Statutory

Reference:
• Arts. 298 to 301 of the Labor Code and related provisions in the Omnibus Rules
Cases:
1. Escareal vs. NLRC, 213 SCRA 472, GR 99359, Sep. 2, 1992
2. Asian Alcohol vs. NLRC, 305 SCRA 416, GR 131108, Mar. 25, 1999

3. Mayon Hotel vs. Adana, 458 SCRA 609, GR 157634, May 16, 2005

4. Industrial Timber vs. Ababon, 480 SCRA 171, GR 164518, January 25, 2006
5. JAT General Services vs. NLRC, 421 SCRA 78, GR 148340, Jan. 26, 2004
6. Genuino Ice vs. Magpantay, 493 SCRA 195, GR No. 147790, June 27, 2006
7. Great Southern vs. Acuna, 425 SCRA 422, GR 140189, February 28, 2005
8. BPI Union vs. BPI, 454 SCRA 357, GR 137863, March 31, 2005

9. Equitable vs. Sadac, 490 SCRA 380, GR 164772, June 8, 2006
10. Eastern Shipping vs. Sedan, 486 SCRA 565, GR 159354, April 7, 2006
11. Hanford vs. Joseph, 454 SCRA 773, GR 158251, March 31, 2005
12. Tan vs Timbal, 434 SCRA 381, GR 141926, July 14, 2004
13. Brion vs. South Philippine, 307 SCRA 497, GR 135136, May 19, 1999
14. Sta. Catalina vs. NLRC, 416 SCRA 233, GR 144483, NOv. 19, 2003

ART. 298. Closure of Establishment and Reduction of Personnel. - The employer may also terminate the
employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment
to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the
closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the

workers and the Ministry of Labor and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at
least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent
losses and in cases of closures or cessation of operations of establishment or undertaking not due to
serious business losses or 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.


ART. 299. Disease as 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 is prejudicial to his health as well as to the health of his co-employees: Provided, That he is paid
separation pay equivalent to at least one (1) month salary or to one-half (1/2) month salary for every
year of service, whichever is greater, a fraction of at least six (6) months being considered as one (1)
whole year.

ART. 300. Termination by Employee. –

(a) An employee may terminate without just cause the employee-employer relationship by serving a
written notice on the employer at least one (1) month in advance. The employer upon whom no such

notice was served may hold the employee liable for damages.


(b) An employee may put an end to the relationship without serving any notice on the employer for any
of the following just causes:

1. Serious insult by the employer or his representative on the honor and person of the
employee;

2. Inhuman and unbearable treatment accorded the employee by the employer or his
representative;

3. Commission of a crime or offense by the employer or his representative against the person
of the employee or any of the immediate members of his family; and

4. Other causes analogous to any of the foregoing.


ART. 301. When Employment not Deemed Terminated. - The bona fide suspension of the operation of a

business or undertaking for a period not exceeding six (6) months, or the fulfillment by the employee of a
military or civic duty shall not terminate employment. In all such cases, the employer shall reinstate the
employee to his former position without loss of seniority rights if he indicates his desire to resume his
work not later than one (1) month from the resumption of operations of his employer or from his relief
from the military or civic duty.






[G.R. No. 99359. September 2, 1992.] Redundancy steadily increased from 1987 to 1990. While concededly, Article 283 of the Labor Code does not
require that the employer should be suffering financial losses before he can terminate the services of
ORLANDO M. ESCAREAL, Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION, HON. MANUEL P. the employee on the ground of redundancy, it does not mean either that a company which is doing well
ASUNCION, Labor Arbiter, NLRC, National Capital Region, PHILIPPINE REFINING COMPANY, INC., CESAR can effect such a dismissal whimsically or capriciously. The fact that a company is suffering from business
BAUTISTA and GEORGE B. DITCHING, Respondents. losses merely provides stronger justification for the termination.

R.S. Arlanza & Associates for Petitioner. 3. ID.; ID.; RIGHT OF EMPLOYEE ILLEGALLY DISMISSED; RULE; CASE AT BAR. — Since We have
concluded that the petitioner’s dismissal was illegal and can not be justified under a valid
Siguion Reyna, Montecillo & Ongsiako for Private Respondents. redundancy initiative, Article 283 of the Labor Code, as amended, on the benefits to be received by the
dismissed employee in the case of redundancy, retrenchment to prevent losses, closure of business or
the installation of labor saving devices, is not applicable. Instead, We apply Article 279 thereof which
SYLLABUS provides, in part, that an "employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from the time his
1. LABOR LAWS AND SOCIAL LEGISLATION; TERMINATION OF EMPLOYMENT; REDUNDANCY IN compensation was withheld from him up to the time of his actual reinstatement.
PERSONNEL FORCE AS A GROUND; DEFINED. — In Wiltshire File Co., Inc. v. NLRC, (193 SCRA 665
[1991]) this Court held that redundancy, for purposes of the Labor Code, exists where the services of 4. ID.; RIGHT OF EMPLOYEE TO SECURITY OF TENURE; CONSTRUED IN CASE AT BAR. — It is evident that
an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise; petitioner’s right to security of tenure was violated by the private respondent PRC. Both the
a position is redundant when it is superfluous, and superfluity of a position or positions may be the Constitution (Section 3, Article XIII) and the Labor Code (Article 279, P.D. 442, as amended)
outcome of a number of factors, such as the overhiring of workers, a decreased volume of business or enunciate this right as available to an employee. In a host of cases, this Court has upheld the
the dropping of a particular product line or service activity previously manufactured or undertaken by employee’s right to security of tenure in the face of oppressive management behavior and
the enterprise. Redundancy in an employer’s personnel force, however, does not necessarily or management prerogative. (Dosch v. NLRC, 123 SCRA 296 [1983]; Tolentino v. NLRC, 152
even ordinarily refer to duplication of work. That no other person was holding the same position SCRA 717 [1987]; Cebu Royal Plant v. Deputy Minister of Labor, 153 SCRA 38 [1987]; PT&T v. NLRC,
which the dismissed employee held prior to the termination of his services does not show that his 183 SCRA 451 [1990]; Filipinas Manufacturers Bank v. NLRC, 182 SCRA 848 [1990]; Batongbacal v.
position had not become redundant. Associated Bank, 168 SCRA 600 [1988]; International Harvester Macleod v. NLRC, 149 SCRA 641 [1987];
Remerco Garments v. Minister of Labor, 135 SCRA 167 [1985]; Cebu Royal Plant v. Deputy Minister of
2. ID.; ID.; ID.; NOT JUSTIFIED IN CASE AT BAR; REASON THEREFOR. — Private respondent PRC had no Labor, 153 SCRA 38 [1987]) Security of tenure is a right which may not be denied on mere speculation of
valid and acceptable basis to declare the position of Pollution Control and Safety Manager any unclear and nebulous basis. (Tolentino v. NLRC, 152 SCRA 717 [1987]) In this regard, it could be
redundant as the same may not be considered as superfluous; by the express mandate of the concluded that the respondent PRC was merely in a hurry to terminate the services of the petitioner as
provisions earlier cited, said positions are required by law. Thus, it cannot be gainsaid that the services of soon as possible in view of the latter’s impending retirement; it appears that said company was
the petitioner are in excess of what is reasonably required by the enterprise. Otherwise, PRC would not merely trying to avoid paying the retirement benefits the petitioner stood to receive upon reaching the
have allowed ten (10) long years to pass before opening its eyes to that fact; neither would it have age of sixty (60). PRC acted in bad faith.
increased the petitioner’s salary to P23,100.00 a month effective 1 April 1988. The latter by itself
is an unequivocal admission of the specific and special need for the position and an open recognition 5. ID.; EMPLOYMENT CONTRACT; PERIOD OF EMPLOYMENT STIPULATED THEREIN; EXPLAINED; CASE AT
of the valuable services rendered by the petitioner. Such admission and recognition are inconsistent with BAR. — An examination of the contents of the contract of employment yields the conclusion arrived at
the proposition that petitioner’s positions are redundant. If based on the ground of redundancy, a by the Solicitor General. There is no indication that PRC intended to offer uninterrupted employment
substitution of the petitioner by Miguelito S. Navarro would be invalid as the creation of said position is until the petitioner reached the mandatory retirement age; it merely informs the petitioner of the
mandated by the law; the same cannot therefore be declared redundant. If the change was effected to compulsory retirement age and the terms pertaining to the retirement. In Brent School, Inc. v. Zamora,
consolidate the functions of the pollution control and safety officer with the duties of the Industrial (181 SCRA 702 [1990]) this Court, in upholding the validity of a contract of employment with a fixed or
Engineering Manager, as private respondent postulates, such substitution was done in bad faith for as specific period, declared that the "decisive determinant in term employment should not be the activities
had already been pointed out, Miguelito S. Navarro was hardly qualified for the position. If the aim was that the employee is called upon to perform, but the day certain agreed upon by the parties for the
to generate savings in terms of the salaries that PRC would not be paying the petitioner any more as a commencement and termination of their employment relationship, a day certain being understood to be
result of the streamlining of operations for improved efficiency, such a move could hardly be justified in ‘that which must necessarily come, although it may not ‘be known when.’" (Id., citing Article 1193
the face of PRC’s hiring of ten (10) fresh graduates for the position of Management Trainee and (third paragraph), Civil Code) The term period was further defined to be, "Length of existence;
advertising for vacant positions in the Engineering/Technical Division at around the time of the duration. A point of time marking a termination as of a cause or an activity; an end, a limit, a bound;
termination. Besides, there would seem to be no compelling reason to save money by removing such an conclusion; termination. A series of years, months or days in which something is completed. A time of
important position. As shown by their recent financial statements, PRC’s year-end net profits had definite length. . . . the period from one fixed date to another fixed date . . . ." (Id., citing Capiral v. Manila
Electric Co., 119 Phil. 124 [1963], cited in MORENO, Philippine Law Dictionary, 3rd ed.)
 "1. All local governments, development authorities, government-owned or controlled corporations,
6. ID.; SEPARATION PAY; DISTINGUISHED FROM BACKWAGES. — In Torillo v. Leogardo, Jr., (197 industrial, commercial and manufacturing establishments, and all other public and private entities,
SCRA 471 [1991]) an amplification was made on Article 279 of the Labor Code and the distinction whose functions involve the discharge or emission of pollutants into the water, air and/or land resources
between separation pay and backwages. Citing the case of Santos v. NLRC, (154 SCRA 166 [1987]), We or the operation, installation or construction of any anti-pollution device, treatment work or facility,
held in the former: "The normal consequences of a finding that an employee has been illegally dismissed sewerage or sewerage disposal system, shall each appoint and/or designate a Pollution Control
are, firstly, that the employee becomes entitled to reinstatement to his former position without loss of Officer." chanrobles law library
seniority rights and, secondly, the payment of backwages corresponding to the period from his illegal
dismissal up to actual reinstatement . . . Though the grant of reinstatement commonly carries with it an and Memorandum Circular No. 02, 6 dated 3 August 1981 and implementing LOI No. 588, which
award to backwages, the inappropriateness or non-availability of one does not carry with it the amended Memorandum Circular No. 007, Series of 1977, issued by the National Pollution Control
inappropriateness or non-availability the other . . . Put a little differently, payment of backwages is a Commission (NPCC), the pertinent portions of which read:jgc:chanrobles.com.ph
form of relief that restores the income that was lost by reason of unlawful dismissal; separation pay, in
contrast, is oriented towards the immediate future, the transitional period the dismissed employee must "Section 3. Appointment/Designation of Pollution Control Officer. — All local governments,
undergo before locating a replacement job." development authorities, government-owned or controlled corporations, industrial and
manufacturing establishments, and public and private entities falling within the purview of Letter of
Instruction No. 588, shall each appoint and/or designate a Pollution Control Officer.
D E C I S I O N
x x x

DAVIDE, JR., J.:
Section 6. Employment Status-In the employment of Pollution Control Officer, the following additional
requirements shall be observed:chanrob1es virtual 1aw library
Petitioner seeks to set aside the Decision 1 dated 14 January 1991 and the Resolution 2 dated 13 May
1991 of the respondent National Labor Relations Commission (hereinafter, NLRC) in NLRC Case No. 00- x x x
08-03412-88 entitled Orlando M. Escareal v. Philippine Refining Company, Inc. The said Decision affirmed
with modification the 19 February 1990 Decision 3 of the respondent Labor Arbiter Manuel P. Asuncion
while the Resolution denied the motion for a reconsideration of the former.cralawnad (b) Private Entities —

The dispositive portion of the respondent Labor Arbiter’s Decision reads:jgc:chanrobles.com.ph 1. Industrial and Manufacturing establishment and other private entities with capitalization of one
million pesos and above shall employ a full time pollution control officer.
"WHEREFORE, the respondent is hereby ordered to pay the complainant his redundancy pay in
accordance with existing company policy on the matter. This is without prejudice to the grant of x x x
additional benefits offered by the respondent during the negotiation stage of the case, though it never
materialized for failure of the parties to reach an agreement.
Section 9. Accreditation of Pollution Control Officer. — A (sic) duly appointed and/or designated
SO ORDERED."cralaw virtua1aw library pollution control officers shall submit copies of their designation and/or appointments to the
Commission within thirty (30) days from the date of such designation/appointment together with their
The controversy stemmed from the dismissal of the petitioner from the private respondent Philippine biodata and curriculum vitae for accreditation purposes. In case of the termination of the
Refining Company, Inc. (hereinafter, PRC) after almost eleven (11) years of gainful employment. appointment/designation of a pollution control officer for any reason whatsoever, it shall be the
responsibility of his employer to inform the Commission of the same immediately to appoint/designate
Petitioner was hired by the PRC for the position of Pollution Control Manager effective on 16 September his successor within thirty (30) days after said termination. (Emphasis supplied)"
1977 with a starting monthly pay of P4,230 00; 4 the employment was made permanent effective on 16
March 1978. 5 The contract of employment provides, inter alia, that his "retirement date will be the day On 1 April 1979, petitioner was also designated as Safety Manager pursuant to Article 162 of the Labor
you reach your 60th birthday, but there is provision (sic) for voluntary retirement when you reach your Code (P.D. 442, as amended) and the pertinent implementing rule thereon. At the time of such
50th birthday. Bases for the hiring of the petitioner are Letter of Instruction (LOI) No. 588 implementing designation, petitioner was duly accredited as a Safety Practitioner by the Bureau of Labor Standards,
the National Pollution Control Decree, P.D No. 984, dated 19 August 1977, the pertinent portion of which Department of Labor and Employment (DOLE) and the Safety Organization of the Philippines. Article 162
reads:jgc:chanrobles.com.ph of the Labor Code, as amended, provides:chanrobles virtual lawlibrary

ARTICLE 162. Safety and Health Standard. — The Secretary of Labor shall, by appropriate orders,
set and enforce mandatory occupational safety and health standards to eliminate or reduce On 8 August 1988, petitioner presented to Javelona a computation 15 showing the amount of
occupational safety and health hazards in all workplaces and institute new, and update existing, P2,436,534.50 due him (petitioner) by way of employee compensation and benefits.
programs to ensure safe and healthful working conditions in all places of employment."cralaw virtua1aw
library On the date of the effectivity of his termination, petitioner was only fifty-seven (57) years of age. He had
until 21 July 1991, his sixtieth (60th) birth anniversary, before he would have been compulsorily retired.
In addition, the pertinent rules on Occupational Health and Safety implementing the Labor Code provide
for the designation of full-time safety men to ensure compliance with the safety requirements prescribed Also, on the date of effectivity of petitioner’s termination, 16 August 1988, Miguelito S. Navarro,
by the Bureau of Labor Standards. 7 Consequently, petitioner’s designation was changed to Pollution PRC’s Industrial Engineering Manager, was designated as the Pollution Control and Safety
Control and Safety Manager. Officer. Such appointment is evidenced by two (2) company correspondences. In its letter dated
6 September 1988 to the Laguna Lake Development Authority, 16 PRC informed the said Authority, to
In the course of his employment, petitioner’s salary was regularly upgraded; the last pay hike was wit:jgc:chanrobles.com.ph
granted on 28 March 1988 when he was officially informed 8 that his salary was being increased
to P23,100.00 per month effective 1 April 1988. This last increase is indisputably a far cry from "With effect from 16 August 1988 the functions and duties of our Safety and Pollution Control Officer has
his starting monthly salary of P4,230.00. (sic) been integrated and absorbed with those of our Industrial Engineering Manager.

Sometime in the first week of November 1987, private respondent George B. Ditching, who was then x x x
PRC’s Personnel Administration Manager, informed petitioner about the company’s plan to
declare the position of Pollution Control and Safety Manager redundant. Ditching attempted to
convince petitioner to accept the redundancy offer or avail of the company’s early retirement plan. The main tasks of our Industrial Engineering Manager, Mr. Miguelito S. Navarro, now includes (sic) safety
Petitioner refused and instead insisted on completing his contract as he still had about three and a and pollution control.chanrobles.com:cralaw:red
half (3 1/2) years left before reaching the mandatory retirement age of sixty (60).
Attached to (sic) the bio-data of Mr. Navarro for your accreditation as our designated Pollution Control
On 15 June 1988, Jesus P. Javelona, PRC’s Engineering Department Manager and petitioner’s Officer."cralaw virtua1aw library
immediate superior, formally informed the petitioner that the position of "Safety and Pollution
Control Manager will be declared redundant effective at the close of work hours on 15th July 1988." 9 In its letter to the Safety Organization of the Philippines 17 dated 14 December 1988, PRC articulated Mr.
Petitioner was also notified that the functions and duties of the position to be declared redundant will be Miguelito S. Navarro’s designation as "Safety Officer of Phil. Refining Company."cralaw virtua1aw
absorbed and integrated with the duties of the Industrial Engineering Manager; as a result thereof, the library
petitioner "will receive full separation benefits provided under the PRC Retirement Plan and additional
redundancy payment under the scheme applying to employees who are 50 years old and above and In view of all this, petitioner filed a complaint for illegal dismissal with damages against the private
whose jobs have been declared redundant by Management." chanrobles law library : red respondent PRC before the Arbitration Branch, NLRC, National Capital Region; the case was docketed as
NLRC-NCR Case No. 00-08-03412-88. 18 After trial, respondent Labor Arbiter Manuel P. Asuncion
Petitioner protested his dismissal via his 22 June 1988 letter to Javelona. 10 This notwithstanding, the rendered a decision dated 19 February 1990, the dispositive portion of which was quoted earlier.
PRC unilaterally circulated a clearance 11 dated 12 July 1988, to take effect on 15 July 1988, indicating
therein that its purpose is for the petitioner’s "early retirement" — and not redundancy. Petitioner Petitioner appealed the said decision to the NLRC which, in its decision of 14 January 1991, made the
confronted Javelona; the latter, in his letter dated 13 July 1988, advised the former that the following findings:jgc:chanrobles.com.ph
employment would be extended for another month, or up to 15 August 1988. 12 Petitioner responded
with a letter dated 25 July 1988 threatening legal action. 13 "Respondent contended that complainant Orlando M. Escareal was employed as Safety and Pollution
Control Engineer on September 16, 1977; that as part of the Company’s policy to streamline the work
Subsequently, or on 14 July 1988, Bernardo N. Jambalos III, respondent company’s Industrial Relations force and to keep the Organization more effective, it allegedly declared redundant several
Manager, sent a Notice of Termination 14 to the Ministry of Labor and Employment (MOLE) positions from all levels and departments of the company; that the position of ‘Safety and
informing the latter that the petitioner was being terminated on the ground of redundancy Pollution Control Manager’ which the herein complainant was holding at the time of dismissal, is one
effective 15 August 1988. of those that were affected; that the functions of Mr. Escareal were fused with the Industrial Engineering
Department, the latter being under the control and supervision of Mr. Miguelito S. Navarro; that no
On 5 August 1988, petitioner had a meeting with private respondent Cesar Bautista and Dr. Reynaldo replacement and/or new appointment to said questioned position have (sic) been made; that
Alejandro, PRC’s President and Corporate Affairs Director, respectively. To his plea that he be respondent terminated complainant on the ground of redundancy and offered him P458,929.00 a
allowed to finish his contract of employment as he only had three (3) years left before reaching separation pay; and that the above mentioned amount, is far above what complainant can get under the
the mandatory retirement age, Bautista retorted that the termination was final. Labor Code, as amended.

 x x x
(a) Retirement credit of 1.5 months pay for every year of service in the amount of P363,825.00; and

The determination as to the usefulness of a particular department or section as an integral aspect of (b) Ex-gratia, amounting to:chanrob1es virtual 1aw library
company prerogative, may not be questioned, the objective of which being to (sic) achieve profitability.
(Special Events Control Shipping Office Workers Union v. San Miguel Corporation, 122 SCRA 557). P81,496.80

x x x ——————

TOTAL P445,321.80"
To submit to the argument of herein Complainant that there is no basis in the management’s decision to
declare his position redundant is to deny the company of its inherent prerogative, without due process As a consequence thereof, the instant petition was filed on 29 May 1991. 22 Private respondent PRC filed
of law. its Comment on 21 August 1991 23 while the public respondent, through the Office of the Solicitor
General, filed its Comment on 10 October 1991. 24
x x x
On 16 October 1991, 25 this Court resolved, inter alia, to give due course to the petition and require the
parties to file their respective Memoranda Petitioner complied with this Resolution on 12 December
Turning to another issue of whether or not a fixed period of employment has been concluded, suffice it 1991; 26 public respondent NLRC, on the other hand, filed its Memorandum only on 24 March 1992. 27
to say that it lacks legal and factual basis.chanrobles virtual lawlibrary
In his thorough and exhaustive Memorandum, herein petitioner makes the following assignment of
x x x errors:chanrobles law library : red

"I
If indeed, a fixed period of contract of employment has been concluded under the circumstances, the
complainant would not have acceded to have undergone a probationary period. The (sic) latter being a
condition sine-qua non before he became a regular worker. Consequently, the averment of breach of RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR IN (sic) EXCESS
Contract pursuant to Article 1159, 1306 and 1308 of the New Civil Code of the Phils., is not in point. OF JURISDICTION IN AFFIRMING THE DECISION OF THE RESPONDENT LABOR ARBITER THAT
Additionally, to subscribe to the protestation of herein complainant that the reference of the retirement PETITIONER’S TERMINATION AS POLLUTION CONTROL AND SAFETY MANAGER OF
age at 60 in the company’s letter dated August 22, 1977 meant fixed duration is to tie the hands of RESPONDENT PRC ON THE GROUND OF REDUNDANCY WAS VALID — TOTALLY
management in doing what is necessary to meet the exigencies of the business . . ."cralaw IGNORING THE FACT THAT PETITIONER’S POSITION WAS NEVER ABOLISHED BUT WAS
virtua1aw library MERELY GIVEN TO ANOTHER EMPLOYEE (MIGUELITO S. NAVARRO) WHO WAS
IMMEDIATELY DESIGNATED AS A REPLACEMENT.
and then ruled that:jgc:chanrobles.com.ph
II
"WHEREFORE, the appealed decision is hereby Affirmed, with modification ordering respondent-
company to pay complainant his retirement pay in accordance with the company policy and other
benefits granted to him thereunder, less outstanding obligations of the complainant with the company at RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR IN (sic) EXCESS
the time of his dismissal." 19 OF JURISDICTION IN DECLARING THAT PETITIONER’S WRITTEN CONTRACT OF EMPLOYMENT
WITH RESPONDENT PRC WAS NOT FOR A DEFINITE PERIOD, AND THAT IT IS NOT
Undaunted by this second setback, the petitioner filed a Motion for Reconsideration 20 of this decision VIOLATED NOTWITHSTANDING THE FACT THAT RESPONDENT PRC PREMATURELY
on 25 January 1991. Private respondent PRC also filed its own motion for reconsideration on the ground SHORTENED PETITIONER’S RETIREMENT AGE AT 57 INSTEAD OF 60.
that petitioner is entitled to only one (1) benefit, and not to both. In a Resolution promulgated on 13
May 1991, the NLRC’s First Division 21 ruled as follows:jgc:chanrobles.com.ph III

"WHEREFORE, in view thereof, the complainant’s motion for reconsideration other than his
pecuniary interest is hereby Dismissed for lack of merit. Accordingly, respondent-company RESPONDENT NLRC COMMITTED A VERY SERIOUS ERROR AMOUNTING TO LACK OR IN (sic) EXCESS OF
(PRC) is ordered to pay Mr. Escareal’s redundancy benefits in accordance with the company policy JURISDICTION IN DECLARING THAT THE PETITIONER IS NOT ENTITLED TO ANY SEPARATION PAY SUCH AS
on the matter as follows:chanrob1es virtual 1aw library CASH EQUIVALENT OF HIS ACCUMULATED VACATION AND SICK LEAVE CREDITS, REDUNDANCY PAY,
BONUSES, ETC., BUT ONLY TO HIS RETIREMENT BENEFITS UNDER THE PRC RETIREMENT PLAN UP TO Safety Manager redundant as the same may not be considered as superfluous; by the express mandate
AUGUST 16, 1988 (DATE OF HIS TERMINATION). of the provisions earlier cited, said positions are required by law. Thus, it cannot be gainsaid that the
services of the petitioner are in excess of what is reasonably required by the enterprise. Otherwise, PRC
IV would not have allowed ten (10) long years to pass before opening its eyes to that fact; neither would it
have increased the petitioner’s salary to P23,100.00 a month effective 1 April 1988. The latter by
itself is an unequivocal admission of the specific and special need for the position and an open
RESPONDENT NLRC SERIOUSLY ERRED IN DECLARING THAT PETITIONER IS NOT ENTITLED TO DAMAGES, recognition of the valuable services rendered by the petitioner. Such admission and recognition are
NOTWITHSTANDING RESPONDENT PRC’S AND ITS OFFICERS’ EVIDENT BAD FAITH, WANTON inconsistent with the proposition that petitioner’s positions are redundant. It cannot also be argued
AND PATENT VIOLATION OF PETITIONER’S WRITTEN CONTRACT OF EMPLOYMENT. that the said functions were duplicative, and hence could be absorbed by the duties pertaining to the
Industrial Engineering Manager. If indeed they were, and assuming that the Industrial Engineering
V department of the PRC had been created earlier, petitioner’s positions should not have been created
and filled up. If, on the other hand, the department was created later, and there is no evidence to this
effect, and it was to absorb the petitioner’s positions, then there would be no reason for the
RESPONDENT NLRC GRAVELY ERRED IN NOT AWARDING PETITIONER AN AMOUNT FOR ATTORNEY’S unexplained delay in its implementation, the restructuring then should have been executed long
FEE EQUIVALENT TO TEN (10%) PERCENT OF THE AMOUNT DUE, NOTWITHSTANDING before the salary increases in petitioner’s favor. That petitioner’s positions were not duplicitous is
THAT PETITIONER WAS COMPELLED TO LITIGATE BY REASON OF HIS ILLEGAL best evidenced by the PRC’s recognition of their imperative need thereof, this is underscored by
DISMISSAL AND OF RESPONDENT PRC’S AND ITS OFFICERS’ MALICIOUS AND WANTON the fact that Miguelito S. Navarro, the company’s Industrial Engineering Manager, was designated
ACTS." 28 as Pollution Control and Safety Manager on the very same day of petitioner’s termination. While
the petitioner had over ten (10) years of experience as a pollution control and safety officer,
We find for the petitioner.chanrobles law library : red Navarro was a virtual greenhorn lacking the requisite training and experience for the assignment. A
cursory perusal of his bio-data 31 reveals that it was only several months after his appointment that he
Article 283 of the Labor Code provides:jgc:chanrobles.com.ph attended his first Occupational Safety & Health Seminar (14-17 November 1988), moreover, it was only
after his second seminar (Loss Control Management Seminar — 6-9 December 1988) that the PRC
"ARTICLE 283. Closure of establishment and reduction of personnel. — The employer may also requested his accreditation with the Safety Organization of the Philippines. 32 In trying to prop
terminate the employment of any employee due to the installation of labor saving devices, up Navarro’s competence for the position, PRC alleges that the former finished from the
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the University of the Philippines with a degree in Chemical Engineering, took some units in pollution
establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this in the process and had "undergone job training in pollution in cement firms through the Bureau of
Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one Mines." 33 Compared to the training and experience of the petitioner, Navarro’s orientation would
(1) month before the intended date thereof. In case of termination due to the installation of labor saving seem to pale.chanrobles virtual lawlibrary
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. The private respondent alleges further 34 that its decision to declare petitioner’s position as redundant
In case of retrenchment to prevent losses and in cases of closures or cessation of operations of "stemmed from its well-considered view that in order for the corporation’s safety and pollution
establishment or undertaking not due to serious business losses or financial reverses, the separation pay program to be more effective, such program would have to be tied up with the functions of the
shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, Industrial Engineering Manager." It is further posited that since the job of safety and pollution
whichever is higher A fraction of at least six (6) months shall be considered one (1) whole year."cralaw engineer "requires coordination with operating departments, knowledge of the manufacturing
virtua1aw library processes, and adequate presence in plant areas, a task which the company’s safety and pollution
control officer would not be up to as he works singlehandedly, it is only the Industrial Engineer,
In Wiltshire File Co., Inc. v. NLRC, 29 this Court held that redundancy, for purposes of the Labor Code, commanding a department of five (5) engineers and one (1) clerk, who can live up to corporate
exists where the services of an employee are in excess of what is reasonably demanded by the actual expectations. Indeed, the proposition that a department manned by a number of engineers presumably
requirements of the enterprise; a position is redundant when it is superfluous, and superfluity of a because of the heavy workload, could still take on the additional responsibilities which were originally
position or positions may be the outcome of a number of factors, such as the overhiring of workers, a reposed in an altogether separate section headed by the petitioner, is difficult to accept. It seems more
decreased volume of business or the dropping of a particular product line or service activity previously reasonable to view the set-up which existed before the termination as being more conducive to efficient
manufactured or undertaken by the enterprise. 30 Redundancy in an employer’s personnel force, operations. And even if We were to sustain PRC’s explanation, why did it so suddenly incorporate
however, does not necessarily or even ordinarily refer to duplication of work. That no other functions after the separate position of Pollution and Safety Control Manager had existed for over
person was holding the same position which the dismissed employee held prior to the ten (10) years? No effort whatsoever was undertaken to gradually integrate both functions over this
termination of his services does not show that his position had not become redundant. span of time. Anent this specific point, all that the private respondent has to say is that the declaration of
redundancy was made pursuant to its continuing program, which has been ongoing for the past ten (10)
Private respondent PRC had no valid and acceptable basis to declare the position of Pollution Control and years, of streamlining the personnel complement and maintaining a lean and effective organization. 35
 Thus, it is evident from the foregoing that petitioner’s right to security of tenure was violated by the
Furthermore, if PRC felt that either the petitioner was incompetent or that the task could be performed private respondent PRC. Both the Constitution (Section 3, Article XIII) and the Labor Code
by someone more qualified, then why is it that the person designated to the position hardly had any (Article 279, P.D. 442, as amended) enunciate this right as available to an employee. In a host of
experience in the field concerned? And why reward the petitioner, barely five (5) months before the cases, this Court has upheld the employee’s right to security of tenure in the face of oppressive
dismissal, with an increase in salary? Assuming PRC’s good faith, it would still seem quite surprising management behavior and management prerogative. 43 Security of tenure is a right which may
that it did not at least provide a transition period wherein the Industrial Engineering Manager not be denied on mere speculation of any unclear and nebulous basis. 44
would be adequately trained for his new assignment; such reckless conduct is not the expected
behavior of a well-oiled and progressive multinational company. Petitioner himself could have very well In this regard, it could be concluded that the respondent PRC was merely in a hurry to terminate the
supervised a training and familiarization program which could have taken the remaining three (3) years services of the petitioner as soon as possible in view of the latter’s impending retirement; it appears
of his employment. But no such move was initiated. Instead, a clever scheme to oust the petitioner from that said company was merely trying to avoid paying the retirement benefits the petitioner stood to
a position held for so long was hatched and implemented. On the very same day of petitioner’s receive upon reaching the age of sixty (60). PRC acted in bad faith.chanrobles law library : red
termination, the position vacated was resurrected and reconstituted as a component of the
position of Industrial Engineering Manager. After more than ten (10) years of unwavering service and Both the Labor Arbiter and the respondent NLRC clearly acted with grave abuse of discretion in
loyalty to the company, the petitioner was so cruelly and callously dismissed.chanrobles.com:cralaw:red disregarding the facts and in deliberately closing their eyes to the unlawful scheme resorted to by the
PRC.
What transpired then was a substitution of the petitioner by Miguelito S. Navarro. If based on the ground
of redundancy, such a move would be invalid as the creation of said position is mandated by the law; the We cannot, however, subscribe to the theory of petitioner that his employment was for a fixed definite
same cannot therefore be declared redundant. If the change was effected to consolidate the functions of period to end at the celebration of his sixtieth (60th) birthday because of the stipulation as to the
the pollution control and safety officer with the duties of the Industrial Engineering Manager, as private retirement age of sixty (60) years. The Solicitor General’s refutation, to wit:jgc:chanrobles.com.ph
respondent postulates, such substitution was done in bad faith for as had already been pointed out,
Miguelito S. Navarro was hardly qualified for the position. If the aim was to generate savings in terms of "A perusal of the provision in the August 22, 1977 letter cited by petitioner merely informs him of the
the salaries that PRC would not be paying the petitioner any more as a result of the streamlining of company policy which pegs the compulsory retirement age of its employees at 60 and which commences
operations for improved efficiency, such a move could hardly be justified in the face of PRC’s hiring of on the date of the employee’s 60th birthday. It likewise informs him that the company recognizes
ten (10) fresh graduates for the position of Management Trainee 36 and advertising for vacant positions the right of the employee to retire voluntarily, which option can be availed of when the employee
in the Engineering/Technical Division at around the time of the termination. 37 Besides, there would reaches his 50th birthday. Clearly, the cited provision is limited solely to the pertinent issue of
seem to be no compelling reason to save money by removing such an important position. As shown by retirement." 45
their recent financial statements, PRC’s year-end net profits had steadily increased from 1987 to
1990. 38 While concededly, Article 283 of the Labor Code does not require that the employer is correct.
should be suffering financial losses before he can terminate the services of the employee on the ground
of redundancy, it does not mean either that a company which is doing well can effect such a dismissal An examination of the contents of the contract of employment 46 yields the conclusion arrived at by the
whimsically or capriciously. The fact that a company is suffering from business losses merely provides Solicitor General. There is no indication that PRC intended to offer uninterrupted employment until the
stronger justification for the termination. petitioner reached the mandatory retirement age, it merely informs the petitioner of the compulsory
retirement age and the terms pertaining to the retirement.
The respondent NLRC 39 relied on Wiltshire File Co., v. NLRC 40 in declaring that the employer has no
legal obligation to keep in its payroll more employees than are necessary for the operation of its In Brent School, Inc. v. Zamora, 47 this Court, in upholding the validity of a contract of employment with
business. Aside from the fact that in the case at bar, there was no compelling reason to dismiss the a fixed or specific period, declared that the "decisive determinant in term employment should not be the
petitioner as the company was not incurring any losses, the position declared redundant in the Wiltshire activities that the employee is called upon to perform, but the day certain agreed upon by the parties for
case was that of a Sales Manager, a management created position. In the case at bar, petitioner’s the commencement and termination of their employment relationship, a day certain being understood
position is one created by law. to be ‘that which must necessarily come, although it may not ‘be known when.’" 48 The term
period was further defined to be, "Length of existence; duration. A point of time marking a
The NLRC adds further that the termination was effected in the exercise of management prerogative and termination as of a cause or an activity; an end, a limit, a bound; conclusion; termination. A
that account should also be taken of the "life of the company which is . . . an active pillar of our economy series of years, months or days in which something is completed. A time of definite length. . . . the
and upon whose existence still depends the livelihood of a great number of workers." 41 It goes on to period from one fixed date to another fixed date . . ." 49
observe that" [t]he records are bereft of proof which could have been the basis of vengeful termination
other than the company’s legitimate objective to trim its work force." 42 In the face of the The letter to the petitioner confirming his appointment does not categorically state when the period of
circumstances surrounding the dismissal, this Court finds it extremely difficult to give credence to employment would end. It stands to reason then that petitioner’s employment was not one with a
such conclusions. specific period.chanrobles law library

Coming to the third assigned error, since We have concluded that the petitioner’s dismissal was illegal 1991, respectively in Labor Case No. NLRC-NCR-00-08-03412-88 and ORDERING private respondent
and can not be justified under a valid redundancy initiative, Article 283 of the Labor Code, as Philippine Refining Co., Inc. to pay petitioner Orlando M. Escareal his backwages from 16 August 1988 to
amended, on the benefits to be received by the dismissed employee in the case of redundancy, 21 July 1991 inclusive of allowances and the monetary equivalent of other benefits due him for that
retrenchment to prevent losses, closure of business or the installation of labor saving devices, is not period, as well as his retirement pay and other benefits provided under the former’s compulsory
applicable. Instead, We apply Article 279 thereof which provides, in part, that an "employee who is retirement scheme. The respondent Labor Arbiter or his successor is hereby directed to make
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other the appropriate computation of these awards within twenty (20) days from receipt of a copy of
privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary this Decision, which respondent Philippine Refining Co., Inc. shall pay to the petitioner within ten (10)
equivalent computed from the time his compensation was withheld from him up to the time of his actual days from notice thereof.
reinstatement."cralaw virtua1aw library
Costs against private respondent Philippine Refining Co., Inc.chanrobles.com : virtual law library
In Torillo v. Leagardo, Jr., 50 an amplification was made on Article 279 of the Labor Code and the
distinction between separation pay and backwages. Citing the case of Santos v. NLRC, 51 We held in the SO ORDERED.
former:jgc:chanrobles.com.ph
Gutierrez, Jr., Bidin and Romero, JJ., concur.
"The normal consequences of a finding that an employee has been illegally dismissed are, firstly, that the
employee becomes entitled to reinstatement to his former position without loss of seniority rights and, Feliciano, J., is on leave.
secondly, the payment of backwages corresponding to the period from his illegal dismissal up to actual
reinstatement.

x x x


Though the grant of reinstatement commonly carries with it an award of backwages, the
inappropriateness or non-availability of one does not carry with it the inappropriateness or non-
availability of the other.

x x x


Put a little differently, payment of backwages is a form of relief that restores the income that was lost by
reason of unlawful dismissal, separation pay, in contrast, is oriented towards the immediate future, the
transitional period the dismissed employee must undergo before locating a replacement job."cralaw
virtua1aw library

Reinstatement then of the petitioner would have been proper. However, since he reached the
mandatory retirement age on 21 July 1991, reinstatement is no longer feasible. He should thus be
awarded his backwages from 16 August 1988 to 21 July 1991, inclusive of allowances and the monetary
equivalent of the other benefits due him for that period, plus retirement benefits under the PRC’s
compulsory retirement scheme which he would have been entitled to had he not been illegally
dismissed.

Finally, anent the last two (2) assigned errors, this Court notes that in his complaint and the attached
Affidavit-Complaint, 52 petitioner does not mention any claim for damages and attorney s fees;
furthermore, no evidence was offered to prove them. An award therefor would not be
justified.chanroblesvirtualawlibrary


WHEREFORE, judgment is hereby rendered GRANTING the petition, SETTING ASIDE the Decision and

Resolution of respondent National Labor Relations Commission, dated 14 January 1991 and 13 May
FACTS: The controversy stemmed from the dismissal of the petitioner from the private respondent Private respondent PRC had no valid and acceptable basis to declare the position of Pollution Control and
Philippine Refining Company, Inc. (hereinafter, PRC) after almost eleven (11) years of gainful Safety Manager redundant as the same may not be considered as superfluous; by the express mandate
employment. of the provisions earlier cited, said positions are required by law. Thus, it cannot be gainsaid that the
Petitioner was hired by the PRC for the position of Pollution Control Manager effective on 16 September services of the petitioner are in excess of what is reasonably required by the enterprise. Otherwise, PRC
1977 with a starting monthly pay of P4,230 00;[4] the employment was made permanent effective on 16 would not have allowed ten (10) long years to pass before opening its eyes to that fact; neither would it
March 1978.[5] The contract of employment provides, inter alia, that his “retirement date will be the have increased the petitioner’s salary to P23,100.00 a month effective 1 April 1988. The latter by
day you reach your 60th birthday, but there is provision (sic) for voluntary retirement when you reach itself is an unequivocal admission of the specific and special need for the position and an open
your 50th birthday. Bases for the hiring of the petitioner are Letter of Instruction (LOI) No. 588 recognition of the valuable services rendered by the petitioner. Such admission and recognition are
implementing the National Pollution Control Decree, P.D No. 984, dated 19 August 1977 inconsistent with the proposition that petitioner’s positions are redundant.
Petitioner’s designation was changed to Pollution Control and Safety Manager. In the course of That petitioner’s positions were not duplicitous is best evidenced by the PRC’s recognition of
his employment, petitioner’s salary was regularly upgraded. their imperative need thereof, this is underscored by the fact that Miguelito S. Navarro, the
Sometime in the first week of November 1987, private respondent George B. Ditching, who was then company’s Industrial Engineering Manager, was designated as Pollution Control and Safety
PRC’s Personnel Administration Manager, informed petitioner about the company’s plan to Manager on the very same day of petitioner’s termination.
declare the position of Pollution Control and Safety Manager redundant. Ditching If We were to sustain PRC’s explanation, why did it so suddenly incorporate functions after the
attempted to convince petitioner to accept the redundancy offer or avail of the company’s separate position of Pollution and Safety Control Manager had existed for over ten (10) years? No
early retirement plan. Petitioner refused and instead insisted on completing his contract as he still effort whatsoever was undertaken to gradually integrate both functions over this span of time.
had about three and a half (3 ½) years left before reaching the mandatory retirement age of sixty Furthermore, if PRC felt that either the petitioner was incompetent or that the task could be performed
(60). by someone more qualified, then why is it that the person designated to the position hardly had any
Thereafter, PRC’s Engineering Department Manager and petitioner’s immediate superior, formally experience in the field concerned? And why reward the petitioner, barely five (5) months before the
informed the petitioner that the position of “Safety and Pollution Control Manager will be dismissal, with an increase in salary? Assuming PRC’s good faith, it would still seem quite surprising
declared redundant effective at the close of work hours on 15th July 1988.”[9] Petitioner was also that it did not at least provide a transition period wherein the Industrial Engineering Manager
notified that the functions and duties of the position to be declared redundant will be absorbed and would be adequately trained for his new assignment; such reckless conduct is not the expected behavior
integrated with the duties of the Industrial Engineering Manager; as a result thereof, the petitioner “will of a well-oiled and progressive multinational company.
receive full separation benefits provided under the PRC Retirement Plan and additional redundancy What transpired then was a substitution of the petitioner by Miguelito S. Navarro. If based on the
payment under the scheme applying to employees who are 50 years old and above and whose jobs have ground of redundancy, such a move would be invalid as the creation of said position is mandated by
been declared redundant by Management.” the law; the same cannot therefore be declared redundant.
Petitioner protested his dismissal. This notwithstanding, the PRC unilaterally circulated a clearance
indicating therein that its purpose is for the petitioner’s “early retirement” — and not redundancy.
Subsequently, a Notice of Termination[14] to the Ministry of Labor and Employment (MOLE) informing While concededly, Article 283 of the Labor Code does not require that the employer should be suffering
the latter that the petitioner was being terminated on the ground of redundancy. financial losses before he can terminate the services of the employee on the ground of redundancy, it
Petitioner had a meeting with PRC’s President and Corporate Affairs Director, respectively. To his does not mean either that a company which is doing well can effect such a dismissal whimsically or
plea that he be allowed to finish his contract of employment as he only had three (3) years left capriciously. The fact that a company is suffering from business losses merely provides stronger
before reaching the mandatory retirement age, Bautista retorted that the termination was final. justification for the termination.
Also, on the date of effectivity of petitioner’s termination, 16 August 1988, Miguelito S. Navarro, Thus, it is evident from the foregoing that petitioner’s right to security of tenure was violated by
PRC’s Industrial Engineering Manager, was designated as the Pollution Control and Safety Officer. the private respondent PRC.
In view of all this, petitioner filed a complaint for illegal dismissal with damages against the private
respondent PRC.
Development of the Case: LA ruled in favour of PRC; NLRC affirmed; MR of both parties denied. As a It appears that said company was merely trying to avoid paying the retirement benefits the petitioner
consequence thereof, the instant petition was filed (hindi ko alam bakit biglang tumalon sa SC ung case stood to receive upon reaching the age of sixty (60). PRC acted in bad faith.
hehe).

ISSUE: WON the dismissal of petitioner on the ground of redundancy was legal and hence, valid. PETITION GRANTED.
HELD: NO

Article 283 of the Labor Code provides (see codal)In Wiltshire File Co., Inc. vs. NLRC,[29] this Court held

that redundancy, for purposes of the Labor Code, exists where the services of an employee are in

excess of what is reasonably demanded by the actual requirements of the enterprise; a position is

redundant when it is superfluous, and superfluity of a position or positions may be the outcome of a

number of factors, such as the overhiring of workers, a decreased volume of business or the dropping

of a particular product line or service activity previously manufactured or undertaken by the

enterprise. Redundancy in an employer’s personnel force, however, does not necessarily or

even ordinarily refer to duplication of work. That no other person was holding the same

position which the dismissed employee held prior to the termination of his services does not show

that his position had not become redundant.
{G.R. No. 131108. March 25, 1999] LAYOFF The fact that respondents AAC incurred losses in its business operations was not seriously challenged by
the complainants. The fact that it incurred substantial losses in its business operations prior to the
ASIAN ALCOHOL CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, FOURTH
implementation of its retrenchment program is amply supported by the documents on records, (sic)
DIVISION, CEBU CITY and ERNESTO A. CARIAS, ROBERTO C. MARTINEZ, RAFAEL H. SENDON,
namely: (1) Balance Sheet of AAC as of December 31, 1991 x x x, (2) Statement of Income and Deficit for
CARLOS A. AMACIO, LEANDRO O. VERAYO and ERENEO S. TORMO, respondents.
the year ended December 31, 1991 x x x, (3) Income Tax Return for Fiscal Year ending September 30,
1989 x x x, (4) Income Tax Return for the Fiscal Year ending December 31, 1989 x x x, (5) Income Tax
D E C I S I O N Return for Fiscal Year ending December 31, 1990 x x x, and (6) Income Tax Return for the Fiscal Year
ending December 31, 1991 x x x, indicating an accumulated deficit of P26,117,889.00.
PUNO, J.:

It has to be emphasized that the law allows an employer to retrench some of its employees to prevent
Contending that the dismissal of private respondents Ernesto A. Carias, Roberto C. Martinez, Rafael
losses. In the case of respondent AAC, it implemented its retrenchment program not only to prevent
H. Sendon, Carlos A. Amacio, Leandro O. Verayo and Ereneo S. Tormo, was valid on the twin grounds of
losses but to prevent further losses as it was then incurring huge losses in its operations.
redundancy and retrenchment to prevent business losses, petitioner Asian Alcohol Corporation
(hereinafter referred to as Asian Alcohol) filed this petition for certiorari. Asian Alcohol ascribes grave
[1]
abuse of discretion to public respondents National Labor Relations Commission (hereinafter referred to Complainants would want us to believe that their positions were abolished because they are union
[2] [3]
as NLRC) when, on May 30, 1997, it set aside the decision of the Executive Labor Arbiter dismissing the members, and that they were replaced by casual employees. Complainants pretense is rather
illegal termination complaints filed by private respondents. untenable. For one thing, the retrenchment program of AAC affected not only union members but also
the non-union members. As earlier said, there were 117 employees of AAC who were affected by the
We first unfurl the facts. reorganization. Of the 117 positions, 72 positions were abolished due to redundancy, 21 of which were
occupied by union members, while 51 were held by non-union members. Thus, the theory of
In September, 1991, the Parsons family, who originally owned the controlling stocks in Asian
complainants that they were terminated from work on ground of their union membership is far from the
Alcohol, were driven by mounting business losses to sell their majority rights to prior Holdings, Inc.
truth.
(hereinafter referred to as Prior Holdings). The next month, Prior Holdings took over its management and
[4]
operation.
On the contrary, we find that complainants Ernesto Carias, Roberto Martinez and Rafael Sendon who
To thwart further losses, Prior Holdings implemented a reorganizational plan and other cost-saving were all Water Pump Tenders assigned to AACs water wells in Ubay, Pulupandan, Negros Occidental
measures. Some one hundred seventeen (117) employees out of a total workforce of three hundred sixty which were drilled and operated before under the old management by virtue of right-of-way with the
(360) were separated. Seventy two (72) of them occupied redundant positions that were abolished. Of landowner, were retrenched as an offshoot to the termination of the lease agreement as the water
these positions, twenty one (21) were held by union members and fifty one (51) by non-union members. thereunder had become salty due to extensive prawn farming nearby, so that AAC could no longer use
[5] the water for its purpose. As a consequence, the services of Ernesto Carias, Roberto Martinez and Rafael
The six (6) private respondents are among those union members whose positions were abolished
Sendon had become unnecessary, redundant and superfluous.
due to redundancy. Private respondents Carias, Martinez, and Sendon were water pump tenders; Amacio
was a machine shop mechanic; Verayo was a briquetting plant operator while Tormo was a plant helper
[6]
under him. They were all assigned at the Repair and Maintenance Section of the Pulupandan plant. As regards complainants Leandro Verayo and Ereneo Tormo, the grounds cited by respondent AAC in
support of its decision to retrench them are too convincing to be ignored.Accordingly to respondent AAC,
In October, 1992, they received individual notices of termination effective November 30, its boiler before was 100% coal fired. The boiler was manned by a briquetting plant operator in the
[7]
1992. They were paid the equivalent of one month salary for every year of service as separation pay, the person of Leandro Verayo and three (3) briquetting helpers, namely, Ereneo Tormo, Eriberto Songaling,
th
money value of their unused sick, vacation, emergency and seniority leave credits, thirteenth (13 ) month Jr. and Rudy Javier, Jr. Since AAC had shifted to the use of bunker fuel by about 70% to fire its boiler, its
pay for the year 1992, medicine allowance, tax refunds, and goodwill cash bonuses for those with at least usage of coal had been drastically reduced to only 30% of its total fuel usage in its production plant,
[8] [9]
ten (10) years of service. All of them executed sworn releases, waivers and quitclaims. Except for thereby saving on fuel cost. For this reason, there was no more need for the position of briquetting plant
Verayo and Tormo, they all signed sworn statements of conformity to the company retrenchment operator and the services for only two briquetting helpers were determined to be adequate for the job
[10] [11]
program. And except for Martinez, they all tendered letters of resignation. of briquetting coal. Of the three (3) briquetting helpers, Ereneo Tormo was the oldest, being already 41
years old, the other two, Javier and Songaling, being only 28 and 35 respectively. Considering the manual
On December 18, 1992, the six (6) private respondents files with the NLRC Regional Arbitration
nature of the work of coal briquetting, younger workers are always preferred for reasons of efficiency
Branch VI, Bacolod City, complaints for illegal dismissal with a prayer for reinstatement with backwages,
[sic]. Hence the abolition of the position of Ereneo Tormo. We have to stress that Eriberto Songaling, Jr.
moral damages and attorneys fees. They alleged that Asian Alcohol used the retrenchment program as a
and Rudy Javier, Jr. are also union members. x x x
subterfuge for the union busting. They claimed that they were singled out for separation by reason for
their active participation in the union. They also asseverated that Asian Alcohol was not bankrupt as it has
engaged in an aggressive scheme of contractual hiring. With respect to Carlos Amacio, he was retrenched not because of his being a union member but because
of his poor health condition which greatly affect[ed] his work efficiency. Records show that Carlos
The Executive Labor Arbiter dismissed the complaints. He explained, thus:
Amacio was among the ten machine shop mechanics employed by respondent AAC. Under AACs WHEREFORE, premises considered, the Decision appealed from is hereby ordered SET ASIDE and
reorganization plan, it needs only nine mechanics. VACATED and in lieu thereof, the respondent Asian Alcohol Corporation is hereby ordered to reinstate
complainants with full backwages from the time they were dismissed on November 30, 1992 and up to
x x x actual reinstatement. Plus 10% attorneys fees.

[14]
On the whole, therefore, the dismissal of complainants on ground of redundancy/retrenchment was SO ORDERED.
[12]
perfectly valid or legal.
On July 2, 1997, Asian Alcohol moved for reconsideration of the foregoing decision. On September
[15]
Private respondents appealed to the NLRC. 25, 1997, the NLRC denied the motion.

On May 30, 1997, the NLRC rendered the challenged decision. It rejected the evidence proffered by On January 12, 1998, Asian Alcohol filed in this Court a petition for certiorari assailing both the
Asian Alcohol to prove its business reversals. It ruled that the positions of private respondents were not decision of the NLRC and the resolution denying its reconsideration. It invoked the following grounds:
redundant for the simple reason that they were replaced by casuals. The NLRC essayed this explanation:
6. GROUNDS FOR THE PETITION
In this case, [that] the respondent terminated complainants to protect the company from future losses,
does not create an impression of imminent loss. The company at the time of retrenchment was not then 6.1 Public respondent has committed, as hereinafter shown, a manifest grave abuse of discretion
in the state of business reverses. There is therefore no reason to retrench. x x x amounting to lack or excess of jurisdiction in declaring in its assailed Decision x x x and Resolution x x x
that the termination of the employment of private respondents by the petitioner herein is illegal and
The alleged deficits of the corporations did not prove anything for the respondent. The financial status as ordering their reinstatement with full backwages from the time they were dismissed on November 30,
shown in the Statement of Income and Deficits and Income Tax Returns from 1989 to 1991, submitted by 1992 up to their actual reinstatement, plus 10% attorneys fees, said Decision and Resolution of the
respondent was before the respondent, new management of Prior Holdings, Inc., took over the public respondents being contrary to the established facts of the case, well-settled jurisprudence and the
operation and management of the corporation in October, 199[1]. This is no proof that on November 30, law on the matter.
1992 when the termination of complainant[s] took effect the company was experiencing losses or at
least imminent losses. Possible future losses do not authorize retrenchment. 6.2 Public respondent has likewise committed, as hereinafter shown, a manifest grave abuse of
discretion amounting to lack or excess of jurisdiction by totally disregarding and refusing to consider the
Secondly in the case of REDUNDANCY. factual findings of the Executive Labor Arbiter with respect to the circumstances which rendered the
positions of the private respondents unnecessary, redundant and superfluous, thereby justifying the
termination of their employment.
Redundancy exist where the service[s] of x x x employee[s] are in excess of what is reasonably demanded
by the actual requirements of the enterprise. The evidence, however, proved that, in truth and in fact,
the positions of the complainants were not redundant for the simple reason that they were replaced by 6.3 Public respondents has furthermore committed, as hereinafter shown, a manifest grave abuse of
casuals. discretion amounting to lack or excess of jurisdiction in giving full credit to the oral testimonies quoted in
its assailed Decision x x x and taking them as conclusive proof of the alleged replacement of the private
respondents with casual workers despite the fact that said quoted testimonies clearly amount to nothing
x x x [16]
but speculations, surmises and conjectures.

Admittedly, from the testimonies of Engr. Palmares, the wells of the respondent were operated by [17]
On March 25, 1998, we issued a Temporary Restraining Order enjoining the NLRC from enforcing
contractors. Otherwise stated, complainant[s] who are regular workers of the respondent, performing
its Decision and Resolution dated May 30, 1997 and September 25, 1997, respectively.
jobs necessary and desirable to the business of the company, were eased out in the guise of
retrenchment or redundancy [so that] their jobs [will] be performed by workers belonging to a We find the petition meritorious.
contractor.
Out of its concern for those with less privilege in life, this Court has inclined towards the worker and
[18]
upheld his cause in his conflicts with the employer. This favored treatment is directed by the social
In summation, retrenchment and/or redundancy not having been proved, complainants, therefore, were [19]
[13] justice policy of the Constitution. But while tilting the scales of justice in favor of workers, the
illegally dismissed.
fundamental law also guarantees the right of the employer to reasonable returns from his
[20]
investments. Corollarily, the law allows an employer to downsize his business to meet clear and
The dispositive portion of the decision of the NLRC provides as follows: [21]
continuing economic threats. Thus, this Court has upheld reductions in the work force to forestall
[22]
business losses or stop the hemorrhaging of capital.
 The right of management to dismiss workers during periods of business recession and to install labor In the instant case, private respondents never contested the veracity of the audited financial
saving devices to prevent losses is governed by Art. 283 of the Labor Code, as amended. It provides, viz.: documents proffered by Asian Alcohol before the Executive Labor Arbiter. Neither did they object their
admissibility. They show that petitioner has accumulated losses amounting to P306,764,349.00 and
Art. 283. Closure of establishment and reduction of personnel.--The employer may also terminate the showing nary sign of abating in the near future. The allegation of union busting is bereft of proof. Union
employment of any employee due to the installation of labor saving devices, redundancy, retrenchment and non-union members were treated alike. The records show that the positions of fifty one (51) other
to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the non-union members were abolished due to business losses.
closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the
In rejecting petitioners claim of business losses, the NLRC stated that the alleged deficits of the
workers and the Ministry of Labor and Employment at least one (1) month before the intended date [37]
corporation did not prove anything for the [petitioners] since they were incurred before the take over
thereof. In case of termination due to the installation of labor saving devices or redundancy, the worker
of Prior Holdings. Theorizing that proof of losses before the take over is no proof of losses after the take
affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at
over, it faulted Asian Alcohol for retrenching private respondent on the ground of mere possible future
least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent [38]
losses .
losses and in case of closures or cessation of operations of establishment or undertaking not due to
serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay We do not agree. It should be observed that Article 283 of the Labor Code uses the phrase
or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least retrenchment to prevent losses. In its ordinary connotation, this phrase means that retrenchment must
[39]
six (6) months shall be considered one (1) whole year.[emphasis ours] be undertaken by the employer before losses are actually sustained. We have, however, interpreted the
law to mean that the employer need not keep all his employees until after his losses shall have
[40]
Under the foregoing provisions, retrenchment and redundancy are just causes for the employer to materialized. Otherwise, the law could be vulnerable to attack as undue taking of property for the
[41]
terminate the services of workers to preserve the viability of the business. In exercising its right, however, benefit of another.
management must faithfully comply with the substantive and procedural requirements laid down by law
[23] In the case at bar, Prior Holdings took over the operations of Asian Alcohol in October 1991. Plain
and jurisprudence.
to see, the last quarter losses in 1991 were already incurred under the new management. There were no
The requirements for valid retrenchment which must be proved by clear and convincing evidence signs that these losses would abate. Irrefutable was the fact that losses have bled Asian Alcohol incessantly
are: (1) that the retrenchment is reasonably necessary and likely to prevent business losses which, if over a span of several years. They were incurred under the management of the Parsons family and
already incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, continued to be suffered under the new management of Prior Holdings. Ultimately, it is Prior Holding that
[24]
are reasonably imminent as perceived objectively and in good faith by the employer; (2) that the will absorb all the losses, including those incurred under the former owners of the company. The law gives
employer served written notice both to the employees and to the Department of Labor and Employment the new management every right to undertake measures to save the company from bankruptcy.
[25]
at least one month prior to the intended date of retrenchment; (3) that the employer pays the
We find that the reorganizational plan and comprehensive cost-saving program to turn the business
retrenched employees separation pay equivalent to one month pay or at least month pay for every year
[26] around were nor designed to bust the union of the private respondent. Retrenched were one hundred
of service, whichever is higher; (4) that the employer exercises its prerogative to retrench employees in
seventeen (117) employees. Seventy two (72) of them including private respondent were separated
good faith for the advancement of its interest and not to defeat or circumvent the employees right to
[27] [28] because their positions had become redundant. In this context, what may technically be considered as
security of tenure; and (5) that the employer used fair and reasonable criteria in ascertaining who [42]
redundancy may verily be considered as retrenchment measures. Their positions had to be declared
would be dismissed and who would be retained among the employees, such as status (i.e., whether they
[29] redundant to cut losses.
are temporary, casual, regular or managerial employees), efficiency, seniority, physical fitness, age, and
[30]
financial hardship for certain workers. Redundancy exist when the service capability of the work is in excess of what is reasonably needed
to meet the demands on the enterprise. A redundant position is one rendered superfluous by any number
The condition of business losses is normally shown by audited financial documents like yearly
[31] of factors, such as overhiring of workers, decreased volume of business, dropping of a particular product
balance sheets and profit and loss statements as well as annual income tax returns. It is our ruling that
[32] line previously manufactured by the company or phasing out of a service activity priorly undertaken by the
financial statements must be prepared and signed by independent auditors. Unless duly audited, they [43]
[33] business. Under these conditions, the employer has no legal obligation to keep in its payroll more
can be assailed as self-serving documents. But it is not enough that only the financial statements for the [44]
employees than are necessary for the operation of its business.
year during which retrenchment was undertaken, are presented in evidence. For it may happen that while
the company has indeed been losing, its losses may be on a downward trend, indicating that business is For the implementation of a redundancy program to be valid, the employer must comply with the
[34]
picking up and retrenchment, being a drastic move, should no longer be resorted to. Thus, the failure following requisites: (1) written notice served on both the employees and the Department of Labor and
[45]
of the employer to show its income or loss for the immediately preceding year or to prove that it expected Employment at least one moth prior to the intended date of retrenchment; (2) payment of separation
[35]
no abatement of such losses in the coming years, may bespeak the weakness of its cause. It is necessary pay equivalent to at least one month pay or at least one month pay for every year of service whichever is
[46]
that the employer also show that its losses increased through a period of time and that the condition of higher; (3) good faith in abolishing the redundant positions; and (4) fair and reasonable criteria in
[36] [47]
the company is not likely to improve in the near future. ascertaining what positions are to be declared redundant and accordingly abolished.
 In the case at bar, private respondent Carias, Martinez and Sendon were water pump tenders. They ATTY. YMBALLA:
tended the water wells of Asian Alcohol located in Ubay, Pulupandan, Negros Occidental. However, Asian
Q In other words, the persons mentioned are all workers of independent contractors?
Alcohol did not own the land where the wells stood. It only leased them.

In 1992, the lease contract which also provided for a right of way leading to the site of the wells, WITNESS:
was terminated. Also, the water from the wells had become salty due to extensive prawn farming nearby A I am not sure, maybe.
[50]

and could no longer be used by Asian Alcohol for its purpose. The wells had to be closed and needless to
say, the services of Carias, Martinez and Sendon had to be terminated on the twin grounds of redundancy In any event, we have held that an employers good faith in implementing a redundancy program is
and retrenchment. not necessarily destroyed by availment of the services of an independent contractor to replace the services
of the terminated employees. We have previously ruled that the reduction of the number of workers in a
Private respondent Verayo was the briquetting plant operator in charge of the coal-fired company made necessary by the introduction of the services of an independent contractor is justified
boiler. Private respondent Tormo was one of the three briquetting helpers. To enhance production when the latter is undertaken in order to effectuate more economic and efficient methods of
efficiency, the new management team shifted to the use of bunker fuel by about seventy percent (70%) [51]
production. In the case at bar, private respondent failed to proffer any proof that the management
to fire its boiler. The shift meant substantial fuel cost savings. In the process, however the need for a acted in a malicious or arbitrary manner in engaging the services of an independent contractor to operate
briquetting plant operator ceased as the services of only two (2) helpers were all that was necessary to the Laura wells. Absent such proof, the Court has no basis to interfere with the bona fide decision of
attend to the much lesser amount of coal required to run the boiler. Thus, the positions of private management to effect more economic and efficient methods of production.
respondent Verayo had to be abolished. Of the three (3) briquetting helpers, Tormo, was the oldest, being
already 41 years old. The other two, Rudy Javier Jr. and Eriberto Songaling, Jr., were younger, being only Finally, private respondents now claim that they signed the quitclaims, waivers and voluntary
28 and 35, respectively. Age, with the physical strength that comes with it, was particularly taken into resignation letters only to get their separation package. They maintain that in principle, they did not
consideration by the management team in deciding whom to separate. Hence, it was private respondent believe that their dismissal was valid.
Tormo who was separated from service. The management choice rested on a rational basis.
It is true that this court has generally held that quitclaims and releases are contrary to public policy
Private respondent Amacio was among the ten (10) mechanics who manned the machine shop at and therefore, void. Nonetheless, voluntary agreements that represents a reasonable settlement are
the plant site. At their current production level, the new management found that it was more cost efficient binding on the parties and should not later be disowned. It is only where there is clear proof that the
to maintain only nine (9) mechanics. In choosing whom to separate among the ten (10) mechanics, the waiver was wangled from an unsuspecting or gullible person, or the terms of settlement are
management examined employment records and reports to determine the least efficient among them. It unconscionable, that the law will step in to bail out the employees. While it is our duty to prevent the
was private respondent Amacio who appeared the least efficient because of his poor health conditions. exploitation of employees, it is also behooves us to protect the sanctity of contracts that do not contravene
our laws.
Not one of the private respondents refuted the foregoing facts. They only contend that the new
management should have followed the policy of first in, last out in choosing which positions to declare as In the case at bar, there is no showing that the quitclaims, waivers and voluntary resignation letters
redundant or whom to retrench to prevent further business losses. No law mandates such a policy. And were executed by the private respondents under force or duress. In truth, the documents embodied
the reason is simple enough. A host of relevant factors come into play in determining cost efficient separation benefits that were well beyond what the company was legally required to give private
measures and in choosing the employees who will be retained or separated to save the company from respondents. We note that out of more than one hundred workers that were retrenched by Asian Alcohol,
closing shop. In determining these issues, management has to enjoy a pre-eminent role. The only these six (6) private respondents were not impressed by the generosity of their employer. Their late
characterization of positions as redundant is an exercise of business judgment on the part of the complaints have no basis and deserve our scant consideration.
[48] [49]
employer. It will be upheld as long as it passes the test of arbitrariness.
IN VIEW WHEREOF, the petition is GRANTED. The Decision of the National Labor Relations
Private respondents call our attention to their allegation that casuals were hired to replace Carias, Commission dated May 30, 1997 and its Resolution dated September 25, 1997 are ANNULED AND SET
Martinez and Sendon as water pump tenders at the Ubay wells. They rely on the testimony of Engr. ASIDE. The Decision of the Executive Labor Arbiter dated January 10, 1996 in RAB Case No. 06-12-10893-
Federico Palmares, Jr., the head of the Mechanical Engineering Department who admitted the 92 is ORDERED REINSTATED. The complaints for illegal dismissal filed by private respondents against Asian
engagement of independent contractors to operate the wells. A reading of the testimony of Engr. Alcohol Corporation are hereby ORDERED DISMISSED FOR LACK OF MERIT. No cost.
Palmares, however, will reveal that he referred not to the Ubay wells which were tended by private
SO ORDERED.
respondents Carias, Martinez and Sendon, but to the Laurawells. Thus, he declared in cross examinations:
Bellosillo, (Chairman), Mendoza, Quisumbing, and Buena , JJ., concur.
ATTY. YMBALLA: (cross-examination of respondent witness, Federico Palmares)

Q But in the Laura well?

WITNESS:

A Mansteel was hired as contractor.
Facts: The Parsons family, who originally owned the controlling stocks in Asian Alcohol Corporation Issues: W/N there was no valid retrenchment thus making the dismissal of private respondents illegal.
(AAC), was driven by mounting business losses to sell their majority rights to Prior Holdings which took
over its management and operation the following month. Ruling: Negative.

Prior Holding implemented organizational plan and other cost-saving measures. 117 employees out of a The right of management to dismiss workers during periods of business recession and to install labor
total workforce of 360 were separated. 72 of them occupied redundant positions that were abolished. Of saving devices to prevent losses is governed by Art. 283 of the labor Code, as amended. Retrenchment
these positions, 21 held by union members and 51 by non-union members. and redundancy are just causes for the employer to terminate the services of workers to preserve the
viability of the business. In exercising its right, however, management must faithfully comply with the
Private respondents are among those union members whose positions were abolished due to substantive and procedural requirements laid down law and jurisprudence.
redundancy. Carias, Martinez, and Sendon were water pump tenders; Amacio was a machine shop
mechanic; Verayo was a briquetting plant operator while Tormo was a plant helper under him. They The requirements for valid retrenchment which must be proved by clear and convincing evidence are:
were all assigned at the Repair and Maintenance Section of the Pulupandan plant. (1) that the retrenchment is reasonably necessary and likely to prevent business losses, which, if already
incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, are
They received individual notices of termination; were paid the equivalent of one month salary for every reasonably imminent as perceived objectively and in good faith by the employer; (2) that the employer
year of service as separation pay, the money value of their unused sick, vacation, emergency and served written notice both to the employees and to the DOLE at least one month prior to the intend date
seniority leave credits, 13th month pay, medicine allowance, tax refunds, and goodwill cash bonuses for of retrenchment; (3) that the employer pays the retrenched employees separation pay equivalent to one
those with at least 10 years of service. All of them executed sworn releases, waivers and quitclaims. month pay or at least 1/2 month pay for every year of service, whichever is higher; (4) that the employer
exercises its prerogative to retrench employees in good faith for the advancement of its interest of its
Except for Verayo and Tormo, they all signed sworn statements of conformity to the company interest and not to defeat or circumvent the employees' right to security of tenure; and (5) that the
retrenchment program. And except for Martinez, they all tendered letters of resignation. employer used fair and reasonable criteria in ascertaining who would be dismissed and who would be
retained among the employees, such as status, efficiency, seniority, physical fitness, age, and financial
Private respondents filed with the NLRC complaints for illegal dismissal with a prayer for reinstatement hardship for certain workers.
with backwages, moral damages and attorney's fees. They alleged that Asian Alcohol used the
retrenchment program as a subterfuge for union busting. They claimed that they were singled out for The condition of business losses is normally shown by audited financial documents like yearly balance
separation by reason of their active participation in the union. They also asseverated that AAC was not sheets and profit and loss statements as well as annual income tax returns. It is our ruling that financial
bankrupt as it has engaged in an aggressive scheme of contractual hiring. statements must be prepared and signed by independent auditors. Unless duly audited, they can be
assailed as self-serving documents. It is necessary that the employer also show that its losses increased
LA dismissed the complainants and held that the fact that respondent AAC incurred losses in its business through a period of time and that the condition of the company is not likely to improve in the near
operations was not seriously challenged by the complainants. The fact that it incurred losses in its future.
business operations prior to the implementation of its retrenchment program is amply supported by the
documents on records, indicating an accumulated deficit of P26,117,889.00. Private respondents never contested the veracity of the audited financial documents proffered by Asian
Alcohol before the LA. Neither did they object to their admissibility. They show that petitioner has
The law allows an employer to retrench some of its employees to prevent of its employees to prevent accumulated losses amounting to P306,764,349.00 and showing nary a sign of abating in the near future.
losses. In the case of respondent AAC, it implemented its retrenchment program not only to prevent The allegation of union busting is bereft of proof. Union and non-union members were treated alike. The
losses but to prevent further losses as it was then incurring huge losses in its operations. records show that the positions of 51 other non-union members were abolished due to business losses.

The dismissal of complainants on ground of redundancy / retrenchment was perfectly valid or legal. Article 283 of the Labor Code uses the phrase "retrenchment to prevent losses". This means that
retrenchment must be undertaken by the employer before losses are actually sustained. The employer
Private respondents appealed to the NLRC. NLRC ruled that the positions of private respondents were need not keep all his employees until after his losses shall have materialized. Otherwise, the law could be
not redundant for the simple reason that they were replaced by casuals. The company at the time of vulnerable of attack as undue taking of property for the benefit of another.
retrenchment was not then in the state of business reverses. There is therefore no reason to retrench. . .
. The alleged deficits of the corporation did not prove anything for the respondent. The financial status Irrefutable was the fact that losses have bled Asian Alcohol incessantly over a span of several years. The
shown in records submitted was before Prior Holdings took over the operation and management of the law gives the new management every right to undertake measures to save the company from
corporation. This is no proof that when the termination of complainant[s] took effect the company was bankruptcy.
experiencing losses or at least imminent losses. Possible future losses do not authorize retrenchment.
We find that the reorganizational plan and comprehensive cost-saving program to turn the business
Retrenchment and/or redundancy not having been proved, complainants, therefore, were illegally around were not designed to bust the union of the private respondents. Retrenched were 117
dismissed. employees. 72 of them including private respondents were separated because their positions had
become redundant. In this context, what may technically be considered as redundancy may verily be
AAC moved for reconsideration of the foregoing decision. NLRC denied the motion. considered as retrenchment measure. Their positions had to be declared redundant to cut losses.

AAC filed in this Court a petition for certiorari assailing both the decision of the NLRC and the resolution Redundancy exists when the service capability of the work force is in excess of what is reasonably
denying its reconsideration. needed to meet the demands on the enterprise. A redundant position is one rendered superfluous by
any number of factors, such as overhiring of workers, decreased volume of business, dropping of a
particular product line previously manufactured by the company or phasing out of a service activity

priorly undertaken by the business. Under these conditions, the employer has no legal obligation to keep
in its payroll more employees than are necessary for the operation of its business.

For the implementation of a redundancy program to be valid, the employer must comply with the
following requisites: (1) written notice served on both the employees and the Department of Labor and
Employment at least one month prior to the intended date of retrenchment; (2) payment of separation
pay equivalent to at least one month pay or at least one month pay for every year of service, whichever
is higher; (3) good faith in abolishing the redundant positions; and (4) fair and reasonable criteria in

ascertaining what positions are to be declared redundant and accordingly abolished.

AAC did not own the land where the wells stood. It only leased them. The lease contract, which also
provided for a right of way leading to the site of the wells, was terminated. Also, the water from the
wells had become salty due to extensive prawn farming nearby and could no longer be used by AAC for
its purpose. The wells had to be closed and needless to say, the services of Carias, Martinez and Sendon
had to be terminated on the twin grounds of redundancy and retrenchment.

The need for a briquetting plant operator ceased as the services of only two 2 helpers were all that was
necessary to attend to the much lesser amount of coal required to run the boiler. Thus, the position of
Verayo had to be abolished. Of the 3 briquetting helpers, Tormo was the oldest. Age, with the physical
strength that comes with it, was particularly taken into consideration by the management team in
deciding whom to separate. Hence, it was Tormo who was separated from service. The management
choice rested on a rational basis.

Amacio was among the 10 mechanics who manned the machine shop at the plant site. It was more cost
efficient to maintain only 9 mechanics. In choosing whom to separate among the ten (10) mechanics, the
management examined employment records and reports to determine the least efficient among them.
Amacio appeared the least efficient because of his poor health condition.

Not one of the private respondents refuted the foregoing facts. The characterization of positions as
redundant is an exercise of business judgment on the part of the employers. It will be upheld as long as it
passes the test of arbitrariness.

Private respondents failed to proffer any proof that the management acted in a malicious or arbitrary
manner in engaging the services of an independent contractor to operate the Laura wells. Absent such
proof, the Court has no basis to interfere with the bona fide decision of management to effect more
economic and efficient methods of production.

Private respondent now claim that they signed the quitclaims, waivers and voluntary resignation letters
only to get their separation package. They maintain that in principle, they did not believe that their
dismissal was valid.

Generally, quit claims and releases are contrary to public policy and therefore, void. Nonetheless,
voluntary agreements that represent a reasonable settlement are binding on the parties and should not
later be disowned. It is only where there is clear proof that the waiver was wangled from an
unsuspecting or gullible person, or the terms of the settlement are unconscionable, that the law will step
in to bail out the employee. While it is our duty to prevent the exploitation of employees, it also
behooves us to protect the sanctity of contracts that do not contravene our laws.

There is no showing that the quitclaims, waivers and voluntary resignation letters were executed by the
private respondents under force or duress. In truth, the documents embodied separation benefits that
were well beyond what the company was legally required to give private respondents. We note that out
of the more than one hundred workers that were retrenched by Asian Alcohol, only these private
respondents were not impressed by the generosity of their employer. Their late complaints have no basis
and deserves our scant consideration.

 [G.R. No. 157634. May 16, 2005] Street, Legazpi City, while waiting for the construction of a new Mayon Hotel & Restaurant at Pearanda
[10]
Street, Legazpi City. Only nine (9) of the sixteen (16) employees continued working in the Mayon
MAYON HOTEL & RESTAURANT, PACITA O. PO and/or JOSEFA PO LAM, petitioners, vs. ROLANDO ADANA, [11]
Restaurant at its new site.
CHONA BUMALAY, ROGER BURCE, EDUARDO ALAMARES, AMADO ALAMARES, EDGARDO
TORREFRANCA, LOURDES CAMIGLA, TEODORO LAURENARIA, WENEFREDO LOVERES, LUIS On various dates of April and May 1997, the 16 employees filed complaints for underpayment of
GUADES, AMADO MACANDOG, PATERNO LLARENA, GREGORIO NICERIO, JOSE ATRACTIVO, [12]
wages and other money claims against petitioners, as follows:
MIGUEL TORREFRANCA, and SANTOS BROOLA, respondents.
Wenefredo Loveres, Luis Guades, Amado Macandog and Jose Atractivo for illegal dismissal,
D E C I S I O N underpayment of wages, nonpayment of holiday and rest day pay; service incentive leave pay (SILP) and
claims for separation pay plus damages;
PUNO, J.:

Paterno Llarena and Gregorio Nicerio for illegal dismissal with claims for underpayment of wages;
This is a petition for certiorari to reverse and set aside the Decision issued by the Court of Appeals
[1] nonpayment of cost of living allowance (COLA) and overtime pay; premium pay for holiday and rest day;
(CA) in CA-G.R. SP No. 68642, entitled Rolando Adana, Wenefredo Loveres, et. al. vs. National Labor
[2] SILP; nightshift differential pay and separation pay plus damages;
Relations Commission (NLRC), Mayon Hotel & Restaurant/Pacita O. Po, et al., and the Resolution denying
petitioners motion for reconsideration. The assailed CA decision reversed the NLRC Decision which had
[3]
dismissed all of respondents complaints, and reinstated the Joint Decision of the Labor Arbiter which
[4] Miguel Torrefranca, Chona Bumalay and Lourdes Camigla for underpayment of wages; nonpayment of
ruled that respondents were illegally dismissed and entitled to their money claims. holiday and rest day pay and SILP;

[5]
The facts, culled from the records, are as follows: Rolando Adana, Roger Burce and Amado Alamares for underpayment of wages; nonpayment of COLA,
overtime, holiday, rest day, SILP and nightshift differential pay;
Petitioner Mayon Hotel & Restaurant is a single proprietor business registered in the name of
[6] [7]
petitioner Pacita O. Po, whose mother, petitioner Josefa Po Lam, manages the establishment. The hotel
and restaurant employed about sixteen (16) employees. Eduardo Alamares for underpayment of wages, nonpayment of holiday, rest day and SILP and night shift
differential pay;
Records show that on various dates starting in 1981, petitioner hotel and restaurant hired the
[8]
following people, all respondents in this case, with the following jobs:
Santos Broola for illegal dismissal, underpayment of wages, overtime pay, rest day pay, holiday pay, SILP,
[13]
1. Wenefredo Loveres Accountant and Officer-in-charge and damages; and
2. Paterno Llarena Front Desk Clerk
3. Gregorio Nicerio Supervisory Waiter Teodoro Laurenaria for underpayment of wages; nonpayment of COLA and overtime pay; premium pay
4. Amado Macandog Roomboy for holiday and rest day, and SILP.
5. Luis Guades Utility/Maintenance Worker
6. SantosBroola Roomboy On July 14, 2000, Executive Labor Arbiter Gelacio L. Rivera, Jr. rendered a Joint Decision in favor of
7. Teodoro Laurenaria Waiter the employees. The Labor Arbiter awarded substantially all of respondents money claims, and held that
respondents Loveres, Macandog and Llarena were entitled to separation pay, while respondents Guades,
8. Eduardo Alamares Roomboy/Waiter
Nicerio and Alamares were entitled to their retirement pay. The Labor Arbiter also held that based on the
9. LourdesCamigla Cashier
evidence presented, Josefa Po Lam is the owner/proprietor of Mayon Hotel & Restaurant and the proper
10. Chona Bumalay Cashier
respondent in these cases.
11. Jose Atractivo Technician
12. Amado Alamares Dishwasher and Kitchen Helper On appeal to the NLRC, the decision of the Labor Arbiter was reversed, and all the complaints were
13. Roger Burce Cook dismissed.
14. Rolando Adana Waiter
Respondents filed a motion for reconsideration with the NLRC and when this was denied, they filed
15. Miguel Torrefranca Cook a petition for certiorari with the CA which rendered the now assailed decision.
16. Edgardo Torrefranca Cook
After their motion for reconsideration was denied, petitioners now come to this Court, seeking the
Due to the expiration and non-renewal of the lease contract for the rented space occupied by the reversal of the CA decision on the following grounds:
said hotel and restaurant at Rizal Street, the hotel operations of the business were suspended on March
[9]
31, 1997. The operation of the restaurant was continued in its new location at Elizondo I. THE HONORABLE COURT OF APPEALS ERRED IN REVERSING THE DECISION OF THE
NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION) BY HOLDING THAT THE
 FINDINGS OF FACT OF THE NLRC WERE NOT SUPPORTED BY SUBSTANTIAL EVIDENCE diametrically opposed and this disparity of findings is called into question, there is, necessarily, a re-
[18]
DESPITE AMPLE AND SUFFICIENT EVIDENCE SHOWING THAT THE NLRC DECISION IS examination of the factual findings to ascertain which opinion should be sustained. As ruled in Asuncion
[19]
INDEED SUPPORTED BY SUBSTANTIAL EVIDENCE; v. NLRC,

II. THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE JOINT DECISION OF THE
Although, it is a legal tenet that factual findings of administrative bodies are entitled to great weight and
LABOR ARBITER WHICH RULED THAT PRIVATE RESPONDENTS WERE ILLEGALLY
respect, we are constrained to take a second look at the facts before us because of the diversity in the
DISMISSED FROM THEIR EMPLOYMENT, DESPITE THE FACT THAT THE REASON WHY
opinions of the Labor Arbiter and the NLRC. A disharmony between the factual findings of the Labor
PRIVATE RESPONDENTS WERE OUT OF WORK WAS NOT DUE TO THE FAULT OF [20]
Arbiter and those of the NLRC opens the door to a review thereof by this Court.
PETITIONERS BUT TO CAUSES BEYOND THE CONTROL OF PETITIONERS.

III. THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE AWARD OF MONETARY The CA, therefore, did not err in reviewing the records to determine which opinion was supported
BENEFITS BY THE LABOR ARBITER IN HIS JOINT DECISION IN FAVOR OF THE PRIVATE by substantial evidence.
RESPONDENTS, INCLUDING THE AWARD OF DAMAGES TO SIX (6) OF THE PRIVATE
[21]
RESPONDENTS, DESPITE THE FACT THAT THE PRIVATE RESPONDENTS HAVE NOT Moreover, it is explicit in Castillo v. NLRC that factual findings of administrative bodies like the
PROVEN BY SUBSTANTIAL EVIDENCE THEIR ENTITLEMENT THERETO AND ESPECIALLY NLRC are affirmed only if they are supported by substantial evidence that is manifest in the decision and
THE FACT THAT THEY WERE NOT ILLEGALLY DISMISSED BY THE PETITIONERS. on the records. As stated in Castillo:

IV. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PACITA ONG PO IS THE
[A]buse of discretion does not necessarily follow from a reversal by the NLRC of a decision of a Labor
OWNER OF THE BUSINESS ESTABLISHMENT, PETITIONER MAYON HOTEL AND
Arbiter. Mere variance in evidentiary assessment between the NLRC and the Labor Arbiter does not
RESTAURANT, THUS DISREGARDING THE CERTIFICATE OF REGISTRATION OF THE
automatically call for a full review of the facts by this Court. The NLRCs decision, so long as it is not
BUSINESS ESTABLISHMENT ISSUED BY THE LOCAL GOVERNMENT, WHICH IS A PUBLIC
bereft of substantial support from the records, deserves respect from this Court. As a rule, the original
DOCUMENT, AND THE UNQUALIFIED ADMISSIONS OF COMPLAINANTS-PRIVATE
[14] and exclusive jurisdiction to review a decision or resolution of respondent NLRC in a petition
RESPONDENTS.
for certiorari under Rule 65 of the Rules of Court does not include a correction of its evaluation of the
In essence, the petition calls for a review of the following issues: evidence but is confined to issues of jurisdiction or grave abuse of discretion. Thus, the NLRCs factual
findings, if supported by substantial evidence, are entitled to great respect and even finality, unless
petitioner is able to show that it simply and arbitrarily disregarded the evidence before it or had
1. Was it correct for petitioner Josefa Po Lam to be held liable as the owner of petitioner
misappreciated the evidence to such an extent as to compel a contrary conclusion if such evidence had
Mayon Hotel & Restaurant, and the proper respondent in this case? [22]
been properly appreciated. (citations omitted)

2. Were respondents Loveres, Guades, Macandog, Atractivo, Llarena and Nicerio illegally
After careful review, we find that the reversal of the NLRCs decision was in order precisely because
dismissed?
it was not supported by substantial evidence.

3. Are respondents entitled to their money claims due to underpayment of wages, and
nonpayment of holiday pay, rest day premium, SILP, COLA, overtime pay, and night
shift differential pay? 1. Ownership by Josefa Po Lam

It is petitioners contention that the above issues have already been threshed out sufficiently and
The Labor Arbiter ruled that as regards the claims of the employees, petitioner Josefa Po Lam is, in
definitively by the NLRC. They therefore assail the CAs reversal of the NLRC decision, claiming that based
[15] fact, the owner of Mayon Hotel & Restaurant. Although the NLRC reversed this decision, the CA, on review,
on the ruling in Castillo v. NLRC, it is non sequitur that the CA should re-examine the factual findings of
agreed with the Labor Arbiter that notwithstanding the certificate of registration in the name of Pacita Po,
both the NLRC and the Labor Arbiter, especially as in this case the NLRCs findings are allegedly supported
it is Josefa Po Lam who is the owner/proprietor of Mayon Hotel & Restaurant, and the proper respondent
by substantial evidence.
in the complaints filed by the employees. The CA decision states in part:
We do not agree.
[Despite] the existence of the Certificate of Registration in the name of Pacita Po, we cannot fault the
There is no denying that it is within the NLRCs competence, as an appellate agency reviewing
[16] labor arbiter in ruling that Josefa Po Lam is the owner of the subject hotel and restaurant. There were
decisions of Labor Arbiters, to disagree with and set aside the latters findings. But it stands to reason
conflicting documents submitted by Josefa herself. She was ordered to submit additional documents to
that the NLRC should state an acceptable cause therefore, otherwise it would be a whimsical, capricious,
clearly establish ownership of the hotel and restaurant, considering the testimonies given by the
oppressive, illogical, unreasonable exercise of quasi-judicial prerogative, subject to invalidation by the
[17] [respondents] and the non-appearance and failure to submit her own position paper by Pacita Po. But
extraordinary writ of certiorari. And when the factual findings of the Labor Arbiter and the NLRC are
Josefa did not comply with the directive of the Labor Arbiter. The ruling of the Supreme Court in was named therein as owner of the hotel and restaurant (pp. 64, 65, 67 to 69; vol. I, rollo)[,] there were
Metropolitan Bank and Trust Company v. Court of Appeals applies to Josefa Po Lam which is stated in documentary evidences also that were submitted by Josefa showing her ownership of said enterprise
this wise: (pp. 468 to 469; vol. II, rollo). While Josefa explained her participation and interest in the business as
merely to help and assist her daughter as the hotel and restaurant was near the formers store, the
When the evidence tends to prove a material fact which imposes a liability on a party, and he has it in his testimonies of [respondents] and Josefa as well as her demeanor during the trial in these cases proves
power to produce evidence which from its very nature must overthrow the case made against him if it is (sic) that Josefa Po Lam owns Mayon Hotel and Restaurant. [Respondents] testified that it was Josefa
not founded on fact, and he refuses to produce such evidence, the presumption arises that the who exercises all the acts and manifestation of ownership of the hotel and restaurant like transferring
evidence[,] if produced, would operate to his prejudice, and support the case of his adversary. employees from the Greatwall Palace Restaurant which she and her husband Roy Po Lam previously
owned; it is Josefa to whom the employees submits (sic) reports, draws money for payment of payables
and for marketing, attending (sic) to Labor Inspectors during ocular inspections. Except for documents
Furthermore, in ruling that Josefa Po Lam is the real owner of the hotel and restaurant, the labor arbiter
whereby Pacita Po appears as the owner of Mayon Hotel and Restaurant, nothing in the record shows
relied also on the testimonies of the witnesses, during the hearing of the instant case. When the
any circumstance or manifestation that Pacita Po is the owner of Mayon Hotel and Restaurant. The least
conclusions of the labor arbiter are sufficiently corroborated by evidence on record, the same should be
that can be said is that it is absurd for a person to purchase a hotel and restaurant in the very heart of
respected by appellate tribunals, since he is in a better position to assess and evaluate the credibility of
[23] the City of Legazpi verbally. Assuming this to be true, when [petitioners], particularly Josefa, was
the contending parties. (citations omitted)
directed to submit evidence as to the ownership of Pacita of the hotel and restaurant, considering the
testimonies of [respondents], the former should [have] submitted the lease contract between the owner
Petitioners insist that it was error for the Labor Arbiter and the CA to have ruled that petitioner of the building where Mayon Hotel and Restaurant was located at Rizal St., Legazpi City and Pacita Po to
Josefa Po Lam is the owner of Mayon Hotel & Restaurant. They allege that the documents they submitted clearly establish ownership by the latter of said enterprise. Josefa failed. We are not surprised why
to the Labor Arbiter sufficiently and clearly establish the fact of ownership by petitioner Pacita Po, and not some employers employ schemes to mislead Us in order to evade liabilities. We therefore consider and
her mother, petitioner Josefa Po Lam. They contend that petitioner Josefa Po Lams participation was hold Josefa Po Lam as the owner/proprietor of Mayon Hotel and Restaurant and the proper respondent
limited to merely (a) being the overseer; (b) receiving the month-to-month and/or year-to-year financial [28]
in these cases.
[24]
reports prepared and submitted by respondent Loveres; and (c) visitation of the premises. They also put
emphasis on the admission of the respondents in their position paper submitted to the Labor Arbiter,
[25] Petitioners reliance on the rules of evidence, i.e., the certificate of registration being the best proof
identifying petitioner Josefa Po Lam as the manager, and Pacita Po as the owner. This, they claim, is a
of ownership, is misplaced. Notwithstanding the certificate of registration, doubts were cast as to the true
judicial admission and is binding on respondents. They protest the reliance the Labor Arbiter and the CA
nature of petitioner Josefa Po Lams involvement in the enterprise, and the Labor Arbiter had the authority
placed on their failure to submit additional documents to clearly establish ownership of the hotel and
to resolve this issue. It was therefore within his jurisdiction to require the additional documents to
restaurant, claiming that there was no need for petitioner Josefa Po Lam to submit additional documents
ascertain who was the real owner of petitioner Mayon Hotel & Restaurant.
considering that the Certificate of Registration is the best and primary evidence of ownership.
Article 221 of the Labor Code is clear: technical rules are not binding, and the application of technical
We disagree with petitioners. We have scrutinized the records and find the claim that petitioner [29]
rules of procedure may be relaxed in labor cases to serve the demand of substantial justice. The rule of
Josefa Po Lam is merely the overseer is not borne out by the evidence.
evidence prevailing in court of law or equity shall not be controlling in labor cases and it is the spirit and
First. It is significant that only Josefa Po Lam appeared in the proceedings with the Labor intention of the Labor Code that the Labor Arbiter shall use every and all reasonable means to ascertain
Arbiter. Despite receipt of the Labor Arbiters notice and summons, other notices and Orders, petitioner the facts in each case speedily and objectively and without regard to technicalities of law or procedure, all
[30]
Pacita Po failed to appear in any of the proceedings with the Labor Arbiter in these cases, nor file her in the interest of due process. Labor laws mandate the speedy administration of justice, with least
[31]
[26]
position paper. It was only on appeal with the NLRC that Pacita Po signed the pleadings. The apathy
[27]
attention to technicalities but without sacrificing the fundamental requisites of due process.
shown by petitioner Pacita Po is contrary to human experience as one would think that the owner of an
Similarly, the fact that the respondents complaints contained no allegation that petitioner Josefa
establishment would naturally be concerned when ALL her employees file complaints against her.
Po Lam is the owner is of no moment. To apply the concept of judicial admissions to respondents who are
Second. The records of the case belie petitioner Josefa Po Lams claim that she is merely an overseer. but lowly employees - would be to exact compliance with technicalities of law that is contrary to the
The findings of the Labor Arbiter on this question were based on credible, competent and substantial demands of substantial justice. Moreover, the issue of ownership was an issue that arose only during the
evidence. We again quote the Joint Decision on this matter: course of the proceedings with the Labor Arbiter, as an incident of determining respondents claims, and
[32]
was well within his jurisdiction.
Mayon Hotel and Restaurant is a [business name] of an enterprise. While [petitioner] Josefa Po Lam Petitioners were also not denied due process, as they were given sufficient opportunity to be heard
claims that it is her daughter, Pacita Po, who owns the hotel and restaurant when the latter purchased [33]
on the issue of ownership. The essence of due process in administrative proceedings is simply an
the same from one Palanos in 1981, Josefa failed to submit the document of sale from said Palanos to opportunity to explain ones side or an opportunity to seek reconsideration of the action or ruling
Pacita as allegedly the sale was only verbal although the license to operate said hotel and restaurant is in [34]
complained of. And there is nothing in the records which would suggest that petitioners had absolute
the name of Pacita which, despite our Order to Josefa to present the same, she failed to comply (p. 38, [35]
lack of opportunity to be heard. Obviously, the choice not to present evidence was made by petitioners
tsn. August 13, 1998). While several documentary evidences were submitted by Josefa wherein Pacita themselves.
[36]
 But more significantly, we sustain the Labor Arbiter and the CA because even when the case was on [F]rom the records, more than six months had lapsed without [petitioner] having resumed operation of
appeal with the NLRC, nothing was submitted to negate the Labor Arbiters finding that Pacita Po is not the the hotel. After more than one year from the temporary closure of Mayon Hotel and the temporary
real owner of the subject hotel and restaurant. Indeed, no such evidence was submitted in the transfer to another site of Mayon Restaurant, the building which [petitioner] Josefa allege[d] w[h]ere the
proceedings with the CA nor with this Court. Considering that petitioners vehemently deny ownership by hotel and restaurant will be transferred has been finally constructed and the same is operated as a hotel
petitioner Josefa Po Lam, it is most telling that they continue to withhold evidence which would shed more with bar and restaurant nevertheless, none of [respondents] herein who were employed at Mayon Hotel
light on this issue. We therefore agree with the CA that the failure to submit could only mean that if and Restaurant which was also closed on April 30, 1998 was/were recalled by [petitioner] to continue
[37]
produced, it would have been adverse to petitioners case. their services...

Thus, we find that there is substantial evidence to rule that petitioner Josefa Po Lam is the owner
Parenthetically, the Labor Arbiter did not grant separation pay to the other respondents as they had
of petitioner Mayon Hotel & Restaurant.
not filed an amended complaint to question the cessation of their employment after the closure of Mayon
[45]
Hotel & Restaurant on March 31, 1997.

2. Illegal Dismissal: claim for separation pay The above factual finding of the Labor Arbiter was never refuted by petitioners in their appeal with
the NLRC. It confounds us, therefore, how the NLRC could have so cavalierly treated this uncontroverted
factual finding by ruling that respondents have not introduced any evidence to show that they were
[46]
Of the sixteen employees, only the following filed a case for illegal dismissal: respondents Loveres, illegally dismissed, and that the Labor Arbiters finding was based on conjecture. It was a serious error
[38]
Llarena, Nicerio, Macandog, Guades, Atractivo and Broola. that the NLRC did not inquire as to the legality of the cessation of employment. Article 286 of the Labor
Code is clear there is termination of employment when an otherwise bona fide suspension of work exceeds
The Labor Arbiter found that there was illegal dismissal, and granted separation pay to respondents [47]
six (6) months. The cessation of employment for more than six months was patent and the employer
Loveres, Macandog and Llarena. As respondents Guades, Nicerio and Alamares were already 79, 66 and has the burden of proving that the termination was for a just or authorized cause.
[48]

65 years old respectively at the time of the dismissal, the Labor Arbiter granted retirement benefits
[39]
pursuant to Article 287 of the Labor Code as amended. The Labor Arbiter ruled that respondent Moreover, we are not impressed by any of petitioners attempts to exculpate themselves from the
Atractivo was not entitled to separation pay because he had been transferred to work in the restaurant charges. First, in the proceedings with the Labor Arbiter, they claimed that it could not be illegal dismissal
operations in Elizondo Street, but awarded him damages. Respondents Loveres, Llarena, Nicerio, because the lay-off was merely temporary (and due to the expiration of the lease contract over the old
Macandog and Guades were also awarded damages.
[40] premises of the hotel). They specifically invoked Article 286 of the Labor Code to argue that the claim for
[49]
separation pay was premature and without legal and factual basis. Then, because the Labor Arbiter had
The NLRC reversed the Labor Arbiter, finding that no clear act of termination is attendant in the ruled that there was already illegal dismissal when the lay-off had exceeded the six-month period provided
case at bar and that respondents did not submit any evidence to that effect, but the finding and conclusion for in Article 286, petitioners raise this novel argument, to wit:
[41]
of the Labor Arbiter [are] merely based on his own surmises and conjectures. In turn, the NLRC was
reversed by the CA.
It is the firm but respectful submission of petitioners that reliance on Article 286 of the Labor Code is
It is petitioners contention that the CA should have sustained the NLRC finding that none of the misplaced, considering that the reason why private respondents were out of work was not due to the
above-named respondents were illegally dismissed, or entitled to separation or retirement pay. According fault of petitioners. The failure of petitioners to reinstate the private respondents to their former
to petitioners, even the Labor Arbiter and the CA admit that when the illegal dismissal case was filed by positions should not likewise be attributable to said petitioners as the private respondents did not
respondents on April 1997, they had as yet no cause of action. Petitioners therefore conclude that the submit any evidence to prove their alleged illegal dismissal. The petitioners cannot discern why they
filing by respondents of the illegal dismissal case was premature and should have been dismissed outright should be made liable to the private respondents for their failure to be reinstated considering that the
[42]
by the Labor Arbiter. Petitioners also claim that since the validity of respondents dismissal is a factual fact that they were out of work was not due to the fault of petitioners but due to circumstances beyond
[43]
question, it is not for the reviewing court to weigh the conflicting evidence. the control of petitioners, which are the termination and non-renewal of the lease contract over the
subject premises. Private respondents, however, argue in their Comment that petitioners themselves
We do not agree. Whether respondents are still working for petitioners IS a factual question. And sought the application of Article 286 of the Labor Code in their case in their Position Paper filed before
the records are unequivocal that since April 1997, when petitioner Mayon Hotel & Restaurant suspended the Labor Arbiter. In refutation, petitioners humbly submit that even if they invoke Article 286 of the
its hotel operations and transferred its restaurant operations in Elizondo Street, respondents Loveres, Labor Code, still the fact remains, and this bears stress and emphasis, that the temporary suspension of
Macandog, Llarena, Guades and Nicerio have not been permitted to work for petitioners. Respondent the operations of the establishment arising from the non-renewal of the lease contract did not result in
Alamares, on the other hand, was also laid-off when the Elizondo Street operations closed, as were all the the termination of employment of private respondents and, therefore, the petitioners cannot be faulted
other respondents. Since then, respondents have not been permitted to work nor recalled, even after the if said private respondents were out of work, and consequently, they are not entitled to their money
[50]
construction of the new premises at Pearanda Street and the reopening of the hotel operations with the claims against the petitioners.
restaurant in this new site. As stated by the Joint Decision of the Labor Arbiter on July 2000, or more than
[44]
three (3) years after the complaint was filed: It is confounding how petitioners have fashioned their arguments. After having admitted, in effect,
that respondents have been laid-off since April 1997, they would have this Court excuse their refusal to
 [58]
reinstate respondents or grant them separation pay because these same respondents purportedly have the NLRC, CA and with this Court) in referring to the closure, i.e., in the petition filed with this court,
not proven the illegality of their dismissal. they assert that there is no illegal dismissal because there was only a temporary cessation or suspension
of operations of the hotel and restaurant due to circumstances beyond the control of petitioners, and that
Petitioners arguments reflect their lack of candor and the blatant attempt to use technicalities to [59]
is, the non-renewal of the lease contract... And yet, in the same petition, they also assert that: (a) the
muddle the issues and defeat the lawful claims of their employees. First, petitioners admit that since April
separation of respondents was due to severe financial losses and reverses leading to the closure of the
1997, when hotel operations were suspended due to the termination of the lease of the old premises,
business; and (b) petitionerPacita Po had to close shop and was bankrupt and has no liquidity to put up
respondents Loveres, Macandog, Llarena, Nicerio and Guades have not been permitted to work. [60]
her own building to house Mayon Hotel & Restaurant. Sixth, and finally, the uncontroverted finding of
Second, even after six months of what should have been just a temporary lay-off, the same respondents
the Labor Arbiter that petitioners terminated all the other respondents, by not employing them when the
were still not recalled to work. As a matter of fact, the Labor Arbiter even found that as of the time when [61]
Hotel and Restaurant transferred to its new site on Pearanda Street. Indeed, in this same memorandum,
he rendered his Joint Decision on July 2000 or more than three (3) years after the supposed temporary [62]
petitioners referred to all respondents as former employees of Mayon Hotel & Restaurant.
lay-off, the employment of all of the respondents with petitioners had ceased, notwithstanding that the
new premises had been completed and the same operated as a hotel with bar and restaurant. This is These factors may be inconclusive individually, but when taken together, they lead us to conclude
clearly dismissal or the permanent severance or complete separation of the worker from the service on that petitioners really intended to dismiss all respondents and merely used the termination of the lease
[51]
the initiative of the employer regardless of the reasons therefor. (on Rizal Street premises) as a means by which they could terminate their employees.

On this point, we note that the Labor Arbiter and the CA are in accord that at the time of the filing Moreover, even assuming arguendo that the cessation of employment on April 1997 was merely
of the complaint, respondents had no cause of action to file the case for illegal dismissal. According to temporary, it became dismissal by operation of law when petitioners failed to reinstate respondents after
the CA and the Labor Arbiter, the lay-off of the respondents was merely temporary, pending construction the lapse of six (6) months, pursuant to Article 286 of the Labor Code.
[52]
of the new building at Pearanda Street.
We are not impressed by petitioners claim that severe business losses justified their failure to
While the closure of the hotel operations in April of 1997 may have been temporary, we hold that reinstate respondents. The evidence to prove this fact is inconclusive. But more important, serious
the evidence on record belie any claim of petitioners that the lay-off of respondents on that same date business losses do not excuse the employer from complying with the clearance or report required under
was merely temporary. On the contrary, we find substantial evidence that petitioners intended the Article 283 of the Labor Code and its implementing rules before terminating the employment of its
[63]
termination to be permanent. First, respondents Loveres, Macandog, Llarena, Guades, Nicerio and workers. In the absence of justifying circumstances, the failure of petitioners to observe the procedural
Alamares filed the complaint for illegal dismissal immediately after the closure of the hotel operations requirements set out under Article 284, taints their actuations with bad faith, especially since they claimed
in Rizal Street, notwithstanding the alleged temporary nature of the closure of the hotel operations, and that they have been experiencing losses in the three years before 1997. To say the least, if it were true
petitioners allegations that the employees assigned to the hotel operations knew about this that the lay-off was temporary but then serious business losses prevented the reinstatement of
beforehand. Second, in their position paper submitted to the Labor Arbiter, petitioners invoked Article respondents, then petitioners should have complied with the requirements of written notice. The
286 of the Labor Code to assert that the employer-employee relationship was merely suspended, and requirement of law mandating the giving of notices was intended not only to enable the employees to look
[53]
therefore the claim for separation pay was premature and without legal or factual basis. But they made for another employment and therefore ease the impact of the loss of their jobs and the corresponding
no mention of any intent to recall these respondents to work upon completion of the new income, but more importantly, to give the Department of Labor and Employment (DOLE) the opportunity
[64]
premises. Third, the various pleadings on record show that petitioners held respondents, particularly to ascertain the verity of the alleged authorized cause of termination.
Loveres, as responsible for mismanagement of the establishment and for abuse of trust and
And even assuming that the closure was due to a reason beyond the control of the employer, it still
confidence. Petitioner Josefa Po Lams affidavit on July 21, 1998, for example, squarely blamed [65]
has to accord its employees some relief in the form of severance pay.
respondents, specifically Loveres, Bumalay and Camigla, for abusing her leniency and causing petitioner
Mayon Hotel & Restaurant to sustain continuous losses until it is closed. She then asserts that respondents While we recognize the right of the employer to terminate the services of an employee for a just or
are not entitled to separation pay for they were not terminated and if ever the business ceased to operate authorized cause, the dismissal of employees must be made within the parameters of law and pursuant to
[54]
it was because of losses. Again, petitioners make the same allegation in their memorandum on appeal [66]
the tenets of fair play. And in termination disputes, the burden of proof is always on the employer to
with the NLRC, where they alleged that three (3) years prior to the expiration of the lease in 1997, the [67]
prove that the dismissal was for a just or authorized cause. Where there is no showing of a clear, valid
operation of the Hotel had been sustaining consistent losses, and these were solely attributed to [68]
and legal cause for termination of employment, the law considers the case a matter of illegal dismissal.
respondents, but most especially due to Loveress mismanagement and abuse of petitioners trust and
[55]
confidence. Even the petition filed in this court made reference to the separation of the respondents Under these circumstances, the award of damages was proper. As a rule, moral damages are
[56]
due to severe financial losses and reverses, again imputing it to respondents mismanagement. The recoverable where the dismissal of the employee was attended by bad faith or fraud or constituted an act
[69]
vehemence of petitioners accusation of mismanagement against respondents, especially against Loveres, oppressive to labor, or was done in a manner contrary to morals, good customs or public policy. We
is inconsistent with the desire to recall them to work. Fourth, petitioners memorandum on appeal also believe that the dismissal of the respondents was attended with bad faith and meant to evade the lawful
averred that the case was filed not because of the business being operated by them or that they were obligations imposed upon an employer.
supposedly not receiving benefits from the Labor Code which is true, but because of the fact that the
To rule otherwise would lead to the anomaly of respondents being terminated from employment
source of their livelihood, whether legal or immoral, was stopped on March 31, 1997, when the owner of
[57] in 1997 as a matter of fact, but without legal redress. This runs counter to notions of fair play, substantial
the building terminated the Lease Contract. Fifth, petitioners had inconsistencies in their pleadings (with
justice and the constitutional mandate that labor rights should be respected. If doubts exist between the respondents rendered work entitling them to payment for overtime work, night shift differential, premium
evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the pay for work on holidays and rest day, and payment of these as well as the COLA and the SILP documents
[78]
latter the employer must affirmatively show rationally adequate evidence that the dismissal was for a which are not in respondents possession but in the custody and absolute control of petitioners. By
[70]
justifiable cause. It is a time-honored rule that in controversies between a laborer and his master, doubts choosing not to fully and completely disclose information and present the necessary documents to prove
reasonably arising from the evidence, or in the interpretation of agreements and writing should be payment of labor standard benefits due to respondents, petitioners failed to discharge the burden of
[71] [79]
resolved in the formers favor. The policy is to extend the doctrine to a greater number of employees proof. Indeed, petitioners failure to submit the necessary documents which as employers are in their
who can avail of the benefits under the law, which is in consonance with the avowed policy of the State to possession, inspite of orders to do so, gives rise to the presumption that their presentation is prejudicial
[72] [80]
give maximum aid and protection of labor. to its cause. As aptly quoted by the CA:

We therefore reinstate the Labor Arbiters decision with the following modifications:
[W]hen the evidence tends to prove a material fact which imposes a liability on a party, and he has it in
his power to produce evidence which from its very nature must overthrow the case made against him if
(a) Separation pay for the illegal dismissal of respondents Loveres, Macandog and Llarena; it is not founded on fact, and he refuses to produce such evidence, the presumption arises that the
(Santos Broola cannot be granted separation pay as he made no such claim); [81]
evidence, if produced, would operate to his prejudice, and support the case of his adversary.

(b) Retirement pay for respondents Guades, Nicerio, and Alamares, who at the time of
Petitioners next claim that the cost of the food and snacks provided to respondents as facilities
dismissal were entitled to their retirement benefits pursuant to Article 287 of the
[73]
should have been included in reckoning the payment of respondents wages. They state that although on
Labor Code as amended; and the surface respondents appeared to receive minimal wages, petitioners had granted respondents other
[82]
benefits which are considered part and parcel of their wages and are allowed under existing laws. They
(c) Damages for respondents Loveres, Macandog, Llarena, Guades, Nicerio, Atractivo, and claim that these benefits make up for whatever inadequacies there may be in
[83]
Broola. compensation. Specifically, they invoked Sections 5 and 6, Rule VII-A, which allow the deduction of
facilities provided by the employer through an appropriate Facility Evaluation Order issued by the Regional
[84]
Director of the DOLE. Petitioners also aver that they give five (5) percent of the gross income each month
as incentives. As proof of compliance of payment of minimum wages, petitioners submitted the Notice of
3. Money claims [85]
Inspection Results issued in 1995 and 1997 by the DOLE Regional Office.

The cost of meals and snacks purportedly provided to respondents cannot be deducted as part of
The CA held that contrary to the NLRCs ruling, petitioners had not discharged the burden of proving [86]
respondents minimum wage. As stated in the Labor Arbiters decision:
[74]
that the monetary claims of the respondents have been paid. The CA thus reinstated the Labor Arbiters
grant of respondents monetary claims, including damages.
While [petitioners] submitted Facility Evaluation Orders (pp. 468, 469; vol. II, rollo) issued by the DOLE
Petitioners assail this ruling by repeating their long and convoluted argument that as there was no Regional Office whereby the cost of meals given by [petitioners] to [respondents] were specified for
illegal dismissal, then respondents are not entitled to their monetary claims or separation pay and purposes of considering the same as part of their wages, We cannot consider the cost of meals in the
damages. Petitioners arguments are not only tiring, repetitive and unconvincing, but confusing and Orders as applicable to [respondents]. [Respondents] were not interviewed by the DOLE as to the
confused entitlement to labor standard benefits is a separate and distinct concept from payment of quality and quantity of food appearing in the applications of [petitioners] for facility evaluation prior to
separation pay arising from illegal dismissal, and are governed by different provisions of the Labor Code. its approval to determine whether or not [respondents] were indeed given such kind and quantity of
food. Also, there was no evidence that the quality and quantity of food in the Orders were voluntarily
We agree with the CA and the Labor Arbiter. Respondents have set out with particularity in their accepted by [respondents]. On the contrary; while some [of the respondents] admitted that they were
complaint, position paper, affidavits and other documents the labor standard benefits they are entitled to, given meals and merienda, the quality of food serve[d] to them were not what were provided for in the
and which they alleged that petitioners have failed to pay them. It was therefore petitioners burden to Orders and that it was only when they filed these cases that they came to know about said Facility
prove that they have paid these money claims. One who pleads payment has the burden of proving it, and Evaluation Orders (pp. 100; 379[,] vol. II, rollo; p. 40, tsn[,] June 19, 1998). [Petitioner] Josefa herself,
even where the employees must allege nonpayment, the general rule is that the burden rests on the who applied for evaluation of the facility (food) given to [respondents], testified that she did not inform
[75]
defendant to prove nonpayment, rather than on the plaintiff to prove non payment. This petitioners [respondents] concerning said Facility Evaluation Orders (p. 34, tsn[,] August 13, 1998).
failed to do.

We also agree with the Labor Arbiter and the CA that the documents petitioners submitted, i.e., Even granting that meals and snacks were provided and indeed constituted facilities, such facilities
affidavits executed by some of respondents during an ocular inspection conducted by an inspector of the could not be deducted without compliance with certain legal requirements. As stated in Mabeza v.
[87]
DOLE; notices of inspection result and Facility Evaluation Orders issued by DOLE, are not sufficient to prove NLRC, the employer simply cannot deduct the value from the employee's wages without satisfying the
[76] [77]
payment. Despite repeated orders from the Labor Arbiter, petitioners failed to submit the pertinent following: (a) proof that such facilities are customarily furnished by the trade; (b) the provision of
employee files, payrolls, records, remittances and other similar documents which would show that deductible facilities is voluntarily accepted in writing by the employee; and (c) the facilities are charged at
fair and reasonable value. The records are clear that petitioners failed to comply with these Thus, we reinstate the award of monetary claims granted by the Labor Arbiter.
requirements. There was no proof of respondents written authorization. Indeed, the Labor Arbiter found
that while the respondents admitted that they were given meals and merienda, the quality of food served
to them was not what was provided for in the Facility Evaluation Orders and it was only when they filed
[88] 4. Conclusion
the cases that they came to know of this supposed Facility Evaluation Orders. Petitioner Josefa Po Lam
[89]
herself admitted that she did not inform the respondents of the facilities she had applied for.

Considering the failure to comply with the above-mentioned legal requirements, the Labor Arbiter There is no denying that the actuations of petitioners in this case have been reprehensible. They
therefore erred when he ruled that the cost of the meals actually provided to respondents should be have terminated the respondents employment in an underhanded manner, and have used and abused the
deducted as part of their salaries, on the ground that respondents have availed themselves of the food quasi-judicial and judicial processes to resist payment of their employees rightful claims, thereby
[90]
given by petitioners. The law is clear that mere availment is not sufficient to allow deductions from protracting this case and causing the unnecessary clogging of dockets of the Court. They have also forced
employees wages. respondents to unnecessary hardship and financial expense. Indeed, the circumstances of this case would
have called for exemplary damages, as the dismissal was effected in a wanton, oppressive or malevolent
More important, we note the uncontroverted testimony of respondents on record that they were [95]
manner, and public policy requires that these acts must be suppressed and discouraged.
[96]

required to eat in the hotel and restaurant so that they will not go home and there is no interruption in
the services of Mayon Hotel & Restaurant. As ruled in Mabeza, food or snacks or other convenience Nevertheless, we cannot agree with the Labor Arbiter in granting exemplary damages of P10,000.00
provided by the employers are deemed as supplements if they are granted for the convenience of the each to all respondents. While it is true that other forms of damages under the Civil Code may be awarded
[97]
employer. The criterion in making a distinction between a supplement and a facility does not so much lie to illegally dismissed employees, any award of moral damages by the Labor Arbiter cannot be based on
[98]
[91]
in the kind (food, lodging) but the purpose. Considering, therefore, that hotel workers are required to the Labor Code but should be grounded on the Civil Code. And the law is clear that exemplary damages
work different shifts and are expected to be available at various odd hours, their ready availability is a can only be awarded if plaintiff shows proof that he is entitled to moral, temperate or compensatory
[99]
[92]
necessary matter in the operations of a small hotel, such as petitioners business. The deduction of the damages.
cost of meals from respondents wages, therefore, should be removed.
As only respondents Loveres, Guades, Macandog, Llarena, Nicerio, Atractivo and Broola specifically
We also do not agree with petitioners that the five (5) percent of the gross income of the claimed damages from petitioners, then only they are entitled to exemplary damages.[sjgs1]
establishment can be considered as part of the respondents wages. We quote with approval the Labor
Finally, we rule that attorneys fees in the amount to P10,000.00 should be granted to each
Arbiter on this matter, to wit:
respondent. It is settled that in actions for recovery of wages or where an employee was forced to litigate
[100]
and incur expenses to protect his rights and interest, he is entitled to an award of attorney's fees. This
While complainants, who were employed in the hotel, receive[d] various amounts as profit share, the case undoubtedly falls within this rule.
same cannot be considered as part of their wages in determining their claims for violation of labor
standard benefits. Although called profit share[,] such is in the nature of share from service charges IN VIEW WHEREOF, the petition is hereby DENIED. The Decision of January 17, 2003 of the Court of
charged by the hotel. This is more explained by [respondents] when they testified that what they Appeals in CA-G.R. SP No. 68642 upholding the Joint Decision of July 14, 2000 of the Labor Arbiter in RAB
received are not fixed amounts and the same are paid not on a monthly basis (pp. 55, 93, 94, 103, 104; V Case Nos. 04-00079-97 and 04-00080-97 is AFFIRMED, with the following MODIFICATIONS:
vol. II, rollo). Also, [petitioners] failed to submit evidence that the amounts received by [respondents] as
profit share are to be considered part of their wages and had been agreed by them prior to their (1) Granting separation pay of one-half (1/2) month for every year of service to respondents
employment. Further, how can the amounts receive[d] by [respondents] be considered as profit share Loveres, Macandog and Llarena;
when the same [are] based on the gross receipt of the hotel[?] No profit can as yet be determined out of
the gross receipt of an enterprise. Profits are realized after expenses are deducted from the gross
(2) Granting retirement pay for respondents Guades, Nicerio, and Alamares;
income.

(3) Removing the deductions for food facility from the amounts due to all respondents;
On the issue of the proper minimum wage applicable to respondents, we sustain the Labor
Arbiter. We note that petitioners themselves have admitted that the establishment employs more or less
[93] (4) Awarding moral damages of P20,000.00 each for respondents Loveres, Macandog, Llarena,
sixteen (16) employees, therefore they are estopped from claiming that the applicable minimum wage
Guades, Nicerio, Atractivo, and Broola;
should be for service establishments employing 15 employees or less.

As for petitioners repeated invocation of serious business losses, suffice to say that this is not a (5) Deleting the award of exemplary damages of P10,000.00 from all respondents except
defense to payment of labor standard benefits. The employer cannot exempt himself from liability to pay Loveres, Macandog, Llarena, Guades, Nicerio, Atractivo, and Broola; and
minimum wages because of poor financial condition of the company. The payment of minimum wages is
[94]
not dependent on the employers ability to pay.
(6) Granting attorneys fees of P10,000.00 each to all respondents.
 The case is REMANDED to the Labor Arbiter for the RECOMPUTATION of the total monetary benefits to a greater number of employees who can avail of the benefits under the law, which is in consonance
awarded and due to the employees concerned in accordance with the decision. The Labor Arbiter is with the avowed policy of the State to give maximum aid and protection of labor.
ORDERED to submit his compliance thereon within thirty (30) days from notice of this decision, with copies
2. Money claims
furnished to the parties.

SO ORDERED. The Supreme Court reinstated the award of monetary claims granted by the Labor Arbiter.

Austria-Martinez, Callejo Sr., Tinga, and Chico-Nazario, JJ., concur. The cost of meals and snacks purportedly provided to respondents cannot be deducted as part of
respondents' minimum wage. As stated in the Labor Arbiter's decision.
Even granting that meals and snacks were provided and indeed constituted facilities, such facilities could

not be deducted without compliance with certain legal requirements. As stated in Mabeza v. NLRC, the
employer simply cannot deduct the value from the employee's wages without satisfying the following:
FACTS: (a) proof that such facilities are customarily furnished by the trade; (b) the provision of deductible
facilities is voluntarily accepted in writing by the employee; and (c) the facilities are charged at fair and
Petitioner Mayon Hotel & Restaurant (MHR) hired herein 16 respondents as employees in its business in reasonable value. The law is clear that mere availment is not sufficient to allow deductions from
Legaspi City. Its operation was suspended on March 31, 1997 due to the expiration and non-renewal of employees' wages.
the lease contract for the space it rented. While waiting for the completion of the construction of its new
site, MHR continued its operation in another site with 9 of the 16 employees. When the new site As for petitioners repeated invocation of serious business losses, suffice to say that this is not a defense
constructed and MHR resumed its business operation, none of the 16 employees was recalled to work. to payment of labor standard benefits. The employer cannot exempt himself from liability to pay
minimum wages because of poor financial condition of the company. The payment of minimum wages is
MHR alleged business losses as the reason for not reinstating the respondents. On various dates, not dependent on the employer's ability to pay.
respondents filed complaints for underpayment of wages, money claims and illegal dismissal.

ISSUES:


1. Whether or not respondents were illegally dismissed by petitioner;
2. Whether or not respondents are entitled to their money claims due to underpayment of wages, and
nonpayment of holiday pay, rest day premium, SILP, COLA, overtime pay, and night shift differential pay.

HELD:

1. Illegal Dismissal: claim for separation pay


Since April 1997 until the time the Labor Arbiter rendered its decision in July 2000, or more than three
(3) years after the supposed “temporary” lay-off, the employment of all the respondents with
petitioner had ceased, notwithstanding that the new premises had been completed and the
same resumed its operation. This is clearly dismissal – or the permanent severance or complete
separation of the worker from the service on the initiative of the employer regardless of the
reasons therefor.
Article 286 of the Labor Code is clear — there is termination of employment when an otherwise

bona fide suspension of work exceeds six (6) months. The cessation of employment for more than six

months was patent and the employer has the burden of proving that the termination was for a just or
authorized cause.

While we recognize the right of the employer to terminate the services of an employee for a just or
authorized cause, the dismissal of employees must be made within the parameters of law and pursuant
to the tenets of fair play. And in termination disputes, the burden of proof is always on the employer to
prove that the dismissal was for a just or authorized cause. Where there is no showing of a clear, valid

and legal cause for termination of employment, the law considers the case a matter of illegal dismissal.

If doubts exist between the evidence presented by the employer and the employee, the scales of justice
must be tilted in favor of the latter — the employer must affirmatively show rationally adequate
evidence that the dismissal was for a justifiable cause. It is a time-honored rule that in controversies
between a laborer and his master, doubts reasonably arising from the evidence, or in the interpretation
of agreements and writing should be resolved in the former's favor. The policy is to extend the doctrine
GR 164518, January 25, 2006 Respondents.
NDUSTRIAL TIMBER G.R. No. 164518
CORPORATION, INDUSTRIAL x ---------------------------------------------------- x
PLYWOOD GROUP CORPORATION,
TOMAS TANGSOC, JR., LORENZO VIRGILIO ABABON, IGNACIO G.R. No. 164965
TANGSOC and TOMAS TAN, ABACAJEN, ANGELINA ABAY-ABAY, EDITH ABREA,
Petitioners, Present: SAMUEL ABREA, BIENVENIDO ACILO, RODRIGO
Panganiban, C.J. (Chairman), ACILO, VICTOR ACILO, ARTURO ADVINCULA,
- versus - Ynares-Santiago, GERTRUDES AMPARO, MILA ARQUITA, VIRGILIO
Austria-Martinez, ANTONIO, PRUDENCIO ARQUITA,
Callejo, Sr., and
Chico-Nazario, JJ. ALBERT ATON, WARLITA AUDITA, ALICIA AWITAN,
VIRGILIO ABABON, IGNACIO ABACAJEN, ANGELINA LEOPOLDO AYATON, ARTURO BALBOTEN, DANILO
ABAY-ABAY, EDITH ABREA, SAMUEL ABREA, BANATE, LOLITA BATAN, RAMIL BUTALON,
BIENVENIDO ACILO, RODRIGO ACILO, VICTOR ACILO, CARMELITA CAINGLES, VICENTE CAHARIAN,
ARTURO ADVINCULA, GERTRUDES AMPARO, BENEDICTA CAJIPE, FELIPE CALLANO, ALFREDO
VIRGILIO ANTONIO, MILA ARQUITA, PRUDENCIO CARILLO, NILA CARILLO, ALGIER CORBETA, GREGORIO
ARQUITA, ALBERT ATON, WARLITA AUTIDA, ALICIA DABALOS, TERESITA DABALOS, VENERANDO
AWITAN, LEOPOLDO AYATON, ARTURO BALBOTEN, DALAUTA, RICARDO DANGCULOS, MONTANO
DANILO BANATE, LOLITA BATAN, RAMIL BUTALON, DAPROSA, LUISITO DIAZ, FELIZARDO DUMULAO,
CARMILITA CAINGLES, VICENTE CAHARIAN, EDITHA DUMANON, ALFREDO FAELNAR, RAUL
BENEDICTA CAJIPE, FELIPE CALLANO, ALFREDO FORTUN, MAXIMO GALLA, ANGELES GALUPO,
CARILLO, NILA CARILLO, ALGER CORBETA, GREGORIO PERFECTO GAMBE, VIRGINITA GANGCA, RUPERTO
DABALOS, TERESITA DABALOS, VENERANDO GORGONIO, ROMEO HERRERO, SERGIO HOR-HORO,
DALAUTA, RICARDO DANGCULOS, MONTANO FRANCISCO IBARRA, ABRAHAM JALE, DANDY
DAPROSA, LUISITO DIAZ, FELIZARDO DUMULAO, LABITAD, ANTONINA LAMBANG, ERNESTO LAUSA,
EDITHA DUMANON, ALFREDO FAELNAR, RAUL VICTORIA LOOD, NEMESIO LOPE, JR., ESCARLITO
FORTUN, MAXIMO GALLA, MADLOS, MARCOS MAKINANO, REMEGIO
MAKINANO, VICENTE MAKINANO, REYNALDO
ANGELES GALUPO, PERFECTO GAMBE, VERGINITA MAHUSAY, HELEN MARATAS, ELIZABETH MENDOZA,
GANGCA, RUPERTO GORGONIO, ROMEO HERRERO, GUILBERTA MONTEROSO, GILDA NAVALTA, PILAR
SERGIO HORO-HORO, FRANCISCO IBARRA, ABRAHAM NAVARRO, SIMPORIANO NUEZ, JR., ELISEO
JALE, DANDY LABITAD, ANTONINA LAMBANG, ORONGAN, ARMANDO OROPA, ASUNCION OROPA,
ERNESTO LAUSA, VICTORIA LOOD, NEMESIO LOPE, JOSE EDWIN OROPA, BALDEMAR PAGALAN,
JR., ESCARLITO MADLOS, MARCOS MAKINANO, BARTOLOME PAGALAN, DAMASO PALOMA, MANALO
REMEGIO MAKINANO, VICENTE MAKINANO, PLAZA, JEREMIAS PELAEZ, FRANCISCO PICARDAL,
REYNALDO MASUHAY, HELEN MARATAS, ELIZABETH HERMINIA PUBLICO, ROMULO QUINTOS, FIDEL
MENDOZA, GUILBERTA MONTEROSO, GILDA QUITA, FELICIANO RANADA, RODOLFO RARU, LEAN
NAVALTA, PILAR NAVARRO, SIMPORIANO NUEZ, JR., CILDRIC RODRIGUEZ, SAMUEL SAROMINES,
ELISEO ORONGAN, ARMANDO OROPA, ASUNCION NATIVIDAD SIGNAR, CHERRIE SON, SAMUEL TAGUPA,
OROPA, JOSE EDWIN OROPA, BALDEMAR PAGALAN, VICTOR TAGUPA, BRIGIDA TABANAO, PEDRO
BARTOLOME PAGALAN, DAMASO PALOMA, MANALO TABANAO, ROBERTO TABANAO,
PLAZA, JEREMIAS PELAEZ, FRANCISCO PICARDAL,
HERMINIA PUBLICO, ROMULO QUINTOS, FIDEL MARIA TAN, RONNIE TAN, TOLENTINO TEE, ROGELIO
QUITA, FELICIANO RANADA, RODOLFO RARU, LEAN TAMADA, MINDA TUMAOB, and ROBERTO TUTOR,
CILDRIC RODRIGUEZ, SAMUEL SAROMINES, Petitioners,
NATIVIDAD SIGNAR, CHERRIE SON, SAMUEL TAGUPA,
VICTOR TAGUPA, BRIGIDA TABANAO, PEDRO - versus -
TABANAO, ROBERTO TABANAO, MARIA TAN, RONNIE
TAN, TOLENTINO TEE, ROGELIO TAMADA, MINDA THE HONORABLE COURT OF APPEALS,
TUMAOB and ROBERTO TUTOR, INDUSTRIAL TIMBER CORPORATION,
INDUSTRIAL PLYWOOD GROUP On January 20, 1992, after requiring both parties to submit their respective position papers,
CORPORATION, TOMAS TANGSOC, Labor Arbiter Irving A. Petilla rendered a decision which refused to pierce the veil of corporate fiction for
JR., LORENZO TANGSOC and Promulgated: lack of evidence to prove that it was used to perpetuate fraud or illegal act; upheld the validity of the
TOMAS TAN, closure; and ordered ITC to pay separation pay of month for every year of service. The dispositive portion
Respondents. January 25, 2006 of the decision reads:


x ---------------------------------------------------------------------------------------- x
PREMISES CONSIDERED, judgment is hereby rendered ordering

respondent Industrial Timber Corporation (ITC) to pay herein ninety-seven
DECISION
individual complainants their separation pay at the rate of one-half (1/2) months

pay for every year of service, a fraction of at least six (6) months to be considered
YNARES-SANTIAGO, J.:
as one whole year, reckoned until August 1990.



All other claims of complainants are hereby ordered DISMISSED for want
Before us are two petitions for review under Rule 45 of the Rules of Court. G.R. No. 164518 assails the
[1]
of merit.
October 21, 2002 Decision of the Court of Appeals, in CA-GR. SP No. 51966, which set aside the May 24,
[2]

1995 Decision of the National Labor Relations Commission (NLRC), as well as the July 16, 2004 [9]
[3]
SO ORDERED.
Resolution denying its motion for reconsideration. G.R. No. 164965 assails only the July 16, 2004
Ababon, et al. appealed to the NLRC. On May 20, 1993, the NLRC set aside the decision of the Labor Arbiter
Resolution of the Court of Appeals which denied their partial motion for reconsideration. These cases were
and ordered the reinstatement of the employees to their former positions, and the payment of full back
consolidated because they arose out of the same facts set forth below. [10]
wages, damages and attorneys fees.


Industrial Plywood Group Corporation (IPGC) is the owner of a plywood plant located at Agusan, Pequeo,
ITC and IPGC filed a Motion for Reconsideration through JRS, a private courier, on June 24,
Butuan City, leased to Industrial Timber Corporation (ITC) on August 30, 1985 for a period of five [11]
[4]
1993. However, it was dismissed for being filed out of time having been filed only on the date of actual
years. Thereafter, ITC commenced operation of the plywood plant and hired 387 workers. [12]
receipt by the NLRC on June 29, 1993, three days after the last day of the reglamentary period. Thus,
[13]
they filed a Petition for Relief from Resolution, which was treated as a second motion for
On March 16, 1990, ITC notified the Department of Labor and Employment (DOLE) and its workers that [14]
reconsideration by the NLRC and dismissed for lack of merit in a Resolution dated September 29, 1994.
effective March 19, 1990 it will undergo a no plant operation due to lack of raw materials and will resume [15]
[5]
From said dismissal, petitioners filed a Notice of Appeal with the Supreme Court. Subsequently, they
only after it can secure logs for milling. [16]
filed a Motion for Reconsideration/Second Petition for Relief with the NLRC.


Meanwhile, IPGC notified ITC of the expiration of the lease contract in August 1990 and its intention not
On December 7, 1994, the Supreme Court dismissed the Notice of Appeal for being a wrong
to renew the same. [17]
mode of appeal from the NLRC decision. On the other hand, the NLRC granted the Second Petition for

Relief and set aside all its prior decision and resolutions. The dispositive portion of the May 24, 1995
On June 26, 1990, ITC notified the DOLE and its workers of the plants shutdown due to the non-
[6]
decision reads:
renewal of anti-pollution permit that expired in April 1990. This fact and the alleged lack of logs for milling

constrained ITC to lay off all its workers until further notice. This was followed by a final notice of closure
WHEREFORE, the decision of this Commission dated May 10, 1993 and its
or cessation of business operations on August 17, 1990 with an advice for all the workers to collect the
[7]
subsequent resolutions dated June 22, 1994 and September 29, 1994 are Set Aside
benefits due them under the law and CBA.
and Vacated. Accordingly, the appeal of complainants is Dismissed for lack of merit

and the decision of the Labor Arbiter dated January 20, 1992 is Reinstated and
On October 15, 1990, IPGC took over the plywood plant after it was issued a Wood Processing
[8]
hereby Affirmed.
Plant Permit No. WPR-1004-081791-042, which included the anti-pollution permit, by the Department

of Environment and Natural Resources (DENR) coincidentally on the same day the ITC ceased operation of [18]
SO ORDERED.
the plant.
On October 2, 1995, Virgilio Ababon, et al. filed a Petition for Certiorari with the Supreme Court, which
[19]
was docketed as G.R. No. 121977. However, pursuant to our ruling in St. Martins Funeral Home v. NLRC,
This prompted Virgilio Ababon, et al. to file a complaint against ITC and IPGC for illegal dismissal, [20]
we referred the petition to the Court of Appeals for appropriate action and disposition.
unfair labor practice and damages. They alleged, among others, that the cessation of ITCs operation was

intended to bust the union and that both corporations are one and the same entity being controlled by
On October 21, 2002, the Court of Appeals rendered a decision setting aside the May 24, 1995 decision of
one owner.
the NLRC and reinstated its May 20, 1993 decision and September 29, 1993 resolution, thus:


 WHEREFORE, the petition is GRANTED. The decision dated May 24, 1995 of the Moreover, under Article 218 (c) of the Labor Code, the NLRC may, in the exercise of its appellate
National Labor Relations Commission is ANNULLED and SET ASIDE, with the result powers, correct, amend, or waive any error, defect or irregularity whether in substance or in form. Further,
that its decision dated May 20, 1993 and resolution dated September 29, 1994 are Article 221 of the same code provides that in any proceeding before the Commission or any of the Labor
REINSTATED. Arbiters, the rules of evidence prevailing in courts of law or equity shall not be controlling and it is the
spirit and intention of this Code that the Commission and its members and the Labor Arbiters shall use
[21]
SO ORDERED. every and all reasonable means to ascertain the facts in each case speedily and objectively and without
[26]
Both parties filed their respective motions for reconsideration which were denied, hence, the present regard to technicalities of law or procedure, all in the interest of due process.
consolidated petitions for review based on the following assigned errors: Also, the rule under Section 14 of Rule VII of the New Rules of Procedure of the NLRC that a motion for
reconsideration of any order, resolution or decision of the Commission shall not be entertained except
In G.R. No. 164518 when based on palpable or patent errors, provided that the motion is under oath and filed within 10
calendar days from receipt of the order, resolution or decisionshould not be interpreted as to sacrifice
THE COURT OF APPEALS ERRED IN LIBERALLY APPLYING THE RULES OF PROCEDURE substantial justice to technicality. It should be borne in mind that the real purpose behind the limitation
WITH RESPECT TO RESPONDENTS BUT BEING RIGID IN ITS APPLICATION AS REGARDS of the period is to forestall or avoid an unreasonable delay in the administration of justice, from which the
[22]
PETITIONERS. NLRC absolved ITC and IPGC because the filing of their motion for reconsideration three days later than
the prescribed period was due to excusable negligence. Indeed, the Court has the power to except a
In G.R. No. 164965 particular case from the operation of the rule whenever the purposes of justice requires it because what
should guide judicial action is that a party is given the fullest opportunity to establish the merits of his
[27]
WITH DUE RESPECT, THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR action or defense rather than for him to lose life, honor, or property on mere technicalities.
WHEN IT REFUSED TO APPLY SECTION 279 OF THE LABOR CODE AS AMENDED BY RA
6715 TO MODIFY THE DECISION OF 20 MAY 1993 WITH RESPECT TO BACKWAGES We now come to the main issues of whether Ababon, et al. were illegally dismissed due to the closure of
[23]
FOR PETITIONERS. ITCs business; and whether they are entitled to separation pay, backwages, and other monetary awards.

ITC and IPGC contend that the Court of Appeals erred in reversing the May 24, 1995 decision of the NLRC Work is a necessity that has economic significance deserving legal protection. The social justice
since its May 20, 1993 decision had become immutable for their failure to file motion for reconsideration and protection to labor provisions in the Constitution dictate so. On the other hand, employers are also
within the reglementary period. While they admit filing their motion for reconsideration out of time due accorded rights and privileges to assure their self-determination and independence, and reasonable return
to excusable negligence of their counsels secretary, however, they advance that the Court of Appeals of capital. This mass of privileges comprises the so-called management prerogatives. Although they may
should have relaxed the rules of technicality in the paramount interest of justice, as it had done so in favor be broad and unlimited in scope, the State has the right to determine whether an employer's privilege is
of the employees, and ruled on the merits of the case; after all, the delay was just three days. exercised in a manner that complies with the legal requirements and does not offend the protected rights
[28]
of labor. One of the rights accorded an employer is the right to close an establishment or undertaking.
Ordinarily, once a judgment has become final and executory, it can no longer be disturbed,
altered or modified. However, this rule admits of exceptions in cases of special and exceptional nature as The right to close the operation of an establishment or undertaking is one of the authorized
[24]
we held in Industrial Timber Corporation v. National Labor Relations Commission: causes in terminating employment of workers, the only limitation being that the closure must not be for
the purpose of circumventing the provisions on termination of employment embodied in the Labor Code.
It is true that after a judgment has become final and executory, it can no
longer be modified or otherwise disturbed. However, this principle admits of
exceptions, as where facts and circumstances transpire which render its execution
impossible or unjust and it therefore becomes necessary, in the interest of justice, Article 283 of the Labor Code provides:
to direct its modification in order to harmonize the disposition with the prevailing
circumstances. ART. 283. Closure of establishment and reduction of personnel. The
employer may also terminate the employment of any employee due to the
A careful scrutiny of the facts and circumstances of these consolidated cases warrants liberality installation of labor saving devices, redundancy, retrenchment to prevent losses or
in the application of technical rules and procedure. We agree with the NLRC that substantial justice is best the closing or cessation of operation of the establishment or undertaking unless the
served by allowing the petition for relief despite procedural defect of filing the motion for reconsideration closing is for the purpose of circumventing the provisions of this Title, by serving a
three days late, for to rule otherwise, a greater injustice would be done to ITC by ordering it to reinstate written notice on the workers and the Ministry of Labor and Employment at least
the employees to their former positions that no longer exist due to valid and legitimate cessation of one (1) month before the intended date thereof. In case of termination due to the
[25]
business and pay huge judgment award. 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
 [36]
retrenchment to prevent losses and in cases of closures or cessation of operations In Shoppers Gain Supermarket v. National Labor Relations Commission, we held that the non-renewal
of establishment or undertaking not due to serious business losses or financial of petitioner corporations lease contract and its consequent closure and cessation of operations may be
reverses, the separation pay shall be equivalent to one (1) month pay or to at least considered an event beyond petitioners control, in the nature of a force majeure situation. As such, it
one-half (1/2) month pay for every year of service, whichever is higher. A fraction of amounts to an authorized cause for termination of the private respondents.
at least six (6) months shall be considered one (1) whole year.
Having established that ITCs closure of the plywood plant was done in good faith and that it
A reading of the foregoing law shows that a partial or total closure or cessation of operations of was due to causes beyond its control, the conclusion is inevitable that said closure is valid. Consequently,
establishment or undertaking may either be due to serious business losses or financial reverses or Ababon, et al. could not have been illegally dismissed to be entitled to full backwages. Thus, we find it no
otherwise. Under the first kind, the employer must sufficiently and convincingly prove its allegation of longer necessary to discuss the issue regarding the computation of their backwages. However, they are
[29] [30]
substantial losses, while under the second kind, the employer can lawfully close shop anytime as long entitled to separation pay equivalent to one month pay or at least one-half month pay for every year of
as cessation of or withdrawal from business operations was bona fide in character and not impelled by a service, whichever is higher.
[31]
motive to defeat or circumvent the tenurial rights of employees, and as long as he pays his employees Although the closure was done in good faith and for valid reasons, we find that ITC did not comply with
[32]
their termination pay in the amount corresponding to their length of service. Just as no law forces the notice requirement. While an employer is under no obligation to conduct hearings before effecting
[37]
anyone to go into business, no law can compel anybody to continue the same. It would be stretching the termination of employment due to authorized cause, however, the law requires that it must notify the
intent and spirit of the law if a court interferes with management's prerogative to close or cease its DOLE and its employees at least one month before the intended date of closure.
business operations just because the business is not suffering from any loss or because of the desire to
[33]
provide the workers continued employment. In the case at bar, ITC notified its employees and the DOLE of the no plant operation on March 16, 1990
In sum, under Article 283 of the Labor Code, three requirements are necessary for a valid due to lack of raw materials. This was followed by a shut down notice dated June 26, 1990 due to the
cessation of business operations: (a) service of a written notice to the employees and to the DOLE at least expiration of the anti-pollution permit. However, this shutdown was only temporary as ITC assured its
one month before the intended date thereof; (b) the cessation of business must be bona fide in character; employees that they could return to work once the renewal is acted upon by the DENR. On August 17,
and (c) payment to the employees of termination pay amounting to one month pay or at least one-half 1990, the ITC sent its employees a final notice of closure or cessation of business operations to take effect
month pay for every year of service, whichever is higher. on the same day it was released. We find that this falls short of the notice requirement for termination of
In these consolidated cases, we find that ITCs closure or cessation of business was done in good employment due to authorized cause considering that the DOLE was not furnished and the notice should
faith and for valid reasons. have been furnished both the employees and the DOLE at least one month before the intended date of
closure.
The records reveal that the decision to permanently close business operations was arrived at after a
[38]
suspension of operation for several months precipitated by lack of raw materials used for milling In Ariola v. Philex Mining Corporation, we held:
operations, the expiration of the anti-pollution permit in April 1990, and the termination of the lease
contract with IPGC in August 1990 over the plywood plant at Agusan, Pequeo, Butuan City. We quote with In Agabon v. National Labor Relations Commission and Jaka Food Processing
approval the observation of the Labor Arbiter: Corporation v. Pacot, the Court sustained the dismissals for just cause under Article
282 and for authorized cause under Article 283 of the Labor Code, respectively,
As borne out from the records, respondent ITC actually underwent no plant despite non-compliance with the statutory requirement of notice and hearing. The
operation since 19 March 1990 due to lack of log supply. This fact is admitted by grounds for the dismissals in those cases, namely, neglect of duty and retrenchment,
complainants (Minutes of hearing, 28 October 1991). Since then several subsequent remained valid because the non-compliance with the notice and hearing
incidents prevented respondent ITC to resume its business operations e.g. requirement in the Labor Code did not undermine the validity of the grounds for the
expiration and non-renewal of the wood processing plant permit, anti-pollution dismissals. Indeed, to invalidate a dismissal merely because of a procedural defect
permit, and the lease contract on the plywood plant. Without the raw materials creates absurdity and runs counter to public interest. We explained in Agabon:
respondent ITC has nothing to produce. Without the permits it cannot lawfully
operate the plant. And without the contract of lease respondent ITC has no option The unfairness of declaring illegal or ineffectual dismissals for
[34]
but to cease operation and turn over the plant to the lessor. (Emphasis supplied) valid or authorized causes but not complying with statutory
due process may have far-reaching consequences.
Moreover, the lack of raw materials used for milling operations was affirmed in Industrial Timber
[35]
Corporation v. National Labor Relations Commission as one of the reasons for the valid closure of ITCs This would encourage frivolous suits, where even the most
Butuan Logs Plant in 1989. In said case, we upheld the management prerogative to close the plant as the notorious violators of company policy are rewarded by
only remedy available in order to prevent imminent heavy losses on account of high production costs, invoking due process. This also creates absurd situations
erratic supply of raw materials, depressed prices and poor market conditions for its wood products. where there is a just or authorized cause for dismissal but a
procedural infirmity invalidates the termination. Let us take
for example a case where the employee is caught stealing or
 threatens the lives of his co-employees or has become a
criminal, who has fled and cannot be found, or where serious
business losses demand that operations be ceased in less
than a month. Invalidating the dismissal would not serve
public interest. It could also discourage investments that can
generate employment in the local economy.

Where the dismissal is based on an authorized cause under Article 283 of the Labor Code but the employer
failed to comply with the notice requirement, the sanction should be stiff as the dismissal process was

initiated by the employers exercise of his management prerogative, as opposed to a dismissal based on a
just cause under Article 282 with the same procedural infirmity where the sanction to be imposed upon
the employer should be tempered as the dismissal process was, in effect, initiated by an act imputable to
[39]
the employee.


In light of the factual circumstances of the cases at bar, we deem it wise and reasonable to award
P50,000.00 to each employee as nominal damages.

WHEREFORE, in view of the foregoing, the October 21, 2002 Decision of the Court of Appeals in CA-GR. SP
No. 51966, which set aside the May 24, 1995 Decision of the NLRC, as well as the July 16, 2004 Resolution
denying ITCs motion for reconsideration, are hereby REVERSED. The May 24, 1995 Decision of the NLRC
reinstating the decision of the Labor Arbiter finding the closure or cessation of ITCs business valid,
is AFFIRMED with the MODIFICATIONS that ITC is ordered to pay separation pay equivalent to one month
pay or to at least one-half month pay for every year of service, whichever is higher, and P50,000.00 as
nominal damages to each employee.

SO ORDERED.


CONSUELO YNARES-SANTIAGO

FACTS: shop anytime as long as cessation of or withdrawal from business operations was bona fide in
• Industrial Plywood Group Corp (IPGC) leased to Industrial Timber Corporation (ITC) a plywood character and not impelled by a motive to circumvent tenurial rights of EEs, and as long as he
plant in Butuan City for a period of 5 years pays termination pay. Just as no law forces anyone to go into business, no law can compel
• ITC commenced operation and hired 387 workers anybody to continue the same
• On Mar 16, 1990, ITC notified the DOLE and its workers that effective Mar 19, 1990, it will
undergo a no plant operation due to lack of raw materials and will resume only after it secures • Under Art 283, 3 requirements are necessary for a valid cessation of business ops:
logs for milling 1. Service of written notice to EEs and to DOLE at least one month before the intended
• Meanwhile, IPGC notified ITC of the expiration of the lease contract in Aug 1990 and its date
intention not to renew 2. Cessation of business must be bona fide in character
• On Jun 26, 1990, ITC notified the DOLE and its workers of the plant's shutdown due to the non- 3. Payment of EEs of termination pay amounting to 1 mo pay or at least 1/2 mo pay
renewal of anti-pollution permit that expired in Apr 1990. for every year of service, whichever is higher
• On Aug 17, 1990 ITC gave final notice of its closure or cessation of business operations, with an
advice for all workers to collect benefits due them under the law and CBA In this case, SC found that ITC's closure was done in good faith and for valid reasons. The records
• On Oct 15, 1990, IPGC took over the plywood plant after it was issued a Wood Processing Plant reveal that the decision to permanently close business was arrived at after a suspension of
Permit by DENR, coincidentally on the same day the ITC ceased operation of the plant. operation for several months precipitated by lack of raw materials used for milling operations,
• Virginio Ababon, et al. then filed a complaint against ITC and IPGC for illegal dismissal, ULP and the expiration of the anti-pollution permit and the termination of the lease contract with IPGC.
damages, alleging that the cessation of business ops was intended to bust the union and that Consequently, Ababon, et al. could not have been illegally dismissed to be entitled to full
both corp are one and the same backwages. However, they are entitled to separation pay.
• LA rendered decision refusing to pierce the veil of corp fiction for lack of evidence to prove that
it was used to perpetuate fraud or illegal act; upholding validity of closure, and ordering ITC to NOTE: Nevertheless, for failure to comply with the notice requirement [ITC gave final notice to its workers
pay separation pay. of its closure on the same day closure was to take effect], SC awarded nominal damages to each EE
• On appeal, NLRC set aside the LA decision and ordered reinstatement plus payment of full
backwages, damages and AF (May 20, 1993 decision). ITC and IPGC's MR was dismissed for
being filed out of time (3 days late). Petition for Relief filed and treated as second MR but was
dismissed for lack of merit.
• Petitioners then filed a Notice of Appeal with SC and also filed a MR/Second Petition for Relief

with NLRC. SC dismissed Notice of Appeal for being a wrong mode of appeal from NLRC
decision. However, NLRC granted the Second Petition for Relief and set aside all its prior decision
and resolutions (May 24, 1995 decision).
• Virgilio Ababon, et al. filed a Petition for Certiorari with the SC; petition was referred to CA (as
per St. Martins Funeral Home ruling) which set aside the May 24, 1995 NLRC decision and
reinstated the May 20, 1993 NLRC decision. MR of both parties were denied, hence the
consolidated petitions.

ISSUE/HOLDING/RATIO: W/N Ababon, et al. were illegally dismissed due to the closure of ITC's business.
NO

• The right to close the operation of an establishment or undertaking is one of the authorized
causes in terminating employment of workers, the only limitation being that the closure must
not be for the purpose of circumventing the provisions on termination of employment
embodied in the LC

• (See Article 2831) A reading of the law shows that a partial or total closure or cessation of
operations of establishment or undertaking may either be due to serious business losses or
financial reverses or otherwise. Under the first kind, the ER must sufficiently and convincingly
prove its allegation of substantial losses, while under the second kind, the ER can lawfully close

1 Art. 283. Closure of establishment and reduction of personnel. The employer may also terminate the pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of
employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to closures or cessation of operations of establishment or undertaking not due to serious business losses or
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2)
is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be
and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case considered one (1) whole year.
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
 [5]
[G.R. No. 148340. January 26, 2004] SO ORDERED.

J.A.T. GENERAL SERVICES and JESUSA ADLAWAN TOROBU, petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION and JOSE F. MASCARINAS, respondents. The Labor Arbiter ruled that (1) private respondent Jose F. Mascarinas dismissal was unjustified
because of petitioners failure to serve upon the private respondent and the DOLE the required written
notice of termination at least one month prior to the effectivity thereof and to submit proof showing that
D E C I S I O N
petitioners suffered a business slowdown in operations and sales effective January 1998; (2) private
[6]
QUISUMBING, J.: respondent may recover backwages from March 1, 1998 up to March 1, 1999 or P66,924.00 and
separation pay, in lieu of reinstatement, at the rate of one (1) month pay for every year of service,
[7]
[1] or P10,296.00; (3) the payrolls submitted by JAT showed that effective May 1, 1997, private respondents
For review are the Decision dated February 27, 2001 of the Court of Appeals in CA-G.R. SP No.
[2] wages did not conform to the prevailing minimum wage, hence, private respondent is entitled to salary
60337, and its Resolution dated May 28, 2001, denying the motion for reconsideration. The Court of [8]
[3] differentials from May 1, 1997 to January 6, 1998, in the amount of P1,066.00; (4) that private
Appeals dismissed the petition for certiorari filed by petitioners and affirmed the Resolution of the [9]
[4] respondent be awarded legal holiday pay in the amount of P1,850.00, service incentive leave pay in the
National Labor Relations Commission (NLRC), Third Division, which affirmed the Decision of Labor Arbiter [10] th [11]
amount of P925.00 and 13 month pay for 1997 in the amount of P4,810.00.
Jose G. De Vera in NLRC-NCR Case No. 00-03-02279-98, which found petitioners liable for illegal dismissal
and ordered petitioners to pay private respondent Jose Mascarinas separation pay, backwages, legal [12]
On appeal, the NLRC affirmed the decision of the labor arbiter. The NLRC found that the financial
th
holiday pay, service incentive leave pay and 13 month pay in the aggregate sum of P85,871.00. statements submitted on appeal were questionable, unreliable and inconsistent with petitioners
allegations in the pleadings, particularly as to the date of the alleged closure of operation; hence, they
The facts, as culled from the records, are as follows:
cannot be used to support private respondents dismissal. The NLRC also affirmed the monetary awards
Petitioner Jesusa Adlawan Trading & General Services (JAT) is a single proprietorship engaged in the because petitioners failed to prove the payment of benefits claimed by private respondent.
business of selling second-hand heavy equipment. JAT is owned by its namesake, co-petitioner Jesusa
Dissatisfied, petitioners filed a Petition for Certiorari under Rule 65 before the Court of Appeals,
Adlawan Torobu. Sometime in April 1997, JAT hired private respondent Jose F. Mascarinas as helper tasked
which the latter dismissed. The decretal portion of the decision reads as follows:
to coordinate with the cleaning and delivery of the heavy equipment sold to customers. Initially, private
respondent was hired as a probationary employee and was paid P165 per day that was increased to P180
in July 1997 and P185 in January 1998. WHEREFORE, foregoing premises considered, the instant petition, having no merit in fact and in law, is
hereby DENIED DUE COURSE, and ordered DISMISSED, and the assailed decision of the National Labor
In October 1997, the sales of heavy equipment declined because of the Asian currency Relations Commission AFFIRMED, with costs to petitioners.
crisis. Consequently, JAT temporarily suspended its operations. It advised its employees, including private
respondent, not to report for work starting on the first week of March 1998. JAT indefinitely closed shop [13]
SO ORDERED.
effective May 1998.

A few days after, private respondent filed a case for illegal dismissal and underpayment of wages The Court of Appeals affirmed the findings of the NLRC, particularly on the illegal dismissal of the
against petitioners before the NLRC. private respondent. The appellate court held that the petitioners failed to prove by clear and convincing
evidence their compliance with the requirements for valid retrenchment. It cited the findings of the NLRC
In his Complaint, private respondent alleged that he started as helper mechanic of JAT on January on the belated submission of the financial statements during appeal that could not be given sufficient
6, 1997 with an initial salary rate of P165.00 per day, which was increased to P180.00 per day after six (6) weight, and that the petitioners late submission of notice of closure is indicative of their bad faith.
months in employment. He related that he was one of those retrenched from employment by JAT and was
allegedly required to sign a piece of paper which he refused, causing his termination from employment. Petitioners filed a Motion of Reconsideration, which was denied by the Court of Appeals.

On December 14, 1998, JAT filed an Establishment Termination Report with the Department of Hence, the present petition alleging that the:
Labor and Employment (DOLE), notifying the latter of its decision to close its business operations due to
business losses and financial reverses. A. THE LOWER COURT (sic) ERRED IN RULING THAT A NOTICE TO THE DEPARTMENT OF LABOR
AND EMPLOYMENT (DOLE) IS NECESSARY IN CASE OF TEMPORARY SUSPENSION OF
After due proceedings, the Labor Arbiter rendered a decision on March 25, 1999, finding the
BUSINESS;
dismissal of herein private respondent unjustified and ordering JAT to pay private respondent separation
pay and backwages, among others. The decretal portion of the decision reads as follows:
B. THE LOWER COURT (sic) ERRED IN RULING THAT PRIVATE RESPONDENT IS ENTITLED TO
BACKWAGES DESPITE THE FACT THAT PRIVATE RESPONDENT WAS NOT DISMISSED FROM
WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered ordering the
SERVICE AT THE TIME THE COMPLAINT WAS FILED;
respondents [herein petitioners] to pay complainant the aggregate sum of P85,871.00.
 C. THE LOWER COURT (sic) ERRED IN RULING THAT THE EMPLOYER HAS THE BURDEN OF PROVING operations in order to cut back on expenses for salaries and wages by laying off some employees. The
THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES; purpose of retrenchment is to save a financially ailing business establishment from eventually
[16]
collapsing.
D. ASSUMING ARGUENDO THAT THE NOTICE TO THE LABOR DEPARTMENT FAILED TO COMPLY
In the present case, we find the issues and contentions more centered on closure of business
WITH THE ONE-MONTH PERIOD, THE LOWER COURT (sic) ERRED IN AWARDING BACKWAGES
operation rather than retrenchment. Closure or cessation of operation of the establishment is
AND/OR SEPARATION PAY TO PRIVATE RESPONDENT EVEN FOR PERIOD AFTER PETITIONERS
an authorized cause for terminating an employee under Article 283 of the Labor Code, to wit:
FILED A NOTICE OF ACTUAL CLOSURE OF THE COMPANY BEFORE THE LABOR
[14]
DEPARTMENT.
ART. 283. Closure of establishment and reduction of personnel. The employer may also terminate the
employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment
The relevant issues for our resolution are: (a) whether or not private respondent was illegally
to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the
dismissed from employment due to closure of petitioners business, and (b) whether or not private
closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the
respondent is entitled to separation pay, backwages and other monetary awards.
workers and the Department of Labor and Employment at least one (1) month before the intended date
On the first issue, the petitioners claim that the Court of Appeals erroneously concluded that they thereof. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of
are liable for illegal dismissal because of non-compliance of the procedural and substantive requirements establishment or undertaking not due to serious business losses or financial reverses, the separation pay
of terminating employment due to retrenchment and cessation of business. They argued that there was shall be equivalent to one (1) month pay or to at least one-half (1/2) month pay for every year of service,
no closure but only suspension of operation in good faith in March 1998, when private respondent claimed whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.
to have been illegally dismissed, due to the decline in sales and heavy losses incurred in its business arising
[17]
from the 1997 Asian financial crisis. Petitioners assert that under Article 286 of the Labor Code, a bona However, the burden of proving that such closure is bona fide falls upon the employer. In the
fide suspension of the operation of a business for a period not exceeding six (6) months shall not terminate present case, JAT justifies its closure of business due to heavy losses caused by declining sales. It belatedly
[18]
employment and no notice to an employee is required. However, petitioners relate that JAT was compelled submitted its 1997 Income Statement and Comparative Statement of Income and Capital for 1997 and
[19]
to permanently close its operation eight (8) months later or on November 1998, when the hope of recovery 1998 to the NLRC to prove that JAT suffered losses starting 1997. However, as noted earlier, these were
became nil but only after sending notices to all its workers and DOLE. Thus, petitioners argue that it cannot not given much evidentiary weight by the NLRC as well as the Court of Appeals, to wit:
be held liable for illegal dismissal in March 1998 since there was no termination of employment during
suspension of operations and a notice to employee is not required, unlike in the case of permanent closure The financial statements submitted by the respondents on appeal are questionable for the following
of business operation. reasons: (1) the figures in Annexes D-2 and E of the appeal memorandum (which both refer to 1997) do
not tally; (2) they (the respondents) allegedly closed on March 1, 1998. Yet, their 1998 financial
We need not belabor the issue of notice requirement for a suspension of operation of business
[15] statement (Annex E) indicates operations up to and ending December 31, 1998. In view of the foregoing,
under Article 286 of the Labor Code. This matter is not pertinent to, much less determinative of, the [20]
the above-mentioned financial statements do not justify the complainants dismissal.
disposition of this case. Suffice it to state that there is no termination of employment during the period of
suspension, thus the procedural requirement for terminating an employee does not come into play
yet. Rather, the issue demanding a sharpened focus here concerns the validity of dismissal resulting from The foregoing findings of the Court of Appeals is conclusive on us. We see no cogent reason to set
the closure of JAT. it aside. While business reverses or losses are recognized by law as an authorized cause for terminating
employment, it is an essential requirement that alleged losses in business operations must be proven
A brief discussion on the difference between retrenchment and closure of business as grounds for convincingly. Otherwise, said ground for termination would be susceptible to abuse by scheming
terminating an employee is necessary. While the Court of Appeals defined the issue to be the validity of employers, who might be merely feigning business losses or reverses in their business ventures in order
dismissal due to alleged closure of business, it cited jurisprudence relating to retrenchment to support its [21]
to ease out employees. In this case, the financial statements were not only belatedly submitted but
resolution and conclusion.While the two are often used interchangeably and are interrelated, they are were also bereft of necessary details on the extent of the alleged losses incurred, if any. The income
actually two separate and independent authorized causes for termination of employment.Termination of statements only indicated a decline in sales in 1998 as compared to 1997. These fell short of the stringent
an employment may be predicated on one without need of resorting to the other. requirement of the law that the employer prove sufficiently and convincingly its allegation of substantial
losses. While the comparative income statement shows a net loss of P207,091 in 1998, the income
Closure of business, on one hand, is the reversal of fortune of the employer whereby there is a
statement of 1997 still shows JAT posting a net income of P19,361. Both statements need interpretation
complete cessation of business operations and/or an actual locking-up of the doors of establishment,
as to their impact on the companys termination of certain personnel as well as business closure.
usually due to financial losses. Closure of business as an authorized cause for termination of employment
aims to prevent further financial drain upon an employer who cannot pay anymore his employees since Having concluded that private respondent was not validly dismissed resulting from closure of
business has already stopped. On the other hand, retrenchment is reduction of personnel usually due to business operations due to substantial losses, we now proceed to determine whether or not private
poor financial returns so as to cut down on costs of operations in terms of salaries and wages to prevent respondent was validly dismissed on the ground of closure or cessation of operations for reasons other
bankruptcy of the company. It is sometimes also referred to as down-sizing. Retrenchment is an authorized than substantial business losses.
cause for termination of employment which the law accords an employer who is not making good in its
 A careful examination of Article 283 of the Labor Code shows that closure or cessation of business letters dated November 25, 1998 of its decision to permanently close its business and had submitted a
[27]
operation as a valid and authorized ground of terminating employment is not limited to those resulting termination report to the DOLE. Generally, review of labor cases elevated to this Court on a petition for
from business losses or reverses. Said provision in fact provides for the payment of separation pay to review on certiorari is confined merely to questions of law. But in certain cases, we are constrained to
employees terminated because of closure of business not due to losses, thus implying that termination of analyze or weigh the evidence again if the findings of fact of the labor tribunals and the appellate court
employees other than closure of business due to losses may be valid. are in conflict, or not supported by evidence on record or the judgment is based on a misapprehension of
[28]
[22]
facts.
Hence, in one case, we emphasized that:
In this case, we are persuaded that the closure of JATs business is not unjustified. Further we hold
Art. 283 governs the grant of separation benefits in case of closures or cessation of operation of business that private respondent was validly terminated, because the closure of business operations is justified.
establishments NOT due to serious business losses or financial reverses x x x.Where, however, the
Nevertheless in this case, we must stress that the closure of business operation is allowed under
closure was due to business lossesas in the instant case, in which the aggregate losses amounted to
the Labor Code, provided separation pay be paid to the terminated employee. It is settled that in case of
over P20 billionthe Labor Code does not impose any obligation upon the employer to pay separation
closure or cessation of operation of a business establishment not due to serious business losses or financial
benefits, for obvious reasons. There is no need to belabor this point. Even the public respondents, in [29]
reverses, the employees are always given separation benefits. The amount of separation pay must be
their Comment filed by the Solicitor General, impliedly concede this point.
computed from the time private respondent commenced employment with petitioners until the time the
[30]
latter ceased operations.
[23]
In another case, we held more emphatically that:
Considering that private respondent was not illegally dismissed, however, no backwages need to be
awarded. Backwages in general are granted on grounds of equity for earnings which a worker or employee
In any case, Article 283 of the Labor Code is clear that an employer may close or cease his business operations [31]
has lost due to illegal dismissal. It is well settled that backwages may be granted only when there is a
or undertaking even if he is not suffering from serious business losses or financial reverses, as long as he [32]
finding of illegal dismissal.
pays his employees their termination pay in the amount corresponding to their length of service. It
would, indeed, be stretching the intent and spirit of the law if we were to unjustly interfere in The other monetary awards to private respondent are undisputed by petitioners and unrefuted by
managements prerogative to close or cease its business operations just because said business operation th
any contrary evidence. These awards, namely legal holiday pay, service incentive leave pay and 13 month
or undertaking is not suffering from any loss. pay, should be maintained.

WHEREFORE, the petition is given due course. The assailed Resolutions of the Court of Appeals in
In the present case, while petitioners did not sufficiently establish substantial losses to justify
CA-G.R. SP No. 60337 are AFFIRMED with the MODIFICATION that the award of P66,924.00 as backwages
closure of the business, its income statement shows declining sales in 1998, prompting the petitioners to
is deleted. The award of separation pay amounting to P10,296.00 and the other monetary awards, namely
suspend its business operations sometime in March 1998, eventually leading to its permanent closure in
salary differentials in the amount of P1,066.00, legal holiday pay in the amount of P1,850.00, service
December 1998. Apparently, the petitioners saw the declining sales figures and the unsustainable business th
incentive leave pay in the amount of P925.00 and 13 month pay in the amount of P4,910, or a total
environment with no hope of recovery during the period of suspension as indicative of bleak business
of P29,047.00 are maintained. No pronouncement as to costs.
prospects, justifying a permanent closure of operation to save its business from further collapse. On this
score, we agree that undue interference with an employers judgment in the conduct of his business is SO ORDERED.
uncalled for. Even as the law is solicitous of the welfare of employees, it must also protect the right of an
employer to exercise what is clearly a management prerogatives. As long as the companys exercise of the Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.
same is in good faith to advance its interest and not for the purpose of defeating or circumventing the
rights of employees under the law or a valid agreement such exercise will be upheld.
[24]


In the event, under Article 283 of the Labor Code, three requirements are necessary for a valid
cessation of business operations, namely: (a) service of a written notice to the employees and to the DOLE

at least one (1) month before the intended date thereof; (b) the cessation of business must be bona fide in

character; and (c) payment to the employees of termination pay amounting to at least one-half (1/2)
month pay for every year of service, or one (1) month pay, whichever is higher.
[25]

The closure of business operation by petitioners, in our view, is not tainted with bad faith or other
circumstance that arouses undue suspicion of malicious intent. The decision to permanently close business
operations was arrived at after a suspension of operation for several months precipitated by a slowdown
in sales without any prospects of improving. There were no indications that an impending strike or any

labor-related union activities precipitated the sudden closure of business. Further, contrary to the findings
[26]
of the Labor Arbiter, petitioners had notified private respondent and all other workers through written
 Genuino Ice Company, Inc. G.R. No. 147790 Respondent appealed from the Labor Arbiters Decision. The NLRC, in its Decision dated June 30,
Petitioner, 1999, sustained the findings of the Labor
[7]
Present: Arbiter and denied the appeal for lack of merit.

PANGANIBAN, CJ., Chairperson, Respondent filed a motion for reconsideration of the NLRC Decision, which was denied in a Resolution
[8]
YNARES-SANTIAGO, dated August 31, 1999.
- versus - AUSTRIA-MARTINEZ,
[9]
CALLEJO, SR. and On October 29, 1999, entry of judgment was made on the NLRC Resolution dated August 31, 1999.
CHICO-NAZARIO, JJ.
On February 7, 2000, respondent filed a special civil action for certiorari with the Court of Appeals (CA),
Promulgated: docketed as CA-G.R. SP No. 57105. Respondents counsel stated that it was on December 20, 1999 that he
[10]
Alfonso S. Magpantay, received the NLRC Resolution dated August 31, 1999.
Respondent. June 27, 2006
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x In his petition before the CA, respondent alleged that the Labor Arbiter committed an error in ruling that
his dismissal was for a valid cause; and reiterated his claim that his dismissal was made without due
[11]
process.

D E C I S I O N Petitioner filed its Comment, contending that the petition was filed out of time, considering that contrary
to respondents claim that the NLRC Resolution dated August 31, 1999 was received on December 20, 1999,
it was actually received on September 15, 1999, as shown in the registry return card. Petitioner also
AUSTRIA-MARTINEZ, J.: reiterated its arguments that respondent was dismissed for cause and with due process.

[12]
On August 3, 2000, the CA rendered the assailed Decision granting the petition and declaring
Alfonso Magpantay (respondent) was employed as a machine operator with Genuino Ice Company, Inc. respondents dismissal as illegal. The dispositive
(petitioner) from March 1988 to December 1995. On November 18, 1996, respondent filed against portion of the Decision reads:
[1]
petitioner a complaint for illegal dismissal with prayer for moral and exemplary damages. In his Position
Paper, respondent alleged that he was dismissed from service effective immediately by virtue of a WHEREFORE, the petition is GRANTED. The dismissal of petitioner is
memorandum, after which he was not allowed anymore to enter the company premises. Respondent hereby declared as illegal. Respondent company is ORDERED to pay to petitioner
[2]
bewailed that his termination from employment was done without due process. separation pay and full backwages. Let this case be remanded to the labor arbiter
for the computation of the aforesaid awards.
Petitioner countered that he was not illegally dismissed, since the dismissal was based on a valid
[13]
ground, i.e., he led an illegal strike at petitioners sister company, Genuino Agro Industrial Development SO ORDERED.
Corporation, which lasted from November 18 to 22, 1995, resulting in big operation losses on the latters
part. Petitioner also maintained that respondents dismissal was made after he was accorded due Petitioner filed a motion for reconsideration which the CA denied per its Resolution dated March 16,
[3] [14]
process. 2001.

Respondent replied, however, that assuming that he led such illegal strike, he could not be liable therefore Hence, herein petition for review on certiorari under Rule 45 of the Rules of Court stating the following
[4]
because it was done in petitioners sister company which is a separate and distinct entity from petitioner. issues:

Petitioner initially claimed that respondents acts were tantamount to serious misconduct or willful 1. Whether or not the Court of Appeals erred and committed grave abuse of
disobedience, gross and habitual neglect of duties, and breach of trust. Subsequently, petitioner amended discretion in giving due course to the respondents Petition for Certiorari?
its position paper to include insubordination among the grounds for his dismissal, since it came out during
respondents cross-examination, and the matter was reported only after the new personnel manager 2. Whether or not the Court a quo erred and committed grave abuse of discretion
[5]
assumed his position in August 1996. in declaring that the respondent was illegally dismissed from
employment?
On August 14, 1998, the Labor Arbiter of the National Labor Relations Commission (NLRC) dismissed the
[6]
case for lack of merit finding that petitioner had valid cause to dismiss respondent.

 3. Whether or not the Court a quo erred and committed grave abuse of discretion
in ordering the payment of separation pay and full backwages to the Records show that Ducut is not an employee of the FEU Legal Aid Bureau, but is connected with
[15]
respondent? the Computer Services Department. The FEU Legal Aid Bureau has its own personnel which include Ms.
dela Paz who is the one authorized to receive communications in behalf of the office. It has been ruled
that a service of a copy of a decision on a person who is neither a clerk nor one in charge of the attorneys
[21] [22]
At the outset, it should be stated that under Rule 45 of the Rules of Court, only questions of office is invalid. This was the Courts ruling in Caete v. National Labor Relations Commission, to wit:
law may be raised, the reason being that this Court is not a trier of facts. It is not for this Court to reexamine
[16]
and reevaluate the evidence on record. However, considering that the CA came up with an opinion We have ruled that where a copy of the decision is served on a person
different from that of the Labor Arbiter and the NLRC, the Court is who is neither a clerk nor one in charge of the attorneys office, such service is
[17]
now constrained to review the evidence on record. invalid. In the case at bar, it is undisputed that Nenette Vasquez, the person who
received a copy of the labor arbiters Decision, was neither a clerk of Atty. Chua,
On the first issue, petitioner argues that the CA should have dismissed respondents petition for respondents counsel, nor a person in charge of Atty. Chuas office. Hence, her receipt
having been filed out of time. According to petitioner, since the registry return receipt shows that the NLRC of said Decision on March 15, 1993 cannot be considered as notice to Atty.
Resolution dated August 31, 1999 denying respondents motion for reconsideration was received Chua. Since a copy of the Decision was actually delivered by Vasquez to Atty. Chuas
on September 15, 1999, the petition filed on February 7, 2000 was, therefore, 85 days late. clerk only on March 16, 1993, it was only on this date that the ten-day period for
the filing of respondents appeal commenced to run. Thus, respondents March 26,
[23]
Respondent, however, counters that the person who received the NLRC Resolution dated August 31, 1999 1993 appeal to the NLRC was seasonably filed.
on September 15, 1999, a certain Mirela G. Ducut of the Computer Services Department, was not a duly-
authorized representative of the FEU Legal Aid Bureau, as it is only Ellen Dela Paz, who is authorized to
[24]
receive all communications addressed to the office. This was recently reiterated in Prudential Bank v. Business Assistance Group, Inc., where the
Court accepted the affidavit executed by Arlan Cayno denying that he was an employee of Gella,
The CA sustained respondents contention that since the service was not made to an authorized person, it Danguilan, Nabaza & Associates law firm authorized to receive legal or judicial processes. Cayno likewise
was not legally effective, and the counting of the period should be reckoned from the date of actual receipt disclaimed knowledge of the whereabouts of the notice. According to the Court, since Mr. Cayno was not
by counsel, which was on December 20, 1999. an employee of the said law firm authorized to receive notices in its behalf, his alleged receipt of the notice
is without any effect in law.
The New Rules of Procedure of the NLRC provides the rule for the service of notices and resolutions in
NLRC cases, to wit: Hence, the CA was correct in ruling that the reckoning period should be the date when
respondents counsel actually received the NLRC Resolution dated August 31, 1999, which was
Sec. 4. Service of notices and resolutions. a) Notices or summons and on December 20, 1999.
copies of orders, resolutions or decisions shall be served on the parties to the case Petitioner, however, pointed out that a certain Ruby D.G. Sayat received a copy of their Motion
[25]
personally by the bailiff or the duly authorized public officer within three (3) days for Reconsideration filed by registered mail on August 16, 2000. Respondent contended that at the time
from receipt thereof by registered mail; Provided, that where a party is represented Sayat received the motion, she was then detailed at the office and was authorized to receive said pleading,
[26]
by counsel or authorized representative, service shall be made on such counsel or and that it was an isolated and exceptional instance. On this matter, the FEU Acting Postmaster certified
[27]
authorized representative; x x x that Sayat is a permanent employee of the FEU Legal Aid Bureau. As such, she is authorized to receive
communications in behalf of the office and need not possess an express authority to do so.
The presumption is that the decision was delivered to a person in his office, who was duly
[18]
authorized to receive papers for him, in the absence of proof to the contrary. It is likewise a fundamental More importantly, the Court has consistently frowned upon the dismissal of an appeal on
rule that unless the contrary is proven, official duty is presumed to have been performed regularly and purely technical grounds. While the right to appeal is a statutory, not a natural right, it is, nonetheless, an
judicial proceedings regularly conducted, which includes the presumption of regularity of service of essential part of our judicial system. Courts should proceed with caution so as not to deprive a party of the
[19]
summons and other notices. The registry return of the registered mail as having been received is prima right to appeal, but rather, ensure amplest opportunity for the proper and just disposition of a cause, free
[28]
facie proof of the facts indicated therein.Thus, it was necessary for respondent to rebut that legal from the constraints of technicalities.
presumption with competent and proper evidence.
On the issue of illegal dismissal, both the Labor Arbiter and the NLRC were one in concluding
In an attempt to disprove that there was proper receipt of the Resolution, respondents counsel that petitioner had just cause for dismissing respondent, as his act of leading a strike at petitioners
presented an Affidavit executed by Ellen dela Paz, who attested that she is the only person authorized to company for four days, his absence from work during such time, and his failure to perform his duties during
receive communications for and in behalf of the FEU Legal Aid Bureau; that she never received the NLRC such absence, make up a cause for habitual neglect of duties, while his failure to comply with petitioners
Resolution dated August 31, 1999 on September 15, 1999; and that it was only on December 20, 1999, order for him to transfer to the GMA, Cavite Plant constituted insubordination or willful disobedience. The
[20]
through respondent, that they learned of said Resolution. CA, however, differed with said conclusion and found that respondents attitude has not been proved to
be visited with any wrongdoing, and that his four-day absence does not appear to be both gross and did not make any factual finding or conclusion in its Decision vis--vis petitioners allegation of respondents
habitual. insubordination.

The Court sustains the CAs finding that respondents four-day absence does not amount to a While its perception may be true, it should not have deterred the CA from making any
habitual neglect of duty; however, the Court finds that respondent was validly dismissed on ground of resolution on the matter. For one, respondent was able to argue against petitioners allegation of
[37] [38]
willful disobedience or insubordination. insubordination before the Labor Arbiter and the NLRC. For another, it was respondent himself who
raised the subject before the CA, wherein he stated in his Petition, inter alia, viz.:
Under Article 282 of the Labor Code, as amended, an employer may terminate an employment 37. Miserably, public respondent [NLRC] justified the validity of his
for any of the following causes: (a) serious misconduct or willful disobedience by the employee of the dismissal by holding that the 12 December 1995 Memorandum showed that it was
lawful orders of his employer or representative in connection with his work; (b) gross and habitual neglect effected with due process. x x x
by the employee of his duties; (c) fraud or willful breach by the employee of the trust reposed in him by
his employer or duly authorized representative; (d) commission of a crime or offense by the employee x x x x
against the person of his employer or any immediate member of his family or his duly authorized
[29]
representative; and, (e) other causes analogous to the foregoing. The employer has the burden of 38. How could the foregoing memorandum justify petitioners dismissal
proving that the dismissal was for a just cause; failure to show this would necessarily mean that the for allegedly joining the four (4) days strike when it refers to his alleged refusal to
[30]
dismissal was unjustified and, therefore, illegal. transfer? This memorandum shows glaring violations of his right to substantive and
procedural due process and reveal the true circumstances of his dismissal, to wit:
[31]
Neglect of duty, to be a ground for dismissal, must be both gross and habitual. Gross 1) petitioner was dismissed because of his failure to abide with the managements
negligence connotes want of care in the performance of ones duties. Habitual neglect implies repeated decision to transfer him, and not on his alleged participation in the four (4) day strike
failure to perform ones duties for a period of time, depending upon the circumstances. On the other hand, or his absence on those dates; x x x;3) while the true cause of his dismissal is his
fraud and willful neglect of duties imply bad faith on the part of the employee in failing to perform his job failure to abide with the decision to transfer, private respondent belatedly and self-
[32]
to the detriment of the employer and the latters business. Thus, the single or isolated act of negligence servingly claimed that he was dismissed because of the alleged strike; 4) the Labor
[33]
does not constitute a just cause for the dismissal of the employee. Arbiters decision that the dismissal is valid is based on speculation in that while it
was clear that petitioner was actually dismissed for refusing the transfer, he held
Thus, the Court agrees with the CA that respondents four-day absence is not tantamount to a that the dismissal is justified because petitioner absented for four (4) days to join
[39]
gross and habitual neglect of duty. As aptly stated by the CA, (W)hile he may be found by the labor courts the strike elsewhere; x x x (Emphasis supplied)
to be grossly negligent of his duties, he has never been proven to be habitually absent in a span of seven
(7) years as GICIs employee. The factual circumstances and evidence do not clearly demonstrate that Further, the proceedings before the Labor Arbiter and the NLRC are non-litigious in
[40]
petitioners [respondent] absences contributed to the detriment of GICIs operations and caused irreparable nature. As such, the proceedings before it are not bound by the technical niceties of the law and
[34] [41]
damage to the company. procedure and the rules obtaining in courts of law, as dictated by Article 221 of the Labor Code:

Petitioner, however, insists that during his four-day absence, respondent was leading an illegal ART. 221. Technical rules not binding and prior resort to amicable
strike in its sister company. In the first place, there is no showing that the strike held at the Genuino Agro settlement. In any proceeding before the Commission or any of the Labor Arbiters,
Industrial Development Corporation is illegal. It is a basic rule in evidence that each party must prove his the rules of evidence prevailing in courts of law or equity shall not be controlling and
affirmative allegation. Since the burden of evidence lies with the party who asserts the affirmative it is the spirit and intention of this Code that the Commission and its members and
allegation, the plaintiff or complainant has to prove his affirmative allegations in the complaint and the the Labor Arbiters shall use every and all reasonable means to ascertain the facts in
defendant or the respondent has to prove the affirmative allegation in his affirmative defenses and each case speedily and objectively and without regard to technicalities of law or
[35]
counterclaim. Since it was petitioner who alleged that such strike is illegal, petitioner must, therefore, procedure, all in the interest of due process.
prove it. Except for such bare allegation, there is a dearth of evidence in this case proving the illegality of
said strike.
This rule applies equally to both the employee and the employer. In the interest of due process,
However, as previously stated, the Court finds that respondent was validly dismissed on the the Labor Code directs labor officials to use all reasonable means to ascertain the facts speedily and
[42]
ground of insubordination or willful disobedience. objectively, with little regard to technicalities or formalities. What is essential is that every litigant is
given reasonable opportunity to appear and defend his right, introduce witnesses and relevant evidence
[43]
On this point, the CA opined that petitioner included insubordination as a mere after-thought. It in his favor, which undoubtedly, was done in this case.
noted that petitioner seemed to be irresolute in stating the cause of respondents dismissal, as in its
Position Paper, it originally relied on respondents four-day absence or participation in the illegal strike as Willful disobedience, or insubordination as otherwise branded in this case, as a just cause for
[36]
a cause for dismissal but later on amended its Position Paper to include insubordination. Thus, the CA dismissal of an employee, necessitates the concurrence of at least two requisites: (1) the employee's
assailed conduct must have been willful, that is, characterized by a wrongful and perverse attitude; and offered you to provide monetary allowance to at least compensate for your
(2) the order violated must have been reasonable, lawful, made known to the employee and must pertain assumed additional expenses. However, you turned down this action of good faith
[44]
to the duties which he had been engaged to discharge. from the management.

In Coca-Cola Bottlers, Phils. Inc v. Kapisanan ng Malayang Manngagawa sa Coca-Cola-FFW, it x x x x
was held that an employer enjoys a wide latitude of discretion in the promulgation of policies, rules and
regulations on work-related activities of the employees so long as they are exercised in good faith for the Your written explanation and the outcome of the plant level
advancement of the employers interest and not for the purpose of defeating or circumventing the rights investigation clearly showed your willful or intentional disobedience. It was
of the employees under special laws or under valid agreements. Company policies and regulations are insubordination in its highest order. In this regard, much to our regret, we have no
generally valid and binding on the parties and must be complied with until finally revised or amended, other recourse but to terminate your services with us for cause and causes cited in
unilaterally or preferably through negotiation, by competent authority. For misconduct or improper the foregoing effective 13 December 1995.
behavior to be a just cause for dismissal, the same must be related to the performance of the employees
[45] [50]
duties and must show that he has become unfit to continue working for the employer. x x x x

In the case at bench, petitioner informed respondent, through a Memorandum The rule is that the transfer of an employee ordinarily lies within the ambit of the employers
dated November 14, 1995, that he was being transferred to its GMA, Cavite operations effective November prerogatives. The employer exercises the prerogative to transfer an employee for valid reasons and
20, 1995, to wit: according to the requirement of its business, provided the transfer does not result in demotion in rank or
[51]
diminution of the employees salary, benefits and other privileges.
We have considered you to fill-up the maintenance position urgently
required in our GMA, Cavite business operations. After thorough evaluation of In this case, petitioners order for respondent to transfer to the GMA, Cavite Plant is a
qualified candidates, we find your qualifications most suited to satisfactorily reasonable and lawful order was made known to him and pertains to his duties as a machine
perform the maintenance activities at GMA, Cavite. operator. There was no demotion involved or diminution of salary, benefits and other privileges, and in
fact, petitioner was even willing to provide respondent with monetary allowance to defray whatever
[46]
x x x x additional expenses he may incur with the transfer.
Due to his refusal to report to the Cavite plant, petitioner reiterated its order transferring
[47] [52]
respondent in its Memorandum dated November 24, 1995, where respondent was also warned that his In Allied Banking Corporation v. Court of Appeals, the Court ruled that an employee cannot
failure to report to the Cavite plant will be considered as an absence without leave (AWOL) and validly refuse a transfer order on the ground of parental obligations, additional expenses, and the anguish
insubordination. Respondent was required to comply with the order within 24 hours from receipt, he would suffer if assigned away from his family. Citing Homeowners Savings and Loan Association, Inc. v.
[53]
otherwise, disciplinary action will be imposed on respondent. Respondent replied with a request that he National Labor Relations Commission, the Court stated:
remain in the Otis plant since a transfer to the Cavite plant will entail additional expenditure and travel
[48]
time on his part. The acceptability of the proposition that transfer made by an employer
for an illicit or underhanded purpose i.e., to defeat an employees right to self-
Petitioner again wrote respondent inviting him to appear before the Plant Level Investigation on December organization, to rid himself of an undesirable worker, or to penalize an employee
[49]
11, 1995 for the latter to be able to clarify his reasons for refusing the transfer. for union activities cannot be upheld is self-evident and cannot be gainsaid. The
difficulty lies in the situation where no such illicit, improper or underhanded
Finally, petitioner issued its Memorandum dated December 12, 1995 informing respondent of its decision purpose can be ascribed to the employer, the objection to the transfer being
to terminate his services. The Memorandum reads, in part: grounded solely upon the personal inconvenience or hardship that will be caused to
the employee by reason of the transfer. What then?
The management panel has discussed and deliberated thoroughly on
your case regarding your transfer to GMA Plant in GMA, Cavite which was supposed This was the very same situation we faced in Phil. Telegraph and
to be effective on 20 November, 1995 but unfortunately you refused to comply Telephone Corp. v. Laplana. In that case, the employee, Alicia Laplana, was a cashier
despite our repeated instructions to you to assume your new assignment while your at the Baguio City Branch of PT&T who was directed to transfer to the companys
case had been under grievance machinery. branch office at Laoag City. In refusing the transfer, the employee averred that she
had established Baguio City as her permanent residence and that such transfer will
On 09 December, 1995 a letter memorandum was served to you involve additional expenses on her part, plus the fact that an assignment to a far
informing you to appear at plant level investigation to be conducted on 11 place will be a big sacrifice for her as she will be kept away from her family which
December, 1995. The management panel in consideration to (sic) your reasons for might adversely affect her efficiency. In ruling for the employer, the Court upheld
not transferring to GMA Plant as stated in your reply dated December 07, 1995,
 [57]
the transfer from one city to another within the country as valid as long as there is transfer. Despite the meeting, and since respondent, apparently, stubbornly refused to heed petitioners
no bad faith on the part of the employer. We held then: order, it was then that the Memorandum dated December 13, 1995 was issued to respondent informing
him of the managements decision to terminate his services.Clearly, respondents right to due process was
Certainly the Court cannot accept the proposition not violated.
that when an employee opposes his employers decision to
transfer him to another work place, there being no bad faith WHEREFORE, the petition is GRANTED. The CA Decision dated August 3, 2000 and Resolution
or underhanded motives on the part of either party, it is the dated March 16, 2001 are SET ASIDE, and the NLRC Decision dated June 30, 1999 is REINSTATED.
employees wishes that should be made to prevail.
No costs.
Such being the case, respondent cannot adamantly refuse to abide by the order of transfer
without exposing himself to the risk of being dismissed. Hence, his dismissal was for just cause in SO ORDERED.
accordance with Article 282 (a) of the Labor Code. Consequently, respondent is not entitled to
reinstatement or separation pay and backwages.

Lastly, on the issue of due process, Section 2 (d), Rule 1, Book VI of the Omnibus Rules
Implementing the Labor Code provides for the standards of due process, which shall
be substantially observed, to wit:

For termination of employment based on just causes as defined in Article
282 of the Labor Code:

(i) A written notice served on the employee specifying the ground or
grounds of termination, and giving said employee reasonable opportunity within
which to explain his side.

(ii) A hearing or conference during which the employee concerned, with
the assistance of counsel if he so desires is given opportunity to respond to the
charge, present his evidence, or rebut the evidence presented against him.

(iii) A written notice of termination served on the employee indicating
that upon due consideration of all the circumstances, grounds have been
established to justify his termination.

Simply stated, the employer must furnish the employee a written notice containing a statement
of the cause for termination and to afford said employee ample opportunity to be heard and defend
himself with the assistance of his representative, if he so desires, and the employee must be notified in
[54]
writing of the decision dismissing him, stating clearly the reasons therefor.

The CA found that petitioner failed to observe the twin requirements of notice and hearing,
stating that its Memorandum dated December 13, 1995 does not squarely meet the standards of due
process. The circumstances surrounding respondents dismissal, however, prove the contrary. The CA failed
to take into account that prior to the Memorandum dated December 13, 1995, petitioner sent respondent
several memoranda apprising him of the possible implications of his refusal to comply with the order of
transfer. Thus, in its Memorandum dated November 24, 1995, petitioner notified respondent that his
[55]
continued non-compliance with the order of transfer might bring about disciplinary action. Respondent
replied to this memorandum, stating the reasons for his refusal, i.e., additional expenses, longer travel
[56]
time, and union concerns. Petitioner sent another Memorandum on December 9, 1995, asking
respondent to appear on December 11, 1995, for further clarification of his reasons for refusing the
Facts:
Alfonso Magpantay was employed as a machine operator with Genuino Ice Comp. Accordingly, he led an
illegal strike at the sister company of Genuino Ice, Genuino Agro Industrial Dev’t Corp. The strike resulted
in big operation losses on the company’s part. Later on, by virtue of a memorandum, Magpantay
was dismissed from service and was not allowed to enter the company premises. He then filed a

complaint against Genuino Ice and alleged that the termination was done without due process and
that even if he led an illegal strike, he could not be liable therefore because it was in the sister company
which is separate and distinct from the petitioner.
Initially genuine claimed that respondent’s acts were tantamount to serious misconduct or willful
disobedience, gross and habitual neglect of duties, and breach of trust. Subsequently it was
amended to include insubordination.
LA – Dismissed for lack of merit. There was valid cause to dismiss resp

NLRC – sustained the decision of the LA

*There was an order for him to transfer to the GMA, Cavite Plant however he neglected his duties –
according to the NLRC and LA, this constitutes as insubordination or willful disobey

Held:
[31]
Neglect of duty, to be a ground for dismissal, must be both gross and habitual. Gross negligence
connotes want of care in the performance of one’s duties. Habitual neglect implies repeated failure to
perform one’s duties for a period of time, depending upon the circumstances. On the other hand,

fraud and willful neglect of duties imply bad faith on the part of the employee in failing to perform his

job to the detriment of the employer and the latter’s business. Thus, the single or isolated act of
negligence does not constitute a just cause for the dismissal of the employee.
Thus, the Court agrees with the CA that respondent’s four-day absence is not tantamount to a gross
and habitual neglect of duty. As aptly stated by the CA, “(W)hile he may be found by the labor courts
to be grossly negligent of his duties, he has never been proven to be habitually absent in a span
of seven (7) years as GICI’s employee. The factual circumstances and evidence do not clearly
demonstrate that petitioner’s [respondent] absences contributed to the detriment of GICI’s

operations and caused irreparable damage to the company.”
Willful disobedience, or insubordination as otherwise branded in this case, as a just cause for dismissal of
an employee, necessitates the concurrence of at least two requisites: (1) the employee's assailed
conduct must have been willful, that is, characterized by a wrongful and perverse attitude; and (2) the
order violated must have been reasonable, lawful, made known to the employee and must pertain to the
duties which he had been engaged to discharge.
he rule is that the transfer of an employee ordinarily lies within the ambit of the employer’s
prerogatives. The employer exercises the prerogative to transfer an employee for valid reasons and

according to the requirement of its business, provided the transfer does not result in demotion in rank or
diminution of the employee’s salary, benefits and other privileges.
In this case, petitioner’s order for respondent to transfer to the GMA, Cavite Plant is a reasonable
and lawful order was made known to him and pertains to his duties as a machine
operator. There was no demotion involved or diminution of salary, benefits and other privileges, and in
fact, petitioner was even willing to provide respondent with monetary allowance to defray whatever
additional expenses he may incur with the transfer.
Such being the case, respondent cannot adamantly refuse to abide by the order of transfer without

exposing himself to the risk of being dismissed. Hence, his dismissal was for just cause in accordance
with Article 282 (a) of the Labor Code. Consequently, respondent is not entitled to reinstatement or
separation pay and backwages.







 [G.R. No. 140189. February 28, 2005] WHEREFORE, premises considered, respondent Great Southern Maritime Services [Corporation] and
Pioneer Insurance and Surety Corporation, are hereby ordered jointly and severally liable to pay
GREAT SOUTHERN MARITIME SERVICES CORPORATION, FERRY CASINOS LIMITED and PIONEER
complainants the following amounts:
INSURANCE AND SURETY CORPORATION, petitioners, vs. JENNIFER ANNE B. ACUA, HAYDEE
ANNE B. ACUA, MARITES T. CLARION, MARISSA C. ENRIQUEZ, GRACIELA M. TORRALBA and
MARY PAMELA A. SANTIAGO, respondents. 1. Jennifer B. Acua US $ 610.17
2. Marissa C. Enriquez 986.17
3. Marites T. Clarion 986.17
D E C I S I O N
4. Graciela M. Torralba 986.17
AUSTRIA-MARTINEZ, J.: 5. Pamela Santiago 582.20
6. Haydee Anne B. Acua 582.20

Before us is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the
[1]
Decision of the Court of Appeals dated June 30, 1999 in CA-G.R. SP No. 50504, which set aside the representing their salaries for the unexpired portion of their contract. All other claims are dismissed for
Decision of the National Labor Relations Commission (NLRC) dated January 15, 1997 in NLRC CA No. lack of merit.
010186-96.
[5]
SO ORDERED.
The factual background of the case is as follows:

Petitioner Great Southern Maritime Services Corporation (GSMSC) is a manning agency organized The POEA ruled that the respondents were illegally dismissed since petitioners failed to prove that
and existing under Philippine laws. It is the local agent of petitioner Ferry Casinos Limited. Petitioner respondents voluntarily resigned from employment. It held that the alleged resignation letters are only
Pioneer Insurance and Surety Corporation is the surety company of petitioner GSMSC. declarations of release and quitclaim.
[6]
On October 7, 1993, respondents Jennifer Anne B. Acua, Haydee Anne B. Acua, Marites T. Clarion, Petitioners appealed to the NLRC which, on January 15, 1997, set aside the decision of the POEA
[7]
Marissa C. Enriquez, Graciela M. Torralba, and Mary Pamela A. Santiago filed a complaint for illegal and dismissed the complaint for illegal dismissal. The NLRC held that the contested letters are not only
dismissal against petitioners before the Philippine Overseas Employment Administration (POEA), docketed declarations of release and quitclaim but resignations as well. It further held that there is no concrete
[2]
as POEA Case No. (M) 93-10-1987. evidence of undue pressure, force and duress in the execution of the resignation letters. The NLRC gave
credence to petitioners claim that respondents pre-terminated their contracts en masse because two of
Respondents claim that: between the months of March and April 1993, they were deployed by the respondents, Haydee Anne B. Acua and Marites T. Clarion, are now working in Singapore.
petitioner GSMSC to work as croupiers (card dealers) for petitioner Ferry Casinos Limited under a six-
[8]
month contract with monthly salaries of US$356.45 plus fixed overtime pay of US$107 a month and Respondents filed a motion for reconsideration but the NLRC denied the same in a Resolution
[9]
vacation leave pay equivalent to two months salary pro rata, except for respondent Jennifer Anne B. Acua dated April 30, 1997.
who had a monthly salary of US$250.56 plus fixed overtime pay of US$87.17 and vacation leave pay
On July 18, 1997, respondents filed a petition for certiorari before us, docketed as G.R. No.
equivalent to two months salary pro rata; sometime in July 1993, Sue Smits, the Casino Manager, informed [10]
129673.
them that their services were no longer needed; considering that their plane tickets were already ready
and they were subjected to harassment, they had no alternative but to sign documents on July 11 and 12, On October 3, 1997, petitioners, in their Comment, prayed for outright dismissal of the petition for:
1993 specifying that they were the ones who terminated their employment; they were repatriated on July (a) failure of respondents to submit a verified statement of the material dates to show that the petition
[3]
25, 1993. was filed on time, and (b) filing a certification on non-forum shopping signed only by their counsel. In
addition, petitioners argued that the issues raised are factual and there is no showing that the NLRC
Petitioners denied the allegations of respondents and averred that respondents voluntarily resigned [11]
committed grave abuse of discretion.
from employment. They contend that: respondents were hired by petitioner Ferry Casinos Limited through
petitioner GSMSC to work as croupiers for a period of six months; sometime in July 1993, respondents On January 27, 1998, the Solicitor General, in lieu of Comment, manifested that he is unable to
intimated their desire to resign; petitioner Ferry Casinos Limited did not allow them to resign as the sustain the position of the NLRC because the allegation that respondents voluntarily resigned was not
simultaneous loss of croupiers would paralyze casino operations; respondents thereafter exhibited substantially established and respondents non-compliance with the formal requirements of the petition
lukewarm attitude towards work, became defiant and rude; consequently, petitioner Ferry Casinos Limited should be waived since the petition is meritorious.
[12]

was forced to accede to respondents demands; and respondents executed resignation letters and
[4] [13]
disembarked on July 27, 1993. The NLRC, in compliance with our Resolution dated March 16, 1998, filed its own Comment
praying for the dismissal of the petition and the affirmance of its decision with finality. It argued that in
On October 5, 1995, the POEA decided the case against petitioners, thus: reversing the POEA, it focused its attention on the correct evaluation of the evidence on record which
substantially showed that petitioners did not dismiss respondents but that the latter resigned en masse on
[14]
July 12, 1993.
 [15]
In accordance with St. Martin Funeral Homes vs. NLRC, we referred the petition to the Court of reveals that the January 15, 1997 decision of the NLRC was received by respondents counsel on January
[24] [25]
Appeals which, on June 30, 1999, set aside the decision of the NLRC and reinstated the decision of the 24, 1997. On February 19, 1997, respondents filed a motion for reconsideration which was denied by
[16] [26]
POEA. The Court of Appeals held that respondents were illegally dismissed since the petitioners failed the NLRC in a Resolution dated April 30, 1997. Respondents counsel received the resolution on May 30,
to substantiate their claim that respondents voluntarily resigned from employment. It ruled that the 1997 and they filed the petition for certiorari on July 18, 1997.
quitclaims are not sufficient to show valid terminations. Anent non-compliance with the formal [27]
In view of the retroactive application of procedural laws, Section 4, Rule 65 of the 1997 Rules of
requirements of the petition, the Court of Appeals, adopting the observation of the Solicitor General, held [28]
Procedure, as amended by A.M. No. 00-2-03 which took effect on September 1, 2000, is the governing
that the case is an exception to the rule on strict adherence to technicality.
provision. It provides that when a motion for reconsideration is timely filed, the 60-day period for filing a
On July 21, 1999, petitioners filed a motion for reconsideration but the Court of Appeals denied it petition for certiorari shall be counted from notice of the denial of said motion. While respondents motion
[29]
in a Resolution dated September 22, 1999. for reconsideration was filed 16 days late, the NLRC nonetheless acted thereon and denied it on the
basis of lack of merit. In resolving the merits of the motion despite being filed out of time, the NLRC
Hence, the present petition for review on certiorari on the following grounds:
undoubtedly recognized that it is not strictly bound by the technicalities of law and procedure. Thus, the
60-day period for filing of a petition for certiorari should be reckoned from the date of the receipt of the
1. Under the law and applicable jurisprudence, the Petition for Certiorari filed by respondents should resolution denying the motion for reconsideration, i.e., May 30, 1997, and thus, the filing made on July 18,
have been denied outright for non-compliance with the requirements for filing a Petition for 1997 was well within the 60-day reglementary period.
[17]
Certiorari.
As regards the verification signed only by respondents counsel, this procedural lapse could have
warranted the outright dismissal of respondents petition for certioraribefore the Court of Appeals.
2. Under the law and applicable jurisprudence, respondents cannot be considered to have been
[18] However, it must be remembered that the rules on forum shopping, which were precisely designed to
dismissed from employment, because it was respondents who resigned from their employment.
promote and facilitate the orderly administration of justice, should not be interpreted with such absolute
literalness as to subvert its own ultimate and legitimate objective which is the goal of all rules of procedure
Petitioners maintain that the petition for certiorari should have merited outright dismissal for non- [30]
- that is, to achieve substantial justice as expeditiously as possible.
compliance with the mandatory requirements of the rules. There is no statement indicating the material
dates when the decision of the NLRC was received and when the motion for reconsideration was filed. Needless to stress, rules of procedure are merely tools designed to facilitate the attainment of
Likewise, the certification on non-forum shopping was not signed by respondents but by their counsel. In justice. They were conceived and promulgated to effectively aid the court in the dispensation of justice.
any event, petitioners insist that respondents voluntarily resigned from their employment. Courts are not slaves to or robots of technical rules, shorn of judicial discretion. In rendering justice, courts
have always been, as they ought to be, conscientiously guided by the norm that on the balance,
In their Comment, respondents allege that the instant petition highlights the same arguments technicalities take a backseat against substantive rights, and not the other way around. Thus, if the
already raised and squarely resolved by the Court of Appeals. Nevertheless, they reiterate that they did application of the Rules would tend to frustrate rather than promote justice, it is always within our power
not resign from employment but were abruptly and unceremoniously terminated by petitioner Ferry to suspend the rules or except a particular case from its operation.
[31]
[19]
Casinos Limited.
[32]
As the Court eloquently stated in the case of Aguam vs. Court of Appeals:
[20]
Section 3 of Rule 46 of the Rules of Court provides that there are three material dates that must
be stated in a petition for certiorari brought under Rule 65: (a) the date when notice of the judgment or
The court has the discretion to dismiss or not to dismiss an appellant's appeal. It is a power conferred on
final order or resolution was received, (b) the date when a motion for new trial or for reconsideration
the court, not a duty. The "discretion must be a sound one, to be exercised in accordance with the tenets
when one such was filed, and, (c) the date when notice of the denial thereof was received. This
of justice and fair play, having in mind the circumstances obtaining in each case." Technicalities,
requirement is for the purpose of determining the timeliness of the petition, since the perfection of an
however, must be avoided. The law abhors technicalities that impede the cause of justice. The court's
appeal in the manner and within the period prescribed by law is jurisdictional and failure to perfect an
[21] primary duty is to render or dispense justice. "A litigation is not a game of technicalities." "Lawsuits
appeal as required by law renders the judgment final and executory.
unlike duels are not to be won by a rapier's thrust. Technicality, when it deserts its proper office as an aid
The same rule requires the pleader to submit a certificate of non-forum shopping to be executed to justice and becomes its great hindrance and chief enemy, deserves scant consideration from courts."
by the plaintiff or principal party. Obviously, it is the plaintiff or principal party, and not the counsel whose Litigations must be decided on their merits and not on technicality. Every party litigant must be afforded
professional services have been retained for a particular case, who is in the best position to know whether the amplest opportunity for the proper and just determination of his cause, free from the unacceptable
he or it actually filed or caused the filing of a petition in that case.
[22]
plea of technicalities. Thus, dismissal of appeals purely on technical grounds is frowned upon where the
policy of the court is to encourage hearings of appeals on their merits and the rules of procedure ought
As a general rule, these requirements are mandatory, meaning, non-compliance therewith is a not to be applied in a very rigid, technical sense; rules of procedure are used only to help secure, not
[23]
sufficient ground for the dismissal of the petition. override substantial justice. It is a far better and more prudent course of action for the court to excuse a
technical lapse and afford the parties a review of the case on appeal to attain the ends of justice rather
In the case before us, the failure to comply with the rule on a statement of material dates in the
than dispose of the case on technicality and cause a grave injustice to the parties, giving a false
petition may be excused since the dates are evident from the records. A thorough scrutiny of the records
impression of speedy disposal of cases while actually resulting in more delay, if not a miscarriage of understand that my contract is uncompleted and I fully understand the consequences of that. I do
[33]
justice. (Emphasis supplied) however promise to work to full for both companies before my departure.

[34]
Thus, in Sy Chin vs. Court of Appeals, we held that the procedural lapse of a partys counsel in I realise (sic) that I may be dismissed by the captain or Purser of my assigned vessel, if I am suspected of
signing the certificate of non-forum shopping may be overlooked if the interests of substantial justice misconduct in the remaining weeks of my employment, until my departure, and I understand that I will
[35]
would thereby be served. Further, in Damasco vs. NLRC, we noted that the certificate of non-forum compansate (sic) both companies for the results from (sic) my actions.
shopping was executed by the petitioners counsel, but nevertheless resolved the case on its merits for the
reason that technicality should not be allowed to stand in the way of equitably and completely resolving I sign to say that I will follow the instructions of Captain A. Sanchez upon my arrival in the Philippines and
the equity and obligations of the parties to a labor case. that any previous arrangements to this date are nul (sic) and void.
Indeed, where a decision may be made to rest on informed judgment rather than rigid rules, the
equities of the case must be accorded their due weight because labor determinations should not only I recognise (sic) that I have been fairly treated by both companies and for this I will not jeopardise (sic)
be secundum rationem but also secundum caritatem.
[36]
them upon my arrival in the Philippines.

In this case, the Court of Appeals aptly found compelling reasons to disregard respondents
I acknowledge and accept this as evidence for (sic) my departure to be shown to the P.O.E.A. in the
procedural lapses in order to obviate a patent injustice. [41]
Philippines.
Time and again we have ruled that in illegal dismissal cases like the present one, the onus of proving
that the employee was not dismissed or if dismissed, that the dismissal was not illegal, rests on the which were all prepared by petitioner Ferry Casinos Limited, are substantially similarly worded and of the
employer and failure to discharge the same would mean that the dismissal is not justified and therefore same tenor. A thorough scrutiny of the purported resignation letters reveals the true nature of these
[37]
illegal. Thus, petitioners must not only rely on the weakness of respondents evidence but must stand documents. In reality, they are waivers or quitclaims which are not sufficient to show valid separation from
on the merits of their own defense. A party alleging a critical fact must support his allegation with work or bar respondents from assailing their termination. The burden of proving that quitclaims were
[42]
substantial evidence for any decision based on unsubstantiated allegation cannot stand as it will offend voluntarily entered into falls upon the employer. Deeds of release or quitclaim cannot bar employees
[38]
due process. Petitioners failed to discharge this burden. from demanding benefits to which they are legally entitled or from contesting the legality of their
[43] [44]
dismissal. The reason for this rule was laid down in the landmark case of Cario vs. ACCFA:
Petitioners complete reliance on the alleged resignation letters cum release and quitclaim to
support their claim that respondents voluntarily resigned is unavailing as the filing of the complaint for
[39]
illegal dismissal is inconsistent with resignation. Resignation is the voluntary act of employees who are Acceptance of those benefits would not amount to estoppel. The reason is plain. Employer and
compelled by personal reasons to dissociate themselves from their employment. It must be done with the employee, obviously, do not stand on the same footing. The employer drove the employee to the wall.
[40]
intention of relinquishing an office, accompanied by the act of abandonment. Thus, it is illogical for The latter must have to get hold of money. Because, out of job, he had to face the harsh necessities of
respondents to resign and then file a complaint for illegal dismissal. We find it highly unlikely that life. He thus found himself in no position to resist money proffered. His, then, is a case of adherence, not
respondents would just quit even before the expiration of their contracts, after all the expenses and the of choice. One thing sure, however, is that petitioners did not relent their claim. They pressed it. They
trouble they went through in seeking greener pastures and financial upliftment, and the concomitant are deemed not to have waived any of their rights. Renuntiatio non praesumitur.
tribulations of being separated from their families, having invested so much time, effort and money to
secure their employment abroad. Considering the hard economic times, it is incongruous for respondents Thus, we are more than convinced that respondents did not voluntarily quit their jobs. Rather, they
to simply give up their work, return home and be jobless once again. were forced to resign or were summarily dismissed without just cause. The Court of Appeals acted in the
exercise of its sound discretion when it denied petitioners insistence to dismiss the petition for certiorari,
Likewise, petitioners submission that respondents voluntarily resigned because of their desire to in light of the factual and antecedent milieu. By so doing, the appellate court correctly gave more
seek employment elsewhere, as accentuated by the concurrent fact that two of the respondents, Haydee importance to the resolution of the case on the merits.
Anne B. Acua and Marites T. Clarion, already have jobs in Singapore is an unreasonable inference. The fact
that these two have already found employment elsewhere should not be weighed against their favor. It WHEREFORE, the instant petition is DENIED and the assailed Decision of the Court of Appeals dated
should be expected that they would seek other means of income to tide them over during the time that June 30, 1999 in CA-G.R. SP No. 50504 is AFFIRMED. Costs against petitioners.
the legality of their termination is under litigation. They should not be faulted for seeking employment
SO ORDERED.
elsewhere for their economic survival.
Puno, (Chairman), Callejo, Sr., Tinga, and Chico-Nazario, JJ., concur.
We further note that the alleged resignation letters, one of which reads:


In signing this document, I am declaring my decision to return to the Philippines with the other eight
th
employees of Ferry Casinos Limited and Great Southern Maritime Corporation, on the 25 July 1993. I
 was involved with quarrels with your co-employees, and alleging that she felt binabastos mo ako (I was
[G.R. No. 137863. March 31, 2005] being sexually harassed) when he uttered Dito ka na lang, marami and [ang] lalaki dito (You just stay
here, there are plenty of men here), and when she answered Hindi ako mahilig sa lalaki (I am not fond of
BANK OF THE PHILIPPINE ISLANDS EMPLOYEES UNION and ZENAIDA UY, petitioners, vs. BANK OF THE
men), he retorted, Maski dito ka na lang sa kuwarto ko (You may just stay here in my room . . .). The
PHILIPPINE ISLANDS, CARLOS FRAGANTE, DELFIN SANTOS, ALBERTO JUGO and/or OSCAR
union asked for a suspension of the grievance machinery and for investigation of the sexual harassment
CONTRERAS, respondents.
charge. On November 24, 1995, Uy requested Management through Mr. Oscar L. Cervantes, for transfer
to the Taft Avenue Branch to save on gasoline expenses. Two meetings were held between the union
D E C I S I O N side and the management side, represented by Mr. Fragantes superior, Senior Vice President Alberto
CHICO-NAZARIO, J.: Jugo and Senior Manager Efren Tuble. When no agreement was reached, the management advised Uy
and the Union as well as their counsel that the management had no choice but to terminate Uy. Both the
union and Uy were sent copies of the Notice of Termination . . . dated December 8, 1995, which had the
This petition for review on certiorari under Rule 45 of the 1997 Rules on Civil Procedure, as
[1] [2] following tenor:
amended, seeks to partially reverse the Decision of 28 October 1998 and the Resolution of 08 March
1999 of the Court of Appeals, in CA-G.R. SP No. 47363, which affirmed with modification the
[3]
Decision rendered by the Accredited Voluntary Arbitrator dated 31 December 1997, in VA Case No. 08-
001-97. The case before the Voluntary Arbitrator was for illegal transfer and termination, with the latter NOTICE OF TERMINATION
ruling in favor of the petitioners herein.

The facts as narrated by the Court of Appeals are quoted hereunder: Dear Ms. Uy:

[4]
On 26 October 1995, respondent Zenaida V. Uy, former teller of the Escolta Branch of BPI, shouted at This is to advise you of the termination of your employment effective December 14, 1995 on the grounds
[5]
her Senior Manager, petitioner Delfin D. Santos (Santos for brevity). Uy was told to go to the office of of gross disrespect/discourtesy towards an officer, insubordination and absence without leave.
the petitioner Carlos B. Fragante, BPIs area head and Assistant Vice President, to discuss her complaint.
On the same date, AVP Fragante told Uy to transfer to the nearby Plaza Cervantes Branch of BPI and
It has been established that you used highly disrespectful, discourteous, insulting, threatening and
report to its operations manager to defuse (sic) the tense situation prevailing at the Escolta Branch. On
unbecoming language and behavior towards your branch manager, Delfin Santos, last October 26.
27 October 1995, AVP Fragante received the report of the Escolta Branch Manager (Santos) on the
Despite being given the chance to explain or justify your actions, you chose to skirt the issue by pointing
shouting incident, together with the written letter-reports of some branch personnel. On the same day,
out that I am in no position to make a conclusion as I was not around when the incident happened. You
AVP Fragante ordered Uy to transfer to the Plaza Cervantes Branch. Upon receipt of the order, Uy
know fully well that as Sales Director of North Manila area having supervision over Escolta Branch, such
commented that she will not transfer and will await the result of the grievance meeting. The respondent
incident was reported to me. Mr. Delfin Santos appropriately inhibited himself from conducting the
BPI Employees Union initiated a grievance proceeding against the BPI Management for the transfer of Uy
investigation for obvious reasons. We disagree with you when you dismissed the incident as trivial.
to the Plaza Cervantes Branch. A meeting was set for 30 October 1995. On 30 October 1995, AVP
Moreover, the explanations you gave at our Head Office were found wanting in circumstances that
Fragante sent Uy a letter . . . directing her to explain within 24 hours why no disciplinary action should be
would absolve you or mitigate your wrongdoing as said explanations in fact confirmed the findings at the
taken against her for insubordination, for not paying heed to the order to transfer. Uy sent a reply on the
branch level. With regard to quarrels with your officemates, you can be considered as recidivist. You can
same date . . . explaining that she could not transfer from Escolta Branch because there was no proper
of course recall your quarrels, using very strong and insulting words, with your co-employees Ms. Teresa
turnover of her accountabilities; that she was not able to do so on October 27, 1995 because she was not
Manalang last year and with Jocelyn Ng this year.
allowed to open (as a teller); and, that since then she has been barred from entering the bank premises.
On the same day, a meeting was held to hear Uys grievance relative to her transfer, but no agreement
was reached. On 31 October 1995, AVP Fragante sent Uy another letter . . . asking her to explain why no You refused to follow the transfer instruction to report to Cervantes Branch last October 27 alleging
disciplinary action should be taken against her for uttering disrespectful, discourteous, insulting and failure to properly turn over your accountabilities despite being in the branch for practically the whole
unbecoming language to her superior, Senior Manager Delfin Santos. Uy sent an undated reply thereto . . day on October 27. We have adequate procedure for the opening of pico boxes in the presence of
. reiterating why she could just not leave her position at the Escolta Branch, and requesting that she be witnesses in cases of refusal and AWOL.
considered on leave starting November 2, 1995. On 13 November 1995, AVP Fragante wrote Uy another
letter . . . directing her to show cause on or before 16 November 1995 why no disciplinary action, In a further manifestation of your contempt towards managerial authority, you went on absence without
including possible termination, should be taken against her for the October 26, 1995 incident, for leave starting October 30. After refusing to receive all communications sent to your residence, you tried
insubordination or defiance to the transfer order, and for going on absence without leave. A copy to rectify this AWOL by sending an undated letter received by us last November 6 wherein you declared
thereof was furnished the Union. Uy sent a reply letter dated November 20, 1995, asking for particulars yourself to be on leave beginning November 2. You have since refused to report for work.
relative to the alleged highly disrespectful, discourteous, insulting, threatening, and unbecoming
language and behavior towards your Manager, Delfin Santos and on the alleged past instances when she Under the circumstances, you left us with no alternative but to terminate your employment with us.
 (SGD.) CARLOS B. FRAGANTE raised in this case has been filed or is pending before this Court, the Court of Appeals, or in the different
Asst. Vice President divisions thereof, or in any other tribunal or quasi-judicial agency, with the undertaking to inform the Court
of any similar case filed or pending in any court, tribunal or quasi-judicial agency that may thereafter come
Uy filed a case for illegal transfer and termination. On June 29, 1996, Labor Arbiter Manuel R. Caday who to their knowledge in accordance with Section 4(e), Rule 45 in relation to Section 5, Rule 7, Section 2, Rule
[10]
initially heard and decided the case issued a decision declaring the dismissal of Uy as illegal and ordering 42, and Sections 4 and 5(d), Rule 56 of the Rules of Court. The corresponding Entry of Judgment was
her reinstatement with full backwages and 10% attorneys fees BPI appealed the said decision to the entered in the Book of Entries of Judgments on 22 September 1999.
National Labor Relations Commission (NLRC) which rendered a decision on May 28, 1997, setting aside
For the reason above stated, only the following errors imputed by herein petitioners Bank of the
the Labor Arbiters Decision for lack of jurisdiction, and ruling that the case falls under the jurisdiction of a
Philippine Islands Employees Union (BPIEU) and Uy to the appellate court are in issue:
Voluntary Arbitrator.
I
The case was raffled to respondent Arbitrator Entuna, who requested the parties to submit their
[6]
respective position papers. WITH DUE RESPECT, THE QUESTIONED RESOLUTION AND DECISION OF THE HONORABLE COURT OF
APPEALS ARE CONTRARY TO LAW INSOFAR AS THEY LIMITED THE AWARD OF BACKWAGES TO THREE (3)
The Voluntary Arbitrator, in his disputed Decision of 31 December 1997, adjudged: YEARS; AND

WHEREFORE, premises considered, judgment is hereby rendered declaring the dismissal of complainant II
Zenaida Uy as illegal and ordering the respondent Bank of the Philippine Islands to immediately reinstate
her to her position as bank teller of the Escolta Branch without loss of seniority rights and with full WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN
backwages computed from the time she was dismissed on December 14, 1995 until she is actually HOLDING THAT STRAINED RELATIONS EXIST BETWEEN THE BANK AND PETITIONER UY DESPITE THE FACT
reinstated in the service, and including all her other benefits which are benefits under their Collective THAT THE SHOUTING INCIDENT IS NOT SO SERIOUS AND IT INVOLVED ONLY PETITIONER UY AND
[11]
Bargaining Agreement (CBA). RESPONDENT DELFIN SANTOS.

For reasonable attorneys fees, respondent is also ordered to pay complainant the equivalent of 10% of Anent the first issue, the petitioners contend that the decision of the appellate court limiting the
[7]
the recoverable award in this case. award of backwages to three (3) years is contrary to law and jurisprudence.

The petition is meritorious.

The Motion for Reconsideration of the herein respondents BPI, et al., was subsequently denied.
The rule providing for the entitlement of an illegally dismissed employee to only three years
Aggrieved, they then filed a Petition for Review before the Court of Appeals assailing the aforestated
backwages without deduction or qualification to obviate the need for further proceedings in the course of
decision. [12]
execution, otherwise known as the Mercury Drug Rule, has long been abandoned.
On 28 October 1998, the Court of Appeals issued the assailed decision affirming the finding of the [13] [14]
In a long line of cases, we have stated that the case of Mercury Drug, Co., Inc. v. CIR, is no
Voluntary Arbitrator that indeed Uys employment was illegally terminated. The appellate court, however,
longer applicable. To preclude the recurrence of the situation where the employee, with folded arms,
modified the award for backwages by limiting it to three years as well as finding that there was strained
remains inactive in the expectation that windfall would come to him and to speed up the process of
relations between the parties, to wit:
execution, the aforementioned Mercury Drug case provided a remedy by ruling that an employee whose
illegal termination had lasted some years was entitled to backwages for a fixed period without further
WHEREFORE, the judgment appealed from is AFFIRMED with the MODIFICATION that instead of qualifications, i.e., without need of taking account of whatever he might have earned during such period,
reinstatement, the petitioner Bank of the Philippine Islands is DIRECTED to pay Uy back salaries not and deducting it from the amount of recovery, by providing a base period of three years. The three-year-
exceeding three (3) years and separation pay of one month for every year of service. The said judgment limit doctrine has been consistently and uniformly applied by this Court over many years until the
[8]
is AFFIRMED in all other respects. promulgation of Republic Act No. 6715 which amended Article 279 of the Labor Code in 1989.

With the new law before us, we clarified the computation of backwages due an employee on
Both parties seasonably filed their respective motions for partial reconsideration of the aforesaid
account of his illegal dismissal from employment in the case of Osmalik Bustamante, et al. v. NLRC and
decision but the appellate court denied them in a Resolution dated 08 March 1999. [15] [16]
Evergreen Farms, Inc. We held that the passing of Republic Act No. 6715, particularly Section
[17]
Hence, the parties individually went to this Court via a Petition for Review on Certiorari. 34, which took effect on 21 March 1989, amended Article 279 of the Labor Code, which now states in
[9]
part:
The petition filed by herein respondents BPI, et al., however, was denied for their failure to submit
a certification duly executed by themselves that no other action or proceeding involving the same issues
ART. 279. Security of Tenure. - An employee who is unjustly dismissed from work shall be entitled to Besides, no strained relations should arise from a valid and legal act of asserting ones right; otherwise an
reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of employee who shall assert his right could be easily separated from the service, by merely paying his
allowances, and to his other benefits or their monetary equivalent computed from the time his separation pay on the pretext that his relationship with his employer had already become strained.
compensation was withheld from him up to the time of his actual reinstatement.
Petitioners reliance is well placed.
Verily, the evident legislative intent as expressed in Rep. Act No. 6715, above-quoted, is that the
backwages to be awarded to an illegally dismissed employee, should not, as a general rule, be diminished We have oft said that mere allegation of strained relations to bar reinstatement is frowned upon.
or reduced by the earnings derived by him elsewhere during the period of his illegal dismissal. The [23]
In the case of PLDT, et al. v. Tolentino, we reiterated our ruling in Quijano v. Mercury Drug
underlying reason for this ruling is that the employee, while litigating the legality (illegality) of his dismissal, [24]
Corp. wherein we propitiously said that the strained relations doctrine should be strictly applied so as
must still earn a living to support himself and his family. Corollary thereto, full backwages have to be paid not to deprive an illegally dismissed employee of his right to reinstatement. We further stated that:
by the employer as part of the price or penalty he has to pay for illegally dismissing his employee. Thus, a
closer adherence to the legislative policy behind Rep. Act. No. 6715 points to full backwages as meaning
Well-entrenched is the rule that an illegally dismissed employee is entitled to reinstatement as a matter
exactly that, i.e., without deducting from backwages the earnings derived elsewhere by the concerned
of right. Over the years, however, the case law developed that where reinstatement is not feasible,
employee during the period of his illegal dismissal. In other words, the provision calling for full backwages
expedient or practical, as where reinstatement would only exacerbate the tension and strained relations
to illegally dismissed employees is clear, plain and free from ambiguity and, therefore, must be applied
[18] between the parties, or where the relationship between the employer and employee has been unduly
without attempted or strained interpretation.
strained by reason of their irreconcilable differences, particularly where the illegally dismissed employee
Consequently, in accordance with Section 34, Rep. Act No. 6715, employees illegally dismissed after held a managerial or key position in the company, it would be more prudent to order payment of
21 March 1989 are entitled to their full backwages, inclusive of other benefits or their monetary separation pay instead of reinstatement. Some unscrupulous employers, however, have taken advantage
equivalent, from the time their actual compensation was withheld from them up to the time of their actual of the overgrowth of this doctrine of strained relations by using it as a cover to get rid of its employees
reinstatement. and thus defeat their right to job security.

Under the factual circumstances of the case, the law and jurisprudence prevailing, therefore, we
To protect labors security of tenure, we emphasize that the doctrine of strained relations should be
find that the Court of Appeals committed a reversible error in limiting the award of backwages for a fixed
strictly applied so as not to deprive an illegally dismissed employee of his right to reinstatement. Every
period of three years. The illegal dismissal of petitioner Uy was effected in 1995, or after Rep. Act No. 6715
labor dispute almost always results in strained relations and the phrase cannot be given an overarching
took effect on 21 March 1989. Absent any exceptional circumstance, it is now settled that an employee
interpretation, otherwise, an unjustly dismissed employee can never be reinstated.
who is unjustly dismissed from work shall be entitled to full backwages, inclusive of allowances, and to his
other benefits or their monetary equivalent from the time his compensation was withheld from him up to
the time of his actual reinstatement.
[19] The said case went on further to quote our pronouncement in the case of Almira v. B.F. Goodrich,
[25]
Philippines, Inc.:
Apropos the issue of non-reinstatement of petitioner Uy, the Court of Appeals held that in a number
of cases, the High Court had allowed mere payment of severance pay, when reinstatement would no
[20]
This Court is cognizant of managements right to select the people who will manage its business as well as
longer be beneficial to either party in view of strained relations between them. And, thus, in lieu of its right to dismiss them. However, this right cannot be abused. Its exercise must always be tempered
reinstatement, it ordered the payment of separation pay instead.
with compassion and understanding. As former Chief Justice Enrique Fernando eloquently put it:
The petitioners, on the other hand, posit that the material incidents of the case at bar are but
confined or personal to the individual respondents Delfin Santos and Carlos Fragante. The other Where penalty less severe would suffice, whatever missteps may be committees by labor ought not to
respondents, namely Alberto Jugo and Oscar Contreras were impleaded merely because of their position be visited with consequence so severe. It is not only because of the laws concern for the workingmen.
in respondent BPIs Human Resources Department. In the words of the petitioners, the controversy was There is, in addition, his family to consider. Unemployment brings untold hardships and sorrows on those
[21]
a personal matter between Ms. Uy and Messrs. Delfin Santos and Carlos Fragante. In addition, they dependent on the wage-earner. The misery and pain attendant on the loss of jobs then could be avoided
bolstered their position by relying on what this Court had to say in Globe-Mackay Cable and Radio Corp. v. if there be acceptance of the view that under all the circumstances of a case, the workers should not be
[22]
NLRC: deprived of their means of livelihood. Nor is this to condone what has been done by them.

Obviously, the principle of strained relations cannot be applied indiscriminately. Otherwise, Moreover, it has been almost a decade since the incident that led to the dismissal of petitioner Uy
reinstatement can never be possible simply because some hostility is invariably engendered between the occurred. Petitioner Uy contends, and the respondents do not contradict, that respondent Carlos Fragante
parties as a result of litigation. That is human nature. has long been assigned in another area and Messrs. Alberto Jugo and Oscar Contreras are no longer
connected with respondent BPI. Considering, thus, that there now appears no more basis for strained
relations between the present management and petitioner Uy, reinstatement is possible.
 WHEREFORE, the instant petition is GRANTED. The assailed 28 October 1998 Decision and 8 March
1999 Resolution of the Court of Appeals are hereby MODIFIED as follows: 1) respondent BPI is DIRECTED
to pay petitioner Uy backwages from the time of her illegal dismissal until her actual reinstatement; and
2) respondent BPI is ORDERED to reinstate petitioner Uy to her former position, or to a substantially
equivalent one, without loss of seniority right and other benefits attendant to the position.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.







































 EQUITABLE BANKING CORPORATION (now known as EQUITABLE- G.R. No. 164772 WHEREFORE, in view of all the foregoing considerations, let the Decision of October
PCI BANK), 2, 1990 be, as it is hereby, SET ASIDE, and a new one ENTERED declaring the
Petitioner, Present: dismissal of the complainant as illegal, and consequently ordering the respondents
PANGANIBAN,C.J. jointly and severally to reinstate him to his former position as bank Vice-President
- versus - Chairperson, and General Counsel without loss of seniority rights and other privileges, and to pay
*
YNARES-SANTIAGO, him full backwages and other benefits from the time his compensation was withheld
**
AUSTRIA-MARTINEZ, to his actual reinstatement, as well as moral damages of P100,000.00, exemplary
CALLEJO, SR., and damages of P50,000.00, and attorneys fees equivalent to Ten Percent (10%) of the
RICARDO SADAC, CHICO-NAZARIO, JJ. monetary award. Should reinstatement be no longer possible due to strained
Respondent. relations, the respondents are ordered likewise jointly and severally to grant
Promulgated: separation pay at one (1) month per year of service in the total sum of P293,650.00
with backwages and other benefits from November 16, 1989 to September 15, 1991
June 8, 2006 (cut off date, subject to adjustment) computed at P1,055,740.48, plus damages of
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x P100,000.00 (moral damages), P50,000.00 (exemplary damages) and attorneys fees
equal to Ten Percent (10%) of all the monetary award, or a grand total of
[7]
P1,649,329.53.
D E C I S I O N

Petitioner Bank came to us for the first time via a Special Civil Action for Certiorari assailing the NLRC
CHICO-NAZARIO, J.: Resolution of 24 September 1991 in Equitable Banking Corporation v. National Labor Relations
[8]
Commission, docketed as G.R. No. 102467.

[9]
Before Us is a Petition for Review on Certiorari with Motion to Refer the Petition to the Court En In our Decision of 13 June 1997, we held respondent Sadacs dismissal illegal. We said that the
Banc filed by Equitable Banking Corporation (now known as Equitable-PCI Bank), seeking to reverse the existence of the employer-employee relationship between petitioner Bank and respondent Sadac had
[1] [2]
Decision and Resolution of the Court of Appeals, dated 6 April 2004 and 28 July 2004, respectively, as been duly established bringing the case within the coverage of the Labor Code, hence, we did not permit
[3] [10]
amended by the Supplemental Decision dated 26 October 2004 in CA-G.R. SP No. 75013, which reversed petitioner Bank to rely on Sec. 26, Rule 138 of the Rules of Court, claiming that the association between
and set aside the Resolutions of the National Labor Relations Commission (NLRC), dated 28 March 2001 the parties was one of a client-lawyer relationship, and, thus, it could terminate at any time the services
and 24 September 2002 in NLRC-NCR Case No. 00-11-05252-89. of respondent Sadac.Moreover, we did not find that respondent Sadacs dismissal was grounded on any of
The Antecedents the causes stated in Article 282 of the Labor Code. We similarly found that petitioner Bank disregarded the
procedural requirements in terminating respondent Sadacs employment as so required by Section 2 and
As culled from the records, respondent Sadac was appointed Vice President of the Legal Section 5, Rule XIV, Book V of the Implementing Rules of the Labor Code. We decreed:
Department of petitioner Bank effective 1 August 1981, and subsequently General Counsel thereof on 8
December 1981. On 26 June 1989, nine lawyers of petitioner Banks Legal Department, in a letter-petition WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with the
to the Chairman of the Board of Directors, accused respondent Sadac of abusive conduct, inter alia, and following MODIFICATIONS: That private respondent shall be entitled to backwages
ultimately, petitioned for a change in leadership of the department. On the ground of lack of confidence from termination of employment until turning sixty (60) years of age (in 1995) and,
in respondent Sadac, under the rules of client and lawyer relationship, petitioner Bank instructed thereupon, to retirement benefits in accordance with law; that private respondent
respondent Sadac to deliver all materials in his custody in all cases in which the latter was appearing as its shall be paid an additional amount of P5,000.00; that the award of moral and
counsel of record. In reaction thereto, respondent Sadac requested for a full hearing and formal exemplary damages are deleted; and that the liability herein pronounced shall be
investigation but the same remained unheeded. On 9 November 1989, respondent Sadac filed a complaint due from petitioner bank alone, the other petitioners being absolved from solidary
[11]
for illegal dismissal with damages against petitioner Bank and individual members of the Board of Directors liability. No costs.
thereof. After learning of the filing of the complaint, petitioner Bank terminated the services of respondent
Sadac. Finally, on 10 August 1989, respondent Sadac was removed from his office and ordered disentitled
[4]
to any compensation and other benefits. On 28 July 1997, our Decision in G.R. No. 102467 dated 13 June 1997 became final and
[12]
executory.
[5]
In a Decision dated 2 October 1990, Labor Arbiter Jovencio Ll. Mayor, Jr., dismissed the
[6]
complaint for lack of merit. On appeal, the NLRC in its Resolution of 24 September 1991 reversed the Pursuant thereto, respondent Sadac filed with the Labor Arbiter a Motion for
[13] [14]
Labor Arbiter and declared respondent Sadacs dismissal as illegal. The decretal portion thereof reads, thus: Execution thereof. Likewise, petitioner Bank filed a Manifestation and Motion praying that the award

in favor of respondent Sadac be computed and that after payment is made, petitioner Bank be ordered
forever released from liability under said judgment. WHEREFORE, in view of al (sic) the foregoing, let an ALIAS Writ of Execution be
issued commanding the Sheriff, this Branch, to collect from respondent Bank the
Per respondent Sadacs computation, the total amount of the monetary award is P6,030,456.59, amount of Ph6,342,307.00 representing the backwages with 12% interest per
[23]
representing his backwages and other benefits, including the general increases which he should have annum due complainant.
earned during the period of his illegal termination. Respondent Sadac theorized that he started with a
monthly compensation of P12,500.00 in August 1981, when he was appointed as Vice President of Petitioner Bank interposed an appeal with the NLRC, which reversed the Labor Arbiter in a
[24]
petitioner Banks Legal Department and later as its General Counsel in December 1981. As of November Resolution, promulgated on 28 March 2001. It ratiocinated that the doctrine on general increases as
1989, when he was dismissed illegally, his monthly compensation amounted to P29,365.00 or more than component in computing backwages in Sigma Personnel Services and St. Louis was merely obiter
twice his original compensation. The difference, he posited, can be attributed to the annual salary dictum. The NLRC found East Asiatic Co., Ltd. inapplicable on the ground that the original circumstances
increases which he received equivalent to 15 percent (15%) of his monthly salary. therein are not only peculiar to the said case but also completely strange to the case of respondent
Sadac. Further, the NLRC disallowed respondent Sadacs claim to check-up benefit ratiocinating that there
Respondent Sadac anchored his claim on Article 279 of the Labor Code of the Philippines, and was no clear and substantial proof that the same was being granted and enjoyed by other employees of
[15]
cited as authority the cases of East Asiatic Company, Ltd. v. Court of Industrial Relations, St. Louis College petitioner Bank. The award of attorneys fees was similarly deleted.
[16]
of Tuguegarao v. National Labor Relations Commission, and Sigma Personnel Services v. National Labor
[17]
Relations Commission. According to respondent Sadac, the catena of cases uniformly holds that it is the The dispositive portion of the Resolution states:
obligation of the employer to pay an illegally dismissed employee the whole amount of the salaries or
wages, plus all other benefits and bonuses and general increases to which he would have been normally WHEREFORE, the instant appeal is considered meritorious and accordingly, the
entitled had he not been dismissed; and therefore, salary increases should be deemed a component in the computation prepared by respondent Equitable Banking Corporation on the award
computation of backwages. Moreover, respondent Sadac contended that his check-up benefit, clothing of backwages in favor of complainant Ricardo Sadac under the decision promulgated
allowance, and cash conversion of vacation leaves must be included in the computation of his backwages. by the Supreme Court on June 13, 1997 in G.R. No. 102476 in the aggregate amount
[25]
of P2,981,442.98 is hereby ordered.
Petitioner Bank disputed respondent Sadacs computation. Per its computation, the amount of
monetary award due respondent Sadac is P2,981,442.98 only, to the exclusion of the latters general salary Respondent Sadacs Motion for Reconsideration thereon was denied by the NLRC in its
[26]
increases and other claimed benefits which, it maintained, were unsubstantiated. The jurisprudential Resolution, promulgated on 24 September 2002.
precedent relied upon by petitioner Bank in assailing respondent Sadacs computation is Evangelista v.
[18]
National Labor Relations Commission, citing Paramount Vinyl Products Corp. v. National Labor Relations Aggrieved, respondent Sadac filed before the Court of Appeals a Petition for Certiorari seeking nullification
[19]
Commission, holding that an unqualified award of backwages means that the employee is paid at the of the twin resolutions of the NLRC, dated 28 March 2001 and 24 September 2002, as well as praying for
wage rate at the time of his dismissal. Furthermore, petitioner Bank argued before the Labor Arbiter that the reinstatement of the 2 August 1999 Order of the Labor Arbiter.
the award of salary differentials is not allowed, the established rule being that upon reinstatement, illegally
dismissed employees are to be paid their backwages without deduction and qualification as to any wage For the resolution of the Court of Appeals were the following issues, viz.:
increases or other benefits that may have been received by their co-workers who were not dismissed or
did not go on strike. (1) Whether periodic general increases in basic salary, check-up
benefit, clothing allowance, and cash conversion of vacation
[20]
On 2 August 1999, Labor Arbiter Jovencio Ll. Mayor, Jr. rendered an Order adopting respondent Sadacs leave are included in the computation of full backwages for
computation. In the main, the Labor Arbiter relying on Millares v. National Labor Relations illegally dismissed employees;
[21]
Commission concluded that respondent Sadac is entitled to the general increases as a component in the
computation of his backwages. Accordingly, he awarded respondent Sadac the amount of P6,030,456.59 (2) Whether respondent is entitled to attorneys fees; and
representing his backwages inclusive of allowances and other claimed benefits, namely check-up benefit,
clothing allowance, and cash conversion of vacation leave plus 12 percent (12%) interest per annum (3) Whether respondent is entitled to twelve percent (12%) per
equivalent to P1,367,590.89 as of 30 June 1999, or a total of P7,398,047.48. However, considering that annum as interest on all accounts outstanding until full
respondent Sadac had already received the amount of P1,055,740.48 by virtue of a Writ of payment thereof.
[22]
Execution earlier issued on 18 January 1999, the Labor Arbiter directed petitioner Bank to pay
respondent Sadac the amount of P6,342,307.00. The Labor Arbiter also granted an award of attorneys fees Finding for respondent Sadac (therein petitioner), the Court of Appeals rendered a Decision
equivalent to ten percent (10%) of all monetary awards, and imposed a 12 percent (12%) interest per on 6 April 2004, the dispositive portion of which is quoted hereunder:
annum reckoned from the finality of the judgment until the satisfaction thereof.
WHEREFORE, premises considered, the March 28, 2001 and the September 24, 2002
The Labor Arbiter decreed, thus: Resolutions of the National Labor Relations Commissions (sic) are REVERSED and
 SET ASIDE and the August 2, 1999 Order of the Labor Arbiter is REVIVED to the effect (c) The Hon. Court of Appeals erred in ruling that respondent is entitled to check-up
that private respondent is DIRECTED TO PAY petitioner the sum of PhP6,342,307.00, benefit, clothing allowance and cash conversion of vacation leaves notwithstanding
representing full back wages (sic) which sum includes annual general increases in that respondent did not present any evidence to prove entitlement to these claims.
basic salary, check-up benefit, clothing allowance, cash conversion of vacation leave
and other sundry benefits plus 12% per annum interest on outstanding balance from (d) The Hon. Court of Appeals erred in ruling that respondent is entitled to be paid
July 28, 1997 until full payment. legal interest even if the principal amount due him has not yet been correctly and
[31]
finally determined.
[27]
Costs against private respondent.

Meanwhile, on 26 October 2004, the Court of Appeals rendered a Supplemental Decision
The Court of Appeals, citing East Asiatic held that respondent Sadacs general increases should be added granting respondent Sadacs Partial Motion for Reconsideration and amending the dispositive portion of
as part of his backwages. According to the appellate court, respondent Sadacs entitlement to the annual the 6 April 2004 Decision in this wise, viz.:
general increases has been duly proven by substantial evidence that the latter, in fact, enjoyed an annual
increase of more or less 15 percent (15%). Respondent Sadacs check-up benefit, clothing allowance, and WHEREFORE, premises considered, the March 24 (sic), 2001 and the September 24,
cash conversion of vacation leave were similarly ordered added in the computation of respondent Sadacs 2002 Resolutions of the National Labor Relations Commission are hereby REVERSED
basic wage. and SET ASIDE and the August 2, 1999 Order of the Labor Arbiter is hereby REVIVED
to the effect that private respondent is hereby DIRECTED TO PAY petitioner the sum
Anent the matter of attorneys fees, the Court of Appeals sustained the NLRC. It ruled that our of P6,342,307.00, representing full backwages which sum includes annual
[28]
Decision of 13 June 1997 did not award attorneys fees in respondent Sadacs favor as there was nothing general increases in basic salary, check-up benefit, clothing allowance, cash
in the aforesaid Decision, either in the dispositive portion or the body thereof that supported the grant of conversion of vacation leave and other sundry benefits and attorneys fees equal to
attorneys fees. Resolving the final issue, the Court of Appeals imposed a 12 percent (12%) interest per TEN PERCENT (10%) of all the monetary award plus 12% per annum interest on all
annum on the total monetary award to be computed from 28 July 1997 or the date our judgment in G.R. outstanding balance from July 28, 1997 until full payment.
No. 102467 became final and executory until fully paid at which time the quantification of the amount may
[32]
be deemed to have been reasonably ascertained. Costs against private respondent.

[29]
On 7 May 2004, respondent Sadac filed a Partial Motion for Reconsideration of the 6 April 2004 Court
[33]
of Appeals Decision insofar as the appellate court did not award him attorneys fees. Similarly, petitioner On 22 November 2004, petitioner Bank filed a Supplement to Petition for Review contending in the main
Bank filed a Motion for Partial Reconsideration thereon. Following an exchange of pleadings between the that the Court of Appeals erred in issuing the Supplemental Decision by directing petitioner Bank to pay
[30]
parties, the Court of Appeals rendered a Resolution, dated 28 July 2004, denying petitioner Banks an additional amount to respondent Sadac representing attorneys fees equal to ten percent (10%) of all
Motion for Partial Reconsideration for lack of merit. the monetary award.

Assignment of Errors The Courts Ruling

Hence, the instant Petition for Review by petitioner Bank on the following assignment of errors, to wit: I.

(a) The Hon. Court of Appeals erred in ruling that general salary increases should be We are called to write finis to a controversy that comes to us for the second time. At the core
included in the computation of full backwages. of the instant case are the divergent contentions of the parties on the manner of computation of
backwages.
(b) The Hon. Court of Appeals erred in ruling that the applicable authorities in this
case are: (i) East Asiatic, Ltd. v. CIR, 40 SCRA 521 (1971); (ii) St. Louis College of Petitioner Bank asseverates that Article 279 of the Labor Code of the Philippines does not
Tuguegarao v. NLRC, 177 SCRA 151 (1989); (iii) Sigma Personnel Services v. contemplate the inclusion of salary increases in the definition of full backwages. It controverts the reliance
NLRC, 224 SCRA 181 (1993); and (iv) Millares v. NLRC, 305 SCRA 500 (1999) and by the appellate court on the cases of (i) East Asiatic; (ii) St. Louis; (iii) Sigma Personnel; and
not (i) Art. 279 of the Labor Code; (ii) Paramount Vinyl Corp. v. NLRC, 190 SCRA 525 (iv) Millares. While it is in accord with the pronouncement of the Court of Appeals that Republic Act No.
(1990); (iii) Evangelista v. NLRC, 249 SCRA 194 (1995); and (iv) Espejo v. NLRC, 255 6715, in amending Article 279, intends to give more benefits to workers, petitioner Bank submits that the
SCRA 430 (1996). Court of Appeals was in error in relying on East Asiatic to support its finding that salary increases should
be included in the computation of backwages as nowhere in Article 279, as amended, are salary increases
spoken of. The prevailing rule in the milieu of the East Asiatic doctrine was to deduct earnings earned
elsewhere from the amount of backwages payable to an illegally dismissed employee.

Petitioner Bank posits that even granting that East Asiatic allowed general salary increases in Verily, jurisprudence has shown that the definition of full backwages has forcefully
[42]
the computation of backwages, it was because the inclusion was purposely to cushion the blow of the evolved. In Mercury Drug Co., Inc. v. Court of Industrial Relations, the rule was that backwages were
deduction of earnings derived elsewhere; with the amendment of Article 279 and the consequent granted for a period of three years without qualification and without deduction, meaning, the award of
elimination of the rule on the deduction of earnings derived elsewhere, the rationale for including salary backwages was not reduced by earnings actually earned by the dismissed employee during the interim
[43]
increases in the computation of backwages no longer exists. On the references of salary increases in the period of the separation. This came to be known as the Mercury Drug rule. Prior to the Mercury
aforementioned cases of (i) St. Louis; (ii) Sigma Personnel; and (iii) Millares, petitioner Bank contends that Drug ruling in 1974, the total amount of backwages was reduced by earnings obtained by the employee
the same were merely obiter dicta. In fine, petitioner Bank anchors its claim on the cases of (i) Paramount elsewhere from the time of the dismissal to his reinstatement. The Mercury Drug rule was subsequently
[34] [44]
Vinyl Products Corp. v. National Labor Relations Commission; (ii) Evangelista v. National Labor Relations modified in Ferrer v. National Labor Relations Commission and Pines City Educational Center v. National
[35] [36] [45]
Commission; and (iii) Espejo v. National Labor Relations Commission, which ruled that an unqualified Labor Relations Commission, where we allowed the recovery of backwages for the duration of the illegal
award of backwages is exclusive of general salary increases and the employee is paid at the wage rate at dismissal minus the total amount of earnings which the employee derived elsewhere from the date of
the time of the dismissal. dismissal up to the date of reinstatement, if any. In Ferrer and in Pines, the three-year period was deleted,
and instead, the dismissed employee was paid backwages for the entire period that he was without work
For his part, respondent Sadac submits that the Court of Appeals was correct when it ruled that subject to the deductions, as mentioned. Finally came our ruling in Bustamante which superseded Pines
his backwages should include the general increases on the basis of the following cases, to wit: (i) East City Educational Center and allowed full recovery of backwages without deduction and without
Asiatic; (ii) St. Louis; (iii) Sigma Personnel; and (iv) Millares. qualification pursuant to the express provisions of Article 279 of the Labor Code, as amended by Rep. Act
No. 6715, i.e., without any deduction of income the employee may have derived from employment
Resolving the protracted litigation between the parties necessitates us to revisit our elsewhere from the date of his dismissal up to his reinstatement, that is, covering the entirety of the
pronouncements on the interpretation of the term backwages. We said that backwages in general are period of the dismissal.
granted on grounds of equity for earnings which a worker or employee has lost due to his illegal
[37]
dismissal. It is not private compensation or damages but is awarded in furtherance and effectuation of The first issue for our resolution involves another aspect in the computation of full backwages,
the public objective of the Labor Code. Nor is it a redress of a private right but rather in the nature of a mainly, the basis of the computation thereof. Otherwise stated, whether general salary increases should
command to the employer to make public reparation for dismissing an employee either due to the formers be included in the base figure to be used in the computation of backwages.
[38]
unlawful act or bad faith. The Court, in the landmark case of Bustamante v. National Labor Relations
[39]
Commission, had the occasion to explicate on the meaning of full backwages as contemplated by Article In so concluding that general salary increases should be made a component in the computation
[40]
279 of the Labor Code of the Philippines, as amended by Section 34 of Rep. Act No. 6715. The Court of backwages, the Court of Appeals ratiocinated, thus:
in Bustamante said, thus:
The Supreme Court held in East Asiatic, Ltd. v. Court of Industrial Relations, 40 SCRA
The Court deems it appropriate, however, to reconsider such earlier 521 (1971) that general increases should be added as a part of full backwages, to
ruling on the computation of backwages as enunciated in said Pines City Educational wit:
Center case, by now holding that conformably with the evident legislative intent as
expressed in Rep. Act No. 6715, above-quoted, backwages to be awarded to an In other words, the just and equitable rule regarding the point
illegally dismissed employee, should not, as a general rule, be diminished or reduced under discussion is this: It is the obligation of the employer to
by the earnings derived by him elsewhere during the period of his illegal pay an illegally dismissed employee or worker the whole
dismissal. The underlying reason for this ruling is that the employee, while litigating amount of the salaries or wages, plus all other benefits and
the legality (illegality) of his dismissal, must still earn a living to support himself and bonuses and general increases, to which he would have been
family, while full backwages have to be paid by the employer as part of the price or normally entitled had he not been dismissed and had not
penalty he has to pay for illegally dismissing his employee. The clear legislative stopped working, but it is the right, on the other hand of the
intent of the amendment in Rep. Act No. 6715 is to give more benefits to workers employer to deduct from the total of these, the amount
than was previously given them under the Mercury Drug rule or the deduction of equivalent to the salaries or wages the employee or worker
earnings elsewhere rule. Thus, a closer adherence to the legislative policy behind would have earned in his old employment on the
Rep. Act No.6715 points to full backwages as meaning exactly that, i.e., without corresponding days he was actually gainfully employed
deducting from backwages the earnings derived elsewhere by the concerned elsewhere with an equal or higher salary or wage, such that if
employee during the period of his illegal dismissal. In other words, the provision his salary or wage in his other employment was less, the
calling for full backwages to illegally dismissed employees is clear, plain and free employer may deduct only what has been actually earned.
from ambiguity and, therefore, must be applied without attempted or strained
[41]
interpretation. Index animi sermo est. The doctrine in East Asiatic was subsequently reiterated, in the cases of St. Louis
College of Tugueg[a]rao v. NLRC, 177 SCRA 151 (1989); Sigma Personnel Services v.
NLRC, 224 SCRA 181 (1993) and Millares v. National Labor Relations Commission, issue in Millares concerned separation pay separation pay and backwages both have
305 SCRA 500 (1999). employees wage rate at their foundation.

Private respondent, in opposing the petitioners contention, alleged in his x x x The rationale is not difficult to discern. It is the obligation
Memorandum that only the wage rate at the time of the employees illegal dismissal of the employer to pay an illegally dismissed employee the
should be considered private respondent citing the following decisions of the whole amount of his salaries plus all other benefits, bonuses
Supreme Court: Paramount Vinyl Corp. v. NLRC 190 SCRA 525 (1990); Evangelista v. and general increases to which he would have been normally
NLRC, 249 SCRA 194 (1995); Espejo v. NLRC, 255 SCRA 430 (1996) which rendered entitled had he not been dismissed and had not stopped
obsolete the ruling in East Asiatic, Ltd. v. Court of Industrial Relations, 40 SCRA 521 working. The same holds true in case of retrenched
(1971). employees. x x x

We are not convinced. x x x x

[46]
The Supreme Court had consistently held that payment of full backwages is the price x x x Annual general increases are akin to allowances or other benefits. (Italics
or penalty that the employer must pay for having illegally dismissed an employee. ours.)

In Ala Mode Garments, Inc. v. NLRC 268 SCRA 497 (1997) and Bustamante v. NLRC We do not agree.
and Evergreen Farms, Inc. 265 SCRA 61 (1996) the Supreme Court held that the clear
legislative intent in the amendment in Republic Act 6715 was to give more benefits Attention must be called to Article 279 of the Labor Code of the Philippines, as amended by
to workers than was previously given them under the Mercury Drug rule or the Section 34 of Rep. Act No. 6715. The law provides as follows:
deductions of earnings elsewhere rule.
ART. 279. Security of Tenure. In cases of regular employment, the employer shall
The Paramount Vinyl, Evangelista, and Espejo cases cited by private respondent are not terminate the services of an employee except for a just cause or when
inapplicable to the case at bar. The doctrines therein came about as a result of the authorized by this Title. An employee who is unjustly dismissed from work shall be
old Mercury Drug rule, which was repealed with the passage of Republic Act 6715 entitled to reinstatement without loss of seniority rights and other privileges and to
into law. It was in Alex Ferrer v. NLRC 255 SCRA 430 (1993) when the Supreme Court his full backwages, inclusive of allowances, and to his other benefits or their
returned to the doctrine in East Asiatic, which was soon supplanted by the case monetary equivalent computed from the time his compensation was withheld from
of Bustamante v. NLRC and Evergreen Farms, Inc., which held that the backwages to him up to the time of his actual reinstatement.(Emphasis supplied.)
be awarded to an illegally dismissed employee, should not, as a general rule, be
diminished or reduced by the earnings derived from him during the period of his
illegal dismissal. Furthermore, the Mercury Drug rule was never meant to prejudice Article 279 mandates that an employees full backwages shall be inclusive
the workers, but merely to speed the recovery of their backwages. of allowances and other benefits or their monetary equivalent. Contrary to the ruling of the Court of
Appeals, we do not see that a salary increase can be interpreted as either an allowance or a benefit. Salary
Ever since Mercury Drug Co. Inc. v. CIR 56 SCRA 694 (1974), it had been the intent increases are not akin to allowances or benefits, and cannot be confused with either. The term allowances
of the Supreme Court to increase the backwages due an illegally dismissed is sometimes used synonymously with emoluments, as indirect or contingent remuneration, which may or
employee. In the Mercury Drug case, full backwages was to be recovered even may not be earned, but which is sometimes in the nature of compensation, and sometimes in the nature
[47]
though a three-year limitation on recovery of full backwages was imposed in the of reimbursement. Allowances and benefits are granted to the employee apart or separate from, and in
name of equity. Then in Bustamante, full backwages was interpreted to mean addition to the wage or salary. In contrast, salary increases are amounts which are added to the employees
absolutely no deductions regardless of the duration of the illegal salary as an increment thereto for varied reasons deemed appropriate by the employer. Salary increases
dismissal. In Bustamante, the Supreme Court no longer regarded equity as a basis are not separate grants by themselves but once granted, they are deemed part of the employees salary. To
when dealing with illegal dismissal cases because it is not equity at play in illegal extend the coverage of an allowance or a benefit to include salary increases would be to strain both the
dismissals but rather, it is employers obligation to pay full back wages (sic). It is an imagination of the Court and the language of law. As aptly observed by the NLRC, to otherwise give the
obligation of the employer because it is the price or penalty the employer has to pay meaning other than what the law speaks for by itself, will open the floodgates to various
[48]
for illegally dismissing his employee. interpretations. Indeed, if the intent were to include salary increases as basis in the computation of
backwages, the same should have been explicitly stated in the same manner that the law used clear and
The applicable modern definition of full backwages is now found in Millares v. unambiguous terms in expressly providing for the inclusion of allowances and other benefits.
National Labor Relations Commission 305 SCRA 500 (1999), where although the
 Moreover, we find East Asiatic inapplicable to the case at bar. In East Asiatic, therein petitioner But the Supreme Court, in the instant case, pronounced a clear but different
East Asiatic Company, Ltd. was found guilty of unfair labor practices against therein respondent, Soledad judgment from that of East Asiatic Co. decretal portion, in this wise:
A. Dizon, and the Court ordered her reinstatement with back pay. On the question of the amount of
backwages, the Court granted the dismissed employee the whole amount of the salaries plus all general WHEREFORE, the herein questioned Resolution of the
increases and bonuses she would have received during the period of her lay-off with the corresponding NLRC is AFFIRMED with the following MODIFICATIONS: that
right of the employer to deduct from the total amounts, all the earnings earned by the employee during private respondent shall be entitled to backwages from
her lay-off. The emphasis in East Asiatic is the duty of both the employer and the employee to disclose the termination of employment until turning sixty (60) years of
material facts and competent evidence within their peculiar knowledge relative to the proper age (in 1995) and, thereupon, to retirement benefits in
determination of backwages, especially as the earnings derived by the employee elsewhere are deductions accordance with law; xxx
to which the employer are entitled. However, East Asiatic does not find relevance in the resolution of the
issue before us. First, the material date to consider is 21 March 1989, when the law amending Article 279 Undisputably (sic), it was decreed in plain and unambiguous language that
of the Labor Code, Rep. Act No. 6715, otherwise known as the Herrera-Veloso Law, took effect. It is obvious complainant Sadac shall be entitled to backwages. No more, no less.
that the backdrop of East Asiatic, decided by this Court on 31 August 1971 was prior to the current state
of the law on the definition of full backwages. Second, it bears stressing that East Asiatic was decided at a Thus, this decree for Sadac cannot be considered in any way, substantially in
time when even as an illegally dismissed employee is entitled to the whole amount of the salaries or wages, essence, with the award of backwages as pronounced for Ms. Dizon in the case of
[50]
it was the recognized right of the employer to deduct from the total of these, the amount equivalent to East Asiatic Co. Ltd.
the salaries or wages the employee or worker would have earned in his old employment on the
corresponding days that he was actually gainfully employed elsewhere with an equal or higher salary or
wage, such that if his salary or wage in his other employment was less, the employer may deduct only In the same vein, we cannot accept the Court of Appeals reliance on the doctrine as espoused
[49]
what has been actually earned. It is for this reason the Court centered its discussion on the duty of both in Millares. It is evident that Millares concerns itself with the computation of the salary base used in
parties to be candid and open about facts within their knowledge to establish the amount of the computing the separation pay of petitioners therein. The distinction between backwages and separation
deductions, and not leave the burden on the employee alone to establish his claim, as well as on the duty pay is elementary. Separation pay is granted where reinstatement is no longer advisable because of
of the court to compel the parties to cooperate in disclosing such material facts. The inapplicability of East strained relations between the employee and the employer. Backwages represent compensation that
Asiatic to respondent Sadac was sufficiently elucidated upon by the NLRC, viz.: should have been earned but were not collected because of the unjust dismissal. The bases for computing
the two are different, the first being usually the length of the employees service and the second the actual
[51]
A full discernment of the pertinent portion of the judgment sought to be period when he was unlawfully prevented from working.
executed in East Asiatic Co., Ltd. would reveal as follows:
The issue that confronted the Court in Millares was whether petitioners housing and
x x x to reinstate Soledad A. Dizon immediately to her transportation allowances therein which they allegedly received on a monthly basis during their
former position with backwages from September 1, 1958 employment should have been included in the computation of their separation pay. It is plain to see that
until actually reinstated with all the rights and privileges the reference to general increases in Millares citing East Asiatic was a mere obiter.The crux in Millares was
acquired and due her, including seniority and such other our pronouncement that the receipt of an allowance on a monthly basis does not ipso facto characterize
terms and conditions of employment AT THE TIME OF HER it as regular and forming part of salary because the nature of the grant is a factor worth
LAY-OFF considering. Whether salary increases are deemed part of the salary base in the computation of backwages
was not the issue in Millares.
The basis on which this doctrine was laid out was summed up by the
Supreme Court which ratiocinated in this light. To quote: Neither can we look at St. Louis of Tuguegarao to resolve the instant controversy. What was
mainly contentious therein was the inclusion of fringe benefits in the computation of the award of
x x x on the other hand, of the employer to deduct from backwages, in particular additional vacation and sick leaves granted to therein concerned employees, it
the total of these, the amount equivalent to these salaries or evidently appearing that the reference to East Asiatic in a footnote was a mere obiter dictum. Salary
[52]
wages the employee or worker would have earned in his old increases are not akin to fringe benefits and neither is it logical to conceive of both as belonging to the
employment on the corresponding days that he was actually same taxonomy.
gainfully employed elsewhere with an equal or higher salary
or wage, such that if his salary or wage in his other We must also resolve against the applicability of Sigma Personnel Services to the case at
employment was less, the employer may deduct only what bar. The basic issue before the Court therein was whether the employee, Susan Sumatre, a domestic helper
has been actually earned x x x (Ibid, pp. 547-548). in Abu Dhabi, United Arab Emirates, had been illegally dismissed, in light of the contention of Sigma
Personnel Services, a duly licensed recruitment agency, that the former was a mere probationary
[53]
employee who was, on top of this status, mentally unsound. Even a cursory reading of Sigma Personnel
Services citing St. Louis College of Tuguegarao would readily show that inclusion of salary increases in the
computation of backwages was not at issue. The same was not on all fours with the instant petition. The case of Paramount was relied upon by the Court in the latter case of Espejo v. National
[57]
Labor Relations Commission, where we reiterated that the computation of backwages should be based
What, then, is the basis of computation of backwages? Are annual general increases in basic on the basic salary at the time of the employees dismissal plus the regular allowances that he had been
salary deemed component in the computation of full backwages? The weight of authority leans in receiving. Further, the clarification made by the Court in General Baptist Bible College v. National Labor
[58]
petitioner Banks favor and against respondent Sadacs claim for the inclusion of general increases in the Relations Commission, settles the issue, thus:
computation of his backwages.
We also want to clarify that when there is an award of backwages this
We stressed in Paramount that an unqualified award of backwages means that the employee actually refers to backwages without qualifications and deductions. Thus, We held
is paid at the wage rate at the time of his dismissal, thus: that:

The determination of the salary base for the computation of backwages requires The term backwages without qualification and deduction
simply an application of judicial precedents defining the term "backwages". means that the workers are to be paid their backwages fixed
Unfortunately, the Labor Arbiter erred in this regard. An unqualified award of as of the time of the dismissal or strike without deduction for
backwages means that the employee is paid at the wage rate at the time of his their earnings elsewhere during their layoff and without
dismissal [Davao Free Worker Front v. Court of Industrial Relations, G.R. No. L- qualification of their wages as thus fixed; i.e., unqualified by
29356, October 27, 1975, 67 SCRA 418; Capital Garments Corporation v. Ople, G.R. any wage increases or other benefits that may have been
No. 53627, September 30, 1982, 117 SCRA 473; Durabilt Recapping Plant & received by their co-workers who are not dismissed or did not
Company v. NLRC, G.R. No. 76746, July 27, 1987, 152 SCRA 328]. And the Court has go on strike. Awards including salary differentials are not
declared that the base figure to be used in the computation of backwages due to allowed. The salary base properly used should, however,
the employee should include not just the basic salary, but also the regular include not only the basic salary but also the emergency cost
allowances that he had been receiving, such as the emergency living allowances and of living allowances and also transportation allowances if the
[59]
the 13th month pay mandated under the law [See Pan-Philippine Life Insurance workers are entitled thereto. (Italics supplied.)
Corporation v. NLRC, G.R. No. 53721, June 29, 1982, 144 SCRA 866; Santos v. NLRC,
G.R. No. 76721, September 21, 1987, 154 SCRA 166; Soriano v. NLRC, G.R. No. Indeed, even a cursory reading of the dispositive portion of the Courts Decision of 13 June
75510, October 27, 1987, 155 SCRA 124; Insular Life Assurance Co., Ltd. v. 1997 in G.R. No. 102467, awarding backwages to respondent Sadac, readily shows that the award of
[54]
NLRC, supra.] (Emphasis supplied.) backwages therein is unqualified, ergo, without qualification of the wage as thus fixed at the time of the
dismissal and without deduction.

There is no ambivalence in Paramount, that the base figure to be used in the computation of backwages A demarcation line between salary increases and backwages was drawn by the Court in Paguio v.
[60]
is pegged at the wage rate at the time of the employees dismissal, inclusive of regular allowances that the Philippine Long Distance Telephone Co., Inc., where therein petitioner Paguio, on account of his illegal
th
employee had been receiving such as the emergency living allowances and the 13 month pay mandated transfer sought backwages, including an amount equal to 16 percent (16%) of his monthly salary
under the law. representing his salary increases during the period of his demotion, contending that he had been
consistently granted salary increases because of his above average or outstanding performance. We said:
[55]
In Evangelista v. National Labor Relations Commission, we addressed the sole issue of
whether the computation of the award of backwages should be based on current wage level or the wage In several cases, the Court had the opportunity to elucidate on the
levels at the time of the dismissal. We resolved that an unqualified award of backwages means that the reason for the grant of backwages. Backwages are granted on grounds of equity to
employee is paid at the wage rate at the time of his dismissal, thus: workers for earnings lost due to their illegal dismissal from work. They are a
reparation for the illegal dismissal of an employee based on earnings which the
As explicitly declared in Paramount Vinyl Products Corp. vs. NLRC, the employee would have obtained, either by virtue of a lawful decree or order, as in
determination of the salary base for the computation of backwages requires simply the case of a wage increase under a wage order, or by rightful expectation, as in the
an application of judicial precedents defining the term backwages. An unqualified case of ones salary or wage. The outstanding feature of backwages is thus the
award of backwages means that the employee is paid at the wage rate at the time degree of assuredness to an employee that he would have had them as earnings
of his dismissal. Furthermore, the award of salary differentials is not allowed, the had he not been illegally terminated from his employment.
established rule being that upon reinstatement, illegally dismissed employees are
to be paid their backwages without deduction and qualification as to any wage Petitioners claim, however, is based simply on expectancy or his
increases or other benefits that may have been received by their co-workers who assumption that, because in the past he had been consistently rated for his
[56]
were not dismissed or did not go on strike. outstanding performance and his salary correspondingly increased, it is probable
 that he would similarly have been given high ratings and salary increases but for his etymology of which is the Latin word salarium, is often used interchangeably with
transfer to another position in the company. wage, the etymology of which is the Middle English word wagen. Both words
generally refer to one and the same meaning, that is, a reward or recompense for
In contrast to a grant of backwages or an award of lucrum cessans in the services performed. Likewise, pay is the synonym of wages and salary (Blacks Law
th [64]
civil law, this contention is based merely on speculation. Furthermore, it assumes Dictionary, 5 Ed). x x x (Italics supplied.)
that in the other position to which he had been transferred petitioner had not been
given any performance evaluation. As held by the Court of Appeals, however, the II.
mere fact that petitioner had been previously granted salary increases by reason of
his excellent performance does not necessarily guarantee that he would have Petitioner Bank ascribes as its second assignment of error the Court of Appeals ruling that
performed in the same manner and, therefore, qualify for the said increase respondent Sadac is entitled to check-up benefit, clothing allowance and cash conversion of vacation
later. What is more, his claim is tantamount to saying that he had a vested right to leaves notwithstanding that respondent Sadac did not present any evidence to prove entitlement to these
[65]
remain as Head of the Garnet Exchange and given salary increases simply because claims.
he had performed well in such position, and thus he should not be moved to any
[61]
other position where management would require his services. The determination of respondent Sadacs entitlement to check-up benefit, clothing allowance,
and cash conversion of vacation leaves involves a question of fact. The well-entrenched rule is that only
[66]
Applying Paguio to the case at bar, we are not prepared to accept that this degree of errors of law not of facts are reviewable by this Court in a petition for review. The jurisdiction of this
assuredness applies to respondent Sadacs salary increases. There was no lawful decree or order supporting Court in a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended,
his claim, such that his salary increases can be made a component in the computation of backwages. What is limited to reviewing only errors of law, not of fact, unless the factual findings being assailed are not
[67]
is evident is that salary increases are a mere expectancy. They are, by its nature volatile and are dependent supported by evidence on record or the impugned judgment is based on a misapprehension of facts. This
on numerous variables, including the companys fiscal situation and even the employees future Court is also not precluded from delving into and resolving issues of facts, particularly if the findings of the
[68]
performance on the job, or the employees continued stay in a position subject to management prerogative Labor Arbiter are inconsistent with those of the NLRC and the Court of Appeals. Such is the case in the
to transfer him to another position where his services are needed. In short, there is no vested right to instant petition. The Labor Arbiter and the Court of Appeals are in agreement anent the entitlement of
salary increases. That respondent Sadac may have received salary increases in the past only proves fact of respondent Sadac to check-up benefit, clothing allowance, and cash conversion of vacation leaves, but the
receipt but does not establish a degree of assuredness that is inherent in backwages. From the foregoing, findings of the NLRC were to the contrary. The Labor Arbiter sustained respondent Sadacs entitlement to
the plain conclusion is that respondent Sadacs computation of his full backwages which includes his check-up benefit, clothing allowance and cash conversion of vacation leaves. He gave weight to petitioner
prospective salary increases cannot be permitted. Banks acknowledgment in its computation that respondent Sadac is entitled to certain benefits, namely,
rice subsidy, tuition fee allowance, and medicine allowance, thus, there exists no reason to deprive
Respondent Sadac cannot take exception by arguing that jurisprudence speaks only respondent Sadac of his other benefits. The Labor Arbiter also reasoned that the petitioner Bank did not
of wage and not salary, and therefore, the rule is inapplicable to him. It is respondent Sadacs stance that adduce evidence to support its claim that the benefits sought by respondent Sadac are not granted to its
he was not paid at the wage rate nor was he engaged in some form of manual or physical labor as he was employees and officers. Similarly, the Court of Appeals ratiocinated that if ordinary employees are entitled
[62]
hired as Vice President of petitioner Bank. He cites Gaa v. Court of Appeals where the Court to receive these benefits, so it is with more reason for a Vice President, like herein respondent Sadac to
distinguished between wage and salary. receive the same.

The reliance is misplaced. The distinction between salary and wage in Gaa was for the purpose We find in the records that, per petitioner Banks computation, the benefits to be received by
of Article 1708 of the Civil Code which mandates that, [t]he laborers wage shall not be subject to execution respondent are monthly rice subsidy, tuition fee allowance per year, and medicine allowance per
[69]
or attachment, except for debts incurred for food, shelter, clothing and medical attendance. In labor law, year. Contained nowhere is an acknowledgment of herein claimed benefits, namely, check-up benefit,
however, the distinction appears to be merely semantics.Paramount and Evangelista may have involved clothing allowance, and cash conversion of vacation leaves. We cannot sustain the rationalization that the
wage earners, but the petitioner in Espejo was a General Manager with a monthly salary of P9,000.00 plus acknowledgment by petitioner Bank in its computation of certain benefits granted to respondent Sadac
privileges. That wage and salary are synonymous has been settled in Songco v. National Labor Relations means that the latter is also entitled to the other benefits as claimed by him but not acknowledged by
[63]
Commission. We said: petitioner Bank. The rule is, he who alleges, not he who denies, must prove. Mere allegations by
respondent Sadac does not suffice in the absence of proof supporting the same.
Broadly, the word salary means a recompense or consideration made to a person
for his pains or industry in another mans business. Whether it be derived from III.
salarium, or more fancifully from sal, the pay of the Roman soldier, it carries with it
the fundamental idea of compensation for services rendered. Indeed, there is We come to the third assignment of error raised by petitioner Bank in its Supplement to Petition
eminent authority for holding that the words wages and salary are in essence for Review, assailing the 26 October 2004 Supplemental Decision of the Court of Appeals which amended
synonymous (Words and Phrases, Vol. 38 Permanent Edition, p. 44 citing Hopkins vs. the fallo of its 6 April 2004 Decision to include attorneys fees equal to TEN PERCENT (10%) of all the
Cromwell, 85 N.Y.S.839, 841, 89 App. Div. 481; 38 Am. Jur. 496). Salary, the monetary award granted to respondent Sadac. Petitioner Bank posits that neither the dispositive portion
of our 13 June 1997 Decision in G.R. No. 102467 nor the body thereof awards attorneys fees to respondent to Ten Percent (10%) of the monetary award. Should reinstatement be no longer
Sadac. It is postulated that the body of the 13 June 1997 Decision does not contain any findings of facts or possible due to strained relations, the respondents are ordered likewise jointly and
conclusions of law relating to attorneys fees, thus, this Court did not intend to grant to respondent Sadac severally to grant separation pay at one (1) month per year of service in the total
the same, especially in the light of its finding that the petitioner Bank was not motivated by malice or bad sum of P293,650.00 with backwages and other benefits from November 16, 1989 to
faith and that it did not act in a wanton, oppressive, or malevolent manner in terminating the services of September 15, 1991 (cut off date, subject to adjustment) computed at
[70]
respondent Sadac. P1,055,740.48, plus damages of P100,000.00 (moral damages), P50,000.00
(exemplary damages) and attorneys fees equal to Ten Percent (10%) of all the
[75]
We do not agree. monetary award, or a grand total of P1,649,329.53. (Italics Ours.)

At the outset it must be emphasized that when a final judgment becomes executory, it thereby
becomes immutable and unalterable. The judgment may no longer be modified in any respect, even if the As can be gleaned from the foregoing, the Courts Decision of 13 June 1997 AFFIRMED with
modification is meant to correct what is perceived to be an erroneous conclusion of fact or law, and MODIFICATION the NLRC Decision of 24 September 1991, which modification did not touch upon the
regardless of whether the modification is attempted to be made by the Court rendering it or by the highest award of attorneys fees as granted, hence, the award stands. Juxtaposing the decretal portions of the NLRC
Court of the land. The only recognized exceptions are the correction of clerical errors or the making of so- Decision of 24 September 1991 with that of the Courts Decision of 13 June 1997, we find that what was
called nunc pro tunc entries which cause no prejudice to any party, and, of course, where the judgment is deleted by the Court was the award of moral and exemplary damages, but not the award of attorneys fees
[71]
void. The Courts 13 June 1997 Decision in G.R. No. 102467 became final and executory on 28 July equivalent to Ten Percent (10%) of the monetary award. The issue on the grant of attorneys fees to
1997. This renders moot whatever argument petitioner Bank raised against the grant of attorneys fees to respondent Sadac has been adequately and definitively threshed out and settled with finality when
respondent Sadac. Of even greater import is the settled rule that it is the dispositive part of the judgment petitioner Bank came to us for the first time on a Petition for Certiorari in Equitable Banking Corporation
that actually settles and declares the rights and obligations of the parties, finally, definitively, and v. National Labor Relations Commission, docketed as G.R. No. 102467. The Court had spoken in its Decision
authoritatively, notwithstanding the existence of inconsistent statements in the body that may tend to of 13 June 1997 in the said case which attained finality on 28 July 1997. It is now immutable.
[72]
confuse.
IV.
Proceeding therefrom, we make a determination of whether the Court in Equitable Banking
[73]
Corporation v. National Labor Relations Commission, G.R. No. 102467, dated 13 June 1997, awarded We proceed with the penultimate issue on the entitlement of respondent Sadac to twelve
attorneys fees to respondent Sadac. In recapitulation, the dispositive portion of the aforesaid Decision is percent (12%) interest per annum on the outstanding balance as of 28 July 1997, the date when our
hereunder quoted: Decision in G.R. No. 102467 became final and executory.

[76]
WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED In Eastern Shipping Lines, Inc. v. Court of Appeals, the Court, speaking through the Honorable
with the following MODIFICATIONS: That private respondent shall be entitled to Justice Jose C. Vitug, laid down the following rules of thumb:
backwages from termination of employment until turning sixty (60) years of age (in I. When an obligation, regardless of its source, i.e., law, contracts, quasi-
1995) and, thereupon, to retirement benefits in accordance with law; that private contracts, delicts or quasi-delicts is breached, the contravenor can be held liable
respondent shall be paid an additional amount of P5,000.00; that the award of moral for damages. The provisions under Title XVIII on Damages of the Civil Code govern
and exemplary damages are deleted; and that the liability herein pronounced shall in determining the measure of recoverable damages.
be due from petitioner bank alone, the other petitioners being absolved from
[74]
solidary liability. No costs. II. With regard particularly to an award of interest in the concept of actual or
compensatory damages, the rate of interest, as well as the accrual thereof, is
imposed, as follows:
The dispositive portion of the 24 September 1991 Decision of the NLRC awards respondent
Sadac attorneys fees equivalent to ten percent (10%) of the monetary award, viz: 1. When the obligation is breached, and it consists in the payment of a sum of
money, i.e., a loan or forbearance of money, the interest due should be that which
WHEREFORE, in view of all the foregoing considerations, let the Decision may have been stipulated in writing. Furthermore, the interest due shall itself earn
of October 2, 1990 be, as it is hereby, SET ASIDE and a new one ENTERED declaring legal interest from the time it is judicially demanded. In the absence of stipulation,
the dismissal of the complainant as illegal, and consequently ordering the the rate of interest shall be 12% per annum to be computed from default, i.e.,
respondents jointly and severally to reinstate him to his former position as bank from judicial or extrajudicial demand under and subject to the provisions of Article
Vice-President and General Counsel without loss of seniority rights and other 1169 of the Civil Code.
privileges, and to pay him full backwages and other benefits from the time his
compensation was withheld to his actual reinstatement, as well as moral damages 2. When an obligation, not constituting a loan or forbearance of money, is
of P100,000.00, exemplary damages of P50,000.00, and attorneys fees equivalent breached, an interest on the amount of damages awarded may be imposed at the
 discretion of the court at the rate of 6% per annum. No interest, however, shall be (2) ATTORNEYS FEES equal to TEN PERCENT (10%) of the total sum of all monetary award; and
adjudged on unliquidated claims or damages except when or until the demand can
be established with reasonable certainty. Accordingly, where the demand is (3) INTEREST of TWELVE PERCENT (12%) per annum is hereby imposed on the total sum of all
established with reasonable certainty, the interest shall begin to run from the time monetary award from 28 July 1997, the date of finality of Our Decision in G.R. No. 102467 until
the claim is made judicially or extrajudicially (Article 1169, Civil Code) but when full payment of the said monetary award.
such certainty cannot be so reasonably established at the time the demand is
made, the interest shall begin to run only from the date the judgment of the court The Motion to Refer the Petition to the Court En Banc is DENIED.
is made (at which time the quantification of damages may be deemed to have
been reasonably ascertained). The actual base for the computation of legal No costs.
interest shall, in any case, be on the amount finally adjudged. SO ORDERED.

3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or

paragraph 2 above, shall be 12% per annum from such finality until its satisfaction,
Facts:
this interim period being deemed to be by then an equivalent to a forbearance of
[77]
Respondent Sadac was appointed as the General Counsel of Equitable Bank. Later on, lawyers of the
credit. bank accused Sadac of abusive conduct which resulted to the termination of his services. Sadac then filed
a complaint for illegal dismissal with damages. The dismissal was finally declared as illegal. Sadac filed
It is obvious that the legal interest of twelve percent (12%) per annum shall be imposed from with the Labor Arbiter a motion for execution of the decision and argued that in the computation of
the time judgment becomes final and executory, until full satisfaction thereof. Therefore, petitioner Bank backwages, salary increases should be deemed included.
[78]
is liable to pay interest from 28 July 1997, the finality of our Decision in G.R. No. 102467. The Court of
Issue: Should periodic general increases in basic salary be included in computing full backwages for
Appeals was not in error in imposing the same notwithstanding that the parties were at variance in the
illegally dismissed employees?
computation of respondent Sadacs backwages. What is significant is that the Decision of 13 June

1997 which awarded backwages to respondent Sadac became final and executory on 28 July 1997. Held:
No.
V. Backwages are granted on grounds of equity for earnings which a worker or employee has lost due to his
illegal dismissal; it is not private compensation or damages but is awarded in furtherance and
Finally, petitioner Banks Motion to Refer the Petition En Banc must necessarily be denied as effectuation of the public objective of the Code. Backwages to be awarded to an illegally dismissed
employee should not as a general rule be diminished or reduced by the earnings derived by him
established in our foregoing discussion. We are not herein modifying or reversing a doctrine or principle
elsewhere during the period of his illegal dismissal. Article 279 of the Labor Code mandates that an
laid down by the Court en banc or in a division. The instant case is not one that should be heard by the employee’s full backwages shall be inclusive of allowance and other benefits or their monetary
[79]
Court en banc. equivalent. The salary increase cannot be interpreted as either as an allowance or a benefit.
Salary increases are not akin to allowances or benefits and cannot be confused with either. Allowances
Fallo and benefits are granted to the employee apart or separate from the wage or salary. In contrast, salary
increases are amounts which are added to the employee’s salary as an increment thereto for varied
WHEREFORE, the petition is PARTIALLY GRANTED in the sense that in the computation of the reasons deemed appropriate by the employer. An unqualified award of backwages means that
the employee is paid at the wage rate at the time of his dismissal. And the court has declared
backwages, respondent Sadacs claimed prospective salary increases, check-up benefit, clothing allowance,
that the base figure to be used in the computation of backwages due to the employee should include not
and cash conversion of vacation leaves are excluded. The petition is PARTIALLY DENIED insofar as just the basic salary, but also the regular allowances that he had been receiving, such as the emergency
we AFFIRMED the grant of attorneys fees equal to ten percent (10%) of all the monetary award and the living allowances and the 13th month pay mandated under the law The term “backwages without
imposition of twelve percent (12%) interest per annum on the outstanding balance as of 28 July qualification and deduction” means that the workers are to be paid their backwages fixed as of
1997. Hence, the Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 75013, dated 6 April the time of the dismissal or strike without deduction for their earnings elsewhere during their
2004 and 28 July 2004, respectively, and the Supplemental Decision dated 26 October layoff and without qualification of their wages as thus fixed; unqualified by any wage increases or other
benefits that may have been received by their co-workers who are not dismissed or did not go on strike.
2004 are MODIFIEDin the following manner, to wit:
Awards including salary differentials are not allowed. The salary base properly used should, however,

includednot only the basic salary but also the emergency cost of living allowance and also transportation
Petitioner Bank is DIRECTED TO PAY respondent Sadac the following: allowances if the workers are entitled thereto.

(1) BACKWAGES in accordance with Our Decision dated 13 June 1997 in G.R. No. 102467 with
a clarification that the award of backwages EXCLUDES respondent Sadacs claimed prospective
salary increases, check-up benefit, clothing allowance, and cash conversion of vacation leaves;

 EASTERN SHIPPING LINES, INC., and/or ERWIN L. CHIONGBIAN, G.R. No. 159354 telegram on December 9, 1997 informing Sedan that his services were needed on board a vessel and that
Petitioners, he should report immediately for work as there was no available replacement. Sedan claims he did not
Present: receive the telegram, nor was this fact proved by the company before the Labor Arbiter or the NLRC.

- versus - QUISUMBING, J., Chairperson, Sedan proceeded to file a complaint with the Labor Arbiter against petitioners, docketed as
CARPIO, NLRC-NCR CASE NO. 00-12-08578-97, demanding payment of his retirement benefits, leave pay,
th
CARPIO MORALES, and 13 month pay and attorneys fees. The Labor Arbiter ruled in favor of Sedan, as follows:
TINGA, JJ.

WHEREFORE, premises all considered, judgment is hereby rendered as
DIOSCORO D. SEDAN, Promulgated:
follows:
Respondent. April 7, 2006

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x 1. Ordering respondents to pay complainant retirement gratuity/separation

pay of P253,000.00 (23 yrs. x P22,000.00 at month for every year of
service).
DECISION
2. Ordering respondents to pay complainant 10% of the total monetary
award by way of attorneys fees.
QUISUMBING, J.:

All other claims are dismissed for lack of merit.
[1] [2]
For review on certiorari are the Decision and Resolution, dated February 14, 2003 and [9]
SO ORDERED.
August 7, 2003, respectively, of the Court of Appeals in CA-G.R. SP No. 70836, which reversed the October
[3]
4, 2001 Resolution of the National Labor Relations Commission affirming the Labor Arbiters Decision of
[4]
June 15, 2000.
Petitioners appealed the said decision to the National Labor Relations Commission. However,

the NLRC found the factual findings of the Labor Arbiter consistent with the evidence on record. Hence,
The antecedent facts, as culled from the records, are as follows:
the NLRC dismissed the appeal for lack of merit. Petitioners motion for reconsideration was likewise

denied.
On December 30, 1973, petitioners hired on a per-voyage basis private
[5] rd
respondent Dioscoro Sedan as 3 marine engineer and oiler in one of the vessels owned by
Dissatisfied, petitioners filed a special civil action for certiorari with the Court of Appeals
petitioners. His last voyage was on July 27, 1997 on board the vessel M/V Eastern Universe. His monthly
[6] anchored on the following grounds:
pay was P22,000. Additionally, after each voyage his earned leave credits are monetized and paid in

cash. He said he was disembarking because he was going to take the board examinations for marine
1. PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF
engineers.
DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN AWARDING

RETIREMENT GRATUITY/SEPARATION PAY TO THE PRIVATE RESPONDENT BY
Two months later, on September 27, 1997, Sedan sent a letter to petitioners applying for
HOLDING THAT THERE WAS NO EVIDENCE TO SHOW THAT PRIVATE RESPONDENT
optional retirement, citing as reason the death of his only daughter, hence the retirement benefits he
WAS INFORMED/NOTIFIED OF PETITIONERS NEED FOR HIS SERVICES OR DIRECTING
would receive would ease his financial burden. However, petitioners deferred action on his application for
HIM TO REPORT FOR WORK, INCLUDING [ACTION] ON HIS APPLICATION FOR
optional retirement since his services on board ship were still needed. Nonetheless, according to
OPTIONAL RETIREMENT.
petitioners, the company expressed intention to extend him a loan in order to defray the costs incurred
for the burial and funeral expenses of his daughter.
2. PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF

[7] DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN AWARDING
On October 28, 1997, Sedan sent petitioners another letter insisting on the release of half of
ATTORNEYS FEES TO THE PRIVATE RESPONDENT CONSIDERING THAT PETITIONERS
his optional retirement benefits. Later, he said that he no longer wanted to continue working on board a [10]
[8] ACTED IN GOOD FAITH IN REFUSING THE SUBJECT CLAIM.
vessel for reasons of health.


The Court of Appeals granted the petition and ruled that the retirement gratuity and attorneys
On December 1, 1997, Sedan sent another letter to petitioners threatening to file a complaint
fees awarded by the Labor Arbiter and the NLRC had no basis in fact or law since pursuant to the
if his application was not granted. In reply, according to petitioners, the company management sent a
Agreement between the company and the employees, the granting of optional retirement is the exclusive
prerogative of the employer, herein petitioners. Unless such prerogative was exercised arbitrarily or ART. 287. Retirement. Any employee may be retired upon reaching the
capriciously, private respondent cannot demand it as a right. Nonetheless, the Court of Appeals ordered retirement age established in the collective bargaining agreement or other
petitioners to pay private respondent P200,000 as financial assistance, to wit: applicable employment contract.

WHEREFORE, FOREGOING PREMISES CONSIDERED, this petition is In case of retirement, the employee shall be entitled to receive such
GRANTED. The assailed Decision dated October 4, 2001 and the Resolution dated retirement benefits as he may have earned under existing laws and any collective
April 22, 2002 of public respondent National Labor Relations Commission in NLRC bargaining agreement and other agreements: Provided, however, That an employees
NCR Case No. 00-12-08578-97/NLRC CA No. 026697-00 entitled, Dioscoro D. Sedan, retirement benefits under any collective bargaining and other agreements shall not be
complainant-appellee vs. Eastern Shipping Lines, Inc. and/or Erwin L. Chiongbian, less than those provided herein.
respondents-appellants are hereby reversed and set aside for having been
rendered/issued with grave abuse of discretion amounting to lack or in excess of In the absence of a retirement plan or agreement providing for
jurisdiction and, in lieu thereof, petitioners are hereby ordered to pay retirement benefits of employees in the establishment, an employee upon reaching
respondent Dioscoro D. Sedan the amount of Two Hundred Thousand (P200,000.00) the age of sixty (60) years or more, but not beyond sixty-five (65) years which is
Pesos as financial assistance. hereby declared the compulsory retirement age, who has served at least five (5)
years in the said establishment may retire and shall be entitled to retirement pay
[11]
SO ORDERED. equivalent to at least one half (1/2) month salary for every year of service, a fraction
of at least six (6) months being considered as one whole year.
Petitioners filed a motion for reconsideration, but it was denied by the Court of Appeals.
x x x


Hence, the instant petition raising as sole issue:
The age of retirement is primarily determined by the existing agreement between the employer
and the employees. However, in the absence of such agreement, the retirement age shall be fixed by
WHETHER OR NOT THE COURT OF APPEALS ERRED IN GIVING THE
law. Under the aforecited article of the Labor Code, the legally mandated age for compulsory retirement
RESPONDENT PHP200,000.00 AS FINANCIAL ASSISTANCE WHEN IN FACT IT WAS THE
[12] is 65 years, while the set minimum age for optional retirement is 60 years.
RESPONDENT WHO REFUSED TO REPORT FOR WORK. [15]
In the instant case, there is an agreement between petitioner shipping company and its employees. The

agreement states:
Petitioners contend that by refusing to report for work and insisting on applying for optional
retirement, private respondent wrongly assumed that he was justified in abandoning his job. Petitioners
x x x
maintain that private respondents refusal to report back to work, despite being duly notified of the need
for his service, is tantamount to voluntary resignation. Therefore, petitioners contend, the respondent
B. Retirement under the Labor Code:
should not be entitled to any financial assistance.
Moreover, granting arguendo that private respondent was entitled to financial assistance,
petitioners protest the amount of the financial assistance awarded by the Court of Appeals for being Any employee whether land-based office personnel or shipboard employee who
disproportionately excessive. Petitioners cite Manggagawa ng Komunikasyon sa Pilipinas v. NLRC, where
[13] shall reach the age of sixty (60) while in active employment with this company may
the employee was given only P10,000 as financial assistance. retire from the service upon his written request in accordance with the provisions
of Art. 277 of the Labor Code and its Implementing Rules, Book 6, Rule 1, Sec. 13
In his Comment, private respondent argues that the Court of Appeals awarded and he shall be paid termination pay equivalent to fifteen (15) days pay for every
him P200,000 for equity consideration. Private respondent claims that the retirement policy of the year of service as stated in said Labor Code and its Implementing Rules. However,
company, which states that [i]t will be the exclusive prerogative and sole option of this company to retire the company may at its own volition grant him a higher benefit which shall not
[14]
any covered employee, must be interpreted in favor of the working class. Otherwise, private respondent exceed the benefits provided for in the Retirement Gratuity table mentioned
laments, he will be placed at the mercy of the company, contrary to the constitutional mandate to afford elsewhere in this policy.
full protection to labor.
C. Optional Retirement:
At the outset, we rule for petitioners on the matter of optional retirement benefits.
It will be the exclusive prerogative and sole option of this company to
Private respondent is not entitled to retirement benefits. The pertinent law governing retire any covered employee who shall have rendered at least fifteen (15) years of
retirement is found in the Labor Code, which provides: credited service for land based employees and 3,650 days actually on board vessel
for shipboard personnel. Such employee shall be entitled to a Retirement Gratuity
which shall be computed in accordance with the following table:
 In this instance, our attention has been called to the following circumstances: that private
Years of Service Monthly Basic Pay respondent joined the company when he was a young man of 25 years and stayed on until he was 48 years
(Percentage)
old; that he had given to the company the best years of his youth, working on board ship for almost 24

15 years 55%
years; that in those years there was not a single report of him transgressing any of the company rules and
16 years 56% regulations; that he applied for optional retirement under the companys non-contributory plan when his
17 years 57% daughter died and for his own health reasons; and that it would appear that he had served the company
18 years 58% well, since even the company said that the reason it refused his application for optional retirement was
19 years 59%
that it still needed his services; that he denies receiving the telegram asking him to report back to work;
20 years 60%
21 years 63% but that considering his age and health, he preferred to stay home rather than risk further working in a
22 years 66% ship at sea.
23 years 69%
24 years 72%
In our view, with these special circumstances, we can call upon the same social and
25 years 75% [26]
26 years 80% compassionate justice cited in several cases allowing financial assistance. These circumstances
27 years 85% indubitably merit equitable concessions, via the principle of compassionate justice for the working
28 years 90% class. Thus, we agree with the Court of Appeals to grant financial assistance to private respondent. The
29 years 95%
only catch is whether, as the shipping company alleges, the amount of P200,000 that the Court of Appeals
30 years or above 100%
granted him is arbitrary and excessive.

The computation of the benefit shall be based on the final basic pay, for every year of
credited service, a fraction of at least six (6) months being considered as one whole year but shall be The propriety of awarding financial assistance has long been tackled by this Court. In Philippine Long
[27]
exclusive of fringe benefits and other special emoluments.[16] Distance Telephone Co. v. NLRC, we laid down the rule that henceforth separation pay shall be allowed
as a measure of social justice only in the instances where the employee is validly dismissed for causes
x x x other than serious misconduct or those reflecting on his moral character. A contrary rule, we said would
have the effect of rewarding rather than punishing an erring employee.
[17]
Clearly, the eligibility age for optional retirement is set at 60 years. However, employees of
[28]
herein petitioners who are under the age of 60 years, but have rendered at least 3650 days (10 years) on Subsequent to PLDT, in the 2004 case of Piero v. NLRC, Piero who was dismissed for an illegal strike was
board ship or fifteen (15) years of service for land-based employees may also avail of optional retirement, granted one-half () months pay for the 29 years of his service. His infraction was deemed
[18]
subject to the exclusive prerogative and sole option of petitioner company. not so reprehensible nor unscrupulous as to warrant complete disregard of his long years of service with
[19] [29]
Records show that private respondent was only 48 years old when he applied for optional no derogatory record. In Aparente, Sr. v. NLRC, for blatant disobedience of company rules, one-half ()
retirement. Thus he cannot claim optional retirement benefits as a matter of right. His application for months pay for every year of service was also deemed equitable. In the 1998 case of Salavarria v.
[30]
optional retirement was subject to the exclusive prerogative and sole option of the shipping company NLRC, for the teacher who had previously been meted with a two week suspension for the same offense,
pursuant to the abovecited agreement between the workers and the company. In this regard, no error illegally soliciting contributions from students, the Court granted one months salary for every year of
was committed by the appellate court when it set aside the ruling of the Labor Arbiter and the NLRC service because, said the Court, she never took custody of the illegally solicited funds.
granting herein private respondent P253,000retirement gratuity/separation pay.
Considering the doctrine in the abovecited NLRC cases and taking into account equitable results in those
So now we come to the grant of financial assistance by the appellate court. We are not cases, we find the grant of two hundred thousand pesos (P200,000) by the Court of Appeals, neither
unmindful of the rule that financial assistance is allowed only in instances where the employee is validly arbitrary nor excessive. Private respondent who has no derogatory record in his 23 years of service should
[20]
dismissed for causes other than serious misconduct or those reflecting on his moral character. Neither be granted equitable assistance equal to one-half months pay for each of his 23 years of service.
are we unmindful of this Courts pronouncements in Arc-Men Food Industries Corporation v.
[21] [22]
NLRC, and Lemery Savings and Loan Bank v. NLRC, where the Court ruled that when there is no To conclude, in the instant case, private respondent has no claim against petitioners for retirement
dismissal to speak of, an award of financial assistance is not in order. benefits. We agree with the appellate court, however, that financial assistance could be awarded him but
only as an equitable concession under the special circumstances of this case.
But we must stress that this Court did allow, in several instances, the grant of financial
[23]
assistance. In the words of Justice Sabino de Leon, Jr., now deceased, financial assistance may be WHEREFORE, the petition is DENIED. The decision of the Court of Appeals granting assistance to private
allowed as a measure of social justice and exceptional circumstances, and as an equitable respondent in the amount of two hundred thousand pesos (P200,000) is AFFIRMED. No pronouncement
[24]
concession. The instant case equally calls for balancing the interests of the employer with those of the as to cost.
[25]
worker, if only to approximate what Justice Laurel calls justice in its secular sense.
SO ORDERED.
 HANFORD PHILIPPINES, G.R. No. 158251 accordance with law. The COMPANY shall give termination pay to those who
INCORPORATED and VICTOR TE, voluntarily resign due to the reasons heretofore statedsubject to the following
Petitioners, terms and conditions:
Present:

a) 1 to 30 years of service shall be paid 20 days for every year of

service;
- versus - PANGANIBAN,J., Chairman,
b) 16 to 20 years of service to the COMPANY shall be paid 15
SANDOVAL-GUTIERREZ,
days pay for every year of service;
CORONA,
c) 11 to 15 years of service to the COMPANY shall be paid 10 days
CARPIO MORALES, and
pay for every year of service; and
GARCIA, JJ.
d) 5 to 10 years of service to the COMPANY shall be paid 5 days
SHIRLEY JOSEPH, [5]
pay for every year of service.
Respondent.

Promulgated:

March 31, 2005 Petitioner denied respondents request on the ground that under the Labor Code, voluntary
[6]
x---------------------------------------------------------------------------------------------x resignation is not one of the grounds which justifies the grant of separation pay.

D E C I S I O N On December 17, 1998, respondent filed with the Office of the Labor Arbiter a complaint for the payment
of her separation pay against petitioner Hanford and co-petitioner Victor Te, docketed as NLRC NCR CN.
00-12-10238-98.
SANDOVAL-GUTIERREZ, J.:
[7]
On May 20, 1999, the Labor Arbiter rendered a Decision granting respondents petition and ordering
petitioners to pay her separation pay in the amount of P93,820.00 as authorized by Section 1, Article IV of
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as the parties CBA.
[1]
amended, assailing the Decision of the Court of Appeals dated January 23, 2003and its Resolution
dated April 29, 2003 in CA-G.R. SP No. 60701.
[8]
On appeal, the National Labor Relations Commission (NLRC) rendered its Resolution dated April 14,
2000 affirming the Labor Arbiters Decision.
On July 17, 1978, petitioner Hanford Philippines, Inc. (Hanford) hired Shirley Joseph, herein respondent,
as a sewer.
Forthwith, petitioners filed their motion for reconsideration

On August 10, 1998, respondent voluntarily tendered her resignation effective September 17,
[2] [3] [9]
1998, which petitioner accepted the following day. but was denied by the NLRC in its Resolution dated July 24, 2000, prompting them to file with the Court
of Appeals a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure, as amended.
th
Petitioner then paid respondent her last salary, 13 month pay and the cash conversion of her unused
[10]
vacation and sick leave. On January 23, 2003, the Appellate Court rendered its Decision dismissing the petition.

[4]
On November 19, 1998, respondent sent a letter to petitioner requesting payment of her The Court of Appeals held that the parties CBA clearly provides that petitioner Hanford shall give
separation pay pursuant to Section 1, Article IV of the Collective Bargaining Agreement (CBA) quoted as termination pay to those who voluntarily resigned due to the following reasons: reduction of personnel;
follows: employees or workers who may be separated without cause; and those whose services are terminated
due to suspension or cessation of operation. Here, respondent voluntarily resigned. This separation from
the service is one without cause as provided by the CBA. Hence, pursuant thereto, petitioner is entitled to
SECTION 1. Regular employees or workers separated by the COMPANY a separation pay.
because of reduction of personnel and employees or workers who may be separated
without cause, or those whose services are terminated or are separated from work
due to suspension or cessation of operation shall be entitled to a termination pay in
Petitioners filed a motion for reconsideration. However, it was denied by the Appellate Court in a intended beneficiaries of such program and our Constitution mandates a clear bias
[11]
Resolution dated April 29, 2003. in favor of the working class.

Hence, the present recourse. Petitioners contend that the Court of Appeals erred in ruling that
[12]
a resigned employee is entitled to separation pay under Section 1, Article IV of the CBA. WHEREFORE, the petition is hereby DENIED. Costs against petitioners.

Respondent counters that the Decision of the Court of Appeals should not be disturbed. She
SO ORDERED.
worked with petitioner company for twenty years but decided to resign believing that pursuant to the
CBA, she is entitled to a separation pay. She also avers that several former employees of petitioner,
namely: Astor Madamag, Danilo Suplito, Domingo Bobis, Rosita Bobis, Evelyn Cunanan, Fe Viray, Doris ANGELINA SANDOVAL-GUTIERREZ
Angeles and Dula Imperia, were granted separation pay pursuant to the CBA and petitioners policy and Associate Justice
[13]
practice.

It is well to note that there is no provision in the Labor Code which grants separation pay to
employees who voluntarily resign. Under the Code, separation pay may be awarded only in cases when
the termination of employment is due to: (a) installation of labor saving devices, (b) redundancy, (c)

retrenchment, (d) closing or cessation of business operations, (e) disease of an employee and his continued
employment is prejudicial to himself or his co-employees, or (f) when an employee is illegally dismissed
but

reinstatement is no longer feasible.


In Hinatuan Mining Corporation and/or the Manager versus National Labor Relations and
[14]
Margo Batister, we held that while it is true that under the Labor Code, an employee who voluntarily
resigns may not be granted separation pay, as in fact, the general rule is that an employee who voluntarily
resigns is not entitled to separation pay, however, there is an exception, that is, when it is stipulated in the
employment contract or CBA or such payment is authorized by the employers practice or policy, as in this
[15]
case.

As aptly held by the Labor Arbiter, the NLRC and the Court of Appeals, it is very clear from the
CBA that when an employee or worker voluntarily resigns due to, among others, separation from the
company without cause, such as voluntary resignation, then he is entitled to a separation pay.

Moreover, records show that petitioners granted the employees mentioned earlier their
separation pay upon their separation by reason of their retirement. Under the Labor Code, retirement is
not also a ground for the grant of separation pay. If petitioners could be liberal to those employees who

retired, there is no reason why they should not also extend such liberality to respondent considering that
she served petitioner for twenty one years.

Our ruling in Philippine National Construction vs. NLRC finds application here, thus:

In the interpretation of an employers program providing for separation
benefits, all doubts should be construed in favor of labor. After all, workers are the


FACTS:

• On July 17, 1978, petitioner Hanford Philippines, Inc. (Hanford) hired Shirley Joseph as a sewer.
• On August 10, 1998, respondent voluntarily tendered her resignation effective September 17,
1998, which petitioner accepted the following day.
• Petitioner then paid respondent her last salary, 13th month pay and the cash conversion of her
unused vacation and sick leave.
• On November 19, 1998, respondent sent a letter to petitioner requesting payment of her
separation pay pursuant to Section 1, Article IV of the Collective Bargaining Agreement.
• Petitioner denied respondent’s request on the ground that under the Labor Code,
voluntary resignation is not one of the grounds which justifies the grant of separation
pay.
• On December 17, 1998, respondent filed with the Office of the Labor Arbiter a complaint for
the payment of her separation pay against petitioner Hanford and co-petitioner Victor Te.
• On May 20, 1999, the Labor Arbiter rendered a Decision granting respondent’s petition and
ordering petitioners to pay her separation pay in the amount ofP93,820.00 as authorized
by Section 1, Article IV of the parties’ CBA.
• On appeal, the NLRC and Court of appeals ruled in favour of respondent Shirley.

ISSUE: WON Shirley Joseph is entitled for separation pay

RULING: The SC denied the petition.

It is well to note that there is no provision in the Labor Code which grants separation pay to employees
who voluntarily resign. Under the Code, separation pay may be awarded only in cases when the
termination of employment is due to: (a) installation of labor saving devices, (b) redundancy, (c)
retrenchment, (d) closing or cessation of business operations, (e) disease of an employee and his continued
employment is prejudicial to himself or his co-employees, or (f) when an employee is illegally dismissed
but reinstatement is no longer feasible.

As aptly held by the Labor Arbiter, the NLRC and the Court of Appeals, it is very clear from the CBA that
when an employee or worker voluntarily resigns due to, among others, “separation from the company
without cause,” such as voluntary resignation, then he is entitled to a separation pay.

Moreover, records show that petitioners granted the employees mentioned earlier their separation pay
upon their separation by reason of their retirement. Under the Labor Code, retirement is not also a ground
for the grant of separation pay. If petitioners could be liberal to those employees who retired, there is no
reason why they should not also extend such liberality to respondent considering that she served
petitioner for twenty one years.











 SSS complaints against the NSC were the result of an investigation conducted by their field representative,
[G.R. No. 141926. July 14, 2004] and not by any of the employees of the NSC.
CONRADO TAN, petitioner, vs. RESTITUTO TIMBAL, JR., respondent. The decision became final and executory as no appeal from the decision was filed by any of the
parties.
D E C I S I O N
On October 10, 1990, the Labor Arbiter issued a Writ of Execution directing the sheriff to effect the
CALLEJO, SR., J.: complainants reinstatement and to collect from the respondent NSC the accrued backwages, and remit
the same to the complainants. The sheriff served a notice of garnishment on the Philippine Banking
[1]
Before us is a petition for review on certiorari of the Decision of the Court of Appeals in CA-G.R. Corporation. However, the Bank did not respond to the notice, and the decision of the labor arbiter
[5]
SP No. 51404 which affirmed with modification the decision of the National Labor Relations Commission remained unsatisfied.
(NLRC) in NLRC Case No. NCR-00-08-03596-89. The complainants filed an omnibus motion, praying that they be paid separation pay instead of
The antecedents are as follows: being reinstated, as part of the monetary award in their favor. They also prayed for the issuance of an alias
writ of execution enforceable against the respondent NSC and its officers/stockholders. Appended to their
On July 17, 1989, Restituto Timbal, Jr. and Ernesto Valenciano received a letter from their employer, motion was a copy of the Articles of Incorporation of the NSC showing that Conrado Tan was one of its
Nationwide Steel Corporation (NSC), through Conrado Tan, its general manager, informing them that they incorporators and member of the Board of Directors. They averred that all of the incorporators had unpaid
were found to be among those employees who filed a complaint with the Social Security System (SSS) in subscribed capital stock, and that they had the right to collect their monetary claim from Conrado Tans
which they claimed that NSC was not remitting its employees SSS premiums. Tan required the two to unpaid subscribed capital stock under the trust fund doctrine as provided in the Corporation Code.
explain their side on the matter within 24 hours.
The Labor Arbiter granted the motion and issued his Order dated January 16, 1991, ordering
After submitting their explanation, Timbal, Jr. and Valenciano were instructed by Tan to report the Conrado D. Tan, Joseph O. Tiu, Rudy D. Ang, Pablo C. King and William T. Ang to pay to the respondent
following day for the resolution of the matter. However, when Timbal, Jr. and Valenciano arrived the corporation, through the Office of the Labor Arbiter, their unpaid subscribed capital stock in the total
following day, they were not allowed entry by the security guard. Both were handed a memorandum amount of P135,514.05 in order that the same may be applied to satisfy the complainants backwages,
[6]
signed by Tan stating that they were being suspended indefinitely. Timbal, Jr. and Valenciano refused to failing which, an alias writ of execution would be issued by his Office against their assets. The Arbiter,
receive the memorandum and tried to report for work the next day. Again, they were refused entry by the thereafter, issued an alias writ of execution.
security guard.
On March 7, 1991, the respondent NSC filed an Urgent Motion to Set Aside the Alias Writ of
Aggrieved, Timbal, Jr. and Valenciano filed, on August 3, 1989, a complaint for illegal dismissal with Execution filed by the complainants. However, the Labor Arbiter denied the said motion in his Order dated
[7]
the NLRC, against NSC, and impleaded Conrado Tan as respondent, in his capacity as general manager of May 2, 1991.
[2]
the said corporation. The case was docketed as NLRC-NCR-00-08-03596-89.
Conrado Tan and William Ang filed with the NLRC a petition for the issuance of a writ of preliminary
The respondents alleged in their position papers that the complainants falsely charged NSC of not injunction and a temporary restraining order to enjoin the implementation of the alias writ of execution
paying the SSS premium contributions of its employees, and that both complainants were indefinitely issued by the Labor Arbiter. They alleged that they were never furnished copies of the omnibus motion
suspended as a result of the criminal case filed by Benny Sy against them for their false charge. filed by Timbal, Jr. and Valenciano; that they were not notified of any hearing on the matter; and, that the
Labor Arbiter acted in excess or lack of jurisdiction when he issued an alias writ of execution ordering the
At the conclusion of the proceedings, the Labor Arbiter rendered his decision on August 9, 1990 in
sheriff to collect from the respondent NSC their unpaid subscriptions.
favor of the complainants and against the NSC only, the decretal portion of which reads as follows:
On June 18, 1997, the NLRC rendered a Decision granting the motion of Tan and Ang and setting
WHEREFORE, finding the respondent company guilty of illegal dismissal as charged, judgment is hereby aside the assailed order and alias writ of execution of the Labor Arbiter. The NLRC ruled as follows:
rendered ordering it to reinstate complainants to their former or equivalent positions without loss of
seniority rights and to pay them full backwages and other benefits. It may be true that the petitioners were/are stockholders of Nation Wide (sic) Steel Corp. and that
accordingly, they have unpaid subscription to the letter but the records likewise, readily show that
SO ORDERED.
[3] petitioners were not impleaded as party respondents in NLRC Case No. 08-3596-80 (sic). A stockholder
who has an unpaid subscription is not automatically held liable in case of judgment against the
corporation where he has an unpaid subscription. A separate complaint for the payment of the unpaid
Labor Arbiter Cornelio L. Linsangan found that the respondents failed to substantiate the charge
subscription should be filed so that unpaid subscriptions of stockholders be made answerable and liable
that Timbal, Jr. and Valenciano falsely accused NSC of not paying the SSS premium contributions of its
to the obligations and debts of the corporation.
employees and failing to remit the said contributions. He also declared that the evidence on record showed
[4]
that the legal officer of the SSS cleared the complainants, through his letter, in which he stated that the
[8]
This Commission has not acquired jurisdiction over the stockholders of the respondent corporation.
 The NLRC denied the complainants motion for reconsideration of the said decision. any amendment or alteration which substantially affects a final and executory judgment is null and void
for lack of jurisdiction, including the entire proceedings held for that purpose. An order of execution
Aggrieved, Restituto Timbal, Jr., filed his petition for certiorari under Rule 65, with this Court for the
which varies the tenor of the judgment or exceeds the terms thereof is a nullity.
nullification of the decision of the NLRC, asserting that the NLRC committed a grave abuse of its discretion
[9]
in setting aside the order and alias writ of execution issued by the Labor Arbiter.
None of the parties in the case before the Labor Arbiter appealed the Decision dated March 10, 1987;
On January 20, 1999, this Court issued a Resolution referring the case to the Court of Appeals hence the same became final and executory. It was, therefore, removed from the jurisdiction of the
[10]
conformably to its ruling in St. Martin Funeral Homes vs. NLRC. Labor Arbiter or the NLRC to further alter or amend it. Thus, the proceedings held for the purpose of
amending or altering the dispositive portion of the said decision are null and void for lack of jurisdiction.
After due proceedings, the Court of Appeals rendered a Decision on September 24, 1999, affirming Also, the Alias Writ of Execution is null and void because it varied the tenor of the judgment in that it
the decision of the NLRC as far as William Ang was concerned, but granting the petition and affirming the sought to enforce the final judgment against Antonio Gonzales/Industrial Management Development
Order and Alias Writ of Execution of the Labor Arbiter against Conrado Tan. The decretal portion of the Corp. (INIMACO) and/or Filipinas Carbon and Mining Corp. and Gerardo Sicat, which makes the
decision reads: [13]
liability solidary.

IN VIEW OF ALL THE FOREGOING, the assailed NLRC decision dated June 18, 1997 is AFFIRMED insofar as Not even the NLRC, the Court of Appeals and this Court has any appellate jurisdiction to alter or
Joseph O. Tiu, Rudy D. Ang, Pablo C. King and William T. Ang are concerned. However, as reverse the decision of the Labor Arbiter.
regard (sic) Conrado D. Tan, the Orders of Labor Arbiter Cornelio L. Linsangan dated January 16 and May
2, 1991, are REINSTATED, SUSTAINED and UPHELD. No pronouncement as to costs. The Court of Appeals correctly cited our ruling in MAM Realty Development Corporation vs.
[14]
NLRC, that in labor cases, corporate directors and officers are solidarily liable with the corporation for
SO ORDERED.
[11]
the termination of employment of corporate employees committed with malice or bad faith. The ruling
applies in a case where a corporate officer acts with malice or bad faith in suspending an
employee. Whether or not the petitioner acted with malice or bad faith in ordering the suspension of the
After the CA denied petitioner Tans motion for reconsideration, the latter filed the petition at bar
respondent is a question of fact submitted by the parties to the Labor Arbiter for resolution.
contending that the Court of Appeals erred in finding him, jointly and severally, liable with the NSC for the
Labor Arbiters monetary award in favor of the respondent on its finding that he acted in bad faith and with In the instant case, the Labor Arbiter did not make any finding in his decision in NLRC Case No. NCR-
malice in suspending the respondent. 00-08-03596-89 that the petitioner acted with malice or bad faith in ordering the suspension of the
respondent. Neither did he hold the petitioner liable, either jointly or severally with the NSC, for the
The sole issue in this case is whether the petitioner is liable, either jointly or severally with the NSC,
monetary award in favor of the complainants therein including the respondent herein. The Court of
for the monetary award in favor of the respondent herein in NLRC Case No. NCR-00-08-03596-89.
Appeals had no jurisdiction to delve into and resolve an issue already passed upon by the Labor Arbiter
The petitioner avers that under his decision, the Labor Arbiter found the NSC solely liable for the with finality. For the Court of Appeals to do so in a petition for certiorari from the decision of the NLRC, by
monetary award issued in favor of the respondent. Hence, the alias writ of execution issued by the Labor granting the petitioners petition for a writ of injunction, is to do indirectly what it is proscribed from doing
Arbiter should be directed only against the NSC and not against him. As such, his property, real and directly.
personal, should not be burdened by the said award. For his part, the respondent contends that the Court
Far from committing a grave abuse of its discretion amounting to excess or lack of jurisdiction, the
of Appeals did not err in holding the petitioner, jointly and severally, liable with NSC for the monetary
NLRC acted in accordance with law and current jurisprudence.
award in his favor on its finding that the petitioner acted in bad faith and with malice in suspending him.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The decision of the Court of Appeals in
The petition is meritorious.
CA-G.R. SP No. 51404 is REVERSED and SET ASIDE. The assailed decision of the NLRC is AFFIRMED. No costs.
Irrefragably, under the decision of the Labor Arbiter in NLRC Case No. NCR-00-08-03596-89, only

the NSC was found liable for the monetary awards in favor of the complainants therein, including the
herein respondent. The petitioner, although the general manager of NSC, was not ordered to pay for the
monetary award in favor of the complainants, jointly or severally, with the NSC. The decision of the Labor
Arbiter had become final and executory; hence, immutable. As we held in Industrial Management
International Development Corporation vs. NLRC:
[12]

It is an elementary principle of procedure that the resolution of the court in a given issue as embodied in
the dispositive part of a decision or order is the controlling factor as to settlement of rights of the parties.

Once a decision or order becomes final and executory, it is removed from the power or jurisdiction of the
court which rendered it to further alter or amend it. It thereby becomes immutable and unalterable and
 [G.R. No. 135136. May 19, 1999] of defendant, since the latter acted in good faith and believing that it is within their right to withhold the
benefits that may be due to the plaintiff.
DELFIN A. BRION, petitioner, vs. SOUTH PHILIPPINE UNION MISSION OF THE SEVENTH DAY ADVENTIST
CHURCH, represented by PASTORS PATERNO DIAZ, ULYSSES CAMAGAY, MANUEL DONATO and
WENDELL SERRANO, respondents. Without pronouncement as to cost.

[1]
D E C I S I O N SO ORDERED.

ROMERO, J.: Aggrieved by the trial courts decision, the SDA filed an appeal with the Court of Appeals, docketed
therein as CA-G.R. SP No. 43846. On March 19, 1998, the appellate court set aside the decision of the trial
Blow, blow, thou winter wind, court and ordered the dismissal of petitioners complaint. Petitioner filed a motion for reconsideration,
Thou art not so unkind which was denied on August 3, 1998, hence this petition.
As mans ingratitude
We find for petitioner.
[Shakespeare: As You Like It, Act II, sc. 7, Line 174]
The following provisions on retirement, contained in the General Conference Working Policy of the
Vilified as an ingrate by his erstwhile church, accused of being possessed by the devil, and likened SDA, are of primary importance in resolving the issue at hand:
to the dog that bit the hand that fed him, petitioner Delfin A. Brion comes to this Court with a novel
question of law: Must the conditions for eligibility for retirement be met only at the time of retirement or [Paragraph] Z1010 Beneficiaries of Retirement Plan The benefits of the retirement plan are designed for
are these conditions continuing ones which must be complied with even after one has retired? those who have devoted their lives to the work of the Seventh-day Adventist Church and are eligible to
The facts are simple. retire for reasons of old age and/or disability.

Petitioner Delfin A. Brion became a member of respondent South Philippine Union Mission of the x x x x x x x x x
Seventh Day Adventist Church (hereafter SDA) sometime in 1949. He worked his way up the ladder,
starting as a literature evangelist, then a janitor or office helper, until he became an ordained minister and
[Paragraph] Z1025 Termination of Benefits The benefits shall terminate with the decease of the
president of the Northeastern Mindanao Mission of the Seventh Day Adventist Church in Butuan City. [2]
beneficiary, except where there is an eligible surviving spouse and/or children.
Respondent claims that due to corruption charges, petitioner was transferred to the Davao Mission
of the SDA. Thereafter, allegedly due to an act of indiscretion with a masseuse, petitioner was demoted to On the basis of these two provisions, the trial court ruled in favor of petitioner. In its own words:
the position of Sabbath School Director at the Northern Mindanao Mission of the SDA located at Cagayan
de Oro City. Here, petitioner worked until he retired in 1983. As was the practice of the SDA, petitioner
Going over the aforecited provisions in the Retirement Plan of defendant church, it is very clear that the
was provided a monthly amount as a retirement benefit.
benefit of retirement provided therein are designed for those who have devoted their lives to the work
Sometime thereafter, petitioner got into an argument with Samuel Sanes, another pastor of the of the SDA. The word have in the quoted provision refers to past acts rendered by the retiree to the
SDA. This disagreement degenerated into a rift between petitioner and the SDA, culminating in the defendant church. There is no doubt that plaintiff has devoted his life to the service. That is the reason
establishment by petitioner of a rival religious group which he called the Home Church. Petitioner he is qualified to receive the retirement benefit.
succeeded in enticing a number of SDA members to become part of his congregation even as he continued
disparaging and criticizing the SDA. Because of his actions, petitioner was excommunicated by the SDA The second quoted provision does not impose any other cause of termination of the benefit except the
and, on July 3, 1993, his name was dropped from the Church Record Book. As a consequence of his death of the beneficiary. Since there is no other condition that is attached to the same except the death
disfellowship, petitioners monthly retirement benefit was discontinued by the SDA. of the beneficiary, then the plaintiff must be entitled to receive the benefits provided. The retirement
benefit is not conditional, but rather it is for past services that have already been rendered. The grant of
On December 21, 1995, petitioner filed an action for mandamus with the Regional Trial Court of retirement benefit is absolute since it is a reward for one who has devoted his life to the defendant
Cagayan de Oro City asking that the SDA restore his monthly retirement benefit. On July 10, 1996, the trial [3]
church up to the time plaintiff retired.
court rendered a decision, the dispositive portion of which reads:

The above declaration was, however, refuted by the Court of Appeals when it stated in its decision
WHEREFORE, premises considered, the Court finds in favor of plaintiff and hereby orders defendant to that:
pay the retirement benefits due to the plaintiff from October 1995 to the present and all subsequent
monthly benefits that may be due to the plaintiff until his demise. The Court finds no basis or no
In the first place, its ruling that the wording of paragraph Z1010 that by using the word have, both
justification to the (sic) award any damages considering that there is no showing of bad faith on the part
parties intended to refer to past acts rendered by the retiree to the Church is erroneous.The provision
was couched in the present perfect tense, the word have being used as an auxiliary verb prefixed to the x x x x x x x x x
past participial form of the verb devote. It is an elementary rule in grammar that the present perfect
From the above, it can be gleaned that employer and employee are free to stipulate on retirement
tense is used to refer to an action or condition that began in the past and continues to the present or has
just been completed. Such being the case, the SDAs argument that a member must maintain loyalty and benefits, as long as these do not fall below the floor limits provided by law.
fealty to the Church for him to continue to qualify for benefits gains ground. The use of the word lives Again, it has been held that pension and retirement plans create a contractual obligation in which
also implies that the beneficiary devoted all of his life not just a part of it, to the work of the Church. On the promise to pay benefits is made in consideration of the continued faithful service of the employee for
the other hand, the word work, instead of service, connotes the ministry of the Church, to which one can [9]
the requisite period. In other words, before a right to retirement benefits or pension vests in an
[4]
be devoted by loyalty, if no longer active participation. employee, he must have met the stated conditions of eligibility with respect to the nature of employment,
age, and length of service. This is a condition precedent to his acquisition of rights thereunder.
Furthermore, the Court of Appeals considered of great significance the fact that petitioner had been
disfellowed and expelled by SDA. Citing American Jurisprudence, the appellate court held that: Under the SDAs theory, however, the right to a pension never really vests in an employee, there
being no fixed period for eligibility for retirement. The SDA insists that an employee must devote his life
to the work of the Seventh-day Adventist Church even after retirement to continue enjoying retirement
It may preliminarily be observed that the profession of priest or minister of any denomination is held
benefits. There is, thus, no definite length of service provided as the SDA can withdraw retirement benefits
subject to its laws; he acquires it by compact, and is not exempt from the proper discipline and authority
at any time after retirement, if it determines that a retired employee is not devoting his life to the work of
of his church. A minister, in the legal point of view, is a voluntary member of the association to which he
the church. Furthermore, the SDAs eligibility requirement as to length of service is even more stringent
belongs. The position is not forced upon him; he seeks it.He accepts it with all its burdens and
than that required by law. Under the Labor Code, an employee upon reaching the age of sixty (60) years
consequences, with all the rules and laws and canons subsisting or to be made by competent authority,
or more, but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age, who
and may, at pleasure and with impunity, abandon it. While a member of the association, however, and
has served at least five (5) years in the said establishment may retire and shall be entitled to retirement
having a full share in the benefits resulting therefrom, he should adhere to its discipline, conform to its
pay Under the law, service for five years is enough to entitle an employee who meets the requisite age to
doctrines and mode of worship, and obey its laws and canons.
retirement benefits. However, the SDA would require its employees to serve it for all his lifetime. It must
be noted that petitioner has served the SDA for thirty-four (34) years.
The continuance, powers, and emoluments of a priest or minister depend on the will of the church, and
the sentence of the church judicatory in a proper case deprives him of the position and the right to Likewise, the SDAs theory negates the very concept of retirement. As earlier defined, retirement
further salary or emoluments; hence, upon the dissolution or suspension of the pastoral relation, or means to withdraw from ones office, occupation, or duty. To require petitioner to continue devoting his
upon the expulsion of a priest or minister from a pastorate, all right to further salary ceases. life to the work of the Seventh-day Adventist Church would mean that petitioner never really withdraws
from his office or occupation, that of working for the church.It is an oxymoron to retire an employee and
[5] yet require him to continue working for the same employer. This Court cannot, thus give its imprimatur to
x x x x x x x x x.
SDAs theory. We rule that the conditions of eligibility for retirement must be met at the time of retirement
Retirement has been defined as a withdrawal from office, public station, business, occupation, or at which juncture the right to retirement benefits or pension, if the employee is eligible, vests in him.
[6]
public duty. It is the result of a bilateral act of the parties, a voluntary agreement between the employer
In the present case, petitioner was adjudged by the SDA in 1983, to be qualified for retirement, such
and the employee whereby the latter, after reaching a certain age, agrees and/or consents to sever his
[7] that when it began paying petitioner retirement benefits in said year, it must have been convinced that
employment with the former. In this connection, the modern socio-economic climate has fostered the
petitioner had devoted his life to the work of the Seventh-day Adventist Church. Having arrived at such a
practice of setting up pension and retirement plans for private employees, initially through their voluntary
conclusion, it may not now reverse this finding to the detriment of petitioner.
adoption by employers, and lately, established by legislation. Pension schemes, while initially
humanitarian in nature, now concomitantly serve to secure loyalty and efficiency on the part of employees, Furthermore, pension and retirement plans, in line with the Constitutional mandate of affording full
and to increase continuity of service and decrease the labor turnover by giving to the employees some [10]
protection to labor, must be liberally construed in favor of the employee, it being the general rule that
assurance of security as they approach and reach the age at which earning ability and earnings are pension plans formulated by an employer are to be construed most strongly against the
[8]
materially impaired or at an end. [11]
employer. Hence, where two constructions of a retirement plan are possible, one of which requires the
retiree to devote his life to the service of the church even after retirement, and the other of which
It must be noted, however, that the nature of the rights conferred by a retirement or pension plan
sanctions the severance by the retiree of his employment thereto at retirement, this Court will not hesitate
depends in large measure upon the provisions of such particular plan. The Labor Code provides:
to adopt the latter interpretation.
[12]
Art. 287. Retirement. Any employee may be retired upon reaching the retirement age established in the Bolstering this conclusion is this Courts observation in UST Faculty Union v. NLRC that upon the
collective bargaining agreement or other applicable employment contract. retirement of an employee or official in the public or private service his employment is deemed
terminated. With the termination of employment, the right of the employer to control the employees
In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have conduct, the so-called control test also terminates; hence, after retirement, the SDA may no longer require
earned under existing laws and any collective bargaining agreement and other agreements petitioner to devote his life to the work of the church, it having lost control over its erstwhile employee.
 Given the above disquisition, it can be seen that the importance placed by the appellate court on Petitioners establishment of a rival church hardly qualifies as an actionable wrong. In fact, it is a
petitioners excommunication and disfellowship is misplaced. While it is true that upon the expulsion of a perfectly legitimate exercise of ones freedom of religion enshrined in our Constitution.
[13]
priest or minister from a pastorate, all right to further salary ceases, this presupposes that the priest or
minister is still on active duty, so to speak. Here, petitioner has already retired. Hence, he already had a WHEREFORE, premises considered, the decision of the Court of Appeals dated March 19, 1998 is
hereby REVERSED and SET ASIDE and the decision of the trial court dated July 10, 1996 AFFIRMED in
vested right to receive retirement benefits, a right which could not be taken away from him by expulsion
toto. No pronouncement as to costs.
or excommunication, this not being a ground for termination of retirement benefits under the SDAs
retirement plan. In fact, under paragraph Z1025 of the SDAs General Conference Working Policy, SO ORDERED.
retirement benefits terminate only with the decease of the beneficiary, an event which has not yet
transpired here. The SDA must, thus, pay petitioner his retirement benefits despite his establishment of a Vitug, Panganiban, and Gonzaga-Reyes, JJ., concur.
rival church and his excommunication. Purisima, J., did not participate in the deliberations.

Again, while paying retirement benefits to petitioner may be odious and abhorrent to the SDA, in
the absence of any other stipulation for the termination of petitioners retirement benefits, the SDA must
comply with its contractual obligations, the contract being the law between the parties. As correctly
pointed out by the trial court:

While what plaintiff is doing may be inimical, despicable or repulsive to the view of defendant, it is of no
consequence. Dura lex sed lex, the law is hard but that is the law. Since the only condition for the
termination of the same is death of (sic) beneficiary, then the defendant cannot legally cut off what is
[14]
due to the plaintiff.

In refutation of this point, the appellate court declared that:

[I]t is not only death which would terminate receipt of benefits under the retirement plan, as per
paragraph Z1025 of the GCWP; to this extent, the covenant must be deemed subject to the implied
condition that the beneficiary continues to be a member in good standing of the church. The Court
believes that such an understanding is inherent in every relationship between the believer and his
[15]
church.

Obviously, the SDA would have petitioner cease and desist from organizing and running a rival
church. This is analogous to provisions limiting or prohibiting a retiree or pensioner from engaging in a
competitive business or accepting employment with a business competitor, a clause not infrequently
found in private retirement or pension plans. The SDA, however, chose not to include such a provision in
its General Conference Working Policy. For its lack of foresight, it now seeks to extricate itself from a messy
[16]
situation through the assistance of the Court. This Courts pronouncement in Vales v. Villa seems
particularly apropos:

Courts cannot follow [a person] every step of his life and extricate him from bad bargains, protect him
from unwise investments, relieve him from one-sided contracts, or annul the effects of foolish
acts. Courts cannot constitute themselves guardians of persons who are not legally incompetent. Courts
operate not because one person has been defeated or overcome by another, but because he has been
defeated or overcome illegally. Men may do foolish things, make ridiculous contracts, use miserable
judgment, and lose money by them-indeed, all they have in the world; but not for that alone can the law
intervene and restore. There must be, in addition, a violation of law, the commission of what the law
knows as an actionable wrong, before the courts are authorized to lay hold the situation and remedy it.

















































 [G.R. No. 144483. November 19, 2003] = (15 days x latest salary per day) + (5 days leave x latest salary per day) + 1/12 of
th
13 month pay
STA. CATALINA COLLEGE and SR. LORETA ORANZA, petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION and HILARIA G. TERCERO, respondents.
= (15 x 290.90) + (5 x 290.90) + 533.33

D E C I S I O N
= P6,351.33
CARPIO MORALES, J.:
Retirement Benefits = P6,351.33 (30 years)
[1]
From the April 28, 2000 decision of the Court of Appeals (CA) affirming that of the National Labor
Relations Commission (NLRC) awarding retirement benefits in the amount of P85,287.72 to private = P190,539.90
[7]

respondent Hilaria G. Tercero (Hilaria), petitioners Sta. Catalina College and its former directress Sr. Loreta
Oranza come to this Court on a petition for review on certiorari.
The parties having failed to agree on how the retirement benefits should be computed, Hilaria filed
[8]
In June 1955, Hilaria was hired as an elementary school teacher at a complaint before the NLRC Regional Arbitration, Branch No. IV against petitioner school and/or
the Sta. Catalina College (petitioner school) in San Antonio, Bian, Laguna. In 1970, she applied for and was petitioner Sr. Loreta Oranza for non-payment of retirement benefits. The complaint was docketed as NLRC
granted a one year leave of absence without pay on account of the illness of her mother. After the Case No. RAB-IV-3-9860.
expiration in 1971 of her leave of absence, she had not been heard from by petitioner school.
By Decision of October 30, 1998, Labor Arbiter Pedro C. Ramos upheld petitioners position,
In the meantime, she was employed as a teacher at the San Pedro Parochial School during school disposing as follows:
year 1980-1981 and at the Liceo de San Pedro, Bian, Laguna during school year 1981-1982.
[2] WHEREFORE, premises considered, judgment is hereby rendered ordering the respondents to pay the
In 1982, she applied anew at petitioner school which hired her with a monthly salary
[3] complainant the amount of P18,185.26 only as the differential of her retirement benefits.
of P6,567.95.
st
On March 22, 1997, during the 51 Commencement Exercises of petitioner school, Hilaria was SO ORDERED.
[9]

awarded a Plaque of Appreciation for thirty years of service and P12,000.00 as gratuity pay.

On May 31, 1997, Hilaria reached the compulsory retirement age of 65. Retiring pursuant to Article On appeal, the NLRC, by Decision of April 27, 1999, set aside the Labor Arbiters decision and
287 of the Labor Code, as amended by Republic Act 7641, petitioner school pegged her retirement benefits disposed as follows:
[4]
at P59,038.35, computed on the basis of fifteen years of service from 1982 to 1997. Her service from
1955 to 1970 was excluded in the computation, petitioner school having asserted that she had, in 1971, WHEREFORE, on account of the foregoing, the judgment a quo is SET ASIDE.
abandoned her employment.
[5] Respondent-appellee is hereby ordered to pay the total amount of P85,287.72 computed as
From the P59,038.35 retirement benefits was deducted the amount of P28,853.09 representing
follows: P3,935.89 (total computation of the retirement components) MULTIPLIED by 29 (number of
reimbursement of the employers contribution to her retirement benefits under the Private Education
years in service) EQUALS P114,140.81 (total retirement package) LESS P28,287.72 (representing
Retirement Annuity Association (PERAA) which Hilaria had already received. Deducted too was the amount
respondent-appellees contribution with the PERAA proven to have already been received by
of P12,000.00 representing the gratuity pay which was given to her. The remaining balance of the
[6] complainant-appellant). However, the gratuity pay earlier already given shall not be deducted from the
retirement benefits due her thus amounted to P18,185.26.
retirement package.
Hilaria insisted, however, that her retirement benefits should be computed on the basis of her thirty
years of service, inclusive of the period from 1955 to 1970; and that the gratuity pay earlier given to her SO ORDERED.
[10]

should not be deducted therefrom. She thus concluded that she was entitled to P190,539.90, computed
as follows: [11]
Not satisfied with the NLRC decision, petitioners brought the case on certiorari to the CA which,
by the assailed decision, dismissed it, holding that petitioners failed to prove that Hilaria had abandoned
Retirement Benefits = month salary for every year of service her position in 1970, as petitioner school even gave her a Plaque of Appreciation for thirty years of service
precisely because of her thirty year continuous service, and that petitioner school never sent notice to her
One-half month salary dismissing her, hence, the employer-employee relationship was not severed and, therefore, her services
for petitioner school during the period from 1955-1970 should be credited in the computation of her
retirement benefits. Held the CA:
x x x [D]espite the absence of the Private Respondent for a period of eleven (11) years or so from 1970 to of the Labor Arbiter, this Court must of necessity examine the records and the evidence presented to
[18]
1982 and her employment with the Liceo de San Pedro and San Pedro Parochial School, her employer- determine which finding should be preferred as more conformable with the evidentiary facts.
employee juridical relationship, with the Petitioner School, had not been severed, namely: (a) the
Petitioner School never sent any notice to the Private Respondent dismissing her from her employment The threshold issue is whether Hilarias services for petitioner school during the period from 1955
to 1970 should be factored in the computation of her retirement benefits.
on account of her unexplained and prolonged absence as required by Section 2, Rule XIV, Book V of the
Omnibus Rules Implementing the Labor Code (Reno Foods, Inc. versus NLRC, et al., 249 SCRA 386); (b) The inapplicability to the present case of the ruling in Carandang notwithstanding, Hilaria cannot be
the Private Respondent did not receive any amount, from the Petitioner School, by way of separation credited for her services in 1955-1970 in the determination of her retirement benefits. For, after her one
pay, indemnity pay, and her share of her retirement contributions for the period from 1955 when she year leave of absence expired in 1971 without her requesting for extension thereof as in fact she had not
commenced her employment with the Petitioner School until her leave of absence in 1970; (c) the been heard from until she resurfaced in 1982 when she reapplied with petitioner school, she abandoned
Petitioner School gave the Private Respondent a Plaque of Appreciation for her thirty (30) year her teaching position as in fact she was employed elsewhere in the interim and effectively relinquished
st
continuous service to the Petitioner School on the occasion of the 51 Commencement Exercise of her the retirement benefits accumulated during the said period.
Petitioner School on March 22, 1997; (d) she was given a gratuity of P12,000.00 on account of her
exemplary services to the Petitioner School until the time when she reached the compulsory retirement For a valid finding of abandonment, two factors must be present: (1) the failure to report for work,
[12]
age of 65 years. (Underscoring supplied) or absence without valid or justifiable reason; and (2) a clear intention to sever employer-employee
relationship, with the second element as the more determinative factor, being manifested by some overt
[19]
With respect to the gratuity pay awarded to Hilaria, the CA upheld the NLRC ruling that it should acts.
not be deducted from the retirement benefits due her. To prove abandonment, the employer must show that the employee deliberately and unjustifiably
[20]
[13] [14]
Their motion for reconsideration having been denied by the CA Resolution of August 11, 2000, refused to resume his employment without any intention of returning. There must be a concurrence of
petitioners lodged the present petition which imputes the following error to the appellate court: the intention to abandon and some overt acts from which an employee may be deduced as having no more
[21]
intention to work. The law, however, does not enumerate what specific overt acts can be considered as
[22]
THE PUBLIC RESPONDENT CA ERRED IN AWARDING THE RETIREMENT BENEFITS strong evidence of the intention to sever the employee-employer relationship.
DIFFERENTIAL OF [HILARIA] COMPUTED BASED ON HER 29 YEARS OF SERVICE WHEN SHE
MERELY RENDERED 15 CONTINUOUS YEARS OF SERVICE PRIOR TO HER RETIREMENT. THE It is not disputed that the approved one year leave of absence without pay of Hilaria expired in
COURT OF APPEALS COMPLETELY IGNORED THE RULING OF THIS HONORABLE COURT IN 1971, without her, it bears repeating, requesting for extension thereof or notifying petitioner school if and
CARANDANG V. DULAY, 188 SCRA 793 [1990] THAT SEPARATION PAY SHOULD BE BASED ON when she would resume teaching. Nor is it disputed that she was rehired only in 1982 after filing anew an
THE NUMBER OF CONTINUOUS YEARS OF SERVICE OF THE EMPLOYEE BEFORE THE DATE OF application, without her proffering any explanation for her more than a decade of absence. Under the
HIS SEPARATION FROM EMPLOYMENT.
[15] circumstances, abandonment of work at petitioner school in 1971 is indubitably manifest.

Petitioners argue that when Hilaria did not report upon the expiration in 1971 of her one year leave As regards the requirement of notice of termination, it was error for the CA to apply Sec 2, Rule XIV,
[23]
of absence without pay nor request for an extension thereof, she actually voluntarily resigned from or Book V of the Omnibus Rules Implementing the Labor Code. It should be noted that when
[16]
abandoned her employment, thus effectively forfeiting all the benefits she had earned for services Hilaria abandoned her teaching position in 1971, the law in force was Republic Act 1052 or the Termination
rendered from 1955 to 1970, hence, she ceased to be an employee of the school. Prescinding from this Pay Law, as amended by Republic Act 1787, Section 1 of which provides:
ratiocination, petitioners conclude that the period from 1955 to 1970 cannot be included in the
determination of her retirement benefits, for when she was rehired in 1982, she was a new employee. SEC. 1. In cases of employment, without a definite period, in a commercial, industrial, or agricultural
establishment or enterprise, the employer or the employee may terminate at any time the employment
In support of their position, petitioners cite the case of Carandang v. Dulay which held that when with just cause; or without just cause in the case of an employee by serving written notice on the
therein petitioner was re-hired as teacher six years after resigning, she had to start from zero experience employer at least one month in advance, or in the case of an employer, by serving such notice to the
and her previous years of service with the therein respondent school could not be credited to her. What employee at least one month in advance or one-half month for every year of service of the employee,
was in issue in Carandang, however, was the therein petitioners separation, not retirement pay, this Court whichever is longer, a fraction of at least six months being considered as one whole year.
therein ruling that separation pay should be computed on the basis of her last continuous period of service.

Petitioners further argue that the P12,000.00 gratuity earlier given to Hilaria should be considered The employer, upon whom no such notice was served in case of termination of employment without just
part of the retirement benefits due her since it was given precisely because she had retired and was in cause may hold the employee liable for damages.
addition to the amount that the school contributed to PERAA for her retirement.
The employee, upon whom no such notice was served in case of termination of employment without just
As a general rule, the factual findings and conclusions of quasi-judicial agencies such as the NLRC
cause shall be entitled to compensation from the date of termination of his employment in an amount
are, on appeal, accorded great weight and respect and even finality as long as they are supported by
equivalent to his salaries or wages corresponding to the required period of notice.
substantial evidence or that amount of relevant evidence which a reasonable man might accept as
[17]
adequate to justify a conclusion. Where, as in the present case, the findings of the NLRC contradict those
x x x (Emphasis and underscoring supplied) 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.
Above-stated law should thus apply in the case at bar, so Mapua Institute of Technology v.
[24]
Manalo instructs: As for the ruling of the CA affirming that of the NLRC that the P12,000.00 gratuity pay earlier
awarded to Hilaria should not be deducted from the retirement benefits due her, the same is in
Without declaring that a private college or university like the Mapua Institute of Technology is a order. Gratuity pay is separate and distinct from retirement benefits. It is paid purely out of
[27]
commercial, industrial, or agricultural establishment, we believe that there being no special law generosity. So Republic Planters Bank v. NLRC holds:
governing the dismissal or separation of professors from colleges and universities, the provisions of
Republic Act No. 1052, as amended by Republic Act No. 1787, should be made to apply. Authority for Gratuity pay x x x is paid to the beneficiary for the past services or favor rendered purely out of the
such a course of action is 78 Corpus Juris Secundum 617, which says: generosity of the giver or grantor. Gratuity, therefore, is not intended to pay a worker for actual services
rendered or for actual performance. It is a money benefit or bounty given to the worker, the purpose of
Contracts between private schools and teachers or other instructors are governed, in general, by the which is to reward employees who have rendered satisfactory service to the company. (Underscoring
rules applicable to other contracts of employment. (Underscoring supplied) supplied)

Abandonment of work being a just cause for terminating the services of Hilaria, petitioner school Retirement benefits, on the other hand, are intended to help the employee enjoy the remaining
was under no obligation to serve a written notice to her. years of his life, releasing him from the burden of worrying for his financial support, and are a form of
[28]
reward for his loyalty to the employer.
That Hilaria was in 1997 given a plaque of appreciation for thirty years of service to the school and
awarded P12,000.00 as gratuity pay should not be taken against petitioners, for acknowledgment of the In Hilarias case, her retirement pay as computed by petitioners amounts to P59,038.35, P28,853.09
total number of years of her service, which was discontinuous, should not obliterate the fact that she of which had already been given to her under the PERAA. Since the computed amount of her retirement
abandoned her employment in 1971, albeit she was rehired in 1982. pay is much lower than that provided under the law, she is entitled to receive the difference between the
actual amount of her retirement benefits as required by law and that provided for under the
It was error too for the CA to conclude that since petitioner school did not award separation pay PERAA. Although she did not appeal from the NLRC decision awarding her P85,287.72, this Court awards
and Hilarias share of her retirement contributions when she temporarily stopped working after she left the entire amount of the retirement benefits to which she is rightfully entitled under the law. Technical
her teaching position in 1971, employer-employee relation between them was not severed. It bears noting [29]
rules of procedure are not binding in labor cases. The application of technical rules of procedure may
that an employee who is terminated for just cause is generally not entitled to separation pay. Moreover, [30]
be relaxed to serve the demands of substantial justice.
the PERAA, petitioner schools substitute retirement plan, was only established in 1972, such that when
Hilaria abandoned her work in 1971, there were no retirement contributions to speak of. Article 287 of the Labor Code, as amended by Republic Act 7641 or the New Retirement Law,
provides:
As Hilaria was considered a new employee when she rejoined petitioner school upon re-applying in
1982, her retirement benefits should thus be computed only on the basis of her years of service from 1982
[25]
ART. 287. Retirement. Any employee may be retired upon reaching the retirement age established in the
to 1997. This is what JAM Transportation Co., Inc. v. Flores teaches:
collective bargaining agreement or other applicable employment contract.

Private respondents re-employment as a new employee x x x would mean a demotion in rank and In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have
privileges, retirement benefits, for example, as his entire previous eighteen (18) years of service with
earned under existing laws and any collective bargaining agreement and other agreements: Provided,
petitioner, would simply be considered as non-existent. however, That an employees retirement benefits under any collective bargaining and other agreements
shall not be less than those provided herein.
This Court is not unmindful of Hilarias rendition of a total of thirty years of teaching in petitioner
school and should be accorded ample support in her twilight years.Petitioner school in fact acknowledges
In the absence of a retirement plan or agreement providing for retirement benefits of employees in the
her dedicated service to its students. She can, however, only be awarded with what she is rightfully entitled
[26]
establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five
to under the law. So Sosito v. Aguinaldo Development Corporation dictates: (65) years which is hereby declared the compulsory retirement age, who has served at least five (5) years
in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least one-
While the Constitution is committed to the policy of social justice and the protection of the working half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as
class, it should not be supposed that every labor dispute will be automatically decided in favor of one whole year.
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 privilege in life, this Court has inclined
more often than not toward the worker and upheld his cause in his conflicts with the employer. Such
Unless the parties provide for broader inclusions, the term one half (1/2) month salary shall mean fifteen
th
(15) days plus one-twelfth (1/12) of the 13 month pay and the cash equivalent of not more than five (5)
days of service incentive leaves.

x x x (Emphasis Supplied)

Likewise, Section 3.3, Rule II of the Rules Implementing R.A. 7641 provides:

3.3 Where both the employer and the employee contribute to a retirement fund in accordance with an
individual or collective agreement or other applicable employment contract, the employers total
contribution thereto shall not be less than the total retirement benefits to which the employee would
have been entitled had there been no such retirement fund. In case the employers contribution is less
than the retirement benefits provided under this Rule, the employer shall pay the difference.

Hence, Hilaria is entitled to receive P98,706.45 computed as follows:

One-half month salary = (15 days x latest salary per day) + (5 days leave x latest salary per
1 th
day) + ( /12 of 13 month pay)

= P4,512.30 + P1,504.10 + P547.33

= P6,563.73

Retirement Pay = number of years in service x one-half month salary

= 15 years x P6,580.43

= P98,455.95

Since petitioner school had already paid Hilaria P28,853.09 representing employer contributions
under the PERAA, the same should be deducted from the retirement pay due her, to thereby leave a
balance of P69,602.86 still due her.

WHEREFORE, the petition is GRANTED in part. The decision of the Court of Appeals dated April 28,
2000 is hereby MODIFIED. Petitioners are directed to pay the balance of the retirement benefits to private
respondent Hilaria G. Tercero in the amount of P69,602.86, as computed above.

SO ORDERED.

Vitug, (Chairman), Sandoval-Gutierrez and Corona, JJ., concur

FACTS: For a valid finding of abandonment, two factors must be present: (1) the failure to report for work,
or absence without valid or justifiable reason; and (2) a clear intention to sever employer-employee
relationship, with the second element as the more determinative factor, being manifested by some overt
acts.

Hilaria Tercero (Tercero) was hired as an elementary school teacher at the Sta. Catalina College (Sta.
Catalina) in June 1955. Fifteen years thereafter, on account of the illness of her mother, she applied for
and was granted a one year leave of absence without pay. After the expiration of her leave of absence,
she had not been heard from by petitioner school. In 1982, she applied anew at petitioner school which
hired her. On March 1997, Hilaria was awarded a Plaque of Appreciation for thirty years of service and a
gratuity pay. On May 1997, she reached the compulsory retirement age of 65. Tercero’s retirement
benefits were computed on the basis of fifteen years of service from 1982 to 1997 and her service
from 1955 to 1970 was excluded in the computation. Sta. Catalina asserted that she had, in 1971,
abandoned her employment. From the retirement benefits was deducted the amount representing
reimbursement of the employer’s contribution to her retirement benefits under the Private Education
Retirement Annuity Association (PERAA) which Tercero had already received. Deducted too was the
gratuity pay which was given to her.

Tercero filed a complaint before the NLRC Regional Arbitration, against Sta. Catalina for non-payment of
retirement benefits. By Decision of October 30, 1998 , Labor Arbiter Pedro C. Ramos ruled in favor of the
petitioner school. On appeal, however, the NLRC, set aside the Labor Arbiter’s decision.

Sta. Catalina then brought the case on certiorari to the CA. The appellate court however, dismissed the
petition, holding that Sta. Catalina failed to prove that Tercero had abandoned her position in 1970, as Sta.
Catalina even gave her a Plaque of Appreciation for thirty years of service ―precisely because of her
thirty year continuous service,‖ and that Sta. Catalina never sent notice to her dismissing her, hence, the
employer-employee relationship was not severed and, therefore, her services for Sta. Catalina during the
period from 1955-1970 should be credited in the computation of her retirement benefits

ISSUE: Whether or not Tercero is entitled to the retirement benefits differential computed by the NLRC
based on her 29 years of service when she merely rendered 15 continuous years of service prior to her
retirement

HELD: The Court is not unmindful of Tercero’s rendition of a total of thirty years of teaching in Sta.
Catalina College and should be accorded ample support in her twilight years. Sta. Catalina in fact
acknowledges her dedicated service to its students. She can, however, only be awarded with what
she is rightfully entitled to under the law.

As a general rule, the factual findings and conclusion of quasi-judicial agencies such as the NLRC are, on
appeal, accorded great weight and respect and even finality as long as they are supported by substantial
evidence or that amount of relevant evidence which a reasonable man might accept as adequate to justify
a conclusion. Where as in the present case, the findings of the NLRC contradict those of the Labor Arbiter,
the Court must of necessity examine the records and the evidence presented to determine which finding
should be preferred as more conformable with evidentiary facts.

For a valid finding of abandonment, two factors must be present: (1) the failure to report for work, or
absence without valid or justifiable reason; and (2) a clear intention to sever employer-employee
relationship, with the second element as the more determinative factor, being manifested by some overt
acts.

To prove abandonment, the employer must show that the employee deliberately and unjustifiably refused
to resume his employment without any intention of returning.

Abandonment of work being a just cause for terminating the services of Hilaria, petitioner school was
under no obligation to serve a written notice to her.