LKKLN

(Alleged) Labor I Digests Atty.
Dante Cadiz
June 6, 2013
1. Asuncion v. NLRC (2001)
Facts: Asuncion was an accountant/bookkeeper of the Mabini Medical Clinic. The NCR-Industrial Relations Div. of DOLE
conducted a routine inspection of the premises of the company and discovered upon petitioner disclosure that there were
violations of the labor standards law. Later a memo was issued charging petitioner with chronic absenteeism, habitual
tardiness, wasting time, getting money without a receipt, and disobedience and was asked to explain why she should not be
terminated so she submitted her response. She was dismissed on the same day so she filed a complaint for illegal dismissal.
The LA ruled that there was illegal dismissal. The NLRC set it saying that petitioner admitted that charges.
Issue: Was there illegal dismissal?
Held: YES. For a valid dismissal not only must there be just cause supported by clear and convincing evidence, there must also
be an opportunity to be heard. The employer has the burden to prove that the dismissal was just or authorized cause. Failure
to discharge this burden means that the dismissal is unjustified. Here, the evidence submitted was merely unsigned
handwritten records and printouts. This is insufficient to justify a dismissal. The provision for flexibility in administrative
procedure does not justify decisions without basis in evidence having rational probative value. Here both the
handwritten listing and computer print outs being unsigned, so the authenticity is suspect and devoid of any rational probative
value.
Nor was there due process. There is no showing that there was warning of the absences and tardiness. The 2 day period given
to answer the allegations is an unreasonably short period of time. The clinic cant have given ample opportunity to answer the
charges filed. There are serious doubts as to the factual basis of the charges against petitioner. There doubts shall be resolved
in her favor in line with the policy that under the Labor Code to afford protection to labor and construe doubts in favor of
labor. If doubts exist between the evidence presented by the employer and the employee, the scales of justice must be titled in
favor of the latter.
2. Gandara Mill Supply v. NLRC (1998)

Facts: Germano was a manual laborer at Gandara Mill Supply owned by Milagros Sy. Gandara is a small business with only 2
laborers for manual work. Without permission, he didnt report for work for 5 days because his wife was about to deliver. Two
weeks after returning to work, he was informed that someone had taken his place but was told that he was to be re-admitted in
June 1996.
Germano commenced a case for illegal dismissal. The LA extended the deadline for Gandara to file its Position Paper. Despite
this, Gandara still failed to comply. As such, a decision was handed down ordering Gandara to pay Germano 65k. As a result,
Gandara appealed but it was dismissed by the NLRC. Gandara claims that NLRC gravely abused its discretion in dismissing
the appeal and not giving a chance to present its case that Germano was only suspended, not dismissed.
Held: NO GRAVE ABUSE. Gandara is guilty of unreasonable delay or laches. Findings of fact by quasi-judicial agencies
(NLRC) are conclusive upon the court without proof of grave error. By its inaction, petitioner was properly considered to
have waived or forfeited the right to refute private respondents stance. Indeed, petitioner cannot now be permitted to
belatedly complain of a denial of due process.
Also, it is clear that Germano was illegally dismissed. Prolonged absence without leave constitute as a just cause of dismissal
and its illegality stems from the non-observance of due process. Where dismissal was not preceded by the twin requirements
of notice and hearing, the legality of dismissal is under heavy clouds and therefore illegal. Preventive suspension shall not last
for more than 30 days.
The Social Justice policy mandates a compassionate attitude toward the working class in its relation to management. In calling
for the protection to labor, the Consitution does not condone wrongdoing by the employee, it nevertheless urges a
moderation of the sanctions that may be applied in the light of many disadvantages that weigh heavily.
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(Alleged) Labor I Digests Atty. Dante Cadiz
3. TSPIC Corp. v. TSPIC Employees Union (2008)

Facts: TSPIC Corp. entered into a CBA with the Corp. Union for the purpose of increasing salary for years 2000-02. Thus, the
increase materialized on Jan. 1, 2000. However, on October 2000, the Regional Tripartite Wage and Production board raised
the minimum wage to P250 from 223 starting Nov. 1. As such, wages of 17 probationary employees were increased to 250 and
became regular employees who received another 10% increase in salary. TSPIC implemented new wage rates as provided in
the CBA. As a result, 9 employees who were senior to the 17 recently hired employees received less wages.
On January 19, 2001, TSPICs HRD notified the 24 employees who are private respondents, that due to an error in the
automated payroll system, they were overpaid and the overpayment would be deducted from their salaries starting February
2001. The Union on the other hand, asserted that there was no error and the deduction of the alleged overpayment constituted
diminution of pay.
Issue: Whether the TSPICs decision to deduct the alleged overpayment from affected Union members constitute diminution
of benefits as alleged by the Union?
Held: NO. Charging the overpayments made to the 16 respondents through staggered deductions from their salaries does not
constitute diminution of benefits. 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.
Here, TSPICs overpayment was a result of an error. An erroneously granted benefit may be withdrawn without violating the
prohibition against non-diminution of benefits. No vested right accrued to the respondents when the error was corrected.
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.
4. Capili v. NLRC (1997)

Facts: Private respondents are licensed PUJ drivers whose jeeps are owned by Gil Capili. Said drivers would pay a
boundary/rent of 280 and earn a profit of 200 per day. In 1991, Ricardo Capili and his wife became co-owners of the
operation of said jeepneys. The operators required the owners of the jeeps and the drivers to sign individually contracts of
lease to formalize their lessor-lessee relationship. However, the respondents got the impression that said signing was a
condition precedent before they could continue driving again. As a result, all 22 drivers boycotted the operation and stopped
doing their routes.
A week later, they filed a complaint for illegal dismissal and prayed for separation pay but not to be reinstated. Capilis opposed
and alleged that the drivers were not dismissed but voluntarily abandoned their jobs without any valid cause and refused to
return despite repeated demands therefor. As such, the LA declared that the misunderstanding of the situation led to the
breakage of their relationship and ordered them to be reinstated but without payment of backwages. On appeal, the NLRC
ordered Capili to give separation pay. Capilis now impute grave abuse on the part of NLRC.
Issue: Should separation pay be awarded to the drivers?
Held: NOT ENTITLED TO SEPARATION PAY. Art. 279 of the Labor Code which states that the remedy for illegal
dismissal is reinstatement without loss of seniority rights plus back wages computed from the time compensation was withheld
up to reinstatement. However there may be instances where reinstatement is not a viable remedy as where the relations
between employer and employee have been so severely strained that it is no longer advisable to order reinstatement or where
the employee decides not to be reinstated. In such events, the employer will instead be ordered to pay separation pay.
Art. 279 in relation to Art. 282 of the Labor Code reveals that an employee who is dismissed for cause after appropriate
proceedings in compliance with the due process requirements is not entitled to an award of separation pay. The common
denominator of those instances where payment of separation pay is warranted (Arts 283-84) is that the employee was dismissed
by the employer.
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Here, there was no dismissal at all. An award of separation pay cant be justified solely based on the existence of strained
relations between employer-employee. It is given only as an alternative to reinstatement emanating from illegal dismissal.
Without illegal dismissal, even if relations are strained, there is no basis for separation pay. The constitutional policy of
providing full protection to labor is not intended to oppress or destroy management.
5. Brew Master v. NAFLU (1997)

Facts: Estrada was a route helper in Brew Master. From April to May 1993 (1 month), he went AWOL. As a result, Brew
Masters sent a memo to Estrada allowing him to explain the circumstances of his absence. In Estradas answer, he revealed
that he had to go bring home his children to Samar because his wife had left him. Unfortunately, Brew Master did not find the
explanation to be valid. As such, he was issued a Notice of Termination. Estrada filed a complaint for illegal dismissal. In the
employers defense, it averred that the dismissal was for cause provided in their Rules and Regulations as well as in the Labor
Code. LA dismissed the complaint. Upon appeal, the NLRC ruled that dismissal was too severe a penalty especially for a first
time offender. Thus, Estrada was reinstated but without backwages. Brew Master now imputes grave abuse on the NLRC.
Issue: Whether NLRC committed grave abuse in modifying the LAs decision
Held: NO. Based on the facts and circumstances, while his failure to inform and seek Brew Masters approval was an omission
which must be corrected and chastised, he did not merit the severest penalty of dismissal from the service.
Abandonment as a just and valid ground for dismissal requires the deliberate, unjustified refusal of the employee to resume his
employment. Two elements must be satisfied: (1) failure to report for work or absence without valid or justifiable reason; and
(2) a clear intention to sever the employer-employee relationship. Likewise, the burden of proof is on the employer to show
the employees clear and deliberate intent to discontinue his employment without any intention of returning, mere absence is
not sufficient. These elements are not present here.
Estradas prolonged absence without approval does not fall within the definition of abandonment and that his dismissal was
unjustified. While we do not decide here the validity of Brew Masters Rules and Regulations on continuous, unauthorized
absences, what is plain is that it was wielded with undue haste resulting in a deprivation of due process, thus not allowing for a
determination of just cause or abandonment. In this light, petitioners dismissal was illegal.
6. CBTC Employees Union v. Clave (1986)

Facts: CBTC Union filed a complaint with the DOLE against CBTC for non-payment of holiday pay benefits provided under
the Labor Code. The parties submitted the dispute for arbitration. In 1976, Arbitrator rendered a decision in favor of the
Union. The next day, DOLE released Policy Instruction No. 9, a policy regarding the implementation of 10 paid legal
holidays.
CBTC appealed to the NLRC and alleged that the Arbitrator gravely abused his discretion when he did not apply said policy
instruction. Said appeal was dismissed. CBTC now appealed to the Sec. of Labor. In 1977, Acting Sec. of Labor reversed the
NLRC decision thereby having the effect of applying Policy Instruction 9 retrospectively.
Issue: Whether Union members are entitled to holiday pay?
Held: YES. In a previous case (IBAAEU v. Inciong), it was already held that said bulletin is null and void, having been
promulgated by the Sec. of Labor in excess of his rule-making powers. In effect, it amended the law by enlarging the scope of
the exclusions. Secretary of Labor went as far as to categorically state that the benefit is principally intended for daily paid
employees whereas the law clearly states that every worker shall be paid their regular holiday pay. This is incompatible with the
directive in the Labor Code that all doubts in the implementation and interpretation of the Labor Code shall be resolved in
favor of labor.
7. PAL v. NLRC (1993)

Facts: In 1985, PAL revised its 1966 Code of Discipline. It was circulated among the employees and was immediately
implemented. Some employees were, in fact, subjected to disciplinary measures embodied therein. As such, PAL Employees
Association (PALEA) sued for unfair labor practice for the arbitrary implementation of the Code of Discipline without notice
and prior discussion with the Union. Thereafter, it was held that no unfair labor practice was committed because there was no
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bad faith on the part of PAL in adopting the new Code of Discipline. However, LA said that PAL was not completely free of
fault. It failed to prove that the new Code was amply circulated. As such, it proceeded to order PAL to furnish all employees
with the Code, reconsider the cases heard under the new Code, and discuss with PALEA all the disputed provisions of said
Code. PAL now imputes grave abuse against NLRC.
Issue: Whether management may be compelled to share with the union or its employees its prerogative of formulating a code
of discipline.
Held: YES. The exercise of managerial prerogative is not unlimited. It is circumscribed by limitations found in law, CBA, or in
the general principles of justice and fair play. The exercise thereof must always be in good faith for the advancement of the
employers interest and not to defeat or circumvent the rights of employees. Upon close scrutiny, the provisions of the Code
reveal that they are not purely business oriented or concern the management aspect of the business. Rather, it had
repercussions on the employees right to security of tenure. 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 of action.
The implementation of said provisions may result in the deprivation of an employees means of livelihood. In upholding the
constitutional requirements for the protection of labor and promotion of social justice, the scales of justice, when there is
doubt, must be tipped in favor of the worker.
8. Abbot Laboratories v. NLRC (1987)

Facts: Bobadilla was a MedRep for Abbot Labs covering an area in Manila. Because of the exigencies of the business, it was
regular for MedReps to be reassigned to different territorial responsibilities. In fact, Bobadillas application for employment
said that he was willing to be assigned to provinces. In 1983, Bobadilla was informed that, because of his experience in the
industry, he was being transferred to Cagayan, a newly opened territory. However, he refused to report to his new assignment.
Therefore, he was held guilty for gross insubordination and dismissed. When Bobadilla appealed, NLRC reversed the previous
decision saying that Abbot did not have a valid nor justifiable reason to dismiss Bobadilla.
Issue: Whether Bobadilla could be validly dismissed based on insubordination for refusing to accept his new assignment.
Held: YES. 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; more so if such reassignments are part of the employment contract.
The hiring, firing, transfer, demotion, and promotion of employees has been traditionally identified as a management
prerogative subject to limitations found in law, a collective bargaining agreement, or general principles of fair play and justice.
This is a function associated with the employer's inherent right to control and manage effectively its enterprise. Even as 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.
As a general rule, the right to transfer or reassign an employee is recognized as an employer's exclusive right and the
prerogative of management. Bobadilla had no valid reason to disobey the order of transfer. He had tacitly given his consent
thereto when he acceded to the petitioners' policy of hiring sales staff who are willing to be assigned anywhere in the
Philippines.
9. AHS/Philippines Employees v. NLRC (1987)

Facts: AHS Phil Employees is the collective bargaining agent of rank-and-file employees of AHS, a company engaged in the
sale of hospital and lab equipment. In 1983, AHS said that its operations have been seriously affected when its suppliers
(Berna and Pharmaton) insisted on a cash basis and also the suspension of trade and foreign credit facilities. When AHS found
it hard to comply with these requirements, it decided to strengthen its HML Division which sold hospital and lab equipment.
As their crisis worsened, it decided to appoint Zuellig Pharmaceuticals as its national distributor to make their company more
viable. As a result of this, their existing Pharma Division would be abolished. The Union president categorically stated that
they would oppose any form of termination. Still, AHS proceeded with announcing the termination by serving termination
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notices to 31 employees of the Pharma Division which was to take effect immediately upon service thereof. In lieu of the 30
day notice required by law, the employees were paid 1 month salary.
Issue: Whether or not there was a valid termination.
Held: NO. Under the Labor Code, even if dismissal is based on a just cause, the 30-day notice to the employee and the
Minister of Labor is required on top of separation pay. Thus, payment of a months salary cannot be considered substantial
compliance with the Labor Code,
Needless to say, in the absence of a showing that the illegal dismissal was dictated by anti-union motives, the same does not
constitute an unfair labor practice as would be a valid ground for a strike. The remedy is an action for reinstatement with
backwages and damages. Nevertheless we take this actuation of AHS as evidence of the abusive and oppressive manner by
which the retrenchment was effected. While the lack of proper notice could not bar a ground to strike this does not mean that
the strike staged by Union was illegal because it was grounded on a violation by respondent company of the CBA.
10. Globe Mackay Cable v. CA (1989)

Facts: Tobias was employed at Globe Mackay. In 1972, fictitious purchases and fraudulent transactions were discovered.
Tobias claimed that he was the one who actually discovered it and reported it to his superiors. After he made the report, GM
Hendry told him that Tobias was the prime suspect. He also called him a crook and a swindler. He was also made to
undergo lie detector tests and police investigations but he was cleared of any participation in said anomalies. Despite the
findings, Hendry issued a memo suspending Tobias from work in preparation for the filing of criminal charges. Later, he was
charged with several counts of estafa and falsification which were all dismissed eventually.
In 1973, Tobias received a notice of termination. As a result, he filed a case for illegal dismissal which was dismissed. Pending
appeal, Tobias sought employment at a telephone company. Without being asked, Hendry wrote a letter stating that Tobias
was dismissed for dishonesty. This prompted Tobias to file a case for damages on the ground of Hendrys abusive acts. He
was thereafter awarded 330K in damages by the RTC which was also affirmed by the CA.
Issue: Whether petitioners are liable for damages to private respondent.
Held: YES. Based on the articles on abuse of rights (arts. 19-21) and after examining the circumstances of the case, Globe
Mackay have indeed abused the rights of Tobias which is compensable by way of damages. Despite the fact that he was the
one who reported said anomalies, Hendry kept on harassing Tobias until they terminated him. Several tortious acts were also
done after he had been dismissed such as the letter sent to the telephone company which caused him not to be employed.
June 8, 2013
11. CF Sharp v. Espanol (2007)
Facts: Louis Cruise Lines (LCL) entered into a Crewing Agreement with PAPASHIP. The latter appointed Rizal Intl Shipping
services as a manning agency in the Philippines who recruited Filipino semen for LCLs vessel.
Later, the agreement between LCL and PAPASHIP was terminated. As a replacement, LCL entered into agreement with CF
Sharp and made it its new Crewing Agent. Thus, to comply with Philippine law, CF Sharp applied for accreditation with
POEA. However, Rizal objected on the ground that its accreditation has not yet expired.
Pending its accreditation, CF Sharp already started conducting interviews for seamen. Rizal found out about this and reported
this to POEA. Upon investigation, CF Sharp was caught doing said interviews. Thus, a complaint for illegal recruitment was
filed against LCL and CF Sharp.
Issue: Whether or not they are liable for illegal recruitment
Held: YES. Since the recruitment was being done prior to obtaining POEA accreditation, the Labor Code was violated.
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: Provided, That any person or entity which in any
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manner, offers or promises for a fee employment to two or more persons shall be deemed engaged in recruitment and
placement. As such, the conduct of preparatory interviews is considered as a recruit activity.
The fact that CF Sharp received no payment during said interviews is immaterial. It is the lack of the necessary license or
authority, not the fact of payment, that renders the recruitment activity of LCL unlawful.
12. People v. Jamilosa (2007)

Facts: Joseph Jamilosa was prosecuted for large scale illegal recruitment under RA 8042 for allegedly recruiting private
complainants Bamba (ended up being his girlfriend), Lagman, and Singh for employment in a nursing home in California
without obtaining the required license from the POEA.
According to the 3 witness testimonies, Jamilosa told each of them that she had connections in the US and that he could help
them get employment as a nurse in California. Jamilosa asked each of them to pay him USD300 and valuable things (jewelry,
liquor) which they did. No receipt was issued to them. The complainants also gave him travel documents as well as their
nursing licenses. To induce them that he actually arranged their trips, he showed a copy of their booking with Northwest
Airlines. Thereafter, Jamilosa disappeared.
In his defense, he claimed that they were the ones who approached him and asked for employment advice. He also said that he
never recruited them nor was there any money involved.
Issue: Is he guilty of illegal recruitment?
Held: Yes. Any recruitment activities to be undertaken by non-licensee or non-holder of contracts shall be deemed illegal. As
defined by the LC, recruitment and placement refers to any act of canvassing, enlisting, contracting, transporting, utilizing,
hiring, or procuring workers, and includes referrals, contract services, promising or advertising for employment, locally or
abroad, whether for profit or not. Provided, That any person or entity which, in any manner, offers or promises for a fee
employment to two or more persons shall be deemed engaged in recruitment and placement.
Illegal recruitment is deemed committed in large scale if committed against three (3) or more persons individually or as a
group. To prove this, the prosecution must prove the ff: (1) the person charged undertook a recruitment activity under Article
13(b) or any prohibited practice under Article 34 of the Labor Code; (2) accused did not have the license or the authority to
lawfully engage in the recruitment and placement of workers; and (3) accused committed the same against 3 or more persons
individually or as a group. These were all gleaned from the collective testimonies of the witnesses.
Even in the absence of money or other valuables given as consideration for the services of appellant, the latter is considered
as being engaged in recruitment activities. Plus, the LC provides that this can be committed for profit or not.
13. People v. Valenciano (2008)

Facts: Valenciano claimed to be an employee of Middle East International Manpower Resources Inc. and told the 4 offended
parties (De Luna, De Villa, Dela Cuesta, Candelaria) that they could apply for a job in Taiwan. They each paid P70,000 to
cover the supposed placement fee and other expenses for the processing of the requirements for the employment.
After the payments were made, Valenciano brought the prospective workers to the office of its office in Pasay City, where
they were made to fill out application forms for their employment as factory workers in Taiwan. She assured the prospective
workers that they could leave for Taiwan within one month from the filing of their applications. During the period material,
they had not yet found employment as factory workers in Taiwan. As such, Valenciano and 3 others were charged with large
scale illegal recruitment.
Issue: Whether Valenciano is guilty of large scale illegal recruitment.
Held: Yes. All the requisites thereof have been duly proven. Valenciano cannot escape liability by claiming that she was not
aware that before working for her employer in the recruitment agency, she should first be registered with the POEA. Illegal
recruitment in large scale is malum prohibitum, not malum in se. Good faith is not a defense. The claim of Valenciano that she was
a mere employee of her other co-accused does not relieve her of liability. An employee of a company or corporation engaged
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in illegal recruitment may be held liable as principal, together with his employer, if it is shown that the employee actively and
consciously participated in illegal recruitment.
As testified to by the complainants, accused-appellant was among those who met and transacted with them regarding the job
placement offers. In some instances, she made the effort to go to their houses to recruit them. She even gave assurances that
they would be able to find employment abroad and leave for Taiwan after the filing of their applications. Accused-appellant
was clearly engaged in recruitment activities, notwithstanding her gratuitous protestation that her actions were merely done in
the course of her employment as a clerk.
14. People v. Chua (2010)

Facts: Melissa Chua and Josie Campos were charged with 5 counts of Estafa, as well as one of Illegal Recruitment in large scale
as provided in Sections 6(a), (l), and (m) of R.A. 8042. There were five victims Tan, Macaranas, Yu, King, and Angeles; they
were altogether deprived of P225,000. Josie Campos remained at large; hence, the case proceeded only against Chua.
Of the five complainants, 3 testified. Macaranas states that she was introduced by Campos to Chua, who represented herself as
able to deploy factory workers to Taiwan. After paying P83,750, she was told that she could leave in the last week of
September 2002, but she did not. This was moved to the 2nd week of October, which did not also push through. She asked
for a refund, but Chua claimed that the amount was in not her possession; she promised to pay, but she did not.
Tan states that he was introduced by Campos to Chua at the Golden Gate Agency in Paragon Tower Hotel. He was assured
work in Taiwan as a factory worker, with a monthly salary of 15,000 Taiwanese dollars. He paid P70,000 for which a receipt
was issued. He was never deployed, and he was never refunded the money. It was later found that Golden Gate was not
licensed to deploy workers to Taiwan.
King was also introduced by Campos to Chua, who was represented to be able to deploy him to Taiwan. He paid P20,000 as
partial payment, but when he inquired as to his deployment, he learned of Golden Gates closure and the expiry of its license.
Chua admits receiving money from Macaranas and Tan, but claims that as a cashier she gave it to the documentation officer,
who in turn remitted it to one Marilyn Calueng. The RTC and the CA convicted her.
Issue: Whether or not the condition was proper
Held. YES. Any recruitment done by an agency with an expired license is illegal. For Illegal Recruitment in large scale, three
elements are necessary: (1) the accused undertook a recruitment activity or any prohibited practice under Article 34 of the
Labor Code; (2) the accused did not have the license or authority to engage in the same; and (3) the accused committed it
against three or more persons individually or as a group.
Even if she was a mere temporary cashier, she is not any less liable, since she actively and consciously participated in the
recruitment process. Even if she was unaware of the illegal nature of Golden Gate, Illegal Recruitment under R.A. 8042 is a
special law, violation of which is malum prohibitum.
15. People v. Adeser (2009)

Facts: In 2002, Spouses Tiongson (agents of Naples Travel and Tours) introduced Josephine Palo to appellant Nida Adeser
(owner and general manager of Naples) to discuss employment opportunities in Australia. Adeser informed Palo that for a
placement fee of P80,000, she can work as an apple picker in Australia with a monthly salary of $1,400.
Palo gave Roberto Tiongson and Lourdes Chang, operations manager of Naples P15,000 as first installment for the placement
fee for Palos visa application with a promise that she would be employed within 3 months. More than 3 months passed,
however, but Palo was not deployed to Australia. Neither did she get her Australian visa.
Palo later learned from the NBI that Naples had closed down and that Naples had no license to operate and deploy workers
abroad. Palo filed a complaint against appellant, the spouses Tiongson and Chang.
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On Novemer 2003, the Office of the City Prosecutor of Pasay filed before the RTC two Informations (syndicated illegal
recruitment constituting economic sabotage and estafa) against appellant Nida Adeser and the spouses Tiongson. Upon
arraignment, appellant pleaded not guilty to both charges while her co-accused remained at large. The trial court rendered a
decision finding appellant guilty of both charges. The CA affirmed.
Issue: Whether or not Adeser is guilty of syndicated illegal recruitment.
Held: YES. Guilty of Illegal Recruit and Estafa. Illegal recruitment is committed when these two elements concur: (1) the
offenders have no valid license or authority required by law to enable them to lawfully engage in the recruitment and
placement of workers, and (2) the offenders undertake any activity within the meaning of recruitment and placement defined
in Article 13(b) or any prohibited practices enumerated in Article 34 of the Labor Code. 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. The law imposes a higher penalty when the crime is committed by a
syndicate as it is considered as an offense involving economic sabotage.
Illegal recruitment is deemed committed by a syndicate if carried out by a group of 3 or more persons conspiring and/or
confederating with one another in carrying out any unlawful or illegal transaction. Undoubtedly, what transpired in the instant
case is illegal recruitment by a syndicate. As categorically testified by Palo and Caraig, appellant, together with her co-accused,
made representations to Palo that they could send her to Australia to work as an apple picker.
Appellant is also guilty of estafa. A person who is convicted of illegal recruitment may also be convicted of estafa under Article
315(2) (a) of the RPC provided the elements of estafa are present. Such is committed by any person who defrauds another by
using a fictitious name, or falsely pretends to possess power, influence, qualifications, property, credit, agency,
business or imaginary transactions, or by means of similar deceits executed prior to or simultaneously with the commission of
the fraud. The offended party must have relied on the false pretense, fraudulent act or fraudulent means of the accused and as
a result thereof, the offended party suffered damage. Such is the case before us.
16. Nasi-Villar v. People (2008)

Facts: Rosario Nasi-Villar was charged for illegal recruitment under RA 8042. The information reads that on or about January
1993, he recruited Nila Panilag for overseas employment, demanded, and received 6500 as placement fee without being
licensed or holder of authority to the damage and prejudice of offended party. Thus, the court convicted her of illegal
recruitment.
Upon appeal to the CA, it was noted that he criminal acts alleged to have been committed happened sometime in 1993.
However, R.A. No. 8042, under which he was charged took effect only on 15 July 1995. Thus, CA affirmed the decision but
modified it and made petitioner liable under the LC.
Thus, petitioner alleges that CA erred in failing to consider that R.A. No. 8042 cannot be given retroactive effect and that the
decision of the RTC constitutes a violation of the constitutional prohibition against ex post facto law.
Issue: Whether or not CA erred in failing to consider that R.A. No. 8042 cannot be given retroactive effect and that the
decision of the RTC constitutes a violation of the constitutional prohibition against ex post facto law.
Held: NO. The real nature of the crime charged is determined, not from the caption or preamble of the information nor from
the specification of the law alleged to have been violated these being conclusions of law but by the actual recital of facts in the
complaint or information. The allegations in the Information clearly charge petitioner with illegal recruitment
as defined in Art. 38, in relation to Art. 13(b) of the Labor Code, and penalized under Art. 39(c) of the same Code.
The basic rule is that a criminal act is punishable under the law in force at the time of its commission. Thus, petitioner can
only be charged and found guilty under the Labor Code which was in force in 1993 when the acts attributed to her were
committed. Petitioner was charged under an Information that erroneously designated the offense as covered by R.A. No.
8042, but alleged in its body acts which are punishable under the Labor Code. As it was proven that petitioner had committed
the acts she was charged with, she was properly convicted under the Labor Code, and not under R.A. No. 8042.
8 Roco 3B
17. Serrano v. Gallant (2009)

Facts: Serrano is an OFW hired by Gallant for the position of chief officer for a term of 12 months with a basic salary of
$1400 per month. However, on the date of departure, petitioner was constrained to accept a downgraded employment and a
lower salary. Gallant, however, promised that he would be made chief officer after 2 months. Unfortunately, Gallant did not
deliver. Thus, petitioner refused to stay and was repatriated to the Philippines after serving 2 months and 7 days of his
contract.
As a result, Serrano filed a complaint for constructive dismissal and for payment of money claims. LA awarded said claims but
only the equivalent of 3 months salary. Consequently, Serrano challenged the constitutionality of Sec. 10 of RA 8042 which
awards money claims equivalent to the unexpired portion of the contract OR for 3 months for ever year of the unexpired
term, whichever is lower. Petitioner claims that this violates the non-impairment of contracts as well as it deprives them of due
process and equal protection of the laws.
Issue: Whether or not said clause is constitutional.
Held: UNCONSTITUTIONAL. While it does not violate the non-impairment clause, it is violative of Art. 3 1, Art 2 18,
and Art. 13 3. In accordance with the Constitutional mandate and the obligation of the Court to afford protection to labor, it
must employ strict judicial scrutiny of the said provision for it perceives a suspect classification prejudicial to OFWs.
Said provision created a distinction between OFWs with employment contracts for less than one year and those for more than
one year, with respect to the money claims that they are entitled.
The disparity becomes more apparent when the Court took into account the previous rule before the passage of RA 8042,
wherein OFWs with employment contracts of less than one year and more than one year are treated the same way, that is, the
unexpired portion of their employment contract would become the basis for the computation of their money claims due them
if they are illegally dismissed. In other words, their claims were subjected to a uniform rule of computation.
The Court concludes that the subject clause contains a suspect classification in that, in the computation of the monetary
benefits of fixed-term employees who are illegally discharged, it imposes a 3-month cap on the claim of OFWs with an
unexpired portion of one year or more in their contracts, but none on the claims of other OFWs or local workers with fixed-
term employment. The subject clause singles out one classification of OFWs and burdens it with a peculiar disadvantage.
To reiterate, it violates the Constitutional mandate to afford full protection to labor as well as the due process and equal
protection clauses.
18. Tangga-an v. Phil. Transmarine (2013)

Facts: Tangga-an entered into a 6-month overseas employment contract with Phil Transmarine Carriers (PTC) as chief
engineer of the vessel SS Kure. After delivering cargo to Japan, the Filipino Engineers was asked by the shipmaster to report
to their office. They were informed that they would be repatriated on account of the delay in the cargo discharging in Japan.
Said task is the principal duty of the Deck Officers, however. Blaming said engineers, the shipmaster said the delay was caused
due to the non-readiness of the ships turbo generator. Upon checking, the engineers found they were all in order. In other
words, to save face for the delay, they put the blame on the engineers. As such, they were ordered to disembark from the ship
and thereafter repatriated.
As a result, a complaint for illegal dismissal was filed. The Labor Arbiter (LA) ruled that PTC illegally dismissed Tangga-an.
Petitioner was awarded 4 months salary representing the unexpired portion of the contract pursuant to 10, RA 8042, to wit:
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.
On appeal, the NLRC affirmed. When it was elevated to the CA, the finding of illegal dismissal was upheld but only awarded 3
months salary representing the unexpired portion of the contract pursuant to the same law. Tangga-an now seeks
modification of the CA ruling with respect to the monetary award.
9 Roco 3B
Issue: Whether the indemnity awarded by CA consisting of only 3 months is in accordance with 10 of RA 8042.
Held: NO. 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 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 1 year or more.
To follow the CAs ruling that he is only entitled to 3 months salary simply because it is the lesser amount is to completely
disregard and overlook some words used in the statute while giving effect to some. The courts, 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.
19. Ravago v. Esso (2005)

Facts: Esso Eastern Marine (EEM) is a foreign company engaged in maritime commerce. It is represented in the Philippines
by its manning agent and co-respondent Trans-Global, a domestic corporation. Roberto Ravago was hired by Trans Global to
work as a seaman on board various Esso vessels. He was employed under 34 unrelated contracts under related companies
EEM, EIS, and ETI.
On August 1992, shortly after completing his latest contract with EIS, a stray bullet hit Ravago on the left leg while he was
waiting for a bus ride. Because of his injury, he could only walk with a limp; thus his doctor opined that he would not be able
to cope with the job of a seaman and suggested that he be given a desk job instead. Because of this, the company physician of
EEM declared him unfit to work once again as a seaman. Consequently, instead of rehiring Ravago, EIS paid him his Career
Employment Incentive Plan after Ravagos execution of a deed of quitclaim.
However, soon after that, Ravago filed a complaint for illegal dismissal. He claims that EEM dismissed him without notice and
just cause, and that as certified by his doctor, at present. He is fit to resume pre-injury activities. EEM denied the allegations
and averred that Ravago is just a contractual employee.
Issue: Whether or not Ravago is just a contractual employee which, in effect, would not make his complaint for illegal
dismissal prosper.
Held: NO ILLEGAL DISMISSAL. In a long line of cases, the Court has held that seafarers are contractual, not regular. Their
employment is governed by the contracts they sign every time they are rehired and their employment is terminated when the
contract expires. Their employment is contractually fixed for a certain period of time.
Moreover, in Brent School v. Zamora, it was held that seamen and overseas contract workers are not covered by the term regular
employment under Art. 280 of the LC. The exigencies of their work necessitates that they be employed on a contractual
basis. Thus, not being a regular employee, separation/termination pay cannot be awarded.
20. Almodiel v. NLRC (1993)

Facts: Petitioner is a CPA hired as Cost Accounting Manager of Respondent Raytheon Philippines, Inc. As such, his major
duties were (1) plan, coordinate, and carry out year-end physical inventory; (2) formulate and issue out hard copies of standard
product costing and other cost/pricing analysis if needed and required; and set up the written cost accounting system for the
whole company. However, when the standard cost accounting system for Raytheon plans worldwide was adopted and installed
in the Philippine operations, the services of the petitioner was reduced to only the submission of period reports that would use
computerized forms prescribed and designed by the international head office of the company in California, USA. In other
words, the position of Almodiel became obsolete in lieu of the new accounting system.
On January 27, 1989, petitioner was told of the abolition of his position on the ground of redundancy. He was constrained to
file the complaint for illegal dismissal after his request to have him transferred to another department was denied.
He also alleged that the functions of his position were absorbed by the Payroll/MIS/Finance Department which is headed by
a resident alien without working permit from the DOLE.
10 Roco 3B
The NLRC ruled for Raytheon and directed the latter to pay the petitioner P100,000.00 as separation pay.
Hence, this petition.
Issue: (a) Whether or not Almodiels termination due to redundancy was tainted with malice, bad faith, and irregularity.
(b) Whether or not the functions of his position were absorbed by a resident alien (Danny Ang) without any working permit
from DOLE in violation of the Labor Code
Held: (a) VALID TERMINATION. Redundancy, for purposes of our Labor Code, exists where the services of an employee
are in excess of what is reasonably demanded by the actual requirements of the enterprise. The characterization of an
employees services as no longer necessary or sustainable, and therefore, properly terminable, was an exercise of business
judgment on the part of the employer.
(b) Art. 40 of the LC requiring an employment permit refers to NON-RESIDENT ALIENS. This is required for entry into
the country for employment purposes and issued after determination of the non-availability of a person in the Philippines who
is competent, able, and willing at the time of application to perform the services for which the alien is desired. Since Danny is
a resident alien, the provision does not apply to him.
June 13, 2013

21. Century Canning v. CA (2007)
Facts: Century Canning Corporation hired Gloria Palad as fish cleaner at its tuna and sardines factory. On 17 July 1997,
Palad signed an apprenticeship agreement with petitioner. Then, on 25 July 1997, Petitioner submitted its apprenticeship
program for approval to the Technical Education and Skills Development Authority (TESDA) of the DOLE. TESDA
approved the apprenticeship on Sep. 1997.
A performance evaluation was conducted on Nov 1997 where petitioner gave Palad a rating of N.I. or needs improvement.
According to the same, Palad incurred numerous tardiness and absences. Thereafter, it issued a termination notice dated 22
Nov 1997 to Palad, informing her of her termination effective at the close of business hours of 28 Nov 1997.
Palad then filed a complaint for illegal dismissal, underpayment of wages, and non-payment of pro-rated 13th month pay.
The LA dismissed the complaint but ordered petitioner to pay Palad her last salary and her pro-rated 13th month pay. On
appeal, the NLRC affirmed with modification the LA decision: + backwages for 2 months. In the CA, the NLRC ruling was
set aside because it found that the apprenticeship agreement was void for having been entered into without prior TESDA
authority. Thus, CA declared Palad to be illegally dismissed.
Issues: (1) Whether Palad is an apprentice.

(2) Whether she was illegally dismissed.
Held: (1) NO. The Labor Code defines an apprentice as a worker who is covered by a written apprenticeship agreement with
an employer. Moreover, the LC provides that only employers in the highly technical industries may employ apprentices and
only in apprenticeable occupations approved by the Minister of Labor (authority now given to TESDA).
In this case, the apprenticeship agreement was entered into between the parties before petitioner filed its apprenticeship
agreement with the TESDA for approval. Clearly, the apprenticeship agreement was enforced even before the TESDA
approved petitioners apprenticeship program. Thus, the apprenticeship agreement is void because it lacked prior approval
from the TESDA.
Said approval is required before the employer is allowed to hire apprentices. Prior approval from the TESDA is necessary to
ensure that only employers in the highly technical industries may employ apprentices and only in apprenticeable occupations.
Thus, under RA 7796, employers can only hire apprentices for apprenticeable occupations which must be officially endorsed
by a tripartite body and approved for apprenticeship by the TESDA. This is to ensure the protection of apprentices and to
obviate possible abuses by prospective employers who may want to take advantage of the lower wage rates for apprentices and
circumvent the right of the employees to be secure in their employment.
Since Palad is not considered an apprentice because the apprenticeship agreement was enforced before the TESDAs approval
of petitioners apprenticeship program, Palad is deemed a regular employee performing the job of a fish cleaner. The job of
a fish cleaner is necessary in petitioners business as a tuna and sardines factory. Under Article 28021 of the Labor Code, an
11 Roco 3B
employment is deemed 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.
(2) YES. To constitute valid dismissal from employment, two requisites must concur: (1) the dismissal must be for a just or
authorized cause; and (2) the employee must be afforded an opportunity to be heard and to defend himself.
In this case, the Labor Arbiter held that petitioner terminated Palad for habitual absenteeism and poor efficiency of
performance. The Labor Arbiters conclusion that petitioner validly terminated Palad was based mainly on the performance
evaluation allegedly conducted by petitioner. However, Palad alleges that she had no knowledge of the performance evaluation
conducted and that she was not even informed of the result of the alleged performance evaluation. Palad also claims she did
not receive a notice of dismissal, nor was she given the chance to explain. According to petitioner, Palad did not receive the
termination notice because Palad allegedly stopped reporting for work after being informed of the result of the evaluation.
22. Bernardo v. NLRC (1999)

Facts: Bernardo and 42 others are deaf-mutes hired on different periods from 1988-93 by Far East Bank as Money Sorters and
Counters through a uniformly worded contract called Employment Contract for Handicapped Workers. They were hired to
accommodate the pakiusap of civic minded personalities and, as such, tellers were relieved of the task of counting and
sorting the bills. Their contracts were renewed every 6 months.
In 1993, they were terminated because ... So, they filed a complaint for illegal dismissal on the ground that they were regular
employees. under Art. 280. On the other hand the Bank claims that they are special workers contemplated in Art. 80.
LA ruled against Bernardo et al. NLRC affirmed claiming that they do not fall under Art. 280 of the LC and that the Magna
Carta for Disabled Persons was also not applicable.
Issue: Whether or not said deaf-mutes can be considered as regular employees within the ambit of Art.280
Held: ILLEGAL DISMISSAL WITH RESPECT TO ONLY 27 OF THEM WHO HAD BEEN EMPLOYED FOR OVER
6 MONTHS. They 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. While the stipulations in the
contracts conform to the requirements of Art. 80, the factual circumstances of the case as well as the subsequent enactment of
RA 7277 (Magna Carta for Disabled Persons) justify the application of Art. 280.
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 importantly, 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. 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 Art. 280
of the LC.
The primary standard 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. Surely, the task
of counting and sorting bills is necessary and desirable to the business of respondent bank.
Arts. 280 and 281 of the LC 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 infini-tum. 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 6-month probationary period, the employees thereby became regular employees.
A contract of employment is impressed with public interest. Provisions of applicable statutes are deemed written into the
contract, and the parties are not at liberty to insulate themselves and their relationships from the impact of labor laws and
12 Roco 3B
regulations by simply contracting with each other. 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.
23. Southeastern v. Navarra (2010)

Facts: Southeastern Shipping, on behalf of its foreign principal, Southeastern Shipping Group, Ltd., hired Federico Navarra to
work on board the vessel "George McLeod." Federico signed 10 successive separate employment contracts of varying
durations covering the period from October 5, 1995 to March 30, 1998. His latest contract was approved by the POEA on
January 21, 1998 for 56 days extendible for another 56 days. He worked as roustabout during the first contract and as a
motorman during the succeeding contracts.
On March 6, 1998, while on board the vessel, Federico complained of having a sore throat and fever with chills. He also
developed a soft mass on the left side of his neck. He was given medication. On June 4, 1998, he was diagnosed at the PGH to
be suffering from a form of cancer called Hodgkin's Disease. This diagnosis was confirmed in another test conducted at the
Medical Center Manila.
On September 6, 1999, Federico filed a complaint against Southeastern with the arbitration branch of the NLRC claiming
entitlement to disability benefits, loss of earning capacity, moral and exemplary damages, and attorney's fees. During the
pendency of the case, on April 29, 2000, Federico died. His widow, Evelyn, substituted him as party complainant on her own
behalf and in behalf of their 3 children. The claim for disability benefits was then converted into a claim for death benefits.
LA dismissed the complaint. NLRC reversed the decision of LA and granted the death compensation benefits prayed for. CA
affirmed the NLRCs decision and found that the claim for benefits had not yet prescribed despite the complaint being filed
more than 1 year after Federicos return to the Philippines.
Eastern Shipping claims that the complaint has already prescribed since despite having been diagnosed on June 4, 1998 of
Hodgkins Disease, the complaint filed only on September 6, 1999, 1 year and 5 months after Federico arrived in Manila from
Qatar. They also claim that respondents are not entitled to the benefits claimed because Federico did not die during the term
of his contract and the cause of his death was not contracted by him during the term of his contract.
Issue: (1) Whether or not the complaint has already prescribed.

(2) Whether or not the death compensation benefits awarded were correct.
Held: (1) NO. While the employment contract stipulates that claims arising from the contract shall be made within 1 year
from the date of the seafarer's return to the point of hire, Art. 291 of the LC states that All money claims arising from
employer-employee relations during the effectivity of this Code shall be filed within three (3) years from the time the
cause of action accrued; otherwise they shall forever be barred.
Based on the foregoing, it is therefore clear that Article 291 is the law governing the prescription of money claims of seafarers,
a class of overseas contract workers. This law prevails over Section 28 of the Standard Employment Contract for Seafarers.
This is in keeping with the constitutional mandate of giving full protection to labor. Therefore, above stipulation is void.
(2) NO. To avail of death benefits, the death of the employee should occur during the effectivity of the employment
contract. The death of a seaman during the term of employment makes the employer liable to his heirs for death
compensation benefits, but if the seaman dies after the termination of his contract of employment, his beneficiaries are not
entitled to the death benefits. Federico did not die while he was under the employ of Southeastern. Thus, his beneficiaries are
not entitled to the death benefits under the Standard Employment Contract for Seafarers.
Moreover, there is no showing that the cancer was brought about by Federico's stint on board Southeasterns vessel. The
records show that he got sick a month after he boarded George Mcleod. It was only more than two months after his contract
with Southeastern had expired, that he was diagnosed to have Hodgkin's Disease. There is no proof that his exposure to the
motor fumes of the vessel, as alleged by Federico, caused or aggravated his Hodgkin's Disease
24. EDI Staffbuilders v. NLRC (2006)
13 Roco 3B
Facts: EDI is a corporation engaged in recruitment and placement of OFWs. ESI, another recruitment agency, collaborated
with EDI to process the documentation and deployment of Gran to Saudi. Gran was an OFW recruited by EDI, and
deployed by ESI to work for OAB, in Riyadh, Saudi Arabia.
OAB informed EDI that, from the applicants CV submitted to it for evaluation, it selected Gran for the position of
Computer Specialist. It also stated that if Gran agrees to the terms and conditions of employment contained in it, one of
which was a monthly salary of SR 2,250.00 (USD600.00). EDI may arrange for Grans immediate dispatch.
After accepting the offer, Gran signed an employment contract that granted him a monthly salary of USD 850.00 for a period
of 2 yrs. Upon arrival in Riyadh, Gran questioned the discrepancy in his monthly salary his employment contract stated
USD 850.00; while his POEA Information Sheet indicated USD 600.00 only. Through the assistance of the EDI office in
Riyadh, OAB agreed to pay Gran USD 850.00.
After 5 months, OAB terminated his employment via letter based on insubordination and non-compliance with the agency
requirements (pre-qualifications, salary and contract duration). On July 11, 1994, Gran received from OAB the total amount of
SR 2,948.00 representing his final pay, and on the same day, he executed a Declaration releasing OAB from any financial
obligation or otherwise, towards him.
Gran instituted a complaint against ESI/EDI, OAB, etc. with the NLRC for underpayment of wages/salaries and illegal
dismissal. LA ruled that there was neither underpayment nor illegal dismissal. Gran appealed with the NLRC. NLRC found
that Gran did not commit any act that constituted a legal ground for dismissal. The alleged non-compliance with contractual
stipulations relating to Grans salary and contract duration, and the absence of pre-qualification requirements cannot be
attributed to Gran but to EDI, which dealt directly with OAB.
Issue: W/N Grans dismissal is justifiable by reason of incompetence, insubordination and disobedience.
Held: NO. In termination disputes or illegal dismissal cases, the employer has the burden of proving that the
dismissal is for just and valid causes; and failure to do so would necessarily mean that the dismissal was not justified
and therefore illegal. Taking into account the character of the charges and the penalty meted to an employee, the employer
is bound to adduce clear, accurate, consistent, and convincing evidence to prove that the dismissal is valid and
legal. This is consistent with the principle of security of tenure as guaranteed by the Constitution and reinforced by Article
277 (b) of the Labor Code of the Philippines.
EDIs imputation of incompetence on private respondent due to his insufficient knowledge in programming and zero
knowledge of the ACAD system based only on the above mentioned letters, without any other evidence, cannot be given
credence. An allegation of incompetence should have a factual foundation. Incompetence may be shown by weighing it against
a standard, benchmark, or criterion.
The elements that must concur for the charge of insubordination or willful disobedience to prosper were not present. For
willful disobedience to be a valid cause for dismissal, the following twin 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 47 to the duties
which he had been engaged to discharge.
EDI failed to discharge the burden of proving Grans insubordination or willful disobedience. EDI also failed to show that the
order of the company which was violatedthe submission of Daily Activity Reportswas part of Grans duties as a
Computer Specialist. Even though EDI and/or ESI were merely the local employment or recruitment agencies and not the
foreign employer, they should have adduced additional evidence to convincingly show that Grans employment was validly and
legally terminated. The burden devolves also on the employment or recruitment agency for the latter is not only an agent of
the former, but is also solidarily liable with the foreign principal for any claims or liabilities arising from the dismissal of the
worker.
Since EDI deployed Gran, it can be presumed that Gran had passed the required trade test and that Gran is qualified for the
job. Even if there was no objective trade test done by EDI, it was still EDIs responsibility to subject Gran to a trade test; and
14 Roco 3B
its failure to do so only weakened its position but should not in any way prejudice Gran. Either way, such issue is rendered
moot and academic because Grans incompetency is unproved.
Our laws and rules on the requisites of due process relating to termination of employment shall apply. EDI claims that Gran
was afforded due process, since he was allowed to work and improve his capabilities for 5 months prior to his termination.
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 DOLE written notices 30 days prior to the effectivity of his separation.
Under the twin notice requirement, the employees must be given two (2) notices before their 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. In between the first and second notice, the employees should be given a hearing or
opportunity to defend themselves personally or by counsel of their choice.
OABs manner of dismissing Gran fell short of the two notice requirement. While it furnished Gran the written notice
informing him of his dismissal, it failed to furnish Gran the written notice apprising him of the charges against him, as
prescribed by the Labor Code. He was denied the opportunity to respond to said notice. In addition, OAB did not schedule a
hearing or conference with Gran to defend himself and adduce evidence in support of his defenses. Moreover, the July 9, 1994
termination letter was effective on the same day. This shows that OAB had already condemned Gran to dismissal, even before
Gran was furnished the termination letter.
OAB failed to give Gran the chance to be heard and to defend himself with the assistance of a representative in accordance
with Article 277 of the Labor Code. There was no intention to provide Gran with due process. Summing up, Gran was
notified and his employment arbitrarily terminated on the same day, through the same letter, and for unjustified grounds.
Obviously, Gran was not afforded due process.
The employer is liable to pay nominal damages as indemnity for violating the employees right to statutory due process. Since
OAB was in breach of the due process requirements under the Labor Code and its regulations, OAB, ESI, and EDI, jointly
and solidarily, are liable to Gran in the amount of PhP 30,000.00 as indemnity.
With regard to employees hired for a fixed period of employment, in cases arising before the effectivity of R.A. No. 804258
(Migrant Workers and Overseas Filipinos Act) on August 25, 1995, when the contract is for a fixed term and the employees
are dismissed without just cause, they are entitled to the payment of their salaries corresponding to the unexpired portion of
their contract.
For cases arising after the effectivity of R.A. No.8042, when the termination of employment is without just, valid or authorized
cause as defined by law or contract, the worker shall be entitled to the full reimbursement of his placement fee with interest 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 employment contract of Gran provides that the employment contract shall be valid for a period of two (2) years from the
date the employee starts to work with the employer. Gran arrived in Riyadh and started to work on February 7, 1994; hence,
his employment contract is until February 7, 1996. Since he was illegally dismissed on July 9, 1994, before the effectivity of
R.A. No. 8042, he is therefore entitled to backwages corresponding to the unexpired portion of his contract, which was
equivalent to USD 16,150.
25. Catan v. NLRC (1988)

Facts: MS Catan Placement Agency is the agent of Ali and Fahd Shabokshi Group, a Saudi Arabian firm. It recruited Reyes to
work in Saudi as a steelman. The contract was for 1 year (81-82) and provided for an automatic renewal if neither party wish to
terminate the contract at least 1 month prior to the expiration of the period.
15 Roco 3B
When Reyes was not repatriated after the expiration of the period, the contract was deemed automatically renewed. However,
he was assigned as a crusher plant operator this time. In 1983, while working therein, Reyes right ankle was crushed under the
machine he was operating. He returned to the Phils after the contract expired and had his ankle operated on. Months later, he
returned to Saudi to resume his work. On May 1984, he was repatriated. When he returned, he had his ankle treated again.
Pursuant to the employment contract, the employer shall compensate the employee if he is injured or permanently disabled in
the course of employment. As such, Reyes filed a claim with POEA against MS Catan. POEA issued its resolution in favor of
Reyes. On appeal, the NLRC confirmed it.
Issue: Whether or not Catan is liable for disability benefits even though the original contract had expired
Held: YES. Reyes of employment cannot be said to have expired on May 14, 1982 as it was automatically renewed since no
notice of its termination was given by either or both of the parties at least a month before its expiration, as so provided in the
contract itself. As such, the injury was sustained during the existence of the contract. A private employment agency may be
sued jointly and solidarily with its foreign principal for violations of the recruitment agreement and the contracts of
employment. Even if indeed Catan and the Saudi principal had already severed their agency agreement at the time Reyes was
injured, Catan may still be sued for a violation of the employment contract because no notice of the agency agreements
termination was given to Reyes.
Catan also contends that the NLRC gravely abused its discretion when it affirmed the award of medical expenses when the
said expenses were the consequence of Reyes negligence in returning to work in Saudi Arabia when he knew that he was not
yet medically fit to do so. However, nothing was presented to prove that he was not fixed for work. Moreover, the fact that
Catan even assisted Reyes in returning to work to Saudi by purchasing his plane ticket. This is as if Catan certified his fitness to
work.
26. Sunace v. NLRC (2006)

Facts: Petitioner Sunace International Management Services deployed Divina Montehermozo as a domestic helper under a 12-
month contract with the assistance of a Taiwanese broker, a certain Wang. After the expiration of her contract, Divina
continued to work for her Taiwanese employer (Hang Rui Xiong) for 2 more years, where she returned thereafter.
Shortly after returning, Divina filed a complaint with the NLRC against Sunace, a certain Perez, the Taiwanese broker and the
Taiwanese employer. She alleged that she was jailed for 3 months and that she was underpaid while working. Divina claimed
that under her orginal 1 year contract and the 2 year extended contract, certain amounts were deducted. While the deductions
under the 1 year contract had already been refunded, those under the 2 year extended contract had not yet been refunded.
In its defense, Sunace alleged that the 2 year extension of her contract was without its knowledge and consent, hence no
liability should attach and alleged that Divina executed a Waiver/Quitclaim and Release of Responsibility and Affidavit of
Desistance. Divina filed a reply but did not refute these allegations. The LA, the NLRC, and the CA ruled in favor of Divina,
holding that Sunace continued communicating with the employer of Divina, thus as agent of the foreign principal, Sunace
cannot profess ignorance of such extension. Hence, this petition.
Issue: Whether or not Sunace had knowledge of the 2 year extension contract of Divina
Held: NO. Contrary to the findings of the CA, the communication made by Sunace was with the Taiwanese broker Wang, and
not with the foreign employer Xiong. The telefax relied by Divina does not show that Sunace continually communicated with
the foreign principal and therefore was aware of and had consented to the execution of the extension contract. That Sunace
and the Taiwanese broker communicated regarding Divina's allegedly withheld savings does not necessarily mean that Sunace
ratified the extension of the contract. As a matter of fact, the letter was only to enlighten Sunace who had been directed by
summons to appear for a mandatory conference following Divina's filing of the complaint.
Sunace cannot also be presumed to have known of the extension based on the doctrine of imputed knowledge. Sunace is the
agent of the foreign employer in the instant case. The theory of imputed knowledge ascribes the knowledge of the agent
Sunace to the principal employer Xiong, not the other way around. Since the foreign employer Xiong was the one who
negotiated with Divina and had knowledge of the extension, it cannot therefore be imputed to its agent Sunace.
16 Roco 3B
There being no proof that Sunace knew of and consented to be bound under the 2 year employment contract extension, it
cannot be said to be privy thereto and hence cannot be made liable for Divina's claims arising from such extension.
Sunace was also correct that from the moment the foreign principal (Xiong) directly negotiated with Divina after the
termination of the original employment contract and entered into a new and separate employment contract in Taiwan, there
was an implied revocation of its agency relationship with its foreign principal in accordance with Article 1924 of the Civil
Code.
June 15, 2013

27. Filamer v. IAC (1992)
Facts: It is undisputed that Funtecha was a working student, being a part-time janitor and a scholar of petitioner
Filamer. He was, in relation to the school, an employee even if he was assigned to clean the school premises for only 2 hours
in the morning of each school day.
Having a student drivers license, Funtecha requested the driver, Allan Masa, and was allowed, to take over the vehicle (a Pinoy
jeep) while the latter was on his way home one late afternoon.(It is significant to note that the place where Allan lives is also
the house of his father, the school president, Agustin Masa. Moreover, it is also the house where Funtecha was allowed free
board while he was a student of Filamer Christian Institute.)
After turning over the vehicle to Funtecha, a fast moving truck with glaring lights nearly hit them so that they had to swerve to
the right to avoid a collision. Upon swerving, they heard a sound as if something had bumped against the vehicle, but they did
not stop to check. Actually, the Pinoy jeep swerved towards the pedestrian, Potenciano Kapunan who was walking in his lane
in the direction against vehicular traffic, and hit him. Allan affirmed that Funtecha followed his advice to swerve to the right.
At the time of the incident (6:30 P.M.) in Roxas City, the jeep had only one functioning headlight.
Thus, Kapunan (and later, his heirs) brought this civil case for damages against Filamer, grounded on Filamer and Funtechas
employer-employee relationship.
Issue: Whether or not Funtecha may be considered as an employee of Filamer such that liability for Funtechas acts befall on
Filamer.
Held: YES. Being an employee of Filamer, Funtechas liability is attributable to Filamer. Funtechas act of driving the jeep was
in furtherance of the interest of Filamer. Allan testified that he was the driver and at the same time a security guard of the
school. He further said that there was no specific time for him to be off--duty and that after driving the students home at 5:00
in the afternoon, he still had to go back to school and then drive home using the same vehicle. Driving the vehicle to and
from the house of the school president where both Allan and Funtecha reside is an act in furtherance of the interest
of the petitioner--school. Allans job demands that he drive home the school jeep so he can use it to fetch students in the
morning of the next school day.
In learning how to drive while taking the vehicle home in the direction of Allans house, Funtecha definitely was not having
a joy ride, but ultimately, for the service for which the jeep was intended by the school. Therefore, the Court is constrained
to conclude that the act of Funtecha in taking over the steering wheel was one done for and in behalf of his employer for
which act the school cannot deny any responsibility by arguing that it was done beyond the scope of his janitorial duties. The
clause within the scope of their assigned tasks for purposes of raising the presumption of liability of an employer,
includes any act done by an employee, in furtherance of the interests of the employer or for the account of the
employer at the time of the infliction of the injury or damage. Even if somehow, the employee driving the vehicle derived
some benefit from the act, the existence of a presumptive liability of the employer is determined by answering the question of
whether or not the servant was at the time of the accident performing any act in furtherance of his masters business.
Filamer failed to show that it exercised due diligence in the supervision of its employees. The Court reiterates that supervision
includes the formulation of suitable rules and regulations for the guidance of its employees and the issuance of proper
instructions intended for the protection of the public and persons with whom the employer has relations through his
employees. An employer is expected to impose upon its employees the necessary discipline called for in the performance of
17 Roco 3B
any act indispensable to the business and beneficial to their employer. In the present case, the petitioner has not shown that it
has set forth such rules and guidelines as would prohibit any one of its employees from taking control over its vehicles if one
is not the official driver or prohibiting the driver and son of the Filamer president from authorizing another employee to drive
the school vehicle. Furthermore, the petitioner has failed to prove that it had imposed sanctions or warned its employees
against the use of its vehicles by persons other than the driver.
Filmar is an employee of Filamer insofar as this case is concerned. Section 14, Rule X, Book III of the Rules implementing
the Labor Code, on which the petitioner anchors its defense, was promulgated only for the purpose of administering and
enforcing the provisions of the Labor Code on conditions of employment. Particularly, Rule X of Book III provides the
exclusion of working scholars from the employment coverage as far as compliance with the substantive labor provisions
on working conditions, rest periods, and wages, is concerned. In other words, Rule X is merely a guide to the
enforcement of the substantive law on labor. The Court, thus, makes the distinction and so holds that Section 14,
Rule X, Book III of the Rules is not the decisive law in a civil suit for damages instituted by an injured person
during a vehicular accident against a working student of a school and against the school itself.
The present case does not deal with a labor dispute on conditions of employment between an alleged employee and
an alleged employer. It invokes a claim brought by one for damages for injury caused by the patently negligent acts of a
person, against both doer--employee and his employer. Hence, the reliance on the implementing rule on labor to
disregard the primary liability of an employer under Article 2180 of the Civil Code is misplaced.
An implementing rule on labor cannot be used by an employer as a shield to avoid liability under the substantive
provisions of the Civil Code. There is evidence to show that there exists in the present case an extra--contractual obligation
arising from the negligence or reckless imprudence of a person whose acts or omissions are imputable, by a legal fiction, to
other(s) who are in a position to exercise an absolute or limited control over him.
28. Francisco v. NLRC (2006)

Facts: Petitioner was hired by Kasei Corporation during its incorporation stage as Accountant and Corporate Secretary and
was assigned to handle all the accounting needs of the company; 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. Although she was
designated as Corporate Secretary, she was not entrusted with the corporate documents; neither did she attend any board
meeting; never prepared any legal document and never represented the company as its Corporate Secretary although on some
occasions, she was prevailed upon to sign documentation for the company.
In 1996, petitioner was designated Acting Manager; also hired Gerry Nino as accountant in lieu of petitioner - 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 (BIR), (SSS) and in the city government of Makati; and to administer
all other matters pertaining to the operation of Kasei Restaurant. For 5 years, petitioner performed the duties of Acting
Manager. In January 2001, petitioner was replaced by Liza R. Fuentes as Manager.
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.
Kasei Corporation reduced her salary by P2,500.00 a month; she 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. 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.
Since she was no longer paid her salary, petitioner did not report for work and filed an action for constructive dismissal.
Respondents averred that petitioner is not an employee of Kasei Corporation. She 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. She 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
matter. She 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
18 Roco 3B
professional fee. She was not one of those reported to the BIR or SSS as one of the companys employees. Petitioners
designation as technical consultant depended solely upon the will of management thus 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. SSS records were also submitted
showing that petitioners latest employer was Seiji Corporation.
LA found the petitioner was illegally dismissed. NLRC affirms. CA reversed.
Issue: (1) Whether an employer-employee relationship between petitioner and Kasei

(2) Whether petitioner was illegally dismissed.
Held: (1) YES. No uniform test to determine the existence of an employer-employee relation. 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.
Economic conditions prevailing between the parties, like the inclusion of the employee in the payrolls, can help in determining
the existence of an employer-employee relationship. In certain cases the control test is not sufficient. 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 two-tiered test:

(1) the putative employers power to control the employee with respect to the means and methods by which the work is
to be accomplished.
(2) the underlying economic realities of the activity or relationship.
It is appropriate in this case where there is no written agreement or terms of reference to base the relationship on; 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. 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.
Determination of the relationship between employer and employee depends upon the circumstances of the whole economic
activity: (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.
Proper standard of economic dependence is whether the worker is dependent on the alleged employer for his
continued employment in that line of business. 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. 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. When petitioner was designated General Manager, respondent corporation made a report to the SSS.
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. It is apparent that petitioner is
economically dependent on respondent corporation for her continued employment in the latters line of business.
19 Roco 3B
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. 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. The
affidavit of Seiji Kamura 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 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. She was never entrusted with corporate documents and was never privy to the preparation of any
document.
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. The corporation hired and engaged petitioner for compensation, with the power to
dismiss her for cause; 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. 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. 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. 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.
29. McLeod v. NLRC (2007)

Facts: John F. McLeod filed a complaint for retirement benefits, vacation and sick leave benefits, non-payment of unused
airline tickets, holiday pay, underpayment of salary and 13th month pay, moral and exemplary damages, attorneys fees plus
interest against Filipinas Synthetic Corporation (Filsyn), Far Eastern Textile Mills, Inc., Sta. Rosa Textiles, Inc.,
Patricio Lim and Eric Hu (respondents).
McLeod said that he is an expert in textile manufacturing process. He was hired as the Manager of Universal Textiles, Inc.
(UTEX) under its President, Patricio Lim. Lim later formed Peggy Mills, Inc. with Filsyn having controlling interest. McLeod
was absorbed by the new company as its VP and Plant Manager. He started receiving the benefits mentioned above at this
time. Respondents failed to pay his benefits. Filsyn then sold Peggy Mills to Far Eastern Textile Mills with Lim as the
chairman and president. Peggy Mills was renamed Sta. Rosa Textile. When McLeod reached retirement age, he was only given
a reduced 13 month pay. Lim offered McLeod a compromise settlement of P300,000 which McLeod rejected.
Respondents allege that Filsyn and Far Eastern Textiles are separate legal entities and have no employer relationship with
McLeod. Sta. Rosa only acquired the assets and NOT the liabilities of Peggy Mills. Respondents also allege that they relied on
McLeod to settle labor problems but due to his lack of attention and absence the strike continued resulting in closure of the
company. They also said that Peggy Mills does not have a retirement program; that whatever amount McLeod is entitled to
should be offset with counterclaims (which they also filed). They also claim that McLeod was just hired as a consultant and not
as an employee; that McLeods attendance record of absence and two hours daily work during the period of the labor
problems wipes out any vacation/sick leave he may have accumulated; that there is no basis for his claim of airline tickets, that
he is not entitled to 13th month pay as a consultant; and that he had already received his holiday pay. They also claim that they
offered McLeod retirement benefits but McLeod refused.
20 Roco 3B
In McLeods reply, he alleged that all the respondents are solidarily liable for all salaries and benefits he is entitled to, being one
and the same entity. McLeod said that their offices were all in the same building, their counsel holds office in the same
address, and that all respondents have the same key personnel such as Lim.
The Labor Arbiter ruled in favor of McLeod, ordering respondents to pay P5,528,996.55. The NLRC reversed the
decision. It ordered only Peggy Mills to pay McLeod his retirement pay. The CA affirmed the NLRC decision and added
that Lim is jointly and solidarily liable for the retirement pay, moral and exemplary damages, and attorneys fees.
Issue: (1) Whether an employer-employee relationship exists.
Held: (1) YES BUT he was an employee of Peggy Mills ONLY. He was a managerial employee of Peggy Mills. He could
have presented evidence to support his allegation of an employer-employee relationship between him and any of Filsyn, Sta.
Rosa Textile, and Far Eastern Textile Mills. But he didnt.
McLeod claims that Peggy Mills was merely renamed Sta. Rosa Textile and that he had continued to work at the same
company with the same responsibilities. However, the SC said that what happened between Peggy Mills and Sta. Rosa textile
was dation in payment with lease. Peggy Mills had ceded, conveyed and transferred all of its rights, title and interests in and to
the assets to Sta. Rosa Textile.
As a rule, a corporation that purchases the assets of another will not be liable for the debts of the selling corporation, provided
the former acted in good faith and paid adequate consideration for such assets, except when any of the following is present:
(1) where the purchaser expressly or impliedly agrees to assume the debts, (2) where the transaction amounts to a
consolidation or merger of the corporations, (3) where the purchasing corporation is merely a continuation of the selling
corporation, and (4) where the selling corporation fraudulently enters into the transaction to escape liability for those debts.
None of the exceptions is present in the case. Peggy Mills transferred its assets to Sta. Rosa Textile to settle its obligations.
In light of the foregoing, and there being no proof of employer-employee relationship between McLeod and respondent
corporations and Eric Hu, McLeods cause of action is only against his former employer, PMI.
On Patricios personal liability, it is settled that in the absence of malice, bad faith, or specific provision of law, a stockholder
or an officer of a corporation cannot be made personally liable for corporate liabilities. Personal liability of corporate directors,
trustees or officers attaches only when (1) they assent to a patently unlawful act of the corporation, or when they are guilty of
bad faith or gross negligence in directing its affairs, or when there is a conflict of interest resulting in damages to the
corporation, its stockholders or other persons; (2) they consent to the issuance of watered down stocks or when, having
knowledge of such issuance, do not forthwith file with the corporate secretary their written objection; (3) they agree to hold
themselves personally and solidarily liable with the corporation; or (4) they are made by specific provision of law personally
answerable for their corporate action.
Considering that McLeod failed to prove any of the foregoing exceptions in the present case, McLeod cannot hold Patricio
solidarily liable with PMI. The records are bereft of any evidence that Patricio acted with malice or bad faith. In the present
case, there is nothing substantial on record to show that Patricio acted in bad faith in terminating McLeods services to warrant
Patricios personal liability. PMI had no other choice but to stop plant operations. The work stoppage therefore was by
necessity. The company could no longer continue with its plant operations because of the serious business losses that it had
suffered. The mere fact that Patricio was president and director of PMI is not a ground to conclude that he should be held
solidarily liable with PMI for McLeods money claims.
30. Lopez v. Bodega City (2007)

Facts: Respondent Bodega City is a domestic Filipino corporation, with Yap as its owner/manager. Petitioner was the lady
keeper of the corporation, tasked with manning the ladies comfort room. In a letter signed by Yap, petitioner was made to
explain why the concessionaire agreement between them should not be terminated/suspended in view of an incident wherein
petitioner acted in a hostile manner against a lady customer who informed management that she was sleeping on the job.
Subsequently, Yap informed her that the agreement was terminated; hence, petitioner filed a complaint for illegal dismissal.
21 Roco 3B
Respondents state that there was no employer-employee relationship agreement. The Labor Arbiter dismisses; on appeal, the
NLRC remanded it. The Labor Arbiter then found that there was an employer-employee relationship that was illegally
terminated. The NLRC, however, reversed, and dismissed the case. CA affirms.
Issue: Whether or not there was an employee-employer relationship.
Held: NO. 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. In filing a complaint before the Labor Arbiter for illegal dismissal based on the premise that she was
an employee of respondent, it is incumbent upon petitioner to prove the employee-employer relationship by
substantial evidence. The NLRC and the CA found that petitioner failed to discharge this burden, and the Court finds no
cogent reason to depart from their findings. The Court applies the four-fold test expounded in Abante v. Lamadrid Bearing
and Parts Corp., to wit:
To ascertain the existence of an employer-employee relationship, jurisprudence has invariably applied the four-fold test,
namely: (1) the manner of selection and engagement; (2) the payment of wages; (3) the presence or absence of the power of
dismissal; and (4) the presence or absence of the power of control. Of these four, the last one is the most important. 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. 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.
Petitioner asserts that the concessionaire agreement was only offered after 10 years of service; that she did not sign it; that the
receipt of an allowance equivalent to minimum wage is evidence of employment; that her ID card shows that she was not a
concessionaire; that her being required to follow rules and regulations re: conduct is proof enough.
However, her allegation that it was offered only after 10 years is unsubstantiated. Her lack of signature is inconsequential, since
contracts are perfected by consent; her performance of her duties for years is implied consent. Further, although an ID card
was substantial evidence in Domasig v. NLRC, she failed to rebut the testimonies of other contractors (bands, singers) that they
were not employees.
To prove the element of payment of wages, petitioner presented a petty cash voucher showing that she received an
allowance for 5 days. The CA did not err when it held that a solitary petty cash voucher did not prove that petitioner had
been receiving salary from respondents or that she had been respondents' employee for 10 years. Indeed, if petitioner
was really an employee of respondents for that length of time, she should have been able to present salary vouchers or
pay slips and not just a single petty cash voucher. The Court agrees with respondents that petitioner could have easily
shown other pieces of evidence such as a contract of employment, SSS or Medicare forms, or certificates of withholding tax
on compensation income; or she could have presented witnesses to prove her contention that she was an employee of
respondents. Petitioner failed to do so.
Anent the element of control, petitioner's contention that she was an employee of respondents because she was subject to
their control does not hold water. Petitioner failed to cite a single instance to prove that she was subject to the control of
respondents insofar as the manner in which she should perform her job as a "lady keeper" was concerned. It is true that
petitioner was required to follow rules and regulations prescribing appropriate conduct while within the premises of Bodega
City. However, this was imposed upon petitioner as part of the terms and conditions in the concessionaire agreement
embodied in a 1992 letter of Yap addressed to petitioner, to wit:
3. You shall at all times ensure satisfaction and good services in the discharge of your undertaking.
More importantly, you shall always observe utmost courtesy in dealing with the persons/individuals using said
comfort room and shall refrain from doing acts that may adversely affect the goodwill and business standing
of Bodega City;
6. It is hereby understood that no employer-employee relationship exists between Bodega City and/or
1121 FoodService Corporation and your goodself, as you are an independent contractor who has represented
22 Roco 3B
to us that you possess the necessary qualification as such including manpower compliment, equipment,
facilities, etc. and that any person you may engage or employ to work with or assist you in the discharge of
your undertaking shall be solely your own employees and/or agents.
Lastly, the Court finds that the elements of selection and engagement as well as the power of dismissal are not present in the
instant case. It has been established that there has been no employer-employee relationship between respondents and
petitioner. Their contractual relationship was governed by the concessionaire agreement embodied in the 1992 letter. Thus,
petitioner was not dismissed by respondents. Instead, as shown by the letter of Yap to her dated February 15, 1995,
their contractual relationship was terminated by reason of respondents' termination of the subject concessionaire
agreement, which was in accordance with the provisions of the agreement in case of violation of its terms and conditions.
31. Republic v. Asiapro (2007)

Facts: Asiapro, as a cooperative, is composed of owners-members. Its primary objectives are to provide savings and credit
facilities and to develop other livelihood services for its owners-members. Pursuant to this, respondent cooperative entered
into several Service Contracts with Stanfilco a division of DOLE Philippines.
Owners-members of the cooperative, who were assigned to Stanfilco requested the services of the latter to register them with
petitioner SSS as self-employed and to remit their contributions as such. Petitioner SSS sent a letter to the Asiapro
informing the latter that based on the Service Contracts it executed with Stanfilco, Asiapro is actually a manpower
contractor supplying employees to Stanfilco and for that reason, it is an employer of its owners-members working
with Stanfilco. SSS demanded that Asiapro register itself with petitioner SSS as an employer and make the corresponding
report and remittance of premium contributions in accordance with the Social Security Law of 1997. Respondent cooperative
continuously ignored the demand of petitioner SSS.
SSS filed a Petition before petitioner SSC against the Asiapro and Stanfilco praying that the respondent cooperative or, in the
alternative, Stanfilco be directed to register as an employer and to report Asiapros owners-members as covered
employees under the compulsory coverage of SSS and to remit the necessary contributions in accordance with the
Social Security Law of 1997.
Respondents Motion to Dismiss was denied by the SSC. Respondent cooperative filed a Petition for Certiorari before the
Court of Appeals: GRANTED. Petitioner SSS moved for a reconsideration: DENIED. Hence this Petition.
Petitioners claim that SSC has jurisdiction over the petition-complaint filed before it by petitioner SSS as it involved an issue
of whether or not a worker is entitled to compulsory coverage under the SSS Law. On the other hand, Respondent contends
that it has no jurisdiction since the issue on the existence of an employer-employee relationship is still being disputed.
Respondent further argues that its owners-members own the cooperative, thus, no employer-employee relationship
can arise between them.
Issue: Whether or not there is an employer-employee relationship between Asiapro (cooperative) and its owner-members.
Held: YES. Contrary to respondents contention, the question on the existence of an employer-employee relationship for the
purpose of determining the coverage of the SSS is explicitly excluded from the jurisdiction of the NLRC (Art. 217, Labor
Code) and falls within the jurisdiction of the SSC which is primarily charged with the duty of settling disputes arising under the
Social Security Law of 1997.
In determining the existence of an employer-employee relationship, the following elements are considered: (1) the
selection and engagement of the workers; (2) the payment of wages by whatever means; (3) the power of dismissal; and
(4) the power to control the workers conduct, with the latter assuming primacy in the overall consideration. The most
important element is the employers control of the employees conduct, not only as to the result of the work to be done, but
also as to the means and methods to accomplish. The power of control refers to the existence of the power and not
necessarily to the actual exercise thereof. It is not essential for the employer to actually supervise the performance of duties of
the employee; it is enough that the employer has the right to wield that power.
All the aforesaid elements are present in this case.
23 Roco 3B
(1) SELECTION
It is expressly stated in the Service Contracts that it is the Asiapro which has the exclusive discretion in the selection
and engagement of the owners-members as well as its team leaders who will be assigned at Stanfilco.
(2) WAGES
The weekly stipends or the so- called shares in the service surplus (which the cooperative earns from different areas of
trade such as the income from the Service Contracts with Stanfilco) given by the Asiapro to its owners-members were in
reality wages, as the same were equivalent to an amount not lower than that prescribed by existing labor laws, rules and
regulations, including the wage order applicable to the area and industry. Moreover, these were given to the owners-members
as compensation in rendering services to Asiapros client, Stanfilco.
(3) DISMISSAL
It is expressly stated in the Service Contracts that it is Asiapro which has the power to investigate, discipline and
remove the owners-members and its team leaders who were rendering services at Stanfilco
(4) CONTROL
It is the Asiapro which has the sole control over the manner and means of performing the services under the Service
Contracts with Stanfilco as well as the means and methods of work.
In its by-laws, its Board of Directors directs, controls, and supervises the business and manages the property of the
Asiapro. Clearly then, the management of the affairs of the Asiapro is vested in its Board of Directors and not in its owners-
members as a whole.
Although the Service Contracts provide that there shall be no employer-employee relationship between the respondent
cooperative and its owners- members, the existence of an employer-employee relationship cannot be negated by
expressly repudiating it in a contract, when the terms and surrounding circumstances show otherwise. The
employment status of a person is defined and prescribed by law and not by what the parties say it should be. The contracting
parties may establish such stipulations, clauses, terms and conditions as they want, and their agreement would have the force
of law between them. However, the agreed terms and conditions must not be contrary to law, morals, customs, public policy
or public order (circumvents the Social Security Law).
32. Tan v. Lagrama (2002)

Facts: Tan is president of Supreme Theater Corporation and the general manager of Crown and Empire Theaters. Lagrama is
a painter, making ad billboards and murals for the motion pictures shown at the Empress, Supreme, and Crown Theaters for
more than 10 years. Lagrama was summoned by Tan and was scolded. Tan said, You again urinated inside your work area.
When Lagrama asked what Tan was saying, Tan told him, Dont say anything further. I dont want you to draw anymore.
From now on, no more drawing. Get out.
Lagrama denied the charge. Every time he spoke, Tan shouted Get out leaving him with no other choice but to leave the
premises. Lagrama filed a complaint for illegal dismissal with NLRC and sought reinvestigation and payment of 13th month
pay, service incentive leave pay, salary differential, and damages.
Tan denied that Lagrama was his employee and claimed that Lagrama was an independent contractor who did his work
according to his methods, while Tan was only interested in the result thereof. He contended that Lagrama was paid for every
painting turned out as ad billboard or mural for the pictures shown in the theaters, on the basis of a no mural/billboard
drawn, no pay policy. He submitted the affidavits of other cinema owners, an amusement park owner, and those supervising
the construction of a church to prove that they contracted the services of Lagrama. Tan denied allegation of illegal dismissal
and claimed that it was Lagrama who refused to paint for him after he was scolded for his habits (abandonment).
Labor Arbiter ruled that Lagramas dismissal was illegal. Tan appealed to the NLRC. NLRC reversed decision of the Labor
Arbiter. CA reversed and found Tan guilty of illegal dismissal.
Issues: (1) W/N an employer-employee relationship existed.

(2) W/N Tan is guilty of illegally dismissing Lagrama.
Held: YES. To determine existence of Employer-employee relationship, apply the 4 Fold Test: (1) whether the alleged
employer has the power of selection and engagement of employees; (2) whether he has control of the employee with respect
24 Roco 3B
to the means and methods by which work is to be accomplished; (3) whether he has the power to dismiss; and (4) whether
the employee was paid wages. All 4 are present in this case.
First element: It was Tan who engaged the services of Lagrama without the intervention of a third party.
Second element: control test is the most important. Compared to an employee, an independent contractor is one who
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, 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. An employee is subject to the
employers power to control the means and methods by which the employees work is to be performed and
accomplished. Evidence shows that the Lagrama performed his work as painter under the supervision and control of
petitioner. He worked in a designated work area inside the theater of Tan, for the use of which petitioner prescribed rules. The
rules included the observance of cleanliness and hygiene and a prohibition against urinating in the work area and any place
other than the toilet or the rest rooms. Tans also had control over the result of Lagramas work, and the manner and means
by which the work was to be accomplished. Tan also supplied the materials used for paintings. Lagrama worked for at least 3
to 4 days a weekthis proves regularity in his employment by petitioner.
Third element: Tan admitted in his position paper right to hire and fire. Given such circumstances, the respondents had every right, nay
all the compelling reason, to fire him from his painting job upon discovery
Moreover, the fact that, as Tan himself said, he waited for Lagrama to report for work but the latter simply stopped reporting
for work reinforces the conviction that Lagrama was indeed an employee of petitioner. Only an employee can nurture such an
expectancy, the frustration of which, unless satisfactorily explained, can bring about some disciplinary action on the part of the
employer.
Fourth element: Payment by result is a method of compensation and does not define the essence of the relation. It is a
method of computing compensation, not a basis for determining the existence or absence of employer-employee relationship.
One may be paid on the basis of results or time expended on the work, and may or may not acquire an employment status,
depending on whether the elements of an employer- employee relationship are present or not. Furthermore, Tan did not
present the payroll to support his claim that Lagrama was not his employee, raising speculations whether his failure to do so
proves that its presentation would be adverse to his case.
The Court clarified that the fact that Lagrama was not reported as an employee to the SSS is not conclusive on the
question of whether he was an employee of Tan. Otherwise, an employer would be rewarded for his failure or even
neglect to perform his obligation. Neither does the fact that Lagrama painted for other persons affect or alter his employment
relationship with Tan. Since Lagrama has been employed by Tan since 1988, pursuant to Art. 279 of the Labor Code, he is
deemed a regular employee and is thus entitled to security of tenure. This Court has held that if the employee has been
performing the job for at least one year, even if not continuously but intermittently, the repeated and continuing
need for its performance is sufficient evidence of the necessity, if not indispensability, of that activity to the business
of his employer. Such employment is also considered regular, although with respect only to such activity, and while such
activity exists.
There is no evidence showing that Lagrama abandoned his work. Abandonment requires two elements: (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, with the second element as the more determinative factor and being manifested by some overt acts. Mere
absence is not sufficient. What is more, the burden is on the employer to show a deliberate and unjustified refusal on the part
of the employee to resume his employment without any intention of returning. Tan has not established clear proof of the
intention of the Lagrama to abandon his job. On the contrary, it was Tan who told Lagarama that he did not want the latter to
draw for him and thereafter refused to give him work to do or any mural or billboard to paint or draw on.
In charges of illegal dismissal, the employer has the burden of proving the lawfulness of his employees dismissal. The validity
of the charge must be clearly established in a manner consistent with due process. The Implementing Rules of the Labor Code
provide that no worker shall be dismissed except for a just or authorized cause provided by law and after due process. This
provision has two aspects: (1) the legality of the act of dismissal, that is, dismissal under the grounds provided for under
25 Roco 3B
Article 282 of the Labor Code and (2) the legality in the manner of dismissal. Illegality of the act of dismissal
constitutes discharge without just cause, while illegality in the manner of dismissal is dismissal without due
process.
By his refusal to give Lagrama work to do and ordering Lagrama to get out of his sight as the latter tried to explain his side,
Tan made it plain that Lagrama was dismissed. Urinating in a work place other than the one designated for the purpose by the
employer constitutes violation of reasonable regulations intended to promote a healthy environment under Art. 282(1) of the
Labor Code for purposes of terminating employment, but the same must be shown by evidence. There was no evidence that
Lagrama did urinate in a place other than a rest room in the premises of his work.
33. Calamba Medical Center v. NLC (2008)

Facts: CMC (petitioner) engaged the services of medical doctors-spouses Ronaldo Lanzanas (Dr. Lanzanas) and Merceditha
Lanzanas (Dr. Merceditha) as part of its team of resident physicians. They reported at the hospital twice a week. They were
also paid a retainer fee plus percentage shares out of patient treatments, billings, etc. Their work schedules were fixed by the
medical director of CMC, Dr. Raul Desipeda (Dr. Desipeda) The doctors were issued identification cards and were enrolled in
the SSS.
A certain Dr. Trinidad (another resident physician) overheard a phone conversation between Dr. Lanzanas with a fellow
employee wherein they were talking about the low census or admission of patients in the hospital. This called the attention
of Dr. Desipeda who issued a memorandum against Dr. Lanzanas asking for an explanation and placing him under preventive
suspension while the investigation was on-going. Additionally, Dr. Merceditha (spouse of Dr. Lanzanas) was not given any
work schedule after the sending of the memorandum.
Dr. Lanzanas admitted talking with a fellow employee, but claimed that their conversation was out of context. Subsequently
the rank-and-file employees union of petitioner went on a strike due to unresolved grievances. Dr. Lanzanas filed a case for
illegal suspension while her spouse filed a case for illegal dismissal.
Meanwhile the Sec. of DOLE issued a return to work order to the striking union officers and employees of petitioner which
Dr. Desipeda echoed in a memorandum. Petitioner CMC later sent Dr. Lanzanas a notice of termination for his failure to
report for work despite the DOLE order and his supposed role in the striking union. Dr. Lanzanas thus amended his
complaint for illegal dismissal.
The Labor Arbiter & NLRC ruled against Dr. Lanzanas, holding that it has no jurisdiction since there is no employer-
employee relationship. The CA reversed finding that there was an employer-employee relationship. Petitioners argue that
respondents only reported to work twice a week, are free to practice their profession elsewhere for the rest of the week, and
are only entitled to of other fees charged.
Issue: Whether an employer-employee relationship exists between CMC and Dr. Lanzanas.
Held: YES. 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.
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.
CMC exercised control over respondents from the fact that respondents work is monitored through its supervisors
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. Respondents were also made subject to petitioner-hospital's
Code of Ethics.
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. Also, the fact that respondents were issued identification cards and enrolled in the SSS and
26 Roco 3B
Medicare (Philhealth) programs bolster the fact that an employer-employee relationship exists. Coverage under the
SSS Law is premised on the existence of an employer-employee relationship, except in cases of compulsory coverage of the
self-employed.
Also, under the IRR 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.
With respect to the dismissal, the court held that respondent was illegally dismissed. Petitioner failed to observe the
requirement of notice and hearing. The termination notice sent to Dr. Lanzanas was the first and only time that he was
apprised of the reason of his dismissal. He was not given any chance to explain his side. Also the grounds relied on by
petitioner in dismissing respondent are baseless. Petitioner in fact never released any findings of its supposed investigation of
Dr. Lanzanas case. Also there was no showing that respondent participated in the strike and did not comply with the return-
to-work order.
34. Dumpit-Murillo v. CA (2007)

Facts: In 1995, Thelma Dumpit-Murillo entered into a Talent Contract for a period of 3 months with ABC. ABC hired
Thelma as a newscaster and co-anchor for Balitang-Balita. After four years of repeated renewals, Thelmas contract expired. 2
weeks after the expiration of the last contract, Thelma sent a letter the VP for News and Public Affairs of ABC, informing the
latter that she was still interested in renewing her contract subject to a salary increase.
When her letter was unheeded, she sent a letter to ABC demanding reinstatement, payment of unpaid wages for services
rendered from Sep. 1 Oct. 20, 1999, backwages, 13th month pay, and other monetary benefits due to a regular employee.
ABC replied that a check covering her talent fees above period but other claims have no basis in law.
As a result, Thelma filed a complaint for illegal constructive dismissal. LA dismissed. NLRC reversed and claimed that there
existed an employer-employee relationship. Upon appeal, CA set aside the NLRC ruling and contended that she was merely a
fixed-term employee and not a regular employee within the ambit of Art. 280 of the LC.
Issue: Whether or not Thelma was a mere fixed-term or a regular employee entitled to the monetary benefits due to the same.
Held: REGULAR EMPLOYEE SI ATE. Elements of an Employer-Employee Relationship: (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 most important element is the employers control of the employees conduct, not only as to the result of the work to be
done, but also as to the means and methods to accomplish it.
The assertion that a Talent Contract exists does not prevent a regular employment status. The duties of Thelma as enumerated
in her employment contract indicate that ABC had control over the work of petitioner. Aside from control, ABC also dictated
the work assignments and payment of petitioners wages. ABC also had power to dismiss her. Thus, all requisites being
present, a valid employer-employee relationship existed.
Concerning regular employment, the law provides for 2 kinds of employees, namely: (1) those who are engaged to perform
activities which are usually necessary or desirable in the usual business or trade of the employer; and (2) those who have
rendered at least one year of service, whether continuous or broken, with respect to the activity in which they are employed. In
other words, regular status arises from either the nature of work of the employee or the duration of his employment. The
primary standard for 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. This 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.
Thelmas work was necessary or desirable in the usual business or trade of the employer which includes, as a precondition for
its enfranchisement, its participation in the governments news and public information dissemination. In addition, her work
27 Roco 3B
was continuous for a period of four years. This repeated engagement under contract of hire is indicative of the necessity and
desirability of her work in ABCs business.
Moreover, for a FIXED TERM CONTRACT to be valid, it should be shown that the fixed period was knowingly and
voluntarily agreed upon by the parties. There should have been no force, duress or improper pressure brought to bear upon
the employee; neither should there be any other circumstance that vitiates the employees consent. It should satisfactorily
appear that the employer and the employee dealt with each other on more or less equal terms with no moral dominance being
exercised by the employer of the employee. Also, fixed-term employment will not be considered valid where, from the
circumstances, it is apparent that periods have been imposed to preclude acquisition of tenurial security by the employee.
In the case at bar, ABCs practice of repeatedly extending petitioners 3-month contract for 4 years is a circumvention of the
acquisition of regular status. Hence, there was no valid fixed-term employment because such is against public policy.
Note: The Court had the occasion to compare the instant case to the circumstances in Sonza v. ABS CBN wherein Sonza was
employed therein under a valid fixed-term contract. To compare, Sonzas had free reign in the means and manner of how he
does his work whereas Thelma was not in control. Moreover, Sonzas salary was a P300,000/mo whilst Thelma only received a
measly 28,000/month.
35. SCA Hygiene Products Employees Assoc. v. CA (2010)

Facts: SCA corp is a domestic corp engaged in the production and manufacture of tissue paper and toiletries. It has two
unions, the Monthly Employees Union (MEU) and the Daily Employees Union (DEU). In both the CBAs entered by the SCA
corp with MEU and DEU, there are provisions on Job Evaluation (basically, this involves the act of classifying positions and
enumerating their functions).
Pursuant to such Job Evaluation provisions, SCA corp conducted a job evaluation through an independent consultant, Mercer
Consulting. The following table shows the result of the job evaluation, the list of each job grade level of the company:
As a result of the job evaluation, 22 DAILY paid job employees where re-classified from Job Grade Level 1 to level 2. And
then some were converted from Job grade level 1/ 2 to Job Grade Level 3. Because of the said reclassification, the 22 daily
paid job employees who were converted to Job Grade Level 2 requested a conversion increase, promotion increase, as well as
retroactive salary increase from the time the job evaluation was completed on the ground that their positions had been
converted into a higher job grade level. Basically it is their contention that the reclassification amounted to a promotion.
Moreover, these daily paid employees claim that their promotion to level 2 entitled them to the same benefits and salaries as
monthly paid employees.
On the other hand, SCA corp answers that (1) the said reclassification was by title or by name only, and it did have any
corresponding increase in duties. (2) And that ultimately, the conversion is merely a process of determining the value of the
positions in the operations and does not provide for any adjustment in the salaries of the covered employees. (3) Finally, they
explain that those converted to level 3 indeed were entitled to the said increase in benefits since they were converted from
rank & file to managerial (see table above), whereas those converted from level 1 to level 2 remained rank & file.
Issue: Whether the 22 daily paid employees who were converted to job grade level 2 are entitled to the said promotion and
conversion increases.
28 Roco 3B
Held: NO. A re-organization is part of employers management prerogatives. It is a well settled rule that labor laws do
not authorize interference with the employers judgment in the conduct of its business. The Labor Code and its implementing
rules do not vest managerial authority in the labor arbiters or in the different divisions of the National Labor Relations
Commission or in the courts. The hiring, firing, transfer, demotion, and promotion of employees have been
traditionally identified as a management prerogative subject to (1) limitations found in the law, (2) a collective
bargaining agreement, or in (3) general principles of fair play and justice. This is a function associated with the
employers inherent right to control and manage effectively its enterprise.
Even as 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. Accordingly, this Court has recognized and affirmed the prerogative of management to implement
a job evaluation program or a re-organization for as long as it is not contrary to law, morals or public policy.
To defeat the management prerogative defense, an employee must prove that the employer acted in bad faith. In the case at
bar, petitioner has miserably failed to convince this Court that respondent acted in bad faith in implementing the job
evaluation program. There is no showing that it was intended to circumvent the law and deprive the 22 daily paid rank--and-
-file employees of the benefits they are supposed to receive.
The job evaluation program was undertaken to streamline respondents operations and to place its employees in their proper
positions or groupings. A perusal of the CBAs of the parties showed that it did not guarantee any adjustment in the salaries of
the employees for each job evaluation. What transpired was only a promotion in nomenclature. Of primordial
consideration is not the nomenclature or title given to the employee, but the nature of his functions.
36. Emirate Security v. Menese (2011)

Facts: 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 Emirate
Security and Maintenance Systems, Inc. and its GM Yan. Menese alleged that she was assigned to the agencys security
detachment at the PGH; engaged her services as payroll and billing clerk with a monthly salary of P9,200.00 and an allowance
of P2,500.00. 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; required to work 7 days a week,
from 8:00 a.m. to 5:00 p.m; required to report for work on holidays, except on New Years Day and Christmas; never given
overtime, holiday, rest day and premium pay.
Menese also alleged that she started getting pressures from the agency for her to resign because it had been committed to a
certain Amy Claro, a protegee of Mrs. Dapula, new chief of the Security Division of 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 but was told not to worry she could still be retained as a lady guard
with a salary equivalent to the minimum wage but detailed to another detachment because Dapula did not like to see her
around anymore.
Menese was actually being demoted in rank and salary and so she declined the offer and continued reporting to the PGH
detachment and performed her usual functions. Claro also reported at the agencys PGH detachment and performed the
functions she was doing. Menese alleged that she continuously received harassment calls and letters; was publicly humiliated
and badly treated at the detachment; agency prohibited her from using the office computer; agencys PGH detachment
commander, arrogantly told her to leave PGH, shouted at her and told her to pack her things and to leave immediately, and
not to return otherwise, she would be physically driven out of the office; withheld her salary. Menese claims that they
dismissed her from the service without just cause and due process.
Petitioners, for their part, denied liability. Dapula informed the agency in writing, through Yan, that she had been receiving
numerous complaints from security guards and other agency employees about Meneses unprofessional conduct. She then 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. Yan sent Menese a memorandum and 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. Menese said that she would think about the matter so they were surprised
to receive summons.
29 Roco 3B
LA ruled for Menese. NLRC reversed on the ground of valid exercise of management prerogative. CA found Menese to have
been constructively, and therefore illegally, dismissed.
Issue: Whether Menese was constructively dismissed thereby invalidating the exercise of management prerogative.
Held: YES. 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.
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. Dapulas letter to Yan asked 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.
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 which
Dapula never responded to and neither did she provide the evidence needed. 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. Meneses transfer then was a ploy
to remove her from the PGH detachment to accommodate the entry of Dapulas protegee agency wanted to create a
vacancy for Claro.
Meneses transfer cannot be considered a valid exercise of management prerogative transfer was arbitrarily done, motivated
no less by ill will and bad faith. 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. It must not be used as a subterfuge to get rid of an undesirable worker. Menese 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. We cannot blame Menese for refusing Yans offer to be transferred since it resulted in a demotion in
rank and a diminution in pay.
Meneses transfer constituted a constructive dismissal as it had no justifiable basis and entailed a demotion in rank and a
diminution in pay. 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 not 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.
Yan had been aware all the time of the utter lack of a valid reason for Meneses transfer. He was very much a part of the
flagrant and duplicitous move to get rid of Menese to give way to Claro, Dapulas protegee. He is thus solidarily liable with
the agency.
37. Ymbong v. ABS CBN (2012)

Facts: In 1993, Ernesto Ymbong first worked for ABS-CBN in Cebu as a TV talent, co-anchoring Hoy Gising and TV Patrol.
He then expanded his work to radio for ABS-CBNs DYAB station. Leandro Patalinghug likewise worked in DYAB. In 1996,
ABS-CBNs Head Office issued the following policy
1. Any employee who intends to run for any public office position, must file his/her letter of
resignation, at least thirty (30) days prior to the official filing of the certificate of candidacy either for
national or local election.
xxxx
3. Further, any employee who intends to join a political group/party or even with no political
affiliation but who intends to openly and aggressively campaign for a candidate or group of candidates
30 Roco 3B
(e.g. publicly speaking/endorsing candidate, recruiting campaign workers, etc.) must file a request for leave
of absence subject to managements approval. For this particular reason, the employee should file the
leave request at least thirty (30) days prior to the start of the planned leave period.
Luzon, the station manager of DYAB, then issued a memorandum which erroneously stated that any employee/talent who
wants to run for any position in the coming election will have to file a leave of absence the moment he/she files
his/her certificate of candidacy. Following this, Luzon claims that Ymbong told him that he would leave for a few
months to campaign for an administration ticket. It was only afterwards that he found that Ymbong ran for office.
Ymbong claims that in accordance with the memorandum, he informed Luzon that he would leave for a few months to run as
co-councilor of Lapu-Lapu City. Patalinghug ran for the same position, but submitted a letter of resignation. Both of them
lost. Both tried to come back, but they were not allowed. They were only given a chance to wind up their participation in
Nagbabagong Langit.
Both filed illegal dismissal complaints. The LA upheld both complaints, while the NLRC sustained only Ymbongs, since
Patalinghug voluntarily resigned. The CA ruled that there was no illegal dismissal for either. Ymbong was considered resigned
when he ran.
Issue: (1) Whether Policy No. HR-ER-016 is valid.

(2) Whether the Memorandum issued by Luzon superseded the above Policy.
(3) Whether Ymbong is deemed to have resigned and not dismissed.
Held: VALID. The rationale is set forth in the policy itself While it encourages and supports its employees to have greater
political awareness and for them to exercise their right to suffrage, the company, however, prefers to remain politically
independent and unattached to any political individual or entity. Therefore, employees who [intend] to run for public office
or accept political appointment should resign from their positions, in order to protect the company from any public
misconceptions. To preserve its objectivity, neutrality and credibility, the company reiterates the following policy
guidelines for strict implementation. We have consistently held that so long as a companys management prerogatives are
exercised in good faith for the advancement of the employers 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.
In the instant case, ABS-CBN validly justified the implementation of Policy No. HR-ER-016. It is well within its rights to
ensure that it maintains its objectivity and credibility and freeing itself from any appearance of impartiality so that the
confidence of the viewing and listening public in it will not be in any way eroded. 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. The free will of management to conduct its own business affairs to achieve its purpose cannot be denied.
It is worth noting that such exercise of management prerogative has earned a stamp of approval from no less than our
Congress itself when on February 12, 2001, it enacted Republic Act No. 9006, otherwise known as the Fair Election Act.
Section 6.6 thereof reads:
6.6. Any mass media columnist, commentator, announcer, reporter, on-air correspondent or personality who
is a candidate for any elective public office or is a campaign volunteer for or employed or retained in any capacity by any
candidate or political party shall be deemed resigned, if so required by their employer, or shall take a leave of absence
from his/her work as such during the campaign period: Provided, That any media practitioner who is an official of a
political party or a member of the campaign staff of a candidate or political party shall not use his/her time or space to favor
any candidate or political party.
The Memorandum did not supersede this, for the simple reason that it was issued beyond the scope of Luzons authority. It is
not a source of right. As Policy No. HR-ER-016 is the subsisting company policy and not Luzons March 25, 1998
Memorandum, Ymbong is deemed resigned when he ran for councilor.
Ymbongs overt act of running for councilor of Lapu-Lapu City is tantamount to resignation on his part. He was
separated from ABS-CBN not because he was dismissed but because he resigned. Since there was no termination
31 Roco 3B
to speak of, the requirement of due process in dismissal cases cannot be applied to Ymbong. Thus, ABS-CBN is not
duty-bound to ask him to explain why he did not tender his resignation before he ran for public office as mandated by the
subject company policy.
In addition, we do not subscribe to Ymbongs claim that he was not in a position to know which of the two issuances was
correct. Ymbong most likely than not, is fully aware that the subsisting policy is Policy No. HR-ER-016 and not the March
25, 1998 Memorandum and it was for this reason that, as stated by Luzon in his Sworn Statement, he only told the latter that
he will only campaign for the administration ticket and not actually run for an elective post. Ymbong claims he had fully
apprised Luzon by letter of his plan to run and even filed a leave of absence but records are bereft of any proof of said claim.
Ymbong claims that the letter stating his intention to go on leave to run in the election is attached to his Position Paper as
Annex A, a perusal of said pleading attached to his petition before this Court, however, show that Annex A was not his
letter to Luzon but the September 14, 1998 Memorandum informing Ymbong that his services had been automatically
terminated when he ran for a local government position.
Moreover, as pointed out by ABS-CBN, had Ymbong been truthful to his superiors, they would have been able to
clarify to him the prevailing company policy and inform him of the consequences of his decision in case he decides
to run, as Luzon did in Patalinghugs case.
38. SMC v. NLRC (1999)

Facts: On July 1990, San Miguel, alleging the need to streamline its operations due to financial losses, shut down some of its
plants and declared 55 positions as redundant. SMC Union filed several grievance cases for the said retrenched employees,
praying for the redeployment of the said employees to the other divisions of the company. Grievance proceedings were
conducted pursuant to their Collective Bargaining Agreement.
During the grievance proceedings, however, most of the employees were redeployed, while others accepted early retirement.
As a result only 17 employees remained when the parties proceeded to the third level of the grievance procedure.
SMC informed the union that if by October 30, 1990, the remaining 17 employees could not yet be redeployed, their services
would be terminated on November 2, 1990. Borbon (a representative of the union) declared that there was nothing more to
discuss in view of the deadlock.
The union filed with the National Conciliation and Mediation Board (NCMB) of the Department of Labor and Employment
(DOLE) a notice of strike. SMC filed a complaint with the respondent NLRC praying for the dismissal of the notice of strike.
NLRC dismissed the complaint. Hence this petition.
Issue: Whether NLRCs dismissal is proper.

Held: NO. In the case under consideration, the grounds relied upon by the private respondent union are non-strikeable.
Under the IRR of the LC, it says: A strike or lockout may be declared in cases of bargaining deadlocks and unfair labor
practices.
Collective Bargaining Deadlock is defined as the situation between the labor and the management of the company where
there is failure in the collective bargaining negotiations resulting in a stalemate.
This situation, is non-existent in the present case since there is a Conciliation Board assigned on the 3rd level of the grievance
machinery to resolve the conflicting views of the parties (next step of the grievance proveedings). For failing to exhaust all
the steps in the grievance machinery and arbitration proceedings provided in the Collective Bargaining Agreement, the
notice of strike should have been dismissed by the NLRC and SMC union ordered to proceed with the grievance and
arbitration proceedings.
Abolition of departments or positions in the company is one of the recognized management prerogatives.
Noteworthy is the fact that the SMC Union does not question the validity of the business move of petitioner. In the absence
of proof that the act of petitioner was ill- motivated, it is presumed that SMC acted in good faith. In fact, SMC
acceded to the demands of the SMC union by redeploying most of the employees involved. Having evinced its willingness to
negotiate the fate of the remaining employees affected, there is no ground to sustain the notice of strike of the union.
32 Roco 3B
39. Herida v. F & C Pawnshop (2009)

Facts: Aileen G. Herida was sales clerk of F & C Pawnshop and Jewelry Store. She was eventually promoted as an appraiser in
the Bacolod City Branch. On August 1, 1998, management issued an office memorandum, directing petitioner to report to the
Guanco Branch in Iloilo City. Herida refused to follow the directive. Consequently, she was preventively suspended from
work on August 10, 1998 for a period of 15 days effective August 7, 1998 and was directed to report to her new assignment on
August 24, 1998.
On August 10, 1998, Herida filed a complaint for illegal dismissal, underpayment of wages, non-payment of separation pay,
13th month pay, as well as for payment of moral and exemplary damages and attorneys fees.
On August 26, 1998, management informed petitioner that it would conduct an investigation on September 7, 1998, which
Herida failed to attend. In a letter dated September 7, 1998, management terminated her services on the grounds of willful
disobedience, insubordination and abandonment of work as well as gross violation of company policy.
Herida contends that her transfer was never discussed by the parties at the start of her employment and adds that the transfer
was unnecessary, inconvenient and prejudicial. Respondents counter that petitioners transfer was made in good faith and in
compliance with managements policy to reshuffle or transfer its employees and that. The Management claimed that travel
time from the Bacolod City Branch to the Iloilo City Branch will only take about an hour by boat and that they were even
willing to defray petitioners transportation and lodging expenses.
The LA, ruling that Herida deliberately refused to obey managements directive, dismissed petitioners complaint for lack of
merit. The LA noted that petitioner filed the complaint as a retaliatory act to secure an award of separation pay. NLRC
affirmed the LAs finding that there was no illegal dismissal. However, due to Heridas long service with respondents, the
NLRC awarded her separation pay. Herida filed a petition for certiorari with the CA. CA ruled that the transfer is not deemed
a constructive dismissal and that Heridas willful disobedience was a just cause for her dismissal.
Issue: Whether petitioners transfer from the Bacolod City Branch to the Iloilo City Branch was valid.
Held: Yes. Transfer was valid exercise of management prerogative. Jurisprudence recognizes the exercise of management
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
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. Should the employer fail to overcome this
burden of proof, the employees transfer shall be tantamount to constructive dismissal.
The management has standing policies that an employee must be single at the time of employment and must be willing to be
assigned to any of its branches in the country. Heridas contention that upon getting married, she no longer bound herself to
be assigned to any of respondents branches in the country is preposterous. Just because an employee gets married does
not mean she can already renege on a commitment she willingly made at the time of her employment particularly if
such commitment does not appear to be unreasonable, inconvenient, or prejudicial to her.
There is no showing of bad faith on the part of management. The objection to the transfer, being grounded solely upon
the personal inconvenience or hardship that will be caused to the employee, is not a valid reason to disobey an order
of transfer. Her dismissal was for just cause in accordance with Article 282(a) 20 of the Labor Code. SC held that Herida is
not entitled to reinstatement or separation pay and backwages.
June 20, 2013

40. PT&T v. NLRC (1997)
Facts: PT&T initially hired Grace de Guzman as a Supernumenary Project Worker for a fixed period (Nov 1990-April 1991)
as reliever for Tenorio who went on maternity leave. She was again invited for employment to replace Erlina Dizon who went
on leave on 2 occasions. De Guzmans employment contracts were named Reliever Agreement.
33 Roco 3B
In Sep. 1991, she was again asked to join as a probationary employee covering 150 days. She indicated in her job
application form that her civil status was Single although she had contracted marriage just a few months earlier.
Upon learning of said marriage, Branch Supervisor Oficial sent her a Memo requiring her to explain the discrepancy attached
with the company policy of not accepting married women for employment.
She was dismissed in Jan. 1992. Thus, she filed for illegal dismissal. LA ruled for De Guzman and claimed that she was
consider a regular employee who had been discriminated on account of her marriage. NLRC affirmed it but imposed a 3
month suspension for her dishonesty in concealing her real civil status.
Issue: Whether PT&T is guilty of unlawful discrimination? Whether De Guzman was illegally dismissed.
Held: YES. Women have a special place in Labor laws. The LC recognizes a womans right against discrimination especially by
reason of marriage. While 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, PT&Ts policy of not accepting or considering as disqualified from work any
woman worker who contracts marriage runs afoul of right against discrimination afforded all women workers by our
labor laws and by no less than the Constitution. Contrary to PT&Ts assertion that it dismissed De Guzman from employment
on account of her dishonesty, the record discloses clearly that her ties with the company were dissolved principally
because of the companys policy that married women are not qualified for employment in PT&T, and not merely
because of her supposed acts of dishonesty. This was seen in the Memo and termination notice served upon her by Oficial.
PT&Ts policy is not only in derogation of the provisions of the LC 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.
Lastly, when she was dismissed she was about to complete the probationary period of 150 days as she was contracted as a
probationary employee on September 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. 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. 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.
41. Del Monte v. Velasco (2007)

Facts: Velasco started working as Field Laborer with Del Monte as a seasonal employee and was regularized on May 1, 1977.
She was warned in writing due to her absences. Thru a letter, she was again warned in writing by Del Monte about her
absences without permission and a forfeiture of her vacation leave entitlement for the year 19901991; again for 1991-1992.
Due to said alleged absences without permission, a notice of hearing was sent to Velasco notifying her of the charges filed
against her for violating the Absence Without Official Leave rule. She failed to appear, and the hearing was reset twice. After
hearing, the Del Monte terminated the services of Velasco effective January 16, 1994 due to excessive absences without
permission.
She filed a case for illegal dismissal against Del Monte asserting that her dismissal was illegal because she was pregnant
suffering from urinary tract infection, a pregnancy-borne illness, at the time she committed the alleged absences. She explained
that for her absence from work on August 15, 16, 17 & 18, 1994, she had sent an application for leave to her supervisor. She
went to the company hospital for check-up and was advised accordingly to rest in quarters for 4 days. Still not feeling well, she
failed to work and was again advised 2 days of rest. Unable to recover, she went to see an outside doctor who ordered her to
rest for another 5 days. She declared she did not file the adequate leave of absence because a medical certificate was already
sufficient per company policy. On September 10, 1994 she failed to report to work but sent an application for leave of absence
to her supervisor, which was not anymore accepted.
34 Roco 3B
LA held that the respondent was an incorrigible absentee. NLRC reversed and held that, under the company rules, the
employee may make a subsequent justification of her absenteeism, which she was able to do. While it is not disputed that the
Velasco incurred absences exceeding 6 days within 1 employment year a ground for dismissal under the company rules
Del Monte actually admitted the fact that the Velasco had been pregnant, hence, negating petitioners assertion that the
respondent failed to give any explanation of her absences. There was also the hospital record showing the cause of her
absences (RIQ advice or restinquarters). It was sufficient notice for the petitioner, a plain laborer with
unsophisticated judgment, to send word to her employer through a coworker that she was frequently vomiting and that the
sheer distance between respondents home and her workplace made it difficult to send formal notice. She even sent her child
of tender age to inform her supervisor about her absence on September 5, 1994 due to stomach ache, but her child failed to
approach the officer because her child felt ashamed. On appeal, CA affirmed the NLRC decision and held that absences due
to a justified cause cannot be a ground for dismissal.
Issue: (1) Whether the employment of Velasco had been validly terminated due to excessive absences without permission.
(2) Whether Del Montes of discharging Velasco due to pregnancy is a prohibited act.
Held: (1) INVALID TERMINATION. Velasco was pregnant and suffered from related ailments. It is unreasonable to
isolate such condition strictly to the dates stated in the Medical Certificate or the Discharge Summary. Absences that
are not covered by the dates stated in the Discharge Summary and Medical Certificate, are due to the continuing condition
of pregnancy and related illnesses, and, hence, are justified absences. It is not disputed that Velasco was pregnant and
that she was suffering from UTI, and that her absences were due to such facts. It was no less than the company doctor who
advised the Velasco to have restinquarters for 4 days on account of a pregnancyrelated sickness.
Tardiness and absenteeism, like abandonment, are recognized forms of neglect of duties that justify the dismissal. However,
Del Montes rule penalizing with discharge any employee who has incurred 6 or more absences without permission or
subsequent justification was complied with. Velasco incurred absences exceeding 6 days but her being pregnant at
the time these absences were incurred is not questioned and is even admitted by Del Monte.
It then puzzles us why Del Monte asserts Velasco failed to explain satisfactorily her absences. Medical and health reports
abundantly disclose that during the 1st trimester of pregnancy, expectant mothers are plagued with morning
sickness, frequent urination, vomiting and fatigue all of which Velasco was similarly plagued with.
(2) YES. The contention that the cause for the dismissal was gross and habitual neglect unrelated to her state of pregnancy is
unpersuasive. Velascos sickness was pregnancyrelated and, therefore, the Del Monte cannot terminate Velascos services
because in doing so, Del Monte will, in effect, be violating the Labor Code which prohibits an employer to discharge an
employee on account of the latters pregnancy.
Art. 137. Prohibited acts.It shall be unlawful for any employer: (1) To deny any woman employee the benefits
provided for in this Chapter or to discharge any woman employed by him for the purpose of preventing her from
enjoying any of the benefits provided under this Code; (2) To discharge such woman on account of her
pregnancy, while on leave or in confinement due to her pregnancy; or (3) To discharge or refuse the admission
of such woman upon returning to her work for fear that she may again be pregnant.
Del Monte stresses that many women go through pregnancy and yet manage to submit prior notices to their employer.
However, under its company rules, absences may be subsequently justified. Velasco was able to subsequently justify her
absences in accordance with company rules and policy that the Velasco was pregnant at the time she incurred the
absences; that this fact of pregnancy and its related illnesses had been duly proven through substantial evidence; that Velasco
attempted to file leaves of absence but the Del Montes supervisor refused to receive them; that she could not have
filed prior leaves due to her continuing condition and that Del Monte, in the last analysis, dismissed the Velasco on
account of her pregnancy, a prohibited act.
Note: Court compared the instant case to Filflex Industrial v. NLRC wherein it was held that the employee was guilty of 10
unjustified absences because the Med Cert presented failed to refer to a specific period of the employees absence. However,
Filflex cannot be applied herein mainly because the illness suffered in Filflex was chronic asthmatic bronchitis and not a
35 Roco 3B
pregnancy related illness. The former was held to be an intermittent form of illness as compared to pregnancy related illness
which is continuing and long-term.
42. Duncan v. Glaxo (2004)

Facts: Facts: Pedro Tecson was hired by Glaxo Philippines, Inc. as a MedRep. He signed a contract of employment which
stipulates, among others, that he shall disclose to management any existing or future relationship by with other competing
drug companies. The contract also states that should management find that such relationship poses a possible conflict of
interest, said employee must resign. The Employee Code of Conduct of Glaxo similarly provides such provision.
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 6 months.
Tecson was initially assigned to market Glaxos products in the CamSur/Norte sales area. He entered into a romantic
relationship with Bettsy, an employee of Astra Pharmaceuticals, 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. 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.
Tecson again requested for more time to resolve the problem. Tecson applied for a transfer in Glaxo 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.
Glaxo transferred Tecson to the Butuan-Surigao-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
same 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 1/2 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.
Issues: (1) Whether Glaxos policy against its employees marrying employees from competitor companies is valid.
(2) Whether Tecson was constructively dismissed.
36 Roco 3B
Held: VALID. 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.
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. The challenged company policy does not violate the
equal protection clause of the Constitution. Said clause no shield against merely private conduct however
discriminatory or wrongful. The only exception occurs when the state in any of its manifestations or actions has been found to
have become entwined or involved in the wrongful private conduct.
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. 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.
An employees personal decision does not detract the employer from exercising management prerogatives to ensure
maximum profit and business success. The assailed company policy which forms part of Glaxos 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. He is therefore estopped from questioning said policy.
(2) NO. Tecson was not constructively dismissed when he was transferred from the his original sales area to a new one. Also,
it did not occur 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.
Tecson was neither demoted nor unduly discriminated upon by reason of such transfer. Glaxo properly exercised its
management prerogative in reassigning Tecson to the Butuan sales area. The transfer to another place of assignment was
merely in keeping with the policy of the company in avoidance of conflict of interest, and thus valid.
In Abbot Labs v. NLRC, the Court also upheld the dismissal of a MedRep for refusing to accept reassignment. It held that 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
37 Roco 3B
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.
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.
43. Star Paper Corp. v. Simbol (2006)

Facts: Simbol, Comia, & Estrella were regular employees of Star Paper. All of whom were asked to resign after getting
married to a co-worker, or getting pregnant by one of them.
The resignation was due to a COMPANY POLICY where possible employees were not to be hired should he or she
have a relative up to the 3rd degree already working therein. The policy also contained a provision which said that should
2 employees get married, 1 of them should resign to preserve the abovementioned policy. Their dismissal, they contend was
forced. The pregnant employee even alleged that she was forced to resign in exchange for her 13th month pay since she had
no money. All of them challenge the dismissal on constitutional grounds, as well as a violation of the LC.
Particularly, they claim that the policy violates Constitutional provisions mandating the full protection of labor as well as Art.
136 of the LC which states that 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.
Issue: Whether said company policy forcing one of the married employees to resign is valid.
Held: NO. The court, using the broad (as opposed to the narrow) interpretation of marital discrimination, decided that it was
invalid because it arbitrarily discriminates against all spouses of present employees without regard to the actual
effect on the individual's qualifications or work performance. The court also noted that to justify a no employee-spouse
rule, there must be a bonafide occupational qualification.
This means there must be a COMPELLING BUSINESS NECESSITY for which no alternative exists other than the
discriminatory practice. To justify a bona fide occupational qualification, the employer must prove two factors: (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. Star Paper was unable to prove this.
It is significant to note that, RESPONDENTS were hired after they were found fit for the job, but were asked to resign
when they married a co-employee. Star Paper failed to show how the marriages could be detrimental to its business
operations. The policy is premised on the mere fear that employees married to each other will be less efficient. If the Court
upheld the questioned rule without valid justification, the employer can create policies based on an unproven presumption of a
perceived danger at the expense of an employees right to security of tenure.
Star Paper also contend that their policy will apply only when one employee marries a co-employee, but they are free to marry
persons other than co-employees. The questioned policy may not facially violate Article 136 of the Labor Code but it
creates a disproportionate effect and under the disparate impact theory, the only way it could pass judicial scrutiny is a
showing that it is reasonable despite the discriminatory, albeit disproportionate, effect. The failure of Star Paper to
38 Roco 3B
prove a legitimate business concern in imposing the questioned policy cannot prejudice the employees right to be free from
arbitrary discrimination based upon stereotypes of married persons working together in one company.
*Broad: discrimination based on who youre married to / Narrow: discrimination as to marital status per se
**Theories of Employee Discrimination:
Disparate Impact Theory: complainants must prove that a facially neutral policy has a disproportionate effect on a particular
class (Ex. Most employment policies do not expressly indicate which spouse will be required to transfer or leave the company,
the policy often disproportionately affects one sex.),
Disparate treatment theory: the plaintiff must prove that an employment policy is discriminatory on its face. (Ex. No-spouse
employment policies requiring an employee of a particular sex to either quit, transfer, or be fired.)
44. Apex Mining v. NLRC (1991)

Facts: Sinclitica Candido was employed by Apex Mining Company, Inc. on May 18, 1973 to perform laundry services at its
staff house located at Davao del Norte. In the beginning, she was paid on a piece rate basis. However, after 9 years, she was
paid on a monthly basis at P250 a month which was ultimately increased to P575 a month.
On December 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 and to the personnel officer. As a result
of the accident, she was not able to continue with her work. She was permitted to go on leave for medication.
Apex offered her the amount of P2,000 which was eventually increased to P5,000 to persuade her to quit her job, but she
refused the offer and preferred to return to work. Apex did not allow her to return to work and dismissed her on February
1988. She filed a request for assistance with the DOLE. The LA rendered a decision in favor of Candido and ordered Apex
Mining to pay the complainant Salary Differential, Emergency Living Allowance, 13th Month Pay Differential, and Separation
Pay. Apex appealed to the NLRC who dismissed the appeal for lack of merit and affirmed the appealed decision. MR was
denied, hence this petition.
Issue: Is a househelper in staff houses of an industrial company a DOMESTIC HELPER or a REGULAR EMPLOYEE
thereof?
Held: REGULAR EMPLOYEE. According to the LC, a househelper/domestic servant shall refer to any person, whether
male or female, who renders services in and about the employers 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 employers family. This covers family drivers, domestic servants, laundry women, yayas, gardeners,
houseboys, and other similar help.
The definition cannot be interpreted to include househelp or laundrywomen working in staffhouses of a company,
like Candido who attends to the needs of the companys guests and other persons availing of said facilities. It cannot be
considered to extend to the 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 abovedefined 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.
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
39 Roco 3B
regular employee of the employer and not as a mere family househelper or domestic servant as contemplated in Rule XIII,
Section 1(b), Book 3 of the Labor Code, as amended.
There is enough evidence to show that because of an accident which took place while Candido 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 Apex.
45. Barcenas v. NLRC (1990)

Facts: Barcena alleged Chua Se Su as the Head Monk of the Buddhist Temple of Manila and Baguio City and as President and
Chairman of the Board of Directors of the Poh Toh Buddhist Association of the Phils. Inc. hired her as secretary and
interpreter because she speaks the Chinese language.
Her tasks were to receive and assist Chinese visitors to the temple, act as tourist guide for foreign Chinese visitors, attend to
the callers of the Head Monk as well as to the food for the temple visitors, run errands for the Head Monk such as paying the
Meralco, PLDT, MWSS bills and act as liaison in some government offices.
Aside from her pay and allowances under the law, she received an amount of P500.00/month plus free board and lodging in
the temple. Su assumed the responsibility of paying for the education of Barcenas nephew. Su and Barcena had amorous
relations. In May 1982 or 5 months before giving birth to the alleged son of Su on October 12, 1982, Barcena was sent home
to Bicol. Upon the death of Su in July 1983, Barcena remained and continued in her job.
Manuel Chua was elected President and Chairman of the Board of the Poh Toh Buddhist Association of the Philippines, Inc.
and Rev. Sim Dee was elected Head Buddhist Priest. Chua and Dee discontinued payment of her monthly allowance and
the additional P500.00 effective 1983. Barcena and her son were evicted forcibly from their quarters in the temple by 6
police officers. She was brought first to the Police precinct in Tondo and then brought to Aloha Hotel where she was
compelled to sign a written undertaking not to return to the Buddhist temple in consideration of the sum of P10,000.00.
Barcena refused and Chua shouted threats against her and her son. Their personal belongings including assorted jewelries were
never returned.
Chua and Dee, on the other hand, claimed that Barcena was never an employee of the Poh Toh Temple but a servant who
confined herself to the temple and to the personal needs of the late Chua Se Su and thus, making her position coterminous
with that of her master.
LA decided in favor of the Barcenas and awarded backwages, separation pay, unpaid wages. NLRC reversed.
Issue: W/N an employer-employee relationship still existed.
Held: At the outset, we agree with the Barcenas claim that she was a regular employee of the Manila Buddhist Temple as
secretary and interpreter of its Head Monk, Su. As Head Monk, President and Chairman of the Board of Directors of the Poh
Toh Buddhist Association of the Philippines, Su was empowered to hire the petitioner under Article V of the By-laws of the
Association which states:
(T)he President or in his absence, the Vice President shall represent the Association in all its dealings with the public, subject
to the Board, shall have the power to enter into any contract or agreement in the name of the Association, shall manage the
active business operation of the Association, shall deal with the bank or banks
Barcena was hired in 1978 and no whimper of protest by the Board was raised until this present controversy. The work that
Barcena performed in the temple could not be categorized as mere domestic work. Being proficient in the Chinese
language, attended to the visitors, mostly Chinese, who came to pray or seek advice before Buddha for personal or business
problems; arranged meetings between these visitors and Su and supervised the preparation of the food for the temple visitors;
acted as tourist guide of foreign visitors; acted as liaison with some government offices; and made the payment for the
temples Meralco, MWSS and PLDT bills. These are not be deemed activities of a household helper. These tasks are
essential and important to the operation and religious functions of the temple.
40 Roco 3B
However, her status as a regular employee ended upon her return to Bicol in May, 1982 to await the birth of her
lovechild allegedly by Su. Records do not show that Barcena filed any leave from work or that a leave was granted her.
Neither did she return to work after the birth of her child. It was only in July 1983 after Su died that she went back to the
Manila Buddhist Temple. Barcenas pleadings failed to rebut this finding. Clearly, her return could not be deemed as a
resumption of her old position, which she had already abandoned. Moreover, there is no proof that she was re-hired by the
new Head Monk.
She stated that it was the death-bed instruction to her by Chua Se Su to stay at the temple and to take care of the two
boys and to see to it that they finish their studies to become monks and when they are monks to eventually take over the two
temples as their inheritance from their father Chua Se Su. Thus, her return to the temple was no longer as an employee
but rather as Sus mistress who is bent on protecting the proprietary and hereditary rights of her son and nephew.
She persisted and continued to work in the temple without receiving her salary because she expected Chua and Dee to relent
and permit the studies of the 2 boys. Under these circumstances, no employer-employee relationship could have arisen.
Anent the petitioners claim for unpaid wages since May, 1982 which she filed only in 1986, We hold that the same has already
prescribed.
June 29, 2013

46. National Sugar Refineries v. NLRC (1993)
Facts: NASUREFCO implemented a Job Evaluation Program affecting all its employees from rank a file to department heads.
This was designed to rationalize the duties and functions of all positions. As a result, all positions were re-evaluated and all
employees including the members of respondent union were granted salary adjustments and increases in benefits
commensurate to their actual duties and functions. The concerned members of the union are supervisory employees according
to Article 212 of the Labor Code.
Prior to the JE program, it was found that the members of the union were treated in the same manner as rank and file
employees. As such, they received overtime, rest day and holiday pay pursuant to Articles 87, 93 and 94 of the Labor Code.
With the implementation of the JE program, the members were re-classified as managerial staff for purposes of
compensation and benefits. They were granted certain increases. Of certain note here is the payment of a special allowance
of P100 in lieu of rest day/holiday work.
Two years after the implementation of the JE Program, the members of the union filed a complaint with the executive LA
for non-payment of overtime, rest day and holiday pay allegedly in violation of Article 100 of the Labor Code. The LA
and the NLRC ruled in favor of the union, holding that the supervisory members of the union are not managerial employees
and are therefore entitled to overtime, rest day, and holiday pay.
Issue: Whether or not the members of the union are entitled to overtime, rest day, and holiday pay (conversely, it depends on
whether or not the union members concerned are managerial staff which exempts them from the coverage of Article 82 of the
Labor Code).
Held: NOT ENTITLED ANYMORE. A MANAGERIAL employee is one is one who is vested with powers or
prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharged, assign
or discipline employees. On the other hand, a SUPEVISORY employees are those who, in the interest of the employer
effectively recommend such managerial actions if the exercise of such authority is not merely routinary or clerical in nature but
requires the use of independent judgment. All employees not falling within any of those above definitions are considered rank-and-
file employees.
A cursory perusal of the Job Value Contribution Statements of the union members will readily show that these supervisory
employees are under the direct supervision of their respective department superintendents and that generally they
assist the latter in planning, organizing, staffing, directing, controlling, communicating, and in making decisions in
attaining the company's set goals and objectives. These supervisory employees are likewise responsible for the effective
and efficient operation of their respective departments.
41 Roco 3B
It is apparent that the members of the union discharge duties and responsibilities which ineluctably qualify them as
officers or members of the managerial staff, as defined in Section 2, Rule I Book III of the aforestated Rules to Implement
the Labor Code, viz.: (1) their primary duty consists of the performance of work directly related to management policies of
their employer; (2) they customarily and regularly exercise discretion and independent judgment; (3) they regularly and directly
assist the managerial employee whose primary duty consist of the management of a department of the establishment in which
they are employed (4) they execute, under general supervision, work along specialized or technical lines requiring special
training, experience, or knowledge; (5) they execute, under general supervision, special assignments and tasks; and (6) they do
not devote more than 20% of their hours worked in a work-week to activities which are not directly and clearly related to the
performance of their work hereinbefore described.
It is admitted that these union members are supervisory employees and this is one instance where the nomenclatures or
titles of their jobs conform with the nature of their functions. Hence, to distinguish them from a managerial employee, as
defined either under Articles 82 or 212 (m) of the Labor Code, is puerile and in efficacious. The controversy actually involved
here seeks a determination of whether or not these supervisory employees ought to be considered as officers or members of
the managerial staff. The distinction, therefore, should have been made along that line and its corresponding conceptual
criteria.
With the promotion of the union members, they are no longer entitled to the benefits which attach and pertain
exclusively to their positions. Entitlement to the benefits provided for by law requires prior compliance with the conditions
set forth therein. With the promotion of the members of the union, they occupied positions which no longer met the
requirements imposed by law. Their assumption of these positions removed them from the coverage of the law, ergo,
their exemption therefrom.
If the union members really wanted to continue receiving the benefits which attach to their former positions, there
was nothing to prevent them from refusing to accept their promotions and their corresponding benefits. As the
saying goes by, they cannot have their cake and eat it too or, as petitioner suggests, they could not, as a simple
matter of law and fairness, get the best of both worlds at the expense of NASUREFCO.
Additionally it cannot be said that the payment of the questioned benefits has ripened into a contractual obligation. To
construe the payment to the employee as constitutive of voluntary employer practice, there must be an indubitable showing
that the employer agreed to continue giving the benefits knowingly fully well that said employees are not covered by the law
requiring payment thereof. In the case at bar, respondent union failed to sufficiently establish that petitioner has been
motivated to give these benefits out of pure generosity.
47. Union of Filipino Employees v. Vivar (1992)

Facts: Filipro Inc (now Nestle Phils.) and its Union had a dispute regarding the payment of holiday pay in favor of sales
personnel pursuant to the Labor Code. Filipro maintains that since these sales personnel are considered as field personnel as
defined by the Labor Code and, thus, the provisions on holiday pay in the LC do not apply. Also, Filipro maintains that the
said holiday pay should be made at the date the Labor Code took effect (1974) and that the use of 251 as divisor should be
used.
They submitted the case for voluntary arbitration wherein Vivar was appointed as the arbitrator. He ruled in favor of the
Union but not entitled to holiday pay as they are considered to be field personnel. Likewise, Vivar ruled that the divisor should
be 261 because this includes the 10 days holiday pay.
Issue: (1) Whether Nestle sales personnel are entitled to holiday pay.
(2) Whether the divisor should be changed from 251 to 261.
Held: (1) NO. Under Article 82, field personnel are not entitled to holiday pay. Said article defines field personnel as 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.
It is undisputed that these sales personnel start their field work at 8AM after having reported to the office and come back to
the office at 4-4:30PM, if they are Makati-based.
42 Roco 3B
The law requires that the actual hours of work in the field be reasonably ascertained. The company has no way of
determining whether or not these sales personnel, even if they report to the office before 8AM prior to field work and
come back at 4:30PM, really spend the hours in between in actual field work.
In deciding whether or not an employee's actual working hours in the field can be determined with reasonable certainty, query
must be made as to whether or not such employee's time and performance is constantly supervised by the employer.
Also, the Court fails to see how the company can monitor the number of actual hours spent in field work by an employee
through the imposition of sanctions on absenteeism contained in the company circular.
Also, the fact that sales personnel receive incentive bonuses does not prove that their actual hours of work in the field can be
determined with reasonable certainty. In this case, the criteria for granting incentive bonus are: (1) attainment or exceeding the
sales volume; (2) good collection performance; (3) proper compliance with market hygiene; etc.
In other words, the criteria indicate that these sales personnel are given incentive bonuses precisely because of the difficulty
in measuring their actual hours of field work. These employees are evaluated by the result of their work and not by the
actual hours of field work which are hardly susceptible to determination.
(2) NO. 251. The divisor assumes an important role in determining whether or not holiday pay is already included in
the monthly paid employee's salary and in the computation of his daily rate. In Chartered Bank v. Ople, it was said that the
251 working days divisor is the result of subtracting all Saturdays, Sundays and the 10 legal holidays from the total number of
calendar days in a year. If the employees are already paid for all non-working days, the divisor should be 365 and not 251.
The use of 251 days' divisor by Filipro indicates that holiday pay is not yet included in the employee's salary, otherwise
the divisor should have been 261. It must be stressed that the daily rate, assuming there are no intervening salary increases, is
a constant figure for the purpose of computing overtime and night differential pay and commutation of sick and
vacation leave credits. Necessarily, the daily rate should also be the same basis for computing the 10 unpaid holidays.
Vivars order to change the divisor to 261 days would result in a lower daily rate which is violative of the prohibition on
non-diminution of benefits
Court holds that the award of holiday pay must be reckoned, not from the effectivity of the Labor Code (1974), but from the
promulgation of Insular Bank v. Inciong (1984) where it declared void the IRR which excluded monthly paid employees from
holiday pay benefits. This is based on the operative fact doctrine.
48. Mercidar v. NLRC (1998)

Facts: Fermin Agao filed a complaint against Mercidar Fishing for illegal dismissal, violation of P.D. No. 851, and non-
payment of 5 days service incentive leave for 1990. Agao had been employed as a bodegero or ships quartermaster on
February 1988. He complained that he had been constructively dismissed by Mercidar when the latter refused him
assignments aboard its boats after he had reported to work on May 1990.
He alleged that he had been sick and thus allowed to go on leave without pay for one month from April 28, 1990 but that
when he reported to work at the end of such period with a health clearance, he was told to come back another time
as he could not be reinstated immediately. Thereafter, Mercidar refused to give him work. For this reason, Agao asked
for a certificate of employment from Mercidar on September 1990. However, when he came back for the certificate on
September 10, Mercidar refused to issue the certificate unless he submitted his resignation. Since Agao refused to
submit such letter unless he was given separation pay, Mercidar prevented him from entering the premises.
Mercidar, in his defense, alleged that it was in fact Agao who actually abandoned his work. It claimed that the latter
failed to report for work after his leave had expired and was, in fact, absent without leave for 3 months. Mercidar further
claims that, nonetheless, it assigned Agao to another vessel, but the latter was left behind on September 1, 1990. Thereafter,
Agao asked for a certificate of employment on September 6 on the pretext that he was applying to another fishing
company. On September 10, 1990, he refused to get the certificate and resign unless he was given separation pay. Both the
Labor Arbiter and the NLRC ruled in favor or Agao. Hence this petition.
43 Roco 3B
Mercidar argues that since the work of Agao is performed away from its principal place of business, it has no way of verifying
his actual hours of work on the vessel. It contends that he and other fishermen in its employ should be classified as field
personnel who have no statutory right to service incentive leave pay.
Issue: Whether Agao is a field personnel which would render the Labor Code inapplicable with respect to Agaos claims.
Held: NOT A FIELD PERSONNEL. A 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.
However, the meaning of the phrase whose actual hours of work in the field cannot be determined with
reasonable certainty is that said personnels time and performance is unsupervised by the employer.
In this case, during the entire course of their fishing voyage, fishermen employed by Mercidar have no choice but to
remain on board its vessel. Although they perform non-agricultural work away from Mercidars business offices, the
fact remains that throughout the duration of their work they are under the effective control and supervision of
petitioner through the vessels patron or master as the NLRC correctly held.
49. Villuga v. NLRC

Facts: Villuga was employed as cutter in the tailoring shop known as Broad Street Tailoring. He was paid a fixed monthly
salary and a monthly transportation allowance. In addition to his work as cutter, Villuga was assigned the chore of
distributing work to the shops tailors or sewers when both the shops manager and assistant manager would be absent. He
saw to it that their work conformed with the pattern he had prepared. The other petitioners were ironers, repairmen, and
sewers. They were paid a fixed amount for every item ironed, repaired or sewn, regardless of the time consumed; did not fill
up any time record since they did not observe regular or fixed hours and; allowed to perform their work at home. From
February 17 to 22, 1978, Villuga failed to report for work allegedly due to illness. For not properly notifying his employer,
he was considered to have abandoned his work.
They filed a complaint wherein Villuga claimed that he was refused admittance when he reported for work after his absence,
allegedly due to his active participation in the union organized by Broad Streets tailors; not paid overtime pay, holiday pay,
premium pay for work done on rest days and holidays, service incentive leave pay and 13th month pay.
The other petitioners also claimed that they were dismissed from their employment because they joined the Union. The other
petitioners that they stopped working because Broad Street gave them few pieces of work to do after learning of their
membership with the Union. All the petitioners laid claims under the different labor standard laws.
Labor Arbiter ordered the dismissal of the complaint. NLRC affirmed. Thus, petitioners filed this instant certiorari.
Petitioners in this case seek a definitive ruling on the status and nature of their employment with Broad Street
Tailoring and pray for the nullification of the resolution of the NLRC which held 11 of them as independent contractors and
the remaining 1 as an employee but of managerial rank.
A basic factor underlying the exercise of rights and the filing of claims for benefits under the Labor Code and other
presidential issuances or labor legislations is the status and nature of ones employment. Whether an employer- employee
relationship exists and whether such employment is managerial in character or that of a rank and file employee are primordial
considerations before extending labor benefits.
Issue: (1) Whether Villuga was a managerial employee.

(2) Whether Broad Street is guilty of unfair labor practice for discriminating against members of the union.
(3) Whether the ironers, repairmen, and sewers are independent contractors
Held: (1) NO. To be a member of a managerial staff, the following elements must concur: (1) directly related to
management policies; (2) that he customarily and regularly exercises discretion and independent judgment in the
44 Roco 3B
performance of his functions; (3) that he regularly and directly assists in the management of the establishment; and (4) that
he does not devote 20% of his time to work other than those described above.
Villugas primary work or duty is to cut or prepare patterns for items to be sewn, not to lay down or implement any of the
management policies, as there is a manager and an assistant manager who perform said functions. While it is true that in the
absence of the manager and assistant manager, he distributes and assigns work to employees but such duty, though
involving discretion, is occasional and not regular or customary. He had also the authority to order the repair or resewing
of defective items but such authority is part and parcel of his function as cutter to see to it that the items cut are sewn
correctly. Villuga does not participate in policy-making. The functions of his position involve execution of approved
and established policies. In Franklin Baker Company of the Philippines v. Trajano it was held that employees who do not
participate in policy-making but are given ready policies to execute and standard practices to observe are not managerial
employees. The test of supervisory or managerial status depends on whether a person possesses authority that is not
merely routinary or clerical in nature but one that requires use of independent judgment. The functions of the position
are not managerial in nature if they only execute approved and established policies leaving little or no discretion at
all whether to implement said policies or not.
Thus, he is definitely a rank and file employee hired to perform the work of a cutter and not hired to perform supervisory
or managerial functions. The fact that he is uniformly paid by the month does not exclude him from the benefits of holiday
pay. He should therefore be paid in addition to the 13th month pay, his overtime pay, holiday pay, premium pay for holiday
and rest day, and service incentive leave pay.
(2) NO. Self-serving allegations without concrete proof that Broad Street knew of their membership in the union and
accordingly reacted against their membership do not suffice.
(3) NO. For an employer-employee relationship to exist, the following elements are generally 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. Petitioners were oftentimes allowed to perform their work at home and were paid wages on a piece-rate
basis. NLRC apparently found the second and fourth elements lacking and ruled that there is no employer-employee
relationship, since they are interested only in the result and not in the means and manner and how the result is obtained.
However, the mere fact that petitioners were paid on a piece-rate basis is no argument that herein petitioners were not
employees. Wage is 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.
As regular employees, paid on a piece-rate basis, petitioners are not entitled to overtime pay, holiday pay, premium
pay for holiday/rest day and service incentive leave pay. Their claim for separation pay should also be denied for lack of
evidence that they were in fact dismissed. They should be paid, however, their 13th month pay since they are employees.
50. Labor Congress v. NLRC

Facts: 99 persons named as petitioners herein are rank and file employees of Empire Food which hired them on
various dates. Petitioners filed against Empire a complaint for payment of money claims and for violation of labor law
standards. They also filed for direct certification of Labor Congress of the Phils as their bargaining rep.
In an Order dated Oct. 1990, the Mediator Arbiter approved the MOA and certified LCP as the sole and exclusive
bargaining agent among the rank and file employees of Empire for CBA purposes.
On Nov 1990, petitioners via LCP president Navarro submitted to Empire a proposal for CBA. On Jan 1991,
petitioners filed a complaint against Empire for ULP by way of illegal lockout and/or dismissal, underpayment of
wages, union busting, etc.
Issue: Whether petitioners are entitled to labor standards benefits considering they are paid by piece rate worker.
Held: YES. They are entitled to holiday pay, premium pay, 13 th month, and SIL.
45 Roco 3B
3 factors lead us to conclude that LCP, though piece-rate workers, were regular employees of Empire. First, the
nature of their tasks were necessary or desirable in the usual business of Empire who was engaged in the manufacture
of food products (cheese curls). Second, they worked for Empire throughout the year. Third, the length of time that
they worked for Empire. Thus, even if their mode of compensation was per piece basis, the status and nature of their
employment was that of regular employees.
The Rules Implementing the Labor Code exclude certain employees from receiving benefits such as nighttime pay, holiday
pay, service incentive leave and 13th month pay, inter alia, 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. LCP does not fall under the classification of field personnel. Not only did LCP labor under the control of Empire,
they also toiled throughout the year to fulfil their quota .
In Section 8(b), Rule IV, Book III which we quote hereunder, piece workers are specifically mentioned as being entitled to
holiday pay.
The Revised Guidelines on the Implementation of the 13th Month Pay Law, in view of the modifications to P.D. No. 85119
by Memorandum Order No. 28, clearly exclude the employer of piece rate workers from those exempted from paying 13th
month pay. The Revised Guidelines as well as the Rules and Regulations identify those workers who fall under the piece- rate
category as those who are paid a standard amount for every piece or unit of work produced that is more or less regularly
replicated, without regard to the time spent in producing the same.
As to overtime pay, according to Sec. 2(e), Rule I, Book III of the Implementing Rules, workers who are paid by results
including those who are paid on piece-work, takay, pakiao, or task basis, if their output rates are in accordance with the
standards prescribed under Sec. 8, Rule VII, Book III, of these regulations, or where such rates have been fixed by the
Secretary of Labor in accordance with the aforesaid section, are not entitled to receive overtime pay.
Here, Empire did not allege adherence to the standards set forth in Sec. nor with the rates prescribed by the Secretary of
Labor. As such, petitioners are beyond the ambit of exempted persons and are therefore entitled to overtime pay. Once more,
the National Labor Relations Commission would be in a better position to determine the exact amounts owed petitioners, if
any.
As to the claim that private respondents violated petitioners right to self-organization, the evidence on record does not
support this claim. Petitioners relied almost entirely on documentary evidence which, per se, did not prove any wrongdoing on
private respondents part.
For example, petitioners presented their complaint to prove the violation of labor laws committed by private respondents. The
complaint, however, is merely the pleading alleging the plaintiffs cause or causes of action.Its contents are merely
allegations, the verity of which shall have to be proved during the trial. They likewise offered their Consolidated Affidavit of
Merit and Position Paper which, like the offer of their Complaint, was a tautological exercise, and did not help nor prove their
cause. In like manner, the petition for certification election and the subsequent order of certification merely proved that
petitioners sought and acquired the status of bargaining agent for all rank-and-file employees.
Finally, the existence of the memorandum of agreement offered to substantiate private respondents non-compliance
therewith, did not prove either compliance or non-compliance, absent evidence of concrete, overt acts in contravention of the
provisions of the memorandum.
51. Interphil Union v. Interphil

Facts: Interphil Laboratories is engaged in manufacturing and packaging pharmaceutical products. ILEU is the sole bargaining
agent of Interphils rank-and-file employees; they had a CBA effective from 1990 to 1993.
Months before the expiration of the CBA, 2 union officers inquired about the CBA with Salazar, the VP for HR. They were
told to discuss it during formal negotiation, which would start soon. After another inquiry, a meeting was held as to whether
46 Roco 3B
the CBA would be made effective for 2 more years. Salazar however stated that it would be premature to discuss the matter,
and that the company could not yet make a decision.
The next day, all rank-and-file employees refused to follow their regular two-shift work schedule from 6 p.m. 6 a.m.
and 6 a.m. 6 p.m. Instead, they stopped working at 2 a.m. and 2 p.m. respectively, without sealing the containers and raw
materials of their products. A meeting was held wherein the workers reiterated their demand as to the CBA, and Salazar gave
the same answer discuss it during formal negotiations. The overtime boycott continued, and the employees engaged in a
work slowdown campaign.
Interphil Labs then filed with the NLRC a petition to declare the boycott and slowdown as an illegal strike. ILEU then filed a
Notice of Strike, citing ULP. The Secretary of Labor assumed jurisdiction over the dispute, and ordered all to return to work.
Meanwhile, the NLRC petition continued, and resulted in a finding that the action of the workers was an illegal strike, and that
the union officers who spearheaded the same had lost their employment status. The union was also held guilty of ULP for
violating the then existing CBA which prohibits the union or any employee during the existence of the CBA from
staging a strike or engaging in slowdown or interruption of work and ordering them to cease and desist from further
committing the aforesaid illegal acts. The CA affirms.
Issue: W/N the CA erred in disregarding the parol evidence rule; in sustaining the DOLEs jurisdiction over the case; in not
interpreting a separation package as condonation of any misdeed.
Held: NO. According to the Union, the provisions of their CBA on working hours clearly stated that the normal working
hours were from 7:30 a.m. to 4:30 p.m. Petitioner union underscored that the regular work hours for the company was only
eight (8) hours.
In any event, the parties stipulated that: A normal workday shall consist of not more than eight (8) hours. The regular
working hours for the Company shall be from 7:30 A.M. to 4:30 P.M. The schedule of shift work shall be maintained;
however the company may change the prevailing work time at its discretion, should such change be necessary in
the operations of the Company. All employees shall observe such rules as have been laid down by the company for
the purpose of effecting control over working hours.
It is evident from the foregoing provision that the working hours may be changed, at the discretion of the company ,
should such change be necessary for its operations, and that the employees shall observe such rules as have been
laid down by the company.
Here, LA found that respondent company had to adopt a continuous 24-hour work daily schedule by reason of the
nature of its business and the demands of its clients. It was established that the employees adhered to the said work
schedule since 1988. The employees are deemed to have waived the eight-hour schedule since they followed,
without any question or complaint, the two-shift schedule while their CBA was still in force and even prior thereto.
The two-shift schedule effectively changed the working hours stipulated in the CBA. As the employees assented by practice to
this arrangement, they cannot now be heard to claim that the overtime boycott is justified because they were not
obliged to work beyond eight hours.
52. UP Faculty Division v. UP
Facts: Petitioner is a Union composed of faculty members (full-time professors, instructors, and teachers) of University of
Pangasinan. Petitioner, through its President, Abad, filed a complaint against UP. The complaint seeks: (a) the payment of
Emergency Cost of Living Allowances (ECOLA) for November 7 to December 5, 1981, a semestral break; (b) salary increases
from the 60% of the incremental proceeds of increased tuition fees; and (c) payment of salaries for suspended extra loads.
The teachers in the college level teach for a normal duration of 10 months a school year, divided into 2 semesters of 5months
each, excluding the 2 months summer vacation. These teachers are paid their salaries on a regular monthly basis.
In November and December 1981, the union members were fully paid their regular monthly salaries. However, from
November 7 to December 5, during the semestral break, they were not paid their ECOLA. The university claims that
47 Roco 3B
the teachers are not entitled thereto because the semestral break is not an integral part of the school year and there
being no actual services rendered by the teachers during said period, the principle of No work, no pay applies.
During the same school year (1981-1982), the UP was authorized by the Ministry of Education and Culture to collect, as it did
collect, from its students a 15% increase of tuition fees. Union members demanded a salary increase effective the first semester
of said school year to be taken from the 60% incremental proceeds of the increased tuition fees. The university refused.
While the complaint was pending in the arbitration branch, the UP granted an across-the-board salary increase of 5.86%.
Nonetheless, the petitioner is still pursuing full distribution of the 60% of the incremental proceeds as mandated by
Presidential Decree No. 451.
Aside from their regular loads, some of union members were given extra loads to handle during the same 1981-1982 school
year. Some of them had extra loads to teach on September 21, 1981, but they were unable to teach as classes in all levels
throughout the country were suspended, although said day was proclaimed by the President of the Philippines as a working
holiday. Those with extra loads to teach on said day claimed they were not paid their salaries for those loads, but the university
claims otherwise.
Issue: (1) Whether teachers are entitled to ECOLA during sem break
Held: YES. It is beyond dispute that the teachers are full-time employees receiving their monthly salaries irrespective of the
number of working days or teaching hours in a month. However, they find themselves in a most peculiar situation
whereby they are forced to go on leave during semestral breaks. These semestral breaks are in the nature of work
interruptions beyond the employees control. Semestral breaks cannot be considered as absences within the
meaning of the law for which deductions may be made from monthly allowances. The No work, no pay principle
does not apply in the instant case.
The teachers received their regular salaries during this period. The teachers certainly do not voluntarily absent themselves
during semestral breaks. Rather, they are constrained to take mandatory leave from work. For this they cannot be faulted nor
can they be deprived of that which is due them under the law. Surely, it was not the intention of the framers of the law to
allow employers to withhold employee benefits by the simple expedient of unilaterally imposing no work days and
consequently avoiding compliance with the mandate of the law for those days.
It is evident that the intention of the law is to grant ECOLA upon the payment of basic wages. Particular attention is brought
to the Implementing Rules and Regulations of Wage Order No. 1 to wit.
SECTION 5. Allowance for Unworked Days. a) All covered employees whether paid on a monthly or daily basis shall be
entitled to their daily living allowance when they are paid their basic wage.
Hence, we have the principle of No pay, no ECOLA. The teachers cannot be considered to be on leave without pay so as
not to be entitled to ECOLA, for, as earlier stated, the petitioners were paid their wages in full for the months of November
and December of 1981, notwithstanding the intervening semestral break. Moreover, even during the semestral break
professors and teachers are, nevertheless, burdened with the task of working during a period of time supposedly available for
rest and private matters.--- papers to correct, students to evaluate, deadlines to meet, and periods within which to submit
grading reports.
53. NDC v. CIR

Facts: NDC has 4 shifts of work: 8am - 4pm, 6am - 2pm, 2pm - 10pm, and 10pm - 6pm.
Each shift had a 1-hour mealtime period. NDC had a practice of crediting its workers with 8 hours of work for each shift and
paid them for the same number of hours. However since 1953, whenever workers from one shift continued working until
the next shift, NDC credits only 6 hours of overtime work instead of 8 hours, claiming that the 2 hour mealtime
periods (from two shifts) should not be included in computing compensation. Private respondent National Textile
Workers Union filed an action with the CIR to order the payment of additional overtime pay corresponding to their mealtime
periods.
48 Roco 3B
The CIR ruled in favor of National Textile, holding that mealtime periods should be included in overtime work because
workers could not leave their places of work and rest completely during those hours.
Issue: Whether or not the workers who work for 2 consecutive shifts are entitled to have their mealtime breaks considered as
working time.
Held: YES. The CIR's finding that work in NDC was continuous and did not permit employees and laborers to rest
completely is not without basis in evidence. It found that while it may be correct to say that it is well-high impossible for an
employee to work while he is eating, yet under Section 1 of Com. Act No. 444 such a time for eating can be segregated or
deducted from his work, if the same is continuous and the employee can leave his working place rest completely. The time
cards show that the work was continuous and without interruption. There is also the evidence adduced by NDC that the
pertinent employees can freely leave their working place nor rest completely. There is furthermore the aspect that during
the period covered the computation the work was on a 24-hour basis and previously stated divided into shifts.
NDCs work was continuous, hence the mealtime breaks should be counted as working time for purposes of
overtime compensation. Petitioner gives an 8-hour credit to its employees who work a single shift. It would be absurd then
if they do not credit 16 hours to those who work in 2 shifts.
54. Sime Darby v. NLRC (1998)

Facts: SD is engaged in the manufacture of automotive tires. SD Salaried Employees Association (Union) is an association of
monthly salaried employees of SD in its Marikina factory. Before, all factory workers in Marikina (including members of the
Union) worked from 7:45AM to 3:45 PM with a 30min paid on call lunch break.
On Aug 1992, SD issued a memorandum to all factory-based employees advising all its monthly salaried employees a change
in work schedule effective Sep 1992. The adjustments are as follows: (1) 7:45AM 4:45PM (Mon-Fri); (2) 7:45AM
11:45AM; (3) Coffee break will be 10 minutes anytime between 930-1030 or 2:30-3:30; (4) Lunch break 12NN 1PM.
Since Unions 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 LA for unfair labor practice. However, LA dismissed the
case finding that change in work schedule is within the management prerogative of employer and that it had no effect of
diminution of benefits of the employee.
Union appealed to NLRC affirmed the decision. However, on MR plus the appointment of 2 new commissioners, reversed. It
declared that the new work schedule deprived the employees of the benefits of a time-honored company practice of providing
its employees a 30-min paid lunch break resulting in an unjust diminution of privileges.
Issue: Whether or not the change in the work schedule as a diminution of benefits.
Held: NO. The right to fix the work schedules of the employees rests principally on their employer. In this case, SD, as
the employer, cites as reason for the adjustment the efficient conduct of its business operations and its improved production.
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 1-hour lunch break without any interruption from their
employer. For a full 1-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 1-hour lunch break, there is no more need for them to be
compensated for this period.
The new work schedule fully complies with the daily work period of 8 hours without violating the LC. Besides, the
new schedule applies to all employees in the factory similarly situated whether they are union members or not.
49 Roco 3B
Consequently, it was grave abuse of discretion for NLRC to equate the earlier Sime Darby case 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 NLRCs
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 the Union. Hence, it
cannot be said that the new scheme adopted by management prejudices the right of union 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. 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.
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 employers 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.
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.
55. National Semiconductor v. NLRC

Facts: National Semiconductor (HK) Distribution, Ltd. (NSC), a foreign corporation licensed to do business in the
Philippines, manufactures and assembles electronic parts for export with principal office at the Mactan Export Processing
Zone, Mactan, Lapu-Lapu City. Private respondent Edgar. Santos was employed by NSC as a technician in its Special Products
Group with a monthly salary of P5,501.00 assigned to the graveyard shift starting at 10AM until 6AM.
On 8 January 1993 Santos did not report for work on his shift. He resumed his duties as night shift Technician Support only
on 9 January 1993. However, at the end of his shift the following morning, he made 2 entries in his daily time record
(DTR) to make it appear that he worked on both the 8th and 9th of January 1993.
His immediate supervisor, Mr. Joel Limsiaco, unknown to private respondent Santos, received the report that there was no
technician in the graveyard shift of 8 January 1993. Thus, Limsiaco checked the DTRs and found out that Santos indeed did
not report for work on 8 January. But when he checked Santos' DTR again in the morning of 9 January 1993 he found the
entry made by Santos for the day before.
Informal investigations were conducted by management. Santos was required in a memorandum to explain in writing within
48 hours from notice why no disciplinary action should be taken against him for dishonesty, falsifying daily time record (DTR )
and violation of company rules and regulations. On 11 January 1993 Santos submitted his written explanation alleging that he
was ill on the day he was absent. As regards the entry on 8 January, he alleged that it was merely due to oversight or
carelessness on his part.
Finding Santos' explanation unsatisfactory, NSC dismissed him on January 1993 on the ground of falsification of his DTR,
which act was inimical to the company and constituted dishonesty and serious misconduct. Thus, on 20 January 1993, Santos
filed a complaint for illegal dismissal and non-payment of back wages, premium pay for holidays and rest days,
night shift differential pay, allowances, separation pay, moral damages and attorney's fees.
50 Roco 3B
LA found that Santos was dismissed on legal grounds although he was not afforded due process, hence, NSC was ordered to
indemnify him P1,000.00. The LA likewise ordered the payment of P19,801.47 representing Santos' unpaid night shift
differentials. This was affirmed by the NLRC.
NSC imputes grave abuse of discretion to the NLRC in affirming the LAs award of night shift differentials and P1,000.00
indemnity for alleged violation of due process. It contends that the question of non-payment of night shift differentials was
never raised as an issue nor pursued and proved by Santos in the proceeding before the LA; that Santos was already paid his
night shift differentials, and any further payment to him would amount to unjust enrichment; and, that the P1,000.00
indemnity is totally unjustified as he was afforded ample opportunity to be heard.
Issue: Who has the burden of providing a claim for night shift differential pay, the worker who claims not to have been
paid night shift differentials, or the employer in custody of pertinent documents which would prove the fact of
payment of the same? Were the requirements of due process substantially complied with in dismissing the worker?
Held: EMPLOYER HAS BURDEN OF PROOF. ACCORDED DUE PROCESS. A perusal of Santos' position paper filed
before the Labor Arbiter reveals that the question of non-payment of night shift differentials was specifically raised as an issue
in the proceedings below which was never abandoned by Santos as erroneously claimed by NSC.
The fact that Santos neglected to substantiate his claim for night shift differentials is not prejudicial to his cause. After all, the
burden of proving payment rests on petitioner NSC. Santos' allegation of non-payment of this benefit, to which he is by
law entitled, is a negative allegation which need not be supported by evidence unless it is an essential part of his
cause of action. It must be noted that his main cause of action is his illegal dismissal, and the claim for night shift differential
is but an incident of the protest against such dismissal. Thus, the burden of proving that payment of such benefit has been
made rests upon the party who will suffer if no evidence at all is presented by either party.
Moreover, as a general rule, one who pleads payment has the burden of proving it. Even where the plaintiff must allege
non-payment, the general rule is that the burden rests on the defendant to prove payment, rather than on the plaintiff
to prove non-payment. The debtor has the burden of showing with legal certainty that the obligation has been discharged by
payment. For sure, private respondent cannot adequately prove the fact of non-payment of night shift differentials since the
pertinent employee files, payrolls, records, remittances and other similar documents which will show that private
respondent rendered night shift work; the time he rendered services; and, the amounts owed as night shift differentials are
not in his possession but in the custody and absolute control of petitioner.
56. Bisig ng Manggagawa v. Phil. Refining

Facts: Appeal from the decision of the CFI holding that Christmas bonus and other fringe benefits are excluded in the
computation of the overtime pay of the members of the appellant union under Section 6 of the 1965 CBA which
provides that: Overtime pay at the rate of regular base pay plus 50% thereof shall be paid for all work performed in excess of
eight hours on ordinary days within the work week (that is to say, Monday to Friday)."
Bisig, as the representative union of the rank and file employees of the PRCI., filed with the CFI a petition for declaratory
relief praying that judgment be rendered declaring and adjudicating their respective rights and duties and further declaring
that the Christmas bonus of 1 month or 30 days pay and other determinable fringe benefits should be included for
the purpose of computation of the overtime pay spread throughout the 12 months period of each year and that PRCI be
directed to pay such differential in the overtime pay of all the employees of the herein respondent. Union contended that the
PRCI was under obligation to include the employees Christmas bonus and other fringe benefits in the computation of their
overtime pay by virtue of the ruling of this Court in the case of NAWASA vs. NAWASA Consolidated Unions.
Philippine Refining Co., Inc. filed its answer and said that never did the parties intend, in the 1965 CBA and in prior
agreements, to include the employees Christmas bonus and other fringe benefits in the computation of the
overtime pay and that the company precisely agreed to a rate of 50%, which is much higher than the 25% required by the
Eight-Hour Labor Law on the condition that in computing the overtime pay only the regular base pay would be considered.
It contended that the ruling of this Court in the NAWASA case relative to the computation of overtime compensation could
not be applied to its employees since it was a private corporation and not a government-owned or controlled corporation like
the NAWASA.
51 Roco 3B
CFI ruled that regular base pay does not include Christmas bonus and other fringe benefits; NAWASA ruling concerning the
meaning of the phrase regular pay is inapplicable to the case at bar which involved the interpretation of the phrase regular
base pay, which was different from regular pay; contracts are binding on the parties.
Issue: (1) Whether regular base pay as used in the CBA includes Christmas bonus and other fringe benefits.
(2) Whether the stipulation in CBA on overtime pay violates the NAWASA doctrine
Held: (1) NO. The phrase regular base pay is clear, unequivocal and requires no interpretation. It means regular basic pay
and necessarily excludes money received in different concepts such as Christmas bonus and other fringe benefits. In the
enforcement of previous CBAs containing the same provision, the overtime compensation was invariably based only on the
regular basic pay, exclusive of Christmas bonus and other fringe benefits. Union knew all the while of such interpretation and
precisely attempted to negotiate for a provision in the subject collective bargaining agreement that would include the
Christmas bonus and other fringe benefits in the computation of the overtime pay but the appellee company did not agree.
(2) NO. In NAWASA vs. NAWASA Consolidated Unions: for purposes of computing overtime compensation a regular
wage includes all payments which the parties have agreed shall be received during the work week, including piece
work wages, differential payments for working at undesirable times, such as at night or on Sundays and holidays, and the cost
of board and lodging customarily furnished the employee. The regular rate of pay also ordinarily includes incentive bonus or
profit-sharing payments made in addition to the normal basic pay
Union contends that by virtue of the foregoing, the PRCI, is under obligation to include the employees Christmas bonus and
other fringe benefits in the computation of their overtime compensation.
Under Sec. 3 & 4 of CA 444, all employers covered by said law are under legal compulsion to grant their employees overtime
compensation in amounts not less than their basic pay and the fringe benefits regularly and continuously received by them plus
25% thereof. This does not however mean that agreements concerning overtime compensation should always provide
for a computation based on the employees regular wage or salary i.e., regular base pay plus fringe benefits regularly
and continuously received.
The parties may agree for the payment of overtime compensation in an amount to be determined by applying a formula other
than the statutory formula of regular wage or salary, plus at least twenty-five per centum additional provided that the result
in applying the contractual formula is not less than the result in applying said statutory formula. The contractual formula of
regular base pay plus 50% thereof yields an overtime compensation which is higher than the result in applying the statutory
formula as elaborated in the Nawasa case. Its validity is upheld.
July 4, 2013
57. PAL v. PALEA (1976)
Facts: The Philippine Air Lines Employees Association (PALEA) and the Philippine Air Lines Supervisors Association
(PALSA) commenced an action against the Philippine Air Lines (PAL) in the Court of Industrial Relations, praying that PAL
be ordered to revise its method of computing the basic daily and hourly rate of its monthly-salaried employees, and
necessarily, to pay them their accrued salary differentials.
Issue: (1) Whether the divisor should include off-days

(2) Whether PALEA is estopped or barred by laches to impugn the correctness of the questioned wage formula.
Held: (1) NO. Off-days are not paid days. Precisely, off-days are rest days for the worker. He is not required to work on
such days. Since during his off-days an employee is not compelled to work, he cannot, conversely, demand for his
corresponding pay.
If, however, a worker works on his off-day, our welfare laws duly reward him with a premium higher than what he
would receive when he works on his regular working day.
52 Roco 3B
The divisor in computing an employees basic daily rate should be the ACTUAL WORKING DAYS in a year. The
number of off-days are not to be counted precisely because on such off-days, an employee is not required to work.
Should an employee opt not to work which he can legally do on an off-day, and for such he gets no pay, he would
be unduly robbed of a portion of his legitimate pay if and when in computing his basic daily and hourly rate, such
off-day is deemed subsumed by the divisor. With a constant dividend, the bigger your divisor is, the smaller your quotient
will be.
NAWASA Doctrine: PAL maintains that the NAWASA doctrine should not apply to a public utility like PAL which, from
the nature of its operations, requires a whole-year-round, uninterrupted work by personnel.
What PAL apparently forgets is that just like NAWASA, it is also a public utility which likewise requires its workers to
work the whole year round. Both are also government owned and controlled corporations. PAL inked with the
representative unions of the employees collective bargaining agreements wherein it bound itself to duly compensate employees
working on their off-days. The same situation obtained in the NAWASA case, wherein WE held: In the CBA entered into
between the NAWASA and respondent unions, it was agreed that all existing benefits enjoyed by the employees and laborers
prior to its effectivity shall remain in force and shall form part of the agreement, among which certainly is the 25% additional
compensation for work on Sundays and legal holidays theretofore enjoyed by said laborers and employees. While under
Commonwealth Act No. a public utility is not required to pay additional compensation to its employees and workers for work
done on Sundays and legal holidays, there is, however, no prohibition for it to pay such additional compensation if it
voluntarily agrees to do so. The NAWASA committed itself to pay this additional compensation. It must pay not
because of compulsion of law but because of contractual obligation.
The settled NAWASA doctrine should not be disturbed.
(2) NO. Doctrine on Estoppel: Mere innocent silence will not work estoppel. There must also be some element of turpitude
or negligence connected with the silence by which another is misled to his injury.
Here, PALs formula of determining daily and hourly rate of pay has been decided and adopted by it unilaterally without the
knowledge and express consent of the employees. It was only later on that the employees came to know of the formulas
irregularity and its being violative of the collective bargaining agreements previously executed by PAL and the unions. PALSA
immediately proposed that PAL use the correct method of computation, which proposal PAL chose to ignore. The alleged
long-standing silence by the PAL employees is in truth and in fact innocent silence, which cannot place a party in estoppel.
Jurisprudence likewise fortifies the position that in the interest of public policy, estoppel and laches cannot arrest recovery of
overtime compensation.
The case of Manila Terminal Co. vs. CIR is squarely in point: The principle of estoppel and laches cannot well be invoked
against the Association. In the first place, it would be contrary to the spirit of the Eight-Hour Labor Law, under which, as
already seen, the laborers cannot waive their right to extra compensation. In the second place, the law principally
obligates the employer to observe it, so much so that it punishes the employer for its violation and leaves the employee or
laborer free and blameless. In the third place, the employee or laborer is in such a disadvantageous position as to be naturally
reluctant or even apprehensive in asserting any claim which may cause the employer to devise a way for exercising his right to
terminate the employment.
If the principle of estoppel and laches is to be applied, it may bring about a situation, whereby the employee or laborer, who
cannot expressly renounce their right to extra compensation under the Eight-Hour Labor Law, may be compelled to
accomplish the same thing by mere silence or lapse of time, thereby frustrating the purpose of the law by indirection
Finally, the unilateral adoption by PAL of an irregular wage formula being an act against public policy, the doctrine of estoppel
cannot give validity to the same.
53 Roco 3B
58. Odango v. NLRC (2004)

Facts: Petitioners are monthly-paid employees of Antique Electric Cooperative (ANTECO), with workdays from Monday to
half of Saturday. After a routine inspection, the DOLE found ANTECO liable for underpayment of salaries, directing it to
pay. It did not.
33 employees then filed complaints with the NLRC for the payment of wage differentials, which prayer was granted by
the LA. It reasoned that monthly-paid employees are considered paid for all the days in the month, including 10 legal
holidays, the unworked half-Saturdays, and Sundays. It ruled that the divisor in converting leave credits was 304, which it
construed as an admission that it paid its employees only for 304 days a year.
The NLRC reversed the decision, as the use of 304 as a divisor yielded a higher rate of pay. The CA denied petitioners
petition, hence, the present recourse.
Petitioners claim that the CA gravely erred in denying their claim for wage differentials. Petitioners base their claim on
Section 2, Rule IV of Book III of the Omnibus Rules Implementing the Labor Code. Petitioners argue that under this
provision monthly-paid employees are considered paid for all days of the month including un-worked days.
Petitioners assert that they should be paid for all the 365 days in a year. They argue that since in the computation of leave
credits, ANTECO uses a divisor of 304, ANTECO is not paying them 61 days every year.
Issue: Whether petitioners are entitled to their claim.
Held: NO. We have long ago declared void Section 2, Rule IV of Book III of the Omnibus Rules Implementing the Labor
Code. In Insular Bank of Asia v. Inciong, we ruled as follows: Section 2, Rule IV, Book III of the Implementing Rules and
Policy Instructions No. 9 issued by the Secretary (then Minister) of Labor are null and void since in the guise of clarifying the
Labor Codes provisions on holiday pay, they in effect amended them by enlarging the scope of their exclusion.
The Labor Code is clear that monthly-paid employees are not excluded from the benefits of holiday pay. However,
the implementing rules on holiday pay promulgated by the then Secretary of Labor excludes monthly-paid employees from the
said benefits by inserting, under Rule IV, Book III of the implementing rules, Section 2 which provides that monthly-paid
employees are presumed to be paid for all days in the month whether worked or not. Thus, Section 2 cannot serve as basis of any right
or claim. Absent any other legal basis, petitioners claim for wage differentials must fail.
Even assuming that Section 2, Rule IV of Book III is valid, petitioners claim will still fail. The basic rule in this jurisdiction
is "no work, no pay." The right to be paid for un-worked days is generally limited to the 10 legal holidays in a year.
Petitioners claim is based on a mistaken notion that Section 2, Rule IV of Book III gave rise to a right to be paid for un-
worked days beyond the ten legal holidays. In effect, petitioners demand that ANTECO should pay them on Sundays,
the un-worked half of Saturdays and other days that they do not work at all. Petitioners line of reasoning is not only a
violation of the "no work, no pay" principle, it also gives rise to an invidious classification, a violation of the equal protection
clause. Sustaining petitioners argument will make monthly-paid employees a privileged class who are paid even if they do not
work.
The use of a divisor less than 365 days cannot make ANTECO automatically liable for underpayment. The facts show that
petitioners are required to work only from Monday to Friday and half of Saturday. Thus, the minimum allowable
divisor is 287, which is the result of 365 days, less 52 Sundays and less 26 Saturdays (or 52 half Saturdays). Any divisor below
287 days means that ANTECOs workers are deprived of their holiday pay for some or all of the ten legal holidays. The 304
days divisor used by ANTECO is clearly above the minimum of 287 days.
Finally, petitioners cite Chartered Bank Employees Association v. Ople as an analogous situation. Petitioners have misread
this case. In Chartered Bank, the workers sought payment for un-worked legal holidays as a right guaranteed by a
valid law.
In THIS case, petitioners seek payment of wages for un-worked non-legal holidays citing as basis a void implementing
rule. The circumstances are also markedly different. In Chartered Bank, there was a collective bargaining agreement that
prescribed the divisor. No CBA exists in this case. In Chartered Bank, the employer was liable for underpayment because the
54 Roco 3B
divisor it used was 251 days, a figure that clearly fails to account for the ten legal holidays the law requires to be paid. Here, the
divisor ANTECO uses is 304 days. This figure does not deprive petitioners of their right to be paid on legal holidays.
A final note. ANTECOs defense is likewise based on Section 2, Rule IV of Book III of the Omnibus Rules Implementing the
Labor Code although ANTECOs interpretation of this provision is opposite that of petitioners. It is deplorable that both
parties premised their arguments on an implementing rule that the Court had declared void twenty years ago in Insular Bank.
This case is cited prominently in basic commentaries. And yet, counsel for both parties failed to consider this. This does not
speak well of the quality of representation they rendered to their clients. This controversy should have ended long ago had
either counsel first checked the validity of the implementing rule on which they based their contentions.
59. Stolt-Nielsen v. NLRC (1996)

Facts: Meynardo J. Hernandez was hired by Stolt-Nielsen Marine Services (Phils.), Inc. as radio officer on board M/T Stolt
Condor for a period of 10 months. He boarded on January 20, 1990. On April 26, 1990, the ship captain ordered Hernandez
to carry the baggage of crew member Loveria who was being repatriated. He refused to obey the order out of fear in view of
the utterance of said crew member makakasaksak ako and also because he did not perceive such task as one of his duties as
radio officer.
Because of this, he was ordered to disembark on April 30, 1990 and was himself repatriated on May 15, 1990. He was paid his
salaries and wages only up to May 16, 1990.
Hernandez filed before POEA a complaint for illegal dismissal and breach of contract praying for, among other things,
payment of salaries, wages, overtime and other benefits due him for the unexpired portion of the contract which was 6
months and 3 days.
STOLT-NIELSEN in its answer alleged that Hernandez refused to follow the request of the master of the vessel which was
to explain to Lolito Loveria the reason for the latters repatriation and to assist him in carrying his baggage which amounts to a
violation of Article XXIV, Section 1 of the Collective CBA and the POEA Standard Contract.
Because of this he was dismissed for gross insubordination and serious misconduct. Hernandez denied that the master of the
vessel requested him to explain to Loveria the reason for the latters repatriation.
POEA Administrator Jose N. Sarmiento rendered an award in favor of Hernandez and held that the penalty imposed was too
severe (a warning would have been sufficient.) and that as a radio officer, it is not one of his official duties to carry the luggage
of outgoing seaman. He was awarded a monetary award equivalent to his salaries (Basic salary, Fixed overtime) for the
unexpired portion of his contract totaling P8,747.
Stolt-Nielsen appealed to the NLRC. NLRC concurred with the POEA Administrator in ruling that Hernandez was entitled to
the monetary award given. The NLRC likewise granted Hernandezs claim for fixed overtime pay. Hence, this petition.
Issue: (1) Whether private respondent was legally dismissed on the ground of gross insubordination and serious misconduct.
(2) Whether Hernandez is entitled to the award of overtime pay.
Held: (1) NO. Stolt-Nielsen emphasizes how (e)mployment on board ocean-going vessels is totally different from land-based
ones in that in the former strict and faithful compliance of all lawful commands and orders of the master or captain of
the vessel is of paramount and crucial importance. Petitioner contends that since the captains order to assist the crew
member who was being repatriated in carrying his baggage is lawful, private respondents refusal to obey the command is
willful, thus warranting his dismissal.
Willful disobedience of the employers lawful orders, as a just cause for the dismissal of an employee, envisages the
concurrence of at least two requisites: (1) employees assailed conduct must have been willful or intentional, the willfulness
being characterized by a wrongful and perverse attitude (2) 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.
55 Roco 3B
The Court agrees that by virtue of the aforementioned CBA and POEA Standard Contract provisions cited by petitioner,
Hernande is indeed bound to obey the lawful commands of the captain of the ship, BUT only as long as these pertain
to his duties. The order to carry the luggage of a crew member, while being lawful, is not part of the duties of a radio
officer. Assuming arguendo that lawful commands of a ship captain are supposed to be obeyed by the complement of a ship,
private respondents so-called act of disobedience does not warrant the supreme penalty of dismissal.
Gold City Integrated Port Services, Inc. vs. NLRC: Not every case of insubordination or wilful disobedience by an
employee of a lawful work-connected order of the employer or its representative is reasonably penalized with dismissal.
The termination was a disproportionately heavy penalty. In instant case, the POEA found that private respondents
actuation which led to his dismissal was the first and only act of disobedience during his service with the petitioner. An
examination of the circumstances surrounding private respondents disobedience shows that the repatriated seamans
utterance of makakasaksak ako instilled fear in private respondent that he was deterred from carrying out the order of the
captain. Hence, his act could not be rightfully characterized as one motivated by a wrongful and perverse attitude.
(2) NO. Complainant alleged that he is entitled thereto as the same is a fixed overtime pay.
Cagampan v. NLRC: NLRC ruling on the disallowance of overtime pay is ably supported by the fact that petitioners never
produced any proof of actual performance of overtime work. Petitioners have conveniently adopted the view that the
guaranteed or fixed overtime pay of 30% of the basic salary per month embodied in their employment contract should be
awarded to them as part of a package benefit.; that even without sufficient evidence of actual rendition of overtime work,
they would automatically be entitled to overtime pay.
Their theory is erroneous for being illogical and unrealistic. The contract provision means that the fixed overtime pay
of 30% would be the basis for computing the overtime pay if and when overtime work would be rendered. Simply
stated, the rendition of overtime work and the submission of sufficient proof that said work was actually
performed are conditions to be satisfied before a seaman could be entitled to overtime pay which should be
computed on the basis of 30% of the basic monthly salary. In short, the contract provision guarantees the right to
overtime pay but the entitlement to such benefit must first be established.
A seaman, by the very nature of his job, stays on board a ship or vessel beyond the regular 8-hour work
schedule. For the employer to give him overtime pay for the extra hours when he might be sleeping or attending to
his personal chores or even just lulling away his time would be extremely unfair and unreasonable.
In the case at bar, a close scrutiny of the computation of the monetary award shows that the award for overtime was for the
remaining 6 months and 3 days of private respondents contract at which time he was no longer rendering services
as he had already been repatriated. In light of our aforequoted ruling in Cagampan v. NLRC, said award for overtime should
be, as it is hereby, disallowed for being unjustified.
60. Meralco Workers Union v. Meralco (1959)

Facts: Petitioner union, composed of laborers and employees of the Manila Electric Company, charged the said company with
unfair labor practice, alleging (1) that it discriminatorily discharged Conrado Trinidad by reason of his union
activities, and (2) that union members were refused overtime compensation enjoyed by non-members.
The lower court dismissed the charges because it held that Trinidad's discharge was caused by his repeated absences without
previous permission and that the members who were denied overtime compensation had signed a waiver in consideration of
certain valuable privileges.
Issue: Whether or not Meralco is guilty of unfair labor practice.
Held: NO. It is not disputed that previous to those 2 absences without permission, he had already been absent 5 times and
warned that should he again absent himself from work without previous permission he would be dismissed from the service.
Repeated absences without permission are something that should not be taken lightly in an enterprise, which, like
the Meralco, is under obligation to furnish electric light and power 24 hours a day to the inhabitants of a metropolitan and
56 Roco 3B
industrial city like Manila, and that disregard of warning against repetition of a series of absences amounts to gross indiscipline
which no enterprise should be compelled to tolerate.
On the second count, petitioner contended that since the court had found that some workers worked overtime, it should have
directed the Meralco to make payment. But since the only issue in the case was that of unfair labor practice based on
alleged discrimination in the payment of overtime compensation, and the court found that there had been no such
discrimination, it had no alternative but to dismiss the charge as without foundation.
If petitioner believes and can prove that there has been a violation of the 8-hour labor law, what it should do is to file a charge
on that specific point so that adequate proof could be adduced for or against it.
Petitioner cannot just assume that the waiver of overtime compensation by drivers who preferred to work in the
motor pool was against the law, it appearing that such waiver was to be in consideration for certain valuable
privileges they were to enjoy, and there is no proof that the value of those privileges did not adequately compensate
for such work.
61. NWSA v. NWSA Union (1964)

Facts: NWSA is a government owned and controlled corporation created under RA 1383. Respondent meanwhile are various
labor organizations composed of laborers and employees of NAWASA.
The CIR conducted a hearing on the controversy then existing between petitioner and respondent concerning the 40-Hour
Week Law (RA 1880). Union alleged violations of the CBA concerning payment of distress pay, the minimum wage of P5.25,
promotional appointments and filling of vacancies of newly created positions, additional compensation for night work, wage
increases to some laborers and employees, etc. Union also raises the issue of whether the 25% additional compensation for
Sunday work should be included in computing the daily wage and whether in determining the daily wage of a
monthly salaried employee, the salary should be divided by 30 days. They also raise the issue for additional
compensation work and overtime pay for respondent intervenors.
The CIR ruled that NAWASA is an agency not performing governmental functions and therefore is liable to pay additional
compensation for work on Sundays and legal holidays in accordance with the Eight-Hour Labor Law (CA 444), even if said
days should be within the staggered / i.e. work days authorized by the President.
Also the respondent intervenors were not managerial employees, hence not exempt from the coverage of the Eight-Hour
Labor Law. It also found that NAWASAs practice of computing overtime compensation by offsetting the overtime work of
an employee to the undertime work is contrary to CA 444.
With regard to the 25% additional compensation for Sunday work, the CIR ruled that the same should be included for
computing the daily wage of an employee. For the monthly salaried employees, the CIR ruled that NAWASAs practice of
dividing the monthly basic pay by 30 is erroneous.
Issue: (1) Whether in determining overtime pay in excess of 8 hours, the undertime for that day should be set off.
(2) Whether or not in computing the daily wage (of those in daily basis), the additional compensation for Sunday work is
included.
(3) What the proper method is in determining the equivalent daily wage of a monthly salaried employees (especially in a public
utility.
Held: (1) NO. The proper method should be to deduct the undertime from the accrued leave but pay the employee the
overtime to which he is entitled. This method also obviated the irregular schedule that would result if the overtime should be
set off against the undertime for that would place the schedule of working hours dependent on the employee.
(2) YES. The differential pay for Sunday is part of the legal wage, hence it must be included in computing the daily
wage, even if it was merely contractual. The regular rate of pay also ordinarily includes incentive bonus or profit sharing
payments made in addition to the normal basic pay, and it was also held that the higher rate for night, Sunday and holiday
work is just as much as a regular rate as the lower rate for daytime work. The court therefore holds that the CIR correctly
57 Roco 3B
included such differential pay in computing the weekly wages of those employees and laborers who worked seven days a week
and were continuously receiving 25% Sunday differential.
(3) For the regular employees it should be the monthly salary divided by the actual number of working hours/ actual number
of working days. For GAO employees, it is covered by the Section 254 of the Revised Administrative Code.
62. Chartered Bank Employees v. Ople (1985)

Facts: On May 1975, Chartered Bank Employees Association (CBEA), representing monthly paid employees/members, filed a
complaint with the DOLE against Chartered Bank (CB) for non-payment of 10 unworked legal holidays as well as
premium and overtime differentials for worked legal holidays from Nov. 1 1974.
This was based on 2 Rule IV Book 3 of the Integrated Rules as well as Policy Instruction No. 9 which essentially states that
employees who are uniformly paid by month shall be presumed to be paid for all days of the month whether worked or not.
As such, the 10 day holiday pay was presumed to be already paid in their monthly salary.
CBEA contends that the Minister of Labor gravely abused his discretion in issuing the above rule and instruction as guidelines
for the implementation of Arts 82 and 94 of the Labor Code because said guidelines actually contravened said law.
CB contends that the employees were not deprived of said holiday pay. Rather, they were included already in their salary.
Thus, said guidelines were promulgated to avoid confusion or misconstruction in the application of Art. 82 & 94.
Issue: Whether or not said Rules and Policy Instruction are valid insofar as they allow non-payment of 10-day holiday pay to
monthly employees.
Held: NO. BOTH ARE VOID. The similar case of Insular Bank Union v. Inciong already resolved a similar issue. It stated that
the provisions of the Labor Code on the entitlement to the benefits of holiday pay are clear and explicit it provides for
both the coverage of and exclusion from the benefit. In Policy Instruction No. 9, the Secretary of Labor went as far as to
categorically state that the benefit is principally intended for daily paid employees, when the law clearly states that
every worker shall be paid their regular holiday pay. This is flagrant violation of the mandatory directive of Art. 4 of
the Labor Code, which states that All doubts in the implementation and interpretation of the provisions of this Code,
including its implementing rules and regulations, shall be resolved in favor of labor. Moreover, it shall always be
presumed that the legislature intended to enact a valid and permanent statute which would have the most beneficial effect that
its language permits. Thus, said rule and policy instruction are null and void.
Since the CB premises its action on the invalidated rule and policy instruction, it is clear that the employees belonging to
the CBEA are entitled to the payment of 10 legal holidays under Arts. 82 and 94 of the Labor Code, aside from their monthly
salary. They are not among those excluded by law from the benefits of such holiday pay.
The questioned rule and the policy instruction added another excluded group, namely, employees who are uniformly
paid by the month. While the additional exclusion is only in the form of a presumption that all monthly paid employees have
already been paid holiday pay, it constitutes a taking away or a deprivation which must be in the law if it is to be valid.
An administrative interpretation which diminishes the benefits of labor more than what the statute delimits or withholds is
obviously ultra vires.
The contention of the CB that the 100% base pay and 50% premium pay for work actually rendered on holidays is given in
addition to monthly salaries only because the CBA so provides is itself an argument in favor of the CBEU stand.
It shows that the CBA already contemplated a divisor of 251 days for holiday pay computations before the questioned
presumption in the Integrated Rules and the Policy Instruction was formulated. There is a similarity between overtime pay,
which is computed on the basis of 251 working days a year, and holiday pay, which should be similarly treated notwithstanding
the public respondents issuances. In both cases overtime work and holiday work the employee works when he is
supposed to be resting. In the absence of an express provision of the CBA or the law to the contrary, the
computations should be similarly handled.
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Moreover, in computing the overtime compensation, for its employees, employs a divisor of 251 days. The 251 working
days divisor is the result of subtracting all Saturdays, Sundays and the 10 legal holidays from the total number of calendar days
in a year. If the employees are already paid for all non-working days, the divisor should be 365 and not 251. The situation is
muddled somewhat by the fact that, in computing the employees absences from work, the CB uses 365 as divisor. Any slight
doubts, however, must be resolved in favor of the workers.
Thus, when monthly paid employees work on a holiday, they are given an additional 100% base pay on top of a premium
pay of 50%. If the employees monthly pay already includes their salaries for holidays, they should be paid only premium pay
but not both base pay and premium pay.
When the law provides benefits for employees in all establishments and undertakings, whether for profit or not and lists
specifically the employees not entitled to those benefits, the administrative agency implementing that law cannot exclude
certain employees from its coverage simply because they are paid by the month or because they are already highly paid.
63. JRC v. NLRC (1987)

Facts: JRC is a non-stock, non-profit educational institution duly organized and existing under the laws of the Philippines. It
has 3 groups of employees categorized as follows: (a) personnel on monthly basis, who receive their monthly salary
uniformly throughout the year, irrespective of the actual number of working days in a month without deduction for holidays;
(b) personnel on daily basis who are paid on actual days worked and they receive unworked holiday pay; and (c) collegiate
faculty who are paid on the basis of student contract hour. Before the start of the semester they sign contracts with the
college undertaking to meet their classes as per schedule.
Unable to receive their corresponding holiday pay, as claimed, from 1975 to 1977, National Alliance of Teachers and
Office Workers (NATOW) in behalf of the faculty and personnel of Jose Rizal College filed with the Ministry of Labor a
complaint against the college for said alleged non-payment of holiday pay.
LA: 1) Those paid by month: presumed already paid the 10 legal holidays and no longer entitled to separate payment; 2) Paid
daily: entitled to be paid the 10 unworked regular holidays; 3) Per hour: not entitled to unworked to holiday pay
NLRC: modified the LA decision, said that those paid by the hour (#3) are entitled to holiday pay.
Issue: Whether the school faculty paid per lecture hour are entitled to unworked holiday pay.
Held: NO. Theres no problem as to the first two classes: Labor Arbiter found that the monthly paid employees are uniformly
paid throughout the school year regardless of working days, hence their holiday pay are included therein while the daily paid
employees are renumerated for work performed during holidays per affidavit of JRCs treasurer. The problem lies with its
faculty members, who are paid on an hourly basis.
JRC contended that its hourly paid faculty members are paid on a "contract" basis because they are required to hold
classes for a particular number of hours. In the programming of these student contract hours, legal holidays are
excluded and labeled in the schedule as no class day. On the other hand, if a regular week day is declared a holiday, the
school calendar is extended to compensate for that day. Thus that the advent of any of the legal holidays within the semester
will not affect the faculty's salary because this day is not included in their schedule while the calendar is extended to
compensate for special holidays.
OSG contended that under Article 94 of the Labor Code, holiday pay applies to all employees except those in retail and
service establishments. Subject holiday pay is provided for in the Labor Code and in the Implementing Rules and
Regulations, Rule IV, Book III, which reads:
SEC. 8. Holiday pay of certain employees. (a) Private school teachers, including faculty members of colleges and
universities, may not be paid for the regular holidays during semestral vacations. They shall, however, be paid
for the regular holidays during Christmas vacations.
59 Roco 3B
Under the foregoing provisions, apparently, JRC, although a non-profit institution, is under obligation to give pay even
on unworked regular holidays to hourly paid faculty members subject to the terms and conditions provided for
therein.
We believe that the aforementioned implementing rule is not justified by the provisions of the law which after all is
silent with respect to faculty members paid by the hour who because of their teaching contracts are obliged to work and
consent to be paid only for work actually done (except when an emergency or a fortuitous event or a national need calls for
the declaration of special holidays). Regular holidays specified as such by law are known to both school and faculty
members as no class days; certainly the latter do not expect payment for said unworked days, and this was clearly in
their minds when they entered into the teaching contracts.
On the other hand, both the law and the Implementing Rules governing holiday pay are silent as to payment on Special Public
Holidays. It is readily apparent that the declared purpose of the holiday pay which is the prevention of diminution of
the monthly income of the employees on account of work interruptions is defeated when a regular class day is
cancelled on account of a special public holiday and class hours are held on another working day to make up for
time lost in the school calendar.
Otherwise stated, the faculty member, although forced to take a rest, does not earn what he should earn on that day. Be it
noted that when a special public holiday is declared, the faculty member paid by the hour is deprived of expected
income, and it does not matter that the school calendar is extended in view of the days or hours lost, for their income that could be
earned from other sources is lost during the extended days. Similarly, when classes are called off or shortened on
account of typhoons, floods, rallies, and the like, these faculty members must likewise be paid, whether or not
extensions are ordered.
Thus, JRC is exempted from paying hourly paid faculty members their pay for regular holidays, whether the same be
during the regular semesters of the school year or during semestral, Christmas, or Holy Week vacations. But ordering JRC to
pay said faculty members their regular hourly rate on days declared as special holidays or for some reason classes
are called off or shortened for the hours they are supposed to have taught, whether extensions of class days be ordered
or not; in case of extensions said faculty members shall likewise be paid their hourly rates should they teach during said
extensions.
64. Cebu Institute v. Ople (1987)

Facts: Here, 6 cases involving private schools (Cebu Institute, Divine Word College, FEU) as well as class suits involving
school personnel (Fabros, Biscocho, Valmonte cases) were consolidated.
Essentially, their claim is hinged on 3 (a) of PD 451 which states that no increase in tuition or other school fees or
charges shall be approved unless 60% of the proceeds is allocated for increase in salaries or wages of the members
of the faculty and all other employees of the school concerned[.] Provided that in no case shall the return to
investments exceed 12% of the incremental proceeds.
The parties basically claim from their respective employers payments of the monetary benefits (ie. holiday pay, 13t h month
pay, COLA, SIL, allowances, fringe benefits, etc.) which are due to them. They contended that their employers refused to
pay said benefits on the ground that said items were already deemed included in the salary increases they had paid
out of the 60% of the proceeds from tuition fee increases.
Issue: (1) Whether said benefits of faculty members and school employees may be charged against the 60% of the proceeds
from the tuition fee increase under said PD 451. NO
(2) Whether the same items may be charged against said 60% portion under BP 232.
(3) Whether schools and their employees may enter into CBAs allocating more than 60% of said proceeds.
Held: (1) NO. PD. 451 imposes among the conditions for the approval of tuition fee increases, the allocation of 60% of
the incremental proceeds thereof for increases in SALARIES or WAGES of school personnel, and not for any other item
such as allowances or other fringe benefits. In other words, they are to be devoted entirely to wage or salary increases
which means increases in BASIC SALARY.
60 Roco 3B
The law cannot be construed to include allowances which are benefits over and above the basic salaries of the employees. To charge
such benefits to the 60% incremental proceeds would be to reduce the increase in basic salary provided by law
consistent with the legislative intent to alleviate the sad plight of private schools and that of their personnel.
Any administrative rules or regulations extending the meaning of salaries and wages to other benefits are ultra vires and not
binding.
(2) YES. BP 232 repealed PD 451. 3 aspects of the disputed provisions of law support this conclusion. FIRST, the legislative
authority under PD 451 retained the power to apportion the incremental proceeds of the tuition fee increases while such
power is delegated to the MECS under BP 232; SECOND, PD 451 limits the application or use of the increment to salary or wage
increase, institutional development, student assistance and extension services and return on investment while BP 232 gives the MECS
discretion to determine the application or use of the increments; THIRD, the extent of the application or use of the increment
under PD 451 is fixed at the pre-determined percentage allocations; 60% for wage and salary increases, 12% for return in investment and
the balance of 28% to institutional development, student assistance and extension services while BP 232, the extent of the
allocation or use of the increment is likewise left to the discretion of the MECS. In other words, B.P. Blg. 232
liberalized the procedure by empowering each private school to determine its rate of tuition and other school fees or charges.
Thus, there was a valid exercise of on the part of MECS in filling the details on the application of tuition fees and
other charges.
(3) YES. The 60% figure is a minimum which means that schools and their employees may agree on a larger portion, or in this
case, as much as 90% for salaries and allowances and other benefits. This is not in anyway to allow diminution or loss of the
portion allotted for institutional development of the school concerned
65. Makati Haberdashery v. NLRC (1989)

Facts: Individual complainants, private respondents herein, have been working for petitioner Makati Haberdashery, Inc. as
tailors, seamstress, sewers, basters (manlililip) and plantsadoras. They are paid on a piece-rate basis except for 2
employees who are paid on a monthly basis. In addition to their piece-rate, they are given a daily allowance of three (P3.00)
pesos provided they report for work before 9:30 a.m. everyday.
The Sandigan ng Manggagawang Pilipino, a labor organization of the respondent workers, filed a complaint for (a)
underpayment of the basic wage; (b) underpayment of living allowance; (c) non-payment of overtime work; (d) non-payment
of holiday pay; (e) non- payment of service incentive pay; (f) 13th month pay; and (g) benefits provided for under Wage
Orders Nos. 1, 2, 3, 4 and 5.
Issue: (1) Whether there was employer-employee relationship?

(2) Whether the workers are entitled to the monetary claims (ie. Minimum wage, COLA, 13 th month, SIL, Holiday)
Held: (1) YES. The test of employer-employee relationship is four-fold: (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. It is the so-called
control test that is the most important element. This simply means the determination of 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 method by
which the same is to be accomplished.
The most important requisite of control is present. As gleaned from the operations of petitioner, when a customer enters into
a contract with the haberdashery or its proprietor, the latter directs an employee who may be a tailor, pattern maker, sewer or
plantsadora to take the customers measurements, and to saw the pants, coat or shirt as specified by the customer.
Supervision is actively manifested in all these aspectsthe manner and quality of cutting, sewing and ironing.
The presence of control is also immediately evident in this memorandum issued by Assistant Manager (providing, inter alia, to
follow orders and instructions from the latter, and before accepting the job orders, tailors must check the materials, job
orders, due dates, and other things to maximize efficiency of production.) (Read 453-54 of the SCRA for others.)
61 Roco 3B
That private respondents are regular employees is further proven by the fact that they have to report for work regularly from
9:30 a.m. to 6:00 or 7:00 p.m. and are paid an additional allowance of P3.00 daily if they report for work before 9:30 a.m. and
which is forfeited when they arrive at or after 9:30 a.m.
Since private respondents are regular employees, necessarily the argument that they are independent contractors must fail.
Private respondents did not exercise independence in their own methods, but on the contrary were subject to the control of
petitioners from the beginning of their tasks to their completion.
Unlike independent contractors who generally rely on their own resources, the equipment, tools, accessories, and
paraphernalia used by private respondents are supplied and owned by petitioners. Private respondents are totally dependent on
petitioners in all these aspects.
(2) Private respondents are entitled to the Minimum Wage as mandated by Section 2(g) of Letter of Instruction No. 829,
Rules Implementing Presidential Decree No. 1614 and reiterated in Section 3(f), Rules Implementing Presidential Decree 1713
which explicitly states that, All employees paid by the result shall receive not less than the applicable new minimum
wage rates for 8 hours work a day, except where a payment by result rate has been established by the Secretary of Labor.
No such rate has been established in this case.
Whether or not there is in fact an underpayment of minimum wages to private respondents has already been resolved in the
decision of the Labor Arbiter where he stated: For lack of sufficient evidence to support the claims of the complainants for
alleged violation of the minimum wage, their claims for underpayment re violation of the Minimum Wage Law under Wage
Orders Nos. 1, 2, 3, 4, and 5 must perforce fall.
The records show that private respondents did not appeal the above ruling of the Labor Arbiter. As a consequence of their
status as regular employees of the petitioners, they can claim cost of living allowance. This is apparent from the
provision defining the employees entitled to said allowance, thus: . . . All workers in the private sector, regardless of their
position, designation or status, and irrespective of the method by which their wages are paid.
Private respondents are also entitled to claim their 13th Month Pay under Section 3(e) of the Rules and Regulations
Implementing P.D. No. 851:
Section 3. Employers covered.The Decree shall apply to all employers except to:
(e) Employers of those who are paid on purely commission, boundary, or task basis, and those who are paid a fixed amount
for performing a specific work, irrespective of the time consumed in the performance thereof, except where the workers are
paid on piece-rate basis in which case the employer shall be covered by this issuance insofar as such workers are concerned.
While private respondents are entitled to Minimum Wage, COLA and 13th Month Pay, they are NOT ENTITLED to
Service Incentive Leave pay because as piece-rate workers being paid at a fixed amount for performing work
irrespective of time consumed in the performance thereof, they fall under one of the exceptions For the same reason
private respondents cannot also claim holiday pay.
66. Kwok v. Phil. Carpet (2005)

Facts: In 1965, Kwok, his father in law Lim, and some others established the Philippine Carpet Manufacturing Corporation
(PCMC). Kwok became its General Manager, Executive Vice President, and Chief Operations Officer. Lim was its
President and Chairman.
Kwok retired in 1996, with a monthly salary of P160,000. He demanded the cash equivalent of his accumulated vacation
and sick leave credits for the entirety of his tenure, amounting to P7,080,546. He asserted that Lim made a verbal
promise to give unlimited leave benefits and their cash conversion, along with golf and country club membership, 6% profit
sharing, among others.
62 Roco 3B
The corporation refused, claiming that he was already paid what was due, amounting to P6,902,387.19, and that he is
demanding again despite this. Further, the Chairman and its President/Vice President had unlimited discretion in their
use of time, and were thus not entitled to vacation and sick leave benefits. It denied any policy granting such benefits, and
that the claim had already prescribed. Hence, a complaint was filed before the NLRC.
The Labor Arbiter ordered payment. The NLRC reversed and dismissed the complaint, which decision the CA affirmed.
Issue: Whether or not Kwok is entitled to the cash value of his VL & SL.
Held: NO. In the present case, the Kwok relied principally on his testimony to prove that Lim made a verbal promise to give
him vacation and sick leave credits, as well as the privilege of converting the same into cash upon retirement. The Court
agrees that those who belong to the upper corporate echelons would have more privileges. However, the Court
cannot presume the existence of such privileges or benefits. Kwok was burdened to prove not only the existence of such
benefits but also that he is entitled to the same, especially considering that such privileges are not inherent to the positions
occupied by Kwok in the respondent corporation, son-in-law of its president or not. Kwok failed to discharge this burden.
The company policy of conversion into equivalent cash of unused vacation and sick leave credits applied only to its
regular employees. Kwok failed to offer evidence to rebut the testimony of Nel Gopez, Chief Accountant of the
respondent, that Kwok was not among the regular employees covered by the policy for the simple reason that he had
unlimited vacation leave benefits.
Second, even assuming that Kwok is included among the regular employees of PCMC referred to in said memorandum,
there is no evidence that he complied with the cut-off dates for the filing of the cash conversion of vacation and sick
leaves. This being so, we find merit in respondents argument that Kwoks money claims have already been barred by the 3-
year prescriptive period under Article 291.
Third, and this is of primordial importance, there is no proof that Kwok has filed vacation and sick leaves with PCMCs
personnel department. Without a record of Kwoks absences, there is no way to determine the actual number of leave
credits he is entitled to. The P7,080,546.00 figure arrived at by Kwok supposedly representing the cash equivalent of his
earned sick and vacation leaves is thus totally baseless.
And, fourth, even assuming that PCMC President Patricio Lim did promise petitioner the cash conversion of his leaves,
we agree with respondent that this cannot bind the company in the absence of any Board resolution to that effect. We must
stress that the personal act of the company president cannot bind the corporation.
In the case at bar, however, there is no showing that PCMC had either recognized, approved or ratified the cash conversion
of Kwoks leave credits as purportedly promised to him by Lim. On the contrary, PCMC has steadfastly maintained that the
Company, through the Board, has long adopted the policy of granting its earlier mentioned corporate officers unlimited leave
benefits denying them the privilege of converting their unused vacation or sick leave benefits into their cash equivalent.
As to the last assigned error, petitioner faults the NLRC for holding as applicable to petitioner, the April 26, 1997
Memorandum issued by PCMC to Raoul Rodrigo, Donald Kwoks successor as company executive vice-president.
The said memo granted Rodrigo unlimited sick and vacation leave credits but disallowed the cash conversion
thereof. Before he became executive vice-president, Rodrigo was senior vice-president and enjoyed the commutation of his
unused vacation and sick leaves.
We note that the April 26, 1997 memo was issued to Rodrigo when petitioner was already retired from PCMC. While said
memorandum was particularly directed to Rodrigo, however, this does not necessarily mean that petitioner, as former
executive vice-president, was then not prohibited from converting his earned vacation and sick leaves into cash since he was
not issued a similar memo. On the contrary, the memo simply affirms the long-standing company practice of excluding
PCMCs top two positions, that of president and executive vice-president, from the commutation of leaves. As
heretofore discussed, among the perks of those occupying these posts is the privilege of having unlimited leaves, which is
totally incompatible with the concept of converting unused leave credits into their cash equivalents.
63 Roco 3B
We are not convinced by the Kwoks claim that Lim capriciously deprived him of his entitlement to the cash
conversion of his accumulated vacation and sick leave credits simply because of his estrangement from his wife,
who happens to be Lims daughter. The petitioner did not adduce any evidence to show that he appealed to the
respondent corporations board of directors for the implementation of the said privilege which was allegedly granted to him.
Even if Lim was the president and chairman of the respondent corporations board of directors, the rest of the membership of
the board could have overruled him and granted to the petitioner his claim if, indeed, the latter was entitled thereto. Indeed,
even the petitioner admitted that, after his retirement, the board of directors granted to him salary increase for two years prior
to his retirement. If the claim of the petitioner had been approved by the board of directors, for sure, it would have approved
the same despite his falling out with the daughter of Lim
67. NSFW v. Ovejera (1982)

Facts: NFSW has been the bargaining agent of CAC rank and file employees (about 1200 of more than 2000 personnel) and
has concluded with CAC a CBA. Under Art. VII Sec. 5 of the said CBA, the parties also agree to maintain the present
practice on the grant of Christmas bonus, milling bonus, and amelioration bonus to the extent as the latter is required
by law. Christmas and milling bonuses amount to 1-1/2 months salary.
On November 28, 1981, NFSW held a strike to compel the payment of the 13th month pay IN ADDITION to the
Christmas, milling and amelioration bonuses being enjoyed by CAC workers. To settle the strike, a compromise agreement was
concluded between CAC and NFSW: The parties agree to abide by the final decision of the Supreme Court in any case
involving the 13th Month Pay Law if it is clearly held that the employer is liable to pay a 13th month pay separate and
distinct from the bonuses already given.
On December 18, 1981 the SC decision in the Marcopper case upholding the 13th month pay in addition to the bonuses
became final and executory. Thus, NFSW renewed its demand that CAC give the 13th month pay. CAC refused.
On January 22, 1982, NFSW filed with the MOLE Regional Office a notice to strike based on non-payment of the 13th
month pay. 6 days after, NFSW struck. One day after the commencement of the strike, a report of the strike-vote was
filed by NFSW with MOLE.
CAC filed a petition to declare the strike illegal, principally for being violative of BP130, that is, the strike was declared
before the expiration of the 15-day cooling-off period for unfair labor practice (ULP) strikes, and the strike was staged
before the lapse of seven days from the submission to MOLE of the result of the strike-vote.
LA ruled for Ovejera and declared the NFSW strike illegal. NFSW filed the Instant Petition for prohibition of the LAs
decision which would allegedly violate fundamental rights of the petitioners.
Issue: (1) Whether NSFWs strike was illegal.

(2) Whether the CAC is obliged to give its workers a 13th month salary in addition to Christmas, milling, and amelioration
bonuses.
Held: (1) YES. The cooling-off period in Art. 264 and the 7-day strike ban after the strike-vote report prescribed in Art. 264
were meant to be, and should be deemed, mandatory. In requiring a strike notice and a cooling-off period, the avowed
NFSW strike is illegal.
The NFSW declared the strike 6 days after filing a strike notice, i.e., before the lapse of the mandatory cooling-off period.
It also failed to file with the MOLE before launching the strike a report on the strike-vote, when it should have filed
such report at least 7 days before the intended strike. Under the circumstances, we are perforce constrained to conclude that
the strike staged by petitioner is not in conformity with law.
(2) NO. PD 851 states that ALL EMPLOYERS are hereby required to pay all their employees receiving a basic salary
of not more than P1,000 a month, regardless of the nature of their employment, a 13th month pay not later than December
24 of every year. Exempted from the obligation however are: Employers already paying their employees a 13th
month pay or its equivalent.
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The evident intention of the law, as revealed by the law itself, was to grant an additional income in the form of a 13th
month pay to employees not already receiving the same. Otherwise put, the intention was to grant some relief not to
all workers but only to the unfortunate ones not actually paid a 13th month salary or what amounts to it, by whatever
name called; but it was not envisioned that a double burden would be imposed on the employer already paying his
employees a 13th month pay or its equivalent whether out of pure generosity or on the basis of a binding agreement
and, in the latter case, regardless of the conditional character of the grant, so long as there is actual payment. Otherwise, what
was conceived to be a 13th month salary would in effect become a 14th or possibly 15th month pay. This view is justified by
the law itself which makes no distinction in the grant of exemption: Employers already paying their employees a 13th
month pay or its equivalent are not covered by this Decree.
The Implementing Rules of PD 851 reinforce this by saying that the term equivalent shall include Christmas bonus,
midyear bonus, profit-sharing payments and other cash bonuses amounting to not less than 1/12th 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 nonmonetary benefits. Where an employer pays less than 1/12th of the employees basic salary, the employer shall pay the
difference
To require employers (already giving their employees a 13th month salary or its equivalent) to give a second 13th
month pay would be unfair and productive of undesirable results. To the employer who had acceded and is already
bound to give bonuses to his employees, the additional burden of a 13th month pay would amount to a penalty for his
munificence or liberality. The probable reaction of one so circumstanced would be to withdraw the bonuses or resist further
voluntary grants for fear that if and when a law is passed giving the same benefits, his prior concessions might not be given
due credit; and this negative attitude would have an adverse impact on the employees.
In the case at bar, the NFSW-CAC CBA provides for the grant to CAC workers of bonus, milling bonus and amelioration
bonus, the aggregate of which is very much more than a workers monthly pay.
Regarding the compromise agreement, when a dispute arose as to whether CAC workers receiving the stipulated bonuses
would additionally be entitled to a 13th month pay, NFSW and CAC concluded a compromise agreement by which they
agree(d) to abide by the final decision of the Supreme Court in any case involving the 13th Month Pay Law if it is clearly held that the employer is
liable to pay a 13th month pay separate and distinct from the bonuses already given.
However, the Marcopper decision is a Court decision but without the necessary 8 votes to be doctrinal. This being so, it
cannot be said that Marcopper clearly held that the employer is liable to pay a 13th month pay separate and
distinct from the bonuses already given, within the meaning of the NFSW-CAC compromise agreement. At any rate, in
view of the rulings made herein, NFSW cannot insist on its claim that its members are entitled to a 13th month pay in
addition to the bonuses already paid by CAC.
68. Universal Corn v. NLRC (1987)

Facts: Sometime May 1972, UC and the Universal Corn Products Workers Union (UNION) entered into a CBA in which it
was provided, among other things, that: The UC agrees to grant all regular workers within the bargaining unit, with at least one (1) year of
continuous service, a Christmas bonus equivalent to the regular wages for seven (7) working days, effective December,
1972. The bonus shall be given to the workers on the second week of December . In the event that the service of a worker is not
continuous due to factory shutdown, machine breakdown or prolonged absences or leaves, the Christmas bonus shall be prorated in accordance with the
length of services that worker concerned has served during the year.
Such agreement had duration of 3 years. On account of differences with respect to certain economic issues, the CBA expired
without being renewed. Subsequently, the parties entered into an "addendum" stipulating certain wage increases covering the
years from 1974 to 1977.
Thereafter, parties entered into a CBA for the years 1979 to 1981. Like the "addendum," the new CBA did not refer to the
"Christmas bonus" theretofore paid but dealt only with salary adjustments. According to UC, the new agreements
deliberately excluded the grant of Christmas bonus with the enactment of PD 851 on December 16, 1975. The
company further claims that since 1975, it had been paying its employees 13th-month pay pursuant to the Decree.
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For failure of UC to pay the 7-day Christmas bonus for 1975 to 1978 inclusive, in accordance with the 1972 CBA, the
Union went to the LA for relief. LA ruled that the payment of the 13th month pay precluded the payment of further
Christmas bonus. Union members appealed to NLRC. NLRC set aside the decision of the LA and ordered UC to pay the 7-
day bonus in accordance with the CBA. (in case he asks, NLRC decision below)
UC invokes NFSW v. Ovejera, in which we held PD. 851, the 13th-month pay law, does not cover employers already paying
their employees an "equivalent" to the 13th month pay.
Issue: Whether the UNION members are entitled to the 7-day Christmas bonus for years 75-78.
Held: YES.. Ovejera does NOT apply. What is applicable is United CMC Textile Workers Union v. Valenzuela wherein the SC held
that, if the Christmas bonus was included in the 13th month pay, then there would be no need for having a specific
provision on Christmas bonus in the CBA. But it did not provide for a bonus in graduated amounts depending on the
length of service of the employee. The intention is clear therefore that the bonus provided in the CBA was meant to be
in addition to the legal requirement. Moreover, why exclude the payment of the 1978 Christmas bonus and pay only the
1979-1980 bonus. The classification of the company's workers in the CBA according to their years of service supports the
allegation that the reason for the payment of bonus was to give bigger award to the senior employeesa purpose which is not
found by P.D. 851. A bonus under the CBA is an obligation created by the contract between the management and workers
while the 13th month pay is mandated by the law (P.D. 851).
We consider the 7-day bonus here demanded "to be in addition to the legal requirement." What is significant for us is
the fact that, like the Valenzuela agreement, the Christmas bonus provided in the CBA accords a reward, in this case, for
loyalty, to certain employees. It is evident from the stipulation granting the bonus in question to workers "with at least one (1)
year of continuous service." As we said in Valenzuela, this is "a purpose not found in P.D. 851."
It is claimed by the company, however, that as a consequence of the impasse between the parties beginning 1974 - 1979, no
CBA was in force during those intervening years. Hence, there is allegedly no basis for the money award granted by the
respondent labor body. But it is not disputed that under the 1972 CBA, "[i]f no agreement and negotiations are continued, all the
provisions of this Agreement shall remain in full force up to the time a new agreement is executed."
The fact that the new agreements are silent on the 7-day bonus demanded should not preclude the private
respondents' claims thereon. The 1972 agreement is basis enough for such claims for the whole writing is " 'instinct with an
obligation,' imperfectly expressed.
69. Framanlis v. Minister of Labor (1989)

Facts: 18 employees of Framanlis filed against their employer and petitioner two labor standard cases, alleging that they were
not paid their ECOLA, minimum wage, 13 th month pay, holiday pay and service incentive leave pay.
Framanlis allege that respondent workers were not regular workers on their hacienda but merely migratory or pakyaw
workers who worked on-and-off and were hired seasonally, or only during the milling season, to do piece-work on the
farms. Hence they claim that they are not entitled to the benefits.
The Minister of Labor ordered Framanlis to pay deficiency payment to female and male workers, ECOLA, service incentive
leave pay, holiday pay and 13th month pay. Upon appeal, the Deputy Minister of Labor modified the order, ordering Framanlis
to pay all non-pakyaw workers their claim for holiday and incentive leave pay, all complainants their 13th month pay,
and all pakyaw workers their pay differentials. The Deputy Minister clarified that pakyaw workers were excluded from
holiday and service incentive leave pay.
Issue: (1) Whether or not pay differentials, holiday, service incentive leave pay are due to the Union members considering they
are mere pakyaw workers
(2) Whether or not Framanlis should pay 13th month pay despite the fact they substantially complied with the requirement by
extending yearly bonuses and other benefits to the workers.
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Held: (1) YES WITH REGARD TO PAY DIFFERENTIALS but not then holiday & SIL pay. It was but proper that
Framanlis be ordered to pay the wage differentials to their pakyaw workers who worked for at least 8 hours daily and earned
less than the minimum wage prevailing at that time.
(2) NO. Under Section 3 of PD 851, the benefits given by Framanlis were not a proper substitute for the 13 th month pay
required by law [benefits given: (1) weekly subsidy of pork meat, (2) free choice pork meat in May and December, and free
light and electricity]. Neither may year-end rewards for loyalty and service be considered in lieu of the 13 th month pay.
70. San Mig v. Inciong (1981)

Facts: On January 3, 1977, Cagayan Coca-Cola Free Workers Union (UNION) filed a complaint against San Miguel
Corporation (SAN MIG) alleging failure or refusal of the latter to include in the computation of 13th-month pay such
items as sick, vacation or maternity leaves, premium for work done on rest days and special holidays, including pay for regular holidays and
night differentials.
On Feb 1977, DOLE Regional Office issued an Order requiring SAN MIG to pay the difference of whatever earnings and the
amount actually received as 13th month pay excluding overtime premium and ECOLA.
SAN MIG appealed to the Minister of Labor who issued an order affirming the prior order and dismissed the petition for
lack of merit. Hence, this petition.
UNION claims said monetary benefits are included in the computation of the 13th month pay. On the other hand, Deputy
Minister Inciong contends that based on past rulings and opinions, in computing the mandatory bonus, the basis is the total
gross basic salary paid by the employer during the calendar year. Such gross basic salary includes: (1) regular salary or wage;
(2) payments for sick, vacation and maternity leaves; (3) premium for work performed on rest days or holidays; (4) holiday pay
for worked or unworked regular holiday; and (5) emergency allowance if given in the form of a wage adjustment.
Issue: Whether or not in the computation of the 13th-month pay, payments for sick, vacation or maternity leaves,
premium for work done on rest days and special holidays, including pay for regular holidays and night differentials should
be considered in computing for the 13th-month pay.
Held: NOT INCLUDED IN THE COMPUTATION. Under PD 851 and its implementing rules, the BASIC SALARY of an
employee is used as the basis in the determination of his 13th-month pay. Basic salary shall include all renumerations
on earnings paid by an employer to an employee for services rendered . Any compensations or remunerations which
are deemed not part of the basic pay is excluded as basis in the computation of the mandatory bonus.
Specifically, the following compensations are deemed not part of basic salary: (1) Cost of living allowances; (2) Profit Sharing
payments; (3) All allowances and monetary benefits which are not considered/integrated as part of the regular basic salary of
the employee.
Under a later set of Supplementary Rules and Regulations Implementing PD 851 issued by the Labor Secretary 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 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,
pays 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.
Moreover, since overtime pay is considered as an additional compensation, it is thus excluded from the definition of
basic salary.
71. Phil. Duplicators v. NLRC (1995)

Facts: PD pays its salesmen a small fixed or guaranteed wage; the greater part of the latters wages or salaries being
composed of the sales or incentive commissions earned on actual sales of duplicating machines closed by them. Thus
the sales commissions received for every duplicating machine sold constituted part of the basic compensation or
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remuneration of the salesmen of the Philippine Duplicators for doing their job. Thus, the LA directed PD to pay 13 th month
pay to employees computed on the basis of their fixed wages plus sales commission
.
Sec. 4 of the Supplementary Rules and Regulations Implementing PD No. 851 (Revised Guidelines Implementing 13 th Month
Pay) provides that overtime pay, earning and other remuneration which are not part of the basic salary shall not be
included in the computation of the 13th month pay.
PD contends that their sales commission should NOT be included in the computation of the 13th month pay invoking
the consolidated cases of Boie-Takeda Chemicals, Inc. vs Hon. Dionisio dela Serna and Philippine Fuji Xerox Corp. vs Hon. Crecencio
Trajano, were the so-called commissions of medical representatives of Boie-Takeda Chemicals and rank-and-file
employees of Fuji Xerox Co. were not included in the term basic salary in computing the 13th month pay.
Issue: Whether sales commissions comprising a pre-determined percent of the selling price of the goods are included in the
computation of the 13th month pay.
Held: YES. These commission which are an integral part of the basic salary structure of the PDs employees-salesmen, are
not overtime payments, nor profit-sharing payments nor any other fringe benefit. Thus, salesmens commissions
comprising a pre-determined percent of the selling price of the goods were properly included in the term basic salary for
purposes of computing the 13th month pay.
(1) Test to determine the nature of additional payments given to employees, and if they should be included in the
computation for 13th month pay:
a. Productivity bonuses: if it is demandable from the employer, it is part of the basic salary. If it is a mere act
of liberality, then it is a bonus per se and should be excluded.
b. Commissions: If they are in the nature of profit sharing payments, they should be excluded.
(2) Medical representatives are not salesmen.
(3) The differences between sales commissions and productivity bonuses
Productivity bonuses:
(1) Productivity bonuses are generally tied to the productivity or profit generation of the employer
corporation.
(2) Productivity bonuses are not directly dependent on the extent an individual employee exerts himself.
(3) A productivity bonus is something extra for which no specific additional services are rendered by any
particular employee and hence not legally demandable, absent a contractual undertaking to pay it.
Sales commissions:
(1) Sales commissions, on the other hand, are intimately related to or directly proportional to the extent or
energy of an employee's endeavors.
(2) Commissions are paid upon the specific results achieved by a salesman-employee.
(3) It is a percentage of the sales closed by a salesman and operates as an integral part of such salesman's basic
pay.
72. Isalama v. NLRC (1995)
Facts: Isalama Machine Works Corporation and Isalama Machine Works Corporation Labor Union-Workers Alliance Trade
Union (UNION) entered into a CBA.
On 21 December 1987, the Isalama paid the workers the 13th month pay based on the average number of days actually
worked during the year. The UNION demanded that the 13th month pay should, instead, be made on the basis of a full
one month basic salary. The corporation countered that its own computation of the 13th month pay accorded with the CBA
provisions and PD No. 851.
The union filed a notice of strike for unfair labor practice and CBA violation by the corporation. The Union insisted that
the failure of the corporation to implement fully the 13th month pay provision of the CBA amounted to an unfair labor
practice. The Isalama argued that the 13th month pay was a mere money claim and therefore not a strikeable issue.
68 Roco 3B
The NLRC promulgated its questioned decision ordering, except for Baygan, the reinstatement, without back salaries, of the
dismissed union members. THE SC issued a temporary restraining order enjoining respondent NLRC from implementing said
decision.
Isalama submits that UNION cannot claim good faith in staging their strike since the attention of both parties had been called
by the conciliator at the hearings before the NCMB to the non-strikeable character of the 13th month pay. UNION
continue to claim, however, that the questioned 13th month pay should be considered a strikeable issue. They have averred
that the illegal work rotation scheme employed by Isalama has pushed them to the honest belief that the latter has, once again,
perpetrated an unfair labor practice.
Issue: Whether the UNION members are entitled to 13t h month pay computed as one month basic salary.
Held: Section 3 of the Omnibus Rules and Regulations Implementing Presidential Decree No. 851 generally states that all
employees shall be entitled to the 13th month pay.
Section 4 provides that employees who are receiving not more than P1,000.00 a month shall enjoy the 13th month
pay regardless of their position, designation or employment status, and irrespective of the method by which their wages are
paid, provided that they have worked for at least one month during the calendar year. If an employee has worked for an
employer for less than a year, he may still be entitled to the full 13th month pay provided his monthly wage is P1,000.00 or less
and he has worked for the employer for at least one month.
The CBA contains a no strike clause: During the term of this Agreement, the Company stipulates and agrees that there
shall be no lockouts, and the Union in turn, as well as its officers and agents, stipulate and agree that there shall be no strike or
will they authorize, instigate or engage in any work stoppage, slowdown or any other form of interruption of work by the
employees and laborers that may hamper or impede the operations 5 of the business of the Company.
The CBA likewise specifies that the company agrees to grant one (1) month basic salary to all employees-workers as
Christmas bonus in compliance with Presidential Decree No. 851 but that a violation thereof will not constitute an unfair
labor practice by an employer.
ART. 248. Unfair labor practices of employers.It shall be unlawful for an employer to commit any of the
following unfair labor practice:
(i) To violate a collective bargaining agreement.
This provision must be read together with Article 261 of the Labor Code
ART. 261. Jurisdiction of Voluntary Arbitrators or panel of Voluntary Arbitrators.The Voluntary Arbitrator
or panel of Voluntary Arbitrators shall have original and exclusive jurisdiction to hear and decide all unresolved
grievances arising from the interpretation or implementation of the Collective Bargaining Agreement and those
arising from the interpretation or enforcement of company personnel policies referred to in the immediately
preceding article. Accordingly, violations of a Collective Bargaining Agreement, except those which are gross in
character, shall no longer be treated as unfair labor practice and shall be resolved as grievances under the
Collective Bargaining Agreement. For purposes of this article, gross violations of Collective Bargaining
Agreement shall mean flagrant and/or malicious refusal to comply with the economic provisions of such
agreement.
Hence, Section 1, Rule XIII, Book V, of the Omnibus Rules Implementing the Labor Code
Section 1. Grounds for strike and lockout.A strike or lockout may be declared in cases of bargaining deadlocks
and unfair labor practices. Violations of collective bargaining agreements, except flagrant and/or malicious
refusal to comply with its economic provisions, shall not be considered unfair labor practice and shall not be
strikeable.
The real reason for the strike is clearly traceable to the unresolved dispute between the parties on 13th month pay
differentials under PD No. 851, i.e., the proper manner of its application and computation. The Court does not see this
issue, given the aforequoted provisions of the law and its implementing rules, to be constitutive of unfair labor practice.
69 Roco 3B
Section 9 of Rules and Regulations Implementing Presidential Decree No. 851 specifically states that (n)onpayment of the
thirteenth- month pay provided by the Decree and (the) rules shall be treated as money claims cases
Private respondents, indeed, showed little prudence, if at all, in their precipitate and ill-considered strike. They violated Art.
264(e) of the Labor Code when they blocked and barricaded the entrance of petitioners premises. Unfortunately for
petitioner, however, the identity of those who committed those illegal acts during the strike, except for Baygan, had not been
adequately established. No sufficient evidence could be found to pin down the afore-named 16 respondents as having
committed illegal acts during the strike,7 that could warrant a loss of their employment status.8 The dismissal of Baygan,
however, was warranted. Being the union president and leader of the strike, his liability was greater than that of mere
members.
Petitioner tells us that it can no longer accept the strikers due to its decision to close down its operations on account of
damages and losses it has incurred because of the strike and that is in fact owned and managed by Golden Engineering.
However this is a question of fact that must be resolved by the NLRC.
The back salaries of the dismissed employees should be limited to three years, without deduction or qualification
73. Petroleum Shipping v. NLRC (2006)

Facts: Esso International Shipping Trans-Global Maritime Agency hired Florello W. Tanchico (Tanchico) as First Assistant
Engineer. After 3 years, he became Chief Engineer. Tanchico returned to the Philippines for a 2-month vacation after
completing his 8 month deployment. Tanchico underwent the required standard medical examination prior to boarding the
vessel.
The medical examination revealed that Tanchico was suffering from Ischemic Heart Disease, Hypertensive Cardio
Muscular Disease and Diabetes Mellitus. Tanchico took medications for 2 months and a subsequent stress test showed a
negative result. However, Esso no longer deployed Tanchico. Instead, Esso offered to pay him benefits under the
Career Employment Incentive Plan. Tanchico accepted the offer.
Tanchico filed a complaint against Esso, Trans-Global and Malayan Insurance before the POEA for illegal dismissal with
claims for backwages, separation pay, disability and medical benefits and 13th month pay.
Issue: (1) Whether Tanchico is a regular employee.

(2) Whether Tanchico is entitled to 13th month pay and disability benefits.
Held: (1) NO. Seafarers are Contractual, not Regular Employees. Their employment is governed by the contracts they sign
every time they are rehired and their employment is terminated when the contract expires.They fall under the exception of
Article 280 whose employment has been fixed for a specific project or undertaking the completion or termination of which
has been determined at the time of 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
(2) NO and YES. On 13th month pay: Because he is not a regular employee, he is not entitled to such. Further, PD 851 does
not apply to seafarers. PD 851 contemplates the situation of land-based workers, and not of seafarers who generally
earn more than domestic land-based workers.
He is governed by his Contract of Enlistment. The coverage of the Contract includes Compensation, Overtime, Sundays and
Holidays, Vacations, Living Allowance, Sickness, Injury and Death, Transportation and Travel Expense, Subsistence and
Living Quarters. It does not provide for the payment of 13th month pay. The Contract of Employment, which is the
standard employment contract of the POEA, likewise does not provide for the payment of 13th month pay.
On Disability benefits: Since Tanchico received compensation during his vacation as provided for in the Contract, the
Contract did not terminate on the day he returned to Manila. The Contract remained in force during Tanchicos vacation
period.
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Indications that Tanchico was suffering from ischemia were detected on 8 December 1992 during Tanchicos vacation
period. Thus, petitioners paid him disability benefits for 18 days in accordance with the Contract.
Tanchico cannot claim that he only acquired the illness during his last deployment since the Medical Report he submitted to
the NLRC showed that he has been hypertensive since 1983 and diabetic since 1987. In the absence of concrete proof that
Tanchico acquired his disability during his last deployment and not during his vacation, he is only entitled to
disability benefits for 18 days.
July 6, 2013
74. GAA v. CA
Facts: Private respondent Europhil Industries Corp. (Europhil) was a tenant in Trinity Building, Manila, administered by
Gaa. Europhil commenced an action against Gaa for cutting off electricity, removing its name from the directory, and
revoking the gate passes of its employees. The CFI awarded damages, which decision became final and executory.
A Notice of Garnishment was sent to El Grande Hotel where Gaa was employed, garnishing her salary, commission, and/or
remuneration. She filed a motion to lift it on the ground that it is exempted under Art. 1708 The laborers wages shall not be
subject to execution or attachment this was denied. The CA dismissed her petition for Certiorari, holding that she is not a mere
laborer, as the term does not apply to managerial or supervisory positions.
Issue: Whether the she was considered a laborer under Art. 1708.
Held: YES. Her property is subject to garnishment. It is beyond dispute that Gaa is not an ordinary or rank and file
laborer but "a responsibly place(d) employee," of El Grande Hotel, "responsible for planning, directing, controlling, and
coordinating the activities of all housekeeping personnel" so as to ensure the cleanliness, maintenance and orderliness of all
guest rooms, function rooms, public areas, and the surroundings of the hotel. Considering the importance of petitioner's
function in El Grande Hotel, it is undeniable that Gaa is occupying a position equivalent to that of a managerial or
supervisory position.
In its broadest sense, the word LABORER includes everyone who performs any kind of mental or physical labor, but
as commonly and customarily used and understood, it only applies to one engaged in some form of manual or physical
labor. That is the sense in which the courts generally apply the term as applied in exemption acts, since persons of that class
usually look to the reward of a day's labor for immediate or present support and so are more in need of the exemption than
are other.
In determining whether a particular laborer or employee is really a "laborer," the character of the word he does must be taken
into consideration. He must be classified not according to the arbitrary designation given to his calling, but with reference to
the character of the service required of him by his employer.
Art 1708 used the word "wages" and not "salary" in relation to "laborer" when it declared what are to be exempted from
attachment and execution. The term "WAGES" as distinguished from "salary", applies to the compensation for
manual labor, skilled or unskilled, paid at stated times, and measured by the day, week, month, or season, while
"SALARY" denotes a higher degree of employment, or a superior grade of services, and implies a position of office:
by contrast, the term wages " indicates considerable pay for a lower and less responsible character of employment, while
"salary" is suggestive of a larger and more important service.
We do not think that the legislature intended the exemption in Article 1708 of the New Civil Code to operate in favor of any
but those who are laboring men or women in the sense that their work is manual. Persons belonging to this class usually look
to the reward of a day's labor for immediate or present support, and such persons are more in need of the exemption than any
others. Petitioner Rosario A. Gaa is definitely not within that class.
75. Milares v. NLRC

Facts: Petitioners numbering 116, occupied the positions of Technical Staff, Unit Manager, Section Manager,
Department Manager, Division Manager and Vice President in the mill site of respondent Paper Industries Corporation of
the Philippines (PICOP) in Surigao del Sur.
71 Roco 3B
In 1992, PICOP suffered a major financial setback and so to avert further losses, it undertook a retrenchment program and
terminated the services of petitioners. Petitioners received separation pay computed at the rate of one (1) month basic pay
for every year of service.
Believing that the allowances they allegedly regularly received on a monthly basis during their employment should
have been included in the computation thereof, petitioners filed a complaint for separation pay differentials. The
allowances in question pertained to the following:
1. Staff/Managers Allowance - Free housing facilities to supervisory and managerial employees
2. Transportation Allowance - for key officers and Managers assigned in the mill site who use their own vehicles in the
performance of their duties
3. Bislig Allowance For Division Managers and corporate officers assigned in Bislig on account of the hostile
environment
Labor Arbiter: Applying Art. 97, par. (f), of the Labor Code which defines wage, the Executive Labor Arbiter opined that
the subject allowances, being customarily furnished by respondent PICOP and regularly received by petitioners, formed part
of the latters wages.
Soriano v. NLRC: In the computation of separation pay, account should be taken not just of the basic salary but also of the
regular allowances that the employee had been receiving.
NLRC did not share the view of the LA, ruling that the allowances did not form part of the salary base used in computing
separation pay. According to the NLRC, the cases relied upon by the LA were inapplicable since they involved illegal dismissal
where separation pay was granted in lieu of reinstatement which was no longer feasible. Relating the present case with Art. 97,
par. (f), of the Labor Code, the NLRC likewise found that petitioners allowances were contingencybased and thus not
included in their salaries. MR was denied hence this petition.
Petitioners submit that their allowances are included in the definition of facilities in Art. 97, par. (f), of the Labor Code,
being necessary and indispensable for their existence and subsistence. Furthermore they claim that their availment of the
monetary equivalent of those facilities on a monthly basis was characterized by permanency, regularity and customariness.
Issue: Whether or not the subject allowances formed part of wages.
Held: NO. In case of retrenchment to prevent losses, Art. 283 of the Labor Code imposes on the employer an obligation to
grant to the affected employees separation pay equivalent to 1 month pay or at least 1/2 month pay for every year of service,
whichever is higher.
What does pay and wage connote?

We correlate Art. 283 with Art. 97 of the same Code on definition of terms.
Pay is not defined therein but wage. In Songco, the Court explained that both words (as well as salary) generally refer to
one and the same meaning, i.e., a reward or recompense for services performed.
Specifically, wage is defined in letter (f) as 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.
Stated differently, when an employer customarily furnishes his employee board, lodging or other facilities, the fair and
reasonable value thereof, as determined by the Secretary of Labor and Employment, is included in wage.
72 Roco 3B
In order to ascertain whether the subject allowances form part of petitioners wages, we divide the discussion on the
following: (1) customarily furnished; (2) board, lodging or other facilities; and (3) fair and reasonable value as
determined by the Secretary of Labor.
(1) Customarily furnished - NO

Customary is founded on longestablished and constant practice connoting regularity. The receipt of an allowance on a
monthly basis does not ipso facto characterize it as regular and forming part of salary because the nature of the grant is a
factor worth considering. We agree with the observation of the Office of the Solicitor General that the subject
allowances were TEMPORARILY, not regularly, received by petitioners because:
a. Housing allowance - once a vacancy occurs in the company-provided housing accommodations, the employee
concerned transfers to the company premises and his housing allowance is discontinued
b. Transportation allowance - is in the form of advances for actual transportation expenses subject to liquidation given
only to employees who have personal cars; in the availment of the transportation allowance, respondent PICOP set
another requirement that the personal cars be used by the employees in the performance of their duties. When the
conditions for availment ceased to exist, the allowance reached the cutoff point.
c. Bislig allowance - given to Division Managers and corporate officers assigned in Bislig, Surigao del Norte. Once the
officer is transferred outside Bislig, the allowance stops.
The finding of the NLRC along the same line likewise merits concurrence, i.e., petitioners continuous enjoyment of the
disputed allowances was based on contingencies the occurrence of which wrote finis to such enjoyment.
(2) Board, lodging or other facilities - NO
Although it is quite easy to comprehend board and lodging, it is not so with facilities. Thus Sec. 5, Rule VII, Book III,
of the Rules Implementing the Labor Code gives meaning to the term as:
Facilities - including articles or services for the benefit of the employee or his family but excluding tools of the
trade or articles or service primarily for the benefit of the employer or necessary to the conduct of the
employers business.
The Staff/Managers allowance may fall under lodging but the transportation and Bislig allowances are not
embraced in facilities on the main consideration that they are granted as well as the Staff/Managers allowance
for respondent PICOPs benefit and convenience , i.e., to insure that petitioners render quality performance.
In determining whether a privilege is a facility, the criterion is not so much its kind but its purpose. That the assailed
allowances were for the benefit and convenience of respondent company was supported by the circumstance that
they were not subjected to withholding tax.
(3) Fair and reasonable value as determined by the Secretary of Labor
The Secretary of Labor and Employment under Sec. 6, Rule VII, Book III, of the Rules Implementing the Labor Code may
from time to time fix in appropriate issuances the fair and reasonable value of board, lodging and other facilities customarily
furnished by an employer to his employees.
Petitioners allowances do not represent such fair and reasonable value as determined by the proper authority simply
because the Staff/Managers allowance and transportation allowance were amounts given by respondent company
in lieu of actual provisions for housing and transportation needs whereas the Bislig allowance was given in
consideration of being assigned to the hostile environment then prevailing in Bislig.
The inevitable conclusion is that, as reached by the NLRC, subject allowances did not form part of petitioners
wages.
73 Roco 3B
As culled from jurisprudence, separation pay when awarded to an illegally dismissed employee in lieu of reinstatement or to a
retrenched employee should be computed based not only on the basic salary but also on the regular allowances that the
employee had been receiving. But in view of the previous discussion that the disputed allowances were not regularly
received by petitioners herein, there was no reason at all for petitioners to resort to such rulings.
Neither is Kneebone applicable, contrary to the finding of the NLRC, because of the difference in factual circumstances. In
Kneebone, the Court was tasked to resolve the issue whether the representation and transportation allowances formed part of
salary as to be considered in the computation of retirement benefits: Ruled in the negative on the main ground that the
retirement plan of the company expressly excluded such allowances from salary.
76. Commando v. NLRC

Facts: Nemesio Decierdo was a security guard of the Commando since February 1981. Petitioner entered into a
contract to provide guarding services to the Alsons Development and Investment Corporation (ALSONS for brevity) at its
Aldevinco Building in Davao City, for a period of one year, unless renewed under such terms and conditions as may be
mutually acceptable. The number of guards to be assigned by the petitioner would depend on ALSONs demand, sometimes
(2) guards on a daily shift, and sometimes (4) guards. Decierdo was one of the guards assigned to the Aldevinco Building by
the petitioner.
Properties Administration Head of ALSONS, requested the petitioner for a periodic reshuffling of guards.
Consequently, petitioner served a recall order on Decierdo., assigning him to the Pacific Oil Company in Bunawan, Davao
City, with instruction to report to the manager, but Decierdo refused to accept the assignment as shown by the
annotation at the bottom of the Order, viz: Refused to accept assignment he is going to rest for a while.
Decierdo filed a complaint for illegal dismissal, unfair labor practice, underpayment of wages, overtime pay, night premium,
13th month pay, holiday pay, rest day pay and incentive leave pay. LA ordered the security agency to pay Decierdo his
salary, holiday and rest day pay differentials, 13th month pay differentials and SIL. LA dismissed complaint for illegal
dismissal, unfair labor practice, overtime pay and night time pay for lack of merit. NLRC affirmed.
Issue/s:
The security agency raise the ff issues
W/N NLRC gravely abused its discretion:
1. in failing to make a clear pronouncement that Decierdo had abandoned his employment as he went on AWOL and
therefore is considered resigned;
2. in denying petitioner due process of law, or a right to be heard;
3. in not considering that Decierdo is in estoppel;
4. in not holding that petitioner is entitled to a 25% share of his monthly salary as agreed between them.
Held: 1) Decierdo had given up his job and chose separation pay in lieu of reinstatement. There was no need for the
LA to fix a period within which to require complainant to report for work considering that the latter is no longer interested in
his job and had claimed for separation benefits in lieu of reinstatement.
LA practically found complainant to have abandoned his job and, besides, complainants claims for separation pay was not
granted. If there was anyone who should have been interested in being recalled to work, it should have been complainant
himself and not the agency. As a result, the NLRC dismissed the charge of illegal dismissal and unfair labor practice against the
petitioner and denied Decierdos claim for separation pay.
2)RE due process: we have time and again pointed out that procedural due process merely requires notice and
opportunity to be heard. Petitioner was properly notified and even took part in the conciliation conference for the
amicable settlement of the case. It was made aware of the nature and specifics of the charges against it but failed to refute
them expecting that a hearing would be called. However, the Labor Arbiter proceeded to decide the case based on the parties
position papers, the records submitted by petitioner, and the report and the computations made by the Corporate Auditing
Examiner regarding the sums which Decierdo was entitled to recover. That procedure complied with the Revised Rules of the
NLRC
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The NLRC correctly held that the Executive Labor Arbiter did not err when she dispensed with a full blown hearing
there being no necessity for one. Under Section 3, the Labor Arbiter may, in his sound discretion, dispense with a hearing and
require, instead, the parties to file their respective position papers together with all the supporting proofs. All that respondent
had to do was present its payrolls and other records which it is required to keep and maintain (see Sec. 6-12, Rule X, Book III
of Omnibus Rules Implementing the Labor Code) and it could already be determined on the face thereof if complainants
monetary claims had actually been paid or not. Complainants entitlements were computed by the Corporate Auditing
Examiner don the basis of respondents records which was secured by virtue of a subpoena duces tecum. The agency should
have met head-on the accuracy of correctness of the computations and not skirt the issue by dwelling merely on technicalities
by complaining that the records were irregularly procured.
3) Petitioners contention that Decierdo is estopped from complaining about the 25% deduction from his salary representing
petitioners share in procuring job placement for him, is not well taken.
That provision of the employment contract was illegal and iniquitous, hence, null and void. The constitutional provisions on
social justice (Sections 9 and 10, Article II) and protection to labor (Sec. 18, Article II) in the declaration of Principles and
State Policies, impose upon the courts the duty to be ever vigilant in protecting the rights of workers who are placed in a
contractually disadvantaged position and who sign waivers or provisions contrary to law and public policy (Mercury Drug Co.
Inc. vs. Dayao, 117 SCRA 99, 116). Respondent may not deduct its so-called share from the salaries of its guards without the
latters express consent and if such deductions are not allowed by law. This is notwithstanding any previous agreement or
understanding between them. Any such agreement or contract is void ab initio being contrary to law and public policy
77. Apodaca v. NLRC

Facts: Petitioner was employed in Intrans Phil Inc. (private respondent). Respondent Mirasol persuaded petitioner to
subscribe 1,500 shares of respondent corporation at P100.00 per share or a total of P150,000.00. Petitioner made an initial
payment of P37,500.00. Petitioner was appointed President and GM of the corporation but eventually resigned one year
after.
Petitioner thereafter instituted a complaint with the NLRC against private respondents for payment of unpaid wages,
COLA, gasoline and representation expenses and bonus compensation. Respondents countered that while there is around
P17,060.07 due to petitioner, the same was applied to the unpaid balance of his subscription. Petitioner questioned the
set-off alleging that there was no call or notice for the payment of the unpaid subscription and that, accordingly, the alleged
obligation is not enforceable.
The LA sustained the claim of petitioner for P17,060.07 on the ground that the employer has no right to withhold payment of
wages already earned under Article 103 of the Labor Code. The NLRC reversed, holding that a stockholder who fails to pay
his unpaid subscription on call becomes a debtor of the corporation and that the set-off of said obligation against the wages
and other amounts due petitioner is valid.
Issue: Whether or not the payment due petitioner may be used to set-off unpaid subscription.
Held: NO. Firstly, the NLRC has no jurisdiction to decide such intra-corporate dispute. The same falls under the
jurisdiction of the SEC.
Secondly, there was no call for the payment of the unpaid subscriptions. Private respondents have not presented a
resolution of the board of directors of respondent corporation calling for the payment of unpaid subscriptions.
What the records show is that the respondent corporation deducted the amount due to petitioner from the amount
receivable from him for the unpaid subscriptions. No doubt such set-off was without lawful basis, if not premature. As
there was no notice or call for the payment of unpaid subscriptions, the same is not yet due and payable.
Lastly, assuming further that there was a call for payment of the unpaid subscription , the NLRC cannot validly set it
off against the wages and other benefits due petitioner. Article 113 of the Labor Code allows such a deduction from the
wages of the employees by the employer, ONLY IN 3 INSTANCES, to wit:
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(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 checkoff 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.
78. American Wire Union v. American Wire (2005)

Facts: AW is engaged in the manufacture of wires and cables. It has 2 unions representing its Monthly and Daily rated
employees. On Feb 2001, an action was filed in the DOLE by the 2 unions for voluntary arbitration. They allege that AW,
without valid cause, suddenly and unilaterally withdrew and denied benefits and entitlements which they have long
enjoyed (ie. Service Award, 35% Premium Pay, Christmas Pay, and Promotional Increase). On Sep 2001, the Arbitrator ruled
for AW. Daily Union appealed before the CA. On March 2002, CA affirmed. Hence, this petition
Union submits that the withdrawal by AW of the 35% premium pay for selected days during the Holy Week and Christmas
season, the holding of the Christmas Party and its incidental benefits, and the giving of service awards violated Article 100 of
the Labor Code. The grant of these benefits was a customary practice that can no longer be unilaterally withdrawn by
AW without the tacit consent of the Union.
In reply, the AW avers that the grant of all subject benefits has not ripened into practice that the employees concerned
can claim a demandable right over them. The grant of these benefits was conditional based upon the financial performance of
the company and that conditions/circumstances that existed before have indeed substantially changed thereby justifying the
discontinuance of said grants.
Issue: Whether or not AW is guilty of violating Article 100 of the Labor Code, as amended, when the benefits/entitlements
given to the members of Daily Union were withdrawn.
Held: NO. It is critical that a determination must be first made on whether the benefits or entitlements are in the nature
of a bonus or not, and assuming they are so, whether they are demandable and enforceable obligations.
A BONUS is an amount 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. It is an act of generosity granted by an
enlightened employer to spur the employee to greater efforts for the success of the business and realization of bigger profits.
The granting of a bonus is a management prerogative, something given in addition to what is ordinarily received by or
strictly due the recipient. Thus, a bonus is not a demandable and enforceable obligation, except when it is made part of
the wage, salary or compensation of the employee .
Based on the foregoing, it is obvious that the benefits/entitlements subjects of the instant case are all bonuses which
were given by the AW out of its generosity and munificence. The additional 35% premium pay for work done during selected
days of the Holy Week and Christmas season, the holding of Christmas parties with raffle, and the cash incentives given
together with the service awards are all in excess of what the law requires each employer to give its employees. Since
they are above what is strictly due to the members of the Union, the granting of the same was a management
prerogative, which, whenever management sees necessary, may be withdrawn, unless they have been made a part of the wage
or salary or compensation of the employees.
The consequential question therefore that needs to be settled is if the subject benefits/entitlements, which are bonuses, are
demandable or not. Stated another way, can these bonuses be considered part of the wage or salary or compensation
making them enforceable obligations?
For a bonus to be enforceable, it must have been promised by the employer and expressly agreed upon by the parties,
or it must have had a fixed amount and had been a long and regular practice on the part of the employer.
The benefits/entitlements in question were never subjects of any express agreement between the parties. They were
never incorporated in the CBA. As observed by the Arbitrator, the records reveal that these benefits/entitlements have not
76 Roco 3B
been subjects of any express agreement between the union and the company, and have not yet been incorporated in the CBA.
In fact, the petitioner has not denied having made proposals with the AW for the service award and the additional 35%
premium pay to be made part of the CBA.
Anent the Christmas party and raffle of prizes, they were merely sponsored by the AW out of generosity and that the same
is dependent on the financial performance of the company for a particular year.
However, the additional 35% premium pay for work rendered during selected days of the Holy Week and Christmas season
cannot be held to have ripened into a company practice that the Union have a right to demand. Aside from the
general averment of the Union that this benefit had been granted by the AW since time immemorial, there had been no evidence
adduced that it had been a regular practice.
To hold that an employer should be forced to distribute bonuses which it granted out of kindness is to penalize him for his
past generosity.
79. Eastern Telecoms v. Eastern Telecoms Union (2012)

Facts: Eastern Telecoms Phils Inc. (ETPI) is engaged in the business of providing telecom facilities employing approximately
400 employees. Eastern Telecoms Employees Union (UNION) is the bargaining agent of ETPIs rank and file employees and
has an existing CBA with the company. Said CBA provides that ETPI confirms that the 14th, 15th, and 16th month
bonuses (other than 13t h month pay) are granted.
The labor dispute was a spin-off of the companys plan to defer payment of said monthly bonuses. ETPI bases its
postponement on the alleged continuing deterioration of the companys financial position. As such, the Union invoked the
CBA and filed a complaint with the conciliation board to determine the date when the bonus should be paid.
In the NCMB, the parties agreed that the payment o the bonuses would only be made in April. However, the President of the
company changed its position in paying the bonuses, stating that until the matter is resolved in a compulsory arbitration,
the company will not pay any bonuses to the union members.
Union filed a Notice to Strike based on ULP for failure to pay bonuses as stated in the CBA.
In its defense, ETPI claims that said bonuses were not legally demandable wage and the grant 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 also contends that its giving of bonuses did not ripen into a company practice since it had always
been a contingent one dependent on the realization of profits.
NLRC dismissed the Unions complaint. CA reversed.
Issue: Whether or not ETPI is liable to pay said bonuses.
Held: LIABLE. A bonus becomes a demandable or enforceable obligation when it is made part of the wage or salary
or compensation of the employee. This is the exception from the general principles that 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.
The grant of a bonus is 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 salary or wages.
In this case, it is indubitable that ETPI and Union agreed on the inclusion of said provision in the CBA without
qualification. It does not state that if the company derives no profits, no bonuses are to be given to the employees. The grant
of said bonuses has become more than just an act of generosity on the part of ETPI but a contractual obligation
which is not merely based on management prerogative.
ETPIs act of granting said bonuses 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
77 Roco 3B
been the companys long and regular practice. To be considered regular practice 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 records show
that ETPI has been giving said bonuses without fail from 1975 to 2002 or for 27 years.
The giving of the subject bonuses cannot be peremptorily withdrawn by ETPI without violating Art 100 on diminution of
benefits.
80. Honda Phils v. Samahan (2005)

Facts: The CBA between Honda and the Union provides that Honda shall maintain the present practice in the implementation
of the 13th Month Pay. Also, Honda shall grant a 14th Month Pay, computed on the same basis as 13th Month Pay. Also,
Honda agrees to continue the practice of granting, in its discretion, financial assistance to covered
employees in December, of not less that 100% of basic pay. This CBA would be effective until the year 2000.
In the latter part of 1998, the parties started re-negotiations. The talks bogged down. As such, Union filed a Notice of Strike
on the ground of Bargaining Deadlock. Honda then filed a Notice of Lockout. DOLE Secretary Laguesma assumed
jurisdiction and ordered the parties to cease and desist from committing acts that would aggravate the situation, and both
parties complied.
On May 11, 1999, the union filed a 2nd notice of strike on the ground of unfair labor practice. They alleged that Honda
illegally contracted out work to the detriment of the workers. They went on strike, and picketed the premises of Honda on
May 19, 1999. Thereafter, Acting Secretary Joson assumed jurisdiction and certified the same to the NLRC for compulsory
arbitration.
The striking employees were ordered to return to work. Honda accepted them under the same terms prior to the strike
stages. Thereafter, Honda issued a memorandum announcing the new computation of the 13th and 14th month pay.
The 31 day long strike would be considered unworked days for the computing of said benefits. Thus, the amount
equivalent to 1/12 of the basic salary be deducted from the bonuses. With a commitment that if the strike is declared legal,
Honda would pay it back. Union opposed the pro-rated computation. Honda brought this case to the Bureau of Working
Conditions, LA, and the CA.
BWC sided with Honda. LA and CA did not. Hence, this petition.
Issue: Whether or not the pro-rated computation of the 13th month pay and other bonuses was valid No.
Held: NO. A CBA is the negotiated contract between employer and employee concerning wages, hours of work, etc.
As in all contracts, the parties may stipulate things as long as they are not contrary to law, etc. When the CBA is
unambiguous, it becomes the law between the parties. Sometimes, the provisions of the CBA are contentious like in this
case.
Honda wanted to implement a pro-rated computation of the benefits based on the no work, no pay rule. According
to them the present practice referred to in the CBA provisions above refers to the manner and requisites with respect to the
payment of the bonuses 50% in May, rest in December. Union says that these provisions relate to the computations thereof.
Court agrees with the findings of the arbitrator that the CBA provisions arent clear. There is no categorical statement
saying whether or not the basis for the bonuses would be based on (a) One full month basic salary; or (b) Pro-rated
based on compensation actually received.
The arbitrator properly resolved the ambiguity in favor of labor, as mandated by Art. 1702 of the NCC. The CA affirmed
this, adding that the computation should be based on length of service and not actual wage.
PD 851, the 13th Month Pay Law, was issued to protect the level of real wages from the Ravages of Worldwide Inflation.
Under the Guidelines for implementation, the minimum 13 th month pay required shall not be less than 1/12 of the total
basic salary earned by an employee within a calendar year.
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Basic salary: all remunerations or earnings paid by employer for services rendered excluding allowances not considered or integrated
as part of regular/basic salary.
SC has interpreted basic salary to mean not the amount actually received, but 1/12 of the monthly wage multiplied by
length of service within a given calendar year. Thus, we exclude payments for sick, vacation, and maternity leaves as well
as premiums for work done, night differentials, etc.
The revised guidelines also provide for a pro-ration only in cases of resignation or separation from work. In these cases,
the employee is entitled to pay in proportion to the length of time he worked. Thus, in this case, as the CA held, there
was no gap in the service of the workers during the calendar year in question thus, the 13th month pay should not be pro-
rated.
Also, before the instant case, Honda never pro-rated. Honda accepted that it was the strike that prompted them to
adopt this pro-rate computation. This is an implicit acceptance that prior to the strike, the full month basic pay
compensation (no pro-rating) was the present practice intended to be maintained by the CBA. As a result, a voluntary act
of the employer may ripen into a company practice. The same is in this case the grant of the benefits has ripened into
company practice or policy which cannot be peremptorily withdrawn. This also constitutes voluntary employer practice which
cannot be unilaterally withdrawn without violating Art. 100 of the Labor Code.
81. Nasipit Lumber v. NWPC

Facts: Region X Tripartite Wages and Productivity Board (RTWPB) issued Guidelines No. 3 for purposes of setting its own
criteria for determining the distressed firm to be exempted from implementing Wage Orders Nos. RX-01 and RX-01-
A. Pursuant thereto, petitioners Nasipit Lumber Co, Inc. (NALCO) and Philippine Wallboard Corp. (PWC), together with
Anakan Lumber Co. (ALCO), claiming to be distressed establishments jointly filed an application for exemption.
The RTWPB then approved the said application by citing that the applicants were suffering liquidity problems and there
was a business decline in the wood-processing industry over which application have very little control. On appeal, the National
Wages and Productivity Commission (NPWC) affirmed ALCO's application but reversed the applications of herein
petitioners NALCO and PWC on the ground that Guidelines No. 3 cannot be used as valid basis for granting
applicants/appellees application for exemption since it did not pass the approval of the Commission and it is only ALCO
which met the criterion set by the NPWC wherein it suffered an accumulated losses of 25% on the last full accounting period
preceding the application for exemption.
Issue: Whether or not a guideline issued by an RTWPB without the approval of or, worse, contrary to the guidelines
promulgated by the NWPC valid.
Held: NO. The Labor Code, as amended by RA 6727 (the Wage Rationalization Act), grants the National Wages and
Productivity Commission (NWPC) the power to prescribe rules and guidelines for the determination of appropriate wages in
the country. Hence, guidelines issued by the Regional Tripartite Wages and Productivity Boards (RTWPB) without the
approval of or, worse, contrary to those promulgated by the NWPC are ineffectual, void and cannot be the source of rights
and privileges.
The Insertion in Guideline No. 3 of Distressed Industry as a Criterion for Exemption Void. The law does not automatically
grant exemption to all establishments belonging to an industry which is deemed distressed. Hence, RX-01, Section 3 (4),
must not be construed to automatically include all establishments belonging to a distressed industry. The fact that the wording
of a wage order may contain some ambiguity would not help petitioners.
Basic is the rule in statutory construction that all doubts in the implementation and the interpretation of the provisions of the
Labor Code, as well as its implementing rules and regulations, must be resolved in favor of labor.
By exempting all establishments belonging to a distressed industry, Guideline No. 3 surreptitiously and irregularly takes away
the mandated increase in the minimum wage awarded to the affected workers. In so acting, the RTWPB proceeded against the
declared policy of the State, enshrined in the enabling act, to rationalize the fixing of minimum wages and to promote
79 Roco 3B
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; Thus, Guideline No. 3 is void not only because it
lacks NWPC approval and contains an arbitrarily inserted exemption, but also because it is inconsistent with the avowed State
policies protective of labor.
82. Metrobank v. NLRC

Facts: Metropolitan Bank (Bank) and MBTCEU entered into a CBA which granted a P900 increase to regular employees
as of Jan. 1, 1989 (Note that this effectively created a intentional quantitative difference in wage between those who WERE
regular employees as of January 1, 1989 and those who WERE NOT as of that date ).
With the passing of RA 6727, an increase of P25 per day was granted to employees in the private sector. The law
however provides that should a wage distortion happen (meaning: there is severe contradiction of intentional quantitative
differences in wage or salary rates between and among employee groups in an establishment ), such shall be resolved
by the NLRC.
MBTCEU complained that there is a reduction in salary gap resulting to a distortion and contended also that the regular
employees be granted the same P25 per day increase. The LA ruled that there is indeed a distortion and an across the board
increase must be implemented. NLRC reversed. Presiding Commissioner Perez dissented and said that, there was a
distortion but instead of an across the board increase, she recommends correction of distortion through a formula.
Issue: Whether the implementation of the law resulted in a wage distortion that would require an adjustment under the law in
the wages of Metrobanks other groups of employees.
Held: YES. The term "wage distortion", under the Rules Implementing Republic Act 6727, is defined, thus:
(p) Wage Distortion means a situation where an increase in prescribed wage rates results in the elimination or severe
contradiction 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.
Here, the majority of the members of the NLRC, as well as its dissenting member, agree that there is a wage distortion
arising from the bank's implementation of the P25 wage increase; they do differ, however, on the extent of the
distortion that can warrant the adoption of corrective measures required by law.
The definition of "wage distortion," aforequoted, shows that such distortion can so exist when, as a result of an increase in
the prescribed wage rate, an "elimination or severe contraction of intentional quantitative differences in wage or salary
rates" would occur "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."
In mandating an adjustment, the law did not require that there be an elimination or total abrogation of quantitative
wage or salary differences; a severe contraction thereof is enough. As has been aptly observed by Presiding Commissioner
Edna Bonto-Perez in her dissenting opinion, the contraction between personnel groupings comes close to 83%, which
cannot, by any stretch of imagination, be considered less than severe.
The "INTENTIONAL QUANTITATIVE DIFFERENCES" in wage among employees of the bank has been set by the CBA to
about P900 per month as of 01 January 1989. It is intentional as it has been arrived at through the collective bargaining
process to which the parties are thereby concluded. The Solicitor General, in recommending the grant of due course to the
petition, has correctly emphasized that the intention of the parties, whether the benefits under a collective bargaining
agreement should be equated with those granted by law or not, unless there are compelling reasons otherwise, must
prevail and be given effect.
In keeping then with the intendment of the law and the agreement of the parties themselves, along with the often repeated
rule that all doubts in the interpretation and implementation of labor laws should be resolved in favor of labor, we must
80 Roco 3B
approximate an acceptable quantitative difference between and among the CBA agreed work levels. We, however, do not
subscribe to the labor arbiter's exacting prescription in correcting the wage distortion. Like the majority of the members of the
NLRC, we are also of the view that giving the employees an across-the-board increase of P750 may not be conducive
to the policy of encouraging "employers to grant wage and allowance increases to their employees higher than the
minimum rates of increases prescribed by statute or administrative regulation," particularly in this case where both
Republic Act 6727 and the CBA allow a credit for voluntary compliance.
(T)o compel employers simply to add on 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. . . .
We find the formula suggested then by Commissioner Bonto-Perez, which has also been the standard considered by the
regional Tripartite Wages and Productivity Commission for the correction of pay scale structures in cases of wage distortion,
to well be the appropriate measure to balance the respective contentions of the parties in this instance. We also view it
as being just and equitable.
Hence, the FORMULA offered and incorporated in Wage Order No. IV-02 issued on 21 May 1991 by the Regional Tripartite
Wages and Productivity Commission for correction of pay scale structures in case of wage distortion as in the case at bar
which is:
Minimum Wage = % x Prescribed = Distortion
Increased Adjustment
Actual Salary
83. PI Manufacturing v. PI Manufacturing Supervisors Association

Facts: P.I. Manufacturing is a domestic corporation engaged in the manufacture and sale of household applicances. P.I.
Manufacturing Supervisors and Foremen Association (UNION) is a union of PIMs foremen and supervisors. They are joined
by NLU.
On December 10, 1987, the President signed into law RA 6640 providing an increase in the statutory minimum wage and
salary rates of employees and workers in the private sector. Minimum wage increased by 10 pesos per day. Also, those
that are already receiving salary above the minimum wage, but is equal to or less than 100 pesos per day, shall
receive an increase of 10 pesos per day.
Thereafter, on December 18, 1987, PIM and UNION entered into a new CBA (1987 CBA) whereby the supervisors were
granted an increase of P625.00 per month and the foremen, P475.00 per month. The increases were made retroactive to
May 12, 1987
UNION filed with the NLRC a complaint, charging petitioner with violation of RA 6640 attached to their complaint a
numerical illustration of WAGE DISTORTION that happened in their company.
LA sided with the workers. To address the wage distortion, the LA ordered the company to give their workers an increase
equivalent to 13.5% of their basic salary. They argued that the percentage in increase given those who received benefits
under R.A. 6640 should be the same percentage given to the supervisors and foremen. The statutory minimum pay then was
P54.00 a day. With the addition of P10.00 a day, the said minimum pay raised to P64.00 a day. The increase of P10.00 a day is
13.5% of the minimum wage prior to December 14.
Basically, WHAT THE LABOR ARBITER IS SAYING is if you increase the salary of A, B, and C from 99 pesos to 109, you should also
increase the salary of D and E in proportion to the increase given to A, B, and C. LA
but modified 13.5% to 18.5% (Onga naman, 54 x 118.5% = 64, di ko alam san nakuha ng Labor Arbiter yung 13.5%)
81 Roco 3B
PIM argues that the 1987 CBA has obliterated any possible wage distortion because the increase
granted to the members of the UNION in the amount of P625.00 and P475.00 per month substantially widened the gap
between the foremen and supervisors and as against the rank and file employees.
Issue: Whether the 1987 CBA corrected the wage distortion.
Held: YES. WAGE DISTORTION means the disappearance or virtual disappearance of pay differentials between lower
and higher positions in an enterprise because of compliance with a wage order.
It is undeniable that the increase in the wage rates by virtue of R.A. No. 6640 resulted in wage distortion or the elimination
of the intentional quantitative differences in the wage rates of the above employees. Notably, the implementation of
R.A. No. 6640 resulted in the increase of P10.00 in the wage rates of certain foremen and of Alcantara, supervisor, and
Morales and Salvo, both foremen. They are petitioners lowest paid supervisor and foremen. As a consequence, the
increased wage rates of foremen Morales and Salvo exceeded that of supervisor Buencuchillo. Also, the increased wage
rate of supervisor Alcantara exceeded those of supervisors Buencuchillo and Del Prado.
Also, the 1987 CBA increased the monthly salaries of the supervisors by P625.00 and the foremen, by P475.00, effective May
12, 1987. These increases re-established and broadened the gap, not only between the supervisors and the foremen,
but also between them and the rank-and-file employees. Significantly, the 1987 CBA wage increases almost doubled
that of the P10.00 increase under R.A. No. 6640. The P625.00/month means P24.03 increase per day for the supervisors,
while the P475.00/month means P18.26 increase per day for the foremen. Such gap as re-established by virtue of the CBA is
more than a substantial compliance with R.A. No. 6640.
Capitol Wireless, Inc. v. Bate: The provisions of the CBA should be read in harmony with the wage orders, whose benefits should
be given only to those employees covered thereby.
Requiring PIM to pay all the members of the UNION a wage increase of 18.5%, over and above the negotiated wage
increases provided under the 1987 CBA, is highly unfair and oppressive to the former. Obviously, it was not the
intention of R.A. No. 6640 to grant an across-the-board increase in pay to all the employees of PIM.
Section 2 of R.A. No. 6640 mandates only the following increases in the private sector: (1) P10.00 per day for the
employees in the private sector (2) P11.00 per day for non-agricultural workers and employees outside Metro Manila
(3) P10.00 per day for those already receiving the minimum wage up to P100.00.
To be sure, only those receiving wages P100.00 and below are entitled to the P10.00 wage increase. The apparent
intention of the law is only to upgrade the salaries or wages of the employees specified therein. In the case at bar, all
of the members of the UNION have been receiving wage rates above P100.00 and, therefore, not entitled to the
P10.00 increase. Only three (3) of them are receiving wage rates below P100.00, thus, entitled to such increase. Now, to direct
petitioner to grant an across-the-board increase to all of them, regardless of the amount of wages they are already receiving,
would be harsh and unfair to the former.
To compel employers simply to add on legislative 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 statutory prescribed minimum rates of increases.
Clearly, this would be counterproductive so far as securing the interests of labor is concerned.
CBA constitutes the law between the parties when freely and voluntarily entered into. Here, it has not been shown that the
UNION was coerced or forced by PIM to sign the 1987 CBA. UNION cannot invoke the beneficial provisions of the 1987
CBA but disregard the concessions it voluntary extended to PIM.
84. Prubankers Association v. Prubankers

Facts: Wage Order No. RB 05-03 provided for a COLA to workers in the private sector who had rendered service for at
least 3 months before its effectivity, and for the same period thereafter, in the following categories: (P17.50) in the cities of
Naga and Legaspi; (P15.50) in the municipalities of Tabaco, Daraga, Pili and the city of Iriga; and (P10.00) for all other areas in
the Bicol Region.
82 Roco 3B
Subsequently, 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, was issued. It also established an increase in the minimum wage
rates for all workers and employees in the private sector as follows: by (P10.00) in the cities of Cebu, Mandaue and
Lapulapu; (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 bank 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.
Prubankers Association wrote the bank 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. The Association then demanded in the Labor Management Committee meetings that the bank 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 banks employees nationwide.
Issue: Whether there was a wage distortion due to the regional implementation of Wage Orders. (FORUM SHOPPING
ISSUE OMITTED)
Held: NO. 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 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.
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; and
(4) The existence of the distortion in the same region of the country.
It is clear that NO wage distortion resulted when bank 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. The hierarchy of positions based on skills,
length of service and other logical bases of differentiation was preserved. Quantitative difference in compensation
between different pay classes remained the same in all branches in the affected region.
A disparity in wages between employees holding similar positions but in different regions does not constitute wage
distortion as contemplated by law. 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. 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.
A disparity in wages between employees with similar positions in different regions is necessarily expected. Varying
in each region of the country are controlling factors such as the cost of living; supply and demand of basic goods,
83 Roco 3B
services and necessities; and the purchasing power of the peso. 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 UNION
herein bewails is precisely what the law provides in order to achieve its purpose.
Uniform national wage structure is antithetical to the purpose of RA 6727, which 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. 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. 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.
85. Bankard Employees v. NLRC

Facts: Bankard, Inc. classifies its employees by rank/levels. The board of directors approved a NEW SALARY SCALE 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. Bankard Employees Union is claiming that there should also be an increase in the salaries of
its old, regular employees.
Bankards refusal caused UNION to file Notices of Strike on the ground of discrimination and other acts of Unfair Labor
Practice. NLRC, finding no wage distortion, dismissed the case for lack of merit. MR was denied.
Issue: Whether or not 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.
Held: NO. UNION maintains that for purposes of wage distortion, the classification is not one based on levels or ranks
but on 2 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. This however is wrong.
There are 4 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.
The employees of bank 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 places them under any of the levels mentioned
in the new salary scale which private respondent adopted retroactive [to] April 1, 1993. UNION cannot make a contrary
classification of banks employees without encroaching upon recognized management prerogative of formulating a wage
structure, in this case, one based on LEVEL not seniority
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 is wanting. 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.The formulation of a wage
structure through the classification of employees is a matter of MANAGEMENT JUDGMENT & DISCRETION.
Even assuming that there is a decrease in the wage gap between the pay of the old employees and the newly hired employees,
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.
UNION 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.
.
84 Roco 3B
86. Ilaw at Buklod v. NLRC (1991)

Facts: Upon effectivity of the Wage Rationalization Act (RA 6727), the union Ilaw at Buklod (IBM), presented to San Miguel
Corp (SMC) a demand for correction of the significant distortion in the workers wages.
In said demand, IBM explicitly invoked 4 (d) of RA 6727 which reads: Where the application of the increases in the wage rates results
in distortions in the wage structure within an establishment and gives rise to a dispute therein, such dispute shall first be settled
voluntarily between the parties and in the event of a deadlock, the same shall be finally resolved through compulsory
arbitration by the regional branches of the NLRC having jurisdiction over the workplace. It shall be mandatory for the
NLRC to conduct continuous hearings and decide any dispute arising under this Section within 20 calendar days from
the time said dispute is formally submitted to it for arbitration. The pendency of a dispute arising from a wage distortion shall
not in any way delay the applicability of the increase in wage rates.
As such, SMC offered an across-the-board wage increase of P7/day per employee as against IBMs proposal of P25/day
per employee. However, this did not satisfy IMB. Consequently, the workers refused to work beyond 8 hours every day to
compel SMC to correct the said distortion. This caused substantial losses to SMC.
Thereafter, SMC filed a complaint against IBM to declare its strike as illegal and to terminate employment of the members
thereof. NLRC issued a resolution in favor of SMC and ordered IBM to cease and desist. IBM appealed.
In its defense, SMC submits that the strike staged by IBM in order to compel SMC to yield to its demand for the correction
of wage distortions is illegal and an unprotected activity. SMC argues that it is contrary to law and to their CBA.
Issue: Whether IBM can compel SMC to correct wage distortions by means of a strike.
Held: NO. Among the rights guaranteed to employees by the Labor Code is that of engaging in concerted activities (ie. Strike,
picketing, boycott) in order to attain their legitimate objectives.
It goes without saying that these joint or coordinated activities may be forbidden or restricted by law or contract. In the
particular instance of distortions of the wage structure within an establishment resulting from the application of any
prescribed wage increase by virtue of a law or wage order, prescribes a specific, detailed and comprehensive procedure for the
correction thereof, thereby implicitly excluding strikes or lockouts or other concerted activities as modes of settlement of the
issue.
The legislative intent of RA 6727 is that the solution of the problem of wage distortions shall be sought by voluntary
negotiation or arbitration, and not by strikes, lockouts, or other concerted activities of the employees or management, is
made clear in the rules implementing RA 6727. Section 16, Chapter I of these implementing rules, after reiterating the policy
that wage distortions be first settled voluntarily by the parties and eventually by compulsory arbitration, declares that,
any issue involving wage distortion shall not be a ground for a strike/lockout.
Moreover, the CBA between SMC and IBM also prescribes a similar avoidance of strikes or other concerted activities as a
mode of resolving disputes.
IBM was thus prohibited to declare and hold a strike or otherwise engage in non-peaceful concerted activities for the
settlement of its controversy with SMC in respect of wage distortions, or for that matter; any other issue involving or
relating to wages, hours of work, conditions of employment and/ or employer-employee relations.
The partial strike or concerted refusal by the IBM members to follow the work schedule which they had therefore been
observing, resorted to as a means of coercing correction of wage distortions, was therefore forbidden by law and contract
and, on this account, illegal.
87. Lingkod ng Manggagawa v. Rubberworlds

Facts: Lingkod Manggagawa sa Rubberworld (Lingkod) is a legitimate labor union whose members were employees of
Rubberworld Philippines, Inc.(Rubberworld, for short).
85 Roco 3B
Rubberworld filed with the DOLE a Notice of Temporary Partial Shutdown due to severe financial crisis, therein
announcing the formal actual company shutdown. A copy of said notice was served on the recognized labor union of
Rubberworld, the Bisig Pagkakaisa-NAFLU. The latter staged a strike. It set up a picket line in front of the premises of
Rubberworld and even welded its gate. As a result, Rubberworld's premises closed prematurely even before the date set
for the start of its temporary partial shutdown.
Lingkod filed a complaint against Rubberworld, for unfair labor practice (ULP), illegal shutdown, and non-payment
of salaries and separation pay. Lingkod claimed that the strike staged was company-instigated/supported. Rubberworld
filed with the SEC a Petition for Declaration of a State of Suspension of Payments with Proposed Rehabilitation
Plan. (while there was a pending case before the Labor Arbiter). SEC granted the petition and issued Suspension Order (1994).
LA Dinopol went ahead with the case: LA ordered inspection of Rubberworld to conduct an investigation to quantify the
backwages and separation pay. (remember these things happened around 1995-1996, mostly 1996). Mr. Ricardo Atienza of the
Research and Information Unit of this Commission is hereby directed to proceed to the office of Rubberworld whose
responsible officers are ordered to allow Mr. Atienza or his representative access to such records as may be necessary and
render a report thereon within 30 days from his receipt of this Decision.
Ricardo Atienza came out with the total amount of P27,506,255.70. LA further ruled that Rubberworld needs to post a bond
in order to appeal or seek remedies. (remember these things happened around 1995-1996, mostly 1996).
Rubberworld went on appeal to the NLRC, posting therefor a temporary appeal bond in the amount of P500,000.00. Appeal
bond was eventually raised to an upgraded version of P27,506,255.70 based on the computation of Mr. Atienza. Because of
failure of Rubberworld to post the appeal bond, its claims were dismissed before the CA.
SEC issued an Order (April 2008) declaring Rubberworld as dissolved. On February 8, 1999, Rubberworld filed with the
Court a Motion to Admit its Amended Petition for Certiorari alleging therein that pursuant to the SEC Order Labor Arbiter
should have been suspended. Hence, since the Labor Arbiter disregarded the SECs suspension order, the subsequent
proceedings before it were null and void.
Issue: (1) Whether the LA and NLRC had jurisdiction.

(2) Whether the decision of LA and NLRC are valid.
Held: NO JURISDICTION. The decisions rendered by NLRC never attained final and executory status. The LA
completely disregarded and violated Section 6(c) of Presidential Decree 902-A, as amended, which categorically mandates
the suspension of all actions for claims against a corporation placed under a management committee by the SEC .
Thus, the proceedings before the LA and the order and writ subsequently issued by the NLRC are all null and void for
having been undertaken or issued in violation of the SEC suspension Order. The Labor Arbiter's decision in this case is
void ab initio, and therefore, non-existent. A void judgment is in effect no judgment at all.
No rights are divested by it nor obtained from it.
Regarding the bond (its relation to the money claims by the laborers) Remember, the appeal of Rubberworld was dismissed
because of its failure to post the bond which was computed based on the findings of the backwages entitled the employees.
A bond is only mandatory from an appeal of the decision itself on the merits of the laborers' money claims to ensure
payment thereof. Had the Labor Arbiter taken heed of Rubberworlds motion to suspend proceedings when that motion was
filed, and ruled upon it separately, no bond would have been required for a review of his resolution thereon. As it were, the
Labor Arbiter chose to continue to decide the main case, then to incorporate in his decision the denial of Rubberworlds
motion to suspend proceedings, thereby effectively requiring a bond on a question which would not have ordinarily required
one.
The power of SEC based on P.D. No. 902-A that upon appointment of a management committee, the rehabilitation
receiver, board or body, pursuant to this Decree, all actions for claims against corporations, partnerships, or
associations under management or receivership pending before any court, tribunal, board or body shall be
suspended accordingly. It is plain from the foregoing provisions of the law that "upon the appointment [by the SEC] of a
86 Roco 3B
management committee or a rehabilitation receiver," all actions for claims against the corporation pending before any court,
tribunal or board shall ipso jure be suspended.
The power of the NLRC to hear cases under Article 217 of the Labor Code should be construed not in isolation but in
harmony with PD 902-A, according to the basic rule in statutory construction that implied repeals are not favored. NLRC has
the power to hear and decide labor disputes, but such authority is DEEMED SUSPENDED when PD 902-A is put into
effect by the SEC.
Thus, when NLRC proceeded to decide the case despite the SEC suspension order, the NLRC acted without or in
excess of its jurisdiction to hear and decide cases. As a consequence, any resolution, decision or order that it
rendered or issued without jurisdiction is a nullity. In short, at the time the SEC issued its suspension Order of December
28, 1994, the proceedings before the Labor Arbiter were still very much pending.
88. PNB v. Cruz

Facts: Article 110 of the Labor Code provides that workers shall enjoy first preference with regard to wages due them in cases
of bankruptcy or liquidation of an employers business.
In 1980 Aggregate Mining Exponents (AMEX) laidoff about 70% of its employees due to business reverses. The retained
employees constituting 30% of the work force however, were not paid their wages until July 1982 when AMEX
completely ceased operations and instead entered into an operating agreement with T.M. San Andres Development
Corporation whereby the latter would be leasing the equipment and machineries of AMEX .
The unpaid employees sought redress from the LA which rendered a decision finding the claims of complainants for
payment of unpaid wages and separation pay to be valid and meritorious; ordered to pay the same to said complainants.
Further, should the principal respondent be unable to satisfy these Awards, the same can be satisfied from the proceeds or
fruits of its machineries and equipment being operated by respondent T.M. San Andres Dev. Corp. either by operating
agreement with respondent Amex or thru lease of the same from PNB.
AMEX and its President, Tirso Revilla did not appeal from this decision. But PNB, in its capacity as mortgagee-creditor of
AMEX interposed an appeal. The appeal was primarily based on the allegation that the workers lien covers unpaid
wages only and not the termination or severance pay which the workers likewise claimed they were entitled to.
Issue: (1) Whether Art. 110 takes precedence over all claims and therefore not subject to requirements under the Concurrence
and Preference of Credits.
(2) Whether the employees are entitled to separation pay,
(3) Whether Art. 110 covers other monetary claims such as separation pay and not just unpaid wages.
Held: YES TO ALL.
Art. 110. Worker preference in case of bankruptcy. In the event of bankcruptcy or liquidation of an employers
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 claims of the government and other creditors may be paid.
This Court must uphold the preference accorded to the private respondents. The phrase any provision of law to the contrary
notwithstanding indicates that such preference shall prevail despite the order set forth in Articles 2241 to 2245 of the
Civil Code. No exceptions were provided.
A.C. Ransom stated that (t)he worker preference applies even if the employers properties are encumbered by means of
a mortgage contract. So that, when (the) machinery and equipment of RANSOM were sold to Revelations Manufacturing
Corporation for P2M in 1975, the right of the 22 laborers to be paid from the proceeds should have been recognized.
87 Roco 3B
Moreover, under Article 110 of the Labor Code as amended, the unpaid wages and other monetary claims of workers
should be paid in full before the claims of the Government and other creditors. Thus not even tax claims could have
preference over the workers claim.
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. The conflict between Article 110 of the
Labor Code and Article 2241 to 2245 of the Civil Code must be resolved in favor of the former. A contrary ruling would
defeat the purpose for which Article 110 was intended; that is, for the protection of the working class.
Petitioner contends that the claim for termination pay should not be enforced against AMEX properties mortgaged to
petitioner PNB because Article 110 of the Labor Code refers only to wages due them for services rendered during the period
prior to bankcruptcy or liquidation. Citing serious financial losses as the basis for the termination of the private respondents,
petitioner alleges that the employees are not entitled to the termination pay. Again, bereft of merit.
AMEX failed to adduce convincing evidence to prove that the financial reverses were indeed serious. The alleged
losses in business operations must be proved. The purpose is to obviate the possibility of an employer fabricating business
reverses in order to ease out employees for no apparent reason.
The term WAGES includes not only remunerations or earnings payable by an employer for services rendered or to be
rendered, but also covers all benefits of the employees under a CBA like severance pay, educational allowance,
accrued vacation leave earned but not enjoyed, as well as workmens compensation awards and unpaid salaries for services
rendered. All of these benefits fall under the term wages which enjoy first preference over all other claims against the
employer. For purposes of the application of Article 110, separation pay must be considered as part of remuneration for
services rendered or to be rendered. Article 110 now provides that the workers preference covers not only unpaid wages
but also other monetary claims.
The termination pay which they so rightfully claim is an additional remuneration for having rendered services to
their employer for a certain period of time. In computing the amount to be given to an employee as termination pay, the
length of service of such employee is taken into consideration such that the former must be considered as part and parcel of
wages. The termination or severance pay awarded by the respondent Commission to the private respondents is proper. The
amount claimed by petitioner PNB for the satisfaction of the obligations of AMEX is relatively insubstantial and is not
significant enough as to drain its coffers. That same amount could mean subsistence or starvation for the workingman.
July 13, 2013

89. GSIS v. NLRC (2010)
Facts: Banlasan, Tafalla, Rubia, Alvarez, Escobal, and Panis were employed as security guards by DNL Security Agency. By
virtue of the service contract entered into by DNL Security and GSIS, the guards were assigned to its Tacloban City office.
In 1993, DNL Security informed respondents that its service contract with GSIS was terminated. This notwithstanding,
DNL Security instructed respondents to continue reporting for work to GSIS . Respondents worked as instructed until
April 20, 1993, but without receiving their wages; after which, they were terminated from employment.
Respondents filed with the NLRC a complaint against DNL Security and petitioner for illegal dismissal, separation pay,
salary differential, 13th month pay, and payment of unpaid salary.
Labor Arbiter rendered a decision against DNL Security and petitioner: No illegal dismissal but ordered DNL Security
Agency to pay complainants their wages, and held DNL Security Agency and GSIS jointly and solidary liable for salary
differential and 13th Month Pay.
NLRC treated DNL Securitys motion for reconsideration as an appeal, but dismissed the same, as it was not perfected within
the reglementary period. CA rendered the assailed Decision affirming the NLRC ruling hence the present petition.
Issue: Whether or not GSIS is jointly and severally liable with DNL Security for payment of the unsubstantiated amounts of
Salary Differential and 13th Month Pay to respondents.
88 Roco 3B
Held: YES. The fact that there is no actual and direct employer-employee relationship between GSIS and respondents
does not absolve the former from liability for the latters monetary claims. When GSIS contracted DNL Securitys
services, it became an indirect employer of respondents, pursuant to Article 107 of the Labor Code.
After DNL Security failed to pay respondents the correct wages and other monetary benefits, GSIS, as principal,
became jointly and severally liable, as provided in Articles 106 and 109 of the Labor Code.
GSIS liability covers the payment of respondents salary differential and 13th month pay during the time they worked for
petitioner. In addition, it is solidarily liable with DNL Security for respondents unpaid wages from February 1993 until
April 20, 1993. While it is true that respondents continued working for petitioner after the expiration of their contract, based
on the instruction of DNL Security, petitioner did not object to such assignment and allowed respondents to render service.
Thus, GSIS impliedly approved the extension of respondents services. Accordingly, it is bound by the provisions of the
Labor Code on indirect employment. GSIS cannot be allowed to deny its obligation to respondents after it had benefited from
their services.
So long as the work, task, job, or project has been performed for petitioners benefit or on its behalf, the liability accrues for
such services. The principal is made liable to its indirect employees because, after all, it can protect itself from
irresponsible contractors by withholding payment of such sums that are due the employees and by paying the
employees directly, or by requiring a bond from the contractor or subcontractor for this purpose.
GSIS liability, however, CANNOT EXTEND to the payment of SEPARATION PAY. An order to pay separation pay is
invested with a punitive character, such that an indirect employer should not be made liable without a finding that it
had conspired in the illegal dismissal of the employees. It should be understood, though, that the solidary liability of
petitioner does not preclude the application of Article 1217 of the Civil Code on the right of reimbursement from its
co-debtor.
90. Kaisahan at Kapatiran ng mga Manggagawa v. Manila Water Company (2011)

Facts:
91. Babas v. Lorenzo Shipping (2010)

Facts: Lorenzo Shipping Corporation (LSC) is a duly organized domestic corporation engaged in the shipping industry. LSC
entered into an agreement with Best Manpower Services, Inc. (BMSI) where BMSI undertook to provide maintenance and
repair services to LSCs container vans, heavy equipment, trailer chassis, and generator sets. BMSI further undertook to
provide checkers to inspect all containers received for loading to and/or unloading from its vessels.
Simultaneous with the execution of the Agreement, LSC leased its equipment, tools, and tractors to BMSI. The period of lease
was coterminous with the Agreement. BMSI then hired petitioners on various dates to work at LSC as checkers,
welders, utility men, clerks, forklift operators, motor pool and machine shop workers, technicians, trailer drivers, and
mechanics.
Six years later, LSC entered into another contract (a service contract) with BMSI. Four months later, petitioners filed with the
LA a complaint for regularization against LSC and BMSI. On October 1, 2003, LSC terminated the Agreement, effective
October 31, 2003. Consequently, petitioners lost their employment.
BMSI asserted that it is an independent contractor. LSC, on the other hand, averred that petitioners were employees of
BMSI and were assigned to LSC by virtue of the Agreement.
LA found that petitioners were employees of BMSI, an independent job contractor. NLRC reversed and found that BMSI was
engaged in labor-only contracting, thereby making LSC the employer of petitioners.
LSC went to the CA via certiorari. CA rendered the now challenged Decision, reversing the NLRC, holding that BMSI was an
independent contractor, According to the CA, the fact that BMSI entered into a contract of lease with LSC did not ipso
facto make BMSI a labor-only contractor; on the contrary, it proved that BMSI had substantial capital
89 Roco 3B
Issue: Whether or not BMSI was engaged in labor-only making contracting thereby making LSC the employer of petitioners.
Held: YES. 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 perform activities which are directly related to the main business of the principal.
BMSI is engaged in labor-only contracting.
First, petitioners worked at LSCs premises, and nowhere else. Other than the provisions of the Agreement, there was no
showing that it was BMSI which established petitioners working procedure and methods, which supervised petitioners in their
work, or which evaluated the same. There was absolute lack of evidence that BMSI exercised control over them or their work,
except for the fact that petitioners were hired by BMSI.
Second, LSC was unable to present proof that BMSI had substantial capital. The record before us is bereft of any proof
pertaining to the contractors capitalization, nor to its investment in tools, equipment, or implements actually used in the
performance or completion of the job, work, or service that it was contracted to render. What is clear was that the
equipment used by BMSI were owned by, and merely rented from, LSC . The law casts the burden on the contractor to
prove that it has substantial capital, investment, tools, etc.
Third, petitioners performed activities which were directly related to the main business of LSC. The work of petitioners as
checkers, welders, utility men, drivers, and mechanics could only be characterized as part of, or at least clearly related to, and in
the pursuit of, LSCs business. Logically, when petitioners were assigned by BMSI to LSC, BMSI acted merely as a laboronly
contractor.
Lastly, as found by the NLRC, BMSI had no other client except for LSC, and neither BMSI nor LSC refuted this finding,
thereby bolstering the NLRC finding that BMSI is a labor-only contractor.
CA erred in considering BMSIs Certificate of Registration as sufficient proof that it is an independent contractor. A
Certificate of Registration issued by the DOLE is not conclusive evidence of such status. The fact of registration
simply prevents the legal presumption of being a mere labor-only contractor from arising .
Indubitably, BMSI can only be classified as a labor-only contractor. Consequently, the workers that BMSI supplied to LSC
became regular employees of the latter. Having gained regular status, petitioners were entitled to security of tenure and
could only be dismissed for just or authorized causes and after they had been accorded due process
Petitioners lost their employment when LSC terminated its Agreement with BMSI. However, the termination of LSCs
Agreement with BMSI cannot be considered a just or an authorized cause for petitioners dismissal
92. Bernarte v. PBA (2011)

Facts: Jose Mel Bernarte and Renato Guevarra aver that they were invited to join the PBA as referees. They were made to
sign contracts on a year-to-year basis. During the term of Commissioner Eala, however, changes were made on the terms
of their employment. Complainant Bernarte, for instance, was not made to sign a contract during the first conference of the
All-Filipino Cup. It was only during the second conference when he was made to sign a one and a half month contract.
Bernarte received a letter from the Office of the Commissioner advising him that his contract would not be renewed citing
his unsatisfactory performance on and off the court. This was total shock for Bernarte who was awarded Referee of the
year in 2003. He felt that the dismissal was caused by his refusal to fix a game.
Complainant Guevarra alleges that he was invited to join the PBA pool of referees in February 2001. On March 1, 2001, he
signed a contract as trainee. Beginning 2002, he signed a yearly contract as Regular Class C referee. Respondent Martinez
90 Roco 3B
issued a memorandum to Guevarra expressing dissatisfaction over his questioning on the assignment of referees officiating
out-of-town games. He was no longer made to sign a contract.
PBA avers, on the other hand, that complainants entered into two contracts of retainer with the PBA in the year 2003. The
first contract was for the period January 1, 2003 to July 15, 2003; and the second was for September 1 to December 2003.
After the lapse of the latter period, PBA decided not to renew their contracts. They allege that complainants were not
illegally dismissed because they were not employees of PBA and that their respective contracts were simply not renewed.
LA declared petitioner an employee whose dismissal by PBA was illegal. NLRC affirmed. CA eventually reversed. CA found
petitioner an independent contractor PBA did not exercise any form of control over the means and methods by which
petitioner performed his work as a basketball referee.
Issue: Whether the referees are employees of PBA, which in turn determines whether they were illegally dismissed.
Held: NO. INDEPENDENT CONTRACTORS. To determine the existence of an employer-employee relationship, the
control test is applied. PBA admits repeatedly engaging petitioners services, as shown in the retainer contracts. PBA pays
petitioner a retainer fee, exclusive of per diem or allowances, as stipulated in the retainer contract. PBA can terminate the
retainer contract for petitioners violation of its terms and conditions.
Petitioner cites the following stipulations in the retainer contract which evidence control: (1) PBA classifies or rates a referee;
(2) PBA requires referees to attend all basketball games organized or authorized by the PBA, at least one hour before the start
of the first game of each day; (3) PBA assigns petitioner to officiate ballgames, or to act as alternate referee or substitute; (4)
referee agrees to observe and comply with all the requirements of the PBA governing the conduct of the referees whether on
or off the court; etc.
The foregoing stipulations hardly demonstrate control over the means and methods by which petitioner performs his
work as a referee officiating a PBA basketball game. The contractual stipulations do not pertain to, much less
dictate, how and when petitioner will blow the whistle and make calls. They merely serve as rules of conduct or
guidelines in order to maintain the integrity of the professional basketball league.
In Sonza, the Court held that not all rules imposed by the hiring party on the hired party indicate that the latter is an
employee of the former. General rules are merely guidelines towards the achievement of the mutually desired result. 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.
Once in the playing court, the referees exercise their own independent judgment, based on the rules of the game, as to
when and how a call or decision is to be made. Referees decide whether an infraction was committed, and the PBA
cannot overrule them once the decision is made on the playing court.
The very nature of petitioners job of officiating a professional basketball game undoubtedly calls for freedom of control by
respondents.
The following circumstances indicate that petitioner is an independent contractor: (1) the referees are required to report
for work only when PBA games are scheduled, which is 3 times a week spread over an average of only 105 playing days a year,
and they officiate games at an average of 2 hours per game; and (2) the only deductions from the fees received by the referees
are withholding taxes. Unlike regular employees who ordinarily report for work eight hours per day for five days a week,
petitioner is required to report for work only when PBA games are scheduled or three times a week at two hours per game.
There are no deductions for contributions to the Social Security System, Philhealth or Pag-Ibig, which are the usual deductions
from employees salaries.
The referee is an independent contractor, whose special skills and independent judgment are required specifically for
such position and cannot possibly be controlled by the hiring party.
91 Roco 3B
In addition, the fact that PBA repeatedly hired petitioner DOES NOT BY ITSELF prove that petitioner is an employee of
the former. For a hired party to be considered an employee, the hiring party must have control over the means and
methods by which the hired party is to perform his work, which is absent in this case. Continuous rehiring by PBA of
petitioner simply signifies the renewal of the contract between PBA and petitioner, and highlights the satisfactory services
rendered by petitioner warranting such contract renewal. If PBA decides to discontinue petitioners services at the end of the
term fixed in the contract, whether for unsatisfactory services, or violation of the terms and conditions of the contract, or for
whatever other reason, the same merely results in the non-renewal of the contract, as in the present case. The non-renewal of
the contract between the parties does not constitute illegal dismissal of petitioner by respondent
93. Garden Memories Park & Life Plan v. NLRC (2012)

Facts: Garden of Memories is engaged in the business of operating a memorial park and selling memorial Plan services.
Cruz worked at the Garden of Memories as a utility worker from 1991 until her termination in 1998.
Cruz filed a complaint for illegal dismissal, underpayment of wages, non-inclusion in SSS, and non-payment of benefits before
the DOLE. Impleaded as respondent was Requino on the alleged ground that she was its service contractor and
employer of Cruz.
Cruz averred that she worked as utility worker wherein she was charged with the cleaning and maintenance of the ground
facilities. Sometime in 1998, she had a misunderstanding with a co-worker named Adoracion Requino regarding the use
of a garden hose. When the misunderstanding was brought to the knowledge of Requino, she requested Cruz to go home
and not to return anymore. When Cruz returned 3 days after, she was told that she had already been replaced. Cruz
immediately brought this matter to the management of Garden of Memories and manifested her protest.
Garden of Memories disclaims liability by asserting that Cruz was not its employee but of Requino, its independent
service contractor, Victoriana Requino who was succeeded by her daughter Paulina Requino (herein private respondent).
Requino moved for the dismissal, alleging that it was her mother Victoriana who hired Cruz and that she merely took over the
supervision and management of the workers eventually, claiming that the ownership of the business was never transferred to
her. She also averred that Cruz abandoned her work.
The LA ruled in favor of Cruz, holding that Requino was not an independent contractor but a labor-only contractor and that
Cruz never abandoned her work. It held Requino and Garden of Memories jointly and severally liable to Cruz . The
NLRC and CA affirmed.
Issue: Whether Requino is a legitimate independent contractor.
Held: NO. Both the capitalization requirement and the power of control on the part of Requio are wanting. Because
of such, Garden of Memories is also liable to Cruz for her claims.
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.
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.
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. 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
92 Roco 3B
claiming the supposed status of Requio as independent contractor. 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.
Another determinant factor that classifies Requio as a labor-only contractor was her failure to exercise the right to
control the performance of the work of Cruz. 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. In this
case, however, the Service Contract Agreement shows 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.
94. Aliviado v. P&G (2011)

DISCLAIMER: This is only a Resolution. READ THE 2010 CASE FIRST (See below)
RECONSIDERATION: P&Gs MR is DENIED WITH FINALITY. In 2010, it was correctly ruled that SAPS is a labor-
only contractor. In said decision, it was established that SAPS has no substantial capitalization and it was performing
merchandising and promotional activities which are directly related to P&Gs business. Since SAPS met one of the
requirements, it was enough basis for us to hold that it is a labor-only contractor. Consequently. P&G, as principal, is
considered as the direct employer.
P&G also raised for the first time that 10 SAPS employees were never assigned to P&G and, thus, should not be declared
employees thereof. So this was dismissed on procedural grounds.
95. Aliviado v. P&G (2010)

Facts: The 80 Petitioners worked as merchandisers of P&G from various dates as early as 1982 until 1993. They were assigned
at different outlets, supermarkets, stores of P&G.
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. They all individually signed employment contracts with Promm-Gem or
SAPS for periods of around 5 months at a time. Also, their received pages from Promm-Gem or SAPS. Moreover, erring
merchandisers were disciplined by the above for reasons such as absenteeism, dishonesty, and changing day-offs without prior
notice.
In 1991, Petitoners filed a complaint against P&G for regularization, service incentive leave pay, and other monetary benefits. Then,
their Merchandising Service Contract was no longer renewed. Thus, the complaint was amended to include the alleged illegal
dismissal.
In 1996, LA dismissed the complaint and ruled that no employer-employee relationship existed between Petitioners & P&G. It
also found that Promm-Gem/SAPS were legitimate job contractors. On appeal to the NLRC, LA affirmed. CA eventually
affirmed as well. Hence, this petition.
Petitioners insist that they undertook merchandising chores for P&G long before Promm-Gem/SAPS existed. They
further claim that when the latter had its so-called realignment program, Petitioners were instructed to fill up application forms
and report to the agencies which P&G created.
93 Roco 3B
Further, they assert that Promm-Gemm/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.
They 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.
P&G, as a defense, allege that no employer-employee relationship existed between them.

Issues: (1) Whether P&G are employers of Petitioners.
(2) Whether Petitioners were illegally dismissed. (not really important for this topic)
Held: (1) NO FOR PROMM-GEM. YES FOR SAPS. 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 (See
Art. 106 of Labor Code + Rule VIII-A Book III of Omnibus Rules Implementing Labor Code as amended by DO 18-02).
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 and ANY of the following elements are present:
i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or
service to be performed AND the employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal ; or
ii) The contractor does not exercise the right to control over the performance of the work of the contractual employee.
In this case, PROMM-GEM has substantial investment which relates to the work to be performed (authorized capital stock of
1M, capital available for operations of 500K, current assets of 719K, has own warehouse, office space with 870sqm area, owns
vehicles, has other clients aside from P&G). The records also show that it supplied its workers with the relevant materials,
such as markers, tapes, liners and cutters, necessary for them to perform their work. It also issued uniforms to them. It is also
relevant to mention that it already considered the Petitioners working under Promm-Gem as its regular, not merely
contractual or project, employees.
It cannot be said, based on these circumstances, that Promm-Gem is in bad faith in trying to circumvent labor laws. Thus, it
cannot be considered as a labor-only contractor but a legitimate independent contractor.
As for SAPS, it failed to show substantial capital. 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. Moreover, in Vinoya, it was said 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.
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, the former is engaged in labor-only contracting.
Where labor-only contracting exists, the Labor Code itself establishes an employer-employee relationship between
the employer and the employees of the labor-only contractor. The statute establishes this relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the
principal employer and the latter is responsible to the employees of the labor-only contractor as if such employees had been
directly employed by the principal employer.
94 Roco 3B
(2) YES for PROMM-GEM, they dismissed Petitioners for loss of trust and confidence. This ground is premised on the fact
that the employee holds a position of responsibility or of trust and confidence. In this case, said workers do not hold such
position.
YES for SAPS. They were dismissed upon initiation by P&G. It was done in violation of their right to due process. Since
SAPS is a labor-only contractor, it cannot be considered employer. Also, P&G, as employer, failed to overcome the burden of
proof to establish the lawfulness of its dismissal.
96. Urbanes v. Secretary (2003)

Facts: Placido O. Urbanes, Jr., doing business under the name and style of Catalina Security Agency, entered into an
agreement to provide security services to SSS. During the effectivity of the agreement, Urbanes requested the SSS for the
upward adjustment of their contract rate in view of a wage order:
Section 9. In the case of contracts for construction projects and for security, janitorial and similar services, the
prescribed amount set forth herein for covered workers shall be borne by the principals or the clients of
the construction/service contractors and the contract shall be deemed amended accordingly. In the event,
however, that the principal or client failed to pay the prescribed increase, the construction/service
contractors shall be jointly and severally liable with the principal or client.
After a number of unheeded letters, Urbanes pulled out his agencys services from the premises of the SSS and another
security agency, Jaguar, took over.
Urbanes filed a complaint with the DOLE-NCR against the SSS seeking the implementation of Wage Order No. NCR-03.
Issue: Whether Urbanes, as contractor, may seek payment from SSS.
Held: NO. In the case of Eagle Security Agency, Inc. v. NLRC, this Court held: The Wage Orders are explicit that payment
of the increases are "to be borne" by the principal or client. "To be borne", however, does not mean that the principal,
PTSI in this case, would directly pay the security guards the wage and allowance increases because there is no privity of
contract between them. The security guards' contractual relationship is with their immediate employer, EAGLE. As an
employer, EAGLE is tasked, among others, with the payment of their wages.
On the other hand, there existed a contractual agreement between PTSI and EAGLE wherein the former availed of the
security services provided by the latter. In return, the security agency collects from its client payment for its security services.
This payment covers the wages for the security guards and also expenses for their supervision and training, the guards' bonds,
firearms with ammunitions, uniforms and other equipment, accessories, tools, materials and supplies necessary for the
maintenance of a security force.
The security guards' immediate recourse for the payment of the increases is with their direct employer, EAGLE.
However, in order for the security agency to comply with the new wage and allowance rates it has to pay the security guards,
the Wage Orders made specific provision to amend existing contracts for security services by allowing the adjustment of the
consideration paid by the principal to the security agency concerned. What the Wage Orders require, therefore, is the
amendment of the contract as to the consideration to cover the service contractor's payment of the increases mandated. In the
end, therefore, ultimate liability for the payment of the increases rests with the principal.
The security guards should claim the amount of the increases from EAGLE. Under the Labor Code, in case the
agency fails to pay them the amounts claimed, PTSI should be held solidarily liable with EAGLE. Should EAGLE
pay, it can claim an adjustment from PTSI for an increase in consideration to cover the increases payable to the
security guards.
Passing on the foregoing disquisition in Eagle, this Court, in Lapanday, held: it is only when [the] contractor pays the
increases mandated that it can claim an adjustment from the principal to cover the increases payable to the security guards.
The conclusion that the right of the contractor (as principal debtor) to recover from the principal (as solidary co-
95 Roco 3B
debtor) arises only if he has paid the amounts for which both of them are jointly and severally liable is in line with
Article 1217 of the Civil Code.
In fine, the liability of the SSS to reimburse Urbanes arises only if and when Urbanes pays his employee-security guards
the increases mandated by the wage order. The records do not show that Urbanes has paid the mandated increases to
the security guards. The security guards in fact have filed a complaint with the NLRC against petitioner relative to, among
other things, underpayment of wages
97. Escario v. NLRC (2010) p. 359

Facts: California Marketing Co., Inc. (CMC) is in the manufacturing and distribution of food products. Private Donna Louise
Advertising and Marketing Associates, Inc. (D.L. Admark) is a duly registered promotional firm. Petitioners worked as
merchandisers for the products of CMC.
According to PETITIONERS
Petitioners allege that they were employed by CMC as merchandisers. Among the tasks assigned to them were the
withdrawing of stocks from the warehouse, the fixing of prices, price-tagging, displaying of merchandise, and the inventory of
stocks. These were done under the control, management and supervision of CMC. The materials and equipment
necessary in the performance of their job, were provided by CMC. Their salaries were being paid by CMC. The hiring, control
and supervision of the workers and the payment of salaries, were all coursed by CMC through its agent D.L. Admark in order
for CMC to avoid its liability under the law. Petitioners filed a case against CMC before the Labor Arbiter for the
regularization of their employment status. During the pendency of the case, D.L. Admark sent to petitioners notice of
termination of their employment Hence, their complaint was amended so as to include illegal dismissal as cause of action.
According to CMC
CMC denied the existence of an employer-employee relationship between petitioner and itself. It is D.L. Admark who
is the employer of the petitioners. It, however, hired independent job contractors such as D.L. Admark, to provide the
necessary promotional activities for its product lines.
According to D.L. Admark

D.L. Admark asserted that it is the employer of the petitioners. Its primary purpose is to carry on the business of
advertising, promotion and publicity, the sales and merchandising of goods and services and conduct survey and opinion polls.
As an independent contractor it serves several clients among which include Purefoods, Corona Supply, First-brand, Splash
Cosmetics and herein private respondent California Marketing.
Issue: Whether the employer is CMC or Admark.
Held: ADMARK IS A LEGITIMATE CONTRACTOR. CMC can validly farm out its merchandising activities to a legitimate
independent contractor.
Labor-only contracting There is labor-only contracting when the contractor or subcontractor merely recruits, supplies or
places workers to perform a job, work or service for a principal.
Elements of labor-only contracting: (a) The person supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among others; and (b) The workers recruited and
placed by such person are performing activities which are directly related to the principal business of the employer.
Job contracting: In contrast, there is permissible job contracting when a principal agrees to put out or farm out with a
contractor or a subcontractor the performance or completion of a specific job, work or service within a definite or
predetermined period, regardless of whether such job or work or service is to be performed or completed within or outside
the premises of the principal.
ELEMENTS OF JOB CONTRACTING: (a) The contractor carries on a distinct and independent business and undertakes the
contract work on his account under his own responsibility according to his own manner and method, free from the control
and direction of his employer or principal in all matters connected with the performance of his work except as to the results
96 Roco 3B
thereof; and (b) The contractor has substantial capital or investment in the form of tools, equipment, machineries (sic), work
premises, and other materials which are necessary in the conduct of 8 his business.
To be considered an independent contractor it is not enough to show substantial capitalization or investment in the form of
tools, equipment, machinery and work premises. In addition, the following factors need be considered: (a) whether the
contractor is carrying on an independent business; (b) the nature and extent of the work; (c) the skill required; (d) the term and
duration of the relationship; (e) the right to assign the performance of specified pieces of work; (f) the control and supervision
of the workers; (g) the power of the employer with respect to the hiring, firing and payment of workers of the contractor; (h)
the control of the premises; (i) the duty to supply premises, tools, appliances, materials, and labor; and (j) the mode, manner
and terms of payment.
In this case
D.L. Admark is a legitimate independent contractor:
1. The SEC registration certificate of D.L. Admark states that it is a firm engaged in promotional, advertising, marketing
and merchandising activities.
2. The service contract between CMC and D.L. Ad- mark clearly provides that the agreement is for the supply of sales
promoting merchandising services rather than one of manpower placement.
3. D.L. Admark was actually engaged in several activities, such as advertising, publication, promotions, marketing and
merchandising. It had several merchandising contracts with companies like Purefoods, Corona Supply, Nabisco
Biscuits, and Licron. It was likewise engaged in the publication business as evidenced by its magazine the
Phenomenon.
4. It had its own capital assets to carry out its promotion business. It then had current assets amounting to P6 million
and is therefore a highly capitalized venture. It had an authorized capital stock of P500,000.00. It owned several motor
vehicles and other tools, materials and equipment to service its clients. It paid rentals of P30,020 for the office space it
occupied.
Four-fold test
1. Selection and engagement of employee: petitioners themselves admitted that they were selected and hired by D.L.
Admark.
2. Payment of wages: D.L. Admark was able to present in evidence the payroll of petitioners, sample SSS contribution
forms filed and submitted by D.L. Admark to the SSS, and the application for employment by R. de los Reyes, all
tending to show that D.L. Admark was paying for the petitioners salaries. In contrast, petitioners did not submit an
iota of evidence that it was CMC who paid for their salaries. The fact that the agreement between CMC and D.L.
Admark contains the billing rate and cost breakdown of payment for core merchandisers and coordinators does not in
any way establish that it was CMC who was paying for their salaries. Such cost breakdown is a standard content of
service contracts designed to insure that under the contract, employees of the job contractor will receive benefits
mandated by law.
3. Power of dismissal: Neither did the petitioners prove the existence of the third element. Again petitioners admitted
that it was D.L. Admark who terminated their employment.
4. Power to control employees conduct: To prove such, petitioners presented the memoranda of CMCs sales and
promotions manager. However, nothing therein will remotely suggest that CMC was supervising and controlling the
work of the petitioners: The memoranda were addressed to the store or grocery owners telling them about the
forthcoming sales promotions of CMC products. Thus, petitioners, who filed a complaint for regularization against
respondent CMC, thereby, conceding that they are not regular employees of the latter, cannot validly claim to be the
ones referred to in said memos.
**Having proven the existence of an employer-employee relationship between D.L. Admark and petitioners, it is no longer
relevant to determine whether the activities performed by the latter are necessary or desirable to the usual business or trade of
CMC.
98. San Miguel v. MAERC Integrated Services Inc (2003)

Facts: 291 workers filed 9 complaints against San Miguel (SMC) and MAERC for illegal dismissal, underpayment of wages,
non-payment of service incentive leave, separation pay, and other benefits. They alleged that SMC hired them through its
agent or intermediary MAERC to work in 2 places: one, inside SMC premises at Mandaue Container Services, and another,
97 Roco 3B
in the Philphos warehouse owned by MAERC. They washed and segregated empty bottles for beer. They were paid on a
per piece or pakiao basis, except for some checkers who were paid daily.
They alleged that long before SMC got MAERCs services, they had already been working for SMC under the guise
of being employees of another contractor, Jopard Services. SMC denied liability, as they were not its employees.
SMCs Service Contract was initially for a period of 1 year, and it was renewed for 2 years. Automatic renewal and a monthly
basis after the two year period, and 30-day notice is required prior to its termination. In a letter dated 15 May 1991, SMC
informed MAERC of the termination of their service contract by the end of June 1991. SMC cited its plans to phase
out its segregation activities starting 1 June 1991 due to the installation of labor and cost-saving devices.
Complainants allege that this was tantamount to illegal dismissal by their real employer, as they were doing work directly
related, necessary, and desirable for SMC; MAERC was a mere shield. MAERC backed them up, citing its role in SMCs
avoiding obligations and responsibilities.
The LA ruled that MAERC was an independent contractor. The NLRC found that it was a labor-only contractor. The CA
affirmed the NLRC.
Issue: Whether SMC or MAERC is the employer.
Held: SMC DUE TO EXISTENCE OF LABOR-ONLY CONTRACTOR. Evidence discloses that SMC played a large
and indispensable part in the hiring of MAERC's workers. It also appears that majority of the complainants had
already been working for SMC long before the signing of the service contract between SMC and MAERC in 1988.
The incorporators of MAERC admitted having supplied and recruited workers for SMC even before MAERC was
created. The NLRC also found that when MAERC was organized into a corporation in February 1988, the complainants who
were then already working for SMC were made to go through the motion of applying for work with Ms. Olga Ouano,
President and General Manager of MAERC, upon the instruction of SMC through its supervisors to make it appear that
complainants were hired by MAERC. This was testified to by two (2) of the workers who were segregator and forklift
operator assigned to the Beer Marketing Division at the SMC compound and who had been working with SMC under a
purported contractor Jopard Services since March 1979 and March 1981, respectively. Both witnesses also testified that
together with other complainants they continued working for SMC without break from Jopard Services to MAERC.
As for the payment of workers' wages, it is conceded that MAERC was paid in lump sum but records suggest that the
remuneration was not computed merely according to the result or the volume of work performed. The memoranda of the
labor rates bearing the signature of a Vice-President and General Manager for the Vismin Beer Operations as well as a director
of SMC appended to the contract of service reveal that SMC assumed the responsibility of paying for the mandated
overtime, holiday and rest day pays of the MAERC workers. SMC also paid the employer's share of the SSS and
Medicare contributions, the 13th month pay, incentive leave pay and maternity benefits. In the lump sum received,
MAERC earned a marginal amount representing the contractors share. These lend credence to the complaining workers'
assertion that while MAERC paid the wages of the complainants, it merely acted as an agent of SMC.
Petitioner insists that the most significant determinant of an employer-employee relationship, i.e., the right to control, is
absent. The contract of services between MAERC and SMC provided that MAERC was an independent contractor and that
the workers hired by it "shall not, in any manner and under any circumstances, be considered employees of the Company, and
that the Company has no control or supervision whatsoever over the conduct of the Contractor or any of its workers in
respect to how they accomplish their work or perform the Contractor's obligations under the Contract."
In deciding the question of control, the language of the contract is not determinative of the parties' relationship; rather, it is
the totality of the facts and surrounding circumstances of each case.
Despite SMCs disclaimer, there are indicia that it actively supervised the complainants. SMC maintained a
constant presence in the workplace through its own checkers. Its asseveration that the checkers were there only to check
the end result was belied by the testimony of Carlito R. Singson, head of the Mandaue Container Service of SMC, that the
98 Roco 3B
checkers were also tasked to report on the identity of the workers whose performance or quality of work was not according to
the rules and standards set by SMC. According to Singson, "it (was) necessary to identify the names of those concerned so
that the management [referring to MAERC] could call the attention to make these people improve the quality of work."
Reinforcing the belief that the SMC EXERTED CONTROL over the work performed by the segregators or cleaners, albeit
through the instrumentality of MAERC, were letters by SMC to the MAERC management. These were letters written
by a certain Mr. W. Padin addressed to the President and General Manager of MAERC as well as to its head of operations,
and a third letter from Carlito R. Singson also addressed to the President and General Manager of MAERC. More than just a
mere written report of the number of bottles improperly cleaned and/or segregated, the letters named three (3)
workers who were responsible for the rejection of several bottles, specified the infraction committed in the
segregation and cleaning, then recommended the penalty to be imposed. Evidently, these workers were reported by
the SMC checkers to the SMC inspector.
While the LA dismissed these letters as merely indicative of the concern in the end-result of the job contracted by MAERC,
we find more credible the contention of the complainants that these were manifestations of the right of petitioner to
recommend disciplinary measures over MAERC employees. Although calling the attention of its contractors as to the quality
of their services may reasonably be done by SMC, there appears to be no need to instruct MAERC as to what disciplinary
measures should be imposed on the specific workers who were responsible for rejections of bottles. This conduct by SMC
representatives went beyond a mere reminder with respect to the improperly cleaned/segregated bottles or a genuine concern
in the outcome of the job contracted by MAERC.
CONTROL OF THE PREMISES in which the contractor's work was performed was also viewed as another phase of control
over the work, and this strongly tended to disprove the independence of the contractor. In the case at bar, the bulk of the
MAERC segregation activities was accomplished at the MAERC-owned PHILPHOS warehouse but the building
along with the machinery and equipment in the facility was actually being rented by SMC. This is evident from the
memoranda of labor rates which included rates for the use of forklifts and the warehouse at the PHILPHOS area, hence, the
NLRCs conclusion that the payment for the rent was cleverly disguised since MAERC was not in the business of renting
warehouses and forklifts.
Other instances attesting to SMCs supervision of the workers are found in the minutes of the meeting held by the SMC
officers on 5 December 1988. Among those matters discussed were the calling of SMC contractors to have workers
assigned to segregation to undergo and pass eye examination to be done by SMC EENT company doctor and a
review of compensation/incentive system for segregators to improve the segregation activities.
But the most telling evidence is a letter by Mr. Antonio Ouano, Vice-President of MAERC dated 27 May 1991 addressed to
Francisco Eizmendi, SMC President and Chief Executive Officer, asking the latter to reconsider the phasing out of SMCs
segregation activities in Mandaue City. The letter was not denied but in fact used by SMC to advance its own arguments.
Briefly, the letter exposed the actual state of affairs under which MAERC was formed and engaged to handle the
segregation project of SMC. It provided an account of how in 1987 Eizmendi approached the would-be incorporators of
MAERC and offered them the business of servicing the SMC bottle-washing and segregation department in order to avert an
impending labor strike. After initial reservations, MAERC incorporators accepted the offer and before long trial segregation
was conducted by SMC at the PHILPHOS warehouse.
The letter also set out the circumstances under which MAERC entered into the Contract of Services in 1988 with the
assurances of the SMC President and CEO that the employment of MAERC's services would be long term to enable it to
recover its investments. It was with this understanding that MAERC undertook borrowings from banking institutions
and from affiliate corporations so that it could comply with the demands of SMC to invest in machinery and
facilities.
In sum, the letter attested to an arrangement entered into by the two (2) parties which was not reflected in the Contract of
Services. A peculiar relationship mutually beneficial for a time but nonetheless ended in dispute when SMC decided to
prematurely end the contract leaving MAERC to shoulder all the obligations to the workers.
99 Roco 3B
In Vinoya, 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 comparison, MAERC, as earlier discussed, displayed the characteristics of a labor-only contractor. Moreover,
while MAERCs investments in the form of buildings, tools and equipment amounted to more than P4 Million, we
cannot disregard the fact that it was the SMC which required MAERC to undertake such investments under the
understanding that the business relationship between petitioner and MAERC would be on a long term basis. Nor do we
believe MAERC to have an independent business. Not only was it set up to specifically meet the pressing needs of SMC
which was then having labor problems in its segregation division, none of its workers was also ever assigned to any other
establishment, thus convincing us that it was created solely to service the needs of SMC. Naturally, with the severance of
relationship between MAERC and SMC followed MAERCs cessation of operations, the loss of jobs for the whole MAERC
workforce and the resulting actions instituted by the workers.
Petitioner also alleged that the Court of Appeals erred in ruling that "whether MAERC is an independent contractor or a
labor-only contractor, SMC is liable with MAERC for the latter's unpaid obligations to MAERC's workers."
On this point, we agree with petitioner as distinctions must be made. 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.
This distinction between job contractor and labor-only contractor, however, will not discharge SMC from paying the
separation benefits of the workers, inasmuch as MAERC was shown to be a labor-only contractor; in which case,
petitioner's liability is that of a direct employer and thus solidarily liable with MAERC.
SMC also failed to comply with the requirement of written notice to both the employees concerned and the Department of
Labor and Employment (DOLE) which must be given at least one (1) month before the intended date of retrenchment
99. Jaguar Security v. Sales (2008) p. p362

Facts: Jaguar Security and Investigation Agency is engaged in the business of providing security services to its clients, one of
whom is Delta Milling. Private respondents Rodolfo Sales, et al. were hired as security guards by Jaguar.
Two of the complainants were dismissed and allege that their dismissals were arbitrary and illegal. Both argue that they
were entitled to separation pay and back wages, for the time they were illegally dismissed until finality of the decision. All the
guard-employees, claim for monetary benefits of underpayment, overtime pay, rest day and holiday premium pay, underpaid
13th month pay, night shift differential, five days service and incentive leave pay.
Private respondents instituted the instant labor case. Labor arbiter rendered a decision in favor of private respondents
dismissing the charges of illegal dismissal on the part of the complainants Tamayo and Caranyagan but ordering Jaguar and
Delta Milling to jointly and severally pay all the six complainants.
100 Roco 3B
Jaguar filed a partial appeal questioning the failure of public respondent NLRC to resolve its cross-claim against
Delta as the party ultimately liable for payment of the monetary award to the security guards.
NLRC dismissed on the ground that it was not the proper forum, and directed petitioner to file a separate civil action for
recovery of the amount before the regular courts. Petitioner filed a petition for certiorari with the CA: dismissed
Issue: Whether Jaguar may claim reimbursement from Delta Milling though a cross-claim filed in the labor court.
Held: NO. There is no question as regards the respective liabilities of Jaguar and Delta Milling. Under Articles 106, 107 and
109 of the Labor Code, the joint and several liability of the contractor and the principal is mandated to assure
compliance of the provisions therein including the statutory minimum wage. The contractor, Jaguar in this case, is made liable
by virtue of his status as direct employer. On the other hand, Delta Milling, as principal, is made the indirect employer of the
contractors employees for purposes of paying the employees their wages should the contractor 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.
However, in the event that Jaguar pays his obligation to the guard employees pursuant to the Decision of the Labor
Arbiter, as affirmed by the NLRC and CA, it has the right of reimbursement from Delta Milling under Article 1217 of the
Civil Code.
Moreover, the liability of Delta Milling to reimburse Jaguar will only arise if and when the latter actually pays its
employees the adjudged liabilities. Payment, which means not only the delivery of money but also the performance,
in any other manner, of the obligation, is the operative fact which will entitle either of the solidary debtors to seek
reimbursement for the share which corresponds to each of the debtors. In this case, it appears that petitioner has yet
to pay the guard employees
100. Coca-Cola v. Climaco (2007)

Facts: Dr. Dean N. Climaco is a medical doctor who was hired by petitioner Coca-Cola Bottlers Phils., Inc. by virtue of a
Retainer Agreement. The Retainer Agreement, which began on January 1, 1988, was renewed annually. The last one
expired on Dec 31, 1993.
Despite the nonrenewal of the Retainer Agreement, respondent continued to perform his functions as company doctor
to Coca-Cola until he received a letter dated March 9, 1995 from petitioner company concluding their retainership agreement
effective 30 days from receipt thereof.
As early as September 1992, Coke was already making inquiries regarding his status with petitioner company. First, he wrote a
letter addressed to Dr. Willie Sy, the Acting President and Chairperson of the Committee on Membership, Philippine College
of Occupational Medicine. Respondent made another inquiry directed to the Assistant Regional Director, Bacolod City
District Office of the DOLE, who referred the inquiry to the Legal Service of the DOLE, Manila. Petitioner company,
however, did not take any action.
Inquiry was likewise addressed to the Social Security System (SSS). Respondent inquired from the management of Coke
whether it was agreeable to recognizing him as a regular employee. The management refused to do so.
Climaco filed a Complaint before the NLRC, Bacolod City, seeking recognition as a regular employee of petitioner
company and prayed for the payment of all benefits of a regular employee, including 13th Month Pay, Cost of Living
Allowance, Holiday Pay, Service Incentive Leave Pay, and Christmas Bonus.
While the complaint was pending before the Labor Arbiter, Climaco received a letter dated March 9, 1995 from petitioner
company concluding their retainership agreement effective thirty (30) days from receipt thereof. This prompted Climaco
to file a complaint for illegal dismissal
101 Roco 3B
LA found that Coke lacked the power of control over respondents performance of his duties, and recognized as valid the
Retainer Agreement between the parties. CA ruled that an employer-employee relationship existed between Coke and
respondent.
Issue: Whether there exists an employer-employee relationship between Dr. Climaco and Coke.
Held: NO. Coke lacked the power of control over the performance by Climacos of his duties. The LA reasoned that the
Comprehensive Medical Plan, which contains the respondents objectives, duties and obligations, does not tell respondent
how to conduct his physical examination, how to immunize, or how to diagnose and treat his patients, employees of
[petitioner] company, in each case.
He likened this case to that of Neri v. National Labor Relations Commission, which held: In the case of petitioner Neri, it is
admitted that FEBTC issued a job description which detailed her functions as a radio/telex operator. However, a cursory
reading of the job description shows that what was sought to be controlled by FEBTC was actually the end result of the task,
e.g., that the daily incoming and outgoing telegraphic transfer of funds received and relayed by her, respectively, tallies with
that of the register. The guidelines were laid down merely to ensure that the desired end result was achieved. It did not,
however, tell Neri how the radio/telex machine should be operated.
In effect, the Labor Arbiter held that petitioner company, through the Comprehensive Medical Plan, provided guidelines
merely to ensure that the end result was achieved, but did not control the means and methods by which respondent performed
his assigned tasks.
It is precisely because the company lacks the power of control that the contract provides that respondent shall be
directly responsible to the employee concerned and their dependents for any injury, harm or damage caused through
professional negligence, incompetence or other valid causes of action.
The provision in the Retainer Agreement that Climaco was on call during emergency cases did not make him a regular
employee. Also, complainant does not dispute the fact that outside of the two (2) hours that he is required to be at respondent
companys premises, he is not at all further required to just sit around in the premises and wait for an emergency to occur so as
to enable him from using such hours for his own benefit and advantage. In fact, complainant maintains his own private
clinic attending to his private practice in the city, where he services his patients, bills them accordingly and if it is an
employee of respondent company who is attended to by him for special treatment that needs hospitalization or operation, this
is subject to a special billing. More often than not, an employee is required to stay in the employers workplace or proximately
close thereto that he cannot utilize his time effectively and gainfully for his own purpose. Such is not the prevailing situation
here.
The schedule of work and the requirement to be on call for emergency cases do not amount to such control, but are
necessary incidents to the Retainership Agreement. The Retainership Agreement granted to both parties the power to
terminate their relationship upon giving a 30-day notice. Hence, petitioner company did not wield the sole power of dismissal
or termination.
There is nothing wrong with the employment of respondent as a retained physician of petitioner company. SC upheld validity
of the Retainership Agreement which clearly stated that no employer-employee relationship existed between the parties. The
Agreement also stated that it was only for a period of 1 year beginning January 1, 1988 to December 31, 1998, but it was
renewed on a yearly basis.
Considering that there is no employer-employee relationship between the parties, the termination of the Retainership
Agreement, which is in accordance with the provisions of the Agreement, does not constitute illegal dismissal of
respondent. Consequently, there is no basis for the moral and exemplary damages granted by the Court of Appeals to
respondent due to his alleged illegal dismissal
101. DOLE v. Esteva (2006) p. 341

Facts: DOLE Phils and Cannery Multi-Purpose Cooperative (CAMPCO) concluded a service contract for the cooperative
to assist DOLE in its daily operations and to perform odd jobs as may be assigned. It stipulated that the coop must carry on
102 Roco 3B
an independent legitimate business and comply with all pertinent laws; also, it must do the contracted work according to
his manner and method, free from the control and direction of the company in all matters connected with the performance
of the work except as the result thereof. Te contractor was also obligated to pay SSS/Medicare premiums for the workers.
An investigation was conducted and it was alleged that CAMPCO was a labor-only contractor.
Issue: Whether the cooperative was indeed a labor-only contractor.
Held: YES. In agreeing that the cooperative was a labor-only contractor, the Court noted that CAMPCO did not carry out an
independent business because it was precisely established to render services to DOLE to augment its workforce during peak
seasons and the fact that DOLE was its only client.
Also, DOLE exercised control over CAMPCO members. The fact that CAMPCO had supervisors in the work premises
did not necessarily mean that CAMPCO had control over its members. It was DOLE who determined and prepared the work
assignments of CAMPCO members. Said members worked within DOLEs plantation and processing plants alongside regular
employees performing identical jobs, a circumstance recognized as an indicium of a labor-only contractorship.
Finally, it was observed that CAMPCO members performed activities directly related to the principal business of
DOLE. They worked as can processing attendant, feeder of canned pineapple and pineapple processing, nata de coco
processing, etc, functions which were not only directly related but were very vital to DOLEs business of production and
processing pineapple products for export.
102. Sonza v. ABSCBN (2004)

Facts: In May 1994, ABS-CBN signed an agreement with the Mel and Jay Management and Development Corporation
(MJMDC). ABS-CBN was represented by its corporate officers while MJMDC was represented by Sonza, as President and
GM, and Tiangco as its EVP and treasurer.
MJMDC agreed to provide Sonzas services exclusively to ABS-CBN as talent for radio and television. ABS-CBN
agreed to pay Sonza a monthly talent fee of P310, 000 for the first year and P317, 000 for the second and third year.
On April 1996, Sonza wrote a letter to ABS-CBN where he irrevocably resigned in view of the recent events concerning
his program and career.
After the said letter, Sonza filed with the DOLE a complaint alleging that ABS-CBN did not pay his salaries, separation pay,
service incentive pay,13th month pay, signing bonus, travel allowance and amounts under the Employees Stock Option Plan
(ESOP). ABS-CBN contended that no employee-employer relationship existed between the parties. However, ABS-
CBN continued to remit Sonzas monthly talent fees but opened another account for the same purpose.
The LA dismissed the complaint and found that there is no employee-employer relationship. NLRC affirmed the decision of
the Labor Arbiter. CA also affirmed the decision of NLRC.
Issue: Whether or not there was an employer-employee relationship between Sonza and ABS CBN.
Held: NO. Case law has consistently held that the ELEMENTS OF AN EMPLOYEE-EMPLOYER RELATIONSHIP are selection
and engagement of the employee, the payment of wages, the power of dismissal and the employers power to control
the employee on the means and methods by which the work is accomplished. The last element, the so-called "control test", is
the most important element.
Sonzas services to co-host its television and radio programs are because of his peculiar talents, skills and celebrity status.
Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from
ordinary employees. The specific selection and hiring of SONZA, because of his unique skills, talent and celebrity status not
possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an independent contractual relationship.
All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. For
103 Roco 3B
violation of any provision of the Agreement, either party may terminate their relationship. Applying the control test to the
present case, we find that SONZA is not an employee but an independent contractor.
The control test is the most important test our courts apply in distinguishing an employee from an independent contractor.
This test is based on the extent of control the hirer exercises over a worker. The greater the supervision and control the
hirer exercises, the more likely the worker is deemed an employee. The converse holds true as well the less control
the hirer exercises, the more likely the worker is considered an independent contractor.
To perform his work, SONZA only needed his skills and talent. How SONZA delivered his lines, appeared on television,
and sounded on radio were outside ABS-CBNs control. ABS-CBN did not instruct SONZA how to perform his job.
ABS-CBN merely reserved the right to modify the program format and airtime schedule "for more effective programming."
ABS-CBNs sole concern was the quality of the shows and their standing in the ratings.
Clearly, ABS-CBN did not exercise control over the means and methods of performance of Sonzas work. A radio
broadcast specialist who works under minimal supervision is an independent contractor. Sonzas work as television and radio
program host required special skills and talent, which SONZA admittedly possesses.
ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries to treat talents
like Sonza as independent contractors. The right of labor to security of tenure as guaranteed in the Constitution arises only
if there is an employer-employee relationship under labor laws. Individuals with special skills, expertise or talent enjoy the
freedom to offer their services as independent contractors. The right to life and livelihood guarantees this freedom to contract
as independent contractors. The right of labor to security of tenure cannot operate to deprive an individual, possessed with
special skills, expertise and talent, of his right to contract as an independent contractor.
103. People v. CA (2004)
104. Lakas sa Industriya v. Burlingame (2007)

Facts: Lakas sa Industriya filed a petition for certification election before Burlingame and sought to represent all
rank-and-file promo employees of DOLE numbering about 70 in all. It also prayed that it be voluntarily recognized by the
Burlingame to be the collective bargaining agent, or, in the alternative, that a certification/consent election be held among
said regular rank-and-file promo employees.
Burlingame argued that there exists no employer-employee relationship between it and the petitioners members and
further alleged that the petitioners members are actually employees of F. Garil Manpower Services (F. Garil), a duly
licensed local employment agency.
Med-Arbiter dismissed the petition for lack of employer-employee relationship. Secretary of Labor and Employment ordered
the immediate conduct of a certification election. Court of Appeals reversed the decision of the Secretary.
Issue: Whether there was an employer-employee relationship between them.
Held: YES. First, F. Garil does not have substantial capitalization or investment in the form of tools, equipment,
machineries, work premises, and other materials, to qualify as an independent contractor. No proof was adduced to show F.
Garils capitalization.
Second, the work of the promo-girls was directly related to the principal business or operation of Burlingame.
Marketing and selling of products is an essential activity to the main business of the principa l.
Lastly, F. Garil 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, Burlingame.
The fourfold test will show that Burlingame is the employer of petitioners members.
104 Roco 3B
Based on the contractual stipulations between Burlingame and F. Garil, it is patent that the involvement of F. Garil in the
hiring process was only with respect to the recruitment aspect, i.e. the screening, testing and pre-selection of the personnel it
provided to Burlingame. The actual hiring itself was done through the deployment of personnel to establishments by
Burlingame.
The contract states that Burlingame would pay the workers through F. Garil, stipulating that Burlingame shall pay F. Garil a
certain sum per worker on the basis of eight- hour work every 15th and 30th of each calendar month. This evinces the fact
that F. Garil merely served as conduit in the payment of wages to the deployed personnel. The interpretation would have been
different if the payment was for the job, project, or services rendered during the month and not on a per worker basis.
Court takes judicial notice of the practice of employers who, in order to evade the liabilities under the Labor Code, do not
issue payslips directly to their employees.
Their contract also provides that any personnel found to be inefficient, troublesome, uncooperative and not observing the
rules and regulations set forth by Burlingame shall be reported to F. Garil and may be replaced upon request. Corollary to
this circumstance would be the exercise of control and supervision by Burlingame over workers supplied by F. Garil in order
to establish the inefficient, troublesome, and uncooperative nature of undesirable personnel. Also implied in the provision on
replacement of personnel carried upon request by Burlingame is the power to fire personnel.
F. Garil was not an independent contractor since it did not carry a distinct business free from the control and supervision of
Burlingame.
It goes without saying that the contractual stipulation on the nonexistence of an employer-employee relationship
between Burlingame and the personnel provided by F. Garil has no legal effect. While the parties may freely stipulate
terms and conditions of a contract, such contractual stipulations should not be contrary to law, morals, good customs, public
order or public policy. This cannot override factual circumstances firmly establishing the legal existence of an
employer-employee relationship.
Under this circumstance, there is no doubt that F. Garil was engaged in labor-only contracting, and as such, is considered
merely an agent of Burlingame
105. Sasan v. NLRC (2008)

Facts: Equitable-PCI Bank (E-PCIBank) entered into a Contract for Services with HI, a domestic corporation primarily
engaged in the business of providing janitorial and messengerial services. Pursuant to their contract, HI shall hire and assign
workers to E-PCIBank to perform janitorial/messengerial and maintenance services. The contract were impliedly
renewed year after year. Petitioners were among those employed and assigned to E-PCIBank at its branch in Cebu City, as well
as to its other branches in the Visayas. Petitioners filed with the Arbitration Branch of the NLRC in Cebu City separate
complaints against E-PCIBank and HI for illegal dismissal, with claims for separation pay, service incentive leave pay,
allowances, damages, attorneys fees and costs.
Issue: Whether HI is a labor-only contractor.
Held: NO. HI is the employer.
LEGAL JOB CONTRACTING

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.
Elements of job contracting:

(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,
105 Roco 3B
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.
LABOR-ONLY CONTRACTING
Arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or
service for a principal.
Elements of labor-only contracting:

(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.
Vinoya v. NLRC It is not enough to show substantial capitalization or investment in the form of tools, equipment, etc. Other
facts that may be considered include the following:
(a) whether or not the contractor is carrying on an independent business;

(b) the nature and extent of the work;
(c) the skill required;
(d) the term and duration of the relationship;
(e) the right to assign the performance of specified pieces of work;
(f) the control and supervision of the work to another;
(g) the employers power with respect to the hiring, firing and payment of the contractors workers;
(h) the control of the premises;
(i) the duty to supply premises, tools, appliances, materials and labor; and
(j) the mode and manner or terms of payment.
The totality of the facts and the surrounding circumstances of the case are to be considered.
In this case, HI is a legitimate job contractor. HI has been issued by the DOLE Certificate of Registration.
HI is carrying on a distinct and independent business from E-PCIBank. The employees of HI are assigned to clients to
perform janitorial and messengerial services, clearly distinguishable from the banking services in which E-PCIBank is engaged.
SUBSTANTIAL CAPITAL OR INVESTMENT

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.
An independent contractor must have either substantial capital or investment in the form of tools, equipment, machineries,
work premises, among others. The law does not require both substantial capital and investment in the form of tools,
equipment, machineries, etc.
It is enough that it has substantial capital. In the case of HI, it has proven both.
Once it is established that an entity such as in this case, HI has substantial capital, it was no longer necessary to
adduce further evidence to prove that it does not fall within the purview of labor-only contracting. There is even no
need for HI to refute the contention of petitioners that some of the activities they performed such as those of messengerial
services are directly related to the principal business of E-PCIBank.
106 Roco 3B
In any event, we have earlier declared that while these services rendered by the petitioners as janitors, messengers and drivers are
considered directly related to the principal business of a bank, in this case E-PCIBank, nevertheless, they are not necessary
in the conduct of its (E-PCIBANKEs) principal business.
HI has substantial capital in the amount of P20,939,935.72. It has its own building where it holds office and it has been
engaged in business for more than a decade now.
All these circumstances establish that HI undertook said contract on its account, under its own responsibility, according
to its own manner and method, and free from the control and direction of E-PCIBank. Where the control of the principal is
limited only to the result of the work, independent job contracting exists. The janitorial service agreement between E-PCIBank
and HI is definitely a case of permissible job contracting.
As such legitimate job contractor, the law creates an employer- HI is a legitimate job contractor. Employee relationship
between HI and petitioners which renders HI liable for the latters claims.
In view of the preceding conclusions, petitioners will never become regular employees of E-PCIBank regardless of how long
they were working for the latter.
106. Coca-Cola v. Agito (2009)

Facts: In 2002, Agito filed two complaints with the NLRC against Coca-Cola (Coke), Peerless Integrated Services, Better
Builders, and Excellent Partners for reinstatement with backwages, regularization, nonpayment of 13 th month pay, and
damages. They alleged that they were salesmen in the employ of Coke for years, but were not regularized, and that they
were terminated without just cause and due process. They failed to state the reasons for filing a complaint against the other
entities.
Coke avers that they were employees of Interserve, performing contracted services pursuant to an agreement between
Coke and Interserve. Coke presented Interserves AOI, its Certificate of Registration with the BIR, its ITR and AFS, and its
DOLE registration to prove its status as an independent contractor. It thus moved for dismissal of the complaint against it.
The LA found that complainants were employees of Interserve, and not Coke. It gave weight to its DOLE registration, its
total assets amounting to P1.4M, and that it kept the complainants employee records. The NLRC affirmed. The CA reversed,
finding that it was a labor-only contractor with insufficient capital and investments; it only had P510,000 invested in vehicles,
making it difficult to keep up with the daily demands of deliveries. It also ruled that Coke had control over the means and
methods of complainants work, evidenced by reports, conventional routes, and memoranda.
Issue: Whether or not Interserve is a legitimate job contractor.
Held: NO. IT IS A LABOR-ONLY CONTRACTOR. A LEGITIMATE JOB CONTRACT, wherein an employer enters into a
contract with a job contractor for the performance of the formers work, is permitted by law. Thus, the employer-employee
relationship between the job contractor and his employees is maintained. In legitimate job contracting, the law creates an
employer-employee relationship between the employer and the contractors employees only for a limited purpose, i.e., to
ensure that the employees are paid their wages. The employer becomes jointly and severally liable with the job contractor only
for the payment of the employees wages whenever the contractor fails to pay the same. Other than that, the employer is not
responsible for any claim made by the contractors employees.
On the other hand, LABOR-ONLY CONTRACTING is an arrangement wherein the contractor merely acts as an agent in
recruiting and supplying the principal employer with workers for the purpose of circumventing labor law provisions setting
down the rights of employees. It is not condoned by law. A finding by the appropriate authorities that a contractor is a
labor-only contractor establishes an 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.
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
107 Roco 3B
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.
The contractor, not the employee, has the burden of proof that it has the substantial capital, investment, and tool to engage in
job contracting. 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.
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.
107. San Miguel v. Aballa (2005) p. 339

Facts: SMC entered into a Contract of Services with Sunflower Multi-purpose Cooperative effective 1 year. The services, to be
rendered at SMCs Shrimp Processing Plant, consists of messengerial-janitorial work, shrimp harvesting, sanitation and cold
storage, etc.
It was stipulated that (1) the coop shall employ necessary personnel and provide adequate equip, materials, tools, and
apparatus over which the coop shall have entire control and supervision; (2) no employer-employee relationship between
SMC, coop, and its members; (3) coop shall have exclusive direction in the selection, engagement, and discharage of its
members; and (4) coop undertakes to pay the wages, premiums, benefits of its members.
Upon expiration of the contract, it was deemed renewed from month to month. Then 97 members filed a complaint
demanding regularization as SMC employees. Then, the Shrimp Plant closed which was reported to the DOLE.
SMC denied the employer-employee relationship and pointed that it was Sunflower who was the employer.
LA and NLRC dismissed the complaint. CA reversed.

Issue: Whether or not SMS is the employer.
Held: YES. SUNFLOWER IS A LABOR-ONLY CONTRACTOR. The language of a contract is not determinative of the
parties relationship; rather, it is the totality of the facts and surrounding circumstances of the case. While Sunflower was
issued a Cert of Registration by the Cooperative Dev Authority, this merely shows that it had at least 2K paid up capital.
What appears is that Sunflower does not have substantial capitalization or investment in the form of tools, equipment,
machineries, work premises, and all other working tools, equipment, machineries etc. to qualify it as an independent
contractor. In this case, said tools and equipment are owned SMC.
Furthermore, Sunflower did not carry on an independent business or undertake the performance of its service contract
according to its own manner and method free from the control and supervision of its principal. Also, the members had been
working n the processing plant alongside regular SMC shrimp processing workers performing identical jobs.
108. Vinoya v. NLRC (2000) p. 360

Facts: Alexander Vinoya worked with Regent Food Corporation as sales representative until his services were terminated on
25 November 1991. Vinoya claims that he applied and was accepted by RFC as sales representative on 26 May 1990. On
same date, a company identification card was issued to him by RFC. He alleges that he reported daily to the office of RFC, in
Pasig City, to take the latters van for the delivery of its products. According to Vinoya, during his employ, he was assigned to
108 Roco 3B
various supermarkets and grocery stores where he booked sales orders and collected payments for RFC. For this task, he was
required by RFC to put up a monthly bond of P200.00 as security deposit to guarantee the performance of his obligation as
sales representative. He contends that he was under the direct control and supervision of the plant manager and senior
salesman of RFC.
Vinoya avers that on 1 July 1991, he was transferred by RFC to Peninsula Manpower Company, Inc. (PMCI), an
agency which provides RFC with additional contractual workers pursuant to a contract for the supply of manpower
services. After his transfer to PMCI, he was allegedly reassigned to RFC as sales representative. Subsequently, on 25
November 1991, he was informed by the personnel manager of RFC, that his services were terminated and he was asked
to surrender his ID card.
Vinoya was told that his dismissal was due to the expiration of the Contract of Service between RFC and PMCI. Petitioner
claims that he was dismissed from employment despite the absence of any notice or investigation. RFC, on the other hand,
maintains that no employer-employee relationship existed and insists that petitioner is actually an employee of PMCI,
allegedly an independent contractor which had a Contract of Service with RFC.
While RFC admits that it had control and supervision over Vinoya, it argues that such was exercised in coordination with
PMCI. RFC contends that the termination of its relationship with petitioner was brought about by the expiration of the
Contract of Service between itself and PMCI and not because petitioner was dismissed from employment.
Vinoya filed a case against RFC before the LA for illegal dismissal and non-payment of 13th month pay. PMCI was initially
impleaded as one of the respondents. Petitioner withdrew his charge against PMCI and pursued his claim solely against RFC.
RFC filed a third party complaint against PMCI.
LA concluded that RFC was the true employer of Vinoya. NLRC reversed. NLRC opined that PMCI is an independent
contractor because it has substantial capital and, as such, is the true employer of petitioner. NLRC held PMCI liable for the
dismissal of petitioner.
Issue: Whether Vinoya was an employee of RFC
Held: YES. PMCI WAS ENGAGED LABOR-ONLY CONTRACTORSHIP.
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
(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.
However, it is not enough to show substantial capitalization or investment in the form of tools, equipment, machineries and
work premises, among others, to be considered as an independent contractor. Jurisprudential holdings are to the effect that in
determining the existence of an independent contractor relationship, several factors might be considered such as, but not
necessarily confined to, 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 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.
109 Roco 3B
Court has to agree with the conclusion of the Labor Arbiter that PMCI is engaged in labor-only contracting. FIRST of all,
PMCI does not have substantial capitalization or investment in the form of tools, equipment, machineries, work
premises, among others, to qualify as an independent contractor. While it has an authorized capital stock of P1,000,000.00,
only P75,000.00 is actually paid-in, which, to our mind, cannot be considered as substantial capitalization. With 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.
SECOND, PMCI did not carry on an independent business nor did it undertake the performance of its contract
according to its own manner and method, free from the control and supervision of its principal, RFC. Workers assigned by
PMCI to RFC were under the control and supervision of the latter. The Contract of Service itself provides that RFC can
require the workers assigned by PMCI to render services even beyond the regular eight hour working day when deemed
necessary. RFC undertook to assist PMCI in making sure that the daily time records of its alleged employees faithfully reflect
the actual working hours. These are telltale indications that PMCI was not left alone to supervise and control its alleged
employees.
THIRD, PMCI was not engaged to perform a specific and special job or service, which is one of the strong indicators
that an entity is an independent contractor. As stated in the Contract of Service, the sole undertaking of PMCI was to
provide RFC with a temporary workforce able to carry out whatever service may be required by it. Such venture was complied
with by PMCI when the required personnel were actually assigned to RFC. Apart from that, no other particular job, work or
service was required from PMCI. Obviously, with such an arrangement, PMCI merely acted as a recruitment agency for RFC.
Since the undertaking of PMCI did not involve the performance of a specific job, but rather the supply of manpower only,
PMCI clearly conducted itself as labor-only contractor.
The work of Vinoya as sales representative is directly related to the business of RFC. Being in the business of food
manufacturing and sales, it is necessary for RFC to hire a sales representative like petitioner to take charge of booking its sales
orders and collecting payments for such.
Even granting that PMCI is an independent contractor, as RFC adamantly suggests, still, a finding of the same will not
save the day for RFC. A perusal of the Contract of Service entered into between RFC and PMCI reveals that petitioner is
actually not included in the enumeration of the workers to be assigned to RFC. The following are the workers
enumerated in the contract: (1) Merchandiser; (2) Promo Girl; (3) Factory Worker; (4) Driverr
The above enumeration does not include the position of petitioner as sales representative. This only shows that petitioner was
never intended to be a part of those to be contracted out. Had it really been the intention of both parties to include the
position of petitioner they should have clearly indicated the same in the contract. However, the contract is totally silent on this
point which can only mean that petitioner was never really intended to be covered by it.
We, therefore, hold that an employer-employee relationship exists between petitioner and RFC. Since petitioner, due to
his length of service, already attained the status of a regular employee, he is entitled to the security of tenure provided under
the labor laws. Hence, he may only be validly terminated from service upon compliance with the legal requisites for dismissal.
RFC never pointed to any valid or authorized cause under the Labor Code which allowed it to terminate the services of
petitioner. The lone allegation that the dismissal was due to the expiration or completion of contract is not even one of the
grounds for termination allowed by law. Neither did RFC show that petitioner was given ample opportunity to contest the
legality of his dismissal. No notice of such impending termination was ever given him.
Petitioner was definitely denied due process. The dismissal of petitioner was tainted with illegality. Vinoya is entitled to
reinstatement to his former position without loss of seniority rights and to payment of full backwages corresponding to the
period from his illegal dismissal up to actual reinstatement
109. Meralco Industrial Engineer Services v. NLRC (2008) p. 366

Facts: Meralco Industrial Engineering Services Corp. (MERALCO / MIESCOR) is the client of herein private respondents
Ofelia P. Landrito General Services (OPLGS). OPLGS is a business firm engaged in providing and rendering general services
such as janitorial and maintenance work to its clients. Ofelia P. Landrito is the Proprietor and General Manager of OPLGS.
110 Roco 3B
Petitioner and OPLGS entered into a Contract whereby the latter would supply janitorial services to petitioner, which
includes labor, materials, tools and equipment and supervision at petitioners Rockwell Thermal Plant. 49 employees as janitors
were assigned to said work.
However later on, the 49 employees (complainants) lodged a complaint against OPLGS for illegal deduction,
underpayment and non-payment of various premium pays. In view of the enactment of Republic Act No. 6727, the contract
between the petitioner and the private respondents was amended again to increase the minimum daily wage per employee
from P63.55 to P89.00 or P2,670.00 per month.
Subsequently a letter was sent by petitioners to private respondents, informing them that at the contract shall be terminated on
January 31, 1990. Accordingly, upon reaching the said date, the complainants were pulled out from their work. Hence they
included illegal dismissal in the charge and impleaded herein petitioner in their complaint.
The LA ruled in favor of the complainants and ordered private respondent to pay. The NLRC upheld the LA, adding that
Meralco was solidarily liable with OPLGS, using as basis Article 107 and 109 of the Labor Code.
The NLRC held that while petitioner is still solidarily liable for underpayment and non-payment of overtime pay, it directed
that labor standards award and separation pay be paid exclusively from the surety bond posted by private respondents. The
CA held that Meralco should also be held liable along with private respondent for the payment of separation pay. It based its
ruling on Article 109 which states: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
It explained: 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. 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 discussed. Hence the instant case filed by MERALCO
Issue: Whether the monetary awards would be shouldered by OPLGS without reimbursement from Meralco.
Whether OPLGS is solidarily liable with Meralco.
Held: YES. The law provides that, 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].
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: 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.
Taken together, an indirect employer 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 Meralco 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.
111 Roco 3B
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:
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. The
contract executed between the petitioner and the private respondents contains no provision for separation pay in the event
that the petitioner terminates the same.
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.
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, the said ruling cannot be applied in
reverse to this case as to allow the private respondents, who paid for the judgment awards in full, to recover from the
petitioner.
Meralco had already handed over to OPLGS 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.
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.
110. Neri v. NLRC (1993) see p. 336, 358 of Red Book

Facts: Building Care Corp (BCC) hired Neri & Caberin. BCC was engaged in technical, maintenance, engineering,
housekeeping, security, and other specific services. They were assigned to work in Far East Bank branch in CDO. Neri
worked as radio/telex operator while Caberin worked as janitor.
Later, they both sued the Bank. The suit was to compel the Bank to recognize them as regular employees and pay them the
wages employees receive.
LA ruled that BCC was a job contractor because it had substantial capitalization. Thus, its employees were not employees of
the Bank. NLRC affirmed. Still, Neri & Caberin insist that they are labor-only contractors and are, as a result, employees of the
Bank.
Neri contends that BCC failed to adduce evidence showing that it invested in tools, equipment, machineries, work premises,
and other materials necessary in the conduct of its business. They also argue that they perform duties directly related to the
principal business and operations of the Bank
Issue: Whether BCC is a labor-only contractor which would, thus, make the Bank their employer.
Held: NO. BCC need not prove that it made investments in the form of tools, equipment, machineries, work premises, among
others, because it has established that it has sufficient capitalization. This was recognized by the LA and in the NLRC. BCC is
therefore a highly capitalized venture and cannot be deemed engaged in labor-only contracting.
112 Roco 3B
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.
BCC cannot be considered a labor-only contractor because it has substantial capital. While there may be no evidence that
it has investment in the form of tools, equipment, machineries, work premises, among others, it is enough that it has
substantial capital.
In other words, the law does not require both substantial capital and investment in the form of tools, equipment,
machineries, etc. This is clear from the use of the conjunction or. If the intention was to require the contractor to prove
that he has both capital and the requisite investment, then the conjunction and should have been used. But, having
established that it has substantial capital, it was no longer necessary for BCC to further adduce evidence to prove that it does
not fall within the purview of labor-only contracting. There is even no need for it to refute petitioners contention that the
activities they perform are directly related to the principal business of the Bank.
The Court has already taken judicial notice the general practice adopted in several government and private institutions and
industries of hiring independent contractors to perform special services (e.g. janitorial, security, technical, etc). While
these services may be considered directly related to the principal business of the employer, nevertheless, they are not
necessary in the conduct of the principal business of the employer.
July 18, 2013

111. Royal Plant v. Coca Cola (2013)
Facts: Coca-Cola Bottlers Philippines, Inc. (CCBPI) is engaged in the manufacture, sale, and distribution of soft drink
products. In its Cebu Plant, there are 20 bottling operators in Bottling Line 1, and 12-14 bottling operators in Line 2, all male
and members of Royal Plant Workers Union (UNION) These bottling operators work in two shifts, from 8am to 5pm and
from 5pm up until production operations cease. For the latter shift, overtime pay is provided for work beyond 8 hours. Prior
to September 2008, the operators were given a 30 minute break every 2 hours of work. This changed after September 2008,
when the chairs provided for the bottling operators pursuant to their request back in 1974, were removed due to a
national directive by CCBPI. Consequently, they were now given a 30 minute break after every 1 hours of work.
The directive is in line with the I Operate, I Maintain, I Clean program of CCBPI, wherein every bottle operator is tasked
with keeping the machinery and equipment assigned to him clean and safe. Accordingly, this requires them to constantly move
about in the performance of their duties. CCBPI further rationalized that this was for the operators to avoid sleeping, thus
preventing injuries, given the nature of their work in dealing with machinery. Additionally, this was to promote efficient flow
of operations.
The bottler operators took issue with the removal of the chairs, thus they initiated the grievance machinery of the
CBA in Nov 2008. The parties were still at a deadlock after exhausting the remedies provided in the grievance machinery,
hence they submitted the issue for arbitration before the NCMB. Failing to arrive at an amicable settlement, the arbitration
proceedings continued, with the sole issue of whether the removal of chairs of the operators assigned at the
production/manufacturing line while performing their duties and responsibilities is valid or not.
CCBPI argues that such is a valid exercise of management prerogative, and does not violate the Labor Code and the
CBA. Union argues that the bottling operators have performed their duties satisfactorily with the presence of the chairs, and
the removal of such is a violation of Occupational Health and Safety Standards (which provide that every worker is entitled to
be provided by the employer with appropriate seats, among others), the State policy of assuring the right of workers to just
and humane conditions of work stated in Article 3 of the LC, the Global Workplace Rights Policy, and Article 100 (non-
diminution of benefits).
The Arbitration Committee ruled in favour of the Union, and ordered restoration of the chairs, stating that the provision
of chairs for 34 years has been a company practice which ripened into a benefit enjoyed by the workers, and is now protected
by the rule on non-diminution of benefits. They also stated that CCBPI failed to provide proof of instances of sleeping in the
113 Roco 3B
workplace, that it was puzzling why it took 34 years for CCBPI to be aware of safety concerns, and that line efficiency was not
solely attributable to the presence of chairs.
CA reversed, stating that the removal was in line with management prerogative, justified by the directives and purpose of the
Operate, I Maintain, I Clean program, and was also beneficial to the workers since the rotation for each shift was reduced
to 1 hours from 2 , increasing their rest periods.
Issue: Was the removal of the bottling operators chairs from the production lines a valid exercise of management prerogative?
Held: YES. The removal of the chairs was a valid exercise of management prerogative. They cant complain since the removal
of the chairs was well compensated: CCBPI removed the operators chairs pursuant to a national directive and in line with its
I Operate, I Maintain, I Clean program. 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.
It was done for a valid purpose: efficiency.
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.
Also, there was no violation of the LC provisions cited by workers. 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.
(a) The Labor Code, specifically Article 132 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.
(b) 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
Also, sitting down for long hours is hazardous to ones health! 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 Vic Health, Australia, 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, national
activity guidelines.
Studies mention the following occupations as those at risk: taxi drivers, call center and office. Aside from injury to the bones
and muscles (due to lack of activity), other risks include decreased fitness higher blood levels of sugar and fats, larger
waistlines, and higher risk of metabolic syndrome.
In addition, studies show 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.
More importantly, there was no diminution of benefits, as it only covers monetary benefits!
114 Roco 3B
The operators chairs cannot be considered as one of the employee benefits covered in Article 100 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.
The court cited benefits which had been considered by the SC in past decisions as covered by non-diminution rule:
Payment of 14th, 15th Nth month bonuses
13th month pay
legal/special holiday pay, night premium pay and vacation and sick leaves;
service awards with cash incentives, premium pay, Christmas party with incidental benefits and promotional increase.
Thus, let it be stressed that the article speaks of non-diminution of supplements and other employee benefits.
Supplements are privileges given to an employee which constitute as extra remuneration besides his or her basic
ordinary earnings and wages. From this definition, it can only deduce that the other employee benefits spoken of by Article
100 pertain only to those which are susceptible of monetary considerations.
112. Letran Calamba Faculty & Employees v. NLRC

Facts: Letran Calamba filed with the NLRC a Complaint against Colegio de San Juan de Letran, Calamba for collection of
various monetary claims due its members.
It alleged in its Position Paper that:

1) In the computation of the 13th month pay of its academic personnel, Letran did not include as basis their
compensation for overloads. It only takes into account the pay the faculty members receive for their teaching loads not
exceeding 18 units. The teaching overloads are rendered within 8 hours a day.
2) not paid the wage increases required by Wage Order No. 5
3) The salary increases due the non-academic personnel as a result of job grading has not been given.
5) not paid to its employees the balances of 70% of the tuition fee increases
6) not also paid its employees the holiday pay for the 10 regular holidays
Petitioners arguments
As to the inclusion of the overloads of Letrans faculty members in the computation of their 13thmonth pay, petitioner
argues that under the Revised Guidelines on the Implementation of the 13th-Month Pay Law, promulgated by the
Secretary of Labor, 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. 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, the
overloads should be included in the computation of the faculty members 13thmonth pay .
Petitioner cites the opinion of the Bureau of Working Conditions of the DOLE that payment of teaching overload
performed within 8 hours of work a day shall be considered in the computation of the 13th-month pay . They further
contends that DOLE-DECS-CHED- TESDA Order No. 02 cannot be applied since was issued long after the
commencement of the complaints for monetary claims and to give retroactive application to the DOLE Order issued in 1996
is to deprive workers of benefits which have become vested.
Respondents arguments
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. Legal Services Office of the DOLE issued an opinion that
remunerations for teaching in excess of the regular load, which includes overload pay for work performed within an 8-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. And that prior to the issuance of the DOLE Order, the prevailing rule is to exclude excess teaching load, which is akin
to overtime.
LA dismissed the money claims. On appeal, NLRC affirms.
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Issue: Whether the pay of faculty members for teaching overloads should be included as basis in computing 13th month pay.
Held: NO. The Court is confronted with conflicting interpretations by different government agencies.
1. That overload pay is included in the computation of 13th month pay

a. opinion of the Bureau of Working Conditions of the DOLE
If overload is performed within a teachers normal 8hour work per day, the remuneration that the teacher will get from the
additional teaching load will form part of the basic wage.
b. Explanatory Bulletin on the Inclusion of Teachers Overload Pay in the 13thMonth Pay Determination issued by
the DOLE
Basis of the 13th-month pay computation:
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.
Basic wage includes 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.
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
OVERLOAD WORK/PAY : load in excess of the normal load of private school teachers as prescribed by the DECS or the
policies, rules and standards of particular private schools. The total actual teaching or classroom hours of which a teacher can
generally perform in less than 8 hours per working day. 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 teachers 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 teachers 13thmonth pay.
Overload work is sometimes misunderstood as synonymous to overtime work. These two terms are not the same
because overtime work is work rendered in excess of normal working hours of eight in a day. 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. 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.
2. That Overload pay is NOT included in the computation of 13 th month pay

a. Legal Services Department of the DOLE opinion
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.
b. DOLE Order
Any work done in addition to the 8 hours daily work shall constitute overtime work. 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.
Petitioner claims that the DOLE Order should not be made to apply to the present case because said Order was issued only
in 1996, 4 years after the present case was initiated since administrative rulings and circulars shall not be given retroactive
effect. 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 preexisting law and the administrative interpretation is at best advisory for it is the
courts that finally determine what the law means. While the DOLE Order may not be applicable, the Court finds that overload
116 Roco 3B
pay should be excluded from the computation of the 13thmonth pay. It is decisive to determine what basic salary includes
and excludes.
According to San Miguel Corporation v. Inciong, basic salary is 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. The following compensations are deemed NOT PART of the basic salary: Cost-of-living allowances
granted pursuant to Presidential Decree 525 and Letter of Instruction No. 174; Profit sharing payments; 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 PD 851, overtime pay, earnings and other
remunerations are excluded as part of the basic salary and in the computation of the 13th-month pay. The catch-all
exclusionary phrase all allowances and monetary benefits which are not considered or integrated as part of the basic salary
shows the intention to strip basic salary of any and all additions which may be in the form of allowances or fringe benefits.
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.
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.
Labor Code:
Art. 87Overtime 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.
Article 93 : 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 clear that overtime pay and premium for special holiday are additional compensations other than the regular
wage or basic salary and shall not be considered in the computation of the 13th- month pay .
An OVERLOAD PAY, may not be considered as part of a teachers 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. 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. 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.
Further, excess teaching load is paid by the hour, while the regular teaching load is paid on a monthly basis; and the
assignment of overload is subject to the availability of teaching loads. Overload pay is not integrated with a teachers basic
salayr; varies from one semester to another, as it is dependent upon the availability of extra teaching loads. Verily, overload pay
may not be included as basis for determining a teachers 13thmonth pay.
113. Asian Alcohol v. NLRC

Facts: The Parsons family, who originally owned the controlling stocks in Asian Alcohol, were driven by mounting business
losses to sell their majority rights to Prior Holdings, Inc. To thwart further losses, Prior Holdings implemented a
reorganizational plan and other cost-saving measures.
117 employees out of a total workforce of 360 were separated. 72 of them occupied redundant positions that were abolished.
Of these positions, 21 were held by union members and 51 by non-union members.
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Private respondents are among those union members whose positions were abolished due to redundancy . They were all
assigned at the Repair and Maintenance Section of the Pulupandan plant.
1. Carias, Martinez, Sendon: water pump tenders
2. Amacio: machine shop mechanic
3. Verayo: briquetting plant operator
4. Tormo: plant helper under Verayo
They received individual notices of termination. They were paid the equivalent of one month salary for every year of service as
separation pay, the money value of their unused sick, vacation, emergency and seniority leave credits, 13th month pay for the
year 1992, medicine allowance, tax refunds, and goodwill cash bonuses for those with at least 10 years of service.
All of them executed sworn releases, waivers, and quitclaims. Except for Verayo and Tormo, they all signed sworn
statements of conformity to the company retrenchment program . And except for Martinez, they all tendered letters of
resignation.
Private respondents filed with the NLRC Regional Arbitration, complaints for illegal dismissal with a prayer for
reinstatement with backwages, moral damages and attorneys fees. They alleged that Asian Alcohol used the
retrenchment program as a subterfuge for union busting . They claimed that they were singled out for separation by
reason of their active participation in the union. They also asseverated that Asian Alcohol was not bankrupt as it has
engaged in an aggressive scheme of contractual hiring.
The private respondents contend that the new management should have followed the policy of first in, last out in
choosing which positions to declare as redundant or whom to retrench to prevent further business losses.
Issue: Whether the plant workers were illegally dismissed.
Held: NO. No law mandates such a policy. And the reason is simple enough. The characterization of positions as
redundant is an exercise of business judgment on the part of the employer. It will be upheld as long as it passes the test of
arbitrariness. Private respondents call our attention to their allegation that casuals were hired to replace Carias, Martinez and
Sendon as water pump tenders at the Ubay wells. They rely on the testimony of Engr. Federico Palmares, Jr., the head of the
Mechanical Engineering Services Department who admitted the engagement of independent contractors to operate the wells.
An employers good faith in implementing a redundancy program is not necessarily destroyed by availment of the
services of an independent contractor to replace the services of the terminated employees. The reduction of the
number of workers in a company made necessary by the introduction of the services of an independent contractor is justified
when the latter is undertaken in order to effectuate more economic and efficient methods of production. Private respondents
failed to proffer any proof that the management acted in a malicious or arbitrary manner in engaging the services of an
independent contractor to operate the Laura wells.
Private respondents now claim that they signed the QUITCLAIMS, WAIVERS and VOLUNTARY RESIGNATION LETTERS
only to get their separation package. They maintain that in principle, they did not believe that their dismissal was valid.
It is true that this Court has generally held that quitclaims and releases are contrary to public policy and therefore,
void. Nonetheless, voluntary agreements that represent a reasonable settlement are binding on the parties and should
not later be disowned. It is only where there is clear proof that the waiver was wangled from an unsuspecting or gullible
person, or the terms of the settlement are unconscionable, that the law will step in to bail out the employee.
There is no showing that the quitclaims, waivers and voluntary resignation letters were executed by the private respondents
under force or duress. In truth, the documents embodied separation benefits that were well beyond what the company was
legally required to give private respondents.
The law allows an employer to downsize his business to meet clear and continuing economic threats. This Court has
upheld reductions in the work force to forestall business losses or stop the hemorrhaging of capital. The right of
management to dismiss workers during periods of business recession and to install labor saving devices to prevent
losses is governed by Art. 283 which provides that the employer may terminate employment of any employee due to the
118 Roco 3B
installation of labor saving devices, redundancy, retrenchment, to prevent losses or the closing or cessation of operation of the
establishment or undertaking.
Retrenchment and redundancy are just causes for the employer to terminate the services of workers to preserve the
viability of the business. In exercising its right, however, management must faithfully comply with the substantive and
procedural requirements laid down by law and jurisprudence.
REQUISITES OF RETRENCHMENT
1. That the retrenchment is reasonably necessary and likely to prevent business losses which, if already incurred,
are not merely de minimis, but substantial, serious, actual and real, or if only expected, are reasonably imminent as
perceived objectively and in good faith by the employer;
2. That the employer served written notice both to the employees and to the DOLE at least one month prior to the
intended date of retrenchment;
3. That the employer pays the retrenched employees separation pay equivalent to one month pay or at least 1/2
month pay for every year of service, whichever is higher;
4. That the employer exercises its prerogative to retrench employees in good faith for the advancement of its
interest and not to defeat or circumvent the employees right to security of tenure ; and
5. That the employer used fair and reasonable criteria in ascertaining who would be dismissed and who would be
retained among the employees, such as status (i.e., whether they are temporary, casual, regular or managerial
employees), efficiency, seniority, physical fitness, age, and financial hardship for certain workers.
Financial Documents as Proof

The condition of business losses is normally shown by audited financial documents like yearly balance sheets and profit and
loss statements as well as annual income tax returns. Financial statements must be prepared and signed by independent
auditors. It is not enough that only the financial statements for the year during which retrenchment was undertaken. While
the company has indeed been losing, its losses may be on a downward trend, indicating that business is picking up and
retrenchment, being a drastic move, should no longer be resorted to. It is necessary that the employer also show that its losses
increased through a period of time and that the condition of the company is not likely to improve in the near future.
Private respondents never contested the veracity of the audited financial documents proffered by Asian Alcohol.
Neither did they object to their admissibility. They show that petitioner has accumulated losses amounting to P306,764,349.00
and showing nary a sign of abating in the near future. The allegation of union busting is bereft of proof. Union and non-union
members were treated alike. The records show that the positions of 51 other non-union members were abolished due to
business losses.
RETRENCHMENT AS A CONCEPT
Article 283 uses the phrase retrenchment to prevent losses. This phrase means that retrenchment must be undertaken by
the employer before losses are actually sustained. The employer need not keep all his employees until after his losses
shall have materialized. Otherwise, the law could be vulnerable to attack as undue taking of property for the benefit of
another.
Prior Holdings took over the operations of Asian Alcohol in October 1991. Plain to see, the last quarter losses in 1991 were
already incurred under the new management. There were no signs that these losses would abate. The law gives the new
management every right to undertake measures to save the company from bankruptcy.
The reorganizational plan and comprehensive cost-saving program to turn the business around were not designed to bust the
union of the private respondents. Retrenched were 117 employees. 72 of them including private respondents were separated
because their positions had become redundant. In this context, what may technically be considered as redundancy may verily
be considered as retrenchment measures. Their positions had to be declared redundant to cut losses.
REDUNDANCY
Redundancy exists when the service capability of the work force is in excess of what is reasonably needed to meet the
demands on the enterprise. A redundant position is one rendered superfluous by any number of factors, such as overhiring
119 Roco 3B
of workers, decreased volume of business, dropping of a particular product line previously manufactured by the company or
phasing out of a service activity priorly undertaken by the business.
REQUISITES
1. Written notice served on both the employees and the DOLE at least one month prior to the intended date of
retrenchment;
2. Payment of separation pay equivalent to at least one month pay for every year of service, whichever is higher;
3. Good faith in abolishing the redundant positions; and
4. Fair and reasonable criteria in ascertaining what positions are to be declared redundant and accordingly
abolished.
114. Coca Cola v. Cruz (2009)

Facts: Seven respondents filed 2 separate complaints for regularization with money claims against Coca-Cola Bottlers
Philippines, Inc. (COKE) which were then consolidated and amended. Peerless Integrated Service, Inc. (Peerless) was also
impleaded as respondent.
They alleged that they were route helpers with Cokes trucks, going from offices or plants to outlets such as stores,
restaurants, groceries, etc. They allege that they render necessary and desirable services. They were hired either directly or
by contractors, not enjoying full benefits granted to the regular sales force. They likewise allege that they worked under the
control of Cokes supervisors who prepared their schedules and assignments, and that the contractors did not have
sufficient capital or investment; they are labor-only contracts.
Coke denies any employer-employee relationship, citing its service contracts with Peerless and Excellent Partners
Cooperative (Excellent). Coke argues that their jobs are not usually necessary and desirable in its main business, since
handling, loading, and unloading of the drinks are not part of the manufacturing process, and they left to them the means
and methods of achieving this result.
The CA found them to be engaged in labor-only contracting. The work given is necessary and desirable, and there was no
proof of substantial capital.
Issue: Whether labor-only contracting existed thereby making Coke liable as an employer.
Held: YES. The law allows contracting and subcontracting involving services but closely regulates these activities for the
protection of workers. Thus, an employer can contract out part of its operations, provided it complies with the limits and
standards provided in the Code and in its implementing rules.
The right to control refers to the prerogative of a party to determine, not only the end result sought to be achieved, but
also the means and manner to be used to achieve this end.
In strictly laymans terms, a manufacturer can sell its products on its own, or allow contractors, independently operating on
their own, to sell and distribute these products in a manner that does not violate the regulations. From the terms of D.O. 18-
02, the legitimate job contractor must have the capitalization and equipment to undertake the sale and distribution of the
manufacturers products, and must do it on its own using its own means and selling methods.
In the present case, both the capitalization of Peerless and Excellent and their control over the means and manner of their
operations are live sub-issues before us.
A key consideration in resolving these issues is the contract between the company and the purported contractors. The
contract with Peerless, which is almost identical with the contract with Excellent, among others, states:
5. The CONTRACTOR shall have exclusive discretion in the selection, engagement and discharge of its
personnel, employees or agents or otherwise in the direction and control hereunder. The determination of the wages,
salaries and compensation of the personnel, workers and employees of the CONTRACTOR shall be within its full control.
120 Roco 3B
Although it is understood and agreed between the parties hereto that the CONTRACTOR, in the performance of its
obligations hereunder, is subject to the control and direction of he COMPANY merely as to result to be accomplished
by the work or services herein specified, and not as to the means and methods of accomplishing such result, the
CONTRACTOR hereby warrants that it will perform such work or services in such manner as will be consistent with the
achievement of the result herein contracted for.
These provisions particularly, that Peerless and Excellent retain the right to select, hire, dismiss, supervise, control, and
discipline all personnel they will assign to the petitioner, as well as pay their salaries were cited by the LA and the NLRC as
basis for their conclusion that no employer-employee relationship existed between the respondents and the petitioner. The CA
viewed matters differently and faulted the labor tribunals for relying solely on the service contracts to prove that the
respondents were employees of Peerless and Excellent.
The fact that the service contract entered into by petitioner and Universal stipulated that private respondents shall
be the employees of Universal, would not help petitioner, as the language of a contract is not determinative of the
relationship of the parties. Petitioner and Universal cannot dictate, by the mere expedient of a declaration in a contract, the
character of Universal business, i.e., whether as labor-only contractor, or job contractor, it being crucial that Universals
character be mentioned in terms of and determined by the criteria set by the statute. as basis for looking at how the contracted
workers really related with the company in performing their contracted tasks. In other words, the contract between the
principal and the contractor is not the final word on how the contracted workers relate to the principal and the
purported contractor; the relationships must be tested on the basis of how they actually operate.
The CA concluded that other than the petitioners bare allegation, there is no indication in the records that Peerless
and Excellent had substantial capital, tools or investment used directly in providing the contracted services to the
petitioner. Thus, in the handling and delivery of company products, the contracted personnel used company trucks and
equipment in an operation where company sales personnel primarily handled sales and distribution, merely utilizing the
contracted personnel as sales route helpers.
In plainer terms, the sales route helpers were only engaged in the marginal work of helping in the sale and
distribution of company products; they only provided the muscle work that sale and distribution required and were thus necessarily under
the companys control and supervision in doing these tasks. Still another way of putting it is that the contractors were not independently
selling and distributing company products, using their own equipment, means and methods of selling and distribution; they
only supplied the manpower that helped the company in the handing of products for sale and distribution. In the context of
D.O. 18-02, the contracting for sale and distribution as an independent and self-contained operation is a legitimate
contract, but the pure supply of manpower with the task of assisting in sales and distribution controlled by a
principal falls within prohibited labor-only contracting.
Magsalin v. National Organization of Workingmen that: The argument of petitioner that its usual business or trade is softdrink
manufacturing and that the work assigned to the respondent workers so involves merely postproduction activities, one
which is not indispensable in the manufacture of its products, scarcely can be persuasive. If, as so argued by petitioner
company, only those whose work are directly involved in the production of softdrinks may be held performing functions
necessary and desirable in its usual business or trade, there would have been no need for it to even maintain regular truck sales
route helpers. The nature of the work performed must be viewed from a perspective of the business or trade in its
entirety and not only in a confined scope.
While the respondents were not direct parties to this ruling, the petitioner was the party involved and Magsalin described in a
very significant way the manufacture of softdrinks and the companys sales and distribution activities in relation with
one another. Following the lead we gave in Magsalin, the CA concluded that the contracted personnel who served as route
helpers were really engaged in functions directly related to the overall business of the petitioner. This led to the further CA
conclusion that the contracted personnel were under the companys supervision and control since sales and distribution were
in fact not the purported contractors independent, discrete and separable activities, but were component parts of sales and
distribution operations that the company controlled in its softdrinks business.
Based on these considerations, we fully agree with the CA that Peerless and Excellent were mere suppliers of labor
who had no sufficient capitalization and equipment to undertake sales and distribution of softdrinks as independent
121 Roco 3B
activities separate from the manufacture of softdrinks, and who had no control and supervision over the contracted
personnel. They are therefore labor-only contractors. Consequently, the contracted personnel, engaged in component
functions in the main business of the company under the latters supervision and control, cannot but be regular company
employees. In these lights, the petition is totally without merit and hence must be denied
115. Temic Automotive v. Temic Automotive Employees (2009)

Facts: Petitioner is a corporation engaged in the manufacture of electronic brake systems and comfort body electronics for
automotive vehicles while respondent Union is the exclusive bargaining agent of the TAs rank-and-file employees.
TA is composed of several departments, one of which is the warehouse department consisting of 2 warehouses, which was
further divided into 4 sections: receiving section, raw materials warehouse section, indirect warehouse section and finished
goods section. The union members are regular rank-and-file employees working in these sections as clerks, material
handlers, system encoders and general clerks.
By practice established since 1998, the TA contracts out some of the work in the warehouse department, specifically
those in the receiving and finished goods sections to 3 independent service providers or forwarders (forwarders), namely:
Diversified Cargo Services, Inc. (Diversified), Airfreight 2100 (Airfreight) and Kuehne & Nagel, Inc. (KNI) all of which
have their own employees who hold the positions of clerk, material handler, system encoder and general clerk who share the
same work area and use the same equipment, tools and computers all belonging to the petitioner.
This outsourcing arrangement gave rise to a union grievance on the issue of the scope and coverage of the collective
bargaining unit, specifically to the question of whether or not the functions of the forwarders employees are functions being
performed by the regular rank-and-file employees covered by the bargaining unit. The union thus demanded that the
forwarders employees be absorbed into the TAs regular employee force and be given positions within the bargaining
unit.
TA contends that contracting/outsourcing was a valid exercise of its management prerogative. The forwarders are all
highly reputable freight forwarding companies providing total logistics services such as customs brokerage that includes the
preparation and processing of import and export documentation, cargo handling, transport (air, land or sea), delivery and
trucking; and they have substantial capital and are fully equipped with the technical knowledge, facilities, equipment, materials,
tools and manpower to service the companys forwarding, packing and loading requirements.
Union and the TA failed to resolve the dispute at the grievance machinery level, thus necessitating recourse to voluntary
arbitration. Voluntary Arbitrator found that the outsourcing of forwarding work is expressly allowed by the rules
implementing the Labor Code. However, voluntary arbitrator also held that the TA went beyond the limits of the legally
allowable contracting out because the forwarders employees encroached upon the functions of the petitioners regular
rank-and-file workers. The forwarders employees perform their jobs in the company warehouse together with the
TAs employees, use the same company tools and equipment and work under the same company supervisors indicators
that the petitioner exercises supervision and control over all the employees in the warehouse department. For these reasons, he
declared the forwarders employees serving as clerks, material handlers, system encoders and general clerks to be employees
of the company who are entitled to all the rights and privileges of regular employees of the company including security of
tenure. CA affirmed.
Issue: Whether or not the company validly contracted out or outsourced the services involving forwarding, packing, loading
and clerical activities related thereto.
Held: YES. Petitioner explained that its regular employees clerical and material handling tasks are not identical with those
done by the service providers; the clerical work rendered by the contractors are recording and documentation tasks
ancillary to or supportive of the contracted services of forwarding, packing and loading; on the other hand, the company
employees assigned as general clerks prepare inventory reports relating to its shipments in general to ensure that the recording of inventory is consistent
with the companys general system; company employees assigned as material handlers essentially assist in counter-checking and
reporting activities to ensure that the contractors services comply with company standards. The similarity of these activities
to those performed by the companys regular employees does not necessarily lead to the conclusion that the
forwarders employees should be absorbed by the company as its regular employees.
122 Roco 3B
In Meralco v. Quisumbing, recognition of outsourcing as a legitimate activity when we held that a company can determine in its
best judgment whether it should contract out a part of its work for as long as the employer is motivated by good faith; the
contracting is not for purposes of circumventing the law; and does not involve or be the result of malicious or arbitrary action.
The forwarding arrangement complies with the requirements of Article 106 of the Labor Code and its implementing rules.
To reiterate, no evidence or argument questions the companys basic objective of achieving greater economy and efficiency
of operations. This, to our mind, goes a long way to negate the presence of bad faith. The forwarding arrangement has
been in place since 1998 and no evidence has been presented showing that any regular employee has been dismissed
or displaced by the forwarders employees since then. No evidence likewise stands before us showing that the outsourcing
has resulted in a reduction of work hours or the splitting of the bargaining unit effects that under the implementing rules of
Article 106 of the Labor Code can make a contracting arrangement illegal.
On the whole, we see no evidence or argument effectively showing that the outsourcing of the forwarding activities
violate our labor laws, regulations, and the parties CBA, specifically that it interfered with, restrained or coerced
employees in the exercise of their rights to self-organization as provided in Section 6, par. (f) of the implementing rules.
The job of forwarding, as we earlier described, consists not only of a single activity but of several services that
complement one another and can best be viewed as one whole process involving a package of services. These
services include packing, loading, materials handling and support clerical activities, all of which are directed at the
transport of company goods, usually to foreign destinations.
A clerical job, for example, may similarly involve typing and paper pushing activities and may be done on the same company
products that the forwarders employees and company employees may work on, but these similarities do not necessarily mean
that all these employees work for the company
From the perspective of the union in the present case, we note that the forwarding agreements were already in place when the
current CBA was signed. In this sense, the union accepted the forwarding arrangement, albeit implicitly, when it signed the
CBA with the company. Thereby, the union agreed, again implicitly by its silence and acceptance, that jobs related to the
contracted forwarding activities are not regular company activities and are not to be undertaken by regular employees falling
within the scope of the bargaining unit but by the forwardersemployees.
Thus, the skills requirements and job content between forwarders jobs and bargaining unit jobs may be the same,
and they may even work on the same company products, but their work for different purposes and for different
entities completely distinguish and separate forwarder and company employees from one another. A clerical job,
therefore, if undertaken by a forwarders employee in support of forwarding activities, is not a CBA covered
undertaking or a regular company activity.
When the CBA provisions were put in place, the forwarding agreements had been in place so that the forwarders
employees were never considered as company employees who would be part of the bargaining unit. To be precise, the
forwarders employees and their positions were not part of the appropriate bargaining unit as already constituted. In fact,
even now, the union implicitly recognizes forwarding as a whole as a legitimate non- company activity by simply claiming as
part of their unit the forwarders employees undertaking allied support activities.
The essential nature of the outsourced services is not substantially altered by the claim of the three KNI employees that they
occasionally do work that pertains to the companys finished goods supervisor or a company employee such as the inspection
of goods to be shipped and inventory of finished goods. This was clarified by petitioners warehouse manager Gregorio and
Section Head Bawar in their respective affidavits. They explained that the three KNI employees do not conduct inventory of
finished goods; rather, as part of the contract, KNI personnel have to count the boxes of finished products they load into the
trucks to ensure that the quantity corresponds with the entries made in the loading form; included in the contracted service is
the preparation of transport documents like the airway bill; the airway bill is prepared in the office and a KNI employee calls
for the airway bill number, a sticker label is then printed; and that the use of the company forklift is necessary for the loading
of the finished goods into the truck.
123 Roco 3B
Thus, even on the evidentiary side, the unions case must fail.
116. Baguio v. NLRC (1991)

Facts: Feliciano LUPO, a building contractor, entered into a contract with GMC, a domestic corporation engaged in flour and
feeds manufacturing, for the construction of an annex building inside the latter's plant in Cebu City. LUPO hired petitioners
either as carpenters, masons or laborers. Subsequently, LUPO terminated petitioners' services, on different dates.
Petitioners filed Complaints against LUPO and GMC before the NLRC for unpaid wages, COLA differentials, bonus and
overtime pay.
LA found LUPO and GMC jointly and severally liable to petitioners. The NLRC First Division denied appeal. The case
was reassigned to the Third Division. Such division absolved GMC from any liability.
Petitioners contend that GMC is jointly and severally liable with LUPO for the latter's obligations to them. They seek recovery
from GMC based on Article 106 of the Labor Code, which holds the employer jointly and severally liable with his contractor
for unpaid wages of employees of the latter.
Solicitor General recognizes the solidary liability of GMC and LUPO but bases recovery on Article 108 of the Labor Code,
contending that inasmuch as GMC failed to require LUPO to post a bond to answer for the latter's obligations to his
employees, as required by said provision, GMC should, correspondingly, be deemed solidarily liable.
Both GMC and the NLRC maintain that Article 106 finds no application in the instant case because it is limited to situations
where the work being performed by the contractor's employees are directly related to the principal business of the employer.
Issue: W/N GMC should be held solidarily liable with LUPO.
Held: YES. GMC is solidarily liable (as an indirect employer in a job contracting set-up [art. 107]) pursuant to Article
109. We uphold the solidary liability of GMC and LUPO for the latter's liabilities in favor of employees whom he had earlier
employed and dismissed. Recovery, however, should not be based on Article 106 of the Labor Code. This provision
treats specifically of "labor-onIy" contracting, which is not the set-up between GMC and LUPO.
A person is deemed to be engaged in "labor-only" contracting where (1) 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 (2)
the workers recruited and placed by such person are performing activities which are directly related to the principal business of
such employer.
Since the construction of an annex building inside the company plant has no relation whatsoever with the employer's
business of flour and feeds manufacturing, "labor-only" contracting does not exist. Article 106 is thus inapplicable.
Instead, it is "job contracting," covered by Article 107, which applies. There is "JOB CONTRACTING" where (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.
It may be that LUPO subsequently ran out of capital and was unable to satisfy the award to petitioners. That was an after-the-
fact development, however, and does not detract from his status as an independent contractor.
GMC qualifies as an "indirect employer." It entered into a contract with an independent contractor, LUPO, for the
construction of an annex building, a work, task, job or project not directly related to GMC's business of flour and feeds
manufacturing. Being an "indirect employer," GMC is solidarily liable with LUPO for any violation of the Labor
Code pursuant to Article 109.
124 Roco 3B
The distinction between Articles 106 and 107 lies in the fact that Article 106 deals with "labor-only" contracting. Here, by
operation of law, the contractor is merely considered as' an agent of the employer, who is deemed "responsible to the workers
to the same extent as if the latter were directly employed by him." On the other hand, Article 107 deals with"job
contracting" In the latter situation, while the contractor himself is the direct employer of the employees, the employer
is deemed, by operation of law, as an indirect employer .
The phrase "not an employer" found in Article 107 must be read in conjunction with Article 106. A contrary interpretation
would render the provisions of Article 107 meaningless considering that every time an employer engages a contractor, the
latter is always acting in the interest of the former, whether directly or indirectly, in relation to his employees.
A finding that a contractor is a "labor-only" contractor is equivalent to declaring that there is an employer-employee
relationship between the owner of the project and the employees of the "labor-only" contractor.
This is evidently because, as heretofore stated, the "labor-only" contractor is considered as a mere agent of an employer.
In contrast, in "job contracting," no employer-employee relationship exists between the owner and the employees of his
contractor. The owner of the project is not the direct employer but merely an indirect employer, by operation of law, of his
contractor's employees.
As an indirect employer, and for purposes of determining the extent of its civil liability, GMC is deemed a "direct employer"
of his contractor's employees pursuant to the last sentence of Article 109 of the Labor Code. GMC cannot escape its joint and
solidary liability to petitioners. Having failed to require LUPO to post such a bond, GMC must answer for whatever liabilities
LUPO may have incurred to his employees. This is without prejudice to its seeking reimbursement from LUPO for whatever
amount it will have to pay petitioners.
CONCURRING AND DISSENTING OPINION (Padilla, J.)
From the foregoing basic premises, it is my submission that GMC is an employer in every sense of the word. It engages in
the primary enterprise of manufacturing flour and feeds, it definitely employs employees and workers in its plant and outlets to
work in various capacities. Therefore, the company cannot, in any way, be considered an indirect employer, as the term
is defined, for purposes of the petitioner's cause of action against it.
To hold as the majority does, that Article 107 does apply in this case, would, in my view, render useless the phrase "not being
an employer" contained therein. Such a qualification, as I see it, gives protection to those workers hired or recruited by a
contractor to work on some job for a person who is not himself engaged in any enterprise.
An example easily comes to mind: a person who wishes to have a residential house built. He engages an architect or engineer
to undertake the project who, in turn, hires laborers, masons and carpenters. Should the architect or engineer renege on his
obligations to the workers he shall have recruited, to whom will the latter seek relief? By mandate of Article 107, above-
quoted, the owner of the house, who is not himself an employer as defined by law, shall be held accountable. This is where, in
my view, Article 107 properly applies.
In the present case, however, the company's liability to the petitioners properly comes under Article 106. It appears
abundantly clear that the juridical relationship envisioned in Article 106 involves an employer, as defined by the Code.
It thus applies to the juridical situation involved in this case, where the actors are GMC (as the employer), LUPO (as the
contractor) and the petitioners (as the employees or workers). Article 106, upon careful examination, deals with three (3)
situations in the juridical relationship between employer-contractor-employee. It does not deal solely with "labor- only"
contracting.
The first situation in Article 106 is where the employer (project owner) enters into a contract with a contractor for the
performance of some job or work; the employees recruited by such contractor shall be paid, according to Article 106, first
paragraph, in accordance with the requirements of the Labor Code. Stated in another way, the first paragraph of Article 106,
provides the manner by which such employees shall be paid their wages and that is, in compliance with the provisions of the
Labor Code. This, therefore, would include the rules on manner of payment, minimum wage, place of payment, etc. In an
125 Roco 3B
employer-contractor-employee relationship, it is clear that the contractor is the real employer and, therefore, responsible to his
workers for their wages. However, should such contractor fail or renege on his said obligation, to whom will the unpaid
worker have recourse? The second paragraph of Article 106 resolves the seeming dilemma of the workers by providing that
the EMPLOYER, (i.e., the project owner) shall be solidarily liable to such workers to the extent of the work performed by
them, meaning that the EMPLOYER shall solidarily answer for the payment of wages corresponding to the amount of work
undertaken by the contractor's employees in the project. This is the second situation contemplated by Article 106. The third
and final situation treated in Article 106 is contained in the fourth paragraph thereof. It pertains to what the majority perceives
(erroneously, in my view) as the sole coverage of Article 106that of a "labor- only" contracting and the extent of the rights
and liabilities of the parties involved in such a relationship. As explained in the ponencia, for this scheme or situation to exist,
two (2) circumstances must concur: one, the contractor who recruits the workers must have 'no substantial capital or
investment in the form of tools, equipment, machineries and work premises,' and two, 'such workers are so engaged to
perform activities directly related to the employer's principal business. Should there be a finding of 'labor-only' contracting,
the law expressly provides that the EMPLOYER (or project owner) shall be considered the direct employer of such workers.
Such juridical relationship would then spawn a whole gamut of employer's obligations, including obligations under the
workmen's compensation, social security, medicare, minimum wage, termination pay and unionism.
From the facts of this case as presented, the second paragraph of Article 106 finds clear application. Because of
contractor Lupo's default in the payment of petitioners' wages, owing to his insolvency, the employer (company)
must comply with its joint and several obligation to answer for Lupo's accountability to his employees for their
unpaid wages. Thereafter, should the company be inclined to do so, it may seek reimbursement from Lupo.
In sum, it is my submission that the company's solidary liability to the petitioners ought to be predicated on the basis, not of
Article 107 of the Labor Code (which applies only to non-employers while the company in this case is an employer) but rather,
upon the express declaration of paragraph 2, Article 106 of the Labor Code, which covers employers (not non-employers) as
the company in the case at bar.
117. Farley v. ABS CBN (2010)

Facts: Farley et al. (petitioners who are cameramen, drivers and editors) filed 2 separate complaints for regularization, ULP,
and money claims against ABS-CBN. They alleged that they only became aware of the CBA when they obtained copies
of the agreement; they learned that they had been excluded from its coverage as ABS-CBN considered them
temporary and not regular employees, in violation of the Labor Code.
They claimed they had already rendered more than a year of service in the company and, therefore, should have been
recognized as regular employees entitled to security of tenure and to the privileges and benefits enjoyed by regular
employees.
ABS-CBN meanwhile alleged that petitioners were merely independent contractors/off camera talents and that they were
not entitled to regularization in these capacities.
The LA ruled that petitioners were regular employees of ABS-CBN and are entitled to the benefits and privileges of regular
employees. ABS-CBN appealed to the NLRC.
Pending appeal, ABS-CBN dismissed herein petitioners when they refused to sign up contracts of employment with service
contractor Able Services. ABS-CBN alleged that this was done since it chose to course through legitimate service contractors
all driving, messengerial, utility etc. services to improve its operations and to make them more economically viable. It claimed
that petitioners herein were not singled out for dismissal since they belonged to a job category that had been contracted out.
Petitioners thus filed an illegal dismissal case.
The LA ruled that there was no illegal dismissal. The NLRC ruled that there was an employer-employee relationship
between the petitioners and ABS-CBN as the company exercised control over the petitioners in the performance of their
work; the petitioners were regular employees because they were engaged to perform activities usually necessary or desirable in
ABS-CBN's trade or business; they cannot be considered contractual employees since they were not paid for the result of
their work, but on a monthly basis and were required to do their work in accordance with the companys schedule.
126 Roco 3B
In an MR, the NLRC maintained that petitioners were regular employees but that they were validly dismissed due to
redundancy. The CA affirmed, albeit stating that petitioners failed to prove their claim to CBA benefits since they never
raised the issue in the compulsory arbitration proceedings, and did not appeal the labor arbiters decision which was silent on
their entitlement to CBA benefits. It also upheld the validity of their dismissal. Hence this petition.
Issue: Whether petitioners are regular employees and that if they were illegally dismissed.
Held: YES. As regular employees, the petitioners fall within the coverage of the bargaining unit and are therefore
entitled to CBA benefits as a matter of law and contract. The declaration by the lower courts unequivocally settled
the petitioners employment status: they are ABS-CBNs regular employees entitled to the benefits and privileges of
regular employees. These benefits and privileges arise from entitlements under the law, and from their employment contract
as regular ABS-CBN employees, part of which is the CBA if they fall within the coverage of this agreement.
Under the CBA, petitioners are members of the appropriate bargaining unit and do not belong to any of the excluded
categories (Supervisory & Confidential employees, casual, probationary, or contract status)
There is also no merit in the fact that the petitioners are not entitled to CBA benefits because: (1) they did not claim these
benefits in their position paper; (2) the NLRC did not categorically rule that the petitioners were members of the bargaining
unit; and (3) there was no evidence of this membership. CBA coverage is not only a question of fact, but of law and contract.
The fact remains that petitioners herein are regular employee. From this flows legal effects touching on the terms and
conditions of petitioners regular employment.
The termination of employment of the 4 drivers occurred under highly questionable circumstances and with plain
and unadulterated bad faith. The records show that the regularization case was in fact the root of the resulting bad
faith as this case gave rise and led to the dismissal case. The regularization case was filed leading to the labor arbiters
decision declaring the petitioners, including Fulache, Jabonero, Castillo and Lagunzad, to be regular employees.
ABS-CBN took matters into its own hands and terminated the petitioners services, clearly disregarding its own appeal then
pending with the NLRC. Notably, this appeal posited that the petitioners were not employees; they were independent
contractors whose services could be terminated at will, subject only to the terms of their contracts. To justify the termination
of service, the company cited redundancy as its authorized cause but offered no justificatory supporting evidence. ABS-CBNs
intent, based on the records, was to transfer the petitioners and their activities to a service contractor without paying any
attention to the requirements of our labor laws; hence, ABS-CBN dismissed the petitioners when they refused to sign up with
the service contractor.
ABS-CBN forgot that by claiming redundancy as authorized cause for dismissal, it impliedly admitted that the
petitioners were regular employees whose services, by law, can only be terminated for the just and authorized causes
defined under the Labor Code.
ABS-CBN forgot that it had an existing CBA with a union, which agreement must be respected in any move affecting the
security of tenure of affected employees; otherwise, it ran the risk of committing unfair labor practice. It similarly forgot that
an exercise of management prerogative can be valid only if it is undertaken in good faith and with no intent to defeat or
circumvent the rights of its employees under the laws or under valid agreements. It also forgot that there was a standing LA
decision that, while not yet final because of its own pending appeal, cannot simply be disregarded. By implementing the
dismissal action at the time the LAs ruling was under review, the company unilaterally negated the effects of the labor arbiters
ruling while at the same time appealling the same ruling to the NLRC.
Under the Labor Code, illegally dismissed employees are entitled to reinstatement without loss of seniority rights and other
privileges and to full backwages, inclusive of allowances, and to other benefits or their monetary equivalent from the time their
compensation was withheld from them up to the time of their actual reinstatement. The four dismissed drivers deserve no less.
118. Jethro v. Secretary (2009)
127 Roco 3B
Facts: Jethro Intelligence and Security Corp (Jethro) is a security service contractor with a service contract with Yakult. Garcia,
one of the security guards deployed in Yakult, filed a complaint for underpayment of wages, holiday pay, premium pay, 13 th
month pay, and night shift diff.
As a result, DOLE Regional Office conducted an inspection at Yakults premises in Calamba. It discovered several labor
standards violations (ie. keeping of payrolls & daily time records in the main office, underpayment of wages, OT pay, and
other benefits, and non-registration with DOLE).
Hearings were conducted on the complaint. By Sep 9 2004, DOLE Regional Director found Jethro solidarily liable with
Yakult for failure to rectify the violations noted during the inspection.
Jethro appealed to the Secretary and assailed the admissibility of security guard Garcias affidavit. Secretary Sto.
Tomas partially granted the appeal but set aside the writs of execution/garnishment without prejudice to the subsequent
issuance of the same. On appeal to the CA, Jethros appeal was likewise denied. Hence, this petition.
They allege that the Secretary and DOLE Regional Director gravely abused their discretion on the following grounds: (1)
Secretary as no jurisdiction over the case because, following Article 129, the aggregate money claim of each employee
exceeded P5,000.00; (2) Jethro could not be expected to keep payrolls and daily time records in Yakults premises as its office
is in QC, hence, the inspection conducted in Yakults plant had no basis; and (3) having filed the required bond equivalent
to the judgment award, and as the Regional Directors Order of September 9, 2004 was not served on their counsel of
record, the writs of execution and garnishment subsequently issued were not in order .
Issue: Whether the Secretary gravely abused her discretion.
Held: NO. The scope of the visitorial powers of the Secratary and his/her duly authorized representatives was clarified in
Allied Investigation Bureau, Inc. In said case, it was said that while it is true that under Articles 129 and 217 of the Labor Code,
the LA has jurisdiction to hear and decide cases where the aggregate money claims of each employee exceeds P5,000.00, said
provisions do not contemplate nor cover the visitorial and enforcement powers of the Secretary or his duly authorized
representatives.
Rather, said powers are defined and set forth in Article 128 which says that the Secretary 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.
Thus, Art. 128 explicitly excludes from its coverage Articles 129 and 217 by the phrase Notwithstanding the provisions
of Articles 129 and 217 of this Code to the contrary, thereby retaining and further strengthening the power of the
Secretary or his duly authorized representative 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 officers or
industrial safety engineers made in the course of inspection.
In Ex-Bataan Veterans, if the labor standards case is covered by the exception in Art. 128 (b), the Regional Director will
have to endorse the case to the proper Arbitration branch of the NLRC. Also, 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 therein;
(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.
(d) 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 Secretary correctly assumed jurisdiction over the case as it does not come under the exception clause
in Art. 128(b).While Jethro appealed the inspection results and there is a need to examine evidentiary matters to resolve the
issues raised, the payrolls presented by it were considered in the ordinary course of inspection.
128 Roco 3B
While the employment records of the employees could not be expected to be found in Yakults premises in Calamba, as
Jethros offices are in Quezon City, the records show that Jethro was given ample opportunity to present its payrolls and
other pertinent documents during the hearings and to rectify the violations noted during the ocular inspection. It,
however, failed to do so, more particularly to submit competent proof that it was giving its security guards the wages and
benefits mandated by law.
Jethros failure to keep payrolls and daily time records in Yakults premises was not the only labor standard violation found to
have been committed by it; it likewise failed to register as a service contractor with the DOLE , pursuant to DO 18-02
and, as earlier stated, failed to pay the wages and benefits in accordance with the rates prescribed by law .
It bears emphasis that the Secretary, under Article 106, exercises quasi-judicial power at least to the extent necessary to
determine violations of labor standards provisions of the Code and other labor legislation. He/she or the Regional
Directors can issue compliance orders and writs of execution for the enforcement thereof. The significance of and
binding effect of the compliance orders of the Secretary is enunciated in Article 128.
119. Ex-Bataan Veterans v. Laguesma

Facts: Ex--Bataan Veterans Security Agency, Inc. (EBVSAI) is in the business of providing security services while private
respondents are EBVSAIs employees assigned to the National Power Corporation at Ambuklao Hydro Electric Plant, Bokod,
Benguet (Ambuklao Plant).
Private respondents instituted a complaint for underpayment of wages against EBVSAI before the Regional Office of the
DOLE. Upon investigation, EBVSAI was found to have committed the following violations: (1) non-presentation of records;
(2) non-payment of holiday pay; (3) non-payment of rest day premium; (4) underpayment of night shift differential pay; (5)
non-payment of service incentive leave; (6) underpayment of 13th month pay; (7) no registration; (8) no annual medical report;
(9) no annual work accidental report; (10) no safety committee; and (11) no trained first aider.
Thus, EBVSAI was ORDERED to pay the computed deficiencies owing to the affected employees. EBVSAI filed a MR and
alleged that under Articles 128 and 217(6) of the LC, the Regional Director does not have jurisdiction over the subject
matter of the case because the money claim of each private respondent exceeded P5,000 . EBVSAI pointed out that the
Regional Director should have endorsed the case to the LA.
Issue: Whether the Secretary or his authorized representatives acquired jurisdiction over money claims exceeding 5K.
Held: YES. Secretary of Labor (or his duly authorized representatives) has jurisdiction over the money claims of private
respondents.
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. Art. 128 explicitly excludes from its coverage Articles 129 and 217
of the Labor Code by the phrase "(N)otwithstanding the provisions of Articles 129 and 217of 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.
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), then the Regional Director
will have to endorse the case to the appropriate Arbitration Branch of the NLRC .
129 Roco 3B
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 .
120. Peoples Broadcasting v. Secretary (2009)

Facts: A complaint was filed by Juezan (respondent) against Bombo Radyo 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, PAG-IBIG and Philhealth before the DOLE Regional Office
A. DOLE conducted a plant level inspection.

In the Notice of Inspection Results, Labor Inspector made the following notations: complainant is a drama talent hired on a
per drama participation basis hence no employer-employeeship existed; 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.
B. DOLE Regional Director ruled that respondent is an employee of petitioner and is entitled to his money claims
C. On appeal to the DOLE Secretary, petitioner denied once more the existence of employer-employee relationship .
Acting DOLE Secretary dismissed the appeal on the ground that petitioner did not post a cash or surety bond.
D. Petitioner elevated the case to the CA, claiming that it was denied due process when the DOLE Secretary disregarded the
evidence it presented; maintained that there is no employer-employee relationship 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 LA because respondents claim exceeded P5,000.00.
CA 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 Secretary 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.
Before this Court, petitioner argues that 1) the NLRC, and not the DOLE Secretary, has jurisdiction over respondents claim,
in view of Articles 217 and 128 of the Labor Code; 2) CA 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
Respondent posits that the CA did not abuse its discretion and relies on 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. Further, 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.
Issue: (1) Does the Secretary have the power to determine the existence of an employer-employee relationship?
(2) Was there substantial evidence to support the Regional Directors finding that there existed an employer-employee
relationship?
130 Roco 3B
Held: (1) NO. Art. 128 (b) is quite explicit that the visitorial and enforcement power of the DOLE comes into play
only in cases when the relationship of employeremployee still exists. The avowed objective is to give effect to the
labor standard provision of this Code and other labor legislation. A persons entitlement to labor standard benefits under the
labor laws presupposes the existence of employer employee relationship. The clause in cases where the relationship of
employer- employee still exists signifies that the employeremployee 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 Cases issued
by the DOLE Secretary.
Sec. 3. Complaints where no employeremployee 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 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. 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.
In the second situation especially, the existence of an employer-employee relationship is a matter which is not easily
determinable because the elements of such a relationship are not verifiable from a mere ocular examination. 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 employeremployee still exists in Art. 128(b).
The existence of an employer-employee relationship is a statutory prerequisite to and a limitation on the power of the
Secretary of Labor to eliminate the prospect of competing conclusions of the Secretary of Labor and the NLRC on
matters best resolved by the quasi-judicial body, which is the NRLC, rather than an administrative official of the executive
branch. If the Secretary of Labor proceeds to exercise his visitorial and enforcement powers absent the first requisite, his
office confers jurisdiction on itself which it cannot otherwise acquire.
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. 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. If there is no employer-employee
relationship in the first place, the duty of the employer to adhere to labor standards with respect to the non-employees is
questionable.
131 Roco 3B
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.
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 puts in genuine doubt the existence of employer-employee
relationship. Prudent recourse on the part of the DOLE should have been to refer respondent to the NLRC for the
proper dispensation of his claims. 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.
(2) NO SUBSTANTIAL EVIDENCE to support the Regional Directors finding that there was an employer-employee
relationship. It is not enough that the evidence be simply considered. The standard is substantial evidence. 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. The onset of arbitrariness is the advent of denial of substantive due process. While quasi judicial agencies
findings of fact are accorded great respect and even finality, the same findings should be supported by substantial evidence.
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.
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. 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 employeremployee relationship, the labor
inspector could have exerted a bit more effort and looked into petitioners payroll. After all, the labor inspector is given
access to employers records and premises which may be necessary to determine violations or which may aid in the
enforcement of this Code and of any labor law.
Records reveal that no additional efforts were exerted in the course of the inspection. 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 8am- 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.
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 and that he was under the control of petitioner and its agents, and it was
petitioner who had the power to dismiss him from his employment. In support of his position paper, respondent attached a
photocopy of an ID purportedly issued by petitioner. 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 with the designation
Spinner. It also included a Certification (This is to certify that MR. JANDELEON JUEZAN is a program employee of
PEOPLES BROADCASTING SERVICES)
On the contrary, petitioner maintained in its position paper that respondent had never been its employee. Attached 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.
In his Order, the Regional Director merely made a passing remark on petitioners claim of lack of employer employee
relationship and 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
132 Roco 3B
and acceptance was accorded to the claims of respondent. In fact, the findings are anchored almost verbatim on the
self-serving allegations of respondent.
Respondents pieces of evidencethe ID and the certification issued are not even determinative of an employer-employee
relationship.The certification is not clear that complainant is a station employee rather than a program employee hence entitled
to all the benefits as found by the DOLE Regional Director. Even the identification card purportedly issued by petitioner is
not proof of employeremployee relationship since it only identified respondent as an Authorized Representative of Bombo
Radyo..., and not as an employee. This gains significance when compared to the notation in the sample identification cards
presented by petitioner ( This is to certify that the person whose picture and signature appear hereon is an employee of
Bombo Radio Philippines.)
Respondent tried to address the discrepancy by arguing that what he presented was an old ID and proceeded to present a
photocopy of another old ID, issued to one of the employees who was issued the new identification card presented by
Bombo Radio. Respondents argument does not convince. If it were true that he is an employee of petitioner, he would have
been issued a new id similar to the ones presented by petitioner. 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.
In administrative and quasi-judicial proceedings, substantial evidence is sufficient as a basis for judgment on the existence of
employer employee relationship. Substantial evidence, is that amount of relevant evidence which a reasonable mind might
accept as adequate to justify a conclusion. No particular form of evidence is required to prove the existence of such
employer employee relationship. Save for respondents selfserving allegations and selfdefeating evidence, there is no
substantial basis to warrant the Regional Directors finding that respondent is an employee of petitioner.
The Order of the Secretary of Labor denying petitioners appeal 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. 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.
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. 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.
121. Peoples Broadcasting v. Secretary (2012)

Facts: Private respondent Jandeleon Juezan filed a complaint against Bombo Radyo with the DOLE Regional Office No. VII,
Cebu City, for illegal deduction, nonpayment of service incentive leave, 13th month pay, premium pay for holiday and rest day
and illegal diminution of benefits, delayed payment of wages and noncoverage of SSS, PAG-IBIG and Philhealth.
DOLE Regional Director found that Juezan was an employee of Bombo Radyo, and was entitled to his money claims.
Bombo Radyo sought reconsideration of the Directors Order, but failed.
Acting DOLE Secretary dismissed Bombo Radyos appeal on the ground that it submitted a Deed of Assignment of Bank
Deposit instead of posting a cash or surety bond. On appeal to the CA, it was held that Bombo Radyo was accorded due
process as it had been given the opportunity to be heard, and that the DOLE Secretary had jurisdiction over the matter, as
the jurisdictional limitation imposed by Article 129 on the power of the DOLE Secretary under Art. 128(b) of the Code had
been repealed by RA 7730.
In the Decision of this Court, the CA Decision was reversed and set aside, and the complaint against Bombo Radyo was
dismissed. The Court found that there was no employer-employee relationship between Bombo Radyo and Juezan.
While the DOLE may make a determination of the existence of an employer-employee relationship, this function
could not be co-extensive with the visitorial and enforcement power provided in Art. 128(b). The NLRC was held to
be the primary agency in determining the existence of an employer- employee relationship.
133 Roco 3B
Under Art. 129, the power of the DOLE and its duly authorized hearing officers to hear and decide any matter involving the
recovery of wages and other monetary claims and benefits was qualified by the proviso that the complaint not include a claim
for reinstatement, or that the aggregate money claims not exceed PhP 5,000. RA 7730, or an Act Further Strengthening the
Visitorial and Enforcement Powers of the Secretary of Labor, did away with the PhP 5,000 limitation, allowing the
DOLE Secretary to exercise its visitorial and enforcement power for claims beyond PhP 5,000. The only qualification
to this expanded power of the DOLE was only that there still be an existing employer-employee relationship.
If there is no employer-employee relationship, whether it has been terminated or it has not existed from the start, the
DOLE has no jurisdiction. Under Art. 128(b) of the Labor Code, as amended by RA 7730, the first sentence reads,
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 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.
An employer-employee relationship must exist for the exercise of the visitorial and enforcement power of the
DOLE. May the DOLE make a determination of whether or not an employer-employee relationship exists, and if so, to what
extent? The first portion of the question must be answered in the affirmative.
The prior decision of this Court in the present case accepts such answer, but places a limitation upon the power of the DOLE, that is, the
determination of the existence of an employer-employee relationship cannot be co-extensive with the visitorial and enforcement power of the DOLE.
But even in conceding the power of the DOLE to determine the existence of an employer-employee relationship, the Court held that the determination
of the existence of an employer- employee relationship is still primarily within the power of the NLRC, that any finding by the DOLE is merely
preliminary.
This conclusion must be revisited.
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 NLRCs
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).
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 (Four-Fold Test). 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.
The determination of the existence of an employer-employee relationship by the DOLE must be respected. The
expanded visitorial and enforcement power of the DOLE granted by RA 7730 would be rendered nugatory if the alleged
employer could, by the simple expedient of disputing the employer-employee relationship, force the referral of the matter to
the NLRC. The Court issued the declaration that at least a prima facie showing of the absence of an employer- employee
relationship be made to oust the DOLE of jurisdiction. But it is precisely the DOLE that will be faced with that evidence, and
it is the DOLE that will weigh it, to see if the same does successfully refute the existence of an employer-employee
relationship.
If the DOLE makes a finding that there is an existing employer-employee relationship, it takes cognizance of the
matter, to the exclusion of the NLRC. The DOLE would have no jurisdiction only if the employer-employee relationship
has already been terminated, or it appears, upon review, that no employer-employee relationship existed in the first place. The
Court, in limiting the power of the DOLE, gave the rationale that such limitation would eliminate the prospect of competing
conclusions between the DOLE and the NLRC. The prospect of competing conclusions could just as well have been
134 Roco 3B
eliminated by according respect to the DOLE findings, to the exclusion of the NLRC, and this We believe is the more prudent
course of action to take.
This is not to say that the determination by the DOLE is beyond question or review. Suffice it to say, there are judicial
remedies such as a petition for certiorari under Rule 65 that may be availed of, should a party wish to dispute the findings of
the DOLE.
Also, the power of the DOLE to determine the existence of an employer-employee relationship need not necessarily
result in an affirmative finding. The DOLE may well make the determination that no employer-employee relationship
exists, thus divesting itself of jurisdiction over the case. Under Art. 128(b), the DOLE is fully empowered to make a
determination as to the existence of an employer-employee relationship in the exercise of its visitorial and
enforcement power, subject to judicial review, not review by the NLRC.
Contra View
There is a view that despite Art. 128(b) of the Labor Code, as amended by RA 7730, there is still a threshold amount set by Arts. 129 and 217
of the Labor Code when money claims are involved, i.e., that if it is for PhP 5,000 and below, the jurisdiction is with the regional director of the
DOLE, under Art. 129, and if the amount involved exceeds PhP 5,000, the jurisdiction is with the labor arbiter, under Art. 217. The view states
that despite the wording of Art. 128(b), this would only apply in the course of regular inspections undertaken by the DOLE, as differentiated from
cases under Arts. 129 and 217, which originate from complaints.
Rebuttal: There are several cases, however, where the Court has ruled that Art. 128(b) has been amended to expand the
powers of the DOLE Secretary and his duly authorized representatives by RA 7730. In these cases, the Court resolved that the
DOLE had the jurisdiction, despite the amount of the money claims involved. Furthermore, in these cases, the inspection held
by the DOLE regional director was prompted specifically by a complaint. Therefore, the initiation of a case through a
complaint does not divest the DOLE Secretary or his duly authorized representative of jurisdiction under Art. 128(b).
SUMMARY
1. If a complaint is brought before the DOLE to give effect to the labor standards provisions of the Labor Code or
other labor legislation, and there is a finding by the DOLE that there is an existing employer-employee relationship,
the DOLE exercises jurisdiction to the exclusion of the NLRC.
2. If the DOLE finds that there is no employer-employee relationship, the jurisdiction is properly with the NLRC.
3. If a complaint is filed with the DOLE, and it is accompanied by a claim for reinstatement, the jurisdiction is properly
with the Labor Arbiter, under Art. 217(3) of the Labor Code, which provides that the Labor Arbiter has original and
exclusive jurisdiction over those cases involving wages, rates of pay, hours of work, and other terms and conditions of
employment, if accompanied by a claim for reinstatement.
4. If a complaint is filed with the NLRC, and there is still an existing employer-employee relationship, the jurisdiction is
properly with the DOLE.
5. The findings of the DOLE, however, may still be questioned through a petition for certiorari under Rule 65 of the
Rules of Court.
APPLICATION TO THIS CASE

In the present case, the finding of the DOLE Regional Director that there was an employer-employee relationship has
been subjected to review by this Court, with the finding being that there was no employer-employee relationship between
Bombo Radyo and Juezan, based on the evidence presented. Juezan presented self-serving allegations as well as self-defeating
evidence. The findings of the Regional Director were not based on substantial evidence, and Juezan failed to prove the
existence of an employer-employee relationship. The DOLE had no jurisdiction over the case , as there was no
employer-employee relationship present. Thus, the dismissal of the complaint against petitioner is proper.
122. Aboitiz Shipping v. De La Serna (1990)

Facts: The Aboitiz Shipping Employees Asociation (Employees) filed a complaint against Aboitiz Shipping for non-
compliance with the minimum wage rates and allowances pursuant to PD Nos 1713, 1751, and Wage Orders 1 through
6. The Regional Director ruled in favor of the Employees, ordering payment of P1.35M worth of underpayment.
135 Roco 3B
On appeal to the Secretary of Labor and Employment, Aboitiz questioned the Regional Directors jurisdiction. The
Undersecretary dismissed the appeal and affirmed the decision; hence, the present petition.
Issue: Whether or not it is the Labor Arbiter, and not the Regional Director, that has jurisdiction over money claims under
Article 217 of the Labor Code.
Held: NO. Regional Director has jurisdiction.
It should be pointed out that, following the ruling in Briad Agro vs. Dela Cerna, and L.M. Camus Engineering vs. Secretary of Labor,
the above-cited amendments, being curative in nature, have retroactive effect and, thus, find application in the instant case.
Under the provisions of Articles 129 and 217 of the Labor Code, as amended, the Regional Director is empowered, through
summary proceeding and after due notice, to hear and decide cases involving recovery of wages and other monetary claims
and benefits, including legal interest, provided the following requisites are present, to wit:
1) the claim is presented by an employee or person employed in domestic or household service, or househelper;
2) the claim arises from employer-employee relations;
3) the claimant does not seek reinstatement; and
4) the aggregate money claim of each employee or househelper does not exceed P5,000.00 (Art. 129, Labor Code, as amended by R.A.
6715).
In the absence of any of the requisites above enumerated, it is the Labor Arbiter who shall have exclusive original jurisdiction
over claims arising from employer-employee relations, except claims for employees' compensation, social security, medicare
and maternity benefits, all these pursuant to Article 217 of the Labor Code, particularly paragraph six (6) thereof.
This power of the Regional Directors qualified under R.A. 6715 is recognized in the modificatory resolution dated 9
November 1989 in said Briad Agro vs. Dela Cerna which modified the earlier decision therein dated 29 June 1989. In view of the
enactment of R.A. 6715, and the modificatory resolution in the Briad Agro case, the ruling in Zambales Base Metals, Inc. vs.
Minister of Labor, supra, is no longer applicable.
In the case at bar, it is noted that in the Order dated 13 October 1988 of the Regional Director, the latter found each
of the 717 complainants entitled to a uniform amount of P1,884.00. (Rollo, pp. 11 7-131,). All the other requisites for
the exercise of the power of the Regional Director under Article 129 of the Labor Code, as amended by R.A. 6715, are
present. It follows that the respondent Regional Director properly took cognizance of the claims, subject of this petition.
To the petitioner's contention that it was denied due process of law as it was not afforded time and opportunity to present its
evidence, the records show that on several occasions despite due notice, petitioner failed to either appear at the scheduled
hearings, or to present its employees' payrolls and vouchers for wages and salaries, particularly, those covering the period from
16 February 1982 to 31 December 1985. Therefore, petitioner was not denied due process of law.
We also do not agree with the petitioner's allegation that it was improper for the respondent Regional Director to order in the
questioned Order dated 13 October 1988, compliance with P.D. 1678 7 as the issue on the said decree was never raised by
private respondent in its complaint filed before the Regional Director. While it may be true that P.D. 1678 is not one of the
laws where non-compliance therewith was complained of, still, the Regional Director correctly acted in ordering
petitioner to comply therewith, as he (Regional Director) has such power under his visitorial and enforcement
authority provided under Article 128(a) of the Labor Code, which 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.
136 Roco 3B
Petitioner also claims that the complaint filed against it should have been dismissed outright, considering the compromise
agreement dated 24 July 1986, which purportedly contains the agreement of the parties therein to dismiss the cases filed by
one against the other.
We find no merit in said contention, in the light of the Regional Director's finding that the said agreement cannot bind the
complainant-union vis-a-vis the instant claims, for the reason that it was entered into by one Mr. Elizardo Manuel in his
personal capacity, one Luis M. Moro, Jr. representing Aboitiz Shipping Corporation, and Atty. Luis D. Flores in his capacity as
legal counsel of ASEA-CLO, which finding is supported by the records of the case before us. Such records show that the
compromise agreement primarily binds only the said Mr. Manuel, and that, therefore, it has nothing to do with the rest of the
other complainant-union members.
123. Candano Shipping v. Sugata-on

Facts: Candano Shipping is a domestic corporation engaged in the business of coastwise trading within the Philippines.
Melquiades Sugata-on was employed by Candano Shipping as Third Marine Engineer on board its cargo vessel M/V
David, Jr. with the monthly salary of P7,800.00.
M/V David, Jr. left the port of Davao City with its cargo and 20 crew members. The vessel encountered rough seas and
strong winds while traversing the waters of Lianga Bay, Surigao del Sur, causing her to tilt at three degrees on its starboard
side. Due to the violent waves which continuously hammered the tilting vessel, the seawaters slowly swallowed up the
main deck causing the tilting to worsen up to 30 degrees.
Despite the efforts exerted by the crew members to save the vessel, M/V David, Jr. sank together with her cargo at around
11 oclock in the evening at Bakulin Point, Lianga Bay, Surigao del Sur. Among the 20 crew members, twelve survived, one
died and seven were missing. One of those who were missing was Melquiades Sugata-on (Melquiades), the husband of herein
respondent, Florentina Sugata-on, (Florentina).
Upon learning of Melquiades fate, Florentina immediately went to the office of Candano Shipping in Manila to claim the
death benefits of her husband but it refused to pay. Such refusal prompted Florentina to institute on 31 January 1997,
an action seeking indemnity for the death of her husband against Candano Shipping before the RTC grounded on Article
17117 of the New Civil Code, which imposes upon the employer liability for the death of his employee in the course of
employment, even if the death is caused by a fortuitous event.
Candano Shipping countered that there was no cause of action because the death of Melquiades was not yet an established fact
since he was merely reported missing upon the sinking of M/V David.
RTC resolved the controversy in favor of Florentina and ordered Candano Shipping to indemnify Florentina for the death of
her husband. She was awarded for actual damages amounting to P988,400.00 computed by adopting the formula in the
computation of loss of earning capacity.
CA affirmed but reduced award for actual damages and deleted awards for moral and exemplary damages including attorneys
fees. CA applied the standard prescribed by Article 194, to wit:
ART. 194. DEATH.(a) Under such regulations as the Commission may approve, the System shall pay to
the primary beneficiaries upon the death of the covered employee under this Title an amount
equivalent to his monthly income benefit, plus 10% thereof for each dependent child, but not exceeding
five, beginning with the youngest and without substitution, except as provided for in paragraph (j) of Article
167 hereof; Provided, however, That the monthly income benefit shall be guaranteed for five years: Provided,
further, That if he has no primary beneficiary, the System shall pay to his secondary beneficiaries the monthly
income benefit not to exceed sixty months; Provided, finally, That the minimum monthly death benefit shall
not be less that fifteen thousand pesos.
MR was denied hence the present Petition for Review on Certiorari.
137 Roco 3B
Issue: Whether or not the formula for fixing the amount of death compensation in Art. 194 applies in determining the
compensation claimed by the heir of the deceased employee against the employer under Art. 1711.
Held: NO. As the presumption of death due to fortuitous event has already been established, the discussion shall be limited to
the computation of the amount of indemnification.
Candano Shipping argues that the application of the measure stipulated under Article 194 of the Labor Code is
erroneous since it applies only to death compensation to be paid by the Social Security System to the beneficiaries of
a deceased member, to which proposition Florentina concedes.
We agree. The remedy availed by Sugata-on in filing the claim under the New Civil Code has been validly
recognized by the prevailing jurisprudence on the matter.
In the case of Floresca v. Philex Mining Company, we declared that the employees may invoke either the Workmens
Compensation Act or the provisions of the Civil Code, subject to the consequence that the choice of one remedy will exclude
the other and that the acceptance of the compensation under the remedy chosen will exclude the other remedy.
The exception is where the claimant who had already been paid under the Workmens Compensation Act may still sue for
damages under the Civil Code on the basis of supervening facts or developments occurring after he opted for the first remedy.
Stated differently, save for the recognized exception, an employee cannot pursue both remedies simultaneously but has the
option to proceed by interposing one remedy and waiving his right over the other. As we have explained in Floresca, this
doctrinal rule is rooted on the theory that the basis of the compensation under the Workmens Compensation Act is separate
and distinct from the award of damages under the Civil Code
Compensation is given to mitigate harshness and insecurity of industrial life for the workman and his family. Hence, an
employer is liable whether negligence exists or not since liability is created by law. Recovery under the Act is not based on any
theory of actionable wrong on the part of the employer. In other words, under compensation acts, the employer is liable
to pay compensation benefits for loss of income, as long as the death, sickness or injury is work-connected or
work-aggravated, even if the death or injury is not due to the fault of the employer. On the other hand, damages are
awarded to one as a vindication of the wrongful invasion of his rights. It is the indemnity recoverable by a person
who has sustained injury either in his person, property or relative rights, through the act or default of another Once
the claim-ant had already exercised his choice to pursue his right under one remedy, he is barred from proceeding
with an alternative remedy.
In the case at bar, Florentina was forced to institute a civil suit for indemnity under the New Civil Code, after
Candano Shipping refused to compensate her husbands death.
The pertinent provision of the New Civil Code reads:

Article 1711. Owners of enterprises and other employers are obliged to pay compensation for the death of or
injuries to their laborers, workmen, mechanics or other employees, even though the event may have been
purely accidental or entirely due to a fortuitous cause, if the death or personal injury arose out of and in the
course of employment. The employer is also liable for compensation if the employee contracts any illness or
diseases caused by such employment or as the result of the nature of employment. If the mishap was due to
the employees own notorious negligence, or voluntary act, or drunkenness, the employer shall not be liable
for compensation. When the employees lack of due care contributed to his death or injury, the compensation
shall be equitably reduced.
Given that the right of the claimant arose from the contract of employment and the corresponding obligation
imposed by the New Civil Code upon the employer to indemnify the former for death and injury of the employee
circumstanced by his employment, necessarily, the provisions of the same code on damages shall govern the extent
of the employers liability.
The pertinent provision on damages under the New Civil Code provides:
138 Roco 3B
Art. 2199. Except as provided by law or by stipulation, one is entitled to an adequate compensation only for
such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or
compensatory damages.
Article 2200. Indemnification for damages shall comprehend not only the value of the loss suffered, but also
that of the profits which the obligee failed to obtain.
In order to give breath to the aforestated provisions on damages of the New Civil Code, they must be transformed into a
more tangible and practical mathematical form, so that the purpose of the law to indemnify the employee or his heirs for his
death or injury occasioned by his employment, as envisioned by the Article 1711 of the same code may be realized. We deem it
best to adopt the formula for loss of earning capacity enunciated in the case of Villa Rey v. Court of Appeals,23 in computing
the amount of actual damages to be awarded to the claimant under Article 1711 of the New Civil Code.
The liability of the employer for death or personal injury of his employees arose from the contract of employment entered into
between the employer and his employee which is likewise imbued with public interest. Accordingly, when the employee died
or was injured in the occasion of employment, the obligation of the employer for indemnity, automatically attaches. The
indemnity may partake of the form of actual, moral, nominal, temperate, liquidated or exemplary damages, as the case may be
depending on the factual milieu of the case and considering the criterion for the award of these damages as outlined by our
jurisprudence.29 In the case at bar, only the award of actual damages, specifically the award for unearned income is warranted
by the circumstances since it has been duly proven that the cause of death of Melquiades is a fortuitous event for which
Candano Shipping cannot be faulted.
August 8, 2013
124.WPP vs. Galera (2010)
Facts: Jocelyn Galera (GALERA), an American citizen, was recruited from the U.S. by John Steedman, Chairman-WPP
Worldwide and Chief Executive Officer of Mindshare, Co., a corporation based in Hong Kong to work in the Philippines for
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.
Employment of GALERA with 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 WPP . 4 months had passed
when WPP filed before the Bureau of Immigration an application for 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.
On December 14, 2000, GALERA alleged she was verbally notified by STEEDMAN that her services had been
terminated from WPP. The termination letter followed the next day.
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).
Labor Arbiter held WPP, Steedman, Webster, and Lansang liable for illegal dismissal and damages. First Division of the
NLRC reversed Labor Arbiters decision. NLRC stressed that Galera was WPPs Vice-President, and therefore, a
corporate officer at the time she was removed by the Board of Directors , which means RTC had jurisdiction and not
LA. CA reversed and set aside the decision of the NLRC. According to CA, Galera was an employee of WPP and thus,
LA and NLRC had jurisdiction and not RTC.
Issue: Whether GALERA was an employee or a corporate officer and, consequently, whether NLRC had jurisdiction.
Held: EMPLOYEE but since she did not obtain an employment permit, she cannot seek redress from the SC.
Galera was an employee

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
139 Roco 3B
provided in the by-laws. 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.
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.
The Amended By-Laws provided for more than one Vice-President and for two additional directors. However, WPP cannot
rely on the Amended By-Laws to support its argument that Galera is a corporate officer because 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.
Applying 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, it can be deduced that Galera was indeed an employee of WPP.
The employment contract mandate where and how often she is to perform her work; and shows that wages she
receives are completely controlled by WPP; and states that she is subject to the regular disciplinary procedures of WPP .
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. 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.
Moreover, the 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 GALERA did sign the Alien Employment Permit from the DOLE and the application for a 9(g) visa with the
Bureau of Immigrationboth of which stated that she was WPPs Vice President these should not be considered against
her. Assuming arguendo that her appointment as Vice-President was a valid act, it must be noted that these
appointments occurred after she was hired as a regular employee.
Galera being an employee, 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;
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.
140 Roco 3B
(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.
On the other hand, 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.
Since Galera was an employee, the Labor Arbiter and subsequently, NLRC had jurisdiction to hear her complaint.
On the alleged illegal dismissal
The dismissal 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.
They failed to substantiate the allegations in Steedmans letter. Galera, on the other hand, presented documentary evidence
in the form of congratulatory letters, including one from Steedman, which contents are diametrically opposed to the 15
December 2000 letter.
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. WPPs acts clearly show that Galeras
dismissal did not comply with the two-notice rule.
Whether Galera is entitled to the monetary award
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.
141 Roco 3B
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.
Our law provides that 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.
Section 4, Rule XIV, Book 1 of the IRR 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. 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.
125.De leon vs. NLRC (1989)

Facts: De Leon was employed by La Tondena on Dec 1981 at the Maintenance Section of it Engineering Dept. His work
consists mainly of painting the company building and equipment as well as other odd jobs relating to maintenance. He as paid
daily through petty cash vouchers.
In Jan 1983 (more than 1 year) De Leon requested from La Tondena that he be included in the payroll of regular workers. As
a response thereto, he was dismissed on January 16, 1983. Having been refused reinstatement despite repeated demands, he
filed a complaint for illegal dismissal, reinstatement, and payment of backwages.
LA ruled for De Leon and found the dismissal to be illegal as he was already a regular employee. On appeal, NLRC reversed.
De Leon avers that he was dismissed following his request to be treated as a regular employee; that his work consisted of
painting company buildings and maintenance chores like cleaning and operating company equipment, assisting Emiliano
Tanque, Jr., a regular maintenanceman. Moreover, that the tasks he performed included not only painting but also other
maintenance work which are usually necessary or desirable in the usual business of private respondent: hence, the reversal
violates the Constitutional and statutory provisions for the protection of labor.
La Tondena, on the other hand, claims that he was merely a casual worker hired allegedly only to paint a certain building in the
company premises, and that his work as a painter terminated upon the completion of the painting job.
The Solicitor General, in his Comment, recommends that the petition be given due course in view of the evidence on record
supporting petitioners contention that his work was regular in nature. In his view, the dismissal of petitioner after he
demanded to be regularized was a subterfuge to circumvent the law on regular employment. He further recommends that the
questioned decision and resolution.
Issue: Whether De Leon was a regular worker or a casual worker.
Held: REGULAR. After a careful review of the records of this case, the Court finds merit in the petition as We sustain the
position of the Solicitor General that the reversal of the decision of the Labor Arbiter by the respondent Commission was
erroneous.
Art. 281 on regular employment reinforces the Constitutional mandate to protect the interest of labor. Its language evidently
manifests the intent to safeguard the tenurial interest of the worker who may be denied the rights and benefits due a
regular employee by virtue of lopsided agreements with the economically powerful employer who can maneuver to
keep an employee on a casual status for as long as convenient.
142 Roco 3B
Thus, contrary agreements notwithstanding, an employment is deemed regular when the activities performed by the
employee are usually necessary or desirable in the usual business or trade of the employer . Not considered regular are
the so-called project employment the completion or termination of which is more or less determinable at the time of
employment, such as those employed in connection with a particular construction project, and seasonal employment which by
its nature is only desirable for a limited period of time. However, any employee who has rendered at least one year of
service, whether continuous or intermittent, is deemed regular with respect to the activity he performed and while
such activity actually exists.
Therefore, the primary standard 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. 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 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.
Here, La Tondena, which is engaged in the business of manufacture and distillery of wines and liquors claims that De Leon
was contracted on a casual basis specifically to paint a certain company building and that its completion rendered his
employment terminated. This may have been true at the beginning, and had it been shown that his activity was
exclusively limited to painting that certain building, La Tondenas theory of casual employment would have been
worthy of consideration.
However, during the period of employment, the records reveal that the tasks assigned to him included not only painting
of company buildings, equipment and tools but also cleaning and oiling machines, even operating a drilling
machine, and other odd jobs assigned to him when he had no painting job. The company did not even attempt to
negate the above averments of petitioner and his co-employee. Indeed, the respondent company did not only fail to dispute
this vital point, it even went further and confirmed its veracity when it expressly admitted in its comment that, The main bulk
of work and/or activities assigned to petitioner was painting and other related activities. Occasionally, he was instructed to
do other odd things in connection with maintenance while he was waiting for materials he would need in his job or
when he had finished early one assigned to him .
It is of no moment that petitioner was told when he was hired that his employment would only be casual, that he was paid
through cash vouchers, and that he did not comply with regular employment procedure. Precisely, the law overrides such
conditions which are prejudicial to the interest of the worker whose weak bargaining position needs the support of the State.
What determines whether a certain employment is regular or casual is not the will and word of the employer, to
which the desperate worker often accedes, much less the procedure of hiring the employee or the manner of paying his salary.
It is the nature of the activities performed in relation to the particular business or trade considering all
circumstances, and in some cases the length of time of its performance and its continued existence .
126.Magsalin vs. NOWM (2003)

Facts: Coca-Cola, herein petitioner, engaged the services of respondent workers as sales route helpers for a limited period of
5 months. After 5 months, workers were employed by Coke on a day-to-day basis. According to Coke, the workers were hired
to substitute for regular sales route helpers whenever the latter would be unavailable or when there would be an
unexpected shortage of manpower in any of its work places or an unusually high volume of work. The practice was for
the workers to wait every morning outside the gates of the sales office of Coke. If thus hired, the workers would then be paid
their wages at the end of the day.
They eventually asked Coke to extend to them the status of regular employee but the latter refused. Thus, on November 1997,
23 of the temporary workers filed a complaint for regularization before the NLRC against Coke. After several amendments,
143 Roco 3B
the complaint ultimately totalled 58 workers. Claiming that they were terminated, they filed a notice to strike and a complaint
for illegal dismissal and ULP.
When submitted for voluntary arbitration, the workers complaint was dismissed. Thus, they appealed to the CA. In April
2000, CA reversed and set aside the arbitrators ruling and declared them to be regular employees who were illegally dismissed.
Coke argues that its usual business or trade is softdrink manufacturing and that the work assigned to said workers as sales
route helpers so involves merely postproduction activities, one which is not indispensable in the manufacture of its
products.
Issue: Whether or not the nature of work of the workers is of such nature as to be deemed necessary and desirable in the usual
business and trade of Coke that would qualify them as regular employees.
Held: YES. Art. 280 provides in part: 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.
Coke is one of the leading and largest manufacturers of softdrinks in the country. Said workers have long been in the service
of the company. These workers, when hired, would go with route salesmen on board delivery trucks and undertake the
laborious task of loading and unloading softdrink products of Coke to its various delivery points.
In determining whether an employment should be considered regular or non-regular, the applicable test is the reasonable
connection between the particular activity performed by the employee in relation to the usual business or trade of
the employer. The standard, supplied by the law itself, is whether the work undertaken is necessary or desirable in the
usual business or trade of the employer, a fact that can be assessed by looking into the nature of the services rendered and
its relation to the general scheme under which the business or trade is pursued in the usual course. It is distinguished from a
specific undertaking that is divorced from the normal activities required in carrying on the particular business or trade.
But, although the work to be performed is only for a specific project or seasonal, where a person thus engaged has
been performing the job for at least one year, even if the performance is not continuous or is merely intermittent, the law
deems the repeated and continuing need for its performance as being sufficient to indicate the necessity or
desirability of that activity to the business or trade of the employer. Consequently, the employment would be deemed to
be regular with respect to such activity and while such activity exists.
Moreover, the contention said workers task is not necessary and desirable because it was merely postproduction activities is
unavailing. If, as so argued by Coke, only those whose work are directly involved in the production of softdrinks may be held
performing functions necessary and desirable in its usual business or trade, there would have then been no need for it to even
maintain regular truck sales route helpers. The nature of the work performed must be viewed from a perspective of the
business or trade in its entirety and not on a confined scope.
The repeated rehiring of said workers and the continuing need for their services clearly attest to the necessity or
desirability of their services in the regular conduct of the business or trade of Coke. The CA has found each of the
workers to have worked for at least one year with the company. While this Court, in Brent School, Inc. vs. Zamora, has upheld
the legality of a fixed-term employment, it has done so, however, with a stern admonition that where from the
circumstances it is apparent that the period has been imposed to preclude the acquisition of tenurial security by the
employee, then it should be struck down as being contrary to law, morals, good customs, public order and public
policy.
The pernicious practice of having employees, workers and laborers, engaged for a fixed period of few months, short of the
normal 6 month probationary period of employment, and, thereafter, to be hired on a day-to-day basis, mocks the law. Any
obvious circumvention of the law cannot be countenanced.
144 Roco 3B
The fact that the workers have agreed to be employed on such basis and to forego the protection given to them on their
security of tenure, demonstrate nothing more than the serious problem of impoverishment of so many of our people
and the resulting unevenness between labor and capital. A contract of employment is impressed with public interest. The
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.
With respect to the Release, Waiver and Quitclaim executed by 36 of the original complainants, this Court finds the
execution of the same to be in order. The receipt of the amount awarded by the voluntary arbitrator, as well as the execution
of a release, waiver and quitclaim, is, in effect, an acceptance of said decision. There is nothing on record which could indicate
that the execution thereof by 36 of the workers has been attended by fraud or deceit.
While quitclaims executed by employees are commonly frowned upon as being contrary to public policy and are
ineffective to bar claims for the full measure of their legal rights , there are, however, legitimate waivers that represent a
voluntary and reasonable settlement of laborers claims which should be so respected by the Court as the law between the
parties. Where the person making the waiver has done so voluntarily, with a full understanding thereof, and the
consideration for the quitclaim is credible and reasonable, the transaction must be recognized as being a valid and
binding undertaking. Dire necessity is not an acceptable ground for annulling the release, when it is not shown that
the employee has been forced to execute it.
127.Brent School vs. Zamora (1990)

Facts: Doroteo R. Alegre was engaged as athletic director by Brent School, Inc. at a yearly compensation of P20,000.00. The
contract fixed a specific term for its existence, 5 years, i.e., from July 18, 1971, the date of execution of the agreement, to
July 17, 1976. Subsequent subsidiary agreements dated March 15, 1973, August 28, 1973, and September 14, 1974
reiterated the same terms and conditions, including the expiry date, as those contained in the original contract of July 18, 1971.
Some 3 months before the expiration of the stipulated period, or more precisely on April 20,1976, Alegre was given a
copy of the report filed by Brent School with the DOLE advising of the termination of his services effective on July 16,
1976. The stated ground for the termination was "completion of contract, expiration of the definite period of employment."
And a month or so later, on May 26, 1976, Alegre accepted the amount of P3,177.71, and signed a receipt therefor containing
the phrase, "in full payment of services for the period May 16, to July 17, 1976 as full payment of contract."
However, at the investigation conducted by a Labor Conciliator of said report of termination of his services , Alegre
protested the announced termination of his employment. He argued that although his contract did stipulate that the same
would terminate on July 17, 1976, since his services were necessary and desirable in the usual business of his
employer, and his employment had lasted for 5 years, he had acquired the status of a regular employee and could not
be removed except for valid cause.
The Regional Director, Sec. of Labor, etc. ruled that Alegre had attained the status of permanent employee and thus he was
entitled to reinstatement. Brent finally brought the case to the SC.
Issue: Whether the dismissal of Alegre as athletic director of Brent School was valid.
Held: YES.
(1) The SC discussed the history of laws regarding fixed period employment. Basically, the SC said that prior to the
Labor Code, and even when it was enacted, fixed period employment was recognized as valid. It was impliedly
recognized by the Termination Pay Law, by the Code of Commerce, and by the Labor Code itself (before
amendment). The Civil Code also expressly allows fixed- term contracts.
The employment contract between Brent School and Alegre was executed on July 18, 1971, at a time when the Labor Code
had not yet been promulgated. Indeed, the Code did not come into effect until November 1, 1974, some 3 years after the
perfection of the employment contract, and rights and obligations thereunder had arisen and been mutually observed and
enforced.
(a) Pre-Labor Code: Termination Pay Law
145 Roco 3B
At that time, there was no doubt whatsoever about the validity of term employment. It was impliedly but nonetheless clearly
recognized by the Termination Pay Law. Basically, this statute provided that
In cases of employment, without a definite period, the employer or the employee may terminate at any time the
employment with just cause; or without just cause in the case of an employee by serving written notice.
There was, to repeat, clear albeit implied recognition of the validity of term employment.
(b) Pre-Labor Code: Code of Commerce

Prior, thereto, it was the Code of Commerce which governed employment without a fixed period, and also implicitly
acknowledged the propriety of employment with a fixed period. Its Article 302 provided that
In cases in which the contract of employment does not have a fixed period, any of the parties may terminate it,
notifying the other thereof one month in advance.
(c) Pre-Labor Code: Civil Code

Now, the Civil Code, which was approved on June 18, 1949 and became effective on August 30,1950, itself deals with
obligations with a period (Oblicon). No prohibition against term-or fixed-period employment is contained in any of its articles
or is otherwise deducible therefrom.
It is plain then that when the employment contract was signed between Brent School and Alegre on July 18, 1971, it was
perfectly legitimate for them to include in it a stipulation fixing the duration thereof Stipulations for a term also were explicitly
recognized as valid in jurisprudence. In the Biboso case for example, the SC held that what is decisive is that petitioners
(teachers) were well aware an the time that their tenure was for a limited duration. Upon its termination, both parties to the
employment relationship were free to renew it or to let it lapse.
(d) Labor Code: Pre-amendment stage

The status of legitimacy continued to be enjoyed by fixed-period employment contracts under the Labor Code which went
into effect on November 1, 1974. The Code contained explicit references to fixed period employment, or employment with a
fixed or definite period. Nevertheless, obscuration of the principle of validity of term employment began to take place at about
this time.
Article 320, entitled "Probationary and fixed period employment," originally stated that the "termination of employment of
probationary employees and those employed WITH A FIXED PERIOD shall be subject to such regulations as the Secretary of
Labor may prescribe." The asserted objective to was "prevent the circumvention of the right of the employee to be secured in their
employment as provided . . . (in the Code)."
Article 321 prescribed the just causes for which an employer could terminate "an employment without a definite period." Also,
Article 319 undertook to define "employment without a fixed period" in the following manner:
An employment shall be deemed to be without a definite period for purposes of this Chapter where the employee has
been engaged to perform activities which are usually necessary or desirable in the usual business or trade of
the employer, except where the employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the engagement of the employee or
where the work or service to be performed is seasonal in nature and the employment is for the duration of
the season.
The question immediately provoked by a reading of Article 319 is whether or not a voluntary agreement on a fixed term
or period would be valid where the employee has been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer.
The definition seems a non sequitur. There is nothing essentially contradictory between a definite period of an
employment contract and the nature of the employee's duties set down in that contract as being usually necessary
or desirable in the usual business or trade of the employer. Logically, 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 by the
146 Roco 3B
parties for the commencement and termination of their employment relationship, a day certain being understood to be
"that which must necessarily come, although it may not be known when." Seasonal employment, and employment for a
particular project are merely instances employment in which a period, where not expressly set down, necessarily implied.
Of course, the term PERIOD has a definite and settled signification. It means, " Length of existence; duration. A point of
time marking a termination as of a cause or an activity; an end, a limit, a bound; conclusion; termination. It should be
apparent that this settled and familiar notion of a period, in the context of a contract of employment, takes no account at all of
the nature of the duties of the employee; it has absolutely no relevance to the character of his duties as being usually
necessary or desirable to the usual business of the employer, or not.
(2) The Court then discussed the numerous amendments to the Labor Code. They showed that the current state
of the LC shows a trend to remove any reference to fixed period employment or employment without a
period.
Subsequently, the foregoing articles regarding employment with "a definite period" and "regular" employment were amended
by Presidential Decree No. 850, effective December 16, 1975. Article 320, dealing with "Probationary and fixed period
employment," was altered by eliminating the reference to persons "employed with a fixed period," and was renumbered (becoming
Article 271). Also amended by PD 850 was Article 319 (entitled "Employment with a fixed period," supra) by (a) deleting
mention of employment with a fixed or definite period, (b) adding a general exclusion clause declaring irrelevant written or
oral agreements "to the contrary," and (c) making the provision treat exclusively of "regular" and "casual" employment.
Still later, however, said Article 272 (formerly Article 321) was further amended by BP 130 to eliminate altogether reference to
employment without a definite period. As lastly amended, the opening lines of the article (renumbered 283), now pertinently
read: "An employer may terminate an employment for any of the following just causes: . . . " BP 130 thus completed the
elimination of every reference in the Labor Code, express or implied, to employment with a fixed or definite period or term.
In the light of the foregoing description of the development of the provisions of the Labor Code bearing on term or
fixed-period employment, is it then the legislative intention to outlaw stipulations in employment contracts laying
down a definite period therefor? Are such stipulations in essence contrary to public policy and should not on this account
be accorded legitimacy?
(3) The proper interpretation of the law is to allow fixed-period employment. To prohibit it entirely is to severely
limit the application of the law as there are indeed instances when the purpose of the law (to prevent violations of
security of tenure) would not violated by having fixed-period employment contracts.
On the one hand, there is the gradual and progressive elimination of references to term or fixed-period employment in the
Labor Code, and the specific statement of the rule that
Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the
oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged
to perform activities which are usually necessary or desirable in the usual business or trade of the employer
except where the employment has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the engagement of the employee or where the work
or service to be employed 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 actually exists.
There is, on the other hand, the Civil Code, which has always recognized, and continues to recognize, the validity and
propriety of contracts and obligations with a fixed or definite period (except the general admonition against stipulations
contrary to law, morals etc). Under the Civil Code, therefore, and as a general proposition, fixed-term employment
contracts are not limited, as they are under the present Labor Code, to those by nature seasonal or for specific projects with
147 Roco 3B
pre-determined dates of completion; they also include those to which the parties by free choice have assigned a specific date of
termination.
Some familiar examples may be cited of employment contracts which may be neither for seasonal work nor for specific
projects, but to which a fixed term is an essential and natural appurtenance: overseas employment contracts , for one,
to which, whatever the nature of the engagement, the concept of regular employment will all that it implies does not appear
ever to have been applied, Article 280 of the Labor Code not withstanding; also appointments to the positions of dean,
assistant dean, college secretary, principal, and other administrative offices in educational institutions, which are by
practice or tradition rotated among the faculty members, and where fixed terms are a necessity, without which no reasonable
rotation would be possible.
Similarly, despite the provisions of Article 280, Policy, Instructions No. 8 of the Minister of Labor implicitly recognize that
certain company officials may be elected for what would amount to fixed periods , at the expiration of which they would
have to stand down, in providing that these officials," . . . may lose their jobs as president, executive vice-president or vice-
president, etc. because the stockholders or the board of directors for one reason or another did not re-elect them."
There can of course be no quarrel with the proposition that where from the circumstances it is apparent that 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, morals, etc. But where no such intent to circumvent the law is shown, i.e.
where it is indeed the employee himself who insists upon a period or where the nature of the engagement is such that, without
being seasonal or for a specific project, a definite date of termination is a sine qua non, would an agreement fixing a period be
essentially illegal?
As it is evident from the examples already given earlier that Article 280 of the Labor Code, under a narrow and literal
interpretation, not only fails to exhaust the gamut of employment contracts to which the lack of a fixed period would be an
anomaly, but would also appear to restrict, without reasonable distinctions, the right of an employee to freely stipulate with his
employer the duration of his engagement, it logically follows that such a literal interpretation should be eschewed or avoided.
The law must be given a reasonable interpretation, to preclude absurdity in its application. Outlawing the whole concept of
term employment and subverting to boot the principle of freedom of contract to remedy the evil of employer's using
it as a means to prevent their employees from obtaining security of tenure is like cutting off the nose to spite the
face or, more relevantly, curing a headache by lopping off the head.
Accordingly, and since the entire purpose behind the development of legislation culminating in the present Article 280 of the
Labor Code clearly appears to have been, as already observed, to prevent circumvention of the employee's right to be secure in
his tenure, the clause in said article indiscriminately and completely ruling out all written or oral agreements conflicting with
the concept of regular employment as defined therein should be construed to refer to the substantive evil that the Code
itself has singled out: agreements entered into precisely to circumvent security of tenure. It should have no
application to instances where a fixed period of employment was agreed upon knowingly and voluntarily by the
parties, without any force, duress or improper pressure being brought to bear upon the employee and absent any other
circumstances vitiating his consent, or where it satisfactorily appears that the employer and employee dealt with each other on
more or less equal terms with no moral dominance whatever being exercised by the former over the latter. Unless thus limited
in its purview, the law would be made to apply to purposes other than those explicitly stated by its framers; it thus becomes
pointless and arbitrary, unjust in its effects and apt to lead to absurd and unintended consequences.
Thus, dismissal due to expiry of an agreed period of employment as still good rule a rule reaffirmed in the recent
case of Escudero vs. Office of the President (1989) where, in the fairly analogous case of a teacher being served by her school a
notice of termination following the expiration of the last of 3 successive fixed-term employment contracts, the Court held:
Reyes (the teacher's) argument is not persuasive. It loses sight of the fact that her employment was
probationary, contractual in nature, and one with a definitive period. At the expiration of the period stipulated
in the contract, her appointment was deemed terminated and the letter informing her of the non-renewal of
her contract is not a condition sine qua non before Reyes may be deemed to have ceased in the employ of
petitioner UST. The notice is a mere reminder that Reyes' contract of employment was due to expire.
148 Roco 3B
Thus: the Decision complained of is REVERSED and SET ASIDE. Alegre's contract of employment with Brent School
having lawfully terminated by reason of the expiration of the agreed term of period thereof, he is declared not entitled to
reinstatement and the other relief awarded and confirmed on appeal in the proceedings below
128.Pakistan International Airlines vs. Ople (1990)

Facts: Pakistan International Airlines Corporation (PIA) executed in Manila 2 contracts of employment with Farrales and
Mamasig.
"5. DURATION OF EMPLOYMENT AND PENALTY This agreement is for a period of three (3) years, but can
be extended by the mutual consent of the parties. xxx xxx xxx
6. TERMINATION xxx xxx xxx Notwithstanding anything to contrary as herein provided, PIA reserves the right to
terminate this agreement at any time by giving the EMPLOYEE notice in writing in advance one month before the
intended termination or in lieu thereof, by paying the EMPLOYEE wages equivalent to one month's salary. xxx xxx xxx
10. APPLICABLE LAW: This agreement shall be construed and governed under and by the laws of Pakistan, and
only the Courts of Karachi, Pakistan shall have the jurisdiction to consider any matter arising out of or under this
agreement."
After their training period, they began discharging their job functions as flight attendants.1 year and 4 months prior to
the expiration of the contracts, PIA sent separate letters to private respondents informing them that their services as
flight stewardesses would be terminated conformably to clause 6 of the employment agreement.
Farrales and Mamasig jointly instituted a complaint for illegal dismissal and non-payment of company benefits and bonuses
with the Ministry of Labor and Employment ("MOLE"). PIA submitted its position paper, alleging that respondents were
terminated pursuant to the provisions of the employment contract.
Regional Director Estrella ordered the reinstatement of the respondents. Deputy MOLE Leogardo also adopted
Issue: Whether the orders of the RD as well as the Deputy MOLE were correct.
Held: YES. Illegally dismissed.
1. Petitioner's right to procedural due process was not violated even if no formal or oral hearing was conducted,
considering that it had ample opportunity to explain its side .
Petitioner was ordered by the Regional Director to submit not only its position paper but also such evidence in its favor
as it might have. Petitioner opted to rely solely upon its position paper; we must assume it had no evidence to sustain its
assertions. Thus, even if no formal or oral hearing was conducted, petitioner had ample opportunity to explain its side.
Further, PIA was able to appeal.
2. Parties may not contract away applicable provisions of law especially peremptory provisions dealing with matters
heavily impressed with public interest.
PIA invokes paragraphs 5 and 6 of its contract of employment with private respondents Farrales and Mamasig, arguing that its
relationship with them was governed by its contract rather than by the Labor Code.
Paragraph 5 of that contract set a term of 3 years for that relationship, extendible by agreement between the parties; while
paragraph 6 provided that, notwithstanding any other provision in the contract, PIA had the right to terminate the
employment agreement at any time by giving one-month's notice to the employee or, in lieu of such notice, one-month's
salary.
The principle of party autonomy in contracts is not an absolute principle. Contracting parties may establish such
stipulations as they may deem convenient, "provided they are not contrary to law, morals, good customs, public order or
149 Roco 3B
public policy." Parties may not contract away applicable provisions of law especially peremptory provisions dealing
with matters heavily impressed with public interest. The law relating to labor and employment is clearly such an area and
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.
Both the Labor Arbiter and the Deputy Minister, MOLE, in effect held that paragraph 5 of that employment contract was
inconsistent with Articles 280 (security of tenure) and (regular employment) of the Labor Code and hence refused to give
effect to said paragraph 5.
3. A contract providing for employment with a fixed period is not unlawful unless it is shown that the period specified
in the agreement was designed to circumvent the security of tenure of regular employees . (like the case at bar)
In Brent School, Inc., the Court reached the conclusion that a contract providing for employment with a fixed period was not
necessarily unlawful. Where from the circumstances it is apparent that 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, morals, etc. But where no such intent to circumvent the law is shown, or stated otherwise, where it is indeed the
employee himself who insists upon a period or where the nature of the engagement is such that, without being seasonal or for
a specific project, a definite date of termination is a sine qua non, would an agreement fixing a period be essentially evil or
illicit, therefore anathema? Would such an agreement come within the scope of Article 280 which admittedly was enacted to
prevent the circumvention of the right of the employee to be secured in x x (his) employment?'
Article 280 of the Labor Code, under a narrow and literal interpretation would appear to restrict, without reasonable
distinctions, the right of an employee to freely stipulate with his employer the duration of his engagement, it logically follows
that such a literal interpretation should be eschewed or avoided. Outlawing the whole concept of term employment and
subverting to boot the principle of freedom of contract to remedy the evil of employers' using it as a means to prevent their
employees from obtaining security of tenure is like cutting off the nose to spite the face or, more relevantly, curing a headache
by lopping off the head. Since the entire purpose behind the development of legislation culminating in the present Article 280
of the Labor Code clearly appears to have been, as already observed, to prevent circumvention of the employee's right to be
secure in his tenure, the clause in said article indiscriminately and completely ruling out all written or oral agreements
conflicting with the concept of regular employment as defined therein should be construed to refer to the substantive evil that
the Code itself has singled out: agreements entered into precisely to circumvent security of tenure. It should have no
application to instances where a fixed period of employment was agreed upon knowingly and voluntarily by the parties,
without any force, duress or improper pressure and employee dealt with each other on more or less equal terms.
Unless thus limited in its purview, the law would be made to apply to purposes other than those explicitly stated by its framers;
it thus becomes pointless and arbitrary, unjust in its effects and apt to lead to absurd and unintended consequences."
The critical consideration is the presence or absence of a substantial indication that the period specified in an
employment agreement was designed to circumvent the security of tenure of regular employees. This indication must
ordinarily rest upon some aspect of the agreement other than the mere specification of a fixed term of the employment
agreement, or upon evidence aliunde of the intent to evade.
The fixed period of 3 years specified in paragraph 5 will be seen to have been effectively neutralized by the
provisions of paragraph 6. Paragraph 6 in effect took back from the employee the fixed three (3)-year period
ostensibly granted by paragraph 5 by rendering such period in effect a facultative one at the option of the employer
PIA. For petitioner PIA claims to be authorized to shorten that term, at any time and for any cause satisfactory to itself, to a
one- month period, or even less by simply paying the employee a month's salary.
Because the net effect of paragraphs 5 and 6 of the agreement here involved is to render the employment of private
respondents Farrales and Mamasig basically employment at the pleasure of petitioner PIA, the Court considers that
paragraphs 5 and 6 were intended to prevent any security of tenure from accruing in favor of private respondents even
during the limited period of three (3) years,13 and thus to escape completely the thrust of Articles 280 and 281 of the Labor
Code.
150 Roco 3B
4. When the relationship between the parties is much affected by public interest, the otherwise applicable Philippine laws
and regulations cannot be rendered illusory by the parties agreeing upon some other law to govern their relationship.
PIA cannot take refuge in paragraph 10 of its employment agreement which specifies, firstly, the law of Pakistan as
the applicable law of the agreement and secondly, the venue for settlement of any dispute only [in] courts of Pakistan.
These cannot be invoked to prevent the application of Philippine labor laws and regulations to the subject matter of
this case, i.e., the employer-employee relationship between petitioner PIA and private respondents. That relationship is
much affected with public interest and that the otherwise applicable Philippine laws and regulations cannot be rendered
illusory by the parties agreeing upon some other law to govern their relationship.
The contract was not only executed in the Philippines, it was also performed here, at least partially; private respondents
are Philippine citizens and residents, while petitioner, although a foreign corporation, is licensed to do business (and actually
doing business) and hence resident in the Philippines; private respondents were based in the Philippines in between their
assigned flights to the Middle East and Europe. All the above contacts point to the Philippine courts and administrative
agencies as a proper forum.
PIA did not undertake to plead and prove the contents of Pakistan law on the matter; it must therefore be presumed
that the applicable provisions of the law of Pakistan are the same as the applicable provisions of Philippine law .
Private respondents Farrales and Mamasig were illegally dismissed and that public respondent Deputy Minister, MOLE, had
not committed any grave abuse of discretion nor any act without or in excess of jurisdiction in ordering their reinstatement
with backwages. Private respondents are entitled to three (3) years backwages without qualification or deduction. Should their
reinstatement to their former or other substantially equivalent positions not be feasible petitioner should be required to pay
separation pay
129.ALU-TUCP vs. NRLC (1994)

Facts: Petitioners filed separate complaints for unfair labor practice, regularization and monetary benefits with the NLRC.
They plead that they had been employed by National Steel Corporation (NSC) in connection with its 5 Year Expansion
Program for varying lengths of time when they were separated from NSCs service.
The Labor Arbiter declared petitioners regular project employees entitled to the salary of a regular employee. The NLRC
affirmed the Labor Arbiters holding that petitioners were project employees but set aside the award to petitioners of the
same benefits enjoyed by regular employees for lack of legal and factual basis .
Issue: Whether the workers are mere project employees or regular employees
Held: PROJECT EMPLOYEES. The services of project employees are co-terminous with the project and may be
terminated upon the end or completion of the project for which they were hired. Regular employees, in contrast, are
legally entitled to remain in the service of their employer until that service is terminated by one or another of the recognized
modes of termination of service under the Labor Code.
The principal test for determining whether particular employees are properly characterized as project employees as
distinguished from regular employees is whether or not the project employees were assigned to carry out a specific
project or undertaking, the duration (and scope) of which were specified at the time the employees were engaged
for that project.
Project could refer to one or the other of at least 2 distinguishable types of activities.
FIRSTLY, a project could refer to a particular job or undertaking that is within the regular or usual business of the
employer company, but which is distinct and separate, and identifiable as such, from the other undertakings of the company.
Such job or undertaking begins and ends at determined or determinable times . Employees who are hired for the
carrying out of one of these separate projects, the scope and duration of which has been determined and made known to the
151 Roco 3B
employees at the time of employment, are properly treated as project employees, and their services may be lawfully
terminated at completion of the project.
The term project could also refer to, SECONDLY, a particular job or undertaking that is not within the regular
business of the corporation. Such a job or undertaking must also be identifiably separate and distinct from the ordinary
or regular business operations of the employer . The job or undertaking also begins and ends at determined or
determinable times.
The case at bar presents what appears to our mind as a typical example of this (the second) kind of project. The 5 Year
Expansion Program I and II had the ultimate end in view of expanding the volume and increasing the kinds of products that it
may offer for sale to the public. The Five Year Expansion Program had a number of component projects: e.g., (a) the setting
up of a Cold Rolling Mill Expansion Project; (b) the establishment of a Billet Steel-Making Plant; (c) the acquisition and
installation of a Five Stand TDM; and (d) the Cold Mill Peripherals Project.
NSC undertook the carrying out of the Five Year Expansion Program (or more precisely, each of its component projects),
which constitutes a distinct undertaking identifiable from the ordinary business and activity of NSC. Each component project,
of course, begins and ends at specified times, which had already been determined by the time petitioners were engaged. NSC
did the work here involved (the construction of buildings and civil and electrical works, installation of machinery and
equipment and the commissioning of such machinery) only for itself. Private respondent NSC was not in the business of
constructing buildings and installing plant machinery for the general business community. NSC did not hold itself out to the
public as a construction company or as an engineering corporation.
Whichever type of project employment is found in a particular case, a common basic requisite is that the designation of
named employees as project employees and their assignment to a specific project, are effected and implemented
in good faith, and not merely as a means of evading otherwise applicable requirements of labor laws .
The particular component projects embraced in the Five Year Expansion Program, to which petitioners were assigned, were
distinguishable from the regular or ordinary business of NSC which, of course, is the production or making and marketing of
steel products. During the time petitioners rendered services to NSC, their work was limited to one or another of the specific
component projects.
There is nothing in the record to show that petitioners were hired for, or in fact assigned to, other purposes, e.g., for
operating or maintaining the old, or previously installed and commissioned, steel-making machinery and equipment, or for
selling the finished steel products.
Petitioners next claim that their service to NSC of more than six (6) years should qualify them as regular employees.
The simple fact that the employment of petitioners as project employees had gone beyond one (1) year, does not
detract from, or legally dissolve, their status as project employees.
The second paragraph of Article 280 of the Labor Code, quoted above, providing that an employee who has served for at
least one (1) year, shall be considered a regular employee, relates to casual employees, not to project employees.
The familiar grammatical rule is that a proviso is to be construed with reference to the immediately preceding part of the
provision to which it is attached, and not to other sections thereof, unless the clear legislative intent is to restrict or qualify not
only the phrase immediately preceding the proviso but also earlier provisions of the statute or even the statute itself as a whole.
No such intent is observable in Article 280 of the Labor Code.
130.Fernandez vs. NLRC (1994)

Facts: Fernandez was a laborer at D.M. Consunji (DMC), a construction firm. He became a skilled welder and worked until
March 23, 1986, when he was terminated on the ground that the project he was assigned to was completed and there
was no more work. He, with 13 other complainants, sought redress with the LA. The LA found that they worked
continuously in various projects from 5 to 20 years, and belonged in a work pool; thus, their dismissal was illegal.
152 Roco 3B
DMC appealed on the ground that they were all project employees on a project to project basis, pointing out gaps in their
work histories. The NLRC reversed. Fernandez et al. then filed a motion for reconsideration out of time, and went to the SC
without waiting for a decision thereon.
Issue: Whether or not the NLRC erred in reversing LAs decision which held that they were regular employees.
Held: NO. At the outset, it is obvious that the petition was not filed within a reasonable time from receipt of the
questioned decision on November 13, 1989 as the petition was filed only on July 21, 1992. Neither does the filing of the
petition appear to be reasonable from the date of receipt of the denial of the motion for reconsideration on August 2, 1991.
Reckoned from this later date, petitioner waited for almost one year before he availed of this extraordinary remedy of
certiorari. We have consistently stated that "the yardstick to measure the
timeliness of a petition for certiorari is the reasonableness of the duration of time that had expired from the commission of
the acts complained of up to the institution of the proceedings to annul the same." Without doubt, petitioner's negligence
or indifference for such a long period of time has in the meantime rendered the questioned decision final and no
longer assailable.
Even if we were to dispense with the requirement that the petition should be filed within a reasonable time, the petition would
still have to be dismissed on the merits. Private respondent presented material documents showing that petitioner was
hired as a project employee with the specific dates of hiring, the duration of hiring, the dates of his lay-offs,
including the lay-off reports and the termination reports submitted to the then MOLE. Such data covered the period
from November 5, 1974 to March 23, 1986.
Inasmuch as the documentary evidence clearly showed gaps of a month or months between the hiring of petitioner in
the numerous projects wherein he was assigned, the ineluctable conclusion is that petitioner has not continuously worked
with private respondent but only intermittently as he was hired solely for specific projects . As such, he is governed by
Policy Instruction No. 20, the pertinent portions of which read as follows:
Generally, there are 2 types of employees in the construction industry, namely 1) Project
Employees and 2) Non-project Employees.
PROJECT EMPLOYEES are those employed in connection with a particular

construction project. NON-PROJECT employees are those employed by a construction
company without reference to a particular project.
Project employees are not entitled to termination pay if they are terminated as a
result of the completion of the project or any phase thereof in which they are
employed, regardless of the number of projects in which they have been employed by
a particular construction company.
Petitioner cites Article 280 of the Labor Code as legal basis for the decision of the Labor Arbiter in his favor. The text of
Article 280 states as follows:
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
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
153 Roco 3B
with respect to the activity in which he is employed and his employment shall continue while
such actually exists.
Petitioner claims that the above-quoted proviso in Article 280 of the Labor Code supports his claim that he should be
regarded as a regular employee.
We disagree. The proviso in the second paragraph of Article 280 of the Labor Code has recently been explained in Mercado v.
NLRC, where it was held that said proviso deems as regular employees ONLY THOSE CASUAL EMPLOYEES who have
rendered at least one year of service regardless of the fact that such service may be continuous or broken. It is not
applicable to project employees, who are specifically excepted therefrom.
xxx
Indeed, a careful reading of the proviso readily discloses that the same relates to employment where the employee is engaged
to perform activities that are usually necessary or desirable in the usual business or trade of the employer but hastens to qualify
that project employment is specifically exempted therefrom.
Finally, petitioner relies on Policy Instruction No. 20 which was issued by then Secretary Blas F. Ople to stabilize employer-
employee relations in the construction industry to support his contention that workers in the construction industry may now
be considered regular employees after their long years of service with private respondent. The pertinent provision of Policy
Instruction No. 20 reads:
Members of a work pool from which a construction company draws its project employees,
if considered employees of the construction company while in the work pool, are non-
project employees or employees for an indefinite period. If they are employed in a
particular project, the completion of the project or of any phase thereof will not mean
severance of employer-employee relationship.
Respondent Commission correctly observed in its decision that complainants, one of whom petitioner, failed to consider the
requirement in Policy Instruction No. 20 that to qualify as member of a work pool, the worker must still be considered
an employee of the construction company while in the work pool . In other words, there must be proof to the effect
that petitioner was under an obligation to be always available on call of the employer and that he was not free to
offer his services to other employees. Unfortunately, petitioner miserably failed to introduce any evidence of such nature
during the times when there were no project.
Noteworthy in this case is the fact that herein private respondent's lay-off reports and the termination reports were duly
submitted to the then Ministry of Labor and Employment everytime a project was completed in accordance with Policy
Instruction No. 20, which provides:
Project employees are not entitled to termination pay if they are terminated as a result of the
completion of the project or any phase thereof in which they are employed, regardless of the
number of projects in which they have been employed by a particular construction company.
Moreover, the company is not required to obtain a clearance from the Secretary of Labor in
connection with such termination. What is required of the company is a report to the
nearest Public Employment Office for statistical purposes.
The presence of this factor makes this case different from the cases decided by the Court where the employees were deemed
regular employees. The various cases uniformly held that the failure of the employer to report to the nearest employment
office the termination of workers everytime a project is completed proves that the employees are not project
employees. Contrariwise, the faithful and regular effort of private respondent in reporting every completion of its
project and submitting the lay-off list of its employees proves the nature of employment of the workers involved
therein as project employees. Given this added circumstance behind petitioner's employment, it is clear that he does not
belong to the work pool from which the private respondent would draw workers for assignment to other projects at its
discretion.
154 Roco 3B
131. Canadian Opportunities vs. Dalangin (2012)

Facts: Bart Q. Dalangin, Jr. filed a complaint for illegal dismissal against Canadian Opportunities Unlimited (provides
assistance and related services to applicants for permanent residence in Canada). Dalangin was hired by the company only
in the previous month as Immigration and Legal Manager , with a monthly salary of P15,000.00 and was placed on
probation for 6 months. He was to report directly to the Chief Operations Officer Abad. His tasks involved principally the
review of the clients applications for immigration to Canada to ensure that they are in accordance with Canadian and
Philippine laws.
Through a memorandum, the company terminated Dalangins employment, declaring him unfit and unqualified to
continue as Immigration and Legal Manager, for the following reasons: Obstinacy and utter disregard of company
policies, Lack of concern for the companys interest, lack of enthusiasm toward work, lack of interest in fostering relationship
with his co- employees
Dalangin alleged that the company issued a memorandum requiring its employees to attend a Values Formation Seminar
on a Saturday at 2:00 p.m. onwards. When he learned that it bore no relation to his duties, he told Abad that he would not
attend the seminar. He said that he would have to leave at 2:00 p.m. in order to be with his family in the province. He alleged
that he requested Abad to have it conducted within office hours to enable everybody to attend but that Abad refused his
request and stressed that all company employees may be required to stay beyond 2:00 p.m. on Saturdays which she considered
still part of office hours. He also alleged that , under his employment contract, he was to work from 9:00 a.m. to 2:00 p.m. on
Saturdays; that it has been an established company practice that on Saturdays, office hours end at 2:00 p.m.; and that an
employee cannot be made to stay in the office beyond office hours, except under circumstances provided in Article 89 of the
Labor Code.
Dalangin alleged: that Abad issued a memorandum requiring him to explain why he could not attend the seminar and the
other forthcoming seminars. The following day, Abad informed him that Mr. Yadi N. Sichani, the companys Managing
Director, wanted to meet with him regarding the matter. Sichani told petitioner that his services were being terminated
because Sichani could not keep in his company people who are hardheaded and who refuse to follow orders from
management. And that since he was a probationary employee, his employment could be terminated at any time and at will.
Sichani refused to accept his letter-reply to the company memorandum dated October 26, 2001 and instead told him to just
hand it over to Abad.
The company on the other hand alleged: That during his brief employment in the company, Dalangin showed lack of
enthusiasm towards his work and was indifferent towards his co-employees and the company clients; that he refused
to comply with the companys policies and procedures, routinely taking long lunch breaks, exceeding the one hour allotted to
employees, and leaving the company premises without informing his immediate superior, only to call the office later and say
that he would be unable to return because he had some personal matters to attend to. He lacked interpersonal skills and
initiative which he manifested when the immigration application of a company client, Mrs. Jennifer Tecson, was denied by the
Canadian Embassy. He failed to provide counsel to Tecson; he also should have found a way to appeal her denied application,
but he did not; that he refused to attend company-sponsored seminars designed to acquaint or update the employees with the
companys policies and objectives.
Labor Arbiter declared Dalangins dismissal illegal. NLRC reversed the labor arbiters ruling. CA held that the NLRC erred
when it ruled that Dalangin was not illegally dismissed. CA affirmed Labor Arbiters decision as the company did not allow
Dalangin to prove that he possessed the qualifications to meet the reasonable standards for his regular employment; instead, it
dismissed Dalangin peremptorily from the service.
Issue: Whether Dalangin, as a probationary employee, was validly dismissed.
Held: YES but ENTITLED TO NOMINAL DAMAGES BECAUSE EMPLOYER FAILED TO COMPLY WITH THE
NOTICE REQUIREMENT.
Dalangin disputes the companys submission that under the Labor Codes implementing rules, only a written notice is required
for the dismissal of probationary employees. He argues that the rules cited by the company clearly mandate the employer to (1)
155 Roco 3B
serve the employee a written notice and (2) within a reasonable time before effecting the dismissal. He stresses that for the
dismissal to be valid, these requirements must go hand in hand. According to him, the company did not observe the above
two requirements as he was dismissed the day after he was asked, by way of a memorandum dated October 26, 2001,26 to
explain within twenty-four hours why he could not attend.
In International Catholic Migration Commission v. NLRC we held that a probationary employee, as understood under Article 281
of the Labor Code, is one who is on trial by an employer, during which, the latter determines whether or not he is
qualified for permanent employment. A probationary appointment gives the employer an opportunity to observe the
fitness of a probationer while at work, and to ascertain whether he would be a proper and efficient employee .
Dalangin was barely a month on the job when the company terminated his employment. He was found wanting in qualities
that would make him a proper and efficient employee or, as the company put it, he was unfit and unqualified to continue as
its Immigration and Legal Manager.
CA did not believe that the company could fully assess Dalangins performance within a month. It viewed Dalangins dismissal
as arbitrary, considering that the company had very little time to determine his fitness for the job. THE COURT
DISAGREES. The essence of a probationary period of employment fundamentally lies in the purpose or objective of
both the employer and the employee during the period. While the employer observes the fitness, propriety and
efficiency of a probationer to ascertain whether he is qualified for permanent employment, the latter seeks to prove
to the former that he has the qualifications to meet the reasonable standards for permanent employment.
The trial period or the length of time the probationary employee remains on probation depends on the parties agreement,
but it shall not exceed 6 months under Article 281 of the Labor Code, unless it is covered by an apprenticeship
agreement stipulating a longer period.
The word PROBATIONARY, as used to describe the period of employment, implies the purpose of the term or period,
but not its length. Thus, the fact that Dalangin was separated from the service after only about 4 weeks does not necessarily
mean that his separation from the service is without basis.
Contrary to the CAs conclusions, we find substantial evidence indicating that the company was justified in
terminating Dalangins employment, however brief it had been. Dalangin overlooks the fact that he offered glimpses of
his own behavior and actuations during his four-week stay with the company.
Dalangin refused to attend the seminar after he learned that it had no relation to his duties . When Abad insisted that he
attend the seminar to encourage his co-employees to attend, he stood pat on not attending, arguing that marked differences
exist between their positions and duties, and insinuating that he did not want to join the other employees. He also questioned
the scheduled 2:00 p.m. seminars on Saturdays as they were not supposed to be doing a company activity beyond
2:00 p.m.
The Values Formation Seminar incident is an eye opener on the kind of person and employee Dalangin was. His refusal to
attend the seminar brings into focus and validates what was wrong with him, as Abad narrated in her affidavit and as reflected
in the termination of employment memorandum. It highlights his lack of interest in familiarizing himself with the
companys objectives and policies. Significantly, the seminar involved acquainting and updating the employees with
the companys policies and objectives. Had he attended the seminar, Dalangin could have broadened his awareness of the
companys policies, in addition to Abads briefing him about the companys policies on punctuality and attendance, and the
procedures to be followed in handling the clients applications. No wonder the company charged him with obstinacy.
The incident also reveals Dalangins lack of interest in establishing good working relationship with his co-
employees, especially the rank and file employees. He did not want to join them because of his view that the seminar was
not relevant to his position and duties. It also betrays an arrogant and condescending attitude on his part towards his co-
employees, and a lack of support for the company objective that company managers be examples to the rank and file
employees.
156 Roco 3B
Additionally, very early in his employment, Dalangin exhibited negative working habits, particularly with respect to
the one hour lunch break policy of the company and the observance of the companys working hours. Thus, Abad
stated that Dalangin would take prolonged lunch breaks or would go out of the officewithout leave of the company only
to call the personnel manager later to inform the latter that he would be unable to return as he had to attend to personal
matters. Without expressly countering or denying Abads statement, Dalangin dismissed the charge for the companys failure
to produce his daily time record. The same thing is true with Dalangins handling of Tecsons application for
immigration to Canada, especially his failure to find ways to appeal the denial of Tecsons application. Again,
without expressly denying Abads statement or explaining exactly what he did with Tecsons application, Dalangin brushes
aside Abads insinuation that he was not doing his job well, with the ready argument that the company did not even bother to
present Tecsons testimony. In the face of Abads direct statements, as well as those of his coemployees, it is puzzling
that Dalangin chose to be silent about the charges, other than saying that the company could not cite any policy he
violated.
All along, he had been complaining that he was not able to explain his side, yet from the labor arbiters level, all the way to this
Court, he offered no satisfactory explanation of the charges. In this light, we are convinced that the company had seen
enough from Dalangins actuations, behavior and deportment during a four-week period to realize that Dalangin
would be a liability rather than an asset to its operations. We find the company not liable for illegal dismissal
Section 2, Rule I, Book VI of the Labor Codes Implementing Rules and Regulations provides:
If the termination is brought about by the completion of a contract or phase thereof, or by failure of an
employee to meet the standards of the employer in the case of probationary employment, it shall be
sufficient that a written notice is served the employee within a reasonable time from the effective
date of termination.
Dalangin insists that the company failed to comply with the rules as he was not afforded a reasonable time to defend himself
before he was dismissed. The records support Dalangins contention. The notice served on him did not give him a reasonable
time, from the effective date of his separation, as required by the rules. He was dismissed on the very day the notice was given
to him, or, on October 27, 2001. Although we cannot invalidate his dismissal in light of the valid cause for his
separation, the companys noncompliance with the notice requirement entitles Dalangin to indemnity , in the form
of nominal damages in an amount subject to our discretion. Under the circumstances, we consider appropriate an
award of nominal damages of P10,000.00 to Dalangin.
August 10, 2013

132.Hacienda Fatima vs. NFSW (2003)
Facts: In the course of a labor dispute between the Hacienda and respondent union, the union members were not given
work for more than one month. In protest, complainants staged a strike which was however settled upon the signing of a
Memorandum of Agreement. A conciliation meeting was conducted wherein Luisa Rombo, Ramona Rombo, Bobong Abrega,
and Boboy Silva were not considered by the company as employees, and thus may not be members of the union.
It was also agreed that a number of other employees will be reinstated. When the Hacienda again reneged on its commitment,
complainants filed the present complaint. It is alleged by the petitioners that the above employees are mere seasonal
employees. NLRC ruled that the workers were regular workers.
The CA affirmed that while the work of respondents was seasonal in nature, they were considered to be merely on leave
during the off-season and were therefore still employed by petitioners. Moreover, the workers enjoyed security of tenure. Any
infringement upon this right was deemed by the CA to be tantamount to illegal dismissal.
Issue: Whether the said workers are indeed seasonal workers or regular workers.
Held: YES. Contrary to petitioners contention, the CA did not err when it held that respondents were regular employees.
Under Art. 280 on regular employment, for respondents to be excluded from those classified as regular employees, it is
not enough that they perform work or services that are seasonal in nature. They must have also been employed ONLY
for the duration of ONE season.
157 Roco 3B
Evidently, petitioners employed respondents for more than one season. Therefore, the general rule of regular employment
is applicable.
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 trade or business 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 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.
The fact that [respondents] 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 said period, but merely considered on leave until re-employed.
In Mercado, workers were required to perform phases of agricultural work for a definite period of time, after which their
services would be available to any other farm owner. They were not hired regularly and repeatedly for the same phase/s of
agricultural work, but on and off for any single phase thereof. Here, the workers, having performed the same tasks for
petitioners every season for several years, are considered the latters regular employees for their respective tasks.
The sudden changes in work assignments reeked of bad faith. These changes were implemented immediately after respondents
had organized themselves into a union and started demanding collective bargaining. Those who were union members were
effectively deprived of their jobs. Petitioners move actually amounted to unjustified dismissal of respondents, in violation of
the Labor Code.
133.Millares vs. NRLC (2002)

Facts: Millares was employed by private respondent ESSO International Shipping Company (Esso International) through its
local manning agency, Trans Global Maritime Agency Inc. (Trans-Global) as a machinist. He was promoted to Chief
Engineer.
Millares applied for a leave of absence for the period July 9 to August 7, 1989 . Estaniel, president of Trans-Global,
approved the request for leave of absence . Millares wrote to the manager, informing him of his intention to avail of the
optional retirement plan under the Consecutive Enlistment Incentive Plan (CEIP) considering that he had already rendered
more than twenty (20) years of continuous service. Esso International denied petitioner Millares' request for optional
retirement, claiming that (1) he was merely employed on a contractual basis, (2) his contract of enlistment (COE) did
not provide for retirement before the age of sixty (60) years , and (3) he did not comply with the requirement for
claiming benefits under the CEIP.
Millares requested for an extension of his leave of absence from August 9 to 24, 1989. On August 19, 1989, Roy C.
Palomar, Crewing Manager, Ship Group A, Trans-global, wrote Millares advising him that Esso International "has corrected
the deficiency in its manpower requirement specifically in the Chief Engineer rank by promoting a First Assistant Engineer to
this position as a result of his previous leave of absence which expired last August 8, 1989. The adjustment in said rank was
required in order to meet manpower schedules as a result of his inability."
On September 26, 1989, Esso International, through H. Regenboog, Personnel Administrator, advised Millares that in view
of his absence without leave, which is equivalent to abandonment of his position, he had been dropped from the roster of
crew members effective September 1, 1989.
Almost the same happened to co-petitioner Lagda. Petitioners Millares and Lagda filed a complaint-affidavit, docketed as
POEA (M) 89-10-9671, for illegal dismissal and non-payment of employee benefits against Esso International and Trans-
Global, before the POEA.
158 Roco 3B
POEA dismissed the complaint. The NLRC affirmed. It upheld the ruling of the POEA that petitioners herein as seamen
and overseas contract workers are not covered by the term "regular employment" as defined under Article 280 of the
Labor Code. Their employment is thus governed by the contracts they sign each time they are re-hired and is terminated at the
expiration of the contract period.
Issue: Whether Millares et al (seafarers) are regular or contractual employees.
Held: CONTRACTUAL. In Pablo Coyoca v. NLRC, the Court also held that a seafarer is not a regular employee and is not
entitled to separation pay. His employment is governed by the POEA Standard Employment Contract for Filipino Seamen.
As a Filipino seaman, petitioner is governed by the Rules and Regulations Governing Overseas
Employment and the said Rules do not provide for separation or termination pay . What is embodied
in petitioner's contract is the payment of compensation arising from permanent partial disability during the
period of employment.
Seafarers are considered contractual employees. They cannot be considered as regular employees under Article 280
of the Labor Code. Their employment is governed by the CONTRACTS THEY SIGN every time they are rehired and
their employment is TERMINATED WHEN THE CONTRACT EXPIRES. Their employment is contractually fixed for a certain
period of time. They fall under the exception of Article 280 whose employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of 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.
They insist that they should be considered regular employees, since they have rendered services which are usually necessary
and desirable to the business of their employer, and that they have rendered more than 20 years of service. While this may be
true, the Brent case has, however, held that there are certain forms of employment which also require the performance of
usual and desirable functions and which exceed one year but do not necessarily attain regular employment status
under Article 280. Overseas workers including seafarers fall under this type of employment which are governed by the mutual
agreements of the parties.
In this jurisdiction and as clearly stated in the Coyoca case, Filipino seamen are governed by the Rules and Regulations of
the POEA. The Standard Employment Contract governing the employment of All Filipino seamen on Board Ocean-Going
Vessels of the POEA, particularly in Part I, Sec. C specifically provides that the contract of seamen shall be for a fixed
period. And in no case should the contract of seamen be longer than 12 months.
Moreover, it is an accepted maritime industry practice that employment of seafarers are for a fixed period only.
Constrained by the nature of their employment which is quite peculiar and unique in itself, it is for the mutual interest of both
the seafarer and the employer why the employment status must be contractual only or for a certain period of time. Seafarers
spend most of their time at sea and understandably, they cannot stay for a long and an indefinite period of time at sea. Limited
access to shore society during the employment will have an adverse impact on the seafarer. The national, cultural and lingual
diversity among the crew during the COE is a reality that necessitates the limitation of its period.
Even though petitioners were continuously rehired, or their contracts renewed before their expiration, still this
cannot be said to have given them regular status. Undeniably, this circumstance of continuous re-hiring was dictated by
practical considerations that experienced crew members are more preferred. Petitioners were only given priority or preference
because of their experience and qualifications but this does not detract the fact that herein petitioners are contractual
employees. They cannot be considered regular employees.
All in all, petitioners Millares and Lagda are not considered regular or permanent employees under Article 280 of the
Labor Code. Petitioners' employment have automatically ceased upon the expiration of their contracts of enlistment
(COE). Since there was no dismissal to speak of, it follows that petitioners are not entitled to reinstatement or payment of
separation pay or backwages, as provided by law.
134.Purefoods vs. NLRC (1997)
159 Roco 3B
Facts: 906 of herein respondents were hired by Purefoods to work for a fixed period of 5 months at its tuna cannery plant in
General Santos City. After the expiration of their respective contracts of employment in June and July 1991, their services
were terminated. They forthwith executed a Release and Quitclaim stating that they had no claim whatsoever against
Purefoods.
Thereafter, respondents filed before the NLRC Sub-Regional Arbitration Branch in General Santos City a complaint for illegal
dismissal against the petitioner and its plant manager, Marciano Aganon. In 1992, LA Aponesto dismissed the complaint
claiming that they were merely contractual workers and not regular ones. Hence, they could not avail of the law on security of
tenure.
LA noted that he also dismissed a similar case involving Purefoods. In another case involving Purefoods, SOLE Ruben Torres
also resolved that said contractual workers are not regular.
The LA also observed that an order for Purefoods reinstatement would result in the reemployment of more than 10,000
former contractual employees of the company. Besides, by executing a Release and Quitclaim, the respondents had waived
and relinquished whatever right they might have against the Purefoods.
Respondents appealed to the NLRC but it affirmed the LAs decision. However, on MR, NLRC set aside former ruling and
held them to regular employees and that the 5 month employment scheme was a mere circumvention of the security of tenure.
Thus, reinstatement and payment of full backwages was ordered. Hence, this petition.
Purefoods submits that the respondents are now estopped from questioning their separation from petitioners employ in view
of their express conformity with the 5-month duration of their employment contracts. Besides, they fell within the exception
provided in Article 280 which reads: [E]xcept 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.
Issue: Whether or not the respondents are regular employees.
Held: YES. Based on Art. 280, the two kinds of regular employees are:
(1) Those who are engaged to perform activities which are necessary or desirable in the usual business or trade of the
employer; and
(2) Those casual employees who have rendered at least one year of service, whether continuous or broken, with respect
to the activity in which they are employed.
Here, the respondents activities consisted in the receiving, skinning, loining, packing, and casing-up of tuna fish which were
then exported by the Purefoods. Indisputably, they were performing activities which were necessary and desirable in
Purefoods business or trade.
The workers could not be regarded as having been hired for a specific project or undertaking . The term SPECIFIC
PROJECT OR UNDERTAKING under Article 280 contemplates an activity which is not commonly or habitually
performed or such type of work which is not done on a daily basis but only for a specific duration of time or until
completion; the services employed are then necessary and desirable in the employers usual business only for the period of
time it takes to complete the project.
The fact that the Purefoods repeatedly and continuously hired workers to do the same kind of work as that performed by
those whose contracts had expired negates their contention that those workers were hired for a specific project or undertaking
only.
On the validity of respondents 5-month contracts of employment, the leading case of Brent School, Inc. v. Zamora, which was
reaffirmed in numerous subsequent cases, this Court has upheld the legality of fixed-term employment. 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 by 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
160 Roco 3B
acquisition of tenurial security by the employee, they should be struck down or disregarded as contrary to public policy and
morals.
Brent also laid down the criteria under which term employment cannot be said to be in circumvention of the law on security of
tenure:
(1) The fixed period of employment was knowingly and voluntarily agreed upon by the parties without any force, duress,
or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his
consent; or
(2) It satisfactorily appears that the employer and the employee dealt with each other on more or less equal terms with no
moral dominance exercised by the former or the latter.
None of these criteria had been met in the present case. Cannery workers are never on equal terms with their employers.
Almost always, they agree to any terms of an employment contract just to get employed considering that it is difficult to find
work given their ordinary qualifications. Their freedom to contract is empty and hollow because theirs is the freedom to
starve if they refuse to work as casual or contractual workers. Indeed, to the unemployed, security of tenure has no
value.
Purefoods does not deny or rebut respondents averments (1) that the main bulk of its workforce consisted of its so-called
casual employees; (2) that as of July 1991, casual workers numbered 1,835; and regular employees, 263; (3) that the
company hired casual every month for the duration of five months, after which their services were terminated and they
were replaced by other casual employees on the same five-month duration; and (4) that these casual employees were
actually doing work that were necessary and desirable in petitioners usual business.
As a matter of fact, the petitioner even stated in its position paper submitted to the LA that, according to its records, the
previous employees of the company hired on a 5-month basis numbered about 10,000 as of July 1990. This confirms
respondents allegation that it was really the practice of the company to hire workers on a uniformly fixed contract
basis and replace them upon the expiration of their contracts with other workers on the same employment duration.
This scheme of the company was apparently designed to prevent the private respondents and the other casual employees
from attaining the status of a regular employee. It was a clear circumvention of the employees right to security of tenure
and to other benefits like minimum wage, cost-ofliving allowance, sick leave, holiday pay, and 13th month pay. Indeed, the
Purefoods succeeded in evading the application of labor laws. Also, it saved itself from the trouble or burden of
establishing a just cause for terminating employees by the simple expedient of refusing to renew the employment
contracts.
Generally, quitclaims by laborers are frowned upon as contrary to public policy and are held to be ineffective to bar
recovery for the full measure of the workers rights. The reason for the rule is that the employer and the employee do not
stand on the same footing. Notably, the respondents lost no time in filing a complaint for illegal dismissal. This act is hardly
expected from employees who voluntarily and freely consented to their dismissal.
135.Hanjin vs. Ibanez (2008)

Facts: On 11 April 2002, Felicito Ibaez, Carolino, Gacula, Dagotdot, Calda, and 4 other co-workers filed a complaint before
the NLRC for illegal dismissal with prayer for reinstatement and full backwages against Hanjin.
Respondents stated that their tasks were usual and necessary or desirable in the usual business or trade of HANJIN. They
averred that they were employed as members of a work pool from which HANJIN draws the workers to be dispatched
to its various construction projects; with the exception of Ruel Calda, who as a warehouseman was required to work in
HANJIN's main office.
On 15 April 2002, Hanjin dismissed respondents from employment. Respondents claimed that at the time of their
dismissal, HANJIN had several construction projects that were still in progress, such as Metro Rail Transit (MRT) II
and MRT III, and continued to hire employees to fill the positions vacated by the respondents.
161 Roco 3B
Petitioners denied the respondents' allegations. They maintained that respondents were hired as project employees for the
construction of the LRT/MRT Line 2 Package 2 and 3 Project. HANJIN and respondents purportedly executed
contracts of employment, in which it was clearly stipulated that the respondents were to be hired as project employees for a
period of only 3 months, but that the contracts may be renewed.
However, Hanjin failed to furnish the Labor Arbiter a copy of said contracts of employment. Petitioners further
emphasized that prior to 15 April 2002, Hak Kon Kim, HANJIN's Project Director, notified respondents of the company's
intention to reduce its manpower due to the completion of the LRT/MRT Line 2 Package 2 and 3 Project. Respondents were
among the project employees who were thereafter laid off.
Finally, petitioners insist that in accordance with the usual practice of the construction industry , a completion bonus
was paid to the respondents. To support this claim, they offered as evidence payroll records for the period 4 April 2002 to
20 April 2002, with the words "completion bonus" written at the lower left corner of each page.
Petitioners attached copies of the Quitclaims, executed by the respondents, which uniformly stated that the latter
received all wages and benefits that were due them and released HANJIN and its representatives from any claims in
connection with their employment. In their Reply respondents vehemently refuted having signed any written contract
stating that they were project employees.
Issue: Whether they are project employees.
Held: NO. The principal test for determining whether particular employees are properly characterized as "project employees"
as distinguished from "regular employees" is whether or not the project employees were assigned to carry out a "specific
project or undertaking," the duration and scope of which were specified at the time the employees were engaged for
that project.
(1) Length of service or re-hiring of project employees in the construction business does not confer upon them
regular employment status.
In a number of cases, the Court has held that the length of service or the re-hiring of construction workers on a project-to-
project basis does not confer upon them regular employment status, since their re-hiring is only a natural consequence of
the fact that experienced construction workers are preferred. Employees who are hired for carrying out a separate job,
distinct from the other undertakings of the company, the scope and duration of which has been determined and made
known to the employees at the time of the employment, are properly treated as project employees and their services may
be lawfully terminated upon the completion of a project. Should the terms of their employment fail to comply with this
standard, they cannot be considered project employees.
(2) Employee must be informed of their status as such; requisites.

In Abesco Construction and Development Corporation v. Ramirez, which also involved a construction company and its workers, this
Court considered it crucial that the employees were informed of their status as project employees.
In subsequent cases, the Court markedly stressed the importance of the employees' knowing consent to being engaged
as project employees when it clarified that "there is no question that stipulation on employment contract providing for a
fixed period of employment such as `project-to-project' contract is valid provided:
(a) the period was agreed upon knowingly and voluntarily by the parties,
(b) without any force, duress or improper pressure being brought to bear upon the employee and
(c) absent any other circumstances vitiating his consent
(3) Absence of written contract does not automatically confer regular status; but it is a red flag which might
show that the employee was not informed of the nature of his project-employee status.
Before the Labor Arbiter, Hanjin initially claimed they executed such contracts with the employees stipulating the 3-month
duration etc etc. But in their appeal to the CA, Hanjin eventually admitted that due to lapse in management procedure, no
such employment contracts were executed; nonetheless, they claim that the absence of a written contract does not remove
respondents from the ambit of being project employees. While the absence of a written contract does not automatically confer
162 Roco 3B
regular status, it has been construed by this Court as a red flag in cases involving the question of whether the workers
concerned are regular or project employees.
In fact, in the Raycor v NLRC case, the Court did not give weight to employment contracts signed by the employer (president
and GM) but not the employees. And this Court has been consistent in that in the cases where construction workers were held
to retain their project employee status, despite being continuously re-hired, the employers were able to produce employment
contracts clearly stipulating that the workers' employment was coterminous with the project to support their claim. Hence,
even though the absence of a written contract does not by itself grant regular status to respondents, such a contract
is evidence that respondents were informed of the duration and scope of their work and their status as project
employees.
In this case, where no other evidence was offered, the absence of an employment contract puts into serious question
whether the employees were properly informed at the onset of their employment status as project employees . It is
doctrinally entrenched that in illegal dismissal cases, the employer has the burden of proving with clear, accurate, consistent
and convincing evidence that a dismissal was valid.
(4) If the employee was not informed of the day certain or the nature of his employment (as a project
employee), the 1-year period applied to casual employees will also apply to these project employees hence,
they will be deemed regular employees after the lapse of 1 year.
Absent any other proof that the project employees were informed of their status as such, it will be presumed that they are
regular employees in accordance with Clause 3.3(a) of Department Order No. 19, Series of 1993, which states that:
a) Project employees whose aggregate period of continuous employment in a construction company is at
least one year shall be considered regular employees, in the absence of a "day certain" agreed upon by
the parties for the termination of their relationship. Project employees who have become regular shall be entitled
to separation pay.
A "day" as used herein, is understood to be that which must necessarily come, although it may not be known exactly when.
This means that where the final completion of a project or phase thereof is in fact determinable and the expected completion
is made known to the employee, such project employee may not be considered regular, notwithstanding the one-year duration
of employment in the project or phase thereof or the one-year duration of two or more employments in the same project or
phase of the project.
(*In effect, although under the LC, as interpreted by the SC, the 1-year period applies only to casual employees, this
period will nonetheless apply to project employees if there is no contract stipulating a day certain, since, in this
case, they are not really project employees.)
Petitioners argue that the Termination Report filed before the DOLE signifies that respondents' services were engaged merely
for the LRT/MRT Line 2 Package 2 and 3 Project. However Hanjin was not able to offer evidence to refute or controvert
the respondents' claim that they were assigned to various construction projects. Had respondents' allegations been
false, petitioners could simply present as evidence documents and records in their custody to disprove the same, i.e.,
payroll for such projects or termination reports, which do not bear respondents' names. Petitioners, instead, chose to
remain vague as to the circumstances surrounding the hiring of the respondents. This Court finds it unusual that petitioners
cannot even categorically state the exact year when HANJIN employed respondents .
(5) On the filing of termination of reports it must be made for each construction project; or else, the
employees would be deemed regular employees.
It also bears to note that petitioners did not present other Termination Reports apart from that filed on 11 April 2002. The
failure of an employer to file a Termination Report with the DOLE every time a project or a phase thereof is
completed indicates that respondents were not project employees. Employers cannot mislead their employees, whose
work is necessary and desirable in the former's line of business, by treating them as though they are part of a work pool from
which workers could be continually drawn and then assigned to various projects and thereafter denied regular status at any
time by the expedient act of filing a Termination Report. This would constitute a practice in which an employee is unjustly
precluded from acquiring security of tenure, contrary to public policy, morals, good customs and public order. 38
In this case, only the last and final termination of petitioners was reported to the DOLE. If respondents were
actually project employees, petitioners should have filed as many Termination Reports as there were construction
163 Roco 3B
projects actually finished and for which respondents were employed. Thus, a lone Termination Report filed by
petitioners only upon the termination of the respondents' final project, and after their previous continuous employment for
other projects, is not only unconvincing, but even suspicious.
(6) On payment of completion bonus it must be paid each time a project is completed. Also, the absence of an
undertaking by the employee (best evidence: if it is part of the employment contract) is an indicator that the
employee is not a project employee.
Petitioners insist that the payment to the respondents of a completion bonus indicates that respondents were project
employees. Assuming that petitioners actually paid respondents a completion bonus, petitioners failed to present
evidence showing that they undertook to pay respondents such a bonus upon the completion of the project, as
provided under Section 2.2(f) of Department Order No. 19, Series of 1993. A completion bonus, if paid as a mere
afterthought, cannot be used to determine whether or not the employment was regular or merely for a project. Otherwise, an
employer may defeat the workers' security of tenure by paying them a completion bonus at any time it is inclined to unjustly
dismiss them.
Department Order No. 19, Series of 1993, provides that in the absence of an undertaking that the completion bonus will
be paid to the employee, as in this case, the employee may be considered a non-project employee.
Furthermore, after examining the payroll documents submitted by petitioners, this Court finds that the payments termed as
"completion bonus" are not the completion bonus paid in connection with the termination of the project. First of all,
the period from 4 April 2002 to 20 April 2002, as stated in the payrolls, bears no relevance to a completion bonus. A
completion bonus is paid in connection with the completion of the project, and is not based on a 15-day period.
Secondly, the amount paid to each employee as his completion bonus was uniformly equivalent to his fifteen-day wages,
without consideration of the number of years of service rendered. Section 3.4 of Department Order No. 19, Series of 1993,
provides that based on industry practice, the completion bonus is at least the employee's one-half month salary for every
twelve months of service.
(7) When quitclaims will always be declared ineffective: when there is clear proof or where the terms are
unconscionable on their face.
Finally, the Quitclaims which the respondents signed cannot bar them from demanding what is legally due them as regular
employees. As a rule, quitclaims and waivers or releases are looked upon with disfavor and frowned upon as contrary to
public policy. They are thus ineffective to bar claims for the full measure of a worker's legal rights, particularly when the
following conditions are applicable:
a) where there is clear proof that the waiver was wangled from an unsuspecting or gullible person; or
b) where the terms of settlement are unconscionable on their face.
To determine whether the Quitclaims signed by respondents are valid, one important factor that must be taken into
account is the consideration accepted by respondents; the amount must constitute a reasonable settlement equivalent
to the full measure of their legal rights. In this case, the Quitclaims signed by the respondents do not appear to have been
made for valuable consideration.
THUS: For these reasons, respondents are to be considered regular employees of HANJIN. Finally, in the instant case,
records failed to show that HANJIN afforded respondents, as regular employees, due process prior to their dismissal, through
the twin requirements of notice and hearing. They were not given written notices informing them of the grounds for their
dismissal; nor were they given the chance to defend themselves.
136.Caseres vs. Universal Robina (2007)

Facts: Universal Robina Sugar Milling Corporation is engaged in the cane sugar milling business. Caseres started working for
URC in 1989 and Pael in 1993. At the start of their employments, they were made to sign a Contract of Employment for
Specific Project or Undertaking. Petitioners contracts were renewed from time to time, until May 1999 when they were
informed that their contracts would not be renewed anymore .
They filed a complaint for illegal dismissal, regularization, incentive leave pay, 13th month pay, damages and attorneys fees.
164 Roco 3B
Issue: Whether Caseres & Pael are Seasonal/Project/Fixed Term employees and not regular employees of URC.
Held: PROJECT EMPLOYEES. The LA, the NLRC and the CA are one in ruling that petitioners were not illegally dismissed
as they were not regular, but contractual or project employees. Consequently, the finding that petitioners were project
employees binds this Court.
THREE KINDS OF EMPLOYEES:

(a) 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;
(b) 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 services to be performed is seasonal in
nature and the employment is for the duration of the season; and
(c) CASUAL EMPLOYEES or those who are neither regular nor project employees.
The principal test for determining whether an employee is a project employee or a regular employee is whether 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 . 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. A true project employee should be assigned to a project which begins and ends at determined or
determinable times, and be informed thereof at the time of hiring.
Petitioners contend that respondents repeated hiring of their services qualifies them to the status of regular employees.
On this matter, the LA ruled: The very nature of the terms and conditions of their hiring would show that
complainants were required to perform phases of special projects which are not related to the main operation of the
respondent for a definite period, after which their services are available to any farm owner.
NLRC ruled: Complainants never bothered to deny that they voluntarily, knowingly and willfully executed the
contracts of employment. Neither was there any showing that respondents exercised moral dominance. The contracts
of employment are valid and binding. The execution of these contracts in the case at bar is necessitated by the peculiar nature
of the work in the sugar industry which has an off milling season. The very nature of the terms and conditions of
complainants hiring reveals that they were required to perform phases of special projects for a definite period after, their
services are available to other farm owners. This is so because the planting of sugar does not entail a whole year
operation, and utility works are comparatively small during the off-milling season.
CA ruled: Upon application, Caseres was interviewed and made to understand that his employment would be co-terminus
with the phase of work that is until February 5, 1989 and thereafter he would be free to seek employment elsewhere. Caseres
agreed and signed the contract of employment. Thereafter Caseres voluntarily signed several other employment contracts for
various undertakings with a determinable period. As in the first contract, his services were co-terminus with the work to which
he was assigned, and that thereafter, he was free to seek employment with other sugar millers or elsewhere. The nature and
terms and conditions of employment of petitioner Andito Pael were the same.
There were intervals in petitioners respective employment contracts, and their work depended on the availability of
such contracts or projects. Petitioners repeated and successive reemployment on the basis of a contract of employment for
more than one year cannot and does not make them regular employees. Length of service is not the controlling
determinant of the employment tenure of a project employee.
In Villa v. NLRC, the court said that by entering into such contract, an employee is deemed to understand that his
employment is coterminous with the project. He may not expect to be employed continuously beyond the completion of
the project. Project employment contracts are not lopsided agreements in favor of only one party thereto. While it may be true
that it is the employer who drafts project employment contracts with its business interest as overriding consideration, such
165 Roco 3B
contracts do not, of necessity, prejudice the employee. Neither is the employee left helpless by a prejudicial employment
contract.
The fact that petitioners were constantly re-hired does not ipso facto establish that they became regular employees.
Their contracts show that there were intervals in their employment.
They were indeed project employees, and since their work depended on the availability of such contracts or projects,
necessarily the employment of respondents work force was not permanent but coterminous with the projects to which they
were assigned and from whose payrolls they were paid. It would be extremely burdensome for their employer to retain
them as permanent employees and pay them wages even if there were no projects to work on.
Even if petitioners were repeatedly and successively re-hired, still it did not qualify them as regular employees, as
length of service is not the controlling determinant of the employment tenure of a project employee, but whether the
employment has been fixed for a specific project or undertaking, its completion has been determined at the time of
the engagement of the employee.
The proviso in Article 280, stating that an employee who has rendered service for at least (1) year shall be considered a regular
employee, pertains to casual employees and not to project employees.
137.Price vs. Innondata (2008)

Facts: Innodata Philippines, Inc./Innodata Corporation (INNODATA) was a domestic corporation engaged in the data
encoding and data conversion business. Respondent Leo Rabang was its Human Resources and Development (HRAD)
Manager, while respondent Jane Navarette was its Project Manager. INNODATA had since ceased operations due to business
losses in June 2002.
Petitioners Cherry J. Price, Stephanie G. Domingo, and Lolita Arbilera were employed as formatters by INNODATA.
The parties executed an employment contract denominated as a Contract of Employment for a Fixed Period,
stipulating that the contract shall be for a period of 1 year. During their employment as formatters, petitioners were assigned
to handle jobs for various clients of INNODATA. Once they finished the job for one client, they were immediately
assigned to do a new job for another client.
The HRAD Manager of INNODATA wrote petitioners informing them of their last day of work. According to
INNODATA, petitioners employment already ceased due to the end of their contract. Petitioners filed a Complaint for illegal
dismissal and damages against respondents.
The Labor Arbiter found petitioners complaint for illegal dismissal and damages meritorious. The NLRC reversed the Labor
Arbiters Decision and absolved INNODATA of the charge of illegal dismissal. The Court of Appeals sustained the ruling of
the NLRC that petitioners were not illegally dismissed.
Issue: Whether Price et al were employed under a valid fixed term contract.
Held: NO. The employment status of a person is defined and prescribed by law and not by what the parties say it should be.
Equally important to consider is that a contract of employment is impressed with public interest such that labor contracts
must yield to the common good. 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.
Regular employment has been defined by Article 280. The following employees are accorded regular status: (1) those who are
engaged to perform activities which are necessary or desirable in the usual business or trade of the employer ,
regardless of the length of their employment; and (2) those who were initially hired as casual employees, but have
rendered at least one year of service , whether continuous or broken, with respect to the activity in which they are
employed.
166 Roco 3B
Petitioners belong to the first type of regular employees. Under Article 280 of the Labor Code, the applicable test to
determine whether an employment should be considered regular or non-regular is the reasonable connection between the
particular activity performed by the employee in relation to the usual business or trade of the employer.
In the case at bar, petitioners were employed by INNODATA on 17 February 1999 as formatters. The primary business of
INNODATA is data encoding, and the formatting of the data entered into the computers is an essential part of the
process of data encoding. Formatting organizes the data encoded, making it easier to understand for the clients and/or the
intended end users thereof. Undeniably, the work performed by petitioners was necessary or desirable in the business or trade
of INNODATA.
However, it is also true that while certain forms of employment require the performance of usual or desirable functions and
exceed one year, these do not necessarily result in regular employment under Article 280 of the Labor Code. Under the Civil
Code, fixed-term employment contracts are not limited, as they are under the present Labor Code, to those by nature seasonal
or for specific projects with predetermined dates of completion; they also include those to which the parties by free choice
have assigned a specific date of termination. The decisive determinant in term employment is 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 must necessarily come, although it may not be known when. Seasonal employment and
employment for a particular project are instances of employment in which a period, where not expressly set down, is
necessarily implied.
Respondents maintain that the contracts of employment entered into by petitioners with INNDOATA were valid fixed-term employment contracts
which were automatically terminated at the expiry of the period stipulated therein, i.e., 16 February 2000.
The Court disagrees. While this Court has recognized the validity of fixed-term employment contracts, it has consistently held
that this is the exception rather than the general rule. More importantly, a fixed-term employment is valid only under
certain circumstances.
Several circumstances wherein a fixed- term is an essential and natural appurtenance (neither for seasonal work nor for specific
projects, but to which a fixed term is an essential and natural appurtenance), to wit:
1. Overseas employment contracts, to which, whatever the nature of the engagement, the concept of regular
employment with all that it implies does not appear ever to have been applied, Article 280 of the Labor Code
notwithstanding;
2. Appointments to the positions of dean, assistant dean, college secretary, principal, and other administrative
offices in educational institutions, which are by practice or tradition rotated among the faculty members, and
where fixed terms are a necessity without which no reasonable rotation would be possible.
3. Despite the provisions of Article 280, Policy Instructions No. 8 of the Minister of Labor implicitly recognize that
certain company officials may be elected for what would amount to fixed periods, at the expiration of which
they would have to stand down, in providing that these officials may lose their jobs as president, executive vice-
president or vice president, etc. because the stockholders or the board of directors for one reason or another did
not reelect them.
Where, from the circumstances, it is apparent that the period was imposed to preclude the acquisition of tenurial security by
the employee, then it should be struck down as being contrary to law, morals, good customs, public order and public policy.
After considering petitioners contracts in their entirety, as well as the circumstances surrounding petitioners employment
at INNODATA, the terms fixed therein were meant only to circumvent petitioners right to security of tenure and
are, therefore, invalid.
The contracts of employment submitted by respondents are highly suspect for not only being ambiguous, but also for
appearing to be tampered with.
167 Roco 3B
Petitioners alleged that their employment contracts with INNODATA became effective 16 February 1999, and the first day they reported for work
was on 17 February 1999. The Certificate of Employment issued by the HRAD Manager of INNODATA also indicated that petitioners Price
and Domingo were employed by INNODATA on 17 February 1999.
However, respondents asserted before the Labor Arbiter that petitioners employment contracts were effective only on
6 September 1999. They later on admitted in their Memorandum filed with this Court that petitioners were originally hired on 16 February
1999 but the project for which they were employed was completed before the expiration of one year . Petitioners were merely
rehired on 6 September 1999 for a new project. While respondents submitted employment contracts with 6 September 1999 as
beginning date of effectivity, it is obvious that in one of them, the original beginning date of effectivity, 16 February
1999, was merely crossed out and replaced with 6 September 1999. The copies of the employment contracts
submitted by petitioners bore similar alterations.
The attempt to change the beginning date of effectivity of petitioners contracts was very crudely done. The
alterations are very obvious, and they have not been initialed by the petitioners to indicate their assent to the same. If the
contracts were truly fixed- term contracts, then a change in the term or period agreed upon is material and would already
constitute a novation of the original contract. Such modification and denial by respondents as to the real beginning date of
petitioners employment contracts render the said contracts ambiguous. The contracts themselves state that they would be
effective until 16 February 2000 for a period of one year. If the contracts took effect only on 6 September 1999, then its
period of effectivity would obviously be less than one year, or for a period of only about five months. Respondents wanted
to make it appear that petitioners worked for INNODATA for a period of less than one year so that they can
preclude petitioners from acquiring regular status based on their employment for one year.
The Court emphasizes that it has already found that petitioners should be considered regular employees of INNODATA by
the nature of the work they performed as formatters, which was necessary in the business or trade of INNODATA. Hence,
the total period of their employment becomes irrelevant.
Contra Proferentem: Even assuming that petitioners length of employment is material, given respondents muddled
assertions, where a contract of employment, being a contract of adhesion, is ambiguous, any ambiguity therein should be
construed strictly against the party who prepared it. The Court is, thus, compelled to conclude that petitioners contracts of
employment became effective on 16 February 1999, and that they were already working continuously for INNODATA for a
year.
INNODATA contends that petitioners were project employees whose employment ceased at the end of a specific project or undertaking. This
contention is specious and devoid of merit.
The Court defined PROJECT EMPLOYEES as those workers hired (1) for a specific project or undertaking, and wherein
(2) the completion or termination of such project has been determined at the time of the engagement of the employee.
Petitioners employment contracts however, failed to reveal any mention therein of what specific project or
undertaking petitioners were hired for. Although the contracts made general references to a project, such project was
neither named nor described at all therein. The conclusion by the CA that petitioners were hired for the Earthweb project is
not supported by any evidence on record. The one-year period for which petitioners were hired was simply fixed in the
employment contracts without reference or connection to the period required for the completion of a project. There
is also a dearth of evidence that such project or undertaking had already been completed or terminated to justify the dismissal
of petitioners. In fact, petitioners alleged and respondents failed to dispute that petitioners did not work on just one project,
but continuously worked for a series of projects for various clients of INNODATA.
The Court also takes note of several other provisions in petitioners employment contracts that display utter disregard for their
security of tenure. Despite fixing a period or term of employment, i.e., one year, INNODATA reserved the right to pre-
terminate petitioners employment.
1. Further, should the Company have no more need for the EMPLOYEES services on account of completion of the
project, lack of work (sic) business losses, introduction of new production processes and techniques, which will negate
168 Roco 3B
the need for personnel, and/or overstaffing, this contract maybe pre-terminated by the EMPLOYER upon giving of
three (3) days notice to the employee.
2. The EMPLOYEE or the EMPLOYER may pre-terminate this CONTRACT, with or without cause, by giving at least
15-day notice to that effect. Provided, that such pre-termination shall be effective only upon issuance of the
appropriate clearance in favor of the said EMPLOYEE.
Pursuant to the afore-quoted provisions, petitioners have no right at all to expect security of tenure , even for the
supposedly one-year period of employment provided in their contracts, because they can still be pre-terminated (1) upon
the completion of an unspecified project; or (2) with or without cause, for as long as they are given a three-day notice.
Such contract provisions are repugnant to the basic tenet in labor law that no employee may be terminated except for just or
authorized cause.
Under Section 3, Article XVI of the Constitution, it is the policy of the State to assure the workers of security of tenure and
free them from the bondage of uncertainty of tenure woven by some employers into their contracts of employment. This was
exactly the purpose of the legislators in drafting Article 280 of the Labor Code to prevent the circumvention by unscrupulous
employers of the employees 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.
In all, respondents insistence that it can legally dismiss petitioners on the ground that their term of employment has expired is
untenable. To reiterate, petitioners, being regular employees of INNODATA, are entitled to security of tenure (See Art.
279 provision on Security of Tenure.
By virtue of the foregoing, an illegally dismissed employee is entitled to reinstatement without loss of seniority rights and other
privileges, with full back wages computed from the time of dismissal up to the time of actual reinstatement.
Considering that reinstatement is no longer possible on the ground that INNODATA had ceased its operations due to
business losses, the proper award is separation pay equivalent to one month pay for every year of service, to be computed
from the commencement of their employment up to the closure of INNODATA. The amount of back wages awarded to
petitioners must be computed from the time petitioners were illegally dismissed until the time INNODATA ceased its
operations in June 2002.
138.Aurora Land vs. NLRC (1997)

Facts: Dagui was hired by Dona Aurora Suntay Tanjangco in 1953 for the repair of the Tanjangco apartments and
residential buildings; he performed carpentry, plumbing, electrical, and masonry work. Aurora died in 1982, and her
daughter, Teresita, took over. In 1991, Dagui received the shock of his life when Tereista suddenly told him wala ka nang
trabaho mula ngayon on the alleged ground of unsatisfactory work. He filed a complaint for illegal dismissal.
Both the LA and the NLRC found in his favor, giving him separation pay only; hence, the present appeal.
Petitioners insist that Dagui had never been their employee. Since the establishment of Aurora Plaza, Dagui served therein
only as a job contractor. Dagui had control and supervision of whoever he would take to perform a contracted job. On
occasion, Dagui was hired only as a "tubero" or plumber as the need arises in order to unclog sewerage pipes. Every time
his services were needed, he was paid accordingly. It was understood that his job was limited to the specific undertaking of
unclogging the pipes. In effect, petitioners would like us to believe that Dagui was an independent contractor,
particularly a job contractor, and not an employee of Aurora Plaza.
Issue: Whether or not Dagui was a regular employee
Held: YES. According to the IRR of the Labor Code, "There is job contracting permissible under the Code if 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."
169 Roco 3B
Honorio Dagui earns a measly sum of P180.00 a day (latest salary). Ostensibly, and by no stretch of the imagination can
Dagui qualify as a job contractor. No proof was adduced by the petitioners to show that Dagui was merely a job
contractor, and it is absurd to expect that Dagui, with such humble resources, would have substantial capital or investment in
the form of tools, equipment, and machineries, with which to conduct the business of supplying Aurora Plaza with manpower
and services for the exclusive purpose of maintaining the apartment houses owned by the petitioners herein.
The bare allegation of petitioners, without more, that Dagui is a job contractor has been disbelieved by the Labor Arbiter and
the NLRC. Dagui, by the findings of both tribunals, was an employee of the petitioners. We are not inclined to set aside these
findings. The issue whether or not an employer-employee relationship exists in a given case is essentially a question of fact.
However, we deem it wise to discuss this issue full-length if only to bolster the conclusions reached by the labor tribunals, to
which we fully concur.
Jurisprudence is firmly settled that whenever the existence of an employment relationship is in dispute, four elements
constitute the reliable yardstick (Four Fold Test). 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.
All these elements are present in the case at bar. Dagui was hired in 1953 by Doa Aurora Suntay Tanjangco (mother of
Teresita Tanjangco-Quazon), who was then the one in charge of the administration of the Tanjangco's various apartments and
other properties. He was employed as a stay-in worker performing carpentry, plumbing, electrical and necessary work
(sic) needed in the repairs of Tanjangco's properties. Upon the demise of Doa Aurora in 1982 petitioner Teresita Tanjangco-
Quazon took over the administration of these properties and continued to employ the private respondent, until his
unceremonious dismissal on June 8, 1991.
Dagui was not compensated in terms of profits for his labor or services like an independent contractor. Rather, he was paid
on a daily wage basis at the rate of P180.00. Employees are those who are compensated for their labor or services by
wages rather than by profits. Clearly, Dagui fits under this classification. Also, Doa Aurora and later her daughter Teresita
Quazon evidently had the power of dismissal for cause over the private respondent.
Finally, the records unmistakably show that the most important requisite of control is likewise extant in this case. 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. The establishment of petitioners is engaged in the leasing of residential and
apartment buildings. Naturally, Daguis work therein as a maintenance man had to be performed within the premises of
herein petitioners. In fact, petitioners do not dispute the fact that Dagui reports for work from 7:00 o'clock in the morning
until 4:00 o'clock in the afternoon. It is not far-fetched to expect, therefore, that Dagui had to observe the instructions
and specifications given by then Doa Aurora and later by Mrs. Teresita Quazon as to how his work had to be
performed. Parenthetically, since the job of a maintenance crew is necessarily done within company premises, it can be
inferred that both Doa Aurora and Mrs. Quazon could easily exercise control on private respondent whenever they
please.
TYPE OF EMPLOYEE
As can be gleaned from this Art. 280, there are two kinds of regular employees, namely: (1) those who are engaged to
perform activities which are usually necessary or desirable in the usual business or trade of the employer; and (2) those
who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which
they are employed.
Whichever standard is applied, Dagui qualifies as a regular employee. As aptly ruled by the Labor Arbiter:
As owner of many residential and apartment buildings in Metro Manila, the necessity of maintaining and employing a
permanent stay-in worker to perform carpentry, plumbing, electrical and necessary work needed in the repairs of
Tanjangco's properties is readily apparent and is in fact needed. So much so that upon the demise of Doa Aurora
Tanjangco, respondent's daughter Teresita Tanjangco-Quazon apparently took over the administration of the properties and
continued to employ complainant until his outright dismissal on June 8, 1991.
170 Roco 3B
The jobs assigned to Dagui as MAINTENANCE MAN, CARPENTER, PLUMBER, ELECTRICIAN and MASON were directly related
to the business of petitioners as lessors of residential and apartment buildings. Moreover, such a continuing need for
his services by herein petitioners is sufficient evidence of the necessity and indispensability of his services to petitioners'
business or trade.
Dagui should likewise be considered a regular employee by the mere fact that he rendered service for the
Tanjangcos for more than one year, that is, beginning 1953 until 1982 , under Doa Aurora; and then from 1982 up to
June 8, 1991 under the petitioners, for a total of 29 and 9 years respectively. Owing to hislength of service, he became a
regular employee, by operation of law, one year after he was employed in 1953 and subsequently in 1982. In Baguio Country
Club Corp. v. NLRC, we decided that it is more in consonance with the intent and spirit of the law to rule that the status of
regular employment attaches to the casual employee on the day immediately after the end of his first year of service .
To rule otherwise is to impose a burden on the employee which is not sanctioned by law. Thus, the law does not provide the
qualification that the employee must first be issued a regular appointment or must first be formally declared as such before he
can acquire a regular status.
Petitioners argue, however, that even assuming arguendo that private respondent can be considered an employee,
he cannot be classified as a regular employee. He was merely a project employee whose services were hired only with
respect to a specific job and only while the same exists, thus falling under the exception of Article 280, paragraph 1 of the
Labor Code. Hence, it is claimed that he is not entitled to the benefits prayed for and subsequently awarded by the Labor
Arbiter as modified by public respondent NLRC.
The circumstances of this case in light of settled case law do not, at all, support this averment. Consonant with a string of
cases, if Dagui was employed as a "project employee," petitioners should have submitted a report of termination to the
nearest public employment office everytime his employment is terminated due to completion of each project, as
required by Policy Instruction No. 20.
Throughout the duration of private respondent's employment as maintenance man, there should have been filed as many
reports of termination as there were projects actually finished, if it were true that Dagui was only a project worker.
Failure of the petitioners to comply with this simple, but nonetheless compulsory, requirement is proof that Dagui is not a
project employee.
ILLEGAL DISMISSAL
The law requires that the employer must furnish the worker sought to be dismissed with TWO WRITTEN NOTICES before
termination of employee 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 employer's decision
to dismiss him. Failure to comply with the requirements taints the dismissal with illegality. This procedure is mandatory; in
the absence of which, any judgment reached by management is void and inexistent.
These mandatory requirements were undeniably absent in the case at bar. Quazon dismissed Dagui on June 8, 1991,
without giving him any written notice informing the worker herein of the cause for his termination. Neither was there any
hearing conducted in order to give Dagui the opportunity to be heard and defend himself. He was simply told: "Wala ka
nang trabaho mula ngayon," allegedly because of poor workmanship on a previous job. The undignified manner by which
private respondent's services were terminated smacks of absolute denial of the employee's right to due process and betrays
petitioner Quazon's utter lack of respect for labor. Such an attitude indeed deserves condemnation.
The Court, however, is bewildered why only an award for separation pay in lieu of reinstatement was made by both
the Labor Arbiter and the NLRC. No backwages were awarded. It must be remembered that backwages and
reinstatement are two reliefs that should be given to an illegally dismissed employee. They are separate and distinct from each
other. In the event that reinstatement is no longer possible, as in this case, separation pay is awarded to the employee. The
award of separation pay is in lieu of reinstatement and not of backwages. In other words, an illegally dismissed employee is
entitled to (1) either reinstatement, if viable, or separation pay if reinstatement is no longer viable, and (2) backwages.
Payment of backwages is specifically designed to restore an employee's income that was lost because of his unjust
171 Roco 3B
dismissal. On the other hand, payment of separation pay is intended to provide the employee money during the period
in which he will be looking for another employment.
Considering, however, that the termination of private respondent Dagui was made on June 8, 1991 or after the effectivity of
the amendatory provision of Republic Act No. 6715 on March 21, 1989, private respondent's backwages should be computed
on the basis of said law.
It is true that private respondent did not appeal the award of the Labor Arbiter awarding separation pay sans backwages. While
as a general rule a party who has not appealed is not entitled to affirmative relief other than the ones granted in the decision of
the court below, law and jurisprudence authorize a tribunal to consider errors, although unassigned, if they involve (1) errors
affecting the lower court's jurisdiction over the subject matter, (2) plain errors not specified, and (3) clerical errors. In this case,
the failure of the Labor Arbiter and the public respondent NLRC to award backwages to the private respondent,
who is legally entitled thereto having been illegally dismissed, amounts to a "plain error" which we may rectify in
this petition, although private respondent Dagui did not bring any appeal regarding the matter, in the interest of substantial
justice. The Supreme Court is clothed with ample authority to review matters, even if they are not assigned as errors on appeal,
if it finds that their consideration is necessary in arriving at a just decision of the case. Rules of procedure are mere tools
designed to facilitate the attainment of justice. Their strict and rigid application, which would result in technicalities that tend
to frustrate rather than promote substantial justice, must always be avoided. Thus, substantive rights like the award of
backwages resulting from illegal dismissal must not be prejudiced by a rigid and technical application of the rules.
Petitioner Quazon argues that, granting the petitioner corporation should be held liable for the claims of private
respondent, she cannot be made jointly and severally liable with the corporation, notwithstanding the fact that she is
the highest ranking officer of the company, since Aurora Plaza has a separate juridical personality.
We disagree. In the cases of Maglutac v. National Labor Relations Commission, Chua v. National Labor Relations
Commission, and A.C Ransom Labor Union-CCLU v. National Labor Relations Commission, we were consistent in holding
that the highest and most ranking officer of the corporation, which in this case is petitioner Teresita Quazon as
manager of Aurora Land Projects Corporation, can be held jointly and severally liable with the corporation for the
payment of the unpaid money claims of its employees who were illegally dismissed . In this case, not only was Teresita
Quazon the most ranking officer of Aurora Plaza at the time of the termination of the private respondent, but worse, she had
a direct hand in the private respondent's illegal dismissal. A corporate officer is not personally liable for the money
claims of discharged corporate employees unless he acted with evident malice and bad faith in terminating their employment.
Here, the failure of petitioner Quazon to observe the mandatory requirements of due process in terminating the services of
Dagui evinced malice and bad faith on her part, thus making her liable.
Finally, we must address one last point. Petitioners aver that, assuming that private respondent can be considered an employee
of Aurora Plaza, petitioners cannot be held liable for separation pay for the duration of his employment with Doa Aurora
Tanjangco from 1953 up to 1982. If petitioners should be held liable as employers, their liability for separation pay should
only be counted from the time Dagui was rehired by the petitioners in 1982 as a maintenance man.
We agree. Petitioners' liability for separation pay ought to be reckoned from 1982 when petitioner Teresita Quazon, as
manager of Aurora Plaza, continued to employ private respondent. From 1953 up to the death of Doa Aurora sometime
in 1982, private respondent's claim for separation pay should have been filed in the testate or intestate proceedings
of Doa Aurora. This is because the demand for separation pay covered by the years 1953-1982 is actually a money claim
against the estate of Doa Aurora, which claim did not survive the death of the old woman. Thus, it must be filed
against her estate in accordance with Section 5, Rule 86 of the Revised Rules of Court
139.Cocomangas v. Visca (2008)

Facts: The present controversy stemmed from 5 individual complaints for illegal dismissal filed by Visca et al. against
Cocomangas Hotel Beach Resort and/or its owner- manager, Susan Munro. Respondents alleged that they were regular
employees of petitioners tasked with the maintenance and repair of the resort facilities.
Maria Nida Inigo-Tanala, the Front Desk Officer/Sales Manager, informed them not to report for work since the ongoing
constructions and repairs would be temporarily suspended because they caused irritation and annoyance to the
172 Roco 3B
resorts guests. As instructed, they did not report for work the succeeding days. John Munro, husband of petitioner Susan
Munro, subsequently visited respondent foreman Visca and informed him that the work suspension was due to budgetary
constraints.
However, when not less than 10 workers were subsequently hired by petitioners to do repairs in 2 cottages of the resort and 2
workers were retained after the completion without respondents being allowed to resume work, the latter filed their individual
complaints for illegal dismissal.
Petitioners denied any employer-employee relationship with respondents and countered that respondent Visca was an
independent contractor who was called upon from time to time when some repairs in the resort facilities were needed
and the other respondents were selected and hired by him.
LA rendered a Decision dismissing the complaint, holding that respondent Visca was an independent contractor and the other
respondents were hired by him to help him with his contracted works at the resort; that there was no illegal dismissal but
completion of projects; that respondents were project workers, not regular employees. NLRC rendered a Decision, setting
aside the Decision of the LA and ordering the payment to respondents of backwages, holding that respondents were not
regular employees but project employees, hired for a short period of time to do some repair jobs in petitioners resort business.
The CA held respondents were regular employees, not project workers hence the present petition. Petitioners then filed
the present petition.
Issue: Whether not Visca et al were project employees.
Held: NO. REGULAR. In their Position Paper filed before the LA, petitioners classified respondent Visca as an independent
contractor and the other respondents as his employees; while in their Motion for Reconsideration before the NLRC,
petitioners treated respondents as project employees. While initially advancing the absence of an employer- employee
relationship, petitioners on appeal, sang a different tune, so to speak, essentially invoking the termination of the period of their
employer-employee relationship. NLRC should not have considered the new theory offered by the petitioners in their Motion
for Reconsideration.
At any rate, after a careful examination of the records, the Court finds that the CA did not err in finding that respondents were
regular employees, not project employees.
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 .
Before an employee hired on a per-project basis can be dismissed, a report must be made to the nearest employment
office, of the termination of the services of the workers every time completes a project, pursuant to Policy Instruction No. 20.
Respondents cannot be classified as project employees, since they worked continuously for petitioners from 3 to 12
years without any mention of a project to which they were specifically assigned. While they had designations as foreman,
carpenter and mason, they performed work other than carpentry or masonry. They were tasked with the maintenance
and repair of the furniture, motor boats, cottages, and windbreakers and other resort facilities.
There was no evidence of the project employment contracts covering respondents alleged periods of employment. More
importantly, there is no evidence that petitioners reported the termination of respondents supposed project employment to
the DOLE as project employees.
Department Order No. 19, as well as the old Policy Instructions No. 20, requires employers to submit a report of an
employees termination to the nearest public employment office every time his employment is terminated due to a completion
of a project. Petitioners failure to file termination reports is an indication that the respondents were not project employees but
regular employees.
173 Roco 3B
Court has held that an employment ceases to be coterminous with specific projects when the employee is
continuously rehired due to the demands of employers business and re-engaged for many more projects without interruption.
Court is not persuaded by petitioners submission that respondents services are not necessary or desirable to the usual trade or
business of the resort. The repeated and continuing need for their services is sufficient evidence of the necessity, if not
indispensability, of their services to petitioners resort business.
In Maraguinot, Jr. v. NLRC, Court ruled that once a project or work pool employee has been: (1) continuously, as opposed to
intermittently, rehired 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.
That respondents were regular employees is further bolstered by the following evidence: (a) the SSS Quarterly Summary of
Contribution Payments listing respondents as employees of petitioners; (b) the Service Record Certificates stating that
respondents were employees of petitioners for periods ranging from three to twelve years and all have given very satisfactory
performance; (c) petty cash vouchers showing payment of respondents salaries and holiday and overtime pays. Thus,
substantial evidence supported the CA finding that respondents were regular employees. Being regular employees, they were
entitled to security of tenure, and their services may not be terminated except for causes provided by law.
140.Buiser vs. Leogardo (1984)

Facts: Petitioners were employed by the private respondent GENERAL TELEPHONE DIRECTORY COMPANY as sales
representatives and charged with the duty of soliciting advertisements for inclusion in a telephone directory. Iluminada
Ver Buiser and Ma. Mercedes P. Intengan entered into an Employment Contract (on Probationary Status) with GTDC,
a corporation engaged in the business of publication and circulation of the directory of PLDT . Petitioner Ma . Cecilia
RilloAcuna entered into the same employment contract.
Employment Contract (On Probationary Status) included the following common provisions:
The company hereby employs the employee as telephone sales representative on a probationary status for a
period of 18 months, i.e. from May 1980 to October 1981, inclusive. It is understood that during the
probationary period of employment, the Employee may be terminated at the pleasure of the company
without the necessity of giving notice of termination or the payment of termination pay .
The Employee recognizes the fact that the nature of the telephone sales representatives job is such that the
company would be able to determine his true character, conduct and selling capabilities only after the publication
of the directory, and that it takes about 18 months before his worth as a telephone sales representative can be
fully evaluated inasmuch as the advertisement solicited by him for a particular year are published in the directory
only the following year.
Private respondent prescribed sales quotas to be accomplished or met by the petitioners. Failing to meet their
respective sales quotas, the petitioners were dismissed from the service by the private respondent. GTDC terminated the
services of petitioners for their failure to meet their sales quotas.
Petitioners filed with the NCR, MOLE, a complaint for illegal dismissal with claims for backwages, earned commissions
and other benefits. They contend that under Articles 281-282 of the Labor Code, having served the respondent
company continuously for over six (6) months, they have become automatically regular employees notwithstanding an
agreement to the contrary.
It is petitioners submission that probationary employment cannot exceed six (6) months, the only exception being
apprenticeship and learnership agreements as provided in the Labor Code; that the Policy Instruction of the Minister of Labor
and Employment nor any agreement of the parties could prevail over this mandatory requirement of the law; that this six
months prescription of the Labor Code was mandated to give further efficacy to the constitutionally- guaranteed security of
tenure of workers; and that the law does not allow any discretion on the part of the Minister of Labor and Employment to
extend the probationary period for a longer period except in the aforecited instances.
174 Roco 3B
Petitioners maintain that since they are regular employees, they can only be removed or dismissed for any of the just and valid
causes enumerated under Article 283 of the Labor Code.
Issue: Whether Buiser et al are regular employees.
Held: NO. Generally, the probationary period of employment is limited to 6 months. The exception to this general
rule is when the parties to an employment contract may agree otherwise, such as when the same is established by
company policy or when the same is required by the nature of work to be performed by the employee .
In the latter case, there is recognition of the exercise of managerial prerogatives in requiring a longer period of
probationary employment, such as in the present case where the probationary period was set for 18 months, especially where
the employee must learn a particular kind of work such as selling, or when the job requires certain qualifications, skills,
experience or training.
Policy Instruction No. 11 of the Minister of Labor and Employment has clarified any and all doubts on the period of
probationary employment:
Under the Labor Code, six (6) months is the general probationary period, but the probationary period is actually the period
needed to determine fitness for the job. This period, for lack of a better measurement is deemed to be the period needed to
learn the job.
The purpose of this policy is to protect the worker at the same time enable the employer to make a meaningful
employee selection. This purpose should be kept in mind in enforcing this provision of the Code. This issuance shall take
effect immediately.
It is shown that private respondent Company needs at least 18 months to determine the character and selling capabilities of
the petitioners as sales representatives. The Company is engaged in advertisement and publication in the Yellow Pages of the
PLDT Telephone Directories. Publication of solicited ads are only made a year after the sale has been made and only then will
the company be able to evaluate the efficiency, conduct, and selling ability of its sales representatives, the evaluation being
based on the published ads. Moreover, an 18- mo probationary period is recognized by the Labor Union in the CBA.
The very contracts of employment signed and acquiesced to by the petitioners specifically indicate that the company hereby
employs the employee as telephone sales representative on a probationary status for a period of eighteen (18) months. This
stipulation is not contrary to law, morals and public policy.
Moreover, the practice of a company in laying off workers because they failed to make the work quota has been
recognized in this jurisdiction.
Petitioners failure to meet the sales quota assigned to each of them constitute a just cause of their dismisal,
regardless of the permanent or probationary status of their employment. Failure to observe prescribed standards of
work, or to fulfill reasonable work assignments due to inefficiency may constitute just cause for dismissal. Such
inefficiency is understood to mean failure to attain work goals or work quotas, either by failing to complete the same within
the allotted reasonable period, or by producing unsatisfactory results. This management prerogative of requiring standards may
be availed of so long as they are exercised in good faith for the advancement of the employers interest.
141. A.M. Oreta vs. NLRC (1989)

Facts: Private respondent Grulla was engaged by Engineering Construction and Industrial Development Company
(ENDECO) through A.M. Oreta and Co. Inc. as a carpenter in its projects in Jeddah, Saudi Arabia. The contract was for 12
months.
10 days after leaving the Philippines, Grulla met an accident which fractured his lumbar vertebra while working at the
jobsite. He was rushed to the New Jeddah Clinic and was confined there for 12 days. Grulla was discharged from the
hospital and was told that he could resume his normal duties after undergoing physical therapy for 2 weeks.
175 Roco 3B
Grulla reported back to his Project Manager and presented to the latter a medical certificate declaring the former already
fit for work. Since then, he started working again until he received a notice of termination of his employment 2
months after he started.
Grulla filed a complaint for illegal dismissal, recovery of medical benefits, unpaid wages for the unexpired ten (10) months
of his contract and the sum of P1,000.00 as reimbursement of medical expenses against A.M. Oreta and ENDECO with
the POEA.
Petitioners contended that the contract of employment entered into between petitioners and Grulla provides, as one of the
grounds for termination, violations of the rules and regulations promulgated by the contractor; and that Grulla was dismissed
because he has not performed his duties satisfactorally within the probationary period of 3 months .
The POEA held that Grulla was illegally dismissed. The NLRC affirmed.
Issue: Whether Grulla was a probationary employee.
Held: REGULAR EMPLOYEE. Grulla was employed in the company as carpenter for a period of 12 months before he
was dismissed on October 9, 1980. A perusal of the employment contract reveals that although the period of employment
of respondent Grulla is twelve (12) months, the contract is renewable subject to future agreements of the parties. It is clear
from the employment contract that the Grulla was hired by the company as a regular employee and not just mere
probationary employee.
The law is clear to the effect that in all cases involving employees engaged on probationary period basis, the employer shall
make known to the employee at the time he is hired, the standards by which he will qualify as a regular employee .
Nowhere in the employment contract executed between company and Grulla is there a stipulation that the latter
shall undergo a probationary period for 3 months before he can qualify as a regular employee.
There is also no evidence on record showing that the Grulla has been appraised of his probationary status and the
requirements which he should comply in order to be a regular employee . In the absence of these requisites, there is
justification in concluding that respondent Grulla was a regular employee at the time he was dismissed by
petitioner. As such, he is entitled to security of tenure during his period of employment and his services cannot be terminated
except for just and authorized causes enumerated under the Labor Code and under the employment contract.
Even though he can be considered a probationary employee, he cannot, likewise, be removed except for cause during the
period of probation. Although a probationary or temporary employee has limited tenure, he still enjoys security of
tenure. During his tenure of employment or before his contract expires, he cannot be removed except for cause as provided
by law.
Article 282 of the Labor Code sets forth the following just causes for which an employer may terminate an
employment, namely:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any
immediate member of his family or his duly authorized representative; and
(e) other cause analogous to the foregoing
The alleged ground of UNSATISFACTORY PERFORMANCE relied upon by petitioner for dismissing respondent Grulla is not
one of the just causes for dismissal provided in the Labor Code. Neither is it included among the grounds for termination
of employment under the contract of employment.
176 Roco 3B
Additionally, it was found that Grulla was not, in any manner, notified of the charges against him before he was
outrightly dismissed. Neither was any hearing or investigation conducted by the company to give the respondent a chance to
be heard concerning the alleged unsatisfactory performance of his work. Hence, this buffers the postulate that he was illegally
dismissed.
142.Mariwasa vs. Leogardo (1989)

Facts: Private respondent Dequila was hired on probation by petitioner Mariwasa Manufacturing, Inc. as a general utility
worker on January 10, 1979. Upon the expiration of the probationary period of 6 months, Dequila was informed by his
employer that his work had proved unsatisfactory and had failed to meet the required standards. To give him a chance to
improve his performance and qualify for regular employment, instead of dispensing with his service then and there, with his
written consent Mariwasa extended his probation period for another three months from July 10 to October 9, 1979. His
performance, however, did not improve and on that account Mariwasa terminated his employment at the end of the extended
period.
Dequilla filed a complaint for illegal dismissal but was dismissed. Upon appeal to the Minister of Labor, the disposition was
reversed. Deputy Minister Leogardo held that Dequila was already a regular employee at the time of his dismissal, therefore,
could not have been lawfully dismissed for failure to meet company standards as a probationary worker. He was ordered
reinstated to his former position without loss of seniority and with full back wages from the date of his dismissal until actually
reinstated. Hence, this petition.
Issue: Whether or not probationary employment, may validly be extended beyond the prescribed 6 month period by
agreement of the employer and employee.
Held. YES. Art. 282 of the then Labor Code provides:
Art. 282.Probationary Employment.Probationary employment shall not exceed six (6) months from the date the employee
started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The services of an employee
who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular
employee in accordance with reasonable standards made known by the employer to the employee at the time of his
engagement. An employee who is allowed to work after probationary period shall be considered a regular employee.
The Court agrees with the Solicitor General, who takes the same position as the Mariwasa, that such an extension may
lawfully be covenanted, notwithstanding the seemingly restrictive language of the cited provision .
Buiser v. Leogardo, Jr. recognized agreements stipulating longer probationary periods as constituting lawful exceptions to the
statutory prescription limiting such periods to 6 months, when it upheld as valid an employment contract between an
employer and two of its employees that provided for an 18-month probation period.
Buiser states: Generally, the probationary period of employment is limited to 6 months. The exception to this general rule is
when the parties to an employment contract may agree otherwise, such as when the same is established by company policy or
when the same is required by the nature of work to be performed by the employee.
The single difference between Buiser and the present case: that in the former involved an 18-month probationary period
stipulated in the original contract of employment, whereas the latter refers to an extension agreed upon at or prior to
the expiration of the statutory 6-month period, is hardly such as to warrant or even suggest a different ruling here.
In both cases the parties agreements in fact resulted in extensions of the period prescribed by law. That in this case the
inability of the probationer to make the grade became apparent only at or about the end of the 6-month period, hence an
extension could not have been prearranged as was done in Buiser assumes no adverse significance, given the lack of any
indication that the extension to which Dequila gave his agreement was a mere stratagem of Mariwasa to avoid the
legal consequences of a probationary period satisfactorily completed.
177 Roco 3B
The extension of Dequilas probation was ex gratia, an act of liberality on the part of his employer affording him a
second chance to make good after having initially failed to prove his worth as an employee. Such an act cannot now unjustly
be turned against said employers account to compel it to keep on its payroll one who could not perform according to its
work standards. The law, surely, was never meant to produce such an inequitable result.
By voluntarily agreeing to an extension of the probationary period, Dequila in effect waived any benefit attaching to
the completion of said period if he still failed to make the grade during the period of extension. The Court finds
nothing in the law which by any fair interpretation prohibits such a waiver. No public policy protecting the employee and the
security of his tenure is served by proscribing voluntary agreements which, by reasonably extending the period of probation,
actually improve and further a probationary employees prospects of demonstrating his fitness for regular employment.
143.Holiday Inn vs. NLRC (1993)

Facts: Elena Honasan applied for employment with the Holiday Inn and was on April 15, 1991, accepted for "on-the-job
training" as a telephone operator for a period of 3 weeks. For her services, she received food and transportation
allowance. On May 13, 1992, after completing her training, she was employed on a "probationary basis" for a period of 6
months ending November 12, 1991.
Her employment contract stipulated that the Hotel could terminate her probationary employment at any time prior to
the expiration of the 6-month period in the event of her failure (a) to learn or progress in her job; (b) to faithfully
observe and comply with the hotel rules and the instructions and orders of her superiors; or (c) to perform her duties
according to hotel standards.
On November 8, 1991, 4 days before the expiration of the stipulated deadline , Holiday Inn notified her of her dismissal,
on the ground that her performance had not come up to the standards of the Hotel. Honasan filed a complaint for
illegal dismissal, claiming that she was already a regular employee at the time of her separation and so was entitled to full
security of tenure.
Issue: Whether or not, as a regular employee of Holiday Inn, Honasan was illegally dismissed.
Held: On the issue of illegal dismissal, we find that Honasan was placed by the petitioner on probation twice, first during
her on-the-job training for 3 weeks, and next during another period of 6 months, ostensibly in accordance with Article
281. Her probation clearly exceeded the period of 6 months prescribed by this article.
PROBATION is the period during which the employer may determine if the employee is qualified for possible
inclusion in the regular force. In the case at bar, the period was for 3 weeks, during Honasan's on-the-job training.
When her services were continued after this training, the petitioners in effect recognized that she had passed
probation and was qualified to be a regular employee.
Honasan was certainly under observation during her 3-week on-the-job training. If her services proved unsatisfactory then, she
could have been dropped as early as during that period. But she was not. On the contrary, her services were continued,
presumably because they were acceptable, although she was formally placed this time on probation.
Even if it be supposed that the probation did not end with the 3-week period of on-the-job training, there is still no
reason why that period should not be included in the stipulated 6-month period of probation. Honasan was accepted for on-
the-job training on April 15, 1991. Assuming that her probation could be extended beyond that date, it nevertheless could
continue only up to October 15, 1991, after the end of six months from the earlier date. Under this more lenient approach,
she had become a regular employee of Holiday Inn and acquired full security of tenure as of October 15, 1991.
The consequence is that she could no longer be summarily separated on the ground invoked by the petitioners. As a regular
employee, she had acquired the protection of Article 279 as regards security of tenure.
The rules for termination of employment under the LC and its IRRs were not observed in the case at bar as Honasan
was simply told that her services were being terminated because they were found to be unsatisfactory. No
178 Roco 3B
administrative investigation of any kind was undertaken to justify this ground. She was not even accorded prior notice, let
alone a chance to be heard.
We find in the Hotel's SYSTEM OF DOUBLE PROBATION a transparent scheme to circumvent the plain mandate of the
law and make it easier for it to dismiss its employees even after they shall have already passed probation. The
petitioners had ample time to summarily terminate Honasan's services during her period of probation if they were deemed
unsatisfactory. Not having done so, they may dismiss her now only upon proof of any of the legal grounds for the separation
of regular employees, to be established according to the prescribed procedure.
144.St. Theresitas Academy vs. NLRC, (1992)

Facts: Ariola, had been employed as a school teacher since the school year 1954-55 up to the school year 1975-76 (or for 22
continuous years). She retired on March 30, 1976 with separation benefits. For a while, she worked as an insurance
underwriter.
In 1979, the Mother Superior invited her to go back as a school teacher because the school needed qualified and good
teachers in Mathematics and English. Ariola accepted on condition that she should be considered a regular teacher and
not as a newly hired teacher. That condition was accepted without hesitation. She signed a contract with the school
which was renewable yearly.
Complainant and her co-teachers were paid summer living allowance in 1979-1980 and 1980-1981. However, in June 1981,
that amount was deducted from their salaries. Ariola and her co-teachers protested. The matter was referred to the
MOLE. Because of the agitation for the payment of the summer living allowance, the Siervas de San Jose, which owns and
operates school held a board meeting wherein it was resolved that effective school year 1983-84, no Siervas de San Jose shall
rehire a retired teacher and that any rehired retiree who is at present a member of the faculty shall be notified that
her/his Teachers Contract will not be renewed for the coming year.
After 4 years of continuous satisfactory service , complainant was notified that her contract would no longer be
renewed. Private respondent filed in the NLRC a complaint for Illegal Dismissal praying for reinstatement with backwages,
ECOLA, non- payment of allowances, underpayment of 13th month pay and damages.
LA ordered the school to pay Ariola NLRC affirms. Hence, this petition.
Petitioner alleges that it is the prerogative of an employer to adopt a policy of not rehiring retired teachers and of not renewing
the annual contracts of teachers who have been recalled from retirement.
Issue: Whether Ariola was illegally dismissed.
Held: YES based on Art. 280. With respect to school teachers, paragraph 75 of the Manual of Regulations for Private Schools
provides: Fulltime teachers who have rendered three (3) years of satisfactory service shall be considered permanent.
Furthermore, paragraphs 7 and 9 of the Teachers Contract categorically stipulated:
7.This CONTRACT SHALL BE IN FULL FORCE AND EFFECT during the school year 19821983 from June to
March, unless sooner terminated by either party for valid causes and approved by the Director of Private Schools. In
the absence of valid cause(s) for termination of services, this CONTRACT shall be rendered for the same period
until the teacher shall have gained a Regular or Permanent Status, pursuant to the pertinent provisions of the
Manual of Regulations for Private Schools.
9.This CONTRACT shall not affect the Permanent Status of the teacher, even if entered into every school
year; provided, that the Probationary Period for new teachers shall be three (3) years.
Ariola retired in 1976, she was rehired 3 years later and rendered 4 more years of satisfactory service. When she was
rehired in 1979 she DID NOT have to undergo the 3-year probationary employment for new teachers for her
teaching competence had already been tried and tested during her 22 years of service . She reentered the service in 1979
179 Roco 3B
as a regular or permanent teacher. She could not be discharged solely on account of the expiration of her fourth annual
contract. She could only be dismissed for cause and with due process.
Her dismissal from the service, on account of the expiration of her annual contract, was illegal and that the school is liable to
pay her backwages and separation pay.
145.Pines vs. NLRC, (1993)

Facts: Private respondents Dangwa Bentrez, Roland Picart, Apollo Ribaya, Sr., Ruperta Ribaya, Virginia Boado, Cecilia
Emocling, Jane Bentrez, Leila Dominguez, Rose Ann Bermudez and Lucia Chan were all employed as teachers on
probationary basis by petitioner Pines City Educational Center, represented in this proceeding by its President, Eugenio
Baltao. With the exception of Jane Bentrez who was hired as a grade school teacher, the remaining private respondents were
hired as college instructors. All the private respondents, except Roland Picart and Lucia Chan, signed contracts of employment
with petitioner for a fixed duration. Except for private respondent Leila Dominguez who worked with petitioners for one
semester, all the other private respondents were employed for one to two years. In the case of private respondent Dangwa
Bentrez, the duration of his employment contract was for one year, or beginning June, 1988 to March, 1989 whereas in the
case of the other private respondents, the duration of their employment contracts was for one semester, or beginning
November, 1988 to March 1989.
Jane Bentrez: Grade school teacher

Everyone else: College instructors
Roland Picart and Lucia Chan: No contracts
Everyone else: Signed contracts of employment for a fixed duration
Leila Dominguez: Employed for one semester
Everyone else: One to two years
Dangwa Bentrez: Duration of employment contract was one year
Everyone else: One semester
Due to the expiration of private respondents contracts and their poor performance as teachers, they were notified of
petitioners decision not to renew their contracts anymore. Private respondents filed a complaint for illegal dismissal
before the Labor Arbiter, alleging that their dismissals were without cause and in violation of due process.
They were never informed in writing by petitioners regarding the standards or criteria of evaluation so as to enable
them to meet the requirements for appointment as regular employees. They were merely notified in writing by
petitioners, through its Chancellor, Dra. Nimia R. Concepcion, of the termination of their respective services as of March 31,
1989, on account of their below-par performance as teachers.
Petitioners contended that private respondents separation from employment, apart from their poor performance, was due to the expiration of
the periods stipulated in their respective contracts . These stipulations were the laws that governed their relationships, and there was
nothing in said contracts, which was contrary to law, morals, good customs and public policy. They argued further that they cannot be compelled to
enter into new contracts with private respondents. They concluded that the separation of private respondents from the service was justified.
The LA rendered judgment in favor of private respondents, ordering the respondents to reinstate the complainants
immediately to their former positions and to pay their full backwages and other benefits and privileges without qualification
and deduction from the time they were dismissed up to their actual reinstatement. On appeal to the NLRC, the decision was
affirmed in toto.
Issue: Whether the employees were illegally dismissed and thus entitled to reinstatement, backwages, etc.
Held: ONLY PICART & CHAN were illegally dismissed.
Brent School, Inc., et al. v. Zamora, et al. states Since the entire purpose of Article 280 of the Labor Code is to prevent
circumvention of the employees right to be secure in his tenure, the clause in said article completely ruling out all written
or oral agreements conflicting with the concept of regular employment as defined therein should be construed to refer to the
substantive evil that the Code itself has singled out: agreements entered into precisely to circumvent security of tenure . It
180 Roco 3B
should have no application to instances where a fixed period of employment was agreed upon knowingly and voluntarily by
the parties, without any force, duress or improper pressure being brought to bear upon the employee and absent any other
circumstances vitiating his consent, or where it satisfactorily appears that the employer and employee dealt with each other on
more or less equal terms with no moral dominance whatever being exercised by the former over the latter.
In this case however, there is a distinction. Insofar as the private respondents who knowingly and voluntarily agreed
upon fixed periods of employment are concerned, their services were lawfully terminated by reason of the expiration
of the periods of their respective contracts. These are Dangwa Bentrez, Apollo Ribaya, Sr., Ruperta Ribaya, Virginia Boado,
Cecilia Emocling, Jose Bentrez, Leila Dominguez and Rose Ann Bermudez. (No reinstatement, full backwages, and other
privileges and benefits).
With respect to private respondents Roland Picart and Lucia Chan, both of whom did not sign any contract fixing the
periods of their employment nor to have knowingly and voluntarily agreed upon fixed periods of employment ,
petitioners had the burden of proving that the termination of their services was legal. As probationary employees, they are
likewise protected by the security of tenure provision of the Constitution. Consequently, they cannot be removed from
their positions unless for cause.
Petitioners contended that based on the evaluation of the Academic Committee their performance as teachers was poor.
However, the Labor Arbiter found as follows: They (employers) did not present any written proofs or evidence to support their allegation.
There is absolutely nothing in the record which will show that the complainants were afforded even an iota of chance to refute respondents allegations
that the complainants did not meet the reasonable standards and criteria set by the school.
The order for their reinstatement and payment of full backwages and other benefits and privileges from the time they were
dismissed up to their actual reinstatement is proper.
146.Philippine Daily Inquirer vs. Magtibay (2007)

Facts: On February 7, 1995, PDI hired Magtibay on a contractual basis to assist the regular phone operator for 5 months.
A 15-day extension was agreed on. After the expiration of his employment, PDI announced the availability of a new
position for a second telephone operator who would undergo probationary employment.
PDIs policy was to accord regular employees preference in new vacancies. Layague, an employee and member of the
Employees Union (PDIEU), filed an application which she subsequently withdrew. Magtibay then applied and was hired
after the usual inteview. He was hired for a period of 6 months on a probationary basis.
A week before the end of the 6 month period, Magtibay was handed his termination paper for failure to meet company
standards. He filed a complaint for illegal dismissal; PDIEU joined for unfair labor practice. He alleged that he became a
regular employee by operation of law; he had worked for a total period of 10 months. He also claimed that he was not
apprised of the standards at the beginning of his employment, and that it was done in bad faith and without due process.
PDI averred that the previous employment was contractual and cannot be tacked to the probationary period. He was
dismissed for violating company rules and policies, such as allowing his lover to enter and linger inside the telephone
operators booth (alam na). It also alleged that standards were made known to him through an orientation seminar. The LA
found that he also omitted to state that he had a dependent child, and that he exhibited a lack of responsibility by locking the
booth without switching the lines. The LA held in favor of PDI, which decision was reversed by the NLRC and the CA.
Issue: Whether Magtibay was validly dismissed.
Held: YES. Management and labor, or the employer and the employee are more often not situated on the same level playing
field, so to speak. Recognizing this reality, the State has seen fit to adopt measures envisaged to give those who have less in life
more in law. Article 279 of the Labor Code which gives employees the security of tenure is one playing field leveling measure:
181 Roco 3B
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. x x x.
But hand in hand with the restraining effect of Section 279, the same Labor Code also gives the employer a period within
which to determine whether a particular employee is fit to work for him or not. This employers prerogative is spelled out in
the Art. 281.
In International Catholic Migration Commission v. NLRC, a probationary employee, as understood under Article 282 (now Article
281) of the Labor Code, is one who is on trial by an employer during which the employer determines whether or not
he is qualified for permanent employment. A probationary appointment is made to afford the employer an opportunity to
observe the fitness of a probationer while at work, and to ascertain whether he will become a proper and efficient employee.
The word probationary, as used to describe the period of employment, implies the purpose of the term or period
but not its length.
Being in the nature of a trial period the essence of a probationary period of employment fundamentally lies in the
purpose or objective sought to be attained by both the employer and the employee during said period. The length
of time is immaterial in determining the correlative rights of both in dealing with each other during said period. While the
employer, as stated earlier, observes the fitness, propriety and efficiency of a probationer to ascertain whether he is qualified
for permanent employment, the probationer, on the other, seeks to prove to the employer, that he has the qualifications to
meet the reasonable standards for permanent employment.
It is well settled that the employer has the right or is at liberty to choose who will be hired and who will be denied
employment. In that sense, it is within the exercise of the right to select his employees that the employer may set or fix a
probationary period within which the latter may test and observe the conduct of the former before hiring him permanently.
Within the limited legal 6-month probationary period, probationary employees are still entitled to security of tenure.
It is expressly provided in the afore-quoted Article 281 that a probationary employee may be terminated ONLY on 2
grounds: (a) for JUST CAUSE, or (b) when he FAILS TO QUALIFY as a regular employee in accordance with reasonable
standards made known by the employer to the employee at the time of his engagement.
PDI invokes the second ground under the premises. In claiming that it had adequately apprised Magtibay of the reasonable
standards against which his performance will be gauged for purposes of permanent employment, PDI cited the one-on-one
seminar between Magtibay and its Personnel Assistant, Ms. Rachel Isip-Cuzio. PDI also pointed to Magtibays direct
superior, Benita del Rosario, who diligently briefed him about his responsibilities in PDI. These factual assertions were never
denied nor controverted by Magtibay.
It is on record that Magtibay committed obstinate infractions of company rules and regulations, which in turn
constitute sufficient manifestations of his inadequacy to meet reasonable employment norms. The suggestion that
Magtibay ought to have been made to understand during his briefing and orientation that he is expected to obey and comply
with company rules and regulations strains credulity for acceptance. The CAs observation that nowhere can it be found
in the list of Basic Responsibility and Specific Duties and Responsibilities of respondent Magtibay that he has to
abide by the duties, rules and regulations that he has allegedly violated is a strained rationalization of an
unacceptable conduct of an employee. Common industry practice and ordinary human experience do not support the CAs
posture. All employees, be they regular or probationary, are expected to comply with company-imposed rules and
regulations, else why establish them in the first place. Probationary employees unwilling to abide by such rules have
no right to expect, much less demand, permanent employment. We, therefore find sufficient factual and legal basis, duly
established by substantial evidence, for PDI to legally terminate Magtibays probationary employment effective upon the end
of the 6-month probationary period.
It is undisputed that PDI apprised Magtibay of the ground of his termination, i.e., he failed to qualify as a regular employee in
accordance with reasonable standards made known to him at the time of engagement, only a week before the expiration of the
6-month probationary period. Given this perspective, does this make his termination unlawful for being violative of his
right to due process of law? It does not.
182 Roco 3B
Unlike under the first ground for the valid termination of probationary employment which is for just cause, the
second ground DOES NOT REQUIRE NOTICE AND HEARING. Due process of law for this second ground consists of
making the reasonable standards expected of the employee during his probationary period known to him at the time
of his probationary employment. By the very nature of a probationary employment, the employee knows from the very start
that he will be under close observation and his performance of his assigned duties and functions would be under continuous
scrutiny by his superiors. It is in apprising him of the standards against which his performance shall be continuously assessed
where due process regarding the second ground lies, and not in notice and hearing as in the case of the first ground.
Even if perhaps he wanted to, Magtibay cannot deny as he has not denied PDIs assertion that he was duly
apprised of the employment standards expected of him at the time of his probationary employment when he underwent a
one-on-one orientation with PDIs personnel assistant, Ms. Rachel Isip-Cuzio. Neither has he denied nor rebutted PDIs
further claim that his direct superior, Benita del Rosario, briefed him regarding his responsibilities in PDI.
Lest it be overlooked, Magtibay had previously worked for PDI as telephone operator from February 7, 1995 to July 31,
1995 as a contractual employee. Thus, the Court entertains no doubt that when PDI took him in on September 21, 1995,
Magtibay was already very much aware of the level of competency and professionalism PDI wanted out of him for
the entire duration of his probationary employment.
PDI was only exercising its statutory hiring prerogative when it refused to hire Magtibay on a permanent basis upon
the expiration of the 6-month probationary period. This was established during the proceedings before the labor arbiter
and borne out by the records and the pleadings before the Court. When the NLRC disregarded the substantial evidence
establishing the legal termination of Magtibays probationary employment and rendered judgment grossly and directly
contradicting such clear evidence, the NLRC commits grave abuse of discretion amounting to lack or excess of jurisdiction.
It was, therefore, reversible error on the part of the appellate court not to annul and set aside such void judgment of the
NLRC.
147.Woodbridge vs. Pe Benito (2008)

Facts: Woodridge School is a private educational institution located in Cavite. Pe Benito and Randy T. Balaguer (Balaguer)
were hired as probationary high school teachers. Their contracts of employment covered a 3 year probationary period.
Pe Benito handled Chemistry and Physics while Balaguer taught Values Education and Christian Living.
Respondents, together with 20 other teachers, presented petitioner with a Manifesto Establishing Relevant Issues Concerning
the School raising various issues which they wanted addressed such as those of the NSAT/NEAT anomaly, teachers right
to due process (former colleague for no solid basis or apparent investigation conducted by the school, was suddenly
expelled), issuance of individual contracts which have not been furnished , for job security and other legal purposes it
may serve, their demand for an appointment of permenancy, non-clear-cut school policies (a lot of inconsistencies
regarding the schools policies)
A confrontation between the school administrators and the concerned teachers was held, but no settlement was arrived at.
Respondents filed a formal complaint against petitioner with the DECS requesting the latter to undertake a formal
investigation. During the pendency of the DECS case, respondents appeared on television and spoke over the radio on the
alleged NEAT/NSAT anomaly (the case didnt really explain the anomaly)
Petitioner sent 2 separate Memoranda to respondents placing them under preventive suspension for a period of 30 days
for uttering defamatory remarks, announcing their alleged immediate termination from service to teachers and students,
tardiness, spreading false accusations, absence without official leave. In the same memoranda, respondents were required to
explain in writing within 72 hours why they should not be terminated from their employment. This prompted
respondents to commence an action for illegal suspension before the NLRC
20 days later, petitioner issued respondents their Notice of Termination. Petitioner informed respondents that they did
not qualify as regular employees for their failure to meet the performance standards made known to them at the start of their
probationary period. Respondents amended their initial complaint, to include illegal dismissal
183 Roco 3B
Labor Arbiter rendered a decision dismissing the complaint because of their failure to submit vital teaching documents
and for maliciously spreading false accusation against the school through the mass media. NLRC affirmed. CA reversed,
declaring the 30-day suspension of petitioners on February 28, 2001 as illegal and ordering private respondent Woodridge
School to pay to both petitioners Joanne C. Pe Benito and Randy T. Balaguer their salaries and benefits accruing during said
period of illegal suspension. CA declared that the preventive suspension of respondents invalid because it was based on the
alleged violation of school regulations on the wearing of uniform, tardiness or absence, and maliciously spreading false
accusations; that the grounds do not pose a serious threat to the life or property of the employer or of the workers; and that
the act of exposing the alleged NSAT/NEAT anomaly only indicates their concern for the integrity of the government
examination and of the school.
Issue:Whether or not the suspension and the subsequent dismissal was illegal.
Held: YES. Initially, it should be clarified that this controversy revolves only on respondents probationary employment.
On March 31, 2001, the effective date of their dismissal, respondents were not regular or permanent employees ; they had
not yet completed 3 years of satisfactory service as academic personnel which would have entitled them to tenure as
permanent employees in accordance with the Manual of Regulations for Private Schools. On that date, Pe Benitos contract of
employment still had two months to run, while Balaguers probationary employment was to expire after one year and two
months.
A PROBATIONARY EMPLOYEE is one who, for a given period of time, is being observed and evaluated to determine
whether or not he is qualified for permanent employment. A probationary appointment affords the employer an
opportunity to observe the skill, competence and attitude of a probationer . The word probationary, as used to
describe the period of employment, implies the purpose of the term or period. While the employer observes the fitness,
propriety and efficiency of a probationer to ascertain whether he is qualified for permanent employment, the probationer at
the same time, seeks to prove to the employer that he has the qualifications to meet the reasonable standards for permanent
employment.
Probationary employees enjoy security of tenure in the sense that during their probationary employment, they cannot be
dismissed except for cause or when he fails to qualify as a regular employee. However, upon expiration of their
contract of employment, probationary employees cannot claim security of tenure and compel their employers to renew
their employment contracts. In fact, the services of an employee hired on probationary basis may be terminated when he fails
to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the
time of his engagement. There is nothing that would hinder the employer from extending a regular or permanent appointment
to an employee once the employer finds that the employee is qualified for regular employment even before the expiration of
the probationary period.
If the purpose sought by the employer is neither attained nor attainable within the said period, the law does not preclude the
employer from terminating the probationary employment on justifiable ground.
The notices of termination sent by petitioner to respondents stated that the latter failed to qualify as regular
employees. However, nowhere in the notices did petitioner explain the details of said failure to qualify and the
standards not met by respondents. We can only speculate that this conclusion was based on the alleged acts of respondents
in uttering defamatory remarks, failure to report for work for 2 or 3 times, going to class without wearing proper uniform,
delay in the submission of class records; and non-submission of class syllabi. Yet, other than bare allegations, petitioner
failed to substantiate the same by documentary evidence.
Petitioner should have presented the evaluation reports and other related documents to support its claim , instead of
relying solely on the affidavits of their witnesses. The unavoidable inference, therefore, remains that the respondents
DISMISSAL IS INVALID.
The Labor Code commands that before an employer may legally dismiss an employee from the service, the requirement
of substantial and procedural due process must be complied with. Under the requirement of SUBSTANTIAL DUE
PROCESS, the grounds for termination of employment must be based on just or authorized causes.
184 Roco 3B
Misconduct is defined as 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 of judgment. The
misconduct to be serious within the meaning of the Act, must be of such a grave and aggravated character and not merely
trivial or unimportant. Such misconduct, however serious, must nevertheless be in connection with the work of the employee
to constitute just cause for his separation.
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.
Petitioner argues that by appearing on television and speaking over the radio, respondents were undeserving to become part of
the school community, and the school, therefore, could not be compelled to retain in its employ such undisciplined teachers.
As correctly observed by the CA, the tenor of the manifesto indicated good faith, as the teachers, in fact, expressly stated
that their ultimate objective was not to put the school down, but to work for some changes which would be beneficial
to the students, teachers, the school and the country as a whole . In their effort to settle the issues amicably, the teachers
(including respondents) asked for a dialogue with petitioner but the latter, instead of engaging in creative resolution of the
matter, uttered unnecessary statement against respondents. The incident was followed by subsequent acts of petitioner
showing abuse of its power over the teachers, especially respondents, who at that time, were under probation.
Notwithstanding its claim that respondents were remiss in their duties as teachers during the whole period of probation, it was
only after the NSAT /NEAT expose when petitioner informed respondents of their alleged substandard performance. The
chronology of events, therefore, supports the view that respondents suspension and eventual dismissal from service
were tainted with bad faith, as obvious retaliatory acts on the part of petitioner. The totality of the acts of respondents
cannot be characterized as misconduct under the law, serious enough to warrant the severe penalty of dismissal.
This is especially true because there is no finding of malice or wrongful intent attributable to respondents.
In light of this disquisition, it is settled that petitioner failed to comply with the requirement of substantial due process in
terminating the employment of respondents.
PROCEDURAL ASPECT of lawful dismissal: In the termination of employment, the employer must (a) give the employee a
written notice specifying the ground or grounds of termination, giving to said employee reasonable opportunity within
which to explain his side; (b) conduct a hearing or conference during which the employee concerned, with the assistance
of counsel if the employee so desires, is given the opportunity to respond to the charge, present his evidence or rebut the
evidence presented against him; and (c) give the employee a written notice of termination indicating that upon due
consideration of all circumstances, grounds have been established to justify his termination.
Respondents were afforded their rights to answer to petitioners allegation and were given the opportunity to present
evidence in support of their defense. Nowhere in any of their pleadings did they question the procedure for their termination
except to challenge the ground relied upon by petitioner.
However, we still hold that the dismissal is illegal, because of petitioners failure to satisfy the substantive aspect thereof, as
discussed above.
While the employer may place the worker concerned under preventive suspension, it can do so only if the latters
continued employment poses a serious and imminent threat to the life or property of the employer or of his
co-workers. In this case, the grounds relied upon by petitioner in placing respondents under preventive suspension were the
alleged violation of school rules and regulations on the wearing of uniform, tardiness or absence, and maliciously
spreading false accusations against the school. These grounds do not, in any way, pose a threat to the life or property of
the school, of the teachers or of the students and their parents. Hence, we affirm the CAs conclusion that respondents
preventive suspension was illegal.
As probationary employees, respondents security of tenure is limited to the period of their probation. As they were no
longer extended new appointments, they are not entitled to reinstatement and full backwages. Rather, Pe Benito is only
185 Roco 3B
entitled to her salary for her 30-day preventive suspension. As to Balaguer, in addition to his 30-day salary during his illegal
preventive suspension, he is entitled to his backwages for the unexpired term of his contract of probationary employment.
148.Pangilinan vs. General Milling (2004)

Facts: General Milling Corporation is engaged in the production and sale of livestock and poultry and is a distributor of
dressed chicken to various restaurants and establishments nationwide.
Petitioners were employed by GM on different dates as emergency workers at its poultry plant under separate
temporary/casual contracts of employment for a period of 5 months. Most of them worked as chicken dressers, while
the others served as packers or helpers. Upon the expiration of their respective contracts, their services were terminated.
Petitioners filed separate complaints for illegal dismissal and non-payment of holiday pay, 13th month pay, night-shift
differential and service incentive leave pay before NLRC. They alleged that their work as chicken dressers was necessary and
desirable in the usual business of the respondent, and added that although they worked from 10:00 p.m. to 6:00 a.m., they
were not paid night-shift differential and that based on the nature of their work, they were regular employees. Hence, they
claimed they could not be dismissed from their employment unless for just cause and after due notice.
Labor Arbiter rendered a decision in favor of the petitioners declaring that they were regular employees and declared that they
were allegedly illegally dismissed. NLRC held that the petitioners, who were temporary or contractual employees of the
respondent, were legally terminated upon the expiration of their respective contracts. CA rendered a decision affirming
with modification the decision of the NLRC.
Issue: Whether petitioners were regular employees.
Held: NO. FIXED-TERM EMPLOYEES. Petitioners were employees with a fixed period, and, as such, were not regular
employees.
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
There are two separate instances whereby it can be determined that an employment is regular:
(1) if the particular activity performed by the employee is necessary or desirable in the usual business or trade of the
employer; and,
(2) if the employee has been performing the job for at least a year.
In the case of St. Theresas School of Novaliches Foundation vs. NLRC, we held that Article 280 of the Labor Code does not
proscribe or prohibit an employment contract with a fixed period. It does not necessarily follow that where the duties of
the employee consist of activities usually necessary or desirable in the usual business of the employer, the parties
are forbidden from agreeing on a period of time for the performance of such activities. There is nothing essentially
contradictory between a definite period of employment and the nature of the employees duties .
In Brent School, Inc. v. Zamora, we laid down the guidelines before a contract of employment may be held as valid.
Stipulations in employment contracts providing for term employment or fixed period employment are valid when the period
were agreed upon knowingly and voluntarily by the parties without force, duress or improper pressure, being brought
to bear upon the employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears
that the employer and employee dealt with each other on more or less equal terms with no moral dominance
whatever being exercised by the former over the latter.
The contracts entered into by the petitioners showed that their employment was limited to a fixed period , usually 5 or 6
months, and did not go beyond such period. The records reveal that the stipulations in the employment contracts were
knowingly and voluntarily agreed to by the petitioners without force, duress or improper pressure, or any circumstances
that vitiated their consent. Similarly, the contracts were not used as a subterfuge to evade the tenurial security and other
labor laws.
186 Roco 3B
While the petitioners employment as chicken dressers is necessary and desirable in the usual business of the respondent, they
were employed on a mere temporary basis, since their employment was limited to a fixed period.
It cannot be said to be regular employees, but are merely contractual employees. Consequently, there was NO ILLEGAL
DISMISSAL when the petitioners services were terminated by reason of the expiration of their contracts. Lack of
notice of termination is of no consequence , because when the contract specifies the period of its duration, it
terminates on the expiration of such period.
149.Mylene Carvajal vs. Luzon Development Bank (LDB) (2012)

Facts: Petitioner Mylene was employed as a trainee-teller by LDB on October 28, 2003 under a 6-month probationary
employment contract.
On December 10, 2003, LDB sent a Memorandum to petitioner directing her to explain why she should not be
subjected to disciplinary action for chronic tardiness on various dates (amounting to 8 times). Petitioner apologized and
offered the explanation that she was in the process of making adjustments regarding her work and house chores. She was
reprimanded and reminder of her probationary status. The same scenario happened again and as a result, she was
suspended for 3 days.
After her suspension was lifted however, her employment was terminated. Hence petitioner filed a complaint for illegal
dismissal. She alleged that she was dismissed by LDB due to (1) ineffective frontliner, (2) she mistakenly cleared a check, (3)
tardiness, (4) absenteeism, and (5) shortage.
Respondent LDB meanwhile averred that they dismissed Mylene on 3 grounds (1) chronic tardiness, (2) unauthorized
absence; and (3) failure to perform satisfactorily as a probationary employee.
The LA held that petitioner was illegally dismissed. The NLRC affirmed with modifications. The CA reversed. Hence this
appeal by petitioner Mylene.
Issue: Whether Mylene Carvajal was a regular employee and was thus illegally dismissed.
Held: NO. LEGAL DISMISSAL. It is beyond dispute that petitioner was hired on a probationary status. However the
court does not see how petitioners status became regular. At the time of her engagement and as mandated by law, petitioner
was informed in writing of the standards necessary to qualify her as a regular employee. Petitioner knew that at the time of
her engagement, she must comply with the standards set forth by respondent and perform satisfactorily in order to
attain regular status.
A probationary employee, like a regular employee, enjoys security of tenure. However, in cases of probationary employment,
aside from just or authorized causes of termination, an additional ground is provided under Article 281 of the Labor
Code, i.e., the probationary employee may also be terminated for failure to qualify as a regular employee in
accordance with reasonable standards made known by the employer to the employee at the time of the engagement.
Thus, the services of an employee who has been engaged on probationary basis may be terminated for any of the following:
(1) a just or (2) an authorized cause and (3) when he fails to qualify as a regular employee in accordance with reasonable
standards prescribed by the employer.
It is evident that the primary cause of respondents dismissal from her probationary employment was her "chronic
tardiness." At the very start of her employment, petitioner already exhibited poor working habits. Even during her
first month on the job, she already incurred 8 tardiness. In a Memorandum, petitioner was warned that her tardiness might
affect her opportunity to become a permanent or regular employee. And petitioner did not provide a satisfactory explanation
for the cause of her tardiness.
Punctuality is a reasonable standard imposed on every employee, whether in government or private sector. As a matter
of fact, habitual tardiness is a serious offense that may very well constitute gross or habitual neglect of duty, a just cause to
dismiss a regular employee. Assuming that petitioner was not apprised of the standards concomitant to her job, it is but
common sense that she must abide by the work hours imposed by the bank.
187 Roco 3B
Respondent also cited other infractions such as unauthorized leaves of absence, mistake in clearing of a check, and
underperformance. All of these infractions were not refuted by petitioner.
More importantly, SATISFACTORY PERFORMANCE is and should be one of the basic standards for regularization.
Naturally, before an employer hires an employee, the former can require the employee, upon his engagement, to undergo a
trial period during which the employer determines his fitness to qualify for regular employment based on reasonable standards
made known to him at the time of engagement. This is the concept of probationary employment which is intended to afford
the employer an opportunity to observe the fitness of a probationary employee while at work, and to ascertain
whether he will become an efficient and productive employee. While the employer observes the fitness, propriety and
efficiency of a probationer to ascertain whether he is qualified for permanent employment, the probationer, on the other hand,
seeks to prove to the satisfaction of the employer that he has the qualifications to meet the reasonable standards for
permanent employment.
Hence, petitioner was validly dismissed from probationary employment before the expiration of her 6-montb
probationary employment contract. If the termination is for cause, it may be done anytime during the probation; the
employer docs not have to wait until the probation period is over.
150.Aliling vs. Feliciano, (2012)

Facts: Through a letter in June 4, 2004, respondent Wide Wide World Express Corporation (WWWEC) offered to employ
Armando Aliling Aliling as Account Executive (Seafreight Sales), with a compensation package which includes a basic monthly
salary of 13K, transportation, clothing, cost of living allowances, 14 th month pay based on the profitability of the company.
The offer came with a 6-month probation period condition with this express caveat: Performance during [sic] probationary period
shall be made as basis for confirmation to Regular or Permanent Status.
Thereafter, on June 11, Aliling and WWWEC signed an employment contract which stipulated, among others, that:
Conversion to regular status shall be determined on the basis of work performance; and Employment services may, at any
time, be terminated for just cause or in accordance with the standards defined at the time of engagement.
Training then started. However, instead of a Seafreight Sale assignment, WWWEC asked Aliling to handle Ground Express
(GX), a new company product launched in 2004 involving domestic cargo forwarding service for Luzon. Marketing this
product and finding daily contracts for it formed the core of Alilings new assignment.
Barely a month later, WWWEC Sales/Marketing Director San Mateo emailed Aliling to express dissatisfaction with his
performance. Thereafter, HR Manager Lariosa sent Aliling a letter in Sept. 25 2004 asking him to explain his absence without
leave from Sept. 20. The latter replied saying that he was not absent on those days and even showed his timesheet. His reply
also included a query regarding WWWECs act of withholding his salary from Sept 11-25.
Then on Sept 27, Aliling tendered his resignation to San Mateo to be effective Oct 15 2004. But before WWWEC took action
and pending evaluation, Aliling demanded reinstatement in a subsequent letter dated Oct 1, 2004 and claimed that San Mateo
forced him to resign. On Oct 6, Lariosa advised Aliling regarding the termination of his services for unsatisfactory perfmance
during the probation period.
Earlier, however, on Oct 4, Aliling filed a complaint for illegal dismissal due to forced resignation, non-payment of salary, and
damages with the NLRC. He claimed that WWWEC did not inform him the standards under which he should be qualified as a
regular employee.
In response, WWWEC showed a signed letter of appointment which contained the terms of engagement which states that
your performance shall be reviewed on the 3 rd month to assess your competence and work attitude. The 5 th month
appraisal shall be the basis in elevating your employment from Probationary to Regular.
188 Roco 3B
WWWEC also attached a memo dated Sept. 20 asking Aliling to explain why he should not be terminated for failure to meet
the expected job performance. It also said that, instead of explaining, Aliling simply submitted a resignation letter. However,
Aliling denied receiving such memo.
On Apr 2006, LA declared Alilings termination to be unjustified and explained that Aliling cannot be validly terminated for
noncompliance with the quota threshold absent a prior advisory of the reasonable standards upon which his performance
would be evaluated. In other words, still a probationary employee but no standards were set. by WWWEC.
The decision was affirmed by the NLRC on appeal. In the CA, it was also affirmed on the ground that he was deemed a
regular employee because no reasonable standards for qualification as regular employee were set (Cielo v. NLRC). Declared
that WWWEC, Lariosa, San Mateo, and other officers joint and severally liable. Awarded damages and separation pay. Hence,
this petition.
WWWEC relies on the case of Alcira v. NLRC saying that the employer substantially complied with the notification of
standards if he apprises the employee that he will be subjected to a performance evaluation on a specific date after being hired.
Issue: Whether Aliling was a regular employee.
Held: YES. Alcira is inapplicable because in that case, the LA, NLRC, and CA found that the employee therein knew of the
standards already upon being engaged by the employer. Here, the LA, NLRC, and CA all held that Aliling was not informed.
The letter itself states that the regularization standards or the performance norms to be used are still to be agreed upon by
Aliling and his supervisor. WWWEC has failed to prove that an agreement as regards thereto has been reached. Clearly
then, there were actually no performance standards to speak of. And lest it be overlooked, Aliling was assigned to GX
trucking sales, an activity entirely different to the Seafreight Sales he was originally hired and trained for . Thus, at the
time of his engagement, the standards relative to his assignment with GX sales could not have plausibly been communicated
to him as he was under Seafreight Sales.
Aliling, albeit hired from managements standpoint as a probationary employee, was deemed a regular employee by force of
the following self-explanatory provisions:
Art. 281. xxx The services of an employee who has been engaged on a probationary basis may be terminated for a just cause
or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer
to the employee at the time of his engagement.
6 (d) IRR. In all cases of probationary employment, the employer shall make known to the employee the standards
under which he will qualify as a regular employee at the time of his engagement. Where no standards are made
known to the employee at that time, he shall be deemed a regular employee.
Also, San Mateos email cannot support their allegation on Aliling being informed of the standards for his continued
employment, such as the sales quota, at the time of his engagement. As it were, the email message was sent to Aliling more
than a month after he signed his employment contract with WWWEC.
Illegal Dismissal
To justify fully the dismissal of an employee, the employer must, as a rule, prove that the dismissal was for a just cause and
that the employee was afforded due process prior to dismissal. The employer has the onus of proving with clear, accurate,
consistent, and convincing evidence the validity of the dismissal. WWWEC had failed to discharge its twin burden in the
instant case.
First off, the attendant circumstances in the instant case aptly show that the issue of petitioners alleged failure to achieve his
quota, as a ground for terminating employment, strikes the Court as a mere afterthought on the part of WWWEC. Lariosas
letter of already betrayed managements intention to dismiss the Aliling for alleged unauthorized absences. Aliling was in fact
made to explain and he did so satisfactorily. But, lo and behold, WWWEC nonetheless proceeded with its plan to dismiss him
for non-satisfactory performance, although the corresponding termination letter did not even specifically state Alilings
189 Roco 3B
nonsatisfactory performance, or that Alilings termination was by reason of his failure to achieve his set quota. In net effect,
WWWEC was at a loss to explain the exact just reason for dismissing Aliling.
In fine, an employees failure to meet sales or work quotas falls under the concept of gross inefficiency, which in turn is
analogous to gross neglect of duty that is a just cause for dismissal under Article 282 of the Code. However, in order for the
quota imposed to be considered a valid productivity standard and thereby validate a dismissal, managements
prerogative of fixing the quota must be exercised in good faith for the advancement of its interest. The duty to prove good
faith, however, rests with WWWEC as part of its burden to show that the dismissal was for a just cause. WWWEC must show
that such quota was imposed in good faith. This WWWEC failed to do, perceptibly because it could not.
Employees must be reminded that while probationary employees do not enjoy permanent status, they enjoy the
constitutional protection of security of tenure . They can only be terminated for cause or when they otherwise fail to
meet the reasonable standards made known to them by the employer at the time of their engagement.
Violation of Due Process

To effect a legal dismissal, the employer must show not only a valid ground therefor, but also that procedural due process has
properly been observed. When the Labor Code speaks of procedural due process, the reference is usually to the 2-written
notice rule envisaged in Section 2 (III), Rule XXIII, Book V of the Omnibus Rules Implementing the Labor Code. (Haba
nung provision eh. Read the explaination in the case below to see the jist of it.)
MGG Marine Services, Inc. v. NLRC tersely described the mechanics of what may be considered a two-part due process
requirement which includes the two-notice rule, x x x ONE, of the intention to dismiss, indicating therein his acts or
omissions complained against, and TWO, notice of the decision to dismiss; and an opportunity to answer and rebut
the charges against him, in between such notices.
Here, the first and second notice requirements have not been properly observed, thus tainting petitioners dismissal with
illegality. The adverted memo dated Sept 20, 2004 of WWWEC supposedly informing Aliling of the likelihood of his
termination and directing him to account for his failure to meet the expected job performance would have had constituted the
charge sheet, sufficient to answer for the first notice requirement, but for the fact that there is no proof such letter had been
sent to and received by him. In fact, in his Complainants Reply Affidavit, Aliling goes on to tag such letter/memorandum as
fabrication. WWWEC did not adduce proof to show that a copy of the letter was duly served upon Aliling. Clearly enough,
WWWEC did not comply with the first notice requirement.
WWWEC Officer Not Solidarily Liable with Company

A review of the facts of the case does not reveal ample and satisfactory proof that the officers of WWEC acted in bad
faith or with malice in effecting the termination of Aliling. Even assuming arguendo that the actions of WWWEC are ill-
conceived and erroneous, officers cannot be held jointly and solidarily with it. Hence, the ruling on the joint and solidary
liability of individual officers must be recalled.
Discussion on damages omitted.
151. DM Consuji vs. Jamin (2012)

Facts: On December 17, 1968, D.M. Consunji, Inc. (DMCI), a construction company, hired Estelito L. Jamin as a laborer.
Sometime in 1975, Jamin became a helper carpenter. Since his initial hiring, Jamins employment contract had been
renewed a number of times. On March 20, 1999, his work at DMCI was terminated due to the completion of the SM
Manila project. This termination marked the end of his employment with DMCI as he was not rehired again.
On April 5, 1999, Jamin filed a complaint for illegal dismissal, with several money claims against DMCI and its
President/General Manager, David M. Consunji. Jamin alleged that DMCI terminated his employment without a just and
authorized cause at a time when he was already 55 years old and had no independent source of livelihood. He claimed
that he rendered service to DMCI continuously for almost 31 years. In addition to the schedule of projects (where he was
assigned) submitted by DMCI to the labor arbiter, he alleged that he worked for three other DMCI projects.
190 Roco 3B
DMCI argued that it hired Jamin on a project-to-project basis, from the start of his engagement in 1968 until the completion
of its SM Manila project on March 20, 1999 where Jamin last worked. With the completion of the project, it terminated
Jamins employment. It alleged that it submitted a report to the DOLE every time it terminated Jamins services.
Labor Arbiter Robles dismissed the complaint. The NLRC affirmed the LA ruling. However, the CA overturned and held
that Jamin was a regular employee based on (1) Jamins repeated and successive rehiring in DMCIs various projects; and (2)
the nature of his work in the projects he was performing activities necessary or desirable in DMCIs construction business.
Issue: Whether Jamin is merely a project employee.
Held: NO. REGULAR EMPLOYEE. The CA pierced the cover of Jamins project employment contract and declared him a
regular employee who had been dismissed without cause and without notice. To reiterate, the CAs findings were based on: (1)
Jamins repeated and successive engagements in DMCIs construction projects, and (2) Jamins performance of
activities necessary or desirable in DMCIs usual trade or business.
(1) The hiring of Jamin was continuous. Even though DMCI showed that there were gaps in between, it was
shown that the gaps were only due to the non-inclusion of certain projects in the schedule of projects.
In Liganza v. RBL Shipyard Corporation the Court held that assuming, without granting, that the petitioner was initially hired for
specific projects or undertakings, the repeated re-hiring and continuing need for his services for over eight (8) years
have undeniably made him a regular employee. We find the Liganza ruling squarely applicable to this case, considering
that for almost 31 years, DMCI had repeatedly, continuously and successively engaged Jamins services since he was hired on
December 17, 1968 or for a total of 38 times 35 as shown by the schedule of projects submitted by DMCI to the labor
arbiter and 3 more projects or engagements added by Jamin, which he claimed DMCI intentionally did not include in its
schedule so as to make it appear that there were wide gaps in his engagements. One of the 3 projects was local, (Ritz
Towers), while the other 2 were overseas (the New Istana Project in Brunei).
We reviewed Jamins employment contracts as the CA did and we noted that while the contracts indeed show that Jamin
had been engaged as a project employee, there was an almost unbroken string of Jamins rehiring from December 17,
1968 up to the termination of his employment on March 20, 1999. While the history of Jamins employment (schedule of
projects) relied upon by DMCI shows a gap of almost 4 years in his employment for the period between July 28, 1980 and
June 13, 1984 the gap was caused by the companys omission of the three projects above mentioned.
As to this non-disclosure by DMCI to Jamin that there had been other projects where DMCI engaged his services, it wouldnt
matter if it was done intentionally by DMCI or if it was done by mere oversight. Either way, it is unfair to Jamin as the non-
inclusion of the three projects gives the impression that there were substantial gaps not only of several months but years in his
employment with DMCI.
(2) Not only did DMCI continuously re-hire him for 38 years, but also the nature of his work was necessary to
the usual business of DMCI. Thus, he shall be deemed to be a regular employee based on the doctrine in the
Maraguinot case.
In all the 38 projects where DMCI engaged Jamins services, the tasks he performed as a carpenter were indisputably
necessary and desirable in DMCIs construction business. He might not have been a member of a work pool as DMCI
insisted that it does not maintain a work pool, but his continuous rehiring and the nature of his work unmistakably
made him a regular employee.
In Maraguinot, Jr. v. NLRC, the Court held that once a project or work pool employee has been: (1) continuously, as
opposed to intermittently, rehired 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.
Surely, length of time is not the controlling test for project employment. Nevertheless, 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.
191 Roco 3B
(3) The termination report is requires to be filed with the nearest Public Employment office. But this does not
matter anymore in this case as Jamin is already deemed a regular employee .
With our ruling that Jamin had been a regular employee, the issue of whether DMCI submitted termination of employment
reports, pursuant to Policy Instructions No. 20, as superseded by DOLE Department Order No. 19, has become academic.
DOLE Policy Instructions No. 20 provides in part:
Project employees are not entitled to termination pay if they are terminated as a result of the
completion of the project or any phase thereof in which they are employed, regardless of the number
of projects in which they have been employed by a particular construction company . Moreover, the
company is NOT REQUIRED to obtain a clearance from the SOLE in connection with such
termination. What is required of the company is a report to the nearest Public Employment Office
for statistical purposes.
To set the records straight, DMCI indeed submitted reports to the DOLE but as pointed out by Jamin, the submissions
started only in 1992. DMCI explained that it submitted the earlier reports (1982), but it lost and never recovered the reports.
It reconstituted the lost reports and submitted them to the DOLE in October 1992; thus, the dates appearing in the reports.
(4) DMCIs president is not liable for Jamins dismissal, absent any showing of actual participation in it.
While there is no question that the company is liable for Jamins dismissal, as there is no express finding of Mr. Consunjis
involvement in Jamins dismissal, we deem it proper to absolve him of liability in this case.
AS A FINAL POINT, it is well to reiterate a cautionary statement we made in Maraguinot, thus:
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 employers usual business or trade.
August 17, 2013

152.Exodus vs Biscocho (2011)
Facts: Petitioners arguments:
As regards Gregorio, Exodus is a duly licensed labor contractor for the painting of residential houses, condominium units and
commercial buildings. Exodus obtained from Dutch Boy a contract for the painting of the Imperial Sky Garden and
Pacific Plaza Towers.
Guillermo, Fernando, Ferdinand, and Miguel (the painters) filed a complaint for illegal dismissal and non payment of
holiday pay, service incentive leave pay, 13th month pay and nightshift differential pay.
Petitioners averred that he absented himself from work and applied as a painter with SAEIEEI which is the general
building contractor of Pacific Plaza Towers; he never reported back. Guillermo absented himself from work without leave
and was reprimanded for being Absent Without Official Leave (AWOL). Because of the reprimand, he worked only halfday
and thereafter was unheard of. Fernando, Ferdinand, and Miguel were caught eating during working hours, were reprimanded
and thereafter no longer reported for work.
Petitioners contend that respondents were never dismissed. If respondents find themselves no longer in the service of
petitioners, it is simply because of their refusal to report for work. Even granting that they were dismissed, respondents
prolonged absences is tantamount to abandonment which is a valid ground for the termination.
192 Roco 3B
As to respondents monetary claims, it is incumbent upon them to prove the same because the burden of proof rests on their
shoulders. Having failed to prove the same, their claims should be denied.
Respondents arguments:
Respondents claim that they were illegally dismissed. That as painters, they performed activities which were necessary and
desirable in the usual business of petitioners, who are engaged in the business of contracting painting jobs. Hence, they are
regular employees who cannot just be dismissed from the service without prior notice and without any just or valid
cause.
They did not abandon their job. For abandonment to serve as basis for a valid termination, it must first be established that
there was a deliberate and unjustified refusal on their part to resume work. Mere absences are not sufficient for these must
be accompanied by overt acts pointing to the fact that they simply do not want to work anymore. Petitioners failed to
prove this. Further, filing of a complaint for illegal dismissal ably defeats the theory of abandonment of the job.
Issue: Whether or not the painters were illegally dismissed.
Held: In cases of illegal dismissal, the employer bears the burden of proof to prove that the termination was for a valid
or authorized cause. But before the petitioners must bear the burden of proving that the dismissal was legal, the
respondents must first establish by substantial evidence that INDEED THEY WERE DISMISSED. If there is no
dismissal, then there can be no question as to the legality or illegality thereof.
1. There was NO DISMISSAL in this case, hence, there is no question that can be entertained regarding its legality or
illegality.
There was no evidence that respondents were dismissed nor were they prevented from returning to their work.
Respondents could not even name the particular person who effected their dismissal and under what particular
circumstances.
In Machica v. Roosevelt it was said that one who alleges a fact has the burden of proving it. Petitioners were burdened to
prove their allegation that respondents dismissed them from their employment it must be clear, positive and convincing. The
rule that the employer bears the burden of proof in illegal dismissal cases finds no application here because the
respondents deny having dismissed the petitioners.
In this case, petitioners were able to show that they never dismissed respondents. As to the case of Fernando, Miguel
and Ferdinand, petitioners foreman, caught the 3 still eating when they were supposed to be working already.
Wenifredo reprimanded them and, apparently, they resented it so they no longer reported for work . In the case of
Gregorio, he absented himself from work to apply as a painter with SAEIEEI, the general contractor of Pacific Plaza Towers.
Since then he never reported back. In the case of Guillermo, he absented himself without leave and so he was reprimanded
when he reported for work the following day. Because of the reprimand, he did not report for work anymore.
As between respondents general allegation of having been orally dismissed from the service visavis those of petitioners which
were found to be substantiated by the sworn statement of foreman Wenifredo, we are persuaded by the latter. Absent any
showing of an overt or positive act proving that petitioners had dismissed respondents , the latters claim of illegal
dismissal cannot be sustained.
2. There was also NO ABANDONMENT OF WORK on the part of the respondents.

Mere absence or failure to report for work is not enough to amount to abandonment of work. 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.
193 Roco 3B
It is the employer who has the burden of proof to show a deliberate and unjustified refusal of the employee to resume
his employment without any intention of returning. It is incumbent upon petitioners to ascertain the respondents interest
or noninterest in the continuance of their employment. Petitioners failed to do so.
3. Respondents must be reinstated and paid their holiday pay, service incentive leave pay, and 13th month pay.
There was no dismissal, much less illegal, and there was also no abandonment of job. Respondents be reinstated but without
any backwages. Petitioners are of the position that the reinstatement of respondents to their former positions, which were no
longer existing, is impossible. The project was already completed. Having completed their tasks, their positions automatically
ceased.
Petitioners are misguided. They forgot that there are two types of employees in the construction industry; project employees
or those employed in connection with a particular construction project or phase thereof and such employment is coterminous
with each project or phase and; nonproject employees or those employed without reference to any particular construction
project or phase of a project.
The second category is where respondents are classified. As such they are regular employees. When one project is completed,
respondents were automatically transferred to the next project awarded to petitioners. There was no employment agreement
given to respondents which clearly spelled out the duration of their employment, the specific work to be performed and that
such is made clear to them at the time of hiring.
Assuming that respondents were initially hired as project employees, in Maraguinot, Jr. v. National Labor Relations
Commission, the court ruled that a project employee x may acquire the status of a regular employee when the following
factors concur: 1. There is a continuous rehiring of project employees even after cessation of a project; and 2. The tasks
performed by the alleged project employee are vital, necessary and indespensable to the usual business or trade of the
employer.
Respondents were employed and assigned continuously to the various projects of petitioners. They performed activities which
were necessary and desirable in the usual business of petitioners. As regular employees, respondents are entitled to be
reinstated without loss of seniority rights.
4. Respondents are also entitled to their money claims such as the payment of holiday pay, service incentive leave
pay, and 13th month pay.
Petitioners as the employer, having complete control over the records could have easily rebutted the monetary claims against
it. All that they had to do was to present the vouchers or payrolls showing payment. Failing to do so, our conclusion therefore
is that they never paid said benefits
5. Respondents are also entitled to the payment of attorneys fees.

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 attorneys fees is legally and morally justifiable.
6. They are not entitled to backwages

Where there is no evidence of dismissal, the remedy is reinstatement but without backwages. In a case where the employees
failure to work was occasioned neither by his abandonment nor by a termination, the burden of economic loss is not rightfully
shifted to the employer; each party must bear his own loss. Inasmuch as no finding of illegal dismissal had been made, this
Court cannot allow an award of the payment of backwages.
153.Sang-an vs. Equator (2013)

Facts: Jonathan was the Assistant Operation Manager of Equator He was tasked, among others, with the duty of assisting
in the operations of the security services; he was also in charge of safekeeping Equators firearms.
Equator discovered that 2 firearms were missing from its inventory. The investigation revealed that it was Jonathan who
might have been responsible for the loss. As such, Jonathan was temporarily suspended from work pending further
investigation.
194 Roco 3B
While Jonathan was under suspension, a security guard from Equator was apprehended by policemen for violating the
Commission on Elections gun ban rule. The security guard stated in his affidavit that the unlicensed firearm had been
issued to him by Jonathan.
Jonathan filed with the NLRC a complaint for illegal suspension with prayer for reinstatement. In his position paper,
however, he treated his case as one for illegal dismissal and alleged that he had been denied due process when he was
dismissed.
Equator, on the other hand, argued that Jonathans dismissal was not illegal but was instead for a just cause under Article 282 of the
Labor Code.
LA: Valid dismissal

NLRC: Illegal dismissal Just cause present but no procedural due process.
CA: Valid dismissal
Issue: Whether Jonathan was validly dismissed.
Held: NO. ILLEGAL. Jonathan was not merely suspended but was dismissed from the service. While Jonathan initially
filed an action for illegal suspension, the position papers both parties filed treated the case as one for illegal
dismissal.
Jonathan alleged in his position paper that the respondent illegally SUSPENDED (DISMISSED) the complainant,
and claimed that his dismissal lacked the required due process. Similarly, Equators position paper states that after the
commission of the second offense on May 8, 2001, management made up a decision to dismiss Jonathan. Even the
LA treated the case before him as a case for illegal dismissal. In Equators memorandum to this Court, it admitted that
Jonathan was dismissed.
Jonathan did not file his complaint for illegal suspension on May 2, 2001. The records of the case disclose that the receiving
date stamped on the complaint is May 24, 2001. The date relied upon by the CA, May 2, 2001, was the date when the
complaint was subscribed and sworn to before a notary public. Due to the second offense committed by Jonathan on May 8,
2001, Equator decided to dismiss him. Therefore, when the LA tried the case, Jonathan had already been dismissed.
EQUATOR FAILED TO COMPLY WITH THE PROCEDURAL DUE PROCESS.

To validly dismiss an employee, it is fundamental that the employer observe both substantive and procedural due process
the termination of employment must be based on a just or authorized cause and the dismissal can only be effected,
after due notice and hearing.
Equator complied with the substantive requirements of due process when Jonathan committed the two offenses.
Article 282(A) of the Labor Code provides that an employee may be dismissed on the ground of serious misconduct or willful
disobedience of the lawful orders of his employer or representative in connection with his work.
MISCONDUCT is improper or wrongful 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 of judgment.
The misconduct, to be serious within the meaning of the Labor Code, must be of such grave and aggravated character and not
merely trivial or unimportant. It is also important that the misconduct be in connection with the employee's work to constitute
just cause for his separation.
By losing two firearms and issuing an unlicensed firearm, Jonathan committed serious misconduct. He did not
merely violate a company policy; he violated the law itself (Presidential Decree No. 1866) and placed Equator and its
employees at risk of being made legally liable. Thus, Equator had a valid reason that warranted Jonathans dismissal
from employment as Assistant Operation Manager.
195 Roco 3B
HOWEVER, Equator FAILED TO OBSERVE THE PROPER PROCEDURE in terminating Jonathans services. According the
the IRR, in all cases of termination of employment, the following standards of due process shall be substantially
observed.
I. For termination of employment BASED ON JUST CAUSES as defined in Article 282 of the Labor Code:
(a) A written notice served on the employee specifying the ground or grounds for termination, and giving to said
employee reasonable opportunity within which to explain his side;
(b) A hearing or conference during which the employee concerned, with the assistance of counsel if the employee so
desires, is given opportunity to respond to the charge, present his evidence, or rebut the evidence presented
against him; and
(c) A written notice of termination served on the employee indicating that upon due consideration of all the
circumstances, grounds have been established to justify his termination.
Jurisprudence has expounded on the guarantee of due process, requiring the employer to furnish the employee with 2 written
notices before termination of employment can be effected: a FIRST WRITTEN NOTICE that informs the employee of the
particular acts or omissions for which his or her dismissal is sought, and a SECOND WRITTEN NOTICE which informs
the employee of the employer's decision to dismiss him . In considering whether the charge in the first notice is sufficient
to warrant dismissal under the second notice, the employer must afford the employee ample opportunity to be heard.
Jonathan was not furnished with any written notice that informed him of the acts he committed justifying his
dismissal from employment. The notice of suspension given to Jonathan only pertained to the first offense , i.e., the
loss of Equators firearms under Jonathans watch. With respect to his second offense (i.e., the issuance of an unlicensed
firearm to Equators security guard that became the basis for his dismissal), Jonathan was never given any notice that
allowed him to air his side and to avail of the guaranteed opportunity to be heard . That Equator brought the second
offense before the LA does not serve as notice because by then, Jonathan had already been dismissed.
In order to validly dismiss an employee, the observance of both substantive and procedural due process by the employer
is a condition sine qua non. Procedural due process requires that the employee be given a notice of the charge against him,
an ample opportunity to be heard, and a notice of termination.
Since Jonathan had been dismissed in violation of his right to procedural due process but for a just cause, Equator should pay
him nominal damages of P30,000.00, in accordance with Agabon v. NLRC.
154.PLDT vs Berbano (2009)

Facts: Berbano alleged that PLDT hired him on June 1, 1987 as an Engineering Assistant . After 3 months of probation,
he was appointed as a regular employee. He was promoted multiple times, reaching the position of Computer Assistant M-
2 on June 16, 1993. He alleged that he performed the functions of a Specialist for EWSD, handling operations and
maintenance of the whole network.
Alleging that PLDT expected him to understand the network, he conducted a study of hi-tech EWSD Switching
Equipment. He then tapped his brother-in-laws phone number without his knowledge , installing features in it for
study. Such features include: Security Code, Conference Call, Abbreviated Dialing, Hot Line Delayed, Call Diversion
Immediate/Dont Answer, Call Hold, Non-Changeable.
He then learned that the Quality Control Inspection Office investigated the number , and he admitted that he was
responsible for such installation. He then received a Memorandum from the Department Head, asking him to explain
within 72 hours why action should not be taken. He wrote that it was for the purposes of study and research, and admitted
that it was without authoriz1ation.
PLDT found this insufficient and dismissed him. According to PLDT, testing should only last for 1 day; this was done 2
months after installation. The LA found the dismissal illegal; NLRC found it legal. CA found it illegal.
Issue: Whether Berbano was illegally dismissed.
196 Roco 3B
Held. YES. ILLEGAL. PLDT contends that the CA erred when it found respondent to have committed an infraction, i.e.,
programming and installing special features in his (respondents) brother-in-laws telephone line without prior authorization
from petitioner, but nonetheless ruled that the infraction was not serious enough to warrant respondents dismissal
from service. Petitioner also asserts that, contrary to respondents claim, due process was observed in the dismissal of
respondent.
Well-settled is the rule that NO EMPLOYEE shall be validly dismissed from employment without the observance of
substantive and procedural due process. The minimum standards of due process are prescribed under Article 277(b) of
the Labor Code of the Philippines (Labor Code) to wit:
(b) 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
cause for 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. x x x
The above provision is implemented by Section 2, Rule XXIII of Book V of the Omnibus Rules Implementing the Labor
Code, which states:
Based on the IRR, dismissal from service of an employee is valid if the following requirements are complied
with: (a) substantive due process which requires that the ground for dismissal is one of the just or authorized causes
enumerated in the Labor Code, and (b) procedural due process which requires that the employee be given an
opportunity to be heard and defend himself. The employee must be furnished two written notices the first
notice apprises the employee of the particular act or omission for which his dismissal is sought, and the second notice
informs the employee of the employers decision to dismiss him.
IN THIS CASE, petitioner formally notified respondent of the complaint against him through an inter-office
memorandum dated 6 July 1994. The memorandum enumerated the service features allegedly installed by respondent in his
brother-in-laws telephone line (911-8234), and stated the acts of the respondent complained of, viz:
You readily admitted to QCI that subscriber of subject telephone is your brother-in-law
and that you installed the features claiming it was for testing purposes.
Records show that subject telephone was temporarily disconnected last March 24, 1994 for non-payment, reconnect order was
faxed to Data Control Unit of OMCC at 1:30PM. In the process of reconnection at OMCC, subject telephone was found
already working.
In the same memorandum, petitioner asked respondent to explain within 72 hours upon receipt thereof why an
administrative action should not be imposed against him. On 11 July 1994, respondent submitted his written
explanation or reply to the complaint against him. More than a month thereafter, or on 9 August 1994, petitioner issued
another inter-office memorandum informing respondent that his act of installing special features in his brother-in-
laws telephone line without authorization from petitioner constituted gross misconduct and was grossly violative of
existing company rules and regulations, hence, warranting his termination from service. Clearly, petitioner complied with the
requirement of procedural due process.
As regards SUBSTANTIAL DUE PROCESS, the grounds for termination of employment must be based on just or
authorized causes. Article 282 of the Labor Code enumerates the just causes for termination of employment by the employer.
The notice of termination sent by petitioner to respondent indicated that the latter was dismissed from service due
to unauthorized installation of service features in his brother-in-laws telephone line, which allegedly constituted gross
197 Roco 3B
misconduct. Thus, we are left with the issue on whether the said unauthorized act of the respondent constitutes a
serious misconduct which warrants dismissal from service under Article 282(a) of the Labor Code.
MISCONDUCT has been defined as 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 of
judgment. Ordinary misconduct would not justify the termination of services of the employee as the Labor Code is
explicit that the misconduct must be serious.
To be serious, the misconduct must be of such grave and aggravated character and not merely trivial and unimportant.
Such misconduct, however serious, must nevertheless be in connection with the employees work to constitute just
cause for his separation. As amplified by jurisprudence, MISCONDUCT, to be a just cause for dismissal, must:
(a) be serious;
(b) relate to the performance of the employees duties; and
(c) show that the employee has become unfit to continue working for the employer.
Moreover, in NLRC v. Salgarino, this Court stressed that [i]n 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.
We believe that the misconduct of respondent is NOT of serious nature as to warrant respondents dismissal from
service. The records of this case are bereft of any showing that the alleged misconduct was performed by respondent
with wrongful intent. On the contrary, respondent readily admitted having installed the service features in his brother-
in-laws telephone line for purposes of study and research which could have benefitted petitioner. Respondent explained
the installation of the service features in the written explanation he sent to petitioner as follows:
There had been a time on that period where I conducted special study on service features of
EWSD. It includes testing the integrity of its actual operation in all digital exchanges
connected to our OMC.
During which [sic] I conducted my study of these features for Cubao there was no available
test number at OMC for code 911 and 912. So to complete my study I decided to use
the number 9118234 at home temporarily and remove those features after the test.
Moreover, as pointed out by the appellate court, respondents misconduct did not result in any economic loss on the
part of petitioner since the service features were not yet available in the market at the time respondent caused its
unauthorized installation.
We also note that respondents dedicated service to petitioner for 6 years, prior to his commission of the misconduct, is
apparent from the records. His employment was untainted with any irregularity . He had been promoted several times,
and had been chosen by petitioner on several occasions to attend various trainings to improve his craft . He
conducted advance research based on his training background and technical expertise, and had even compiled a service feature
manual which served as quick reference guide of his colleagues for inquiries regarding subscriber operation of special (or
service) features.
Based on the foregoing, we consider respondents offense to be a simple misconduct which does not merit
termination of his employment. The penalty of dismissal from service is not commensurate to respondents offense.
Although petitioner, as an employer, has the right to discipline its erring employees, exercise of such right should be tempered
with compassion and understanding. The magnitude of the infraction committed by an employee must be weighed and
equated with the penalty prescribed and must be commensurate thereto, in view of the gravity of the penalty of
dismissal or termination from the service. The employer should bear in mind that in termination cases, what is at stake
is not simply the employees job or position but his very livelihood.
ON WHETHER THE CA ERRED IN ORDERING PETITIONER TO PAY RESPONDENT BACKWAGES AND ATTORNEYS FEES
198 Roco 3B
Since respondent was illegally dismissed, he is entitled to reinstatement without loss of seniority rights, and to payment of
backwages. Article 279 of the Labor Code, as amended by Section 34 of Rep. Act No. 6715, provides as follows:
Thus, an ILLEGALLY DISMISSED EMPLOYEE IS ENTITLED TO THE TWIN RELIEFS of (a) either reinstatement or
separation pay, if reinstatement is no longer viable, and (b) backwages. These reliefs are given to alleviate the economic
damage suffered by the illegally dismissed employee.
Finally, we find no error in the award of attorneys fees. In San Miguel Corporation v. Aballa, 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 attorneys fees is justifiable under Article 111 of the Labor Code; Section
8, Rule VIII of Book III of the Omnibus Rules Implementing the Labor Code; and paragraph 7, Article 2208 of the Civil
Code. The award of attorneys 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.
155.Technol vs NLRC (2010)

Facts: Technol Eight Philippines Corp. (Technol) manufactures metal parts and motor vehicle components. It hired the
respondent Dennis Amular in March 1998 and assigned him to Technols Shearing Line, together with Ducay. Mendoza was
the lines team leader.
In April of 2002 at around 5:30PM, Mendoza went to an internet cafe somewhere in Binan Laguna (outside work premises).
As he was leaving, he was confronted by Amular and Ducay who engaged him in a heated argument regarding their work in
the shearing line, particularly Mendozas report to De Leon (Production Control and Delivery assistant supervisor) about
Amulars and Ducays questionable behavior at work. The heated argument resulted in a fistfight that required the intervention
of the barangay tanods in the area.
Thereafter, Technol sent to Amular and Ducay a notice of preventive suspension saying that the fistfight that ensued was in
violation of their HR Manual. They were given 48 hrs to explain. They were then placed on preventive suspension for 30 days
(May-June).
After Amular submitted his written statement, he was notified that an administrative hearing will be conducted by Technol
and was given 2 days to respond. During this period, Ducay resigned. A day before the hearing, however, Amular filed a
complaint for illegal suspension/constructive dismissal against Technol (with prayer for separation pay, money claims, bla bla
bla). Amular failed to attend the administrative hearing. Thus, on July 4, 2002, Technol sent him a notice of dismissal
Executive LA Reyes found the suspension and subsequent dismissal illegal as they were merely based on unsubscribed written
statements; that there was absence of procedural due process; that the incident occurred 200-300 meters away from the work
area and happened after office hours. On appeal to the NLRC, the LAs decision was affirmed. It was then elevated to the CA
but the latter also affirmed. CA said that the misconduct was not serious, unrelated to performance of duties, and not
shown that employee has become unfit to continue working for employer. Moreover, operations of the company were
not disrupted and thus no substantial prejudiced to the employer was caused. Hence, this petition.
Technol avers that just because there was no disruption in the operations, it created a hostile environment inside the company
despite the fact that it was nipped in the bud by the timely intervention of the tanods. It also disputes the finding that Amular
was unfairly treated because Ducay was also suspended and the non-suspension of Mendoza was a valid exercise of
management prerogative.
Amular claims that when the parties involved in the incident settled their differences and even shook hands in a meeting
conducted by Technol. As such, he was surprised that he was still suspended and then forced to resign.
Issue: Whether the suspension and subsequent dismissal based on alleged the misconduct was proper.
Held: YES. IT WAS PROPER. CA concluded that there Amular committed a misconduct but concluded that it not was work-
related and thus not reflective of Amulars unfitness to continue working for Technol.
199 Roco 3B
SUBSTANTIVE: DISMISSED FOR CAUSE

Contrary to the CAs perception, we find a work-connection in Amular's and Ducays assault on Mendoza. The underlying
reason why Amular and Ducay confronted Mendoza was to question him about his report to De Leon Technols
PCD assistant supervisor regarding the duos questionable work behavior. The motivation behind the
confrontation was rooted on workplace dynamics as Mendoza, Amular and Ducay interacted with one another in the
performance of their duties. The incident could very well have happened inside company premises had the 2 found time
to confront Mendoza in the workplace as they intimated in their written statements.
Amular and Ducay purposely set out for the internet cafe on April 2002 looking for Mendoza. It was not an incidental or
casual encounter. They sought Mendoza out and confronted him regarding what they perceived as Mendozas negative
attitude towards them or pamamarako as Mendoza described it. When Mendoza appeared, they accosted him.
Under these circumstances, Amular undoubtedly committed a misconduct or exhibited improper behaviour that
constituted a valid cause for his dismissal under the law39 and jurisprudential standards . The circumstances of his
misdeed rendered him unfit to continue working for Technol; guilt is not diminished by his claim that Technols management
called the three of them to a meeting, and asked them to explain their sides and settle their differences, which they did. Neither
do we believe that Amular was discriminated against because he was not the only one preventively suspended.
PROCEDURAL: ACCORDED DUE PROCESS

Contary to the findings of the LA & NLRC, the notice of preventive suspension/notice of discharge served on Amular
and Ducay required them to explain within 48 hours why no disciplinary action should be taken against them for their
involvement in the mauling incident. Amular submitted 2 written statements: the first received by the company on May 19,
2002 and the other received on May 20, 2002.
On June 8, 2002, Technol management sent Amular a memorandum informing him of an administrative hearing on June 14,
2002 at 10:00 a.m., regarding the charges against him. At the bottom left hand corner of the memorandum, the following
notation appears: accept the copy of notice but refused to receive , he will study first. A day before the administrative
hearing or on June 13, 2002, Amular filed the complaint for illegal suspension/dismissal and did not appear at the
administrative hearing. On July 4, 2002, the company sent Amular a notice of dismissal.
The records belie the LA & NLRCs findings that he was denied due process. He chose not to present his side at the
administrative hearing. In fact, he avoided the investigation into the charges against him by filing his illegal dismissal
complaint ahead of the scheduled investigation.
Under these facts, he was given the opportunity to be heard and he cannot now come to us protesting that he was
denied this opportunity. To belabor a point the Court has repeatedly made in employee dismissal cases, the ESSENCE OF
DUE PROCESS is simply an opportunity to be heard; it is the denial of this opportunity that constitutes violation of due
process of law.
156.Caltex vs Agad (2010)

Facts: Caltex employed Hermie G. Agad as Depot Superintendent-A on a probationary basis for 6 months. Agad became
a regular employee with a monthly salary of P2,560 and cost of living assistance of P380. For the next 11 years, Agad
obtained various commendations and held the positions of Depot Superintendent-A, Field Engineer, Senior
Superintendent, and Bulk Depot Superintendent until his dismissal on 8 August 1994.
After Agad had served for 2 years since 1990 as Superintendent of the Tacloban Bulk Depot (Depot) in Leyte, Caltex
transferred Agad to Bauan Bulk Depot in Batangas. To transfer his belongings from Leyte to Batangas, Agad secured the
carpentry services of Delda Engineering Services (Delda Services) for the construction of two crates. Agad paid Delda
P15,500, evidenced by Official Receipt No. 09708. Agad submitted the receipt sometime in August 1992 and Caltex
reimbursed him the said amount. The company auditor of Caltex verified the crating expense incurred by Agad with Delda.
Delda, through an Affidavit dated 5 May 1993, disclosed that Delda Services did not perform any crating service for
Agad or receive the amount of P15,500 as stated in the official receipt . Delda alleged that he was forced by Agad to issue
the official receipt in order to get a favorable recommendation from the incoming superintendent of the Depot. Further
200 Roco 3B
investigations revealed that Arsenio Asperas (Asperas), a carpenter from Tacloban, was commissioned by Agad to
build two wooden crates on 12 May 1992. Asperas attested that Agad paid him the amount of P400 and he completed the
work in 2 12 days beside the quarters of Agad inside the Depot. Basilia Villalino (Villalino), a household staff of the Depot
Staff House, corroborated Asperas statement in a Sworn Testimony that Agad did hire Asperas to make two wooden crates
inside the Depot before he left for his next post.
In another audit report, the company auditor declared that 190 pieces of 11 kg. LPG cylinders from the Depot were
allegedly withdrawn for scrap and repair purposes without proper documentation when Agad was still depot
superintendent. Isidro B. Millanes (Millanes), the depots LPG cylinder repair/reconditioning contractor and owner of IBM
Enterprises, claimed that the LPG cylinders were hauled to his compound and allegedly later sold, upon the express
instructions of Agad, to Leyte Development Corporation and Ernesto Mercado, a service station dealer.
Regional Manager of Caltex, issued a Memorandum to Agad directing him to explain the following audit review
findings: (1) the questionable reimbursement of crating expense; and (2) the alleged unauthorized withdrawal and sale of 190
pieces of LPG cylinders.
Agad stated: (1) that Delda Services constructed the two crates worth P15,500 as evidenced by an official receipt issued by
Delda; and (2) that the withdrawal of the scrap LPG cylinders formed part of his housekeeping duties as depot superintendent.
The scrap materials consisting of tanks, pumps and pipelines were bidded out to a certain Rogelio Boy H. Bato on an as is,
where is basis. However, the scrap materials went missing and Boy Bato demanded that such be replaced with equivalent
materials. The scrap LPG cylinders were released instead after Agad secured the approval of his superiors. After the approval,
Boy Batos buyer, a certain Mr. Ang, allegedly acquired the scrap LPG cylinders from IBM Enterprises.
Caltex placed Agad under preventive suspension. Almost 10 months after the first formal inquiry, the investigating panel
conducted another hearing. Two other hearings were held. In a Confidential Memorandum, Agad was informed of his
dismissal on the grounds of serious misconduct and loss of trust and confidence, both just causes for termination of
employment.
Agad received the memorandum on 25 August 1994. On 1 September 1994, respondents Agad and Caltex United
Supervisors Association filed a complaint with the Labor Arbiter for illegal dismissal , illegal suspension with prayer for
full backwages, moral damages, exemplary damages and 10% of the total monetary award as attorneys fees against petitioners
Caltex and its officers. LA held that there were no just causes. NLRC reversed. CA modified the judgment of the NLRC and
ruled in favor of Agad.
Issue: Whether Caltex legally terminated Agads employment on just causes.
Held: YES. In termination cases, the burden of proof rests on the employer to show that the dismissal is for just cause. 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. The
employees dismissal due to serious misconduct and loss of trust and confidence must be supported by substantial
evidence. Substantial evidence is 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.
CRATING EXPENSE IS REASONABLE

Caltex readily approved the reimbursement claim when Agad submitted the official receipt. It was only a year later, during a
regular audit, when Caltex sought Deldas affidavit of denial when the company questioned the authenticity and
reasonableness of the amount of the crating expense. The former Manager for Distribution of Caltex, testified that the amount
of P15,500 for crating expense was reasonable. Even the former auditor of Caltex testified on the necessity and reasonableness
of said amount.
The official receipt submitted by Agad serves as the best evidence of payment and is presumed regular on its face
absent any showing to the contrary. Upon presentation of the receipt, Agads superior did not mention that the amount of
the crating expense incurred was unreasonable. Delda, in his affidavit, disclosed that he was forced to issue the receipt in
order to get a favorable recommendation from the incoming superintendent who would replace Agad in the Depot. However,
201 Roco 3B
in the same affidavit, Delda mentioned that he had been a standby worker at the Depot from 1956 to 1982 and a piece-worker
from 1982 up to 1993, the date he executed the affidavit. It appears then that Delda had established a name for himself and his
business with Caltex. Any favorable recommendation from Agad, as the outgoing superintendent, would not provide much
impact compared to the reputation he had built all those years. The testimonies of the two corroborating witnesses, Esperas
and Villalino, cannot be given credence since Agad was not given an opportunity to cross-examine them. Lastly, petitioners
did not present any other evidence to show that Agad violated company policy dealing with crating expenses to be limited to a
certain amount. Reasonableness was the only criterion given by the employer.
Petitioners were not able to fully substantiate the alleged fictitious reimbursement of the crating expense. Deldas
testimony alone, without any corroborating evidence to prove otherwise, is insufficient to overcome the presumption of
regularity in the issuance of his own official receipt.
WITHDRAWAL AND SALE OF 190 PIECES OF LPG CYLINDERS IS UNAUTHORIZED

The company rules required the issuance of RMRDs for any company properties with value to be withdrawn from the Bulk
Depot. Petitioner failed to comply with this rule. Furthermore, he ordered the sale of the cylinders without bidding, and there
were no evidence that the proceeds of such sale were turned over to the company. Agad had no authority to withdraw the
LPG cylinders from the Tacloban Bulk Depot. Records show that Agads request for the withdrawal of scrap materials
only covered 3,000 kilograms of B.I. plates. This request, however, did not include the LPG cylinders, numbering 190, which
were withdrawn from the Tacloban Depot.
Agad also did not observe the existing company rules and regulations on the withdrawal of LPG cylinders from the
Tacloban Bulk Depot. No Records of Materials Received/Delivered were issued to cover the withdrawal of the cylinders.
Also, the periodic inventory of the LPG cylinders was not submitted by Agad to the accounting department. Further, the LPG
cylinders were not sold through bidding, which was corroborated by the statement of Mr. Isidro B. Millanes, who testified that
the subject LPG cylinders were first stored at his premises and later sold without bidding upon the express instructions of
complainant Agad. It cannot be validly claimed that the LPG cylinders in question were mere scrap materials, i.e. they had no
monetary value anymore and therefore not subject to the strict requirement laid down by the company rules and regulations.
The LPG containers have monetary value as they can still be sold even as scrap.
It is clear that Agad committed a serious infraction amounting to theft of company property. Such act is akin to a
serious misconduct or willful disobedience by the employee of the lawful orders of his employer in connection with his
work, a just cause for termination of employment recognized under Article 282(a) of the Labor Code.
MISCONDUCT has been defined as a transgression of some established and definite rule of action, a forbidden act, a
dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment. To be serious,
the misconduct must be of such grave and aggravated character. Agads conduct constitutes willful breach of the trust
reposed in him, another just cause for termination of employment recognized under Article 282(c) of the Labor Code.
LOSS OF TRUST AND CONFIDENCE, as a just cause for termination of employment, is premised on the fact that the
employee concerned holds a position of responsibility , trust and confidence. The employee must be invested with
confidence on delicate matters, such as the custody, handling, care and protection of the employers property and funds. In
loss of trust and confidence, as a just cause for dismissal, it is sufficient that there must only be some basis for the loss of
trust and confidence or that there is reasonable ground to believe, if not to entertain the moral conviction, that the
employee concerned is responsible for the misconduct and that his participation in the misconduct rendered him
absolutely unworthy of trust and confidence.
Even if Agad did not commit the alleged charge of fictitious reimbursement of crating expense, he was found to
have acted without authority, a serious infraction amounting to theft of company property, in the withdrawal and sale of
the 190 pieces of LPG cylinders owned by the company . Agads dismissal from employment based on (1) acts tantamount
to serious misconduct or willful violation of company rules and regulations; and (2) willful breach of trust and confidence as
Depot Superintendent was lawful and valid under the circumstances as mandated by Article 282 (a) and (c) of the Labor Code.
157.Hospital Management vs Hospital Managements Services Inc-Medical Center Employees Association

(2011)
202 Roco 3B
Facts: Respondent De Castro worked as a nurse in petitioner hospital. While De Castro and ward-clerk orientee Gina
Guillergan were at the nurse station on night duty, one Rufina Causaren, an 81-year-old patient confined at the
hospital for "gangrenous wound on her right anterior leg and right forefoot" and scheduled for operation, fell from
the right side of the bed as she was trying to reach for the bedpan. Because of what happened, the niece of patient
Causaren staying in the room was awakened and she sought assistance from the nurse station. Instead of personally seeing
the patient, De Castro directed ward-clerk orientee Guillergan to check the patient. The vital signs of the patient were
normal. Later, the physician on duty and the nursing staff on duty for the next shift again attended to patient Causaren.
Chief Nurse Josefina M. Villanueva informed Dr. Asuncion Abaya-Morido, president and hospital director, about the incident
and requested for a formal investigation. De Castro and 3 other nurses were directed to appear before the Investigation
Committee.
De Castro explained that at that time, she was attending to a newly-admitted patient at one room and, because of this, she
instructed one of the nurses, Nursing Assistant Tatad to check the vital signs of patient Causaren, with ward-clerk orientee
Guillergan accompanying the latter. When the two arrived at the room, the patient was in a squatting position, with the right
arm on the bed and the left hand holding on to a chair.
The Investigation Committee found that the 3 other nurses for the shift were not at the nurse station. Staff Nurse
Paderes was then in another nurse station encoding the medicines for the current admissions of patients, while Nursing
Assistant Respicio was making the door name tags of admitted patients and Nursing Assistant Tatad delivered some
specimens to the laboratory. The committee recommended that despite her more than 7 years of service, De Castro
should be terminated from employment for her lapse in responding to the incident and for trying to manipulate and
influence her staff to cover-up the incident.
Thereafter, the HRD officer of the hospital issued a notice of termination to respondent De Castro for (1) negligence
to follow company policy on what to do with patient Rufina Causaren who fell from a hospital bed; (2) failure to record and
refer the incident to the physician on- duty and allowing a significant lapse of time before reporting the incident; (3)
deliberately instructing the staff to follow her version of the incident in order to cover up the lapse; and (4) negligence and
carelessness in carrying out her duty as staff nurse-on-duty when the incident happened.
Union and De Castro filed a complaint for illegal dismissal against petitioner hospital. The LA ruled in favor of
respondents. The NLRC reversed. The CA reversed again, ruling in favor of De Castro.
Issue: Whether the dismissal of De Castro was warranted.
Held: NO. Article 282 (b) of the Labor Code provides that an employer may terminate an employment for GROSS AND
HABITUAL NEGLECT by the employee of his duties.
It is incumbent upon De Castro to ensure that patients, covered by the nurse station to which she was assigned, be accorded
utmost health care at all times without any qualification or distinction. De Castros failure to personally assist patient
Causaren, check her vital signs and examine if she sustained any injury , refer the matter to the patient's attending
physician or any physician-on-duty, and note the incident in the report sheet for endorsement to the next shift for proper
monitoring CONSTITUTE SERIOUS MISCONDUCT THAT WARRANTS HER TERMINATION OF EMPLOYMENT.
After attending to the toxic patients under her area of responsibility, De Castro should have immediately proceeded to
check the health condition of patient Causaren and, if necessary, request the physician-on-duty to diagnose her
further. More importantly, De Castro should make everything of record in the patients chart as there might be a
possibility that while the patient may appear to be normal at the time she was initially examined, an injury as a consequence of
her fall may become manifest only in the succeeding days of her confinement. The patients chart is a repository of ones
medical history and, in this regard, respondent De Castro should have recorded the subject incident in the chart of patient
Causaren so that any subsequent discomfort or injury of the patient arising from the incident may be accorded proper medical
treatment.
203 Roco 3B
NEGLECT OF DUTY, to be a ground for dismissal, must be both gross and habitual. Gross negligence connotes want of
care in the performance of one's duties. HABITUAL NEGLECT implies repeated failure to perform one's duties for a
period of time, depending upon the circumstances. A single or isolated act of negligence does not constitute a just cause for
the dismissal of the employee.
The court here found that there cannot be imputed to De Castro any wrongful intent, deliberate refusal, or bad faith on
her part when, instead of personally attending to patient Causaren, she requested Nursing Assistant Tatad and ward-clerk
orientee Guillergan to see the patient, as she was then attending to a newly-admitted patient at another room. It was her
judgment call, albeit an error of judgment, being the staff nurse with presumably more work experience and better
learning curve, to send Nursing Assistant Tatad and ward-clerk orientee Guillergan to check on the health condition of
the patient, as she deemed it best, under the given situation, to attend to a newly-admitted patient who had more concerns that
needed to be addressed accordingly.
Being her first offense, De Castro cannot be said to be grossly negligent so as to justify her termination of
employment. Moreover, petitioners allegation, that De Castro exerted undue pressure upon her co-nurses to alter the actual
time of the incident so as to exculpate her from any liability, was not clearly substantiated.
However, in some cases, the Court had ruled that sanctioning an erring employee with suspension would suffice as the
extreme penalty of dismissal would be too harsh. Considering that this was the first offense of respondent De Castro in
her nine (9) years of employment with petitioner hospital as a staff nurse without any previous derogatory record
and, further, as her lapse was not characterized by any wrongful motive or deceitful conduct. De Castro was meted the
penalty of suspension for 6 months.
158. Sampaguita vs NLRC (2013)

Facts: Efren Sagad filed a complaint for illegal dismissal against Sampaguita Auto Transportation Corp, its President, GM, VP,
Finance Manager. Sagad alleged that on May 2006, Sampaguita employed him as a regular (not probationary) and that he was
dismissed on Nov 2008 for allegedly conniving with his conductor Vitola for issuing bus tickets outside their assigned route.
In its defense, Sampaguita claimed that Sagad was merely a probationary employee as evidenced by the contract he signed.
During this period (May to Oct 2006), Sagads performance, work attitude etc was still under observation to determine
whether he would be qualified to be regularized. For this purpose and as a matter of company policy, an evaluator disguised as
a passenger to observe the latters performance.
The evaluator described Sagads manner of driving as reckless driver, nakikipaggitgitan, nakikipaghabulan, nagsasakay sa gitna ng
kalsada, sumusubsob ang pasahero[.] But he disputed this saying that his pregnant wife and child was there at that time. He
admitted though that at one time, he chased an Everlasting bus to serve warning on its driver not to block his bus when he
was overtaking. He also admitted that once in a while, he sped up to make up for lost time in making trips.
It was further alleged that the conductors revealed to Sampaguita that Sagad proposed that they cheat on the company by way
of an unreported early bus trip (hindi ko gets). Also, a dispatcher of Sampaguita recommended his dismissal because he was
involved in an alleged hit and run along Commonwealth Ave but did not report this to the company. Thus, on Oct 2006,
Sampaguita terminated Sagad.
On May 2008, LA Padolina dismissed the complaint. On appeal with the NLRC, it declared that Sagad was illegally dismissed
and that he was not a probationary employee. Also, it was found that Sagads signature in the contract of employement was
forged. On appeal, CA affirmed in toto. It also added that there was absence of the 2-notice requirement. Hence this petition.
The company maintains that it terminated Sagads employment in good faith. They are not expected to follow the procedure
for dismissing a regular employee, as the NLRC opined, considering that Sagad was merely on probation. Lastly, it contends
that the award of backwages and separation pay to Sagad amounting to P604,050.00 is unwarranted and confiscatory since he
worked for only five months.
Issue: Whether the dismissal was legal and whether Sagad is entitled to backwages after barely working for 5 months.
204 Roco 3B
Held: NO. SAGAD WAS DISMISSED AS A REGULAR EMPLOYEE. The companys evidence on Sagads purported
hiring as a probationary employee is inconclusive. To start with, Sagad denied that he entered into a probationary employment
contract with the company, arguing that the signature on the supposed contract was not his. He also denied receiving the
alleged notice terminating his probationary employment.
Beyond 6-mo Probationary Period

Independently of the above discussion and even if we were to consider that Sagad went through a probationary period, the
records indicate that he was retained even beyond the expiration of his supposed probationary employment on October
2006. As the NLRC noted, Sagad claimed that he was dismissed by the company on November 2006, after he was accused of
conniving with conductor Vitola in issuing tickets outside their assigned route.
The company never refuted this particular assertion and its silence can only mean that Sagad remained in employment
until November 4 2006, thereby attaining regular status as of that date. Under the law, an employee who is allowed to work
after a probationary period shall be considered a regular employee.
Sagad also presented 5 payslips for the month of October and 1 for November. This showed Sagad actually continued
working beyond the 6-mo period.
SUBSTANTIVE DUE PROCESS: DISMISSAL WAS LEGAL

During his brief employment with the company, he exhibited the tendency to speed up when he finds the need for it, very
obviously in violation of traffic rules, regulations and company policy. Instead of negating the evaluators observations, his
admissions that he chased an Everlasting Bus (he was suspended for 5 days as a result) make them credible.
Also, the conductors who gave Sagads performance a poor rating based on the low revenue, inability to make
scheduled trips, habit of bringing his wife in the bus, had no ax to grind against Sagad so that they would lie about their
impression of him as a bus driver. Moreover, the conductors statements validate the observation that proposed a scheme for
the conductors to cheat on the company.
Also, as regards the alleged hit and run incident, the Traffic Accident Investation report showed that a bus with the same
plate number as he was driving was also involved but the driver remained to be unidentified. This was corroborated by the
statements of other parties involved (Elf Truck and driver of a Honda City owned by Purefoods). It was also shown that a
demand letter from Purefoods insurer was sent to Sagads employer.
Finally, the irregularities or infractions committed by Sagad in connection with his work as a bus driver constitute a serious
misconduct or, at the very least, conduct analogous to serious misconduct pursuant to the grounds for just causes for
termination under the Labor Code.
His tendency to speed up during his trips, his reckless driving, his picking up passengers in the middle of the road, his racing
with other buses and his jostling for vantage positions do not speak well of him as a bus driver. Moreover, the fact that he was
suspended for one reckless driving incident does not erase all the other infractions he committed. The conductors comments
and the dispatchers evaluation, together with the earlier on-board evaluation, all paint a picture of a reckless driver who
endangers the safety of his passengers, other motorists and the general public. With this record, it is not surprising that
he figured in a hit-and-run accident on September 2006.
Under the circumstances, Sagad has become a liability rather than an asset to his employer, more so when we consider that he
attempted to cheat on the company or could have, in fact, defrauded the company during his brief tenure as a driver. All told,
we find substantial evidence supporting Sagads removal as a bus driver. Through his reckless driving and his schemes
to defraud the company, Sagad committed serious misconduct and breach of the trust and confidence of his
employer, which, without doubt, are just causes for his separation from the service.
PROCEDURAL DUE PROCESS WAS VIOLATED

Even as we find a just cause for Sagads dismissal, we agree with the CA that the company failed to comply with the two-
notice rule. It failed to serve notice of: (1) the particular acts for which Sagad was being dismissed on November 5, 2006 and
(2) his actual dismissal. Consistent with our ruling in Agabon v. NLRC, we hold that the violation of Sagads right to
205 Roco 3B
procedural due process entitles him to an indemnity in the form of NOMINAL DAMAGES. Considering the circumstances
in the present case, we deem it appropriate to award Sagad P30,000.00.
159.PNB vs Padao (2011)

Facts: Philippine National Bank (PNB) seeks the reversal of the CA decision which ruled that the dismissal of Padao was
invalid.
Originally, Padao was hired by PNB as a clerk at its Dipolog City Branch. He was later designated as a credit investigator
in an acting capacity. Then, he was appointed regular Credit Investigator III, and was ultimately promoted to the position
of Loan and Credit Officer IV.
Sometime in 1994, PNB became embroiled in a scandal involving behest loans. A certain Sih Wat Kai complained to
the Commission on Audit that anomalous loans were being granted by some of its officers (AVPs, Brang Managers, Senior
Credit Investigators etc)
Because of this controversy, a number of employees who were involved were charged and eventually ordered
dismissed by the company. Padao, along with Division Chief Velasco were included in those administratively charged
(with Dishonesty, Grave Misconduct, Gross Neglect of Duty, Conduct Prejudicial to the Best Interest of the
Service).
The case against Padao was grounded on his having allegedly presented a deceptively positive status of the business, credit
standing/rating and financial capability of 12 loan applicants. It was later found that either said borrowers businesses were
inadequate to meet their loan obligations, or that the projects they sought to be financed did not exist. Padao was also
accused of having over-appraised the collateral of a number of loan applicants.
On January 10, 1997, after due investigation, PNB found Padao guilty of gross and habitual neglect of duty and ordered
him dismissed from the bank. Padao appealed to the banks BOD. (Velasco later on was reinstated; however, Padaos
appeal remained pending for a long time). In 1999, after almost 3 years of inaction on the part of the Board, Padao
instituted a complaint ]against PNB and its then AVP, Matienzo, with the NLRC.
PNB argues that the position of a credit investigator is one reposed with trust and confidence , such that its holder may
be validly dismissed based on loss of trust and confidence On the other hand, Padao counters that local bank policies
implemented by the highest-ranking branch officials such as the assistant vice-president/branch manager, assistant
manager/cashier, chief of the loans division and legal counsel, are presumed to be sanctioned and approved by the bank, and a
subordinate employee should not be faulted for his reliance thereon. He argues that a person who acts in obedience to an
order issued by a superior for some lawful purpose cannot be held liable.
Padao also claims that PNB cruelly betrayed him by charging and dismissing him after using him as a prosecution
witness to secure the conviction of the senior bank officials, that he was never part of the conspiracy, and that he did not
derive any benefit from the scheme.
Issue: Whether Padaos dismissal was valid.
Held: YES. In this case, Padao was dismissed by PNB for gross and habitual neglect of duties under Article 282 (b) of the
Labor Code.
GROSS NEGLIGENCE connotes want of care in the performance of ones duties, while HABITUAL NEGLECT implies
repeated failure to perform ones duties for a period of time, depending on the circumstances. Gross negligence has been
defined as the want or absence of or failure to exercise slight care or diligence, or the entire absence of care. It
evinces a thoughtless disregard of consequences without exerting any effort to avoid them.
In the case at bench, Padao was accused of having presented a fraudulently positive evaluation of the business, credit
standing/rating and financial capability of Reynaldo and Luzvilla Baluma and 11 other loan applicants. Some businesses were
eventually found not to exist at all, while in other transactions, the financial status of the borrowers simply could not support
206 Roco 3B
the grant of loans in the approved amounts. Moreover, Padao over-appraised the collateral of spouses Gardito and Alma
Ajero, and that of spouses Ihaba and Rolly Pango.
(1) Padao is guilty of gross and habitual neglence, considering that, bank employees and banks in general are required
to perform more than just ordinary diligence.
The role that a credit investigator plays in the conduct of a banks business cannot be overestimated. The amount of loans to
be extended by a bank depends upon the report of the credit investigator on the collateral being offered. If a loan is
not fairly secured, the bank is at the mercy of the borrower who may just opt to have the collateral foreclosed. If the scheme is
repeated a hundredfold, it may lead to the collapse of the bank. In the case of Sawadjaan v. CA the Court stressed the crucial
role that a credit investigator or an appraiser plays.
In fact, banks are mandated to exercise more care and prudence in dealing with registered lands :
Padaos repeated failure to discharge his duties as a credit investigator of the bank amounted to gross and habitual
neglect of duties under Article 282 (b) of the Labor Code. He not only failed to perform what he was employed to do, but
also did so repetitively and habitually, causing millions of pesos in damage to PNB. Thus, PNB acted within the
bounds of the law by meting out the penalty of dismissal, which it deemed appropriate given the circumstances.
(2) The DISMISSAL OF PADAO IS VALID even if he merely followed his superiors orders, considereing that the
acts he did were actually fraudulent and/or illegal.
The CA was correct in stating that when the violation of company policy or breach of company rules and regulations is
tolerated by management, it cannot serve as a basis for termination. Such ruling, however, does not apply here. The
principle only applies when the breach or violation is one which neither amounts to nor involves fraud or illegal
activities. In such a case, one cannot evade liability or culpability based on obedience to the corporate chain of command.
Padao cited Llosa-Tan v. Silahis International Hotel, where the violation of corporate policy was held not per se fraudulent or
illegal. Moreover, the said violation was done in compliance with the apparent lawful orders of the concerned employees
superiors. Management-sanctioned deviations in the said case did not amount to fraud or illegal activities. If anything, it merely
represented flawed policy implementation.
In sharp contrast, Padao, in affixing his signature on the fraudulent reports, attested to the falsehoods contained therein.
Moreover, by doing so, he repeatedly failed to perform his duties as a credit investigator.
(3) EVEN IF THE EXEMPTING CIRCUMSTANCE UNDER THE RPC IS APPLIED BY ANALOGY, Padao still cannot
escape liability.
Further, even Article 11(6) of the Revised Penal Code requires that any person, who acts in obedience to an order issued by a
superior does so for some lawful purpose in order for such person not to incur criminal liability. The succeeding article exempts
from criminal liability any person who acts under the compulsion of an irresistible force
Assuming solely for the sake of argument that these principles apply by analogy, even an extremely liberal interpretation of
these justifying or exempting circumstances will not allow Padao to escape liability. Also, had Padao wanted immunity in
exchange for his testimony as a prosecution witness, he should have demanded that there be a written agreement. Without
it, his claim is self-serving and unreliable.
That there is no proof that Padao derived any benefit from the scheme is immaterial. What is crucial is that his gross and
habitual negligence caused great damage to his employer. Padao was aware that there was something irregular about the
practices being implemented by his superiors, but he went along with, became part of, and participated in the scheme.
It does not speak well for a person to apparently blindly follow his superiors, particularly when, with the exercise of
ordinary diligence, one would be able to determine that what he or she was being ordered to do was highly irregular,
if not illegal, and would, and did, work to the great disadvantage of his or her employer.
(4) Padao also claims that he should have treated the same way as the other employees who were charged with
the same offenses (but were eventually reinstated).
207 Roco 3B
However, the SC asserts that her case was different. Finally, Padao claims that he should be accorded the same treatment as
his co-employees. However:
The case of Padao was different, and his culpability, much more than his aforementioned co-employees. In
the case of Palomares and Dagpin, they were involved in only one case of over-appraisal of collateral. But in
the case of Padao, his over-appraisals involved three (3) loan accounts and amounting to
9,537,759.00, not to mention that he also submitted falsified Credit Investigation Reports for the
loan accounts of seven (7) other borrowers of PNB
The number of over-appraisals (3) and falsified credit investigation reports (7) or countersigned by
the complainant indicates habituality, or the propensity to do the same. The best that can be said of his
acts is the lack of moral strength to resist the repeated commission of illegal or prohibited acts in loan
transactions. He thus cannot interpose undue pressure or coercion exerted upon [him] by his superiors, to
absolve himself of liability for his signing or countersigning the aforementioned falsified reports. It may have
been allowable or justifiable for him to give in to one anomalous loan transaction report, but
definitely not for 10 loan accounts. It is axiomatic that obedience to ones superiors extends only to
lawful orders, not to unlawful orders calling for unauthorized, prohibited or immoral acts to be done.
Wilma Velasco, their division chief whose case was also dismissed, was on a different footing than Padao. It appeared
that she was merely a victim of the misrepresentations of the appraisal reports of Pado upon which she relied on.
(5) Padao is NOT ENTITLED TO FINANCIAL ASSISTANCE (separation pay) since the dismissal was based on a just
cause.
However, Padao is not entitled to financial assistance. The GENERAL RULE is that separation pay shall be allowed as a
measure of social justice only in those instances where the employee is validly dismissed for causes other than
serious misconduct, willful disobedience, gross and habitual neglect of duty, fraud or willful breach of trust,
commission of a crime against the employer or his family, or those reflecting on his moral character . These 5
grounds are just causes for dismissal as provided in Article 282 of the Labor Code.
In Central Philippine Bandag Retreaders, Inc. v. Diasnes, we discussed the parameters of awarding separation pay to dismissed
employees as a measure of financial assistance:
Adjudicatory officials must be judicious and circumspect in awarding separation pay or financial assistance as
the constitutional policy to provide full protection to labor is not meant to be an instrument to oppress the
employers. The commitment of the Court to the cause of labor should not embarrass us from sustaining the
employers when they are right, as here. In fine, we should be more cautions in awarding financial
assistance to the undeserving and those who are unworthy of the liberality of the law.
160.PAL vs NLRC (2010)

Facts: Quijano rose from the ranks starting as accounting clerk in December 1967 until she became Manager of the
Agents Services Accounting Division (ASAD). The investigating committee chaired by Leslie W. Espino formally charged
Quijano as Manager ASAD in connection with the processing and payment of commission claims to Goldair Pty. Ltd.
wherein PAL overpaid commissions to the latter amounting to several million Australian dollars.
Quijano was charged as ManagerASAD with the following:
Failure on the job and gross negligence resulting in loss of trust and confidence in that you failed to:
a. Exercise the necessary monitoring, control and supervision over your Senior Accounts Analyst to ensure that the latter was
performing the basic duties and responsibilities of her job in checking and verifying the correctness and validity of the
commission claims from Goldair.
208 Roco 3B
b. Adopt and perform the necessary checks and verification procedures as demanded by your position in order to ensure that
the commission claims of Goldair which you were approving for payment were correct and valid claims thus resulting in
consistent substantial overpayments to Goldair over a period of more than three years.
c. Require or otherwise cause a final reconciliation of the remaining balance due as commission claims to Goldair for a
particular month such that a claim for a particular month was never liquidated in a final amount and thus contributing to
consistent overpayments to Goldair.
Espino Committee placed Quijano under preventive suspension. Quijano submitted her answer which stated the ff:
My staff processes production reports submitted by both passenger and cargo agents. In 1984, they were only seven (7) people
and yet they process commission claims of an average of PHP four billion annually. My colleagues who are responsible for
processing and recording gross passenger and cargo sales have around 51 people. Just the ratio of my staff to accounting
sales staff, which is 1:7, would indicate the heavy load our unit experience. I also seek your appreciation of the work
environment we are in and the intermittent conflicts we experience due to the pressure of prompt settlement of claims to
agents and yet having the satisfaction that the processing procedures are adequate. When my staff informed me of their
findings of double claims on the production reports, I followed this up with a representative of Goldair. Due to the
confidential nature of its functions (ASAD), the accounting procedures were not written. The procedures being performed by
the staff were mainly practices handed down from their predecessors. During all these 41/2 years I have been with ASAD,
I did not receive any feedback that there were weaknesses or lapses in accounting controls and procedures. My
division underwent scrutiny of three (3) prestigious consulting firms and of our own internal audit. I relied heavily on the
absence of any unfavorable findings on accounting procedures and controls from them since their studies were quite extensive
and lengthy.
Another Administrative charge involving the same Goldair anomaly was filed, this time including Committee Chairman Leslie
W. Espino and Committee Member Romeo R. Ines for gross incompetence and inefficiency, negligence, imprudence,
mismanagement, dereliction of duty, failure to observe and/or implement administrative and executive policies,
and related acts or omissions.
Meantime, PAL filed a civil case in Australia against Goldair seeking to recover AUD 11 million. Thereafter, a settlement was
reached whereby Goldair was to pay PAL a total of around AUD 7 million
The Ocampo Committee having submitted its findings to the PAL Board of Directors considered respondents Leslie
W. Espino, Ramon C. Lozon, Romeo R. Ines, Robin C. Dui, Josefina Sioson, and Aida M. Quijano, resigned from the
service effective immediately, for loss of confidence and for acts inimical to the interest of the company .
The Board found as follows:
The Goldair fraud has caused a total loss to PAL as of August 1990 in the amount of AUD 14.6 million. PAL lost the above
huge sum of money to Goldair as a result of false, padded, erroneous or irregular claims for commissions submitted by
Goldair and unwittingly paid by PAL. The responsibility for the Goldair fraud has been attributed mainly to the failure of
ASAD to properly process and validate Goldairs commission claims prior to payment.
Quijano was the Manager ASAD and responsible for the final scrutiny of agents Production Reports and final
recommendation for payment of travel agents commissions. She failed to uncover or detect and report or grossly disregarded
the fraud although the commissions visa vis production were scandalously high. Ms. Quijano claims that she relied heavily on
Ms. Curammengs judgment competence to perform her work, particularly the completeness of the documents check. Her
basic role and duty as a manager was to make sure that the analysts in her division were performing the tasks assigned to them.
But Ms. Quijano did not see to it that the completeness check was actually being performed by Ms. Curammeng. This lapse in
control, contributed materially to the double, multiple and fictitious reporting of tickets, and double claims for commissions
perpetrated by Goldair.
Ms. Quijano was certainly not expected to personally do and perform the completeness check herself. But as manager, it was
clearly incumbent upon her to see to it that this completeness check was being done by her subordinates competently and
209 Roco 3B
efficiently. Yet, Ms. Quijano even failed to adopt ways and means of keeping herself sufficiently informed of the activities of
her staff members so as to prevent or at least discover at an early stage the fraud being perpetrated on a massive scale by
Goldair against her company. Her incompetence at her job is patent.
Quijano filed a case against PAL for illegal suspension and illegal dismissal. NLRC issued its ruling directing the
Philippine Airlines to pay Aida M. Quijano her separation pay.
Issue: Whether Quiajano entitled to separation pay despite the fact that termination was due to a just cause.
Held: YES. Parties do not dispute the validity of private respondents dismissal from employment for loss of confidence and
acts inimical to the interest of the employer. NLRC was emphatic in declaring that it was not prepared to rule as illegal the
preventive suspension and eventual dismissal from the service of [private respondent and rightfully so because the last position
that private respondent held, ManagerASAD undeniably qualifies as a position of trust and confidence.
Loss of confidence as a just cause for termination of employment is premised from the fact that an employee
concerned holds a position of trust and confidence. This situation holds where a person is entrusted with confidence
on delicate matters, such as the custody, handling, or care and protection of the employers property. But, in order to
constitute a just cause for dismissal, the act complained of must be workrelated such as would show the employee
concerned to be unfit to continue working for the employer .
The resolution of the PAL Board of Directors, clearly laid out the reasons why it considered private respondent along with her
other coemployees in PAL resigned from the service effective immediately for loss of confidence and for acts inimical to the
interest of the company. The Resolution underscored her acts of mismanagement and gross incompetence which
made her fail to detect the irregularities in the Goldair account that resulted in huge financial losses for petitioner.
Said findings are not backed by proof beyond reasonable doubt but are, nevertheless, given credence since they are supported
by substantial evidence.
Employers are allowed a wider latitude of discretion in terminating the employment of managerial personnel or those
who, while not of similar rank, perform functions which by their nature require the employers full trust and confidence. This
must be distinguished from the case of ordinary rank and file employees, whose termination on the basis of these same
grounds requires a higher proof of involvement in the events in question; mere uncorroborated assertions and accusations by
the employer will not suffice.
The AWARD OF SEPARATION PAY TO PRIVATE RESPONDENT DESPITE HAVING BEEN LAWFULLY TERMINATED FOR A
JUST CAUSE
Article 279 implies that a legally dismissed employee is not entitled to separation pay
However, in exceptional cases, this Court has granted separation pay to a legally dismissed employee as an act of
social justice or based on equity. In both instances, it is required that the dismissal (1) was not for serious
misconduct; and (2) does not reflect on the moral character of the employee or would involve moral turpitude.
This equitable and humanitarian principle was first discussed in (PLDT) v. NLRC:
It is not correct to say that there is no express justification for the grant of separation pay to lawfully dismissed
employees other than the abstract consideration of equity. Our Constitution is replete with positive commands for
the promotion of social justice, and particularly the protection of the rights of the workers.
When it comes to such valid but not iniquitous causes as failure to comply with work standards, the grant of separation
pay to the dismissed employee may be both just and compassionate, particularly if he has worked for some time with
the company. A subordinate who has irreconcilable policy or personal differences with his employer may be validly
dismissed for demonstrated loss of confidence, which is an allowable ground. A working mother who has to be
frequently absent because she has also to take care of her child may also be removed because of her poor attendance,
this being another authorized ground. It is not the employees fault if he does not have the necessary aptitude for his
work but on the other hand the company cannot be required to maintain him just the same. Under these and similar
210 Roco 3B
circumstances, however, the award to the employee of separation pay would be sustainable under the social justice
policy even if the separation is for cause.
But where the cause of the separation is more serious than mere inefficiency , the generosity of the law must be
more discerning. It is compassionate to give separation pay to a salesman if he is dismissed for his inability to fill his
quota but surely he does not deserve such generosity if his offense is misappropriation of the receipts of his sales. This
is no longer mere incompetence but clear dishonesty.
Separation pay shall be allowed as a measure of social justice only in those instances where the employee is
validly dismissed for causes other than serious misconduct or those reflecting on his moral character.
The grant of separation pay as a matter of equity to a validly dismissed employee is not contingent on whether the
ground for dismissal is expressly under Article 282(a) but whether the ground relied upon is akin to serious
misconduct or involves willful or wrongful intent on the part of the employee. It, thus, becomes pertinent to examine
the ground relied upon for the dismissal of private respondent and to determine if the special circumstances described in
PLDT are present in the case at bar.
Serious misconduct as a valid cause for the dismissal of an employee is defined simply as improper or wrong conduct. It is a
transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and
implies wrongful intent and not mere error of judgment. To be serious, the misconduct must be of such grave and
aggravated character and not merely trivial or unimportant. However serious such misconduct, it must, nevertheless, be in
connection with the employees work to constitute just cause for his separation. The act complained of must be related to the performance
of the employees duties such as would show him to be unfit to continue working for the employer.
MORAL TURPITUDE has been defined as everything which is done contrary to justice, modesty, or good morals; an
act of baseness, vileness or depravity in the private and social duties which a man owes his fellowmen, or to society
in general, contrary to justice, honesty, modesty, or good morals.
In the case at bar, the transgressions imputed to private respondent have never been firmly established as deliberate and willful
acts clearly directed at making petitioner lose millions of pesos. At the very most, they can only be characterized as
unintentional, albeit major, lapses in professional judgment. Likewise, the same cannot be described as morally reprehensible
actions. Thus, private respondent may be granted separation pay on the ground of equity.
The following equitable considerations were relied upon by the NLRC to arrive at its assailed ruling
a) The Goldair fraud was found to have started in 1981. Private respondent became the ManagerASAD only on September
1, 1984. The former ManagerASAD from 1981 to August 1984 was Josefina Sioson.
b) ASAD is under the direct supervision and control of the Vice PresidentComptroller and within the scope of the audit
program of the Vice PresidentInternal Audit and Control. The VPComptroller for the period 1981 to 1983 and the VPInternal
Audit for the period 1984 to 1987 was Romeo Ines.
c) The accounting procedures and controls inherited by private respondent when she took over ASAD were subjected
to the scrutiny of prestigious accounting firms like Cressop, McCormick & Paget in 1985 , the Sycip, Gorres, Velayo &
Co., Inc. in 1986, including a special team from the Commission on Audit in 1987, all of which made no adverse findings
concerning ASAD.
d) No less than the VPInternal Audit made a regular audit in Australia in November 1986 and in the early part of 1987, by
borrowing all production reports covering April to September 1986, but found no irregularities nor made any adverse
feedback against ASAD.
e) Private respondent was the first to discover the overpayment of commission claims to Goldair in 1984 in rate differences in
net/net settlement which, after her intervention, did not recur. She was also the one who first discovered the fraud in double
and fictitious commission claims and promptly took action
211 Roco 3B
f) Even after the Goldair anomaly was discovered, private respondent could have availed of PALs Special Retirement and
Separation Program, but she stayed put and had gone twice to Australia, while under preventive suspension, to attend court
proceedings as a witness for petitioner enabling the said company to recover and minimize its economic loss.
g) Private respondent has no derogatory record during the entire period of her employment with petitioner
h) A mitigating factor in [private respondents] favor is that UNSEEN HANDS designed or allowed this new procedures
to be put in place. Ines, who became the VP Internal Audit should have known the prescribed procedures (or at the very
least the actual practice during the period 1981 to 1983 when he was the VP Comptroller) and yet, did not alert her.
Unknowingly, [private respondent] allowed the bypass and the automatic payment of 80% upon presentation of production
reports because Sioson assured her that was the procedure previously followed. Trusting, she became a participant in this
mess.
Separation pay should not be awarded in accordance with PALs Special Retirement & Separation Program
Private respondent was not separated from petitioners employ due to mandatory or optional retirement but, rather, by
termination of employment for a just cause. Any retirement pay provided by PALs Special Retirement & Separation
Program does not operate nor can be made to operate for the benefit of private respondent.
Her assertion that, at the time of her lawful dismissal, she was already qualified for retirement does not aid her case because
the fact remains that private respondent was already terminated for cause thereby rendering nugatory any entitlement to
mandatory or optional retirement pay that she might have previously possessed.
Attorneys fees are not proper in this case because the same can only be awarded when the employee is illegally dismissed in
bad faith and is compelled to litigate
As to the matter of the proper amount of separation pay, in Yrasuegui v. PAL., the court granted separation pay
equivalent to (1/2) months pay for every year of service . It should include regular allowances which he might have been
receiving. We are not blind to the fact that he was not dismissed for any serious misconduct or to any act which would reflect
on his moral character. We also recognize that his employment with PAL lasted for more or less a decade.
Private respondents circumstances are more or less identical to the abovecited case. Her dismissal was neither for serious
misconduct nor for an offense involving moral turpitude. Her employment with petitioner spanned more than two decades
unblemished with any derogatory record.
161. Lopez vs Alturas Group (2011)

Facts: Quirico Lopez was hired by Alturas Group of Companies as truck driver. Ten years later he was dismissed after he
was allegedly caught by respondents security guard in the act of attempting to smuggle out of the company
premises 60 kilos of scrap iron worth P840 aboard the companys aluminum van that was then assigned to him.
When questioned, petitioner allegedly admitted to the security guard that he was taking out the scrap iron consisting of lift
springs out of which he would make axes.
Petitioner, in compliance with the Show Cause Notice issued by respondent companys Human Resource Department
Manager, denied the allegations by a handwritten explanation written in the Visayan dialect.
Finding petitioners explanation unsatisfactory, respondent company terminated his employment by Notice of
Termination on the grounds of loss of trust and confidence , and of violation of company rules and regulations. In issuing
the Notice, respondent company also took into account the result of an investigation showing that petitioner had been
smuggling out its cartons which he had sold, in conspiracy with one Maritess Alaba, for his own benefit to thus prompt it to
file a criminal case for Qualified Theft against him before the RTC of Bohol. It had in fact earlier filed another criminal case
for Qualified Theft against petitioner arising from the theft of the scrap iron.
Petitioner filed a complaint against respondent company for illegal dismissal and underpayment of wages.
212 Roco 3B
LA: Valid dismissal.

NLRC: Illegal dismissal (insufficient evidence as to substantive due process and should have been afforded counsel).
CA: Illegal dismissal (Just cause was found but no opportunity to defend in proper hearing).
Issue: Whether dismissa was valid.
Held: YES. Dismissals have two facets: the legality of the act of dismissal, which constitutes substantive due process, and the
legality of the manner of dismissal which constitutes procedural due process.
SUBSTANTIVE DUE PROCESS

As to substantive due process, the Court finds that respondent companys loss of trust and confidence arising from
petitioners smuggling out of the scrap iron, compounded by his past acts of unauthorized selling cartons belonging
to respondent company, constituted just cause for terminating his services .
Loss of trust and confidence as a ground for dismissal of employees covers employees occupying a position of trust who are
proven to have breached the trust and confidence reposed on them.
Cruz v. Court of Appeals explains the basis and QUANTUM OF EVIDENCE OF LOSS OF TRUST AND CONFIDENCE, viz:
In addition, the language of Article 282(c) of the Labor Code states that the loss of trust and confidence must
be based on willful breach of the trust reposed in the employee by his employer. Such breach is willful if
it is done intentionally, knowingly, and purposely, without justifiable excuse, as distinguished from an act done
carelessly, thoughtlessly, heedlessly or inadvertently. Moreover, it must be based on substantial evidence
and not on the employers whims or caprices or suspicions otherwise, the employee would eternally
remain at the mercy of the employer. Loss of confidence must not be indiscriminately used as a shield by
the employer against a claim that the dismissal of an employee was arbitrary . And, in order to constitute
a just cause for dismissal, the act complained of must be work-related and shows that the employee
concerned is unfit to continue working for the employer. In addition, loss of confidence as a just cause for
termination of employment is premised on the fact that the employee concerned holds a position of
responsibility, trust and confidence or that the employee concerned is entrusted with confidence with respect to
delicate matters, such as the handling or care and protection of the property and assets of the employer. The
betrayal of this trust is the essence of the offense for which an employee is penalized.
Petitioner, a driver assigned with a specific vehicle, was entrusted with the transportation of respondent companys goods and
property, and consequently with its handling and protection, hence, even if he did not occupy a managerial position, he can be
said to be holding a position of responsibility. As to his act principal ground for his dismissal his attempt to smuggle out
the scrap iron belonging to respondent company, the same is undoubtedly work-related.
Respondent companys charge against petitioner was amply proven by substantial evidence consisting of the affidavits of
various employees of respondent. Contrary to the NLRCs observation, the security guard who apprehended petitioner,
Gerardo Luega, actually executed a statement relative to the smuggling out of scrap iron, which was attached to, and served as
basis for the filing of, the corresponding complaint for Qualified Theft. Petitioners claim that he was framed up after he
allegedly lost his pay slip to draw respondent company to suspect that he might file a labor complaint for underpayment does
not inspire credence.
Procedural due process: Yes
Procedural due process has been defined as giving an opportunity to be heard before judgment is rendered. In termination
cases, Perez v. PTTC, the correct proceedings to be followed therein in order to comply with the due process requirement are:
After receiving the FIRST NOTICE apprising him of the charges against him, the employee may submit a
written explanation (which may be in the form of a letter, memorandum, affidavit or position paper) and
offer evidence in support thereof, like relevant company records (such as his 201 file and daily time records)
213 Roco 3B
and the sworn statements of his witnesses. For this purpose, he may prepare his explanation personally or with
the assistance of a representative or counsel. He may also ask the employer to provide him copy of records
material to his defense. His written explanation may also include a request that a formal hearing or conference
be held. In such a case, the conduct of a formal hearing or conference becomes mandatory, just as it is where
there exist substantial evidentiary disputes or where company rules or practice requires an actual hearing as part
of employment pretermination procedure.
Petitioner was given the opportunity to explain his side when he was informed of the charge against him and required to
submit his written explanation with which he complied.
That there might have been no hearing is of no moment, for as Autobus Workers Union v. NLRC holds: This Court has
held that there is no violation of due process even if no hearing was conducted , where the party was given a chance to
explain his side of the controversy. What is frowned upon is the denial of the opportunity to be heard.
It was error for the NLRC to opine that petitioner should have been afforded counsel or advised of the right to counsel. The
right to counsel and the assistance of one in investigations involving termination cases is neither indispensable nor mandatory,
except when the employee himself requests for one or that he manifests that he wants a formal hearing on the charges against
him.
In petitioners case, there is no showing that he requested for a formal hearing to be conducted or that he be assisted by
counsel. Since he was furnished a second notice informing him of his dismissal and the grounds therefor, the twin-notice
requirement had been complied with to call for a deletion of the appellate courts award of nominal damages to petitioner.
As for the subsequent dismissal of the criminal cases filed against petitioner, criminal and labor proceedings are distinct
and separate from each other. Each requires a different quantum of proof, arising though they are from the same set of
facts or circumstances.
An employees acquittal in a criminal case does not automatically preclude a determination that he has been guilty of acts
inimical to the employers interest resulting in loss of trust and confidence. Corollarily, the ground for the dismissal of an
employee does not require proof beyond reasonable doubt; as noted earlier, the quantum of proof required is merely
substantial evidence.
More importantly, the trial court acquitted petitioner not because he did not commit the offense, but merely because of the
failure of the prosecution to prove his guilt beyond reasonable doubt. In other words, while the evidence presented against
petitioner did not satisfy the quantum of proof required for conviction in a criminal case, it substantially proved his culpability
which warranted his dismissal from employment.
162.Samahan vs Magsalin (2011)

Facts: Petitioner Samahan is a duly-registered union and the bargaining representative of Hyatt Regencys rank and file
employees. David Pacey, Hyatts General Manager, issued a Memorandum informing all employees that security has been
instructed to conduct thorough bag inspection and body frisking at every entrance and exit; employees were enjoined to
comply therewith, and copies were furnished to them.
Angelito Caragdag, a waiter at the hotels Caf Al Fresco restaurant and a Union Director, refused to be frisked on Feb. 3,
2001. It was reported to the HR Dept, and a Memorandum was issued to him, requiring him to explain within 48 hours why
no action should be taken against him. The next day, Feb. 6, he refused to be frisked again. Another Memorandum was
issued.
On Feb. 14, a reprimand was issued for the first offense, and a 3-day suspension for the second. Both were in accordance
with its Code of Discipline. On Feb. 22, while Mike Moral, the Cafs manager and Caragdags superior was about to counsel 2
staff members, Caragdag burst into the room and yelled at the two employees. In a disturbing voice he said, Ang titigas
talaga ng ulo nyo. Sinabi ko na sa inyo na huwag kayong makikipagusap sa management habang ongoing pa ang kaso!
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On Feb. 23, another Memorandum was issued to him regarding the incident. He explained that he was informed that his presence
was requested, and that they should be accompanied by a union officer to any inquisition. However, he alleges that Moral blocked
him. Moral found the explanation unsatisfactory, and held Caragdag liable for Offenses Subject to Disciplinary Action; he was
suspended for 7 days.
On March 2, he left his work assignment at 9:35 am, during official work hours, without permission; his subsequent explanation
was likewise found unsatisfactory, and was suspended for 3 days.
Because of the multiple infractions, he was required to explain why the hotels policy of imposing regarding the incurring
of three suspensions in a year should not be enforced on him. He did not appear during the hearing. He was then sent a
notice of dismissal.
The Arbitrator affirmed it, but ordered P100,000 as financial assistance be given to him. The CA dismissed Caragdags appeal for
being improper, and having been filed out of time, and deleted the award of financial assistance.
Issue: Whether the award of financial assistance was proper.
Held: NO. The grant of separation pay or some other financial assistance to an employee dismissed for just causes is
based on EQUITY. In PLDT v. NLRC, we ruled that severance compensation, or whatever name it is called, on the ground
of social justice shall be allowed only when the cause of the dismissal is other than serious misconduct or for causes
which reflect adversely on the employees moral character.
Here, Caragdags dismissal was due to several instances of willful disobedience to the reasonable rules and regulations
prescribed by his employer. The Voluntary Arbitrator pointed out that according to the hotels Code of Discipline, an
employee who commits 3 different acts of misconduct within a twelve (12)-month period commits serious
misconduct.
He stressed that Caragdags infractions were not even spread in a period of twelve (12) months, but rather in a period of
a little over a month. Records show the various violations of the hotels rules and regulations were committed by Caragdag.
He was suspended for violating the hotel policy on bag inspection and body frisking. He was likewise suspended for
threatening and intimidating a superior while the latter was counseling his staff. He was again suspended for leaving his work
assignment without permission. Evidently, Caragdags acts constitute serious misconduct.
In Piedad v. Lanao del Norte Electric Cooperative, Inc., we ruled that a series of irregularities when put together may constitute
serious misconduct, which under Article 282 of the Labor Code, as amended, is a just cause for dismissal.
Caragdags dismissal being due to serious misconduct, it follows that he should not be entitled to financial assistance. To
rule otherwise would be to reward him for the grave misconduct he committed. We must emphasize that social justice
is extended only to those who deserve its compassion.
163.Lores Realty vs Pacia (2011)

Facts: Virginia E. Pacia was hired by LREI. At the time of her dismissal, she was the assistant manager and officerin-
charge of LREIs Accounting Department. LREIs acting general manager, petitioner Sumulong, through Ms. Julie Ontal,
directed Pacia to prepare Check Voucher No. 16477 worth P150,000.00 as partial payment for LREIs outstanding obligation
to the BPI. Pacia did not immediately comply with the instruction. After 2 repeated directives, Pacia eventually prepared
Check No. 0000737526 in the amount of P150,000.00. Later, Sumulong again directed Pacia to prepare Check Voucher No.
16478 in the amount of P175,000.00 to settle the balance of LREIs outstanding indebtedness with BPIFB. Pacia once again
was slow in obeying the order. Due to the insistence of Sumulong, however, Pacia eventually prepared Check No.
0000737527 in the amount of P175,000.00. LREIs acting general manager, petitioner Sumulong, through Ms. Julie Ontal,
directed Pacia to prepare Check Voucher
Sumulong issued a memorandum ordering Pacia to explain in writing why she refused to follow a clear and lawful
directive. Pacia reasoned out that the funds in LREIs account were not sufficient to cover the amounts to be indicated
in the checks and that she only wanted to protect LREI from liability under the Bouncing Checks Law
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Pacia received a notice of termination stating that she was dismissed because of her willful disobedience and their loss of
trust and confidence in her.
Pacia filed a complaint for Unfair Labor Practice due to Harassment, Constructive Dismissal, Moral and Exemplary
Damages against LREI and Sumulong. The amended complaint included the charges of illegal dismissal and nonpayment of
salaries.
Labor Arbiter ruled that the dismissal of Pacia was for a just and valid cause. The NLRC reversed the LAs Decision and
found LREI and Sumulong guilty of illegal dismissal. CA held that LREI and Sumulong failed to establish with substantial
evidence that the dismissal of Pacia was for a just cause. It found that Pacias initial reluctance to obey the orders of her
superiors was for a good reason to shield the company from liability in the event that the checks would be dishonored for
insufficiency of funds.
Issue: Whether Pacia was validly dismissed.
Held: YES. LREI and Sumulong argue that Pacias refusal to obey the directives of Sumulong was a manifest intent not to
perform the function she was engaged to discharge. And that her defense was a mere afterthought.
Pacia argues that the ground cannot be characterized as wrongful or perverse attitude. In her view, the directive to prepare
the checks at the time it was not sufficiently funded was not a lawful order contemplated in Article 282 of the Labor Code. It
was an unlawful directive because it asked for the preparation of a check despite the fact that the account had no sufficient
funds to cover the same.
The offense of WILLFUL DISOBEDIENCE requires the concurrence of 2 requisites:

(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.
The Court finds nothing unlawful in the directive of Sumulong to prepare checks in payment of LREIs obligations.
The availability or unavailability of sufficient funds to cover the check is immaterial in the physical preparation of
the checks. Pacias initial reluctance to prepare the checks, however, which was seemingly an act of disrespect and defiance,
was for honest and well-intentioned reasons. Protecting LREI and Sumulong from liability under the Bouncing Checks Law
was foremost in her mind. It was not wrongful or willful. Neither can it be considered an obstinate defiance of company
authority.
Court takes into consideration that Pacia, despite her initial reluctance, eventually did prepare the checks on the same
day she was tasked to do it.
Court also finds it difficult to subscribe to LREI and Sumulongss contention that the reason for Pacias initial reluctance to
prepare the checks was a mere afterthought considering that check no. 0000737527 under one of the check vouchers she
reluctantly prepared, bounced when it was deposited. Pacias apprehension was justified when the check was dishonored.
This clearly affirms her assertion that she was just being cautious and circumspect for the companys sake. Thus, her actuation
should not be construed as improper conduct.
Court is guided by the timehonored principle that if doubt exists between the evidence presented by the employer and
the employee, the scales of justice must be tilted in favor of the latter . The rule in controversies between a laborer and his
master distinctly states that doubts reasonably arising from the evidence, or in the interpretation of agreements and writing,
should be resolved in the formers favor.
164.School of the Holy Spirit vs Taguiam (2008)

Facts: Corazon P. Taguiam was the Class Adviser of Grade 5-Esmeralda of the School of the Holy Spirit of Quezon City.
The class was planning to hold a year-end celebration at the school grounds. Principal authorized the activity and
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allowed the pupils to use the swimming pool. Taguiam distributed the parents/guardians permit forms to the pupils.
Taguiam admitted that Chiara Mae Federicos permit form was unsigned. Nevertheless, she concluded that Chiara
Mae was allowed by her mother to join the activity since her mother personally brought her to the school with her
packed lunch and swimsuit.
Before the activity started, Taguiam warned the pupils who did not know how to swim to avoid the deeper area. While the
pupils were swimming, two of them sneaked out. Taguiam went after them to verify where they were going. Unfortunately,
while respondent was away, Chiara Mae drowned. When Taguiam returned, the maintenance man was already
administering CPR on Chiara Mae. They rushed her to the General Malvar Hospital where she was pronounced dead on
arrival. Petitioners (school and/or Sr. Crispina Tolentino) issued a Notice of Administrative Charge to respondent
for alleged gross negligence and required her to submit her written explanation . They conducted a clarificatory hearing
which respondent attended. Respondent also submitted her Affidavit of Explanation. Petitioners dismissed respondent on
the ground of gross negligence resulting to loss of trust and confidence.
Chiara Maes parents filed a P7 Million damage suit against petitioners and respondent, among others. They also filed against
respondent a criminal complaint for reckless imprudence resulting in homicide. Taguiam in turn filed a complaint against
the school and/or Sr. Crispina Tolentino for illegal dismissal, with a prayer for reinstatement with full backwages and
other money claims, damages and attorneys fees.
Labor Arbiter declared that respondent was validly terminated for gross neglect of duty. NLRC affirmed. CA ruled in
Taguiams favor and held that there was insufficient proof that respondents negligence was both gross and habitual.
Issue:Whether the dismissal on the ground of gross negligence resulting to loss of trust and confidence was valid.
Held: YES. Under Article 282 of the Labor Code, gross and habitual neglect of duties is a valid ground for an employer to
terminate an employee. GROSS NEGLIGENCE implies a want or absence of or a failure to exercise slight care or diligence, or
the entire absence of care. It evinces a thoughtless disregard of consequences without exerting any effort to avoid them.
HABITUAL NEGLECT implies repeated failure to perform ones duties for a period of time, depending upon the
circumstances.
First, it is undisputed that Chiara Maes permit form was unsigned . Yet, respondent allowed her to join the activity
because she assumed that Chiara Maes mother has allowed her to join it by personally bringing her to the school with her
packed lunch and swimsuit. The purpose of a permit form is precisely to ensure that the parents have allowed their
child to join the school activity involved. Taguiam cannot simply ignore this by resorting to assumptions. Taguiam could
have requested the mother to sign the permit form before she left the school or at least called her up to obtain her conformity.
Second, it was respondents responsibility as Class Adviser to supervise her class in all activities sanctioned by the
school. She should have coordinated with the school to ensure that proper safeguards, such as adequate first aid and sufficient
adult personnel, were present during their activity. She should have been mindful of the fact that with the number of pupils
involved, it would be impossible for her by herself alone to keep an eye on each one of them. Since she was the only adult
present, majority of the pupils were left unsupervised when she followed the two pupils who sneaked out. Respondent
should have considered that those who sneaked out could not have left the school premises since there were guards
manning the gates. The guards would not have allowed them to go out in their swimsuits and without any adult
accompanying them. But those who stayed at the pool were put at greater risk, when she left them unattended by an adult.
The court noted that respondents negligence, although gross, was not habitual. In view of the considerable resultant
damage, however, the SC held that the cause is sufficient to dismiss respondent.
In Philippine Airlines, Inc. v. NLRC, we ruled that PAL cannot be legally compelled to continue with the employment of a
person admittedly guilty of gross negligence in the performance of his duties although it was his first offense. In that case, we
noted that a mere delay on PALs flight schedule due to aircraft damage entails problems like hotel accommodations for its
passengers, re- booking, the possibility of law suits, and payment of special landing fees not to mention the soaring costs of
replacing aircraft parts.
217 Roco 3B
In Fuentes v. National Labor Relations Commission, we held that it would be unfair to compel Philippine Banking Corporation to
continue employing its bank teller. In that case, we observed that although the tellers infraction was not habitual, a substantial
amount of money was lost.
Indeed, the sufficiency of the evidence as well as the resultant damage to the employer should be considered in the
dismissal of the employee. In this case, the damage went as far as claiming the life of a child. As a result of gross
negligence in the present case, petitioners lost its trust and confidence in respondent. Loss of trust and confidence to
be a valid ground for dismissal must be based on a willful breach of trust and founded on clearly established facts.
A breach is willful if it is done intentionally , knowingly and purposely, without justifiable excuse, as distinguished from
an act done carelessly, thoughtlessly, heedlessly or inadvertently. It must rest on substantial grounds and not on the
employers arbitrariness, whims, caprices or suspicion; otherwise, the employee would eternally remain at the mercy of the
employer. It should be genuine and not simulated; nor should it appear as a mere afterthought to justify earlier action taken
in bad faith or a subterfuge for causes which are improper, illegal or unjustified. There must, therefore, be an actual breach of
duty committed by the employee which must be established by substantial evidence.
As a teacher who stands in loco parentis to her pupils, respondent should have made sure that the children were
protected from all harm while in her company. She should have known that leaving the pupils in the swimming pool area
all by themselves may result in an accident. A simple reminder not to go to the deepest part of the pool was insufficient to
cast away all the serious dangers that the situation presented to the children, especially when respondent knew that Chiara Mae
cannot swim.
Respondent created an unsafe situation which exposed the lives of all the pupils concerned to real danger. This is a
clear violation not only of the trust and confidence reposed on her by the parents of the pupils but of the school itself.
Based on the criminal complaint filed by Chiara Maes parents, the Assistant City Prosecutor found probable cause to indict
respondent for the crime of reckless imprudence resulting in homicide. By leaving her pupils in the swimming pool,
respondent displayed an inexcusable lack of foresight and precaution. While this finding is not controlling for
purposes of the instant case, this only supports our conclusion that respondent has indeed been grossly negligent.
There being a clear showing that respondent was culpable for gross negligence resulting to loss of trust and confidence, her
dismissal was valid and legal.
165.Batong Bakal vs Associated Bank (1988)

Facts: Petitioner Bienvenido R. Batongbacal, a lawyer who was admitted to the Bar in 1952 , began his banking career in
1961 as manager of the Second Rizal Development Bank. Eventually he ascended the ranks and became Assistant Vice-
President. The appointment however did not have a period.
More than 6 years later or in March, 1982, petitioner learned that the salary and allowances he was receiving were very
much below the standard remuneration of the bank's other assistant vice presidents as in fact they were even less than
those paid for employees holding positions lower than the rank of assistant vice-president.
He wrote the bank's board of directors requesting that he be paid "the accrued salary and allowance arbitrarily
withheld from him. However this was unanswered. Petitioner wrote the newly appointed vice-president for administration
about the glaring inequality in the salaries and allowances of the bank's assistant vice-presidents. However, this too
remained unanswered.
Eventually the bank came out with a resolution which in order to give the new management the necessary flexibility in
streamlining the operations of the bank, it required all officers with corporate rank of Manager and higher to submit
to the President their courtesy resignations. Petitioner Batongbacal did not submit his courtesy resignation. He thereafter
received a letter from the Bank, advising him that they had already accepted his resignation.
Because of this, petitioner on the same day wrote the bank's executive vice-president requesting a reconsideration of the board
of director's decision accepting his resignation. He stated therein that he thought the call for the submission of courtesy
resignations was only for erring "loathsome" officers and not those like him who had served the bank honestly and
218 Roco 3B
sincerely for 16 years; that although he was a stockholder with the smallest investment in the bank, he had called the attention
of higher officers on matters that are of vital importance to the bank's financial stability; and that should there be evidence of
any act of dishonesty on his part, the bank should so inform him so that he could accordingly submit his voluntary resignation.
Petitioner was not paid his usual salary and allowance. Nevertheless, he made repeated requests for the
reconsideration of the bank's decision to terminate his employment but the same were ignored . Hence, he filed a
complaint for illegal dismissal and damages. The LA ruled in favor of petitioner. The NLRC reversed.
Issue: Whether Batongbacal validly resigned.
Held: NO. While it may be said that the private respondent's call for courtesy resignations was prompted by its
determination to survive, we cannot lend legality to the manner by which it pursued its goal. By directing its
employees to submit letters of courtesy resignation, the bank in effect forced upon its employees an act which they
themselves should voluntarily do.
It should be emphasized that resignation per se means voluntary relinquishment of a position or office. Adding the
word "courtesy" did not change the essence of resignation. That courtesy resignations were utilized in government
reorganization did not give private respondent the right to use it as well in its own reorganization and rehabilitation plan.
There is no guarantee that all employers will not use it to rid themselves arbitrarily of employees they do not like, in
the guise of "streamlining" its organization. On the other hand, employees would be unduly exposed to outright termination
of employment which is anathema to the constitutional mandate of security of tenure.
Petitioner's dismissal was effected through a letter "accepting" his resignation. Private respondent rationalizes that this
was done, even if petitioner did not actually submit such letter, so as not to jeopardize his chances of future employment.
Private respondent claims that it terminated petitioner's employment for insubordination in view of his failure to comply with
the order to submit his letter of courtesy resignation. However the court is of the view that this cannot be countenanced
since insubordination may not be imputed to one who refused to follow an unlawful order .
Private respondent also asserts that petitioner's refusal to submit his letter of courtesy resignation was "sufficient reason to
distrust him." Loss of confidence as a ground for dismissal must be supported by satisfactory evidence. Even with
respect to managerial employees who, under Policy Instructions No. 8, may be dismissed for lack of confidence,
loss of trust must be substantiated and clearly proven. The same was not met in the instant case.
The record fails to show any valid reasons for terminating the employment of petitioner. There are no proofs of
malfeasance or misfeasance committed by petitioner which jeopardized private respondent's interest. The latter's allegations
that petitioner was "purged" because he sabotaged the bank and that he "contributed, directly or indirectly" to its downfall are
mere subjective conclusions unsubstantiated by hard facts.
**Discussion on whether petitioner is a rank-and-file employee or managerial employee omitted. That issue was remanded to
the NLRC for hearing.
166.Yrasuegui vs PAL (2008)

Facts: Armando Yrasuegui (Armando) was a former international flight steward of PAL. Stands 58 with a large body frame.
The proper weight for a man of this type is from 147-166 lbs. As mandated by the Cabin & Crew Admin Manual, the ideal
weight for this body type is 166 lbs.
As far back as 1984, PAL advised him to go on an extended vacation leave to address his weight concerns. When he was
allowed to return, his weight problem recurred. Again, he went on leave without pay from 1988-1989. On April 1989,
Armando weighed 209 lbs 43 lbs above the limit). Thus, in line with PALs policy, he was removed from flight duty in order to
trim down from May to July 1989. He was also told that he could avail of the companys physicians should he wish to do so.
219 Roco 3B
After undergoing a weight check, it was revealed that instead of losing weight, he was now 215 lbs. Thus, his off-duty status
was retained. A PAL personnel personally visited him and saw that he was in fact heavier by 2 lbs (217 lbs). So he wrote a
letter expressing his commitment to trim down within 90 days. Despite the lapse of the period, he was still overweight. He was
to remain grounded until he complied with the weight requirement. However, he failed to attend several weight checks.
On Apr 1990, he was formally warned that repeated refusal to report for weight checks would be dealt with accordingly. After
ignoring the directive, he was formally required to explain. On June 30, 1990, he tipped the scale at 212 lbs. From that time,
nothing was heard from him until he requested for leniency in 1992 wherein he weighed 205 on November 1992.
Nov 1992, PAL served a notice of Administrative Charge for violation of the company requirements and given 10 days to
respond. In his reply, while admitting to be overweight, he claimed that since it was condoned by PAL due to the fact that no
action was taken by the company. Moreover, he said PAL discriminated against him because other overweight employees had
been promoted.
In June 1993, Armando was formally told that due to his inability to attain the ideal weight notwithstanding the leniency
accorded to him which spanned almost 5 years, his services now were considered terminated effective immediately.
LA: Weight standards of PAL are reasonable in view of the nature of the job of Armando. However, the weight standards
need not be complied with under pain of dismissal since his weight did not hamper the performance of his duties.
NLRC: Found the weight standards of PAL to be reasonable. However, the LA should have limited himself to the issue of
whether the failure of Armando to attain his ideal weight constituted willful defiance of the weight standards of PAL.
CA: Weight standards of PAL are reasonable and a bona fide occupational qualification. However, it is not willful disobedience
as the NLRC seemed to suggest.
Issues: (1) Whether obesity can be a valid ground for dismissal

(2) Whether the qualification is a bona fide occupational qualification (BFOQ)
(3) Whether Armando was discriminated against
Held: VALID DISMISSAL.

(1) OBESITY AS A GROUND UNDER LABOR CODE.
The weight requirements constitute a continuing qualification of an employee in order to keep the job. An employee
may be dismissed the moment he is unable to comply with his ideal weight as prescribed by the weight standards. The
dismissal of the employee would thus fall under Article 282(e) of the Labor Code .
Armando relies on Nadura by claiming that since obesity is an illness, it is not considered a just cause under the Labor Code.
However, reliance in Nadura is misplaced because it was not deided under the LC but RA 1787. Also, flight safety was not the
concern in that case. Rather, it involved a miner laid off due to illness.
In the case at bar, the evidence on record militates against Armandos claims that obesity is a disease. That he was able
to reduce his weight from 1984 to 1992 clearly shows that it is possible for him to lose weight given the proper attitude,
determination, and self-discipline. He could have easily availed the assistance of the company physician, per the advice of PAL.
He chose to ignore the suggestion. In fact, he repeatedly failed to report when required to undergo weight checks, without
offering a valid explanation. Thus, his fluctuating weight indicates absence of willpower rather than an illness.
Moreover, the use of the Cook Case (AmJur) involving a morbidly obese (more than 100 lbs). However, in this case, Armando
was not morbidly obese as he was just less than 50 lbs overweight. In fine, We hold that the obesity of Armando, when
placed in the context of his work as flight attendant, becomes an analogous cause under Article 282(e) of the Labor Code that
justifies his dismissal from the service. His obesity may not be unintended, but is nonetheless voluntary.
As the CA correctly puts it, [v]oluntariness basically means that the just cause is solely attributable to the employee
without any external force influencing or controlling his actions . This element runs through all just causes under
220 Roco 3B
Article 282, whether they be in the nature of a wrongful action or omission. Gross and habitual neglect, a recognized just
cause, is considered voluntary although it lacks the element of intent found in Article 282(a), (c), and (d).
Bona Fide Occupational Qualification Defense

Employment in particular jobs may not be limited to persons of a particular sex, religion, or national origin unless the
employer can show that sex, religion, or national origin is an actual qualification for performing the job . This is called
the Bona Fide Occupational Qualification.
Armando contends that BFOQ is a statutory defense. It does not exist if there is no statute providing for it. However, the
Constitution (Art. 13, 3), the Labor Code (Art. 3), and Magna Carta for Disabled Persons (32) contains provisions
similar to BFOQ.
In Canada, their SC applied the MEIORIN TEST in determining whether an employment policy is justified. Under this test:
(1) the employer must show that it adopted the standard for a purpose rationally connected to the performance of
the job;
(2) the employer must establish that the standard is reasonably necessary to the accomplishment of that
workrelated purpose; and
(3) the employer must establish that the standard is reasonably necessary in order to accomplish the legitimate
work-related purpose.
In Star Paper v. Simbol it was held that to justify a BFOQ, the employer must prove that:
(1) the employment qualification is reasonably related to the essential operation of the job involved; and
(2) that there is factual basis for believing that all or substantially all persons meeting the qualification would be
unable to properly perform the duties of the job.
In short, the test of reasonableness of the company policy is used because it is parallel to BFOQ. BFOQ is valid provided
it reflects an inherent quality reasonably necessary for satisfactory job performance.
In Duncan v. Glaxo, Court did not hesitate to pass upon the validity of a company policy which prohibits its employees from
marrying employees of a rival company. It was held that the company policy is reasonable considering that its purpose is the
protection of the interests of the company against possible competitor infiltration on its trade secrets and procedures. Verily,
there is no merit to the argument that BFOQ cannot be applied if it has no supporting statute.
The weight standards of PAL are reasonable. It is bound to carry its passengers safely as far as human care and foresight
can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances.
The law leaves no room for mistake or oversight on the part of a common carrier. Thus, it is only logical to hold that the
weight standards of PAL show its effort to comply with the exacting obligations imposed upon it by law by virtue of being a
common carrier.
The business of PAL is air transportation. As such, it has committed itself to safely transport its passengers. In order to achieve
this, it must necessarily rely on its employees, most particularly the cabin flight deck crew who are on board the aircraft. The
weight standards of PAL should be viewed as imposing strict norms of discipline upon its employees.
In other words, the primary objective of PAL in the imposition of the weight standards for cabin crew is flight safety.
It cannot be gainsaid that cabin attendants must maintain agility at all times in order to inspire passenger confidence on their
ability to care for the passengers when something goes wrong. It is not farfetched to say that airline companies, just like all
common carriers, thrive due to public confidence on their safety records. People, especially the riding public, expect no
less than that airline companies transport their passengers to their respective destinations safely and soundly. A
lesser performance is unacceptable.
The task of a cabin crew or flight attendant is not limited to serving meals or attending to the whims and caprices of the
passengers. The most important activity of the cabin crew is to care for the safety of passengers and the evacuation of
the aircraft when an emergency occurs. Passenger safety goes to the core of the job of a cabin attendant. Truly, airlines need cabin
221 Roco 3B
attendants who have the necessary strength to open emergency doors, the agility to attend to passengers in cramped working
conditions, and the stamina to withstand grueling flight schedules.
On board an aircraft, the body weight and size of a cabin attendant are important factors to consider in case of
emergency. Aircrafts have constricted cabin space, and narrow aisles and exit doors. Thus, the arguments of respondent that
[w]hether the airlines flight attendants are overweight or not has no direct relation to its mission of transporting passengers
to their destination; and that the weight standards has nothing to do with airworthiness of respondents airlines, must fail.
That an obese cabin attendant occupies more space than a slim one is an unquestionable fact which courts can judicially
recognize without introduction of evidence. It would also be absurd to require airline companies to reconfigure the aircraft in
order to widen the aisles and exit doors just to accommodate overweight cabin attendants like petitioner. The biggest
problem with an overweight cabin attendant is the possibility of impeding passengers from evacuating the aircraft,
should the occasion call for it. Being overweight necessarily impedes mobility. Indeed, in an emergency situation, seconds are what cabin
attendants are dealing with, not minutes. Three lost seconds can translate into three lost lives. Evacuation might slow down just
because a wide-bodied cabin attendant is blocking the narrow aisles. These possibilities are not remote.
He is presumed to know the weight limit that he must maintain at all times. In fact, never did he question the authority of
PAL when he was repeatedly asked to trim down his weight. Bona fides exigit ut quod convenit fiat. Good faith demands that
what is agreed upon shall be done. Kung ang tao ay tapat kanyang tutuparin ang napagkasunduan.
No Discrimination
Since the burden of evidence lies with the party who asserts an affirmative allegation, Armando has to prove his allegation
with particularity. There is nothing on the records which could support the finding of discriminatory treatment.
Armando cannot establish discrimination by simply naming the supposed cabin attendants who are allegedly similarly situated
with him. Substantial proof must be shown as to how and why they are similarly situated and the differential
treatment petitioner got from PAL despite the similarity of his situation with other employees. Except for pointing out
the names of the supposed overweight cabin attendants, Armando miserably failed to indicate their respective ideal weights;
weights over their ideal weights; the periods they were allowed to fly despite their being overweight; the particular flights
assigned to them; the discriminating treatment they got from PAL; and other relevant data that could have adequately
established a case of discriminatory treatment by PAL.
Entitled to Separation Pay

Separation pay is granted to a legally dismissed employee as an act social justice, or based on equity. In both instances, it is
required that the dismissal (1) was not for serious misconduct; and (2) does not reflect on the moral character of the employee.
Thus, Armando is entitled to months separation pay for every year of service. It should include regular allowances which he
might have ben receiving. End.
167.Philippine Telegraph vs CA (2003)

Facts: The petitioner is a domestic corporation engaged in the business of providing telegraph and communication services
thru its branches all over the country. Sometime in 1997, after conducting a series of studies regarding the profitability of
its retail operations, its existing branches and the number of employees , the petitioner came up with a RELOCATION
AND RESTRUCTURING PROGRAM designed to (a) sustain its (PT&Ts) retail operations; (b) decongest surplus workforce in
some branches, to promote efficiency and productivity; (c) lower expenses incidental to hiring and training new personnel; and
(d) avoid retrenchment of employees occupying redundant positions.
On August 11, 1997, private respondents Cristina Rodiel, Jesus Paracale, Romeo Tee, etc. received separate letters from the
petitioner, giving them the option to choose the branch to which they could be transferred. Thereafter through HRAG
Bulletin No. 97-06-16, the private respondents and other petitioners employees were directed to relocate to their new
PT&T Branches.
The petitioner offered benefits/allowances to those employees who would agree to be transferred under its new
program (Existing relocation allowance, special relocation allowance, flat relocation allowance, and moving
expenses).
Moreover, the employees who would agree to the transfers would be considered promoted
222 Roco 3B
The private respondents rejected the petitioners offer. On October 2, 1997, the petitioner sent letters to the private
respondents requiring them to explain in writing why no disciplinary action should be taken against them for their
refusal to be transferred/relocated. They replied that the transfers imposed by the management would cause enormous
difficulties on the individual complainants (due to distance, will cause separation from their families, etc etc).
Dissatisfied with this explanation, the petitioner considered the private respondents refusal as insubordination and
willful disobedience to a lawful order; hence, the private respondents were dismissed from work. They forthwith filed
their respective complaints against the petitioner before the appropriate sub-regional branches of the NLRC. NLRC held that
there was illegal dismissal.
Issue: Whether they were illegally dismissed.
Held: YES. Even if what PT&T offered was in fact a promotion, they cannot impose it on the employees without their
consent/ acceptance. Thus, their refusal cannot be considered insubordination.
In its position with the LA, the petitioner adverted that when the private respondents were transferred, they were also
promoted. Clearly, the transfer of the complainants is not unreasonable nor does it involve demotion in rank. They
are being moved to branches where the complainants will function with maximum benefit to the company and they were in
fact promoted not demoted from a lower job-grade to a higher job-grade and receive even higher salaries than
before.
Thus, transfer of the complainants would not also result in diminution in pay benefit and privilege since the salaries of
the complainant would be receiving a bigger salary if not the same salary plus additional special relocation package. Although
the increase in the pay is not significant this however would be translated into an increase rather than decrease in their salary
because the complainants who were transferred from the city to the province would greatly benefit because it is of judicial
notice that the cost of living in the province is much lower than in the city. This would mean a higher purchasing power of
the same salary previously being received by the complainants.
Indeed, the increase in the respondents responsibility can be ascertained from the scalar ascent of their job grades. With or
without a corresponding increase in salary, the respective transfer of the private respondents were in fact promotions,
following the ruling enunciated in Homeowners Savings and Loan Association, Inc. v. NLRC:
[P]ROMOTION, as we defined in Millares v, Subido, 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.
Apparently, the indispensable element for there to be a promotion is that there must be an advancement from one
position to another or an upward vertical movement of the employees rank or position. Any increase in salary should
only be considered incidental but never determinative of whether or not a promotion is bestowed upon an
employee. This can be likened to the upgrading of salaries of government employees without conferring upon the, the
concomitant elevation to the higher positions.
The admissions of the petitioner are conclusive on it. An employee cannot be promoted, even if merely as a result of a
transfer, without his consent. A transfer that results in promotion or demotion, advancement or reduction or a
transfer that aims to lure the employee away from his permanent position cannot be done without the employees
consent.
There is no law that compels an employee to accept a promotion for the reason that a promotion is in the nature of a
gift or reward, which a person has a right to refuse. Hence, the exercise by the private respondents of their right
cannot be considered in law as insubordination, or willful disobedience of a lawful order of the employer. As such,
there was no valid cause for the private respondents dismissal.
As the questioned dismissal is not based on any of the just or valid grounds under Article 282 of the Labor Code, the NLRC
correctly ordered the private respondents reinstatement without loss of seniority rights and the payment of backwages from
the time of their dismissal up to their actual reinstatement.
168.Functional Inc vs Granfil (2011)
223 Roco 3B
Facts: Granfil was hired as key operator by petitioner Functional, Inc. FI is engaged in the business of sale and rental of
various business equipments, including photocopying machines. As Key Operator, Granfil was tasked to operate the
photocopying machine rented by the National Bookstore at its SM Megamall Branch.
Granfil attended to a customer by the name of Cosme Cavaldeja who, together with his wife, asked to have their flyers
photocopied. It appears that Bonnel Dechavez, the security guard assigned at said establishment, saw Cavaldeja
handing money to Granfil after the transaction was finished. After investigating the matter, Dechavez submitted the
following incident report to NBS Branch Manager
I checked one customer and asked if he already paid for his xerox[ed] items (sic) and he said yes. Upon asking for a
receipt, he pointed to Sammy the Xerox operator [to] whom he g[a]ve payment, instead of paying to the cashier. Sammy
came and it was only then that he brought the customer to the counter 09 for payment [of] the amount of [the]
xerox[ed] items (sic) is P250.
Granfil filed a complaint for illegal dismissal, unpaid 13th month pay, moral and exemplary damages and attorneys fees.
Granfil alleged, among other matters, that the money which Dechavez saw him receive from Cavaldeja was a P200 tip;
that payment for the materials was, however, already paid per batch by Cavaldejas wife who, by that time, had already left the
premises; and, that rather than listening to his explanation and simply verifying the meter of the photocopy machine as well as
the paper allotted to it, Dechavez submitted his incident report which, in turn, caused Tenorio to tell him, Mr. Granfil,
magpahinga ka muna. Mabuti pa, pumirma ka nalang ng resignation letter para may makuha ka pa.
With said incident report having been telefaxed to FIs head office, he was asked to report thereat in the morning; that
instead of allowing him to explain, however, Ballesteros peremptorily ordered his termination from employment; that
wishing to explain his side, he sought out Dizon who merely ignored and tersely advised him, Magpahinga ka na lang; that
he was refused entry when he tried to report for work; that having been terminated without just cause and observance of due
process, he was constrained to file this complaint; that aside from the reinstatement to which he is clearly entitled as an illegally
dismissed employee, he should be paid full backwages and 13th month pay for the year 2002; and, that in view of the malice
and bad faith which characterized his dismissal, Bautista, Tenorio, Ballesteros and Dizon should be held jointly and severally
liable with FI for the payment of said indemnities.
FI and its corporate officers, in turn, averred that having been apprised of the incident, t he NBS Branch manager
requested for Granfils relief as Key Operator of the photocopying machine and that for the good of all concerned, FI
informed Granfil that he was going to be transferred to a different assignment, without demotion in rank or diminution of his
salaries, benefits and other privileges; that required to report to FIs main office to act as emergency reliever to other Key
Operators while waiting for his new assignment, Granfil misconstrued his transfer as a punishment and refused to heed
said directive; that an employees right to security of tenure does not give him such vested right to his position as would
deprive his employer of its prerogative to change his assignment or transfer him where he will be most useful; and, that aside
from being guilty of insubordination, Granfil clearly abandoned his employment rather than illegally dismissed therefrom.
Issue: Whether Granfil was illegally dismissed.
Held: YES. In illegal dismissal cases, the burden of proof is upon the employer to show that the employees termination
from service is for a just and valid cause. The employers case succeeds or fails on the strength of its evidence and not the
weakness of that adduced by the employee. The quantum of proof is substantial evidence which is understood as such relevant
evidence as a reasonable mind might accept as adequate to support a conclusion, even if other equally reasonable minds might
conceivably opine otherwise.
Failure of the employer to discharge the foregoing onus would mean that the dismissal is not justified. FI insists that Granfil
abandoned his employment after he was transferred from his assignment. An employer cannot expediently escape liability for
illegal dismissal by claiming that the former abandoned his work.
FI adduced no evidence to prove Granfils supposed abandonment beyond submitting copies of NBS request for
said employees transfer and its written acquiescence thereto. CA correctly discounted their probative value insofar as
FIs theory of abandonment is concerned.
224 Roco 3B
Being a matter of intention, abandonment cannot be inferred or presumed from equivocal acts. As a just and valid
ground for dismissal, it requires the deliberate, unjustified refusal of the employee to resume his employment, without any
intention of returning. TWO ELEMENTS MUST CONCUR: (1) failure to report for work or absence without valid or
justifiable reason, and (2) a clear intention to sever the employeremployee relationship, with the second element as the
more determinative factor and being manifested by some overt acts.
The burden of proving abandonment is once again upon the employer who, additionally has the legal duty to observe due
process. Mere absence or failure to report to work is not tantamount to abandonment of work.
Aside from the fact that Bautista, Tenorio, Ballesteros and Dizon did not even execute sworn statements to refute
the overt acts of dismissal imputed against them , the record is wholly bereft of any showing that FI required Granfil to
report to its main office or, for that matter, to explain his supposed unauthorized absences. Absence must be accompanied by
overt acts unerringly pointing to the fact that the employee simply does not want to work anymore.
FIs theory of abandonment was likewise negated by Granfils filing the complaint for illegal dismissal which evinced
his desire to return to work. Granfil clearly manifested that he has no intention of relinquishing his employment. The fact that
Granfil prayed for his reinstatement speaks against any intent to sever the employeremployee relationship with FI
169.Cosmos Bottling Corporation vs Fermin (2012)

Facts: Wilson B. Fermin was a forklift operator at Cosmos Bottling Corporation. He was accused of stealing the cellphone
of his fellow employee, Luis Braga. Fermin was then given a Show Cause Memorandum, requiring him to explain why the
cellphone was found inside his locker. In compliance therewith, he submitted an affidavit the following day, explaining that he
only hid the phone as a practical joke and had every intention of returning it to Braga.
Braga executed a handwritten narration of events stating the following:
(a) At around 6:00 a.m. on 16 December 2002, he was changing his clothes inside the locker room, with Fermin as the only
other person present.
(b) Braga went out of the locker room and inadvertently left his cellphone by the chair. Fermin was left inside the room.
(c) After 10 minutes, Braga went back to the locker room to retrieve his cellphone, but it was already gone.
(d) Braga asked if Fermin saw the cellphone, but the latter denied noticing it.
(e) Braga reported the incident to the security guard, who thereafter conducted an inspection of all the lockers.
(f) The security guard found the cellphone inside Fermins locker.
(g) Later that afternoon, Fermin talked to Braga to ask for forgiveness. The latter pardoned the former and asked him not to
do the same to their colleagues.
After conducting an investigation, COSMOS found Fermin guilty of stealing Bragas phone in violation of company rules
and regulations.
The company terminated Fermin from employment after 27 years of service. Following the dismissal of Fermin from
employment, Braga executed an affidavit, which stated the belief that the former had merely pulled a prank without
any intention of stealing the cellphone, and withdrew from COSMOS his complaint against Fermin.
Meanwhile, Fermin filed a Complaint for Illegal Dismissal.
LA: Valid dismissal; gross misconduct.

NLRC: Affirmed LA.
CA: Illegal dismissal; not serious misconduct nor willful disobedience.
COSMOS argues, among other things, that:

(a) Fermin committed a clear act of bad faith and dishonesty in taking the cellphone of Braga and denying knowledge
thereof;
(b) the latters recantation was a mere afterthought;
225 Roco 3B
(c) the lack of material damage or prejudice on the part of COSMOS does not preclude it from imposing the penalty of termination; and
(d) the previous infractions committed by Fermin strengthen the decision of COSMOS to dismiss him from service.
On the other hand, , it should have ruled in favor of his entitlement to backwages.
All the lower tribunals were in agreement that Fermins act of taking Bragas cellphone amounted to theft. Factual
findings made by administrative agencies, if established by substantial evidence as borne out by the records, are final and
binding on this Court, whose jurisdiction is limited to reviewing questions of law.
Issue: Whether the imposition of the penalty of dismissal appropriate.
Held: YES. THEFT COMMITTED AGAINST A CO-EMPLOYEE is considered as a case analogous to serious misconduct,
for which the penalty of dismissal from service may be meted out to the erring employee.
Misconduct involves the transgression of some established and definite rule of action, forbidden act, a dereliction of
duty, willful in character, and implies wrongful intent and not mere error in judgment.
FOR MISCONDUCT TO BE SERIOUS and therefore a VALID GROUND FOR DISMISSAL, it must be:
1. Of grave and aggravated character and not merely trivial or unimportant and
2. Connected with the work of the employee.
Nonetheless, Article 282(e) of the Labor Code talks of other analogous causes or those which are susceptible of comparison to
another in general or in specific detail. For an employee to be validly dismissed for a CAUSE ANALOGOUS to those
enumerated in Article 282, the cause must involve a voluntary and/or willful act or omission of the employee.
A CAUSE ANALOGOUS TO SERIOUS MISCONDUCT is a voluntary and/or willful act or omission attesting to an employees
moral depravity. Theft committed by an employee against a person other than his employer, if proven by substantial evidence,
is a cause analogous to serious misconduct.
In this case, the LA has already made a factual finding, which was affirmed by both the NLRC and the CA, that Fermin
had committed theft when he took Bragas cellphone. Thus, this act is deemed analogous to serious misconduct,
rendering Fermins dismissal from service just and valid.
Further, the CA was correct in ruling that previous infractions (ie. committing acts of disrespect to superiors, sleeping on
duty) may be cited as justification for dismissing an employee only if they are related to the subsequent offense .
However, it must be noted that such a discussion was unnecessary since the theft, taken in isolation from Fermins other
violations, was in itself a valid cause for the termination of his employment.
Finally, it must be emphasized that the award of financial compensation or assistance to an employee validly dismissed from
service has no basis in law. Therefore, considering that Fermins act of taking the cellphone of his co-employee is a case
analogous to serious misconduct, this Court is constrained to reverse the CAs ruling as regards the payment of his full
retirement benefits. In the same breath, neither can this Court grant his prayer for backwages.
170.The Orchard Golf and Country Club vs Francisco GR No. 178125

Facts: The Club has two golf courses in Dasmarinas, Cavite, for members and guests. Francisco was a club accountant,
heading its General Accounting Division. She reports directly to the Financial Comptroller, Famy. On May 18, 2000,
Famy ordered Francisco to draft a letter to SGV, its external auditor, to inquire about the financial treatment of some
Club property. Francisco failed to do so, even after repeated reminders until June 22.
One June 27, a memorandum was issued requiring Francisco to explain her insubordination. Instead of replying, she went
to the General Manager to personally explain that it was due to heavy work. The Manager said he would discuss the matter
with Famy; she never made a written explanation. Famy then suspended Francisco without pay for 15 days from July 3 to 19..
226 Roco 3B
On July 3, Francisco then wrote to Nuevo, the General and Administrative Manager, wherein she alleged that since her case
was not coursed through the Personnel Department, there was no due process, and abuse of authority. Nuevo sided with
Famy. On July 5, Francisco then wrote a letter to the General Manager, accusing Famy of fraudulent releasing of checks.
On July 20, Famy transferred Francisco without dimunition in salary and benefits to the Clubs Cost Accounting
Section, pending investigation of the charges against Famy.
On August 1, Famy sought an investigation into Franciscos insubordination, as she changed her day-off without authorization
and for being absent despite disapproval. Francisco replied that this was in accord with past experience, since she had to make
monthly payments to Pag-Ibig, and that her transfer was constructive dismissal. She filed a complaint for illegal dismissal.
On August 16, Francisco was then accused of betrayal of company trust in distributing copies of her letter to the Board.
She was suspended for another 15 days.
On September 7, she was placed on forced leave for 30 days with pay due to her strained relations . When she reported
back on October 12, she was permanently transferred without dimunition to the Cost Accounting Section. The LA
upheld the Club; the NLRC held that her transfer was an illegal demotion and thus gave her P50,000 in attorneys fees; the CA
upheld this.
Issue: Whether the transfer was in fact a demotion.
Held: NOT A DEMOTION. 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.
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.
227 Roco 3B
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.
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.
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.
[A]n 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.
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
incurexpenses to protect his interest by reason of an unjustified act or omission of the party from whom it is sought,
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
228 Roco 3B
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. 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
Adjustment of Arsenio Rodrigo Neyra, the former Cost Accountant which position she now occupies, and pertinent portions
of the Collective Bargaining Agreement. She 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. 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 [t]echnical rules of procedure are not binding in labor cases. The application of
technical rules of procedure maybe relaxed to serve the demands of substantial justice.52 [I]t 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." 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.
171. PLDT vs Balbastro (2007)

Facts: Amparo Balbastro was employed by petitioner in 1978 as its telephone operator until her questioned dismissal from
employment. Balbastro was dismissed by petitioner for her absences without authorized leave due to unconfirmed
sick leave from June 28 to July 14, 1989, which constituted her 3rd offense punishable by dismissal under petitioners rules
and regulations.
Balbastro filed a complaint with the Labor Arbiter against petitioner and its President, Antonio Cojuangco, for illegal
dismissal, non payment of salary wage, premium pay for rest day, 13th month pay, and damages. She alleged that she was
dismissed on the ground of unconfirmed sick leave despite her presentation of medical certificates from her
attending physicians; that she has 4 minor children and it was not her intention to habitually absent herself without
reason considering that her loss of job which was based only on opinions of petitioners doctors had caused her great
deprivation and moral suffering.
Petitioner filed its position paper with Motion to Dismiss alleging that private respondents habitual and unjustified absences
was a just and valid cause for her termination under its rules and regulations; and that her record of unauthorized absences for
1989 showed the following:
1. FIRST UNAUTHORIZED ABSENCES from March 19 to 29, 1989: Private respondent absented herself from work for
nine days excluding rest days on March 23 to 24, 1989 without notice to petitioner; She used marital problem as the
reason for her absence. She was penalized with 18 days suspension for violating petitioners rules and regulations
regarding absences.
2. SECOND UNAUTHORIZED ABSENCES, from June 11 to 13, 1989: Private respondent called in sick from Batangas
on June 5, that she was suffering from gastroenteritis. On June 14, she presented herself to petitioners doctor, and
submitted a medical certificate where it was stated that she was under treatment from June 5 to 8, 1989 of
gastroenteritis. Petitioners doctor confirmed private respondents sick leave from June 5 to 10, 1989 but did not
confirm her absences from June 11 to 13, 1989 because her medical certificate covered only the period from June 5 to
8, 1989. Doctor found that she bore no postillness manifestations of gastroenteritis. Petitioner treated it as her second
offense and was penalized with 15 days suspension.
229 Roco 3B
3. THIRD UNAUTHORIZED ABSENCES, from June 28 to July 14, 1989: Private respondent made a sick call that she
had sore eyes and absented herself from June 25 to July 14, 1989. On July 3, 1989, she was outvisited at her given
address in Makati but was not found home. She had her medical certificate issued by her attending physician showing
that she had been under his professional treatment from June 25 to July 12, 1989 for systemic viral infection.
Petitioners doctor, Dr. Benito Dungo, confirmed her sick leave from June 25 to 27, 1989 but did not confirm as to
the rest of the dates when she was absent from work. Petitioners doctor did not confirm her leave of absence from
June 28 to July 14, 1989 on the ground that such illness did not warrant a very long time of rest.
4. While private respondents third leave of absence was being deliberated upon, she again absented herself from August
6 to 12, 1989. She called in sick on August 6, 1989 informing her supervisor that she had a fever. The medical
certificate showed treatment from August 7 to 10, 1989 for influenza. Petitioners doctor confirmed private
respondents leave of absence from August 6 to 8, 1989 but did not confirm the rest because her absences from
August 9 to 12, 1989 were not covered by a medical certificate and the illness did not warrant prolonged absence; and
it was medically impossible for her to contract the same illness which she contracted the previous month since it is a
medical fact that there is no such thing as an immediately recurrent viral infection.
In view of her repeated absences without authorized leave for the third time, petitioner terminated private respondents
service effective October 5, 1989.
Labor Arbiter ruled in favor of Balbastro and gave more credence to the doctor who actually attended to private respondent
rather than to the medical opinion of petitioners doctors.
NLRC affirmed and found that company practice allows leave of absence due to sickness if supported by a medical certificate
issued by the attending physician; that a difference in opinion by the Medical Director from that of the attending physician
should not prejudice private respondent since the Medical Director can consider absences unauthorized only in cases of
forgery and patent abuse of sick leave privileges which were not proven in this case
CA issued its assailed Decision which dismissed the petition and affirmed the NLRC Decision. It held that as long as the
medical certificate presented did not fall under any of the infirmities set forth in petitioners rules and regulations, the
unconfirmed leave should be treated merely as absence without leave and was not subject to disciplinary action;
Issue: Whether Balbastro was validly dismissed.
Held: YES. We find the petition meritorious. It must be borne in mind that the basic principle in termination cases is that the
burden of proof rests upon the employer to show that the dismissal is for just and valid cause and failure to do so would
necessarily mean that the dismissal was not justified and, therefore, was illegal. For dismissal to be valid, the evidence must be
substantial and not arbitrary and must be founded on clearly established facts. We find that petitioner had discharged this
burden.
Under petitioners own Rules & Regulations, for the absence due to an alleged illness to be considered unauthorized ,
without pay, and subject to disciplinary action, it must be shown that the medical certificate is forged, altered as to the
date and contents, false as to the facts stated therein, issued by a doctor not qualified to attend to the patients illness,
and there is patent abuse of sick leave privileges. The penalty for 3 offenses of unauthorized absences committed within
the threeyear period is dismissal.
Private respondents unconfirmed absences from June 28 to July 14, 1989 is the crucial period in this particular case. The LA
and the NLRC found that private respondent was illegally dismissed by petitioner. Such finding was affirmed by the CA. They
all concluded that the medical certificate which private respondent presented did not fall under the circumstances enumerated
in Department Order No. ADM7902, and there was no patent abuse of sick leave privileges, thus, there was no basis for
petitioners doctors not to confirm her sick leave and consider the same unauthorized. The jurisdiction of this Court in a
petition for review on certiorari is limited to reviewing only errors of law, not of fact, unless the factual findings being assailed
are not supported by evidence on record or the impugned judgment is based on a misapprehension of facts. We find that
those exceptions are present in the instant case. We find that petitioner had sufficiently established that private
respondent committed a patent abuse of her sick leave privileges which is one of the grounds listed in Department
Order No. ADM7902 for disciplinary action.
230 Roco 3B
Private respondent was absent on June 25, 1989 and the reason given was sore eyes. She was then absent from June 25 to July
14, 1989. When she reported for work on July 15, 1989, she went to petitioners doctor, Dr. Benito Dungo, for confirmation
of her leave of absence and presented a medical certificate from her attending physician, Dr. Manuel C. Damian of Tanauan
Batangas, who certified that she had been under his professional care from June 25 to July 12, 1989 for systemic viral disease.
Dr. Dungo confirmed private respondents leave of absence from June 25 to 27, 1989 only and did not confirm her leave from
June 28 to July 14, 1989 for the following reasons:
1. Private respondents reason for her absence on June 25, 1989 was sore eyes, however the medical certificate that she
presented for her prolonged absence from June 25 to July 14, 1989 was systemic viral disease and as correctly
observed by Dr. Dungo, sore eyes was never mentioned therein.
2. It would appear that there was a discrepancy between the reason given when she called in sick on June 25, 1989
and her complaints when she consulted Dr. Damian on the same day. In fact, when private respondent was
asked on cross examination why sore eyes was never mentioned in her medical certificate, all that she could say was
the diagnosis was systemic viral disease, samasama na lahat.
3. The medical certificate issued by Dr. Damian showed that private respondent was under his professional care from
June 25 to July 12, 1989. However, the medical progress note dated October 10, 1989 of the same doctor showed that
private respondent consulted him only on June 25, 27, and 29, 1989. It was never mentioned that Dr. Damian had
seen private respondent after June 29, 1989. Thus, there was even a discrepancy between the medical certificate
dated July 13, 1989 and the medical progress note as to the time frame that private respondent was seen by
Dr. Damian.
From the time private respondent called in sick on June 25, 1989 due to sore eyes, she never called up petitioner again until
she reported for work on July 15, 1989. She never went to petitioners doctors for them to verify her sickness.
Private respondent had committed the first two offenses of unauthorized absences in the same year. First, she did not report
for work from March 19 to 29, 1989 without notice to petitioner, thus her absence was treated as unauthorized and considered
her first offense for which she was penalized with suspension. Second, she again did not report for work from June 5 to 13,
1989 and when she reported for work and presented her medical certificate, it covered the period from June 5 to 8, 1989 only
but she did not report for work until June 14, 1989. Petitioners doctor did not confirm her absences from June 11 to 13, 1989,
thus, the same was considered unauthorized and her second offense for which she was penalized again with suspension.
These 2 unauthorized absences together with her 3rd unauthorized absences committed from June 28 to July 14,
1989 are sufficient bases for petitioners finding that private respondent patently abused her sick leave privileges.
Previous infractions may be used as justification for an employees dismissal from work in connection with a
subsequent similar offense. Moreover, it is in petitioners rules and regulations that the same offense committed
within the threeyear period merits the penalty of dismissal.
It had also been established by Dr. Dungos testimony that private respondents medical record showed that she did not go
to the clinic for consultation as she would only present a medical certificate and get a clearance for her sick leave.
As petitioner stated in its pleadings, it is a telecommunication service company which provides the country with
various telecommunication services and facilities. Its operations are a vital part to many transactions all over the
country and abroad, and private respondent was one of its telephone operators who used to connect all these calls.
Thus, her patent abuse of her sick leave privileges is detrimental to petitioners business.
While it is true that compassion and human consideration should guide the disposition of cases involving termination of
employment since it affects ones source or means of livelihood, it should not be overlooked that the benefits accorded to
labor do not include compelling an employer to retain the services of an employee who has been shown to be a gross liability
to the employer. The law in protecting the rights of the employees authorizes neither oppression nor selfdestruction
of the employer.
231 Roco 3B
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.
172.Press vs Galit (2008)

Facts: Galit 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. Galit was tardy for a total of 190 times and
was absent without leave for a total of 9 and a half days.
On February 22, 1999, Galit 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, Galit 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. The 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) Insubordinationwillfully disobeying, defying or disregarding company authority
On February 24, 1999, respondent was terminated from employment. The employer, through petitioner Escobia, gave him
his two-day salary and a termination letter. Galit subsequently filed a complaint for illegal dismissal and money claims
before NLRC. Labor arbiter found that complainant was illegally dismissed.
Issue: Whether the dismissal was valid.
Held: YES (SUBSTANCE). NO (PROCEDURAL)

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 LA ruled that petitioners cannot use Galits habitual tardiness and unauthorized
absences to justify his dismissal since they had already deducted the corresponding amounts from his salary and that since
Galit 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.
SC found 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. 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 or benefit which legally pertains to him. Hence, the management prerogative to discipline employees and impose
punishment is a legal right which cannot, as a general rule, be impliedly waived. 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. Galit did not adduce any evidence to show waiver
or condonation on the part of petitioners.
In the case of Filipro v. The Honorable Minister Blas F. Ople, 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, petitioners can use said infractions collectively as a ground for dismissal. Galit 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
232 Roco 3B
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

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.
There is no question that petitioners order for respondent to render overtime service to meet a production deadline complies
with the second requisite. 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, 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. Galit, 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.
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. His 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. 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 SC ruled 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.
On 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. SC was not persuaded.
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.
Under the twin notice rule, 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
The procedure was further elucidated in King of Kings Transport v. Mamac:

(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
233 Roco 3B
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 conference wherein the
employees will be given the opportunity to: (a) explain and clarify their defenses to the charge against them; (b)
present evidence in support of their defenses; and (c) 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: (a) all circumstances involving the charge against the employees have been
considered; and (b) 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, the 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. 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 simulation the 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 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. 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.
SC held that termination of respondent was railroaded in serious breach of his right to due process. Court declared
respondents dismissal from employment VALID and LEGAL. Petitioners were, 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.
234 Roco 3B
173. Duterte vs Kingswood (2007)

Facts: Duterte was hired as a truck driver by Kingswood Trading Co. (KTC). He usually averaged 21 trips per month.
When not driving, petitioner was assigned to clean KTCs equipment.
One day, Duterte had his first heart attack and was confined for 2 weeks at the Philippine Heart Center (PHC), which was
confirmed by KTC and admitted that petitioner was on sick leave. One month later, petitioner returned to work, with a
medical certificate signed by his attending physician at PHC, attesting petitioners fitness to work. However this was not
honored by respondent KTC.
Shortly thereafter, Duterte suffered another heart attack and was again confined at PHC. Upon release, he stayed home
for 3 months to recuperate.
Petitioner attempted to report back to work after recuperating but was told to look for another job because he was
unfit. Respondents refused to declare petitioner fit to work unless physically examined by the company physician.
Respondents promise to pay petitioner his separation pay turned out to be an empty one. He was asked to sign a document as
proof of his receipt of SSS benefits. Having received no such amount, petitioner refused to affix his signature thereon and
instead requested for the necessary documents from respondents to enable him to claim his SSS benefits, but the latter did not
heed his request.
Petitioner filed a case against his employer for illegal dismissal and damages. The LA ruled in favor of petitioner. The LA
however applied Article 284 (Disease as ground for termination) on the rationale that since the respondents admitted that
petitioner could not be allowed back to work because of the latters disease, the case fell within the ambit of Article 284. The
NLRC and the CA reversed.
Issue: Whether Dutertes dismissal was valid. Whether the dismissal on the ground of disease still requires employer to present
certification from competent public health authority that the disease could not be cured within 6 mos even with medical
treatment.
Held: INVALID DISMISSAL. CERTIFICATION NEEDED.

Book VI, Rule I, Section 8 of the Omnibus Implementing Rules of the Labor Code requires:
Disease as a ground for dismissal. -- Where the employee suffers from a disease and his continued
employment is prohibited by law or prejudicial to his health or to the health of his co-employees, the
employer shall not terminate his employment unless there is a certification by a competent public
health authority that the disease is of such nature or at such a stage that it cannot be cured within a
period of six (6) months even with proper medical treatment. If the disease or ailment can be cured
within the period, the employer shall not terminate the employee but shall ask the employee to take a leave.
The employer shall reinstate such employee to his former position immediately upon the restoration of his
normal health.
In ruling against petitioner, the NLRC and the CA placed on the petitioner the burden of establishing, by a certification of a
competent public authority, that his ailment is such that it cannot be cured within a period of six months even with proper
medical treatment.
The law is unequivocal: the employer, before it can legally dismiss its employee on the ground of disease , must adduce
a certification from a competent public authority that the disease of which its employee is suffering is of such nature
or at such a stage that it cannot be cured within a period of six months even with proper treatment.
Here, the record does not contain the required certification. And when the respondents asked the petitioner to look for
another job because he was unfit to work, such unilateral declaration, even if backed up by the findings of its company
doctors, did not meet the quantum requirement mandated by the law, i.e., there must be a certification by a competent public
authority.
235 Roco 3B
The court cites the case of Triple Eight Integrated Services Inc. v. NLRC wherein it explained why the submission of the requisite
medical certificate is for the employers compliance:
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.
Much was made by the NLRC and the CA about petitioners refusal to comply with respondents order to submit a
medical certificate irresistibly implying that such refusal is what constrained them to refuse to take petitioner back in.
However the court does not agree with this. Even assuming, in gratia argumenti, that petitioner committed what may be
considered an act of insubordination for refusing to present a medical certificate, such offense, without more,
certainly did not warrant the latters placement in a floating status, a veritable dismissal, and deprived of his only
source of livelihood.
The court is not unmindful of the connection between the nature of petitioners disease and his job as a truck/trailer driver.
Petitioners job places at stake the safety of the public. The court however does not agree with the NLRC that petitioner
was validly dismissed because his continued employment was prohibited by the basic legal mandate that reasonable
diligence must be exercised to prevent prejudice to the public, which justified respondents in refusing work to
petitioner. Petitioner could have been admitted back to work performing OTHER TASKS, such as cleaning and
maintaining respondent companys machine and transportation assets.
174.Sampaguita Garments vs NLRC (1994)

Facts: Emilia Santos was an employee of Sampaguita Garments (SG). On Apr 14 1987, it was alleged that she attempted to
bring out of the company premises, without authorization or permission, a piece of cloth belonging to SG.
SG dismissed her based on this. Thus, Santos filed a complaint for illegal dismissal. LA dismissed the complaint but the NLRC
ruled otherwise and ordered her reinstatement with back wages.
Meanwhile, SG also instituted a criminal complaint against Santos for theft. Santos was found guilty. RTC and CA affirmed.
Thereafter, the decision became final and executory and judgment was entered.
Santos moved for the execution of the NLRC case (reinstatement with back wages) but SG asserted that, in light of her
conviction, the NLRCs decision should no longer be enforced. Otherwise, she would be undeservedly rewarded when she
should have been punished.
On the other hand, Santos argues that the NLRC decision is independent of the criminal case and, in any event, can no longer
be modified for having attained finality.
Issue: If in a labor case, an employee is absolved of an offense that led to her dismissal and is ordered reinstated, will her
subsequent conviction in a criminal prosecution for the same offense affect the administrative decision?
Held: YES. CONVICTION AFFECTS THE ADMIN DECISION. It is true that once a judgment has become final and
executory, it can no longer be disturbed except only for the correction of clerical errors or where supervening events
render its execution impossible or unjust. In the latter event, the interested party may ask the court to modify the judgment
to harmonize it with justice and the facts.
Supervening Event
There is no dispute in the case at bar that the decision of the NLRC ordering the Santos reinstatement with back wages had
indeed become final and executory. Even so, we find, in light of the subsequent developments, that the NLRC was not
correct in sustaining the implementation of that decision.
In a Heirs of Guballa, it was held that the power of the NLRC to issue a writ of execution carries with it the right to look into
the correctness of events that may affect such execution.
236 Roco 3B
The affirmance by the RTC and the CA of Santos conviction for theft is justification enough for the NLRC to exercise
this authority and suspend the execution of its decision. Such conviction, which was also upheld by this Court in G.R.
No. 100929, is a supervening cause that rendered unjust and inequitable the decision mandating the Santos
reinstatement and with back wages to boot.
Lack of Procedural Due Process

Santos conviction of the crime of theft of property belonging to the SG has affirmed the existence of a valid ground for
her dismissal and thus removed the justification for the administrative decision ordering her reinstatement with back
wages.
Nevertheless, in accordance with Wenphil v. NLRC, SG is still subject to sanction for its failure to accord the private
respondent the right to an administrative investigation in conformity with the procedural requirements of due
process laid down in the IRR of the Labor Code.
175.Elcee Farms Inc vs NLRC (2007)

Facts: Pampelo Semillano and 143 other complainants, represented by the labor union, Sugar Agricultural Industrial Labor
Organization (SAILO), filed this complaint for illegal dismissal with prayer for reinstatement with back wages, or in the
alternative, separation pay, with damages against Elcee Farms, Corazon Saguemuller, Hilla Corporation (HILLA), Rey
Hilado, and Roberto Montao. They alleged that they were all regular farm workers in Hacienda Trinidad, which was
owned and operated by petitioner corporation Elcee Farms.
Complainants alleged that petitioner Corazon Saguemuller was the president of Elcee Farms, but records disclosed that it was
her son, Konrad Saguemuller, who was the president thereof. Some of the complainants allegedly worked in Hacienda
Trinidad as early as 1960. On 27 April 1987, Elcee Farms entered into a Lease Agreement with Garnele Aqua Culture
Corporation (Garnele). Nevertheless, most of the private respondents continued to work in Hacienda Trinidad. They
presented payrolls and Social Security System (SSS) Forms E-4 issued during the period that Garnele leased the hacienda,
naming Elcee Farms as their employer.
On 15 November 1990, Garnele sub-leased Hacienda Trinidad to Daniel Hilado, who operated HILLA. The contract
of lease executed between Garnele and Daniel Hilado stipulated the continued employment of 120 of the formers
employees by the latter, but the contract was silent as to the benefits which may accrue to the employees as a
consequence of their employment with Elcee Farms. Thus, private respondents were allowed to continue working in
Hacienda Trinidad, under the management of HILLA. Soon after HILLA took over, Daniel Hilado entered into a
Collective Bargaining Agreement (CBA) with the United Sugar Farmers Organization (USFO). The CBA contained a
CLOSED SHOP PROVISION stating that:
Sec. 2 Employees/laborers, who at the time of the execution of this Agreement are not yet members of the
UNION be required by the EMPLOYER to join the UNION within thirty (30) days from the signing of this
Agreement, and remain members in good standing as condition of continued employment. Should these
employees/laborers refuse and fail to join and affiliate with the UNION within such a period of time , said
employees/laborers shall be dismissed by the EMPLOYER upon recommendation by the UNION .
Complainants refused to join USFO. Thus, they were dismissed. They are now claiming damages/ separation pay. To this,
Elcee used as a defense that the employer/employee relationship was already severed when the lease contract with
Garnele in 1987. And thus, the complainants claim has prescribed since it was filed more than 3 years from the
severance of the EER.
Issue: (1) Whether complainants are entitled to separation pay & moral damages.
(2) Whether Elcee and Corazon Saguemiller should be held liable for the labor claims.
Held: YES. YES.
237 Roco 3B
(1) AFTER THE LEASE AGREEMENT WITH GARNELE, ELCEE STILL REMAINED THE EMPLOYER OF
COMPLAINANTS.
The NLRC held that the lease contract between Elcee Farms and Garnele is simulated. Records show that Elcee Farms was
the employer named in the payrolls at the time when the hacienda was supposed to have been leased to Garnele.
During the same period, the SSS Forms E-4 submitted before the SSS that were used in paying the complainants
contributions also named Elcee Farms as employer. Although these pieces of evidence were submitted only during the
appeal before the NLRC, the petitioners had ample opportunity to submit opposing evidence, but failed to do so. The lease
agreement between Garnele and Elcee Farms was a haphazardly drafted two-page document, which only provided for a
uniform minimal rent for a period of fifteen years, and had not provided for the employment status of the employees of Elcee
Farms. Furthermore, the lease agreement was entered into by the corporate officers of Garnele and Elcee Farms, who
are members of the same family. In addition, the employees were not informed of the lease agreement and were not paid by
Elcee Farms the separation pay due at the time Garnele was supposed to have taken over and leased the hacienda.
(2) COMPLAINANTS ARE THUS ENTITLED TO MORAL DAMAGES.

The above findings show that even after the execution of the lease agreement between Elcee Farms and Garnele, Elcee
Farms continued to act as the employer of the farm workers of Hacienda Trinidad. The employer-employee
relationship between the farm workers and Elcee Farms was severed only when Garnele, acting in behalf of Elcee
Farms, entered into a lease agreement with Daniel Hilado and, thereafter, Hilla took over the management of Hacienda
Trinidad in November 1990. The NLRC, then, concluded that the claims of the private respondents against Elcee Farms had
not yet prescribed at the time their complaint was filed on 26 December1990.
Moral damages are recoverable when the dismissal of an employee is attended by bad faith or fraud or constitutes
an act oppressive to labor, or is done in a manner contrary to good morals, good customs or public policy.
Exemplary damages, on the other hand, are recoverable when the dismissal was done in a wanton, oppressive, or
malevolent manner.
Bad faith on the part of Elcee Farms is shown by the act of simulating a lease agreement with Garnele in order to
evade paying private respondents the proper amount of separation benefits based on the number of years they worked in the
hacienda, as provided by the Labor Code. Records show that Elcee Farms did not pay any separation benefits to the private
respondents when they allegedly leased the hacienda to Garnele, and again when the hacienda was leased to Daniel Hilado.
When the employees filed their complaint with the Labor Arbiter, Elcee Farms, using the simulated lease agreement with
Garnele, tried to deny liability by claiming that their claims had already prescribed. It claimed that the lease agreement with
Garnele, which was allegedly executed in 1987, effectively terminated the employer-employee relationship before the
complaint was filed in 1990, or more than three years after. These unlaudable acts undermine the workers statutory rights
for which moral damages may be awarded.
(3) ELCEE IS ALSO LIABLE FOR SEPARATION PAY, as there was a cessation of operations when it entered into the
second lease (with HILLA).
From the LC, 3 requirements are enumerated in cases of cessation of business operations of an employer company
not due to business reverses: (1) service of a written notice to the employees and to the MOLE (now the Secretary of
Labor and Employment) at least one month before the intended date thereof; (2) the cessation of or withdrawal
from business operations must be bona fide in character; and (3) payment to the employees of termination pay
amounting to at least one-half month pay for each year of service, or one month pay, whichever is higher.
In the present case, Elcee Farms effectively ceased to operate and manage Hacienda Trinidad when, through Garnele, it leased
the hacienda to Daniel Hilado. The validity of the aforementioned lease was not questioned by any of the parties. There is no
question that the lease to Daniel Hilado (HILLA) effectively terminated the employer-employee relationship
between Elcee Farms and the farmworkers. The lease agreement between Garnele and Daniel Hilado identified the
employees who will continue working with the new management and stipulated that workers who were not in the list, whether
new or employed in the past, will not be employed by the lessee. The lease contract even specified that Daniel Hilado will
only be liable for all future labor cases, the cause of which arose during or by virtue of the sublease. Clearly, there was a
cessation of operations of Elcee Farms, which renders it liable for separation pay to its employees, under Section 283
of the Labor Code.
238 Roco 3B
In a similar case, Abella v. NLRC, the Court ruled that an employer whose lease agreement had already expired, and
therefore no longer manages and controls the hacienda, is still required to pay the separation pay due to its former
employees in connection with their employment with such employer, even if the said employees were terminated by
the new employer. It justified this position thus:
The purpose of Article 284 as amended is obvious the protection of the workers whose employment is terminated because of the closure of
establishment and reduction of personnel. Without said law, employees like private respondents in the case at bar will lose the benefits to
which they are entitled for the thirty three years of service in the case of Dionele and fourteen years in the case of Quitco. Although
they were absorbed by the new management of the hacienda, in the absence of any showing that the latter
has assumed the responsibilities of the former employer, they will be considered as new employees and the
years of service behind them would amount to nothing.
(4) Although Elcee is liable for separation pay and moral damages, CORAZON SAGUEMILLER IS NOT LIABLE
SINCE ELCEE HAS A SEPARATE JURIDICAL PERSONALITY.
This Court, nonetheless, finds merit in the petitioners allegation that Corazon Saguemuller should not be subsidiarily liable
with Elcee Farms for separation pay and damages. It is basic that a corporation is invested by law with a personality separate
and distinct from those of the persons composing it as well as from that of any other legal entity to which it may be related.
Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a
corporation is not of itself sufficient ground for disregarding the separate corporate personality
Jurisprudence regarding the liability of owners/directors/ officers when there is a cessation/ closure of business no due to
serious financial reverses:
Santos v NLRC a corporate officer was not held liable for the obligations incurred by the corporation, where
the corporate officer was not even shown to have had a direct hand in the dismissal of the employee enough to
attribute to him an unlawful act.
M. Greenfield v Ramos restated the rule that corporate directors and officers are solidarily liable with the
corporation for the termination of employees done with malice or bad faith. Bad faith was defined by the Court
thus: "It has been held that bad faith does not connote bad judgment or negligence; it imports a dishonest
purpose or some moral obliquity and conscious doing of wrong; it means breach of a known duty through some
motive or interest or ill will; it partakes of the nature of fraud."
In A.C Ransom Owner of company was made liable due to the disposition post-haste of its leviable assets
evidently in order to evade its just and due obligations. The doctrine of "piercing the veil of corporate fiction" was
properly applied.
In the Chua case There was a finding of bad faith on the part of the owner thus he was properly made liable
for the separation pay.
Naguiat v. NLRC - There was a cessation of the operations of the employer-corporation and, thus, a problem as
to who shall pay the employees. In holding the president solidarily liable, the Court considered that he had
actively engaged in the management and operations of the corporation. Nevertheless, it absolved from
liability the vice-president, since no evidence on the extent of his participation in the management or
operation of the business was proffered.
IN THE PRESENT CASE, the NLRC took into account the testimony of the witness who said that they believed that
petitioner Corazon Saguemuller was the president of Elcee Farms because the employees would approach her if they needed
help, as well as the fact that her sons were the officers of Elcee Farms and Garnele. Beyond these bare suppositions, no
evidence, oral or documentary, was presented to prove that Corazon Saguemuller was truly the President of Elcee
Farms. Nor was there even proof that she was in active management of the corporation and had dictated policies for
implementation by the corporation. Extending help to private respondents certainly did not automatically vest upon her the
position of President of the corporation. There, likewise, appears to be no evidence on record that she had acted
maliciously or in bad faith in terminating the services of the private respondents; nor has it been shown that she has in
any way consented to the simulated lease contract executed by her sons which effectively terminated the services of the private
respondents
176.Felix vs Buenaseda (1995)
239 Roco 3B
Facts: Petitioner assails his dismissal as Medical Specialist I of the National Center for Mental Health as illegal and
violative of the constitutional provision on security of tenure allegedly because his removal was made pursuant to an invalid
reorganization.
In Mendoza vs. Quisumbing, involving the reorganization of various government departments and agencies we held:
We are constrained to set aside the reorganizations embodied in these consolidated petitions because the heads of departments
and agencies concerned have chosen to rely on their own concepts of unlimited discretion and progressive ideas on
reorganization instead of showing that they have faithfully complied with the clear letter and spirit of the two Constitutions
and the statutes affecting reorganization.
In De Guzman vs. CSC, we upheld the principle, laid down by Justice J.B.L. Reyes, that a valid abolition of an office neither
results in a separation or removal, likewise upholding the corollary principle that if the abolition is void, the incumbent is
deemed never to have ceased to hold office, in sustaining therein petitioners right to the position she held prior to the
reorganization.
The instant petition on its face turns on similar facts and issues, which is that petitioners removal from a permanent
position in the National Center for Mental Health as a result of the reorganization of the Department of Health was
void. However, a closer look at the facts surrounding the instant petition leads us to a different conclusion.
After passing the Physicians Licensure Examinations, petitioner, Dr. Alfredo B. Felix, joined the National Center for Mental
Health as a Resident Physician. He was promoted to the position of Senior Resident Physician a position he held until the
Ministry of Health reorganized the National Center for Mental Health pursuant to Executive Order No. 119. Under the
reorganization, petitioner was appointed to the position of Senior Resident Physician in a temporary capacity immediately
after he and other employees of the NCMH allegedly tendered their courtesy resignations to the Secretary of Health.
Petitioner was promoted to the position of Medical Specialist I (Temporary Status), which position was renewed the
following year.
DOH issued Department Order No. 347 which required board certification as a prerequisite for renewal of specialist
positions. It provided that specialists working in various hospitals and branches of the Department of Health be recognized as
Fellows of their respective specialty societies and/or Diplomates of their specialty boards or both. The purpose is
upgrading the quality of specialists in DOH hospitals by requiring them to pass rigorous theoretical and clinical (bedside)
examinations.
Secretary of Health Alfredo Bengzon issued Department Order 478, amending Sec. 4 of Department Order No. 347 providing
for an extension of appointments of Medical Specialist positions in cases where the termination of medical
specialists who failed to meet the requirement for board certification might result in the disruption of hospital
services.
Petitioner was one of the hundreds of government medical specialists who would have been adversely affected by
Department Order No. 347 since he was not yet accredited by the Psychiatry Specialty Board. Under Department Order
No. 478, extension of his appointment remained subject to the guidelines set by the said department order.
The Medical Credentials Committee of the National Center for Mental Health recommended nonrenewal of his
appointment as Medical Specialist I. He was, however, allowed to continue in the service, and receive his salary,
allowances and other benefits even after being informed of the termination of his appointment.
An emergency meeting of the Chiefs of Service was held to discuss petitioners case. Petitioners immediate supervisor,
pointed out petitioners poor performance, frequent tardiness and inflexibility as among the factors responsible for the
recommendation not to renew his appointment. With one exception, other department heads present in the meeting expressed
the same opinion, and the overwhelming concensus was for nonrenewal.
240 Roco 3B
The matter was thereafter referred to the CSC, which ruled that the temporary appointment (of petitioner) as Medical
Specialist I can be terminated at any time . . . and that [a]ny renewal of such appointment is within the discretion of the
appointing authority.
In a memorandum, petitioner was advised by hospital authorities to vacate his cottage since he was no longer entitled to
accommodation. Refusing to comply with said memorandum he filed a petition with the Merit System Protection
Board(MSPB) complaining about the alleged harassment by respondents and questioning the nonrenewal of his appointment.
(MSPB) dismissed petitioners complaint for lack of merit :
As an apparent incident of the power to appoint, the renewal of a temporary appointment upon or after its expiration is a
matter largely addressed to the sound discretion of the appointing authority. There is no dispute that Complainant was a
temporary employee and his appointment expired. His reappointment to his former position or the renewal of his temporary
appointment would be determined solely by the proper appointing authority who is the Secretary of the DOH.
The power of appointment is essentially a political question involving considerations of wisdom which only the appointing
authority can decide. This Board cannot substitute its judgment to that of the appointing authority. Department Order merely
allowed the extension of tenure of Medical Specialist I for a certain period but does not mandate the renewal of the expired
appointment.
The subsistence, quarters and laundry benefits provided to the Complainant were in connection with his employment with the
NCMH. Now that his employment ties with the said agency are severed, he eventually loses his right to the said benefits. The
Hospital Management has the right to take steps to prevent him from the continuous enjoyment thereof.
Issue: Whether the Commission acted with grave abuse in affirming petitioners non-renewal of his appointment at the Mental
Health Center.
Held: NO GRAVE ABUSE. The patent absurdity of petitioners posture is readily obvious. A residency or resident
physician position in a medical specialty is NEVER A PERMANENT ONE.
Residency connotes training and temporary status. It is the step taken by a physician right after postgraduate internship
prior to his recognition as a specialist or subspecialist in a given field. This upward movement from residency to specialist
rank, institutionalized in the residency training process, guarantees minimum standards and skills and ensures that the
physician claiming to be a specialist will not be set loose on the community without the basic knowledge and skills of his
specialty. Because acceptance and promotion requirements are stringent, competitive, and based on merit,
acceptance to a first year residency program is no guaranty that the physician will complete the program .
Residents, specially those in university teaching hospitals enjoy their right to security of tenure only to the extent that
they periodically make the grade, making the situation quite unique as far as physicians undergoing postgraduate residencies
and fellowships are concerned. While physicians (or consultants) of specialist rank are not subject to the same
stringent evaluation procedures, specialty societies require continuing education as a requirement for accreditation
in good standing, in addition to peer review processes based on performance, mortality and morbidity audits, feedback from
residents, interns and medical students and research output.
The nature of the contracts of resident physicians meet traditional tests for determining employeremployee relationships, but
because the focus of residency is training, they are neither here nor there. Stringent standards and requirements for
renewal of specialistrank positions or for promotion to the next postgraduate residency year are necessary because
lives are ultimately at stake.
From the position of senior resident physician, which he held at the time of the government reorganization, the next logical
step in the stepladder process was obviously his promotion to the rank of Medical Specialist I, a position which he apparently
accepted not only because of the increase in salary and rank but because of the prestige and status. Such status, however,
clearly carried with it certain professional responsibilities including the responsibility of keeping up with the minimum
requirements of specialty rank, the responsibility of keeping abreast with current knowledge in his specialty and in
241 Roco 3B
Medicine and the responsibility of completing board certification requirements within a reasonable period of time.
The evaluation made by petitioners peers and superiors clearly showed that he was deficient in a lot of areas, in fact, he was
not even boardcertified.
At the time of petitioners promotion to the position of Medical Specialist I (temporary), no objection was raised by him about
the change of position or the temporary nature of the designation. The pretense of objecting to the promotion to specialist
rank apparently came only as an afterthought, three years later, following the nonrenewal of his position by the Department of
Health. Petitioner made no attempt to oppose earlier renewals of his temporary Specialist I contracts clearly demonstrating his
acquiescence toif not his unqualified acceptance ofthe promotion (albeit of a temporary nature). Whatever objections
petitioner had against the earlier change from the status of permanent senior resident physician to temporary senior resident
physician were neither pursued nor mentioned at or after his designation as Medical Specialist I (Temporary). He is therefore
estopped from insisting upon a right or claim which he had plainly abandoned when he, from all indications, enthusiastically
accepted the promotion. Such warrants a presumption that he either abandoned (his claim) or declined to assert it.
Any claim to any position in the civil service, permanent, temporary or otherwise, or any claim to a violation of the
constitutional provision on security of tenure be made within a reasonable period of time. Delays in the statement of a right to
any position are strongly discouraged. In the same token, the failure to assert a claim or the voluntary acceptance of another
position in government, obviously without reservation, leads to a presumption that the civil servant has either given up his
claim or has already settled into the new position. This is the essence of laches which is the failure or neglect, for an
unreasonable and unexplained length of time to do that which, by exercising due diligence, could or should have been done
earlier; it is the negligence or omission to assert a right within a reasonable time, warranting a presumption that the party
entitled to assert it either has abandoned it or declined to assert it.
This petition, on its surface, seems to be an ordinary challenge against the validity of the conversion of petitioners position
from permanent resident physician status to that of a temporary resident physician pursuant to the government reorganization
after the EDSA Revolution. What is unique to petitioners averments is the fact that he hardly attempts to question the validity
of his removal from his position of Medical Specialist I (Temporary) of the National Center for Mental Health, which is
plainly the pertinent issue in the case at bench.
There is a deliberate and dishonest attempt to skirt the fundamental issue first, by falsely claiming that petitioner was forced to
submit his courtesy resignation in 1987 when he actually did not; and second, by insisting on a right of claim clearly abandoned
by his acceptance of the position of Medical Specialist I (temporary), which is hence barred by laches.
The validity of the government reorganization of the Ministry of Health pursuant to E.O. 119 not being the real issue, we
decline to make any further pronouncements relating to petitioners contentions relating to the effect on him of the
reorganization.
The patient who consults with a physician of specialist rank should at least be safe in the assumption that the government
physician of specialist rank: 1.) has completed all necessary requirements of specialist training in his field; and 2.) has been
board certified. These fundamental requirements at least assure the public at large that those in government centers who claim
to be specialists in specific areas of Medicine possess the minimum knowledge and skills required
Petitioner accepted a temporary appointment (Medical Specialist I). The appointment was for a definite and renewable period
which, when it was not renewed, did not involve a dismissal but an expiration of the petitioners term.
August 22, 2013

177.Flight Attendants (FASAP) vs PAL July 23, 2008
Facts: FASAP is the duly certified collective bargaining representative of PAL flight attendants and stewards, or collectively
known as PAL cabin crew personnel. On June 15, 1998, PAL retrenched 5,000 of its employees, including more than 1,400
of its cabin crew personnel, to take effect on July 15, 1998.
PAL adopted the retrenchment scheme allegedly to cut costs and mitigate huge financial losses as a result of a
downturn in the airline industry brought about by the Asian financial crisis. During said period, PAL claims to have
incurred P90 billion in liabilities, while its assets stood at P85 billion.
242 Roco 3B
In implementing the retrenchment scheme, PAL adopted its so-called PLAN 14 whereby PALs fleet of aircraft would be
reduced from 54 to 14, thus requiring the services of only 654 cabin crew personnel .
PAL admits that the retrenchment is wholly premised upon such reduction in fleet, and to the strike staged by PAL pilots since this action also
translated into a reduction of flights. PAL claims that the scheme resulted in savings amounting to approximately P24 million per month savings
that would greatly alleviate PALs financial crisis.
Prior to the full implementation of the assailed retrenchment program, FASAP and PAL conducted a series of consultations
and meetings and explored all possibilities of cushioning the impact of the impending reduction in cabin crew
personnel.
However, the parties failed to agree on how the scheme would be implemented. Thus PAL unilaterally resolved to utilize
the criteria set forth in Section 112 of the PAL-FASAP CBA in retrenching cabin crew personnel: that is, that
retrenchment shall be based on the individual employees efficiency rating and seniority. PAL determined the cabin
crew personnel efficiency ratings through an evaluation of the individual cabin crew members overall performance for the
year 1997 alone. Their respective performance during previous years, i.e., the whole duration of service with PAL of
each cabin crew personnel, was not considered. The FACTORS taken into account on whether the cabin crew member
would be retrenched, demoted or retained were:
(1) the existence of excess sick leaves;

(2) the crew members being physically overweight;
(3) seniority; and
(4) previous suspensions or warnings imposed.
While consultations between FASAP and PAL were ongoing, PAL began implementing its retrenchment program by
initially terminating the services of 140 probationary cabin attendants only to rehire them in April 1998. Moreover, their
employment was made permanent and regular.
On July 15, 1998, however, PAL carried out the retrenchment of its more than 1,400 cabin crew personnel.
Meanwhile, in June 1998, PAL was placed under corporate rehabilitation and a rehabilitation plan was approved.
On September 4, 1998, PAL, through its Chairman and Chief Executive Officer Lucio Tan, offered to transfer shares of
stock to its employees and 3 seats in its Board of Directors, on condition that all the existing Collective Bargaining
Agreements with its employees would be suspended for 10 years, but it was rejected by the employees.
On September 17, 1998, PAL informed its employees that it was shutting down its operations effective September 23, 1998,
despite the previous approval on June 23, 1998 of its rehabilitation plan.
On September 23, 1998, PAL ceased its operations and sent notices of termination to its employees .
2 days later, PAL employees, through the Philippine Airlines Employees Association (PALEA) board, sought the intervention
of then President Joseph E. Estrada.
PALEA offered a 10-year moratorium on strikes and similar actions and a waiver of some of the economic benefits in
the existing CBA.
Lucio Tan, however, rejected this counter-offer.
On September 27, 1998, the PALEA board again wrote the President proposing the following terms and conditions, subject to
ratification by the general membership:
243 Roco 3B
1. Each PAL employee shall be granted 60,000 shares of stock with a par value of P5.00, from Mr. Lucio Tans
shareholdings, with three seats in the PAL Board and an additional seat from government shares as indicated by His
Excellency;
2. Likewise, PALEA shall, as far as practicable, be granted adequate representation in committees or bodies which deal
with matters affecting terms and conditions of employment;
3. To enhance and strengthen labor-management relations, the existing Labor-Management Coordinating Council shall
be reorganized and revitalized, with adequate representation from both PAL management and PALEA;
4. To assure investors and creditors of industrial peace, PALEA agrees, subject to the ratification by the general
membership, to the suspension of the PAL-PALEA CBA for a period of ten years, provided the following safeguards
are in place:
a. PAL shall continue recognizing PALEA as the duly certified bargaining agent of the regular rank-and-file
ground employees of the Company;
b. The union shop/maintenance of memberships provision under the PAL-PALEA CBA shall be respected.
c. No salary deduction, with full medical benefits.
5. PAL shall grant the benefits under the 26 July 1998 Memorandum of Agreement forged by and between PAL and
from the company.
6. PALEA members who have been retrenched but have not received separation benefits shall be granted priority in the
hiring/rehiring of employees.
7. In the absence of applicable Company rule or regulation, the provisions of the Labor Code shall apply.
In a referendum conducted on October 2, 1998, PAL employees ratified the above proposal.
On October 7, 1998, PAL resumed domestic operations and, soon after, international flights as well.
Meanwhile, in November 1998, or 5 months after the June 15, 1998 mass dismissal of its cabin crew personnel, PAL
began recalling to service those it had previously retrenched. Thus, in November 1998 and up to March 1999, several of
those retrenched were called back to service. To date, PAL claims to have recalled 820 of the retrenched cabin crew
personnel. FASAP, however, claims that only 80 were recalled as of January 2001.
In December 1998, PAL submitted a stand-alone rehabilitation plan to the SEC by which it undertook a recovery on
its own while keeping its options open for the entry of a strategic partner in the future. Accordingly, it submitted an
amended rehabilitation plan to the SEC with a proposed revised business and financial restructuring plan, which required the
infusion of US$200 million in new equity into the airline.
On May 17, 1999, the SEC approved the proposed Amended and Restated Rehabilitation Plan of PAL and appointed a
permanent rehabilitation receiver for the latter.
On June 7, 1999, the SEC issued an Order confirming its approval of the Amended and Restated Rehabilitation Plan of
PAL. In said order, the cash infusion of US$200 million made by Lucio Tan on June 4, 1999 was acknowledged.
On October 4, 2007, PAL officially exited receivership.
On June 22, 1998, FASAP filed a Complaint against PAL and Patria T. Chiong for UNFAIR LABOR PRACTICE, ILLEGAL
RETRENCHMENT with claims for reinstatement and payment of salaries, allowances, and backwages of affected FASAP
members, actual, moral, and exemplary damages with a prayer to enjoin the retrenchment program then being implemented.
Issue: Whether PALs retrenchment or reduction of employees was justified.
Held: NO. Under the Labor Code, retrenchment or reduction of employees is authorized as follows:
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
244 Roco 3B
provisions of this Title, by serving a written notice on the workers and the Ministry of
Labor and Employment at least one month before the intended date thereof. ... 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 month pay or at least month pay for every
year of service, whichever is higher. A fraction of at least six months shall be considered
one whole year.
The law recognizes the right of every business entity to reduce its work force if the same is made necessary by
compelling economic factors which would endanger its existence or stability . Where appropriate and where conditions
are in accord with law and jurisprudence, the Court has authorized valid reductions in the work force to forestall business
losses, the hemorrhaging of capital, or even to recognize an obvious reduction in the volume of business which has rendered
certain employees redundant. Nevertheless, while it is true that the exercise of this right is a prerogative of
management, there must be faithful compliance with substantive and procedural requirements of the law and
jurisprudence, for retrenchment strikes at the very heart of the workers employment, the lifeblood upon which he and his
family owe their survival.
Retrenchment is only a measure of last resort, when other less drastic means have been tried and found to be inadequate.
The burden clearly falls upon the employer to prove economic or business losses with sufficient supporting
evidence. Its failure to prove these reverses or losses necessarily means that the employees dismissal was not justified.
Any claim of actual or potential business losses must satisfy certain established standards, all of which must concur,
before any reduction of personnel becomes legal. These are:
(1) THAT RETRENCHMENT IS REASONABLY NECESSARY AND LIKELY TO PREVENT BUSINESS LOSSES WHICH, IF
ALREADY INCURRED, ARE NOT MERELY DE MINIMIS, BUT SUBSTANTIAL, SERIOUS, ACTUAL AND REAL, OR IF
ONLY EXPECTED, ARE REASONABLY IMMINENT AS PERCEIVED OBJECTIVELY AND IN GOOD FAITH BY THE
EMPLOYER;
(2) That the employer SERVED WRITTEN NOTICE both to the employees and to the DOLE at least one month prior
to the intended date of retrenchment;
(3) That the employer pays the retrenched employees SEPARATION PAY equivalent to one month pay or at least
(4) THAT THE EMPLOYER EXERCISES ITS PREROGATIVE TO RETRENCH EMPLOYEES IN GOOD FAITH FOR THE
ADVANCEMENT OF ITS INTEREST AND NOT TO DEFEAT OR CIRCUMVENT THE EMPLOYEES RIGHT TO SECURITY OF
TENURE; AND,
(5) THAT THE EMPLOYER USED FAIR AND REASONABLE CRITERIA IN ASCERTAINING WHO WOULD BE DISMISSED
AND WHO WOULD BE RETAINED AMONG THE EMPLOYEES, SUCH AS STATUS, EFFICIENCY, SENIORITY, PHYSICAL
FITNESS, AGE, AND FINANCIAL HARDSHIP FOR CERTAIN WORKERS.
In view of the facts and the issues raised, the resolution of the instant petition hinges on a determination of the existence of
the 1st, 4th and the 5th elements set forth above, as well as compliance therewith by PAL, taking to mind that the burden of
proof in retrenchment cases lies with the employer in showing valid cause for dismissal; that legitimate business reasons exist
to justify retrenchment.
I. FIRST ELEMENT: That retrenchment is reasonably necessary and likely to prevent business losses which, if
already incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, are
reasonably imminent as perceived objectively and in good faith by the employer.
The employers prerogative to layoff employees is subject to certain limitations.
In Lopez Sugar Corporation v. Federation of Free Workers, we held that:
FIRSTLY, the losses expected should be substantial and not merely de minimis in extent.
If the loss purportedly sought to be forestalled by retrenchment is clearly shown to be
245 Roco 3B
insubstantial and inconsequential in character, the bona fide nature of the retrenchment
would appear to be seriously in question.
SECONDLY, the substantial loss apprehended must be reasonably imminent, as such

imminence can be perceived objectively and in good faith by the employer. There should, in
other words, be a certain degree of urgency for the retrenchment , which is after all a
drastic recourse with serious consequences for the livelihood of the employees retired or
otherwise laid-off.
Because of the consequential nature of retrenchment, it must, THIRDLY, be reasonably

necessary and likely to effectively prevent the expected losses . The employer should
have taken other measures prior or parallel to retrenchment to forestall losses, i.e., cut
other costs than labor costs. An employer who, for instance, lays off substantial numbers of
workers while continuing to dispense fat executive bonuses and perquisites or so-called
golden parachutes, can scarcely claim to be retrenching in good faith to avoid losses. To
impart operational meaning to the constitutional policy of providing full protection to
labor, the employers prerogative to bring down labor costs by retrenching must be
exercised essentially as a measure of last resort, after less drastic means e.g.,
reduction of both management and rank-and- file bonuses and salaries, going on reduced
time, improving manufacturing efficiencies, trimming of marketing and advertising costs, etc.
have been tried and found wanting.
LASTLY, but certainly not the least important, alleged losses if already realized, and the
expected imminent losses sought to be forestalled, must be proved by sufficient and
convincing evidence.
The law speaks of serious business losses or financial reverses. Sliding incomes or decreasing gross revenues are not
necessarily losses, much less serious business losses within the meaning of the law . The fact that an employer may
have sustained a net loss, such loss, per se, absent any other evidence on its impact on the business, nor on expected losses
that would have been incurred had operations been continued, may not amount to serious business losses mentioned in the
law. The employer must show that its losses increased through a period of time and that the condition of the company will not
likely improve in the near future, or that it expected no abatement of its losses in the coming years. Put simply, not every loss
incurred or expected to be incurred by a company will justify retrenchment.
The employer must also exhaust all other means to avoid further losses without retrenching its employees. Retrenchment is a
means of last resort; it is justified only when all other less drastic means have been tried and found insufficient . Even
assuming that the employer has actually incurred losses by reason of the Asian economic crisis, the retrenchment is not
completely justified if there is no showing that the retrenchment was the last recourse resorted to. Where the only less drastic
measure that the employer undertook was the rotation work scheme, or the three-day-work-per-employee-per-week schedule,
and it did not endeavor at other measures, such as cost reduction, lesser investment on raw materials, adjustment of the work
routine to avoid scheduled power failure, reduction of the bonuses and salaries of both management and rank-and-file,
improvement of manufacturing efficiency, and trimming of marketing and advertising costs, the claim that retrenchment was
done in good faith to avoid losses is belied.
Alleged losses if already realized, and the expected imminent losses sought to be forestalled, must be proved by sufficient and
convincing evidence. The reason for requiring this is readily apparent: any less exacting standard of proof would render
too easy the abuse of this ground for termination of services of employees ; scheming employers might be merely
feigning business losses or reverses in order to ease out employees. In establishing a unilateral claim of actual or potential
losses, financial statements audited by independent external auditors constitute the normal method of proof of profit
and loss performance of a company. The condition of business losses justifying retrenchment is normally shown by audited
financial documents like yearly balance sheets and profit and loss statements as well as annual income tax returns. Financial
statements must be prepared and signed by independent auditors; otherwise, they may be assailed as self-serving. A Statement
of Profit and Loss submitted to prove alleged losses, without the accompanying signature of a certified public accountant or
audited by an independent auditor, is nothing but a self-serving document which ought to be treated as a mere scrap of paper
246 Roco 3B
devoid of any probative value. The audited financial statements should be presented before the Labor Arbiter who is
in the position to evaluate evidence. They may not be submitted belatedly with the Court of Appeals, because the
admission of evidence is outside the sphere of the appellate courts certiorari jurisdiction. Neither can this Court admit in
evidence audited financial statements, or make a ruling on the question of whether the employer incurred substantial losses
justifying retrenchment on the basis thereof, as this Court is not a trier of facts. Even so, this Court may not be compelled to
accept the contents of said documents blindly and without thinking. The requirement of evidentiary substantiation dictates
that not even the affidavit of the Assistant to the General Manager is admissible to prove losses, as the same is self- serving.
In the instant case, PAL failed to substantiate its claim of actual and imminent substantial losses which would justify
the retrenchment of more than 1,400 of its cabin crew personnel. Although the Philippine economy was gravely affected
by the Asian financial crisis, however, it cannot be assumed that it has likewise brought PAL to the brink of
bankruptcy. Likewise, the fact that PAL underwent corporate rehabilitation does not automatically justify the
retrenchment of its cabin crew personnel . Records show that PAL was not even aware of its actual financial position
when it implemented its retrenchment program . It initially decided to cut its fleet size to only 14 Plan 14 and based on
said plan, it retrenched more than 1,400 of its cabin crew personnel. Later on, however, it abandoned its Plan 14 and
decided to retain 22 units of aircraft (Plan 22). Unfortunately, it has retrenched more than what was necessary.
PAL admits that: Upon reconsideration and with some optimistic prospects for operations, the Company (PAL) decided not to implement Plan 14
and instead implemented Plan 22, which would involve a fleet of 22 planes. Since Plan 14 was abandoned, the Company deemed it
appropriate to recall back into employment employees it had previously retrenched . Thus, some of the employees who were
initially laid off were recalled back to duty, the basis of which was passing the 1997 efficiency rating to meet the Companys operational requirements.
PAL decided to adopt Plan 14 on June 12, 1998. Three days after, or on June 15, 1998, it sent notices of retrenchment to its
cabin crew personnel to take effect on July 15, 1998. However, after allegedly realizing that it was going to retain 22 of its
aircraft instead of 14, and after more than 1,400 of its cabin crew have been fired during the period from November 30,
1998 to December 15, 1998, it suddenly recalled to duty 202 of the retrenched cabin crew personnel.
This only proves that PAL was not aware of the true state of its finances at the time it implemented the assailed
massive retrenchment scheme. It embarked on the mass dismissal without first undertaking a well-considered study on the
proposed retrenchment scheme. This view is underscored by the fact that previously, PAL terminated the services of 140
probationary cabin attendants, but rehired them almost immediately and even converted their employment into
permanent and regular, even as a massive retrenchment was already looming in the horizon .
To prove that PAL was financially distressed, it could have submitted its audited financial statements but it failed to
present the same with the Labor Arbiter . Instead, it narrated a litany of woes without offering any evidence to show that
they translated into specific and substantial losses that would necessitate retrenchment, thus: It is a matter of public knowledge that
PAL had been suffering severe financial losses that reached its most critical condition in 1998 when its liabilities amounted to about
P90,642,933,919.00, while its assets amounted to only about P85,109,075,351.00. The precarious situation prompted PAL to adopt cost-
cutting measures to prevent it from becoming totally bankrupt, including the reduction of its flight fleet from 56 to 14 aircrafts and the retrenchment of
unneeded employees. To save its business, PAL had every right to undergo a retrenchment program immediately. PAL did not need, by law, to justify
or explain to FASAP the reasons for the retrenchment before it could implement it. Proof of actual financial losses incurred by the company is not a
condition sine qua non for retrenchment.
This bare and unilateral claim does not suffice. The Labor Arbiters finding that PAL amply satisfied the rules imposed by law
and jurisprudence that sustain retrenchment, is without basis, absent the presentation of documentary evidence to that effect.
In Saballa v. National Labor Relations Commission, we ruled that where the decision of the Labor Arbiter did not indicate the
specific bases for such crucial finding that the employer was suffering business reverses, the same was arbitrary. We
ratiocinated therein that since the employer insisted that its critical financial condition was the central and pivotal reason for its
retrenchment, there was no reason why it should have neglected or refused to submit its audited financial statements.
PALs assertion that its finances were gravely compromised as a result of the 1997 Asian financial crisis and the pilots strike
lacks basis due to the non-presentation of its audited financial statements to prove actual or imminent losses.
247 Roco 3B
Also, the fact that PAL was placed under receivership did not excuse it from submitting to the labor authorities
copies of its audited financial statements to prove the urgency, necessity and extent, of its retrenchment program.
PAL should have presented its audited financial statements for the years immediately preceding and during which
the retrenchment was carried out. Law and jurisprudence require that alleged losses or expected imminent losses must be
proved by sufficient and convincing evidence.
Likewise, PAL has not shown to the Courts satisfaction that the pilots strike had gravely affected its operations. It offered no
proof to show the correlation between the pilots strike and its alleged financial difficulties.
Moreover, as the Court ruled in the case of EMCO Plywood Corporation, it must be shown that the employer resorted to other
means but these proved to be insufficient or inadequate, such as cost reduction, lesser investment on raw materials, adjustment
of the work routine to avoid scheduled power failure, reduction of the bonuses and salaries of both management and rank-
and-file, improvement of manufacturing efficiency, and trimming of marketing and advertising costs.
In the instant case, there is no proof that PAL engaged in cost-cutting measures other than a mere reduction in its
fleet of aircraft and the retrenchment of 5,000 of its personnel.
The only manifestation of PALs attempt at exhausting other possible measures besides retrenchment was when it
conducted negotiations and consultations with FASAP which, however, ended nowhere. None of the plans and
suggestions taken up during the meetings was implemented.
On the other hand, PALs September 4, 1998 offer of shares of stock to its employees was adopted belatedly, or only after its
more than 1,400 cabin crew personnel were retrenched. Besides, this offer can hardly be considered to be borne of good faith,
considering that it was premised on the condition that, if accepted, all existing CBAs between PAL and its employees would
have to be suspended for 10 years. When the offer was rejected by the employees, PAL ceased its operations on September 23,
1998. It only resumed business when the CBA suspension clause was ratified by the employees in a referendum subsequently
conducted. Moreover, this stock distribution scheme does not do away with PALs expenditures or liabilities, since it has for
its sole consideration the commitment to suspend CBAs with its employees for 10 years. It did not improve the financial
standing of PAL, nor did it result in corporate savings, vis-a-vis the financial difficulties it was suffering at the time.
Also, the claim that PAL saved P24 million monthly due to the implementation of the retrenchment program does
not prove anything; it has not been shown to what extent or degree such savings benefited PAL , vis-a-vis its total
expenditures or its overall financial position. Likewise, its claim that its liabilities reached P90 billion, while its assets amounted
to P85 billion only or a debt to asset ratio of more than 1:1 may not readily be believed, considering that it did not submit
its audited financial statements. All these allegations are self-serving evidence.
Interestingly, PAL submitted its audited financial statements only when the case was the subject of certiorari
proceedings in the CA by attaching in its Comment a copy of its consolidated audited financial statements for the years
2002, 2003 and 2004. However, these are not the financial statements that would have shown PALs alleged precarious
position at the time it implemented the massive retrenchment scheme in 1998.
PAL should have submitted its financial statements for the years 1997 up to 1999; and not for the years 2002 up to 2004
because these financial statements cover a period markedly distant to the years in question, which make them irrelevant and
unacceptable.
Neither could PAL claim to suffer from imminent or resultant losses had it not implemented the retrenchment scheme in
1998. It could not have proved that retrenchment was necessary to prevent further losses, because immediately thereafter or
in February 199978 PAL was on the road to recovery; this is the airlines bare admission in its Comment to the instant
petition. During that period, it was recalling to duty cabin crew it had previously retrenched. In March 2000, PAL declared a
net income of P44.2 million. In March 2001, it reported a profit of P419 million. In March 2003, it again registered a net
income of P295 million0 All these facts are anathema to a finding of financial difficulties.
248 Roco 3B
Finally, what further belied PALs allegation that it was suffering from substantial actual and imminent losses was the fact that
in December 1998, PAL submitted a stand-alone rehabilitation plan to the SEC, and on June 4, 1999, or less than a year
after the retrenchment, the amount of US$200 million was invested directly into PAL by way of additional capital
infusion for its operations. These facts betray PALs claim that it was in dire financial straits. By submitting a stand-alone
rehabilitation plan, PAL acknowledged that it could undertake recovery on its own and that it possessed enough resources to
weather the financial storm, if any.
Thus said, it was grave error for the Labor Arbiter, the NLRC and the Court of Appeals, to have simply assumed that
PAL was in grievous financial state, without requiring the latter to substantiate such claim. It bears stressing that in
retrenchment cases, the presentation of proof of financial difficulties through the required documents, preferably audited
financial statements prepared by independent auditors, may not summarily be done away with.
II. FOURTH ELEMENT: That the employer exercises its prerogative to retrench employees in good faith
for the advancement of its interest and not to defeat or circumvent the employees right to security of
tenure.
Concededly, retrenchment to prevent losses is an authorized cause for terminating employment and the decision
whether to resort to such move or not is a management prerogative. However, the right of an employer to dismiss an
employee differs from and should not be confused with the manner in which such right is exercised. It must not be
oppressive and abusive since it affects ones person and property.
In Indino v. NLRC, the Court held that it is almost an inflexible rule that employers who contemplate terminating the services
of their workers cannot be so arbitrary and ruthless as to find flimsy excuses for their decisions. This 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. Applying this caveat, it is therefore incumbent for the employer, before putting into effect any retrenchment
process on its work force, to show by convincing evidence that it was being wrecked by serious financial problems.
Simply declaring its state of insolvency or its impending doom will not be sufficient. To do so would render the security of
tenure of workers and employees illusory. Any employer desirous of ridding itself of its employees could then easily do so
without need to adduce proof in support of its action. We can not countenance this. Security of tenure is a right guaranteed to
employees and workers by the Constitution and should not be denied on the basis of mere speculation.
On the requirement that the prerogative to retrench must be exercised in good faith, we have ruled that the hiring of
new employees and subsequent rehiring of retrenched employees CONSTITUTE BAD FAITH; that the failure of the
employer to resort to other less drastic measures than retrenchment seriously belies its claim that retrenchment was
done in good faith to avoid losses; and that the demonstrated arbitrariness in the selection of which of its employees to
retrench is further proof of the illegality of the employers retrenchment program, not to mention its bad faith.
When PAL implemented Plan 22, instead of Plan 14, which was what it had originally made known to its employees, it
could not be said that it acted in a manner compatible with good faith. It offered no satisfactory explanation why it
abandoned Plan 14; instead, it justified its actions of subsequently recalling to duty retrenched employees by making
it appear that it was a show of good faith; that it was due to its good corporate nature that the decision to consider recalling
employees was made. The truth, however, is that it was unfair for PAL to have made such a move; it was capricious and
arbitrary, considering that several thousand employees who had long been working for PAL had lost their jobs, only
to be recalled but assigned to lower positions (i.e., demoted), and, worse, some as new hires, without due regard for
their long years of service with the airline.
The irregularity of PALs implementation of Plan 14 becomes more apparent when it rehired 140 probationary cabin
attendants whose services it had previously terminated, and yet proceeded to terminate the services of its permanent
cabin crew personnel.
In sum, we find that PAL had implemented its retrenchment program in an arbitrary manner and with evident bad
faith, which prejudiced the tenurial rights of the cabin crew personnel . Moreover, the managements September 4, 1998
offer to transfer PAL shares of stock in the name of its employees in exchange for the latters commitment to suspend all
249 Roco 3B
existing CBAs for 10 years; the closure of its operations when the offer was rejected; and the resumption of its business after
the employees relented; all indicate that PAL had not acted in earnest in regard to relations with its employees at the time.
III. ELEMENT: That the employer used fair and reasonable criteria in ascertaining who would be
dismissed and who would be retained among the employees, such as status, efficiency, seniority,
physical fitness, age, and financial hardship for certain workers.
In selecting employees to be dismissed, fair and reasonable criteria must be used, such as but not limited to: (a) less
preferred status (e.g., temporary employee), (b) efficiency and (c) seniority.
In Villena v. NLRC, the Court considered seniority an important aspect for the validity of a retrenchment program.
In the implementation of its retrenchment scheme, PAL evaluated the cabin crew personnels performance during the
year preceding the retrenchment (1997), based on the following set of criteria or rating variables found in the Performance
Evaluation Form of the cabin crew personnels Grooming and Appearance Handbook:
The appellate court held that there was no need for PAL to consult with FASAP regarding standards or criteria that the airline would utilize in the
implementation of the retrenchment program; and that the criteria actually used which was unilaterally formulated by PAL using its Performance
Evaluation Form in its Grooming and Appearance Handbook was reasonable and fair.
Indeed, PAL was not obligated to consult FASAP regarding the standards it would use in evaluating the performance of the
each cabin crew. However, we do not agree with the findings of the appellate court that the criteria utilized by PAL in
the actual retrenchment were reasonable and fair. This Court has repeatedly enjoined employers to adopt and observe fair
and reasonable standards to effect retrenchment. This is of paramount importance because an employers retrenchment
program could be easily justified considering the subjective nature of this requirement. The adoption and implementation of
unfair and unreasonable criteria could not easily be detected especially in the retrenchment of large numbers of employees, and
in this aspect, abuse is a very distinct and real possibility. This is where labor tribunals should exercise more diligence; this
aspect is where they should concentrate when placed in a position of having to judge an employers retrenchment program.
250 Roco 3B
Indeed, the NLRC made a detailed listing of the retrenchment scheme based on the ICCD Masterank and Seniority 1997 Ratings. It found the
following:
Prominent from the above data is the retrenchment of cabin crew personnel due to other reasons which, however,
are not specifically stated and shown to be for a valid cause. This is not allowed because it has no basis in fact and
in law.
Moreover, in assessing the overall performance of each cabin crew personnel , PAL only considered the year 1997.
This makes the evaluation of each cabin attendants efficiency rating capricious and prejudicial to PAL employees covered by
it. By discarding the cabin crew personnels previous years of service and taking into consideration only one years
worth of job performance for evaluation, PAL virtually did away with the concept of seniority , loyalty and past
efficiency, and treated all cabin attendants as if they were on equal footing, with no one more senior than the other.
In sum, PALs RETRENCHMENT PROGRAM is illegal because it was based on wrongful premise (Plan 14, which in reality
turned out to be Plan 22, resulting in retrenchment of more cabin attendants than was necessary) and in a set of criteria or
rating variables that is unfair and unreasonable when implemented. It failed to take into account each cabin
attendants respective service record, thereby disregarding seniority and loyalty in the evaluation of overall employee
performance.
Anent the claim of unfair labor practices committed against petitioner, we find the same to be without basis. Article 261 of
the Labor Code provides that violations of a CBA, except those which are gross in character, shall no longer be treated as
unfair labor practice and shall be resolved as grievances under the parties CBA. Moreover, gross violations of CBA under
the same Article referred to flagrant and/or malicious refusal to comply with the economic provisions of such agreement,
which is not the issue in the instant case.
Also, we fail to see any specific instance of union busting, oppression or harassment and similar acts of FASAPs
officers. The fact that majority of FASAPs officers were either retrenched or demoted does not prove restraint or coercion in
their right to organize. Instead, we see a simple retrenchment scheme gone wrong for failure to abide by the stringent rules
prescribed by law, and a failure to discharge the employers burden of proof in such cases.
Quitclaims executed as a result of PALs illegal retrenchment program are likewise annulled and set aside because
they were not voluntarily entered into by the retrenched employees ; their consent was obtained by fraud or mistake, as
volition was clouded by a retrenchment program that was, at its inception, made without basis.
The law looks with disfavor upon quitclaims and releases by employees pressured into signing by unscrupulous
employers minded to evade legal responsibilities. As a rule, deeds of release or quitclaim cannot bar employees from
demanding benefits to which they are legally entitled or from contesting the legality of their dismissal. The acceptance of those
benefits would not amount to estoppel. The amounts already received by the retrenched employees as consideration for
signing the quitclaims should, however, be deducted from their respective monetary awards.
251 Roco 3B
As to PALs recall and rehire process (of retrenched cabin crew employees), the same is likewise defective. Considering
the illegality of the retrenchment, it follows that the subsequent recall and rehire process is likewise invalid and
without effect.
A CORPORATE OFFICER is not personally liable for the money claims of discharged corporate employees unless he
acted with evident malice and bad faith in terminating their employment. We do not see how respondent Patria Chiong
may be held personally liable together with PAL, it appearing that she was merely acting in accordance with what
her duties required under the circumstances. Being an Assistant Vice President for Cabin Services of PAL, she takes direct
orders formulation of the policies to be implemented.
With respect to moral damages, we have time and again held that as a general rule, a corporation cannot suffer nor be
entitled to moral damages. A corporation, being an artificial person and having existence only in legal contemplation, has no
feelings, no emotions, no senses; therefore, it cannot experience physical suffering and mental anguish. Mental suffering can
be experienced only by one having a nervous system and it flows from real ills, sorrows, and griefs of life all of which cannot
be suffered by an artificial, juridical person. The Labor Arbiters award of moral damages was therefore improper.
178.Culili vs Eastern Telecoms (ETPI), February 9, 2011

Facts: Nelson Culili was employed by ETPI as a technician in its Field Operations Department on 27 January 1981. On
12 December 1996, he was promoted to Senior Technician in the Customer Premises Equipment Management Unit of the
Service Quality Department.
ETPIs mandate was to establish landlines. Due to interconnection problems with PLDT, poor subscription,
cancellations, and other difficulties, it was forced to halt the roll out of 129,000 landlines allocated to its employees. In
1998, ETPI was compelled by business troubles to implement a Right-Sizing Program with TWO PHASES (1) the
reduction of the workforce to necessary employees, and (2) a company-wide reorganization resulting in merger,
absorption, or abolition of certain departments.
For the first phase, on 10 December 1998, ETPI offered to employees who had rendered at least 15 years of service a Special
Retirement Program, giving them 2 months pay for every year of service. The Union rejected his, and threatened to strike.
They eventually agreed, however. 102 employees were qualified; 101 accepted. Culili did not.
For the second phase, the Service Quality Department was abolished, and the Customer Premises Equipment
Management Unit (Culilis unit) was absorbed by the Business and Consumer Accounts Department . A Senior
Technician was rendered unnecessary. Culilis position was abolished due to redundancy.
On 5 March 1999, Culili discovered that his name was omitted in the new organization . He protested with 3 other
employees. ETPIs AVP replied, terminating him, and giving him one month of paid leave to find work.
Culili alleges that neither he nor the DOLE was notified of his termination ; that he performed services under a labor-
only contractor; that he was discriminated against since he was not offered a motorcycle as an incentive to retire. ETPI
alleges that after his position was declared redundant, he still reported for work and asked for P1M worth of tools in addition
to other benefits. He filed a complaint for illegal dismissal and ULP. The LA found ETPI guilty; NLRC affirmed. The CA
reversed.
Issue: Whether Culili was validly dismissed.
Held: YES. Under our laws, an employee may be terminated for reasons involving measures taken by the employer due to
business necessities.
There is REDUNDANCY when the service capability of the workforce is greater than what is reasonably required to
meet the demands of the business enterprise. A position becomes redundant when it is rendered superfluous by any
number of factors such as over-hiring of workers, decrease in volume of business, or dropping a particular product line
or service activity previously manufactured or undertaken by the enterprise.
252 Roco 3B
This Court has been consistent in holding that the determination of whether or not an employees services are still
needed or sustainable properly belongs to the employer. Provided there is no violation of law or a showing that the
employer was prompted by an arbitrary or malicious act, the soundness or wisdom of this exercise of business judgment is
not subject to the discretionary review of the Labor Arbiter and the NLRC.
However, an employer cannot simply declare that it has become overmanned and dismiss its employees without producing
adequate proof to sustain its claim of redundancy . 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, such as but not limited
to: preferred status, efficiency, and seniority.
This Court also held that the following evidence may be proffered to substantiate redundancy:
(1) New staffing pattern;
(2) Feasibility studies/proposal on the viability of the newly created positions;
(3) Job description; and
(4) Approval by the management of the restructuring.
In the case at bar, ETPI was upfront with its employees about its plan to implement a Right-Sizing Program. Even in
the face of initial opposition from and rejection of the said program by ETEU, ETPI patiently negotiated with ETEUs
officers to make them understand ETPIs business dilemma and its need to reduce its workforce and streamline its
organization. This evidently rules out bad faith on the part of ETPI.
In deciding which positions to retain and which to abolish, ETPI chose on the basis of efficiency, economy, versatility
and flexibility. It needed to reduce its workforce to a sustainable level while maintaining functions necessary to keep it
operating. The records show that ETPI had sufficiently established not only its need to reduce its workforce and
streamline its organization, but also the existence of redundancy in the position of a Senior Technician . ETPI
explained how it failed to meet its business targets and the factors that caused this, and how this necessitated it to reduce its
workforce and streamline its organization. ETPI also submitted its old and new tables of organization and sufficiently
described how limited the functions of the abolished position of a Senior Technician were and how it decided on
whom to absorb these functions.
In his affidavit dated April 10, 2000, Mr. Arnel D. Reyel, the Head of both the Business Services Department and the Finance
Department of ETPI, described how ETPI went about in reorganizing its departments. Mr. Reyel said that in the course of
ETPIs reorganization, new departments were created, some were transferred, and 2 were abolished. Among the
departments abolished was the Service Quality Department. Mr. Reyel said that ETPI felt that the functions of the Service
Quality Department, which catered to both corporate and small and medium-sized clients, overlapped and were too
large for a single department, thus, the functions of this department were split and simplified into two smaller but
more focused and efficient departments. In arriving at the decision to abolish the position of Senior Technician, Mr. Reyel
explained:
11.5. The business reason for the abolition of the position of Senior Technician was
because in ETPIs judgment, what was needed in the Business and Consumer
Accounts Department was a versatile, yet economical position with functions which
were not limited to the mere repair and servicing of telecommunications equipment .
It was determined that what was called for was a position that could also perform varying
functions such as the actual installation of telecommunications products for medium and
small scale clients, handle telecommunications equipment inventory monitoring, evaluation
of telecommunications equipment purchased and the preparation of reports on the daily and
monthly activation of telecommunications equipment by these small and medium scale
clients.
11.6. Thus, for the foregoing reasons, ETPI decided that the position of Senior
Technician was to be abolished due to redundancy. The functions of a Senior
253 Roco 3B
Technician was to be abolished due to redundancy. The functions of a Senior Technician

would then be absorbed by an employee assigned to the Business and Consumer Accounts
Department who was already performing the functions of actual installation of
telecommunications products in the field and handling telecommunications equipment
inventory monitoring, evaluation of telecommunications equipment purchased and the
preparation of reports on the daily and monthly activation of telecommunications
equipment. This employee would then simply add to his many other functions the
duty of repairing and servicing telecommunications equipment which had been
previously performed by a Senior Technician.
In the new table of organization that the management approved, 112 employees were redeployed and 9 positions were
declared redundant. It is inconceivable that ETPI would effect a company-wide reorganization of this scale for the mere
purpose of singling out Culili and terminating him. If Culilis position were indeed indispensable to ETPI, then it would be
absurd for ETPI, which was then trying to save its operations, to abolish that one position which it needed the most.
Contrary to Culilis assertions that ETPI could not do away with his functions as long as it is in the
telecommunications industry, ETPI did not abolish the functions performed by Culili as a Senior Technician. What
ETPI did was to abolish the position itself for being too specialized and limited. The functions of that position were
then added to another employee whose functions were broad enough to absorb the tasks of a Senior Technician.
Culili maintains that ETPI had already decided to dismiss him even before the second phase of the Right-Sizing Program was
implemented as evidenced by the December 7, 1998 letter.
The December 7, 1998 termination letter signed by ETPIs AVP Stella Garcia hardly suffices to prove bad faith on the
part of the company. The fact remains that the said letter was never officially transmitted and Culili was not
terminated at the end of the first phase of ETPIs Right-Sizing Program. ETPI had given an adequate explanation for
the existence of the letter and considering that it had been transparent with its employees, through their union ETEU, so
much so that ETPI even gave ETEU this unofficial letter, there is no reason to speculate and attach malice to such act.
That Culili would be subsequently terminated during the second phase of the Right-Sizing Program is not evidence
of undue discrimination or singling out since not only Culilis position, but his entire unit was abolished and
absorbed by another department.
UNFAIR LABOR PRACTICE

Culili also alleged that ETPI is guilty of unfair labor practice for violating Article 248(c) and (e) of the Labor Code, to wit:
Art. 248. Unfair labor practices of employers. - It shall be unlawful for an employer to
commit any of the following unfair labor practice:
c. To contract out services or functions being performed by union members when such
will interfere with, restrain or coerce employees in the exercise of their rights to self-
organization;
e. To discriminate in regard to wages, hours of work, and other terms and conditions of
employment in order to encourage or discourage membership in any labor organization.
Nothing in this Code or in any other law shall stop the parties from requiring membership in
a recognized collective bargaining agent as a condition for employment, except those
employees who are already members of another union at the time of the signing of the
collective bargaining agreement. Employees of an appropriate collective bargaining unit who
are not members of the recognized collective bargaining agent may be assessed a reasonable
fee equivalent to the dues and other fees paid by members of the recognized collective
bargaining agent, if such non-union members accept the benefits under the collective
agreement: Provided, that the individual authorization required under Article 242, paragraph
(o) of this Code shall not apply to the non-members of the recognized collective bargaining
agent.
254 Roco 3B
Culili asserted that ETPI is guilty of unfair labor practice because his functions were sourced out to labor-only
contractors and he was discriminated against when his co-employees were treated differently when they were each
offered an additional motorcycle to induce them to avail of the Special Retirement Program . ETPI denied hiring
outside contractors and averred that the motorcycles were not given to his co-employees but were purchased by them
pursuant to their CBA, which allowed a retiring employee to purchase the motorcycle he was assigned during his employment.
The concept of unfair labor practice is provided in Article 247 of the Labor Code which states:
Article 247. Concept of unfair labor practice and procedure for prosecution thereof. --
Unfair labor practices violate the constitutional right of workers and employees to self-
organization, are inimical to the legitimate interest of both labor and management,
including their right to bargain collectively and otherwise deal with each other in an
atmosphere of freedom and mutual respect, disrupt industrial peace and hinder the
promotion of healthy and stable labor-management relations.
In the past, we have ruled that unfair labor practice refers to acts that violate the workers' right to organize. The
prohibited acts are related to the workers' right to self-organization and to the observance of a CBA. We have likewise
declared that there should be no dispute that all the prohibited acts constituting unfair labor practice in essence
relate to the workers' right to self-organization. Thus, an employer may only be held liable for unfair labor practice
if it can be shown that his acts affect in whatever manner the right of his employees to self-organize.
There is no showing that ETPI, in implementing its Right-Sizing Program, was motivated by ill will, bad faith or malice,
or that it was aimed at interfering with its employees right to self-organize. In fact, ETPI negotiated and consulted with
ETEU before implementing its Right-Sizing Program.
According to jurisprudence, basic is the principle that good faith is presumed and he who alleges bad faith has the duty to
prove the same. By imputing bad faith to the actuations of ETPI, Culili has the burden of proof to present substantial
evidence to support the allegation of unfair labor practice. Culili failed to discharge this burden and his bare allegations
deserve no credit.
OBSERVANCE OF PROCEDURAL DUE PROCESS

Although the Court finds Culilis dismissal was for a lawful cause and not an act of unfair labor practice, ETPI, however,
was remiss in its duty to observe procedural due process in effecting the termination of Culili .
Section 2(d), Rule I, Book VI of the Rules Implementing the Labor Code provides:
(d) In all cases of termination of employment, the following standards of due process shall
be substantially observed:
For termination of employment as defined in Article 283 of the Labor Code, the
requirement of due process shall be deemed complied with upon service of a written notice
to the employee and the appropriate Regional Office of the Department of Labor and
Employment at least thirty days before effectivity of the termination, specifying the
ground or grounds for termination.
In Mayon Hotel & Restaurant v. Adana, we observed:
The requirement of law mandating the giving of notices was intended not only to enable
the employees to look for another employment and therefore ease the impact of the loss
of their jobs and the corresponding income, but more importantly, to give the Department
of Labor and Employment (DOLE) the opportunity to ascertain the verity of the
alleged authorized cause of termination.
255 Roco 3B
ETPI does not deny its failure to provide DOLE with a written notice regarding Culilis termination. It, however, insists that it
has complied with the requirement to serve a written notice to Culili as evidenced by his admission of having received it and
forwarding it to his union president.
In Serrano v. National Labor Relations Commission, we noted that a job is more than the salary that it carries. There is a
psychological effect or a stigma in immediately finding ones self laid off from work . This is exactly why our labor laws
have provided for mandating procedural due process clauses. Our laws, while recognizing the right of employers to terminate
employees it cannot sustain, also recognize the employees right to be properly informed of the impending severance of
his ties with the company he is working for. In the case at bar, ETPI, in effecting Culilis termination, simply asked one
of its guards to serve the required written notice on Culili . Culili, on one hand, claims in his petition that this was handed
to him by ETPIs vice president, but previously testified before the Labor Arbiter that this was left on his table. Regardless of
how this notice was served on Culili, this Court believes that ETPI failed to properly notify Culili about his termination.
Aside from the manner the written notice was served, a reading of that notice shows that ETPI failed to properly inform
Culili of the grounds for his termination.
The CA, in finding that Culili was not afforded procedural due process, held that Culilis dismissal was ineffectual, and
required ETPI to pay Culili full backwages in accordance with our decision in Serrano. Over the years, this Court has had the
opportunity to reexamine the sanctions imposed upon employers who fail to comply with the procedural due process
requirements in terminating its employees. In Agabon v. NLRC, this Court reverted back to the doctrine in Wenphil
Corporation v. National Labor Relations Commission and held that where the dismissal is due to a just or authorized cause,
but without observance of the due process requirements, the dismissal may be upheld but the employer must pay an
indemnity to the employee. The sanctions to be imposed however, must be stiffer than those imposed in Wenphil to
achieve a result fair to both the employers and the employees.
In Jaka Food Processing Corporation v. Pacot, this Court, taking a cue from Agabon, held that since there is a clear-cut
distinction between a dismissal due to a just cause and a dismissal due to an authorized cause, the legal
implications for employers who fail to comply with the notice requirements must also be treated differently:
Accordingly, it is wise to hold that:

(1) If the dismissal is BASED ON A JUST CAUSE under Article 282 but the employer failed to comply with the notice
requirement, the sanction to be imposed upon him should be tempered because the dismissal process was, in
effect, initiated by an act imputable to the employee ; and
(2) If the dismissal is BASED ON AN AUTHORIZED CAUSE under Article 283 but the employer failed to comply with the
notice requirement, the sanction should be stiffer because the dismissal process was initiated by the
employer's exercise of his management prerogative .
Hence, since it has been established that Culilis termination was due to an authorized cause and cannot be considered
unfair labor practice on the part of ETPI, his dismissal is valid. However, in view of ETPIs failure to comply with the
notice requirements under the Labor Code, Culili is entitled to nominal damages in addition to his separation pay.
PERSONAL LIABILITY OF ETPIS OFFICERS AND AWARD OF DAMAGES

As a general rule, a corporate officer cannot be held liable for acts done in his official capacity because a corporation,
by legal fiction, has a personality separate and distinct from its officers, stockholders, and members. To pierce this
fictional veil, it must be shown that the corporate personality was used to perpetuate fraud or an illegal act, or to evade an
existing obligation, or to confuse a legitimate issue. In illegal dismissal cases, corporate officers may be held solidarily
liable with the corporation if the termination was done with malice or bad faith.
It is our considered view that Culili has failed to prove that his dismissal was orchestrated by the individual
respondents herein for the mere purpose of getting rid of him . In fact, most of them have not even dealt with Culili
personally. Moreover, it has been established that his termination was for an authorized cause, and that there was no bad faith
on the part of ETPI in implementing its Right-Sizing Program, which involved abolishing certain positions and departments
for redundancy. It is not enough that ETPI failed to comply with the due process requirements to warrant an award of
damages, there being no showing that the companys and its officers acts were attended with bad faith or were done
oppressively.
256 Roco 3B
179. Lambert Pawnbrokers vs Binamira, July 12, 2010

Facts: Petitioner Lambert Lim (Lim) is a Malaysian national operating various businesses in Cebu and Bohol one of
which is Lambert Pawnbrokers and Jewelry Corporation.
Lambert Pawnbrokers and Jewelry Corporation hired Helen Binamira as an appraiser and designated her as Vault
Custodian in 1996. On September 14, 1998, Helen received a letter from Lim terminating her employment effective
that same day. Lim cited business losses necessitating retrenchment as the reason for the termination. Helen thus filed a
case for illegal dismissal against petitioners.
Helen alleged that she was dismissed without cause and the benefit of due process. She claimed that she was a mere
casualty of the war of attrition between Lim and the Binamira family . Moreover, she claimed that there was no proof
that the company was suffering from business losses.
Petitioners asserted that they had no choice but to retrench respondent due to economic reverses. The corporation suffered
a marked decline in profits as well as substantial and persistent increase in losses . In its Statement of Income and
Expenses, its gross income for 1998 dropped from P1million to P665,000.00.
LA: Helen was not illegally dismissed but was validly retrenched.
NLRC: Redundancy not retrenchment; Redundancy program/Retrenchment was not valid for lack of notice.
CA: Illegal dismissal; Management prerogative done in bad faith and in violation of the employees right to due process.
Issue: Whether the dismissal was legal.
Held: NO.
1. THERE WAS NO VALID DISMISSAL BASED ON RETRENCHMENT.
Retrenchment is the termination of employment initiated by the employer through no fault of and without prejudice
to the employees. It is resorted to during periods of business recession, industrial depression, seasonal fluctuations, or
during lulls occasioned by lack of orders, shortage of materials, conversion of the plant to a new production program, or
automation. It is a management prerogative resorted to avoid or minimize business losses, and is recognized by Article
283 of the Labor Code.
To effect a VALID RETRENCHMENT, the following elements must be present:

(a) Retrenchment is reasonably necessary and likely to prevent business losses which, if already incurred, are not
merely de minimis, but substantial, serious and real, or only if expected, are reasonably imminent as perceived
objectively and in good faith by the employer;
(b) Employer serves written notice both to the employee/s concerned and the DOLE at least one month before the
(c) Employer pays the retrenched employee separation pay in an amount prescribed by the Code;
(d) Employer exercises its prerogative to retrench in good faith; and
(e) Employer uses fair and reasonable criteria in ascertaining who would be retrenched or retained.
The LOSSES must be supported by sufficient and convincing evidence. The normal method of discharging this is by the
submission of financial statements duly audited by independent external auditors .
In this case, however, the Statement of Income and Expenses for the year 1997-1998 submitted by the petitioners was
prepared only on January 12, 1999. Thus, it is highly improbable that the management already knew on September 14,
1998, the date of Helens retrenchment, that they would be incurring substantial losses . At any rate, we perused over
the financial statements submitted by petitioners and we find no evidence at all that the company was suffering from
business losses. In fact, in their Position Paper, petitioners merely alleged a sharp drop in its income in 1998 from P1 million
to only P665,000.00. This is not the business losses contemplated by the Labor Code that would justify a valid retrenchment.
A mere decline in gross income cannot in any manner be considered as serious business losses. It should be
substantial, sustained and real.
257 Roco 3B
To make matters worse, there was also no showing that petitioners adopted other cost-saving measures before
resorting to retrenchment. They also did not use any fair and reasonable criteria in ascertaining who would be retrenched.
Finally, no written notices were served on the employee and the DOLE prior to the implementation of the
retrenchment. Helen received her notice only on September 14, 1998, the day when her termination would supposedly take
effect. This is in clear violation of the Labor Code provision which requires notice at least one month prior to the intended
date of termination.
2. THERE WAS NO VALID DISMISSAL BASED ON REDUNDANCY.

Redundancy, on the other hand, exists when the service capability of the workforce is in excess of what is reasonably
needed to meet the demands of the enterprise. A redundant position is one rendered superfluous by any number of
factors, such as over hiring of workers, decreased volume of business, dropping of a particular product line previously
manufactured by the company, or phasing out of a service activity previously undertaken by the business. Under these
conditions, the employer has no legal obligation to keep in its payroll more employees than are necessary for the operation of
its business.
For the IMPLEMENTATION OF A REDUNDANCY PROGRAM TO BE VALID, the employer must comply with the following
requisites:
(a) Written notice served on both the employees and the DOLE at least one month prior to the intended date of
termination of employment;
(b) Payment of separation pay equivalent to at least one month pay for every year of service;
(c) Good faith in abolishing the redundant positions; and
(d) Fair and reasonable criteria in ascertaining what positions are to be declared redundant and accordingly abolished.
In this case, there is no proof that the essential requisites for a valid redundancy program as a ground for the
termination of the employment of respondent are present. There was no showing that the function of respondent is
superfluous or that the business was suffering from a serious downturn that would warrant redundancy considering that such
serious business downturn was the ground cited by petitioners in the termination letter sent to respondent.
In fine, Helens dismissal is illegal for lack of just or authorized cause and failure to observe due process of law.
3. CORPORATION IS SOLELY LIABLE FOR THE ILLEGAL DISMISSAL OF RESPONDENT.

They are only solidarily liable with the corporation for the illegal termination of services of employees if they acted with
malice or bad faith.
In Philippine American Life and General Insurance v. Gramaje, bad faith is defined as a state of mind affirmatively operating with
furtive design or with some motive of self-interest or ill will or for ulterior purpose. It implies a conscious and intentional
design to do a wrongful act for a dishonest purpose or moral obliquity.
In the present case, malice or bad faith on the part of Lim as a corporate officer was not sufficiently proven to justify a
ruling holding him solidarily liable with the corporation. The lack of authorized or just cause to terminate ones employment
and the failure to observe due process do not ipso facto mean that the corporate officer acted with malice or bad faith. There
must be independent proof of malice or bad faith which is lacking in the present case.
4. RESPONDENT IS ENTITLED TO THE FOLLOWING RELIEF UNDER THE LAW.

An illegally dismissed employee is entitled to reinstatement without loss of seniority rights and other privileges and to this full
backwages, inclusive of allowances, and to her other benefits or their monetary equivalent, computed from the time the
compensation was withheld up to the time of actual reinstatement. Where reinstatement is no longer feasible, separation pay
equivalent to at least one month salary or one month salary for every year of service, whichever is higher, a fraction of at least
six months being considered as one whole year, should be awarded to respondent.
258 Roco 3B
In this case, Helen is entitled to her full backwages from the time she was illegally dismissed on September 14, 1998.
Considering the strained relations between the parties, reinstatement is no longer feasible . Consequently, Helen is also
entitled to receive separation pay equivalent to one month salary for every year of service.
A dismissal may be contrary to law but by itself alone, it does not establish bad faith to entitle the dismissed employee to
moral damages. The award of moral and exemplary damages cannot be justified solely upon the premise that the employer
dismissed his employee without authorized cause and due process. Considering that there is no clear and convincing
evidence showing that the termination of Helens services had been carried out in an arbitrary, capricious and
malicious manner, the award of moral and exemplary damages is not warranted.
However, the award of attorneys fee is warranted pursuant to Article 111 of the Labor Code. Ten (10%) percent of the
total award is usually the reasonable amount of attorneys fees awarded. It is settled that where an employee was forced to
litigate and, thus, incur expenses to protect his rights and interest, the award of attorneys fees is legally and morally justifiable.
180.Alabang Country Club vs NLRC, 466 SCRA 329

Facts: Francisco Ferrer, then President of ACCI, requested its Internal Auditor, Ugalde, to conduct a study on the
profitability of ACCIs Food and Beverage Department. Ugalde made use of the audited figures in the financial statements
prepared by SGV&Co. for the years 1989-1993 in reflecting the total revenue and costs and expenses of the F& B
Department. While SGV&Co. deducted the entire undistributed operating costs and expenses consisting of general and
maintenance costs from the total income of ACCI, Ugalde allocated a percentage of these expenses and charged the same
against the total revenue of the F & B Department. Her report showed that from 1989 to 1993 , F & B Department had
been incurring substantial losses in the aggregate amount of P8,727,135.00 .
Realizing that it was no longer profitable for ACCI to maintain its own F & B Department, the management decided to
cease from operating the department and to open the same to a contractor, such as a concessionaire, which would be
willing to operate its own food and beverage business within the club. ACCIs Labor Committee Chairman Santos thus
met with the Union officers and members and discussed the financial standing of the F & B Department.
ACCI subsequently entered into an agreement with La Tasca Restaurant , Inc. (La Tasca), for it to operate the F & B
Department. ACCI sent its F & B Department employees individual letters informing them that their services were
being terminated and that they would be paid separation pay equivalent to 125% percent of their monthly salary for
every year of service. ACCI also informed them that La Tasca agreed to absorb all affected employees immediately
with the status of regular employees without need of undergoing a probationary period, and that all affected employees would
receive the same salary they were receiving from ACCI at the time of their termination.
Union, with the authority of individual respondents, filed before the NLRC a complaint for illegal dismissal, unfair labor
practice, regularization and damages. The Union then filed a notice of strike. According to ACCI, requirements under the
Labor Code had not been complied with; so they suspended those who participated in the strike. Union averred, however, that
no strike was actually held and that it was caught by surprise when, upon reporting for work, employees of La Tasca
brought their equipment and took over the posts held by most of the individual respondents.
In the proceedings before the Labor Arbiter, the union averred that the F & B Division had been gaining profits as shown by
the Statement of Income and Deficit prepared by SGV&Co. They argued that compliance with the standards for losses in
Lopez Sugar Corporation v. Federation of Free Workers to justify their retrenchment were not met by ACCI. ACCI averred, however,
that it may exercise management prerogatives to adopt a cost-saving and cost- consciousness program to improve efficiency in
its operations, prevent losses, and concentrate on core businesses, and to lay-off workers and contract out their jobs. During
the pendency of the complaint for illegal dismissal before the Labor Arbiter , 47 respondents accepted separation
benefits and executed Waivers and Quitclaims in favor of ACCI. Labor Arbiter dismissed the complaint for illegal
dismissal. NLRC affirmed. CA reversed.
Issue: Whether the employees of ACCI were legally dismissed.
259 Roco 3B
Held: YES. TERMINATION DUE TO CLOSURE/CESSATION (NOT RETRENCHMENT). ACCI justifies the closure
of its F & B Department based on business losses incurred for the past years as reflected in its letter to its employees dated
December 1, 1994, to wit:
As you probably been losing for the past several years have known, our Food and
Beverage Division has. Your management tried to remedy the situation through
changes and innovations but to no avail. This being so and to prevent further losses,
management has deemed it necessary to concessionize (sic) our Food and Beverage
operations. Since La Tasca won in the bidding and pursuant to our agreement with the same,
La Tasca shall, effective January 1, 1995, be operating all our Food and Beverage outlets. As
a consequence thereof, please be informed that effective January 1, 1995, your services shall
be terminated as effective said date ACCI shall cease to operate all Food and Beverage
outlets.
In Lopez Sugar Corporation v. Federation of Free Workers cited by respondents, this Court held that retrenchment on the ground
of serious business losses is allowed subject to the conditions that: (1) the losses expected should be substantial and not
merely de minimis in extent; (2) the substantial losses apprehended must be reasonably imminent as such imminence can be
perceived objectively in good faith by the employer; (3) retrenchment must be reasonably necessary and likely to effectively
prevent the expected losses; and (4) the alleged losses, if already realized and the expected imminent losses sought to be
forestalled, must be proven by sufficient and convincing evidence.
This Court, however, views the case as one involving CLOSURE OF A BUSINESS UNDERTAKING, not retrenchment. While
retrenchment and closure of a business establishment or undertaking are often used interchangeably and are interrelated, they
are actually 2 separate and independent authorized causes for termination of employment .
RETRENCHMENT is the reduction of personnel for the purpose of cutting down on costs of operations in terms of
salaries and wages resorted to by an employer because of losses in operation of a business occasioned by lack of work and
considerable reduction in the volume of business. CLOSURE OF A BUSINESS or undertaking due to business losses is the
reversal of fortune of the employer whereby there is a complete cessation of business operations to prevent further
financial drain upon an employer who cannot pay anymore his employees since business has already stopped.
One of the prerogatives of management is the decision to close the entire establishment or to close or abolish a
department or section thereof for economic reasons, such as to minimize expenses and reduce capitalization. While the Labor
Code provides for the payment of separation package in case of retrenchment to prevent losses, it does not obligate the
employer for the payment thereof if there is closure of business due to serious losses.
In the present case, when petitioner decided to cease operating its F & B Department and open the same to a
concessionaire, it did not reduce the number of personnel assigned thereat. It terminated the employment of all
personnel assigned at the department. As in the case of retrenchment, however, for the closure of a business or a
department due to serious business losses to be regarded as an authorized cause for terminating employees, it must
be proven that the losses incurred are substantial and actual or reasonably imminent; that the same increased through a
period of time; and that the condition of the company is not likely to improve in the near future.
The study report submitted by the internal auditor of petitioner, the only evidence submitted to prove its alleged losses,
is self-serving and falls short of the stringent requirement of the law that the employer prove sufficiently and
convincingly its allegation of substantial losses. In contrast, part of the evidence presented by respondents are audited
financial statements prepared by SGV&Co. for 1989 to 1993 which show a positive net income for the F & B Department
ranging from P959,533- P2,911,810 and, except for the year 1992, marked increases in annual net income per year.
In claiming that the F & B Department had been losing, petitioners internal auditor deducted from the departments
annual income the undistributed operating costs and expenses. However, the study report failed to provide the
necessary details on how the undistributed operating costs and expenses charged to the F & B Department was
arrived at, including the basis, for example, of allocating association dues and real estate tax directly to the F & B Department
as expenses. Petitioners failure to prove that the closure of its F & B Department was due to substantial losses
260 Roco 3B
notwithstanding, this Court finds that individual respondents were dismissed on the ground of closure or cessation
of an undertaking not due to serious business losses or financial reverses, which is allowed under Article 283 of the Labor
Code.
The CLOSURE OF OPERATION OF AN ESTABLISHMENT OR UNDERTAKING not due to serious business losses or
financial reverses includes both the complete cessation of operations and the cessation of only part of a companys
activities. For any bona fide reason, an employer can lawfully close shop anytime. Just as no law forces anyone to go into
business, no law can compel anybody to continue the same. It would be stretching the intent and spirit of the law if a court
interferes with managements prerogative to close or cease its business operations just because the business is not suffering
from any loss or because of the desire to provide the workers continued employment.
While petitioner did not sufficiently establish substantial losses to justify closure of its F & B Department on this
ground, there is basis for its claim that the continued maintenance of said department had become more expensive
through the years. The audited financial statements prepared by the SGV&Co. show that 91%-96% percent of the actual
revenues earned by the F & B Department comprised the costs and expenses in maintaining the department. Petitioners
decision to place its F & B operations under a concessionaire must then be respected, absent a showing of bad faith on its
part. Managements exercise of its prerogative to close a section, branch, department, plant or shop will be upheld as
long as it is done in good faith to advance the employers interest and not for the purpose of defeating or
circumventing the rights of employees under the law or a valid agreement.
While the closure of F & B Department is found to be justified, petitioner is, under the above-quoted provision of Art.
283 of the Labor Code, mandated to pay separation pay computed from the time individual respondents commenced their
employment until the time the department ceased operations, in an amount equivalent to one (1) month pay or at least one-
half (1/2) month pay for every year of service, whichever is higher. In petitioners case, it in fact voluntarily doled out to some
of individual respondents separation pay equivalent to one month and a quarter (1 ) for every year of service, a fraction of a
year being considered as one year. Respondents not having been illegally dismissed, they are not entitled to backwages.
A WAIVER or QUITCLAIM is a valid and binding agreement between the parties, provided that it constitutes a credible and
reasonable settlement and the one accomplishing it has done so voluntarily and with a full understanding of its import. As the
waivers and quitclaims executed by individual respondents who had been given their separation pay were duly notarized,
the certificate of acknowledgement in each of them serves as prima facie evidence of their due execution .
181. Mindanao Termia vs Nagkahiusang Mamumuo, December 5, 2012

Facts: Mindanao Terminal and Brokerage Service Inc. (Minterbro) is a domestic corporation managed by De Castro and
engaged in the business of providing arrastre and stevedoring services to its clientele. It has a Contract for Use of Pier
with Del Monte Philippines, Inc. (Del Monte), which provides for the exclusive use by Del Monte of the Minterbro
pier.
The docking of vessels at the piers in Davao City, including that of Minterbro, is being carried out by the Davao Pilots'
Association, Inc. (DPAI). DPAI requested Minterbro to waive any claim of liability against it for any damage to the
pier or vessel. DPAI alleged that Minterbros pier vibrates everytime a ship docks due to weak posts at the underwater
portion.
Minterbro denied the request explaining that DPAIs observation had no basis as any damage to the pier was
actually caused by a vessel under the control of DPAI which bumped the pier . DPAI replied in a letter, informing
Minterbro of its intention to refrain from docking vessels at Minterbros pier for security and safety reasons, until such
time as Minterbro shall have caused the restoration of the original independent fenders of the said pier.
This prompted Minterbro to bring up the matter to the Philippine Ports Authority (PPA). The PPA promptly dispatched a
team to conduct ocular inspection on Minterbros pier. A survey report was issued which showed that the pier facilities
of Minterbro can still be used for loading and unloading of cargoes provided, however, that docking procedures
were properly carried out. However, immediate attention should be given to the Pier damages in order to prevent further
deterioration of its structural members which will lead to a costly repair later on.
261 Roco 3B
Thereafter, from January 1 to April 13, 1997, a total of 16 vessels were serviced at the Minterbro pier. No vessels were
thereafter serviced.
Subsequently, Minterbro decided to rehabilitate the pier on August 1, 1997 on the same day, sent a letter to the DOLE
to inform them of Minterbros intention to temporarily suspend arrastre and stevedoring operations . Minterbro
alleged that, despite the condition of the pier, it was able to service 16 vessels and that it was awaiting vessels to dock at the
pier for the next 3 months, during which Minterbros office, motor pool, and field personnel continued operations.
Respondent Nagkahiusang Mamumuo sa Minterbro-Southern Philippines Federation of Labor composed of Manuel

Abellana, et al., employees of Minterbro working on a rotation basis and employed for arrastre and stevedoring work
depending on the actual requirements of the vessels serviced by Minterbro, filed a complaint for payment of separation
pay against Minterbro and De Castro with the NLRC.
Eventually the repairs were completed on December 10, 1997, and Minterbro sent a letter to the PPA requesting for
certification of the piers readiness to accept vessels for loading and unloading operations. At the initial hearing before the
LA, Minterbro informed the union members that the rehabilitation of the pier has been completed and that they are
merely awaiting clearance. Eventually the PPA released the certification on December 16, 1997. The first vessel that was
serviced after the rehabilitation was done on December 22-28, 1997.
However the union and its members responded that "they are not anymore amenable to going back to work with
the company, for the reason that the latter has not been operating for more than 6 months, even if it resumes operation
at a later date and would just demand that they be given retirement or separation pay. They claim that from the time the last
vessel was serviced before the rehabilitation (April 13,1997) up to the time the first vessel was serviced after the
rehabilitation (December 22, 1997), more than 8 months have passed.
Minterbro contends that the suspension of operations should only be counted from the time they initiated repairs on
the pier (August 1, 1997) and that by the time the certification was released (and conversely the time the first vessel was
serviced) less than 6 months have passed, thus, respondents should be denied their monetary claims.
The LA dismissed respondents complaint. The NLRC modified and ruled in favor of respondents. The CA affirmed.
Issue: Whether the union members/employees were constructively dismissed.
Held. YES. CONSTRUCTIVELY DISMISSED. Del Monte had an undertaking to use petitioners pier for docking under the
Contract of Use it entered with Minterbro. It is petitioners who had the right to demand from Del Monte to perform its
obligations under the Contract for Use of Pier . Petitioners right to compel Del Monte to comply with its contractual
obligations becomes stronger in view of the undertaking of Del Monte to maximize the use of Minterbros pier and not to
dock any of the vessels elsewhere.
Petitioners failed to show any effort on their part to hold Del Monte to its end of the bargain even though the union
members were being forced to be laid off. Effectively, when petitioners allowed Del Monte to abandon its agreement with
Minterbro for 8 months covering the middle of April 1997 until the latter part of December 1997 (period wherein no ship
docked with the pier) without holding Del Monte accountable for such breach, petitioners consented to Del Montes
unexplained action and the prejudice it caused to the union members .
Petitioners exert much effort to dissociate themselves from Del Montes act of stopping its vessels from docking at
Minterbros pier beginning April 14, 1997. They also went to great lengths not only to refute the complaint of DPAI that
Minterbros pier is damaged and defective but also to establish that such allegedly baseless claims have no connection with the
decision of the vessels not to dock at the Minterbro pier. The above communications, however, negate petitioners contention.
If petitioners really believed their claim that the piers condition was still suitable for normal operations even
without having undertaken the repairs which it took starting August 1997 , petitioners could have simply submitted
the survey report which showed the condition of the pier and requested for a certification similar to the PPA
certification dated December 17, 1997 . Yet, they did not. They had to rehabilitate the pier first before they requested
262 Roco 3B
for the certification. Furthermore, the survey report that petitioners use to support their claim that the claim of DPAI as to
the condition of the pier is totally baseless is not completely true. As quoted by petitioners, the Survey Report states that the
Minterbro pier "can still be used for loading and unloading of cargoes provided, however, that docking procedures were
properly carried out.
Moreover, the said Survey Report expressly directs that "immediate attention should be given to the Pier damages in
order to prevent further deterioration of its structural members." Thus, in view of the condition of the pier, it could not
have failed to dawn upon petitioners that no vessel would take the risk of docking in their pier because of its damaged
condition.
A LAY-OFF, used interchangeably with "retrenchment," is a recognized prerogative of management. It is the termination of
employment resorted to by the employer, through no fault of nor with prejudice to the employees, during periods of business
recession, industrial depression, seasonal fluctuations, or during lulls occasioned by lack of orders, shortage of materials,
conversion of the plant for a new production program, or the introduction of new methods or more efficient machinery, or of
automation. Simply put, it is an act of the employer of dismissing employees because of losses in operation of a
business, lack of work, and considerable reduction on the volume of his business, a right consistently recognized and
affirmed by this Court.
When a LAY-OFF IS TEMPORARY, the employment status of the employee is not deemed terminated , but merely
suspended. Article 286 of the Labor Code provides, in part, that the bona fide suspension of the operation of the
business or undertaking for a period not exceeding 6 months does not terminate employment.
Under Article 286 of the Labor Code, the bona fide suspension of the operation of a business or undertaking for a
period not exceeding six months shall not terminate employment. Consequently, when the bona fide suspension of the
operation of a business or undertaking exceeds 6 months, then the employment of the employee shall be deemed
terminated. By the same token and applying said rule by analogy, if the employee was forced to remain without work or
assignment for a period exceeding six months, then he is in effect constructively dismissed.
Article 283 however, speaks of a permanent retrenchment as opposed to a temporary lay-off as is the case here. There is no
specific provision of law which treats of a temporary retrenchment or lay-off and provides for the requisites in
effecting it or a period or duration therefor. These employees cannot forever be temporarily laid-off. To remedy this
situation or fill the hiatus, Article 286 may be applied but only by analogy to set a specific period that employees may remain
temporarily laid-off or in floating status. Six months is the period set by law that the operation of a business or
undertaking may he suspended thereby suspending the employment of the employees concerned. The temporary
lay-off wherein the employees likewise cease to work should also not last longer than six months.
After six months, the employees should either be recalled to work or permanently retrenched following the
requirements of the law, and that failing to comply with this would be tantamount to dismissing the employees and the
employer would thus he liable for such dismissal.
When petitioners failed to make work available to the union members for a period of more than 6 months starting April 14,
1997 by failing to call the attention of Del Monte on the latters obligations under the Contract of Use of Pier and to
undertake a timely rehabilitation of the pier, they are deemed to have constructively dismissed the union members.
182.Ever Electrical (EEMI) vs Samahang Mangagawa, GR No 194795, June 13, 2012

Facts: EEMI manufactures electrical parts and supplies. Respondents herein are the Union of EEMIs employees. EEMI
closed its business operations on Oct. 2006 on the grounds of serious business losses. As a result, the employees thereof were
terminated.
The Union filed a complaint for illegal dismissal and prayer for monetary benefits against EEMI. They alleged that the
termination was without warning, notice, or memorandum, and in full disregard of the requirements in the Labor Code.
In its defense, EEMI explained that it closed due to the following factors:
(a) In 1995, it invested 500M in Orient Bank but failed due to the Asian Financial Crisis in the late 90s.
263 Roco 3B
(b) In 1996, it obtained a 121M loan from UCPB and mortgaged its land, factory, and other assets as security.
(c) The loan because the business was not making money due to the entry of cheaper goods from China.
(d) Orient Bank, where it invested most of its money, closed down due to the Asian Crisis.
In an attempt to save the company, in 2002, EEMI entered into a dacion en pago arrangement with UCPB (mortgagee bank) and
transferred ownership of its property to said bank . UCPB, in turn, leased it to an affiliate company EGO Electronic Supply in
behalf of EEMI.
The arrangement between UCPB and EGO soured due to failure to pay rentals. Thus, in 2006, EGO was ordered to vacate by
virtue of a unlawful detainer action filed by UCPB. When the writ of execution was implemented, the premises were closed
and, as a result, the employees were prevented from entering the factory.
In April 2007, LA ruled in favor of EEMI and found that there was no illegal dismissal. However, it ordered EEMI and its
President (Go) to pay separation pay and 13th month pay.
On Sep 2008, NLRC set aside the previous ruling. It declared that the employees were not enttled to separation pay because
the cessation of business was due to serious business losses.
On appeal, in Aug 2010, CA reinstated the LAs ruling and awarded separation pay. Hence, this petition.
Issue: (1) Whether EEMIs closure was due to serious business losses.
(2) Whether President (Vicente Go) is solidarily liable with EEMI.
Held: (1) NO. Article 283 identifies closure or cessation of operation of the establishment as an AUTHORIZED CAUSE for
terminating an employee. Similarly, the said provision mandates that employees who are laid off from work due to closures
that are not due to business insolvency should be paid separation pay equivalent to one-month pay or to at least
one-half month pay for every year of service, whichever is higher .
Although business reverses or losses are recognized by law as an authorized cause, it is still essential that the alleged losses
in the business operations be proven convincingly; otherwise, this ground for termination of employment would be
susceptible to abuse by conniving employers, who might be merely feigning business losses or reverses in their
business ventures in order to ease out employees.
In this case, EEMI failed to establish that the main reason for its closure was business reverses. As aptly observed by the
CA, the cessation of EEMIs business was not directly brought about by serious business losses or financial reverses, but by
reason of the enforcement of a judgment against it. Thus, EEMI should be required to pay separation pay to its
affected employees.
(2) NOT SOLIDARILY LIABLE. As a general rule, corporate officers should not be held solidarily liable with the
corporation for separation pay for it is settled that a corporation is invested by law with a personality separate and distinct
from those of the persons composing it as well as from that of any other legal entity to which it may be related. Mere
ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of
itself sufficient ground for disregarding the separate corporate personality.
The LA was of the view that Go, as President, actively participated in the management of EEMIs corporate obligations, and,
accordingly, rendered judgment ordering EEMI and Go in solidum to pay the complainants their due. The LA explained
that Gos negligence in not paying the lease rental of the plant in behalf of the lessee EGO where EEMI was operating and
reimburse expenses of UCPB for real estate taxes and the like, prompted the bank to file an unlawful detainer case against the
EGO. This evasion of an existing obligation, made Go as liable as EEMI, for the employees money awards. Added the LA,
being the President and the one actively representing EEMI, in major contracts i.e. Real Estate Mortgage, loans, dacion en pago,
Go has to be liable in the case.
264 Roco 3B
In ruling for Gos solidary liability with EEMI, CA claimed that, in the case of Restaurante Las Conchas v. Llego, when the
employer corporation is no longer existing and unable to satisfy the judgment in favor of the employees , the officers
should be held liable for acting on behalf of the corporation.
A study of Restaurante Las Conchas case, however, bears that it was an application of the EXCEPTION RATHER THAN THE
GENERAL RULE. As stated in the said case, as a rule, the officers and members of a corporation are not personally liable for
acts done in the performance of their duties.
The Court therein explained that it applied the exception because of the peculiar circumstances of the case. If the rule
would be applied, the employees would end up in an empty victory because as the restaurant had been closed for lack of
venue, there would be no one to pay its liability as the respondents therein claimed that the restaurant was owned by a
different entity, not a party in the case.
In Mandaue Dinghow Dimsum House, Co., Inc., the Court declined to apply the ruling in Restaurante Las Conchas because there was
no evidence that the respondent therein, Henry Uytrengsu, acted in bad faith or in excess of his authority. It stressed
that a corporation is invested by law with a personality separate and distinct from those of the persons composing it as well as
from that of any other legal entity to which it may be related. For said reason, the doctrine of piercing the veil of corporate
fiction must be exercised with caution.
The Court explained that corporate directors and officers are solidarily liable with the corporation for the termination
of employees done with malice or bad faith. It stressed that bad faith does not connote bad judgment or negligence; it
imports a dishonest purpose or some moral obliquity and conscious doing of wrong; it means breach of a known duty through
some motive or interest or ill will; it partakes of the nature of fraud.
In Pantranco Employees Association, the Court also rejected the invocation of Restaurante Las Conchas and refused to pierce the veil
of corporate fiction. It explained that:
[T]he doctrine of piercing the corporate veil applies only in three (3) basic areas, namely: 1)
defeat of public convenience as when the corporate fiction is used as a vehicle for the
evasion of an existing obligation; 2) fraud cases or when the corporate entity is used to
justify a wrong, protect fraud, or defend a crime; or 3) alter ego cases, where a corporation is
merely a farce since it is a mere alter ego or business conduit of a person, or where the
corporation is so organized and controlled and its affairs are so conducted as to make it
merely an instrumentality, agency, conduit or adjunct of another corporation. In the
absence of malice, bad faith, or a specific provision of law making a corporate officer
liable, such corporate officer cannot be made personally liable for corporate
liabilities.
The rule, which requires the presence of malice or bad faith, must still prevail. In the recent case of Wensha Spa Center and/or
Xu Zhi Jie v. Yung, the Court absolved the corporations president from liability in the absence of bad faith or malice. In the
said case, the Court stated:
In labor cases, corporate directors and officers may be held solidarily liable with the
corporation for the termination of employment only if done with malice or in bad faith.
Bad faith does not connote bad judgment or negligence; it imports a dishonest purpose or
some moral obliquity and conscious doing of wrong; it means breach of a known duty
through some motive or interest or ill will; it partakes of the nature of fraud.
In the present case, Go may have acted in behalf of EEMI but the companys failure to operate cannot be equated to
bad faith. Cessation of business operation is brought about by various causes like mismanagement, lack of demand,
negligence, or lack of business foresight. Unless it can be shown that the closure was deliberate, malicious and in bad
faith, the Court must apply the general rule that a corporation has, by law, a personality separate and distinct from
that of its owners. As there is no evidence that Go, as EEMIs President, acted maliciously or in bad faith in handling their
265 Roco 3B
business affairs and in eventually implementing the closure of its business, he cannot be held jointly and solidarily liable with
EEMI.
183.Hotel Enterprises vs Samahan, June 5, 2009

Facts: Respondent Union is the certified collective bargaining agent of the rank-and-file employees of Hyatt Regency
Manila, a hotel owned by petitioner Hotel Enterprises of the Philippines, Inc. (HEPI).
In 2001, HEPIs hotel business suffered a slump due to the local and international economic slowdown, aggravated by
the events of September 11, 2001 in the United States. An audited financial report made by SGV on 2002 indicated that the
hotel suffered a gross operating loss amounting to P16,137,217.00 in 2001, a staggering decline compared to
its P48,608,612.00 gross operating profit in year 2000.
To remedy the situation, HEPI did the following:

the management initially decided to cost-cut by implementing energy-saving schemes: prioritizing
acquisitions/purchases etc.
issued a memorandum offering a Special Limited Voluntary Resignation/Retirement Program (SLVRRP) to
its regular employees.
And finally, petitioner decided to implement a downsizing scheme.
The downsizing scheme: the following positions were identified as redundant or in excess of what was required for the
hotels actual operation given the prevailing poor business condition, viz.: a) HOUSEKEEPING ATTENDANT-LINEN; b)
TAILOR; c) ROOM ATTENDANT; d) MESSENGER/MAIL CLERK; and e) TELEPHONE TECHNICIAN (which by their nature
were contractable pursuant to existing laws and jurisprudence ). The effect was to be a reduction of the hotels rank-and file
employees from the agreed number of 248 down to just 150 but it would generate estimated savings of around P9M
per year.
The Union opposed the downsizing plan because no substantial evidence was shown to prove that the hotel was incurring
heavy financial losses, and for being violative of the CBA, and that even if it incurred losses, nonetheless the company
remained profitable.
Despite its opposition, the management pursued sending notices of termination to 48 employees whose positions were
to be retrenched/ declared redundant. Thereafter, the hotel management engaged the services of independent job
contractors to perform the following services: (1) JANITORIAL (previously, stewarding and public area attendants); (2)
LAUNDRY; (3) SUNDRY SHOP; (4) CAFETERIA; and (5) ENGINEERING. Some employees, including one Union officer, who
were affected by the downsizing plan were transferred to other positions in order to save their employment.
On April 12, 2002, the Union filed a notice of strike based on ULP against HEPI. On April 25, 2002, a strike vote was
conducted with majority in the bargaining unit voting in favor of the strike. The result of the strike vote was sent to NCMB-
NCR Director de Jesus also on the same day.
On April 29, 2002, HEPI filed a motion to dismiss notice of strike. On May 3, 2002, the Union filed a petition to suspend
the effects of termination before the Office of the Secretary of Labor. On May 5, 2002, the hotel management began
implementing its downsizing plan immediately terminating seven (7) employees due to redundancy and 41 more due to
retrenchment or abolition of positions. All were given separation pay equivalent to one (1) months salary for every year of
service.
Conciliation proceedings were held between petitioner and respondent, but to no avail. On May 10, 2002,
respondent Union went on strike. A petition to declare the strike illegal was filed by petitioner on May 22, 2002 with the
NLRC (NLRC case 1).
Acting Labor Secretary Imson issued an order (in NLRC case 2, or the certified case) certifying the labor dispute to the
NLRC for compulsory arbitration and directing the striking workers, except the 48 workers earlier terminated, to return to
work within 24 hours. On June 16, 2002, after receiving a copy of the order, members of respondent Union returned to work.
266 Roco 3B
On August 1, 2002, HEPI filed a manifestation informing the NLRC of the pending petition to declare the strike
illegal. Because of this, the NLRC, on November 15, 2002, issued an order directing Labor Arbiter Aliman Mangandog
to immediately suspend the proceedings in the pending petition to declare the strike illegal (NLRC Case 1) and to
elevate the records of the said cas for consolidation with the certified case (NLRC Case 2). However, the labor arbiter had
already issued a Decision dated October 30, 2002 declaring the strike legal. Aggrieved, HEPI filed an appeal ad
cautelam before the NLRC questioning the decision in NLRC case 1 (Oct 30). The Union, on the other hand, filed an MR of
the Order in NLRC Case 2 (Nov 15) on the ground that a decision was already issued in one of the cases ordered to be
consolidated.
On appeal, the NLRC declared the strike illegal. Union moved for an MR, but it was denied. The Union filed a petition
for certiorari with the CA, which reversed it.
Issue: (1) Whether the downsizing scheme is valid.

(2) Whether the strike was legal.
Held: (1) YES.

THE DOWNSIZING SCHEME WAS A VALID RETRENCHMENT/ REDUNDANCY MEASURE.
(a) Elements of Retrenchment and Redundancy
RETRENCHMENT is the reduction of work personnel usually due to poor financial returns, aimed to cut down costs for
operation particularly on salaries and wages. REDUNDANCY, on the other hand, exists where the number of employees is in
excess of what is reasonably demanded by the actual requirements of the enterprise. Both are forms of downsizing and are
often resorted to by the employer during periods of business recession, industrial depression, or seasonal
fluctuations, and during lulls in production occasioned by lack of orders, shortage of materials, conversion of the
plant for a new production program, or introduction of new methods or more efficient machinery or automation .
Retrenchment and redundancy are valid management prerogatives, provided they are done in good faith and the
employer faithfully complies with the substantive and procedural requirements laid down by law and jurisprudence .
For a VALID RETRENCHMENT, the following requisites must be complied with: (1) the retrenchment is necessary to prevent
losses and such losses are proven; (2) written notice to the employees and to the DOLE at least one month prior to the
intended date of retrenchment; and (3) payment of separation pay equivalent to one-month pay or at least one-half month pay
for every year of service, whichever is higher.
In case of REDUNDANCY, the employer must prove that: (1) a written notice was served on both the employees and the
DOLE at least one month prior to the intended date of retrenchment; (2) separation pay equivalent to at least one month pay
or at least one month pay for every year of service, whichever is higher, has been paid; (3) good faith in abolishing the
redundant positions; and (4) adoption of fair and reasonable criteria in ascertaining which positions are to be declared
redundant and accordingly abolished.
It is the employer who bears the onus of proving compliance with these requirements, retrenchment and redundancy
being in the nature of affirmative defenses. Otherwise, the dismissal is not justified.
In the case at bar, petitioner justifies the downsizing scheme on the ground of serious business losses it suffered in 2001. Some
positions had to be declared redundant to cut losses. In this context, what may technically be considered as redundancy
may verily be considered as a retrenchment measure . To substantiate its claim, petitioner presented a financial report
covering the years 2000 and 2001 submitted by the SGV & Co., an independent external auditing firm.
(b) HEPI has shown that the downsizing scheme was used only after all other measures failed. Thus, it was a
valid measure.
This Court will not hesitate to strike down a companys redundancy program structured to downsize its personnel, solely for
the purpose of weakening the union leadership. Our labor laws only allow retrenchment or downsizing as a valid exercise
of management prerogative if all other else fail. But in this case, petitioner did implement various cost-saving
measures and even transferred some of its employees to other viable positions just to avoid the premature
termination of employment of its affected workers. It was when the same proved insufficient and the amount of loss
267 Roco 3B
became certain that petitioner had to resort to drastic measures to stave off P9,981,267.00 in losses, and be able to survive.
Thus, the downsizing scheme was a valid measure.
If we see reason in allowing an employer not to keep all its employees until after its losses shall have fully materialized, with
more reason should we allow an employer to let go of some of its employees to prevent further financial slide.
(c) Implementing a downsizing scheme does not preclude HEPI, or any other employer in general, from
availing the services of contractual/ agency-hired employees.
In Asian Alcohol Corporation v. National Labor Relations Commission, we answered in the negative. We said:
In any event, we have held that an employers good faith in implementing a

redundancy program is not necessarily destroyed by availment of the services of an
independent contractor to replace the services of the terminated employees. We have
previously ruled that the reduction of the number of workers in a company made necessary
by the introduction of the services of an independent contractor is justified when the latter
is undertaken in order to effectuate more economic and efficient methods of
production. In the case at bar, private respondent failed to proffer any proof that the
management acted in a malicious or arbitrary manner in engaging the services of an
independent contractor to operate the Laura wells. Absent such proof, the Court has no
basis to interfere with the bona fide decision of management to effect more economic and
efficient methods of production.
(2) STRIKE DONE IN GOOD FAITH. Procedurally, a strike to be valid must comply with Article 263 of the Labor Code.
Accordingly, the REQUISITES FOR A VALID STRIKE are: (a) a notice of strike filed with the DOLE 30 days before the
intended date thereof or 15 days in case of ULP; (b) a strike vote approved by a majority of the total union
membership in the bargaining unit concerned obtained by secret ballot in a meeting called for that purpose; and (c) a notice
to the DOLE of the results of the voting at least seven (7) days before the intended strike. The requirements are
mandatory and failure of a union to comply therewith renders the strike illegal.
In this case, respondent fully satisfied the procedural requirements prescribed by law: a strike notice filed on April 12,
2002; a strike vote reached on April 25, 2002; notification of the strike vote filed also on April 25, 2002; conciliation
proceedings conducted on May 8, 20002; and the actual strike on May 10, 2002.
Substantively, however, there appears to be a problem. A valid and legal strike must be based on strikeable grounds,
because if it is based on a non-strikeable ground, it is generally deemed an illegal strike. Corollarily, a strike grounded on
ULP is illegal if no acts constituting ULP actually exist. As an exception, even if no such acts are committed by the
employer, if the employees believe in good faith that ULP actually exists, then the strike held pursuant to such belief may be
legal. As a general rule, therefore, where a union believes that an employer committed ULP and the surrounding
circumstances warranted such belief in good faith, the resulting strike may be considered legal although,
subsequently, such allegations of unfair labor practices were found to be groundless.
Here, Union went on strike in the honest belief that petitioner was committing ULP after the latter decided to downsize its
workforce contrary to the staffing/manning standards adopted by both parties under a CBA forged only four (4) short months
earlier. The belief was bolstered when the management hired 100 contractual workers to replace the 48 terminated regular
rank-and-file employees who were all Union members. Indeed, those circumstances showed prima facie that the hotel
committed ULP. Thus, even if technically there was no legal ground to stage a strike based on ULP, since the attendant
circumstances support the belief in good faith that petitioners retrenchment scheme was structured to weaken the bargaining
power of the Union, the strike, by exception, may be considered legal.
Because of this, we view the NLRCs decision to suspend all the Union officers for six (6) months without pay to be too harsh
a punishment. A suspension of two (2) months without pay should have been more reasonable and just. Be it noted that the
striking workers are not entitled to receive strike-duration pay, the ULP allegation against the employer being
unfounded. But since reinstatement is no longer feasible, the hotel having permanently ceased operations on July 2, 2007, we
268 Roco 3B
hereby order the Labor Arbiter to instead make the necessary adjustments in the computation of the separation pay to be
received by the Union officers concerned.
Dispositive Part:
WHEREFORE, the petition is PARTLY GRANTED. The downsizing scheme implemented by petitioner is hereby
declared a valid exercise of management prerogative. The penalty of six (6) months suspension without pay imposed in the
April 3, 2003 NLRC Resolution is hereby reduced to two (2) months, to be considered in the Labor Arbiters computation of
the separation pay to be received by the Union officers concerned. The first batch of quitclaims signed by 33 of the 48
terminated employees is hereby declared invalid and illegal for failure to state the proper consideration therefor, but the
amount received by the employees concerned, if any, shall be deducted from their separation pay and other monetary benefits,
subject to the computation to be made by the Labor Arbiter. The second batch of quitclaims signed by 85 of the 160
terminated employees, following Hyatt Regency Manilas permanent closure, is declared valid and binding.
184.Bog-Medellin Sugarcane Planters vs NLRC, September 25, 1998

Facts: Private respondents were former employees of the respondents with services ranging from 1-16yrs. They
performed the functions of computer, sampler and scalers. Private respondents joined and became members of
Associated Labor Unions. Bonifacio Montilla being the president actively campaigned and convinced the rest of their
co-employees to join with the union. The treasurer of respondent firm Mr. Jose Mari Miranda called Montilla to his office
and told him to withdraw his membership from the Associated Labor Unions or else they will not be hired at the
start of the milling season and will be dismissed. They did not heed the warning of Mr. Miranda and stuck to their
membership with the private respondent union.
Notices of termination were sent to Private Respondents informing them that their services will be terminated due to
financial difficulties. While the said notices stated that their services will be terminated 30 days from date , they were
not allowed to work within that 30 day period and Montilla was immediately replaced
Private respondents alleged that their dismissal was sought due to their membership in the union as they have not
violated any company rules and regulations. They filed the present complaint. On the 30th day of the notice of
termination, 4 of the private respondents, were paid their corresponding separation/gratuity pay and accordingly signed
their Quitclaim and Release.
The Petitioners on the other hand strongly maintained that the dismissal of the private respondents was validly carried
out in accordance with corporate powers to prevent losses. To support this stand they submitted a comparative
statement of Revenue and Expenses for the crop years 1983-1984 and 1984-1985, to show they suffered losses. In
addition they claimed that the private respondents were already barred from filing this present case by virtue of their Quitclaim
and Release.
NLRC ruling
Petitioners failed to present adequate proof of such losses. The Comparative Statement of Revenue and Expenses
submitted by Petitioner Corporation was neither sufficient nor substantial. Petitioners failed to show that, in undertaking
the retrenchment, fair and reasonable standards were used in determining who among its employees would be separated
from the service. They failed to show that they gave the required 30-day notice to the labor department before effecting the
retrenchment. Petitioners hired additional personnel after the private respondents were retrenched. Such actuation
strengthened, rather than negated, private respondents contention that their dismissal was an orchestrated move
to ease them out of employment due to their union activities. It also rejected the posturing of the petitioners that the
execution of a deed of quitclaim and release exculpated them from liability. It did not bar the private respondents from
questioning the legality of their dismissal. Hence, this petition.
Issue: Whether the retrenchment was valid.
Held: NO.
NO PROOF OF BUSINESS LOSSES TO JUSTIFY RETRENCHMENT
269 Roco 3B
Retrenchment is the termination of employment effected by management during periods of business recession ,
industrial depression, seasonal fluctuations, lack of work or considerable reduction in the volume of the employers business.
Resorted to by an employer to avoid or minimize business losses, it is a management prerogative.
REQUISITES OF A VALID RETRENCHMENT: (1) the losses incurred are substantial and not de minimis; (2) the losses are
actual or reasonably imminent; (3) the retrenchment is reasonably necessary and is likely to be effective in preventing the
expected losses; and (4) the alleged losses, if already incurred, or the expected imminent losses sought to be forestalled, are
proven by sufficient and convincing evidence.
In the present case, petitioners miserably failed to prove (1) SUBSTANTIAL LOSSES and (2) the REASONABLE NECESSITY
of the retrenchment.
NO SUFFICIENT AND SUBSTANTIAL EVIDENCE OF BUSINESS LOSS

To justify retrenchment, the employer must prove serious business losses. Not all business losses suffered by the
employer would justify retrenchment. The loss referred to in Article 283 cannot be just any kind or amount of loss;
otherwise, a company could easily feign excuses to suit its whims and prejudices or to rid itself of unwanted employees.
Petitioner Corporation claimed that the retrenchment of private respondents was justified, because it suffered business losses,
as evidenced by its Comparative Statement of Revenue and Expenses. Respondent Commission held that this evidence
was neither sufficient nor substantial :
The only evidence adduced by the petitioners to prove that they suffered economic losses and had therefore to cut down
expenses and reduce personnel is a Comparative Statement of Revenue and Expenses for 2 crop years. No financial
statement, or statement of profit and loss or books of account have been presented to substantiate the alleged losses .
It is also dubious why the said Comparative Statement of Revenue and Expenses was prepared by the office manager instead
of their accountant.
The Comparative Statement of Revenue and Expenses is inconsistent with the statement of Jose Mari M. Miranda
that the petitioners had to cut down expenses and do some retrenchment to prevent further losses and that they had
been incurring losses of P54,692.21 for crop year 1984-1985, and P54,110.94 for the previous crop year 1983-1984. A closer
scrutiny reveal that for the crop year 1983-1984, the petitioners had a net income of P54,110.94.
Another instance which would clearly negate that the [petitioners] did cut down on expenses to prevent any further losses are
the marked increase in the amount of over P13,000.00 in the expenses for conferences, meetings and conventions in
1984-1985 over the previous year, the increase in the printing of office supplies and the National Federation dues which were
unpaid in 1983-1984, but in 1984-1985 the amount of P36,410.59 was paid. The alleged losses become unjustifiable to warrant
the dismissal of the private respondents.Petitioners should have come out with their books of accounts, profit and loss
statements and better still should have presented their accountant to competently amplify their financial position.
The financial statement of Petitioner Corporation for two crop years is insufficient proof of serious business losses that
would justify the retrenchment of private respondents . In Somerville Stainless Steel Corporation v. NLRC, the Court said The
financial statement for 1992, by itself, does not sufficiently prove petitioners allegation that it already suffered
actual serious losses, because it does not show whether its losses increased or decreased. Although petitioner posted a
loss for 1992, it is also possible that such loss was considerably less than those previously incurred, thereby indicating the
companys improving condition.
NO REASONABLE NECESSITY OF RETRENCHMENT

They failed to rebut the allegation that new employees were hired to replace the private respondents after the latter
had been retrenched. The employment of these replacements clearly belies petitioners contention that the retrenchment was
necessary to prevent or offset the expected losses effectively. Petitioners did not consider the long years of service
rendered by the private respondents, ranging from 1 to 16 years. The real motive behind the retrenchment must have
been to discriminate against private respondents as a consequence of their membership in Respondent Union.
WRITTEN NOTICE TO DOLE A MANDATORY REQUIREMENT
270 Roco 3B
Although the absence of this notice renders the dismissal merely defective, not illegal, the failure of petitioners to comply
with this requirement shows nonetheless the bankruptcy of their cause.
WHEN DEED OF QUITCLAIM AND RELEASE IS NOT A BAR

Petitioners pray that the present action should be barred because private respondents have voluntarily executed quitclaims and
releases and received their separation pay.
Not all quitclaims are per se invalid or against public policy, except (1) where there is clear proof that the waiver was
wangled from an unsuspecting or gullible person, or (2) where the terms of settlement are unconscionable on their face. In
these cases, the law will step in to annul the questionable transactions. The private respondents agreed to the quitclaim and
release in consideration of their separation pay. Since they were dismissed allegedly for business losses, they are entitled to
separation pay under Article 283. And since there was thus no extra consideration for the private respondents to give up their
employment, such undertakings cannot be allowed to bar the action for illegal dismissal.
LIABILITY OF A CORPORATE OFFICER

Unless they have exceeded their authority, corporate officers are, as a general rule, not personally liable for their official acts.
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.
Nowhere in the records is there such evidence to show malice or bad faith on Petitioner Francos part. It was
Miranda, the corporate treasurer, who told Private Respondent Montilla to withdraw membership from the union and
threatened not to rehire him and his companions if they refused. Petitioner Francos liability is based only on his being
the chief executive officer of Petitioner Corporation and the lone signatory to the Notice of Termination do not in
themselves support the allegation of bad faith or malice and are, therefore, insufficient to hold him solidarily liable with
Petitioner Corporation for illegal dismissal.
NO VIOLATION OF DUE PROCESS

Petitioners were not denied their day in court, because they were given an opportunity to rebut and refute said private
respondents allegations in their position paper. The case was even further appealed to Respondent Commission.
185.Asian Alcohol vs NLRC, March 25, 1998

Facts: The Parsons family, who originally owned the controlling stocks in Asian Alcohol, were driven by mounting
business losses to sell their majority rights to Prior Holdings, Inc.
To thwart further losses, Prior Holdings implemented a reorganizational plan and other cost-saving measures. 117
employees out of a total workforce of 360 were separated. 72 of them occupied redundant positions that were abolished. Of
these positions, 21 were held by union members and 51 by non-union members.
Private respondents are among those union members whose positions were abolished due to redundancy. They were
all assigned at the Repair and Maintenance Section of the Pulupandan plant.
1. Carias, Martinez, Sendon: water pump tenders
2. Amacio: machine shop mechanic
3. Verayo: briquetting plant operator
4. Tormo: plant helper under Verayo
They received individual notices of termination. They were paid the equivalent of one month salary for every year of
service as separation pay, the money value of their unused sick, vacation, emergency and seniority leave credits, 13th month
pay for the year 1992, medicine allowance, tax refunds, and goodwill cash bonuses for those with at least 10 years of
service.
All of them executed sworn releases, waivers and quitclaims. Except for Verayo and Tormo, they all signed sworn
statements of conformity to the company retrenchment program. And except for Martinez, they all tendered letters of
resignation.
271 Roco 3B
Private respondents filed with the NLRC Bacolod City, complaints for illegal dismissal with a prayer for reinstatement with
backwages, moral damages and attorneys fees. They alleged that Asian Alcohol used the retrenchment program as a
subterfuge for union busting. They claimed that they were singled out for separation by reason of their active participation
in the union. They also asseverated that Asian Alcohol was not bankrupt as it has engaged in an aggressive scheme of
contractual hiring.
Issue: Whether the workers were illegally dismissed.
Held: NO. VALID DISMISSAL. While tilting the scales of justice in favor of workers, the fundamental law also guarantees
the right of the employer to reasonable returns from his investment. The law allows an employer to downsize his
business to meet clear and continuing economic threats. This Court has upheld reductions in the work force to forestall
business losses or stop the hemorrhaging of capital.
The right of management to dismiss workers during periods of business recession and to install labor saving devices to prevent
losses is governed by Art. 283 of the Labor Code, as amended.
RETRENCHMENT and REDUNDANCY are just causes for the employer to terminate the services of workers to preserve
the viability of the business. In exercising its right, however, management must faithfully comply with the substantive and
procedural requirements laid down by law and jurisprudence.
RETRENCHMENT
Requisites
(a) That the retrenchment is reasonably necessary and likely to prevent business losses which, if already incurred,
are not merely de minimis, but substantial, serious, actual and real, or if only expected, are reasonably imminent as
perceived objectively and in good faith by the employer;
(b) That the employer served written notice both to the employees and to the DOLE at least one month prior to the
(c) That the employer pays the retrenched employees separation pay equivalent to one month pay or at least 1/2
(d) That the employer exercises its prerogative to retrench employees in good faith for the advancement of its
interest and not to defeat or circumvent the employees right to security of tenure; and
(e) That the employer used fair and reasonable criteria in ascertaining who would be dismissed and who would
be retained among the employees, such as status (i.e., whether they are temporary, casual, regular or managerial
employees), efficiency, seniority, physical fitness, age, and financial hardship for certain workers.
FINANCIAL DOCUMENTS AS PROOF

The condition of business losses is normally shown by audited financial documents like yearly balance sheets and profit and
loss statements as well as annual income tax returns. Financial statements must be prepared and signed by independent
auditors. Unless duly audited, they can be assailed as self-serving documents. It is not enough that only the financial
statements for the year during which retrenchment was undertaken . While the company has indeed been losing, its
losses may be on a downward trend, indicating that business is picking up and retrenchment, being a drastic move, should no
longer be resorted to. It is necessary that the employer also show that its losses increased through a period of time
and that the condition of the company is not likely to improve in the near future .
Private respondents never contested the veracity of the audited financial documents proffered by Asian Alcohol.
Neither did they object to their admissibility. They show that petitioner has accumulated losses amounting to
P306,764,349.00 and showing nary a sign of abating in the near future . The allegation of union busting is bereft of proof.
Union and non-union members were treated alike. The records show that the positions of 51 other non-union members were
abolished due to business losses.
RETRENCHMENT AS A CONCEPT
272 Roco 3B
Article 283 of the Labor Code uses the phrase retrenchment to prevent losses. This phrase means that retrenchment
must be undertaken by the employer before losses are actually sustained. The employer need not keep all his employees
until after his losses shall have materialized. Otherwise, the law could be vulnerable to attack as undue taking of property for
the benefit of another.
Prior Holdings took over the operations of Asian Alcohol in October 1991. Plain to see , the last quarter losses in 1991 were
already incurred under the new management. There were no signs that these losses would abate. Losses have bled
Asian Alcohol incessantly over a span of several years. They were incurred under the management of the Parsons family
and continued to be suffered under the new management of Prior Holdings . Ultimately, it is Prior Holdings that will
absorb all the losses, including those incurred under the former owners of the company.
The law gives the new management every right to undertake measures to save the company from bankruptcy.
The reorganizational plan and comprehensive cost-saving program to turn the business around were not designed to
bust the union of the private respondents. Retrenched were 117 employees. 72 of them including private respondents were
separated because their positions had become redundant. In this context, what may technically be considered as
redundancy may verily be considered as retrenchment measures . Their positions had to be declared redundant to cut
losses.
REDUNDANCY
Redundancy exists when the service capability of the work force is in excess of what is reasonably needed to meet the
demands on the enterprise. A 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 a service activity priorly undertaken by the business. Under these conditions, the employer has no
legal obligation to keep in its payroll more employees than are necessary for the operation of its business.
Requisites
(a) Written notice served on both the employees and the DOLE at least one month prior to the intended date of
retrenchment;
(b) Payment of separation pay equivalent to at least one month pay for every year of service, whichever is higher;
(c) Good faith in abolishing the redundant positions; and
(d) Fair and reasonable criteria in ascertaining what positions are to be declared redundant and accordingly abolished.
Private respondents Carias, Martinez and Sendon were water pump tenders. They tended the water wells of Asian Alcohol
located in Ubay, Pulupandan, Negros Occidental. However, Asian Alcohol did not own the land where the wells stood . It
only leased them. The lease contract, which also provided for a right of way leading to the site of the wells, was terminated.
The water from the wells had become salty due to extensive prawn farming nearby and could no longer be used by
Asian Alcohol for its purpose. The wells had to be closed and needless to say, the services of Carias, Martinez and Sendon
had to be terminated on the twin grounds of redundancy and retrenchment .
Private respondent Verayo was the briquetting plant operator in charge of the coal-fired boiler. Private respondent Tormo was
one of the three briquetting helpers. To enhance production efficiency, the new management team shifted to the use of
bunker fuel by about 70% to fire its boiler. The shift meant substantial fuel cost savings. The services of only 2
helpers were all that was necessary to attend to the much lesser amount of coal required to run the boiler. Thus, the
position of private respondent Verayo had to be abolished. Of the three briquetting helpers, Tormo was the oldest, being
already 41 years old. The other two, Rudy Javier, Jr. and Eriberto Songaling, Jr., were younger, being only 28 and 35,
respectively. Age, with the physical strength that comes with it, was particularly taken into consideration by the management
team in deciding whom to separate. Hence, it was private respondent Tormo who was separated from service.
Private respondent Amacio was among the 10 mechanics who manned the machine shop at the plant site. At their current
production level, the new management found that it was more cost efficient to maintain only 9 mechanics. In
choosing whom to separate among the 10) mechanics, the management examined employment records and reports to
determine the least efficient among them . It was Amacio who appeared the least efficient because of his poor health
condition.
273 Roco 3B
The private respondents contend that the new management should have followed the policy of first in, last out in choosing which
positions to declare as redundant or whom to retrench to prevent further business losses.
No law mandates such a policy. And the reason is simple enough. The characterization of positions as redundant is an
exercise of business judgment on the part of the employer. It will be upheld as long as it passes the test of arbitrariness.
Private respondents call our attention to their allegation that casuals were hired to replace Carias, Martinez and Sendon as
water pump tenders at the Ubay wells. They rely on the testimony of Engr. Federico Palmares, Jr., the head of the
Mechanical Engineering Services Department who admitted the engagement of independent contractors to operate the wells.
A reading of the testimony of Engr. Palmares, however, will reveal that he referred not to the Ubay wells which were
tended by private respondents Carias, Martinez and Sendon, but to the Laura wells.
An employers good faith in implementing a redundancy program is not necessarily destroyed by availment of the
services of an independent contractor to replace the services of the terminated employees. The reduction of the
number of workers in a company made necessary by the introduction of the services of an independent contractor is justified
when the latter is undertaken in order to effectuate more economic and efficient methods of production. Private respondents
failed to proffer any proof that the management acted in a malicious or arbitrary manner in engaging the services of an
independent contractor to operate the Laura wells.
Private respondents now claim that they signed the quitclaims, waivers and voluntary resignation letters only to get their
separation package. They maintain that in principle, they did not believe that their dismissal was valid.
It is true that this Court has generally held that quitclaims and releases are contrary to public policy and therefore, void.
Nonetheless, voluntary agreements that represent a reasonable settlement are binding on the parties and should not
later be disowned. It is only where there is clear proof that the waiver was wangled from an unsuspecting or gullible person,
or the terms of the settlement are unconscionable, that the law will step in to bail out the employee.
There is no showing that the quitclaims, waivers and voluntary resignation letters were executed by the private
respondents under force or duress. In truth, the documents embodied separation benefits that were well beyond what
the company was legally required to give private respondents.
We note that out of the more than 100 workers that were retrenched by Asian Alcohol, only these six private
respondents were not impressed by the generosity of their employer. Their late complaints have no basis and deserve our
scant consideration.
186.National Federation of Labor (NFL) vs NLRC, Marc 2, 2000

Facts: Petitioners are members of NFL who were employed by respondents Charles and Susie Reith GM and Owner
of the Patalon Coconut Estate in Zamboanga City . In 1988 Congress enacted R.A. 6657, the Comprehensive Agrarian
Reform Law, mandating the acquisition of lands for distribution to farmer-beneficiaries under the CARP. The Estate was
awarded to the Patalon Estate Agrarian Reform Association (PEARA), a cooperative accredited by the DAR of
which petitioners are members and co-owners.
As a result, the Reiths shut down the estate, and petitioners employment was severed on 31 July 1994. They did not
receive separation pay. The cooperative took over the estate on August 1, with petitioners becoming part-owners of the
land. On 25 April 1995, they filed a complaint with the NLRCs Regional Arbitration Branch for reinstatement on the
ground of illegal dismissal. The RAB ruled in their favor. The NLRC reversed.
Issue: Whether or not an employer that was compelled to cease operations due to the compulsory acquisition by the
government of its lands for the purposes of agrarian reform is liable to pay separation pay.
Held: NO. Petitioners contend that they are entitled to separation pay pursuant to Article 283. It is clear that Article 283 of
the Labor Code applies in cases of closures of establishment and reduction of personnel.
274 Roco 3B
The peculiar circumstances in the case at bar, however, involves neither the closure of an establishment nor a
reduction of personnel as contemplated under the aforesaid article . When the Patalon Coconut Estate was closed
because a large portion of the estate was acquired by DAR pursuant to CARP, the ownership of that large portion of the
estate was precisely transferred to PEARA and ultimately to the petitioners as members thereof and as agrarian lot
beneficiaries. Hence, Article 283 of the Labor Code is not applicable to the case at bench.
Even assuming, arguendo, that the situation in this case were a closure of the business establishment called Patalon Coconut
Estate of private respondents, still the petitioners/employees are not entitled to separation pay. The closure
contemplated under Article 283 is a unilateral and voluntary act on the part of the employer to close the business
establishment as may be gleaned from the wording of the said legal provision that "The employer may also terminate the
employment of any employee due to...". The use of the word "may," in a statute, denotes that it is directory in nature
and generally permissive only. The "plain meaning rule" or verba legis in statutory construction is thus applicable in this case.
Where the words of a statute are clear, plain and free from ambiguity, it must be given its literal meaning and applied without
attempted interpretation.
In other words, Article 283 does not contemplate a situation where the closure of the business establishment is forced
upon the employer and ultimately for the benefit of the employees.
As earlier stated, the Patalon Coconut Estate was closed down because a large portion of the said estate was acquired by
the DAR pursuant to the CARP. Hence, the closure of the Patalon Coconut Estate was not effected voluntarily by
private respondents who even filed a petition to have said estate exempted from the coverage of RA 6657 .
Unfortunately, their petition was denied by the Department of Agrarain Reform.
Since the closure was due to the act of the government to benefit the petitioners, as members of the Patalon Estate
Agrarian Reform Association, by making them agrarian lot beneficiaries of said estate, the petitioners are not entitled
to separation pay. The termination of their employment was not caused by the private respondents. The blame, if any, for the
termination of petitioners employment can even be laid upon the petitioner-employees themselves inasmuch as they formed
themselves into a cooperative, PEARA, ultimately to take over, as agrarian lot beneficiaries, of private respondents landed
estate pursuant to RA 6657. The resulting closure of the business establishment, Patalon Coconut Estate, when it was placed
under CARP, occurred through no fault of the private respondents.
187. San Felipe Neri vs NLRC, September 11, 1991

Facts: Petitioners were the incorporators, stockholders and/or trustees of a corporation known as the San Felipe Neri
School of Mandaluyong which owned and operated petitioner school. Private respondents were formerly teacher
employees of the aforesaid institution.
On April 18,1981, petitioner-school sold the 2 storey concrete building (and other buildings, structures, or improvements)
used in the operation of the San Felipe School to the Roman Catholic Archbishop of Manila (RCAM).
Private respondents (former teachers of petitioner school) upon reporting for work sometime in May of the same year for
the opening of the school year 198182, were surprised to learn from school authorities that the school was already
under new ownership and management. They had never been previously notified nor informed of the sale or transfer of
the school to the RCAM. The new owner and administrator (RCAM), in turn, required said respondent teachers to apply
as new employees subject to the usual probation
Demoted to probationary status and their past services not recognized by the new employer, said teachers inquired about
their rights from the former school owners (herein petitioners), but to no avail. Instead, they were referred to the new owners
of the school, supposedly as the proper party who should answer for and adjust private respondents demand and grievances.
Respondent teachers then filed a complaint before the Labor Arbiter against all the petitioners, including the RCAM, the
vendee or transferee, as alternative defendant for separation pay, differential pay and other claims
275 Roco 3B
Labor Arbiter rendered judgment in favor of private respondents, ordering petitioners to pay the latter their separation pay.
Second Division of the NLRC in its Resolution, affirmed the findings and decision of the Labor Arbiter.
Issue: Whether the teachers employement were terminanted by the sale/transfer of San Felipe to RDCAM thus entitling them
to separation pay.
Held: YES. It is not disputed that San Felipe Neri School of Mandaluyong, Inc. sold its properties and assets to RCAM on
April 18, 1981; but RCAM did not buy the school nor assumed its liabilities. Immediately thereafter, RCAM, as the
transferee-purchaser, continued the operation of the school, but applied for a new permit to operate the same . In short,
there was a change of ownership or management of the school properties and assets.
Change of ownership or management of an establishment or company, however, is not one of the just causes provided
by law for the termination of employment. There can be no controversy, however, 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
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. Such dismissal or termination should not, however, be interpreted in such a manner
as to insulate the employer or selling corporation (petitioner school) from its obligation to its employees, particularly
the payment of separation pay. Such situation is not envisioned in the law. It strikes at the very concept of social justice.
A close scrutiny of the pertinent Deed of Sale dated April 18, 1981 reveals no express stipulation whatsoever relative to
the continued employment by the transferee , RCAM, of the employees (herein private respondents) of the erstwhile
employer (petitioner). On the contrary, records show that RCAM expressly manifested its unwillingness to absorb the
petitioner schools employees or to recognize their prior service.
As correctly found by the Labor Arbiter and the NLRC, respondent teachers employment has been effectively
terminated and there was in effect a closure. Obviously, therefore, the fate of private respondents under the new
owner (RCAM) appeared unprovided for. And there is no law which requires the purchaser to absorb the employees of the
selling corporation. As there is no such law, the most that the purchasing company may do, for purposes of public
policy and social justice, is to give preference to the qualified separated employees of the selling company, who in
their judgment are necessary in the continued operation of the business establishment (Ibid.). This, RCAM, did. It required
private respondents to re-apply as new employees as a condition for rehiring, subject to the usual probationary status, the
latters past service with the petitionerstransferors not recognized.
Records further reveal that the negotiations for the sale of the assets and properties of petitioner school were held
behind the back of the private respondents who were taken by surprise when they reported for work finding a new
owner of the school. As mentioned at the outset they were not formally notified of the sale or transfer to RCAM and its
attendant consequences with respect to their continued employment status under the new owners. As such, the recognition
of their past services as teachers remains uncertain. Worse, they were not at all given the required notice of their
termination.
On all fours with the instant case is the ruling in Central Azucarera del Danao vs. CA:
Technically then, the employees were actually terminated and/or separated from the
service on the date of the sale, or on July 7, 1961. Worse, they were not at all given the
required notice of their termination. Inasmuch as there was no notice of termination
whatsoever given to the employees of Central Danao coupled with the fact that no
efforts were exerted by Central Danao to apprise its employees of the consequences of the
sale or disposition of its assets to Dadeco, justice and equity dictate that private respondents
be entitled to their termination or separation pay corresponding to the number of years of
service with Central Danao until June 7, 1961.
276 Roco 3B
In the case of Philippine Refining Company vs. Garcia, the Court held that except where other applicable statutes provide
differently, it is not the cause for the dismissal but the employers failure to serve notice upon the employee that renders
the employer answerable to the employee for termination pay .
Hence, petitioners contention that private respondents are not entitled to separation pay on the ground that there was no
termination of the latters employment but a mere change of ownership in the assets and properties of the school is untenable.
Neither can the flimsy excuse that at the time of their alleged termination, there was no employer-employee relationship
between them (private respondents) and petitioners, be sustained.
Finally, this Honorable Court took the occasion to remind employers to exercise caution and care in dealing with their
employees to prevent suspicion that the adoption of certain corporate combinations such as merger or
consolidation, or outright sale or disposition of assets is but a scheme to evade payment of termination pay to their
employees.
With the resolution of the main issue, there appears to be no necessity to go into the other issues, except to say that only
petitioner San Felipe Neri School of Mandaluyong is liable to the private respondents , the other petitioners not being
the employers of the teachers.
188.International Hardware vs NLRC, August 10, 1989

Facts: Bonifacio Pedroso was employed as a truck helper and later as a delivery truck driver with a monthly salary of
P900.00 starting from 1966 until December 1984 when the number of working days of Pedroso was reduced to just 2 days
a week due to the financial losses suffered by the business of petitioner .
Pedroso filed a complaint for illegal dismissal and the payment of separation pay. Labor arbiter ruled that inasmuch as the
working arrangement of private respondent was rotated in such a way that the number of his working days had been
substantially reduced for more than 6 months since December, 1984 and considering that the financial crisis of petitioner has
not eased, private respondent is entitled to the payment of separation pay as if he was actually retrenched, in the
amount of P8,100.00. NLRC affirmed and held that there was in effect a "constructive dismissal" of private respondent
considering that his rotation of work was not with his consent and that the same was not reported to the DOLE, and
considering further that more than 6 months have already lapsed but the financial crisis of petitioner had not been adverted to.
Issue: Whether an employee who had been retrenched or otherwise separated from the service of an employer who, in turn,
suffered financial losses and revenues is entitled to separation pay.
Held: YES. ENTITLED TO SEPARATION PAY. Under Art. 283, an employer may terminate the employment of any
employee due to the following causes: (1) installation of labor-saving devices; (2) redundancy; (3) retrenchment to prevent
losses; and (4) the closing or cessation of operation of the establishment or undertaking, unless the closing is for the purpose
of circumventing the provisions of law. It is required that to effect such termination of any employee, the employer must
serve a written notice on the workers and the DOLE at least 1 month before the intended date thereof. The purpose of
such previous notice to DOLE must be to enable it to ascertain the verity of the cause for termination of employment.
In case of termination due to the installation of labor-saving devices or redundancy the worker affected thereby shall be
entitled to separation pay equivalent to at least one (1) month pay or to at least one month pay for every year of service,
whichever is higher. However, in case of retrenchment to prevent losses and in cases of closure or cessation of
operations of the 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.
Pedroso had not been terminated or retrenched by petitioner but that due to financial crisis the number of working
days of private respondent was reduced to just 2 days a week. Petitioner could not have been expected to notify DOLE
of the retrenchment of private respondent under the circumstances for there was no intention to do so on the part of
petitioner.
277 Roco 3B
By the same token, if an employee CONSENTED TO HIS RETRENCHMENT or VOLUNTARILY APPLIED FOR
RETRENCHMENT with the employer due to the installation of labor-saving devices, redundancy, closure or cessation of
operation or to prevent financial losses to the business of the employer, the required previous notice to the DOLE is
NOT necessary as the employee thereby acknowledged the existence of a valid cause for termination of his employment.
Nevertheless, considering that private respondent had been rotated by petitioner for over 6 months due to the serious
losses in the business so that private respondent had been effectively deprived a gainful occupation thereby , and
considering further that the business of petitioner was ultimately closed and sold off, the Court finds, and so holds that the
NLRC correctly ruled that private respondent was thereby constructively dismissed or retrenched from employment.
Pursuant to Art. 286 of the Labor Code, it is clear that when the bona fide suspension of the operation of a business or
undertaking exceeds 6 months then the employment of the employee shall be deemed terminated. Thus, Pedroso is
entitled to one (1) month pay or at least (1/2) month pay for every year of service, whichever is higher. The Court assumes
that the award of P8,100.00 separation pay in favor of the private respondent was computed in accordance with the foregoing
formula as provided by law. Otherwise, it should be recomputed accordingly.
August 24, 2013

189.Perez vs PTT, April 7, 2009
Facts: Petitioner Perez and Doria were employed by PT&T as shipping clerk and supervisor in PT&Ts Shipping Section.
Acting on an alleged unsigned letter regarding anomalous transactions at the Shipping Section , respondents formed a
special audit team to investigate the matter. It was discovered that the Shipping Section jacked up the value of the
freight costs for goods shipped and that the duplicates of the shipping documents allegedly showed traces of tampering,
alteration and superimposition.
Petitioners were placed on PREVENTIVE SUSPENSION for 30 days for their alleged involvement in the anomaly. This was
extended for 15 days twice on different occasions. Eventually a memorandum was sent to petitioners, informing them
of their termination. Hence petitioners filed a complaint for ILLEGAL SUSPENSION and DISMISSAL.
Petitioners contend that there was no just cause for their dismissal, that they were not accorded due process and that
they were illegally suspended for 30 days. The LA ruled in favor of them. The NLRC reversed. The CA affirmed. The CA,
in upholding the NLRCs decision, reasoned that there was s ufficient basis for respondents to lose their confidence in
petitioners for allegedly tampering with the shipping documents . Respondents emphasized the importance of a shipping
order or request, as it was the basis of their liability to a cargo forwarder.
Issue: Whether the petitioners were illegally suspended and dismissed.
Held: YES. The court held that respondents evidence was found to be insufficient to clearly and convincingly
establish the facts from which the loss of confidence resulted. Other than their bare allegations and the fact that such
documents came into petitioners hands at some point, respondents should have provided evidence of petitioners
functions, the extent of their duties, the procedure in the handling and approval of shipping requests and the fact that
no personnel other than petitioners were involved.
The alterations on the shipping documents could not reasonably be attributed to petitioners because it was never
proven that petitioners alone had control of or access to these documents . Unless duly proved or sufficiently
substantiated otherwise, impartial tribunals should not rely only on the statement of the employer that it has lost confidence in
its employee.
Willful breach by the employee of the trust reposed in him by his employer or duly authorized representative is a just cause for
termination. However, loss of confidence should not be simulated. It should not be used as a subterfuge for causes
which are improper, illegal or unjustified. Loss of confidence may not be arbitrarily asserted in the face of overwhelming
evidence to the contrary. It must be genuine, not a mere afterthought to justify an earlier action taken in bad faith.
278 Roco 3B
The burden of proof rests on the employer to establish that the dismissal is for cause in view of the security of tenure
that employees enjoy under the Constitution and the Labor Code. The employers evidence must clearly and convincingly
show the facts on which the loss of confidence in the employee may be fairly made to rest. The same must be adequately
proven by substantial evidence. In this case, respondent failed to do so.
Respondents illegal act of dismissing petitioners was aggravated by their failure to observe due process. To meet the
requirements of due process in the dismissal of an employee, an employer must furnish the worker with TWO WRITTEN
NOTICES: (1) a written notice specifying the grounds for termination and giving to said employee a reasonable opportunity to
explain his side and (2) another written notice indicating that, upon due consideration of all circumstances, grounds have been
established to justify the employer's decision to dismiss the employee.
Petitioners were neither apprised of the charges against them nor given a chance to defend themselves. They were
simply and arbitrarily separated from work and served notices of termination in total disregard of their rights to due
process and security of tenure. The labor arbiter and the CA correctly found that respondents failed to comply with the two-
notice requirement for terminating employees.
Petitioner next contends that they are lack of due process was aggravated by the fact that they are entitled to a hearing. There
is no need for a hearing or CONFERENCE. We note a marked difference in the standards of due process to be
followed as prescribed in the Labor Code and its implementing rules. The Labor Code, on one hand, provides that an
employer must provide the employee ample opportunity to be heard and to defend himself with the assistance of his representative if
he so desires. The omnibus rules implementing the Labor Code, on the other hand, require a hearing and conference during
which the employee concerned is given the opportunity to respond to the charge, present his evidence or rebut the evidence
presented against him.
In case of conflict, the law prevails over the administrative regulations implementing it. The authority to promulgate
implementing rules proceeds from the law itself. To be valid, a rule or regulation must conform to and be consistent with the
provisions of the enabling statute. As such, it cannot amend the law either by abridging or expanding its scope.
Nonetheless, the IRR of the Labor Code should not be taken to mean that holding an actual hearing or conference is
a condition sine qua non for compliance with the due process requirement in termination of employment. The test for
the fair procedure guaranteed under Article 277(b) cannot be whether there has been a formal pre-termination confrontation
between the employer and the employee. The ample opportunity to be heard standard is neither synonymous nor similar to
a formal hearing. To confine the employees right to be heard to a solitary form narrows down that right. It deprives him of
other equally effective forms of adducing evidence in his defense. Certainly, such an exclusivist and absolutist interpretation is
overly restrictive. The very nature of due process negates any concept of inflexible procedures universally applicable to every imaginable situation.
An employees right to be heard in termination cases under Article 277(b) as implemented by Section 2(d), Rule I of the
Implementing Rules of Book VI of the Labor Code should be interpreted in broad strokes. It is satisfied not only by a
formal face to face confrontation but by any meaningful opportunity to controvert the charges against him and to
submit evidence in support thereof.
A HEARING means that a party should be given a chance to adduce his evidence to support his side of the case and
that the evidence should be taken into account in the adjudication of the controversy. To be heard does not mean verbal
argumentation alone inasmuch as one may be heard just as effectively through written explanations, submissions or pleadings. Therefore, while
the phrase ample opportunity to be heard may in fact include an actual hearing, it is not limited to a formal
hearing only. In other words, the existence of an actual, formal trial-type hearing, although preferred, is not absolutely
necessary to satisfy the employees right to be heard.
The Court has consistently ruled that the due process requirement in cases of termination of employment does not
require an actual or formal hearing.
The following are the guiding principles in connection with the hearing requirement in dismissal cases:
279 Roco 3B
(a) AMPLE OPPORTUNITY TO BE HEARD means any meaningful opportunity (verbal or written) given to the
employee to answer the charges against him and submit evidence in support of his defense , whether in
a hearing, conference or some other fair, just and reasonable way.
(b) A formal hearing or conference becomes MANDATORY ONLY when requested by the employee in writing
or substantial evidentiary disputes exist or a company rule or practice requires it, or when similar
circumstances justify it.
(c) The AMPLE OPPORTUNITY TO BE HEARD standard in the Labor Code prevails over the hearing or
conference requirement in the IRRs.
190.Suico et al vs NLRC, January 30, 2007

Facts: This is a consolidation of 3 cases: GR Nos 146762, 153584, and 163793. Said cases arose from the September 1997
PLDT Strike wherein members of Manggagawa ng Komunikasyon ng Pilipinas (MKP) were dismissed by their employer
PLDT for allegedly participating in the illegal strike and at the same time performing acts which are contrary to the company
rules and regulations as well as the Labor Code.
During said strike, DOLE Sec. Trajano issued a Return-to-Work Order on Sep 20 1997 but MKP did not heed. They merely
filed an opposition to said Order.
GR No. 146762
PARTIES: Suico, Ceniza, Dacut
POSITION: Regular employees of PLDT Cebu Jones Exchange
ACT ALLEGEDLY PERFORMED: Parties blocked Ann Fernando (Traffic Supervisor; thus managerial) way to the PLDT
premises. In doing so, Fernando sustained injuries.
PROCEDURE: PLDT VP Tanchico sent each of them notices asking them to explain why they should not be terminated for
the above acts and required them to submit their notarized explanation within 48 hours. Parties did not file any explanation so
Tanchico sent them two sets of notices. Thereafter, parties sent Tanchico separate but uniformly worded letters requesting for
a formal hearing. Then, PLDT Division Head Cotelo replied saying that formal hearing shall be deferred until the parties filed
their answers to the charges. Since the parties merely reiterated their request for foral hearing, they were issued termination
notices.
ILLEGAL DISMISSAL SUIT: Parties naturally filed a complaint. LA ordered reinstatemtent. NLRC reversed. CA, via Rule 65,
affirmed. Hence, this petition.
GR No. 153584
PARTY: Mariano
POSITION: PLDT Laoag City Sub-Exchange and MKP Officer

ACT ALLEGEDLY PERFORMED: While leading a picket during said strike, PLDT subscriber Guillermo suffered injury and
humiliation at the hands of Mariano. Thus, Guillermo sent a letter to PLDT and demanded for Marianos dismissal.
PROCEDURE: Tanchico sent Mariano a notice asking him to explain why he shouldnt be dismissed and asked for a notarized
explanation within 48 hours. Mariano did not reply. So, Tanchico sent him another notice instructing him to submit the
notarized explanation. Thereafter, Mariano requested for a formal hearing but did not submit his explanation. Thus, PLDT
AVP Puzon sent him a notice for his termination.
ILLEGAL DISMISSAL SUIT: LA dismissed complaint. NLRC affirmed. CA also affirmed. Hence, this petition.
GR No. 163793
PARTIES: Borje
POSITION: PLDT SFU Mother Exchange; member of MKP
280 Roco 3B
ACT ALLEGEDLY PERFORMED: Hurled stones at Garcia (Supervisor; hit in the knee), Visico (Security Guard), a PLDT Service
vehicle (window was broken).
PROCEDURE: Tanchico sent notices similar to the above incidents. Borje replied and asked for a formal hearing but not
submitting a notarized explanation. Thus, Puzon sent him a termination notice.
ILLEGAL DISMISSAL SUIT: LA dismissed the complaint. NLRC affirmed. CA reversed and ordered reinstatement. Hence, this
petition.
Issue: Whether or not parties above were illegally dismissed when PLDT did not heed their request to conduct a formal
proceeding.
Held: ALL PARTIES were LEGALLY DISMISSED BUT PLDT should have been ordered to pay nominal damages pursuant
to Agabon.
In the 3 petitions, the substantive basis of the dismissal of is not in issue. Only the procedural aspect is in issue,
specifically, whether PLDT violated the requirements of due process under the Labor Code when it dismissed said
employees without heeding their request for the conduct of a formal hearing as provided for under PLDT Systems
Practice No. 94-016 and prior to submission of their respective answers to the charges against them.
The Art. 277 (b) of the Labor Code provides that:
Art. 277. Miscellaneous Provisions. 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 cause for 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.
It is implemented by Rule XXIII of the IRR of the Labor Code, which provides:
Section 2. Standards of due process; requirements of notice.

For termination of employment based on just causes as defined in Article 282 of the Code:
(a) A written notice served on the employee specifying the ground or grounds for termination,
and giving to said employee reasonable opportunity within which to explain his side;
(b) A hearing or conference during which the employee concerned, with the assistance of
counsel if the employee so desires, is given opportunity to respond to the charge, present his
evidence or rebut the evidence presented against him; and
(c) A written notice of termination served on the employee indicating that upon due
consideration of all the circumstances, grounds have been established to justify his
termination[.]
It is the view of PLDT that in the dismissal of employees for strike-related violence, it is sufficient to merely declare the latter
to have lost their employment without having to comply with any procedure for their termination.
PLDT is mistaken. Art. 277 (b) in relation to Art. 264 (a) and (e) recognizes the right to due process of all workers,
without distinction as to the cause of their termination. Where no distinction is given, none is construed. Hence, the
foregoing standards of due process apply to the termination of employment of Suico, et al. even if the cause therefor was their
supposed involvement in strike-related violence prohibited under Art. 264 (a) and (e).
281 Roco 3B
Moreover, the procedure for termination prescribed under Art. 277(b) and Rule XXII of the IRR is supplemented by
existing company policy. Art. 277(b) provides that the procedure for termination prescribed therein is without prejudice to
the adoption by the employer of company policy on the matter, provided this conforms to the guidelines set by the DOLE
such as Rule XXII of the Implementing Rules of Book V. This is consistent with the established principle that
employers are allowed, under the broad concept of management prerogative, to adopt company policies that
regulate all aspects of personnel administration including the dismissal and recall of workers.
COMPANY POLICIES or PRACTICES are binding on the parties. Some can ripen into an obligation on the part of the
employer, such as those which confer benefits on employees or regulate the procedures and requirements for their
termination. Thus, in Batangas Laguna Tayabas Bus Company (BLTB) v. CA, the Court held that the employer BLTB is obliged
under the Service Manual it issued to grant an erring employee the right to be heard and defend himself , and to
apply the table of penalties fixed therein.
In its Comment to the Petition in G.R. No. 146762, PLDT objected to the application to this case of the ruling in BLTB,
arguing that the more appropriate case is Mendoza v. NLRC, where the SC ruled that company procedures for discipline
do not require strict observance as long as the essential requirements of due process had been observed .
But even Mendoza favors the view that company procedure for termination should be implemented, even if not to
the letter. In fact, in said case, the employer San Miguel implemented company procedure for termination by
conducting a formal investigation, in question and answer form, against the employee Mendoza.
Here, PLDT does not deny the existence of a company procedure in termination cases known as Systems Practice No. 94-016
which provides that:
An employee under investigation for the commission of an offense or infraction shall be

informed in writing of the particular act constituting the offense or infraction imputed to
him. He may answer the charges against him in writing within a reasonable period of time (at
least 48 hours but not more than 72 hours) or be afforded the opportunity to be heard
and defend himself with the assistance of his counsel or union representative , if he so
desires.
PLDT, however, refused to implement said policy, contending that it applies to administrative cases only and not to
strike-related cases.
While it is true that Systems Practice No. 94-016 relates to administrative cases, PLDT failed to prove that a termination
proceeding arising from strike-related violence is not an administrative case. If by administrative case, PLDT refers to
cases arising from violation of company rules and regulations, then the proceedings against Suico, et al. were of that nature for
the notices sent to said employees accused them not just of breach of Art. 264 of the Labor Code but also of behaviour
prejudicial to company operations and violative of the company code of conduct. The termination proceedings against
Suico, et al. were therefore administrative in nature, subject to the requirements of Systems Practice No. 94-016.
PLDT complied with the 2-notice requirement of due process. These two notices would have sufficed had it not been for
the existence of Systems Practice No. 94-016. Under this, PLDT granted its employee the alternative of either filing a
written answer to the charges or requesting for opportunity to be heard and defend himself with the assistance of his
counsel or union representative, if he so desires.
Suico, et al. exercised their option under the Systems Practice by requesting that a formal hearing be conducted and that
they be given copies of sworn statements and other pertinent documents to enable them to prepare for the hearing. This
option is part of their right to due process. PLDT is bound to comply with the Systems Practice.
Clearly, such refusal by PLDT to conduct a hearing was unreasonable and arbitrary as it defeated the exercise by Suico,
et al. of an option which, by virtue of Systems Practice No. 94-016, was a component of their right to due process. The
impairment of their option constituted an impairment of their right to due process.
282 Roco 3B
191. Golden Ace Builders vs Talde, May 5, 2010

Facts: Jose A. Talde was hired in 1990 as a carpenter by Golden Ace Builders of which its co-petitioner Arnold Azul
(Azul) is the owner-manager. In February 1999, Azul, alleging the unavailability of construction projects, stopped
giving work assignments to respondent, prompting the latter to file a complaint for illegal dismissal.
The Labor Arbiter ruled in favor of respondent and ordered his immediate reinstatement without loss of seniority rights
and other privileges, and with payment of full backwages, which at that time was computed at P144,382.23, and the amount
of P3,236.37 representing premium pay for rest days, service incentive leave pay and 13 th month pay.
Pending their appeal to the NLRC and in compliance with the Labor Arbiters Decision, peti tioners, through counsel,
advised respondent to report for work in the construction site within 10 days from receipt thereof . Respondent
submitted, however, on May 16, 2001 a manifestation to the Labor Arbiter that actual animosities existed between him
and petitioners and there had been threats to his life and his familys safety, hence, he opted for the payment of
separation pay. Petitioners denied the existence of any such animosity.
Meanwhile, the NLRC dismissed petitioners appeal, holding that respondent was a regular employee and not a project
employee, and that there was no valid ground for the termination of his services. The CA also affirmed it, and this became
final on Sept 15 2004.
As an agreement could not be forged by the parties on the satisfaction of the judgment, the matter was referred to the Fiscal
Examiner of the NLRC who recomputed at P562,804.69 the amount due respondent, which was approved by the Labor
Arbiter A writ of execution was thereupon issued.
Finding the amount exorbitant, petitioners filed an MR with the NLRC, contending that since respondent refused to report
back to work, he should be considered to have abandoned the same, hence, the recomputation of the wages and benefits due
him should not be beyond May 15, 2001, the date when he manifested his refusal to be reinstated.
The NLRC granted petitioners motion and accordingly vacated the computation . It held that since respondent did not
appeal the Decision of the Labor Arbiter granting him only reinstatement and backwages, not separation pay in lieu thereof, he
may not be afforded affirmative relief; and since he refused to go back to work, he may recover backwages only up to
May 20, 2001, the day he was supposed to return to the job site . Respondents motion for reconsideration was denied by
the NLRC by Resolution of June 30, 2006, hence, he filed a petition for certiorari with the CA.
The CA set aside the NLRC Resolutions, holding that respondent is entitled to both backwages and separation pay,
even if separation pay was not granted by the Labor Arbiter, the latter in view of the strained relations between the
parties. (Backwages @ P522k, Sep. pay @ 45.76k.). Also awarded attorneys fees. Hence, this petition for review on certiorari.
Issue: Whether Talde is entitled to both backwages and separation pay.
Held: The basis for the payment of backwages is different from that for the award of separation pay . SEPARATION PAY
is granted where reinstatement is no longer advisable because of strained relations between the employee and the
employer. BACKWAGES represent compensation that should have been earned but were not collected because of the
unjust dismissal. The basis for computing backwages is usually the length of the employees service while that for separation pay
is the actual period when the employee was unlawfully prevented from working.
As to how both awards should be computed, Macasero v. Southern Industrial Gases Philippines instructs:
Thus, an illegally dismissed employee is entitled to 2 reliefs: backwages and

separation pay. 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
283 Roco 3B
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.
Velasco v. National Labor Relations Commission emphasizes:
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.
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.
Strained relations must be demonstrated as a fact, however, to be adequately supported by evidence substantial
evidence to show that the relationship between the employer and the employee is indeed strained as a necessary consequence
of the judicial controversy.
In the present case, the Labor Arbiter found that actual animosity existed between petitioner Azul and respondent as a
result of the filing of the illegal dismissal case. Such finding, especially when affirmed by the CA as in the case at bar, is
binding upon the Court, consistent with the prevailing rules that this Court will not try facts anew and that findings of facts of
quasi-judicial bodies are accorded great respect, even finality.
Clearly then, respondent is entitled to backwages AND separation pay as his reinstatement has been rendered
impossible due to strained relations. As correctly held by the appellate court, the backwages due respondent must be
computed from the time he was unjustly dismissed until his actual reinstatement, or from February 1999 until June 30, 2005
when his reinstatement was rendered impossible without fault on his part.
The Court, however, does not find the CAs computation of separation pay in order. The CA considered respondent to
have served petitioner company for only 8 years. Petitioner was hired in 1990, however, and he must be considered to
have been in the service not only until 1999, when he was unjustly dismissed, but until June 30, 2005, the day he is
deemed to have been actually separated (his reinstatement having been rendered impossible) from petitioner
company or for a total of 15 years.
Thus, the amount of separation pay due respondent is, in light of the discussion in the immediately foregoing
paragraph, computed at P85,800.00.
192.Cabigting vs SMFI, Nov 5, 2009

Facts: Cabigting was hired as a receiver/issuer at the San Miguel Corporation, Feeds and Livestock Division (B-Meg) and
after years of service, he was promoted as inventory controller. San Miguel Foods, Inc., through its President, Mr. Arnaldo
Africa, sent petitioner a letter informing him that his position as sales office coordinator under its logistic
department has been declared redundant.
Respondent terminated the services of petitioner and offered him an early retirement package. Petitioner was included
in the list of retrenched employees for reason of redundancy. Petitioner was surprised upon receipt of the letter because
he was not a sales office coordinator, and yet he was being terminated as such. He refused to avail of the early retirement
284 Roco 3B
package. He was an inventory controller, performing at the same time the function of a warehouseman. Prior to petitioners
termination, he was an active union officer of respondents union but upon his termination, was only a member thereof.
Petitioner filed a Complaint questioning his termination primarily because he was not a sales office coordinator , but
an inventory controller, performing the functions of both an inventory controller and a warehouseman.
Respondent reiterated its declaration that petitioners position as sales office coordinator was redundant as a result of
respondents effort to streamline its operations. According to respondent, petitioner was supposed to be separated from
employment due to the cessation of business of the B-Meg Plant. However, upon petitioners request for redeployment
to another position, he was accommodated and was designated as sales coordinator even without rendering actual work as
sales coordinator. Petitioner would replace the Sales Coordinator of respondents Luzon Operations Center, upon the latters
impending retirement and for the sole purpose of justifying his inclusion in the payroll. However, the position of Mr. Luis del
Rosario as sales coordinator was abolished due to redundancy as a result of its streamlining efforts.
Labor Arbiter: petitioner was illegally dismissed; ordered respondent to pay petitioner backwages, separation pay in lieu
of reinstatement and attorneys fees.
NLRC : affirmed that petitioner was illegally dismissed by respondent; modified by ordering the reinstatement of
petitioner to his previous post, without loss of seniority rights.
CA : illegally dismissed; but on the ground that there were strained relations between employee and employer, reversed the
portion of the NLRC Decision which decreed petitioners reinstatement.
Issue: Whether the alleged strained relations barred petitioners reinstatement.
Held: NO. REINSTATEMENT AND THE PRINCIPLE OF STRAINED RELATIONS

The Code provides that 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.
An illegally dismissed employee is entitled to reinstatement as a matter of right . However, if reinstatement would only
exacerbate the tension and strained relations between the parties, or where the relationship between the employer and the
employee has been unduly strained by reason of their irreconcilable differences, particularly where the illegally dismissed
employee held a managerial or key position in the company, it would be more prudent to order payment of separation
pay instead of reinstatement.
In Globe-Mackay Cable and Radio Corporation v. NLRC, this Court discussed the application of the STRAINED RELATIONS
principle:
If, in the wisdom of the Court, there may be a ground or grounds for non-application of the
above-cited provision, this should be by way of exception, such as when the reinstatement
may be inadmissible due to ensuing strained relations between the employer and the
employee. In such cases, it should be proved that the employee concerned occupies a
position where he enjoys the TRUST and CONFIDENCE of his employer; and that it is
likely that if reinstated, an atmosphere of antipathy and antagonism may be
generated as to adversely affect the efficiency and productivity of the employee
concerned.
A few EXAMPLES will suffice to illustrate the Courts application of the above principle:
where the employee is a Vice-President for Marketing and, as such, enjoys the full trust
and confidence of top management; or is the Officer-In-Charge of the extension office of
the bank where he works; or is an organizer of a union who was in a position to sabotage
the unions efforts to organize the workers in commercial and industrial establishments; or is
a warehouseman of a non-profit organization whose primary purpose is to facilitate and
285 Roco 3B
maximize voluntary gifts by foreign individuals and organizations to the Philippines; or is a

manager of its Energy Equipment Sales.
The principle of strained relations cannot be applied indiscriminately. Otherwise,

reinstatement can never be possible simply because some hostility is invariably engendered
between the parties as a result of litigation. Besides, no strained relations should arise from a
valid and legal act of asserting ones right; otherwise, an employee who shall assert his right
could be easily separated from the service, by merely paying his separation pay on the pretext
that his relationship with his employer had already become strained.
Chief Justice Reynato S. Puno, in his dissenting opinion in MGG Marine Services, Inc. v. NLRC: The alleged strained
relationship must be pleaded and proved if either the employer or the employee does not want the employment tie to
remain. By making strained relationship a triable issue of fact we will eliminate rulings on strained relationship based on
mere impression alone.
LA ruled that strained relations barred petitioners reinstatement; no longer practical and would not promote peace
considering the animosity and strained relations that exist between the parties.
The LA had no hard facts upon which to base the application of the doctrine of strained relations , as the same was not
squarely discussed nor elaborated on. Said issue was addressed by the LA in just one sentence without indicating factual
circumstances why strained relations exist. The same is also true for the CA Decision which disposed of the issue in just
one sentence without any elaboration. Both the LA and the CA based their conclusions on impression alone.
Reinstatement is the rule and, for the exception of strained relations to apply, it should be proved that it is likely that if
reinstated, an atmosphere of antipathy and antagonism would be generated as to adversely affect the efficiency and
productivity of the employee concerned. However, both the LA and the CA failed to state the basis for their finding that a
strained relationship exists.
This Court upholds the ruling of the NLRC finding the doctrine of strained relations inapplicable . The position of
WAREHOUSEMAN and INVENTORY CONTROLLER is still existing up to date. The nature of the controversy where the
parties to this case were engaged is not of such nature that would spawn a situation where the relations are severely
strained between them as would bar the complainant to his continued employment . Neither may it be said that his
position entails a constant communion with the respondent such that hostilities may bar smooth interactions .
We find no basis for an award of separation pay in lieu of reinstatement.
Respondent repeatedly argued against the reinstatement of petitioner:
Strained relations MAY RESULT, among others, from the imputations made by the
employer and the employee as against each other or, by the filing of a complaint by
the employee against the employer. The petitioner, in his pleadings submitted before the
Labor Arbiter below, resorted to imputations and accusations which are totally uncalled for,
hitting the respondent below the belt, so to speak. In his reply position paper, petitioner
declared as a blatant display of arrogance the alleged refusal of respondent to observe
certain provisions of the collective bargaining agreement; that it was highly ridiculous on
the part of the respondent to assert that his continued employment was due merely to an act
of accommodation on the part of the respondent. Petitioner intimated that respondent
fabricated evidence when it presented a document which showed that petitioner was a Sales
Office Coordinator. In fact, in his comment, petitioner imputes malice and bad faith on
the part of respondent. These imputations effectively placed a strain on the relationship
The claim of respondent is not meritorious.
286 Roco 3B
The words allegedly imputing malice and bad faith towards the respondent cannot be made a basis for denying his
reinstatement. Respondents perceived antipathy and antagonism is not of such degree as would preclude
reinstatement of petitioner to his former position. By themselves alone, the words used by petitioner in his pleadings are
insufficient to prove the presence of strained relations.
One should not fault petitioner for his choice of words, especially in light of overwhelming evidence showing he was
illegally dismissed. The filing of the complaint by petitioner cannot be used as a basis for strained relations. As a rule, no
strained relations should arise from a valid and legal act asserting ones right.
Respondents claim that it was betrayed by petitioner, after several accommodations it had extended to him, deserves scant
consideration. NLRC was categorical that no such accommodation existed.
The DOCTRINE OF STRAINED RELATIONS has been made applicable to cases where the employee decides not to be
reinstated and demands for separation pay. The same, however, does not apply to herein petition, as petitioner is asking for
his reinstatement despite his illegal dismissal. The position of inventory controller and warehouseman is still existing up
to date. Petitioner has been an inventory controller for so many years. There should be no problem in ordering the
reinstatement with facility of a laborer, clerk, or other rank-and-file employee.
It is human nature that some hostility will inevitably arise between parties as a result of litigation, but the same does
not always constitute strained relations in the absence of proof or explanation that such indeed exists.
193.Sarona vs NLRC, January 18, 2012

Facts: Sarona, who was hired by Sceptre as a security guard was asked by Karen Therese Tan, Sceptres Operation
Manager, to submit a resignation letter as the same was supposedly required for applying for a position at Royale.
Sarona was also asked to fill up Royales employment application form , which was handed to him by Royales General
Manager, Cesar Antonio Tan II.
After several weeks of being in floating status, Royales Security Officer, Martin Gono, assigned Sarona at Highlight
Metal Craft, Inc.
Thereafter, Sarona was transferred and assigned to Wide Wide World Express, Inc. During his assignment at
Highlight Metal, Sarona used the patches and agency cloths of Sceptre and it was only when he was posted at
WWWE, Inc. that he started using those of Royale.
Sarona was informed that his assignment at WWWE, Inc. had been withdrawn because Royale had allegedly been
replaced by another security agency . Sarona, however, shortly discovered thereafter that Royale was never replaced as
WWWE, Inc.s security agency. When he placed a call at WWWE, Inc., he learned that his fellow security guard was not
relieved from his post.
Sarona was once again assigned at Highlight Metal, albeit for a short period.
Subsequently, when Sarona reported at Royales office, Martin informed him that he would no longer be given any
assignment per the instructions of Aida Sabalones-Tan, general manager of Sceptre. This prompted him to file a
complaint for illegal dismissal
Issues: (1) Whether Royales corporate fiction should be pierced so that Saronas length of service with Sceptre would be
recognized and hold it liable for Saronas unpaid benefits that have accrued in his favor.
(2) Whether Saronas backwages should be limited to his salary for 3 mos.
Held: YES. ROYALE IS SCEPTRES SUCCESSOR. A corporation is an artificial being created by operation of law. It
possesses the right of succession and such powers, attributes, and properties expressly authorized by law or incident to its
existence. It has a personality separate and distinct from the persons composing it, as well as from any other legal entity to
which it may be related.
287 Roco 3B
The corporate mask may be removed or the corporate veil pierced when the corporation is just an alter ego of a
person or of another corporation. For reasons of public policy and in the interest of justice, the corporate veil will justifiably
be impaled only when it becomes a shield for fraud, illegality or inequity committed against third persons.
Hence, any application of the doctrine of piercing the corporate veil should be done with caution. A court should be
mindful of the milieu where it is to be applied. It must be certain that the corporate fiction was misused to such an extent that
injustice, fraud, or crime was committed against another, in disregard of rights. The wrongdoing must be clearly and
convincingly established; it cannot be presumed. Otherwise, an injustice that was never unintended may result from an
erroneous application.
Whether the separate personality of the corporation should be pierced hinges on obtaining facts appropriately pleaded or
proved. However, any piercing of the corporate veil has to be done with caution, albeit the Court will not hesitate to
disregard the corporate veil when it is misused or when necessary in the interest of justice . After all, the concept of
corporate entity was not meant to promote unfair objectives.
The doctrine of piercing the corporate veil applies only in 3 basic areas, namely: 1) defeat of public convenience as when
the corporate fiction is used as a vehicle for the evasion of an existing obligation; 2) fraud cases or when the corporate entity
is used to justify a wrong, protect fraud, or defend a crime; or 3) alter ego cases, where a corporation is merely a farce since
it is a mere alter ego or business conduit of a person, or where the corporation is so organized and controlled and its affairs are
so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation.
Here, evidence abound showing that ROYALE IS A MERE CONTINUATION OR SUCCESSOR OF SCEPTRE and fraudulent
objectives are behind Royales incorporation and Saronas subsequent employment therein . These are plainly
suggested by events that the respondents do not dispute and which the CA, the NLRC and LA Gutierrez accept as fully
substantiated but misappreciated as insufficient to warrant the use of the equitable weapon of piercing.
It was Aida who exercised control and supervision over the affairs of both Sceptre and Royale. Contrary to the
submissions of the respondents that Roso had been the only one in sole control of Sceptres finances and business affairs,
Aida took over as early as 1999 when Roso assigned his license to operate Sceptre on May 3, 1999.
As further proof of Aidas acquisition of the rights as Sceptres sole proprietor , she caused the registration of the
business name Sceptre Security & Detective Agency under her name with the DTI a few months after Roso abdicated
his rights to Sceptre in her favor.
As far as Royale is concerned, the respondents do not deny that she has a hand in its management and operation and
possesses control and supervision of its employees, including Sarona. As Sarona correctly pointed out, that Aida was the
one who decided to stop giving any assignments to Sarona and summarily dismiss him is an eloquent testament of the
power she wields insofar as Royalesaffairs are concerned.
The presence of actual common control coupled with the misuse of the corporate form to perpetrate oppressive or
manipulative conduct or evade performance of legal obligations is patent; Royale cannot hide behind its corporate fiction.
Aidas control over Sceptre and Royale does not, by itself, call for a disregard of the corporate fiction. There must be a
showing that a fraudulent intent or illegal purpose is behind the exercise of such control to warrant the piercing of the
corporate veil.
The manner by which Sarona was made to resign from Sceptre and how he became an employee of Royale suggest
the perverted use of the legal fiction of the separate corporate personality. It is undisputed that Sarona tendered his
resignation and that he applied at Royale at the instance of Karen and Cesar and on the impression they created that
these were necessary for his continued employment. They orchestrated Saronas resignation from Sceptre and subsequent
employment at Royale, taking advantage of their ascendancy over Sarona and the latters lack of knowledge of his rights and
the consequences of his actions.
288 Roco 3B
Furthermore, that Sarona was made to resign from Sceptre and apply with Royale only to be unceremoniously
terminated shortly thereafter leads to the ineluctable conclusion that there was intent to violate Saronas rights as an
employee, particularly his right to security of tenure.
The respondents scheme reeks of bad faith and fraud and compassionate justice dictates that Royale and Sceptre be
merged as a single entity, compelling Royale to credit and recognize Saronas length of service with Sceptre. The
respondents cannot use the legal fiction of a separate corporate personality for ends subversive of the policy and purpose
behind its creation or which could not have been intended by law to which it owed its being.
For the piercing doctrine to apply, it is of no consequence if Sceptre is a sole proprietorship.
Also, Sceptre and Royale have the same principal place of business. As early as October 14, 1994, Aida and Wilfredo
became the owners of the property used by Sceptre as its principal place of business by virtue of a Deed of Absolute Sale they
executed with Roso. Royale, shortly after its incorporation, started to hold office in the same property. These, the respondents
failed to dispute.
The respondents do not likewise deny that Royale and Sceptre share the same officers and employees. Karen assumed the
dual role of Sceptres Operation Manager and incorporator of Royale. With respect to Sarona, even if he has already resigned
from Sceptre and has been employed by Royale, he was still using the patches and agency cloths of Sceptre during his
assignment at Highlight Metal.
Royale also claimed a right to the cash bond which Sarona posted when he was still with Sceptre . If Sceptre and
Royale are indeed separate entities, Sceptre should have released Saronas cash bond when he resigned and Royale would have
required Sarona to post a new cash bond in its favor.
Taking the foregoing in conjunction with Aidas control over Sceptres and Royales business affairs, it is patent that Royale
was a mere subterfuge for Aida. Since a sole proprietorship does not have a separate and distinct personality from that of
the owner of the enterprise, the latter is personally liable. This is what she sought to avoid but cannot prosper.
SEPARATION PAY
Effectively, Sarona cannot be deemed to have changed employers as Royale and Sceptre are one and the same. His
separation pay should, thus, be computed from the date he was hired by Sceptre in April 1976 until the finality of this
decision.
Based on this Courts ruling in Masagana Concrete Products, et al. v. NLRC, et al., the intervening period between the day an
employee was illegally dismissed and the day the decision finding him illegally dismissed becomes final and
executory shall be considered in the computation of his separation pay as a period of imputed or putative
service:
Separation pay, equivalent to one months salary for every year of service, is awarded as
an alternative to reinstatement when the latter is no longer an option. 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, with the
salary rate prevailing at the end of the period of putative service being the basis for
computation.
BACKWAGES
If reinstatement is not possible, the period covered in the computation of backwages is from the time the employee was
unlawfully terminated until the finality of the decision finding illegal dismissal .
With respect to Saronas backwages, this Court cannot subscribe to the view that it should be limited to an amount equivalent
to 3 months of his salary. Backwages is a remedy affording the employee a way to recover what he has lost by reason of
the unlawful dismissal. In awarding backwages, the primordial consideration is the income that should have accrued to
289 Roco 3B
the employee from the time that he was dismissed up to his reinstatement and the length of service prior to his
dismissal is definitely inconsequential.
In Bustamante, et al. v. NLRC, et al., clarified in no uncertain terms that if reinstatement is no longer possible , backwages
should be computed from the time the employee was terminated until the finality of the decision, finding the dismissal
unlawful.
Clearly, the law intends the award of backwages and similar benefits to accumulate past the date of the Labor
Arbiters decision until the dismissed employee is actually reinstated. But if, as in this case, reinstatement is no longer
possible, this Court has consistently ruled that backwages shall be computed from the time of illegal dismissal until
the date the decision becomes final.
In case separation pay is awarded and reinstatement is no longer feasible, backwages shall be computed from the time of illegal
dismissal up to the finality of the decision should separation pay not be paid in the meantime. It is the employees actual
receipt of the full amount of his separation pay that will effectively terminate the employment of an illegally
dismissed employee. Otherwise, the employer-employee relationship subsists and the illegally dismissed employee is entitled to backwages,
taking into account the increases and other benefits, including the 13th month pay, that were received by his co-employees
who are not dismissed. 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.
In fine, this Court holds Royale liable to pay Sarona backwages to be computed from his dismissal on October 1, 2003
until the finality of this decision. Nonetheless, the amount received by Sarona from the respondents in satisfaction of the
November 30, 2005 Decision shall be deducted accordingly.
MORAL DAMAGES
Finally, moral damages and exemplary damages at P25,000.00 each as indemnity for Saronas dismissal, which was
tainted by bad faith and fraud, are in order. MORAL DAMAGES may be recovered 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.
SUMMARY OF AWARDS
a) Full backwages and other benefits computed from October 1, 2003 (the date Royale illegally dismissed the petitioner)
until the finality of this decision;
b) Separation pay computed from April 1976 until the finality of this decision at the rate of one month pay per year of
service;
c) Ten percent (10%) attorneys fees based on the total amount of the awards under (a) and (b) above;
d) Moral damages of Twenty-Five Thousand Pesos (P25,000.00); and
e) Exemplary damages of Twenty-Five Thousand Pesos (P25,000.00).
194.Session Delights vs CA, February 8, 2010

SUMMARY: Illegal dismissal complaint was filed against Session Delights (alam na). LA ruled that there was illegal dismissal and
ordered Session to pay separation pay, indemnity, 13 th mo pay, back wages, etc. NLRC affirmed. On appeal, CA affirmed it
but set aside the order for payment of 13th mo pay. This CA decision became final and executor.
Upon execution of above judgment, the LA executing it re-computed the monetary award and included the 13 th month pay
that was deleted by the CA. Session appealed to the NLRC but was denied. CA affirmed its previous ruling with certain
changes which increased the monetary award but deleted the 13th mo pay.
Court held that the first CA decision had already become immutable. Ergo, deleted na talaga yung 13 th mo pay sa computation.
Nonetheless, the monetary award can be recomputed so to keep up with the lapse of time between the finality of the decision
up until actual payment is made.
290 Roco 3B
Facts: Adonis Flora filed a complaint for illegal dismissal against Session, which the LA resolved in his favor, awarding
backwages, separation pay, attorneys fees, and proportional 13 th month pay. It ordered:
a) Backwages:
P170.00 x 154 days P 26,180.00
Proportional 13th month pay
P 26,180/12 2,181.65 28,361.65
b) Separation Pay:
P 170.00 x 314/12 x 1 4,448.35
c) Indemnity of P5,000.00 for failure to observe due process
d) Attorneys fees which is 10% of the total award in the amount of P3,781.00.
The NLRC and CA affirmed it, but the latter deleted the 13th month pay. The CA decision became final and executory.
A pre-execution conference was held, wherein the LAs Finance Analyst submitted an update computation with additional
backwages and separation pay. It also included the proportional 13 th month pay, as follows:
1. Additional backwages: (March 1, 2001-Sept. 17, 2003)

March 1, 2001-April 30, 2002:
P178.00 x 52 days = 9,256.00
May 1, 2001-June 30, 2002:
P185.00 x 365 days = 67,525.00
July 1, 2002- Sept. 17, 2003:
P190.00 x 382 days = 72,580.00 149,361.00
Proportional 13th month pay:
P149,361.00/12 = 12,446.75
161,807.75
2. Additional separation pay:
P190.00 x 314/12 x 3 years = 14,915.00
3. Additional attorneys fee:
P176,722.75 x 10% = 17,672.25 194,395.00
TOTAL 253,986.00
Session objected, and appealed to the NLRC since the computation was inconsistent with the CA decision. The NLRC
disagreed and affirmed the LA. Session then filed a petition for certiorari with the CA. The CA ruled partially in Sessions favor,
directing the LA to not include the proportional 13 th month pay. The CA reasoned that a re-computation of the monetary
awards was necessary to determine the correct amount due to Flora from the time his salary was withheld from him until July
29, 2003 (the date of finality of the July 4, 2003 decision in CA-G.R. SP No. 74653) since the separation pay, which was
awarded in lieu of reinstatement, had not been paid by the petitioner. Session filed an MR, which was denied.
Issue: Whether a final and executory decision (The LAs decision, as affirmed with modification) may be enforced beyond the
terms decreed in its dispositive portion.
Held: YES. BUT ONLY AS REGARDS THE RE-COMPUTATION OF THE MONETARY PORTION OF THE
DISPOSITIVE PORTION.
That a judgment should be implemented according to the terms of its dispositive portion is a long and well-established rule.
Otherwise stated, it is the dispositive portion that categorically states the rights and obligations of the parties to the
dispute as against each other. Thus, it is the dispositive portion which the entities charged with the execution of a
final judgment that must be enforced to ensure the validity of the execution.
291 Roco 3B
A companion to the above rule on the execution of a final judgment is the principle of its immutability. Save for
recognized exceptions, a final judgment may no longer be altered, amended or modified, even if the alteration,
amendment or modification is meant to correct what is perceived to be an erroneous conclusion of fact or law and
regardless of what court, be it the highest Court of the land, renders it . Any attempt on the part of the responsible
entities charged with the execution of a final judgment to insert, change or add matters not clearly contemplated in the
dispositive portion violates the rule on immutability of judgments.
In the present case, with the CAs deletion of the proportionate 13th month pay and indemnity awards in the labor
arbiters February 8, 2001 decision, only the awards of backwages, separation pay, and attorneys fees remain. These are
the awards subject to execution.
AWARD OF BACKWAGES AND SEPARATION PAY

A distinct feature of the judgment under execution is that the February 8, 2001 labor arbiter decision already provided for
the computation of the payable separation pay and backwages due , and did not literally order the computation of the
monetary awards up to the time of the finality of the judgment. The private respondent, too, did not contest the decision
through an appeal. The petitioners argument to confine the awards to what the labor arbiter stated in the dispositive part of
his decision is largely based on these established features of the judgment.
We reject the petitioners view as a narrow and misplaced interpretation of an illegal dismissal decision, particularly of the
terms of the labor arbiters decision.
While the private respondent failed to appeal the February 8, 2001 decision of the labor arbiter , the failure, at the
most, had the effect of making the awards granted to him final so that he could no longer seek any other affirmative
relief, or pray for any award additional to what the labor arbiter had given. Other than these, the illegal dismissal case
remained open for adjudication based on the appeal made for the higher tribunals consideration. In other words, the higher
tribunals, on appropriate recourses made, may reverse the judgment and declare that no illegal dismissal took place, or affirm
the illegal dismissal already decreed with or without modifying the monetary consequences flowing from the dismissal.
As the case developed and is presented to us, the issue before us is not the correctness of the awards, nor the finality of the
CAs judgment, nor the petitioners failure to appeal. The issue before us is the propriety of the computation of the awards
made, and, whether this violated the principle of immutability of final judgments.
In concrete terms, the question is whether a re-computation in the course of execution of the labor arbiters original
computation of the awards made, pegged as of the time the decision was rendered and confirmed with modification by a final
CA decision, is legally proper. The question is posed, given that the petitioner did not immediately pay the awards stated
in the original labor arbiters decision; it delayed payment because it continued with the litigation until final
judgment at the CA level.
A source of misunderstanding in implementing the final decision in this case proceeds from the way the original labor arbiter
framed his decision. The decision consists essentially of two parts.
The first is that part of the decision that cannot now be disputed because it has been confirmed with finality. This is the
finding of the illegality of the dismissal and the awards of separation pay in lieu of reinstatement, backwages, attorneys fees,
and legal interests.
The second part is the computation of the awards made. On its face, the computation the labor arbiter made shows that
it was time-bound as can be seen from the figures used in the computation . This part, being merely a computation of
what the first part of the decision established and declared, can, by its nature, be re-computed. This is the part, too, that the
petitioner now posits should no longer be re-computed because the computation is already in the labor arbiters decision that
the CA had affirmed. The public and private respondents, on the other hand, posit that a re-computation is necessary because
the relief in an illegal dismissal decision goes all the way up to reinstatement if reinstatement is to be made, or up to the finality
of the decision, if separation pay is to be given in lieu reinstatement.
292 Roco 3B
That the labor arbiters decision, at the same time that it found that an illegal dismissal had taken place, also made a
computation of the award, is understandable in light of Section 3, Rule VIII of the then NLRC Rules of Procedure which
requires that a computation be made. This Section in part states:
[T]he Labor Arbiter of origin, in cases involving monetary awards and at all events, as far as
practicable, shall embody in any such decision or order the detailed and full amount
awarded.
Clearly implied from this original computation is its currency up to the finality of the labor arbiters decision. As we
noted above, this implication is apparent from the terms of the computation itself, and no question would have arisen had the
parties terminated the case and implemented the decision at that point.
However, the petitioner disagreed with the labor arbiters findings on all counts i.e., on the finding of illegality as well as on
all the consequent awards made. Hence, the petitioner appealed the case to the NLRC which, in turn, affirmed the labor
arbiters decision. By law, the NLRC decision is final, reviewable only by the CA on jurisdictional grounds.
The petitioner appropriately sought to nullify the NLRC decision on jurisdictional grounds through a timely filed Rule 65
petition for certiorari. The CA decision, finding that NLRC exceeded its authority in affirming the payment of 13th
month pay and indemnity, lapsed to finality and was subsequently returned to the labor arbiter of origin for
execution.
It was at this point that the present case arose. Focusing on the core illegal dismissal portion of the original labor arbiters
decision, the implementing labor arbiter ordered the award re-computed; he apparently read the figures originally ordered
to be paid to be the computation due had the case been terminated and implemented at the labor arbiters level .
Thus, the labor arbiter re-computed the award to include the separation pay and the backwages due up to the finality of the
CA decision that fully terminated the case on the merits. Unfortunately, the labor arbiters approved computation went
beyond the finality of the CA decision (July 29, 2003) and included as well the payment for awards the final CA
decision had deleted specifically, the proportionate 13th month pay and the indemnity awards. Hence, the CA issued
the decision now questioned in the present petition.
We see no error in the CA decision confirming that a re-computation is necessary as it essentially considered the labor arbiters
original decision in accordance with its basic component parts as we discussed above. To reiterate, the first part contains the
finding of illegality and its monetary consequences; the second part is the computation of the awards or monetary
consequences of the illegal dismissal, computed as of the time of the labor arbiters original decision.
To illustrate these points, had the case involved a PURE MONEY CLAIM FOR A SPECIFIC SUM (e.g. salary for a specific period)
or a SPECIFIC BENEFIT (e.g. 13th month pay for a specific year) made by a former employee, the labor arbiters computation
would admittedly have continuing currency because the sum is specific and any variation may only be on the interests
that may run from the finality of the decision ordering the payment of the specific sum.
In contrast with a ruling on a specific pure money claim, is a CLAIM THAT RELATES TO STATUS (as in this case, where the
claim is the legality of the termination of the employment relationship). In this type of cases, the decision or ruling is
essentially declaratory of the status and of the rights, obligations and monetary consequences that flow from the declared
status (in this case, the payment of separation pay and backwages and attorneys fees when illegal dismissal is found). When
this type of decision is executed, what is primarily implemented is the declaratory finding on the status and the
rights and obligations of the parties therein; the arising monetary consequences from the declaration only follow as
component of the parties rights and obligations.
In the present case, the CA confirmed that indeed an illegal dismissal had taken place , so that separation pay in lieu
of reinstatement and backwages should be paid. How much that separation pay would be, would ideally be stated in the
final CA decision; if not, the matter is for handling and computation by the labor arbiter of origin as the labor official charged
with the implementation of decisions before the NLRC.
293 Roco 3B
As the CA correctly pointed out, the basis for the computation of separation pay and backwages is Article 279 of the
Labor Code, as amended, which reads:
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.
By jurisprudence derived from this provision, separation pay may be awarded to an illegally dismissed employee in lieu
of reinstatement. Recourse to the payment of separation pay is made when continued employment is no longer possible, in
cases where the dismissed employees position is no longer available, or the continued relationship between the employer and
the employee is no longer viable due to the strained relations between them, or when the dismissed employee opted not to be
reinstated, or payment of separation benefits will be for the best interest of the parties involved.
This reading of Article 279, of course, does not appear to be disputed in the present case as the petitioner admits that
separation pay in lieu of reinstatement shall be paid, computed up to the finality of the judgment finding that illegal dismissal
had taken place. What the petitioner simply disputes is the re-computation of the award when the final CA decision did not
order any re-computation while the NLRC decision that the CA affirmed and the labor arbiter decision the NLRC in turn
affirmed, already made a computation that on the basis of immutability of judgment and the rule on execution of the
dispositive portion of the decision should not now be disturbed.
Consistent with what we discussed above, we hold that under the terms of the decision under execution, no essential
change is made by a re-computation as this step is a necessary consequence that flows from the nature of the
illegality of dismissal declared in that decision. A re-computation (or an original computation, if no previous computation
has been made) is a part of the law specifically, Article 279 of the Labor Code and the established jurisprudence on this
provision that is read into the decision. By the nature of an illegal dismissal case, the reliefs continue to add on until
full satisfaction, as expressed under Article 279 of the Labor Code. The re-computation of the consequences of illegal
dismissal upon execution of the decision does not constitute an alteration or amendment of the final decision being
implemented. The illegal dismissal ruling stands; only the computation of monetary consequences of this dismissal is
affected and this is not a violation of the principle of immutability of final judgments .
We fully appreciate the petitioners efforts in trying to clarify how the standing jurisprudence on the payment of separation pay
in lieu of reinstatement and the accompanying payment of backwages ought to be read and reconciled. Its attempt, however, is
out of place and, rather than clarify, may only confuse the implementation of Article 279; the core issue in this case is not
the payment of separation pay and backwages but their re-computation in light of an original labor arbiter ruling that
already contained a dated computation of the monetary consequences of illegal dismissal.
That the amount the petitioner shall now pay has greatly increased is a consequence that it cannot avoid as it is the
risk that it ran when it continued to seek recourses against the labor arbiters decision. Article 279 provides for the
consequences of illegal dismissal in no uncertain terms, qualified only by jurisprudence in its interpretation of when separation
pay in lieu of reinstatement is allowed. When that happens, the finality of the illegal dismissal decision becomes the reckoning
point instead of the reinstatement that the law decrees. In allowing separation pay, the final decision effectively declares
that the employment relationship ended so that separation pay and backwages are to be computed up to that point.
The decision also becomes a judgment for money from which another consequence flows the payment of interest in case of
delay. This was what the CA correctly decreed when it provided for the payment of the legal interest of 12% from the finality
of the judgment, in accordance with our ruling in Eastern Shipping Lines, Inc. v. Court of Appeals.
195.Moreno vs San Sebastian, March 28, 2008

Facts: Respondent SSC-R is a domestic corporation and an educational institution. On 16 January 1999, SSC-R employed
petitioner Jackqui R. Moreno (Moreno) as a teaching fellow. Moreno was appointed as a full-time college faculty
member. Moreno became a member of the permanent college faculty . She was also offered the chairmanship of the
Business Finance and Accountancy Department of her college . Subsequently, reports and rumors of Morenos
unauthorized external teaching engagements allegedly circulated and reached SSC-R.
294 Roco 3B
The HR Department of the school thereafter conducted a formal investigation on the said activities. On 24 October 2002,
the Department submitted its report which stated that Moreno indeed had unauthorized teaching assignments at the
Centro Escolar University during the first semester of the School Year 2002-2003, and at the College of the Holy Spirit,
Manila, during the School Years 2000-2001, 2001-2002 and the first semester of School Year 2002-2003.
On 27 October 2002, Moreno received a memorandum from the Dean of her college , requiring her to explain the
reports regarding her unauthorized teaching engagements. The said activities allegedly violated Section 2.2 of Article II of
SSCRs Faculty Manual which provides that
Administrative permission is required for all full-time faculty members to teach part-time
elsewhere. If ever teaching permission is granted, the total teaching load should not exceed
the maximum allowed by CHED rules and regulations. Faculty members are required to
report all other teaching assignments elsewhere within two (2) weeks from start of the
classes every semester.
On 28 October 2002, Moreno sent a written explanation in which she admitted her failure to secure any written
permission before she taught in other schools. Moreno explained that the said teaching engagements were merely
transitory in nature as the aforesaid schools urgently needed lecturers and that she was no longer connected with them.
Moreno further stated that it was never her intention to jeopardize her work in SSC-R and that she merely wanted to
improve her familys poor financial conditions.
A Special Grievance Committee was then formed in order to investigate and make recommendations regarding Morenos case.
Moreno admitted she did not formally disclose her teaching loads at the College of the Holy Spirit and at the Centro
Escolar University for fear that the priest administrators may no longer grant her permission , as prior similar requests
had already been declined; that the Dean of her college was aware of her external teaching loads; that she went beyond the
maximum limit for an outside load in the School Years 2000 until 2002, because she needed to support her mother and
sister, her masteral studies, and her sisters canteen business , all of which coincided with the payment of the emergency
loan from the SSCR administrators that paid for her mothers illness; that she did not deny teaching parttime in the
aforementioned schools; and that she did not wish to resign because she felt she deserved a second chance.
On the same day that Moreno sent her letter, the grievance committee issued its resolution, which unanimously found
that she violated the prohibition against a full-time faculty having an unauthorized external teaching load . The
majority of the grievance committee members recommended Morenos dismissal from employment in accordance with the
school manual, but Dean Espejo dissented and called only for a suspension for one semester.
Thereafter, SSC-R sent a letter to Moreno that was signed by the College President, informing her that they had
approved and adopted the findings and recommendations of the grievance committee and, in accordance therewith, her
employment was to be terminated. Moreno thus instituted with the NLRC a complaint for illegal termination against
SSC-R seeking reinstatement, money claims, backwages, separation pay if reinstatement is not viable, and attorneys fees.
LA: Valid dismissal since Moreno violated the Faculty Manual

NLRC: Invalid dismissal; Moonlighting activities did not affect her work performance as she consistently landed among
the five best teachers; Dismissal too harsh and unreasonable
CA: Reinstated LAs decision on the ground of willful disobedience
Issue: Whether Morenos dismissal was unlawful
Held: YES. IT WAS IMPROPER. The Court holds that the dismissal of Moreno failed to comply with the substantive
aspect of due process. The most basic of tenets in employee termination cases is that no worker shall be dismissed from
employment without the observance of substantive and procedural due process.
In termination cases, the burden of proof rests on the employer to show that the dismissal is for just cause. 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.
295 Roco 3B
SSCR contends that Morenos dismissal from employment was valid because she knowingly violated the
prohibition embodied in the aforementioned Section 2.2 of Art. II of the SSC-R Faculty Manual , in accordance with
Section 4525 of the Manual of Regulations for Private Schools, and which prohibition was likewise contained in Morenos employment contract. In
so doing, Moreno allegedly committed serious misconduct and willful disobedience against the school, and thereby submitted
herself to the corresponding penalty provided for in both the Faculty Manual and the employment contract, which is termination for cause.
On the basis of the evidence on record, the Court finds that Moreno has indeed committed misconduct against
respondent SSC-R. Her admitted failure to obtain the required permission from the school before she engaged in external
teaching engagements is a clear transgression of SSCRs policy. However, SAID MISCONDUCT FALLS BELOW THE
REQUIRED LEVEL OF GRAVITY THAT WOULD WARRANT DISMISSAL AS A PENALTY.
Under Art. 282(a) of the Labor Code, WILLFUL DISOBEDIENCE of the employers lawful orders as a just cause for
termination of employment envisages the concurrence of at least two requisites:
(1) the employees assailed conduct must have been willful or intentional, the willfulness being 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 has been engaged to discharge.
Similarly, with respect to serious misconduct, the Court has already ruled in Salgarino that Misconduct is defined as 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 of judgment. The misconduct to be serious
within the meaning of the act must be of such a grave and aggravated character and not merely trivial or unimportant. Such
misconduct, however serious, must nevertheless be in connection with the work of the employee to constitute just cause from
his separation. 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.
After examining the records of the case, the Court finds that SSCR miserably failed to prove that Morenos misconduct
was induced by a perverse and wrongful intent as required in Art. 282(a) of the Labor Code. SSC-R merely anchored
Morenos alleged bad faith on the fact that she had full knowledge of the policy that was violated and that it was
relatively easy for her to secure the required permission before she taught in other schools. This posture is utterly lacking.
It bears repeating that it is the employer that has the burden of proving the lawful cause sustaining the dismissal of the
employee. Even equipoise is not enough; the employer must affirmatively show rationally adequate evidence that the
dismissal was for a justifiable cause. In the present case, SSC-R failed to adduce any concrete evidence to prove that
Moreno indeed harbored perverse or corrupt motivations in violating the aforesaid school policy.
In her letter of explanation to the grievance committee dated 12 November 2002, Moreno explained in detail her role as the
breadwinner and the grave financial conditions of her family. As previous requests for permission had already been denied,
Moreno was thus prompted to engage in illicit teaching activities in other schools, as she desperately needed them to augment
her income.
Instead of submitting controverting evidence, SSC-R simply dismissed the above statements as nothing more than a
lame excuse and are clearly an afterthought, considering that no evidence was offered to support them and that
Morenos salary was allegedly one of the highest among the universities in the country. In addition, even if dismissal for
cause is the prescribed penalty for the misconduct herein committed , in accordance with the SSC-R Faculty Manual and
Morenos employment contract, the Court finds the same to be DISPROPORTIONATE TO THE OFFENSE.
Time and again, we have ruled that while an employer enjoys wide latitude of discretion in the promulgation of policies,
rules and regulations on work-related activities of the employees, those directives, however, must always be fair and
reasonable, and the corresponding penalties, when prescribed, must be commensurate to the offense involved and to
the degree of the infraction.
296 Roco 3B
Special circumstances were present in the case at bar which should have been properly taken into account in the imposition of
the appropriate penalty. Moreno, in this case, had readily admitted her misconduct, which was undisputedly the first she
has ever committed against the school. Her teaching abilities and administrative skills remained apparently unaffected by
her external teaching engagements, as she was found by the grievance committee to be one of the better professors in the
Accounting Department and she was even offered the Chairmanship of her college. Also, the fact that Moreno merely
wanted to alleviate her familys poor financial conditions is a justification that SSCR failed to refute. SSCR likewise failed to
prove any resulting material damage or prejudice on its part as a consequence of Morenos misconduct.
The claim by SSC-R that the imposition of a lesser penalty would set a bad precedent for the other faculty members
who comply with the school policies is too speculative for this Court to even consider.
Finally, the Court notes that in Morenos contract of employment, one of the provisions therein categorically stated that
should a violation of any of the terms and conditions thereof be committed, the penalty that will be imposed would
either be suspension or dismissal from employment. Thus, contrary to its position from the beginning, SSC-R clearly
had the discretion to impose a lighter penalty of suspension and was not at all compelled to dismiss Moreno under the
circumstances, just because the Faculty Manual said so.
PROCEDURAL DUE PROCESS

With regard to the observance of procedural due process, neither of the parties has put the same into issue . Indeed, based
on the evidence on record, Moreno was served with the required twin notices and was afforded the opportunity to be heard.
The first notice was embodied in the memorandum by her College Dean, which required her to explain her unauthorized
teaching assignments. The letter by SSC-R that informed Moreno that her services were being terminated effective 16
November 2002 constituted the second required notice. Moreno was also given the opportunity to explain her side when
the special grievance committee asked her a series of questions pertaining to their investigation in a letter and to
which she replied likewise through a letter.
Despite SSCRs observance of procedural due process, it nonetheless failed to discharge its burden of proving the
legality of Morenos termination from employment. Thus, the imposed penalty of dismissal is hereby declared as invalid.
In so ruling, this Court does not depreciate the misconduct committed by Moreno. Indeed, SSC-R has adequate reasons to
impose sanctions on her. However, this should not be dismissal from employment. Because of the serious implications of
this penalty, our Labor Code decrees that an employee cannot be dismissed, except for the most serious causes.
Considering the presence of extenuating circumstances in the instant case, the Court deems it appropriate to impose the
penalty of suspension of one (1) year on Moreno, to be counted from 16 November 2002, the effective date of her illegal
dismissal. However, given the period of time in which Moreno was actually prevented from working in the respondent
school, the said suspension should already be deemed served.
Furthermore, the Court holds that Moreno should be reinstated to her former position, without loss of seniority rights and
other privileges, but without payment of backwages. As a general rule, the normal consequences of a finding that an employee
has been illegally dismissed are, firstly, that the employee becomes entitled to reinstatement without loss of seniority rights;
and secondly, the payment of backwages corresponding to the period from his illegal dismissal up to his actual reinstatement.
The two forms of relief are, however, distinct and separate from each other. Though the grant of reinstatement commonly
carries with it an award of backwages, the appropriateness or non- availability of one does not carry with it the
inappropriateness or non-availability of the other.
In accordance with Durabuilt Recapping Plant & Co. v. NLRC, the Court may not only mitigate, but also absolve entirely,
the liability of the employer to pay backwages where good faith is evident. Likewise, backwages may be withheld from a
dismissed employee where exceptional circumstances are availing.
In the present case, the good faith of SSC-R is apparent. The termination of Moreno from her employment cannot be
said to have been carried out in a malevolent, arbitrary or oppressive manner . Indeed, the only mistake that the
respondent school has committed was to strictly apply the provisions of its Faculty Manual and its contract with
297 Roco 3B
Moreno without regard for the aforementioned special circumstances that were attendant in this case. Even then, Morenos
right to procedural due process was fully respected, as she was given the required twin notices and an ample opportunity to be
heard. This fact was not even disputed by Moreno herself.
196. Equitable Banking vs Sadac, June 8, 2006

Facts: Sadac was appointed VP of the Legal Department of petitioner Bank and subsequently General Counsel thereof.
9 lawyers of petitioner Banks Legal Department, in a letter-petition to the Chairman of the Board of Directors, accused
Sadac of abusive conduct, and ultimately, petitioned for a change in leadership of the department. On the ground of
lack of confidence in Sadac, under the rules of client and lawyer relationship, petitioner Bank instructed Sadac to deliver all
materials in his custody in all cases in which the latter was appearing as its counsel of record.
Sadac requested for a full hearing and formal investigation but the same remained unheeded. Sadac filed a complaint
for illegal dismissal with damages against petitioner Bank and individual members of the Board of Directors. After
learning of the filing of the complaint, petitioner Bank terminated the services of respondent Sadac . Sadac was
removed from his office and ordered disentitled to any compensation and other benefits. Labor Arbiter dismissed the
complaint. NLRC reversed the Labor Arbiter and declared respondent Sadacs dismissal as illegal.
Bank brought case to SC via a Special Civil Action for Certiorari assailing the NLRC Resolution. In Decision of 13 June 1997,
SC held respondent Sadacs dismissal illegal.
SC held that the existence of the employer-employee relationship between petitioner Bank and respondent Sadac had been
duly established. Moreover, SC did not find that respondent Sadacs dismissal was grounded on any of the causes
stated in Article 282 of the Labor Code . The Court similarly found that petitioner Bank disregarded the procedural
requirements in terminating respondent Sadacs employment. On 28 July 1997, the SC Decision in G.R. No. 102467 dated
13 June 1997 became FINAL AND EXECUTORY.
Sadac filed with the Labor Arbiter a Motion for Execution thereof. Bank filed a Manifestation and Motion praying that the
award in favor of Sadac be computed and that after payment is made, petitioner Bank be ordered forever released from
liability under said judgment.
Per SADACS COMPUTATION, the total amount of the monetary award is P6M, representing his backwages and other
benefits, including the general increases which he should have earned during the period of his illegal termination.
Sadac theorized that he started with a monthly compensation of P12,500.00 in August 1981, when he was appointed as Vice
President of petitioner Banks Legal Department and later as its General Counsel in December 1981. When he was dismissed
illegally, his monthly compensation amounted to P29,365.00 or more than twice his original compensation. The difference, he
posited, can be attributed to the annual salary increases which he received equivalent to 15 percent (15%) of his monthly
salary.
Sadac anchored his claim on Article 279 and cited as authority the cases several cases. According to Sadac, the catena of cases
uniformly holds that it is the obligation of the employer to pay an illegally dismissed employee 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 therefore, salary increases should be deemed a component in the
computation of backwages.
Sadac contended that his check-up benefit, clothing allowance, and cash conversion of vacation leaves must be
included in the computation of his backwages.
Bank disputed Sadacs computation. Per its computation, the amount of monetary award due respondent Sadac is P3M only,
to the exclusion of the latters general salary increases and other claimed benefits which, it maintained, were
unsubstantiated.
Labor Arbiter rendered an Order adopting Sadacs computation and awarded Sadac the amount of P6,030,456.59
representing his backwages inclusive of allowances and other claimed benefits, namely check-up benefit, clothing allowance,
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and cash conversion of vacation leave plus (12%) interest per annum equivalent to P1,367,590.89 as of 30 June 1999, or a total
of P7,398,047.48. NLRC reversed.
NLRC ratiocinated that the doctrine on general increases as component in computing backwages in Sigma Personnel Services and
St. Louis was merely obiter dictum. The NLRC found East Asiatic Co., Ltd. inapplicable on the ground that the original
circumstances therein are not only peculiar to the said case but also completely strange to the case of Sadac.
NLRC disallowed Sadacs claim to check-up benefit ratiocinating that there was no clear and substantial proof that the same
was being granted and enjoyed by other employees of petitioner Bank. The award of attorneys fees was similarly deleted.
CA, citing East Asiatic held that Sadacs general increases should be added as part of his backwages. According to the
CA, Sadacs entitlement to the annual general increases has been duly proven by substantial evidence that the latter, in fact,
enjoyed an annual increase of more or less (15%). Sadacs check-up benefit, clothing allowance, and cash conversion of
vacation leave were similarly ordered added in the computation of Sadacs basic wage. Anent the matter of attorneys fees, the
Court of Appeals sustained the NLRC as there was nothing in the aforesaid Decision, either in the dispositive portion or the
body thereof that supported the grant of attorneys fees. Sadac filed a Partial MR of the Court of Appeals Decision insofar as
the appellate court did not award him attorneys fees. Court of Appeals granted Sadacs Partial MR.
Issue: Whether salary differentials and check-up benefits, clothing allowances, and cash conversion of VLs should be included
in the computation of backwages.
Held: NO. BACKWAGES IN GENERAL are granted on grounds of equity for earnings which a worker or employee has
lost due to his illegal dismissal. It is not private compensation or damages but is awarded in furtherance and
effectuation of the public objective of the Labor Code. Nor is it a redress of a private right but rather in the nature of a
command to the employer to make public reparation for dismissing an employee either due to the formers unlawful act or
bad faith.
I. ON THE APPLICABILITY OF THE CASES CITED

Attention must be called to Article 279 of the Labor Code of the Philippines, as amended by Section 34 of Rep. Act No. 6715.
Article 279 mandates that an employees FULL BACKWAGES shall be inclusive of allowances and other benefits or their
monetary equivalent. Contrary to the ruling of the CA, we do not see that a salary increase can be interpreted as either
an allowance or a benefit.
ALLOWANCES and BENEFITS are granted to the employee apart or separate from, and in addition to the wage or
salary. In contrast, SALARY INCREASES are amounts which are added to the employees salary as an increment thereto
for varied reasons deemed appropriate by the employer . Salary increases are not separate grants by themselves but once
granted, they are deemed part of the employees salary.
To extend the coverage of an allowance or a benefit to include salary increases would be to strain both the imagination of the
Court and the language of law. Indeed, if the intent were to include salary increases as basis in the computation of backwages,
the same should have been explicitly stated in the same manner that the law used clear and unambiguous terms in expressly
providing for the inclusion of allowances and other benefits.
We find East Asiatic inapplicable to the case at bar. In East Asiatic, therein petitioner East Asiatic Company, Ltd. was found
guilty of unfair labor practices against therein respondent, Soledad A. Dizon, and the Court ordered her reinstatement with
back pay. On the question of the amount of backwages, the Court granted the dismissed employee the whole amount of the
salaries plus all general increases and bonuses she would have received during the period of her lay-off with the corresponding
right of the employer to deduct from the total amounts, all the earnings earned by the employee during her lay-off. The
emphasis in East Asiatic is the duty of both the employer and the employee to disclose the material facts and
competent evidence within their peculiar knowledge relative to the proper determination of backwages, especially as
the earnings derived by the employee elsewhere are deductions to which the employer are entitled . However, East
Asiatic does not find relevance in the resolution of the issue before us. First, the material date to consider is 21 March 1989,
when the law amending Article 279 of the Labor Code, Rep. Act No. 6715, otherwise known as the Herrera-Veloso Law,
299 Roco 3B
took effect. It is obvious that the backdrop of East Asiatic, decided by this Court on 31 August 1971 was prior to the current
state of the law on the definition of full backwages. Second, it bears stressing that East Asiatic was decided at a time when
even as an illegally dismissed employee is entitled to the whole amount of the salaries or wages, it was the recognized right of
the employer to deduct from the total of these, the amount equivalent to the salaries or wages the employee or worker would
have earned in his old employment on the corresponding days that he was actually gainfully employed elsewhere with an equal
or higher salary or wage, such that if his salary or wage in his other employment was less, the employer may deduct only what
has been actually earned.
We cannot accept the CAs reliance on the doctrine as espoused in Millares. It is evident that Millares concerns itself with
the computation of the salary base used in computing the separation pay of petitioners therein. The distinction
between backwages and separation pay is elementary. Separation pay is granted where reinstatement is no longer
advisable because of strained relations between the employee and the employer. Backwages represent
compensation that should have been earned but were not collected because of the unjust dismissal. The bases for
computing the two are different, the first being usually the length of the employees service and the second the actual period
when he was unlawfully prevented from working.
Neither can we look at St. Louis of Tuguegarao to resolve the instant controversy. What was mainly contentious therein was
the inclusion of fringe benefits in the computation of the award of backwages, in particular additional vacation and sick
leaves granted to therein concerned employees, it evidently appearing that the reference to East Asiatic in a footnote was a
mere obiter dictum. Salary increases are not akin to fringe benefits and neither is it logical to conceive of both as belonging to
the same taxonomy.
We must also resolve against the applicability of Sigma Personnel Services to the case at bar. The basic issue before the Court
therein was whether the employee, Susan Sumatre, a domestic helper in Abu Dhabi, United Arab Emirates, had been illegally
dismissed, in light of the contention of Sigma Personnel Services, a duly licensed recruitment agency, that the former was a
mere probationary employee who was, on top of this status, mentally unsound. Even a cursory reading of Sigma Personnel
Services citing St. Louis College of Tuguegarao would readily show that inclusion of salary increases in the computation of
backwages was not at issue.
II. BASIS OF COMPUTATION OF BACKWAGES

The weight of authority leans in the Banks favor and against Sadacs claim for the inclusion of general increases in the
computation of his backwages. We stressed in Paramount that an unqualified award of backwages means that the
employee is paid at the wage rate AT THE TIME OF HIS DISMISSAL. Court has declared that the base figure to be used in
the computation of backwages due to the employee should include not just the basic salary, but also the regular allowances
that he had been receiving, such as the emergency living allowances and the 13th month pay mandated under the law.
In Evangelista v. NLRC, We resolved that an unqualified award of backwages means that the employee is paid at the
wage rate AT THE TIME OF HIS DISMISSAL.
As explicitly declared in Paramount Vinyl Products Corp. vs. NLRC, an unqualified award of backwages means that the employee
is paid at the wage rate at the time of his dismissal. Furthermore, the award of salary differentials is not allowed, the
established rule being that upon reinstatement, illegally dismissed employees are to be paid their backwages
without deduction and qualification as to any wage increases or other benefits that may have been received by their
co-workers who were not dismissed or did not go on strike.
Even a cursory reading of the dispositive portion of the Courts Decision of 13 June 1997 in G.R. No. 102467, awarding
backwages to respondent Sadac, readily shows that the award of backwages therein is unqualified, ergo, without
qualification of the wage as thus fixed at the time of the dismissal and without deduction.
The outstanding feature of backwages is thus the degree of assuredness to an employee that he would have had them as
earnings had he not been illegally terminated from his employment. Petitioners claim, however, is based simply on
expectancy or his assumption that, because in the past he had been consistently rated for his outstanding performance and his
salary correspondingly increased, it is probable that he would similarly have been given high ratings and salary increases but for
his transfer to another position in the company.
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In contrast to a grant of backwages or an award of lucrum cessans in the civil law, this contention is based merely on
speculation. Furthermore, it assumes that in the other position to which he had been transferred petitioner had not been given
any performance evaluation. The mere fact that petitioner had been previously granted salary increases by reason of
his excellent performance does not necessarily guarantee that he would have performed in the same manner and,
therefore, qualify for the said increase later. We are not prepared to accept that this degree of assuredness applies to
respondent Sadacs salary increases. There was no lawful decree or order supporting his claim, such that his salary increases
can be made a component in the computation of backwages. Salary increases are a mere expectancy. They are, by its
nature volatile and are dependent on numerous variables, including the companys fiscal situation and even the
employees future performance on the job, or the employees continued stay in a position subject to management
prerogative to transfer him to another position where his services are needed . There is NO VESTED RIGHT TO SALARY
INCREASES. Sadac may have received salary increases in the past only proves fact of receipt but does not establish a degree of
assuredness that is inherent in backwages.
Sadac cannot take exception by arguing that jurisprudence speaks only of wage and not salary, and therefore, the rule is
inapplicable to him. It is respondent Sadacs stance that he was not paid at the wage rate nor was he engaged in some form of
manual or physical labor as he was hired as Vice President of petitioner Bank. He cites Gaa v. Court of Appeals where the Court
distinguished between wage and salary. The reliance is misplaced. The distinction between salary and wage in Gaa was for
the purpose of Article 1708 of the Civil Code which mandates that, [t]he laborers wage shall not be subject to execution or
attachment, except for debts incurred for food, shelter, clothing and medical attendance. In labor law, however, the
distinction appears to be merely semantics.
That wage and salary are synonymous has been settled in Songco v. NLRC. Broadly, the word salary means a recompense or
consideration made to a person for his pains or industry in another mans business.
III. On the inclusion of CHECK-UP BENEFIT, CLOTHING ALLOWANCE and CASH CONVERSION OF VACATION LEAVES
Bank claims that Sadac should not be entitled to check-up benefit, clothing allowance and cash conversion of vacation leaves
because Sadac did not present any evidence to prove entitlement to these claims. Labor Arbiter and the Court of Appeals are
in agreement anent the entitlement of respondent Sadac to check-up benefit, clothing allowance, and cash conversion of
vacation leaves, but the findings of the NLRC were to the contrary.
Labor Arbiter gave weight to petitioner Banks acknowledgment in its computation that respondent Sadac is entitled to certain
benefits, namely, rice subsidy, tuition fee allowance, and medicine allowance, thus, there exists no reason to deprive
respondent Sadac of his other benefits and also reasoned that the petitioner Bank did not adduce evidence to support its
claim that the benefits sought by respondent Sadac are not granted to its employees and officers. CA ratiocinated that if
ordinary employees are entitled to receive these benefits, so it is with more reason for a Vice President, like herein respondent
Sadac to receive the same.
Per petitioner Banks computation, the benefits to be received by respondent are monthly rice subsidy, tuition fee allowance
per year, and medicine allowance per year. Contained nowhere is an acknowledgment of herein claimed benefits, namely,
check- up benefit, clothing allowance, and cash conversion of vacation leaves.
We cannot sustain the rationalization that the acknowledgment by petitioner Bank in its computation of certain benefits
granted to respondent Sadac means that the latter is also entitled to the other benefits as claimed by him but not acknowledged
by petitioner Bank. The rule is, he who alleges, not he who denies, must prove. Allegations by respondent Sadac does not
suffice in the absence of proof supporting the same.
197.Banares vs Tabaco, April 1, 2013

Facts: Petitioner was the GM of Tabaco Womens Transport Service Cooperative (TAWTRASCO) until its management,
on March 6, 2006, terminated his services. Petitioner filed a complaint for illegal dismissal wherein the LA ruled in favor
of petitioner and ordered TAWTRASCO to immediately reinstate complainant to his former position, without loss of
seniority right.
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Since TAWTRASCO opted not to appeal, the LA Decision soon became final and executory. In fact, TAWTRASCO in
no time paid petitioner the amount due him by way of damages and backwages . Owing to the strained employer-
employee relationship perceived to exist between them, TAWTRASCO offered to pay petitioner separation pay , but
petitioner rejected the offer. Eventually the two parties entered into a compromise. In turn, TAWTRASCO undertook to
reinstate the petitioner. Accordingly, the LA issued order based on the compromise agreement thus executed, and declared
the instant case closed and terminated.
Eventually a resolution was a memorandum from the BOD, requiring him to report at the companys Virac,
Catanduanes terminal. The memorandum order contained an enumeration of petitioners duties and responsibilities. A day
after, petitioner went to see Oliva Barcebal, the BOD Chairman, to decry that the adverted return-to-work
memorandum and board resolution contravene the NLRC approved compromise agreement which called for his
reinstatement as GM without loss of seniority rights. Another memorandum was sent to him, which set forth his location
assignment, as follows: temporarily assigned at the Virac, Catanduanes terminal/office for 2 months, after which he is to
divide his time between the Virac Terminal and the Araneta Center Bus Terminal.
Barely a week into his new assignment, petitioner, thru a memorandum report, proposed the
construction/rehabilitation of the passenger lounge in the Virac terminal, among other improvements. The proposal
came with a request for a monthly lodging accommodation allowance for the duration of his stay.
Subsequent events saw petitioner requesting and receiving an allocation of his travel, accommodation, representation and
communication allowance subject to liquidation. No replenishment, however, came after. Oliva, while conducting, in the
company of another director, an ocular inspection of the Virac terminal, discovered that petitioner had not reported
for work. Thus, a company memorandum was issued asking petitioner to explain his absence. In response, petitioner
addressed a letter-reply to management stating the underlying reason for not reporting and continue reporting for
work in his new place of assignment and expressing in detail his grievances against management.
Petitioner gave reasons thus: he realized that in truth his reinstatement effected by TAWTRASCO which is supposed
to be in pursuance to the NLRC decision is nothing but an artificial, fake, fictitious and a sham kind of return to
work order. Other reasons given were the slow funding for the reconstruction of the terminal, non-replenishment of his
allowances, the work assigned to him as opposed to his original duty was different, which he alleged was a demotion
in rank, lack of appreciable office supplies and materials in the office, various workers under him were given orders not to
follow him, etc.
In essence, he alleges that there is an ongoing mockery of the mandate of the NLRC (LA) decision that he should be
reinstated to his former position as GM without loss of seniority rights . What was truly happening is the obvious
evidence that TAWTRASCO does not want petitioner to work the way he was doing it before and the way as mandated by the
by-laws of the transport cooperative.
He concludes that he cannot be charged for abandonment of work because TAWTRASCO is causing him an inhumane and
degrading treatment as General Manager and giving an embarrassing kind of work.
Petitioner filed a complaint against TAWTRASCO for nonpayment of salaries and withholding of privileges before
the LA. The LA ruled in favor of him. TAWTRASCO was ordered to pay salary differentials and to reinstate petitioner to his
former position as GM. The NLRC affirmed. The CA reversed, holding that TAWTRASCO fully reinstated petitioner to his
former post and that petitioner abandoned his work.
Issue: (1) Whethe there was a genuine reinstatement of petitioner to his former position as GM without loss of seniority rights
(2) Whether petitioner abandoned is work.
Held: NO for both. REINSTATEMENT, as a labor law concept, means the admission of an employee back to work
prevailing prior to his dismissal; restoration to a state or position from which one had been removed or separated ,
which presupposes that there shall be no demotion in rank and/or diminution of salary, benefits and other privileges;
if the position previously occupied no longer exists, the restoration shall be to a substantially equivalent position in
302 Roco 3B
terms of salary, benefits and other privileges. Managements prerogative to transfer an employee from one office or
station to another within the business establishment, however, generally remains unaffected by a reinstatement
order, as long as there is no resulting demotion or diminution of salary and other benefits and/or the action is not
motivated by consideration less than fair or effected as a punishment or to get back at the reinstated employee.
Guided by the foregoing reasonable albeit exaction norm, the reinstatement of petitioner as general manager of
TAWTRASCO, effected by TAWTRASCO pursuant to the compromise agreement, was not a real, bona fide
reinstatement in the context of the Labor Code and pertinent decisional law .
TAWTRASCO, at the outset, directed petitioner to report to the Virac terminal with duties and responsibilities not
befitting a general manager of a transport company . In fine, the assignment partook of the nature of a DEMOTION.
A cursory reading the duties of Banares in his new position would readily reveal that petitioner was tasked to
discharge menial duties, such as maintaining a record of the in and out of freight loaded on all TAWTRASCO buses
and signing the trip records of the buses going out daily. To be sure, these tasks cannot be classified as pertaining to the office
of a general manager, but that of a checker. As may reasonably be expected, petitioner promptly reacted to this assignment. A
day after he received the memorandum in question, or on February 25, 2007, he repaired to the office of Oliva to personally
voice out his misgivings about the set up and why he believed that the above memorandum contravened their compromise
agreement and the February 5, 2007 Order of the LA specifically providing for his reinstatement as general manager without
loss of seniority rights and privileges.
While the memorandum issued by TAWTRASCO was couched as if they had in mind the reinstatement of petitioner to his
former position, there cannot be any quibble that TAWTRASCO withheld petitioners customary boarding house
privilege. What is more, TAWTRASCO did not provide him with a formal office space . As evidence on record
abundantly shows, TAWTRASCO was made aware of its shortcomings as employer, but it opted not to lift a finger to address
petitioners reasonable requests for office space and free lodging while assigned at the Virac terminal. Thus, the stand-off
between employer and employee led to petitioner writing to TAWTRASCO, an explanatory letter explaining his failure to
report back to work at the Virac terminal.
As reflected above, the reinstatement order has not been faithfully complied with. To reiterate, there was a lack of a
viable office: no proper office space, no office furniture and equipment, no office supplies. Petitioners request for immediate
remediation of the above unfortunate employment conditions fell on deaf ears. This is not to mention petitioners board and
lodging privilege which he was deprived of without so much as an explanation. Thus, it could not be said that petitioners
absence is without valid or justifiable cause.
Additionally the course of action taken by petitioner when his letter explanation was not given any reaction disproves
any intention on him to abandon his work. Petitioner lost no time in filing a complaint and sought to compel
TAWTRASCO for the implementation of the LAs decision.
Given the convergence of events and circumstances above described, the Court can readily declare that TAWTRASCO
admitted petitioner back to work under terms and conditions adversely dissimilar to those prevailing before his illegal
dismissal. Put a bit differently, petitioner was admitted back, but required to work under conditions crafted to cause
unnecessary hardship to or meant to be rejected by him. And to reiterate, these conditions entailed a demotion in rank
and diminution of perks and standard privileges. The shabby and unfair treatment accorded him by the management of
TAWTRASCO is definitely not genuine reinstatement to his former position. Proper reinstatement is, therefore, proper.
REINSTATEMENT NO LONGER FEASIBLE

Supervening events, however, had transpired which inexorably makes the reinstatement infeasible. For one,
TAWTRASCO already appointed a new general manager. Petitioner no less has raised this fact of appointment. As a
matter of settled law, reinstatement and payment of backwages, as the normal consequences of illegal dismissal, presuppose
that the previous position from which the employee has been removed is still in existence or there is an unfilled position of a
nature, more or less, similar to the one previously occupied by said employee. For another, a considerable period of time
has elapsed since petitioner last reported to work in early 2007 (this case was decided in 2013) or practically a six-
303 Roco 3B
year period. And this protracted labor suit have likely engendered animosity and exacerbated already strained relations
between petitioner and his employer.
Reinstatement is no longer viable where, among other things, the relations between the employer and employee
have been so severely strained, that it is not in the best interest of the parties, nor is it advisable or practical to order
reinstatement. Under the doctrine of strained relations, payment of separation pay is considered an acceptable alternative to
reinstatement when the latter option is no longer desirable or viable. Indeed, separation pay is made an alternative relief in lieu
of reinstatement in certain circumstances, such as:
(1) when reinstatement can no longer be effected in view of the passage of a long period of time or because of the
realities of the situation;
(2) reinstatement is inimical to the employers interest;
(3) reinstatement is no longer feasible;
(4) reinstatement does not serve the best interests of the parties involved;
(5) the employer is prejudiced by the workers continued employment;
(6) facts that make execution unjust or inequitable have supervened; or
(7) strained relations between the employer and the employee.
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. In lieu of reinstatement, petitioner is entitled to separation pay
198.Bordomeo vs CA, February 20, 2013 (tangina sobrang labo nito)

Facts: International Pharmaceuticals Inc.s (IPI) official bargaining unit is IPI Employees Union (UNION). In 1989, The
Union and IPI had a bargaining deadlock. As a result, the Union staged a strike while IPI ordered a lockout.
DOLE Secretary Torres assumed jurisdiction over the dispute and ordered the reinstatement of around 50 employee-Union
members on Dec. 5 1991. This order became final. Thus, on June 8 1994, the Union moved for the execution of said order
with the National Conciliation and Mediation Board (NCMB).
On Nov 1994, Atty. Arnado who represented 15 of the 50 Union members filed an Urgent Motion for Execution. Ruling
thereon, Regional Director Macaraya increased the number of workers to be benefited to 962 who is to share equally in the
43M set aside for the backwages.
IPI appealed the execution. On Dec. 22, 1995, Acting DOLE Sec. Brillantes quashed the writ of execution and considered the
case closed and terminated. Upon reconsideration, DOLE Sec. Quisumbing granted the MR and reinstated the writ of
execution.
Aggrieved, IPI moved for reconsideration. Pending resolution of IPIs MR, IPIs funds in China Bank were garnished.
Therafter, the 15 employees under Atty. Arnaldo executed quitclaims subject to its right to claim unsatisfied amounts of
separation pay. Notwithstanding this, Atty Arnaldo filed another motion, this time, on behalf of the other group of
employees to which the petitioner belongs seeking to recover 58M.
On Dec 1997, Sec. Quisumbing denied IPIs MR and ruled in favor of the group to which the petitioner belongs. Then,
petitioners moved for partial reconsideration of the Dec 1997 ruling to which Acting DOLE Sec. Espanol denied on
March 27 1998.
Meanwhile, the other group of employee-Union members to which petitioner belongs, filed on May 15 1996 a Motion
for Issuance of a Writ of Execution based on the computation by RD Macaraya . Essentially, petitioners seek the
execution of the order issued by DOLE Secretary Torres (re: reinstatement) in accordance with the computation
issued by RD Macaraya.
Ultimately, on July 4 2001. DOLE Sec. Sto. Tomas affirmed that the March 27 1998 ruling was completely closed and has
terminated this case. Hence, this petition.
304 Roco 3B
Issue: Whether the employees who executed the quitclaim can still execute upon the property of IPI to cover for the balance
of their separation pay.
Held: NO. The petitioners submit that of the groups of employees classified under the April 12, 1995 notice of computation/
execution issued by Regional Director Macaraya, only the first two groups, that is, the 15 employees initially represented by
Atty. Arnado; and the nine salesmen led by Geronimo S. Banquirigo, had been granted a writ of execution. They further
submit that the May 24, 1995 writ of execution issued in favor of the first group of employees, including themselves, had only
been partially satisfied because no backwages or separation pay from March 16, 1995 onwards had yet been paid to them; that
the reduced award granted to the second group of employees was in violation of the April 12, 1995 notice of
computation/execution; that no writ of execution had been issued in favor of the other groups of employees; and that DOLE
Secretary Sto. Tomas thus committed grave abuse of discretion in refusing to fully execute the December 26, 1990 and
December 5, 1991 orders.
In its comment, IPI counters that the petition for certiorari should be dismissed for being an improper remedy, the more
appropriate remedy being a petition for review on certiorari; that a petition for review on certiorari should have been filed
within 15 days from receipt of the denial of the motion for reconsideration, as provided in Section 1 and Section 2 of Rule 45;
and that the petition must also be outrightly dismissed for being filed out of time.
There is no question that the 15 employees represented by Atty. Arnado, inclusive of the petitioners, received their
portion of the award covered by the writ of execution for the amount through the release of the garnished deposit of
IPI at China Banking Corporation. That was why they then executed the satisfaction of judgment and quitclaim/release, the
basis for the DOLE Secretary to expressly declare in her July 4, 2001 decision that the full satisfaction of the writ of execution
completely CLOSED and TERMINATED this case.
Still, the 15 employees demand payment of their separation pay and backwages from March 16, 1995 onwards
pursuant to their reservation reflected in the satisfaction of judgment and quitclaim/release they executed on
September 11, 1996.
The demand lacked legal basis. Although the decision of the DOLE Secretary dated December 5, 1991 had required IPI to
reinstate the affected workers to their former positions with full backwages reckoned from December 8, 1989 until actually
reinstated without loss of seniority rights and other benefits, the reinstatement thus decreed was no longer possible. Hence,
separation pay was instead paid to them. This alternative was sustained in law and jurisprudence, for 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 .
Under the circumstances, the employment of the 15 employees or the possibility of their reinstatement terminated by March
15, 1995. Thereafter, their claim for separation pay and backwages beyond March 15, 1995 would be unwarranted. The
computation of separation pay and backwages due to illegally dismissed employees should not go beyond the date when they
were deemed to have been actually separated from their employment, or beyond the date when their reinstatement was
rendered impossible.
Anent this, the Court has observed in Golden Ace Builders v. Talde that the BASIS FOR THE PAYMENT OF BACKWAGES is
different from that for the award of separation pay . SEPARATION PAY is granted where reinstatement is no longer
advisable because of strained relations between the employee and the employer . BACKWAGES represent
compensation that should have been earned but were not collected because of the unjust dismissal .
The basis for computing backwages is usually the length of the employees service while that for separation pay is the
actual period when the employee was unlawfully prevented from working.
199.San Miguel Properties vs Gucaban, July 18, 2011

Facts: Gwendellyn Rose Gucaban (Gucaban) was well into the 10th year of her career as a licensed civil engineer when she
joined the workforce of San Miguel Properties Philippines, Inc. (SMPI) in 1991. Initially engaged as a construction
management specialist, she, by her satisfactory performance on the job, was promoted in 1994 and 1995, respectively, to the
305 Roco 3B
position of technical services manager, and then of project development manager. As project development manager,
she also sat as a member of the companys management committee.
In her COMPLAINT FOR ILLEGAL DISMISSAL filed on June 26, 1998, she claimed that on January 27, 1998, she was informed
by SMPIs President Federico Gonzalez that the company was planning to reorganize its manpower in order to cut
on costs, and that she must file for resignation or otherwise face termination. Three days later, the HR Dept. allegedly
furnished her a blank resignation form which she refused to sign. From then on, she had been hounded by Gonzalez to sign
and submit her resignation letter.
Gucaban complained of the ugly treatment which she had since received from Gonzalez and the management
supposedly on account of her refusal to sign the resignation letter. She claimed she had been kept off from all the
meetings of the management committee, and that on February 12, 1998, she received an evaluation report signed by
Gonzalez showing that for the covered period she had been negligent and unsatisfactory in the performance of her
duties. She found said report to be unfounded and unfair, because no less than the companys VP for Property Management,
Manuel Torres, in a subsequent memorandum, had actually vouched for her competence and efficiency on the job. She
herself professed having been consistently satisfactory in her job performance as shown by her successive promotions in the
company. It was supposedly the extreme humiliation and alienation that impelled her to submit a signed resignation
letter on February 18, 1998.
Gucaban surmised that she had merely been tricked by SMPI into filing her resignation letter because it never
actualized its reorganization and streamlining plan; on the contrary, SMPI allegedly expanded its employee
population and also made new appointments and promotions to various other positions . She felt that she had been
dismissed without cause and, hence, prayed for reinstatement and payment of backwages and damages.
SMPI argued that it truly encountered a steep market decline in 1997 that necessitated cost-cutting measures and
streamlining of its employee structure which, in turn, would require the abolition of certain job positions; Gucabans post as
project development manager was one of such positions. As a measure of generosity, it allegedly proposed to Gucaban
that she voluntarily resign from office in consideration of a financial package an offer for which Gucaban was supposedly
given the first week of February 1998 to evaluate. Gucaban, however, did not communicate her acceptance of the offer and,
instead, she allegedly conferred with the HR Dept and negotiated to augment her benefits package.
SMPI claimed that Gucaban was able to grasp the favorable end of the bargain and, expectant of an even more generous
benefits package, she voluntarily tendered her resignation effective Feb 27, 1998. On the day before her effective date of
resignation, she signed a document denominated as Receipt and Release whereby she acknowledged receipt
of P1,131,865.67 cash representing her monetary benefits and waived her right to demand satisfaction of any
employment-related claims which she might have against management. SMPI admitted having made several other
appointments in June 1998, but the same, however, were supposedly part of the full implementation of its reorganization
scheme.
Labor Arbiter: dismissed the complaint. NLRC: reversed. CA: Affirmed NLRC decision.
Issue: Whether Gucaban was illegally dismissed.
Held: YES.
HER RESIGNATION WAS NOT VOLUNTARY
RESIGNATION the formal pronouncement or relinquishment of a position or office is the voluntary act of an
employee who is in a situation where he believes that personal reasons cannot be sacrificed in favor of the exigency
of the service, and he has then no other choice but to disassociate himself from employment. The intent to relinquish
must concur with the overt act of relinquishment; hence, the acts of the employee before and after the alleged resignation
must be considered in determining whether he in fact intended to terminate his employment. In illegal dismissal cases,
fundamental is the rule that when an employer interposes the defense of resignation, on him necessarily rests the burden to
prove that the employee indeed voluntarily resigned. Guided by these principles, we agree with the CA that SMPI was
unable to discharge this burden.
306 Roco 3B
While indeed the abolition of Gucabans position as a consequence of petitioners supposed reorganization plan is not the
ground invoked in this case of termination, still, the question of whether or not there was such reorganization plan in place
at the time of Gucabans separation from the company, is material to the determination of whether her resignation was of her
own volition as claimed by SMPI, inasmuch as the facts of this case tell that Gucaban could not have filed for resignation
had Gonzalez not communicated to her the alleged reorganization plan for the company.
In all stages of the proceedings, SMPI has been persistent that there was an existing reorganization plan in 1998 and
that it was implemented shortly after the effective date of Gucabans resignation. As proof, it submitted a copy of its June 9,
1998 Memorandum which shows that new appointments had been made to various positions in the company. A fleeting
glance at the said document, however, tells that there were four high-ranking personnel who received their respective
promotions, yet interestingly it tells nothing of a reorganization scheme being implemented within the larger
corporate structure.
Equally interesting is that SMPI, in its Supplemental Argument to the Motion for Reconsideration filed with the NLRC, attached
copies of the notices it sent to the DOLE stating that it would have to terminate the services of its 76 employees due
to business losses and financial reverses. True, while a reorganization of SMPIs corporate structure might have indeed
taken place as shown by these notices, nevertheless, it happened only in the latter part of 1999 or more than a year after
Gucabans separation from the company and incidentally, after she filed the instant complaint .
It is not difficult to see that, shortly prior to and at the time of Gucabans alleged resignation, there was actually no
genuine corporate restructuring plan in place as yet. In other words, although the company might have been
suffering from losses due to market decline as alleged, there was still no concrete plan for a corporate reorganization
at the time Gonzalez presented to Gucaban the seemingly last available alternative options of voluntary resignation
and termination by abolition of her office . Certainly, inasmuch as the necessity of corporate reorganization generally lies
within the exclusive prerogative of management, Gucaban at that point had no facility to ascertain the truth behind it,
and neither was she in a position to question it right then and there . Indeed, she could not have chosen to file for
resignation had SMPI not broached to her the possibility of her being terminated from service on account of the
supposed reorganization.
It is then understandable for Gucaban, considering the attractive financial package which SMPI admittedly offered to
her, to opt for resignation instead of suffer termination a consequence the certainty of which she was made to
believe. As rightly noted by the Court of Appeals, that there was no actual reorganization plan in place when Gucaban was
induced to resign, and that she had been excluded from the meetings of the management committee since she refused to sign
her resignation letter followed by the soured treatment that caused her humiliation and alienation, are matters which SMPI has
not directly addressed and successfully refuted.
Besides, whether there have been negotiations or not, the irreducible fact remains that Gucabans separation from the
company was the confluence of the fraudulent representation to her that her office would be declared redundant,
coupled with the subsequent alienation which she suffered from the company by reason of her refusal to tender
resignation. The element of voluntariness in her resignation is, therefore, missing. She had been constructively and,
hence, illegally dismissed as indeed her continued employment is rendered impossible, unreasonable or unlikely under the
circumstances.
ENTITLED TO MORAL DAMAGES AND EXEMPLARY DAMAGES

A final word. Moral damages are awarded in termination cases where the employees dismissal was attended by bad
faith, malice or fraud, or where it constitutes an act oppressive to labor, or where it was done in a manner contrary to
morals, good customs or public policy. In Gucabans case, the said bases indeed obtain when she was fraudulently
induced to resign and accede to a quitclaim upon the false representation of an impending and genuine
reorganization as well as on the pretext that such option would be the most beneficial. This, coupled with the
subsequent oppression that immediately preceded her involuntary resignation, deserves an award of moral damages consistent
with the Court of Appeals ruling. Accordingly, Gucaban is likewise entitled to exemplary damages as decreed by the Court of
Appeals.
ENTITLED TO SEPARATION PAY AND DAMAGES
307 Roco 3B
Lastly, reinstatement and payment of backwages, as the normal consequences of illegal dismissal, presuppose that the previous
position from which the employee has been removed is still in existence or there is an unfilled position of a nature, more or
less, similar to the one previously occupied by said employee. Yet, it has been more than a decade since the incident
which led to Gucabans involuntary resignation took place and, hence, with the changes in SMPIs corporate structure
through the years, the former position occupied by Gucaban, or an equivalent thereof, may no longer be existing or is
currently occupied. Furthermore, there is the possibility that Gucabans rejoining SMPIs workforce would only
exacerbate the tension and strained relations which in the first place had given rise to this incident . This, considering
that as project development manager she was holding a key position in the company founded on trust and confidence and,
hence, there is also the possibility of compromising her efficiency and productivity on the job. For these two reasons, the
ruling of the Court of Appeals is modified in this respect. In lieu of reinstatement, an award of separation pay is in order,
equivalent to one (1) month salary for every year of service.
200. Nestle vs NLRC, 193 SCRA 504

Facts: Nestle Philippines, Inc seeks to annul the decision of the NLRC insofar as it modified the petitioners existing
non-contributory Retirement Plan.
4 CBAs separately covering the petitioners employees (in diff branches) all expired on June 30, 1987.
Union of Filipino Employees (UFE) was certified as the sole and exclusive bargaining agent for all regular rank-and-file
employees at the petitioners Cagayan de Oro factory, as well as its Cebu/Davao Sales Office. While the parties were
negotiating, the employees at Cabuyao resorted to a slowdown and walk outs prompting the petitioner to shut
down the factory. Collective bargaining negotiations between the parties ensued.
UFE declared a bargaining deadlock. Thus, the SOLE issued a return to work order. In spite of that order, the union
struck, without notice. The company retaliated by dismissing the union officers and members of the negotiating panel
who participated in the illegal strike.
NLRC affirmed the dismissals
UFE filed a notice of strike on the same ground of CBA deadlock and unfair labor practices.
The company was able to conclude a CBA with the union at the Cebu/Davao Sales Office , and with the Cagayan de
Oro factory workers. The union assailed the validity of those agreements and filed a case of unfair labor practice against the
company.
The NLRC issued a resolution whose pertinent disposition regarding the unions demand for liberalization of the companys
retirement plan for its workers, provides as follows :
The company shall continue implementing its retirement plan modified as follows: a)
for fifteen years of service or lessan amount equal to 100% of the employees monthly
salary for every year of service; b) more than 15 but less than 20 years125% of the
employees monthly salary for every year of service; c) 20 years or more150% of the
employees monthly salary for every year of service.
Both parties separately moved for reconsideration. NLRC denied the motions for reconsideration:
Anent managements objection to the modification of its Retirement Plan, we find no reason
to alter our decision. While it is not disputed that the plan is non-contributory on the
part of the workers, this does not automatically remove it from the ambit of collective
bargaining negotiations. On the contrary, the plan is specifically mentioned in the
previous bargaining agreements thereby integrating or incorporating the provisions thereof
to the agreement. By reason of its incorporation, the plan assumes a consensual character
which cannot be terminated or modified at will by either party. Consequently, it becomes
308 Roco 3B
part and parcel of CBA negotiations. When we increased the emoluments in the plan, the
conditions for the availment of the benefits set forth therein remain the same.
Hence, petitioner filed this petition for certiorari, alleging that since its retirement plan is non- contributory, it (Nestle)
has the sole and exclusive prerogative to define the terms of the plan because the workers have no vested and
demandable rights thereunder, the grant thereof being not a contractual obligation but merely gratuitous.
Issue: Whether the non-contributory retirement plan is within the sole and exlclusive prerogative of the employer.
Held: NO. At most the company can only be directed to maintain the same but not to change its terms . It should be left
to the discretion of the company on how to improve or modify the same.
The Court agrees with the NLRCs finding that the Retirement Plan was a collective bargaining issue right from the start for
the improvement of the existing Retirement Plan was one of the original CBA proposals submitted by the UFE. The unions
original proposal was to modify the existing plan by including a provision for early retirement. The company did not question
the validity of that proposal as a collective bargaining issue but merely offered to maintain the existing non-contributory
retirement plan. The union thereafter modified its proposal, but the company was adamant. Consequently, the impasse on the
retirement plan become one of the issues certified to the NLRC for compulsory arbitration.
The companys contention that its retirement plan is non negotiable, is not well-taken. The inclusion of the
retirement plan in the CBA as part of the package of economic benefits extended by the company to its employees
to provide them a measure of financial security after they shall have ceased to be employed gives a consensual character
to the plan so that it may not be terminated or modified at will by either party
The fact that the retirement plan is non-contributory, i.e., that the employees contribute nothing to the operation of the
plan, does not make it a non-issue in the CBA negotiations. Almost all of the benefits that the petitioner has granted to its
employees under the CBAsalary increases, rice allowances, midyear bonuses, 13th and 14th month pay, seniority pay,
medical and hospitalization plans, health and dental services, vacation, sick & other leaves with payare non-contributory
benefits.
Since the retirement plan has been an integral part of the CBA since 1972, the Unions demand to increase the
benefits due the employees under said plan, is a valid CBA issue . The deadlock between the company and the union on
this issue was resolvable by the Secretary of Labor , or the NLRC, after the Secretary had assumed jurisdiction
The petitioners contention, that employees have no vested or demandable right to a non-contributory retirement plan,
has no merit for employees do have a vested and demandable right over existing benefits voluntarily granted to them
by their employer. The latter may not unilaterally withdraw, eliminate or diminish such benefits.
This Court ruled similarly in Republic Cement Corporation vs. Honorable Panel of Arbitrators : Petitioners claim that retirement
benefits, being non- contributory in nature, are not proper subjects for voluntary arbitration is devoid of merit. The expired
CBA included provisions for the implementation of a Retirement and Separation Plan.It is only to be expected that the parties
would seek a renewal or an improvement of said item in the new CBA. Petitioner is estopped from now contesting the validity
of the increased award granted by the arbitrators.
The benefits and concessions given to the employees were based on the NLRCs evaluation of the unions demands, the
evidence adduced by the parties, the financial capacity of the Company to grant the demands, its longterm viability, the
economic conditions prevailing in the country as they affect the purchasing power of the employees as well as its
concommitant effect on the other factors of production, and the recent trends in the industry.
201.Cainta vs CCSEU, May 4, 2006

Facts: A CBA was entered into between Cainta Catholic School and the Cainta Catholic School Employees Union. Msgr.
Mariano Balbago was appointed School Director. From this time, the Union became inactive. It was only six years after that
the Union held an election of officers.
309 Roco 3B
The School retired Llagas and Javier, who had rendered more than 20 years of continuous service , pursuant to Section
2, Article X of the CBA, to wit: An employee may be retired, either upon application by the employee himself or by the
decision of the Director of the School, upon reaching the age of 60 or having rendered at least 20 years of service to the
School the last three years of which must be continuous.
Three days later, the Union filed a notice of strike with the National Conciliation and Mediation Board. The Union struck
and picketed the Schools entrances. Then SOLE Ma. Nieves R. Confesor issued an Order certifying the labor dispute to
the NLRC. The School filed a petition directly with the NLRC to declare the strike illegal. The Union filed a complaint for
unfair labor practice before the NLRC Upon motion, then Labor Arbiter Oswald Lorenzo ordered the consolidation of this
unfair labor practice case with the above-certified case.
The NLRC rendered a Resolution favoring the School. The Union moved for reconsideration but it was denied in a
Resolution. The Union filed a petition for certiorari before this Court. The Court issued a temporary restraining order against
the enforcement of the subject resolutions. The School, however, filed a motion for clarification considering that it had already
enforced the NLRC Resolution.
Ten regular teachers, who were declared to have lost their employment status under the aforesaid NLRC Resolution reported
back to work but the School refused to accept them by reason of its pending motion for clarification. This prompted the
Union to file a petition for contempt against Balbago and his agents before this Court. The case was referred to the Court of
Appeals. The Court of Appeals rendered a decision giving due course and granting the petition to annul and set aside the
Resolutions of the NLRC; while dismissing the petition for contempt for lack of merit.
Issue: Whether the forced retirement of Llagas & Javier was a valid exercise of management prerogative.
Held: YES. ITS A MANAGEMENT PREROGATIVE GRANTED BY THE CBA. Pursuant to the existing CBA, the
School has the option to retire an employee upon reaching the age limit of 60 or after having rendered at least twenty 20 years
of service to the School, the last three years of which must be continuous.
Retirement is a different specie of termination of employment from dismissal for just or authorized causes under
Articles 282 and 283 of the Labor Code . While in all 3 cases, the employee to be terminated may be unwilling to part from
service, there are eminently higher standards to be met by the employer validly exercising the prerogative to dismiss
for just or authorized causes.
In those 2 instances, it is indispensable that the employer establish the existence of just or authorized causes for dismissal as
spelled out in the Labor Code.
RETIREMENT, on the other hand, is the result of a bilateral act of the parties, a voluntary agreement between the
employer and the employee whereby the latter after reaching a certain age agrees and/or consents to sever his
employment with the former.
Article 287 of the Labor Code, as amended, governs retirement of employees.
The CBA in the case at bar established 60 as the compulsory retirement age. However, it is not alleged that either Javier
or Llagas had reached the compulsory retirement age of 60 years, but instead that they had rendered at least 20 years
of service in the School, the last three years continuous. Clearly, the CBA provision allows the employee to be retired by
the School even before reaching the age of 60, provided that he/she had rendered 20 years of service .
Would such a stipulation be valid? Jurisprudence affirms the position of the School:
In Pantranco North Express, Inc. v. NLRC, the CBA involved in Pantranco allowed the employee to be compulsorily retired upon
reaching the age of 60 or upon completing 25 years of service to Pantranco. On the basis of the CBA, private respondent was
compulsorily retired by Pantranco at the age of 52, after 25 years of service. Interpreting Article 287, the Court ruled that the
Labor Code permitted employers and employees to fix the applicable retirement age at below 60 years of age.
Moreover, the Court also held that there was no illegal dismissal since it was the CBA itself that incorporated the
310 Roco 3B
agreement reached between the employer and the bargaining agent with respect to the terms and conditions of
employment; hence, when the private respondent ratified the CBA with his union, he concurrently agreed to conform to and
abide by its provisions. Thus, the Court asserted, providing in a CBA for compulsory retirement of employees after 25 years
of service is legal and enforceable so long as the parties agree to be governed by such CBA.
In Progressive Development Corporation v. NLRC, the CBA therein stipulated that an employee with 20 years of service,
regardless of age, may be retired at his option or at the option of the company. The stipulation was used by
management to compulsorily retire two employees with more than 20 years of service, at the ages of 45 and 38. The Court
affirmed the validity of the stipulation on retirement as consistent with Article 287 of the Labor Code.
In Philippine Airlines, Inc. v. Airline Pilots Association of the Philippines, at contention therein was a provision of the PAL-ALPAP
Retirement Plan, the Plan having subsequently been misquoted in the CBA mutually negotiated by the parties. The Plan
authorized PAL to exercise the option of retirement over pilots who had chosen not to retire after completing 20 years
of service or logging over 20,000 hours for PAL. After PAL exercised such option over a pilot, ALPAP charged PAL with
illegal dismissal and union-busting. While the Secretary of Labor upheld the unilateral retirement, it nonetheless ruled that PAL
should first consult with the pilot to be retired before it could exercise such option. The Court struck down that proviso,
ruling that the requirement to consult the pilots prior to their retirement defeats the exercise by management of its
option to retire the said employees, giving the pilot concerned an undue prerogative to assail the decision of
management. By their acceptance of the CBA, the Union and its members are obliged to abide by the
commitments and limitations they had agreed to cede to management. The questioned retirement provisions cannot be
deemed as an imposition foisted on the Union, which very well had the right to have refused to agree to allowing management
to retire employees with at least 20 years of service.
It should NOT BE TAKEN TO MEAN that retirement provisions agreed upon in the CBA are absolutely beyond the
ambit of judicial review and nullification. A CBA, as a labor contract, is not merely contractual in nature but impressed
with public interest. If the retirement provisions in the CBA run contrary to law , public morals, or public policy, such
provisions may very well be voided. Certainly, a CBA provision or employment contract that would allow management to
subvert security of tenure and allow it to unilaterally retire employees after one month of service cannot be upheld. Neither
will the Court sustain a retirement clause that entitles the retiring employee to benefits less than what is guaranteed
under Article 287 of the Labor Code, pursuant to the provisions express proviso thereto in the provision.
Yet the CBA in the case at bar contains no such infirmities which must be stricken down. There is no essential
difference between the CBA provision in this case and those we affirmed in Pantranco and Progressive. Twenty years is a
more than ideal length of service an employee can render to one employer. Under ordinary contemplation, a CBA provision
entitling an employee to retire after 20 years of service and accordingly collect retirement benefits is reward for services
rendered since it enables an employee to reap the fruits of his labor particularly retirement benefits, whether lump-sum or
otherwise at an earlier age, when said employee, in presumably better physical and mental condition, can enjoy them better
and longer.
We affirm the continued validity of Pantranco and its kindred cases, and thus reiterate that under Article 287 of the Labor
Code, a CBA may validly accord management the prerogative to optionally retire an employee under the terms and
conditions mutually agreed upon by management and the bargaining union, even if such agreement allows for
retirement at an age lower than the optional retirement age or the compulsory retirement age. The Court of Appeals
gravely erred in refusing to consider this case from the perspective of Pantranco, or from the settled doctrine enunciated
therein.
What the CA did instead was to favorably consider the claim of the Union that the real purpose behind the retirement of
Llagas and Javier was to bust the union, they being its president and vice-president, respectively. To that end, the appellate
court favorably adopted the citation by the Union of the American case of NLRB v. Ace Comb, Co., which in turn was taken
from a popular local labor law textbook. The citation stated that for the purpose of determining whether or not a discharge is
discriminatory, it is necessary that the underlying reason for the discharge be established. The fact that a lawful cause for
discharge is available is not a defense where the employee is actually discharged because of his union activities.
311 Roco 3B
Reliance on NLRB v. Ace Comb, Co. was grossly inapropos. The case did not involve an employee sought to be retired, but one
who cited for termination from employment for cause, particularly for violating Section 8(a) (3) of the National Labor
Relations Act, or for insubordination. Moreover, the United States Court of Appeals Eighth Circuit, which decided the case,
ultimately concluded that here the evidence abounds that there was a justifiable cause for the employees discharge, his
union activities notwithstanding. Certainly, the Union and the Court of Appeals would have been better off citing a case
wherein the decision actually concluded that the employee was invalidly dismissed for union activities despite the ostensible
existence of a valid cause for termination.
Nonetheless, the premise warrants considering whether management may be precluded from retiring an employee whom it is
entitled to retire upon a determination that the true cause for compulsory retirement is the employees union activities.
The law and this Court frowns upon unfair labor practices by management, including so-called union- busting. Such
illegal practices will not be sustained by the Court, even if guised under ostensibly legal premises. But with respect to an
active unionized employee who claims having lost his/her job for union activities, there are different considerations presented
if the termination is justified under just or authorized cause under the Labor Code; and if separation from service is effected
through the exercise of a duly accorded management prerogative to retire an employee. There is perhaps a greater imperative
to recognize the management prerogative on retirement than the prerogative to dismiss employees for just or authorized
causes. For one, there is a greater subjectivity, not to mention factual dispute, attached to the concepts of just or authorized
cause than retirement which normally contemplates merely the attainment of a certain age or a certain number of years in the
service. It would be easier for management desirous to eliminate pesky union members to abuse the prerogative of termination
for such purpose since the determination of just or authorized cause is rarely a simplistic question, but involves facts highly
prone to dispute and subjective interpretation.
On the other hand, the exercise by management of its retirement prerogative is less susceptible to dubitability as to the
question whether an employee could be validly retired. The only factual matter to consider then is whether the employee
concerned had attained the requisite age or number of years in service pursuant to the CBA or employment agreement, or if
none, pursuant to Article 287 of the Labor Code. In fact, the question of the amount of retirement benefits is more likely to
be questioned than the retirement itself. Evidently, it more clearly emerges in the case of retirement that management would
anyway have the right to retire an employee, no matter the degree of involvement of said employee in union activities.
There is another point that militates against the Union. A ruling in its favor is tantamount to a concession that a
validly drawn management prerogative to retire its employees can be judicially interfered on a showing that the
employee in question is highly valuable to the union. Such a rule would be a source of mischief, even if narrowly carved
out by the Court, for it would imply that an active union member or officer may be, by reason of his/her importance to the
union, somehow exempted from the normal standards of retirement applicable to the other, perhaps less vital members of the
union. Indeed, our laws protection of the right to organize labor does not translate into perpetual job security for union
leaders by reason of their leadership role alone. Should we entertain such a notion, the detriment is ultimately to the union
itself, promoting as it would a stagnating entrenched leadership.
We can thus comfortably uphold the principle, as reiterated in Philippine Airlines, that the exercise by the employer of a valid
and duly established prerogative to retire an employee does not constitute unfair labor practice.
The School insisted that Llagas and Javier were actually managerial employees, and it was illegal for the Union to have called a strike on
behalf of two employees who were not legally qualified to be members of the Union in the first place. The Union, on the other hand, maintains that
they are rank-and-file employees.
Article 212(m) of the Labor Code defines a MANAGERIAL EMPLOYEE as one who is vested with powers or prerogatives to
lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline
employees, or to effectively recommend such managerial actions.
The functions of the Dean of Student Affairs, as occupied by Llagas, are enumerated in the Faculty Manual. The salient
portions are hereby enumerated:
a. Manages the High School Department with the Registrar and Guidance Counselors (acting as a COLLEGIAL
BODY) in the absence of the Director or Principal.
312 Roco 3B
b. Enforces the school rules and regulations governing students to maintain discipline.
c. Plans with the Guidance Counselors student leadership training programs to encourage dynamic and responsible
leadership among the students and submits the same for the approval of the Principal/Director.
d. Studies proposals on extra-curricular or co- curricular activities and projects proposed by teachers and students and
recommends to the Principal/Director the necessary approval.
e. Implements and supervises activities and projects approved by the Principal/Director so that the activities and
projects follow faithfully the conditions set forth by the Principal/Director in the approval.
f. Assists in the planning, supervising and evaluating of programs of co-curricular activities in line with the philosophy
and objectives of the School for the total development of the students.
g. Recommends to the Principal policies and rules to serve as guides to effective implementation of the student activity
program.
It is fairly obvious from a perusal of the list that the Dean of Student Affairs exercises managerial functions, thereby
classifying Llagas as a managerial employee.
Javier was occupying the position of SUBJECT AREA COORDINATOR. Her duties and responsibilities include:
1. Recommends to the principals consideration the appointment of faculty members in the department, their
promotion, discipline and even termination;
2. Recommends advisory responsibilities of faculty members;
3. Recommends to the principal curricular changes, purchase the books and periodicals, supplies and equipment for the
growth of the school;
4. Recommends his/her colleagues and serves as channel between teachers in the department the principal and/or
director.
Supervisory employees, as defined in Article 212(m) are those who, in the interest of the employer, effectively recommend
such managerial actions if the exercise of such authority is not merely routinary or clerical in nature but requires the use of
independent judgment.
In the same vein, a reading of the above functions leads us to conclude that Javier was a supervisory employee. Verily,
Javier made recommendations as to what actions to take in hiring, termination, disciplinary actions, and management policies,
among others.
We can concede, as the Court of Appeals noted, that such job descriptions or appellations are meaningless should it be
established that the actual duties performed by the employees concerned are neither managerial nor supervisory in nature. Yet
on this point, we defer to the factual finding of the NLRC, the proximate trier of facts, that Llagas and Javier were indeed
managerial and supervisory employees, respectively.
Having established that Llagas is a managerial employee, she is proscribed from joining a labor union, more so being elected as
union officer.
In the case of Javier, a supervisory employee, she may join a labor union composed only of supervisory employees. Finding
both union officers to be employees not belonging to the rank-and-file, their membership in the Union has become
questionable, rendering the Union inutile to represent their cause.
Since the strike has been declared as illegal based on the foregoing discussion, we need not dwell on its legality with respect to
the means employed by the Union.
Finally, there is neither legal nor factual justification in awarding backwages to some union officers who have lost
their employment status, in light of our finding that the strike is illegal.
We are satisfied with the disposition of the NLRC that mandates that Llagas and Javier receive their retirement
benefits.
313 Roco 3B
August 31, 2013

202. Ortega vs Social Security Commission 555 SCRA 353
Facts: Ortega is a member of the SSS who filed claims for partial permanent disability benefits due to his Generalized
Arthritis and Partial Ankylosis; the SSS granted pension for 23 months. After this expired, he filed a claim for total
permanent disability benefits. It was denied since it was for the same illness which had not progressed; the SSS senior
physician only noted a slight limitation of grasping movement for both hands.
He thus filed an unverified petition before the SSC, alleging that he suffered from Trigger finger (4 th finger and thumb) on
the left hand, and that a private doctor diagnosed him with Bronchial Asthma, Hypertension, and Gastro-Esophageal Reflux
Disease, along with Rheumatoid Arthritis. He contended that the SSS three minute interview cannot prevail over these
findings.
Directing exhaustion of administrative remedies, it was referred to the SSS Office of the Medical Program Director. The Legal
Department denied reconsideration. The Medical Program Department also denied his claim, despite him alleging fraudulent
medical findings.
After complying with verification, the case was heard by the SSC which denied his claim. it opined that, considering that
he had reached the retirement age of 60 , on March 19, 1998, with 41 contributions to his name, petitioner may opt:
(a) [t]o continue paying to the SSS monthly contributions (including employers share) on his own to
complete the required 120 monthly contributions in order to avail of the retirement pension benefit;
(b) [to] leave his monthly contributions with the SSS for his and his familys future benefits; or
(c) [to a]vail of the lump sum retirement benefit
Reconsideration was denied; a domiciliary visit and physical exam revealed no basis for the benefit. The CA affirmed the SSC.
He filed a petition for certiorari under R65, with a rider averring that it was a petition for review under R45. (btw, the petition
was drafted by petitioner himself, apparently without the aid of counsel.)
Issue: Whether he is entitled to total permanent disability benefits.
Held: NO. The requisite quantum of proof in cases filed before administrative or quasi-judicial bodies is neither proof
beyond reasonable doubt nor preponderance of evidence. In these type of cases, a fact may be deemed established if it is
supported by substantial evidence, or that amount of relevant evidence which a reasonable mind might accept as adequate
to justify a conclusion. In this case, substantial evidence abounds.
The conclusion that petitioner is not entitled to total permanent disability benefits under the Social Security Law was reached
after petitioner was examined not just by one but four SSS physicians, namely, Dr. Juanillo Descalzo III, Dr. Carlota A.
Cruz-Tutaan, Dr. Jesus S. Tan and Dr. Rebecca Sison.
The initial physical examination and interview revealed that petitioner had slight limitation of grasping movement for both
hands. According to Dr. Descalzo, this finding was not enough to grant an extension of benefit since petitioner had already
received benefits equivalent to 30% of the body. Responding to the allegation that the April 2000 physical examination was
performed in a short period of time, the doctor credibly explained that petitioners movements were already being monitored
and evaluated from a distance as part of the examination of his extremities in order to minimize malingering and overacting.
Meanwhile, the medical findings of Dr. Carlota A. Cruz-Tutaan and Dr. Jesus S. Tan in August and September 2000 were
summarized as follows:
Heart:
- manifest regular rhythm
- no murmurs
Lungs:
- on ausculation showed no evidence of wheezing
- breath sounds are normal and;
- he is not in a state of respiratory distress
314 Roco 3B
Hypertension:
- Blood Pressure is 140/80, hence, under control
Extremities: (Hands)
- No deformities noted except for the right small finger, the distal interphalangeal joint is
bent at about 30. No abnormal limitation of movement noted on all the fingers, grasping
has improved.
Contrary to petitioners asseverations, the SSC did not ignore the certifications of petitioners attending physicians as, in
fact, it ordered the SSS in June 2001 to conduct an investigation as to the medical findings and final diagnosis by his attending
physicians. It was surfaced that petitioners medical records in the custody of Dr. Flo dela Cruz could not be found as they
were allegedly destroyed by inundation. And it was found that the July 10, 2001 letter-certification by Dr. Rafael Recto, Jr. only
narrated the recurring condition of petitioners trigger finger, the administration to him of local steroid injections, and the
performance of surgical release on his left 4th trigger finger on June 16, 1998; and that he was diagnosed on August 28, 2000
with mallet finger (R, 5th), for which he was advised to undergo reconstructive surgery.
ADOPTING A LIBERAL ATTITUDE and exercising sound discretion, the SSC even directed the conduct of another physical
examination on petitioner to judiciously resolve his motion for reconsideration. Pursuant thereto, Dr. Sison physically
examined petitioner in August 2002, the results of which were reflected in a medical report, viz:
Physical Examination:
General Survey: well nourished, well developed, conscious, coherent but talks with sarcasm
and arrogance.
EENT: normocephalic, pinkish conjunctiva, anicteric sclerae; negative tonsillo-pharyngeal
congestion
C/L: clear breath sounds, no wheezes; (-) dyspnea
Heart: normal rate, regular rhythm.
Abdomen: negative tenderness
Extremeties: no neurological and sensory deficit
no gross deformity, (+) scar, 4th finger (L)
no loss of grasping power for large and small objects
no loss of opposition between thumb and forefingers
can bend fully to reach toes
can bend both knees fully without pain or difficulty
can raise both arms above shoulder level without pain and difficulty
can bend both elbows without limitation
The member was requested to submit recent ECG, x-rays and other laboratory work-up results but he could ot locate them
during visit and would still look for the said medical documents and mail them to SSS. He was then advised to come to SSS,
Diliman Branch for ECG and x-ray, however he refused. He also refused to affix his signature on the medical field
service form to confirm the visit of our Medical Officer.
Based on these recent physical examination findings and functional assessment and the
medical certificate (Form MMD 102) with final diagnosis of Trigger Finger, there is no
sufficient basis that warrants the granting of Total Permanent disability.
Dr. Sison subsequently noted that petitioners Electrocardiograph, Chest X-ray, Kidney and Urinary Bladder Ultrasound
indicated his condition as normal, which conclusion was arrived at by going through the same medical documents
presented by petitioner following a series of tests conducted on him by hospitals of his choice.
From the foregoing recital of petitioners medical history, the SSC concluded that petitioner is not entitled to total
permanent disability benefits under the Social Security Law.
315 Roco 3B
Indeed, the evidence indicates that petitioners condition at the time material to the case does not fall under the
enumeration in the above-quoted provisions of the Social Security Law. Moreover, as correctly held by the appellate
court, the proviso of such provisions on the percentage degree of disability applies when there is a related deterioration of the
illness previously considered as partial permanent disability. In this case, there is dearth of evidence on the proposition that
petitioners array of illnesses is related to Generalized Arthritis and Partial Ankylosis of the specific body parts.
Petitioners reliance on jurisprudence on work-connected disability claims insofar as it relates to a demonstration of disability
to perform his trade and profession is misplaced.
Claims under the Labor Code for compensation and under the Social Security Law for benefits are not the same as to
their nature and purpose. On the one hand, the pertinent provisions of the Labor Code govern compensability of work-
related disabilities or when there is loss of income due to work-connected or work-aggravated injury or illness. On
the other hand, the benefits under the Social Security Law are intended to provide insurance or protection against the
hazards or risks of disability, sickness, old age or death, inter alia, irrespective of whether they arose from or in the
course of the employment. And unlike under the Social Security Law, a disability is total and permanent under the
Labor Code 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 regardless of whether he loses the use of any of his body parts.
The Court notes that the main issue petitioner proffers is whether he is entitled to total permanent disability benefits from the
SSS given his angioplasty operation of the heart, coronary artery disease, ischemic heart disease, severe hypertension and a
host of other serious illnesses filed with the SSS[.]
A perusal of the records shows that when the case was already submitted for decision before the appellate court, petitioner
manifested that he suffered a heart attack on February 25, 2004, for which he claimed to have undergone a coronary
angiogram on March 9, 2005 and a coronary angioplasty on September 27, 2005 at the Philippine Heart Center.
Unfortunate as these events were, the CA correctly ruled that it could not consider such allegation of subsequent events since
a factual question may not be raised for the first time on appeal[,] and documents forming no part of the proofs before the
appellate court will not be considered in disposing of the issues of an action.
The issues in every case are limited to those presented in the pleadings. The object of the pleadings is to draw the lines of
battle between the litigants and to indicate fairly the nature of the claims or defenses of both parties. A change of theory
on appeal is not allowed. In this case, the matter of petitioners serious heart condition was not raised in his application before
the SSS or in his June 19, 2000 petition before the SSC.
Fair play dictates that the SSS be afforded the opportunity to properly meet the issue with respect to the new ailments
besetting petitioner, in line with the actual practice that only qualified government physicians, by virtue of their oath as civil
service officials, are competent to examine persons and issue medical certificates which will be used by the government for a
specific official purpose. This holds greater significance where there exist differences or doubts as to the medical condition of
the person.
In this case, the SSS medical examiners are tasked by law to analyze the extent of personal incapacity resulting from
disease or injury. Oftentimes, a physician who is adequately versed in the knowledge of anatomy and physiology will find
himself deficient when called upon to express an opinion on the permanent changes resulting from a disability. Unlike the
general practitioner who merely concerns himself with the examination of his patient for purposes of diagnosis and treatment,
the medical examiner has to consider varied factors and ascertain the claimants related history and subjective complaints. The
members of this Court cannot strip their judicial robe and don the physicians gown, so to speak, in a pretense to correlate
variances in medical findings.
Finding no cogent reason to discuss the ancillary issues, the Court dismisses the petition, without prejudice to the filing of a
new application by petitioner who is not left without any recourse in his legal bout respecting his supervening claims anchored
mainly on Coronary Artery Disease 1VD and Diabetes Mellitus Type 2, these illnesses having been found to be dissimilar
from the subject matter of the present action.
316 Roco 3B
203. SSS vs CA, June 30, 1972

Facts: On February 18, 1960, as a result of a letter sent by the SSSm to the Philippine Guards Protection Unit threatening it
with court action if it did not continue to remit its contributions to the System, the said protection unit, owned and
operated by Clemente V. Eslao, filed with the SSC a petition far exclusion from coverage under the System and for a refund of
its remittances for September and October 1958. The reason given by the unit is that it is not subject to compulsory
coverage under the Social Security Act of 1954, as amended by Republic Act No. 1792, because it is not the employer,
but merely the agent, of the 39 security guards or watchmen whose names appear in its membership list, for, actually, it has
only one employee, namely, the clerk-secretary of the office.
Under Section 9 of the Social Security Act of 1954, as amended by Republic Act No. 1792, which took effect on June 21,
1957,
the Commission may not compel any employer to become a member of the System unless
he shall have been in operation for at least two years and has, at the time of admission, if
admitted for membership during the first year of the System's operation, at least fifty
employee's and if admitted for membership in the following year of operation and thereafter,
at least six employees.
After the issues had been joined and the case heard, the SSC, on April 12, 1961, handed down a resolution finding the
Philippine Guards Protection Unit the employer of the security guards or watchmen, and accordingly declaring the
latter subject to compulsory coverage . The motion to reconsider was denied. CA reversed.
Hence the present petition.
Although under the judgment of the CA private respondent's membership in the System as of June 18, 1960, has been
expressly declared and recognized pursuant to Section 9 of the Social Security Act of 1954, as amended by Republic Act No.
2658, which eliminated, among others, the requirement under Republic Act No. 1792 that the employer should have at
least six employees for purposes of compulsory coverage , it is not clear from the appealed decision if it is also the sense
and intent of that court that the security guards or watchmen in the roster of private respondent should, under Republic Act
No. 2658, likewise not be considered employees of the said respondent.
As it now stands, the decision under review can be interpreted to mean that private respondent became a member of
the System as of June 18, 1960 , when Republic Act No. 2658 took effect, because it had at least one employee, but that the
security guards or watchmen in its roster should not as under Republic Act No. 1792be considered private respondent's
employees.
Issue: Whether or not for purposes of social security coverage, the security guards or watchmen in question should be
considered employees not only under Republic Act No. 1792, but also under Republic Act No. 2658.
Held: YES. The pertinent facts concerning the mechanics of the tripartite relationship among the Philippine Guards
Protection Unit, its clients and the security guards or watchmen, which were substantially adopted by the Court of Appeals, are
succinctly stated in the basic resolution of the Social Security Commission, to wit:
1. Whenever a person approaches the owner of the agency for employment, the owner tells him to secure a license as a
special watchman and in the meantime, the owner would look for persons or establishments that need the service of a
guard or guards. If no such persons or establishments are found after the applicant has secured a license, he remains
with the agency as an 'extra guard' and he is utilized by the agency as a substitute for those guards going on vacation
or for those who are sick or otherwise absent.
2. The owner may refuse to accommodate an applicant if he so desires.
3. When a person or establishment requiring the services of a guard is found by the owner, a contract is entered into
between the owner of the agency and the client, either orally or in writing.
4. The owner collects from the client the fee for the service and from the amount received, the owner pays the salary of
the guard, retaining a part thereof for himself as his 'commission' as long as the watchman is assigned to guard the
premises of a client.
5. The owner of the agency furnishes the firearms and ammunitions, but the watchmen buy their own uniforms.
317 Roco 3B
6. If a client is dissatisfied with the service of a guard, as when a guard is always late, the agency may change the guard if
the client so requests, or it may impose a fine on the guard as a disciplinary measure.
The reasons of the CA for concluding that there is no employer-employee relationship between private respondent and the
security guards and watchmen may be summarized as follows:
1. It is to the employing units or companies that the watchmen render their services, hence, it is the former
that are the employers of the watchmen, pursuant to Section 8(c) of the Act, which defines an employer as one
who "uses the services of another person who is under his orders as regards the employment," and to Section 8(d),
which defines an employee as one e "who performs services for an employer in which either or both mental and
physical efforts are used and who receives compensation for such services where there is an employer- employee
relation." While the companies or units hand over the watchmen's compensation to private respondent, which in turn
pays the salaries of the watchmen after deducting a commission, whatever right or interest private respondent has in
the said salaries is limited to receiving the same for, in behalf of and in trust for the watchmen, subject to its right to
deduct its commission for securing work for them.
2. Since no service is rendered by the watchmen to private respondent, it follows that in relation to their duties of
guarding, watching and protecting the Interests of the companies or units, the watchmen receive no orders
from private respondent but from the said companies or units.
3. It is the companies or units that hire or engage the watchmen, because without their asking for the latter's
services, the watchmen concerned cannot be employed in the said companies or units.
4. The employing company or unit has the right to ask for a change or replacement or even to terminate its
agreement with private respondent.
5. The Supreme Court has, in a number of cases, recognized special watchmen as employees of the companies
to which they are assigned; and while those cases involve the Interpretation of the Workmen's Compensation Act
and not the Social Security Act, the two laws being kindred legislations aimed at providing protection to the
employees against the hazards of disability, sickness and death, it would not be improper to adopt a uniform
interpretation.
Several considerations constrain us to differ with the views expressed above, and the conclusion arrived at, by
respondent Court of Appeals.
The Social Security Act of 1954, in its Section 8, contains, for purposes of social security coverage, definitions of terms, among
which are the following:
(c) Employer.Any person, natural or juridical, domestic or foreign, who carries on in the
Philippines any trade, business, industry, undertaking, or activity of any kind and uses the
services of another person who is under his orders as regards the employment, except the
Government and any of its political subdivisions, branches or instrumentalities, including
corporations owned or controlled by the Government. "(d) Employee.Any person who
performs services for an 'employer' in which either or both mental and physical efforts are
used and who receives compensation for such services, where there is an employer-employee
relationship.
Tested against the criteria in Section 8(c) and (d) of the Act, Philippine Guards Protection Unit must be considered an
employer of the 39 security guards or watchmen, and the latter employees of said respondent. Private respondent carries
on a businessa watchmen's servicefrom which it derives its income in the form of what it terms "commission".
It uses the services of other persons the guards or watchmento carry on its business. Without them, respondent
would not be in business, which consists solely in the letting out of watchmen's services for a fee.
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.
318 Roco 3B
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. Consequently, 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 watch-man; such fee is arrived at
independently of the salary to which the guard or watchman is entitled under his arrangements with private respondent. All
the fees received by private respondent from its clients constitute its gross income; and the salaries it pays to the guards or
watchmen and to its clerk-secretary, its expenses for, say, office rent, light, water and telephone services, licenses, firearms and
ammunition, are expenses incurred in the operation of the business. The net income or profit is arrived at after deducting all
these expenses from the gross income. Consequently, the term "commission" as applied to the difference between the
fee received from a client and the salary paid to a guard or watchman is a misnomer, and its use by private
respondent cannot alter the relationship of employer and employee between it and the guards or watchmen.
In defining an employee, section 8(d) employs the phrase "who receives compensation for such services, where there is an
employer-employee relationship." Considering our view that the guards or watchmen included in its roster are private
respondent's employees, and considering, further, that private respondent is a bona fide independent contractor, the client
companies may not be deemed employers of said guards or watchmen, pursuant to Section 8(j) (10), which reads: "Employees
of bona fide independent contractors shall not be deemed employees of the employer engaging the services of said
contractors."
Applying the Four-fold test, it can be seen that all the four elements enumerated above are present to make out a relationship
of employer and employee between private respondent and its 39 security guards or watchmen.
There are practical considerations why Philippine Guards Protection Unit, and not its clients, should be considered,
for purposes of social security coverage, the employer of the 39 guards or watchmen listed in its roster:
1. A watchman is not permanently assigned to a client; for one reason or another he may he pulled out of a
particular assignment and detailed to another client. Consequently, different clients will have to deduct premiums
from different watchmen at different times and remit them to the System together with. the cIients' own share of the
premiums.
2. Under the arrangements between private respondent and its clients, the clients do not determine how much salary
is to be paid to the watchmen. The clients merely pay to private respondent the fee stipulated in their contracts.
How, then, can a client deduct the premiums due from a watchman? And how can it determine the amount of the
watchman's premium as well as its own?
3. Service performed by one person for another is not considered an employment if the same is "purely casual
and not for the purposes of occupation or business of the employer" (Section 8[j] [3], Social Security Act of
1954). Under private respondent's hypothesis, a watchman may at times be considered an employee and at other times
not depending on whether or not he happens to be assigned to a client which carries on a trade, business, industry,
undertaking or activity of any kind (Section 8[c], supra). A fortiori, of private respondents 39 watchmen, some may be
covered by the System's plan, while others not. To pursue the matter further, all the 39 watchmen may be covered
sometimes, and not at other times.
319 Roco 3B
4. If private respondent's clients are considered the watchmen's employers, it may happen that the 39 different
watchmen will have 39 different employers, which seems absurd, considering that all the the watchmen are
on the payroll and under the supervision of only one entity.
Dispositive Portion:
Private respondent's membership in the Social Security System from August 1, 1958 up to the present is declared valid and
effective. Coverage in the System upon all its employees falling within the required age Ievel, including its security guards or
watchmen, is hereby declared compulsory; and private respondent is directed to pay or remit to petitioner all back premiums
due. Costs against private respondent.
204. Philippine Blooming Mills vs SSS, 17 SCRA 175

Facts: Philippine Blooming Mills Co., Inc. has been employing Japanese technicians under a pre-arranged contract of
employment (6-24 months). From April 28, 1957, to October 26, 1958, the corporation had in its employ 6 Japanese
technicians. The company sent an inquiry to SSS whether these employees are subject to compulsory coverage under
the System.
Company answered by the First Deputy Administrator of the SSS:
Aliens who are employed in the Philippines shall also be compulsorily covered . But
aliens who are employed temporarily shall, upon their departure from the Philippines, be
entitled to a rebate of a proportionate amount of their contributions; their employers
shall be entitled to the same proportionate rebate of their contributions in behalf of said
aliens employed by them. (Rule I, Sec. 3[d], Rules and Regulations.)
Assistant General Manager of the corporation, on its behalf and as attorney-in-fact of the Japanese technicians, filed a
claim with the SSS for the refund of the premiums paid to the System , on the ground of TERMINATION OF THE
MEMBERS EMPLOYMENT. The claim was denied. They filed a petition with the SSC for the return or refund of the premiums,
in the total sum of P2,520.00, paid by the employer corporation and the 6 Japanese employees, plus atty fees.
The claim was controverted by the SSS, alleging that Rule IX of the Rules and Regulations of the System, as amended,
requires membership in the System for at least 2 years before a separated or resigned employee may be allowed a
return of his personal contributions. Under the same rule, the employer is not also entitled to a refund of the premium-
contributions it had paid. Commission denied the petition for the reason that, although under the original provisions of
Section 3(d) of Rule I of the Rules and Regulations of the SSS, alien-employees (who are employed temporarily) and their
employers are entitled to a rebate of a proportionate amount of their respective contributions upon the employees departure
from the Philippines, said rule was amended by eliminating that portion granting a return of the premium
contributions. The amendment became effective on January 14, 1958, or before the employment of the subject aliens
terminated. The rights of covered employees who are separated from employment, under the present Rules, are covered by
Rule IX which allows a return of the premiums only if they have been members for at least 2 years.
It is claimed, in effect, that when appellants employees became members in September, 1957, and paid the corresponding
premiums to the System, it is subject to the condition that upon their departure from the Philippines, these employees,
as well as their employer, are entitled to a rebate of a proportionate amount of their respective contributions.
Issue: (1) Whether the petitioner is entitled to a refund of the premium.

(2) Whether the amended Rules requiring membership for 2 years before a refund may be allowed is binding.
Held. NO. YES. The contention cannot be sustained. Appellants argument is based on the theory that the employees
membership in the System established contractual relationship between the members and the System, in the sense
contemplated and protected by the constitutional prohibition against its impairment by law. But, membership in this
institution is NOT the result of a bilateral, consensual agreement where the rights and obligations of the parties are
defined by and subject to their will. Republic Act 1161 requires compulsory coverage of employers and employees under
the System. It is actually a LEGAL IMPOSITION, on said employers and employees, designed to provide social security
320 Roco 3B
to the workingmen. Membership in the SSS is, therefore, in compliance with a lawful exercise of the police power of the
State, to which the principle of non-impairment of the obligation of contract is not a proper defense.
The Rules and Regulations promulgated by the SSS provide:
DETERMINATION OF COMPULSORY COVERAGE
3. The determination of whether an employer or an employee shall be compulsorily covered shall be vested in
the Commission. The following general principles shall guide the Commission in deciding each case:
(d) Aliens who are employed in the Philippines shall also be compulsorily covered. But aliens who are employed temporarily and
whose visas are only for fixed terms shall, upon their departure from the Philippines, be entitled to a rebate of a proportionate
amount of their contributions; their employers shall be entitled to the same proportionate rebate of their contributions in behalf of
said aliens employed by them.
Rule I, Section 3(d) and Rule IX, however, were later amended:
(d) Aliens who are employed in the Philippines shall also be compulsorily covered (Sec. 3, Rule I).
EFFECT OF SEPARATION FROM EMPLOYMENT
When an employee under compulsory coverage is separated from employment, his employers contribution on
his account shall cease at the end of the month of separation; but such employee may continue his membership in the System and
receive the benefits of the Act, as amended, in accordance with these rules. If he continues paying the 6 percent monthly premiums
representing his as well as the employers contribution, based on his monthly salary at the time of his separation; but if at the time of
his separation the covered employee has been a member of the System for at least 2 years, he shall have the
option to choose any one of the following adjustments of his membership in the System :
1. A refund of an amount equivalent to his total contributions of two and one-half per centum plus interests at
the rate of three per centum per annum, compounded annually; (Rule IX)
The Rules and Regulations of the SSS, having been promulgated in implementation of a law, have the force and effect of a
statute; that the amendment thereto, although approved by the President on January 14, 1958 , was published in the
Official Gazette in November, 1958, or after the employment of the Japanese technicians had ceased and the
corresponding claim for the refund of the premium-contributions was filed with the System, the issue is whether or not
appellants are bound by the amended Rules requiring membership for two years before a refund of the premium-contributions
may be allowed.
These rules and regulations were promulgated to provide guidelines to be observed in the enforcement of the law.
Section 3 of Rule I is merely an enumeration of the general principles to guide the Commission in the determination of the
extent or scope of the compulsory coverage of the law. One of these guiding principles is paragraph (d) relied upon by
appellants, on the coverage of temporarily employed aliens. It is not here pretended, that the amendment of this Section 3(d)
of Rule I, as to eliminate the provision granting to these aliens the right to a refund of part of their premium contributions
upon their departure from the Philippines, is not in implementation of the law or beyond the authority of the Commission to
do.
It may be argued that while the amendment to the Rules may have been lawfully made by the Commission and duly approved
by the President on January 14, 1958, such amendment was only published in the November 1958 issue of the Official
Gazette, and after appellants employment had already ceased.
Suffice it to say, in this regard, Article 2 of the Civil Code provides that publication of laws in the Official Gazette is material
for the purpose of determining their effectivity, only if the statutes themselves do not so provide.
The original Rules and Regulations of the SSS specifically provide that any amendment thereto subsequently adopted by the
Commission, shall take effect on the date of its approval by the President. Consequently, the delayed publication of the
321 Roco 3B
amended rules in the Official Gazette did not affect the date of their effectivity, which is January 14, 1958, when they were
approved by the President. It follows that when the Japanese technicians were separated from employment in October,
1958, the rule governing refund of premiums is Rule IX of the amended Rules and Regulations, which requires
membership for 2 years before such refund of premiums may be allowed.
205. CMS Estate vs SSS, 132 SCRA 108

Facts: Petitioner CMS Estate Inc. is a domestic corporation organized primarily for the purpose of engaging in the real estate
business. On December 1, 1952, it started doing business with 6 employees. Later on, its Articles of Incorporation was
amended to include logging business.
On January 28, 1957, petitioner entered into a contract of management with one Eufracio D. Rojas for the operation and
exploitation of the forest concession. The logging operation actually started on April 1, 1957 with 4 monthly salaried
employees. As of September 1, 1957, petitioner had 89 employees and laborers in the logging operation. On December 26,
1957, petitioner revoked its contract of management with Mr. Rojas.
On August 1, 1958, petitioner became a member of the SSS with respect to its real estate business. Eventually
petitioner remitted to the SSS the initial premiums for its logging business. However petitioner eventually demanded the
refund of the payment, claiming that it is not yet subject to compulsory coverage with respect to its logging business .
The request was denied by SSS on the ground that the logging business was a mere expansion of petitioner's activities and
for purposes of the Social Security Act, petitioner should be considered a member of the System since December 1, 1952
when it commenced its real estate business.
Petitioner filed a petition with the Social Security Commission praying for the determination of the effectivity date of the
compulsory coverage of petitioner's logging business.
Issue: When is the effective date of the compulsory coverage of the logging business (Dec. 1, 1952 or Apr 1, 1957)?
Held: DECEMBER 1 1952. The Social Security Law was enacted pursuant to the policy of the government "to develop,
establish gradually and perfect a social security system which shall be suitable to the needs of the people throughout the
Philippines, and shall provide protection against the hazards of disability, sickness, old age and death" (Sec. 2, RA 1161, as
amended). x x x said enactment implements the general welfare mandate of the Constitution and constitutes a
legitimate exercise of the police power of the State. As held in the case of Philippine Blooming Mills Co., Inc., et al. vs. SSS
Membership in the SSS is not a result of bilateral, concensual agreement where the rights
and obligations of the parties are defined by and subject to their will, RA 1161 requires
compulsory coverage of employees and employers under the System. It is actually a legal
imposition on said employers and employees, designed to provide social security to the
workingmen. Membership in the SSS is therefore, in compliance with the lawful exercise of
the police power of the State, to which the principle of non-impairment of the obligation of
contract is not a proper defense.
Under our Social Security Law, the emphasis is on the promotion of the general welfare. The funds contributed to the
System belong to the members who will receive benefits, as a matter of right, whenever the hazards provided by the law occur.
Should each business venture of the employer be considered as the basis of the coverage, an employer with more than one line
of business but with less than six employees in each, would never be covered although he has in his employ a total of more
than six employees which is sufficient to bring him within the ambit of compulsory coverage. This would frustrate rather than
foster the policy of the Act. The legislative intent must be respected. In the absence of an express provision for a separate
coverage for each kind of business, the reasonable interpretation is that once an employer is covered in a particular
kind of business, he should be automatically covered with respect to any new name . Any interpretation which would
defeat rather than promote the ends for which the Social Security Act was enacted should be eschewed.
Section 10 (formerly Sec. 9) of RA 1161, as amended by RA 2658 now provides:
322 Roco 3B
Sec. 10. Effective date of coverage. Compulsory coverage of the employer shall take effect ON THE FIRST DAY
OF HIS OPERATION, and that of the employee on the date of his employment.
It is the intention of the law to cover as many persons as possible so as to promote the constitutional objective of social
justice. It is axiomatic that a later law prevails over a prior statute and moreover the legislative in tent must be given effect.
Prior to its amendment, Sec. 9 of the Act provides that before an employer could be compelled to become a member of the
System, he must have been in operation for at least two years and has at the time of admission at least six employees. It should
be pointed out that it is the employer, either natural, or judicial person, who is subject to compulsory coverage and not
the business. If the intention of the legislature was to consider every venture of the employer as the basis of a separate
coverage, an express provision to that effect could have been made. Unfortunately, however, none of that sort appeared
provided for in the said law.
The contention of petitioner that the Commission cannot indiscriminately combine for purposes of coverage two distinct and
separate businesses when one has not yet been in operation for more than two years lacks merit since the amendatory law, RA
2658, which was approved on June 18, 1960, eliminated the two-year stabilization period as employers now become
automatically covered immediately upon the start of the business.
They also cannot claim that Rojas is an independent contractor and thus not covered by the SSS. Rojas was appointed
as operations manager of the logging consession; he has no power to appoint or hire employees; as the term implies, he
only manages the employees and it is petitioner who furnishes him the necessary equipment for use in the logging business;
and he is not free from the control and direction of his employer in matter connected with the performance of his
work. These factors clearly indicate that Rojas is not an independent contractor but merely an employee of petitioner;
and should be entitled to the compulsory coverage of the Act.
The records indubitably show that petitioner started its real estate business on December 1, 1952 while its logging
operation was actually commenced on April 1, 1957. Applying the provision of Sec. 10 of the Act, petitioner is subject to
compulsory coverage as of December 1, 1952 with respect to the real estate business and as of April 1, 1957 with respect to its
logging operation.
206. Santiago vs CA, 133 SCRA 341

Facts: Santiago, et. al. were employees of I-Feng Enamelling Company Inc. for several years some from 1950 up to the time
the company closed its business in May 1965. Since the enactment of the Social Security Act, said employees have been
paying their contributions to the System by means of salary deductions. Also, during their employment, they enjoyed
salary loan benefits and their instalment payments thereto were likewise deducted and collected by their employer .
The employer failed to remit to the System not only the instalment payments to their salary loans in the amount of P7,940.13
but also the back premiums in the amount of P137,787.90.
Naturally, Santiago et al wanted to have the amounts credit in their favor but the ECC denied their petition by stating that
WHEREFORE, in the light of the foregoing discussion, the stand taken by petitioners in
this case is untenable, hence their petition is hereby dismissed. If it is the claim of petitioner
that there are deductions made on their salaries which were not remitted to the System then
petitioners should have proceeded against the I-Feng Enamelling Company (Phil.)
Inc., their alleged employer.
The System is likewise directed to study and determine what action to take under the
premises in order to protect the interest of the System.
Petitioner appealed to CA but it affirmed the ECC ruling. And now, we are here.
Petitioners argue that they are entitled to full credit for the unremitted premium contributions and salary loan
installment payments deducted from their wages because, by law, a contract of agency exists between the SSS and the
323 Roco 3B
Employer in the collection of the salary loan instalment payments, and therefore, as such agent, payment to the Employer is
payment to the principal, which is the System.
Issue: Whether the premium contributions and payments of salary loans by petitioners which are deducted and collected from
their salaries by their employer, but not remitted to the System, should be credited in their favor by the System.
Held: ONLY PREMIUM CONTRIBUTIONS. Regarding PAYMENT OF SALARY LOANS, SSS Circ 52 provides:
In case the borrower is in active employment, payment shall be made thru

his employer by means of salary deductions. For this purpose, he shall
expressly author ize in the application form his employer and the
subsequent employers to whom he may later on transfer to deduct
from his salaries the installments due. The employer, in turn shall remit
to the System these installments in accordance with the procedure laid
down in heading VII hereof.
It is the borrower who expressly authorizes his employer and subsequent employers to deduct from his salary the in
stallments due on his salary loan. The employer then remits the installments due to the System in accordance with rules that
the System has laid down. The employer, in so deducting the installment payments from the borrower, does so upon the
latters authorization. The employer is merely the conduit for remitting the premiums for reasons of administrative
convenience and expediency in order that SSS members may be served efficiently and expeditiously . No contract of
agency, in the legal sense, therefore may be said to exist between the employer and the System.
Moreover, the entitlement to the collection fee by the employer neither makes the latter the agent of the System. The fee
was devised to encourage employers to be prompt in the remittance of their collections to the System .
To rule otherwise would be to open the door for unscrupulous employers to circumvent the law by not remitting their
collections of salary loans instalment payments from employees since, anyway, the System would credit them with what they
had paid to the Employer even though the latter fails to remit them to the System.
As regards PREMIUM CONTRIBUTIONS, 22 (b) of the SSS Act provides that
The contributions payable under this Act in cases where an employer refuses or neglects to pay the same shall be
collected by the System in the same manner as taxes are made collectible under the National Internal Revenue
Code, as amended. Failure or refusal of the employer to pay or remit the contributions herein prescribed shall not prejudice
the right of the covered employee to the benefits of the coverage.
Clearly, if the employer neglects to pay the premium contributions, the System may proceed with the collection in the
same manner as the BIR in case of unpaid taxes. Plainly, too, notwithstanding nonremittance by employers of the
premium contributions, covered employees are entitled to the benefits of the coverage, such as death sickness,
retirement, and permanent disability benefits. These benefits continue to be enjoyed by the employees by operation of
law and not, as petitioners allege, because the premium contributions and salary loan installment payments have
already became the money of the System upon payment by the employees to the employer .
It should be remembered that funds contributed to the System by compulsion of law are funds belonging to the members,
which are merely held in trust by the government. The mentioned benefits, however, do not include the salary loan
privileges that member employees apply for. The System may or may not grant those loans pursuant to its rules and
regulations. The salary loans are not covered by law but by contract between the System as lender , and the private
employee, as borrower.
WHEREFORE, the judgment under review is hereby modified in that ONLY THE PREMIUM CONTRIBUTIONS PAID BY
PETITIONERS TO ITS EMPLOYER, the I-Feng Enamelling Company (Phil.) Inc., shall be credited in petitioners favor so
that they may continue to enjoy the benefits of the coverage as provided by law. No costs. SO ORDERED.
324 Roco 3B
September 5, 2013
207. Neeland vs. Villanueva, 364 SCRA 204
Facts: This resolves the prayer of respondent Ildefonso M. Villanueva, Jr., to be paid his "back wages and other economic
benefits from the time of my 'dismissal' in November 1989 to my reinstatement " contained in his letter addressed to the
Honorable Chief Justice Hilario G. Davide, Jr. dated 22 August 2000.
The SC issued a resolution on 29 Oct 1999 dismissed Clerk of Court (COC) and ex officio provincial sheriff Villanueva.
Even before he could file an MR, his dismissal was ordered by the court to be immediately executory. The earlier resolution
was modified by the SC resolution of 8 Aug 2000 only found him liable to pay a fine.
Now, Villanueva is asking for back salaries and other economic benefits for the period he was forced out of work by the first
SC resolution. (around 300,000php worth already).
We rewind to better grasp the facts: Sugarland Motor Sales placed the highest bid price of P40,000 for a motor vehicle owned
by Kenneth Neeland which was the subject of an auction sale. Sheriff Abordaje who conducted the sale turned over the
amount of the mortgage obligation to Sugarland. The Clerk of Court, Ildifonso Villanueva (respondent) issued a
certificate of sale but failed to turn over the balance to Neeland thus an administrative complaint was filed against the
Sheriff and the Clerk of Court.
The investigating Executive Judge as well as the Court Administrator ruled that they were liable for the balance but it did not
constitute gross misconduct. Unfortunately, when it reached the SC, both were thus found to be guilty of gross
misconduct in the performance of their duties and meted the penalty of "DISMISSAL from the service, with forfeiture of
all leave credits and retirement benefits, if any, and with prejudice to re-instatement or re-employment in any agency, branch
or instrumentality of the government, including government-owned and controlled corporations." This Resolution dismissing
respondents was immediately enforced, and so they were barred from working even before they could move for
reconsideration.
On MR, the SC relented to the motion for reconsideration of respondent Villanueva, Jr., upon our finding that "[a]fter a
review of the records, we note that this is the first administrative complaint against respondent in his long years of service
with the judiciary. He has also introduced various innovations in court to increase the efficiency of the employees."
The offense was accordingly downgraded to simple neglect of duty, and he was sentenced to pay a FINE of
P5,000.00 with a warning that a repetition of the same or similar offense would be dealt with more severely.
Notwithstanding this disposition of the motion for reconsideration, we nevertheless sustained our finding that Clerk of Court
Villanueva, Jr., was remiss in his duties as ex-officio provincial sheriff for failing to oversee the rightful turnover to the
mortgagor of the balance of the proceeds of the auction sale to the mortgagee.
Respondent Clerk of Court now asks for back salaries and other economic benefits withheld from him from the time
of his dismissal up to his reinstatement. The Financial Management Service (FMS) objected to the demand, opining that
the demand for payment of back salaries had no legal basis on the principle of "no work, no pay." Atty. Eden T. Candelaria,
Deputy Clerk of Court and Chief Administrative Officer of this Court, agreed with the recommendation of the FMS that
Clerk of Court Villanueva, Jr. should not be paid back salaries and other economic benefits since he was not completely
exonerated of the accusation against him; on the contrary, was found guilty of neglect of duty. Thus, the respondents defenses
against awarding back salaries include (1) the principle of no work no pay and (2) the fact that Villanueva was not
completely exonerated of the offenses.
Issue: Whether Villanueva is entitled to back salaries.
Held: YES. There are two (2) items that must be stressed to grant respondent Clerk of Court his prayer for the payment of his
back salaries and other economic benefits:
First, even under the extant rule on the matter, he is clearly entitled to such demand. For one, the immediate
execution of the order of dismissal was premature. There being no rule to the contrary, he was entitled to file a motion for
reconsideration, and corollarily, the suspension of the enforcement of the order of dismissal pending resolution of his motion.
325 Roco 3B
For another, the physical impossibility of effecting reinstatement for the period of employment that was long gone by reasons
not attributable to him entitles him to restitution in the form of back salaries and other economic benefits. For, otherwise, he
would find himself unfortunately punished twice for an offense that is properly and singularly penalized only by a fine.
Second, the grant of back salaries and other economic benefits hews well to an employee's aspirations for moral
justice; precisely, recourse may be had to our corrective powers to avoid a right granted in law from being rendered
illusory in fact. For, how could we account for the additional penalty when we ourselves declared that the proper
penalty under the circumstances was only a fine? For sure, we can hark back to the presumptive validity of our earlier
Resolution dismissing respondent Clerk of Court, but this presumption does not hold true when we are not being taken to
task for the Resolution that we made but simply being asked to restore what in the first place was due him. The demand is
plainly honestly and firmly one of justice.
These two grounds are discussed below.

(1) This is a classic case of unjustified dismissal. Thus, by law and jurisprudence, he is entitled to the benefits
being claimed by him.
Our Resolution dismissing respondent Villanueva, Jr. from the service for gross misconduct was not justified. He did not
commit any act that would constitute misconduct. He was nonetheless found guilty of simple neglect of duty (of which he
was not even charged!) for which he was fined P5,000.00.
With emphasis on the law, the present case clearly falls under a situation of unjustified dismissal from work, which
lays the basis for the claim for back salaries and other economic benefits . Our Resolution dated 29 October 1999
dismissing respondent Villanueva, Jr., from the service was immediately enforced despite his right to file a motion for
reconsideration. We erroneously treated him like a judge who was immediately thrown out of his seat as soon as he
was declared guilty of gross misconduct to prevent him from committing more injustices in the bench and "bastardizing the
judiciary." But respondent Villanueva, Jr., is not a judge but a mere Clerk of Court and Ex-officio Provincial Sheriff.
In Abellera v. City of Baguio, this Court held
The rule on payment of back salaries during the period of suspension of a member of the
civil service who is subsequently ordered reinstated, is already settled in this jurisdiction.
Such payment of salaries corresponding to the period when an employee is not
allowed to work may be decreed not only if he is found innocent of the charges which
caused his suspension (Sec. 35, RA 2260), but also when the suspension is
unjustified.
Execution of decisions takes place only when they become final and executory , and a judgment becomes "final and
executory" by operation of law. Execution of decisions before such stage is not allowed unless specifically permitted by
statute. Thus, in quasi-judicial agencies, "[w]here the legislature has seen fit to declare that the decision of the
quasi-judicial agency is immediately final and executory pending appeal, the law expressly so provides."
In the present case, neither our Resolution dismissing from the service Clerk of Court Villanueva, Jr., nor any rule
promulgated by this Court in connection with administrative disciplinary proceedings deprives any party the opportunity to
move for reconsideration, or similarly, decrees the immediate execution of decisions or resolutions. Thus, we stress that the
immediate dismissal of respondent Villanueva, Jr., was unwarranted on the ground of prematurity of execution, hence, he
must be entitled to back salaries and other economic benefits as mandated in the cases of Abellera and Gimenez.
(2) Moral justice (not just law and jurisprudence) dictates that he be awarded the reliefs sought. If not
granted, he would have been punished twice through an improper rollover of penalties.
(a) IF DENIED, HE WOULD HAVE BEEN UNJUSTLY PUNISHED TWICE.
We come to moral justice - to our sense of fairness. Verily, every government employee found to be dishonest in the
performance of his duties, after proper hearing, should get the full measure of punishment. But this should not be confused
with imposing sanctions in a manner far beyond that fixed in our Resolution dated 8 August 2000. The penalty imposed upon
Clerk of Court Villanueva, Jr., was a fine of P5,000.00, so its execution could not go beyond what was so determined. While
he may have done acts amounting only to an offense penalized with a fine, he ended up suffering suspension or
326 Roco 3B
dismissal for the duration of his motion for reconsideration, an additional penalty that was not commensurate with
simple neglect of duty - the act he was not charged with but found liable for.
In requiring Clerk of Court Villanueva, Jr., to pay a fine, we did not at all indicate that he should have also suffered the
penalty of losing his job - and hence of the emoluments attached thereto - for the time that he was dismissed from the
service. The fine was the only penalty imposed on him for his alleged failure to properly supervise Sheriff Abordaje.
Therefore, respondent Villanueva, Jr., should not be punished with more than what has been imposed, i.e., fine;
otherwise, the supplanting of the charge of gross misconduct with simple neglect of duty and the consequent imposition of a
much lighter penalty from dismissal from the service to a mere fine would be worthless. In effect, respondent Villanueva,
Jr., is being punished twice since the physical impossibility of reinstating him to his post and lost period of
employment would have already deprived him of salaries and other economic benefits, a loss that is perpetuated by
failing to pay him salaries for the same period of time. This is an improper rollover of penalties as we held in Bautista v.
Peralta:
In the particular case of petitioner herein, the penalty imposed by the Civil Service Board of
Appeals was in effect served by him during the first two months of his preventive
suspension. His reinstatement during the rest of the period was no longer physically
possible, but there is no inherent obstacle to his receiving the back salaries
corresponding to such period. Denial of the back salaries would amount to an
amendment of the decision of the Civil Service Board of Appeals, in effect increasing
the two-month suspension meted out to him and converting the preventive
suspension into the penalty itself. It would then make no difference, as far as petitioner
is concerned, whether the Board had suspended him for two months or for two years, or
indeed for any length of time, provided it did not exceed the period of preventive
suspension already undergone. These implications cannot reasonably be read into the
Board's decision in this case.
It must be pointed out that restitution is strongly mandated in the present case since the dismissal order against Clerk
of Court Villanueva, Jr. was found to be imprope r. The reconsideration of the initial order is proof of such impropriety or
incorrectness of our resolution of dismissal. While the immediate implementation of our order of dismissal may have been
correct and could therefore have been legal before this was modified, the modificatory resolution removed completely the
basis of such implementation and, as a necessary legal consequence, the effects thereof must be set aside and
rectified. This is the essence of justice and the rule of law.
(b) HE WAS IN FACT COMPLETELY EXONERATED OF THE OFFENSE OF GROSS MISCONDUCT.

Indeed, to insist on denying to Villanueva, Jr., his back salaries and other economic benefits on the ground that he
has not been completely exonerated or that he did not work, is to indulge ourselves in a tyranny of concepts. To
adopt such formula would be to resort to circuitous arguments: he cannot be compensated because his dismissal was justified
or because he did not work. But, for one thing, such penalty can never be justified since the facts, although they remain the
same, only amount to an offense that is clearly not so punishable. For the record, Clerk of Court Villanueva, Jr. was
completely exonerated in our Resolution dated 8 August 2000 of the administrative offense of gross misconduct with
which he was charged. For this reason, we ordered his reinstatement.
True it is that we found him negligent in the discharge of his duties (a finding that we concede although in conscience hardly
admit), but this finding would not still have called for his dismissal from the service. In granting his claim for back
salaries and other economic benefits, we are thus simply repairing the damage that was unduly caused him , and unless
we can turn back the hands of time, we can do so only by restoring to him that which is physically feasible to do under the
circumstances. Back salaries are after all meant to recover from the employer that which the employee had lost by
way of wages as a result of his unfounded dismissal.
(c) THE PRINCIPLE OF NO WORK NO PAY IS INAPPLICABLE IN THE PRESENT CASE.

We also cannot deny back salaries and other economic benefits on the ground that respondent Clerk of Court did not work.
For the principle of "no work, no pay" DOES NOT APPLY when the employee himself was forced out of job. As ruled
sympathetically in University of Pangasinan Faculty Union v. University of Pangasinan, the "no work, no pay" principle does not apply
327 Roco 3B
where the employee is "constrained to take mandatory leave from work," and for this, Clerk of Court Villanueva, Jr. cannot
altogether be faulted or begrudged for asserting and claiming that which is due him under the law. Indeed, it is not always
true that back salaries are paid only when work was done:
1. In Serrano vs. NLRC, the employer is liable for back wages when he fails to give notice to the employee before
the latter is dismissed from work, regardless of fault.
2. Back wages too are paid to an employee who is merely reinstated in the payroll under Art. 223 of the Labor
Code which provides that "[i]n any event, the decision of the Labor Arbiter reinstating a dismissed or
separated employee, insofar as the reinstated aspect is concerned, shall be immediately executory, even
pending appeal. The employee shall either be admitted back to work under the same terms and conditions
prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated in the
payroll
For another, the poor employee could offer no work since he was forced out of work. Thus, to always requir e complete
exoneration or performance of work would ultimately leave the dismissal uncompensated no matter how grossly disproportionate
the penalty was. Clearly, it does not serve justice to simply restore the dismissed employee to his position and deny him his
claim for back salaries and other economic benefits on these grounds. We would otherwise be serving justice in halves.
(d) ALSO, HIS ACTS, TAKEN TOGETHER, ARE NOT GRAVE ENOUGH TO WARRANT SEPARATION FROM OFFICE.
To be sure, the act of respondent Villanueva, Jr., for which he stands charged - failing to diligently supervise his
subordinate - did not constitute gross misconduct which would have justified separation from the service ; neither was
it as evil as the dishonest acts involved in the jurisprudence of old whereby the payment of back salaries would certainly be
odious and insulting to the sensibilities of honest workers. What is at stake here is a simple case of isolated oversight, which
does not call for dismissal from the service. The fact is that Clerk of Court Villanueva, Jr., like other clerks of court, is saddled
with numerous documents, letters, memoranda, vouchers, and supporting papers that routinely pass through his desk for
his signature. To miss out on any one of them, after good faith reliance upon subordinates is done, would not humanly be
possible to avoid. Furthermore, his act did not involve any dishonesty.
(e) FINALLY, AT THAT TIME, IT COULD BE SAID THAT HE MIGHT NOT HAVE COMMITTED ANY
TRANSGRESSION AT ALL.
It is interesting to note that at the time the foreclosure sale was effected the rule then prevailing, SC - AO No. 3 (19 October
1994), was that the responsibility for signing and issuing certificates of sale devolved upon the Office of the Sheriff, although
subject to the approval of the Executive Judge, or in his absence, the Vice-Executive Judge. This rule was subsequently
amended by SC - Adm. Circ. No. 3-98 (5 February 1998) whereby the duty of signing and issuing certificates of sale still
devolved upon the Office of the Sheriff, but the Clerk of Court as Ex-Officio Sheriff was tasked only with the duty of receiving
"a quarterly report to include all foreclosure sales he has conducted, dates of the auction sales, descriptions of the properties,
sale prices, names of the highest bidders, numbers of the official receipts issued for the fees paid, and amounts paid. The
Clerk of Court shall certify the report and submit the same to the Financial Management Office, Office of the Court
Administrator, within fifteen (15) days after the end of each quarter," and supervise "the work of the implementing sheriffs in
connection with extrajudicial foreclosures."
Significantly, the express directive to Clerks of Court to sign and issue certificates of sale came only upon the promulgation of
A.M. No. 99-10-05-0 (28 December 1999) expressly amending the two (2) previous orders of this Court, viz:
PROCEDURE IN EXTRA-JUDICIAL FORECLOSURE OF MORTGAGE
2. Upon receipt of an application for extra-judicial foreclosure of mortgage, it shall be the duty of the
Clerk of Court to: x x x x (d) sign and issue the certificate of sale, subject to the approval of the
Executive Judge, or in his absence, the Vice-Executive Judge; and (e) after the certificate of sale has
been issued to the highest bidder, keep the complete records, while awaiting any redemption within a
period of one (1) year from date of registration of the certificate of sale with the Register of Deeds
concerned, after which the records shall be archived x x x
This clear delineation of responsibility only goes to show that during all the relevant times, Clerk of Court Villanueva, Jr.,
might not have had in the first place the responsibility for the alleged negligent act of signing and issuing the
certificate of sale without ascertaining beforehand the existence of any excess in the amount collected from the
328 Roco 3B
foreclosure and the amount of indebtedness. The penalty of fine therefore may not have in fact been called for under this
state of responsibilities that he is to discharge. Justice dictates that all the inconvenience caused him, not the least of which is
the promulgation to the whole world that he had been dismissed from the service, should be mended. The only rectification
that can be done now is the payment of his back salaries and other economic benefits.
We can make the difference: precisely, recourse may be had to our corrective powers to avoid a right granted in law from
being rendered illusory in fact. Clerk of Court Villanueva, Jr. was fined all right, but he ended up suffering suspension from
work too; worse, he was deprived of his salaries and other economic benefits. We may have humored him at one end, only to
fry him at the other. To stress once again, our Resolution of 8 August 2000 penalized him only with fine, and did not see it fit
to include as part of his penalty his suspension from work for the period he was dismissed from the service on account of our
Resolution of 29 October 1999, much less did it order the forfeiture of his salaries and other economic benefits. It behooves
us to empathize with Clerk of Court Villanueva, Jr., that being out of job even for one day for an act that does not deserve
such consequence is like being condemned to an eternity of distress. This is what unjust acts, after all, bring about.
THUS: It is not amiss, as it is important, to point out also that even the complainant himself, Kenneth S. Neeland, perhaps
upon deep examination of his conscience, has come out openly in support of respondent Sheriff Nelson N. Abordaje's call for
clemency. With more reason should this call of the complainant be made to affect favorably Clerk of Court Villanueva, Jr.,
who certainly was not the principal "offender" (if such terms be used) in the omission now sought to be punished.
Significantly, the relevant personalities in Bacolod City have spoken for the integrity, efficiency and effectiveness of Clerk of
Court Villanueva, Jr. We should now take time to listen to what our individual consciences for justice tell each of us.
WHEREFORE, the prayer of respondent Atty. Ildefonso M. Villanueva, Jr., Clerk of Court VI and Ex-Officio Provincial
Sheriff, Regional Trial Court, Bacolod City, to be paid his back salaries and other economic benefits to which he was entitled
for the period of his dismissal from the service to his actual reinstatement be paid to him is GRANTED.
208. Dela Salle vs. DSLU Employees Association, 330 SCRA 363
Facts: Dela Salle University and Dela Salle University Employees Association-National Federation of Teachers and Employees
Union (DLSUEANAFTEU), which is composed of regular non-academic rank and file employees entered into a collective
bargaining agreement with a life span of 3 years, that is, from December 23, 1986 to December 22, 1989.
60 days before the expiration of the said CBA, Union initiated negotiations with the University for a new CBA which,
however, turned out to be unsuccessful. Union filed a Notice of Strike. After several conciliation-mediation meetings 5 out
of the 11 issues were resolved by the parties. A partial collective bargaining agreement was thereafter executed.
Voluntary arbitrator Buenaventura rendered its decision on the 6 unresolved issues for arbitration. The Solicitor General
agreed with the Voluntary Arbitrator except on the issue of CSB. It came to this conclusion after finding . . . sufficient
evidence to justify the Unions proposal to consider the University and the CSB [College of St. Benilde] as only one
entity. Hence, this petition.
Issues/Held:
(1) Whether the computer operators assigned at the Universitys Computer Services Center and the Universitys discipline officers may be
considered as confidential employees and should therefore be excluded from the bargaining unit which is composed of rank and
file employees of the University, and whether the employees of the College of St. Benilde should also be included in the same bargaining unit.
The express exclusion of the computer operators and discipline officers from the bargaining unit of rank-and-file employees
in the 1986 collective bargaining agreement does not bar any renegotiation for the future inclusion of the said
employees in the bargaining unit. During the freedom period, the parties may not only renew the existing collective
bargaining agreement but may also propose and discuss modifications or amendments thereto .
With regard to the alleged confidential nature of the said employees functions ,we rule that the said computer
operators and discipline officers are not confidential employees. The service record of a computer operator reveals that
his duties are basically clerical and non-confidential in nature. As to the discipline officers, we agree with the voluntary
arbitrator that based on the nature of their duties, they are not confidential employees and should therefore be included in the
bargaining unit of rank-and-file employees.
329 Roco 3B
The employees of the College of St. Benilde should be excluded from the bargaining unit because the two educational
institutions have their own separate juridical personality and no sufficient evidence was shown to justify the piercing
(2) Whether a UNION SHOP CLAUSE should be included in the parties collective bargaining agreement, in addition to
the existing maintenance of membership clause;
We affirm the ruling of the voluntary arbitrator for the inclusion of a union shop provision in addition to the existing
maintenance of membership clause in the collective bargaining agreement.
The Universitys reliance on the case of Victoriano vs. Elizalde Rope Workers Union is clearly misplaced. In that case, we ruled
that . . . the right to join a union includes the right to abstain from joining any union. The right to refrain from joining labor
organizations recognized by Section 3 of the Industrial Peace Act is, however, limited. The legal protection granted to such
right to refrain from joining is withdrawn by operation of law, where a labor union and an employer have agreed on a closed
shop, by virtue of which the employer may employ only members of the collective bargaining union, and the employees must
continue to be members of the union for the duration of the contract in order to keep their jobs.
(3) Whether the denial of the Unions proposed lastinfirstout method of laying-off employees, is proper;
W e agree with the voluntary arbitrator that as an exercise of management prerogative, the University has the right to
adopt valid and equitable grounds as basis for terminating or transferring employees.
Autobus Workers Union (AWU) and Ricardo Escanlar vs. National Labor Relations Commission, [a] valid exercise of
management prerogative is one which, among others, covers: work assignment, working methods, time, supervision of
workers, transfer of employees, work supervision, and the discipline, dismissal and recall of workers. Except as provided for,
or limited by special laws, an employer is free to regulate, according to his own discretion and judgment, all aspects of
employment.
(4) Whether the ruling that on the basis of the Universitys proposed budget, the University can no longer be required
to grant a second round of wage increases for the school years 1991-92 and 1992-93 and charge the same to the
incremental proceeds, is correct;
The voluntary arbitrator committed grave abuse of discretion. In Caltex Refinery Employees Association(CREA) vs. Jose S.
Brillantes, the standard proof of a companys financial standing is its financial statements duly audited by independent
and credible external auditors. Financial statements audited by independent external auditors constitute the normal method
of proof of profit and loss performance of a company. The financial capability of a company cannot be based on its
proposed budget because a proposed budget does not reflect the true financial condition of a company . The use of a
proposed budget as proof of a companys financial condition would be susceptible to abuse by scheming employers who
might be merely feigning dire financial condition in order to avoid granting salary increases and fringe benefits
(5) Whether the denial of the Unions proposals on the deloading of the union president, improved leave benefits
and indefinite union leave with pay, is proper;
Voluntary arbitrator correctly rejected it.
(6) Whether the finding that the multi-sectoral committee in the University is the legitimate group which
determines and scrutinizes the annual salary increases and fringe benefits of the employees of the University, is
correct; and
Assuming for the sake of argument that the said committee is the group responsible for determining wage increases and fringe
benefits, as ruled by the voluntary arbitrator, the committees determination must still be based on duly audited financial
statements
(7) Whether the ruling that the 70% share in the incremental tuition proceeds is the only source of salary increases
and fringe benefits of the employees, is proper.
Error is unnecessary and irrelevant, in view of our rulings on the fourth and preceding issues. No evidence presented before
the voluntary arbitrator that the University held incremental tuition fee proceeds from which any wage increase or fringe
benefit may be satisfied.
330 Roco 3B
The assailed decision dated January 19, 1993 of voluntary arbitrator Buenaventura Magsalin is hereby AFFIRMED with the
modification that the issue on salary increases for the second and third years of the collective bargaining agreement be
REMANDED to the voluntary arbitrator on the basis of the externally audited financial statements of the University.
209. Philex Gold Philippines vs. Philex Bulawan, 468 SCRA 111
Facts: Philex Bulawan Supervisors Union is the sole and exclusive bargaining representative of all supervisors of
petitioner Philex Gold a gold mining company with mine site at Vista Alegre, Nabulao, Sipalay, Negros Occidental.
On July 1997, union entered into a CBA with Philex effective August 1996 for 5 years.
It appears, however, that after the signing of the CBA, Philex Gold made the employees of Philex Mining Corporation
from Padcal, Tuba, Benguet, its regular supervisory employees effective July 1997. Some of the so- called ex-Padcal
supervisors began to work in the Bulawan mines of Philex Mining Corporation in 1992 as ordinary rank-and-file
workers. When Philex Gold was incorporated in 1996 to exclusively handle gold mining, it took over the operations of the
Bulawan mines and absorbed some of the ex-Padcal employees.
Philex Gold conveyed to Philex Supervisors Union the status of the ex-Padcal supervisors in November 1997 upon the
insistence of the union to be informed of their standing.
It turned out that the ex-Padcal supervisors were maintained under a confidential payroll , receiving a different set of
benefits and higher salaries compared to the locally hired supervisors of similar rank and classification doing parallel duties
and functions.
Philex Supervisors Union filed a Complaint against Philex Gold with the National Conciliation and Mediation Board,
Bacolod City, for the payment of wage differential and damages and the rectification of the discriminatory salary
structure and benefits between the ex-Padcal supervisors and the local-hires.
Issue: (1) Whether the corporate officers of Philex are directly liable with Philex for its liability to the Union-members.
(2) Whether the doctrine of Equal Pay for Equal Work should not remove the management prerogative to institute
difference in salary within the same supervisory level.
Held: (1) NOT LIABLE. Petitioners officers contend that they should not be adjudged solidarily liable with Philex Gold.
A corporation is a juridical entity with legal personality separate and distinct from those acting for and in its behalf and, in
general, from the people comprising it. Obligations incurred by the corporation, acting through its directors, officers and
employees, are its sole liabilities.
However, it is possible for a corporate director, trustee or officer to be held solidarily liable with the corporation in the
following instances:
1. When directors and trustees or, in appropriate cases, the officers of a corporation
(a) vote for or assent to patently unlawful acts of the corporation;
(b) act in bad faith or with gross negligence in directing the corporate affairs;
(c) are guilty of conflict of interest to the prejudice of the corporation, its stockholders or members, and other persons.
2. When a director or officer has consented to the issuance of watered stocks or who, having knowledge thereof, did not
forthwith file with the corporate secretary his written objection thereto.
3. When a director, trustee or officer has contractually agreed or stipulated to hold himself personally and solidarily liable
with the Corporation.
4. When a director, trustee or officer is made, by specific provision of law, personally liable for his corporate action.
The corporate officers IN THIS CASE have not been proven to fall under any of the aforecited instances ; hence, they
cannot be held solidarily liable with the company in the payment of any liability.
331 Roco 3B
(2) NO. Petitioners submit that the equal pay for equal work doctrine in International School Alliance of Educators v. Quisumbing, which the
Court of Appeals cited to support its Decision should be narrowly construed to apply to a situation where invidious discrimination exists by reason of
race or ethnicity, but not where valid factors exist to justify distinctive treatment of employees even if they do the same work.
Petitioners explained that the ex-Padcal supervisors were paid higher because of their longer years of service, experience, their training and skill in the
underground mining method wanting in the local supervisors, and their relocation to Bulawan, Negros Occidental. They assert that the differential
treatment of the ex-Padcal supervisors is not arbitrary, malicious or discriminatory but justified by the circumstances of their relocation and
integration in the new mining operation in Bulawan.
The Court is not persuaded by petitioners contention.
Philex admits that the same class of workers [are] doing the same kind of work. This means that an ex-Padcal
supervisor and a locally hired supervisor of equal rank do the same kind of work. If an employer accords employees the
same position and rank, the presumption is that these employees perform equal work. Hence, the doctrine of equal
pay for equal work in International School Alliance of Educators was correctly applied by the Court of Appeals.
Petitioners now contend that the doctrine of equal pay for equal work should not remove management prerogative to institute difference in salary on
the basis of seniority, skill, experience and the dislocation factor in the same class of supervisory workers doing the same kind of work.
IN THIS CASE, the Court cannot agree because Philex failed to adduce evidence to show that an ex-Padcal supervisor
and a locally hired supervisor of the same rank are initially paid the same basic salary for doing the same kind of
work. They failed to differentiate this basic salary from any kind of salary increase or additional benefit which may have been
given to the ex-Padcal supervisors due to their seniority, experience and other factors. The records only show that an ex-
Padcal supervisor is paid a higher salary than a locally hired supervisor of the same rank. Therefore, petitioner failed to
prove with satisfactory evidence that it has not discriminated against the locally hired supervisor in view of the
unequal salary.
As held in Philippine-Singapore Transport Services, Inc. v. NLRC,
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 prerogative 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
210. Gapayao vs. Fulo, SSS, et. al. June 13, 2013
Facts: On 4 November 1997, Jaime Fulo died of acute renal failure secondary to 1st degree burn 70% secondary
electrocution while doing repairs at the residence and business establishment of petitioner in Sorsogon. Moved by
his Christian faith, petitioner extended financial assistance to Fulos widow, who thereon executed an Affidavit of
Desistance. She stated that she was not holding them liable for his death and was waiving her right and desisting from filing
any criminal or civil action. They then entered into a Compromise Agreement, where petitioner agreed to pay P40,000 in
exchange for his total release and discharge from all claims.
Fulo then filed a claim for social security benefits with the SSS. It was discovered that the deceased was not
registered with the SSS. The SSS investigated, and found that:
Per interview of Delgra, Bolanos, and Gacelo (co-employees):

Fulo was an employee of Jaime Gapayao as farm laborer from 1983 to 1997.
332 Roco 3B
Delgra and Bolanos are co-employees.

Fulo receives compensation on a daily basis, ranging from P5 to P60.
Fulo is an employee on an extra basis
Per interview of Mrs. Gapayao:
Sometimes he is allowed to work as an abaca harvester, and earn 1/3 share of its harvest.
His services were hired for house repairs whenever it is available. He receives remuneration usually in the
afternoon after doing his job.
They hire 50-100 persons when necessary, and Fulo is one of them. He receives more or less P50 a day.
Apparently linaglag niya yung husband niya, si Jaime.
The SSS then demanded that petitioner remit the contributions of the deceased. Petitioner denied his being an
employer; the SSS then required Fulo to present evidence. Instead of doing so, she filed a petition before the SSC for
social security coverage and payment of contributions, which petitioner opposed by averring that Fulo was an
independent contractor, not an employee. Assuming that he was, he was not entitled to premiums when he was not at work,
since he was an intermittent worker. He also insisted that he had no obligation to report his demise to the SSS. The SSC
ordered Gapayao to pay the SS contributions, and also ordered the SSS to pay the appropriate death benefit.
Reconsideration was denied, and the CA affirmed.
FULOS CONTENTIONS
In asserting the existence of an employer-employee relationship, Fulo alleges that her late husband had been in the employ
of petitioner for 14 years, from 1983 to 1997. During that period, he was made to work as a laborer in the agricultural
landholdings, a harvester in the abaca plantation, and a repairman/utility worker in several business establishments owned by
petitioner. To private respondent, the considerable length of time during which [the deceased] was given diverse tasks by
petitioner was a clear indication of the necessity and indispensability of her late husbands services to petitioners business.
This view is bolstered by the admission of petitioner himself in the Compromise Agreement that he was the
deceaseds employer. Private respondents position is similarly espoused by the SSC, which contends that its findings are
duly supported by evidence on record. It insists that pakyaw workers are considered employees, as long as the employer
exercises control over them. In this case, the exercise of control by the employer was delegated to the caretaker of his
farm, Amado Gacelo. The SSC further asserts that the deceased rendered services essential for the petitioners harvest.
While these services were not rendered continuously (in the sense that they were not rendered every day throughout the
year), still, the deceased had never stopped working for petitioner from year to year until the day the former died. In
fact, the deceased was required to work in the other business ventures of petitioner , such as the latters bakery and
grocery store.
The Compromise Agreement entered into by petitioner with private respondent should not be a bar to an employee
demanding what is legally due the latter. The SSS, while clarifying that it is neither adversarial nor favoring any of the private
parties x x x as it is only tasked to carry out the purposes of the Social Security Law, agrees with both private respondent and
SSC. It stresses that factual findings of the lower courts, when affirmed by the appellate court, are generally conclusive and
binding upon the Court. Petitioner, on the other hand, insists that the deceased was not his employee. Supposedly, the latter,
during the performance of his function, wasnot under petitioners control.
EMPLOYERS CONTENTIONS
Control is not necessarily present even if the worker works inside the premises of the person who has engaged his
services. Granting without admitting that petitioner gave rules or guidelines to the deceased in the process of the latters
performing his work, the situation cannot be interpreted as control, because it was only intended to promote mutually desired
results. Alternatively, petitioner insists that the deceased was hired by Adolfo Gamba, the contractor whom he had hired to
construct their building; and by Amado Gacelo, the tenant whom petitioner instructed to manage the latters farm. For this
reason, petitioner believes that a tenant is not beholden to the landlord and is not under the latters control and supervision. So
if a worker is hired to work on the land of a tenant such as petitioner the former cannot be the worker of the landlord, but
of the tenants.
333 Roco 3B
Anent the Compromise Agreement, petitioner clarifies that it was executed to buy peace, because respondent kept on
pestering them by asking for money. Petitioner allegedly received threats that if the matter was not settled, private respondent
would refer the matter to the New Peoples Army. Allegedly, the Compromise Agreement was extortion camouflaged
as an agreement.
Likewise, petitioner maintains that he shouldered the hospitalization and burial expenses of the deceased to express
his compassion and sympathy to a distressed person and his family, and not to admit liability. Lastly, petitioner
alleges that the deceased is a freelance worker. Since he was engaged on a pakyaw basis and worked for a short period of
time, in the nature of a farm worker every season, he was not precluded from working with other persons and in fact worked
for them. Under Article 280 of the Labor Code, seasonal employees are not covered by the definitions of regular and casual
employees. Petitioner cites Mercado, Sr. v. NLRC, in which the Court held 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.
Issue: Whether or not there exists between Jaime Fulo and Petitioner an employer-employee relationship that would merit an
award of benefits in favor of private respondent under social security laws.
Held: YES.
FARM WORKERS MAY BE CONSIDERED REGULAR SEASONAL EMPLOYEES.

Article 280 of the Labor Code states:
Article 280. Regular and Casual Employment. The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreement of the parties, an employment
shall be deemed to be regular where the employee has been engaged to perform activities
which are usually necessary or desirable in the usual business or trade of the employer,
except where the employment hasbeen 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
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 actually
exists.
Jurisprudence has identified THE 3 TYPES OF EMPLOYEES MENTIONED IN THE PROVISION:

(1) REGULAR EMPLOYEES or those who have been engaged to perform activities that 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 their engagement , or those whose
work or service is seasonal in nature and is performed for the duration of the season; and
(3) CASUAL EMPLOYEES or those who are neither regular nor project employees.
Workers generally fall under the definition of seasonal employees. We have consistently held that seasonal employees
may be considered as regular employees. Regular seasonal employees are those called to work from time to time. The
nature of their relationship with the employer is such that during the off season , they are temporarily laid off; but
reemployed during the summer season or when their services may be needed.
They are in regular employment because of the nature of their job, and not because of the length of time they have
worked. rule, however, is not absolute. In Hacienda Fatima v. NFSW, the Court held that seasonal workers who have worked
for one season only may not be considered regular employees. Similarly, in Mercado, Sr. v. NLRC, it was held that when
seasonal employees are free to contract their services with other farm owners, then the former are not regular employees. For
regular employees to be considered as such, the PRIMARY STANDARD used is the reasonable connection between the
334 Roco 3B
particular activity they perform and the usual trade or business of the employer. This test has been explained
thoroughly in De Leon v. NLRC, viz:
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. 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 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.
A reading of the records reveals that the deceased was indeed a farm worker who was in the regular employ of
petitioner. From year to year, starting January 1983 up until his death, the deceased had been working on petitioners
land by harvesting abaca and coconut, processing copra, and clearing weeds. His employment was continuous in the
sense that it was done for more than one harvesting season. Moreover, no amount of reasoning could detract from the fact
that these tasks were necessary or desirable in the usual business of petitioner.
The other tasks allegedly done by the deceased outside his usual farm work only bolster the existence of an
employer-employee relationship. As found by the SSC, the deceased was a construction worker in the building and a helper
in the bakery, grocery, hardware, and piggery all owned by petitioner. This fact only proves that even during the off
season, the deceased was still in the employ of petitioner. The most telling indicia of this relationship is the Compromise
Agreement executed by petitioner and private respondent. It is a valid agreement as long as the consideration is reasonable
and the employee signed the waiver voluntarily, with a full understanding of what he or she was entering into. All that is
required for the compromise to be deemed voluntarily entered into is personal and specific individual consent. Once executed
by the workers or employees and their employers to settle their differences, and done in good faith, a Compromise Agreement
is deemed valid and binding among the parties. Petitioner entered into the agreement with full knowledge that he was
described as the employer of the deceased. This knowledge cannot simply be denied by a statement that petitioner
was merely forced or threatened into such an agreement . His belated attempt to circumvent the agreement should not be
given any consideration or weight by this Court.
PAKYAW WORKERS ARE REGULAR EMPLOYEES, PROVIDED THEY ARE SUBJECT TO THE CONTROL OF PETITIONER.
Pakyaw workers are considered employees for as long as their employers exercise control over them. In Legend Hotel Manila v.
Realuyo, the Court held that 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. This is the so-called control test and 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.
It should be remembered that the control test merely calls for the existence of the right to control, and not necessarily
the exercise thereof. It is not essential that the employer actually supervises the performance of duties by the
employee. It is enough that the former has a right to wield the power .
In this case, we agree with the CA that petitioner wielded control over the deceased in the discharge of his functions.
Being the owner of the farm on which the latter worked, petitioner on his own or through his overseer-necessarily had the
right to review the quality of work produced by his laborers. It matters not whether the deceased conducted his work inside
petitioners or not petitioner retained the right to control him in his work, and in fact exercised it through his managerAmado
Gacelo. The latter himself testified that petitioner had hired the deceased as one of the pakyaw workers whose salaries were
derived from the gross proceeds or the harvest.
We do not give credence to the allegation that the deceased was an independent contractor hired by a certain Adolfo Gamba,
the contractor whom petitioner himself had hired to build a building. The allegation was based on the self-serving testimony
335 Roco 3B
of Joyce Gapay Demate, the daughter of petitioner. The latter has not offered any other proof apart from her testimony to
prove the contention.
The right of an employee to be covered by the Social Security Act is premised on the existence of an employer-
employee relationship. That having been established, the Court hereby rules in favor of private respondent Amado Gacelo.
The latter himself testified that petitioner had hired the deceased as one of the pakyaw workers whose salaries were derived
from the gross proceeds or the harvest. We do not give credence to the allegation that the deceased was an independent
contractor hired by a certain Adolfo Gamba, the contractor whom petitioner himself had hired to build a building. The
allegation was based on the self-serving testimony of Joyce Gapay Demate, the daughter of petitioner. The latter has not
offered any other proof apart from her testimony to prove the contention. The right of an employee to be covered by the
Social Security Act is premised on the existence of an employer-employee relationship. That having been established, the
Court hereby rules in favor of private respondent.Amado Gacelo. The latter himself testified that petitioner had hired the
deceased as one of the pakyaw workers whose salaries were derived from the gross proceeds or the harvest. We do not give
credence to the allegation that the deceased was an independent contractor hired by a certain Adolfo Gamba, the contractor
whom petitioner himself had hired to build a building. The allegation was based on the self-serving testimony of Joyce Gapay
Demate, the daughter of petitioner. The latter has not offered any other proof apart from her testimony to prove the
contention. The right of an employee to be covered by the Social Security Act is premised on the existence of an
employer-employee relationship. That having been established, the Court hereby rules in favor of private respondent.
211. Fulache vs. ABS-CBN, 610 SCRA 567

Facts: On June 2001, petitioners Fulache, Jabonero, Castillo, Lagunzad, Malig-on Bigno, Cabas, Jr., Ponce Almendras and
Antinen (did not file an MR anymore) filed 2 separate complaints for regularization, unfair labor practice and several money
claims (regularization case) against ABS-CBN. Fulache and Castillo were drivers/cameramen; Atinen, Lagunzad and
Jabonero were drivers; Ponce and Almendras were cameramen/editors; Bigno was a PA/Teleprompter Operator-Editing,
and Cabas was a VTR man/editor.
The petitioners in this case are questioning the CBA executed between ABS-CBN and the ABS-CBN Rank-and-File
Employees Union (Union) because under such agreement, they are only considered as temporary and not regular
employees. The petitioners claimed that they should be recognized as regular employees of ABS-CBN because they had
already rendered more than a year of service in the company and, therefore, entitled to the benefits of a regular employee.
ABS-CBN claimed that it operates in several divisions, one of which is the Regional Network Group (RNG); that RNG
exercises control and supervision over all the ABS-CBN local stations to ensure that ABS-CBN programs are extended to the
provinces; that a local station, like the Cebu station, can resort to cost-effective and cost-saving measures to remain viable local
stations produced shows and programs that were constantly changing because of the competitive nature of the industry, the
changing public demand or preference, and the seasonal nature of media broadcasting programs; that the production of
programs per se is not necessary or desirable in its business because it could generate profits by selling airtime to block-timers
or through advertising.
ABS-CBN further claimed that to cope with fluctuating business conditions, it contracts on a case-to-case basis the
services of persons who possess the necessary talent, skills, training, expertise or qualifications to meet the
requirements of its programs and productions. These contracted persons are called talents and are considered
independent contractors who offer their services to broadcasting companies.
Talents do not undergo probation. Their services are engaged for a specific program or production, or a segment
thereof. Their contracts are terminated once the program, production or segment is completed. Instead of salaries, ABS-
CBN pointed out that talents are paid a pre-arranged consideration called talent fee taken from the budget of a
particular program and subject to a ten percent (10%) withholding tax.
ABS-CBN alleged that the petitioners services were contracted on various dates by its Cebu station as independent
contractors/off camera talents, and they were not entitled to regularization in these capacities.
LA Rendoque rendered his decision holding that the petitioners were regular employees of ABS-CBN, not
independent contractors, and are entitled to the benefits and privileges of regular employees
336 Roco 3B
ABS-CBN appealed the ruling to the NLRC, mainly contending that the petitioners were independent contractors, not
regular employees.
While the appeal of the regularization case was pending , ABS-CBN dismissed Fulache et al. for their refusal to sign
up contracts of employment with service contractor Able Services. The 4 drivers and Atinen responded by filing
a complaint for illegal dismissal.
The Labor Arbiter Rendoque upheld the validity of ABS-CBN's contracting out of certain work or services in its operations.
The LA found that petitioners Fulache et al had been dismissed due to redundancy, an authorized cause under the
law.
The NLRC reversed the labor arbiters ruling in the illegal dismissal case ; it found that petitioners had been illegally
dismissed and awarded them backwages and separation pay in lieu of reinstatement. Under both cases, the petitioners were
awarded CBA benefits and privileges from the time they became regular employees up to the time of their dismissal .
The NLRC resolved the motions for reconsideration on by both parties, thus, on the regularization issue, the NLRC stood by
the ruling that the petitioners were regular employees entitled to the benefits and privileges of regular employees. On the illegal
dismissal case, the petitioners, while recognized as regular employees, were declared dismissed due to
redundancy. The NLRC denied the petitioners second motion for reconsideration in its order of May 31, 2006 for being a
prohibited pleading.
CA ruled that the petitioners failed to prove their claim to CBA benefits since they never raised the issue in the compulsory
arbitration proceedings, and did not appeal the labor arbiters decision which was silent on their entitlement to CBA benefits.
On the illegal dismissal issue, the CA upheld the NLRC decision reinstating the labor arbiters April 21, 2003 ruling that
the driversFulache, Jabonero, Castillo and Lagunzadwere not illegally dismissed as their separation from the service
was due to redundancy. Hence the present petition.
Issue: (1) Whether Fulache et al were regular employees.

(2) Whether Fulache et al were illegally dismissed.
Held: (1) REGULAR EMPLOYEES. As regular employees, the petitioners fall within the coverage of the bargaining unit
and are therefore entitled to CBA benefits as a matter of law and contract. In the root decision (the LAs decision of
January 17, 2002) that the NLRC and CA affirmed, the LA declared that petitioners were regular employees of ABS-CBN and
not independent contractors and thus henceforth they are entitled to the benefits and privileges attached to regular status of
their employment
This declaration unequivocally settled the petitioners employment status: they are ABSCBNs regular employees entitled
to the benefits and privileges of regular employees. These benefits and privileges arise from entitlements under the law
(specifically, the Labor Code and its related laws), and from their employment contract as regular ABS-CBN employees, part
of which is the CBA if they fall within the coverage of this agreement. Thus, what only needs to be resolved as an issue for
purposes of implementation of the decision is whether the petitioners fall within CBA coverage.
The parties 19992002 CBA provided in its Article I (Scope of the Agreement) that
Section 1. APPROPRIATE BARGAINING UNIT.The parties agree that the appropriate

bargaining unit shall be regular rank-and-file employees of ABS-CBN BROADCASTING
CORPORATION but shall not include:
a) Personnel classified as Supervisor and Confidential employees;
b) Personnel who are on casual or probationary status as defined in Section 2 hereof;
c) Personnel who are on contract status or who are paid for specified units of work such
as writer-producers, talent- artists, and singers.
337 Roco 3B
The inclusion or exclusion of new job classifications into the bargaining unit shall be subject
of discussion between the COMPANY and the UNION.
Under these terms, the petitioners are members of the appropriate bargaining unit because they are regular
rank-and-file employees and do not belong to any of the excluded categories.
Specifically, nothing in the records shows that they are supervisory or confidential employees; neither are they casual
nor probationary employees. Most importantly, the LAs decision of January 17, 2002 affirmed all the way up to the CA
level ruled against ABSCBNs submission that they are independent contractors. Thus, as regular rankandfile employees,
they fall within CBA coverage under the CBAs express terms and are entitled to its benefits.
CBA coverage is not only a question of fact, but of law and contract. The factual issue is whether the petitioners are
regular rank-and-file employees of ABS- CBN. The tribunals below uniformly answered this question in the affirmative.
From this factual finding flows legal effects touching on the terms and conditions of the petitioners regular employment. This
was what the labor arbiter meant when he stated in his decision that henceforth they are entitled to the benefits and privileges
attached to regular status of their employment.
Significantly, ABSCBN itself posited before this Court that the Court of Appeals did not gravely err nor gravely abuse its
discretion when it affirmed the resolution of the NLRC dated March 24, 2006 reinstating and adopting in toto the decision of
the Labor Arbiter dated January 17, 2002 x x x.30 This representation alone fully resolves all the objections procedural or
otherwise ABS-CBN raised on the regularization issue.
(2) ILLEGALLY DISMISSED. The termination of employment of the 4 drivers occurred under highly questionable
circumstances and with plain and unadulterated bad faith.
The records show that the regularization case was in fact the root of the resulting bad faith as this case gave rise and
led to the dismissal case. First, the regularization case was filed leading to the labor arbiters decision declaring the
petitioners, including Fulache, Jabonero, Castillo and Lagunzad, to be regular employees. ABS-CBN appealed the decision and
maintained its position that the petitioners were independent contractors.
In the course of this appeal, ABSCBN took matters into its own hands and terminated the petitioners services,
clearly disregarding its own appeal then pending with the NLRC. Notably, this appeal posited that the petitioners were
not employees (whose services therefore could be terminated through dismissal under the Labor Code); they were
independent contractors whose services could be terminated at will, subject only to the terms of their contracts. To justify the
termination of service, the company cited redundancy as its authorized cause but offered no justificatory supporting
evidence. It merely claimed that it was contracting out the petitioners activities in the exercise of its management
prerogative.
ABSCBNs intent, of course, based on the records, was to transfer the petitioners and their activities to a service
contractor without paying any attention to the requirements of our labor laws; hence, ABS-CBN dismissed the
petitioners when they refused to sign up with the service contractor. In this manner, ABS-CBN fell into a downward
spiral of irreconcilable legal positions, all undertaken in the hope of saving itself from the decision declaring its talents to be
regular employees. By doing all these, ABS-CBN forgot labor law and its realities.
It forgot that by claiming redundancy as authorized cause for dismissal, it impliedly admitted that the petitioners
were regular employees whose services, by law, can only be terminated for the just and authorized causes defined under the
Labor Code.
Likewise ABS-CBN forgot that it had an existing CBA with a union, which agreement must be respected in any move
affecting the security of tenure of affected employees; otherwise, it ran the risk of committing unfair labor practice both a
criminal and an administrative offense. It similarly forgot that an exercise of management prerogative can be valid only
if it is undertaken in good faith and with no intent to defeat or circumvent the rights of its employees under the laws
or under valid agreements.
338 Roco 3B
Lastly, it forgot that there was a standing LAs decision that, while not yet final because of its own pending appeal,
cannot simply be disregarded. By implementing the dismissal action at the time the labor arbiters ruling was under review,
the company unilaterally negated the effects of the labor arbiters ruling while at the same time appealing the same ruling to the
NLRC. This unilateral move is a direct affront to the NLRCs authority and an abuse of the appeal process.
All these go to show that ABS-CBN acted with patent bad faith. A close parallel we can draw to characterize this bad
faith is the prohibition against forum-shopping under the Rules of Court. In forum-shopping, the Rules characterize as bad
faith the act of filing similar and repetitive actions for the same cause with the intent of somehow finding a favorable ruling in
one of the actions filed. ABSCBNs actions in the two cases, as described above, are of the same character, since its obvious
intent was to defeat and render useless, in a roundabout way and other than through the appeal it had taken, the labor arbiters
decision in the regularization case. Forum-shopping is penalized by the dismissal of the actions involved. The penalty against
ABS- CBN for its bad faith in the present case should be no less.
While notice has been made to the employees whose positions were declared redundant, the element of good faith in
abolishing the positions of the complainants appear to be wanting. In fact, it remains undisputed that herein
complainants were terminated when they refused to sign an employment contract with Able Services which would make
them appear as employees of the agency and not of ABS-CBN. Such act by itself clearly demonstrates bad faith on the part
of the respondent in carrying out the companys redundancy program.
The injustice committed on the petitioners/drivers requires rectification. Their dismissal was not only unjust and in bad
faith as the above discussions abundantly show. The bad faith in ABSCBNs move toward its illegitimate goal was not
even hidden; it dismissed the petitioners already recognized as regular employees for refusing to sign up with
its service contractor. Thus, from every perspective, the petitioners were illegally dismissed.
By law, illegally dismissed employees are entitled to reinstatement without loss of seniority rights and other
privileges and to full backwages, inclusive of allowances, and to other benefits or their monetary equivalent from the time
their compensation was withheld from them up to the time of their actual reinstatement. The 4 dismissed drivers deserve no
less. Moreover, they are also entitled to moral damages since their dismissal was attended by bad faith. For having been
compelled to litigate and to incur expenses to protect their rights and interest, the petitioners are likewise entitled to attorneys
fees.
212. Avon Cosmetics vs. Luna, 20 December 2006

Facts: Luna began working for Beautifont, Inc. in 1972, first as a franchise dealer and then a year later, as a Supervisor.
Sometime in 1978, Avon Cosmetics, Inc. (Avon) acquired and took over the management and operations of
Beautifont, Inc. Nonetheless, Luna continued working for said successor company . Luna also acted as a make-up artist of
petitioner Avons Theatrical Promotions Group. Avon and Luna entered into a Supervisors Agreement:
5) That the Supervisor shall sell or offer to sell, display or promote only and exclusively products sold by the
Company.
6) Either party may terminate this agreement at will, with or without cause, at any
time upon notice to the other.
By virtue of the execution of the Supervisors Agreement, Luna became part of the independent sales force of Avon. Luna
was invited by a former Avon employee who was then currently a Sales Manager of Sandre Philippines, Inc., a domestic
corporation engaged in direct selling of vitamins and other food supplements, to sell said products. Luna accepted the
invitation as she then became a Group Franchise Director of Sandre Philippines, Inc. concurrently with being a
Group Supervisor of petitioner Avon. As Group Franchise Director, Luna began selling and/or promoting Sandre products
to other Avon employees and friends.
She requested a law firm to render a legal opinion as to the legal consequence of the Supervisors Agreement. The lawyer
of the firm opined that the Supervisors Agreement was "contrary to law and public policy."
Luna wrote a letter to her colleagues and attached mimeographed copies of the opinion and then circulated them:
339 Roco 3B
We all love our work as independent dealers and we all love to continue in this livelihood. Because my
livelihood is important to me, I have asked the legal opinion of a leading Makati law office regarding my
status as an independent dealer, I am sharing this opinion with you. I have asked their advice on three specific
things:
1) May the company legally change the conditions of the existing "Supervisors Agreement" without the
Supervisors consent? If I should refuse to sign the new Agreement, may the company terminate my
dealership?
On the first issue, my lawyers said that the company cannot change the existing "Agreement" without my
consent, and that it would be illegal if the company will compel me to sign the new agreement.
2) Is Section 5 of the "Supervisors Agreement" which says that a dealer may only sell products sold by the
company, legal?
My lawyers said that Section 5 of the Supervisors Agreement is NOT valid because it is contrary to public
policy, being an unreasonable restraint of trade.
3) Is Section 6 of the "Supervisors Agreement" which authorizes the company to terminate the contract at
any time, with or without cause, legal?
My lawyer said Section 6 is NOT valid because it is contrary to law and public
policy. The company cannot terminate the "Supervisors Agreement" without a valid
cause.
Therefore, I can conclude that I dont violate Section 5 if I sell any product which is
not in direct competition with the companys products, and there is no valid reason
for the company to terminate my dealership contract if I sell a non-competitive
product.
Dear co-supervisor[s], let us all support the reasonable and legal policies of the company. However, we must
all be conscious of our legal rights and be ready to protect ourselves if they are trampled upon. I hope we will
all stay together selling Avon products for a long time and at the same time increase our earning opportunity
by engaging in other businesses without being afraid to do so.
Avon, through its President and General Manager, Jose Mari Franco, through a letter, notified Luna of the termination or
cancellation of her Supervisors Agreement:
In September, (sic) 1988, you brought to our attention that you signed up as Group Franchise Director of
another company, Sandre Philippines, Inc. (SPI). Not only that. You have also sold and promoted products
of SPI (please refer for example to SPI Invoice No. 1695 dated Sept. 30, 1988). Worse, you promoted/sold
SPI products even to several employees of our company including Mary Arlene Nolasco, Regina Porter,
Emelisa Aguilar, Hermie Esteller and Emma Ticsay. To compound your violation of the above-quoted
provision, you have written letters to other members of the Avon salesforce inducing them to violate their own
contracts with our company. x x x.
For violating paragraph 5 x x x, the Company, pursuant to paragraph 6 of the same Agreement, is
terminating and canceling its Supervisors Agreement with you effective upon your receipt of this notice. We
regret having to do this, but your repeated disregard of the Agreement, despite warnings, leaves (sic) the
Company no other choice.
Luna filed a complaint for damages. RTC and CA ruled in favor of Luna.
Issue: (1) Whether 5 of the Supervisor Agreement is void for being violative of the law and public policy.
340 Roco 3B
(2) Whether 6 which authorizes Avon to terminate or cancel the agreement at will is void for being contrary to law and
public policy.
Held: VALID.
VALIDITY OF 5
There is nothing invalid or contrary to public policy either in the objectives sought to be attained by paragraph 5 in
prohibiting Luna, and all other Avon supervisors, from selling products other than those manufactured by Avon .
The reason for such exclusion is to safeguard the network that it has cultivated through the years. Admittedly, both
companies employ the direct selling method in order to peddle their products . By direct selling, Avon and Sandre, the
manufacturer, forego the use of a middleman in selling their products, thus, controlling the price by which they are to be sold.
The limitation does not affect the public at all. It is only a means by which Avon is able to protect its investment. It
was not by chance that Sandre Philippines, Inc. made Luna one of its Group Franchise Directors.
It doesnt take a genius to realize that by making her an important part of its distribution arm, Sandre Philippines,
Inc., a newly formed direct-selling business, would be saving time, effort and money as it will no longer have to recruit,
train and motivate supervisors and dealers. Luna, who learned the tricks of the trade from petitioner Avon, will do it for
them. This is tantamount to unjust enrichment.
Worse, the goodwill established by Avon among its loyal customers will be taken advantaged of by Sandre
Philippines, Inc. It is not so hard to imagine the scenario wherein the sale of Sandre products by Avon dealers will
engender a belief in the minds of loyal Avon customers that the product that they are buying had been
manufactured by Avon. In other words, they will be misled into thinking that the Sandre products are in fact Avon products.
Sandre Philippines, Inc. is still very much free to distribute its products in the market but it must do so at its own expense. The
exclusivity clause does not in any way limit its selling opportunities, just the undue use of the resources of Avon.
* omitted discussions on restraint on trade, definitions of pubic policy and contracts of adhesion*
VALIDITY OF 6
This Court already had the opportunity to opine that termination or cancellation clauses such as that subject of the case
at bar are legitimate if exercised in good faith. In the case of Petrophil Corporation v. Court of Appeals, facts of said case
likewise involved a termination or cancellation clause that clearly provided for two ways of terminating the contract, i.e., with
or without cause. The utilization of one mode will not preclude the use of the other. Therein, we stated that the finding
that the termination of the contract was "for cause," is immaterial. When petitioner terminated the contract "without
cause," it was required only to give a 30-day prior written notice, which it did.
IN THE CASE AT BAR, the termination clause of the Supervisors Agreement clearly provides for two ways of
terminating and/or canceling the contract. One mode does not exclude the other. The contract provided that it can be
terminated or cancelled for cause, it also stated that it can be terminated without cause, both at any time and after
written notice.
Thus, whether or not the termination or cancellation of the Supervisors Agreement was "for cause," is immaterial.
The ONLY REQUIREMENT is that of notice to the other party. When Avon chose to terminate the contract, for cause,
respondent Luna was duly notified thereof.
Worth stressing is that the right to unilaterally terminate or cancel the Supervisors Agreement with or without cause is
equally available to respondent Luna, subject to the same notice requirement. Obviously, no advantage is taken against
each other by the contracting parties.
213. Manila Polo Club Employees Union vs. MPC Inc., July 24, 2013
341 Roco 3B
Facts: Petitioner Manila Polo Club Employees Union (MPC-EU) is a legitimate labor organization duly registered with the
DOLE, while respondent Manila Polo Club, Inc. (MPC) is a non-profit and proprietary membership organization which
provides recreation and sports facilities to its proprietary members, their dependents, and guests.
MPCs Board of Directors decided to terminate the entire operations of its Food and Beverage (F&B) outlets (except
one Last Chukker) and award its operations to a qualified restaurant operator or caterer. Some of the reasons it gave
for the abolishment were that (1) the F&B operations has resulted in yearly losses for 6 out of 8 years in its operation, (2) cost
and loss-cutting measures, (3) to eliminate substantial losses.
Respondents Board approved the implementation of the retrenchment program of employees who are directly and
indirectly involved with the operations of the F & B outlets and authorized then General Manager Philippe D. Bartholomi to
pay the employees separation pay.
Respondent then sent termination notices to petitioner and to the affected employees as well as to the DOLE,
informing them of the retrenchment of 123 employees and the discontinuance of the F&B Operations effective March 25,
2002.
Unaware yet of the termination notice sent to them by MPC, the affected employees were surprised when they were
prevented from entering the Club premises as they reported for work on March 25, 2002. They later learned that the
F & B operations of respondent had been awarded to Makati Skyline, Inc. effective that day. Treating the incident as
respondents way of terminating union members under the pretense of retrenchment to prevent losses, petitioner filed a Step
II grievance and requested for an immediate meeting with the Management. Management refused and petitioner filed a Notice
of Strike. Petitioner however withdrew its notice eventually and resolved to exhaust all remedies first.
Later, on May 10, 2002, petitioner again filed a Notice of Strike, based on the same grounds, when it sensed the brewing
tension brought about by the CBA negotiation that was in the meantime taking place. However this was discontinued and
eventually the parties agreed to refer to the Voluntary Arbitrator (VA) the issue of retrenchment of 117 union
members, to determine whether the same is legal or not.
The VA dismissed petitioners complaint.
Issue: Whether the retrenchment was legal.
Held: YES. CLOSURE NOT RETRENCHMENT. It is apparent from the records that this case involves a closure of
business undertaking, not retrenchment. The legal requirements and consequences of these two authorized causes in the
termination of employment are discernible. As held in Alabang Country Club Inc. v. NLRC:
While retrenchment and closure of a business establishment or undertaking are often used
interchangeably and are interrelated, they are actually two separate and independent
authorized causes for termination of employment.
RETRENCHMENT is the reduction of personnel for the purpose of cutting down on

costs of operations in terms of salaries and wages resorted to by an employer because of
losses in operation of a business occasioned by lack of work and considerable reduction in
the volume of business.
CLOSURE OF A BUSINESS or UNDERTAKING due to business losses is the reversal of

fortune of the employer whereby there is a complete cessation of business operations
to prevent further financial drain upon an employer who cannot pay anymore his
employees since business has already stopped.
One of the prerogatives of management is the decision to close the entire establishment or
to close or abolish a department or section thereof for economic reasons, such as to
minimize expenses and reduce capitalization.
342 Roco 3B
While the Labor Code provides for the payment of separation package in case of
retrenchment to prevent losses, it does not obligate the employer for the payment thereof if
there is closure of business due to serious losses.
Likewise, the case of Eastridge Golf Club, Inc. v. Eastridge Golf Club, Inc., Labor-Union, Super stressed the differences:
RETRENCHMENT or lay-off is the termination of employment initiated by the employer,

through no fault of the employees and without prejudice to the latter, during periods
of business recession, industrial depression, or seasonal fluctuations, or during lulls
occasioned by lack of orders, shortage of materials, conversion of the plant for a new
production program or the introduction of new methods or more efficient machinery, or of
automation. It is an exercise of management prerogative which the Court upholds if
compliant with certain substantive and procedural requirements, namely:
1. That retrenchment is necessary to prevent losses and it is proven, by sufficient and

convincing evidence such as the employer's financial statements audited by an independent
and credible external auditor, that such losses are substantial and not merely flimsyand
actual or reasonably imminent; and that retrenchment is the only effective measure to
prevent such imminent losses;
2. That written notice is served on to the employees and the DOLE at least one (1)
month prior to the intended date of retrenchment; and
3. That the retrenched employees receive 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.
The employer must prove compliance with all the foregoing requirements. Failure to
prove the first requirement will render the retrenchment illegal and make the employer liable
for the reinstatement of its employees and payment of full backwages. However, were the
retrenchment undertaken by the employer is bona fide , the same will not be
invalidated by the latter's failure to serve prior notice on the employees and the
DOLE; the employer will only be liable in nominal damages, the reasonable rate of
which the Court En Banc has set at P50,000.00 for each employee.
CLOSURE OR CESSATION OF BUSINESS is the complete or partial cessation of the

operations and/or shut-down of the establishment of the employer. It is carried out to
either stave off the financial ruin or promote the business interest of the employer.
Unlike retrenchment, closure or cessation of business, as an authorized cause of termination

of employment, need not depend for validity on evidence of actual or imminent
reversal of the employer's fortune. Article 283 authorizes termination of employment
due to business closure, regardless of the underlying reasons and motivations
therefor, be it financial losses or not.
To be precise, closure or cessation of an employers business operations, whether in whole or in part, is governed by Article
283 of the Labor Code, as amended.
In Industrial Timber Corporation v. Ababon, the Court explained the above-quoted provision in this wise:
A reading of the foregoing law shows that a partial or total closure or cessation of
operations of establishment or undertaking may either be due to serious business
losses or financial reverses or otherwise. Under the FIRST KIND, the employer must
sufficiently and convincingly prove its allegation of substantial losses,while under the
343 Roco 3B
SECOND KIND, the employer can lawfully close shop anytime as long as cessation of or
withdrawal from business operations was bona fide in character and not impelled by a
motive to defeat or circumvent the tenurial rights of employees, and as long as he
pays his employees their termination pay in the amount corresponding to their length of
service. Just as no law forces anyone to go into business, no law can compel anybody
to continue the same. It would be stretching the intent and spirit of the law if a court
interferes with management's prerogative to close or cease its business operations just
because the business is not suffering from any loss or because of the desire to provide the
workers continued employment.
In sum, under Article 283 of the Labor Code, THREE REQUIREMENTS ARE NECESSARY
FOR A VALID CESSATION OF BUSINESS OPERATIONS: (a) service of a written notice to
the employees and to the DOLE at least one month before the intended date thereof; (b)
the cessation of business must be bona fide in character; and (c) payment to the
employees of termination pay amounting to one month pay or at least one-half month pay
for every year of service, whichever is higher.
The foregoing doctrines may be SUMMARIZED in wise:
1. Closure or cessation of operations of establishment or undertaking may either be partial or total.
2. Closure or cessation of operations of establishment or undertaking may or may not be due to serious
business losses or financial reverses. However, in both instances, proof must be shown that: (1) it was
done in good faith to advance the employer's interest and not for the purpose of defeating or
circumventing the rights of employees under the law or a valid agreement; and (2) a written notice
on the affected employees and the DOLE is served at least one month before the intended date of
termination of employment.
3. The employer can lawfully close shop even if not due to serious business losses or financial
reverses but SEPARATION PAY, which is equivalent to at least one month pay as provided for by Article
283 of the Labor Code, as amended, must be given to all the affected employees.
4. If the closure or cessation of operations of establishment or undertaking is due to serious business

losses or financial reverses, the employer must prove such allegation in order to avoid the
payment of separation pay. Otherwise, the affected employees are entitled to separation pay.
5. The burden of proving compliance with all the above-stated falls upon the employer.
There is no need to inquire on the financial condition of respondent MPC. An employer can lawfully close shop
anytime even if not due to serious business losses or financial reverses. When it decided to cease operating its F & B
Department and open the same to a concessionaire, respondent did not reduce the number of personnel assigned thereat;
instead, it terminated the employment of all personnel assigned at the department and those who are directly and indirectly
involved in its operations. The closure of the F & B Department was due to legitimate business considerations.
The characterization of the employee's service as no longer necessary or sustainable, and therefore, properly terminable, is an
exercise of business judgment on the part of the employer; the determination of the continuing necessity of a particular officer
or position in a business corporation is a management prerogative, and the courts will not interfere with the exercise of such
so long as no abuse of discretion or arbitrary or malicious action on the part of the employer is shown.
As recognized by both the VA and the CA, EVIDENT PROOFS OF RESPONDENTS GOOD FAITH to arrest the losses which
the F & B Department had been incurring since 1994 are: engagement of an independent consulting firm to conduct
manpower audit/organizational development; institution of cost-saving programs, termination of the services of
probationary employees, substantial reduction of a number of agency staff and personnel , and the retrenchment of
344 Roco 3B
eight (8) managers. After the effective date of the termination of employment relation, respondent even went on to aid the
displaced employees in finding gainful employment by soliciting the assistance of respondents members, Makati Skyline.
As a final note, even if the members of petitioner are not considered as illegally dismissed, they are entitled to separation pay
pursuant to Article 283 of the Labor Code, as amended. Per respondent's information, however, the separation packages of
all 117 union members were already paid during the pendency of the case.
214. Abbot Laboratories vs. Alcaraz, July 23, 2013

Facts: On June 27, 2004, Abbott caused the publication in a major broadsheet newspaper of its need for a Medical and
Regulatory Affairs Manager (Regulatory Affairs Manager) who would: (a) be responsible for drug safety surveillance
operations, staffing, and budget; (b) lead the development and implementation of standard operating procedures/policies for
drug safety surveillance and vigilance; and (c) act as the primary interface with internal and external customers regarding safety
operations and queries.
Pearlie Alcaraz, who was then a Regulatory Affairs and Information Manager at Aventis Pasteur, another pharmaceutical
company like Abbott, showed interest and submitted her application on October 4, 2004.
Alcaraz was formally offered the job in the Hospira Affiliate Local Surveillance Unit on probationary basis on Dec 2004 via e-
mail. On Feb 12, 2005, Alcaraz signed an employment contract which stated that the probationary period of 6 months would
begin from Feb. 15,2005 to August 15 2005.
During orientation, she was briefed about her duties and responsibilities one of which was to implement Abbotts Code of
Good Corporate Conduct (Code of Conduct), office policies on human resources and finance, and ensure that Abbott will
hire people who are fit in the organizational discipline. Moreover, she was required to use 2 ID cards: one to identify her as
Abbots employee and another, as Hospira employee.
On March 3, 2005, petitioner Misa, Abbotts HR Director, sent Alcaraz an e-mail which contained an explanation of the
procedure for evaluating the performance of probationary employees and further indicated that Abbott had only one
evaluation system for all of its employees. Alcaraz was also given copies of Abbotts Code of Conduct and Probationary
Performance Standards and Evaluation (PPSE) and Performance Excellence Orientation Modules (Performance Modules)
which she had to apply in line with her task of evaluating the Hospira ALSU staff.
ABBOTTS PPSE PROCEDURE mandates that the job performance of a probationary employee should be formally reviewed
and discussed with the employee at least twice: first on the third month and second on the fifth month from the date of
employment. The necessary Performance Improvement Plan should also be made during the third-month review in case of a
gap between the employees performance and the standards set. These performance standards should be discussed in detail
with the employee within the first two (2) weeks on the job. It was equally required that a signed copy of the PPSE form must
be submitted to Abbotts HRD and shall serve as documentation of the employees performance during his/her probationary
period. This shall form the basis for recommending the confirmation or termination of the probationary employment.
During the course of her employment, Alcaraz noticed that some of the staff had disciplinary problems. Thus, she would
reprimand them for their unprofessional behavior such as non-observance of the dress code, moonlighting, and disrespect of
Abbott officers. However, Alcarazs method of management was considered by Walsh to be too strict. Alcaraz approached
Misa to discuss these concerns and was told to lie low and let Walsh handle the matter. Misa even assured her that Abbotts
HRD would support her in all her management decisions.
On April 20, 2005, Alcaraz had a meeting with petitioner Cecille Terrible, Abbotts former HR Director, to discuss certain
issues regarding staff performance standards. In the course thereof, Alcaraz accidentally saw a printed copy of an e-mail sent
by Walsh to some staff members which essentially contained queries regarding the formers job performance. Alcaraz asked if
Walshs action was the normal process of evaluation. Terrible said that it was not.
On May 16, 2005, Alcaraz was called to a meeting with Walsh and Terrible where she was informed that she failed to meet
the regularization standards for the position of Regulatory Affairs Manager. Thereafter, Walsh and Terrible requested
Alcaraz to tender her resignation, else they be forced to terminate her services.
345 Roco 3B
On May 23, 2005, Walsh, Almazar, and Bernardo personally handed to Alcaraz a letter stating that her services had been
terminated effective May 19, 2005. The letter detailed the reasons for Alcarazs termination particularly, that Alcaraz: (a)
did not manage her time effectively; (b) failed to gain the trust of her staff and to build an effective rapport with them; (c) failed
to train her staff effectively; and (d) was not able to obtain the knowledge and ability to make sound judgments on case
processing and article review which were necessary for the proper performance of her duties.
As such, she filed a complaint for illegal dismissal and damages and claimed that she should have been already considered as a
regular and not a probationary employee.
LA dismissed the complaint. NLRC set aside the LA ruling. CA affirmed.
Issues: Whether Alcaraz was sufficiently informed of the reasonable standards to qualify her as a regular employee.
Held: YES. VALID DISMISSAL but DEFECT IN PROCEDURAL DUE PROCESS. A probationary employee, like a
regular employee, enjoys security of tenure. However, in cases of probationary employment, aside from just or authorized
causes of termination, an additional ground is provided under Article 295 i.e., the probationary employee may also be
terminated for failure to qualify as a regular employee in accordance with the reasonable standards made known by the
employer to the employee at the time of the engagement. Thus, the services of an employee who has been engaged on
probationary basis may be terminated for any of the following: (a) a just or (b) an authorized cause; and (c) when he fails to
qualify as a regular employee in accordance with reasonable standards prescribed by the employer.
In other words, the employer is made to comply with 2 REQUIREMENTS WHEN DEALING WITH A PROBATIONARY
EMPLOYEE: first, the employer must communicate the regularization standards to the probationary employee; and second,
the employer must make such communication at the time of the probationary employees engagement. If the employer fails to
comply with either, the employee is deemed as a regular and not a probationary employee.
Keeping with these rules, an employer is deemed to have made known the standards that would qualify a probationary
employee to be a regular employee when it has exerted reasonable efforts to apprise the employee of what he is expected to do
or accomplish during the trial period of probation. This goes without saying that the employee is sufficiently made aware of
his probationary status as well as the length of time of the probation.
The exception to the foregoing is when the job is self-descriptive in nature, for instance, in the case of maids, cooks,
drivers, or messengers. Also, in Aberdeen Court, Inc. v. Agustin, it has been held that the rule on notifying a probationary
employee of the standards of regularization should not be used to exculpate an employee who acts in a manner contrary to
basic knowledge and common sense in regard to which there is no need to spell out a policy or standard to be met. In the
same light, an employees failure to perform the duties and responsibilities which have been clearly made known to him
constitutes a justifiable basis for a probationary employees nonregularization.
In this case, Abbot contends that Alcaraz was terminated because she failed to qualify as a regular employee according to
Abbotts standards which were made known to her at the time of her engagement . Contrarily, Alcaraz claims that
Abbott never apprised her of these standards and thus, maintains that she is a regular and not a mere probationary employee.
The Court finds petitioners assertions to be well-taken.
Examination of the records reveals that Abbott had indeed complied with the above-stated requirements. This conclusion is
largely impelled by the fact that Abbott clearly conveyed to Alcaraz her duties and responsibilities prior to, during the time of
her engagement, and the incipient stages of her employment. On this score, the Court finds it apt to detail not only the
incidents which point out to the efforts made by Abbott but also those circumstances which would show that Alcaraz was
well-apprised of her employers expectations that would, in turn, determine her regularization:
(a) On June 27, 2004, Abbott caused the publication in a major broadsheet newspaper of its need for a Regulatory Affairs
Manager, indicating therein the job description for as well as the duties and responsibilities attendant to the aforesaid
position; this prompted Alcaraz to submit her application to Abbott on October 4, 2004;
(b) In Abbotts December 7, 2004 offer sheet, it was stated that Alcaraz was to be employed on a probationary status;
346 Roco 3B
(c) On February 12, 2005, Alcaraz signed an employment contract which specifically stated, inter alia, that she was to be
placed on probation for a period of six (6) months beginning February 15, 2005 to August 14, 2005;
(d) On the day Alcaraz accepted Abbotts employment offer, Bernardo sent her copies of Abbotts organizational
structure and her job description through e-mail;
(e) Alcaraz was made to undergo a pre-employment orientation where Almazar informed her that she had to implement
Abbotts Code of Conduct and office policies on human resources and finance and that she would be reporting
directly to Walsh;
(f) Alcaraz was also required to undergo a training program as part of her orientation;
(g) Alcaraz received copies of Abbotts Code of Conduct and Performance Modules from Misa who explained to her the
procedure for evaluating the performance of probationary employees; she was further notified that Abbott had only
one evaluation system for all of its employees; and
(h) Moreover, Alcaraz had previously worked for another pharmaceutical company and had admitted to have an
extensive training and background to acquire the necessary skills for her job.
Verily, basic knowledge and common sense dictate that the adequate performance of ones duties is, by and of itself, an
inherent and implied standard for a probationary employee to be regularized; such is a regularization standard
which need not be literally spelled out or mapped into technical indicators in every case . In this regard, it must be
observed that the assessment of adequate duty performance is in the nature of a management prerogative which when
reasonably exercised as Abbott did in this case should be respected. This is especially true of a managerial employee
like Alcaraz who was tasked with the vital responsibility of handling the personnel and important matters of her
department.
In fine, the Court rules that Alcarazs status as a probationary employee and her consequent dismissal must stand. To
elucidate, records show that the NLRC based its decision on the premise that Alcarazs receipt of her job description and
Abbotts Code of Conduct and Performance Modules was not equivalent to being actually informed of the performance
standards upon which she should have been evaluated on. It, however, overlooked the legal implication of the other
attendant circumstances as detailed herein which should have warranted a contrary finding that Alcaraz was indeed a
probationary and not a regular employee more particularly the fact that she was well-aware of her duties and responsibilities
and that her failure to adequately perform the same would lead to her non-regularization and eventually, her termination.
PROCEDURE FOR TERMINATION OF PROBATIONARY EMPLOYEE

A different procedure is applied when terminating a probationary employee; the usual two-notice rule does not govern.
Section 2, Rule I, Book VI of the Implementing Rules of the Labor Code states that if the termination is brought about by
the failure of an employee to meet the standards of the employer in case of probationary employment, it shall be
sufficient that a written notice is served the employee, within a reasonable time from the effective date of termination.
As the records show, Alcaraz's dismissal was effected through a letter dated May 19, 2005 which she received on May 23, 2005
and again on May 27, 2005. Stated therein were the reasons for her termination, i.e., that after proper evaluation, Abbott
determined that she failed to meet the reasonable standards for her regularization considering her lack of time and people
management and decision-making skills, which are necessary in the performance of her functions as Regulatory Affairs
Manager. Undeniably, this written notice sufficiently meets the criteria set forth above, thereby legitimizing the
cause and manner of Alcarazs dismissal as a probationary employee under the parameters set by the Labor Code .
VIOLATION OF COMPANY POLICY & PROCEDURE

Despite the existence of a sufficient ground to terminate Alcarazs employment and Abbotts compliance with the Labor Code
termination procedure, it is readily apparent that Abbott breached its contractual obligation to Alcaraz when it failed to abide
by its own procedure in evaluating the performance of a probationary employee .
Jurisprudence says that once an employer establishes an express personnel policy and the employee continues to work
while the policy remains in effect, the policy is deemed an implied contract for so long as it remains in effect. If the
employer unilaterally changes the policy, the terms of the implied contract are also thereby changed.
Records show that Abbotts PPSE procedure mandates, inter alia, that the job performance of a probationary employee should
be formally reviewed and discussed with the employee at least twice: first on the third month and second on the fifth month
347 Roco 3B
from the date of employment. Abbott is also required to come up with a Performance Improvement Plan during the third
month review to bridge the gap between the employees performance and the standards set, if any.69 In addition, a signed
copy of the
In this case, it is apparent that Abbott failed to follow the above-stated procedure in evaluating Alcaraz. For one, there
lies a hiatus of evidence that a signed copy of Alcarazs PPSE form was submitted to the HRD. It was not even shown that a
PPSE form was completed to formally assess her performance . Neither was the performance evaluation discussed
with her during the third and fifth months of her employment . Nor did Abbott come up with the necessary Performance
Improvement Plan to properly gauge Alcarazs performance with the set company standards.
PPSE form should be submitted to Abbotts HRD as the same would serve as basis for recommending the confirmation or
termination of the probationary employment.
In this case, it is apparent that Abbott failed to follow the above-stated procedure in evaluating Alcaraz. For one, there
lies a hiatus of evidence that a signed copy of Alcarazs PPSE form was submitted to the HRD. It was not even shown that a
PPSE form was completed to formally assess her performance. Neither was the performance evaluation discussed with her
during the third and fifth months of her employment. Nor did Abbott come up with the necessary Performance Improvement
Plan to properly gauge Alcarazs performance with the set company standards. While it is Abbotts management prerogative to
promulgate its own company rules and even subsequently amend them, this right equally demands that when it does create its
own policies and thereafter notify its employee of the same, it accords upon itself the obligation to faithfully implement them.
Indeed, a contrary interpretation would entail a disharmonious relationship in the work place for the laborer should never be
mired by the uncertainty of flimsy rules in which the latters labor rights and duties would, to some extent, depend.
In this light, while there lies due cause to terminate Alcarazs probationary employment for her failure to meet the standards
required for her regularization, and while it must be further pointed out that Abbott had satisfied its statutory duty to serve a
written notice of termination, the fact that it violated its own company procedure renders the termination of Alcarazs
employment procedurally infirm, warranting the payment of nominal damages. A further exposition is apropos. Case law has
settled that an employer who terminates an employee for a valid cause but does so through invalid procedure is liable to pay
the latter nominal damages.
Corporate officers were not held liable. Gets niyo na yan. Malice malice piercing the veil bleh bleh bleh.
215. Permrex vs. NLRC, 323 SCRA 121

Facts: Permex Producer and Exporter Corporation (hereinafter Permex), is a company engaged in the business of canning
tuna and sardines, both for export and domestic consumption. Its office and factory are both located in Zamboanga
City. Co-petitioners Edgar Lim and Jean Punzalan are its Manager and Personnel Manager, respectively.
Private respondent Emmanuel Filoteo, an employee of Permex, was terminated by petitioners allegedly for flagrantly
and deliberately violating company rules and regulations. More specifically, he was dismissed allegedly for falsifying
his daily time record.
The pertinent facts, as found by both the NLRC and the Labor Arbiter, are as follows:
Permex initially hired Filoteo on October 1, 1990, as a mechanic. Eventually, Filoteo was promoted to water treatment
operator, a position he held until his termination on August 29, 1994. As water treatment operator, Filoteo did not have a
fixed working schedule. His hours of work were dependent upon the company's shifting production schedules.
Ncmmis
On July 31, 1994, Filoteo was scheduled for the night shift from 7:00 p.m. to 7:00 a.m. the following day. That night he
reported for work together with his co-workers, Felix Pelayo and Manuel Manzan. They logged in at the main gate and
guardhouse of the petitioner's factory.
Filoteo entered his time-in at 8:45 p.m. and since he was scheduled to work until 7:00 a.m. the next day , he wrote 7:00
a.m. in his scheduled time-out. This practice of indicating the time out at the moment they time in, was customarily
done by most workers for convenience and practicality since at the end of their work shift, they were often tired and
348 Roco 3B
in a hurry to catch the available service vehicle for their trip home , so they often forgot to log out. There were times also
when the Log Book was brought to the Office of the Personnel Manager and they could not enter their time out . The
company had tolerated the practice.
On the evening of July 31,1994, at around 9:20 p.m., Filoteo, together with Pelayo, went to see the Assistant Production
Manager to inquire if "butchering" of fish would be done that evening so they could start operating the boiler. They were
advised to wait from 9:30 p.m. to 10:00 p.m. for confirmation. Scn
cm
At or about 10:00 p.m., Filoteo and Pelayo went back to the Assistant Production Manager's office. There they were informed
that there would be no "butchering" of tuna that night. Filoteo then sought permission to go home, which was granted.
Filoteo then hurriedly got his things and dashed off to the exit gate to catch the service jeep provided by Permex.
The next day, August 1, 1994, Filoteo reported for work as usual. He then remembered that he had to make a re-entry in
his daily time record for the previous day. He proceeded to the Office of the Personnel Manager to retime his DTR entry.
Later, he received a memorandum from the Assistant Personnel Officer asking him to explain, in writing, the entry he
made in his DTR. Filoteo complied and submitted his written explanation that same evening. Sdaam
On August 8, 1994, Filoteo was suspended indefinitely. His explanation was found unsatisfactory. He was dismissed from
employment on August 23, 1994.
The dismissal arose from Filoteo's alleged violation of Article 2 of the company rules and regulations. The offense charged
was entering in his DTR that he had worked from 8:45 p.m. of July 31, 1994 to 7:00 a.m. of August 1,1994, when in
fact he had worked only up to 10:00 p.m.
On September 5, 1994, Filoteo filed a complaint for illegal dismissal with claims for separation pay, damages, and attorney's
fees with the Labor Arbiter.
On June 9, 1995, the Labor Arbiter dismissed the complaint for lack of merit. Filoteo appealed to the NLRC. Finding merit
therein, the Commission's Fifth Division promulgated its resolution, reversing and setting aside the Labor Arbiter's
decision.
Issue: Whether Filoteo was illegally dismissed.
Held: YES. ILLEGALLY DISMISSED. Whether Filoteo was illegally dismissed or not is governed by Article 282 of the
Labor Code. To constitute a valid dismissal from employment, two requisites must concur:
(1) the dismissal must be for any of the causes provided for in Article 282 of the Labor Code; and
(2) the employee must be afforded an opportunity to be heard and defend himself.
This means that an employer can terminate the services of an employee for just and valid causes, which must be
supported by clear and convincing evidence. It also means that, procedurally, the employee must be given notice, with
adequate opportunity to be heard, before he is notified of his actual dismissal for cause.
In the present case, the NLRC found that the 2-fold requirements for a valid dismissal were not satisfied by the
petitioners. Sc
First, petitioner's charge of serious misconduct of falsification or deliberate misrepresentation was not supported by
the evidence on the record contrary to Art. 277 of the Labor Code which provides that:
Art. 277. Miscellaneous provisions. -

xxx
(b) 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...The burden of proving
that the termination was for a valid or authorized cause shall rest on the employer.
349 Roco 3B
Second, the private respondent was not afforded an opportunity to be heard. As found by the NLRC:
Calrsc
Aside from the fact that there was no valid and justifiable cause for his outright
dismissal from the service, complainant's dismissal as correctly held by the
Labor Arbiter was tainted with arbitrariness for failure of respondent
company (petitioner herein) to observe procedural due process in effecting his
dismissal. Admittedly, complainant was suspended indefinitely on August 8, 1994
and subsequently dismissed on August 23, 1994 without any formal
investigation to enable complainant to defend himself.
Such dismissal, in our view, was too harsh a penalty for an unintentional infraction, not to mention that it was his first
offense committed without malice, and committed also by others who were not equally penalized.
It is clear that the alleged false entry in private respondent's DTR was actually the result of having logged his scheduled time-
out in advance on July 31, 1994. But it appears that when he timed in, he had no idea that his work schedule (night
shift) would be cancelled. When it was confirmed at 10:00 p.m. that there was no "butchering" of tuna to be done, those
who reported for work were allowed to go home, including private respondent. In fact, Filoteo even obtained permission to
leave from the Assistant Production Manager.
Considering the factory practice which management tolerated, we are persuaded that Filoteo, in his rush to catch the
service vehicle, merely forgot to correct his initial time-out entry. Nothing is shown to prove he deliberately falsified
his daily time record to deceive the company . The NLRC found that even management's own evidence reflected that a
certain Felix Pelayo, a co-worker of private respondent, was also allowed to go home that night and like private
respondent logged in advance 7:00 a.m. as his time-out. This supports Filoteo's claim that it was common practice among
night-shift workers to log in their usual time-out in advance in the daily time record.
Moreover, as early as Tide Water Associated Oil Co. v. Victory Employees and Laborers Association, 85 Phil. 166 (1949), we ruled that,
where a violation of company policy or breach of company rules and regulations was found to have been
TOLERATED BY MANAGEMENT, then the same could not serve as a basis for termination.
216. Santos vs. NLRC, 287 SCRA 117

Facts: Petitioner, a married man, was employed as a teacher by the private respondent Hagonoy Institute, Inc. from
June 1980 until his dismissal on June 1, 1991. Likewise working as a teacher was Mrs. Arlene T. Martin, also married. In
the course of their employment, the couple fell in love. Concerned about the rumors, private respondent advised Mrs.
Martin to take a leave of absence which she ignored. On November 9, 1990, she was barred from reporting for work
and was not allowed to enter the private respondents premises, effectively dismissing her from her employment. Mrs.
Martin filed a case for illegal dismissal.
Labor Arbiter Ariel Santos dismissed the complaint. However, considering the length of service of complainant and for
humanitarian reason she would be given financial assistance based on onemonth pay on every year of service.
NLRC reversed (so Mrs Martin was illegally dismissed) Ordering respondent to pay complainant her backwages and
separation pay. The reversal was anchored on the failure by the private respondent, in dismissing Mrs. Martin, to accord her
the necessary procedural due process.
Hagonoy Institute set up a committee to investigate the veracity of the rumors. After 2 weeks of inquiry, the committee
rendered its report confirming the illicit relationship between the petitioner and Mrs. Martin. In view of the
committees finding, petitioner was charged administratively for immorality and was required to present his side on
the controversy. Five months later, petitioner was informed by the private respondents Board of Directors of his
dismissal
Petitioner filed a complaint for illegal dismissal. After a full blown trial was conducted, Labor Arbiter Quintin C.
Mendoza dismissed petitioners complaint, but awarding monetary sums as financial assistance.
Petitioner filed an appeal before the NLRC. Dismissed. Motion for reconsideration. Denied. Thus, this petition for certiorari.
350 Roco 3B
Issue: Whether the illicit relationship between Santos and Martin could be considered immoral as to constitute just cause to
terminate an employee under the Labor Code.
Held: YES. To constitute a valid dismissal, two requisites must concur: (a) the dismissal must be for any of the causes
expressed in Art. 282 of the Labor Code, and (b) the employee must be accorded due process, basic of which are the
opportunity to be heard and defend himself.
Under Article 282, the ff are just causes to terminate an employee:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in
connection with his work; (b) Gross and habitual neglect by the employee of his duties; (c) Fraud or willful breach by the
employee of the trust reposed in him by his employer or duly authorized representative; (d) Commission of a crime or offense
by the employee against the person of his employer or any immediate member of his family or his duly authorize
representative; and (e) Other causes analogous
Section 9410 of the Manual of Regulations for Private Schools provides:

Section 94. Causes of Terminating Employment.In addition to the just cases enumerated in the Labor Code, the
employment of school personnels, including faculty, may be terminated for any of the following causes: xxx xxx xxx E.
Disgraceful or immoral conduct.
Private respondent, in justifying the termination contends that being a teacher, he must live up to the high moral
standards required of his position. Its purpose in dismissing the petitioner was to preserve the respect of the community
towards the teachers and to strengthen the educational system. Petitioner merely argues that the alleged illicit relationship
was not substantially proven.
TO CONSTITUTE IMMORALITY, the circumstances of each particular case must be holistically considered and
evaluated in light of the prevailing norms of conduct and applicable laws. American jurisprudence has defined IMMORALITY
as a course of conduct which offends the morals of the community and is a bad example to the youth whose ideals a
teacher is supposed to foster and to elevate, the same including sexual misconduct.
In petitioners case, the gravity and seriousness of the charges against him stem from his being a married man and at
the same time a teacher. Having an extra-marital affair is an affront to the sanctity of marriage . This is rooted in the
fact that both our Constitution and our laws cherish the validity of marriage and unity of the family. As a teacher, petitioner
serves as an example to his pupils, especially during their formative years and stands in loco parentis to them.
Teachers are given substitute and special parental authority under our laws . Teachers must adhere to the exacting
standards of morality and decency.
A teacher, both in his official and personal conduct, must display exemplary behavior. He must freely and willingly accept
restrictions on his conduct. The personal behavior of teachers, in and outside the classroom, must be beyond reproach.
Teachers must abide by a standard of personal conduct which not only proscribes the commission of immoral acts, but also
prohibits behavior creating a suspicion of immorality because of the harmful impression it might have on the students. They
must observe a high standard of integrity and honesty. When a teacher engages in extra-marital relationship, especially
when the parties are both married, such behavior amounts to immorality, justifying his termination.
Having concluded that immorality is a just cause for dismissing petitioner, it is imperative that the private respondent prove
the same. Since the burden of proof rests upon the employer to show that the dismissal was for a just and valid cause; the
same must be supported by substantial evidence. The question of immorality by the petitioner is factual in nature.
Factual findings by the NLRC, particularly when it coincides with those by the Labor Arbiter, are accorded respect even
finality when supported by substantial evidence.
We concur with the NLRCs finding that petitioner indeed entered into an illicit relationship with his coteacher.
This fact was attested to by the testimonies of 9 witnesses (a fourth year student, a security guard, a janitor and six
351 Roco 3B
co-teachers) which petitioner failed to rebut. In fact, the petitioners only recourse was to deny and insinuate that these
witnesses were coerced. It is not enough for petitioner to simply cast doubt on the motives of the witnesses ; he must
present countervailing evidence to prove that no such affair took place. Denial, if unsubstantiated by clear and
convincing evidence, is a negative and selfserving evidence which has no weight in law and cannot be given greater evidentiary
value over the testimony of credible witnesses. Thus, since there is nothing to indicate that the witnesses were moved by
dubious or improper motives to testify falsely against the petitioner, their testimonies are hereby accorded full faith and credit.
Petitioner cannot take comfort from the letter signed by 28 of his co-teachers, expressing their unequivocal support
for Mrs. Arlene Martin. The said letter did not in any way absolve Mrs. Martin from any wrongdoing . It merely
affirmed the fact that when she was forcibly asked to take a leave of absence, the same was done in a precipitous manner,
without the benefit of due process. The expression of support was personal to Mrs. Martin, and the same should not
redound to the benefit of the petitioner . Ff petitioner really had the support of his peers, then it should have been easy for
him to obtain a similar letter. However, not only did he not get such support, but six of his co-teachers even testified against
him
Petitioner cannot invoke in his favor the ruling in the Arlene Martin case, wherein the NLRC ruled that her dismissal
was illegal. The reason for declaring Martins dismissal as illegal was the failure by the private respondent to accord her
the required due process.
IN THE CASE AT BAR, the complainant was amply afforded the due process requirements of law. He was dismissed only
on June 1, 1991 after an exhaustive investigation. A committee was formed to conduct an inquiry. An administrative charge
for immorality was filed against him. He was even required to testify in said case . He was given the opportunity to answer
said accusation. He was in fact present during the hearing
Petitioners dismissal was for a just and valid cause, the grant of financial assistance by the NLRC is without any factual
and legal basis. In PLDT v. NLRC, separation pay shall be as a measure of social justice only in these instances
where the employee is validly dismissed for cause other than serious misconduct or those reflecting his moral
character. Where the reason for the valid dismissal is, for example, habitual intoxication or an offense involving moral
turpitude, like theft or illicit sexual relationship with a fellow worker, the employer may not be required to give the dismissed
employee separation pay, or financial assistance, or whatever other name it is called, on the ground of social justice.
217. Villamor Golf Club vs. Denid, October 4, 2005

Facts: In September 1975, Rodolfo F. Pehid was employed by the Villamor Golf Club as an attendant in the mens
locker room, and, thereafter, he became the Supervisor-in-Charge. His subordinates included Juanito Superal, Jr., Patricio
Parilla, Ricardo Mendoza, Cesar Velasquez, Vicente Casabon, Pepito Buenaventura and Carlito Modelo.
In May 1998, the aforenamed employees agreed to establish a common fund from the tips they received from the
customers, guests and members of the club for their mutual needs and benefits. Each member was to contribute the
amount of P100.00 daily. By October 1998, the contributions of the employees had reached the aggregate amount of
P17,990.00 based on the logbook maintained in the locker room. This agreement, however, was not known to the VGC
management.
An audit of the Locker Room Section of the golf club was conducted on February 7, 1999. On February 19, 1999, an
additional Audit Report was submitted by Ludy Capuyan, the audit clerk, to the Administrative Department of the club
stating, among others, that based on the information relayed to her, there was an undeclared and unrecorded aggregate
amount of P17,990.00 for the fund during the period of May 1998 to October 1998. Further, not one in the said section
admitted custody of such amount and there was no record that the money had been distributed among those
employed in the locker room. In said report, Capuyan recommended that an investigation be conducted to determine the
whereabouts of said amount and who was accountable therefor.
In the meantime, an administrative complaint was filed by Juanito Superal, Jr., Patricio Parilla, Ricardo Mendoza, Cesar
Velasquez, and Vicente Casabon charging Pehid with misappropriating the P17,990.00.
352 Roco 3B
An investigation of the matter was conducted by the Head of the Security Department, who then submitted a Report dated
May 1999 with the following recommendations:
10. Mr. Rodolfo Pehid should produce the common fund amounting allegedly to
P17,990.00.
11. If unable to produce the money, a case of Swindling (ESTAFA) be filed against
him by the locker room employees.
12. Separation from the service if found guilty of the charge by an administrative body
convened by the VGC.
The Legal Officer of the VGC made a similar recommendation. In a Letter dated May
1999, Col. Ruben Estepa, the Head of the Administrative Department, directed Pehid to submit his explanation on the
said complaint and the reason why he should not be dismissed from the club for violation of VGC Rules of Conduct No.
IV-E(d).
In May 1999, a certain Mil Raymundo, a VGC member, filed a letter-complaint against Pehid for misappropriating
P3,000.00 from the common fund.
On the same day, Pehid submitted his verified Explanation to Col. Estepa denying the charges against him and
alleging that it was Pepito Buenaventura who had custody of the fund . He also alleged that the charges filed against him
stemmed from his strict management of the mens locker room and that his co-employees wanted to install Carlito Modelo as
the person-in-charge in his stead. Pehid demanded that a formal investigation of the matter be conducted.
After the requisite formal investigation by the Administrative Board of Inquiry, Pehid received an Office Order from the
General Manager of the club informing him that his employment was terminated effective July 1999. Based on its
findings, Pehid committed gross misconduct in the performance of his duties in violation of Paragraph IV-E(d) of the
VGC Rules and Regulations.6 He was also informed that he committed acts of dishonesty which caused and tend to cause
prejudice to the club for misappropriating the common fund of P17,990.00 for his personal benefit.
Pehid filed a complaint for illegal dismissal, unfair labor practice, separation pay/retirement benefits, damages and
attorneys fees against petitioners VGC and/or Brig. Gen. Filamer Artajo (Ret. AFP), Col. Ruben Estepa, Lt. Milagros
Aguillon, and the VGC Administrative Board of Inquiry.
Pehid averred that he was dismissed without just cause and due process of law; that there was no basis or evidence to show that he
had custody of the common fund which was used for his own benefit; that he incurred the ire of his superiors for testifying in support
of Asterio Tansiongco, a former Director of Personnel who was dismissed by VGC ; and that one of Tansiongcos accusers was
Dario Velasquez, the brother of Cesar Velasquez, one of the locker boys who complained against him.
The petitioners alleged that when confronted with the letter-complaint against him, Pehid admitted that his accountability arose from the proceeds of
the sale of the golf club and golf shares entrusted to him, which he used for his personal needs without the knowledge of the persons concerned.
Paragraph IV-E(a) and (d) of the VGC Rules and Regulation cited by the petitioners reads:
E. Dishonesty
1. The following shall constitute violation of this section.
a) Misappropriation or malversation of Club funds.
d) All other acts of dishonesty which cause or tend to cause prejudice to Villamor Golf Club.
The CA ruled that the petitioners cannot rely on the aforequoted rule, thus:
353 Roco 3B
VGC does not only cater its golf services to its club members who are purely officers of the Armed Forces of
the Philippines.
This is belied by no less than the allegations contained in the respondents REPLY TO THE POSITION
PAPER OF THE COMPLAINANT: the membership of VGC is categorized as follows: a) Service member; b)
Special members; c) Associate member; and d) Honorary member.
Under the categories of special member, honorary member and partly an associate member, they are not
officers of the Armed Forces of the Philippines. In fact, even golfers who are not within the category of the
memberships specified above, could make use of the course and the facilities of the club as long as they pay the
necessary fees. Secondly, the golfers, be they members of the respondent VGC or simply walk-in paying golfers
are not the employers of the personnel of respondent VGC; and lastly, in no uncertain terms that the personnel
of respondent VGC are members of the Club.
Therefore, the funds alleged to have been embezzled by the petitioner, belonged to the personnel of
respondent VGC and not to respondent VGC. In fact, the latter had not sanctioned the purpose upon which
the said funds were established.
Issue: Whether he was illegally dismissed.
Held: YES. We adhere to the LAs disquisition ratiocinated in this wise:
In the case at bench, the voluntary contribution by the locker personnel amongst
themselves to a mutual fund for their own personal benefit in times of need is not in
any way connected with the work of the locker boys and the complainant. If ever
there was misappropriation or loss of the said mutual fund, the respondent will not
and cannot be in any way tend or cause to prejudice the club. Such mutual fund is a
separate transaction among the employees and is not in any way connected with the
employees work. Thus, if a co-employee A owes employee B P100,000.00 and the
former absconds with the money, the employer cannot terminate the employment of
employee A for dishonesty and/or serious misconduct since the same was not committed
in connection with the employees work.
Under the afore-quoted VGC rule, the dishonesty of an employee to be a valid cause for dismissal must relate to or
involve the misappropriation or malversation of the club funds, or cause or tend to cause prejudice to VGC. The
substantial evidence on record indicates that the P17,990.00, which was accumulated from a portion of the tips given by the
golfers from May 1998 to October 1998 and was allegedly misappropriated by the respondent as the purported custodian
thereof, did not belong to VGC but to the forced savings of its locker room personnel . The truth is, the separate
affidavits of Pepito Buenaventura, Juanito Superal, Jr., Ricardo Mendoza, Cesar Velasquez, and Vicente Casabon, as well as the
allegations in the petitioners Position Paper, show that even the VGC management did not know about the mutual fund
or sanctioned its existence. Hence, the claim that the petitioners interest was prejudiced has no factual basis.
Company policies and regulations are, unless shown to be grossly oppressive or contrary to law , generally valid and
binding and must be complied with by the parties unless finally revised or amended, unilaterally or preferably
through negotiation. However, while an employee may be validly dismissed for violation of a reasonable rule or regulation
adopted for the conduct of the companys business, an act allegedly in breach thereof must clearly and convincingly fall
within the express intendment of such order .
Neither may the petitioners rely on Article 282 of the Labor Code.
As the CA succinctly ruled:
Based on the grounds of termination provided under Article 282 of the Labor Code and the
VGC Rules and Regulations, the common denominator thereof to constitute gross
354 Roco 3B
misconduct as a ground for a valid termination of the employee, is that it is

committed in connection with the latters work or employment . In the instant case, as
previously pointed out, the alleged petitioners misappropriation or malversation was
committed, assuming it to be true, against the common funds of the Locker Room
personnel, which did not belong nor sanctioned by respondent VGC. A fortiori, respondent
VGC was not prejudiced or damaged by the loss or misappropriation thereof.
Undoubtedly, the parties who were prejudiced or damaged by the alleged embezzlement,
were locker room personnel, who may ventilate any proper civil or criminal action to
whomsoever responsible therefor.
SERIOUS MISCONDUCT as a valid cause for the dismissal of an employee is defined as improper or wrong conduct; 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. To be serious within the meaning and
intendment of the law, the misconduct must be of such grave and aggravated character and not merely trivial or unimportant.
However serious such misconduct, it must, nevertheless, be in connection with the employees work to constitute just
cause for his separation. The act complained of must be related to the performance of the employees duties such as would
show him to be unfit to continue working for the employer.
218. Heavy Lift Manila vs. CA, October 20, 2005

Facts: On 23 February 1999, Heavylift, a maritime agency, sent through Evangelio, its Administrative and Finance Manager,
a letter to Dottie Galay, an Insurance and Provisions Assistant, concerning the latters low performance rating and the
negative feedback regarding her work attitude. She was relieved of all functions other than the development of the new
Access program.
On 16 August 1999, she was terminated for loss of confidence; hence, she filed a complaint for illegal dismissal and
nonpayment of SIL and 13th month pay.
Petitioners posited that she had an attitude problem which affected efficiency and productivity, but the LA found that
she was illegally dismissed for failure to prove any violation of any regulation , as well as failure to give proper notice.
The NLRC affirmed. The CA dismissed petitioners action for certiorari on procedural grounds. (failure to state full names and
addresses; attach copies of pleadings and supporting docs; verification; certification against forum-shopping) An MR was also denied; hence, the
present recourse.
Issue: Whether attitude problem is a valid ground for termination.
Held: ILLEGAL DISMISSAL. Attitude problem is a valid ground, BUT THIS WAS NOT PROVEN. Notice requirement
not complied with. Awards proper.
WAS THERE JUST CAUSE IN THE TERMINATION OF GALAY?

Petitioners assert that it terminated Galay because she had an attitude problem. This situation, according to petitioners, is
analogous to loss of trust and confidence. They aver that respondent did not deny the strained and irreconcilable
relationship between them, in effect, admitting the same. Further, petitioners aver that having lost their trust and confidence
on Galay, they could no longer make her in-charge of the confidential Crew Information System which accounts for
the personnel, management and professional records of all the employees of and seamen connected with the
company. Lastly, petitioners maintain that because of Galays attitude, the companys work atmosphere had become
very strained and had gravely affected the workers and their outputs. Galays dismissal, according to petitioners, was
merely an act of self-preservation.
Petitioners explained that they sent Galay a letter of notice dated February 23, 1999, apprising her of her low performance
and her attitude problem, before the letter of her termination dated August 16, 1999. Petitioners claim that the company
waited for 6 months, to give Galay a chance to undergo counseling before dismissing her from the service.
Galay counters that petitioners failed to show a just and valid cause for her termination, and that letters of notice and
termination did not comply with the twin requirement of notice and hearing. Galay argues that the letter dated February 23,
355 Roco 3B
1999 neither informed her of her infraction of any company rule that warrants disciplinary action; nor required her to submit
an explanation.
An employee who cannot get along with his co-employees is detrimental to the company for he can upset and strain
the working environment. Without the necessary teamwork and synergy, the organization cannot function well. Thus,
management has the prerogative to take the necessary action to correct the situation and protect its organization .
When personal differences between employees and management affect the work environment, the peace of the company is
affected. Thus, an employees attitude problem is a valid ground for his termination. It is a situation analogous to loss
of trust and confidence that must be duly proved by the employer. Similarly, compliance with the twin requirement of
notice and hearing must also be proven by the employer.
However, we are not convinced that in the present case, petitioners have shown sufficiently clear and convincing
evidence to justify Galays termination. Though they are correct in saying that in this case, proof beyond reasonable
doubt is not required, still there MUST BE SUBSTANTIAL EVIDENCE to support the termination on the ground of attitude.
The mere mention of negative feedback from her team members, and the letter dated February 23, 1999, are not proof
of her attitude problem.
Likewise, her failure to refute petitioners allegations of her negative attitude DOES NOT AMOUNT TO ADMISSION.
Technical rules of procedure are not binding in labor cases. Besides, the burden of proof is not on the employee but on
the employer who must affirmatively show adequate evidence that the dismissal was for justifiable cause.
In our view, neither does the February 23, 1999 letter constitute the required notice. The letter did not inform her of
the specific acts complained of and their corresponding penalty . The law requires the employer to give the worker to be
dismissed two written notices before terminating his employment, namely, (1) a notice which apprises the employee of the
particular acts or omissions for which his dismissal is sought; and (2) the subsequent notice which informs the employee of the
employers decision to dismiss him. Additionally, the letter never gave respondent Galay an opportunity to explain herself,
hence denying her due process.
In sum, we find that Galay was illegally dismissed, because petitioners failed to show adequately that a valid cause for
terminating respondent exists, AND because petitioners failed to comply with the twin requirement of notice and
hearing.
Apropos the award of service incentive pay and 13th month pay, we find that they were properly prayed for by Galay.
These were subsumed in the complaint and under the position papers general prayer of such other relief as are just and
equitable under the law. Petitioners failed to present evidence that these benefits were already paid. Moreover, this
issue involves a question of fact which is not proper in a petition for certiorari and the determinations of the Labor Arbiter
and the NLRC are afforded great weight and respect by the courts on these matters, when these findings are supported by
substantial evidence, and devoid of any unfairness or arbitrariness. Hence, their findings must be sustained.
September 7, 2013
219. Javier vs Fly Ace Corporation, 666 SCRA 382
220. Hornales vs NLRC, 364 SCRA 778
221. Sagun vs Surnace 644 SCRA 1717
222. Sto. Tomas vs Rey Salac (2012)
Facts: On June 7, 1995 Congress enacted RA 8042 or the Migrant Workers and Overseas Filipinos Act of 1995. These
CONSOLIDATED cases pertain to the constitutionality of certain provisions of RA 8042.
Held:
CONSTITUTIONALITY OF 29 & 30
Rey Salac et al. challenged the constitutionality of 29 & 30 and sought to enjoin/TRO the SOLE, DOLE, POEA, TESDA
etc. Said provisions commanded the DOLE to begin deregulating within one year of its passage the business of
handling the recruitment and migration of overseas Filipino workers and phase out within 5 years the regulatory
functions of the POEA.
356 Roco 3B
On March 2002, QC RTC granted the petition. As a result, the Republic along with other intervenors sought to annul the RTC
decision. On December 4, 2008, however, the Republic informed the Court that on April 10, 2007 former PGMA signed into
law R.A. 9422 which expressly repealed Sections 29 and 30 of R.A. 8042 and adopted the policy of close government
regulation of the recruitment and deployment of OFWs. Thus, it was rendered moot and academic.
CONSITUTIONALITY OF 6, 7, AND 9
Philippine Association of Service Exporters, Inc. (PASEI) filed a petition for declaratory relief and prohibition with prayer for
issuance of TRO and writ of preliminary injunction before the RTC of Manila, seeking to annul Sections 6, 7, and 9 of
R.A. 8042 for being unconstitutional.
Section 6 defines the crime of illegal recruitment and enumerates the acts constituting the same. Section 7 provides the
penalties for prohibited acts. Thus:
SEC. 6. Definition.For purposes of this Act, illegal recruitment shall mean any act of
canvassing, enlisting, contracting, transporting, utilizing, hiring, procuring workers and
includes referring, contract services, promising or advertising for employment abroad,
whether for profit or not, when undertaken by a non-license or non-holder of authority
contemplated under Article 13(f) of Presidential Decree No. 442, as amended, otherwise
known as the Labor Code of the Philippines: Provided, That such nonlicense 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.
SEC. 7. Penalties.
(a) Any person found guilty of illegal recruitment shall suffer the penalty of imprisonment of
not less than six (6) years and one (1) day but not more than twelve (12) years and a fine not
less than two hundred thousand pesos (P200,000.00) nor more than five hundred thousand
pesos (P500,000.00). (b) The penalty of life imprisonment and a fine of not less than five
hundred thousand pesos (P500,000.00) nor more than one million pesos (P1,000,000.00)
shall be imposed if illegal recruitment constitutes economic sabotage as defined herein.
Finally, Section 9 of R.A. 8042 allowed the filing of criminal actions arising from illegal recruitment before the RTC
of the province or city where the offense was committed or where the offended party actually resides at the time of the
commission of the offense.
The RTC declared 6 unconstitutional after hearing on the ground that its definition of illegal recruitment is vague as it
fails to distinguish between licensed and non-licensed recruiters and for that reason gives undue advantage to the non-licensed
recruiters in violation of the right to equal protection of those that operate with government licenses or authorities.
But illegal recruitment as defined in Sectionbut illegal recruitment as defined in Section 6 is clear and unambiguous and,
contrary to the RTCs finding, actually makes a distinction between licensed and nonlicensed recruiters . By its terms,
persons who engage in canvassing, enlisting, contracting, transporting, utilizing, hiring, or procuring workers without the
appropriate government license or authority are guilty of illegal recruitment whether or not they commit the wrongful acts
enumerated in that section. On the other hand, recruiters who engage in the canvassing, enlisting, etc. of OFWs, although with
the appropriate government license or authority, are guilty of illegal recruitment.
RTC also declared 7 unconstitutional on the ground that its sweeping application of the penalties failed to make any
distinction as to the seriousness of the act committed for the application of the penalty imposed on such violation. As an
example, said the trial court, the mere failure to render a report under Section 6(h) or obstructing the inspection by the Labor
Department under Section 6(g) are penalized by imprisonment for six years and one day and a minimum fine of P200,000.00
but which could unreasonably go even as high as life imprisonment if committed by at least three persons.
357 Roco 3B
Apparently, the Manila RTC did not agree that the lawcan impose such grave penalties upon what it believed were specific acts
that were not as condemnable as the others in the lists. But, in fixing uniform penalties for each of the enumerated acts under
Section 6, Congress was within its prerogative to determine what individual acts are equally reprehensible, consistent with the
State policy of according full protection to labor, and deserving of the same penalties.
It is not within the power of the Court to question the wisdom of this kind of choice. Notably, this legislative policy has been
further stressed in July 2010 with the enactment of R.A. 10022 which increased even more the duration of the penalties of
imprisonment and the amounts of fine for the commission of the acts listed under Section 7 Obviously, in fixing such tough
penalties, the law considered the unsettling fact that OFWs must work outside the countrys borders and beyond its immediate
protection.
The RTC also invalidated 9 of R.A. 8042 on the ground that allowing the offended parties to file the criminal case in their
place of residence would negate the general rule on venue of criminal cases which is the place where the crime or any of its
essential elements were committed. Venue, said the RTC, is jurisdictional in penal laws and, allowing the filing of criminal
actions at the place of residence of the offended parties violates their right to due process. Section 9 provides:
SEC. 9. Venue.A criminal action arising from illegal recruitment as defined herein shall be
filed with the Regional Trial Court of the province or city where the offense was committed
or where the offended party actually resides at the time of the commission of the offense:
Provided, That the court where the criminal action is first filed shall acquire jurisdiction to the
exclusion of other courts: Provided, however, That the aforestated provision shall also apply to
those criminal actions that have already been filed in court at the time of the effectivity of
this Act.
But there is nothing arbitrary or unconstitutional in Congress fixing an alternative venue for violations of Section 6 of R.A .
8042 that differs from the venue established by the Rules on Criminal Procedure.
Section 9 of R.A. 8042, as an exception to the rule on venue of criminal actions is, consistent with that laws declared
policy of providing a criminal justice system that protects and serves the best interests of the victims of illegal
recruitment.
CONSTITUTIONALITY OF 10
The RTC held as unconstitutional the last sentence of the 2nd paragraph of 10 which provides that
SEC. 10. Money Claims.x x x

The liability of the principal/employer and the recruitment/placement agency for any and all
claims under this section shall be joint and several. This provision shall be incorporated in
the contract for overseas employment and shall be a condition precedent for its approval.
The performance bond to be filed by the recruitment/placement agency, as provided by law,
shall be answerable for all money claims or damages that may be awarded to the workers. If
the recruitment/placement agency is a juridical being, the corporate officers and
directors and partners as the case may be, shall themselves be jointly and solidarily
liable with the corporation or partnership for the aforesaid claims and damages.
But the Court has already held, pending adjudication of this case, that the liability of corporate directors and officers is not
automatic. To make them jointly and solidarily liable with their company, there must be a finding that they were remiss in
directing the affairs of that company, such as sponsoring or tolerating the conduct of illegal activities.
As a final note, R.A. 8042 is a police power measure intended to regulate the recruitment and deployment of OFWs. It aims
to curb, if not eliminate, the injustices and abuses suffered by numerous OFWs seeking to work abroad. The rule is settled that
every statute has in its favor the presumption of constitutionality. The Court cannot inquire into the wisdom or expediency of
the laws enacted by the Legislative Department. Hence, in the absence of a clear and unmistakable case that the statute is
unconstitutional, the Court must uphold its validity.
358 Roco 3B
223. Stolt-Nielsen Transportation Group, Inc. & Chung Gai 663 SCRA 291
224. Wallen Maritime Services, Inc. vs Tanawan, 679 SCRA 255
225. Abante v. KJGS Fleet, 67 SCRA 734
226. Flourish Maritime Shipping vs Almanzor 568 SCRA 713
227. Pert/CPM Manpower vs Vinuya, et al., 680 SCRA 284
228. Eastern Mediterranian vs Estanislao Surio, 679 SCRA 305
229. Babas vs. Lorenzo Shipping, 638 SCRA 735
230. Pearanda vs. Banganga Plywood Corp (BPC) 489 SCRA 94
Facts: On June 1999, Charlito Pearanda was hired as an employee of BPC to take charge of the operations and maintenance
of its steam plant boiler. He filed a complaint for illegal dismissal with money claims against BPC and its GM Chua.
He alleged that, as Foreman/Boiler Head/Shift Engineer, on Dec. 2000, he alleges that his services were terminated without
the benefit of due process and valid grounds in accordance with law. Furthermore, he was not paid his overtime pay, premium
pay for working during holidays/rest days, night shift differentials and finally claims for payment of damages and attorneys
fees having been forced to litigate the present complaint.
On the other hand, BPC alleged that complainants separation from service was done pursuant to Art. 283 of the Labor Code.
BPC was on temporary closure due to repair and general maintenance and it applied for clearance with the Department
of Labor and Employment to shut down and to dismiss employees.
Consequently, when BPC partially reopened in January 2001, Pearanda failed to reapply. Hence, he was not terminated
from employment much less illegally. He opted to severe employment when he insisted payment of his separation
benefits. Furthermore, being a MANAGERIAL EMPLOYEE he is not entitled to overtime pay and if ever he rendered
services beyond the normal hours of work.
LA ruled that there was no illegal dismissal but held that complainant was entitled to overtime and premium pay. NLRC
affirmed but deleted overtimime and premium pay. CA dismissed the appeal. Hence, this petition.
Issue: Whether complainant is entitled to overtime play and other monetary benfits.
Held: NO. (Omitted the discussion the procedural shiz)

NATURE OF EMPLOYMENT
Article 82 of the Labor Code exempts managerial employees from the coverage of labor standards. Labor standards
provide the working conditions of employees, including entitlement to overtime pay and premium pay for working on rest
days. Under this provision, managerial employees are those whose primary duty consists of the management of the
establishment in which they are employed or of a department or subdivision.
The IRR of the Labor Code state that managerial employees are those who meet the following conditions:
(1) Their primary duty consists of the management of the establishment in which they are
employed or of a department or subdivision thereof;
(2) They customarily and regularly direct the work of two or more employees therein;
(3) They have the authority to hire or fire other employees of lower rank; or their
suggestions and recommendations as to the hiring and firing and as to the promotion
or any other change of status of other employees are given particular weight.
The Court disagrees with the NLRCs finding that petitioner was a managerial employee. However, petitioner was a member
of the managerial staff, which also takes him out of the coverage of labor standards. Like managerial employees, officers
and members of the managerial staff are not entitled to the provisions of law on labor standards.
The IRR of the Labor Code define members of a managerial staff as those with the following duties and responsibilities:
(1) The primary duty consists of the performance of work directly related to management
policies of the employer;
359 Roco 3B
(2) Customarily and regularly exercise discretion and independent judgment;

(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary
duty consists of the management of the establishment in which he is employed or
subdivision thereof; or (ii) execute under general supervision work along specialized or
technical lines requiring special training, experience, or knowledge; or (iii) execute under
general supervision special assignments and tasks; and
(4) Who do not devote more than 20 percent of their hours worked in a workweek to
activities which are not directly and closely related to the performance of the work
described in paragraphs (1), (2), and (3) above.
As SHIFT ENGINEER, petitioners duties are: to supply the required and continuous steam to all consuming units at
minimum cost; to supervise, check and monitor manpower workmanship as well as operation of boiler and accessories; to
evaluate performance of machinery and manpower; to follow-up supply of waste and other materials for fuel; to train new
employees for effective and safety while working; recommend parts and supplies purchases; to recommend personnel actions
such as: promotion, or disciplinary action; to check water from the boiler, feedwater and softener, regenerate softener if
beyond hardness limit; implement Chemical Dosing; and perform other task as required by the superior from time to time.
The foregoing enumeration illustrates that petitioner was a member of the managerial staff. His duties and
responsibilities conform to the definition of a member of a managerial staff under the Implementing Rules.
Petitioner supervised the engineering section of the steam plant boiler. His work involved overseeing the operation of the
machines and the performance of the workers in the engineering section . This work necessarily required the use of
discretion and independent judgment to ensure the proper functioning of the steam plant boiler. As supervisor, petitioner
is deemed a member of the managerial staff.
In his Position Paper, he stated that he was the FOREMAN responsible for the operation of the boiler. The term foreman
implies that he was the representative of management over the workers and the operation of the department of the
plant.
His classification as supervisor is further evident from the manner his salary was paid. He belonged to the 10% of
respondents 354 employees who were paid on a monthly basis; the others were paid only on a daily basis. On the
basis of the foregoing, the Court finds no justification to award overtime pay and premium pay for rest days to petitioner.
231. Far East Agricultural Supply, Inc. v. Lebatique, 515 SCRA 491
232. Philippine Airlines, Inc. vs. NLRC, 302 SCRA 582
Facts: Dr. Fabros was employed as flight surgeon at PAL. He was assigned at the PAL Medical Clinic at Nichols and was on
duty from 4PM until 12 midnight.
On February 17, 1994, at around 7 PM, Fabros left the clinic to have his dinner at his residence, which was about a 5-
minute drive away. A few minutes later, the clinic received an emergency call from the PAL Cargo Services. One of its
employees,Manuel Acosta, had suffered a heart attack. The nurse on duty, Mr. Merlino Eusebio, called Fabros at home to
inform him of the emergency.
The patient arrived at the clinic at 7:50 PM and Mr. Eusebio immediately rushed him to the hospital. When Fabros reached
the clinic at around 7:51PM, Mr. Eusebio had already left with the patient. Mr. Acosta died the following day.
As a result, PAL Med Director Banzon ordered the Chief Flight Surgeon to investigate. Fabros was made to explain why no
sanction should be taken against him.
In reply, Fabros said that he was entitled to a 30-minute meal break; that he immediately left his residence upon being
informed by Mr. Eusebio about the emergency and arrived at the clinic a few minutes later and that Eusebio panicked and
brought the patient to the hospital without waiting for him.
360 Roco 3B
Management found the explanation untenable. As such, Fabros was charged with abandonment of post while on duty. He
was given 10 days to submit a written answer to the administrative charge. He reiterated the above reasons in his answer.
After evaluating the charge as well as the answer of Fabros, PAL decided to suspend him for 3 months effective December 16,
1994.
Thus, a complaint for illegal suspension was filed. LA Protacio ruled in favor of Fabros. On appeal to the NLRC, it was
affirmed. Hence, this petition.
PAL argues that being a full-time employee, Fabros is obliged to stay in the company premises for not less than 8
hours. Hence, he may not leave the company premises during such time, even to take his meals.
Issue: Whether Dr. Fabros was illegally suspended.
Held: YES. We find that the NLRC correctly nullified the 3-month suspension of Fabros. They, however, erred in
awarding moral damages.
ILLEGALITY OF SUSPENSION
The facts do not support PALs allegation that Fabros abandoned his post on that night. He left the clinic only to have his
dinner at his house, which was only a few minutes drive away from the clinic. His whereabouts were known to the nurse
on duty so that he could be easily reached in case of emergency .
Upon being informed of Mr. Acostas condition, Fabros immediately left his home and returned to the clinic. These
facts belie petitioners claim of abandonment.
According to the Labor Code:

Art. 83. Normal hours of work.The normal hours of work of any employee shall not exceed
eight (8) hours a day.
Health personnel in cities and municipalities with a population of at least one million
(1,000,000) or in hospitals and clinics with a bed capacity of at least one hundred (100) shall
hold regular office hours for eight (8) hours a day, for five (5) days a week, EXCLUSIVE OF
TIME FOR MEALS, except where the exigencies of the service require that such personnel
work for six (6) days or forty-eight (48) hours, in which case they shall be entitled to an
additional compensation of at least thirty percent (30%) of their regular wage for work on
the sixth day. For purposes of this Article, health personnel shall include: resident
physicians, nurses, nutritionists, dieticians, pharmacists, social workers, laboratory
technicians, paramedical technicians, psychologists, midwives, attendants and all other
hospital or clinic personnel.
Art. 85. Meal periods.Subject to such regulations as the Secretary of Labor may prescribe, it
shall be the duty of every employer to give his employees not less than sixty (60) minutes
time-off for their regular meals.
The IRR also states that:
Sec. 7. Meal and Rest Periods.Every employer shall give his employees, regardless of sex, not
less than one (1) hour time-off for regular meals, except in the following cases when a meal
period of not less than twenty (20) minutes may be given by the employer provided that
such shorter meal period is credited as compensable hours worked of the employee[.]
Thus, the 8-hour work period DOES NOT INCLUDE the meal break. Nowhere in the law may it be inferred that
employees must take their meals within the company premises . Employees are not prohibited from going out of the
361 Roco 3B
premises as long as they return to their posts on time . Fabros act, therefore, of going home to take his dinner does not
constitute abandonment.
AWARD OF MORAL DAMAGES

As a rule, moral damages are recoverable only where the dismissal or suspension 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.
In the case at bar, there is no showing that the management of PAL was moved by some evil motive in suspending
private respondent. It suspended Fabros on an honest, albeit erroneous, belief that his act of leaving the company premises to
take his meal at home constituted abandonment of post which warrants the penalty of suspension.
September 12, 2013

233. Rada vs NLRC, 205 SCRA 69
234. Pigcaulan vs Security & Credit Investigation, Inc. 663 SCRA 1
235. Bisig ng Mangagawa sa Tryco vs. NLRC 569 SCRA 122
236. Lepanto Consolidated Mining Co. vs Lepanto Local Staff Union, 562 SCRA 495
237. Trans-Asia Phil. Employees Association vs NLRC, 320 SCRA 347
238. San Miguel vs Court of Appeals, 375 SCRA 311
Facts: On Oct 17 1992, DOLE conducted a routine inspection in the premises of SMC in Sta. Filomena, Iligan City. In the
course of the inspection, it was discovered that there was underpayment by SMC of regular Muslim holiday pay to its
employees.
DOLE sent a copy of the inspection result to SMC and it was received by and explained to its personnel officer Elena dela
Puerta. SMC contested the findings and DOLE conducted summary hearings on November 1992, May 1993 and October
1993. Still, SMC failed to submit proof that it was paying regular Muslim holiday pay to its employees. Hence, Director
Macaraya of DOLE Iligan District Office issued a compliance order , dated 17 December 1993, directing SMC to
consider Muslim holidays as regular holidays and to pay both its Muslim and non-Muslim employees holiday pay
within 30 days from the receipt of the order.
SMC appealed to the DOLE but the same was dismissed for lack of merit. SMC then went to the SC via petition for certiorari
(R65) but then it was referred to the CA pursuant to St. Martin Funeral Homes v. NLRC. CA modified the the DOLE ruling in
this wise
WHEREFORE, the Order dated December 17, 1993 of Director Macaraya and Order dated
July 17, 1998 of Undersecretary Espaol, Jr. is hereby MODIFIED with regards the
payment of Muslim holiday pay from 200% to 150% of the employees basic salary.
Let this case be remanded to the Regional Director for the proper computation of the said
holiday pay.
MR denied. Hence, this petition. (After said CA decision became final and executory, SMC went to the SC via Rule 65. The
proper remedy should have been Rule 45. In any case, CA decision need not be reversed.).
Issues: (1) Whether Muslim holiday pay should also be accorded to non-Muslims.
(2) Whether the issuance of the compliance order was valid.
Held: (1) YES. Muslim holidays are provided under Articles 169 and 170, Title I, Book V, of PD 1083 (Code of Muslim
Personal Laws), which states:
Art. 169. Official Muslim holidays.The following are hereby recognized as legal Muslim
holidays:
(a) Amun Jadid (New Year), which falls on the first day of the first lunar month of
Muharram;
362 Roco 3B
(b) Maulid-un-Nabi (Birthday of the Prophet Muhammad), which falls on the twelfth day of
the third lunar month of Rabi-ulAwwal;
(c) Lailatul Isra Wal Miraj (Nocturnal Journey and Ascension of the Prophet Muhammad),
which falls on the twenty-seventh day of the seventh lunar month of Rajab;
(d) Id-ul-Fitr (Hari Raya Puasa), which falls on the first day of the tenth lunar month of
Shawwal, commemorating the end of the fasting season; and
(e) Id-ul-Adha (Hari Raya Haji), which falls on the tenth day of the twelfth lunar month of
Dhu I-Hijja.
Art. 170. Provinces and cities where officially observed.(1) Muslim holidays shall be officially
observed in the Provinces of Basilan, Lanao del Norte, Lanao del Sur, Maguindanao, North
Cotabato, Iligan, Marawi, Pagadian, and Zamboanga and in such other Muslim provinces
and cities as may hereafter be created;
(2) Upon proclamation by the President of the Philippines, Muslim holidays may also be
officially observed in other provinces and cities.
The foregoing provisions should be read in conjunction with Article 94 of the Labor Code, which provides:
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 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.
There should be no distinction between Muslims and non-Muslims as regards payment of benefits for Muslim
holidays. The CA did not err in sustaining Undersecretary Espaol who stated:
Assuming arguendo that the respondents position is correct, then by the same token,
Muslims throughout the Philippines are also not entitled to holiday pays on Christian holidays declared by
law as regular holidays. We must remind the respondent-appellant that wages and other
emoluments granted by law to the working man are determined on the basis of the
criteria laid down by laws and certainly not on the basis of the workers faith or
religion.
At any rate, Article 3(3) of PD 1083 also declares that nothing herein shall be construed to operate to the prejudice of a
non-Muslim. In addition, the 1999 Handbook on Workers Statutory Benefits, approved by n DOLE Secretary Laguesma on
December 1999 categorically stated:
Considering that all private corporations, offices, agencies, and entities or establishments
operating within the designated Muslim provinces and cities are required to observe Muslim
holidays, both Muslim and Christians working within the Muslim areas may not
report for work on the days designated by law as Muslim holidays .
(2) YES. VALID COMPLIANCE ORDER. On the question regarding the jurisdiction of the Regional Director Macaraya,
Article 128, Section B of the Labor Code, as amended by Republic Act No. 7730, provides:
Article 128. Visitorial and enforcement power.
(b) Notwithstanding the provisions of Article 129 and 217 of this Code to the contrary, and
in cases where the relationship of employer-employee still exists, the Secretary of Labor and
Employment or his duly 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 the inspection. The Secretary or his duly authorized
363 Roco 3B
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.
Here, Regional Director Macaraya acted as the duly authorized representative of the SOLE and it was within his power
to issue the compliance order to SMC. In addition, the Court agrees with the Solicitor General that the petitioner did not deny
that it was not paying Muslim holiday pay to its non-Muslim employees. Indeed, petitioner merely contends that its non-
Muslim employees are not entitled to Muslim holiday pay.
Hence, the issue could be resolved even without documentary proofs. In any case, there was no indication that Regional
Director Macaraya failed to consider any documentary proof presented by SMC in the course of the inspection.
Anent the allegation that petitioner was not accorded due process, we sustain the CA in finding that SMC was
furnished a copy of the inspection order and it was received by and explained to its Personnel Officer. Further, a
series of summary hearings were conducted by DOLE on 19 November 1992, 28 May 1993 and 4 and 5 October 1993. Thus,
SMC could not claim that it was not given an opportunity to defend itself.
239. Sentinel vs NLRC, 295 SCRA 123

240. Legend Hotel (Manila) vs Hernani S. Realuyo, 677 SCRA 10
241. Ladabar vs. Forest Hills, 575 SCRA 262
242. Asian Transmission vs. CA, 425 SCRA 478
243. Auto Bus vs. Bautista, 458 SCRA 578
244. JPL Marketing vs. CA, 463 SCRA 136
245.
246.
364 Roco 3B

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(Alleged) Labor I Digests Atty.

Issue: Was there illegal dismissal?

2. Gandara Mill Supply v. NLRC (1998)

3. TSPIC Corp. v. TSPIC Employees Union (2008)

4. Capili v. NLRC (1997)

Issue: Should separation pay be awarded to the drivers?

5. Brew Master v. NAFLU (1997)

6. CBTC Employees Union v. Clave (1986)

Issue: Whether Union members are entitled to holiday pay?

7. PAL v. NLRC (1993)

8. Abbot Laboratories v. NLRC (1987)

9. AHS/Philippines Employees v. NLRC (1987)

Issue: Whether or not there was a valid termination.

10. Globe Mackay Cable v. CA (1989)

Issue: Whether petitioners are liable for damages to private respondent.

Issue: Whether or not they are liable for illegal recruitment

12. People v. Jamilosa (2007)

Issue: Is he guilty of illegal recruitment?

13. People v. Valenciano (2008)

Issue: Whether Valenciano is guilty of large scale illegal recruitment.

14. People v. Chua (2010)

Issue: Whether or not the condition was proper

15. People v. Adeser (2009)

Issue: Whether or not Adeser is guilty of syndicated illegal recruitment.

16. Nasi-Villar v. People (2008)

17. Serrano v. Gallant (2009)

Issue: Whether or not said clause is constitutional.

18. Tangga-an v. Phil. Transmarine (2013)

19. Ravago v. Esso (2005)

20. Almodiel v. NLRC (1993)

June 13, 2013

Issues: (1) Whether Palad is an apprentice.

22. Bernardo v. NLRC (1999)

23. Southeastern v. Navarra (2010)

Issue: (1) Whether or not the complaint has already prescribed.

24. EDI Staffbuilders v. NLRC (2006)

25. Catan v. NLRC (1988)

26. Sunace v. NLRC (2006)

June 15, 2013

28. Francisco v. NLRC (2006)

LA found the petitioner was illegally dismissed. NLRC affirms. CA reversed.

Issue: (1) Whether an employer-employee relationship between petitioner and Kasei

The two-tiered test:

29. McLeod v. NLRC (2007)

Issue: (1) Whether an employer-employee relationship exists.

30. Lopez v. Bodega City (2007)

Issue: Whether or not there was an employee-employer relationship.

31. Republic v. Asiapro (2007)

All the aforesaid elements are present in this case.

32. Tan v. Lagrama (2002)

Issues: (1) W/N an employer-employee relationship existed.

33. Calamba Medical Center v. NLC (2008)

34. Dumpit-Murillo v. CA (2007)

35. SCA Hygiene Products Employees Assoc. v. CA (2010)

36. Emirate Security v. Menese (2011)

37. Ymbong v. ABS CBN (2012)

Issue: (1) Whether Policy No. HR-ER-016 is valid.

38. SMC v. NLRC (1999)

Issue: Whether NLRCs dismissal is proper.

39. Herida v. F & C Pawnshop (2009)

June 20, 2013

41. Del Monte v. Velasco (2007)

42. Duncan v. Glaxo (2004)