and that it
was PALs responsibility to issue rules and regulations regarding discipline to be followed by petitioner at that department.
Instead, petitioner merely offered factual assertions which are unfortunately not supported by proof, documentary or otherwise.
We cannot accept this as substantial evidence that is necessary to make a finding of an employer-employee relationship. It is
elementary that he who alleges a fact must prove it, and a mere allegation is not evidence. 49
On the basis of the pleadings and evidence before Us, We cannot accept the claim that petitioner was PALs employee.
Petitioner does not deny that he was selected and engaged by Stellar when he was assigned to PAL. 50Moreover, while
petitioner claims that the funds for his salary came from PAL, he did not adduce proof to support his allegation. In any event,
he admits that it was Stellar that paid his wages.51 The evidence further shows that it was Stellar, not PAL, that disciplined
petitioner. It was Stellar that issued to petitioner various memoranda asking for an explanation about his infractions, 52 and
petitioner explained himself to that company, not PAL.53 In fine, petitioner recognized the disciplinary authority of Stellar over
him, and not that of the air carrier.
WHEREFORE, the petition is DENIED for lack of merit.
SO ORDERED.

G.R. No. 157647 October 15, 2007

GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LANTING SECURITY and WATCHMAN AGENCY, TOMAS LANTING,
DANIEL FANILA,* HECTOR MORENO, ISAURO FERRER,** RUBIN WILFREDO, JESUS DELIMA, JR., MARIA LEGASPI,
SANTIAGO NOTO, JR., and VIRGILIO SORIANO, Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari of the Decision1 dated July 25, 2002 of the Court of Appeals (CA) in CA-
G.R. SP No. 61570 and the CA Resolution2 dated March 19, 2003 which denied the motion for reconsideration thereof.
The facts:
Tomas Lanting, doing business under the name and style of Lanting Security and Watchman Agency (LSWA) entered into a
Security Service Contract to provide security guards to the properties of the Government Service Insurance System (GSIS) at
the contract rate of P3,000.00 per guard per month.3
During the effectivity of the contract, LSWA requested the GSIS for an upward adjustment of the contract rate in view of
Section 7 of Wage Order No. 1 and Section 3 of Wage Order No. 2, which were issued by the Regional Tripartite Wages and
Productivity Board-NCR pursuant to Republic Act No. 6727, otherwise known as the Wage Rationalization Act.
Acting on the request of LSWA, the GSIS, through its Board of Trustees and under Board Resolution No. 207, dated May 24,
1991, approved the upward adjustments of the contract price from P3,000.00 to P3,716.07 per guard, per month effective
November 1, 1990 to January 7, 1991, and P4,200.00 effective January 8, 1991 to May 31, 1991.4
LSWA assigned security guards Daniel Fanila, Hector Moreno, Isauro Ferrer, Rubin Wilfredo, Jesus Delima, Jr., Maria
Legaspi, Santiago Noto, Jr., and Virgilio Soriano (hereafter complainants) to guard one of GSIS's properties. The complainants
have the following dates of employment and compensation package with LSWA:
1. Daniel Fanila 3/28/91-3/15/93 P3,100/month
2. Virgilio Soriano 10/0/91-3/15/93 P3,100/month
483
 3. Hector Moreno 1/04/89-3/15/93 P3,100/month
4. Isauro Torres 11/ /88-3/15/93 P3,100/month
5. Rubin Wilfredo 3/08/91-3/15/93 P3,100/month
6. Jesus Delima, Jr. 3/28/91-3/15/93 P3,100/month
7. Maria Legaspi 3/13/91-3/15/93 P3,100/month
On March 15, 1993, GSIS terminated the Security Service Contract with LSWA. All the complainants, except Virgilio Soriano,
were absorbed by the incoming security agency.
On March 7, 1994, complainants filed separate complaints against LSWA for underpayment of wages and non-payment of
labor standard benefits from March 1991 to March 15, 1993. Virgilio Soriano also complained of illegal dismissal.
In its Position Paper, LSWA alleged that complainants were estopped from claiming that they were underpaid because they
were informed that the pay and benefits given to them were based on the contract rate of P103.00 per eight hours of work or
about P3,100.00 per month.
On August 9, 1994, LSWA filed a Third-Party Complaint5 against GSIS for underpayment of complainants' wages.
In its Position Paper,6 GSIS alleged that the Third-Party Complaint states no cause of action against it; that LSWA obligated
itself in the Security Service Contract to be solely liable for the enforcement of and compliance with all existing labor laws,
rules and regulations; that the GSIS Board of Trustees approved the upward adjustment on a month-to-month basis, at P4,200
per guard per month, effective January 8, 1991 to May 31, 1991, under Board Resolution No. 207 dated May 24, 1991, which
was incorporated in the Security Service Contract; that GSIS fully paid the services of the security guards as agreed upon in
the Security Service Contract.
On August 27, 1996, Labor Arbiter Renato Bugarin rendered a Decision 7 in favor of complainants, the dispositive portion of
which reads:
WHEREFORE, premises considered judgment is hereby rendered:
1. Ordering respondents Lanting Security and Watchman Agency and Tomas Lanting to reinstate complainant Virgilio
Soriano without loss of seniority rights and benefits and to pay his backwages amounting to P161,400.47, computed
up to the promulgation of this decision. Failure to reinstate complainant to his former position as hereby ordered, his
backwages shall continue to run but in no case shall exceed three (3) years;
2. Ordering, respondents Lanting Security and Watchman Agency and/or Thomas Lanting and the Government
Service Insurance System, jointly and severally liable to pay the complainants, their salary differentials; cash
equivalent of their service incentive leaves and proportionate 13th month pay covering the period from June 1, 1991
to March 15, 1993, hereto indicated as follows:
1.Daniel Fanila,Jr. P18, 439.50
2. Hector Moreno - P18, 439.50
3. Isauro Torres - P18, 439.50
4. Rubin Wilfredo - P18, 439.50
5. Jesus Delima, Jr. - P18, 439.50
6. Maria Legaspi - P18, 439.50
7. Virgilio Soriano - P18, 439.50
3. All other claims are hereby dismissed for lack of merit.
SO ORDERED.8
The Labor Arbiter held LSWA and GSIS jointly and severally liable for the payment of complainants' money claims, pursuant to
Articles 106 and 107 of the Labor Code.
LSWA appealed to the NLRC. On April 14, 2000, the NLRC issued a Resolution,9 the dispositive portion of which reads:
WHEREFORE, premises considered, the Appeal is hereby GRANTED. Accordingly, the Decision appealed from is
SUSTAINED subject to the modification that Complainant-Appellee Soriano was not illegally dismissed and hence, is not
entitled to reinstatement to his former position and to payment of any backwages; that from the other Complainants-Appellees'
awarded salary differentials from 7 March 1991 to 1 June 1991 in the amount of (sic) each should be deducted from their
awarded total salary differentials in the sum of P10,917.00 each; and that the Third-Party Respondent GSIS is alone liable for
payment of their salary differentials.
SO ORDERED.10
The NLRC held the GSIS solely liable for payment of complainants' money claims.
Dissatisfied, the GSIS filed on May 15, 2000 a Motion for Reconsideration.11 On August 20, 2000, the NLRC issued a
Resolution12 denying GSIS's Motion for Reconsideration.
On November 6, 2000, the GSIS filed a Petition for Certiorari13 with the CA arguing that the NLRC gravely abused its
discretion in holding GSIS solely liable for complainants' money claims.
On July 25, 2002, the CA rendered a Decision,14 the dispositive portion of which reads:
WHEREFORE, the petition is GRANTED for being meritorious. The questioned resolution dated 14 April 2000 of the NLRC is
hereby modified insofar as it holds petitioner GSIS solely liable for the salary differentials of the complainants. Instead, We

484
revert back to the ruling of the Honorable Labor Arbiter and hold petitioner GSIS and respondent Lanting Security and
Watchman Agency and/or Tomas Lanting jointly and severally liable for the payment of complainants' salary differentials.
SO ORDERED.15
While finding that the GSIS complied with its obligations under Wage Order Nos. 1 and 2 by incorporating the mandated
increase in the Security Service Contract, the CA held the GSIS jointly and severally liable with LSWA for complainants'
money claims pursuant to Articles 106 and 107 of the Labor Code.
On September 3, 2002, the GSIS filed a Motion for Reconsideration. 16 In a Resolution17 dated March 19, 2003, the CA denied
the motion for reconsideration.
Hence, the present petition anchored on the following assigned error:
THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN HOLDING THAT PETITIONER GSIS IS
SOLIDARILY LIABLE FOR PAYMENT OF COMPLAINANTS-RESPONDNENTS' SALARY DIFFERENTIALS.18
The GSIS avers that it cannot twice be held liable for complainants' salary differentials since it fully paid complainants' salaries
by incorporating in the Security Service Contract the salary rate increases mandated by Wage Order Nos. 1 and 2; otherwise,
it would be unjust enrichment on the part of complainants and/or LSWA at its expense. It submits that Articles 106 and 107 of
the Labor Code were not contemplated by its framers to cover principals or clients of service contractors who had already paid
for the wages of the contractor or subcontractor.
In its Comment,19 LSWA maintains that the GSIS is jointly and severally liable with LSWA because Articles 106 and 107 of the
Labor Code provide so and these provisions were intended to ensure that employees are paid the wages due them in case of
violation of the Labor Code of either the contractor or the principal; that the GSIS cannot claim that holding it jointly and
severally liable with LSWA would result in grave injustice since the law did not leave it without recourse as the GSIS has the
right of reimbursement from its co-debtor under Article 121720of the Civil Code.
In their Comment,21 complainants argue that the GSIS is jointly and severally liable with LSWA for complainants' money claims
since LSWA actually paid only the sum of P3,100.00 a month, even though the GSIS incorporated in the Security Service
Contract the mandated wage increases in Wage Order Nos. 1 and 2; that although the Security Service Contract provided that
there shall be employer-employer relationship between LSWA and/or its security guards and the GSIS, Article 106 of the
Labor Code establishes an employer-employee relationship between the employer and the job contractor's employees for a
limited purpose, that is, in order to ensure that the latter get paid the wages due them.
The Court gave due course to the petition and required the parties to submit their respective memoranda.22 Only the GSIS
complied.23 In the interest of justice and speedy disposition of cases, the Court resolved to dispense with the filing of the
respective memoranda of LSWA and the complainants and to decide the case based on the pleadings filed. 24
The petition is bereft of merit.
Articles 106 and 107 of the Labor Code provide:
ART. 106. Contractor or subcontractor. Whenever an employer enters into contract with another person for the performance
of the formers work, the employees of the contractor and of the latters subcontractor, if any, shall be paid in accordance with
the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wage of his employees in accordance with this Code,
the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent
of the work performed under the contract, in the same manner and extent that he is liable to employees directly
employed by him.
xxx
ART. 107 Indirect employer. The provisions of the immediately preceding Article shall likewise apply to any person,
partnership, association or corporation which, not being an employer, contracts with an independent contractor for the
performance of any work, task, job or project. (Emphasis supplied.)
In this case, the GSIS cannot evade liability by claiming that it had fully paid complainants' salaries by incorporating in the
Security Service Contract the salary rate increases mandated by Wage Order Nos. 1 and 2 by increasing the contract price
from P3,000.00 to P3,176.07 per guard per month effective November 1, 1990 to January 7, 1991, and P4,200.00 effective
January 8, 1991 to May 31, 1991.
In Rosewood Processing, Inc. v. National Labor Relations Commission,25 the Court explained the rationale for the joint and
several liability of the employer, thus:
The joint and several liability of the employer or principal was enacted to ensure compliance with the provisions of
the Code, principally those on statutory minimum wage. The contractor or subcontractor is made liable by virtue of his or
her status as a direct employer, and the principal as the indirect employer of the contractors employees. This liability
facilitates, if not guarantees, payment of the workers compensation, thus, giving the workers ample protection as
mandated by the 1987 Constitution. This is not unduly burdensome to the employer. Should the indirect employer be
constrained to pay the workers, it can recover whatever amount it had paid in accordance with the terms of the
service contract between itself and the contractor.(Emphasis supplied)26
Thus, the Court does not agree with the GSIS's claim that a double burden would be imposed upon the latter because it would
be paying twice for complainants' services. Such fears are unfounded. Under Article 1217 of the Civil Code, if the GSIS should
485
pay the money claims of complainants, it has the right to recover from LSWA whatever amount it has paid in accordance with
the terms of the service contract between the LSWA and the GSIS.
Joint and solidary liability is simply meant to assure aggrieved workers of immediate and sufficient payment of what is due
them. This is in line with the policy of the State to protect and alleviate the plight of the working class.
WHEREFORE, the petition is DENIED. The Decision dated July 25, 2002 and the Resolution dated March 19, 2003 of the
Court of Appeals (CA) in CA-G.R. SP No. 61570 are AFFIRMED with the MODIFICATION that the joint and solidary liability of
LSWA and the GSIS to pay complainants' salary differentials shall be without prejudice to the GSIS's right of reimbursement
from LSWA.
SO ORDERED.

G.R. No. 145402 March 14, 2008

MERALCO INDUSTRIAL ENGINEERING SERVICES CORPORATION, Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, OFELIA P. LANDRITO GENERAL SERVICES and/or OFELIA P.
LANDRITO, Respondents.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure seeking to
reverse and set aside (1) the Decision1 of the Court of Appeals in CA-G.R. SP No. 50806, dated 24 April 2000, which modified
the Decision2 of the National Labor Relations Commission (NLRC), dated 30 January 1996 in NLRC NCR CA No. 001737-91
(NLRC NCR Case No. 00-09-04432-89), and thereby held the petitioner solidarily liable with the private respondents for the
satisfaction of the separation pay of the latters employees; and (2) the Resolution 3 of the appellate court, dated 27 September
2000, in the same case which denied the petitioners Motion for Reconsideration.
Petitioner Meralco Industrial Engineering Services Corporation (MIESCOR) is a corporation duly organized and existing under
the laws of the Republic of the Philippines and a client of private respondents. Private respondent Ofelia P. Landrito General
Services (OPLGS) is a business firm engaged in providing and rendering general services, such as janitorial and maintenance
work to its clients, while private respondent Ofelia P. Landrito is the Proprietor and General Manager of OPLGS.
The factual milieu of the present case is as follows:
On 7 November 1984, petitioner and private respondents executed Contract Order No. 166-84,4 whereby the latter would
supply the petitioner janitorial services, which include labor, materials, tools and equipment, as well as supervision of its
assigned employees, at petitioners Rockwell Thermal Plant in Makati City. Pursuant thereto, private respondents assigned
their 49 employees as janitors to petitioners Rockwell Thermal Plant with a daily wage of P51.50 per employee.
On 20 September 1989, however, the aforesaid 49 employees (complainants) lodged a Complaint for illegal deduction,
underpayment, non-payment of overtime pay, legal holiday pay, premium pay for holiday and rest day and night
differentials5 against the private respondents before the Labor Arbiter. The case was docketed as NLRC NCR Case No. 00-
09-04432-89.
In view of the enactment of Republic Act No. 6727,6 the contract between the petitioner and the private respondents was
amended7 for the 10th time on 3 November 1989 to increase the minimum daily wage per employee from P63.55 to P89.00
or P2,670.00 per month. Two months thereafter, or on 2 January 1990, 8petitioner sent a letter to private respondents informing
them that effective at the close of business hours on 31 January 1990, petitioner was terminating Contract Order No. 166-84.
Accordingly, at the end of the business hours on 31 January 1990, the complainants were pulled out from their work at the
petitioners Rockwell Thermal Plant. Thus, on 27 February 1990, complainants amended their Complaint to include the charge
of illegal dismissal and to implead the petitioner as a party respondent therein.
Since the parties failed to settle amicably before the Labor Arbiter, they submitted their respective position papers and other
pleadings together with their documentary evidence. Thereafter, a Decision was rendered by the Labor Arbiter on 26 March
1991, dismissing the Complaint against the petitioner for lack of merit, but ordering the private respondents to pay the
complainants the total amount of P487,287.07 representing unpaid wages, separation pay and overtime pay; as well as
attorneys fees in an amount equivalent to 10% of the award or P48,728.70. All other claims of the complainants against the
private respondents were dismissed. 9
Feeling aggrieved, private respondents appealed the aforesaid Decision to the NLRC. Private respondents alleged, among
other things, that: (1) 48 of the 49 complainants had executed affidavits of desistance and they had never attended any
hearing nor given any authority to anyone to file a case on their behalf; (2) the Labor Arbiter erred in not conducting a full-
blown hearing on the case; (3) there is only one complainant in that case who submitted a position paper on his own; (4) the
complainants were not constructively dismissed when they were not given assignments within a period of six months, but had
abandoned their jobs when they failed to report to another place of assignment; and (5) the petitioner, being the principal, was
solidarily liable with the private respondents for failure to make an adjustment on the wages of the complainants. 10 On 28 May
1993, the NLRC issued a Resolution11 affirming the Decision of the Labor Arbiter dated 26 March 1991 with the modification
that the petitioner was solidarily liable with the private respondents, ratiocinating thus:
486
We, however, disagree with the dismissal of the case against [herein petitioner]. Under Art. 107 12 of the Labor Code of the
Philippines, [herein petitioner] is considered an indirect employer and can be held solidarily liable with [private respondents] as
an independent contractor. Under Art. 109,13 for purposes of determining the extent of its liability, [herein petitioner] is
considered a direct employer, hence, it is solidarily liable for complainants (sic) wage differentials and unpaid overtime. We
find this situation obtaining in this case in view of the failure of [private respondents] to pay in full the labor standard benefits of
complainants, in which case liability is limited thereto and does not extend to the establishment of employer-employee
relations.14 [Emphasis supplied].
Both private respondents and petitioner separately moved for reconsideration of the aforesaid Resolution of the NLRC. In their
Motion for Reconsideration, private respondents reiterated that the complainants abandoned their work, so that private
respondents should not be liable for separation pay; and that petitioner, not private respondents, should be liable for
complainants other monetary claims, i.e., for wage differentials and unpaid overtime. The petitioner, in its own Motion for
Reconsideration, asked that it be excluded from liability. It averred that private respondents should be solely responsible for
their acts as it sufficiently paid private respondents all the benefits due the complainants.
On 30 July 1993, the NLRC issued an Order15 noting that based on the records of the case, the judgment award in the amount
of P487,287.07 was secured by a surety bond posted by the private respondents;16 hence, there was no longer any
impediment to the satisfaction of the complainants claims. Resultantly, the NLRC denied the private respondents Motion for
Reconsideration. The NLRC likewise directed the Labor Arbiter to enforce the monetary award against the private
respondents surety bond and to determine who should finally shoulder the liability therefor. 17
Alleging grave abuse of discretion of the NLRC in its issuance of the Resolution and Order dated 28 May 1993 and 30 July
1993, respectively, private respondents filed before this Court a Petition for Certiorari with prayer for the issuance of a writ of
preliminary injunction. The same was docketed as G.R. No. 111506 entitled Ofelia Landrito General Services v. National Labor
Relations Commission. The said Petition suspended the proceedings before the Labor Arbiter.
On 23 May 1994, however, this Court issued a Resolution18 dismissing G.R. No. 111506 for failure of private respondents to
sufficiently show that the NLRC had committed grave abuse of discretion in rendering its questioned judgment. This Courts
Resolution in G.R. No. 111506 became final and executory on 25 July 1994. 19
As a consequence thereof, the proceedings before the Labor Arbiter resumed with respect to the determination of who should
finally shoulder the liability for the monetary awards granted to the complainants, in accordance with the NLRC Order dated 30
July 1993.
On 5 October 1994, the Labor Arbiter issued an Order,20 which reads:
As can be gleaned from the Resolution dated [28 May 1993], there is that necessity of clarifying the respective liabilities of
[herein petitioner] and [herein private respondents] insofar as the judgment award in the total sum of P487,287.07 is
concerned.
The judgment award in the total sum of P487,287.07 as contained in the Decision dated [26 March 1991] consists of three (3)
parts, as follows: First, the judgment award on the underpayment; Second, the judgment award on separation pay; and Third,
the judgment award on the overtime pay.
The question now is: Which of these awards is [petitioner] solidarily liable with [private respondents]?
An examination of the record elicits the finding that [petitioner] is solidarily liable with [private respondents] on the judgment
awards on the underpayment and on the non-payment of the overtime pay. xxx. This joint and several liability of the contractor
[private respondents] and the principal [petitioner] is mandated by the Labor Code to assure compliance of the provisions
therein, including the statutory minimum wage (Art. 99, 21 Labor Code). The contractor-agency is made liable by virtue of his
status as direct employer. The principal, on the other hand, is made the indirect employer of the contractor-agencys
employees for purposes of paying the employees their wages should the contractor-agency be unable to pay them. This joint
and several liability facilitates, if not guarantees, payment of the workers performance of any work, task, job or project, thus
giving the workers ample protection as mandated by the 1987 Constitution.
In sum, the complainants may enforce the judgment award on underpayment and the non-payment of overtime pay against
either [private respondents] and/or [petitioner].
However, in view of the finding in the Decision that [petitioner] had adjusted its contract price for the janitorial services it
contracted with [private respondents] conforming to the provisions of Republic Act No. 6727, should the complainants enforce
the judgment on the underpayment and on the non-payment of the overtime pay aginst (sic) [petitioner], the latter can seek
reimbursement from the former [meaning (private respondents)], but should the judgment award on the underpayment and on
the non-payment of the overtime pay be enforced against [private respondents], the latter cannot seek reimbursement against
[petitioner].
The judgment award on separation pay is the sole liability of [private respondents].
WHEREFORE, [petitioner] is jointly and severally liable with [private respondents] in the judgment award on underpayment
and on the non-payment of overtime pay. Should the complainants enforce the above judgment award against [petitioner], the
latter can seek reimbursement against [private respondents], but should the aforementioned judgment award be enforced
against [private respondents], the latter cannot seek reimbursement from the [petitioner].
The judgment award on the payment of separation pay is the sole liability of [private respondents].
487
Let an alias writ of execution be issued. [Emphasis supplied].
Again, both the private respondents and the petitioner appealed the afore-quoted Order of the Labor Arbiter to the NLRC. On
25 April 1995, the NLRC issued a Resolution22 affirming the Order dated 5 October 1994 of the Labor Arbiter and dismissing
both appeals for non-posting of the appeal or surety bond and/or for utter lack of merit.23 When the private respondents and
the petitioner moved for reconsideration, however, it was granted by the NLRC in its Order 24 dated 27 July 1995. The NLRC
thus set aside its Resolution dated 25 April 1995, and directed the private respondents and the petitioner to each post an
appeal bond in the amount of P487,287.62 to perfect their respective appeals.25 Both parties complied.26
On 30 January 1996, the NLRC rendered a Decision modifying the Order of the Labor Arbiter dated 5 October 1994, the
dispositive portion of which reads:
WHEREFORE, the [21 November 1994] appeal of [herein petitioner] is hereby granted. The [5 October 1994] Order of Labor
Arbiter Donato G. Quinto, Jr., is modified to the extent that it still held [petitioner] as "jointly and severally liable with [herein
private respondents] in the judgment award on underpayment and on the non-payment of overtime pay," our directive being
that the Arbiter should now satisfy said labor-standards award, as well as that of the separation pay, exclusively through the
surety bond posted by [private respondents].27[Emphasis supplied].
Dissatisfied, private respondents moved for the reconsideration of the foregoing Decision, but it was denied by the NLRC in an
Order28 dated 30 October 1996. This NLRC Order dated 30 October 1996 became final and executory on 29 November 1996.
On 4 December 1996, private respondents filed a Petition for Certiorari 29 before this Court assailing the Decision and the
Order of the NLRC dated 30 January 1996 and 30 October 1996, respectively. On 9 December 1998, this Court issued a
Resolution30 referring the case to the Court of Appeals conformably with its ruling in St. Martin Funeral Home v. National Labor
Relations Commission.31 The case was docketed before the appellate court as CA-G.R. SP No. 50806.
The Petition made a sole assignment of error, to wit:
THE HONORABLE COMMISSION GRAVELY ERRED AND GRAVELY ABUSED ITS DISCRETION IN FINDING THAT THE
ULTIMATE LIABILITY SHOULD FALL ON THE [HEREIN PRIVATE RESPONDENTS] ALONE, WITHOUT REIMBURSEMENT
FROM THE [HEREIN PETITIONER], IN ORDER TO SATISFY THE MONETARY AWARDS OF THE [THEREIN
COMPLAINANTS].32
After due proceedings, the Court of Appeals rendered the assailed Decision on 24 April 2000, modifying the Decision of the
NLRC dated 30 January 1996 and holding the petitioner solidarily liable with the private respondents for the satisfaction of the
laborers separation pay. According to the Court of Appeals:
The [NLRC] adjudged the payment of separation pay to be the sole responsibility of [herein private respondents] because (1)
there is no employer-employee relationship between [herein petitioner] and the forty-nine (49) [therein complainants]; (2) the
payment of separation pay is not a labor standard benefit. We disagree.
Again, We quote Article 109 of the Labor Code, as amended, viz:
"The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held responsible
with his contractor or subcontractor for any violation of any provision of this Code"
The abovementioned statute speaks of "any violation of any provision of this Code." Thus, the existence or non-existence of
employer-employee relationship and whether or not the violation is one of labor standards is immaterial because said provision
of law does not make any distinction at all and, therefore, this Court should also refrain from making any distinction.
Concomitantly, [herein petitioner] should be jointly and severally liable with [private respondents] for the payment of wage
differentials, overtime pay and separation pay of the [therein complainants]. The joint and several liability imposed to
[petitioner] is, again, without prejudice to a claim for reimbursement by [petitioner] against [private respondents] for reasons
already discusses (sic).
WHEREFORE, premises studiedly considered, the assailed 30 January 1996 decision of [the NLRC] is hereby modified
insofar as [petitioner] should be held solidarily liable with [the private respondents] for the satisfaction of the laborers
separation pay. No pronouncement as to costs.33 [Emphasis supplied].
The petitioner filed a Motion for Reconsideration of the aforesaid Decision but it was denied by the Court of Appeals in a
Resolution dated 27 September 2000.
Petitioner now comes before this Court via a Petition for Review on Certiorari, docketed as G.R. No. 145402, raising the sole
issue of "whether or not the Honorable Court of Appeals palpably erred when it went beyond the issues of the case as it
modified the factual findings of the Labor Arbiter which attained finality after it was affirmed by Public Respondent NLRC and
by the Supreme Court which can no longer be disturbed as it became the law of the case." 34
Petitioner argues that in the assailed Decision dated 24 April 2000, the Court of Appeals found that the sole issue for its
resolution was whether the ultimate liability to pay the monetary awards in favor of the 49 employees falls on the private
respondents without reimbursement from the petitioner. Hence, the appellate court should have limited itself to determining the
right of private respondents to still seek reimbursement from petitioner for the monetary awards on the unpaid wages and
overtime pay of the complainants.
According to petitioner, the NLRC, in its Resolution dated 28 May 1993, already found that petitioner had fully complied with its
salary obligations to the complainants. Petitioner invokes the same NLRC Resolution to support its claim that it was not liable
to share with the private respondents in the payment of separation pay to complainants. When private respondents questioned
488
the said NLRC Resolution in a Petition for Certiorari with this Court, docketed as G.R. No. 111506, this Court found that the
NLRC did not commit grave abuse of discretion in the issuance thereof and accordingly dismissed private respondents
Petition. Said NLRC Resolution, therefore, has since become final and executory and can no longer be disturbed for it now
constitutes the law of the case.
Assuming for the sake of argument that the Court of Appeals can still take cognizance of the issue of petitioners liability for
complainants separation pay, petitioner asserts that the appellate court seriously erred in concluding that it is jointly and
solidarily liable with private respondents for the payment thereof. The payment of separation pay should be the sole
responsibility of the private respondents because there was no employer-employee relationship between the petitioner and the
complainants, and the payment of separation pay is not a labor standards benefit.
Law of the case has been defined as the opinion delivered on a former appeal. It is a term applied to an established rule that
when an appellate court passes on a question and remands the case to the lower court for further proceedings, the question
there settled becomes the law of the case upon subsequent appeal. It means that whatever is once irrevocably established as
the controlling legal rule or decision between the same parties in the same case continues to be the law of the case, whether
correct on general principles or not, so long as the facts on which such decision was predicated continue to be the facts of the
case before the court.35 Indeed, courts must adhere thereto, whether the legal principles laid down were "correct on general
principles or not" or "whether the question is right or wrong" because public policy, judicial orderliness and economy require
such stability in the final judgments of courts or tribunals of competent jurisdiction. 36
Petitioners application of the law of the case principle to the case at bar as regards its liability for payment of separation pay is
misplaced.
The only matters settled in the 23 May 1994 Resolution of this Court in G.R. No. 111506, which can be regarded as the law of
the case, were (1) both the petitioner and the private respondents were jointly and solidarily liable for the judgment awards due
the complainants; and (2) the said judgment awards shall be enforced against the surety bond posted by the private
respondents. However, the issue as regards the liability of the petitioner for payment of separation pay was yet to be resolved
because precisely, the NLRC, in its Order dated 30 July 1993, still directed the Labor Arbiter to make a determination on who
should finally shoulder the monetary awards granted to the complainants. And it was only after G.R. No. 111506 was
dismissed by this Court that the Labor Arbiter promulgated his Decision dated 5 October 1994, wherein he clarified the
respective liabilities of the petitioner and the private respondents for the judgment awards. In his 5 October 1994 Decision, the
Labor Arbiter explained that the solidary liability of the petitioner was limited to the monetary awards for wage underpayment
and non-payment of overtime pay due the complainants, and it did not, in any way, extend to the payment of separation pay as
the same was the sole liability of the private respondents.
Nonetheless, this Court finds the present Petition meritorious.
The Court of Appeals indeed erred when it ruled that the petitioner was jointly and solidarily liable with the private respondents
as regards the payment of separation pay.
The appellate court used as basis Article 109 of the Labor Code, as amended, in holding the petitioner solidarily liable with the
private respondents for the payment of separation pay:
ART. 109. Solidary Liability. - The provisions of existing laws to the contrary notwithstanding, every employer or indirect
employer shall be held responsible with his contractor or subcontractor for any violation of any provision of this Code. For
purposes of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers.
[Emphasis supplied].1avvphi1
However, the afore-quoted provision must be read in conjunction with Articles 106 and 107 of the Labor Code, as amended.
Article 107 of the Labor Code, as amended, defines an indirect employer as "any person, partnership, association or
corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job
or project." To ensure that the contractors employees are paid their appropriate wages, Article 106 of the Labor Code, as
amended, provides:
ART. 106. CONTRACTOR OR SUBCONTRACTOR. x x x.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code,
the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the
work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.
[Emphasis supplied].
Taken together, an indirect employer (as defined by Article 107) can only be held solidarily liable with the independent
contractor or subcontractor (as provided under Article 109) in the event that the latter fails to pay the wages of its employees
(as described in Article 106).
Hence, while it is true that the petitioner was the indirect employer of the complainants, it cannot be held liable in the same
way as the employer in every respect. The petitioner may be considered an indirect employer only for purposes of unpaid
wages. As this Court succinctly explained in Philippine Airlines, Inc. v. National Labor Relations Commission 37:
While USSI is an independent contractor under the security service agreement and PAL may be considered an indirect
employer, that status did not make PAL the employer of the security guards in every respect. As correctly posited by the Office
of the Solicitor General, PAL may be considered an indirect employer only for purposes of unpaid wages since Article 106,
489
which is applicable to the situation contemplated in Section 107, speaks of wages. The concept of indirect employer only
relates or refers to the liability for unpaid wages. Read together, Articles 106 and 109 simply mean that the party with whom an
independent contractor deals is solidarily liable with the latter for unpaid wages, and only to that extent and for that purpose
that the latter is considered a direct employer. The term "wage" is defined in Article 97(f) of the Labor Code as "the
remuneration of earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained
on a time, task, piece, or commission basis, or other method of calculating the unwritten contract of employment for work done
or to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as determined by the
Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee."
Further, there is no question that private respondents are operating as an independent contractor and that the complainants
were their employees. There was no employer-employee relationship that existed between the petitioner and the complainants
and, thus, the former could not have dismissed the latter from employment. Only private respondents, as the complainants
employer, can terminate their services, and should it be done illegally, be held liable therefor. The only instance when the
principal can also be held liable with the independent contractor or subcontractor for the backwages and separation pay of the
latters employees is when there is proof that the principal conspired with the independent contractor or subcontractor in the
illegal dismissal of the employees, thus:
The liability arising from an illegal dismissal is unlike an order to pay the statutory minimum wage, because the workers right
to such wage is derived from law. The proposition that payment of back wages and separation pay should be covered by
Article 109, which holds an indirect employer solidarily responsible with his contractor or subcontractor for "any violation of any
provision of this Code," would have been tenable if there were proof - there was none in this case - that the principal/employer
had conspired with the contractor in the acts giving rise to the illegal dismissal. 38
It is the established fact of conspiracy that will tie the principal or indirect employer to the illegal dismissal of the contractor or
subcontractors employees. In the present case, there is no allegation, much less proof presented, that the petitioner conspired
with private respondents in the illegal dismissal of the latters employees; hence, it cannot be held liable for the same.
Neither can the liability for the separation pay of the complainants be extended to the petitioner based on contract. Contract
Order No. 166-84 executed between the petitioner and the private respondents contains no provision for separation pay in the
event that the petitioner terminates the same. It is basic that a contract is the law between the parties and the stipulations
therein, provided that they are not contrary to law, morals, good customs, public order or public policy, shall be binding as
between the parties.39 Hence, if the contract does not provide for such a liability, this Court cannot just read the same into the
contract without possibly violating the intention of the parties.
It is also worth noting that although the issue in CA-G.R. SP No. 50806 pertains to private respondents right to reimbursement
from petitioner for the "monetary awards" in favor of the complainants, they limited their arguments to the monetary awards for
underpayment of wages and non-payment of overtime pay, and were conspicuously silent on the monetary award for
separation pay. Thus, private respondents sole liability for the separation pay of their employees should have been deemed
settled and already beyond the power of the Court of Appeals to resolve, since it was an issue never raised before it. 40
Although petitioner is not liable for complainants separation pay, the Court conforms to the consistent findings in the
proceedings below that the petitioner is solidarily liable with the private respondents for the judgment awards for
underpayment of wages and non-payment of overtime pay.
In this case, however, private respondents had already posted a surety bond in an amount sufficient to cover all the judgment
awards due the complainants, including those for underpayment of wages and non-payment of overtime pay. The joint and
several liability of the principal with the contractor and subcontractor were enacted to ensure compliance with the provisions of
the Labor Code, principally those on statutory minimum wage. This liability facilitates, if not guarantees, payment of the
workers compensation, thus, giving the workers ample protection as mandated by the 1987 Constitution.41 With private
respondents surety bond, it can therefore be said that the purpose of the Labor Code provision on the solidary liability of the
indirect employer is already accomplished since the interest of the complainants are already adequately protected.
Consequently, it will be futile to continuously hold the petitioner jointly and solidarily liable with the private respondents for the
judgment awards for underpayment of wages and non-payment of overtime pay.
But while this Court had previously ruled that the indirect employer can recover whatever amount it had paid to the employees
in accordance with the terms of the service contract between itself and the contractor, 42 the said ruling cannot be applied in
reverse to this case as to allow the private respondents (the independent contractor), who paid for the judgment awards in full,
to recover from the petitioner (the indirect employer).
Private respondents have nothing more to recover from petitioner.
Petitioner had already handed over to private respondent the wages and other benefits of the complainants. Records reveal
that it had complied with complainants salary increases in accordance with the minimum wage set by Republic Act No. 6727
by faithfully adjusting the contract price for the janitorial services it contracted with private respondents. 43 This is a finding of
fact made by the Labor Arbiter,44 untouched by the NLRC45 and explicitly affirmed by the Court of Appeals,46 and which should
already bind this Court.
This Court is not a trier of facts. Well-settled is the rule that the jurisdiction of this Court in a petition for review
on certiorari under Rule 45 of the Revised Rules of Court is limited to reviewing only errors of law, not of fact, unless the

490
factual findings complained of are completely devoid of support from the evidence on record, or the assailed judgment is
based on a gross misapprehension of facts. Besides, factual findings of quasi-judicial agencies like the NLRC, when affirmed
by the Court of Appeals, are conclusive upon the parties and binding on this Court. 47
Having already received from petitioner the correct amount of wages and benefits, but having failed to turn them over to the
complainants, private respondents should now solely bear the liability for the underpayment of wages and non-payment of the
overtime pay.
WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The Decision and Resolution of the Court of
Appeals dated 24 April 2000 and 27 September 2000, respectively, in CA-G.R. SP No. 50806, are hereby REVERSED AND
SET ASIDE. The Decision dated 30 January 1996 of the National Labor Relations Commission in NLRC NCR CA No. 001737-
91 (NLRC NCR Case No. 00-09-04432-89) is hereby REINSTATED. No costs.
SO ORDERED.

G.R. No. 178827 March 4, 2009

JEROMIE D. ESCASINAS and EVAN RIGOR SINGCO, Petitioners,
vs.
SHANGRI-LA'S MACTAN ISLAND RESORT and DR. JESSICA J.R. PEPITO, Respondents.
DECISION
CARPIO MORALES, J.:
Registered nurses Jeromie D. Escasinas and Evan Rigor Singco (petitioners) were engaged in 1999 and 1996, respectively,
by Dr. Jessica Joyce R. Pepito (respondent doctor) to work in her clinic at respondent Shangri-las Mactan Island Resort
(Shangri-la) in Cebu of which she was a retained physician.
In late 2002, petitioners filed with the National Labor Relations Commission (NLRC) Regional Arbitration Branch No. VII
(NLRC-RAB No. VII) a complaint1 for regularization, underpayment of wages, non-payment of holiday pay, night shift
differential and 13th month pay differential against respondents, claiming that they are regular employees of Shangri-la. The
case was docketed as RAB Case No. 07-11-2089-02.
Shangri-la claimed, however, that petitioners were not its employees but of respondent doctor whom it retained via
Memorandum of Agreement (MOA)2 pursuant to Article 157 of the Labor Code, as amended.
Respondent doctor for her part claimed that petitioners were already working for the previous retained physicians of Shangri-la
before she was retained by Shangri-la; and that she maintained petitioners services upon their request.
By Decision3 of May 6, 2003, Labor Arbiter Ernesto F. Carreon declared petitioners to be regular employees of Shangri-la. The
Arbiter thus ordered Shangri-la to grant them the wages and benefits due them as regular employees from the time their
services were engaged.
In finding petitioners to be regular employees of Shangri-la, the Arbiter noted that they usually perform work which is
necessary and desirable to Shangri-las business; that they observe clinic hours and render services only to Shangri-las
guests and employees; that payment for their salaries were recommended to Shangri-las Human Resource Department
(HRD); that respondent doctor was Shangri-las "in-house" physician, hence, also an employee; and that the MOA between
Shangri-la and respondent doctor was an "insidious mechanism in order to circumvent [the doctors] tenurial security and that
of the employees under her."
Shangri-la and respondent doctor appealed to the NLRC. Petitioners appealed too, but only with respect to the non-award to
them of some of the benefits they were claiming.
By Decision4 dated March 31, 2005, the NLRC granted Shangri-las and respondent doctors appeal and dismissed petitioners
complaint for lack of merit, it finding that no employer-employee relationship exists between petitioner and Shangri-la. In so
deciding, the NLRC held that the Arbiter erred in interpreting Article 157 in relation to Article 280 of the Labor Code, as what is
required under Article 157 is that the employer should provide the services of medical personnel to its employees, but nowhere
in said article is a provision that nurses are required to be employed; that contrary to the finding of the Arbiter, even if Article
280 states that if a worker performs work usually necessary or desirable in the business of the employer, he cannot be
automatically deemed a regular employee; and that the MOA amply shows that respondent doctor was in fact engaged by
Shangri-la on a retainer basis, under which she could hire her own nurses and other clinic personnel.
Brushing aside petitioners contention that since their application for employment was addressed to Shangri-la, it was really
Shangri-la which hired them and not respondent doctor, the NLRC noted that the applications for employment were made by
persons who are not parties to the case and were not shown to have been actually hired by Shangri-la.
On the issue of payment of wages, the NLRC held that the fact that, for some months, payment of petitioners wages were
recommended by Shangri-las HRD did not prove that it was Shangri-la which pays their wages. It thus credited respondent
doctors explanation that the recommendations for payment were based on the billings she prepared for salaries
of additional nurses during Shangri-las peak months of operation, in accordance with the retainership agreement, the guests
payments for medical services having been paid directly to Shanrgi-la.
Petitioners thereupon brought the case to the Court of Appeals which, by Decision 5 of May 22, 2007, affirmed the NLRC
Decision that no employer-employee relationship exists between Shangri-la and petitioners. The appellate court concluded
491
that all aspects of the employment of petitioners being under the supervision and control of respondent doctor and since
Shangri-la is not principally engaged in the business of providing medical or healthcare services, petitioners could not be
regarded as regular employees of Shangri-la.
Petitioners motion for reconsideration having been denied by Resolution6 of July 10, 2007, they interposed the present
recourse.
Petitioners insist that under Article 157 of the Labor Code, Shangri-la is required to hire a full-time registered nurse, apart from
a physician, hence, their engagement should be deemed as regular employment, the provisions of the MOA notwithstanding;
and that the MOA is contrary to public policy as it circumvents tenurial security and, therefore, should be struck down as being
void ab initio. At most, they argue, the MOA is a mere job contract.
And petitioners maintain that respondent doctor is a labor-only contractor for she has no license or business permit and no
business name registration, which is contrary to the requirements under Sec. 19 and 20 of the Implementing Rules and
Regulations of the Labor Code on sub-contracting.
Petitioners add that respondent doctor cannot be a legitimate independent contractor, lacking as she does in substantial
capital, the clinic having been set-up and already operational when she took over as retained physician; that respondent
doctor has no control over how the clinic is being run, as shown by the different orders issued by officers of Shangri-la
forbidding her from receiving cash payments and several purchase orders for medicines and supplies which were coursed thru
Shangri-las Purchasing Manager, circumstances indubitably showing that she is not an independent contractor but a mere
agent of Shangri-la.
In its Comment,7 Shangri-la questions the Special Powers of Attorneys (SPAs) appended to the petition for being inadequate.
On the merits, it prays for the disallowance of the petition, contending that it raises factual issues, such as the validity of the
MOA, which were never raised during the proceedings before the Arbiter, albeit passed upon by him in his Decision; that
Article 157 of the Labor Code does not make it mandatory for a covered establishment to employ health personnel; that the
services of nurses is not germane nor indispensable to its operations; and that respondent doctor is a legitimate individual
independent contractor who has the power to hire, fire and supervise the work of the nurses under her.
The resolution of the case hinges, in the main, on the correct interpretation of Art. 157 vis a vis Art. 280 and the provisions on
permissible job contracting of the Labor Code, as amended.
The Court holds that, contrary to petitioners postulation, Art. 157 does not require the engagement of full-time nurses as
regular employees of a company employing not less than 50 workers. Thus, the Article provides:
ART. 157. Emergency medical and dental services. It shall be the duty of every employer to furnish his employees in any
locality with free medical and dental attendance and facilities consisting of:
(a) The services of a full-time registered nurse when the number of employees exceeds fifty (50) but not more than
two hundred (200) except when the employer does not maintain hazardous workplaces, in which case the services of
a graduate first-aider shall be provided for the protection of the workers, where no registered nurse is available. The
Secretary of Labor shall provide by appropriate regulations the services that shall be required where the number of
employees does not exceed fifty (50) and shall determine by appropriate order hazardous workplaces for purposes of
this Article;
(b) The services of a full-time registered nurse, a part-time physician and dentist, and an emergency clinic, when the
number of employees exceeds two hundred (200) but not more than three hundred (300); and
(c) The services of a full-time physician, dentist and full-time registered nurse as well as a dental clinic, and an
infirmary or emergency hospital with one bed capacity for every one hundred (100) employees when the number of
employees exceeds three hundred (300).
In cases of hazardous workplaces, no employer shall engage the services of a physician or dentist who cannot stay in the
premises of the establishment for at least two (2) hours, in the case of those engaged on part-time basis, and not less than
eight (8) hours in the case of those employed on full-time basis. Where the undertaking is nonhazardous in nature, the
physician and dentist may be engaged on retained basis, subject to such regulations as the Secretary of Labor may prescribe
to insure immediate availability of medical and dental treatment and attendance in case of emergency. (Emphasis and
underscoring supplied)
Under the foregoing provision, Shangri-la, which employs more than 200 workers, is mandated to "furnish" its employees with
the services of a full-time registered nurse, a part-time physician and dentist, and an emergency clinic which means that it
should provide or make available such medical and allied services to its employees, not necessarily to hire or employ a service
provider. As held in Philippine Global Communications vs. De Vera: 8
x x x while it is true that the provision requires employers to engage the services of medical practitioners in certain
establishments depending on the number of their employees, nothing is there in the law which says that medical practitioners
so engaged be actually hired as employees, adding that the law, as written, only requires the employer "to retain", not employ,
a part-time physician who needed to stay in the premises of the non-hazardous workplace for two (2) hours. (Emphasis and
underscoring supplied)1avvphi1

492
The term "full-time" in Art. 157 cannot be construed as referring to the type of employment of the person engaged to provide
the services, for Article 157 must not be read alongside Art. 2809 in order to vest employer-employee relationship on the
employer and the person so engaged. So De Vera teaches:
x x x For, we take it that any agreement may provide that one party shall render services for and in behalf of another, no
matter how necessary for the latters business, even without being hired as an employee. This set-up is precisely true in the
case of an independent contractorship as well as in an agency agreement. Indeed, Article 280 of the Labor Code, quoted by
the appellate court, is not the yardstick for determining the existence of an employment relationship. As it is, the provision
merely distinguishes between two (2) kinds of employees, i.e., regular and casual. x x x10 (Emphasis and underscoring
supplied)
The phrase "services of a full-time registered nurse" should thus be taken to refer to the kind of services that the nurse will
render in the companys premises and to its employees, not the manner of his engagement.
As to whether respondent doctor can be considered a legitimate independent contractor, the pertinent sections of DOLE
Department Order No. 10, series of 1997, illuminate:
Sec. 8. Job contracting. There is job contracting permissible under the Code if the following conditions are met:
(1) The contractor carries on an independent business and undertakes the contract work on his own account under
his own responsibility according to his own manner and method, free from the control and direction of his employer or
principal in all matters connected with the performance of the work except as to the results thereof; and
(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises,
and other materials which are necessary in the conduct of his business.
Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to an employer shall be deemed to be
engaged in labor-only contracting where such person:
(1) Does not have substantial capital or investment in the form of tools, equipment, machineries,
work premises and other materials; and
(2) The workers recruited and placed by such persons are performing activities which are directly
related to the principal business or operations of the employer in which workers are habitually
employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be
considered merely as an agent or intermediary of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.
(c) For cases not falling under this Article, the Secretary of Labor shall determine through appropriate orders whether
or not the contracting out of labor is permissible in the light of the circumstances of each case and after considering
the operating needs of the employer and the rights of the workers involved. In such case, he may prescribe
conditions and restrictions to insure the protection and welfare of the workers. (Emphasis supplied)
The existence of an independent and permissible contractor relationship is generally established by considering the following
determinants: whether the contractor is carrying on an independent business; the nature and extent of the work; the skill
required; the term and duration of the relationship; the right to assign the performance of a specified piece of work; the control
and supervision of the work to another; the employer's power with respect to the hiring, firing and payment of the contractor's
workers; the control of the premises; the duty to supply the premises, tools, appliances, materials and labor; and the mode,
manner and terms of payment.11
On the other hand, existence of an employer- employee relationship is established by the presence of the following
determinants: (1) the selection and engagement of the workers; (2) power of dismissal; (3) the payment of wages by whatever
means; and (4) the power to control the worker's conduct, with the latter assuming primacy in the overall consideration.12
Against the above-listed determinants, the Court holds that respondent doctor is a legitimate independent contractor. That
Shangri-la provides the clinic premises and medical supplies for use of its employees and guests does not necessarily prove
that respondent doctor lacks substantial capital and investment. Besides, the maintenance of a clinic and provision of medical
services to its employees is required under Art. 157, which are not directly related to Shangri-las principal business
operation of hotels and restaurants.
As to payment of wages, respondent doctor is the one who underwrites the following: salaries, SSS contributions and other
benefits of the staff13; group life, group personal accident insurance and life/death insurance 14 for the staff with minimum
benefit payable at 12 times the employees last drawn salary, as well as value added taxes and withholding taxes, sourced
from her P60,000.00 monthly retainer fee and 70% share of the service charges from Shangri-las guests who avail of the
clinic services. It is unlikely that respondent doctor would report petitioners as workers, pay their SSS premium as well as their
wages if they were not indeed her employees.15
With respect to the supervision and control of the nurses and clinic staff, it is not disputed that a document, "Clinic Policies and
Employee Manual"16 claimed to have been prepared by respondent doctor exists, to which petitioners gave their
conformity17 and in which they acknowledged their co-terminus employment status. It is thus presumed that said document,
and not the employee manual being followed by Shangri-las regular workers, governs how they perform their respective tasks
and responsibilities.
493
Contrary to petitioners contention, the various office directives issued by Shangri-las officers do not imply that it is Shangri-
las management and not respondent doctor who exercises control over them or that Shangri-la has control over how the
doctor and the nurses perform their work. The letter18 addressed to respondent doctor dated February 7, 2003 from a certain
Tata L. Reyes giving instructions regarding the replenishment of emergency kits is, at most, administrative in nature, related as
it is to safety matters; while the letter19 dated May 17, 2004 from Shangri-las Assistant Financial Controller, Lotlot Dagat,
forbidding the clinic from receiving cash payments from the resorts guests is a matter of financial policy in order to ensure
proper sharing of the proceeds, considering that Shangri-la and respondent doctor share in the guests payments for medical
services rendered. In fine, as Shangri-la does not control how the work should be performed by petitioners, it is not petitioners
employer.
WHEREFORE, the petition is hereby DENIED. The Decision of the Court of Appeals dated May 22, 2007 and the Resolution
dated July 10, 2007 are AFFIRMED.
SO ORDERED.

G.R. No. 158956 April 24, 2009

ILIGAN CEMENT CORPORATION Petitioner,
vs.
ILIASCOR EMPLOYEES AND WORKERS UNION - SOUTHERN PHILIPPINES FEDERATION OF LABOR (IEWU-SPFL),
AND ITS OFFICERS AND MEMBERS, HEADED BY CLEMENTINO DENSING, PRESIDENT, ANTONIO ACASO, FIDEL
BADILLO, JR., BONIFACIO BANSAG, FELIPE BARDILAS, ALFREDO BERNALDEZ, ROMEO CARANYAGAN, MIGUEL
CLAUDEL, VENERANDO DEL MONTE, ROMY DUMA-OG, JAIME DUMA-OG, EUSTIQUIO EBABIOSA, PEDRO
EBABIOSA, VIRGINITO EBABIOSA, DOLIO EPAT, VIRGILIO FABRICANTE, ANACLETO JUNTILLA, JR., ROBERTO
MILIJON, PACIFICO NACA, EDGARDO PACULBA, DAMACINO PANCHO, RODULFO QUARTEROS, EDGARDO RICO,
GIL SECULA, SILVANO VEGA, EMEGDIO AMISTOSO, RODOLFO BABATIDO, CRISOLOGO BAGOY, PRUDENCIO
BALABA, JR., ROMEO BALLANCA, PERFECTO BOHOL, JASUS BUGTAY, FRANCISCO CABALLA, ROMULO
CABALUNA, ROLANDO CAGULA, RONALD CASTRO, DOMINADOR CATIAN, LUCRESIO CUNADO, PABLO DAYDAY,
BERNABE DELA PENA, DISOCORO DIOSMANOS, SIXTO DUMAOG, ANASTACIO FLORIN, JOSELITO FULLIDO,
LEONARDO GALLETO, APOLINARIO GUINITA, EMELIANO GUINITA, FELIX HERMOSO, RODOLFO HERMOSO,
DOMINGO JAGONAL, AVELINO JORZA, ANTONIO JURADO, ISIDRO LAHOY-LAHOY, JR., SALVADOR LAURE, JIMMY
MALIKSI, DEMOCRTO MAGHINAY, MANUELITO MAGSAYO, EDUARDO MALONHAO, JUANITO MANGGAS, LUCIANO
MANGGAS, DIONESIO MANTALABA, FERNANDO MARIQUIT, JOSE MATA, NELSON MIANO, PERDO MIANO, JR.,
ALFREDO MICABALO, ELISAR MONTEJO, FELIX NAMOC, EDMUNDO NOTORIO, LUIS OGUIMAS, SILVINO
OLANDAG, NARCISO OLLOVES, MARIO OLPOC, SANTIAGO MONDANG, RAUL PANILAGAO, JOLLY PESARAS,
ANTONIO RAGANAS, DIOSCORO RICO, FELIPE RICO, CASEMERO RASARIO, ISIDRO RUBIO, BUENAVENTURA
RUIZ, IRENIO SABINAY, JR., GILBERT SAYSON, ELESIO SANTINIAMAN, NIEVES SECULA, BALBINO SILLE,
NORBERTO SUMILE, REMEGIO TAMPUS, WILFREDO TANUDRA, ANTONIO TEJANO, PABLITO TOLEDO, JOHNAN
OVALO, ET AL., Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Court assailing the twin Resolutions of the
Court of Appeals in CA-G.R. SP No. 72267 dated October 17, 20021 , and July 3, 20032 which dismissed the petition for
certiorari and denied petitioners motion for reconsideration respectively.
Petitioner Iligan Cement Corporation, is a corporation duly organized and existing under the laws of the Philippines with plant
offices at Kiwalan, Iligan City.
Iligan Industrial and Agency Services Corporation (ILIASCOR), is the accredited job contractor of petitioner which provided
stevedoring and arrastre services to the latter since its operations in the 1970s at its private pier in Kiwalan, Iligan City.
Respondent ILIASCOR Employees and Workers Union- Southern Philippines Federation of Labor (IEWU-SPFL) is the
certified bargaining representative of ILIASCORs arrastre and stevedoring workers, including herein individual respondents,
from August 1, 1995 to August 1, 2000.3
Vedali General Services (Vedali) is an accredited service agency which provided general services to petitioners various
departments.
On November 11, 1999, Blue Circle Philippines, Inc. took over the management of petitioners business, 4 and decided to
bid5 out the services at petitioners private pier. Before the actual bidding, respondent requested that the employment of
ILIASCORs workers be continued.6 In a letter dated November 26, 1999, Peter Brinkley, petitioners Vice-President for
Operations denied respondents request as the contract with ILIASCOR had already expired.7
ILIASCOR lost the bidding to Luzon Visayas Mindanao Arrastre and Stevedoring, Inc. (LVMASI). Consequently, ILIASCOR
paid the individual respondents their separation pay of half-month (1/2) pay for every year of service8 , contrary to the
stipulation in the Collective Bargaining Agreement (CBA), which is one-month pay for every year of service.9

494
The contract between petitioner and LVMASI was not perfected when it was discovered that LVMASI was a dormant
corporation which was neither a stevedoring company nor possessed with sufficient capital to engage in the stevedoring and
arrastre works.10
To ensure that its operations would not be hampered, petitioner issued a service order to Vedali. 11 On August 2, 2000 Vedali
fielded stevedores, including herein respondents. Petitioners Packhouse Manager Alex Sagario readily engaged
stevedores.12 On October 12, 2000, Vedali issued Charge Invoice No. 0275 to petitioner in the amount of 534,404.93 for the
stevedores assigned at Packhouse from September 16-30, 200013
On October 23, 2000, individual respondents filed a complaint 14 with the National Labor Relations Commission (NLRC) Sub-
Regional Arbitration Branch XII against petitioner. Pursuant to Article 109 of the Labor Code respondents demanded for the
declaration of their status as regular employees and for the payment of the half of their separation pay which ILIASCOR
previously withheld.
On October 25, 2000, Vedali sent a Bill/ Demand Letter15 to petitioner, demanding payment in the amount of P533,666.11 for
the services of its stevedores assigned at Packhouse from October 1-15, 2000.
On November 15, 2000, petitioner entered into a stevedoring and arrastre contract with Northern Mindanao Industrial and Port
Services Corporation (NMIPSC). Thereafter, NMIPSC took over the stevedoring duties of individual respondents. 16
Hence, on December 14, 2000, individual respondents filed a Supplemental Complaint 17 with the NLRC Sub-Regional
Arbitration Branch XII for violation of Article 246 of the Labor Code, illegal dismissal, with prayer for preliminary injunction,
damages and attorneys fees.
On March 30, 2001, Labor Arbiter Guardson A. Siao rendered a Decision 18 dismissing the complaint for lack of merit, thus:
x x x, this office believes that respondent ICC is not liable to pay the unpaid portion of complainants separation pay
representing differentials since respondent is not the employer of the former. Besides, in the case of PCI Automation Center,
Inc. v. NLRC, G.R. No. 145920, 29 January 1996, citing Phil. Bank of Commerce v. NLRC, 146 SCRA 347 (1986), the Hon.
Supreme Court opines, viz:
Other than the payment of wages, the principal employer is not responsible for any claim made by the employee.
As can be gleaned from the above-discussion, herein respondent ICC is merely the principal in the contract with ILIASCOR,
an independent contractor, the employer of individual complainants.
xxx
Another point worth discussing is that, the separation pay is based on the collective bargaining agreement entered into
between the individual complainants and the complaining union, ILIASCOR IEWU-SPFL. Respondent ICC is not a privy to that
CBA, thus the former cannot be held liable or be demanded upon to pay the same to the complainants.
xxx
WHEREFORE, premises considered, the instant case is hereby ordered DISMISSED for lack of merit.
All other issues not discussed above and inconsistent with the above discussions are likewise ordered dismissed for lack of
merit.
SO ORDERED.
On appeal, the National Labor Relations Commission (NLRC), Fifth Division, issued a Resolution 19 dated April 19, 2002,
reversing the Decision of the Labor Arbiter and declaring, among others, that respondents are regular employees of petitioner,
thus:
The contention of complainants that they were directly employed with respondent ICC during the period August 2 to November
15, 2000, stressing that they were in fact hired by its Packhouse Manager, Alex Sagario, is found credible. Not only has
respondent failed to deny having the said Alex Sagario under its ranks, it has not given us any plausible reason why
complainants would wrongfully drag the name of Sagario in this case. Complainants could not be faulted for failing to adduce
evidence about their hiring by respondent. The workers employment papers, their payrolls and other vouchers are naturally in
the possession of the employers given the mandate of the law for them to keep the same. Thus, having claimed that
complainants were otherwise employed with Vedali General Services, respondent ICC is burdened to produce the
employment papers of the former with the latter, but none is offered so far.
Besides, we note that respondent has avowed Vedali was a legitimate contractor which it could and in fact contracted with to
provide stevedoring services, though it was only on temporary basis. However, the status of Vedali has been challenged by
complainants declaring that it was actually a labor-only contractor. With "labor-only" contracting being strictly prohibited in this
jurisdiction, necessity dictates for respondent to confront the charge and lay bare the records of Vedali for our scrutiny. This, it
should do. After all, we have already been aptly convinced by complainants on the matter of respondent having earlier
contracted the services of an unqualified contractor, Luzon Visayas Mindanao Arrastre and Stevedoring, Inc. The documentary
evidence (Vol. I pp. 35-40) submitted by complainants clearly suggest that LVMASI was incorporated for the primary purpose
of engaging, operating, conducting and maintaining the business of manufacturing, exporting, importing, buying or selling
white cement, its by-products and other cement products, despite its corporate name; that it only had a paid-up capital of only
Php 625,000.00 while the arrastre and stevedoring works up for bidding required the use of two (2) cranes and eight (8)
forklifts; and, that, amazingly it was not engaged in any singular business as of October, 1999. Truly, the replacement of
LVMASI with Vedali validated complainants submission in this regard.
495
For us to gloss over the aforecited matters will be tantamount to our abandonment of the constitutional mandate affording
protection to labor.
Hired by respondents representative and working at its premises as stevedores and piers, services which were undoubtedly
necessary in its business, complainants are thereby declared regular employees of respondent ICC during the period claimed.
That, by the take-over of their jobs by the workforce of the Northern Mindanao Industrial and Port Services Corporation
(NMIPSC) on November 15, 2000, complainants were evidently dismissed as a result. Bereft of any cause nor notice other
than the actual take-over by another corporation of their jobs, the dismissal of complainants is clearly illegal.
This being the case, complainants are entitled to the reliefs of reinstatement with full backwages pursuant to Art. 279 of the
Labor Code. However, the reinstatement of complainants to their previous positions is rendered impossible by the takeover of
NMIPSC manpower. Thus, in lieu of thereof, the payment of separation pay proportionate to their length of service with
respondent ICC is warranted.
Going to their claim for separation pay differential, the submission of complainants that respondent ICC should be held liable
therefore is misplaced. Respondent ICC, as indirect employer of complainants, may only be held liable, "(I)n the event that the
contractor or subcontractor fails to pay the wages of his employees in accordance with this Code" (Art. 106 Labor Code).
Wage and salary, as differentiated from separation pay, refer to one and the same meaning, that is, a reward or recompense
for services performed. Meanwhile, separation pay is that what is paid by the employer to an employee on account of the
severance of their employment relations for any of the causes authorized by law.
Thus, as this case involved the severance of the employment of complainants, only their undisputed employer, ILIASCOR,
may be held answerable for the benefit sought. More so that the differential being asked is essentially a contractual obligation
of ILIASCOR arising out of a specific stipulation in the collective bargaining agreement between them. Correspondingly, since
respondent ICC was not privy to the CBA, it has no responsibility to comply therewith.
The claim of complainants for damage is likewise dismissed for lack of merit, but they are awarded attorneys fees equivalent
to 10% of the total money award as they were compelled to litigate this case for reliefs.
WHEREFORE, premises considered, the decision on appeal is hereby VACATED and a new one entered:
1. Declaring complainants regular employees of respondent ICC for the period August 2, 2000 to November 15,
2000;
2. Declaring their dismissal from employment illegal; and
3. Awarding complainants full backwages, separation pay and attorneys fees in the amounts to be computed by the
branch of origin.
SO ORDERED.20
Petitioner elevated the case to the Court of Appeals (CA) through a petition for certiorari21 under Rule 65.
On October 17, 2002, the CA issued the assailed Resolution22 dismissing the petition, thus:
The Court resolves to DISMISS the petition based on the following legal infirmities:
1. The verification and certification of non-forum-shopping was signed by Renato C. Sunico, however, petitioner failed
to attach a copy of the board resolution authorizing him to sign the same in behalf of the corporation as required
in Digital Microwave Corp. v. Court of Appeals (328 SCRA 286 [2001]); and
2. Petitioner failed to explain why service was done through mail as required by Section 3, Rule 13 of the 1997 Rules
of Civil Procedure.
SO ORDERED.
Petitioners subsequent Motion for Reconsideration was denied in the other assailed Resolution 23 dated July 3, 2003:
The Court has gone over the said Motion for Reconsideration and the grounds raised therein but finds no cogent reason to
reverse the aforesaid Resolution particularly because the SPA granted to Renato C. Sunico on August 9, 2002 (See:
Secretarys Certificate, Records, p. 317) referred to a case filed before the NLRC.
Hence, the present petition seeking resolution as to whether the CA erred in denying the petition based merely on procedural
infirmities.
We note that petitioner subsequently made up for its earlier lapse when it submitted a Secretarys Certificate 24attesting that on
August 9, 2002, the Board of Directors of the Corporation authorized Mr. Sunico "to sign the verification and/or certification of
non-forum shopping of pleadings that may be filed by the corporation in the above mentioned case and in subsequent
proceedings." While the authorization was submitted to the CA only after the issuance of the Resolution dismissing the
petition, in view of the peculiar circumstances of the case and in the interest of substantial justice, the initial procedural lapse
may be excused.25 It is well settled that the application of technical rules of procedure may be relaxed in labor cases to serve
the demand of substantial justice.26
The CAs second ground for dismissal of the petition, that petitioner failed to explain why service was done through mail, was
not passed upon by the CA in its second Resolution.27 The CA must have found the explanation of petitioner in its motion for
reconsideration acceptable. Counsel for petitioner admitted that the non-inclusion of an explanation on non-personal service
was due to an oversight, but he explained that personal service was not feasible considering the geographical distance
between counsels office in Makati City and the address of the other parties in Iligan City. He added that there was never any

496
intention not to comply with the rules as shown by his subsequent compliance with all the other technical requirements. 28 The
Court also finds this explanation satisfactory.
Moreover, petitioners argument that the failure to file an explanation on non-personal service of the petition should not
automatically result to the outright dismissal of the petition, is meritorious. Section 11, Rule 13 reads:
Section 11. Priorities in modes of service and filing. Whenever practicable, the service and filing of pleadings and other papers
shall be done personally. Except with respect to papers emanating from the court, a resort to other modes must be
accompanied by a written explanation why the service or filing was not done personally. A violation of this Rule may be cause
to consider the paper as not filed. (emphasis ours)
The use of "may," in the above quoted section signifies permissiveness and gives the court discretion whether or not to
consider a pleading as not filed. While it is true that procedural rules are necessary to secure an orderly and speedy
administration of justice, in this case, the rigid application of Section 11, Rule 13 may be relaxed in the interest of substantial
justice.29
The procedural lapses having been cured, the CA should have reconsidered its Resolution dated October 17, 2002 and Order
dated July 3, 2003 and gave due course to the petition for certiorari.
Pertinently, Section 9 of Batas Pambansa 129 (B.P. 129), known as the Judiciary Reorganization Act provides:
SEC. 9. Jurisdiction.- The Court of Appeals shall exercise:
(1) Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas corpus, and quo warranto, and auxiliary writs
or processes, whether or not in aid of its appellate jurisdiction;
xxx
The Court of Appeals shall have the power to try cases and conduct hearings, receive evidence and perform any and all acts
necessary to resolve factual issues raised in cases falling within its original and appellate jurisdiction, including the power to
grant and conduct new trials or further proceedings. Trials or hearings in the Court of Appeals must be continuous and must
be completed within three (3) months, unless extend[ed] by the Chief Justice.
Clearly, the CA can resolve factual issues in special civil actions for certiorari from decisions and resolutions of the NLRC.
However, the remand of the case to the CA would only result in further delay. Pursuant to established precedents, we deem it
expedient in the interest of speedy justice, to rule on the merits of petitioners claims based on the records of the case
including the pleadings and the evidence submitted by the parties. 30
We now go to the merits of the case by re-examining the contradicting findings of the Labor Arbiter and the NLRC in order to
resolve the following substantial issues: (1) whether petitioner is the employer of individual respondents, and; (2) whether
individual respondents were illegally dismissed.
Petitioner maintains that it never employed the individual respondents and that it contracted Vedali to render services at its
pier as a stop-gap measure so as not to hamper its activities while it was negotiating with another contractor. Petitioner claims
that the elements of employer-employee relationship were not present as it did not hire, fire, pay nor exercise control over the
work of individual respondents. Petitioner further argues that the allegation that it was petitioners Packhouse Manager Alex
Sagario who hired individual respondents should not be given credence for lack of evidence.
Individual respondents, on the other hand, counter that there is no proof that petitioner and Vedali entered into a service
contract to provide stevedoring services at petitioners pier from August 2, 2000 to November 15, 2000. In the absence of such
contract, Vedali was merely utilized by petitioner as a purported contractor. With regard to their hiring by Alex Sagario,
individual respondents contend that they cannot be faulted for failing to adduce evidence. Their employment papers, payrolls
and other vouchers are naturally in the possession of petitioner. Thus, petitioner is burdened to produce the same. Since
petitioner offered nothing to prove their contrary claim, the NLRC Decision should be upheld.
We rule for the individual respondents.
In determining the true status of Vedali viz-a-viz the petitioner, it is important to ascertain first whether Vedali is a labor-only
contractor or an independent contractor.
Labor-only contracting,31 which is prohibited, is an arrangement where the contractor or subcontractor merely recruits,
supplies or places workers to perform a job, work or service for a principal. In labor-only contracting, the following elements
are present:
(a) The contractor or subcontractor does not have substantial capital or investment to actually perform the job, work
or service under its own account and responsibility; and
(b) The employees recruited, supplied or placed by such contractor or subcontractor are performing activities which
are directly related to the main business of the principal.
On the other hand, permissible job contracting or subcontracting32 refers to an arrangement whereby a principal agrees to
put out or farm out with a contractor or subcontractor the performance or completion of a specific job, work or service within a
definite or predetermined period, regardless of whether such job, work or service is to be performed or completed within or
outside the premises of the principal. A person is considered engaged in legitimate job contracting or subcontracting if the
following conditions concur:
(a) The contractor or subcontractor carries on a distinct and independent business and undertakes to perform the job,
work or service on its own account and under its own responsibility according to its own manner and method, and
497
 free from the control and direction of the principal in all matters connected with the performance of the work except as
to the results thereof;
(b) The contractor or subcontractor has substantial capital or investment; and
(c) The agreement between the principal and contractor or subcontractor assures the contractual employees
entitlement to all labor and occupational safety and health standards, free exercise of the right to self-organization,
security of tenure, and social and welfare benefits.33
Taking into account the above mentioned elements and the facts obtaining in the present case, we are not convinced that
Vedali is an independent contractor. Petitioner failed to present any service contract with Vedali in the proceedings with the
Labor Arbiter. There is nothing on record that Vedali has a substantial capital or investment to actually perform the service
under its own account and responsibility. Petitioner only attached to its petition with the CA Vedalis Certificate of Registration
and Business permit, which merely pertain to the registration of Vedali with the SEC as engaged in Construction and General
Services.34 The Charge Invoices, billing statements and certificate of payment and inspection, 35 instead of strengthening
petitioners argument, weakened its defense and bolstered the claims of individual respondents. The Charge Invoices, billing
statements and certificates of payments only show that the wages of individual respondents were paid by petitioner.
The evidence not having adequately shown that Vedali is an independent contractor, can it be considered as a labor-only
contractor? We answer in the affirmative. Petitioner is a mere labor-only contractor because it only supplied workers to
petitioner to work at its pier.
In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2) the employee who is ostensibly
under the employ of the "labor-only" contractor; and (3) the principal who is deemed the real employer. Under this scheme, the
"labor-only" contractor is the agent of the principal. Here, Vedali is the "labor-only" contractor; individual respondents are the
employees and petitioner is the principal. The law makes the principal responsible to the employees of the "labor-only
contractor" as if the principal itself directly hired or employed the employees.36
Taking into consideration the factual milieu of this case, the Court agrees with the conclusion of the NLRC that petitioner and
not Vedali, is the employer of individual respondents and the latter are employees of petitioner. Individual respondents work
as stock-pilers, arrastre and stevedores were undoubtedly directly related to and in pursuit of the cement manufacturing and
sales business of petitioner. Petitioners packing plant operations would have been hampered were it not for the work rendered
by individual respondents.1awphi1.zw+
Having determined the real employer of respondents, we now proceed to ascertain the legality of their dismissal from
employment.
Under the Labor Code, as amended, the requirements for the lawful dismissal of an employee are two-fold, the substantive
and the procedural.37 Not only must the dismissal be for a valid or authorized cause, 38 the rudimentary requirements of due
process - notice and hearing must, likewise, be observed before an employee may be dismissed. 39 One does not suffice;
without their concurrence, the termination would, in the eyes of the law, be illegal. 40
As the employer, petitioner has the burden of proving that the dismissal of petitioner was for a cause allowed under the law
and that petitioner was afforded procedural due process. Petitioner failed to discharge this burden. Indeed, it failed to show
any valid or authorized cause under the Labor Code which allowed it to terminate the services of individual respondents.
Neither did petitioner show that individual respondents were given ample opportunity to contest the legality of their dismissal.
No notice of such impending termination was ever given to them. Individual respondents were definitely denied due process.
Having failed to establish compliance with the requirements on termination of employment under the Labor Code, the
dismissal of individual respondents was tainted with illegality.
Even if the assailed resolutions of the CA were set aside, the petition must still fail considering that we find no reversible error
was committed by the NLRC in rendering its April 19, 2002 Resolution.
WHEREFORE, the petition is hereby DENIED. The Resolution of the National Labor Relations Commission dated April 19,
2002 is AFFIRMED.
Costs against petitioner.
SO ORDERED.

G.R. Nos. 97320-27 July 30, 1993

VALLUM SECURITY SERVICES and BAGUIO LEISURE CORPORATION (HYATT TERRACES BAGUIO),petitioners,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, RUBEN ABELLERA, MANUEL GANANCIAL, SAMSON ALEJERA,
ROMEO BAUTISTA, CARLOS BANIAGO, GABRIEL CABASAL, ARTEMIO CARIO, BENJAMIN LARON, SANTIAGO
PACULAN, FRANCISCO OBEDOZA, CEFERINO GARCIA, ARNOLD PAMINLAN, ROMAN PALIMA, JOSEFINO LOZANO,
PEDRO DULAY, JR., CLAUDIO PANGANIBAN, RONNIE BALDERAS, AVELINO PINTO, BEN ENRIQUE ESTOCAPIO,
ESABELITO ANGARA, ROBERT AGUIMBAG, WILSON ESTAVILLO, FELIXBERTO NARVASA, PABLITO ROSARIO,
EDGAR PALISOC, DONIE PERALTA, WILLY QUESADA, MARIO URBANO, EDWIN JACOB, JOSE VIRGILIO LUSTERIO,
MA. NESTOR LABADOR, ROMEO LOPEZ, MANOLO MAGAT, MARIANO MARCENA, WILSON MUNAR. ROSEMARIE
DUMLAO, FLORENTINO CASTAEDA, RUBEN PANTERIA, JOHNNY VILLANUEVA, DELIA ROSARIO, GARY JAVATE,

498
DEAN PASAMIC, VALERIE BRIONES, NEMENCIO CUTCHON, PHILIP MORIS, VINCENT NOEL CABRERA and JAIME
GIMENO,respondents.
Sanidad Law Offices for petitioners.
Cabato Law Office for respondents.

FELICIANO, J.:
On 1 September 1986, petitioner Baguio Leisure Corporation (Hyatt Terraces Baguio) ("Hyatt Baguio") and petitioner Vallum
Security Services ("Vallum") entered into a contract for security services under the terms of which Vallum agreed to protect the
properties and premises of Hyatt Baguio by providing fifty (50) security guards, on a 24-hour basis, a day.
On 1 June 1988, Heinrich L. Maulbecker, Hyatt Baguio's General Manager, wrote to Domingo A. Inocentes, President of
Vallum advising that effective 1 July 1988, the contract of security services would be terminated.
Vallum informed Mr. Maulbecker, on 22 June 1988, that it was agreeable to the termination of the contract.
On 30 June 1988, private respondents, who were security guards provided by Vallum to Hyatt Baguio, were informed by
Vallum's Personnel Officer that the contract between the two (2) had already expired. Private respondents were directed to
report to Vallum's head office at Sucat Road, in Muntinlupa, Metropolitan Manila, not later than 15 July 1988 for re-assignment.
They were also told that failure to report at Sucat would be taken to mean that they were no longer interested in being re-
assigned to some other client of Vallum.
None of the private respondents reported at Sucat for re-assignment. Instead, between July and September 1988, private
respondents filed several complaints against petitioners in the National Labor Relations Commission's Office ("NLRC") in
Baguio City for illegal dismissal and unfair labor practices; for violation of labor standards relating to underpayment of wages,
premium holiday and restday pay, uniform allowances and meal allowances. They prayed for reinstatement with full
backwages. The several cases were consolidated together.
On 19 May 1989, the Labor Arbiter rendered a decision dismissing the complaints. He found Vallum to be an independent
contractor and, consequently, declined to hold Hyatt Baguio liable for dismissal of private respondents. He also held that the
termination of services of private respondents by Vallum did not constitute an unfair labor practice, considering that such
termination had been brought about by lack of work. Furthermore, the Labor Arbiter held that private respondents were not
entitled to backwages or separation pay, in line with the "no work, no pay" principle. Lastly, he found no violation of the labor
standard provisions on payment of wages and other employee benefits. 1
Private respondents appealed the Labor Arbiter's decision to the NLRC. On 31 July 1990, the NLRC promulgated a resolution
reversing the Labor Arbiter's decision, the dispositive portion of which resolution reads as follows:
WHEREFORE, the decision appealed from is hereby REVERSED and set aside and a new one entered
ordering the respondent Hyatt Terraces Baguio to reinstate the complainants to their former positions with
full backwages limited to one (1) year. In view of supervening event which makes the reinstatement
imposible, respondents Hyatt Terraces Baguio and Vallum Security Services Corporation, are directed,
jointly and severally to pay complainants, in lieu of reinstatement, separation pay equal to one (1) month per
year of service. Service of six month shall be considered a year for the purpose of the same. 2
Petitioners moved for reconsideration, without success.
Vallum and Hyatt Baguio are hence before this Court on certiorari seeking to: (a) reverse and annul the Resolutions of the
NLRC of 31 July 1990 and 31 January 1991; and (b) reinstate the decision of the Labor Arbiter dated 19 May 1989. Petitioners
assert that the NLRC's finding that an employer-employee relationship had existed between Hyatt Baguio and private
respondents, is tainted with arbitrariness.
The main issue here presented and addressed below is whether or not private respondent security guards are indeed
employees of petitioner Hyatt Baguio.
In determining whether a given set of circumstances constitute or exhibit an employer-employee relationship, the accepted
rule is that the elements or circumstances relating to the following matters shall be examined and considered:
1. the selection and engagement of the employee;.
2. the payment of wages;
3. the power of dismissal; and
4. the power to control the employees' conduct. 3
Of the above, control of the employees' conduct is commonly regarded as the most crucial and determinative indicator of the
presence or absence of an employer-employee relationship. 4 We examine below the circumstances of the relationship
between petitioners and private respondents under the above four (4) rubrics.
In respect of the selection and engagement of the employees, the records here show that private respondents filled up Hyatt
employment application forms and submitted the executed forms directly to the Security Department of Hyatt Baguio. 5 It
appears that these executed application forms were returned to the respective applicants; 6 nonetheless, however, a few days
after the applications to Hyatt Baguio were submitted, Vallum sent letters of acceptance to private respondents. Petitioners do
not deny that private respondent had applied for employment at Hyatt's Security Department and that Security Department
was used to process the applications. Petitioners argue that because the premises to be secured were located in Baguio,
499
Vallum found it more advantageous to recruit security guards from the Baguio area. It would have been most inconvenient for
applicants from the Baguio area to have gone all the way to Sucat in Makati to file and follow-up their applications; accordingly,
Vallum was provided with its own office at Hyatt Baguio and there the applications, with the assistance of Hyatt Baguio's
Security Department, were processed. 7 Petitioners' argument here, while understandable, does not negate the fact that the
process of selection and engagement of private respondents had been carried out in Hyatt Baguio and subject to the scrutiny
of officers and employees of Hyatt Baguio.
In respect of the mode or manner of payment of wages, private respondents submitted in evidence four hundred twenty-three
(423) pay slips (Exhibits "A" for complainants-private respondents), which bore Hyatt Baguio's logo. 8These pay slips show that
it was Hyatt Baguio which paid their wages directly and that Hyatt Baguio deducted therefrom the necessary amounts for SSS
premiums, internal revenue withholding taxes, and medicare contributions. The Labor Arbiter had found that a separate payroll
was maintained for Vallum by Hyatt Baguio; the NLRC, however, held that this finding had no factual basis, and we are
compelled to agree with this finding. It is true that a subsequent agreement (10 September 1986) between Vallum and Hyatt
Baguio had provided:
1. That for the purposes of facilitating and prevention of delays in the distribution of payroll to all Security
guards assigned at the premises of the company and as embraced in the contract of Security services, the
[vallum] shall herewith authorize the [Hyatt Baguio] to undertake the distribution of the payroll directly to the
guards as mentioned herein. (Emphasis supplied)
2. That for purposes of the payroll distribution as stated above, the company shall devise ways to ensure the
efficient and prompt distribution to the guards of their respective salaries. 9 (Emphasis supplied)
The fact that this agreement had stipulated for direct payment by Hyatt Baguio of private respondents' wages did not, of
course, dissolve the relevance of such direct payment as an indicator of an employer-employee relationship between Hyatt
Baguio and private respondents. Vallum did not even provide Hyatt Baguio with Vallum's own pay slips or payroll vouchers for
such direct payments. What clearly emerges is that Hyatt Baguio discharged a function which was properly a function of the
employer.
Turning to the matter of location of the power of dismissal, we note that the contract provided that upon loss of confidence on
the part of Hyatt Baguio vis-a-vis any security guard furnished by Vallum, such security guard "maybe changed
immediately upon the request to [Vallum] by [Hyatt Baguio]." Notwithstanding the terms of the formal contract between
petitioners, the NLRC found that, in operative fact, it was Hyatt Baguio's Chief Security Officer
who exercised the power of enforcing disciplinary measures over the security guards. 10 In the matter of termination of services
of particular security guards, Hyatt Baguio had merely used Vallum as a channel to implement its decisions, much as it had
done in the process of selection and recruitment of the guards.
Coming then to the location of the power of control over the activities of the security guards, the following factors lead us to the
conclusion that power was effectively located in Hyatt Baguio rather than in Vallum:
(a) the assignments of particular security guards was subject to the approval of Hyatt Baguio's Chief
Security Officer; 11
(b) promotions of the security guards from casual to regular employees were approved or ratified by the
Chief Security Officer of Hyatt Baguio; 12
(c) Hyatt Baguio's Chief Security Officer decided who among the various security guards should be an duty
or on call, as well as who, in cases of disciplinary matters, should be suspended or dismissed; 13
(d) the petitioners themselves admitted that Hyatt Baguio, through its Chief Security Officer, awarded
citations to individual security guards for meritorious services. 14
Petitioners contend that what existed between Vallum and Hyatt Baguio was simply close coordination and dove-tailing of
operations, rather than control and supervision by one over the operations of the other, and that Hyatt Baguio's Chief Security
Officer had acted as the conduit between Hyatt Baguio and Vallum in respect of the implementation of the contract of security
services. That is not, however, the characterization given by the NLRC to the details of the factual relationships between Hyatt
Baguio (acting through its Chief Security Officer) and Vallum and private respondent security guards and it is clear to the Court
that the characterization reached by the NLRC is not without the support of substantial evidence of record. We agree with the
NLRC's characterization.
One final circumstance seems worthy of note: orders received by private respondent security guards were set forth on paper
bearing the letterheads of both Hyatt Baguio and Vallum. 15 It appears to us, therefore, that Hyatt Baguio explicitly purported,
at the very least, to share with Vallum the exercise of the power of control and supervision with Vallum over the security
guards, if indeed Vallum was not functioning merely as an alter ego of Hyatt Baguio in respect of the operations of the security
guards. In the ordinary course of business, security guard agencies are engaged because of their specialized capabilities in
the matter of physical security. It is a security agency's business to know the most efficacious manner of protecting and
securing a particular place at a particular time. In the case at bar, the functions performed by Hyatt Baguio's Chief Security
Officer were precisely the duties which the head or senior officer of a legitimate security agency would be exercising over its
own employees.
Finally, we note that the contract for security services between Vallum and Hyatt Baguio contained the following provisions:
500
 xxx xxx xxx
3. The AGENCY shall exercise discipline, supervision, control and administration over the security guard so
assigned to the premises of the COMPANY in accordance with the Rules and Regulations of the PCSUSIA,
the Local Police Departments, the AGENCY and the COMPANY.
4. The AGENCY shall provide at its own expense all necessary, proper and duly licensed firearms,
ammunitions, nightsticks, and other paraphernalia for security purposes, to the guards it assigns to the
COMPANY and shall shoulder all taxes and licenses relating to the Security Services referred to in this
agreement.
5. It is expressly understood and mutually agreed by the parties hereto that the AGENCY shall be held
solely liable for any claim for security guards' wages and/or damages arising out of personal injury including
death caused, either by the AGENCY's guard upon a third party or by the AGENCY'S guard or third party
upon a guard assigned by the AGENCY to the COMPANY, and should the COMPANY be held liable
therefore, the AGENCY shall reimburse the COMPANY for any and all amounts that it may have been called
upon to pay.
xxx xxx xxx
7. The AGENCY shall always detail within the hours the period provided for and in the paragraph 1 of this
contract, an authorized representative who shall handle for the AGENCY all matters regarding security and
enforcement which the COMPANY may wish to implement.
The thrust of the foregoing discussion, however, is that the relationship between Vallum and Hyatt Baguio as actually
conducted departed significantly from the formal written terms of their agreement. It is to us self-evident that the
characterization in law of such relationship cannot conclusively be made in terms alone of the written agreement which
constitutes but one factor out of many that the Court must take into account but must rest upon an examination of the
detailed facts of such relationship in the world of time and space.
We find no basis for overturning the conclusions reached by the NLRC that Vallum, in the specific circumstances of this case,
was not an independent contractor but was, rather, a "labor-only" contracor. Section 9 of Rule VII of Book III entitled
"Conditions of Employment" of the Omnibus Rules Implementing the Labor Code provides as follows:
Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to an employer shall be
deemed to be engaged in labor-only contracting where such person:
(1) Does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises and other materials; and
(2) The workers recruited and placed by such person are performing activities which are
directly related to the principal business or operations of the employer in which workers
are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall
be considered merely as an agent or intermediary of the employer who shall be responsible to the workers
in the same manner and extent as if the latter were directly employed by him.
xxx xxx xxx
Sec. 8. Job contracting. There is job contracting permissible under the Code if the following conditions
are met:
(1) The contractor carries on an independent business and undertakes the contract work on his own account
under his own responsibility according his own manner and method, free from the control and direction of his
employer or principal in all matters connected with the performance of the work except as to results thereof;
and
(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work
premises, and other materials which are necessary in the conduct of his business.
In the case at bar, we noted that Vallum did not have a branch office in Baguio City and that Hyatt Baguio provided Vallum
with offices at Hyatt's own premises and allowed Vallum to use its Security Department in the processing of applications. That
was the reason too why Vallum had stipulated that Hyatt Baguio was to distribute the salaries of the security guards directly to
them and that Hyatt had used its own corporate forms and pay slips in doing so. The security guards were clearly performing
activities directly related to the business operations of Hyatt Baguio, since the undertaking to safeguard the person and
belongings of hotel guests is one of the obligations of a hotel vis-a-vis its guests and the general public.
Where labor-only contracting exists in a given case, the law itself implies or establishes an employer-employee relationship
between the employer (the owner of the project or establishment) (here, Hyatt Baguio) and the employees of the labor-only
contractor (here, Vallum) to prevent any violation or circumvention of provisions of the Labor Code. 16
The issue of illegal dismissal need not detain us for long. It has not been alleged by petitioners that a just or authorized cause
for terminating private respondents' services had existed. And even if such lawful cause existed, it is not alleged that private
respondents' rights to procedural due process in that connection had been appropriately observed.

501
We conclude that petitioners have not shown any grave abuse of discretion or any act without or any in excess of jurisdiction
on the part of the National Labor Relations Commission in rendering its Resolutions dated 31 July 1990 and 31 January 1991.
WHEREFORE, premises considered, the Petition for Certiorari is hereby DISMISSED for lack of merit. Costs against
petitioners.

G.R. No. 179546 February 13, 2009

COCA-COLA BOTTLERS PHILS., INC., Petitioner,
vs.
ALAN M. AGITO, REGOLO S. OCA III, ERNESTO G. ALARIAO, JR., ALFONSO PAA, JR., DEMPSTER P. ONG,
URRIQUIA T. ARVIN, GIL H. FRANCISCO, and EDWIN M. GOLEZ, Respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari, under Rule 45 of the Rules of Court, assailing the Decision 1 dated 19 February
2007, promulgated by the Court of Appeals in CA-G.R. SP No. 85320, reversing the Resolution2rendered on 30 October 2003
by the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 036494-03. The Court of Appeals, in its assailed
Decision, declared that respondents Alan M. Agito, Regolo S. Oca III, Ernesto G. Alariao, Jr., Alfonso Paa, Jr., Dempster P.
Ong, Urriquia T. Arvin, Gil H. Francisco, and Edwin M. Golez were regular employees of petitioner Coca-Cola Bottlers Phils.,
Inc; and that Interserve Management & Manpower Resources, Inc. (Interserve) was a labor-only contractor, whose presence
was intended merely to preclude respondents from acquiring tenurial security.
Petitioner is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) and engaged in
manufacturing, bottling and distributing soft drink beverages and other allied products.
On 15 April 2002, respondents filed before the NLRC two complaints against petitioner, Interserve, Peerless Integrated
Services, Inc., Better Builders, Inc., and Excellent Partners, Inc. for reinstatement with backwages, regularization, nonpayment
of 13th month pay, and damages. The two cases, docketed as NLRC NCR Case No. 04-02345-2002 and NLRC NCR Case
No. 05-03137-02, were consolidated.
Respondents alleged in their Position Paper that they were salesmen assigned at the Lagro Sales Office of petitioner. They
had been in the employ of petitioner for years, but were not regularized. Their employment was terminated on 8 April 2002
without just cause and due process. However, they failed to state the reason/s for filing a complaint against Interserve;
Peerless Integrated Services, Inc.; Better Builders, Inc.; and Excellent Partners, Inc. 3
Petitioner filed its Position Paper (with Motion to Dismiss),4 where it averred that respondents were employees of Interserve
who were tasked to perform contracted services in accordance with the provisions of the Contract of Services 5 executed
between petitioner and Interserve on 23 March 2002. Said Contract between petitioner and Interserve, covering the period of 1
April 2002 to 30 September 2002, constituted legitimate job contracting, given that the latter was a bona fide independent
contractor with substantial capital or investment in the form of tools, equipment, and machinery necessary in the conduct of its
business.
To prove the status of Interserve as an independent contractor, petitioner presented the following pieces of evidence: (1) the
Articles of Incorporation of Interserve;6 (2) the Certificate of Registration of Interserve with the Bureau of Internal Revenue;7 (3)
the Income Tax Return, with Audited Financial Statements, of Interserve for 2001; 8 and (4) the Certificate of Registration of
Interserve as an independent job contractor, issued by the Department of Labor and Employment (DOLE). 9
As a result, petitioner asserted that respondents were employees of Interserve, since it was the latter which hired them, paid
their wages, and supervised their work, as proven by: (1) respondents Personal Data Files in the records of Interserve; 10 (2)
respondents Contract of Temporary Employment with Interserve; 11 and (3) the payroll records of Interserve.12
Petitioner, thus, sought the dismissal of respondents complaint against it on the ground that the Labor Arbiter did not acquire
jurisdiction over the same in the absence of an employer-employee relationship between petitioner and the respondents.13
In a Decision dated 28 May 2003, the Labor Arbiter found that respondents were employees of Interserve and not of petitioner.
She reasoned that the standard put forth in Article 280 of the Labor Code for determining regular employment (i.e., that the
employee is performing activities that are necessary and desirable in the usual business of the employer) was not
determinative of the issue of whether an employer-employee relationship existed between petitioner and respondents. While
respondents performed activities that were necessary and desirable in the usual business or trade of petitioner, the Labor
Arbiter underscored that respondents functions were not indispensable to the principal business of petitioner, which was
manufacturing and bottling soft drink beverages and similar products.
The Labor Arbiter placed considerable weight on the fact that Interserve was registered with the DOLE as an independent job
contractor, with total assets amounting to P1,439,785.00 as of 31 December 2001. It was Interserve that kept and maintained
respondents employee records, including their Personal Data Sheets; Contracts of Employment; and remittances to the Social
Securities System (SSS), Medicare and Pag-ibig Fund, thus, further supporting the Labor Arbiters finding that respondents
were employees of Interserve. She ruled that the circulars, rules and regulations which petitioner issued from time to time to
respondents were not indicative of control as to make the latter its employees.

502
Nevertheless, the Labor Arbiter directed Interserve to pay respondents their pro-rated 13th month benefits for the period of
January 2002 until April 2002.14
In the end, the Labor Arbiter decreed:
WHEREFORE, judgment is hereby rendered finding that [herein respondents] are employees of [herein petitioner]
INTERSERVE MANAGEMENT & MANPOWER RESOURCES, INC. Concomitantly, respondent Interserve is further ordered
to pay [respondents] their pro-rated 13th month pay.
The complaints against COCA-COLA BOTTLERS PHILS., INC. is DISMISMMED for lack of merit.
In like manner the complaints against PEERLESS INTEGRATED SERVICES, INC., BETTER BUILDING INC. and
EXCELLENT PARTNERS COOPERATIVE are DISMISSED for failure of complainants to pursue against them.
Other claims are dismissed for lack of merit.
The computation of the Computation and Examination Unit, this Commission if (sic) made part of this Decision. 15
Unsatisfied with the foregoing Decision of the Labor Arbiter, respondents filed an appeal with the NLRC, docketed as NLRC
NCR CA No. 036494-03.
In their Memorandum of Appeal,16 respondents maintained that contrary to the finding of the Labor Arbiter, their work was
indispensable to the principal business of petitioner. Respondents supported their claim with copies of the Delivery
Agreement17 between petitioner and TRMD Incorporated, stating that petitioner was "engaged in the manufacture, distribution
and sale of soft drinks and other related products with various plants and sales offices and warehouses located all over the
Philippines." Moreover, petitioner supplied the tools and equipment used by respondents in their jobs such as forklifts,
pallet, etc. Respondents were also required to work in the warehouses, sales offices, and plants of petitioner. Respondents
pointed out that, in contrast, Interserve did not own trucks, pallets cartillas, or any other equipment necessary in the sale of
Coca-Cola products.
Respondents further averred in their Memorandum of Appeal that petitioner exercised control over workers supplied by various
contractors. Respondents cited as an example the case of Raul Arenajo (Arenajo), who, just like them, worked for petitioner,
but was made to appear as an employee of the contractor Peerless Integrated Services, Inc. As proof of control by petitioner,
respondents submitted copies of: (1) a Memorandum18 dated 11 August 1998 issued by Vicente Dy (Dy), a supervisor of
petitioner, addressed to Arenajo, suspending the latter from work until he explained his disrespectful acts toward the
supervisor who caught him sleeping during work hours; (2) a Memorandum 19 dated 12 August 1998 again issued by Dy to
Arenajo, informing the latter that the company had taken a more lenient and tolerant position regarding his offense despite
having found cause for his dismissal; (3) Memorandum 20 issued by Dy to the personnel of Peerless Integrated Services, Inc.,
requiring the latter to present their timely request for leave or medical certificates for their absences; (4) Personnel Workers
Schedules, 21 prepared by RB Chua, another supervisor of petitioner; (5) Daily Sales Monitoring Report prepared by
petitioner;22 and (6) the Conventional Route System Proposed Set-up of petitioner. 23
The NLRC, in a Resolution dated 30 October 2003, affirmed the Labor Arbiters Decision dated 28 May 2003 and pronounced
that no employer-employee relationship existed between petitioner and respondents. It reiterated the findings of the Labor
Arbiter that Interserve was an independent contractor as evidenced by its substantial assets and registration with the DOLE. In
addition, it was Interserve which hired and paid respondents wages, as well as paid and remitted their SSS, Medicare, and
Pag-ibig contributions. Respondents likewise failed to convince the NLRC that the instructions issued and trainings conducted
by petitioner proved that petitioner exercised control over respondents as their employer. 24 The dispositive part of the NLRC
Resolution states:25
WHEREFORE, the instant appeal is hereby DISMISSED for lack of merit. However, respondent Interserve Management &
Manpower Resources, Inc., is hereby ordered to pay the [herein respondents] their pro-rated 13th month pay.
Aggrieved once more, respondents sought recourse with the Court of Appeals by filing a Petition for Certiorariunder Rule 65,
docketed as CA-G.R. SP No. 85320.
The Court of Appeals promulgated its Decision on 9 February 2007, reversing the NLRC Resolution dated 30 October 2003.
The appellate court ruled that Interserve was a labor-only contractor, with insufficient capital and investments for the services
which it was contracted to perform. With only P510,000.00 invested in its service vehicles and P200,000.00 in its machineries
and equipment, Interserve would be hard-pressed to meet the demands of daily soft drink deliveries of petitioner in the Lagro
area. The Court Appeals concluded that the respondents used the equipment, tools, and facilities of petitioner in the day-to-
day sales operations.
Additionally, the Court of Appeals determined that petitioner had effective control over the means and method of respondents
work as evidenced by the Daily Sales Monitoring Report, the Conventional Route System Proposed Set-up, and the
memoranda issued by the supervisor of petitioner addressed to workers, who, like respondents, were supposedly supplied by
contractors. The appellate court deemed that the respondents, who were tasked to deliver, distribute, and sell Coca-Cola
products, carried out functions directly related and necessary to the main business of petitioner. The appellate court finally
noted that certain provisions of the Contract of Service between petitioner and Interserve suggested that the latters
undertaking did not involve a specific job, but rather the supply of manpower.
The decretal portion of the Decision of the Court of Appeals reads: 26

503
WHEREFORE, the petition is GRANTED. The assailed Resolutions of public respondent NLRC are REVERSED and SET
ASIDE. The case is remanded to the NLRC for further proceedings.
Petitioner filed a Motion for Reconsideration, which the Court of Appeals denied in a Resolution, dated 31 August 2007. 27
Hence, the present Petition, in which the following issues are raised28:
I
WHETHER OR NOT THE COURT OF APPEALS ACTED IN ACCORDANCE WITH EVIDENCE ON RECORD, APPLICABLE
LAWS AND ESTABLISHED JURISPRUDENCE WHEN IT RULED THAT INTERSERVE IS A LABOR-ONLY CONTRACTOR;
II
WHETHER OR NOT THE COURT OF APPEALS ACTED IN ACCORDANCE WITH APPLICABLE LAWS AND
ESTABLISHED JURISPRUDENCE WHEN IT CONCLUDED THAT RESPONDENTS PERFORMED WORK NECESSARY
AND DESIRABLE TO THE BUSINESS OF [PETITIONER];
III
WHETHER OR NOT THE COURT OF APPEALS COMMITTED SERIOUS ERROR WHEN IT DECLARED THAT
RESPONDENTS WERE EMPLOYEES OF [PETITIONER], EVEN ABSENT THE FOUR ELEMENTS INDICATIVE OF AN
EMPLOYMENT RELATIONSHIP; AND
IV
WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT CONCLUDED THAT INTERSERVE WAS
ENGAGED BY [PETITIONER] TO SUPPLY MANPOWER ONLY.
The Court ascertains that the fundamental issue in this case is whether Interserve is a legitimate job contractor. Only by
resolving such issue will the Court be able to determine whether an employer-employee relationship exists between petitioner
and the respondents. To settle the same issue, however, the Court must necessarily review the factual findings of the Court of
Appeals and look into the evidence presented by the parties on record.
As a general rule, factual findings of the Court of Appeals are binding upon the Supreme Court. One exception to this rule is
when the factual findings of the former are contrary to those of the trial court, or the lower administrative body, as the case
may be. This Court is obliged to resolve an issue of fact herein due to the incongruent findings of the Labor Arbiter and the
NLRC and those of the Court of Appeals. 29
The relations which may arise in a situation, where there is an employer, a contractor, and employees of the contractor, are
identified and distinguished under Article 106 of the Labor Code:
Article 106. Contractor or subcontractor. - Whenever an employer enters into a contract with another person for the
performance of the formers work, the employees of the contractor and of the latters subcontractor, if any, shall be paid in
accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the
employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work
performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of
workers established under this Code. In so prohibiting or restriction, he may make appropriate distinctions between labor-only
contracting and job contracting as well as differentiations within these types of contracting and determine who among the
parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employee does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed
by such persons are performing activities which are directly related to the principal business of such employer. In such cases,
the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in
the same manner and extent as if the latter were directly employed by him.
The afore-quoted provision recognizes two possible relations among the parties: (1) the permitted legitimate job contract, or
(2) the prohibited labor-only contracting.
A legitimate job contract, wherein an employer enters into a contract with a job contractor for the performance of the formers
work, is permitted by law. Thus, the employer-employee relationship between the job contractor and his employees is
maintained. In legitimate job contracting, the law creates an employer-employee relationship between the employer and the
contractors employees only for a limited purpose, i.e., to ensure that the employees are paid their wages. The employer
becomes jointly and severally liable with the job contractor only for the payment of the employees wages whenever the
contractor fails to pay the same. Other than that, the employer is not responsible for any claim made by the contractors
employees.30
On the other hand, labor-only contracting is an arrangement wherein the contractor merely acts as an agent in recruiting and
supplying the principal employer with workers for the purpose of circumventing labor law provisions setting down the rights of
employees. It is not condoned by law. A finding by the appropriate authorities that a contractor is a "labor-only" contractor
establishes an employer-employee relationship between the principal employer and the contractors employees and the former
becomes solidarily liable for all the rightful claims of the employees. 31
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Section 5 of the Rules Implementing Articles 106-109 of the Labor Code, as amended, provides the guidelines in determining
whether labor-only contracting exists:
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For this purpose,
labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies, or places
workers to perform a job, work or service for a principal, and any of the following elements are [is] present:
i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work, or
service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal; or
ii) The contractor does not exercise the right to control the performance of the work of the contractual employee.
The foregoing provisions shall be without prejudice to the application of Article 248(C) of the Labor Code, as amended.
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations, tools,
equipment, implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the
performance or completion of the job, work, or service contracted out.
The "right to control" shall refer to the right reversed to the person for whom the services of the contractual workers are
performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that end.
(Emphasis supplied.)
When there is labor-only contracting, Section 7 of the same implementing rules, describes the consequences thereof:
Section 7. Existence of an employer-employee relationship.The contractor or subcontractor shall be considered the
employer of the contractual employee for purposes of enforcing the provisions of the Labor Code and other social legislation.
The principal, however, shall be solidarily liable with the contractor in the event of any violation of any provision of the Labor
Code, including the failure to pay wages.
The principal shall be deemed the employer of the contractual employee in any of the following case, as declared by a
competent authority:
a. where there is labor-only contracting; or
b. where the contracting arrangement falls within the prohibitions provided in Section 6 (Prohibitions) hereof.
According to the foregoing provision, labor-only contracting would give rise to: (1) the creation of an employer-employee
relationship between the principal and the employees of the contractor or sub-contractor; and (2) the solidary liability of the
principal and the contractor to the employees in the event of any violation of the Labor Code.
Petitioner argues that there could not have been labor-only contracting, since respondents did not perform activities that were
indispensable to petitioners principal business. And, even assuming that they did, such fact alone does not establish an
employer-employee relationship between petitioner and the respondents, since respondents were unable to show that
petitioner exercised the power to select and hire them, pay their wages, dismiss them, and control their conduct.
The argument of petitioner is untenable.
The law clearly establishes an employer-employee relationship between the principal employer and the contractors employee
upon a finding that the contractor is engaged in "labor-only" contracting. Article 106 of the Labor Code categorically states:
"There is labor-only contracting where the person supplying workers to an employee does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed
by such persons are performing activities which are directly related to the principal business of such employer." Thus,
performing activities directly related to the principal business of the employer is only one of the two indicators that "labor-only"
contracting exists; the other is lack of substantial capital or investment. The Court finds that both indicators exist in the case at
bar.
Respondents worked for petitioner as salesmen, with the exception of respondent Gil Francisco whose job was designated as
leadman. In the Delivery Agreement32 between petitioner and TRMD Incorporated, it is stated that petitioner is engaged in the
manufacture, distribution and sale of softdrinks and other related products. The work of respondents, constituting distribution
and sale of Coca-Cola products, is clearly indispensable to the principal business of petitioner. The repeated re-hiring of some
of the respondents supports this finding.33Petitioner also does not contradict respondents allegations that the former has
Sales Departments and Sales Offices in its various offices, plants, and warehouses; and that petitioner hires Regional Sales
Supervisors and District Sales Supervisors who supervise and control the salesmen and sales route helpers. 34
As to the supposed substantial capital and investment required of an independent job contractor, petitioner calls the attention
of the Court to the authorized capital stock of Interserve amounting to P2,000,000.00.35 It cites as authority Filipinas Synthetic
Fiber Corp. v. National Labor Relations Commission36 and Frondozo v. National Labor Relations Commission,37 where the
contractors authorized capital stock of P1,600,000.00 and P2,000,000.00, respectively, were considered substantial for the
purpose of concluding that they were legitimate job contractors. Petitioner also refers to Neri v. National Labor Relations
Commission38 where it was held that a contractor ceases to be a labor-only contractor by having substantial capital alone,
without investment in tools and equipment.
This Court is unconvinced.
At the outset, the Court clarifies that although Interserve has an authorized capital stock amounting to P2,000,000.00,
only P625,000.00 thereof was paid up as of 31 December 2001. The Court does not set an absolute figure for what it
505
considers substantial capital for an independent job contractor, but it measures the same against the type of work which the
contractor is obligated to perform for the principal. However, this is rendered impossible in this case since the Contract
between petitioner and Interserve does not even specify the work or the project that needs to be performed or completed by
the latters employees, and uses the dubious phrase "tasks and activities that are considered contractible under existing laws
and regulations." Even in its pleadings, petitioner carefully sidesteps identifying or describing the exact nature of the services
that Interserve was obligated to render to petitioner. The importance of identifying with particularity the work or task which
Interserve was supposed to accomplish for petitioner becomes even more evident, considering that the Articles of
Incorporation of Interserve states that its primary purpose is to operate, conduct, and maintain the business of janitorial and
allied services.39 But respondents were hired as salesmen and leadman for petitioner. The Court cannot, under such
ambiguous circumstances, make a reasonable determination if Interserve had substantial capital or investment to undertake
the job it was contracting with petitioner.
Petitioner cannot seek refuge in Neri v. National Labor Relations Commission. Unlike in Neri, petitioner was unable to prove in
the instant case that Interserve had substantial capitalization to be an independent job contractor. In San Miguel Corporation v.
MAERC Integrated Services, Inc.,40 therein petitioner San Miguel Corporation similarly invoked Neri, but was rebuffed by the
Court based on the following ratiocination41 :
Petitioner also ascribes as error the failure of the Court of Appeals to apply the ruling in Neri v. NLRC. In that case, it was held
that the law did not require one to possess both substantial capital and investment in the form of tools, equipment, machinery,
work premises, among others, to be considered a job contractor. The second condition to establish permissible job contracting
was sufficiently met if one possessed either attribute.
Accordingly, petitioner alleged that the appellate court and the NLRC erred when they declared MAERC a labor-only
contractor despite the finding that MAERC had investments amounting to P4,608,080.00 consisting of buildings, machinery
and equipment.
However, in Vinoya v. NLRC, we clarified that it was not enough to show substantial capitalization or investment in the form of
tools, equipment, machinery and work premises, etc., to be considered an independent contractor. In fact, jurisprudential
holdings were to the effect that in determining the existence of an independent contractor relationship, several factors may be
considered, such as, but not necessarily confined to, whether the contractor was carrying on an independent business; the
nature and extent of the work; the skill required; the term and duration of the relationship; the right to assign the performance
of specified pieces of work; the control and supervision of the workers; the power of the employer with respect to the hiring,
firing and payment of the workers of the contractor; the control of the premises; the duty to supply premises, tools, appliances,
materials and labor; and the mode, manner and terms of payment.
In Neri, the Court considered not only the fact that respondent Building Care Corporation (BCC) had substantial capitalization
but noted that BBC carried on an independent business and performed its contract according to its own manner and method,
free from the control and supervision of its principal in all matters except as to the results thereof. The Court likewise
mentioned that the employees of BCC were engaged to perform specific special services for their principal. The status of BCC
had also been passed upon by the Court in a previous case where it was found to be a qualified job contractor because it was
a "big firm which services among others, a university, an international bank, a big local bank, a hospital center, government
agencies, etc." Furthermore, there were only two (2) complainants in that case who were not only selected and hired by the
contractor before being assigned to work in the Cagayan de Oro branch of FEBTC but the Court also found that the contractor
maintained effective supervision and control over them.
Thus, in San Miguel Corporation, the investment of MAERC, the contractor therein, in the form of buildings, tools, and
equipment of more than P4,000,000.00 did not impress the Court, which still declared MAERC to be a labor-only contractor. In
another case, Dole Philippines, Inc. v. Esteva,42 the Court did not recognize the contractor therein as a legitimate job
contractor, despite its paid-up capital of over P4,000,000.00, in the absence of substantial investment in tools and equipment
used in the services it was rendering.
Insisting that Interserve had substantial investment, petitioner assails, for being purely speculative, the finding of the Court of
Appeals that the service vehicles and equipment of Interserve, with the values of P510,000.00 and P200,000.00, respectively,
could not have met the demands of the Coca-Cola deliveries in the Lagro area.
Yet again, petitioner fails to persuade.
The contractor, not the employee, has the burden of proof that it has the substantial capital, investment, and tool to engage in
job contracting.43 Although not the contractor itself (since Interserve no longer appealed the judgment against it by the Labor
Arbiter), said burden of proof herein falls upon petitioner who is invoking the supposed status of Interserve as an independent
job contractor. Noticeably, petitioner failed to submit evidence to establish that the service vehicles and equipment of
Interserve, valued at P510,000.00 and P200,000.00, respectively, were sufficient to carry out its service contract with
petitioner. Certainly, petitioner could have simply provided the courts with records showing the deliveries that were undertaken
by Interserve for the Lagro area, the type and number of equipment necessary for such task, and the valuation of such
equipment. Absent evidence which a legally compliant company could have easily provided, the Court will not presume that
Interserve had sufficient investment in service vehicles and equipment, especially since respondents allegation that they
were using equipment, such as forklifts and pallets belonging to petitioner, to carry out their jobs was uncontroverted.
506
In sum, Interserve did not have substantial capital or investment in the form of tools, equipment, machineries, and work
premises; and respondents, its supposed employees, performed work which was directly related to the principal business of
petitioner. It is, thus, evident that Interserve falls under the definition of a "labor-only" contractor, under Article 106 of the Labor
Code; as well as Section 5(i) of the Rules Implementing Articles 106-109 of the Labor Code, as amended.
The Court, however, does not stop at this finding. It is also apparent that Interserve is a labor-only contractor under Section
5(ii)44 of the Rules Implementing Articles 106-109 of the Labor Code, as amended, since it did not exercise the right to control
the performance of the work of respondents.
The lack of control of Interserve over the respondents can be gleaned from the Contract of Services between Interserve (as
the CONTRACTOR) and petitioner (as the CLIENT), pertinent portions of which are reproduced below:
WHEREAS, the CONTRACTOR is engaged in the business, among others, of performing and/or undertaking, managing for
consideration, varied projects, jobs and other related management-oriented services;
WHEREAS, the CONTRACTOR warrants that it has the necessary capital, expertise, technical know-how and a team of
professional management group and personnel to undertake and assume the responsibility to carry out the above mentioned
project and services;
WHEREAS, the CLIENT is desirous of utilizing the services and facilities of the CONTRACTOR for emergency needs, rush
jobs, peak product loads, temporary, seasonal and other special project requirements the extent that the available work of the
CLIENT can properly be done by an independent CONTRACTOR permissible under existing laws and regulations;
WHEREAS, the CONTRACTOR has offered to perform specific jobs/works at the CLIENT as stated heretofore, under the
terms and conditions herein stated, and the CLIENT has accepted the offer.
NOW THEREFORE, for and in consideration of the foregoing premises and of the mutual covenants and stipulations
hereinafter set forth, the parties have hereto have stated and the CLIENT has accepted the offer:
1. The CONTRACTOR agrees and undertakes to perform and/or provide for the CLIENT, on a non-exclusive basis
for tasks or activities that are considered contractible under existing laws and regulations, as may be needed by the
CLIENT from time to time.
2. To carry out the undertakings specified in the immediately preceding paragraph, the CONTRACTOR shall employ
the necessary personnel like Route Helpers, Salesmen, Drivers, Clericals, Encoders & PD who are at least
Technical/Vocational courses graduates provided with adequate uniforms and appropriate identification cards, who
are warranted by the CONTRACTOR to be so trained as to efficiently, fully and speedily accomplish the work and
services undertaken herein by the CONTRACTOR. The CONTRACTOR represents that its personnel shall be in
such number as will be sufficient to cope with the requirements of the services and work herein undertaken and that
such personnel shall be physically fit, of good moral character and has not been convicted of any crime. The CLIENT,
however, may request for the replacement of the CONTRACTORS personnel if from its judgment, the jobs or the
projects being done could not be completed within the time specified or that the quality of the desired result is not
being achieved.
3. It is agreed and understood that the CONTRACTORS personnel will comply with CLIENT, CLIENTS policies,
rules and regulations and will be subjected on-the-spot search by CLIENT, CLIENTS duly authorized guards or
security men on duty every time the assigned personnel enter and leave the premises during the entire duration of
this agreement.
4. The CONTRACTOR further warrants to make available at times relievers and/or replacements to ensure
continuous and uninterrupted service as in the case of absences of any personnel above mentioned, and to exercise
the necessary and due supervision over the work of its personnel.45
Paragraph 3 of the Contract specified that the personnel of contractor Interserve, which included the respondents, would
comply with "CLIENT" as well as "CLIENTs policies, rules and regulations." It even required Interserve personnel to subject
themselves to on-the-spot searches by petitioner or its duly authorized guards or security men on duty every time the said
personnel entered and left the premises of petitioner. Said paragraph explicitly established the control of petitioner over the
conduct of respondents. Although under paragraph 4 of the same Contract, Interserve warranted that it would exercise the
necessary and due supervision of the work of its personnel, there is a dearth of evidence to demonstrate the extent or degree
of supervision exercised by Interserve over respondents or the manner in which it was actually exercised. There is even no
showing that Interserve had representatives who supervised respondents work while they were in the premises of petitioner.
Also significant was the right of petitioner under paragraph 2 of the Contract to "request the replacement of the
CONTRACTORS personnel." True, this right was conveniently qualified by the phrase "if from its judgment, the jobs or the
projects being done could not be completed within the time specified or that the quality of the desired result is not being
achieved," but such qualification was rendered meaningless by the fact that the Contract did not stipulate what work or job the
personnel needed to complete, the time for its completion, or the results desired. The said provision left a gap which could
enable petitioner to demand the removal or replacement of any employee in the guise of his or her inability to complete a
project in time or to deliver the desired result. The power to recommend penalties or dismiss workers is the strongest
indication of a companys right of control as direct employer.461avvphil.zw+

507
Paragraph 4 of the same Contract, in which Interserve warranted to petitioner that the former would provide relievers and
replacements in case of absences of its personnel, raises another red flag. An independent job contractor, who is answerable
to the principal only for the results of a certain work, job, or service need not guarantee to said principal the daily attendance of
the workers assigned to the latter. An independent job contractor would surely have the discretion over the pace at which the
work is performed, the number of employees required to complete the same, and the work schedule which its employees need
to follow.
As the Court previously observed, the Contract of Services between Interserve and petitioner did not identify the work needed
to be performed and the final result required to be accomplished. Instead, the Contract specified the type of workers Interserve
must provide petitioner ("Route Helpers, Salesmen, Drivers, Clericals, Encoders & PD") and their qualifications
(technical/vocational course graduates, physically fit, of good moral character, and have not been convicted of any crime). The
Contract also states that, "to carry out the undertakings specified in the immediately preceding paragraph, the CONTRACTOR
shall employ the necessary personnel," thus, acknowledging that Interserve did not yet have in its employ the personnel
needed by petitioner and would still pick out such personnel based on the criteria provided by petitioner. In other words,
Interserve did not obligate itself to perform an identifiable job, work, or service for petitioner, but merely bound itself to provide
the latter with specific types of employees. These contractual provisions strongly indicated that Interserve was merely a
recruiting and manpower agency providing petitioner with workers performing tasks directly related to the latters principal
business.
The certification issued by the DOLE stating that Interserve is an independent job contractor does not sway this Court to take it
at face value, since the primary purpose stated in the Articles of Incorporation47 of Interserve is misleading. According to its
Articles of Incorporation, the principal business of Interserve is to provide janitorial and allied services. The delivery and
distribution of Coca-Cola products, the work for which respondents were employed and assigned to petitioner, were in no way
allied to janitorial services. While the DOLE may have found that the capital and/or investments in tools and equipment of
Interserve were sufficient for an independent contractor for janitorial services, this does not mean that such capital and/or
investments were likewise sufficient to maintain an independent contracting business for the delivery and distribution of Coca-
Cola products.
With the finding that Interserve was engaged in prohibited labor-only contracting, petitioner shall be deemed the true employer
of respondents. As regular employees of petitioner, respondents cannot be dismissed except for just or authorized causes,
none of which were alleged or proven to exist in this case, the only defense of petitioner against the charge of illegal dismissal
being that respondents were not its employees. Records also failed to show that petitioner afforded respondents the twin
requirements of procedural due process, i.e., notice and hearing, prior to their dismissal. Respondents were not served notices
informing them of the particular acts for which their dismissal was sought. Nor were they required to give their side regarding
the charges made against them. Certainly, the respondents dismissal was not carried out in accordance with law and,
therefore, illegal.48
Given that respondents were illegally dismissed by petitioner, they are entitled to reinstatement, full backwages, inclusive of
allowances, and to their other benefits or the monetary equivalents thereof computed from the time their compensations were
withheld from them up to the time of their actual reinstatement, as mandated under Article 279 of the Labor Code,.
IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The Court AFFIRMS WITH MODIFICATION the Decision
dated 19 February 2007 of the Court of Appeals in CA-G.R. SP No. 85320. The Court DECLARES that respondents were
illegally dismissed and, accordingly, ORDERS petitioner to reinstate them without loss of seniority rights, and to pay them full
back wages computed from the time their compensation was withheld up to their actual reinstatement. Costs against the
petitioner.
SO ORDERED.

G.R. No. 177785 September 3, 2008

RANDY ALMEDA, EDWIN M. AUDENCIAL, NOLIE D. RAMIREZ, ERNESTO M. CALICAGAN and REYNALDO M.
CALICAGAN, petitioners,
vs.
ASAHI GLASS PHILIPPINES, INC., respondent.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court,filed by petitioners Randy
Almeda, Edwin Audencial, Nolie Ramirez, Ernesto Calicagan and Reynaldo Calicagan, seeking to reverse and set aside the
Decision1 dated 10 November 2006 and the Resolution2 dated 27 April 2007 of the Court of Appeals in CA-G.R. SP No.
93291. The appellate court reversed and set aside the Decision dated 29 June 2005 and Resolution dated 24 November 2005
of the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 039768-04 finding respondent Asahi Glass
Philippines, Inc. jointly and severally liable with San Sebastian Allied Services, Inc. (SSASI) for illegal dismissal, and ordering
both respondent and SSASI to reinstate petitioners to their former positions and to pay their backwages from 2 December
2002 up to the date of their actual reinstatement. Instead, the Court of Appeals reinstated the Decision dated 18 February
508
2004 of the Labor Arbiter dismissing petitioners complaint for illegal dismissal against respondent and SSASI, but ordering the
payment of separation benefits to petitioners.
The present Petition arose from a complaint for illegal dismissal with claims for moral and exemplary damages and attorneys
fees filed by petitioners against respondent and SSASI.
In their Complaint3 filed before the Labor Arbiter, petitioners alleged that respondent (a domestic corporation engaged in the
business of glass manufacturing) and SSASI (a labor-only contractor) entered into a service contract on 5 March 2002
whereby the latter undertook to provide the former with the necessary manpower for its operations. Pursuant to such a
contract, SSASI employed petitioners Randy Almeda, Edwin Audencial, Nolie Ramirez and Ernesto Calicagan as glass
cutters, and petitioner Reynaldo Calicagan as Quality Controller, 4 all assigned to work for respondent. Petitioners worked for
respondent for periods ranging from three to 11 years.5 On 1 December 2002, respondent terminated its service contract with
SSASI, which in turn, terminated the employment of petitioners on the same date. Believing that SSASI was a labor-only
contractor, and having continuously worked as glass cutters and quality controllers for the respondent - functions which are
directly related to its main line of business as glass manufacturer - for three to 11 years, petitioners asserted that they should
be considered regular employees of the respondent; and that their dismissal from employment without the benefit of due
process of law was unlawful. In support of their complaint, petitioners submitted a copy of their work schedule to show that
they were under the direct control of the respondent which dictated the time and manner of performing their jobs.
Respondent, on the other hand, refuted petitioners allegations that they were its regular employees. Instead, respondent
claimed that petitioners were employees of SSASI and were merely assigned by SSASI to work for respondent to perform
intermittent services pursuant to an Accreditation Agreement, dated 5 March 2002, the validity of which was never assailed by
the petitioners. Respondent contested petitioners contention that they were performing functions that were directly related to
respondents main business since petitioners were simply tasked to do mirror cutting, an activity occasionally performed upon
a customers order. Respondent likewise denied exercising control over petitioners and asserted that such was wielded by
SSASI. Finally, respondent maintained that SSASI was engaged in legitimate job contracting and was licensed by the
Department of Labor and Employment (DOLE) to engage in such activity as shown in its Certificate of
Registration.6Respondent presented before the Labor Arbiter copies of the Opinion dated 18 February 2003 of DOLE
Secretary Patricia Sto. Tomas authorizing respondent to contract out certain activities not necessary or desirable to the
business of the company; and the Opinion dated 10 July 2003 of DOLE Bureau of Labor Relations (DOLE-BLR) Director Hans
Leo Cacdac allowing respondent to contract out even services that were not directly related to its main line of business.
SSASI, for its part, claimed that it was a duly registered independent contractor as evidenced by the Certificate of Registration
issued by the DOLE on 3 January 2003. SSASI averred that it was the one who hired petitioners and assigned them to work
for respondent on occasions that the latters work force could not meet the demands of its customers. Eventually, however,
respondent ceased to give job orders to SSASI, constraining the latter to terminate petitioners employment.
On 18 February 2004, the Labor Arbiter promulgated his Decision7 finding that respondent submitted overwhelming
documentary evidence to refute the bare allegations of the petitioners and accordingly dismissing the complaint for lack of
merit. However, he also ordered the payment of separation benefits to petitioners. The Labor Arbiter thus decreed:
WHEREFORE, premises considered, judgment is hereby rendered declaring that the instant case should be, as it is
hereby DISMISSED for lack of merit. However, the respondent San Sebastian Allied Services, Inc. is hereby ordered
to pay the [herein petitioners] Edwin M. Audencial, Reynaldo Calicagan, Randy Almeda, Nolie D. Ramirez and
Ernesto Calicagan their respective separation benefits in the following specified amounts:

(1) Edwin Audencial P 41,327.00

(2) Reynaldo M. Calicagan 15, 860.00

(3) Randy V. Almeda 45,084.00

(4) Nolie Ramirez 15,028.00

(5) Ernesto Calicagan 22,542.00

All other claims are dismissed.

On appeal, the NLRC reversed the afore-quoted Decision of the Labor Arbiter, giving more evidentiary weight to petitioners
testimonies. It appeared to the NLRC that SSASI was engaged in labor-only contracting since it did not have substantial
capital and investment in the form of tools, equipment and machineries. The petitioners were recruited and assigned by SSASI
to respondent as glass cutters, positions which were directly related to respondents principal business of glass manufacturing.
In light of the factual circumstances of the case, the NLRC declared that petitioners were employees of respondent and not of
SSASI. Hence, the NLRC ruled in its Decision8 dated 29 June 2005:

509
 WHEREFORE, the decision appealed from is hereby VACATED and SET ASIDE. [Herein respondent] and [SSASI]
are hereby ordered to: (1) reinstate the [herein petitioners] to their former position as glass cutters; and (2) pay
[petitioners] full backwages from December 2, 2002 up to the date of their actual reinstatement. The liability of
[respondent] and [SSASI] for [petitioners] backwages is further declared to be joint and several.
Only respondent moved for the reconsideration of the foregoing NLRC Decision. Respondent prayed that the NLRC vacate its
previous finding that SSASI was a labor-only contractor and that it was guilty of the illegal dismissal of petitioners. In a
Resolution9 dated 24 November 2005, the NLRC denied the Motion for Reconsideration of respondent for lack of compelling
justification to modify, alter or reverse its earlier Decision.
This prompted respondent to elevate its case to the Court of Appeals by the filing of a Petition for Certiorari with Application for
the Issuance of Temporary Restraining Order (TRO),10 alleging that the NLRC abused its discretion in ignoring the established
facts and legal principles fully substantiated by the documentary evidence on record and legal opinions of labor officials, and in
giving more credence to the empty allegations advanced by petitioners.
To prevent the execution of the Decision dated 25 June 2005 and Resolution dated 24 November 2005 of the NLRC,
respondent included in its Petition a prayer for the issuance of a TRO, which it reiterated in a motion filed on 29 August 2006.
Acting on respondents motion, the Court of Appeals issued a TRO on 11 September 2006 enjoining the NLRC from enforcing
its 25 June 2005 Decision and 24 November 2005 Resolution. 11
On 10 November 2006, the Court of Appeals rendered a Decision granting respondents Petition for Certiorari and
reversingthe NLRC Decision dated 25 June 2005. The appellate court found merit in respondents argument that the NLRC
gravely abused its discretion in not finding that there was a legitimate job contracting between respondent and SSASI. SSASI
is a legitimate job contractor as proven by its Certificate of Registration issued by the DOLE. Respondent entered into a valid
service contract with SSASI, by virtue of which petitioners were assigned by SSASI to work for respondent. The service
contract itself, which was duly approved by the DOLE, defined the relationship between SSASI and petitioners as one of
employer-employees. It was SSASI which exercised the power of control over petitioners. Petitioners were merely allowed to
work at respondents premises for reasons of efficiency. Moreover, it was SSASI, not respondent, who terminated petitioners
services. The fallo of the Decision of the Court of Appeals state:
WHEREFORE, premises considered, the petition is GRANTED and [NLRCs] assailed 29 June 2005 Decision is,
accordingly, REVERSED and SET ASIDE. In lieu thereof, the 18 February 2004 Decision rendered in the case by
Labor Arbiter Francisco A. Robles is REINSTATED.12
The Court of Appeals denied petitioners Motion for Reconsideration in a Resolution dated 27 April 2007.
Hence, petitioners come before this Court via the instant Petition for Review on Certiorari assailing the 10 November 2006
Decision and 27 April 2007 Resolution of the Court of Appeals based on the following assignment of errors:
I.
THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN REVERSING THE FINDING OF THE NLRC
THAT RESPONDENT COMPANY IS ENGAGED IN LABOR-ONLY CONTRACTING.
II.
THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN REVERSING THE RULING OF THE NLRC THAT
SAN SEBASTIAN ALLIED SERVICES, INC. IS MERELY RESPONDENTS AGENT AND RESPONDENT IS
PETITIONERS REAL EMPLOYER.
III.
THE COURT OF APPEALS COMMITTED AN ERROR IN DISMISSING PETITIONERS COMPLAINT FOR ILLEGAL
DISMISSAL.
It is apparent to this Court that the judicious resolution of the Petition at bar hinges on two elemental issues: (1) whether
petitioners were employees of respondent; and (2) if they were, whether they were illegally dismissed.
Respondent adamantly insists that petitioners were not its employees but those of SSASI, a legitimate job contractor duly
licensed by the DOLE to undertake job contracting activities. The job performed by petitioners were not directly related to
respondents primary venture as flat glass manufacturer, for they were assigned to the mirroring line to perform glass cutting
on occasions when the employees of respondent could not comply with the markets intermittent increased demand. And even
if petitioners were working at respondents premises, it was SSASI which effectively supervised the manner and method
petitioners performed their jobs, except as to the result thereof.
The Court would only be able to deem petitioners as employees of respondent if it is established that SSASI was a labor-only
contractor, and not a legitimate job contractor or subcontractor.
Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to put out or farm out to a
contractor or subcontractor the performance or completion of a specific job, work or service within a definite or predetermined
period, regardless of whether such job, work or service is to be performed or completed within or outside the premises of the
principal.13 A person is considered engaged in legitimate job contracting or subcontracting if the following conditions concur:
(a) The contractor or subcontractor carries on a distinct and independent business and undertakes to perform the job,
work or service on its own account and under its own responsibility according to its own manner and method, and

510
 free from the control and direction of the principal in all matters connected with the performance of the work except as
to the results thereof;
(b) The contractor or subcontractor has substantial capital or investment; and
(c) The agreement between the principal and contractor or subcontractor assures the contractual employees
entitlement to all labor and occupational safety and health standards, free exercise of the right to self-organization,
security of tenure, and social and welfare benefits.14
On the other hand, labor-only contracting, a prohibited act, is an arrangement in which the contractor or subcontractor merely
recruits, supplies or places workers to perform a job, work or service for a principal. 15 In labor-only contracting, the following
elements are present:
(a) The contractor or subcontractor does not have substantial capital or investment to actually perform the job, work
or service under its own account and responsibility;
(b) The employees recruited, supplied or placed by such contractor or subcontractor are performing activities which
are directly related to the main business of the principal. 16
In labor-only contracting, the statutes create an employer-employee relationship for a comprehensive purpose: to prevent
circumvention of labor laws. The contractor is considered as merely the agent of the principal employer and the latter is
responsible to the employees of the labor-only contractor as if such employees are directly employed by the principal
employer.17 Therefore, if SSASI was a labor-only contractor, then respondent shall be considered as the employer of
petitioners who must bear the liability for the dismissal of the latter, if any.
An important element of legitimate job contracting is that the contractor has substantial capital or investment, which
respondent failed to prove. There is a dearth of evidence to prove that SSASI possessed substantial capital or investment
when respondent began contractual relations with it more than a decade before 2003. Respondents bare allegations, without
supporting proof that SSASI had substantial capital or investment, do not sway this Court. The Court did not find a single
financial statement or record to attest to the economic status and financial capacity of SSASI to venture into and sustain its
own business independent from petitioner.
Furthermore, the Court is unconvinced by respondents argument that petitioners were performing jobs that were not directly
related to respondents main line of business. Respondent is engaged in glass manufacturing. One of the petitioners served as
a quality controller, while the rest were glass cutters. The only excuse offered by respondent - that petitioners services were
required only when there was an increase in the markets demand with which respondent could not cope - only prove even
more that the services rendered by petitioners were indeed part of the main business of respondent. It would mean that
petitioners supplemented the regular workforce when the latter could not comply with the markets demand; necessarily,
therefore, petitioners performed the same functions as the regular workforce. Even respondents claim that petitioners
services were required only intermittently, depending on the market, deserves scant credit. The indispensability of petitioners
services was fortified by the length and continuity of their performance, lasting for periods ranging from three to 11 years.
More importantly, the Court finds that the crucial element of control over petitioners rested in respondent. The power of control
refers to the authority of the employer to control the employee not only with regard to the result of work to be done, but also to
the means and methods by which the work is to be accomplished. It should be borne in mind that the power of control refers
merely to the existence of the power and not to the actual exercise thereof. It is not essential for the employer to actually
supervise the performance of duties of the employee; it is enough that the former has a right to wield the power. 18
In the instant case, petitioners worked at the respondents premises, and nowhere else. Petitioners followed the work schedule
prepared by respondent. They were required to observe all rules and regulations of the respondent pertaining to, among other
things, the quality of job performance, regularity of job output, and the manner and method of accomplishing the jobs.
Obscurity hounds respondents argument that even if petitioners were working under its roof, it was still SSASI which
exercised control over the manner in which they accomplished their work. There was no showing that it was SSASI who
established petitioners working procedure and methods, or who supervised petitioners in their work, or who evaluated the
same. Other than being the one who hired petitioners, there was absolute lack of evidence that SSASI exercised control over
them or their work.
The fact that it was SSASI which dismissed petitioners from employment is irrelevant. It is hardly proof of control, since it was
demonstrated only at the end of petitioners employment. What is more, the dismissal of petitioners by SSASI was a mere
result of the termination by respondent of its contractual relations with SSASI.
Despite respondents disavowal of the existence of an employer-employee relationship between it and petitioners and its
unyielding insistence that petitioners were employees of SSASI, the totality of the facts and the surrounding circumstances of
the case convey otherwise. SSASI is a labor-only contractor; hence, it is considered as the agent of respondent. Respondent
is deemed by law as the employer of petitioners. Surely, respondent cannot expect this Court to sustain its stance and accord
full evidentiary weight to the documentary evidence belatedly procured in its vain attempt to evade liability as petitioners
employer.
The Certificate of Registration presented by respondent to buttress its position that SSASI is a duly registered job contractor is
of little significance, considering that it were issued only on 3 January 2003. There is no further proof that prior to said date,
SSASI had already registered with and had been recognized by the DOLE as a job contractor.
511
Verily, the Certificate of Registration of SSASI, instead of supporting respondents case, only served to raise more doubts. The
timing of the registration of SSASI is highly suspicious. It is important to note that SSASI was already providing respondent
with workers, including petitioners, long before SSASI was registered with the DOLE as a job contractor. Some of the
petitioners were hired by SSASI and made to work for respondent for 11 years. Petitioners were also dismissed from service
only a month prior to the issuance of the Certificate of Registration of SSASI. Neither respondent nor SSASI exerted any effort
to explain the reason for the belated registration with the DOLE by SSASI as a purported job contractor. It may be safely
discerned from the surrounding circumstances that the Certificate of Registration of SSASI was merely secured in order to
blanket the previous relations between SSASI and respondent with legality.
Moreover, the Certificate of Registration issued by the DOLE recognized that SSASI was a legitimate job contractor only as of
the date of its issuance, 3 January 2003. There is no basis whatsoever to give the said Certificate any retroactive effect. The
Certificate can only be used as reference by persons who would consider the services offered by SSASI subsequent to its
issuance. Respondent, who entered into contractual relations with SSASI way before the said Certificate, cannot claim that it
relied thereon.
Hence, the status of SSASI as a job contractor previous to its registration with the DOLE on 3 January 2003 is still refutable. It
can only be determined upon an evaluation of its activities as contractor prior to the issuance of its Certificate of Registration.
For the same reasons, this Court cannot give much weight to the Opinions dated 18 February 2003 and 10 July 2003 of DOLE
Secretary Sto. Tomas and DOLE-BLR Director Cacdac, respectively, allowing respondent to contract out certain services. The
said Opinions were noticeably issued only after the hiring and termination of petitioners. And, although the Opinions allow
respondent to contract out certain services, they do not necessarily prove that the services respondent contracted to SSASI
were actually among those it was allowed to contract out; or that SSASI was a legitimate job contractor, thus, relieving
respondent of any liability for the dismissal of petitioners by SSASI.
Equally unavailing is respondents stance that its relationship with petitioners should be governed by the Accreditation
Agreement stipulating that petitioners were to remain employees of SSASI and shall not become regular employees of the
respondent. To permit respondent to disguise the true nature of its transactions with SSASI by the terms of its contract, for the
purpose of evading its liabilities under the law, would seriously impair the administration of justice. A party cannot dictate, by
the mere expedient of a unilateral declaration in a contract, the character of its business, i.e., whether as labor-only contractor
or as job contractor, it being crucial that its character be measured in terms of and determined by the criteria set by statute.19
Having established that respondent was petitioners employer, the Court now proceeds to determining whether petitioners
were dismissed in accordance with law.
Article 280 of the Labor Code, as amended, reads -
ART. 280. Regular and Casual Employment. - The provisions of written agreement to the contrary notwithstanding
and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the
employee has been engaged to perform activities which are usually necessary or desirable in the usual business or
trade of the employer, except where the employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the engagement of the employee or where the
work or services to be performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if its is not covered by the preceding paragraph: Provided, That, any
employee who has rendered at least one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which he is employed and his employment shall continue
while such activity exists.
This Court expounded on the afore-quoted provision, thus -
The primary standard, therefore, of determining a regular employment is the reasonable connection between the
particular activity performed by the employee in relation to the usual business or trade of the employer. x x x The
connection can be determined by considering the nature of the work performed and its relation to the scheme of the
particular business or trade in its entirety. Also, if the employee has been performing the job for at least one year,
even if the performance is not continuous or merely intermittent, the law deems the repeated and continuing need for
its performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence,
the employment is also considered regular, but only with respect to such activity and while such activity exists. 20
In the instant Petition, the Court has already declared that petitioners employment as quality controllers and glass cutters are
directly related to the usual business or trade of respondent as a glass manufacturer. Respondent would have wanted this
Court to believe that petitioners employment was dependent on the increased market demand. However, bearing in mind that
petitioners have worked for respondent for not less than three years and as much as 11 years, which respondent did not
refute, then petitioners continued employment clearly demonstrates its continuing necessity and indispensability to the
business of respondent, raising their employment to regular status. Thus, having gained regular status, petitioners were
entitled to security of tenure and could only be dismissed on just or authorized causes and after they had been accorded due
process.21

512
As petitioners employer, respondent has the burden of proving that the dismissal was for a cause allowed under the law, and
that they were afforded procedural due process.22 However, respondent failed to discharge this burden with substantial
evidence as it noticeably narrowed its defense to the denial of any employer-employee relationship between it and petitioners.
The sole reason given for the dismissal of petitioners by SSASI was the termination of its service contract with respondent. But
since SSASI was a labor-only contractor, and petitioners were to be deemed the employees of respondent, then the said
reason would not constitute a just or authorized cause23 for petitioners dismissal. It would then appear that petitioners were
summarily dismissed based on the afore-cited reason, without compliance with the procedural due process for notice and
hearing.
Herein petitioners, having been unjustly dismissed from work, are entitled to reinstatement without loss of seniority rights and
other privileges and to full back wages, inclusive of allowances, and to other benefits or their monetary equivalents computed
from the time compensation was withheld up to the time of actual reinstatement.24 Their earnings elsewhere during the periods
of their illegal dismissal shall not be deducted therefrom.25
WHEREFORE, premises considered, the instant Petition is GRANTED. The Decision dated 10 November 2006 and
Resolution dated 27 April 2007 of the Court of Appeals in CA-G.R. SP No. 93291 are REVERSED and SET ASIDE. The
Decision dated 29 June 2005 of the National Labor Relations Commission in NLRC-NCR CA No. 039768-04 is
thereby REINSTATED. Let the records of this case be remanded to the Computation and Examination Unit of the NLRC for
the proper computation of subject money claims as above-discussed. No costs.
SO ORDERED.

G.R. No. 168537 December 11, 2008

DAMIAN AKLAN, JUANITO AMIDO, REYNALDO BATICA, RAMIL BAUTISTA, WELARD BAUTISTA, MAMERTO
BRIGOLI, ELMER CABOTEJA, JOEL CAMMAYO, WELFREDO CARIO, RODOLFO CINCO, ARWEN DABLO, RUBEN DE
CASTRO, ROMEO DEL ROSARIO, RODERICK DELA CRUZ, ALEX DELA VEGA, JOAN ERICO DUMALAGAN, JULITO
DURIAN, JOSELITO DUYANEN, REX FARNACIO, ROLANDO FELIZARDO, EFREN FERNANDEZ, BERNARDO
GALLOGO, EDUARDO GARCIA, REX IGNACIO, DANIEL JAMISOLA, NOEL JANER, RAQUEL JANER, ROWAN JANER,
CONSORCIO LIAN, BERNARD MACARAEG, DARIO MACARAEG, JESUS MACARAEG, EDGARDO MAHAGUAY,
IRENEO ODIAMAR, ALEXIS OLIVAR, ARNEL OLIVAR, EDUARDO PEREMNE, ALAN QUILES, JOSEPH QUILES,
RHONNEL RODIL, RONALDO SALVADOR, RAMIL SANTIAGO, FRANCIS SUPRINO, REXES SUPRINO, RODRIGO
SUPRINO, RONALD SUPRINO, EDUARDO TIONGSON, petitioners,
vs.
SAN MIGUEL CORPORATION, BMA PHILASIA, INC., and ARLENE EUSEBIO, respondents.
DECISION
REYES, R.T., J.:
WE tackle in this labor case the dichotomy between impermissible labor-only contracting and legitimate job contracting.
This is a review on certiorari of the Decision1 of the Court of Appeals (CA) upholding that of the National Labor Relations
Commission (NLRC), finding the dismissal of petitioners justified.
The Facts
Respondent BMA Philasia, Inc. (BMA) is a domestic corporation engaged in the business of transporting and hauling of
cargoes, goods, and commodities of all kinds. Respondent Arlene Eusebio is the president of BMA.
Petitioners, numbering forty-seven (47) in all, are the former employees of respondent BMA at respondent San Miguel
Corporations (SMC) warehouse in Pasig City. They were hired under fixed-term contracts beginning October 1999.
On July 31, 2001, a number of petitioners went to the Department of Labor and Employment (DOLE) District Office to file a
complaint against BMA and Eusebio for underpayment of wages and non-payment of premium pay for rest day, 13th month
pay, and service incentive leave pay.2
On August 14, 2001, petitioner Elmer Caboteja was charged with insubordination and disrespect to superior, failure to properly
perform his job assignment, and unauthorized change of schedule. He was directed to submit his written explanation within
forty-eight (48) hours. On August 17, 2001, Caboteja was terminated for the offenses of disregard of company rules and
regulations and rude attitude to supervisors. On August 27, 2001, he filed a complaint for illegal dismissal against BMA.3
On various dates thereafter, BMA agreed to a settlement with some of the complainants in the case 4 for underpayment of
wages.5 Eleven of the present petitioners executed quitclaims and releases in favor of BMA and Eusebio in the presence of
DOLE district officers. BMA refused to settle the claim of other complainants.
On September 13, 2001, petitioners Joan Erico Dumalagan and Ronaldo Salvador were also terminated for failure to perform
their job responsibilities. On September 17, 2001, Dumalagan and Salvador filed complaints for illegal dismissal against BMA. 6
On October 18, 2001, petitioners held a picket at the warehouse premises to protest BMAs refusal to pay the claim for
underpayment of the rest of the workers. This picket disrupted the business operations of private respondents, prompting BMA
to terminate their services. Subsequently, petitioners filed separate complaints against BMA, Eusebio, and SMC for illegal
dismissal.7 All the complaints for illegal dismissal were consolidated.

513
Petitioners alleged that they were illegally dismissed after filing a complaint for underpayment of wages and non-payment of
benefits before the DOLE; they were terminated after staging a peaceful picket to protest the non-payment of their claims.
According to them, BMA is a labor-only contractor. SMC was not only the owner of the warehouse and equipment used by
BMA, it was their true employer. The manner and means by which they performed their work were controlled by SMC through
its Sales Logistic Coordinator who was overseeing their performance everyday.
Private respondents BMA and Eusebio countered that petitioners Caboteja, Dumalagan, and Salvador were validly and justly
dismissed. They were among the eleven who already signed quitclaims and releases before the DOLE district office after
receiving an amount in settlement of their claims. As for the rest of petitioners (36 complainants), there was no illegal dismissal
to speak of. Said employees simultaneously did not go back to work for no apparent reason on October 18, 2001.
Private respondent SMC maintained that it had no employer-employee relationship with petitioners who were hired and
supervised exclusively by BMA pursuant to a warehousing and delivery agreement in consideration of a fixed monthly fee.
SMC argued that BMA is a legitimate and independent contractor, duly registered with the Securities and Exchange
Commission (SEC) as a separate and distinct corporation with substantial capitalization, investment, equipment, and tools. It
submitted documentary evidence proving that BMA engaged the services of petitioners, paid for their wages and benefits, and
exercised exclusive control and supervision over them.
SMC showed that under their contract, BMA provided delivery trucks, drivers, and helpers in the storage and distribution of
SMC products. On a day-to-day basis, after the routes were made by SMC salesmen, they would book the orders they
obtained. In turn, BMAs Schedular Planner, detailed at the Pasig Warehouse, downloaded these booked orders from the
computer and processed the necessary documents to be forwarded to the Warehouse Checker, also an employee of BMA.
SMC contended that petitioners were dismissed by BMA for staging a two-hour strike without complying with the mandatory
requirements for a valid strike. As a result, BMA had to come up with ways and means in order to avoid the disruption of
delivery operations.
Labor Arbiter and NLRC Dispositions
After due hearings, Labor Arbiter Veneranda C. Guerrero found respondent BMA liable for illegal dismissal and ordered the
reinstatement of petitioners. She ruled that the evidence presented duly established that BMA was a legitimate independent
contractor and the actual employer of petitioners. Its failure, however, to comply with the registration and reportorial
requirements of the DOLE rendered SMC, its principal, directly liable to the claims of petitioners. 8 Thus, BMA and SMC were
found jointly and severally liable for the payment of petitioners backwages and money claims. The dispositive part of the
Arbiter ruling runs in this wise:
WHEREFORE, all the foregoing considered, judgment is hereby rendered finding respondent BMA Philasia, Inc.,
liable for illegal dismissal. Accordingly, is it hereby ordered to reinstate all of the complainants to their previous
positions, and to pay jointly and severally with respondent San Miguel the complainants backwages reckoned from
the time of their illegal dismissal up to their actual/payroll reinstatement, the aggregate amount of which as of this
date amounts to SEVEN MILLION FIVE HUNDRED EIGHTEEN THOUSAND TWO HUNDRED FIFTY-TWO AND
89/100 PESOS (P7,518,252.89). In addition respondents are solidarily held liable to pay the complainants Daniel
Jamisola, Rodolfo Cinco, Eduardo Garcia, Dario Macaraeg, Romeo Del Rosario, Alan Quiles, Joseph Quiles, Ronald
Suprino, Rolando Felizardo, Efren Fernandez, Damian Aklan, Welard Bautista, Rodrigo Suprino, Noel Janer, Jesus
Macaraeg, Reynaldo Batica, Rhonnel Rodil, Eduardo Peremne, Mamerto Brigoli, Ireneo Odiamar, Rex Ignacio,
Edgardo Mahaguay, Reyes Suprino, Rodrigo Dela Cruz, Ramil Bautista, Francis Suprino, Eduardo Tiongson, Joel
Cammayo, Arwen Dablo, Alex Dela Vega, Bernard Gallogo, Rex Farnacio, Ruben De Castro, Rowan Janer, Raquel
Janer, and Bernardo Macaraeg their salary differentials, service incentive leave pay and 13th month pay in the
aggregate amount of ONE MILLION TWO HUNDRED FIFTY-SIX THOUSAND THREE HUNDRED SIXTY-SIX and
80/100 PESOS (P1,256,366.80).
Respondents are further assessed the amount equivalent to ten percent (10%) of the total award, as and for
attorneys fees.
The computation of the complainants individually adjudged benefits shall form part of this Decision as Annex "A"
hereof.
All other claims are DISMISSED for lack of merit.
SO ORDERED.9 (Emphasis supplied)
Respondents appealed the decision of the Labor Arbiter to the NLRC. On December 19, 2003, the NLRC reversed the Labor
Arbiter disposition and ruled that there was no illegal dismissal. The fallo of the NLRC decision reads:
WHEREFORE, in view of all the foregoing, the appealed decision of the Labor Arbiter is hereby REVERSED and
SET ASIDE and a new decision is hereby rendered finding that there was no illegal dismissal committed by
respondents, hence, no liability for backwages. However, complainants are awarded their salary differentials, service
incentive leave pay and 13th month pay except for the year 2000 in the aggregate amount of ONE MILLION TWO
HUNDRED FIFTY-SIX THOUSAND THREE HUNDRED SIXTY-SIX AND 80/100 (P1,256,366.80) and 10%
ATTORNEYs FEES based on the salary differentials, SILP and 13th month pay.
SO ORDERED.10
514
The NLRC found that petitioners Caboteja, Dumalagan, and Salvador were separated from their jobs for just and valid causes.
They were given the opportunity to explain their sides. As for the quitclaims previously executed by the other petitioners, the
NLRC ruled that these were sufficient basis to release respondent BMA from liability.
With respect to the first and second assigned errors, the records show that complainants Elmer Caboteja, Erico "Jojo"
Dumalagan and Ronaldo Salvador were separated from their jobs for just and valid causes and after they were given
the chance to explain their sides. Copies of memoranda were served upon them advising their violation of company
rules and regulations and rude attitude and disrespect to superiors and disrespect to superiors in the case of
Caboteja and failure to perform duties and responsibilities in the case of Dumalagan and Salvador. They were asked
to explain and finding their explanations unacceptable, respondents dismissed them. Hence, they are not entitled to
separation pay.
As regards the other complainants, there is no showing that they were illegally dismissed from their jobs by BMA.
They have not given details on to whom they reported for work, who barred them from entering the respondents
premises and from working, in so many words how they were told that they were already dismissed. The only evident
fact is that they just stopped reporting for work beginning October 18, 2001 without informing BMA why there were
doing so. Their claim that they were not allowed by the respondents to return to their work is hard to believe. Why
should the respondents terminate simultaneously the services of the complainants and completely paralyze
respondents business operation, particularly their service contract with SMC? Complainants have not shown any
reason which would compel the respondents to resort to mass dismissal. On the other hand, complainants have
strong reason to paralyze respondents operation in order to force compliance to their demands.
xxxx
In fact, the records of this case also disclose that during the mandatory conciliation proceedings, BMA urged these
complainants to go back to work, but may refused to do so. Obviously, their refusal to go back to their work was a
deliberate move to force respondents to give in to their demands. Considering this refusal, it is not hard to believe
that complainants were not dismissed but rather they refused to work in order to paralyze respondents operations
and force them to give in to complainants demands.11(Emphasis supplied)
CA Disposition
Aggrieved, petitioners filed a Rule 65 petition with the CA. The following grounds were interposed: (1) that the NLRC gravely
abused its discretion in holding that Caboteja, Dumalagan, and Salvador were validly dismissed; (2) that the other petitioners
were not dismissed but were guilty of abandonment; and (3) that the quitclaims executed by eleven of the petitioners barred
the complaint for illegal dismissal.12
On April, 15, 2005, the CA denied the petition, affirming in full the NLRC disposition, thus:
WHEREFORE, premises considered, the present petition is hereby DENIED DUE COURSE and accordingly
DISMISSED, for lack of merit. The assailed Decision dated December 19, 2003 and Resolution dated July 20, 2004
of the National Labor Relations Commission in the consolidated cases, NLRC Case No. CN 08-04522-01-CA No.
036856-03 (NLRC NCR North Sector Case Nos. 08-04522-2001, 09-04941-2001, 00-11-05023-2001, 00-11-05969-
2001, 11-01-00450-2002, 02-00934-2002, 12-06288-2001, and 12-06320-2001), are hereby AFFIRMED and
UPHELD.
No pronouncement as to costs.
SO ORDERED.13
In ruling against petitioners, the CA found that the NLRC committed no reversible error or grave abuse of discretion in ruling
that petitioners were not illegally dismissed but actually refused to report back to work after staging a surprise stoppage that
paralyzed respondent BMAs business operations at the Pasig warehouse on October 18, 2001.
Issues
Undaunted, petitioners resorted to this review on certiorari, anchored on the following grounds:
The CA committed a serious legal error in not ruling that respondent San Miguel Corporation (principal of respondent
BMA Philasia), and respondent Arlene Eusebio, (president and owner of respondent BMA Philasia) are all solidarily
liable for petitioners money claims.
The CA committed a serious legal error in ruling that the quitclaims executed by eleven (11) of the petitioners, in
relation to their claims for underpayment of wages before the DOLE, also barred their subsequent complaint for illegal
dismissal, despite the fact that the said complaint was not yet in existence at the time the quitclaims were executed.
The CA committed a serious legal error in refusing to hold that respondent San Miguel Corporation was petitioners
real employer despite the fact that respondent BMA Philasia was not duly registered with the DOLE and caused the
workers to perform tasks directly related to the business of respondent San Miguel Corporation and under the latters
supervision.
The CA committed a legal error and acted with grave abuse of discretion in holding that petitioners Elmer Caboteja,
Joan Erico Dumalagan, and Ronaldo Salvador were not illegally dismissed from their jobs, despite a previous ruling
of the Labor Arbiter to the contrary.

515
 The CA committed a serious legal error in not awarding damages, at the very least, to petitioners Joan Erico
Dumalagan, and Ronaldo Salvador for violation of their right to due process.
The CA seriously committed an error of law in holding that the rest of the petitioners abandoned their jobsand were
not dismissed therefrom, contrary to the findings of the Labor Arbiter who heard the case. 14(Underscoring supplied)
Our Ruling
Petitioners argue mainly that their employer is, in fact, respondent SMC, not respondent BMA. They contend that BMA is a
labor-only contractor and SMC, as their true employer, should be held directly liable for their money claims.
A finding that a contractor is a "labor-only" contractor, as opposed to permissible job contracting, is equivalent to
declaring that there is an employer-employee relationship between the principal and the employees of the supposed
contractor, and the "labor-only" contractor is considered as a mere agent of the principal, the real employer.15
Both the Labor Arbiter and the NLRC found that the employment contracts of petitioners duly prove that an employer-
employee relationship existed between petitioners and BMA. We hasten to add that the existence of an employer-employee
relationship is ultimately a question of fact and the findings by the Labor Arbiter and the NLRC on that score shall be accorded
not only respect but even finality when supported by ample evidence. 16
In its ruling, the NLRC considered the following elements to determine the existence of an employer-employee relationship: (1)
the selection and engagement of the workers; (2) power of dismissal; (3) the payment of wages by whatever means; and (4)
the power to control the workers conduct.17 All four elements were found by the NLRC to be vested in BMA. This NLRC
finding was affirmed by the CA:
x x x It is the BMA which actually conducts the hauling, storage, handling, transporting, and delivery operations of
SMCs products pursuant to their warehousing and Delivery Agreement. BMA itself hires and supervises its own
workers to carry out the aforesaid business activities. Apart from the fact that it was BMA which paid for the wages
and benefits, as well as SSS contributions of petitioners, it was also the management of BMA which directly
supervised and imposed disciplinary actions on the basis of established rules and regulations of the company. The
documentary evidence consisting of numerous memos throughout the period of petitioners employment leaves no
doubt in the mind of this Court that petitioners are only too aware of who is their true employer. Petitioners received
daily instructions on their tasks form BMA management, particularly, private respondent Arlene C. Eusebio, and
whenever they committed lapses or offenses in connection with their work, it was to said officer that they submitted
compliance such as written explanations, and brought matters connected with their specific responsibilities. 18
The employer-employee relationship between BMA and petitioners is not tarnished by the absence of registration with DOLE
as an independent job contractor on the part of BMA. The absence of registration only gives rise to the presumption that the
contractor is engaged in labor-only contracting, a presumption that respondent BMA ably refuted.
Thus, We find no grave abuse of discretion in the CA observation that respondent BMA is the true employer of petitioners who
should be held directly liable for their claims. Likewise, no grave abuse of discretion can be ascribed to the CA when it ruled
that illegal dismissal was absent.
The records fully disclose that petitioners Caboteja, Dumalagan, and Salvador were separated from their jobs for just and valid
causes. Caboteja was cited for violation of company rules and regulations and disrespectful conduct. Dumalagan and
Salvador were investigated for failure to perform duties and responsibilities. After their explanations were found unacceptable,
they were accordingly dismissed.
As for the other petitioners, they contend that they were illegally dismissed when respondent BMA barred them from entering
the work premises and from performing their work. Both the NLRC and the CA found that petitioners failed to substantiate this
contention. Rather, what was shown in the records was that they simply stopped reporting for work starting October 18, 2001
when they staged a picket. The CA observation along this line is worth restating:
x x x petitioners failed to substantiate their claim that they had been prevented from entering the work premises after
staging a "picket" on October 18, 2001 to further press their demands for payment of their money claims. At this time,
the labor standards case was already pending with the DOLE District Office and petitioners could have availed of said
proceedings with the intervention of DOLE officials. Instead, however, they resorted to an illegal stoppage of work
that paralyzed the business operations of BMA. As aptly noted by the NLRC, there is simply no probable or logical
reason for private respondent BMA to simultaneously dismiss its workers that will disrupt business operations at the
warehouse. Under the factual circumstances, it clearly appears that petitioners refused to report back to their work in
order to force their employer BMA to give in to their immediate demand for the salary differentials and unpaid benefits
subject of their complaint with the DOLE. Hence, BMA cannot be held liable for illegal dismissal.
While it is true that the defense of abandonment may not be given credence or is negated by the immediate filing of
illegal dismissal cases by the affected employees, records clearly reveal that as of October 18, 2001, petitioners
without justifiable cause failed and refused to report back to their work. Their claim of having been prevented from
entering the work premises was not given due weight for no particulars was even alleged by them in their report back
to their jobs, who prevented their entry to the company premises and details as to what steps they took to bring the
matter to the attention of DOLE District Office wherein their complaint for labor standards violation was already
pending.19 (Emphasis supplied)
516
Moreover, eleven of petitioners contend that their quitclaims should not be considered as a bar to their complaint for illegal
dismissal because that complaint was not yet in existence at the time the quitclaims were executed. That the quitclaims were
executed voluntarily is not denied by petitioners. They, however, contend that the quitclaims should be construed as limited to
the money claims in connection with the first labor standards complaint 20 they had filed before the DOLE district office.
Unless there is a showing that the employee signed involuntarily or under duress, quitclaims and releases are upheld
by this Court as the law between the parties.21 If the agreement was voluntarily entered into by the employee, with full
understanding of what he was doing, and represents a reasonable settlement of the claims of the employee, it is binding on
the parties and may not be later disowned simply because of a change of mind. 22 In the case under review, the quitclaims and
releases signed by petitioners stated:
That for and in consideration of the sum of FIFTY-THREE THOUSAND PESOS (P53,000.00)23 in settlement of
my/our claim/s as financial assistance and/or gratuitously given by my/our employer receipt of which is hereby
acknowledge to my/our complete and full satisfaction, I/we hereby release and discharge the above respondent
and/or its officers from any and all claims by way of wages, overtime pay, differential pay, or otherwise as may be due
me/us incident to my/our past employment with said establishment. I/we hereby state further that I/we have no more
claim, right or action of whatsoever nature whether past, present or contingent against the said respondent and/or its
officers.24 (Emphasis supplied)
As correctly observed by the NLRC, the language employed by the above quitclaims and releases indicates in no uncertain
terms that petitioners voluntarily and freely acknowledged receipt of full satisfaction of all claims against respondents. Thus,
the quitclaims effectively barred petitioners from questioning their dismissal.
Social justice must be founded on the recognition of the necessity of interdependence among diverse units of a society and of
the protection that should be equally and evenly extended to all groups as a combined force in our social and economic
life.25 While labor should be protected at all times, this protection must not be at the expense of capital.
WHEREFORE, the petition is DENIED and the assailed Decision of the Court of Appeals AFFIRMED.
SO ORDERED.

MANDAUE GALLEON TRADE, INC. G.R. No. 159668

and/or GAMALLOSONS TRADERS, INC.,
Petitioners, Present:
YNARES-SANTIAGO, J.,
Chairperson,
- versus - AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
VICENTE ANDALES, RESTITUTA SOLITANA,* ELPIDIO SUELTO,
ET AL.,* Promulgated:
Respondents.[1]
March 7, 2008
x---------------------------------------------------------x

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the Decision[2] dated May 21, 2003 and the
Amended Decision[3] dated August 19, 2003 of the Court of Appeals (CA) in CA-G.R. SP No. 70214.

The facts:

Petitioners Mandaue Galleon Trade, Inc. (MGTI) and Gamallosons Traders, Inc.[4] (GTI) are business entities engaged in rattan furniture
manufacturing for export, with principal place of business at Cabangcalan, Mandaue City.

517
Respondent Vicente Andales[5] (Andales) filed a complaint with the Labor Arbiter (LA) against both petitioners for illegal dismissal and non-
payment of 13th month pay and service incentive leave pay. His other co-workers numbering 260 filed a similar complaint against petitioner
MGTI only.

The complainants alleged that MGTI hired them on various dates as weavers, grinders, sanders and finishers; sometime in August 1998,
workers in the Finishing Department were told that they would be transferred to a contractor and they were given Visitor Identification Cards
(IDs), while workers in the Weaving Department were told to look for work elsewhere as the company had no work for them; sometime in
September 1998, workers in the Grinding Department were not allowed to enter the company premises, while workers in the Sanding
Department were told that they could no longer work since there was no work available; workers who were issued IDs were allowed to go inside
the premises; and they were dismissed without notice and just cause.

They further alleged that they are regular employees of MGTI because: (a) they performed their work inside the company premises
in Cabangcalan, Mandaue City; (b) they were issued uniforms by MGTI and were told to strictly follow company rules and regulations; (c) they
were under the supervision of MGTI's foremen, quality control personnel and checkers; (d) MGTI supplied the materials, designs, tools and
equipment in the production of furniture; (e) MGTI conducts orientations on how the work was to be done and the safe and efficient use of tools
and equipment; (f) MGTI issues memoranda regarding absences and waste of materials; and (g) MGTI exercises the power to discipline them.

On the other hand, MGTI denied the existence of employer-employee relationship with complainants, claiming that they are workers of
independent contractors whose services were engaged temporarily and seasonally when the demands for its products are high and could not
be met by its regular workforce; the independent contractors recruited and hired the complainants, prepared the payroll and paid their wages,
supervised and directed their work, and had authority to dismiss them. It averred that due to the economic crisis and internal squabble in the
company, the volume of orders from foreign buyers dived; as a survival measure, management decided to retrench its employees; and the
substantial separation pay paid to retrenched employees caught the jealous eyes of complainants who caused the filing of the complaint for
illegal dismissal.

On August 23, 1999, the LA rendered a Decision[6] holding that 183[7] complainants are regular piece-rate employees of MGTI since they were
made to perform functions which are necessary to MGTI's rattan furniture manufacturing business; the independent contractors were not
properly identified; the absence of proof that the independent contractors have work premises of their own, substantial capital or investment in
the form of tools, equipment and machineries make them only labor contractors; and there was no dismissal but only a claim for separation
pay.The LA ordered petitioners to take back complainants and directed it to pay their 13th month pay in the total sum of P545,386.43.

Both parties appealed. On April 30, 2001, the National Labor Relations
Commission (NLRC) rendered a Decision[8] affirming the LA's finding of employer-employee relationship. It held that labor-only contracting and
not job-contracting was present since the alleged contractors did not have substantial capital in the form of equipment, machineries and work
premises. The NLRC, however, did not agree with the LA's finding that there was no dismissal. It held that complainants were constructively
dismissed when they were unilaterally transferred to a contractor to evade payment of separation pay as a result of the retrenchment. Thus, it
directed MGTI to pay complainants separation pay of one month for every year of service based on the prevailing minimum wage at the time of
their dismissal, in addition to payment of 13th month pay.

Both parties filed separate motions for reconsideration[9] but the NLRC denied them in a Resolution[10] dated February 12, 2002.

On April 19, 2002, petitioners filed a Petition for Certiorari[11] with the CA. On May 21, 2003 the CA rendered a Decision[12] dismissing the
petition and affirming the findings of the NLRC. It held that MGTI is liable to the respondents because the alleged contractors are not
independent contractors but labor-only contractors; that respondents were constructively dismissed when they were unilaterally transferred to
another contractor; and that the allegation of retrenchment was not proven.

On June 12, 2003, petitioners filed a Motion for Reconsideration.[13]

On August 19, 2003, the CA rendered an Amended Decision[14] partially granting the motion, in this wise:

After taking a second look at the petition and in consonance with Article 283 of the Labor Code, We are computing the
separation pay of the 183 private respondents at one-half month salary per year of service up to the promulgation of this
Amended Decision.

WHEREFORE, petitioners' motion for reconsideration is PARTIALLY GRANTED. This Court's decision dated May 21,
2003 is hereby amended.Petitioners are ordered to pay the 183 respondents their separation pay computed at one-half
month salary per year of service up to the promulgation of this Amended Decision.

518
 SO ORDERED.[15]

On September 16, 2003, petitioners filed with this Court a Motion for Extension of Time to file a petition for review, which was granted by the
Court,[16] and petitioners filed herein petition on October 23, 2003.

Meanwhile, on September 24, 2003, respondents filed a Motion for Reconsideration with the CA assailing the reduction of the separation pay in
the Amended Decision.[17] On December 9, 2003, the CA issued a Resolution[18] merely noting the Motion for Reconsideration filed by
respondents on the ground that the case had already been referred to this Court by way of the present petition.

Respondents then filed with this Court a Petition for Certiorari with Motion to Consolidate the Petition with the present petition, assailing
theAugust 19, 2003 Amended Decision and December 9, 2003 CA Resolution. Respondents petition, docketed as G.R. No. 162227, was
dismissed in a Resolution[19] dated April 14, 2004 for failure to attach a clearly legible duplicate original or certified true copy of the Amended
Decision.On August 26, 2004, entry of judgment was made.[20]

In the present petition, petitioners raise the sole issue:

I
WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR IN
CONSIDERING THE RESPONDENTS AS EMPLOYEES OF THE PETITIONERS ABSENT THE REQUISITES/
ELEMENTS IN THE JURISPRUDENCE AS DETERMINATIVE FACTOR IN THE EXISTENCE OF EMPLOYER-
EMPLOYEE RELATIONSHIP.[21]

Petitioners submit that respondents are employees of independent contractors who have their own manpower, tools, equipment and
capital; they did not have a hand in respondents' recruitment and hiring, payment of wages, control and supervision, and dismissal; and
respondents did not have time cards or uniforms, nor were they subjected to petitioner's company policies.

On the other hand, respondents, in their Comment and Memorandum, assail the CA's Amended Decision which reduced the
separation pay from one month to one-half month, claiming there was no justification to support such order. Moreover, they contend that they
were denied their day in court when the CA did not resolve their Motion for Reconsideration of the Amended Decision. They aver that since they
were illegally dismissed, they are entitled to backwages and not only separation pay.

The petition is bereft of merit.

Factual findings of quasi-judicial bodies like the NLRC, when adopted and confirmed by the CA and if supported by substantial
evidence, are accorded respect and even finality by this Court.[22] The existence of an employer-employee relationship is a factual matter that
will not be delved into by this Court, since only questions of law may be raised in petitions for review.[23] The Court has recognized several
exceptions to this rule, such as: (1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference
made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of fact are conflicting; (6) when in making its findings, the CA went beyond the issues of the case,
or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when
the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in
the petitioners main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of
evidence and contradicted by the evidence on record; and (11) when the CA manifestly overlooked certain relevant facts not disputed by the
parties, which, if properly considered, would justify a different conclusion.[24] None of these exceptions, however, has been convincingly shown
by petitioners to apply in the present case.

Article 106 of the Labor Code explains the relations which may arise between an employer, a contractor and the contractors
employees thus:
ART. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for
the performance of the formerswork, the employees of the contractor and of the latters subcontractor, if any, shall be paid in
accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the
employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work
performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.

The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of
workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-
519
 only contracting and job contracting as well as differentiations within these types of contracting and determine who among
the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of
any provision of this Code.

There is labor-only contracting where the person supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and
placed by such persons are performing activities which directly related to the principal business of such employer. In such
cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by him.

The first two paragraphs of Article 106 set the general rule that a principal is permitted by law to engage the services of a contractor for
the performance of a particular job, but the principal, nevertheless, becomes solidarily liable with the contractor for the wages of the contractors
employees. The third paragraph of Article 106, however, empowers the Secretary of Labor to make distinctions between permissible job
contracting and labor-only contracting, which is a prohibited act further defined under the last paragraph. A finding that a contractor is a labor-only
contractor is equivalent to declaring that there is an employer-employee relationship between the principal and the employees of the supposed
contractor, and the labor-only contractor is considered as a mere agent of the principal, the real employer.[25]

Sections 5 and 7 of the Rules Implementing Articles 106 to 109 of the Labor Code, as amended[26] (Implementing Rules), reinforce
the rules in determining the existence of employer-employee relationship between employer, contractor or subcontractor, and the contractors or
subcontractors employee, to wit:

Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited.
For this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits,
supplies or places workers to perform a job, work or service for a principal, and any of the following elements are [is]
present:
i) The contractor or subcontractor does not have substantial capital or investment which
relates to the job, work or service to be performed and the employees recruited, supplied or placed by
such contractor or subcontractor are performing activities which are directly related to the main
business of the principal; or
ii) The contractor does not exercise the right to control over the performance of the work of the contractual
employee.

The forgoing provisions shall be without prejudice to the application of Article 248 (C) of the Labor Code, as
amended.

Substantial capital or investment refers to capital stocks and subscribed capitalization in the case of corporations, tools,
equipment, implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the
performance or completion of the job, work or service contracted out.

The right to control shall refer to the right reserved to the person for whom the services of the contractual workers
are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that
end.

Section 7. Existence of an employer-employee relationship. The contractor or subcontractor shall be

considered the employer of the contractual employee for purposes of enforcing the provisions of the Labor Code and other
social legislation. The principal, however, shall be solidarily liable with the contractor in the event of any violation of any
provision of the Labor Code, including the failure to pay wages.

The principal shall be deemed the employer of the contractual employee in any of the following cases, as
declared by a competent authority:

a. where there is a labor-only contracting; or

b. where the contracting arrangement falls within the prohibitions provided in Section 6 (Prohibitions) hereof.

Thus, based on Article 106 of the Labor Code and Sections 5 and 7 of the Implementing Rules, labor-only contracting exists when
the following criteria are present: (1) where the contractor or subcontractor supplying workers to an employer does not have substantial capital
or investment in the form of tools, equipment, machineries, work premises, among other things; and the workers recruited and placed by the
520
contractor or subcontractor are performing activities which are directly related to the principal business of such employer; or (2) where the
contractor does not exercise the right to control the performance of the work of the contractual employee.

In the present case, petitioners claim that their contractors are independent contractors, and, therefore, this case is one of permissible
job contracting, is without basis.

First, respondents work as weavers, grinders, sanders and finishers is directly related to MGTI's principal business of rattan furniture
manufacturing. Where the employees are tasked to undertake activities usually desirable or necessary in the usual business of the employer,
the contractor is considered as a labor-only contractor and such employees are considered as regular employees of the employer.[27]

Second, MGTI was unable to present any proof that its contractors had substantial capital. There was no evidence pertaining to the
contractors' capitalization; nor to their investment in tools, equipment or implements actually used in the performance or completion of the job,
work, or service that they were contracted to render. The law casts the burden on the contractor to prove that it has substantial capital,
investment, tools, etc. Employees, on the other hand, need not prove that the contractor does not have substantial capital, investment, and tools
to engage in job-contracting.[28]

Thus, the contractors are labor-only contractors since they do not have substantial capital or investment which relates to the service
performed and respondents performed activities which were directly related to MGTI's main business. MGTI, the principal employer,
is solidarily liable with the labor-only contractors, for the rightful claims of the employees. Under this set-up, labor-only contractors are deemed
agents of the principal, MGTI, and the law makes the principal responsible to the employees of the labor-only contractor as if the principal itself
directly hired or employed the employees. In prohibiting labor-only contracting and creating an employer-employee relationship between the
principal and the supposed contractors employees, the law intends to prevent employers from circumventing labor laws intended to protect
employees.

Hence, the Court sees no reason to disturb the findings of fact of the NLRC and the CA.

Respondents' contention that the CA erred in lowering the award of separation pay from one month to one-half month for every year
of service cannot prosper in the present petition. Whether right or wrong, the decision of the CA on that matter had long become final
and executorywith the dismissal of respondents' Petition for Certiorari, docketed as G.R. No. 162227, assailing the reduction of the award of
separation pay.Entry of judgment was made therein on August 26, 2004; hence, the reduction of the separation pay is now immutable, beyond
the jurisdiction of this Court to amend, modify or reverse.[29]

Nothing is more settled in the law than that a decision that has acquired finality becomes immutable and unalterable
and may no longer be modified in any respect even if the modification is meant to correct erroneous conclusions of fact or law
and whether it will be made by the Court that rendered it or by the highest Court of the land.[30] The doctrine is founded on
considerations of public policy and sound practice that, at the risk of occasional errors, judgments must become final at some
definite point in time.[31]

The only recognized exceptions to the general rule are the correction of clerical errors, the so-
called nunc pro tunc entries which cause no prejudice to any party, void judgments, and whenever circumstances transpire
after the finality of the decision rendering its execution unjust and inequitable.[32] None of the exceptions are present in the
instant case.

The CA Amended Decision cannot be considered by the Court as a void judgment, as it was rendered by a tribunal
with jurisdiction over the subject matter of the petition.[33] Neither can respondents complain that they were denied due process of law
since they had the opportunity to be heard when they assailed the reduction of separation pay in their Petition for Certiorari, G.R. No. 162227, but
bungled the same when they failed to comply with the basic procedural requirements in filing the petition. Respondents cannot be allowed to
resurrect a cause lost thru negligence in properly pursuing their case.

WHEREFORE, the present petition is DENIED for lack of merit.

SO ORDERED.

G.R. No. 149793. April 15, 2005

WACK WACK GOLF & COUNTRY CLUB, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, MARTINA G. CAGASAN, CARMENCITA F. DOMINGUEZ, and
BUSINESS STAFFING AND MANAGEMENT, INC., Respondents.

521
 DECISION
CALLEJO, SR., J.:
This is a petition for review of the Resolution1 of the Court of Appeals (CA) in CA-G.R. SP No. 63658, dismissing the petition
for certiorari before it for being insufficient in form and the subsequent resolution denying the motion for reconsideration
thereof.
The undisputed antecedent facts are as follows:
On November 29, 1996, a fire destroyed a large portion of the main clubhouse of the Wack Wack Golf and Country Club
(Wack Wack), including its kitchen. In view of the reconstruction of the whole clubhouse complex, Wack Wack filed a notice
with the Department of Labor and Employment (DOLE) on April 14, 1997 that it was going to suspend the operations of the
Food and Beverage (F & B) Department one (1) month thereafter. Notices to 54 employees (out of a complement of 85
employees in the department) were also sent out, informing them that they need not report for work anymore after April 14,
1997 but that they would still be paid their salaries up to May 14, 1997. They were further told that they would be informed
once full operations in Wack Wack resume.
The Wack Wack Golf Employees Union branded the suspension of operations of the F & B Department as arbitrary,
discriminatory and constitutive of union-busting, so they filed a notice of strike with the DOLEs National Conciliation and
Mediation Board (NCMB). Several meetings between the officers of Wack Wack and the Union, headed by its President,
Crisanto Baluyot, Sr., and assisted by its counsel, Atty. Pedro T. De Quiroz, were held until the parties entered into an
amicable settlement. An Agreement2 was forged whereby a special separation benefit/retirement package for interested Wack
Wack employees, especially those in the F & B Department was offered. The terms and conditions thereof reads as follows:
1. The UNION and the affected employees of F & B who are members of the UNION hereby agree to accept the special
separation benefit package agreed upon between the CLUB management on the one hand, and the UNION officers and the
UNION lawyer on the other, in the amount equivalent to one-and-one-half months salary for every year of service, regardless
of the number of years of service rendered. That, in addition, said employees shall also receive the other benefits due them,
namely, the cash equivalent of unused vacation and sick leave credits, proportionate 13th month pay; and other benefits, if
any, computed without premium;
2. That the affected F & B employees who have already signified intention to be separated from the service under the special
separation benefit package shall receive their separation pay as soon as possible;
3. That the same package shall, likewise, be made available to other employees who are members of the bargaining unit and
who may or may not be affected by future similar suspensions of operations. The UNION re-affirms and recognizes that it is
the sole prerogative of the management of the Club to suspend part or all of its operations as may be necessitated by the
exigencies of the situation and the general welfare of its membership. The closure of the West Course, which is scheduled for
conversion to an All-Weather Championship golf course, is cited as an example. It is, however, agreed that if a sufficient
number of employees, other than F & B employees, would apply for availment of the package within the next two months, the
Club may no longer go through the process of formally notifying the Department of Labor. The processing and handling of
benefits for these other employees shall be done over a transition period within one year;
4. All qualified employees who may have been separated from the service under the above package shall be considered under
a priority basis for employment by concessionaires and/or contractors, and even by the Club upon full resumption of
operations, upon the recommendation of the UNION. The Club may even persuade an employee-applicant for availment under
the package to remain on his/her job, or be assigned to another position.3
Respondent Carmencita F. Dominguez, who was then working in the Administrative Department of Wack Wack, was the first
to avail of the special separation package.4 Computed at 1 months for every year of service pursuant to the Agreement, her
separation pay amounted to P91,116.84, while economic benefits amounted to P6,327.53.5 On September 18, 1997,
Dominguez signed a Release and Quitclaim6 in favor of Wack Wack.
Respondent Martina B. Cagasan was Wack Wacks Personnel Officer who, likewise, volunteered to avail of the separation
package.7 On September 30, 1997, she received from Wack Wack the amount of P469,495.66 as separation pay and other
economic benefits amounting to P17,010.50.8 A Release and Quitclaim9 was signed on September 30, 1997.
The last one to avail of the separation package was Crisanto Baluyot, Sr. who, in a Letter 10 dated January 16, 1998 addressed
to Mr. Bienvenido Juan, Administrative Manager of Wack Wack, signified his willingness to avail of the said early retirement
package. The total amount of P688,290.3011 was received and the Release and Quitclaim12 signed on May 14, 1998.
On October 15, 1997, Wack Wack entered into a Management Contract 13 with Business Staffing and Management, Inc.
(BSMI), a corporation engaged in the business as Management Service Consultant undertaking and managing for a fee
projects which are specialized and technical in character like marketing, promotions, merchandising, financial management,
operation management and the like.14 BSMI was to provide management services for Wack Wack in the following operational
areas:
1. Golf operations management;
2. Management and maintenance of building facilities;
3 .Management of food and beverage operation;
4. Management of materials and procurement functions;
522
5. To provide and undertake administrative and support services for the [said] projects. 15
Pursuant to the Agreement, the retired employees of Wack Wack by reason of their experience were given priority by BSMI in
hiring. On October 21, 1997, respondents Cagasan and Dominguez filed their respective applications16 for employment with
BSMI. They were eventually hired by BSMI to their former positions in Wack Wack as project employees and were issued
probationary contracts.17
Aside from BSMI, Wack Wack also engaged several contractors which were assigned in various operating functions of the
club, to wit:
1. Skills and Talent Employment Promotion (STEP) whose 90 workers are designated as locker attendants, golf bag
attendants, nurses, messengers, technical support engineer, golf director, agriculturist, utilities and gardeners;
2. Marvel Manpower Agency - whose 19 employees are designated as sweepers, locker attendants, drive range attendant,
telephone operator, workers and secretaries;
3 City Service Corporation contractor for janitorial services for the whole club;
4. Microstar Business and Management Services, Inc. whose 15 employees are designated in the Finance and Accounting
departments.18
Due to these various management service contracts, BSMI undertook an organizational analysis and manpower evaluation to
determine its efficacy, and to streamline its operations. In the course of its assessment, BSMI saw that the positions of
Cagasan and Dominguez were redundant. In the case of respondent Cagasan, her tasks as personnel officer were likewise
being taken cared of by the different management service contractors; on the other hand, Dominguezs work as telephone
operator was taken over by the personnel of the accounting department. Thus, in separate Letters 19 dated February 27, 1998,
the services of Dominguez and Cagasan were terminated. With respect to Baluyot, he applied for the position of Chief Porter
on May 12, 1998. The position, however, was among those recommended to be abolished by the BSMI, so he was offered the
position of Caddie Master Aide with a starting salary of P5,500.00 a month. Baluyot declined the offer. Pending Wack Wacks
approval of the proposed abolition of the position of Chief Porter, Baluyot was temporarily accepted to the position with a
monthly salary of P12,000.00. In July 1998, Baluyot decided not to accept the position of Caddie Master Aide; thus, BSMI
continued with its plan to abolish the said position of Chief Porter and Baluyot was dismissed from the service.
Thereafter, the three (3) employees filed their respective complaints with the National Labor Relations Commission (NLRC) for
illegal dismissal and damages against Wack Wack and BSMI.
The complainants averred that they were dismissed without cause. They accepted the separation package upon the
assurance that they would be given their former work and assignments once the Food and Beverage Department of Wack
Wack resumes its operations. On the other hand, the respondents therein alleged that the dismissal of the complainants were
made pursuant to a study and evaluation of the different jobs and positions and found them to be redundant.
In a Decision20 dated January 25, 2000, the Labor Arbiter found that the dismissal of Dominguez and Cagasan was for a valid
and authorized cause, and dismissed their complaints.
The position of personnel manager occupied by Martina Cagasan was redundated as it is allegedly not necessary, because
her functions will be taken over [by] the field superintendent and the companys personnel and operations manager. The work
of Carmencita Dominguez on the other hand as telephone operator will be taken over by the accounting department
personnel. Such move really are intended to streamline operations. While admittedly, they are still necessary in the operations
of Wack Wack, their jobs can be assigned to some other personnel, who will be performing dual functions and does save
Wack Wack money. This is feasible on account of the fact that they are functions pertaining to administrative work. 21
As to Baluyot, however, the Labor Arbiter found that while the position of chief porter had been abolished, the caddie master
aide had been created. Their functions were one and the same. The porters, upon instructions from the chief porter, are the
ones who bring down the golf bags of the players from the vehicle. The caddie master receives them and counts the number
of clubs inside the golf set. After the game, the same procedure is repeated before the golf sets are loaded once more into the
vehicle.22 The Labor Arbiter found that the dismissal of Baluyot as Chief Porter was unjustified and can not be considered
redundant in the case at bar. It was a means resorted to in order to unduly sever Baluyots relationship with BSMI without
justifiable cause. The Labor Arbiter therefore found Baluyots dismissal to be illegal. The dispositive portion of the decision
reads as follows:
CONFORMABLY WITH THE FOREGOING, judgment is hereby rendered dismissing the complaints of Carmencita F.
Dominguez and Martina Cagasan for lack of merit. Finding Crisanto Baluyots dismissal to be illegal. Consequently, he should
immediately be reinstated to his former position as Chief Porter or Caddie Master, and paid his backwages which, as of
December 31, 1999, has accumulated in the sum of P180,000.00 by BSMI.
All other claims are dismissed for lack of merit.23
Since Baluyot no longer appealed the decision, complainants Dominguez and Cagasan filed a Partial Appeal on the ground
of prima facie abuse of discretion on the part of the Labor Arbiter and serious errors in his findings of facts and law. Their
claims were anchored on the Agreement between the Union and management, that they were promised to be rehired upon the
full resumption of operations of Wack Wack. They asserted that Wack Wack and BSMI should not avoid responsibility to their
employment, by conniving with each other to render useless and meaningless the Agreement.

523
BSMI also appealed to the NLRC, alleging that the Labor Arbiter committed grave abuse of discretion in finding Baluyots
dismissal to be illegal, when in fact his position as Chief Porter was abolished pursuant to a bona fidereorganization of Wack
Wack. It was not motivated by factors other than the promotion of the interest and welfare of the company.
On September 27, 2000, the NLRC rendered its Decision24 ordering Wack Wack to reinstate Carmencita F. Dominguez and
Martina Cagasan to their positions in respondent Wack Wack Golf & Country Club with full backwages and other benefits from
the date of their dismissal until actually reinstated. It anchored its ruling on the Agreement dated June 16, 1997 reached
between the Union and Wack Wack, particularly Section 4 25 thereof. The NLRC directed Wack Wack to reinstate the
respondents and pay their backwages since "Business Staffing and Management, Inc. (BSMI) is a contractor who [merely]
supplies workers to respondent Wack Wack. It has nothing to do with the grievance of the complainants with their employer,
respondent Wack Wack."
Wack Wack and BSMI filed a motion for reconsideration which was denied in the Resolution 26 dated December 15, 2000.
Wack Wack, now the petitioner, consequently filed a petition for certiorari with the Court of Appeals, docketed as CA-G.R. SP
No. 63658 alleging the following:
A. RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION AND DENIAL OF DUE PROCESS IN HOLDING THAT RESPONDENTS CAGASAN AND DOMINGUEZ
HAVE REGAINED THEIR JOBS OR EMPLOYMENT PURSUANT TO THE AGREEMENT BETWEEN PETITIONER AND
WACK WACK GOLF EMPLOYEES UNION.
B. RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION AND DENIAL OF DUE PROCESS IN RULING THAT RESPONDENT BSMI IS NOT AN INDEPENDENT
CONTRACTOR BUT A MERE SUPPLIER OF WORKERS TO THE PETITIONER.
C. RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION AND DENIAL OF DUE PROCESS IN HOLDING PETITIONER LIABLE FOR THE REINSTATEMENT OF
RESPONDENTS CAGASAN AND DOMINGUEZ AND FOR THE PAYMENT OF THEIR SUPPOSED BACKWAGES DESPITE
THE ABSENCE OF EMPLOYER-EMPLOYEE RELATION BETWEEN THEM.27
Likewise, BSMI also assailed the resolutions of the NLRC and filed its own petition for certiorari with the CA, docketed as CA-
G.R. SP No. 63553.28 A perusal of the petition which is attached to the records reveal that BSMI ascribes grave abuse of
discretion on the part of the NLRC in ruling that: (a) the private respondents have regained their employment pursuant to the
Agreement between Wack Wack and the Wack Wack Golf Employees Union; (b) the dismissal of private respondents was
made pursuant to the petitioners exercise of its management prerogatives; and (c) the petitioner (BSMI) is liable for the
reinstatement of private respondents and the payment of their backwages.29
On April 3, 2001, the CA (Twelfth Division) dismissed the petition on the ground that the petitioner therein failed to attach an
Affidavit of Service as required in Section 11, Rule 13 of the 1997 Rules of Civil Procedure. Moreover, the verification and
certification against forum shopping was insufficient for having been executed by the general manager who claimed to be the
duly-authorized representative of the petitioner, but did not show any proof of authority, i.e., a board resolution, to the effect.
A motion for reconsideration was, consequently, filed appending thereto the requisite documents of proof of authority. It
asserted that in the interest of substantial justice, the CA should decide the case on its merits.
BSMI filed a Comment30 to the Motion for Reconsideration of the petitioner, also urging the CA to set aside technicalities and
to consider the legal issues involved: (a) whether or not there is a guaranty of employment in favor of the complainants under
the Agreement between the petitioner and the Union; (b) whether or not the termination of the employment of the
complainants, based on redundancy, is legal and valid; and (c) who are the parties liable for the reinstatement of the
complainants and the payment of backwages. It further added that it shares the view of the petitioner, that the assailed
resolutions of the NLRC are tainted with legal infirmities. For this reason, it was also constrained to file its own petition
for certiorari with the CA, docketed as CA-G.R. SP No. 63553 pending with the Special Fourth Division, just to stress that there
is no guaranty of perpetual employment in favor of the complainants.
On August 31, 2001, the CA denied petitioners motion for reconsideration.
The petitioner is now before the Court, assailing the twin resolutions of the CA. It points out that BSMI has filed its petition for
certiorari before the CA one day late and yet, the Special Fourth Division admitted the petition in the interest of substantial
justice, and directed the respondents to file a comment thereon; 31 whereas, in the instant case, the mere lack of proof of
authority of Wack Wacks General Manager to sign the certificate of non-forum shopping was considered fatal by the CAs
Twelfth Division. It further asserts that its petition for certiorari is meritorious, considering that the NLRC committed grave
abuse of discretion in ordering Wack Wack to reinstate the respondents Cagasan and Dominguez, and to pay their backwages
when indubitable evidence shows that the said respondents were no longer employees of Wack Wack when they filed their
complaints with the Labor Arbiter.
There is merit in the petition.
In Novelty Philippines, Inc. v. Court of Appeals,32 the Court recognized the authority of the general manager to sue on behalf of
the corporation and to sign the requisite verification and certification of non-forum shopping. The general manager is also one
person who is in the best position to know the state of affairs of the corporation. It was also error for the CA not to admit the
requisite proof of authority when in the Novelty case, the Court ruled that the subsequent submission of the requisite
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documents constituted substantial compliance with procedural rules. There is ample jurisprudence holding that the subsequent
and substantial compliance of an appellant may call for the relaxation of the rules of procedure in the interest of justice. 33 While
it is true that rules of procedure are intended to promote rather than frustrate the ends of justice, and while the swift unclogging
of court dockets is a laudable objective, it nevertheless must not be met at the expense of substantial justice. 34 It was,
therefore, reversible error for the CA to have dismissed the petition for certiorari before it. The ordinary recourse for us to take
is to remand the case to the CA for proper disposition on the merits; however, considering that the records are now before us,
we deem it necessary to resolve the instant case in order to ensure harmony in the rulings and expediency.
Indeed, the merits of the case constitute special or compelling reasons for us to overlook the technical rules in this case. With
the dismissal of its petition for certiorari before the CA, the petitioner by virtue of the NLRC decision is compelled to reinstate
respondents Cagasan and Dominguez and pay their full backwages from the time of their dismissal until actual reinstatement
when the attendant circumstances, however, show that the respondents had no cause of action against the petitioner for illegal
dismissal and damages.
It must be recalled that said respondents availed of the special separation package offered by the petitioner. This special
separation package was thought of and agreed by the two parties (Wack Wack and the Union) after a series of discussions
and negotiations to avert any labor unrest due to the closure of Wack Wack. 35 Priority was given to the employees of the F & B
Department, but was, likewise, offered to the other employees who may wish to avail of the separation package due to the
reconstruction of Wack Wack. Respondents do not belong to the F & B Department and yet, on their own volition opted to avail
of the special separation package. The applications which were similarly worded read as follows:
TO : WACK WACK GOLF & COUNTRY CLUB
BOARD OF DIRECTORS AND MANAGEMENT
Based on the information that the Club and the employees Union have reached an agreement on a special separation benefit
package equivalent to one-and-one-half months salary for every year of service, regardless of the number of years of service,
for employees who have been affected and may be affected by ongoing as well as forthcoming Club renovation, construction
and related activities and reportedly even for those who may not be affected but wish to avail of an early retirement under the
above package arrangement, I hereby register my desire to be separated from the Club and receive the benefits under the
above stated package.36
Thereafter, the respondents signed their respective release and quitclaims after receiving their money benefits.
It cannot be said that the respondents in the case at bar did not fully comprehend and realize the consequences of their acts.
Herein respondents are not unlettered persons who need special protection. They held responsible positions in the petitioner-
employer, so they presumably understood the contents of the documents they signed. There is no showing that the execution
thereof was tainted with deceit or coercion. Further, the respondents were paid hefty amounts of separation pay indicating that
their separation from the company was for a valuable consideration. Where the person making the waiver has done so
voluntarily, with a full understanding thereof, and the consideration for the quitclaim is credible and reasonable, the transaction
must be recognized as being a valid and binding undertaking.37 As in contracts, these quitclaims amount to a valid and binding
compromise agreement between the parties which deserve to be respected.38
We reiterate what was stated in the case of Periquet v. NLRC 39 that:
Not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily entered into and represents
a reasonable settlement, it is binding on the parties and may not later be disowned simply because of a change of mind. It is
only where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or the terms of settlement
are unconscionable on its face, that the law will step in to annul the questionable transaction. But where it is shown that the
person making the waiver did so voluntarily, with full understanding of what he was doing, and the consideration for the
quitclaim is credible and reasonable, the transaction must be recognized as a valid and binding undertaking. 40
When the respondents voluntarily signed their quitclaims and accepted the separation package offered by the petitioner, they,
thenceforth, already ceased to be employees of the petitioner. Nowhere does it appear in the Agreement that the petitioner
assured the respondents of continuous employment in Wack Wack. Qualified employees were given priority in being hired by
its concessionaires and/or contractors such as BSMI when it entered into a management contract with the petitioner.
This brings us to the threshold issue on whether or not BSMI is an independent contractor or a labor-only contractor. The
NLRC posits that BSMI is merely a supplier of workers or a labor-only contractor; hence, the petitioner remains to be the
principal employer of the respondents and liable for their reinstatement and payment of backwages.
The ruling of the NLRC is wrong. An independent contractor is one who undertakes "job contracting," i.e., a person who: (a)
carries on an independent business and undertakes the contract work on his own account under his own responsibility
according to his own manner and method, free from the control and direction of his employer or principal in all matters
connected with the performance of the work except as to the results thereof; and (b) has substantial capital or investment in
the form of tools, equipments, machineries, work premises and other materials which are necessary in the conduct of the
business. Jurisprudential holdings are to the effect that in determining the existence of an independent contractor relationship,
several factors may be considered, such as, but not necessarily confined to, whether or not the contractor is carrying on an
independent business; the nature and extent of the work; the skill required; the term and duration of the relationship; the right
to assign the performance of specified pieces of work; the control and supervision of the work to another; the employers
525
power with respect to the hiring, firing, and payment of the contractors workers; the control of the premises; the duty to supply
premises, tools, appliances, materials and labor; and the mode, manner and terms of payment. 41
There is indubitable evidence showing that BSMI is an independent contractor, engaged in the management of projects,
business operations, functions, jobs and other kinds of business ventures, and has sufficient capital and resources to
undertake its principal business. It had provided management services to various industrial and commercial business
establishments. Its Articles of Incorporation proves its sufficient capitalization. In December 1993, Labor Secretary Bienvenido
Laguesma, in the case of In re Petition for Certification Election Among the Regular Rank-and-File Employees Workers of
Byron-Jackson (BJ) Services International Incorporated, Federation of Free Workers (FFW)-Byron Jackson Services
Employees Chapter,42 recognized BSMI as an independent contractor. As a legitimate job contractor, there can be no doubt as
to the existence of an employer-employee relationship between the contractor and the workers. 43
BSMI admitted that it employed the respondents, giving the said retired employees some degree of priority merely because of
their work experience with the petitioner, and in order to have a smooth transition of operations. 44 In accordance with its own
recruitment policies, the respondents were made to sign applications for employment, accepting the condition that they were
hired by BSMI as probationary employees only. Not being contrary to law, morals, good custom, public policy and public order,
these employment contracts, which the parties are bound are considered valid. Unfortunately, after a study and evaluation of
its personnel organization, BSMI was impelled to terminate the services of the respondents on the ground of redundancy. This
right to hire and fire is another element of the employer-employee relationship45 which actually existed between the
respondents and BSMI, and not with Wack Wack.
There being no employer-employee relationship between the petitioner and respondents Cagasan and Dominguez, the latter
have no cause of action for illegal dismissal and damages against the petitioner. Consequently, the petitioner cannot be validly
ordered to reinstate the respondents and pay them their claims for backwages.
WHEREFORE, the petition is GRANTED. The Resolutions of the Court of Appeals and the NLRC are SET ASIDE and
REVERSED. The complaints of respondents Cagasan and Dominguez are DISMISSED. No costs.
SO ORDERED.

G.R. No. 145271 July 14, 2005

MANILA ELECTRIC COMPANY, Petitioner,
vs.
ROGELIO BENAMIRA, ERNIE DE SAGUN1, DIOSDADO YOGARE, FRANCISCO MORO2, OSCAR LAGONOY3, Rolando
Beni, Alex Beni, Raul4 Guia, Armed Security & Detective Agency, Inc., (ASDAI) and Advance FORCES Security &
INVESTIGATION Services, Inc., (AFSISI), Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the Decision,5 dated September
27, 2000, of the Court of Appeals (CA) in CA-G.R. SP No. 50520 which declared petitioner Manila Electric Company
(MERALCO) as the direct employer of individual respondents Rogelio Benamira, Ernie De Sagun, Diosdado Yogare,
Francisco Moro, Oscar Lagonoy, Rolando Beni, Alex Beni and Raul De Guia (individual respondents for brevity).
The factual background of the case is as follows:
The individual respondents are licensed security guards formerly employed by Peoples Security, Inc. (PSI) and deployed as
such at MERALCOs head office in Ortigas Avenue, Pasig, Metro Manila.
On November 30, 1990, the security service agreement between PSI and MERALCO was terminated.
Immediately thereafter, fifty-six of PSIs security guards, including herein eight individual respondents, filed a complaint for
unpaid monetary benefits against PSI and MERALCO, docketed as NLRC-NCR Case No. 05-02746-90.
Meanwhile, the security service agreement between respondent Armed Security & Detective Agency, Inc., (ASDAI) and
MERALCO took effect on December 1, 1990. In the agreement, ASDAI was designated as the AGENCY while MERALCO was
designated as the COMPANY. The pertinent terms and conditions of the agreement are as follows:
1. The AGENCY shall initially provide the COMPANY with TWO HUNDRED TWENTY (220) licensed, uniformed, bonded and
armed security guards to be assigned at the COMPANYs "MERALCO CENTER," complete with nightsticks, flashlights,
raincoats, and other paraphernalias to work on eight (8) hours duty. The COMPANY shall determine the number of security
guards in accordance with its needs and the areas of responsibility assigned to each, and shall have the option to increase or
decrease the number of guards at any time provided the AGENCY is notified within twenty four (24) hours of the contemplated
reduction or increase of the guards in which case the cost or consideration shall be adjusted accordingly.
2. The COMPANY shall furnish the AGENCY copies of written specific instruction to be followed or implemented by the latters
personnel in the discharge of their duties and responsibilities and the AGENCY shall be responsible for the faithful compliance
therewith by its personnel together with such general and specific orders which shall be issued from time to time.
3. For and in consideration of the services to be rendered by the AGENCY to the COMPANY, the COMPANY during the term
of this contract shall pay the AGENCY the amount of THREE THOUSAND EIGHT HUNDRED PESOS (P3,800.00) a month
per guard, FOUR THOUSAND PESOS (P4,000.00) for the Shift Leader and FOUR THOUSAND TWO HUNDRED PESOS
526
(P4,200.00) for the Detachment Commander for eight (8) hours work/day, Saturdays, Sundays and Holidays included, payable
semi-monthly.
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5. The AGENCY shall assume the responsibility for the proper and efficient performance of duties by the security guards
employed by it and it shall be solely responsible for any act of said security guards during their watch hours, the COMPANY
being specifically released from any and all liability to third parties arising from the acts or omission of the security guards of
the AGENCY.
6. The AGENCY also agrees to hold the COMPANY entirely free from any liability, cause or causes of action or claims which
may be filed by said security guards by reason of their employment with the AGENCY pursuant to this Agreement or under the
provisions of the Labor Code, the Social Security Act, and other laws, decrees or social legislations now enacted or which
hereafter may be enacted.
7. Discipline and Administration of the security guards shall conform with the rules and regulations of the AGENCY, and the
COMPANY reserves the right to require without explanation the replacement of any guard whose behavior, conduct or
appearance is not satisfactory to the COMPANY and that the AGENCY cannot pull-out any security guard from the
COMPANY without the consent of the latter.
8. The AGENCY shall conduct inspections through its duly authorized inspector at least two (2) times a week of guards
assigned to all COMPANY installations secured by the AGENCY located in the Metropolitan Manila area and at least once a
week of the COMPANYs installations located outside of the Metropolitan Manila area and to further submit its inspection
reports to the COMPANY. Likewise, the COMPANY shall have the right at all times to inspect the guards of the AGENCY
assigned to the COMPANY.
9. The said security guards shall be hired by the AGENCY and this contract shall not be deemed in any way to constitute a
contract of employment between the COMPANY and any of the security guards hired by the AGENCY but merely as a
contract specifying the conditions and manner under which the AGENCY shall render services to the COMPANY.
10. Nothing herein contained shall be understood to make the security guards under this Agreement, employees of the
COMPANY, it being clearly understood that such security guards shall be considered as they are, employees of the AGENCY
alone, so that the AGENCY shall be responsible for compliance with all pertinent labor laws and regulations included but not
limited to the Labor Code, Social Security Act, and all other applicable laws and regulations including that providing for a
withholding tax on income.
xxx
13. This contract shall take effect on the 1st day of December, 1990 and shall continue from year to year unless sooner
terminated by the COMPANY for cause or otherwise terminated by either party without cause upon thirty (30) days written
notice by one party to the other.6
Subsequently, the individual respondents were absorbed by ASDAI and retained at MERALCOs head office.
On June 29, 1992, Labor Arbiter Manuel P. Asuncion rendered a decision in NLRC-NCR Case No. 05-02746-90 in favor of the
former PSI security guards, including the individual respondents.
Less than a month later, or on July 21, 1992, the individual respondents filed another complaint for unpaid monetary benefits,
this time against ASDAI and MERALCO, docketed as NLRC-NCR Case No. 00-07-03953-92.
On July 25, 1992, the security service agreement between respondent Advance Forces Security & Investigation Services, Inc.
(AFSISI) and MERALCO took effect, terminating the previous security service agreement with ASDAI. 7 Except as to the
number of security guards,8 the amount to be paid the agency,9 and the effectivity of the agreement,10 the terms and
conditions were substantially identical with the security service agreement with ASDAI.
On July 29, 1992, the individual respondents amended their complaint to implead AFSISI as party respondent. On August 11,
1992 they again amended their complaint to allege that AFSISI terminated their services on August 6, 1992 without notice and
just cause and therefore guilty of illegal dismissal.
The individual respondents alleged that: MERALCO and ASDAI never paid their overtime pay, service incentive leave pay,
premium pay for Sundays and Holidays, P50.00 monthly uniform allowance and underpaid their 13th month pay; on July 24,
1992, when the security service agreement of ASDAI was terminated and AFSISI took over the security functions of the former
on July 25, 1992, respondent security guard Benamira was no longer given any work assignment when AFSISI learned that
the former has a pending case against PSI, in effect, dismissing him from the service without just cause; and, the rest of the
individual respondents were absorbed by AFSISI but were not given any assignments, thereby dismissing them from the
service without just cause.
ASDAI denied in general terms any liability for the claims of the individual respondents, claiming that there is nothing due them
in connection with their services.
On the other hand, MERALCO denied liability on the ground of lack of employer-employee relationship with individual
respondents. It averred that the individual respondents are the employees of the security agencies it contracted for security
services; and that it has no existing liability for the individual respondents claims since said security agencies have been fully
paid for their services per their respective security service agreement.

527
For its part, AFSISI asserted that: it is not liable for illegal dismissal since it did not absorb or hire the individual respondents,
the latter were merely hold-over guards from ASDAI; it is not obliged to employ or absorb the security guards of the agency it
replaced since there is no provision in its security service agreement with MERALCO or in law requiring it to absorb and hire
the guards of ASDAI as it has its own guards duly trained to service its various clients.
On January 3, 1994, after the submission of their respective evidence and position papers, Labor Arbiter Pablo C. Espiritu, Jr.
rendered a Decision holding ASDAI and MERALCO jointly and solidarily liable to the monetary claims of individual
respondents and dismissing the complaint against AFSISI. The dispositive portion of the decision reads as follows:
WHEREFORE, conformably with the above premises, judgment is hereby rendered:
1. Declaring ASDAI as the employer of the complainants and as such complainants should be reinstated as regular security
guards of ASDAI without loss of seniority rights, privileges and benefits and for ASDAI to immediately post the complainants
as security guards with their clients. The complaint against AFSISI is Dismissed for lack of merit.
2. Ordering both respondents, ASDAI and MERALCO to jointly and solidarily pay complainants monetary claims
(underpayment of actual regular hours and overtime hours rendered, and premium pay for holiday and rest day) in the
following amounts:
NAME OVERTIME DIFFERENTIALS AND PREMIUM PAY FOR HOLIDAY & REST DAY
1. Rogelio Benamira P14,615.75
2. Ernie De Sagun 21,164.31
3. Diosdado Yogare 7,108.77
4. Francisco Maro 26,567.11
5. Oscar Lagonay 18,863.36
6. Rolando Beni 21,834.12
7. Alex Beni 21,648.80
8. Ruel De Guia 14,200.33
3. Ordering Respondents ASDAI and MERALCO to jointly and solidarily pay complainants 10% attorneys fees in the amount
of P14,600.25 based on the total monetary award due to the complainants in the amount of P146,002.55.
All other claims of the complainants are hereby DISMISSED for lack of merit.
The counter-claim of respondent AFSISI for damages is hereby dismissed for want of substantial evidence to justify the grant
of damages.
SO ORDERED.11
All the parties, except AFSISI, appealed to the National Labor Relations Commission (NLRC).
Individual respondents partial appeal assailed solely the Labor Arbiters declaration that ASDAI is their employer. They
insisted that AFSISI is the party liable for their illegal dismissal and should be the party directed to reinstate them.
For its part, MERALCO attributed grave abuse of discretion on the part of the Labor Arbiter in failing to consider the absence
of employer-employee relationship between MERALCO and individual respondents.
On the other hand, ASDAI took exception from the Labor Arbiters finding that it is the employer of the individual respondents
and therefore liable for the latters unpaid monetary benefits.
On April 10, 1995, the NLRC affirmed in toto the decision of the Labor Arbiter.12 On April 19, 1995, the individual respondents
filed a motion for partial reconsideration but it was denied by the NLRC in a Resolution dated May 23, 1995. 13
On August 11, 1995, the individual respondents filed a petition for certiorari before us, docketed as G.R. No. 121232.14 They
insisted that they were absorbed by AFSISI and the latter effected their termination without notice and just cause.
After the submission of the responsive pleadings and memoranda, we referred the petition, in accordance with St. Martin
Funeral Homes vs. NLRC,15 to the CA which, on September 27, 2000, modified the decision of the NLRC by declaring
MERALCO as the direct employer of the individual respondents.
The CA held that: MERALCO changed the security agency manning its premises three times while engaging the services of
the same people, the individual respondents; MERALCO employed a scheme of hiring guards through an agency and
periodically entering into service contract with one agency after another in order to evade the security of tenure of individual
respondents; individual respondents are regular employees of MERALCO since their services as security guards are usually
necessary or desirable in the usual business or trade of MERALCO and they have been in the service of MERALCO for no
less than six years; an employer-employee relationship exists between MERALCO and the individual respondents because:
(a) MERALCO had the final say in the selection and hiring of the guards, as when its advice was proved to have carried weight
in AFSISIs decision not to absorb the individual respondents into its workforce; (b) MERALCO paid the wages of individual
respondents through ASDAI and AFSISI; (c) MERALCOs discretion on matters of dismissal of guards was given great weight
and even finality since the record shows that the individual respondents were replaced upon the advice of MERALCO; and, (d)
MERALCO has the right, at any time, to inspect the guards, to require without explanation the replacement of any guard
whose behavior, conduct or appearance is not satisfactory and ASDAI and AFSISI cannot pull out any security guard from
MERALCO without the latters consent; and, a labor-only contract existed between ASDAI and AFSISI and MERALCO, such

528
that MERALCO is guilty of illegal dismissal without just cause and liable for reinstatement of individual respondents to its
workforce.
The dispositive portion of the CAs Decision reads as follows:
WHEREFORE, in view of the foregoing premises, the Resolution subject of this petition is hereby AFFIRMED with
MODIFICATION in the sense that MERALCO is declared the employer of the petitioners. Accordingly, private respondent
MERALCO is hereby ordered as follows:
1. To reinstate petitioners into MERALCOs work force as regular security guards without loss of seniority rights and other
privileges; and
2. To pay the petitioners full backwages, inclusive of allowances, and other benefits or their monetary equivalent computed
from the time their compensation was withheld from them up to the time of their actual reinstatement, for which the Labor
Arbiter Pablo C. Espiritu, Jr. is hereby directed to undertake the necessary computation and enforcement thereof.
With respect to the rest of the dispositive portion of the assailed Resolution which affirmed the decision of the Labor Arbiter
Pablo C. Espiritu, Jr., particularly the joint and solidary liabilities of both ASDAI and MERALCO to the petitioners, the same are
hereby AFFIRMED.
SO ORDERED.16
Hence, the present petition for review on certiorari, filed by MERALCO, anchored on the following grounds:
A. THE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE ERROR AND GRAVE ABUSE OF DISCRETION IN
HOLDING THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTS BETWEEN PETITIONER MERALCO AND
INDIVIDUAL RESPONDENTS.
B. THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN HOLDING THAT INDIVIDUAL RESPONDENTS
ARE REGULAR EMPLOYEES OF PETITIONER MERALCO.
C. THE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE ERROR IN ALLOWING INDIVIDUAL RESPONDENTS
TO RAISE FOR THE FIRST TIME ON APPEAL, THE ISSUE THAT PETITIONER WAS THEIR DIRECT EMPLOYER.
D. THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN FINDING THAT PETITIONER MERALCO IS GUILTY OF
ILLEGAL DISMISSAL.
E. THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT INDIVIDUAL RESPONDENTS ARE ENTITLED TO
REINSTATEMENT INTO PETITIONERS WORKFORCE.
F. THE COURT OF APPEALS SERIOUSLY ERRED IN NOT FINDING THAT PETITIONER MERALCO IS ENTITLED TO
REIMBURSEMENT FROM RESPONDENT ASDAI FOR THE MONETARY CLAIMS PETITIONER PAID TO INDIVIDUAL
RESPONDENTS PURSUANT TO THE SECURITY SERVICE AGREEMENT.17
Anent the first ground, MERALCO submits that the elements of "four-fold" test to determine the existence of an employer-
employee relation, namely: (1) the power to hire, (2) the payment of wages, (3) the power to dismiss, and (4) the power to
control, are not present in the instant case.
Regarding the power to hire, MERALCO contends that the records are bereft of any evidence that shows that it participated in
or influenced the decision of PSI and ASDAI to hire or absorb the individual respondents.
As to the payment of wages, MERALCO maintains that the individual respondents received their wages from their agency.
With regard to the power to dismiss, MERALCO argues that the security service agreement clearly provided that the discipline
and administration of the security guards shall conform to the rules and regulations of the agency.
Concerning the power of control, MERALCO asserts that there is no evidence that individual respondents were subjected to its
control as to the manner or method by which they conduct or perform their work of guarding of MERALCOs premises.
Furthermore, MERALCO insists that ASDAI and AFSISI are not labor-only contractors since they have their own equipment,
machineries and work premises which are necessary in the conduct of their business and the duties performed by the security
guards are not necessary in the conduct of MERALCOs principal business.
With respect to the second ground, MERALCO argues that the individual respondents cannot be considered as regular
employees as the duties performed by them as security guards are not necessary in the conduct of MERALCOs principal
business which is the distribution of electricity.
As regards the third ground, MERALCO argues that it was denied due process when the individual respondents raised for the
first time in the CA the issue that MERALCO is their direct employer since the individual respondents have always considered
themselves as employees of AFSISI and nowhere in the Labor Arbiter or the NLRC did they raise the argument that
MERALCO is their direct employer.
Regarding the fourth ground, MERALCO asserts that it is not guilty of illegal dismissal because it had no direct hand or
participation in the termination of the employment of individual respondents, who even insisted in their petition for certiorari in
the CA that it was AFSISI which terminated their employment.
As to the fifth ground, MERALCO maintains that the individual respondents are not entitled to reinstatement into its workforce
because no employer-employee relationship exists between it and the individual respondents.
With regard to the sixth ground, MERALCO asserts that since it is not the direct employer of the individual respondents, it has
a right of reimbursement from ASDAI for the full amount it may pay to the individual respondents under Articles 106 and 107 of
the Labor Code.
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In contrast, the individual respondents maintain that the CA aptly found that all the elements in employer-employee
relationship exist between them and MERALCO and there is no cogent reason to deviate from such factual findings.
For its part, ASDAI contends that the instant petition raises factual matters beyond the jurisdiction of this Court to resolve since
only questions of law may be raised in a petition for review on certiorari. It submits that while the rule admits of exceptions,
MERALCO failed to establish that the present case falls under any of the exceptions.
On the other hand, AFSISI avers that there is no employer-employee relationship between MERALCO and the security guards
of any of the security agencies under contract with MERALCO.
It is a settled rule that in the exercise of the Supreme Courts power of review, the Court is not a trier of facts and does not
normally undertake the re-examination of the evidence presented by the contending parties during the trial of the case
considering that the findings of facts of the CA are conclusive and binding on the Court. However, jurisprudence has
recognized several exceptions in which factual issues may be resolved by this Court, to wit:
(1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly
mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the Court of Appeals
went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7)
when the findings are contrary to the trial court; (8) when the findings are conclusions without citation of specific evidence on
which they are based; (9) when the facts set forth in the petition as well as in the petitioners main and reply briefs are not
disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and
contradicted by the evidence on record; and (11) when the Court of Appeals manifestly overlooked certain relevant facts not
disputed by the parties, which, if properly considered, would justify a different conclusion. 18
In the present case, the existence of an employer-employee relationship is a question of fact which is well within the province
of the CA. Nonetheless, given the reality that the CAs findings are at odds to those of the NLRC, the Court is constrained to
look deeper into the attendant circumstances obtaining in the present case, as appearing on record.
At the outset, we note that the individual respondents never alleged in their complaint in the Labor Arbiter, in their appeal in the
NLRC and even in their petition for certiorari in the CA that MERALCO was their employer. They have always advanced the
theory that AFSISI is their employer. A perusal of the records shows it was only in their Memorandum in the CA that this thesis
was presented and discussed for the first time. We cannot ignore the fact that this position of individual respondents runs
contrary to their earlier submission in their pleadings filed in the Labor Arbiter, NLRC and even in the petition for certiorari in
the CA that AFSISI is their employer and liable for their termination. As the object of the pleadings is to draw the lines of battle,
so to speak, between the litigants and to indicate fairly the nature of the claims or defenses of both parties, a party cannot
subsequently take a position contrary to, or inconsistent, with his pleadings.19
Moreover, it is a fundamental rule of procedure that higher courts are precluded from entertaining matters neither alleged in
the pleadings nor raised during the proceedings below, but ventilated for the first time only in a motion for reconsideration or
on appeal.20 The individual respondents are bound by their submissions that AFSISI is their employer and they should not be
permitted to change their theory. Such a change of theory cannot be tolerated on appeal, not due to the strict application of
procedural rules but as a matter of fairness. A change of theory on appeal is objectionable because it is contrary to the rules of
fair play, justice and due process.21
Thus, the CA should not have considered the new theory offered by the individual respondents in their memorandum.
The present petition for review on certiorari is far from novel and, in fact, not without precedence. We have ruled in Social
Security System vs. Court of Appeals22 that:
...The guards or watchmen render their services to private respondent by allowing themselves to be assigned by said
respondent, which furnishes them arms and ammunition, to guard and protect the properties and interests of private
respondent's clients, thus enabling that respondent to fulfill its contractual obligations. Who the clients will be, and under what
terms and conditions the services will be rendered, are matters determined not by the guards or watchmen, but by private
respondent. On the other hand, the client companies have no hand in selecting who among the guards or watchmen shall be
assigned to them. It is private respondent that issues assignment orders and instructions and exercises control and
supervision over the guards or watchmen, so much so that if, for one reason or another, the client is dissatisfied with the
services of a particular guard, the client cannot himself terminate the services of such guard, but has to notify private
respondent, which either substitutes him with another or metes out to him disciplinary measures. That in the course of a
watchman's assignment the client conceivably issues instructions to him, does not in the least detract from the fact that private
respondent is the employer of said watchman, for in legal contemplation such instructions carry no more weight than mere
requests, the privity of contract being between the client and private respondent, not between the client and the guard or
watchman. Corollarily, such giving out of instructions inevitably spring from the client's right predicated on the contract for
services entered into by it with private respondent.
In the matter of compensation, there can be no question at all that the guards or watchmen receive compensation from private
respondent and not from the companies or establishments whose premises they are guarding. The fee contracted for to be
paid by the client is admittedly not equal to the salary of a guard or watchman; such fee is arrived at independently of the
salary to which the guard or watchman is entitled under his arrangements with private respondent. 23
530
and reiterated in American President Lines vs. Clave,24 thus:
In the light of the foregoing standards, We fail to see how the complaining watchmen of the Marine Security Agency can be
considered as employees of the petitioner. It is the agency that recruits, hires, and assigns the work of its watchmen. Hence, a
watchman can not perform any security service for the petitioner's vessels unless the agency first accepts him as its
watchman. With respect to his wages, the amount to be paid to a security guard is beyond the power of the petitioner to
determine. Certainly, the lump sum amount paid by the petitioner to the agency in consideration of the latter's service is much
more than the wages of any one watchman. In point of fact, it is the agency that quantifies and pays the wages to which a
watchman is entitled.
Neither does the petitioner have any power to dismiss the security guards. In fact, We fail to see any evidence in the record
that it wielded such a power. It is true that it may request the agency to change a particular guard. But this, precisely, is proof
that the power lies in the hands of the agency.
Since the petitioner has to deal with the agency, and not the individual watchmen, on matters pertaining to the contracted task,
it stands to reason that the petitioner does not exercise any power over the watchmen's conduct. Always, the agency stands
between the petitioner and the watchmen; and it is the agency that is answerable to the petitioner for the conduct of its
guards.25
In this case, the terms and conditions embodied in the security service agreement between MERALCO and ASDAI expressly
recognized ASDAI as the employer of individual respondents.
Under the security service agreement, it was ASDAI which (a) selected, engaged or hired and discharged the security guards;
(b) assigned them to MERALCO according to the number agreed upon; (c) provided the uniform, firearms and ammunition,
nightsticks, flashlights, raincoats and other paraphernalia of the security guards; (d) paid them salaries or wages; and, (e)
disciplined and supervised them or principally controlled their conduct. The agreement even explicitly provided that "[n]othing
herein contained shall be understood to make the security guards under this Agreement, employees of the COMPANY, it
being clearly understood that such security guards shall be considered as they are, employees of the AGENCY alone."
Clearly, the individual respondents are the employees of ASDAI.
As to the provision in the agreement that MERALCO reserved the right to seek replacement of any guard whose behavior,
conduct or appearance is not satisfactory, such merely confirms that the power to discipline lies with the agency. It is a
standard stipulation in security service agreements that the client may request the replacement of the guards to it. Service-
oriented enterprises, such as the business of providing security services, generally adhere to the business adage that "the
customer or client is always right" and, thus, must satisfy the interests, conform to the needs, and cater to the reasonable
impositions of its clients.
Neither is the stipulation that the agency cannot pull out any security guard from MERALCO without its consent an indication
of control. It is simply a security clause designed to prevent the agency from unilaterally removing its security guards from their
assigned posts at MERALCOs premises to the latters detriment.
The clause that MERALCO has the right at all times to inspect the guards of the agency detailed in its premises is likewise not
indicative of control as it is not a unilateral right. The agreement provides that the agency is principally mandated to conduct
inspections, without prejudice to MERALCOs right to conduct its own inspections.
Needless to stress, for the power of control to be present, the person for whom the services are rendered must reserve the
right to direct not only the end to be achieved but also the means for reaching such end. 26 Not all rules imposed by the hiring
party on the hired party indicate that the latter is an employee of the former.27 Rules which serve as general guidelines towards
the achievement of the mutually desired result are not indicative of the power of control.28
Verily, the security service agreements in the present case provided that all specific instructions by MERALCO relating to the
discharge by the security guards of their duties shall be directed to the agency and not directly to the individual respondents.
The individual respondents failed to show that the rules of MERALCO controlled their performance.
Moreover, ASDAI and AFSISI are not "labor-only" contractors. There is "labor only" contract when the person acting as
contractor is considered merely as an agent or intermediary of the principal who is responsible to the workers in the same
manner and to the same extent as if they had been directly employed by him. On the other hand, "job (independent)
contracting" is present if the following conditions are met: (a) the contractor carries on an independent business and
undertakes the contract work on his own account under his own responsibility according to his own manner and method, free
from the control and direction of his employer or principal in all matters connected with the performance of the work except to
the result thereof; and (b) the contractor has substantial capital or investments in the form of tools, equipment, machineries,
work premises and other materials which are necessary in the conduct of his business. 29 Given the above distinction and the
provisions of the security service agreements entered into by petitioner with ASDAI and AFSISI, we are convinced that ASDAI
and AFSISI were engaged in job contracting.
The individual respondents can not be considered as regular employees of the MERALCO for, although security services are
necessary and desirable to the business of MERALCO, it is not directly related to its principal business and may even be
considered unnecessary in the conduct of MERALCOs principal business, which is the distribution of electricity.
Furthermore, the fact that the individual respondents filed their claim for unpaid monetary benefits against ASDAI is a clear
indication that the individual respondents acknowledge that ASDAI is their employer.
531
We cannot give credence to individual respondents insistence that they were absorbed by AFSISI when MERALCOs security
service agreement with ASDAI was terminated. The individual respondents failed to present any evidence to confirm that
AFSISI absorbed them into its workforce. Thus, respondent Benamira was not retained in his post at MERALCO since July 25,
1992 due to the termination of the security service agreement of MERALCO with ASDAI. As for the rest of the individual
respondents, they retained their post only as "hold-over" guards until the security guards of AFSISI took over their post on
August 6, 1992.30
In the present case, respondent Benamira has been "off-detail" for seventeen days while the rest of the individual respondents
have only been "off- detail" for five days when they amended their complaint on August 11, 1992 to include the charge of
illegal dismissal. The inclusion of the charge of illegal dismissal then was premature. Nonetheless, bearing in mind that ASDAI
simply stopped giving the individual respondents any assignment and their inactivity clearly persisted beyond the six-month
period allowed by Article 28631 of the Labor Code, the individual respondents were, in effect, constructively dismissed by
ASDAI from employment, hence, they should be reinstated.
The fact that there is no actual and direct employer-employee relationship between MERALCO and the individual respondents
does not exonerate MERALCO from liability as to the monetary claims of the individual respondents. When MERALCO
contracted for security services with ASDAI as the security agency that hired individual respondents to work as guards for it,
MERALCO became an indirect employer of individual respondents pursuant to Article 107 of the Labor Code, which reads:
ART. 107. Indirect employer - The provisions of the immediately preceding Article shall likewise apply to any person,
partnership, association or corporation which, not being an employer, contracts with an independent contractor for the
performance of any work, task, job or project.
When ASDAI as contractor failed to pay the individual respondents, MERALCO as principal becomes jointly and severally
liable for the individual respondents wages, under Articles 106 and 109 of the Labor Code, which provide:
ART. 106. Contractor or subcontractor. - Whenever an employer enters into a contract with another person for the
performance of the former[s] work, the employees of the contractor and of the latter[s] subcontractor, if any, shall be paid in
accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the
employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work
performed under the contract, in the same manner and extent that he is liable to employees directly employed by him. xxx
ART. 109. Solidary liability - The provisions of existing laws to the contrary notwithstanding, every employer or indirect
employer shall be held responsible with his contractor or subcontractor for any violation of any provision of this Code. For
purpose of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers.
ASDAI is held liable by virtue of its status as direct employer, while MERALCO is deemed the indirect employer of the
individual respondents for the purpose of paying their wages in the event of failure of ASDAI to pay them. This statutory
scheme gives the workers the ample protection
consonant with labor and social justice provisions of the 1987 Constitution.32
However, as held in Mariveles Shipyard Corp. vs. Court of Appeals,33 the solidary liability of MERALCO with that of ASDAI
does not preclude the application of Article 1217 of the Civil Code on the right of reimbursement from his co-debtor by the one
who paid,34 which provides:
ART. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors offer to
pay, the creditor may choose which offer to accept.
He who made the payment may claim from his co-debtors only the share which corresponds to each, with the interest for the
payment already made. If the payment is made before the debt is due, no interest for the intervening period may be
demanded.
When one of the solidary debtors cannot, because of his insolvency, reimburse his share to the debtor paying the obligation,
such share shall be borne by all his co-debtors, in proportion to the debt of each.
ASDAI may not seek exculpation by claiming that MERALCOs payments to it were inadequate for the individual respondents
lawful compensation. As an employer, ASDAI is charged with knowledge of labor laws and the adequacy of the compensation
that it demands for contractual services is its principal concern and not any others.35
WHEREFORE, the present petition is GRANTED. The assailed Decision, dated September 27, 2000, of the CA is REVERSED
and SET ASIDE. The Decision of the Labor Arbiter dated January 3, 1994 and the Resolution of the NLRC dated April 10,
1995 are AFFIRMED with the MODIFICATION that the joint and solidary liability of ASDAI and MERALCO to pay individual
respondents monetary claims for underpayment of actual regular hours and overtime hours rendered, and premium pay for
holiday and rest day, as well as attorneys fees, shall be without prejudice to MERALCOs right of reimbursement from ASDAI.
SO ORDERED.

G.R. No. 171814 May 8, 2009

SOUTH DAVAO DEVELOPMENT COMPANY, INC. (NOW SODACO AGRICULTURAL CORPORATION) AND/OR
MALONE PACQUIAO AND VICTOR A. CONSUNJI, Petitioners,
vs.
532
SERGIO L. GAMO, ERNESTO BELLEZA, FELIX TERONA, CARLOS ROJAS, MAXIMO MALINAO, VIRGILIO COSEP,
ELEONOR COSEP, MAXIMO TOLDA, NELSON BAGAAN, and TRADE UNION OF THE PHILIPPINES and ALLIED
SERVICES (TUPAS), Respondents.
D E C I S I ON
TINGA, J.:
Before us is a Rule 45 petition1 which seeks the reversal of the Court of Appeals decision2 and resolution3 in CA-G.R. SP No.
68511. The Court of Appeals decision reinstated the NLRCs Resolution 4 dated 23 March 2001 which reversed the labor
arbiters decision.5
Petitioner South Davao Development Company (petitioner or petitioner corporation) is the operator of a coconut and mango
farm in San Isidro, Davao Oriental and Inawayan/Baracatan, Davao del Sur. On August 1963 petitioner hired respondent
Sergio L. Gamo (Gamo) as a foreman. Sometime in 1987, petitioner appointed Gamo as a copra maker contractor.
Respondents Ernesto Belleza, Carlos Rojas, Maximo Malinao were all employees in petitioners coconut farm, while
respondents Felix Terona, Virgilio Cosep, Maximo Tolda, and Nelson Bagaan were assigned to petitioners mango farm. All of
the abovenamed respondents (copra workers) were later transferred by petitioner to Gamo as the latters copraceros. From
1987 to 1999, Gamo and petitioner entered into a profit-sharing agreement wherein 70% of the net proceeds of the sale of
copra went to petitioner and 30% to Gamo. The copra workers were paid by Gamo from his 30% share.
Petitioner wanted to standardize payments to its "contractors" in its coconut farms. On 2 October 1999, petitioner proposed a
new payment scheme to Gamo. The new scheme provided a specific price for each copra making activity. Gamo submitted his
counter proposal.6 Petitioner did not accept Gamos counter proposal since it was higher by at least fifty percent (50%) from its
original offer. Without agreeing to the new payment scheme, Gamo and his copra workers started to do harvesting work.
Petitioner told them to stop. Eventually, petitioner and Gamo agreed that the latter may continue with the harvest provided that
it would be his last "contract" with petitioner. Gamo suggested to petitioner to look for a new "contractor" since he was not
amenable to the new payment scheme.7
Gamo and petitioner failed to agree on a payment scheme, thus, petitioner did not renew the "contract" of Gamo. Gamo and
the copra workers alleged that they were illegally dismissed.
On the other hand, respondent Eleonor Cosep (Eleonor) was employed as a mango classifier in the packing house of
petitioners mango farm in San Isidro, Davao Oriental. Sometime in October 1999, she did not report for work as she had
wanted to raise and sell pigs instead. Petitioner, through Malone Pacquiao, tried to convince Eleonor to report for work but to
no avail.
On 22 March 2000, respondents filed a complaint8 for illegal dismissal against petitioner. They alleged that sometime in
December 1999, petitioner verbally terminated them en masse.
The labor arbiter dismissed9 the complaint. He ruled that there was no employee-employer relationship between petitioner and
respondents. As to Eleonor, he ruled that she had voluntarily stopped working.
Respondents appealed to the National Labor Relations Commission (NLRC). The NLRCs Resolution10 reversed the arbiters
decision and ruled that respondents were petitioners employees. Petitioner moved 11 for reconsideration. The NLRC
granted12 the motion for reconsideration and ruled that the nature of the job of the respondents could not result in an employer-
employee relationship. Respondents moved for reconsideration which was denied. 13
Respondents filed a petition for certiorari14 under Rule 65 with the Court of Appeals. The Court of Appeals ruled that there
existed an employer-employee relationship. It declared that respondents were regular seasonal employees who can be
dismissed by the petitioner at the end of the season provided due process is observed. 15With regard to Eleonor, the Court of
Appeals ruled that she did not abandon her work.
Hence this petition.
Petitioner raises the following issues: (1) whether the Court of Appeals failed to take judicial notice of the accepted practice of
independent contractors in the coconut industry; (2) whether there is a valid job contracting between petitioner and Gamo; and
(3) whether Eleonor had effectively abandoned her work.
The labor arbiter took judicial notice of the alleged prevailing business practices in the coconut industry that copra making
activities are done quarterly; that the workers can contract with other farms; and that the workers are independent from the
land owner on all work aspects. Petitioner wants this Court to take judicial notice of the current business practice in the
coconut industry which allegedly treats copraceros as independent contractors. In Expertravel & Tours, Inc. v. Court of
Appeals, 16 we held, thus:
Generally speaking, matters of judicial notice have three material requisites: (1) the matter must be one of common and
general knowledge; (2) it must be well and authoritatively settled and not doubtful or uncertain; and (3) it must be known to be
within the limits of the jurisdiction of the court. The principal guide in determining what facts may be assumed to be judicially
known is that of notoriety.17 Hence, it can be said that judicial notice is limited to facts evidenced by public records and facts of
general notoriety. Moreover, a judicially noticed fact must be one not subject to a reasonable dispute in that it is either: (1)
generally known within the territorial jurisdiction of the trial court; or (2) capable of accurate and ready determination by
resorting to sources whose accuracy cannot reasonably be questionable.18

533
Things of "common knowledge," of which courts take judicial matters coming to the knowledge of men generally in the course
of the ordinary experiences of life, or they may be matters which are generally accepted by mankind as true and are capable
of ready and unquestioned demonstration. Thus, facts which are universally known, and which may be found in encyclopedias,
dictionaries or other publications, are judicially noticed, provided, they are of such universal notoriety and so generally
understood that they may be regarded as forming part of the common knowledge of every person. As the common knowledge
of man ranges far and wide, a wide variety of particular facts have been judicially noticed as being matters of common
knowledge. But a court cannot takejudicial notice of any fact which, in part, is dependent on the existence or non-existence of
a fact of which the court has no constructive knowledge.19
An invocation that the Court take judicial notice of certain facts should satisfy the requisites set forth by case law. A mere
prayer for its application shall not suffice. Thus, in this case the Court cannot take judicial notice of the alleged business
practices in the copra industry since none of the material requisites of matters of judicial notice is present in the instant
petition. The record is bereft of any indication that the matter is of common knowledge to the public and that it has the
characteristic of notoriety, except petitioners self-serving claim.
A related issue is whether Gamo is an independent contractor. In Escario v. NLRC, 20 we ruled that there is permissible job
contracting when a principal agrees to put out or farm out with a contractor or a subcontractor the performance or completion
of a specific job, work or service within a definite or predetermined period, regardless of whether such job or work service is to
be performed within or outside the premises of the principal. 21 To establish the existence of an independent contractor, we
apply the following conditions: first, the contractor carries on an independent business and undertakes the contract work on his
own account under his own responsibility according to his own manner and method, free from the control and direction of his
employer or principal in all matters connected with the performance of the work except to the result thereof; and second, the
contractor has substantial capital or investments in the form of tools, equipment, machineries, work premises and other
materials which are necessary in the conduct of his business. 22
The Implementing Rules and Regulation of the Labor Code defines investmentas tools, equipment, implements,
machineries and work premises, actually and directly used by the contractor or subcontractor in the performance or completion
of the job, work, or service contracted out.23 The investment must be sufficient to carry out the job at hand.
In the case at bar, Gamo and the copra workers did not exercise independent judgment in the performance of their tasks. The
tools used by Gamo and his copra workers like the karit, bolo, pangbunot, panglugit and pangtapok are not sufficient to enable
them to complete the job.24 Reliance on these primitive tools is not enough. In fact, the accomplishment of their task required
more expensive machineries and equipment, like the trucks to haul the harvests and the drying facility, which petitioner
corporation owns.
In order to determine the existence of an employer-employee relationship, the Court has frequently applied the four-fold test:
(1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to
control the employees conduct, or the so called "control test," which is considered the most important element. 25 From the
time they were hired by petitioner corporation up to the time that they were reassigned to work under Gamos supervision, their
status as petitioner corporations employees did not cease. Likewise, payment of their wages was merely coursed through
Gamo. As to the most determinative testthe power of control, it is sufficient that the power to control the manner of doing the
work exists, it does not require the actual exercise of such power. 26 In this case, it was in the exercise of its power of control
when petitioner corporation transferred the copra workers from their previous assignments to work as copraceros. It was also
in the exercise of the same power that petitioner corporation put Gamo in charge of the copra workers although under a
different payment scheme. Thus, it is clear that an employer-employee relationship has existed between petitioner corporation
and respondents since the beginning and such relationship did not cease despite their reassignments and the change of
payment scheme.
As to the last issue, petitioner seeks our indulgence to declare that Eleonor has abandoned her work. Petitioner admitted that
Eleonor was its regular employee.27 However, it claimed that she abandoned her work, preferring to sell and raise pigs
instead.
It is well settled that abandonment as a just and valid ground for dismissal requires the deliberate and unjustified refusal of the
employee to return for work. Two elements must be present, namely: (1) the failure to report for work or absence without valid
or justifiable reason, and (2) a clear intention to sever the employer-employee relationship. The second element is more
determinative of the intent and must be evinced by overt acts. Mere absence, not being sufficient, the burden of proof rests
upon the
employer to show that the employee clearly and deliberately intended to discontinue her employment without any intention of
returning.28 In Samarca v. Arc-Men Industries, Inc, we held that abandonment is a matter of intention and cannot lightly be
presumed from certain equivocal acts.1awphi1
To constitute abandonment, there must be clear proof of deliberate and unjustified intent to sever the employer-employee
relationship. Clearly, the operative act is still the employees ultimate act of putting an end to his employment.29 However, an
employee who takes steps to protest her layoff cannot be said to have abandoned her work because a charge of
abandonment is totally inconsistent with the immediate filing of a complaint for illegal dismissal, more so when it includes a

534
prayer for reinstatement.30 When Eleonor filed the illegal dismissal complaint, it totally negated petitioners theory of
abandonment.
Also, to effectively dismiss an employee for abandonment, the employer must comply with the due process requirement of
sending notices to the employee. In Brahm Industries, Inc. v. NLRC, 31 we ruled that this requirement is not a mere formality
that may be dispensed with at will. Its disregard is a matter of serious concern since it constitutes a safeguard of the highest
order in response to mans innate sense of justice.32 Petitioner was not able to send the necessary notice requirement to
Eleonor. Petitioners belated claim that it was not able to send the notice of infraction prior to the filing of the illegal dismissal
case cannot simply unacceptable.33 Based on the foregoing, Eleonor did not abandon her work.
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals is AFFIRMED. Cost against petitioner.
SO ORDERED.

G.R. No. 161366 June 16, 2009

SYCIP, GORRES, VELAYO & COMPANY, Petitioner,
vs.
CAROL DE RAEDT, Respondent.
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review1 challenging the 7 October 2003 Decision2 and 17 December 2003 Resolution3 of the
Court of Appeals in CA-G.R. SP No. 59916. The Court of Appeals reversed the 16 February 2000 Decision 4 of the National
Labor Relations Commission and partially reinstated the 14 July 1999 Decision 5 of Labor Arbiter Monroe C. Tabingan holding
that respondent Carol De Raedt (De Raedt) was illegally dismissed by petitioner Sycip, Gorres, Velayo & Company (SGV).
The Facts
Sometime in June 1989, the Philippine Government and the Commission for European Communities (Commission) entered
into a Financing Memorandum whereby the Commission undertook to provide financial and technical assistance for the
implementation of rural micro projects in five provinces of the Cordillera area in Northern Luzon. Consequently, the Central
Cordillera Agricultural Programme (CECAP) project was launched to be implemented by the Department of Agriculture (DA).
On 22 May 1989, the DA contracted Travers Morgan International Ltd. (TMI) to provide the required technical assistance
services for CECAP.
On 1 July 1989, TMI and SGV entered into a Sub-Consultancy Agreement for the latter to undertake part of the technical
assistance services requirements of the CECAP. SGV would provide for the Technical Assistance Services. Hence, SGV
proposed qualified consultants as defined by the Terms of Reference.
The acceptance and appointment of the proposed consultants to the project were subject to the unanimous approval of the
TMI, the DA and the Commission. For the position of Sociologist, SGV proposed Felino Lorente (Lorente). However, Thomas
Gimenez (Gimenez) of the DA disputed the qualifications of Lorente and recommended instead De Raedt.
Martin Tull (Tull) of TMI replied to Gimenez that TMI would consider De Raedt for the sociologist position. Thus, Gimenez
volunteered to call De Raedt to advise her of a possible assignment to the CECAP.
Eventually, the DA advised SGV that De Raedts nomination, among others, had been approved by the Commission and the
DA and that she was expected to start her assignment on 3 July 1989.
On 6 July 1989, De Raedt wrote SGV expressing her conformity to the consultancy contract, thus she was advised to sign the
same. De Raedt signed the contract on 14 July 1989 but her start-up date with the CECAP was moved to 15 August 1989 with
the approval of the DA because she was in Thailand to finish an assignment.
While the CECAP was in progress, TMI received verbal and written complaints from the project staff regarding De Raedts
performance and working relations with them.
An investigation was then conducted by the TMI on the above complaints. Thereafter, the TMI confirmed that De Raedts
retention would be counter-productive to the progress of the project because a number of project staff found it difficult to work
with her. Thus, the TMI directed SGV to withdraw De Raedt from the CECAP.
In compliance with TMIs instructions, SGV facilitated De Raedts withdrawal from the CECAP.
De Raedt filed a case against SGV for illegal dismissal and damages before the Arbitration Branch of the NLRC.
The Labor Arbiter rendered a decision in favor of De Raedt.
SGV appealed the decision of the Labor Arbiter to the NLRC, which rendered judgment in favor of SGV.
De Raedt filed a petition for certiorari with the Court of Appeals, which reversed the NLRC in a Decision promulgated on 7
October 2003.
SGV filed a motion for reconsideration, which was denied by the Court of Appeals in its Resolution dated 17 December 2003.
Hence, this petition.
The Ruling of the Labor Arbiter
The Labor Arbiter found De Raedt as an employee of SGV. How she conducted herself and how she carried out the project
were dependent on and prescribed by SGV and TMI, respectively. The Labor Arbiter further ruled that SGV is considered as
535
the employer of De Raedt since it acted indirectly in the interest of TMI, the entity directly in-charge of the CECAP project for
which De Raedt was hired. Moreover, the Labor Arbiter found SGV as the entity which is the source of De Raedts income and
other benefits.1avvphi1
The Labor Arbiter found no sufficient valid ground to terminate De Raedts services although procedural due process was
observed. The dispositive portion of the 14 July 1999 Decision of the Labor Arbiter reads:
WHEREFORE, judgment is hereby rendered declaring complainant to have been illegally dismissed by respondent.
Consequently, respondent Sycip, Gorres & Velayo and Co. is hereby ordered to pay complainant the following:
a) Unpaid salaries corresponding to the unexpired portion of the contract in the amount of Eight Hundred Two
Thousand (P802,000.00) Pesos;
b) Moral damages in the amount of Two Hundred Fifty Thousand (P250,000.00) Pesos;
c) Exemplary damages in the amount of One Hundred Thousand (P100,000.00) Pesos;
d) 10% of the total award as attorneys fees amounting to One Hundred Fifteen Thousand Two Hundred Pesos
(P115,200.00).
The computations of which are hereto attached as Annex "A" and made an integral part hereof.
SO ORDERED.6
The Ruling of the NLRC
The NLRC reversed the ruling of the Labor Arbiter and found that there was no employer-employee relationship between SGV
and De Raedt.
The NLRC agreed with the Labor Arbiters finding that SGV had no discretion in the selection of De Raedt for the position of
Sociologist in the CECAP. The selection was made by the TMI, upon recommendation of Gimenez of the DA, to be approved
by the DA and the Commission. The engagement of De Raedt was coursed through SGV.
The payment of De Raedts service fee was done through SGV but the funds came from the TMI as shown by SGVs billings
to TMI for De Raedts professional fee.
As regards the power of dismissal, SGV merely implemented TMIs instructions to withdraw De Raedt from the CECAP.
The NLRC found that SGV did not exercise control over De Raedts work. The Sub-Consultancy Agreement between TMI and
SGV clearly required De Raedt to work closely with and under the direction and supervision of both the Team leader and the
Project Coordinator.
Hence, SGVs participation is to merely monitor her attendance, through time records, for the payment of her retainer fee and
to validate the time she expended in the project with her written reports.
The following circumstances also indicated that no employment relationship existed between the parties: (1) De Raedt was
engaged on a contract basis; (2) the letter-agreement between the parties clearly states that there is no employer-employee
relationship between the parties and that De Raedt was at all times to be considered an independent contractor; and (3) De
Raedt was allowed to engage in other employment during all the time she was connected with the project.
The dispositive portion of the 16 February 2000 Decision of the NLRC reads:
WHEREFORE, premises considered, the assailed decision of the Labor Arbiter is REVERSED and SET ASIDE and the
complaint is DISMISSED for lack of jurisdiction.
SO ORDERED.7
The Ruling of the Court of Appeals
The Court of Appeals reversed the ruling of the NLRC and reinstated the decision of the Labor Arbiter insofar as the latter
found De Raedt as an employee of SGV.
The Court of Appeals found that based on the letter-agreement between the parties, SGV engaged De Raedt for the project on
a contract basis for 40 months over a period of five years during which she was to work full time. She could not engage in any
other employment. In fact, she had to resign from her teaching job at the University of the Philippines. She could not leave her
place of assignment without SGVs consent. She must maintain an accurate record of the time she spent on the job, and
prepare reports which may be required by her team leader and SGV. Whether actual supervision of her work had turned out to
be minimal or not, SGV reserved the right to exercise it at any time. Further, SGV asserted its right to terminate her services.8
The Court of Appeals found that De Raedt was removed from the project because of personality differences, which is not one
of the grounds for a valid dismissal of an employee.9
The dispositive portion of the 7 October 2003 Decision of the Court of Appeals reads:
IN VIEW OF THE FOREGOING, the assailed decision of the NLRC dated February 16, 2000 is REVERSED, and a new one
ENTERED partially REINSTATING the Decision of Labor Arbiter Monroe Tabing[a]n on July 14, 1999, by affirming paragraph
(a) thereof, deleting paragraph (b) and (c), and reducing the award of attorneys fees in paragraph (d) to 5% of the principal
award.
SO ORDERED.10
The Issue
The issue in this case is whether De Raedt was an employee of SGV. If so, whether De Raedt was illegally dismissed by SGV.
The Ruling of the Court
The petition is meritorious.
536
The existence of an employer-employee relationship is ultimately a question of fact. As a general rule, factual issues are
beyond the province of this Court. However, this rule admits of exceptions, one of which is where there are conflicting findings
of fact, such as in the present case. Consequently, this Court shall scrutinize the records to ascertain the facts for itself.11
To determine the existence of an employer-employee relationship, case law has consistently applied the four-fold test, to wit:
(a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
employers power to control the employee on the means and methods by which the work is accomplished. The so-called
"control test" is the most important indicator of the presence or absence of an employer-employee relationship.12
A. Selection and Engagement of the Employee
De Raedt was contracted by SGV as part of the latters obligation under the Sub-Consultancy Agreement with TMI, which was
in turn contracted by the DA to provide the services required for the foreign-assisted CECAP project. De Raedt was neither
engaged by SGV as an ordinary employee, nor was she picked by SGV from a pool of consultants already working for SGV.
Hence, SGV engaged De Raedts services precisely because SGV had an existing Sub-Consultancy Agreement with TMI to
provide such services.1avvphi1
The Labor Arbiter and the NLRC both agree that SGV had no discretion in the selection of De Raedt for the position of
Sociologist in the CECAP. The selection was made by the TMI, upon recommendation of Gimenez of the DA, to be approved
by the DA and the Commission. The engagement of De Raedt was merely coursed through SGV.
Moreover, SGVs first choice for the Sociologist position was Lorente. However, Gimenez recommended De Raedt to SGV. De
Raedts testimony proves that her appointment was ultimately the DAs decision, and not SGVs, thus:
Q Madam Witness, how did you come to know the vacancy here in CECAP project for a position of project
Sociologist?
A I was contacted when I was in Honolulu. I was contacted by the firm Sarmiento and Company who asked me if I
would list myself for the position of project sociologist for the CECAP project in 1987 when it was discussed by the
NGOs in the Cordillera and finally I was contacted by the SGV. They asked me if I am interested in the position
project sociologist. I was also contacted by Mr. Gimenez to ask me if SGV had contacted me regarding the position.
Q So among the informants who gave you an idea that the position of project sociologist is the project director
himself, is it not?
A He informed me that I have been considered by the Department of Agriculture for the position of project
sociologist.
Q Before you were considered for the position of (sic) the Department of Agriculture, did you give them an
application?
A No, sir.
Q Do you know who gave your name to them?
A Not sure, may be the Department of Agriculture or Sarmiento, because I was asked by the consultancy firm
Sarmiento if I would be willing to list with their business consultants for the CECAP project and this was before the
bidding and Sarmiento did not make the bidding for the project.
Q Sarmiento is different from SGV is that correct?
A Yes, sir.13 (Emphasis supplied)
B. Payment of Wages
The letter-agreement between the parties specifies the consideration for De Raedts services as a retainer fee payable for
every day of completed service in the project. In addition to this, monthly subsistence and housing allowances and medical
insurance were to be given to De Raedt. The retainer fees and privileges given to De Raedt are not commonly given to
ordinary employees, who receive basic monthly salaries and other benefits under labor laws.
The Court notes that the retainer fees paid by SGV to De Raedt ultimately came from its "client," TMI. De Raedt was aware
that the source of the funds was the grant from the Commission. By the terms of the Sub-Consultancy Agreement, TMI paid
SGV remuneration of the fixed unit rate component of the part services.
However, whatever amount SGV received from TMI did not necessarily entitle De Raedt to the entire amount. In the parties
letter-agreement, SGV made it clear that payments made by TMI "should not be construed as being due [De Raedt] since
these items are intended for the administration, overhead expenses, and other related expenses of [SGV] in the development,
management, and supervision of [De Raedts] assignment."
C. Power of Dismissal
Under the letter-agreement between the parties, SGV may terminate De Raedts services "at anytime that the contract
between the Department of Agriculture Government of the Philippines and Travers Morgan International, Consulting
Engineers, Planners and Management Consultants is terminated for any cause whatsoever."
De Raedt failed to show that SGV could terminate her services on grounds other than the end of the contract between the DA
as implementing agency of the CECAP and TMI or the termination by TMI of the contract with SGV, such as retrenchment to
prevent losses as provided under labor laws.14
Further, under the parties agreement, should De Raedt decide to leave the project for any reason whatsoever other than a
reasonable cause beyond her control which prevents her from performing the required services, De Raedt shall be liable for
537
liquidated damages for breach of contract, in an amount equivalent to the retainer fee for a period of one month. This pre-
termination with penalty clause in the parties agreement clearly negates the existence of an employment relationship between
the parties. If De Raedt were indeed SGVs employee, she should have been able to resign for whatever professional or
personal reason at anytime, even prior to the end of the contract between the DA and TMI or between TMI and SGV, without
incurring any liability for such resignation.
Besides, it was TMI, through Tull, which instructed SGV to disengage De Raedt from the project. Terminating De Raedts
services was beyond SGVs control, as SGV had no choice but to comply with the directive of its client (TMI). Clearly, De
Raedts retention as a Sociologist in the CECAP project was dependent on TMIs and DAs decisions. In his letter dated 14
June 1991 addressed to SGV, Tull wrote the following:
Notwithstanding a number of staff on the project, all employed by the Department of Agriculture, have confirmed that they
have found it difficult to work with Mrs de Raedt over the past few months which supports the earlier advice from the
Department of Agriculture.
In the circumstances I consider we have no alternative but to replace Mrs de Raedt. Would you please make
arrangement for her to be withdrawn from the project by the end of June 1991. Payment of staff fees and housing allowances
under the project in respect of Mrs de Raedt will be paid up to 30th June 1991.15 (Emphasis supplied)
D. Power of Control
The letter-agreement between the parties required De Raedt to maintain an accurate time record, notify SGV of delays in De
Raedts schedule, secure a prior clearance to leave place of assignment, and prepare reports. These requirements hardly
show that SGV exercises control over the means and methods in the performance of De Raedts duties as a Sociologist of the
CECAP. SGV was not concerned with De Raedts ways of accomplishing her work as a Sociologist. Rather, SGV naturally
expected to be updated regularly of De Raedts "work progress," if any, on the project for which she was specifically
engaged16 to ensure SGVs compliance with the terms and conditions of the Sub-Consultancy Agreement with TMI. The
services to be performed by her specified what she needed to achieve but not on how she was to go about it. 17
In sum, there existed no employer-employee relationship between the parties. De Raedt is an independent contractor, who
was engaged by SGV to render services to SGVs client TMI, and ultimately to DA on the CECAP project, regarding matters in
the field of her special knowledge and training for a specific period of time. Unlike an ordinary employee, De Raedt received
retainer fees and benefits such as housing and subsistence allowances and medical insurance. De Raedts services could be
terminated on the ground of end of contract between the DA and TMI, and not on grounds under labor laws. Though the end of
the contract between the DA and TMI was not the ground for the withdrawal of De Raedt from the CECAP, De Raedt was
disengaged from the project upon the instruction of SGVs client, TMI. Most important of all, SGV did not exercise control over
the means and methods by which De Raedt performed her duties as Sociologist. SGV did impose rules on De Raedt, but
these were necessary to ensure SGVs faithful compliance with the terms and conditions of the Sub-Consultancy Agreement it
entered into with TMI.
WHEREFORE, the Court GRANTS the petition. The Court SETS ASIDE the 7 October 2003 Decision and 17 December 2003
Resolution of the Court of Appeals in CA-G.R. SP No. 59916 and REINSTATES the 16 February 2000 Decision of the
National Labor Relations Commission.
SO ORDERED.

G.R. No. 185251 October 2, 2009

RAUL G. LOCSIN and EDDIE B. TOMAQUIN, Petitioners,
vs.
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, Respondent.
DECISION
VELASCO, JR., J.:
The Case
This Petition for Review on Certiorari under Rule 45 seeks the reversal of the May 6, 2008 Decision 1 and November 4, 2008
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 97398, entitled Philippine Long Distance Telephone Company v.
National Labor Relations Commission, Raul G. Locsin and Eddie B. Tomaquin. The assailed decision set aside the
Resolutions of the National Labor Relations Commission (NLRC) dated October 28, 2005 and August 28, 2006 which in turn
affirmed the Decision dated February 13, 2004 of the Labor Arbiter. The assailed resolution, on the other hand, denied
petitioners motion for reconsideration of the assailed decision.
The Facts
On November 1, 1990, respondent Philippine Long Distance Telephone Company (PLDT) and the Security and Safety
Corporation of the Philippines (SSCP) entered into a Security Services Agreement3 (Agreement) whereby SSCP would
provide armed security guards to PLDT to be assigned to its various offices.
Pursuant to such agreement, petitioners Raul Locsin and Eddie Tomaquin, among other security guards, were posted at a
PLDT office.
On August 30, 2001, respondent issued a Letter dated August 30, 2001 terminating the Agreement effective October 1, 2001. 4
538
Despite the termination of the Agreement, however, petitioners continued to secure the premises of their assigned office. They
were allegedly directed to remain at their post by representatives of respondent. In support of their contention, petitioners
provided the Labor Arbiter with copies of petitioner Locsins pay slips for the period of January to September 2002.5
Then, on September 30, 2002, petitioners services were terminated.
Thus, petitioners filed a complaint before the Labor Arbiter for illegal dismissal and recovery of money claims such as overtime
pay, holiday pay, premium pay for holiday and rest day, service incentive leave pay, Emergency Cost of Living Allowance, and
moral and exemplary damages against PLDT.
The Labor Arbiter rendered a Decision finding PLDT liable for illegal dismissal. It was explained in the Decision that petitioners
were found to be employees of PLDT and not of SSCP. Such conclusion was arrived at with the factual finding that petitioners
continued to serve as guards of PLDTs offices. As such employees, petitioners were entitled to substantive and procedural
due process before termination of employment. The Labor Arbiter held that respondent failed to observe such due process
requirements. The dispositive portion of the Labor Arbiters Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering respondent Philippine Long Distance and
Telephone Company (PLDT) to pay complainants Raul E. Locsin and Eddie Tomaquin their separation pay and back wages
computed as follows:
NAME SEPARATION PAY BACKWAGES

1. Raul E. Locsin P127,500.00 P240,954.67

2. Eddie B. Tomaquin P127,500.00 P240,954.67

P736,909.34
All other claims are DISMISSED for want of factual basis.
Let the computation made by the Computation and Examination Unit form part of this decision.
SO ORDERED.
PLDT appealed the above Decision to the NLRC which rendered a Resolution affirming in toto the Arbiters Decision.
Thus, PDLT filed a Motion for Reconsideration of the NLRCs Resolution which was also denied.
Consequently, PLDT filed a Petition for Certiorari with the CA asking for the nullification of the Resolution issued by the NLRC
as well as the Labor Arbiters Decision. The CA rendered the assailed decision granting PLDTs petition and dismissing
petitioners complaint. The dispositive portion of the CA Decision provides:
WHEREFORE, the instant Petition for Certiorari is GRANTED. The Resolutions dated October 28, 2005 and August 28, 2006
of the National Labor Relations Commission are ANNULLED and SET ASIDE. Private respondents complaint against
Philippine Long Distance Telephone Company is DISMISSED.
SO ORDERED.
The CA applied the four-fold test in order to determine the existence of an employer-employee relationship between the
parties but did not find such relationship. It determined that SSCP was not a labor-only contractor and was an independent
contractor having substantial capital to operate and conduct its own business. The CA further bolstered its decision by citing
the Agreement whereby it was stipulated that there shall be no employer-employee relationship between the security guards
and PLDT.
Anent the pay slips that were presented by petitioners, the CA noted that those were issued by SSCP and not PLDT; hence,
SSCP continued to pay the salaries of petitioners after the Agreement. This fact allegedly proved that petitioners continued to
be employees of SSCP albeit performing their work at PLDTs premises.
From such assailed decision, petitioners filed a motion for reconsideration which was denied in the assailed resolution.
Hence, we have this petition.
The Issues
1. Whether or not; complainants extended services to the respondent for one (1) year from October 1, 2001, the
effectivity of the termination of the contract of complainants agency SSCP, up to September 30, 2002, without a
renewed contract, constitutes an employer-employee relationship between respondent and the complainants.
2. Whether or not; in accordance to the provision of the Article 280 of the Labor Code, complainants extended
services to the respondent for another one (1) year without a contract be considered as contractual employment.
3. Whether or not; in accordance to the provision of the Article 280 of the Labor Code, does complainants thirteen
(13) years of service to the respondent with manifestation to the respondent thirteen (13) years renewal of its security
contract with the complainant agency SSCP, can be considered only as "seasonal in nature" or fixed as [specific
projects] or undertakings and its completion or termination can be dictated as [controlled] by the respondent anytime
they wanted to.
4. Whether or not; complainants from being an alleged contractual employees of the respondent for thirteen (13)
years as they were then covered by a contract, becomes regular employees of the respondent as the one (1) year
539
 extended services of the complainants were not covered by a contract, and can be considered as direct employment
pursuant to the provision of the Article 280 of the Labor Code.
5. Whether or not; the Court of Appeals committed grave abuse of discretion when it set aside and [annulled] the
labor [arbiters] decision and of the NLRCs resolution declaring the dismissal of the complainant as illegal. 6
The Courts Ruling
This petition is hereby granted.
An Employer-Employee
Relationship Existed Between the Parties
It is beyond cavil that there was no employer-employee relationship between the parties from the time of petitioners first
assignment to respondent by SSCP in 1988 until the alleged termination of the Agreement between respondent and SSCP. In
fact, this was the conclusion that was reached by this Court in Abella v. Philippine Long Distance Telephone Company,7 where
we ruled that petitioners therein, including herein petitioners, cannot be considered as employees of PLDT. It bears pointing
out that petitioners were among those declared to be employees of their respective security agencies and not of PLDT.
The only issue in this case is whether petitioners became employees of respondent after the Agreement between SSCP and
respondent was terminated.
This must be answered in the affirmative.
Notably, respondent does not deny the fact that petitioners remained in the premises of their offices even after the Agreement
was terminated. And it is this fact that must be explained.
To recapitulate, the CA, in rendering a decision in favor of respondent, found that: (1) petitioners failed to prove that SSCP
was a labor-only contractor; and (2) petitioners are employees of SSCP and not of PLDT.
In arriving at such conclusions, the CA relied on the provisions of the Agreement, wherein SSCP undertook to supply PLDT
with the required security guards, while furnishing PLDT with a performance bond in the amount of PhP 707,000. Moreover,
the CA gave weight to the provision in the Agreement that SSCP warranted that it "carry on an independent business and has
substantial capital or investment in the form of equipment, work premises, and other materials which are necessary in the
conduct of its business."
Further, in determining that no employer-employee relationship existed between the parties, the CA quoted the express
provision of the Agreement, stating that no employer-employee relationship existed between the parties herein. The CA
disregarded the pay slips of Locsin considering that they were in fact issued by SSCP and not by PLDT.
From the foregoing explanation of the CA, the fact remains that petitioners remained at their post after the termination of the
Agreement. Notably, in its Comment dated March 10, 2009,8 respondent never denied that petitioners remained at their post
until September 30, 2002. While respondent denies the alleged circumstances stated by petitioners, that they were told to
remain at their post by respondents Security Department and that they were informed by SSCP Operations Officer Eduardo
Juliano that their salaries would be coursed through SSCP as per arrangement with PLDT, it does not state why they were not
made to vacate their posts. Respondent said that it did not know why petitioners remained at their posts.
Rule 131, Section 3(y) of the Rules of Court provides:
SEC. 3. Disputable presumptions.The following presumptions are satisfactory if uncontradicted, but may be contradicted
and overcome by other evidence:
xxxx
(y) That things have happened according to the ordinary course of nature and the ordinary habits of life.
In the ordinary course of things, responsible business owners or managers would not allow security guards of an agency with
whom the owners or managers have severed ties with to continue to stay within the business premises. This is because upon
the termination of the owners or managers agreement with the security agency, the agencys undertaking of liability for any
damage that the security guard would cause has already been terminated. Thus, in the event of an accident or otherwise
damage caused by such security guards, it would be the business owners and/or managers who would be liable and not the
agency. The business owners or managers would, therefore, be opening themselves up to liability for acts of security guards
over whom the owners or managers allegedly have no control.
At the very least, responsible business owners or managers would inquire or learn why such security guards were remaining
at their posts, and would have a clear understanding of the circumstances of the guards stay. It is but logical that responsible
business owners or managers would be aware of the situation in their premises.
We point out that with respondents hypothesis, it would seem that SSCP was paying petitioners salaries while securing
respondents premises despite the termination of their Agreement. Obviously, it would only be respondent that would benefit
from such a situation. And it is seriously doubtful that a security agency that was established for profit would allow its security
guards to secure respondents premises when the Agreement was already terminated.
From the foregoing circumstances, reason dictates that we conclude that petitioners remained at their post under the
instructions of respondent. We can further conclude that respondent dictated upon petitioners that the latter perform their
regular duties to secure the premises during operating hours. This, to our mind and under the circumstances, is sufficient to
establish the existence of an employer-employee relationship. Certainly, the facts as narrated by petitioners are more
believable than the irrational denials made by respondent. Thus, we ruled in Lee Eng Hong v. Court of Appeals:9
540
Evidence, to be believed, must not only proceed from the mouth of a credible witness, but it must be credible in itself such
as the common experience and observation of mankind can approve as probable under the circumstances. We have no test of
the truth of human testimony, except its conformity to our knowledge, observation and experience. Whatever is repugnant to
these belongs to the miraculous and is outside judicial cognizance (Castaares v. Court of Appeals, 92 SCRA 568 [1979]).
To reiterate, while respondent and SSCP no longer had any legal relationship with the termination of the Agreement,
petitioners remained at their post securing the premises of respondent while receiving their salaries, allegedly from SSCP.
Clearly, such a situation makes no sense, and the denials proffered by respondent do not shed any light to the situation. It is
but reasonable to conclude that, with the behest and, presumably, directive of respondent, petitioners continued with their
services. Evidently, such are indicia of control that respondent exercised over petitioners.
Such power of control has been explained as the "right to control not only the end to be achieved but also the means to be
used in reaching such end."10 With the conclusion that respondent directed petitioners to remain at their posts and continue
with their duties, it is clear that respondent exercised the power of control over them; thus, the existence of an employer-
employee relationship.
In Tongko v. The Manufacturers Life Insurance Co. (Phils.) Inc., 11 we reiterated the oft repeated rule that control is the most
important element in the determination of the existence of an employer-employee relationship:
In the determination of whether an employer-employee relationship exists between two parties, this Court applies the four-fold
test to determine the existence of the elements of such relationship. In Pacific Consultants International Asia, Inc. v.
Schonfeld, the Court set out the elements of an employer-employee relationship, thus:
Jurisprudence is firmly settled that whenever the existence of an employment relationship is in dispute, four elements
constitute the reliable yardstick: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employers power to control the employees conduct. It is the so-called "control test" which constitutes
the most important index of the existence of the employer-employee relationship that is, whether the employer controls or has
reserved the right to control the employee not only as to the result of the work to be done but also as to the means and
methods by which the same is to be accomplished. Stated otherwise, an employer-employee relationship exists where the
person for whom the services are performed reserves the right to control not only the end to be achieved but also the means
to be used in reaching such end.
Furthermore, Article 106 of the Labor Code contains a provision on contractors, to wit:
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the performance of
the formers work, the employees of the contractor and of the latters subcontractor, if any, shall be paid in accordance with the
provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the
employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work
performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting-out of labor to
protect the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions
between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine
who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or
circumvention of any provision of this Code.1avvphi1
There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed
by such person are performing activities which are directly related to the principal business of such employer. In such cases,
the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in
the same manner and extent as if the latter were directly employed by him. (Emphasis supplied.)
Thus, the Secretary of Labor issued Department Order No. 18-2002, Series of 2002, implementing Art. 106 as follows:
Section 5. Prohibition against labor-only contracting.Labor-only contracting is hereby declared prohibited. For this purpose,
labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a principal, and any of the following elements are present:
(i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or
service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal; or
(ii) the contractor does not exercise the right to control over the performance of the work of the contractual employee.
The foregoing provisions shall be without prejudice to the application of Article 248 (C) of the Labor Code, as amended.
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations, tools,
equipment, implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the
performance or completion of the job, work or service contracted out.
The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers are
performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that end.
On the other hand, Sec. 7 of the department order contains the consequence of such labor-only contracting:
541
Section 7. Existence of an employer-employee relationship.The contractor or subcontractor shall be considered the
employer of the contractual employee for purposes of enforcing the provisions of the Labor Code and other social legislation.
The principal, however, shall be solidarily liable with the contractor in the event of any violation of any provision of the Labor
Code, including the failure to pay wages.
The principal shall be deemed the employer of the contractual employee in any of the following cases as declared by a
competent authority:
(a) where there is labor-only contracting; or
(b) where the contracting arrangement falls within the prohibitions provided in Section 6 (Prohibitions) hereof.
(Emphasis supplied.)
Evidently, respondent having the power of control over petitioners must be considered as petitioners employerfrom the
termination of the Agreement onwardsas this was the only time that any evidence of control was exhibited by respondent
over petitioners and in light of our ruling in Abella. 12 Thus, as aptly declared by the NLRC, petitioners were entitled to the rights
and benefits of employees of respondent, including due process requirements in the termination of their services.
Both the Labor Arbiter and NLRC found that respondent did not observe such due process requirements. Having failed to do
so, respondent is guilty of illegal dismissal.
WHEREFORE, we SET ASIDE the CAs May 6, 2008 Decision and November 4, 2008 Resolution in CA-G.R. SP No. 97398.
We hereby REINSTATE the Labor Arbiters Decision dated February 13, 2004 and the NLRCs Resolutions dated October 28,
2005 and August 28, 2006.
No costs.
SO ORDERED.

G.R. No. 164205 September 3, 2009

OLDARICO S. TRAVEO, ROVEL A. GENELSA, RUEL U. VILLARMENTE, ALFREDO A. PANILAGAO, CARMEN P.
DANILA, ELIZABETH B. MACALINO, RAMIL P. ALBITO, REYNALDO A. LADRILLO, LUCAS G. TAMAYO, DIOSDADO A.
AMORIN, RODINO C. VASQUEZ, GLORIA A. FELICANO, NOLE E. FERMILAN, JOSELITO B. RENDON, CRISTETA D.
CAA, EVELYN D. ARCENAL and JEORGE M. NONO, Petitioners,
vs.
BOBONGON BANANA GROWERS MULTI-PURPOSE COOPERATIVE, TIMOG AGRICULTURAL CORPORATION,
DIAMOND FARMS, INC., and DOLE ASIA PHILIPPINES, Respondents.
DECISION
CARPIO MORALES, J.:
By the account of petitioner Oldarico Traveo and his 16 co-petitioners, in 1992, respondent Timog Agricultural Corporation
(TACOR) and respondent Diamond Farms, Inc. (DFI) hired them to work at a banana plantation at Bobongon, Santo Tomas,
Davao Del Norte which covered lands previously planted with rice and corn but whose owners had agreed to convert into a
banana plantation upon being convinced that TACOR and DFI could provide the needed capital, expertise, and equipment.
Petitioners helped prepare the lands for the planting of banana suckers and eventually carried out the planting as well.1
Petitioners asseverated that while they worked under the direct control of supervisors assigned by TACOR and DFI, these
companies used different schemes to make it appear that petitioners were hired through independent contractors, including
individuals, unregistered associations, and cooperatives; that the successive changes in the names of their employers
notwithstanding, they continued to perform the same work under the direct control of TACOR and DFI supervisors; and that
under the last scheme adopted by these companies, the nominal individual contractors were required to, as they did, join a
cooperative and thus became members of respondent Bobongon Banana Growers Multi-purpose Cooperative (the
Cooperative).2
Continued petitioners: Sometime in 2000, above-named respondents began utilizing harassment tactics to ease them out of
their jobs. Without first seeking the approval of the Department of Labor and Employment (DOLE), they changed their
compensation package from being based on a daily rate to a pakyawan rate that depended on the combined productivity of
the "gangs" they had been grouped into. Soon thereafter, they stopped paying their salaries, prompting them to stop working. 3
One after another, three separate complaints for illegal dismissal were filed by petitioners, individually and collectively, with the
National Labor Relations Commission (NLRC) against said respondents including respondent Dole Asia Philippines as it then
supposedly owned TACOR,4 for unpaid salaries, overtime pay, 13th month pay, service incentive leave pay, damages, and
attorneys fees.5
DFI answered for itself and TACOR, which it claimed had been merged with it and ceased to exist as a corporation. Denying
that it had engaged the services of petitioners,6 DFI alleged that during the corporate lifetime of TACOR, it had an
arrangement with several landowners in Santo Tomas, Davao Del Norte whereby TACOR was to extend financial and
technical assistance to them for the development of their lands into a banana plantation on the condition that the bananas
produced therein would be sold exclusively to TACOR; that the landowners worked on their own farms and hired laborers to
assist them; that the landowners themselves decided to form a cooperative in order to better attain their business objectives;

542
and that it was not in a position to state whether petitioners were working on the banana plantation of the landowners who had
contracted with TACOR.7a1f
The Cooperative failed to file a position paper despite due notice, prompting the Labor Arbiter to consider it to have waived its
right to adduce evidence in its defense.
Nothing was heard from respondent Dole Asia Philippines.
By consolidated Decision dated October 30, 2002,8 the Labor Arbiter, found respondent Cooperative guilty of illegal dismissal.
It dropped the complaints against DFI, TACOR and Dole Asia Philippines. Thus it disposed:
WHEREFORE, judgment is hereby rendered:
1. Declaring respondent Bobongon Banana Growers Multi-purpose Cooperative guilty of illegal dismissal;
2. Ordering respondent Bobongon Banana Growers Multi-purpose Cooperative to pay complainants full
backwages from the time of their illegal dismissal up to this promulgation, to be determined during the execution
stage;
3. Ordering respondent Bobongon Banana Growers Multi-purpose Cooperative to reinstate complainants to their
former positions without loss of seniority rights and if not possible, to pay them separation pay equivalent to 1/2
month pay for every year of service;
4. Ordering respondent Bobongon Banana Grower Cooperative [sic] to pay 10% of the total award as Attorneys fees;
5. All other respondents are hereby dropped as party-respondents for lack of merit. (Underscoring supplied)
In finding for petitioners, the Labor Arbiter relied heavily on the following Orders submitted by DFI which were issued in an
earlier case filed with the DOLE, viz: (1) Order dated July 11, 1995 of the Director of DOLE Regional Office No. XI declaring
the Cooperative as the employer of the 341 workers in the farms of its several members; (2) Order dated December 17, 1997
of the DOLE Secretary affirming the Order dated July 11, 1995 of the Director of DOLE Regional Office No. XI; and (3) Order
dated June 23, 1998 of the DOLE Secretary denying the Cooperatives Motion for Reconsideration.
On partial appeal to the NLRC, petitioners questioned the Labor Arbiters denial of their money claims and the dropping of their
complaints against TACOR, DFI, and Dole Asia Philippines.
By Resolution dated July 30, 2003,9 the NLRC sustained the Labor Arbiters ruling that the employer of petitioners is the
Cooperative, there being no showing that the earlier mentioned Orders of the DOLE Secretary had been set aside by a court
of competent jurisdiction. It partially granted petitioners appeal, however, by ordering the Cooperative to pay them their unpaid
wages, wage differentials, service incentive leave pay, and 13th month pay. It thus remanded the case to the Labor Arbiter for
computation of those awards.
Their Motion for Reconsideration having been denied by Resolution of September 30, 2003, 10 petitioners appealed to the
Court of Appeals via certiorari.11
By Resolution dated February 20, 2004,12 the appellate court dismissed petitioners petition for certiorari on the ground that the
accompanying verification and certification against forum shopping was defective, it having been signed by only 19 of the 22
therein named petitioners. Their Motion for Reconsideration having been denied by Resolution of May 13, 2004, 13 petitioners
lodged the present Petition for Review on Certiorari.
Petitioners posit that the appellate court erred in dismissing their petition on a mere technicality as it should have, at most,
dismissed the petition only with respect to the non-signing petitioners.
Dwelling on the merits of the case, petitioners posit that the Labor Arbiter and the NLRC disregarded evidence on record
showing that while the Cooperative was their employer on paper, the other respondents exercised control and supervision
over them; that the Cooperative was a labor-only contractor; and that the Orders of the DOLE Secretary relied upon by the
Labor Arbiter and the NLRC are not applicable to them as the same pertained to a certification election case involving different
parties and issues.14
DFI, commenting for itself and TACOR, maintains that, among other things, it was not the employer of petitioners; and that it
cannot comment on their money claims because no evidence was submitted in support thereof.15
It appears that respondent Cooperative had been dissolved.16
As respondent Dole Asia Philippines failed to file a comment, the Court, by Resolution of November 29, 2006, 17required it to
(1) show cause why it should not be held in contempt for its failure to heed the Courts directive, and (2) file the required
comment, within 10 days from notice.
Dole Philippines, Inc. (DPI) promptly filed an Urgent Manifestation 18 stating that, among other things, while its division located
in Davao City received the Courts Resolution directing Dole Asia Philippines to file a comment on the present petition, DPI did
not file a comment as the directive was addressed to "Dole Asia Philippines", an entity which is not registered at the Securities
and Exchange Commission.
Commenting on DPIs Urgent Manifestation, petitioners contend that DPI cannot be allowed to take advantage of their lack of
knowledge as to its exact corporate name, DPI having raised the matter for the first time before this Court notwithstanding its
receipt of all pleadings and court processes from the inception of this case. 19
Upon review of the records, the Court finds that DPI never ever participated in the proceedings despite due notice. Its
posturing, therefore, that the court processes it received were addressed to "Dole Asia Philippines," a non-existent entity, does
not lie. That DPI is the intended respondent, there is no doubt.
543
Respecting the appellate courts dismissal of petitioners appeal due to the failure of some of them to sign the therein
accompanying verification and certification against forum-shopping, the Courts guidelines for the bench and bar in Altres v.
Empleo,20 which were culled "from jurisprudential pronouncements," are instructive:
For the guidance of the bench and bar, the Court restates in capsule form the jurisprudential pronouncements already
reflected above respecting non-compliance with the requirements on, or submission of defective, verification and certification
against forum shopping:
1) A distinction must be made between non-compliance with the requirement on or submission of defective
verification, and non-compliance with the requirement on or submission of defective certification against forum
shopping.
2) As to verification, non-compliance therewith or a defect therein does not necessarily render the pleading fatally
defective. The court may order its submission or correction or act on the pleading if the attending circumstances are
such that strict compliance with the Rule may be dispensed with in order that the ends of justice may be served
thereby.
3) Verification is deemed substantially complied with when one who has ample knowledge to swear to the truth of the
allegations in the complaint or petition signs the verification, and when matters alleged in the petition have been
made in good faith or are true and correct.
4) As to certification against forum shopping, non-compliance therewith or a defect therein, unlike in verification, is
generally not curable by its subsequent submission or correction thereof, unless there is a need to relax the Rule on
the ground of "substantial compliance" or presence of "special circumstances or compelling reasons."
5) The certification against forum shopping must be signed by all the plaintiffs or petitioners in a case; otherwise,
those who did not sign will be dropped as parties to the case. Under reasonable or justifiable circumstances,
however, as when all the plaintiffs or petitioners share a common interest and invoke a common cause of action or
defense, the signature of only one of them in the certification against forum shopping substantially complies with the
Rule.
6) Finally, the certification against forum shopping must be executed by the party-pleader, not by his counsel. If,
however, for reasonable or justifiable reasons, the party-pleader is unable to sign, he must execute a Special Power
of Attorney designating his counsel of record to sign on his behalf. (Emphasis and underscoring supplied)
The foregoing restated pronouncements were lost in the challenged Resolutions of the appellate court. Petitioners contention
that the appellate court should have dismissed the petition only as to the non-signing petitioners or merely dropped them as
parties to the case is thus in order.
Instead of remanding the case to the appellate court, however, the Court deems it more practical to decide the substantive
issue raised in this petition so as not to further delay the disposition of this case.21 And it thus resolves to deviate as well from
the general rule that factual questions are not entertained in petitions for review on certiorari of the appellate courts decisions
in order to write finis to this protracted litigation.
The sole issue is whether DFI (with which TACOR had been merged) and DPI should be held solidarily liable with the
Cooperative for petitioners illegal dismissal and money claims.
The Labor Code and its Implementing Rules empower the Labor Arbiter to be the trier of facts in labor cases. 22Much reliance
is thus placed on the Arbiters findings of fact, having had the opportunity to discuss with the parties and their witnesses the
factual matters of the case during the conciliation phase. 23 Just the same, a review of the records of the present case does not
warrant a conclusion different from the Arbiters, as affirmed by the NLRC, that the Cooperative is the employer of petitioners.
To be sure, the matter of whether the Cooperative is an independent contractor or a labor-only contractor may not be used to
predicate a ruling in this case. Job contracting or subcontracting refers to an arrangement whereby a principal agrees to farm
out with a contractor or subcontractor the performance of a specific job, work or service within a definite or predetermined
period, regardless of whether such job, work or service is to be performed or completed within or outside the premises of the
principal.24 The present case does not involve such an arrangement.
DFI did not farm out to the Cooperative the performance of a specific job, work, or service. Instead, it entered into a Banana
Production and Purchase Agreement25 (Contract) with the Cooperative, under which the Cooperative would handle and fund
the production of bananas and operation of the plantation covering lands owned by its members in consideration of DFIs
commitment to provide financial and technical assistance as needed, including the supply of information and equipment in
growing, packing, and shipping bananas. The Cooperative would hire its own workers and pay their wages and benefits, and
sell exclusively to DFI all export quality bananas produced that meet the specifications agreed upon.
To the Court, the Contract between the Cooperative and DFI, far from being a job contracting arrangement, is in essence a
business partnership that partakes of the nature of a joint venture. 26 The rules on job contracting are, therefore, inapposite.
The Court may not alter the intention of the contracting parties as gleaned from their stipulations without violating the
autonomy of contracts principle under Article 1306 of the Civil Code which gives the contracting parties the utmost liberality
and freedom to establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not
contrary to law, morals, good custom, public order or public policy.

544
Petitioners claim of employment relationship with the Cooperatives herein co-respondents must be assessed on the basis of
four standards, viz: (a) the manner of their selection and engagement; (b) the mode of payment of their wages; (c) the
presence or absence of the power of dismissal; and (d) the presence or absence of control over their conduct. Most
determinative among these factors is the so-called "control test."27
There is nothing in the records which indicates the presence of any of the foregoing elements of an employer-employee
relationship.
The absence of the first requisite, which refers to selection and engagement, is shown by DFIs total lack of knowledge on who
actually were engaged by the Cooperative to work in the banana plantation. This is borne out by the Contract between the
Cooperative and DFI, under which the Cooperative was to hire its own workers. As TACOR had been merged with DFI, and
DPI is merely alleged to have previously owned TACOR, this applies to them as well. Petitioners failed to prove the contrary.
No employment contract whatsoever was submitted to substantiate how petitioners were hired and by whom.
On the second requisite, which refers to the payment of wages, it was likewise the Cooperative that paid the same. As
reflected earlier, under the Contract, the Cooperative was to handle and fund the production of bananas and operation of the
plantation.28 The Cooperative was also to be responsible for the proper conduct, safety, benefits, and general welfare of its
members and workers in the plantation.29
As to the third requisite, which refers to the power of dismissal, and the fourth requisite, which refers to the power of control,
both were retained by the Cooperative. Again, the Contract stipulated that the Cooperative was to be responsible for the
proper conduct and general welfare of its members and workers in the plantation.
The crucial element of control refers to the authority of the employer to control the employee not only with regard to the result
of the work to be done, but also to the means and methods by which the work is to be accomplished. 30 While it suffices that
the power of control exists, albeit not actually exercised, there must be some evidence of such power. In the present case,
petitioners did not present any.
There being no employer-employee relationship between petitioners and the Cooperatives co-respondents, the latter are not
solidarily liable with the Cooperative for petitioners illegal dismissal and money claims.
While the Court commiserates with petitioners on their loss of employment, especially now that the Cooperative is no longer a
going concern, it cannot simply, by default, hold the Cooperatives co-respondents liable for their claims without any factual
and legal justification therefor. The social justice policy of labor laws and the Constitution is not meant to be oppressive of
capital.
En passant, petitioners are not precluded from pursuing any available remedies against the former members of the defunct
Cooperative as their individual circumstances may warrant.
WHEREFORE, the petition is DISMISSED.
SO ORDERED.

G.R. No. 172349 June 13, 2012

POLYFOAM-RGC INTERNATIONAL, CORPORATION and PRECILLA A. GRAMAJE, Petitioners,
vs.
EDGARDO CONCEPCION, Respondent.
DECISION
PERALTA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court filed by petitioners Polyfoam-RGC International
Corporation (Polyfoam) and Precilla A. Gramaje (Gramaje) against respondent Edgardo Concepcion assailing the Court of
Appeals (CA) Decision1 dated December 19, 2005 and Resolution2 dated April 25, 2006 in CA-G.R. SP No. 83696. The
assailed decision reversed the National Labor Relations Commissions (NLRCs) Decision 3 dated May 7, 2003 in NLRC NCR
CA No. 030622-02, while the assailed resolution denied petitioners and respondents motions for reconsideration.
The factual and procedural antecedents follow:
On February 8, 2000, respondent filed a Complaint4 for illegal dismissal, non-payment of wages, premium pay for rest day,
separation pay, service incentive leave pay, 13th month pay, damages, and attorneys fees against Polyfoam and Ms.
Natividad Cheng (Cheng). Respondent alleged that he was hired by Polyfoam as an "all-around" factory worker and served as
such for almost six years.5 On January 14, 2000, he allegedly discovered that his time card was not in the rack and was later
informed by the security guard that he could no longer punch his time card. 6 When he protested to his supervisor, the latter
allegedly told him that the management decided to dismiss him due to an infraction of a company rule. Cheng, the companys
manager, also refused to face him. Respondents counsel later wrote a letter 7 to Polyfoams manager requesting that
respondent be re-admitted to work, but the request remained unheeded prompting the latter to file the complaint for illegal
dismissal.8
On April 28, 2000, Gramaje filed a Motion for Intervention 9 claiming to be the real employer of respondent. On the other hand,
Polyfoam and Cheng filed a Motion to Dismiss10 on the grounds that the NLRC has no jurisdiction over the case, because of
the absence of employer-employee relationship between Polyfoam and respondent and that the money claims had already
prescribed.11
545
On May 24, 2000, Labor Arbiter Adolfo Babiano issued an Order 12 granting Gramajes motion for intervention, it appearing that
she is an indispensable party and denying Polyfoam and Chengs motion to dismiss as the lack of employer-employee
relationship is only a matter of defense.
In their Position Paper,13 Polyfoam and Cheng insisted that the NLRC has no jurisdiction over the case, because respondent
was not their employee. They likewise contended that respondents money claims had already prescribed. Finally, they fault
respondent for including Cheng as a party-defendant, considering that she is not even a director of the company. 14
In her Position Paper,15 Gramaje claimed that P.A. Gramaje Employment Services (PAGES) is a legitimate job contractor who
provided some manpower needs of Polyfoam. It was alleged that respondent was hired as "packer" and assigned to Polyfoam,
charged with packing the latters finished foam products. She argued, however, that respondent was not dismissed from
employment, rather, he simply stopped reporting for work.16
On December 14, 2001, Labor Arbiter (LA) Marita V. Padolina rendered a Decision finding respondent to have been illegally
dismissed from employment and holding Polyfoam and Gramaje/PAGES solidarily liable for respondents money claims. The
dispositive portion of the Decision is quoted below for easy reference:
WHEREFORE, premises considered, judgment is hereby rendered finding complainant to have been illegally dismissed and
respondents Polyfoam-RGC International Corporation, P.A. Gramaje Employment Services/Precilla A. Gramaje are ordered to
pay complainant jointly and severally the following:
1). Separation Pay - P 52,000.00

2). Backwages - 157,041.38

3). 13th Month Pay - 17,407.00

4). Moral Damages - 5,000.00

5). Exemplary Damages - 5,000.00

6). Attorneys fees - 23,644.83

P 260,093.21
All other claims are denied for lack of factual basis.
SO ORDERED.17
The Labor Arbiter found respondent to have been illegally dismissed from employment and thus is entitled to full backwages
inclusive of allowances. In lieu of reinstatement, the LA awarded respondent separation pay of one month salary for every year
of service from April 21, 1994 until promulgation of the decision. 18 The LA further held that petitioners are solidarily liable to
respondent for the latters money claims, considering that Gramaje (the contractor) was not enrolled as private employment
agency in the registry of the Regional Office of the Department of Labor and Employment (DOLE) and considering further that
respondent performed a job directly related to the main business of Polyfoam. 19
On appeal by petitioners, the NLRC modified the LA decision by exonerating Polyfoam from liability for respondents claim for
separation pay and deleting the awards of backwages, 13th month pay, damages, and attorneys fees. The dispositive portion
of the decision reads:
WHEREFORE, the appealed decision is modified in that the complaint against respondent-appellant Polyfoam-RGC
International Corp. is dismissed. However, respondent-intervenor-appellant P.A. Gramaje Employment Services is hereby
ordered to pay complainant separation pay of one (1) month salary for every year of service reckoned from April 21, 1996 up
to the rendition of this decision, or the sum of P58,5000 (sic).
The awards of backwages, 13th month pay, damages, and attorneys fees are set aside.
SO ORDERED.20
The NLRC found Gramaje to be an independent contractor who contracted the packaging aspect of the finished foam products
of Polyfoam. Pursuant to said contract, Gramajes employees, including respondent, were assigned to Polyfoam but remained
under the control and supervision of Gramaje. It likewise concluded that Gramaje had its own office equipment, tools, and
substantial capital and, in fact, supplied the plastic containers and carton boxes used by her employees in performing their
duties.21 The Commission also found sufficient evidence to prove that Gramaje paid respondents wages and benefits and
reported the latter to the Social Security System (SSS) as a covered employee. 22 As to whether there was illegal dismissal, the
NLRC answered in the negative, since respondent was not notified that he had been dismissed nor was he prevented from
returning to his work. The NLRC found Gramaje liable for claiming that respondent abandoned his job. Reinstatement,
however, could not be decreed because of the strained relations between the parties; hence, the award of separation pay. But
the NLRC refused to award backwages.23 The award of moral and exemplary damages was likewise deleted for lack of
evidence.24

546
Aggrieved, respondent elevated the case to the CA in a special civil action for certiorari under Rule 65 of the Rules of Court.
On December 19, 2005, the appellate court rendered the assailed decision, 25 the dispositive portion of which reads:
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is GRANTED. The assailed Decision of the National Labor
Relations Commission, First Division dated May 7, 2003 is REVERSED and the decision of Labor Arbiter Marita Padolina,
dated December 14, 2001, is hereby REINSTATED.
SO ORDERED.26
The CA agreed with the LAs conclusion that Gramaje is not a legitimate job contractor but only a "labor-only" contractor
because of the following: (1) Gramaje failed to present its Audited Financial Statement that would have shown its financial
standing and ownership of equipment, machineries, and tools necessary to run her own business; 27 (2) Gramaje failed to
present a single copy of the purported contract with Polyfoam as to the packaging aspect of the latters business; 28 (3)
Gramajes licenses supposedly issued by the DOLE appeared to be spurious.29 (4) Gramaje was not registered with DOLE as
a private recruitment agency;30 and (5) Gramaje presented only one (1) SSS Quarterly Collection List whose authenticity is
doubtful.31 The CA noted that petitioners are represented by only one law firm though they made it appear that they were
represented by different lawyers.32 These circumstances, says the CA, give rise to the suspicion that the creation or
establishment of Gramaje was just a scheme designed to evade the obligation inherent in an employer-employee
relationship.33 Thus, respondent was indeed Polyfoams employee. This relationship was specifically shown by Polyfoams
exercise of supervision over the work of respondent;34 the furnishing of a copy of Polyfoams "Mga Alituntunin at Karampatang
Parusa" to serve as respondents guide in the performance of his duty;35 the length of time that respondent had performed
activities necessary for Polyfoams business;36 and Polyfoams act of directly firing respondent.37 Finally, the appellate court
affirmed the LAs findings of illegal dismissal as respondent was dismissed from the service without cause and due
process.38 Consequently, separation pay in lieu of reinstatement was awarded. The CA quoted with approval the LA
conclusions on the award of respondents other money claims. 39
Petitioners now come before the Court in this petition for review on certiorari based on the following assigned errors:
I.
THE COURT OF APPEALS ERRED IN NOT DISMISSING THE PETITION FOR CERTIORARI FILED BY HEREIN
RESPONDENT CONSIDERING THE FACT THAT IT WAS CLEARLY FILED OUT OF TIME, HAVING BEEN FILED
ON THE 77TH DAY FROM RECEIPT BY HEREIN RESPONDENT OF THE RESOLUTION OF THE NLRC DENYING
HIS MOTION FOR RECONSIDERATION.
II.
THE COURT OF APPEALS ERRED IN NOT UPHOLDING THE DECISION OF THE NLRC AND ITS FINDINGS
THAT A) RESPONDENT CONCEPCION IS AN EMPLOYEE OF P.A. GRAMAJE EMPLOYMENT SERVICES; B)
P.A. GRAMAJE IS A LEGITIMATE JOB CONTRACTOR; C) RESPONDENT CONCEPCION WAS NOT DISMISSED
FROM HIS JOB, CONSIDERING THAT THESE FINDINGS ARE FULLY SUPPORTED BY EVIDENCE.
III.
THE COURT OF APPEALS ERRED IN REINSTATING THE DECISION OF THE LABOR ARBITER MARITA
PADOLINA AWARDING RESPONDENT CONCEPCION BACKWAGES, MORAL AND EXEMPLARY DAMAGES
AND ATTORNEYS FEES.40
There are three issues for resolution, to wit: (1) whether or not Gramaje is an independent job contractor; (2) whether or not an
employer-employee relationship exists between Polyfoam and respondent; and (3) whether or not respondent was illegally
dismissed from employment.
Gramaje is a Labor-Only Contractor
Article 106 of the Labor Code explains the relations which may arise between an employer, a contractor, and the contractors
employees, thus:
ART. 106. Contractor or subcontracting. Whenever an employer enters into a contract with another person for the
performance of the formers work, the employees of the contractor and of the latters subcontractor, if any, shall be paid in
accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the
employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work
performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting out of labor to
protect the rights of workers established under the Code. In so prohibiting or restricting, he may make appropriate distinctions
between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine
who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or
circumvention of any provision of this Code.
There is labor-only contracting where the person supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed
by such person are performing activities which are directly related to the principal business of such employer. In such cases,

547
the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in
the same manner and extent as if the latter were directly employed by him.
In Sasan, Sr. v. National Labor Relations Commission 4th Division, 41 the Court distinguished permissible job contracting or
subcontracting from "labor-only" contracting, to wit:
Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to put out or farm out to a
contractor or subcontractor the performance or completion of a specific job, work or service within a definite or predetermined
period, regardless of whether such job, work or service is to be performed or completed within or outside the premises of the
principal. A person is considered engaged in legitimate job contracting or subcontracting if the following conditions concur:
(a) The contractor or subcontractor carries on a distinct and independent business and undertakes to perform the job, work or
service on its own account and under its own responsibility according to its own manner and method, and free from the control
and direction of the principal in all matters connected with the performance of the work except as to the results thereof;
(b) The contractor or subcontractor has substantial capital or investment; and
(c) The agreement between the principal and contractor or subcontractor assures the contractual employees entitlement to all
labor and occupational safety and health standards, free exercise of the right to self-organization, security of tenure, and social
and welfare benefits.
In contrast, labor-only contracting, a prohibited act, is an arrangement where the contractor or subcontractor merely recruits,
supplies or places workers to perform a job, work or service for a principal. In labor-only contracting, the following elements
are present:
(a) The contractor or subcontractor does not have substantial capital or investment to actually perform the job, work
or service under its own account and responsibility; and
(b) The employees recruited, supplied or placed by such contractor or subcontractor are performing activities which
are directly related to the main business of the principal. 42
The test of independent contractorship is "whether one claiming to be an independent contractor has contracted to do the work
according to his own methods and without being subject to the control of the employer, except only as to the results of the
work."43 In San Miguel Corporation v. Semillano,44 the Court laid down the criteria in determining the existence of an
independent and permissible contractor relationship, to wit:
x x x [W]hether or not the contractor is carrying on an independent business; the nature and extent of the work; the skill
required; the term and duration of the relationship; the right to assign the performance of a specified piece of work; the control
and supervision of the work to another; the employers power with respect to the hiring, firing and payment of the contractors
workers; the control of the premises; the duty to supply the premises, tools, appliances, materials, and labor; and the mode,
manner and terms of payment.45
Simply put, the totality of the facts and the surrounding circumstances of the case are to be considered. Each case must be
determined by its own facts and all the features of the relationship are to be considered.46
Applying the foregoing tests, we agree with the CAs conclusion that Gramaje is not an independent job contractor, but a
"labor-only" contractor.
First, Gramaje has no substantial capital or investment. The presumption is that a contractor is a labor-only contractor unless
he overcomes the burden of proving that it has substantial capital, investment, tools, and the like. The employee should not be
expected to prove the negative fact that the contractor does not have substantial capital, investment and tools to engage in
job-contracting.47
Gramaje claimed that it has substantial capital of its own as well as investment in its office, equipment and tools. She pointed
out that she furnished the plastic containers and carton boxes used in carrying out the function of packing the mattresses of
Polyfoam. She added that she had placed in Polyfoams workplace ten (10) sealing machines, twenty (20) hand trucks, and
two (2) forklifts to enable respondent and the other employees of Gramaje assigned at Polyfoam to perform their job. Finally,
she explained that she had her own office with her own staff.48 However, aside from her own bare statement, neither Gramaje
nor Polyfoam presented evidence showing Gramajes ownership of the equipment and machineries used in the performance
of the alleged contracted job. Considering that these machineries are found in Polyfoams premises, there can be no other
logical conclusion but that the tools and equipment utilized by Gramaje and her "employees" are owned by Polyfoam. Neither
did Polyfoam nor Gramaje show that the latter had clients other than the former. Since petitioners failed to adduce evidence
that Gramaje had any substantial capital, investment or assets to perform the work contracted for, the presumption that
Gramaje is a labor-only contractor stands.49
Second, Gramaje did not carry on an independent business or undertake the performance of its service contract according to
its own manner and method, free from the control and supervision of its principal, Polyfoam, its apparent role having been
merely to recruit persons to work for Polyfoam.50 It is undisputed that respondent had performed his task of packing
Polyfoams foam products in Polyfoams premises. As to the recruitment of respondent, petitioners were able to establish only
that respondents application was referred to Gramaje, but that is all. Prior to his termination, respondent had been performing
the same job in Polyfoams business for almost six (6) years. He was even furnished a copy of Polyfoams "Mga Alituntunin at
Karampatang Parusa,"51 which embodied Polyfoams rules on attendance, the manner of performing the employees duties,

548
ethical standards, cleanliness, health, safety, peace and order. These rules carried with them the corresponding penalties in
case of violation.
While it is true that petitioners submitted the Affidavit of Polyfoams supervisor Victor Abadia, claiming that the latter did not
exercise supervision over respondent because the latter was not Polyfoams but Gramajes employee, said Affidavit is
insufficient to prove such claim. Petitioners should have presented the person who they claim to have exercised supervision
over respondent and their alleged other employees assigned to Polyfoam. It was never established that Gramaje took entire
charge, control and supervision of the work and service agreed upon. And as aptly observed by the CA, "it is likewise highly
unusual and suspect as to the absence of a written contract specifying the performance of a specified service, the nature and
extent of the service or work to be done and the term and duration of the relationship." 52
An Employer-Employee Relationship Exists Between Respondent and Polyfoam
A finding that a contractor is a "labor-only" contractor, as opposed to permissible job contracting, is equivalent to declaring that
there is an employer-employee relationship between the principal and the employees of the supposed contractor, and the
"labor-only" contractor is considered as a mere agent of the principal, the real employer. 53 In this case, Polyfoam is the
principal employer and Gramaje is the labor-only contractor. Polyfoam and Gramaje are, therefore, solidarily liable for the
rightful claims of respondent.54
Respondent was Illegally Dismissed
From Employment
Respondent stated that on January 14, 2000, his time card was suddenly taken off the rack. His supervisor later informed him
that Polyfoams management decided to dismiss him due to infraction of company rule. In short, respondent insisted that he
was dismissed from employment without just or lawful cause and without due process. Polyfoam did not offer any explanation
of such dismissal. It, instead, explained that respondents real employer is Gramaje. Gramaje, on the other hand, denied the
claim of illegal dismissal. She shifted the blame on respondent claiming that the latter in fact abandoned his work.
The LA gave credence to respondents narration of the circumstances of the case. Said conclusion was affirmed by the CA.
We find no reason to depart from such findings.
Abandonment cannot be inferred from the actuations of respondent. When he discovered that his time card was off the rack,
he immediately inquired from his supervisor. He later sought the assistance of his counsel, who wrote a letter addressed to
Polyfoam requesting that he be re-admitted to work. When said request was not acted upon, he filed the instant illegal
dismissal case. These circumstances clearly negate the intention to abandon his work.
Petitioners failed to show any valid or authorized cause under the Labor Code which allowed it to terminate the services of
respondent. Neither was it shown that respondent was given ample opportunity to contest the legality of his dismissal. No
notice of termination was given to him. Clearly, respondent was not afforded due process. Having failed to establish
compliance with the requirements of termination of employment under the Labor Code, the dismissal of respondent was
tainted with illegality.55 Consequently, respondent is entitled to reinstatement without loss of seniority rights, and other
privileges and to his full backwages inclusive of allowances and to his other benefits or their monetary equivalent computed
from the time his compensation was withheld up to the time of his actual reinstatement. However, if reinstatement is no longer
feasible as in this case, separation pay equivalent to one month salary for every year of service shall be awarded as an
alternative.56 Thus, the CA is correct in affirming the LAs award of separation pay with full backwages and other monetary
benefits.
WHEREFORE, premises considered, the petition is hereby DENIED. The Court of Appeals Decision dated December 19,
2005 and Resolution dated April 25, 2006, in CA-G.R. SP No. 83696, are AFFIRMED.
SO ORDERED.

GARDEN OF MEMORIESPARK and LIFE G.R. No. 160278

PLAN, INC. and PAULINA T. REQUIO,
Petitioners, Present:

VELASCO, JR., J., Chairperson,

PERALTA,
- versus - ABAD,
MENDOZA, and
PERLAS-BERNABE, JJ.

NATIONAL LABOR RELATIONS

COMMISSION, SECOND DIVISION,
LABOR ARBITER FELIPE
T. GARDUQUE II and HILARIA CRUZ,
Respondents.
549
 Promulgated:

February 8, 2012

X -------------------------------------------------------------------------------------- X
DECISION

MENDOZA, J.:

This is a petition for review under Rule 45 of the Rules of Court seeking nullification of the June 11, 2003
Decision[1] and October 16, 2003 Resolution[2] of the Court of Appeals (CA), in CA-G.R. SP No. 64569, which affirmed the
December 29, 2000 Decision[3] of the National Labor Relations Commission (NLRC). The NLRC agreed with the Labor
Arbiter (L.A.) in finding that petitioner Garden of Memories Memorial Park and Life Plan, Inc. (Garden of Memories) was the
employer of respondent Hilaria Cruz (Cruz), and that Garden of Memories and petitioner Paulina Requio (Requio), were jointly
and severally liable for the money claims of Cruz.

The Facts

Petitioner Garden of Memories is engaged in the business of operating a memorial park situated at Calsadang Bago,
Pateros, Metro-Manila and selling memorial Plan and services.

Respondent Cruz, on the other hand, worked at the Garden of Memories Memorial Park as a utility worker from
August 1991 until her termination in February 1998.

On March 13, 1998, Cruz filed a complaint[4] for illegal dismissal, underpayment of wages, non-inclusion in the Social
Security Services, and non-payment of legal/special holiday, premium pay for rest day, 13 th month pay and service incentive
leave pay against Garden of Memories before the Department of Labor and Employment (DOLE).

Upon motion of Garden of Memories, Requio was impleaded as respondent on the alleged ground that she was its
service contractor and the employer of Cruz.

In her position paper,[5] Cruz averred that she worked as a utility worker of Garden of Memories with a salary
of P115.00 per day. As a utility worker, she was in charge, among others, of the cleaning and maintenance of the ground
facilities of the memorial park. Sometime in February 1998, she had a misunderstanding with a co-worker named Adoracion
Requio regarding the use of a garden water hose. When the misunderstanding came to the knowledge of Requio, the latter
instructed them to go home and not to return anymore. After three (3) days, Cruz reported for work but she was told that she
had been replaced by another worker. She immediately reported the matter of her replacement to the personnel manager
of Garden of Memories and manifested her protest.

Cruz argued that as a regular employee of the Garden of Memories, she could not be terminated without just or valid
cause. Also, her dismissal was violative of due process as she was not afforded the opportunity to explain her side before her
employment was terminated.

Cruz further claimed that as a result of her illegal dismissal, she suffered sleepless nights, serious anxiety and mental
anguish.

In its Answer,[6] Garden of Memories denied liability for the claims of Cruz and asserted that she was not its employee
but that of Requio, its independent service contractor, who maintained the park for a contract price. It insisted that there was
no employer-employee relationship between them because she was employed by its service contractor, Victoriana
Requio (Victoriana), who was later succeeded by her daughter, Paulina, when she (Victoriana) got
sick. Garden of Memories claimed that Requio was a service contractor who carried an independent business and undertook
the contract of work on her own account, under her own responsibility and according to her own manner and method, except
as to the results thereof.

In her defense, Requio prayed for the dismissal of the complaint stating that it was Victoriana, her mother, who hired
Cruz, and she merely took over the supervision and management of the workers of the memorial park when her mother got ill.
She claimed that the ownership of the business was never transferred to her.

550
 Requio further stated that Cruz was not dismissed from her employment but that she abandoned her work. [7]

On October 27, 1999, the LA ruled that Requio was not an independent contractor but a labor-only contractor and
that her defense that Cruz abandoned her work was negated by the filing of the present case. [8] The LA declared
both Garden of Memoriesand Requio, jointly and severally, liable for the monetary claims of Cruz, the dispositive portion of the
decision reads:

WHEREFORE, premises considered, respondents Garden of Memories Memorial [P]ark and Life
Plan, Inc. and/or Paulina Requio are hereby ordered to jointly and severally pay within ten (10) days from
receipt hereof, the herein complainant Hilaria Cruz, the sums of 72,072 (198 x 26 days x 14 months pay),
representing her eight (8) months separation pay and six (6) months backwages; 42,138.46, as salary
differential; 2,475.00, as service incentive leave pay; and 12,870.00 as 13th month pay, for three (3)
years, or a total sum of 129,555.46, plus ten percent attorneys fee.

Complainants other claims including her prayer for damages are hereby denied for lack of concrete
evidence.

SO ORDERED.[9]

Garden of Memories and Requio appealed the decision to the NLRC. In its December 29, 2000 Decision, the NLRC
affirmed the ruling of the LA, stating that Requio had no substantial capital or investments in the form of tools, equipment,
machineries, and work premises, among others, for her to qualify as an independent contractor. It declared the dismissal of
Cruz illegal reasoning out that there could be no abandonment of work on her part since Garden of Memories and Requio
failed to prove that there was a deliberate and unjustified refusal on the part of the employee to go back to work and resume
her employment.

Garden of Memories moved for a reconsideration of the NLRC decision but it was denied for lack of merit. [10]

Consequently, Garden of Memories and Requio filed before the CA a petition for certiorari under Rule 65 of the Rules
of Court. In its June 11, 2003 Decision, the CA dismissed the petition and affirmed the NLRC decision. Hence, this petition,
where they asserted that:

The Public Respondents National Labor Relations Commission and Court of Appeals
committed serious error, gravely abused their discretion and acted in excess of jurisdiction when
they failed to consider the provisions of Section 6 (d) of Department Order No. 10, Series of 1997, by
the Department of Labor and Employment, and then rendered their respective erroneous rulings
that:

PETITIONER PAULINA REQUIO IS ENGAGED IN LABOR-ONLY CONTRACTING.

II

THERE EXISTS AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN RESPONDENT

CRUZ AND PETITIONER GARDEN OF MEMORIES.

III

RESPONDENT HILARIA CRUZ DID NOT ABANDON HER WORK.

IV

THERE IS [NO] BASIS IN GRANTING THE MONETARY AWARDS IN FAVOR OF THE

RESPONDENT CRUZ DESPITE THE ABSENCE OF A CLEAR PRONOUNCEMENT REGARDING THE
LEGALITY OR ILLEGALITY OF HER DISMISSAL.[11]

551
 The petitioners aver that Requio is the employer of Cruz as she (Requio) is a legitimate independent contractor
providing maintenance work in the memorial park such as sweeping, weeding and watering of the lawns. They insist that there
was no employer-employee relationship between Garden of Memories and Cruz. They claim that there was a service contract
between Garden of Memories and Requio for the latter to provide maintenance work for the former and that the power of
control, the most important element in determining the presence of such a relationship was missing.
Furthermore, Garden of Memories alleges that it did not participate in the selection or dismissal of Requios employees.

As to the issue of dismissal, the petitioners denied the same and insist that Cruz willfully and actually abandoned her
work. They argue that Cruzs utterances HINDI KO KAILANGAN ANG TRABAHO and HINDI KO KAILANGAN MAGTRABAHO
AT HINDI KO KAILANGAN MAKI-USAP KAY PAULINA REQUIO, manifested her belligerence and disinterest in her work and
that her unexplained absences later only showed that she had no intention of returning to work.

The Court finds no merit in the petition.

At the outset, it must be stressed that the jurisdiction of this Court in a petition for review on certiorari under Rule 45
of the Rules of Court is limited to reviewing errors of law, not of fact. This is in line with the well-entrenched doctrine that the
Court is not a trier of facts, and this is strictly adhered to in labor cases. [12] Factual findings of labor officials, who are deemed
to have acquired expertise in matters within their respective jurisdictions, are generally accorded not only respect but even
finality, and bind the Court when supported by substantial evidence. Particularly when passed upon and upheld by the CA,
they are binding and conclusive upon the Court and will not normally be disturbed. [13] This is because it is not the function of
this Court to analyze or weigh all over again the evidence already considered in the proceedings below; or reevaluate the
credibility of witnesses; or substitute the findings of fact of an administrative tribunal which has expertise in its special field. [14]

In the present case, the LA, the NLRC, and the CA are one in declaring that petitioner Requio was not a legitimate
contractor. Echoing the decision of the LA and the NLRC, the CA reasoned out that Requio was not a licensed contractor and
had no substantial capital or investment in the form of tool, equipment and work premises, among others.

Section 106 of the Labor Code on contracting and subcontracting provides:

Article 106. Contractor or subcontractor. - Whenever, an employer enters into a contract with another
person for the performance of the formers work, the employees of the contractor and of the latters
subcontractor shall be paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with
this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such
employees to the extent of the work performed under the contract, in the same manner and extent that he
is liable to employees directly employed by him.

The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to
protect the rights of workers established under this Code. In so prohibiting or restricting, he may make
appropriate distinctions between labor-only contracting and job contracting as well as differentiations within
these types of contracting and determine who among the parties involved shall be considered the employer
for purposes of this Code, to prevent any violation or circumvention of any provision of this Code.

There is labor-only contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such persons are performing activities which are directly
related to the principal business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.[Underscoring provided]
In the same vein, Sections 8 and 9, DOLE Department Order No. 10, Series of 1997, state that:

Sec. 8. Job contracting. There is job contracting permissible under the Code if the following conditions are
met:

(1) The contractor carries on an independent business and undertakes the contract work on
his own account under his own responsibility according to his own manner and
method, free from the control and direction ofhis employer or principal in all
552
 matters connected with the performance of the work except as to the results thereof;
and

(2) The contractor has substantial capital or investment in the form of tools, equipment,
machineries, work premises, and other materials which are necessary in the conduct
of his business.

Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to an employer shall be
deemed to be engaged in labor-only contracting where such person:

(1) Does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises and other materials; and

(2) The workers recruited and placed by such persons are performing activities which are
directly related to the principal business or operations of the employer in which
workers are habitually employed.

(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be
considered merely as an agent or intermediary of the employer who shall be responsible to the workers in the
same manner and extent as if the latter were directly employed by him.

(c) For cases not falling under this Article, the Secretary of Labor shall determine through appropriate orders
whether or not the contracting out of labor is permissible in the light of the circumstances of each case and
after considering the operating needs of the employer and the rights of the workers involved. In such case,
he may prescribe conditions and restrictions to insure the protection and welfare of the workers.

On the matter of labor-only contracting, Section 5 of Rule VIII-A of the Omnibus Rules Implementing the Labor Code,
provides:

Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared

prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal,
and any of the following elements are present:

i) The contractor or subcontractor does not have substantial capital or investment

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

ii) The contractor does not exercise the right to control over the performance of the
work of the contractual employee.

Xxxx

Thus, in determining the existence of an independent contractor relationship, several factors may be considered,
such as, but not necessarily confined to, whether or not the contractor is carrying on an independent business; the nature and
extent of the work; the skill required; the term and duration of the relationship; the right to assign the performance of specified
pieces of work; the control and supervision of the work to another; the employers power with respect to the hiring, firing and
payment of the contractors workers; the control of the premises; the duty to supply premises, tools, appliances, materials and
labor; and the mode, manner and terms of payment. [15]

On the other hand, there is labor-only contracting where: (a) the person supplying workers to an employer does not
have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others; and (b) the
workers recruited and placed by such person are performing activities which are directly related to the principal business of the
employer.[16]

553
 The Court finds no compelling reason to deviate from the findings of the tribunals below. Both the capitalization
requirement and the power of control on the part of Requio are wanting.

Generally, the presumption is that the contractor is a labor-only contracting unless such contractor overcomes the
burden of proving that it has the substantial capital, investment, tools and the like. [17] In the present case,
though Garden of Memories is not the contractor, it has the burden of proving that Requio has sufficient capital or investment
since it is claiming the supposed status of Requio as independent contractor. [18] Garden of Memories, however, failed to
adduce evidence purporting to show that Requio had sufficient capitalization. Neither did it show that she invested in the form
of tools, equipment, machineries, work premises and other materials which are necessary in the completion of the service
contract.

Furthermore, Requio was not a licensed contractor. Her explanation that her business was a mere livelihood
program akin to a cottage industry provided by Garden of Memories as part of its contribution to the upliftment of the
underprivileged residing near the memorial park proves that her capital investment was not substantial. Substantial capital or
investment refers to capital stocks and subscribed capitalization in the case of corporations, tools, equipment, implements,
machineries, and work premises, actually and directly used by the contractor or subcontractor in the performance or
completion of the job, work or service contracted out.[19]Obviously, Requio is a labor-only contractor.

Another determinant factor that classifies petitioner Requio as a labor-only contractor was her failure to exercise the
right to control the performance of the work of Cruz. This can be gleaned from the Service Contract
Agreement[20] between Garden of Memories and Requio, to wit:

xxxx

NOW THEREFORE, premises considered, the parties hereto have hereunto agreed on the
following terms and conditions:

1. That the Contractor shall undertake the maintenance of the above-mentioned works in strict
compliance with and subject to all the requirements and standards of GMMPLPI.

2. Likewise, the Contractor shall perform all other works that may from time to time be designated
by GMMPLPI thru its authorized representatives, which work is similar in nature to the responsibilities of a
regular employee with a similar function.

3. The contract price for the labor to be furnished or the service to be rendered shall be THIRTY-
FIVE THOUSAND (35,000.00) PESOS per calendar month, payable as follows:

(a) Eight Thousand Seven Hundred Fifty Thousand (8,750.00) Pesos

payable on every 7th, 15th, 23rdand 30th of the month.

4. The period of this Contract shall be for Three (3) months from Feb 1, April 30, 1998 and
renewable at the option of the Management.

5. It is expressly recognized that this contract was forged for the purpose of supplying the
necessary maintenance work and in no way shall the same be interpreted to have created an employer-
employee relationship.

Xxxx [Underscoring supplied]

The requirement of the law in determining the existence of independent contractorship is that the contractor should
undertake the work on his own account, under his own responsibility, according to his own manner and method, free from the
control and direction of the employer except as to the results thereof. [21] In this case, however, the Service Contract Agreement
clearly indicates that Requio has no discretion to determine the means and manner by which the work is performed. Rather,
the work should be in strict compliance with, and subject to, all requirements and standards of Garden of Memories.
554
 Under these circumstances, there is no doubt that Requio is engaged in labor-only contracting, and is considered
merely an agent of Garden of Memories. As such, the workers she supplies should be considered as employees
of Garden of Memories. Consequently, the latter, as principal employer, is responsible to the employees of the labor-only
contractor as if such employees have been directly employed by it. [22]

Notably, Cruz was hired as a utility worker tasked to clean, sweep and water the lawn of the memorial park. She
performed activities which were necessary or desirable to its principal trade or business. Thus, she was a regular employee
of Garden of Memories and cannot be dismissed except for just and authorized causes. [23]

Moreover, the Court agrees with the findings of the tribunals below that respondent Cruz did not abandon her work
but was illegally dismissed.

As the employer, Garden of Memories has the burden of proof to show the employee's deliberate and unjustified
refusal to resume his employment without any intention of returning. [24] For abandonment to exist, two factors must be present:
(1) the failure to report for work or absence without valid or justifiable reason; and (2) a clear intention to sever employer-
employee relationship, with the second element as the more determinative factor being manifested by some overt acts. [25] It
has been said that abandonment of position cannot be lightly inferred, much less legally presumed from certain equivocal
acts.[26] Mere absence is not sufficient.[27]

In this case, no such intention to abandon her work can be discerned from the actuations of Cruz. Neither were there
overt acts which could be considered manifestations of her desire to truly abandon her work. On the contrary, her reporting to
the personnel manager that she had been replaced and the immediate filing of the complaint before the DOLE demonstrated a
desire on her part to continue her employment with Garden of Memories. As correctly pointed out by the CA, the filing of the
case for illegal dismissal negated the allegation of abandonment.

WHEREFORE, the petition is DENIED. The June 11, 2003 Decision of the Court of Appeals in CA-G.R. SP No.
64569 and its October 16, 2003 Resolution are hereby AFFIRMED.

SO ORDERED.

G.R. No. 209418, December 07, 2015

W.M. MANUFACTURING, INC., Petitioner, v. RICHARD R. DALAG AND GOLDEN ROCK MANPOWER
SERVICES, Respondent.
DECISION
VELASCO JR., J.:
Nature of the Case

For consideration is the amended petition for review under Rule 45 of the Rules of Court, assailing the February 21, 2013
Decision1 and September 17, 2013 Amended Decision2 of the Court of Appeals (CA) in CA-G.R. SP No. 122425,3 which
declared petitioner W.M. Manufacturing, Inc. (WM MFG) and respondent Golden Rock Manpower Services (Golden Rock)
solidarily liable to respondent Richard R. Dalag (Dalag) for the latter's alleged illegal dismissal from employment.
The Facts

On January 3, 2010, petitioner, as client, and respondent Golden Rock, as contractor, executed a contract denominated as
"Service Agreement,"4 which pertinently reads:
SERVICE AGREEMENT

KNOW ALL MEN BY THESE PRESENTS

xxxx

The CONTRACTOR shall render, undertake, perform and employ the necessary number of workers as the CLIENT may need,
at such dates and times as the CLIENT may deem necessary.

The CLIENT shall have the right to request for replacement to relieve such workers as the need arises for any reason
whatsoever and the CONTRACTOR undertakes to furnish a replacement immediately as possible.

xxxx
555
There shall be no employer-employee relationship between the CLIENT, on the one hand, and the persons assigned by the
CONTRACTOR to perform the services called for hereunder, on the other hand.

In view of this, CONTRACTOR agrees to hold the CLIENT free from any liability, cause(s) o(f) action and/or claims which may
failed (sic) by said workers including but not limited to those arising from injury or death of any kind of nature that may be
sustained by them while in the performance of their assigned tasks.

The CONTRACTOR hereby warrants compliance with the provisions of the Labor Code of the Philippines as well as with all
other presidential decrees, general orders, letters of instruction, laws rules and regulations pertaining to the employment of a
labor now existing or which may hereafter be enacted, including the payment of wages, allowances, bonuses, and other fringe
benefits, and the CLIENT shall not in any way be responsible for any claim for personal injury or death, for wages, allowances,
bonuses and other fringe benefits, made either by the said personnel or by third parties, whether or not such injury, death or
claim by third parties, whether or not such injury, death or claim arises out of, or in any way connected with, the performance
of personnel's duties.

The CLIENT shall have the right to report to the CONTRACTOR and protest any untoward act, negligence, misconduct,
malfeasance or nonfeasance of the said personnel and the contractor alone shall have the right to discipline the said
personnel.

The CONTRACTOR shall fully and faithfully comply with the provisions of the New Labor Code, as well as with other laws,
rules and regulations, pertaining to the employment of labor which is now existing or which hereafter be promulgated or
enacted.
In relation to the Service Agreement, Golden Rock, on April 26, 2010, engaged the services of respondent Dalag as a factory
worker to be assigned at petitioner's factory. For this purpose, respondents inked a five-month Employment Contract For
Contractual Employees (Employment Contract)5 that reads:
EMPLOYMENT CONTRACT FOR CONTRACTUAL EMPLOYEES Dear Mr./Ms. Richard Dalag,

[Golden Rock] hire(s) you as a contractual worker/employee to work at WM MFG under these conditions:

1) You will hold the position as (sic) Factory Worker.

2) Your employment as a CONTRACTUAL EMPLOYEE takes effect on April 26, 2010 to Sept. 26, 2010. You will receive a
salary of P328.00 per day payable weekly/15'h (sic) day monthly of the calendar month.

xxxx

7) Your employment as a CONTRACTUAL EMPLOYEE may be terminated at any time for any cause, which may arise due to
inability to learn and undertake duties and responsibilities of the position you are being employed for, inefficiency, violation of
company rules, policies and regulations, personnel reduction and recession business. In either event, you will be given a
notice of termination during your working hours/day.

The company undertakes to pay your compensation for the days actually worked and the company shall not be liable for the
period of the contract not run for any separation pay.
Notwithstanding the five-month duration stipulated in the contract, respondent Dalag would allege in his complaint for illegal
dismissal6 that on August 7, 2010, one of WM MFCs security guards prevented him from going to his work station and,
instead, escorted him to the locker room and limited his activity to withdrawing his belongings therefrom. Having been denied
entry to his work station without so much as an explanation from management, Dalag claimed that he was illegally dismissed,
his employment having been terminated without either notice or cause, in violation of his right to due process, both substantive
and procedural.

Dalag further claimed that his assignment at WM MFG as side seal machine operator was necessary and desirable for the
company's plastic manufacturing business, making him a regular employee entitled to benefits under such classification. 7 He
likewise alleged that WM MFG and Golden Rock engaged in the illegal act of labor-only contracting based on the following
circumstances: that all the equipment, machine and tools that he needed to perform his job were furnished by WM MFG; that
the jobs are to be performed at WM MFCs workplace; and that he was under the supervision of WM MFCs team leaders and
supervisors.

556
The complaint, docketed as LAC No. 03-000673-11, was lodged against WM MFG, Golden Rock, Jocelyn Hernando
(Hernando), Watson Nakague (Nakague) and Pablo Ong (Ong), the latter three individuals as officers of the impleaded
companies. In their joint position paper, therein respondents argued that Dalag was not dismissed and that, on the contrary, it
was he who abandoned his work. They offered as proof WM MFG's memos 8 addressed to Dalag, which ordered him to
answer within 24-hours the accusations relating to the following alleged infractions: gross negligence, qualified theft, malicious
mischief, incompetence, grave misbehaviour, insubordination, dishonesty, and machine sabotage. 9 Based on the memos and
the affidavits submitted by his former co-workers,10Dalag repeatedly failed to immediately report to management the
breakdowns of the side-seal machine he was assigned to operate; that he did not report that the machine's thermocouple wire
and conveyor belt needed repair, causing the damage on the belt to worsen and for the wire to eventually break; and that he
pocketed spare parts of petitioner's machines without company management's consent.

Memo 2010-19 dated August 7, 2010, the final memo WM MFG attempted to serve Dalag, pertinently reads: 11
Samakaluwid, matapos ang isinagawang imbestigasyon tungkol sa mga insidenteng kinasangkutan mo. Napagdesisyunan na
ng Management na magbaba ng Final Decision na ikaw ay patawan ng suspension at pinagrereport sa Golden Rock Agency,
ito ay clahil sa mga alegasyon na nagpapatunay na ikaw ay nagkasala at lumabag sa Patakaran ng kumpanyang ito.
Dalag, however, allegedly refused to receive the memos, and instead turned his back on his superiors, informing them that he
will no longer return, and then walked away. And on that very same day, WM MFG, through a letter addressed to Golden
Rock, informed the manpower company of its intention to exercise its right to ask for replacement employees under the
Service Agreement. As per the letter, WM MFG no longer needed Dalag's services. 12

The parties would later file their respective replies in support of the allegations and arguments raised in their position papers. 13
Ruling of the Labor Arbiter

On January 24, 2011, Labor Arbiter Eduardo G. Magno rendered a Decision 14 in LAC No. 03-000673-11 dismissing Dalag's
complaint. The dispositive portion of the Decision reads:
WHEREFORE, the Complaint is hereby DISMISSED for lack of merit.

However, respondents are hereby ordered to pay his unpaid wages for three days in the amount of P1,212.00

SO ORDERED.
Citing Machica v. Roosevelt Center Services, Inc.,15 the Labor Arbiter ratiocinated that the burden of proving actual dismissal
is upon the shoulders of the party alleging it; and that WM MFG and Golden Rock can only be burdened to justify a dismissal if
it, indeed, took place. Unfortunately for Dalag, the Labor Arbiter did not find substantial evidence to sustain a finding that he
was, in the first place, actually dismissed from employment. As observed by the Labor Arbiter: 16
Records show that complainant [Dalag] last reported for work on August 6, 2010 and filed his complaint for illegal dismissal on
August 9, 2010. However, [Dalag] failed to establish the fact of his alleged dismissal on August 07, 2010.

As established by respondents [WM MFG, Golden Rock, Hernando, Nakague, and Ong], [Dalag] was hired by [Golden Rock]
as contractual employee on April 26, 2010 until September 26, 2010 and was assigned at its client [WM MFG].

[Dalag] failed to present any letter of termination of his employment by his employer [Golden Rock].

A party alleging a critical fact must support his allegation with substantial evidence for any decision based on unsubstantiated
allegation cannot stand as it will offend due process.

There is no illegal dismissal to speak of where the employee was not notified that he had been dismissed from his employment
nor he was prevented from returning to his work. (words in brackets added, citations omitted)
Plainly, between WM MFG and Golden Rock, the Labor Arbiter considered the latter as Dalag's true employer. Thus, Dalag's
termination from employment, if any, ought to come not from WM MFG but from Golden Rock. Without such termination,
actual or constructive, Dalag's complaint cannot prosper for there was no dismissal to begin with, legal or otherwise.

Obviously aggrieved by the Labor Arbiter's ruling, Dalag interposed an appeal with the National Labor Relations Commission
(NLRC).
Rulings of the NLRC

On May 31,2011, Dalag obtained a favorable ruling from the NLRC through its Decision 17 in NLRC NCR CASE NO. 08-11002-
10, which granted his appeal in the following wise:

557
WHEREFORE, in view of the foregoing premises, the appeal of the complainant is GRANTED. The assailed Decision dated
January 24, 2011 is hereby REVERSED and SET ASIDE. Judgment is now rendered declaring complainant to have been
illegally terminated from employment. Respondents W.M Manufacturing, Inc., et. al., are hereby ordered to reinstate
immediately complainant to his former position without loss of seniority rights and privileges computed from the time he was
actually dismissed or his compensation withheld up to the time of actual reinstatement, which as of the decision, amounted to
a total of One Hundred Seven Thousand Seven Hundred Thirty-Nine and 73/100 Pesos (P107,739.73), as computed by the
NLRC Computation Unit, exclusive of the complainant's unpaid wages from August 4-6, 2010, in the amount of P1,212.00 as
previously awarded.

All other claims are hereby dismissed for lack of merit.

SO ORDERED.
In siding with respondent Dalag, the NLRC determined that Dalag's true employer was WM MFG, who merely engaged
respondent Golden Rock as a labor-only contractor. To arrive at this conclusion, the NLRC utilized the control test, thusly: 18
x x x [T]he employment contract of the complainant only showed that [Golden Rocld] hired [Dalag] as a factory worker to be
assigned to [WM MFG] and by all indications, Golden Rock did not provide technical or special services [WM MFG]. Moreover,
[WM MFG and Golden Rock] did not deny that the machines or tools used by the complainant, including the work premises,
belonged to respondent [WM MFG], and not to the agency.

[WM MFG]'s control and supervision over the work of [Dalag] is indeed explicit, and as stated by [Dalag] he was supervised
not by Golden Rock but by the team leaders and supervisors of [WM MFG]. And not only that, based on the evidence
submitted by respondent [WM MFG], it was the latter who even took the pains of investigating the alleged infractions of
[Dalag]. By [WM MFG and Golden Rock]'s own allegation, it was [WM MFG] who issued memos to [Dalag] directing him to
explain several infractions allegedly committed. All those notices and memoranda, which according to [WM MFG] [Dalag]
refused to receive, emanated from [WM MFG], and not from Golden Rock. This only demonstrates that the complainant is not
an employee of [Golden Rock] but of [WM MFG].

The so-called "control test" in determining employer-employee relationship is applicable in the instant case. In this case, [WM
MFG] reserved the right to control the complainant not only as to the result of the work to be done but also to the means and
methods by which the same is to be accomplished. Hence, clearly, there is an employer-employee between [WM MFG] and
[Dalag].
Aside from applying the control test, the Commission likewise gave credence to Dalag's postulation that several other factors
point to Golden Rock's nature as a labor-only contractor, a mere agent. The NLRC outlined these considerations as follows:
that Golden Rock supplied WM MFG with employees that perform functions that are necessary, desirable, and directly related
to the latter's main business;19 that there is an absence of proof that Golden Rock is involved in permissible contracting
services20 and that it carries on an independent business for undertaking job contracts other than to WM MFG;21 and that both
WM MFG and Golden Rock even jointly submitted pleadings to the NLRC, with the same submission and defenses, and even
under the same representation.22 On account of these circumstances, the NLRC deemed the contractual relation between WM
MFG and Golden Rock as one of labor-only contracting, akin to that of a principal and his agent. In light of this determination,
the NLRC held that they are, therefore, jointly and severally liable 23 to WM MFG's illegally dismissed employees that were
supplied by Golden Rock.

Dalag, having been prevented from reporting to work without just cause and without being afforded the opportunity to be
heard, is one of such illegally dismissed employees to whom Golden Rock and petitioner are solidarily liable, so the NLRC
ruled. In its initial findings, the NLRC held that the attempt to serve Dalag copies of the memoranda did not constitute sufficient
notice for there was no proof of service or even of an attempt thereof. The Commission explained that assuming for the sake
of argument that Dalag, indeed, refused to receive copies of the memos personally served, WM MFG's remedy was then to
serve them through registered mail in order to be considered as compliance with the procedural requirement of notice.24 WM
MFG's failure to comply with the same then resulted in Dalag being deprived of his procedural due process right.

Moreover, assuming even further that there was no deviation from procedure, the NLRC held that the contents of the memos
offered by petitioner in evidence do not amount to valid cause for they merely constituted allegations, not proof, of Dalag's
infractions. As noted by the NLRC, no formal investigation followed the attempt to serve Dalag copies of the memoranda.
Thus, to the mind of the Commission, the veracity of the allegations in the memoranda were not verified and cannot, therefore,
be taken at face value.25

Dalag's legal victory, however, would be short-lived, for eventually, WM MFG and Nakague would jointly move for
reconsideration, which would be granted by the NLRC.
558
In its second Decision26 promulgated on September 20, 2011, the NLRC absolved Dalag's alleged employers from liability, as
follows:
WHEREFORE, in view of the foregoing premises, the Motion for Reconsideration is hereby, GRANTED. The assailed
Decision dated May 31, 2011 is hereby REVERSEDand SET ASIDE. The Decision of Labor Arbiter Eduardo G. Magno dated
January 24, 2011 is hereby REINSTATED.

SO ORDERED.
To justify the turnabout, the NLRC took into consideration Certificate of Registration No. NCR-CFO-091110-0809-00327 dated
August 27, 2009 and issued by the Department of Labor and Employment (DOLE) to Golden Rock pursuant to Department
Order No. 18-02, s. 2002,28 and Articles 106-109 of the Labor Code, on job-contracting.29 The said certificate, along with the
copy of the Service Agreement between WM MFG and Golden Rock and Dalag's Employment Contract, was submitted for the
first time as attachments to WM MFG and Nakague's motion for reconsideration, but were, nevertheless, admitted by the
NLRC in the interest of substantial justice.30

With the introduction of these new pieces of evidence, the commission ruled anew that its previous observationthat there
was an absence of proof that Golden Rock is a legitimate job contractorhas effectively been refuted. What is more, the
NLRC no longer relied solely on the control test and instead applied the four-fold test in ascertaining Dalag's true employer.
And in reviewing its earlier Decision, the NLRC noted that it is Golden Rock who paid Dalag's salaries and wages; that under
the Service Agreement, it reserved unto itself the power to dismiss Dalag; and that it has sole control over the exercise of
Dalag's employment.31

The NLRC then proceeded to reiterate the Labor Arbiter's position that for the employer's burden to prove that its dismissal of
an employee was for just cause to arise, the employee must first demonstrate that he was, in the first place, actually
dismisseda fact which Dalag failed to establish. Lastly, the NLRC noted that Dalag reported for work for only three (3)
months and cannot, therefore, be considered a regular employee. 32
Rulings of the Court of Appeals

Expectedly, the September 20, 2011 NLRC Decision prompted Dalag to elevate the case to the CA via a Rule 65 petition for
certiorari, docketed as CA-G.R. SP No. 122425, alleging that the commission committed grave abuse of discretion when it
reversed its own ruling. Specifically, Dalag argued that it was highly irregular for the Commission to have admitted the
documents belatedly offered by WM MFG as evidence,33 and insisted that the NLRC did not err in its first Decision finding that
he was illegally dismissed.34 Meanwhile, WM MFG and Nakague would counter that the petition to the CA ought to be
dismissed outright since Dalag failed to file a motion for reconsideration of the NLRC's second Decision, a condition sine qua
non for filing a petition for certiorari under Rule 65. They likewise point to the Entry of Judgment 35 issued by the NLRC,
signifying that the second Decision of the NLRC has already attained finality. To modify the same would then violate the
doctrine on the immutability of judgments.

On February 21, 2013, the appellate court rendered a Decision favoring Dalag in the following wise:
WHEREFORE, the petition is GRANTED. The Decision Dated September 20, 2011 of the National Labor Arbiter's
Commission, Second Division in NLRC NCR 08-11002-10 (LAC No. 03-000673-11) is hereby REVERSED and SET ASIDE.
The NLRC's Decision dated May 31, 2011 is REINSTATED.

SO ORDERED.36ChanRoblesVirtualawlibrary
Dispensing with the procedural arguments, the CA struck down the contentions of both parties relating to the rigid application
of procedural rules.37 It held that rules of evidence prevailing in courts of law or equity are not binding in labor cases, 38 and
allow the admission of additional evidence not presented before the Labor Arbiter, and submitted before the NLRC for the first
time on appeal,39 as in WM MFCs case.

As regards the alleged availability of a plain, speedy, and adequate remedy at Dalag's disposal that bars the filing of a petition
for certiorari, the CA held that technical rules may be relaxed in this regard in the interest of substantial justice. 40 To quote the
appellate court:
In this case, a liberal construction of the rules is called for as records show that petitioner filed the petition as a pauper litigant.
Technical rules of procedure may be relaxed to serve the demands of substantial justice particularly in labor cases, where the
prevailing principle is that technical rules shall be liberally construed in favor of the working class in accordance with the
demands of substantial justice. Rules of procedure should also not be applied in a very rigid technical sense in labor cases in
order that technicalities would not stand in the way of equitably and completely resolving the rights and obligations of the
parties. (citations omitted)
559
On to the merits, the CA discussed that Golden Rock's Certificate of Registration is not conclusive evidence that the company
is an independent contractor.41 More controlling for the CA was the failure of Golden Rock to prove the concurrence of the
requisites of a legitimate independent job contractor according to jurisprudence. 42 Absent proof that Golden Rock has
substantial capital and that it exercised control over Dalag, the CA held that petitioner and Golden Rock miserably failed to
establish the latter's status as a legitimate independent contractor.43 Finally, the appellate court did not give credence to
petitioner's claim of abandonment since it failed to discharge the burden of proving Dalag's unjustified refusal to return to
work.44

Unfazed, WM MFG and Nakague moved for reconsideration of the CA's ruling. On September 17, 2013, the CA rendered an
Amended Decision partially granting the motion and modifying the decretal portion of its earlier ruling in the following wise:
WHEREFORE, the Motion for Reconsideration is PARTIALLY GRANTED. The Decision, dated February 21, 2013 of this
Court which reads:
WHEREFORE, the petition is GRANTED. The Decision Dated September 20, 2011 of the National Labor Arbiter's
Commission, Second Division in NLRC NCR 08-11002-10 (LAC No. 03-000673-11) is hereby REVERSED and SET ASIDE.
The NLRC's Decision dated May 31, 2011 is REINSTATED.

SO ORDERED.
is hereby AMENDED to read:
WHEREFORE, the petition is GRANTED. The Decision Dated September 20, 2011 of the National Labor Arbiter's
Commission, Second Division in NLRC NCR 08-11002-10 (LAC No. 03-000673-11) is hereby REVERSED and SET ASIDE.
The NLRC's Decision dated May 31, 2011 is REINSTATED insofar as the liability of Golden Rock Manpower Services and
W.M. Manufacturing, Inc. are concerned. The company officers, Watson Nakague and Pablo Ong are absolved of liability.

SO ORDERED.
SO ORDERED.45ChanRoblesVirtualawlibrary
Citing Delima v. Gois,46 the CA determined that the absence of malice or bad faith on the part of Nakague and Ong negated
any possibility of liability for Dalag's illegal dismissal.
Grounds for the Petition

Unsatisfied with the outcome, petitioner WM MFG interposed a petition for review against respondent Dalag, anchored on the
following assignment of errors:
I

WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN DECIDING A QUESTION OF
SUBSTANCE NOT IN ACCORD WITH THE LAW AND APPLICABLE DECISIONS OF THIS HONORABLE COURT WHEN IT
GAVE DUE COURSE TO DALAG'S PETITION NOTWITHSTANDING THE FACT THAT HE FAILED TO FILE A MOTION
FOR RECONSIDERATION OF THE NLRC'S 20 SEPTEMBER 2011 DECISION, A CONDITION SINE QUA NON FOR ONE
TO AVAIL THE EXTRAORDINARY REMEDY OF CERTIORARI UNDER RULE 65 OF THE RULES OF COURT
II

WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN DECIDING A QUESTION OF
SUBSTANCE NOT IN ACCORD WITH THE LAW AND APPLICABLE DECISIONS OF THIS HONORABLE COURT WHEN IT
GAVE DUE COURSE TO DALAG'S PETITION FOR CERTIORARI NOTWITHSTANDING THE FACT THAT THE NLRC'S 20
SEPTEMBER 2011 DECISION HAD LONG BECOME FINAL AND EXECUTORY
III

WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN DECIDING A QUESTION OF
SUBSTANCE NOT IN ACCORD WITH THE LAW AND APPLICABLE DECISIONS OF THIS HONORABLE COURT IN
FINDING THAT RESPONDENT WAS AN EMPLOYEE OF THE COMPANY AND THAT HE WAS ILLEGALLY
DISMISSED47ChanRoblesVirtualawlibrary
Petitioner maintains that the filing of a motion for reconsideration prior to resorting to certiorari cannot be dispensed with
merely on account of the filer's status as a pauper litigant; that the CA violated the doctrine on the immutability of judgments
when it reversed the NLRC's second final and executory Decision; that Golden Rock is Dalag's true employer, not WM MFG;
that Golden Rock is a legitimate independent contractor with whom WM MFG cannot be held solidarity liable; and that Dalag
abandoned his work, and was not in any way dismissed.

In his Comment, Dalag, substantially reiterating the May 31, 2011 Decision of the NLRC in NLRC NCR CASE NO. 08-11002-
10 as affirmed by the appellate court, maintained that the non-filing of a motion for reconsideration in this case falls under one
560
of the recognized exceptions in jurisprudence, and is, therefore, excused; that the CA did not err in finding that WM MFG and
Golden Rock engaged in labor-only contracting and should be considered solidarity liable; and that he was illegally dismissed.

By claiming that Golden Rock is an independent contractor, the Court noted that petitioner's claim could potentially shift liability
to Golden Rock alone, should the Court maintain the finding that Dalag was illegally dismissed. Given this circumstance, and
the fact that Golden Rock has actively participated in the proceedings a quo, the Court, by its November 24, 2014
Resolution,48 directed petitioner to implead Golden Rock in the instant case. Petitioner, on January 28, 2015, complied with the
directive and impleaded Golden Rock in its Amended Petition for Review on Certiorari.

On June 23, 2015, Golden Rock submitted its Comment alleging that all the elements of legitimate contracting are present in
this case. Moreover, it joined petitioner in its claim that Dalag was not terminated, illegally or otherwise, but abandoned his
post.
The Issues

The issues in this case can be summarized, thusly:

1. Whether or not Dalag is excused from not moving for reconsideration before filing a petition for certiorari;
2. Whether or not WM MFG and Golden Rock engaged in labor-only contracting;
3. Whether or not Dalag was illegally dismissed; and
4. What monetary award/s is Dalag entitled to, if any, and at what amount.
The Court's Ruling

The petition is meritorious.

Respondent Dalag was excused from filing a Motion for Reconsideration before filing a Petition for Certiorari under
Rule 65 with the CA

As a general rule, a motion for reconsideration is a prerequisite for the availment of a petition for certiorari under Rule 65. The
intention behind the requirement is to afford the public respondent an opportunity, the NLRC in this case, to correct any error
attributed to it by way of re-examination of the legal and factual aspects of the case. 49 The Court, however, has declined from
applying the rule rigidly in certain scenarios. The well-recognized exceptions are enumerated in Romy 's Freight Service v.
Castro,50 viz:
(a) Where the order is a patent nullity, as where the court a quo has no jurisdiction;

(b) Where the questions raised in the certiorari proceeding have been duly raised and passed upon by the lower
court, or are the same as those raised and passed upon in the lower court;

(c) Where there is an urgent necessity for the resolution of the question and any further delay would prejudice the interests of
the Government or of the petitioner or the subject matter of the action is perishable;

(d) Where, under the circumstances, a motion for reconsideration would be useless;

(e) Where petitioner was deprived of due process and there is extreme urgency for relief;

(f) Where, in a criminal case, relief from an order of arrest is urgent and the granting of such relief by the trial court is
improbable;

(g) Where the proceedings in the lower court are a nullity for lack of due process;

(h) Where the proceedings were ex parte or in which the petitioner had no opportunity to object; and

(i) Where the issue raised is one purely of law or where public interest is involved, (emphasis added)
Verily, the CA is mistaken in looking to respondent Dalag's indigency to exempt the latter from complying with procedural
rules. Under the Rules of Court, a pauper or indigent litigant is exempted from the payment of legal fees,51 but not from filing a
motion for reconsideration before resorting to the extraordinary remedy of certiorari.

Be that as it may, the second exception (i.e. that the questions raised in the certiorari proceeding have been duly raised and
passed upon by the lower court, or are the same as those raised and passed upon in the lower court) may still be invoked to
achieve the same result of exempting Dalag from moving for reconsideration of the September 20, 2011 NLRC Decision. As
561
extensively discussed, the contractual relation between WM MFG and Golden Rock, as well as the validity of Dalag's
dismissal, have consistently been the main issues in the flip-flopping rulings in the proceedings below. Moreover, noteworthy is
that the ruling that respondent Dalag assailed by certiorari was the NLRC's second Decision, petitioner having already moved
for reconsideration of the labor commission's May 31, 2011 findings. Thus, to settle the issues once and for all, the CA aptly
deemed it prudent, and rightfully so, to dispense with the procedural requirement of reconsideration and to address the
substantive issues head on.

WM MFG and Golden Rock engaged in labor-only contracting

Delving into the core of the controversy, the Court first determines whether or not petitioner WM MFG and Golden Rock
engaged in labor-only contracting. Both companies claim that Golden Rock is a legitimate contractor for manpower services,
relying on its Certificate of Registration and their contractual stipulation leaving Golden Rock with the power to discipline its
employees.

We are not convinced.

There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed
by such person are performing activities which are directly related to the principal business of such employer. In such cases,
the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in
the same manner and extent as if the latter were directly employed by him. 52

Under Art. 106 of Presidential Decree No. 442, otherwise known as the Labor Code of the Philippines, the Secretary of Labor
and Employment (SOLE) may issue pertinent regulations to protect the rights of workers against the prohibited practice of
labor-only contracting. Pursuant to this delegated authority, the SOLE, throughout the years, endeavored to provide clearer
guidelines in distinguishing a legitimate manpower provider from a labor-only contractor, beginning with Department Order No.
10,53 series of 1997, issued on May 30, 1997; followed by Department Order No. 03, 54 series of 2001, issued on May 8, 2001;
Department Order 18-02,55 series of 2002, issued on February 21, 2002; and by Department Order No. 18-A,56 series of 2011,
promulgated on November 14, 2011. Of these executive edicts, Department Order 18-02 (DO 18-02) is the applicable
issuance at the time respondent Dalag complained of his alleged illegal dismissal. 57

Section 5 of DO 18-02 laid down the criteria in determining whether or not labor-only contracting exists between two parties,
as follows:
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For this purpose,
labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a principal, and any of the following elements are present:

i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or
service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal; or

ii) the contractor does not exercise the right to control over the performance of the work of the contractual employee.

xxxx
It is clear from the above section that the essential element in labor-only contracting is that the contractor merely recruits,
supplies or places workers to perform a job, work or service for a principal. However, the presence of this essential element is
not enough and must, in fact, be accompanied by any one of the confirmatory elements to be considered a labor-only
contractor within the contemplation of the rule.58

The presence of the essential element in the extant case cannot be gainsaid. This much is clearly provided in the service
agreement between WM MFG and Golden Rock:
The CONTRACTOR shall render, undertake, perform and employ the necessary number of workers as the CLIENT may
need, at such dates and times as the CLIENT may deem necessary.
As to the presence of the confirmatory elements, Dalag draws our attention to (1) Golden Rock's lack of substantial capital,
coupled with the necessity and desirability of the job he performed in WM MFG; and (2) Golden Rock's lack of control over the
employees it supplied WM MFG.

562
i. Golden Rock lacked substantial capital

Anent the first confirmatory element, petitioner and Golden Rock refuted the latter's alleged lack of substantial capital by
presenting its Certificate of Registration from the DOLE Regional Office in Valenzuela City. Although not conclusive proof of
legitimacy as a manpower provider, the certification nevertheless prevented the presumption of labor-only contracting from
arising.59 In its stead, the certification gave rise to a disputable presumption that the contractor's operations are legitimate. As
provided in Gallego v. Bayer Philippines, Inc.:60
The DOLE certificate having been issued by a public officer, it carries with it the presumption that it was issued in the regular
performance of official duty. Petitioners bare assertions fail to rebut this presumption. Further, since the DOLE is the agency
primarily responsible for regulating the business of independent job contractors, the Court can presume, in the absence of
evidence to the contrary, that it had thoroughly evaluated the requirements submitted by PRODUCT IMAGE before issuing the
Certificate of Registration. x x x
Among the requirements for registration is a copy of the contractor's audited financial statements, if the applicant is a
corporation, partnership, cooperative or a union, or a copy of the latest income tax return if the applicant is a sole
proprietorship.61 Upon submission of the requirements, the DOLE Regional Director concerned will then have seven (7) days
to evaluate the information supplied and determine whether the application ought to be approved or denied. Since Golden
Rock's application was approved, both petitioner and respondent company claimed that the DOLE Regional Office found
Golden Rock's capitalization to be satisfactory and substantial, contrary to Dalag's claim.

Petitioner and Golden Rock's claim fails to convince.

It may be that the DOLE Regional Director for the National Capital Region was satisfied by Golden Rock's capitalization as
reflected on its financial documents, but the basis for determining the substantiality of a company's "capital" rests not only
thereon but also on the tools and equipment it owns in relation to the job, work, or service it provides. DO 18-02 defines
"substantial capital or investment" in the context of labor-only contracting as referring not only to a contractor's financial
capability, but also encompasses the tools, equipment, implements, machineries and work premises, actually and directly
used by the contractor or subcontractor in the performance or completion of the job, work or service contracted out. 62

Here, the Certificate of Registration may have prevented the presumption of labor-only contracting from arising, but the
evidence Dalag adduced was sufficient to overcome the disputable presumption that Golden Rock is an independent
contractor. To be sure, in performing his tasks, Dalag made use of the raw materials and equipment that WM MFG supplied.
He also operated the side-seal machine in the workplace of WM MFG, not of Golden Rock. With these attendant
circumstances, the Court rules that the first confirmatory element indubitably exists.

ii. WM MFG exercised control over the employees supplied by Golden Rock

As to the second confirmatory element (i.e. control), petitioner argues that the Service Agreement it forged with Golden Rock
specifically provides that the latter exclusively exercises control over the employees it assigns to WM MFG. What is more, it is
Golden Rock who paid for Dalag's salaries and wages, a badge of their employer-employee relation.

Petitioner's claim does not persuade.

The second confirmatory element under DO 18-02 does not require the application of the economic test and, even more so,
the four-fold test to determine whether or not the relation between the parties is one of labor-only contracting. All it requires is
that the contractor does not exercise controlover the employees it supplies, making the control test of paramount
consideration. The fact that Golden Rock pays for Dalag's wages and salaries then has no bearing in resolving the issue.

Under the same DO 18-02, the "right to control" refers to the right to determine not only the end to be achieved, but also the
manner and means to be used in reaching that end.63 Here, notwithstanding the contract stipulation leaving Golden Rock the
exclusive right to control the working warm bodies it provides WM MFG, evidence irresistibly suggests that it was WM MFG
who actually exercised supervision over Dalag's work performance. As culled from the records, Dalag was supervised by WM
MFG's employees. Petitioner WM MFG even went as far as furnishing Dalag with not less than seven (7) memos directing him
to explain within twenty-four (24) hours his alleged work infractions.64 The company likewise took pains in issuing investigation
reports detailing its findings on Dalag's culpability.65 Clearly, WM MFG took it upon itself to discipline Dalag for violation of
company rules, regulations, and policies, validating the presence of the second confirmatory element.

Having ascertained that the essential element and at least one confirmatory element obtain in the extant case, there is then no
other result than for the Court to rule that WM MFG and Golden Rock engaged in labor-only contracting. As such, they are, by
563
legal fiction, considered principal and agent, respectively, jointly and severally liable to their illegally dismissed employees, in
accordance with Art. 109 of the Labor Code66 and Sec. 19 of DO 18-02.67

We stress, however, that this finding of labor-only contracting does not preclude the Court from re-examining, in future cases,
the nature of the contractual relationship between WM MFG and Golden Rock under Department Order No. 18-A, series of
2011, which redefined the parameters of legitimate service contracting, private recruitment and placement services, and labor-
only contracting.

WM MFG dismissed Dalag for just cause, but did not comply with the procedural requirements

This brings us to the question of whether or not Dalag was illegally dismissed.

i. Dalag did not abandon his employment, but was in fact dismissed

The Court is not unmindful of the rule in labor cases that the employer has the burden of proving that the termination was for a
valid or authorized cause; but fair evidentiary rule dictates that before an employer is burdened to prove that they did not
commit illegal dismissal, it is incumbent upon the employee to first establish by substantial evidence that he or she was, in
fact, dismissed.68

A cursory reading of the records of this case would reveal that the fact of Dalag's dismissal was sufficiently established by
petitioner's own evidence.

Recall that Memo 2010-19 dated August 7, 2010 indefinitely suspended Dalag from work. This is in hew with Dalag's
allegation in his complaint that on even date, he was prevented by WM MFG's security guard from proceeding to his work
station, and was told to withdraw his belongings from his locker. Noteworthy, however, is that while Memo 2010-19 merely
imposed an indefinite period of suspension, WM MFG's true intentionto sever its ties with Dalagis brought to the fore by its
letter dated August 9, 2010, informing Golden Rock that it no longer requires respondent Dalag's services. 69

We cannot subscribe to petitioner's contrary view that Dalag was never terminated, legally or otherwise, and that it was he who
abandoned his employment. On this point, the teaching in MZR Industries v. Colambot70 is apropos:
In a number of cases, this Court consistently held that to constitute abandonment of work, two elements must be present: first,
the employee must have failed to report for work or must have been absent without valid or justifiable reason; and second,
there must have been a clear intention on the part of the employee to sever the employer-employee relationship
manifested by some overt act.

In the instant case, other than Colambot's failure to report back to work after suspension, petitioners failed to present any
evidence which tend to show his intent to abandon his work. It is a settled rule that mere absence or failure to report for work is
not enough to amount to abandonment of work. There must be a concurrence of the intention to abandon and some overt acts
from which an employee may be deduced as having no more intention to work. On this point, the CA was correct when it held
that:
Mere absence or failure to report for work, even after notice to return, is not tantamount to abandonment. The burden of proof
to show that there was unjustified refusal to go back to work rests on the employer. Abandonment is a matter of intention and
cannot lightly be presumed from certain equivocal acts. To constitute abandonment, there must be clear proof of deliberate
and unjustified intent to sever the employer-employee relationship. Clearly, the operative act is still the employee's ultimate act
of putting an end to his employment. Furthermore, it is a settled doctrine that the filing of a complaint for illegal dismissal
is inconsistent with abandonment of employment. An employee who takes steps to protest his dismissal cannot
logically be said to have abandoned his work. The filing of such complaint is proof enough of his desire to return to work,
thus negating any suggestion of abandonment. (emphasis added)
A prayer for reinstatement in a complaint for illegal dismissal signifies the employee's desire to continue his working relation
with his employer, and militates against the latter's claim of abandonment. Pursuant to the age-old adage that he who alleges
must prove,71 it becomes incumbent upon the employer to rebut this seeming intention of the employee to resume his work.
Hence, to prove abandonment, the onus rests on the employer to establish by substantial evidence the employee's non-
interest in the continuance of his employment, which petitioner herein failed to do. On the contrary, Dalag's immediate filing of
a complaint after his dismissal, done in a span of only two (2) days, convinces us of his intent to continue his work with WM
MFG.

With the foregoing discussion, the burden now shifts to petitioner and Golden Rock to justify the legality of Dalag's dismissal,
by proving that the termination was for just cause, and that the employee was afforded ample opportunity to be heard prior to
564
dismissal.72

ii. Dalag's dismissal was for just cause

The Labor Code mandates that an employee cannot be terminated except for just or authorized cause, lest the employer
violate the former's constitutionally guaranteed right to security of tenure. 73Relevant hereto, the just causes for termination of
employment are enumerated under Art. 282 of P.D. 442, as follows:
1. Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in
connection with his work;
2. Gross and habitual neglect by the employee of his duties;
3. Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;
4. 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 representatives; and
5. Other causes analogous to the foregoing. (emphasis added)
To constitute just cause for an employee's dismissal, the neglect of duties must not only be gross but also habitual. Gross
neglect means an absence of that diligence that an ordinarily prudent man would use in his own affairs.74 Meanwhile, to be
considered habitual, the negligence must not be a single or isolated act. 75

Here, WM MFG duly established that Dalag was terminated for just cause on the second ground. The litany of Dalag's
infractions, as detailed in memos 2010-13 up to 2010-18 demonstrated how Dalag repeatedly failed to report to his supervisor
the problems he encountered with the side-seal machine assigned to nim for operation. This failure resulted in repeated
machine breakdowns that caused production and delivery delays, and lost business opportunities for the company. As stated
in the memos:
MEMO 2010-1376

Base sa inireport na insidente reference number CTRL #2010-27. Ikaw ay nakasira |ng] Conveyor Belt ng Sideseal Machine
No.02 noong ika-20 ng Hulyo 2010 dahil sa iyong kapabayaan.

Lumalabas na ikaw ay nagkasala ng Gross Negligence na nagresulta sa pagkakasira ng mamahaling gamit ng kompanya.

Ang ganitong pangyayari ay nagdulot ng malaking abala sa produksyon at pagkaantala sa delivery. Sa panahong kung saan
mahigpit ang kompetisyon at pabago-bagong ekonomiya, ang mga ganitong pangyayari at may lubhang epekto sa kumpanya.

Ikaw ay binibigyan ng 24-oras para magsubmite sa Admin office ng written explanation o depensa sa nangyari. Inaasahan na
itong pangyayari ay hindi na mauulit. Ito rin ay babala para sa iyo at pag alala na kailangan mag ingal at umiwas sa paglabag
sa Company Rules and Regulation.
MEMO2010-1477

Base sa inireport na insidente reference number CTRL #2010-28 Ang pagkasira mo ng Conveyor belt ay hindi mo ginawan ng
oral o written report ang pagkasira mo ng makina sa team leader o sa maintenance o SINO MAN kahit na alam mo na ito ay
dapat mong gawin.

Lumalabas na ikaw ay nagkasala ng sadyang pagtatago o paglilihim ng tunay na kalagayan ng makina na nagdulot ng
malaking negatibong epekto sa produksyon.

Ang ganitong pangyayari ay nagdulot ng malaking abala sa produksyon at pagkaantala sa delivery. Sa panahong kung saan
mahigpit ang kompetisyon at pabago-bagong ekonomiya, ang mga ganitong pangyayari at may lubhang epekto sa kumpanya.

Ikaw ay binibigyan ng 24-oras para magsubmite sa Admin office ng written explanation o depensa sa nangyari. Inaasahan na
itong pangyayari ay hindi na mauulit. Ito rin ay babala para sa iyo at pag alala na kailangan mag ingat at umiwas sa paglabag
sa Company Rules and Regulation.
MEMO2010-1678

Base sa inireport na insidente reference number CTRL #2010-30 Ang pagkasira ng manual heater ng sideseal machine no.02
ay hindi mo nanaman pinaalam o ginawan ng report.

Lumalabas na ikaw ay nagkasala ng sadyang pagtatago o paglilihim ng tunay na kalagayan ng makina na nagdudulot ng
malaking negatibong epekto sa produksyon.
565
Ang di pagrereport mapa-verbal o written, pagtatago o pagkukubli sa kundisyon ng makina ay nagdulot ng malaking abala sa
produksyon. Amg paglilihis ng tunay na pangyayari ay nagdulot din ng pagkakaroon ng di pagkakaunawaan ng Maintenance
at ni Melvin Luna. Dahil dito nagkagulo at nadelay ang produksyon.

Sa panahong kung saan mahigpit ang kumpetisyon at pabago-bagong ekonomiya, ang mga ganitong pangyayari ay lubhang
nakakaapekto sa kumpanya.

Ikaw ay binibigyan ng 24-oras para magsubmite sa Admin office ng written explanation o depensa sa nangyari. Inaasahan na
itong pangyayari ay Hindi na mauulit. Ito rin ay babala para sa iyo at pag alala na kailangan mag ingat at umiwas sa paglabag
sa Company Rules and Regulation.
MEMO2010-1779

Base sa inireport na insidente reference number CTRL #2010-31 Ang naputol na Thermocouple wire ng sideseal machine no.
02 at ang hindi mo paggawa ng report tungkol dito ay patunay na walang dahilan para ito ay masira.

Lumalabas na ikaw ay nagkasala ng sadyang pagtatago o paglilihim ng tunay na kalagayan ng makina na nagdulot ng
malaking negatibong epekto sa produksyon.

Ang mga ganitong pangyayari na kahina-hinala at kaduda-duda ay hindi maganda at dapat gayahin ng sinuman. Sa panahong
kung saan mahigpit ang kumpetisyon at pabago-bago ang ekonomiya, ang mga ganitong pangyayari ay lubhang
nakakaapekto sa kumpanya.

Ikaw ay binibigyan ng 24-oras para magsubmite sa Admin office ng written explanation o depensa sa nangyari. Inaasahan na
itong pangyayari ay hindi na mauulit. Ito rin ay babala para sa iyo at pag alala na kailangan mag ingat at umiwas sa paglabag
sa Company Rules and Regulation.
MEMO 2010-1880

Base sa pangyayaring naganap, ang hindi pagsasabi o pag amin na nasira ang makina ay napakalaking responsibilidad ng
isang operator. Sa kabila ng pagbigay ng memo sa iyo at babala, nauulit pa rin ang insidente ng hindi mo pagreport sa kahit
anong paraan, mapawritten o verbal na pararan.

Ang paulit-ulit na pangyayari ay lubos na nakaapekto sa produksyon. Dahil dito, nagkaroon ng pagkaantala at di pagkadeliver
ng mga produkto sa ating kliyente sa tamang oras.

Ang ganitung gawain ay isang maliwanag na isang uri ng kapabayaan, pananadya at hindi magandang halimbawa para
gayahin ng sinuman.

Ikaw ay binibigyan ng 24-oras para magsubmite sa Admin office ng written explanation o depensa sa nangyari. Inaasahan na
itong pangyayari ay hindi na mauulit. Ito rin ay babala para sa iyo at pag alala na kailangan mag ingat at umiwas sa paglabag
sa Company Rules and Regulation.
Contrary to the NLRC's May 31, 2011 Decision, as effectively affirmed by the CA, Dalag's dismissal rested not on mere
suspicion alone as the allegations in the memos were supported by written statements executed by Dalag's co-workers and
immediate superiors.81 As recounted by Melvin Luna, who operates the same side-seal machine assigned to Dalag, he
frequently encounters problems when starting up the equipment after Dalag was through with it, and that Dalag usually leaves
the machine unserviceable after use. This practice was observed by Danilo Acosta, one of the team leaders of WM MFG, as
per his written statement. Dalag's own team leader, Bonifacio Dimaano, likewise executed a written statement to the effect that
Dalag never reported any problem with his side-seal machine.

Moreover, the NLRC's finding that WM MFG took no further step in the form of administrative investigation to confirm its
suspicion is refuted by the Investigation Report82 that served as basis for Dalag's "suspension." The Court notes that from the
dates the memos were issued, the earliest being July 20, 2010, until the date of Dalag's dismissal, August 7, 2010, there was
reasonable time for WM MFG to look into the matter, and that it, in fact, did so. As per the Investigation Report:

Kinalabasan ng Imbestigasyon ng Insidente:

1. Noong ika-20 ng Hulyo 2010 nalaman ni Melvin Luna na nasira ang conveyor belt at di mapaandar ang Sideseal
Machine No. 2. Ito ay nangyari dahil sa kapabayaan ng kanyang kapalitan na si Richard Dalag. Bilang isang operator

566
 isa sa mga binabantayan niya ay ang pag-ikot ng conveyor belt ngunit hindi niya napansin ang paghinto nito habang
umaandar ang makina na naging sanhi ng pagkakaroon ng malaking butas ng conveyor belt.

2. Nabutas ang conveyor belt sa pamamagitan ng mainit na sealing bar na siyang dumidiin dito. Ang hindi pag-ikot ng belt
at madiin na puwersa ng mainit na sealing bar sa isang parte ng belt ay mag-iiwan ng malalim na hiwa sa hindi umiikot
na belt.

3. Dahil sa hindi pagreport ng nakasriang si RICHARD DALAG, itong insidenteng ito ay nagdulot ng di pagkakaunawaan
sa pagitan ng Maintenance Staff at ng iyong kapalitang si Melvin Luna.

4. Dahil rin dito, ito ay nagdulot ng malaking delays sa ating produksyon at di pagkakadeliver ng produkto sa tamang oras
sa kliyente.

xxxx

8. Napagalaman din ng Maintenance staff, Team Leader at Production Supervisor ang mga hindi maipaliwanag na sira ng
makina sa kabila ng maayos na kondisyon nito bago ito hawakan ni RICHARD DALAG.

9. Ito ay hindi nangyari ng isang beses lamang kundi paulit ulit. Ang magkasunod na insidente ng pagkasira ng manual
heater at ng thermocouple wire at hindi paggawa ni RICHARD DALAG ng report ay patunay na walang malinaw na
dahilan upang masira ang mga piyesa.

10. Ang paulit-ulit na hindi pagrereport ni RICHARD DALAG sa mga nagiging sira ng makina ay hindi maganda at kahina-
hinala na Gawain ng pananabotahe.

Hence, Dalag's gross and habitual neglect of his duty to report to his superiors the problems he encountered with the side-seal
machine he was assigned to operate was well-documented and duly investigated by WM MFG. The Court, therefore, holds
that there was, indeed, just cause to terminate Dalag's employment under Art. 282(2) of the Labor Code.

iii. Procedural requirements were not observed when Dalag's employment was terminated

Anent the conformity of Dalag's dismissal to procedural requirements, the cardinal rule in our jurisdiction is that the employer
must furnish the employee with two written notices before the termination of his employment can be effected: (1) the first
apprises the employee of the particular acts or omissions for which his dismissal is sought; and (2) the second informs the
employee of the employer's decision to dismiss him. The twin notice rule is coupled with the requirement of a hearing, which is
complied with as long as there was an opportunity to be heard, and not necessarily that an actual hearing was conducted. 83

In the case at bar, while petitioner submitted as evidence memos that it supposedly attempted to serve Dalag, there was no
proof that these were, indeed, received by the latter. 84 By petitioner's own allegation, Dalag refused to receive the same.
Under such circumstance, the more prudent recourse would have been to serve the memos through registered mail instead of
directly proceeding with the investigation. As held in NEECO II v. NLRC:85
x x x That private respondent refused to receive the memorandum is to us, too self-serving a claim on the part of petitioner in
the absence of any showing of the signature or initial of the proper serving officer. Moreover, petitioner could have easily
remedied the situation by the expediency of sending the memorandum to private respondent by registered mail at his last
known address as usually contained in the Personal Data Sheet or any personal file containing his last known address.
The non-service of notice effectively deprived Dalag of any, if not ample, opportunity to be informed of and defend himself
against the administrative charges leveled against him, which element goes into the very essence of procedural due process.86

Dalag is only entitled to nominal damages, not full backwages

In spite of the failure of WM MFG and Golden Rock to show that they complied with the procedural requirements of a valid
termination under the Labor Code and its implementing rules, Dalag's dismissal cannot be deemed tainted with illegality,
567
contrary to the CA's ruling,87 for the circumstance merely renders the two companies solidarity liable to Dalag for nominal
damages. Instructional on this point is the doctrine in JAKA Food Processing Corp. v. Pacot (JAKA).88 There, the Court
expounded that a dismissal for just cause under Art. 282 of the Labor Code implies that the employee concerned has
committed, or is guilty of, some violation against the employer, i.e. the employee has committed some serious misconduct, is
guilty of some fraud against the employer, or he has neglected his duties. Thus, it can be said that the employee himself
initiated the dismissal process. However, the employer will still be held liable if procedural due process was not observed in
the employee's dismissal. In such an event, the employer is directed to pay, in lieu of backwages, indemnity in the form of
nominal damages.89

Nominal damages are adjudicated in order that a right of the plaintiff that has been violated or invaded by the defendant may
be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him. 90 In cases such
as JAKA, the nominal damages awarded serves as vindication or recognition of the employee's fundamental due process
right,91 and as a deterrent against future violations of such right by the employer. 92

The amount of nominal damages to be awarded is addressed to the sound discretion of the court, taking into account the
relevant circumstances.93 Nonetheless, JAKA laid down the following guidelines in determining what amount could be
considered proper:94

(1) if the dismissal is based on a just cause under Article 282 but the employer failed to comply with the notice requirement,
the sanction to be imposed upon him should be tempered because the dismissal process was, in effect, initiated by an act
imputable to the employee; and

(2) if the dismissal is based on an authorized cause under Article 283 but the employer failed to comply with the notice
requirement, the sanction should be stiffer because the dismissal process was initiated by the employer's exercise of his
management prerogative.

In the case at bar, given that there was substantial attempt on the part of WM MFG to comply with the procedural
requirements, the Court, nevertheless, deems the amount of P30,000 as sufficient nominal damages 95 to be awarded to
respondent Dalag.

WHEREFORE, premises considered, the petition is GRANTED. The February 21, 2013 Decision and September 17, 2013
Amended Decision of the Court of Appeals in CA-G.R. SP No. 122425 are hereby REVERSED and SET ASIDE. Let a new
one be entered declaring W.M. Manufacturing and Golden Rock Manpower Services jointly and severally liable to Richard R.
Dalag in the amount of One Thousand Two Hundred Twelve Pesos (P1,212) representing Richard R. Dalag's unpaid wages
from August 4-6, 2010 as determined by the Labor Arbiter; and Thirty Thousand Pesos (P30,000) as nominal damages for
Dalag's dismissal with just cause, but without observing proper procedure.

SO ORDERED.

[ G.R. No. 208451, February 03, 2016 ]

MANILA MEMORIAL PARK CEMETERY, INC., PETITIONER, VS. EZARD D. LLUZ, NORMAN CORRAL, ERWIN
FUGABAN, VALDIMAR BALISI, EMILIO FABON, JOHN MARK APLICADOR, MICHAEL CURIOSO, JUNLIN ESPARES,
GAVINO FARINAS, AND WARD TRADING AND SERVICES, RESPONDENTS.
DECISION
CARPIO, J.:
The Case

This is a petition for review on certiorari[1] assailing the Decision[2] dated 21 January 2013 and the Resolution[3]dated 17 July
2013 of the Court of Appeals (CA) in CA-G.R. SP No. 119237.
The Facts

On 23 February 2006, petitioner Manila Memorial Park Cemetery, Inc. (Manila Memorial) entered into a Contract of Services
with respondent Ward Trading and Services (Ward Trading). The Contract of Services provided that Ward Trading, as an
independent contractor, will render interment and exhumation services and other related work to Manila Memorial in order to
supplement operations at Manila Memorial Park, Paraaque City.

Among those assigned by Ward Trading to perform services at the Manila Memorial Park were respondents Ezard Lluz,
Norman Corral, Erwin Fugaban, Valdimar Balisi, Emilio Fabon, John Mark Aplicador, Michael Curioso, Junlin Espares, and
568
Gavino Farinas (respondents). They worked six days a week for eight hours daily and were paid P250 per day.

On 26 June 2007, respondents filed a Complaint[4] for regularization and Collective Bargaining Agreement benefits against
Manila Memorial; Enrique B. Lagdameo, Manila Memorial's Executive Vice-President and Director in Charge for Overall
Operations, and Ward Trading. On 6 August 2007, respondents filed an amended complaint to include illegal dismissal,
underpayment of 13th month pay, and payment of attorney's fees.

Respondents alleged that they asked Manila Memorial to consider them as regular workers within the appropriate bargaining
unit established in the collective bargaining agreement by Manila Memorial and its union, the Manila Memorial Park Free
Workers Union (MMP Union). Manila Memorial refused the request since respondents were employed by Ward Trading, an
independent labor contractor. Thereafter, respondents joined the MMP Union. The MMP Union, on behalf of respondents,
sought their regularization which Manila Memorial again declined. Respondents then filed the complaint. Subsequently,
respondents were dismissed by Manila Memorial. Thus, respondents amended the complaint to include the prayer for their
reinstatement and payment of back wages.

Meanwhile, Manila Memorial sought the dismissal of the complaint for lack of jurisdiction since there was no employer-
employee relationship. Manila Memorial argued that respondents were the employees of Ward Trading.

In a Decision[5] dated 29 March 2010, the Labor Arbiter dismissed the complaint for failing to prove the existence of an
employer-employee relationship. The dispositive portion of the Decision states:
WHEREFORE, premises considered, judgment is hereby rendered dismissing the above-entitled case for complainants' lack
of employer-employee relationship with respondent Manila Memorial Park Cemetery, Inc.

SO ORDERED.[6]
Respondents appealed[7] to the NLRC. In a Decision[8] dated 30 September 2010, the NLRC reversed the Labor Arbiter's
findings. The NLRC ruled that Ward Trading was a labor-only contractor and an agent of Manila Memorial. The dispositive
portion of the Decision states:
WHEREFORE, premises considered, complainants' appeal is GRANTED. The assailed Decision of Labor Arbiter Geobel A.
Bartolabac dated March 29, 2010 is MODIFIED. It is hereby declared that complainants were regular employees of respondent
Manila Memorial Park Cemetery, Inc. and entitled to the benefits provided for under the CBA between the latter and the Manila
Memorial Park Free Workers Union.

Respondent Manila Memorial Park Cemetery, Inc. is ordered to pay wage differentials to complainants as follows:

1. Ezard D. Lluz - P43,982.79

2. Norman Corral - P29,765.67

3. Erwin Fugaban - P28,634.67

4. Valdimar Balisi - P20,310.33

5. Emilio Fabon - P43,982.79

6. John Mark Aplicador - P43,982.79

7. Michael Curioso - P43,982.79

8. Ju[n]lin Espares - P43,982.79

9. Gavino Farinas - P43,982.79

SO ORDERED.[9]
Manila Memorial filed a Motion for Reconsideration which was denied in a Resolution[10] dated 31 January 2011.

Thereafter, Manila Memorial filed an appeal with the CA. In a Decision dated 21 January 2013, the CA affirmed the ruling of

569
the NLRC. The CA found the existence of an employer-employee relationship between Manila Memorial and respondents. The
dispositive portion of the Decision states:
WHEREFORE, in view of the foregoing, the instant Petition for Certiorari is DENIED. The Decision, dated September 30, 2010
and the Resolution, dated January 31, 2011, rendered by the National Labor Relations Commission (NLRC) in NLRC LAC No.
06-001267-10 are AFFIRMED.

SO ORDERED.[11]
Manila Memorial then filed a Motion for Reconsideration which was denied by the CA in a Resolution dated 17 July 2013.

Hence, the instant petition.

The Issue

The main issue for our resolution is whether or not an employer-employee relationship exists between Manila Memorial and
respondents for the latter to be entitled to their claim for wages and other benefits.
The Court's Ruling

The petition lacks merit.

Manila Memorial contends that Ward Trading has total assets in excess of P1.4 million, according to Ward Trading's financial
statements for the year 2006, proving that it has sufficient capitalization to qualify as a legitimate independent contractor.
Manila Memorial insists that nowhere is it provided in the Contract of Services that Manila Memorial controls the manner and
means by which respondents accomplish the results of their work. Manila Memorial states that the company only wants its
contractors and the latter's employees to abide by company rules and regulations.

Respondents, on the other hand, assert that they are regular employees of Manila Memorial since Ward Trading cannot
qualify as an independent contractor but should be treated as a mere labor-only contractor. Respondents state that (1) there is
enough proof that Ward Trading does not have substantial capital, investment, tools and the like; (2) the workers recruited and
placed by the alleged contractors performed activities that were related to Manila Memorial's business; and (3) Ward Trading
does not exercise the right to control the performance of the work of the contractual employees.

As a general rule, factual findings of the CA are binding upon this Court. One exception to this rule is when the factual findings
of the former are contrary to those of the trial court, or the lower administrative body, as the case may be. This Court is obliged
to resolve an issue of fact due to the conflicting findings of the Labor Arbiter on one hand, and the NLRC and the CA on the
other.

In order to determine whether there exists an employer-employee relationship between Manila Memorial and respondents,
relevant provisions of the labor law and rules must first be reviewed. Article 106 of the Labor Code states:
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the performance of
the former's work, the employees of the contractor and of the latter's subcontractor, if any, shall be paid in accordance with the
provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the
employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work
performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.

The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting-out of labor to
protect the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions
between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine
who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or
circumvention of any provision of this Code.

There is "labor-only" contracting where the person supplying workers to an employer does not have substantial
capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers
recruited and placed by such person are performing activities which are directly related to the principal business of
such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer
who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by
him. (Emphasis supplied)

570
Sections 3, 5 and 7 of Department Order No. 18-02[12] distinguish between legitimate and labor-only contracting and assume
the existence of an employer-employee relationship if found to be engaged in labor-only contracting. The provisions state:
xxxx

Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists a trilateral relationship
under which there is a contract for a specific job, work or service between the principal and the contractor or subcontractor,
and a contract of employment between the contractor or subcontractor and its workers. Hence, there are three parties involved
in these arrangements, the principal which decides to farm out a job or service to a contractor or subcontractor, the contractor
or subcontractor which has the capacity to independently undertake the performance of the job, work or service, and the
contractual workers engaged by the contractor or subcontractor to accomplish the job, work or service.

xxxx

Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For this purpose,
labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a principal, and any of the following elements are present:

i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to
be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities
which are directly related to the main business of the principal; or

ii) The contractor does not exercise the right to control over the performance of the work of the contractual employee.

The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor Code, as amended.

"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations, tools,
equipment, implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the
performance or completion of the job, work or service contracted out.

The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers are
performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that end.

xxxx

Section 7. Existence of an employer-employee relationship. - The contractor or subcontractor shall be considered the
employer of the contractual employee for purposes of enforcing the provisions of the Labor Code and other social legislation.
The principal, however, shall be solidarity liable with the contractor in the event of any violation of any provision of the Labor
Code, including the failure to pay wages.

The principal shall be deemed the employer of the contractual employee in any of the following cases as declared by a
competent authority:
(a) where there is labor-only contracting; or
(b) where the contracting arrangement falls within the prohibitions provided in Section 6 (Prohibitions) hereof. (Emphasis
supplied)
It is clear from these provisions that contracting arrangements for the performance of specific jobs or services under the law
and its implementing rules are allowed. However, contracting must be made to a legitimate and independent job contractor
since labor rules expressly prohibit labor-only contracting.

Labor-only contracting exists when the contractor or subcontractor merely recruits, supplies or places workers to perform a
job, work or service for a principal and any of the following elements are present:
1) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service
to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing
activities which are directly related to the main business of the principal; or

2) The contractor does not exercise the right to control the performance of the work of the contractual employee. [13]

571
In the present case, Manila Memorial entered into a Contract of Services with Ward Trading, a single proprietorship owned by
Emmanuel Mayor Ward with business address in Las Pias City on 23 February 2006. In the Contract of Services, it was
provided that Ward Trading, as the contractor, had adequate workers and substantial capital or investment in the form of tools,
equipment, machinery, work premises and other materials which were necessary in the conduct of its business.

However, a closer look at the Contract of Services reveals that Ward Trading does not have substantial capital or investment
in the form of tools, equipment, machinery, work premises and other materials since it is Manila Memorial which owns the
equipment used in the performance of work needed for interment and exhumation services. The pertinent provision in the
Contract of Services which shows that Manila Memorial owns the equipment states:
The COMPANY shall [sell] to the contractor the COMPANY owned equipment in the amount of ONE MILLION FOUR
HUNDRED THOUSAND PESOS ONLY (Php1,400,000.00) payable in two (2) years or a monthly payment of FIFTY EIGHT
THOUSAND THREE HUNDRED THIRTY FIVE PESOS ONLY (Php58,335.00) to be deducted from the CONTRACTOR'S
billing.[14]
Just by looking at the provision, it seems that the sale was a regular business transaction between two parties. However,
Manila Memorial did not present any evidence to show that the sale actually pushed through or that payments were made by
Ward Trading to prove an ordinary arms length transaction. We agree with the NLRC in its findings:
While the above-cited provision of the Contract of Service implies that respondent MMPCI would sell subject equipment to
Ward at some future time, the former failed to present any contract of sale as proof that, indeed, it actually sold said equipment
to Ward. Likewise, respondent MMPCI failed to present any "CONTRACTOR'S billing" wherein the purported monthly
installment of P58,335.00 had been deducted, to prove that Ward truly paid the same as they fell due. In a contract to sell, title
is retained by the vendor until full payment of the price.

Moreover, the Contract of Service provides that:

"5. The COMPANY reserves the right to rent all or any of the CONTRACTOR'S equipment in the event the COMPANY
requires the use of said equipment, x x x."
This provision is clear proof that Ward does not have an absolute right to use or enjoy subject equipment, considering that its
right to do so is subject to respondent MMPCI's use thereof at any time the latter requires it. Such provision is contrary to
Article 428 of the Civil Code, which provides that "The owner has the right to enjoy and dispose of a thing, without other
limitation than those established by law." It is plain to see that Ward is not the owner of the equipment worth P1,400,000.00
that is being actually and directly used in the performance of the services contracted out.

Further, the Service Contract states that:

"For its part, the COMPANY agrees to provide the following:

a) Area to store CONTRACTOR'S equipment and materials

b) Office space for CONTRACTOR'S staff and personnel"
This provision is clear proof that even the work premises actually and directly used by Ward in the performance of the services
contracted out is owned by respondent MMPCI.[15]
Also, the difference in the value of the equipment in the total amount of P1,400,000.00 can be glaringly seen in Ward Trading's
financial statements for the year 2006 when compared to its 2005 financial statements. It is significant to note that these
financial statements were submitted by Manila Memorial without any certification that these financial statements were actually
audited by an independent certified public accountant. Ward Trading's Balance Sheet [16] as of 31 December 2005 showed that
it had assets in the amount of P441,178.50 and property and equipment with a net book value of P86,026.50 totaling
P534,705. A year later, Ward Trading's Balance Sheet[17] ending in 31 December 2006 showed that it had assets in the
amount of P57,084.70 and property and equipment with a net book value of P1,426,468 totaling P1,491,052.70. Ward Trading,
in its Income Statements[18]for the years 2005 and 2006, only earned a net income of P53,800 in the year ending 2005 and
P68,141.50 in 2006. Obviously, Ward Trading could not have raised a substantial capital of P1,400,000.00 from its income
alone without the inclusion of the equipment owned and allegedly sold by Manila Memorial to Ward Trading after they signed
the Contract of Services on 23 February 2006.

Further, the records show that Manila Memorial and Enrique B. Lagdameo admitted that respondents performed various
interment services at its Sucat, Paraaque branch which were directly related to Manila Memorial's business of developing,
selling and maintaining memorial parks and interment functions. Manila Memorial even retained the right to control the
performance of the work of the employees concerned. As correctly observed by the CA:
A perusal of the Service Contract would reveal that respondent Ward is still subject to petitioner's control as it specifically
provides that although Ward shall be in charge of the supervision over individual respondents, the exercise of its supervisory
function is heavily dependent upon the needs of petitioner Memorial Park, particularly:
572
"It is also agreed that:

a) The CONTRACTOR'S supervisor will conduct a regular inspection of grave sites/areas being dug to ensure compliance with
the COMPANY'S interment schedules and other related ceremonies.
b) The CONTRACTOR will provide enough manpower during peak interment days including Sundays and Holidays.
c) The CONTRACTOR shall schedule off-days for its workers in coordination with the COMPANY'S schedule of interment
operation.
d) The CONTRACTOR shall be responsible for any damage done to lawn/s and/or structure/s resulting from its operation,
which must be restored to its/their original condition without delay and at the expense of CONTRACTOR."
The contract further provides that petitioner has the option to take over the functions of Ward's personnel if it finds any part or
aspect of the work or service provided to be unsatisfactory, thus:
"6.1 It is hereby expressly agreed and understood that, at any time during the effectivity of this CONTRACT and its sole
determination, the COMPANY may take over the performance of any of the functions mentioned in Paragraph I above, in any
of the following cases:
xxx

c. If the COMPANY finds the performance of the CONTRACTOR in any part or aspect of the grave digging works or other
services provided by it to be unsatisfactory."
It is obvious that the aforementioned provision leaves respondent Ward at the mercy of petitioner Memorial Park as the
contract states that the latter may take over if it finds any part of the services to be below its expectations, including the
manner of its performance. x x x.[19]

The NLRC also found that Ward Trading's business documents fell short of sound business practices. The relevant portion in
the NLRC's Decision states:
It is also worth noting that while Ward has a Certificate of Business Name Registration issued by the Department of Trade and
Industry on October 24, 2003 and valid up to October 24, 2008, the same expressly states that it is not a license to engage in
any kind of business, and that it is valid only at the place indicated therein, which is Las Pias City. Hence, the same is not
valid in Paraaque City, where Ward assigned complainants to perform interment services it contracted with respondent
MMPCI. It is also noted that the Permit, which was issued to Ward by the Office of the Mayor of Las Pias City on October 28,
2003, was valid only up to December 31, 2003. Likewise, the Sanitary Permit to Operate, which was issued to Ward by the
Office of the City Health Officer of the Las Pias City Health Office on October 28, 2003, expired on December 31, 2003.
While respondents MMPCI and Lagdameo were able to present copies of the above-mentioned documents, they failed to
present any proof that Ward is duly registered as [a] contractor with the Department of Labor and Employment. [20]
Section 11 of Department Order No. 18-02, which mandates registration of contractors or subcontractors with the DOLE,
states:
Section 11. Registration of Contractors or Subcontractors. - Consistent with authority of the Secretary of Labor and
Employment to restrict or prohibit the contracting out of labor through appropriate regulations, a registration system to govern
contracting arrangements and to be implemented by the Regional Office is hereby established.

The Registration of contractors and subcontractors shall be necessary for purposes of establishing an effective labor market
information and monitoring.

Failure to register shall give rise to the presumption that the contractor is engaged in labor-only contracting.
For failing to register as a contractor, a presumption arises that one is engaged in labor-only contracting unless the contractor
overcomes the burden of proving that it has substantial capital, investment, tools and the like. [21]

In this case, however, Manila Memorial failed to adduce evidence to prove that Ward Trading had any substantial capital,
investment or assets to perform the work contracted for. Thus, the presumption that Ward Trading is a labor-only contractor
stands. Consequently, Manila Memorial is deemed the employer of respondents. As regular employees of Manila Memorial,
respondents are entitled to their claims for wages and other benefits as awarded by the NLRC and affirmed by the CA.

WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 21 January 2013 and the Resolution dated 17 July
2013 of the Court of Appeals in CA-G.R. SP No. 119237.

SO ORDERED.

573
[ G.R. Nos. 173254-55 & 173263, January 13, 2016 ]
DIAMOND FARMS, INC., PETITIONER, VS. SOUTHERN PHILIPPINES FEDERATION OF LABOR (SPFL)-WORKERS
SOLIDARITY OF DARBMUPCO/DIAMOND-SPFL, DIAMOND FARMS AGRARIAN REFORM BENEFICIARIES MULTI-
PURPOSE COOPERATIVE (DARBMUPCO), VOLTER LOPEZ, RUEL ROMERO, PATRICK) CAPRECHO, REY DIMACALI,
ELESIO EMANEL, VICTOR SINGSON, NILDA DIMACALI, PREMITIVO* DIAZ, RUDY VISTAL, ROGER MONTERO,
JOSISIMO GOMEZ AND MANUEL MOSQUERA, RESPONDENTS.
DECISION
JARDELEZA, J.:
We resolve in this Petition for Review[1] under Rule 45 of the Rules of Court, the issue of who among Diamond Farms, Inc.
("DFI"), Diamond Farms Agrarian Reform Beneficiaries Multi-Purpose Cooperative ("DARBMUPCO") and the individual
contractors[2] ("respondent-contractors") is the employer of the 400 employees ("respondent-workers").

DFI challenges the March 31, 2006 Decision[3] and May 30, 2006 Resolution[4] of the Court Appeals, Special Twenty-Second
Division, Cagayan De Oro City for being contrary to law and jurisprudence. The Decision dismissed DFI's Petition
for Certiorari in C.A.-G.R. SP Nos. 53806 and 61607 and granted DARBMUPCO's Petition for Certiorari in C.A.-G.R. SP No.
59958. It declared DFI as the statutory employer of the respondent-workers.
The Facts

DFI owns an 800-hectare banana plantation ("original plantation") in Alejal, Carmen, Davao. [5] Pursuant to Republic Act No.
6657 or the Comprehensive Agrarian Reform Law of 1988 ("CARL"), commercial farms shall be subject to compulsory
acquisition and distribution,[6] thus the original plantation was covered by the law. However, the Department of Agrarian
Reform ("DAR") granted DFI a deferment privilege to continue agricultural operations until 1998. [7] Due to adverse marketing
problems and observance of the so-called "lay-follow" or the resting of a parcel of land for a certain period of time after
exhaustive utilization, DFI closed some areas of operation in the original plantation and laid off its employees. [8] These
employees petitioned the DAR for the cancellation of DFI's deferment privilege alleging that DFI already abandoned its area of
operations.[9] The DAR Regional Director recalled DFI's deferment privilege resulting in the original plantation's automatic
compulsory acquisition and distribution under the CARL.[10] DFI filed a motion for reconsideration which was denied. It then
appealed to the DAR Secretary.[11]

In the meantime, to minimize losses, DPI offered to give up its rights and interest over the original plantation in favor of the
government by way of a Voluntary Offer to Sell.[12] The DAR accepted DFI's offer to sell the original plantation. However, out of
the total 800 hectares, the DAR only approved the disposition of 689.88 hectares. Hence, the original plantation was split into
two: 689.88 hectares were sold to the government ("awarded plantation") and the remaining 200 hectares, more or less, were
retained by DPI ("managed area").[13] The managed area is subject to the outcome of the appeal on the cancellation of the
deferment privilege before the DAR Secretary.

On January 1, 1996, the awarded plantation was turned over to qualified agrarian reform beneficiaries ("ARBs") under the
CARL. These ARBs are the same farmers who were working in the original plantation. They subsequently organized
themselves into a multi-purpose cooperative named "DARBMUPCO," which is one of the respondents in this case. [14]

On March 27, 1996, DARBMUPCO entered into a Banana Production and Purchase Agreement ("BPPA") [15] with
DFI.[16] Under the BPPA, DARBMUPCO and its members as owners of the awarded plantation, agreed to grow and cultivate
only high grade quality exportable bananas to be sold exclusively to DPI. [17] The BPPA is effective for 10 years.[18]

On April 20, 1996, DARBMUPCO and DFI executed a "Supplemental to Memorandum Agreement" ("SMA").[19]The SMA
stated that DFI shall take care of the labor cost arising from the packaging operation, cable maintenance, irrigation pump and
irrigation maintenance that the workers of DARBMUPCO shall conduct for DFI's account under the BPPA.[20]

From the start, DARBMUPCO was hampered by lack of manpower to undertake the agricultural operation under the BPPA
because some of its members were not willing to work.[21] Hence, to assist DARBMUPCO in meeting its production obligations
under the BPPA, DFI engaged the services of the respondent-contractors, who in turn recruited the respondent-workers.[22]

The engagement of the respondent-workers, as will be seen below, started a series of labor disputes among DARBMUPCO,
DFI and the respondent-contractors.

C.A. G.R. SP No. 53806

On February 10, 1997, respondent Southern Philippines Federation of Labor ("SPFL")a legitimate labor organization with a
574
local chapter in the awarded plantationfiled a petition for certification election in the Office of the Med-Arbiter in Davao
City.[23] SPFL filed the petition on behalf of some 400 workers (the respondent-workers in this petition) "jointly employed by DFI
and DARBMUPCO" working in the awarded plantation.

DARBMUPCO and DFI dented that they are the employers of the respondent-workers. They claimed, instead, that the
respondent-workers are the employees of the respondent-contractors.[24]

In an Order dated May 14, 1997,[25] the Med-Arbiter granted the petition for certification election. It directed the conduct of
certification election and declared that DARBMUPCO was the employer of the respondent-workers. The Order stated that
"whether the said workers/employees were hired by independent contractors is of no moment. What is material is that they
were hired purposely to work on the 689.88 hectares banana plantation [the awarded plantation] now owned and operated by
DARBMUPCO."[26]

DARBMUPCO appealed to the Secretary of Labor and Employment ("SOLE"). In a Resolution dated February 18, 1999, [27] the
SOLE modified the decision of the Med-Arbiter. The SOLE held that DFI, through its manager and personnel, supervised and
directed the performance of the work of the respondent-contractors. The SOLE thus declared DFI as the employer of the
respondent-workers.[28]

DFI filed a motion for reconsideration which the SOLE denied in a Resolution dated May 4, 1999. [29]

On June 11, 1999, DFI elevated the case to the Court of Appeals ("CA") via a Petition for Certiorari[30] under Rule 65 of the
Rules of Court. The case was raffled to the CA's former Twelfth Division and was docketed as C.A.-G.R. SP No. 53806.

C.A.-G.R. SP No. 59958

Meanwhile, on June 20, 1997[31] and September 15, 1997,[32] SPFL, together with more than 300 workers, filed a case for
underpayment of wages, nonpayment of 13th month pay and service incentive leave pay and attorney's fees against DFI,
DARBMUPCO and the respondent-contractors before the National Labor Relations Commission ("NLRC") in Davao City.
DARBMUPCO averred that it is not the employer of respondent-workers; neither is DFI. It asserted that the money claims
should be directed against the true employerthe respondent-contractors.[33]

In a Decision dated January 22, 1999,[34] the Labor Arbiter ("LA") held that die respondent-contractors are "labor-only
contractors." The LA gave credence to the affidavits of the other contractors [35] of DFI (who are not party-respondents in this
petition) asserting that DFI engaged their services, and supervised and paid their laborers. The affidavits also stated that the
contractors had no dealings with DARBMUPCO, except that their work is done in the awarded plantation. [36]

The LA held that, under the law, DFI is deemed as the statutory employer of all the respondent-workers.[37] The LA dismissed
the case against DARBMUPCO and the respondent-contractors.[38]

DFI appealed to the NLRC. In a Resolution dated May 24, 1999, [39] the NLRC Fifth Division modified the Decision of the LA
and declared that DARBMUPCO and DFI are the statutory employers of the workers rendering services in the awarded
plantation and the managed area, respectively.[40] It adjudged DFI and DARBMUPCO as solidarity liable with the respondent-
contractors for the monetary claims of the workers, in proportion to their net planted area.[41]

DARBMUPCO filed a motion for reconsideration which was denied. [42] It filed a second motion for reconsideration in the NLRC,
which was also denied for lack of merit and for being barred under the NLRC Rules of Procedure. [43]Hence, DARBMUPCO
elevated the case to the CA by way of a Petition for Certiorari.[44] The case was docketed as C.A.-G.R. SP No. 59958.

The former Eleventh Division of the CA consolidated C.A. G.R. SP No. 59958 and C.A.-G.R. SP No. 53806 in a Resolution
dated January 27, 2001.[45]

C.A.-G.R. SP No. 61607

Pursuant to the May 4, 1999 Resolution of the SOLE approving the conduct of certification election, the Department of Labor
and Employment ("DOLE") conducted a certification election on October 1, 1999. [46] On even date, DFI filed an election
protest[47] before the Med-Arbiter arguing that the certification election was premature due to the pendency of a petition
for certiorari before the CA assailing the February 18, 1999 and May 4, 1999 Resolutions of the SOLE (previously discussed in
C.A.-G.R. SP No. 53806).

575
In an Order dated December 15, 1999,[48] the Med-Arbiter denied DFI's election protest, and certified SPFL-Workers Solidarity
of DARBMUPCO/DIAMOND-SPFL ("WSD-SPFL") as the exclusive bargaining representative of the respondent-workers. DPI
filed a Motion for Reconsideration[49] which the Med-Arbiter treated as an appeal, and which the latter elevated to the SOLE.

In a Resolution dated July 18, 2000,[50] the SOLE dismissed the appeal. The Resolution stated that the May 4, 1999
Resolution directing the conduct of certification election is already final and executory on June 4, 1999. It pointed out that the
filing of the petition for certiorari before the CA assailing the February 18, 1999 and May 4, 1999 Resolutions does not stay the
conduct of the certification election because the CA did not issue a restraining order. [51] DFI filed a Motion for Reconsideration
but the motion was denied.[52]

On October 27, 2000, DFI filed a Petition for Certiorari[53] before the CA, docketed as C.A.-G.R. SP No. 61607.

In a Resolution dated August 2, 2005,[54] the CA Twenty-Third Division consolidated C.A.-G.R. SP No. 61607 with C.A.-G.R.
SP. No. 59958 and C.A. G.R. SP No. 53806.
The Assailed CA Decision and Resolution

The CA was confronted with two issues:[55]

(1) "Whether DFI or DARBMUPCO is the statutory employer of the [respondent-workers] in these petitions; and

(2) Whether or not a certification election may be conducted pending the resolution of the petition for certiorarifiled before
this Court, the main issue of which is the identity of the employer of the [respondent-workers] in these petitions."
On the first issue, the CA agreed with the ruling of the SOLE [56] that DFI is the statutory employer of the respondent-workers. It
noted that the DFI hired the respondent-contractors, who in turn procured their own men to work in the land owned by
DARBMUPCO. Further, DFI admitted that the respondent-contractors worked under the direction and supervision of DFI's
managers and personnel. DFI also paid for the respondent-contractors' services.[57] The CA said that the fact that the
respondent-workers worked in the land owned by DARBMUPCO is immaterial. "Ownership of the land is not one of the four (4)
elements generally considered to establish employer-employee relationship."[58]

The CA also ruled that DFI is the true employer of the respondent-workers because the respondent-contractors are not
independent contractors.[59] The CA stressed that in its pleadings before the Med-Arbiter, the SOLE, and the CA, DFI revealed
that DARBMUPCO lacks manpower to fulfill the production requirements under the BPPA. This impelled DFI to hire
contractors to supply labor enabling DARBMUPCO to meet its quota. The CA observed that while the various agencies
involved in the consolidated petitions sometimes differ as to who the statutory employer of the respondent-workers is, they are
uniform in finding that the respondent-contractors are labor-only contractors.[60]

On the second issue, the CA reiterated the ruling of the SOLE[61] that absent an injunction from the CA, the pendency of a
petition for certiorari does not stay the holding of the certification election. [62] The challenged Resolution of the SOLE is already
final and executory as evidenced by an Entry of Judgment dated July 14, 1999; hence, the merits of the case can no longer be
reviewed.[63]

The CA thus held in its Decision dated March 31, 2006:

WHEREFORE, premises considered, this Court hereby ORDERS:
(1) the DISMISSAL of the petitions in C.A.-G.R. SP No. 53806 and C.A.-G.R. SP No. 61607; and

(2) the GRANTING of the petition in C.A.-G.R. SP No. 59958 and the SETTING ASIDE of the assailed resolutions of the
NLRC dated 24 May 1999, 30 July 1999 and 26 June 2000, respectively.
SO ORDERED.[64]
DFI filed a Motion for Reconsideration of the CA Decision which was denied in a Resolution dated May 30, 2006. [65]

DFI is now before us by way of Petition for Review on Certiorari praying that DARBMUPCO be declared the true employer of
the respondent-workers.

DARBMUPCO filed a Comment[66] maintaining that under the control test, DFI is the true employer of the respondent-workers.

Respondent-contractors filed a Verified Explanation and Memorandum [67] asserting that they were labor-only contractors;
hence, they are merely agents of the true employer of the respondent-workers.

576
SPFL did not file any comment or memorandum on behalf of the respondent-workers.[68]
The Issue

The issue before this Court is who among DFI, DARBMUPCO and the respondent-contractors is the employer of the
respondent-workers.
Our Ruling

We deny the petition.

This case involves job contracting, a labor arrangement expressly allowed by law. Contracting or subcontracting is an
arrangement whereby a principal (or employer) agrees to put out or farm out with a contractor or subcontractor the
performance or completion of a specific job, work or service within a definite or predetermined period, regardless of whether
such job, work or service is to be performed or completed within or outside the premises of the principal.[69] It involves a
trilateral relationship among the principal or employer, the contractor or subcontractor, and the workers engaged by the
contractor or subcontractor.[70]

Article 106 of the Labor Code of the Philippines [71] (Labor Code) explains the relations which may arise between an employer,
a contractor, and the contractor's employees,[72] thus:
ART. 106. Contractor or subcontracting. - Whenever an employer enters into a contract with another person for the
performance of the formers work, the employees of the contractor and of the latter's subcontractor, if any, shall be paid in
accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the
employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work
performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.

The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting out of labor to
protect the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions
between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine
who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or
circumvention of any provision of this Code.

There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed
by such person are performing activities which are directly related to the principal business of such employer. In such cases,
the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in
the same manner and extent as if the latter were directly employed by him.
The Omnibus Rules Implementing the Labor Code[73] distinguishes between permissible job contracting (or independent
contractorship) and labor-only contracting. Job contracting is permissible under the Code if the following conditions are met:
(1) The contractor carries on an independent business and undertakes the contract work on his own account under his own
responsibility according to his own manner and method, free from the control and direction of his employer or principal in
all matters connected with the performance of the work except as to the results thereof; and

(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and
other materials which are necessary in the conduct of his business. [74]
In contrast, job contracting shall be deemed as labor-only contracting, an arrangement prohibited by law, if a person who
undertakes to supply workers to an employer:
(1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work premises and other
materials; and

(2) The workers recruited and placed by such person are performing activities which are directly related to the principal
business or operations of the employer in which workers are habitually employed. [75]
As a general rule, a contractor is presumed to be a labor-only contractor, unless such contractor overcomes the burden of
proving that it has the substantial capital, investment, tools and the like. [76]

577
Based on the conditions for permissible job contracting, we rule that respondent-contractors are labor-only
contractors.

There is no evidence showing that respondent-contractors are independent contractors. The respondent-contractors, DFI, and
DARBMUPCO did not offer any proof that respondent-contractors were not engaged in labor-only contracting. In this regard,
we cite our ruling in Caro v. Rilloraza,[77] thus:
"In regard to the first assignment of error, the defendant company pretends to show through Venancio Nasol's own testimony
that he was an independent contractor who undertook to construct a railway line between Maropadlusan and Mantalisay, but
as far as the record shows, Nasol did not testify that the defendant company had no control over him as to the manner or
methods he employed in pursuing his work. On the contrary, he stated that he was not bonded, and that he only depended
upon the Manila Railroad for money to be paid to his laborers. As stated by counsel for the plaintiffs, the word 'independent
contractor' means 'one who exercises independent employment and contracts to do a piece of work according to his own
methods and without being subject to control of his employer except as to result of the work.' furthermore, if the employer
claims that the workmen is an independent contractor, for whose acts he is not responsible, the burden is on him to show his
independence.

Tested by these definitions and by the fact that the defendant has presented practically no evidence to determine
whether Venancio Nasol was in reality an independent contractor or not, we are inclined to think that he is nothing
but an intermediary between the defendant and certain laborers. It is indeed difficult to find that Nasol is an
independent contractor; a person who possesses no capital or money of his own to pay his obligations to them, who files no
bond to answer for any fulfillment of his contract with his employer and specially subject to the control and supervision of his
employer, falls short of the requisites or conditions necessary for the common and independent contractor." [78] (Citations
omitted; emphasis supplied.)
To support its argument that respondent-contractors are the employers of respondent-workers, and not merely labor-only
contractors, DFI should have presented proof showing that respondent-contractors carry on an independent business and
have sufficient capitalization. The record, however, is bereft of showing of even an attempt on the part of DFI to substantiate
its argument.

DFI cannot cite the May 24, 1999 Resolution of the NLRC as basis that respondent-contractors are independent contractors.
Nowhere in the NLRC Resolution does it say that the respondent-contractors are independent contractors. On the contrary,
the NLRC declared that "it was not clearly established on record that said [respondent-]contractors are independent, xxx."[79]

Further, respondent-contractors admit, and even insist that they are engaged in labor-only contracting. As will be seen below,
respondent-contractors made the admissions and declarations on two occasions: first was in their Formal Appearance of
Counsel and Motion for Exclusion of Individual Party-Respondents filed before the LA; and second was in their Verified
Explanation and Memorandum filed before this Court.

Before the LA, respondent-contractors categorically stated that they are "labor-only" contractors who have been engaged by
DFI and DARBMUPCO.[80] They admitted that they do not have substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials, and they recruited workers to perform activities directly related to
the principal operations of their employer.[81]

Before this Court, respondents-contractors again admitted that they are labor-only contractors. They narrated that:
1. Herein respondents, Voltaire Lopez, Jr., et. al., were commissioned and contracted by petitioner, Diamond Farms,
Inc. (DFI) to recruit farm workers, who are the complaining [respondent-workers] (as represented by Southern
Philippines Federation of Labor (SPFL) in this appeal by certiorari), in order to perform specific farm activities, such
as pruning, deleafing, fertilizer application, bud inject, stem spray, drainage, bagging, etc., on banana plantation lands
awarded to private respondent, Diamond Farms Agrarian Reform Beneficiaries Multi-Purpose Cooperative
(DARBMUPCO) and on banana planted lands owned and managed by petitioner, DFI.
2. All farm tools, implements and equipment necessary to performance of such farm activities were supplied by petitioner
DFI to respondents Voltaire Lopez, Jr., et. al. as well as to respondents-SPFL, et. al. Herein respondents Voltaire
Lopez, Jr. et. al. had no adequate capital to acquire or purchase such tools, implements, equipment, etc.
3. Herein respondents Voltaire Lopez, Jr., et. al. as well as rcspondents-SPFL, et. al. were being directly supervised,
controlled and managed by petitioner DFI farm managers and supervisors, specifically on work assignments and
performance targets. DFI managers and supervisors, at their sole discretion and prerogative, could directly hire and
terminate any or all of the respondents-SPFL, et. al., including any or all of the herein respondents Voltaire Lopez, Jr., et.
al.
578
4. Attendance/Time sheets of respondents-SPFL, et. al. were being prepared by herein respondents Voltaire Lopez, Jr., et.
al., and correspondingly submitted to petitioner DFI. Payment of wages to respondents-SPFL, et. al. were being paid for
by petitioner DFI thru herein respondents Voltaire Lopez, [Jr.], et. al. The latter were also receiving their wages/salaries
from petitioner DFI for monitoring/leading/recruiting the respondents-SPFL, et. al.
5. No monies were being paid directly by private respondent DARBMUPCO to respondents-SPFL, et. al., nor to herein
respondents Voltaire Lopez, [Jr.], et. al. Nor did respondent DARBMUPCO directly intervene much less supervise any or
all of [the] respondents-SPFL, et. al. including herein respondents Voltaire Lopez, Jr. et. al.[82](Emphasis supplied.)
The foregoing admissions are legally binding on respondent-contractors.[83] Judicial admissions made by parties in the
pleadings, or in the course of the trial or other proceedings in the same case are conclusive and so does not require further
evidence to prove them.[84] Here, the respondent-contractors voluntarily pleaded that they are labor-only contractors; hence,
these admissions bind them.

A finding that a contractor is a labor-only contractor is equivalent to a declaration that there is an employer-employee
relationship between the principal, and the workers of the labor-only contractor; the labor-only contractor is deemed only as
the agent of the principal.[85] Thus, in this case, respondent-contractors are the labor-only contractors and either DFI or
DARBMUPCO is their principal.

We hold that DFI is the principal.

Under Article 106 of the Labor Code, a principal or employer refers to the person who enters into an agreement with a job
contractor, either for the performance of a specified work or for the supply of manpower. [86] In this regard, we quote with
approval the findings of the CA, to wit:
The records show that it is DFI which hired the individual [respondent-contractors] who in turn hired their own men
to work in the 689.88 hectares land of DARBMUPCO as well as in the managed area of the plantation.DFI admits [that]
these [respondent-contractors] worked under the direction and supervision of the DFI. managers and personnel. DFI paid the
[respondent-contractors] for the services rendered in the plantation and the [respondent-contractors] in turn pay their workers
after they [respondent-contractors] received payment from DFI xxx DARBMUPCO did not have anything to do with the hiring,
supervision and payment of the wages of the workers-respondents thru the contractors-respondents. xxx[87] (Emphasis
supplied.)
DFI does not deny that it engaged the services of the respondent-contractors. It does not dispute the claims of respondent-
contractors that they sent their billing to DFI for payment; and that DFI's managers and personnel are in close consultation with
the respondent-contractors.[88]

DFI cannot argue that DARBMUPCO is the principal of the respondent-contractors because it (DARBMUPCO) owns the
awarded plantation where respondent-contractors and respondent-workers were working;[89] and therefore DARBMUPCO is
the ultimate beneficiary of the employment of the respondent-workers.[90]

That DARBMUPCO owns the awarded plantation where the respondent-contractors and respondent-workers were working is
immaterial. This does not change the situation of the parties. As correctly found by the CA, DFI, as the principal, hired the
respondent-contractors and the latter, in turn, engaged the services of the respondent-workers.[91] This was also the
unanimous finding of the SOLE,[92] the LA,[93] and the NLRC.[94] Factual findings of the NLRC, when they coincide with the LA
and affirmed by the CA are accorded with great weight and respect and even finality by this Court. [95]

Alilin v. Petron Corporation[96] is applicable. In that case, this Court ruled that the presence of the power of control on the part
of the principal over the workers of the contractor, under the facts, prove the employer-employee relationship between the
former and the latter, thus:
[A] finding that a contractor is a 'labor-only' contractor is equivalent to declaring that there is an employer-employee
relationship between the principal and the employees of the supposed contractor. In this case, the employer-employee
relationship between Petron and petitioners becomes all the more apparent due to the presence of the power of
control on the part of the former over the latter.

It was held in Orozco v. The Fifth Division of the Hon. Court of Appeals that:
This Court has constantly adhered to the "fourfold test" to determine whether there exists an employer-employee relationship
between the parties. The four elements of an employment relationship are: (a) the selection and engagement of the employee;
(b) the payment of wages; (c) the power of dismissal; and (d) the power to control the employee's conduct.
Of these four elements, it is the power to control which is the most crucial and most determinative factor, so
important, in fact, that, the other elements may even be disregarded.

579
Hence, the facts that petitioners were hired by Romeo or his father and that their salaries were paid by them do not detract
from the conclusion that there exists an employer-employee relationship between the parties due to Petron's power of control
over the petitioners. One manifestation of the power of control is the power to transfer employees from one work assignment
to another. Here, Petron could order petitioners to do work outside of their regular "maintenance/utility" job. Also, petitioners
were required to report for work everyday at the bulk plant, observe an 8:00 a.m. to 5:00 p.m. daily work schedule, and wear
proper uniform and safety helmets as prescribed by the safety and security measures being implemented within the bulk plant.
All these imply control. In an industry where safety is of paramount concern, control and supervision over sensitive operations,
such as those performed by the petitioners, are inevitable if not at all necessary. Indeed, Petron deals with commodities that
are highly volatile and flammable which, if mishandled or not properly attended to, may cause serious injuries and damage to
property and the environment. Naturally, supervision by Petron is essential in every aspect of its product handling in order not
to compromise the integrity, quality and safety of the products that it distributes to the consuming public. [97] (Citations omitted;
emphasis supplied)
That DFI is the employer of the respondent-workers is bolstered by the CA's finding that DFI exercises control over the
respondent-workers.[98] DFI, through its manager and supervisors provides for the work assignments and performance targets
of the respondent-workers. The managers and supervisors also have the power to directly hire and terminate the respondent-
workers.[99] Evidently, DFI wields control over the respondent-workers.

Neither can DFI argue that it is only the purchaser of the bananas produced in the awarded plantation under the
BPPA,[100] and that under the terms of the BPPA, no employer-employee relationship exists between DFI and the respondent-
workers,[101] to wit:
UNDERTAKING OF THE FIRST PARTY

xxx

3. THE FIRST PARTY [DARBMUPCO] shall be responsible for the proper conduct, safety, benefits and general welfare of its
members working in the plantation and specifically render free and harmless the SECOND PARTY [DPI] of any expense,
liability or claims arising therefrom. It is clearly recognized, by the FIRST PARTY that its members and other personnel
utilized in the performance of its function under this agreement are not employees of the SECOND
PARTY.[102] (Emphasis supplied)
In labor-only contracting, it is the law which creates an employer-employee relationship between the principal and the workers
of the labor-only contractor.[103]

Inasmuch as it is the law that forms the employment ties, the stipulation in the BPPA that respondent-workers are not
employees of DFI is not controlling, as the proven facts show otherwise. The law prevails over the stipulations of the parties.
Thus, in Tabas v. California Manufacturing Co., Inc.,[104] we held that:
The existence of an employer-employees relation is a question of law and being such, it cannot be made the subject
of agreement. Hence, the fact that the manpower supply agreement between Livi and California had specifically designated
the former as the petitioners' employer and had absolved the latter from any liability as an employer, will not erase either
party's obligations as an employer, if an employer-employee relation otherwise exists between the workers and either firm.
xxx[105] (Emphasis supplied.)
Clearly, DFI is the true employer of the respondent-workers; respondent-contractors are only agents of DFI. Under Article 106
of the Labor Code, DFI shall be solidarily liable with the respondent-contractors for the rightful claims of the respondent-
workers, to the same manner and extent, as if the latter are directly employed by DFI. [106]

WHEREFORE, the petition is DENIED for lack of merit. The March 31, 2006 Decision and the May 30, 2006 Resolution of the
Court of Appeals in C.A.-G.R. SP Nos. 53806, 61607 and 59958 are hereby AFFIRMED.

SO ORDERED.

[ G.R. No. 186114, October 07, 2015 ]

CHEVRON (PHILS.), INC., PETITIONER, VS. VITALIANO C GALIT, SJS AND SONS CONSTRUCTION CORPORATION
AND MR. REYNALDO SALOMON, RESPONDENTS.
DECISION
PERALTA J.:*
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking the reversal and setting aside
of the Decision[1] and Resolution[2] of the Court of Appeals (CA), dated December 8, 2008 and January 20, 2009, respectively,
in CA-G.R. SP No. 104713. The assailed CA Decision reversed and set aside the Decision dated January 31, 2008 and the
Resolution dated May 27, 2008 of the National Labor Relations Commission (NLRC), Second Division in NLRC NCR (Case

580
No.) 00-03-02399-06 (CA No. 051468-07), while the questioned CA Resolution denied petitioner's Motion for Reconsideration.

The factual and procedural antecedents of the case are as follows:

On March 20, 2006, herein respondent (Galit) filed against Caltex Philippines, Inc., now Chevron (Phils.), Inc., SJS and Sons
Construction Corporation (SJS), and its president, Reynaldo Salomon (Salomon),[3] a Complaint[4] for illegal dismissal,
underpayment/non-payment of 13th month pay, separation pay and emergency cost of living allowance. The Complaint was
filed with the NLRC National Capital Region, North Sector Branch in Quezon City.

In his Position Paper,[5] Galit alleged that: he is a regular and permanent employee of Chevron since 1982, having been
assigned at the company's Pandacan depot; he is an "all-around employee" whose job consists of cleaning the premises of
the depot, changing malfunctioning oil gaskets, transferring oil from containers and other tasks that management would assign
to him; in the performance of his duties, he was directly under the control and supervision of Chevron supervisors; on January
15, 2005, he was verbally informed that his employment is terminated but was promised that he will be reinstated soon; for
several months, he followed up his reinstatement but was not given back his job.

In its Position Paper,[6] SJS claimed that: it is a company which was established in 1993 and was engaged in the business of
providing manpower to its clients on a "per project/contract" basis; Galit was hired by SJS in 1993 as a project employee and
was assigned to Chevron, as a janitor, based on a contract between the two companies; contrary to Galit's allegation, he
started working for SJS only in 1993; the manpower contract between SJS and Chevron eventually ended on November 30,
2004 which resulted in the severance of Galit's employment; SJS finally closed its business operations in December 2004; it
retired from doing business in Manila on January 21, 2005; Galit was paid separation pay of P11,000.00.

On the other hand, petitioner contended in its Position Paper with Motion to Dismiss [7] that: it entered into two (2) contracts for-
janitorial services with SJS from May 1, 2001 to April 30, 2003 and from June 1, 2003 to June 1, 2004; under these contracts,
SJS undertook to "assign such number of its employees, upon prior .agreement with [petitioner], as would be sufficient to fully
and effectively render the work and services undertaken" and to "supply the equipment, tools and materials, which shall, by all
means, be effective and efficient, at its own expense, necessary for the performance" of janitorial services; Galit, who was
employed by SJS, was assigned to petitioner's Pandacan depot as a janitor; his wages and all employment benefits were paid
by SJS; he was subject to the supervision, discipline and control of SJS; on November 30, 2004, the extended contract
between petitioner and SJS expired; subsequently, a new contract for janitorial services was awarded by petitioner to another
independent contractor; petitioner was surprised that Galit filed an action impleading it; despite several conferences, the
parties were not able to arrive at an amicable settlement.

On October 31, 2006, the Labor Arbiter (LA) assigned to the case rendered a Decision,[8] the dispositive portion of which reads
as follows:
WHEREFORE, judgment is hereby rendered DISMISSING the Complaint against respondent Chevron for lack of jurisdiction,
and against respondents SJS and Reynaldo Salomon for lack of merit. For equity and compassionate consideration, however,
respondent SJS is hereby ordered to pay the complainant a separation pay at the rate of a half-month salary for every year of
service that the complainant had with respondent SJS.

SO ORDERED.[9]

The LA found that SJS is a legitimate contractor and that it was Galit's employer, not petitioner. The LA dismissed Galit's
complaint for illegal dismissal against petitioner for lack of jurisdiction on the ground that there was no employer-employee
relationship between petitioner and Galit. The LA likewise dismissed the complaint against SJS and Salomon for lack of merit
on the basis of his finding that Galit's employment with SJS simply expired as a result of the completion of the project for which
he was engaged.

Aggrieved, herein respondent filed an appeal[10] with the NLRC.

On January 31, 2008, the NLRC rendered its Decision[11] and disposed as follows:
WHEREFORE, premises considered, the decision under review is hereby, MODIFIED.

Respondent SJS and Sons Construction Corporation is ordered to pay the complainant, severance compensation, at the rate
of one (1) month salary for every year of service. In all other respects, the appealed decision so stands as AFFIRMED.

SO ORDERED.[12]
581
The NLRC affirmed the findings of the LA that SJS was a legitimate job contractor and that it was Galit's employer.
However,"the NLRC found that Gal it was a regular, and not a project employee, of SJS, whose employment was effectively
terminated when SJS ceased to operate.

Herein respondent tiled a Motion for Reconsideration,[13] but the NLRC denied it in its Resolution[14] dated May 27, 2008.

Respondent then filed a petition for certiorari with the CA assailing the above NLRC Decision and Resolution.

On December 8, 2008, the CA promulgated its assailed Decision, the dispositive portion of which reads, thus:
WHEREFORE, premises considered, the petition is GRANTED. The Decision dated January 31, 2008 and the Resolution
dated May 27, 2008 of the NLRC, Second Division in NLRC NCR [Cast No.] 00-03-02399-06 (CA No. 051468-07)
are REVERSED and SET ASIDE. Judgment is rendered declaring private respondent Chevron Phils, guilty of illegal dismissal
and ordering petitioner Galit's reinstatement without loss of seniority rights and other privileges and payment of his full
backwages, inclusive of allowances and to other benefits or their monetary equivalents computed from the time compensation
was withheld up to the time of actual reinstatement. Private respondent Chevron Phils, is also hereby ordered to pay 10% of
the amount due petitioner Galit as attorney's fees.

SO ORDERED.[15]

Contrary to the- findings of the LA and the NLRC, the CA held that SJS was a labor-only contractor, that petitioner is Galit's
actual employer and that the latter was unjustly dismissed from his employment.

Herein petitioner filed a motion for reconsideration, but the CA denied it in its Resolution dated January 20, 2009.

Hence, the present petition for review on certiorari based on the following grounds:
I.

WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN DECLARING THAT THE
DISMISSAL OF RESPONDENT WAS ILLEGAL CONSIDERING THAT:

A. THE FINDINGS OF FACT OF TFIE LABOR ARBITER A QUO AND THE NATIONAL LABOR RELATIONS COMMISSION
ARE ALREADY BINDING UPON THE HONORABLE COURT OF APPEALS.

B. THERE IS NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE COMPANY AND RESPONDENT HEREIN.

C. PETITIONER SJS IS A. LEGITIMATE INDEPENDENT CONTRACTOR.

II.

CONSIDERING THAT THERE IS NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE COMPANY AND

RESPONDENT HEREIN, THE HONORABLE COURT OF APPEALS' AWARD OF REINSTATEMENT, BACKWAGES, AND
ATTORNEY'S FEES AGAINST THE COMPANY HAS NO LEGAL BASIS.[16]

On September 19, 2012, this Court issued a Resolution[17] directing petitioner to implead SJS as party-respondent on the
ground that it is an indispensable party without whom no final determination can be had of this case.

In a Motion[18] dated November 21, 2012, petitioner manifested its compliance with this Court's September 19, 2012
Resolution. In addition, it prayed that Salomon be also impleaded as party-respondent

Acting on petitioner's above Motion, this Court issued another Resolution [19] on June 19, 2013, stating that SJS and Salomon
are impleaded as parties-respondents and are required to comment on the petition for review on certiorari.

However, despite due notice sent to SJS and Salomon at their last known addresses, copies of the above Resolution were
returned unserved. Hence, on October 20, 2014, the Court, acting on Galit's plea for early resolution of the case, promulgated
a Resolution[20] resolving to dispense with the filing by SJS and Salomon of their respective comments.

The Court will, thus, proceed to resolve the instant petition.

582
At the outset, the Court notes that the first ground raised by petitioner consists of factual issues. It is settled that this Court is
not a trier of facts, and this applies with greater force in labor cases. [21] Corollary thereto, this Court has held in a number of
cases that factual findings of administrative or quasi-judicial bodies, which are deemed to have acquired expertise in matters
within their respective jurisdictions, are generally accorded not only respect but even finality, and bind the Court when
supported by substantial evidence.[22] However, it is equally settled that the.foregoing principles admit of certain exceptions, to
wit: (1) the findings are grounded entirely on speculation, surmises or conjectures; (2) the inference made is manifestly
mistaken, absurd or impossible; (3) there is grave abuse of discretion; (4) the judgment is based on a misapprehension of
facts; (5) the findings of fact are conflicting; (6) in making its findings, the Court of Appeals went beyond the issues of the case,
or its findings are contrary to the admissions of both appellant and appellee; (7) the findings are contrary to those of the trial
court; (8) the findings are conclusions without citation of specific evidence on which they are based; (9) the facts set forth in
the petition, as well as in petitioners main and reply briefs, are not disputed by respondent; (10) the findings of fact are
premised on the supposed absence of evidence and contradicted by the evidence on record; and (11) the Court of Appeals
manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different
conclusion.[23] In the instant case, the Court gives due course to the instant petition considering that the findings of fact and
conclusions of law of the LA and the NLRC differ from those of the CA.

Thus, the primordial question that confronts the Court is whether there existed an employer-employee relationship between
petitioner and Galit, and whether the former is liable to the latter for the termination of his employment. Corollary to this, is the
issue of whether or not SJS is an independent contractor or a labor only contractor.

To ascertain the existence of an employer-employee relationship, jurisprudence has invariably adhered to the four-fold test, to
wit: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
power to control the employee's conduct, or the so-called "control test."[24] Of these four, the last one is the most
important.[25] The so-called "control test" is commonly regarded as the most crucial and determinative indicator of the presence
or absence of an employer-employee relationship.[26] Under the control test, an employer-employee relationship exists where
the person for whom the services are performed reserves the right to control not only the end achieved, but also the manner
and means to be used in reaching that end.[27]

In the instant case, the true nature of Galit's employment is evident from the Job Contract between petitioner and SJS,
pertinent portions of which are reproduced hereunder:
xxxx

1.1 The CONTRACTOR [SJS] shall provide the following specific services to the COMPANY [petitioner]:
xxxx

1. Scooping of slop of oil water separator

2. Cleaning of truck parking area/drum storage area and pier

xxxx
4.1 In the fulfillment of its obligations to the COMPANY, the CONTRACTOR shall select and hire its workers. The
CONTRACTOR alone shall be responsible for the payment of their wages and other employment benefits and likewise for the
safeguarding of their health and safety in accordance with existing laws- and regulations. Likewise, the CONTRACTOR shall
be responsible for the discipline and/or dismissal of these workers.

4.2 The CONTRACTOR shall retain the right to control the manner and the means of performing the work, with the COMPANY
having the control or direction only as to the results to be accomplished.

xxxx

4.4 It is understood that, for the above reasons, these workers shall be considered as the employees of the CONTRACTOR.
Under no circumstances, shall these workers be deemed directly or indirectly as the employees of the COMPANY.

xxxx

5.1 The CONTRACTOR shall maintain efficient and effective discipline over any and all employees it may utilize in performing
its obligations under this CONTRACT, x x x

5.2 The COMPANY shall in no manner be answerable or accountable for any incident or injury which may occur to any worker
583
or personnel of .the CONTRACTOR during the time and consequent upon the performance of the work and services under
this Agreement, nor for any injury, loss or damage arising from fault, negligence or carelessness of the CONTRACTOR or
anyone of its workers to any person or persons or to his or their property; and the CONTRACTOR covenants and agrees to
assume, as it does hereby assume, all liabilities for any such injury, loss or damage and to make the COMPANY free and
blameless therefrom, x x x

5.3. The CONTRACTOR shall be responsible for any loss or damage that may be incurred upon the products, properties and
installations of the COMPANY during the effectivity of this Contract which are due to the unreasonable or negligent act of the
CONTRACTOR, its agents or its workers.

xxxx

6.1 The CONTRACTOR shall at its own expense maintain with a reputable insurance company, acceptable to the CQMPANY,
a comprehensive liability insurance in the amount required by the COMPANY to cover claims for bodily injury, death or
property damage caused to any person or persons by an act or omission of the CONTRACTOR or any of its employees,
agents or representatives.

xxxx

x x x [T]he CONTRACTOR agrees and undertakes:

xxxx

b. To submit satisfactory proof to the COMPANY that it has registered its personnel/workers assigned to perform the work and
services herein required with the Social Security System, Medicare and other appropriate agencies for purposes of the Labor
Code as well as other laws, decrees, rules and regulations.

c. To pay the wages or salaries of its personnel/workers as well as benefits, premia and protection in accordance with the
provisions of the Labor Code and other applicable laws, decrees, rules and regulations promulgated by competent authority,
xxx

d. To assign such number of its employees, upon prior agreement with the COMPANY, as would be sufficient to fully and
effectively render the work and services herein undertaken, xxx

e. To supply the equipment, tools and materials, which shall, by all means, be effective and efficient, at its own expense,
necessary for the performance of the services under this Contract. [28]

The foregoing provisions of the Job Contract between petitioner and SJS demonstrate that the latter possessed the following
earmarks of an employer, to wit: (1) the power of selection and engagement of employees, under.Sections 4.1 and 6.1(d); (2)
the payment of wages, under Sections 4.1 and 6.1(c); (3) the power to discipline and dismiss, under Section 4.1; and, (4) the
power to control the employee's conduct, under Sections 4.1, 4.2, and 5.1.

As to SJS' power of selection and engagement, Galit himself admitted in his own affidavit that it was SJS which assigned him
to work at Chevron's Pandacan depot.[29] As such, there is no question that it was SJS which selected and engaged Galit as its
employee.

With respect to the payment of wages, the Court finds no error in the findings of the LA that Galit admitted that it was SJS
which paid his wages. While Galit claims that petitioner was the one which actually paid his wages and that SJS was merely
used as a conduit, Galit failed to present evidence to this effect. Galit, likewise, failed to present sufficient proof to back up his
claim that it was petitioner, and not SJS, which actually paid his SSS, Philhealth and Pag-IBIG premiums. On the contrary, it is
.unlikely that SJS would report Galit as its worker, pay his SSS, Philhealth and Pag-IBIG premiums, as well as his wages, if it
were not true that he was indeed its employee.[30] In the same manner, the Quitclaim and Release,[31] which was undisputedly
signed by Galit, acknowledging receipt of his separation pay from SJS, is an indirect admission or recognition of the fact that
the latter was indeed his employer. Again, it would be unlikely for SJS to pay Galit his separation pay if it is not the latter's
employer.

Galit also did not dispute the fact that he was dismissed from employment by reason of the termination of the service contract
between SJS and petitioner. In other words, it was not petitioner which ended his employment. He was dismissed therefrom
584
because petitioner no longer renewed its contract with SJS and that the latter subsequently ceased to operate.

Anent the power of control, the Court again finds no cogent reason to depart from the findings of the NLRC that in case of
matters that needed to be addressed with respect to employee performance, petitioner dealt directly with SJS and not with the
employee concerned. In any event, it is settled that such power merely calls for the existence of the right to control and not
necessarily the exercise thereof. In the' present case, the Job Contract between petitioner and SJS clearly provided that SJS
"shall retain the right to control the manner and the means of performing the work, with [petitioner] having the control or
direction only as to the results to be accomplished." [32]

In addition, it would bear to point out that contrary to the ruling of the CA, the work performed by Galit, which is the "scooping
of slop of oil water separator,"[33] has no direct relation to petitioner's business, which is the importation, refining and
manufacture of petroleum products. The Court defers to the findings of both the LA and the NLRC that the job performed by
Galit, which essentially consists of janitorial services, may be incidental or desirable to petitioner's main activity but it is not
necessary and directly related to it.

As to whether or not SJS is an independent contractor, jurisprudence has invariably ruled that an independent contractor
carries on an independent business and undertakes the contract work on his own account, under his own responsibility,
according to his own manner and method, and free from the control and direction of his employer or principal in all matters
connected with the performance of the work except as to the results thereof.[34]This embodies what has long been
jurisprudentially recognized as the control test, as discussed above. In the instant case, SJS presented evidence to show that
it had an independent business by paying business taxes and fees and that it was registered as an employer with the Social
Security System. Moreover, there was no evidence to show that SJS and its employees were ever subject to the control of
petitioner. On the contrary, as shown above, SJS possessed the right to control its employees' manner and means of
performing their work , including herein respondent Galit.

As to its capital, there is no dispute that SJS generated an income of P1,523,575.81 for the year 2004. [35] In Neri v. National
Labor Relations Commission,[36] this Court held that a business venture which had a capitalization of P1,000,000.00 was
considered as highly capitalized and cannot be deemed engaged in labor-only contracting. In the present case, while SJS'
income of more than P1,500,000.00 was not shown to be equivalent to its authorized capital stock, such income is an
indication of how much capital was put into its business to generate such amount of revenue. Thus, the Court finds no
sufficient reason to disturb the findings of the LA and the NLRC that SJS had substantial capital.

WHEREFORE, the instant petition is GRANTED. The assailed Decision and Resolution of the Court of Appeals, dated
December 8, 2008 and January 20, 2009, respectively, are REVERSED and SET ASIDE. The Decision of the National Labor
Relations Commission, dated January 31, 2008 in NLRC NCR' [Case No.] 00-03-02399-06 (CA No. 051468-07)
is REINSTATED.

SO ORDERED.

G.R. No. 177592 June 9, 2014

AVELINO S. ALILIN, TEODORO CALESA, CHARLIE HINDANG, EUTIQUIO GINDANG, ALLAN SUNGAHID, MAXIMO
LEE, JOSE G. MORA TO, REX GABILAN, AND EUGEMA L. LAURENTE, Petitioners,
vs.
PETRON CORPORATION, Respondent.
DECISION
DEL CASTILLO, J.:
A contractor is presumed to be a labor-only contractor, unless it proves that it has the substantial capital, investment, tools and
the like. However, where the principal is the one claiming that the contractor is a legitimate contractor, the burden of proving
the supposed status of the contractor rests on the principal.1
This Petition for Review on Certiorari2 assails the Decision3 dated May 10, 2006 of the Court of Appeals (CA) in CA-G.R. SP
No. 01291 which granted the Petition for Certiorari filed therewith, reversed and set aside the February 18, 2005 Decision4 and
August 24, 2005 Resolution5 of the National Labor Relations Commission (NLRC) in NLRC Case No. V-000481-2003 and
dismissed the Complaint for illegal dismissal filed by petitioners Avelino Alilin (Alilin), Teodoro Calesa (Calesa), Charlie
Hindang (Hindang), Eutiquio Gindang (Gindang), Allan Sungahid (Sungahid), Maximo Lee (Lee), Jose G. Morato (Morato),
Rex Gabilan (Gabilan) and Eugema L. Laurente (Laurente) against respondent Petron Corporation (Petron). Also assailed in
this Petition is the CA Resolution6 dated March 30, 2007 which denied petitioners Motion for Reconsideration 7 and
Supplemental Motion for Reconsideration.8
Factual Antecedents
585
Petron is a domestic corporation engaged in the oil business. It owns several bulk plants in the country for receiving, storing
and distributing its petroleum products.
In 1968, Romualdo D. Gindang Contractor, which was owned and operated by Romualdo D. Gindang (Romualdo), started
recruiting laborers for fielding to Petrons Mandaue Bulk Plant. When Romualdo died in1989, his son Romeo D. Gindang
(Romeo), through Romeo D. Gindang Services(RDG), took over the business and continued to provide manpower services to
Petron. Petitioners were among those recruited by Romualdo D. Gindang Contractor and RDG to work in the premises of the
said bulk plant, with the corresponding dates of hiring and work duties, to wit:
Employees Date of Hiring Duties

Eutiquio Gindang 1968 utility/tanker receiver/barge loader/warehouseman/mixer

Eugema L. Laurente June 1979 telephone operator/order taker

Teodoro Calesa August 1, 1981 utility/tanker receiver/barge loader/sounder/gauger

Rex Gabilan July 1, 1987 warehouseman/forklift driver/tanker receiver/barge loader

Charlie T. Hindang September 18, 1990 utility/tanker receiver/barge loader/sounder/gauger

Allan P. Sungahid September 18, 1990 filler/sealer/painter/tanker receiver/utility

Maximo S. Lee September 18, 1990 gasul filler/painter/utility

Avelino S. Alilin July 16, 1992 carpenter/driver

Jose Gerry M. Morato March 16, 1993 cylinder checker/tanker receiver/grass cutter/janitor/utility
On June 1, 2000, Petron and RDG entered into a Contract for Services 9 for the period from June 1, 2000 to May 31, 2002,
whereby RDG undertook to provide Petron with janitorial, maintenance, tanker receiving, packaging and other utility services
in its Mandaue Bulk Plant. This contract was extended on July 31, 2002 and further extended until September 30, 2002. Upon
expiration thereof, no further renewal of the service contract was done.
Proceedings before the Labor Arbiter
Alleging that they were barred fromcontinuing their services on October 16, 2002, petitioners Alilin, Calesa, Hindang, Gindang,
Sungahid, Lee, Morato and Gabilan filed a Complaint10 for illegal dismissal, underpayment of wages, damages and attorneys
fees against Petron and RDG on November 12, 2002. Petitioner Laurente filed another Complaint11 for illegal dismissal,
underpayment of wages, non-payment of overtime pay, holiday pay, premium pay for holiday, rest day, 13th month pay,
service incentive leave pay, allowances, separation pay, retirement benefits, damages and attorneys fees against Petron and
RDG. The said complaints were later consolidated.
Petitioners did not deny that RDG hired them and paid their salaries. They, however, claimed that the latter is a labor-only
contractor, which merely acted as an agent of Petron, their true employer. They asseverated that their jobs, which are directly
related to Petrons business, entailed them to work inside the premises of Petron using the required equipment and tools
furnished by it and that they were subject to Petrons supervision. Claiming to be regular employees, petitioners thus asserted
that their dismissal allegedly in view of the expiration of the service contract between Petron and RDG is illegal.
RDG corroborated petitioners claim that they are regular employees of Petron. It alleged that Petron directly supervised their
activities; they performed jobs necessary and desirable to Petrons business; Petron provided petitioners with supplies, tools
and equipment used in their jobs; and that petitioners workplace since the start of their employment was at Petrons bulk plant
in Mandaue City. RDG denied liability over petitioners claim of illegal dismissal and further argued that Petron cannot
capitalize on the service contract to escape liability.
Petron, on the other hand, maintained that RDG is an independent contractor and the real employer of the petitioners. It was
RDG which hired and selected petitioners, paid their salaries and wages, and directly supervised their work. Attesting to these
were two former employees of RDG and Petrons Mandaue Terminal Superintendent whose joint affidavit 12 and
affidavit,13 respectively, were submitted by Petron. Anent its allegation that RDG is an independent contractor, Petron
presented the following documents: (1) RDGs Certificate of Registration issued by the Department of Labor and Employment
(DOLE) on December 27, 2000;14 (2) RDGs Certificate of Registration of Business Name issued by the Department of Trade
and Industry (DTI) on August 18, 2000;15 (3) Contractors Pre-Qualification Statement;16 (4) Conflict of Interest Statement
signed by Romeo Gindang as manager of RDG;17 (5) RDGs Audited Financial Statements for the years 1998 18 199919 and
2000;20(6) RDGs Mayors Permit for the years 200021 and 2001;22 (7) RDGs Certificate of Accreditation issued by DTI in
October 1991;23 (8) performance bond24 and insurance policy25 posted to insure against liabilities; (9) Social Security System
(SSS) Online Inquiry System Employee Contributions and Employee Static Information; 26 and, (10) Romeos affidavit27 stating
that he had paid the salaries of his employees assigned to Petron for the period of November 4, 2001 to December 31, 2001.
Petron argued that with the expiration of the service contract it entered with RDG, petitioners term of employment has
concomitantly ended. And not being the employer, Petron cannot be held liable for petitioners claim of illegal dismissal.
586
In a Decision28 dated June 12, 2003,the Labor Arbiter ruled that petitioners are regular employees of Petron. It found that their
jobs were directly related to Petrons business operations; they worked under the supervision of Petrons foreman and
supervisor; and they were using Petrons tools and equipment in the performance of their works. The Labor Arbiter also found
that Petron merely utilized RDG in its attempt to hide the existence of employee-employer relationship between it and
petitioners and avoid liability under labor laws. And there being no showing that petitioners dismissal was for just or authorized
cause, the Labor Arbiter declared them to have been illegally dismissed. Petron was thus held solidarily liable with Romeo for
the payment of petitioners separation pay (in lieu of reinstatement due to strained relations with Petron) fixed at one month
pay for every year of service and backwages computed on the basis of the last salary rate at the time of dismissal. The
dispositive portion of the Decision reads: WHEREFORE, premises considered, judgment is hereby rendered ordering the
respondents Petron Corporation and Romeo Gindang to pay the complainants as follows:
1. Teodoro Calesa P 136,890.00

2. Eutiquio Gindang P 202,800.00

3. Charlie T. Gindang P 91,260.00

4. Allan P. Sungahid P 91,260.00

5. Jose Gerry Morato P 76,050.00

6. Avelino A. Alilin P 95,680.00

7. Rex S. Gabilan P 106,470.00

8. Maximo S. Lee P 91,260.00

9. Eugema Minao Laurente P 150,800.00

Total award P1,042,470.00

The other claims are dismissed for lack of merit.
SO ORDERED.29
Proceedings before the National Labor Relations Commission
Petron continued to insist that there is no employer-employee relationship between it and petitioners. The NLRC, however,
was not convinced. In its Decision30 of February 18, 2005, the NLRC ruled that petitioners are Petrons regular employees
because they are performing job assignments which are germane to its main business. Thus:
WHEREFORE, premises considered, the Decision of the Labor Arbiter is hereby affirmed. It is understood that the grant of
backwages shall be until finality of the Decision.
The appeal of respondent Petron Corporation is hereby DISMISSED for lack of merit.
SO ORDERED.31
The NLRC also denied Petrons Motion for Reconsideration in its Resolution32 of August 24, 2005.
Proceedings before the Court of Appeals
Petron filed a Petition for Certiorari with prayer for the issuance of a temporary restraining order or writ of injunction before the
CA. The said court resolved to grant the injunction.33 Hence, a Writ of Preliminary Injunction34to restrain the implementation of
the February 18, 2005 Decision and August 24, 2005 Resolution of the NLRC was issued on March 3, 2006.
In a Decision35 dated May 10, 2006, the CA found no employer-employee relationship between the parties. According to it, the
records of the case do not show that petitioners were directly hired, selected or employed by Petron; that their wages and
other wage related benefits were paid by the said company; and that Petron controlled the manner by which they carried out
their tasks. On the other hand, RDG was shown to be responsible for paying petitioners wages. In fact, SSS records show
that RDG is their employer and actually the one remitting their contributions thereto. Also, two former employees of RDG who
were likewise assigned in the Mandaue Bulk Plant confirmed by way of a joint affidavit that it was Romeo and his brother
Alejandre Gindang who supervised their work, not Petrons foreman or supervisor. This was even corroborated by the
Terminal Superintendent of the Mandaue Bulk Plant.
The CA also found RDG to be an independent labor contractor with sufficient capitalization and investment as shown by its
financial statement for year-end 2000. In addition, the works for which RDG was contracted to provide were menial which were
neither directly related nor sensitive and critical to Petrons principal business. The CA disposed of the case as follows:
WHEREFORE, the Petition is GRANTED. The February 18, 2005 Decision and the August 24, 2005 Resolution of the Fourth
Division of the National Labor Relations Commission in NLRC Case No. V-000481-2003, entitled "Teodoro Calesa et al. vs.
Petron Corporation and R.D. Gindang Services", having been rendered with grave abuse of discretion amounting to excess of
jurisdiction, are hereby REVERSED and SET ASIDE and a NEW ONE is entered DISMISSING private respondents complaint
against petitioner. It is so ordered.36

587
Petitioners filed a Motion for Reconsideration37 insisting that Petron illegally dismissed them; that RDG is a labor-only
contractor; and that they performed jobs which are sensitive to Petrons business operations. To support these, they attached
to their Supplemental Motion for Reconsideration38 Affidavits39 of former employees of Petron attesting to the fact that their
jobs were critical to Petrons business operations and that they were carried out under the control of a Petron employee.
Petitioners motions were, however, denied by the CA in a Resolution40 dated March 30, 2007.
Hence, this Petition.
Issue
The primary issue to be resolved in this case is whether RDG is a legitimate job contractor. Upon such finding hinges the
determination of whether an employer-employee relationship exists between the parties as to make Petron liable for
petitioners dismissal.
Our Ruling
The Petition is impressed with merit. The conflicting findings of the Labor Arbiter and the NLRC on one hand, and of the CA on
the other, constrains the Court to review the factual issues involved in this case.
As a general rule, the Court does not review errors that raise factual questions. 41 Nonetheless, while it is true that the
determination of whether an employer-employee relationship existed between the parties basically involves a question of fact,
the conflicting findings of the Labor Arbiter and the NLRC on one hand, and of the CA on the other, constrains the Court to
review and reevaluate such factual findings.42
Labor-only contracting, distinguished
from permissible job contracting.
The prevailing rule on labor-only contracting at the time Petron and RDG entered into the Contract for Services in June 2000 is
DOLE Department Order No. 10, series of 1997,43 the pertinent provision of which reads:
Section 4. x x x
xxxx
(f) "Labor-only contracting" prohibited under this Rule is an arrangement where the contractor or subcontractor merely recruits,
supplies or places workers to perform a job, work or service for a principal and the following elements are present:
(i) The contractor or subcontractor does not have substantial capital or investment to actually perform the job, work or
service under its own account and responsibility; and
(ii) The employees recruited, supplied or placed by such contractor or subcontractor are performing activities which
are directly related to the main business of the principal.
xxxx
Section 6. Permissible contracting or subcontracting. - Subject to the conditions set forth in Section 3 (d) and (e) and Section 5
hereof, the principal may engage the services of a contractor or subcontractor for the performance of any of the following:
(a) Works or services temporarily or occasionally needed to meet abnormal increase in the demand of products or
services, provided that the normal production capacity or regular workforce of the principal cannot reasonably cope
with such demands;
(b) Works or services temporarily or occasionally needed by the principal for undertakings requiring expert or highly
technical personnel to improve the management or operations of an enterprise;
(c) Services temporarily needed for the introduction or promotion of new products, only for the duration of the
introductory or promotional period;
(d) Works or services not directly related or not integral to the main business or operation of the principal, including
casual work, janitorial, security, landscaping, and messengerial services, and work not related to manufacturing
processes in manufacturing establishments;
(e) Services involving the public display of manufacturers products which do not involve the act of selling or issuance
of receipts or invoices;
(f) Specialized works involving the use of some particular, unusual or peculiar skills, expertise, tools or equipment the
performance of which is beyond the competence of the regular workforce or production capacity of the principal; and
(g) Unless a reliever system is in place among the regular workforce, substitute services for absent regular
employees, provided that the period of service shall be coextensive with the period of absence and the same is made
clear to the substitute employee at the time of engagement. The phrase "absent regular employees" includes those
who are serving suspensions or other disciplinary measures not amounting to termination of employment meted out
by the principal, but excludes those on strike where all the formal requisites for the legality of the strike have been
prima facie complied with based on the records filed with the National Conciliation and Mediation Board.
"Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to farm out with a
contractor or subcontractor the performance of a specific job, work, or service within a definite or predetermined period,
regardless of whether such job, work or, service is to be performed or completed within or outside the premises of the
principal. Under this arrangement, the following conditions must be met: (a) the contractor carries on a distinct and
independent business and undertakes the contract work on his account under his own responsibility according to his own
manner and method, free from the control and direction of his employer or principal in all matters connected with the
588
performance of his work except as to the results thereof; (b) the contractor has substantial capital or investment; and (c) the
agreement between the principal and contractor or subcontractor assures the contractual employees entitlement to all labor
and occupational safety and health standards, free exercise of the right to self-organization, security of tenure, and social
welfare benefits."44 Labor-only contracting, on the other hand, is a prohibited act, defined as "supplying workers to an
employer who does not have substantial capital or investment in the form of tools, equipment, machineries, work premises,
among others, and the workers recruited and placed by such person are performing activities which are directly related to the
principal business of such employer."45 "[I]n distinguishing between prohibited labor-only contracting and permissible job
contracting, the totality of the facts and the surrounding circumstances of the case shall be considered." 46 Generally, the
contractor is presumed to be a labor-only contractor, unless such contractor overcomes the burden of proving that it has the
substantial capital, investment, tools and the like. However, where the principal is the one claiming that the contractor is a
legitimate contractor, as in the present case, said principal has the burden of proving that supposed status. 47 It is thus
incumbent upon Petron, and not upon petitioners as Petron insists,48 to prove that RDG is an independent contractor.
Petron failed to discharge the burden of
proving that RDG is a legitimate
contractor. Hence, the presumption that
RDG is a labor-only contractor stands.
Here, the audited financial statements and other financial documents of RDG for the years 1999 to 2001 establish that it does
have sufficient working capital to meet the requirements of its service contract. In fact, the financial evaluation conducted by
Petron of RDGs financial statements for years 1998-2000 showed RDG to have a maximum financial capability of Php4.807
Million as of December 1998,49 and Php1.611 Million as of December 2000.50 Petron was able to establish RDGs sufficient
capitalization when it entered into the service contract in 2000. The Court stresses though that this determination of RDGs
status as an independent contractor is only with respect to its financial capability for the period covered by the financial and
other documents presented. In other words, the evidence adduced merely proves that RDG was financially qualified as a
legitimate contractor but only with respect to its last service contract with Petron in the year 2000.
As may be recalled, petitioners have rendered work for Petron for a long period of time even before the service contract was
executed in 2000. The respective dates on which petitioners claim to have started working for Petron, as well as the fact that
they have rendered continuous service to it until October 16, 2002, when they were prevented from entering the premises of
Petrons Mandaue Bulk Plant, were not at all disputed by Petron. In fact, Petron even recognized that some of the petitioners
were initially fielded by Romualdo Gindang, the father of Romeo, through RDGs precursor, Romualdo D.Gindang Contractor,
while the others were provided by Romeo himself when he took over the business of his father in 1989. Hence, while Petron
was able to establish that RDG was financially capable as a legitimate contractor at the time of the execution of the service
contract in 2000, it nevertheless failed to establish the financial capability of RDG at the time when petitioners actually started
to work for Petron in 1968, 1979, 1981, 1987, 1990,1992 and 1993.
Sections 8 and 9,Rule VIII, Book III51 of the implementing rules of the Labor Code, in force since 1976 and prior to DOLE
Department Order No. 10, series of 1997,52 provide that for job contracting to be permissible, one of the conditions that has to
be met is that the contractor must have substantial capital or investment. Petron having failed to show that this condition was
met by RDG, it can be concluded, on this score alone, that RDG is a mere labor-only contractor. Otherwise stated, the
presumption that RDG is a labor-only contractor stands due to the failure of Petron to discharge the burden of proving the
contrary.
The Court also finds, as will be discussed below, that the works performed by petitioners were directly related to Petrons
business, another factor which negates Petrons claim that RDG is an independent contractor.
Petrons power of control over
petitioners exists in this case.
"[A] finding that a contractor is a labor-only contractor is equivalent to declaring that there is an employer-employee
relationship between the principal and the employees of the supposed contractor."53 In this case, the employer employee
relationship between Petron and petitioners becomes all the more apparent due to the presence of the power of control on the
part of the former over the latter.
It was held in Orozco v. The Fifth Division of the Hon. Court of Appeals 54 that:
This Court has constantly adhered to the "four-fold test" to determine whether there exists an employer-employee relationship
between the parties. The four elements of an employment relationship are: (a) the selection and engagement of the employee;
(b) the payment of wages; (c) the power of dismissal; and (d) the power to control the employees conduct.
Of these four elements, it is the power to control which is the most crucial and most determinative factor, so important, in fact,
that, the other elements may even be disregarded." (Emphasis supplied)
Hence, the facts that petitioners were hired by Romeo or his father and that their salaries were paid by them do not detract
from the conclusion that there exists an employer-employee relationship between the parties due to Petrons power of control
over the petitioners. One manifestation of the power of control is the power to transfer employees from one work assignment
to another.55 Here, Petron could order petitioners to do work outside of their regular "maintenance/utility" job. Also, petitioners
were required to report for work everyday at the bulk plant, observe an 8:00 a.m. to 5:00 p.m. daily work schedule, and wear
589
proper uniform and safety helmets as prescribed by the safety and security measures being implemented within the bulk plant.
All these imply control. In an industry where safety is of paramount concern, control and supervision over sensitive operations,
such as those performed by the petitioners, are inevitable if not at all necessary. Indeed, Petron deals with commodities that
are highly volatile and flammable which, if mishandled or not properly attended to, may cause serious injuries and damage to
property and the environment. Naturally, supervision by Petron is essential in every aspect of its product handling in order not
to compromise the integrity, quality and safety of the products that it distributes to the consuming public.
Petitioners already attained regular
status as employees of Petron.
Petitioners were given various work assignments such as tanker receiving, barge loading, sounding, gauging, warehousing,
mixing, painting, carpentry, driving, gasul filling and other utility works. Petron refers to these work assignments as menial
works which could be performed by any able-bodied individual. The Court finds, however, that while the jobs performed by
petitioners may be menial and mechanical, they are nevertheless necessary and related to Petrons business operations. If not
for these tasks, Petrons products will not reach the consumers in their proper state. Indeed, petitioners roles were vital
inasmuch as they involve the preparation of the products that Petron will distribute to its consumers.
Furthermore, while it may be true that any able-bodied individual can perform the tasks assigned to petitioners, the Court
notes the undisputed fact that for many years, it was the same able-bodied individuals (petitioners) who performed the tasks
for Petron. The engagement of petitioners for the same works for a long period of time is a strong indication that such works
were indeed necessary to Petrons business. In view of these, and considering further that petitioners length of service entitles
them to become regular employees under the Labor Code, petitioners are deemed by law to have already attained the status
as Petrons regular employees. As such, Petron could not terminate their services on the pretext that the service contract it
entered with RDG has already lapsed. For one, and as previously discussed, such regular status had already attached to them
even before the execution of the service contract in 2000. For another, the same does not constitute a just or authorized cause
for a valid dismissal of regular employees.
In sum, the Court finds that RDG is a labor-only contractor. As such, it is considered merely as an agent of Petron.
Consequently, the employer-employee relationship which the Court finds to exist in this case is between petitioners as
employees and Petron as their employer. Petron therefore, being the principal employer and RDG, being the labor-only
contractor, are solidarily liable for petitioners' illegal dismissal and monetary claims.56
WHEREFORE, the Petition is GRANTED. The May 10, 2006 Decision and March 30, 2007 Resolution of the Court of Appeals
in CA-G.R. SP No. 01291 are REVERSED and SET ASIDE. The February 18, 2005 Decision and August 24, 2005 Resolution
of the National Labor Relations Commission in NLRC Case No. V-000481-2003 are hereby REINSTATED and AFFIRMED.
SO ORDERED.

G.R. Nos. 82763-64 March 19, 1990

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ISABEL P. ORTIGUERRA, and LABOR ALLIANCE
FOR NATIONAL DEVELOPMENT, respondents.
The Legal Counsel for petitioner.
Piorello E. Azura, Errol Ismael, B. Palaci and Maria Lourdes C. Legaspi for APT.
Pablo B. Castillon for respondent LAND.

MELENCIO-HERRERA, J.:
This Petition for Certiorari addresses itself to the 12 February 1986 Order of the National Labor Relations Commission
directing petitioner Development Bank of the Philippines (DBP) to remit the sum of P6,292,380.00 "out of proceeds of the
foreclosed properties of Lirag Textile Mills Inc., sold at public auction in order to satisfy the judgment" in NLRC Cases Nos.
NCR-3-2581-82 and 2-2090-82.
The background facts of these two cases may be summarized as follows:
The complainants in the two cases filed below were former employees of Lirag Textile Mills, Inc. (LIRAG, for short). LIRAG
was a mortgage debtor of DBP. Private respondent Labor Alliance for National Development (LAND, for brevity) was the
bargaining representative of the more or less 800 former rank and file employees of LIRAG. Around September 1981, LIRAG
started terminating the services of its employees on the ground of retrenchment. By December of the said year there were
already 180 regular employees separated from the service. LIRAG has since ceased operations presumably due to financial
reverses.
In February 1982, Joselito Albay, one of the employees dismissed in September 1981, filed a complaint before the National
Labor Relations Commission (NLRC) against LIRAG for illegal dismissal (Case No. 2-2090-82). On 1 March 1982, LAND, on
behalf of 180 dismissed members, also filed a Complaint against LIRAG seeking separation pay, 13th month pay, gratuity pay,
sick leave and vacation leave pay and emergency allowance (Case No. 3-2581-82). These two cases were consolidated and
jointly heard by the NLRC. Said complainants have since been joined by supervisors and managers.
590
In a Decision, dated 30 July 1982, Labor Arbiter Apolinar L. Sevilla ordered LIRAG to pay the individual complainants. The
NLRC (Third Division) affirmed the same on 28 March 1982. That judgment became final and executory.
On 15 April 1983, a Writ of Execution was issued. On the same day, DBP extrajudicially foreclosed the mortgaged properties
for failure of LIRAG to pay its mortgage obligation. As the only bidder at the foreclosure sale, DBP acquired said mortgaged
properties for P31,346,462.90. Since DBP was the sole mortgagee, no actual payment was made, the amount of the bid
having been merely credited in partial satisfaction of LIRAG's indebtedness.
By reason of said foreclosure, the Writ of Execution issued in favor of the complainants remained unsatisfied. A Notice of Levy
on Execution on the properties of LIRAG was then entered.
On 7 December 1984, LAND filed a "Motion for Writ of Execution and Garnishment" of the proceeds of the foreclosure sale.
On 30 May 1985, upon motion of LAND, Labor Arbiter Apolinar L. Sevilla ordered the DBP impleaded "in the interest of justice
and due process," and required it to intervene.
On 12 February 1986, and over the opposition of DBP, Labor Arbiter Sevilla granted the Writ of Garnishment and directed
DBP to remit to the NLRC the sum of P6,292,380.00 out of the proceeds of the foreclosed properties of LIRAG sold at public
auction in order to satisfy the judgment previously rendered.
DBP sought reconsideration of the above Order on the grounds of NLRC's lack of jurisdiction over it since it was not a party to
the case, and that it was deprived of its property without due process of law. Public respondent, Labor Arbiter Isabel P.
Ortiguerra denied reconsideration on 25 May 1987. DBP appealed that denial to the NLRC.
In the meantime, on 3 February 1987, by virtue of Proclamation Nos. 50 and 50-A, the Asset Privatization Trust (APT) became
the transferee of the DBP foreclosed assets of LIRAG. On 12 July 1989, by virtue of that transfer, we deemed APT impleaded
as a party-petitioner and gave it time within which to file its pleading. It submitted a Memorandum on 22 November 1989.
It appears that on 21 December 1987, a partial Compromise Agreement was entered into between APT and LAND (Litex
Chapter) whereby APT paid the complainants-employees, ex gratia, the sum of P750,000.00 "in full settlement of their claims,
past and present, with respect to all assets of LITEX transferred by DBP to APT." That amount was received by LAND's local
President. Apparently, however, on 25 January 1988, LAND, through its national President, filed its opposition to the
Compromise Agreement for being contrary to law, morals and public policy.
On 25 March 1988, the NLRC (First Division) affirmed the appealed Order and dismissed the DBP appeal.
DBP is now before us seeking a review and reversal. On 30 January 1989, the Court resolved to give due course to the
petition and to require the parties to submit simultaneous memoranda. On 1 February 1990, the Court's Second Division
referred the case to the Court en banc, which the latter accepted on the same date.
It is true that DBP was not an original party and that it was ordered impleaded only after the Writs of Execution were not
satisfied because the properties levied upon on execution had been foreclosed extrajudicially by it. DBP had to be impleaded,
however, for the proper satisfaction of a final judgment. Being an incident in the execution of the final judgment award, NLRC
retained jurisdiction and control over the case and could issue such orders as were necessary for the implementation of that
award. Its inclusion as a party could not have been accomplished at the earlier stages of the proceedings because at the time
of the filing of the Complaint, private respondents' cause of action was only against LIRAG.
DBP cannot rightfully contend that it was deprived of due process. It was given the opportunity to be heard and to present its
evidence. It had actually filed its Opposition to the Motion for Execution and Garnishment filed by LAND on 7 January 1985,
and the Order granting the Motion was issued only after hearing. DBP had also addressed an appeal to the NLRC. It had
submitted, therefore, to the jurisdiction of the NLRC.
Now, for the core issue whether or not the NLRC gravely abused its discretion in affirming the Order of the Labor Arbiter
granting the Writ of Garnishment out of the proceeds of LIRAG's properties foreclosed by DBP to satisfy the judgment in these
cases.
We are constrained to rule in the affirmative.
Article 110 of the Labor Code provides:
Art. 110. Worker preference in case of bankruptcy. In the event of bankruptcy or liquidation of an
employer's business, his workers shall enjoy first preference as regards wages due them for services
rendered during the period prior to the bankruptcy or liquidation, any provision to the contrary
notwithstanding. Unpaid wages shall be paid in full before other creditors may establish any claim to a share
in the assets of the employer.
In implementation of the foregoing, Section 10, Rule VIII, Book III of the Revised Rules and Regulations Implementing the
Labor Code, as amended, provides:
Sec. 10. Payment of wages in case of bankruptcy. Unpaid wages earned by the employees before
the declaration of bankruptcy or judicial liquidation of the employer's business shall be given first preference
and shall be paid in full before other creditors may establish any claim to a share in the assets of the
employer. (Emphasis supplied).
In interpreting the foregoing provisions, the Court, in Development Bank of the Philippines vs. Santos (G.R. Nos. 78261-62, 8
March 1989), categorically stated:

591
 It is quite clear from the provision that a declaration of bankruptcy or a judicial liquidation must be present
before the workers preference may be enforced. Thus, Article 110 of the Labor Code and its implementing
rule cannot be invoked by the respondents in this case absent a formal declaration of bankruptcy or a
liquidation order. . . .
Since then, however, Article 110 has been amended by Republic Act No. 6715 and now reads as follows:
Sec. 1. Article 110 of Presidential Decree No. 442, as amended, otherwise known as the Labor Code of the
Philippines, is hereby further amended to read as follows:
Art. 110. Worker preference in case of bankruptcy. In the event of bankruptcy or liquidation of an
employer's business, his workers shall enjoy first preference as regards their unpaid wages and other
monetary claims, any provision of law to the contrary notwithstanding. Such unpaid wages and monetary
claims shall be paid in full before the claims of the Government and other creditors may be paid.
(Amendments emphasized).
The amendment expands worker preference to cover not only unpaid wages but also other monetary claims to which even
claims of the Government must be deemed subordinate.
Section 10, Rule III, Book III of the Omnibus Rules Implementing the Labor Code has also been amended by Section 1 of the
Rules and Regulations Implementing RA 6715 as approved by the then Secretary of Labor and Employment on 24 May 1989,
and now provides:
Sec. 10. Payment of wages and other monetary claims in case of bankruptcy. In case of bankruptcy or
liquidation of the employer's business, the unpaid wages and other monetary claims of the employees shall
be given first preference and shall be paid in full before the claims of government and other creditors may be
paid.
Notably, the terms "declaration" of bankruptcy or "judicial" liquidation have been eliminated. Does this mean then that
liquidation proceedings have been done away with?
We opine in the negative, upon the following considerations:
1. Because of its impact on the entire system of credit, Article 110 of the Labor Code cannot be viewed in isolation but must be
read in relation to the Civil Code scheme on classification and preference of credits.
Article 110 of the Labor Code, in determining the reach of its terms, cannot be viewed in isolation. Rather,
Article 110 must be read in relation to the provisions of the Civil Code concerning the classification,
concurrence and preference of credits, which provisions find particular application in insolvency proceedings
where the claims of all creditors, preferred or non-preferred, may be adjudicated in a binding manner. . .
. Republic vs. Peralta (G.R. No. L-56568, May 20, 1987, 150 SCRA 37).
2. In the same way that the Civil Code provisions on classification of credits and the Insolvency Law have been brought into
harmony, so also must the kindred provisions of the Labor Law be made to harmonize with those laws.
3. In the event of insolvency, a principal objective should be to effect an equitable distribution of the insolvent's property
among his creditors. To accomplish this there must first be some proceeding where notice to all of the insolvents's creditors
may be given and where the claims of preferred creditors may be bindingly adjudicated (De Barretto vs. Villanueva, No. L-
14938, December 29, 1962, 6 SCRA 928). The rationale therefore has been expressed in the recent case of DBP
vs. Secretary of Labor (G.R. No. 79351, 28 November 1989), which we quote:
A preference of credit bestows upon the preferred creditor an advantage of having his credit satisfied first
ahead of other claims which may be established against the debtor. Logically, it becomes material only
when the properties and assets of the debtors are insufficient to pay his debts in full; for if the debtor is
amply able to pay his various creditors in full, how can the necessity exist to determine which of his creditors
shall be paid first or whether they shall be paid out of the proceeds of the sale the debtor's specific property?
Indubitably, the preferential right of credit attains significance only after the properties of the debtor have
been inventoried and liquidated, and the claims held by his various creditors have been established
(Kuenzle & Streiff (Ltd.) vs. Villanueva, 41 Phil 611 (1916); Barretto vs. Villanueva, G.R. No. 14938, 29
December 1962, 6 SCRA 928; Philippine Savings Bank vs. Lantin, G.R. 33929, 2 September 1983, 124
SCRA 476).
4. A distinction should be made between a preference of credit and a lien. A preference applies only to claims which do not
attach to specific properties. A lien creates a charge on a particular property. The right of first preference as regards unpaid
wages recognized by Article 110 does not constitute a lien on the property of the insolvent debtor in favor of workers. It is but a
preference of credit in their favor, a preference in application. It is a method adopted to determine and specify the order in
which credits should be paid in the final distribution of the proceeds of the insolvent's assets. It is a right to a first preference in
the discharge of the funds of the judgment debtor.
In the words of Republic vs. Peralta, supra:
Article 110 of the Labor Code does not purport to create a lien in favor of workers or employees for unpaid
wages either upon all of the properties or upon any particular property owned by their employer. Claims for
unpaid wages do not therefore fall at all within the category of specially preferred claims established under
592
 Articles 2241 and 2242 of the Civil Code, except to the extent that such complaints for unpaid wages are
already covered by Article 2241, number 6: "claims for laborers wages, on the goods manufactured or the
work done;" or by Article 2242, number 3: "claims of laborers and other workers engaged in the construction,
reconstruction or repair of buildings, canals and other works, upon said buildings, canals and other works,
upon said buildings, canals and other works." To the extent that claims for unpaid wages fall outside the
scope of Article 2241, number 6 and 2242, number 3, they would come within the ambit of the category of
ordinary preferred credits under Article 2244.
5. The DBP anchors its claim on a mortgage credit. A mortgage directly and immediately subjects the property upon which it is
imposed, whoever the possessor may be, to the fulfillment of the obligation for whose security it was constituted (Article 2176,
Civil Code). It creates a real right which is enforceable against the whole world. It is a lien on an identified immovable property,
which a preference is not. A recorded mortgage credit is a special preferred credit under Article 2242 (5) of the Civil Code on
classification of credits. The preference given by Article 110, when not falling within Article 2241 (6) and Article 2242 (3) of the
Civil Code and not attached to any specific property, is an ordinary preferred credit although its impact is to move it from
second priority to first priority in the order of preference established by Article 2244 of the Civil Code (Republic vs.
Peralta, supra).
In fact, under the Insolvency Law (Section 29) a creditor holding a mortgage or lien of any kind as security is not permitted to
vote in the election of the assignee in insolvency proceedings unless the value of his security is first fixed or he surrenders all
such property to the receiver of the insolvent's estate.
6. Even if Article 110 and its Implementing Rule, as amended, should be interpreted to mean "absolute preference," the same
should be given only prospective effect in line with the cardinal rule that laws shall have no retroactive effect, unless the
contrary is provided (Article 4, Civil Code). Thereby, any infringement on the constitutional guarantee on non-impairment of the
obligation of contracts (Section 10, Article III, 1987 Constitution) is also avoided. In point of fact, DBP's mortgage credit
antedated by several years the amendatory law, RA No. 6715. To give Article 110 retroactive effect would be to wipe out the
mortgage in DBP's favor and expose it to a risk which it sought to protect itself against by requiring a collateral in the form of
real property.
In fine, the right to preference given to workers under Article 110 of the Labor Code cannot exist in any effective way prior to
the time of its presentation in distribution proceedings. It will find application when, in proceedings such as insolvency, such
unpaid wages shall be paid in full before the "claims of the Government and other creditors" may be paid. But, for an orderly
settlement of a debtor's assets, all creditors must be convened, their claims ascertained and inventoried, and thereafter the
preferences determined in the course of judicial proceedings which have for their object the subjection of the property of the
debtor to the payment of his debts or other lawful obligations. Thereby, an orderly determination of preference of creditors'
claims is assured (Philippine Savings Bank vs. Lantin, No. L-33929, September 2, 1983, 124 SCRA 476); the adjudication
made will be binding on all parties-in-interest, since those proceedings are proceedings in rem; and the legal scheme of
classification, concurrence and preference of credits in the Civil Code, the Insolvency Law, and the Labor Code is preserved in
harmony.
WHEREFORE, Certiorari is GRANTED, and the assailed Decision of public respondent, the National Labor Relations
Commission (NLRC), dated 25 March 1988, is hereby SET ASIDE.
The Development Bank of the Philippines, the Asset Privatization Trust, the Labor Alliance for National Development (LAND),
and other creditors who may be so minded, are hereby directed, within sixty (60) days from notice, to institute involuntary
insolvency proceedings before the proper Court where all the assets of Lirag Textile Mills, Inc., may be inventoried, the
preferences of all its creditors determined, and their claims discharged in a binding and conclusive manner. No costs.
SO ORDERED.

G.R. No. 151983-84 July 31, 2008

JOSE MAX S. ORTIZ, Petitioner,
vs.
SAN MIGUEL CORPORATION, Respondent.
DECISION
CHICO-NAZARIO, J.:
This case is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure seeking to modify
or partially reconsider the Decision1 dated 22 August 2001 and Resolution2 dated 9 January 2002 of the Court of Appeals in
CA-G.R. SP No. 54576-77, insofar as the award of attorneys fees is concerned. Herein petitioner Jose Max S. Ortiz prays that
this Court affirm the award of attorneys fees equivalent to 10% of the monetary award adjudged by the National Labor
Relations Commission (NLRC) in its Decisions dated 21 July 1995 and 25 July 1995 in NLRC Cases No. V-0255-943 and No.
V-0068-95,4 respectively. Petitioner asserts that he is entitled to the said attorneys fees.
Petitioner is a member of the Philippine Bar who represented the complainants in NLRC Cases No. V-0255-94 and No. V-
0068-95 instituted against herein private respondent San Miguel Corporation sometime in 1992 and 1993.

593
Private respondent, on the other hand, is a corporation duly organized and existing under and by virtue of the laws of the
Republic of the Philippines. It is primarily engaged in the manufacture and sale of food and beverage particularly beer
products. In line with its business, it operates breweries and sales offices throughout the Philippines. 5 The complainants in
NLRC Cases No. V-0255-94 and No. V-0068-95 were employees at private respondents Sales Offices in the provinces.
NLRC Case No. V-0255-94 (Aguirre Cases)
In 1992, several employees from the Bacolod, Cadiz, and Himamaylan Beer Sales Offices filed with the Labor Arbiter separate
complaints against private respondent for illegal dismissal with prayer for reinstatement with backwages; elevation of
employment status from casual-temporary to regular-permanent reckoned after six months from the start of complainants
employment; underpayment of salaries; non-payment of holiday pay, service incentive leave pay, allowances and sick leaves;
non-payment of benefits under the existing Collective Bargaining Agreements (CBA); attorneys fees; moral, exemplary and
other damages; and interest. The foregoing complaints were consolidated and initially docketed as RAB Cases No. 06-01-
10031-92; 06-01-10048-92; 06-01-10049-92; 06-02-10210-92; 06-02-10211-92; and 06-03-10255-92 (hereinafter collectively
referred to as the Aguirre Cases). After conducting a full-blown trial, the parties were given the opportunity to submit their
respective memoranda. Subsequently, the cases were submitted for resolution.
On 30 June 1994, Labor Arbiter Reynaldo J. Gulmatico (Labor Arbiter Gulmatico) rendered a Decision 6 in the Aguirre Cases
finding all the complainants to have been illegally dismissed. He ordered complainants reinstatement to their previous or
equivalent positions without loss of seniority rights. He also ordered private respondent to pay the complainants (1) full
backwages and other CBA benefits in the total amount of P6,197,952.88; (2) rice subsidy or its monetary equivalent; and (3)
attorneys fees equivalent to 10% of the monetary award or in the amount of P619,795.28. Labor Arbiter Gulmatico, however,
dismissed complainants claim for overtime pay, holiday pay, 13th month pay differential, service incentive leave pay, moral
damages and all other claims for lack of merit.7
Unsatisfied with Labor Arbiter Gulmaticos monetary and economic awards, complainants appealed to the NLRC, where the
Aguirre Cases were collectively docketed as NLRC Case No. V-0255-94. The NLRC would later render a Decision dated 21
July 1995 in the Aguirre Cases affirming the Decision of Labor Arbiter Gulmatico, with the following modifications: (1) granting
sales commission to the complainants and adopting their computation thereof in their Appeal Memorandum 8 filed before the
NLRC; (2) adjusting and/or reducing the amounts awarded to complainants Alfredo Gadian, Jr., Renato Junsay, Agustines
Llacuna, and Florencio de la Piedra depending on the dates they were employed; (3) determining that Modesto Jabaybay, who
died on 28 December 1993, was to receive only the amount of P356,128.02; (4) declaring that all the complainants except
Romeo Magbanua, who withdrew his complaint, were entitled to whatever benefits were given under the CBA; and (5) that
complainants Romeo Magbanua and Modesto Jabaybay shall no longer be reinstated. 9
Private respondent moved for the reconsideration of the aforesaid 21 July 1995 NLRC Decision, but its motion was denied by
the NLRC in its Resolution10 dated 27 February 1996.
NLRC Case No. V-0068-95 (Toquero Case)
While the Aguirre Cases were still pending resolution by Labor Arbiter Gulmatico, three other employees at the San Carlos
Sales Office filed with the Labor Arbiter a similar complaint for illegal dismissal against private respondent in 1993. Their
complaint was docketed as RAB Case No. 06-07-10404-93 (hereinafter referred to as the Toquero Case).
On 26 December 1994, Labor Arbiter Ray Allan T. Drilon (Labor Arbiter Drilon) rendered his Decision 11 in the Toquero
Case also ruling that the three complainants were illegally dismissed. Thus, he ordered the complainants immediate
reinstatement to their former positions without loss of seniority rights. He ordered private respondent to pay complainants (1)
backwages and other benefits in the amount of P572,542.50; (2) all benefits, privileges and rights enjoyed by the private
respondents regular employees in the total amount of P339,055.00; (3) a total of 159 sacks of rice ration; (4) sales
commissions based on the monthly sales of beer sold by their office for the last three years; and (5) attorneys fees in the
amount of P91,159.75.12
Again, the complainants were not contented with Labor Arbiter Drilons Decision, and they appealed their case to the NLRC
which was then docketed as NLRC Case No. V-0068-95. On 25 July 1995, the NLRC rendered a Decision modifying the 26
December 1994 Decision of Labor Arbiter Drilon by ordering the private respondent to pay the complainants the following: (1)
additional awards of sales commission; (2) tailoring allowance; (3) monetary equivalent of their uniform for two years
consisting of 24 sets of t-shirts and 6 pairs of pants; and (4) attorneys fees of 10% of the total monetary award
or P198,296.95.13
In its Resolution14 dated 9 October 1995, the NLRC partially granted private respondents motion for reconsideration by
allowing the deduction from the award of backwages any earnings of complainants elsewhere during the pendency of their
case.15
CA-G.R. SP No. 54576-77
Failing to get a favorable ruling from the NLRC in both the Aguirre and Toquero Cases, private respondent elevated the NLRC
Decisions to this Court via a Petition for Certiorari, where they were docketed as G.R. No. 124426 16 and G.R. No. 122975,
respectively.17 On 15 July 1996, this Court issued a Resolution18 consolidating the two cases. In another Resolution19 dated 30
June 1999, this Court referred the said cases to the Court of Appeals conforming to its ruling in St. Martin Funeral Home v.

594
NLRC and Bienvenido Aricayos.20 The Court of Appeals accepted the consolidated cases in its Resolution 21 dated 7
September 1999, and docketed the same as CA-G.R. SP No. 54576-77.
While the private respondents Petitions for Certiorari were pending before the Court of Appeals, all but one of the remaining
complainants in the Aguirre and Toquero Cases appeared on various dates before Labor Arbiters Gulmatico and Drilon, and in
the presence of two witnesses, signed separate Deeds of Release, Waiver and Quitclaim 22 in favor of private respondent.
Based on the Deeds they executed, the complainants agreed to settle their claims against private respondent for amounts less
than what the NLRC actually awarded. Private respondent withheld 10% of the total amount agreed upon by the parties in the
said Deeds as attorneys fees and handed it over to petitioner.
Private respondent then attached the Deeds of Release, Waiver and Quitclaim to its Manifestation and Motion23filed before the
appellate court. On 22 August 2001, the Court of Appeals rendered a Decision 24 in CA-G.R. SP No. 54576-77 affirming the
NLRC Decision dated 21 July 1995 and Resolution dated 27 February 1996 in the Aguirre Cases, only insofar as it concerned
complainant Alfredo Gadian, Jr. (complainant Gadian), the only complainant who did not execute a Deed of Release, Waiver
and Quitclaim. With respect to the other complainants in the Aguirre and Toquero Cases, their complaints were dismissed on
account of their duly executed Deeds of Release, Waiver and Quitclaim.25
Private respondent moved for the partial reconsideration of the 22 August 2001 Decision of the Court of Appeals, seeking the
reversal and setting aside of the 22 August 2001 Decision of the Court of Appeals in CA-G.R. SP. No. 54576-77, which
affirmed the 21 July 1995 Decision and 27 February 1996 Resolution of the NLRC in the Aguirre Cases, insofar as
complainant Gadian was concerned; and the dismissal of complainant Gadians complaint against private respondent for lack
of merit.26 Complainant Gadian and his counsel, herein petitioner, for their part, likewise moved for the partial reconsideration
of the same Decision of the appellate court praying that the award of attorneys fees of 10% should be based on the monetary
awards adjudged by the NLRC.27 In a Resolution28 dated 9 January 2002, the appellate court denied both motions.
G.R. No. 151421 and No. 151427
Private respondent appealed before this Court by filing a Petition for Review, docketed as G.R. No. 151421 and No. 151427.
However, private respondents Petition was denied due course by this Court in a Resolution 29 dated 18 March 2002 for failure
of the private respondent to show that a reversible error had been committed by the appellate court. The Court also denied
private respondents motion for reconsideration.30 The denial of the private respondents Petition in G.R. No. 151421 and No.
151427 became final and executory on 24 July 2002.31
G.R. No. 151983-84
Petitioner filed this present Petition for Review on his own behalf, docketed as G.R. No. 151983-84, praying that this Court
grant him attorneys fees equivalent to those awarded by the NLRC in the Aguirre and Toquero Cases. He makes the following
lone assignment of error in his Petition:
THE HONORABLE PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN NOT
AWARDING ATTORNEYS FEES BASED ON THE ORIGINAL AWARD MADE BY THE NLRC-FOURTH DIVISON.32
In his Memorandum,33 petitioner posits the following issues:
I. WHETHER THE PRESENT PETITION RAISES A QUESTION OF LAW.
II. WHETHER PETITIONER IS A REAL PARTY IN INTEREST TO FILE THE PRESENT PETITION.
III. WHETHER PETITIONER IS ENTITLED TO ADDITIONAL ATTORNEYS FEES ON TOP OF WHAT WAS
ALREADY RECEIVED.34
Petitioner alleges that the Decision of the appellate court was prejudicial only insofar as it failed to grant 10% attorneys fees
based on the monetary and economic awards adjudged by the NLRC in its Decisions in the Aguirre and Toquero Cases.
Considering that the only complainant who did not execute a Deed of Release, Waiver and Quitclaim, namely, complainant
Gadian, obtained a favorable judgment from the Court of Appeals, he was no longer interested in pursuing an appeal; and
petitioner is, thus, constrained to bring the present Petition, with himself as the forced petitioner, for the purpose of recovering
the aforesaid attorneys fees.
In the instant Petition, petitioner is claiming additional attorneys fees, representing the difference between the amount as
decreed in the NLRC Decisions in the Aguirre and Toquero Cases and the amount he already received from private
respondent, equivalent to the 10% attorneys fees the latter withheld from the amounts it actually paid to the complainants who
signed the Deeds of Release, Waiver and Quitclaim.
Petitioner avows that he is entitled to attorneys fees based on the monetary awards as stated in the Decisions of the NLRC in
the Aguirre and Toquero Cases because (1) the Deeds of Release, Waiver and Quitclaim executed by all but one of the
complainants during the pendency of CA-G.R. SP. No. 54576-77 before the Court of Appeals were done without his
conformity; (2) he, together with his assistant lawyers, had invested substantial time and effort for more than seven or eight
years and even spent considerable amounts of personal money for the prosecution of these consolidated cases from the
Labor Arbiter up to this Court; hence, it would be grossly unfair for the petitioner to receive only 10% of the financial assistance
given to the complainants by virtue of the Deeds of Release, Waiver and Quitclaim they signed; and (3) petitioners right to
attorneys fees has become vested after rendering painstaking legal services to the complainants, making him and his
collaborating counsels entitled to the full amount of attorneys fees as awarded by the NLRC.

595
While this Court concedes that the instant Petition for Review raises a question of law, it denies the Petition for lack of merit
and lack of petitioners standing to file the same.
This Court has consistently ruled that a question of law exists when there is a doubt or controversy as to what the law is on a
certain state of facts. On the other hand, there is a question of fact when the doubt or difference arises as to the alleged truth
or falsehood of the alleged facts. For a question to be one of law, it must involve no examination of the probative value of the
evidence presented by the litigants or any of them.35 The test of whether a question is one of law or of fact is not the
appellation given to such question by the party raising the same; rather, it is whether the appellate court can determine the
issue raised without reviewing or evaluating the evidence, in which case, it is a question of law; otherwise, it is a question of
fact.36
In the case at bar, the core issue presented by the petitioner is with respect to the amount of attorneys fees to which he
should be entitled: whether he is entitled to the amount of attorneys fees as adjudged by the NLRC in its Decisions in the
Aguirre and Toquero Cases or only to the 10% of the amounts actually paid to his clients, the complainants who signed the
Deeds of Release, Waiver and Quitclaim.
The aforesaid issue evidently involves a question of law. In determining whether the petitioner should be entitled to the
attorneys fees stated in the NLRC Decisions, this Court does not need to go over the pieces of evidence submitted by the
parties in the proceedings below to determine their probative value. What it needs to do is ascertain and apply the relevant law
and jurisprudence on the award of attorneys fees to the prevailing parties in labor cases.
Article 111 of the Labor Code, as amended, specifically provides:
ART. 111. ATTORNEYS FEES. - (a) In cases of unlawful withholding of wages the culpable party may be assessed attorneys
fees equivalent to ten percent of the amount of wages recovered.
(b) It shall be unlawful for any person to demand or accept, in any judicial or administrative proceedings for the recovery of the
wages, attorneys fees which exceed ten percent of the amount of wages recovered. (Emphasis supplied.)
In PCL Shipping Philippines, Inc. v. National Labor Relations Commission 37 citing Dr. Reyes v. Court of Appeals,38 this Court
enunciated that there are two commonly accepted concepts of attorneys fees, the so-called ordinary and extraordinary. In its
ordinary concept, an attorneys fee is the reasonable compensation paid to a lawyer by his client for the legal services the
former has rendered to the latter. The basis of this compensation is the fact of the attorneys employment by and his
agreement with the client. In its extraordinary concept, attorneys fees are deemed indemnity for damages ordered by the court
to be paid by the losing party in a litigation. The instances in which these may be awarded are those enumerated in Article
2208 of the Civil Code, specifically paragraph 739 thereof, which pertains to actions for recovery of wages, and is payable not
to the lawyer but to the client, unless they have agreed that the award shall pertain to the lawyer as additional compensation or
as part thereof.40 Article 111 of the Labor Code, as amended, contemplates the extraordinary concept of attorneys fees.
Still according to PCL Shipping, Article 111 is an exception to the declared policy of strict construction in the awarding of
attorneys fees. Although express findings of fact and law are still necessary to prove the merit of the award, there need not be
any showing that the employer acted maliciously or in bad faith when it withheld the wages. In carrying out and interpreting the
Labor Codes provisions and implementing regulations, the employees 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 in Article 4 of the 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"; and Article 1702 of the
Civil Code, which provides that "in case of doubt, all labor legislation and all labor contracts shall be construed in favor of the
safety and decent living for the laborer."41
Based on the foregoing, the attorneys fees awarded by the NLRC in its Decisions in the Aguirre and Toquero Cases pertain to
the complainants, petitioners clients, as indemnity for damages; and not to petitioner as compensation for his legal services.
Records show that the petitioner neither alleged nor proved that his clients, the complainants, willingly agreed that the award
of attorneys fees would accrue to him as an additional compensation or part thereof.
What the complainants explicitly agreed to in their individual Deeds of Release, Waiver, and Quitclaim was that the 10%
attorneys fees of the petitioner shall be deducted from the amount of the gross settlement. Provision 8 of the Deeds of
Release, Waiver and Quitclaim reads:
8. x x x. As a client, I have the right to decide on the matter of whether to settle my case and the amount of the settlement,
which right I am now exercising without prejudice to my counsels claim to the legally mandated 10% attorneys fees. As a
matter of fact, I had requested and [herein private respondent] has complied with it, that [private respondent] deduct from the
gross settlement 10% representing attorneys fees of [herein petitioner] and make a check payable to the latter in such
amount.42 (Emphasis supplied.)
The foregoing provision cannot be taken to mean that the complainants concerned agreed that the attorneys fees awarded by
the NLRC pertained to petitioner as additional compensation or part thereof since (1) the Deeds were executed between
complainants and private respondent, the petitioner was not even a party to the said documents; and (2) private complainants
request that private respondent withhold 10% attorneys fees to be payable to petitioner was in relation to the amount of gross
settlement under the Deeds and not to the amounts awarded by the NLRC. In fact, petitioner challenges the due execution of
the Deeds, and may not now take an inconsistent position by using the provisions of the very same Deeds as proof that
596
complainants impliedly or expressly agreed that the attorneys fees awarded by the NLRC pertained to him under the ordinary
concept of attorneys fees.
Thus, this Court has no recourse but to interpret the award of attorneys fees by the NLRC in its extraordinary concept. And
since the attorneys fees pertained to the complainants as indemnity for damages, it was totally within the complainants right
to waive the amount of said attorneys fees and settle for a lesser amount thereof in exchange for the immediate end to
litigation. Petitioner cannot prevent complainants from compromising and/or withdrawing their complaints at any stage of the
proceedings just to protect his anticipated attorneys fees.
Even assuming arguendo that the complainants in the Aguirre and Toquero Cases did indeed agree that the attorneys fees
awarded by the NLRC should be considered in their ordinary concept, i.e., as compensation for petitioners services, we refer
back to Article 111 of the Labor Code, as amended, which provides that the attorneys fees should be equivalent to 10% of the
amount of wages recovered. Since the complainants decided to settle their complaints against the private respondent, the
amounts actually received by them pursuant to the Deeds of Release, Waiver and Quitclaim are the amounts "recovered" and
the proper basis for determining the 10% attorneys fees.
Petitioner cannot claim further to be a real party in interest herein for the very same reasons already discussed above.
It is elementary that it is only in the name of a real party in interest that a civil suit may be prosecuted. 43 Section 2, Rule 3 of
the 1997 Revised Rules of Civil Procedure, as amended, provides:
SEC. 2. Parties in interest. A real party in interest is the party who stands to be benefited or injured by the judgment in the
suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every action must be
prosecuted or defended in the name of the real party in interest.
The established rule is that a real party in interest is one who would be benefited or injured by the judgment, or one entitled to
the avails of the suit. The word "interest," as contemplated by the Rules, means material interest or an interest in issue and to
be affected by the judgment, as distinguished from mere interest in the question involved or a mere incidental interest. Stated
differently, the rule refers to a real or present substantial interest as distinguished from a mere expectancy or a future,
contingent, subordinate, or consequential interest. As a general rule, one who has no right or interest to protect cannot invoke
the jurisdiction of the court as party-plaintiff in an action.44
The afore-quoted rule has two requirements: 1) to institute an action, the plaintiff must be the real party in interest; and 2) the
action must be prosecuted in the name of the real party in interest. Necessarily, the purposes of this provision are 1) to prevent
the prosecution of actions by persons without any right or title to or interest in the case; 2) to require that the actual party
entitled to legal relief be the one to prosecute the action; 3) to avoid a multiplicity of suits; and 4) to discourage litigation and
keep it within certain bounds, pursuant to sound public policy.45
In the case at bar, it is beyond cavil that the petitioner is not the real party in interest; hence, he cannot file this Petition to
recover the attorneys fees as adjudged by the NLRC in its Decisions dated 21 July 1995 and 25 July 1995 in
the Aguirre and Toquero Cases, respectively. To reiterate, the award of attorneys fees pertain to the prevailing parties in the
NLRC cases, namely, the complainants, all but one of whom no longer pursued their complaints against private respondent
after executing Deeds of Release, Waiver and Quitclaim. Not being the party to whom the NLRC awarded the attorneys fees,
neither is the petitioner the proper party to question the non-awarding of the same by the appellate court.
In addition, as found by the Court of Appeals, when the complainants executed their respective Deeds of Release, Waiver and
Quitclaim, petitioner already received attorneys fees equivalent to 10% of the amounts paid to the complainants in accordance
with the Deeds, as evidenced by several cash vouchers and checks payable to petitioner 46 and signed by his
representative.47 Even petitioner himself admitted this fact.
This would show that petitioner has been compensated for the services he rendered the complainants. It may do well for
petitioner to remember that as a lawyer, he is a member of an honorable profession, the primary vision of which is justice. The
practice of law is a decent profession and not a money-making trade. Compensation should be but a mere incident.48
If petitioner earnestly believes that the amounts he already received are grossly deficient, considering the substantial time and
efforts he and his assistant lawyers invested, as well as the personal money he expended for the prosecution of complainants
cases for more than seven or eight years, then petitioners remedy is not against the private respondent, but against his own
clients, the complainants. He should file a separate action for collection of sum of money against complainants to recover just
compensation for his legal services, and not the present Petition for Review to claim from private respondent the attorneys
fees which were adjudged by the NLRC in favor of complainants as the prevailing parties in the Aguirre and Toquero
Cases.1avvphi1
Finally, as stated earlier, petitioner assails the Deeds of Release, Waiver and Quitclaim executed by the complainants for
being executed without his conformity and, thus, in violation of the requirements of the Labor Code. Such argument is
specious.
There is no specific provision in the Labor Code, as amended, which requires the conformity of petitioner, as the complainants
counsel, to make their Deeds of Release, Waiver and Quitclaim valid. The only requisites for the validity of any Deed of
Release, Waiver and Quitclaim are the following: (1) that there was no fraud or deceit on the part of any of the parties; (2) that
the consideration for the quitclaim is credible and reasonable; and (3) that the contract is not contrary to law, public order,
public policy, morals or good customs or prejudicial to a third person with a right recognized by law. 49 In this case, it cannot be
597
questioned that those requisites were completely satisfied, making the Deeds of Release, Waiver and Quitclaim individually
executed by the complainants valid.
Moreover, both the NLRC and the Court of Appeals found the Deeds of Release, Waiver and Quitclaim to be validly and
willfully executed by the complainants. The Court of Appeals ruled:
Further, as correctly stated by the [herein private respondent], to wit:
The separate Deeds of Release, Waiver and Quitclaim were all executed and signed by the private respondents concerned
before the Labor Arbiter, Hon. Reynaldo Gulmatico, who handled the case a quo and rendered the decision in favor of
[complainants therein]. As a matter of course, a Labor Arbiter asks, and even explains, to the person executing a quitclaim
before him about the contents and the implications thereof. It is only after the Labor Arbiter has satisfied himself that the
quitclaim involved was voluntarily executed by the person concerned and that there is a substantial consideration involved
would he sign it.
"While quitclaims executed by employees are commonly frowned upon as contrary to public policy and are ineffective to bar
claims for the full measure of the employees legal rights, there are legitimate waivers that represent a voluntary and
reasonable settlement of laborers claims which should be respected by the courts as the law between the parties." 50
WHEREFORE, premises considered, the instant Petition is hereby DENIED. Costs against petitioner.
SO ORDERED.

G.R. No. 180636 March 13, 2013

LORENZO T. TANGGA-AN,* Petitioner,
vs.
PIDLIPPINE TRANSMARINE CARRIERS, INC., UNIVERSE TANKSHIP DELAWARE LLC, and CARLOS C.
SALINAS, Respondents.
DECISION
DEL CASTILLO, J.:
This Court's labor pronouncements must be read and applied with utmost care and caution, taking to mind that in the very
heart of the judicial system, labor cases occupy a special place. More than the State guarantees of protection of labor and
security of tenure, labor disputes involve the fundamental survival of the employees and their families, who depend -upon the
former for all the basic necessities in life.
This Petition for Review on Certiorari1 seeks a modification of the November 30, 2006 Decision2 of the Court of Appeals (CA)
in CA-G.R. SP No. 00806. Also assailed is the November 15, 2007 Resolution 3 denying petitioner's Motion for
Reconsideration.
Factual Antecedents
The facts, as found by the CA, are as follows:
This is a case for illegal dismissal with a claim for the payment of salaries corresponding to the unexpired term of the contract,
damages and attorneys fees filed by private respondent Lorenzo T. Tangga-an against the petitioners Philippine Transmarine
Carriers, Inc., Universe Tankship Delaware LLC, and Carlos C. Salinas 4 or herein respondents.
In his position paper, Tangga-an alleged that on January 31, 2002, he entered into an overseas employment contract with
Philippine Transmarine Carriers, Inc. (PTC) for and in behalf of its foreign employer, Universe Tankship Delaware, LLC. Under
the employment contract, he was to be employed for a period of six months as chief engineer of the vessel the S.S. "Kure". He
was to be paid a basic salary of US$5,000.00; vacation leave pay equivalent to 15 days a months [sic] or US$2,500.00 per
month and tonnage bonus in the amount of US$700.00 a month.
On February 11, 2002, Tangga-an was deployed. While performing his assigned task, he noticed that while they were loading
liquid cargo at Cedros, Mexico, the vessel suddenly listed too much at the bow. At that particular time both the master and the
chief mate went on shore leave together, which under maritime standard was prohibited. To avoid any conflict, he chose to
ignore the unbecoming conduct of the senior officers of the vessel.
On or about March 13, 2002, the vessel berthed at a port in Japan to discharge its cargo. Thereafter, it sailed to the U.S.A.
While the vessel was still at sea, the master required Tangga-an and the rest of the Filipino Engineer Officers to report to his
office where they were informed that they would be repatriated on account of the delay in the cargo discharging in Japan,
which was principally a duty belonging to the deck officers. He imputed the delay to the non-readiness of the turbo generator
and the inoperation of the boom, since the turbo generator had been prepared and synchronized for 3.5 hours or even before
the vessel arrived in Japan. Moreover, upon checking the boom, they found the same [sic] operational. Upon verification, they
found out that when the vessel berthed in Japan, the cargo hold was not immediately opened and the deck officers concerned
did not prepare the stock. Moreover, while cargo discharging was ongoing, both the master and the chief mate again went on
shore leave together at 4:00 in the afternoon and returned to the vessel only after midnight. To save face, they harped on the
Engine Department for their mistake. Tangga-an and the other Engineering Officers were ordered to disembark from the
vessel on April 2, 2002 and thereafter repatriated. Thence, the complaint.
Philippine Transmarine Carriers, Inc., Universe Tankship Delaware LLC, and Carlos C. Salinas on the other hand, contended
that sometime on [sic] March 2002, during a test of the cargo discharging conveyor system, Tangga-an and his assistant
598
engineers failed to start the generator that supplied power to the conveyor. They spent 3 hours trying to start the generator but
failed. It was only the third assistant engineer who previously served in the same vessel who was able to turn on the
generator. When the master tried to call the engine room to find out the problem, Tangga-an did not answer and merely hang
[sic] up. The master proceeded to the engine room to find out the problem by [sic] Tangga-an and his assistant engineers were
running around trying to appear busy.
At another time, during a cargo discharging operation requiring the use of a generator system and the conveyor boom,
Tangga-an was nowhere to be found. Apparently, he went on shore leave resulting in a delay of 2 hours because the machine
could not be operated well. Both incidents were recorded in the official logbook. Due to the delay, protests were filed by the
charter [sic].
The master required Tangga-an to submit a written explanation to which he did but blamed the captain and the chief officer.
He failed to explain why he did not personally supervise the operation of the generator system and the conveyor boom during
the cargo discharging operations. His explanation not having been found satisfactory, respondents decided to terminate
Tangga-ans services. Thus, a notice of dismissal was issued against Tangga-an. He arrived in the Philippines on April 4,
2002.5
Tangga-an filed a Complaint6 for illegal dismissal with prayer for payment of salaries for the unexpired portion of his contract,
leave pay, exemplary and moral damages, attorneys fees and interest.
On January 27, 2004, Labor Arbiter Jose G. Gutierrez rendered a Decision 7 finding petitioner to have been illegally dismissed.
The Labor Arbiter noted that in petitioners letter to respondent Universe Tankship Delaware, LLC dated April 1, 2002 8 he
categorically denied any negligence on his part relative to the delay in the discharge of the cargo while the vessel was berthed
in Japan. In view thereof, the Labor Arbiter opined that an investigation should have been conducted in order to ferret out the
truth instead of dismissing petitioner outright. Consequently, petitioners dismissal was illegal for lack of just cause and for
failure to comply with the twin requirements of notice and hearing.9
As regards petitioners claim for back salaries, the Labor Arbiter found petitioner entitled not to four months which is equivalent
to the unexpired portion of his contract, but only to three months, inclusive of vacation leave pay and tonnage bonus (or
US$8,200 x 3 months = US$24,600) pursuant to Section 10 of Republic Act (RA) No. 8042 or The Migrant Workers and
Overseas Filipinos Act of 2005.
Regarding petitioners claim for damages, the same was denied for failure to prove bad faith on the part of the respondents.
However, attorneys fees equivalent to 10% of the total back salaries was awarded because petitioner was constrained to
litigate.
The dispositive portion of the Labor Arbiters Decision, reads:
WHEREFORE, the foregoing premises considered, judgment is hereby rendered finding Tangga-an illegally dismissed from
his employment and directing the respondent Phil. Transmarine Carriers, Inc. to pay Tangga-an the amount of US$24,600.00
PLUS US$2,460.00 attorneys fees or a total aggregate amount of US Dollars: TWENTY SEVEN THOUSAND SIXTY
(US$27,060.00) or its peso equivalent at the exchange rate prevailing at the time of payment.
SO ORDERED.10
Ruling of the National Labor Relations Commission
Respondents appealed to the National Labor Relations Commission (NLRC). They claimed that the Labor Arbiter committed
grave abuse of discretion in finding that petitioner was illegally dismissed; in awarding unearned vacation leave pay and
tonnage bonus when the law and jurisprudence limit recovery to the employees basic salary; and in awarding attorneys fees
despite the absence of proof of bad faith on their part.
On August 25, 2004, the NLRC issued its Decision,11 the dispositive portion of which reads:
WHEREFORE, the Decision dated January 27, 2004 of the Labor Arbiter is AFFIRMED.
Respondents-appellants Memorandum of Appeal, dated 23 March 2004 is DISMISSED for lack of merit.
SO ORDERED.12
The NLRC affirmed the finding of illegal dismissal. It held that no notice of hearing was served upon petitioner, and no hearing
whatsoever was conducted on the charges against him. It ruled that respondents could not dispense with the twin
requirements of notice and hearing, which are essential elements of procedural due process. For this reason, no valid cause
for termination has been shown. The NLRC likewise found respondents guilty of bad faith in illegally dismissing petitioners
services.
On the issue covering the award of unearned vacation leave pay and tonnage bonus, the NLRC struck down respondents
arguments and held that in illegal dismissal cases, the employee is entitled to all the salaries, allowances and other benefits or
their monetary equivalents from the time his compensation is withheld from him until he is actually reinstated, in effect citing
Article 27913 of the Labor Code. It held that vacation leave pay and tonnage bonus are provided in petitioners employment
contract, which thus entitles the latter to the same in the event of illegal dismissal.
Finally, on the issue of attorneys fees, the NLRC held that since respondents were found to be in bad faith for the illegal
dismissal and petitioner was constrained to litigate with counsel, the award of attorneys fees is proper.
Respondents moved for reconsideration which was denied by the NLRC in its March 18, 2005 Resolution. 14
Ruling of the Court of Appeals
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Respondents went up to the CA by Petition for Certiorari,15 seeking to annul the Decision of the NLRC, raising essentially the
same issues taken up in the NLRC.
On November 30, 2006, the CA rendered the assailed Decision, the dispositive portion of which reads, as follows:
WHEREFORE, premises considered, the instant petition is PARTIALLY GRANTED. The Decision of public respondent is
MODIFIED in the following manner:
a. Tangga-an is entitled to three (3) months salary representing the unexpired portion of his contract in the total
amount of US$15,000.00 or its peso equivalent at the exchange rate prevailing at the time of payment;
b. Tangga-ans placement fee should be reimbursed with 12% interest per annum;
c. The award of attorneys fees is deleted.
SO ORDERED.16
The CA adhered to the finding of illegal dismissal. But on the subject of monetary awards, the CA considered only petitioners
monthly US$5,000.00 basic salary and disregarded his monthly US$2,500.00 vacation leave pay and US$700.00 tonnage
bonus. It likewise held that petitioners "unexpired portion of contract" for which he is entitled to back salaries should only be
three months pursuant to Section 1017 of RA 8042. In addition, petitioner should be paid back his placement fee with interest at
the rate of twelve per cent (12%) per annum.
As to attorneys fees, the CA did not agree with the NLRCs finding that bad faith on the part of respondents was present to
justify the award of attorneys fees. It held that there is nothing from the facts and proceedings to suggest that respondents
acted with dishonesty, moral obliquity or conscious doing of wrong in terminating petitioners services.
Petitioner filed a Motion for (Partial) Reconsideration,18 which was denied in the assailed November 15, 2007 Resolution.
Thus, he filed the instant Petition.
Issues
In this Petition, Tangga-an seeks a modification of the CA Decision and the reinstatement of the monetary awards as decreed
in the Labor Arbiters January 27, 2004 Decision, or in the alternative, the grant of back salaries equivalent to four months
which corresponds to the unexpired portion of the contract, inclusive of vacation leave pay and tonnage bonus, plus 10%
thereof as attorneys fees.19
Petitioner submits the following issues for resolution:
I. Whether x x x the CAs issuance of the writ of certiorari reversing the NLRC decision is in accordance with law;
II. Whether x x x the indemnity provided in Section 10, R. A. 8042 x x x be limited only to the seafarers basic monthly
salary or x x x include, based on civil law concept of damages as well as Labor Code concept of backwages,
allowances/benefits or their monetary equivalent as a further relief to restore the seafarers income that was lost by
reason of his unlawful dismissal;
III. Whether x x x the indemnity awarded by the CA in petitioners favor consisting only of 3 months basic salaries
conform with the proper interpretation of Section 10 R. A. 8042 and with the ruling in Skippers Pacific, Inc. v. Mira, et
al., G.R. No. 144314, November 21, 2002 and related cases or is petitioner entitled to at least 4 months salaries
being the unexpired portion of his contract; and
IV. Whether x x x the CAs disallowance of the award of attorneys fees, based on the alleged absence of bad faith on
the part of respondent, is in accordance with law or is the attorneys fees awarded by the NLRC to petitioner, who
was forced to litigate to enforce his rights, justified x x x. 20
Petitioners Arguments
Petitioner essentially contends that respondents resort to an original Petition for Certiorari in the CA is erroneous because the
issues they raised did not involve questions of jurisdiction but of fact and law. He adds that the CA Decision went against the
factual findings of the labor tribunals which ought to be binding, given their expertise in matters falling within their jurisdiction.
Petitioner likewise contends that the CA erred in excluding his vacation leave pay and tonnage bonus in the computation of his
back salaries as they form part of his salaries and benefits under his employment contract with the respondents, a covenant
which is deemed to be the law governing their relations. He adds that under Article 279 of the Labor Code, he is entitled to full
backwages inclusive of allowances and other benefits or their monetary equivalent from the time his compensation was
withheld up to the time he is actually reinstated.
Petitioner accuses the CA of misapplying the doctrine laid down in Skippers Pacific, Inc. v. Skippers Maritime Services,
Ltd.21 He points out that the CA wrongly interpreted and applied what the Court said in the case, and that the pronouncement
therein should have benefited him rather than the respondents.
Petitioner would have the Court reinstate the award of attorneys fees, on the argument that the presence of bad faith is not
necessary to justify such award. He maintains that the grant of attorneys fees in labor cases constitutes an exception to the
general requirement that bad faith or malice on the part of the adverse party must first be proved.
Finally, petitioner prays that this Court reinstate the Labor Arbiters monetary awards in his January 27, 2004 Decision or, in
the alternative, to grant him full back salaries equivalent to the unexpired portion of his contract, or four months, plus 10%
thereof as attorneys fees.
Respondents Arguments

600
In seeking affirmance of the assailed CA issuances, respondents basically submit that the CA committed no reversible error in
excluding petitioners claims for vacation leave pay, tonnage bonus, and attorneys fees. They support and agree with the CAs
reliance upon Skippers Pacific, Inc. v. Skippers Maritime Services, Ltd.,22 and emphasize that in the absence of bad faith on
their part, petitioner may not recover attorneys fees.
Our Ruling
The Court grants the Petition.
There remains no issue regarding illegal dismissal. In spite of the consistent finding below that petitioner was illegally
dismissed, respondents did not take issue, which thus renders all pronouncements on the matter final.
In resolving petitioners monetary claims, the CA utterly misinterpreted the Courts ruling in Skippers Pacific, Inc. v. Skippers
Maritime Services, Ltd.,23 using it to support a view which the latter case precisely ventured to strike down. In that case, the
employee was hired as the vessels Master on a six-months employment contract, but was able to work for only two months,
as he was later on illegally dismissed. The Labor Arbiter, NLRC, and the CA all took the view that the complaining employee
was entitled to his salary for the unexpired portion of his contract, but limited to only three months pursuant to Section 10 24 of
RA 8042. The Court did not agree and hence modified the judgment in said case. It held that, following the wording of Section
10 and its ruling in Marsaman Manning Agency, Inc. v. National Labor Relations Commission, 25 when the illegally dismissed
employees employment contract has a term of less than one year, he/she shall be entitled to recovery of salaries representing
the unexpired portion of his/her employment contract. Indeed, there was nothing even vaguely confusing in the Courts citation
therein of Marsaman:
In Marsaman Manning Agency, Inc. vs. NLRC, involving Section 10 of Republic Act No. 8042, we held:
We cannot subscribe to the view that private respondent is entitled to three (3) months salary only. 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 wording "for every year of the unexpired term" which follows the wording "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 lawmaking body is presumed to know the meaning of the words employed in the statute
and to have used them advisedly. Ut res magis valeat quam pereat.
It is not disputed that private respondents employment contract in the instant case was for six (6) months. Hence, we see no
reason to disregard the ruling in Marsaman that private respondent should be paid his salaries for the unexpired portion of his
employment contract.26 (Emphases supplied)
At this juncture, the courts, especially the CA, should be reminded to read and apply this Courts labor pronouncements with
utmost care and caution, taking to mind that in the very heart of the judicial system, labor cases occupy a special place. More
than the State guarantees of protection of labor and security of tenure, labor disputes involve the fundamental survival of the
employees and their families, who depend upon the former for all the basic necessities in life.
Thus, petitioner must be awarded his salaries corresponding to the unexpired portion of his six-months employment contract,
or equivalent to four months. This includes all his corresponding monthly vacation leave pay and tonnage bonuses which are
expressly provided and guaranteed in his employment contract as part of his monthly salary and benefit package. These
benefits were guaranteed to be paid on a monthly basis, and were not made contingent. In fact, their monetary equivalent was
fixed under the contract: US$2,500.00 for vacation leave pay and US$700.00 for tonnage bonus each month. Thus, petitioner
is entitled to back salaries of US$32,800 (or US$5,000 + US$2,500 + US$700 = US$8,200 x 4 months). "Article 279 of the
Labor Code mandates that an employees full backwages shall be inclusive of allowances and other benefits or their monetary
equivalent."27 As we have time and again held, "it is the obligation of the employer to pay an illegally dismissed employee or
worker the whole amount of the salaries or wages, plus all other benefits and bonuses and general increases, to which he
would have been normally entitled had he not been dismissed and had not stopped working." 28 This well-defined principle has
likewise been lost on the CA in the consideration of the case.
The CA likewise erred in deleting the award of attorneys fees on the ground that bad faith may not readily be attributed to the
respondents given the circumstances. The Courts discussion on the award of attorneys fees in Kaisahan at Kapatiran ng mga
Manggagawa at Kawani sa MWC-East Zone Union v. Manila Water Company, Inc.,29 speaking through Justice Brion, is
instructive, viz:
Article 111 of the Labor Code, as amended, governs the grant of attorneys fees in labor cases:
Art. 111. Attorneys fees. (a) In cases of unlawful withholding of wages, the culpable party may be assessed attorneys fees
equivalent to ten percent of the amount of wages recovered.
(b) It shall be unlawful for any person to demand or accept, in any judicial or administrative proceedings for the recovery of
wages, attorneys fees which exceed ten percent of the amount of wages recovered.
Section 8, Rule VIII, Book III of its Implementing Rules also provides, viz.:

601
Section 8. Attorneys fees. Attorneys fees in any judicial or administrative proceedings for the recovery of wages shall not
exceed 10% of the amount awarded. The fees may be deducted from the total amount due the winning party.
We explained in PCL Shipping Philippines, Inc. v. National Labor Relations Commission that there are two commonly
accepted concepts of attorneys fees the ordinary and extraordinary. In its ordinary concept, an attorneys fee is the
reasonable compensation paid to a lawyer by his client for the legal services the former renders; compensation is paid for the
cost and/or results of legal services per agreement or as may be assessed. In its extraordinary concept, attorneys fees are
deemed indemnity for damages ordered by the court to be paid by the losing party to the winning party. The instances when
these may be awarded are enumerated in Article 2208 of the Civil Code, specifically in its paragraph 7 on actions for recovery
of wages, and is payable not to the lawyer but to the client, unless the client and his lawyer have agreed that the award shall
accrue to the lawyer as additional or part of compensation.
We also held in PCL Shipping that Article 111 of the Labor Code, as amended, contemplates the extraordinary concept of
attorneys fees and that Article 111 is an exception to the declared policy of strict construction in the award of attorneys fees.
Although an express finding of facts and law is still necessary to prove the merit of the award, there need not be any showing
that the employer acted maliciously or in bad faith when it withheld the wages. x x x
We similarly so ruled in RTG Construction, Inc. v. Facto and in Ortiz v. San Miguel Corporation. In RTG Construction, we
specifically stated:
'Settled is the rule that in actions for recovery of wages, or where an employee was forced to litigate and, thus, incur expenses
to protect his rights and interests, a monetary award by way of attorney's fees is justifiable under Article Ill of the Labor Code;
Section 8, Rule VIII, Book III of its Implementing Rules; and paragraph 7, Article 208 of the Civil Code. The award of attorney's
fees is proper, and there need not be any showing that the employer acted maliciously or in bad faith when it withheld the
wages. There need only be a showing that the lawful wages were not paid accordingly.'
In PCL Shipping, we found the award of attorney's fees due and appropriate since the respondent therein incurred legal
expenses after he was forced to file an action for recovery of his lawful wages and other benefits to protect his rights. From
this perspective and the above precedents, we conclude that the CA erred in ruling that a finding of the employer's malice or
bad faith in withholding wages must precede an award of attorney's fees under Article Ill of the Labor Code. To reiterate, a
plain showing that the lawful wages were not paid without justification is sufficient. 30
In this case, it is already settled that petitioner's employment was illegally terminated. As a result, his wages as well as
allowances were withheld without valid and legal basis. Otherwise stated, he was not paid his lawful wages without any valid
justification. Consequently, he was impelled to litigate to protect his interests. Thus, pursuant to the above ruling, he is entitled
to receive attorneys fees. An award of attorney's fees in petitioners favor is in order in the amount of US$3, 280 (or US$32,
800 x 10%).
WHEREFORE, the Petition is GRANTED. Petitioner Lorenzo T. Tangga-an is hereby declared ENTITLED to back salaries for
the unexpired portion of his contract, inclusive of vacation leave pay and tonnage bonus which is equivalent to US$32,800 plus
US$3,280 as attorney's fees or a total of US$36,080 or its peso equivalent at the exchange rate prevailing at the time of
payment.
SO ORDERED.

G.R. No. 185814 October 13, 2010

SHS PERFORATED MATERIALS, INC., WINFRIED HARTMANNSHENN, and HINRICH JOHANN
SCHUMACHER, Petitioners,
vs.
MANUEL F. DIAZ, Respondent.
DECISION
MENDOZA, J.:
Petitioners, by way of this petition for review on certiorari under Rule 45, seek to annul and set aside the December 23, 2008
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 100015, which reversed and set aside the December 29, 2006
Resolution2 of the National Labor Relations Commission (NLRC). The NLRC Resolution, in turn, reversed and set aside the
June 15, 2006 Decision3 of the Labor Arbiter (LA).4
THE FACTS
Petitioner SHS Perforated Materials, Inc. (SHS) is a start-up corporation organized and existing under the laws of the Republic
of the Philippines and registered with the Philippine Economic Zone Authority. Petitioner Winfried
Hartmannshenn (Hartmannshenn), a German national, is its president, in which capacity he determines the administration and
direction of the day-to-day business affairs of SHS. Petitioner Hinrich Johann Schumacher (Schumacher), also a German
national, is the treasurer and one of the board directors. As such, he is authorized to pay all bills, payrolls, and other just debts
of SHS of whatever nature upon maturity. Schumacher is also the Executive Vice-President of the European Chamber of
Commerce of the Philippines (ECCP) which is a separate entity from SHS. Both entities have an arrangement where ECCP
handles the payroll requirements of SHS to simplify business operations and minimize operational expenses. Thus, the wages
of SHS employees are paid out by ECCP, through its Accounting Services Department headed by Juliet Taguiang (Taguiang).

602
Manuel F. Diaz (respondent) was hired by petitioner SHS as Manager for Business Development on probationary status from
July 18, 2005 to January 18, 2006, with a monthly salary of P100,000.00. Respondents duties, responsibilities, and work
hours were described in the Contract of Probationary Employment,5 as reproduced below:
NAME : Jose Manuel F. Diaz

TITLE/STATUS : Manager for Business Development

LOCATION : Lot C3-2A, Phase I, Camelray

Industrial Park II, Calamba, Laguna

REPORTS TO : Direct to Mr. Winfried

Hartmannshenn

Normal Working Hours : 8:00 a.m. to 5:00 p.m.

subject to requirements of the job

OVERTIME : ________________________
JOB DESCRIPTION AND RESPONSIBILITIES:
DAILY/GENERAL DUTIES:
(a) Represent the company in any event organized by PEZA;
(b) Perform sales/marketing functions;
(c) Monitor/follow-up customers inquiry on EMPLOYERs services;
(d) Monitor on-going job orders/projects;
(e) Submit requirements as needed in application/renewal of necessary permits;
(f) Liaise closely with the other commercial and technical staff of the company;
(g) Accomplish PEZA documents/requirements for every sales made; with legal assistance where necessary
at EMPLOYERs expense; and
(h) Perform other related duties and responsibilities.
OTHER RESPONSIBILITIES:
(a) abide by and perform to the best of his abilities all functions, duties and responsibilities to be assigned by
the EMPLOYER in due course;
(b) comply with the orders and instructions given from time to time by the EMPLOYER, INC. through its
authorized representatives;
(c) will not disclose any confidential information in respect of the affairs of the EMPLOYER to any
unauthorized person;
(d) perform any other administrative or non-administrative duties, as assigned by any of the EMPLOYERs
representative from time to time either through direct written order or by verbal assignment. The
EMPLOYER may take into account EMPLOYEEs training and expertise when assigning additional tasks.
AGREED:
(sgd. Manuel Diaz).
In addition to the above-mentioned responsibilities, respondent was also instructed by Hartmannshenn to report to the SHS
office and plant at least two (2) days every work week to observe technical processes involved in the manufacturing of
perforated materials, and to learn about the products of the company, which respondent was hired to market and sell.
During respondents employment, Hartmannshenn was often abroad and, because of business exigencies, his instructions to
respondent were either sent by electronic mail or relayed through telephone or mobile phone. When he would be in the
Philippines, he and the respondent held meetings. As to respondents work, there was no close supervision by him.
During meetings with the respondent, Hartmannshenn expressed his dissatisfaction over respondents poor performance.
Respondent allegedly failed to make any concrete business proposal or implement any specific measure to improve the
productivity of the SHS office and plant or deliver sales except for a meagre P2,500.00 for a sample product. In numerous
electronic mail messages, respondent acknowledged his poor performance and offered to resign from the company.
Respondent, however, denied sending such messages but admitted that he had reported to the SHS office and plant only
eight (8) times from July 18, 2005 to November 30, 2005.
On November 16, 2005, in preparation for his trip to the Philippines, Hartmannshenn tried to call respondent on his mobile
phone, but the latter failed to answer. On November 18, 2005, Hartmannshenn arrived in the Philippines from Germany, and
on November 22 and 24, 2005, notified respondent of his arrival through electronic mail messages and advised him to get in
touch with him. Respondent claimed that he never received the messages.

603
On November 29, 2005, Hartmannshenn instructed Taguiang not to release respondents salary. Later that afternoon,
respondent called and inquired about his salary. Taguiang informed him that it was being withheld and that he had to
immediately communicate with Hartmannshenn. Again, respondent denied having received such directive.
The next day, on November 30, 2005, respondent served on SHS a demand letter and a resignation letter. The resignation
letter reads:
This is to tender my irrevocable resignation from SHS Perforated Materials, Inc, Philippines, effective immediately upon receipt
of my due and demandable salary for the period covering November 16 to 30, 2005, which has yet been unpaid and is still
currently being withheld albeit illegally. This covers and amounts to the sum of Php50,000.00 pesos net of all taxes. As my
employment contract clearly shows I receive a monthly salary of Php100,000.00 net of all taxes.
It is precisely because of illegal and unfair labor practices such as these that I offer my resignation with neither regret nor
remorse.6
In the evening of the same day, November 30, 2005, respondent met with Hartmannshenn in Alabang. The latter told him that
he was extremely disappointed for the following reasons: his poor work performance; his unauthorized leave and malingering
from November 16 to November 30, 2005; and failure to immediately meet Hartmannshenn upon his arrival from Germany.
Petitioners averred that respondent was unable to give a proper explanation for his behavior. Hartmannshenn then accepted
respondents resignation and informed him that his salary would be released upon explanation of his failure to report to work,
and proof that he did, in fact, work for the period in question. He demanded that respondent surrender all company property
and information in his possession. Respondent agreed to these "exit" conditions through electronic mail. Instead of complying
with the said conditions, however, respondent sent another electronic mail message to Hartmannshenn and Schumacher on
December 1, 2005, appealing for the release of his salary.
Respondent, on the other hand, claimed that the meeting with Hartmannshenn took place in the evening of December 1, 2005,
at which meeting the latter insulted him and rudely demanded that he accept P25,000.00 instead of his accrued wage and stop
working for SHS, which demands he refused. Later that same night, he sent Hartmannshenn and Schumacher an electronic
mail message appealing for the release of his salary. Another demand letter for respondents accrued salary for November 16
to November 30, 2005, 13th month pay, moral and exemplary damages, and attorneys fees was sent on December 2, 2005.
To settle the issue amicably, petitioners counsel advised respondents counsel by telephone that a check had been prepared
in the amount of P50,000.00, and was ready for pick-up on December 5, 2005. On the same date, a copy of the formal reply
letter relating to the prepared payment was sent to the respondents counsel by facsimile transmission. Despite being informed
of this, respondent never picked up the check.
Respondent countered that his counsel received petitioners formal reply letter only on December 20, 2005, stating that his
salary would be released subsequent to the turn-over of all materials owned by the company in his possession. Respondent
claimed that the only thing in his possession was a sample panels folder which he had already returned and which was duly
received by Taguiang on November 30, 2005.
On December 9, 2005, respondent filed a Complaint7 against the petitioners for illegal dismissal; non-payment of
salaries/wages and 13th month pay with prayer for reinstatement and full backwages; exemplary damages, and attorneys
fees, costs of suit, and legal interest.
THE RULING OF THE LABOR ARBITER
On June 15, 2006, the LA rendered his decision, the dispositive portion of which states:
WHEREFORE, premises considered, judgment is hereby rendered declaring complainant as having been illegally dismissed
and further ordering his immediate reinstatement without loss of seniority rights and benefits. It is also ordered that
complainant be deemed as a regular employee. Accordingly, respondents are hereby ordered to jointly and severally pay
complainant the following
1. P704,166.67 (P100,000.00 x 6.5 + (P100,000.00 x 6.5/12) as backwages;
2. P50,000.00 as unpaid wages;
3. P37,083.33 as unpaid 13th month pay
4. P200,000.00 as moral and exemplary damages;
5. P99,125.00 as attorneys fees.
SO ORDERED.8
The LA found that respondent was constructively dismissed because the withholding of his salary was contrary to Article 116
of the Labor Code as it was not one of the exceptions for allowable wage deduction by the employer under Article 113 of the
Labor Code. He had no other alternative but to resign because he could not be expected to continue working for an employer
who withheld wages without valid cause. The LA also held that respondents probationary employment was deemed
regularized because petitioners failed to conduct a prior evaluation of his performance and to give notice two days prior to his
termination as required by the Probationary Contract of Employment and Article 281 of the Labor Code. Petitioners contention
that they lost trust and confidence in respondent as a managerial employee was not given credence for lack of notice to
explain the supposed loss of trust and confidence and absence of an evaluation of respondents performance.
The LA believed that the respondent complied with the obligations in his contract as evidenced by his electronic mail
messages to petitioners. He ruled that petitioners are jointly and severally liable to respondent for backwages including 13th
604
month pay as there was no showing in the salary vouchers presented that such was integrated in the salary; for moral and
exemplary damages for having in bad faith harassed respondent into resigning; and for attorneys fees.
THE RULING OF THE NLRC
On appeal, the NLRC reversed the decision of the LA in its December 29, 2006 Resolution, the dispositive portion of which
reads:
WHEREFORE, premises considered, the appeal is hereby GRANTED.
The Decision dated June 15, 2006 is hereby REVERSED and SET ASIDE and a new one is hereby entered:
(1) dismissing the complaint for illegal dismissal for want of merit;
(2) dismissing the claims for 13th month pay, moral and exemplary damages and attorneys fees for lack of factual
and legal basis; and
(3) ordering respondents to pay the complainants unpaid salary for the period covering November 16-30, 2005 in the
amount of FIFTY THOUSAND PESOS (Php 50,000.00).
SO ORDERED.9
The NLRC explained that the withholding of respondents salary was a valid exercise of management prerogative. The act was
deemed justified as it was reasonable to demand an explanation for failure to report to work and to account for his work
accomplishments. The NLRC held that the respondent voluntarily resigned as evidenced by the language used in his
resignation letter and demand letters. Given his professional and educational background, the letters showed respondents
resolve to sever the employer-employee relationship, and his understanding of the import of his words and their
consequences. Consequently, respondent could not have been regularized having voluntarily resigned prior to the completion
of the probationary period. The NLRC further noted that respondents 13th month pay was already integrated in his salary in
accordance with his Probationary Contract of Employment and, therefore, no additional amount should be due him.
On January 25, 2007, respondent filed a motion for reconsideration but the NLRC subsequently denied it for lack of merit in its
May 23, 2007 Resolution.
THE RULING OF THE COURT OF APPEALS
The CA reversed the NLRC resolutions in its December 23, 2008 Decision, the dispositive portion of said decision reads:
WHEREFORE, premises considered, the herein petition is GRANTED and the 29 December 2006 Resolution of the NLRC in
NLRC CN RAB-IV-12-21758-05-L, and the 23 May 2007 Resolution denying petitioners Motion for Reconsideration, are
REVERSED and SET ASIDE. Accordingly, a new judgment is hereby entered in that petitioner is hereby awarded separation
pay equivalent to at least one month pay, and his full backwages, other privileges and benefits, or their monetary equivalent
during the period of his dismissal up to his supposed actual reinstatement by the Labor Arbiter on 15 June 2006.
SO ORDERED.10
Contrary to the NLRC ruling, the CA held that withholding respondents salary was not a valid exercise of management
prerogative as there is no such thing as a management prerogative to withhold wages temporarily. Petitioners averments of
respondents failure to report to work were found to be unsubstantiated allegations not corroborated by any other evidence,
insufficient to justify said withholding and lacking in probative value. The malicious withholding of respondents salary made it
impossible or unacceptable for respondent to continue working, thus, compelling him to resign. The respondents immediate
filing of a complaint for illegal dismissal could only mean that his resignation was not voluntary. As a probationary employee
entitled to security of tenure, respondent was illegally dismissed. The CA ruled out actual reinstatement, however, reasoning
out that antagonism had caused a severe strain in their relationship. It was of the view that separation pay equivalent to at
least one month pay would be a more equitable disposition.
THE ISSUES
Aggrieved, the petitioners come to this Court praying for the reversal and setting aside of the subject CA decision presenting
the following
ISSUES
I
THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN NOT AFFIRMING THE DECISION OF
THE NLRC, WHICH WAS BASED ON SUBSTANTIAL EVIDENCE.
II
THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN NOT AFFIRMING THE NLRCS
HOLDING THAT PETITIONERS WITHHOLDING OF RESPONDENTS SALARY FOR THE PAYROLL PERIOD NOVEMBER
16-30, 2005 IN VIEW OF RESPONDENTS FAILURE TO RENDER ACTUAL WORK FOR SAID PAYROLL PERIOD WAS A
VALID EXERCISE OF MANAGEMENT PREROGATIVE.
III
THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN AFFIRMING THE LABOR ARBITERS
FINDING THAT RESPONDENT HAD BEEN CONSTRUCTIVELY DISMISSED.
IV
THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN AWARDING RESPONDENT
SEPARATION PAY EQUIVALENT TO AT LEAST ONE MONTH PAY IN LIEU OF REINSTATEMENT, FULL BACKWAGES,
605
AND OTHER PRIVILEGES AND BENEFITS, OR THEIR MONETARY EQUIVALENT IN VIEW OF THE FACT THAT
RESPONDENT VOLUNTARILY RESIGNED FROM PETITIONER SHS AND WAS NOT ILLEGALLY DISMISSED.
V
THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN NOT HOLDING THAT INDIVIDUAL
PETITIONERS HARTMANNSHENN AND SCHUMACHER MAY NOT BE HELD SOLIDARILY AND PERSONALLY LIABLE
WITH PETITIONER SHS FOR THE PAYMENT OF THE MONETARY AWARD TO RESPONDENT.
The resolution of these issues is dependent on whether or not respondent was constructively dismissed by petitioners, which
determination is, in turn, hinged on finding out (i) whether or not the temporary withholding of respondents salary/wages by
petitioners was a valid exercise of management prerogative; and (ii) whether or not respondent voluntarily resigned.
THE COURTS RULING
As a rule, the factual findings of the courts below are conclusive in a petition for review on certiorari where only errors of law
should be reviewed. The case, however, is an exception because the factual findings of the CA and the LA are contradictory to
that of the NLRC. Thus, a review of the records is necessary to resolve the factual issues involved and render substantial
justice to the parties.11
Petitioners contend that withholding respondents salary from November 16 to November 30, 2005, was justified because
respondent was absent and did not show up for work during that period. He also failed to account for his whereabouts and
work accomplishments during said period. When there is an issue as to whether an employee has, in fact, worked and is
entitled to his salary, it is within management prerogative to temporarily withhold an employees salary/wages pending
determination of whether or not such employee did indeed work.
We disagree with petitioners.
Management prerogative refers "to the right of an employer to regulate all aspects of employment, such as the freedom to
prescribe work assignments, working methods, processes to be followed, regulation regarding transfer of employees,
supervision of their work, lay-off and discipline, and dismissal and recall of work." 12 Although management prerogative refers
to "the right to regulate all aspects of employment," it cannot be understood to include the right to temporarily withhold
salary/wages without the consent of the employee. To sanction such an interpretation would be contrary to Article 116 of the
Labor Code, which provides:
ART. 116. Withholding of wages and kickbacks prohibited. It shall be unlawful for any person, directly or indirectly, to
withhold any amount from the wages of a worker or induce him to give up any part of his wages by force, stealth, intimidation,
threat or by any other means whatsoever without the workers consent.
Any withholding of an employees wages by an employer may only be allowed in the form of wage deductions under the
circumstances provided in Article 113 of the Labor Code, as set forth below:
ART. 113. Wage Deduction. No employer, in his own behalf or in behalf of any person, shall make any deduction from the
wages of his employees, except:
(a) In cases where the worker is insured with his consent by the employer, and the deduction is to recompense the
employer for the amount paid by him as premium on the insurance;
(b) For union dues, in cases where the right of the worker or his union to check-off has been recognized by the
employer or authorized in writing by the individual worker concerned; and
(c) In cases where the employer is authorized by law or regulations issued by the Secretary of Labor.
As correctly pointed out by the LA, "absent a showing that the withholding of complainants wages falls under the exceptions
provided in Article 113, the withholding thereof is thus unlawful." 13
Petitioners argue that Article 116 of the Labor Code only applies if it is established that an employee is entitled to his
salary/wages and, hence, does not apply in cases where there is an issue or uncertainty as to whether an employee has
worked and is entitled to his salary/wages, in consonance with the principle of "a fair days wage for a fair days work."
Petitioners contend that in this case there was precisely an issue as to whether respondent was entitled to his salary because
he failed to report to work and to account for his whereabouts and work accomplishments during the period in question.
To substantiate their claim, petitioners presented hard copies of the electronic mail messages 14 sent to respondent on
November 22 and 24, 2005, directing the latter to contact Hartmannshenn; the Affidavit 15 of Taguiang stating that she advised
respondent on or about November 29, 2005 to immediately communicate with Mr. Hartmannshenn at the SHS office;
Hartmannshenns Counter-Affidavit16 stating that he exerted earnest efforts to contact respondent through mobile phone;
Schumachers Counter-Affidavit17 stating that respondent had not filed any request for official leave; and respondents
admission in his Position Paper18 that he found it absurd to report to the SHS plant when only security guards and machinists
were present.
Respondent, on the other hand, presented reports 19 prepared by him and submitted to Hartmannshenn on November 18 and
25, 2005; a receipt20 issued to him by Taguiang for a clients payment during the subject period; and eight notarized letters 21 of
prospective clients vouching for meetings they had with the respondent during the subject period.
The Court finds petitioners evidence insufficient to prove that respondent did not work from November 16 to November 30,
2005. As can be gleaned from respondents Contract of Probationary Employment and the exchanges of electronic mail
messages22 between Hartmannshenn and respondent, the latters duties as manager for business development entailed
606
cultivating business ties, connections, and clients in order to make sales. Such duties called for meetings with prospective
clients outside the office rather than reporting for work on a regular schedule. In other words, the nature of respondents job
did not allow close supervision and monitoring by petitioners. Neither was there any prescribed daily monitoring procedure
established by petitioners to ensure that respondent was doing his job. Therefore, granting that respondent failed to answer
Hartmannshenns mobile calls and to reply to two electronic mail messages and given the fact that he admittedly failed to
report to work at the SHS plant twice each week during the subject period, such cannot be taken to signify that he did not work
from November 16 to November 30, 2005.
Furthermore, the electronic mail reports sent to Hartmannshenn and the receipt presented by respondent as evidence of his
having worked during the subject period were not controverted by petitioners. The eight notarized letters of prospective clients
vouching for meetings they had with respondent during the subject period may also be given credence. Although respondent
only presented such letters in support of his Motion for Reconsideration filed with the NLRC, they may be considered by this
Court in light of Section 10, Rule VII, of the 2005 New Rules of Procedure of the NLRC, which provides in part that "the rules
of procedure and evidence prevailing in courts of law and equity shall not be controlling and the Commission shall use every
and all reasonable means to ascertain the facts in each case speedily and objectively, without regard to technicalities of law or
procedure, all in the interest of due process." While administrative tribunals exercising quasi-judicial functions are free from the
rigidity of certain procedural requirements, they are bound by law and practice to observe the fundamental and essential
requirements of due process in justiciable cases presented before them. 23 In this case, due process was afforded petitioners
as respondent filed with the NLRC a Motion to Set Case for Reception of Additional Evidence as regards the said letters,
which petitioners had the opportunity to, and did, oppose.
Although it cannot be determined with certainty whether respondent worked for the entire period from November 16 to
November 30, 2005, the consistent rule is that if doubt exists between the evidence presented by the employer and that by the
employee, the scales of justice must be tilted in favor of the latter 24 in line with the policy mandated by Articles 2 and 3 of the
Labor Code to afford protection to labor and construe doubts in favor of labor. For petitioners failure to satisfy their burden of
proof, respondent is presumed to have worked during the period in question and is, accordingly, entitled to his salary.
Therefore, the withholding of respondents salary by petitioners is contrary to Article 116 of the Labor Code and, thus,
unlawful.
Petitioners contend that respondent could not have been constructively dismissed because he voluntarily resigned as
evidenced by his resignation letter. They assert that respondent was not forced to draft the letter and his intention to resign is
clear from the contents and terms used, and that given respondents professional and educational background, he was fully
aware of the import and consequences of the said letter. They maintain that respondent resigned to save face and avoid
disciplinary measures due to his allegedly dismal work performance and failure to report to work.
The Court, however, agrees with the LA and the CA that respondent was forced to resign and was, thus, constructively
dismissed. In Duldulao v. Court of Appeals, it was written:
There is constructive dismissal if an act of clear discrimination, insensibility, or disdain by an employer becomes so unbearable
on the part of the employee that it would foreclose any choice by him except to forego his continued employment. It exists
where there is cessation of work because continued employment is rendered impossible, unreasonable or unlikely, as an offer
involving a demotion in rank and a diminution in pay. 25
What made it impossible, unreasonable or unlikely for respondent to continue working for SHS was the unlawful withholding of
his salary. For said reason, he was forced to resign. It is of no moment that he served his resignation letter on November 30,
2005, the last day of the payroll period and a non-working holiday, since his salary was already due him on November 29,
2005, being the last working day of said period. In fact, he was then informed that the wages of all the other SHS employees
were already released, and only his was being withheld. What is significant is that the respondent prepared and served his
resignation letter right after he was informed that his salary was being withheld. It would be absurd to require respondent to
tolerate the unlawful withholding of his salary for a longer period before his employment can be considered as so impossible,
unreasonable or unlikely as to constitute constructive dismissal. Even granting that the withholding of respondents salary on
November 30, 2005, would not constitute an unlawful act, the continued refusal to release his salary after the payroll period
was clearly unlawful. The petitioners claim that they prepared the check ready for pick-up cannot undo the unlawful
withholding.
It is worthy to note that in his resignation letter, respondent cited petitioners "illegal and unfair labor practice"26as his cause
for resignation. As correctly noted by the CA, respondent lost no time in submitting his resignation letter and eventually filing a
complaint for illegal dismissal just a few days after his salary was withheld. These circumstances are inconsistent with
voluntary resignation and bolster the finding of constructive dismissal.
Petitioners cite the case of Solas v. Power & Telephone Supply Phils., Inc.27 to support their contention that the mere
withholding of an employees salary does not by itself constitute constructive dismissal. Petitioners are mistaken in anchoring
their argument on said case, where the withholding of the salary was deemed lawful. In the above-cited case, the employees
salary was withheld for a valid reason - it was applied as partial payment of a debt due to the employer, for withholding taxes
on his income and for his absence without leave. The partial payment of a debt due to the employer and the withholding of
taxes on income were valid deductions under Article 113 paragraph (c) of the Labor Code. The deduction from an employees
607
salary for a due and demandable debt to an employer was likewise sanctioned under Article 1706 of the Civil Code. As to the
withholding for income tax purposes, it was prescribed by the National Internal Revenue Code. Moreover, the employee
therein was indeed absent without leave.
In this case, the withholding of respondents salary does not fall under any of the circumstances provided under Article 113.
Neither was it established with certainty that respondent did not work from November 16 to November 30, 2005. Hence, the
Court agrees with the LA and the CA that the unlawful withholding of respondents salary amounts to constructive dismissal.
Respondent was constructively dismissed and, therefore, illegally dismissed.1avvphi1 Although respondent was a
probationary employee, he was still entitled to security of tenure. Section 3 (2) Article 13 of the Constitution guarantees the
right of all workers to security of tenure. In using the expression "all workers," the Constitution puts no distinction between a
probationary and a permanent or regular employee. This means that probationary employees cannot be dismissed except for
cause or for failure to qualify as regular employees.28
This Court has held that probationary employees who are unjustly dismissed during the probationary period are entitled to
reinstatement and payment of full backwages and other benefits and privileges from the time they were dismissed up to their
actual reinstatement.29 Respondent is, thus, entitled to reinstatement without loss of seniority rights and other privileges as
well as to full backwages, inclusive of allowances, and other benefits or their monetary equivalent computed from the time his
compensation was withheld up to the time of actual reinstatement. Respondent, however, is not entitled to the additional
amount for 13th month pay, as it is clearly provided in respondents Probationary Contract of Employment that such is deemed
included in his salary. Thus:
EMPLOYEE will be paid a net salary of One Hundred Thousand (Php100,000.00) Pesos per month payable every 15th day
and end of the month.
The compensation package defined in this paragraph shall represent all that is due and demandable under this Contract and
includes all benefits required by law such as the 13th month pay. No other benefits, bonus or allowance shall be due the
employee. 30
(emphasis supplied)
Respondents reinstatement, however, is no longer feasible as antagonism has caused a severe strain in their working
relationship. Under the doctrine of strained relations, the payment of separation pay is considered an acceptable alternative to
reinstatement when the latter option is no longer desirable or viable. Payment liberates the employee from what could be a
highly oppressive work environment, and at the same time releases the employer from the obligation of keeping in its employ a
worker it no longer trusts. Therefore, a more equitable disposition would be an award of separation pay equivalent to at least
one month pay, in addition to his full backwages, allowances and other benefits. 31
With respect to the personal liability of Hartmannshenn and Schumacher, this Court has held that corporate directors and
officers are only solidarily liable with the corporation for termination of employment of corporate employees if effected with
malice or in bad faith.32 Bad faith does not connote bad judgment or negligence; it imports dishonest purpose or some moral
obliquity and conscious doing of wrong; it means breach of unknown duty through some motive or interest or ill will; it partakes
of the nature of fraud.33 To sustain such a finding, there should be evidence on record that an officer or director acted
maliciously or in bad faith in terminating the employee. 34
Petitioners withheld respondents salary in the sincere belief that respondent did not work for the period in question and was,
therefore, not entitled to it. There was no dishonest purpose or ill will involved as they believed there was a justifiable reason to
withhold his salary. Thus, although they unlawfully withheld respondents salary, it cannot be concluded that such was made in
bad faith. Accordingly, corporate officers, Hartmannshenn and Schumacher, cannot be held personally liable for the corporate
obligations of SHS.
WHEREFORE, the assailed December 23, 2008 Decision of the Court of Appeals in CA-G.R. SP No. 100015 is
hereby AFFIRMED with MODIFICATION. The additional amount for 13th month pay is deleted. Petitioners Winfried
Hartmannshenn and Hinrich Johann Schumacher are not solidarily liable with petitioner SHS Perforated Materials, Inc.
SO ORDERED.

G.R. No. 162332 August 28, 2008

HERBERT SOLAS, petitioner,
vs.
POWER & TELEPHONE SUPPLY PHILS., INC., DERWIN OTWELL,* PELAGIO BATTUNG, JR.*AND FRANKLIN
QUIACHON*, respondents.**.
DECISION
AUSTRIA-MARTINEZ, J.:
This resolves the petition for review on certiorari under Rule 45 of the Rules of Court, seeking the reversal of the Decision of
the Court of Appeals (CA) dated September 12, 20031 dismissing the petition for certiorari filed by Herbert Solas (petitioner).
The antecedent facts, as accurately summarized by the CA, are as follows.

608
 On 16 August 1997, Herbert Solas entered into a contract of employment with Power and Telephone /Supply
Philippines, Inc., to be the Assistant Sales Manager of the company with a monthly salary of P21,600.00, excluding
bonuses and commission.
On 06 November 1998, private respondent company granted petitioner Herbert Solas and Franklin D. Quiachon an
amount of P85,418.00 each, corresponding to their sales commission from the month of January to June of 1998.
From that time up to the present, no other sales commission was ever again given to them.
Thus, on 04 February 2000, petitioner requested for the release of his alleged commission which had already
accumulated since July of 1998. However, in an inter-office memorandum, said request was denied, and instead,
petitioner was even mandated to settle his outstanding obligation with the company.
On 07 February 2000, petitioner likewise received another memorandum requiring him to return the issued cellular
phone, car and key to his office, which he allegedly all complied. Petitioner averred that these were all forms of
harassment including the non-payment of his salary for the month of February 2000, and onwards. Hence, on 15
February 2000, he instituted a case for illegal constructive dismissal, recovery of 10% sales commission on gross
sales, and attorney's fees.
In response, private respondents maintained that there was no agreement, written or oral, which talked of the grant of
10% commission on gross sales to sales agent, nor was there a CBA on the matter. There was even no CBA to
speak of, since the company had no union, with its employees numbering only to less than 10, all being fixed-salaried
employees. The company gave bonuses when there was an income, but these were purely on the liberality of the
company, subject to the availability of funds and profits. Besides, petitioner has actually no client of his own from
whom he could close sales, thus the claim for commission was utterly baseless.
Private respondents maintained also that the claim of petitioner that he was constructively dismissed, was without
basis. Beginning 02 February 2000, petitioner's attendance was already irregular. On 11 February 2000, he was on
absence without leave. He was sick and had a growing lump on his left shoulder. It was this absence without leave
which prompted private respondents to write several memoranda to petitioner, one advising him to return to work
immediately, as his continued absence was inimical to the company; the other, directing him to explain his continued
unauthorized absences within 24 hours from receipt of the memo.
Private respondents asserted further that neither the order directing petitioner to return the company car, the issued
cellular phone and keys, nor the deductions made on his salary, could constitute as basis for his alleged constructive
dismissal, all allegations being baseless and without merit. Thus, private respondents prayed for an order directing
petitioner to pay the latter's debt with the company, and an award amounting to P100,000.00 as attorney's fees, as
well as the dismissal of petitioner from employment.
The parties submitted their position papers. On 31 August 2000, the Labor Arbiter rendered a decision finding for the
petitioner Herbert Solas, the dispositive portion of which states:
"WHEREFORE, premises considered, respondents are hereby ordered to pay the complainant the amount
of P892,780.37 as sales commission, and clearly computed appearing as Annex "K-K1" and "K-3" of complainant's
position paper. Complainant is also entitled to six (6) months backwages and separation pay of one month for every
year of service and 10% attorney's fees, as computed below by the Research and Information Unit of the
Commission:
xxxx
SO ORDERED.2
Respondents appealed to the National Labor Relations Commission (NLRC), which reversed and set aside the decision of the
Labor Arbiter (LA). The NLRC ruled that that there was no constructive dismissal in this case, because petitioner never
resigned but merely filed an indefinite sick leave, even admitting during the preliminary hearings that he was still an employee
of respondents, and his principal claim was for payment of his sales commission. Furthermore, the NLRC saw no badge of
constructive dismissal in respondents' action of applying petitioner's salary for the month of February 2000 as payment for his
debts to the company amounting to P95,000.00. It was also held that petitioner failed to establish that there was an agreement
between him and respondent employer for a 10% sales commission, and that he failed to establish the origin and authenticity
of the specific amount of the commission being claimed by him.
Petitioner filed a motion for reconsideration of the NLRC Decision, but the same was denied perResolution dated September
24, 2002.
From such adverse judgment, petitioner elevated his case to the CA via a petition for certiorari. On September 12, 2003, the
CA promulgated the assailed Decision affirming the NLRC ruling, stating thus:
An examination of the resolution of the public respondent shows no patent and gross error amounting to grave abuse
of discretion. In reversing the labor arbiter, public respondent NLRC rightly held that petitioner Herbert Solas
did not really quit from his employment, nor did he involuntarily resign from his office. What he did was
merely to file an indefinite sick leave. As aptly observed by public respondent, if indeed petitioner resigned from
his post, he should have filed a resignation letter, not an indefinite sick leave. His contention that the non-payment
of his salary for the month of February 2000 and onwards bolsters even more his claim of constructive

609
 dismissal, is without merit. Petitioner has outstanding loans with private respondent. Thus, it is more logical to
conclude that the reason why he did not receive his salary for the month of February 2000, was due to the
off-setting made by the company of his cash advances amounting to about P95,000.00.
Anent the issue of 10% commission, We find no sufficient basis to grant the claim of petitioner, having no satisfactory
evidence to prove his entitlement thereto. What the petitioner did in this case was merely to present a certificate of
employment which merely confirms the fact that he is an employee of the company and is receiving the amount
provided therein as his salary, exclusive of any bonuses and commission, and nothing more. Consequently, we
cannot grant petitioner's claim of commission on the basis of the certificate of employment alone. Assuming,
arguendo, that the certificate on its face speaks of petitioner's entitlement to commission, then, the same, however,
does not provide for its percentage. The records attest that petitioner has not presented sufficient evidence to
bolster his claim that he is entitled to a 10% commission. His self-serving allegations are not sufficient to justify
the claim.3 (Emphasis supplied)
In its Decision promulgated on September 12, 2003, the CA dismissed the petition for lack of merit. 4Petitioner's motion for
reconsideration of the foregoing decision was denied per Resolution dated February 12, 2004.
Petitioner then filed the present petition for review on certiorari, alleging that:
I. THE PUBLIC RESPONDENT COURT OF APPEALS PATENTLY ERRED AND COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION WHEN IT AFFIRMED THE DECISION
OF THE NLRC FINDING THAT THERE WAS NO ILLEGAL DISMISSAL.
II. THE PUBLIC RESPONDENT COURT OF APPEALS SERIOUSLY ERRED AND COMMITTED GRAVE ABUSE
OF DISCRETION WHEN IT AFFIRMED THE DECISION OF THE NLRC DELETING THE VARIOUS MONEY CLAIM
AWARDED IN FAVOR OF THE PETITIONER.5
Respondents counter by stressing that the NLRC Decision has become final and executory, and insists that the NLRC and the
CA committed no error in ruling that petitioner was not constructively dismissed. 6
The Court finds the petition unmeritorious.
However, at the outset, respondents must be disabused of their belief that since no appeal may be taken from the NLRC
Decision, then the same can no longer be altered. In Panuncillo v. CAP Philippines, Inc.,7 the Court explained that:
x x x while under the sixth paragraph of Article 223 of the Labor Code, the decision of the NLRC becomes final and
executory after the lapse of ten calendar days from receipt thereof by the parties, the adverse party is not
precluded from assailing it via Petition for Certiorari under Rule 65 before the Court of Appeals and then to
this Court via a Petition for Review under Rule 45. x x x8 (Emphasis supplied)
Rule 65 gives the adverse party, petitioner in this case, 60 days from the date of receipt of the order denying petitioner's
motion for reconsideration within which to file a petition for certiorari with the CA. Thus, petitioner took the proper procedural
steps to question the NLRC Decision before the CA.
As to the merits of the petition, our oft-repeated ruling, reiterated in Reyes v. National Labor Relations Commission,9 must be
emphasized, to wit:
x x x findings of facts of quasi-judicial bodies like the NLRC, and affirmed by the Court of Appeals in due course, are
conclusive on this Court, which is not a trier of facts.
xxxx
x x x Findings of fact of administrative agencies and quasi-judicial bodies, which have acquired expertise because
their jurisdiction is confined to specific matters, are generally accorded not only respect, but finality when affirmed by
the Court of Appeals. Such findings deserve full respect and, without justifiable reason, ought not to be altered,
modified or reversed.10
The CA affirmed the finding of the NLRC that petitioner's salary for February 2000 was applied as payment for his cash
advances from the company amounting to about P95,000.00. The CA likewise upheld the NLRC's finding that the evidence on
record was insufficient to establish either that there was an agreement between petitioner and respondents or that it was
company policy to give commissions to employees.
Considering that the NLRC reversed the findings of the LA, it behooves the Court to re-examine the records and resolve the
conflicting rulings between the LA, on the one hand, and those of the NLRC and the CA, on the other. 11
The Court's examination of the records reveals that such factual findings of the NLRC, as affirmed by the CA, are supported by
substantial evidence; hence, there is no cogent reason for this Court to modify or reverse the same.
In Duldulao v. Court of Appeals,12 the Court held that:
There is constructive dismissal if an act of clear discrimination, insensibility, or disdain by an employer becomes so
unbearable on the part of the employee that it would foreclose any choice by him except to forego his continued
employment. It exists where there is cessation of work because "continued employment is rendered impossible,
unreasonable or unlikely, as an offer involving a demotion in rank and a diminution in pay." 13
In this case, petitioner's allegations that respondents committed acts of harassment, i.e., the withholding of his salary for the
month of February and directing him to return the company car, cellphone and office keys, have been rebutted and sufficiently

610
explained by private respondent company in its Position Paper.14 Respondents were able to show that its acts were not
intended to harass or discriminate against petitioner.
There was valid reason for respondents' withholding of petitioner's salary for the month of February 2000. Petitioner does not
deny that he is indebted to his employer in the amount of around P95,000.00. Respondents explained that petitioner's salary
for the period of February 1-15, 2000 was applied as partial payment for his debt and for withholding taxes on his income;
while for the period of February 15-28, 2000, petitioner was already on absence without leave, hence, was not entitled to any
pay.15
With regard to the company car, respondents explained that the company car was actually issued to Franklin D. Quiachon
although petitioner and another employee, Nelson Gatbunton, may borrow the car for company operations with the consent of
Quiachon as stated in an office memorandum dated March 10, 1999. Since Nelson Gatbunton had to attend to official
business in Clark, said employee was then given use of the company car.16
The taking of the office key from petitioner was also justified, as respondents stated that the company's office consisted only of
one big room without separate or individual offices, so it was only the main door that required a key. The key to the office door
could be borrowed by any employee from a co-employee in possession thereof in case of overtime or weekend work, but not a
single employee had the exclusive use of the key to the office. Thus, when another employee, Myrna Dumlao, had to work
overtime, she borrowed the key from petitioner on February 4, 2000. Thereafter, on February 18, 2000, respondents moved to
another unit in the same condominium building housing its office, so it was already useless to return the key to the door of the
former office to petitioner.17
As to the cellphone, respondents maintain that said phone remained the property of the company, and it became company
policy for its employees to pay for personal calls. When petitioner's debts and advances accumulated, and he showed no
intention of paying for them despite receipt of bonuses, the company had to take measures to regulate the use of the company
cellphones.18
Notably, petitioner never refuted respondents' explanations for withholding his salary and the reasons why he was required to
return the company car, key and cellphone. This constitutes admission by silence under Section 32, Rule 130 of the Rules of
Court, to wit:
Sec. 32. Admission by silence. - An act or declaration made in the presence and within the hearing or observation of
a party who does or says nothing when the act or declaration is such as naturally to call for action or comment if not
true, and when proper and possible for him to do so, may be given in evidence against him.
Verily, the only conclusion that may be reached is that respondents' explanations are truthful and, based thereon, the NLRC
and the CA committed no grave abuse of discretion in ruling that there was no constructive dismissal in this case.
Lastly, as to petitioner's claim for commissions, the NLRC and the CA were correct in not sustaining the award thereof by the
LA. It must be borne in mind that there is no law which requires employers to pay commissions; 19 thus, it is incumbent upon
petitioner to prove that that there is indeed an agreement between him and his employer for payment of the same.
The only evidence presented by petitioner to prove that he is entitled to sales commissions are the employment certificate,
stating that he is an employee of respondents receiving P21,600.00 per month as salary, exclusive of bonuses and sales
commissions, and the undisputed fact that private respondent company gave him and its other employees the amount
of P85,418.00 sometime in 1998. However, the CA was correct in ruling that the employment certificate was insufficient to
prove that petitioner was indeed entitled to his claim for sales commissions, as said document does not give the details as to
the conditions for payment of the same or the agreed percentage, if any. As to the amount of P85,418.00, respondents assert
that said amount is actually a one-time bonus, not a commission. Thus, even assuming arguendo that petitioner is entitled to
sales commissions, his evidence is inadequate to establish the amount to which he is entitled. In Ropali Trading Corporation v.
National Labor Relations Commission,20 the employee presented a Memorandum from his employer stating that he would be
receiving a 20% overriding commission, including sales commission and interest income on all sales he had successfully
obtained. Yet, the Court still struck down petitioner's claim for unpaid commissions, stating that the employee should present
evidence, such as credible documents, to prove his claim. Vague and doubtful sales documents, the origins of which have not
been proven, are considered insufficient to establish a claim for payment of commissions.
Here, the NLRC and the CA found that the computations for commissions were determined and prepared unilaterally by
petitioner. Thus, it was correctly ruled that said computation, with its uncertain origin and authenticity, is self-serving and
cannot prove petitioner's claim for commissions in the amount of P892,780.37.
In sum, the Court sees no justification whatsoever to deviate from the ruling of the NLRC and the CA.
WHEREFORE, the petition is DENIED for lack of merit.
SO ORDERED.

G.R. No. 192582 April 7, 2014

BLUER THAN BLUE JOINT VENTURES COMPANY/MARY ANN DELA VEGA, Petitioners,
vs.
GLYZA ESTEBAN, Respondent.
DECISION
611
REYES, J.:
"It is not the job title but the actual work that the employee performs that determines whether he or she occupies a position of
trust and confidence."1 In this case, while respondent's position was denominated as Sales Clerk, the nature of her work
included inventory and cashiering, a function that clearly falls within the sphere of rank-and-file positions imbued with trust and
confidence.
Facts of the Case
Respondent Glyza Esteban (Esteban) was employed in January 2004 as Sales Clerk, and assigned at Bluer Than Blue Joint
Ventures Company's (petitioner) EGG boutique in SM City Marilao, Bulacan, beginning the year 2006. Part of her primary
tasks were attending to all customer needs, ensuring efficient inventory, coordinating orders from clients, cashiering and
reporting to the accounting department.
In November 2006, the petitioner received a report that several employees have access to its point-of-sale (POS) system
through a universal password given by Elmer Flores (Flores). Upon investigation, it was discovered that it was Esteban who
gave Flores the password. The petitioner sent a letter memorandum to Esteban on November 8, 2006, asking her to explain in
writing why she should not be disciplinary dealt with for tampering with the companys POS system through the use of an
unauthorized password. Esteban was also placed under preventive suspension for ten days.
In her explanation, Esteban admitted that she used the universal password three times on the same day in December 2005,
after she learned of it from two other employees who she saw browsing through the petitioners sales inquiry. She inquired
how the employees were able to open the system and she was told that they used the "123456" password.
On November 13, 2006, Estebans preventive suspension was lifted, but at the same time, a notice of termination was sent to
her, finding her explanation unsatisfactory and terminating her employment immediately on the ground of loss of trust and
confidence. Esteban was given her final pay, including benefits and bonuses, less inventory variances incurred by the store
amounting to P8,304.93. Esteban signed a quitclaim and release in favor of the petitioner.
On December 6, 2006, Esteban filed a complaint for illegal dismissal, illegal suspension, holiday pay, rest day and separation
pay.
In a Decision2 dated September 28, 2007, the Labor Arbiter (LA) ruled in favor of Esteban and found that she was illegally
dismissed. The LA also awarded separation pay, backwages, unpaid salary during her preventive suspension and attorneys
fees. The dispositive portion of the LA decision provides:
WHEREFORE, a Decision is hereby rendered declaring [Esteban] to have been illegally dismissed. Corollarily, she is entitled
for the payment of separation pay as prayed for at one month salary for every year of service, plus backwages from November
13, 2006 when she was dismissed up to the rendition of this Decision.
Further, as [Esteban] was illegally suspended she is entitled to salaries during her suspension from November 9-13, 2006.
In addition, an attorneys fees equivalent to ten (10%) percent of the total award is hereby granted, computed as follows:
a) Backwages

11/13/06 - 9/28/07 = 10.50 mos.

[P]350 x 26 x 10.50 = [P]95,550.00

13th Month Pay

1/12 of [P]95,550.00 = 7,962.50

SILP

[P]350 x 5/12 x 10.50 = 1,531.25 [P]105,043.75

b) Separation Pay

11/25/03 - 12/6/06 = 3 yrs.

[P]350 x 26 x 3 27,300.00

c) Unpaid Salaries

11/9 - 13/06 = 5 days

[P]350 x 5 = 1,750.00

[P]134,093.75

Ten (10%) Percent Attorneys Fees 13,409.37

612
 TOTAL [P]147,503.12
SO ORDERED.3
The petitioner filed an appeal with the National Labor Relations Commission (NLRC), and in its Decision 4 dated September 23,
2008, the NLRC reversed the decision of the LA and dismissed the case for illegal dismissal. The dispositive portion of the
NLRC decision reads:
WHEREFORE, the decision appealed from is hereby reversed and set aside and in its stead a new one is rendered dismissing
this case for lack of merit.
[Petitioners] however are ordered to refund to [Esteban] the amount of [P]8,304.93 which was illegally deducted from her
salary.
SO ORDERED.5
Thus, Esteban went to the Court of Appeals (CA) on certiorari. In the assailed Decision 6 dated November 25, 2009, the CA
granted Estebans petition and reinstated the LA decision, to wit:
WHEREFORE, premises considered, the petition is hereby GRANTED. The assailed Decision dated September 23, 2008 and
Resolution dated November 27, 2008 of public respondent National Labor Relations Commission are ANNULLED and SET
ASIDE[.]
Accordingly, the Decision of the Labor Arbiter dated September 28, 2007 is REINSTATED with MODIFICATION, that the
award of separation pay is computed from January 2, 2004, and not from November 25, 2003.
SO ORDERED.7
Hence, this petition with the following assignment of errors:
I. THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION WHEN IT HELD THAT RANK-
AND-FILE EMPLOYEES CANNOT BE DISMISSED ON GROUND OF LOSS OF TRUST AND CONFIDENCE.
II. THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN APPLYING THE
PRINCIPLE OF REASONABLE PROPORTIONALITY ON THE WRONGFUL ACTS OF RESPONDENT ESTEBAN.
II. THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN HOLDING THAT THE
PREVENTIVE SUSPENSION OF RESPONDENT ESTEBAN WAS UNWARRANTED.
IV. THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN HOLDING THAT THE
WAGE DEDUCTION FOR THE NEGATIVE VARIANCE AMOUNTING TO [P]8,304.93 IS UNFOUNDED.8
The petitioner argues that it had just cause to terminate the employment of Esteban, that is, loss of trust and confidence.
Esteban, the petitioner believes, is a rank-and-file employee whose nature of work is reposed with trust and confidence. Her
unauthorized access to the POS system of the company and her dissemination of the unauthorized password, which Esteban
admitted, is a breach of trust and confidence, and justifies her dismissal. 9
The petitioner also contends that the CA failed to appreciate the significance of Estebans infraction when it ruled that
suspension would have sufficed to discipline her. Estebans length of service should also not have been considered to mitigate
the penalty imposed, as her acts show a lack of concern for her employer. As regards her preventive suspension, the
petitioner maintains that it was justified in imposing the same despite that the acts were committed almost a year before the
investigation since it did not have any prior knowledge of the infraction.10
Finally, the petitioner contends that the deduction on Estebans wages of the negative variances in the sales is allowed by the
Labor Code, and such practice has been widely recognized in the retail industry. 11
Esteban, on the other hand, avers that the competency clause she signed with the petitioner merely states the following
functions: (1) attend to and assist the customer in all their needs; (2) conduct physical inventory; (3) clean and tidy up the
merchandise and store; and (4) coordinate with the stockroom for orders. As regards the cashiering function, it merely states
"to follow."12 As such, her main task is that of a sales clerk.
Esteban also avers, albeit belatedly, that the notice to explain given to her did not identify the acts or omissions allegedly
committed by her. She also contends that it was the companys fault in not creating a strong password, and that she was
forced into signing the quitclaim and waiver, among others. 13
Ruling of the Court
The LA and the CA were one in ruling that Esteban was illegally dismissed by the petitioner. It was their finding that the
position occupied by Esteban was that of a rank-and-file employee and she is neither a supervisor, manager nor a cashier;
thus, she does not hold a position of trust and confidence.14 The CA also affirmed the ruling of the LA that Estebans
preventive suspension was not warranted.15 The CA also upheld the finding of the NLRC that the deduction of P8,304.93,
representing the stores negative variance, from Estebans salary violates Article 113 of the Labor Code, which prohibits wage
deduction.16
The NLRC, on the other hand, found that Esteban was dismissed for cause. According to the NLRC, Esteban admitted that
she violated the petitioner when she made an unauthorized access to the POS system, and even shared the password to
another employee. The NLRC also rejected Estebans assertion that her job as sales clerk does not occupy a position of trust,
and that her preventive suspension was not warranted. With regard to her waiver and quitclaim, the NLRC upheld its validity
as Esteban signed the same with full awareness that she committed a wrong. 17

613
Loss of trust and confidence as a
valid ground for dismissal from
employment
The antecedent facts that gave rise to Estebans dismissal from employment are not disputed in this case. The issue is
whether Estebans acts constitute just cause to terminate her employment with the company on the ground of loss of trust and
confidence.
Loss of trust and confidence is premised on the fact that the employee concerned holds a position of responsibility, trust and
confidence. The employee must be invested with confidence on delicate matters, such as the custody, handling, care and
protection of the employers property and funds.18 "[W]ith respect to rank-and-file personnel, loss of trust and confidence as
ground for valid dismissal requires proof of involvement in the alleged events in question, and that mere uncorroborated
assertions and accusations by the employer will not be sufficient." 19
Esteban is, no doubt, a rank-and-file employee. The question now is whether she occupies a position of trust and confidence.
Among the fiduciary rank-and-file employees are cashiers, auditors, property custodians, or those who, in the normal exercise
of their functions, regularly handle significant amounts of money or property. 20 These employees, though rank-and-file, are
routinely charged with the care and custody of the employers money or property, and are thus classified as occupying
positions of trust and confidence.21
In this case, Esteban was a sales clerk. Her duties, however, were more than that of a sales clerk. Aside from attending to
customers and tending to the shop, Esteban also assumed cashiering duties. This, she does not deny; instead, she insists that
the competency clause provided that her tasks were that of a sales clerk and the cashiering function was labelled "to
follow."22 A perusal of the competency clause, however, shows that it is merely an attestation on her part that she is competent
to "meet the basic requirements needed for the position [she] is applying for x x x". It does not define her actual duties. As
consistently ruled by the Court, it is not the job title but the actual work that the employee performs that determines whether he
or she occupies a position of trust and confidence.23 In Philippine Plaza Holdings, Inc. v. Episcope,24 the Court ruled that a
service attendant, who was tasked to attend to dining guests, handle their bills and receive payments for transmittal to the
cashier and was therefore involved in the handling of company funds, is considered an employee occupying a position of trust
and confidence. Similarly in Estebans case, given that she had in her care and custody the stores property and funds, she is
considered as a rank-and-file employee occupying a position of trust and confidence.
Proceeding from the above conclusion, the pivotal question that must be answered is whether Estebans acts constitute just
cause to terminate her employment.
Loss of trust and confidence to be a valid cause for dismissal must be work related such as would show the employee
concerned to be unfit to continue working for the employer and it must be based on a wilful breach of trust and founded on
clearly established facts.25 Such breach is wilful if it is done intentionally, knowingly, and purposely, without justifiable excuse
as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently.26 The loss of trust and confidence
must spring from the voluntary or wilful act of the employee, or by reason of some blameworthy act or omission on the part of
the employee.27
In this case, the Court finds that the acts committed by Esteban do not amount to a wilful breach of trust. She admitted that
she accessed the POS system28 with the use of the unauthorized "123456" password. She did so, however, out of curiosity
and without any obvious intention of defrauding the petitioner. As professed by Esteban, "she was acting in good faith in
verifying what her co-staff told her about the opening of the computer by the use of the "123456" password, x x x. She even
told her co-staff not to open again said computer, and that was the first and last time she opened said computer." 29 Moreover,
the petitioner even admitted that Esteban has her own password to the POS system. If it was her intention to manipulate the
stores inventory and funds, she could have done so long before she had knowledge of the unauthorized password. But the
facts on hand show that she did not. The petitioner also failed to establish a substantial connection between Estebans use of
the "123456" password and any loss suffered by the petitioner. Indeed, it may be true that, as posited by the petitioner, it is the
fact that she used the password that gives cause to the loss of trust and confidence on Esteban. However, as ruled above,
such breach must have been done intentionally, knowingly, and purposely, and without any justifiable excuse, and not simply
something done carelessly, thoughtlessly, heedlessly or inadvertently. To the Courts mind, Estebans lapse is, at best, a
careless act that does not merit the imposition of the penalty of dismissal.
The Court is not saying that Esteban is innocent of any breach of company policy. That she relayed the password to another
employee is likewise demonstrative of her mindless appreciation of her duties as a sales clerk in the petitioners employ. But
absent any showing that her acts were done with "moral perverseness" that would justify the claimed loss of trust and
confidence attendant to her job,30 the Court must sustain the conclusion that Esteban was illegally dismissed. As stated by the
CA, "[s]uspension would have sufficed as punishment, considering that the petitioner had already been with the company for
more than 2 years, and the petitioner apologized and readily admitted her mistake in her written explanation, and considering
that no clear and convincing evidence of loss or prejudice, which was suffered by the [petitioner] from [Estebans] supposed
infraction."31
Preventive suspension during
investigation

614
Preventive suspension is a measure allowed by law and afforded to the employer if an employees continued employment
poses a serious and imminent threat to the employers life or property or of his co-workers.32 It may be legally imposed against
an employee whose alleged violation is the subject of an investigation. 33
In this case, the petitioner was acting well within its rights when it imposed a 10-day preventive suspension on Esteban. While
it may be that the acts complained of were committed by Esteban almost a year before the investigation was conducted, still, it
should be pointed out that Esteban was performing functions that involve handling of the petitioners property and funds, and
the petitioner had every right to protect its assets and operations pending Estebans investigation. 34
Sales negative variances as wage
deductions
The petitioner deducted the amount of P8,304.93 from Estebans last salary. According to the petitioner, this represents the
stores negative variance for the year 2005 to 2006. The petitioner justifies the deduction on the basis of alleged trade practice
and that it is allowed by the Labor Code.
Article 113 of the Labor Code provides that no employer, in his own behalf or in behalf of any person, shall make any
deduction from the wages of his employees, except in cases where the employer is authorized by law or regulations issued by
the Secretary of Labor and Employment, among others. The Omnibus Rules Implementing the Labor Code, meanwhile,
provides:
SECTION 14. Deduction for loss or damage. Where the employer is engaged in a trade, occupation or business where the
practice of making deductions or requiring deposits is recognized to answer for the reimbursement of loss or damage to tools,
materials, or equipment supplied by the employer to the employee, the employer may make wage deductions or require the
employees to make deposits from which deductions shall be made, subject to the following conditions:
(a) That the employee concerned is clearly shown to be responsible for the loss or damage;
(b) That the employee is given reasonable opportunity to show cause why deduction should not be made;
(c) That the amount of such deduction is fair and reasonable and shall not exceed the actual loss or damage; and
(d) That the deduction from the wages of the employee does not exceed 20 percent of the employees wages in a
week.
In this case, the petitioner failed to sufficiently establish that Esteban was responsible for the negative variance it had in its
sales for the year 2005 to 2006 and that Esteban was given the opportunity to show cause the deduction from her last salary
should not be made. The Court cannot accept the petitioners statement that it is the practice in the retail industry to deduct
variances from an employees salary, without more. In Nia Jewelry Manufacturing of Metal Arts, Inc. v. Montecillo, 35 the Court
ruled that:
[T]he petitioners should first establish that the making of deductions from the salaries is authorized by law, or regulations
issued by the Secretary of Labor. Further, the posting of cash bonds should be proven as a recognized practice in the jewelry
manufacturing business, or alternatively, the petitioners should seek for the determination by the Secretary of Labor through
the issuance of appropriate rules and regulations that the policy the former seeks to implement is necessary or desirable in the
conduct of business. The petitioners failed in this respect. It bears stressing that without proofs that requiring deposits and
effecting deductions are recognized practices, or without securing the Secretary of Labor's determination of the necessity or
desirability of the same, the imposition of new policies relative to deductions and deposits can be made subject to abuse by
the employers. This is not what the law intends.36
WHEREFORE, the petition is PARTIALLY GRANTED. The Decision dated November 25, 2009 and Resolution dated June 10,
2010 of the Court of Appeals in CA-G.R. SP No. 107573 insofar as it reinstated with modification the Decision of the Labor
Arbiter dated September 28, 2007 are AFFIRMED. Insofar as it affirmed respondent Glyza Esteban's preventive suspension,
the same are hereby REVERSED.
The Labor Arbiter is hereby ORDERED to re-compute the monetary award in favor of Glyza Esteban and to exclude the award
of backwages during such period of preventive suspension, if any.
SO ORDERED.

[ G.R. No. 202961, February 04, 2015 ]

EMER MILAN, RANDY MASANGKAY, WILFREDO JAVIER, RONALDO DAVID, BONIFACIO MATUNDAN, NORA
MENDOZA, ET AL., PETITIONERS, VS. NATIONAL LABOR RELATIONS COMMISSION, SOLID MILLS, INC., AND/OR
PHILIP ANG, RESPONDENTS.
DECISION
LEONEN, J.:
An employer is allowed to withhold terminal pay and benefits pending the employees return of its properties.

Petitioners are respondent Solid Mills, Inc.s (Solid Mills) employees. [1] They are represented by the National Federation of
Labor Unions (NAFLU), their collective bargaining agent.[2]

As Solid Mills employees, petitioners and their families were allowed to occupy SMI Village, a property owned by Solid Mills.[3]
615
According to Solid Mills, this was [o]ut of liberality and for the convenience of its employees . . . [and] on the condition that the
employees . . . would vacate the premises anytime the Company deems fit. [4]

In September 2003, petitioners were informed that effective October 10, 2003, Solid Mills would cease its operations due to
serious business losses.[5] NAFLU recognized Solid Mills closure due to serious business losses in the memorandum of
agreement dated September 1, 2003.[6] The memorandum of agreement provided for Solid Mills grant of separation pay less
accountabilities, accrued sick leave benefits, vacation leave benefits, and 13th month pay to the employees. [7] Pertinent
portions of the agreement provide:
WHEREAS, the COMPANY has incurred substantial financial losses and is currently experiencing further severe financial
losses;

WHEREAS, in view of such irreversible financial losses, the COMPANY will cease its operations on October 10, 2003;

WHEREAS, all employees of the COMPANY on account of irreversible financial losses, will be dismissed from employment
effective October 10, 2003;

In view thereof, the parties agree as follows:

1. That UNION acknowledges that the COMPANY is experiencing severe financial losses and as a consequence of which,
management is constrained to cease the companys operations.
2. The UNION acknowledges that under Article 283 of the Labor Code, separation pay is granted to employees who are
dismissed due to closures or cessation of operations NOT DUE to serious business losses.
3. The UNION acknowledges that in view of the serious business losses the Company has been experiencing as seen in
their audited financial statements, employees ARE NOT granted separation benefits under the law.
4. The COMPANY, by way of goodwill and in the spirit of generosity agrees to grant financial assistance less
accountabilities to members of the Union based on length of service to be computed as follows: (Italics in this paragraph
supplied)

Number of days - 12.625 for every year of service

5. In view of the above, the members of the UNION will receive such financial assistance on an equal monthly installments
basis based on the following schedule:

First Check due on January 5, 2004 and every 5th of the month thereafter until December 5, 2004.
6. The COMPANY commits to pay any accrued benefits the Union members are entitled to, specifically those arising from
sick and vacation leave benefits and 13th month pay, less accountabilities based on the following schedule:

One Time Cash Payment to be distributed anywhere from. . . .

....
7. The foregoing agreement is entered into with full knowledge by the parties of their rights under the law and they hereby
bind themselves not to conduct any concerted action of whatsoever kind, otherwise the grant of financial assistance as
discussed above will be withheld.[8] (Emphasis in the original)

Solid Mills filed its Department of Labor and Employment termination report on September 2, 2003. [9]

Later, Solid Mills, through Alfredo Jingco, sent to petitioners individual notices to vacate SMI Village. [10]

Petitioners were no longer allowed to report for work by October 10, 2003. [11] They were required to sign a memorandum of
agreement with release and quitclaim before their vacation and sick leave benefits, 13th month pay, and separation pay would
be released.[12] Employees who signed the memorandum of agreement were considered to have agreed to vacate SMI
Village, and to the demolition of the constructed houses inside as condition for the release of their termination benefits and
separation pay.[13] Petitioners refused to sign the documents and demanded to be paid their benefits and separation pay. [14]

Hence, petitioners filed complaints before the Labor Arbiter for alleged non-payment of separation pay, accrued sick and
vacation leaves, and 13th month pay.[15] They argued that their accrued benefits and separation pay should not be withheld
because their payment is based on company policy and practice. [16] Moreover, the 13th month pay is based on law,
specifically, Presidential Decree No. 851.[17] Their possession of Solid Mills property is not an accountability that is subject to
clearance procedures.[18] They had already turned over to Solid Mills their uniforms and equipment when Solid Mills ceased
operations.[19]
616
On the other hand, Solid Mills argued that petitioners complaint was premature because they had not vacated its property. [20]

The Labor Arbiter ruled in favor of petitioners.[21] According to the Labor Arbiter, Solid Mills illegally withheld petitioners
benefits and separation pay.[22] Petitioners right to the payment of their benefits and separation pay was vested by law and
contract.[23] The memorandum of agreement dated September 1, 2003 stated no condition to the effect that petitioners must
vacate Solid Mills property before their benefits could be given to them.[24] Petitioners possession should not be construed as
petitioners accountabilities that must be cleared first before the release of benefits. [25] Their possession is not by virtue of
any employer-employee relationship.[26] It is a civil issue, which is outside the jurisdiction of the Labor Arbiter. [27]

The dispositive portion of the Labor Arbiters decision reads:

WHEREFORE, premises considered, judgment is entered ORDERING respondents SOLID MILLS, INC. and/or PHILIP
ANG (President), in solido to pay the remaining 21 complainants:

1) 19 of which, namely EMER MILAN, RAMON MASANGKAY, ALFREDO JAVIER, RONALDO DAVID, BONIFACIO
MATUNDAN, NORA MENDOZA, MYRNA IGCAS, RAUL DE LAS ALAS, RENATO ESTOLANO, REX S. DIMAFELIX, MAURA
MILAN, JESSICA BAYBAYON, ALFREDO MENDOZA, ROBERTO IGCAS, ISMAEL MATA, CARLITO DAMIAN, TEODORA
MAHILOM, MARILOU LINGA, RENATO LINGA their separation pay of 12.625 days pay per year of service, pro-rated 13th
month pay for 2003 and accrued vacation and sick leaves, plus 12% interest p.a. from date of filing of the lead case/judicial
demand on 12/08/03 until actual payment and/or finality;

2) the remaining 2 of which, complainants CLEOPATRA ZACARIAS, as she already received on 12/19/03 her accrued 13th
month pay for 2003, accrued VL/SL total amount of P15,435.16, likewise, complainant Jerry L. Sesma as he already received
his accrued 13th month pay for 2003, SL/VL in the total amount of P10,974.97, shall be paid only their separation pay of
12.625 days pay per year of service but also with 12% interest p.a. from date of filing of the lead case/judicial demand on
12/08/03 until actual payment and/or finality, which computation as of date, amount to as shown in the attached computation
sheet.

3) Nine (9) individual complaints viz., of Maria Agojo, Joey Suarez, Ronaldo Vergara, Ronnie Vergara, Antonio R. Dulo, Sr.,
Bryan D. Durano, Silverio P. Durano, Sr., Elizabeth Duarte and Purificacion Malabanan are DISMISSED WITH
PREJUDICE due to amicable settlement, whereas, that of [RONIE ARANAS], [EMILITO NAVARRO], [NONILON PASCO],
[GENOVEVA PASCO], [OLIMPIO A. PASCO] are DISMISSED WITHOUT PREJUDICE, for lack of interest and/or failure to
prosecute.

The Computation and Examination unit is directed to cause the computation of the award in Pars. 2 and 3
above.[28] (Emphasis in the original)

Solid Mills appealed to the National Labor Relations Commission. [29] It prayed for, among others, the dismissal of the
complaints against it and the reversal of the Labor Arbiters decision.[30]

The National Labor Relations Commission affirmed paragraph 3 of the Labor Arbiters dispositive portion, but reversed
paragraphs 1 and 2. Thus:
WHEREFORE, the Decision of Labor Arbiter Renaldo O. Hernandez dated 10/17/05 is AFFIRMED in so far as par. 3 thereof is
concerned but modified in that paragraphs 1 and 2 thereof are REVERSED and SET ASIDE. Accordingly, the following
complainants, namely: Emir Milan, Ramon Masangkay, Alfredo Javier, Ronaldo David, Bonifacio Matundan, Nora Mendoza,
Myrna Igcas, Raul De Las Alas, Renato Estolano, Rex S. Dimaf[e]lix, Maura Milan, Jessica Baybayon, Alfredo Mendoza,
Roberto Igcas, Cleopatra Zacarias and Jerry L. Sesmas monetary claims in the form of separation pay, accrued 13th month
pay for 2003, accrued vacation and sick leave pays are held in abeyance pending compliance of their accountabilities to
respondent company by turning over the subject lots they respectively occupy at SMI Village Sucat Muntinlupa City, Metro
Manila to herein respondent company.[31]

The National Labor Relations Commission noted that complainants Marilou Linga, Renato Linga, Ismael Mata, and Carlito
Damian were already paid their respective separation pays and benefits. [32] Meanwhile, Teodora Mahilom already retired long
before Solid Mills closure.[33] She was already given her retirement benefits.[34]

The National Labor Relations Commission ruled that because of petitioners failure to vacate Solid Mills property, Solid Mills
was justified in withholding their benefits and separation pay.[35] Solid Mills granted the petitioners the privilege to occupy its
property on account of petitioners employment.[36] It had the prerogative to terminate such privilege. [37] The termination of
617
Solid Mills and petitioners employer-employee relationship made it incumbent upon petitioners to turn over the property to
Solid Mills.[38]

Petitioners filed a motion for partial reconsideration on October 18, 2010, [39] but this was denied in the November 30, 2010
resolution.[40]

Petitioners, thus, filed a petition for certiorari[41] before the Court of Appeals to assail the National Labor Relations Commission
decision of August 31, 2010 and resolution of November 30, 2010.[42]

On January 31, 2012, the Court of Appeals issued a decision dismissing petitioners petition,[43] thus:
WHEREFORE, the petition is hereby ordered DISMISSED.[44]

The Court of Appeals ruled that Solid Mills act of allowing its employees to make temporary dwellings in its property was a
liberality on its part. It may be revoked any time at its discretion.[45] As a consequence of Solid Mills closure and the resulting
termination of petitioners, the employer-employee relationship between them ceased to exist. There was no more reason for
them to stay in Solid Mills property.[46] Moreover, the memorandum of agreement between Solid Mills and the union
representing petitioners provided that Solid Mills payment of employees benefits should be less accountabilities. [47]

On petitioners claim that there was no evidence that Teodora Mahilom already received her retirement pay, the Court of
Appeals ruled that her complaint filed before the Labor Arbiter did not include a claim for retirement pay. The issue was also
raised for the first time on appeal, which is not allowed. [48] In any case, she already retired before Solid Mills ceased its
operations.[49]

The Court of Appeals agreed with the National Labor Relations Commissions deletion of interest since it found that Solid Mills
act of withholding payment of benefits and separation pay was proper. Petitioners terminal benefits and pay were withheld
because of petitioners failure to vacate Solid Mills property. [50]

Finally, the Court of Appeals noted that Carlito Damian already received his separation pay and benefits. [51] Hence, he should
no longer be awarded these claims.[52]

In the resolution promulgated on July 16, 2012, the Court of Appeals denied petitioners motion for reconsideration. [53]

Petitioners raise in this petition the following errors:

I

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT RULED
THAT PAYMENT OF THE MONETARY CLAIMS OF PETITIONERS SHOULD BE HELD IN ABEYANCE PENDING
COMPLIANCE OF THEIR ACCOUNTABILITIES TO RESPONDENT SOLID MILLS BY TURNING OVER THE SUBJECT
LOTS THEY RESPECTIVELY OCCUPY AT SMI VILLAGE, SUCAT, MUNTINLUPA CITY.
II

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT UPHELD
THE RULING OF THE NLRC DELETING THE INTEREST OF 12% PER ANNUM IMPOSED BY THE HONORABLE LABOR
ARBITER HERNANDEZ ON THE AMOUNT DUE FROM THE DATE OF FILING OF THE LEAD CASE/JUDICIAL DEMAND
ON DECEMBER 8, 2003 UNTIL ACTUAL PAYMENT AND/OR FINALITY.
III

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT UPHELD
THE RULING OF THE NLRC DENYING THE CLAIM OF TEODORA MAHILOM FOR PAYMENT OF RETIREMENT
BENEFITS DESPITE LACK OF ANY EVIDENCE THAT SHE RECEIVED THE SAME.
IV

WHETHER OR NOT PETITIONER CARLITO DAMIAN IS ENTITLED TO HIS MONETARY BENEFITS FROM RESPONDENT
SOLID MILLS.[54]

Petitioners argue that respondent Solid Mills and NAFLUs memorandum of agreement has no provision stating that benefits
shall be paid only upon return of the possession of respondent Solid Mills property. [55] It only provides that the benefits shall
be less accountabilities, which should not be interpreted to include such possession. [56] The fact that majority of NAFLUs
618
members were not occupants of respondent Solid Mills property is evidence that possession of the property was not
contemplated in the agreement.[57] Accountabilities should be interpreted to refer only to accountabilities that were incurred
by petitioners while they were performing their duties as employees at the worksite. [58] Moreover, applicable laws, company
practice, or policies do not provide that 13th month pay, and sick and vacation leave pay benefits, may be withheld pending
satisfaction of liabilities by the employee.[59]

Petitioners also point out that the National Labor Relations Commission and the Court of Appeals have no jurisdiction to
declare that petitioners act of withholding possession of respondent Solid Mills property is illegal. [60] The regular courts have
jurisdiction over this issue.[61] It is independent from the issue of payment of petitioners monetary benefits.[62]

For these reasons, and because, according to petitioners, the amount of monetary award is no longer in question, petitioners
are entitled to 12% interest per annum.[63]

Petitioners also argue that Teodora Mahilom and Carlito Damian are entitled to their claims. They insist that Teodora Mahilom
did not receive her retirement benefits and that Carlito Damian did not receive his separation benefits. [64]

Respondents Solid Mills and Philip Ang, in their joint comment, argue that petitioners failure to turn over respondent Solid
Mills property constituted an unsatisfied accountability for which reason petitioners benefits could rightfully be withheld.[65]
The term accountability should be given its natural and ordinary meaning. [66] Thus, it should be interpreted as a state of
being liable or responsible, or obligation.[67] Petitioners differentiation between accountabilities incurred while performing
jobs at the worksite and accountabilities incurred outside the worksite is baseless because the agreement with NAFLU merely
stated accountabilities, without qualification.[68]

On the removal of the award of 12% interest per annum, respondents argue that such removal was proper since respondent
Solid Mills was justified in withholding the monetary claims.[69]

Respondents argue that Teodora Mahilom had no more cause of action for retirement benefits claim. [70] She had already
retired more than a decade before Solid Mills closure. She also already received her retirement benefits in 1991.[71] Teodora
Mahiloms claim was also not included in the complaint filed before the Labor Arbiter. It was improper to raise this claim for the
first time on appeal. In any case, Teodora Mahiloms claim was asserted long after the three-year prescriptive period provided
in Article 291 of the Labor Code.[72]

Lastly, according to respondents, it would be unjust if Carlito Damian would be allowed to receive monetary benefits again,
which he, admittedly, already received from Solid Mills. [73]
I
The National Labor Relations
Commission may preliminarily
determine issues related to rights
arising from an employer-employee
relationship

The National Labor Relations Commission has jurisdiction to determine, preliminarily, the parties rights over a property, when
it is necessary to determine an issue related to rights or claims arising from an employer-employee relationship.

Article 217 provides that the Labor Arbiter, in his or her original jurisdiction, and the National Labor Relations Commission, in
its appellate jurisdiction, may determine issues involving claims arising from employer-employee relations. Thus:
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. (1) 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 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; and

619
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.
(2) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters. (Emphasis supplied)

Petitioners claim that they have the right to the immediate release of their benefits as employees separated from respondent
Solid Mills is a question arising from the employer-employee relationship between the parties.

Claims arising from an employer-employee relationship are not limited to claims by an employee. Employers may also have
claims against the employee, which arise from the same relationship.

In Baez v. Valdevilla,[74] this court ruled that Article 217 of the Labor Code also applies to employers claim for damages,
which arises from or is connected with the labor issue. Thus:
Whereas this Court in a number of occasions had applied the jurisdictional provisions of Article 217 to claims for damages filed
by employees, we hold that by the designating clause arising from the employer-employee relations Article 217 should apply
with equal force to the claim of an employer for actual damages against its dismissed employee, where the basis for the claim
arises from or is necessarily connected with the fact of termination, and should be entered as a counterclaim in the illegal
dismissal case.[75]

Baez was cited in Domondon v. National Labor Relations Commission.[76] One of the issues in Domondon is whether the
Labor Arbiter has jurisdiction to decide an issue on the transfer of ownership of a vehicle assigned to the employee. It was
argued that only regular courts have jurisdiction to decide the issue. [77]

This court ruled that since the transfer of ownership of the vehicle to the employee was connected to his separation from the
employer and arose from the employer-employee relationship of the parties, the employers claim fell within the Labor Arbiters
jurisdiction.[78]

As a general rule, therefore, a claim only needs to be sufficiently connected to the labor issue raised and must arise from an
employer-employee relationship for the labor tribunals to have jurisdiction.

In this case, respondent Solid Mills claims that its properties are in petitioners possession by virtue of their status as its
employees. Respondent Solid Mills allowed petitioners to use its property as an act of liberality. Put in other words, it would
not have allowed petitioners to use its property had they not been its employees. The return of its properties in petitioners
possession by virtue of their status as employees is an issue that must be resolved to determine whether benefits can be
released immediately. The issue raised by the employer is, therefore, connected to petitioners claim for benefits and is
sufficiently intertwined with the parties employer-employee relationship. Thus, it is properly within the labor tribunals
jurisdiction.
II
Institution of clearance procedures
has legal bases

Requiring clearance before the release of last payments to the employee is a standard procedure among employers, whether
public or private. Clearance procedures are instituted to ensure that the properties, real or personal, belonging to the
employer but are in the possession of the separated employee, are returned to the employer before the employees departure.

As a general rule, employers are prohibited from withholding wages from employees. The Labor Code provides:
Art. 116. Withholding of wages and kickbacks prohibited. It shall be unlawful for any person, directly or indirectly, to
withhold any amount from the wages of a worker or induce him to give up any part of his wages by force, stealth, intimidation,
threat or by any other means whatsoever without the workers consent.

The Labor Code also prohibits the elimination or diminution of benefits. Thus:
Art. 100. Prohibition against elimination or diminution of benefits. Nothing in this Book shall be construed to eliminate or
in any way diminish supplements, or other employee benefits being enjoyed at the time of promulgation of this Code.

However, our law supports the employers institution of clearance procedures before the release of wages. As an exception to
the general rule that wages may not be withheld and benefits may not be diminished, the Labor Code provides:
Art. 113. Wage deduction. No employer, in his own behalf or in behalf of any person, shall make any deduction from the
wages of his employees, except:
620
1. In cases where the worker is insured with his consent by the employer, and the deduction is to recompense the employer
for the amount paid by him as premium on the insurance;

2. For union dues, in cases where the right of the worker or his union to check-off has been recognized by the employer or
authorized in writing by the individual worker concerned; and

3. In cases where the employer is authorized by law or regulations issued by the Secretary of Labor and
Employment. (Emphasis supplied)

The Civil Code provides that the employer is authorized to withhold wages for debts due:
Article 1706. Withholding of the wages, except for a debt due, shall not be made by the employer.

Debt in this case refers to any obligation due from the employee to the employer. It includes any accountability that the
employee may have to the employer. There is no reason to limit its scope to uniforms and equipment, as petitioners would
argue.

More importantly, respondent Solid Mills and NAFLU, the union representing petitioners, agreed that the release of petitioners
benefits shall be less accountabilities.

Accountability, in its ordinary sense, means obligation or debt. The ordinary meaning of the term accountability does not
limit the definition of accountability to those incurred in the worksite. As long as the debt or obligation was incurred by virtue of
the employer-employee relationship, generally, it shall be included in the employees accountabilities that are subject to
clearance procedures.

It may be true that not all employees enjoyed the privilege of staying in respondent Solid Mills property. However, this alone
does not imply that this privilege when enjoyed was not a result of the employer-employee relationship. Those who did avail of
the privilege were employees of respondent Solid Mills. Petitioners possession should, therefore, be included in the term
accountability.

Accountabilities of employees are personal. They need not be uniform among all employees in order to be included in
accountabilities incurred by virtue of an employer-employee relationship.

Petitioners do not categorically deny respondent Solid Mills ownership of the property, and they do not claim superior right to
it. What can be gathered from the findings of the Labor Arbiter, National Labor Relations Commission, and the Court of
Appeals is that respondent Solid Mills allowed the use of its property for the benefit of petitioners as its employees. Petitioners
were merely allowed to possess and use it out of respondent Solid Mills liberality. The employer may, therefore, demand the
property at will.[79]

The return of the propertys possession became an obligation or liability on the part of the employees when the employer-
employee relationship ceased. Thus, respondent Solid Mills has the right to withhold petitioners wages and benefits because
of this existing debt or liability. In Solas v. Power and Telephone Supply Phils., Inc., et al.,this court recognized this right of the
employer when it ruled that the employee in that case was not constructively dismissed. [80] Thus:
There was valid reason for respondents withholding of petitioners salary for the month of February 2000. Petitioner does not
deny that he is indebted to his employer in the amount of around P95,000.00. Respondents explained that petitioners salary
for the period of February 1-15, 2000 was applied as partial payment for his debt and for withholding taxes on his income;
while for the period of February 15-28, 2000, petitioner was already on absence without leave, hence, was not entitled to any
pay.[81]

The law does not sanction a situation where employees who do not even assert any claim over the employers property are
allowed to take all the benefits out of their employment while they simultaneously withhold possession of their employers
property for no rightful reason.

Withholding of payment by the employer does not mean that the employer may renege on its obligation to pay employees their
wages, termination payments, and due benefits. The employees benefits are also not being reduced. It is only subjected to
the condition that the employees return properties properly belonging to the employer. This is only consistent with the
equitable principle that no one shall be unjustly enriched or benefited at the expense of another. [82]

621
For these reasons, we cannot hold that petitioners are entitled to interest of their withheld separation benefits. These benefits
were properly withheld by respondent Solid Mills because of their refusal to return its property.
III
Mahilom and Damian are not
entitled to the benefits claimed

Teodora Mahilom is not entitled to separation benefits.

Both the National Labor Relations Commission and the Court of Appeals found that Teodora Mahilom already retired long
before respondent Solid Mills closure. They found that she already received her retirement benefits. We have no reason to
disturb this finding. This court is not a trier of facts. Findings of the National Labor Relations Commission, especially when
affirmed by the Court of Appeals, are binding upon this court. [83]

Moreover, Teodora Mahiloms claim for retirement benefits was not included in her complaint filed before the Labor Arbiter.
Hence, it may not be raised in the appeal.

Similarly, the National Labor Relations Commission and the Court of Appeals found that Carlito Damian already received his
terminal benefits. Hence, he may no longer claim terminal benefits.

The fact that respondent Solid Mills has not yet demolished Carlito Damians house in SMI Village is not evidence that he did
not receive his benefits. Both the National Labor Relations Commission and the Court of Appeals found that he executed an
affidavit stating that he already received the benefits.

Absent any showing that the National Labor Relations Commission and the Court of Appeals misconstrued these facts, we will
not reverse these findings.

Our laws provide for a clear preference for labor. This is in recognition of the asymmetrical power of those with capital when
they are left to negotiate with their workers without the standards and protection of law. In cases such as these, the collective
bargaining unit of workers are able to get more benefits and in exchange, the owners are able to continue with the program of
cutting their losses or wind down their operations due to serious business losses. The company in this case did all that was
required by law.

The preferential treatment given by our law to labor, however, is not a license for abuse. [84] It is not a signal to commit acts of
unfairness that will unreasonably infringe on the property rights of the company. Both labor and employer have social utility,
and the law is not so biased that it does not find a middle ground to give each their due.

Clearly, in this case, it is for the workers to return their housing in exchange for the release of their benefits. This is what they
agreed upon. It is what is fair in the premises.

WHEREFORE, the petition is DENIED. The Court of Appeals decision is AFFIRMED.

G.R. No. 150326

THE NATIONAL WAGES AND PRODUCTIVITY COMMISSION (NWPC) and THE REGIONAL TRIPARTITE WAGES AND
PRODUCTIVITY BOARD (RTWPB)- NCR, Petitioners,
vs.
THE ALLIANCE OF PROGRESSIVE LABOR (APL) and THE TUNAY NA NAGKAKAISANG MANGGAGAwA SA ROYAL
(TNMR-APL), Respondents.
DECISION
BERSAMIN, J.:
This case concerns the authority of the National Wages and Productivity Commission (NWPC) and the Regional Tripartite
Wages and Productivity Board (RTWPB) created under Republic Act No. 6727,1 otherwise known as the Wage Rationalization
Act, to issue wage orders, and to receive, process and act on applications for exemption from the prescribed wage rates.
The Case
Petitioners NWPC and RTWPB of the National Capital Region (NCR) appeal the decision promulgated on June 15,
2001,2 whereby the Court of Appeals (CA) reversed the decisions rendered by the NWPC on February 28, 2000 3 and July 17,
20004, and declared as null and void Section 2(A) and Section 9(2) of Wage Order No. NCR-07.
Antecedents

622
On June 9, 1989, Republic Act No. 6727 was enacted into law. In order to rationalize wages throughout the Philippines,
Republic Act No. 6727 created the NWPC and the RTWPBs of the different regions.
Article 121 of the Labor Code, as amended by Section 3 of Republic Act No. 6727, empowered the NWPC to formulate
policies and guidelines on wages, incomes and productivity improvement at the enterprise, industry and national levels; to
prescribe rules and guidelines for the determination of appropriate minimum wage and productivity measures at the regional,
provincial or industry levels; and to review regional wage levels set by the RTWPBs to determine whether the levels were in
accordance with the prescribed guidelines and national development plans, among others. On the other hand, Article 122(b) of
the Labor Code, also amended by Section 3 of Republic Act No. 6727, tasked the RTWPBs to determine and fix minimum
wage rates applicable in their region, provinces or industries therein; and to issue the corresponding wage orders, subject to
the guidelines issued by the NWPC. The RTWPBs were also mandated to receive, process and act on applications for
exemption from the prescribed wage rates as may be provided by law or any wage order. 5
Consequently, the RTWPB-NCR issued Wage Order No. NCR-07 on October 14, 1999 imposing an increase of P25.50/day
on the wages of all private sector workers and employees in the NCR and pegging the minimum wage rate in the NCR at
P223.50/day.6 However, Section 2 and Section 9 of Wage Order No. NCR-07 exempted certain sectors and industries from its
coverage, to wit:
Section 2. The adjustment in this Order does not cover the following:
A. [W]orkers in the following sectors which were granted corresponding wage increases on January 1, 1999 as prescribed by
Wage Order No. NCR-06:
a.1. Agriculture workers
-Plantation P 12.00
-Non-plantation P 18.50
a.2. Cottage/handicraft industry P 16.00
a.3. Private hospitals with bed capacity
of 100 or less P 12.00
a.4. Retail/Service establishments
-Employing 11-15 workers P 12.00
-Employing not more than 10 workers P 19.00
B. Workers in small establishments employing less that ten (10) workers.
xxxx
Section 9. Upon application with and as determined by the Board, based on documentation and other requirements in
accordance with applicable rules and regulations issued by the Commission, the following may be exempt from the
applicability of this Order:
1.Distressed establishments as defined in the NPWC Guidelines No. 01, series of 1996;
2.Exporters including indirect exporters with at least 50% export sales and with forward contracts with their foreign
buyers/principals entered into on or twelve (12) months before the date of publication of this Order may be exempt
during the lifetime of said contract but not to exceed twelve (12) months from the effectivity of this Order.
Feeling aggrieved by their non-coverage by the wage adjustment, the Alliance of Progressive Labor (APL) and the Tunay na
Nagkakaisang Manggagawa sa Royal (TNMR) filed an appeal with the NWPC assailing Section 2(A) and Section 9(2) of
Wage Order No. NCR-07. They contended that neither the NWPC nor the RTWPB-NCR had the authority to expand the non-
coverage and exemptible categories under the wage order; hence, the assailed sections of the wage order should be voided.
The appeal was docketed as NWPC Case No. W.O.- 99-001.
Ruling of the NWPC
In its decision dated February 28, 2000,7 the NWPC upheld the validity of Section 2(A) and Section 9(2) of Wage Order No.
NCR-07. It observed that the RTWPBs power to determine exemptible categories was adjunct to its wage fixing function
conferred by Article 122(e) of the Labor Code, as amended by Republic Act No. 6727; that such authority of the RTWPB was
also recognized in NWPC Guidelines No. 01, Series of 1996; that APL and TNMR did not adduce evidence to show any
arbitrariness on the part of the RTWPB-NCR when it included in Wage Order No. NCR-07 the disputed exclusionary
provisions; and that the RTWPB-NCR was able to submit strong and justifiable reasons for the inclusion of the exemptible
categories in Wage Order No. NCR-07.
With regard to the excluded sectors provided for in Section 2(A) of Wage Order No. NCR-07, the NWPC took cognizance of
the precarious situation in the Philippines in 1997 because of the Asian economic turmoil that had prompted the RTWPB-NCR
to issue Wage Order No. NCR-06 to prescribe a staggered amount of wage increases for the agricultural workers,
cottage/handicraft industry, private hospitals with bed capacity of 100 or less, and retail/service establishments employing 15
or less workers. It noted that the effects of that economic turmoil were still felt in the NCR when Wage Order No. NCR-07 was
issued considering that the unemployment rate was 15.4% in July 1999; that the RTWPB-NCR thought it wise to defer the

623
implementation of the new wage increase until a future date; and that the non-inclusion of some sectors from the coverage of
the Wage Order No. NCR-07 was only temporary in character.
As regards the exemption granted to the exporting firms, the NWPC considered the nature of the business wherein the
exporters would normally enter into forwarding contracts with their principals. It held that the recent adjustment imposed by
Wage Order No. NCR-07 could not have been anticipated by the parties at the time they agreed on the price of their forward
contract; that the implementation of the wage adjustment would surely result, therefore, into either financial loss or at the very
least a marked reduction of profits on the part of the exporters; and that the exemption given to exporting firms was not
automatic because the RTWPB-NCR had the discretion to ascertain if the exporter had complied with the requirements, and
the exemption given was only for a period of one year8
Accordingly, the NWPC denied the appeal of APL and TNMR for its lack of merit. It also denied TNMRs motion for
reconsideration through its resolution of July 17, 2000. 9
Ruling of the CA
The APL and TNMR assailed the decisions of the NWPC on certiorari in the CA (C.A.-G.R. SP No. 60833), attributing grave
abuse of discretion to the NWPC in upholding Section 2(A) and Section 9(2) of Wage Order No. NCR-07, and contending that
the power of the RTWPB- NCR to determine exemptible categories was not an adjunct to its wage fixing function.
On June 15, 2001, the CA granted the petition for certiorari,10 holding that the powers and functions of the NWPC and
RTWPB-NCR as set forth in Republic Act No. 6727 did not include the power to grant additional exemptions from the adjusted
minimum wage; that an administrative rule or regulation must be in harmony with the enabling law; and that the statutory grant
of power could not be extended by implication beyond what was necessary for their just and reasonable execution. It disposed
as follows:
WHEREFORE, the petition is GRANTED and the Decisions of the respondent Commission dated February 28, 2000 and July
17, 2000 are hereby SET ASIDE.
Sections 2A and 9(2) of the Wage Order No. NCR-07 are hereby declared NULL and VOID.
SO ORDERED.11
The NWPC and RTWPB-NCR moved to reconsider the decision, but the CA denied their motion in the resolution promulgated
on September 11, 2001,12 ruling that notwithstanding the pronouncement in Nasipit Lumber Company, Inc. v. National Wages
and Productivity Commission13 to the effect that the NWPC had the power not only to prescribe guidelines to govern wage
orders but also to issue exemptions therefrom, Section 2(A) and Section 9(2) of Wage Order No. NCR-07 were invalid due to
lack of approval by the NWPC.
Hence, this appeal by petition for review on certiorari by the NWPC and RTWPB-NCR.
Issues
The NWPC and RTWPB-NCR submit for resolution that:
I
SECTION 3 OF REPUBLIC ACT NO. 6727 MAY BE CONSTRUED TO AUTHORIZE THE NWPC AND RTWPB TO PROVIDE
FOR ADDITIONAL EXEMPTIONS IN THE MINIMUM WAGE ADJUSTMENTS SUCH AS IN WAGE ORDER NO. NCR-07.
II
THE APPROVAL GIVEN BY THE NWPC WHICH WAS CONTAINED IN ITS DECISIONS DATED FEBRUARY 28, 2000 AND
JULY 17, 2000 COMPLIES WITH THE REQUIREMENT OF REVIEW/APPROVAL REQUIRED UNDER SECTION 2 OF THE
REVISED GUIDELINES ON EXEMPTIONS FROM WAGE ORDER.14
Restated, the issues are: (a) whether or not the RTWPB-NCR had the authority to provide additional exemptions from the
minimum wage adjustments embodied in Wage Order No. NCR-07; and (b) whether or not Wage Order No. NCR-07 complied
with the requirements set by NWPC Guidelines No. 01, Series of 1996.
Ruling
The petition for review on certiorari is meritorious.
Indisputably, the NWPC had the authority to prescribe the rules and guidelines for the determination of the minimum wage and
productivity measures, and the RTWPB-NCR had the power to issue wage orders.
Pursuant to its statutorily defined functions, the NWPC promulgated NWPC Guidelines No. 001-95 (Revised Rules of
Procedure on Minimum Wage Fixing) to govern the proceedings in the NWPC and the RTWPBs in the fixing of minimum wage
rates by region, province and industry. Section 1 of Rule VIII of NWPC Guidelines No. 001-95 recognized the power of the
RTWPBs to issue exemptions from the application of the wage orders subject to the guidelines issued by the NWPC, viz:
SECTION 1. APPLICATION FOR EXEMPTION.
Whenever a wage order provides for exemption, applications for exemption shall be filed with the appropriate Board which
shall process these applications, subject to the guidelines issued by the Commission.
The NWPC also issued NWPC Guidelines No. 01, Series of 1996, to fix the rules on the exemption from compliance with the
wage increases prescribed by the RTWPBs. Section 2 of the Guidelines No. 01 reads:
SECTION 2. CATEGORIES OF EXEMPTIBLE ESTABLISHMENTS
Exemption of establishments from compliance with the wage increases and cost of living allowances prescribed by the Boards
may be granted in order to (1) assist establishments experiencing temporary difficulties due to losses maintain the financial
624
viability of their businesses and continued employment of their workers; (2) encourage the establishment of new businesses
and the creation of more jobs, particularly in areas outside the National Capital Region and Export Processing Zones, in line
with the policy on industry dispersal; and (3) ease the burden of micro establishments, particularly in the retail and service
sector, that have a limited capacity to pay.
Pursuant to the above, the following categories of establishments may be exempted upon application with and as determined
by the Board, in accordance with applicable criteria on exemption as provided in this Guidelines; provided further that such
categories are expressly specified in the Order.
1.Distressed establishments
2.New business enterprises (NBEs)
3.Retail/Service establishments employing not more than ten (10) workers
4.Establishments adversely affected by natural calamities
Exemptible categories outside of the abovementioned list may be allowed only if they are in accord with the
rationale for exemption reflected in the first paragraph of this section. The concerned Regional Board shall
submit strong and justifiable reason/s for the inclusion of such categories which shall be subject to
review/approval by the Commission.
Under the guidelines, the RTWPBs could issue exemptions from the application of the wage orders as long as the exemptions
complied with the rules of the NWPC. In its rules, the NWPC enumerated four exemptible establishments, but the list was not
exclusive. The RTWPBs had the authority to include in the wage orders establishments that belonged to, or to exclude from
the four enumerated exemptible categories. If the exempted category was one of the listed ones, the RTWPB issuing the wage
order must see to it that the requisites stated in Section 3 and Section 4 of the NWPC Guidelines No. 01, Series of 1996 were
complied with before granting fully or partially the application of an establishment seeking to avail of the exemption, to wit:
SECTION 3. CRITERIA FOR EXEMPTION
The following criteria shall be used to determine whether the applicant-establishment is qualified for exemption:
A. Distressed Establishments
1. For Stock Corporations/Cooperatives
a. When deficit as of the last full accounting period or interim period, if any, immediately preceding the
effectivity of the Order amounts to 20% or more of the paid-up capital for the same period; or
b. When an establishment registers capital deficiency i.e., negative stockholders' equity as of the last full
accounting period or interim period, if any, immediately preceding the effectivity of the Order.
2. For Single Proprietorships/Partnerships
a. Single proprietorships/partnerships operating for at least two (2) years may be granted exemption:
a.1. When the net accumulated losses for the last two (2) full accounting periods and interim
period, if any, preceding the effectivity of the Order amounts to 20% or more of the total invested
capital at the beginning of the period under review; or
a.2. When an establishment registers capital deficiency i.e., negative net worth as of the last full
accounting period or interim period, if any, immediately preceding the effectivity of the Order.
b. Single proprietorships/partnerships operating for less than two (2) years may be granted exemption when
the net accumulated losses for the period immediately preceding the effectivity of the Order amounts to 20%
or more of the total invested capital at the beginning of the period under review.
3. For Non-stock Non-profit Organizations
a.Non-stock Non-profit organizations operating for at least two (2) years may be granted exemption:
a.1. When the net accumulated losses for the last two (2) full accounting periods and interim
period, if any, immediately preceding the effectivity of the Order amounts to 20% or more of the
fund balance/members' contribution at the beginning of the period under review; or
a.2. When an establishment registers capital deficiency i.e.,negative fund balance/members'
contribution as of the last full accounting period or interim period, if any, immediately preceding the
effectivity of the Order.
b.Non-stock non-profit organizations operating for less than two (2) years may be granted exemption when
the net accumulated losses for the period immediately preceding the effectivity of the Order amounts to 20%
or more of the fund balance/members' contribution at the beginning of the period under review.
4. For Banks and Quasi-banks
a. Under receivership/liquidation
Exemption may be granted to a bank or quasi-bank under receivership or liquidation when there is a
certification from the Bangko Sentral ng Pilipinas that it is under receivership or liquidation as provided in
Section 30 of RA 7653, otherwise known as the New Central Bank Act.
b. Under controllership/conservatorship
A bank or quasi-bank under controllership/conservatorship may apply for exemption as a distressed
establishment under Section 3 A of this Guideline.
625
 B. New Business Enterprises
Exemption may be granted to New Business Enterprises established outside the National Capital Region (NCR) and Export
Processing Zones within two (2) years from effectivity of the Order, classified under any of the following:
1.Agricultural establishments whether plantation or non- plantation.
2.Establishments with total assets after financing of five million pesos (P5, 000,000.00) and below.
C.Retail/Service Establishments Regularly Employing Not More Than Ten (10) Workers
Exemption may be granted to a retail/service establishment when:
1.It is engaged in the retail sale of goods and/or services to end users for personal or household use; and
2.It is regularly employing not more than ten (10) workers regardless of status, except the owner/s, for at least six (6)
months in any calendar year.
D.Establishments Adversely Affected by Natural Calamities
1.The establishment must be located in an area declared by a competent authority as under a state of calamity.
2.The natural calamities, such as earthquakes, lahar flow, typhoons, volcanic eruptions, fire, floods and similar
occurrences, must have occurred within 6 months prior to the effectivity of the Wage Order.
3.Losses suffered by the establishment as a result of the calamity that exceed the insurance coverage should amount
to 20% or more of the stockholders' equity as of the last full accounting period in the case of corporations and
cooperatives, total invested capital in the case of partnerships and single proprietorships and fund balance/members
contribution in the case of non-stock non-profit organizations.
Only losses or damage to properties directly resulting from the calamity and not incurred as a result of normal
business operations shall be considered.
4.Where necessary, the Board or its duly-authorized representative shall conduct an ocular inspection of the
establishment or engage the services of experts to validate the extent of damages suffered.
SECTION 4. DOCUMENTS REQUIRED
The following supporting documents shall be submitted together with the application:
For All Categories of Exemption
Proof of notice of filing of the application to the President of the union/contracting party if one is organized in the
establishment, or if there is no union, a copy of a circular giving general notice of the filing of the application to all the workers
in the establishment. The proof of notice, which may be translated in the vernacular, shall state that the workers'
representative was furnished a copy of the application with all the supporting documents. The notice shall be posted in a
conspicuous place in the establishment.
A. For Distressed Establishments
1.For corporations, cooperatives, single proprietorships, partnerships, non-stock non-profit organizations.
a.Audited financial statements (together with the Auditor's opinion and the notes thereto) for the last
two (2) full accounting periods preceding the effectivity of the Order filed with and stamped
"received" by the appropriate government agency.
b.Audited interim quarterly financial statements (together with the Auditor's opinion and the notes
thereto) for the period immediately preceding the effectivity of the Order.
2.For Banks and Quasi-banks
a.Certification from Bangko Sentral ng Pilipinas that it is under receivership/liquidation.
B. For New Business Enterprises
1.Affidavit from employer regarding the following:
a.Principal economic activity
b.Date of registration with appropriate government agency
c.Amount of total assets
2.Certificate of registration from the appropriate government agency.
C. For Retail/Service Establishments Employing not more than Ten (10) Workers:
1.Affidavit from employer stating the following:
a.It is a retail/service establishment.
b.It is regularly employing not more than ten (10) workers for at least six months in any calendar
year.
2.Business Permit for the current year from the appropriate government agency.
D. For Establishments Adversely Affected by Natural Calamities
1.Affidavit from the General Manager or Chief Executive Officer of the establishment regarding the following:
a. Date and type of calamity
b.Amount of losses/damages suffered as a direct result of the calamity
c.List of properties damaged/lost together with estimated valuation
d.For properties that are not insured, a statement that the same are not covered by insurance.
2.Copies of insurance policy contracts covering the properties damaged, if any.
626
 3.Adjuster's report for insured properties.
4.Audited financial statements for the last full accounting period preceding the effectivity of the Order
stamped received by the appropriate government agency.
The Board may require the submission of other pertinent documents to support the application for exemption.
On the other hand, if the exemption was outside of the four exemptible categories, like here, the exemptible category should
be: (1) in accord with the rationale for exemption; (2) reviewed/approved by the NWPC; and (3) upon review, the RTWPB
issuing the wage order must submit a strong and justifiable reason or reasons for the inclusion of such category. It is the
compliance with the second requisite that is at issue here.
The CA reversed the decisions of the NWPC dated February 28, 2000 and July 17, 2000 mainly on the ground that Wage
Order No. NCR-07, specifically its Section 2(A) and Section 9(2), had not been reviewed or approved by the NWPC. However,
the NWPC stated that it had reviewed and approved the challenged sections when it upheld the validity of Wage Order No.
NCR-07 in its decisions of February 28, 2000 and July 17, 2000.
We rule in favor of petitioners.
The wage orders issued by the RTWPBs could be reviewed by the NWPC motu proprio or upon appeal. 15 Any party aggrieved
by the wage order issued by the RTWPBs could appeal. Here, APL and TNMR appealed on October 26, 1999, submitting to
the NWPC precisely the issue of the validity of the Section 2(A) and Section 9(2) of Wage Order No. NCR-07. The NWPC, in
arriving at its decision, weighed the arguments of the parties and ruled that the RTWPB-NCR had substantial and justifiable
reasons in exempting the sectors and establishments enumerated in Section 2(A) and
Section 9(2) based on the public hearings and consultations, meetings, social-economic data and informations gathered prior
to the issuance of Wage Order No. NCR-07. The very fact that the validity of the assailed sections of Wage Order No. NCR-07
had been already passed upon and upheld by the NWPC meant that the NWPC had already given the wage order its
necessary legal imprimatur. Accordingly, the requisite approval or review was complied with.
In creating the RTWPBs, Congress intended to rationalize wages, firstly, by establishing full time boards to police wages
round-the-clock, and secondly, by giving the boards enough powers to achieve this objective. In Employers Confederation of
the Phils. v. National Wages and Productivity Commission,16 this Court all too clearly pronounced that Congress meant the
RTWPBs to be creative in resolving the annual question of wages without Labor and Management knocking on the doors of
Congress at every turn. The RTWPBs are the thinking group of men and women guided by statutory standards and bound by
the rules and guidelines prescribed by the NWPC. In the nature of their functions, the RTWPBs investigate and study all the
pertinent facts to ascertain the conditions in their respective regions. Hence, they are logically vested with the competence to
determine the applicable minimum wages to be imposed as well as the industries and sectors to exempt from the coverage of
their wage orders.
Lastly, Wage Order No. NCR-07 is presumed to be regularly issued in the absence of any strong showing of grave abuse of
discretion on the part of RTWPB-NCR. The presumption of validity is made stronger by the fact that its validity was upheld by
the NWPC upon review.
WHEREFORE, we GRANT the petition for review on certiorari; SET ASIDE the decision promulgated on June 15, 2001 and
resolution promulgated on September 11, 2001 by the Court of Appeals; REINSTATE the decisions rendered on February 28,
2000 and July 17, 2000 by the National Wages and Productivity Commission; and DIRECT the respondents to pay the costs of
suit.
SO ORDERED.

G.R. No. 179652 May 8, 2009

PEOPLE'S BROADCASTING (BOMBO RADYO PHILS., INC.), Petitioner,
vs.
THE SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT, THE REGIONAL DIRECTOR, DOLE
REGION VII, and JANDELEON JUEZAN, Respondents.
DECISION
TINGA, J.:
The present controversy concerns a matter of first impression, requiring as it does the determination of the demarcation line
between the prerogative of the Department of Labor and Employment (DOLE) Secretary and his duly authorized
representatives, on the one hand, and the jurisdiction of the National Labor Relations Commission, on the other, under Article
128 (b) of the Labor Code in an instance where the employer has challenged the jurisdiction of the DOLE at the very first level
on the ground that no employer-employee relationship ever existed between the parties.
I.
The instant petition for certiorari under Rule 65 assails the decision and the resolution of the Court of Appeals dated 26
October 2006 and 26 June 2007, respectively, in C.A. G.R. CEB-SP No. 00855.1
The petition traces its origins to a complaint filed by Jandeleon Juezan (respondent) against Peoples Broadcasting Service,
Inc. (Bombo Radyo Phils., Inc) (petitioner) for illegal deduction, non-payment of service incentive leave, 13th month pay,
premium pay for holiday and rest day and illegal diminution of benefits, delayed payment of wages and non-coverage of SSS,
627
PAG-IBIG and Philhealth before the Department of Labor and Employment (DOLE) Regional Office No. VII, Cebu City.2 On
the basis of the complaint, the DOLE conducted a plant level inspection on 23 September 2003. In the Inspection Report
Form,3 the Labor Inspector wrote under the heading "Findings/Recommendations" "non-diminution of benefits" and "Note:
Respondent deny employer-employee relationship with the complainant- see Notice of Inspection results." In the Notice of
Inspection Results4also bearing the date 23 September 2003, the Labor Inspector made the following notations:
Management representative informed that complainant is a drama talent hired on a per drama " participation basis" hence
no employer-employeeship [sic] existed between them. As proof of this, management presented photocopies of cash
vouchers, billing statement, employments of specific undertaking (a contract between the talent director & the complainant),
summary of billing of drama production etc. They (mgt.) has [sic] not control of the talent if he ventures into another contract w/
other broadcasting industries.
On the other hand, complainant Juezans alleged violation of non-diminution of benefits is computed as follows:
@ P 2,000/15 days + 1.5 mos = P 6,000
(August 1/03 to Sept 15/03)
Note: Recommend for summary investigation or whatever action deem proper.5
Petitioner was required to rectify/restitute the violations within five (5) days from receipt. No rectification was effected by
petitioner; thus, summary investigations were conducted, with the parties eventually ordered to submit their respective position
papers.6
In his Order dated 27 February 2004,7 DOLE Regional Director Atty. Rodolfo M. Sabulao (Regional Director) ruled that
respondent is an employee of petitioner, and that the former is entitled to his money claims amounting to P203,726.30.
Petitioner sought reconsideration of the Order, claiming that the Regional Director gave credence to the documents offered by
respondent without examining the originals, but at the same time he missed or failed to consider petitioners evidence.
Petitioners motion for reconsideration was denied.8 On appeal to the DOLE Secretary, petitioner denied once more the
existence of employer-employee relationship. In its Order dated 27 January 2005, the Acting DOLE Secretary dismissed the
appeal on the ground that petitioner did not post a cash or surety bond and instead submitted a Deed of Assignment of Bank
Deposit.9
Petitioner elevated the case to the Court of Appeals, claiming that it was denied due process when the DOLE Secretary
disregarded the evidence it presented and failed to give it the opportunity to refute the claims of respondent. Petitioner
maintained that there is no employer-employee relationship had ever existed between it and respondent because it was the
drama directors and producers who paid, supervised and disciplined respondent. It also added that the case was beyond the
jurisdiction of the DOLE and should have been considered by the labor arbiter because respondents claim
exceeded P5,000.00.
The Court of Appeals held that petitioner was not deprived of due process as the essence thereof is only an opportunity to be
heard, which petitioner had when it filed a motion for reconsideration with the DOLE Secretary. It further ruled that the latter
had the power to order and enforce compliance with labor standard laws irrespective of the amount of individual claims
because the limitation imposed by Article 29 of the Labor Code had been repealed by Republic Act No. 7730. 10 Petitioner
sought reconsideration of the decision but its motion was denied.11
Before this Court, petitioner argues that the National Labor Relations Commission (NLRC), and not the DOLE Secretary, has
jurisdiction over respondents claim, in view of Articles 217 and 128 of the Labor Code. 12 It adds that the Court of Appeals
committed grave abuse of discretion when it dismissed petitioners appeal without delving on the issues raised therein,
particularly the claim that no employer-employee relationship had ever existed between petitioner and respondent. Finally,
petitioner avers that there is no appeal, or any plain, speedy and adequate remedy in the ordinary course of law available to it.
On the other hand, respondent posits that the Court of Appeals did not abuse its discretion. He invokes Republic Act No. 7730,
which "removes the jurisdiction of the Secretary of Labor and Employment or his duly authorized representatives, from the
effects of the restrictive provisions of Article 129 and 217 of the Labor Code, regarding the confinement of jurisdiction based
on the amount of claims."13 Respondent also claims that petitioner was not denied due process since even when the case was
with the Regional Director, a hearing was conducted and pieces of evidence were presented. Respondent stands by the
propriety of the Court of Appeals ruling that there exists an employer-employee relationship between him and petitioner.
Finally, respondent argues that the instant petition for certiorari is a wrong mode of appeal considering that petitioner had
earlier filed a Petition for Certiorari, Mandamus and Prohibition with the Court of Appeals; petitioner, instead, should have filed
a Petition for Review.14
II.
The significance of this case may be reduced to one simple questiondoes the Secretary of Labor have the power to
determine the existence of an employer-employee relationship?
To resolve this pivotal issue, one must look into the extent of the visitorial and enforcement power of the DOLE found in Article
128 (b) of the Labor Code, as amended by Republic Act 7730. It reads:
Article 128 (b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the
relationship of employer-employee still exists, the Secretary of Labor and Employment or his duly authorized representatives
shall have the power to issue compliance orders to give effect to the labor standards provisions of this Code and other labor
628
legislation based on the findings of labor employment and enforcement officers or industrial safety engineers made in the
course of inspection. The Secretary or his duly authorized representative shall issue writs of execution to the appropriate
authority for the enforcement of their orders, except in cases where the employer contests the findings of the labor
employment and enforcement officer and raises issues supported by documentary proofs which were not considered in the
course of inspection. (emphasis supplied)
xxx
The provision is quite explicit that the visitorial and enforcement power of the DOLE comes into play only "in cases when the
relationship of employer-employee still exists." It also underscores the avowed objective underlying the grant of power to the
DOLE which is "to give effect to the labor standard provision of this Code and other labor legislation." Of course, a persons
entitlement to labor standard benefits under the labor laws presupposes the existence of employer-employee relationship in
the first place.
The clause "in cases where the relationship of employer-employee still exists" signifies that the employer-employee
relationship must have existed even before the emergence of the controversy. Necessarily, the DOLEs power does not apply
in two instances, namely: (a) where the employer-employee relationship has ceased; and (b) where no such relationship has
ever existed.
The first situation is categorically covered by Sec. 3, Rule 11 of the Rules on the Disposition of Labor Standards
Cases15 issued by the DOLE Secretary. It reads:
Rule II MONEY CLAIMS ARISING FROM COMPLAINT/ROUTINE INSPECTION
Sec. 3. Complaints where no employer-employee relationship actually exists. Where employer-employee relationship no
longer exists by reason of the fact that it has already been severed, claims for payment of monetary benefits fall within the
exclusive and original jurisdiction of the labor arbiters. Accordingly, if on the face of the complaint, it can be ascertained that
employer-employee relationship no longer exists, the case, whether accompanied by an allegation of illegal dismissal, shall
immediately be endorsed by the Regional Director to the appropriate branch of the National Labor Relations Commission
(NLRC).
In the recent case of Bay Haven, Inc. v. Abuan,16 this Court recognized the first situation and accordingly ruled that a
complainants allegation of his illegal dismissal had deprived the DOLE of jurisdiction as per Article 217 of the Labor Code. 17
In the first situation, the claim has to be referred to the NLRC because it is the NLRC which has jurisdiction in view of the
termination of the employer-employee relationship. The same procedure has to be followed in the second situation since it is
the NLRC that has jurisdiction in view of the absence of employer-employee relationship between the evidentiary parties from
the start.
Clearly the law accords a prerogative to the NLRC over the claim when the employer-employee relationship has terminated or
such relationship has not arisen at all. The reason is obvious. In the second situation especially, the existence of an employer-
employee relationship is a matter which is not easily determinable from an ordinary inspection, necessarily so, because the
elements of such a relationship are not verifiable from a mere ocular examination. The intricacies and implications of an
employer-employee relationship demand that the level of scrutiny should be far above the cursory and the mechanical. While
documents, particularly documents found in the employers
office are the primary source materials, what may prove decisive are factors related to the history of the employers business
operations, its current state as well as accepted contemporary practices in the industry. More often than not, the question of
employer-employee relationship becomes a battle of evidence, the determination of which should be comprehensive and
intensive and therefore best left to the specialized quasi-judicial body that is the NLRC.
It can be assumed that the DOLE in the exercise of its visitorial and enforcement power somehow has to make a
determination of the existence of an employer-employee relationship. Such prerogatival determination, however, cannot be
coextensive with the visitorial and enforcement power itself. Indeed, such determination is merely preliminary, incidental and
collateral to the DOLEs primary function of enforcing labor standards provisions. The determination of the existence of
employer-employee relationship is still primarily lodged with the NLRC. This is the meaning of the clause "in cases where the
relationship of employer-employee still exists" in Art. 128 (b).
Thus, before the DOLE may exercise its powers under Article 128, two important questions must be resolved: (1) Does the
employer-employee relationship still exist, or alternatively, was there ever an employer-employee relationship to speak of; and
(2) Are there violations of the Labor Code or of any labor law?
The existence of an employer-employee relationship is a statutory prerequisite to and a limitation on the power of the
Secretary of Labor, one which the legislative branch is entitled to impose. The rationale underlying this limitation is to eliminate
the prospect of competing conclusions of the Secretary of Labor and the NLRC, on a matter fraught with questions of fact and
law, which is best resolved by the quasi-judicial body, which is the NRLC, rather than an administrative official of the executive
branch of the government. If the Secretary of Labor proceeds to exercise his visitorial and enforcement powers absent the first
requisite, as the dissent proposes, his office confers jurisdiction on itself which it cannot otherwise acquire.
The approach suggested by the dissent is frowned upon by common law. To wit:
[I]t is a general rule, that no court of limited jurisdiction can give itself jurisdiction by a wrong decision on a point collateral to
the merits of the case upon which the limit to its jurisdiction depends; and however its decision may be final on all particulars,
629
making up together that subject matter which, if true, is within its jurisdiction, and however necessary in many cases it may be
for it to make a preliminary inquiry, whether some collateral matter be or be not within the limits, yet, upon this preliminary
question, its decision must always be open to inquiry in the superior court. 18
A more liberal interpretative mode, "pragmatic or functional analysis," has also emerged in ascertaining the jurisdictional
boundaries of administrative agencies whose jurisdiction is established by statute. Under this approach, the Court examines
the intended function of the tribunal and decides whether a particular provision falls within or outside that function, rather than
making the provision itself the determining centerpiece of the analysis. 19 Yet even under this more expansive approach, the
dissent fails.
A reading of Art. 128 of the Labor Code reveals that the Secretary of Labor or his authorized representatives was granted
visitorial and enforcement powers for the purpose of determining violations of, and enforcing, the Labor Code and any labor
law, wage order, or rules and regulations issued pursuant thereto. Necessarily, the actual existence of an employer-employee
relationship affects the complexion of the putative findings that the Secretary of Labor may determine, since employees are
entitled to a different set of rights under the Labor Code from the employer as opposed to non-employees. Among these
differentiated rights are those accorded by the "labor standards" provisions of the Labor Code, which the Secretary of Labor is
mandated to enforce. If there is no employer-employee relationship in the first place, the duty of the employer to adhere to
those labor standards with respect to the non-employees is questionable.
This decision should not be considered as placing an undue burden on the Secretary of Labor in the exercise of visitorial and
enforcement powers, nor seen as an unprecedented diminution of the same, but rather a recognition of the statutory limitations
thereon. A mere assertion of absence of employer-employee relationship does not deprive the DOLE of jurisdiction over the
claim under Article 128 of the Labor Code. At least a prima facie showing of such absence of relationship, as in this case, is
needed to preclude the DOLE from the exercise of its power. The Secretary of Labor would not have been precluded from
exercising the powers under Article 128 (b) over petitioner if another person with better-grounded claim of employment than
that which respondent had. Respondent, especially if he were an employee, could have very well enjoined other employees to
complain with the DOLE, and, at the same time, petitioner could ill-afford to disclaim an employment relationship with all of the
people under its aegis.
Without a doubt, petitioner, since the inception of this case had been consistent in maintaining that respondent is not its
employee. Certainly, a preliminary determination, based on the evidence offered, and noted by the Labor Inspector during the
inspection as well as submitted during the proceedings before the Regional Director puts in genuine doubt the existence of
employer-employee relationship. From that point on, the prudent recourse on the part of the DOLE should have been to refer
respondent to the NLRC for the proper dispensation of his claims. Furthermore, as discussed earlier, even the evidence relied
on by the Regional Director in his order are mere self-serving declarations of respondent, and hence cannot be relied upon as
proof of employer-employee relationship.
III.
Aside from lack of jurisdiction, there is another cogent reason to to set aside the Regional Directors 27 February 2004 Order.
A careful study of the case reveals that the said Order, which found respondent as an employee of petitioner and directed the
payment of respondents money claims, is not supported by substantial evidence, and was even made in disregard of the
evidence on record.
It is not enough that the evidence be simply considered. The standard is substantial evidence as in all other quasi-judicial
agencies. The standard employed in the last sentence of Article 128(b) of the Labor Code that the documentary proofs be
"considered in the course of inspection" does not apply. It applies only to issues other than the fundamental issue of existence
of employer-employee relationship. A contrary rule would lead to controversies on the part of labor officials in resolving the
issue of employer-employee relationship. The onset of arbitrariness is the advent of denial of substantive due process.
As a general rule, the Supreme Court is not a trier of facts. This applies with greater force in cases before quasi-judicial
agencies whose findings of fact are accorded great respect and even finality. To be sure, the same findings should be
supported by substantial evidence from which the said tribunals can make its own independent evaluation of the facts.
Likewise, it must not be rendered with grave abuse of discretion; otherwise, this Court will not uphold the tribunals
conclusion.20 In the same manner, this Court will not hesitate to set aside the labor tribunals findings of fact when it is clearly
shown that they were arrived at arbitrarily or in disregard of the evidence on record or when there is showing of fraud or error
of law.21
At the onset, it is the Courts considered view that the existence of employer- employee relationship could have been easily
resolved, or at least prima facie determined by the labor inspector, during the inspection by looking at the records of petitioner
which can be found in the work premises. Nevertheless, even if the labor inspector had noted petitioners manifestation and
documents in the Notice of Inspection Results, it is clear that he did not give much credence to said evidence, as he did not
find the need to investigate the matter further. Considering that the documents shown by petitioner, namely: cash vouchers,
checks and statements of account, summary billings evidencing payment to the alleged real employer of respondent, letter-
contracts denominated as "Employment for a Specific Undertaking," prima facie negate the existence of employer-employee
relationship, the labor inspector could have exerted a bit more effort and looked into petitioners payroll, for example, or its roll
of employees, or interviewed other employees in the premises. After all, the labor inspector, as a labor regulation officer is
630
given "access to employers records and premises at any time of day or night whenever work is being undertaken therein, and
the right to copy therefrom, to question any employee and investigate any fact, condition or matter which may be necessary to
determine violations or which may aid in the enforcement of this Code and of any labor law, wage order or rules and
regulations pursuant thereto."22 Despite these far-reaching powers of labor regulation officers, records reveal that no additional
efforts were exerted in the course of the inspection.
The Court further examined the records and discovered to its dismay that even the Regional Director turned a blind eye to the
evidence presented by petitioner and relied instead on the self-serving claims of respondent.
In his position paper, respondent claimed that he was hired by petitioner in September 1996 as a radio talent/spinner, working
from 8:00 am until 5 p.m., six days a week, on a gross rate of P60.00 per script, earning an average of P15,0000.00 per
month, payable on a semi-monthly basis. He added that the payment of wages was delayed; that he was not given any service
incentive leave or its monetary commutation, or his 13th month pay; and that he was not made a member of the Social
Security System (SSS), Pag-Ibig and PhilHealth. By January 2001, the number of radio programs of which respondent was a
talent/spinner was reduced, resulting in the reduction of his monthly income from P15,000.00 to only P4,000.00, an amount he
could barely live on. Anent the claim of petitioner that no employer-employee relationship ever existed, respondent argued that
that he was hired by petitioner, his wages were paid under the payroll of the latter, he was under the control of petitioner and
its agents, and it was petitioner who had the power to dismiss him from his employment. 23 In support of his position paper,
respondent attached a photocopy of an identification card purportedly issued by petitioner, bearing respondents picture and
name with the designation "Spinner"; at the back of the I.D., the following is written: " This certifies that the card holder is a
duly Authorized MEDIA Representative of BOMBO RADYO PHILIPPINES THE NO.1 Radio Network in the Country
***BASTA RADYO BOMBO***"24 Respondent likewise included a Certification which reads:
This is to certify that MR. JANDELEON JUEZAN is a program employee of PEOPLES BROADCASTING SERVICES, INC.
(DYMF- Bombo Radyo Cebu) since 1990 up to the present.
Furtherly certifies that Mr. Juezan is receiving a monthly salary of FIFTEEN THOUSAND (P15,000.00) PESOS.
This certification is issued upon the request of the above stated name to substantiate loan requirement.
Given this 18th day of April 2000, Cebu City , Philippines.
(signed)
GREMAN B. SOLANTE
Station Manager
On the other hand, petitioner maintained in its position paper that respondent had never been its employee. Attached as
annexes to its position paper are photocopies of cash vouchers it issued to drama producers, as well as letters of employment
captioned "Employment for a Specific Undertaking", wherein respondent was appointed by different drama directors as
spinner/narrator for specific radio programs.25
In his Order, the Regional Director merely made a passing remark on petitioners claim of lack of employer-employee
relationshipa token paragraphand proceeded to a detailed recitation of respondents allegations. The documents
introduced by petitioner in its position paper and even those presented during the inspection were not given an iota of
credibility. Instead, full recognition and acceptance was accorded to the claims of respondentfrom the hours of work to his
monthly salary, to his alleged actual duties, as well as to his alleged "evidence." In fact, the findings are anchored almost
verbatim on the self-serving allegations of respondent.
Furthermore, respondents pieces of evidencethe identification card and the certification issued by petitioners Greman
Solante are not even determinative of an employer-employee relationship. The certification, issued upon the request of
respondent, specifically stated that "MR. JANDELEON JUEZAN is a program employee of PEOPLES BROADCASTING
SERVICES, INC. (DYMF- Bombo Radyo Cebu)," it is not therefore "crystal clear that complainant is a station employee rather
than a program employee hence entitled to all the benefits appurtenant thereto," 26 as found by the DOLE Regional Director.
Respondent should be bound by his own evidence. Moreover, the classification as to whether one is a "station employee" and
"program employee," as lifted from Policy Instruction No. 40,27 dividing the workers in the broadcast industry into only two
groups is not binding on this Court, especially when the classification has no basis either in law or in fact.28
Even the identification card purportedly issued by petitioner is not proof of employer-employee relationship since it only
identified respondent as an "Authorized Representative of Bombo Radyo," and not as an employee. The phrase gains
significance when compared vis a vis the following notation in the sample identification cards presented by petitioner in its
motion for reconsideration:
1. This is to certify that the person whose picture and signature appear hereon is an employee of Bombo Radio
Philippines.
2. This ID must be worn at all times within Bombo Radyo Philippines premises for proper identification and security.
Furthermore, this is the property of Bombo Radyo Philippines and must be surrendered upon separation from the
company.
HUMAN RESOURCE DEPARMENT

631
 (Signed)
JENALIN D. PALER
HRD HEAD
Respondent tried to address the discrepancy between his identification card and the standard identification cards issued by
petitioner to its employees by arguing that what he annexed to his position paper was the old identification card issued to him
by petitioner. He then presented a photocopy of another "old" identification card, this time purportedly issued to one of the
employees who was issued the new identification card presented by petitioner. 29 Respondents argument does not convince. If
it were true that he is an employee of petitioner, he would have been issued a new identification card similar to the ones
presented by petitioner, and he should have presented a copy of such new identification card. His failure to show a new
identification card merely demonstrates that what he has is only his "Media" ID, which does not constitute proof of his
employment with petitioner.
It has long been established that in administrative and quasi-judicial proceedings, substantial evidence is sufficient as a basis
for judgment on the existence of employer-employee relationship. Substantial evidence, which is the quantum of proof
required in labor cases, is "that amount of relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion."30 No particular form of evidence is required to prove the existence of such employer-employee relationship. Any
competent and relevant evidence to prove the relationship may be admitted. 31 Hence, while no particular form of evidence is
required, a finding that such relationship exists must still rest on some substantial evidence. Moreover, the substantiality of the
evidence depends on its quantitative as well as its qualitative aspects.32
In the instant case, save for respondents self-serving allegations and self-defeating evidence, there is no substantial basis to
warrant the Regional Directors finding that respondent is an employee of petitioner. Interestingly, the Order of the Secretary of
Labor denying petitioners appeal dated 27 January 2005, as well as the decision of the Court of Appeals dismissing the
petition for certiorari, are silent on the issue of the existence of an employer-employee relationship, which further suggests that
no real and proper determination the existence of such relationship was ever made by these tribunals. Even the dissent skirted
away from the issue of the existence of employer-employee relationship and conveniently ignored the dearth of evidence
presented by respondent.
Although substantial evidence is not a function of quantity but rather of quality, the peculiar environmental circumstances of
the instant case demand that something more should have been proffered. 33 Had there been other proofs of employment,
such as respondents inclusion in petitioners payroll, or a clear exercise of control, the Court would have affirmed the finding
of employer-employee relationship. The Regional Director, therefore, committed grievous error in ordering petitioner to answer
for respondents claims. Moreover, with the conclusion that no employer-employee relationship has ever existed between
petitioner and respondent, it is crystal-clear that the DOLE Regional Director had no jurisdiction over respondents complaint.
Thus, the improvident exercise of power by the Secretary of Labor and the Regional Director behooves the court to subject
their actions for review and to invalidate all the subsequent orders they issued.
IV.
The records show that petitioners appeal was denied because it had allegedly failed to post a cash or surety bond. What it
attached instead to its appeal was the Letter Agreement 34 executed by petitioner and its bank, the cash voucher, 35 and the
Deed of Assignment of Bank Deposits.36 According to the DOLE, these documents do not constitute the cash or surety bond
contemplated by law; thus, it is as if no cash or surety bond was posted when it filed its appeal.
The Court does not agree.
The provision on appeals from the DOLE Regional Offices to the DOLE Secretary is in the last paragraph of Art. 128 (b) of the
Labor Code, which reads:
An order issued by the duly authorized representative of the Secretary of Labor and Employment under this article may be
appealed to the latter. In case said order involves a monetary award, an appeal by the employer may be perfected only upon
the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Secretary of Labor and
Employment in the amount equivalent to the monetary award in the order appealed from. (emphasis supplied)
While the requirements for perfecting an appeal must be strictly followed as they are considered indispensable interdictions
against needless delays and for orderly discharge of judicial business, the law does admit exceptions when warranted by the
circumstances. Technicality should not be allowed to stand in the way of equitably and completely resolving the rights and
obligations of the parties.37 Thus, in some cases, the bond requirement on appeals involving monetary awards had been
relaxed, such as when (i) there was substantial compliance with the Rules; (ii) the surrounding facts and circumstances
constitute meritorious ground to reduce the bond; (iii) a liberal interpretation of the requirement of an appeal bond would serve
the desired objective of resolving controversies on the merits; or (iv) the appellants, at the very least exhibited their willingness
and/or good faith by posting a partial bond during the reglementary period.38
A review of the documents submitted by petitioner is called for to determine whether they should have been admitted as or in
lieu of the surety or cash bond to sustain the appeal and serve the ends of substantial justice.
The Deed of Assignment reads:
DEED OF ASSIGNMENT OF BANK DEPOSIT
WITH SPECIAL POWER OF ATTORNEY
632
KNOW ALL MEN BY THESE PRESENTS:
That I, GREMAN B. SOLANTE in my capacity as Station Manager of DYMF Cebu City, PEOPLES BROADCASTING
SERVICES, INC., a corporation duly authorized and existing under and by virtue of the laws of the Philippines, for and in
consideration of the sum of PESOS: TWO HUNDRED THREE THOUSAND SEVEN HUNDRED TWENTY SIX PESOS &
30/100 ONLY (P203,726.30) Phil. Currency, as CASH BOND GUARANTEE for the monetary award in favor to the Plaintiff in
the Labor Case docketed as LSED Case No. R0700-2003-09-CI-09, now pending appeal.
That Respondent-Appellant do hereby undertake to guarantee available and sufficient funds covered by Platinum Savings
Deposit (PSD) No. 010-8-00038-4 of PEOPLES BROADCASTING SERVICES, INC. in the amount of PESOS: TWO
HUNDRED THREE THOUSAND SEVEN HUNDRED TWENTY SIX PESOS & 30/100 ONLY (P203,726.30) payable to
Plaintiff-Appellee/Department of Labor and Employment Regional Office VII at Queen City Development Bank, Cebu Branch,
Sanciangko St. Cebu City.
It is understood that the said bank has the full control of Platinum Savings Deposit (PSD) No. 010-8-00038-4 from and after
this date and that said sum cannot be withdrawn by the Plaintiff-Appellee/ Department of Labor and Employment Regional
Office VII until such time that a Writ of Execution shall be ordered by the Appellate Office.
FURTHER, this Deed of Assignment is limited to the principal amount of PESOS: TWO HUNDRED THREE THOUSAND
SEVEN HUNDRED TWENTY SIX PESOS & 30/100 ONLY (P203,726.30) Phil. Currency, therefore, any interest to be earned
from the said Deposit will be for the account holder.
IN WITNESS WHEREOF, I have hereunto affixed my signature this 18th day if June, 2004, in the City of Cebu, Philippines.
PEOPLES BROADCASTING SERVICES, INC.
By:
(Signed)
GREMAN B. SOLANTE
Station Manager
As priorly mentioned, the Deed of Assignment was accompanied by a Letter Agreement between Queen City Development
Bank and petitioner concerning Platinum Savings Deposit (PSD) No. 010-8-00038-4,39 and a Cash Voucher issued by
petitioner showing the amount of P203,726.30 deposited at the said bank.
Casting aside the technical imprecision and inaptness of words that mark the three documents, a liberal reading reveals the
documents petitioner did assign, as cash bond for the monetary award in favor of respondent in LSED Case NO. RO700-
2003-CI-09, the amount of P203,726.30 covered by petitioners PSD Account No. 010-8-00038-4 with the Queen City
Development Bank at Sanciangko St. Cebu City, with the depositary bank authorized to remit the amount to, and upon
withdrawal by respondent and or the Department of Labor and Employment Regional Office VII, on the basis of the proper writ
of execution. The Court finds that the Deed of Assignment constitutes substantial compliance with the bond requirement.
The purpose of an appeal bond is to ensure, during the period of appeal, against any occurrence that would defeat or diminish
recovery by the aggrieved employees under the judgment if subsequently affirmed. 40 The Deed of Assignment in the instant
case, like a cash or surety bond, serves the same purpose. First, the Deed of Assignment constitutes not just a partial amount,
but rather the entire award in the appealed Order. Second, it is clear from the Deed of Assignment that the entire amount is
under the full control of the bank, and not of petitioner, and is in fact payable to the DOLE Regional Office, to be withdrawn by
the same office after it had issued a writ of execution. For all intents and purposes, the Deed of Assignment in tandem with the
Letter Agreement and Cash Voucher is as good as cash. Third, the Court finds that the execution of the Deed of Assignment,
the Letter Agreement and the Cash Voucher were made in good faith, and constituted clear manifestation of petitioners
willingness to pay the judgment amount.
The Deed of Assignment must be distinguished from the type of bank certification submitted by appellants in Cordova v.
Keysas Boutique,41 wherein this Court found that such bank certification did not come close to the cash or surety bond
required by law. The bank certification in Cordova merely stated that the employer maintains a depository account with a
balance of P23,008.19, and that the certification was issued upon the depositors request for whatever legal purposes it may
serve. There was no indication that the said deposit was made specifically for the pending appeal, as in the instant case. Thus,
the Court ruled that the bank certification had not in any way ensured that the award would be paid should the appeal fail.
Neither was the appellee in the case prevented from making withdrawals from the savings account. Finally, the amount
deposited was measly compared to the total monetary award in the judgment.42
V.
Another question of technicality was posed against the instant petition in the hope that it would not be given due course.
Respondent asserts that petitioner pursued the wrong mode of appeal and thus the instant petition must be
dismissed.1avvphi1.zw+ Once more, the Court is not convinced.
A petition for certiorari is the proper remedy when any tribunal, board or officer exercising judicial or quasi-judicial functions
has acted without or in excess of its jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction
and there is no appeal, nor any plain speedy, and adequate remedy at law. There is "grave abuse of discretion" when
respondent acts in a capricious or whimsical manner in the exercise of its judgment as to be equivalent to lack of jurisdiction.43

633
Respondent may have a point in asserting that in this case a Rule 65 petition is a wrong mode of appeal, as indeed the writ of
certiorari is an extraordinary remedy, and certiorari jurisdiction is not to be equated with appellate jurisdiction. Nevertheless, it
is settled, as a general proposition, that the availability of an appeal does not foreclose recourse to the extraordinary remedies,
such as certiorari and prohibition, where appeal is not adequate or equally beneficial, speedy and sufficient, as where the
orders of the trial court were issued in excess of or without jurisdiction, or there is need to promptly relieve the aggrieved party
from the injurious effects of the acts of an inferior court or tribunal, e.g., the court has authorized execution of the
judgment.44 This Court has even recognized that a recourse to certiorari is proper not only where there is a clear deprivation of
petitioners fundamental right to due process, but so also where other special circumstances warrant immediate and more
direct action.45
In one case, it was held that the extraordinary writ of certiorari will lie if it is satisfactorily established that the tribunal acted
capriciously and whimsically in total disregard of evidence material to or even decisive of the controversy,46 and if it is shown
that the refusal to allow a Rule 65 petition would result in the infliction of an injustice on a party by a judgment that evidently
was rendered whimsically and capriciously, ignoring and disregarding uncontroverted facts and familiar legal principles without
any valid cause whatsoever.47
It must be remembered that a wide breadth of discretion is granted a court of justice in certiorari proceedings. 48The Court has
not too infrequently given due course to a petition for certiorari, even when the proper remedy would have been an appeal,
where valid and compelling considerations would warrant such a recourse. 49Moreover, the Court allowed a Rule 65 petition,
despite the availability of plain, speedy or adequate remedy, in view of the importance of the issues raised
therein.50 The rules were also relaxed by the Court after considering the public interest involved in the case; 51when public
welfare and the advancement of public policy dictates; when the broader interest of justice so requires; when the writs issued
are null and void; or when the questioned order amounts to an oppressive exercise of judicial authority. 52
"The peculiar circumstances of this case warrant, as we held in Republic v. Court of Appeals, 107 SCRA 504, 524, the
exercise once more of our exclusive prerogative to suspend our own rules or to exempt a particular case from its operation as
in x x Republic of the Philippines v. Court of Appeals, et al., (83 SCRA 453, 478-480 [1978]), thus: x x The Rules have been
drafted with the primary objective of enhancing fair trials and expediting justice. As a corollary, if their applications and
operation tend to subvert and defeat instead of promote and enhance it, their suspension is justified." 53
The Regional Director fully relied on the self-serving allegations of respondent and misinterpreted the documents presented as
evidence by respondent. To make matters worse, DOLE denied petitioners appeal based solely on petitioners alleged failure
to file a cash or surety bond, without any discussion on the merits of the case. Since the petition for certiorari before the Court
of Appeals sought the reversal of the two aforesaid orders, the appellate court necessarily had to examine the evidence anew
to determine whether the conclusions of the DOLE were supported by the evidence presented. It appears, however, that the
Court of Appeals did not even review the assailed orders and focused instead on a general discussion of due process and the
jurisdiction of the Regional Director. Had the appellate court truly reviewed the records of the case, it would have seen that
there existed valid and sufficient grounds for finding grave abuse of discretion on the part of the DOLE Secretary as well the
Regional Director. In ruling and acting as it did, the Court finds that the Court of Appeals may be properly subjected to its
certiorari jurisdiction. After all, this Court has previously ruled that the extraordinary writ of certiorari will lie if it is
satisfactorily1avvphi1
established that the tribunal had acted capriciously and whimsically in total disregard of evidence material to or even decisive
of the controversy.54
The most important consideration for the allowance of the instant petition is the opportunity for the Court not only to set the
demarcation between the NLRCs jurisdiction and the DOLEs prerogative but also the procedure when the case involves the
fundamental challenge on the DOLEs prerogative based on lack of employer-employee relationship. As exhaustively
discussed here, the DOLEs prerogative hinges on the existence of employer-employee relationship, the issue is which is at
the very heart of this case. And the evidence clearly indicates private respondent has never been petitioners employee. But
the DOLE did not address, while the Court of Appeals glossed over, the issue. The peremptory dismissal of the instant petition
on a technicality would deprive the Court of the opportunity to resolve the novel controversy.1avvphi1
WHEREFORE, the petition is GRANTED. The Decision dated 26 October 2006 and the Resolution dated 26 June 2007 of the
Court of Appeals in C.A. G.R. CEB-SP No. 00855 are REVERSED and SET ASIDE. The Order of the then Acting Secretary of
the Department of Labor and Employment dated 27 January 2005 denying petitioners appeal, and the Orders of the Director,
DOLE Regional Office No. VII, dated 24 May 2004 and 27 February 2004, respectively, are ANNULLED. The complaint
against petitioner is DISMISSED.
SO ORDERED.

G.R. No. 161794 June 16, 2009

NESTOR J. BALLADARES, ROLDAN L. GUANIZO, ARNULFO E. MERTO, GERONIMO G. GOBUYAN, EDGARDO O.
AVILA, and EDUARD F. RAMOS, JR., Petitioners,
vs.

634
PEAK VENTURES CORPORATION/EL TIGRE SECURITY AND INVESTIGATION AGENCY and YANGCO MARKET
OWNERS ASSOCIATION/LAO TI SIOK BEE, Respondents.
DECISION
NACHURA, J.:
This is a petition for review on certiorari of the decision1 of the Court of Appeals (CA) dated September 16, 2003 and the
resolution2 denying the motion for reconsideration thereof in CA-G.R. SP No. 67587.
Petitioners Nestor J. Balladares, Roldan L. Guanizo, Arnulfo E. Merto, Geronimo G. Gobuyan, Edgardo O. Avila, and Eduard
F. Ramos, Jr.
were employed by respondent Peak Ventures Corporation/El Tigre Security and Investigation Agency (Peak Ventures) as
security guards and were assigned at the premises of respondent Yangco Market Owners and Administrators Association
(YMOAA). They filed a complaint for underpayment of wages against their employer, Peak Ventures, with the Department of
Labor and Employment (DOLE).
Acting on the complaint, DOLE conducted an inspection of Peak Ventures on March 4, 1999, and the following violations were
noted:
- underpayment of the minimum wage and other auxiliary benefits;
- pertinent employment records (payrolls, daily time records, contract of employment) were not available at the time of
inspection.3
A Notice of Inspection Result was issued to and received by the Human Resource Department Manager, Ms. Cristina Q.
Villacrusis. Peak Ventures was instructed to effect restitution and/or to file its objections within five (5) working days from
receipt thereof.
Respondent failed to correct the violations or contest the findings as required; hence, the parties were summoned for hearing.
During the scheduled hearing on March 26, 1999, both complainants and Peak Ventures moved to implead its client, YMOAA,
represented by its President, Ms. Lao Ti Siok Bee, as party respondent. YMOAA opposed on the ground that it was not the
employer of petitioners. On May 25, 1999, Peak Ventures filed a Third-Party Complaint and/or Position Paper with leave of
court, alleging that Peak Ventures was entitled to indemnity or subrogation from YMOAA in respect to the monetary claims of
petitioners, because the cause of the underpayment of wages, if any, arose from the failure of the YMOAA to pay the security
agency the correct amount due petitioners as prescribed by various Wage Orders.4
In the Order dated July 21, 1999, Regional Director Maximo Baguyot Lim rendered judgment in favor of petitioners and ruled
that the contractor was jointly and severally liable with the principal, pursuant to the law and jurisprudence on the matter. 5 He
further stated that:
In view of the respondents failure to controvert the complainants contentions and repeated denial to give access to its
employment records despite demands by the labor inspector and hearing officer, it is deemed to have waived its constitutional
right to due process, therefore, this is an implied admission of the violations discovered, hence, we have no other recourse but
to rule in favor of the complainants and compute the salary differentials due them based on their affidavits x x x.
xxxx
WHEREFORE, premises considered, respondents PEAK VENTURES CORP./EL TIGRE SECURITY AND INVESTIGATION
AGENCY AND/OR YANGCO MARKET OWNERS AND ADMINISTRATORS ASSOCIATION/MS. LAO TI SIOK BEE are
hereby jointly and severally ordered to pay complainants NESTOR BALLADARES AND TEN (10) OTHER SIMILARLY
SITUATED EMPLOYEES the sum opposite their names or a total amount of ONE MILLION ONE HUNDRED SIX THOUSAND
TWO HUNDRED NINETY EIGHT PESOS AND 07/100 (P1,106,298.07) corresponding to their claims within ten (10) calendar
days from receipt hereof, otherwise, WRIT OF EXECUTION shall be issued unless an Appeal shall have been filed within the
reglementary period together with a Cash or Surety Bond equivalent to the monetary award. 6
Respondent Peak Ventures filed a Motion for Reconsideration which was denied for lack of merit.
Respondent appealed the Order to the Office of the Secretary of Labor positing that the Regional Director committed serious
errors in awarding the amount of P1,106,298.00 to petitioners, which it alleged to be quite excessive.
On December 7, 2000, respondents appeal was dismissed.7 A subsequent motion for reconsideration was, likewise, denied
by the Secretary of Labor in a Resolution dated September 11, 2001. 8
Undaunted, respondent Peak Ventures elevated the case to the CA, alleging that public respondent Secretary of DOLE acted
without, or in excess of, jurisdiction or with grave abuse of discretion. 9
The CA granted the petition, ruling that the Regional Director had no jurisdiction to hear and decide the case, because the
claims of each of the petitioners exceeded P5,000.00, and the power to adjudicate such claims belonged to the Labor Arbiter,
pursuant to Servandos, Inc. v. Secretary of Labor.10 The appellate court ratiocinated that this exclusive jurisdiction of the
Labor Arbiters was confirmed by Article 129 of the Labor Code, which excludes from the jurisdiction of the Regional Directors
or any hearing officer of the DOLE the power to hear and decide claims of employees arising from employer-employee
relations exceeding the amount of P5,000.00 for each employee. The dispositive portion of the decision, thus, reads as
follows:

635
WHEREFORE, petition is GRANTED. The Order of public respondent Secretary of Labor and Employment dated December 7,
2000 and the Resolution dated September 11, 2001 are SET ASIDE and declared null and void. The case is REFERRED to
the appropriate Labor Arbiter for proper determination.11
Petitioners now come to this Court assigning the following errors:
The Court of Appeals, Third Division erred in applying Article 129 of the Labor Code instead of Article 128.
The Court of Appeals, Third Division erred in applying the Servandos, Inc. versus Secretary of Labor, which had long been
abandoned.12
Only Peak Ventures filed its comment. Several resolutions of the Court sent to respondent YMOAA were returned unserved,
despite earnest efforts to obtain its current address. Meanwhile, the Court received a letter in the vernacular, dated May 16,
2006, from petitioner Nestor Balladares, for and on behalf of petitioners. Therein, petitioners expressed their apprehension
over the sale by Lao Siok Bee of Section 9 of Yangco Market to her nephew, Kay Ken Wah, which may be detrimental to their
cause, with a request for justice in this case. The letter was noted by the Court in the Resolution dated June 28, 2006. 13
In its comment, Peak Ventures averred that the CA did not err in applying Article 129 and Article 217 of the Labor Code,
because the instant case arose from a complaint for recovery of wages, simple money claims and other benefits, and the
claims exceeded P5,000.00. It argued that the inspection conducted by the DOLE using the "visitorial and enforcement
powers" of the Secretary of Labor and Employment did not, in any way, convert the case to one falling under Article 128,
otherwise, there would be no need for Article 129.14 It reiterated that Article 12915 and Article 21716 provide that it is the Labor
Arbiter which has jurisdiction over claims arising from employer-employee relations, including those of persons in domestic or
household service involving an amount exceeding P5,000.00.
We uphold the jurisdiction of the DOLE Regional Director.
It should be noted that petitioners complaint involved underpayment of wages and other benefits. In order to verify the
allegations in the complaint, DOLE conducted an inspection, which yielded proof of violations of labor standards. By the nature
of the complaint and from the result of the inspection, the authority of the DOLE, under Article 128, came into play regardless
of the monetary value of the claims involved.17 The extent of this authority and the powers flowing therefrom are defined and
set forth in Article 128 of the Labor Code, as amended by R.A. No. 7730, 18 the pertinent portions of which read as follows:
ART. 128. Visitorial and enforcement power. (a) The Secretary of Labor or his duly authorized representatives, including
labor regulation officers, shall have access to employers records and premises at any time of the day or night whenever work
is being undertaken therein, and the right to copy therefrom, to question any employee and investigate any fact, condition or
matter which may be necessary to determine violations or which may aid in the enforcement of this Code and of any labor law,
wage order or rules and regulations issued pursuant thereto.
(b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the relationship of
employer-employee still exists, the Secretary of Labor and Employment or his duly authorized representatives shall have the
power to issue compliance orders to give effect to the labor standards provisions of this Code and other labor legislation based
on the findings of labor employment and enforcement officers or industrial safety engineers made in the course of inspection.
The Secretary or his duly authorized representatives shall issue writs of execution to the appropriate authority for the
enforcement of their orders, except in cases where the employer contests the finding of the labor employment and
enforcement officer and raises issues supported by documentary proofs which were not considered in the course of
inspection.
An order issued by the duly authorized representative of the Secretary of Labor and Employment under this article may be
appealed to the latter. In case said order involves a monetary award, an appeal by the employer may be perfected only upon
the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Secretary of Labor and
Employment in the amount equivalent to the monetary award in the order appealed from.
xxxx
This Court has held in a plethora of cases19 that reliance on the Servando ruling is no longer tenable in view of the enactment
of R.A. No. 7730, amending Article 128 (b) of the Labor Code. The Secretary of Labor or his duly authorized representatives is
now empowered to hear and decide, in a summary proceeding, any matter involving the recovery of any amount of wages and
other monetary claims arising out of employer-employee relations at the time of the inspection, even if the amount of the
money claim exceeds P5,000.00. In Ex-Bataan Veterans Security Agency, Inc. v. Laguesma,20 the Court elucidated:
In Allied Investigation Bureau, Inc. v. Sec. of Labor, we ruled that:
While it is true that under Articles 129 and 217 of the Labor Code, the Labor Arbiter has jurisdiction to hear and decide cases
where the aggregate money claims of each employee exceeds P5,000.00, said provisions of law do not contemplate nor cover
the visitorial and enforcement powers of the Secretary of Labor or his duly authorized representatives. Rather, said powers are
defined and set forth in Article 128 of the Labor Code (as amended by R.A. No. 7730) x x x
The aforequoted provision explicitly excludes from its coverage Articles 129 and 217 of the Labor Code by the phrase
"(N)otwithstanding the provisions of Articles 129 and 217 of this Code to the contrary x x x" thereby retaining and further
strengthening the power of the Secretary of Labor or his duly authorized representatives to issue compliance orders to give
effect to the labor standards provisions of said Code and other labor legislation based on the findings of labor employment and
enforcement officer or industrial safety engineer made in the course of inspection.1avvphi1

636
This was further affirmed in our ruling in Cirineo Bowling Plaza, Inc. v. Sensing, where we sustained the jurisdiction of the
DOLE Regional Director and held that :"the visitorial and enforcement powers of the DOLE Regional director to order and
enforce compliance with labor standard laws can be exercised even where the individual claim exceeds P5,000."
However, if the labor standards case is covered by the exception clause in Article 128 (b) of the Labor Code, then the
Regional Director will have to endorse the case to the appropriate Arbitration Branch of the NLRC. In order to divest the
Regional Director or his representatives of jurisdiction, the following elements must be present: (a) that the employer contests
the findings of the labor regulations officer and raises issues thereon; (b) that in order to resolve such issues, there is a need
to examine evidentiary matters; and (c) that such matters are not verifiable in the normal course of inspection. The rules also
provide that the employer shall raise such objections during the hearing of the case or at any time after receipt of the notice of
inspection results.
In this case, the Regional Director validly assumed jurisdiction over the money claims of private respondents even if the claims
exceeded P5,000 because such jurisdiction was exercised in accordance with Article 128(b) of the Labor Code and the case
does not fall under the exception clause.1avvphi1
The Court notes that EBVSAI did not contest the findings of the labor regulations officer during the hearing or after receipt of
the notice of inspection results. It was only in its supplemental motion for reconsideration before the Regional Director that
EBVSAI questioned the findings of the labor regulations officer and presented documentary evidence to controvert the claims
of private respondent. But even if this was the case, the Regional Director and the Secretary of Labor still looked into and
considered EBVSAIs documentary evidence and found that such did not warrant the reversal of the Regional Directors order.
The Secretary of Labor also doubted the veracity and authenticity of EBVSAIs documentary evidence. Moreover, the pieces of
evidence presented by EBVSAI were verifiable in the normal course of inspection because all the employment records of the
employees should be kept and maintained in or about the premises of the workplace, which in this case is in Ambuklao Plant,
the establishment where the private respondents were regularly assigned. 21
Accordingly, we find no sufficient reason to warrant the certification of the instant case to the Labor Arbiter and divest the
Regional Director of jurisdiction. Respondent did not contest the findings of the labor regulations officer. Even during the
hearing, respondent never denied that petitioners were not paid correct wages and benefits. This was, in fact, even admitted
by respondent in its petition filed before the CA.22 In its defense, respondent tried to pass the buck to YMOAA, which failed to
pay the correct wages pursuant to the wage orders. Considering that the liability of the principal and the contractor is joint and
solidary, respondent thereby prayed for a re-computation of the awards it claimed to be quite excessive. In the motion for
reconsideration filed before the Regional Director, respondent submitted its own computation of the salary adjustment due
petitioners in the amount of P533,220.33 as wage differentials, deducting further the amount of P39,371.52, which was already
allegedly received by petitioners, as shown in petitioners sample pay slips and earning cards. 23 This contention, however, was
unacceptable, as the Secretary of Labor ruled:
The arguments of the respondents that the award of the Regional Director is excessive considering that it has only a total
amount of P533,220.00 as they have computed, does not warrant consideration.
As correctly pointed out by the Regional Director, "the alleged salary adjustment of the complainants for the years 1996, 1997,
1998 and 1999 failed to show from what source and on what basis have respondent arrived at the said computations.
Likewise, the documents presented is not sufficient to re-compute the award."
"With regard to the salary differentials paid to eight guards for the period covering June 30, 1997 as evidenced by the
payment, but unfortunately nowhere in their annexes can we find a clear indication of such payment. However, complainants
admitted having received such salary differentials from respondents, but the same was intended as wage adjustments under
Wage Order No. 1, No. NCR-03. Their claims in this instant case are backpay for Wage Order Nos. NCR-04, NCR-5 and
NCR-6. Hence, the amount of P39,371.52 cannot be deducted from the computed monetary award of P1,106,298.00."
We find no cogent reason to deviate from the foregoing.24
It bears stressing that this petition clearly involves a labor standards case, and it is in keeping with the law that "the worker
need not litigate to get what legally belongs to him, for the whole enforcement machinery of the DOLE exists to insure its
expeditious delivery to him free of charge."25 We, therefore, sustain the jurisdiction of the DOLE Regional Director in this case.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals dated September 16, 2003 is REVERSED and
SET ASIDE. The decision of the Secretary of Labor is REINSTATED.
SO ORDERED.

G.R. No. 167708 August 22, 2008

THE HON. SECRETARY OF LABOR AND EMPLOYMENT, EDGARDO M. AGAPAY and SAMILLANO A. ALONSO,
JR., petitioners,
vs.
PANAY VETERANS SECURITY AND INVESTIGATION AGENCY, INC. and JULITO JALECO,1respondent.
DECISION
CORONA, J.:

637
This is a petition for review2 of the November 25, 2004 amended decision3 of the Court of Appeals (CA) in CA-G.R. SP No.
72713.
Petitioners Edgardo M. Agapay and Samillano A. Alonso, Jr.4 were hired by respondent Panay Veterans Security and
Investigation Agency, Inc. as security guards sometime in 1988. They were stationed at the plant site of Food Industries, Inc.
(FII) in Sta. Rosa, Laguna until FII terminated its contract with respondent security agency on July 6, 2000. They were not
given new assignments and their benefits (including 13 th month pay, overtime pay and holiday pay as well as wage
differentials due to underpayment of wages) were withheld by respondent security agency. This prompted them to file a
complaint for violation of labor standards in the regional office of the Department of Labor and Employment in the National
Capital Region (DOLE-NCR).
Acting on the complaint, Manuel M. Cayabyab, a labor employment officer of the DOLE-NCR, conducted an inspection of
respondent security agency on October 30, 2000. During the inspection, respondent security agency failed to present its
payroll as well as the daily time records submitted by petitioners Agapay and Alonso, Jr. Such failure was noted as a violation.
After conducting his inspection, Cayabyab issued a notice of inspection to respondent security agency through its authorized
representative, respondent Julito Jaleco.5 Cayabyab explained the contents and significance of the notice to respondent
Jaleco. He emphasized the need for respondents either to comply with labor standards by paying the claims of petitioners
Agapay and Alonso, Jr. (as computed by Cayabyab) or to raise any question regarding the notice to the DOLE-NCR within five
days.
Respondents neither paid the claims of petitioners Agapay and Alonso, Jr. nor questioned the labor employment officers
findings. Thus, in his May 10, 2001 order, the Regional Director of the DOLE-NCR adopted the findings and computation of
Cayabyab as to the unpaid benefits due to petitioners Agapay and Alonso, Jr. The dispositive portion of the order read:
WHEREFORE, premises considered, Panay Veterans Security and Investigation Agency, Inc. and/or Julius Jaleco
[are/]is hereby ordered to pay Edgardo Agapay, [et al.] the aggregate amount of P206,569.20 representing
13th month, overtime and legal holiday [pay] & [underpaid] wages within ten (10) days from receipt hereof.
Otherwise, a [w]rit of [e]xecution shall be issued for the enforcement of [this] order.
SO ORDERED.6
Respondents moved for reconsideration but the DOLE-NCR Regional Director denied it.
Undeterred, respondents filed an appeal (with motion to reduce cash or surety bond) to the Secretary of Labor and
Employment. In his July 9, 2002 order, the Secretary of Labor and Employment found that respondents failed to perfect their
appeal since they did not post a cash or surety bond equivalent to the monetary award. Thus, the appeal was dismissed and
the DOLE-NCR Regional Directors May 10, 2001 order was declared final and executory. The Secretary of Labor and
Employment denied reconsideration.
Respondents assailed the Secretary of Labor and Employments July 9, 2002 order via a petition for certiorari in the CA. The
CA initially dismissed the petition for lack of merit and ordered respondents to pay a total recomputed amount
of P224,603.26.7 However, the CA granted reconsideration by applying the following ruling in Star Angel Handicraft v. National
Labor Relations Commission8(NLRC) by analogy:
Inasmuch as in practice, the NLRC allows the reduction of the appeal bond upon motion of appellant and on
meritorious grounds, it follows that a motion to that effect may be filed within the reglementary period for appealing.
Such motion may be filed in lieu of a bond which amount is being contested. In the meantime, the appeal is not
deemed perfected and the Labor Arbiter retains jurisdiction over the case until the NLRC has acted on the motion and
appellant has filed the bond as fixed by the NLRC.
Thus, the CA amended its decision and allowed respondents to pursue their appeal. 9 The Secretary of Labor and Employment
moved for reconsideration but it was denied. Thus, this petition.
The Secretary of Labor and Employment contends that respondents failed to perfect their appeal in the manner prescribed by
the Labor Code. He further asserts that a motion to reduce the appeal bond is not allowed by the Labor Code and the Rules of
Disposition of Labor Standards Cases in the Regional Offices (Rules on the Disposition of Labor Standards Cases) and does
not suspend the period of appeal. Moreover, the rules of procedure of the NLRC do not apply in this case.
We uphold the Secretary of Labor and Employment.
Respondents Failed to
Perfect Their Appeal
Article 128 of the Labor Code provides:
ART. 128. Visitorial and enforcement power.
(a) The Secretary of Labor or his duly authorized representatives, including labor regulation officers, shall have
access to employers records and premises at any time of the day or night whenever work is being undertaken
therein, and the right to copy therefrom, to question any employee and investigate any fact, condition or matter which
may be necessary to determine violations or which may aid in the enforcement of this Code and of any labor law,
wage order or rules and regulations issued pursuant thereto.
(b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the
relationship of employer-employee exists, the Secretary of Labor and Employment or his duly authorized
638
 representatives shall have the power to issue compliance orders to give effect to the labor standards provisions of
this Code and other labor legislation based on the findings of labor employment and enforcement officers or industrial
safety engineers made in the course of inspection. The Secretary or his duly authorized representatives shall issue
writs of execution to the appropriate authority for the enforcement of their orders, except in cases where the employer
contests the finding of the labor employment and enforcement officer and raises issues supported by documentary
proofs which were not considered in the course of inspection.
An order issued by the duly authorized representative of the Secretary of Labor and Employment under this Article
may be appealed to the latter. In case said order involves a monetary award, an appeal by the employer may be
perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly
accredited by the Secretary of Labor and Employment in the amount equivalent to the monetary award in the
order appealed from. (emphasis supplied)
In this connection, this Court ruled in Guico, Jr. v. Hon. Quisumbing:10
Article 128(b) of the Labor Code clearly provides that the appeal bond must be "in the amount equivalent to the
monetary award in the order appealed from." The records show that petitioner failed to post the required amount of
the appeal bond. His appeal was therefore not perfected.
The rule is that, to perfect an appeal of the Regional Directors order involving a monetary award in cases which concern the
visitorial and enforcement powers of the Secretary of Labor and Employment, the appeal must be filed and the cash or surety
bond equivalent to the monetary award must be posted within ten calendar days from receipt of the order. 11 Failure either to
file the appeal or post the bond within the prescribed period renders the order final and executory.
The legislative intent to make the bond an indispensable requisite for the perfection of an appeal by the employer is
underscored by the provision that "an appeal by the employer may be perfected only upon the posting of a cash or surety
bond."12 The word "only" makes it clear that the lawmakers intended the posting of a cash or surety bond by the employer to
be the exclusive means by which an employers appeal may be perfected. 13 In one case, we held that:
Anent the issue of whether or not the respondent Secretary of Labor acted with grave abuse of discretion in
dismissing petitioners appeal on the ground that petitioner failed to post the required cash or surety bond, we rule in
the negative.
Article 128 of the Labor Code likewise explicitly provides that in case an order issued by the duly authorized
representative of the Secretary of Labor and Employment involves a monetary award, an appeal by the
employer may be perfected only upon posting of a cash or surety bond in an amount equivalent to the
monetary award in the order appealed from.
As correctly noted by the Office of the Solicitor General, since the Order appealed from involves a monetary
award, an appeal by petitioner may be perfected only upon posting of a cash or surety bond issued by a
reputable bonding company duly accredited by respondent Secretary of Labor in the amount equivalent to
the monetary award in the Order appealed from.
It is undisputed that petitioner herein did not post a cash or surety bond when it filed its appeal with the Office of
respondent Secretary of Labor. Consequently, petitioner failed to perfect its appeal on time and the Order of
respondent Regional Director became final and executory.
Thus, the Secretary of Labor and Employment thru Undersecretary Cresenciano B. Trajano correctly dismissed
petitioners appeal.14 (emphasis supplied)
In this case, respondents admit that they failed to post the required bond when they filed their appeal to the Secretary of Labor
and Employment. Because of such failure, the appeal was never perfected and the May 10, 2001 order of the DOLE-NCR
Regional Director attained finality.
Motion To Reduce Appeal Bond Is Not Allowed In Appeals To The Secretary Of Labor
The jurisdiction of the NLRC is separate and distinct from that of the Secretary of Labor and Employment. In the exercise of
their respective jurisdictions, each agency is governed by its own rules of procedure. In other words, the rules of procedure of
the NLRC are different from (and do not apply in) cases cognizable by the Secretary of Labor and Employment.
Unlike the New Rules of Procedure of the NLRC,15 no provision in the Rules on the Disposition of Labor Standards Cases
governs the filing of a motion for the reduction of the amount of the bond. However, on matters that are not covered by the
Rules on the Disposition of Labor Standards Cases, the suppletory application of the Rules of Court is authorized. 16 In other
words, the Rules on the Disposition of Labor Standards Cases does not sanction the suppletory resort to the rules of
procedure of the NLRC.
By ruling that the rules of procedure of the NLRC should be applied suppletorily to respondents appeal to the Secretary of
Labor of Employment, the CA effectively amended the Rules on the Disposition of Labor Standards Cases. In the process, it
encroached on the rule-making power of the Secretary of Labor and Employment.
The CAs amended decision also contradicted the spirit that animates all labor laws, the promotion of social justice and the
protection of workers. The posting of a cash or surety bond to perfect an appeal of an order involving a monetary award has a
two-fold purpose: (1) to assure the employee that, if he finally prevails in the case, the monetary award will be given to him
upon dismissal of the employers appeal and (2) to discourage the employer from using the appeal to delay or evade payment
639
of his obligations to the employee.17 The CA disregarded these pro-labor objectives when it treated respondents failure to post
the required bond with undue leniency. The CA should have resolved any doubt in the implementation and interpretation of the
Labor Code and its implementing rules in favor of labor.18 For like all laws which govern industrial relations (assuming all
things are equal), the rules governing the proceedings in labor disputes should be interpreted in favor of the worker.
Moreover, Star Angel Handicraft permitted the filing of a motion for reduction of the appeal bond because the Court recognized
the NLRCs existing practice at that time to allow the reduction of the appeal bond "upon motion of appellant and on
meritorious grounds." In fact, the practice was subsequently institutionalized in the rules of procedure of the NLRC which now
allow the reduction of the amount of the bond "in justifiable cases and upon motion of the appellant." 19 On the contrary, no
such practice ever existed in cases taken cognizance of by the Secretary of Labor and Employment in the exercise of his
visitorial and enforcement powers. Hence, Star Angel Handicraft cannot be applied in labor standards cases appealed to the
Secretary of Labor and Employment.
In ruling that Star Angel Handicraft was applicable by analogy to appeals to the Secretary of Labor and Employment in cases
involving his visitorial and enforcement powers, the CA effectively reversed Guico, Jr. and Allied Investigation Bureau, Inc. v.
Secretary of Labor,20 thus arrogating to itself a power that it did not possess, a power only this Court sitting en banc may
exercise.21 For this reason, the amended decision was invalid as it was rendered by the CA in excess of its jurisdiction.
Monetary Award Is
Subject to Legal Interest
In Eastern Shipping Lines, Inc. v. Court of Appeals,22 the Court laid down the following guidelines:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts, is
breached, the contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the Civil
Code govern in determining the measure of recoverable damages.
II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of
interest, as well as the accrual thereof, is imposed, as follows: a
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the courtat the rate of 6% per annum. No
interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand
can be established with reasonable certainty. Accordingly, where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169,
Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made,
the interest shall begin to run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from
such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit.
The obligation of respondents to pay the lawful claims of petitioners Agapay and Alonso, Jr. was established with reasonable
certainty on October 30, 2000 when respondents received the notice of inspection from the labor employment officer. Since
such obligation did not constitute a loan or forbearance of money, it was subject to legal interest at the rate of 6% per annum
from that date until the May 10, 2001 order of the DOLE-NCR Regional Director attained finality. From the time the May 10,
2001 order of the DOLE-NCR Regional Director became final and executory, petitioners Agapay and Alonso, Jr. were entitled
to 12% legal interest per annum until the full satisfaction of their respective claims.
WHEREFORE, the petition is hereby GRANTED. The November 25, 2004 amended decision of the Court of Appeals in CA-
G.R. SP No. 72713 is REVERSED and SET ASIDE. The July 9, 2002 order of the Secretary of Labor and Employment
affirming the May 10, 2001 order of the DOLE-NCR Regional Director is hereby REINSTATED with the modification that the
monetary award shall earn 6% legal interest per annum from October 30, 2000 until the finality of the May 10, 2001 order of
the DOLE-NCR Regional Director and, thereafter, 12% legal interest per annum until the full satisfaction thereof.
SO ORDERED.

G.R. No. 162994 September 17, 2004

DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO A. TECSON, petitioners,
vs.
GLAXO WELLCOME PHILIPPINES, INC., Respondent.

640
 RESOLUTION
TINGA, J.:
Confronting the Court in this petition is a novel question, with constitutional overtones, involving the validity of the policy of a
pharmaceutical company prohibiting its employees from marrying employees of any competitor company.
This is a Petition for Review on Certiorari assailing the Decision1 dated May 19, 2003 and the Resolution dated March 26,
2004 of the Court of Appeals in CA-G.R. SP No. 62434.2
Petitioner Pedro A. Tecson (Tecson) was hired by respondent Glaxo Wellcome Philippines, Inc. (Glaxo) as medical
representative on October 24, 1995, after Tecson had undergone training and orientation.
Thereafter, Tecson signed a contract of employment which stipulates, among others, that he agrees to study and abide by
existing company rules; to disclose to management any existing or future relationship by consanguinity or affinity with co-
employees or employees of competing drug companies and should management find that such relationship poses a possible
conflict of interest, to resign from the company.
The Employee Code of Conduct of Glaxo similarly provides that an employee is expected to inform management of any
existing or future relationship by consanguinity or affinity with co-employees or employees of competing drug companies. If
management perceives a conflict of interest or a potential conflict between such relationship and the employees employment
with the company, the management and the employee will explore the possibility of a "transfer to another department in a non-
counterchecking position" or preparation for employment outside the company after six months.
Tecson was initially assigned to market Glaxos products in the Camarines Sur-Camarines Norte sales area.
Subsequently, Tecson entered into a romantic relationship with Bettsy, an employee of Astra Pharmaceuticals 3(Astra), a
competitor of Glaxo. Bettsy was Astras Branch Coordinator in Albay. She supervised the district managers and medical
representatives of her company and prepared marketing strategies for Astra in that area.
Even before they got married, Tecson received several reminders from his District Manager regarding the conflict of interest
which his relationship with Bettsy might engender. Still, love prevailed, and Tecson married Bettsy in September 1998.
In January 1999, Tecsons superiors informed him that his marriage to Bettsy gave rise to a conflict of interest. Tecsons
superiors reminded him that he and Bettsy should decide which one of them would resign from their jobs, although they told
him that they wanted to retain him as much as possible because he was performing his job well.
Tecson requested for time to comply with the company policy against entering into a relationship with an employee of a
competitor company. He explained that Astra, Bettsys employer, was planning to merge with Zeneca, another drug company;
and Bettsy was planning to avail of the redundancy package to be offered by Astra. With Bettsys separation from her
company, the potential conflict of interest would be eliminated. At the same time, they would be able to avail of the attractive
redundancy package from Astra.
In August 1999, Tecson again requested for more time resolve the problem. In September 1999, Tecson applied for a transfer
in Glaxos milk division, thinking that since Astra did not have a milk division, the potential conflict of interest would be
eliminated. His application was denied in view of Glaxos "least-movement-possible" policy.
In November 1999, Glaxo transferred Tecson to the Butuan City-Surigao City-Agusan del Sur sales area. Tecson asked Glaxo
to reconsider its decision, but his request was denied.
Tecson sought Glaxos reconsideration regarding his transfer and brought the matter to Glaxos Grievance Committee. Glaxo,
however, remained firm in its decision and gave Tescon until February 7, 2000 to comply with the transfer order. Tecson
defied the transfer order and continued acting as medical representative in the Camarines Sur-Camarines Norte sales area.
During the pendency of the grievance proceedings, Tecson was paid his salary, but was not issued samples of products which
were competing with similar products manufactured by Astra. He was also not included in product conferences regarding such
products.
Because the parties failed to resolve the issue at the grievance machinery level, they submitted the matter for voluntary
arbitration. Glaxo offered Tecson a separation pay of one-half () month pay for every year of service, or a total of P50,000.00
but he declined the offer. On November 15, 2000, the National Conciliation and Mediation Board (NCMB) rendered
its Decision declaring as valid Glaxos policy on relationships between its employees and persons employed with competitor
companies, and affirming Glaxos right to transfer Tecson to another sales territory.
Aggrieved, Tecson filed a Petition for Review with the Court of Appeals assailing the NCMB Decision.
On May 19, 2003, the Court of Appeals promulgated its Decision denying the Petition for Review on the ground that the NCMB
did not err in rendering its Decision. The appellate court held that Glaxos policy prohibiting its employees from having
personal relationships with employees of competitor companies is a valid exercise of its management prerogatives.4
Tecson filed a Motion for Reconsideration of the appellate courts Decision, but the motion was denied by the appellate court
in its Resolution dated March 26, 2004.5
Petitioners filed the instant petition, arguing therein that (i) the Court of Appeals erred in affirming the NCMBs finding that the
Glaxos policy prohibiting its employees from marrying an employee of a competitor company is valid; and (ii) the Court of
Appeals also erred in not finding that Tecson was constructively dismissed when he was transferred to a new sales territory,
and deprived of the opportunity to attend products seminars and training sessions. 6

641
Petitioners contend that Glaxos policy against employees marrying employees of competitor companies violates the equal
protection clause of the Constitution because it creates invalid distinctions among employees on account only of marriage.
They claim that the policy restricts the employees right to marry. 7
They also argue that Tecson was constructively dismissed as shown by the following circumstances: (1) he was transferred
from the Camarines Sur-Camarines Norte sales area to the Butuan-Surigao-Agusan sales area, (2) he suffered a diminution in
pay, (3) he was excluded from attending seminars and training sessions for medical representatives, and (4) he was prohibited
from promoting respondents products which were competing with Astras products.8
In its Comment on the petition, Glaxo argues that the company policy prohibiting its employees from having a relationship with
and/or marrying an employee of a competitor company is a valid exercise of its management prerogatives and does not violate
the equal protection clause; and that Tecsons reassignment from the Camarines Norte-Camarines Sur sales area to the
Butuan City-Surigao City and Agusan del Sur sales area does not amount to constructive dismissal. 9
Glaxo insists that as a company engaged in the promotion and sale of pharmaceutical products, it has a genuine interest in
ensuring that its employees avoid any activity, relationship or interest that may conflict with their responsibilities to the
company. Thus, it expects its employees to avoid having personal or family interests in any competitor company which may
influence their actions and decisions and consequently deprive Glaxo of legitimate profits. The policy is also aimed at
preventing a competitor company from gaining access to its secrets, procedures and policies. 10
It likewise asserts that the policy does not prohibit marriage per se but only proscribes existing or future relationships with
employees of competitor companies, and is therefore not violative of the equal protection clause. It maintains that considering
the nature of its business, the prohibition is based on valid grounds. 11
According to Glaxo, Tecsons marriage to Bettsy, an employee of Astra, posed a real and potential conflict of interest. Astras
products were in direct competition with 67% of the products sold by Glaxo. Hence, Glaxos enforcement of the foregoing
policy in Tecsons case was a valid exercise of its management prerogatives.12 In any case, Tecson was given several months
to remedy the situation, and was even encouraged not to resign but to ask his wife to resign form Astra instead. 13
Glaxo also points out that Tecson can no longer question the assailed company policy because when he signed his contract of
employment, he was aware that such policy was stipulated therein. In said contract, he also agreed to resign from respondent
if the management finds that his relationship with an employee of a competitor company would be detrimental to the interests
of Glaxo.14
Glaxo likewise insists that Tecsons reassignment to another sales area and his exclusion from seminars regarding
respondents new products did not amount to constructive dismissal.
It claims that in view of Tecsons refusal to resign, he was relocated from the Camarines Sur-Camarines Norte sales area to
the Butuan City-Surigao City and Agusan del Sur sales area. Glaxo asserts that in effecting the reassignment, it also
considered the welfare of Tecsons family. Since Tecsons hometown was in Agusan del Sur and his wife traces her roots to
Butuan City, Glaxo assumed that his transfer from the Bicol region to the Butuan City sales area would be favorable to him
and his family as he would be relocating to a familiar territory and minimizing his travel expenses. 15
In addition, Glaxo avers that Tecsons exclusion from the seminar concerning the new anti-asthma drug was due to the fact
that said product was in direct competition with a drug which was soon to be sold by Astra, and hence, would pose a potential
conflict of interest for him. Lastly, the delay in Tecsons receipt of his sales paraphernalia was due to the mix-up created by his
refusal to transfer to the Butuan City sales area (his paraphernalia was delivered to his new sales area instead of Naga City
because the supplier thought he already transferred to Butuan). 16
The Court is tasked to resolve the following issues: (1) Whether the Court of Appeals erred in ruling that Glaxos policy against
its employees marrying employees from competitor companies is valid, and in not holding that said policy violates the equal
protection clause of the Constitution; (2) Whether Tecson was constructively dismissed.
The Court finds no merit in the petition.
The stipulation in Tecsons contract of employment with Glaxo being questioned by petitioners provides:

10. You agree to disclose to management any existing or future relationship you may have, either by consanguinity or
affinity with co-employees or employees of competing drug companies. Should it pose a possible conflict of interest in
management discretion, you agree to resign voluntarily from the Company as a matter of Company policy.
17
The same contract also stipulates that Tescon agrees to abide by the existing company rules of Glaxo, and to study and
become acquainted with such policies.18 In this regard, the Employee Handbook of Glaxo expressly informs its employees of
its rules regarding conflict of interest:
1. Conflict of Interest
Employees should avoid any activity, investment relationship, or interest that may run counter to the responsibilities
which they owe Glaxo Wellcome.
Specifically, this means that employees are expected:

642
 a. To avoid having personal or family interest, financial or otherwise, in any competitor supplier or other
businesses which may consciously or unconsciously influence their actions or decisions and thus deprive
Glaxo Wellcome of legitimate profit.
b. To refrain from using their position in Glaxo Wellcome or knowledge of Company plans to advance their
outside personal interests, that of their relatives, friends and other businesses.
c. To avoid outside employment or other interests for income which would impair their effective job
performance.
d. To consult with Management on such activities or relationships that may lead to conflict of interest.
1.1. Employee Relationships
Employees with existing or future relationships either by consanguinity or affinity with co-employees of competing
drug companies are expected to disclose such relationship to the Management. If management perceives a conflict
or potential conflict of interest, every effort shall be made, together by management and the employee, to arrive at a
solution within six (6) months, either by transfer to another department in a non-counter checking position, or by
career preparation toward outside employment after Glaxo Wellcome. Employees must be prepared for possible
resignation within six (6) months, if no other solution is feasible. 19
No reversible error can be ascribed to the Court of Appeals when it ruled that Glaxos policy prohibiting an employee from
having a relationship with an employee of a competitor company is a valid exercise of management prerogative.
Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential programs and
information from competitors, especially so that it and Astra are rival companies in the highly competitive pharmaceutical
industry.
The prohibition against personal or marital relationships with employees of competitor companies upon Glaxos employees is
reasonable under the circumstances because relationships of that nature might compromise the interests of the company. In
laying down the assailed company policy, Glaxo only aims to protect its interests against the possibility that a competitor
company will gain access to its secrets and procedures.
That Glaxo possesses the right to protect its economic interests cannot be denied. No less than the Constitution recognizes
the right of enterprises to adopt and enforce such a policy to protect its right to reasonable returns on investments and to
expansion and growth.20 Indeed, while our laws endeavor to give life to the constitutional policy on social justice and the
protection of labor, it does not mean that every labor dispute will be decided in favor of the workers. The law also recognizes
that management has rights which are also entitled to respect and enforcement in the interest of fair play. 21
As held in a Georgia, U.S.A case,22 it is a legitimate business practice to guard business confidentiality and protect a
competitive position by even-handedly disqualifying from jobs male and female applicants or employees who are married to a
competitor. Consequently, the court ruled than an employer that discharged an employee who was married to an employee of
an active competitor did not violate Title VII of the Civil Rights Act of 1964.23The Court pointed out that the policy was applied
to men and women equally, and noted that the employers business was highly competitive and that gaining inside information
would constitute a competitive advantage.
The challenged company policy does not violate the equal protection clause of the Constitution as petitioners erroneously
suggest. It is a settled principle that the commands of the equal protection clause are addressed only to the state or those
acting under color of its authority.24 Corollarily, it has been held in a long array of U.S. Supreme Court decisions that the equal
protection clause erects no shield against merely private conduct, however, discriminatory or wrongful. 25 The only exception
occurs when the state29 in any of its manifestations or actions has been found to have become entwined or involved in the
wrongful private conduct.27 Obviously, however, the exception is not present in this case. Significantly, the company actually
enforced the policy after repeated requests to the employee to comply with the policy. Indeed, the application of the policy was
made in an impartial and even-handed manner, with due regard for the lot of the employee.
In any event, from the wordings of the contractual provision and the policy in its employee handbook, it is clear that Glaxo
does not impose an absolute prohibition against relationships between its employees and those of competitor companies. Its
employees are free to cultivate relationships with and marry persons of their own choosing. What the company merely seeks
to avoid is a conflict of interest between the employee and the company that may arise out of such relationships. As succinctly
explained by the appellate court, thus:
The policy being questioned is not a policy against marriage. An employee of the company remains free to marry
anyone of his or her choosing. The policy is not aimed at restricting a personal prerogative that belongs only to the
individual. However, an employees personal decision does not detract the employer from exercising management
prerogatives to ensure maximum profit and business success. . .28
The Court of Appeals also correctly noted that the assailed company policy which forms part of respondents Employee Code
of Conduct and of its contracts with its employees, such as that signed by Tescon, was made known to him prior to his
employment. Tecson, therefore, was aware of that restriction when he signed his employment contract and when he entered
into a relationship with Bettsy. Since Tecson knowingly and voluntarily entered into a contract of employment with Glaxo, the
stipulations therein have the force of law between them and, thus, should be complied with in good faith." 29 He is therefore
estopped from questioning said policy.
643
The Court finds no merit in petitioners contention that Tescon was constructively dismissed when he was transferred from the
Camarines Norte-Camarines Sur sales area to the Butuan City-Surigao City-Agusan del Sur sales area, and when he was
excluded from attending the companys seminar on new products which were directly competing with similar products
manufactured by Astra. Constructive dismissal is defined as a quitting, an involuntary resignation resorted to when continued
employment becomes impossible, unreasonable, or unlikely; when there is a demotion in rank or diminution in pay; or when a
clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee. 30 None of these conditions
are present in the instant case. The record does not show that Tescon was demoted or unduly discriminated upon by reason
of such transfer. As found by the appellate court, Glaxo properly exercised its management prerogative in reassigning Tecson
to the Butuan City sales area:
. . . In this case, petitioners transfer to another place of assignment was merely in keeping with the policy of the
company in avoidance of conflict of interest, and thus validNote that [Tecsons] wife holds a sensitive supervisory
position as Branch Coordinator in her employer-company which requires her to work in close coordination with
District Managers and Medical Representatives. Her duties include monitoring sales of Astra products, conducting
sales drives, establishing and furthering relationship with customers, collection, monitoring and managing Astras
inventoryshe therefore takes an active participation in the market war characterized as it is by stiff competition
among pharmaceutical companies. Moreover, and this is significant, petitioners sales territory covers Camarines Sur
and Camarines Norte while his wife is supervising a branch of her employer in Albay. The proximity of their areas of
responsibility, all in the same Bicol Region, renders the conflict of interest not only possible, but actual, as learning by
one spouse of the others market strategies in the region would be inevitable. [Managements] appreciation of a
conflict of interest is therefore not merely illusory and wanting in factual basis 31
In Abbott Laboratories (Phils.), Inc. v. National Labor Relations Commission,32 which involved a complaint filed by a medical
representative against his employer drug company for illegal dismissal for allegedly terminating his employment when he
refused to accept his reassignment to a new area, the Court upheld the right of the drug company to transfer or reassign its
employee in accordance with its operational demands and requirements. The ruling of the Court therein, quoted hereunder,
also finds application in the instant case:
By the very nature of his employment, a drug salesman or medical representative is expected to travel. He should
anticipate reassignment according to the demands of their business. It would be a poor drug corporation which
cannot even assign its representatives or detail men to new markets calling for opening or expansion or to areas
where the need for pushing its products is great. More so if such reassignments are part of the employment
contract.33
As noted earlier, the challenged policy has been implemented by Glaxo impartially and disinterestedly for a long period of time.
In the case at bar, the record shows that Glaxo gave Tecson several chances to eliminate the conflict of interest brought about
by his relationship with Bettsy. When their relationship was still in its initial stage, Tecsons supervisors at Glaxo constantly
reminded him about its effects on his employment with the company and on the companys interests. After Tecson married
Bettsy, Glaxo gave him time to resolve the conflict by either resigning from the company or asking his wife to resign from
Astra. Glaxo even expressed its desire to retain Tecson in its employ because of his satisfactory performance and suggested
that he ask Bettsy to resign from her company instead. Glaxo likewise acceded to his repeated requests for more time to
resolve the conflict of interest. When the problem could not be resolved after several years of waiting, Glaxo was constrained
to reassign Tecson to a sales area different from that handled by his wife for Astra. Notably, the Court did not terminate
Tecson from employment but only reassigned him to another area where his home province, Agusan del Sur, was included. In
effecting Tecsons transfer, Glaxo even considered the welfare of Tecsons family. Clearly, the foregoing dispels any suspicion
of unfairness and bad faith on the part of Glaxo.34
WHEREFORE, the Petition is DENIED for lack of merit. Costs against petitioners.
SO ORDERED.

Zialcita, et al. v. PAL, RO4-3-3398-76, 20 February 1977

Facts:
Complainant Zialcita, an international flight stewardess of PAL, wasdischarged from the service on account of her marriage. In
separating Zialcita, PALinvoked its policy which stated that flight attendants must be single, and shall
beautomatically separated from employment in the event they subsequently getmarried. They claimed that this policy was in
accordance with Article 132 of theLabor Code. On the other hand, Zialcita questioned her termination on account of her
marriage, invoking Article 136 of the same law.
Issue:
W/N Zialcita was validly terminated on account of her marriage.
Ruling:
NO. When Presidential Decree No. 148, otherwise known as theWomen and Child Labor Law, was promulgated in 13 March
1973, PALs policy hadmet its doom. However, since no one challenged its validity, the said policy wasable to obtain
a momentary reprieve. Section 8 of PD148 is exactly the same
644
provision reproduced verbatim in Article 136 of the Labor Code, which waspromulgated on 1 May 1974 and took effect six
months later.Although Article 132 enjoins the Secretary of Labor to establish standardsthat will ensure the safety and health of
women employees and in appropriatecases shall by regulation require employers to determine appropriate minimumstandards
for termination in special occupations, such as those of flight attendants,it is logical to presume that, in the absence of said
standards or regulations whichare yet to be established, the policy of PAL against marriage is patently illegal.
Article 136 is not intended to apply only to women employed in
ordinaryoccupations, or it should have categorically expressed so. The sweepingintendment of the law, be it on
special or ordinary occupations, is reflected inthe whole text and supported by Article 135 that speaks of non-
discriminationon the employment of women.
Pt&T vs NLRC (May 1997): It would be worthwhile to reflect upon and adopt here the rationalization in Zialcita, et al. vs.
Philippine Air Lines,[33] a decision that emanated from the Office of the President. There, a policy of Philippine Air Lines
requiring that prospective flight attendants must be single and that they will be automatically separated from the service once
they marry was declared void, it being violative of the clear mandate in Article 136 of the Labor Code with regard to
discrimination against married women. Thus:
Of first impression is the incompatibility of the respondents policy or regulation with the codal provision of law. Respondent is
resolute in its contention that Article 136 of the Labor Code applies only to women employed in ordinary occupations and that
the prohibition against marriage of women engaged in extraordinary occupations, like flight attendants, is fair and reasonable,
considering the pecularities of their chosen profession.
We cannot subscribe to the line of reasoning pursued by respondent. All along, it knew that the controverted policy has
already met its doom as early as March 13, 1973 when Presidential Decree No. 148, otherwise known as the Women and
Child Labor Law, was promulgated. But for the timidity of those affected or their labor unions in challenging the validity of the
policy, the same was able to obtain a momentary reprieve. A close look at Section 8 of said decree, which amended
paragraph (c) of Section 12 of Republic Act No. 679, reveals that it is exactly the same provision reproduced verbatim in
Article 136 of the Labor Code, which was promulgated on May 1, 1974 to take effect six (6) months later, or on November 1,
1974.
It cannot be gainsaid that, with the reiteration of the same provision in the new Labor Code, all policies and acts against it are
deemed illegal and therefore abrogated. True, Article 132 enjoins the Secretary of Labor to establish standards that will ensure
the safety and health of women employees and in appropriate cases shall by regulation require employers to determine
appropriate minimum standards for termination in special occupations, such as those of flight attendants, but that is precisely
the factor that militates against the policy of respondent. The standards have not yet been established as set forth in the first
paragraph, nor has the Secretary of Labor issued any regulation affecting flight attendants.
It is logical to presume that, in the absence of said standards or regulations which are as yet to be established, the policy of
respondent against marriage is patently illegal. This finds support in Section 9 of the New Constitution, which provides:
Sec. 9. The State shall afford protection to labor, promote full employment and equality in employment, ensure equal work
opportunities regardless of sex, race, or creed, and regulate the relations between workers and employees. The State shall
assure the rights of workers to self-organization, collective bargaining, security of tenure, and just and humane conditions of
work x x x.
Moreover, we cannot agree to the respondents proposition that termination from employment of flight attendants on account of
marriage is a fair and reasonable standard designed for their own health, safety, protection and welfare, as no basis has been
laid therefor. Actually, respondent claims that its concern is not so much against the continued employment of the flight
attendant merely by reason of marriage as observed by the Secretary of Labor, but rather on the consequence of marriage-
pregnancy. Respondent discussed at length in the instant appeal the supposed ill effects of pregnancy on flight attendants in
the course of their employment. We feel that this needs no further discussion as it had been adequately explained by the
Secretary of Labor in his decision of May 2, 1976.
In a vain attempt to give meaning to its position, respondent went as far as invoking the provisions of Articles 52 and 216 of
the New Civil Code on the preservation of marriage as an inviolable social institution and the family as a basic social
institution, respectively, as bases for its policy of non-marriage. In both instances, respondent predicates absence of a flight
attendant from her home for long periods of time as contributory to an unhappy married life.This is pure conjecture not based
on actual conditions, considering that, in this modern world, sophisticated technology has narrowed the distance from one
place to another. Moreover, respondent overlooked the fact that married flight attendants can program their lives to adapt to
prevailing circumstances and events.
Article 136 is not intended to apply only to women employed in ordinary occupations, or it should have categorically expressed
so. The sweeping intendment of the law, be it on special or ordinary occupations, is reflected in the whole text and supported
by Article 135 that speaks of non-discrimination on the employment of women.

645
G.R. No. 118978 May 23, 1997
PHILIPPINE TELEGRAPH AND TELEPHONE COMPANY, * petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and GRACE DE GUZMAN, respondents.

REGALADO, J.:
Seeking relief through the extraordinary writ of certiorari, petitioner Philippine Telegraph and Telephone Company (hereafter,
PT & T) invokes the alleged concealment of civil status and defalcation of company funds as grounds to terminate the services
of an employee. That employee, herein private respondent Grace de Guzman, contrarily argues that what really motivated PT
& T to terminate her services was her having contracted marriage during her employment, which is prohibited by petitioner in
its company policies. She thus claims that she was discriminated against in gross violation of law, such a proscription by an
employer being outlawed by Article 136 of the Labor Code.
Grace de Guzman was initially hired by petitioner as a reliever, specifically as a "Supernumerary Project Worker," for a fixed
period from November 21, 1990 until April 20, 1991 vice one C.F. Tenorio who went on maternity leave. 1 Under the Reliever
Agreement which she signed with petitioner company, her employment was to be immediately terminated upon expiration of
the agreed period. Thereafter, from June 10, 1991 to July 1, 1991, and from July 19, 1991 to August 8, 1991, private
respondent's services as reliever were again engaged by petitioner, this time in replacement of one Erlinda F. Dizon who went
on leave during both periods. 2 After August 8, 1991, and pursuant to their Reliever Agreement, her services were terminated.
On September 2, 1991, private respondent was once more asked to join petitioner company as a probationary employee, the
probationary period to cover 150 days. In the job application form that was furnished her to be filled up for the purpose, she
indicated in the portion for civil status therein that she was single although she had contracted marriage a few months earlier,
that is, on May 26, 1991. 3
It now appears that private respondent had made the same representation in the two successive reliever agreements which
she signed on June 10, 1991 and July 8, 1991. When petitioner supposedly learned about the same later, its branch
supervisor in Baguio City, Delia M. Oficial, sent to private respondent a memorandum dated January 15, 1992 requiring her to
explain the discrepancy. In that memorandum, she was reminded about the company's policy of not accepting married women
for employment. 4
In her reply letter dated January 17, 1992, private respondent stated that she was not aware of PT&T's policy regarding
married women at the time, and that all along she had not deliberately hidden her true civil status. 5Petitioner nonetheless
remained unconvinced by her explanations. Private respondent was dismissed from the company effective January 29,
1992, 6 which she readily contested by initiating a complaint for illegal dismissal, coupled with a claim for non-payment of cost
of living allowances (COLA), before the Regional Arbitration Branch of the National Labor Relations Commission in Baguio
City.
At the preliminary conference conducted in connection therewith, private respondent volunteered the information, and this was
incorporated in the stipulation of facts between the parties, that she had failed to remit the amount of P2,380.75 of her
collections. She then executed a promissory note for that amount in favor of petitioner 7. All of these took place in a formal
proceeding and with the agreement of the parties and/or their counsel.
On November 23, 1993, Labor Arbiter Irenarco R. Rimando handed down a decision declaring that private respondent, who
had already gained the status of a regular employee, was illegally dismissed by petitioner. Her reinstatement, plus payment of
the corresponding back wages and COLA, was correspondingly ordered, the labor arbiter being of the firmly expressed view
that the ground relied upon by petitioner in dismissing private respondent was clearly insufficient, and that it was apparent that
she had been discriminated against on account of her having contracted marriage in violation of company rules.
On appeal to the National Labor Relations Commission (NLRC), said public respondent upheld the labor arbiter and, in its
decision dated April 29, 1994, it ruled that private respondent had indeed been the subject of an unjust and unlawful
discrimination by her employer, PT & T. However, the decision of the labor arbiter was modified with the qualification that
Grace de Guzman deserved to be suspended for three months in view of the dishonest nature of her acts which should not be
condoned. In all other respects, the NLRC affirmed the decision of the labor arbiter, including the order for the reinstatement of
private respondent in her employment with PT & T.
The subsequent motion for reconsideration filed by petitioner was rebuffed by respondent NLRC in its resolution of November
9, 1994, hence this special civil action assailing the aforestated decisions of the labor arbiter and respondent NLRC, as well as
the denial resolution of the latter.
1. Decreed in the Bible itself is the universal norm that women should be regarded with love and respect but, through the ages,
men have responded to that injunction with indifference, on the hubristic conceit that women constitute the inferior sex.
Nowhere has that prejudice against womankind been so pervasive as in the field of labor, especially on the matter of equal
employment opportunities and standards. In the Philippine setting, women have traditionally been considered as falling within
the vulnerable groups or types of workers who must be safeguarded with preventive and remedial social legislation against
discriminatory and exploitative practices in hiring, training, benefits, promotion and retention.

646
The Constitution, cognizant of the disparity in rights between men and women in almost all phases of social and political life,
provides a gamut of protective provisions. To cite a few of the primordial ones, Section 14, Article II 8on the Declaration of
Principles and State Policies, expressly recognizes the role of women in nation-building and commands the State to ensure, at
all times, the fundamental equality before the law of women and men. Corollary thereto, Section 3 of Article XIII 9 (the
progenitor whereof dates back to both the 1935 and 1973 Constitution) pointedly requires the State to afford full protection to
labor and to promote full employment and equality of employment opportunities for all, including an assurance of entitlement to
tenurial security of all workers. Similarly, Section 14 of Article XIII 10 mandates that the State shall protect working women
through provisions for opportunities that would enable them to reach their full potential.
2. Corrective labor and social laws on gender inequality have emerged with more frequency in the years since the Labor Code
was enacted on May 1, 1974 as Presidential Decree No. 442, largely due to our country's commitment as a signatory to the
United Nations Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW). 11
Principal among these laws are Republic Act No. 6727 12 which explicitly prohibits discrimination against women with respect
to terms and conditions of employment, promotion, and training opportunities; Republic Act No. 6955 13 which bans the "mail-
order-bride" practice for a fee and the export of female labor to countries that cannot guarantee protection to the rights of
women workers; Republic Act No. 7192 14 also known as the "Women in Development and Nation Building Act," which affords
women equal opportunities with men to act and to enter into contracts, and for appointment, admission, training, graduation,
and commissioning in all military or similar schools of the Armed Forces of the Philippines and the Philippine National Police;
Republic Act No. 7322 15 increasing the maternity benefits granted to women in the private sector; Republic Act No.
7877 16 which outlaws and punishes sexual harassment in the workplace and in the education and training environment; and
Republic Act No. 8042, 17 or the "Migrant Workers and Overseas Filipinos Act of 1995," which prescribes as a matter of
policy, inter alia, the deployment of migrant workers, with emphasis on women, only in countries where their rights are secure.
Likewise, it would not be amiss to point out that in the Family Code, 18 women's rights in the field of civil law have been greatly
enhanced and expanded.
In the Labor Code, provisions governing the rights of women workers are found in Articles 130 to 138 thereof. Article 130
involves the right against particular kinds of night work while Article 132 ensures the right of women to be provided with
facilities and standards which the Secretary of Labor may establish to ensure their health and safety. For purposes of labor
and social legislation, a woman working in a nightclub, cocktail lounge, massage clinic, bar or other similar establishments
shall be considered as an employee under Article 138. Article 135, on the other hand, recognizes a woman's right against
discrimination with respect to terms and conditions of employment on account simply of sex. Finally, and this brings us to the
issue at hand, Article 136 explicitly prohibits discrimination merely by reason of the marriage of a female employee.
3. Acknowledged as paramount in the due process scheme is the constitutional guarantee of protection to labor and security of
tenure. Thus, an employer is required, as a condition sine qua non prior to severance of the employment ties of an individual
under his employ, to convincingly establish, through substantial evidence, the existence of a valid and just cause in dispensing
with the services of such employee, one's labor being regarded as constitutionally protected property.
On the other hand, it is recognized that regulation of manpower by the company falls within the so-called management
prerogatives, which prescriptions encompass the matter of hiring, supervision of workers, work assignments, working methods
and assignments, as well as regulations on the transfer of employees, lay-off of workers, and the discipline, dismissal, and
recall of employees. 19 As put in a case, an employer is free to regulate, according to his discretion and best business
judgment, all aspects of employment, "from hiring to firing," except in cases of unlawful discrimination or those which may be
provided by law. 20
In the case at bar, petitioner's policy of not accepting or considering as disqualified from work any woman worker who
contracts marriage runs afoul of the test of, and the right against, discrimination, afforded all women workers by our labor laws
and by no less than the Constitution. Contrary to petitioner's assertion that it dismissed private respondent from employment
on account of her dishonesty, the record discloses clearly that her ties with the company were dissolved principally because of
the company's policy that married women are not qualified for employment in PT & T, and not merely because of her
supposed acts of dishonesty.
That it was so can easily be seen from the memorandum sent to private respondent by Delia M. Oficial, the branch supervisor
of the company, with the reminder, in the words of the latter, that "you're fully aware that the company is not accepting married
women employee (sic), as it was verbally instructed to you." 21 Again, in the termination notice sent to her by the same branch
supervisor, private respondent was made to understand that her severance from the service was not only by reason of her
concealment of her married status but, over and on top of that, was her violation of the company's policy against marriage
("and even told you that married women employees are not applicable [sic] or accepted in our company.") 22 Parenthetically,
this seems to be the curious reason why it was made to appear in the initiatory pleadings that petitioner was represented in
this case only by its said supervisor and not by its highest ranking officers who would otherwise be solidarily liable with the
corporation. 23
Verily, private respondent's act of concealing the true nature of her status from PT & T could not be properly characterized as
willful or in bad faith as she was moved to act the way she did mainly because she wanted to retain a permanent job in a
stable company. In other words, she was practically forced by that very same illegal company policy into misrepresenting her
647
civil status for fear of being disqualified from work. While loss of confidence is a just cause for termination of employment, it
should not be simulated. 24 It must rest on an actual breach of duty committed by the employee and not on the employer's
caprices. 25 Furthermore, it should never be used as a subterfuge for causes which are improper, illegal, or unjustified. 26
In the present controversy, petitioner's expostulations that it dismissed private respondent, not because the latter got married
but because she concealed that fact, does have a hollow ring. Her concealment, so it is claimed, bespeaks dishonesty hence
the consequent loss of confidence in her which justified her dismissal.
Petitioner would asseverate, therefore, that while it has nothing against marriage, it nonetheless takes umbrage over the
concealment of that fact. This improbable reasoning, with interstitial distinctions, perturbs the Court since private respondent
may well be minded to claim that the imputation of dishonesty should be the other way around.
Petitioner would have the Court believe that although private respondent defied its policy against its female employees
contracting marriage, what could be an act of insubordination was inconsequential. What it submits as unforgivable is her
concealment of that marriage yet, at the same time, declaring that marriage as a trivial matter to which it supposedly has no
objection. In other words, PT & T says it gives its blessings to its female employees contracting marriage, despite the
maternity leaves and other benefits it would consequently respond for and which obviously it would have wanted to avoid. If
that employee confesses such fact of marriage, there will be no sanction; but if such employee conceals the same instead of
proceeding to the confessional, she will be dismissed. This line of reasoning does not impress us as reflecting its true
management policy or that we are being regaled with responsible advocacy.
This Court should be spared the ennui of strained reasoning and the tedium of propositions which confuse through less than
candid arguments. Indeed, petitioner glosses over the fact that it was its unlawful policy against married women, both on the
aspects of qualification and retention, which compelled private respondent to conceal her supervenient marriage. It was,
however, that very policy alone which was the cause of private respondent's secretive conduct now complained of. It is then
apropos to recall the familiar saying that he who is the cause of the cause is the cause of the evil caused.
Finally, petitioner's collateral insistence on the admission of private respondent that she supposedly misappropriated company
funds, as an additional ground to dismiss her from employment, is somewhat insincere and self-serving. Concededly, private
respondent admitted in the course of the proceedings that she failed to remit some of her collections, but that is an altogether
different story. The fact is that she was dismissed solely because of her concealment of her marital status, and not on the
basis of that supposed defalcation of company funds. That the labor arbiter would thus consider petitioner's submissions on
this supposed dishonesty as a mere afterthought, just to bolster its case for dismissal, is a perceptive conclusion born of
experience in labor cases. For, there was no showing that private respondent deliberately misappropriated the amount or
whether her failure to remit the same was through negligence and, if so, whether the negligence was in nature simple or grave.
In fact, it was merely agreed that private respondent execute a promissory note to refund the same, which she did, and the
matter was deemed settled as a peripheral issue in the labor case.
Private respondent, it must be observed, had gained regular status at the time of her dismissal. When she was served her
walking papers on January 29, 1992, she was about to complete the probationary period of 150 days as she was contracted
as a probationary employee on September 2, 1991. That her dismissal would be effected just when her probationary period
was winding down clearly raises the plausible conclusion that it was done in order to prevent her from earning security of
tenure. 27 On the other hand, her earlier stints with the company as reliever were undoubtedly those of a regular employee,
even if the same were for fixed periods, as she performed activities which were essential or necessary in the usual trade and
business of PT & T. 28 The primary standard of determining regular employment is the reasonable connection between the
activity performed by the employee in relation to the business or trade of the employer. 29
As an employee who had therefore gained regular status, and as she had been dismissed without just cause, she is entitled to
reinstatement without loss of seniority rights and other privileges and to full back wages, inclusive of allowances and other
benefits or their monetary equivalent. 30 However, as she had undeniably committed an act of dishonesty in concealing her
status, albeit under the compulsion of an unlawful imposition of petitioner, the three-month suspension imposed by respondent
NLRC must be upheld to obviate the impression or inference that such act should be condoned. It would be unfair to the
employer if she were to return to its fold without any sanction whatsoever for her act which was not totally justified. Thus, her
entitlement to back wages, which shall be computed from the time her compensation was withheld up to the time of her actual
reinstatement, shall be reduced by deducting therefrom the amount corresponding to her three months suspension.
4. The government, to repeat, abhors any stipulation or policy in the nature of that adopted by petitioner PT & T. The Labor
Code state, in no uncertain terms, as follows:
Art. 136. Stipulation against marriage. It shall be unlawful for an employer to require as a condition of
employment or continuation of employment that a woman shall not get married, or to stipulate expressly or
tacitly that upon getting married, a woman employee shall be deemed resigned or separated, or to actually
dismiss, discharge, discriminate or otherwise prejudice a woman employee merely by reason of marriage.
This provision had a studied history for its origin can be traced to Section 8 of Presidential Decree No. 148, 31better known as
the "Women and
Child Labor Law," which amended paragraph (c), Section 12 of Republic Act No. 679, 32 entitled "An Act to Regulate the
Employment of Women and Children, to Provide Penalties for Violations Thereof, and for Other Purposes." The forerunner to
648
Republic Act No. 679, on the other hand, was Act No. 3071 which became law on March 16, 1923 and which regulated the
employment of women and children in shops, factories, industrial, agricultural, and mercantile establishments and other places
of labor in the then Philippine Islands.
It would be worthwhile to reflect upon and adopt here the rationalization in Zialcita, et al. vs. Philippine Air Lines,33 a decision
that emanated from the Office of the President. There, a policy of Philippine Air Lines requiring that prospective flight
attendants must be single and that they will be automatically separated from the service once they marry was declared void, it
being violative of the clear mandate in Article 136 of the Labor Code with regard to discrimination against married women.
Thus:
Of first impression is the incompatibility of the respondent's policy or regulation with the codal provision of
law. Respondent is resolute in its contention that Article 136 of the Labor Code applies only to women
employed in ordinary occupations and that the prohibition against marriage of women engaged in
extraordinary occupations, like flight attendants, is fair and reasonable, considering the pecularities of their
chosen profession.
We cannot subscribe to the line of reasoning pursued by respondent. All along, it knew that the controverted
policy has already met its doom as early as March 13, 1973 when Presidential Decree No. 148, otherwise
known as the Women and Child Labor Law, was promulgated. But for the timidity of those affected or their
labor unions in challenging the validity of the policy, the same was able to obtain a momentary reprieve. A
close look at Section 8 of said decree, which amended paragraph (c) of Section 12 of Republic Act No. 679,
reveals that it is exactly the same provision reproduced verbatim in Article 136 of the Labor Code, which was
promulgated on May 1, 1974 to take effect six (6) months later, or on November 1, 1974.
It cannot be gainsaid that, with the reiteration of the same provision in the new Labor Code, all policies and
acts against it are deemed illegal and therefore abrogated. True, Article 132 enjoins the Secretary of Labor
to establish standards that will ensure the safety and health of women employees and in appropriate cases
shall by regulation require employers to determine appropriate minimum standards for termination in special
occupations, such as those of flight attendants, but that is precisely the factor that militates against the policy
of respondent. The standards have not yet been established as set forth in the first paragraph, nor has the
Secretary of Labor issued any regulation affecting flight attendants.
It is logical to presume that, in the absence of said standards or regulations which are as yet to be
established, the policy of respondent against marriage is patently illegal. This finds support in Section 9 of
the New Constitution, which provides:
Sec. 9. The State shall afford protection to labor, promote full employment and equality in employment,
ensure equal work opportunities regardless of sex, race, or creed, and regulate the relations between
workers and employees. The State shall assure the rights of workers to self-organization, collective
bargaining, security of tenure, and just and humane conditions of work . . . .
Moreover, we cannot agree to the respondent's proposition that termination from employment of flight
attendants on account of marriage is a fair and reasonable standard designed for their own health, safety,
protection and welfare, as no basis has been laid therefor. Actually, respondent claims that its concern is not
so much against the continued employment of the flight attendant merely by reason of marriage as observed
by the Secretary of Labor, but rather on the consequence of marriage-pregnancy. Respondent discussed at
length in the instant appeal the supposed ill effects of pregnancy on flight attendants in the course of their
employment. We feel that this needs no further discussion as it had been adequately explained by the
Secretary of Labor in his decision of May 2, 1976.
In a vain attempt to give meaning to its position, respondent went as far as invoking the provisions of Articles
52 and 216 of the New Civil Code on the preservation of marriage as an inviolable social institution and the
family as a basic social institution, respectively, as bases for its policy of non-marriage. In both instances,
respondent predicates absence of a flight attendant from her home for long periods of time as contributory to
an unhappy married life. This is pure conjecture not based on actual conditions, considering that, in this
modern world, sophisticated technology has narrowed the distance from one place to another. Moreover,
respondent overlooked the fact that married flight attendants can program their lives to adapt to prevailing
circumstances and events.
Article 136 is not intended to apply only to women employed in ordinary occupations, or it should have
categorically expressed so. The sweeping intendment of the law, be it on special or ordinary occupations, is
reflected in the whole text and supported by Article 135 that speaks of non-discrimination on the
employment of women.
The judgment of the Court of Appeals in Gualberto, et al. vs. Marinduque Mining & Industrial Corporation 34considered as void
a policy of the same nature. In said case, respondent, in dismissing from the service the complainant, invoked a policy of the
firm to consider female employees in the project it was undertaking as separated the moment they get married due to lack of
facilities for married women. Respondent further claimed that complainant was employed in the project with an oral
649
understanding that her services would be terminated when she gets married. Branding the policy of the employer as an
example of "discriminatory chauvinism" tantamount to denying equal employment opportunities to women simply on account of
their sex, the appellate court struck down said employer policy as unlawful in view of its repugnance to the Civil Code,
Presidential Decree No. 148 and the Constitution.
Under American jurisprudence, job requirements which establish employer preference or conditions relating to the marital
status of an employee are categorized as a "sex-plus" discrimination where it is imposed on one sex and not on the other.
Further, the same should be evenly applied and must not inflict adverse effects on a racial or sexual group which is protected
by federal job discrimination laws. Employment rules that forbid or restrict the employment of married women, but do not apply
to married men, have been held to violate Title VII of the United States Civil Rights Act of 1964, the main federal statute
prohibiting job discrimination against employees and applicants on the basis of, among other things, sex. 35
Further, it is not relevant that the rule is not directed against all women but just against married women. And, where the
employer discriminates against married women, but not against married men, the variable is sex and the discrimination is
unlawful. 36 Upon the other hand, a requirement that a woman employee must remain unmarried could be justified as a "bona
fide occupational qualification," or BFOQ, where the particular requirements of the job would justify the same, but not on the
ground of a general principle, such as the desirability of spreading work in the workplace. A requirement of that nature would
be valid provided it reflects an inherent quality reasonably necessary for satisfactory job performance. Thus, in one case, a no-
marriage rule applicable to both male and female flight attendants, was regarded as unlawful since the restriction was not
related to the job performance of the flight attendants. 37
5. Petitioner's policy is not only in derogation of the provisions of Article 136 of the Labor Code on the right of a woman to be
free from any kind of stipulation against marriage in connection with her employment, but it likewise assaults good morals and
public policy, tending as it does to deprive a woman of the freedom to choose her status, a privilege that by all accounts
inheres in the individual as an intangible and inalienable right. 38 Hence, while it is true that the parties to a contract may
establish any agreements, terms, and conditions that they may deem convenient, the same should not be contrary to law,
morals, good customs, public order, or public policy. 39 Carried to its logical consequences, it may even be said that
petitioner's policy against legitimate marital bonds would encourage illicit or common-law relations and subvert the sacrament
of marriage.
Parenthetically, the Civil Code provisions on the contract of labor state that the relations between the parties, that is, of capital
and labor, are not merely contractual, impressed as they are with so much public interest that the same should yield to the
common good. 40 It goes on to intone that neither capital nor labor should visit acts of oppression against the other, nor impair
the interest or convenience of the public. 41 In the final reckoning, the danger of just such a policy against marriage followed by
petitioner PT & T is that it strikes at the very essence, ideals and purpose of marriage as an inviolable social institution and,
ultimately, of the family as the foundation of the nation. 42 That it must be effectively interdicted here in all its indirect, disguised
or dissembled forms as discriminatory conduct derogatory of the laws of the land is not only in order but imperatively required.
ON THE FOREGOING PREMISES, the petition of Philippine Telegraph and Telephone Company is hereby DISMISSED for
lack of merit, with double costs against petitioner.
SO ORDERED.

OLYMPIA GUALBERTO, petitioner vs MARINDUQUE MINING & INDUSTRIAL CORP., respondent

23 CAR 528
June 28, 1978
FACTS:
The company employed plaintiff Olympia Gualberto as a dentist in 1971 while she was still single. She married Roberto,
another employee (electrical engineer) of the company, in 1972. The company informed her that she was regarded to have
resigned her office, invoking the firms policy that stipulated that female employees were regarded to automatically terminate
their employment the moment they got married. Olympia filed a claim for compensation.
The Court of Appeals not only upheld her claim for damages but also awarded exemplary damages, and held, inter alia: No
employer may require female applicants for jobs to enter into pre-employment arrangements that they would be dismissed
once they get married and afterwards expect the Courts to sustain such an agreement.
ISSUE:
WON an employer may terminate an employee by reason of marriage.
HELD:
No.
The Court made references to the Civil Code, the Woman and Child Labor Act and the 1935 Constitution of the Philippines. In
light of this the Court further stated: The agreement which the appellants want this Court to sustain on appeal is an example of
discriminatory chauvinism. Acts which deny equal employment opportunities to women because of their sex are inherently
odious and must be struck down.

650
[ G.R. No. 187417, February 24, 2016 ]
CHRISTINE JOY CAPIN-CADIZ, PETITIONER, VS. BRENT HOSPITAL AND COLLEGES, INC., RESPONDENT.
DECISION
REYES, J.:
This is a petition for review on certiorari[1] under Rule 45 of the Rules of Court assailing the Resolutions dated July 22,
2008[2] and February 24, 2009[3] of the Court of Appeals (CA) in CA-G.R. SP No. 02373-MIN, which dismissed the petition filed
by petitioner Christine Joy Capin-Cadiz (Cadiz) on the following grounds: (1) incomplete statement of material dates; (2) failure
to attach registry receipts; and (3) failure to indicate the place of issue of counsel's Professional Tax Receipt (PTR) and
Integrated Bar of the Philippines (IBP) official receipts.
Antecedent Facts

Cadiz was the Human Resource Officer of respondent Brent Hospital and Colleges, Inc. (Brent) at the time of her indefinite
suspension from employment in 2006. The cause of suspension was Cadiz's Unprofessionalism and Unethical Behavior
Resulting to Unwed Pregnancy. It appears that Cadiz became pregnant out of wedlock, and Brent imposed the suspension
until such time that she marries her boyfriend in accordance with law.

Cadiz then filed with the Labor Arbiter (LA) a complaint for Unfair Labor Practice, Constructive Dismissal, Non-Payment of
Wages and Damages with prayer for Reinstatement.[4]
Ruling of the Labor Tribunals

In its Decision[5] dated April 12, 2007, the LA found that Cadiz's indefinite suspension amounted to a constructive dismissal;
nevertheless, the LA ruled that Cadiz was not illegally dismissed as there was just cause for her dismissal, that is, she
engaged in premarital sexual relations with her boyfriend resulting in a pregnancy out of wedlock.[6] The LA further stated that
her "immoral conduct x x x [was] magnified as serious misconduct not only by heir getting pregnant as a result thereof before
and without marriage, but more than that, also by the fact that Brent is an institution of the Episcopal Church in the Philippines
operating both a hospital and college where [Cadiz] was employed." [7] The LA also ruled that she was not entitled to
reinstatement "at least until she marries her boyfriend," to backwages and vacation/sick leave pay. Brent, however, manifested
that it was willing to pay her 1311 month pay. The dispositive portion of the decision reads:
WHEREFORE, judgment is hereby rendered, ordering [Brent] to pay [Cadiz] 13th month pay in the sum of Seven Thousand
Nine Hundred Seventy & 11/100 Pesos (P7,970.11).

All other charges and claims are hereby dismissed for lack of merit.

SO ORDERED.[8]

Cadiz appealed to the National Labor Relations Commission (NLRC), which affirmed the LA decision in its Resolution [9] dated
December 10, 2007. Her motion for reconsideration having been denied by the NLRC in its Resolution [10] dated February 29,
2008, Cadiz elevated her case to the CA on petition for certiorari under Rule 65.
Ruling of the CA

The CA, however, dismissed her petition outright due to technical defects in the petition: (1) incomplete statement of material
dates; (2) failure to attach registry receipts; and (3) failure to indicate the place of issue of counsel's PTR and IBP official
receipts.[11] Cadiz sought reconsideration of the assailed CA Resolution dated July 22, 2008 but it was denied in the assailed
Resolution dated February 24, 2009.[12] The CA further ruled that "a perusal of the petition will reveal that public respondent
NLRC committed no grave abuse of discretion amounting to lack or excess of jurisdiction x x x holding [Cadiz's] dismissal from
employment valid."[13]

Hence, the present petition. Cadiz argues that -

I

THE HONORABLE [NLRC] GRAVELY ABUSED ITS DISCRETION WHEN IT HELD TFIAT [CADIZ'S] IMPREGNATION
OUTSIDE OF WEDLOCK IS A GROUND FOR THE TERMINATION OF [CADIZ'S] EMPLOYMENT[14]
II

THE [NLRC] COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT UPHELD THE DISMISSAL OF [CADIZ] ON THE
GROUND THAT THE INDEFINITE SUSPENSION WAS VALID AND REQUIRED [CADIZ] TO FIRST ENTER INTO
MARRIAGE BEFORE SHE CAN BE ADMITTED BACK TO HER EMPLOYMENT[15]
III
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RESPONDENT [NLRC] GRAVELY ABUSED ITS DISCRETION WHEN IT DENIED [CADIZ'S] CLAIM FOR BACKWAGES,
ALLOWANCES, SICK LEAVE PAY, MATERNITY PAY AND MORAL AND EXEMPLARY DAMAGES AND ATTORNEY'S
FEES[16]
IV

THE [CA] MISPLACED APPLICATION OF THE MATERIAL DATA RULE RESULTING TO GRAVE ABUSE OF DISCRETION
WHEN IT DISMISSED THE APPEAL[17]

Cadiz contends, among others, that getting pregnant outside of wedlock is not grossly immoral, especially when both partners
do not have any legal impediment to marry. Cadiz surmises that the reason for her suspension was not because of her
relationship with her then boyfriend but because of the resulting pregnancy. Cadiz also lambasts Brent's condition for her
reinstatement - that she gets married to her boyfriend - saying that this violates the stipulation against marriage under Article
136 of the Labor Code. Finally, Cadiz contends that there was substantial compliance with the rules of procedure, and the CA
should not have dismissed the petition.[18]

Brent, meanwhile, adopts and reiterates its position before the LA and the NLRC that Cadiz's arguments are irrational and out
of context. Brent argues, among others, that for Cadiz to limit acts of immorality only to extra-marital affairs is to "change the
norms, beliefs, teachings and practices of BRENT as a Church institution of the x x x Episcopal Church in the Philippines." [19]
Ruling of the Court

Ordinarily, the Court will simply gloss over the arguments raised by Cadiz, given that the main matter dealt with by the CA
were the infirmities found in the petition and which caused the dismissal of her case before it. In view, however, of the
significance of the issues involved in Cadiz's dismissal from employment, the Court will resolve the petition including the
substantial grounds raised herein.

The issue to be resolved is whether the CA committed a reversible error in ruling that: (1) Cadiz's petition is dismissible on
ground of technical deficiencies; and (2) the NLRC did not commit grave abuse of discretion in upholding her dismissal from
employment.

Rules of procedure are mere

tools designed to facilitate the
attainment of justice

In dismissing outright Cadiz's petition, the CA found the following defects: (1) incomplete statement of material dates; (2)
failure to attach registry receipts; and (3) failure to indicate the place of issue of counsel's PTR and IBP official receipts.

Rule 46, Section 3 of the Rules of Court states the contents of a petition filed with the CA under Rule 65, viz, "the petition shall
x x x indicate the material dates showing when notice of the judgment or final order or resolution subject thereof was received,
when a motion for new trial or reconsideration, if any, was filed and when notice of the denial thereof was received." The
rationale for this is to enable the CA to determine whether the petition was filed within the period fixed in the rules. [20] Cadiz's
failure to state the date of receipt of the copy of the NLRC decision, however, is not fatal to her case since the more important
material date which must be duly alleged in a petition is the date of receipt of the resolution of denial of the motion for
reconsideration,[21] which she has duly complied with.[22]

The CA also dismissed the petition for failure to attach the registry receipt in the affidavit of service. [23] Cadiz points out, on the
other hand, that the registry receipt number was indicated in the petition and this constitutes substantial compliance with the
requirement. What the rule requires, however, is that the registry receipt must be appended to the paper being
served.[24] Clearly, mere indication of the registry receipt numbers will not suffice. In fact, the absence of the registry receipts
amounts to lack of proof of service.[25] Nevertheless, despite this defect, the Court finds that the ends of substantial justice
would be better served by relaxing the application of technical rules of procedure. [26] With regard to counsel's failure to indicate
the place where the IBP and PTR receipts were issued, there was substantial compliance with the requirement since it was
indicated in the verification and certification of non-forum shopping, as correctly argued by Cadiz's lawyer.[27]

Time and again, the Court has emphasized that rules of procedure are designed to secure substantial justice. These are mere
tools to expedite the decision or resolution of cases and if their strict and rigid application would frustrate rather than promote
substantial justice, then it must be avoided.[28]

652
Immorality as a just cause for
termination of employment

Both the LA and the NLRC upheld Cadiz's dismissal as. one attended with just cause. The LA, while ruling that Cadiz's
indefinite suspension was tantamount to a constructive dismissal, nevertheless found that there was just cause for her
dismissal. According to the LA, "there was just cause therefor, consisting in her engaging in premarital sexual relations with
Carl Cadiz, allegedly her boyfriend, resulting in her becoming pregnant out of wedlock."[29] The LA deemed said act to be
immoral, which was punishable by dismissal under Brent's rules and which likewise constituted serious misconduct under
Article 282(a) of the Labor Code. The LA also opined that since Cadiz was Brent's ITuman Resource Officer in charge of
implementing its rules against immoral conduct, she should have been the "epitome of proper conduct." [30] The LA ruled:
[Cadiz's] immoral conduct by having premarital sexual relations with her alleged boy friend, a former Brent worker and her co-
employee, is magnified as serious misconduct not only by her getting pregnant as a result thereof before and without
marriage, but more than that, also by the fact that Brent is an institution of the Episcopal Church in the Philippines xxx
committed to "developing competent and dedicated professionals xxx and in providing excellent medical and other health
services to the community for the Glory of God and Service to Humanity." x x x As if these were not enough, [Cadiz] was
Brent's Human Resource Officer charged with, among others, implementing the rules of Brent against immoral conduct,
including premarital sexual relations, or fornication xxx. She should have been the epitome of proper conduct, but miserably
failed. She herself engaged in premarital sexual relations, which surely scandalized the Brent community, x x x. [31]

The NLRC, for its part, sustained the LA's conclusion.

The Court, however, cannot subscribe to the labor tribunals' conclusions.

Admittedly, one of the grounds for disciplinary action under Brent's policies is immorality, which is punishable by dismissal at
first offense[32] Brent's Policy Manual provides:
CATEGORY IV

In accordance with Republic Act No. 1052,[33] the following are just cause for terminating an employment of an employee
without a definite period:

xxxx

2. Serious misconduct or willful disobedience by the employee of the orders of his employer or representative in connection
with his work, such as, but not limited to the following:
xxxx

b. Commission of immoral conduct or indecency within the company premises, such as an act of lasciviousness or any act
which is sinful and vulgar in nature.

c. Immorality, concubinage, bigamy.[34]

Its Employee's Manual of Policies, meanwhile, enumerates "[a]cts of immorality such as scandalous behaviour, acts of
lasciviousness against any person (patient, visitors, co-workers) within hospital premises"[35] as a ground for discipline and
discharge. Brent also relied on Section 94 of the Manual of Regulations for Private Schools (MRPS), which lists "disgraceful or
immoral conduct" as a cause for terminating employment. [36]

Thus, the question that must be resolved is whether Cadiz's premarital relations with her boyfriend and the resulting pregnancy
out of wedlock constitute immorality. To resolve this, the Court makes reference to the recently promulgated case of Cheryll
Santos Lens v. St. Scholastica 's College Westgrove and/or Sr. Edna Quiambao, OSB [37]

Leus involved the same personal circumstances as the case at bench, albeit the employer was a Catholic and sectarian
educational institution and the petitioner, Cheryl 1 Santos Leus (Leus), worked as an assistant to the school's Director of the
Lay Apostolate and Community Outreach Directorate. Leus was dismissed from employment by the school for having borne a
child out of wedlock. The Court ruled in Leus that the determination of whether a conduct is disgraceful or immoral involves a
two-step process: first, a consideration of the totality of the circumstances surrounding the conduct; and second, an
assessment of the said circumstances vis-a-vis the prevailing norms of conduct, i.e., what the society generally considers
moral and respectable.

653
In this case, the surrounding facts leading to Cadiz's dismissal are straightforward - she was employed as a human resources
officer in an educational and medical institution of the Episcopal Church of the Philippines; she and her boyfriend at that time
were both single; they engaged in premarital sexual relations, which resulted into pregnancy. The labor tribunals characterized
these as constituting disgraceful or immoral conduct. They also sweepingly concluded that as Human Resource Officer, Cadiz
should have been the epitome of proper conduct and her indiscretion "surely scandalized the Brent community." [38]

The foregoing circumstances, however, do not readily equate to disgraceful and immoral conduct. Brent's Policy Manual and
Employee's Manual of Policies do not define what constitutes immorality; it simply stated immorality as a ground for
disciplinary action. Instead, Brent erroneously relied on the standard dictionary definition of fornication as a form of illicit
relation and proceeded to conclude that Cadiz's acts fell under such classification, thus constituting immorality.[39]

Jurisprudence has already set the standard of morality with which an act should be gauged - it is public and secular, not
religious.[40] Whether a conduct is considered disgraceful or immoral should be made in accordance with the prevailing norms
of conduct, which, as stated in Leus, refer to those conducts which are proscribed because they are detrimental to
conditions upon which depend the existence and progress of human society. The fact that a particular act does not
conform to the traditional moral views of a certain sectarian institution is not sufficient reason to qualify such act as immoral
unless it, likewise, does not conform to public and secular standards. More importantly, there must be substantial
evidence to establish that premarital sexual relations and pregnancy out of wedlock is considered disgraceful or immoral. [41]

The totality of the circumstances of this case does not justify the conclusion that Cadiz committed acts of immorality. Similar
to Leus, Cadiz and her boyfriend were both single and had no legal impediment to marry at the time she committed the alleged
immoral conduct. In fact, they eventually married on April 15, 2008.[42] Aside from these, the labor tribunals' respective
conclusion that Cadiz's "indiscretion" "scandalized the Brent community" is speculative, at most, and there is no proof adduced
by Brent to support such sweeping conclusion. Even Brent admitted that it came to know of Cadiz's "situation" only when her
pregnancy became manifest.[43] Brent also conceded that "[a]t the time [Cadiz] and Carl R. Cadiz were just carrying on their
boyfriend-girlfriend relationship, there was no knowledge or evidence by [Brent] that they were engaged also in premarital
sex."[44] This only goes to show that Cadiz did not flaunt her premarital relations with her boyfriend and it was not carried on
under scandalous or disgraceful circumstances. As declared in Leus, "there is no law which penalizes an unmarried mother by
reason of her sexual conduct or proscribes the consensual sexual activity between two unmarried persons; that neither does
such situation contravene[s] any fundamental state policy enshrined in the Constitution." [45] The fact that Brent is a sectarian
institution does not automatically subject Cadiz to its religious standard of morality absent an express statement in its manual
of personnel policy and regulations, prescribing such religious standard as gauge as these regulations create the obligation on
both the employee and the employer to abide by the same.[46]

Brent, likewise, cannot resort to the MRPS because the Court already stressed in Leus that "premarital sexual relations
between two consenting adults who have no impediment to marry each other, and, consequently, conceiving a child out of
wedlock, gauged from a purely public and secular view of morality, does not amount to a disgraceful or immoral conduct under
Section 94(e) of the 1992 MRPS."[47]

Marriage as a condition for reinstatement

The doctrine of management prerogative gives an employer the right to "regulate, according to his own discretion and
judgment, all aspects of employment, including hiring, work assignments, working methods, the time, place and manner of
work, work supervision, transfer of employees, lay-off of workers, and discipline, dismissal, and recall of employees." [48] In this
case, Brent imposed on Cadiz the condition that she subsequently contract marriage with her then boyfriend for her to be
reinstated. According to Brent, this is "in consonance with the policy against encouraging illicit or common-law relations that
would subvert the sacrament of marriage."[49]

Statutory law is replete with legislation protecting labor and promoting equal opportunity in employment. No less than the 1987
Constitution mandates that the "State shall afford full protection to labor, local and overseas, organized and unorganized, and
promote full employment and equality of employment opportunities for all." [50]The Labor Code of the Philippines, meanwhile,
provides:
Art. 136. Stipulation against marriage. It shall be unlawful for an employer to require as a condition of employment or
continuation of employment that a woman employee shall not get married, or to stipulate expressly or tacitly that upon getting
married, a woman employee shall be deemed resigned or separated, or to actually dismiss, discharge, discriminate or
otherwise prejudice a woman employee merely by reason of her marriage.

With particular regard to women, Republic Act No. 9710 or the Magna Carta of Women[51] protects women against

654
discrimination in all matters relating to marriage and family relations, including the right to choose freely a spouse and to
enter into marriage only with their free and full consent.[52]

Weighed against these safeguards, it becomes apparent that Brent's condition is coercive, oppressive and discriminatory.
There is no rhyme or reason for it. It forces Cadiz to marry for economic reasons and deprives her of the freedom to choose
her status, which is a privilege that inheres in her as an intangible and inalienable right.[53]While a marriage or no-marriage
qualification may be justified as a "bona fide occupational qualification," Brent must prove two factors necessitating its
imposition, viz: (1) that the employment qualification is reasonably related to the essential operation of the job involved;
and (2) that there is a factual basis for believing that all or substantially all persons meeting the qualification would be unable
to properly perform the duties of the job.[54]Brent has not shown the presence of neither of these factors. Perforce, the Court
cannot uphold the validity of said condition.

Given the foregoing, Cadiz, therefore, is entitled to reinstatement without loss of seniority rights, and payment of backwages
computed from the time compensation was withheld up to the date of actual reinstatement. Where reinstatement is no longer
viable as an option, separation pay should be awarded as an alternative and as a form of financial assistance. [55] In the
computation of separation pay, the Court stresses that it should not go beyond the date an employee was deemed to
have been actually separated from employment, or beyond the date when reinstatement was rendered
impossible.[56] In this case, the records do not show whether Cadiz already severed her employment with Brent or whether
she is gainfully employed elsewhere; thus, the computation of separation pay shall be pegged based on the findings that she
was employed on August 16, 2002, on her own admission in her complaint that she was dismissed on November 17, 2006,
and that she was earning a salary of P9,108.70 per month,[57] which shall then be computed at a rate of one (1) month salary
for every year of service,[58] as follows:
Monthly salary P9,108.70

multiplied by number of years x

in service (Aug 02 to Nov 06) 4

P36,434.80

The Court also finds that Cadiz is only entitled to limited backwages. Generally, the computation of backwages is reckoned
from the date of illegal dismissal until actual reinstatement. [59] In case separation pay is ordered in lieu of reinstatement or
reinstatement is waived by the employee, backwages is computed from the time of dismissal until the finality of the decision
ordering separation pay.[60] Jurisprudence further clarified that the period for computing the backwages during the period of
appeal should end on the date that a higher court reversed the labor arbitration ruling of illegal dismissal. [61] If applied in
Cadiz's case, then the computation of backwages should be from November 17, 2006, which was the time of her illegal
dismissal, until the date of promulgation of this decision. Nevertheless, the Court has also recognized that the constitutional
policy of providing full protection to labor is not intended to oppress or destroy management.[62] The Court notes that at the
time of Cadiz's indefinite suspension from employment, Leus was yet to be decided by the Court. Moreover, Brent was acting
in good faith and on its honest belief that Cadiz's pregnancy out of wedlock constituted immorality. Thus, fairness and equity
dictate that the award of backwages shall only be equivalent to one (1) year or P109,304.40, computed as follows:
Monthly salary P9,108.70

multiplied by one year x x

or 12 months 12

P109,304.40

Finally, with regard to Cadiz's prayer for moral and exemplary damages, the Court finds the same without merit. A finding of
illegal dismissal, by itself, does not establish bad faith to entitle an employee to moral damages. [63]Absent clear and convincing
evidence showing that Cadiz's dismissal from Brent's employ had been carried out in an arbitrary, capricious and malicious
manner, moral and exemplary damages cannot be awarded. The Court nevertheless grants the award of attorney's fees in the
amount often percent (10%) of the total monetary award, Cadiz having been forced to litigate in order to seek redress of her
grievances.[64]

655
WHEREFORE, the petition is GRANTED. The Resolutions dated July 22, 2008 and February 24, 2009 of the Court of Appeals
in CA-G.R. SP No. 02373-M1N are REVERSED and SET ASIDE, and a NEW ONE ENTERED finding petitioner Christine Joy
Capin-Cadiz to have been dismissed without just cause.

Respondent Brent Hospital and Colleges, Inc. is hereby ORDERED TO PAY petitioner Christine Joy Capin-Cadiz:
(1) One Hundred Nine Thousand Three Hundred Four Pesos and 40/100 (P109,304.40) as backwages;

(2) Thirty-Six Thousand Four Hundred Thirty-Four Pesos and 80/100 (P36,434.80) as separation pay; and

(3) Attorney's fees equivalent to ten percent (10%) of the total award.

The monetary awards granted shall earn legal interest at the rate of six percent (6%) per annum from the date of the finality of
this Decision until fully paid.

SO ORDERED

G.R. No. 94951 April 22, 1991

APEX MINING COMPANY, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and SINCLITICA CANDIDO, respondents.
Bernabe B. Alabastro for petitioner.
Angel Fernandez for private respondent.
GANCAYCO, J.:
Is the househelper in the staff houses of an industrial company a domestic helper or a regular employee of the said firm? This
is the novel issue raised in this petition.
Private respondent Sinclita Candida was employed by petitioner Apex Mining Company, Inc. on May 18, 1973 to perform
laundry services at its staff house located at Masara, Maco, Davao del Norte. In the beginning, she was paid on a piece rate
basis. However, on January 17, 1982, she was paid on a monthly basis at P250.00 a month which was ultimately increased to
P575.00 a month.
On December 18, 1987, while she was attending to her assigned task and she was hanging her laundry, she accidentally
slipped and hit her back on a stone. She reported the accident to her immediate supervisor Mila de la Rosa and to the
personnel officer, Florendo D. Asirit. As a result of the accident she was not able to continue with her work. She was permitted
to go on leave for medication. De la Rosa offered her the amount of P 2,000.00 which was eventually increased to P5,000.00
to persuade her to quit her job, but she refused the offer and preferred to return to work. Petitioner did not allow her to return to
work and dismissed her on February 4, 1988.
On March 11, 1988, private respondent filed a request for assistance with the Department of Labor and Employment. After the
parties submitted their position papers as required by the labor arbiter assigned to the case on August 24, 1988 the latter
rendered a decision, the dispositive part of which reads as follows:
WHEREFORE, Conformably With The Foregoing, judgment is hereby rendered ordering the respondent, Apex
Mining Company, Inc., Masara, Davao del Norte, to pay the complainant, to wit:
1 Salary
Differential P16,289.20
2. Emergency Living
Allowance 12,430.00
3. 13th Month Pay
Differential 1,322.32
4. Separation Pay
(One-month for
every year of
service [1973-19881) 25,119.30
or in the total of FIFTY FIVE THOUSAND ONE HUNDRED SIXTY ONE PESOS AND 42/100 (P55,161.42).
SO ORDERED.1
Not satisfied therewith, petitioner appealed to the public respondent National Labor Relations Commission (NLRC), wherein in
due course a decision was rendered by the Fifth Division thereof on July 20, 1989 dismissing the appeal for lack of merit and
affirming the appealed decision. A motion for reconsideration thereof was denied in a resolution of the NLRC dated June 29,
1990.

656
Hence, the herein petition for review by certiorari, which appopriately should be a special civil action for certiorari, and which in
the interest of justice, is hereby treated as such.2 The main thrust of the petition is that private respondent should be treated as
a mere househelper or domestic servant and not as a regular employee of petitioner.
The petition is devoid of merit.
Under Rule XIII, Section l(b), Book 3 of the Labor Code, as amended, the terms "househelper" or "domestic servant" are
defined as follows:
The term "househelper" as used herein is synonymous to the term "domestic servant" and shall refer to any person,
whether male or female, who renders services in and about the employer's home and which services are usually
necessary or desirable for the maintenance and enjoyment thereof, and ministers exclusively to the personal comfort
and enjoyment of the employer's family.3
The foregoing definition clearly contemplates such househelper or domestic servant who is employed in the employer's home
to minister exclusively to the personal comfort and enjoyment of the employer's family. Such definition covers family drivers,
domestic servants, laundry women, yayas, gardeners, houseboys and other similar househelps.
The definition cannot be interpreted to include househelp or laundrywomen working in staffhouses of a company, like
petitioner who attends to the needs of the company's guest and other persons availing of said facilities. By the same token, it
cannot be considered to extend to then driver, houseboy, or gardener exclusively working in the company, the staffhouses and
its premises. They may not be considered as within the meaning of a "househelper" or "domestic servant" as above-defined by
law.
The criteria is the personal comfort and enjoyment of the family of the employer in the home of said employer. While it may be
true that the nature of the work of a househelper, domestic servant or laundrywoman in a home or in a company staffhouse
may be similar in nature, the difference in their circumstances is that in the former instance they are actually serving the family
while in the latter case, whether it is a corporation or a single proprietorship engaged in business or industry or any other
agricultural or similar pursuit, service is being rendered in the staffhouses or within the premises of the business of the
employer. In such instance, they are employees of the company or employer in the business concerned entitled to the
privileges of a regular employee.
Petitioner contends that it is only when the househelper or domestic servant is assigned to certain aspects of the business of
the employer that such househelper or domestic servant may be considered as such as employee. The Court finds no merit in
making any such distinction. The mere fact that the househelper or domestic servant is working within the premises of the
business of the employer and in relation to or in connection with its business, as in its staffhouses for its guest or even for its
officers and employees, warrants the conclusion that such househelper or domestic servant is and should be considered as a
regular employee of the employer and not as a mere family househelper or domestic servant as contemplated in Rule XIII,
Section l(b), Book 3 of the Labor Code, as amended.
Petitioner denies having illegally dismissed private respondent and maintains that respondent abandoned her work. This
argument notwithstanding, there is enough evidence to show that because of an accident which took place while private
respondent was performing her laundry services, she was not able to work and was ultimately separated from the service. She
is, therefore, entitled to appropriate relief as a regular employee of petitioner. Inasmuch as private respondent appears not to
be interested in returning to her work for valid reasons, the payment of separation pay to her is in order.
WHEREFORE, the petition is DISMISSED and the appealed decision and resolution of public respondent NLRC are hereby
AFFIRMED. No pronouncement as to costs.
SO ORDERED.

G.R. No. 150898 April 13, 2011

OCEAN BUILDERS CONSTRUCTION CORP., and/or DENNIS HAO, Petitioners,
vs.
SPOUSES ANTONIO and ANICIA CUBACUB, Respondents.
DECISION
CARPIO MORALES, J.:
Bladimir Cubacub (Bladimir) was employed as maintenance man by petitioner company Ocean Builders Construction Corp. at
its office in Caloocan City.
On April 9, 1995, Bladimir was afflicted with chicken pox. He was thus advised by petitioner Dennis Hao (Hao), the companys
general manager, to rest for three days which he did at the companys "barracks" where he lives free of charge.
Three days later or on April 12, 1995, Bladimir went about his usual chores of manning the gate of the company premises and
even cleaned the company vehicles. Later in the afternoon, however, he asked a co-worker, Ignacio Silangga (Silangga), to
accompany him to his house in Capas, Tarlac so he could rest. Informed by Silangga of Bladimirs intention, Hao gave
Bladimir P1,000.00 and ordered Silangga to instead bring Bladimir to the nearest hospital.
Along with co-workers Narding and Tito Vergado, Silangga thus brought Bladimir to the Caybiga Community Hospital (Caybiga
Hospital), a primary-care hospital around one kilometer away from the office of the company.

657
The hospital did not allow Bladimir to leave the hospital. He was then confined, with Narding keeping watch over him. The next
day, April 13, 1995, a doctor of the hospital informed Narding that they needed to talk to Bladimirs parents, hence, on
Silanggas request, their co-workers June Matias and Joel Edrene fetched Bladimirs parents from Tarlac.
At about 8 oclock in the evening of the same day, April 13, 1995, Bladimirs parents-respondent spouses Cubacub, with their
friend Dr. Hermes Frias (Dr. Frias), arrived at the Caybiga Hospital and transferred Bladimir to the Quezon City General
Hospital (QCGH) where he was placed in the intensive care unit and died the following day, April 14, 1995.
The death certificate issued by the QCGH recorded Bladimirs immediate cause of death as cardio-respiratory arrest and the
antecedent cause as pneumonia. On the other hand, the death certificate issued by Dr. Frias recorded the causes of death as
cardiac arrest, multiple organ system failure, septicemia and chicken pox.
Bladimirs parents-herein respondents later filed on August 17, 1995 before the Tarlac Regional Trial Court (RTC) at Capas
a complaint for damages against petitioners, alleging that Hao was guilty of negligence which resulted in the deterioration of
Bladimirs condition leading to his death.
By Decision of April 14, 1997,1 Branch 66 of the Tarlac RTC at Capas dismissed the complaint, holding that Hao was not
negligent. It ruled that Hao was not under any obligation to bring Bladimir to better tertiary hospitals, and assuming that
Bladimir died of chicken pox aggravated by pneumonia or some other complications due to lack of adequate facilities at the
hospital, the same cannot be attributed to Hao.
On respondents appeal, the Court of Appeals, by Decision of June 22, 2001, reversed the trial courts decision, holding that
by Haos failure to bring Bladimir to a better-equipped hospital, he violated Article 161 of the Labor Code. It went on to state
that Hao should have foreseen that Bladimir, an adult, could suffer complications from chicken pox and, had he been brought
to hospitals like St. Lukes, Capitol Medical Center, Philippine General Hospital and the like, Bladimir could have been saved.
Thus the appellate court disposed:
WHEREFORE, the decision of the Regional Trial Court of Capas, Tarlac, Branch 66 in Civil Case No. 349 dated April 14, 1997
is hereby REVERSED and SET ASIDE and a new one rendered holding the defendants solidarily liable to plaintiffs-appellants
for the following:
1. P50,000.00 for the life of Bladimir Cubacub;
2. P584,630.00 for loss of Bladimirs earning capacity;
3. P4,834.60 as reimbursement of expenses incurred at Quezon City General Hospital as evidenced by Exhibits "E"
to "E-14" inclusive;
4. P18,107.75 as reimbursement of expenses for the 5-day wake covered by Exhibits "F" to "F-17";
5. P30,000.00 as funeral expenses at Prudential Funeral Homes covered by Exhibit "I";
6. P6,700.00 for acquisition of memorial lot at Sto. Rosario Memorial Park covered by Exhibit "J";
7. P50,000.00 as moral damages;
8. P20,000.00 as exemplary damages;
9. P15,000.00 as attorneys fees and
10. Cost of suit.
SO ORDERED.2
The motion for reconsideration was denied by Resolution3 of November 26, 2001, hence this petition.
Petitioners maintain that Hao exercised the diligence more than what the law requires, hence, they are not liable for damages.
The petition is meritorious.
At the onset, the Court notes that the present case is one for damages based on torts, the employer-employee relationship
being merely incidental. To successfully prosecute an action anchored on torts, three elements must be present, viz: (1) duty
(2) breach (3) injury and proximate causation. The assailed decision of the appellate court held that it was the duty of
petitioners to provide adequate medical assistance to the employees under Art. 161 of the Labor Code, failing which a breach
is committed.
Art. 161 of the Labor Code provides:
ART. 161. Assistance of employer. It shall be the duty of any employer to provide all the necessary assistance to ensure
the adequate and immediate medical and dental attendance and treatment to an injured or sick employee in case of
emergency. (emphasis and underscoring supplied)
The Implementing Rules of the Code do not enlighten what the phrase "adequate and immediate" medical attendance means
in relation to an "emergency." It would thus appear that the determination of what it means is left to the employer, except when
a full-time registered nurse or physician are available on-site as required, also under the Labor Code, specifically Art. 157
which provides:
Article 157. Emergency Medical and Dental Services. It shall be the duty of every employer to furnish his employees in any
locality with free medical and dental attendance and facilities consisting of:
(a) The services of a full-time registered nurse when the number of employees exceeds fifty (50) but not more than
two hundred (200) except when the employer does not maintain hazardous workplaces, in which case, the services
of a graduate first-aider shall be provided for the protection of workers, where no registered nurse is available. The
Secretary of Labor and Employment shall provide by appropriate regulations, the services that shall be required
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 where the number of employees does not exceed fifty (50) and shall determine by appropriate order, hazardous
workplaces for purposes of this Article;
(b) The services of a full-time registered nurse, a part-time physician and dentist, and an emergency clinic, when the
number of employees exceeds two hundred (200) but not more than three hundred (300); and
(c) The services of a full-time physician, dentist and a full-time registered nurse as well as a dental clinic and an
infirmary or emergency hospital with one bed capacity for every one hundred (100) employees when the number of
employees exceeds three hundred (300). (emphasis and underscoring supplied)
In the present case, there is no allegation that the company premises are hazardous. Neither is there any allegation on the
number of employees the company has. If Haos testimony4 would be believed, the company had only seven regular
employees and 20 contractual employees still short of the minimum 50 workers that an establishment must have for it to be
required to have a full-time registered nurse.
The Court can thus only determine whether the actions taken by petitioners when Bladimir became ill amounted to the
"necessary assistance" to ensure "adequate and immediate medical . . . attendance" to Bladimir as required under Art. 161 of
the Labor Code.
As found by the trial court and borne by the records, petitioner Haos advice for Bladimir to, as he did, take a 3-day rest and to
later have him brought to the nearest hospital constituted "adequate and immediate medical" attendance that he is mandated,
under Art. 161, to provide to a sick employee in an emergency.
Chicken pox is self-limiting. Hao does not appear to have a medical background. He may not be thus expected to have known
that Bladimir needed to be brought to a hospital with better facilities than the Caybiga Hospital, contrary to appellate courts
ruling.
AT ALL EVENTS, the alleged negligence of Hao cannot be considered as the proximate cause of the death of Bladimir.
Proximate cause is that which, in natural and continuous sequence, unbroken by an efficient intervening cause, produces
injury, and without which, the result would not have occurred.5 An injury or damage is proximately caused by an act or failure
to act, whenever it appears from the evidence in the case that the act or omission played a substantial part in bringing about or
actually causing the injury or damage, and that the injury or damage was either a direct result or a reasonably probable
consequence of the act or omission.6
Verily, the issue in this case is essentially factual in nature. The dissent, apart from adopting the appellate courts findings,
finds that Bladimir contracted chicken pox from a co-worker and Hao was negligent in not bringing that co-worker to the
nearest physician, or isolating him as well. This finding is not, however, borne by the records. Nowhere in the appellate courts
or even the trial courts decision is there any such definite finding that Bladimir contracted chicken pox from a co-worker. At
best, the only allusion to another employee being afflicted with chicken pox was when Hao testified that he knew it to heal
within three days as was the case of another worker, without reference, however, as to when it happened.7
On the issue of which of the two death certificates is more credible, the dissent, noting that Dr. Frias attended to Bladimir
during his "last illness," holds that the certificate which he issued citing chicken pox as antecedent cause deserves more
credence.
There appears, however, to be no conflict in the two death certificates on the immediate cause of Bladimirs death since both
cite cardio-respiratory arrest due to complications from pneumonia per QCGH, septicemia and chicken pox per Dr. Frias. In
fact, Dr. Frias admitted that the causes of death in both certificates were the same.8
Be that as it may, Dr. Frias could not be considered as Bladimirs attending physician, he having merely ordered Bladimirs
transfer to the QCGH after seeing him at the Caybiga Hospital. He thereafter left Bladimir to the care of doctors at QCGH,
returning to Capas, Tarlac at 4 oclock the following morning or eight hours after seeing Bladimir. As he himself testified upon
cross-examination, he did not personally attend to Bladimir anymore once the latter was brought to the ICU at QCGH. 9
It bears emphasis that a duly-registered death certificate is considered a public document and the entries therein are
presumed correct, unless the party who contests its accuracy can produce positive evidence establishing otherwise. 10 The
QCGH death certificate was received by the City Civil Registrar on April 17, 1995. Not only was the certificate shown by
positive evidence to be inaccurate. Its credibility, more than that issued by Dr. Frias, becomes more pronounced as note is
taken of the fact that he was not around at the time of death.
IN FINE, petitioner company and its co-petitioner manager Dennis Hao are not guilty of negligence.1avvphil
WHEREFORE, the petition is GRANTED. The challenged Decision of the Court of Appeals is REVERSED, and the complaint
is hereby DISMISSED.

G.R. No. 192531 November 12, 2014

BERNARDINA P. BARTOLOME, Petitioner,
vs.
SOCIAL SECURITY SYSTEM and SCANMAR MARITIME SERVICES, INC., Respondents.
DECISION
VELASCO, JR., J.:
Nature of the Case
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This Appeal, filed under Rule 43 of the Rules of Court, seeks to annul the March 17, 2010 Decision 1 of the Employees
Compensation Commission (ECC) in ECC Case No. SL-18483-0218-10, entitled Bernardina P. Bartolome v. Social Security
System (SSS) [Scanmar Maritime Services, Inc.}, declaring that petitioner is not a beneficiary of the deceased employee under
Presidential Decree No. (PD) 442, otherwise known as the Labor Code of the Philippines, as amended by PD 626.2
The Facts
John Colcol (John), born on June 9, 1983, was employed as electrician by Scanmar Maritime Services, Inc., on board the
vessel Maersk Danville, since February 2008. As such, he was enrolled under the government's Employees' Compensation
Program (ECP).3 Unfortunately, on June 2, 2008, an accident occurred on board the vessel whereby steel plates fell on John,
which led to his untimely death the following day.4
John was, at the time of his death, childless and unmarried. Thus, petitioner Bernardina P. Bartolome, Johns biological mother
and, allegedly, sole remaining beneficiary, filed a claim for death benefits under PD 626 with the Social Security System (SSS)
at San Fernando City, La Union. However, the SSS La Union office, in a letter dated June 10, 2009 5 addressed to petitioner,
denied the claim, stating:
We regret to inform you that wecannot give due course to your claim because you are no longer considered as the parent of
JOHN COLCOL as he was legally adopted by CORNELIO COLCOL based on documents you submitted to us.
The denial was appealed tothe Employees Compensation Commission (ECC), which affirmed the ruling of the SSS La Union
Branch through the assailed Decision, the dispositive portion of which reads:
WHEREFORE, the appealed decision is AFFIRMED and the claim is hereby dismissed for lack of merit.
SO ORDERED.6
In denying the claim, both the SSS La Union branch and the ECC ruled against petitioners entitlement to the death benefits
sought after under PD 626 on the ground she can no longer be considered Johns primary beneficiary. As culled from the
records, John and his sister Elizabeth were adopted by their great grandfather, petitioners grandfather, Cornelio Colcol
(Cornelio), by virtue of the Decision7 in Spec. Proc. No. 8220-XII of the Regional Trial Court in Laoag City dated February 4,
1985, which decree of adoption attained finality.8Consequently, as argued by the agencies, it is Cornelio who qualifies as
Johns primary beneficiary, not petitioner. Neither, the ECC reasoned, would petitioner qualify as Johns secondary beneficiary
even if it wereproven that Cornelio has already passed away. As the ECC ratiocinated:
Under Article 167 (j) of P.D. 626, as amended, provides (sic) that beneficiaries are the "dependent spouse until he remarries
and dependent children, who are the primary beneficiaries. In their absence, the dependent parentsand subject to the
restrictions imposed on dependent children, the illegitimate children and legitimate descendants who are the secondary
beneficiaries; Provided; that the dependent acknowledged natural child shall be considered as a primary beneficiary when
there are no other dependent children who are qualified and eligible for monthly income benefit."
The dependent parent referred to by the above provision relates to the legitimate parent of the covered member, as provided
for by Rule XV, Section 1 (c) (1) of the Amended Rules on Employees Compensation. This Commission believes that the
appellant is not considered a legitimate parent of the deceased, having given up the latter for adoption to Mr. Cornelio C.
Colcol. Thus, in effect, the adoption divested her of the statusas the legitimate parent of the deceased.
xxxx
In effect, the rights which previously belong [sic] to the biological parent of the adopted child shall now be upon the adopting
parent. Hence, in this case, the legal parent referred to by P.D. 626, as amended, as the beneficiary, who has the right to file
the claim, is the adoptive father of the deceased and not herein appellant.9 (Emphasis supplied)
Aggrieved, petitioner filed a Motion for Reconsideration, which was likewise denied by the ECC. 10 Hence, the instant petition.
The Issues
Petitioner raises the following issues in the petition:
ASSIGNMENT OF ERRORS
I. The Honorable ECCs Decision is contrary to evidence on record.
II. The Honorable ECC committed grave abuse in denying the just, due and lawful claims of the petitioner as a lawful
beneficiary of her deceased biological son.
III. The Honorable ECC committed grave abuse of discretion in not giving due course/denying petitioners otherwise
meritorious motion for reconsideration.11
In resolving the case, the pivotal issue is this: Are the biological parents of the covered, but legally adopted, employee
considered secondary beneficiaries and, thus, entitled, in appropriate cases, to receive the benefits under the ECP?
The Court's Ruling
The petition is meritorious.
The ECCs factual findings are not consistent with the evidence on record
To recall, one of the primary reasons why the ECC denied petitioners claim for death benefits is that eventhough she is Johns
biological mother, it was allegedly not proven that his adoptive parent, Cornelio, was no longer alive. As intimated by the ECC:
Moreover, there had been no allegation in the records as to whether the legally adoptive parent, Mr. Colcol, is dead, which
would immediately qualify the appellant [petitioner] for Social Security benefits. Hence, absent such proof of death of the
adoptive father, this Commission will presume him to be alive and well, and as such, is the one entitled to claim the benefit
660
being the primary beneficiary of the deaceased. Thus, assuming that appellant is indeed a qualified beneficiary under the
Social Security law, in view of her status as other beneficiary, she cannot claim the benefit legally provided by law to the
primary beneficiary, in this case the adoptive father since he is still alive.
We disagree with the factual finding of the ECC on this point.
Generally, findings of fact by administrative agencies are generally accorded great respect, if not finality, by the courts by
reason of the special knowledge and expertise of said administrative agenciesover matters falling under their
jurisdiction.12 However, in the extant case, the ECC had overlooked a crucial piece of evidence offered by the petitioner
Cornelios death certificate.13
Based on Cornelios death certificate, it appears that Johns adoptive father died on October 26, 1987, 14 or only less than three
(3) years since the decree of adoption on February 4, 1985, which attained finality. 15 As such, it was error for the ECC to have
ruled that it was not duly proven that the adoptive parent, Cornelio, has already passed away.
The rule limiting death benefits claims to the legitimate parents is contrary to law
This brings us to the question of whether or not petitioner is entitled to the death benefits claim in view of Johns work-related
demise. The pertinent provision, in this regard, is Article 167 (j) of the Labor Code, as amended, which reads:
ART. 167. Definition of terms. - Asused in this Title unless the context indicates otherwise:
xxxx
(j) 'Beneficiaries' means the dependent spouse until he remarries and dependent children, who are the primary beneficiaries.
In their absence, the dependent parents and subject to the restrictions imposed on dependent children, the illegitimate children
and legitimate descendants who are the secondary beneficiaries; Provided, that the dependent acknowledged natural child
shall be considered as a primary beneficiary when there are no other dependent children who are qualified and eligible for
monthly income benefit. (Emphasis supplied)
Concurrently, pursuant to the succeeding Article 177(c) supervising the ECC "[T]o approve rules and regulations governing the
processing of claims and the settlement of disputes arising therefrom as prescribed by the System," the ECC has issued the
Amended Rules on Employees Compensation, interpreting the above-cited provision as follows:
RULE XV BENEFICIARIES
SECTION 1. Definition. (a) Beneficiaries shall be either primary or secondary, and determined atthe time of employees death.
(b) The following beneficiaries shall be considered primary:
(1) The legitimate spouse living with the employee at the time of the employees death until he remarries;
and
(2) Legitimate, legitimated, legally adopted or acknowledged natural children, who are unmarried not
gainfully employed, not over 21 years of age, or over 21 years of age provided that he is incapacitated and
incapable of self - support due to physicalor mental defect which is congenital or acquired during minority;
Provided, further, that a dependent acknowledged natural child shall be considered as a primary beneficiary
only when there are no other dependent children who are qualified and eligible for monthly income benefit;
provided finally, that if there are two or more acknowledged natural children, they shall be counted from the
youngest and without substitution, but not exceeding five.
(c) The following beneficiaries shall be considered secondary:
(1) The legitimate parentswholly dependent upon the employee for regular support;
(2) The legitimate descendants and illegitimate children who are unmarried, not gainfully employed, and not
over 21 years of age, or over 21 years of age providedthat he is incapacitated and incapable of self - support
dueto physical or mental defect which is congenital or acquired during minority. (Emphasis supplied)
Guilty of reiteration, the ECC denied petitioners claim on the ground that she is no longer the deceaseds legitimate parent, as
required by the implementing rules. As held by the ECC, the adoption decree severed the relation between John and
petitioner, effectively divesting her of the status of a legitimate parent, and, consequently, that of being a secondary
beneficiary.
We disagree.
a. Rule XV, Sec. 1(c)(1) of the Amended Rules on Employees Compensation deviates from the clear language of Art. 167 (j)
of the Labor Code, as amended
Examining the Amended Rules on Employees Compensation in light of the Labor Code, as amended, it is at once apparent
that the ECC indulged in an unauthorized administrative legislation. In net effect, the ECC read into Art. 167 of the Code an
interpretation not contemplated by the provision. Pertinent in elucidating on this point isArticle 7 of the Civil Code of the
Philippines, which reads:
Article 7. Laws are repealed only by subsequent ones, and their violation or non-observance shall not beexcused by disuse, or
custom or practice to the contrary.
When the courts declared a law to be inconsistent with the Constitution, the former shall be void and the latter shall govern.
Administrative or executive acts, orders and regulations shall be valid only when they are not contrary to the laws or the
Constitution.(Emphasis supplied)
As applied, this Court held in Commissioner of Internal Revenue v. Fortune Tobacco Corporation16 that:
661
As we have previously declared, rule-making power must be confined to details for regulating the mode or proceedings in
order to carry into effect the law as it has been enacted, and it cannot be extended to amend or expand the statutory
requirements or to embrace matters not covered by the statute. Administrative regulations must always be in harmony with the
provisions of the law because any resulting discrepancy between the two will always be resolved in favor of the basic law.
(Emphasis supplied)
Guided by this doctrine, We find that Rule XV of the Amended Rules on Employees Compensation is patently a wayward
restriction of and a substantial deviation from Article 167 (j) of the Labor Code when it interpreted the phrase "dependent
parents" to refer to "legitimate parents."
It bears stressing that a similar issue in statutory construction was resolved by this Court in Diaz v. Intermediate Appellate
Court17 in this wise:
It is Our shared view that the word "relatives" should be construed in its general acceptation. Amicus curiae Prof. Ruben
Balane has this to say:
The term relatives, although used many times in the Code, is not defined by it. In accordancetherefore with the canons of
statutory interpretation, it should beunderstood to have a general and inclusive scope, inasmuch as the term is a general one.
Generalia verba sunt generaliter intelligenda. That the law does not make a distinction prevents us from making one: Ubi lex
non distinguit, nec nos distinguera debemus. xxx
According to Prof. Balane, to interpret the term relatives in Article 992 in a more restrictive sense thanit is used and intended is
not warranted by any rule ofinterpretation. Besides, he further states that when the law intends to use the termin a more
restrictive sense, it qualifies the term with the word collateral, as in Articles 1003 and 1009 of the New Civil Code.
Thus, the word "relatives" is a general term and when used in a statute it embraces not only collateral relatives but also all the
kindred of the person spoken of, unless the context indicates that it was used in a more restrictive or limited sense which as
already discussed earlier, is not so in the case at bar. (Emphasis supplied)
In the same vein, the term "parents" in the phrase "dependent parents" in the afore-quoted Article 167 (j) of the Labor Code is
usedand ought to be taken in its general sense and cannot be unduly limited to "legitimate parents" as what the ECC did. The
phrase "dependent parents" should, therefore, include all parents, whether legitimate or illegitimate and whether by nature or
by adoption. When the law does not distinguish, one should not distinguish. Plainly, "dependent parents" are parents, whether
legitimate or illegitimate, biological or by adoption,who are in need of support or assistance.
Moreover, the same Article 167 (j),as couched, clearly shows that Congress did not intend to limit the phrase "dependent
parents" to solely legitimate parents. At the risk of being repetitive, Article 167 provides that "in their absence, the dependent
parents and subject to the restrictions imposed on dependent children, the illegitimate children and legitimate descendants
who are secondary beneficiaries." Had the lawmakers contemplated "dependent parents" to mean legitimate parents, then it
would have simply said descendants and not "legitimate descendants." The manner by which the provision in question was
crafted undeniably show that the phrase "dependent parents" was intended to cover all parents legitimate, illegitimate or
parents by nature or adoption.
b. Rule XV, Section 1(c)(1) of the Amended Rules on Employees Compensation is in contravention of the equal protection
clause
To insist that the ECC validly interpreted the Labor Code provision is an affront to the Constitutional guarantee of equal
protection under the laws for the rule, as worded, prevents the parents of an illegitimate child from claiming benefits under Art.
167 (j) of the Labor Code, as amended by PD 626. To Our mind, such postulation cannot be countenanced.
As jurisprudence elucidates, equal protection simply requires that all persons or things similarly situated should be treated
alike, both as to rights conferred and responsibilities imposed. It requires public bodies and institutions to treat similarly
situated individuals in a similar manner.18 In other words, the concept of equal justice under the law requires the state to
govern impartially, and it may not drawdistinctions between individuals solely on differences that are irrelevant to a legitimate
governmental objective.19
The concept of equal protection, however, does not require the universal application of the laws to all persons or things without
distinction. What it simply requires isequality among equals as determined according to a valid classification. Indeed, the equal
protection clause permits classification. Such classification, however, to be valid must pass the test of reasonableness. The
test has four requisites: (1) The classification rests on substantial distinctions; (2) It is germane tothe purpose of the law; (3) It
is not limited to existing conditions only; and (4) It applies equally to all members of the same class. "Superficial differences do
not make for a valid classification."20
In the instant case, there is no compelling reasonable basis to discriminate against illegitimate parents. Simply put, the above-
cited rule promulgated by the ECC that limits the claim of benefits to the legitimate parents miserably failed the test of
reasonableness since the classification is not germane to the law being implemented. We see no pressing government
concern or interest that requires protection so as to warrant balancing the rights of unmarried parents on one hand and the
rationale behind the law on the other. On the contrary, the SSS can better fulfill its mandate, and the policy of PD 626 that
employees and their dependents may promptly secure adequate benefits in the event of work-connected disability or death -
will be better served if Article 167 (j) of the Labor Code is not so narrowly interpreted.

662
There being no justification for limiting secondary parent beneficiaries to the legitimate ones, there can be no other course of
action to take other than to strikedown as unconstitutional the phrase "illegitimate" as appearing in Rule XV, Section 1(c)(1) of
the Amended Rules on Employees Compensation.
Petitioner qualifies as Johns dependent parent
In attempting to cure the glaring constitutional violation of the adverted rule, the ECC extended illegitimate parents an
opportunity to file claims for and receive death benefitsby equating dependency and legitimacy to the exercise of parental
authority. Thus, as insinuated by the ECC in its assailed Decision, had petitioner not given up John for adoption, she could
have still claimed death benefits under the law.
To begin with, nowhere in the law nor in the rules does it say that "legitimate parents" pertain to those who exercise parental
authority over the employee enrolled under the ECP. Itwas only in the assailed Decision wherein such qualification was made.
In addition, assuming arguendothat the ECC did not overstep its boundaries in limiting the adverted Labor Code provision to
the deceaseds legitimate parents, and that the commission properly equated legitimacy to parental authority, petitioner can
still qualify as Johns secondary beneficiary.
True, when Cornelio, in 1985, adoptedJohn, then about two (2) years old, petitioners parental authority over John was
severed. However, lest it be overlooked, one key detail the ECC missed, aside from Cornelios death, was that when the
adoptive parent died less than three (3) years after the adoption decree, John was still a minor, at about four (4) years of age.
Johns minority at the time of his adopters death is a significant factor in the case at bar. Under such circumstance, parental
authority should be deemed to have reverted in favor of the biological parents. Otherwise, taking into account Our consistent
ruling that adoption is a personal relationship and that there are no collateral relatives by virtue of adoption,21 who was then left
to care for the minor adopted child if the adopter passed away?
To be sure, reversion of parental authority and legal custody in favor of the biological parents is not a novel concept. Section
20 of Republic Act No. 855222 (RA 8552), otherwise known as the Domestic Adoption Act, provides:
Section 20. Effects of Rescission. If the petition [for rescission of adoption] is granted, the parental authority of the adoptee's
biological parent(s), if known, or the legal custody of the Department shall be restored if the adoptee is still a minoror
incapacitated. The reciprocal rights and obligations of the adopter(s) and the adoptee to each other shall be extinguished.
(emphasis added)
The provision adverted to is applicable herein by analogy insofar as the restoration of custody is concerned. The manner
herein of terminating the adopters parental authority, unlike the grounds for rescission, 23 justifies the retention of vested rights
and obligations between the adopter and the adoptee, while the consequent restoration of parental authority in favor of the
biological parents, simultaneously, ensures that the adoptee, who is still a minor, is not left to fend for himself at such a tender
age.
To emphasize, We can only apply the rule by analogy, especially since RA 8552 was enacted after Cornelios death. Truth be
told, there is a lacuna in the law as to which provision shall govern contingencies in all fours with the factual milieu of the
instant petition. Nevertheless, We are guided by the catena of cases and the state policies behind RA 8552 24 wherein the
paramount consideration is the best interest of the child, which We invoke to justify this disposition. It is, after all, for the best
interest of the child that someone will remain charged for his welfare and upbringing should his or her adopter fail or is
rendered incapacitated to perform his duties as a parent at a time the adoptee isstill in his formative years, and, to Our mind, in
the absence or, as in this case, death of the adopter, no one else could reasonably be expected to perform the role of a parent
other than the adoptees biological one.
Moreover, this ruling finds support on the fact that even though parental authority is severed by virtue of adoption, the ties
between the adoptee and the biological parents are not entirely eliminated. To demonstrate, the biological parents, insome
instances, are able to inherit from the adopted, as can be gleaned from Art. 190 of the Family Code:
Art. 190. Legal or intestate succession to the estate of the adopted shall be governed by the following rules:
xxx
(2) When the parents, legitimate or illegitimate, or the legitimate ascendants of the adopted concur withthe adopter, they shall
divide the entire estate, one-half tobe inherited by the parents or ascendants and the other half, by the adopters;
xxx
(6) When only collateral blood relatives of the adopted survive, then the ordinary rules of legal or intestate succession shall
apply.
Similarly, at the time of Cornelio Colcols death, which was prior to the effectivity of the Family Code, the governing provision is
Art. 984 of the New Civil Code, which provides:
Art. 984. In case of the death of an adopted child, leaving no children or descendants, his parents and relatives by
consanguinity and not by adoption, shall be his legal heirs.
From the foregoing, it is apparent that the biological parents retain their rights of succession tothe estate of their child who was
the subject of adoption. While the benefits arising from the death of an SSS covered employee do not form part of the estateof
the adopted child, the pertinent provision on legal or intestate succession at least reveals the policy on the rights of the
biological parents and those by adoption vis--vis the right to receive benefits from the adopted. In the same way that certain
rights still attach by virtue of the blood relation, so too should certain obligations, which, We rule, include the exercise of
663
parental authority, in the event of the untimely passing of their minor offsprings adoptive parent. We cannot leave
undetermined the fate of a minor child whose second chance ata better life under the care of the adoptive parents was
snatched from him by deaths cruel grasp. Otherwise, the adopted childs quality of life might have been better off not being
adopted at all if he would only find himself orphaned in the end. Thus, We hold that Cornelios death at the time of
Johnsminority resulted in the restoration of petitioners parental authority over the adopted child.
On top of this restoration of parental authority, the fact of petitioners dependence on John can be established from the
documentary evidence submitted to the ECC. As it appears in the records, petitioner, prior to Johns adoption, was a
housekeeper. Her late husband died in 1984, leaving her to care for their seven (7) children. But since she was unable to "give
a bright future to her growing children" as a housekeeper, she consented to Cornelios adoption of Johnand Elizabeth in 1985.
Following Cornelios death in 1987, so records reveal, both petitioner and John repeatedly reported "Brgy. Capurictan,
Solsona, Ilocos Norte" as their residence. In fact, this veryaddress was used in Johns Death Certificate 25 executed in Brazil,
and in the Report of Personal Injury or Loss of Life accomplished by the master of the vessel boarded by John.26 Likewise, this
is Johns known address as per the ECCs assailed Decision.27Similarly, this same address was used by petitioner in filing her
claim before the SSS La Union branch and, thereafter, in her appeal with the ECC. Hence, it can be assumed that aside from
having been restored parental authority over John, petitioner indeed actually execised the same, and that they lived together
under one roof.
Moreover, John, in his SSS application,28 named petitioner as one of his beneficiaries for his benefits under RA 8282,
otherwise known as the "Social Security Law." While RA 8282 does not cover compensation for work-related deaths or injury
and expressly allows the designation of beneficiaries who are not related by blood to the member unlike in PD 626, Johns
deliberate act of indicating petitioner as his beneficiary at least evinces that he, in a way, considered petitioner as his
dependent. Consequently, the confluence of circumstances from Cornelios death during Johns minority, the restoration
ofpetitioners parental authority, the documents showing singularity of address, and Johns clear intention to designate
petitioner as a beneficiary - effectively made petitioner, to Our mind, entitled to death benefit claims as a secondary beneficiary
under PD 626 as a dependent parent.
All told, the Decision of the ECC dated March 17, 2010 is bereft of legal basis. Cornelios adoption of John, without more, does
not deprive petitioner of the right to receive the benefits stemming from Johns death as a dependent parent given Cornelios
untimely demise during Johns minority. Since the parent by adoption already died, then the death benefits under the
Employees' Compensation Program shall accrue solely to herein petitioner, John's sole remaining beneficiary.
WHEREFORE, the petition is hereby GRANTED. The March 17, 2010 Decision of the Employees' Compensation
Commission, in ECC Case No. SL-18483-0218-10, is REVERSED and SET ASIDE. The ECC is hereby directed to release the
benefits due to a secondary beneficiary of the deceased covered employee John Colcol to petitioner Bernardina P. Bartolome.
No costs.
SO ORDERED.

[ G.R. No. 167050, June 01, 2011 ]

SOCIAL SECURITY COMMISSION, PETITIONER, VS. RIZAL POULTRY AND LIVESTOCK ASSOCIATION, INC., BSD
AGRO INDUSTRIAL DEVELOPMENT CORPORATION AND BENJAMIN SAN DIEGO, RESPONDENTS.
DECISION
PEREZ, J.:
This petition for certiorari challenges the Decision[1] dated 20 September 2004 and Resolution[2] dated 9 February 2005 of the
Court of Appeals. The instant case stemmed from a petition filed by Alberto Angeles (Angeles) before the Social Security
Commission (SSC) to compel respondents Rizal Poultry and Livestock Association, Inc. (Rizal Poultry) or BSD Agro Industrial
Development Corporation (BSD Agro) to remit to the Social Security System (SSS) all contributions due for and in his behalf.
Respondents countered with a Motion to Dismiss[3] citing rulings of the National Labor Relations Commission (NLRC) and
Court of Appeals regarding the absence of employer-employee relationship between Angeles and the respondents.

As a brief backgrounder, Angeles had earlier filed a complaint for illegal dismissal against BSD Agro and/or its owner,
Benjamin San Diego (San Diego). The Labor Arbiter initially found that Angeles was an employee and that he was illegally
dismissed. On appeal, however, the NLRC reversed the Labor Arbiter's Decision and held that no employer-employee
relationship existed between Angeles and respondents. The ruling was anchored on the finding that the duties performed by
Angeles, such as carpentry, plumbing, painting and electrical works, were not independent and integral steps in the essential
operations of the company, which is engaged in the poultry business.[4] Angeles elevated the case to the Court of
Appeals via petition for certiorari. The appellate court affirmed the NLRC ruling and upheld the absence of employer-
employee relationship.[5] Angeles moved for reconsideration but it was denied by the Court of Appeals.[6] No further appeal
was undertaken, hence, an entry of judgment was made on 26 May 2001. [7]

At any rate, the SSC did not take into consideration the decision of the NLRC. It denied respondents' motion to dismiss in an
Order dated 19 February 2002. The SSC ratiocinated, thus:
664
Decisions of the NLRC and other tribunals on the issue of existence of employer-employee relationship between parties are
not binding on the Commission. At most, such finding has only a persuasive effect and does not constitute res judicata as a
ground for dismissal of an action pending before Us. While it is true that the parties before the NLRC and in this case are the
same, the issues and subject matter are entirely different. The labor case is for illegal dismissal with demand for backwages
and other monetary claims, while the present action is for remittance of unpaid SS[S] contributions. In other words, although
in both suits the respondents invoke lack of employer-employee relationship, the same does not proceed from identical causes
of action as one is for violation of the Labor Code while the instant case is for violation of the SS[S] Law.

Moreover, the respondents' arguments raising the absence of employer-employee relationship as a defense already traverse
the very issues of the case at bar, i.e., the petitioner's fact of employment and entitlement to SS[S] coverage. Generally,
factual matters should not weigh in resolving a motion to dismiss when it is based on the ground of failure to state a cause of
action, but rather, merely the sufficiency or insufficienciy of the allegations in the complaint. x x x. In this respect, it must be
observed that the petitioner very categorically set forth in his Petition, that he was employed by the respondent(s) from 1985 to
1997.[8]

A subsequent motion for reconsideration filed by respondents was likewise denied on 11 June 2002. The SSC reiterated that
the principle of res judicata does not apply in this case because of the "absence of the indispensable element of `identity of
cause of action.'"[9]

Unfazed, respondents sought recourse before the Court of Appeals by way of a petition for certiorari. The Court of Appeals
reversed the rulings of the SSC and held that there is a common issue between the cases before the SSC and in the NLRC;
and it is whether there existed an employer-employee relationship between Angeles and respondents. Thus, the case falls
squarely under the principle of res judicata, particularly under the rule on conclusiveness of judgment, as enunciated in Smith
Bell and Co. v. Court of Appeals.[10]

The Court of Appeals disposed, thus:

WHEREFORE, the petition is GRANTED. The Order dated February 19, 2000 and the Resolution dated June 11, 2002
rendered by public respondent Social Security Commissoin in SSC Case No. 9-15225-01 are hereby REVERSED and SET
ASIDE and the respondent commission is ordered to DISMISS Social Security Commission Case No. 9-15225-01.[11]

After the denial of their motion for reconsideration in a Resolution [12] dated 9 February 2005, petitioner filed the instant petition.

For our consideration are the issues raised by petitioner, to wit:

WHETHER OR NOT THE DECISION OF THE NLRC AND THE COURT OF APPEALS, FINDING NO EMPLOYER-
EMPLOYEE RELATIONSHIP, CONSTITUTES RES JUDICATA AS A RULE ON CONCLUSIVENESS OF JUDGMENT AS TO
PRECLUDE THE RELITIGATION OF THE ISSUE OF EMPLOYER-EMPLOYEE RELATIONSHIP IN A SUBSEQUENT CASE
FILED BEFORE THE PETITIONER.

WHETHER OR NOT RESPONDENT COURT OF APPEALS MAY ORDER OUTRIGHT THE DISMISSAL OF THE SSC CASE
IN THE CERTIORARI PROCEEDINGS BEFORE IT.[13]

SSC maintains that the prior judgment rendered by the NLRC and Court of Appeals, that no employer-employee relationship
existed between the parties, does not have the force of res judicata by prior judgment or as a rule on the conclusiveness of
judgment. It contends that the labor dispute and the SSC claim do not proceed from the same cause of action in that the
action before SSC is for non-remittance of SSS contributions while the NLRC case was for illegal dismissal. The element of
identity of parties is likewise unavailing in this case, according to SSC. Aside from SSS intervening, another employer, Rizal
Poultry, was added as respondent in the case lodged before the SSC. There is no showing that BSD Agro and Rizal Poultry
refer to the same juridical entity. Thus, the finding of absence of employer-employee relationship between BSD Agro and
Angeles could not automatically extend to Rizal Poultry. Consequently, SSC assails the order of dismissal of the case lodged
before it.

SSC also claims that the evidence submitted in the SSC case is different from that adduced in the NLRC case. Rather than
ordering the dismissal of the SSC case, the Court of Appeals should have allowed SSC to resolve the case on its merits by
applying the Social Security Act of 1997.

Respondents assert that the findings of the NLRC are conclusive upon the SSC under the principle of res judicataand in line
with the ruling in Smith Bell v. Court of Appeals. Respondents argue that there is substantially an identity of parties in the
NLRC and SSC cases because Angeles himself, in his Petition, treated Rizal Poultry, BSD Agro and San Diego as one and
665
the same entity.

Respondents oppose the view proffered by SSC that the evidence to prove the existence of employer-employee relationship
obtaining before the NLRC and SSS are entirely different. Respondents opine that the definition of an employee always
proceeds from the existence of an employer-employee relationship.

In essence, the main issue to be resolved is whether res judicata applies so as to preclude the SSC from resolving anew the
existence of employer-employee relationship, which issue was previously determined in the NLRC case.

Res judicata embraces two concepts: (1) bar by prior judgment as enunciated in Rule 39, Section 47(b) of the Rules of Civil
Procedure; and (2) conclusiveness of judgment in Rule 39, Section 47(c). [14]

There is "bar by prior judgment" when, as between the first case where the judgment was rendered and the second case that
is sought to be barred, there is identity of parties, subject matter, and causes of action. In this instance, the judgment in the
first case constitutes an absolute bar to the second action.[15]

But where there is identity of parties in the first and second cases, but no identity of causes of action, the first judgment is
conclusive only as to those matters actually and directly controverted and determined and not as to matters merely involved
therein. This is the concept of res judicata known as "conclusiveness of judgment." Stated differently, any right, fact or matter
in issue directly adjudicated or necessarily involved in the determination of an action before a competent court in which
judgment is rendered on the merits is conclusively settled by the judgment therein and cannot again be litigated between the
parties and their privies, whether or not the claim, demand, purpose, or subject matter of the two actions is the same. [16]

Thus, if a particular point or question is in issue in the second action, and the judgment will depend on the determination of
that particular point or question, a former judgment between the same parties or their privies will be final and conclusive in the
second if that same point or question was in issue and adjudicated in the first suit. Identity of cause of action is not required
but merely identity of issue.[17]

The elements of res judicata are: (1) the judgment sought to bar the new action must be final; (2) the decision must have been
rendered by a court having jurisdiction over the subject matter and the parties; (3) the disposition of the case must be a
judgment on the merits; and (4) there must be as between the first and second action, identity of parties, subject matter, and
causes of action. Should identity of parties, subject matter, and causes of action be shown in the two cases, then res
judicata in its aspect as a "bar by prior judgment" would apply. If as between the two cases, only identity of parties can be
shown, but not identical causes of action, then res judicata as "conclusiveness of judgment" applies.[18]

Verily, the principle of res judicata in the mode of "conclusiveness of judgment" applies in this case. The first element is
present in this case. The NLRC ruling was affirmed by the Court of Appeals. It was a judicial affirmation through a decision
duly promulgated and rendered final and executory when no appeal was undertaken within the reglementary period. The
jurisdiction of the NLRC, which is a quasi-judicial body, was undisputed. Neither can the jurisdiction of the Court of Appeals
over the NLRC decision be the subject of a dispute. The NLRC case was clearly decided on its merits; likewise on the merits
was the affirmance of the NLRC by the Court of Appeals.

With respect to the fourth element of identity of parties, we hold that there is substantial compliance.

The parties in SSC and NLRC cases are not strictly identical. Rizal Poultry was impleaded as additional respondent in the
SSC case. Jurisprudence however does not dictate absolute identity but only substantial identity. [19] There is substantial
identity of parties when there is a community of interest between a party in the first case and a party in the second case, even
if the latter was not impleaded in the first case.[20]

BSD Agro, Rizal Poultry and San Diego were litigating under one and the same entity both before the NLRC and the SSC.
Although Rizal Poultry is not a party in the NLRC case, there are numerous indications that all the while, Rizal Poultry was
also an employer of Angeles together with BSD Agro and San Diego. Angeles admitted before the NLRC that he was
employed by BSD Agro and San Diego from 1985 until 1997.[21] He made a similar claim in his Petition before the SSC
including as employer Rizal Poultry as respondent.[22] Angeles presented as evidence before the SSC his Identification Card
and a Job Order to prove his employment in Rizal Poultry. He clarified in his Opposition to the Motion to Dismiss [23] filed
before SSC that he failed to adduce these as evidence before the NLRC even if it would have proven his employment with
BSD Agro. Most significantly, the three respondents, BSD Agro, Rizal Poultry and San Diego, litigated as one entity before the
SSC. They were represented by one counsel and they submitted their pleadings as such one entity. Certainly, and at the very
666
least, a community of interest exists among them. We therefore rule that there is substantial if not actual identity of parties
both in the NLRC and SSC cases.

As previously stated, an identity in the cause of action need not obtain in order to apply res judicata by "conclusiveness of
judgment." An identity of issues would suffice.

The remittance of SSS contributions is mandated by Section 22(a) of the Social Security Act of 1997, viz:
SEC. 22. Remittance of Contributions. - (a) The contributions imposed in the preceding Section shall be remitted to the SSS
within the first ten (10) days of each calendar month following the month for which they are applicable or within such time as
the Commission may prescribe. Every employer required to deduct and to remit such contributions shall be liable for their
payment and if any contribution is not paid to the SSS as herein prescribed, he shall pay besides the contribution a penalty
thereon of three percent (3%) per month from the date the contribution falls due until paid. x x x.

The mandatory coverage under the Social Security Act is premised on the existence of an employer-employee relationship.[24]
This is evident from Section 9(a) which provides:
SEC. 9. Coverage. - (a) Coverage in the SSS shall be compulsory upon all employees not over sixty (60) years of age and
their employers: Provided, That in the case of domestic helpers, their monthly income shall not be less than One thousand
pesos (P1,000.00) a month x x x.

Section 8(d) of the same law defines an employee as any person who performs services for an employer in which either or
both mental or physical efforts are used and who receives compensation for such services, where there is an employer-
employee relationship. The illegal dismissal case before the NLRC involved an inquiry into the existence or non-existence of
an employer-employee relationship. The very same inquiry is needed in the SSC case. And there was no indication therein
that there is an essential conceptual difference between the definition of "employee" under the Labor Code and the Social
Security Act.

In the instant case, therefore, res judicata in the concept of "conclusiveness of judgment" applies. The judgment in the NLRC
case pertaining to a finding of an absence of employer-employee relationship between Angeles and respondents is conclusive
on the SSC case.

A case in point is Smith Bell and Co. v. Court of Appeals[25] which, contrary to SSC, is apt and proper reference. Smith Bell
availed of the services of private respondents to transport cargoes from the pier to the company's warehouse. Cases were
filed against Smith Bell, one for illegal dismissal before the NLRC and the other one with the SSC, to direct Smith Bell to report
all private respondents to the SSS for coverage. While the SSC case was pending before the Court of Appeals, Smith Bell
presented the resolution of the Supreme Court in G.R. No. L-44620, which affirmed the NLRC, Secretary of Labor, and Court
of Appeals' finding that no employer-employee relationship existed between the parties, to constitute as bar to the SSC case.
We granted the petition of Smith Bell and ordered the dismissal of the case. We held that the controversy is squarely covered
by the principle of res judicata, particularly under the rule on "conclusiveness of judgment." Therefore, the judgment in G.R.
No. L-44620 bars the SSC case, as the relief sought in the latter case is inextricably related to the ruling in G.R. No. L-44620
to the effect that private respondents are not employees of Smith Bell.

The fairly recent case of Co v. People,[26] likewise applies to the present case. An information was filed against Co by private
respondent spouses who claim to be employees of the former for violation of the Social Security Act, specifically for non-
remittance of SSS contributions. Earlier, respondent spouses had filed a labor case for illegal dismissal. The NLRC finally
ruled that there was no employer-employee relationship between her and respondent spouses. Co then filed a motion to
quash the information, arguing that the facts alleged in the Information did not constitute an offense because respondent
spouses were not her employees. In support of her motion, she cited the NLRC ruling. This Court applied Smith Bell and
declared that the final and executory NLRC decision to the effect that respondent spouses were not the employees of
petitioner is a ruling binding in the case for violation of the Social Security Act. The Court further stated that the doctrine of
"conclusiveness of judgment" also applies in criminal cases. [27]

Applying the rule on res judicata by "conclusiveness of judgment" in conjunction with the aforecited cases, the Court of
Appeals aptly ruled, thus:
In SSC Case No. 9-15225-01, private respondent Angeles is seeking to compel herein petitioners to remit to the Social
Security System (SSS) all contributions due for and in his behalf, whereas in NLRC NCR CA 018066-99 (NLRC RAB-IV-5-
9028-97 RI) private respondent prayed for the declaration of his dismissal illegal. In SSC No. 9-15225-01, private respondent,
in seeking to enforce his alleged right to compulsory SSS coverage, alleged that he had been an employee of petitioners;
whereas to support his position in the labor case that he was illegally dismissed by petitioners BSD Agro and/or Benjamin San
667
Diego, he asserted that there was an employer-employee relationship existing between him and petitioners at the time of his
dismissal in 1997. Simply stated, the issue common to both cases is whether there existed an employer-employee
relationship between private respondent and petitioners at the time of the acts complaint of were committed both in SSC Case
No. 9-15225-01 and NLRC NCR CA 018066-99 (NLRC RAB-IV-5-9028-977-RI).

The issue of employer-employee relationship was laid to rest in CA GR. SP. No. 55383, through this Court's Decision dated
October 27, 2000 which has long attained finality. Our affirmation of the NLRC decision of May 18, 1999 was an adjudication
on the merits of the case.

Considering the foregoing circumstances, the instant case falls squarely under the umbrage of res judicata,particularly, under
the rule on conclusiveness of judgment. Following this rule, as enunciated in Smith Bell and Co. and Carriaga, Jr. cases, We
hold that the relief sought in SSC Case No. 9-15225-01 is inextricably related to Our ruling in CA GR SP No. 55383 to the
effect that private respondent was not an employee of petitioners.[28]

The NLRC decision on the absence of employer-employee relationship being binding in the SSC case, we affirm the dismissal
by Court of Appeals of the SSC case.

WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals Decision dated 20 September 2004, as
well as its Resolution dated 9 February 2005, is AFFIRMED.

SO ORDERED.

G.R. No. 186509 July 29, 2013

PHILMAN MARINE AGENCY, INC. (now DOHLE-PHILMAN MANNING AGENCY, INC.) and/or DOHLE (10M)
LIMITED, Petitioners,
vs.
ARMANDO S. CABANBAN, Respondent.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari1 the challenge to the December 10, 2008 decision2 and the February 18,
20093 resolution of the Court of Appeals (CA) in CA-G.R. SP No. 105079 setting aside the February 29, 2008 decision 4 and
the June 10, 2008 resolution5 of the National Labor Relations Commission (NLRC) in NLRC NCR Case No. OFW (M) 03-07-
1666-00, NLRC NCR CA No. 043223-05. The reversed NLRC decision affirmed the December 29, 2004 decision 6 of the Labor
Arbiter (LA) dismissing the complaint filed by respondent Armando S. Cabanban against Philippine Transmarine Carriers, Inc.
(PTCI), later on substituted by petitioner Philman Marine Agency, Inc. (Philman), Carlos Salinas and petitioner DOHLE (IOM)
Limited (DOHLE).
The Factual Antecedents
On September 15, 2002, Armando entered into a nine-month contract of employment7 with DOHLE, through its local agent
PTCI. He was assigned to work as a 2nd mate on board the vessel "INGA-S." His basic monthly salary was US$966.00 on a
48-hour workweek, with a fixed overtime pay of US$581.00 a month and vacation leave pay of US$161.00 for five days per
month.
On September 9, 2002, Armando underwent the requisite pre-employment medical examination (PEME) at PTCIs accredited
medical clinic,8 which found him fit for sea service.9 During his medical examination, he declared that he had no history of high
blood pressure and heart trouble, and had not previously consulted any doctor relative to any disease. 10 Armando was
deployed on October 14, 2002.
On February 9, 2003, while on board the vessel "INGA-S," Armando felt dizzy and complained of chest pain. He was
immediately brought to the Fujairah Port Clinic, UAE, and was admitted to the Coronary Care Unit after an initial diagnosis of
"Unstable Angina."11 On February 13, 2003, Armando was discharged from the hospital but was re-admitted four days after
due to recurrent angina at rest. On February 21, 2003, Dr. Mohamed Dipti Ranjan, the Chief Medical Officer of Fujairah Port
Clinic, UAE, stated in Armandos medical report that "[h]e is a known case of HT, on atenolol 50 mg od for five years." 12
On February 22, 2003, Armando underwent Cardiac Catheterisation and Angiography to check for damages to his coronary
arteries. The result of the angiography indicated "essentially normal coronary arteries with good left ventricular function." 13 The
final diagnosis of Armandos illness, issued on February 23, 2003, stated "Microvascular Unstable Angina Class III B
established on medical treatment, Type II-A Hyperlipidemia, HT, Obesity, Alcoholism." Dr. Ranjan gave the following treatment
and advice:14
1. Medications as advised.
2. Unfit for duty for 4 weeks from today.
3. FIT FOR AIR TRAVEL.
668
 4. REPATRIATION on Medical ground.
5. Risk stratification after 3 weeks by TMT/Stress Thallium 201/Technetium 99/sestambi scan.
Following Dr. Ranjans recommendation, the petitioners repatriated Armando on medical ground. Armando arrived in the
Philippines on February 23, 2003 and upon instruction, he proceeded to PTCIs companydesignated physician, Dr. Natalio
Alegre II, at the St. Lukes Medical Center. Dr. Alegre treated Armando and monitored his condition for three months. During
the course of the treatment, Armando underwent several laboratory tests,15which included an ECG, CR-M, Troponin,
spirometry and cardiac imaging. After the three-month close monitoring, treatment and consultation with the attending
cardiologist, Dr. Marietta Crisostomo, Dr. Alegre declared Armando "fit to work" on May 12, 2003. 16
Despite the certification of Dr. Alegre as to Armandos fitness to resume work, Armando nevertheless claimed otherwise. In a
letter17 dated June 25, 2003, Armando demanded from PTCI payment of permanent disability benefits under the Philippine
Overseas Employment Agency Standard Employment Contract (POEA-SEC).
The petitioners did not heed Armandos demand, prompting Armando to file, on July 4, 2003, a complaint18against the
petitioners for injury/illness compensation benefit under a disability grade of 7, according to the POEASEC, in the amount of
US$20,900.00. In the complaint, he indicated "Coronary Artery Disease" (CAD) as the ground for his claim for disability
benefits. Armando also sought payment of the balance of his sickness allowance equivalent to two months, unpaid/underpaid
salary amounting to US$966.00, vacation leave pay, sick leave pay, moral and exemplary damages, and attorneys fees. On
September 9, 2003, Armando amended his complaint19 to include "hypertension, hyperlipidemia, obesity and alcoholism" as
grounds for his disability benefits claim.
On August 11, 2003, Armando went to the UST Hospital and consulted Dr. Patrick Gerard L. Moral (Internal Medicine,
Pulmonary Disease and Sleep Breathing Disorders). Dr. Moral issued a medical certificate 20 diagnosing Armando with
"Coronary Heart Disease, Hypertension and Dyslipidemia," and gave him a disability grade of "7" based on the POEA
disability grading schedule under the POEA-SEC.
On August 27 and 29, 2003, Armando visited the Philippine General Hospital and consulted Dr. Antonio L. Dans (Internal
Medicine and Cardiology). Dr. Dans diagnosed Armando with "Gastroesophageal reflux, Hypertension and Dyslipidemia." 21 On
September 4, 2003, Armando visited Dr. Cayetano Reyes, Jr. (General Surgeon, Obstetrician and Gynecologist) at the Reyes
Medical Maternity Center who diagnosed him with "essential hypertension and coronary heart disease." 22 On September 26,
2003, a fourth personal physician, Dr. Renato Matawaran (Internal Medicine) of the Holy Rosary Medical Specialty Clinic,
concurred with the hypertension and coronary heart disease diagnosis and similarly gave Armando a disability grade of
"7."23 Armando subsequently presented these medical certificates before the LA.
In their position paper24 and amended position paper,25 the petitioners denied any liability to Armando for disability benefits
under the POEA-SEC. They pointed out that Dr. Alegre has already declared him fit to work following the "normal" results of
his laboratory tests.
The petitioners also disagreed with Armandos computation of his sickness allowance at 120 days. The petitioners argued that
since Dr. Alegre had already declared Armando fit to work on May 12, 2003, following the provisions of the POEA-SEC,
Armandos sickness allowance should be counted at only ninety-two (92) days, that is, beginning February 10, 2003 when
Armando disembarked/signed off from the vessel, until May 12, 2003. As they had already paid Armandos final wages up to
February 9, 2003 and his sickness allowance for the period covering February 10, 2003 until April 1, 2003, Armando is thus
entitled to receive only P68,560.30, representing the balance of his sickness allowance covering the period of April 2, 2003
until May 12, 2003.
Per its Manifestation and Motion filed on September 25, 2003, Philman substituted PTCI. 26
In a decision dated December 29, 2004,27 the LA dismissed Armandos claims except for the balance of the latters sickness
allowance in the amount of P68,560.30. In ruling for the petitioners, the LA declared that the petitioners had fully complied with
their liabilities to Armando for the work-related injury/illness suffered by the latter during the term of the contract, pursuant to
the POEA-SEC. The LA noted that the petitioners company-designated physician declared Armando fit to work after three
months of monitoring and treatment, in contrast with Armandos chosen physicians who arrived at their diagnosis after only
one day of consultation. The findings and declaration of Dr. Alegre, which Armando did not question, therefore binds the latter
and bars his claim for disability benefits. Armando appealed the decision with the NLRC. 28
The Ruling of the NLRC
In its February 29, 2008 decision,29 the NLRC dismissed Armandos appeal for lack of merit. As the LA did, the NLRC upheld
the certification of fitness to work issued by Dr. Alegre over the various medical certificates Armando presented. The NLRC
noted that the diagnosis of the several private doctors consulted by Armando was based merely on a review of Armandos
medical history and not the result of a thorough examination, treatment and monitoring similar to that undertaken by Dr.
Alegre. The NLRC concluded that absent proof that the certification of fitness to work was irregularly issued or did not reflect
his actual condition, Armandos claim for disability benefits under the POEA-SEC is without merit.
When the NLRC denied, in its June 10, 2008 resolution,30 his motion for reconsideration,31 Armando filed with the CA a
petition for certiorari under Rule 65 of the Rules of Court.
The Ruling of the CA

669
In its December 10, 2008 decision,33 the CA reversed the NLRCs decision and ordered the petitioners to pay Armando the
following: (1) total and permanent disability benefits in the amount of US$20,900.00 at its peso equivalent at the time of actual
payment; (2) the balance of the sickness allowance in the amount of US$2,189.60 at its peso equivalent at the time of actual
payment; and (3) attorneys fees.
In granting Armandos claims, the CA declared that all of the conditions laid out under Section 32-A of the POEA-SEC for an
occupational disease to be compensable had been satisfied, namely: that Armandos disability resulted from CAD and
essential hypertension, both of which arose during the period of the contract; that both CAD and hypertension are work-
related; and that both are compensable illnesses pursuant to Section 32-A of the POEA-SEC. The CA made the following
observations: (1) Armando was declared fit for sea service in his PEME result which sufficiently proves that his work-related
illness occurred during the term of his contract; (2) the petitioners failed to rebut the disputable presumption laid out under
Section 20-B of the POEA-SEC that though not listed as an occupational disease, Armandos CAD is presumed work-related;
and (3) the findings of the company-designated physician are not conclusive, do not bind Armando, the labor tribunals and
even the courts, and do not prevent Armando from seeking a second opinion.
The CA added that while Armando may have concealed his five-year history of hypertension, this alone was not sufficient to
disqualify Armando from claiming disability benefits under the POEA-SEC. Moreover, the law does not require absolute or
direct causal connection between the illness and the work; that the work contributed even to a small degree to the
development of the disease is enough to warrant compensation.
Finally, the CA ruled that the term "disability" in claims for compensation and disability benefits should be understood as mere
loss of earning capacity. The law does not require that the illness be incurable or that the employee be absolutely disabled or
paralyzed for the disability to be considered total and permanent, but only that the employee was unable to perform the usual
work and earn from it for more than 120 days.
The CAs denial of the petitioners motion for reconsideration34 in its February 18, 2009 resolution35 prompted the present
petition.
The Petition
In their present petition, the petitioners argue that the CA committed grave abuse of discretion in: (1) disregarding the factual
findings of the LA and of the NLRC; (2) upholding the findings of the private doctors over those of the company-designated
physician; and (3) awarding Armando attorneys fees.
Directly addressing the CAs ruling, the petitioners argue that the disability benefits under the POEA-SEC are not automatically
granted. To be entitled, the seafarer must show that the illness or injury occurred during the term of the contract and that it is
work-related. To the petitioners, Armando failed to prove these requirements, as his medical records during and soon after his
employment did not show that he ever suffered from CAD during the term of the contract.
The petitioners added that since Dr. Alegre has declared Armando fit to work, Armando was bound by such declaration,
pursuant to Section 20-B, paragraphs 2 and 3 of the POEA-SEC. Citing the Courts declarations, the petitioners argue that the
doctor most qualified to assess Armandos disability grade is the doctor who regularly monitored and treated his health, which,
in this case, was the company-designated physician Dr. Alegre.
Further, the petitioners contend that "hypertension, hyperlipidemia, obesity and alcoholism," which Armando added as grounds
for his claim for disability benefits, were the direct result of his willful acts and wrong lifestyle choice for which he alone should
be held responsible. As these are not work-related, they are not compensable under the POEA-SEC.
The petitioners also posit that Armandos hypertension was not even acquired during the term of the latters contract but was a
pre-existing condition which he did not disclose during his PEME. And while hypertension is listed as an occupational disease
under Section 32-A, paragraph 20, Armandos willful concealment of this information in his PEME disqualifies him from
claiming benefits under the POEA-SEC, pursuant to its Section 20-E. Assuming that this concealment does not disqualify
Armando from claiming benefits, he still failed to present, by laboratory test results, that his hypertension impaired the
functions of his body organs, as required by Section 32-A.
Finally, the petitioners take exception to the CAs award of sickness allowance counted at 120 days instead of 92 days. They
argue that Dr. Alegre declared Armando fit to work on May 12, 2003; hence, the sickness allowance should be counted only
until this date, or a total of 92 days counted from February 10, 2003 when he disembarked from the vessel. They also question
the award of attorneys fees for Armandos failure to prove bad faith on their part.
The Case for the Respondents
Relying on the ruling of the CA, Armando contends 36 that a seafarers entitlement to disability benefits automatically accrues
by reason of death or illness. He argues that in claims for disability benefits under the POEA-SEC, the presumption of
compensability and aggravation of the illness exists as long as the illness occurred during the term of the contract. The
employer has the burden to rebut these presumptions which, in this case, the petitioners failed to do. For Armando, his various
medical records more than adequately proved that his illness arose during the term of his contract, that such illness is work-
related, and that the nature of his work and the risk factors with which he was exposed to during such employment aggravated
his illness. Armando points out that the factors that contributed to his permanent disability are all related to his work and the
primary and antecedent causes of his illness are listed as occupational diseases under Section 32-A of the POEA-SEC.

670
Further, Armando contends that since the PEME is exploratory, his clean bill of health after undergoing the PEME and prior to
his employment proves that his illness occurred during, and was aggravated by, his employment. Lastly, Armando insists that
the petitioners are liable for attorneys fees for their bad faith in refusing to pay his duly proved claim for disability benefits.
The Courts Ruling
We resolve to GRANT the petition.
Preliminary Considerations
At the outset, we emphasize the settled rule that only questions of law are allowed in a petition for review on certiorari. 37 This
Courts power of review in a Rule 45 petition is limited to resolving matters pertaining to perceived legal errors that the CA may
have committed in issuing the assailed decision,38 in contrast with the review for jurisdictional errors that we undertake in an
original certiorari action.39 In reviewing the legal correctness of the CA decision in a labor case taken under Rule 65 of the
Rules of Court, we examine the CA decision in the context that it determined the presence or the absence of a grave abuse of
discretion in the NLRC decision before it and not on the basis of whether the NLRC decision, on the merits of the case, was
correct.40 In other words, we have to be keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of the
NLRC decision challenged before it.41
Viewed in this light, we do not re-examine the factual findings of the NLRC nor do we substitute our own judgment for
theirs42 as finding of fact of labor tribunals are generally conclusive on this Court. As presented by the petitioners, the issues
raised before us require the re-evaluation of the evidence on record and consideration of the applicable law. The question of
Armandos entitlement to disability benefits and attorneys fees, while essentially a question of law appropriate for a Rule 45
review, nevertheless hinges for their resolution on a factual issue the question whether the CAD, hypertension,
hyperlipidemia, obesity and alcoholism afflicting Armando are work-related or work-aggravated.
Based on these Rule 45 parameters, we generally cannot touch factual questions. Nevertheless, in the exercise of our
discretionary appellate jurisdiction, we allow certain exceptions, all in the interest of giving substance and meaning to the
justice we are sworn to uphold and give primacy to. The conflicting ruling of the LA and the NLRC, on the one hand, and of the
CA, on the other,43 in the present petition is one such exception to the above general rule. A re-examination of the record for
purposes of determining the presence or absence of grave abuse of discretion committed by the CA is justified when this
situation is present.
Armando is not entitled to total and
permanent disability benefits
The core issue for our resolution is whether Armando is entitled to disability benefits on account of his medical condition. The
results of our consideration of the records compel us to rule in the negative.
The entitlement of a seafarer on overseas employment to disability benefits is governed by the medical findings, by law and by
the parties contract.44 By law, the governing provisions are Articles 191 to 193, Chapter VI (Disability Benefits) of the Labor
Code, in relation to Section 2, Rule X of the Rules and Regulations Implementing Book IV of the Labor Code. By contract, the
provisions of the POEA-SEC incorporating Department Order No. 4, series of 2000 of the Department of Labor and
Employment (the POEA-SEC) govern.45
Since the present controversy centers on Armandos claim for total permanent disability, we find it necessary to define total
and permanent disability as provided under Article 192(3)(1) of the Labor Code:
(3) The following disabilities shall be deemed total and permanent:
(1) Temporary total disability lasting continuously for more than one hundred twenty days, except as otherwise provided for in
the Rules. [emphasis ours]
In relation to this Labor Code provision, we also refer to Section 2, Rule X of the Rules and Regulations Implementing Book IV
of the Labor Code:
SEC. 2. Period of entitlement (a) The income benefit shall be paid beginning on the first day of such disability. If caused by
an injury or sickness it shall not be paid longer than 120 consecutive days except where such injury or sickness still requires
medical attendance beyond 120 days but not to exceed 240 days from onset of disability in which case benefit for temporary
total disability shall be paid. However, the System may declare the total and permanent status at any time after 120 days of
continuous temporary total disability as may be warranted by the degree of actual loss or impairment of physical or mental
functions as determined by the System. [emphases ours]
By contract, pertinent to the issue of compensability in the event of the seafarers illness or disability is Section 20-B of the
POEA-SEC. It reads:
SECTION 20. COMPENSATION AND BENEFITS
xxxx
B. COMPENSATION AND BENEFITS FOR INJURY OR ILLNESS
The liabilities of the employer when the seafarer suffers work-related injury or illness during the term of his contract are as
follows:
xxxx

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3. Upon sign-off from the vessel for medical treatment, the seafarer is entitled to sickness allowance equivalent to his basic
wage until he is declared fit to work or the degree of permanent disability has been assessed by the company-designated
physician but in no case shall this period exceed one hundred twenty (120) days.
For this purpose, the seafarer shall submit himself to a post-employment medical examination by a company-designated
physician within three working days upon his return except when he is physically incapacitated to do so, in which case, a
written notice to the agency within the same period is deemed as compliance. Failure of the seafarer to comply with the
mandatory reporting requirement shall result in his forfeiture of the right to claim the above benefits.
If a doctor appointed by the seafarer disagrees with the assessment, a third doctor may be agreed jointly between the
Employer and the seafarer. The third doctors decision shall be final and binding on both parties. [emphases ours]
Section 20-B of the POEA-SEC, in plain terms, laid out two primary conditions which the seafarer must meet in order for him to
claim disability benefits that the injury or illness is work-related and that it occurred during the term of the contract. It also
spelled out the procedure to be followed in assessing the seafarers disability - whether total or partial and whether temporary
or permanent - resulting from either injury or illness during the term of the contract, in addition to specifying the employers
liabilities on account of such injury or illness.
When read together with Articles 191 to 193, Chapter VI (Disability Benefits) of the Labor Code and Section 2, Rule X of the
Rules and Regulations Implementing Book IV of the Labor Code, and following our various pronouncements, Section 20-B of
the POEA-SEC evidently shows that it is the company-designated physician who primarily assesses the degree of the
seafarers disability. Upon the seafarers repatriation for medical treatment, and during the course of such treatment, the
seafarer is under total temporary disability and receives medical allowance until the company-designated physician declares
his fitness to work resumption or determines the degree of the seafarers permanent disability - either total or partial. The
company-designated physician should, however, make the declaration or determination within 120 days, otherwise, the law
considers the seafarers disability as total and permanent and the latter shall be entitled to disability benefits. Should the
seafarer still require medical treatment for more than 120 days, the period granted to the company-designated physician to
make the declaration of the fitness to work or determination of the permanent disability may be extended, but not to exceed
240 days. At anytime during this latter period, the company-designated physician may make the declaration or determination:
either the seafarer will no longer be entitled to any sickness allowance as he is already declared fit to work, or he shall be
entitled to receive disability benefits depending on the degree of his permanent disability.
The seafarer is not, of course, irretrievably bound by the findings of the company-designated physician as the above
provisions allow him to seek a second opinion and consult a doctor of his choice. In case of disagreement between the
findings of the company-designated physician and the seafarers appointed physician, the parties shall jointly agree to refer the
matter to a third doctor whose findings shall be final and binding on both.
In the present petition, the petitioners designated physician Dr. Alegre declared Armando fit for sea service on May 12,
2003 or 92 days from the time he disembarked or signed off from the vessel on February 10, 2003. As defined under Article
192(c)(1) of the Labor Code, total and permanent disability means total temporary disability lasting for more than 120 days
(unless the seafarer is still under treatment up to a maximum period of 240 days as the Court held in Vergara v. Hammonia
Maritime Services, Inc.).46 While Armando was initially under temporary total disability, Dr.Alegre declared him fit to work well
within the 120-day mark. Viewed in this light, we find the LA and the NLRC legally correct when they refused to recognize any
disability on Armandos part as the petitioners designated physician had already declared his fitness to resume work.
Consequently, absent any disability after his temporary disability was dealt with, he is therefore not entitled to compensation
benefits under Section 20 of the POEA-SEC.
Armando, acting well within his rights, disagreed with the assessment of the company-designated physician and sought the
opinion of four private physicians who arrived at a contrary finding. We note, however, that he did so only after he had already
filed his complaint with the LA. Thus, Armando, in fact, had no ground for a disability claim at the time he filed his complaint, as
he did not have any sufficient evidentiary basis to support his claim.
More than this, the disagreement between the findings of the company-designated physician and Armandos chosen
physicians was never referred to a third doctor chosen by both the petitioners and Armando, following the procedure outlined
in Section 20-B, paragraph 3 of the POEASEC. Had this been done, Armandos medical condition could have been easily
clarified and finally determined.
Considering the absence of findings coming from a third doctor, we sustain the findings of the NLRC and hold that the
certification of the company-designated physician should prevail. We do so for the following reasons: first, the records show
that the medical certifications issued by Armandos chosen physician were not supported by such laboratory tests and/or
procedures that would sufficiently controvert the "normal" results of those administered to Armando at the St. Lukes Medical
Center. And second, majority of these medical certificates were issued after Armando consulted these private physicians only
once.
In contrast, the medical certificate of the petitioners designated physician was issued after three months of closely monitoring
Armandos medical condition and progress, and after careful analysis of the results of the diagnostic tests and procedures
administered to Armando while in consultation with Dr. Crisostomo, a cardiologist. The extensive medical attention that Dr.

672
Alegre gave to Armando enabled him to acquire a more accurate diagnosis of Armandos medical condition and fitness for
work resumption compared to Armandos chosen physicians who were not privy to his case from the beginning.
In several cases, we held that the doctor who have had a personal knowledge of the actual medical condition, having closely,
meticulously and regularly monitored and actually treated the seafarers illness, is more qualified to assess the seafarers
disability.47 In Coastal Safeway Marine Services, Inc. v. Esguerra,48 the Court significantly brushed aside the probative weight
of the medical certifications of the private physicians, which were based merely on vague diagnosis and general impressions.
Similarly in Ruben D. Andrada v. Agemar Manning Agency, Inc., et al., 49 the Court accorded greater weight to the
assessments of the company-designated physician and the consulting medical specialist which resulted from an extensive
examination, monitoring and treatment of the seafarers condition, in contrast with the recommendation of the private physician
which was "based only on a single medical report x x x outlining the alleged findings and medical history x x x obtained after x
x x [one examination]."50
Thus, in the absence of adequate diagnostic tests and procedures and reasonable findings to support the assessments of the
four private physicians, their certifications on Armandos alleged disability simply cannot be taken at face value, particularly in
light of the overwhelming evidence supporting the findings of Dr. Alegre. The rule is still that whoever claims entitlement to
disability benefits must prove such entitlement by substantial evidence. 51 The burden of proof rested on Armando to establish,
by substantial evidence, the causal link between his work as a 2nd mate and his alleged disability to serve as basis for the
grant of relief.52 Unfortunately, he failed to discharge this burden.
Consequently, the CA erroneously imputed grave abuse of discretion on the part of the NLRC in giving greater evidentiary
weight to the medical certificate issued by Dr. Alegre over those issued by Armandos physicians.
In this light, we find it unnecessary to discuss whether Armandos alleged CAD, hypertension, hyperlipidemia, obesity and
alcoholism were work-related and arose during the term of his contract so as to entitle him to disability benefits.
Even if we were to address the matter, our consideration of the records will lead us to the same conclusion that Armando is
not entitled to disability benefits. Primarily, other than his bare assertions, Armando did not specifically describe in detail the
nature of his work, the working conditions, the risks attendant to the nature of his work with which he was allegedly exposed
to, as well as how and to what degree the nature of his work caused or contributed to his alleged medical conditions. To recall,
all of the diagnostic tests and procedures administered on Armando yielded "normal" results for which the company-
designated physician declared him fit to work.
We arrive at this conclusion based on the following reasons: first, while CAD, which is subsumed under cardio-vascular
disease,53 and hypertension are listed as occupational diseases under Section 32-A, paragraphs 11 and 20 of the POEA-SEC,
certain specified conditions54 must first be satisfied for these diseases and the resulting disability to be considered
compensable. Contrary to the CAs conclusion, we find that Armando failed to show, by satisfactory evidence, that these
specified conditions have been met. Moreover, both the findings at the Fujairah Port Clinic while Armando was confined
following the incident at the vessel, and at the St. Lukes Medical Center while he was undergoing treatment, did not reveal
that he ever suffered from CAD.
Second, although Dr. Ranjan of the Fujairah Port Clinic diagnosed Armando with hypertension, Armando did not reveal in his
PEME that he had been suffering from this condition and had been taking anti-hypertensive medications for five years. As the
petitioners correctly argued, Armandos concealment of this vital information in his PEME disqualifies him from claiming
disability benefits pursuant to Section 20-E of the POEA-SEC. It reads:
SECTION 20. COMPENSATION AND BENEFITS
xxxx
E. A seafarer who knowingly conceals and does not disclose past medical condition, disability and history in the pre-
employment medical examination constitutes fraudulent misrepresentation and shall disqualify him from any compensation
and benefits. This may also be a valid ground for termination of employment and imposition of the appropriate administrative
and legal sanctions. [emphasis ours]
We need not belabor this point as a plain reading of the above provision shows that the seafarers concealment of a pre-
existing medical condition disqualifies him from claiming disability benefits. We note that Dr. Ranjan of the Fujairah Port Clinic
stated in his report that Armando was a "known case of HT, on atenolol 50 mg OD for five years." The import of this statement
cannot be disregarded as it directly points to Armandos willful concealment; it also shows that Armando did not acquire
hypertension during his employment and is therefore not work-related.
Contrary to Armandos contention, the PEME is not sufficiently exhaustive so as to excuse his non-disclosure of his pre-
existing hypertension. The PEME is not exploratory55 and does not allow the employer to discover any and all pre-existing
medical condition with which the seafarer is suffering and for which he may be presently taking medication. The PEME is
nothing more than a summary examination of the seafarers physiological condition and is just enough for the employer to
determine his fitness for the nature of the work for which he is to be employed. 56
In Escarcha v. Leonis Navigation Co., Inc.,57 we brushed aside the seafarers claim that he acquired his illness during his
employment simply because he passed the PEME. There, we held that "a PEME x x x is generally not exploratory in nature,
nor is it a totally in-depth and thorough examination of an applicants medical condition. x x x It does not reveal the real state of
health of an applicant"58 In this case, considering that the PEME is not exploratory, its failure to reveal or uncover Armandos
673
hypertension cannot therefore shield him from the consequences of his willful concealment of this information and preclude the
petitioners from denying his claim on the ground of concealment.
Finally, if indeed Armando had been suffering from obesity, hyperlipidemia and alcoholism as found by Dr. Ranjans final
diagnosis, he was suffering from infirmities that are not listed as occupational diseases under Section 32-A of the POEA-SEC
and for which disability may be awarded. While we are aware of the provisions of Section 20-B, paragraph 4 which presumes
any other illness not included under Section 32-A as work-related, still Armando has to prove that his illnesses are work-
related and that they occurred during the term of the employment.59 He cannot simply argue that the petitioners bear the
burden of rebutting the presumption.
More than all these, plain logic dictates that mere work in a ship, in Armandos case as 2nd mate, does not necessarily lead to
the imputed medical conditions. Obesity is "excess body weight, defined as a body mass index (BMI) of 30
kg/m2,"60 ultimately resulting from a long-standing imbalance between energy intake and energy expenditure. 61 On the other
hand, hyperlipidemia or dyslipidemia is the "elevation of plasma cholesterol, triglycerides (TGs), or both, or a low high-density
lipoprotein level that contributes to the development of atherosclerosis."62 The causes may beprimary (genetic) or secondary,
the most important of which is a sedentary lifestyle with excessive dietary intake of saturated fat, cholesterol, and trans
fats.63 Alcoholism, also known as alcohol dependence, refers to frequent consumption of large amounts of alcohol. 64
These definitions of the imputed medical conditions plainly do not indicate work-relatedness; by their nature, they are more the
result of poor lifestyle choices and health habits for which disability benefits are improper.
Under Section 20-D of the POEA-SEC, no compensation and benefits are due in respect of any disability resulting from the
seafarers willful act.65
Armando is entitled to sickness
allowance only until the company-
designated physician declared him fit
to work
The petitioners question the CAs computation of the balance of Armandos sickness allowance at 120 days. We find that the
CA seriously erred in arriving at this computation.
To recall, the company-designated physician declared Armando fit to work on May 12, 2003. Armando disembarked or
signed/off from the vessel on February 10, 2003. Thus, following our discussion above and pursuant to Section 20-B,
paragraph 3 of the POEA-SEC, Armandos sickness allowance should be counted only at 92 days, that is from February 10,
2003 when he disembarked form the vessel, until May 12, 2003 when Dr. Alegre declared him fit to work.
In sum, we hold that the CA seriously erred in finding that the NLRC committed grave abuse of discretion in denying
Armandos claim for disability benefits.
As a final note, while the Court adheres to the principle of liberality in favor of the seafarer in construing the POEA-SEC, it
cannot allow claims for compensation based on surmises. 66 Liberal construction is not a license to disregard the evidence on
record or to misapply our laws.67
WHEREFORE, premises considered, we hereby GRANT the petition and accordingly REVERSE and SET ASIDE the decision
dated December 10, 2008 and the resolution dated February 18, 2009 of the Court of Appeals in CA-G.R. SP No. 105079, and
REINSTATE the decision dated February 29, 2008 of the NLRC affirming the December 29, 2004 decision of Labor Arbiter
Fedriel S. Panganiban.
SO ORDERED.

G.R. No. 214132 February 18, 2015

SEALANES MARINE SERVICES, INC./ARKLOW SHIPPING NETHERLAND and/or CHRISTOPHER
DUMATOL,Petitioners,
vs.
ARNEL G. DELA TORRE, Respondent.
RESOLUTION
REYES, J.:
This is a Petition for Review on Certiorari1 from the Decision2 dated April 24, 2014 of the Court of Appeals (CA) in CA-G.R. SP
No. 130641, which affirmed the .Decision dated February 28, 2013 and Resolution dated April 24, 2013 of the National Labor
Relations Commission (NLRC), in NLRC LAC-09-000747-12-0FW, entitled, "Arne! G. Dela Torre v. Sealanes Marine Services,
lnc./Arklow Shipping Netherland and Christopher Dumatol," which upheld the disability award by the Labor Arbiter (LA) of
US$80,000.00 in favor of Amel G. Dela Torre (respondent), pursuant to the parties' Collective Bargaining Agreement (CBA).
Factual Antecedents
The respondent was hired by Sealanes Marine Services, Inc. (Sealanes), a local manning agency, through its President,
Christopher Dumatol (Dumatol), in behalf of its foreign principal, Arklow Shipping Netherland (petitioners), as an able seaman
on board M/V Arklow Venture for a period of nine months at a basic monthly salary of US$545.00. An overriding CBA between
the respondents union, Associated Marine Officers and Seamens Union of the Philippines, and the Netherlands Maritime

674
Employers Association, called "CBA for Filipino Ratings on Board Netherlands Flag Vessels" (Dutch CBA), also covered his
contract.3
The respondent embarked on January 21, 2010. On August 1, 2010, during the crews rescue boat drill at the port of Leith,
Scotland, he figured in an accident and injured his lower back. An X-ray of his lumbosacral spine was taken at a hospital at the
port, but while according to his attending physician he sustained no major injury, the pain in his back persisted and he was
repatriated. On August 4, 2010, the respondent was referred by Sealanes to the Marine Medical Services of the Metropolitan
Medical Center. On August 5, 2010, an X-ray of his lumbosacral spine showed, per the medical report, that he sustained
"lumbar spine degenerative changes with associated L1 compression fracture." The next day, a Magnetic Resonance Imaging
scan of his lumbar spine revealed an "acute compression fracture body of L1; right paracentral disc protrusion at L5-S1
causing minimal canal compromise; L4-L5 and L5-S1 disc dehydration." Again on December 16, 2010, an X-ray showed
"compression deformity of L1 vertebra; L2-L1 disc space is now defined but slightly narrowed". On January 27, 2011, his
fourth X-ray still showed a "compression fracture, L1 with narrowed L2-L1 disc space; no significant neural for aminal
compromise."4
The respondent underwent several physical therapy sessions, and finally on March 10, 2011 the company-designated
physician assessed him with a Grade 11 disability for slight rigidity or one-third loss of motion or lifting power of trunk.
Nonetheless, he was informed of the assessment only in May 2011, or more than 240 days since the accident. 5
Rulings of the LA and the NLRC
On May 20, 2011, the respondent filed a complaint for disability benefits, medical reimbursement, underpaid sick leave,
damages and attorneys fees. On July 30, 2012, the LA rendered judgment awarding him US$80,000.00 in disability benefits
as provided in the Dutch CBA, plus 10% as attorneys fees. In particular, the LA held that such an award cannot be made to
depend on the company-designated physicians disability assessment which was issued more than 120 days after the
accident, especially if despite treatment for more than 240 days the respondent was still unable to return to his accustomed
work.6
On August 31, 2012, the petitioners appealed to the NLRC contending that the disability benefits due to the respondent should
be based on his Grade 11 disability assessment issued by the company-designated physician. On September 21, 2012, the
respondent also filed his appeal assailing the denial of his medical and transportation expenses. 7
In its Decision dated February 28, 2013, the NLRC affirmed the award of total disability benefits to the respondent noting that
he continued with his rehabilitation even after the companys Grade 11 disability rating issued on March 10, 2011, indicating
that its disability rating was intended merely to comply with the 240-day limit for the company-designated physician to either
declare him fit to work or to assess the degree of his permanent disability. The petitioners motion for reconsideration was
denied on April 24, 2013.
On petition for certiorari to the CA, the petitioners raised the following grounds:
I. PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION WHEN IT AWARDED MAXIMUM DISABILITY COMPENSATION AND ATTORNEYS FEES TO [THE
RESPONDENT] DESPITE THE FOLLOWING:
a. Private respondent was assessed with Disability Grade 11 only by the company-designated physician within his
240-day period of treatment;
b. Under the POEA-contract and the Dutch CBA, disability benefits of seafarer shall be based on the medical
assessment of the company-designated physician.
c. Under the POEA-contract, benefits are awarded based solely on gradings and not by the number of days of
treatment.
II. PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION WHEN IT AWARDED ATTORNEY'S FEES TO PRIVATE RESPONDENT. 8
Ruling of the CA
The petitioners maintained that the respondent is not entitled to maximum disability benefits under the Philippine Overseas
Employment Administration Standard Employment Contract (POEA SEC), the Dutch CBA and this Courts decisions, in view
of his Grade 11 disability rating as assessed by the company-designated physician. But the respondent pointed out that, at the
time the said rating was issued, he was not completely healed but had to continue with his physical therapy sessions even
beyond the maximum 240-day period allowed under the Amended Rules on Employee Compensation (AREC), 9 implying that
the companys disability rating on March 10, 2011 was temporary; that since his treatment exceeded the 240 days permitted,
his disability is now total and permanent.
In its Decision10 dated April 24, 2014, the CA ruled that the seafarers right to disability benefits is determined not solely by the
companys assessment of his impediment but also by law, contract and medical findings. Citing Articles 191 to 193 of the
Labor Code, Section 2, Rule X of the AREC, the POEA SEC, the parties CBA, and the employment contract between the
parties, the appellate concurred that the respondent was entitled to total permanent disability benefits. 11
Petition for Review in the Supreme Court

675
In this petition, the petitioners insist that the CA erred in disregarding the petitioners partial permanent disability rating of
Grade 11 under the POEA SEC schedule of disability benefits, even as they pointed out that the respondent failed to refer his
assessment to a neutral third doctor as provided in Paragraph 3, Section 20(B) of the POEA SEC.
Ruling of the Court
The Court denies the petition.
It is expressly provided in Article 192(c)(1) of the Labor Code that a "temporary total disability lasting continuously for more
than [120] days, except as otherwise provided in the Rules," shall be deemed total and permanent. Section 2(b), Rule VII of
the AREC, likewise provides that "a disability is total and permanent if as a result of the injury or sickness the employee is
unable to perform any gainful occupation for a continuous period exceeding 120 days, except as otherwise provided under
Rule X of these Rules."
As to sickness allowance, Section 2(a), Rule X of the AREC, referred to in Article 192(c)(1) of the Labor Code, reads:
Sec. 2. Period of Entitlement (a) The income benefit shall be paid beginning on the first day of such disability. If caused by
an injury or sickness it shall not be paid longer than 120 consecutive days except where such injury or sickness still requires
medical attendance beyond 120 days but not to exceed 240 days from onset of disability in which case benefit for temporary
total disability shall be paid. However, the System may declare the total and permanent status at any time after 120 days of
continuous temporary total disability as may be warranted by the degree of actual loss or impairment of physical or mental
functions as determined by the System.
For its part, the POEA SEC for seafarers provides in Paragraph 3 of Section 20(B) thereof that: 3. Upon sign-off from the
vessel for medical treatment, the seafarer is entitled to sickness allowance equivalent to his basic wage until he is declared fit
to work or the degree of permanent disability has been assessed by the company-designated physician but in no case shall
this period exceed one hundred twenty (120) days.
For this purpose, the seafarer shall submit himself to a post-employment medical examination by a company-designated
physician within three working days upon his return except when he is physically incapacitated to do so, in which case, a
written notice to the agency within the same period is deemed as compliance. Failure of the seafarer to comply with the
mandatory reporting requirement shall result in his forfeiture of the right to claim the above benefits.
If a doctor appointed by the seafarer disagrees with the assessment, a third doctor may be agreed jointly between the
employer and the seafarer. The third doctors decision shall be final and binding on both parties.
True, under Section 20(B)(3) of the POEA SEC, it is the company-designated physician who should determine the disability
grading or fitness to work of the seafarer. Also, under Article 21.4.1 of the Dutch CBA governing the parties, it is the doctor
appointed by the companys medical advisor who shall determine the degree of disability suffered by a seafarer:
21.4.1 DISABILITY COMPENSATION the degree of disability which the COMPANY subject to this Agreement is liable to pay
shall be determined by a doctor appointed by the COMPANY'S MEDICAL ADVISOR.
Under Section 3212 of the POEA SEC, only those injuries or disabilities classified as Grade 1 are considered total and
permanent. In Kestrel Shipping Co., Inc. v. Munar,13 the Court read the POEA SEC in harmony with the Labor Code and the
AREC, and explained that: (a) the 120 days provided under Section 20(B)(3) of the POEA SEC is the period given to the
employer to determine fitness to work and when the seafarer is deemed to be in a state of total and temporary disability; (b)
the 120 days of total and temporary disability may be extended up to a maximum of 240 days should the seafarer require
further medical treatment; and (c) a total and temporary disability becomes permanent when so declared by the company-
designated physician within 120 or 240 days, as the case may be, or upon the expiration of the said periods without a
declaration of either fitness to work or permanent disability and the seafarer is still unable to resume his regular seafaring
duties.14
The respondent was repatriated on August 4, 2010 and immediately underwent treatment and rehabilitation at the company-
designated facility, Marine Medical Services of the Metropolitan Medical Center. It lasted until July 20, 2011, exceeding the
240 days allowed to declare him either fit to work or permanently disabled. Although he was given a Grade 11 disability rating
on March 10, 2011, the assessment may be deemed tentative because he continued his physical therapy sessions beyond
240 days. Yet, despite his long treatment and rehabilitation, he was eventually unable to go back to work as a seafarer, which
fact entitled him under the Dutch CBA to maximum disability benefits.
It was held in Kestrel that the POEA SEC provides merely for the basic or minimal acceptable terms of a seafarers
employment contract, thus, in the assessment of whether his injury is partial and permanent, the same must be so
characterized not only under the Schedule of Disabilities in Section 32 of the POEA SEC, but also under the relevant
provisions of the Labor Code and the AREC implementing Title II, Book IV of the Labor Code. According to Kestrel, while the
seafarer is partially injured or disabled, he must not be precluded from earning doing the same work he had before his injury or
disability or that he is accustomed or trained to do. Otherwise, if his illness or injury prevents him from engaging in gainful
employment for more than 120 or 240 days, as may be the case, then he shall be deemed totally and permanently disabled.
In Crystal Shipping, Inc. v. Natividad,15 the Court ruled that it is of no consequence that the seafarer recovered from his illness
or injury, for what is important is that he was unable to perform his customary work for more than 120 days, and this
constitutes total permanent disability:

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Petitioners tried to contest the above findings by showing that respondent was able to work again as a chief mate in March
2001. Nonetheless, this information does not alter the fact that as a result of his illness, respondent was unable to work as a
chief mate for almost three years. It is of no consequence that respondent was cured after a couple of years. The law does not
require that the illness should be incurable. What is important is that he was unable to perform his customary work for more
than 120 days which constitutes permanent total disability. An award of a total and permanent disability benefit would be
germane to the purpose of the benefit, which is to help the employee in making ends meet at the time when he is unable to
work.16 (Citations omitted and italics supplied)
Thus, that the respondent required therapy beyond 240 days and remained unable to perform his customary work during this
time rendered unnecessary any further need by him to secure his own doctors opinion or that of a neutral third doctor to
determine the extent of his permanent disability.
Concerning the joint and solidary liability of the manning agency, Sealanes, its foreign principal, Arklow Shipping Netherland,
and Sealanes President Dumatol, Section 10 of Republic Act (R.A.) No. 8042, otherwise known as the "Migrant Workers and
Overseas Filipinos Act of 1995", as amended by Section 7 of R.A. No. 10022, reads:
SEC. 10. Money Claims. Notwithstanding any provision of law to the contrary, the Labor Arbiters of the National Labor
Relations Commission (NLRC) shall have the original and exclusive jurisdiction to hear and decide, within ninety (90)calendar
days after the filing of the complaint, the claims arising out of an employer-employee relationship or by virtue of any law or
contract involving Filipino workers for overseas deployment including claims for actual, moral, exemplary and other forms of
damage. Consistent with this mandate, the NLRC shall endeavor to update and keep abreast with the developments in the
global services industry.
The liability of the principal/employer and the recruitment/placement agency for any and all claims under this section shall be
joint and several. This provision shall be incorporated in the contract for overseas employment and shall be a condition
precedent for its approval. The performance bond to [be] filed by the recruitment/placement agency, as provided by law, shall
be answerable for all money claims or damages that may be awarded to the workers. If the recruitment/placement agency is a
juridical being, the corporate officers and directors and partners as the case may be, shall themselves be jointly and solidarily
liable with the corporation or partnership for the aforesaid claims and damages.
Such liabilities shall continue during the entire period or duration of the employment contract and shall not be affected by any
substitution, amendment or modification made locally or in a foreign country of the said contract.
x x x x (Italics ours)
Thus, every applicant for license to operate a seafarers manning agency shall, in the case of a corporation or partnership,
submit a written application together with, among others, a verified undertaking by officers, directors and partners that they will
be jointly and severally liable with the company over claims arising from employer-employee relationship.17 Laws are deemed
incorporated in employment contracts and the contracting parties need not repeat them. They do not even have to be referred
to. Every contract, thus, contains not only what has been explicitly stipulated, but also the statutory provisions that have any
bearing on the matter.18 WHEREFORE, the petition is DENIED.
SO ORDERED.

G.R. No. 209741 April 15, 2015

SOCIAL SECURITY COMMISSION, Petitioner,
vs.
EDNA A. AZOTE, Respondent.
DECISION
MENDOZA, J.:
This petition for review on certiorari1 under Rule 45 of the Rules of Court filed by petitioner Social Security Commission (SSC)
assails the August 13, 2013 Decision2 of the Court of Appeals (CA), and its October 29, 2013 Resolution3 in CA-G.R. SP No.
122933, allowing respondent Edna A. Azote (Edna) to claim the death benefits of her late husband, Edgardo Azote (Edgardo).
The Antecedents:
On June 19, 1992, respondent Edna and Edgardo, a member of the Social Security System (SSS), were married in civil rites
at the Regional Trial Court, Branch 9, Legazpi City, Albay (RTC). Their union produced six Children 4born from 1985 to 1999.
On April 27, 1994, Edgardo submitted Form E-4 to the SSS with Edna and their three older children as designated
beneficiaries. Thereafter or on September 7, 2001, Edgardo submitted another Form E-4 to the SSS designating his three
younger children as additional beneficiaries.5
On January 13, 2005, Edgardo passed away. Shortly thereafter, Edna filed her claim for death benefits with the SSS as the
wife of a deceased-member. It appeared, however, from the SSS records that Edgardo had earlier submitted another Form E-
4 on November 5, 1982 with a different set of beneficiaries, namely: Rosemarie Azote (Rosemarie), as his spouse; and Elmer
Azote (Elmer),as dependent, born on October 9, 1982. Consequently, Ednas claim was denied. Her children were adjudged
as beneficiaries and she was considered as the legal guardian of her minor children. The benefits, however, would be stopped
once a child would attain the age of 21.6

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On March 13, 2007, Edna filed a petition with the SSC to claim the death benefits, lump sum and monthly pension of
Edgardo.7 She insisted that she was the legitimate wife of Edgardo. In its answer, the SSS averred that there was a conflicting
information in the forms submitted by the deceased. Summons was published in a newspaper of general circulation directing
Rosemarie to file her answer. Despite the publication, no answer was filed and Rosemarie was subsequently declared in
default.8
In the Resolution,9 dated December 8, 2010,the SSC dismissed Ednas petition for lack of merit. Citing Section 24(c) of the SS
Law, it explained that although Edgardo filed the Form E-4 designating Edna and their six children as beneficiaries, he did not
revoke the designation of Rosemarie as his wife-beneficiary, and Rosemarie was still presumed to be his legal wife.
The SSC further wrote that the National Statistics Office (NSO) records revealed that the marriage of Edgardo to one
Rosemarie Teodora Sino was registered on July 28, 1982. Consequently, it opined that Edgardos marriage to Edna was not
valid as there was no showing that his first marriage had been annulled or dissolved. The SSC stated that there must be a
judicial determination of nullity of a previous marriage before a party could enter into a second marriage. 10
In an order,11 dated June 8, 2011, the SSC denied Ednas motion for reconsideration. It explained that it was incumbent upon
Edna to prove that her marriage to the deceased was valid, which she failed to do. It further opined that Rosemarie could not
be merely presumed dead, and that death benefits under the SSS could not be considered properties which may be disposed
of in a holographic will.12
In the assailed August 13, 2013 Decision, the CA reversed and set aside the resolution and the order of the SSC. It held that
the SSC could not make a determination of the validity or invalidity of the marriage of Edna to Edgardo considering that no
contest came from either Rosemarie or Elmer.13
The CA explained that Edna had established her right to the benefits by substantial evidence, namely, her marriage certificate
and the baptismal certificates of her children.14 It ruled that Edgardo made a deliberate change of his wife-beneficiary in his
1994 E-4 form, as such was clearly his voluntary act manifesting his intention to revoke his former declaration in the 1982 E-4
form.15 The 1994 E-4 form submitted by Edgardo, designating Edna as his wife, superseded his former declaration in his 1982
E-4 form.16
It further opined that the Davac case cited by the SSC was not applicable because there were two conflicting claimants in that
case, both claiming to be wives of the deceased, while in this case, Edna was the sole claimant for the death benefits, and that
her designation as wife-beneficiary remained valid and unchallenged. It was of the view that Rosemaries nonappearance
despite notice could be deemed a waiver to claim death benefits from the SSS, thereby losing whatever standing she might
have had to dispute Ednas claim.17
In the assailed October 29, 2013 Resolution,18 the CA denied the SSCs motion for reconsideration.19
Hence, the present petition.
GROUNDS
RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE COMMISSION IS BEREFT OF
AUTHORITY TO DETERMINE THE VALIDITY OR INVALIDITY OF THE MARRIAGE OF THE PRIVATE RESPONDENT AND
MEMBER EDGARDO AZOTE. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN GRANTING THE PETITION OF
THE PRIVATE RESPONDENT AND FINDING HER ENTITLED TO THE SS BENEFITS.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE DESIGNATION OF THE PRIVATE
RESPONDENT AS WIFE-BENEFICIARY IS VALID.20
The SSC argues that the findings of fact of the CA were not supported by the records. It submits that under Section 5 of the
SS Law, it is called upon to determine the rightful beneficiary in the performance of its quasi-judicial function of adjudicating SS
benefits. In fact, it cited a number of cases,21 where the SSC had passed upon the validity of marriages for the purpose of
determining who were entitled to SS benefits.22
The SSC contends that Edna was not the legitimate spouse of deceased member Edgardo as the CA failed to consider the
NSO certification showing that Edgardo was previously married to Rosemarie. With the death certificate of Rosemarie showing
that she died only on November 6, 2004, it proved that she was alive at the time Edna and Edgardo were married, and,
therefore, there existed a legal impediment to his second marriage, rendering it void. Edna is, therefore, not a legitimate
spouse who is entitled to the death benefits of Edgardo.23
The SSC claims that the right to designate a beneficiary is subject to the SS Law. The designation of a wife-beneficiary merely
creates a disputable presumption that they are legally married and may be overthrown by evidence to the contrary. Ednas
designation became invalid with the determination of the subsistence of a previous marriage. The SSC posits that even though
Edgardo revoked and superseded his earlier designation of Rosemarie as beneficiary, his designation of Edna was still not
valid considering that only a legitimate spouse could qualify as a primary beneficiary. 24
The Courts Ruling
The petition is meritorious.
The law in force at the time of Edgardos death was Republic Act (R.A.) No. 8282, 25 the amendatory law of R.A. No. 1161 or
the "Social Security Law." It is a tax-exempt social security service designed to promote social justice and provide meaningful
protection to members and their beneficiaries against the hazards of disability, sickness, maternity, old age, death, and other

678
contingencies resulting in loss of income or financial burden.26 As a social security program of the government, Section 8 (e)
and (k) of the said law expressly provides who would be entitled to receive benefits from its deceased-member, to wit:
SEC. 8. Terms Defined. - For purposes of this Act, the following terms shall, unless the context indicates otherwise, have the
following meanings:
xxxx
(e) Dependents - The dependents shall be the following:
(1) The legal spouse entitled by law to receive support from the member;
(2) The legitimate, legitimated or legally adopted, and illegitimate child who is unmarried, not gainfully
employed, and has not reached twenty-one (21) years of age, or if over twenty-one (21) years of age, he is
congenitally or while still a minor has been permanently incapacitated and incapable of self-support,
physically or mentally; and
(3) The parent who is receiving regular support from the member.
xxxx
(k) Beneficiaries - The dependent spouse until he or she remarries, the dependent legitimate, legitimated or legally
adopted, and illegitimate children, who shall be the primary beneficiaries of the member: Provided, That the
dependent illegitimate children shall be entitled to fifty percent (50%) of the share of the legitimate, legitimated or
legally adopted children: Provided, further, That in the absence of the dependent legitimate, legitimated children of
the member, his/her dependent illegitimate children shall be entitled to one hundred percent (100%) of the benefits. In
their absence, the dependent parents who shall be the secondary beneficiaries of the member. In the absence of all
the foregoing, any other person designated by the member as his/her secondary beneficiary. (Emphasis supplied)
Applying Section 8(e) and (k) of R.A. No. 8282, it is clear that only the legal spouse of the deceased-member is qualified to be
the beneficiary of the latters SS benefits. In this case, there is a concrete proof that Edgardo contracted an earlier marriage
with another individual as evidenced by their marriage contract. Edgardo even acknowledged his married status when he filled
out the 1982 Form E-4 designating Rosemarie as his spouse.27
It is undisputed that the second marriage of Edgardo with Edna was celebrated at the time when the Family Code was already
in force. Article 41 of the Family Code expressly states:
Art. 41. A marriage contracted by any person during subsistence of a previous marriage shall be null and void, unless before
the celebration of the subsequent marriage, the prior spouse had been absent for four consecutive years and the spouse
present has a well-founded belief that the absent spouse was already dead. In case of disappearance where there is danger
under the circumstances set forth in the provisions of Article 391 of the Civil Code, an absence of only two years shall be
sufficient.
For the purpose of contracting a subsequent marriage under the preceding paragraph, the spouse present must institute a
summary proceeding as provided in this Code for the declaration of presumptive death of the absentee, without prejudice to
the effect of reappearance of the absent spouse. (Emphasis and underscoring supplied)
Using the parameters outlined in Article 41 of the Family Code, Edna, without doubt, failed to establish that there was no
impediment or that the impediment was already removed at the time of the celebration of her marriage to Edgardo. Settled is
the rule that "whoever claims entitlement to the benefits provided by law should establish his or her right thereto by substantial
evidence."28 Edna could not adduce evidence to prove that the earlier marriage of Edgardo was either annulled or dissolved or
whether there was a declaration of Rosemaries presumptive death before her marriage to Edgardo. What is apparent is that
Edna was the second wife of Edgardo. Considering that Edna was not able to show that she was the legal spouse of a
deceased-member, she would not qualify under the law to be the beneficiary of the death benefits of Edgardo.
The Court does not subscribe to the disquisition of the CA that the updated Form E-4 of Edgardo was determinative of Ednas
status and eligibility to claim the death benefits of deceased-member. Although an SSS member is free to designate a
beneficiary, the designation must always conform to the statute. To blindly rely on the form submitted by the deceased-
member would subject the entire social security system to the whims and caprices of its members and would render the SS
Law inutile.
Although the SSC is not intrinsically empowered to determine the validity of marriages, it is required by Section 4(b) (7) of R.A.
No. 828229 to examine available statistical and economic data to ensure that the benefits fall into the rightful beneficiaries. As
held in Social Security Commission vs. Favila,30 SSS, as the primary institution in charge of extending social security
protection to workers and their beneficiaries is mandated by Section 4(b)(7) of RA 8282 to require reports, compilations and
analyses of statistical and economic data and to make an investigation as may be needed for its proper administration and
development. Precisely, the investigations conducted by SSS are appropriate in order to ensure that the benefits provided
under the SS Law are received by the rightful beneficiaries. It is not hard to see that such measure is necessary for the
systems proper administration, otherwise, it will be swamped with bogus claims that will pointlessly deplete its funds. Such
scenario will certainly frustrate the purpose of the law which is to provide covered employees and their families protection
against the hazards of disability, sickness, old age and death, with a view to promoting their well-being in the spirit of social
justice. Moreover and as correctly pointed out by SSC, such investigations are likewise necessary to carry out the mandate of
Section 15 of the SS Law which provides in part, viz:
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Sec. 15. Non-transferability of Benefits. - The SSS shall pay the benefits provided for in this Act to such [x x xj persons as may
be entitled thereto in accordance with the provisions of this Act x x x. (Emphasis supplied.)
The existence of two Form E-4s designating, on two different dates, two different women as his spouse is already an indication
that only one of them can be the legal spouse. As can be gleaned from the certification issued by the NSO, 31 there is no doubt
that Edgardo married Rosemarie in 1982. Edna cannot be considered as the legal spouse of Edgardo as their marriage took
place during the existence of a previously contracted marriage. For said reason, the denial of Edna's claim by the SSC was
correct. It should be emphasized that the SSC determined Edna's eligibility on the basis of available statistical data and
documents on their database as expressly permitted by Section 4(b) (7) of R.A. No. 8282.
It is of no moment that the first wife, Rosemarie, did not participate or oppose Edna's claim. Rosemarie's non-participation or
her subsequent death on November 11, 200432 did not cure or legitimize the status of Edna.
WHEREFORE, the petition is GRANTED. The August 13, 2013 Decision and the October 29, 2013 Resolution of the Court of
Appeals in CA-G.R. SP No. 122933 are REVERSED and SET ASIDE. Accordingly, the petition for entitlement of SS death
benefits filed by respondent Edna Azote is DENIED for lack of merit.
SO ORDERED.

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