1
DISCUSSION 3 WITNESSETH: That
CHAPTER III
G.R. No. 122917, July 12, 1999
MARITES BERNARDO, ELVIRA GO DIAMANTE, REBECCA
E. DAVID, DAVID P. PASCUAL, RAQUEL ESTILLER,
ALBERT HALLARE, EDMUND M. CORTEZ, JOSELITO O.
AGDON GEORGE P. LIGUTAN JR., CELSO M. YAZAR,
ALEX G. CORPUZ, RONALD M. DELFIN, ROWENA M.
TABAQUERO, CORAZON C. DELOS REYES, ROBERT G.
NOORA, MILAGROS O. LEQUIGAN, ADRIANA F.
TATLONGHARI, IKE CABANDUCOS, COCOY NOBELLO,
DORENDA CANTIMBUHAN, ROBERT MARCELO, LILIBETH
Q. MARMOLEJO, JOSE E. SALES, ISABEL MAMAUAG,
VIOLETA G. MONTES, ALBINO TECSON, MELODY V.
GRUELA, BERNADETH D. AGERO, CYNTHIA DE VERA,
LANI R. CORTEZ, MA. ISABEL B. CONCEPCION, DINDO
VALERIO, ZENAIDA MATA, ARIEL DEL PILAR, MARGARET
CECILIA CANOZA, THELMA SEBASTIAN, MA. JEANETTE
CERVANTES, JEANNIE RAMIL, ROZAIDA PASCUAL,
PINKY BALOLOA, ELIZABETH VENTURA, GRACE S.
PARDO & RICO TIMOSA, PETITIONERS VS. NATIONAL
LABOR RELATIONS COMMISSION & FAR EAST BANK
AND TRUST COMPANY, RESPONDENTS.
DECISION
PANGANIBAN, J.:
The Magna Carta for Disabled Persons mandates that qualified
disabled persons be granted the same terms and conditions of
employment as qualified able-bodied employees. Once they
have attained the status of regular workers, they should be
accorded all the benefits granted by law, notwithstanding
written or verbal contracts to the contrary. This treatment is
rooted not merely on charity or accommodation, but on justice
for all.
The Case
Challenged in the Petition for Certiorari[1] before us is the June
20, 1995 Decision[2] of the National Labor Relations
Commission (NLRC),[3] which affirmed the August, 22 1994
ruling of Labor Arbiter Cornelio L. Linsangan. The labor
arbiter's Decision disposed as follows:[4]
"WHEREFORE, judgment is hereby rendered dismissing the
above-mentioned complaint for lack of merit."
Also assailed is the August 4, 1995 Resolution[5] of the NLRC,
which denied the Motion for Reconsideration.
The Facts
The facts were summarized by the NLRC in this wise:[6]
"Complainants numbering 43 (p. 176, Records) are deaf-mutes
who were hired on various periods from 1988 to 1993 by
respondent Far East Bank and Trust Co. as Money Sorters and
Counters through a uniformly worded agreement called
`Employment Contract for Handicapped Workers'. (pp. 68 &
69, Records) The full text of said agreement is quoted below:
`EMPLOYMENT CONTRACT FOR HANDICAPPED
WORKERS
This Contract, entered into by and between:
FAR EAST BANK AND TRUST COMPANY, a universal
banking corporation duly organized and existing under and by
virtue of the laws of the Philippines, with business address at
FEBTC Building, Muralla, Intramuros, Manila, represented
herein by its Assistant Vice President, MR. FLORENDO G.
MARANAN, (hereinafter referred to as the `BANK');
- and -
________________, ________________ years old, of legal
age, _____________, and residing at __________________
(hereinafter referred to as the (`EMPLOYEE').
WHEREAS, the BANK, cognizant of its social responsibility,
realizes that there is a need to provide disabled and
handicapped persons gainful employment and opportunities to
realize their potentials, uplift their socio-economic well being
and welfare and make them productive, self-reliant and useful
citizens to enable them to fully integrate in the mainstream of
society;
WHEREAS, there are certain positions in the BANK which may
be filled-up by disabled and handicapped persons, particularly
deaf-mutes, and the BANK ha[s] been approached by some
civic-minded citizens and authorized government agencies
[regarding] the possibility of hiring handicapped workers for
these positions;
WHEREAS, the EMPLOYEE is one of those handicapped
workers who [were] recommended for possible employment
with the BANK;
NOW, THEREFORE, for and in consideration of the foregoing
premises and in compliance with Article 80 of the Labor Code
of the Philippines as amended, the BANK and the EMPLOYEE
have entered into this Employment Contract as follows:
1. The BANK agrees to employ and train the
EMPLOYEE, and the EMPLOYEE agrees to
diligently and faithfully work with the BANK,
as Money Sorter and Counter.
2. The EMPLOYEE shall perform among
others, the following duties and
responsibilities:
i. Sort out bills according to color;
ii. Count each denomination per
hundred, either manually or with the
aid of a counting machine;
iii. Wrap and label bills per hundred;
iv. Put the wrapped bills into bundles;
and
v. Submit bundled bills to the bank
teller for verification.
3. The EMPLOYEE shall undergo a training
period of one (1) month, after which the
BANK shall determine whether or not he/she
should be allowed to finish the remaining
term of this Contract.
4. The EMPLOYEE shall be entitled to an initial
compensation of P118.00 per day, subject to
adjustment in the sole judgment of the
BANK, payable every 15th and end of the
month.
5. The regular work schedule of the
EMPLOYEE shall be five (5) days per week,
from Mondays thru Fridays, at eight (8)
hours a day. The EMPLOYEE may be
required to perform overtime work as
circumstance may warrant, for which
overtime work he/she [shall] be paid an
additional compensation of 125% of his daily
rate if performed during ordinary days and
130% if performed during Saturday or [a]
rest day.
6. The EMPLOYEE shall likewise be entitled to
the following benefits:
i. Proportionate 13th month pay based
on his basic daily wage.
ii. Five (5) days incentive leave.
iii. SSS premium payment.
7. The EMPLOYEE binds himself/herself to
abide [by] and comply with all the BANK
 2

Rules and Regulations and Policies, and to part of their duties (p. 97, Records); that through the `pakiusap'
conduct himself/herself in a manner of Arturo Borjal, the tellers were relieved of this task of counting
expected of all employees of the BANK. and sorting bills in favor of deaf-mutes without creating new
positions as there is no position either in the respondent or in
any other bank in the Philippines which deals with purely
8. The EMPLOYEE acknowledges the fact that
counting and sorting of bills in banking operations."
he/she had been employed under a special
Petitioners specified when each of them was hired and
employment program of the BANK, for which
dismissed.
reason the standard hiring requirements of
the BANK were not applied in his/her case.
As earlier noted, the labor arbiter and, on appeal, the NLRC
Consequently, the EMPLOYEE
ruled against herein petitioners. Hence, this recourse to this
acknowledges and accepts the fact that the
Court.[9]
terms and conditions of the employment
generally observed by the BANK with
respect to the BANK's regular employee are
not applicable to the EMPLOYEE, and that The Ruling of the NLRC
therefore, the terms and conditions of the
EMPLOYEE's employment with the BANK In affirming the ruling of the labor arbiter that herein petitioners
shall be governed solely and exclusively by could not be deemed regular employees under Article 280 of
this Contract and by the applicable rules and the Labor Code, as amended, Respondent Commission
regulations that the Department of Labor and ratiocinated as follows:
Employment may issue in connection with
the employment of disabled and "We agree that Art. 280 is not controlling herein. We give due
handicapped workers. More specifically, the credence to the conclusion that complainants were hired as an
EMPLOYEE hereby acknowledges that the accommodation to [the] recommendation of civic oriented
provisions of Book Six of the Labor Code of personalities whose employment[s] were covered by xxx
the Philippines as amended, particularly on Employment Contract[s] with special provisions on duration of
regulation of employment and separation contract as specified under Art. 80. Hence, as correctly held by
pay are not applicable to him/her. the Labor Arbiter a quo, the terms of the contract shall be the
9. The Employment Contract shall be for a law between the parties."[10]
period of six (6) months or from ____ to The NLRC also declared that the Magna Carta for Disabled
____ unless earlier terminated by the BANK Persons was not applicable, "considering the prevailing
for any just or reasonable cause. Any circumstances/milieu of the case."
continuation or extension of this Contract
shall be in writing and therefore this Contract
will automatically expire at the end of its Issues
terms unless renewed in writing by the
BANK. In their Memorandum, petitioners cite the following grounds in
support of their cause:
IN WITNESS WHEREOF, the parties, have hereunto affixed
their signature[s] this ____ day of _________________, "I. The Honorable Commission committed grave abuse of
____________ at Intramuros, Manila, Philippines.' discretion in holding that the petitioners - money sorters and
"In 1988, two (2) deaf-mutes were hired under this Agreement; counters working in a bank - were not regular employees.
in 1989 another two (2); in 1990, nineteen (19); in 1991 six (6);
in 1992, six (6) and in 1993, twenty-one (21). Their "II. The Honorable Commission committed grave abuse of
employment[s] were renewed every six months such that by discretion in holding that the employment contracts signed and
the time this case arose, there were fifty-six (56) deaf-mutes renewed by the petitioners - which provide for a period of six
who were employed by respondent under the said employment (6) months - were valid.
agreement. The last one was Thelma Malindoy who was
employed in 1992 and whose contract expired on July 1993. "III. The Honorable Commission committed grave abuse of
discretion in not applying the provisions of the Magna Carta for
the Disabled (Republic Act No. 7277), on proscription against
xxxxxxxxx
discrimination against disabled persons."[11]
In the main, the Court will resolve whether petitioners have
"Disclaiming that complainants were regular employees,
become regular employees.
respondent Far East Bank and Trust Company maintained that
complainants who are a special class of workers - the hearing
impaired employees were hired temporarily under [a] special
This Court's Ruling
employment arrangement which was a result of overtures
made by some civic and political personalities to the
The petition is meritorious. However, only the employees, who
respondent Bank; that complainant[s] were hired due to
worked for more than six months and whose contracts were
`pakiusap' which must be considered in the light of the context
renewed are deemed regular. Hence, their dismissal from
of the respondent Bank's corporate philosophy as well as its
employment was illegal.
career and working environment which is to maintain and
strengthen a corps of professionals trained and qualified
officers and regular employees who are baccalaureate degree
Preliminary Matter:
holders from excellent schools which is an unbending policy in
Propriety of Certiorari
the hiring of regular employees; that in addition to this, training
continues so that the regular employee grows in the corporate
Respondent Far East Bank and Trust Company argues that a
ladder; that the idea of hiring handicapped workers was
review of the findings of facts of the NLRC is not allowed in a
acceptable to them only on a special arrangement basis; that it
petition for certiorari. Specifically, it maintains that the Court
adopted the special program to help tide over a group of
cannot pass upon the findings of public respondents that
handicapped workers such as deaf-mutes like the
petitioners were not regular employees.
complainants who could do manual work for the respondent
Bank; that the task of counting and sorting of bills which was
True, the Court, as a rule, does not review the factual findings
being performed by tellers could be assigned to deaf-mutes;
of public respondents in a certiorari proceeding. In resolving
that the counting and sorting of money are tellering works
whether the petitioners have become regular employees, we
which were always logically and naturally part and parcel of the
shall not change the facts found by the public respondent. Our
tellers' normal functions; that from the beginning there have
task is merely to determine whether the NLRC committed
been no separate items in the respondent Bank plantilla for
grave abuse of discretion in applying the law to the established
sorters or counters; that the tellers themselves already did the
facts, as above-quoted from the assailed Decision.
sorting and counting chore as a regular feature and integral

Main Issue:
Are Petitioners Regular Employees?
Petitioners maintain that they should be considered regular
employees, because their task as money sorters and counters
was necessary and desirable to the business of respondent
bank. They further allege that their contracts served merely to
preclude the application of Article 280 and to bar them from
becoming regular employees.
Private respondent, on the other hand, submits that petitioners
were hired only as "special workers and should not in any way
be considered as part of the regular complement of the
Bank."[12] Rather, they were "special" workers under Article 80
of the Labor Code. Private respondent contends that it never
solicited the services of petitioners, whose employment was
merely an "accommodation" in response to the requests of
government officials and civic-minded citizens. They were told
from the start, "with the assistance of government
representatives," that they could not become regular
employees because there were no plantilla positions for
"money sorters," whose task used to be performed by tellers.
Their contracts were renewed several times, not because of
need "but merely for humanitarian reasons." Respondent
submits that "as of the present, the `special position' that was
created for the petitioners no longer exist[s] in private
respondent [bank], after the latter had decided not to renew
anymore their special employment contracts."
At the outset, let it be known that this Court appreciates the
nobility of private respondent's effort to provide employment to
physically impaired individuals and to make them more
productive members of society. However, we cannot allow it to
elude the legal consequences of that effort, simply because it
now deems their employment irrelevant. The facts, viewed in
light of the Labor Code and the Magna Carta for Disabled
Persons, indubitably show that the petitioners, except sixteen
of them, should be deemed regular employees. As such, they
have acquired legal rights that this Court is duty-bound to
protect and uphold, not as a matter of compassion but as a
consequence of law and justice.
The uniform employment contracts of the petitioners stipulated
that they shall be trained for a period of one month, after which
the employer shall determine whether or not they should be
allowed to finish the 6-month term of the contract. Furthermore,
the employer may terminate the contract at any time for a just
and reasonable cause. Unless renewed in writing by the
employer, the contract shall automatically expire at the end of
the term.
According to private respondent, the employment contracts
were prepared in accordance with Article 80 of the Labor Code,
which provides:
"ART. 80. Employment agreement. - Any employer who
employs handicapped workers shall enter into an employment
agreement with them, which agreement shall include:
(a) The names and addresses of the handicapped workers to
be employed;
(b) The rate to be paid the handicapped workers which shall be
not less than seventy five (75%) per cent of the applicable
legal minimum wage;
(c) The duration of employment period; and
(d) The work to be performed by handicapped workers.
The employment agreement shall be subject to inspection by
the Secretary of Labor or his duly authorized representatives."
The stipulations in the employment contracts indubitably
conform with the aforecited provision. Succeeding events and
the enactment of RA No. 7277 (the Magna Carta for Disabled
Persons),[13] however, justify the application of Article 280 of the
Labor Code.
Respondent bank entered into the aforesaid contract with a
3
total of 56 handicapped workers and renewed the contracts of
37 of them. In fact, two of them worked from 1988 to 1993.
Verily, the renewal of the contracts of the handicapped workers
and the hiring of others lead to the conclusion that their tasks
were beneficial and necessary to the bank. More important,
these facts show that they were qualified to perform the
responsibilities of their positions. In other words, their disability
did not render them unqualified or unfit for the tasks assigned
to them.
In this light, the Magna Carta for Disabled Persons mandates
that a qualified disabled employee should be given the same
terms and conditions of employment as a qualified able-bodied
person. Section 5 of the Magna Carta provides:
"Section 5. Equal Opportunity for Employment.--No disabled
person shall be denied access to opportunities for suitable
employment. A qualified disabled employee shall be subject to
the same terms and conditions of employment and the same
compensation, privileges, benefits, fringe benefits, incentives
or allowances as a qualified able bodied person."
The fact that the employees were qualified disabled persons
necessarily removes the employment contracts from the ambit
of Article 80. Since the Magna Carta accords them the rights of
qualified able-bodied persons, they are thus covered by Article
280 of the Labor Code, which provides:
"ART. 280. Regular and Casual Employment. -- The provisions
of written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an employment
shall be deemed to be regular where the employee has been
engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer,
except where the employment has been fixed for a specific
project or undertaking the completion or termination of which
has been determined at the time of the engagement of the
employee or where the work or services to be performed is
seasonal in nature and the employment is for the duration of
the season.
"An employment shall be deemed to be casual if it is not
covered by the preceding paragraph: Provided, That, any
employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be
considered as regular employee with respect to the activity in
which he is employed and his employment shall continue while
such activity exists."
The test of whether an employee is regular was laid down
in De Leon v. NLRC,[14] in which this Court held:
"The primary standard, therefore, of determining regular
employment is the reasonable connection between the
particular activity performed by the employee in relation to the
usual trade or business of the employer. The test is whether
the former is usually necessary or desirable in the usual
business or trade of the employer. The connection can be
determined by considering the nature of the work performed
and its relation to the scheme of the particular business or
trade in its entirety. Also if the employee has been performing
the job for at least one year, even if the performance is not
continuous and merely intermittent, the law deems repeated
and continuing need for its performance as sufficient evidence
of the necessity if not 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."
Without a doubt, the task of counting and sorting bills is
necessary and desirable to the business of respondent bank.
With the exception of sixteen of them, petitioners performed
these tasks for more than six months. Thus, the following
twenty-seven petitioners should be deemed regular
employees: Marites Bernardo, Elvira Go Diamante, Rebecca
E. David, David P. Pascual, Raquel Estiller, Albert Hallare,
Edmund M. Cortez, Joselito O. Agdon, George P. Ligutan Jr.,
Lilibeth Q. Marmolejo, Jose E. Sales, Isabel Mamauag, Violeta
G. Montes, Albino Tecson, Melody V. Gruela, Bernadeth D.
Agero, Cynthia de Vera, Lani R. Cortez, Ma. Isabel B.
Concepcion, Margaret Cecilia Canoza, Thelma Sebastian, Ma.
Jeanette Cervantes, Jeannie Ramil, Rozaida Pascual, Pinky
Baloloa, Elizabeth Ventura and Grace S. Pardo.

As held by the Court, "Articles 280 and 281 of the Labor Code
put an end to the pernicious practice of making permanent
casuals of our lowly employees by the simple expedient of
extending to them probationary appointments, ad
infinitum."[15] The contract signed by petitioners is akin to a
probationary employment, during which the bank determined
the employees' fitness for the job. When the bank renewed the
contract after the lapse of the six-month probationary period,
the employees thereby became regular employees.[16] No
employer is allowed to determine indefinitely the fitness of its
employees.
As regular employees, the twenty-seven petitioners are entitled
to security of tenure; that is, their services may be terminated
only for a just or authorized cause. Because respondent failed
to show such cause,[17] these twenty-seven petitioners are
deemed illegally dismissed and therefore entitled to back
wages and reinstatement without loss of seniority rights and
other privileges.[18] Considering the allegation of respondent
that the job of money sorting is no longer available because it
has been assigned back to the tellers to whom it originally
belonged,[19] petitioners are hereby awarded separation pay in
lieu of reinstatement.[20]
Because the other sixteen worked only for six months, they are
not deemed regular employees and hence not entitled to the
same benefits.
Applicability of the
Brent Ruling
Respondent bank, citing Brent School v. Zamora[21] in which the
Court upheld the validity of an employment contract with a
fixed term, argues that the parties entered into the contract on
equal footing. It adds that the petitioners had in fact an
advantage, because they were backed by then DSWD
Secretary Mita Pardo de Tavera and Representative Arturo
Borjal.
We are not persuaded. The term limit in the contract was
premised on the fact that the petitioners were disabled, and
that the bank had to determine their fitness for the position.
Indeed, its validity is based on Article 80 of the Labor Code.
But as noted earlier, petitioners proved themselves to
be qualified disabled persons who, under the Magna Carta for
Disabled Persons, are entitled to terms and conditions of
employment enjoyed by qualified able-bodied individuals;
hence, Article 80 does not apply because petitioners
are qualified for their positions. The validation of the limit
imposed on their contracts, imposed by reason of their
disability, was a glaring instance of the very mischief sought to
be addressed by the new law.
Moreover, it must be emphasized that a contract of
employment is impressed with public interest.[22] Provisions of
applicable statutes are deemed written into the contract, and
the "parties are not at liberty to insulate themselves and their
relationships from the impact of labor laws and regulations by
simply contracting with each other."[23] Clearly, the agreement
of the parties regarding the period of employment cannot
prevail over the provisions of the Magna Carta for Disabled
Persons, which mandate that petitioners must be treated as
qualified able-bodied employees.
Respondent's reason for terminating the employment of
petitioners is instructive. Because the Bangko Sentral ng
Pilipinas (BSP) required that cash in the bank be turned over to
the BSP during business hours from 8:00 a.m. to 5:00 p.m.,
respondent resorted to nighttime sorting and counting of
money. Thus, it reasons that this task "could not be done by
deaf mutes because of their physical limitations as it is very
risky for them to travel at night."[24] We find no basis for this
argument. Travelling at night involves risks to handicapped and
able-bodied persons alike. This excuse cannot justify the
termination of their employment.
Other Grounds Cited by Respondent
Respondent argues that petitioners were merely
"accommodated" employees. This fact does not change the
nature of their employment. As earlier noted, an employee is
regular because of the nature of work and the length of
4
service, not because of the mode or even the reason for hiring
them.
Equally unavailing are private respondent's arguments that it
did not go out of its way to recruit petitioners, and that its
plantilla did not contain their positions. In L. T. Datu v. NLRC,
[25]
the Court held that "the determination of whether
employment is casual or regular does not depend on the will or
word of the employer, and the procedure of hiring x x x but on
the nature of the activities performed by the employee, and to
some extent, the length of performance and its continued
existence."
Private respondent argues that the petitioners were informed
from the start that they could not become regular employees.
In fact, the bank adds, they agreed with the stipulation in the
contract regarding this point. Still, we are not persuaded. The
well-settled rule is that the character of employment is
determined not by stipulations in the contract, but by the nature
of the work performed.[26] Otherwise, no employee can become
regular by the simple expedient of incorporating this condition
in the contract of employment.
In this light, we iterate our ruling in Romares v. NLRC:[27]
"Article 280 was emplaced in our statute books to prevent the
circumvention of the employee's right to be secure in his tenure
by indiscriminately and completely ruling out all written and oral
agreements inconsistent with the concept of regular
employment defined therein. Where an employee has been
engaged to perform activities which are usually necessary or
desirable in the usual business of the employer, such
employee is deemed a regular employee and is entitled to
security of tenure notwithstanding the contrary provisions of his
contract of employment.
"x x x x x x x x x
"At this juncture, the leading case of Brent School, Inc. v.
Zamora proves instructive. As reaffirmed in subsequent cases,
this Court has upheld the legality of fixed-term employment. It
ruled that the decisive determinant in `term employment'
should not be the activities that the employee is called upon to
perform but the day certain agreed upon the parties for the
commencement and termination of their employment
relationship. But this Court went on to say that where from the
circumstances it is apparent that the periods have been
imposed to preclude acquisition of tenurial security by the
employee, they should be struck down or disregarded as
contrary to public policy and morals."
In rendering this Decision, the Court emphasizes not only the
constitutional bias in favor of the working class, but also the
concern of the State for the plight of the disabled. The noble
objectives of Magna Carta for Disabled Persons are not based
merely on charity or accommodation, but on justice and the
equal treatment of qualified persons, disabled or not. In the
present case, the handicap of petitioners (deaf-mutes) is not a
hindrance to their work. The eloquent proof of this statement is
the repeated renewal of their employment contracts. Why then
should they be dismissed, simply because they are physically
impaired? The Court believes, that, after showing their fitness
for the work assigned to them, they should be treated and
granted the same rights like any other regular employees.
In this light, we note the Office of the Solicitor General's prayer
joining the petitioners' cause.[28]
WHEREFORE, premises considered, the Petition is
hereby GRANTED. The June 20, 1995 Decision and the
August 4, 1995 Resolution of the NLRC
are REVERSED and SET ASIDE. Respondent Far East Bank
and Trust Company is hereby ORDERED to pay back wages
and separation pay to each of the following twenty-seven (27)
petitioners, namely, Marites Bernardo, Elvira Go Diamante,
Rebecca E. David, David P. Pascual, Raquel Estiller, Albert
Hallare, Edmund M. Cortez, Joselito O. Agdon, George P.
Ligutan Jr., Lilibeth Q. Marmolejo, Jose E. Sales, Isabel
Mamauag, Violeta G. Montes, Albino Tecson, Melody V.
Gruela, Bernadeth D. Agero, Cynthia de Vera, Lani R. Cortez,
Ma. Isabel B. Concepcion, Margaret Cecilia Canoza, Thelma

Sebastian, Ma. Jeanette Cervantes, Jeannie Ramil, Rozaida
Pascual, Pinky Baloloa, Elizabeth Ventura and Grace S. Pardo.
The NLRC is hereby directed to compute the exact amount
due each of said employees, pursuant to existing laws and
regulations, within fifteen days from the finality of this Decision.
No costs.
SO ORDERED.
DISCUSSION 4
TITLE I
CHAPTER I
G.R. No. L-48645, January 07, 1987
"BROTHERHOOD" LABOR UNITY MOVEMENT OF THE
PHILIPPINES, ANTONIO CASBADILLO, PROSPERO
TABLADA, ERNESTO BENGSON, PATRICIO SERRANO,
ANTONIO B. BOBIAS, VIRGILIO ECHAS, DOMINGO
PARINAS, NORBERTO GALANG, JUANITO NAVARRO,
NESTORIO MARCELLANA, TEOFILO B. CACATIAN, RUFO
L. EGUIA, CARLOS SUMOYAN, LAMBERTO RONQUILLO,
ANGELITO AMANCIO, DANILO B. MATIAR, ET AL.,
PETITIONERS, VS. HON. RONALDO B. ZAMORA,
PRESIDENTIAL ASSISTANT FOR LEGAL AFFAIRS, OFFICE
OF THE PRESIDENT, HON. AMADO G. INCIONG,
UNDERSECRETARY OF LABOR, SAN MIGUEL
CORPORATION, GENARO OLIVES, ENRIQUE CAMAHORT,
FEDERICO OATE, ERNESTO VILLANUEVA, ANTONIO
BOCALING AND GODOFREDO CUETO, RESPONDENTS.
DECISION
GUTIERREZ, JR., J.:
The elemental question in labor law of whether or not an
employer-employee relationship exists between petitioners -
members of the "Brotherhood Labor Unit Movement of
the Philippines" (BLUM) and respondent
San Miguel Corporation, is the main issue in this petition. The
disputed decision of public respondent Ronaldo Zamora,
Presidential Assistant for Legal Affairs, contains a brief
summary of the facts involved:
"1. The records disclose that on July 11, 1969, BLUM filed a
complaint with the now defunct Court of Industrial Relations,
charging San Miguel Corporation, and the following
officers: Enrique Camahort, Federico Oate,
Feliciano Arceo, Melencio Eugenio, Jr., Ernesto Villanueva,
Antonio Bocaling and Godofredo Cueto of unfair labor practice
as set forth in Section 4 (a), sub-sections (1) and (4) of
Republic Act No. 875 and of illegal dismissal. It was alleged
that respondents ordered the individual complainants to
disaffiliate from the complainant union; and that management
dismissed the individual complainants when they insisted on
their union membership.
"On their part, respondents moved for the dismissal of the
complaint on the grounds that the complainants are not and
have never been employees of respondent company but
employees of the independent contractor; that respondent
company has never had control over the means and methods
followed by the independent contractor who enjoyed full
authority to hire and control said employees; and that the
individual complainants are barred by estoppel from asserting
that they are employees of respondent company.
"While pending with the Court of Industrial Relations (CIR),
pleadings and testimonial and documentary evidences were
duly presented, although the actual hearing was delayed by
several postponements. The dispute was taken over by the
National Labor Relations Commission (NLRC) with thedecreed
abolition of the CIR and the hearing of the
case intransferably commenced on September 8, 1975.
"On February 9, 1976, Labor Arbiter Nestor C. Lim found
for complainants which was concurred in by the NLRC in a
decision dated June 28, 1976. The amount
of backwages awarded, however, was reduced by NLRC to the
equivalent of one (1) year salary.
5
"On appeal, the Secretary in a decision dated June 1, 1977,
set aside the NLRC ruling, stressing the absence of an
employer-employee relationship as borne out by the records of
the case. x x x."
The petitioners strongly argue that there exists an employer-
employee relationship between them and the respondent
company and that they were dismissed for unionism, an act
constituting unfair labor practice "for which respondents must
be made to answer".
Unrebutted evidence and testimony on record establish that
the petitioners are workers who have been employed at the
San Miguel Parola Glass Factory since 1961, averaging about
seven (7) years of service at the time of their
termination. They worked as "cargadores" or "pahinantes" at
the SMC Plant loading, unloading, piling or palleting empty
bottles and wooden shells to and from company trucks and
warehouses. At times, they accompanied the company trucks
on their delivery routes.
The petitioners first reported for work to Superintendent-in-
Charge Camahort. They were issued gate passes signed
by Camahort and were provided by the respondent company
with the tools, equipment and paraphernalia used in the
loading, unloading, piling and hauling operation.
Job orders emanated from Camahort. The orders are then
transmitted to an assistant-officer-in-charge. In turn, the
assistant informs the warehousemen and checkers regarding
the same. The latter, thereafter, relays said orders to
the capatazes or group leaders who then give orders to the
workers as to where, when and what to load, unload, pile,
pallet or clean.
Work in the glass factory was neither regular nor continuous,
depending wholly on the volume of bottles manufactured to be
loaded and unloaded, as well as the business activity of the
company. Work did not necessarily mean a full eight (8) hour
day for the petitioners. However, work, at times, exceeded the
eight (8) hour day and necessitated work on Sundays and
holidays. For this, they were neither paid overtime nor
compensation for work on Sundays and holidays.
Petitioners were paid every ten (10) days on a piece rate basis,
that is, according to the number of cartons and wooden shells
they were able to load, unload, or pile. The group leader notes
down the number or volume of work that each individual
worker has accomplished. This is then made the basis of a
report or statement which is compared with the notes of the
checker and warehousemen as to whether or not they
tally. Final approval of report is by officer-in-
charge Camahort. The pay check is given to the group leaders
for encashment, distribution, and payment to the petitioners in
accordance with payrolls prepared by said leaders. From the
total earnings of the group, the group leader gets a
participation or share of ten (10%) percent plus an additional
amount from the earnings of each individual.
The petitioners worked exclusively at the SMC plant, never
having been assigned to other companies or departments of
SMC plant, even when the volume of work was at its
minimum. When any of the glass furnaces suffered a
breakdown, making a shutdown necessary, the petitioners'
work was temporarily suspended. Thereafter, the petitioners
would return to work at the glass plant.
Sometime in January, 1969, the petitioner workers
numbering one hundred and forty (140) organized and
affiliated themselves with the petitioner union and engaged in
union activities. Believing themselves entitled to overtime and
holiday pay, the petitioners pressed management, airing other
grievances such as being paid below the minimum wage law,
in human treatment, being forced to borrow at usurious rates of
interest and to buy raffle tickets, coerced by withholding their
salaries, and salary deductions made without their
consent. However, their gripes and grievances were not
heeded by the respondents.

On February 6, 1969, the petitioner union filed a notice of strike
with the Bureau of Labor Relations in connection with the
dismissal of some of its members who were allegedly
castigated for their union membership and warned that should
they persist in continuing with their union activities they would
be dismissed from their jobs. Several conciliation conferences
were scheduled in order to thresh out their
differences. On February 12, 1969, union member
Rogelio Dipad was dismissed from work. At the scheduled
conference on February 19, 1969, the complainant union
through its officers headed by National
President ArtemioPortugal, Sr., presented a letter to the
respondent company containing proposals and/or labor
demands together with a request for recognition and collective
bargaining.
San Miguel refused to bargain with the petitioner union alleging
that the workers are not their employees.
On February 20, 1969, all the petitioners were dismissed from
their jobs and, thereafter, denied entrance to respondent
company's glass factory despite their regularly reporting for
work. A complaint for illegal dismissal and unfair labor practice
was filed by the petitioners.
The case reaches us now with the same issues to be resolved
as when it had begun.
The question of whether an employer-employee relationship
exists in a certain situation continues to bedevil the
courts. Some businessmen try to avoid the bringing about of
an employer-employee relationship in their enterprises
because that judidical relation spawns obligations connected
with workmen's compensation, social security, medicare,
minimum wage, termination pay, and
unionism. (Mafinco Trading Corporation v. Ople, 70 SCRA
139).
In determining the existence of an employer-employee
relationship, the elements that are generally considered are the
following: (a) the selection and engagement of the employee;
(b) the payment of wages; (c) the power of dismissal; and (d)
the employer's power to control the employee with respect to
the means and methods by which the work is to be
accomplished. It is the so-called "control test" that is the most
important element (Investment Planning Corp. of the Phils. v.
The Social Security System, 21 SCRA 924; Mafinco Trading
Corp. v. Ople, supra, and Rosario Brothers, Inc. v. Ople, 131
SCRA 72).
Applying the above criteria, the evidence strongly indicates the
existence of an employer-employee relationship between
petitioner workers and respondent San Miguel
Corporation. The respondent asserts that the petitioners are
employees of the Guaranteed Labor Contractor, an
independent labor contracting firm.
The facts and evidence on record negate respondent SMC's
claim.
The existence of an independent contractor relationship is
generally established by the following criteria: "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 a specified piece of work; the control and supervision of the
work to another; the employer's power with respect to the
hiring, firing and payment of the contractor's workers; the
control of the premises; the duty to supply the premises tools,
appliances, materials and labor; and the mode, manner and
terms of payment (56 CJS Master and Servant, Sec. 3(2), 46;
See also 27 AM. Jur. Independent Contractor, Sec. 5, 485
and Anne., 75 ALR 7260727).
None of the above criteria exists in the case at bar.
Highly unusual and suspect is the absence of a written contract
to specify the performance of a specified piece of work, the
6
nature and extent of the work and the term and duration of the
relationship. The records fail to show that a large commercial
outfit, such as the San Miguel Corporation, entered into mere
oral agreements of employment or labor contracting where the
same would involve considerable expenses and dealings with
a large number of workers over a long period of time. Despite
respondent company's allegations not an iota of evidence was
offered to prove the same or its particulars. Such failure
makes respondent SMC's stand subject to serious doubts.
Uncontroverted is the fact that for an average of seven (7)
years, each of the petitioners had worked continuously and
exclusively for the respondent company's shipping and
warehousing department. Considering the length of time that
the petitioners have worked with the respondent company,
there is justification to conclude that they were engaged to
perform activities necessary or desirable in the usual business
or trade of the respondent, and the petitioners are, therefore
regular employees (Phil. Fishing Boat Officers and Engineers
Union v. Court of Industrial Relations, 112 SCRA 159 and RJL
Martinez Fishing Corporation v. National Labor Relations
Commission, 127 SCRA 454).
As we have found in RJL Martinez Fishing Corporation v.
National Labor Relations Commission, (supra):
"x x x [T]he employer-employee relationship between the
parties herein is not co-terminous with each loading and
unloading job. As earlier shown, respondents are engaged in
the business of fishing. For this purpose, they have a fleet of
fishing vessels. Under this situation, respondents' activity of
catching fish is a continuous process and could hardly be
considered as seasonal in nature. So that the activities
performed by herein complainants, i.e. unloading the catch of
tuna fish from respondents' vessels and then loading the same
to refrigerated vans, are necessary or desirable in the business
of respondents. This circumstance makes the employment of
complainants a regular one, in the sense that it does not
depend on any specific project or seasonable activity. (NLRC
Decision, p. 94, Rollo)."
so is it with petitioners in the case at bar. In fact, despite past
shutdowns of the glass plant for repairs, the petitioners,
thereafter, promptly returned to their jobs, never having been
replaced, or assigned elsewhere until the present controversy
arose. The term of the petitioners' employment appears
indefinite. The Continuity and habituality of petitioners' work
bolsters their claim of employee status vis-a-vis respondent
company.
Even under the assumption that a contract of employment had
indeed been executed between respondent SMC and the
alleged labor contractor, respondent's case will, nevertheless,
fail.
Section 8, Rule VIII, Book III of the Implementing Rules of the
Labor Code provides:
"Job contracting. There is job contracting permissible under
the Code if the following conditions are met:
"(1) The contractor carries on an independent business and
undertakes the contract work on his own account under his
own responsibility according to his own manner and method,
free from the control and direction of his employer or principal
in all matters connected with the performance of the work
except as to the results thereof; and
"(2) The contractor has substantial capital or investment in the
form of tools, equipment, machineries, work premises, and
other materials which are necessary in the conduct of his
business."
We find that Guaranteed and Reliable Labor contractors have
neither substantial capital nor investment to qualify as an
independent contractor under the law. The premises, tools,
equipment and paraphernalia used by the petitioners in their
jobs are admittedly all supplied by respondent company. It is
only the manpower or labor force which the alleged contractors
supply, suggesting the existence of a "labor-only" contracting
scheme prohibited by law (Article 106, 109 of the Labor Code;

Section 9(b), Rule VIII, Book III, Implementing Rules and
Regulations of the Labor Code). In fact, even the alleged
contractor's office, which consists of a space at respondent
company's warehouse, table, chair, typewriter and cabinet, are
provided for by respondent SMC. It is therefore clear that the
alleged contractors have no capital outlay involved in the
conduct of its business, in the maintenance thereof or in the
payment of its workers' salaries.
The payment of the workers' wages is a critical factor in
determining the actuality of an employer-employee relationship
whether between respondent company and petitioners or
between the alleged independent contractor and petitioners. It
is important to emphasize that in a truly independent
contractor-contracteerelationship, the fees are paid directly to
the manpower agency in lump sum without indicating or
implying that the basis of such lump sum is the salary per
worker multiplied by the number of workers assigned to the
company. This is the rule in Social Security System v. Court of
Appeals (39 SCRA 629, 635).
The alleged independent contractors in the case at bar were
paid a lump sum representing only the salaries the workers
were entitled to, arrived at by adding the salaries of each
worker which depend on the volume of work they had
accomplished individually. These are based on payrolls,
reports or statements prepared by the workers' group leader,
warehousemen and checkers, where they note down the
number of cartons, wooden shells and bottles each worker was
able to load, unload, pile or pallet and see whether they
tally. The amount paid by respondent company to the alleged
independent contractor considers no business expenses or
capital outlay of the latter. Nor is the profit or gain of the
alleged contractor in the conduct of its business provided for as
an amount over and above the workers' wages. Instead, the
alleged contractor receives a percentage from the total
earnings of all the workers plus an additional amount
corresponding to a percentage of the earnings of each
individual worker, which, perhaps, accounts for the petitioners'
charge of unauthorized deductions from their salaries by the
respondents.
Anent the argument that the petitioners are not employees as
they worked on piece basis, we merely have to cite our rulings
in Dy Keh Beng v. International Labor and Marine Union of the
Philippines (90 SCRA 161), as follows:
"'[C]ircumstances must be construed to determine indeed if
payment by the piece is just a method of compensation and
does not define the essence of the relation. Units of time ...
and units of work are in establishments like respondent (sic)
just yardsticks whereby to determine rate of compensation, to
be applied whenever agreed upon. We cannot construe
payment by the piece where work is done in such an
establishment so as to put the worker completely at liberty to
turn him out and take in another at pleasure.'"
Article 106 of the Labor Code provides the legal effect of a
labor-only contracting scheme, to wit:
"x x x the person or intermediary shall be considered merely as
an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were
directly employed by him."
Firmly establishing respondent SMC's role as employer is the
control exercised by it over the petitioners that is, control in
the means and methods/manner by which petitioners are to go
about their work, as well as in disciplinary measures imposed
by it.
Because of the nature of the petitioners' work
as cargadores or pahinantes, supervision as to the means
and manner of performing the same is practically nil. For, how
many ways are there to load and unload bottles and wooden
shells? The mere concern of both respondent SMC and the
alleged contractor is that the job of having the bottles and
wooden shells brought to and from the warehouse be
done. More evident and pronounced is respondent company's
7
right to control in the discipline of petitioners. Documentary
evidence presented by the petitioners establish respondent
SMC's right to impose disciplinary measures for violations or
infractions of its rules and regulations as well as its right to
recommend transfers and dismissals of the piece
workers. The inter-office memoranda submitted in evidence
prove the company's control over the petitioners. That
respondent SMC has the power to recommend penalties or
dismissal of the piece workers, even as to Abner Bungay who
is alleged by SMC to be a representative of the alleged labor
contractor, is the strongest indication of respondent company's
right of control over the petitioners as direct employer. There is
no evidence to show that the alleged labor contractor had such
right of control or much less had been there to supervise or
deal with the petitioners.
The petitioners were dismissed allegedly because of the
shutdown of the glass manufacturing plant. Respondent
company would have us believe that this was a case of
retrenchment due to the closure or cessation of operations of
the establishment or undertaking. But such is not the case
here. The respondent's shutdown was merely temporary, one
of its furnaces needing repair. Operations continued after such
repairs, but the petitioners had already been refused entry to
the premises and dismissed from respondent's service. New
workers manned their positions. It is apparent that the closure
of respondent's warehouse was merely a ploy to get rid of the
petitioners, who were then agitating the respondent company
for benefits, reforms and collective bargaining as a
union. There is no showing that petitioners had been remiss in
their obligations and inefficient in their jos to warrant their
separation.
As to the charge of unfair labor practice because of SMC's
refusal to bargain with the petitioners, it is clear that the
respondent company had an existing collective bargaining
agreement with the IBM union which is the recognized
collective bargaining representative at the respondent's glass
plant.
There being a recognized bargaining representative of all
employees at the company's glass plant, the petitioners cannot
merely form a union and demand bargaining. The Labor Code
provides the proper procedure for the recognition of unions as
sole bargaining representatives. This must be followed.
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is
GRANTED. The San Miguel Corporation is hereby ordered
to REINSTATE petitioners, with three (3)
years backwages. However, where reinstatement is no longer
possible, the respondent SMC is ordered to pay the petitioners
separation pay equivalent to one (1) month pay for every year
of service.
SO ORDERED.
G.R. No. L-43825, May 09, 1988
CONTINENTAL MARBLE CORP. AND FELIPE DAVID,
PETITIONERS, VS. NATIONAL LABOR RELATIONS
COMMISSION (NLRC); ARBITRATOR JOSE T. COLLADO
AND RODITO NASAYAO, RESPONDENTS.
DECISION
PADILLA, J.:
In this petition for mandamus, prohibition and certiorari with
preliminary injunction, petitioners seek to annul and set aside
the decision rendered by the respondent Arbitrator Jose T.
Collado, dated 29 December 1975, in NLRC Case No. LR-
6151, entitled: "Rodito Nasayao, complainant, versus
Continental Marble Corp. and Felipe David, respondents", and
the resolution issued by the respondent Commission, dated 7
May 1976, which dismissed herein petitioners' appeal from
said decision.
In his complaint before the NLRC, herein private respondent
Rodito Nasayao claimed that sometime in May 1974, he was

appointed plant manager of the petitioner corporation, with an
alleged compensation of P3,000.00, a month, or 25% of the
monthly net income of the company, whichever is greater, and
when the company failed to pay his salary for the months of
May, June, and July 1974, Rodito Nasayao filed a complaint
with the National Labor Relations Commission, Branch IV, for
the recovery of said unpaid salaries. The case was docketed
therein as NLRC Case no. LR-6151.
Answering, the herein petitioners denied that Rodito Nasayao
was employed in the company as plant manager with a fixed
monthly salary of P3,000.00. They claimed that the
undertaking agreed upon by the parties was a joint venture, a
sort of partnership, wherein Rodito Nasayao was to keep the
machinery in good working condition and, in return, he would
get the contracts from end-users for the installation of marble
products, in which the company would not interfere. In addition,
private respondent Nasayao was to receive an amount
equivalent to 25% of the net profits that the petitioner
corporation would realize, should there be any. Petitioners
alleged that since there had been no profits during said period,
private respondent was not entitled to any amount.
The case was submitted for voluntary arbitration and the
parties selected the herein respondent Jose T. Collado as
voluntary arbitrator. In the course of the proceedings, however,
the herein petitioners challenged the arbitrator's capacity to try
and decide the case fairly and judiciously and asked him to
desist from further hearing the case. But, the respondent
arbitrator refused. In due time, or on 29 December 1975, he
rendered judgment in favor of the complainant, ordering the
herein petitioners to pay Rodito Nasayao the amount of
P9,000.00, within 10 days from notice[1].
Upon receipt of the decision, the herein petitioners appealed to
the National Labor Relations Commission on grounds that the
labor arbiter gravely abused his discretion in persisting to hear
and decide the case notwithstanding petitioners' request for
him to desist therefrom; and that the appealed decision is not
supported by evidence[2].
On 18 March 1976, Rodito Nasayao filed a motion to dismiss
the appeal on the ground that the decision of the voluntary
arbitrator is final, unappealable, and immediately executory[3];
and, on 23 March 1976, he filed a motion for the issuance of a
writ of execution[4].
Acting on the motions, the respondent Commission, in a
resolution dated 7 May 1976, dismissed the appeal on the
ground that the decision appealed from is final, unappealable
and immediately executory, and ordered the herein petitioners
to comply with the decision of the voluntary arbitrator within 10
days from receipt of the resolution[5].
The petitioners are before the Court in the present recourse.
As prayed for, the Court issued a temporary restraining order,
restraining herein respondents from enforcing and/or carrying
out the questioned decision and resolution[6].
The issue for resolution is whether or not the private
respondent Rodito Nasayao was employed as plant manager
of petitioner Continental Marble Corporation with a monthly
salary of P3,000.00 or 25% of its monthly income, whichever is
greater, as claimed by said respondent, or entitled to receive
only an amount equivalent to 25% of net profits, if any, that the
company would realize, as contended by the petitioners.
The respondent arbitrator found that the agreement between
the parties was for the petitioner company to pay the private
respondent, Rodito Nasayao, a monthly salary of P3,000.00,
and, consequently, ordered the company to pay Rodito
Nasayao the amount of P9,000.00 covering a period of three
(3) months, that is, May, June and July 1974.
The respondent Rodito Nasayao now contends that the
judgment or award of the voluntary arbitrator is final,
unappealable and immediately executory, and may not be
reviewed by the Court. His contention is based upon the
provisions of Art. 262 of the Labor Code, as amended.
The petitioners, upon the other hand, maintain that "where
there is patent and manifest abuse of discretion, the rule on
8
unappealability of awards of a voluntary arbitrator becomes
flexible and it is the inherent power of the Courts to maintain
the people's faith in the administration of justice".
The question of the finality and unappealability of a decision
and/or award of a voluntary arbitrator had been laid to rest in
Oceanic Bic Division (FFW) vs. Romero[7], and reiterated in
Mantrade/FMMC Division Employees and Workers Union vs.
Bacungan[8]. The Court therein ruled that it can review the
decisions of voluntary arbitrators, thus -
"We agree with the petitioner that the decisions of voluntary
arbitrators must be given the highest respect and as a general
rule must be accorded a certain measure of finality. This is
especially true where the arbitrator chosen by the parties
enjoys the first rate credentials of Professor Flerida Ruth
Pineda Romero, Director of the U.P. Law Center and an
academician of unquestioned expertise in the field of Labor
Law. It is not correct, however, that this respect precludes the
exercise of judicial review over their decisions. Article 262 of
the Labor Code making voluntary arbitration awards final,
inappelable, and executory except where the money claims
exceed P100,000.00 or 40% of paid-up capital of the employer
or where there is abuse of discretion or gross incompetence
refers to appeals to the National Labor Relations Commission
and not to judicial review.
"Inspite of statutory provisions making 'final' the decisions of
certain administrative agencies, we have taken cognizance of
petitions questioning these decisions where want of
jurisdiction, grave abuse of discretion, violation of due process,
denial of substantial justice, or erroneous interpretation of the
law were brought to our attention. There is no provision for
appeal in the statute creating the Sandiganbayan but this has
not precluded us from examining decisions of this special court
brought to us in proper petitions. x x x"
The Court further said:
"A voluntary arbitrator by the nature of her functions acts in a
quasi-judicial capacity. There is no reason why her decisions
involving interpretation of law should be beyond this Court's
review. Administrative officials are presumed to act in
accordance with law and yet we do not hesitate to pass upon
their work where a question of law is involved or where a
showing of abuse of authority or discretion in their official acts
is properly raised in petitions for certiorari".
The foregoing pronouncements find support in Section 29 of
Republic Act No. 876, otherwise known as the Arbitration Law,
which provides:
"Sec. 29. Appeals. - An appeal may be taken from an order
made in a proceeding under this Act, or from a judgment
entered upon an award through certiorari proceedings, but
such appeals shall be limited to questions of law. The
proceedings upon such an appeal, including the judgment
thereon shall be governed by the Rules of Court in so far as
they are applicable".
The private respondent, Rodito Nasayao, in his Answer to the
petition[9], also claims that the case is premature for non-
exhaustion of administrative remedies. He contends that the
decision of the respondent Commission should have been first
appealed by petitioners to the Secretary of Labor, and, if they
are not satisfied with his decision, to appeal to the President of
the Philippines, before resort is made to the Court.
The contention is without merit. The doctrine of exhaustion of
administrative remedies cannot be invoked in this case, as
contended. In the recent case of John Clement Consultants,
Inc. versus National Labor Relations Commission[10], the Court
said:
"As is well known, no law provides for an appeal from
decisions of the National Labor Relations Commission; hence,
there can be no review and reversal on appeal by higher
authority of its factual or legal conclusions. When, however, it
decides a case without or in excess of its jurisdiction, or with
grave abuse of discretion, the party thereby adversely affected
may obtain a review and nullification of that decision by this
Court through the extraordinary writ of certiorari. Since, in this
case, it appears that the Commission has indeed acted without
jurisdiction and with grave abuse of discretion in taking
cognizance of a belated appeal sought to be taken from a
decision of Labor Arbiter and thereafter reversing it, the writ of
certiorari will issue to undo those acts, and do justice to the
aggrieved party".

We also find no merit in the contention of Rodito Nasayao that
only questions of law, and not findings of fact of a voluntary
arbitrator may be reviewed by the Court, since the findings of
fact of the voluntary arbitrator are conclusive upon the Court.
While the Court has accorded great respect for, and finality to,
findings of fact of a voluntary arbitrator[11] and administrative
agencies which have acquired expertise in their respective
fields, like the Labor Department and the National Labor
Relations Commission[12], their findings of fact and the
conclusions drawn therefrom have to be supported by
substantial evidence. In the instant case, the finding of the
voluntary arbitrator that Rodito Nasayao was an employee of
the petitioner corporation is not supported by the evidence or
by the law.
On the other hand, we find the version of the petitioners to be
more plausible and in accord with human nature and the
ordinary course of things. As pointed out by the petitioners, it
was illogical for them to hire the private respondent Rodito
Nasayao as plant manager with a monthly salary of P3,000.00,
an amount which they could ill-afford to pay, considering that
the business was losing, at the time he was hired, and that
they were about to close shop in a few months' time.
Besides, there is nothing in the record which would support the
claim of Rodito Nasayao that he was an employee of the
petitioner corporation. He was not included in the company
payroll, nor in the list of company employees furnished the
Social Security System.
Most of all, the element of control is lacking. In Brotherhood
Labor Unity Movement in the Philippines vs. Zamora[13], the
Court enumerated the factors in determining whether or not an
employer-employee relationship exists, to wit:
"In determining the existence of an employer-employee
relationship, the elements that are generally considered are the
following: (a) the selection and engagement of the employee;
(b) the payment of wages; (c) the power of dismissal; and (d)
the employer's power to control the employee with respect to
the means and methods by which the work is to be
accomplished. It is the so-called 'control test' that is the most
important element (Investment Planning Corp. of the Phils. vs.
The Social Security System, 21 SCRA 924; Mafinco Trading
Corp. v. Ople, supra, and Rosario Brothers, Inc. v. Ople, 131
SCRA 72)".
In the instant case, it appears that the petitioners had no
control over the conduct of Rodito Nasayao in the performance
of his work. He decided for himself on what was to be done
and worked at his own pleasure. He was not subject to definite
hours or conditions of work and, in turn, was compensated
according to the results of his own effort. He had a free hand in
running the company and its business, so much so, that the
petitioner Felipe David did not know, until very much later, that
Rodito Nasayao had collected old accounts receivables, not
covered by their agreement, which he converted to his own
personal use. It was only after Rodito Nasayao had abandoned
the plant following discovery of his wrong-doings, that Felipe
David assumed management of the plant.
Absent the power to control the employee with respect to the
means and methods by which his work was to be
accomplished, there was no employer-employee relationship
between the parties. Hence, there is no basis for an award of
unpaid salaries or wages to Rodito Nasayao.
WHEREFORE, the decision rendered by the respondent Jose
T. Collado in NLRC Case No. LR-6151, entitled: "Rodito
Nasayao, complainant, versus Continental Marble Corp. and
Felipe David, respondents", on 29 December 1975, and the
resolution issued by the respondent National Labor Relations
Commission in said case on 7 May 1976, are REVERSED and
SET ASIDE and another one entered DISMISSING private
respondent's complaint. The temporary restraining order
heretofore issued by the Court is made permanent. Without
costs.
SO ORDERED.
G.R. No. 84484, November 15, 1989
9
INSULAR LIFE ASSURANCE CO., LTD., PETITIONER, VS.
NATIONAL LABOR RELATIONS COMMISSION AND
MELECIO BASIAO, RESPONDENTS.
DECISION
NARVASA, J.:
On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter
simply called the Company) and Melecio T. Basiao entered into
a contract[1] by which:
1. Basiao was "authorized to solicit within
the Philippines applications for insurance policies and annuities
in accordance with the existing rules and regulations" of the
Company;
2. he would receive "compensation, in the form of
commissions * * as provided in the Schedule of Commissions"
of the contract to "constitute a part of the consideration of * *
(said) agreement;" and
3. the "rules in * * (the Company's) Rate Book and its
Agent's Manual, as well as all its circulars * * and those which
may from time to time be promulgated by it, * *" were made
part of said contract.
The contract also contained, among others, provisions
governing the relations of the parties, the duties of the Agent,
the acts prohibited to him, and the modes of termination of the
agreement, viz.:
"RELATION WITH THE COMPANY. The Agent shall be free to
exercise his own judgment as to time, place and means of
soliciting insurance. Nothing herein contained shall therefore
be construed to create the relationship of employee and
employer between the Agent and the Company. However, the
Agent shall observe and conform to all rules and regulations
which the Company may from time to time prescribe.
"ILLEGAL AND UNETHICAL PRACTICES. The Agent is
prohibited from giving, directly or indirectly, rebates in any
form, or from making any misrepresentation or over-selling,
and, in general, from doing or committing acts prohibited in the
Agent's Manual and in circulars of the Office of the Insurance
Commissioner.
"TERMINATION. The Company may terminate the contract at
will, without any previous notice to the Agent, for or on account
of * * (explicitly specified causes). * *
Either party may terminate this contract by giving to the other
notice in writing to that effect. It shall become ipso
facto cancelled if the Insurance Commissioner should revoke a
Certificate of Authority previously issued or should the Agent
fail to renew his existing Certificate of Authority upon its
expiration. The Agent shall not have any right to any
commission on renewal of premiums that may be paid after the
termination of this agreement for any cause whatsoever,
except when the termination is due to disability or death in line
of service. As to commission corresponding to any balance of
the first year's premiums remaining unpaid at the termination of
this agreement, the Agent shall be entitled to it if the balance of
the first year premium is paid, less actual cost of collection,
unless the termination is due to a violation of this contract,
involving criminal liability or breach of trust.
"ASSIGNMENT. No assignment of the Agency herein created
or of commissions or other compensations shall be valid
without the prior consent in writing of the Company. * *."
Some four years later, in April 1972, the parties entered into
another contract -- an Agency Manager's Contract -- and to
implement his end of it Basiao organized an agency or office to
which he gave the name M. Basiao and Associates, while
concurrently fulfilling his commitments under the first contract
with the Company.[2]
In May, 1979, the Company terminated the Agency a
Manager's Contract. After vainly seeking a
reconsideration, Basiao sued the Company in a civil action and
this, he was later to claim, prompted the latter to terminate also
his engagement under the first contract and to stop payment of
his commissions starting April 1, 1980.[3]

Basiao thereafter filed with the then Ministry of Labor a
complaint[4] against the Company and its president. Without
contesting the termination of the first contract, the complaint
sought to recover commissions allegedly unpaid thereunder,
plus attorney's fees. The respondents disputed the Ministry's
jurisdiction over Basiao's claim, asserting that he was not the
Company's employee, but an independent contractor and that
the Company had no obligation to him for unpaid commissions
under the terms and conditions of his contract.[5]
The Labor Arbiter to whom the case was assigned found
for Basiao. He ruled that the underwriting agreement had
established an employer-employee relationship between him
and the Company, and this conferred jurisdiction on the
Ministry of Labor to adjudicate his claim. Said official's
decision directed payment of his unpaid commissions "* *
equivalent to the balance of the first year's premium remaining
unpaid, at the time of his termination, of all the insurance
policies solicitedby * * (him) in favor of the respondent
company * *" plus 10% attorney's fees.[6]
This decision was, on appeal by the Company, affirmed by the
National Labor Relations Commission.[7] Hence, the present
petition for certiorari and prohibition.
The chief issue here is one of jurisdiction: whether,
as Basiao asserts, he had become the Company's employee
by virtue of the contract invoked by him, thereby placing his
claim for unpaid commissions within the original and exclusive
jurisdiction of the Labor Arbiter under the provisions of Section
217 of the Labor Code[8] or, contrarily, as the Company would
have it, that under said contract Basiao's status was that of an
independent contractor whose claim was thus cognizable, not
by the Labor Arbiter in a labor case, but by the regular courts in
an ordinary civil action.
The Company's thesis, that no employer-employee relation in
the legal and generally accepted sense existed between it
and Basiao, is drawn from the terms of the contract they had
entered into, which, either expressly or by necessary
implication, made Basiao the master of his own time and
selling methods, left to his judgment the time, place and means
of soliciting insurance, set no accomplishment quotas and
compensated him on the basis of results obtained. He was not
bound to observe any schedule of working hours or report to
any regular station; he could seek and work on his prospects
anywhere and at anytime he chose to, and was free to adopt
the selling methods he deemed most effective.
Without denying that the above were indeed the expressed or
implicit conditions of Basiao's contract with the Company, the
respondents contend that they do not constitute the decisive
determinant of the nature of his engagement, invoking
precedents to the effect that the critical feature distinguishing
the status of an employee from that of an independent
contractor is control, that is, whether or not the party who
engages the services of another has the power to control the
latter's conduct in rendering such services. Pursuing the
argument, the respondents draw attention to the provisions
of Basiao's contract obliging him to "* * observe and conform to
all rules and regulations which the Company may from time to
time prescribe * *," as well as to the fact that the Company
prescribed the qualifications of applicants for insurance,
processed their applications and determined the amounts of
insurance cover to be issued as indicative of the control which
made Basiao, in legal contemplation, an employee of the
Company.[9]
It is true that the "control test" expressed in the following
pronouncement of the Court in the 1956 case
of Viana vs. Alejo Al-Lagadan:[10]
"* * Indetermining the existence of employer-employee
relationship, the following elements are generally considered,
namely: (1) the selection and engagement of the employee;
(2) the payment of wages; (3) the power of dismissal; and (4)
the power to control the employees conduct -- although the
latter is the most important element (35 Am. Jur. 445). * *,"
10
has been followed and applied in later cases, some fairly
recent.[11] Indeed, it is without question a valid test of the
character of a contract or agreement to render service. It
should, however, be obvious that not every form of control that
the hiring party reserves to himself over the conduct of the
party hired in relation to the services rendered may be
accorded the effect of establishing an employer-employee
relationship between them in the legal or technical sense of the
term. A line must be drawn somewhere, if the recognized
distinction between an employee and an individual contractor
is not to vanish altogether. Realistically, it would be a rare
contract of service that gives untrammelled freedom to the
party hired and eschews any intervention whatsoever in his
performance of the engagement.
Logically, the line should be drawn between rules that merely
serve as guidelines towards the achievement of the mutually
desired result without dictating the means or methods to be
employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of
such means. The first, which aim only to promote the result,
create no employer-employee relationship unlike the second,
which address both the result and the means used to achieve
it. The distinction acquires particular relevance in the case of
an enterprise affected with public interest, as is the business of
insurance, and is on that account subject to regulation by the
State with respect, not only to the relations between insurer
and insured but also to the internal affairs of the insurance
company.[12] Rules and regulations governing the conduct of
the business are provided for in the Insurance Code and
enforced by the Insurance Commissioner. It is, therefore,
usual and expected for an insurance company to promulgate a
set of rules to guide its commission agents in selling its policies
that they may not run afoul of the law and what it requires or
prohibits. Of such a character are the rules which prescribe
the qualifications of persons who may be insured, subject
insurance applications to processing and approval by the
Company, and also reserve to the Company the determination
of the premiums to be paid and the schedules of
payment. None of these really invades the agent's contractual
prerogative to adopt his own selling methods or to sell
insurance at his own time and convenience, hence cannot
justifiably be said to establish an employer-employee
relationship between him and the company.
There is no dearth of authority holding persons similarly placed
as respondent Basiao to be independent contractors, instead
of employees of the parties for whom they
worked. In Mafinco Trading Corporation vs. Ople,[13] the Court
ruled that a person engaged to sell soft drinks for another,
using a truck supplied by the latter, but with the right to employ
his own workers, sell according to his own methods subject
only to prearranged routes, observing no working hours fixed
by the other party and obliged to secure his own licenses and
defray his own selling expenses, all in consideration of a
peddlers discount given by the other party for at least 250
cases of soft drinks sold daily, was not an employee but an
independent contractor.
In Investment Planning Corporation of the Philippines vs.
Social Security System,[14] a case almost on all fours with the
present one, this Court held that there was no employer-
employee relationship between a commission agent and an
investment company, but that the former was an independent
contractor where said agent and others similarly placed
were: (a) paid compensation in the form of commissions
based on percentages of their sales, any balance of
commissions earned being payable to their legal
representatives in the event of death or resignation; (b)
required to put up performance bonds; (c) subject to a set of
rules and regulations governing the performance of their duties
under the agreement with the company and termination of their
services for certain causes; (d) not required to report for work
at any time, nor to devote their time exclusively to working for
the company nor to submit a record of their activities, and who,
finally, shouldered their own selling and transportation
expenses.
More recently, in Sara vs. NLRC,[15] it was held that one who
had been engaged by a rice miller to buy and sell rice

and palay without compensation except a certain percentage
of what he was able to buy or sell, did work at his own pleasure
without any supervision or control on the part of his principal
and relied on his own resources in the performance of his
work, was a plain commission agent, an independent
contractor and not an employee.
The respondents limit themselves to pointing out
that Basiao's contract with the Company bound him to observe
and conform to such rules and regulations as the latter might
from time to time prescribe. No showing has been made that
any such rules or regulations were in fact promulgated, much
less that any rules existed or were issued which effectively
controlled or restricted his choice of methods -- or the methods
themselves -- of selling insurance. Absent such showing, the
Court will not speculate that any exceptions or qualifications
were imposed on the express provision of the contract
leaving Basiao "* * free to exercise his own judgment as to the
time, place and means of soliciting insurance."
The Labor Arbiter's decision makes reference to Basiao's claim
of having been connected with the Company for twenty-five
years. Whatever this is meant to imply, the obvious reply
would be that what is germane here is Basiao's status under
the contract of July 2, 1968, not the length of his relationship
with the Company.
The Court, therefore, rules that under the contract invoked by
him, Basiao was not an employee of the petitioner, but a
commission agent, an independent contractor whose claim for
unpaid commissions should have been litigated in an ordinary
civil action. The Labor Arbiter erred in taking cognizance of,
and adjudicating, said claim, being without jurisdiction to do so,
as did the respondent NLRC in affirming the Arbiter's
decision. This conclusion renders it unnecessary and
premature to consider Basiao's claim for commissions on its
merits.
WHEREFORE, the appealed Resolution of the National Labor
Relations Commission is set aside, and the complaint of
private respondent Melecio T. Basiao in RAB Case No. VI-
0010-83 is dismissed. No pronouncement as to costs.
SO ORDERED.
G.R. No. 119268, February 23, 2000
ANGEL JARDIN, DEMETRIO CALAGOS, URBANO
MARCOS, ROSENDO MARCOS, LUIS DE LOS ANGELES,
JOEL ORDENIZA AND AMADO CENTENO, PETITIONERS,
VS. NATIONAL LABOR RELATIONS COMMISSION (NLRC)
AND GOODMAN TAXI (PHILJAMA INTERNATIONAL, INC.),
RESPONDENTS.
DECISION
QUISUMBING, J.:
This special civil action for certiorari seeks to annul the
decision[1] of public respondent promulgated on October 28,
1994, in NLRC NCR CA No. 003883-92, and its
resolution[2] dated December 13, 1994 which denied petitioners
motion for reconsideration.
Petitioners were drivers of private respondent, Philjama
International Inc., a domestic corporation engaged in the
operation of "Goodman Taxi." Petitioners used to drive private
respondents taxicabs every other day on a 24-hour work
schedule under the boundary system. Under this arrangement,
the petitioners earned an average of P400.00 daily.
Nevertheless, private respondent admittedly regularly deducts
from petitioners daily earnings the amount of P30.00
supposedly for the washing of the taxi units. Believing that the
deduction is illegal, petitioners decided to form a labor union to
protect their rights and interests.
Upon learning about the plan of petitioners, private respondent
refused to let petitioners drive their taxicabs when they
reported for work on August 6, 1991, and on succeeding days.
11
Petitioners suspected that they were singled out because they
were the leaders and active members of the proposed union.
Aggrieved, petitioners filed with the labor arbiter a complaint
against private respondent for unfair labor practice, illegal
dismissal and illegal deduction of washing fees. In a
decision[3] dated August 31, 1992, the labor arbiter dismissed
said complaint for lack of merit.
On appeal, the NLRC (public respondent herein), in a decision
dated April 28, 1994, reversed and set aside the judgment of
the labor arbiter. The labor tribunal declared that petitioners are
employees of private respondent, and, as such, their dismissal
must be for just cause and after due process. It disposed of the
case as follows:
"WHEREFORE, in view of all the foregoing considerations, the
decision of the Labor Arbiter appealed from is hereby SET
ASIDE and another one entered:
1. Declaring the respondent company guilty of illegal dismissal
and accordingly it is directed to reinstate the complainants,
namely, Alberto A. Gonzales, Joel T. Morato, Gavino Panahon,
Demetrio L. Calagos, Sonny M. Lustado, Romeo Q. Clariza,
Luis de los Angeles, Amado Centino, Angel Jardin, Rosendo
Marcos, Urbano Marcos, Jr., and Joel Ordeniza, to their former
positions without loss of seniority and other privileges
appertaining thereto; to pay the complainants full backwages
and other benefits, less earnings elsewhere, and to reimburse
the drivers the amount paid as washing charges; and
2. Dismissing the charge of unfair [labor] practice for
insufficiency of evidence.
SO ORDERED."[4]
Private respondents first motion for reconsideration was
denied. Remaining hopeful, private respondent filed another
motion for reconsideration. This time, public respondent, in its
decision[5] dated October 28, 1994, granted aforesaid second
motion for reconsideration. It ruled that it lacks jurisdiction over
the case as petitioners and private respondent have no
employer-employee relationship. It held that the relationship of
the parties is leasehold which is covered by the Civil Code
rather than the Labor Code, and disposed of the case as
follows:
"VIEWED IN THE LIGHT OF ALL THE FOREGOING, the
Motion under reconsideration is hereby given due course.
Accordingly, the Resolution of August 10, 1994, and the
Decision of April 28, 1994 are hereby SET ASIDE. The
Decision of the Labor Arbiter subject of the appeal is likewise
SET ASIDE and a NEW ONE ENTERED dismissing the
complaint for lack of jurisdiction.
No costs.
SO ORDERED."[6]
Expectedly, petitioners sought reconsideration of the labor
tribunals latest decision which was denied. Hence, the instant
petition.
In this recourse, petitioners allege that public respondent acted
without or in excess of jurisdiction, or with grave abuse of
discretion in rendering the assailed decision, arguing that:
"I
THE NLRC HAS NO JURISDICTION TO ENTERTAIN
RESPONDENTS SECOND MOTION FOR
RECONSIDERATION WHICH IS ADMITTEDLY A PLEADING
PROHIBITED UNDER THE NLRC RULES, AND TO GRANT
THE SAME ON GROUNDS NOT EVEN INVOKED THEREIN.
II
THE EXISTENCE OF AN EMPLOYER-EMPLOYEE
RELATIONSHIP BETWEEN THE PARTIES IS ALREADY A
SETTLED ISSUE CONSTITUTING RES JUDICATA, WHICH
THE NLRC HAS NO MORE JURISDICTION TO REVERSE,
ALTER OR MODIFY.
III
IN ANY CASE, EXISTING JURISPRUDENCE ON THE

MATTER SUPPORTS THE VIEW THAT PETITIONERS-TAXI
DRIVERS ARE EMPLOYEES OF RESPONDENT TAXI
COMPANY."[7]
The petition is impressed with merit.
The phrase "grave abuse of discretion amounting to lack or
excess of jurisdiction" has settled meaning in the jurisprudence
of procedure. It means such capricious and whimsical exercise
of judgment by the tribunal exercising judicial or quasi-judicial
power as to amount to lack of power.[8] In labor cases, this
Court has declared in several instances that disregarding rules
it is bound to observe constitutes grave abuse of discretion on
the part of labor tribunal.
In Garcia vs. NLRC,[9] private respondent therein, after
receiving a copy of the labor arbiters decision, wrote the labor
arbiter who rendered the decision and expressed dismay over
the judgment. Neither notice of appeal was filed nor cash or
surety bond was posted by private respondent. Nevertheless,
the labor tribunal took cognizance of the letter from private
respondent and treated said letter as private respondents
appeal. In a certiorari action before this Court, we ruled that the
labor tribunal acted with grave abuse of discretion in treating a
mere letter from private respondent as private respondents
appeal in clear violation of the rules on appeal prescribed
under Section 3(a), Rule VI of the New Rules of Procedure of
NLRC.
In Philippine Airlines Inc. vs. NLRC,[10] we held that the labor
arbiter committed grave abuse of discretion when he failed to
resolve immediately by written order a motion to dismiss on the
ground of lack of jurisdiction and the supplemental motion to
dismiss as mandated by Section 15 of Rule V of the New
Rules of Procedure of the NLRC.
In Unicane Workers Union-CLUP vs. NLRC,[11] we held that the
NLRC gravely abused its discretion by allowing and deciding
an appeal without an appeal bond having been filed as
required under Article 223 of the Labor Code.
In Maebo vs. NLRC,[12] we declared that the labor arbiter
gravely abused its discretion in disregarding the rule governing
position papers. In this case, the parties have already filed their
position papers and even agreed to consider the case
submitted for decision, yet the labor arbiter still admitted a
supplemental position paper and memorandum, and by taking
into consideration, as basis for his decision, the alleged facts
adduced therein and the documents attached thereto.
In Gesulgon vs. NLRC,[13] we held that public respondent
gravely abused its discretion in treating the motion to set aside
judgment and writ of execution as a petition for relief of
judgment. In doing so, public respondent had, without sufficient
basis, extended the reglementary period for filing petition for
relief from judgment contrary to prevailing rule and case law.
In this case before us, private respondent exhausted
administrative remedy available to it by seeking
reconsideration of public respondents decision dated April 28,
1994, which public respondent denied. With this motion for
reconsideration, the labor tribunal had ample opportunity to
rectify errors or mistakes it may have committed before resort
to courts of justice can be had.[14] Thus, when private
respondent filed a second motion for reconsideration, public
respondent should have forthwith denied it in accordance with
Rule 7, Section 14 of its New Rules of Procedure which allows
only one motion for reconsideration from the same party, thus:
"SEC. 14. Motions for Reconsideration. --- Motions for
reconsideration of any order, resolution or decision of the
Commission shall not be entertained except when based on
palpable or patent errors, provided that the motion is under
oath and filed within ten (10) calendar days from receipt of the
order, resolution or decision with proof of service that a copy of
the same has been furnished within the reglementary period
the adverse party and provided further, that only one such
motion from the same party shall be entertained." [Emphasis
supplied]
The rationale for allowing only one motion for reconsideration
from the same party is to assist the parties in obtaining an
expeditious and inexpensive settlement of labor cases. For
obvious reasons, delays cannot be countenanced in the
resolution of labor disputes. The dispute may involve no less
12
than the livelihood of an employee and that of his loved ones
who are dependent upon him for food, shelter, clothing,
medicine, and education. It may as well involve the survival of
a business or an industry.[15]
As correctly pointed out by petitioner, the second motion for
reconsideration filed by private respondent is indubitably a
prohibited pleading[16] which should have not been entertained
at all. Public respondent cannot just disregard its own rules on
the pretext of "satisfying the ends of justice",[17] especially when
its disposition of a legal controversy ran afoul with a clear and
long standing jurisprudence in this jurisdiction as elucidated in
the subsequent discussion. Clearly, disregarding a settled legal
doctrine enunciated by this Court is not a way of rectifying an
error or mistake. In our view, public respondent gravely abused
its discretion in taking cognizance and granting private
respondents second motion for reconsideration as it wrecks
the orderly procedure in seeking reliefs in labor cases.
But, there is another compelling reason why we cannot leave
untouched the flip-flopping decisions of the public respondent.
As mentioned earlier, its October 28, 1994 judgment is not in
accord with the applicable decisions of this Court. The labor
tribunal reasoned out as follows:
"On the issue of whether or not employer-employee
relationship exists, admitted is the fact that complainants are
taxi drivers purely on the boundary system. Under this system
the driver takes out his unit and pays the owner/operator a fee
commonly called boundary for the use of the unit. Now, in the
determination the existence of employer-employee
relationship, the Supreme Court in the case of Sara, et al., vs.
Agarrado, et al. (G.R. No. 73199, 26 October 1988) has
applied the following four-fold test: (1) the selection and
engagement of the employee; (2) the payment of wages; (3)
the power of dismissal; and (4) the power of control the
employees conduct.
Among the four (4) requisites, the Supreme Court stresses
that control is deemed the most important that the other
requisites may even be disregarded. Under the control test, an
employer-employee relationship exists if the employer has
reserved the right to control the employee not only as to the
result of the work done but also as to the means and methods
by which the same is to be accomplished. Otherwise, no such
relationship exists. (Ibid.)
Applying the foregoing parameters to the case herein
obtaining, it is clear that the respondent does not pay the
drivers, the complainants herein, their wages. Instead, the
drivers pay a certain fee for the use of the vehicle. On the
matter of control, the drivers, once they are out plying their
trade, are free to choose whatever manner they conduct their
trade and are beyond the physical control of the
owner/operator; they themselves determine the amount of
revenue they would want to earn in a days driving; and, more
significantly aside from the fact that they pay for the gasoline
they consume, they likewise shoulder the cost of repairs on
damages sustained by the vehicles they are driving.
Verily, all the foregoing attributes signify that the relationship of
the parties is more of a leasehold or one that is covered by a
charter agreement under the Civil Code rather than the Labor
Code."[18]
The foregoing ratiocination goes against prevailing
jurisprudence.
In a number of cases decided by this Court,[19] we ruled that the
relationship between jeepney owners/operators on one hand
and jeepney drivers on the other under the boundary system is
that of employer-employee and not of lessor-lessee. We
explained that in the lease of chattels, the lessor loses
complete control over the chattel leased although the lessee
cannot be reckless in the use thereof, otherwise he would be
responsible for the damages to the lessor. In the case of
jeepney owners/operators and jeepney drivers, the former
exercise supervision and control over the latter. The
management of the business is in the owners hands. The
owner as holder of the certificate of public convenience must
see to it that the driver follows the route prescribed by the
franchising authority and the rules promulgated as regards its
operation. Now, the fact that the drivers do not receive fixed
wages but get only that in excess of the so-called "boundary"

they pay to the owner/operator is not sufficient to withdraw the
relationship between them from that of employer and
employee. We have applied by analogy the abovestated
doctrine to the relationships between bus owner/operator and
bus conductor,[20] auto-calesa owner/operator and driver,[21] and
recently between taxi owners/operators and taxi drivers.
[22]
Hence, petitioners are undoubtedly employees of private
respondent because as taxi drivers they perform activities
which are usually necessary or desirable in the usual business
or trade of their employer.
As consistently held by this Court, termination of employment
must be effected in accordance with law. The just and
authorized causes for termination of employment are
enumerated under Articles 282, 283 and 284 of the Labor
Code. The requirement of notice and hearing is set-out in
Article 277 (b) of the said Code. Hence, petitioners, being
employees of private respondent, can be dismissed only for
just and authorized cause, and after affording them notice and
hearing prior to termination. In the instant case, private
respondent had no valid cause to terminate the employment of
petitioners. Neither were there two (2) written notices sent by
private respondent informing each of the petitioners that they
had been dismissed from work. These lack of valid cause and
failure on the part of private respondent to comply with the
twin-notice requirement underscored the illegality surrounding
petitioners dismissal.
Under the law, an employee who is unjustly dismissed from
work shall be entitled to reinstatement without loss of seniority
rights and other privileges and to his full backwages, inclusive
of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement.
[23]
It must be emphasized, though, that recent judicial
pronouncements[24] distinguish between employees illegally
dismissed prior to the effectivity of Republic Act No. 6715 on
March 21, 1989, and those whose illegal dismissals were
effected after such date. Thus, employees illegally dismissed
prior to March 21, 1989, are entitled to backwages up to three
(3) years without deduction or qualification, while those illegally
dismissed after that date are granted full backwages inclusive
of allowances and other benefits or their monetary equivalent
from the time their actual compensation was withheld from
them up to the time of their actual reinstatement. The
legislative policy behind Republic Act No. 6715 points to "full
backwages" as meaning exactly that, i.e., without deducting
from backwages the earnings derived elsewhere by the
concerned employee during the period of his illegal dismissal.
Considering that petitioners were terminated from work on
August 1, 1991, they are entitled to full backwages on the
basis of their last daily earnings.
With regard to the amount deducted daily by private
respondent from petitioners for washing of the taxi units, we
view the same as not illegal in the context of the law. We note
that after a tour of duty, it is incumbent upon the driver to
restore the unit he has driven to the same clean condition
when he took it out. Car washing after a tour of duty is indeed
a practice in the taxi industry and is in fact dictated by fair play.
[25]
Hence, the drivers are not entitled to reimbursement of
washing charges.
WHEREFORE, the instant petition is GRANTED. The
assailed DECISION of public respondent dated October 28,
1994, is hereby SET ASIDE. The DECISION of public
respondent dated April 28, 1994, and its RESOLUTION dated
December 13, 1994, are hereby REINSTATED subject
to MODIFICATION. Private respondent is directed to reinstate
petitioners to their positions held at the time of the complained
dismissal. Private respondent is likewise ordered to pay
petitioners their full backwages, to be computed from the date
of dismissal until their actual reinstatement. However, the order
of public respondent that petitioners be reimbursed the amount
paid as washing charges is deleted. Costs against private
respondents.
SO ORDERED.
G.R. No. 64948, September 27, 1994
13
MANILA GOLF & COUNTRY CLUB, INC. PETITIONER, VS.
INTERMEDIATE APPELLATE COURT AND FERMIN
LLAMAR, RESPONDENTS.
DECISION
NARVASA, C.J.:
The question before the Court here is whether or not persons
rendering caddying services for members of golf clubs and
their guests in said clubs' courses or premises are the
employees of such clubs and therefore within the compulsory
coverage of the Social Security System (SSS).
That question appears to have been involved, either directly or
peripherally, in three separate proceedings, all initiated by or
on behalf of herein private respondent and his fellow caddies.
That which gave rise to the present petition for review was
originally filed with the Social Security Commission
(SSC) via petition of seventeen (17) persons who styled
themselves "Caddies of Manila Golf and Country Club-
PTCCEA" for coverage and availment of benefits under the
Social Security Act as amended, "PTCCEA" being the acronym
of a labor organization, the "Philippine Technical, Clerical,
Commercial Employees Association," with which the petitioners
claimed to be affiliated. The petition, docketed as SSC Case
No. 5443, alleged in essence that although the petitioners were
employees of the Manila Golf and Country Club, a domestic
corporation, the latter had not registered them as such with the
SSS.
At about the same time, two other proceedings bearing on the
same question were filed or were pending; these were:
(1) a certification election case filed with the Labor Relations
Division of the Ministry of Labor by the PTCCEA on behalf of
the same caddies of the Manila Golf and Country Club, the
case being titled "Philippine Technical, Clerical, Commercial
Association vs. Manila Golf and Country Club" and docketed
as Case No. R4-LRDX-M-10-504-78; it appears to have been
resolved in favor of the petitioners therein by Med-Arbiter
Orlando S. Rojo, who was thereafter upheld by Director
Carmelo S. Noriel, denying the Club's motion for
reconsideration;[1]
(2) a compulsory arbitration case initiated before the Arbitration
Branch of the Ministry of Labor by the same labor organization,
titled "Philippine Technical, Clerical, Commercial Employees
Association (PTCCEA), Fermin Lamar and Raymundo Jomok
vs. Manila Golf and Country Club, Inc., Miguel Celdran, Henry
Lim and Geronimo Alejo;" it was dismissed for lack of merit by
Labor Arbiter Cornelio T. Linsangan, a decision later affirmed
on appeal by the National Labor Relations Commission on the
ground that there was no employer-employee relationship
between the petitioning caddies and the respondent Club.[2]
In the case before the SSC, the respondent Club filed answer
praying for the dismissal of the petition, alleging in substance
that the petitioners, caddies by occupation, were allowed into
the Club premises to render services as such to the individual
members and guests playing the Club's golf course and who
themselves paid for such services; that as such caddies, the
petitioners were not subject to the direction and control of the
Club as regards the manner in which they performed their
work; and hence, they were not the Club's employees.
Subsequently, all but two of the seventeen petitioners of their
own accord withdrew their claim for social security coverage,
avowedly coming to realize that indeed there was no
employment relationship between them and the Club. The
case continued, and was eventually adjudicated by the SSC
after protracted proceedings only as regards the two holdouts,
Fermin Llamar and Raymundo Jomok. The Commission
dismissed the petition for lack of merit,[3] ruling:
*** that the caddy's fees were paid by the golf players
themselves and not by respondent club. For instance,
petitioner Raymundo Jomok averred that for their services as
caddies a caddy's Claim Stub (Exh. '1- A') is issued by a player
who will in turn hand over to management the other portion of

the stub known as Caddy Ticket (Exh. '1') so that by this
arrangement management will know how much a caddy will be
paid (TSN, p. 80, July 23, 1980). Likewise, petitioner Fermin
Llamar admitted that caddy works on his own in accordance
with the rules and regulations (TSN, p. 24, February 26, 1980)
but petitioner Jomok could not state any policy of respondent
that directs the manner of caddying (TSN, pp. 76-77, July 23,
1980). While respondent club promulgates rules and
regulations on the assignment, deportment and conduct of
caddies (Exh. 'C') the same are designed to impose personal
discipline among the caddies but not to direct or conduct their
actual work. In fact, a golf player is at liberty to choose a caddy
of his preference regardless of the respondent club's group
rotation system and has the discretion on whether or not to pay
a caddy. As testified to by petitioner Llamar that their income
depends on the number of players engaging their services and
liberality of the latter (TSN, pp. 10-11, Feb. 26, 1980). This
lends credence to respondent's assertion that the caddies are
never their employees in the absence of two elements, namely,
(1) payment of wages and (2) control or supervision over them.
In this connection, our Supreme Court ruled that in the
determination of the existence of an employer-employee
relationship, the 'control test' shall be considered decisive
(Philippine Manufacturing Co. vs. Geronimo and Garcia, 96
Phil. 276; Mansal vs. P.P. Cocheco Lumber Co., 96 Phil. 941;
Viana vs. Al-lagadan, et al., 99 Phil. 408; Vda. de Ang, et al. vs.
The Manila Hotel Co., 101 Phil. 358, LVN Pictures Inc. vs. Phil.
Musicians Guild, et al., L-12582, January 28, 1961, 1 SCRA
132. *** (reference being made also to Investment Planning
Corporation Phil. vs. SSS 21 SCRA 925).
Records show that respondent club had reported for SS
coverage Graciano Awit and Daniel Quijano, as bat unloader
and helper, respectively, including their ground men, house
and administrative personnel, a situation indicative of the
latter's concern with the rights and welfare of its employees
under the SS law, as amended. The unrebutted testimony of
Col. Generoso A. Alejo (Ret.) that the ID cards issued to the
caddies were merely intended to identify the holders as
accredited caddies of the club and privilege(d) to ply their trade
or occupation within its premises which could be withdrawn
anytime for loss of confidence. This gives us a reasonable
ground to state that the defense posture of respondent that
petitioners were never its employees is well taken."[4]
From this Resolution appeal was taken to the Intermediate
Appellate Court by the union representing Llamar and Jomok.
After the appeal was docketed[5] and some months before
decision thereon was reached and promulgated, Raymundo
Jomok's appeal was dismissed at his instance, leaving Fermin
Llamar the lone appellant.[6]
The appeal ascribed two errors to the SSC:
(1) refusing to suspend the proceedings to await judgment by
the Labor Relations Division of National Capital Regional
Office in the certification election case (R-4-LRD-M-10-504-
78) supra, on the precise issue of the existence of employer-
employee relationship between the respondent club and the
appellants, it being contended that said issue was "a function
of the proper labor office"; and
(2) adjudging that self same issue in a manner contrary to the
ruling of the Director of the Bureau of Labor Relations, which
"has not only become final but (has been) executed or
(become) res adjudicata."[7]
The Intermediate Appellate Court gave short shrift to the first
assigned error, dismissing it as of the least importance. Nor, it
would appear, did it find any greater merit in the second
alleged error. Although said Court reversed the appealed SSC
decision and declared Fermin Llamar an employee of the
Manila Golf and Country Club, ordering that he be reported as
such for social security coverage and paid any corresponding
benefits,[8] it conspicuously ignored the issue of res
adjudicata raised in said second assignment. Instead, it drew
basis for the reversal from this Court's ruling in Investment
Planning Corporation of the Philippines vs. Social Security
System, supra[9] and declared that upon the evidence, the
questioned employer-employee relationship between the Club
and Fermin Llamar passed the so-called "control test,"
established in that case -- i.e., "whether the employer controls
14
or has reserved the right to control the employee not only as to
the result of the work to be done but also as to the means and
methods by which the same is to be accomplished, -- the
Club's control over the caddies encompassing:
(a) the promulgation of no less than twenty four (24) rules and
regulations just about every aspect of the conduct that the
caddy must observe, or avoid, when serving as such, any
violation of any of which could subject him to disciplinary
action, which may include suspending or cutting off his access
to the club premises;
(b) the devising and enforcement of a group rotation system
whereby a caddy is assigned a number which designates his
turn to serve a player;
(c) the Club's "suggesting" the rate of fees payable to the
caddies.
Deemed of little or no moment by the Appellate Court was the
fact that the caddies were paid by the players, not by the Club,
that they observed no definite working hours and earned no
fixed income. It quoted with approval from an American
decision[10] to the effect that: "whether the club paid the caddies
and afterward collected from the players or the players
themselves paid the caddies in the first instance, the caddies
were still employees of the club." This, no matter that the case
which produced this ruling had a slightly different factual cast,
apparently having involved a claim for workmen's
compensation made by a caddy who, about to leave the
premises of the club where he worked, was hit and injured by
an automobile then negotiating the club's private driveway.
That same issue of res adjudicata, ignored by the IAC beyond
bare mention thereof, as already pointed out, is now among
the mainstays of the private respondent's defense to the
petition for review. Considered in the perspective of the
incidents just recounted, it illustrates as well as anything can,
why the practice of forum-shopping justly merits censure and
punitive sanction. Because the same question of employer-
employee relationship has been dragged into three different
fora, willy-nilly and in quick succession, it has birthed
controversy as to which of the resulting adjudications must now
be recognized as decisive. On the one hand, there is the
certification case (R4-LRDX-M-10-504-78), where the decision
of the Med-Arbiter found for the existence of employer-
employee relationship between the parties, was affirmed by
Director Carmelo S. Noriel, who ordered a certification election
held, a disposition never thereafter appealed according to the
private respondent; on the other, the compulsory arbitration
case (NCR Case No. AB-4-1771-79), instituted by or for the
same respondent at about the same time, which was
dismissed for lack of merit by the Labor Arbiter, which was
afterwards affirmed by the NLRC itself on the ground that there
existed no such relationship between the Club and the private
respondent. And, as if matters were not already complicated
enough, the same respondent, with the support and assistance
of the PTCCEA, saw fit, also contemporaneously, to initiate still
a third proceeding for compulsory social security coverage with
the Social Security Commission (SSC Case No. 5443), with
the result already mentioned.
Before this Court, the petitioner Club now contends that the
decision of the Med-Arbiter in the certification case had never
become final, being in fact the subject of three pending and
unresolved motions for reconsideration, as well as of a later
motion for early resolution.[11] Unfortunately, none of these
motions is incorporated or reproduced in the record before the
Court. And, for his part, the private respondent contends, not
only that said decision had been appealed to and been
affirmed by the Director of the BLR, but that a certification
election had in fact been held, which resulted in the PTCCEA
being recognized as the sole bargaining agent of the caddies
of the Manila Golf and Country Club with respect to wages,
hours of work, terms of employment, etc.[12] Whatever the truth
about these opposing contentions, which the record before the
Court does not adequately disclose, the more controlling
consideration would seem to be that, however final it may
become, the decision in a certification case, by the very nature
of that proceeding, is not such as to foreclose all further
dispute between the parties as to the existence, or non-
existence, of employer-employee relationship between them.

It is well settled that for res adjudicata, or the principle of bar by
prior judgment, to apply, the following essential requisites must
concur: (1) there must be a final judgment or order; (2) said
judgment or order must be on the merits; (3) the court
rendering the same must have jurisdiction over the subject
matter and the parties; and (4) there must be between the two
cases identity of parties, identity of subject matter and identity
of cause of action.[13]
Clearly implicit in these requisites is that the action or
proceedings in which is issued the "prior Judgment" that would
operate in bar of a subsequent action between the same
parties for the same cause, be adversarial, or contentious,
"one having opposing parties; (is) contested, as distinguished
from an ex parte hearing or proceeding. *** of which the party
seeking relief has given legal notice to the other party and
afforded the latter an opportunity to contest it."[14] and a
certification case is not such a proceeding, as this Court has
already ruled:
"A certification proceeding is not a litigation in the sense in
which this term is commonly understood, but a mere
investigation of a non-adversary, fact-finding character, in
which the investigating agency plays the part of a disinterested
investigator seeking merely to ascertain the desires of the
employees as to the matter of their representation. The court
enjoys a wide discretion in determining the procedure
necessary to insure the fair and free choice of bargaining
representatives by the employees.15
Indeed, if any ruling or judgment can be said to operate as res
adjudicata on the contested issue of employer-employee
relationship between present petitioner and the private
respondent, it would logically be that rendered in the
compulsory arbitration case (NCR Case No. AB-4-771-
79, supra), petitioner having asserted, without dispute from the
private respondent, that said issue was there squarely raised
and litigated, resulting in a ruling of the Arbitration Branch (of
the same Ministry of Labor) that such relationship did not exist,
and which ruling was thereafter affirmed by the National Labor
Relations Commission in an appeal taken by said
respondent.16
In any case, this Court is not inclined to allow private
respondent the benefit of any doubt as to which of the
conflicting rulings just adverted to should be accorded primacy,
given the fact that it was he who actively sought them
simultaneously, as it were, from separate fora, and even if the
graver sanctions more lately imposed by the Court for forum-
shopping may not be applied to him retroactively.
Accordingly, the IAC is not to be faulted for ignoring private
respondent's invocation of res adjudicata; on the contrary, it
acted correctly in doing so.
Said Court's holding that upon the facts, there exists (or
existed) a relationship of employer and employee between
petitioner and private respondent is, however, another matter.
The Court does not agree that said facts necessarily or
logically point to such a relationship, and to the exclusion of
any form of arrangements, other than of employment, that
would make the respondent's services available to the
members and guests of the petitioner.
As long as it is, the list made in the appealed decision detailing
the various matters of conduct, dress, language, etc. covered
by the petitioner's regulations, does not, in the mind of the
Court, so circumscribe the actions or judgment of the caddies
concerned as to leave them little or no freedom of choice
whatsoever in the manner of carrying out their services. In the
very nature of things, caddies must submit to some supervision
of their conduct while enjoying the privilege of pursuing their
occupation within the premises and grounds of whatever club
they do their work in. For all that is made to appear, they work
for the club to which they attach themselves on sufferance but,
on the other hand, also without having to observe any working
hours, free to leave anytime they please, to stay away for as
long as they like. It is not pretended that if found remiss in the
observance of said rules, any discipline may be meted them
15
beyond barring them from the premises which, it may be
supposed, the Club may do in any case even absent any
breach of the rules, and without violating any right to work on
their part. All these considerations clash frontally with the
concept of employment.
The IAC would point to the fact that the Club suggests the rate
of fees payable by the players to the caddies as still another
indication of the latter's status as employees. It seems to the
Court, however, that the intendment of such fact is to the
contrary, showing that the Club has not the measure of control
over the incidents of the caddies' work and compensation that
an employer would possess.
The Court agrees with petitioner that the group rotation system
so-called, is less a measure of employee control than an
assurance that the work is fairly distributed, a caddy who is
absent when his turn number is called simply losing his turn to
serve and being assigned instead the last number for the
day.17
By and large, there appears nothing in the record to refute the
petitioner's claim that:
"(Petitioner) has no means of compelling the presence of a
caddy. A caddy is not required to exercise his occupation only
in the premises of petitioner. He may work with any other golf
club or he may seek employment as a caddy or otherwise with
any entity or individual without restriction by petitioner. ***.
*** In the final analysis, petitioner has no way of compelling the
presence of the caddies as they are not required to render a
definite number of hours of work on a single day. Even the
group rotation of caddies is not absolute because a player is at
liberty to choose a caddy of his preference regardless of the
caddy's order in the rotation.
It can happen that a caddy who has rendered services to a
player on one day may still find sufficient time to work
elsewhere. Under such circumstances, he may then leave the
premises of petitioner and go to such other place of work that
he wishes (sic). Or a caddy who is on call for a particular day
may deliberately absent himself if he has more profitable
caddying, or another, engagement in some other place. These
are things beyond petitioner's control and for which it imposes
no direct sanctions on the caddies. ***18
WHEREFORE, the Decision of the Intermediate Appellate
Court, review of which is sought, is reversed and set aside, it
being hereby declared that the private respondent, Fermin
Llamar, is not an employee of petitioner Manila Golf and
Country Club and that petitioner is under no obligation to report
him for compulsory coverage to the Social Security System. No
pronouncement as to costs.
SO ORDERED.
G.R. No. L-32245, May 25, 1979
DY KEH BENG, PETITIONER, VS. INTERNATIONAL LABOR
AND MARINE UNION OF THE PHILIPPINES, ET. AL.,
RESPONDENTS.
DECISION
DE CASTRO, J.:
Petitioner Dy Keh Beng seeks a review by certiorari of the
decision of the Court of Industrial Relations dated March 23,
1970 in Case No. 3019-ULP and the Court's
Resolution en banc of June 10, 1970 affirming said
decision. The Court of Industrial Relations in that case
found Dy Keh Beng guilty of the unfair labor practice acts
alleged and ordered him to
"reinstate Carlos Solano and Ricardo Tudla to their former jobs
with backwages from their respective dates of dismissal until
fully reinstated without loss to their right of seniority and of

such other rights already acquired by them and/or allowed by
law."[1]
Now, Dy Keh Beng assigns the following errors[2] as having
been committed by the Court of Industrial Relations:
I According to Dy Keh Beng, however, Solano was not his
RESPONDENT COURT ERRED IN FINDING THAT
RESPONDENTS SOLANO AND TUDLA WERE EMPLOYEES
OF PETITIONER.
II
RESPONDENT COURT ERRED IN FINDING THAT
RESPONDENTS SOLANO AND TUDLA WERE DISMISSED
FROM THEIR EMPLOYMENT BY PETITIONER.
III
RESPONDENT COURT ERRED IN FINDING THAT THE
TESTIMONIES ADDUCED BY COMPLAINANT ARE
CONVINCING AND DISCLOSES (SIC) A PATTERN OF
DISCRIMINATION BY THE PETITIONER HEREIN.
IV
RESPONDENT COURT ERRED IN DECLARING
PETITIONER GUILTY OF UNFAIR LABOR PRACTICE ACTS
AS ALLEGED AND DESCRIBED IN THE COMPLAINT.
V
RESPONDENT COURT ERRED IN ORDERING PETITIONER
TO REINSTATE RESPONDENTS TO THEIR FORMER JOBS
WITH BACKWAGES FROM THEIR RESPECTIVE DATES OF
DISMISSALS UNTIL FINALLY REINSTATED WITHOUT LOSS
TO THEIR RIGHT OF SENIORITY AND OF SUCH OTHER
RIGHTS ALREADY ACQUIRED BY THEM AND/OR
ALLOWED BY LAW.
The facts as found by the Hearing Examiner are as follows:
A charge of unfair labor practice was
filed against Dy Keh Beng, proprietor of a basket factory,
for discriminatory acts within the meaning of Section 4(a), sub-
paragraph (1) and (4), Republic Act No. 875,[3] by dismissing on
September 28 and 29, 1960, respectively, Carlos N. Solano
and Ricardo Tudla for their union activities. After preliminary
investigation was conducted, a case was filed in the Court of
Industrial Relations for and in behalf of the International Labor
and Marine Union of the Philippines and two of its members,
Solano and Tudla. In his answer, Dy Keh Beng contended that
he did not know Tudla and that Solano was not his employee
because the latter came to the establishment only when there
was work which he did on pakiaw basis, each piece of work
being done under a separate
contract. Moreover, Dy Keh Beng countered with a special
defense of simple extortion committed by the head of the labor
union, Bienvenido Onayan.
After trial, the Hearing Examiner prepared a report which was
subsequently adopted in toto by the Court of Industrial
Relations. An employee-employer relationship was found to
have existed between Dy Keh Beng and
complainants Tudla and Solano, although Solano was admitted
to have worked on piece basis.[4]The issue therefore centered
on whether there existed an employee-employer relation
between petitioner Dy Keh Beng and the respondents Solano
and Tudla.
According to the Hearing Examiner, the evidence for the
complainant Union tended to show that Solano
and Tudla became employees of Dy Keh Beng from May 2,
1953 and July 15, 1955,[5] respectively, and that except in the
event of illness, their work with the establishment was
16
continuous although their services were compensated on piece
basis. Evidence likewise showed that at times the
establishment had eight (8) workers and never less than five
(5); including the complainants, and that complainants used to
receive P5.00 a day, sometimes less.[6]
employee for the following reasons:
"(1) Solano never stayed long enough at Dy's establishment;
(2) Solano had to leave as soon as he was through with the
order given him by Dy;
(3) When there were no orders needing his services there
was nothing for him to do;
(4) When orders came to the shop that his regular workers
could not fill, it was then that Dy went to his address
in Caloocan and fetched him for these orders; and
(5) Solano's work with Dy's establishment was not
continuous."[7]
According to petitioner, these facts show that respondents
Solano and Tudla are only piece workers, not employees under
Republic Act 875, where an employee[8]is referred to as
"shall include any employee and shall not be limited to the
employee of a particular employer unless the Act explicitly
states otherwise and shall include any individual whose work
has ceased as a consequence of, or in connection with any
current labor dispute or because of any unfair labor practice
and who has not obtained any other substantially equivalent
and regular employment."
while an employer[9]
"includes any person acting in the interest of an employer,
directly or indirectly but shall not include any labor organization
(otherwise than when acting as an employer) or anyone acting
in the capacity of officer or agent of such labor organization."
Petitioner really anchors his contention of the nonexistence of
employee-employer relationship on the control test. He points
to the case of Madrigal Shipping Co., Inc. v. Nieves Baens del
Rosario, et al., L-13130, October 31, 1959, where the Court
ruled that:
"The test ... of the existence of employee and employer
relationship is whether there is an understanding between the
parties that one is to render personal services to or for the
benefit of the other, and recognition by them of the right of one
to order and control the other in the performance of the work
and to direct the manner and method of its performance."
Petitioner contends that the private respondents "did not meet
the control test in the light of the ... definition of the terms
employer and employee, because there was no evidence to
show that petitioner had the right to direct the manner and
method of respondent's work."[10] Moreover, it is argued that
petitioner's evidence showed that "Solano worked on
a pakiaw basis" and that he stayed in the establishment only
when there was work.
While this Court upholds the control test[11] under which an
employer-employee relationship exists "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," it finds no merit with petitioner's
arguments as stated above. It should be borne in mind that
the control test calls merely for the existence of the right to
control the manner of doing the work, not the actual exercise of
the right.[12] Considering the finding by the Hearing Examiner
that the establishment of Dy Keh Beng is "engaged in the
manufacture of baskets known as kaing,"[13] it is natural to
expect that those working under Dy would have to observe,
among others, Dy's requirements of size and quality of
the kaing. Some control would necessarily be exercised
by Dy as the making of the kaing would be subject
to Dy's specifications. Parenthetically, since the work on the
baskets is done at Dy's establishments, it can be inferred that

the proprietor Dy could easily exercise control on the men he
employed.
As to the contention that Solano was not an employee because
he worked on piece basis, this Court agrees with the Hearing
Examiner that
"circumstances must be construed to determine indeed if
payment by the piece is just a method of compensation and
does not define the essence of the relation. Units of time ...
and units of work are in establishments like respondent (sic)
just yardsticks whereby to determine rate of compensation, to
be applied whenever agreed upon. We cannot construe
payment by the piece where work is done in such an
establishment so as to put the worker completely at liberty to
turn him out and take in another at pleasure."
At this juncture, it is worthy to note that Justice Perfecto,
concurring with Chief Justice Ricardo Paras who penned the
decision in "Sunripe Coconut Products Co. v. Court of
Industrial Relations" (83 Phil. 518, 523), opined that
"judicial notice of the fact that the so-called 'pakyaw' system
mentioned in this case as generally practiced in our country, is,
in fact, a labor contract between employers and employees,
between capitalists and laborers."
Insofar as the other assignments of errors are concerned,
there is no showing that the Court of Industrial Relations
abused its discretion when it concluded that the findings of fact
made by the Hearing Examiner were supported by evidence on
the record. Section 6, Republic Act 875 provides that in unfair
labor practice cases, the factual findings of the Court of
Industrial Relations are conclusive on the Supreme Court, if
supported by substantial evidence. This provision has been
put into effect in a long line of decisions where the Supreme
Court did not reverse the findings of fact of the Court of
Industrial Relations when they were supported by substantial
evidence.[14]
Nevertheless, considering that about eighteen (18) years have
already elapsed from the time the complainants were
dismissed,[15] and that the decision being appealed ordered the
payment of backwages to the employees from their respective
dates of dismissal until finally reinstated, it is fitting to apply in
this connection the formula for backwages worked out by
Justice Claudio Teehankee in "cases not terminated
sooner."[16] The formula calls for fixing the award
of backwageswithout qualification and deduction to three
years, "subject to deduction where there are mitigating
circumstances in favor of the employer but subject to increase
by way of exemplary damages where there are aggravating
circumstances."[17] Considering there are no such
circumstances in this case, there is no reason why the Court
should not apply the above-mentioned formula in this instance.
WHEREFORE, the award of backwages granted by the Court
of Industrial Relations is herein modified to an award
of backwages for three years without qualification and
deduction at the respective rates of compensation the
employees concerned were receiving at the time of
dismissal. The execution of this award is entrusted to the
National Labor Relations Commission. Costs against
petitioner.
SO ORDERED.
G.R. No. 138051, June 10, 2004
JOSE Y. SONZA, PETITIONER, VS. ABS-CBN
BROADCASTING CORPORATION, RESPONDENT.
DECISION
CARPIO, J.:
17
The Case
Before this Court is a petition for review on certiorari[1] assailing
the 26 March 1999 Decision[2] of the Court of Appeals in CA-
G.R. SP No. 49190 dismissing the petition filed by Jose Y.
Sonza (SONZA). The Court of Appeals affirmed the findings
of the National Labor Relations Commission (NLRC), which
affirmed the Labor Arbiters dismissal of the case for lack of
jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation
(ABS-CBN) signed an Agreement (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 General Manager, and Carmela Tiangco
(TIANGCO), as EVP and Treasurer. Referred to in the
Agreement as AGENT, MJMDC agreed to provide SONZAs
services exclusively to ABS-CBN as talent for radio and
television. The Agreement listed the services SONZA would
render to ABS-CBN, as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00
a.m., Mondays to Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00
p.m., Sundays.[3]
ABS-CBN agreed to pay for SONZAs services a monthly talent
fee of P310,000 for the first year and P317,000 for the second
and third year of the Agreement. ABS-CBN would pay the
talent fees on the 10th and 25th days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs
President, Eugenio Lopez III, which reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated
May 1994 entered into by your goodself on behalf of ABS-CBN
with our company relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view
of recent events concerning his programs and career. We
consider these acts of the station violative of the Agreement
and the station as in breach thereof. In this connection, we
hereby serve notice of rescission of said Agreement at our
instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing
recovery of the remaining amount stipulated in paragraph 7 of
the Agreement but reserves the right to seek recovery of the
other benefits under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE Y. SONZA
President and Gen. Manager[4]
On 30 April 1996, SONZA filed a complaint against ABS-CBN
before the Department of Labor and Employment, National
Capital Region in Quezon City. SONZA complained that ABS-
CBN did not pay his salaries, separation pay, service incentive
leave pay, 13th month pay, signing bonus, travel allowance and
amounts due under the Employees Stock Option Plan
(ESOP).
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the
ground that no employer-employee relationship existed
between the parties. SONZA filed an Opposition to the motion
on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly
talent fees through his account at PCIBank, Quezon Avenue
Branch, Quezon City. In July 1996, ABS-CBN opened a new
account with the same bank where ABS-CBN deposited
SONZAs talent fees and other payments due him under the
 18

Agreement.
x x x (Emphasis supplied)[7]
In his Order dated 2 December 1996, the Labor SONZA appealed to the NLRC. On 24 February 1998, the
Arbiter[5] denied the motion to dismiss and directed the parties NLRC rendered a Decision affirming the Labor Arbiters
to file their respective position papers. The Labor Arbiter ruled: decision. SONZA filed a motion for reconsideration, which the
In this instant case, complainant for having invoked a claim NLRC denied in its Resolution dated 3 July 1998.
that he was an employee of respondent company until April 15,
1996 and that he was not paid certain claims, it is sufficient On 6 October 1998, SONZA filed a special civil action for
enough as to confer jurisdiction over the instant case in this certiorari before the Court of Appeals assailing the decision
Office. And as to whether or not such claim would entitle and resolution of the NLRC. On 26 March 1999, the Court of
complainant to recover upon the causes of action asserted is a Appeals rendered a Decision dismissing the case.[8]
matter to be resolved only after and as a result of a hearing.
Thus, the respondents plea of lack of employer-employee Hence, this petition.
relationship may be pleaded only as a matter of defense. It
behooves upon it the duty to prove that there really is no
The Rulings of the NLRC and Court of Appeals
employer-employee relationship between it and the
complainant.
The Court of Appeals affirmed the NLRCs finding that no
The Labor Arbiter then considered the case submitted for
employer-employee relationship existed between SONZA and
resolution. The parties submitted their position papers on 24
ABS-CBN. Adopting the NLRCs decision, the appellate court
February 1997.
quoted the following findings of the NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC
On 11 March 1997, SONZA filed a Reply to Respondents
entered into the contract merely as an agent of complainant
Position Paper with Motion to Expunge Respondents Annex 4
Sonza, the principal. By all indication and as the law puts it, the
and Annex 5 from the Records. Annexes 4 and 5 are affidavits
act of the agent is the act of the principal itself. This fact is
of ABS-CBNs witnesses Soccoro Vidanes and Rolando V.
made particularly true in this case, as admittedly MJMDC is a
Cruz. These witnesses stated in their affidavits that the
management company devoted exclusively to managing the
prevailing practice in the television and broadcast industry is to
careers of Mr. Sonza and his broadcast partner, Mrs. Carmela
treat talents like SONZA as independent contractors.
C. Tiangco. (Opposition to Motion to Dismiss)
The Labor Arbiter rendered his Decision dated 8 July 1997
Clearly, the relations of principal and agent only accrues
dismissing the complaint for lack of jurisdiction.[6] The pertinent
between complainant Sonza and MJMDC, and not between
parts of the decision read as follows:
ABS-CBN and MJMDC. This is clear from the provisions of the
xxx
May 1994 Agreement which specifically referred to MJMDC as
the AGENT. As a matter of fact, when complainant herein
While Philippine jurisprudence has not yet, with certainty,
unilaterally rescinded said May 1994 Agreement, it was
touched on the true nature of the contract of a talent, it stands
MJMDC which issued the notice of rescission in behalf of Mr.
to reason that a talent as above-described cannot be
Sonza, who himself signed the same in his capacity as
considered as an employee by reason of the peculiar
President.
circumstances surrounding the engagement of his services.
Moreover, previous contracts between Mr. Sonza and ABS-
It must be noted that complainant was engaged by
CBN reveal the fact that historically, the parties to the said
respondent by reason of his peculiar skills and talent as a
agreements are ABS-CBN and Mr. Sonza. And it is only in the
TV host and a radio broadcaster. Unlike an ordinary
May 1994 Agreement, which is the latest Agreement executed
employee, he was free to perform the services he
between ABS-CBN and Mr. Sonza, that MJMDC figured in the
undertook to render in accordance with his own style. The
said Agreement as the agent of Mr. Sonza.
benefits conferred to complainant under the May 1994
Agreement are certainly very much higher than those generally
We find it erroneous to assert that MJMDC is a mere labor-
given to employees. For one, complainant Sonzas monthly
only contractor of ABS-CBN such that there exist[s] employer-
talent fees amount to a staggering P317,000. Moreover, his
employee relationship between the latter and Mr. Sonza. On
engagement as a talent was covered by a specific contract.
the contrary, We find it indubitable, that MJMDC is an agent,
Likewise, he was not bound to render eight (8) hours of work
not of ABS-CBN, but of the talent/contractor Mr. Sonza, as
per day as he worked only for such number of hours as may be
expressly admitted by the latter and MJMDC in the May 1994
necessary.
Agreement.
The fact that per the May 1994 Agreement complainant was
It may not be amiss to state that jurisdiction over the instant
accorded some benefits normally given to an employee is
controversy indeed belongs to the regular courts, the same
inconsequential. Whatever benefits complainant enjoyed
being in the nature of an action for alleged breach of
arose from specific agreement by the parties and not by
contractual obligation on the part of respondent-appellee. As
reason of employer-employee relationship. As correctly put
squarely apparent from complainant-appellants Position
by the respondent, All these benefits are merely talent fees
Paper, his claims for compensation for services, 13th month
and other contractual benefits and should not be deemed as
pay, signing bonus and travel allowance against respondent-
salaries, wages and/or other remuneration accorded to an
appellee are not based on the Labor Code but rather on the
employee, notwithstanding the nomenclature appended to
provisions of the May 1994 Agreement, while his claims for
these benefits. Apropos to this is the rule that the term or
proceeds under Stock Purchase Agreement are based on the
nomenclature given to a stipulated benefit is not controlling, but
latter. A portion of the Position Paper of complainant-appellant
the intent of the parties to the Agreement conferring such
bears perusal:
benefit.
Under [the May 1994 Agreement] with respondent ABS-CBN,
the latter contractually bound itself to pay complainant a
The fact that complainant was made subject to
signing bonus consisting of shares of stockswith FIVE
respondents Rules and Regulations, likewise, does not
HUNDRED THOUSAND PESOS (P500,000.00).
detract from the absence of employer-employee
relationship. As held by the Supreme Court, The line should
Similarly, complainant is also entitled to be paid 13th month
be drawn between rules that merely serve as guidelines
pay based on an amount not lower than the amount he was
towards the achievement of the mutually desired result without
receiving prior to effectivity of (the) Agreement.
dictating the means or methods to be employed in attaining it,
and those that control or fix the methodology and bind or
Under paragraph 9 of (the May 1994 Agreement), complainant
restrict the party hired to the use of such means. The first,
is entitled to a commutable travel benefit amounting to at least
which aim only to promote the result, create no employer-
One Hundred Fifty Thousand Pesos (P150,000.00) per year.
employee relationship unlike the second, which address both
Thus, it is precisely because of complainant-appellants own
the result and the means to achieve it. (Insular Life Assurance
recognition of the fact that his contractual relations with ABS-
Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November 15,
CBN are founded on the New Civil Code, rather than the Labor
1989).

Code, that instead of merely resigning from ABS-CBN,
complainant-appellant served upon the latter a notice of
rescission of Agreement with the station, per his letter dated
April 1, 1996, which asserted that instead of referring to unpaid
employee benefits, he is waiving and renouncing recovery of
the remaining amount stipulated in paragraph 7 of the
Agreement but reserves the right to such recovery of the other
benefits under said Agreement. (Annex 3 of the respondent
ABS-CBNs Motion to Dismiss dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the
May 1994 Agreement and/or the Stock Purchase Agreement
by respondent-appellee that complainant-appellant filed his
complaint. Complainant-appellants claims being anchored on
the alleged breach of contract on the part of respondent-
appellee, the same can be resolved by reference to civil law
and not to labor law. Consequently, they are within the realm of
civil law and, thus, lie with the regular courts. As held in the
case of Dai-Chi Electronics Manufacturing vs. Villarama, 238
SCRA 267, 21 November 1994, an action for breach of
contractual obligation is intrinsically a civil dispute.
[9]
(Emphasis supplied)
The Court of Appeals ruled that the existence of an employer-
employee relationship between SONZA and ABS-CBN is a
factual question that is within the jurisdiction of the NLRC to
resolve.[10] A special civil action for certiorari extends only to
issues of want or excess of jurisdiction of the NLRC.[11] Such
action cannot cover an inquiry into the correctness of the
evaluation of the evidence which served as basis of the
NLRCs conclusion.[12] The Court of Appeals added that it could
not re-examine the parties evidence and substitute the factual
findings of the NLRC with its own.[13]
The Issue
In assailing the decision of the Court of Appeals, SONZA
contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING
THE NLRCS DECISION AND REFUSING TO FIND THAT AN
EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED
BETWEEN SONZA AND ABS-CBN, DESPITE THE WEIGHT
OF CONTROLLING LAW, JURISPRUDENCE AND
EVIDENCE TO SUPPORT SUCH A FINDING.[14]
The Courts Ruling
We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the
decision of the Court of Appeals affirming the NLRC ruling
which upheld the Labor Arbiters dismissal of the case for lack
of jurisdiction.
The present controversy is one of first impression. Although
Philippine labor laws and jurisprudence define clearly the
elements of an employer-employee relationship, this is the first
time that the Court will resolve the nature of the relationship
between a television and radio station and one of its talents.
There is no case law stating that a radio and television
program host is an employee of the broadcast station.
The instant case involves big names in the broadcast industry,
namely Jose Jay Sonza, a known television and radio
personality, and ABS-CBN, one of the biggest television and
radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over
the case because he was an employee of ABS-CBN. On the
other hand, ABS-CBN insists that the Labor Arbiter has no
jurisdiction because SONZA was an independent contractor.
Employee or Independent Contractor?
The existence of an employer-employee relationship is a
question of fact. Appellate courts accord the factual findings of
the Labor Arbiter and the NLRC not only respect but also
finality when supported by substantial evidence.[15] Substantial
evidence means such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion.[16] A party
cannot prove the absence of substantial evidence by simply
pointing out that there is contrary evidence on record, direct or
circumstantial. The Court does not substitute its own judgment
19
for that of the tribunal in determining where the weight of
evidence lies or what evidence is credible.[17]
SONZA maintains that all essential elements of an employer-
employee relationship are present in this case. Case law has
consistently held that the elements of an employer-employee
relationship are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employers power to control the
employee on the means and methods by which the work is
accomplished.[18] The last element, the so-called control test,
is the most important element.[19]
A. Selection and Engagement of Employee
ABS-CBN engaged SONZAs services to co-host its television
and radio programs because of SONZAs peculiar skills, talent
and celebrity status. SONZA contends that the discretion used
by respondent in specifically selecting and hiring complainant
over other broadcasters of possibly similar experience and
qualification as complainant belies respondents claim of
independent contractorship.
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. If SONZA did not possess such unique
skills, talent and celebrity status, ABS-CBN would not have
entered into the Agreement with SONZA but would have hired
him through its personnel department just like any other
employee.
In any event, the method of selecting and engaging SONZA
does not conclusively determine his status. We must consider
all the circumstances of the relationship, with the control test
being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no
part of his fees going to MJMDC. SONZA asserts that this
mode of fee payment shows that he was an employee of ABS-
CBN. SONZA also points out that ABS-CBN granted him
benefits and privileges which he would not have enjoyed if he
were truly the subject of a valid job contract.
All the talent fees and benefits paid to SONZA were the result
of negotiations that led to the Agreement. If SONZA were ABS-
CBNs employee, there would be no need for the parties to
stipulate on benefits such as SSS, Medicare, x x x and 13th
month pay[20] which the law automatically incorporates into
every employer-employee contract.[21] Whatever benefits
SONZA enjoyed arose from contract and not because of an
employer-employee relationship.[22]
SONZAs talent fees, amounting to P317,000 monthly in the
second and third year, are so huge and out of the ordinary that
they indicate more an independent contractual relationship
rather than an employer-employee relationship. ABS-CBN
agreed to pay SONZA such huge talent fees precisely because
of SONZAs unique skills, talent and celebrity status not
possessed by ordinary employees. Obviously, SONZA acting
alone possessed enough bargaining power to demand and
receive such huge talent fees for his services. The power to
bargain talent fees way above the salary scales of ordinary
employees is a circumstance indicative, but not conclusive, of
an independent contractual relationship.
The payment of talent fees directly to SONZA and not to
MJMDC does not negate the status of SONZA as an
independent contractor. The parties expressly agreed on such
mode of payment. Under the Agreement, MJMDC is the
AGENT of SONZA, to whom MJMDC would have to turn over
any talent fee accruing under the Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party
may terminate their relationship. SONZA failed to show that

ABS-CBN could terminate his services on grounds other than
breach of contract, such as retrenchment to prevent losses as
provided under labor laws.[23]
During the life of the Agreement, ABS-CBN agreed to pay
SONZAs talent fees as long as AGENT and Jay Sonza shall
faithfully and completely perform each condition of this
Agreement.[24] Even if it suffered severe business losses, ABS-
CBN could not retrench SONZA because ABS-CBN remained
obligated to pay SONZAs talent fees during the life of the
Agreement. This circumstance indicates an independent
contractual relationship between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting
his programs, ABS-CBN still paid him his talent fees. Plainly,
ABS-CBN adhered to its undertaking in the Agreement to
continue paying SONZAs talent fees during the remaining life
of the Agreement even if ABS-CBN cancelled SONZAs
programs through no fault of SONZA.[25]
SONZA assails the Labor Arbiters interpretation of his
rescission of the Agreement as an admission that he is not an
employee of ABS-CBN. The Labor Arbiter stated that if it were
true that complainant was really an employee, he would merely
resign, instead. SONZA did actually resign from ABS-CBN but
he also, as president of MJMDC, rescinded the Agreement.
SONZAs letter clearly bears this out.[26] However, the manner
by which SONZA terminated his relationship with ABS-CBN is
immaterial. Whether SONZA rescinded the Agreement or
resigned from work does not determine his status as employee
or independent contractor.
D. Power of Control
Since there is no local precedent on whether a radio and
television program host is an employee or an independent
contractor, we refer to foreign case law in analyzing the
present case. The United States Court of Appeals, First Circuit,
recently held in Alberty-Vlez v. Corporacin De Puerto
Rico Para La Difusin Pblica (WIPR)[27] that a television
program host is an independent contractor. We quote the
following findings of the U.S. court:
Several factors favor classifying Alberty as an independent
contractor. First, a television actress is a skilled position
requiring talent and training not available on-the-job. x x x
In this regard, Alberty possesses a masters degree in public
communications and journalism; is trained in dance, singing,
and modeling; taught with the drama department at the
University of Puerto Rico; and acted in several theater and
television productions prior to her affiliation with Desde Mi
Pueblo. Second, Alberty provided the tools and
instrumentalities necessary for her to
perform. Specifically, she provided, or obtained sponsors to
provide, the costumes, jewelry, and other image-related
supplies and services necessary for her appearance. Alberty
disputes that this factor favors independent contractor status
because WIPR provided the equipment necessary to tape the
show. Albertys argument is misplaced. The equipment
necessary for Alberty to conduct her job as host of Desde Mi
Pueblo related to her appearance on the show. Others
provided equipment for filming and producing the show, but
these were not the primary tools that Alberty used to perform
her particular function. If we accepted this argument,
independent contractors could never work on collaborative
projects because other individuals often provide the equipment
required for different aspects of the collaboration. x x x
Third, WIPR could not assign Alberty work in addition to
filming Desde Mi Pueblo. Albertys contracts with WIPR
specifically provided that WIPR hired her professional services
as Hostess for the Program Desde Mi Pueblo. There is no
evidence that WIPR assigned Alberty tasks in addition to work
related to these tapings. x x x[28] (Emphasis supplied)
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.
[29]
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
20
independent contractor.[30]
First, SONZA contends that ABS-CBN exercised control over
the means and methods of his work.
SONZAs argument is misplaced. ABS-CBN engaged SONZAs
services specifically to co-host the Mel & Jay programs. ABS-
CBN did not assign any other work to SONZA. 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. SONZA did not have to
render eight hours of work per day. The Agreement required
SONZA to attend only rehearsals and tapings of the shows, as
well as pre- and post-production staff meetings.[31] ABS-CBN
could not dictate the contents of SONZAs script. However, the
Agreement prohibited SONZA from criticizing in his shows
ABS-CBN or its interests.[32] The clear implication is that
SONZA had a free hand on what to say or discuss in his shows
provided he did not attack ABS-CBN or its interests.
We find that ABS-CBN was not involved in the actual
performance that produced the finished product of SONZAs
work.[33] 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.[34] 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.
SONZA claims that ABS-CBNs power not to broadcast his
shows proves ABS-CBNs power over the means and methods
of the performance of his work. Although ABS-CBN did have
the option not to broadcast SONZAs show, ABS-CBN was still
obligated to pay SONZAs talent fees... Thus, even if ABS-CBN
was completely dissatisfied with the means and methods of
SONZAs performance of his work, or even with the quality or
product of his work, ABS-CBN could not dismiss or even
discipline SONZA. All that ABS-CBN could do is not to
broadcast SONZAs show but ABS-CBN must still pay his
talent fees in full.[35]
Clearly, ABS-CBNs right not to broadcast SONZAs show,
burdened as it was by the obligation to continue paying in full
SONZAs talent fees, did not amount to control over the means
and methods of the performance of SONZAs work. ABS-CBN
could not terminate or discipline SONZA even if the means and
methods of performance of his work - how he delivered his
lines and appeared on television - did not meet ABS-CBNs
approval. This proves that ABS-CBNs control was limited only
to the result of SONZAs work, whether to broadcast the final
product or not. In either case, ABS-CBN must still pay
SONZAs talent fees in full until the expiry of the Agreement.
In Vaughan, et al. v. Warner, et al.,[36] the United States Circuit
Court of Appeals ruled that vaudeville performers were
independent contractors although the management reserved
the right to delete objectionable features in their shows. Since
the management did not have control over the manner of
performance of the skills of the artists, it could only control the
result of the work by deleting objectionable features.[37]
SONZA further contends that ABS-CBN exercised control over
his work by supplying all equipment and crew. No doubt, ABS-
CBN supplied the equipment, crew and airtime needed to
broadcast the Mel & Jay programs. However, the equipment,
crew and airtime are not the tools and instrumentalities
SONZA needed to perform his job. What SONZA principally
needed were his talent or skills and the costumes necessary
for his appearance. [38] Even though ABS-CBN provided
SONZA with the place of work and the necessary equipment,
SONZA was still an independent contractor since ABS-CBN did
not supervise and control his work. ABS-CBNs sole concern
was for SONZA to display his talent during the airing of the
programs.[39]
A radio broadcast specialist who works under minimal
supervision is an independent contractor.[40] SONZAs work as
television and radio program host required special skills and
talent, which SONZA admittedly possesses. The records do
not show that ABS-CBN exercised any supervision and control
over how SONZA utilized his skills and talent in his shows.

Second, SONZA urges us to rule that he was ABS-CBNs
employee because ABS-CBN subjected him to its rules and
standards of performance. SONZA claims that this indicates
ABS-CBNs control not only [over] his manner of work but also
the quality of his work.
The Agreement stipulates that SONZA shall abide with the
rules and standards of performance covering talents[41] of
ABS-CBN. The Agreement does not require SONZA to comply
with the rules and standards of performance prescribed for
employees of ABS-CBN. The code of conduct imposed on
SONZA under the Agreement refers to the Television and
Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas
(KBP), which has been adopted by the COMPANY (ABS-CBN)
as its Code of Ethics.[42] The KBP code applies to
broadcasters, not to employees of radio and television stations.
Broadcasters are not necessarily employees of radio and
television stations. Clearly, the rules and standards of
performance referred to in the Agreement are those applicable
to talents and not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the
hired party indicate that the latter is an employee of the former.
[43]
In this case, SONZA failed to show that these rules
controlled his performance. We find that these general rules
are merely guidelines towards the achievement of the mutually
desired result, which are top-rating television and radio
programs that comply with standards of the industry. We have
ruled that:
Further, not every form of control that a party reserves to
himself over the conduct of the other party in relation to the
services being rendered may be accorded the effect of
establishing an employer-employee relationship. The facts of
this case fall squarely with the case of Insular Life Assurance
Co., Ltd. vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely
serve as guidelines towards the achievement of the mutually
desired result without dictating the means or methods to be
employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of
such means. The first, which aim only to promote the result,
create no employer-employee relationship unlike the second,
which address both the result and the means used to achieve
it.[44]
The Vaughan case also held that one could still be an
independent contractor although the hirer reserved certain
supervision to insure the attainment of the desired result. The
hirer, however, must not deprive the one hired from performing
his services according to his own initiative.[45]
Lastly, SONZA insists that the exclusivity clause in the
Agreement is the most extreme form of control which ABS-
CBN exercised over him.
This argument is futile. Being an exclusive talent does not by
itself mean that SONZA is an employee of ABS-CBN. Even an
independent contractor can validly provide his services
exclusively to the hiring party. In the broadcast industry,
exclusivity is not necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted
practice in the entertainment industry.[46] This practice is not
designed to control the means and methods of work of the
talent, but simply to protect the investment of the broadcast
station. The broadcast station normally spends substantial
amounts of money, time and effort in building up its talents as
well as the programs they appear in and thus expects that said
talents remain exclusive with the station for a commensurate
period of time.[47] Normally, a much higher fee is paid to talents
who agree to work exclusively for a particular radio or
television station. In short, the huge talent fees partially
compensates for exclusivity, as in the present case.
MJMDC as Agent of SONZA
SONZA protests the Labor Arbiters finding that he is a talent of
MJMDC, which contracted out his services to ABS-CBN. The
Labor Arbiter ruled that as a talent of MJMDC, SONZA is not
an employee of ABS-CBN. SONZA insists that MJMDC is a
labor-only contractor and ABS-CBN is his employer.
21
In a labor-only contract, there are three parties involved: (1) the
labor-only contractor; (2) the employee who is ostensibly
under the employ of the labor-only contractor; and (3) the
principal who is deemed the real employer. Under this
scheme, the labor-only contractor is the agent of the
principal. The law makes the principal responsible to the
employees of the labor-only contractor as if the principal itself
directly hired or employed the employees.[48] These
circumstances are not present in this case.
There are essentially only two parties involved under the
Agreement, namely, SONZA and ABS-CBN. MJMDC merely
acted as SONZAs agent. The Agreement expressly states that
MJMDC acted as the AGENT of SONZA. The records do not
show that MJMDC acted as ABS-CBNs agent. MJMDC, which
stands for Mel and Jay Management and Development
Corporation, is a corporation organized and owned by SONZA
and TIANGCO. The President and General Manager of
MJMDC is SONZA himself. It is absurd to hold that MJMDC,
which is owned, controlled, headed and managed by SONZA,
acted as agent of ABS-CBN in entering into the Agreement
with SONZA, who himself is represented by MJMDC. That
would make MJMDC the agent of both ABS-CBN and SONZA.
As SONZA admits, MJMDC is a management company
devoted exclusively to managing the careers of SONZA and
his broadcast partner, TIANGCO. MJMDC is not engaged in
any other business, not even job contracting. MJMDC does not
have any other function apart from acting as agent of SONZA
or TIANGCO to promote their careers in the broadcast and
television industry.[49]
Policy Instruction No. 40
SONZA argues that Policy Instruction No. 40 issued by then
Minister of Labor Blas Ople on 8 January 1979 finally settled
the status of workers in the broadcast industry. Under this
policy, the types of employees in the broadcast industry are the
station and program employees.
Policy Instruction No. 40 is a mere executive issuance which
does not have the force and effect of law. There is no legal
presumption that Policy Instruction No. 40 determines
SONZAs status. A mere executive issuance cannot exclude
independent contractors from the class of service providers to
the broadcast industry. The classification of workers in the
broadcast industry into only two groups under Policy
Instruction No. 40 is not binding on this Court, especially when
the classification has no basis either in law or in fact.
Affidavits of ABS-CBNs Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits
of Socorro Vidanes and Rolando Cruz without giving his
counsel the opportunity to cross-examine these witnesses.
SONZA brands these witnesses as incompetent to attest on
the prevailing practice in the radio and television industry.
SONZA views the affidavits of these witnesses as misleading
and irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses,
he was never prevented from denying or refuting the
allegations in the affidavits. The Labor Arbiter has the
discretion whether to conduct a formal (trial-type) hearing after
the submission of the position papers of the parties, thus:
Section 3. Submission of Position Papers/Memorandum
xxx
These verified position papers shall cover only those claims
and causes of action raised in the complaint excluding those
that may have been amicably settled, and shall be
accompanied by all supporting documents including the
affidavits of their respective witnesses which shall take the
place of the latters direct testimony. x x x
Section 4. Determination of Necessity of Hearing.
Immediately after the submission of the parties of their position
papers/memorandum, the Labor Arbiter shall motu propio
determine whether there is need for a formal trial or hearing. At
this stage, he may, at his discretion and for the purpose of
making such determination, ask clarificatory questions to

further elicit facts or information, including but not limited to the
subpoena of relevant documentary evidence, if any from any
party or witness.[50]
The Labor Arbiter can decide a case based solely on the
position papers and the supporting documents without a formal
trial.[51] The holding of a formal hearing or trial is something that
the parties cannot demand as a matter of right.[52] If the Labor
Arbiter is confident that he can rely on the documents before
him, he cannot be faulted for not conducting a formal trial,
unless under the particular circumstances of the case, the
documents alone are insufficient. The proceedings before a
Labor Arbiter are non-litigious in nature. Subject to the
requirements of due process, the technicalities of law and the
rules obtaining in the courts of law do not strictly apply in
proceedings before a Labor Arbiter.
Talents as Independent Contractors
ABS-CBN claims that there exists a prevailing practice in the
broadcast and entertainment industries to treat talents like
SONZA as independent contractors. SONZA argues that if
such practice exists, it is void for violating the right of labor to
security of tenure.
The right of labor to security of tenure as guaranteed in the
Constitution[53] arises only if there is an employer-employee
relationship under labor laws. Not every performance of
services for a fee creates an employer-employee relationship.
To hold that every person who renders services to another for
a fee is an employee - to give meaning to the security of tenure
clause - will lead to absurd results.
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. An individual like an artist or talent has
a right to render his services without any one controlling the
means and methods by which he performs his art or craft. This
Court will not interpret the right of labor to security of tenure to
compel artists and talents to render their services only as
employees. If radio and television program hosts can render
their services only as employees, the station owners and
managers can dictate to the radio and television hosts what
they say in their shows. This is not conducive to freedom of the
press.
Different Tax Treatment of Talents and Broadcasters
The National Internal Revenue Code (NIRC)[54] in relation to
Republic Act No. 7716,[55] as amended by Republic Act No.
8241,[56] treats talents, television and radio broadcasters
differently. Under the NIRC, these professionals are subject to
the 10% value-added tax (VAT) on services they render.
Exempted from the VAT are those under an employer-
employee relationship.[57] This different tax treatment accorded
to talents and broadcasters bolters our conclusion that they are
independent contractors, provided all the basic elements of a
contractual relationship are present as in this case.
Nature of SONZAs Claims
SONZA seeks the recovery of allegedly unpaid talent fees,
13th month pay, separation pay, service incentive leave,
signing bonus, travel allowance, and amounts due under the
Employee Stock Option Plan. We agree with the findings of the
Labor Arbiter and the Court of Appeals that SONZAs claims
are all based on the May 1994 Agreement and stock option
plan, and not on the Labor Code. Clearly, the present case
does not call for an application of the Labor Code provisions
but an interpretation and implementation of the May 1994
Agreement. In effect, SONZAs cause of action is for breach of
contract which is intrinsically a civil dispute cognizable by the
regular courts.[58]
WHEREFORE, we DENY the petition. The assailed Decision of
the Court of Appeals dated 26 March 1999 in CA-G.R. SP No.
49190 is AFFIRMED. Costs against petitioner.
SO ORDERED.
22
G.R. No. L-19124, November 18, 1967
INVESTMENT PLANNING CORPORATION OF THE
PHILIPPINES, PETITIONER-APPELLANT, VS. SOCIAL
SECURITY SYSTEM, RESPONDENT-APPELLEE.
DECISION
MAKALINTAL, J.:
Petitioner is a domestic corporation engaged in business
management and the sale of securities. It has two classes of
agents who sell its investment plans: (1) salaried employees
who keep definite hours and work under the control and
supervision of the company; and (2) registered representatives
who work on commission basis.
On August 27, 1960 petitioner, through counsel, applied to
respondent Social Security Commission for exemption of its
so-called registered representatives from the compulsory
coverage of the Social Security Act. The application was
denied in a letter signed by the Secretary to the Commission
on January 16, 1961. A motion to reconsider was filed and
also denied, after hearing, by the Commission itself in its
resolution dated September 8, 1961. The matter was
thereafter elevated to this Court for review.
The issue submitted for decision here is whether petitioner's
registered representatives are employees within the meaning
of the Social Security Act (R.A. No. 1161 as
amended). Section 8 (d) thereof defines the term "employee" -
for purposes of the Act - as "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."
(As amended by Sec. 4, R.A. No. 2658) These representatives
are in reality commission
agents. The uncontradicted testimony of petitioner's lone
witness, who was its assistant sales director, is that these
agents are recruited and trained by him particularly for the job
of selling "Filipinas Mutual Fund" shares, made to undergo a
test after such training and, if successful, are given license to
practice by the Securities and Exchange Commission. They
then execute an agreement with petitioner with respect to the
sale of FMF shares to the general public. Among the features
of said agreement which respondent Commission considered
pertinent to the issue are: (a) an agent is paid compensation
for services in the form of commission; (b) in the event of death
or resignation he or his legal representative shall be paid the
balance of the commission corresponding to him; (c)
he is subject to a set of rules and regulations governing the
performance of his duties under the agreement; (d)
he is required to put up a performance bond; and (e) his
services may be terminated for certain causes. At the same
time the Commission found from the evidence and so stated in
its resolution that the agents "are not required to report (for
work) at any time; they do not have to devote their time
exclusively to or work solely for petitioner; the time and the
effort they spend in their work depend entirely upon their own
will and initiative; they are not required to account for their time
nor submit a record of their activities; they shoulder their own
selling expenses as well as transportation; and they are paid
their commission based on a certain percentage of their sales."
The record also reveals that the commission earned by an
agent on his sales is directly deducted by him from the
amount he receives from the investor and turns over to the
company the amount invested after such deduction is
made. The majority of the agents are regularly employed
elsewhere - either in the government or in private enterprises.
Of the three requirements under Section 8 (d) of the Social
Security Act it is admitted that the first is present in respect of
the agents whose status is in question. They exert both mental
and physical efforts in the performance of their services. The
compensation they receive, however, is not necessarily for
those efforts but rather for the results thereof, that is, for actual
sales that they make. This point is relevant in

the determination of whether or not the third requisite is also
present, namely, the existence of employer-employee
relationship. Petitioner points out that in effect such
compensation is paid not by it but by the investor, as shown by
the basis on which the amount of the commission is fixed and
the manner in which it is collected.
Petitioner submits that its commission agents, engaged under
the terms and conditions already enumerated, are not
employees but independent contractors, as defined in Article
1713 of the Civil Code, which provides:
"ART. 1713. By the contract for a piece of work the contractor
binds himself to execute a piece of work for the employer, in
consideration of a certain price or compensation. The
contractor may either employ only his labor or skill, or also
furnish the material."
We are convinced from the facts that the work of petitioner's
agents or registered representatives more nearly approximates
that of an independent contractor than that of an
employee. The latter is paid for the labor he performs, that is,
for the acts of which such labor consists; the former is paid for
the result thereof. This Court has recognized the distinction in
Chartered Bank et al. vs. Constantino, 56 Phil. 717, where it
said:
On this point, the distinguished commentator Manresa in
referring to Article 1588 of the (Spanish) Civil Code has the
following to say. x x x
The code does not begin by giving a general idea of the
subject matter, but by fixing its two distinguishing
characteristics.
But such an idea was not absolutely necessary because the
difference between the lease of work by contract or for a fixed
price and the lease of services of hired servants or laborers is
sufficiently clear. In the latter, the direct object of the
contract is the lessor's labor; the acts in which such labor
consists, performed for the benefit of the lessee, are taken into
account immediately. In work done by contract or for a fixed
price, the lessor's labor is indeed an important, a most
important factor; but it is not the direct object of the contract,
nor is it immediately taken into account. The object which the
parties consider, which they bear in mind in order to determine
the cause of the contract, and upon which they really give their
consent, is not the labor but its result, the complete and
finished work, the aggregate of the lessor's acts embodied in
something material, which is the useful object of the
contract. x x x' (Manresa Commentarios al Codigo Civil, Vol.
X, 3d ed., pp. 774-775.)"
Even if an agent of petitioner should devote all of his time and
effort trying to sell its investment plans he would not
necessarily be entitled to compensation therefor. His right to
compensation depends upon and is measured by the tangible
results he produces.
The specific question of when there is "employer?employee
relationship" for purposes of the Social Security Act has not yet
been settled in this jurisdiction by any decision of this
Court. But in other connections wherein the term is used the
test that has been generally applied is the so-called control
test, that is, whether the "employer" controls or has reserved
the right to control the "employee" not only as to the result of
the work to be done but also as to the means and methods by
which the same is to be accomplished.
Thus in Philippine Manufacturing Company vs. Geronimo et
al., L-6968, November 29, 1954, involving the Workmen's
Compensation Act, we read:
. . . Garcia, a painting contractor, had a contract undertaken to
paint a water tank belonging to the Company in accordance
with specifications and price stipulated, and with 'the actual
supervision of the work (being) taken care of by'
himself. Clearly, this made Garcia an independent contractor,
for while the company prescribed what should be done, the
doing of it and the supervision thereof was left entirely to him,
all of which meant that he was free to do the job according to
23
his own method without being subject to the control of the
company except as to the result."
Cruz et al. vs. The Manila Hotel Company, L-9110, April 30,
1957, presented the issue of who were to be considered
employees of the defendant firm for purposes of separation
gratuity. LVN Pictures, Inc. vs. Phil. Musicians Guild et al., L-
12582, January 28, 1961, involved the status of certain
musicians for purposes of determining the appropriate
bargaining representative of the employees. In both instances
the "control" test was followed. (See also Mensal vs.
P.P. GochecoLumber Co., L-8017, April 30, 1955;
and Viana vs. Alagadan, et al., L-8967, May 31, 1956.)
In the United States, the Federal Social Security Act of 935 set
forth no definition of the term 'employee' other than that it
includes an officer of a corporation. Under that Act the U.S.
Supreme Court adopted for a time and in several cases the so-
called "economic reality" test instead of the "control" test. (U.S.
vs. Silk and Harrison, 91 Law Ed. 1757; Bartels vs.
Birmingham Ibid, 1947, both decided in June 1947). In the
Bartels case the Court said:
"In United States v. Silk, No. 312, 331 US 704, ante, 1957, 67
S Ct 1463, supra, we held that the relationship of employer-
employee, which determines the liability for employment taxes
under the Social Security Act was not to be determines solely
by the idea of control which an alleged employer may or could
exercise over the details of the service rendered to his
business by the worker or workers. Obviously control is
characteristically associated with the employer-employee
relationship, but in the application of social legislation
employees are those who as a matter of economic reality are
dependent upon the business to which they render service. In
Silk, we pointed out that permanency of the relation, the skill
required, the investment in the facilities for work and
opportunities for profit or less from the activities were also
factors that should enter into judicial determination as to the
coverage of the Social Security Act. It is the total situation that
controls. These standards are as important in the
entertainment field as we have just said, in Silk, that they were
in that of distribution and transportation." (91 Law, Ed.
1947, 1953;)
However, the "economic-reality" test was subsequently
abandoned as not reflective of the intention of Congress in the
enactment of the original Security Act of 1935. The change
was accomplished by means of an amendatory Act passed in
1948, which was construed and applied in later cases. In
Benson vs. Social Security Board, 172 F. 2d. 682,
the U.S. Supreme Court said:
"After the decision by the Supreme Court in the Silk case, the
Treasury Department revamped its Regulation, 12 Fed. Reg.
7966, using the test set out in the Silk case for determining the
existence of an employer-employee relationship. Apparently
this was not the concept of such a relationship that Congress
had in mind in the passage of such remedial acts as the one
involved here because thereafter on June 14, 1948, Congress
enacted Public Law 642, 42 U.S. C.A. Sec. 1301(a)
(6). Section 1101(a) (6) of the Social Security Act was
amended to read as follows:
The term employee includes an officer of a corporation, but
such term does not include (1) any individual who, under the
usual common-law rules applicable in determining the
employer-employee relationship, has the status of an
independent contractor or (2) any individual (except an officer
of a corporation) who is not an employee under such common-
law rules.
"While it is not necessary to explore the full effect of this
enactment in the determination of the existence of employer-
employee relationships arising in the future, we think it can
fairly be said that the intent of Congress was to say that in
determining in a given case whether under the Social Security
Act such a relationship exists, the common-law elements of
such a relationship, as recognized and applied by the courts
generally at the time of the passage of the Act, were the
standard to be used . . . ."

The common-law principles expressly adopted by the United
States Congress are summarized in
Corpus Juris Secundum as follows:
"Under the common-law principles as to tests of the
independent contractor relationship, discussed in Master and
Servant, and applicable in determining coverage under the
Social Security Act and related taxing provisions, the significant
factor in determining the relationship of the parties is the
presence or absence of a supervisory power to control the
method and detail of performance of the service, and the
degree to which the principal may intervene to exercise such
control, the presence of such power of control being indicative
of an employment relationship and the absence of such power
being indicative of the relationship of independent
contractor. In other words, the test of existence of the
relationship of independent contractor, which relationship is not
taxable under the Social Security Act and related
provisions, is whether the one who is claimed to be an
independent contractor has contracted to do the work
according to his own methods and without being subject to the
control of the employer except as to the result of the work." (81
C.J.S. Sec. 5, pp. 24-25;) See also Millard's Inc. vs. United
States, 146 F. Supp. 385; Schmidt vs. Ewing, 108 F. Supp.
505; Rambin vs. Ewing, 106 F. Supp. 268.
In the case last cited (Rambin v. Ewing) the question presented
was whether the plaintiff there, who was a sales representative
of a cosmetics firm working on a commission basis, was to be
considered an employee. Said the Court:
"Plaintiffs only remuneration was her commission of 40% plus
$5 extra for every $250 of sales. Plaintiff was
not guaranteed any minimum compensation and she was not
allowed a drawing account or advance of any kind against
unearned commissions. Plaintiff paid all of her traveling
expenses and she even had to pay the postage for sending
orders to Avon.
"The only office which Avon maintained in Shreveport was an
office for the city manager. Plaintiff worked from her own home
and she was never furnished any leads. The relationship
between plaintiff and Avon was terminable at will x x x
x x x
x x x A long line of decisions holds that commissions sales
representatives are not employees within the coverage of the
Social Security Act. The underlying circumstances of the
relationship between the sales representatives and company
often vary widely from case to case, but commission sales
representatives have uniformly been held to be outside the
Social Security Act."
Considering the similarity between the definition of "employee"
in the Federal Social Security Act (U.S.) as amended and its
definitions in our own Social Security Act, and considering
further that the local statute is admittedly patterned after that of
the United States, the decisions of American courts on the
matter before us may well be accorded persuasive force. The
logic of the situation indeed dictates that where the
element of control is absent; 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 in turn is
compensated according to the result of his efforts and not the
amount thereof, we should not find that the relationship of
employer and employee exists.
We have examined the contract form between petitioner and
its registered representatives and found nothing therein which
would indicate that the latter are under the control of the former
in respect of the means and methods they employ in the
performance of their work. The fact that for certain specified
causes the relationship may be terminated (e.g. failure to meet
the annual quota of sales, inability to make any sales
production during a six-month period, conduct detrimental to
petitioner, etc.) does not mean that such control exists, for the
causes of termination thus specified have no relation to the
means and methods of work that are ordinarily required of or
imposed upon employees.
24
In view of the foregoing considerations, the resolution of
respondent Social Security Commission subject of this appeal
is reversed and set aside, without pronouncement as to costs.
G.R. No. 101761, March 24, 1993
NATIONAL SUGAR REFINERIES CORPORATION,
PETITIONER, VS. NATIONAL LABOR RELATIONS
COMMISSION AND NBSR SUPERVISORY UNION (PACIWU)
TUCP, RESPONDENTS.
DECISION
REGALADO, J.:
The main issue presented for resolution in this original petition
for certiorari is whether supervisory employees, as defined in
Article 212(m), Book V of the Labor Code, should be
considered as officers or members of the managerial staff
under Article 82, Book III of the same Code, and hence are not
entitled to overtime, rest day and holiday pay.
Petitioner National Sugar Refineries Corporation
(NASUREFCO), a corporation which is fully owned and
controlled by the Government, operates three (3) sugar
refineries located at Bukidnon, Iloilo and Batangas. The
Batangas refinery was privatized on April 11, 1992 pursuant to
Proclamation No. 50.[1] Private respondent union represents
the former supervisors of the NASUREFCO Batangas Sugar
Refinery, namely, the Technical Assistant to the Refinery
Operations Manager, Shift Sugar Warehouse Supervisor,
Senior Financial/Budget Analyst, General Accountant, Cost
Accountant, Sugar Accountant, Junior Financial/Budget
Analyst, Shift Boiler Supervisor, Shift Operations Chemist, Shift
Electrical Supervisor, General Services Supervisor,
Instrumentation Supervisor, Community Development Officer,
Employment and Training Supervisor, Assistant Safety and
Security Officer, Head of Personnel Services, Head Nurse,
Property Warehouse Supervisor, Head of Inventory Control
Section, Shift Process Supervisor, Assistant Shift Process
Supervisor, Shift R/M Supervisor, Day Maintenance Supervisor
and Motorpool Supervisor.
On June 1, 1988, petitioner implemented a Job Evaluation (JE)
Program affecting all employees, from rank-and-file to
department heads. The JE Program was designed to
rationalize the duties and functions of all positions, reestablish
levels of responsibility, and reorganize both wage and
operational structures. Jobs were ranked according to effort,
responsibility, training and working conditions and relative
worth of the job. 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.
We glean from the records that for about ten years prior to the
JE Program, the members of respondent union were treated in
the same manner as rank-and-file employees. As such, they
used to be paid overtime, rest day and holiday pay pursuant to
the provisions of Articles 87, 93 and 94 of the Labor Code, as
amended. With the implementation of the JE Program, the
following adjustments were made: (1) the members of
respondent union were re-classified under levels S-5 to S-8
which are considered managerial staff for purposes of
compensation and benefits; (2) there was an increase in basic
pay on the average of 50% of their basic pay prior to the JE
Program, with the union members now enjoying a wide gap
(P1,269.00 per month) in basic pay compared to the highest
paid rank-and-file employee; (3) longevity pay was increased
on top of alignment adjustments; (4) they were entitled to
increased company COLA of P225.00 per month; and (5) there
was a grant of P100.00 allowance for rest day/holiday work.
On May 11, 1990, petitioner NASUREFCO recognized herein
respondent union, which was organized pursuant to Republic
Act No. 6715 allowing supervisory employees to form their own
unions, as the bargaining representative of all the supervisory
employees at the NASUREFCO Batangas Sugar Refinery.
Two years after the implementation of the JE Program,

specifically on June 20, 1990, the members of herein
respondent union filed a complaint with the executive labor
arbiter for non-payment of overtime, rest day and holiday pay
allegedly in violation of Article 100 of the Labor Code.
On January 7, 1991, Executive Labor Arbiter Antonio C. Pido
rendered a decision[2] disposing as follows:
WHEREFORE, premises considered, respondent National
Sugar Refineries Corporation is hereby directed to -
1. pay the individual members of complainant union the usual
overtime pay, restday pay and holiday pay enjoyed by them
instead of the P100.00 special allowance which was
implemented on June 1, 1988; and
2. pay the individual members of complainant union the
difference in money value between the P100.00 special
allowance and the overtime pay, restday pay and holiday pay
that they ought to have received from June 1, 1988.
All other claims are hereby dismissed for lack of merit.
SO ORDERED.
In finding for the members of herein respondent union, the
labor arbiter ruled that the long span of time during which the
benefits were being paid to the supervisors has caused the
payment thereof to ripen into a contractual obligation; that the
complainants cannot be estopped from questioning the validity
of the new compensation package despite the fact that they
have been receiving the benefits therefrom, considering that
respondent union was formed only a year after the
implementation of the Job Evaluation Program, hence there
was no way for the individual supervisors to express their
collective response thereto prior to the formation of the union;
and the comparative computations presented by the private
respondent union showed that the P100.00 special allowance
given by NASUREFCO fell short of what the supervisors ought
to receive had the overtime pay, rest day pay and holiday pay
not been discontinued, which arrangement, therefore,
amounted to a diminution of benefits.
On appeal, in a decision promulgated on July 19, 1991 by its
Third Division, respondent National Labor Relations
Commission (NLRC) affirmed the decision of the labor arbiter
on the ground that the members of respondent union are not
managerial employees, as defined under Article 212(m) of the
Labor Code and, therefore, they are entitled to overtime, rest
day and holiday pay. Respondent NLRC declared that these
supervisory employees are merely exercising recommendatory
powers subject to the evaluation, review and final action by
their department heads; their responsibilities do not require the
exercise of discretion and independent judgment; they do not
participate in the formulation of management policies nor in the
hiring or firing of employees; and their main function is to carry
out the ready policies and plans of the corporation.
[3]
Reconsideration of said decision was denied in a resolution
of public respondent dated August 30, 1991.[4]
Hence this petition for certiorari, with petitioner NASUREFCO
asseverating that public respondent commission committed a
grave abuse of discretion in refusing to recognize the fact that
the members of respondent union are members of the
managerial staff who are not entitled to overtime, rest day and
holiday pay; and in making petitioner assume the double
burden of giving the benefits due to rank-and-file employees
together with those due to supervisors under the JE Program.
We find creditable merit in the petition and the extraordinary
writ of certiorari shall accordingly issue.
The primordial issue to be resolved herein is whether the
members of respondent union are entitled to overtime, rest day
and holiday pay. Before this can be resolved, however, it must
of necessity be ascertained first whether or not the union
members, as supervisory employees, are to be considered as
officers or members of the managerial Staff who are exempt
from the coverage of Article 82 of the Labor Code.
It is not disputed that the members of respondent union are
supervisory employees, as defined under Article 212(m), Book
V of the Labor Code on Labor Relations, which reads:
25
(m) Managerial employee 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, discharge,
assign or discipline employees. Supervisory 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 the above definitions are considered rank-
and-file employees for purposes of this Book.
Respondent NLRC, in holding that the union members are
entitled to overtime, rest day and holiday pay, and in ruling that
the latter are not managerial employees, adopted the definition
stated in the aforequoted statutory provision.
Petitioner, however, avers that for purposes of determining
whether or not the members of respondent union are entitled to
overtime, rest day and holiday pay, said employees should be
considered as officers or members of the managerial staff as
defined under Article 82, Book III of the Labor Code on
Working Conditions and Rest Periods and amplified in
Section 2, Rule I, Book III of the Rules to Implement the Labor
Code, to wit:
Art. 82. Coverage. - The provisions of this title shall apply to
employees in all establishments and undertakings whether for
profit or not, but not to government employees, managerial
employees, field personnel, members of the family of the
employer who are dependent on him for support, domestic
helpers, persons in the personal service of another, and
workers who are paid by results as determined by the
Secretary of Labor in appropriate regulations.
As used herein, managerial employees refer to those whose
primary duty consists of the management of the establishment
in which they are employed or of a department or subdivision
thereof, and to other officers or members of the managerial
staff. (Emphasis supplied.)
xxx
Sec. 2. Exemption. - The provisions of this rule shall not apply
to the following persons if they qualify for exemption under the
condition set forth herein:
xxx
(b) Managerial employees, if they meet all of the following
conditions, namely:
(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.
(c) Officers or members of a managerial staff if they perform
the following duties and responsibilities:
(1) The primary duty consists of the performance of work
directly related to management policies of their employer;
(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 work week to activities which are not directly and

closely related to the performance of the work described in
paragraphs (1), (2), and (3) above.
It is the submission of petitioner that while the members of
respondent union, as supervisors, may not be occupying
managerial positions, they are clearly officers or members of
the managerial staff because they meet all the conditions
prescribed by law and, hence, they are not entitled to overtime,
rest day and holiday pay. It contends that the definition of
managerial and supervisory employees under Article 212(m)
should be made to apply only to the provisions on Labor
Relations, while the right of said employees to the questioned
benefits should be considered in the light of the meaning of a
managerial employee and of the officers or members of the
managerial staff, as contemplated under Article 82 of the Code
and Section 2, Rule I, Book III of the implementing rules. In
other words, for purposes of forming and joining unions,
certification slections, collective bargaining, and so forth, the
union members are supervisory employees. In terms of
working conditions and rest periods and entitlement to the
questioned benefits, however, they are officers or members of
the managerial staff, hence they are not entitled thereto.
While the Constitution is committed to the policy of social
justice and the protection of the working class, it should not be
supposed that every labor dispute will be automatically decided
in favor of labor. Management also has its own rights which, as
such, are entitled to respect and enforcement in the interest of
simple fair play. Out of its concern for those with less privileges
in life, this Court has inclined more often than not toward the
worker and upheld his cause in his conflicts with the employer.
Such favoritism, however, has not blinded us to the rule that
justice is in every case for the deserving, to be dispensed in
the light of the established facts and the applicable law and
doctrine.[5]
This is one such case where we are inclined to tip the scales of
justice in favor of the employer.
I. The question whether a given employee is exempt from the
benefits of the law is a factual one dependent on the
circumstances of the particular case. In determining whether
an employee is within the terms of the statutes, the criterion is
the character of the work performed, rather than the title of the
employees position.[6]
Consequently, while generally this Court is not supposed to
review the factual findings of respondent commission,
substantial justice and the peculiar circumstances obtaining
herein mandate a deviation from the rule.
A cursory perusal of the Job Value Contribution Statements[7] 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
companys set goals and objectives. These supervisory
employees are likewise responsible for the effective and
efficient operation of their respective departments. More
specifically, their duties and functions include, among others,
the following operations whereby the employee:
1) assists the department superintendent in the following:
a) planning of systems and procedures relative to department
activities;
b) organizing and scheduling of work activities of the
department, which includes employee shifting schedule and
manning complement;
c) decision making by providing relevant information data and
other inputs;
d) attaining the companys set goals and objectives by giving
his full support;
e) selecting the appropriate man to handle the job in the
department; and
f) preparing annual departmental budget;
2) observes, follows and implements company policies at all
26
times and recommends disciplinary action on erring
subordinates;
3) trains and guides subordinates on how to assume
responsibilities and become more productive;
4) conducts semi-annual performance evaluation of his
subordinates and recommends necessary action for their
development/advancement;
5) represents the superintendent or the department when
appointed and authorized by the former;
6) coordinates and communicates with other inter and intra
department supervisors when necessary;
7) recommends disciplinary actions/ promotions;
8) recommends measures to improve work methods,
equipment performance, quality of service and working
conditions;
9) sees to it that safety rules and regulations and procedure
are implemented and followed by all NASUREFCO employees,
recommends revisions or modifications to said rules when
deemed necessary, and initiates and prepares reports for any
observed abnormality within the refinery;
10) supervises the activities of all personnel under him and
sees to it that instructions to subordinates are properly
implemented; and
11) performs other related tasks as may be assigned by his
immediate superior.
From the foregoing, it is apparent that the members of
respondent 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 consists 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.
Under the facts obtaining in this case, we are constrained to
agree with petitioner that the union members should be
considered as officers or members of the managerial staff and
are, therefore, exempt from the coverage of Article 82.
Perforce, they are not entitled to overtime, rest day and holiday
pay.
The distinction made by respondent NLRC on the basis of
whether or not the union members are managerial
employees, to determine the latters entitlement to the
questioned benefits, is misplaced and inappropriate. 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 inefficacious. 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.
II. We likewise do not subscribe to the finding of the labor
arbiter that the payment of the questioned benefits to the union
members has ripened into a contractual obligation.
A. Prior to the JE Program, the union members, while being
supervisors, received benefits similar to the rank-and-file
employees such as overtime, rest day and holiday pay, simply

because they were treated in the same manner as rank-and-
file employees, and their basic pay was nearly on the same
level as those of the latter, aside from the fact that their specific
functions and duties then as supervisors had not been properly
defined and delineated from those of the rank-and-file. Such
fact is apparent from the clarification made by petitioner in its
motion for reconsideration[8] filed with respondent commission
in NLRC Case No. CA No. I-000058, dated August 16, 1991,
wherein it lucidly explained:
But, complainants no longer occupy the same positions they
held before the JE Program. Those positions formerly
classified as supervisory and found after the JE Program to be
rank-and-file were classified correctly and continue to receive
overtime, holiday and restday pay. As to them, the practice
subsists.
However, those whose duties confirmed them to be
supervisory, were re-evaluated, their duties re-defined and in
most cases their organizational positions re-designated to
confirm their superior rank and duties. Thus, after the JE
program, complainants cannot be said to occupy the same
positions.[9]
It bears mention that this positional submission was never
refuted nor controverted by respondent union in any of its
pleadings filed before herein public respondent or with this
Court. Hence, it can be safely concluded therefrom that the
members of respondent union were paid the questioned
benefits for the reason that, at that time, they were rightfully
entitled thereto. Prior to the JE Program, they could not be
categorically classified as members or officers of the
managerial staff considering that they were then treated merely
on the same level as rank-and-file. Consequently, the payment
thereof could not be construed as constitutive of voluntary
employer practice, which cannot now be unilaterally withdrawn
by petitioner. To be considered as such, it should have been
practiced over a long period of time, and must be shown to
have been consistent and deliberate.[10]
The test or rationale of this rule on long practice requires an
indubitable showing that the employer agreed to continue
giving the benefits knowing fully well that said employees are
not covered by the law requiring payment thereof.[11] In the
case at bar, respondent union failed to sufficiently establish
that petitioner has been motivated or is wont to give these
benefits out of pure generosity.
B. It remains undisputed that with the implementation of the JE
Program, the members of private respondent union were re-
classified under levels S-5 to S-8 which were considered under
the program as managerial staff for purposes of compensation
and benefits, that they occupied re-evaluated positions, and
that their basic pay was increased by an average of 50% of
their basic salary prior to the JE Program. In other words, after
the JE Program there was an ascent in position, rank and
salary. This in essence is a promotion which is defined as 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.[12]
Quintessentially, with the promotion of the union members,
they are no longer entitled to the benefits which attach and
pertain exclusively to their former 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 respondent union, they occupied positions which no longer
meet the requirements imposed by law. Their assumption of
these positions removed them from the coverage of the law,
ergo, their exemption therefrom.
As correctly pointed out by petitioner, 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, they cannot have their cake and
eat it too or, as petitioner suggests, they should not, as a
simple matter of law and fairness, get the best of both worlds
at the expense of NASUREFCO.
Promotion of its employees is one of the jurisprudentially-
recognized exclusive prerogatives of management, provided it
is done in good faith. In the case at bar, private respondent
union has miserably failed to convince this Court that the
27
petitioner acted in bad faith in implementing the JE Program.
There is no showing that the JE Program was intended to
circumvent the law and deprive the members of respondent
union of the benefits they used to receive.
Not so long ago, on this particular score, we had the occasion
to hold that:
x x x it is the prerogative of management to regulate,
according to its discretion and judgment, all aspects of
employment. This flows from the established rule that labor law
does not authorize the substitution of the judgment of the
employer in the conduct of its business. Such management
prerogative may be availed of without fear of any liability so
long as it is exercised in good faith for the advancement of the
employers interest and not for the purpose of defeating or
circumventing the rights of employees under special laws or
valid agreement and are not exercised in a malicious, harsh,
oppressive, vindictive or wanton manner or out of malice or
spite.[13]
WHEREFORE, the impugned decision and resolution of
respondent National Labor Relations Commission promulgated
on July 19, 1991 and August 30, 1991, respectively, are
hereby ANNULLED and SET ASIDE for having been rendered
and adopted with grave abuse of discretion, and the basic
complaint of private respondent union is DISMISSED.
SO ORDERED.
G.R. NO. 156367, May 16, 2005
AUTO BUS TRANSPORT SYSTEMS, INC., PETITIONER,
VS. ANTONIO BAUTISTA, RESPONDENT.
DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari assailing the
Decision[1] and Resolution[2] of the Court of Appeals affirming
the Decision[3] of the National Labor Relations Commission
(NLRC). The NLRC ruling modified the Decision of the Labor
Arbiter (finding respondent entitled to the award of 13th month
pay and service incentive leave pay) by deleting the award of
13th month pay to respondent.
THE FACTS
Since 24 May 1995, respondent Antonio Bautista has been
employed by petitioner Auto Bus Transport Systems, Inc.
(Autobus), as driver-conductor with travel routes Manila-
Tuguegarao via Baguio, Baguio- Tuguegarao via Manila and
Manila-Tabuk via Baguio. Respondent was paid on
commission basis, seven percent (7%) of the total gross
income per travel, on a twice a month basis.
On 03 January 2000, while respondent was driving Autobus
No. 114 along Sta. Fe, Nueva Vizcaya, the bus he was driving
accidentally bumped the rear portion of Autobus No. 124, as
the latter vehicle suddenly stopped at a sharp curve without
giving any warning.
Respondent averred that the accident happened because he
was compelled by the management to go back to Roxas,
Isabela, although he had not slept for almost twenty-four (24)
hours, as he had just arrived in Manila from Roxas, Isabela.
Respondent further alleged that he was not allowed to work
until he fully paid the amount of P75,551.50, representing thirty
percent (30%) of the cost of repair of the damaged buses and
that despite respondent's pleas for reconsideration, the same
was ignored by management. After a month, management sent
him a letter of termination.
Thus, on 02 February 2000, respondent instituted a Complaint
for Illegal Dismissal with Money Claims for nonpayment of
13th month pay and service incentive leave pay against
Autobus.
Petitioner, on the other hand, maintained that respondent's

employment was replete with offenses involving reckless
imprudence, gross negligence, and dishonesty. To support its
claim, petitioner presented copies of letters, memos,
irregularity reports, and warrants of arrest pertaining to several
incidents wherein respondent was involved.
Furthermore, petitioner avers that in the exercise of its
management prerogative, respondent's employment was
terminated only after the latter was provided with an
opportunity to explain his side regarding the accident on 03
January 2000.
On 29 September 2000, based on the pleadings and
supporting evidence presented by the parties, Labor Arbiter
Monroe C. Tabingan promulgated a Decision,[4]the dispositive
portion of which reads:
WHEREFORE, all premises considered, it is hereby found that
the complaint for Illegal Dismissal has no leg to stand on. It is
hereby ordered DISMISSED, as it is hereby DISMISSED.
However, still based on the above-discussed premises, the
respondent must pay to the complainant the following:
a. his 13th month pay from the date of his hiring to the
date of his dismissal, presently computed at
P78,117.87;
b. his service incentive leave pay for all the years he had
been in service with the respondent, presently
computed at P13,788.05.
All other claims of both complainant and respondent are
hereby dismissed for lack of merit.[5]
Not satisfied with the decision of the Labor Arbiter, petitioner
appealed the decision to the NLRC which rendered its decision
on 28 September 2001, the decretal portion of which reads:
[T]he Rules and Regulations Implementing Presidential Decree
No. 851, particularly Sec. 3 provides:
"Section 3. Employers covered. The Decree shall apply to all
employers except to:
xxx xxx xxx
e) employers of those who are paid on purely commission,
boundary, or task basis, performing a specific work,
irrespective of the time consumed in the performance thereof.
xxx."
Records show that complainant, in his position paper, admitted
that he was paid on a commission basis.
In view of the foregoing, we deem it just and equitable to
modify the assailed Decision by deleting the award of 13th
month pay to the complainant.
...
WHEREFORE, the Decision dated 29 September 2000 is
MODIFIED by deleting the award of 13th month pay. The other
findings are AFFIRMED.[6]
In other words, the award of service incentive leave pay was
maintained. Petitioner thus sought a reconsideration of this
aspect, which was subsequently denied in a Resolution by the
NLRC dated 31 October 2001.
Displeased with only the partial grant of its appeal to the
NLRC, petitioner sought the review of said decision with the
Court of Appeals which was subsequently denied by the
appellate court in a Decision dated 06 May 2002, the
dispositive portion of which reads:
WHEREFORE, premises considered, the Petition is
DISMISSED for lack of merit; and the assailed Decision of
respondent Commission in NLRC NCR CA No. 026584-2000 is
hereby AFFIRMED in toto. No costs.[7]
Hence, the instant petition.
ISSUES
1. Whether or not respondent is entitled to
service incentive leave;
28
2. Whether or not the three (3)-year
prescriptive period provided under Article
291 of the Labor Code, as amended, is
applicable to respondent's claim of service
incentive leave pay.
RULING OF THE COURT
The disposition of the first issue revolves around the proper
interpretation of Article 95 of the Labor Code vis--vis Section
1(D), Rule V, Book III of the Implementing Rules and
Regulations of the Labor Code which provides:
Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE
(a) Every employee who has rendered at least one year of
service shall be entitled to a yearly service incentive leave of
five days with pay.
Book III, Rule V: SERVICE INCENTIVE LEAVE
SECTION 1. Coverage. This rule shall apply to all employees
except:
...
(d) Field personnel and other employees whose performance
is unsupervised by the employer including those who are
engaged on task or contract basis, purely commission basis, or
those who are paid in a fixed amount for performing work
irrespective of the time consumed in the performance thereof; .
..
A careful perusal of said provisions of law will result in the
conclusion that the grant of service incentive leave has been
delimited by the Implementing Rules and Regulations of the
Labor Code to apply only to those employees not explicitly
excluded by Section 1 of Rule V. According to the
Implementing Rules, Service Incentive Leave shall not apply to
employees classified as "field personnel." The phrase "other
employees whose performance is unsupervised by the
employer" must not be understood as a separate classification
of employees to which service incentive leave shall not be
granted. Rather, it serves as an amplification of the
interpretation of the definition of field personnel under the
Labor Code as those "whose actual hours of work in the field
cannot be determined with reasonable certainty."[8]
The same is true with respect to the phrase "those who are
engaged on task or contract basis, purely commission basis."
Said phrase should be related with "field personnel," applying
the rule on ejusdem generis that general and unlimited terms
are restrained and limited by the particular terms that they
follow.[9] Hence, employees engaged on task or contract basis
or paid on purely commission basis are not automatically
exempted from the grant of service incentive leave, unless,
they fall under the classification of field personnel.
Therefore, petitioner's contention that respondent is not entitled
to the grant of service incentive leave just because he was
paid on purely commission basis is misplaced. What must be
ascertained in order to resolve the issue of propriety of the
grant of service incentive leave to respondent is whether or not
he is a field personnel.
According to Article 82 of the Labor Code, "field personnel"
shall refer to non-agricultural employees who regularly perform
their duties away from the principal place of business or branch
office of the employer and whose actual hours of work in the
field cannot be determined with reasonable certainty. This
definition is further elaborated in the Bureau of Working
Conditions (BWC), Advisory Opinion to Philippine Technical-
Clerical Commercial Employees Association[10] which states
that:
As a general rule, [field personnel] are those whose
performance of their job/service is not supervised by the
employer or his representative, the workplace being away from
the principal office and whose hours and days of work cannot
be determined with reasonable certainty; hence, they are paid
specific amount for rendering specific service or performing
specific work. If required to be at specific places at specific
times, employees including drivers cannot be said to be field

personnel despite the fact that they are performing work away
from the principal office of the employee. [Emphasis ours]
To this discussion by the BWC, the petitioner differs and
postulates that under said advisory opinion, no employee
would ever be considered a field personnel because every
employer, in one way or another, exercises control over his
employees. Petitioner further argues that the only criterion that
should be considered is the nature of work of the employee in
that, if the employee's job requires that he works away from the
principal office like that of a messenger or a bus driver, then he
is inevitably a field personnel.
We are not persuaded. At this point, it is necessary to stress
that the definition of a "field personnel" is not merely concerned
with the location where the employee regularly performs his
duties but also with the fact that the employee's performance is
unsupervised by the employer. As discussed above, field
personnel are those who regularly perform their duties away
from the principal place of business of the employer and
whose actual hours of work in the field cannot be determined
with reasonable certainty. Thus, in order to conclude whether
an employee is a field employee, it is also necessary to
ascertain if actual hours of work in the field can be determined
with reasonable certainty by the employer. In so doing, an
inquiry must be made as to whether or not the employee's time
and performance are constantly supervised by the employer.
As observed by the Labor Arbiter and concurred in by the
Court of Appeals:
It is of judicial notice that along the routes that are plied by
these bus companies, there are its inspectors assigned at
strategic places who board the bus and inspect the
passengers, the punched tickets, and the conductor's reports.
There is also the mandatory once-a-week car barn or shop
day, where the bus is regularly checked as to its mechanical,
electrical, and hydraulic aspects, whether or not there are
problems thereon as reported by the driver and/or conductor.
They too, must be at specific place as [sic] specified time, as
they generally observe prompt departure and arrival from their
point of origin to their point of destination. In each and every
depot, there is always the Dispatcher whose function is
precisely to see to it that the bus and its crew leave the
premises at specific times and arrive at the estimated proper
time. These, are present in the case at bar. The driver, the
complainant herein, was therefore under constant supervision
while in the performance of this work. He cannot be considered
a field personnel.[11]
We agree in the above disquisition. Therefore, as correctly
concluded by the appellate court, respondent is not a field
personnel but a regular employee who performs tasks usually
necessary and desirable to the usual trade of petitioner's
business. Accordingly, respondent is entitled to the grant of
service incentive leave.
The question now that must be addressed is up to what
amount of service incentive leave pay respondent is entitled to.
The response to this query inevitably leads us to the correlative
issue of whether or not the three (3)-year prescriptive period
under Article 291 of the Labor Code is applicable to
respondent's claim of service incentive leave pay.
Article 291 of the Labor Code states that all money claims
arising from employer-employee relationship shall be filed
within three (3) years from the time the cause of action
accrued; otherwise, they shall be forever barred.
In the application of this section of the Labor Code, the pivotal
question to be answered is when does the cause of action for
money claims accrue in order to determine the reckoning date
of the three-year prescriptive period.
It is settled jurisprudence that a cause of action has three
elements, to wit, (1) a right in favor of the plaintiff by whatever
means and under whatever law it arises or is created; (2) an
obligation on the part of the named defendant to respect or not
to violate such right; and (3) an act or omission on the part of
such defendant violative of the right of the plaintiff or
constituting a breach of the obligation of the defendant to the
plaintiff.[12]
To properly construe Article 291 of the Labor Code, it is
29
essential to ascertain the time when the third element of a
cause of action transpired. Stated differently, in the
computation of the three-year prescriptive period, a
determination must be made as to the period when the act
constituting a violation of the workers' right to the benefits
being claimed was committed. For if the cause of action
accrued more than three (3) years before the filing of the
money claim, said cause of action has already prescribed in
accordance with Article 291.[13]
Consequently, in cases of nonpayment of allowances and
other monetary benefits, if it is established that the benefits
being claimed have been withheld from the employee for a
period longer than three (3) years, the amount pertaining to the
period beyond the three-year prescriptive period is therefore
barred by prescription. The amount that can only be demanded
by the aggrieved employee shall be limited to the amount of
the benefits withheld within three (3) years before the filing of
the complaint.[14]
It is essential at this point, however, to recognize that the
service incentive leave is a curious animal in relation to other
benefits granted by the law to every employee. In the case of
service incentive leave, the employee may choose to either
use his leave credits or commute it to its monetary equivalent if
not exhausted at the end of the year.[15] Furthermore, if the
employee entitled to service incentive leave does not use or
commute the same, he is entitled upon his resignation or
separation from work to the commutation of his accrued
service incentive leave. As enunciated by the Court
in Fernandez v. NLRC:[16]
The clear policy of the Labor Code is to grant service incentive
leave pay to workers in all establishments, subject to a few
exceptions. Section 2, Rule V, Book III of the Implementing
Rules and Regulations provides that "[e]very employee who
has rendered at least one year of service shall be entitled to a
yearly service incentive leave of five days with pay." Service
incentive leave is a right which accrues to every employee who
has served "within 12 months, whether continuous or broken
reckoned from the date the employee started working,
including authorized absences and paid regular holidays
unless the working days in the establishment as a matter of
practice or policy, or that provided in the employment
contracts, is less than 12 months, in which case said period
shall be considered as one year." It is also "commutable to its
money equivalent if not used or exhausted at the end of the
year." In other words, an employee who has served for one
year is entitled to it. He may use it as leave days or he may
collect its monetary value. To limit the award to three years, as
the solicitor general recommends, is to unduly restrict such
right.[17] [Italics supplied]
Correspondingly, it can be conscientiously deduced that the
cause of action of an entitled employee to claim his service
incentive leave pay accrues from the moment the employer
refuses to remunerate its monetary equivalent if the employee
did not make use of said leave credits but instead chose to
avail of its commutation. Accordingly, if the employee wishes to
accumulate his leave credits and opts for its commutation upon
his resignation or separation from employment, his cause of
action to claim the whole amount of his accumulated service
incentive leave shall arise when the employer fails to pay such
amount at the time of his resignation or separation from
employment.
Applying Article 291 of the Labor Code in light of this peculiarity
of the service incentive leave, we can conclude that the three
(3)-year prescriptive period commences, not at the end of the
year when the employee becomes entitled to the commutation
of his service incentive leave, but from the time when the
employer refuses to pay its monetary equivalent after demand
of commutation or upon termination of the employee's
services, as the case may be.
The above construal of Art. 291, vis--vis the rules on service
incentive leave, is in keeping with the rudimentary principle that
in the implementation and interpretation of the provisions of the
Labor Code and its implementing regulations, the
workingman's welfare should be the primordial and paramount
consideration.[18] The policy is to extend the applicability of the
decree to a greater number of employees who can avail of the
benefits under the law, which is in consonance with the
avowed policy of the State to give maximum aid and protection

to labor.[19]
In the case at bar, respondent had not made use of his service
incentive leave nor demanded for its commutation until his
employment was terminated by petitioner. Neither did petitioner
compensate his accumulated service incentive leave pay at the
time of his dismissal. It was only upon his filing of a complaint
for illegal dismissal, one month from the time of his dismissal,
that respondent demanded from his former employer
commutation of his accumulated leave credits. His cause of
action to claim the payment of his accumulated service
incentive leave thus accrued from the time when his employer
dismissed him and failed to pay his accumulated leave credits.
Therefore, the prescriptive period with respect to his claim for
service incentive leave pay only commenced from the time the
employer failed to compensate his accumulated service
incentive leave pay at the time of his dismissal. Since
respondent had filed his money claim after only one month
from the time of his dismissal, necessarily, his money claim
was filed within the prescriptive period provided for by Article
291 of the Labor Code.
WHEREFORE, premises considered, the instant petition is
hereby DENIED. The assailed Decision of the Court of Appeals
in CA-G.R. SP. No. 68395 is hereby AFFIRMED. No Costs.
SO ORDERED.
G.R. No. 126383, November 28, 1997
SAN JUAN DE DIOS HOSPITAL EMPLOYEES
ASSOCIATION-AFW/MA. CONSUELO MAQUILING,
LEONARDO MARTINEZ, DOMINGO ELA, JR., RODOLFO
CALUCIN, JR., PERLA MENDOZA, REX RAPHAEL REYES,
ROGELIO BELMONTE, AND 375 OTHER EMPLOYEE-
UNION MEMBERS, PETITIONERS, VS. NATIONAL LABOR
RELATIONS COMMISSION, AND SAN JUAN DE DIOS
HOSPITAL, RESPONDENTS.
DECISION
FRANCISCO, J.:
Petitioners, the rank-and-file employee-union officers and
members of San Juan De Dios Hospital Employees
Association, sent on July 08, 1991, a four (4)-page letter with
attached support signatures x x x requesting and pleading for
the expeditious implementation and payment by respondent
Juan De Dios Hospital "of the 40 HOURS/5-DAY
WORKWEEK with compensable weekly two (2) days off
provided for by Republic Act 5901 as clarified for enforcement
by the Secretary of Labors Policy Instructions No. 54 dated
April 12, 1988.[1] Respondent hospital failed to give a favorable
response; thus, petitioners filed a complaint regarding their
claims for statutory benefits under the above-cited law and
policy issuance[2], docketed as NLRC NCR Case No. 00-08-
04815-91. On February 26, 1992, the Labor Arbiter[3] dismissed
the complaint. Petitioners appealed before public respondent
National Labor Relations Commission[4] (NLRC), docketed as
NLRC NCR CA 003028-92, which affirmed the Labor Arbiters
decision. Petitioners subsequent motion for reconsideration
was denied; hence, this petition under Rule 65 of the Rules of
Court ascribing grave abuse of discretion on the part of NLRC
in concluding that Policy Instructions No. 54 proceeds from a
wrong interpretation of RA 5901[5] and Article 83 of the Labor
Code.
As the Court sees it, the core issue is whether Policy
Instructions No. 54 issued by then Labor Secretary (now
Senator) Franklin M. Drilon is valid or not.
The policy instruction in question provides in full as follows:
Policy Instruction No. 54
To: All Concerned
Subject: Working Hours and Compensation of
Hospital/Clinic Personnel
30
This issuance clarifies the enforcement policy of this
Department on the working hours and compensation of
personnel employed by hospital/clinics with a bed capacity of
100 or more and those located in cities and municipalities with
a population of one million or more.
Republic Act 5901 took effect on 21 June 1969 prescribes a
40-hour/5 day work week for hospital/clinic personnel. At the
same time, the Act prohibits the diminution of the
compensation of these workers who would suffer a reduction in
their weekly wage by reason of the shortened workweek
prescribed by the Act. In effect, RA 5901 requires that the
covered hospital workers who used to work seven (7) days a
week should be paid for such number of days for working only
5 days or 40 hours a week.
The evident intention of RA 5901 is to reduce the number of
hospital personnel, considering the nature of their work, and at
the same time guarantee the payment to them of a full weekly
wage for seven (7) days. This is quite clear in the Exemplary
Note of RA 5901 which states:
As compared with the other employees and laborers, these
hospital and health clinic personnel are over-worked despite
the fact that their duties are more delicate in nature. If we offer
them better working conditions, it is believed that the brain
drain, that our country suffers nowadays as far as these
personnel are concerned will be considerably lessened. The
fact that these hospitals and health clinics personnel perform
duties which are directly concerned with the health and lives of
our people does not mean that they should work for a longer
period than most employees and laborers. They are also
entitled to as much rest as other workers. Making them work
longer than is necessary may endanger, rather than protect the
health of their patients. Besides, they are not receiving better
pay than the other workers. Therefore, it is just and fair that
they may be made to enjoy the privileges of equal working
hours with other workers except those excepted by law. (Sixth
Congress of the Republic of the Philippines, Third Session,
House of Representatives, H. No. 16630)
The Labor Code in its Article 83 adopts and incorporates the
basic provisions of RA 5901 and retains its spirit and intent
which is to shorten the workweek of covered hospital
personnel and at the same time assure them of a full weekly
wage.
Consistent with such spirit and intent, it is the position of the
Department that personnel in subject hospital and clinics are
entitled to a full weekly wage for seven (7) days it they have
completed the 40-hours/5-day workweek in any given
workweek.
All enforcement and adjudicatory agencies of this Department
shall be guided by this issuance in the disposition of cases
involving the personnel of covered hospitals and clinics.
Done in the City of Manila, this 12th day of April, 1988.
(Sgd.) FRANKLIN M. DRILON
Secretary
(Emphasis Added)
We note that Policy Instruction No. 54 relies and purports to
implement Republic Act No. 5901, otherwise known as An Act
Prescribing Forty Hours A Week Of Labor For Government and
Private Hospitals Or Clinic Personnel, enacted on June 21,
1969. Reliance on Republic Act No. 5901, however, is
misplaced for the said statute, as correctly ruled by respondent
NLRC, has long been repealed with the passage of the Labor
Code on May 1, 1974, Article 302 of which explicitly provides:
All labor laws not adopted as part of this Code either directly
or by reference are hereby repealed. All provisions of existing
laws, orders, decrees, rules and regulations inconsistent
herewith are likewise repealed. Accordingly, only Article 83 of
the Labor Code which appears to have substantially
incorporated or reproduced the basic provisions of Republic
Act No. 5901 may support Policy Instructions No. 54 on which
the latters validity may be gauged. Article 83 of the Labor
Code states:
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 per cent (30%) of
their regular wage for work on the sixth day. For purposes of
this Article, health personnel shall include: resident
physicians, nurses, nutritionists, dietitians, pharmacists, social
workers, laboratory technicians, paramedical technicians,
psychologists, midwives, attendants and all other hospital or
clinic personnel. (Underscoring supplied)
A cursory reading of Article 83 of the Labor Code betrays
petitioners position that hospital employees are entitled to a
full weekly salary with paid two (2) days off if they have
completed the 40-hour/5-day workweek.[6] What Article 83
merely provides are: (1) the regular office hour of eight hours a
day, five days per week for health personnel, and (2) where the
exigencies of service require that health personnel work for six
days or forty-eight hours then such health personnel shall be
entitled to an additional compensation of at least thirty percent
of their regular wage for work on the sixth day. There is nothing
in the law that supports then Secretary of Labors assertion
that personnel in subject hospitals and clinics are entitled to a
full weekly wage for seven (7) days if they have completed the
40-hour/5-day workweek in any given workweek. Needless to
say, the Secretary of Labor exceeded his authority by including
a two days off with pay in contravention of the clear mandate of
the statute. Such act the Court shall not countenance.
Administrative interpretation of the law, we reiterate, is at best
merely advisory,[7] and the Court will not hesitate to strike down
an administrative interpretation that deviates from the provision
of the statute.
Indeed, even if we were to subscribe with petitioners
erroneous assertion that Republic Act No. 5901 has neither
been amended nor repealed by the Labor Code, we
nevertheless find Policy Instructions No. 54 invalid. A perusal
of Republic Act No. 5901[8] reveals nothing therein that gives
two days off with pay for health personnel who complete a 40-
hour work or 5-day workweek. In fact, the Explanatory Note of
House Bill No. 16630 (later passed into law as Republic Act
No. 5901) explicitly states that the bills sole purpose is to
shorten the working hours of health personnel and not to dole
out a two days off with pay.
Hence:
The accompanying bill seeks to grant resident physicians,
staff nurses, nutritionists, midwives, attendants and other
hospital and health clinic personnel of public and private
hospitals and clinics, the privilege of enjoying the eight hours a
week exclusive of time for lunch granted by law to all
government employees and workers except those employed in
schools and in courts. At present those hospitals and health
clinic personnel including those employed in private hospitals
and clinics, work six days a week, 8 hours a day or 48 hours a
week.
As compared with the other employees and laborers, these
hospital and health clinic personnel are over-worked despite
the fact that their duties are more delicate in nature. If we offer
them better working conditions, it is believed that the brain
drain, that our country suffers nowadays as far as these
personnel are concerned will be considerably lessened. The
fact that these hospitals and health clinic personnel perform
duties which are directly concerned with the health and lives of
our people does not mean that they should work for a longer
period than most employees and laborers. They are also
entitled to as much rest as other workers. Making them work
longer than is necessary may endanger, rather than protect,
the health of their patients. Besides, they are not receiving
better pay than the other workers. Therefore, it is just and fair
that they be made to enjoy the privileges of equal working
hours with other workers except those excepted by law.
In the light of the foregoing, approval of this bill is strongly
recommended.
(SGD.) SERGIO H. LOYOLA
31
Congressman, 3rd District Manila
(Annex F of petition, underscoring supplied)
Further, petitioners' position is also negated by the very rules
and regulations promulgated by the Bureau of Labor Standards
which implement Republic Act No. 5901. Pertinent portions of
the implementing rules provide:
RULES AND REGULATIONS IMPLEMENTING REPUBLIC
ACT NO. 5901
By virtue of Section 79 of the Revised Administrative Code, as
modified by section 18 of Implementation Report for
Reorganization Plan No. 20-A on Labor, vesting in the Bureau
of Labor Standards the authority to promulgate rules and
regulations to implement wage and hour laws, the following
rules and regulations are hereby issued for the implementation
of Republic Act No. 5901.
CHAPTER I Coverage
Section 1. General Statement on Coverage. Republic Act No.
5901, hereinafter referred to as the Act, shall apply to:
(a) All hospitals and clinics, including those with a bed capacity
of less than one hundred, which are situated in cities or
municipalities with a population of one million or more; and to
(b) All hospitals and clinics with a bed capacity of at least one
hundred, irrespective of the size of population of the city or
municipality where they may be situated.
Section 7. Regular Working Day. The regular working days of
covered employees shall be not more than five days in a
workweek. The workweek may begin at any hour and on any
day, including Saturday or Sunday, designated by the
employer.
Employers are not precluded from changing the time at which
the workday or workweek begins, provided that the change is
not intended to evade the requirements of these regulations on
the payment of additional compensation.
Section 15. Additional Pay Under the Act and C.A. No. 444.
(a) Employees of covered hospitals and clinics who are entitled
to the benefits provided under the Eight-Hour Labor Law, as
amended, shall be paid an additional compensation equivalent
to their regular rate plus at least twenty-five percent thereof for
work performed on Sunday and Holidays, not exceeding eight
hours, such employees shall be entitled to an additional
compensation of at least 25% of their regular rate.
(b) For work performed in excess of forty hours a week,
excluding those rendered in excess of eight hours a day during
the week, employees covered by the Eight-Hour Labor Law
shall be entitled to an additional straight-time pay which must
be equivalent at least to their regular rate.
If petitioners are entitled to two days off with pay, then there
appears to be no sense at all why Section 15 of the
implementing rules grants additional compensation equivalent
to the regular rate plus at least twenty-five percent thereof for
work performed on Sunday to health personnel, or an
additional straight-time pay which must be equivalent at least
to the regular rate [f]or work performed in excess of forty
hours a week xxx. Policy Instructions No. 54 to our mind
unduly extended the statute. The Secretary of Labor moreover
erred in invoking the spirit and intent of Republic Act No.
5901 and Article 83 of the Labor Code for it is an elementary
rule of statutory construction that when the language of the law
is clear and unequivocal, the law must be taken to mean
exactly what it says.[9] No additions or revisions may be
permitted. Policy Instructions No. 54 being inconsistent with
and repugnant to the provision of Article 83 of the Labor Code,
as well as to Republic Act No. 5901, should be, as it is hereby,
declared void.
WHEREFORE, the decision appealed from is AFFIRMED. No
costs.
SO ORDERED.

GAYONA DELIVERY TRUCK DRIVER
G.R. No. 119205, April 15, 1998
SIME DARBY PILIPINAS, INC., PETITIONER, VS.
NATIONAL LABOR RELATIONS COMMISSION (2ND
DIVISION) AND SIME DARBY SALARIED EMPLOYEES
ASSOCIATION (ALU-TUCP), RESPONDENTS.
DECISION
BELLOSILLO, J.:
Is the act of management in revising the work schedule of its
employees and discarding their paid lunch break constitutive of
unfair labor practice?
Sime Darby Pilipinas, Inc., petitioner, is engaged in the
manufacture of automotive tires, tubes and other rubber
products. Sime Darby Salaried Employees Association (ALU-
TUCP), private respondent, is an association of monthly
salaried employees of petitioner at its Marikina factory. Prior to
the present controversy, all company factory workers in
Marikina including members of private respondent union
worked from 7:45 a.m. to 3:45 p.m. with a 30 minute paid on
call lunch break.
On 14 August 1992 petitioner issued a memorandum to all
factory-based employees advising all its monthly salaried
employees in its Marikina Tire Plant, except those in the
Warehouse and Quality Assurance Department working on
shifts, a change in work schedule effective 14 September 1992
thus
TO: ALL FACTORY-BASED EMPLOYEES
RE: NEW WORK SCHEDULE
Effective Monday, September 14, 1992, the new work schedule
factory office will be as follows:
7:45 A.M. 4:45 P.M. (Monday to Friday)
7:45 A.M. 11:45 P.M. (Saturday).
Coffee break time will be ten minutes only anytime between:
9:30 A.M. 10:30 A.M. and
2:30 P.M. 3:30 P.M.
Lunch break will be between:
12:00 NN 1:00 P.M. (Monday to Friday).
Excluded from the above schedule are the Warehouse and QA
employees who are on shifting. Their work and break time
schedules will be maintained as it is now.[1]
Since private respondent felt affected adversely by the change
in the work schedule and discontinuance of the 30-minute paid
on call lunch break, it filed on behalf of its members a
complaint with the Labor Arbiter for unfair labor practice,
discrimination and evasion of liability pursuant to the resolution
of this Court in Sime Darby International Tire Co., Inc. v.
NLRC.[2] However, the Labor Arbiter dismissed the complaint
on the ground that the change in the work schedule and the
elimination of the 30-minute paid lunch break of the factory
workers constituted a valid exercise of management
prerogative and that the new work schedule, break time and
one-hour lunch break did not have the effect of diminishing the
benefits granted to factory workers as the working time did not
exceed eight (8) hours.
The Labor Arbiter further held that the factory workers would
be justly enriched if they continued to be paid during their lunch
32
break even if they were no longer on call or required to work
during the break. He also ruled that the decision in the
earlier Sime Darby case[3] was not applicable to the instant
case because the former involved discrimination of certain
employees who were not paid for their 30-minute lunch break
while the rest of the factory workers were paid; hence, this
Court ordered that the discriminated employees be similarly
paid the additional compensation for their lunch break.
Private respondent appealed to respondent National Labor
Relations Commission (NLRC) which sustained the Labor
Arbiter and dismissed the appeal.[4] However, upon motion for
reconsideration by private respondent, the NLRC, this time
with two (2) new commissioners replacing those who earlier
retired, reversed its arlier decision of 20 April 1994 as well as
the decision of the Labor Arbiter.[5] The NLRC considered the
decision of this Court in the Sime Darby case of 1990 as the
law of the case wherein petitioner was ordered to pay the
money value of these covered employees deprived of lunch
and/or working time breaks. The public respondent declared
that the new work schedule deprived the employees of the
benefits of time-honored company practice of providing its
employees a 30-minute paid lunch break resulting in an unjust
diminution of company privileges prohibited by Art. 100 of the
Labor Code, as amended. Hence, this petition alleging that
public respondent committed grave abuse of discretion
amounting to lack or excess of jurisdiction: (a) in ruling that
petitioner committed unfair labor practice in the implementation
of the change in the work schedule of its employees from 7:45
a.m. 3:45 p.m. to 7:45 a.m. 4:45 p.m. with one-hour lunch
break from 12:00 nn to 1:00 p.m.; (b) in holding that there was
diminution of benefits when the 30-minute paid lunch break
was eliminated; (c) in failing to consider that in the earlier Sime
Darby case affirming the decision of the NLRC, petitioner was
authorized to discontinue the practice of having a 30-minute
paid lunch break should it decide to do so; and (d) in ignoring
petitioners inherent management prerogative of determining
and fixing the work schedule of its employees which is
expressly recognized in the collective bargaining agreement
between petitioner and private respondent.
The Office of the Solicitor General filed in lieu of comment a
manifestation and motion recommending that the petition be
granted, alleging that the 14 August 1992 memorandum which
contained the new work schedule was not discriminatory of the
union members nor did it constitute unfair labor practice on the
part of petitioner.
We agree, hence, we sustain petitioner. The right to fix the
work schedules of the employees rests principally on their
employer. In the instant case petitioner, as the employer, cites
as reason for the adjustment the efficient conduct of its
business operations and its improved production.[6] It
rationalizes that while the old work schedule included a 30-
minute paid lunch break, the employees could be called upon
to do jobs during that period as they were on call. Even if
denominated as lunch break, this period could very well be
considered as working time because the factory employees
were required to work if necessary and were paid accordingly
for working. With the new work schedule, the employees are
now given a one-hour lunch break without any interruption from
their employer. For a full one-hour undisturbed lunch break, the
employees can freely and effectively use this hour not only for
eating but also for their rest and comfort which are conducive
to more efficiency and better performance in their work. Since
the employees are no longer required to work during this one-
hour lunch break, there is no more need for them to be
compensated for this period. We agree with the Labor Arbiter
that the new work schedule fully complies with the daily work
period of eight (8) hours without violating the Labor Code.
[7]
Besides, the new schedule applies to all employees in the
factory similarly situated whether they are union members or
not.[8]
Consequently, it was grave abuse of discretion for public
respondent to equate the earlier Sime Darby case[9] with the
facts obtaining in this case. That ruling in the former case is not
applicable here. The issue in that case involved the matter of
granting lunch breaks to certain employees while depriving the
other employees of such breaks. This Court affirmed in that

case the 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 private respondent union.
Hence, it cannot be said that the new scheme adopted by
management prejudices the right of private respondent to self-
organization.
Every business enterprise endeavors to increase its profits. In
the process, it may devise means to attain that goal. Even as
the law is solicitous of the welfare of the employees, it must
also protect the right of an employer to exercise what are
clearly management prerogatives.[10] Thus, management is free
to regulate, according to its own discretion and judgment, all
aspects of employment, including hiring, work assignments,
working methods, time, place and manner of work, processes
to be followed, supervision of workers, working regulations,
transfer of employees, work supervision, lay off of workers and
discipline, dismissal and recall of workers.[11] Further,
management retains the prerogative, whenever exigencies of
the service so require, to change the working hours of its
employees. So long as such prerogative is exercised in good
faith for the advancement of the 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.[12]
While the Constitution is committed to the policy of social
justice and the protection of the working class, it should not be
supposed that every dispute will be automatically decided in
favor of labor. Management also has right which, as such, are
entitled to respect and enforcement in the interest of simple fair
play. Although this Court has inclined more often than not
toward the worker and has upheld his cause in his conflicts
with the employer, such as favoritism has not blinded the Court
to the rule that justice is in every case for the deserving, to be
dispensed in the light of the established facts and the
applicable law and doctrine.[13]
WHEREFORE, the Petition is GRANTED. The Resolution of
the National Labor Relations Commission dated 29 November
1994 is SET ASIDE and the decision of the Labor Arbiter dated
26 November 1993 dismissing the complaint against petitioner
for unfair labor practice is AFFIRMED.
SO ORDERED.
G.R. No. L-15422, November 30, 1962
NATIONAL DEVELOPMENT COMPANY, PETITIONER, VS.
COURT OF INDUSTRIAL RELATIONS AND NATIONAL
TEXTILE WORKERS UNION, RESPONDENTS.
DECISION
REGALA, J.:
This is a case for review from the Court of Industrial Relations.
The pertinent facts are the following.
At the National Development Co., a government-owned and
controlled corporation, there were four shifts of work. One shift
was from 8 a.m. to 4 p.m., while the three other shifts were
from 6 a.m. to 2 p.m.; then from 2 p.m. to 10 p.m. and, finally,
from 10 p.m. to 6 a.m. In each shift, there was a one-hour
mealtime period, to wit: from (1) 11 a.m. to 12 noon for those
working between 6 a.m. and 2 p.m. and from (2) 7 p.m. to 8
p.m. for those working between 2 p.m. and 10 p.m.
The records disclose that although there was a one-hour
mealtime, petitioner nevertheless credited the workers with
33
eighth hours of work for each shift and paid them for the same
number of hours. However, since 1953, whenever workers in
one shift were required to continue working until the next shift,
petitioner, instead of crediting them with eight hours of
overtime work, has been paying them for six hours only,
petitioner claiming that the two hours corresponding to the
mealtime periods should not be included in computing
compensation. On the other hand, respondent National Textile
Workers Union whose members are employed at the NDC,
maintained the opposite view and asked the Court of Industrial
Relations to order the payment of additional overtime pay
corresponding to the mealtime periods.
After hearing, Judge Arsenio I. Martinez of the CIR issued an
order, dated March 19, 1959, holding that mealtime should be
counted in the determination of overtime work and accordingly
ordered petitioner to pay P101,407.96 by way of overtime
compensation. Petitioner filed a motion for reconsideration but
the same was dismissed by the CIR en banc on the ground
that petitioner failed to furnish the union a copy of its motion.
Thereafter, petitioner appealed to this Court, contending, first,
that the CIR has no jurisdiction over claims for overtime
compensation and, secondly, that the CIR did not make "a
correct appraisal of the facts, in the light of the evidence" in
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.
In support of its contention that the CIR lost its jurisdiction over
claims for overtime pay upon the enactment of the Industrial
Peace Act (Republic Act No. 875), petitioner cites a number of
decisions of this Court. On May 23, 1960, however, We ruled in
Price Stabilization Corp. vs. Court of Industrial Relations, et al.,
108 Phil., 138, 139, that
"Analyzing these cases, the underlying principle, it will bt noted
in all of them, though not stated in express terms, is that were
the employer-employee relationship is still existing or is sought
to be reestablished because of its wrongful severance, (at
where the employee seeks reinstatement), the Court of
Industrial Relations has jurisdiction over all claims arising out
of, or in connection with the employment, such as those related
to the Minimum Wage Law and Eight-Hour Labor Law. After the
termination of their relationship and no reinstatement is sought,
such claims become mere money claims, and come within the
jurisdiction of the regular courts.
"We are aware that in 2 cases, some statements implying a
different view have been made, but we now hold and declare
the principle set forth in the next preceding paragraph as the
one governing all cases of this nature."
This has been the constant doctrine of this Court since May 23,
1960[1]
A more recent definition of the jurisdiction of the CIR is found in
Campos, et al. vs. Manila Railroad Co., et al., G. R. No. L-
17905, May 25, 1962, in which We held that, for such
jurisdiction to come into play, the following requisites must be
complied with: (a) there must exist between the parties an
employer-employee relationship or the claimant must seek his
reinstatement; and (b) the controversy must relate to a case
certified by the President to the CIR as one involving national
interest, or must have a bearing on an unfair labor practice
charge, or must arise either under the Eight-Hour Labor Law,
or under the Minimum Wage Law. In default of any of these
circumstances, the claim becomes a mere money claim that
comes under the jurisdiction of the regular courts. Here,
petitioner does not deny the existence of an employer-
employee relationship between it and the members of the
union. Neither is there any question that the claim is based on
the Eight-Hour Labor Law (Com. Act No. 444, as amended).
We therefore rule in favor of the jurisdiction of the CIR over the
present claim.
The other issue raised in the appeal is whether or not, on the
basis of the evidence, the mealtime breaks should be

considered working time under the following provision of the
law:
"The legal working day for any person employed by another
shall be of not more than eight hours daily. When the work is
not continuous, the time during which the laborer is not
working and can leave his working place and can rest
completely shall not be counted." (Sec. 1, Com. Act No. 444,
as amended. Italics ours.)
It will be noted that, under the law, the idle time that an
employee may spend for resting and during which ha may
leave the spot or place of work though not the premises[2] of his
employer, is not counted as working time only where the work
is broken or is not continuous.
The determination as to whether work is continuous or not is
mainly one of fact which We shall not review as A long as the
same is supported by evidence. (Sec 15, Com. Act No. 103, as
amended; Philippine Newspaper Guild vs. Evening News, Inc.,
86 Phil. 303).
That is why We brushed aside petitioner's contention in one
case that workers who worked under a 6 a.m. to 6 p.m.
schedule had enough "free time" and, therefore should not be
credited with four hours of overtime and held that the finding of
the CIR "that claimants herein rendered services to the
Company from 6:00 a.m. to 6 p.m. including Sundays and
holidays, * * * implies either that they were not allowed to leave
the spot of their working place, or that they could not rest
completely." (Luzon Stevedoring Co., Inc., vs. Luzon Marine
Department Union, et al., 101 Phil., 257).
Indeed, it has been said that no general rule can be laid down
as to what constitutes compensable work, but rather the
question is one of fact depending upon the particular
circumstances, to be determined by the courts in controverted
cases. (31 Am. Jur. Sec. 626 pp. 877-378)
In this case, the CIR's finding that work in the petitioner
company was continuous and did not permit employees and
laborers to rest completely is not without basis in evidence and
following our earlier rulings, We shall not disturbed the same.
Thus, the CIR found:
"While it may be corrected to say that it is well-nigh 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 only be
segregated or deducted from his work, if the same is not
continuous and the employee can leave his working place and
rest completely. The tune cards show that, the work was
continuous and without interruption. There is also the evidence
adduced by the petitioner that the pertinent employees cannot
freely leave their working places nor rest completely. There is
furthermore the aspect that during the period covered by the
computation the work was on a 24 hour basis and as
previously stated divided into shifts."
From these facts, the CIR correctly concluded that work in
petition company was continuous and therefore the mealtime
breaks should be counted as working time for purposes of
overtime compensation.
Petitioner gives an eight-hour credit to its employees who work
a single shift, say from 6 a.m. to 2 p.m.. Why cannot it credit
them sixteen hours should they work in two shifts?
There is another reason why this appeal should be dismissed
and that is that there is no decision by the CIR en banc from
which petitioner can appeal to this Court. As already indicated
above, the records show that petitioner's motion for
reconsideration of the order of March 19, 1959 was dismissed
by the CIR en banc because of petitioner's failure to serve a
copy of the same on the union.
Section 15 of the rules of the CIR, in relation to Section 1 of
Commonwealth Act No. 103, states:
34
"The movant shall file the motion (for reconsideration), in six
copies within five (5) days from the date on which he receives
notice of the order or decision, object of the motion for
reconsideration, the same to be verified under oath with
respect to the correctness of the allegations of fact,
and serving a copy thereof, personally or by registered mail,
on the adverse party. The latter may file an answer, is six (6)
copies duly verified under oath." (Italics ours)
In one case (Bien, et al. vs. Castillo, etc., et al. G. R. No. L-
7428, May 24, 1955), We sustained the dismissal of a motion
for reconsideration filed outside of the period provided in the
rules of the CIR. A motion for reconsideration, a copy of winch
has not been served on the adverse party as required by the
rules, stands on the same footing. For "in the very nature of
things, a motion for reconsideration against a ruling or decision
by one Judge is in effect an appeal to the Court of Industrial
Relations, en banc," the purpose being "to substitute the
decision or order of a collegiate court for the ruling or decision
of any judge." The provision in Commonwealth Act No. 103
authorizing the presentation of a motion for reconsideration of
a decision or order of the judge to the CIR, en banc, and not
direct appeal therefrom to this Court, is also in accord with the
principle of exhaustion of administrative remedies before resort
can be made to this Court (Broce, et al. vs. The Court of
Industrial Relations, et al., 106 Phil. 388; 56 Off. Gaz. (49)
7445).
Petitioner's motion for reconsideration having been dismissed
for its failure to serve a copy of the same on the union, there is
no decision of the CIR en banc that petitioner can bring to this
Court for review.
G. R. No. L-9265, April 29, 1957
LUZON STEVEDORING CO., INC., PETITIONER, VS.
LUZON MARINE DEPARTMENT UNION AND THE HON.
MODESTO CASTILLO, THE HON. JOSE S. BAUTISTA, THE
HON. V. JIMENEZ YANSON AND THE HON. JUAN L.
LANTING, JUDGES OF THE COURT OF INDUSTRIAL
RELATIONS, RESPONDENTS.
DECISION
FELIX, J.:
This case involves a petition for certiorari filed hy the Luzon
Stevedoring Co., Inc., to review a resolution dated June 5,
1955, issued by the Court of Industrial Relations. On
September 5, 1955, with leave of court, a supplemental petition
was filed by said petitioner, and both petitions were given due
course by resolution of this Court of September 15, 1955. The
facts of the case may be summarized as follows:
On June 21, 1948, herein respondent Luzon Marine
Department Union filed a petition with the Court of Industrial'
Relations containing several demands against herein petitioner
Luzon Stevedoring Co., Inc., among which were the petition for
full recognition of the right of collective bargaining, close shop
and check off. However, on July 18, 1948, while the case was
still pending with the CIR, said labor union declared a strike
which was ruled down as illegal by this Court in case G. R. No.
L-2660, promulgated on May 30, 1950. In view of said ruling,
the Union filed a "Constancia" with the Court of Industrial
Relations praying that the remaining unresolved demands of
the Union presented in their original petition, be granted.
Said unresolved demands are the following:
a. Point No. 2.
"That the work performed in excess of eight (8) hours be paid
an overtime pay oi' 50 per cent the regular rate of pay, and that
work performed on Sundays and legal holidays be paid double
the regular rate of pay",
b. Point No. 7.
"That all officers, engineers and crew members of motor
tugboats who have not received their pay corresponding to the
second half of December, 1941, be paid accordingly".
c. Point No. 11.
"That Ciriaco Sarmiento, Chief Mate, M/V Ularlin, Kafael
Santos, Port Engineer, and Lorenzo de la Cruz, Chief
Engineer, M/V Shark, who have been suspended without

justifiable cause and for union activities, be reinstated with pay
from time of suspension".
d. Point No. 12.
"That all officers, engineers and crew members of the motor
tugboats "Shark", "Herring-", "Pike" and "Ray", who have been
discharged without justifiable cause and for union activities, be
reinstated with/pay from time of discharge", (p, 65-66, Record).
On the basis of these demands, the case was set for hearing
and the parties submitted their respective evidence, both oral
and documentary, from June 8, 1951, to January 7, 1954. In
one of the hearings of the case, the original intervenor in L-
2660, Union de Obreros Estibadores de Filipinas (UOEF),
through counsel, moved for the withdrawal of said Union from
the case, which motion was granted by the Court.
After the parties had submitted exhaustive memoranda, the
trial Judge rendered a decision on February 10, 1955, finding
that the company gave said employees 3 free meals every day
and about 20 minutes rest after each mealtime; that they
worked from 6:00 a.m. to 6:00 p.m. every day including
Sundays and holidays, and for work performed in excess of 8
hours, the officers, patrons and radio operators were given
overtime pay in the amount of P4 each and P2 each for the
rest of the crew up to March, 1947, and after said date, these
payments were increased to P5 and P2.50, respectively, until
the time of their separation or the strike of July 19, 1948; that
when the tugboats underwent repairs, their personnel worked
only 8 hours a day excluding Sundays and holidays; that
although there was an effort on the part of claimants to show
that some had worked beyond 6:00 p.m., the evidence was
uncertain and indefinite and that demand was, therefore,
denied; that respondent Company, by the nature of its
business and as denned by law (Section 18-b of
Commonwealth Act No. 146, as amended) is considered a
public service operator by the Public Service Commission in its
decision in case No. 3035-C entitled "Philippine Shipowners .
Association vs. Luzon Stevedoring Co., Inc., et al." (Exh, 23),
and, therefore, exempt from paying additional remuneration or
compensation for work performed on Sundays and legal
holidays, pursuant to the provisions of section 4 of
Commonwealth Act No. 444 (Manila Electric Co. vs. Public
Utilities Employees Association, 79 Phil., 408, 44 Off. Gaz.,
1760) ; and ruled that:
"For the above reasons, the aforementioned employees are
only entitled to receive overtime pay for work Tendered in
excess of 8 hours on ordinary days including Sundays and
legal holidays.
"However, the respondent company has proved to the
satisfaction of the Court that it has paid its employees for such
overtime work as shown above Exhs. 1 to 20-B).
"It is, therefore, only a matter of computation whether such
over time pay by the respondent for overtime services
rendered covers the actual overtime work performed by the
employees concerned equivalent to 25 per cent which is the
minimum rate fixed by law in the absence of other proof to
justify the granting' of more beyond said minimum rate."
Demands Nos. 11 and 12 regarding the reinstatement to the
service of the employees named therein were denied and
respondent Company was only ordered to pay the reparation
pay and overtime work rendered by Ciriaco Sarmiento, Rafael
Santos and Lorenzo de la Cruz, after making the
pronouncement that their separation or dismissal was not due
to union activities but for valid and legal grounds.
The Luzon Marine Department Union, through counsel,
therefore, filed a motion for reconsideration praying that the
decision of February 10, 1955, be modified so as to declare
and rule that the members of the Union who had rendered
services from 6:00 a.m. to 6:00 p.m. were entitled to 4 hours'
overtime pay; that whatever little time allotted to the taking of
their meals should not be deducted from the 4 hours of
overtime rendered by said employees, that the amounts of P3
and P2 set aside for the daily meals of the employees be
considered as part of their actual compensation in determining
the amount due to said employees for their unpaid overtime
work; that the employees separated from the service without
just cause be paid their unearned Wages and salaries from the
date of their separation up to the time the decision in case L-
35
2660 became final; and for such other relief as may be just and
equitable in the premises.
Luzon Stevedoring Go., Inc. also sought for the
reconsideration of the decision only in so far as it interpreted
that the period during which a seaman is aboard a tugboat
shall be considered as "working time" for the purpose of the
Eight-Hour-Labor Law.
In pursuance of Section 1 of Commonwealth Act No. 103, as
amended by Commonwealth Act No. 254 and further amended
by Commonwealth Act No. 559, the motions for
reconsideration were passed upon by the Court en banc,
and on June 6, 1955, a resolution modifying the decision of
February 10, 1955, was issued, in the sense that the 4 hours of
overtime work included in the regular daily schedule of work
from 6:00 a.m. to 6:00 p.m. should be paid independently of
the so-called "coffee-money", after making a finding that said
extra amounts were given to crew members of some tugboats
for work performed beyond 6:00 p.m. over a period of some 16
weeks. The Company's motion for reconsideration was denied.
From this resolution, the Luzon Stevedoring Co., Inc. filed the
present petition for certiorari and when the Court of Industrial
Relations, acting upon said Company's motion for clarification,
ruled that the 20 minutes' rest given the claimants after
mealtime should not be deducted from the 4 hours of overtime
worked performed by said claimants, petitioner filed a
supplemental petition for certiorari dated September 5, 1955,
and both petitions were given due course by this Court.
Respondent Luzon Marine Labor Union filed within the
reglementary period a motion to dismiss, which this Court
considered as an answer by resolution of October 14, 1955,
alleging that the decision, resolution and order of the Court of
Industrial Relations sought to be reviewed by petitioner do not
present any question of law, the issues in said CIR case No.
147-V being purely factual. The respondent judges of the Court
of Industrial Relations, represented by counsel, timely filed an
answer likewise asserting that there could have been no
question of law involved or error of law committed by the said
Judges in the resolutions appealed from, same having been
based on purely findings of fact.
In this instance, petitioner does not seek to alter the lower
court's finding that the regular daily schedule of work of the
members of the herein respondent Union was from 6:00 a.m.
to 6:00 p.m. Petitioner, however, submits several "issues"
which We will proceed to discuss one after the other. They
are the following:
I. Is the definition for "hours of work" as presently applied to
dryland laborers equally applicable to seamen? Or should a
different criterion be applied by virtue of the fact that the
seamen's employment is completely different in nature as well
as in condition of work from that of a dryland laborer?
Petitioner questions the applicability to seamen of the
interpretation given to the phrase "hours of work" for the
purpose of the Eight-Hour Labor Law, insinuating that although
the seamen concerned stayed in petitioner's tugboats, or
merely within its compound, for 12 hours, yet their work was
not continuous but interrupted or broken. It has been the
consistent stand of petitioner that while it is true that the
workers herein were required to report for work at 6:00 a.m.
and were made to stay up to 6:00 p.m., their work was not
continuous and they could have left the premises of their
working place were it not for the inherent physical impossibility
peculiar to the nature of their duty which prevented them from
leaving the tugboats. It is the Company's defense that a literal
interpretation of what constitutes non-working hours would
result in absurdity if made to apply to seamen aboard vessels
in bays and rivers, and We are called upon to make an
interpretation of the law on "non-working hours" that may
comprehend within its embrace not only the non-working hours
of laborers employed in land jobs, but also of that particular
group of seamen, i.e., those employed in vessels plying in
rivers and bays, since admittedly there is no need for such
ruling with respect to officers and crew of interisland vessels,
which have aboard 2 shifts of said men and strictly follow the
8-hour working period.

Seetion 1 of Commonwealth Act No. 444, known as the Eight-
Hour Labor Law, provides:
"Sec. L The legal working day for any person employed by
another shall be of not more than eight hours daily. When the
work is not continuous, the time drawing which the laborer is
not working AND CAN LEAVE HIS WORKING PLACE and can
rest completely, shall nor be counted."
The requisites contained in this section are further
implemented by contemporary regulations issued by
administrative authorities (Sections 4 and 5 of Chapter III,
Article 1, Code of Rules and Regulations to Implement the
Minimum Wage Law).
For the purposes of this case, We do not need to set for
seamen a criterion different from that applied to laborers on
land, for under the provisions of the above quote'd section, the
only thing to be done is to determine the meaning and scope of
the term "working place" used therein. As We understand this
term, a laborer need not leave the premises of the factory,
shop or boat in order that his period of rest shall not be
counted, it being enough that he ''cease to work", may rest
completely and leave or may leave at his will the spot where
he actually stays while working, to go somewhere else,
whether within or outside the premises of said factory, shop or
boat. If these requisites are complied with, the period of such
rest shall not be counted.
In the case at bar We do not need to look into the nature of the
work of claimant mariners to ascertain the truth of petitioner's
allegation that this kind of seamen have had enough "free
time", a task of which We are relieved, for although after an
ocular inspection of the working premises of the seamen
affected in this case the trial Judge declared in his decision
that the Company gave the complaining laborers 3 free meals
a day with a recess of 20 minutes after each meal, this
decision was specifically amended by the Court en banc in its
Resolution of June 6, 1955, wherein it held that the claimants
herein rendered services to the Company from 6:00 a.m. to
6:00 p.m. including Sundays and holidays, which implies either
that said laborers were not given any recess at all, or that they
were not allowed to leave the spot of their working place, or
that they could not rest completely. And such resolution being
on a question essentially of facts this Court is now precluded to
review the same (Com. Act No. 103, Sec. 15, as amended by
Sec. 2 of Com. Act
No. 559; Rule 44 of the Rules of Court; Kaisahan Ng Mga
Manggagawa sa Kahoy sa Filipinas vs. Gotamco Sawmill, 80
Phil., 521; Operators, Inc. vs. Pelagic, 99 Phil., 893, and
others).
II. Should a person be penalized for following an opinion
issued by the Secretary of Justice in the absence of any
judicial pronouncement whatsoever?
Petitioner cites Opinion No. 247, Series of 1941 of the
Secretary of Justice to a query made by the Secretary of Labor
in connection with a similar subject matter as the one involved
in this issue, but that opinion has no bearing on the case at bar
because it refers to officers and crew on board interisland
boats whose situation is different from that of mariners or
sailors working in small tugboats that ply along bays and rivers
and have no cabins or resting places for persons that man the
same. Moreover, We cannot pass upon this second issue
because, aside from the fact that there appears nothing on
record that would support petitioner's assertion that in its
dealing with its employees, it was guided by an opinion of the
Secretary of Justice, the issue involves a mere theoretical
question.
III. When employees with full knowledge of the law, voluntarily
agreed to work for so many hours in consideration of a certain
definite wage, and continue working without any protest for a
period of almost two years, is said compensation as agreed
upon legally deemed and retroactively presumed to constitute
full payment for all services rendered, including' whatever
overtime wages might be due? Especially so if such wages,
though received years before the enactment of the Minimum
Wage1 Law, were already set mostly above said minimum
wage?
IV. The members of respondent Union having expressly
36
manifested acquiescence over a period of almost two years
with reference to the sufficiency of their wages and having
made no protest whatsoever with reference to said
compensation, does the legal and equitable principle of
estoppel operate to bar them from making a claim for, or
making any recovery of, back overtime compensation?
We are going to discuss these two issues jointly. Section 6 of
Commonwealth Act No. 444 provides:
"Sec. 6. Any agreement or contract between the employer and
the laborer or employee contrary to the provisions of this Act
shall be mill and void ab initio."
In the case of the Manila Terminal Co. vs. Court of Industrial
Relations et al., 91 Phil., 625, 48 Off. Gaz., 2725, this. Court
held:
"The principles of estoppel and laches cannot be invoked
against employees or laborers in an action for the recovery of
compensation i'or past overtime work. 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 conpensation. 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 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 a claim
which may cause the employer to devise a way for exercising
Ins-right to terminate the employment.
Moreover, if the principle of estoppel and laches is to be
applied, it would bring about a situation whereby the employee
or laborer, who can not expressly renounce the 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."
This is the law on the matter and We certainly adhere to it in
the present ease. We deem it, however, convenient to say a
few words of explanation so that the principle enunciated
herein may not lead to any misconstruction of the law in future
cases. There is no question that the right of the laborers to
overtime pay cannot be waived. But there may be cases in
which the silence of the employee or laborer who lets the time
go by for quite a long period without claiming or asserting his
right to overtime compensation may favor the inference that he
has not worked any such overtime or that his extra work has
been duly compensated. But this is not so in the case at bar.
The complaining laborers have declared that long before the
filing of this case, they had informed Mr. Martinez, a sort of
overseer of the petitioner, that they had been working overtime
and claiming the corresponding compensation therefor, and
there is nothing on record to show that the claimants, at least
the majority of them, had received wages in excess of the
minimum wage later provided by Republic Act No. 602,
approved April 6, 1951. On the contrary, in the decision of the
trial Judge, it appears that 34 out of the 58 claimants received
salaries less than the minimum wage authorized by said
Minimum Wage Law, to wit:
1. Ambrosio Tanada but after passing the oiler
examinations his wages were increased to
P225 per month;
2. Patricio Santiagobut after passing the quartermaster
examinations his wages were increased to
P225 per month;
3. Fidelino Viilanueva oiler
4. Pedro Filamor then his wage was reduced quartermaster
to P67.50 per month as cook;
5. Emiliano Irabo then his wage was reduced seaman
to P60 and he stayed for 1 month only; it was
increased again to P67.50;
6. Juanito de Luna oiler
7. Benigno Curambao oiler
8. Salvador Mercadillo oiler
9. Nicasio Sta. Lucia cook
10. Damaso Arciaga seaman
11. Leonardo Patmigot oiler
12. Bienvenido Crisostomo oiler
13. Isidro Malabanan cook
14. Saturnine Tumbokon seaman
15. Bonifacio Cortex quarter-master
16. Vietorio Carillo cook

17. Francisco Atilano cook
18. Gualberto Legaspi seaman
] 9. Numeriano Juanillo quarter-master
20. Moises Nicodemus quarter-master
21. Arsenio Itidiano seaman
22. Ricardo Autencio oiler
23. Mateo Areiaga seaman
24. Eomuio Magallanes quarter-master
25. Antonio Belbes seaman
26. Benjamin Aguirre quarter-master
27. Emilio Anastasio quarter-master
28. Ealtazar- Labrada oiler
29. Emetcrio Magallanes seaman
30. Agripino Laurente quarter-master
31. Roberto Francisco oiler
32. Elias Matrocinio seaman
33. ftaltazar Vega seaman
34. Jose Sanchez. oiler
Consequently, for lack of the necessary supporting evidence
for the petitioner, the inference referred to above cannot be
drawn in this case.
V. Granting, without conceding, that any overtime pay in
arrears is due, what is the extent and rule of retro-activity with
reference to overtime pay in arrears as set forth and
established by the precedents and policies of the Court of
Industrial Relations in past decisions duly affirmed by the
Honorable Supreme Court?
VI. Is the grant of a .sizeable amount as back overtime
wages by the Court of Industrial Relations in consonance with
the dictates of public policy and the avowed national and
government policy on economic recovery and financial
stability?
In connection with issue No. 5, petitioner advances the theory
that the computation of the overtime payment in arrears should
be based from the filing of the petition. In support of this
contention, petitioner cites the case of Gotamco Lumber Co.
vs. Court of Industrial Relations, 85 Phil., 242; 47 Off. Gaz.,
3421. This case is not in point; it merely declares that
Commonwealth Act No-444 imposes upon the employer the
duty to secure the permit for overtime work, and the latter may
not therefore be heard to plead his own negligence as
exemption or defense. The employee in rendering extra
services at the request of his employer has a right to assume
that the latter has complied with the requirements of the law
and therefore has obtained the required permission from the
Department of Labor (47 Off. Gaz., 3421). The other decisions
of the Court of Industrial Relations cited by petitioner, to wit:
Cases 6-V, 7-V and 8-V, Gotamco & Co., Dy Pac & Co., Inc.
and D. C. Chuan; Case 110-V, National Labor Union vs.
Standard Vacuum Oil Co.; Case No. 76-V, Dee Cho Workers,
CLO vs. Dee Cho Lumber Co., and Case No. 70V, National
Labor Union vs. Benguet Consolidated Mining Co., do not
seem to have reached this Court and to have been affirmed by
Us.
It is of common occurrence that a workingman has already
rendered services in excess of the statutory period of 8 hours
for some time before he can be led or he can muster enough
courage to confront his employer with a demand for payment
thereof Fear of possible unemployment sometimes is a very
strong factor that gags the working-man from asserting his
right under the law and it may take him months or years before
he could be made to present a claim against his employer. To
allow the workingman to be compensated only from the date of
the filing of the petition with the court would be to penalize him
for his acquiescence or silence which We have declared in the
case of the Manila Terminal Co. vs. CIR, supra, to be beyond
the intent of the law. It is not just and humane that he should
be deprived of what is lawfully his under the law, for the true
intendent of Commonwealth Act No. 444 is to compensate the
worker for services rendered beyond the statutory period and
this should be made to retroact to the date when such services
were actually performed.
Anent issue No. VI, petitioner questions the reasonableness of
the law providing for the grant of overtime wages. It is sufficient
for Us to state here that courts cannot go outside of the field of
interpretation so as to inquire into the motive or motives of
Congress in enacting a particular piece of legislation. This
37
question, certainly, is not within Our province to entertain.
It may be alleged, however, that the delay in asserting the right
to back overtime compensation may cause an unreasonable or
irreparable injury to the employer, be- cause the accumulation
of such back overtime wages may become so great that their
payment might cause the bankruptcy or the closing of the
business of the employer who might not be in a position to
defray the same. Perhaps this situation may occur, but We
shall. not delve on it this time because petitioner does not
claim that the payment of the back overtime wages it is
ordered to pay to its claimant laborers will cause the injury it
foresees or force it to close its business, a situation which it
speaks of theoretically and in general.
VII. Should not a Court of Industrial Relations' resolution, en
banc, which is clearly unsupported in fact and in law, patently
arbitrary and capricious and absolutely devoid of sustaining
reason, be declared illegal? Especially so, if the trial court's
decision which the resolution en banc reversed, is most
detailed, exhaustive and comprehensive in its findings as well
as most reasonable and legal in its conclusions?
This issue was raised by petitioner in its supplemental petition
and We have this much to say. The Court of Industrial
Relations has been considered "a court of justice"
(Metropolitan Transportation Service vs. Paredes, * G. R. No.
L-1232, prom. January 12, 1948), although in another case.
We said that it is "more an administrative board than a part of
the integrated judicial system of the nation" (Ang Tibay vs.
Court of Industrial Relations, 69 Phil., 635). But for procedural
purposes, the Court of Industrial Relations is a court with well-
defined powers vested by the law creating it and with such
other powers as generally pertain to a court of justice (Sec. 20,
Com. Act No. 103). As such, the general rule that before a
judgment becomes final, the Court that rendered the same
may alter or modify it so as to conform with the with the law
and the evidence, is applicable to the Court of Industrial
Relations (Connel Bros. Co. (Phil.) vs. National Labor Union,
G. R. No. L-8631 prom. January SO, 1956). The law also
provides that after a judge of the Court of Industrial Relations,
duly designated by the Presiding Judge therein to hear a
particular case, had rendered a decision, any agrieved party
may request for reconsideration thereof and the judges of said
Court shall sit together, the concurrence of the 3 of them being
necessary for the pronouncement of a decision, order or award
(Sec. 1, Com. Act No. 103). It was in virtue of these rules and
upon motions for reconsideration presented by both parties
that resolution subject of the present petition was issued, the
Court en banc finding it necessary to modify a part of the
decision of February 10, 1955, which is clearly within its power
to do.
On the other hand, the issue under consideration is predicated
on a situation which is not obtaining in the case at bar, for it
presupposes that the resolutions en banc of the respondent
Court "are clearly unsupported in fact and in law, patently
arbitrary and capricious and absolutely devoid of any
sustaining reason", which does not seem to be the case as a
matter of fact.
Wherefore, and on the strength of the foregoing consideration,
the resolutions of the Court of Industrial Relations appealed
from are hereby affirmed, with costs against petitioner. It is
so ordered.
CHAPTER II
G.R. No. L-26844, September 30, 1969
FELIPE DE LEON, BALDOMERO SALVADOR,
MARTINIANO EVANGELISTA, VICENTE PANLAQUI,
CASTOR TUASON, FRANCISCO GONZALO, ENRIQUE
PAGCU, CLAUDIO SICHON, ESTANISLAO SICHON,
RUBEN ICBAN, ABONDINO ISIP, LUIS P. ISIP, DIOSDADO P.
GONZALES, MAXIMO PAULE, FAUSTINO DIMATULAC,
MATEO BAUTISTA, WILFREDO AYCARDO, HORACIO
OCAMPO, FABIAN MENESES, FLORENTINO GARCIA AND
JOSE D. GALANG, PETITIONERS, VS. PAMPANGA SUGAR

DEVELOPMENT COMPANY, INC., RESPONDENTS.
DECISION
RUIZ CASTRO, J.:
Review on certiorari of the resolution dated October 14,
1966 of the Court of Industrial Relations (CIR) dismissing the
petitioners' complaint in case 38-V.
The respondent Pampanga Sugar Development Company
(PASUDECO) operates a sugar central at San
Fernando, Pampanga. The petitioners, 21 all told, were its
security guards required to work eight hours a day, seven days
a week. On November 28, 1961 the petitioners filed with the
CIR a complaint seeking payment to them of premium or
differential pay in the total amount of P49,581.79, plus
attorney's fees of P3,000 and costs of suit. Upon the finding
that the "petitioners were paid their monthly salaries plus 25%
additional compensation for work on Sundays and holidays as
provided for by law and that work on said days is one of the
terms and conditions of their employment as security guards,"
CIR Judge Joaquin M. Salvador dismissed the case. Acting on
the petitioners' motion for reconsideration, the
court en banc affirmed Judge Salvador's order. Hence this
appeal
The petitioners' claim, in essence, is that under the authority of
section 4 of Commonwealth Act 444 as amended (Eight-Hour
Labor Law), for a Sunday or legal holiday work of not more
than eight hours, each of them is entitled to his monthly salary
and his premium or differential compensation, i.e., his wage for
the said. Sunday or legal holiday plus at least 25% thereof.
Sec. 4 of C.A. 444, as amended, reads:
"No person, firm, or corporation, business establishment or
place or center of labor-shall compel an employee or laborer to
work during Sundays and legal holidays, unless he is paid an
additional sum of at least twenty-five per centum of his regular
remuneration: Provided, however, That this prohibition shall
not apply to public utilities per forming some public service
such as supplying gas, electricity, power, water, or providing
means of transportation or communication."
The issue which the petitioners here pose is not one of novel
perception. In Manalo vs. Pampanga Sugar Development
Company, Inc., L-26776, June 30, 1969, this Court disposed of
a similar contention, thus:
"The law is plain and unambiguous. It directs payment for
work done not exceeding eight hours during Sundays and legal
holidays by an employee or laborer not falling under the
exception 'an additional sum of at least twenty-five per centum
of his regular remuneration'. And we already said in one case
that '(t)he minimum legal additional compensation for work on
Sundays and legal holidays is - - - - 25% of the laborer's
regular remuneration'. Thus, if said employee or laborer
regularly receives P6 a day for an eight-hour work on an
ordinary day and he is made to work for eight hours on a
Sunday or legal holiday, he is entitled to his base pay of P6
plus P1.50 (25% of P6), or a total of P7.50. His premium pay is
P1. 50, the 'twenty-five per centum of his regular remuneration'
of P6. It does not include his base pay of P6. He gets that P6
for an eight-hour work performed any day. And he gets the
extra P1.50 if such eight-hour work is rendered on a Sunday or
legal holiday. This is the most logical and reasonable import of
the law. The CIR did not err in following it.
"The same signification is, contrary to petitioners' contention,
given to the term 'premium pay' by the Department of Labor, as
may be gleaned from the following formula it devised in
determining the daily wage of monthly-salaried employees,
except those employed by public utilities, working the whole
year round, including Sundays and legal holidays:
"Monthly salary multiplied by 12 (months) equals yearly salary;
yearly salary divided by 380.5 (days) equals daily wage.
"The figure 380.5 above is the sum of the 303 ordinary days of
the year and the 62 Sundays and legal holidays of the same
year and 15.5 (25% of 62). Stated otherwise, the last figure
38
15.5 is the difference between 380.5 (theoretically, the number
of days worked by the employee in one year) and 365 days
(the actual number of days in a year). It is, in short, the
equivalent in days of the employee's 25% premium pay for 52
Sundays and 10 legal holidays in one year. The premium pay
is not therefore, 125% as petitioners want us to believe. Thus,
if the employee's daily wage is P6, his total premium pay for
one year is P93 (P6 times 15.5). Computed in another way,
with the same daily wage, his premium pay for one Sunday or
legal holiday is 1.50 (25% of P 6); multiplying P1.50 by 62 (the
number of Sundays and legal holidays in one year), we get the
same amount of P93. This is the amount of premium pay to
which he is entitled in one year in addition to his fixed yearly
salary.
"Petitioners postulate that the monthly salary or, for that matter,
the yearly salary applies only to the ordinary working days and
does not take into account the Sundays and legal holidays
found in a given calendar month or year.
"The position thus taken by petitioners-appellants, that they are
entitled to 125% premium, or extra pay, for work done in each
Sunday and holiday, would only apply if it is shown that the
monthly or yearly salaries stipulated are intended to cover work
on ordinary working days only or where the nature or
conditions of employment do not require work on Sundays and
holidays. But where, in agreeing to the monthly or yearly
stipend, the parties knew, or had reason to know, that the work
would be continuous, without interruption on Sundays and
holidays, then the wage earner would only be entitled to the
25% supplement (or extra pay) provided by section 4 of the
Eight-Hour Labor law, as the regular monthly or yearly wage
already covered the work done on Sundays and holidays."
The import of the law and the decision in Manalo is that for
work on Sundays and legal holidays, the employer must pay
the employee (1) his regular remuneration, or 100%, and (2)
an additional sum of at least 25% of the regular remuneration,
which is called the "premium pay. In other words, the pay for
Sundays and legal holidays is 125% of the pay for ordinary
days, but only the excess of 25% is premium pay. With
respect to employees paid on a monthly basis, the first 100%
(of the 125%), corresponding to the regular remuneration, may
or may not be included in the monthly salary. If it is, then the
employee is entitled to collect only the premium of 25%. If it is
not, then the employee has a right to receive the entire 125%.
The question that thus emerges is whether the petitioners'
monthly salaries already cover the 100% regular remuneration
for Sundays and legal holidays.[1]
From the allegations in paragraph 3 of the
petitioners' complaint it can be clearly inferred
that such regular remuneration of 100% is
already encompassed in the petitioners' monthly
salaries. We hereunder quote the itemization of
the claim (which is essentially the same in
respect to the other petitioners) of the petitioner
Felipe de Leon:
Period of employment for which
claim is based January 1, 1946 to
October 31, 1957
Salary per month
from January 1,
1946 to December
31, 1950 P95.00
Number of Sundays
and Holidays from
January 1, 1946 to
December 31, 1950 300
Rate per day plus
25% P3.95
300 Sundays and P1,185.00
Holidays multiplied
by P3.95 rate per
each Sunday and

Holiday
From the particular precise statement, "Rate per day plus 25%
- - - P3.95,"[2] it follows that the regular rate per ordinary day is
P 3.1666, which is 1/30th of the monthly salary of P95. This
means that in computing the daily wage, each of the petitioners
divided his monthly salary by 30, the average number of days
in a month, which includes Sundays and legal holidays. This is
an effective admission, or at least demonstrates awareness on
the part of the petitioners, that their monthly salaries covered
work not only on ordinary days but also on Sundays and legal
holidays.[3] The allegation, "300 Sundays and holidays
multiplied by P 3.95 rate per each Sunday and Holiday - - - -
P1,185.00," is correct. However, it must be remembered that
of the amount of P1,185, the sum of P948 had already been
paid to De Leon as part of his salary for the five-year period
from January 1, 1946 to December 31, 1950.
The only question remaining is whether the 25% premium pay
has also been paid. In the order of Judge Salvador, affirmed
by the court en banc, there is a finding that the "petitioners
were paid their monthly salaries plus 25% additional
compensation for work on Sundays and holidays." The factual
findings of the trial judge, unaltered or unmodified by the
court en banc, cannot be reviewed by this Court.[4] The findings
of fact of the CIR are conclusive on this Court, where they are
supported by substantial evidence, and the lower court has not
acted with grave abuse of discretion in reaching them.[5]
ACCORDINGLY, the judgment a quo dismissing the complaint
is affirmed. No pronouncement as to costs.
G.R. No. L-63122, February 20, 1984
UNIVERSITY OF PANGASINAN FACULTY UNION,
PETITIONER, VS. UNIVERSITY OF PANGASINAN AND
NATIONAL LABOR RELATIONS COMMISSION,
RESPONDENTS.
DECISION
GUTIERREZ, JR., J.:
This is a petition for review on certiorari pursuant to Rule 65 of
the Rules of Court to annul and to set aside the decision of
respondent National Labor Relations Commission (NLRC)
dated October 25, 1982, dismissing the appeal of petitioner in
NLRC Case No. RBI-47-82, entitled "University of Pangasinan
Faculty Union, complainant, versus University of Pangasinan,
respondent."
Petitioner is a labor union composed of faculty members of the
respondent University of Pangasinan, an educational institution
duly organized and existing by virtue of the laws of the
Philippines.
On December 18, 1981, the petitioner, through its President,
Miss Consuelo Abad, filed a complaint against the private
respondent with the Arbitration Branch of the NLRC, Dagupan
District Office, Dagupan City. 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 sixty (60%) percent of the
incremental proceeds of increased tuition fees; and (c)
payment of salaries for suspended extra loads.
The petitioner's members are full-time professors, instructors,
and teachers of respondent University. The teachers in the
college level teach for a normal duration of ten (10) months a
school year, divided into two (2) semesters of five (5) months
each, excluding the two (2) months summer vacation. These
teachers are paid their salaries on a regular monthly basis.
In November and December, 1981, the petitioner's 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 private respondent claims that
39
the teachers are not entitled thereto because the semestral
break is not an integral part of the schoolyear and there being
no actual services rendered by the teachers during said period,
the principle of "No work, no pay" applies.
During the same schoolyear (1981-1982), the private
respondent was authorized by the Ministry of Education and
Culture to collect, as it did collect, from its students a fifteen
(15%) percent increase of tuition fees. Petitioner's members
demanded a salary increase effective the first semester of said
schoolyear to be taken from the sixty (60%) percent
incremental proceeds of the increased tuition fees. Private
respondent refused, compelling the petitioner to include said
demand in the complaint filed in the case at bar. While the
complaint was pending in the arbitration branch, the private
respondent 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 petitioner's members
were given extra loads to handle during the same 1981-1982
schoolyear. 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 private respondent claim otherwise.
The issues to be resolved in the case at bar are the following:
I
"WHETHER OR NOT PETITIONER'S MEMBERS ARE
ENTITLED TO ECOLA DURING THE SEMESTRAL BREAK
FROM NOVEMBER 7 TO DECEMBER 5, 1981 OF THE 1981-
82 SCHOOL YEAR.
II
"WHETHER OR NOT 60% OF THE INCREMENTAL
PROCEEDS OF INCREASED TUITION FEES SHALL BE
DEVOTED EXCLUSIVELY SALARY INCREASE.
III
"WHETHER OR NOT ALLEGED PAYMENT OF SALARIES
FOR EXTRA LOADS ON NOVEMBER 21, 1981 WAS
PROVEN BY SUBSTANTIAL EVIDENCE."
Anent the first issue, the various Presidential Decrees on
ECOLAs to wit: PD's 1614, 1634, 1678 and 1713, provide on
"Allowances of Fulltime Employees x x x" that "Employees
shall be paid in full the required monthly allowance regardless
of the number of their regular working days if they incur
no absences during the month. If they incur absences without
pay, the amounts corresponding to the absences may be
deducted from the monthly allowance x x x"; and on "Leave of
Absence Without Pay", that "All covered employees shall be
entitled to the allowance provided herein when they are on
leave of absence with pay."
It is beyond dispute that the petitioner's members 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. The duration of
the semestral break varies from year to year dependent on a
variety of circumstances affecting at times only the private
respondent but at other times all educational institutions in the
country. As such, these 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 petitioner's
members received their regular salaries during this period. It is

clear from the aforequoted provision of law that it contemplates
a "no work" situation where the employees voluntarily absent
themselves. Petitioners, in the case at bar, certainly do not, ad
voluntatem, 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
begrudged that which is due them under the law. To a certain
extent, the private respondent can specify dates when no
classes would be held. 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.
Respondent's contention that "the fact of receiving a salary
alone should not be the basis of receiving ECOLA", is,
likewise, without merit. 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."
xxx xxx
xx
This provision, at once refutes the above contention. It is
evident that the intention of the law is to grant ECOLA upon the
payment of basic wages. Hence, we have the principle of "No
pay, no ECOLA" the converse of which finds application in the
case at bar. Petitioners 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. This, in itself, is a tacit
recognition of the rather unusual state of affairs in which
teachers find themselves. Although said to be on forced leave,
professors and teachers are, nevertheless, burdened with the
task of working during a period of time supposedly available for
rest and private matters. There are papers to correct, students
to evaluate, deadlines to meet, and periods within which to
submit grading reports. Although they may be considered by
the respondent to be on leave, the semestral break could not
be used effectively for the teachers' own purposes for the
nature of a teacher's job imposes upon him further duties
which must be done during the said period of time. Learning is
a never ending process. Teachers and professors must keep
abreast of developments all the time. Teachers cannot also
wait for the opening of the next semester to begin their work.
Arduous preparation is necessary for the delicate task of
educating our children. Teaching involves not only an
application of skill and an imparting of knowledge, but a
responsibility which entails self dedication and sacrifice. The
task of teaching ends not with the perceptible efforts of the
petitioner's members but goes beyond the classroom: a
continuum where only the visible labor is relieved by academic
intermissions. It would be most unfair for the private
respondent to consider these teachers as employees on leave
without pay to suit its purposes and, yet, in the meantime,
continue availing of their services as they prepare for the next
semester or complete all of the last semester's requirements.
Furthermore, we may also by analogy apply the principle
enunciated in the Omnibus Rules Implementing the Labor
Code to wit:
Sec. 4 Principles in Determining Hours Worked. - The following
general principles shall govern in determining whether the tine
spent by an employee is considered hours worked for
purposes of this Rule:
xxx xxx
x second purpose stated in Section 3(a) of P.D. 451."
"(d) The time during which an Employee is inactive by reason
of interruptions in his work beyond his control shall be
considered time either if the imminence of the resumption of
40
work requires the employee's presence at the place of work or
if the interval is too brief to be utilized effectively and gainfully
in the employee's own interest." (Italics ours)
The petitioner's members in the case at bar, are exactly in such
a situation. The semestral break scheduled is an interruption
beyond petitioner's control and it cannot be used "effectively
nor gainfully in the employee's interest". Thus, the semestral
break may also be considered as "hours worked". For this, the
teachers are paid regular salaries and, for this, they should be
entitled to ECOLA. Not only do the teachers continue to work
during this short recess but much less do they cease to live for
which the cost of living allowance is intended. The legal
principles of "No work, no pay; No pay, no ECOLA" must
necessarily give way to the purpose of the law to augment the
income of employees to enable them to cope with the harsh
living conditions brought about by inflation, and to protect
employees and their wages against the ravages brought by
these conditions. Significantly, it is the commitment of the State
to protect labor and to provide means by which the difficulties
faced by the working force may best be alleviated. To submit to
the respondents' interpretation of the no work, no pay policy is
to defeat this noble purpose. The Constitution and the law
mandate otherwise.
With regard to the second issue, we are called upon to
interpret and apply Section 3 of Presidential Decree 451 to wit:
x
SEC. 3. Limitations. - The increase in tuition or other school
fees or other charges as well as the new fees or charges
authorized under the next preceding section shall be subject to
the following conditions:
"a) That no increase in tuition or other school fees or charges
shall be approved unless sixty (60%) per centum 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, and the balance for institutional development,
student assistance and extension services, and return to
investments: Provided, That in no case shall the return to
investments exceed twelve (12%) per centum of the
incremental proceeds; x x x "
xxx xxx x
xx
This Court had the occasion to rule squarely on this point in the
very recent case entitled, University of the East v. University of
the East Faculty Association, 117 SCRA 554. We held that:
"In effect, the problem posed before Us is whether or not the
reference in Section 3(a) to increase in salaries or wages of
the faculty and all other employees of the schools concerned
as the first purpose to which the incremental proceeds from
authorized increases to tuition fees may be devoted, may be
construed to include allowances and benefits. In the negative,
which is the position of respondents, it would follow that such
allowances must be taken from resources of the school not
derived from tuition fees.
"Without delving into the factual issue of whether or not there
could be any such other resources, We note that among the
items of the second purpose stated in provision in question is
return in investment. And the law provides only for a maximum,
not a minimum. In other words, the schools may get a return to
investment of not more than 12%, but if circumstances warrant,
there is no minimum fixed by law which they should get.
"On this predicate, We are of the considered view that, if the
schools happen to have no other resources to grant
allowances and benefits, either mandated by law or secured by
collective bargaining, such allowances and benefits should be
xx charged against the return to investments referred to in the
Private respondent argues that the above interpretation
"disregarded the intention and spirit of the law" which intention
is clear from the "whereas" clauses as follows:

"It is imperative that private educational institutions upgrade
classroom instruction x x x provide salary and or wage
increases and other benefits x x x."
Respondent further contends that PD 451 was issued to
alleviate the sad plight of private schools, their personnel and
all those directly or indirectly on school income as the decree
was aimed -
"x x x to upgrade classroom instruction by improving their
facilities and bring competent teachers in all levels of
education, provide salary and or wage increases and other
benefits to their teaching, administrative, and other personnel
to keep up with the increasing cost of living." (Italics ours)
Respondent overlooks the elemental principle of statutory
construction that the general statements in the whereas
clauses cannot prevail over the specific or particular
statements in the law itself which define or limit the purposes of
the legislation or proscribe certain acts. True, the whereas
clauses of PD 451 provide for salary and or wage increase and
other benefits, however, the same do not delineate the source
of such funds and it is only in Section 3 which provides for the
limitations wherein the intention of the framers of the law is
clearly outlined. The law is clear. The sixty (60%) percent
incremental proceeds from the tuition increase are to be
devoted entirely to wage or salary increases which means
increases in basic salary. 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, an increase intended also to help
the teachers and other workers tide themselves and their
families over these difficult economic times.
This Court is not guilty of usurpation of legislative functions as
claimed by the respondents. We expressed the opinion in the
University of the East case that benefits mandated by law and
collective bargaining may be charged to the 12% return on
investments within the 40% incremental proceeds of tuition
increase. As admitted by respondent, we merely made this
statement as a suggestion in answer to the respondent's query
as to where then, under the law, can such benefits be charged.
We were merely interpreting the meaning of the law within the
confines of its provisions. The law provides that 60% should go
to wage increases and 40% to institutional developments,
student assistance, extension services, and return on
investments (ROI). Under the law, the last item ROI has
flexibility sufficient to accommodate other purposes of the law
and the needs of the university. ROI is not set aside for any
one purpose of the university such as profits or returns on
investments. The amount may be used to comply with other
duties and obligations imposed by law which the university
exercising managerial prerogatives finds cannot under present
circumstances, be funded by other revenue sources. It may be
applied to any other collateral purpose of the university or
invested elsewhere. Hence, the framers of the law intended
this portion of the increases in tuition fees to be a general fund
to cover up for the university's miscellaneous expenses and,
precisely, for this reason, it was not so delimited. Besides, ROI
is a return or profit over and above the operating expenditures
of the university, and still, over and above the profits it may
have had prior to the tuition increase. The earning capacities of
private educational institutions are not dependent on the
increases in tuition fees allowed by P.D. 451. Accommodation
of the allowances required by law require wise and prudent
management of all the university resources together with the
incremental proceeds of tuition increases. Cognizance should
be taken of the fact that the private respondent had, before PD
451, managed to grant all allowances required by law. It cannot
now claim that it could not afford the same, considering that
additional funds are even granted them by the law in question.
We find no compelling reason, therefore, to deviate from our
previous ruling in the University of the East case even as we
take the second hard look at the decision requested by the
private respondent. This case was decided in 1982 when PDs
1614, 1634, 1678, and 1713 which are also the various
Presidential Decrees on ECOLA were already in force. PD 451
was interpreted in the light of these subsequent legislations
which bear upon, but do not modify nor amend, the same. We
41
need not go beyond the ruling in the University of the
East case.
Coming now to the third issue, the respondents are of the
considered view that as evidenced by the payrolls submitted by
them during the period September 16 to September 30, 1981,
the faculty members have been paid for the extra loads. We
agree with the respondents that this issue involves a question
of fact properly within the competence of the respondent NLRC
to pass upon. The findings of fact of the respondent
Commission are binding on this Court there being no indication
of their being unsubstantiated by evidence. We find no grave
abuse in the findings of respondent NLRC on this matter to
warrant reversal. Assuming arguendo, however, that the
petitioners have not been paid for these extra loads, they are
not entitled to payment following the principle of "No work, no
pay". This time, the rule applies. Involved herein is a matter
different from the payment of ECOLA under the first issue. We
are now concerned with extra, not regular loads for which the
petitioners are paid regular salaries every month regardless of
the number of working days or hours in such a month. Extra
loads should be paid for only when actually performed by the
employee. Compensation is based, therefore, on actual work
done and on the number of hours and days spent over and
beyond their regular hours of duty. Since there was no work on
September 21, 1981, it would now be unfair to grant
petitioner's demand for extra wages on that day.
Finally, disposing of the respondent's charge of petitioner's lack
of legal capacity to sue, suffice it to say that this question can
no longer be raised initially on appeal or certiorari. It is quite
belated for the private respondent to question the personality
of the petitioner after it had dealt with it as a party in the
proceedings below. Furthermore, it was not disputed that the
petitioner is a duly registered labor organization and as such
has the legal capacity to sue and be sued. Registration grants
it the rights of a legitimate labor organization and recognition
by the respondent University is not necessary for it to institute
this action in behalf of its members to protect their interests
and obtain relief from grievances. The issues raised by the
petitioner do not involve pure money claims but are more
intricately intertwined with conditions of employment.
WHEREFORE, the petition for certiorari is hereby GRANTED.
The private respondent is ordered to pay its regular fulltime
teachers/employees emergency cost of living allowances for
the semestral break from November 7 to December 5, 1981
and the undistributed balance of the sixty (60%) percent
incremental proceeds from tuition increases for the same
schoolyear as outlined above. The respondent Commission is
sustained insofar as it DENIED the payment of salaries for the
suspended extra loads on September 21, 1981.
SO ORDERED.
CHAPTER III
G.R. No. 65482, December 01, 1987
JOSE RIZAL COLLEGE, PETITIONER, VS. NATIONAL
LABOR RELATIONS COMMISSION AND NATIONAL
ALLIANCE OF TEACHERS/OFFICE WORKERS,
RESPONDENTS.
DECISION
PARAS, J.:
This is a petition for certiorari with prayer for the issuance of a
writ of preliminary injunction, seeking the annulment of the
decision of the national labor relations
commission* in nlrc case no. Rb-iv-23037-78 (case no. R4-1-
1081-71) entitled "national alliance of teachers and office
workers and juan e. Estacio, jaime medina, et al.
Vs.jose rizal college" modifying the decision of the labor arbiter
as follows:

"wherefore, in view of the foregoing considerations, the
decision appealed from is modified, in the sense that teaching
personnel paid by the hour are hereby declared to be entitled
to holiday pay.
"so ordered."
The factual background of this case which is undisputed is as
follows:
Petitioner is a non-stock, non-profit educational institution duly
organized and existing under the laws of the philippines. It has
three 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 contact
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, private respondent national alliance of
teachers and office workers (natow) in behalf of the faculty and
personnel of jose rizal collegefiled with the ministry of labor a
complaint against the college for said alleged non-payment
of holiday pay, docketed as case no. R04-10-81-72. Due to
the failure of the parties to settle their differences on
conciliation, the case was certified for compulsory arbitration
where it was docketed as rb-iv-23037-78 (rollo, pp. 155-156).
After the parties had submitted their respective position
papers, the labor arbiter* rendered a
decision on february 5, 1979, the dispositive portion of which
reads:
"wherefore, judgment is hereby rendered as follows:
1. The faculty and personnel of the respondent jose rizal
college who are paid their salary by the month uniformly in a
school year, irrespective of the number of working days in a
month, without deduction for holidays, are presumed to be
already paid the 10 paid legal holidays and are no longer
entitled to separate payment for the said regular holidays;
2. The personnel of the respondent jose rizal college who are
paid their wages daily are entitled to be paid the 10 unworked
regular holidays according to the pertinent provisions of the
rules and regulations implementing the labor code;
3. Collegiate faculty of the respondent jose rizal college who
by contract are paid compensation per student contact
hour are not entitled to unworked regular holiday pay
considering that these regular holidays have been excluded in
the programming of the student contact hours." (rollo, pp. 26-
27)
On appeal, respondent national labor relations commission in a
decision promulgated on june 2, 1982, modified the decision
appealed from, in the sense that teaching personnel paid by
the hour are declared to be entitled to holiday pay (rollo, p. 33).
Hence, this petition.
The sole issue in this case is whether or not the school faculty
who according to their contracts are paid per lecture
hour are entitled to unworked holiday pay.
Labor arbiter julio andres, jr. Found that faculty and personnel
employed by petitioner who are paid their salaries monthly, 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 petitioner's treasurer
(rollo, pp. 72-73).
There appears to be no problem therefore as to the first two
classes or categories of petitioner's workers.
The problem, however, lies with its faculty members, who are
paid on an hourly basis, for while the labor arbiter sustains the
42
view that said instructors and professors are not entitled to
holiday pay, his decision was modified by the national labor
relations commission holding the contrary. Otherwise stated,
on appeal the nlrc ruled that teaching personnel paid by the
hour are declared to be entitled to holiday pay.
Petitioner maintains the position among others, that it is not
covered by book v of the labor code on labor relations
considering that it is a non-profit institution and 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 contact hours,
legal holidays are excluded and labelled 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 petitioner argues 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. Thus the programmed number of lecture hours is not
diminished (rollo, pp. 157-158).
The solicitor general on the other hand, argues that under
article 94 of the labor code
(p.d. no. 442 as amended), holiday pay applies to all
employees except those in retail and service
establishments. To deprive therefore employees paid at an
hourly rate of unworked holiday pay is contrary to the policy
considerations underlying such presidential enactment, and its
precursor, the blue sunday law (republic act no. 946) apart
from the constitutional mandate to grant greater rights to labor
(constitution, article ii, section 9). (rollo, pp. 76-77).
In addition, respondent national labor relations commission in
its decision promulgated on june 2, 1982, ruledthat the purpose
of a holiday pay is obvious; that is to prevent diminution of the
monthly income of the workers on account of work
interruptions. In other words, although the worker is forced to
take a rest, he earns what he should earn. That is
his holiday pay. It is no excuse therefore that the school
calendar is extended whenever holidays occur, because such
happens only in cases of special holidays (rollo, p. 32).
Subject holiday pay is provided for in the labor code
(presidential decree no. 442, as amended), which reads:
"art. 94. Right to holiday pay - (a) every worker shall be paid
his regular daily wage during regular holidays, except in retail
and service establishments regularly employing less than 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; x x x"
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. X x x"
Under the foregoing provisions, apparently, the petitioner,
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 provisons 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.
Petitioner alleges that it was deprived of due process as it was
not notified of the appeal made to the nlrc against the decision
of the labor arbiter.
The court has already set forth what is now known as the
"cardinal primary" requirements of due process in
administrative proceedings, to wit: "(1) the right to a hearing
which includes the right to present one's case and submit
evidence in support thereof; (2) the tribunal must consider the
evidence presented; (3) the decision must have something to
support itself; (4) the evidence must be substantial, and
substantial evidence means such evidence as a reasonable
mind might accept as adequate to support a conclusion; (5) the
decision must be based on the evidence presented at the
hearing, or at least contained in the record and disclosed to the
parties affected; (6) the tribunal or body of any of its judges
must act on its or his own independent consideration of the law
and facts of the controversy, and not simply accept the views
of a subordinate; (7) the board or body should in all
controversial questions, render its decisions in such manner
that the parties to the proceeding can know the various issues
involved, and the reason for the decision rendered." (doruelo
vs. Commission on elections, 133 scra 382 [1984]).
The records show petitioner jrc was amply
heard and represented in the instant proceedings. It submitted
its position paper before the labor arbiter and the nlrc and even
filed a motion for reconsideration of the decision of the latter,
as well as an "urgent motion for hearing en banc" (rollo, p.
175). Thus, petitioner's claim of lack of due process is
unfounded.
Premises considered, the decision of respondent national
labor relations commission is hereby set aside, and a new one
is hereby rendered:
(a) exempting petitioner 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;
(b) but ordering petitioner 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.
So ordered.
G.R. No. 114698, July 03, 1995
43
WELLINGTON INVESTMENT AND MANUFACTURING
CORPORATION, PETITIONER, VS. CRESENCIANO B.
TRAJANO, UNDER-SECRETARY OF LABOR AND
EMPLOYMENT, ELMER ABADILLA, AND 34 OTHERS,
RESPONDENTS.
DECISION
NARVASA, C.J.:
The basic issue raised by petitioner in this case is, as its
counsel puts it, "whether or not a monthly-paid employee,
receiving a fixed monthly compensation, is entitled to an
additional pay aside from his usual holiday pay, whenever a
regular holiday falls on a Sunday."
The case arose from a routine inspection conducted by a
Labor Enforcement Officer on August 6, 1991 of the Wellington
Flour Mills, an establishment owned and operated by petitioner
Wellington Investment and Manufacturing Corporation
(hereafter, simply Wellington). The officer thereafter drew up a
report, a copy of which was "explained to and received by"
Wellington's personnel manager, in which he set forth his
finding of "(n)on-payment of regular holidays falling on a
Sunday for monthly-paid employees."[1]
Wellington sought reconsideration of the Labor Inspector's
report, by letter dated August 10, 1991. It argued that "the
monthly salary of the company's monthly-salaried employees
already includes holiday pay for all regular holidays ** (and
hence) there is no legal basis for the finding of alleged non-
payment of regular holidays falling on a Sunday."[2] It
expounded on this thesis in a position paper subsequently
submitted to the Regional Director, asserting that it pays its
monthly-paid employees a fixed monthly compensation "using
the 314 factor which undeniably covers and already includes
payment for all the working days in a month as well as all the
10 unworked regular holidays within a year."[3]
Wellington's arguments failed to persuade the Regional
Director who, in an Order issued on July 28, 1992, ruled that
"when a regular holiday falls on a Sunday, an extra or
additional working day is created and the employer has the
obligation to pay the employees for the extra day except the
last Sunday of August since the payment for the said holiday is
already included in the 314 factor," and accordingly directed
Wellington to pay its employees compensation corresponding
to four (4) extra working days.[4]
Wellington timely filed a motion for reconsideration of this
Order of August 10, 1992, pointing out that it was in effect
being compelled to "shell out an additional pay for an alleged
extra working day" despite its complete payment of all
compensation lawfully due its workers, using the 314 factor.
[5]
Its motion was treated as an appeal and was acted on by
respondent Undersecretary. By Order dated September 22,
the latter affirmed the challenged order of the Regional
Director, holding that "the divisor being used by the respondent
(Wellington) does not reliably reflect the actual working days in
a year," and consequently commanded Wellington to pay its
employees the "six additional working days resulting from
regular holidays falling on Sundays in 1988, 1989 and
1990."[6] Again, Wellington moved for reconsideration,[7] and
again was rebuffed.[8]
Wellington then instituted the special civil action of certiorari at
bar in an attempt to nullify the orders above mentioned. By
Resolution dated July 4, 1994, this Court authorized the
issuance of a temporary restraining order enjoining the
respondents from enforcing the questioned orders.[9]
Every worker should, according to the Labor Code,[10] "be paid
his regular daily wage during regular holidays, except in retail
and service establishments regularly employing less than ten
(10) workers;" this, of course, even if the worker does no work
on these holidays. The regular holidays include: "New Year's
Day, Maundy Thursday, Good Friday, the ninth of April, the first
of May, the twelfth of June, the fourth of July, the thirtieth of
November, the twenty-fifth of December, and the day
designated by law for holding a general election (or national
referendum or plebiscite).[11]

Particularly as regards employees "who are uniformly paid by
the month, "the monthly minimum wage shall not be less than
the statutory minimum wage multiplied by 365 days divided by
twelve."[12] This monthly salary shall serve as compensation
"for all days in the month whether worked or not," and
"irrespective of the number of working days therein."[13] In other
words, whether the month is of thirty (30) or thirty-one (31)
days' duration, or twenty-eight (28) or twenty-nine (29) (as in
February), the employee is entitled to receive the entire
monthly salary. So, too, in the event of the declaration of any
special holiday, or any fortuitous cause precluding work on any
particular day or days (such as transportation strikes, riots, or
typhoons or other natural calamities), the employee is entitled
to the salary for the entire month and the employer has no right
to deduct the proportionate amount corresponding to the days
when no work was done. The monthly compensation is
evidently intended precisely to avoid computations and
adjustments resulting from the contingencies just mentioned
which are routinely made in the case of workers paid on daily
basis.
In Wellington's case, there seems to be no question that at the
time of the inspection conducted by the Labor Enforcement
Officer on August 6, 1991, it was and had been paying its
employees "a salary of not less than the statutory or
established minimum wage," and that the monthly salary thus
paid was "not ** less than the statutory minimum wage
multiplied by 365 days divided by twelve," supra. There is, in
other words, no issue that to this extent, Wellington complied
with the minimum norm laid down by law.
Apparently the monthly salary was fixed by Wellington to
provide for compensation for every working day of the year
including the holidays specified by law and excluding only
Sundays. In fixing the salary, Wellington used what it calls
the "314 factor;" that is to say, it simply deducted 51 Sundays
from the 365 days normally comprising a year and used the
difference, 314, as basis for determining the monthly salary.
The monthly salary thus fixed actually covers payment for 314
days of the year, including regular and special holidays, as well
as days when no work is done by reason of fortuitous cause,
as above specified, or causes not attributable to the
employees.
The Labor Officer who conducted the routine inspection of
Wellington discovered that in certain years, two or three
regular holidays had fallen on Sundays. He reasoned that this
had precluded the enjoyment by the employees of a non-
working day, and the employees had consequently had to work
an additional day for that month. This ratiocination received
the approval of his Regional Director who opined[14] that "when
a regular holiday falls on a Sunday, an extra or additional
working day is created and the employer has the obligation to
pay its employees for the extra day except the last Sunday of
August since the payment for the said holiday is already
included in the 314 factor."[15]
This ingenuous theory was adopted and further explained by
respondent Labor Undersecretary, to whom the matter was
appealed, as follows:[16]
" * * By using said (314) factor, the respondent (Wellington)
assumes that all the regular holidays fell on ordinary days and
never on a Sunday. Thus, the respondent failed to consider
the circumstance that whenever a regular holiday coincides
with a Sunday, an additional working day is created and left
unpaid. In other words, while the said divisor may be utilized
as proof evidencing payment of 302 working days, 2 special
days and the ten regular holidays in a calendar year, the same
does not cover or include payment of additional working days
created as a result of some regular holidays falling on
Sundays."
He pointed out that in 1988 there was "an increase of three (3)
working days resulting from regular holidays falling on
Sundays;" hence Wellington "should pay for 317 days, instead
of 314 days." By the same process of ratiocination, respondent
Undersecretary theorized that there should be additional
payment by Wellington to its monthly-paid employees for "an
increment of three (3) working days" for 1989 and again, for
44
1990. What he is saying is that in those years, Wellington
should have used the "317 factor," not the "314 factor."
The theory loses sight of the fact that the monthly salary in
Wellington -- which is based on the so-called "314 factor"
accounts for all 365 days of a year; i.e., Wellington's "314
factor" leaves no day unaccounted for; it is paying for all the
days of a year with the exception only of 51 Sundays.
The respondents' theory would make each of the years in
question (1988, 1989, 1990), a year of 368 days. Pursuant to
this theory, no employer opting to pay his employees by the
month would have any definite basis to determine the number
of days in a year for which compensation should be given to
his work force. He would have to ascertain the number of
times legal holidays would fall on Sundays in all the years of
the expected or extrapolated lifetime of his business.
Alternatively, he would be compelled to make adjustments in
his employees' monthly salaries every year, depending on the
number of times that a legal holiday fell on a Sunday.
There is no provision of law requiring any employer to make
such adjustments in the monthly salary rate set by him to take
account of legal holidays falling on Sundays in a given year, or,
contrary to the legal provisions bearing on the point, otherwise
to reckon a year at more than 365 days. As earlier mentioned,
what the law requires of employers opting to pay by the month
is to assure that "the monthly minimum wage shall not be less
than the statutory minimum wage multiplied by 365 days
divided by twelve,"[17] and to pay that salary "for all days in the
month whether worked or not," and "irrespective of the number
of working days therein."[18] That salary is due and payable
regardless of the declaration of any special holiday in the entire
country or a particular place therein, or any fortuitous cause
precluding work on any particular day or days (such as
transportation strikes, riots, or typhoons or other natural
calamities), or cause not imputable to the worker. And as also
earlier pointed out, the legal provisions governing monthly
compensation are evidently intended precisely to avoid re-
computations and alterations in salary on account of the
contingencies just mentioned, which, by the way, are routinely
made between employer and employees when the wages are
paid on daily basis.
The public respondents argue that their challenged
conclusions and dispositions may be justified by Section 2,
Rule X, Book III of the Implementing Rules, giving the Regional
Director power - [19]
" ** to order and administer (in cases where employer-
employee relations still exist), after due notice and hearing,
compliance with the labor standards provisions of the Code
and the other labor legislations based on the findings of their
Regulations Officers or Industrial Safety Engineers (Labor
Standard and Welfare Officers) and made in the course of
inspection, and to issue writs of execution to the appropriate
authority for the enforcement of his order, in line with the
provisions of Article 128 in relation to Articles 289 and 290 of
the Labor Code, as amended. ** ."
The respondents beg the question. Their argument assumes
that there are some "labor standards provisions of the Code
and the other labor legislations" imposing on employers the
obligation to give additional compensation to their monthly-paid
employees in the event that a legal holiday should fall on a
Sunday in a particular month with which compliance may be
commanded by the Regional Director when the existence of
said provisions is precisely the matter to be established.
In promulgating the orders complained of the public
respondents have attempted to legislate, or interpret legal
provisions in such a manner as to create obligations where
none are intended. They have acted without authority, or at the
very least, with grave abuse of their discretion. Their acts must
be nullified and set aside.
WHEREFORE, the orders complained of, namely: that of the
respondent Undersecretary dated September 22, 1993, and
that of the Regional Director dated July 30, 1992, are
NULLIFIED AND SET ASIDE, and the proceeding against
petitioner DISMISSED.

SO ORDERED.
TITLE II
CHAPTER I
G.R. No. 83834, June 30, 1989
PHILIPPINE AIRLINES, INC., PETITIONER, VS. NATIONAL
LABOR RELATIONS COMMISSION, GASSIE C. SANGEL
AND PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION,
RESPONDENTS.
DECISION
GRIO-AQUINO. J.
Private respondent Gassie C. Sangel was an employee of
Philippine Airlines Inc. (PAL) from May 1978 until June 25 986.
At the time of his dismissal, he was a Cargo Representative A
with a basic monthly salary of P2,653 cost-of-living allowance
of P270 per month and night shift differential of P200 monthly.
As Cargo Representative A at the PAL International Cargo
Terminal his duties were:
1. To receive cargoes tendered by agents;
2. To check packing and documentation requirements;
3. To re-weigh cargoes being transferred by forwarders; and
4. To verify correctness of rates applied on airway bills.
In May 1986 Sangel received cargo for shipment to Stuttgart
Germany under Airway Bill 079-0444-3681 dated May 1, 1986.
The cargo was weighed in by Sangel at 2,334 kilograms.
However, when the cargo was reweighed in Germany by PAL's
employees there they discovered that it weighed 2734 kilos or
400 kilos more than Sangel had indicated. The discrepancy
was reported to PAL's Manila office.
As a result Sangel was "interviewed" by Messrs. Avelino
Zapanta, Estrada and Fulo of PAL. The minutes of the
interview were transcribed. He was questioned about the
underweighing of the Stuttgart cargo. He insisted, however,
that he recorded on the airway bill only what the scales
showed.
On June 14 1986, Sangel received some cargo for
Copenhagen which he weighed. He recorded its weight on the
airway bill as 2,520 kilos, but when the weight was entered in
the logbook in the Manifesting Section, it was recorded as only
2,220 kgs. or 300 kgs. less. Sangel was not present when the
re-weighing was done in the Manifesting Section. PAL's
supervisor Virgilio Pasia, who noticed the discrepancy
personally supervised the re-weighing and registered 2,560
kgs.
On June 24, 1986 a Notice of Administrative Charge was
issued to Sangel by Avelino Zapanta. The notice placed him
under preventive suspension on the same day and directed
him to submit evidence within ten (10) days. Sangel sent a
reply dated July 1 1986.
On July 14, 1986, Zapanta and Leslie Espino jointly signed a
Notice of Termination addressed to Sangel which reads:
"1. Upon examination and evaluation of documents/evidence
submitted to this office in connection with the administrative
charge filed against you, the committee investigating your case
found you to have committed serious misconduct and breach
of trust in the improprieties in your dealings with some cargo
agents and forwarders. These were deemed most inimical to
the best interest of the Company since the said acts resulted
45
not only in losses in revenues but in jeopardizing the safety of
the flights as well.
"2. In view of the above, the committee has recommended,
and the undersigned has concurred, to terminate your services
from the Company effective June 25, 1986 the date you were
placed on preventive suspension." (p. 27, Rollo.)
Sangel filed a compiaint for illegal dismissal with damages and
attorney's fees against PAL. After the parties had filed their
position papers and other pleadings the Labor Arbiter rendered
a decision ordering the reinstatement of Sangel with full
backwages but denied his claim for damages and attorney's
fees.
On appeal, the National Labor Relations Commission affirmed
the Labor Arbiter's decision but awarded damages and
attorney's fees to Sangel thus:
"WHEREFORE, in view of all the foregoing, the decision of
Labor Arbiter Evangeline S. Lubaton ordering the
reinstatement of complainant-appellee to his former position
with full backwages computed from June 24 1986 up to the
time he is actually reinstated is hereby AFFIRMED with the
following modifications to wit:
"a) Respondent-appellant Philippine Airlines Inc. is hereby
ordered to pay complainant-appellee moral damages of
P20,000.00 as well as exemplary damages of P10,000.00;
"b) Respondent-appellant Philippine Airlines Inc. is further
ordered to pay complainant Gassie C. Sangel attorney's fees
of P3,000.00." (p. 35, Rollo.)
In this petition for review PAL alleges that the NLRC gravely
abused its discretion and erred:
1. in ruling that Sangel was dismissed without due process;
2. in finding that there was no just and valid cause for his
dismissal;
3. in ruling that Sangel's dismissal was attended with malice
and bad faith; and
4. in baselessly indicting some employees of PAL and in the
Process freeing Sangel of responsibility.
The essential elements of due process in a labor dispute are:
notice of the charge and a hearing where the employee is
given an opportunity to defend himself (Century Textile Mills
Inc., et al. vs. NLRC. et al., 161 SCRA 528: Wenphil Corp. vs.
NLRC, et al., G.R. No. 80587, February 8 1989).
The Labor Arbiter and the NLRC erred in finding that Sangel
was not given notice of the charge against him before he was
dismissed. Sangel was informed of the said charge during the
"fact-finding interview" (Annex F). Thus, the transcript of that
interview shows:
ZAPANTA: Do you know this business of underweighing
Gassie?
SANGEL: Wala akong alam sir.
XXX XXX XXX
ZAPANTA: Eh paano itong shipment ng Stuttgart? Ang
ibig mong sabihin walang nag-imbestiga sa iyo tungkol dito?
SANGEL: Sir, merong nagtanong sa akin nuong . . . last
May tungkol sa mga timbangan sa ibaba ilinuro ko sa kanila
ang ginagamit ko.
ZAPANTA: Sino ang nagtanong sa iyo?

SANGEL: Sir, si Jess Madrid.
ZAPANTA: Si Jess Madrid, Iyon tang ang itinanong sa iyo?
Kung anong timbangan mong ginagamit? Hindi sinabi sa iyo
na merong kaso ng underweighing?
SANGEL: Sir, eh sabi sa akin dahil meron daw silang
sagot na imporlante kaya itinatanong sa akin iyong mga
limbangang ginagamit ko.
XXX XXX XXX
ZAPANTA: Wala ka ring ibinigay na written reply? Eh.
paano ito cstablisido na itong kargamento ng Stuttgart ikaw
ang tumunggap. Natatandaan mo ba ito?
SANGEL: Iyon nga, sir, ang sabi sa akin, ako daw ang
tumanggap niyan sabi ni Jess Madrid. Kinakabahan na nga
ako.
ZAPANTA: At sa dalawang tonelada dito mahigit na 400
ang underweighing according to Frankfurt eksaktong 400 as a
matter of fact. Paano mong i-explain iyan?
SANGEL: Sir wala akong . . . kasi ang ano kasi. . . kung
ano ang recorded na ano diyan sa TRM iyon ang isinusulat ko.
ZAPANTA: Ibig mong sabihin ni-reweigh mo at iyon ang
isinulat mo sa TRM?
SANGEL: Yes, sir.
ZAPANTA: Eh bakit may 400 underweighing?
SANGEL: Ewan ko sir, dahil may guardia naman kasi kami
sir. Nagta-tally naman kami ng guardia.
XX XXX XXX
ZAPANTA: Gusto ko lang ipaliwanag sa iyo, Gassie, na
itong denial mo hindi sapat dahil sa ang ebidensya ay
maliwanag. Ang HA WB nagsasabi 2, 700, and MA WB mo
2,300. Eksaktong 400 ang underweighing. Ni-reweigh ng
Customs sa Germany iyong shipment, ang kanilang
reweighing eksakto duon sa HAWB 2700. So, maliwanag na
niloko ang pagtanggap dito.
SANGEL: Sir, so far na nalalaman ko, iyong timbang natin,
iyon ang timbang na lumalabas duon sa weighing scale natin."
(pp. 43-46 Rollo.)
Formal notice of the charge was also given him on June 24
1986 eleven (11) days after his interview or investigation on
June 13,1986 (Annex F). He was placed under suspension and
advised to submit evidence within ten (10) days but he did not
submit any evidence to rebut the charge against him on the
pretext that it would have been futile to do so because the
investigating committee had already prejudged and
pronounced him guilty. So, no further investigation or hearing
was conducted by the Committee. What followed was a notice
of his termination on July 14,1986.
Under the circumstances, it cannot be said that Sangel was
dismissed without due process. If the process of investigation
was not completed it was because he refused to submit to it.
There is no doubt that the Stuttgart shipment was
underweighed by Sangel. Sangel's supervisor Jesus T. Madrid
in his sworn statement (Annex N) declared that when he
required Sangel to submit a handling report as required by
Ralph Duran Manager of the Export Division regarding the
weight discrepancy "Mr. Sangel verbally told me that he
used one of the electronic weighing scales which according to
him was defective at the time of the shipment." (Italics
supplied; p. 65, Rollo.)
46
The use by Sangel of a weighing scale which he knew to be
defective (possibly tampered) at the time of the shipment in
order to benefit the shipper and defraud the airline, constituted
serious misconduct and dishonesty justifying his dismissal from
the service. With regard to the second airway bill where the
recorded weight of 2,520 kilos was erased and substituted with
2,200 kilos (Annex L, Petition), Sangel's denial of having made
the alteration (for he allegedly could have simply entered the
understated weight of the cargo on the airway bill instead of
recording the correct weight [2,520 kilos] and then changing
the figures to 2,220 kilos) was shattered by Abundio the
representative of the cargo forwarder, who stated in his
affidavit (Annex R) that it was he not Sangel who typed the
correct weight in the airway bill:
"4. That I personally typed the figure 2,520 kgs. at (sic) the
airway bill (AWB-217-316 7572) and signed the same before 1
gave it to Mr. Sangel for counter-signature."
Evidently, the weight of the cargo had already been filled in the
airway bill so all that had to be done was to change the "5" to
"2" in order to lop off 300 kgs. from the true weight of the
cargo.
Sangel lied when he alleged that it was he who recorded the
correct weight of 2,520 in the airway bill and that someone else
must have changed it in the Manifesting Section. The fact is
that the underweighing was discovered precisely in the
Manifesting Section.
We find ourselves unable to agree with the Commission's
finding that PAL acted with malice and bad faith in conducting
the "fact-finding interview" to fish for evidence against
employees who were suspected of involvement in the
underweighing anomalies at its International Cargo Terminal
a. What is one's domicile? (p.
b. Where is one's home economy?
c. To which country does one owe economic allegiance?
d. Was the individual hired abroad specifically to work in the
School and was the School responsible for bringing that
individual to the Philippines?[2]
28, Rollo). PAL may not be accused of bad faith and malice for
trying to ferret out the culprits responsible for the shenanigans
in its international cargo department. The fraudulent
underweighing of cargo not only robs PAL of substantial
revenues from this particular field of its operations, but, more
importantly, it endangers the safety of the airline's aircraft and
passengers. PAL must be vigilant to protect its airplanes its
passengers and its business for, as a carrier, it has the
obligation to exercise extraordinary diligence to safely conduct
its passengers and cargo to their destinations (Art. 1733, Civil
Code). Its efforts to discharge that grave responsibility may not
be characterized as malicious or in bad faith.
WHEREFORE, the petition for review is granted. The decisions
of the Labor Arbiter and the NLRC in NLRC Case No. NCR-6-
2532-36 are reversed and set aside. The private respondent's
complaint for illegal dismissal is hereby dismissed. No
pronouncement as to costs.
SO ORDERED.
G.R. No. 128845, June 01, 2000
INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS
(ISAE), PETITIONER, VS. HON. LEONARDO A.
QUISUMBING IN HIS CAPACITY AS THE SECRETARY OF
LABOR AND EMPLOYMENT; HON. CRESENCIANO B.
TRAJANO IN HIS CAPACITY AS THE ACTING SECRETARY
OF LABOR AND EMPLOYMENT; DR. BRIAN MACCAULEY
IN HIS CAPACITY AS THE SUPERINTENDENT OF
INTERNATIONAL SCHOOL-MANILA; AND INTERNATIONAL
SCHOOL, INC., RESPONDENTS.
DECISION
KAPUNAN, J.:

Receiving salaries less than their counterparts hired abroad,
the local-hires of private respondent School, mostly Filipinos,
cry discrimination. We agree. That the local-hires are paid
more than their colleagues in other schools is, of course,
beside the point. The point is that employees should be given
equal pay for work of equal value. That is a principle long
honored in this jurisdiction. That is a principle that rests on
fundamental notions of justice. That is the principle we uphold
today.
Private respondent International School, Inc. (the School, for
short), pursuant to Presidential Decree 732, is a domestic
educational institution established primarily for dependents of
foreign diplomatic personnel and other temporary residents.
[1]
To enable the School to continue carrying out its educational
program and improve its standard of instruction, Section 2(c) of
the same decree authorizes the School to
employ its own teaching and management personnel selected
by it either locally or abroad, from Philippine or other
nationalities, such personnel being exempt from otherwise
applicable laws and regulations attending their employment,
except laws that have been or will be enacted for the protection
of employees.
Accordingly, the School hires both foreign and local teachers
as members of its faculty, classifying the same into two: (1)
foreign-hires and (2) local-hires. The School employs four tests
to determine whether a faculty member should be classified as
a foreign-hire or a local hire:
Should the answer to any of these queries point to the
Philippines, the faculty member is classified as a local hire;
otherwise, he or she is deemed a foreign-hire.
The School grants foreign-hires certain benefits not accorded
local-hires. These include housing, transportation, shipping
costs, taxes, and home leave travel allowance. Foreign-hires
are also paid a salary rate twenty-five percent (25%) more than
local-hires. The School justifies the difference on two
"significant economic disadvantages" foreign-hires have to
endure, namely: (a) the "dislocation factor" and (b) limited
tenure. The School explains:
A foreign-hire would necessarily have to uproot himself from
his home country, leave his family and friends, and take the
risk of deviating from a promising career path-all for the
purpose of pursuing his profession as an educator, but this
time in a foreign land. The new foreign hire is faced with
economic realities: decent abode for oneself and/or for one's
family, effective means of transportation, allowance for the
education of one's children, adequate insurance against illness
and death, and of course the primary benefit of a basic
salary/retirement compensation.
Because of a limited tenure, the foreign hire is confronted
again with the same economic reality after his term: that he will
eventually and inevitably return to his home country where he
will have to confront the uncertainty of obtaining suitable
employment after a long period in a foreign land.
The compensation scheme is simply the School's adaptive
measure to remain competitive on an international level in
terms of attracting competent professionals in the field of
international education.[3]
When negotiations for a new collective bargaining agreement
were held on June 1995, petitioner International School
Alliance of Educators, "a legitimate labor union and the
collective bargaining representative of all faculty members"[4] of
the School, contested the difference in salary rates between
foreign and local-hires. This issue, as well as the question of
whether foreign-hires should be included in the appropriate
bargaining unit, eventually caused a deadlock between the
parties.
On September 7, 1995, petitioner filed a notice of strike. The
failure of the National Conciliation and Mediation Board to
bring the parties to a compromise prompted the Department of
Labor and Employment (DOLE) to assume jurisdiction over the
dispute. On June 10, 1996, the DOLE Acting Secretary,
Crescenciano B. Trajano, issued an Order resolving the parity
and representation issues in favor of the School. Then DOLE
Secretary Leonardo A. Quisumbing subsequently denied
petitioner's motion for reconsideration in an Order dated March
19, 1997. Petitioner now seeks relief in this Court.
47
Petitioner claims that the point-of-hire classification employed
by the School is discriminatory to Filipinos and that the grant of
higher salaries to foreign-hires constitutes racial discrimination.
The School disputes these claims and gives a breakdown of its
faculty members, numbering 38 in all, with nationalities other
than Filipino, who have been hired locally and classified as
local hires.[5]The Acting Secretary of Labor found that these
non-Filipino local-hires received the same benefits as the
Filipino local-hires:
The compensation package given to local-hires has been
shown to apply to all, regardless of race. Truth to tell, there are
foreigners who have been hired locally and who are paid
equally as Filipino local hires.[6]
The Acting Secretary upheld the point-of-hire classification for
the distinction in salary rates:
The principle "equal pay for equal work" does not find
application in the present case. The international character of
the School requires the hiring of foreign personnel to deal with
different nationalities and different cultures, among the student
population.
We also take cognizance of the existence of a system of
salaries and benefits accorded to foreign hired personnel
which system is universally recognized. We agree that certain
amenities have to be provided to these people in order to
entice them to render their services in the Philippines and in
the process remain competitive in the international market.
Furthermore, we took note of the fact that foreign hires have
limited contract of employment unlike the local hires who enjoy
security of tenure. To apply parity therefore, in wages and other
benefits would also require parity in other terms and conditions
of employment which include the employment contract.
A perusal of the parties' 1992-1995 CBA points us to the
conditions and provisions for salary and professional
compensation wherein the parties agree as follows:
All members of the bargaining unit shall be compensated only
in accordance with Appendix C hereof provided that the
Superintendent of the School has the discretion to recruit and
hire expatriate teachers from abroad, under terms and
conditions that are consistent with accepted international
practice.
Appendix C of said CBA further provides:
The new salary schedule is deemed at equity with the
Overseas Recruited Staff (OSRS) salary schedule. The 25%
differential is reflective of the agreed value of system
displacement and contracted status of the OSRS as
differentiated from the tenured status of Locally Recruited Staff
(LRS).
To our mind, these provisions demonstrate the parties'
recognition of the difference in the status of two types of
employees, hence, the difference in their salaries.
The Union cannot also invoke the equal protection clause to
justify its claim of parity. It is an established principle of
constitutional law that the guarantee of equal protection of the
laws is not violated by legislation or private covenants based
on reasonable classification. A classification is reasonable if it
is based on substantial distinctions and apply to all members of
the same class. Verily, there is a substantial distinction
between foreign hires and local hires, the former enjoying only
a limited tenure, having no amenities of their own in the
Philippines and have to be given a good compensation
package in order to attract them to join the teaching faculty of
the School.[7]
We cannot agree.
That public policy abhors inequality and discrimination is
beyond contention. Our Constitution and laws reflect the policy
against these evils. The Constitution[8] in the Article on Social
Justice and Human Rights exhorts Congress to "give highest
priority to the enactment of measures that protect and enhance
the right of all people to human dignity, reduce social,
economic, and political inequalities." The very broad Article 19
of the Civil Code requires every person, "in the exercise of his
rights and in the performance of his duties, [to] act with justice,
give everyone his due, and observe honesty and good faith."
International law, which springs from general principles of law,

[9]
likewise proscribes discrimination. General principles of law
include principles of equity,[10] i.e., the general principles of
fairness and justice, based on the test of what is reasonable.
[11]
The Universal Declaration of Human Rights,[12] the
International Covenant on Economic, Social, and Cultural
Rights,[13] the International Convention on the Elimination of All
Forms of Racial Discrimination,[14] the Convention against
Discrimination in Education,[15] the Convention (No. 111)
Concerning Discrimination in Respect of Employment and
Occupation[16] - all embody the general principle against
discrimination, the very antithesis of fairness and justice. The
Philippines, through its Constitution, has incorporated this
principle as part of its national laws.
In the workplace, where the relations between capital and labor
are often skewed in favor of capital, inequality and
discrimination by the employer are all the more reprehensible.
The Constitution[17] specifically provides that labor is entitled to
"humane conditions of work." These conditions are not
restricted to the physical workplace - the factory, the office or
the field - but include as well the manner by which employers
treat their employees.
The Constitution[18] also directs the State to promote "equality
of employment opportunities for all." Similarly, the Labor
Code[19] provides that the State shall "ensure equal work
opportunities regardless of sex, race or creed." It would be an
affront to both the spirit and letter of these provisions if the
State, in spite of its primordial obligation to promote and
ensure equal employment opportunities, closes its eyes to
unequal and discriminatory terms and conditions of
employment.[20]
Discrimination, particularly in terms of wages, is frowned upon
by the Labor Code. Article 135, for example, prohibits and
penalizes[21] the payment of lesser compensation to a female
employee as against a male employee for work of equal value.
Article 248 declares it an unfair labor practice for an employer
to discriminate in regard to wages in order to encourage or
discourage membership in any labor organization.
Notably, the International Covenant on Economic, Social, and
Cultural Rights, supra, in Article 7 thereof, provides:
The States Parties to the present Covenant recognize the right
of everyone to the enjoyment of just and favourable conditions
of work, which ensure, in particular:
The States Parties to the present Covenant recognize the right
of everyone to the enjoyment of just and favourable conditions
of work, which ensure, in particular:
a.....Remuneration which provides all workers, as a minimum,
with:
i.....Fair wages and equal remuneration for work of equal value
without distinction of any kind, in particular women being
guaranteed conditions of work not inferior to those enjoyed by
men, with equal pay for equal work;
x x x.
The foregoing provisions impregnably institutionalize in this
jurisdiction the long honored legal truism of "equal pay for
equal work." Persons who work with substantially equal
qualifications, skill, effort and responsibility, under similar
conditions, should be paid similar salaries.[22] This rule applies
to the School, its "international character" notwithstanding.
The School contends that petitioner has not adduced evidence
that local-hires perform work equal to that of foreign-hires.
[23]
The Court finds this argument a little cavalier. If an employer
accords employees the same position and rank, the
presumption is that these employees perform equal work. This
presumption is borne by logic and human experience. If the
employer pays one employee less than the rest, it is not for
that employee to explain why he receives less or why the
others receive more. That would be adding insult to injury. The
employer has discriminated against that employee; it is for the
employer to explain why the employee is treated unfairly.
The employer in this case has failed to discharge this burden.
There is no evidence here that foreign-hires perform 25% more
efficiently or effectively than the local-hires. Both groups have
48
similar functions and responsibilities, which they perform under
similar working conditions.
The School cannot invoke the need to entice foreign-hires to
leave their domicile to rationalize the distinction in salary rates
without violating the principle of equal work for equal pay.
"Salary" is defined in Black's Law Dictionary (5th ed.) as "a
reward or recompense for services performed." Similarly, the
Philippine Legal Encyclopedia states that "salary" is the
"[c]onsideration paid at regular intervals for the rendering of
services." In Songco v. National Labor Relations Commission,
[24]
we said that:
"salary" means a recompense or consideration made to a
person for his pains or industry in another man's business.
Whether it be derived from "salarium," or more fancifully from
"sal," the pay of the Roman soldier, it carries with it the
fundamental idea of compensation for services
rendered. (Emphasis supplied.)
While we recognize the need of the School to attract foreign-
hires, salaries should not be used as an enticement to the
prejudice of local-hires. The local-hires perform the same
services as foreign-hires and they ought to be paid the same
salaries as the latter. For the same reason, the "dislocation
factor" and the foreign-hires' limited tenure also cannot serve
as valid bases for the distinction in salary rates. The dislocation
factor and limited tenure affecting foreign-hires are adequately
compensated by certain benefits accorded them which are not
enjoyed by local-hires, such as housing, transportation,
shipping costs, taxes and home leave travel allowances.
The Constitution enjoins the State to "protect the rights of
workers and promote their welfare,"[25] "to afford labor full
protection."[26] The State, therefore, has the right and duty to
regulate the relations between labor and capital.[27] These
relations are not merely contractual but are so impressed with
public interest that labor contracts, collective bargaining
agreements included, must yield to the common good.
[28]
Should such contracts contain stipulations that are contrary
to public policy, courts will not hesitate to strike down these
stipulations.
In this case, we find the point-of-hire classification employed by
respondent School to justify the distinction in the salary rates of
foreign-hires and local hires to be an invalid classification.
There is no reasonable distinction between the services
rendered by foreign-hires and local-hires. The practice of the
School of according higher salaries to foreign-hires
contravenes public policy and, certainly, does not deserve the
sympathy of this Court.
We agree, however, that foreign-hires do not belong to the
same bargaining unit as the local-hires.
A bargaining unit is "a group of employees of a given employer,
comprised of all or less than all of the entire body of
employees, consistent with equity to the employer indicate to
be the best suited to serve the reciprocal rights and duties of
the parties under the collective bargaining provisions of the
law."[29] The factors in determining the appropriate collective
bargaining unit are (1) the will of the employees (Globe
Doctrine); (2) affinity and unity of the employees' interest, such
as substantial similarity of work and duties, or similarity of
compensation and working conditions (Substantial Mutual
Interests Rule); (3) prior collective bargaining history; and (4)
similarity of employment status.[30] The basic test of an
asserted bargaining unit's acceptability is whether or not it is
fundamentally the combination which will best assure to all
employees the exercise of their collective bargaining rights.[31]
It does not appear that foreign-hires have indicated their
intention to be grouped together with local-hires for purposes
of collective bargaining. The collective bargaining history in the
School also shows that these groups were always treated
separately. Foreign-hires have limited tenure; local-hires enjoy
security of tenure. Although foreign-hires perform similar
functions under the same working conditions as the local-hires,
foreign-hires are accorded certain benefits not granted to local-
hires. These benefits, such as housing, transportation,
shipping costs, taxes, and home leave travel allowance, are

reasonably related to their status as foreign-hires, and justify
the exclusion of the former from the latter. To include foreign-
hires in a bargaining unit with local-hires would not assure
either group the exercise of their respective collective
bargaining rights.
WHEREFORE, the petition is GIVEN DUE COURSE. The
petition is hereby GRANTED IN PART. The Orders of the
Secretary of Labor and Employment dated June 10, 1996 and
March 19, 1997, are hereby REVERSED and SET ASIDE
Rice ration ....................................................................
insofar as they uphold the practice of respondent School of
Housing facility...............................................................
according foreign-hires higher salaries than local-hires.
All other facilities such as recreation facilities, medical treatment to
dependents of laborers, school facilities, rice ration during off-days,
SO ORDERED.
water, light, fuel, etc., equivalent to at least......................
G.R. No. L-7349, July 19, 1955
ATOK-BIG WEDGE MUTUAL BENEFIT ASSOCIATION,
PETITIONER, VS. ATOK-BIG WEDGE MINING COMPANY,
INCORPORATED, RESPONDENTS.
DECISION
REYES, J.B.L., J.:
On September 4, 1950, the. petitioner labor union, the Atok-Big
Wedge Mutual Benefit Association, submitted to the Atok-Big
Wedge Mining Co., Inc. (respondent herein) several 'demands,
among which was an increase of P0.50 in daily wage. The
matter was referred by the mining company to the Court of
Industrial Relations for arbitration and settlement (Case No.
523-V). In the course of conciliatory measures taken by the
Court, some of the demands were granted, and others
(including the demand for increased wages)' rejected, and so,
hearings proceeded and evidence submitted on the latter. On
July 14, 1951, the Court rendered a decision (Record, pp. 25-
32) fixing the minimum wage at P2.65 a day with rice ration, or
P3.20 without rice ration; denying the deduction from such
minimum wage, of the value of housing facilities furnished by
the company to the laborers, as well as the efficiency bonus
given to them by the company; and ordered that the award be
made effective retroactively from the date of the demand,
September 4, 1950, as agreed by the parties. From this
decision, the mining company appealed to this Court (G. R.
No. L-5276).
Subsequently, an urgent petition was presented in Court on
October 15, 1952 by the Atok-Big Wedge Mining Company for
authority to stop operations and lay off employees and
laborers, for the reason that due to heavy losses, increased
taxes, high cost of materials, negligible quantity of ore
deposits, and the enforcement of the Minimum Wage Law, the
continued operation of the company would lead to its
immediate bankruptcy and collapse (Rec. pp. 100-109). To
avert the closure of the company and the consequent lay-off of
hundreds of laborers and employees, the Court, instead of
hearing the petition on the merits, convened the parties for
voluntary conciliation and mediation. After lengthy discussions
and exchange of views, the parties on October 29, 1952
reached an agreement effective from August 4, 1952 to
December 31, 1954 (Rec. pp. 18-23). The Agreement in part
provides:
I
That the petitioner, Atok-Big Wedge Mining Company, Incor-
porated, agrees to abide by whatever decision that the
Supreme Court may render with respect to Case No. 523-V (G.
R. 5276) and Case No. 523-1 (10) (G. R. 5594).
*******
III
*******
49
That the petitioner, Atok-Big Wedge Mining
Company, Incorporated, and the respondent,
Atok-Big Wedge Mutual Benefit Association,
agree that the following facilities heretofore
given or actually being given by the petitioner to
its workers and laborers, and which constitute as
part of their wages, be valued as follows:
It is understood that the said amount of facilities valued at the
above-mentioned prices, may be charged in full or partially by
the Atok-Big Wedge Mining Company, Inc., against laborer or
employee, as it may see fit pursuant to the exigencies of its
operation."
The agreement was submitted to the Court for approval and on
December 26, 1952, was approved by the Court in an order
giving it effect as ail award, or decision in the case (Rec, p.
24).
Later, Case No. G. R. No. L-5276 was decided by this Court
(promulgated March 3, 1953), affirming the decision of the
Court of Industrial Relations fixing the minimum cash wage of
the laborers and employees of the Atok-Big Wedge Mining Co.
at P3.20 cash, without rice ration, or P2.65, with rice ration. On
June 13, 1953, the labor union presented to the Court a
petition for the enforcement of the terms of the agreement of
October 29, 1952, as allegedly modified by the decision of this
Court in G. R. No. L-5276 and the provisions of the Minimum
Wage Law, which has since taken effect, praying for the
payment of the minimum cash wage of P3.45 a day with rice
ration, or P4.00 without rice ration, and the payment of
differential pay from August 4, 1952, when the award became
effective. The mining company opposed the petition claiming
that the Agreement of October 29, 1952 was entered into by
the parties with the end in view that the company's cost of
production be not increased in any way, so that it was intended
to supersede whatever decision the Supreme Court would
render in G. R. No. L-5276 and the provisions of the Minimum
Wage Law with respect to the minimum cash wage payable to
the laborers and employees. Sustaining the opposition, the
Court of Industrial Relations, in an order issued, on September
22, 1953 (Rec. pp. 44-49), denied the petition, upon the ground
that when the Agreement of the parties of October 29, 1952
was entered into by them, they already knew the decision of
said Court (although subject to appeal to the Supreme Court)
fixing the minimum cash wage at P3.20 without rice ration, or
P2.65 with rice ration, as well as the provisions of the Minimum
Wage Law requiring the payment of P4 minimum daily wage in
the provinces effective August 4, 1952; so that the parties had
intended to be regulated by their Agreement of October 29,
1952. On the same day, the Court issued another order (Rec
pp. 50-55), denying the claim of the labor union for payment of
an additional 50 per cent based on the basic wage of P4 for
work on Sundays and holidays, holding that the payments
being made by the company were within the requirements of
the law. Its motion for the reconsideration of both orders having
been denied, the labor union filed this petition for review by
certiorari.
. The first issue submitted to us arises from an apparent
contradiction in the Agreement of October 29, 1952. By
paragraph' III thereof, the parties by common consent
evaluated the facilities furnished by the Company to its
laborers (rice rations, housing, recreation, medical treat- ment,
water, light, fuel, etc.) at P1.80 per day, and authorized the
company to have such value "charge in full or partially
against any laborer or employee as it may see fit"; while in
paragraph I, the Company agreed to abide by the decision of
this Court (pending at the time the agreement was had) in G.
R. No. L-5594; and as rendered, the decision was to the effect
that the Company could deduct from the minimum wage only
the value of the rice ration.

It is contended by the petitioner union that the two provisions
should be harmonized by holding paragraph III (deduction of all
facilities) to be merely provisional, effective only while this
Court had not rendered its decision in G. R. No. L-5594; and
that'tne terms of said paragraph should be deemed
superseded by the decision from the time the latter became
final, some four or five months after the agreement was
entered into; in consequence, (it is claimed), the laborers
became entitled by virtue of said decision to the prevailing
P4.00 minimum wage with no other deduction than that of the
rice ration, or a net cash wage of P3.45.
This contention, in our opinion, is untenable. The in- tention of
the parties could not have been to mate the arrangement in
paragraph III a merely provisional arrangement pending the
decision of the Supreme Court for "this agreement" was
expressly made retroactive and effective as of August 4, 1952,
and to be in force up to and including December 31, 1954"
(Par. IV). When concluded on October 29, 1952, neither party
could anticipate the date when the decision of the Supreme
Court would be rendered; nor is any reason shown why the
parties should desire to limit the effects of the decision to the
period 1952-1954 if it was to supersede the agreement of
October 29, 1952. '
To ascertain the true import of paragraph I of said Agreement
providing that the respondent company agreed to abide by
whatever decision the Supreme Court would render in G. R.
No. L-5276, it is important to remember that, as shown by the
records, the agreement was prompted by an urgent petition
filed by the respondent mining company to close operations
and lay-off laborers because of heavy losses and the full
enforcement of the Minimum Wage Law in the provinces,
requiring it to pay its laborers the minimum wage of P4; to
avoid such eventuality, through the mediation of the Court of
Industrial Relations, a compromise was reached whereby it
was agreed that the company would pay the minimum wage
fixed by the law, but the facilities then being received by the
laborers would be evaluated and charged as part of the wage,
but without in any way reducing the P2.00 cash portion of their
wages which they were receiving prior to the agreement
(hearing of Oct. 28, 1952, CIR, t. s. n. 47). In other words,
while it was the objective of the parties to comply with the
requirements of the Minimum Wage Law, it was also deemed
important that the mining company should not have to increase
the cash wages it was then paying its laborers, so that its cost
of production would not also be increased, in order to prevent
its closure and the lay-off of employees and laborers. And as
found by the Court below in the order appealed from (which
finding is conclusive upon us), "it is this eventuality that the
parties did not like to happen, when they have executed the
said agreement" (Rec. p. 49). Accordingly, after said
agreement was entered into, the Company started paying its
laborers a basic cash or "take-home" wage of P2.20 (Rec. p.
9), representing the difference between P4 (minimum wage)
and P1.80 (value of all facilities).
With this background, the provision to abide by our decision in
G. R. L-5276 can only be interpreted thus: That the company
agreed to pay whatever award this Court would make in said
case from the date fixed by the decision (which was that of the
original demand, September 4, 1950) up to August 3, 1952 (the
day previous to the effectivity of the Compromise Agreement)
and from August 4, 1952 to December 31, 1954, they are to be
bound by their agreement of October 29, 1952.
This means that during the first period (September 4. 1950 to
August 3, 1952), only rice rations given to the laborers are to
be regarded as forming part of their wage and deductible
therefrom. The minimum wage was then fixed (by the Court of
Industrial Relations, and affirmed by this Court) at P3.20
without rice ration, or P2.65 with rice ration. Since the
respondent company had been pay- ing its laborers the basic
cash or "take-home" wage of F2 prior to said decision and up
to August 3, 1952, the laborers are entitled to a differential pay
of P0.65 per working day from September 4, 1950 (the date of
the effectivity of the award in G. R. L-5276) up to August 3,
1952.
50
From August 4, 1952, the date when the Agreement of the
parties of October 29, 1952 became effective (which was also
the date when the Minimum Wage Law became fully
enforceable in the provinces), the laborers should be paid a
minimum wage of P4 a day. From this amount, the respondent
mining company is given the right to charge each laborer "in
full or partially", the facilities enumerated in par. III of the
Agreement; i. e., rice ration at P0.55 per day, housing facility at
P0.40 per day, and other facilities at P0.85 per day (or a total
of P1.80), which facilities '"constitute part of his wages". It
appears that the company had actually been paying its
laborers the minimum wage of P2.20 since August 4, 1952;
hence they are not entitled to any differential pay from this
date.
Petitioner argues that to allow the deductions stipulated in the
Agreement of October 29, 1952 from the minimum daily wage
of P4 would be a waiver of the minimum wage fixed by the law
and hence null and void, since Republic Act No. 602, section
20, provides that "no agreement or contract, oral or written, to
accept a lower wage or less than any other under this Act, shall
be valid". An agreement to deduct certain facilities received by
the laborers from their employer is not a waiver of the minimum
wage fixed by the law. Wage, as defined by section 2 of
Republic Act No. 602, "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." thus, the law permits the deduction of such
facilities- from the laborer's minimum wage of P4, as long as
their value is "fair and reasonable". It is not here claimed that
the valuations fixed in the Agreement of October 29, 1952 are
not fair and reasonable. On the contrary, the agreement
expressly states that such valuations:
'have been arrived at after careful study and deliberation by
both representatives of both parties, with the assistance of
their respective counsels, and in the presence of the
Honorable Presiding Judge of the Court of Industrial Relations'
(Rec. p. 2).
Neither is it claimed that the parties, with the aid of the Court of
Industrial Relations in a dispute pending before it, may not fix
by agreement the valuation of such facilities, without referring
the matter to the Department of Labor.
Petitioner also argues that to allow the deductions of the
facilities appearing in the Agreement referred to, would be
contrary to the mandate of section 19 of the law, that "nothing
in this Act shall * * * justify an employer * * * in reducing
supplements furnished on the date of enactment".
The meaning of the term "supplements" has been fixed by the
Code of Rules and Regulations promulgated by the Wage
Administration Office to implement the Minimum Wage Law
(Ch. 1, [c]), as:
"extra remuneration or benefits received by wage earners from
their employers and include but are not restricted to pay for
vacation and holidays not worked; paid sick leave or maternity
leave; overtime rate in excess of what is required by law; sick,
pension, retirement, and death benefits; profit-sharing; family
allowances; Christmas, war risk and cost-of-living bonuses; or
other bonuses other than those paid as a reward for extra
output or time spent on the job."
"Supplements", therefore, constitute extra enumeration or
special privileges or benefits given to or received by the
laborers over and above their ordinary earnings or wages.
Facilities, on the other hand,1 are items of expense necessary
for the laborer's and his family's existence and subsistence, so
that by express provision of the law (sec. 2[g]) they form part of
the wage and when furnished by the employer are deductible
therefrom since if they are not so furnished, the laborer would
spend and pay for them just the same. It is thus clear that the
facilities mentioned in the agreement of October 29, 1952 do
not come within the term "supplements" as used in Art. 19 of
the Minimum Wage Law.

For the above reasons, we find the appeal from the Order of
the Court a quo of September 22, 1953 denying the motion of
the petitioner labor union for the payment of the minimum
wage of P3.45 per day plus rice ration, or P4 without rice
ration, to be unmeritorious and untenable.
The second question involved herein relates to the additional
compensation that should be paid by the respondent company
to its laborers for work rendered on Sundays and holidays. It is
admitted that the respondent company is paying an additional
compensation of 50 per cent based on the basic "cash portion"
of the laborer's wage of P2.20 per day; ie., P1.10 additional
compensation for each Sunday or holiday's work. Petitioner
union insists, however, that this 50 per cent additional
compensation should be computed on the minimum wage of
P400 and not on the "cash portion" of the laborer's wage of
P2.20, under the provisions of the Agreement of October 29,
1952 and the Minimum Wage Law.
Sec. 4. Commonwealth Act No. 444 (otherwise known as the
Eight Hour Labor Law) provides:
"No person, firm, or corporations, business establishment or
place or center of labor shall compel an employee or laborer to
work during Sundays and holidays, unless he is paid an
additional sum of at least twenty-five per centum of his regular
remuneration:
The minimum legal additional compensation for work on
Sundays and legal holidays is, therefore, 25 per cent of the
laborer's regular renumeration. Under the Minimum Wage Law,
this minimum additional compensation is P1 a day (25 per cent
of P4, the minimum daily wage).
While the respondent company computes the additional
compensation given to its laborers for work on Sundays and
holidays on the "cash portion" of their wages of P2.20, it is
giving them 50 per cent thereof, or P1.10 a day. Considering
that the minimum additional compensation fixed by the law is
P1 (25 per cent of P4), the compensation being paid by the
respondent company to its laborers is even higher than such
minimum legal additional compensation. We, therefore, see no
error in the holding of the Court a quo that the respondent
company has not violated the law with respect to the payment
of additional compensation for work rendered by its laborers on
Sundays and legal holidays.
Finding no reason to sustain the present petition for review, the
same is, therefore, dismissed, with costs against the petitioner
Atok-Big Wedge Mutual Benefit Association.
G.R. No. 118506, April 18, 1997
NORMA MABEZA, PETITIONER, VS. NATIONAL LABOR
RELATIONS COMMISSION, PETER NG/HOTEL SUPREME,
RESPONDENTS.
DECISION
KAPUNAN, J.:
This petition seeking the nullification of a resolution of public
respondent National Labor Relations Commission dated April
28, 1994 vividly illustrates why courts should be ever vigilant in
the preservation of the constitutionally enshrined rights of the
working class. Without the protection accorded by our laws and
the tempering of courts, the natural and historical inclination of
capital to ride roughshod over the rights of labor would run
unabated.
The facts of the case at bar, culled from the conflicting versions
of petitioner and private respondent, are illustrative.
Petitioner Norma Mabeza contends that around the first week
of May, 1991, she and her co-employees at the Hotel Supreme
in Baguio City were asked by the hotel's management to sign
an instrument attesting to the latter's compliance with minimum
wage and other labor standard provisions of law.[1] The
instrument provides:[2]
51
JOINT AFFIDAVIT
We, SYLVIA IGANA, HERMINIGILDO AQUINO, EVELYN
OGOY, MACARIA JUGUETA, ADELAIDA NONOG, NORMA
MABEZA, JONATHAN PICART and JOSE DIZON, all of legal
ages (sic), Filipinos and residents of Baguio City, under oath,
depose and say:
1. That we are employees of Mr. Peter L. Ng of his Hotel
Supreme situated at No. 416 Magsaysay Ave., Baguio City;
2. That the said Hotel is separately operated from the Ivy's Grill
and Restaurant;
3. That we are all (8) employees in the hotel and assigned in
each respective shifts;
4. That we have no complaints against the management of the
Hotel Supreme as we are paid accordingly and that we are
treated well.
5. That we are executing this affidavit voluntarily without any
force or intimidation and for the purpose of informing the
authorities concerned and to dispute the alleged report of the
Labor Inspector of the Department of Labor and Employment
conducted on the said establishment on February 2, 1991.
IN WITNESS WHEREOF, we have hereunto set our hands this
7th day of May, 1991 at Baguio City, Philippines.
(Sgd.) (Sgd.)
(Sgd.)
SYLVIA IGAMA HERMINIGILDO AQUINO
EVELYN OGOY
(Sgd) (Sgd.)
(Sgd.)
MACARIA JUGUETA ADELAIDA NONOG
NORMA MABEZA
(Sgd) (Sgd.)
JONATHAN PICART JOSE DIZON
SUBSCRIBED AND SWORN to before me this 7th day of May,
1991, at Baguio City, Philippines.
Asst. City Prosecutor
Petitioner signed the affidavit but refused to go to the City
Prosecutor's Office to swear to the veracity and contents of the
affidavit as instructed by management. The affidavit was
nevertheless submitted on the same day to the Regional Office
of the Department of Labor and Employment in Baguio City.
As gleaned from the affidavit, the same was drawn by
management for the sole purpose of refuting findings of the
Labor Inspector of DOLE (in an inspection of respondent's
establishment on February 2, 1991) apparently adverse to the
private respondent.[3]
After she refused to proceed to the City Prosecutor's Office -
on the same day the affidavit was submitted to the Cordillera
Regional Office of DOLE - petitioner avers that she was
ordered by the hotel management to turn over the keys to her
living quarters and to remove her belongings from the hotel
premises.[4]According to her, respondent strongly chided her for
refusing to proceed to the City Prosecutor's Office to attest to
the affidavit.[5] She thereafter reluctantly filed a leave of
absence from her job which was denied by management.
When she attempted to return to work on May 10, 1991, the
hotel's cashier, Margarita Choy, informed her that she should
not report to work and, instead, continue with her unofficial
leave of absence. Consequently, on May 13, 1991, three days
after her attempt to return to work, petitioner filed a complaint
for illegal dismissal before the Arbitration Branch of the
National Labor Relations Commission - CAR Baguio City. In
addition to her complaint for illegal dismissal, she alleged
underpayment of wages, non-payment of holiday pay, service
incentive leave pay, 13th month pay, night differential and other

benefits. The complaint was docketed as NLRC Case No.
RAB-CAR-05-0198-91 and assigned to Labor Arbiter Felipe P.
Pati.
Responding to the allegations made in support of petitioner's
complaint for illegal dismissal, private respondent Peter Ng
alleged before Labor Arbiter Pati that petitioner "surreptitiously
left (her job) without notice to the management"[6] and that she
actually abandoned her work. He maintained that there was no
basis for the money claims for underpayment and other
benefits as these were paid in the form of facilities to petitioner
and the hotel's other employees.[7] Pointing to the Affidavit of
May 7, 1991, the private respondent asserted that his
employees actually have no problems with management. In a
supplemental answer submitted eleven (11) months after the
original complaint for illegal dismissal was filed, private
respondent raised a new ground, loss of confidence, which
was supported by a criminal complaint for Qualified Theft he
filed before the prosecutor's office of the City of Baguio against
petitioner on July 4, 1991.[8]
On May 14, 1993, Labor Arbiter Pati rendered a decision
dismissing petitioner's complaint on the ground of loss of
confidence. His disquisitions in support of his conclusion read
as follows:
It appears from the evidence of respondent that complainant
carted away or stole one (1) blanket, 1 piece bedsheet, 1 piece
thermos, 2 pieces towel (Exhibits '9', '9-A,' '9-B,' '9-C' and '10'
pages 12-14 TSN, December 1, 1992).
In fact, this was the reason why respondent Peter Ng lodged a
criminal complaint against complainant for qualified theft and
perjury. The fiscal's office finding a prima facie evidence that
complainant committed the crime of qualified theft issued a
resolution for its filing in court but dismissing the charge of
perjury (Exhibit '4' for respondent and Exhibit 'B-7' for
complainant). As a consequence, complainant was charged in
court for the said crime (Exhibit '5' for respondent and Exhibit
'B-6' for the complainant).
With these pieces of evidence, complainant committed serious
misconduct against her employer which is one of the just and
valid grounds for an employer to terminate an employee
(Article 282 of the Labor Code as amended).[9]
On April 28, 1994, respondent NLRC promulgated its assailed
Resolution[10] affirming the Labor Arbiter's decision. The
resolution substantially incorporated the findings of the Labor
Arbiter.[11] Unsatisfied, petitioner instituted the instant special
civil action for certiorari under Rule 65 of the Rules of Court on
the following grounds:[12]
1. WITH ALL DUE RESPECT, THE HONORABLE
NATIONAL LABOR RELATIONS COMMISSION COMMITTED
A PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE
ABUSE OF DISCRETION IN ITS FAILURE TO CONSIDER
THAT THE ALLEGED LOSS OF CONFIDENCE IS A FALSE
CAUSE AND AN AFTERTHOUGHT ON THE PART OF THE
RESPONDENT-EMPLOYER TO JUSTIFY, ALBEIT
ILLEGALLY, THE DISMISSAL OF THE COMPLAINANT FROM
HER EMPLOYMENT;
2. WITH ALL DUE RESPECT, THE HONORABLE
NATIONAL LABOR RELATIONS COMMISSION COMMITTED
A PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE
ABUSE OF DISCRETION IN ADOPTING THE RULING OF
THE LABOR ARBITER THAT THERE WAS NO
UNDERPAYMENT OF WAGES AND BENEFITS ON THE
BASIS OF EXHIBIT "8" (AN UNDATED SUMMARY OF
COMPUTATION PREPARED BY ALLEGEDLY BY
RESPONDENT'S EXTERNAL ACCOUNTANT) WHICH IS
TOTALLY INADMISSIBLE AS AN EVIDENCE TO PROVE
PAYMENT OF WAGES AND BENEFITS;
3. WITH ALL DUE RESPECT, THE HONORABLE
NATIONAL LABOR RELATIONS COMMISSION COMMITTED
A PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE
ABUSE OF DISCRETION IN FAILING TO CONSIDER THE
EVIDENCE ADDUCED BEFORE THE LABOR ARBITER AS
52
CONSTITUTING UNFAIR LABOR PRACTICE COMMITTED
BY THE RESPONDENT.
The Solicitor General, in a Manifestation in lieu of Comment
dated August 8, 1995 rejects private respondent's principal
claims and defenses and urges this Court to set aside the
public respondent's assailed resolution.[13]
We agree.
It is settled that in termination cases the employer bears the
burden of proof to show that the dismissal is for just cause, the
failure of which would mean that the dismissal is not justified
and the employee is entitled to reinstatement.[14]
In the case at bar, the private respondent initially claimed that
petitioner abandoned her job when she failed to return to work
on May 8, 1991. Additionally, in order to strengthen his
contention that there existed sufficient cause for the
termination of petitioner, he belatedly included a complaint for
loss of confidence, supporting this with charges that petitioner
had stolen a blanket, a bedsheet and two towels from the
hotel.[15] Appended to his last complaint was a suit for qualified
theft filed with the Baguio City prosecutor's office.
From the evidence on record, it is crystal clear that the
circumstances upon which private respondent anchored his
claim that petitioner "abandoned" her job were not enough to
constitute just cause to sanction the termination of her services
under Article 283 of the Labor Code. For abandonment to
arise, there must be concurrence of two things: 1) lack of
intention to work;[16] and 2) the presence of overt acts signifying
the employee's intention not to work.[17]
In the instant case, respondent does not dispute the fact that
petitioner tried to file a leave of absence when she learned that
the hotel management was displeased with her refusal to attest
to the affidavit. The fact that she made this attempt clearly
indicates not an intention to abandon but an intention to return
to work after the period of her leave of absence, had it been
granted, shall have expired.
Furthermore, while absence from work for a prolonged period
may suggest abandonment in certain instances, mere absence
of one or two days would not be enough to sustain such a
claim. The overt act (absence) ought to unerringly point to the
fact that the employee has no intention to return to work,
[18]
which is patently not the case here. In fact, several days
after she had been advised to take an informal leave, petitioner
tried to resume working with the hotel, to no avail. It was only
after she had been repeatedly rebuffed that she filed a case for
illegal dismissal. These acts militate against the private
respondent's claim that petitioner abandoned her job. As the
Solicitor General in his manifestation observed:
Petitioner's absence on that day should not be construed as
abandonment of her job. She did not report because the
cashier told her not to report anymore, and that private
respondent Ng did not want to see her in the hotel premises.
But two days later or on the 10th of May, after realizing that
she had to clarify her employment status, she again reported
for work. However, she was prevented from working by private
respondents.[19]
We now come to the second cause raised by private
respondent to support his contention that petitioner was validly
dismissed from her job.
Loss of confidence as a just cause for dismissal was never
intended to provide employers with a blank check for
terminating their employees. Such a vague, all-encompassing
pretext as loss of confidence, if unqualifiedly given the seal of
approval by this Court, could readily reduce to barren form the
words of the constitutional guarantee of security of tenure.
Having this in mind, loss of confidence should ideally apply
only to cases involving employees occupying positions of trust
and confidence or to those situations where the employee is
routinely charged with the care and custody of the employer's
money or property. To the first class belong managerial
employees, i.e., those vested with the powers or prerogatives
to lay down management policies and/or to hire, transfer,
suspend, lay-off, recall, discharge, assign or discipline
employees or effectively recommend such managerial actions;

and to the second class belong cashiers, auditors, property
custodians, etc., or those who, in the normal and routine
exercise of their functions, regularly handle significant amounts
of money or property. Evidently, an ordinary chambermaid who
has to sign out for linen and other hotel property from the
property custodian each day and who has to account for each
and every towel or bedsheet utilized by the hotel's guests at
the end of her shift would not fall under any of these two
classes of employees for which loss of confidence, if ably
supported by evidence, would normally apply. Illustrating this
distinction, this Court, in Marina Port Services, Inc. vs. NLRC,
[20]
has stated that:
To be sure, every employee must enjoy some degree of trust
and confidence from the employer as that is one reason why
he was employed in the first place. One certainly does not
employ a person he distrusts. Indeed, even the lowly janitor
must enjoy that trust and confidence in some measure if only
because he is the one who opens the office in the morning and
closes it at night and in this sense is entrusted with the care or
protection of the employer's property. The keys he holds are
the symbol of that trust and confidence.
By the same token, the security guard must also be considered
as enjoying the trust and confidence of his employer, whose
property he is safeguarding. Like the janitor, he has access to
this property. He too, is charged with its care and protection.
Notably, however, and like the janitor again, he is entrusted
only with the physical task of protecting that property. The
employer's trust and confidence in him is limited to that
ministerial function. He is not entrusted, in the Labor Arbiter's
words, 'with the duties of safekeeping and safeguarding
company policies, management instructions, and company
secrets such as operation devices.' He is not privy to these
confidential matters, which are shared only in the higher
echelons of management. It is the persons on such levels who,
because they discharge these sensitive duties, may be
considered holding positions of trust and confidence. The
security guard does not belong in such category.[21]
More importantly, we have repeatedly held that loss of
confidence should not be simulated in order to justify what
would otherwise be, under the provisions of law, an illegal
dismissal. "It should not be used as a subterfuge for causes
which are illegal, improper and unjustified. It must be genuine,
not a mere afterthought to justify an earlier action taken in bad
faith."[22]
In the case at bar, the suspicious delay in private respondent's
filing of qualified theft charges against petitioner long after the
latter exposed the hotel's scheme (to avoid its obligations as
employer under the Labor Code) by her act of filing illegal
dismissal charges against the private respondent would hardly
warrant serious consideration of loss of confidence as a valid
ground for dismissal. Notably, the Solicitor General has himself
taken a position opposite the public respondent and has
observed that:
If petitioner had really committed the acts charged against her
by private respondents (stealing supplies of respondent hotel),
private respondents should have confronted her before
dismissing her on that ground. Private respondents did not do
so. In fact, private respondent Ng did not raise the matter when
petitioner went to see him on May 9, 1991, and handed him
her application for leave. It took private respondents 52 days or
up to July 4, 1991 before finally deciding to file a criminal
complaint against petitioner, in an obvious attempt to build a
case against her.
The manipulations of private respondents should not be
countenanced.[23]
Clearly, the efforts to justify petitioner's dismissal - on top of the
private respondent's scheme of inducing his employees to sign
an affidavit absolving him from possible violations of the Labor
Code - taints with evident bad faith and deliberate malice
petitioner's summary termination from employment.
Having said this, we turn to the important question of whether
or not the dismissal by the private respondent of petitioner
constitutes an unfair labor practice.
53
The answer in this case must inevitably be in the affirmative.
The pivotal question in any case where unfair labor practice on
the part of the employer is alleged is whether or not the
employer has exerted pressure, in the form of restraint,
interference or coercion, against his employee's right to
institute concerted action for better terms and conditions of
employment. Without doubt, the act of compelling employees
to sign an instrument indicating that the employer observed
labor standards provisions of law when he might have not,
together with the act of terminating or coercing those who
refuse to cooperate with the employer's scheme constitutes
unfair labor practice. The first act clearly preempts the right of
the hotel's workers to seek better terms and conditions of
employment through concerted action.
We agree with the Solicitor General's observation in his
manifestation that "[t]his actuation... is analogous to the
situation envisaged in paragraph (f) of Article 248 of the Labor
Code"[24] which distinctly makes it an unfair labor practice "to
dismiss, discharge or otherwise prejudice or discriminate
against an employee for having given or being about to give
testimony"[25] under the Labor Code. For in not giving positive
testimony in favor of her employer, petitioner had reserved not
only her right to dispute the claim and proffer evidence in
support thereof but also to work for better terms and conditions
of employment.
For refusing to cooperate with the private respondent's
scheme, petitioner was obviously held up as an example to all
of the hotel's employees, that they could only cause trouble to
management at great personal inconvenience. Implicit in the
act of petitioner's termination and the subsequent filing of
charges against her was the warning that they would not only
be deprived of their means of livelihood, but also possibly, their
personal liberty.
This Court does not normally overturn findings and conclusions
of quasi-judicial agencies when the same are ably supported
by the evidence on record. However, where such conclusions
are based on a misperception of facts or where they patently
fly in the face of reason and logic, we will not hesitate to set
aside those conclusions. Going into the issue of petitioner's
money claims, we find one more salient reason in this case to
set things right: the labor arbiter's evaluation of the money
claims in this case incredibly ignores existing law and
jurisprudence on the matter. Its blatant one-sidedness simply
raises the suspicion that something more than the facts, the
law and jurisprudence may have influenced the decision at the
level of the Arbiter.
Labor Arbiter Pati accepted hook, line and sinker the private
respondent's bare claim that the reason the monetary benefits
received by petitioner between 1981 to 1987 were less than
minimum wage was because petitioner did not factor in the
meals, lodging, electric consumption and water she received
during the period in her computations.[26] Granting that meals
and lodging were provided and indeed constituted facilities,
such facilities could not be deducted without the employer
complying first with certain legal requirements. Without
satisfying these requirements, the employer simply cannot
deduct the value from the employee's wages. First, proof must
be shown that such facilities are customarily furnished by the
trade. Second, the provision of deductible facilities must be
voluntarily accepted in writing by the employee. Finally,
facilities must be charged at fair and reasonable value.[27]
These requirements were not met in the instant case. Private
respondent "failed to present any company policy or guideline
to show that the meal and lodging . . . (are) part of the
salary;"[28] he failed to provide proof of the employee's written
authorization; and, he failed to show how he arrived at the
valuations.[29]
Curiously, in the case at bench, the only valuations relied upon
by the labor arbiter in his decision were figures furnished by
the private respondent's own accountant, without corroborative
evidence. On the pretext that records prior to the July 16, 1990
earthquake were lost or destroyed, respondent failed to
produce payroll records, receipts and other relevant
documents, where he could have, as has been pointed out in
the Solicitor General's manifestation, "secured certified copies

thereof from the nearest regional office of the Department of
Labor, the SSS or the BIR."[30]
More significantly, the food and lodging, or the electricity and
water consumed by the petitioner were not facilities but
supplements. A benefit or privilege granted to an employee for
the convenience of the employer is not a facility. The criterion
in making a distinction between the two not so much lies in the
kind (food, lodging) but the purpose.[31] Considering, therefore,
that hotel workers are required to work different shifts and are
expected to be available at various odd hours, their ready
availability is a necessary matter in the operations of a small
hotel, such as the private respondent's hotel.
It is therefore evident that petitioner is entitled to the payment
of the deficiency in her wages equivalent to the full wage
applicable from May 13, 1988 up to the date of her illegal
dismissal.
Additionally, petitioner is entitled to payment of service
incentive leave pay, emergency cost of living allowance, night
differential pay, and 13th month pay for the periods alleged by
the petitioner as the private respondent has never been able to
adduce proof that petitioner was paid the aforestated benefits.
However, the claims covering the period of October 1987 up to
the time of filing the case on May 13, 1988 are barred by
prescription as P.D. 442 (as amended) and its implementing
rules limit all money claims arising out of employer-employee
relationship to three (3) years from the time the cause of action
accrues.[32]
We depart from the settled rule that an employee who is
unjustly dismissed from work normally should be reinstated
without loss of seniority rights and other privileges. Owing to
the strained relations between petitioner and private
respondent, allowing the former to return to her job would only
subject her to possible harassment and future embarrassment.
In the instant case, separation pay equivalent to one month's
salary for every year of continuous service with the private
respondent would be proper, starting with her job at the
Belfront Hotel.
In addition to separation pay, backwages are in order. Pursuant
to R.A. 6715 and our decision in Osmalik Bustamante, et al.
vs. National Labor Relations Commission,[33] petitioner is
entitled to full backwages from the time of her illegal dismissal
up to the date of promulgation of this decision without
qualification or deduction.
Finally, in dismissal cases, the law requires that the employer
must furnish the employee sought to be terminated from
employment with two written notices before the same may be
legally effected. The first is a written notice containing a
statement of the cause(s) for dismissal; the second is a notice
informing the employee of the employer's decision to terminate
him stating the basis of the dismissal. During the process
leading to the second notice, the employer must give the
employee ample opportunity to be heard and defend himself,
with the assistance of counsel if he so desires.
Given the seriousness of the second cause (qualified theft) of
the petitioner's dismissal, it is noteworthy that the private
respondent never even bothered to inform petitioner of the
charges against her. Neither was petitioner given the
opportunity to explain the loss of the articles. It was only almost
two months after petitioner had filed a complaint for illegal
dismissal, as an afterthought, that the loss was reported to the
police and added as a supplemental answer to petitioner's
complaint. Clearly, the dismissal of petitioner without the
benefit of notice and hearing prior to her termination violated
her constitutional right to due process. Under the
circumstances, an award of One Thousand Pesos (P1,000.00)
on top of payment of the deficiency in wages and benefits for
the period aforestated would be proper.
WHEREFORE, premises considered, the RESOLUTION of the
National Labor Relations Commission dated April 24, 1994
is REVERSED and SET ASIDE, with costs. For clarity, the
economic benefits due the petitioner are hereby summarized
as follows:
54
1) Deficiency wages and the applicable ECOLA from May
13, 1988 up to the date of petitioner's illegal dismissal;
2) Service incentive leave pay; night differential pay and
13th month pay for the same period;
3) Separation pay equal to one month's salary for every
year of petitioner's continuous service with the private
respondent starting with her job at the Belfront Hotel;
4) Full backwages, without qualification or deduction, from
the date of petitioner's illegal dismissal up to the date of
promulgation of this decision pursuant to our ruling in
Bustamante vs. NLRC.[34]
5) P1.000.00.
SO ORDERED.
CHAPTER II
DEL ROSARIO V DIR
G.R. No. L-23542, January 02, 1968
JUANA T. VDA. DE RACHO, PLAINTIFF-APPELLEE, VS.
MUNICIPALITY OF ILAGAN, DEFENDANT-APPELLANT.
DECISION
BENGZON, J.P., J.:
Plaintiff Juana T. Vda. de Racho and the decedent,
Manuel Racho, were spouses and had five minor
children. On July 1, 1954 the decedent was appointed as
market cleaner in the Municipality of Ilagan, Isabela, at the rate
of P660.00 per annum (P55.00 monthly) which amount he
received up to June 30, 1958. On July 1, 1958, decedent's
salary was increased to P720.00 per annum (P60.00 monthly)
by virtue of a promotional appointment extended to him by the
Municipal Mayor. He received this amount until January 6,
1960 when he tendered his resignation effective July 7,
1960. Decedent was then paid the money value of his
accumulated leaves from January 7, 1960 to May 23, 1960 at
the rate of P60.00 a month.
On October 5, 1960, decedent died intestate at Ilagan. Plaintiff
then filed on December 9, 1960 a claim for salary differentials
with the Regional Office of the Department of Labor which
dropped the case later on for lack of jurisdiction.
Based on the foregoing facts, the Court of First Instance
of Isabela, in an action brought on December 5, 1961, by
plaintiff, in her own behalf and as guardian ad litem of her
minor children, ruled that defendant Municipality of Ilagan must
pay P1,766.00 to plaintiff representing the wage differentials
and adjusted terminal leave of the decedent from December 9,
1957[1] to May 23, 1960, based on the monthly wage rate of
P120.00 pursuant to the Minimum Wage Law.
Defendant municipality immediately appealed the case
to Us on the sole submission that its shortage and lack of
available funds and expected revenue validly exempted it from
complying with the Minimum Wage Law.
The appeal must be dismissed. We have already answered
the question posed in Rivera vs. Colago, L-12323, February
24, 1961, wherein We ruled that lack of funds of a municipality
does not excuse it from paying the statutory minimum wages to
its employees, which, after all, is a mandatory statutory
obligation of the municipality. To uphold such defense of lack
of available funds would render the Minimum Wage Law futile
and defeat its purpose. This also disposes of the implication
appellant is trying to make that its duty to pay minimum wages
is not a statutory obligation which would command preference
in the municipal budget and appropriation ordinance.[2]
Moreover, We cannot sanction appellant's proposition that it
would eventually and gradually implement the Minimum Wage

Law, "if and when its revenues can afford." The law - insofar as
it affects government employees - took effect in 1952.[3] It
should have been implemented - or at least steps to implement
it should have been taken - right then. To excuse the
defendant municipality now would be to permit it to benefit from
its nonfeasance. It would also make the effectivityof the law
dependent upon the will and initiative of said municipality
without statutory sanction. Defendant's remedy, therefore, is
not to seek an excuse from implementing the law but, as the
lower court suggested, to upgrade and improve its tax
collection machinery with a view towards realizing more
revenues. Or, it could for the present forego all non-essential
expenditures.
WHEREFORE, the appealed judgment is, as it is hereby,
affirmed. No costs.
SO ORDERED.
G.R. NO. 155059, April 29, 2005
AMERICAN WIRE AND CABLE DAILY RATED EMPLOYEES
UNION, PETITIONER, VS. AMERICAN WIRE AND CABLE
CO., INC. AND THE COURT OF APPEALS,
RESPONDENTS.
DECISION
CHICO-NAZARIO, J.:
Before Us is a special civil action for certiorari, assailing the
Decision[1] of the Special Eighth Division of the Court of
Appeals dated 06 March 2002. Said Decision upheld the
Decision[2] and Order[3] of Voluntary Arbitrator Angel A. Ancheta
of the National Conciliation and Mediation Board (NCMB)
dated 25 September 2001 and 05 November 2001,
respectively, which declared the private respondent herein not
guilty of violating Article 100 of the Labor Code, as amended.
Assailed likewise, is the Resolution[4] of the Court of Appeals
dated 12 July 2002, which denied the motion for
reconsideration of the petitioner, for lack of merit.
THE FACTS
The facts of this case are quite simple and not in dispute.
American Wire and Cable Co., Inc., is a corporation engaged
in the manufacture of wires and cables. There are two unions
in this company, the American Wire and Cable Monthly-Rated
Employees Union (Monthly-Rated Union) and the American
Wire and Cable Daily-Rated Employees Union (Daily-Rated
Union).
On 16 February 2001, an original action was filed before the
NCMB of the Department of Labor and Employment (DOLE) by
the two unions for voluntary arbitration. They alleged that the
private respondent, without valid cause, suddenly and
unilaterally withdrew and denied certain benefits and
entitlements which they have long enjoyed. These are the
following:
a. Service Award;
b. 35% premium pay of an employees basic pay for the
work rendered during Holy Monday, Holy Tuesday,
Holy Wednesday, December 23, 26, 27, 28 and 29;
c. Christmas Party; and
d. Promotional Increase.
A promotional increase was asked by the petitioner for fifteen
(15) of its members who were given or assigned new job
classifications. According to petitioner, the new job
classifications were in the nature of a promotion, necessitating
the grant of an increase in the salaries of the said 15 members.
On 21 June 2001, a Submission Agreement was filed by the
55
parties before the Office for Voluntary Arbitration. Assigned as
Voluntary Arbitrator was Angel A. Ancheta.
On 04 July 2001, the parties simultaneously filed their
respective position papers with the Office of the Voluntary
Arbitrator, NCMB, and DOLE.
On 25 September 2001, a Decision[5] was rendered by
Voluntary Arbitrator Angel A. Ancheta in favor of the private
respondent. The dispositive portion of the said Decision is
quoted hereunder:
WHEREFORE, with all the foregoing considerations, it is
hereby declared that the Company is not guilty of violating
Article 100 of the Labor Code, as amended, or specifically for
withdrawing the service award, Christmas party and 35%
premium for work rendered during Holy Week and Christmas
season and for not granting any promotional increase to the
alleged fifteen (15) Daily-Rated Union Members in the absence
of a promotion. The Company however, is directed to grant the
service award to deserving employees in amounts and extent
at its discretion, in consultation with the Unions on grounds of
equity and fairness.[6]
A motion for reconsideration was filed by both unions[7] where
they alleged that the Voluntary Arbitrator manifestly erred in
finding that the company did not violate Article 100 of the Labor
Code, as amended, when it unilaterally withdrew the subject
benefits, and when no promotional increase was granted to the
affected employees.
On 05 November 2001, an Order[8] was issued by Voluntary
Arbitrator Angel A. Ancheta. Part of the Order is quoted
hereunder:
Considering that the issues raised in the instant case were
meticulously evaluated and length[i]ly discussed and explained
based on the pleadings and documentary evidenc[e] adduced
by the contending parties, we find no cogent reason to change,
modify, or disturb said decision.
WHEREFORE, let the instant MOTION[S] FOR
RECONSIDERATION be, as they are hereby, denied for lack of
merit. Our decision dated 25 September 2001 is affirmed en
toto.[9]
An appeal under Rule 43 of the 1997 Rules on Civil Procedure
was made by the Daily-Rated Union before the Court of
Appeals[10] and docketed as CA-G.R. SP No. 68182. The
petitioner averred that Voluntary Arbitrator Angel A. Ancheta
erred in finding that the company did not violate Article 100 of
the Labor Code, as amended, when the subject benefits were
unilaterally withdrawn. Further, they assert, the Voluntary
Arbitrator erred in adopting the companys unaudited
Revenues and Profitability Analysis for the years 1996-2000 in
justifying the latters withdrawal of the questioned benefits.[11]
On 06 March 2002, a Decision in favor of herein respondent
company was promulgated by the Special Eighth Division of
the Court of Appeals in CA-G.R. SP No. 68182. The decretal
portion of the decision reads:
WHEREFORE, premises considered, the present petition is
hereby DENIED DUE COURSE and accordingly DISMISSED,
for lack of merit. The Decision of Voluntary Arbitrator Angel A.
Ancheta dated September 25, 2001 and his Order dated
November 5, 2001 in VA Case No. AAA-10-6-4-2001 are
hereby AFFIRMED and UPHELD.[12]
A motion for reconsideration[13] was filed by the petitioner,
contending that the Court of Appeals misappreciated the facts
of the case, and that it committed serious error when it ruled
that the unaudited financial statement bears no importance in
the instant case.
The Court of Appeals denied the motion in its Resolution dated
12 July 2002[14] because it did not present any new matter
which had not been considered in arriving at the decision. The
dispositive portion of the Resolution states:
WHEREFORE, the motion for reconsideration is
hereby DENIED for lack of merit.[15]
Dissatisfied with the court a quos ruling, petitioner instituted
the instant special civil action for certiorari,[16] citing grave
abuse of discretion amounting to lack of jurisdiction.
ASSIGNMENT OF ERRORS
The petitioner assigns as errors the following:

I Christmas Party and its incidental benefits, and the giving of
THE COURT OF APPEALS ERRED IN HOLDING THAT THE
COMPANY DID NOT VIOLATE ARTICLE 100 OF THE LABOR
CODE, AS AMENDED, WHEN IT UNILATERALLY
WITHDREW THE BENEFITS OF THE MEMBERS OF
PETITIONER UNION, TO WIT: 1) 35% PREMIUM PAY; 2)
CHRISTMAS PARTY AND ITS INCIDENTAL BENEFITS; AND
3) SERVICE AWARD, WHICH IN TRUTH AND IN FACT SAID
BENEFITS/ENTITLEMENTS HAVE BEEN GIVEN THEM
SINCE TIME IMMEMORIAL, AS A MATTER OF LONG
ESTABLISHED COMPANY PRACTICE, WITH THE FURTHER
FACT THAT THE SAME NOT BEING DEPENDENT ON
PROFITS.
II
THE COURT OF APPEALS ERRED WHEN IT JUST
ACCEPTED HOOK, LINE AND SINKER, THE RESPONDENT
COMPANYS SELF SERVING AND UNAUDITED REVENUES
AND PROFITABILITY ANALYSIS FOR THE YEARS 1996-
2000 WHICH THEY SUBMITTED TO FALSELY JUSTIFY
THEIR UNLAWFUL ACT OF UNILATERALLY AND
SUDDENLY WITHDRAWING OR DENYING FROM THE
PETITIONER THE SUBJECT BENEFITS/ENTITLEMENTS.
III
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT
THE YEARLY SERVICE AWARD IS NOT DEPENDENT ON
PROFIT BUT ON SERVICE AND THUS, CANNOT BE
UNILATERALLY WITHDRAWN BY RESPONDENT COMPANY.
ISSUE
Synthesized, the solitary issue that must be addressed by this
Court is whether or not private respondent is guilty of violating
Article 100 of the Labor Code, as amended, when the
benefits/entitlements given to the members of petitioner union
were withdrawn.
THE COURTS RULING
Before we address the sole issue presented in the instant
case, it is best to first discuss a matter which was raised by the
private respondent in its Comment. The private respondent
contends that this case should have been dismissed outright
because of petitioners error in the mode of appeal. According
to it, the petitioner should have elevated the instant case to this
Court through a petition for review on certiorari under Rule 45,
and not through a special civil action for certiorari under Rule
65, of the 1997 Rules on Civil Procedure.[17]
Assuming arguendo that the mode of appeal taken by the
petitioner is improper, there is no question that the Supreme
Court has the discretion to dismiss it if it is defective. However,
sound policy dictates that it is far better to dispose the case on
the merits, rather than on technicality.[18]
The Supreme Court may brush aside the procedural barrier
and take cognizance of the petition as it raises an issue of
paramount importance. The Court shall resolve the solitary
issue on the merits for future guidance of the bench and bar.[19]
With that out of the way, we shall now resolve whether or not
the respondent company is guilty of violating Article 100 of the
Labor Code, as amended.
Article 100 of the Labor Code provides:
ART. 100. PROHIBITION AGAINST ELIMINATION OR
DIMINUTION OF BENEFITS. Nothing in this Book shall be
construed to eliminate or in any way diminish supplements, or
other employee benefits being enjoyed at the time of
promulgation of this Code.
The petitioner submits that the withdrawal of the private
respondent of the 35% premium pay for selected days during
the Holy Week and Christmas season, the holding of the
56
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 private respondent without
the tacit consent of the petitioner. The benefits in question
were given by the respondent to the petitioner consistently,
deliberately, and unconditionally since time immemorial. The
benefits/entitlements were not given to petitioner due to an
error in interpretation, or a construction of a difficult question of
law, but simply, the grant has been a practice over a long
period of time. As such, it cannot be withdrawn from the
petitioner at respondents whim and caprice, and without the
consent of the former. The benefits given by the respondent
cannot be considered as a bonus as they are not founded on
profit. Even assuming that it can be treated as a bonus, the
grant of the same, by reason of its long and regular
concession, may be regarded as part of regular compensation.
[20]
With respect to the fifteen (15) employees who are members of
petitioner union that were given new job classifications, it
asserts that a promotional increase in their salaries was in
order. Salary adjustment is a must due to their promotion.[21]
On respondent companys Revenues and Profitability Analysis
for the years 1996-2000, the petitioner insists that since the
former was unaudited, it should not have justified the
companys sudden withdrawal of the benefits/entitlements.
The normal and/or legal method for establishing profit and loss
of a company is through a financial statement audited by an
independent auditor.[22]
The petitioner cites our ruling in the case of Saballa v. NLRC,
[23]
where we held that financial statements audited by
independent auditors constitute the normal method of proof of
the profit and loss performance of the company. Our ruling in
the case of Bogo-Medellin Sugarcane Planters Association,
Inc., et al. v. NLRC, et al.[24] was likewise invoked. In this case,
we held:
The Court has previously ruled that financial statements
audited by independent external auditors constitute the normal
method of proof of the profit and loss performance of a
company.
On the matter of the withdrawal of the service award, the
petitioner argues that it is the employees length of service
which is taken as a factor in the grant of this benefit, and not
whether the company acquired profit or not.[25]
In answer to all these, the respondent corporation 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. The companys financial performance was
affected by the recent political turmoil and instability that led
the entire nation to a bleeding economy. Hence, it only
necessarily follows that the companys financial situation at
present is already very much different from where it was three
or four years ago.[26]
On the subject of the unaudited financial statement presented
by the private respondent, the latter contends that the cases
cited by the petitioner indeed uniformly ruled that financial
statements audited by independent external auditors constitute
the normal method of proof of the profit and loss performance
of a company. However, these cases do not require that the
only legal method to ascertain profit and loss is through an
audited financial statement. The cases only provide that an
audited financial statement is the normal method.[27]
The respondent company likewise asseverates that the 15
members of petitioner union were not actually promoted.
There was only a realignment of positions.[28]
From the foregoing contentions, it appears that for the Court to
resolve the issue presented, it is critical that a determination
must be first made on whether the benefits/entitlements are in
the nature of a bonus or not, and assuming they are so,
whether they are demandable and enforceable obligations.

In the case of Producers Bank of the Philippines v. NLRC[29] we
have characterized what a bonus is, viz:
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 pronouncement, it is obvious that the
benefits/entitlements subjects of the instant case are all
bonuses which were given by the private respondent 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 petitioner-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?
The Court does not believe so.
For a bonus to be enforceable, it must have been promised by
the employer and expressly agreed upon by the parties,[30] or it
must have had a fixed amount[31]and had been a long and
regular practice on the part of the employer.[32]
The benefits/entitlements in question were never subjects of
any express agreement between the parties. They were never
incorporated in the Collective Bargaining Agreement (CBA).
As observed by the Voluntary Arbitrator, the records reveal that
these benefits/entitlements have not 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
private respondent for the service award and the additional
35% premium pay to be made part of the CBA.[33]
The Christmas parties and its incidental benefits, and the
giving of cash incentive together with the service award cannot
be said to have fixed amounts. What is clear from the records
is that over the years, there had been a downtrend in the
amount given as service award.[34] There was also a downtrend
with respect to the holding of the Christmas parties in the
sense that its location changed from paid venues to one which
was free of charge,[35] evidently to cut costs. Also, the grant of
these two aforementioned bonuses cannot be considered to
have been the private respondents long and regular practice.
To be considered a 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.[36] The
downtrend in the grant of these two bonuses over the years
demonstrates that there is nothing consistent about it. Further,
as held by the Court of Appeals:
Anent the Christmas party and raffle of prizes, We agree with
the Voluntary Arbitrator that the same was
merely sponsored by the respondent corporation out of
generosity and that the same is dependent on the financial
performance of the company for a particular year[37]
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
petitioner herein have a right to demand. Aside from the
general averment of the petitioner that this benefit had been
granted by the private respondent since time immemorial,
there had been no evidence adduced that it had been a regular
practice. As propitiously observed by the Court of Appeals:
57
. . . [N]otwithstanding that the subject 35% premium pay was
deliberately given and the same was in excess of that provided
by the law, the same however did not ripen into a company
practice on account of the fact that it was only granted for two
(2) years and with the express reservation from respondent
corporations owner that it cannot continue to rant the same in
view of the companys current financial situation.[38]
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.[39]
Having thus ruled that the additional 35% premium pay for
work rendered during selected days of the Holy Week and
Christmas season, the holding of Christmas parties with its
incidental benefits, and the grant of cash incentive together
with the service award are all bonuses which are neither
demandable nor enforceable obligations of the private
respondent, it is not necessary anymore to delve into the
Revenues and Profitability Analysis for the years 1996-2000
submitted by the private respondent.
On the alleged promotion of 15 members of the petitioner
union that should warrant an increase in their salaries, the
factual finding of the Voluntary Arbitrator is revealing, viz:
Considering that the Union was unable to adduce proof that
a promotion indeed occur[ed] with respect to the 15
employees, the Daily Rated Unions claim for promotional
increase likewise fall[s] there being no promotion established
under the records at hand.[40]
WHEREFORE, in view of all the foregoing, the assailed
Decision and Resolution of the Court of Appeals dated 06
March 2002 and 12 July 2002, respectively, which affirmed and
upheld the decision of the Voluntary Arbitrator, are hereby
AFFIRMED. No pronouncement as to costs.
SO ORDERED.
G.R. No. 112658, March 16, 1995
INTERNATIONAL SCHOOL OF SPEECH AND/OR WILMA
CRUZ TAPALLA, PETITIONERS, VS. NATIONAL LABOR
RELATIONS COMMISSION AND MA. CORAZON D.
MAMUYAC, RESPONDENTS.
DECISION
REGALADO, J.:
The instant case was precipitated by a complaint, dated April
18, 1990, filed by private respondent Ma. Corazon D.
Mamuyac against petitioners International School of Speech
and/or Wilma Cruz Tapalla, charging the latter with unfair labor
practice; illegal deduction; non-payment of wages, overtime
pay, legal holiday pay, premium pay for holiday and rest day;
and violation of Presidential Decrees Nos. 525, 851 and 928. [1]
On June 20, 1990, petitioners filed a counter-complaint
charging private respondent with abandonment and violation of
contract, with a prayer for P150,000.00 as actual damages,
P50,000.00 as moral damages and P50,000.00 for exemplary
damages. [2]
It appears that sometime in June, 1989, private respondent
was hired as an English teacher paid on an hourly basis, and
she served as such up to March 15, 1990. She avers that
petitioners committed acts constitutive of unfair labor practice,
that is, by preventing employees of the school from socializing
with each other for fear that a labor organization might be
formed, not furnishing her a copy of her contract, imposing stiff
penalties for tardiness, imposing inhuman and unbearable
working conditions such as lunch-break of only 15 minutes,
violating labor standard laws, prohibiting stay-in employees
from eating in adjoining restaurants, and hitting a teacher for
allegedly refusing to sign a contract. [3]
She likewise cited several unauthorized deductions made from
her salary, namely, P1,000.00 for cash bond, P460.00 for
books, and P1,500.00 for alleged tardiness. [4]
On unpaid wages, she claimed that she was not compensated

from March 15 up to September 15 (the year was not specified
but, based on the records, it was in 1990) at the agreed sum of
P3,000.00 per month, or a total sum of P21,000.00. She further
asseverates that she was constructively dismissed from the
service when she was divested of her assigned load of
subjects. Finally, she was allegedly not paid for services she
rendered on weekends and legal holidays. [5]
On their part, petitioners contended that private respondent
abandoned her job when she failed to report for work in the
summer of 1990 contrary to their agreement, hence they
prayed for an award of damages in their favor. [6]
After a careful evaluation of the position papers of the
contending parties, the labor arbiter found that only the claims
for illegal deduction, 13th month pay, unpaid wages, and legal
holiday pay were meritorious. Accordingly, petitioners were
ordered to pay private respondent the aggregate sum of
P11,335.96 and attorney's fees in the amount of P1,133.60,
while petitioners' counter-complaint was dismissed. [7]
For the ratio decidendi of said ruling, we reproduce with
approval the following discussion in the decision of the labor
arbiter:
"x x x This Branch cannot give due course to the alleged illegal
dismissal. In the first place, illegal dismissal was not among the
causes of action cited in the complaint. The complainant is not
permitted by the rules to implead additional causes of action in
her position paper without first amending her complaint. To
allow her such stance would unduly prejudice the respondents
who are entitled to due process inasmuch as under the
ordinary course of procedure summons must first be issued
before additional causes of action could be cited against the
respondents. Besides, how could there be illegal dismissal
when it was the complainant who ceased reporting for work on
April 12, 1990? The reason advanced by the complainant in
support of her alleged illegal dismissal is that her subject loads
were withdrawn from her. Granting that her subject loads as an
English Teacher were withdrawn, it appears that when that was
done, complainant yielded without any remonstrance as in fact
she agreed to work as Course Adviser instead during the
summer time.
Regarding the claim of unfair labor practice, the acts
complained of and being attributed to the respondents as
hereinbefore discussed cannot be categorized as unfair labor
practice acts as understood and contemplated by the Labor
Code, as amended, particularly Art. 248, paragraph (a) to (i),
inclusive. The alleged attempts of the respondents not to let
(sic) the employees to socialize for fear of the organization of a
labor union is just a mere conclusion of fact not supported by
the evidence.
"Anent the alleged violations of PD 525 and PD 928, these
charges do not have merit. PD 525 refers to emergency living
allowance already integrated into the basic wage sometime in
1980. PD 928 refers to wage increase granted sometime in
1982 not applicable to the case of the complainant.
"With respect to the claim for overtime pay, it appears from the
evidence (Exh. 3-b to '3-j') that the complainant being paid on
per hour basis did not render any overtime work or services
beyond eight (8) hours everyday. Most of the time, her
teaching loads did not keep her at work to no (sic) more than
four (4) hours everyday.
"On legal holiday pays, it appears from the evidence that
complainant reported for work on November 30 and December
30, 1989, at four (4) hours each. Being legal holidays,
complainant is entitled to an additional 100% of her daily rate
which was P30.00 per hour. Thus, complainant for the total
eight (8) hours for the two (2) legal holidays, she must be paid
P240.00.
"On unpaid wages, it appears that complainant was paid
P500.00 only for the period from March 15, 1990 up to April 12,
1990 instead of the P3,500.00 per month as agreed upon
between her and the respondents. Thus, the respondents must
pay the balance in the sum of P3,000.00. The complainant's
claim for unpaid salaries from April 15, 1990 up to September
58
15, 1990 cannot be granted where it appears that she was
already out of work starting April 12, 1990.
"Regarding the complainant's claim for illegal deduction, the
alleged deduction of P460.00 for books was admitted by the
respondents. Said deduction without any written authorization
from the complainant cannot be made. Besides, there was no
agreement before complainant was hired that she had to buy
books from the respondents. Hence, respondent must
reimburse the complainant the said sum of P460.00. This
Branch also awards the claim of P1,000.00 to complainant by
way of reimbursement of what was also deducted as cash
bond. As between the affirmative declaration of the
complainant and the negative denial of the respondents, the
former deserves more evidentiary weight. Besides, in case of
doubt in case of two (2) unsubstantiated but opposing
assertions, such doubt must be resolved in favor of
workingmen.
"On the claim for 13th month pay (violation of PD 851), it
appears from the evidence submitted by the respondents that
no such payment by way of proportionate 13th month pay for
1990 and 1989 was paid to the complainant. From July, 1989
up to December 31, 1989, the complainant received a total
compensation amounting to P7,319.00, then, from January 1,
1990 up to April, 1990, she received a total of P10,205.00.
Thus, her proportionate 13th month pay is computed, as
follows:
1989
6 mos. x P 7,319.00 = P3,659.50
12
1990
3.5 x P 10,205.00 = P2,976.46
12
TOTAL 13TH MONTH PAY = P6,635.96
"With respect to the counter-complaint that respondents filed
against the complainant for damages, for want of basis the
same, is dismissed. The complainant has been forced to be
absent on account of the failure of the respondents to pay her
salaries. In fact, for that reason and her other money claims
against the respondents, complainant without further delay
instituted her suit against the respondents in less than a week
after she absented herself. The complainant cannot be faulted.
Part of the blame is imputable to the respondents. It has been
said that one who comes to court must do so with clean hands.
The respondents do not belong to this category. Apart from
their non-observance of certain labor standard laws as
hereinabove discussed, it even appears that they do not keep
the required payrolls, daily time records, and pay slips as
required by Book III, Rule X, Section 6, to 12, of the
Implementing Rules and Regulations of the Labor Code, as
amended."[8]
Dissatisfied with the aforequoted ruling, both petitioners and
private respondent lodged separate appeals before the
National Labor Relations Commission (NLRC). The latter
affirmed the appealed decisions [9], hence the instant petition.
In this action for certiorari, petitioners assail the public
respondent's judgment on two points, viz.: (1) in awarding 13th
month pay in the amount of P6,635.96 in favor of private
respondent, and (2) in dismissing its counter-complaint. [10]
The appeal with regard to the first issue is meritorious. The
NLRC, as earlier illustrated, adopted the labor arbiter's
computation of private respondent's 13th month pay as follows:
1989
6 mos. x P7,319.00 = P3,659.50
 59

12 A As Course Adviser whenever there are enrollees, we advise

them on the course that they have to take.
1990
THE LABOR ARBITER
(to witness)
3.5 mos. x P10,205.00 = P2,976.46
Q So, after you agreed with Mrs. Tapalla, did you report for the
two month period, April and May, 1990 as Course Adviser?

THE WITNESS
12 (answering)

TOTAL 13TH MONTH PAY = P6,635.96 A As Course Adviser, yes, Your Honor.

THE LABOR ARBITER

(to witness)
According to No. 4(a) of the Revised Guidelines on the
implementation of the 13th Month Pay Law (Presidential Q For the two month period April and May?
Decree No. 851) dated November 16, 1987, the 13th month
pay of an individual is (not less than) one-twelfth (1/12) of the THE WITNESS
total basic salary earned by an employee within a calendar (answering)
year. Moreover, in No. 6 thereof, it is provided that an
employee who has resigned or whose services were A Not for the two month period. I was not able to finish since
terminated at any time before the time for payment of the 13th when I waited for the salary, there were two fifteen that were
month pay is entitled to this monetary benefit in proportion to not given.
the length of time he worked during the year, reckoned from
the time he started working during the calendar year up to the THE LABOR ARBITER
time of his resignation or termination from the service. Thus, if (to witness)
he worked only from January up to September, his
proportionate 13th month pay should be equivalent to 1/12 of Q In other words, there were two (2) pay periods that you were
the total basic salary he earned during that period. not paid?
Since no evidence was adduced by private respondent that THE WITNESS
petitioners observe a different formula in the computation of (answering)
the 13th month pay for their employees, the aforementioned
mode of computation should be applied. A Yes, Your Honor.
Thus, considering that in 1989 private respondent rendered THE LABOR ARBITER
service for only 6 months, her 13th month pay should be one- (to witness)
twelfth (1/12) of the total compensation she received for that
year, that is, P7,319.00. Consequently her 13th month pay for Q What in particular were the periods involved?
the year 1989 should be P610,00.
THE WITNESS
Following the same formula, private respondent should receive (answering)
a 13th month pay of P850.00 for the year 1990 for services
rendered for three months wherein she received a total A The first month.
compensation of P10,205.00, that is, P10,205.00 divided by 12
equals P850.00. THE LABOR ARBITER
(to witness)
On this particular aspect, therefore, the Court takes exception
to the rule that the findings on technical matters by Q You mean April?
administrative bodies like respondent NLRC are accorded
respect and finality on appeal [12], since it is clear that a THE WITNESS
palpable and demonstrable mistake has been committed and (answering)
should be rectified. Petitioners should, therefore, pay private
respondent the total amount of P1,460.00, instead of A Yes, Your Honor, March 15 to April 15.
P6,635.96, as her 13th month pay for 1989 and 1990.
xxx xxx xxx
With regard to the second issue, on whether or not petitioners
are entitled to damages in view of private respondent's THE LABOR ARBITER
abandonment of her job, the Court upholds and approvingly (to witness)
quotes respondent NLRC's ruling on this matter which affirmed
that of the labor Arbiter, to wit: Q In other words, your agreement involving rendition of your
services as Course Adviser started March 15, 1990?
"As regards respondents counterclaim on the allegation that
complainant is guilty of having abandoned her job, we likewise THE WITNESS
vote for a dismissal thereof. It is a well-settled rule that to (answering)
constitute abandonment, there must be a deliberate unjustified
refusal of the employee to resume his employment. This A Yes, Your Honor.
circumstance does not however exist in complainant's case,
the assertions in her testimony given during the hearing THE LABOR ARBITER
standing unrebutted, and which is hereunder quoted as: (to witness)

Q And according to you, you were not paid your salary for
THE LABOR ARBITER March 15 up to March 31?
(to witness)
THE WITNESS
What did you do as Course Adviser? (answering)
THE WITNESS A Yes, Your Honor.
(answering)
THE LABOR ARBITER

(to witness)
Q And also from April 1 to April 15 because according to you
two pay periods?
THE WITNESS
(answering)
A Yes, Your Honor.
xxx xxx xxx
THE LABOR ARBITER
(to witness)
Q All right, after that conference with Mrs. Tapalla, did you still
report for work as Course Adviser?
THE WITNESS
(answering)
A I wasn't able to report anymore because I don't have any
money. In fact I borrowed money from people without my
husband's knowledge.
THE LABOR ARBITER
(to witness)
Q Did you inform Mrs. Tapalla About the fact that you will no
longer report anymore to your work?
THE WITNESS
(answering)
A I was not able to inform her since they sent me a letter at
once. So, they did not give me any chance to call them up
because I received a letter the following day, and I think that is
a Sunday.
"Had respondents been free from any participation in the
adverted cause for complainant's failure to report for work, this
Commission could have taken a different course from that of
the Labor Arbiter. It appears, however, that respondents are
not free from any wrong as it is also clear from the records of
the case that they have been remiss in fully observing the letter
of the law concerning labor standards provisions. As such, we
concur with the Labor Arbiter in invoking the principle in equity
that he who comes to court must do so with 'clean hands.'
Accordingly, respondents do not deserve the remedial relief
asked." [13]
WHEREFORE, as MODIFIED by awarding private respondent
her 13th month pay for 1989 and 1990 in the reduced total
amount of P1,460.00, the assailed decision of respondent
National Labor Relations Commission is hereby AFFIRMED in
all other respects.
SO ORDERED.
G. R. No. 123938, May 21, 1998
LABOR CONGRESS OF THE PHILIPPINES (LCP) FOR AND
IN BEHALF OF ITS MEMBERS, ANA MARIE OCAMPO,
MARY INTAL, ANNABEL CARESO, MARLENE MELQIADES,
IRENE JACINTO, NANCY GARCIA, IMELDA SARMIENTO,
LENITA VIRAY, GINA JACINTO, ROSEMARIE DEL
ROSARIO, CATHERINE ASPURNA, WINNIE PENA, VIVIAN
BAA, EMILY LAGMAN, LILIAN MARFIL, NANCY DERACO,
JANET DERACO, MELODY JACINTO, CAROLYN DIZON,
IMELDA MANALOTO, NORY VIRAY, ELIZA SALAZAR, GIGI
MANALOTO, JOSEFINA BASILIO, MARY ANN MAYATI,
ZENAIDA GARCIA, MERLY CANLAS, ERLINDA
MANALANG, ANGELINA QUIAMBAO, LANIE GARCIA,
ELVIRA PIEDRA, LOURDES PANLILIO, LUISA PANLILIO,
LERIZA PANLILIO, ALMA CASTRO, ALDA DAVID, MYRA T.
OLALIA, MARIFE PINLAC, NENITA DE GUZMAN, JULIE
GACAD, EVELYN MANALO, NORA PATIO, JANETH
CARREON, ROWENA MENDOZA, ROWENA MANALO,
LENY GARCIA, FELISISIMA PATIO, SUSANA SALOMON,
JOYDEE LANSANGAN, REMEDIOS AGUAS, JEANIE
LANSANGAN, ELIZABETH MERCADO, JOSELYN
60
MANALESE, BERNADETH RALAR, LOLITA ESPIRITU,
AGNES SALAS, VIRGINIA MENDIOLA, GLENDA SALITA,
JANETH RALAR, ERLINDA BASILIO, CORA PATIO,
ANTONIA CALMA, AGNES CARESO, GEMMA BONUS,
MARITESS OCAMPO, LIBERTY GELISANGA, JANETH
MANARANG, AMALIA DELA CRUZ, EVA CUEVAS, TERESA
MANIAGO, ARCELY PEREZ, LOIDA BIE, ROSITA CANLAS,
ANALIZA ESGUERRA, LAILA MANIAGO, JOSIE MANABAT,
ROSARIO DIMATULAC, NYMPA TUAZON, DAIZY TUASON,
ERLINDA NAVARRO, EMILY MANARANG, EMELITA
CAYANAN, MERCY CAYANAN, LUZVIMINDA CAYANAN,
ANABEL MANALO, SONIA DIZON, ERNA CANLAS,
MARIAN BENEDICTA, DOLORES DOLETIN, JULIE DAVID,
GRACE VILLANUEVA, VIRGINIA MAGBAG, CORAZON
RILLION, PRECY MANALILI, ELENA RONOZ, IMELDA
MENDOZA, EDNA CANLAS AND ANGELA CANLAS,
PETITIONERS, VS. NATIONAL LABOR RELATIONS
COMMISSION, EMPIRE FOOD PRODUCTS, ITS
PROPRIETOR/PRESIDENT & MANAGER, MR. GONZALO
KEHYENG AND MRS. EVELYN KEHYENG,
RESPONDENTS.
DECISION
DAVIDE, JR., J.:
In this special civil action for certiorari under Rule 65,
petitioners seek to reverse the 29 March 1995 resolution[1] of
the National Labor Relations Commission (NLRC) in NLRC
RAB III Case No. 01-1964-91 which affirmed the Decision[2] of
Labor Arbiter Ariel C. Santos dismissing their complaint for
utter lack of merit.
The antecedents of this case as summarized by the Office of
the Solicitor General in its Manifestation and Motion in Lieu of
Comment,[3] are as follows:
The 99 persons named as petitioners in this proceeding were
rank-and-file employees of respondent Empire Food Products,
which hired them on various dates (Paragraph 1, Annex A of
Petition, Annex B; Page 2, Annex F of Petition).
Petitioners filed against private respondents a complaint for
payment of money claim[s] and for violation of labor
standard[s] laws (NLRC Case No. RAB-111-10-1817-90). They
also filed a petition for direct certification of petitioner Labor
Congress of the Philippines as their bargaining representative
(Case No. R0300-9010-RU-005).
On October 23, 1990, petitioners represented by LCP
President Benigno B. Navarro, Sr. and private respondents
Gonzalo Kehyeng and Evelyn Kehyeng in behalf of Empire
Food Products, Inc. entered into a Memorandum of Agreement
which provided, among others, the following:
1. That in connection with the pending Petition for Direct
Certification filed by the Labor Congress with the
DOLE, Management of the Empire Food Products
has no objection [to] the direct certification of the LCP
Labor Congress and is now recognizing the Labor
Congress of the Philippines (LCP) and its Local
Chapter as the SOLE and EXCLUSIVE Bargaining
Agent and Representative for all rank and file
employees of the Empire Food Products regarding
WAGES, HOURS OF WORK, AND OTHER TERMS
AND CONDITIONS OF EMPLOYMENT;
2. That with regards [sic] to NLRC CASE NO. RAB-III-
10-1817-90 pending with the NLRC parties jointly and
mutually agreed that the issues thereof, shall be
discussed by the parties and resolve[d] during the
negotiation of the Collective Bargaining Agreement;
3. That Management of the Empire Food Products shall
make the proper adjustment of the Employees Wages
within fifteen (15) days from the signing of this
Agreement and further agreed to register all the
employees with the SSS;

4. That Employer, Empire Food Products thru its
Management agreed to deduct thru payroll deduction
UNION DUES and other Assessment[s] upon
submission by the LCP Labor Congress individual
Check-Off Authorization[s] signed by the Union
Members indicating the amount to be deducted and
further agreed all deduction[s] made representing
Union Dues and Assessment[s] shall be remitted
immediately to the LCP Labor Congress Treasurer or
authorized representative within three (3) or five (5)
days upon deductions [sic], Union dues not deducted
during the period due, shall be refunded or
reimbursed by the Employer/Management.
Employer/Management further agreed to deduct
Union dues from non-union members the same
amount deducted from union members without need
of individual Check-Off Authorizations [for] Agency
Fee;
5. That in consideration [of] the foregoing covenant,
parties jointly and mutually agreed that NLRC CASE
NO. RAB-III-10-1817-90 shall be considered
provisionally withdrawn from the Calendar of the
National Labor Relations Commission(NLRC), while
the Petition for direct certification of the LCP Labor
Congress parties jointly move for the direct
certification of the LCP Labor Congress;
6. That parties jointly and mutually agreed that upon
signing of this Agreement, no Harassments [sic],
Threats, Interferences [sic] of their respective rights
under the law, no Vengeance or Revenge by each
partner nor any act of ULP which might disrupt the
operations of the business;
7. Parties jointly and mutually agreed that pending
negotiations or formalization of the propose[d] CBA,
this Memorandum of Agreement shall govern the
parties in the exercise of their respective rights
involving the Management of the business and the
terms and condition[s] of employment, and whatever
problems and grievances may arise by and between
the parties shall be resolved by them, thru the most
cordial and good harmonious relationship by
communicating the other party in writing indicating
said grievances before taking any action to another
forum or government agencies;
8. That parties [to] this Memorandum of Agreement
jointly and mutually agreed to respect, abide and
comply with all the terms and conditions hereof.
Further agreed that violation by the parties of any
provision herein shall constitute an act of ULP. (Annex
A of Petition).
In an Order dated October 24, 1990, Mediator Arbiter Antonio
Cortez approved the memorandum of agreement and certified
LCP as the sole and exclusive bargaining agent among the
rank-and-file employees of Empire Food Products for purposes
of collective bargaining with respect to wages, hours of work
and other terms and conditions of employment (Annex B of
Petition).
On November 9, 1990, petitioners through LCP President
Navarro submitted to private respondents a proposal for
collective bargaining (Annex C of Petition).
On January 23, 1991, petitioners filed a complaint docketed as
NLRC Case No. RAB-III-01-1964-91 against private
respondents for:
a. Unfair Labor Practice by way of Illegal Lockout and/or
Dismissal;
b. Union busting thru Harassments [sic], threats, and
interfering with the rights of employees to self-
organization;
c. Violation of the Memorandum of Agreement dated
October 23, 1990;
61
d. Underpayment of Wages in violation of R.A. No. 6640
and R.A. No. 6727, such as Wages promulgated by
the Regional Wage Board;
e. Actual, Moral and Exemplary Damages. (Annex D
of Petition)
After the submission by the parties of their respective position
papers and presentation of testimonial evidence, Labor Arbiter
Ariel C. Santos absolved private respondents of the charges of
unfair labor practice, union busting, violation of the
memorandum of agreement, underpayment of wages and
denied petitioners prayer for actual, moral and exemplary
damages. Labor Arbiter Santos, however, directed the
reinstatement of the individual complainants:
The undersigned Labor Arbiter is not oblivious to the fact that
respondents have violated a cardinal rule in every
establishment that a payroll and other papers evidencing hours
of work, payments, etc. shall always be maintained and
subjected to inspection and visitation by personnel of the
Department of Labor and Employment. As such penalty,
respondents should not escape liability for this technicality,
hence, it is proper that all individual complainants except those
who resigned and executed quitclaim[s] and releases prior to
the filing of this complaint should be reinstated to their former
position[s] with the admonition to respondents that any
harassment, intimidation, coercion or any form of threat as a
result of this immediately executory reinstatement shall be
dealt with accordingly.
SO ORDERED. (Annex G of Petition)
On appeal, the National Labor Relations Commission vacated
the Decision dated April 14, 1972 [sic] and remanded the case
to the Labor Arbiter for further proceedings for the following
reasons:
The Labor Arbiter, through his decision, noted that xxx
complainant did not present any single witness while
respondent presented four (4) witnesses in the persons of
Gonzalo Kehyeng, Orlando Cairo, Evelyn Kehyeng and Elvira
Bulagan xxx (p. 183, Records), that xxx complainant before
the National Labor Relations Commission must prove with
definiteness and clarity the offense charged. xxx (Record, p.
183); that xxx complainant failed to specify under what
provision of the Labor Code particularly Art. 248 did
respondents violate so as to constitute unfair labor practice
xxx (Record, p. 183); that complainants failed to present any
witness who may describe in what manner respondents have
committed unfair labor practice xxx (Record, p. 185); that xxx
complainant LCP failed to present anyone of the so-called 99
complainants in order to testify who committed the threats and
intimidation xxx (Record, p. 185).
Upon review of the minutes of the proceedings on record,
however, it appears that complainant presented witnesses,
namely, BENIGNO NAVARRO, JR. (28 February 1991,
RECORD, p. 91; 8 March 1991, RECORD, p. 92, who adopted
its POSITION PAPER AND CONSOLIDATED AFFIDAVIT, as
Exhibit A and the annexes thereto as Exhibit B, B-1 to B-
9, inclusive. Minutes of the proceedings on record show that
complainant further presented other witnesses, namely:
ERLINDA BASILIO (13 March 1991, RECORD, p. 93;
LOURDES PANTILLO, MARIFE PINLAC, LENIE GARCIA (16
April 1991, Record, p. 96, see back portion thereof; 2 May
1991, Record, p. 102; 16 May 1991, Record, p. 103; 11 June
1991, Record, p. 105). Formal offer of Documentary and
Testimonial Evidence was made by complainant on June 24,
1991 (Record, p. 106-109)
The Labor Arbiter must have overlooked the testimonies of
some of the individual complainants which are now on record.
Other individual complainants should have been summoned
with the end in view of receiving their testimonies. The
complainants should be afforded the time and opportunity to

fully substantiate their claims against the respondents.
Judgment should be rendered only based on the conflicting
positions of the parties. The Labor Arbiter is called upon to
consider and pass upon the issues of fact and law raised by
the parties. Toward this end, therefore, it is Our considered
view [that] the case should be remanded to the Labor Arbiter of
origin for further proceedings.(Annex H of Petition)
In a Decision dated July 27, 1994, Labor Arbiter Santos made
the following determination:
Complainants failed to present with definiteness and clarity the
particular act or acts constitutive of unfair labor practice.
It is to be borne in mind that a declaration of unfair labor
practice connotes a finding of prima facie evidence of
probability that a criminal offense may have been committed so
as to warrant the filing of a criminal information before the
regular court. Hence, evidence which is more than a scintilla is
required in order to declare respondents/employers guilty of
unfair labor practice. Failing in this regard is fatal to the cause
of complainants. Besides, even the charge of illegal lockout
has no leg to stand on because of the testimony of
respondents through their guard Orlando Cairo (TSN, July 31,
1991 hearing; p. 5-35) that on January 21, 1991, complainants
refused and failed to report for work, hence guilty of
abandoning their post without permission from respondents. As
a result of complainants[] failure to report for work, the cheese
curls ready for repacking were all spoiled to the prejudice of
respondents. Under cross-examination, complainants failed to
rebut the authenticity of respondents witness testimony.
As regards the issue of harassments [sic], threats and
interference with the rights of employees to self-organization
which is actually an ingredient of unfair labor practice,
complainants failed to specify what type of threats or
intimidation was committed and who committed the same.
What are the acts or utterances constitutive of harassments
[sic] being complained of? These are the specifics which
should have been proven with definiteness and clarity by
complainants who chose to rely heavily on its position paper
through generalizations to prove their case.
Insofar as violation of [the] Memorandum of Agreement dated
October 23, 1990 is concerned, both parties agreed that:
2 - That with regards [sic] to the NLRC Case No. RAB III-10-
1817-90 pending with the NLRC, parties jointly and mutually
agreed that the issues thereof shall be discussed by the parties
and resolve[d] during the negotiation of the CBA.
The aforequoted provision does not speak of [an] obligation on
the part of respondents but on a resolutory condition that may
occur or may not happen. This cannot be made the basis of an
imposition of an obligation over which the National Labor
Relations Commission has exclusive jurisdiction thereof.
Anent the charge that there was underpayment of wages, the
evidence points to the contrary. The enumeration of
complainants wages in their consolidated Affidavits of merit
and position paper which implies underpayment has no leg to
stand on in the light of the fact that complainants admission
that they are piece workers or paid on a pakiao [basis] i.e. a
certain amount for every thousand pieces of cheese curls or
other products repacked. The only limitation for piece workers
or pakiao workers is that they should receive compensation no
less than the minimum wage for an eight (8) hour work [sic].
And compliance therewith was satisfactorily explained by
respondent Gonzalo Kehyeng in his testimony (TSN, p. 12-30)
during the July 31, 1991 hearing. On cross-examination,
complainants failed to rebut or deny Gonzalo Kehyengs
testimony that complainants have been even receiving more
than the minimum wage for an average workers [sic]. Certainly,
a lazy worker earns less than the minimum wage but the same
cannot be attributable to respondents but to the lazy workers.
Finally, the claim for moral and exemplary damages has no leg
to stand on when no malice, bad faith or fraud was ever proven
to have been perpetuated by respondents.
62
WHEREFORE, premises considered, the complaint is hereby
DISMISSED for utter lack of merit. (Annex I of Petition).[4]
On appeal, the NLRC, in its Resolution dated 29 March 1995,
[5]
affirmed in toto the decision of Labor Arbiter Santos. In so
doing, the NLRC sustained the Labor Arbiters findings that: (a)
there was a dearth of evidence to prove the existence of unfair
labor practice and union busting on the part of private
respondents; (b) the agreement of 23 October 1990 could not
be made the basis of an obligation within the ambit of the
NLRCs jurisdiction, as the provisions thereof, particularly
Section 2, spoke of a resolutory condition which could or could
not happen; (c) the claims for underpayment of wages were
without basis as complainants were
admittedly pakiao workers and paid on the basis of their
output subject to the lone limitation that the payment
conformed to the minimum wage rate for an eight-hour
workday; and (d) petitioners were not underpaid.
Their motion for reconsideration having been denied by the
NLRC in its Resolution of 31 October 1995,[6] petitioners filed
the instant special civil action for certiorari raising the following
issues:
I
WHETHER OR NOT THE PUBLIC RESPONDENT NATIONAL
LABOR RELATIONS COMMISSION GRAVELY ABUSED ITS
DISCRETION WHEN IT DISREGARDED OR IGNORED NOT
ONLY THE EVIDENCE FAVORABLE TO HEREIN
PETITIONERS, APPLICABLE JURISPRUDENCE BUT ALSO
ITS OWN DECISIONS AND THAT OF THIS HONORABLE
HIGHEST TRIBUNAL WHICH [WAS] TANTAMOUNT NOT
ONLY TO THE DEPRIVATION OF PETITIONERS RIGHT TO
DUE PROCESS BUT WOULD RESULT [IN] MANIFEST
INJUSTICE.
II
WHETHER OR NOT THE PUBLIC RESPONDENT GRAVELY
ABUSED ITS DISCRETION WHEN IT DEPRIVED THE
PETITIONERS OF THEIR CONSTITUTIONAL RIGHT TO
SELF-ORGANIZATION, SECURITY OF TENURE,
PROTECTION TO LABOR, JUST AND HUMANE
CONDITIONS OF WORK AND DUE PROCESS.
III
WHETHER OR NOT THE PETITIONERS WERE ILLEGALLY
EASED OUT [OF] OR CONSTRUCTIVELY DISMISSED
FROM THEIR ONLY MEANS OF LIVELIHOOD.
IV
WHETHER OR NOT PETITIONERS SHOULD BE
REINSTATED FROM THE DATE OF THEIR DISMISSAL UP
TO THE TIME OF THEIR REINSTATEMENT, WITH
BACKWAGES, STATUTORY BENEFITS, DAMAGES AND
ATTORNEYS FEES.[7]
We required respondents to file their respective Comments.
In their Manifestation and Comment, private respondents
asserted that the petition was filed out of time. As petitioners
admitted in their Notice to File petition for Review
on Certiorari that they received a copy of the resolution
(denying their motion for reconsideration) on 13 December
1995, they had only until 29 December 1995 to file the petition.
Having failed to do so, the NLRC thus already entered
judgment in private respondents favor.
In their Reply, petitioners averred that Mr. Navarro, a non-
lawyer who filed the notice to file a petition for review on their
behalf, mistook which reglementary period to apply. Instead of
using the reasonable time criterion for certiorari under Rule
65, he used the 15-day period for petitions for review
on certiorari under Rule 45. They hastened to add that such

was a mere technicality which should not bar their petition from
being decided on the merits in furtherance of substantial
justice, especially considering that respondents neither denied
nor contradicted the facts and issues raised in the
petition. In its
Manifestation and Motion in Lieu of Comment, the Office of the
Solicitor General (OSG) sided with petitioners. It pointed out
that the Labor Arbiter, in finding that petitioners abandoned
their jobs, relied solely on the testimony of Security Guard
Rolando Cairo that petitioners refused to work on 21 January
1991, resulting in the spoilage of cheese curls ready for
repacking. However, the OSG argued, this refusal to report for
work for a single day did not constitute abandonment, which
pertains to a clear, deliberate and unjustified refusal to resume
employment, and not mere absence. In fact, the OSG
stressed, two days after allegedly abandoning their work,
petitioners filed a complaint for, inter alia, illegal lockout or
illegal dismissal. Finally, the OSG questioned the lack of
explanation on the part of Labor Arbiter Santos as to why he
abandoned his original decision to reinstate petitioners.
In view of the stand of the OSG, we resolved to require the
NLRC to file its own Comment.
In its Comment, the NLRC invokes the general rule that factual
findings of an administrative agency bind a reviewing court and
asserts that this case does not fall under the exceptions. The
NLRC further argues that grave abuse of discretion may not be
imputed to it, as it affirmed the factual findings and legal
conclusions of the Labor Arbiter only after carefully reviewing,
weighing and evaluating the evidence in support thereof, as
well as the pertinent provisions of law and jurisprudence.
In their Reply, petitioners claim that the decisions of the NLRC
and the Labor Arbiter were not supported by substantial
evidence; that abandonment was not proved; and that much
credit was given to self-serving statements of Gonzalo
Kehyeng, owner of Empire Foods, as to payment of just
wages.
On 7 July 1997, we gave due course to the petition and
required the parties to file their respective memoranda.
However, only petitioners and private respondents filed their
memoranda, with the NLRC merely adopting its Comment as
its Memorandum.
We find for petitioners.
Invocation of the general rule that factual findings of the NLRC
bind this Court is unavailing under the circumstances. Initially,
we are unable to discern any compelling reason justifying the
Labor Arbiters volte face from his 14 April 1992 decision
reinstating petitioners to his diametrically opposed 27 July
1994 decision, when in both instances, he had before him
substantially the same evidence. Neither do we find the 29
March 1995 NLRC resolution to have sufficiently discussed the
facts so as to comply with the standard of substantial evidence.
For one thing, the NLRC confessed its reluctance to inquire
into the veracity of the Labor Arbiters factual findings,
staunchly declaring that it was not about to substitute [its]
judgment on matters that are within the province of the trier of
facts. Yet, in the 21 July 1992 NLRC resolution,[8] it chastised
the Labor Arbiter for his errors both in judgment and procedure,
for which reason it remanded the records of the case to the
Labor Arbiter for compliance with the pronouncements therein.
What cannot escape from our attention is that the Labor Arbiter
did not heed the observations and pronouncements of the
NLRC in its resolution of 21 July 1992, neither did he
understand the purpose of the remand of the records to him. In
said resolution, the NLRC summarized the grounds for the
appeal to be:
1. that there is a prima facie evidence of abuse of
discretion and acts of gross incompetence committed
by the Labor Arbiter in rendering the decision.
63
2. that the Labor Arbiter in rendering the decision
committed serious errors in the findings of facts.
After which, the NLRC observed and found:
Complainant alleged that the Labor Arbiter disregarded the
testimonies of the 99 complainants who submitted their
Consolidated Affidavit of Merit and Position Paper which was
adopted as direct testimonies during the hearing and cross-
examined by respondents counsel.
The Labor Arbiter, through his decision, noted that x x x
complainant did not present any single witness while
respondent presented four (4) witnesses in the persons of
Gonzalo Kehyeng, Orlando Cairo, Evelyn Kehyeng and Elvira
Bulagan x x x (Records, p. 183), that x x x complainant
before the National Labor Relations Commission must prove
with definiteness and clarity the offense charged. x x x
(Record, p. 183; that x x x complainant failed to specify under
what provision of the Labor Code particularly Art. 248 did
respondents violate so as to constitute unfair labor practice x x
x (Record, p. 183); that complainants failed to present any
witness who may describe in what manner respondents have
committed unfair labor practice x x x (Record, p. 185); that x x
x complainant a [sic] LCP failed to present anyone of the so
called 99 complainants in order to testify who committed the
threats and intimidation x x x (Record, p. 185).
Upon review of the minutes of the proceedings on record,
however, it appears that complainant presented witnesses,
namely BENIGNO NAVARRO, JR. (28 February 1991,
RECORD, p. 91; 8 March 1991, RECORD, p. 92), who
adopted its POSITION PAPER AND CONSOLIDATED
AFFIDAVIT, as Exhibit A and the annexes thereto as Exhibit B,
B-1 to B-9, inclusive. Minutes of the proceedings on record
show that complainant further presented other witnesses,
namely: ERLINDA BASILIO (13 March 1991, RECORD, p. 93;
LOURDES PANTILLO, MARIFE PINLAC, LENI GARCIA (16
April 1991, Record, p. 96, see back portion thereof; 2 May
1991, Record, p. 102; 16 May 1991, Record, p. 103; 11 June
1991, Record, p. 105). Formal offer of Documentary and
Testimonial Evidence was made by the complainant on June
24, 1991 (Record, p. 106-109).
The Labor Arbiter must have overlooked the testimonies of
some of the individual complainants which are now on record.
Other individual complainants should have been summoned
with the end in view of receiving their testimonies. The
complainants should [have been] afforded the time and
opportunity to fully substantiate their claims against the
respondents. Judgment should [have been] rendered only
based on the conflicting positions of the parties. The Labor
Arbiter is called upon to consider and pass upon the issues of
fact and law raised by the parties.
Toward this end, therefore, it is Our considered view the case
should be remanded to the Labor Arbiter of origin for further
proceedings.
Further, We take note that the decision does not contain a
dispositive portion or fallo. Such being the case, it may be well
said that the decision does not resolve the issues at hand. On
another plane, there is no portion of the decision which could
be carried out by way of execution.
It may be argued that the last paragraph of the decision may
be categorized as the dispositive portion thereof:
x x x x x
The undersigned Labor Arbiter is not oblivious [to] the fact that
respondents have violated a cardinal rule in every
establishment that a payroll and other papers evidencing
hour[s] of work, payment, etc. shall always be maintained and
subjected to inspection and visitation by personnel of the
Department of Labor and Employment. As such penalty,
respondents should not escape liability for this technicality,
hence, it is proper that all the individual complainants except

those who resigned and executed quitclaim[s] and release[s]
prior to the filing of this complaint should be reinstated to their
former position with the admonition to respondents that any
harassment, intimidation, coercion or any form of threat as a
result of this immediately executory reinstatement shall be
dealt with accordingly.
SO ORDERED.
It is Our considered view that even assuming arguendo that
the respondents failed to maintain their payroll and other
papers evidencing hours of work, payment etc., such
circumstance, standing alone, does not warrant the directive to
reinstate complainants to their former positions. It is [a] well
settled rule that there must be a finding of illegal dismissal
before reinstatement be mandated.
In this regard, the LABOR ARBITER is hereby directed to
include in his clarificatory decision, after receiving evidence,
considering and resolving the same, the requisite dispositive
portion.[9]
Apparently, the Labor Arbiter perceived that if not for
petitioners, he would not have fallen victim to this stinging
rebuke at the hands of the NLRC. Thus does it appear to us
that the Labor Arbiter, in concluding in his 27 July 1994
Decision that petitioners abandoned their work, was moved by,
at worst, spite, or at best, lackadaisically glossed over
petitioners evidence. On this score, we find the following
observations of the OSG most persuasive:
In finding that petitioner employees abandoned their work, the
Labor Arbiter and the NLRC relied on the testimony of Security
Guard Rolando Cairo that on January 21, 1991, petitioners
refused to work. As a result of their failure to work, the cheese
curls ready for repacking on said date were spoiled.
The failure to work for one day, which resulted in the spoilage
of cheese curls does not amount to abandonment of work. In
fact two (2) days after the reported abandonment of work or on
January 23, 1991, petitioners filed a complaint for, among
others, unfair labor practice, illegal lockout and/or illegal
dismissal. In several cases, this Honorable Court held that
one could not possibly abandon his work and shortly
thereafter vigorously pursue his complaint for illegal dismissal
(De Ysasi III v. NLRC, 231 SCRA 173; Ranara v. NLRC, 212
SCRA 631; Dagupan Bus Co. v. NLRC, 191 SCRA 328; Atlas
Consolidated Mining and Development Corp. v. NLRC, 190
SCRA 505; Hua Bee Shirt Factory v. NLRC, 186 SCRA
586; Mabaylan v. NLRC, 203 SCRA 570 and Flexo
Manufacturing v. NLRC, 135 SCRA 145). In Atlas
Consolidated, supra, this Honorable Court explicitly stated:
It would be illogical for Caballo, to abandon his work and then
immediately file an action seeking for his reinstatement. We
can not believe that Caballo, who had worked for Atlas for two
years and ten months, would simply walk away from his job
unmindful of the consequence of his act, i.e. the forfeiture of
his accrued employment benefits. In opting to finally to [sic]
contest the legality of his dismissal instead of just claiming his
separation pay and other benefits, which he actually did but
which proved to be futile after all, ably supports his sincere
intention to return to work, thus negating Atlas stand that he
had abandoned his job.
In De Ysasi III v. NLRC (supra), this Honorable Court stressed
that it is the clear, deliberate and unjustified refusal to resume
employment and not mere absence that constitutes
abandonment. The absence of petitioner employees for one
day on January 21, 1991 as testified [to] by Security Guard
Orlando Cairo did not constitute abandonment.
In his first decision, Labor Arbiter Santos expressly directed the
reinstatement of the petitioner employees and admonished the
private respondents that any harassment, intimidation,
coercion or any form of threat as a result of this immediately
executory reinstatement shall be dealt with accordingly.
64
In his second decision, Labor Arbiter Santos did not state why
he was abandoning his previous decision directing the
reinstatement of petitioner employees.
By directing in his first decision the reinstatement of petitioner
employees, the Labor Arbiter impliedly held that they did not
abandon their work but were not allowed to work without just
cause.
That petitioner employees are pakyao or piece workers does
not imply that they are not regular employees entitled to
reinstatement. Private respondent Empire Food Products, Inc.
is a food and fruit processing company. In Tabas v. California
Manufacturing Co., Inc. (169 SCRA 497), this Honorable Court
held that the work of merchandisers of processed food, who
coordinate with grocery stores and other outlets for the sale of
the processed food is necessary in the day-to-day operation[s]
of the company. With more reason, the work of processed food
repackers is necessary in the day-to-day operation[s] of
respondent Empire Food Products.[10]
It may likewise be stressed that the burden of proving the
existence of just cause for dismissing an employee, such as
abandonment, rests on the employer, [11] a burden private
respondents failed to discharge.
Private respondents, moreover, in considering petitioners
employment to have been terminated by abandonment,
violated their rights to security of tenure and constitutional right
to due process in not even serving them with a written notice of
such termination.[12] Section 2, Rule XIV, Book V of the
Omnibus Rules Implementing the Labor Code provides:
SEC. 2. Notice of Dismissal. - Any employer who seeks to
dismiss a worker shall furnish him a written notice stating the
particular acts or omission constituting the grounds for his
dismissal. In cases of abandonment of work, the notice shall
be served at the workers last known address.
Petitioners are therefore entitled to reinstatement with full back
wages pursuant to Article 279 of the Labor Code, as amended
by R.A. No. 6715. Nevertheless, the records disclose that
taking into account the number of employees involved, the
length of time that has lapsed since their dismissal, and the
perceptible resentment and enmity between petitioners and
private respondents which necessarily strained their
relationship, reinstatement would be impractical and hardly
promotive of the best interests of the parties. In lieu of
reinstatement then, separation pay at the rate of one month for
every year of service, with a fraction of at least six (6) months
of service considered as one (1) year, is in order.[13]
That being said, the amount of back wages to which each
petitioner is entitled, however, cannot be fully settled at this
time. Petitioners, as piece-rate workers having been paid by
the piece,[14] there is need to determine the varying degrees of
production and days worked by each worker. Clearly, this issue
is best left to the National Labor Relations Commission.
As to the other benefits, namely, holiday pay, premium pay,
13th month pay and service incentive leave which the labor
arbiter failed to rule on but which petitioners prayed for in their
complaint,[15] we hold that petitioners are so entitled to these
benefits. Three (3) factors lead us to conclude that petitioners,
although piece-rate workers, were regular employees of private
respondents. First, as to the nature of petitioners tasks, their
job of repacking snack food was necessary or desirable in the
usual business of private respondents, who were engaged in
the manufacture and selling of such food products; second,
petitioners worked for private respondents throughout the year,
their employment not having been dependent on a specific
project or season; and third, the length of time[16] that
petitioners worked for private respondents. Thus, while
petitioners mode of compensation was on a 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[17] and 13th month pay,
[18]
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. Plainly, petitioners as piece-rate workers
do not fall within this group. As mentioned earlier, not only did
petitioners labor under the control of private respondents as
their employer, likewise did petitioners toil throughout the year
with the fulfillment of their quota as supposed basis for
compensation. Further, in Section 8 (b), Rule IV, Book III which
we quote hereunder, piece workers are specifically mentioned
as being entitled to holiday pay.
SEC. 8. Holiday pay of certain employees.-
(b) Where a covered employee is paid by results or output,
such as payment on piece work, his holiday pay shall not be
less than his average daily earnings for the last seven (7)
actual working days preceding the regular holiday: Provided,
however, that in no case shall the holiday pay be less than the
applicable statutory minimum wage rate.
In addition, the Revised Guidelines on the Implementation of
the 13th Month Pay Law, in view of the modifications to P.D. No.
851[19] by Memorandum Order No. 28, clearly exclude the
employer of piece rate workers from those exempted from
paying 13th month pay, to wit:
2. EXEMPTED EMPLOYERS
The following employers are still not covered by P.D. No. 851:
d. Employers of those who are paid on purely commission,
boundary or task basis, and those who are paid a fixed amount
for performing 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 grant the
required 13th month pay to such workers. (italics supplied)
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.[20]
As to overtime pay, the rules, however, are different. 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, private respondents did not allege adherence to the
standards set forth in Sec. 8 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[21]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.[22] 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[23] 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[24] and the
subsequent order of certification[25] merely proved that
petitioners sought and acquired the status of bargaining agent
65
for all rank-and-file employees. Finally, the existence of the
memorandum of agreement[26] 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.
IN VIEW WHEREOF, the instant petition is hereby GRANTED.
The Resolution of the National Labor Relations Commission of
29 March 1995 and the Decision of the Labor Arbiter of 27 July
1994 in NLRC Case No. RAB-III-01-1964-91 are hereby SET
ASIDE, and another is hereby rendered:
1. DECLARING petitioners to have been illegally
dismissed by private respondents, thus entitled to full
back wages and other privileges, and separation pay
in lieu of reinstatement at the rate of one months
salary for every year of service with a fraction of six
months of service considered as one year;
2. REMANDING the records of this case to the National
Labor Relations Commission for its determination of
the back wages and other benefits and separation
pay, taking into account the foregoing observations;
and
3. DIRECTING the National Labor Relations
Commission to resolve the referred issues within sixty
(60) days from its receipt of a copy of this decision
and of the records of the case and to submit to this
Court a report of its compliance hereof within ten (10)
days from the rendition of its
resolution.
Costs against private
respondents.
SO ORDERED.
CHAPTER III
G.R. No. 116960, April 02, 1996
BERNARDO JIMENEZ AND JOSE JIMENEZ, AS
OPERATORS OF JJS TRUCKING, PETITIONERS, VS.
NATIONAL LABOR RELATIONS COMMISSION, PEDRO
JUANATAS AND FREDELITO JUANATAS, RESPONDENTS.
DECISION
REGALADO, J.:
This petition for certiorari seeks the annulment of the decision
of respondent National Labor Relations Commission (NLRC),
dated May 27, 1994, as well as its resolution, dated August 8,
1994, denying petitioners motion for reconsideration,[1] which
assailed decision affirmed with modifications the adverse
decision of the labor arbiter against herein petitioners.
On June 29, 1990, herein private respondents Pedro and
Fredelito Juanatas, father and son, filed a claim for unpaid
wages/commissions, separation pay and damages against JJ
s Trucking and/or Dr. Bernardo Jimenez. Said respondents, as
complainants therein, alleged that in December, 1987, they
were hired by herein petitioner Bernardo Jimenez as driver!
mechanic and helper, respectively, in his trucking firm, JJ
Trucking. They were assigned to a ten-wheeler truck to haul
soft drinks of Coca-Cola Bottling Company and paid on
commission basis, initially fixed at 17% but later increased to
20% in 1988.
Private respondents further alleged that for the years 1988 and
1989 they received only a partial commission of P84,000.00
from petitioners total gross income of almost P1,000,000.00
for the said two years. Consequently, with their commission for
that period being computed at 20% of said income, there was
an unpaid balance to them of P106,211.86; that until March,
1990 when their services were illegally terminated, they were
further entitled to P15,050.309 which, excluding the partial
payment of P7,000.00, added up to a grand total of
P114,261.86 due and payable to them; and that petitioners

refusal to pay their aforestated commission was a ploy to
unjustly terminate them.
Disputing the complaint, petitioners contend that respondent
Fredelito Juanatas was not an employee of the firm but was
merely a helper of his father Pedro; that all commissions for
1988 and 1989, as well as those up to March, 1990, were duly
paid; and that the truck driven by respondent Pedro Juanatas
was sold to one Winston Flores in 1991 and, therefore, private
respondents were not illegally dismissed.[2]
After hearings duly conducted, and with the submission of the
parties position/supporting papers, Labor Arbiter Roque B. de
Guzman rendered a decision dated March 9, 1993, with this
decretal portion:
"WHEREFORE, decision is hereby issued ordering
respondents JJs Trucking and/or Dr. Bernardo Jimenez to pay
jointly and severally complainant Pedro Juanatas a separation
pay of FIFTEEN THOUSAND FIFTY (P15,050.00) PESOS,
plus attorneys fee equivalent to ten percent (10%) of the
award.
The complaint of Fredelito Juanatas is hereby dismissed for
lack of merit."[3]
On appeal filed by private respondents, the NLRC modified the
decision of the labor arbiter and disposed as follows:
"PREMISES CONSIDERED, the Decision of March 9, 1993 is
hereby MODIFIED, to wit:
1. Complainant Fredelito Juanatas is hereby declared
respondents employee and shares in (the) commission and
separation pay awarded to complainant Pedro Juanatas, his
father.
2. Respondent JJs Trucking and Dr. Bernardo Jimenez are
jointly and severally liable to pay complainants their unpaid
commissions in the total amount of Eighty Four Thousand
Three Hundred Eighty Seven Pesos and 05/100 (P84,387.05).
3. The award of attorneys fees is reduced accordingly to eight
thousand four hundred thirty eight pesos and 70/100
(P8,438.70).
4. The other findings stand affirmed."[4]
Petitioners motion for reconsideration having been denied
thereafter in public respondents resolution dated August 8,
1994,[5] petitioners have come to us in this recourse, raising for
resolution the issues as to whether or not respondent NLRC
committed grave abuse of discretion in ruling (a) that private
respondents were not paid their commissions in full, and (b)
that respondent Fredelito Juanatas was an employee of JJs
Trucking.
The review of labor cases elevated to us on certiorari is
confined to questions ofjurisdiction or grave abuse of
discretion.[6] As a rule, this Court does not review supposed
errors in the decision of the NLRC which raise factual issues,
because factual findings of agencies exercising quasi-judicial
functions are accorded not only respect but even finality,
[7]
aside from the consideration that the Court is essentially not
a trier of facts. However, in the case at bar, a review of the
records thereof with an assessment of the facts is necessary
since the factual findings of the NLRC and the labor arbiter are
at odds with each other.[8]
On the first issue, we find no reason to disturb the findings of
respondent NLRC that the entire amount of commissions was
not paid, this by reason of the evident failure of herein
petitioners to present evidence that full payment thereof has
been made. It is a basic rule in evidence that each party must
prove his affirmative allegations. Since the burden of evidence
lies with the party who asserts an affirmative allegation, the
plaintiff or complainant has to prove his affirmative allegation,
in the complaint and the defendant or respondent has to prove
the affirmative allegations in his affirmative defenses and
counterclaim. Considering that petitioners herein assert that
the disputed commissions have been paid, they have the
66
bounden duty to prove that fact.
As a general rule, one who pleads payment has the burden of
proving it.[9] 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.[10] The debtor has the burden of showing with legal
certainty that the obligation has been discharged by payment.
[11]
When the existence of a debt is fully established by the
evidence contained in the record, the burden of proving that it
has been extinguished by payment devolves upon the debtor
who offers such a defense to the claim of the creditor.[12] Where
the debtor introduces some evidence of payment, the burden
of going forward with the evidence - as distinct from the
general burden of proof - shifts to the creditor, who is then
under a duty of producing some evidence to show non-
payment.[13]
In the instant case, the right of respondent Pedro Juanatas to
be paid a commission equivalent to 17%, later increased to
20%, of the gross income is not disputed by petitioners.
Although private respondents admit receipt of partial payment,
petitioners still have to present proof of full payment. Where
the defendant sued for a debt admits that the debt was
originally owed, and pleads payment in whole or in part, it is
incumbent upon him to prove such payment. That a plaintiff
admits that some payments have been made does not change
the burden of proof. The defendant still has the burden of
establishing payments beyond those admitted by plaintiff.[14]
The testimony of petitioners which merely denied the claim of
private respondents, unsupported by documentary evidence, is
not sufficient to establish payment. Although petitioners
submitted a notebook showing the alleged vales of private
respondents for the year 1990,[15] the same is inadmissible and
cannot be given probative value considering that it is not
properly accomplished, is undated and unsigned, and is thus
uncertain as to its origin and authenticity.[16]
The positive testimony of a creditor may be sufficient of itself to
show non-payment, even when met by indefinite testimony of
the debtor. Similarly, the testimony of the debtor may also be
sufficient to show payment, but, where his testimony is
contradicted by the other party or by a disinterested witness,
the issue may be determined against the debtor since he has
the burden of proof. The testimony of the debtor creating
merely an inference of payment will not be regarded as
conclusive on that issue.[17]
Hence, for failure to present evidence to prove payment,
petitioners defaulted in their defense and in effect admitted the
allegations of private respondents.
With respect to the second issue, however, we agree with
petitioners that the NLRC erred in holding that the son,
Fredelito, was an employee of petitioners.
We have consistently ruled that in determining the existence of
an employer-employee relationship, the elements that are
generally considered are the following: (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,[18] with the control test assuming primacy
in the overall consideration.
In the case at bar, the aforementioned elements are not
present. The agreement was between petitioner JJs Trucking
and respondent Pedro Juanatas. The hiring of a helper was
discretionary on the part of Pedro. Under their contract, should
he employ a helper, he would be responsible for the latters
compensation. With or without a helper, respondent Pedro
Juanatas was entitled to the same percentage of commission.
Respondent Fredelito Juanatas was hired by his father, Pedro,
and the compensation he received was paid by his father out
of the latters commission. Further, Fredelito was not subject to
the control and supervision of and dismissal by petitioners but
of and by his father.
Even the Solicitor General, in his comment, agreed with the

finding of the labor arbiter that Fredelito was not an employee
of petitioners, to wit:
"Public respondent committed grave abuse of discretion in
holding that said private respondent is an employee of JJs
Trucking on the ground that, citing Article 281 of the Labor
Code, Fredelitos functions as helper was (sic) necessary and
desirable to respondents trucking business.
"In the first place, Article 281 of the Labor Code does not refer
to the basic factors that must underlie every existing employer-
employee relationship, the absence of any of which will negate
such existence. It refers instead to the qualifications of (A)n
employee who is allowed to work after a probationary period
and who, as a consequence, shall be considered a regular
employee. Secondly, the test in determining the existence of
an employee-employer relationship is not the necessity and/or
desirability of ones functions in relation to an employers
business, but (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.
The latter is the most important element (Singer Sewing
Machine Company vs. Drilon, 193 SCRA 270, 275; Deferia vs.
NLRC, 194 SCRA 531, 525; Ecal vs. NLRC, 224, 228; Hijos De
F. Escano, Inc. vs. NLRC, 224 SCRA 781, 785). The
aforequoted pertinent findings of the Labor Arbiter indicate
(that) the foregoing requirements do not exist between
petitioner and private respondent Fredelito Juanatas. Thus, the
labor arbiter stated that respondent Fredelito Juanatas was
never hired by petitioners. Instead the formers services were
availed of by respondent Pedro Juanatas his father, who, at the
same time, supervised and controlled his work and paid his
commissions. Respondent NLRCs ruling did not traverse
these findings of the labor arbiter."[19]
WHEREFORE, the judgment of respondent National Labor
Relations Commission is hereby AFFIRMED, with
the MODIFICATION that paragraph 1 thereof, declaring
Fredelito Juanatas an employee of petitioners and entitled to
share in the award for commission and separation pay, is
hereby DELETED.
SO ORDERED.
G.R. No. 129584, December 03, 1998
TRIPLE EIGHT INTEGRATED SERVICES, INC.,
PETITIONER, VS. NATIONAL LABOR RELATIONS
COMMISSION, HON. LABOR ARBITER POTENCIANO S.
CANIZARES, JR. AND ERLINDA R. OSDANA,
RESPONDENTS.
DECISION
ROMERO, J.:
In this petition for certiorari now before us, petitioner Triple
Eight Integrated Services Inc. seeks to annul the decision[1] of
public respondent National Labor Relations Commission (First
Division, Quezon City) dated March 11, 1997 affirming the
August 20, 1996 decision[2] of Labor Arbiter Potenciano
Canizares. Petitioner was ordered to pay private respondent
Erlinda Osdana her salaries for the unexpired portion of her
employment contract, unpaid salaries, salary differential, moral
and exemplary damages, as well as attorneys fees. On April
28, 1997, the NLRC denied petitioners motion for
reconsideration.[3]
The antecedent facts follow.
Sometime in August 1992, private respondent Osdana was
recruited by petitioner for employment with the latters
principal, Gulf Catering Company (GCC), a firm based in the
Kingdom of Saudi Arabia. Under the original employment
contract, Osdana was engaged to work as "Food Server" for a
period of thirty-six (36) months with a salary of five hundred
fifty Saudi rials (SR550).
Osdana claims she was required by petitioner to pay a total of
eleven thousand nine hundred fifty pesos (P11,950.00) in
67
placement fees and other charges, for which no receipt was
issued. She was likewise asked to undergo a medical
examination conducted by the Philippine Medical Tests
System, a duly accredited clinic for overseas workers, which
found her to be "Fit of Employment."
Subsequently, petitioner asked Osdana to sign another
"Contractor-Employee Agreement"[4] which provided that she
would be employed as a waitress for twelve (12) months with a
salary of two hundred eighty US dollars ($280). It was this
employment agreement which was approved by the Philippine
Overseas Employment Administration (POEA).
On September 16, 1992, Osdana left for Riyadh, Saudi Arabia,
and commenced working for GCC. She was assigned to the
College of Public Administration of the Oleysha University and,
contrary to the terms and conditions of the employment
contract, was made to wash dishes, cooking pots, and utensils,
perform janitorial work and other tasks which were unrelated to
her job designation as waitress. Making matters worse was the
fact that she was made to work a gruelling twelve-hour shift,
from six oclock in the morning to six oclock in the evening,
without overtime pay.
Because of the long hours and the strenuous nature of her
work, Osdana suffered from numbness and pain in her arms.
The pain was such that she had to be confined at the Ladies
Villa, a housing facility of GCC, from June 18 to August 22,
1993, during which period, she was not paid her salaries.
After said confinement, Osdana was allowed to resume work,
this time as Food Server and Cook at the Hota Bani Tameem
Hospital, where she worked seven days a week from August
22 to October 5, 1993. Again, she was not compensated.
Then, from October 6 to October 23, 1993, Osdana was again
confined at the Ladies Villa for no apparent reason. During this
period, she was still not paid her salary.
On October 24, 1993, she was re-assigned to the Oleysha
University to wash dishes and do other menial tasks. As with
her previous assignment at the said University, Osdana worked
long hours and under harsh conditions. Because of this, she
was diagnosed as having Bilateral Carpal Tunnel Syndrome, a
condition precipitated by activities requiring "repeated flexion,
pronation, and supination of the wrist and characterized by
excruciating pain and numbness in the arms."[5]
As the pain became unbearable, Osdana had to be
hospitalized. She underwent two surgical operations, one in
January 1994, another on April 23, 1994. Between these
operations, she was not given any work assignments even if
she was willing and able to do light work in accordance with
her doctors advice. Again, Osdana was not paid any
compensation for the period between February to April 22,
1994.
After her second operation, Osdana was discharged from the
hospital on April 25, 1994. The medical report stated that "she
had very good improvement of the symptoms and she was
discharged on the second day of the operation."[6]
Four days later, however, she was dismissed from work,
allegedly on the ground of illness. She was not given any
separation pay nor was she paid her salaries for the periods
when she was not allowed to work.
Upon her return to the Philippines, Osdana sought the help of
petitioner, but to no avail. She was thus constrained to file a
complaint before the POEA against petitioner, praying for
unpaid and underpaid salaries, salaries for the unexpired
portion of the employment contract, moral and exemplary
damages and attorneys fees, as well as the revocation,
cancellation, suspension and/or imposition of administrative
sanctions against petitioner.
Pursuant to Republic Act No. 8042, otherwise known as the
Migrant Workers and Overseas Filipinos Act of 1995, the case
was transferred to the arbitration branch of the NLRC and
assigned to Labor Arbiter Canizares.
In a decision dated August 20, 1996, the labor arbiter ruled in

favor of Osdana. The dispositive portion of the decision
follows:
"Wherefore, the respondent is hereby ordered to pay the
complainant US$2,499.00 as salaries for the unexpired portion
of the contract, and US$1,076.00 as unpaid salary and salary
differential, or its equivalent in Philippine Peso.
The respondent is likewise ordered to pay the complainant
P50,000 moral damages, and P20,000 exemplary damages.
The respondent is further ordered to pay the complainant 10%
of the monetary award as attorneys fee.
Other claims are hereby dismissed for lack of sufficient
evidence.
SO ORDERED."
Aggrieved by the labor arbiters decision, petitioner appealed to
the NLRC, which affirmed the decision in question on March
11, 1997. Petitioners motion for reconsideration was likewise
denied by the NLRC in its order dated April 28, 1997.
Hence, this petition for certiorari.
Petitioner alleges grave abuse of discretion on the part of the
public respondents for the following reasons: (a) ruling in favor
of Osdana even if there was no factual or legal basis for the
award and, (b) holding petitioner solely liable for her claims
despite the fact that its liability is joint and several with its
principal, GCC.
At the outset, petitioner argues that "public respondent Labor
Arbiter gravely abused his discretion when he rendered the
questioned decision dated August 20, 1996 without stating the
facts and the law where he derived his conclusions."[7] In
support of this argument, petitioner cites the first paragraph of
Article VIII, Section 14 of the Constitution: "No decision shall
be rendered by any court without expressing therein clearly
and distinctly the facts and the law on which it is based."
On this point, it is enough to note that the decisions of both the
labor arbiter and the NLRC were based mainly on the facts and
allegations in Osdanas position paper and supporting
documents. We find these sufficient to constitute substantial
evidence to support the questioned decisions. Generally,
findings of facts of quasi-judicial agencies like the NLRC are
accorded great respect and, at times, even finality if supported
by substantial evidence. "Substantial evidence" is such amount
of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion.[8]
Moreover, well-settled is the rule that if doubts exist between
the evidence presented by the employer and the employee, the
scales of justice must be tilted in favor of the latter. Thus, in
controversies between a worker and her employer, doubts
reasonably arising from the evidence or in the interpretation of
agreements should be resolved in favor of the former.
Petitioner, for its part, was given the same opportunity to file its
own position paper but instead, it opted to file a two-page
Answer With Special And Affirmative Defenses, denying
generally the allegations of the complaint.[9]
As observed by the labor arbiter, "The record shows the
complainant filed complaint (sic), position paper, and
supporting documents, and prosecuted her case diligently;
while the respondent merely tried to settle the case amicably,
failing even to file its position paper."[10] The present case being
one for illegal dismissal, it was incumbent upon petitioner
employer to show by substantial evidence that the termination
was validly made. In termination cases, the burden of proof
rests on the employer to show that the dismissal is for a just
cause.[11] Having failed to file its position paper and to support
its denials and affirmative defenses in its answer, petitioner
cannot now fault the labor arbiter and the NLRC for relying on
the facts as laid down by Osdana in her position paper and
supported by other documents. The essence of due process is
that a party be afforded reasonable opportunity to be heard
and to submit any evidence he may have in support of his
defense,[12] and this is exactly what petitioner was accorded,
although it chose not to fully avail thereof.
68
This Court, therefore, upholds the finding of herein public
respondents that the facts and the evidence on record
adduced by Osdana and taken in relation to the answer of
petitioner show that indeed there was breach of the
employment contract and illegal dismissal committed by
petitioners principal.
Petitioner claims that public respondents committed grave
abuse of discretion when they ruled that Osdana had been
illegally dismissed by GCC. It maintains that the award for
salaries for the unexpired portion of the contract was improper
because Osdana was validly dismissed on the ground of
illness.
The argument must fail.
In its Answer, Memorandum of Appeal,[13] Petition for Certiorari,
[14]
and Consolidated Reply,[15] petitioner consistently asserted
that Osdana was validly repatriated for medical reasons, but it
failed to substantiate its claim that such repatriation was
justified and done in accordance with law.
Article 284 of the Labor Code is clear on the matter of
termination by reason of disease or illness, viz:
"Art. 284. Disease as a ground for termination - An employer
may terminate the services of an employee who has been
found to be suffering from any disease and whose continued
employment is prohibited by law or prejudicial to his health as
well as the health of his co-employees: x x x."
Specifically, Section 8, Rule 1, Book VI of the Omnibus Rules
Implementing the Labor Code provides:
"Sec. 8. 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
competent public authority that the disease is of such nature or
at such a stage that it cannot be cured within a period of six (6)
months 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." (Underscoring supplied)
Viewed in the light of the foregoing provisions, the manner by
which Osdana was terminated was clearly in violation of the
Labor Code and its implementing rules and regulations.
In the first place, Osdanas continued employment despite her
illness was not prohibited by law nor was it prejudicial to her
health, as well as that of her co-employees. In fact, the medical
report issued after her second operation stated that "she had
very good improvement of the symptoms." Besides, "Carpal
Tunnel Syndrome" is not a contagious disease.
Petitioner attributes good faith on the part of its principal,
claiming that "It was the concern for the welfare and physical
well being (sic) of private respondent that drove her employer
to take the painful decision of terminating her from the service
and having her repatriated to the Philippines at its expense.
The employer did not want to risk the aggravation of the illness
of private respondent which could have been the logical
consequence were private respondent allowed to continue with
her job."[16]
The Court notes, however, that aside from these bare
allegations, petitioner has not presented any medical certificate
or similar document from a competent public health authority in
support of its claims.
On the medical certificate requirement, petitioner erroneously
argues that "private respondent was employed in Saudi Arabia
and not here in the Philippines. Hence, there was a physical
impossibility to secure from a Philippine public health authority
the alluded medical certificate that public respondents illness
will not be cured within a period of six months."[17]
Petitioner entirely misses the point, as counsel for private
respondent states in the Comment.[18] The rule simply
prescribes a "certification by a competent public health
authority" and not a "Philippine public health authority."

If, indeed, Osdana was physically unfit to continue her
employment, her employer could have easily obtained a
certification to that effect from a competent public health
authority in Saudi Arabia, thereby heading off any complaint for
illegal dismissal.
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. As the
Court observed in Prieto v. NLRC,[19]"The Court is not unaware
of the many abuses suffered by our overseas workers in the
foreign land where they have ventured, usually with heavy
hearts, in pursuit of a more fulfilling future. Breach of contract,
maltreatment, rape, insufficient nourishment, sub-human
lodgings, insults and other forms of debasement, are only a
few of the inhumane acts to which they are subjected by their
foreign employers, who probably feel they can do as they
please in their country. While these workers may indeed have
relatively little defense against exploitation while they are
abroad, that disadvantage must not continue to burden them
when they return to their own territory to voice their muted
complaint. There is no reason why, in their own land, the
protection of our own laws cannot be extended to them in full
measure for the redress of their grievances."
Petitioner likewise attempts to sidestep the medical certificate
requirement by contending that since Osdana was working in
Saudi Arabia, her employment was subject to the laws of the
host country. Apparently, petitioner hopes to make it appear
that the labor laws of Saudi Arabia do not require any
certification by a competent public health authority in the
dismissal of employees due to illness.
Again, petitioners argument is without merit.
First, established is the rule that lex loci contractus (the law of
the place where the contract is made) governs in this
jurisdiction. There is no question that the contract of
employment in this case was perfected here in the Philippines.
Therefore, the Labor Code, its implementing rules and
regulations, and other laws affecting labor apply in this case.
Furthermore, settled is the rule that the courts of the forum will
not enforce any foreign claim obnoxious to the forums public
policy.[20] Here in the Philippines, employment agreements are
more than contractual in nature. The Constitution itself, in
Article XIII Section 3, guarantees the special protection of
workers, to wit:
"The State shall afford full protection to labor, local and
overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-organization,
collective bargaining and negotiations, and peaceful concerted
activities, including the right to strike in accordance with law.
They shall be entitled to security of tenure, humane conditions
of work, and a living wage. They shall also participate in policy
and decision-making processes affecting their rights and
benefits as may be provided by law.
xxx xxx x x x."
This public policy should be borne in mind in this case because
to allow foreign employers to determine for and by themselves
whether an overseas contract worker may be dismissed on the
ground of illness would encourage illegal or arbitrary pre-
termination of employment contracts.
As regards the monetary award of salaries for the unexpired
portion of the employment contract, unpaid salaries and salary
differential granted by public respondents to Osdana, petitioner
assails the same for being contrary to law, evidence and
existing jurisprudence, all of which therefore constitutes grave
abuse of discretion.
Although this contention is without merit, the award for salaries
for the unexpired portion of the contract must, however, be
reduced. Paragraph 5, Section 10 of R.A. No. 8042, applies in
this case, thus:
"In case of termination of overseas employment without just,
valid or authorized cause as defined by law or contract, the
worker shall be entitled to the full reimbursement of his
69
placement fee with interest at twelve percent (12%) per
annum, plus his salaries for the unexpired portion of his
employment contract or for three (3) months for every year of
the unexpired term, whichever is less."
In the case at bar, while it would appear that the employment
contract approved by the POEA was only for a period of twelve
months, Osdanas actual stint with the foreign principal lasted
for one year and seven-and-a-half months. It may be inferred,
therefore, that the employer renewed her employment contract
for another year. Thus, the award for the unexpired portion of
the contract should have been US$1,260 (US$280 x 4
months) or its equivalent in Philippine pesos, not US$2,499 as
adjudged by the labor arbiter and affirmed by the NLRC.
As for the award for unpaid salaries and differential amounting
to US$1,076 representing seven months unpaid salaries and
one month underpaid salary, the same is proper because, as
correctly pointed out by Osdana, the "no work, no pay" rule
relied upon by petitioner does not apply in this case. In the first
place, the fact that she had not worked from June 18 to August
22, 1993 and then from January 24 to April 29, 1994, was due
to her illness which was clearly work-related. Second, from
August 23 to October 5, 1993, Osdana actually worked as food
server and cook for seven days a week at the Hota Bani
Tameem Hospital, but was not paid any salary for the said
period. Finally, from October 6 to October 23, 1993, she was
confined to quarters and was not given any work for no reason
at all.
Now, with respect to the award of moral and exemplary
damages, the same is likewise proper but should be reduced.
Worth reiterating is the rule that moral damages are
recoverable where the dismissal of the employee was attended
by bad faith or fraud or constituted an act oppressive to labor,
or was done in a manner contrary to morals, good customs, or
public policy.[21] Likewise, exemplary damages may be awarded
if the dismissal was effected in a wanton, oppressive or
malevolent manner.[22]
According to the facts of the case as stated by public
respondent, Osdana was made to perform such menial chores,
as dishwashing and janitorial work, among others, contrary to
her job designation as waitress. She was also made to work
long hours without overtime pay. Because of such arduous
working conditions, she developed Carpal Tunnel Syndrome.
Her illness was such that she had to undergo surgery twice.
Since her employer determined for itself that she was no
longer fit to continue working, they sent her home posthaste
without as much as separation pay or compensation for the
months when she was unable to work because of her illness.
Since the employer is deemed to have acted in bad faith, the
award for attorneys fees is likewise upheld.
Finally, petitioner alleges grave abuse of discretion on the part
of public respondents for holding it solely liable for the claims
of Osdana despite the fact that its liability with the principal is
joint and several.
Petitioner misunderstands the decision in question. It should
be noted that contrary to petitioners interpretation, the decision
of the labor arbiter which was affirmed by the NLRC did not
really absolve the foreign principal.
Petitioner was the only one held liable for Osdanas monetary
claims because it was the only respondent named in the
complaint and it does not appear that petitioner took steps to
have its principal included as co-respondent. Thus, the POEA,
and later the labor arbiter, did not acquire jurisdiction over the
foreign principal.
This is not to say, however, that GCC may not be held liable at
all. Petitioner can still claim reimbursement or contribution from
it for the amounts awarded to the illegally-dismissed employee.
WHEREFORE, in view of the foregoing, the instant petition
is DISMISSED. Accordingly, the decisions of the labor arbiter
dated August 20, 1996, and of the NLRC dated March 11,
1997, are AFFIRMED with the MODIFICATION that the award
to private respondent Osdana should be one thousand two
hundred sixty US dollars (US$1,260), or its equivalent in
Philippine pesos, as salaries for the unexpired portion of the
employment contract, and one thousand seventy six US dollars

(US$1,076), or its equivalent in Philippine pesos, representing
unpaid salaries for seven (7) months and underpaid salary for
one (1) month, plus interest.
Petitioner is likewise ordered to pay private respondent
P30,000.00 in moral damages, P10,000.00 in exemplary
damages and 10% attorneys fees.
This decision is without prejudice to any remedy or claim for
reimbursement or contribution petitioner may institute against
its foreign principal, Gulf Catering Company. No
pronouncement as to costs.
SO ORDERED.
G.R. No. 87700, June 13, 1990
SAN MIGUEL CORPORATION EMPLOYEES UNION-
PTGWO, DANIEL S.L. BORBON II, HERMINIA REYES,
MARCELA PURIFICACION, ET AL., PETITIONERS, VS.
HON. JESUS G. BERSAMIRA, IN HIS CAPACITY AS
PRESIDING JUDGE OF BRANCH 166, RTC, PASIG, AND
SAN MIGUEL CORPORATION, RESPONDENTS.
DECISION
MELENCIO-HERRERA, J.:
Respondent Judge of the Regional Trial Court of Pasig, Branch
166, is taken to task by petitioners in this special civil action
for Certiorari and Prohibition for having issued the challenged
Writ of Preliminary Injunction on 29 March 1989 in Civil Case
No. 57055 of his Court entitled San Miguel Corporation vs.
SMCEU-PTGWO, et als.
Petitioners plea is that said Writ was issued without or in
excess of jurisdiction and with grave abuse of
discretion, a labor dispute being involved. Private respondent
San Miguel Corporation (SanMig, for short), for its part,
defends the Writ on the ground of absence of any employer-
employee relationship between it and the contractual workers
employed by the companies Lipercon Services, Inc. (Lipercon)
and DRite Service Enterprises (DRite), besides the fact that
the Union is bereft of personality to represent said workers for
purposes of collective bargaining. The Solicitor General
agrees with the position of SanMig.
The antecedents of the controversy reveal that:
Sometime in 1983 and 1984, SanMig entered into contracts for
merchandising services with Lipercon and DRite (Annexes K
and I, SanMigs Comment, respectively). These companies
are independent contractors duly licensed by the Department
of Labor and Employment (DOLE). SanMig entered into those
contracts to maintain its competitive position and in keeping
with the imperatives of efficiency, business expansion and the
diversity of its operation. In said contracts, it was expressly
understood and agreed that the workers employed by the
contractors were to be paid by the latter and that none of them
were to be deemed employees or agents of SanMig. There
was to be no employer-employee relation between the
contractors and/or its workers, on the one hand,
and SanMig on the other.
Petitioner San Miguel Corporation Employees Union-PTWGO
(the Union, for brevity) is the duly authorized representative of
the monthly paid rank-and-file employees of SanMig with
whom the latter executed a Collective Bargaining Agreement
(CBA) effective 1 July 1986 to 30 June 1989 (Annex
A, SanMigs Comment). Section 1 of their CBA specifically
provides that temporary, probationary, or contract employees
and workers are excluded from the bargaining unit and,
therefore, outside the scope of this Agreement.
In a letter, dated 20 November 1988 (Annex C, Petition), the
Union advised SanMig that some Lipercon and DRite workers
had signed up for union membership and sought the
regularization of their employment with SMC. The Union
alleged that this group of employees, while appearing to be
70
contractual workers of supposedly independent contractors,
have been continuously working for SanMig for a period
ranging from six (6) months to fifteen (15) years and that their
work is neither casual nor seasonal as they are performing
work or activities necessary or desirable in the usual business
or trade of SanMig. Thus, it was contended that there exists a
labor-only contracting situation. It was then demanded that
the employment status of these workers be regularized.
On 12 January 1989, on the ground that it had failed to receive
any favorable response from SanMig, the Union filed a notice
of strike for unfair labor practice, CBA violations, and union
busting (Annex D, Petition).
On 30 January 1989, the Union again filed a second notice of
strike for unfair labor practice (Annex F, Petition).
As in the first notice of strike, conciliatory meetings were held
on the second notice. Subsequently, the two (2) notices of
strike were consolidated and several conciliation conferences
were held to settle the dispute before the National Conciliation
and Mediation Board (NCMB) of DOLE (Annex G, Petition).
Beginning 14 February 1989 until 2 March 1989, series of
pickets were staged by Lipercon and DRite workers in various
SMC plants and offices.
On 6 March 1989, SMC filed a verified Complaint for Injunction
and Damages before respondent Court to enjoin
the Union from:
a. representing and/or acting for and in behalf of the
employees of LIPERCON and/or DRITE for the purposes of
collective bargaining;
b. calling for and holding a strike vote to compel plaintiff to hire
the employees or workers of LIPERCON and DRITE;
c. inciting, instigating and/or inducing the employees or
workers of LIPERCON and DRITE to demonstrate and/or
picket at the plants and offices of plaintiff within the bargaining
unit referred to in the CBA, x x x;
d. staging a strike to compel plaintiff to hire the employees or
workers of LIPERCON and DRITE;
e. using the employees or workers of LIPERCON AND DRITE
to man the strike area and/or picket lines and/or barricades
which the defendants may set up at the plants and offices of
plaintiff within the bargaining unit referred to in the CBA x x x ;
f. intimidating, threatening with bodily harm and/or molesting
the other employees and/or contract workers of plaintiff, as well
as those persons lawfully transacting business with plaintiff at
the work places within the bargaining unit referred to in the
CBA, x x x , to compel plaintiff to hire the employees or
workers of LIPERCON and DRITE;
g. blocking, preventing, prohibiting, obstructing and/or
impeding the free ingress to, and egress from, the work places
within the bargaining unit referred to in the CBA x x , to compel
plaintiff to hire the employees or workers of LIPERCON and
DRITE.
h. preventing and/or disrupting the peaceful and normal
operation of plaintiff at the work places within the bargaining
unit referred to in the CBA. Annex C hereof, to compel
plaintiff to hire the employees or workers of LIPERCON and
DRITE. (Annex H, Petition)
Respondent Court found the Complaint sufficient in form and
substance and issued a Temporary Restraining Order for the
purpose of maintaining the status quo,and set the application
for Injunction for hearing.
In the meantime, on 13 March 1989, the Union filed a Motion to
Dismiss SanMigs Complaint on the ground of lack of
jurisdiction over the case/nature of the action, which motion
was opposed by SanMig. That Motion was denied by
respondent Judge in an Order dated 11 April 1989.
After several hearings on SanMigs application for injunctive
relief, where the parties presented both testimonial and
documentary evidence, on 25 March 1989, respondent Court
issued the questioned Order (Annex A, Petition) granting the
application and enjoining the Union from committing the acts

complained of, supra. Accordingly, on 29 March 1989,
respondent Court issued the corresponding Writ of Preliminary
Injunction after SanMig had posted the required bond of
P100,000.00 to answer for whatever damages petitioners may
sustain by reason thereof.
In issuing the Injunction, respondent Court rationalized:
The absence of employer-employee relationship negates the
existence of labor dispute. Verily, this court has jurisdiction to
take cognizance of plaintiffs grievance.
The evidence so far presented indicates that plaintiff has
contracts for services with Lipercon and DRite. The
application and contract for employment of the defendants
witnesses are either with Lipercon or DRite. What could be
discerned is that there is no employer-employee relationship
between plaintiff and the contractual workers employed
by Lipercon and DRite. This, however, does not mean that a
final determination regarding the question of the existence of
employer-employee relationship has already been made. To
finally resolve this dispute, the court must extensively consider
and delve into the manner of selection and engagement of the
putative employee; the mode of payment of wages; the
presence or absence of a power of dismissal; and the
presence or absence of a power to control the putative
employees conduct. This necessitates a full-blown trial. If the
acts complained of are not restrained, plaintiff would,
undoubtedly, suffer irreparable damages. Upon the other
hand, a writ of injunction does not necessarily expose
defendants to irreparable damages.
Evidently, plaintiff has established its right to the relief
demanded. (p. 21, Rollo)
Anchored on grave abuse of discretion, petitioners are now
before us seeking nullification of the challenged Writ. On 24
April 1989, we issued a Temporary Restraining Order enjoining
the implementation of the Injunction issued by respondent
Court. The Union construed this to mean that we can now
strike, which it superimposed on the Order and widely
circulated to entice the Union membership to go on
strike. Upon being apprised thereof, in a Resolution of 24 May
1989, we required the parties to RESTORE
the status quo ante declaration of strike (p. 262 Rollo).
In the meantime, however, or on 2 May 1989, the Union went
on strike. Apparently, some of the contractual workers
of Lipercon and DRite had been laid off. The strike adversely
affected thirteen (13) of the latters plants and offices.
On 3 May 1989, the National Conciliation and Mediation Board
(NCMB) called the parties to conciliation. The Union stated
that it would lift the strike if the thirty
(30) Lipercon and DRite employees were recalled, and
discussion on their other demands, such as wage distortion
and appointment of coordinators, were made. Effected
eventually was a Memorandum of Agreement
between SanMig and the Union that without prejudice to the
outcome of G.R. No. 87700 (this case) and Civil Case No.
57055 (the case below), the laid-off individuals x x x shall be
recalled effective 8 May 1989 to their former jobs or equivalent
positions under the same terms and conditions prior to lay-off
(Annex 15, SanMig Comment). In turn, the Union would
immediately lift the pickets and return to work.
After an exchange of pleadings, this Court, on 12 October
1989, gave due course to the Petition and required the parties
to submit their memoranda simultaneously, the last of which
was filed on 9 January 1990.
The focal issue for determination is whether or not respondent
Court correctly assumed jurisdiction over the present
controversy and properly issued the Writ of Preliminary
Injunction. Crucial to the resolution of that question, is the
matter of whether or not the case at bar involves, or is in
connection with, or relates to a labor dispute. An affirmative
answer would bring the case within the original and exclusive
jurisdiction of labor tribunals to the exclusion of the regular
Courts.
71
Petitioners take the position that it is beyond dispute that the
controversy in the court a quo involves or arose out of a labor
dispute and is directly connected or interwoven with the cases
pending with the NCMB-DOLE, and is thus beyond the ambit
of the public respondents jurisdiction. That the acts
complained of (i.e., the mass concerted action of picketing and
the reliefs prayed for by the private respondent) are within the
competence of labor tribunals, is beyond question (pp. 6-7,
Petitioners Memo).
On the other hand, SanMig denies the existence of any
employer-employee relationship and consequently of any labor
dispute between itself and the Union. SanMig submits, in
particular, that respondent Court is vested with jurisdiction and
judicial competence to enjoin the specific type of strike staged
by petitioner union and its officers herein complained of, for
the reasons that:
A. The exclusive bargaining representative of an employer unit
cannot strike to compel the employer to hire and thereby
create an employment relationship with contractual workers,
especially where the contractual workers were recognized by
the union, under the governing collective bargaining
agreement, as excluded from, and therefore strangers to, the
bargaining unit.
B. A strike is a coercive economic weapon granted the
bargaining representative only in the event of a deadlock in a
labor dispute over wages, hours of work and all other terms
and conditions of the employment of the employees in the
unit. The union leaders cannot instigate a strike to compel the
employer, especially on the eve of certification elections, to hire
strangers or workers outside the unit, in the hope the latter will
help re-elect them.
C. Civil courts have the jurisdiction to enjoin the above strike
because this specie of strike does not arise out of a labor
dispute, is an abuse of right, and violates the employers
constitutional liberty to hire or not to
hire. (SanMigs Memorandum, pp. 475-476, Rollo).
We find the Petition of a meritorious character.
A labor dispute as defined in Article 212 (1) of the Labor Code
includes any controversy or matter concerning terms and
conditions of employment or the association or representation
of persons in negotiating, fixing, maintaining, changing, or
arranging the terms and conditions of employment, regardless
of whether the disputants stand in the proximate relation of
employer and employee.
While it is SanMigs submission that no employer-employee
relationship exists between itself, on the one hand, and the
contractual workers of Lipercon and DRiteon the other, a labor
dispute can nevertheless exist regardless of whether the
disputants stand in the proximate relationship of employer and
employee (Article 212 [1], Labor Code, supra) provided the
controversy concerns, among others, the terms and conditions
of employment or a change or arrangement thereof
(ibid.). Put differently, and as defined by law, the existence of a
labor dispute is not negatived by the fact that the plaintiffs and
defendants do not stand in the proximate relation of employer
and employee.
That a labor dispute, as defined by law, does exist herein is
evident. At bottom, what the Union seeks is to regularize the
status of the employees contracted
by Lipercon and DRite and, in effect, that they be absorbed
into the working unit of SanMig. This matter definitely dwells
on the working relationship between said employees vis-a-
vis SanMig. Terms, tenure and conditions of their employment
and the arrangement of those terms are thus involved bringing
the matter within the purview of a labor dispute. Further,
the Union also seeks to represent those workers, who have
signed up for Union membership, for the purpose of collective
bargaining. SanMig, for its part, resists that Union demand on
the ground that there is no employer-employee relationship
between it and those workers and because the demand
violates the terms of their CBA. Obvious then is that
representation and association, for the purpose of negotiating
the conditions of employment are also involved. In fact, the
injunction sought by SanMig was precisely also to prevent

such representation. Again, the matter of representation falls
within the scope of a labor dispute. Neither can it be denied
that the controversy below is directly connected with the labor
dispute already taken cognizance of by the NCMB-DOLE
(NCMB-NCR-NS-01-021-89; NCMB NCR-NS-01-093-83).
Whether or not the Union demands are valid; whether or
not SanMigs contracts with Lipercon and DRite constitute
labor-only contracting and, therefore, a regular employer-
employee relationship may, in fact, be said to exist; whether or
not the Union can lawfully represent the workers
of Lipercon and DRite in their demands against SanMig in the
light of the existing CBA; whether or not the notice of strike
was valid and the strike itself legal when it was allegedly
instigated to compel the employer to hire strangers outside the
working unit; - those are issues the resolution of which call for
the application of labor laws. And SanMigs cause/s of action
in the Court below are inextricably linked with those issues.
The precedent in Layno vs. de la Cruz (G.R. No. L-29636, 30
April 1965, 13 SCRA 738) relied upon by SanMig is not
controlling as in that case there was no controversy over
terms, tenure or conditions of employment or the
representation of employees that called for the application of
labor laws. In that case, what the petitioning union demanded
was not a change in working terms and conditions, or the
representation of the employees, but that its members be hired
as stevedores in the place of the members of a rival union,
which petitioners wanted discharged notwithstanding the
existing contract of the arrastre company with the latter
union. Hence, the ruling therein, on the basis of those facts
unique to that case, that such a demand could hardly be
considered a labor dispute.
As the case is indisputably linked with a labor dispute,
jurisdiction belongs to the labor tribunals. As explicitly
provided for in Article 217 of the Labor Code, prior to its
amendment by R.A. No. 6715 on 21 March 1989, since the suit
below was instituted on 6 March 1989, Labor Arbiters have
original and exclusive jurisdiction to hear and decide the
following cases involving all workers including 1. unfair labor
practice cases; 2. those that workers may file involving wages,
hours of work and other terms and conditions of employment;
x x x and 5. cases arising from any violation of Article 265 of
this Code, including questions involving the legality of strikes
and lockouts. x x x. Article 217 lays down the plain command
of the law.
The claim of SanMig that the action below is for damages
under Articles 19, 20 and 21 of the Civil Code would not suffice
to keep the case within the jurisdictional boundaries of regular
Courts. That claim for damages is interwoven with a labor
dispute existing between the parties and would have to be
ventilated before the administrative machinery established for
the expeditious settlement of those disputes. To allow the
action filed below to prosper would bring about split
jurisdiction which is obnoxious to the orderly administration of
justice (Philippine Communications, Electronics and Electricity
Workers Federation vs. Hon. Nolasco, L-24984, 29 July 1968,
24 SCRA 321).
We recognize the proprietary right of SanMig to exercise an
inherent management prerogative and its best business
judgment to determine whether it should contract out the
performance of some of its work to independent
contractors. However, the rights of all workers to self-
organization, collective bargaining and negotiations, and
peaceful concerted activities, including the right to strike in
accordance with law (Section 3, Article XIII, 1987 Constitution)
equally call for recognition and protection. Those contending
interests must be placed in proper perspective and equilibrium.
WHEREFORE, the Writ of Certiorari is GRANTED and the
Orders of respondent Judge of 25 March 1989 and 29 March
1989 are SET ASIDE. The Writ of Prohibition is GRANTED
and respondent Judge is enjoined from taking any further
action in Civil Case No. 57055 except for the purpose of
dismissing it. The status quo ante declaration of strike ordered
by the Court on 24 May 1989 shall be observed pending the
proceedings in the National Conciliation Mediation Board -
72
Department of Labor and Employment, docketed as NCMB-
NCR-NS-01-021-89 and NCMB-NCR-NS-01-093-83. No
costs.
SO ORDERED.
G.R. No. 127598, January 27, 1999
MANILA ELECTRIC COMPANY, PETITIONER, VS. THE
HONORABLE SECRETARY OF LABOR LEONARDO
QUISUMBING AND MERALCO EMPLOYEES AND
WORKERS ASSOCIATION (MEWA), RESPONDENTS
DECISION
AUSTRIA-MARTINEZ, J.:
In this petition for certiorari, the Manila Electric Company
(MERALCO) seeks to annul the orders of the Secretary of
labor dated August 19, 1996 and December 28, 1996, wherein
the Secretary required MERALCO and its rank and file union-
the Meralco Workers Association (MEWA) to execute a
collective bargaining agreement (CBA) for the remainder of the
parties 1992-1997 CBA cycle, and to incorporate in this new
CBA the Secretarys dispositions on the disputed economic
and non-economic issues.
MEWA is the duly recognized labor organization of the rank-
and-file employees of MERALCO.
On September 7, 1995, MEWA informed MERALCO of its
intention to re-negotiate the terms and conditions of their
existing 1992-1997 Collective Bargaining Agreement (CBA)
covering the remaining period of two years starting from
December 1, 1995 to November 30, 1997.[1] MERALCO
signified its willingness to re-negotiate through its letter dated
October 17, 1995[2] and formed a CBA negotiating panel for the
purpose. On November 10, 1995, MEWA submitted its
proposal[3] to MERALCO, which, in turn, presented a counter-
proposal. Thereafter, collective bargaining negotiations
proceeded. However, despite the series of meetings between
the negotiating panels of MERALCO and MEWA, the parties
failed to arrive at terms and conditions acceptable to both of
them.
On April 23, 1996, MEWA filed a Notice of Strike with the
National Capital Region Branch of the National Conciliation
and Mediation Board (NCMB) of the Department of Labor and
Employment (DOLE) which was docketed as NCMB-NCR-NS-
04-152-96, on the grounds of bargaining deadlock and unfair
labor practices. The NCMB then conducted a series of
conciliation meetings but the parties failed to reach an
amicable settlement. Faced with the imminence of a strike,
MERALCO on May 2, 1996, filed an Urgent Petition[4] with the
Department of Labor and Employment which was docketed as
OS-AJ No. 0503[1]96 praying that the Secretary assume
jurisdiction over the labor dispute and to enjoin the striking
employees to go back to work.
The Labor Secretary granted the petition through its Order[5] of
May 8, 1996, the dispositive portion of which reads:
WHEREFORE, premises considered, this Office now assumes
jurisdiction over the labor dispute obtaining between the parties
pursuant to Article 263 (g) of the Labor Code. Accordingly, the
parties are here enjoined from committing any act that may
exacerbate the situation. To speed up the resolution of the
dispute, the parties are also directed to submit their respective
Position Papers within ten (10) days from receipt.
Undersecretary Jose M. Espanol, Jr. is deputized to conduct
conciliation conferences between the parties to bridge their
differences and eventually hammer out a solution that is
mutually acceptable. He shall be assisted by the Legal
Service.
SO ORDERED.
Thereafter, the parties submitted their respective memoranda
and on August 19, 1996, the Secretary resolved the labor
dispute through an Order,[6] containing the following awards:
 73

ECONOMIC DEMANDS over 70 are entitled to not more than 30 days of hospitalization
Wage P2,300.00 for the first year covering the period at the J.F. Cotton Hospital with the company shouldering the
- entire cost.
increase from December 1, 1995 to November 30, 1996
P2,200.00 for the second year covering the period e. HMP coverage for retirees dependents is denied
- f. Monthly pension of P3,000.00 for each retiree is
December 1, 1996 to November 30, 1997.
denied.
g. Death benefit for retirees beneficiaries is denied.
Red Circle Rate (RCR) Allowance- all RCR allowances
Optional retirement - unions demand is denied; present policy
(promotional increases that go beyond the maximum range of
is maintained; employee is eligible for optional retirement if he
a job classification salary) shall be integrated into the basic
has rendered at least 18 years of service.
salary of employees effective December 1, 1995.
Dental, Medical and Hospitalization Benefits- grant of all the
allowable medical, surgical, dental and annual physical
Longevity Allowance- the integration of the longevity allowance
examination benefits, including free medicine whenever the
into the basic wage is denied; the present policy is maintained.
same is not available at the JFCH.
Longevity Increase- the present longevity bonus is maintained
Resignation benefits- unions demand is denied.
but the bonus shall be incorporated into the new CBA.
Night work- union demand is denied but present policy must be
Sick Leave- MEWAs demand for upgrading is denied; the
incorporated in CBA.
companys present policy is maintained. However, those who
have not used the sick leave benefit during a particular year
Shortswing- work in another shift within the same day shall be
shall be entitled to a one-day sick leave incentive.
considered as the employees work for the following day and
the employee shall be given additional four (4) hours straight
Sick leave reserve- the present reserve of 25 days shall be
time and the applicable excess time premium if he works
reduced to 15 days; the employee has the option either to
beyond 8 hours in the other shift.
convert the excess of 10 days to cash or let it remain as long
as he wants. In case he opts to let it remain, he may later on
High Voltage allowance- is increased from P45.00 to P55.00 to
convert it to cash at his retirement or separation.
be given to any employee authorized by the Safety Division to
perform work on or near energized bare lines & bus including
Vacation Leave - MEWAs demand for upgrading denied & the
stockman drivers & crane operators and other crew members
companys present policy is maintained which must be
on ground.
incorporated into the new CBA but scheduled vacation leave
may be rounded off to one full day at a time in case of a benefit
High Pole Allowance- is increased from P30.00 to P40.00 to be
involving a fraction of a day.
given to those authorized to climb poles up to at least 60 ft.
from the ground. Members of the team including stockman
Union Leave- of MEWAs officers, directors or stewards
drivers, crane operators and other crew members on the
assigned to perform union duties or legitimate union activity is
ground, are entitled to this benefit.
increased from 30 to 40 Mondays per month.
Towing Allowance- where stockmen drive tow trailers with long
Maternity, Paternity and Funeral leaves- the existing policy is to
poles and equipment on board, they shall be entitled to a
be maintained and must be incorporated in the new CBA
towing allowance of P20.00 whether they perform the job on
unless a new law granting paternity leave benefit is enacted
regular shift or on overtime.
which is superior to what the company has already granted.
Employees Cooperative- a loan of P3 M seed money is
Birthday Leave - unions demand is granted. If birthday falls on
granted to the proposed establishment of a cooperative,
the employees rest day or on a non-working holiday, the
payable in twenty (20) years starting one year from the start of
worker shall be entitled to go on leave with pay on the next
operations.
working day.
Holdup Allowance- the union demand is denied; the present
Group Hospitalization & Surgical Insurance Plan (GHSIP) and
policy shall be maintained.
Health Maintenance Plan (HMP)- present policy is maintained
insofar as the cost sharing is concerned- 70% for the Company
Meal and Lodging Allowance- shall be increased effective
and 30% for MEWA.
December 1, 1995 as follows:
Health Maintenance Plan (HMP) for dependents - subsidized
dependents increased from three to five dependents. Breakfast - from P25.00 to P35.00
Lunch - from P35.00 to P45.00
Longevity Bonus- is increased from P140.00 to P200.00 for
every year of service to be received by the employee after
serving the Company for 5 years. Dinner - from P35.00 to P45.00
Lodging - from P135.00 to P180.00 a night in all MERALCO
Christmas Bonus and Special Christmas Grant- MEWAs franchise areas
demand of one month salary as Christmas Bonus and two
months salary as Special Christmas Grant is granted and to Payroll Treatment for Accident while on Duty- an employee
be incorporated in the new CBA. shall be paid his salary and allowance if any is due plus
average excess time for the past 12 months from the time of
Midyear Bonus- one months pay to be included in the CBA. the accident up to the time of full recovery and placing of the
employee back to normal duty or an allowance of P2,000.00,
Anniversary Bonus - unions demand is denied. whichever is higher.

Christmas Gift Certificate - company has the discretion as to
whether it will give it to its employees.
Retirement Benefits:
a. Full retirement-present policy is maintained;
b. one cavan of rice per month is granted to retirees;
c. special retirement leave and allowance-present policy
is maintained;
d. HMP coverage for retirees- HMP coverage is granted
to retirees who have not reached the age of 70, with
MERALCO subsidizing 100% of the monthly premium; those
Housing and Equity Assistance Loan- is increased to
P60,000.00; those who have already availed of the privilege
shall be allowed to get the difference.
Benefits for Collectors:
a. Company shall reduce proportionately the quota and
monthly average product level (MAPL) in terms of equivalent
bill assignment when an employee is on sick leave and paid
vacation leave.
 74

b. When required to work on Saturdays, Sundays and On August 30, 1996, MERALCO filed a motion for
holidays, an employee shall receive P60.00 lunch allowance reconsideration[7] alleging that the Secretary of Labor
and applicable transportation allowance as determined by the committed grave abuse of discretion amounting to lack or
Company and shall also receive an additional compensation to excess of jurisdiction:
one day fixed portion in addition to lunch and transportation
allowance.
1. in awarding to MEWA a package that would cost at least
c. The collector shall be entitled to an incentive pay of
P1.142 billion, a package that is grossly excessive and
P25.00 for every delinquent account disconnected.
exorbitant, would not be affordable to MERALCO and would
d. When a collector voluntarily performs other work on
imperil its viability as a public utility affected with national
regular shift or overtime, he shall be entitled to remuneration
interest.
based on his computed hourly compensation and the
reimbursement of actually incurred transportation expenses.
2. in ordering the grant of a P4,500.00 wage increase, as well
e. Collectors shall be provided with bobcat belt bags
as a new and improved fringe benefits, under the remaining
every year
two (2) years of the CBA for the rank-and-file employees.
f. Collectors cash bond shall be deposited under his
capital contribution to MESALA.
3. in ordering the incorporation into the CBA of all existing
g. Collectors quota and MAPL shall be proportionately
employee benefits, on the one hand, and those that
reduced during typhoons, floods, earthquakes and other similar
MERALCO has unilaterally granted to its employees by virtue
force majeure events when it is impossible for a collector to
of voluntary company policy or practice, on the other hand.
perform collection work.
Political Demands:
4. in granting certain political demands presented by the
a. Scope of the collective bargaining unit- the collective
union.
bargaining unit shall be composed of all regular rank-and-file
employees hired by the company in all its offices and operative
5. in ordering the CBA to be effective December 1995 instead
centers throughout its franchise area and those it may employ
of August 19, 1996 when he resolved the dispute.
by reason of expansion, reorganization or as a result of
MERALCO filed a supplement to the motion for reconsideration
operational exigencies.
on September 18, 1995, alleging that the Secretary of Labor
b. Union recognition and security -
did not properly appreciate the effect of the awarded wages
i. The union shall be recognized by the Company as sole and
and benefits on MERALCOs financial viability.
exclusive bargaining representative of the rank-and-file
employees included in the bargaining unit. The Company shall
MEWA likewise filed a motion asking the Secretary of Labor to
agree to meet only with Union officers and its authorized
reconsider its Order on the wage increase, leaves,
representatives on all matters involving the Union and all
decentralized filing of paternity and maternity leaves, bonuses,
issues arising from the implementation and interpretation of the
retirement benefits, optional retirement, medical, dental and
new CBA.
hospitalization benefits, short swing and payroll treatment. On
ii. The union shall meet with the newly regularized employees
its political demands, MEWA asked the Secretary to rule its
for a period not to exceed four (4) hours, on company time, to
proposal to institute a Code of Discipline for its members and
acquaint the new regular employees of the rights, duties and
the unions representation in the administration of the Pension
benefits of Union membership.
Fund.
iii. The right of all rank-and-file employees to join the union
shall be recognized in accordance with the maintenance of
On December 28, 1996, the Secretary issued an
membership principle as a form of union security.
Order[8] resolving the parties separate motions, the
c. Transfer of assignment and job security-
modifications of the August 19, 1996 Order being highlighted
i. No transfer of an employee from one position to another shall
hereunder:
be made if motivated by considerations of sex, race, creed,
1) Effectivity of Agreement - December 1, 1995 to November
political and religious belief, seniority or union activity.
30, 1997.
ii. If the transfer is due to the reorganization or decentralization,
the distance from the employees residence shall be considered
Economic Demands
unless the transfer is accepted by the employee. If the transfer
is extremely necessary, the transfer shall be made within the
2) Wage Increase:
offices in the same district.
First year - P2,200.00 per month;
iii. Personnel hired through agencies or contractors to perform
the work done by covered employees shall not exceed one
Second year - P2,200.00 per month.
month. If extension is necessary, the union shall be informed.
3) Integration of Red Circle Rate (RCR) and Longevity
But the Company shall not permanently contract out regular or
Allowance into Basic Salary -the RCR allowance shall be
permanent positions that are necessary in the normal
integrated into the basic salary of employees as of August 19,
operation of the Company.
1996 (the date of the disputed Order).
d. Check off Union Dues- where the union increases its
dues as approved by the Board of Directors, the Company
4) Longevity Bonus - P170 per year of service starting from
shall check off such increase from the salaries of union
10 years of continuous service.
members after the union submits check off authorizations
signed by majority of the members. The Company shall honor
5) Vacation Leave - The status quo shall be maintained as to
only those individual authorizations signed by the majority of
the number of vacation leave but employees scheduled
the union members and collectively submitted by the union to
vacation may be taken one day at a time in the manner
the Companys Salary Administration.
that this has been provided in the supervisory CBA.
e. Payroll Reinstatement- shall be in accordance with
Article 223, p. 3 of the Labor Code.
6) Sick Leave Reserve - is reduced to 15 days, with any
f. Union Representation in Committees- the union is
excess payable at the end of the year. The employee has the
allowed to participate in policy formulation and in the decision-
option to avail of this cash conversion or to accumulate his sick
making process on matters affecting their rights and welfare,
leave credits up to 25 days for conversion to cash at retirement
particularly in the Uniform Committee, the Safety Committee
or separation from the service.
and other committees that may be formed in the future.
7) Birthday Leave - the grant of a day off when an
Signing Bonus- P4,000.00 per member of the bargaining unit
employees birthday falls on a non-working day is deleted.
for the conclusion of the CBA
8) Retirement Benefits for Retirees - The benefits granted
Existing benefits already granted by the Company but which
shall be effective on August 19, 1996, the date of the disputed
are not expressly or impliedly repealed in the new agreement
order up to November 30, 1997, which is the date the CBA
shall remain subsisting and shall be included in the new
expires and shall apply to those who are members of the
agreement to be signed by the parties effective December 1,
bargaining unit at the time the award is made.
1995.
 75

One sack of rice per quarter of the year shall be given to 1). . . in awarding wage increases of P2,200.00 for 1996 and
those retiring between August 19, 1996 and November 30, P2,200.00 for 1997;
1997.
2) . . . in awarding the following economic benefits:
On HMP Coverage for Retirees- The parties maintain the a. Two months Christmas bonus;
status quo, that is, with the Company complying with the b. Rice Subsidy and retirement benefits for retirees;
present arrangement and the obligations to retirees as is. c. Loan for the employees cooperative;
9) Medical, Dental and Hospitalization Benefits - The cost of
d. Social benefits such as GHSIP and HMP for dependents, emp
medicine unavailable at the J.F. Cotton Hospital shall be in
equity assistance loan;
accordance with MERALCOs Memorandum dated September
14, 1976. e. Signing bonus;
f. Integration of the Red Circle Rate Allowance
10) GHSIP and HMP for Dependents - The number of g. Sick leave reserve of 15 days
dependents to be subsidized shall be reduced from 5 to 4 h. The 40-day union leave;
provided that their premiums are proportionately increased. i. High pole/high voltage and towing allowance; and
j. Benefits for collectors
11) Employees Cooperative - The original award of P3
million pesos as seed money for the proposed Cooperative is
3) . . . in expanding the scope of the bargaining unit to all
reduced to P1.5 million pesos.
regular rank and file employees hired by the company in all its
offices and operating centers and those it may employ by
12) Shortswing - the original award is deleted.
reason of expansion, reorganization or as a result of
operational exigencies;
13) Payroll Treatment for Accident on Duty - Company ordered
to continue its present practice on payroll treatment for
4) . . . in ordering for a closed shop when his original order for
accident on duty without need to pay the excess time the
a maintenance of membership arrangement was not
Union demanded.
questioned by the parties;
Political Demands:
5) . . . in ordering that Meralco should consult the union before
any contracting out for more than six months;
14) Scope of the collective bargaining unit - The bargaining
unit shall be composed of all rank and file employees hired by
6) . . . in decreeing that the union be allowed to have
the Company in accordance with the original Order.
representation in policy and decision making into matters
affecting personnel welfare, rights and benefits as well as
15) Union recognition and security - The incorporation of
duties;
a closed shop form of union security in the CBA; the
Company is prohibited from entertaining individuals or groups
7) . . . in ruling for the inclusion of all terms and conditions of
of individuals only on matters that are exclusively within the
employment in the collective bargaining agreement;
domain of the union; the Company shall furnish the union with
a complete list of newly regularized employees within a week
8) . . . in exercising discretion in determining the retroactivity of
from regularization so that the Union can meet these
the CBA;
employees on the Unions and the employees own time.
Both MEWA and the Solicitor General; on behalf of the
Secretary of Labor, filed their comments to the petition. While
16) Transfer of assignment and job security - Transfer is a
the case was also set for oral argument on Feb 10, 1997, this
prerogative of the Company but the transfer must be for a
hearing was cancelled due to MERALCO not having received
valid business reason, made in good faith and must be
the comment of the opposing parties. The parties were instead
reasonably exercised. The CBA shall provide that No transfer
required to submit written memoranda, which they did.
of an employee from one position to another, without the
Subsequently, both petitioner and private respondent MEWA
employees written consent, shall be made if motivated by
also filed replies to the opposing parties Memoranda, all of
considerations of sex, race, creed, political and religious belief,
which We took into account in the resolution of this case.
age or union activity.
The union disputes the allegation of MERALCO that the
17) Contracting Out - The Company has the prerogative to
Secretary abused his discretion in issuing the assailed orders
contract out services provided that this move is based on valid
arguing that he acted within the scope of the powers granted
business reasons in accordance with law, is made in good
him by law and by the Constitution. The union contends that
faith, is reasonably exercised and, provided further that if the
any judicial review is limited to an examination of the
contracting out involves more than six months, the Union must
Secretarys decision-making/discretion - exercising process to
be consulted before its implementation.
determine if this process was attended by some capricious or
whimsical act that constitutes grave abuse; in the absence of
18) Check off of union dues
such abuse, his findings - considering that he has both
In any increase of union dues or contributions for mandatory
jurisdiction and expertise to make them - are valid.
activities, the union must submit to the Company a copy of its
board resolution increasing the union dues or authorizing such
The unions position is anchored on two premises:
contributions;
First, no reviewable abuse of discretion could have attended
If a board resolution is submitted, the Company shall deduct
the Secretarys arbitral award because the Secretary complied
union dues from all union members after a majority of the
with constitutional norms in rendering the dispute award. The
union members have submitted their individual written
union posits that the yardstick for comparison and for the
authorizations. Only those check-off authorizations submitted
determination of the validity of the Secretarys actions should
by the union shall be honored by the Company.
be the specific standards laid down by the Constitution itself.
To the union, these standards include the State policy on the
With respect to special assessments, attorneys fees,
promotion of workers welfare,[9] the principle of distributive
negotiation fees or any other extraordinary fees, individual
justice,[10] the right of the State to regulate the use of property,
authorizations shall be necessary before the company may so [11]
the obligation of the State to protect workers, both organized
deduct the same.
and unorganized, and insure their enjoyment of humane
19) Union Representation in Committees - The union is
conditions of work and a living wage, and the right of labor to
granted representation in the Safety Committee, the Uniform
a just share in the fruits of production.[12]
Committee and other committees of a similar nature and
purpose involving personnel welfare, rights and benefits as
Second, no reversible abuse of discretion attended the
well as duties.
Secretarys decision because the Secretary took all the
Dissatisfied, petitioner filed this petition contending that the
relevant evidence into account, judiciously weighed them, and
Secretary of Labor gravely abused his discretion:
rendered a decision based on the facts and law. Also, the

arbitral award should not be reversed given the Secretarys
expertise in his field and the general rule that findings of fact
based on such expertise is generally binding on this Court.
To put matters in proper perspective, we go back to basic
principles. The Secretary of Labors statutory power under Art.
263 (g) of the Labor Code to assume jurisdiction over a labor
dispute in an industry indispensable to the national interest,
and, to render an award on compulsory arbitration, does not
exempt the exercise of this power from the judicial review that
Sec. 1, Art. 8 of the Constitution mandates. This constitutional
provision states:
Judicial power includes the duty of the courts of justice to
settle actual controversies involving rights which are legally
demandable and enforceable, and to determine whether or not
there has been a grave abuse of discretion amounting to lack
or excess of jurisdiction on the part of any branch or
instrumentality of the government.
Under this constitutional mandate, every legal power of the
Secretary of Labor under the Labor Code, or, for that matter,
any act of the Executive, that is attended by grave abuse of
discretion is subject to review by this Court in an appropriate
proceeding. To be sure, the existence of an executive power
alone - whether granted by statute or by the Constitution -
cannot exempt the executive action from judicial oversight,
interference or reversal when grave abuse of discretion is, or is
alleged to be, present. This is particularly true when
constitutional norms are cited as the applicable yardsticks
since this Court is the final interpreter of the meaning and
intent of the Constitution.[13]
The extent of judicial review over the Secretary of Labors
arbitral award is not limited to a determination of grave abuse
in the manner of the secretarys exercise of his statutory
powers. This Court is entitled to, and must - in the exercise of
its judicial power - review the substance of the Secretarys
award when grave abuse of discretion is alleged to exist in the
award, i.e., in the appreciation of and the conclusions the
Secretary drew from the evidence presented.
The natural and ever present limitation on the Secretarys acts
is, of course, the Constitution. And we recognize that indeed
the constitutional provisions the union cited are State policies
on labor and social justice that can serve as standards in
assessing the validity of a Secretary of Labors actions.
However, we note that these provisions do not provide clear,
precise and objective standards of conduct that lend
themselves to easy application. We likewise recognize that the
Constitution is not a lopsided document that only recognizes
the interests of the working man; it too protects the interests of
the property owner and employer as well.[14]
For these reasons - and more importantly because a ruling on
the breadth and scope of the suggested constitutional
yardsticks is not absolutely necessary in the disposition of this
case - we shall not use these yardsticks in accordance with the
time-honored practice of avoiding constitutional interpretations
when a decision can be reached using non-constitutional
standards. We have repeatedly held that one of the essential
requisites for a successful judicial inquiry into constitutional
questions is that the resolution of the constitutional question
must be necessary in deciding the case.[15]
In this case we believe that the more appropriate and available
standard - and one does not require a constitutional
interpretation - is simply the standard of reasonableness. In
laymans terms, reasonableness implies the absence of
arbitrariness;[16] in legal parlance, this translates into the
exercise of proper discretion and to the observance of due
process. Thus, the question we have to answer in deciding
this case is whether the Secretarys actions have been
reasonable in light of the parties positions and the evidence
they presented.
MEWAs second premise - i.e., that the Secretary duly
considered the evidence presented - is the main issue that we
shall discuss at length below. Additionally, MEWA implied that
we should take great care before reading an abuse of
discretion on the part of the Secretary because of his expertise
on labor issues and because his findings of fact deserve the
highest respect from this Court.
76
This Court has recognized the Secretary of Labors distinct
expertise in the study and settlement of labor disputes falling
under his power of compulsory arbitration.[17] It is also well-
settled that factual findings of labor administrative officials, if
supported by substantial evidence, are entitled not only to
great respect but even to finality.[18] We, therefore, have no
difficulty in accepting the unions caveat on how to handle a
Secretary of Labors arbitral award.
But at the same time, we also recognize the possibility that
abuse of discretion may attend the exercise of the Secretarys
arbitral functions; his findings in an arbitration case are usually
based on position papers and their supporting documents (as
they are in the present case), and not on the thorough
examination of the parties contending claims that may be
present in a court trial and in the face-to-face adversarial
process that better insures the proper presentation and
appreciation of evidence.[19] There may also be grave abuse of
discretion where the board, tribunal or officer exercising judicial
function fails to consider evidence adduced by the parties.
[20]
Given the parties positions on the justiciability of the issues
before us, the question we have to answer is one that goes
into the substance of the Secretarys disputed orders: Did the
Secretary properly consider and appreciate the evidence
presented before him?
We find, based on our consideration of the parties positions
and the evidence on record, that the Secretary of Labor
disregarded and misappreciated evidence, particularly with
respect to the wage award. The Secretary of Labor apparently
also acted arbitrarily and even whimsically in considering a
number of legal points; even the Solicitor General himself
considered that the Secretary gravely abused his discretion on
at least three major points: (a) on the signing bonus issue; (b)
on the inclusion of confidential employees in the rank and file
bargaining unit, and (c) in mandating a union security closed-
shop regime in the bargaining unit.
We begin with a discussion on the wages issue. The focal
point in the consideration of the wage award is the projected
net income for 1996 which became the basis for the 1996
wage award, which in turn - by extrapolation - became the
basis for the (2nd Year) 1997 award. MERALCO projected that
the net operating income for 1996 was 14.7% above the 1999
level or a total net operating income of 4.171 Billion, while the
union placed the 1996 net operating income at 5.795 Billion.
MERALCO based its projection on the increase of the income
for the first 6 months of 1996 over the same period in 1995.
The union, on the other hand, projected that the 1996 income
would increase by 29% to 35% because the consumption of
electric power is at its highest during the last two quarters with
the advent of the Yuletide season. The union likewise relied
heavily on a newspaper report citing an estimate by an all Asia
capital financial analyst that the net operating income would
amount to 5.795 Billion.[21]
Based essentially on these considerations, the Secretary made
the following computations and ordered his disputed wage
award
Projected net
operating income for
1996 I 5,795,000,000
Principals and
interests 1,426,571,703
Dividends at 1995
rate 1,636,949,000
Net amount left with
the Company 2,729,479,297
Add: Tax credit
equivalent to 35% of
labor cost 231,804,940
Companys net
operating income 2,961,284,237
For 1997, the projected income is P7,613,612 which can
easily absorb the incremental increase of P2,200 per month or
a total of P4,500 during the last year of the CBA period.
 77

xxx xxx xxx position, on the fear that a Solomonic solution cannot be
avoided. Thus, rather than encourage agreement, a middle
An overriding aim is to estimate the amount that is left with the ground approach instead promotes a play safe attitude that
Company after the awarded wages and benefits and the leads to more deadlocks than to successfully negotiated CBAs.
companys customary obligations are paid. This amount can
be the source of an item not found in the above computations After considering the various factors the parties cited, we
but which the Company must provide for, that is - the amount believe that the interests of both labor and management are
the company can use for expansion. best served by a wage increase of P1,900.00 per month for the
first year and another P1,900.00 per month for the second year
Considering the expansion plans stated in the Companys of the two-year CBA term. Our reason for this is that these
Supplement that calls for capital expenditures of 6 billion, increases sufficiently protects the interest of the worker as they
6.263 billion and 5.802 billion for 1996, 1997 and 1998 are roughly 15% of the monthly average salary of P11,600.00.
[26]
respectively, We conclude that our original award of P2,300 per They likewise sufficiently consider the employers costs and
month for the first year and P2,200 for the second year will still its overall wage structure, while at the same time, being within
leave much by way of retained income that can be used for the range that will not disrupt the wage trends in Philippine
expansion.[22] (Underscoring ours.) industries.
We find after considering the records that the Secretary
gravely abused his discretion in making this wage award The records shows that MERALCO, throughout its long years
because he disregarded evidence on record. Where he of existence, was never remiss in its obligation towards its
considered MERALCOs evidence at all, he apparently employees. In fact, as a manifestation of its strong
misappreciated this evidence in favor of claims that do not commitment to the promotion of the welfare and well-being of
have evidentiary support. To our mind, the MERALCO its employees, it has consistently improved their compensation
projection had every reason to be reliable because it was package. For instance, MERALCO has granted salary
based on actual and undisputed figures for the first six months increases[27] through the collective bargaining agreement the
of 1996.[23] On the other hand, the union projection was based amount of which since 1980 for both rank-and-file and
on a speculation of Yuletide consumption that the union failed supervisory employees were as follows:
to substantiate. In fact, as against the unions unsubstantiated
Yuletide consumption claim, MERALCO adduced evidence in
the form of historical consumption data showing that a lengthy
AMOUNT OF CBA
consumption does not tend to rise during the Christmas period. DIFFERENCE
[24] INCREASES
Additionally, the All-Asia Capital Report was nothing more
than a newspaper report that did not show any specific CBA RANK-
breakdown or computations. While the union claimed that its COVERA AND- SUPERVI PERCEN
cited figure is based on MERALCOs 10-year income stream, GE FILE SORY AMOUNT T
[25]
no data or computation of this 10-year stream appear in the
record. 1980 230.00 342.50 112.50 48.91%
1981 210.00 322.50 112.50 53.57
While the Secretary is not expected to accept the company- 1982 200.00 312.50 112.50 56.25
offered figures wholesale in determining a wage award, we find TOTAL 640.00 977.50 337.50 52.73
it a grave abuse of discretion to completely disregard data that
is based on actual and undisputed record of financial
performance in favor of the third-hand and unfounded claims 1983 320.00 432.50 112.50 35.16
the Secretary eventually relied upon. At the very least, the 1984 350.00 462.50 112.50 32.14
Secretary should have properly justified his disregard of the 1985 370.00 482.50 112.50 30.41
company figures. The Secretary should have also reasonably TOTAL 1,040.00 1,377.50 337.50 32.45
insured that the figure that served as the starting point for his
computation had some substantial basis. 1986 860.00 972.50 112.50 13.08
1987 640.00 752.50 112.50 17.58
Both parties extensely discussed the factors that the decision
maker should consider in making a wage award. While We do 1988 600.00 712.50 112.50 18.75
not seek to enumerate in this decision the factors that should TOTAL 2,100.00 2,437.50 337.50 16.07
affect wage determination, we must emphasize that a
collective bargaining dispute such as this one requires due 1989 1,100.00 1,212.50 112.50 10.23
consideration and proper balancing of the interests of the 1990 1,200.00 1,312.50 112.50 9.38
parties to the dispute and of those who might be affected 1991 1,300.00 1,412.50 112.50 8.65
by the dispute. To our mind, the best way in approaching this
TOTAL 3,600.00 3,937.50 337.50 9.38
task holistically is to consider the available objective facts,
including, where applicable, factors such as the bargaining
history of the company, the trends and amounts of arbitrated 1992 1,400.00 1,742.50 342.50 24.46
and agreed wage awards and the companys previous CBAs, 1993 1,350.00 1,682.50 332.50 24.63
and industry trends in general. As a rule, affordability or 1994 1,150.00 1,442.50 292.50 25.43
capacity to pay should be taken into account but cannot be the TOTAL 3,900.00 4,867.50 967.50 24.81
sole yardstick in determining the wage award, especially in a
public utility like MERALCO. In considering a public utility, the Based on the above-quoted table, specifically under the
decision maker must always take into account the public column RANK-AND-FILE, it is easily discernible that the total
interest aspects of the case; MERALCOs income and the wage increase of P3,800.00 for 1996 to 1997 which we are
amount of money available for operating expenses - including granting in the instant case is significantly higher than the total
labor costs - are subject to State regulation. We must also increases given in 1992 to 1994, or a span of three (3) years,
keep in mind that high operating costs will certainly and which is only P3,900.00 a month. Thus, the Secretarys grant
eventually be passed on to the consuming public as of P2,200.00 monthly wage increase in the assailed order is
MERALCO has bluntly warned in its pleadings. unreasonably high a burden for MERALCO to shoulder.
We take note of the middle ground approach employed by We now go to the economic issues.
the Secretary in this case which we do not necessarily find to
be the best method of resolving a wage dispute. Merely 1. CHRISTMAS BONUS
finding the midway point between the demands of the company
and the union, and splitting the difference is a simplistic MERALCO questions the Secretarys award of Christmas
solution that fails to recognize that the parties may already be bonuses on the ground that what it had given its employees
at the limits of the wage levels they can afford. It may lead to were special bonuses to mark or celebrate special occasions,
the danger too that neither of the parties will engage in such as when the Asia Money Magazine recognized
principled bargaining; the company may keep its position MERALCO as the best managed company in Asia. These
artificially low while the union presents an artificially high
 78

grants were given on or about Christmas time, and the timing
of the grant apparently led the Secretary to the conclusion that
what were given were Christmas bonuses given by way of a
company practice on top of the legally required 13th month
pay.
bonus, We believe, is sufficient, this being merely a generous
act on the part of MERALCO.
2. RICE SUBSIDY and RETIREMENT BENEFITS for
RETIREES

The Secretary in granting the two-month bonus, considered the It appears that the Secretary of Labor originally ordered the
following factual finding, to wit: increase of the retirement pay, rice subsidy and medical
We note that each of the grant mentioned in the commonly benefits of MERALCO retirees. This ruling was reconsidered
adopted table of grants has a special description. Christmas based on the position that retirees are no longer employees of
bonuses were given in 1988 and 1989. However, the amounts the company and therefore are no longer bargaining members
of bonuses given differed. In 1988, it was P1,500. In 1989, it who can benefit from a compulsory arbitration award. The
was month salary. The use of Christmas bonus title Secretary, however, ruled that all members of the bargaining
stopped after 1989. In 1990, what was given was a cash gift unit who retire between August 19, 1996 and November 30,
of months salary. The grants thereafter bore different titles 1997 (i.e., the term of the disputed CBA under the Secretarys
and were for varying amounts. Significantly, the Company disputed orders) are entitled to receive an additional rice
explained the reason for the 1995 bonuses and this subsidy.
explanation was not substantially contradicted by the Union.
The question squarely brought in this petition is whether the
What comes out from all these is that while the Company has Secretary can issue an order that binds the retirement fund.
consistently given some amount by way of bonuses since The company alleges that a separate and independent trust
1988, these awards were not given uniformly as Christmas fund is the source of retirement benefits for MERALCO
bonuses or special Christmas grants although they may have retirees, while the union maintains that MERALCO controls
been given at or about Christmas time. these funds and may therefore be compelled to improve this
benefit in an arbitral award.
xxx xxx xxx
The issue requires a finding of fact on the legal personality of
the retirement fund. In the absence of any evidence on record
The Company is not therefore correct in its position that there
indicating the nature of the retirement funds legal personality,
is not established practice of giving Christmas bonuses that
we rule that the issue should be remanded to the Secretary for
has ripened to the status of being a term and condition of
reception of evidence as whether or not the MERALCO
employment. Regardless of its nomenclature and purpose, the
retirement fund is a separate and independent trust fund. The
act of giving this bonus in the spirit of Christmas has ripened
existence of a separate and independent juridical entity which
into a Company practice.[28]
controls an irrevocable retirement trust fund means that these
It is MERALCOs position that the Secretary erred when he
retirement funds are beyond the scope of collective bargaining:
recognized that there was an established practice of giving a
they are administered by an entity not a party to the collective
two-month Christmas bonus based on the fact that bonuses
bargaining and the funds may not be touched without the
were given on or about Christmas time. It points out that the
trustees conformity.
established practice attributed to MERALCO was neither for a
considerable period of time nor identical in either amount or
On the other hand, MERALCO control over these funds means
purpose. The purpose and title of the grants were never the
that MERALCO may be compelled in the compulsory
same except for the Christmas bonuses of 1988 and 1989, and
arbitration of a CBA deadlock where it is the employer, to
were not in the same amounts.
improve retirement benefits since retirement is a term or
condition of employment that is a mandatory subject of
We do not agree.
bargaining.
As a rule, a bonus is not a demandable and enforceable
3. EMPLOYEES COOPERATIVE
obligation;[29] it may nevertheless be granted on equitable
consideration[30] as when the giving of such bonus has
The Secretarys disputed ruling requires MERALCO to provide
been the companys long and regular practice.[31] To be
the employees covered by the bargaining unit with a loan of
considered a regular practice, the giving of the bonus should
1.5 Million as seed money for the employees formation of a
have been done over a long period of time, and must be shown
cooperative under the Cooperative Law, R.A. 6938. We see
to have been consistent and deliberate.[32] Thus we have ruled
nothing in this law - whether expressed or implied - that
in National Sugar Refineries Corporation vs. NLRC:[33]
requires employers to provide funds, by loan or otherwise, that
The test or rationale of this rule on long practice requires an
employees can use to form a cooperative. The formation of a
indubitable showing that the employer agreed to continue
cooperative is a purely voluntary act under this law, and no
giving the benefits knowing fully well that said employees are
party in any context or relationship is required by law to set up
not covered by the law requiring payment thereof.
a cooperative or to provide the funds therefor. In the absence
In the case at bar, the record shows the MERALCO, aside from
of such legal requirement, the Secretary has no basis to order
complying with the regular 13th month bonus, has further been
the grant of a 1.5 million loan to MERALCO employees for the
giving its employees an additional Christmas bonus at the tail-
formation of a cooperative. Furthermore, we do not see the
end of the year since 1988. While the special bonuses differed
formation of an employees cooperative, in the absence of an
in amount and bore different titles, it can not be denied that
agreement by the collective bargaining parties that this is a
these were given voluntarily and continuously on or about
bargainable term or condition of employment, to be a term or
Christmas time. The considerable length of time MERALCO
condition of employment that can be imposed on the parties on
has been giving the special grants to its employees indicates a
compulsory arbitration.
unilateral and voluntary act on its part, to continue giving said
benefits knowing that such act was not required by law.
4. GHSIP, HMP BENEFITS FOR DEPENDENTS and
HOUSING EQUITY LOAN
Indeed, a company practice favorable to the employees has
been established and the payments made by MERALCO
MERALCO contends that it is not bound to bargain on these
pursuant thereto ripened into benefits enjoyed by the
benefits because these do not relate to wages, hours of work
employees. Consequently, the giving of the special bonus can
and other terms and conditions of employment hence, the
no longer be withdrawn by the company as this would amount
denial of these demands cannot result in a bargaining
to a diminution of the employees existing benefits.[34]
impasse.
We can not, however, affirm the Secretarys award of a two-
The GHSIP, HMP benefits for dependents and the housing
month special Christmas bonus to the employees since there
equity loan have been the subject of bargaining and arbitral
was no recognized company practice of giving a two-month
awards in the past. We do not see any reason why MERALCO
special grant. The two-month special bonus was given only in
should not now bargain on these benefits. Thus, we agree
1995 in recognition of the employees prompt and efficient
with the Secretarys ruling:
response during the calamities. Instead, a one-month special

x x x Additionally and more importantly, GHSIP and HMP,
aside from being contributory plans, have been the subject of
previous rulings from this Office as bargainable matters. At
this point, we cannot do any less and must recognize that
GHSIP and HMP are matters where the union can demand and
negotiate for improvements within the framework of the
collective bargaining system.[35]
Moreover, MERALCO have long been extending these benefits
to the employees and their dependents that they now become
part of the terms and conditions of employment. In fact,
MERALCO even pledged to continue giving these benefits.
Hence, these benefits should be incorporated in the new CBA.
With regard to the increase of the housing equity grant, we find
P60,000.00 reasonable considering the prevailing economic
crisis.
5. SIGNING BONUS
On the signing bonus issue, we agree with the positions
commonly taken by MERALCO and by the Office of the
Solicitor General that the signing bonus is a grant motivated by
the goodwill generated when a CBA is successfully negotiated
and signed between the employer and the union. In the
present case, this goodwill does not exist. In the words of the
Solicitor General:
When negotiations for the last two years of the 1992-1997
CBA broke down and the parties sought the assistance of the
NCMB, but which failed to reconcile their differences, and
when petitioner MERALCO bluntly invoked the jurisdiction of
the Secretary of Labor in the resolution of the labor dispute,
whatever goodwill existed between petitioner MERALCO and
respondent union disappeared. xxx.[36]
In contractual terms, a signing bonus is justified by and is the
consideration paid for the goodwill that existed in the
negotiations that culminated in the signing of a CBA. Without
the goodwill, the payment of a signing bonus cannot be
justified and any order for such payment, to our mind,
constitutes grave abuse of discretion. This is more so where
the signing bonus is in the not insignificant total amount of P16
Million.
6. RED-CIRCLE-RATE ALLOWANCE
An RCR allowance is an amount, not included in the basic
salary, that is granted by the company to an employee who is
promoted to a higher position grade but whose actual basic
salary at the time of the promotion already exceeds the
maximum salary for the position to which he or she is
promoted. As an allowance, it applies only to specifics
individuals whose salary levels are unique with respect to their
new and higher positions. It is for these reasons that
MERALCO prays that it be allowed to maintain the RCR
allowance as a separate benefit and not be integrated in the
basic salary.
The integration of the RCR allowance in the basic salary of the
employees had consistently been raised in the past CBAs
(1989 and 1992) and in those cases, the Secretary decreed
the integration of the RCR allowance in the basic salary. We
do not see any reason why it should not be included in the
present CBA. In fact, in the 1995 CBA between MERALCO
and the supervisory union (FLAMES), the integration of the
RCR allowance was recognized. Thus, Sec. 4 of the CBA
provides:
All Red-Circle-Rate Allowance as of December 1, 1995 shall
be integrated in the basic salary of the covered employees who
as of such date are receiving such allowance. Thereafter, the
company rules on RCR allowance shall continue to be
observed/applied.[37]
For purposes of uniformity, we affirm the Secretarys order on
the integration of the RCR allowance in the basic salary of the
employees.
7. SICK LEAVE RESERVE OF 15 DAYS
MERALCO assails the Secretarys reduction of the sick leave
reserve benefit from 25 days to 15 days, contending that the
sick leave reserve of 15 days has reached the lowest safe level
that should be maintained to give employees sufficient buffer in
the event they fall ill.
79
We find no compelling reason to deviate from the Secretarys
ruling that the sick leave reserve is reduced to 15 days, with
any excess convertible to cash at the end of the year. The
employee has the option to avail of this cash conversion or to
accumulate his sick leave credits up to 25 days for conversion
to cash at his retirement or separation from the service. This
arrangement is, in fact, beneficial to MERALCO. The latter
admits that the diminution of this reserve does not seriously
affect MERALCO because whatever is in reserve are sick
leave credits that are payable to the employee upon separation
from service. In fact, it may be to MERALCOs financial
interest to pay these leave credits now under present salary
levels than pay them at future higher salary levels.[38]
8. 40-DAY UNION LEAVE
MERALCO objects to the demand increase in union leave
because the union leave granted to the union is already
substantial. It argues that the union has not demonstrated any
real need for additional union leave.
The thirty (30) days union leave granted by the Secretary, to
our mind, constitute sufficient time within which the union can
carry out its union activities such as but not limited to the
election of union officers, selection or election of appropriate
bargaining agents, conduct referendum on union matters and
other union-related matters in furtherance of union objectives.
Furthermore, the union already enjoys a special union leave
with pay for union authorized representatives to attend work
education seminars, meetings, conventions and conferences
where union representation is required or necessary, and Paid-
Time-off for union officers, stewards and representatives for
purpose of handling or processing grievances.
9. HIGH VOLTAGE/HIGH POLE/TOWING ALLOWANCE
MERALCO argues that there is no justification for the increase
of these allowances. The personnel concerned will not receive
any additional risk during the life of the current CBA that would
justify the increase demanded by the union. In the absence of
such risk, then these personnel deserve only the same salary
increase that all other members of the bargaining unit will get
as a result of the disputed CBA. MERALCO likewise assails
the grant of the high voltage/high pole allowance to members
of the team who are not exposed to the high voltage/high pole
risks. The risks that justify the higher salary and the added
allowance are personal to those who are exposed to those
risks. They are not granted to a team because some members
of the team are exposed to the given risks.
The increase in the high-voltage allowance (from P45.00 to
P55.00), high-pole allowance (from P30.00 to P40.00), and
towing allowance is justified considering the heavy risk the
employees concerned are exposed to. The high-voltage
allowance is granted to an employee who is authorized by the
company to actually perform work on or near energized bare
lines and bus, while the high-pole allowance is given to those
authorized to climb poles on a height of at least 60 feet from
the ground to work thereat. The towing allowance, on the
other hand, is granted to the stockman drivers who tow trailers
with long poles and equipment on board. Based on the nature
of the job of these concerned employees, it is imperative to
give them these additional allowances for taking additional
risks. These increases are not even commensurate to the
danger the employees concerned are subjected to. Besides,
no increase has been given by the company since 1992.[39]
We do not, however, subscribe to the Secretarys order
granting these allowances to the members of the team who are
not exposed to the given risks. The reason is obvious- no risk,
no pay. To award them the said allowances would be
manifestly unfair for the company and even to those who are
exposed to the risks, as well as to the other members of the
bargaining unit who do not receive the said allowances.
10. BENEFITS FOR COLLECTORS
MERALCO opposes the Secretarys grant of benefits for
collectors on the ground that this is grossly unreasonable both
in scope and on the premise it is founded.
We have considered the arguments of the opposing parties

regarding these benefits and find the Secretarys ruling on the
(a) lunch allowance; (b) disconnection fee for delinquent
accounts; (c) voluntary performance of other work at the
instance of the Company; (d) bobcat belt bags; and (e)
reduction of quota and MAPL during typhoons and other force
majeure events, reasonable considering the risks taken by the
company personnel involved, the nature of the employees
functions and responsibilities and the prevailing standard of
living. We do not however subscribe to the Secretarys award
on the following:
(a) Reduction of quota and MAPL when the collector is on sick
leave because the previous CBA has already provided for a
reduction of this demand. There is no need to further reduce
this.
(b) Deposit of cash bond at MESALA because this is no longer
necessary in view of the fact that collectors are no longer
required to post a bond.
We shall now resolve the non-economic issues.
1. SCOPE OF THE BARGAINING UNIT
The Secretarys ruling on this issue states that:
a. Scope of the collective bargaining unit. The union is
demanding that the collective bargaining unit shall be
composed of all regular rank and file employees hired by the
company in all its offices and operating centers through its
franchise and those it may employ by reason of expansion,
reorganization or as a result of operational exigencies. The
law is that only managerial employees are excluded from any
collective bargaining unit and supervisors are now allowed to
form their own union (Art. 254 of the Labor Code as amended
by R.A. 6715). We grant the union demand.
Both MERALCO and the Office of the Solicitor General dispute
this ruling because if disregards the rule We have established
on the exclusion of confidential employee from the rank and
file bargaining unit.
In Pier 8 Arrastre vs. Confesor and General Maritime and
Stevedores Union,[40] we ruled that:
Put another way, the confidential employee does not share in
the same community of interest that might otherwise make
him eligible to join his rank and file co-workers, precisely
because of a conflict in those interests.
Thus, in Metrolab Industries vs. Roldan-Confesor,[41] We
ruled:
..that the Secretarys order should exclude the
confidential employees from the regular rank and file
employees qualified to become members of the MEWA
bargaining unit.
From the foregoing disquisition, it is clear that employees
holding a confidential position are prohibited from joining the
union of the rank and file employees.
2. ISSUE OF UNION SECURITY
The Secretary in his Order of August 19, 1996,[42] ruled that:
b. Union recognition and security. The union is proposing that
it be recognized by the Company as sole and exclusive
bargaining representative of the rank and file employees
included in the bargaining unit for the purpose of collective
bargaining regarding rates of pay, wages, hours of work and
other terms and conditions of employment. For this reason,
the Company shall agree to meet only with the Union officers
and its authorized representatives on all matters involving the
Union as an organization and all issues arising from the
implementation and interpretation of the new CBA. Towards
this end, the Company shall not entertain any individual or
group of individuals on matters within the exclusive domain of
the Union.
Additionally, the Union is demanding that the right of all rank
and file employees to join the Union shall be recognized by the
Company. Accordingly, all rank and file employees shall join
the union.
xxx xxx xxx
These demands are fairly reasonable. We grant the same in
80
accordance with the maintenance of membership principle as a
form of union security."
The Secretary reconsidered this portion of his original order
when he said in his December 28, 1996 order that:
x x x. when we decreed that all rank and file employees shall
join the Union, we were actually decreeing the incorporation of
a closed shop form of union security in the CBA between the
parties. In Ferrer v. NLRC, 224 SCRA 410, the Supreme Court
ruled that a CBA provision for a closed shop is a valid form of
union security and is not a restriction on the right or freedom of
association guaranteed by the Constitution, citing Lirag v.
Blanco, 109 SCRA 87.
MERALCO objected to this ruling on the grounds that: (a) it
was never questioned by the parties; (b) there is no evidence
presented that would justify the restriction on employee's union
membership; and (c) the Secretary cannot rule on the union
security demand because this is not a mandatory subject for
collective bargaining agreement.
We agree with MERALCOs contention.
An examination of the records of the case shows that the union
did not ask for a closed shop security regime; the Secretary in
the first instance expressly stated that a maintenance of
membership clause should govern; neither MERALCO nor
MEWA raised the issue of union security in their respective
motions for reconsideration of the Secretarys first disputed
order; and that despite the parties clear acceptance of the
Secretarys first ruling, the Secretary motu
proprio reconsidered his maintenance of membership ruling in
favor of the more stringent union shop regime.
Under these circumstances, it is indubitably clear that the
Secretary gravely abused his discretion when he ordered a
union shop in his order of December 28, 1996. The
distinctions between a maintenance of membership regime
from a closed shop and their consequences in the relationship
between the union and the company are well established and
need no further elaboration.
Consequently, We rule that the maintenance of membership
regime should govern at MERALCO in accordance with the
Secretarys order of August 19, 1996 which neither party
disputed.
3. THE CONTRACTING OUT ISSUE
This issue is limited to the validity of the requirement that the
union be consulted before the implementation of any
contracting out that would last for 6 months or more.
Proceeding from our ruling in San Miguel Employees Union-
PTGWO vs Bersamina,[43] (where we recognized that
contracting out of work is a proprietary right of the employer in
the exercise of an inherent management prerogative) the issue
we see is whether the Secretarys consultation requirement is
reasonable or unduly restrictive of the companys management
prerogative. We note that the Secretary himself has
considered that management should not be hampered in the
operations of its business when he said that:
We feel that the limitations imposed by the union advocates
are too specific and may not be applicable to the situations that
the company and the union may face in the future. To our
mind, the greater risk with this type of limitation is that it will
tend to curtail rather than allow the business growth that the
company and the union must aspire for. Hence, we are for the
general limitations we have stated above because they will
allow a calibrated response to specific future situations the
company and the union may face.[44]
Additionally, We recognize that contracting out is not unlimited;
rather, it is a prerogative that management enjoys subject to
well-defined legal limitations. As we have previously held, the
company can determine in its best business judgment whether
it should contract out the performance of some of its work for
as long as the employer is motivated by good faith, and the
contracting out must not have been resorted to circumvent the
law or must not have been the result of malicious or arbitrary
action.[45] The Labor Code and its implementing rules also
contain specific rules governing contracting out (Department of
Labor Order No. 10, May 30, 1997, Sections. 1-25).

Given these realities, we recognize that a balance already exist
in the parties relationship with respect to contracting out;
MERALCO has its legally defined and protected management
prerogatives while workers are guaranteed their own protection
through specific labor provisions and the recognition of limits to
the exercise of management prerogatives. From these
premises, we can only conclude that the Secretarys added
requirement only introduces an imbalance in the parties
collective bargaining relationship on a matter that the law
already sufficiently regulates. Hence, we rule that the
Secretarys added requirement, being unreasonable, restrictive
and potentially disruptive should be struck down.
4. UNION REPRESENTATION IN COMMITTEES
As regards this issue, We quote with approval the holding of
the Secretary in his Order of December 28, 1996, to wit:
We see no convincing reason to modify our original Order on
union representation in committees. It reiterates what the
Article 211 (A)(g) of the Labor Codes provides: To ensure the
participation of workers in decision and policy-making
processes affecting their rights, duties and welfare. Denying
this opportunity to the Union is to lay the claim that only
management has the monopoly of ideas that may improve
management strategies in enhancing the Companys growth.
What every company should remember is that there might be
one among the Union members who may offer productive and
viable ideas on expanding the Companys business horizons.
The unions participation in such committees might just be the
opportune time for dormant ideas to come forward. So, the
Company must welcome this development (see also PAL v.
NLRC, et. al., G.R. 85985, August 13, 1995). It must be
understood, however, that the committees referred to here are
the Safety Committee, the Uniform Committee and other
committees of a similar nature and purpose involving
personnel welfare, rights and benefits as well as duties.
We do not find merit in MERALCOs contention that the above-
quoted ruling of the Secretary is an intrusion into the
management prerogatives of MERALCO. It is worthwhile to
note that all the Union demands and what the Secretarys
order granted is that the Union be allowed to participate in
policy formulation and decision-making process on matters
affecting the Union members right, duties and welfare as
required in Article 211 (A)(g) of the Labor Code. And this
can only be done when the Union is allowed to have
representatives in the Safety Committee, Uniform Committee
and other committees of a similar nature. Certainly, such
participation by the Union in the said committees is not in the
nature of a co-management control of the business of
MERALCO. What is granted by the Secretary
is participation and representation. Thus, there is no
impairment of management prerogatives.
5. INCLUSION OF ALL TERMS AND CONDITIONS IN THE
CBA
MERALCO also decries the Secretarys ruling in both the
assailed Orders that-
All other benefits being enjoyed by the companys employees
but which are not expressly or impliedly repealed in this new
agreement shall remain subsisting and shall likewise be
included in the new collective bargaining agreement to be
signed by the parties effective December 1, 1995.[46]
claiming that the above-quoted ruling intruded into the
employers freedom to contract by ordering the inclusion in the
new CBA all other benefits presently enjoyed by the employees
even if they are not incorporated in the new CBA. This matter
of inclusion, MERALCO argues, was never discussed and
agreed upon in the negotiations; nor presented as issues
before the Secretary; nor were part of the previous CBAs
between the parties.
We agree with MERALCO.
The Secretary acted in excess of the discretion allowed him by
law when he ordered the inclusion of benefits, terms and
conditions that the law and the parties did not intend to be
reflected in their CBA.
To avoid the possible problems that the disputed orders may
bring, we are constrained to rule that only the terms and
conditions already existing in the current CBA and was granted
81
by the Secretary (subject to the modifications decreed in this
decision) should be incorporated in the CBA, and that the
Secretarys disputed orders should accordingly be modified.
6. RETROACTIVITY OF THE CBA
Finally, MERALCO also assails the Secretarys order that the
effectivity of the new CBA shall retroact to December 1, 1995,
the date of the commencement of the last two years of the
effectivity of the existing CBA. This retroactive date,
MERALCO argues, is contrary to the ruling of this Court in Pier
8 Arrastre and Stevedoring Services, Inc. vs. Roldan-
Confessor[47] which mandates that the effective date of the
new CBA should be the date the Secretary of Labor has
resolved the labor disputes.
On the other hand, MEWA supports the ruling of the Secretary
on the theory that he has plenary power and discretion to fix
the date of effectivity of his arbitral award citing our ruling in St.
Lukes Medical Center, Inc. vs. Torres.[48] MEWA also
contends that if the arbitral award takes effect on the date of
the Secretary Labors ruling on the parties motion for
reconsideration (i.e., on December 28, 1996), an anomaly
situation will result when CBA would be more than the 5-year
term mandated by Article 253-A of the Labor Code.
However, neither party took into account the factors necessary
for a proper resolution of this aspect. Pier 8, for instance, does
not involve a mid-term negotiation similar to this case,
while St. Lukes does not take the hold over principle into
account, i.e., the rule that although a CBA has expired, it
continues to have legal effects as between the parties until a
new CBA has been entered into.[49]
Article 253-A serves as the guide in determining when the
effectivity of the CBA at bar is to take effect. It provides that
the representation aspect of the CBA is to be for a term of 5
years, while
x x x [A]ll other provisions of the Collective Bargaining
Agreement shall be re-negotiated not later than 3 years after
its execution. Any agreement on such other provisions of the
Collective Bargaining Agreement entered into within 6 months
from the date of expiry of the term of such other provisions as
fixed in such Collective Bargaining Agreement shall retroact to
the day immediately following such date. If such agreement is
entered into beyond 6 months, the parties shall agree on the
duration of the effectivity thereof. x x x.
Under these terms, it is clear that the 5-year term requirement
is specific to the representation aspect. What the law
additionally requires is that a CBA must be re-negotiated within
3 years after its execution. It is in this re-negotiation that
gives rise to the present CBA deadlock.
If no agreement is reached within 6 months from the expiry
date of the 3 years that follow the CBA execution, the law
expressly gives the parties - not anybody else - the discretion
to fix the effectivity of the agreement.
Significantly, the law does not specifically cover the situation
where 6 months have elapsed but no agreement has been
reached with respect to effectivity. In this eventuality, we hold
that any provision of law should then apply for the law abhors a
vacuum.[50]
One such provision is the principle of hold over, i.e., that in the
absence of a new CBA, the parties must maintain the status
quo and must continue in full force and effect the terms and
conditions of the existing agreement until a new agreement is
reached.[51] In this manner, the law prevents the existence of a
gap in the relationship between the collective bargaining
parties. Another legal principle that should apply is that in the
absence of an agreement between the parties, then, an
arbitrated CBA takes on the nature of any judicial or quasi-
judicial award; it operates and may be executed only
respectively unless there are legal justifications for its
retroactive application.
Consequently, we find no sufficient legal ground on the other
justification for the retroactive application of the disputed CBA,
and therefore hold that the CBA should be effective for a term
of 2 years counted from December 28, 1996 (the date of the
Secretary of Labors disputed order on the parties motion for

reconsideration) up to December 27, 1999.
WHEREFORE, the petition is granted and the orders of public
respondent Secretary of Labor dated August 19, 1996 and
December 28, 1996 are set aside to the extent set forth
above. The parties are directed to execute a Collective
Bargaining Agreement incorporating the terms and conditions
contained in the unaffected portions of the Secretary of Labors
order of August 19, 1996 and December 28, 1996, and the
modifications set forth above. The retirement fund issue is
remanded to the Secretary of Labor for reception of evidence
and determination of the legal personality of the MERALCO
retirement fund.
SO ORDERED.
G.R. No. 115394, September 27, 1995
FE S. SEBUGUERO, CARLOS ONG, NENE MANAOG,
JUANITO CUSTODIO, CRISANTA LACSAM, SATURNINO
GURAL, WILMA BALDERA, LEONILA VALDEZ, FATIMA
POTESTAD, EVANGELINE AGNADO, RESTITUTO
GLORIOSO, JANESE DE LOS REYES, RODOLFO
SANCHEZ, WILMA ORBELLO, DAISY PASCUA, AND ALEX
MASAYA, PETITIONERS, VS. NATIONAL LABOR
RELATIONS COMMISSION, G.T.I. SPORTSWEAR
CORPORATION AND/OR BENEDICTO YUJUICO,
RESPONDENTS.
DECISION
DAVIDE, JR., J.:
This is a special civil action for certiorari under Rule 65 of the
Rules of Court to set aside for having been rendered with
grave abuse of discretion the decision of 29 November
1993[1] and resolution of 9 February 1994[2] of public
respondent National Labor Relations Commission (NLRC) in
NLRC NCR CA Case No. 004673-93. The former modified the
decision of 26 February 1993 of the Labor Arbiter[3] by setting
aside the award of back wages, proportionate 13th month pay
for 1991 and attorney's fees, while the latter denied the motion
to reconsider the former.
The antecedent facts as disclosed by the decisions of the
Labor Arbiter and the NLRC, as well as by the pleadings of the
parties, are not complicated.
The petitioners were among the thirty-eight (38) regular
employees of private respondent GTI Sportswear Corporation
(hereinafter GTI), a corporation engaged in the manufacture
and export of ready-to-wear garments, who were given
"temporary lay-off" notices by the latter on 22 January 1991
due to alleged lack of work and heavy losses caused by the
cancellation of orders from abroad and by the garments
embargo of 1990.
Believing that their "temporary lay-off" was a ploy to dismiss
them, resorted to because of their union activities and was in
violation of their right to security of tenure since there was no
valid ground therefor, the 38 laid-off employees filed with the
Labor Arbiter's office in the National Capital Region complaints
for illegal dismissal, unfair labor practice, underpayment of
wages under Wage Orders Nos. 01 and 02, and nonpayment
of overtime pay and 13th month pay.[4]
Private respondent GTI denied the claim of illegal dismissal
and asserted that it was its prerogative to lay-off its employees
temporarily for a period not exceeding six months to prevent
losses due to lack of work or job orders from abroad, and that
the lay-off affected both union and non-union members. It
justified its failure to recall the 38 laid-off employees after the
lapse of six months because of the subsequent cancellations
of job orders made by its foreign principals, a fact which was
communicated to the petitioners and the other complainants
who were all offered severance pay. Twenty-two (22) of the 38
complainants accepted the separation pay. The petitioners
herein did not.
The cases then involving those who accepted the separation
82
pay were pro tanto dismissed with prejudice.
In his decision of 26 February 1993 with respect to the claims
of the petitioners, Labor Arbiter Pablo C. Espiritu, Jr. found for
them and disposed as follows:
WHEREFORE, above premises considered, judgment is
hereby rendered finding Respondent, G.T.I. Sportswear
Corporation, liable for constructive dismissal, underpayment of
wages under NCR 01 and 02, and 13th-month pay differentials
and concomitantly, Respondent corporation is hereby ordered:
a. To pay the following complainants backwages from
the time of their constructive dismissal (July 22, 1991)
till promulgation considering that reinstatement is no
longer, decreed: ...
b. To pay complainants separation pay of 1/2 month for
every year of service in lieu of reinstatement in the
following amounts: ...
c. To pay complainants 13th-month pay differentials
arising out of underpayment of wages and
proportionate 13th-month pay for 1991 in the following
amounts: ...
d. To pay complainants underpayment of wages under
NCR Wage 01 and NCR Wage 02 in the following
amounts: ...
e. To pay complainants the amount of P120,618.87
representing 10% attorney's fees based on the total
judgment award of P1,326,807.63.
The claims for unfair labor practice, nonpayment of overtime
pay, moral damages, and exemplary damages are hereby
denied for lack of merit.
SO ORDERED.[5]
In support of the disposition, the Labor Arbiter made the
following ratiocinations:
On the validity of the temporary lay-off, this Arbitration Branch
finds that there was ample justification on the part of
Respondent company to lay-off temporarily some of its
employees to prevent losses as a result of the reduction of the
garment quota allocated to Respondent company due to the
garment embargo of 1990. In fact, in the months of March,
April, and May of 1991 respondent company received several
messages/correspondence from its foreign principals informing
them (Respondent) that they are cancelling/transferring some
of their quotas/orders to other countries. The evidence
presented by Respondent company proves this fact (Exhibits
"12", "13", "14", "15", "15-A", "16", "17" and Annexes "5", "6",
"7", showing the different documentary evidence on
cancellation of orders and forced leave schedules of workers
due to lack of work). This is sustainable, as in this case, where
the Respondent found it unnecessary to continue employing
some of its workers because of business recession, lack of
materials to work on due to government controls (garments
embargo) and due to the lack of the demand for export quota
from its principal foreign buyers.
Although, as a general rule, Respondent company has the
prerogative and right to resort to temporary lay-off, such right is
likewise limited to a period of six (6) months applying Art. 286
of the Labor Code on suspension of employer-employee
relationship not exceeding six (6) months.
In this case, respondent company was justified in the
temporary lay-off of some of its employees. However,
Respondent company should have recalled them after the end
of the six month period or at the least reasonably informed
them (complainants) that the Respondent company is still not
in a position to recall them due to the continuous drop of
demand in the export market (locally or internationally), thereby
extending the temporary lay-off with a definite period of recall
and if the same cannot be met, then the company should
implement retrenchment and pay its employees separation
pay. Failing in this regard, respondent company chose not to
recall nor send notice to the complainants after the lapse of the
 83

six (6) month period. Hence, there is in this complaint a clear Art. 286 of the Labor Code is precised [sic] in this regards
case of constructive dismissal. While there is a valid reason when it provided that:
for the temporary lay-off, the same is also limited to a duration
of six months. Thereafter the employees, complainants herein,
"Art. 286. When employment not deemed terminated.
are entitled under the law (Art. 286) to be recalled back to
The bona fide suspension of the operation of a business or
work. As result thereof, the temporary lay-off of the
undertaking for a period not exceeding six (6) months, x x x
complainants from January 2??? 1991 (date of lay-off) to July
shall not terminate employment x x x."
22, 1991 is valid, however, thereafter complainants are already
entitled to backwages, in view of constructive dismissal, due to
It is only after the six months period that an employee can be
the fact that they were no longer recalled back to work.
presumed to have been terminated.[7]
Complainants cannot be placed on temporary lay-off forever.
The limited period of six (6) months is based provisionally to
It thus set aside the awards for back wages, proportionate 13th
prevent circumvention on the right to security of tenure and to
month pay for 1991, and for attorney's fees which it found to be
prevent grave abuse of discretion on the part of the employer.
without basis, and disposed as follows:
However, since during the trial it was proven, as testified by the
Vice-President for marketing and personnel manager, that the
WHEREFORE, premises considered the decision of the Labor
lack of work and selection of personnel continued to persist
Arbiter dated February 26, 1993 is hereby modified by deleting
and considering the antagonism and hostility displayed by both
the award of backwages, the proportionate 13th month pay for
litigants, as observed by this Arbiter, during the trial of this case
1991 and attorney's fees for lack of legal basis and direct, the
and in view of the strained relations between the parties,
payment of separation pay equal to one-half month salary for
reinstatement of the complainants would not be prudent.
every year of service as of July 22, 1991.[8]
(Divine Word High School vs. NLRC, G.R. 72207, 6 Aug. 1986;
Esmalin vs. NLRC, G.R. 67880, 15 Sept. 1989; Hernandez vs.
Unable to accept the NLRC judgment, the petitioners filed this
NLRC, G.R. 34302, 10 Aug. 1989). Hence, separation pay of
special civil action for certiorari. They contend that the NLRC
1/2 month for every year of service in lieu of reinstatement is in
acted without or in excess of jurisdiction or with grave abuse of
order. . . .
discretion when it: (a) ruled that there was a valid and legal
reduction of business and in sustaining the theory of
On the issue of monetary claims this Arbitration Branch finds
redundancy in justifying the dismissal of the petitioners; (b)
that Respondent is liable for underpayment of wages under
failed to apply in full the provisions of law and of jurisprudence
NCR Wage Order 01 and 02 considering that respondent failed
as to the full payment of back wages in cases of illegal
to rebut the claims of the complainants. Respondent failed to
dismissal; and (c) deleted the award of attorney's fees.
show proof by means of payrolls to disprove the claim of the
complainants. Complainants are also entitled to their
We gave due course to this petition after the filing of the
proportionate 13th-month pay differentials as a result of the
separate comments to the petition by the public and private
underpayment of wages under NCR-01 and 02 and likewise to
respondents and the petitioners' reply to the public
their proportionate 13th-month pay for 1991 for the month of
respondent's comment.
January 1991. . . .
The petitioners' first contention is based on a wrong premise or
However, complainants are entitled to reasonable attorney's
on a miscomprehension of the statement of the NLRC. What
fees considering they were forced to engage the services of
the NLRC sustained and affirmed is not redundancy,
counsel in order to fully ventilate their rights and grievances in
but retrenchment as a ground for termination of employment.
accordance with the Labor Code as amended.[6]
They are not synonymous but distinct and separate grounds
under Article 283 of the Labor Code, as amended.[9]
The Labor Arbiter found no sufficient evidence to prove the
petitioners' charges of unfair labor practice, overtime pay, and
Redundancy exists where the services of an employee are in
for moral and exemplary damages.
excess of what is reasonably demanded by the actual
requirements of the enterprise. A position is redundant where
Private respondent GTI seasonably appealed the aforesaid
it is superfluous, and superfluity of a position or positions may
decision to the NLRC, which docketed the appeal as NLRC
be the outcome of a number of factors, such as overhiring of
NCR CA Case No. 004673-93.
workers, decreased volume of business, or dropping of a
particular product line or service activity previously
In its challenged decision, the NLRC concurred with the
manufactured or undertaken by the enterprise.[10]
findings of the Labor Arbiter that there was a valid lay-off of the
petitioners due to lack of work, but disagreed with the latter's
Retrenchment, on the other hand, is used interchangeably with
ruling granting back wages after 22 July 1991. The NLRC
the term "lay-off." It is the termination of employment initiated
justified its postulation as follows:
by the employer through no fault of the employee's and without
prejudice to the latter, resorted to by management during
However, we cannot sustain the findings of the Labor Arbiter in
periods of business recession, industrial depression, or
awarding the complainants backwages after July 22, 1991 in
seasonal fluctuations, or during lulls occasioned by lack of
view of constructive dismissal, it being acknowledged by him
orders, shortage of materials, conversion of the plant for a new
that "x x during the trial it was proven, as testified by the Vice-
production program or the introduction of new methods or
President for marketing and personnel manager, that the lack
more efficient machinery, or of automation.[11] Simply put, it is
of work and selection of personnel continued to persist xx."
an act of the employer of dismissing employees because of
Besides, it was not denied by the complainants that during the
losses in the operation of a business, lack of work, and
proceeding of the case, the respondents conveyed to the
considerable reduction on the volume of his business, a right
complainants the impossibility of having them recalled in view
consistently recognized and affirmed by this Court.[12]
of the continued unavailability of work as the economic
recession of the respondent's principal market persisted. In
Article 283 of the Labor Code which covers retrenchment,
fact, the respondent company offered to complainants payment
reads as follows:
of their separation pay which offer [w]as accepted by 22 out of
38 complainants.
ART. 283. Closure of establishment and reduction of
personnel. -- The employer may also terminate the
Having established lack of work, it necessarily follow[s] that
employment of any employee due to the installation of labor
retrenchment did take place and not constructive dismissal.
saving devices, redundancy, retrenchment to prevent losses or
Dismissal by its term, presuppose that there was still work
the closing or cessation of operation of the establishment or
available and that the employer terminated the services of the
undertaking unless the closing is for the purpose of
employee therefrom. The same cannot be said of the case at
circumventing the provisions of this Title, by servicing a written
bar. The complainants did not question the evidence of lack of
notice on the workers and the Ministry of Labor and
work on account of reduction of government quota or
Employment at least one (1) month before the intended date
cancellation of orders.
thereof. In case of termination due to the installation of labor
saving devices or redundancy, the worker affected thereby

shall be entitled to a separation pay equivalent to at least his
one (1) month pay or to at least one (1) month pay for every
year of service, whichever is higher. In case of retrenchment
to prevent losses and in cases of closure or cessation of
operations of establishment or undertaking not due to serious
business losses or financial reverses, the separation pay shall
be equivalent to one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1)
whole year.
This provision, 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.[13] Six months is the period set by
law that the operation of a business or undertaking may be
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 be liable for such dismissal.
To determine, therefore, whether the petitioners were validly
retrenched or were illegally dismissed, we must determine
whether there was compliance with the law regarding a valid
retrenchment at anytime within the six month-period that they
were temporarily laid-off.
Under the aforequoted Article 283 of the Labor Code, there are
three basic requisites for a valid retrenchment:
(1) the retrenchment is necessary to prevent losses and such losses are proven;
(2) written notice to the employees and to the Department of Labor and Employment 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 1/2 month pay for every year
of service, whichever is higher.
As for the first requisite, whether or not an employer would
imminently suffer serious or substantial losses for economic
reasons is essentially a question of fact for the Labor Arbiter
[14]
and the NLRC to determine. Here, both the Labor Arbiter and
the NLRC found that the private respondent was suffering and
would continue to suffer serious losses, thereby justifying the
retrenchment of some of its employees, including the
petitioners. We are not prepared to disregard this finding of
fact. It is settled that findings of quasi-judicial agencies which
have acquired expertise in the matters entrusted to their
jurisdiction are accorded by this Court not only with respect but
with finality if they are supported by substantial evidence.
[15]
The latter means that amount of relevant evidence which a
reasonable mind might accept as adequate to justify a
[16]
conclusion. In the instant case, no claim was made by any of
the parties that such a finding was not supported by substantial
evidence. Furthermore, the petitioners did not appeal the
finding of the Labor Arbiter that their temporary lay-off to
prevent losses was amply justified. They cannot now question
this finding that there is a valid ground to lay-off or retrench
them.
The requirement of notice to both the employees concerned
and the Department of Labor and Employment (DOLE) is
mandatory and must be written and given at least one month
before the intended date of retrenchment. In this case, it is
undisputed that the petitioners were given notice of the
temporary lay-off. There is, however, no evidence that any
written notice to permanently retrench them was given at least
one month prior to the date of the intended retrenchment. The
NLRC found that GTI conveyed to the petitioners the
impossibility of recalling them due to the continued
[17]
unavailability of work. But what the law requires is
a written notice to the employees concerned and that
84
requirement is mandatory .[18] The notice must also be given at
least one month in advance of the intended date of
retrenchment to enable the employees to look for other means
of employment and therefore to ease the impact of the loss of
their jobs and the corresponding income.[19] That they were
already on temporary lay-off at the time notice should have
been given to them is not an excuse to forego the one-month
written notice because by this time, their lay-off is to become
permanent and they were definitely losing their employment.
There is also nothing in the records to prove that a written
notice was ever given to the DOLE as required by law. GTI's
position paper,[20] offer of exhibits,[21]Comment to the Petition,
[22]
and Memorandum[23] in this case do not mention of any such
written notice. The law requires two notices one to the
employee/s concerned and another to the DOLE not just
one. The notice to the DOLE is essential because the right to
retrench is not an absolute prerogative of an employer but is
subject to the requirement of law that retrenchment be done to
prevent losses. The DOLE is the agency that will determine
whether the planned retrenchment is justified and adequately
supported by facts.[24]
With respect to the payment of separation pay, the NLRC
found that GTI offered to give the petitioners their separation
pay but that the latter rejected such offer which was accepted
only by 22 out of the 38 original complainants in this case.
[25]
As to when this offer was made was not, however, proven.
All that the parties, the Labor Arbiter and the NLRC stated in
their respective pleadings and decisions was that the offer and
payment were made during the pendency of the illegal
dismissal case with the Labor Arbiter. But with or without this
offer of separation pay, our conclusion would remain the same:
that the retrenchment of the petitioners is defective in the face
of our finding that the required notices to both the petitioners
and the DOLE were not given.
The lack of written notice to the petitioners and to the DOLE
does not, however, make the petitioners' retrenchment illegal
such that they are entitled to the payment of back wages and
separation pay in lieu of reinstatement as they contend. Their
retrenchment, for not having been effected with the required
notices, is merely defective. In those cases where we found
the retrenchment to be illegal and ordered the employees'
reinstatement and the payment of back wages, the validity of
the cause for retrenchment, that is the existence of imminent or
actual serious or substantial losses, was not proven.[26] But
here, such a cause is present as found by both the Labor
Arbiter and the NLRC. There is only a violation by GTI of the
procedure prescribed in Article 283 of the Labor Code in
effecting the retrenchment of the petitioners.
It is now settled that where the dismissal of an employee is in
fact for a just and valid cause and is so proven to be but he is
not accorded his right to due process, i.e., he was not
furnished the twin requirements of notice and the opportunity to
be heard, the dismissal shall be upheld but the employer must
be sanctioned for non-compliance with the requirements of or
for failure to observe due process. The sanction, in the nature
of indemnification or penalty, depends on the facts of each
case and the gravity of the omission committed by the
employer and has ranged from P1,000.00 as in the cases
of Wenphil vs. National Labor Relations Commission,
[27]
Seahorse Maritime Corp. vs. National Labor Relations
Commission,[28] Shoemart, Inc. vs. National Labor Relations
Commission,[29] Rubberworld (Phils.), Inc. vs. National Labor
Relations Commission,[30] Pacific Mills, Inc. vs. Alonzo,
[31]
and Aurelio vs. National Labor Relations Commission[32] to
P10,000.00 in Reta vs. National Labor Relations
Commission[33] and Alhambra Industries, Inc. vs. National
Labor Relations Commission.[34] More recently, in Worldwide
Papermills, Inc. vs. National Labor Relations Commission,
[35]
the sum of P5,000.00 was awarded to the employee as
indemnification for the employer's failure to comply with the
requirements of procedural due process.
Accordingly, we affirm the deletion by the NLRC of the award
of back wages. But because the required notices of the
petitioners' retrenchment were not served upon the petitioners
and the DOLE, GTI must be sanctioned for such failure and
thereby required to indemnify each of the petitioners the sum
of P2,000.00 which we find to be just and reasonable under the

circumstances of this case.
As for the award of the 13th-month pay made by the Labor
Arbiter and deleted by the NLRC, we do not find anything in
the decision of the NLRC to support the deletion of this award
other than its opinion that there is lack of legal basis to support
such an award, without, however, furnishing any explanation
for this finding. Thus, the award of the 13th-month pay made
and sufficiently justified by the Labor Arbiter must be reinstated
as prayed for by the petitioners.
Also, the petitioners are entitled to an award for attorney's fees
pursuant to paragraph 7, Article 2208 of the Civil Code which
must, however, be reasonable. The award of P120,618.87,
which is equivalent to ten percent (10%) of the amounts
recovered, as attorney's fees should be reduced to
P25,000.00, an amount we find to be reasonable. The ten
percent (10%) attorney's fees provided for in Article 111 of the
Labor Code and Section 11, Rule VIII, Book III of the
Implementing Rules is the maximum; hence, any amount less
than that may be awarded as the circumstances of the case
may warrant.
WHEREFORE, the instant petition is partially GRANTED and
the challenged decision of public respondent National Labor
Relations Commission in NLRC NCR CA Case No. 004673-93
is modified by reversing and setting aside its deletion of the
awards in the Labor Arbiter's decision of proportionate 13th
month pay for 1991 and attorney's fees, the latter being
reduced to P25,000.00. Separation pay equivalent to one-half
(1/2) month pay for every year of service shall be computed
from the dates of the commencement of the petitioners'
respective employment until the end of their six-month
temporary lay-off which is 22 July 1991. In addition, private
respondent G.T.I. Sportswear Corporation is ordered to pay
each of the petitioners the sum of P2,000.00 as indemnification
for its failure to observe due process in effecting the
retrenchment.
Costs against the private respondent.
SO ORDERED.
G.R. No. 116354, December 04, 1997
HEIRS OF THE LATE R/O REYNALDO ANIBAN
REPRESENTED BY BRIGIDA P. ANIBAN, PETITIONERS,
VS. NATIONAL LABOR RELATIONS COMMISSION,
PHILIPPINE TRANSMARINE CARRIERS, INC.,
NORWEGIAN SHIP MANAGEMENT, INC. A/S, AND
PIONEER INSURANCE AND SURETY CORPORATION,
RESPONDENTS.
DECISION
BELLOSILLO, J.:
BRIGIDA P. ANIBAN representing the heirs of the late
Reynaldo Aniban assails the decision of the National Labor
Relations Commission (NLRC), [1] reversing that of the
Philippine Overseas Employment Administration (POEA) which
ruled that myocardial infarction was an occupational decease
in the case of radio operator Reynaldo Aniban and awarded,
aside from attorney's fees of US$6,700.00, a total of
US$67,000.00 in death benefits to his heirs: US$13,000.00 for
death benefits under the POEA Standard Employment
Contract; US$30,000.00 for death benefits under the Collective
Bargaining Agreement; and, US$24,000.00 as additional
compensation for his three (3) children under eighteen (18)
years of age at US$8,000.00 each, [2] as well as denying the
motion for its reconsideration. [3]
Reynaldo Aniban was employed by the Philippine Transmarine
Carriers, Inc. (TRANSMARINE) acting in behalf of its foreign
principal Norwegian Ship Management A/S
(NORWEGIAN) [4] as radio operator (R/O) on board the vessel
"Kassel" for a contract period of nine (9) to eleven (11) months.
On 26 June 1992, or during the period of his employment, R/O
Aniban died due to myocardial infarction. [5] He was survived by
a pregnant wife and three (3) minor children who prayed for
85
death benefits provided under par. (1) of the POEA Standard
Employment Contract thus -
1. In case of death of the seaman during the term of his
contract, the employer shall pay his beneficicaries the
Philippine currency equivalent to the amount of: x x x x b.
US$13,000.00 for other officers including radio operators and
master electricians.
A claim was also made for additional death benefits under the
Collective Bargaining Agreement executed between
Associated Marine Officers and Seamen's Union of the
Philippines and NORWEGIAN represented by
TRANSMARINE, to wit:
Article 11
Compensation for loss of Life
Death caused by an Occupational Injury or Disease. - In the
event of death of an officer due to an occupational injury or
disease while serving on board, while travelling to and from the
vessel on Company's business or due to marine peril, the
Company will pay his beneficiaries a compensation in
accordance with the POEA's rules and regulations x x x x It is
agreed that these beneficiaries will be the following next of kin:
The officer's spouse, children or parents in this preferential
order.
The company will pay an additional compensation to the
beneficiaries listed above with same preferential order to that
compensation provided by the POEA Rules and Regulations.
The additional compensation will be US$30,000.00 plus
US$8,000.00 to each child under the age of eighteen (18)
years, maximum US$24,000.00 (not exceeding 3 children).
The claim was granted only to the extent of US$13,000.00
provided under the POEA Standard Employment Contract. The
claim under the CBA was rejected on the ground that
myocardial infarction of which R/O Aniban died was not an
occupational disease as to entitle his heirs to the additional
death benefits provided therein. Consequently, Brigida Aniban
and her children filed a formal complaint for non-payment of
death compensation benefits under the CBA. [6]
On 11 January 1994 the POEA ruled that myocardial infarction
was an occupational disease in the case of R/O Aniban and
granted the prayer of his heirs for payment of death benefits
under the POEA Standard Employment Contract as well as
under the Collective Bargaining Agreement plus attorney's fees
of US$6,700.00 equivalent to 10% of the total award. [7]
On appeal, however, the NLRC reversed the POEA and denied
the claim for additional death benefits on the ground that it was
the Employees Compensation Commission (ECC) which had
original and exclusive jurisdiction to hear and determine the
claim for death benefits. [8] A motion to reconsider the decision
of the NLRC was denied; hence, this petition by the heirs of
R/O Reynaldo Aniban.
Two issues are raised before us: (a) whether the POEA has
jurisdiction to determine the claim of petitioners for death
benefits, and (b) whether myocardial infarction is an
occupational disease as to entitle petitioners to the death
benefits provided under the CBA.
It must be stated at the outset that the proper issue raised
before us is that dealing with the jurisdiction of the POEA to
resolve the claim for additional death benefits since the NLRC
denied the claim on this sole ground. However, we are likewise
addressing the second issue, i.e., merits of the claim, to afford
the parties the relief they seek and prevent further needless
delay in the resolution thereof.
On the issue of jurisdiction, it is not disputed that R/O
Reynaldo Aniban was a Filipino seaman and that he died on
board the vessel of his foreign employer during the existence
of his employment contract, hence, this claim for death benefits
by his widow and children.
The law applicable at the time the complaint was filed on 13
November 1992 was Art. 20 of the Labor Code as amended by
E. O. Nos. 797 [9] and 247 [10] which clearly provided that
"original and exclusive jurisdiction over all matters or cases
including money claims, involving employer-employee

relations, arising out of or by virtue of any law or contract
involving Filipino seamen for overseas employment is vested
with the POEA. [11]
On the other hand, the jurisdiction of the ECC comes into play
only when the liability of the State Insurance Fund is in issue,
as correctly suggested by the Solicitor General. The ECC was
created under Title II, Bk. IV, of the Labor Code with the
heading of Employees Compensation and State Insurance
Fund. In addition to its powers and duties enumerated in Art.
177, Art. 180 explicitly provides that the Commission exercises
appellate jurisdiction only over decisions rendered by either the
Government Service Insurance System (GSIS) or Social
Security System (SSS) in the exercise of their respective
original and exclusive jurisdictions. Hence, the ECC may not
be considered as having jurisdiction over money claims, albeit
death compensation benefits, of overseas contract workers.
Thus, in so ruling, the NLRC clearly committed grave abuse of
discretion.
As regards the second issue, i.e., whether the death of
Reynaldo Aniban due to myocardial infarction is compensable,
the POEA ruled in the affirmative when it likened the infirmity to
a "heart attack" commonly aggravated by pressure and strain.
It was observed that R/O Aniban, in addition to undergoing
physical exertion while performing his duties as radio operator,
was also exposed to undue pressure and strain as he was
required to be on call twenty-four (24) hours a day to
receive/transmit messages and to keep track of weather
conditions. Such pressure and strain were aggravated by being
away from his family, a plight commonly suffered by all
seamen. In the case of R/O Aniban, the separation was
particularly distressful as his pregnant wife was due to deliver
their fourth child. Hence, the POEA ruled that myocardial
infarction was an occupational disease.
We cannot rule otherwise. Reynaldo Aniban was healthy at the
time he boarded the vessel of his foreign employer. His
medical records reveal that he had no health problem except
for a "defective central vision secondary to injury." [12] Hence,
he was certified "fit to work as radio operator" by the examining
physician. However, R/O Aniban died three (3) months after he
boarded "Kassel" due to myocardial infarction. As aforesaid,
the POEA ruled that the cause of death could be considered
occupational. Being a factual finding by the administrative
agency tasked with its determination, such conclusion
deserves respect and must be accorded finality. [13] Besides we
have already repeatedly ruled that death due to myocardial
infarction is compensable. [14] In Eastern Shipping Lines, Inc. v.
POEA, [15] although compensability was not the main issue, we
upheld the decision of the POEA adjudging as compensable
the death of a seaman on board the vessel of his foreign
employer due to myocardial infarction.
Although it may be conceded in the instant case that the
physical exertion involved in carrying out the functions of a
radio operator may have been quite minimal, we cannot
discount the pressure and strain that went with the position of
radio operator. As radio operator, Reynaldo Aniban had to
place his full attention in hearing the exact messages received
by the vessel and to relay those that needed to be transmitted
to the mainland or to other vessels. We have already
recognized that any kind of work or labor produces stress and
strain normally resulting in the wear and tear of the human
body.[16] It is not required that the occupation be the only cause
of the disease as it is enough that the employment contributed
even in a small degree to its development. [17]
It must be stressed that the strict rules of evidence are not
applicable in claims for compensation considering that
probability and not the ultimate degree of certainty is the test of
proof in compensation proceedings. [18]
It is a matter of judicial notice that an overseas worker, having
to ward off homesickness by reason of being physically
separated from his family for the entire duration of his contract,
bears a great degree of emotional strain while making an effort
to perform his work well. The strain is even greater in the case
of a seaman who is constantly subjected to the perils of the
sea while at work abroad and away from his family. In this
case, there is substantial proof that myocardial infarction is an
occupational disease for which Aniban's employer obligated
86
itself to pay death benefits and additional compensation under
the CBA in the event of the demise of its employee by reason
thereof.
On the award of attorney's fees which NLRC deleted on the
ground that there was no unlawful withholding of wages,
suffice it to say that Art. 111 of the Labor Code does not limit
the award of attorney's fees to cases of unlawful withholding of
wages only. What it explicitly prohibits is the award of
attorney's fees which exceed 10% of the amount of wages
recovered. Thus, under the circumstances, attorney's fees are
recoverable for the services rendered by petitioner's counsel to
compel Aniban's employer to pay its monetary obligations
under the CBA. However the amount of P50,000.00 claimed as
attorney's fees in this case is the reasonable compensation
based on the records and not the maximum 10% of the total
award as granted by POEA. The reduction of unreasonable
attorney's fees is within our regulatory powers. [19]
WHEREFORE, the assailed Decision and Resolution of the
National Labor Relations Commission
are REVERSED and SET ASIDE.
The Decision of the Philippine Overseas Employment
Administration dated 10 January 1994 ordering respondents
Philippine Transmarine Carriers, Inc., Norwegian Ship
Management A/S, and Pioneer Insurance and Surety
Corporation jointly and severally to pay the heirs of the late
R/O Reynaldo Aniban represented by his widow Brigida P.
Aniban the following amounts in Philippine currency at the
prevailing rate of exchange at the time of payment: (a)
US$13,000.00 for death benefits in accordance with POEA
Standard Employment Contract; (b) US$30,000.00 death
benefits under the Collective Bargaining Agreement; (c)
US$24,000.00 additional compensation for the three (3)
children under 18 years of age at US$8,000.00 each; and, (d)
US$6,700.00 for attorney's fees,
is REINSTATED and ADOPTED herein, with
the MODIFICATION that the award of US$6,700.00 or its
equivalent in Philippine currency for attorney's fees is reduced
to P50,000.00, with costs against private respondents.
SO ORDERED.
CHAPTER V
G.R. No. 113097, April 27, 1998
NASIPIT LUMBER COMPANY, INC., AND PHILIPPINE
WALLBOARD CORPORATION, PETITIONERS, VS.
NATIONAL WAGES AND PRODUCTIVITY COMMISSION,
WESTERN AGUSAN WORKERS UNION (WAWU-ULGWP
LOCAL 101), TUNGAO LUMBER WORKERS UNION
(TULWU-ULGWP LOCAL 102) AND UNITED WORKERS
UNION (UWU-ULGWP LOCAL 103), RESPONDENTS.
DECISION
PANGANIBAN, J.:
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 Case
This is the principle used by the Court in resolving this petition
for certiorari under Rule 65 of the Rules of Court assailing the
Decision[1] dated March 8, 1993, promulgated by the
NWPC[2] which disposed as follows:
WHEREFORE, premises considered, the Decision appealed
from is hereby MODIFIED. The application for exemption of

Anakan Lumber Company is hereby GRANTED for a period of
one (1) year retroactive to the date subject Wage Orders took
effect until November 21, 1991. The applications for exemption
of Nasipit Lumber Company and Philippine Wallboard
Corporation are hereby DENIED for lack of merit, and as such,
they are hereby ordered to pay their covered workers the wage
increases under subject Wage Orders retroactive to the date of
effectivity of said Wage Orders plus interest of one percent
(1%) per month.
SO ORDERED.
Petitioners also challenge the NWPCs Decision[3] dated
November 17, 1993 which denied their motion for
reconsideration.
The RTWPBs August 1, 1991 Decision, which the NWPC
modified, disposed as follows:
WHEREFORE, all foregoing premises considered, the instant
petition for exemption from compliance with Wage Order Nos.
RX-01 and RX-01-A is hereby approved under and by virtue of
criteria No. 2, Section 3 of RTWPB Guidelines No. 3 on
Exemption, dated November 26, 1990, for a period of only one
(1) year, retroactive to the date said Wage Order took effect up
to November 21, 1991.
SO ORDERED.[4]
The Facts
The undisputed facts are narrated by the NWPC as follows:
On October 20, 1990, the Region X [Tripartite Wages and
Productivity] Board issued Wage Order No. RX-01 which
provides as follows:
Section 1. Upon the effectivity of this Wage Order, the
increase in minimum wage rates applicable to workers and
employees in the private sector in Northern Mindanao (Region
X) shall be as follows:
a. The provinces of Agusan del Norte, Bukidnon, Misamis
Oriental, and the Cities of Butuan, Gingoog, and Cagayan de
Oro - - - - -P13.00/day
b. The provinces of Agusan del Sur, Surigao del Norte and
Misamis Occidental, and the Cities of Surigao Oroquieta,
Ozamis and Tangub - - - - - P11.00/day
c. The province of Camiguin P9.00/day
Subsequently, a supplementary Wage Order No. RX-01-A was
issued by the Board on November 6, 1990 which provides as
follows:
Section 1. Upon the effectivity of the original Wage Order RX-
01, all workers and employees in the private sector in Region X
already receiving wages above the statutory minimum wage
rates up to one hundred and twenty pesos (P120.00) per day
shall also receive an increase of P13, P11, P9 per day, as
provided for under Wage Order No. RX-01;
Applicants/appellees Nasipit Lumber Company, Inc. (NALCO),
Philippine Wallboard Corporation (PWC), and Anakan Lumber
Company (ALCO), claiming to be separate and distinct from
each other but for expediency and practical purposes, jointly
filed an application for exemption from the above-mentioned
Wage Orders as distressed establishments under Guidelines
No. 3, issued by the herein Board on November 26, 1990,
specifically Sec. 3(2) thereof which, among others, provides:
A. For purposes of this Guidelines the following criteria to
determine whether the applicant-firm is actually distressed
shall be used.
xxx xxx xxx
87
2. Establishment belonging to distressed industry - an
establishment that is engaged in an industry that is distressed
due to conditions beyond its control as may be determined by
the Board in consultation with DTI and NWPC. (Underscoring
supplied)
xxx xxx xxx
Applicants/appellees aver that they are engaged in logging and
integrated wood processing industry but are distressed due to
conditions beyond their control, to wit: 1) Depressed economic
conditions due to worldwide recession; 2) Peace and order and
other emergency-related problems causing disruption and
suspension of normal logging operations; 3) Imposition of
environmental fee for timber production in addition to regular
forest charges; 4) Logging moratorium in Bukidnon; 5) A
reduction in the annual allowable volume of cut logs of NALCO
& ALCO by 59%; 6) Highly insufficient raw material supply; 7)
Extraordinary increases in the cost of fuel, oil, spare parts, and
maintenance; 8) Excessive labor cost/production ratio that is
more or less 47%; and 9) Lumber export ban.
On the other hand, oppositor/appellant Unions jointly opposed
the application for exemption on the ground that said
companies are not distressed establishments since their
capitalization has not been impaired by 25%.[5]
Citing liquidity problems and business decline in the wood-
processing industry, the RTWPB approved the applicants joint
application for exemption in this wise:
1. The Board considered the arguments presented by
petitioners and the oppositors. The Board likewise took note of
the financial condition of petitioner firms. One of the affiliates,
Anakan Lumber Company, is confirmed to be suffering from
capital impairment by: 14:80% in 1988, 71.35% in 1989 and
100% in 1990. On the other hand, NALCO had a capital
impairment of 6.41%. 13.53% and 17.04% in 1988, 1989 and
1990, respectively, while PWC had no capital impairment from
1988 to 1990. However, the Board also took note of the fact
that petitioners are claiming for exemption, not on the strength
of capital impairment, but on the basis of belonging to a
distressed industry - an establishment that is engaged in an
industry that is distressed due to conditions beyond its control
as may be determined by the Board in consultation with DTI
and NWPC.
2. Inquiries made by the Board from the BOI and the DTI
confirm that all petitioner-firms are encountering liquidity
problems and extreme difficulty servicing their loan obligations.
3. A perusal of the Provincial Trade and Industry
Development Plan for Agusan del Norte and Butuan City where
petitioners are operating their business, confirms the existence
of a slump in the wood-processing industry due to the growing
scarcity of [a] large volume of raw materials to feed the various
plywood and lumber mills in the area. A lot of firms have closed
and shifted to other ventures, the report continued, although
the competitive ones are still in operation.
4. The Board took note of the fact that most of the
circumstances responsible for the financial straits of petitioners
are largely external, over which petitioners have very little
control. The Board feels that as an alternative to closing up
their business[es] which could bring untold detriment and
dislocation to [their] 4,000 workers and their families,
petitioners should be extended assistance and encouragement
to continue operating - so that jobs could thereby be preserved
during these difficult times. One such way is for the Board to
grant them a temporary reprieve from compliance with the
mandated wage increase specifically W.O. RX-01 and RX-01-A
only.[6]
Dissatisfied with the RTWPBs Decision, the private
respondents lodged an appeal with the NWPC, which affirmed
ALCOs application but reversed the applications of herein
petitioners, NALCO and PWC. The NWPC reasoned:
The Guidelines No. 3 dated November 26, 1990, issued by
the herein Board cannot be used as valid basis for granting
applicants/appellees application for exemption since it did not
pass the approval of this Commission.
Under the Rules of Procedure on Minimum Wage Fixing dated
June 4, 1990, issued by this Commission pursuant to Republic

Act 6727, particularly Section 1 of Rule VIII thereof provides
that:
Section 1. Application For Exemption. Whenever a wage order
provides for exemption, applications thereto shall be filed with
the appropriate Board which shall process the same, subject to
guidelines issued by the Commission. (Underscoring supplied)
Clearly, it is the Commission that is empowered to set [the]
criteria on exemption from compliance with wage orders. While
the Boards may issue supplementary guidelines on exemption,
the same should first pass the Commission for the purpose of
determining its conformity to the latters general policies and
guidelines relative thereto. In fact, under the Guidelines on
Exemption from Compliance with the Prescribed Wage/Cost of
Living Allowance Increases Granted by the Regional Tripartite
Wages and Productivity Boards dated February 25, 1991,
issued by the Commission, there is a provision that (T)he
Board may issue supplementary guidelines for exemption x x x
subject to review/approval by the Commission. (Section 11). In
the case at bar, after the Commission Secretariat made some
comments on said Guidelines No. 3, the same was never
submitted again for [the] Commissions approval either
justifying its original provisions or incorporating the comments
made thereon. Until and unless said Guidelines No. 3 is
approved by the Commission, it has no operative force and
effect.
The applicable guidelines on exemption therefore is that one
issued by the Commission dated February 25, 1991, the
pertinent portion of which reads:
Section 3. CRITERIA FOR EXEMPTION
xxx xxx xxx
2. Distressed Employers/Establishment:
a. In the case of a stock corporation, partnership, single
proprietorship or non-stock, non-profit organization engaged in
business activity or charging fees for its services.
When accumulated losses at end of the period under
review have impaired by at least 25 percent the:
- Paid-up-capital at the end of the last full accounting period
preceding the application, in the case of corporations;
- Total invested capital at the beginning of the last full
accounting period preceding the application, in the case of
partnership and single proprietor-ships(Underscoring
supplied)
A perusal of the financial documents on record shows that for
the year 1990, which is the last full accounting period
preceding the applications for exemption, appellees NALCO,
ALCO, and PWC incurred a capital impairment of 1.89%,
28.72%, and 5.03%, respectively. Accordingly, based on the
criteria set forth above in the NWPC Guidelines on Exemption,
only the application for exemption of ALCO should be
approved in view of its capital impairment of 28.72%.
We are not unmindful of the fact that during the Board hearing
conducted, both labor and management manifested their
desire for a uniform decision to apply to all three (3) firms.
However, we cannot grant the same for want of legal basis
considering that we are required by the rules to decide on the
basis of the merit of application by an establishment having a
legal personality of its own.[7]
In denying petitioners motion for reconsideration, public
respondent explained:
The fact that applicant companies relied in good faith upon
Guidelines No. 3 issued by the Board a quo, the same is not
sufficient reason that they should be assessed based on the
criteria of said Guidelines considering that it does not conform
to the policies and guidelines relative to wage exemption
issued by this Commission pursuant to Republic Act 6727.
Consequently, it has no force and effect. As such, said
Guidelines No. 3 cannot therefore be a source of a right no
88
matter if one has relied on it in good faith. In like manner that
the workers, who are similarly affected, cannot be bound
thereof.
Moreover, even assuming that Guidelines No. 3 conforms to
the procedural requirement, still, the same cannot be given
effect insofar as it grants exemption by industry considering
that the subject Wage Order mentioned only distressed
establishments as one of those to be exempted thereof. It did
not mention exemption by industries. Well-settled is the rule
that an implementing guidelines [sic] cannot expand nor limit
the provision of [the] law it seeks to implement. Otherwise, it
shall be considered ultra vires. And, contrary to applicant
companies claim, this Commission does not approve rules
implementing the Wage Orders issued by the Regional
Tripartite Wages and Productivity Boards. Perforce, it cannot
be said that this Commission has approved the Rules
Implementing Wage Order No[s]. RX-01 and RX-01-A.[8]
Hence, this recourse.[9]
The Issue
Petitioners raise this solitary issue:
With all due respect, Public Respondent National Wages and
Productivity Commission committed grave abuse of discretion
amounting to lack of or in excess of jurisdiction in ruling that
RTWPB-X-Guideline No. 3 has no operative force and effect,
among others, and consequently, denying for lack of merit the
application for exemption of petitioners Nasipit Lumber
Company, Inc. and Philippine Wallboard Corporation from the
coverage of Wage Orders Nos. RX-01 and RX-01-A.
In the main, the issue boils down to a question of power. Is a
guideline issued by an RTWPB without the approval of or,
worse, contrary to the guidelines promulgated by the NWPC
valid?
The Courts Ruling
The petition is unmeritorious. The answer to the above
question is in the negative.
Sole Issue: Approval of NWPC Required
Petitioners contend that the NWPC gravely abused its
discretion in overturning the RTWPBs approval of their
application for exemption from Wage Orders RX-01 and RX-
01-A. They argue that under Art. 122 (e) of the Labor Code, the
RTWPB has the power [t]o receive, process and act on
applications for exemption from prescribed wage rates as may
be provided by law or any wage order.[10] They also maintain
that no law expressly requires the approval of the NWPC for
the effectivity of the RTWPBs Guideline No. 3.
Assuming arguendo that the approval of the NWPC was legally
necessary, petitioners should not be prejudiced by their
observance of the guideline, pointing out that the NWCPs own
guidelines[11] took effect only on March 18, 1991 long after
Guideline No. 3 was issued on November 26, 1990.[12] Lastly,
they posit that the NWPC guidelines cannot be given
retroactive effect as [they] will affect or change the petitioners
vested rights.[13]
The Court is not persuaded.
Power to Prescribe Guidelines Lodged in the NWPC, Not in the
RTWPB
The three great branches and the various administrative
agencies of the government can exercise only those powers
conferred upon them by the Constitution and the law.[14] It is
through the application of this basic constitutional principle that
the Court resolves the instant case.
RA 6727 (the Wage Rationalization Act), amending the Labor
Code, created both the NWPC and the RTWPB and defined

their respective powers. Article 121 of the Labor Code lists the
powers and functions of the NWPC, as follows:
ART. 121. Powers and Functions of the Commission. - The
Commission shall have the following powers and functions:
(a) To act as the national consultative and advisory body to the
President of the Philippine[s] and Congress on matters relating
to wages, incomes and productivity;
(b) To formulate policies and guidelines on wages, incomes
and productivity improvement at the enterprise, industry and
national levels;
(c) To prescribe rules and guidelines for the determination of
appropriate minimum wage and productivity measures at the
regional, provincial or industry levels;
(d) To review regional wage levels set by the Regional
Tripartite Wages and Productivity Boards to determine if these
are in accordance with prescribed guidelines and national
development plans;
(e) To undertake studies, researches and surveys necessary
for the attainment of its functions and objectives, and to collect
and compile data and periodically disseminate information on
wages and productivity and other related information,
including, but not limited to, employment, cost-of-living, labor
costs, investments and returns;
(f) To review plans and programs of the Regional Tripartite
Wages and Productivity Boards to determine whether these
are consistent with national development plans;
(g) To exercise technical and administrative supervision over
the Regional Tripartite Wages and Productivity Boards;
(h) To call, from time to time, a national tripartite conference of
representatives of government, workers and employers for the
consideration of measures to promote wage rationalization and
productivity; and
(i) To exercise such powers and functions as may be
necessary to implement this Act.
xxx xxx x x x (Underscoring supplied)
Article 122 of the Labor Code, on the other hand, prescribes
the powers of the RTWPB thus:
ART.122. Creation of Regional Tripartite Wages and
Productivity Boards.
xxx xxx xxx
The Regional Boards shall have the following powers and
functions in their respective territorial jurisdiction:
(a) To develop plans, programs and projects relative to wages,
income and productivity improvement for their respective
regions;
(b) To determine and fix minimum wage rates applicable in
their region, provinces or industries therein and to issue the
corresponding wage orders, subject to guidelines issued by the
Commission;
(c) To undertake studies, researches, and surveys necessary
for the attainment of their functions, objectives and programs,
and to collect and compile data on wages, incomes,
productivity and other related information and periodically
disseminate the same;
(d) To coordinate with the other Regional Boards as may be
necessary to attain the policy and intention of this Code.
(e) To receive, process and act on applications for exemption
from prescribed wage rates as may be provided by law or any
Wage Order; and
(f) To exercise such other powers and functions as may be
necessary to carry out their mandate under this Code.
(Underscoring supplied)
The foregoing clearly grants the NWPC, not the RTWPB, the
power to prescribe the rules and guidelines for the
determination of minimum wage and productivity measures.
While the RTWPB has the power to issue wage orders under
Article 122 (b) of the Labor Code, such orders are subject to
the guidelines prescribed by the NWPC. One of these
guidelines is the Rules on Minimum Wage Fixing, which was
issued on June 4, 1990.[15] Rule IV, Section 2 thereof, allows
the RTWPB to issue wage orders exempting enterprises from
the coverage of the prescribed minimum wages.[16] However,
the NWPC has the power not only to prescribe guidelines to
govern wage orders, but also to issue exemptions therefrom,
as the said rule provides that [w]henever a wage order
provides for exemption, applications thereto shall be filed with
89
the appropriate Board which shall process the same, subject to
guidelines issued by the Commission.[17] In short, the NWPC
lays down the guidelines which the RTWPB implements.
Significantly, the NWPC authorized the RTWPB to issue
exemptions from wage orders, but subject to its review and
approval.[18] Since the NWPC never assented to Guideline No.
3 of the RTWPB, the said guideline is inoperative and cannot
be used by the latter in deciding or acting on petitioners
application for exemption. Moreover, Rule VIII, Section 1 of the
NWPCs Rules of Procedure on Minimum Wage Fixing issued
on June 4, 1990 -- which was prior to the effectivity of RTWPB
Guideline No. 3 -- requires that an application for exemption
from wage orders should be processed by the RTWPB, subject
specifically to the guidelines issued by the NWPC.
To allow RTWPB Guideline No. 3 to take effect without the
approval of the NWPC is to arrogate unto RTWPB a power
vested in the NWPC by Article 121 of the Labor Code, as
amended by RA 6727. The Court will not countenance this
naked usurpation of authority. It is a hornbook doctrine that the
issuance of an administrative rule or regulation must be in
harmony with the enabling law. If a discrepancy occurs
between the basic law and an implementing rule or regulation,
it is the former that prevails.[19] This is so because the law
cannot be broadened by a mere administrative issuance. It is
axiomatic that [a]n administrative agency cannot amend an
act of Congress.[20] Article 122 (e) of the Labor Code cannot
be construed to enable the RTWPB to decide applications for
exemption on the basis of its own guidelines which were not
reviewed and approved by the NWPC, for the simple reason
that a statutory grant of powers should not be extended by
implication beyond what may be necessary for their just and
reasonable execution. Official powers cannot be merely
assumed by administrative officers, nor can they be created by
the courts in the exercise of their judicial functions.[21]
There is no basis for petitioners claim that their vested rights
were prejudiced by the NWPCs alleged retroactive application
of its own rules[22] which were issued on February 25, 1991 and
took effect on March 18, 1991.[23] Such claim cannot stand
because Guideline No. 3, as previously discussed and as
correctly concluded by the NWPC,[24] was not valid and, thus,
cannot be a source of a right; much less, a vested one.
The Insertion in Guideline No. 3 of Distressed Industry as a
Criterion for Exemption Void
The Court wishes to stress that the law does not automatically
grant exemption to all establishments belonging to an industry
which is deemed distressed. Hence, RX-O1, 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.[25] 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 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; x x x.[26] 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.
NWPC Decision Not Arbitrary
To justify the exemption of a distressed establishment from
effects of wage orders, the NWPC requires the applicant, if a
stock corporation like petitioners, to prove that its accumulated
losses impaired its paid-up capital by at least 25 percent in the

last full accounting period preceding the application[27] or the
effectivity of the order.[28] In the case at bar, it is undisputed that
during the relevant accounting period, NALCO, ALCO and
PWC sustained capital impairments of 1.89, 28.72, and 5.03
percent, respectively.[29] Clearly, it was only ALCO which met
the exemption standard. Hence, the NWPC did not commit
grave abuse of discretion in approving the application only of
ALCO and in denying those of petitioners. Indeed, the NWPC
acted within the ambit of its administrative prerogative when it
set guidelines for the exemption of a distressed establishment.
Absent any grave abuse of discretion, NWPCs actions will not
be subject to judicial review.[30] Accordingly, we deem the
appealed Decisions to be consistent with law.
WHEREFORE, the petition is hereby DISMISSED. The
assailed Decisions are hereby AFFIRMED. Costs against
petitioners.
SO ORDERED.
G.R. No. 128399, January 15, 1998
CAGAYAN SUGAR MILLING COMPANY, PETITIONER, VS.
SECRETARY OF LABOR AND EMPLOYMENT, DIRECTOR
RICARDO S. MARTINEZ, SR., AND CARSUMCO
EMPLOYEES UNION, RESPONDENTS.
DECISION
PUNO, J.:
In this petition for certiorari, petitioner CAGAYAN SUGAR
MILLING COMPANY (CARSUMCO) impugns the October 8,
1996 Decision of the Secretary of Labor, dismissing its appeal
and upholding the Order of Regional Director Ricardo S.
Martinez, Sr. finding petitioner guilty of violating Regional Wage
Order No. RO2-02.
The facts: On November 16, 1993, Regional Wage Order No.
RO2-02[1] was issued by the Regional Tripartite Wage and
Productivity Board, Regional Office No. II of the Department of
Labor and Employment (DOLE). It provided, inter alia, that:
"Section 1. Upon effectivity of this Wage Order, the statutory
minimum wage rates applicable to workers and employees in
the private sector in Region II shall be increased as follows:
xxx
1.2 P14.00 per day .... Cagayan
x x x"
On September 12 and 13, 1994, labor inspectors from the
DOLE Regional Office examined the books of petitioner to
determine its compliance with the wage order. They found
that petitioner violated the wage order as it did not
implement an across the board increase in the salary of its
employees.
At the hearing at the DOLE Regional Office for the alleged
violation, petitioner maintained that it complied with Wage
Order No. RO2-02 as it paid the mandated increase in the
minimum wage.
In an Order dated December 16, 1994, public respondent
Regional Director Ricardo S. Martinez, Sr. ruled that petitioner
violated Wage Order RO2-02 by failing to implement an across
the board increase in the salary of its employees. He ordered
petitioner to pay the deficiency in the salary of its employees in
the total amount of P555,133.41.
On January 6, 1995, petitioner appealed to public respondent
Labor Secretary Leonardo A. Quisumbing. On the same date,
the Regional Wage Board issued Wage Order No. RO2-02-A,
[2]
amending the earlier wage order, thus:
"Section 1. Section 1 of Wage Order No. RO2-02 shall now
read as, "Upon effectivity of this Wage Order, the workers and
employees in the private sector in Region 2 shall receive an
across the board wage increase as follows:
xxx
90
1.2 P14.00 per day .... Cagayan
xxx
"Section 2. This amendment is curative in nature and shall
retroact to the date of the effectivity of Wage Order No. RO2-
02."
On October 8, 1996, the Secretary of Labor dismissed
petitioner's appeal and affirmed the Order of Regional Director
Martinez, Sr. Petitioner's motion for reconsideration was
likewise denied.[3]
On February 12, 1997, private respondent CARSUMCO
EMPLOYEES UNION moved for execution of the December
16, 1994 Order. Regional Director Martinez, Sr. granted the
motion and issued the writ of execution. On March 4, 1997,
petitioner moved for reconsideration to set aside the writ of
execution. On March 5, the DOLE regional sheriff served on
petitioner a notice of garnishment of its account with the Far
East Bank and Trust Company. On March 10, the sheriff seized
petitioner's dump truck and scheduled its public sale on March
20, 1997.
Hence, this petition, with a prayer for the issuance of a
temporary restraining order (TRO).
On April 3, 1997, this Court issued a TRO enjoining
respondents from enforcing the writ of execution.[4] On July 16,
upon petitioner's motion, we amended the TRO by also
enjoining respondents from enforcing the Decision of the
Secretary of Labor and conducting further proceedings until
further orders from this Court.[5]
In the case at bar, petitioner contends that:
I
WAGE ORDER RO2-02 IS NULL AND VOID FOR HAVING
BEEN ISSUED IN VIOLATION OF THE PROCEDURE
PROVIDED BY LAW AND IN VIOLATION OF PETITIONER'S
RIGHT TO DUE PROCESS OF LAW.
II
WAGE ORDER NO. RO2-02 CLEARLY PROVIDED FOR THE
FIXING OF A STATUTORY MINIMUM WAGE RATE AND NOT
AN ACROSS THE BOARD INCREASE IN WAGES.
III
THE DECISION OF THE SECRETARY OF LABOR AND
EMPLOYMENT IS NULL AND VOID FOR LACK OF ANY
LEGAL BASIS.
The petition has merit.
Wage Order No. RO2-02, passed on November 16, 1993,
provided for an increase in the statutory minimum
wage rates for Region II. More than a year later, or on January
6, 1995, the Regional Board passed Wage Order RO2-02-A
amending the earlier wage order and providing instead for an
across the board increase in wages of employees in Region II,
retroactive to the date of effectivity of Wage Order RO2-02.
Petitioner assails the validity of Wage Order RO2-02-A on the
ground that it was passed without the required public
consultation and newspaper publication. Thus, petitioner
claims that public respondent Labor Secretary Quisumbing
abused his discretion in upholding the validity of said wage
order.
We agree.
Article 123 of the Labor Code provides:
"ART. 123. Wage Order. -- Whenever conditions in the region
so warrant, the Regional Board shall investigate and study all
pertinent facts, and, based on the standards and criteria herein
prescribed, shall proceed to determine whether a Wage Order
should be issued. Any such Wage Order shall take effect
after fifteen (15) days from its complete publication in at least
one (1) newspaper of general circulation in the region.
"In the performance of its wage-determining functions, the
Regional Board shall conduct public hearings/consultations,
giving notices to employees' and employers' groups and other

interested parties.
x x x"
The record shows that there was no prior public consultation or
hearings and newspaper publication insofar as Wage Order
No. RO2-02-A is concerned. In fact, these allegations were not
denied by public respondents in their Comment. Public
respondents' position is that there was no need to comply with
the legal requirements of consultation and newspaper
publication as Wage Order No. RO2-02-A merely clarified the
ambiguous provision of the original wage order.
We are not persuaded.
To begin with, there was no ambiguity in the provision of
Wage Order RO2-02 as it provided in clear and categorical
terms for an increase in statutory minimum wage of
workers in the region. Hence, the subsequent passage of RO2-
02-A providing instead for an across the board increase in
wages did not clarify the earlier Order but amended the same.
In truth, it changed the essence of the original Order. In
passing RO2-02-A without going through the process of public
consultation and hearings, the Regional Board deprived
petitioner and other employers of due process as they were not
given the opportunity to ventilate their positions regarding the
proposed wage increase. In wage-fixing, factors such as fair
return of capital invested, the need to induce industries to
invest in the countryside and the capacity of employers to pay
are, among others, taken into consideration.[6] Hence, our
legislators provide for the creation of Regional Tripartite Boards
composed of representatives from the government, the
workers and the employers to determine the appropriate wage
rates per region to ensure that all sides are heard. For the
same reason, Article 123 of the Labor Code also provides that
in the performance of their wage-determining functions, the
Regional Board shall conduct public hearings and
consultations, giving notices to interested parties. Moreover, it
mandates that the Wage Order shall take effect only after
publication in a newspaper of general circulation in the region.
It is a fundamental rule, borne out of a sense of fairness, that
the public is first notified of a law or wage order before it can
be held liable for violation thereof. In the case at bar, it is
indisputable that there was no public consultation or hearing
conducted prior to the passage of RO2-02-A. Neither was it
published in a newspaper of general circulation as attested in
the February 3, 1995 minutes of the meeting of the Regional
Wage Board that the non-publication was by consensus of all
the board members.[7] Hence, RO2-02-A must be struck down
for violation of Article 123 of the Labor Code.
Considering that RO2-02-A is invalid, the next issue to settle is
whether petitioner could be held liable under the original wage
order, RO2-02.
Public respondents insist that despite the wording of Wage
Order RO2-02 providing for a statutory increase in minimum
wage, the real intention of the Regional Board was to provide
for an across the board increase. Hence, they urge that
petitioner is liable for merely providing an increase in the
statutory minimum wage rates of its employees.
The contention is absurd. Petitioner clearly complied with
Wage Order RO2-02 which provided for an increase in
statutory minimum wage rates for employees in Region II. It is
not just to expect petitioner to interpret Wage RO2-02 to mean
that it granted an across the board increase as such
interpretation is not sustained by its text. Indeed, the Regional
Wage Board had to amend Wage Order RO2-02 to clarify this
alleged intent.
In sum, we hold that RO2-02-A is invalid for lack of public
consultations and hearings and non-publication in a newspaper
of general circulation, in violation of Article 123 of the Labor
Code. We likewise find that public respondent Secretary of
Labor committed grave abuse of discretion in upholding the
findings of Regional Director Ricardo S. Martinez, Sr. that
petitioner violated Wage Order RO2-02.
IN VIEW WHEREOF, the petition is GRANTED. The Decision
of the Secretary of Labor, dated October 8, 1996, is set aside
for lack of merit.
91
SO ORDERED.
G.R. No. 102636, September 10, 1993
METROPOLITAN BANK & TRUST COMPANY EMPLOYEES
UNION-ALU-TUCP AND ANTONIO V. BALINANG,
PETITIONERS, VS. NATIONAL LABOR RELATIONS
COMMISSION (2ND DIVISION) AND METROPOLITAN BANK
& TRUST COMPANY, RESPONDENTS.
RESOLUTION
VITUG, J.:
In this petition for certiorari, the Metropolitan Bank & Trust
Company Employees Union-ALU-TUCP (MBTCEU) and its
president, Antonio V. Balinang, raise the issue of whether or
not the implementation by the Metropolitan Bank and Trust
Company of Republic Act No. 6727, mandating an increase in
pay of P25 per day for certain employees in the private sector,
created a distortion that would require an adjustment under
said law in the wages of the latter's other various groups of
employees.
On 25 May 1989, the bank entered into a collective bargaining
agreement with the MBTCEU, granting a monthly P900 wage
increase effective 01 January 1989, P600 wage increase
effective 01 January 1990, and P200 wage increase effective
01 January 1991. The MBTCEU had also bargained for the
inclusion of probationary employees in the list of employees
who would benefit from the first P900 increase but the bank
had adamantly refused to accede thereto. Consequently, only
regular employees as of 01 January 1989 were given the
increase to the exclusion of probationary employees.
Barely a month later, or on 01 July 1989, Republic Act 6727,
"an act to rationalize wage policy determination by establishing
the mechanism and proper standards therefor, x x x fixing new
wage rates, providing wage incentives for industrial dispersal
to the countryside, and for other purposes," took effect. Its
provisions, pertinent to this case, state:
"SEC. 4. (a) Upon the effectivity of this Act, the statutory
minimum wage rates of all workers and employees in the
private sector, whether agricultural or non-agricultural, shall be
increased by twenty-five pesos (P25) per day, x x x: Provided,
That those already receiving above the minimum wage rates
up to one hundred pesos (P100.00) shall also receive an
increase of twenty-five pesos (P25.00) per day, x x x.
xxx xx
x x x x.
(d) If expressly provided for and agreed upon in the collective
bargaining agreements, all increases in the daily basic wage
rates granted by the employers three (3) months before the
effectivity of this Act shall be credited as compliance with the
increases in the wage rates prescribed herein, provided that,
where such increases are less than the prescribed increases in
the wage rates under this Act, the employer shall pay the
difference. Such increase shall not include anniversary wage
increases, merit wage increase and those resulting from the
regularization or promotion of employees.
Where the application of the increases in the wage rates under
this Section results in distortions as defined under existing laws
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 National Labor Relations Commission
(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 twenty (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 the wage rates
prescribed under this Section."

Pursuant to the above provisions, the bank gave the P25
increase per day, or P750 a month, to its probationary
employees and to those who had been promoted to regular or
permanent status before 01 July 1989 but whose daily rate
was P100 and below. The bank refused to give the same
increase to its regular employees who were receiving more
than P100 per day and recipients of the P900 CBA increase.
Contending that the bank's implementation of Republic Act
6727 resulted in the categorization of the employees into (a)
the probationary employees as of 30 June 1989 and regular
employees receiving P100 or less a day who had been
promoted to permanent or regular status before 01 July 1989,
and (b) the regular employees as of 01 January 1989,
whose pay was over P100 a day, and that, between the two
groups, there emerged a substantially reduced salary gap, the
MBTCEU sought from the bank the correction of the alleged
distortion in pay. In order to avert an impending strike, the bank
petitioned the Secretary of Labor to assume jurisdiction over
the case or to certify the same to the National Labor Relations
Commission (NLRC) under Article 263 (g) of the Labor Code.
[1]
The parties ultimately agreed to refer the issue for
compulsory arbitration to the NLRC.
The case was assigned to Labor Arbiter Eduardo J. Carpio. In
his decision of 05 February 1991, the labor arbiter disagreed
with the bank's contention that the increase in its
implementation of Republic Act 6727 did not constitute a
distortion because "only 143 employees or 6.8% of the bank's
population of a total of 2,108 regular employees" benefited. He
stressed that "it is not necessary that a big number of wage
earners within a company be benefited by the
mandatory increase before a wage distortion may be
considered to have taken place," it being enough, he said, that
such increase "result(s) in the severe contraction of an
intentional quantitative difference in wage rates between
employee groups."
The labor arbiter concluded that since the "intentional
quantitative difference" in wage or salary rates between and
among groups of employees is not based purely on skills or
length of service but also on "other logical bases of
differentiation, a P900.00 wage gap intentionally provided in a
collective bargaining agreement as a quantitative difference in
wage between those who WERE regular employees as of
January 1, 1989 and those who WERE NOT as of that date, is
definitely a logical basis of differentiation (that) deserves
protection from any distorting statutory wage increase."
Otherwise, he added, "a minimum wage statute that seek to
uplift the economic condition of labor would itself destroy
the mechanism of collective bargaining which, with perceived
stability, has been labor's constitutional and regular source of
wage increase for so long a time now." Thus, since the
"subjective quantitative difference" between wage rates had
been reduced from P900.00 to barely P150.00, correction of
the wage distortion pursuant to Section 4(c) of the
Rules Implementing Republic Act 6727 should be made.
The labor arbiter disposed of the case, thus:
WHEREFORE, premises considered, the respondent is hereby
directed to restore to complainants and their members the Nine
Hundred (P900.00) Pesos CBA wage gap they used to enjoy
over non-regular employees as of January 1, 1989 by granting
them a Seven Hundred Fifty (P750.00) Pesos monthly
increase effective July 1, 1989.
SO ORDERED.[2]
The bank appealed to the NLRC. On 31 May 1991, the NLRC
Second Division, by a vote of 2 to 1, reversed the decision of
the Labor Arbiter. Speaking, through Commissioners Rustico L.
Diokno and Domingo H. Zapanta, the NLRC said:
"x x x a wage distortion can arise only in a situation where the
salary structure is characterized intentional quantitative
differences among employee groups determined or fixed on
the basis of skills, length of service, or other logical basis of
differentiation and such differences or distinctions are
obliterated or contracted by subsequent wage increases (In
92
Re: Labor Dispute at the Bank of the Philippine Islands,
NCMB-RB-7-11-096-89, Secretary of Labor and Employment,
February 18, 1991).
As applied in this case, We noted that in the new wage salary
structure, the wage gaps between Levels 6 and 7 levels 5 and
6, and levels 6 and 7 (sic) were maintained. While there is a
noticeable decrease in the wage gap between Levels 2 and 3,
Levels 3 and 4, and Levels 4 and 5, the reduction in the wage
gaps between said levels is not significant as to obliterate or
result in severe contraction of the intentional quantitative
differences in salary rates between the employee groups. For
this reason, the basic requirement for a wage distortion to exist
does not appear in this case. Moreover, there is nothing in the
law which would justify an across-the-board adjustment of
P750.00 as ordered by the Labor Arbiter.
WHEREFORE, premises considered, the appealed decision
is hereby set aside and a new judgment is hereby entered,
dismissing the complaint for lack of merit.
SO ORDERED."[3]
In her dissent, Presiding Commissioner Edna Bonto-
Perez opined:
"There may not be an obliteration nor elimination of said
quantitative distinction/difference aforecited but clearly there is
a contraction. Would such contraction be severe as to warrant
the necessary correction sanctioned by the law in point, RA
6727? It is my considered view that the quantitative intended
distinction in pay between the two groups of workers in
respondent company was contracted by more than fifty (50%)
per cent or in particular by more or less eighty-three (83%)
percent hence, there is no doubt that there is an evident
severe contraction resulting in the complained of wage
distortion.
Nonetheless, the award of P750.00 per month to all of herein
individual complainants as ordered by the Labor Arbiter below,
to my mind is not the most equitable remedy at bar, for the
same would be an across the board increase which is not the
intention of RA 6727. For that matter, herein complainants
cannot by right claim for the whole amount of P750.00 a month
or P25.00 per day granted to the workers covered by the said
law in the sense that they are not covered by the said increase
mandated by RA 6727. They are only entitled to the relief
granted by said law by way of correction of the pay scale in
case of distortion in wages by reason thereof.
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 cases of wage distortion as in the case at bar
which is:
Minimum Wage = % x Prescribed = Distortion
Actual Salary Increase Adjustment
would be the most equitable and fair under the circumstances
obtaining in this case.
For this very reason, I register my dissent from the majority
opinion and opt for modification of the Labor Arbiter's decision
as afore-discussed."[4]
The MBTCEU filed a motion for the reconsideration of the
decision of the NLRC; having been denied, the MBTCEU and
its president filed the instant petition for certiorari, charging the
NLRC with grave abuse of discretion by its refusal (a) "to
acknowledge the existence of a wage distortion in the wage or
salary rates between and among the employee groups of the
respondent bank as a result of the bank's
partial implementation" of Republic Act 6727 and (b) to give
due course to its claim for an across-the-board P25 increase
under Republic Act No. 6727.[5]
We agree with the Solicitor General that the petition is
impressed with merit.[6]
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
contraction of intentional quantitative differences in wage or
salary rates between and among employee groups in an
establishment as to effectively obliterate the distinctions

embodied in such wage structure based on skills, length of
service, or other logical bases of differentiation."
The issue of whether or not a wage distortion exists as a
consequence of the grant of a wage increase to certain
employees, we agree, is, by and large, a question of fact the
determination of which is the statutory function of the NLRC.
[7]
Judicial review of labor cases, we may add, does not go
beyond the evaluation of the sufficiency of the evidence upon
which the labor officials' findings rest.[8] As such, factual
findings of the NLRC are generally accorded not only respect
but also finality provided that its decisions are supported by
substantial evidence and devoid of any taint of unfairness or
arbitrariness.[9] When, however, the members of the same
labor tribunal are not in accord on those aspects of a case, as
in this case, this Court is well cautioned not to be as so
conscious in passing upon the sufficiency of the evidence, let
alone the conclusions derived therefrom.
In this case, 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 the law.
The definition of "wage distortion,"[10] 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
BontoPerez in her dissenting opinion, the contraction between
personnel groupings comes close to eighty-three (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[11]. 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.[12]
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,[13] we must 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. As the Court, through Associate Justice
Florentino Feliciano, also pointed out
in Apex Mining Company, Inc. v. NLRC:[14]
"x x x. (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 counterproductive so
far as securing the interests of labor is concerned. x x x."
93
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,
[15]
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.
WHEREFORE, finding merit in the instant petition for certiorari,
the same is GRANTED DUE COURSE, the questioned NLRC
decision is hereby SET ASIDE and the decision of the labor
arbiter is REINSTATED subject to the MODIFICATION
that the wage distortion in question be corrected in accordance
with the formula expressed in the dissenting opinion of
Presiding Commissioner Edna Bonto-Perez. This decision is
immediately executory.
SO ORDERED.
G.R. No. 91980, June 27, 1991
ILAW AT BUKLOD NG MANGGAGAWA (IBM), PETITIONER,
VS. NATIONAL LABOR RELATIONS COMMISSION (FIRST
DIVISION), HON. CARMEN TALUSAN AND SAN MIGUEL
CORPORATION, RESPONDENTS.
DECISION
NARVASA, J.:
The controversy at bar had its origin in the "wage distortions"
affecting the employees of respondent San Miguel Corporation
allegedly caused by Republic Act No. 6727, otherwise known
as the Wage Rationalization Act.
Upon the effectivity of the Act on June 5, 1989, the union
known as "Ilaw at Buklod Ng Manggagawa (IBM)" -- said to
represent 4,500 employees of San Miguel Corporation, more
or less, working at the various plants, offices, and warehouses
located at the National Capital Region" -- presented to the
company a "demand" for correction of the "significant distortion
in ** (the workers) wages." In that "demand," the Union
explicitly invoked Section 4 (d) of RA 6727 which reads as
follows:
*****
(d) * * * * *
Where the application of the increases in the wage rates under
this Section results in distortions as defined under existing laws
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 National Labor Relations Commission
(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 twenty (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 the wage rates
prescribed under this Section."
But the Union claims that that "demand" was ignored:[1]
"The ** COMPANY ignored said demand by offering a measly
across-the-board wage increase of P7.00 per day, per
employee, as against the proposal of the UNION of P25.00 per
day, per employee. Later, the UNION reduced its proposal to
P15.00 per day, per employee by way of amicable settlement.
When the ** COMPANY rejected the reduced proposal of the
UNION, the members thereof, on their own accord, refused to
render overtime services, most especially at the Beer Bottling
Plants at Polo, starting October 16, 1989."
In this connection, the workers involved issued a joint notice
reading as follows:[2]

"SAMA-SAMANG PAHAYAG: KAMING ARAWANG
MANGGAGAWA NG POLO BREWERY PAWANG KASAPI NG
ILAW AT BUKLOD NG MANGGAGAWA (IBM) AY
NAGKAISANG NAGPASYA NA IPATUPAD MUNA ANG EIGHT
HOURS WORK SHIFT PANSAMANTALA HABANG HINDI
IPINATUTUPAD NG SMC
MANAGEMENT ANG TAMANG WAGE DISTORTION."
The Union's position (set out in the petition subsequently filed
in this Court, infra) was that the workers' refusal "to work
beyond eight (8) hours everyday starting October 16, 1989" as
a legitimate means of compelling SMC to correct "the distortion
in their wages brought about by the implementation of the said
laws (R.A. 6640 and R.A. 6727) to newly-hired
employees."[3] That decision to observe the "eight hours work
shift" was implemented on October 16, 1989 by "some 800
daily-paid workers at the Polo Plant's production line (of San
Miguel Corporation [hereafter, simply SMC]), joined by others
at statistical quality control and warehouse, all members of **
IBM **."[4] There ensued thereby a change in the work schedule
which had been observed by daily-paid workers at the Polo
Plant for the past five (5) years, i.e., "ten (10) hours for the first
shift and ten (10) to fourteen (14) hours for the second shift,
from Mondays to Fridays **; (and on) Saturdays, ** eight (8)
hours for both shifts" -- a work schedule which, SMC says, the
workers had "welcomed, and encouraged" because the
automatic overtime built into the schedule "gave them a steady
source of extra-income," and pursuant to which it (SMC)
"planned its production targets and budgets."[5]
This abandonment of the long-standing schedule of work and
the reversion to the eight-hour shift apparently caused
substantial losses to SMC. Its claim is that there ensued "from
16 October 1989 to 30 November 1989 alone ** work
disruption and lower efficiency ** (resulting in turn, in) lost
production of 2,004,105 cases of beer ** ; that (i)n "money
terms, SMC lost P174,657,598 in sales and P48,904,311 in
revenues ** (and the) Government lost excise tax revenue of
P42 Million, computed at the rate of P21 per case collectible at
the plant."[6] These losses occurred despite such measures
taken by SMC as organizing "a third shift composed of regular
employees and some contractuals," and appeals "to the Union
members, through letters and memoranda and dialogues with
their plant delegates and shop stewards," to adhere to the
existing work schedule.
Thereafter, on October 18, 1989, SMC filed with the Arbitration
Branch of the National Labor Relations Commission a
complaint against the Union and its members "to declare the
strike or slowdown illegal" and to terminate the employment of
the union officers and shop stewards. The complaint was
docketed as NLRC-NCR Case No. 00-10-04917.[7]
Then on December 8, 1989, on the claim that its action in the
Arbitration Branch had as yet "yielded no relief," SMC filed
another complaint against the Union and members thereof, this
time directly with the National Labor Relations Commission, "to
enjoin and restrain illegal slowdown and for damages, with
prayer for the issuance of a cease-and-desist and temporary
restraining order."[8] Before acting on the application for
restraining order, the NLRC's First Division first directed SMC
to present evidence in support of the application before a
commissioner, Labor Arbiter Carmen Talusan. On December
19, 1989, said First Division promulgated a Resolution on the
basis of "the allegations of the petitioner (SMC) and the
evidence adduced ex parte in support of their petition." The
Resolution -
1) authorized the issuance of "a Temporary Restraining
Order for a period of twenty (20) days ** upon ** a cash or
surety bond in the amount of P50,000.00 ** DIRECTING the
respondents to CEASE and DESIST from further committing
the acts complained about particularly their not complying with
the work schedule established and implemented by the
company through the years or at the least since 1984, which
schedule appears to have been adhered to by the respondents
until October 16, 1989 ** ;"
2) "set the incident on injunction for hearing before Labor
Arbiter Carmen Talusan on 27 December 1989 **."
94
The Labor Arbiter accordingly scheduled the incident for
hearing on various dates: December 27 and 29, 1989, January
8, 11, 16, and 19, 1990. The first two settings were cancelled
on account of the unavailability of the Union's counsel. The
hearing on January 8, 1990 was postponed also at the
instance of said counsel who declared that the Union refused
to recognize the NLRC's jurisdiction. The hearings set on
January 11, 16 and 19, 1990 were taken up with the cross-
examination of SMC's witness on the basis of his affidavit and
supplemental affidavits. The Union thereafter asked the
Hearing Officer to schedule other hearings. SMC
objected. The Hearing Officer announced she would submit a
report to the Commission relative to the extension of the
temporary restraining order of December 9,
1989, supra, prayed for by SMC. Here the matter rested until
February 14, 1990, when the Union filed the petition which
commenced the special civil action of certiorari and prohibition
at bar.[9]
In its petition, the Union asserted that:
1) the "central issue ** is the application of the Eight-Hour
Labor Law ** (i.e.) (m)ay an employer force an employee to
work everyday beyond eight hours a day?"
2) although the work schedule adopted by SMC with built-in
"automatic overtime,"[10] "tremendously increased its production
of beer at lesser cost," SMC had been paying its workers
wages far below the productivity per employee," and turning a
deaf ear to the Union's demands for wage increases;
3) the NLRC had issued the temporary restraining order of
December 19, 1989 "with indecent haste, based
on ex parte evidence of SMC; and such an order had the effect
of "forcing the workers to work beyond eight (8) hours a day,
everyday !!"
4) the members of the NLRC had no authority to act as
Commissioners because their appointments had
not been confirmed by the Commission on Appointment; and
5) even assuming the contrary, the NLRC, as an essentially
appellate body, had no jurisdiction to act on the plea for
injunction in the first instance.
The petition thus prayed:
1) for judgment (a) annulling the Resolution of December
19, 1990; (b) declaring mandatory the confirmation by the
Commission on Appointments of the appointments of National
Labor Relations Commissioners; and (c) ordering the removal
"from the 201 files of employees any and all memoranda or
disciplinary action issued/imposed to the latter by reason of
their refusal to render overtime work;" and
2) pending such judgment, restraining (a) the NLR
Commissioners "from discharging their power and authority
under R.A. 6715 prior to their re-appointment and/or
confirmation;" as well as (b) Arbiter Talusan and the
Commission from acing on the matter or rendering a decision
or issuing a permanent injunction therein, or otherwise
implementing said Resolution of December 19, 1989.
In traverse of the petition, SMC filed a pleading entitled
"Comment with Motion to Admit Comment as Counter-
Petition," in which it contended that:
1) the workers' abandonment of the regular work schedule
and their deliberate and wilful reduction of the Polo plant's
production efficiency is a slowdown, which is an illegal and
unprotected concerted activity;
2) against such a slowdown, the NLRC has jurisdiction to
issue injunctive relief in the first instance;
3) indeed, the NLRC has "the positive legal duty and
statutory obligation to enjoin the slowdown complained of and
to compel the parties to arbitrate **, (and) to effectuate the
important national policy of peaceful settlement of labor
disputes through arbitration;" accordingly, said NLRC "had no
legal choice but to issue injunction to enforce the reciprocal
no lockout-no slowdown and mandatory arbitration agreement
of the parties;" and
4) the NLRC "gravely abused its discretion when it refused
to decide the application for injunction within the twenty day
period of its temporary restraining order, in violation of its own
rules and the repeated decisions of this ** Court."

It is SMC's submittal that the coordinated reduction by the
Union's members of the work time theretofore willingly and
consistently observed by them, thereby causing financial
losses to the employer in order to compel it to yield to the
demand for correction of "wage distortions," is an illegal and
"unprotected" activity. It is, SMC argues, contrary to the law
and to the collective bargaining agreement between it and the
Union. The argument is correct and will be sustained.
Among the rights guaranteed to employees by the Labor Code
is that of engaging in concerted activities in order to attain their
legitimate objectives. Article 263 of the Labor Code, as
amended, declares that in line with "the policy of the State to
encourage free trade unionism and free collective bargaining,
** (w)orkers shall have the right to engage in concerted
activities for purposes of collective bargaining or for their
mutual benefit and protection." A similar right to engage in
concerted activities for mutual benefit and protection is tacitly
and traditionally recognized in respect of employers.
The more common of these concerted activities as far as
employees are concerned are: strikes -- the temporary
stoppage of work as a result of an industrial or labor dispute;
picketing -- the marching to and fro at the employer's premises,
usually accompanied by the display of placards and other
signs making known the facts involved in a labor dispute; and
boycotts -- the concerted refusal to patronize an employer's
goods or services and to persuade others to a like refusal. On
the other hand, the counterpart activity that management may
licitly undertake is the lockout -- the temporary refusal to
furnish work on account of a labor dispute. In this connection,
the same Article 263 provides that the "right of legitimate labor
organizations to strike and picket and of employer to lockout,
consistent with the national interest, shall continue to be
recognized and respected." The legality of these activities is
usually dependent on the legality of the purposes sought to be
attained and the means employed therefor.
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,"
Section 3 of Republic Act No. 6727 prescribes a specific,
detailed and comprehensive procedure for the correction
thereof, thereby implicitly excluding strikes or lockouts or other
concerted activities as a modes of settlement of the issue. The
provision[11] states that?
" ** the employer and the union shall negotiate to correct the
distortions. Any dispute arising from wage distortions shall be
resolved through the grievance procedure under their
collective bargaining agreement and, if it remains unresolved,
through voluntary arbitration. Unless otherwise agreed by the
parties in writing, such dispute shall be decided by
the voluntary arbitration or panel of voluntary arbitrators within
ten (10) calendar days from the time said dispute was referred
to voluntary arbitration.
In cases where there are no collective agreements or
recognized labor unions, the employers and workers shall
endeavor to correct such distortions. Any dispute
arising therefrom shall be settled through the National
Conciliation and Mediation Board and, if it remains unresolved
after ten (10) calendar days of conciliation, shall be referred to
the appropriate branch of the National Labor Relations
Commission (NLRC). It shall be mandatory for the NLRC to
conduct continuous hearings and decide the dispute within
twenty (20) calendar days from the time said dispute is
submitted for compulsory arbitration.
The pendency of a dispute arising from a wage distortion shall
not in any way delay the applicability of any increase in
prescribed wage rates pursuant to the provisions of law or
Wage Order.
*****."
The legislative intent that 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 issued by the Secretary of
95
Labor and Employment[12]pursuant to the authority granted by
Section 13 of the Act.[13] 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 collective bargaining agreement between the
SMC and the Union, relevant provisions of which are quoted by
the former without the latter's demurring to the accuracy of the
quotation,[14] also prescribes a similar eschewal of strikes or
other similar or related concerted activities as a mode of
resolving disputes or controversies, generally, said agreement
clearly stating that settlement of "all disputes, disagreements or
controversies of any kind" should be achieved by the stipulated
grievance procedure and ultimately by arbitration. The
provisions are as follows:
"Section 1. Any and all disputes, disagreements and
controversies of any kind between the COMPANY and the
UNION and/or the workers involving or relating to wages,
hours of work, conditions of employment and/or employer-
employee relations arising during the effectivity of this
Agreement or any renewal thereof, shall be settled by
arbitration in accordance with the procedure set out in this
Article. No dispute, disagreement or controversy which may
be submitted to the grievance procedure in Article IX shall be
presented for arbitration unless all the steps of the grievance
procedure are exhausted" (Article V - Arbitration).
"Section 1. The UNION agrees that there shall be no strikes,
walkouts, stoppage or slowdown of work, boycotts, secondary
boycotts, refusal to handle any merchandise, picketing, sit-
down strikes of any kind, sympathetic or general strikes,
or any other interference with any of the operations of the
COMPANY during the terms of this agreement" (Article VI).
The Union 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 Union members to follow the five-
year-old work schedule which they had theretofore 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.
Awareness by the Union of the proscribed character of its
members' collective activities, is clearly connoted by its attempt
to justify those activities as a means of protesting and
obtaining redress against said members working overtime
every day from Monday to Friday (on an average of 12 hours),
and every Saturday (on 8-hour shifts),[15] rather than as a
measure to bring about rectification of the wage distortions
caused by RA 6727 -- which was the real cause of its
differences with SMC. By concealing the real cause of their
dispute with management (alleged failure of correction of wage
distortion), and trying to make it appear that the controversy
involved application of the eight-hour labor law, they obviously
hoped to remove their case from the operation of the rules
implementing RA 6727 that "Any issue involving wage
distortion shall not be a ground for a strike / lockout." The
stratagem cannot succeed.
In the first place, that it was indeed the wage distortion issue
that principally motivated the Union's partial or limited strike is
clear from the facts. The work schedule (with "built-in
overtime") had not been forced upon the workers; it had been
agreed upon between SMC and its workers at the Polo Plant
and indeed, had been religiously followed with mutually
beneficial results for the past five (5) years. Hence, it could not
be considered a matter of such great prejudice to the workers
as to give rise to a controversy between them and
management. Furthermore, the workers never asked, nor
were there ever any negotiations at their instance, for a change
in that work schedule prior to the strike. What really bothered
them, and was in fact the subject of talks between their
representatives and management, was the wage distortion

question, a fact made even more apparent by the joint notice
circulated by them prior to the strike, i.e., that they would adopt
the eight-hour work shift in the meantime pending correction by
management of the wage distortion (IPATUPAD MUNA ANG
EIGHT HOURS WORK SHIFT PANSAMANTALA HABANG
HINDI IPINATUTUPAD NG SMC MANAGEMENT ANG
TAMANG WAGE DISTORTION").
In the second place, even if there were no such legal
prohibition, and even assuming the controversy really did not
involve the wage distortions caused by RA 6727, the concerted
activity in question would still be illicit because contrary to the
workers' explicit contractual commitment "that there shall be no
strikes, walkouts, stoppage or slowdown of work, boycotts,
secondary boycotts, refusal to handle any merchandise,
picketing, sit-down strikes of any kind, sympathetic or general
strikes, or any other interference with any of the operations of
the COMPANY during the term of ** (their collective
bargaining) agreement."[16]
What has just been said makes unnecessary resolution of
SMC's argument that the workers' concerted refusal to adhere
to the work schedule in force for the last several years, is
a slowdown, an inherently illegal activity essentially illegal even
in the absence of a no-strike clause in a collective bargaining
contract, or statute or rule. The Court is in substantial
agreement with the petitioner's concept of a slowdown as a
"strike on the installment plan;" as a wilful reduction in the rate
of work by concerted action of workers for the purpose of
restricting the output of the employer, in relation to a labor
dispute; as an activity by which workers, without a complete
stoppage of work, retard production or their performance of
duties and functions to compel management to grant their
demands.[17] The Court also agrees that such a slowdown is
generally condemned as inherently illicit and unjustifiable,
because while the employees "continue to work and remain at
their positions and accept the wages paid to them," they at the
same time "select what part of their allotted tasks they care to
perform of their own volition or refuse openly or secretly, to the
employer's damage, to do other work;" in other words, they
"work on their own terms."[18] But whether or not the workers'
activity in question -- their concerted adoption of a different
work schedule than that prescribed by management and
adhered to for several years -- constitutes a slowdown need
not, as already stated, be gone into. Suffice it to say that that
activity is contrary to the law, RA 6727, and the parties'
collective bargaining agreement.
The Union's claim that the restraining order is void because
issued by Commissioners whose appointments had not been
duly confirmed by the Commission on Appointments should be
as it is hereby given short shrift, for, as the Solicitor General
points out, it is an admitted fact that the members of the
respondent Commission were actually appointed by the
President of the Philippines on November 18, 1989; there is no
evidence whatever in support of the Union's bare allegation
that the appointments of said members had not been
confirmed; and the familiar presumption of regularity in
appointment and in performance of official duty exists in their
favor.[19]
Also untenable is the Union's other argument that the
respondent NLRC Division had no jurisdiction to issue the
temporary restraining order or otherwise grant the preliminary
injunction prayed for by SMC and that, even assuming the
contrary, the restraining order had been improperly
issued. The Court finds that the respondent Commission had
acted entirely in accord with applicable provisions of the Labor
Code.
Article 254 of the Code provides that "No temporary or
permanent injunction or restraining order in any case involving
or growing out of labor disputes shall be issued by any court or
other entity, except as otherwise provided in Articles 218 and
264 * *." Article 264 lists down specific "prohibited activities"
which may be forbidden or stopped by a restraining order or
injunction. Article 218 inter alia enumerates the powers of the
National Labor Relations Commission and lays down then
conditions under which a restraining order or preliminary
96
injunction may issue, and the procedure to be followed in
issuing the same.
Among the powers expressly conferred on the Commission by
Article 218 is the power to "enjoin or restrain any actual or
threatened commission of any or all prohibited or unlawful acts
or to require the performance of a particular act in any labor
dispute which, if not restrained or performed forthwith, may
cause grave or irreparable damage to any party or render
ineffectual any decision in favor of such party **."
As a rule such restraining orders or injunctions do not
issue ex parte, but only after compliance with the following
requisites, to wit:
a) a hearing held "after due and personal notice thereof has
been served, in such manner as the Commission shall direct,
to all known persons against whom relief is sought, and also to
the Chief Executive and other public officials of the province or
city within which the unlawful acts have been threatened or
committed charged with the duty to protect complainant's
property;"
b) reception at the hearing of "testimony of witnesses, with
opportunity for cross-examination, in support of the allegations
of a complaint made under oath," as well as "testimony in
opposition thereto, if offered ** ;"
c) "a finding of fact by the Commission, to the effect:
(1) That prohibited or unlawful acts have
been threatened and will be committed
and will be continued unless restrained,
but no injunction or temporary restraining
order shall be issued on account of any
threat, prohibited or unlawful act, except
against the person or persons, association
or organization making the threat or
committing the prohibited or unlawful act
or actually authorizing or ratifying the
same after actual knowledge thereof;
(2) That substantial and irreparable injury to
complainant's property will follow;
(3) That as to each item of relief to be
granted, greater injury will be inflicted
upon complainant by the denial of relief
than will be inflicted upon defendants by
the granting of relief;
(4) That complainant has no adequate
remedy at law; and
(5) That the public officers charged with the
duty to protect complainant's property are
unable or unwilling to furnish adequate
protection."
However, a temporary restraining order may be
issued ex parte under the following conditions:
a) the complainant "shall also allege that, unless a temporary
restraining order shall be issued without notice, a substantial
and irreparable injury to complainant's property will be
unavoidable;"
b) there is "testimony under oath, sufficient, if sustained, to
justify the Commission in issuing a temporary injunction upon
hearing after notice;"
c) the "complainant shall first file an undertaking with
adequate security in an amount to be fixed by the Commission
sufficient to recompense those enjoined for any loss, expense
or damage caused by the improvident or erroneous issuance
of such order or injunction, including all reasonable costs,
together with a reasonable attorney's fee, and expense of
defense against the order or against the granting of any
injunctive relief sought in the same proceeding and
subsequently denied by the Commission;" and

d) the "temporary restraining order shall be effective for no
longer than twenty (20) days and shall become void at the
expiration of said twenty (20) days."
The reception of evidence "for the application of a writ of
injunction may be delegated by the Commission to any of its
Labor Arbiters who shall conduct such hearings in such places
as he may determine to be accessible to the parties and their
witnesses and shall submit thereafter his recommendation to
the Commission."
The record reveals that the Commission exercised the power
directly and plainly granted to it by sub-paragraph (e) Article
217 in relation to Article 254 of the Code, and that it faithfully
observed the procedure and complied with the conditions for
the exercise of that power prescribed in said sub-paragraph
(e). It acted on SMC's application for immediate issuance of a
temporary restraining order ex parte on the ground that
substantial and irreparable injury to its property would transpire
before the matter could be heard on notice; it, however, first
directed SMC Labor Arbiter Carmen Talusan to receive SMC's
testimonial evidence in support of the application and
thereafter submit her recommendation thereon; it found SMC's
evidence adequate and issued the temporary restraining order
upon bond. No irregularity may thus be imputed to the
respondent Commission in the issuance of that order.
In any event, the temporary restraining order had a lifetime of
only twenty (20) days and became void ipso facto at the
expiration of that period.
In view of the foregoing factual and legal considerations, all
irresistibly leading to the basic conclusion that the concerted
acts of the members of petitioner Union in question
are violative of the law and their formal agreement with the
employer, the latter's submittal, in its counter-petition that there
was, in the premises, a "legal duty and obligation" on the part
of the respondent Commission to enjoin the unlawful and
prohibited acts and omissions of petitioner IBM and the
workers complained of[20] -- a proposition with which, it must
be said, the Office of the Solicitor General concurs, asserting
that the "failure of the respondent commission to resolve the
application for a writ of injunction is an abuse of discretion
especially in the light of the fact that the restraining order it
earlier issued had already expired"[21] -- must perforce be
conceded.
WHEREFORE, the petition is DENIED, the counter-petition is
GRANTED, and the case is REMANDED to the respondent
Commission (First Division) with instructions to immediately
take such action thereon as is indicated by and is otherwise in
accord with, the findings and conclusions herein set
forth. Costs against petitioner.
IT IS SO ORDERED.
G.R. No. 131247, January 25, 1999
PRUBANKERS ASSOCIATION, PETITIONER, VS.
PRUDENTIAL BANK & TRUST COMPANY, RESPONDENT
DECISION
PANGANIBAN, J.:
Wage distortion presupposes an increase in the compensation
of the lower ranks in an office hierarchy without a
corresponding raise for higher-tiered employees in the same
region of the country, resulting in the elimination or the severe
diminution of the distinction between the two groups. Such
distortion does not arise when a wage order gives employees
in one branch of a bank higher compensation than that given to
their counterparts in other regions occupying the same pay
scale, who are not covered by said wage order. In short, the
implementation of wage orders in one region but not in others
does not in itself necessarily result in wage distortion.
The Case
97
Before us is a Petition for Review on Certiorari, challenging the
November 6, 1997 Decision[1] of the Court of Appeals in CA-GR
SP No. 42525. The dispositive portion of the challenged
Decision reads:
WHEREFORE, the petition is GRANTED. The assailed
decision of the Voluntary Arbitration Committee dated June 18,
1996 is hereby REVERSED and SET ASIDE for having been
issued with grave abuse of discretion tantamount to lack of or
excess of jurisdiction, and a new judgment is rendered finding
that no wage distortion resulted from the petitioners separate
and regional implementation of Wage Order No. VII-03 at its
Cebu, Mabolo and P. del Rosario branches.
The June 18, 1996 Decision of the Voluntary Arbitration
Committee,[2] which the Court of Appeals reversed and set
aside, disposed as follows:
WHEREFORE, it is hereby ruled that the Banks separate and
regional implementation of Wage Order No. VII-03 at its Cebu,
Mabolo and P. del Rosario branches created a wage distortion
in the Bank nationwide which should be resolved in
accordance with Art. 124 of the Labor Code.[3]
The Facts
The facts of the case are summarized by the Court of Appeals
thus:
On November 18, 1993, the Regional Tripartite Wages and
Productivity Board of Region V issued Wage Order No. RB 05-
03 which provided for a Cost of Living Allowance (COLA) to
workers in the private sector who ha[d] rendered service for at
least three (3) months before its effectivity, and for the same
period [t]hereafter, in the following categories: SEVENTEEN
PESOS AND FIFTY CENTAVOS (P17.50) in the cities of Naga
and Legaspi; FIFTEEN PESOS AND FIFTY CENTAVOS
(P15.50) in the municipalities of Tabaco, Daraga, Pili and the
city of Iriga; and TEN PESOS (P10.00) for all other areas in
the Bicol Region.
Subsequently on November 23, 1993, the Regional Tripartite
Wages and Productivity Board of Region VII issued Wage
Order No. RB VII-03, which directed the integration of the
COLA mandated pursuant to Wage Order No. RO VII-02-A into
the basic pay of all workers. It also established an increase in
the minimum wage rates for all workers and employees in the
private sector as follows: by Ten Pesos (P10.00) in the cities of
Cebu, Mandaue and Lapulapu; Five Pesos (P5.00) in the
municipalities of Compostela, Liloan, Consolacion, Cordova,
Talisay, Minglanilla, Naga and the cities of Davao, Toledo,
Dumaguete, Bais, Canlaon, and Tagbilaran.
The petitioner then granted a COLA of P17.50 to its
employees at its Naga Branch, the only branch covered by
Wage Order No. RB 5-03, and integrated the P150.00 per
month COLA into the basic pay of its rank-and-file employees
at its Cebu, Mabolo and P. del Rosario branches, the branches
covered by Wage Order No. RB VII-03.
On June 7, 1994, respondent Prubankers Association wrote
the petitioner requesting that the Labor Management
Committee be immediately convened to discuss and resolve
the alleged wage distortion created in the salary structure upon
the implementation of the said wage orders. Respondent
Association then demanded in the Labor Management
Committee meetings that the petitioner extend the application
of the wage orders to its employees outside Regions V and VII,
claiming that the regional implementation of the said orders
created a wage distortion in the wage rates of petitioners
employees nationwide. As the grievance could not be settled
in the said meetings, the parties agreed to submit the matter to
voluntary arbitration. The Arbitration Committee formed for
that purpose was composed of the following: public
respondent Froilan M. Bacungan as Chairman, with Attys.
Domingo T. Anonuevo and Emerico O. de Guzman as
members. The issue presented before the Committee was
whether or not the banks separate and regional
implementation of Wage Order No. 5-03 at its Naga Branch
and Wage Order No. VII-03 at its Cebu, Mabolo and P. del
Rosario branches, created a wage distortion in the bank
nationwide.
The Arbitration Committee on June 18, 1996 rendered the
questioned decision.[4]
Ruling of the Court of Appeals

In ruling that there was no wage distortion, the Court of
Appeals held that the variance in the salary rates of employees
in different regions of the country was justified by RA 6727. It
noted that the underlying considerations in issuing the wage
orders are diverse, based on the distinctive situations and
needs existing in each region. Hence, there is no basis to
apply the salary increases imposed by Wage Order No. VII-03
to employees outside of Region VII. Furthermore, the Court of
Appeals ruled that the distinctions between each employee
group in the region are maintained, as all employees were
granted an increase in minimum wage rate.[5]
The Issues
In its Memorandum, petitioner raises the following issues:[6]
I constitutive of the requisites for auter action pendant or lis
Whether or not the Court of Appeals departed from the usual
course of judicial procedure when it disregarded the factual
findings of the Voluntary Arbitration Committee as to the
existence of wage distortion.
II
Whether or not the Court of Appeals committed grave error in
law when it ruled that wage distortion exists only within a
region and not nationwide.
III
Whether or not the Court of Appeals erred in implying that the
term establishment as used in Article 125 of the Labor Code
refers to the regional branches of the bank and not to the bank
as a whole.
The main issue is whether or not a wage distortion resulted
from respondents implementation of the aforecited Wage
Orders. As a preliminary matter, we shall also take up the
question of forum-shopping.
The Courts Ruling
The petition is devoid of merit.[7]
Preliminary Issue: Forum-Shopping
Respondent asks for the dismissal of the petition because
petitioner allegedly engaged in forum-shopping. It maintains
that petitioner failed to comply with Section 2 of Rule 42 of the
Rules of Court, which requires that parties must certify under
oath that they have not commenced any other action involving
the same issues in the Supreme Court, the Court of Appeals,
or different divisions thereof, or any other tribunal or agency; if
there is such other action or proceeding, they must state the
status of the same; and if they should thereafter learn that a
similar action or proceeding has been filed or is pending before
the said courts, they should promptly inform the aforesaid
courts or any other tribunal or agency within five days
therefrom. Specifically, petitioner accuses respondent of failing
to inform this Court of the pendency of NCMB-NCR-RVA-04-
012-97 entitled In Re: Voluntary Arbitration between Prudential
Bank and Prubankers Association (hereafter referred to as
voluntary arbitration case), an action involving issues
allegedly similar to those raised in the present controversy.
In its Reply, petitioner effectively admits that the voluntary
arbitration case was already pending when it filed the present
petition. However, it claims no violation of the rule against
forum-shopping, because there is no identity of causes of
action and issues between the two cases.
We sustain the respondent. The rule on forum-shopping was
first included in Section 17 of the Interim Rules and Guidelines
issued by this Court on January 11, 1983, which imposed a
sanction in this wise: A violation of the rule shall constitute
contempt of court and shall be a cause for the summary
dismissal of both petitions, without prejudice to the taking of
appropriate action against the counsel or party concerned.
98
Thereafter, the Court restated the rule in Revised Circular No.
28-91 and Administrative Circular No. 04-94. Ultimately, the
rule was embodied in the 1997 amendments to the Rules of
Court.
As explained by this Court in First Philippine International Bank
v. Court of Appeals,[8] forum-shopping exists where the
elements of litis pendentia are present, and where a final
judgment in one case will amount to res judicata in the other.
Thus, there is forum-shopping when, between an action
pending before this Court and another one, there exist: a)
identity of parties, or at least such parties as represent the
same interests in both actions, b) identity of rights asserted
and relief prayed for, the relief being founded on the same
facts, and c) the identity of the two preceding particulars is
such that any judgement rendered in the other action, will,
regardless of which party is successful amount to res
judicata in the action under consideration; said requisites also
pendens.[9] Another case elucidates the consequence of
forum-shopping: [W]here a litigant sues the same party
against whom another action or actions for the alleged violation
of the same right and the enforcement of the same relief is/are
still pending, the defense of litis pendentia in one case is a bar
to the others; and, a final judgment in one would constitute res
judicata and thus would cause the dismissal of the rest.[10]
The voluntary arbitration case involved the issue of whether
the adoption by the Bank of regionalized hiring rates was valid
and binding.
On the other hand, the issue now on hand revolves around the
existence of a wage distortion arising from the Banks separate
and regional implementation of the two Wage Orders in the
affected branches. A closer look would show that, indeed, the
requisites of forum-shopping are present.
First, there is identity of parties. Both cases are between the
Bank and the Association, acting on behalf of all its
members. Second, although the respective issues and reliefs
prayed for in the two cases are stated differently, both actions
boil down to one single issue: the validity of the Banks
regionalization of its wage structure based on RA 6727. Even
if the voluntary arbitration case calls for striking down the
Banks regionalized hiring scheme while the instant petition
calls for the correction of the alleged wage distortion caused by
the regional implementation of Wage Order No. VII-03, the
ultimate relief prayed for in both cases is the maintenance of
the Banks national wage structure. Hence, the final
disposition of one would constitute res judicata in the other.
Thus, forum-shopping is deemed to exist and, on this basis,
the summary dismissal of both actions is indeed warranted.
Nonetheless, we deem it appropriate to pass upon the main
issue on its merit in view of its importance.
Main Issue: Wage Distortion
The statutory definition of wage distortion is found in Article
124 of the Labor Code, as amended by Republic Act No. 6727,
which reads:
Article 124. Standards/Criteria for Minimum Wage Fixing - xxx
As used herein, a wage distortion shall mean a situation
where an increase in prescribed wage results in the elimination
or severe contraction of intentional quantitative differences in
wage or salary rates between and among employee groups in
an establishment as to effectively obliterate the distinctions
embodied in such wage structure based on skills, length of
service, or other logical bases of differentiation.
Elaborating on this statutory definition, this Court ruled: Wage
distortion presupposes a classification of positions and ranking
of these positions at various levels. One visualizes a hierarchy
of positions with corresponding ranks basically in terms of
wages and other emoluments. Where a significant change
occurs at the lowest level of positions in terms of basic wage
without a corresponding change in the other level in the
hierarchy of positions, negating as a result thereof the
distinction between one level of position from the next higher
level, and resulting in a parity between the lowest level and the
next higher level or rank, between new entrants and old hires,
there exists a wage distortion. xxx. 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[11]
Wage distortion involves four elements:
1.) An existing hierarchy of positions with corresponding salary
rates
2.) A significant change in the salary rate of a lower pay class
without a concomitant increase in the salary rate of a higher
one
3.) The elimination of the distinction between the two levels
4.) The existence of the distortion in the same region of the
country.
In the present case, it is clear that no wage distortion resulted
when respondent implemented the subject Wage Orders in the
covered branches. In the said branches, there was an
increase in the salary rates of all pay classes. Furthermore,
the hierarchy of positions based on skills, length of service and
other logical bases of differentiation was preserved. In other
words, the quantitative difference in compensation between
different pay classes remained the same in all branches in the
affected region. Put differently, the distinction between Pay
Class 1 and Pay Class 2, for example, was not eliminated as a
result of the implementation of the two Wage Orders in the said
region. Hence, it cannot be said that there was a wage
distortion.
Petitioner argues that a wage distortion exists because the
implementation of the two Wage Orders has resulted in the
discrepancy in the compensation of employees of similar pay
classification in different regions. Hence, petitioner maintains
that, as a result of the two Wage Orders, the employees in the
affected regions have higher compensation than their
counterparts of the same level in other regions. Several tables
are presented by petitioner to illustrate that the employees in
the regions covered by the Wage Orders are receiving more
than their counterparts in the same pay scale in other regions.
The Court is not persuaded. A wage parity between
employees in different rungs is not at issue here, but a wage
disparity between employees in the same rung but located in
different regions of the country.
Contrary to petitioners postulation, a disparity in wages
between employees holding similar positions but in different
regions does not constitute wage distortion as contemplated by
law. As previously enunciated, it is the hierarchy of positions
and the disparity of their corresponding wages and other
emoluments that are sought to be preserved by the concept of
wage distortion. Put differently, a wage distortion arises when
a wage order engenders wage parity between employees
in different rungs of the organizational ladder of the same
establishment. It bears emphasis that wage distortion involves
a parity in the salary rates of different pay classes which, as a
result, eliminates the distinction between the different ranks in
the same region.
Different Regional Wages
Mandated by RA 6727
Petitioners claim of wage distortion must also be denied for
one other reason. The difference in wages between
employees in the same pay scale in different regions is not the
mischief sought to be banished by the law. In fact, Republic
Act No. 6727 (the Wage Rationalization Act), recognizes
existing regional disparities in the cost of living. Section 2 of
said law provides:
SEC 2. It is hereby declared the policy of the State to
rationalize the fixing of minimum wages and to promote
productivity-improvement and gain-sharing measures to
ensure a decent standard of living for the workers and their
families; to guarantee the rights of labor to its just share in the
fruits of production; to enhance employment generation in the
countryside through industry dispersal; and to allow business
and industry reasonable returns on investment, expansion and
growth.
The State shall promote collective bargaining as the primary
mode of settling wages and other terms and conditions of
employment; and whenever necessary, the minimum wage
rates shall be adjusted in a fair and equitable manner,
99
considering existing regional disparities in the cost of living and
other socio-economic factors and the national economic and
social development plans.
RA 6727 also amended Article 124 of the Labor Code, thus:
Art. 124. Standards/Criteria for Minimum Wage Fixing. - The
regional minimum wages to be established by the Regional
Board shall be as nearly adequate as is economically feasible
to maintain the minimum standards of living necessary for the
health, efficiency and general well-being of the employees
within the frame work of the national economic and social
development program. In the determination of such regional
minimum wages, the Regional Board shall, among other
relevant factors, consider the following:
From the above-quoted rationale of the law, as well as the
criteria enumerated, a disparity in wages between employees
with similar positions in different regions is necessarily
expected. In insisting that the employees of the same pay
class in different regions should receive the same
compensation, petitioner has apparently misunderstood both
the meaning of wage distortion and the intent of the law to
regionalize wage rates.
It must be understood that varying in each region of the
country are controlling factors such as the cost of living; supply
and demand of basic goods, services and necessities; and the
(a) The demand for living wages;
(b) Wage adjustment vis-a-vis the consumer price index;
(c) The cost of living and changes or increases therein;
(d) The needs of workers and their families;
(e) The need to induce industries to invest in the countryside;
(f) Improvements in standards of living;
(g) The prevailing wage levels;
(h) Fair return of the capital invested and capacity to pay of
employers;
(I) Effects on employment generation and family income; and
(j) The equitable distribution of income and wealth along the
imperatives of social and economic development.
purchasing power of the peso. Other considerations
underscore the necessity of the law. Wages in some areas
may be increased in order to prevent migration to the National
Capital Region and, hence, to decongest the metropolis.
Therefore, what the petitioner herein bewails is precisely what
the law provides in order to achieve its purpose.
Petitioner claims that it does not insist that the Regional Wage
Boards created pursuant to RA 6727 do not have the authority
to issue wage orders based on the distinctive situations and
needs existing in each region. So also, xxx it does not insist
that the [B]ank should not implement regional wage orders.
Neither does it seek to penalize the Bank for following Wage
Order VII-03. xxx What it simply argues is that it is wrong for
the Bank to peremptorily abandon a national wage structure
and replace the same with a regionalized structure in violation
of the principle of equal pay for equal work. And, it is wrong to
say that its act of abandoning its national wage structure is
mandated by law.
As already discussed above, we cannot sustain this argument.
Petitioner contradicts itself in not objecting, on the one hand, to
the right of the regional wage boards to impose a regionalized
wage scheme; while insisting, on the other hand, on a national
wage structure for the whole Bank. To reiterate, a uniform
national wage structure is antithetical to the purpose of RA
6727.
The objective of the law also explains the wage disparity in the
example cited by petitioner: Armae Librero, though only in Pay
Class 4 in Mabolo, was, as a result of the Wage Order,
receiving more than Bella Cristobal, who was already in Pay
Class 5 in Subic.[12] RA 6727 recognizes that there are different
needs for the different situations in different regions of the
country. The fact that a person is receiving more in one region
does not necessarily mean that he or she is better off than a
person receiving less in another region. We must consider,
among others, such factors as cost of living, fulfillment of
national economic goals, and standard of living. In any event,

this Court, in its decisions, merely enforces the law. It has no
power to pass upon its wisdom or propriety.
Equal Pay for Equal Work
Petitioner also avers that the implementation of the Wage
Order in only one region violates the equal-pay-for-equal-work
principle. This is not correct. At the risk of being repetitive, we
stress that RA 6727 mandates that wages in every region must
be set by the particular wage board of that region, based on
the prevailing situation therein. Necessarily, the wages in
different regions will not be uniform. Thus, under RA 6727, the
minimum wage in Region 1 may be different from that in
Region 13, because the socioeconomic conditions in the two
regions are different.
Meaning of Establishment
Petitioner further contends that the Court of Appeals erred in
interpreting the meaning of establishment in relation to wage
distortion. It quotes the RA 6727 Implementing Rules,
specifically Section 13 thereof which speaks of workers
working in branches or agencies of establishments in or
outside the National Capital Region. Petitioner infers from this
that the regional offices of the Bank do not themselves
constitute, but are simply branches of, the establishment which
is the whole bank. In effect, petitioner argues that wage
distortion covers the pay scales even of employees in different
regions, and not only those of employees in the same region
or branch. We disagree.
Section 13 provides that the minimum wage rates of workers
working in branches or agencies of establishments in or
outside the National Capital Region shall be those applicable
in the place where they are sanctioned. The last part of the
sentence was omitted by petitioner in its argument. Given the
entire phrase, it is clear that the statutory provision does not
support petitioners view that establishment includes all
branches and offices in different regions.
Further negating petitioners theory is NWPC Guideline No. 1
(S. 1992) entitled Revised Guidelines on Exemption From
Compliance With the Prescribed Wage/Cost of Living
Allowance Increases Granted by the Regional Tripartite Wages
and Productivity Board, which states that establishment
refers to an economic unit which engages in one or
predominantly one kind of economic activity with a single fixed
location.
Management Practice
Petitioner also insists that the Bank has adopted a uniform
wage policy, which has attained the status of an established
management practice; thus, it is estopped from implementing a
wage order for a specific region only. We are not persuaded.
Said nationwide uniform wage policy of the Bank had been
adopted prior to the enactment of RA 6727. After the passage
of said law, the Bank was mandated to regionalize its wage
structure. Although the Bank implemented Wage Order Nos.
NCR-01 and NCR-02 nationwide instead of regionally even
after the effectivity of RA 6727, the Bank at the time was still
uncertain about how to follow the new law. In any event, that
single instance cannot be constitutive of management
practice.
WHEREFORE, the petition is DENIED and the assailed
Decision is AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. 140689, February 17, 2004
BANKARD EMPLOYEES UNION-WORKERS ALLIANCE
TRADE UNIONS, PETITIONER, VS. NATIONAL LABOR
RELATIONS COMMISSION AND BANKARD, INC.,
RESPONDENTS.
DECISION
CARPIO MORALES, J.:
100
The present Petition for Review on Certiorari under Rule 45 of
the Rules of Court raises the issue of whether the unilateral
adoption by an employer of an upgraded salary scale that
increased the hiring rates of new employees without increasing
the salary rates of old employees resulted in wage distortion
within the contemplation of Article 124 of the Labor Code.
Bankard, Inc. (Bankard) classifies its employees by levels, to
wit: Level I, Level II, Level III, Level IV, and Level V. On May
28, 1993, its Board of Directors approved a New Salary
Scale, made retroactive to April 1, 1993, for the purpose of
making its hiring rate competitive in the industrys labor market.
The New Salary Scale increased the hiring rates of new
employees, to wit: Levels I and V by one thousand pesos
(P1,000.00), and Levels II, III and IV by nine hundred pesos
(P900.00). Accordingly, the salaries of employees who fell
below the new minimum rates were also adjusted to reach
such rates under their levels.
Bankards move drew the Bankard Employees Union-WATU
(petitioner), the duly certified exclusive bargaining agent of the
regular rank and file employees of Bankard, to press for the
increase in the salary of its old, regular employees.
Bankard took the position, however, that there was no
obligation on the part of the management to grant to all its
employees the same increase in an across-the-board manner.
As the continued request of petitioner for increase in the wages
and salaries of Bankards regular employees remained
unheeded, it filed a Notice of Strike on August 26, 1993 on the
ground of discrimination and other acts of Unfair Labor
Practice (ULP).
A director of the National Conciliation and Mediation Board
treated the Notice of Strike as a Preventive Mediation Case
based on a finding that the issues therein were not strikeable.
Petitioner filed another Notice of Strike on October 8, 1993 on
the grounds of refusal to bargain, discrimination, and other acts
of ULP -union busting. The strike was averted, however, when
the dispute was certified by the Secretary of Labor and
Employment for compulsory arbitration.
The Second Division of the NLRC, by Order of May 31, 1995,
finding no wage distortion, dismissed the case for lack of merit.
Petitioners motion for reconsideration of the dismissal of the
case was, by Resolution of July 28, 1995, denied.
Petitioner thereupon filed a petition for certiorari before this
Court, docketed as G.R. 121970. In accordance with its ruling
in St. Martin Funeral Homes v. NLRC,[1]the petition was
referred to the Court of Appeals which, by October 28, 1999,
denied the same for lack of merit.
Hence, the present petition which faults the appellate court as
follows:
(1) It misapprehended the basic issues when it concluded that
under Bankards new wage structure, the old salary gaps
between the different classification or level of employees were
still reflected by the adjusted salary rates[2]; and
(2) It erred in concluding that wage distortion does not
appear to exist, which conclusion is manifestly contrary to law
and jurisprudence.[3]
Upon the enactment of R.A. No. 6727 (WAGE
RATIONALIZATION ACT, amending, among others, Article 124
of the Labor Code) on June 9, 1989, the term wage distortion
was explicitly defined as:
... a situation where an increase in prescribed wage rates
results in the elimination or severe contraction of intentional
quantitative differences in wage or salary rates between and
among employee groups in an establishment as to effectively
obliterate the distinctions embodied in such wage structure
based on skills, length of service, or other logical bases of
differentiation.[4]
Prubankers Association v. Prudential Bank and Trust
Company[5] laid down the four elements of wage distortion, to
wit: (1.) An existing hierarchy of positions with corresponding
salary rates; (2) A significant change in the salary rate of a
lower pay class without a concomitant increase in the salary
 101

rate of a higher one; (3) The elimination of the distinction management judgment and discretion, and ultimately,
between the two levels; and (4) The existence of the distortion perhaps, a subject matter for bargaining
in the same region of the country. negotiations between employer and employees. It is
assuredly something that falls outside the concept of wage
Normally, a company has a wage structure or method of distortion.[11] (Emphasis and underscoring supplied)
determining the wages of its employees. In a problem dealing As did the Court of Appeals, this Court finds that the third
with wage distortion, the basic assumption is that there exists element provided in Prubankers is also wanting. For, as the
a grouping or classification of employees that establishes appellate court explained:
distinctions among them on some relevant or legitimate bases. In trying to prove wage distortion, petitioner union presented a
[6]
list of five (5) employees allegedly affected by the said
increase:
Involved in the classification of employees are various factors
such as the degrees of responsibility, the skills and knowledge Pay of Newly
Pay of Old/Regular
required, the complexity of the job, or other logical basis of Hired Difference
Employees
differentiation. The differing wage rate for each of the existing Employees
classes of employees reflects this classification.
A. Prior to April 1,
Petitioner maintains that for purposes of wage distortion, the 1993
classification is not one based on levels or ranks but on two
groups of employees, the newly hired and the old, in each and
every level, and not between and among the different levels or Level I P4,518.75
P3,100 P1,418.75
ranks in the salary structure. (Sammy Guce)
Level II P6,242.00
P3,200 P3,042.00
Public respondent National Labor Relations Commission (Nazario Abello)
(NLRC) refutes petitioners position, however. It, through the Level IIIP4,850.00
P3,300 P1,550.00
Office of the Solicitor General, essays in its Comment of April (Arthur Chavez)
12, 2000 as follows: Level IVP5,339.00
P3,500 P1,839.00
To determine the existence of wage distortion, the historical (Melissa Cordero)
classification of the employees prior to the wage increase must Level VP7,090.69
P3,700 P3,390.69
be established. Likewise, it must be shown that as between the (Ma. Lourdes Dee)
different classification of employees, there exists a historical
gap or difference. B. Effective April 1,
1993
xxx Level I P4,518.75
P4,100 P418.75
(Sammy Guce)
The classification preferred by petitioner is belied by the wage Level II P6,242.00
P4,100 P2,142.00
structure of private respondent as shown in the new salary (Nazario Abello)
scale it adopted on May 28, 1993, retroactive to April 1, 1993, Level IIIP4,850.00
P4,200 P650.00
which provides, thus: (Arthur Chavez)
Thus the employees of private respondent have been Level IVP5,330.00
P4,400 P939.00
historically classified into levels, i.e. I to V, and not on the (Melissa Cordero)
basis of their length of service. Put differently, the entry Level VP7,090.69
P4,700 P2,390.69
of new employees to the company ipso facto place[s] them (Ma. Lourdes Dee)
under any of the levels mentioned in the new salary scale
which private respondent adopted retroactive [to] April 1,
1993. Petitioner cannot make a contrary classification of Even assuming that there is a decrease in the wage gap
private respondents employees without encroaching upon between the pay of the old employees and the newly hired
recognized management prerogative of formulating a wage employees, to Our mind said gap is not significant as to
structure, in this case, one based on level.[7] (Emphasis and obliterate or result in severe contraction of the intentional
underscoring supplied) quantitative differences in the salary rates between the
The issue of whether wage distortion exists being a question of employee group. As already stated, the classification under the
fact that is within the jurisdiction of quasi-judicial tribunals, wage structure is based on the rank of an employee, not on
[8]
and it being a basic rule that findings of facts of quasi-judicial seniority. For this reason, ,wage distortion does not appear to
agencies, like the NLRC, are generally accorded not only exist.[12] (Emphasis and underscoring supplied)
respect but at times even finality if they are supported by
substantial evidence, as are the findings in the case at bar, Apart from the findings of fact of the NLRC and the Court of
they must be respected. For these agencies have acquired Appeals that some of the elements of wage distortion are
expertise, their jurisdiction being confined to specific matters.[9] absent, petitioner cannot legally obligate Bankard to correct the
alleged wage distortion as the increase in the wages and
It is thus clear that there is no hierarchy of positions between salaries of the newly-hired was not due to a prescribed law or
the newly hired and regular employees of Bankard, hence, the wage order.
first element of wage distortion provided in Prubankers is
wanting. The wordings of Article 124 are clear. If it was the intention of
the legislators to cover all kinds of wage adjustments, then the
While seniority may be a factor in determining the wages of language of the law should have been broad, not restrictive as
employees, it cannot be made the sole basis in cases where it is currently phrased:
the nature of their work differs. Article 124. Standards/Criteria for Minimum Wage Fixing.

Moreover, for purposes of determining the existence of wage xxx

distortion, employees cannot create their own independent
classification and use it as a basis to demand an across-the-
board increase in salary.
As National Federation of Labor v. NLRC, et al.[10] teaches, the
formulation of a wage structure through the classification of
employees is a matter of management judgment and
discretion.
[W]hether or not a new additional scheme of classification of
employees for compensation purposes should be established
by the Company (and the legitimacy or viability of the bases of
distinction there embodied) is properly a matter of
Where the application of any prescribed wage increase by
virtue of a law or Wage Order issued by any Regional
Board results in distortions of the wage structure within an
establishment, the employer and the union shall negotiate to
correct the distortions. Any dispute arising from the wage
distortions shall be resolved through the grievance procedure
under their collective bargaining agreement and, if it remains
unresolved, through voluntary arbitration.
x x x (Italics and emphasis supplied)

Article 124 is entitled Standards/Criteria for Minimum Wage
Fixing. It is found in CHAPTER V on WAGE STUDIES,
WAGE AGREEMENTS AND WAGE DETERMINATION which
principally deals with the fixing of minimum wage. Article 124
should thus be construed and correlated in relation to minimum
wage fixing, the intention of the law being that in the event of
an increase in minimum wage, the distinctions embodied in the
wage structure based on skills, length of service, or other
logical bases of differentiation will be preserved.
If the compulsory mandate under Article 124 to correct wage
distortion is applied to voluntary and unilateral increases by
the employer in fixing hiring rates which is inherently a
business judgment prerogative, then the hands of the employer
would be completely tied even in cases where an increase in
wages of a particular group is justified due to a re-evaluation of
the high productivity of a particular group, or as in the present
case, the need to increase the competitiveness of Bankards
hiring rate. An employer would be discouraged from adjusting
the salary rates of a particular group of employees for fear that
it would result to a demand by all employees for a similar
increase, especially if the financial conditions of the business
cannot address an across-the-board increase.
Petitioner cites Metro Transit Organization, Inc. v. NLRC[13] to
support its claim that the obligation to rectify wage distortion is
not confined to wage distortion resulting from government
decreed law or wage order.
Reliance on Metro Transit is however misplaced, as the
obligation therein to rectify the wage distortion was not by
virtue of Article 124 of the Labor Code, but on account of a
then existing company practice that whenever rank-and-file
employees were paid a statutorily mandated salary increase,
supervisory employees were, as a matter of practice, also paid
the same amount plus an added premium. Thus this Court held
in said case:
We conclude that the supervisory employees, who then (i.e.,
on April 17, 1989) had, unlike the rank-and-file employees, no
CBA governing the terms and conditions of their employment,
had the right to rely on the company practice of unilaterally
correcting the wage distortion effects of a salary increase given
to the rank-and-file employees, by giving the supervisory
employees a corresponding salary increase plus a premium. . .
.[14] (Emphasis supplied)
Wage distortion is a factual and economic condition that may
be brought about by different causes. In Metro Transit, the
reduction or elimination of the normal differential between the
wage rates of rank-and-file and those of supervisory
employees was due to the granting to the former of wage
increase which was, however, denied to the latter group of
employees.
The mere factual existence of wage distortion does not,
however, ipso facto result to an obligation to rectify it, absent a
law or other source of obligation which requires its rectification.
Unlike in Metro Transit then where there existed a company
practice, no such management practice is herein alleged to
obligate Bankard to provide an across-the-board increase to all
its regular employees.
Bankards right to increase its hiring rate, to establish minimum
salaries for specific jobs, and to adjust the rates of employees
affected thereby is embodied under Section 2, Article V (Salary
and Cost of Living Allowance) of the parties Collective
Bargaining Agreement (CBA), to wit:
Section 2. Any salary increase granted under this Article shall
be without prejudice to the right of the Company to establish
such minimum salaries as it may hereafter find appropriate for
specific jobs, and to adjust the rates of the employees thereby
affected to such minimum salaries thus established.[15] (Italics
and underscoring supplied)
This CBA provision, which is based on legitimate business-
judgment prerogatives of the employer, is a valid and legally
enforceable source of rights between the parties.
In fine, absent any indication that the voluntary increase of
salary rates by an employer was done arbitrarily and illegally
for the purpose of circumventing the laws or was devoid of any
legitimate purpose other than to discriminate against the
regular employees, this Court will not step in to interfere with
102
this management prerogative. Employees are of course not
precluded from negotiating with its employer and lobby for
wage increases through appropriate channels, such as through
a CBA.
This Court, time and again, has shown concern and
compassion to the plight of workers in adherence to the
Constitutional provisions on social justice and has always
upheld the right of workers to press for better terms and
conditions of employment. It does not mean, however, that
every dispute should be decided in favor of labor, for
employers correspondingly have rights under the law which
need to be respected.
WHEREFORE, the present petition is hereby DENIED.
SO ORDERED.
CHAPTER VI
G.R. NO. 88538, April 25, 1990
ABOITIZ SHIPPING CORPORATION, PETITIONER, VS.
HON. DIONISIO C. DELA SERNA, IN HIS CAPACITY AS
UNDERSECRETARY OF LABOR AND EMPLOYMENT; HON.
LUNA C. PIEZAS, IN HIS CAPACITY AS DIRECTOR,
NATIONAL CAPITAL REGION, DEPARTMENT OF LABOR
AND EMPLOYMENT; AND, ABOITIZ SHIPPING
EMPLOYEES ASSOCIATION, RESPONDENTS.
DECISION
PADILLA, J.:
The principal issue in this special civil action for certiorari is
whether the respondent Regional Director, National Capital
Region, Department of Labor and Employment (Regional
Director, for short) correctly assumed jurisdiction over the
money claims filed with him by the complainants (members of
herein private respondent).
Assailed specifically in this petition is the Order dated 9
February 1989 of the respondent Undersecretary of Labor and
Employment affirming the Order dated 13 October 1988 of the
Regional Director, ordering petitioner company to pay the
seven hundred seventeen (717) complainants a total amount
of P1,350,828.00, or P1,884.00 each, representing
underpayment of an allowance of P2.00 per day, reckoned
from 16 February 1982 to 15 February 1985.
The facts of the case, as found by respondent Undersecretary,
are as follows:
''x x x a complaint was filed by the Aboitiz Shipping Employees
Association against Aboitiz Shipping Corporation for non-
compliance of the mandated minimum wage rates and
allowances pursuant to P.D. Nos. 1713, 1751, Wage Order
Nos. 1, 2, 3, 4, 5 and 6. Accordingly, the Labor Regulation
Officers of the Regional Office a quo inspected the
respondent's employment records.
On the other hand, the respondent filed a Motion to Dismiss
contending that the complainant-union has no legal capacity to
sue because a representation issue is still pending with Med-
Arbiter Edgardo Cruz in LRD CASE NO. M?001-85.
Series of hearings were conducted whereby the Office a
quo repeatedly directed the respondent to present and submit
all its pertinent papers/employment records covered by the
investigation. However, on several occasions, the respondent
failed to appear. Likewise, despite repeated notices, the
respondent failed to present any of the documents due for
inspection evidencing correct payments of salaries and
allowances.
On December 28, 1987, the hearing officer submitted his
report and recommended for the payment to the union's
members amounting to an aggregate sum of P16,200,877.47.
On January 20, 1988, the Office a quo formally issued
subpoena duces tecum, requiring the presentation by the

respondent of its employees' payrolls and vouchers covering
the period from February 16, 1982 to December 31, 1985.
This, the respondent ignored. In lieu thereof, it filed a second
Motion to Dismiss alleging that on July 24, 1986, the parties
entered into a compromise agreement whereby they agreed
that all cases filed against and by respondent would be
dropped and/or dismissed, including the above entitled case;
that pursuant to and by virtue of the compromise agreement,
cases filed against the Aboitiz Shipping Corporation and its
officers were dropped and/or withdrawn and/or dismissed; and
that similarly, cases filed by Aboitiz Shipping Corporation and
its officers against the union and its officers were dropped,
withdrawn and/or dismissed.
In the subsequent hearing of February 16, 1988 however, the
parties agreed that on March 4, 1988, the respondent shall
submit to the Office a quo the required payrolls/vouchers for
wages and salaries covering the period from February 16,
1982 to December 31, 1985. On that date, the respondent
again failed to make good its commitment. Nevertheless, it
agreed to submit the payrolls of its Manila-based employees
for the period from January 1982 to December 1982. Together
with the submission of the photocopies of the payrolls of the
Manila-based employees, the respondent also filed a
Manifestation of Compliance stating that the following should
be taken into consideration:
Annex 1. Which is a BWF/ISM Form No. 5 an advance notice
dated October 1987 issued by the DOLE Regional Office No. 7
notifying respondent of their intent to check payrolls etc. xxx
Annex 2. Which is the notice of inspection results no. 05598
dated October 23, 1987 stating that the respondent
(companywide payrolls, etc.) has no violation insofar as wages,
salaries, etc. are concerned as well as the benefits indicated in
the CBA. xxx
Annex 3. Which is the certification of the ASEA Union
President based in Cebu City and the Union Vice President
that company records inspected covering the period 1984-
1987 were true correct and in order, and in compliance with the
Labor and Standard Laws;
Annex 4. Which is the existing CBA between the respondent
and complainant ASEA employees Union;
Annex 5. Which is the letter of Bureau of Working Conditions
dated July 17, 1987 signed by Director Augusto Sanchez
sustaining and validating respondent's use of 314 as divisor in
the computation of wages and COLA for land based
employees of respondent.
Again, on July 5, 1988, the respondent filed a supplemental
Motion to Dismiss, questioning this time the jurisdiction of the
Office a quo. The motion alleged that x x x considering the
complaint involves money claims, the original and exclusive
jurisdiction rests not before the Honorable Director but before
the Labor Arbiter x x x'.
xxx xxx xxx
Another hearing was conducted on August 17, 1988, whereby
the respondent was required to submit its payrolls for the year
1984. The respondent manifested however, that its Motion to
Dismiss be resolved first by the Office a quo. Further, the
respondent averred that the payroll for 1984 need not be
submitted, and thus moved for the resolution of this case
based on the available records and motions submitted."[1]
Subsequently, respondent Regional Director issued the now
assailed Order dated 13 October 1988, the dispositive portion
of which reads:
"WHEREFORE, premises considered, the Aboitiz Shipping
Corporation is hereby Ordered to pay the herein listed
complainants the total amount of ONE MILLION THREE
HUNDRED FIFTY THOUSAND EIGHT HUNDRED TWENTY
EIGHT and 00/100 PESOS (P1,350,828.00) representing
underpayment of daily allowance of TWO (P2.00) PESOS per
day reckoned from 16 February 1982 to 15 February 1985.
FURTHER, the Aboitiz Shipping Corporation is hereby Ordered
to pay each and every one of its employees the deficiency in
103
allowance of two (P2.00) PESOS per day from 16 February
1985 on ward until this Order is fully complied with."[2]
On appeal to the Office of the Secretary of Labor and
Employment, in which petitioner questioned, among others, the
jurisdiction of respondent Regional Director over the instant
claims, respondent Undersecretary issued the Order dated 9
February 1989 dismissing petitioner's appeal and affirming the
Order dated 13 October 1988 of the respondent Director. The
motion for reconsideration of the order dated 9 February 1989
having been denied by respondent Undersecretary in the
Order dated 2 June 1989, petitioner interposed this present
petition.
Petitioner contends that it is the Labor Arbiter, not the Regional
Director who has jurisdiction over money claims, citing Article
217 of the Labor Code, and invoking this Court's ruling in
Zambales Base Metals, Inc. vs. Minister of Labor.[3]
We rule against petitioner's contention.
Pertinent to the issue at bar are Articles 129 and 217 of the
Labor Code, as amended by Sections 2 and 9 of Republic Act
6715 approved on 2 March 1989 which read as follows:
"Article 129. Recovery of wages, simple money claims and
other benefits. - Upon complaint of any interested party, the
Regional Director of the Department of Labor and Employment
or any of the duly authorized hearing officers of the
Department is empowered, through summary proceeding and
after due notice, to hear and decide any matter involving the
recovery of wages and other monetary claims and benefits,
including legal interest, owing to an employee or person
employed in domestic or household service or househelper
under this Code, arising from employer-employee relations:
Provided, that such complaint does not include a claim for
reinstatement: Provided, further, That the aggregate money
claims of each employee or househelper do not exceed five
thousand pesos (P5,000.00). The Regional Director or hearing
officer shall decide or resolve the complaint within thirty (30)
calendar days from the date of the filing of the same. Any sum
thus recovered on behalf of any employee or househelper
pursuant to this Article shall be held in a special deposit
account, and shall be paid, on order of the Secretary of Labor
and Employment or the Regional Director directly to the
employee or househelper concerned. Any such sum not paid
to the employee or house-helper, because he cannot be
located after diligent and reasonable effort to locate him within
a period of three (3) years, shall be held as a special fund of
the Department of Labor and Employment to be used
exclusively for the amelioration and benefit of workers.
Any decision or resolution of the Regional Director or hearing
officer pursuant to this provision may be appealed on the same
grounds provided in Article 223 of this Code, within five (5)
calendar days from receipt of a copy of said decision or
resolution, to the National Labor Relations Commission which
shall resolve the appeal within ten (10) calendar days from the
submission of the last pleading required or allowed under its
rules.
The Secretary of Labor and Employment or his duly authorized
representative may supervise the payment of unpaid wages
and other monetary claims and benefits, including legal
interest, found owing to any employee or househelper under
this Code."
xxx xxx xxx
"Art. 217. 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, within thirty (30) calendar days after the
submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the
following cases involving all workers, whether agricultural or
non-agricultural:
(1) Unfair labor practice cases;
(2) Termination disputes;

'(3) If accompanied with a claim for reinstatement, those
cases that workers may file involving wages, rates of pay hours
of work and other terms and conditions of employment;
(4) Claims for actual, moral, exemplary and other forms
of damages arising from the employer-employee relations
(5) Cases arising from any violation of Article 264 of this
Code, including questions involving the legality of strikes and
lockouts; and
(6) Except claims for employees compensation, social
security, medicare and maternity benefits, all other claims
arising from employer-employee relations, including those of
persons in domestic or household service, involving an amount
exceeding five thousand pesos (P5,000.00), whether or not
accompanies with a claim for reinstatement.
(b) The Commission shall have exclusive appellate
jurisdiction over all cases decided by Labor Arbiters.
(c) Cases arising from the interpretation or implementation
of collective bargaining agreements and those arising from the
interpretation or enforcement of company personnel policies
shall be disposed of by the Labor Arbiter by referring the same
to the grievance machinery and voluntary arbitration as may be
provided in said agreements."
It should be pointed out that, following the ruling in Briad Agro
vs. Dela Cerna, and L.M. Camus Engineering vs. Secretary of
Labor,[4] the above-cited amendments, being curative in nature,
have retroactive effect and, thus, find application in the instant
case.
Under the foregoing 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,[5] 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.[6]
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 seven hundred seventeen (717) complainants entitled to a
uniform amount of P1,884.00. (Rollo, pp. 117-131). 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
104
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."
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.[8]
We find no merit in said contention, in the light of the Regional
Director's finding that the said agreement can not bind the
complainant-union vis-a-vis the instant claims, for the reason
that it was entered into by one Mr. Elizardo Manuel[9] 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,[10] 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. The said
agreement[11] reads:
"COMPROMISE AGREEMENT
This Agreement, entered into by and among Mr. ELIZARDO
MANUEL in his personal capacity, LUIS M. MORO, JR.
representing Aboitiz Shipping Corporation and Atty. LUIS D.
FLORES in his capacity as Legal Counsel of ASEA-CLO.
Based on a compromise agreement Mr. Elizardo Manuel is
requesting Aboitiz Shipping Corporation for payment of
P70,000.00 in full settlement of all monetary claims for back
wages and benefits he has, including the settlement decided
by the NLRC which presently is under appeal.
For and in consideration of the above stated amount Mr.
Elizardo Manuel and Aboitiz Shipping Corporation mutually
agree that:
- Mr. Elizardo Manuel is deemed resigned from Aboitiz
Shipping Corporation upon payment of the above stated
amount; xxx
- Aboitiz Shipping Corporation will furnish Mr. E.
Manuel a certificate of good moral character;
- All pending cases as attested by our Legal Counsel
that are related or filed by Mr. E. Manuel against the Officers of
Aboitiz Shipping Corporation and Aboitiz Shipping Corporation
itself will be immediately dropped;
- Aboitiz Shipping Corporation also agrees to drop all
pending cases related to and filed against Mr. E. Manuel and
Officers of the Union.

Done this 24th day of July, 1986 in Metro Manila,
Philippines.
(SGD) (SGD)
_________________ ________________
ELIZARDO MANUEL LUIS M. MORO, JR.
(SGD)
_________________
ATTY. LUIS D. FLORES"
Considering the terms of the said compromise agreement, we
rule that said Mr. Manuel shall be excluded from the list of
complainants who shall receive money awards from the
petitioner.
Finally, petitioner avers: that the award of P1,350,828 is
without factual and legal basis; that petitioner did not commit
any labor standards violation pursuant to the DOLE inspection
results and the union certification to that effect; and that 291 of
the 717 complainants are non-employees of petitioner, and that
the other 136 of the said 717 commenced employment only
after February 1982, hence, not entitled to receive money
awards. The foregoing contentions being evidentiary in nature,
we have to respect the factual findings of public respondents
regarding the above-cited petitioner's averments, the long-
settled rule being that factual findings of labor officials are,
generally, conclusive and binding on this Court when
supported by substantial evidence.[12]
WHEREFORE, the assailed Order dated 9 February 1989 of
the respondent Undersecretary of Labor and Employment
affirming the Order dated 13 October 1988 of the Regional
Director is hereby AFFIRMED, with the modification that Mr.
Elizardo Manuel shall be excluded from the list of complainants
at bar who are entitled to money awards of P1,884.00 each.
Petition is DISMISSED.
SO ORDERED.
G.R. No. 122791, February 19, 2003
PLACIDO O. URBANES, JR., DOING BUSINESS UNDER
THE NAME & STYLE OF CATALINA SECURITY AGENCY,
PETITIONER, VS. THE HONORABLE SECRETARY OF
LABOR AND EMPLOYMENT AND SOCIAL SECURITY
SYSTEM, RESPONDENTS.
DECISION
CARPIO MORALES, J.:
Before this Court is a Petition for Certiorari under Rule 65 of
the Revised Rules of Court assailing the June 22, 1995 Order
of the Department of Labor and Employment (DOLE) Secretary
which set aside the September 16, 1994 Order of the Regional
Director, National Capital Region (NCR).
The antecedent facts of the case are as follows:
Petitioner Placido O. Urbanes, Jr., doing business under the
name and style of Catalina Security Agency, entered into an
agreement[1] to provide security services to respondent Social
Security System (SSS).
During the effectivity of the agreement, petitioner, by letter of
May 16, 1994,[2] requested the SSS for the upward adjustment
of their contract rate in view of Wage Order No. NCR-03 which
was issued by the Regional Tripartite Wages and Productivity
Board-NCR pursuant to Republic Act 6727 otherwise known as
the Wage Rationalization Act, the pertinent provision of which
wage order reads:
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
105
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. (Emphasis and underscoring supplied.)
As his May 16, 1994 letter to the SSS remained unheeded,
petitioner sent another letter,[3] dated June 7, 1994, reiterating
the request, which was followed by still another letter,[4] dated
June 8, 1994.
On June 24, 1994, petitioner pulled out his agencys services
from the premises of the SSS and another security agency,
Jaguar, took over.[5]
On June 29, 1994, petitioner filed a complaint[6] with the DOLE-
NCR against the SSS seeking the implementation of Wage
Order No. NCR-03.
In its position paper,[7] the SSS prayed for the dismissal of the
complaint on the ground that petitioner is not the real party in
interest and has no legal capacity to file the same. In any
event, it argued that if it had any obligation, it was to the
security guards.
On the other hand, petitioner in his position paper,
[8]
citing Eagle Security Agency, Inc. v. NLRC,[9] contended that
the security guards assigned to the SSS do not have any legal
basis to file a complaint against it for lack of contractual privity.
Finding for petitioner, the Regional Director of the DOLE-NCR
issued an Order [10] of September 16, 1994, the dispositive
portion of which reads, quoted verbatim:
WHEREFORE, premises considered, the respondent Social
Security System (SSS) is hereby Ordered to pay Complainant
the total sum of ONE MILLION SIX HUNDRED THOUSAND
EIGHT HUNDRED FIFTY EIGHT AND 46/100 (P
1,600,858.46) representing the wage differentials under Wage
Order No. NCR-03 of the ONE HUNDRED SIXTY EIGHT (168)
Security Guards of Catalina Security Agency covering the
period from December 16, 1993 to June 24, 1994, inclusive
within ten (10) days from receipt hereof, otherwise a writ of
execution shall be issued to enforce this Order.
The claims for the payment of interest and Attorneys fees are
hereby ordered dismissed for want of jurisdiction.
SO ORDERED.
The SSS moved to reconsider the September 16, 1994 Order
of the Regional Director, praying that the computation be
revised.[11]
By Order[12] of December 9, 1994, the Regional Director
modified his September 16, 1994 Order by reducing the
amount payable by the SSS to petitioner. The dispositive
portion of the Regional Directors Order of December 9, 1994
reads:
WHEREFORE, premises considered, the Order of this Office
dated September 16, 1994 is hereby modified. Respondent
Social Security System is hereby ordered to pay complainant
the amount of ONE MILLION TWO HUNDRED THIRTY
SEVEN THOUSAND SEVEN HUNDRED FORTY PESOS (P
1,237,740.00) representing the wage differentials under Wage
Order No. NCR-03 of the one hundred sixty-eight (168)
security guards of Catalina Security Agency covering the
period from December 16, 1993 to June 20, 1994, inclusive,
within ten (10) days from receipt of this Order, otherwise,
execution shall issue.
The SSS appealed[13] to the Secretary of Labor upon the
following assigned errors, quoted verbatim:
A. THE REGIONAL DIRECTOR HAS NO
JURISDICTION OF THE CASE AT BAR.
B. THE HONORABLE REGIONAL DIRECTOR ERRED
IN FINDING THAT COMPLAINANT IS THE REAL
PARTY IN INTEREST AND HAS LEGAL CAPACITY
TO FILE THE CASE.
C. THE HONORABLE REGIONAL DIRECTOR ERRED
IN ADOPTING COMPLAINANTS COMPUTATION
FOR WAGE ADJUSTMENT UNDER WAGE ORDER

NO. NCR-03 AS BASIS OF RESPONDENTS
LIABILITY.[14]
The Secretary of Labor, by Order[15] of June 22, 1995, set aside
the order of the Regional Director and remanded the records of
the case for recomputation of the wage differentials using P
5,281.00 as the basis of the wage adjustment. And the
Secretary held petitioners security agency JOINTLY AND
SEVERALLY liable for wage differentials, the amount of which
should be paid DIRECTLY to the security guards concerned.
Petitioners Motion for Reconsideration of the DOLE
Secretarys Order of June 22, 1995 having been denied by
Order[16] of October 10, 1995, the present petition was filed,
petitioner contending that the DOLE Secretary committed
grave abuse of discretion when he:
1. . . . TOTALLY IGNORED THE PROVISION OF
ARTICLE 129 OF THE LABOR CODE FOR
PERFECTING AN APPEAL FROM THE DECISION
OF THE REGIONAL DIRECTOR UNDER ARTICLE
129 INVOKED BY RESPONDENT SSS;
2. . . . DISREGARDED THE PROVISION ON APPEALS
FROM THE DECISIONS OR RESOLUTIONS OF
THE REGIONAL DIRECTOR, DOLE, UNDER
ARTICLE 129 OF THE LABOR CODE, AS AMENDED
BY REPUBLIC ACT NO. 6715;
3. . . . TOTALLY OVERLOOKED THE LAW AND
PREVAILING JURISPRUDENCE WHEN IT ACTED
ON THE APPEAL OF RESPONDENT SSS.[17]
Petitioner asserts that the Secretary of Labor does not have
jurisdiction to review appeals from decisions of the Regional
Directors in complaints filed under Article 129 of the Labor
Code[18] which provides:
ART. 129. RECOVERY OF WAGES, SIMPLE MONEY
CLAIMS AND OTHER BENEFITS. Upon complaint of any
interested party, the regional director of the Department of
Labor and Employment or any duly authorized hearing officers
of the Department is empowered, through summary
proceeding and after due notice, to hear and decide any matter
involving the recovery of wages and other monetary claims and
benefits, including legal interest, owing to an employee or
person employed in domestic or household service or
househelper under this Code, arising from employer-employee
relations: Provided, That such complaint does not include a
claim for reinstatement; Provided, further, That the aggregate
money claim of each employee or househelper does not
exceed Five Thousand pesos (P5,000.00). The regional
director or hearing officer shall decide or resolve the complaint
within thirty (30) calendar days from the date of the filing of the
same. Any sum thus recovered on behalf of any employee or
househelper pursuant to this Article shall be held in a special
deposit account by, and shall be paid on order of, the
Secretary of Labor and Employment or the regional director
directly to the employee or househelper concerned. Any such
sum not paid to the employee or househelper, because he
cannot be located after diligent and reasonable effort to locate
him within a period of three (3) years, shall be held as a special
fund of the Department of Labor and Employment to be used
exclusively for the amelioration and benefit of workers.
Any decision or resolution of the regional director or
officer pursuant to this provision may be appealed on the
same grounds provided in Article 223 of this Code, within five
(5) calendar days from receipt of a copy of said decision or
resolution, to the National Labor Relations
Commission which shall resolve the appeal within ten (10)
calendar days from submission of the last pleading required or
allowed under its rules.
x x x (Emphasis supplied).
Petitioner thus contends that as the appeal of SSS was filed
with the wrong forum, it should have been dismissed.[19]
The SSS, on the other hand, contends that Article 128, not
Article 129, is applicable to the case. Article 128 provides:
ART. 128. VISITORIAL AND ENFORCEMENT POWERS
106
xxx
(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 labor legislation based on the findings of labor
employment and enforcement officers or industrial safety
engineers made in the course of inspection.
xxx
An order issued by the duly authorized representative of
the Secretary of Labor and Employment under this article
may be appealed to the latter.
x x x (Emphasis supplied).
Neither the petitioners contention nor the SSSs is impressed
with merit. Lapanday Agricultural Development Corporation v.
Court of Appeals[20] instructs so. In that case, the security
agency filed a complaint before the Regional Trial Court (RTC)
against the principal or client Lapanday for the upward
adjustment of the contract rate in accordance with Wage Order
Nos. 5 and 6. Lapanday argued that it is the National Labor
Relations Commission, not the civil courts, which has
jurisdiction to resolve the issue in the case, it involving the
enforcement of wage adjustment and other benefits due the
agencys security guards as mandated by several wage orders.
Holding that the RTC has jurisdiction over the controversy, this
Court ruled:
We agree with the respondent that the RTC has jurisdiction
over the subject matter of the present case. It is well settled
in law and jurisprudence that where no employer-
employee relationship exists between the parties and no
issue is involved which may be resolved by reference to
the Labor Code, other labor statutes or any collective
bargaining agreement, it is the Regional Trial Court that
has jurisdiction. In its complaint, private respondent is not
seeking any relief under the Labor Code but seeks
payment of a sum of money and damages on account of
petitioner's alleged breach of its obligation under their
Guard Service Contract. The action is within the realm of
civil law hence jurisdiction over the case belongs to the
regular courts. While the resolution of the issue involves
the application of labor laws, reference to the labor code
was only for the determination of the solidary liability of
the petitioner to the respondent where no employer-
employee relation exists.[21]
x x x (Emphasis and underscoring supplied).
In the case at bar, even if petitioner filed the complaint on his
and also on behalf of the security guards,[22] the relief sought
has to do with the enforcement of the contract between him
and the SSS which was deemed amended by virtue of Wage
Order No. NCR-03. The controversy subject of the case at bar
is thus a civil dispute, the proper forum for the resolution of
which is the civil courts.
But even assuming arguendo that petitioners complaint were
filed with the proper forum, for lack of cause of action it must
be dismissed.
Articles 106, 107 and 109 of the Labor Code provide:
ART. 106. CONTRACTOR OR SUBCONTRACTOR.
Whenever an employer enters into contract with another
person for the performance of the formers work, the
employees of the contractor and of the latters subcontractor, if
any, shall be paid in accordance with the provisions of this
Code.
In the event that the contractor or subcontractor fails to
pay the wage of his employees in accordance with this
Code, the employer shall be jointly and severally liable
with his contractor or subcontractor to such employees to
the extent of the work performed under the contract, in the
same manner and extent that he is liable to employees
directly employed by him.
xxx (Emphasis and underscoring supplied)

ART. 107 INDIRECT EMPLOYER. The provisions of the
immediately preceding Article shall likewise apply to any
person, partnership, association or corporation which, not
being an employer, contracts with an independent contractor
for the performance of any work, task, job or project.
ART. 109. SOLIDARY LIABILTY. 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.)
In the case of Eagle Security Agency, Inc. v. NLRC,[23] 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 [See Article VII Sec. 3 of the Contract for Security
Services, supra and Bautista v. Inciong, G.R. No. 52824,
March 16, 1988, 158 SCRA 665].
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
equipments, accessories, tools, materials and supplies
necessary for the maintenance of a security force.
Premises considered, 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.
In view of the foregoing, 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 [Articles 106, 107 and 109]. Should EAGLE pay, it
can claim an adjustment from PTSI for an increase in
consideration to cover the increases payable to the
security guards.
x x x (Emphasis and underscoring supplied).
Passing on the foregoing disquisition in Eagle, this Court,
in Lapanday,[24] held:
It is clear also from the foregoing that 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-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 which provides:
Art. 1217. Payment made by one the solidary debtors
extinguishes the obligation. If two or more solidary debtors
offer to pay, the creditor may choose which offer to accept.
He who made payment make claim from his co-debtors only
the share which corresponds to each, with interest for the
payment already made. If the payment is made before the debt
107
is due, no interest for the intervening period may be
demanded. x x x [25] (Emphasis and underscoring supplied).
In fine, the liability of the SSS to reimburse petitioner arises
only if and when petitioner pays his employee-security guards
the increases mandated by Wage Order No. NCR-03.
The records do not show that petitioner has paid the mandated
increases to the security guards. The security guards in fact
have filed a complaint[26] with the NLRC against petitioner
relative to, among other things, underpayment of wages.
WHEREFORE, the present petition is hereby DISMISSED, and
petitioners complaint before the Regional Director is dismissed
for lack of jurisdiction and cause of action.
SO ORDERED.
TITLE IV
CHAPTER I
G.R. No. 118978, May 23, 1997
PHILIPPINE TELEGRAPH AND TELEPHONE COMPANY,*
PETITIONER, VS. NATIONAL LABOR RELATIONS
COMMISSION AND GRACE DE GUZMAN, RESPONDENTS.
DECISION
REGALADO, J.:
Seeking relief through the extraordinary writ
of certiorari, petitioner Philippine Telegraph and Telephone
Company (hereafter, PT&T) invokes the alleged concealment
of civil status and defalcation of company funds as grounds to
terminate the services of an employee. That employee, herein
private respondent Grace de Guzman, contrarily argues that
what really motivated PT&T to terminate her services was her
having contracted marriage during her employment, which is
prohibited by petitioner in its company policies. She thus
claims that she was discriminated against in gross violation of
law, such a proscription by an employer being outlawed by
Article 136 of the Labor Code.
Grace de Guzman was initially hired by petitioner as a reliever,
specifically as a Supernumerary Project Worker, for a fixed
period from November 21, 1990 until April 20, 1991 vice one
C.F. Tenorio who went on maternity leave.[1] Under the Reliever
Agreement which she signed with petitioner company, her
employment was to be immediately terminated upon expiration
of the agreed period. Thereafter, from June 10, 1991 to July 1,
1991, and from July 19, 1991 to August 8, 1991, private
respondents services as reliever were again engaged by
petitioner, this time in replacement of one Erlinda F. Dizon who
went on leave during both periods.[2] After August 8, 1991, and
pursuant to their Reliever Agreement, her services were
terminated.
On September 2, 1991, private respondent was once more
asked to join petitioner company as a probationary employee,
the probationary period to cover 150 days. In the job
application form that was furnished her to be filled up for the
purpose, she indicated in the portion for civil status therein that
she was single although she had contracted marriage a few
months earlier, that is, on May 26, 1991.[3]
It now appears that private respondent had made the same
representation in the two successive reliever agreements
which she signed on June 10, 1991 and July 8, 1991. When
petitioner supposedly learned about the same later, its branch
supervisor in Baguio City, Delia M. Oficial, sent to private
respondent a memorandum dated January 15, 1992 requiring
her to explain the discrepancy. In that memorandum, she was
reminded about the companys policy of not accepting married
women for employment.[4]
In her reply letter dated January 17, 1992, private respondent
stated that she was not aware of PT&Ts policy regarding
married women at the time, and that all along she had not
deliberately hidden her true civil status.[5] Petitioner
nonetheless remained unconvinced by her explanations.

Private respondent was dismissed from the company effective
January 29, 1992,[6] which she readily contested by initiating a
complaint for illegal dismissal, coupled with a claim for non-
payment of cost of living allowances (COLA), before the
Regional Arbitration Branch of the National Labor Relations
Commission in Baguio City.
At the preliminary conference conducted in connection
therewith, private respondent volunteered the information, and
this was incorporated in the stipulation of facts between the
parties, that she had failed to remit the amount of P2,380.75 of
her collections. She then executed a promissory note for that
amount in favor of petitioner.[7] All of these took place in a
formal proceeding and with the agreement of the parties and/or
their counsel.
On November 23, 1993, Labor Arbiter Irenarco R. Rimando
handed down a decision declaring that private respondent,
who had already gained the status of a regular employee, was
illegally dismissed by petitioner. Her reinstatement, plus
payment of the corresponding back wages and COLA, was
correspondingly ordered, the labor arbiter being of the firmly
expressed view that the ground relied upon by petitioner in
dismissing private respondent was clearly insufficient, and that
it was apparent that she had been discriminated against on
account of her having contracted marriage in violation of
company rules.
On appeal to the National Labor Relations Commission
(NLRC), said public respondent upheld the labor arbiter and, in
its decision dated April 29, 1994, it ruled that private
respondent had indeed been the subject of an unjust and
unlawful discrimination by her employer, PT&T. However, the
decision of the labor arbiter was modified with the qualification
that Grace de Guzman deserved to be suspended for three
months in view of the dishonest nature of her acts which
should not be condoned. In all other respects, the NLRC
affirmed the decision of the labor arbiter, including the order for
the reinstatement of private respondent in her employment with
PT&T.
The subsequent motion for reconsideration filed by petitioner
was rebuffed by respondent NLRC in its resolution of
November 9, 1994, hence this special civil action assailing the
aforestated decisions of the labor arbiter and respondent
NLRC, as well as the denial resolution of the latter.
1. Decreed in the Bible itself is the universal norm that women
should be regarded with love and respect but, through the
ages, men have responded to that injunction with indifference,
on the hubristic conceit that women constitute the inferior sex.
Nowhere has that prejudice against womankind been so
pervasive as in the field of labor, especially on the matter of
equal employment opportunities and standards. In the
Philippine setting, women have traditionally been considered
as falling within the vulnerable groups or types of workers who
must be safeguarded with preventive and remedial social
legislation against discriminatory and exploitative practices in
hiring, training, benefits, promotion and retention.
The Constitution, cognizant of the disparity in rights between
men and women in almost all phases of social and political life,
provides a gamut of protective provisions. To cite a few of the
primordial ones, Section 14, Article II[8] on the Declaration of
Principles and State Policies, expressly recognizes the role of
women in nation-building and commands the State to ensure,
at all times, the fundamental equality before the law of women
and men. Corollary thereto, Section 3 of Article XIII[9] (the
progenitor whereof dates back to both the 1935 and 1973
Constitution) pointedly requires the State to afford full
protection to labor and to promote full employment and equality
of employment opportunities for all, including an assurance of
entitlement to tenurial security of all workers. Similarly, Section
14 of Article XIII[10] mandates that the State shall protect
working women through provisions for opportunities that would
enable them to reach their full potential.
2. Corrective labor and social laws on gender inequality have
emerged with more frequency in the years since the Labor
Code was enacted on May 1, 1974 as Presidential Decree No.
442, largely due to our countrys commitment as a signatory to
the United Nations Convention on the Elimination of All Forms
108
of Discrimination Against Women (CEDAW).[11]
Principal among these laws are Republic Act No. 6727[12] which
explicitly prohibits discrimination against women with respect to
terms and conditions of employment, promotion, and training
opportunities; Republic Act No. 6955[13] which bans the mail-
order-bride practice for a fee and the export of female labor to
countries that cannot guarantee protection to the rights of
women workers; Republic Act No. 7192,[14] also known as the
Women in Development and Nation Building Act, which
affords women equal opportunities with men to act and to enter
into contracts, and for appointment, admission, training,
graduation, and commissioning in all military or similar schools
of the Armed Forces of the Philippines and the Philippine
National Police; Republic Act No. 7322[15] increasing the
maternity benefits granted to women in the private sector;
Republic Act No. 7877[16] which outlaws and punishes sexual
harassment in the workplace and in the education and training
environment; and Republic Act No. 8042,[17] or the Migrant
Workers and Overseas Filipinos Act of 1995, which prescribes
as a matter of policy, inter alia, the deployment of migrant
workers, with emphasis on women, only in countries where
their rights are secure. Likewise, it would not be amiss to point
out that in the Family Code,[18] womens rights in the field of
civil law have been greatly enhanced and expanded.
In the Labor Code, provisions governing the rights of women
workers are found in Articles 130 to 138 thereof. Article 130
involves the right against particular kinds of night work while
Article 132 ensures the right of women to be provided with
facilities and standards which the Secretary of Labor may
establish to ensure their health and safety. For purposes of
labor and social legislation, a woman working in a nightclub,
cocktail lounge, massage clinic, bar or other similar
establishments shall be considered as an employee under
Article 138. Article 135, on the other hand, recognizes a
womans right against discrimination with respect to terms and
conditions of employment on account simply of sex. Finally,
and this brings us to the issue at hand, Article 136 explicitly
prohibits discrimination merely by reason of the marriage of a
female employee.
3. Acknowledged as paramount in the due process scheme is
the constitutional guarantee of protection to labor and security
of tenure. Thus, an employer is required, as a condition sine
qua non prior to severance of the employment ties of an
individual under his employ, to convincingly establish, through
substantial evidence, the existence of a valid and just cause in
dispensing with the services of such employee, ones labor
being regarded as constitutionally protected property.
On the other hand, it is recognized that regulation of manpower
by the company falls within the so-called management
prerogatives, which prescriptions encompass the matter of
hiring, supervision of workers, work assignments, working
methods and assignments, as well as regulations on the
transfer of employees, lay-off of workers, and the discipline,
dismissal, and recall of employees.[19] As put in a case, an
employer is free to regulate, according to his discretion and
best business judgment, all aspects of employment, from
hiring to firing, except in cases of unlawful discrimination or
those which may be provided by law.[20]
In the case at bar, petitioners policy of not accepting or
considering as disqualified from work any woman worker who
contracts marriage runs afoul of the test of, and the right
against, discrimination, afforded all women workers by our
labor laws and by no less than the Constitution. Contrary to
petitioners assertion that it dismissed private respondent from
employment on account of her dishonesty, the record discloses
clearly that her ties with the company were dissolved
principally because of the companys policy that married
women are not qualified for employment in PT&T, and not
merely because of her supposed acts of dishonesty.
That it was so can easily be seen from the memorandum sent
to private respondent by Delia M. Oficial, the branch supervisor
of the company, with the reminder, in the words of the latter,
that youre fully aware that the company is not accepting
married women employee (sic), as it was verbally instructed to
you.[21] Again, in the termination notice sent to her by the same
branch supervisor, private respondent was made to understand

that her severance from the service was not only by reason of
her concealment of her married status but, over and on top of
that, was her violation of the companys policy against
marriage (and even told you that married women employees
are not applicable [sic] or accepted in our company.)
[22]
Parenthetically, this seems to be the curious reason why it
was made to appear in the initiatory pleadings that petitioner
was represented in this case only by its said supervisor and
not by its highest ranking officers who would otherwise be
solidarily liable with the corporation.[23]
Verily, private respondents act of concealing the true nature of
her status from PT&T could not be properly characterized as
willful or in bad faith as she was moved to act the way she did
mainly because she wanted to retain a permanent job in a
stable company. In other words, she was practically forced by
that very same illegal company policy into misrepresenting her
civil status for fear of being disqualified from work. While loss
of confidence is a just cause for termination of employment, it
should not be simulated.[24] It must rest on an actual breach of
duty committed by the employee and not on the employers
caprices.[25]Furthermore, it should never be used as a
subterfuge for causes which are improper, illegal, or unjustified.
[26]
In the present controversy, petitioners expostulations that it
dismissed private respondent, not because the latter got
married but because she concealed that fact, does have a
hollow ring. Her concealment, so it is claimed, bespeaks
dishonesty hence the consequent loss of confidence in her
which justified her dismissal. Petitioner would asseverate,
therefore, that while it has nothing against marriage, it
nonetheless takes umbrage over the concealment of that fact.
This improbable reasoning, with interstitial distinctions,
perturbs the Court since private respondent may well be
minded to claim that the imputation of dishonesty should be the
other way around.
Petitioner would have the Court believe that although private
respondent defied its policy against its female employees
contracting marriage, what could be an act of insubordination
was inconsequential. What it submits as unforgivable is her
concealment of that marriage yet, at the same time, declaring
that marriage as a trivial matter to which it supposedly has no
objection. In other words, PT&T says it gives its blessings to its
female employees contracting marriage, despite the maternity
leaves and other benefits it would consequently respond for
and which obviously it would have wanted to avoid. If that
employee confesses such fact of marriage, there will be no
sanction; but if such employee conceals the same instead of
proceeding to the confessional, she will be dismissed. This line
of reasoning does not impress us as reflecting its true
management policy or that we are being regaled with
responsible advocacy.
This Court should be spared the ennui of strained reasoning
and the tedium of propositions which confuse through less than
candid arguments. Indeed, petitioner glosses over the fact that
it was its unlawful policy against married women, both on the
aspects of qualification and retention, which compelled private
respondent to conceal her supervenient marriage. It was,
however, that very policy alone which was the cause of private
respondents secretive conduct now complained of. It is
then apropos to recall the familiar saying that he who is the
cause of the cause is the cause of the evil caused.
Finally, petitioners collateral insistence on the admission of
private respondent that she supposedly misappropriated
company funds, as an additional ground to dismiss her from
employment, is somewhat insincere and self-serving.
Concededly, private respondent admitted in the course of the
proceedings that she failed to remit some of her collections,
but that is an altogether different story. The fact is that she was
dismissed solely because of her concealment of her marital
status, and not on the basis of that supposed defalcation of
company funds. That the labor arbiter would thus consider
petitioners submissions on this supposed dishonesty as a
mere afterthought, just to bolster its case for dismissal, is a
perceptive conclusion born of experience in labor cases. For,
there was no showing that private respondent deliberately
misappropriated the amount or whether her failure to remit the
same was through negligence and, if so, whether the
109
negligence was in nature simple or grave. In fact, it was merely
agreed that private respondent execute a promissory note to
refund the same, which she did, and the matter was deemed
settled as a peripheral issue in the labor case.
Private respondent, it must be observed, had gained regular
status at the time of her dismissal. When she was served her
walking papers on January 29, 1992, she was about to
complete the probationary period of 150 days as she was
contracted as a probationary employee on September 2, 1991.
That her dismissal would be effected just when her
probationary period was winding down clearly raises the
plausible conclusion that it was done in order to prevent her
from earning security of tenure.[27] On the other hand, her
earlier stints with the company as reliever were undoubtedly
those of a regular employee, even if the same were for fixed
periods, as she performed activities which were essential or
necessary in the usual trade and business of PT&T.[28] The
primary standard of determining regular employment is the
reasonable connection between the activity performed by the
employee in relation to the business or trade of the employer.
[29]
As an employee who had therefore gained regular status, and
as she had been dismissed without just cause, she is entitled
to reinstatement without loss of seniority rights and other
privileges and to full back wages, inclusive of allowances and
other benefits or their monetary equivalent.[30] However, as she
had undeniably committed an act of dishonesty in concealing
her status, albeit under the compulsion of an unlawful
imposition of petitioner, the three-month suspension imposed
by respondent NLRC must be upheld to obviate the impression
or inference that such act should be condoned. It would be
unfair to the employer if she were to return to its fold without
any sanction whatsoever for her act which was not totally
justified. Thus, her entitlement to back wages, which shall be
computed from the time her compensation was withheld up to
the time of her actual reinstatement, shall be reduced by
deducting therefrom the amount corresponding to her three
months suspension.
4. The government, to repeat, abhors any stipulation or policy
in the nature of that adopted by petitioner PT&T. The Labor
Code states, in no uncertain terms, as follows:
ART. 136. Stipulation against marriage. - It shall be unlawful
for an employer to require as a condition of employment or
continuation of employment that a woman shall not get
married, or to stipulate expressly or tacitly that upon getting
married, a woman employee shall be deemed resigned or
separated, or to actually dismiss, discharge, discriminate or
otherwise prejudice a woman employee merely by reason of
marriage.
This provision had a studied history for its origin can be traced
to Section 8 of Presidential Decree No. 148,[31] better known as
the Women and Child Labor Law, which amended paragraph
(c), Section 12 of Republic Act No. 679,[32] entitled An Act to
Regulate the Employment of Women and Children, to Provide
Penalties for Violations Thereof, and for Other Purposes. The
forerunner to Republic Act No. 679, on the other hand, was Act
No. 3071 which became law on March 16, 1923 and which
regulated the employment of women and children in shops,
factories, industrial, agricultural, and mercantile establishments
and other places of labor in the then Philippine Islands.
It would be worthwhile to reflect upon and adopt here the
rationalization in Zialcita, et al. vs. Philippine Air Lines,[33] a
decision that emanated from the Office of the President. There,
a policy of Philippine Air Lines requiring that prospective flight
attendants must be single and that they will be automatically
separated from the service once they marry was declared void,
it being violative of the clear mandate in Article 136 of the
Labor Code with regard to discrimination against married
women. Thus:
Of first impression is the incompatibility of the respondents
policy or regulation with the codal provision of law. Respondent
is resolute in its contention that Article 136 of the Labor Code
applies only to women employed in ordinary occupations and

that the prohibition against marriage of women engaged in
extraordinary occupations, like flight attendants, is fair and
reasonable, considering the pecularities of their chosen
profession.
We cannot subscribe to the line of reasoning pursued by
respondent. All along, it knew that the controverted policy has
already met its doom as early as March 13, 1973 when
Presidential Decree No. 148, otherwise known as the Women
and Child Labor Law, was promulgated. But for the timidity of
those affected or their labor unions in challenging the validity of
the policy, the same was able to obtain a momentary reprieve.
A close look at Section 8 of said decree, which amended
paragraph (c) of Section 12 of Republic Act No. 679, reveals
that it is exactly the same provision reproduced verbatim in
Article 136 of the Labor Code, which was promulgated on May
1, 1974 to take effect six (6) months later, or on November 1,
1974.
It cannot be gainsaid that, with the reiteration of the same
provision in the new Labor Code, all policies and acts against it
are deemed illegal and therefore abrogated. True, Article 132
enjoins the Secretary of Labor to establish standards that will
ensure the safety and health of women employees and in
appropriate cases shall by regulation require employers to
determine appropriate minimum standards for termination in
special occupations, such as those of flight attendants, but that
is precisely the factor that militates against the policy of
respondent. The standards have not yet been established as
set forth in the first paragraph, nor has the Secretary of Labor
issued any regulation affecting flight attendants.
It is logical to presume that, in the absence of said standards
or regulations which are as yet to be established, the policy of
respondent against marriage is patently illegal. This finds
support in Section 9 of the New Constitution, which provides:
Sec. 9. The State shall afford protection to labor, promote full
employment and equality in employment, ensure equal work
opportunities regardless of sex, race, or creed, and regulate
the relations between workers and employees. The State shall
assure the rights of workers to self-organization, collective
bargaining, security of tenure, and just and humane conditions
of work x x x.
Moreover, we cannot agree to the respondents proposition
that termination from employment of flight attendants on
account of marriage is a fair and reasonable standard
designed for their own health, safety, protection and welfare,
as no basis has been laid therefor. Actually, respondent claims
that its concern is not so much against the continued
employment of the flight attendant merely by reason of
marriage as observed by the Secretary of Labor, but rather on
the consequence of marriage-pregnancy. Respondent
discussed at length in the instant appeal the supposed ill
effects of pregnancy on flight attendants in the course of their
employment. We feel that this needs no further discussion as it
had been adequately explained by the Secretary of Labor in
his decision of May 2, 1976.
In a vain attempt to give meaning to its position, respondent
went as far as invoking the provisions of Articles 52 and 216 of
the New Civil Code on the preservation of marriage as an
inviolable social institution and the family as a basic social
institution, respectively, as bases for its policy of non-marriage.
In both instances, respondent predicates absence of a flight
attendant from her home for long periods of time as
contributory to an unhappy married life. This is pure conjecture
not based on actual conditions, considering that, in this modern
world, sophisticated technology has narrowed the distance
from one place to another. Moreover, respondent overlooked
the fact that married flight attendants can program their lives to
adapt to prevailing circumstances and events.
Article 136 is not intended to apply only to women employed in
ordinary occupations, or it should have categorically expressed
so. The sweeping intendment of the law, be it on special or
ordinary occupations, is reflected in the whole text and
supported by Article 135 that speaks of non-discrimination on
the employment of women.
The judgment of the Court of Appeals in Gualberto, et al. vs.
Marinduque Mining & Industrial Corporation[34] considered as
void a policy of the same nature. In said case, respondent, in
dismissing from the service the complainant, invoked a policy
110
of the firm to consider female employees in the project it was
undertaking as separated the moment they get married due to
lack of facilities for married women. Respondent further
claimed that complainant was employed in the project with an
oral understanding that her services would be terminated when
she gets married. Branding the policy of the employer as an
example of discriminatory chauvinism tantamount to denying
equal employment opportunities to women simply on account
of their sex, the appellate court struck down said employer
policy as unlawful in view of its repugnance to the Civil Code,
Presidential Decree No. 148 and the Constitution.
Under American jurisprudence, job requirements which
establish employer preference or conditions relating to the
marital status of an employee are categorized as a sex-plus
discrimination where it is imposed on one sex and not on the
other. Further, the same should be evenly applied and must not
inflict adverse effects on a racial or sexual group which is
protected by federal job discrimination laws. Employment rules
that forbid or restrict the employment of married women, but do
not apply to married men, have been held to violate Title VII of
the United States Civil Rights Act of 1964, the main federal
statute prohibiting job discrimination against employees and
applicants on the basis of, among other things, sex.[35]
Further, it is not relevant that the rule is not directed against all
women but just against married women. And, where the
employer discriminates against married women, but not
against married men, the variable is sex and the discrimination
is unlawful.[36] Upon the other hand, a requirement that a
woman employee must remain unmarried could be justified as
a bona fide occupational qualification, or BFOQ, where the
particular requirements of the job would justify the same, but
not on the ground of a general principle, such as the
desirability of spreading work in the workplace. A requirement
of that nature would be valid provided it reflects an inherent
quality reasonably necessary for satisfactory job performance.
Thus, in one case, a no-marriage rule applicable to both male
and female flight attendants, was regarded as unlawful since
the restriction was not related to the job performance of the
flight attendants.[37]
5. Petitioners policy is not only in derogation of the provisions
of Article 136 of the Labor Code on the right of a woman to be
free from any kind of stipulation against marriage in connection
with her employment, but it likewise assaults good morals and
public policy, tending as it does to deprive a woman of the
freedom to choose her status, a privilege that by all accounts
inheres in the individual as an intangible and inalienable right.
[38]
Hence, while it is true that the parties to a contract may
establish any agreements, terms, and conditions that they may
deem convenient, the same should not be contrary to law,
morals, good customs, public order, or public policy.[39] Carried
to its logical consequences, it may even be said that
petitioners policy against legitimate marital bonds would
encourage illicit or common-law relations and subvert the
sacrament of marriage.
Parenthetically, the Civil Code provisions on the contract of
labor state that the relations between the parties, that is, of
capital and labor, are not merely contractual, impressed as
they are with so much public interest that the same should
yield to the common good.[40] It goes on to intone that neither
capital nor labor should visit acts of oppression against the
other, nor impair the interest or convenience of the public.[41] In
the final reckoning, the danger of just such a policy against
marriage followed by petitioner PT&T is that it strikes at the
very essence, ideals and purpose of marriage as an inviolable
social institution and, ultimately, of the family as the foundation
of the nation.[42] That it must be effectively interdicted here in all
its indirect, disguised or dissembled forms as discriminatory
conduct derogatory of the laws of the land is not only in order
but imperatively required.
ON THE FOREGOING PREMISES, the petition of Philippine
Telegraph and Telephone Company is hereby DISMISSED for
lack of merit, with double costs against petitioner.
SO ORDERED.

G.R. No. 106341, September 02, 1994
DELFIN G. VILLARAMA, PETITIONER, VS. NATIONAL
LABOR RELATIONS COMMISSION AND GOLDEN
DONUTS, INC., RESPONDENTS.
DECISION
PUNO, J.:
Sexual harassment abounds in all sick societies. It is
reprehensible enough but more so when inflicted by those with
moral ascendancy over their victims. We rule that it is a valid
cause for separation from service.
First, the facts. On November 16, 1987, petitioner DELFIN
VILLARAMA was employed by private respondent GOLDEN
DONUTS, INC., as its Materials Manager. His starting salary
was P6,500.00 per month, later increased to P8,500.00.
On July 15 1989, petitioner Villarama was charged with sexual
harassment by Divina Gonzaga, a clerk-typist assigned in his
department. The humiliating experience compelled her to
resign from work. Her letter-resignation, dated July 15, 1989,
reads:
"MR. LEOPOLDO H. PRIETO
President
Golden Donuts, Inc.
Dear Sir:
I would like to tender my resignation from my post as Clerk
Typist of Materials Department effective immediately.
It is really my regret to leave this company which has given me
all the opportunity I long desired. My five (5) months stay in the
company have been very gratifying professionally and
financially and I would not entertain the idea of resigning
except for the most shocking experience I have had in
my wholelife.
Last Friday, July 7, 1989, Mr. Delfin Villarama and Mr. Jess de
Jesus invited all the girls of Materials Department for a dinner
when in (sic) the last minute the other three (3) girls decided
not to join the group anymore. I do (sic) not have second
thought(s) in accepting their invitation for they are my
colle(a)gues and I had nothing in mind that would in any
manner prompt me to refuse to what appeared to me as a
simple and cordial invitation. We went to a restaurant along
Makati Avenue where we ate our dinner. Mr. Villarama, Mr.
Olaybar and Mr. Jess de Jesus were drinking while we were
eating and (they) even offered me a few drinks and when we
were finished, they decided to bring me home. While on
my way, I found out that Mr. Villarama was not driving the
way to my house. I was wondering why we were taking the
wrong way until I found out that we were entering a motel.
I was really shock(ed). I did not expect that a somewhat
reputable person like Mr. Villarama could do such a thing
to any of his subordinates. I should have left the company
without any word but I feel that I would be unfair to those
who might be similarly situated. I hope that you would find
time to investigate the veracity of my allegations and make
each (sic) responsible for his own deed. (emphasis ours)
Thank you very much and more power.
Very respectfully yours,
DIVINA GONZAGA"
The letter prompted Mr. Leopoldo Prieto, President of Golden
Donuts, Inc., to call petitioner to a meeting on August 4, 1989.
Petitioner was then required to explain the letter against him. It
appears that petitioner agreed to tender his resignation. Private
respondent moved swiftly to separate petitioner. Thus, private
respondent approved petitioner's application for leave of
absence with pay from August 5-28, 1989. It also issued an
inter-office memorandum, dated August 4, 1989, advising "all
concerned" that petitioner was no longer connected with the
company effective August 5, 1989.[1] Two (2) days later, or on
August 7, 1989, Mr. Prieto sent a letter to petitioner confirming
111
their agreement that petitioner would be officially separated
from the private respondent. The letter reads:
"Dear Mr. Villarama:
This is to officially confirm our discussion last Friday, August 4,
1989, regarding your employment with us. As per our
agreement, you will be officially separated from the company
effective August 23, 1989.
May I, therefore, request you to please submit or send us your
resignation letter on or before the close of business hours of
August 22, 1989.
Please see the Personnel & Industrial Relations Office for your
clearance.
Very truly yours,
(SGD). LEOPOLDO H. PRIETO, JR.
President"
In the interim, petitioner had a change of mind. In a letter dated
August 16, 1989, petitioner sought reconsideration of the
management's decision to terminate him, viz:
"DEAR SIR:
MAY I REQUEST FOR A RECONSIDERATION ON THE
DECISION HANDED DURING OUR MEETING OF AUGUST
4, 1989, TERMINATING MY SERVICES WITH THE
COMPANY EFFECTIVE AUGUST 5, 1989.
THE SIGNIFICANT CONTRIBUTION OF THE MATERIALS
DEPARTMENT, WHICH I HAD BEEN HEADING FOR THE
PAST 21 MONTHS, TO THE PERFORMANCE OF THE
COMPANY FAR OUTWEIGHS THE ERROR THAT I HAD
COMMITTED. AN ERROR THAT MUST NOT BE A BASIS
FOR SUCH A DRASTIC DECISION.
AS I AM STILL OFFICIALLY ON LEAVE UNTIL THE 29th, OF
THIS MONTH, MAY I EXPECT THAT I WILL RESUME MY
REGULAR DUTY ON THE 29th?
ANTICIPATING YOUR FAVORABLE REPLY.
VERY TRULY YOURS,
(SGD.) DELFIN G. VILLARAMA"
For his failure to tender his resignation, petitioner was
dismissed by private respondent on August 23, 1989. Feeling
aggrieved, petitioner filed an illegal dismissal case[2] against
private respondent.
In a decision dated January 23, 1991, Labor Arbiter Salimar V.
Nambi held that due process was not observed in the dismissal
of petitioner and there was no valid cause for dismissal. Private
respondent GOLDEN DONUTS, INC. was ordered to: (1)
reinstate petitioner DELFIN G. VILLARAMA to his former
position, without loss of seniority rights, and pay his
backwages at the rate of P8,500.00 per month from August
1989, until actual reinstatement; (2) pay petitioner the amount
of P24,866.66, representing his unused vacation leave and
proportionate 13th month pay; (3) pay petitioner P100,000.00,
as moral damages, and P20,000.00, as exemplary damages;
and (3) pay the attorney's fees equivalent to ten percent of the
entire monetary award.
Private respondent appealed to the National Labor Relations
Commission. On July 16, 1992, public respondent reversed the
decision of the labor arbiter. The dispositive portion of its
Resolution reads:
"WHEREFORE, premises considered, the decision appealed
from is hereby set aside and a new one entered declaring the
cause of dismissal of complainant as valid; however, for the
procedural lapses, respondent (Golden Donuts, Inc.) is hereby
ordered to indemnify complainant (petitioner) in the form of
separation pay equivalent to two month's (sic) pay (for his two
years of service, as appears (sic) in the records), or the
amount of P17,000.00.
"SO ORDERED."
Hence, this petition where the following arguments are raised:
THE ALLEGED IMMORALITY CHARGED AGAINST
PETITIONER IS NOT SUPPORTED BY SUBSTANTIAL
EVIDENCE ON RECORD.

THE MERE ADMISSION OF THE VIOLATION OF DUE
PROCESS ENTITLES PETITIONER TO REINSTATEMENT.
IN ANY EVENT, PETITIONER IS ENTITLED TO HIS
SALARIES FROM RECEIPT BY PRIVATE RESPONDENT OF
THE DECISION OF THE LABOR ARBITER ON 4 FEBRUARY
1991 TO (sic) AT LEAST THE PROMULGATION OF THE
ASSAILED RESOLUTION ON (sic) 16 JULY 1992.
IN ANY EVENT, PETITIONER IS ALSO ENTITLED TO HIS
UNUSED VACATION LEAVE AND PROPORTIONATE 13TH
MONTH PAY IN THE TOTAL AMOUNT OF P24,866.66,
ADJUDGED BY THE LABOR ARBITER.
THE AWARD OF MORAL AND EXEMPLARY DAMAGES AND
ATTORNEY'S FEES BY THE LABOR ARBITER IS
JUSTIFIED.
We affirm with modification the impugned Resolution.
At the outset, we note that the Petition was not accompanied
by a certified true copy of the assailed July 16, 1992 NLRC
Resolution,[3] in violation of Revised Circular No. 1-88. Neither
was there any certification under oath that "petitioner has not
commenced any other action or proceeding involving the same
issues in the Supreme Court, the Court of Appeals or different
Divisions thereof, or any other tribunal or agency, and that to
the best of his knowledge, no such action or proceeding is
pending in the Supreme Court, the Court of Appeals, or
different Divisions thereof or any other tribunal or agency," as
required under Circular No. 28-91. It is settled, that non-
compliance with the provisions of Revised Circular No. 1-88
and Circular No. 28-91, would result in the outright dismissal of
the petition.[4]
In addition, under Rule 65 of the Revised Rules of Court, the
special civil action for certiorari is available in cases where the
concerned "tribunal, board or officer exercising judicial
functions had acted without or in excess of its jurisdiction, or
with grave abuse of discretion and there is no appeal, nor
any plain, speedy, and adequate remedy in the ordinary
course of law." In Antonio v. National Labor Relations
Commission,[5] we held that the plain and adequate remedy
expressly provided by law is a motion for reconsideration of the
assailed decision, and the resolution thereof, which is not only
expected to be but would actually have provided adequate and
more speedy remedy than a petition for certiorari. The rationale
for this requirement is to enable the court or agency concerned
to pass upon and correct its mistakes without the intervention
of a higher court.[6] In this case, the assailed July 16, 1992
Resolution of the National Labor Relations
Commission was received by petitioner's counsel on July 23,
1992.[7] Petitioner did not file a motion for reconsideration,
instead, he commenced this special civil action for certiorari.
Be that as it may, we allowed the petition to enable us to rule
on the significant issues raised before us, viz: (1) whether or
not petitioner's right to procedural due process was violated,
and (2) whether or not he was dismissed for a valid or just
cause.
The procedure for terminating an employee is found in Article
277 (b) of the Labor Code, viz:
"x x x
"(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 causes for termination and shall afford the latter ample
opportunity to be heard and to defend himself with the
assistance of his counsel if he so desires in accordance with
company rules and regulations promulgated pursuant to
guidelines set by the Department of Labor and Employment.
Any decision taken by the employer shall be without prejudice
to the right of the worker to contest the validity or legality of his
dismissal by filing a complaint with the regional branch of the
National Labor Relations Commission. The burden of proving
that the termination was for a valid or authorized cause shall
rest on the employer. xxx" (emphasis supplied)
112
This procedure protects not only rank-and-file employees but
also managerial employees. Both have the right to security of
tenure as provided for in Section 3, Article XIII of the 1987
Constitution. In the case at bench, petitioner decided to seek
reconsideration of the termination of his service thru his August
16, 1989 letter. While admitting his error, he felt that its gravity
did not justify his dismissal. Considering this stance, and in
conformity with the aforequoted Article 277 (b) of the Labor
Code, petitioner should have been formally charged and given
an opportunity to refute the charges. Under the facts in field,
we hold that petitioner was denied procedural due process.
We now come to the more important issue of whether there
was valid cause to terminate petitioner.
Petitioner claims that his alleged immoral act was
unsubstantiated, hence, he could not be dismissed. We hold
otherwise. The records show that petitioner was confronted
with the charge against him. Initially, he voluntarily agreed to
be separated from the company. He took a leave of absence
preparatory to his separation. This agreement was confirmed
by the letter to him by Mr. Prieto dated August 7, 1989. A few
days after, petitioner reneged on the agreement. He refused to
be terminated on the ground that the seriousness of his
offense would not warrant his separation from service. So he
alleged in his letter to Mr. Prieto dated August 16, 1989. But
even in this letter, petitioner admitted his "error" vis-a-vis Miss
Gonzaga. As a manager, petitioner should know the
evidentiary value of his admissions. Needless to stress, he
cannot complain there was no valid cause for his separation.
Moreover, loss of trust and confidence is a good ground for
dismissing a managerial employee. It can be proved by
substantial evidence which is present in the case at bench. As
further observed by the Solicitor General:
"x x x assuming arguendo that De Jesus and Gonzaga were
sweethearts and that petitioner merely acceded to the request
of the former to drop them in the motel, petitioner acted in
collusion with the immoral designs of De Jesus and did not
give due regard to Gonzaga's feeling on the matter and acted
in chauvinistic disdain of her honor, thereby justifying public
respondent's finding of sexual harassment. Thus, petitioner not
only failed to act accordingly as a good father of the family
because he was not able to maintain his moral ascendancy
and authority over the group in the matter of morality and
discipline of his subordinates, but he actively facilitated the
commission of immoral conduct of his subordinates by driving
his car into the motel."
(Comment, April 29, 1993, p. 9)
As a managerial employee, petitioner is bound by a more
exacting work ethics. He failed to live up to this higher standard
of responsibility when he succumbed to his moral perversity.
And when such moral perversity is perpetrated against his
subordinate, he provides a justifiable ground for his dismissal
for lack of trust and confidence. It is the right, nay, the duty of
every employer to protect its employees from over sexed
superiors.
To be sure, employers are given wider latitude of discretion in
terminating the employment of managerial employees on the
ground of lack of trust and confidence.[8]
We next rule on the monetary awards due to petitioner. The
public respondent erred in awarding separation pay of
P17,000.00 as indemnity for his dismissal without due process
of law. The award of separation pay is proper in the cases
enumerated under Articles 283 and 284 of the Labor Code,
[9]
and in cases where there is illegal dismissal (for lack of valid
cause) and reinstatement is no longer feasible. But this is not
to state that an employer cannot be penalized for failure to give
formal notice and conduct the necessary investigation before
dismissing an employee.[10] Thus, in Wenphil
vs. NLRC[11] and Pacific Mills, Inc. vs. Alonzo,[12] this Court
awarded P1,000.00 as penalty for non-observance of due
process.

Petitioner is not also entitled to moral and exemplary damages.
There was no bad faith or malice on the part of private
respondent in terminating the services of petitioner.[13]
Petitioner is entitled, however, to his unused vacation/sick
leave and proportionate 13th month pay, as held by the labor
arbiter. These are monies already earned by petitioner and
should be unaffected by his separation from the service.
WHEREFORE, premises considered, the assailed resolution of
public respondent is hereby AFFIRMED WITH MODIFICATION
that the award of separation pay is DELETED. Private
respondent is ordered to pay petitioner the amount of
P1,000.00 for non-observance of due process, and the
equivalent amount of his unused vacation/sick leave and
proportionate 13th month pay. No pronouncement as to costs.
SO ORDERED.
G.R. No. 123737, May 28, 1999
CARLOS G. LIBRES, PETITIONER, VS. NATIONAL LABOR
RELATIONS COMMISSION, NATIONAL STEEL
CORPORATION, OSMUNDO G. WAGA, JR., ANTOINE D.
SEVA, PETER J. LOQUILLANO, SATURNINO P.
MEJORADA AND ISIDRO F. HYNSON, JR.,
RESPONDENTS.
DECISION
BELLOSILLO, J.:
This petition for certiorari seeks to annul the decision of public
respondent National Labor Relations Commission (NLRC)
sustaining the Labor Arbiter's finding that petitioner was validly
suspended by private respondents, as well as the NLRC
resolution denying petitioner's motion to reconsider its
decision.
Petitioner Carlos G. Libres, an electrical engineer, was holding
a managerial position with National Steel Corporation (NSC) as
Assistant Manager. On 3 August 1993 he received a Notice of
Investigation from Assistant Vice President Isidro F. Hynson Jr.,
his immediate superior, requesting him to submit a written
explanation relative to the charge of sexual harassment made
by Susan D. Capiral, Hynson's secretary, allegedly committed
by Libres sometime in May 1992, and subsequently to answer
clarificatory questions on the matter. The notice also warned
him that failure to file his written explanation would be
construed as a waiver of his right to be heard. On 14 August
1993 petitioner submitted his written explanation denying the
accusation against him and offering to submit himself for
clarificatory interrogation.
Subsequently, Hynson Jr. conducted an internal investigation
to which Libres and Capiral were invited to ventilate their
respective sides of the issue. They readily responded.
Thereafter, Hynson Jr. submitted his report to the Management
Evaluation Committee (MEC).
The MEC, after deliberation, concluded that the charges
against petitioner constituted a violation of Item 2, Table V, of
the Plant's Rules and Regulations.[1] It opined that "touching a
female subordinate's hand and shoulder, caressing her nape
and telling other people that Capiral was the one who hugged
and kissed or that she responded to the sexual advances
are unauthorized acts that damaged her honor."[2] Referring to
the Manual of the Philippine Daily Inquirer in defining sexual
harassment,[3] the MEC finally concluded that petitioner's acts
clearly constituted sexual harassment as charged and
recommended petitioner's suspension for thirty (30) days
without pay.
On 5 January 1994 petitioner wrote Melchor Q. Villamor, Vice
President for Manufacturing, requesting reconsideration of his
suspension, but the same was denied. On 12 February 1994
the suspension order was finally implemented.
Seeking to reverse his misfortune, Libres filed a complaint for
113
illegal suspension and unjust discrimination against respondent
NSC and its officers, private respondents herein, before the
Labor Arbiter. Citing the failure of the MEC to grant him
audience despite his offer to answer clarificatory questions,
petitioner claimed denial of due process. Labor Arbiter
Nicodemus G. Palangan however ruled that due process was
properly observed and that there was a positive finding of
sexual harassment to justify petitioner's suspension. He
pointed out that there was no substantial inconsistency
between the narration of complainant Capiral and petitioner
regarding the incident in the evening of May 1992. The Labor
Arbiter found that aside from a few facts which were
controverted by Capiral in her complaint-affidavit, petitioner's
admissions approximated the truth; consequently, he ruled that
the MEC was correct in including that sexual harassment had
indeed transpired. The Labor Arbiter observed that petitioner
should welcome that his penalty was only for suspension of
thirty (30) days as opposed to termination imposed
in Villarama v. NLRC and Golden Donuts.[4] In this recourse
petitioner maintains that public respondent grievously erred
amounting to lack or excess of jurisdiction in finding that he
committed sexual harassment justifying his suspension, and in
concluding that he was afforded due process.
Petitioner argues that the issue of sexual harassment was not
adequately considered as he noted that the finding of the
NLRC was made without proper basis in fact and in law. He
maintains that the NLRC merely adopted the conclusions of
the Labor Arbiter which in turn were simply derived from the
report of the MEC. Petitioner primarily disputes the failure of
the NLRC to apply RA No. 7877, "An Act Declaring Sexual
Harassment Unlawful in the Employment, Education or
Training Environment and for Other Purposes," in determining
whether he actually committed sexual harassment. He asserts
that his acts did not fall within the definition and criteria of
sexual harassment as laid down in Sec. 3 of the law.
[5]
Specifically, he cites public respondent's failure to show that
his acts of fondling the hand and massaging the shoulders of
Capiral "discriminated against her continued employment,"
"impaired her rights and privileges under the Labor Code," or
"created a hostile, intimidating or offensive environment."[6]
Petitioner also contends that public respondent's reliance
on Villarama v. NLRC and Golden Donuts[7] was misplaced. He
draws attention to victim Divina Gonzaga's immediate filing of
her letter of resignation in the Villarama case as opposed to
the one year delay of Capiral in filing her complaint against
him. He now surmises that the filing of the case against him
was merely an afterthought and not borne out of a valid
complaint, hence, the Villarama case should have no bearing
on the instant case.
As regards his assertion that he was not afforded due process,
petitioner would point to his demand for personal confrontation
which was brushed aside by the MEC. He argues strongly that
in rejecting his plea, the MEC clearly denied him an opportunity
to be heard and present his side.
The issues raised in this petition require this Court to delve into
the findings of fact by the public respondent. We have ruled in
a litany of cases that resort to judicial review of the decisions of
the NLRC under Rule 65 of the Rules of Court is confined only
to issues of want or excess of jurisdiction and grave abuse of
discretion on the part of the tribunal rendering them. It does not
include an inquiry on the correctness of the evaluation of
evidence, which served as basis for the labor official in
determining his conclusion. Findings of fact of administrative
officers are generally given finality.[8] Nonetheless, the Court
shall discuss the matter if only to emphasize that the
contentions of petitioner are definitely without merit.
Petitioner assails the failure of the NLRC to strictly apply RA
No. 7877 to the instant case. We note however, that petitioner
never raised the applicability of the law in his appeal to the
NLRC nor in his motion for reconsideration. Issues or
arguments must chiefly be raised before the court or agency
concerned so as to allow it to pass upon and correct its
mistakes without the intervention of a higher court. Having
failed to indicate his effort along this line, petitioner cannot now
belatedly raise its application in this petition.
Republic Act No. 7877 was not yet in effect at the time of the
 114

occurrence of the act complained of. It was still being suspension of petitioner Carlos G. Libres as justified and in
deliberated upon in Congress when petitioner's case was accordance with due process. Consequently, its decision of 28
decided by the Labor Arbiter. As a rule, laws shall have no August 1995 as well as its resolution of 31 October 1995
retroactive effect unless otherwise provided, or except in a is AFFIRMED.
criminal case when their application will favor the accused.
[9]
Hence, the Labor Arbiter have to rely on the MEC report and SO ORDERED.
the common connotation of sexual harassment as it is
generally understood by the public. Faced with the same
predicament, the NLRC had to agree with the Labor Arbiter. In
so doing, the NLRC did not commit any abuse of discretion in
affirming the decision of the Labor Arbiter.

Petitioner next trains his gun on the reliance by the NLRC

on Villarama and claims it was erroneous. We rule otherwise
and hold that it was both fitting and appropriate since it
singularly addressed the issue of a managerial employee
committing sexual harassment on a subordinate. The disparity
in the periods of filing the complaints in the two (2) cases did
not in any way reduce this case into insignificance. On the
contrary, it even invited the attention of the Court to focus on
sexual harassment as a just and valid cause for termination.
Whereas petitioner Libres was only meted a 30-day
suspension by the NLRC, Villarama, in the other case was
penalized with termination. As Mr. Justice Puno elucidated, "As
a managerial employee, petitioner is bound by more exacting
work ethics. He failed to live up to his higher standard of
responsibility when he succumbed to his moral perversity. And
when such moral perversity is perpetrated against his
subordinate, he provides a justifiable ground for his dismissal
for lack of trust and confidence. It is the right, nay, the duty of
every employer to protect its employees from oversexed
superiors."[10] Public respondent therefore is correct in its
observation that the Labor Arbiter was in fact lenient in his
application of the law and jurisprudence for which petitioner
must be grateful and not gripe against.

Petitioner further claims that the delay in instituting the

complaint shows that it was only an afterthought. We disagree.
As pointed out by the Solicitor General, it could be expected
since Libres was Capiral's immediate superior. Fear of
retaliation and backlash, not to forget the social humiliation and
embarrassment that victims of this human frailty usually suffer,
are all realities that Capiral had to contend with. Moreover, the
delay did not detract from the truth derived from the facts.
Petitioner Libres never questioned the veracity of Capiral's
allegations. In fact his narration even corroborated the latter's
assertion in several material points. He only raised issue on
the complaint's protracted filing.

On the question of due process, we find that the requirements

thereof were sufficiently complied with. Due process as a
constitutional precept does not always and in all situations
require a trial type proceeding. Due process is satisfied when a
person is notified of the charge against him and given an
opportunity to explain or defend himself. The essence of due
process is simply to be heard, or as applied to administrative
proceedings, an opportunity to explain one's side, or an
opportunity to seek a reconsideration of the action or ruling
complained of.[11] It is undeniable that petitioner was given a
Notice of Investigation informing him of the charge of sexual
harassment as well as advising him to submit a written
explanation regarding the matter; that he submitted his written
explanation to his superior, Isidro F. Hynson Jr.; that Hynson Jr.
further allowed him to air his grievance in a private session;
and, that upon release of the suspension order made by the
MEC petitioner requested its reconsideration but was denied.
From the foregoing it can be gleaned that petitioner was given
more than adequate opportunity to explain his side and air his
grievances.

The personal confrontation with the MEC officers, which he

requested, was not necessary. The parties had already
exhaustively presented their claims and defenses in different
fora. As stated in Homeowners Savings and Loan Association
v. NLRC, litigants may be heard through pleadings, written
explanations, position papers, memoranda or oral arguments.
[12]
Petitioner has been afforded all of the above means to air
his side. Due process was therefore properly observed.

WHEREFORE, the petition is DISMISSED, no grave abuse of

discretion having been committed by public respondent
National Labor Relations Commission in upholding the