TABLE OF CONTENTS

G. R. No. / SCRA No. Title Date PAGE No.

1. 167622 Tongco vs The Manufacturers Life Insurance Co. (Phils.), Inc. Jun 29 2010

2. 171212 Indophil Textile Mills vs Adviento Aug 4, 2014

3. 192558 Danilo vs CA Feb 15,2012

4. 19261 Phil. Journalists, INC. vs Journal Employees Union Jun 26, 2013

5. 202090 ICT Marketing Services vs Mariphil Sales Sept 9, 2015

6. 174184 GJT RebuldersMachine Shop vs Ricardo Ambos Jan 28, 2015

7. 181490 Mirant Phil Corporation vs Caro Apr 23, 2014

8. 198783 Royal Plant Workers Union vs Coca-Cola Bottlers Phil. Apr 15, 2013

9. 196280/196286 Unibersidad de Sta. Isabel vs Sambajon Apr 2, 2014

10. 192571 Abbot Laboratories Phil vs Pearlie Alcaraz Apr 22, 2014

11. 170388 Colegio del Santisimo Rosario vs Rojo Sept 3, 2013

12. 538 SCRA 438 AMA Computer College Paranaque vs Austria Nov 2007

13. 160905 Goma v. Pamplona Plantation, Inc. Jul 4, 2008

14. 209499 Ma. Charito Gacia vs Syker Asia, Inc. Jan 28, 2015

15. 204406 MacArthur Malicdem vs Marulas Industrial Corp. Feb 26, 2014

16. 179640 Hacienda Cataywa vs Rosario Lorezo

Mar 18, 2015

17. 162025 Tunay Na Pagkakaisa Ng Manggagawa vs. Asia Brewery, Inc. Aug 3, 2010

18. 204944-45 Fuji Television Network, Inc. Vs. Arlene S. Espiritu Dec 3, 2014

19. 146408 Philippine Airlines, Inc. Vs. Enrique Ligan, Feb 29, 2008

20. 144672 Miguel Corporation vs. MAERC Integrated Services, Inc. Jul10, 2003

21. 184977 Coca-Cola Bottlers Phil Inc. Vs Ricky E. Dela Cruz Dec 7, 2009

22. 170054 Goya, Inc. Vs. Goya, Inc. Employees Union-Ffw Jan 21, 2013

23. Aliviado, Et. Al., Vs. Procter & Gamble Phils., Inc. Mar 9, 2010
160506

24. 179807 Gallego Vs. Bayer Philippines, Inc. Jul 31, 2009

25. 205300 Mar 18, 2015

Fonterra Brands Phils., Inc. Vs. Largado

26. 128845 Int’l School Alliance Of Educators Vs. Quisumbing Jun 1, 2000

27. 202961 EMER vs NLRC Feb 4, 2015

28. 428SCRA 239 Sevilla vs Semana 2004

29. 94 SCRA 270 Oceanic vs Inciong 1979

30. 225 SCRA 562 Davao vs Associated

KAYE RAMOGA LABOR LAW

31. 176985 Vergara vs Coca-Cola Apr 1. 2013

32. 1989 SRA 274 Traders vs NLRC 1990

33. 241 SCRA 380 Phil Duplicate vs NLRC

34. 228 SCRA 329 BOIE vs Dela Serna 1993

35. 278 SCRA 213 International vs NLRC 1998

36. 185499 Goodyear vs MARINA Nov 14, 2014

37. 181738 General vs Viajar Jan 30, 2313

38. 199554 Zenaida vs Northern Feb 18, 2015

39. 187232 Mendoza vs HMS Apr 17, 2013

40. 171587 Eastern vs Ferres Oct 13, 2009

41. 181995 Bibiano vs PAL Jul 16, 2012

- https://cdasiaonline.com/jurisprudences/53386?s_params=mbiDWtsy6jGk5ywHvL2L
KAYE RAMOGA
G.R. No. 167622 June 29, 2010
GREGORIO V. TONGKO, Petitioner, vs. THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC.
and RENATO A. VERGEL DE DIOS, Respondents
BRION, J.:
This resolves the Motion for Reconsideration1 dated
December 3, 2008 filed by respondent The
Manufacturers Life Insurance Co. (Phils.), Inc.
(Manulife) to set aside our Decision of November 7,
2008. In the assailed decision, we found that an
employer-employee relationship existed between
Manulife and petitioner Gregorio Tongko and ordered
Manulife to pay Tongko backwages and separation
pay for illegal dismissal.
The following facts have been stated in our Decision
of November 7, 2008, now under reconsideration, but
are repeated, simply for purposes of clarity.
The contractual relationship between Tongko and
Manulife had two basic phases. The first or initial
phase began on July 1, 1977, under a Career
Agent’s Agreement (Agreement) that provided:
It is understood and agreed that the Agent is an
independent contractor and nothing contained herein
shall be construed or interpreted as creating an
employer-employee relationship between the
Company and the Agent. x x x x
a) The Agent shall canvass for applications for Life
Insurance, Annuities, Group policies and other
products offered by the Company, and collect, in
exchange for provisional receipts issued by the
Agent, money due to or become due to the Company
in respect of applications or policies obtained by or
through the Agent or from policyholders allotted by
the Company to the Agent for servicing, subject to
subsequent confirmation of receipt of payment by the
Company as evidenced by an Official Receipt issued
by the Company directly to the policyholder. x x x x
The Company may terminate this Agreement for any
breach or violation of any of the provisions hereof by
the Agent by giving written notice to the Agent within
fifteen (15) days from the time of the discovery of the
breach. No waiver, extinguishment, abandonment,
withdrawal or cancellation of the right to terminate
this Agreement by the Company shall be construed
for any previous failure to exercise its right under any
provision of this Agreement.
Either of the parties hereto may likewise terminate
his Agreement at any time without cause, by giving to
the other party fifteen (15) days notice in writing.2
Tongko additionally agreed (1) to comply with all
regulations and requirements of Manulife, and (2) to
maintain a standard of knowledge and competency in
the sale of Manulife’s products, satisfactory to
Manulife and sufficient to meet the volume of the new
business, required by his Production Club
membership.3
LABOR LAW
The second phase started in 1983 when Tongko was
named Unit Manager in Manulife’s Sales Agency
Organization. In 1990, he became a Branch
Manager. Six years later (or in 1996), Tongko
became a Regional Sales Manager.4
Tongko’s gross earnings consisted of commissions,
persistency income, and management overrides.
Since the beginning, Tongko consistently declared
himself self-employed in his income tax returns.
Thus, under oath, he declared his gross business
income and deducted his business expenses to
arrive at his taxable business income. Manulife
withheld the corresponding 10% tax on Tongko’s
earnings.5
In 2001, Manulife instituted manpower development
programs at the regional sales management level.
Respondent Renato Vergel de Dios wrote Tongko a
letter dated November 6, 2001 on concerns that were
brought up during the October 18, 2001 Metro North
Sales Managers Meeting. De Dios wrote:
The first step to transforming Manulife into a big
league player has been very clear – to increase the
number of agents to at least 1,000 strong for a start.
This may seem diametrically opposed to the way
Manulife was run when you first joined the
organization. Since then, however, substantial
changes have taken place in the organization, as
these have been influenced by developments both
from within and without the company. x x x x
The issues around agent recruiting are central to the
intended objectives hence the need for a Senior
Managers’ meeting earlier last month when Kevin
O’Connor, SVP-Agency, took to the floor to
determine from our senior agency leaders what more
could be done to bolster manpower development. At
earlier meetings, Kevin had presented information
where evidently, your Region was the lowest
performer (on a per Manager basis) in terms of
recruiting in 2000 and, as of today, continues to
remain one of the laggards in this area.
While discussions, in general, were positive other
than for certain comments from your end which were
perceived to be uncalled for, it became clear that a
one-on-one meeting with you was necessary to
ensure that you and management, were on the same
plane. As gleaned from some of your previous
comments in prior meetings (both in group and one-
on-one), it was not clear that we were proceeding in
the same direction.
Kevin held subsequent series of meetings with you
as a result, one of which I joined briefly. In those
subsequent meetings you reiterated certain views,
the validity of which we challenged and subsequently
found as having no basis.
KAYE RAMOGA
With such views coming from you, I was a bit
concerned that the rest of the Metro North Managers
may be a bit confused as to the directions the
company was taking. For this reason, I sought a
meeting with everyone in your management team,
including you, to clear the air, so to speak.
This note is intended to confirm the items that were
discussed at the said Metro North Region’s Sales
Managers meeting held at the 7/F Conference room
last 18 October. x x x x
Issue # 2: "Some Managers are unhappy with their
earnings and would want to revert to the position of
agents."
This is an often repeated issue you have raised with
me and with Kevin. For this reason, I placed the
issue on the table before the rest of your Region’s
Sales Managers to verify its validity. As you must
have noted, no Sales Manager came forward on their
own to confirm your statement and it took you to
name Malou Samson as a source of the same, an
allegation that Malou herself denied at our meeting
and in your very presence.
This only confirms, Greg, that those prior comments
have no solid basis at all. I now believe what I had
thought all along, that these allegations were simply
meant to muddle the issues surrounding the inability
of your Region to meet its agency development
objectives!
Issue # 3: "Sales Managers are doing what the
company asks them to do but, in the process, they
earn less." x x x x
All the above notwithstanding, we had your own
records checked and we found that you made a lot
more money in the Year 2000 versus 1999. In
addition, you also volunteered the information to
Kevin when you said that you probably will make
more money in the Year 2001 compared to Year
2000. Obviously, your above statement about making
"less money" did not refer to you but the way you
argued this point had us almost believing that you
were spouting the gospel of truth when you were not.
xxx
All of a sudden, Greg, I have become much more
worried about your ability to lead this group towards
the new direction that we have been discussing
these past few weeks, i.e., Manulife’s goal to become
a major agency-led distribution company in the
Philippines. While as you claim, you have not
stopped anyone from recruiting, I have never heard
you proactively push for greater agency recruiting.
You have not been proactive all these years when it
comes to agency growth. x x x x
I cannot afford to see a major region fail to deliver on
its developmental goals next year and so, we are
making the following changes in the interim:
1. You will hire at your expense a competent
assistant who can unload you of much of the routine
LABOR LAW
tasks which can be easily delegated. This assistant
should be so chosen as to complement your skills
and help you in the areas where you feel "may not be
your cup of tea."
You have stated, if not implied, that your work as
Regional Manager may be too taxing for you and for
your health. The above could solve this problem. x x
2. Effective immediately, Kevin and the rest of the
Agency Operations will deal with the North Star
Branch (NSB) in autonomous fashion. x x x
I have decided to make this change so as to reduce
your span of control and allow you to concentrate
more fully on overseeing the remaining groups under
Metro North, your Central Unit and the rest of the
Sales Managers in Metro North. I will hold you solely
responsible for meeting the objectives of these
remaining groups. x x x x
The above changes can end at this point and they
need not go any further. This, however, is entirely
dependent upon you. But you have to understand
that meeting corporate objectives by everyone is
primary and will not be compromised. We are
meeting tough challenges next year, and I would
want everybody on board. Any resistance or holding
back by anyone will be dealt with accordingly.6
Subsequently, de Dios wrote Tongko another letter,
dated December 18, 2001, terminating Tongko’s
services:
It would appear, however, that despite the series of
meetings and communications, both one-on-one
meetings between yourself and SVP Kevin
O’Connor, some of them with me, as well as group
meetings with your Sales Managers, all these efforts
have failed in helping you align your directions with
Management’s avowed agency growth policy. x x x x
On account thereof, Management is exercising its
prerogative under Section 14 of your Agents Contract
as we are now issuing this notice of termination of
your Agency Agreement with us effective fifteen days
from the date of this letter.7
Tongko responded by filing an illegal dismissal
complaint with the National Labor Relations
Commission (NLRC) Arbitration Branch. He
essentially alleged – despite the clear terms of the
letter terminating his Agency Agreement – that he
was Manulife’s employee before he was illegally
dismissed.8
Thus, the threshold issue is the existence of an
employment relationship. A finding that none exists
renders the question of illegal dismissal moot; a
finding that an employment relationship exists, on the
other hand, necessarily leads to the need to
determine the validity of the termination of the
relationship.
A. Tongko’s Case for Employment Relationship
KAYE RAMOGA
Tongko asserted that as Unit Manager, he was paid
an annual over-rider not exceeding ₱50,000.00,
regardless of production levels attained and
exclusive of commissions and bonuses. He also
claimed that as Regional Sales Manager, he was
given a travel and entertainment allowance of
₱36,000.00 per year in addition to his overriding
commissions; he was tasked with numerous
administrative functions and supervisory authority
over Manulife’s employees, aside from merely selling
policies and recruiting agents for Manulife; and he
recommended and recruited insurance agents
subject to vetting and approval by Manulife. He
further alleges that he was assigned a definite place
in the Manulife offices when he was not in the field –
at the 3rd Floor, Manulife Center, 108 Tordesillas
corner Gallardo Sts., Salcedo Village, Makati City –
for which he never paid any rental. Manulife provided
the office equipment he used, including tables,
chairs, computers and printers (and even office
stationery), and paid for the electricity, water and
telephone bills. As Regional Sales Manager, Tongko
additionally asserts that he was required to follow at
least three codes of conduct.9
B. Manulife’s Case – Agency Relationship with
Tongko
Manulife argues that Tongko had no fixed wage or
salary. Under the Agreement, Tongko was paid
commissions of varying amounts, computed based
on the premium paid in full and actually received by
Manulife on policies obtained through an agent. As
sales manager, Tongko was paid overriding sales
commission derived from sales made by agents
under his unit/structure/branch/region. Manulife also
points out that it deducted and withheld a 10% tax
from all commissions Tongko received; Tongko even
declared himself to be self-employed and
consistently paid taxes as such—i.e., he availed of
tax deductions such as ordinary and necessary
trade, business and professional expenses to which
a business is entitled.
Manulife asserts that the labor tribunals have no
jurisdiction over Tongko’s claim as he was not its
employee as characterized in the four-fold test and
our ruling in Carungcong v. National Labor Relations
Commission.10
The Conflicting Rulings of the Lower Tribunals
The labor arbiter decreed that no employer-employee
relationship existed between the parties. However,
the NLRC reversed the labor arbiter’s decision on
appeal; it found the existence of an employer-
employee relationship and concluded that Tongko
had been illegally dismissed. In the petition for
certiorari with the Court of Appeals (CA), the
appellate court found that the NLRC gravely abused
its discretion in its ruling and reverted to the labor
arbiter’s decision that no employer-employee
relationship existed between Tongko and Manulife.
Our Decision of November 7, 2008
LABOR LAW
In our Decision of November 7, 2008, we reversed
the CA ruling and found that an employment
relationship existed between Tongko and Manulife.
We concluded that Tongko is Manulife’s employee
for the following reasons:
1. Our ruling in the first Insular11 case did not
foreclose the possibility of an insurance agent
becoming an employee of an insurance company;
if evidence exists showing that the company
promulgated rules or regulations that effectively
controlled or restricted an insurance agent’s
choice of methods or the methods themselves in
selling insurance, an employer-employee
relationship would be present. The determination
of the existence of an employer-employee
relationship is thus on a case-to-case basis
depending on the evidence on record.
2. Manulife had the power of control over Tongko,
sufficient to characterize him as an employee, as
shown by the following indicators:
2.1 Tongko undertook to comply with Manulife’s
rules, regulations and other requirements, i.e., the
different codes of conduct such as the Agent
Code of Conduct, the Manulife Financial Code of
Conduct, and the Financial Code of Conduct
Agreement;
2.2 The various affidavits of Manulife’s insurance
agents and managers, who occupied similar
positions as Tongko, showed that they performed
administrative duties that established employment
with Manulife;12 and
2.3 Tongko was tasked to recruit some agents in
addition to his other administrative functions. De
Dios’ letter harped on the direction Manulife
intended to take, viz., greater agency recruitment
as the primary means to sell more policies;
Tongko’s alleged failure to follow this directive led
to the termination of his employment with
Manulife.
The Motion for Reconsideration
Manulife disagreed with our Decision and filed the
present motion for reconsideration on the
following GROUNDS:
1. The November 7[, 2008] Decision violates
Manulife’s right to due process by: (a) confining
the review only to the issue of "control" and utterly
disregarding all the other issues that had been
joined in this case; (b) mischaracterizing the
divergence of conclusions between the CA and
the NLRC decisions as confined only to that on
"control"; (c) grossly failing to consider the findings
and conclusions of the CA on the majority of the
material evidence, especially [Tongko’s]
declaration in his income tax returns that he was a
"business person" or "self-employed"; and (d)
allowing [Tongko] to repudiate his sworn
statement in a public document.
KAYE RAMOGA
2. The November 7[, 2008] Decision contravenes
settled rules in contract law and agency, distorts
not only the legal relationships of agencies to sell
but also distributorship and franchising, and
ignores the constitutional and policy context of
contract law vis-à-vis labor law.
3. The November 7[, 2008] Decision ignores the
findings of the CA on the three elements of the
four-fold test other than the "control" test, reverses
well-settled doctrines of law on employer-
employee relationships, and grossly misapplies
the "control test," by selecting, without basis, a
few items of evidence to the exclusion of more
material evidence to support its conclusion that
there is "control."
4. The November 7[, 2008] Decision is judicial
legislation, beyond the scope authorized by
Articles 8 and 9 of the Civil Code, beyond the
powers granted to this Court under Article VIII,
Section 1 of the Constitution and contravenes
through judicial legislation, the constitutional
prohibition against impairment of contracts under
Article III, Section 10 of the Constitution.
5. For all the above reasons, the November 7[,
2008] Decision made unsustainable and
reversible errors, which should be corrected, in
concluding that Respondent Manulife and
Petitioner had an employer-employee relationship,
that Respondent Manulife illegally dismissed
Petitioner, and for consequently ordering
Respondent Manulife to pay Petitioner
backwages, separation pay, nominal damages
and attorney’s fees.13
THE COURT’S RULING
A. The Insurance and the Civil Codes; the Parties’
Intent and Established Industry Practices
We cannot consider the present case purely from a
labor law perspective, oblivious that the factual
antecedents were set in the insurance industry so
that the Insurance Code primarily governs. Chapter
IV, Title 1 of this Code is wholly devoted to
"Insurance Agents and Brokers" and specifically
defines the agents and brokers relationship with the
insurance company and how they are governed by
the Code and regulated by the Insurance
Commission.
The Insurance Code, of course, does not wholly
regulate the "agency" that it speaks of, as agency is
a civil law matter governed by the Civil Code. Thus,
at the very least, three sets of laws – namely, the
Insurance Code, the Labor Code and the Civil Code
– have to be considered in looking at the present
case. Not to be forgotten, too, is the Agreement
(partly reproduced on page 2 of this Dissent and
which no one disputes) that the parties adopted to
govern their relationship for purposes of selling the
insurance the company offers. To forget these other
laws is to take a myopic view of the present case and
to add to the uncertainties that now exist in
LABOR LAW
considering the legal relationship between the
insurance company and its "agents."
The main issue of whether an agency or an
employment relationship exists depends on the
incidents of the relationship. The Labor Code
concept of "control" has to be compared and
distinguished with the "control" that must necessarily
exist in a principal-agent relationship. The principal
cannot but also have his or her say in directing the
course of the principal-agent relationship, especially
in cases where the company-representative
relationship in the insurance industry is an agency.
a. The laws on insurance and agency
The business of insurance is a highly regulated
commercial activity in the country, in terms
particularly of who can be in the insurance business,
who can act for and in behalf of an insurer, and how
these parties shall conduct themselves in the
insurance business. Section 186 of the Insurance
Code provides that "No person, partnership, or
association of persons shall transact any insurance
business in the Philippines except as agent of a
person or corporation authorized to do the business
of insurance in the Philippines." Sections 299 and
300 of the Insurance Code on Insurance Agents and
Brokers, among other provisions, provide:
Section 299. No insurance company doing business
in the Philippines, nor any agent thereof, shall pay
any commission or other compensation to any
person for services in obtaining insurance, unless
such person shall have first procured from the
Commissioner a license to act as an insurance agent
of such company or as an insurance broker as
hereinafter provided.
No person shall act as an insurance agent or as an
insurance broker in the solicitation or procurement of
applications for insurance, or receive for services in
obtaining insurance, any commission or other
compensation from any insurance company doing
business in the Philippines or any agent thereof,
without first procuring a license so to act from the
Commissioner x x x The Commissioner shall satisfy
himself as to the competence and trustworthiness of
the applicant and shall have the right to refuse to
issue or renew and to suspend or revoke any such
license in his discretion.1avvphi1.net
Section 300. Any person who for compensation
solicits or obtains insurance on behalf of any
insurance company or transmits for a person other
than himself an application for a policy or contract of
insurance to or from such company or offers or
assumes to act in the negotiating of such insurance
shall be an insurance agent within the intent of this
section and shall thereby become liable to all the
duties, requirements, liabilities and penalties to which
an insurance agent is subject.
The application for an insurance agent’s license
requires a written examination, and the applicant
must be of good moral character and must not have
KAYE RAMOGA
been convicted of a crime involving moral
turpitude.14 The insurance agent who collects
premiums from an insured person for remittance to
the insurance company does so in a fiduciary
capacity, and an insurance company which delivers
an insurance policy or contract to an authorized
agent is deemed to have authorized the agent to
receive payment on the company’s behalf.15 Section
361 further prohibits the offer, negotiation, or
collection of any amount other than that specified in
the policy and this covers any rebate from the
premium or any special favor or advantage in the
dividends or benefit accruing from the policy.
Thus, under the Insurance Code, the agent must, as
a matter of qualification, be licensed and must also
act within the parameters of the authority granted
under the license and under the contract with the
principal. Other than the need for a license, the agent
is limited in the way he offers and negotiates for the
sale of the company’s insurance products, in his
collection activities, and in the delivery of the
insurance contract or policy. Rules regarding the
desired results (e.g., the required volume to continue
to qualify as a company agent, rules to check on the
parameters on the authority given to the agent, and
rules to ensure that industry, legal and ethical rules
are followed) are built-in elements of control specific
to an insurance agency and should not and cannot
be read as elements of control that attend an
employment relationship governed by the Labor
Code.
On the other hand, the Civil Code defines an agent
as a "person [who] binds himself to render some
service or to do something in representation or on
behalf of another, with the consent or authority of the
latter."16 While this is a very broad definition that on
its face may even encompass an employment
relationship, the distinctions between agency and
employment are sufficiently established by law and
jurisprudence.
Generally, the determinative element is the control
exercised over the one rendering service. The
employer controls the employee both in the results
and in the means and manner of achieving this
result. The principal in an agency relationship, on the
other hand, also has the prerogative to exercise
control over the agent in undertaking the assigned
task based on the parameters outlined in the
pertinent laws.
Under the general law on agency as applied to
insurance, an agency must be express in light of the
need for a license and for the designation by the
insurance company. In the present case, the
Agreement fully serves as grant of authority to
Tongko as Manulife’s insurance agent.17 This
agreement is supplemented by the company’s
agency practices and usages, duly accepted by the
agent in carrying out the agency.18 By authority of the
Insurance Code, an insurance agency is for
compensation,19 a matter the Civil Code Rules on
Agency presumes in the absence of proof to the
contrary.20 Other than the compensation, the
LABOR LAW
principal is bound to advance to, or to reimburse, the
agent the agreed sums necessary for the execution
of the agency.21 By implication at least under Article
1994 of the Civil Code, the principal can appoint two
or more agents to carry out the same assigned
tasks,22 based necessarily on the specific instructions
and directives given to them.
With particular relevance to the present case is the
provision that "In the execution of the agency, the
agent shall act in accordance with the instructions of
the principal."23 This provision is pertinent for
purposes of the necessary control that the principal
exercises over the agent in undertaking the assigned
task, and is an area where the instructions can
intrude into the labor law concept of control so that
minute consideration of the facts is necessary. A
related article is Article 1891 of the Civil Code which
binds the agent to render an account of his
transactions to the principal.
B. The Cited Case
The Decision of November 7, 2008 refers to the first
Insular and Grepalife cases to establish that the
company rules and regulations that an agent has to
comply with are indicative of an employer-employee
relationship.24 The Dissenting Opinions of Justice
Presbitero Velasco, Jr. and Justice Conchita Carpio
Morales also cite Insular Life Assurance Co. v.
National Labor Relations Commission (second
Insular case)25 to support the view that Tongko is
Manulife’s employee. On the other hand, Manulife
cites the Carungcong case and AFP Mutual Benefit
Association, Inc. v. National Labor Relations
Commission (AFPMBAI case)26 to support its
allegation that Tongko was not its employee.
A caveat has been given above with respect to the
use of the rulings in the cited cases because none of
them is on all fours with the present case; the
uniqueness of the factual situation of the present
case prevents it from being directly and readily cast
in the mold of the cited cases. These cited cases are
themselves different from one another; this difference
underscores the need to read and quote them in the
context of their own factual situations.
The present case at first glance appears aligned with
the facts in the Carungcong, the Grepalife, and the
second Insular Life cases. A critical difference,
however, exists as these cited cases dealt with the
proper legal characterization of a subsequent
management contract that superseded the original
agency contract between the insurance company
and its agent. Carungcong dealt with a subsequent
Agreement making Carungcong a New Business
Manager that clearly superseded the Agreement
designating Carungcong as an agent empowered to
solicit applications for insurance. The Grepalife case,
on the other hand, dealt with the proper legal
characterization of the appointment of the Ruiz
brothers to positions higher than their original
position as insurance agents. Thus, after analyzing
the duties and functions of the Ruiz brothers, as
these were enumerated in their contracts, we
KAYE RAMOGA
concluded that the company practically dictated the
manner by which the Ruiz brothers were to carry out
their jobs. Finally, the second Insular Life case dealt
with the implications of de los Reyes’ appointment as
acting unit manager which, like the subsequent
contracts in the Carungcong and the Grepalife cases,
was clearly defined under a subsequent contract. In
all these cited cases, a determination of the presence
of the Labor Code element of control was made on
the basis of the stipulations of the subsequent
contracts.
In stark contrast with the Carungcong, the Grepalife,
and the second Insular Life cases, the only contract
or document extant and submitted as evidence in the
present case is the Agreement – a pure agency
agreement in the Civil Code context similar to the
original contract in the first Insular Life case and the
contract in the AFPMBAI case. And while Tongko
was later on designated unit manager in 1983,
Branch Manager in 1990, and Regional Sales
Manager in 1996, no formal contract regarding these
undertakings appears in the records of the case. Any
such contract or agreement, had there been any,
could have at the very least provided the bases for
properly ascertaining the juridical relationship
established between the parties.
These critical differences, particularly between the
present case and the Grepalife and the second
Insular Life cases, should therefore immediately drive
us to be more prudent and cautious in applying the
rulings in these cases.
C. Analysis of the Evidence
c.1. The Agreement
The primary evidence in the present case is the July
1, 1977 Agreement that governed and defined the
parties’ relations until the Agreement’s termination in
2001. This Agreement stood for more than two
decades and, based on the records of the case, was
never modified or novated. It assumes primacy
because it directly dealt with the nature of the parties’
relationship up to the very end; moreover, both
parties never disputed its authenticity or the accuracy
of its terms.
By the Agreement’s express terms, Tongko served
as an "insurance agent" for Manulife, not as an
employee. To be sure, the Agreement’s legal
characterization of the nature of the relationship
cannot be conclusive and binding on the courts; as
the dissent clearly stated, the characterization of the
juridical relationship the Agreement embodied is a
matter of law that is for the courts to determine. At
the same time, though, the characterization the
parties gave to their relationship in the Agreement
cannot simply be brushed aside because it embodies
their intent at the time they entered the Agreement,
and they were governed by this understanding
throughout their relationship. At the very least, the
provision on the absence of employer-employee
relationship between the parties can be an aid in
LABOR LAW
considering the Agreement and its implementation,
and in appreciating the other evidence on record.
The parties’ legal characterization of their intent,
although not conclusive, is critical in this case
because this intent is not illegal or outside the
contemplation of law, particularly of the Insurance
and the Civil Codes. From this perspective, the
provisions of the Insurance Code cannot be
disregarded as this Code (as heretofore already
noted) expressly envisions a principal-agent
relationship between the insurance company and the
insurance agent in the sale of insurance to the
public.1awph!1 For this reason, we can take judicial
notice that as a matter of Insurance Code-based
business practice, an agency relationship prevails in
the insurance industry for the purpose of selling
insurance. The Agreement, by its express terms, is in
accordance with the Insurance Code model when it
provided for a principal-agent relationship, and thus
cannot lightly be set aside nor simply be considered
as an agreement that does not reflect the parties’
true intent. This intent, incidentally, is reinforced by
the system of compensation the Agreement provides,
which likewise is in accordance with the production-
based sales commissions the Insurance Code
provides.
Significantly, evidence shows that Tongko’s role as
an insurance agent never changed during his
relationship with Manulife. If changes occurred at all,
the changes did not appear to be in the nature of
their core relationship. Tongko essentially remained
an agent, but moved up in this role through
Manulife’s recognition that he could use other agents
approved by Manulife, but operating under his
guidance and in whose commissions he had a share.
For want of a better term, Tongko perhaps could be
labeled as a "lead agent" who guided under his wing
other Manulife agents similarly tasked with the selling
of Manulife insurance.
Like Tongko, the evidence suggests that these other
agents operated under their own agency
agreements. Thus, if Tongko’s compensation
scheme changed at all during his relationship with
Manulife, the change was solely for purposes of
crediting him with his share in the commissions the
agents under his wing generated. As an agent who
was recruiting and guiding other insurance agents,
Tongko likewise moved up in terms of the
reimbursement of expenses he incurred in the course
of his lead agency, a prerogative he enjoyed
pursuant to Article 1912 of the Civil Code. Thus,
Tongko received greater reimbursements for his
expenses and was even allowed to use Manulife
facilities in his interactions with the agents, all of
whom were, in the strict sense, Manulife agents
approved and certified as such by Manulife with the
Insurance Commission.
That Tongko assumed a leadership role but
nevertheless wholly remained an agent is the
inevitable conclusion that results from the reading of
the Agreement (the only agreement on record in this
case) and his continuing role thereunder as sales
KAYE RAMOGA
agent, from the perspective of the Insurance and the
Civil Codes and in light of what Tongko himself
attested to as his role as Regional Sales Manager.
To be sure, this interpretation could have been
contradicted if other agreements had been submitted
as evidence of the relationship between Manulife and
Tongko on the latter’s expanded undertakings. In the
absence of any such evidence, however, this reading
– based on the available evidence and the applicable
insurance and civil law provisions – must stand,
subject only to objective and evidentiary Labor Code
tests on the existence of an employer-employee
relationship.
In applying such Labor Code tests, however, the
enforcement of the Agreement during the course of
the parties’ relationship should be noted. From 1977
until the termination of the Agreement, Tongko’s
occupation was to sell Manulife’s insurance policies
and products. Both parties acquiesced with the terms
and conditions of the Agreement. Tongko, for his
part, accepted all the benefits flowing from the
Agreement, particularly the generous commissions.
Evidence indicates that Tongko consistently clung to
the view that he was an independent agent selling
Manulife insurance products since he invariably
declared himself a business or self-employed person
in his income tax returns. This consistency with,
and action made pursuant to the Agreement were
pieces of evidence that were never mentioned
nor considered in our Decision of November 7,
2008. Had they been considered, they could, at the
very least, serve as Tongko’s admissions against his
interest. Strictly speaking, Tongko’s tax returns
cannot but be legally significant because he certified
under oath the amount he earned as gross business
income, claimed business deductions, leading to his
net taxable income. This should be evidence of the
first order that cannot be brushed aside by a mere
denial. Even on a layman’s view that is devoid of
legal considerations, the extent of his annual income
alone renders his claimed employment status
doubtful.27
Hand in hand with the concept of admission against
interest in considering the tax returns, the concept of
estoppel – a legal and equitable concept28 –
necessarily must come into play. Tongko’s previous
admissions in several years of tax returns as an
independent agent, as against his belated claim that
he was all along an employee, are too diametrically
opposed to be simply dismissed or ignored.
Interestingly, Justice Velasco’s dissenting opinion
states that Tongko was forced to declare himself a
business or self-employed person by Manulife’s
persistent refusal to recognize him as its
employee.29 Regrettably, the dissent has shown
no basis for this conclusion, an understandable
omission since no evidence in fact exists on this
point in the records of the case. In fact, what the
evidence shows is Tongko’s full conformity with, and
action as, an independent agent until his relationship
with Manulife took a bad turn.
LABOR LAW
Another interesting point the dissent raised with
respect to the Agreement is its conclusion that the
Agreement negated any employment relationship
between Tongko and Manulife so that the
commissions he earned as a sales agent should not
be considered in the determination of the backwages
and separation pay that should be given to him. This
part of the dissent is correct although it went on to
twist this conclusion by asserting that Tongko had
dual roles in his relationship with Manulife; he was an
agent, not an employee, in so far as he sold
insurance for Manulife, but was an employee in his
capacity as a manager. Thus, the dissent concluded
that Tongko’s backwages should only be with respect
to his role as Manulife’s manager.
The conclusion with respect to Tongko’s employment
as a manager is, of course, unacceptable for the
legal, factual and practical reasons discussed in this
Resolution. In brief, the factual reason is grounded
on the lack of evidentiary support of the conclusion
that Manulife exercised control over Tongko in the
sense understood in the Labor Code. The legal
reason, partly based on the lack of factual basis, is
the erroneous legal conclusion that Manulife
controlled Tongko and was thus its employee.
The practical reason, on the other hand, is the
havoc that the dissent’s unwarranted conclusion
would cause the insurance industry that, by the law’s
own design, operated along the lines of principal-
agent relationship in the sale of insurance.
c.2. Other Evidence of Alleged Control
A glaring evidentiary gap for Tongko in this case is
the lack of evidence on record showing that Manulife
ever exercised means-and-manner control, even to a
limited extent, over Tongko during his ascent in
Manulife’s sales ladder. In 1983, Tongko was
appointed unit manager. Inexplicably, Tongko never
bothered to present any evidence at all on what this
designation meant. This also holds true for Tongko’s
appointment as branch manager in 1990, and as
Regional Sales Manager in 1996. The best evidence
of control – the agreement or directive relating to
Tongko’s duties and responsibilities – was never
introduced as part of the records of the case. The
reality is, prior to de Dios’ letter, Manulife had
practically left Tongko alone not only in doing the
business of selling insurance, but also in guiding the
agents under his wing. As discussed below, the
alleged directives covered by de Dios’ letter,
heretofore quoted in full, were policy directions and
targeted results that the company wanted Tongko
and the other sales groups to realign with in their
own selling activities. This is the reality that the
parties’ presented evidence consistently tells us.
What, to Tongko, serve as evidence of labor law
control are the codes of conduct that Manulife
imposes on its agents in the sale of insurance. The
mere presentation of codes or of rules and
regulations, however, is not per se indicative of labor
law control as the law and jurisprudence teach us.
KAYE RAMOGA
As already recited above, the Insurance Code
imposes obligations on both the insurance company
and its agents in the performance of their respective
obligations under the Code, particularly on licenses
and their renewals, on the representations to be
made to potential customers, the collection of
premiums, on the delivery of insurance policies, on
the matter of compensation, and on measures to
ensure ethical business practice in the industry.
The general law on agency, on the other hand,
expressly allows the principal an element of control
over the agent in a manner consistent with an
agency relationship. In this sense, these control
measures cannot be read as indicative of labor law
control. Foremost among these are the directives
that the principal may impose on the agent to
achieve the assigned tasks, to the extent that they do
not involve the means and manner of undertaking
these tasks. The law likewise obligates the agent to
render an account; in this sense, the principal may
impose on the agent specific instructions on how an
account shall be made, particularly on the matter of
expenses and reimbursements. To these extents,
control can be imposed through rules and regulations
without intruding into the labor law concept of control
for purposes of employment.
From jurisprudence, an important lesson that the first
Insular Life case teaches us is that a commitment to
abide by the rules and regulations of an insurance
company does not ipso facto make the insurance
agent an employee. Neither do guidelines somehow
restrictive of the insurance agent’s conduct
necessarily indicate "control" as this term is defined
in jurisprudence. Guidelines indicative of labor law
"control," as the first Insular Life case tells us,
should not merely relate to the mutually desirable
result intended by the contractual relationship;
they must have the nature of dictating the means
or methods to be employed in attaining the result, or
of fixing the methodology and of binding or restricting
the party hired to the use of these means. In fact,
results-wise, the principal can impose production
quotas and can determine how many agents, with
specific territories, ought to be employed to achieve
the company’s objectives. These are management
policy decisions that the labor law element of control
cannot reach. Our ruling in these respects in the first
Insular Life case was practically reiterated in
Carungcong. Thus, as will be shown more fully
below, Manulife’s codes of conduct,30 all of which do
not intrude into the insurance agents’ means and
manner of conducting their sales and only control
them as to the desired results and Insurance Code
norms, cannot be used as basis for a finding that the
labor law concept of control existed between
Manulife and Tongko.
The dissent considers the imposition of
administrative and managerial functions on Tongko
as indicative of labor law control; thus, Tongko as
manager, but not as insurance agent, became
Manulife’s employee. It drew this conclusion from
what the other Manulife managers disclosed in their
affidavits (i.e., their enumerated administrative and
LABOR LAW
managerial functions) and after comparing these
statements with the managers in Grepalife. The
dissent compared the control exercised by Manulife
over its managers in the present case with the
control the managers in the Grepalife case exercised
over their employees by presenting the following
matrix:31
Duties of Manulife’s Manager Duties of Grepalife’s
Managers/Supervisors
- to render or recommend - train understudies for the
prospective agents to be position of district manager
licensed, trained and
contracted to sell Manulife
products and who will be part
of my Unit
- to coordinate activities of the - properly account, record and
agents under [the managers’] document the company’s funds,
Unit in [the agents’] daily, spot-check and audit the work of
weekly and monthly selling the zone supervisors, x x x
activities, making sure that follow up the submission of
their respective sales targets weekly remittance reports of the
are met; debit agents and zone
supervisors
- to conduct periodic training
sessions for [the] agents to - direct and supervise the sales
further enhance their sales activities of the debit agents
skill; and under him, x x x undertake and
discharge the functions of
- to assist [the] agents with absentee debit agents, spot-
their sales activities by way of check the record of debit agents,
joint fieldwork, consultations and insure proper
and one-on-one evaluation documentation of sales and
and analysis of particular collections of debit agents.
accounts
Aside from these affidavits however, no other
evidence exists regarding the effects of Tongko’s
additional roles in Manulife’s sales operations on the
contractual relationship between them.
To the dissent, Tongko’s administrative functions as
recruiter, trainer, or supervisor of other sales agents
constituted a substantive alteration of Manulife’s
authority over Tongko and the performance of his
end of the relationship with Manulife. We could not
deny though that Tongko remained, first and
foremost, an insurance agent, and that his additional
role as Branch Manager did not lessen his main and
dominant role as insurance agent; this role continued
to dominate the relations between Tongko and
Manulife even after Tongko assumed his leadership
role among agents. This conclusion cannot be
denied because it proceeds from the undisputed fact
that Tongko and Manulife never altered their July 1,
1977 Agreement, a distinction the present case has
with the contractual changes made in the second
Insular Life case. Tongko’s results-based
commissions, too, attest to the primacy he gave to
his role as insurance sales agent.
The dissent apparently did not also properly analyze
and appreciate the great qualitative difference that
exists between:
• the Manulife managers’ role is to coordinate
activities of the agents under the managers’
KAYE RAMOGA
Unit in the agents’ daily, weekly, and monthly
selling activities, making sure that their
respective sales targets are met.
• the District Manager’s duty in Grepalife is to
properly account, record, and document the
company's funds, spot-check and audit the
work of the zone supervisors, conserve the
company's business in the district through
"reinstatements," follow up the submission of
weekly remittance reports of the debit agents
and zone supervisors, preserve company
property in good condition, train understudies
for the position of district managers, and
maintain his quota of sales (the failure of
which is a ground for termination).
• the Zone Supervisor’s (also in
Grepalife) has the duty to direct and
supervise the sales activities of the debit
agents under him, conserve company
property through "reinstatements," undertake
and discharge the functions of absentee debit
agents, spot-check the records of debit
agents, and insure proper documentation of
sales and collections by the debit agents.
These job contents are worlds apart in terms of
"control." In Grepalife, the details of how to do the job
are specified and pre-determined; in the present
case, the operative words are the "sales target," the
methodology being left undefined except to the
extent of being "coordinative." To be sure, a
"coordinative" standard for a manager cannot be
indicative of control; the standard only essentially
describes what a Branch Manager is – the person in
the lead who orchestrates activities within the group.
To "coordinate," and thereby to lead and to
orchestrate, is not so much a matter of control by
Manulife; it is simply a statement of a branch
manager’s role in relation with his agents from the
point of view of Manulife whose business Tongko’s
sales group carries.
A disturbing note, with respect to the presented
affidavits and Tongko’s alleged administrative
functions, is the selective citation of the portions
supportive of an employment relationship and the
consequent omission of portions leading to the
contrary conclusion. For example, the following
portions of the affidavit of Regional Sales Manager
John Chua, with counterparts in the other affidavits,
were not brought out in the Decision of November 7,
2008, while the other portions suggesting labor law
control were highlighted. Specifically, the following
portions of the affidavits were not brought out:32
1.a. I have no fixed wages or salary since my
services are compensated by way of commissions
based on the computed premiums paid in full on
the policies obtained thereat;
1.b. I have no fixed working hours and employ my
own method in soliticing insurance at a time and
place I see fit;
1.c. I have my own assistant and messenger who
handle my daily work load;
LABOR LAW
1.d. I use my own facilities, tools, materials and
supplies in carrying out my business of selling
insurance; x x x x
6. I have my own staff that handles the day to day
operations of my office;
7. My staff are my own employees and received
salaries from me; x x x x
9. My commission and incentives are all reported
to the Bureau of Internal Revenue (BIR) as
income by a self-employed individual or
professional with a ten (10) percent creditable
withholding tax. I also remit monthly for
professionals.
These statements, read with the above comparative
analysis of the Manulife and the Grepalife cases,
would have readily yielded the conclusion that no
employer-employee relationship existed between
Manulife and Tongko.
Even de Dios’ letter is not determinative of control as
it indicates the least amount of intrusion into
Tongko’s exercise of his role as manager in guiding
the sales agents. Strictly viewed, de Dios’ directives
are merely operational guidelines on how Tongko
could align his operations with Manulife’s re-directed
goal of being a "big league player." The method is to
expand coverage through the use of more agents.
This requirement for the recruitment of more agents
is not a means-and-method control as it relates,
more than anything else, and is directly relevant, to
Manulife’s objective of expanded business
operations through the use of a bigger sales force
whose members are all on a principal-agent
relationship. An important point to note here is that
Tongko was not supervising regular full-time
employees of Manulife engaged in the running of the
insurance business; Tongko was effectively guiding
his corps of sales agents, who are bound to Manulife
through the same Agreement that he had with
Manulife, all the while sharing in these agents’
commissions through his overrides. This is the lead
agent concept mentioned above for want of a more
appropriate term, since the title of Branch Manager
used by the parties is really a misnomer given that
what is involved is not a specific regular branch of
the company but a corps of non-employed agents,
defined in terms of covered territory, through which
the company sells insurance. Still another point to
consider is that Tongko was not even setting policies
in the way a regular company manager does;
company aims and objectives were simply relayed to
him with suggestions on how these objectives can be
reached through the expansion of a non-employee
sales force.
Interestingly, a large part of de Dios’ letter focused
on income, which Manulife demonstrated, in
Tongko’s case, to be unaffected by the new goal and
direction the company had set. Income in insurance
agency, of course, is dependent on results, not on
the means and manner of selling – a matter for
Tongko and his agents to determine and an area into
which Manulife had not waded. Undeniably, de Dios’
letter contained a directive to secure a competent
assistant at Tongko’s own expense. While couched
KAYE RAMOGA
in terms of a directive, it cannot strictly be understood
as an intrusion into Tongko’s method of operating
and supervising the group of agents within his
delineated territory. More than anything else, the
"directive" was a signal to Tongko that his results
were unsatisfactory, and was a suggestion on how
Tongko’s perceived weakness in delivering results
could be remedied. It was a solution, with an eye on
results, for a consistently underperforming group; its
obvious intent was to save Tongko from the result
that he then failed to grasp – that he could lose even
his own status as an agent, as he in fact eventually
did.
The present case must be distinguished from the
second Insular Life case that showed the hallmarks
of an employer-employee relationship in the
management system established. These were:
exclusivity of service, control of assignments and
removal of agents under the private respondent’s
unit, and furnishing of company facilities and
materials as well as capital described as Unit
Development Fund. All these are obviously absent in
the present case. If there is a commonality in these
cases, it is in the collection of premiums which is a
basic authority that can be delegated to agents under
the Insurance Code.
As previously discussed, what simply happened in
Tongko’s case was the grant of an expanded sales
agency role that recognized him as leader amongst
agents in an area that Manulife defined. Whether
this consequently resulted in the establishment
of an employment relationship can be answered
by concrete evidence that corresponds to the
following questions:
• as lead agent, what were Tongko’s specific
functions and the terms of his additional
engagement;
• was he paid additional compensation as a so-
called Area Sales Manager, apart from the
commissions he received from the insurance
sales he generated;
• what can be Manulife’s basis to terminate his
status as lead agent;
• can Manulife terminate his role as lead agent
separately from his agency contract; and
• to what extent does Manulife control the means
and methods of Tongko’s role as lead agent?
The answers to these questions may, to some
extent, be deduced from the evidence at hand, as
partly discussed above. But strictly speaking, the
questions cannot definitively and concretely be
answered through the evidence on record. The
concrete evidence required to settle these questions
is simply not there, since only the Agreement and the
anecdotal affidavits have been marked and
submitted as evidence.
Given this anemic state of the evidence, particularly
on the requisite confluence of the factors
determinative of the existence of employer-employee
relationship, the Court cannot conclusively find that
the relationship exists in the present case, even if
such relationship only refers to Tongko’s additional
LABOR LAW
functions. While a rough deduction can be made, the
answer will not be fully supported by the substantial
evidence needed.
Under this legal situation, the only conclusion that
can be made is that the absence of evidence
showing Manulife’s control over Tongko’s contractual
duties points to the absence of any employer-
employee relationship between Tongko and
Manulife. In the context of the established evidence,
Tongko remained an agent all along; although his
subsequent duties made him a lead agent with
leadership role, he was nevertheless only an agent
whose basic contract yields no evidence of means-
and-manner control.
This conclusion renders unnecessary any further
discussion of the question of whether an agent may
simultaneously assume conflicting dual personalities.
But to set the record straight, the concept of a single
person having the dual role of agent and employee
while doing the same task is a novel one in our
jurisprudence, which must be viewed with caution
especially when it is devoid of any jurisprudential
support or precedent. The quoted portions in Justice
Carpio-Morales’ dissent,33 borrowed from both the
Grepalife and the second Insular Life cases, to
support the duality approach of the Decision of
November 7, 2008, are regrettably far removed from
their context – i.e., the cases’ factual situations, the
issues they decided and the totality of the rulings in
these cases – and cannot yield the conclusions that
the dissenting opinions drew.
The Grepalife case dealt with the sole issue of
whether the Ruiz brothers’ appointment as zone
supervisor and district manager made them
employees of Grepalife. Indeed, because of the
presence of the element of control in their contract of
engagements, they were
considered Grepalife’s employees. This did not
mean, however, that they were simultaneously
considered agents as well as employees
of Grepalife; the Court’s ruling never implied that this
situation existed insofar as the Ruiz brothers were
concerned. The Court’s statement – the Insurance
Code may govern the licensing requirements and
other particular duties of insurance agents, but it
does not bar the application of the Labor Code with
regard to labor standards and labor relations – simply
means that when an insurance company has
exercised control over its agents so as to make them
their employees, the relationship between the
parties, which was otherwise one for agency
governed by the Civil Code and the Insurance Code,
will now be governed by the Labor Code. The reason
for this is simple – the contract of agency has been
transformed into an employer-employee relationship.
The second Insular Life case, on the other hand,
involved the issue of whether the labor bodies have
jurisdiction over an illegal termination dispute
involving parties who had two contracts – first, an
original contract (agency contract), which was
undoubtedly one for agency, and another
subsequent contract that in turn designated the agent
KAYE RAMOGA
acting unit manager (a management contract). Both
the Insular Life and the labor arbiter were one in the
position that both were agency contracts. The Court
disagreed with this conclusion and held that insofar
as the management contract is concerned, the labor
arbiter has jurisdiction. It is in this light that we
remanded the case to the labor arbiter for further
proceedings. We never said in this case though that
the insurance agent had effectively assumed dual
personalities for the simple reason that the agency
contract has been effectively superseded by the
management contract. The management contract
provided that if the appointment was terminated for
any reason other than for cause, the acting unit
manager would be reverted to agent status and
assigned to any unit.
The dissent pointed out, as an argument to support
its employment relationship conclusion, that any
doubt in the existence of an employer-employee
relationship should be resolved in favor of the
existence of the relationship.34This observation,
apparently drawn from Article 4 of the Labor Code, is
misplaced, as Article 4 applies only when a doubt
exists in the "implementation and application" of the
Labor Code and its implementing rules; it does not
apply where no doubt exists as in a situation where
the claimant clearly failed to substantiate his claim of
employment relationship by the quantum of evidence
the Labor Code requires.
On the dissent’s last point regarding the lack of
jurisprudential value of our November 7, 2008
Decision, suffice it to state that, as discussed above,
the Decision was not supported by the evidence
adduced and was not in accordance with controlling
jurisprudence. It should, therefore, be reconsidered
and abandoned, but not in the manner the dissent
suggests as the dissenting opinions are as factually
and as legally erroneous as the Decision under
reconsideration.
In light of these conclusions, the sufficiency of
Tongko’s failure to comply with the guidelines of de
Dios’ letter, as a ground for termination of Tongko’s
agency, is a matter that the labor tribunals cannot
rule upon in the absence of an employer-employee
relationship. Jurisdiction over the matter belongs to
the courts applying the laws of insurance, agency
and contracts.
WHEREFORE, considering the foregoing discussion,
we REVERSE our Decision of November 7,
2008, GRANTManulife’s motion for reconsideration
and, accordingly, DISMISS Tongko’s petition. No
costs. SO ORDERED.
Footnotes
12 In an Affidavit dated April 28, 2003, John D. Chua, a Regional
Sales Manager of Manulife, stated:
4. On September 1, 1996, my services were engaged by
Manulife as an Agency Regional Sales Manager ("RSM") for
Metro South Region pursuant to an Agency Contract. As such
RSM, I have the following functions:
1. Refer and recommend prospective agents to Manulife
2. Coach agents to become productive
LABOR LAW
3. Regularly meet with, and coordinate activities of agents
affiliated to my region.
While Amanda Toledo, a Branch Manager of Manulife, stated in
her Affidavit, dated April 29, 2003, that:
3. In January 1997, I was assigned as a Branch Manager ("BM")
of Manulife for the Metro North Sector;
4. As such BM, I render the following services:
a. Refer and recommend prospective agents to Manulife;
b. Train and coordinate activities of other commission agents;
c. Coordinate activities of Agency Managers who, in turn, train
and coordinate activities of other commission agents;
d. Achieve agreed production objectives in terms of Net
Annualized Commissions and Case Count and recruitment
goals; and
e. Sell the various products of Manulife to my personal clients.
While Ma. Lourdes Samson, a Unit Manager of Manulife, stated
in her Affidavit, dated April 28, 2003, that:
3. In 1977, I was assigned as a Unit Manager ("UM") of North
Peaks Unit, North Star Branch, Metro North Region;
4. As such UM, I render the following services:
a. To render or recommend prospective agents to be licensed,
trained and contracted to sell Manulife products and who will be
part of my Unit.
b. To coordinate activities of the agents under my Unit in their
daily, weekly and monthly selling activities, making sure that their
respective sales targets are met.
c. To conduct periodic training sessions for my agents to further
enhance their sales skills.
d. To assist my agents with their sales activities by way of joint
fieldwork, consultations and one-on-one evaluation and analysis
of particular accounts.
e. To provide opportunities to motivate my agents to succeed like
conducting promos to increase sales activities and encouraging
them to be involved in company and industry activities.
f. To provide opportunities for professional growth to my agents
by encouraging them to be a member of the LUCAP (Life
Underwriters Association of the Philippines).
29 Justice Velasco’s Dissenting Opinion, p. 10. Justice Velasco
maintains that Tongko’s declaration in his tax returns that he was
self-employed was forced upon him by Manulife, which refused
and still refuses to consider him as its employee, and withheld
10% of Tongko’s income as an agent for taxes. Tongko therefore
had no choice but to use the withholding tax certificates issued to
Manulife in connection with the taxes it paid on his income as an
agent and he could not have been faulted for declaring himself
as self-employed.
33Separate Dissenting Opinion of Justice Conchita Carpio
Morales, pp. 1-2. Justice Carpio Morales asserts that an agent
may, at the same time, be an employee of a life insurance
company and quotes the Grepalife case:
True, it cannot be denied that based on the definition of an
"insurance agent" in the Insurance Code some of the functions
performed by private respondents were those of insurance
agents. Nevertheless, it does not follow that they are not
employees of Grepalife. The Insurance Code may govern the
licensing requirements and other particular duties of insurance
agents, but it does not bar the application of the Labor Code with
regard to labor standards and labor relations.
She additionally posits that the hybrid model is not novel—the
second Insular Life case purportedly held that Pantaleon delos
Reyes, acting unit manager, was an employee of Insular Life
only insofar as the management contract is concerned, quoting
in support of this assertion the following discussion in the second
Insular Life case:
Parenthetically, both petitioner and respondent NLRC treated the
agency contract and the management contract entered into
between petitioner and De los Reyes as contracts of agency.
We, however, hold otherwise. Unquestionably there exist major
distinctions between the two agreements. While the first has the
earmarks of an agency contract, the second is far removed from
the concept of agency in that provided therein are conditionalities
that indicate an employer-employee relationship. The NLRC
therefore was correct in finding that private respondent was an
employee of petitioner, but this holds true only insofar as the
management contract is concerned. In view thereof, the Labor
Arbiter has jurisdiction over the case.
KAYE RAMOGA
SEPARATE DISSENTING OPINION CARPIO
MORALES, J.:
Writing for the Court, Justice Arturo Brion grants the
Motion for Reconsideration (Motion) filed by respondent
Manufacturer’s Life Insurance Co. (Phils.). The ponente,
who concurred in the Court’s November 7, 2008
Decision,1this time reverses the finding of employer-
employee relationship. The ponencia states that petitioner
cannot simultaneously assume the dual or hybrid role of
employee and agent.
I dissent.
I submit this Separate Dissenting Opinion, after taking a
closer look at the juxtaposition of five pertinent labor cases
bearing on the insurance industry, three of which ruled in
favor of the existence of an employer-employee
relationship.
An agent may, at the same time, be an employee of a
life insurance company
In Great Pacific Life Assurance Corp. v. NLRC2 (second
Grepalife case), the Court found that an employer-
employee relationship existed between Grepalife and the
Ruiz brothers in their capacities as zone
supervisor and district manager. On the relevant point, it
elucidated:
True, it cannot be denied that based on the definition of
an "insurance agent" in the Insurance Code some of
the functions performed by private respondents were
those of insurance agents. Nevertheless, it does not
follow that they are not employees of Grepalife. The
Insurance Code may govern the licensing
requirements and other particular duties of insurance
agents, but it does not bar the application of the Labor
Code with regard to labor standards and labor
relations.3 (Citations omitted; emphasis and underscoring
supplied)
This type of hybrid role is not novel. In Insular Life
Assurance Co., Ltd. v. NLRC (4th Division)4 (second
Insular Life case), the Court ruled that the therein
respondent Pantaleon de los Reyes, acting unit manager,
was an employee of Insular Life only insofar as the
management contract is concerned.
Parenthetically, both petitioner and respondent NLRC
treated the agency contract and the management contract
entered into between petitioner and De los Reyes as
contracts of agency. We[,] however[,] hold otherwise.
Unquestionably there exist major distinctions between the
two agreements. While the first has the earmarks of an
agency contract, the second is far removed from the
concept of agency in that provided therein are
conditionalities that indicate an employer-employee
relationship. The NLRC therefore was correct in finding
that private respondent was an employee of petitioner,
but this holds true only insofar as the management
contract is concerned. In view thereof, the Labor Arbiter
has jurisdiction over the case.5 (Emphasis and
underscoring supplied)
In the present case, the employer-employee relationship is
extant from petitioner’s management functions as Unit
Manager in 1983, later as Branch Manager in 1990, and
finally as Regional Sales Manager in 1996,
notwithstanding the absence of written management
contracts. Even assuming that management contracts
LABOR LAW
were executed, the law is deemed written into them and its
application cannot be disavowed by the parties.
Admittedly, petitioner was allowed to continue selling as
an agent simultaneously with his management functions.
Insofar as the termination of his agency agreement 6 is
concerned, the trial court has jurisdiction over such
controversy.
The ponencia finds it "conflicting" for petitioner to assume
the dual roles of agent and employer. It agrees, however,
that petitioner’s "additional role as Branch Manager did not
lessen his main and dominant role as insurance agent,"
without explaining how to weigh the dominance of one
function over another.
In the present Motion, there is no reiteration of the
invocation of Insurance Commission (IC) Memorandum
Circular 3-93 (June 28, 1993) which provides that "[n]o
official or employee of an insurance brokerage or an
adjustment company and no individual adjuster, shall be
licensed to act as an insurance agent or general agent"
and that "[n]o employee with the rank of manager and
above of an insurance company shall be licensed to act as
its insurance agent or general agent."7
There is no conflict between the 1993 IC Circular and the
Court’s 1998 Decision in the second Insular Life case.
That the regulation says that things should run in a certain
manner does not mean that any determination of facts
should not be contrary to that manner. "He should not" is
different from "he did not." Respondent may assert that the
parties herein could not have violated the Circular, but it
does not bar the Court to determine otherwise when facts
glaringly point to the existence of an employer-employee
relationship.
Whatever infraction or tolerance committed or exhibited by
the parties in defiance of the Circular or any other
regulation or Code, it is for the IC or the appropriate body
to determine. The same holds true with the corollary tax
implications which respondent invites the Court to explore.
Reconcilability of tax returns has never been decisive of
the issue of employer-employee relationship. It never
became the business of this Court to thresh out for the
parties the tax consequences arising from every labor
dispute where an alleged "independent contractor" was
declared by the Court to be an employee. Suffice it to
state that a party would have to face the consequences, if
any, of his or her actions before the proper forum.
On one hand, respondent proffers petitioner’s income tax
returns and documents8 as an admission that it did not
employ petitioner, to which petitioner replies that the
withholding and remittance of taxes were done by
respondent as payor and withholding agent, as indicated
in the Certificates of Creditable Income Tax Withheld at
Source.
On the other, petitioner relies as respondent’s implied
admission that he is an employee respondent’s having
offered him a Stock Option that could only be exercised by
"active employees" and would be terminated upon
"termination of employment,"9 respondent’s disclaimer to
this exceptional grant solely decided by its Head Office in
Canada notwithstanding.
As the conflicting claims effectively cancel each other, a
review of the other array of evidence is in order.
Control over the means and methods in the attainment
of the result
KAYE RAMOGA
It bears noting that the NLRC Decision of September 27,
2004 judiciously explained why the resolution of the
employment status of petitioner hinges on the "control
test" after discussing the three other components of the
four-fold test.10
Delving into jurisprudence, no employer-employee
relationship was found in Insular Life Assurance Co., Ltd.
v. NLRC11 (first Insular Life case) because the Court,
applying the control test, found that Insular Life neither
controlled nor restricted the choice of methods – or the
methods themselves – of selling insurance by agency
manager Melecio Basiao, leaving him free to exercise his
own judgment as to the time, place and means of soliciting
insurance.
In declaring the type of "control" that is necessary for one
to be deemed an employee, the Court explained in the first
Insular Life case, viz:
x x x It should, however, be obvious that not every form of
control that the hiring party reserves to himself over the
conduct of the party hired in relation to the services
rendered may be accorded the effect of establishing an
employer-employee relationship between them in the legal
or technical sense of the term. A line must be drawn
somewhere, if the recognized distinction between an
employee and an individual contractor is not to vanish
altogether. Realistically, it would be a rare contract of
service that gives untrammelled freedom to the party hired
and eschews any intervention whatsoever in his
performance of the engagement.
Logically, the line should be drawn between rules that
merely serve as guidelines towards the achievement of
the mutually desired result without dictating the means or
methods to be employed in attaining it, and those that
control or fix the methodology and bind or restrict the
party hired to the use of such means. The first, which
aim only to promote the result, create no employer-
employee relationship unlike the second, which address
both the result and the means used to achieve it. The
distinction acquires particular relevance in the case of an
enterprise affected with public interest, as is the business
of insurance, and is on that account subject to regulation
by the State with respect, not only to the relations between
insurer and insured but also to the internal affairs of the
insurance company. Rules and regulations governing the
conduct of the business are provided for in the Insurance
Code and enforced by the Insurance Commissioner. It is,
therefore, usual and expected for an insurance company
to promulgate a set of rules to guide its commission
agents in selling its policies that they may not run afoul of
the law and what it requires or prohibits. Of such a
character are the rules which prescribe the qualifications
of persons who may be insured, subject insurance
applications to processing and approval by the Company,
and also reserve to the Company the determination of the
premiums to be paid and the schedules of payment. None
of these really invades the agent's contractual prerogative
to adopt his own selling methods or to sell insurance at his
own time and convenience, hence cannot justifiably be
said to establish an employer-employee relationship
between him and the company.12 (Emphasis and
underscoring supplied)
I thus concur with the conclusion that the imposition of the
codes of conduct is not indicative of control on the part of
an insurance company.
In Great Pacific Life Assurance Corporation v.
Judico13 (first Grepalife case), however, the therein
LABOR LAW
respondent Honorato Judico was found to be an employee
because
x x x the element of control by the petitioner on Judico was
very much present. The record shows that petitioner
Judico received a definite minimum amount per week as
his wage known as "sales reserve" wherein the failure to
maintain the same would bring him back to a beginner's
employment with a fixed weekly wage of P200.00 for
thirteen weeks regardless of production. He was assigned
a definite place in the office to work on when he is not in
the field; and in addition to his canvassing work he was
burdened with the job of collection. In both cases he was
required to make regular report to the company regarding
these duties, and for which an anemic performance would
mean a dismissal. Conversely[,] faithful and productive
service earned him a promotion to Zone Supervisor with
additional supervisor's allowance, a definite amount of
P110.00 aside from the regular P200.00 weekly
"allowance". Furthermore, his contract of services with
petitioner is not for a piece of work nor for a definite
period.14(Underscoring supplied)
The question on the presence of "control over the means
and methods" must always be taken in relation to the
attainment of the result or goal. The proper query is thus
not whether respondent exercised means-and-method
control but whether such control was directed in attaining
which result.
Although the bottomline of any commercial enterprise has
always been sales, the identification of the specific "result
or goal" in a particular case can only be gathered from the
nature of one’s functions. It is thus imperative to identify
the functions appurtenant to the goal before
administering the control test.
In the first Insular Life case, it was clear that selling or
soliciting insurance was the goal, the attainment of which
Insular Life did not exercise control over the methodology
of the agency manager. Insular Life set no
accomplishment quotas and compensated him on the
basis of results obtained. He was not bound to observe
any schedule of working hours or report to any regular
station. He could seek and work on his prospects
anywhere and at anytime he chooses.
In the first Grepalife case, however, although the debit
agent’s goal of selling was basically identical, Grepalife
retained control over the means in achieving sales.
Grepalife assigned him a definite place in the office to
work on when he is not in the field, gave him collection
and canvassing jobs, required him to make regular report
regarding these duties, and, in fact, exercised the power of
dismissal for his dismal performance.
There is no element of control with respect to petitioner’s
function of selling insurance as an agent. His managerial
function, however, takes another form.
In the second Insular Life and Grepalife cases, the goal
expected from the managers was different from the first
set of cases. The "result or goal" (in how to accomplish it
the company was found to have exercised control) were
specifically aligned to the coordination and supervision of
the whole marketing effort or strategy.
In the second Insular Life case, the acting unit manager
was assigned the task of supervising and coordinating the
sales efforts of the underwriters who were to be recruited
and trained within his designated territory.
KAYE RAMOGA
In the second Grepalife case, the zone supervisor and the
district manager were entrusted with supervisory, sales
and administrative functions to guard Grepalife's business
interests, to bring in more clients to the company, and to
ensure that all collections and reports are faithfully brought
to the company.
In both cases, the manner by which those goals were
carried out was dictated by their respective employers.
Similarly, in the present case, the nature of petitioner’s
job as such called for the exercise of supervisory and
administrative functions, including recruitment and training
of agents, which, when examined in the light of the two
cases, were discharged within the close range of control
wielded by respondent. Tersely stated, petitioner’s duty of
supervision was under the "control" of respondent.
A comparison of functions with that obtaining in the
second Grepalife case illustrates an intimate similarity:
Furthermore, it cannot be gainsaid that Grepalife had
control over private respondents' performance as well as
the result of their efforts. A cursory reading of their
respective functions as enumerated in their contracts
reveals that the company practically dictates the manner
by which their jobs are to be carried out. For instance, the
District Manager must properly account, record and
document the company's funds spot-check and audit the
work of the zone supervisors, conserve the company's
business in the district through 'reinstatements', follow up
the submission of weekly remittance reports of the debit
agents and zone supervisors, preserve company property
in good condition, train understudies for the position of
district manager, and maintain his quota of sales (the
failure of which is a ground for termination). On the other
hand, a zone supervisor must direct and supervise the
sales activities of the debit agents under him, conserve
company property through "reinstatements", undertake
and discharge the functions of absentee debit agents,
spot-check the records of debit agents, and insure proper
documentation of sales and collections by the debit
agents.15 (Underscoring supplied)
In contradistinction with Carungcong v. NLRC,16 which
also involves an insurance manager, the Court found the
therein petitioner Susan Carungcong, a new business
manager of Sun Life Assurance Company, to be an
independent contractor. In the absence of restrictive or
interfering company regulations that effectively and
actually controlled her choice of methods in performing her
management duties, the Court gave weight to the
contractual disavowals in the management contracts and
her admission that she alone judges the element of time
and place and means in the performance of duties. She
patently admitted that she performed "monitoring, training,
recruitment and sales, at her own time and
convenience, at however she deemed convenient, and
with whomever she chose."17
More significantly, in the succeeding Insular Life case, the
Court found the following indicators material in finding the
presence of control in cases involving insurance
managers:
Exclusivity of service, control of assignments and removal
of agents under private respondent's unit, collection of
premiums, furnishing of company facilities and materials
as well as capital described as Unit Development Fund
are but hallmarks of the management system in which
herein private respondent worked. This obtaining, there is
no escaping the conclusion that private respondent
Pantaleon de los Reyes was an employee of herein
petitioner.18(Underscoring supplied)
LABOR LAW
The ponencia concludes that "[a]ll these are obviously
absent" in petitioner’s case. The facts show otherwise,
however. On top of the exclusive service rendered to
respondent, which AFP Mutual Benefit Association, Inc. v.
NLRC19 instructs to be not controlling, other factors were
present. Petitioner established no agency of his own as
the Metro North Region to which he was assigned
remained intact even after his ties with respondent were
severed.20 Respondent provided and furnished company
facilities, equipments and materials for petitioner at
respondent’s Makati office.21 Respondent’s control of
assignments was evident from its act of removing the
North Star Branch from petitioner’s scope of the Metro
North Region, on which a "memo to spell this matter out in
greater detail" was advised to be issued shortly
thereafter.22 Respondent reserved to impose other
improvements in the region after manifesting its intention
to closely follow the region. 23 Respondent’s managers, like
petitioner, could only refer and recommend to respondent
prospective agents who would be part of their respective
units.24 In other words, respondent had the last say on
the composition and structure of the sales unit or region of
petitioner. Respondent, in fact, even devised the
deployment of an Agency Development Officer in the
region to "contribute towards the manpower development
work x x x as part of our agency growth campaign."
Such an arrangement leads to no other conclusion than
that respondent exercised the type of control of an
employer, thereby wiping away the perception that
petitioner was only a "lead agent" as viewed by the
ponencia. Even respondent sees otherwise when it
rebuked petitioner that "[y]ou (petitioner) may have
excelled in the past as an agent but, to this date, you still
carry the mindset of a senior agent."25 Insofar as his
management functions were concerned, petitioner was no
longer considered a senior agent.
I vote to DENY respondent’s Motion but MODIFY the
dispositive portion of the Court’s November 7, 2008
Decision to (a) clarify that petitioner, Gregorio Tongko,
became respondent’s employee not when he started as an
agent in 1977 but when he was appointed as unit manager
in 1983, thus moving the reckoning of the computation of
separation pay; and (b) remand the case to the NLRC for
the purpose of computing petitioner’s proper backwages
as manager.
DISSENTING OPINION VELASCO, JR., J.:
By Decision dated November 7, 2008, the Court, on the
finding that petitioner Gregorio V. Tongko was illegally
dismissed as employee of respondent Manufacturers Life
Insurance Co. (Phils.), Inc. (Manulife), awarded him full
backwages and separation benefits, in lieu of
reinstatement.
Manulife, via this Motion for Reconsideration, urges the
Court to reconsider and set aside its aforementioned
Decision by declaring, in effect, that Tongko had never
been its employee.1 As Manulife avers, the subject
Decision effectively "converted agency contracts of life
insurance agents to contracts of regular employment."2 It
thus warns that the ruling, if not reconsidered, would apply
to all 41,853 life insurance agents spread across the
country, thrusting in the process the insurance industry in
the Philippines into a crisis.3
The majority seems to agree with the grim possibilities
thus painted by Manulife.
KAYE RAMOGA LABOR LAW

As was before the National Labor Relations Commission respective duties as would adequately support a similar
(NLRC), then the Court of Appeals and as it is before the finding on the question of whether the petitioner, like the
Court, the critical issue in the present case is the same: Ruizes, is an employee of Manulife just as the Ruizes
whether or not Tongko––during all the time he was directly were Grepalife’s. Consider:
or indirectly connected with the company, first as an Duties of Manulife’s Managers Duties of Grepalife’s
agent, pursuant to a Career Agent’s Agreement Managers/Supervisors
(Agreement), and then as unit, branch and eventually
regional sales manager of Manulife’s Sales Agency - to render or recommend - train understudies for the
prospective agents to be position of district manager
Organization––was an employee of Manulife. In resolving
licensed, trained and
the issue of whether an employer-employee tie obtains, contracted to sell Manulife
attention was focused, as jurisprudential trend dictates, on products, and who will be part
the four-fold test on employment developed and invariably of the managers’ Unit
invoked by labor officials and this Court as a guiding, if not
governing norm, to determine, based on the facts and - to coordinate activities of the - properly account, record and
circumstances involved in a given situation, whether such agents under [the managers’] document the company’s
Unit in [the agents’] daily, funds, spot-check and audit the
relationship exists. These four elements are: (1) the
weekly and monthly selling work of the zone supervisors, x
selection and engagement of the employee; (2) the activities, making sure that their x x follow up the submission of
payment of wages; (3) the power of dismissal; and (4) the respective sales targets are weekly remittance reports of
control test.4 And as stressed in the Decision subject of met; the debit agents and zone
this recourse, of the four, the control test––meaning - to conduct periodic training supervisors
whether or not the employer controls or has reserved the sessions for [the] agents to - direct and supervise the sales
right to control the employee not only as to the result of further enhance their sales activities of the debit agents
the work to be done but also the means and methods skills; and under him, x x x undertake and
employed in reaching that end––constitutes the most - to assist [the] agents with discharge the functions of
their sales activities by way of absentee debit agents, spot-
important index of the existence of an employer-employee
joint fieldwork, consultations check the records of debit
relationship. And as also there emphasized, the security of and one-on-one evaluation and agents, and insure proper
tenure of a regular employee flowing from employment analysis of particular accounts documentation of sales and
cannot be defeated by any contract, for the law defines the collections by the debit agents.
employment status of a person.5 Article 280 of the Labor
Code provides that "[t]he provisions of written agreement
The ponencia would altogether deny Tongko––either while
to the contrary notwithstanding and regardless of oral
serving as insurance agent or underwriter pursuant to the
agreement of the parties, an employment shall be deemed
Agreement, or as appointed manager––the status of
to be regular where the employee has been engaged to
Manulife’s employee. It added the observation that the
perform activities which are usually necessary or desirable
factual antecedents in this case were set in the insurance
in the usual business or trade of the employer."
industry and, hence, the Insurance Code and the industry
practices instead of the Labor Code shall primary govern
From the evidence on record, it appears that Manulife had
in determining the element of control and necessarily
control over the work of Tongko after his appointment as
whether an employer-employee existed between Tongko
manager of the company’s insurance sales force,
and Manulife. The ponencia also went on to state that
indubitably implying the existence of an employer-
the Agreement, which provided that "the Agent is an
employee relationship between them.
independent contractor x x x and nothing herein shall be
construed as creating an employer-employee relationship
It cannot be over-emphasized enough that in Great Pacific between the Company and Agent," embodies the intent of
Life Assurance Corporation v. NLRC, Ernesto Ruiz and Manulife and Tongko at the time they executed
Rodrigo Ruiz6 (Grepalife), the Court considered the Agreement and they were governed by this
respondents Ruizes, then district managers, as employees understanding throughout their relationship.
of Grepalife, taking into account their duties and
undertakings. Some excerpts from Grepalife:
I beg to disagree.
x x x A cursory reading of their respective functions as
First, the suggestion in the ponencia that the
enumerated in their contracts reveals that the company
characterization the parties gave their relationship cannot
practically dictates the manner by which their jobs are to
simply be brushed aside runs counter against established
be carried out. For instance, the District Manager must
jurisprudence. As it were, the question of the existence of
properly account, record and document the company’s
an employer-employee relationship is a matter of public
funds, spot-check and audit the work of the zone
concern, never left, if ever, for the parties to peremptorily
supervisors, conserve the company’s business in the
determine. To borrow from Insular Life Assurance Co.,
district through ‘reinstatements’, follow up the submission
Ltd. v. NLRC (4th Division)9 (Insular Life II), neither can
of weekly remittance reports of the debit agents and zone
such existence be negated by expressly repudiating it in
supervisors, preserve company property in good condition,
the management contract and providing therein, as here,
train understudies for the position of district manager, and
that the employee is an independent contractor. For, as
maintain his quota of sales (the failure of which is a
earlier indicated, the law defines and prescribes the
ground for termination). On the other hand, a zone
employment status of a person, not what the clashing
supervisor must direct and supervise the sales activities of
parties chose to call it or say it should be.10 We said as
the debit agents under him, conserve company property
much in Servidad v. National Labor Relations
through "reinstatements", undertake and discharge the
Commission:11
functions of absentee debit agents, spot-check the records
of debit agents, and insure proper documentation of sales
The private agreement of the parties cannot prevail over
and collections by the debit agents.7 (Emphasis supplied.)
Article 1700 of the Civil Code, which provides:
A comparative look at the duties of the Ruizes, as set forth
Art. 1700. The relations between capital and labor are not
in the decision in Grepalife, and those of Tongko, as may
merely contractual. They are so impressed with public
be deduced from affidavits8 of insurance managers of
interest that labor contracts must yield to the common
Manulife, would reveal a striking similarity in their
KAYE RAMOGA
good. Therefore, such contracts are subject to special
laws on labor unions, collective bargaining, strikes and
lockouts, closed shops, wages, working conditions, hours
of labor and similar subjects.
Similarly telling is the case of Pakistan Airlines
Corporation vs. Pole, et al. There, it was said:
xxx provisions of applicable law, especially provisions
relating to matters affected with public policy, are deemed
written into the contract. Put a little differently, the
governing principle is that the parties may not contract
away applicable provisions of law especially peremptory
provisions dealing with matters heavily impressed with
public interest. The law relating to labor and employment
is clearly such an area and parties are not at liberty to
insulate themselves and their relationships from the
impact of labor laws and regulations by simply contracting
with each other. . .
Of the same tenor is the Court’s fairly recent holding in
Paguio v. National Labor Relations Commission:12
Respondent company cannot seek refuge under the terms
of the agreement it has entered into with petitioner. The
law, in defining their contractual relationship, does so, not
necessarily or exclusively upon the terms of their written or
oral contract, but also on the basis of the nature of the
work petitioner has been called upon to perform. The law
affords protection to an employee, and it will not
countenance any attempt to subvert its spirit and intent. A
stipulation in an agreement can be ignored as and when it
is utilized to deprive the employee of his security of tenure.
The sheer inequality that characterizes employer-
employee relations, where the scales generally tip against
the employee, often scarcely provides him real and better
options. (Emphasis supplied.)
Second, and in relation to the first reason, the fact that
the Agreement was subsisting even after Tongko’s
appointment as manager does not militate against a
conclusion that Tongko was Manulife’s employee, at least
during his stint as such manager. To be sure, an
insurance agent may at the same time be an employee of
an insurance company. Or to put it a bit differently, an
employee-manager may be given the privilege of soliciting
insurance, as agent, and earn in the process commission
for every contract concluded as a result of such
solicitation. The reality of two personalities–– one as
employee and the other as non-employee of an insurance
company, coinciding in one person––was acknowledged
in Insular Life II, in which the Court wrote:
Parenthetically, both petitioner and respondent NLRC
treated the agency contract and the management contract
entered into between [Insular Life] and [respondent] De
Los Reyes as contracts of agency. We however hold
otherwise. Unquestionably there exist major distinctions
between the two agreements. While the first has the
earmarks of an agency contract, the second is far
removed from the concept of agency in that provided
therein are conditionalities that indicate an employer-
employee relationship. The NLRC therefore was correct in
finding that private respondent was an employee of
petitioner, but this holds true only insofar the management
contract is concerned.13 x x x
Grepalife may also be cited where we declared:
True, it cannot be denied that based on the definition of an
"insurance agent" in the Insurance Code some of the
functions performed by private respondent were those of
insurance agents. Nevertheless, it does not follow that
LABOR LAW
they are not employees of Grepalife. The Insurance Code
may govern the licensing requirements and other
particular duties of insurance agents, but it does not bar
the application of the Labor Code with regard to labor
standards and labor relations.14
The ponencia points out that Grepalife and Insular Life
II factually differ with the instant case in that: "these cited
cases dealt with the proper legal characterization of a
subsequent management contract that superseded the
original agency contract between the insurance company
and its agent." In other words, the majority opinion
distinguishes the instant case from Grepalife and Insular
Life II in the lack of a written management contract
between Tongko and Manulife.
The cited difference does not, for that reason alone, pose
a plausible bar to the application of Grepalife and Insular
Life II to the instant case. In fact, the absence of a written
agreement to memorialize the naming and assumption of
Tongko as unit and later branch manager is irrelevant to
the issue of the presence of an employer-employee
relationship. A management contract, for purposes of
determining the relationship between the worker and the
employer, is simply an evidence to support a conclusion
either way. Such document, or the absence thereof, would
not influence the conclusion on the issue of employment.
The presence of a management contract would merely
simplify the issue as to the duties and responsibilities of
the employee concerned as they would then be defined
more clearly.
Manulife’s decision not to execute a management contract
with Tongko was well within its discretion. However, the
fact of Manulife and Tongko not having inked a
management contract, if this were the case, did not reduce
the petitioner to a mere "lead agent," as
the ponencia would have it. While there was perhaps no
written management contract whence Tongko’s rights,
duties and functions as unit/branch manager may easily
be fleshed out as a prelude to determining if an employer-
employee relationship with Manulife did exist, other
evidence was adduced to show such duties and
responsibilities. For one, in his letter15 of November 6,
2001, respondent de Dios distinctly referred to Tongko as
sales manager. For another, it is well nigh inconceivable
that Manulife issued no promotional appointments to
petitioner as unit manager, branch manager and
eventually regional sales manager. Basic and sound
management practice simply requires an appointment for
any upward personnel movement, particularly when
additional duties and compensation are involved. Then,
too, the aforementioned affidavits of the managers of
Manulife as to the duties and responsibilities of a unit
manager, such as Tongko, point to the conclusion that
these managers were employees of Manulife, applying the
four-fold test.
To my mind, Grepalife and Insular Life II bear obvious
parallelism to the instant case vis-à-vis the facts against
which they are cast. Too, the parties are similarly situated
in point of positions occupied, the agreed exclusivity of
service and functional profiles to warrant the application of
the stare decisis doctrine. The Latin maxim stare decisis et
non quieta movere, translates "stand by the thing and do
not disturb the calm." It requires that high courts must
follow, as a matter of sound policy, its own precedents, or
respect settled jurisprudence absent compelling reason to
do otherwise.16 Put a bit differently, the doctrine holds that
when a court has laid down a principle of law as applicable
to a certain set of facts, it will abide with that principle in
future cases in which the facts are substantially the
same.17 In the view I take of this case, there is absolutely
KAYE RAMOGA
nothing in Grepalife and Insular Life II which may be
viewed as plainly unreasonable as to justify withholding
from them the stare decisis effect.
And lest it be overlooked, both Grepalife and Insular Life II
appreciated and applied the element of control––the most
crucial and determinative indicator of an employer-
employee relationship––as a labor law concept. The Labor
Code and other labor relations laws, some of which have
been incorporated in the Civil Code, regulate the
relationship between labor and capital or between worker
and employer in the private sector. The Insurance Code,
on the other hand, governs the licensing requirements and
other particular duties of insurance agents;18 it also
regulates not only the relationship between the insurer and
the insured but also the internal affairs of the insurance
company.19 These are the particular areas of operation of
the aforementioned laws. To argue then that the Insurance
Code and insurance industry practice shall determine the
existence of an employer-employee relationship in the
case at bench is, it is submitted, simplistic if not downright
erroneous. Both law and jurisprudence do not support the
contention on the primacy of the Insurance Code and
insurance usages in determining said relationship. As a
matter of fact, the Court, in a string of cases involving
corporations engaged in non-insurance activities as well
as those into the insurance business, notably
in Grepalife, Insular Life I20 and II, Great Pacific Life
Assurance Corporation v. Judico,21 and AFP Mutual
Benefit Association v. NLRC,22 held that the determination
of the existence of an employer-employee relationship lies
in the four-fold test. An examination of these cases yields
no indication that a separate law, other than the Labor
Code and labor law concepts, was ever considered by the
Court in determining the existence of an employer-
employee relationship.
There can be no quibbling that Tongko, as unit, branch
and regional sales manager, was without a fixed salary,
but earned his income strictly on commission basis.
However, how and when he was paid his compensation is,
without more, not an argument against a finding that he
was an employee of Manulife. For, the phrase "wage
paid," as a component of employment and as an element
of the four-fold test, is defined under Art. 97(f) of the Labor
Code as "the remuneration or earnings, however
designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, piece
or commission basis or other method of calculating the
same, which is payable by an employer to an employee
under a written or unwritten contract of employment for
work done or to be done, or for services rendered or to be
rendered."23 Lazaro v. Social Security Commission24 is
emphatic on this point:
Lazaro’s arguments may be dispensed with by applying
precedents. Suffice it to say, the fact that Laudato was
paid by way of commission does not preclude the
establishment of an employer-employee relationship. In
Grepalife v. Judico, the Court upheld the existence of an
employer-employee relationship between the insurance
company and its agents, despite the fact that the
compensation that the agents on commission received
was not paid by the company but by the investor or the
person insured. The relevant factor remains, as stated
earlier, whether the "employer" controls or has reserved
the right to control the "employee" not only as to the result
of the work to be done but also as to the means and
methods by which the same is to be accomplished.
(Emphasis supplied.)
Much has been made in the ponencia, following Manulife’s
line, of Tongko’s income tax returns (ITRs), in which he
LABOR LAW
described himself to be "self-employed." It must be
stressed in this regard, however, that he had no other
choice but to do so, for the following reasons: (1) Manulife
had refused to consider him as its employee; and (2)
Manulife withheld 10% of his income as an agent as taxes.
Tongko had no other viable alternative but to make use of
the withholding tax certificates issued by Manulife in
paying his taxes. Thus, petitioner could not have really
been faulted for including in his ITRs an entry declaring
himself as self-employed. While perhaps not on all fours
here, because its issue revolved around estoppel instead
of declaration against interest made in an ITR, Philippine
National Construction Corporation v. NLRC25 is
nonetheless most instructive:
Time honored is the precept that quitclaims are ineffective
in barring recovery for the full measure of the worker's
rights and that acceptance of benefits therefrom does not
amount to estoppel. In Lopez Sugar Corporation vs.
Federation of Free Workers, the Court explained:
Acceptance of those benefits would not amount to
estoppel. The reason is plain. Employer and employee,
obviously do not stand on the same footing. The employer
drove the employee to the wall. The latter must have to
get hold of money. Because, out of the job, he has to face
harsh necessities of life. He thus found himself in no
position to resist money proffered. His, then, is a case of
adherence, not of choice. One thing sure, however, is that
petitioners did not relent their claim. They pressed it. They
are deemed not to have waived any of their rights. x x x
It may be noted at this juncture that Manulife has changed
its stance on the issue of illegal dismissal. In its Position
Paper with Motion to Dismiss filed before the Labor
Arbiter, in its Motion for Reconsideration (Re: Decision
dated 27 September 2004) dated October 11, 2004 filed
before the NLRC, and in its Comment dated August 5,
2006 filed before the Court, Manulife had consistently
assumed the posture that the dismissal of petitioner was a
proper exercise of termination proviso under the
Agreement.26 In this motion, however, Manulife, in a virtual
acknowledgment of Tongko being its employee, contends
that he was "dismissed for a just and lawful cause – for
gross and habitual neglect of duties, inefficiency and willful
disobedience of the lawful orders."27 Manulife adds that:
Respondents presented an abundance of evidence
demonstrating how termination happened only after failure
to meet company goals, after all remedial efforts to correct
the inefficiency of Petitioner failed and after Petitioner, as
found by the CA, created dissension in Respondent
Manulife when he refused to accept the need for
improvement in his area and continued to spread the bile
of discontent and rebellion that he had generated among
the other agents.28
If Manulife claimed at every possible turn that Tongko was
never an employee of the insurance company, why take a
formal action of dismissal with a statement of the grounds
therefor?
No less than the Constitution itself guarantees protection
to labor:
ARTICLE XIII LABOR Section 3. The State shall afford full
protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality of
employment opportunities for all. x x x x
The State shall promote the principle of shared
responsibility between workers and employers and the
preferential use of voluntary modes in settling disputes,
KAYE RAMOGA
including conciliation, and shall enforce their mutual
compliance therewith to foster industrial peace.
The State shall regulate the relations between workers
and employers, recognizing the right of labor to its just
share in the fruits of production and the right of enterprises
to reasonable returns to investments, and to expansion
and growth.
Complementing the foregoing guarantee provisions is
Article 1702 of the Civil Code mandating that, in case of
doubt, all labor legislation and all labor contracts shall be
construed in favor of the safety and decent living for the
laborer. Along side with the Civil Code command is Art. 4
of the Labor Code providing:
ART. 4. Construction in favor of labor.––All doubts in the
implementation and interpretation of the provisions of this
Code, including its implementing rules and regulations,
shall be resolved in favor of labor.
The fairly recent Dealco Farms, Inc. v. National Labor
Relations Commission (5th Division)29 is reflective of the
statutory bias in favor of the working class and the need to
give labor the benefit of the doubt, thus:
Having failed to substantiate its allegation on the
relationship between the parties, we stick to the settled
rule in controversies between a laborer and his master
that doubts reasonably arising from the evidence should
be resolved in the former’s favor. (Emphasis supplied.)
LABOR LAW
In the instant case, doubts as to the true relationship
between Tongko and Manulife should be resolved in favor
of the former and for employment.
Lest it be misunderstood, this dissent proposes only to
affirm the underlying Decision of the Court dated
November 7, 2008, but only insofar as it considered
Tongko Manulife’s employee following his hiring as
manager, first as unit manager, then branch manager and
ultimately as regional sales manager. For, it was only after
such engagement that Manulife exercised effective control
not only over the results of his works, but also over the
means and methods by which it is to be accomplished; it
was then that Tongko was tasked to perform
administrative duties. As to Tongko’s stint as insurance
agent, an employer-employee relationship cannot be
posited in light of the paucity of evidence to support the
proposition.
In view of the foregoing, I vote to partially grant the motion
for reconsideration but only in the sense that petitioner
Tongko shall only be considered as employee of
respondent Manulife only after his engagement as
manager of the company. Accordingly, his entitlement to
backwages and separation benefits shall be reckoned
from that point in time and the amount shall correspond to
his commission earned as such manager only, subject to
the usual accounting requirements.
KAYE RAMOGA
2. G.R. No. 171212 August 4, 2014
INDOPHIL TEXTILE MILLS, INC., Petitioner, vs. ENGR. SALVADOR ADVIENTO, Respondents
PERALTA, J.:
Before the Court is a petition for review on certiorari
under Rule 45 of the Revised Rules of Court which
seeks to review, reverse and set-aside the
Decision1 of the Court of Appeals (CA), dated May
30, 2005, and its Resolution2dated January 10, 2006
in the case entitled Jndophil Textile Mills, Inc. v. Hon.
Rolando R. Velasco and Engr. Salvador Adviento,
docketed as CA-G.R. SP No. 83099.
The facts are not disputed.
Petitioner Indophil Textile Mills, Inc. is a domestic
corporation engaged in the business of
manufacturing thread for weaving.3 On August 21,
1990, petitioner hired respondent Engr. Salvador
Adviento as Civil Engineer to maintain its facilities in
Lambakin, Marilao, Bulacan.4 On August 7, 2002,
respondent consulted a physician due to recurring
weakness and dizziness.5 Few days later, he was
diagnosed with Chronic Poly Sinusitis, and
thereafter, with moderate, severe and persistent
Allergic Rhinitis.6 Accordingly, respondent was
advised by his doctor to totally avoid house dust mite
and textile dust as it will transmute into health
problems.7
Distressed, respondent filed a complaint against
petitioner with the National Labor Relations
Commission (NLRC), San Fernando, Pampanga, for
alleged illegal dismissal and for the payment of
backwages, separation pay, actual damages and
attorney’s fees. The said case, docketed as NLRC
Case No. RAB-III-05-5834-03, is still pending
resolution with the NLRC at the time the instant
petition was filed.8
Subsequently, respondent filed another
9
Complaint with the Regional Trial Court (RTC) of
Aparri, Cagayan, alleging that he contracted such
occupational disease by reason of the gross
negligence of petitioner to provide him with a safe,
healthy and workable environment.
In his Complaint, respondent alleged that as part of
his job description, he conductsregular maintenance
check on petitioner’s facilities including its dye house
area, which is very hot and emits foul chemical odor
with no adequate safety measures introduced by
petitioner.10 According to respondent, the air washer
dampers and all roof exhaust vests are blown into
open air, carrying dust thereto.11 Concerned,
respondent recommended to management to place
roof insulation to minimize, if not, eradicate the health
hazards attendant in the work place.12 However, said
recommendation was turned down by management
due to high cost.13 Respondent further suggested to
petitioner’s management that the engineering office
be relocated because ofits dent prone location, such
that even if the door of the office is sealed,
accumulated dust creeps in outside the office.14 This
LABOR LAW
was further aggravated by the installation of new
filters fronting the office.15 However, no action was
taken by management.16 According to respondent,
these healthhazards have been the persistent
complaints of most, if not all, workers of
petitioner.17 Nevertheless, said complaints fell on
deaf ears as petitioner callously ignored the health
problems of its workers and even tended to be
apathetic to their plight, including respondent.18
Respondent averred that, being the only breadwinner
in the family, he made several attempts to apply for a
new job, but to his dismay and frustration, employers
who knew ofhis present health condition
discriminated against him and turned down his
application.19 By reason thereof, respondent suffered
intense moral suffering, mental anguish, serious
anxiety and wounded feelings, praying for the
recovery of the following: (1) Five Million Pesos
(₱5,000,000.00) asmoral damages; (2) Two Million
Pesos (₱2,000,000.00) as exemplary damages; and
(3) Seven Million Three Thousand and Eight Pesos
(₱7,003,008.00) as compensatory
damages.20 Claiming to be a pauper litigant,
respondent was not required to pay any filing fee.21
In reply, petitioner filed a Motion to Dismiss22 on the
ground that: (1) the RTC has no jurisdiction over the
subject matter of the complaint because the same
falls under the original and exclusive jurisdiction of
the Labor Arbiter (LA) under Article 217(a)(4) of the
Labor Code; and (2) there is another action pending
with the Regional Arbitration Branch III of the NLRC
in San Fernando City, Pampanga, involving the same
parties for the same cause.
On December 29, 2003, the RTC issued a
Resolution23 denying the aforesaid Motion and
sustaining its jurisdiction over the instant case. It held
that petitioner’s alleged failure to provide its
employees with a safe, healthy and workable
environment is an act of negligence, a case of quasi-
delict. As such, it is not within the jurisdiction of the
LA under Article 217 of the Labor Code. On the
matter of dismissal based on lis pendencia, the RTC
ruled that the complaint before the NLRC has a
different cause of action which is for illegal dismissal
and prayer for backwages, actual damages,
attorney’s fees and separation pay due to illegal
dismissal while in the present case, the cause of
action is for quasi-delict.24 The falloof the Resolution
is quoted below:
WHEREFORE, finding the motion to dismiss to be
without merit, the Court deniesthe motion to dismiss.
SO ORDERED.25
On February 9, 2004, petitioner filed a motion for
reconsideration thereto, which was likewise denied in
an Order issued on even date.
KAYE RAMOGA
Expectedly, petitioner then filed a Petition for
Certiorariwith the CA on the ground that the RTC
committed grave abuse of discretion amounting to
lack or excess of jurisdiction in upholding that it has
jurisdiction over the subject matter of the complaint
despite the broad and clear terms of Article 217 of
the Labor Code, as amended.26
After the submission by the parties of their respective
Memoranda, the CA rendered a Decision27 dated
May 30, 2005 dismissing petitioner’s Petition for lack
of merit, the dispositive portion of which states:
WHEREFORE, premises considered, petition for
certiorari is hereby DISMISSEDfor lack of merit. SO
ORDERED.28
From the aforesaid Decision, petitioner filed a Motion
for Reconsideration which was nevertheless denied
for lack of merit in the CA’s Resolution29 dated
January 10, 2006. Hence, petitioner interposed the
instant petition upon the solitary ground that "THE
HONORABLE COURT OF APPEALS HAS
DECIDED A QUESTION OF SUBSTANCE IN A
WAY NOT IN ACCORD WITH LAW AND WITH
APPLICABLE DECISIONS OF THE HONORABLE
SUPREME COURT."30 Simply, the issue presented
before us is whether or not the RTC has jurisdiction
over the subject matter of respondent’s complaint
praying for moral damages,exemplary damages,
compensatory damages, anchored on petitioner’s
alleged gross negligence in failing to provide a safe
and healthy working environment for respondent.
The delineation between the jurisdiction of regular
courts and labor courts over cases involving workers
and their employers has always been a matter of
dispute.31 It is up to the Courts to lay the line after
careful scrutiny of the factual milieu of each case.
Here, we find that jurisdiction rests on the regular
courts.
In its attempt to overturn the assailed Decision and
Resolution of the CA, petitioner argues that
respondent’sclaim for damages is anchored on the
alleged gross negligence of petitioner as an
employer to provide its employees, including herein
respondent, with a safe, healthy and workable
environment; hence, it arose from an employer-
employee relationship.32 The fact of respondent’s
employment withpetitioner as a civil engineer is a
necessary element of his cause ofaction because
without the same, respondent cannot claim to have a
rightto a safe, healthy and workable
environment.33 Thus, exclusive jurisdiction over the
same should be vested in the Labor Arbiter and the
NLRC pursuant to Article 217(a)(4) of the Labor
Code of the Philippines (Labor Code), as amended.34
We are not convinced.
The jurisdiction of the LA and the NLRC is outlined in
Article 217 of the Labor Code, as amended by
Section 9 of Republic Act (R.A.) No. 6715, to wit:
LABOR LAW
ART. 217. Jurisdiction of Labor Arbiters and the
Commission-- (a) Except as otherwise provided
under this Code the Labor Arbiter shall have original
and exclusive jurisdiction to hear and decide, within
thirty (30) calendar days after the submission of the
case by the parties for decision without extension,
even in the absence of stenographic notes, the
following cases involving all workers, whether
agricultural or nonagricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement,
those cases that workers may file involvingwages,
rates of pay, hours of work and other terms and
conditions of employment;
4. Claims for actual, moral, exemplary and other
forms of damages arising from employer-employee
relations;
5. Cases arising from any violation of Article 264 of
this Code including questions involving the legality of
strikes and lockouts; and
6. Except claims for Employees Compensation,
Social Security, Medicare and maternity benefits, all
other claims, arising from employer-employee
relations, including those of persons in domestic or
household service,involving an amount exceeding
five thousand pesos (₱5,000.00) regardless of
whether accompanied with a claim for reinstatement.
x x x.35
While we have upheld the present trend to refer
worker-employer controversies to labor courts in light
of the aforequoted provision, we have also
recognized that not all claims involving employees
can be resolved solely by our labor courts,
specifically when the law provides otherwise.36 For
this reason, we have formulated the "reasonable
causal connection rule," wherein if there is a
reasonable causal connection between the claim
asserted and the employer-employee relations, then
the case is within the jurisdiction of the labor courts;
and in the absence thereof, it is the regular courts
that have jurisdiction.37 Such distinction is apt since it
cannot be presumed that money claims of workers
which do not arise out of or in connection with their
employer-employee relationship, and which would
therefore fall within the general jurisdiction of the
regular courts of justice, were intended by the
legislative authority to be taken away from the
jurisdiction of the courts and lodged with Labor
Arbiters on an exclusive basis.38
In fact, as early as Medina vs. Hon. Castro-
Bartolome,39 in negating the jurisdiction of the LA,
although the parties involved were an employer and
two employees, the Court succinctly held that:
The pivotal question to Our mind iswhether or not the
Labor Code has any relevance to the reliefs sought
by the plaintiffs. For if the Labor Code has no
relevance, any discussion concerning the statutes
amending it and whether or not they have retroactive
effect is unnecessary.
KAYE RAMOGA
It is obvious from the complaint that the plaintiffs
have not alleged any unfair labor practice. Theirs is a
simple action for damages for tortious acts allegedly
committed by the defendants. Such being the case,
the governing statute is the Civil Code and not the
Labor Code. It results that the orders under
revieware based on a wrong premise.40
Similarly, we ruled in the recent case of Portillo v.
Rudolf Lietz, Inc.41 that not all disputes between an
employer and his employees fall within the
jurisdiction of the labor tribunals suchthat when the
claim for damages is grounded on the "wanton failure
and refusal" without just cause of an employee to
report for duty despite repeated notices served upon
him of the disapproval of his application for leave
ofabsence, the same falls within the purview of Civil
Law, to wit:
As early as Singapore Airlines Limited v. Paño, we
established that not all disputes between an
employer and his employee(s) fall within the
jurisdiction of the labor tribunals. We differentiated
between abandonment per seand the manner and
consequent effects of such abandonment and ruled
that the first, is a labor case, while the second, is a
civil law case.
Upon the facts and issues involved, jurisdiction over
the present controversy must be held to belong to the
civil Courts. While seemingly petitioner's claim for
damages arises from employer-employee relations,
and the latest amendment to Article 217 of the Labor
Code under PD No. 1691 and BP Blg. 130 provides
that all other claimsarising from employer-employee
relationship are cognizable by Labor Arbiters [citation
omitted], in essence, petitioner's claim for damages
is grounded on the "wanton failure and
refusal"without just cause of private respondent Cruz
to report for duty despite repeated notices served
upon him of the disapproval of his application for
leave of absence without pay. This, coupled with the
further averment that Cruz "maliciously and with bad
faith" violated the terms and conditions of the
conversion training course agreement to the damage
of petitioner removes the present controversy from
the coverage of the Labor Code and brings it within
the purview of Civil Law.
Clearly, the complaint was anchored not on the
abandonment per seby private respondent Cruz of
his job—as the latter was not required in the
Complaint to report back to work—but on the manner
and consequent effects of such abandonmentof work
translated in terms of the damages which petitioner
had to suffer. x x x.42
Indeed, jurisprudence has evolved the rule that
claims for damages under Article 217(a)(4) of the
Labor Code, to be cognizable by the LA, must have a
reasonable causal connection withany of the claims
provided for in that article.43Only if there is such a
connection with the other claims can a claim for
damages be considered as arising from employer-
employee relations.44
LABOR LAW
In the case at bench, we find that such connection is
nil.
True, the maintenance of a safe and healthy
workplace is ordinarily a subject of labor cases.
More, the acts complained of appear to constitute
matters involving employee-employer relations since
respondent used to be the Civil Engineer of
petitioner. However, it should be stressed that
respondent’s claim for damages is specifically
grounded on petitioner’s gross negligenceto provide
a safe, healthy and workable environment for its
employees −a case of quasi-delict. This is easily
ascertained from a plain and cursory reading of the
Complaint,45 which enumerates the acts and/or
omissions of petitioner relative to the conditions in
the workplace, to wit:
1. Petitioner’s textile mills have excessive flying
textile dust and waste in its operations and no effort
was exerted by petitioner to minimize or totally
eradicate it;
2. Petitioner failed to provide adequate and sufficient
dust suction facilities;
3. Textile machines are cleaned with air compressors
aggravating the dusty work place;
4. Petitioner has no physician specializing in
respiratoryrelated illness considering it is a textile
company;
5. Petitioner has no device to detectthe presence or
density of dust which is airborne;
6. The chemical and color room are not equipped
with proper safety chemical nose mask; and
7. The power and boiler plant emit too much smoke
with solid particles blown to the air from the smoke
stack of the power plant emitting a brown rust color
which engulfs the entire compound.46
In addition, respondent alleged that despite his
earnest efforts to suggest to management to place
roof insulation to minimize, if not, eradicate the health
hazards attendant in the workplace, the same was
not heeded.47
It is a basic tenet that jurisdiction over the subject
matter is determined upon the allegations made in
the complaint, irrespective of whether or not the
plaintiff is entitled to recover upon the claim asserted
therein, which is a matter resolved only after and as
a result of a trial.48 Neither can jurisdiction of a court
bemade to depend upon the defenses made by a
defendant in his answer or motion to dismiss.49 In
this case, a perusal of the complaint would reveal
that the subject matter is one of claim for damages
arising from quasi-delict, which is within the ambit of
the regular court's jurisdiction.
The pertinent provision of Article 2176 of the Civil
Code which governs quasi-delictprovides that:
Whoever by act or omissioncauses damageto
another, there being fault or negligence, is obliged to
pay for the damagedone. Such fault or negligence, if
there is no pre-existing contractual relation between
the parties, is called quasi-delict.50
KAYE RAMOGA
Thus, to sustain a claim liability under quasi-delict,
the following requisites must concur: (a) damages
suffered by the plaintiff; (b) fault or negligence of the
defendant, or someother person for whose acts he
must respond; and (c) the connection of causeand
effect between the fault or negligence of the
defendant and the damages incurred by the
plaintiff.51
In the case at bar, respondent alleges that due to the
continued and prolonged exposure to textile dust
seriously inimical to his health, he suffered work-
contracted disease which is now irreversible and
incurable, and deprived him of job
opportunities.52 Clearly, injury and damages were
allegedly suffered by respondent, an element of
quasi-delict. Secondly, the previous contract of
employment between petitioner and respondent
cannot be used to counter the element of "no pre-
existing contractual relation" since petitioner’s
alleged gross negligence in maintaining a hazardous
work environment cannot be considered a mere
breach of such contract of employment, but falls
squarely within the elements of quasi-delictunder
Article 2176 of the Civil Code since the negligence is
direct, substantive and independent.53 Hence, we
ruled in Yusen Air and Sea Services Phils., Inc. v.
Villamor54 that:
When, as here, the cause of action is based on a
quasi-delictor tort, which has no reasonable causal
connection with any of the claims provided for in
Article 217, jurisdiction over the action is with the
regular courts.55
It also bears stressing that respondent is not praying
for any relief under the Labor Code of the
Philippines. He neither claims for reinstatement nor
backwages or separation pay resulting from an illegal
termination. The cause of action herein pertains to
the consequence of petitioner’s omission which led to
a work-related disease suffered by respondent,
causing harm or damage to his person. Such cause
of action is within the realm of Civil Law, and
jurisdiction over the controversy belongs to the
regular courts.56
Our ruling in Portillo, is instructive, thus:
There is no causal connection between private
respondent’s claim for damages and the respondent
employers’ claim for damages for the alleged
"Goodwill Clause" violation. Portillo’s claim for unpaid
salaries did not have anything to do with her alleged
violation of the employment contract as, in fact, her
separation from employmentis not "rooted" in the
alleged contractual violation. She resigned from her
LABOR LAW
employment. She was not dismissed. Portillo’s
entitlementto the unpaid salaries is not even
contested. Indeed, Lietz Inc.’s argument about legal
compensation necessarily admits that it owesthe
money claimed by Portillo.57
Further, it cannot be gainsaid that the claim for
damages occurred afterthe employer-employee
relationship of petitioner and respondent has ceased.
Given that respondent no longer demands for any
relief under the Labor Code as well as the rules and
regulations pertinent thereto, Article 217(a)(4) of the
Labor Code is inapplicable to the instant case, as
emphatically held in Portillo, to wit:
It is clear, therefore, that while Portillo’s claim for
unpaid salaries is a money claim that arises out ofor
in connection with an employeremployee
relationship, Lietz Inc.’s claim against Portillo for
violation of the goodwill clause is a money claim
based on an act done after the cessation of the
employment relationship. And, while the jurisdiction
over Portillo’s claim is vested in the labor arbiter, the
jurisdiction over Lietz Inc.’s claim rests on the regular
courts. Thus:
As it is, petitioner does not ask for any relief under
the Labor Code. It merely seeks to recover damages
based on the parties' contract of employment as
redress for respondent's breach thereof. Such cause
of action is within the realm of Civil Law, and
jurisdiction over the controversy belongs to the
regular courts. More so must this be in the present
case, what with the reality that the stipulation refers
to the post-employment relations of the parties.58
Where the resolution of the dispute requires
expertise, not in labor management relations nor in
wage structures and other terms and conditions of
employment, but rather in the application of the
general civil law, such claim falls outside the area of
competence of expertise ordinarily ascribed to the LA
and the NLRC.59
Guided by the aforequoted doctrines, we find no
reason to reverse the findings of the CA.1âwphi1 The
RTC has jurisdiction over the subject matter of
respondent's complaint praying for moral damages,
exemplary damages, compensatory damages,
anchored on petitioner's alleged gross negligence in
failing to provide a safe and healthy working
environment for respondent. WHEREFORE, the
petition is DENIED. The Decision of the Court of
Appeals, dated May 30, 2005, and its Resolution
dated January 10, 2006 in CA-G.R. SP No. 83099
are hereby AFFIRMED. SO ORDERED.
KAYE RAMOGA
G.R. No. 192558 : February 15, 2012
BITOY JAVIER (DANILO P. JAVIER) VS. FLY ACE CORPORATION/ FLORDELYN CASTILLO.
MENDOZA, J.:
This is a petition under Rule 45 of the Rules of Civil
Procedure assailing the March 18, 2010
Decision[1] of the Court of Appeals (CA) and its June
7, 2010 Resolution,[2] in CA-G.R. SP No. 109975,
which reversed the May 28, 2009 Decision[3] of the
National Labor Relations Commission (NLRC) in the
case entitled Bitoy Javier v. Fly Ace/Flordelyn
Castillo,[4] holding that petitioner Bitoy Javier
(Javier) was illegally dismissed from employment and
ordering Fly Ace Corporation (Fly Ace) to pay
backwages and separation pay in lieu of
reinstatement.
Antecedent Facts
On May 23, 2008, Javier filed a complaint before the
NLRC for underpayment of salaries and other labor
standard benefits. He alleged that he was an
employee of Fly Ace since September 2007,
performing various tasks at the respondent’s
warehouse such as cleaning and arranging the
canned items before their delivery to certain
locations, except in instances when he would be
ordered to accompany the company’s delivery
vehicles, as pahinante; that he reported for work from
Monday to Saturday from 7:00 o’clock in the morning
to 5:00 o’clock in the afternoon; that during his
employment, he was not issued an identification card
and payslips by the company; that on May 6, 2008,
he reported for work but he was no longer allowed to
enter the company premises by the security guard
upon the instruction of Ruben Ong (Mr. Ong), his
superior;[5] that after several minutes of begging to
the guard to allow him to enter, he saw Ong whom
he approached and asked why he was being barred
from entering the premises; that Ong replied by
saying, “Tanungin mo anak mo;” [6] that he then
went home and discussed the matter with his family;
that he discovered that Ong had been courting his
daughter Annalyn after the two met at a fiesta
celebration in Malabon City; that Annalyn tried to talk
to Ong and convince him to spare her father from
trouble but he refused to accede; that thereafter,
Javier was terminated from his employment without
notice; and that he was neither given the opportunity
to refute the cause/s of his dismissal from work.
To support his allegations, Javier presented an
affidavit of one Bengie Valenzuela who alleged that
Javier was a stevedore or pahinante of Fly Ace from
September 2007 to January 2008. The said affidavit
was subscribed before the Labor Arbiter (LA).[7]
For its part, Fly Ace averred that it was engaged in
the business of importation and sales of groceries.
Sometime in December 2007, Javier was contracted
by its employee, Mr. Ong, as extra helper on
a pakyaw basis at an agreed rate of ?300.00 per trip,
which was later increased to ?325.00 in January
2008. Mr. Ong contracted Javier roughly 5 to 6 times
only in a month whenever the vehicle of its
LABOR LAW
contracted hauler, Milmar Hauling Services, was not
available. On April 30, 2008, Fly Ace no longer
needed the services of Javier. Denying that he was
their employee, Fly Ace insisted that there was no
illegal dismissal.[8] Fly Ace submitted a copy of its
agreement with Milmar Hauling Services and copies
of acknowledgment receipts evidencing payment to
Javier for his contracted services bearing the words,
“daily manpower (pakyaw/piece rate pay)” and the
latter’s signatures/initials.
Ruling of the Labor Arbiter
On November 28, 2008, the LA dismissed the
complaint for lack of merit on the ground that Javier
failed to present proof that he was a regular
employee of Fly Ace. He wrote:
Complainant has no employee ID showing his
employment with the Respondent nor any document
showing that he received the benefits accorded to
regular employees of the Respondents. His
contention that Respondent failed to give him said ID
and payslips implies that indeed he was not a regular
employee of Fly Ace considering that complainant
was a helper and that Respondent company has
contracted a regular trucking for the delivery of its
products.
Respondent Fly Ace is not engaged in trucking
business but in the importation and sales of
groceries. Since there is a regular hauler to deliver its
products, we give credence to Respondents’ claim
that complainant was contracted on “pakiao” basis.
As to the claim for underpayment of salaries, the
payroll presented by the Respondents showing
salaries of workers on “pakiao” basis has evidentiary
weight because although the signature of the
complainant appearing thereon are not uniform, they
appeared to be his true signature. x x x x
Hence, as complainant received the rightful salary as
shown by the above described payrolls,
Respondents are not liable for salary differentials. [9]
Ruling of the NLRC
On appeal with the NLRC, Javier was favored. It
ruled that the LA skirted the argument of Javier and
immediately concluded that he was not a regular
employee simply because he failed to present
proof. It was of the view that a pakyaw-basis
arrangement did not preclude the existence of
employer-employee relationship. “Payment by result
x x x is a method of compensation and does not
define the essence of the relation. It is a mere
method of computing compensation, not a basis for
determining the existence or absence of an
employer-employee relationship.[10]” The NLRC
further averred that it did not follow that a worker was
KAYE RAMOGA
a job contractor and not an employee, just because
the work he was doing was not directly related to the
employer’s trade or business or the work may be
considered as “extra” helper as in this case; and that
the relationship of an employer and an employee
was determined by law and the same would prevail
whatever the parties may call it. In this case, the
NLRC held that substantial evidence was sufficient
basis for judgment on the existence of the employer-
employee relationship. Javier was a regular
employee of Fly Ace because there was reasonable
connection between the particular activity performed
by the employee (as a “pahinante”) in relation to the
usual business or trade of the employer (importation,
sales and delivery of groceries). He may not be
considered as an independent contractor because he
could not exercise any judgment in the delivery of
company products. He was only engaged as a
“helper.”
Finding Javier to be a regular employee, the NLRC
ruled that he was entitled to a security of tenure. For
failing to present proof of a valid cause for his
termination, Fly Ace was found to be liable for illegal
dismissal of Javier who was likewise entitled to
backwages and separation pay in lieu of
reinstatement. The NLRC thus ordered:
WHEREFORE, premises considered, complainant’s
appeal is partially GRANTED. The assailed Decision
of the labor arbiter is VACATED and a new one is
hereby entered holding respondent FLY ACE
CORPORATION guilty of illegal dismissal and non-
payment of 13th month pay. Consequently, it is
hereby ordered to pay complainant DANILO “Bitoy”
JAVIER the following:
1. Backwages - P45,770.83
2. Separation pay, in lieu of reinstatement -
8,450.00
3. Unpaid 13th month pay (proportionate) - PETITIONER WAS NOT A REGULAR EMPLOYEE
5,633.33
TOTAL - P59,854.16
All other claims are dismissed for lack of merit. SO
ORDERED.[11]
Ruling of the Court of Appeals
On March 18, 2010, the CA annulled the NLRC
findings that Javier was indeed a former employee of
Fly Ace and reinstated the dismissal of Javier’s
complaint as ordered by the LA. The CA exercised its
authority to make its own factual determination anent
the issue of the existence of an employer-employee
relationship between the parties. According to the
CA: x x x the confirming receipt of his salaries will not show the
In an illegal dismissal case the onus probandi rests
on the employer to prove that its dismissal was for a
valid cause. However, before a case for illegal
dismissal can prosper, an employer-employee
relationship must first be established. x x x it is
incumbent upon private respondent to prove the
employee-employer relationship by substantial
evidence. x x x for delivery to clients.”[15] More importantly, Javier
LABOR LAW
It is incumbent upon private respondent to prove, by
substantial evidence, that he is an employee of
petitioners, but he failed to discharge his burden. The
non-issuance of a company-issued identification card
to private respondent supports petitioners’ contention
that private respondent was not its employee.[12]
The CA likewise added that Javier’s failure to present
salary vouchers, payslips, or other pieces of
evidence to bolster his contention, pointed to the
inescapable conclusion that he was not an employee
of Fly Ace. Further, it found that Javier’s work was
not necessary and desirable to the business or trade
of the company, as it was only when there were
scheduled deliveries, which a regular hauling service
could not deliver, that Fly Ace would contract the
services of Javier as an extra helper. Lastly, the CA
declared that the facts alleged by Javier did not pass
the “control test.”
He contracted work outside the company premises;
he was not required to observe definite hours of
work; he was not required to report daily; and he was
free to accept other work elsewhere as there was no
exclusivity of his contracted service to the company,
the same being co-terminous with the trip
only.[13] Since no substantial evidence was
presented to establish an employer-employee
relationship, the case for illegal dismissal could not
prosper.
The petitioners moved for reconsideration, but to no
avail.
Hence, this appeal anchored on the following
grounds:
I.
WHETHER THE HONORABLE COURT OF
APPEALS ERRED IN HOLDING THAT THE
OF FLY ACE.
II.
WHETHER THE HONORABLE COURT OF
APPEALS ERRED IN HOLDING THAT THE
PETITIONER IS NOT ENTITLED TO HIS
MONETARY CLAIMS.[14]
The petitioner contends that other than its bare
allegations and self-serving affidavits of the other
employees, Fly Ace has nothing to substantiate its
claim that Javier was engaged on a pakyaw basis.
Assuming that Javier was indeed hired on
a pakyaw basis, it does not preclude his regular
employment with the company. Even the
acknowledgment receipts bearing his signature and
true nature of his employment as they do not reflect
the necessary details of the commissioned task.
Besides, Javier’s tasks as pahinante are related,
necessary and desirable to the line of business by
Fly Ace which is engaged in the importation and sale
of grocery items. “On days when there were no
scheduled deliveries, he worked in petitioners’
warehouse, arranging and cleaning the stored cans
was subject to the control and supervision of the
KAYE RAMOGA
company, as he was made to report to the office from
Monday to Saturday, from 7:00 o’clock in the
morning until 5:00 o’clock in the afternoon. The list of
deliverable goods, together with the corresponding
clients and their respective purchases and
addresses, would necessarily have been prepared by
Fly Ace. Clearly, he was subjected to compliance
with company rules and regulations as regards
working hours, delivery schedule and output, and his
other duties in the warehouse.[16]
The petitioner chiefly relied on Chavez v.
NLRC,[17] where the Court ruled that payment to a
worker on a per trip basis is not significant because
“this is merely a method of computing compensation
and not a basis for determining the existence of
employer-employee relationship.” Javier likewise
invokes the rule that, “in controversies between a
laborer and his master, x x x doubts reasonably
arising from the evidence should be resolved in the
former’s favour. The policy is reflected is no less than
the Constitution, Labor Code and Civil Code.”[18]
Claiming to be an employee of Fly Ace, petitioner
asserts that he was illegally dismissed by the latter’s
failure to observe substantive and procedural due
process. Since his dismissal was not based on any of
the causes recognized by law, and was implemented
without notice, Javier is entitled to separation pay
and backwages.
In its Comment,[19] Fly Ace insists that there was no
substantial evidence to prove employer-employee
relationship. Having a service contract with Milmar
Hauling Services for the purpose of transporting and
delivering company products to customers, Fly Ace
contracted Javier as an extra helper or pahinante on
a mere “per trip basis.” Javier, who was actually a
loiterer in the area, only accompanied and assisted
the company driver when Milmar could not deliver or
when the exigency of extra deliveries arises for
roughly five to six times a month. Before making a
delivery, Fly Ace would turn over to the driver and
Javier the delivery vehicle with its loaded company
products. With the vehicle and products in their
custody, the driver and Javier “would leave the
company premises using their own means, method,
best judgment and discretion on how to deliver, time
to deliver, where and [when] to start, and manner of
delivering the products.”[20]
Fly Ace dismisses Javier’s claims of employment as
baseless assertions. Aside from his bare allegations,
he presented nothing to substantiate his status as an
employee. “It is a basic rule of evidence that each
party must prove his affirmative allegation. If he
claims a right granted by law, he must prove his
claim by competent evidence, relying on the strength
of his own evidence and not upon the weakness of
his opponent.”[21] Invoking the case of Lopez v.
Bodega City,[22] Fly Ace insists that in an illegal
dismissal case, the burden of proof is upon the
complainant who claims to be an employee. It is
essential that an employer-employee relationship be
proved by substantial evidence. Thus, it cites:
LABOR LAW
In an illegal dismissal case, the onus probandi rests
on the employer to prove that its dismissal of an
employee was for a valid cause. However, before a
case for illegal dismissal can prosper, an employer-
employee relationship must first be established.
Fly Ace points out that Javier merely offers factual
assertions that he was an employee of Fly Ace,
“which are unfortunately not supported by proof,
documentary or otherwise.”[23] Javier simply
assumed that he was an employee of Fly Ace,
absent any competent or relevant evidence to
support it. “He performed his contracted work outside
the premises of the respondent; he was not even
required to report to work at regular hours; he was
not made to register his time in and time out every
time he was contracted to work; he was not
subjected to any disciplinary sanction imposed to
other employees for company violations; he was not
issued a company I.D.; he was not accorded the
same benefits given to other employees; he was not
registered with the Social Security System (SSS) as
petitioner’s employee; and, he was free to leave,
accept and engage in other means of livelihood as
there is no exclusivity of his contracted services with
the petitioner, his services being co-terminus with the
trip only. All these lead to the conclusion that
petitioner is not an employee of the respondents.”[24]
Moreover, Fly Ace claims that it had “no right to
control the result, means, manner and methods by
which Javier would perform his work or by which the
same is to be accomplished.”[25] In other words,
Javier and the company driver were given a free
hand as to how they would perform their contracted
services and neither were they subjected to definite
hours or condition of work.
Fly Ace likewise claims that Javier’s function as
a pahinante was not directly related or necessary to
its principal business of importation and sales of
groceries. Even without Javier, the business could
operate its usual course as it did not involve the
business of inland transportation. Lastly, the
acknowledgment receipts bearing Javier’s signature
and words “pakiao rate,” referring to his earned
salaries on a per trip basis, have evidentiary weight
that the LA correctly considered in arriving at the
conclusion that Javier was not an employee of the
company.
The Court affirms the assailed CA decision.
It must be noted that the issue of Javier’s alleged
illegal dismissal is anchored on the existence of an
employer-employee relationship between him and
Fly Ace. This is essentially a question of fact.
Generally, the Court does not review errors that raise
factual questions. However, when there is conflict
among the factual findings of the antecedent
deciding bodies like the LA, the NLRC and the CA, “it
is proper, in the exercise of Our equity jurisdiction, to
review and re-evaluate the factual issues and to look
into the records of the case and re-examine the
questioned findings.”[26] In dealing with factual
issues in labor cases, “substantial evidence – that
KAYE RAMOGA
amount of relevant evidence which a reasonable
mind might accept as adequate to justify a
conclusion – is sufficient.”[27]
As the records bear out, the LA and the CA found
Javier’s claim of employment with Fly Ace as wanting
and deficient. The Court is constrained to
agree. Although Section 10, Rule VII of the New
Rules of Procedure of the NLRC[28] allows a
relaxation of the rules of procedure and evidence in
labor cases, this rule of liberality does not mean a
complete dispensation of proof. Labor officials are
enjoined to use reasonable means to ascertain the
facts speedily and objectively with little regard to
technicalities or formalities but nowhere in the rules
are they provided a license to completely discount
evidence, or the lack of it. The quantum of proof
required, however, must still be satisfied. Hence,
“when confronted with conflicting versions on factual
matters, it is for them in the exercise of discretion to
determine which party deserves credence on the
basis of evidence received, subject only to the
requirement that their decision must be supported by
substantial evidence.”[29] Accordingly, the petitioner
needs to show by substantial evidence that he was
indeed an employee of the company against which
he claims illegal dismissal.
Expectedly, opposing parties would stand poles apart
and proffer allegations as different as chalk and
cheese. It is, therefore, incumbent upon the Court to
determine whether the party on whom the burden to
prove lies was able to hurdle the same. “No
particular form of evidence is required to prove the
existence of such employer-employee relationship.
Any competent and relevant evidence to prove the
relationship may be admitted. Hence, while no
particular form of evidence is required, a finding that
such relationship exists must still rest on some
substantial evidence. Moreover, the substantiality of
the evidence depends on its quantitative as well as
its qualitative aspects.”[30] Although substantial
evidence is not a function of quantity but rather of
quality, the x x x circumstances of the instant case
demand that something more should have been
proffered. Had there been other proofs of
employment, such as x x x inclusion in petitioner’s
payroll, or a clear exercise of control, the Court would
have affirmed the finding of employer-employee
relationship.”[31]
In sum, the rule of thumb remains: the onus
probandi falls on petitioner to establish or
substantiate such claim by the requisite quantum of
evidence.[32] “Whoever claims entitlement to the
benefits provided by law should establish his or her
right thereto x x x.”[33] Sadly, Javier failed to adduce
substantial evidence as basis for the grant of relief.
In this case, the LA and the CA both concluded that
Javier failed to establish his employment with Fly
Ace. By way of evidence on this point, all that Javier
presented were his self-serving statements
purportedly showing his activities as an employee of
Fly Ace. Clearly, Javier failed to pass the
substantiality requirement to support his
LABOR LAW
claim. Hence, the Court sees no reason to depart
from the findings of the CA.
While Javier remains firm in his position that as an
employed stevedore of Fly Ace, he was made to
work in the company premises during weekdays
arranging and cleaning grocery items for delivery to
clients, no other proof was submitted to fortify his
claim. The lone affidavit executed by one Bengie
Valenzuela was unsuccessful in strengthening
Javier’s cause. In said document, all Valenzuela
attested to was that he would frequently see Javier at
the workplace where the latter was also hired as
stevedore.[34] Certainly, in gauging the evidence
presented by Javier, the Court cannot ignore the
inescapable conclusion that his mere presence at the
workplace falls short in proving employment therein.
The supporting affidavit could have, to an extent,
bolstered Javier’s claim of being tasked to clean
grocery items when there were no scheduled delivery
trips, but no information was offered in this subject
simply because the witness had no personal
knowledge of Javier’s employment status in the
company. Verily, the Court cannot accept Javier’s
statements, hook, line and sinker.
The Court is of the considerable view that on Javier
lies the burden to pass the well-settled tests to
determine the existence of an employer-employee
relationship, viz: (1) the selection and engagement of
the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power to control the
employee’s conduct. Of these elements, the most
important criterion is whether the employer controls
or has reserved the right to control the employee not
only as to the result of the work but also as to the
means and methods by which the result is to be
accomplished.[35]
In this case, Javier was not able to persuade the
Court that the above elements exist in his case. He
could not submit competent proof that Fly Ace
engaged his services as a regular employee; that Fly
Ace paid his wages as an employee, or that Fly Ace
could dictate what his conduct should be while at
work. In other words, Javier’s allegations did not
establish that his relationship with Fly Ace had the
attributes of an employer-employee relationship on
the basis of the above-mentioned four-fold test.
Worse, Javier was not able to refute Fly Ace’s
assertion that it had an agreement with a hauling
company to undertake the delivery of its goods. It
was also baffling to realize that Javier did not dispute
Fly Ace’s denial of his services’ exclusivity to the
company. In short, all that Javier laid down were bare
allegations without corroborative proof.
Fly Ace does not dispute having contracted Javier
and paid him on a “per trip” rate as a stevedore,
albeit on a pakyaw basis. The Court cannot fail to
note that Fly Ace presented documentary proof that
Javier was indeed paid on a pakyaw basis per the
acknowledgment receipts admitted as competent
evidence by the LA. Unfortunately for Javier, his
mere denial of the signatures affixed therein cannot
automatically sway us to ignore the documents
KAYE RAMOGA
because “forgery cannot be presumed and must be
proved by clear, positive and convincing evidence
and the burden of proof lies on the party alleging
forgery.”[36]
Considering the above findings, the Court does
not see the necessity to resolve the second issue
presented.
One final note. The Court’s decision does not
contradict the settled rule that “payment by the piece
is just a method of compensation and does not
define the essence of the relation.”[37] Payment on
a piece-rate basis does not negate regular
employment. “The term ‘wage’ is broadly defined in
Article 97 of the Labor Code as remuneration or
earnings, capable of being expressed in terms of
money whether fixed or ascertained on a time, task,
piece or commission basis. Payment by the piece is
just a method of compensation and does not define
the essence of the relations. Nor does the fact that
the petitioner is not covered by the SSS affect the
employer-employee relationship. However, in
determining whether the relationship is that of
employer and employee or one of an independent
contractor, each case must be determined on its own
facts and all the features of the relationship are to be
LABOR LAW
considered.”[38] Unfortunately for Javier, the
attendant facts and circumstances of the instant case
do not provide the Court with sufficient reason to
uphold his claimed status as employee of Fly Ace.
While the Constitution is committed to the policy of
social justice and the protection of the working class,
it should not be supposed that every labor dispute
will be automatically decided in favor of labor.
Management also has its rights which are entitled to
respect and enforcement in the interest of simple fair
play. Out of its concern for the less privileged in life,
the Court has inclined, more often than not, toward
the worker and upheld his cause in his conflicts with
the employer. Such favoritism, however, has not
blinded the Court to the rule that justice is in every
case for the deserving, to be dispensed in the light of
the established facts and the applicable law and
doctrine.[39]
WHEREFORE, the petition is DENIED. The March
18, 2010 Decision of the Court of Appeals and its
June 7, 2010 Resolution, in CA-G.R. SP No. 109975,
are hereby AFFIRMED.
SO ORDERED.
KAYE RAMOGA
G.R. No. 192601 June 3, 2013
PHILIPPINE JOURNALISTS, INC. vs.
JOURNAL EMPLOYEES UNION (JEU), FOR ITS UNION MEMBER, MICHAEL ALFANTE.
BERSAMIN, J.:
The coverage of the term legal dependent as used in
a stipulation in a collective bargaining agreement
(CBA) granting funeral or bereavement benefit to a
regular employee for the death of a legal dependent,
if the CBA is silent about it, is to be construed as
similar to the meaning that contemporaneous social
legislations have set. This is because the terms of
such social legislations are deemed incorporated in
or adopted by the CBA.
The decision of the Court of Appeals (CA) under
review summarizes the factual and procedural
antecedents, as follows:
Complainant Judith Pulido alleged that she was hired
by respondent as proofreader on 10 January 1991;
that she was receiving a monthly basic salary of P-
15,493.66 plus P-155.00 longevity pay plus other
benefits provided by law and their Collective
Bargaining Agreement; that on 21 February 2003, as
union president, she sent two letters to President
Gloria Arroyo, regarding their complaint of
mismanagement being committed by PIJ executive;
that sometime in May 2003, the union was furnished
with a letter by Secretary Silvestre Afable, Jr. head of
Presidential Management Staff (PMS), endorsing
their letter-complaint to Ombudsman Simeon V.
Marcelo; that respondents took offense and started
harassments to complainant union president; that on
30 May 2003, complainant received a letter from
respondent Fundador Soriano, International Edition
managing editor, regarding complainant’s attendance
record; that complainant submitted her reply to said
memo on 02 June 2003; that on 06 June 2003,
complainant received a memorandum of reprimand;
that on 04 July 2003, complainant received another
memo from Mr. Soriano, for not wearing her
company ID, which she replied the next day 05 July
2003; that on 04 August 2003, complainant again
received a memo regarding complainant’s tardiness;
that on 05 August 2003, complainant received
another memorandum asking her to explain why she
should not be accused of fraud, which she replied to
on 07 August 2003; and that on the same day
between 3:00 to 4:00 P.M., Mr. Ernesto "Estong" San
Agustin, a staff of HRD handed her termination
paper.
Complainant added that in her thirteen (13) years
with the company and after so many changes in its
management and executives, she had never done
anything that will cause them to issue a
memorandum against her or her work attitude, more
so, reasons to terminate her services; that she got
dismissed because she was the Union President who
was very active in defending and pursuing the rights
of her union members, and in fighting against the
abuses of respondent Corporate Officers; and that
she got the ire of respondents when the employees
LABOR LAW
filed a complaint against the Corporate Officers
before Malacañang and which was later indorsed to
the Office of the Ombudsman.
The second complainant Michael L. Alfante alleged
that he started to work with respondents as computer
technician at Management Information System under
manager Neri Torrecampo on 16 May 2000; that on
15 July 2001, he was regularized receiving a monthly
salary of ₱9,070.00 plus other monetary benefits;
that sometime in 2001, Rico Pagkalinawan replaced
Torrecampo, which was opposed by complainant and
three other co-employees; that Pagkalinawan took
offense of their objection; that on 22 October 2002,
complainant Alfante received a memorandum from
Pagkalinawan regarding his excessive tardiness; that
on 10 June 2003, complainant Alfante received a
memorandum from Executive Vice-President Arnold
Banares, requiring him to explain his side on the
evaluation of his performance submitted by manager
Pagkalinawan; that one week after complainant
submitted his explanation, he was handed his notice
of dismissal on the ground of "poor performance";
and that complainant was dismissed effective 28 July
2003.
Complainant Alfante submitted that he was
dismissed without just cause.
Respondents, in their position paper, averred that
complainants Pulido and Alfante were dismissed for
cause and with due process.
With regard to complainant Pulido, respondents
averred that in a memorandum dated 30 May 2003,
directed complainant to explain her habitual
tardiness, at least 75 times from January to May of
2003. In a memorandum, dated 06 June 2003,
directed complainant to observe the 3 p.m. rule to
avoid grammatical lapses, use of stale stories just to
beat the 10:00 p.m. deadline. In the same
memorandum complainant was given the warning
that any repeated violation of the rules shall be dealt
with more severely. Once again, in a memorandum,
dated 04 August 2003, complainant Pulido was
required to explain why no disciplinary action should
be taken against her for habitual tardiness – 18 times
out of the 23 reporting days during the period from 27
June – 27 July 2003 and on 05 August 2003,
complainant was directed to explain in writing why
complainant should not be administratively
sanctioned for committing fraud or attempting to
commit fraud against respondents. Respondents
found complainant’s explanations unsatisfactory. On
07 August 2003, respondents dismissed complainant
Pulido for habitual tardiness, gross insubordination,
utter disrespect for superiors, and committing fraud
or attempting to commit fraud which led to the
respondents’ loss of confidence upon complainant
Pulido.
KAYE RAMOGA
In case of complainant Alfante, respondents averred
in defense that complainant was dismissed for "poor
performance" after an evaluation by his superior, and
after being forewarned that complainant may be
removed if there was no showing of improvement in
his skills and knowledge on current technology.
In both instances, respondents maintained that they
did not commit any act of unfair labor practices; that
they did not commit acts tantamount to interfering,
restraining, or coercing employees in the exercise of
their right to self-organization.
Respondents deny liabilities as far as complainants’
monetary claims are concerned. Concerning
violations of the provision on wage distortion under
Wage Order No. 9, respondents stressed that
complainants were not affected since their salary is
way over the minimum wage.
With respect to the alleged non-adjustment of
longevity pay and burial aid, respondent PJI pointed
out that it complies with the provisions of the CBA
and that both complainants have not claimed for the
burial aid.
Respondents put forward the information that the
alleged nonpayment of rest days – every Monday for
the past three (3) years is a matter that is still at
issue in NLRC Case No. 02-0402973-93, which case
is still pending before this Commission.
Respondents asserted that the respondents Arturo
Dela Cruz, Bobby Capco, Arnold Banares, Ruby
Ruiz-Bruno and Fundador Soriano should not be
held liable on account of complainants’ dismissal as
they merely acted as agents of respondent PJI.1
Upon the foregoing backdrop, Labor Arbiter Corazon
C. Borbolla rendered her decision on March 29,
2006, disposing thusly:
WHEREFORE, foregoing premises considered,
judgment is hereby rendered, finding complainant
Judith Pulido to have been illegally dismissed. As
such, she is entitled to reinstatement and backwages
from 07 August 2003 up to her actual or payroll
reinstatement. To date, complainant’s backwages is
₱294,379.54.
Respondent Philippine Journalist, Inc. is hereby
ordered to pay complainant Judith Pulido her
backwages from 07 August 2003 up to her actual or
payroll reinstatement and to reinstate her to her
former position without loss of seniority right.
Respondent is further ordered to submit a report to
this Office on complainant’s reinstatement ten (10)
days from receipt of this decision.
The charge of illegal dismissal by Michael Alfante is
hereby dismissed for lack of merit.
The charge of unfair labor practice is dismissed for
lack of basis. SO ORDERED.2
LABOR LAW
Complainant Michael Alfante (Alfante), joined by his
labor organization, Journal Employees Union (JEU),
filed a partial appeal in the National Labor Relations
Commission (NLRC).3
In the meantime, on May 10, 2006, petitioner and
Judith Pulido (Pulido), the other complainant, jointly
manifested to the NLRC that the decision of March
29, 2006 had been fully satisfied as to Pulido under
the following terms, namely: (a) she would be
reinstated to her former position as editorial
staffmember, or an equivalent position, without loss
of seniority rights, effective May 15, 2006; (b) she
would go on maternity leave, and report to work after
giving birth; (c) she would be entitled to backwages
of ₱130,000.00; and (d) she would execute the
quitclaim and release on May 11, 2006 in favor of
petitioner.4 This left Alfante as the remaining
complainant.
On January 31, 2007, the NLRC rendered its
decision dismissing the partial appeal for lack of
merit.
JEU and Alfante moved for the reconsideration of the
decision, but the NLRC denied their motion on April
24, 2007.
Thereafter, JEU and Alfante assailed the decision of
the NLRC before the CA on certiorari (C.A.-G.R. SP
No. 99407).
On February 5, 2010, the CA promulgated its
decision in C.A.-G.R. SP No. 99407,7 decreeing:
WHEREFORE, premises considered, the instant
petition is PARTLY GRANTED.
The twin Resolutions dated January 31, 2007 and
April 24, 2007, respectively, of the Third Division of
the National Labor Relations Commission (NLRC), in
NLRC NCR CA No. 048785-06 (NLRC NCR Case
No. 00-10-11413-04), are MODIFIED insofar as the
funeral or bereavement aid is concerned, which is
hereby GRANTED, but only after submission of
conclusive proofs that the deceased is a parent,
either father or mother, of the employees concerned,
as well as the death certificate to establish the fact of
death of the deceased legal dependent.
The rest of the findings of fact and law in the assailed
Resolutions are hereby AFFIRMED. SO ORDERED.
Both parties moved for reconsideration, but the CA
denied their respective motions for reconsideration
on June 2, 2010.8
JEU and Alfante appealed to the Court (G.R. No.
192478) to challenge the CA’s dispositions regarding
the legality of: (a) Alfante’s dismissal; (b) the non-
compliance with Minimum Wage Order No. 9; and (c)
the non-payment of the rest day.9
On August 18, 2010, the Court denied due course to
the petition in G.R. No. 192478 for failure of
KAYE RAMOGA
petitioners to sufficiently show that the CA had
committed any reversible error to warrant the Court’s
exercise of its discretionary appellate jurisdiction.10
The Court denied with finality JEU and Alfante’s
ensuing motion for reconsideration through the
resolution of December 8, 2010.11 The entry of
judgment in G.R. No. 192478 issued in due course
on February 1, 2011.12
On its part, petitioner likewise appealed (G.R. No.
192601), seeking the review of the CA’s disposition
in the decision of February 5, 2010 on the granting of
the funeral and bereavement aid stipulated in the
CBA.
In its petition for review, petitioner maintained that
under Section 4, Article XIII of the CBA, funeral and
bereavement aid should be granted upon the death
of a legal dependent of a regular employee; that
consistent with the definition provided by the Social
Security System (SSS), the term legal dependent
referred to the spouse and children of a married
regular employee, and to the parents and siblings, 18
years old and below, of a single regular
employee;13that the CBA considered the term
dependents to have the same meaning as
beneficiaries, as provided in Section 5, Article XIII of
the CBA on the payment of death benefits;14 that its
earlier granting of claims for funeral and
bereavement aid without regard to the foregoing
definition of the legal dependents of married or single
regular employees did not ripen into a company
policy whose unilateral withdrawal would constitute a
violation of Article 100 of the Labor Code,15 the law
disallowing the non-diminution of benefits;16 that it
had approved only four claims from 1999 to 2003
based on its mistaken interpretation of the term legal
dependents, but later corrected the same in
2000;17 that the grant of funeral and bereavement aid
for the death of an employee’s legal dependent,
regardless of the employee’s civil status, did not
occur over a long period of time, was not consistent
and deliberate, and was partly due to its mistake in
appreciating a doubtful question of law; and that its
denial of subsequent claims did not amount to a
violation of the law against the non-diminution of
benefits.18
In their comment,19 JEU and Alfante countered that
the CBA was a bilateral contractual agreement that
could not be unilaterally changed by any party during
its lifetime; and that the grant of burial benefits had
already become a company practice favorable to the
employees, and could not anymore be reduced,
diminished, discontinued or eliminated by petitioner.
Issue
In view of the entry of judgment issued in G.R. No.
192478, JEU and Alfante’s submissions on the
illegality of his dismissal, the non-payment of his rest
days, and the violation of Minimum Wage Order No.
9 shall no longer be considered and passed upon.
LABOR LAW
The sole remaining issue is whether or not
petitioner’s denial of respondents’ claims for funeral
and bereavement aid granted under Section 4,
Article XIII of their CBA constituted a diminution of
benefits in violation of Article 100 of the Labor Code.
Ruling: The petition for review lacks merit.
The nature and force of a CBA are delineated in
Honda Phils., Inc. v. Samahan ng Malayang
Manggagawa sa Honda,20 thuswise:
A collective bargaining agreement (or CBA) refers to
the negotiated contract between a legitimate labor
organization and the employer concerning wages,
hours of work and all other terms and conditions of
employment in a bargaining unit. As in all contracts,
the parties in a CBA may establish such stipulations,
clauses, terms and conditions as they may deem
convenient provided these are not contrary to law,
morals, good customs, public order or public policy.
Thus, where the CBA is clear and unambiguous, it
becomes the law between the parties and
compliance therewith is mandated by the express
policy of the law.
Accordingly, the stipulations, clauses, terms and
conditions of the CBA, being the law between the
parties, must be complied with by them. The literal
meaning of the stipulations of the CBA, as with every
other contract, control if they are clear and leave no
doubt upon the intention of the contracting parties.22
Here, a conflict has arisen regarding the
interpretation of the term legal dependent in
connection with the grant of funeral and bereavement
aid to a regular employee under Section 4, Article
XIII of the CBA,23 which stipulates as follows:
SECTION 4. Funeral/Bereavement Aid. The
COMPANY agrees to grant a funeral/bereavement
aid in the following instances:
a. Death of a regular employee in line of duty
– ₱50,000
b. Death of a regular employee not in line of
duty – ₱40,000
c. Death of legal dependent of a regular
employee – ₱15,000. (Emphasis supplied)
Petitioner insists that notwithstanding the silence of
the CBA, the term legal dependent should follow the
definition of it under Republic Act (R.A.) No. 8282
(Social Security Law),24 so that in the case of a
married regular employee, his or her legal
dependents include only his or her spouse and
children, and in the case of a single regular
employee, his or her legal dependents include only
his or her parents and siblings, 18 years old and
below; and that the term dependents has the same
meaning as beneficiaries as used in Section 5,
Article XIII of the CBA.
We cannot agree with petitioner’s insistence.
Social legislations contemporaneous with the
execution of the CBA have given a meaning to the
KAYE RAMOGA
term legal dependent. First of all, Section 8(e) of the
Social Security Law provides that a dependent shall
be the following, namely: (a) the legal spouse entitled
by law to receive support from the member; (b) the
legitimate, legitimated, or legally adopted, and
illegitimate child who is unmarried, not gainfully
employed and has not reached 21 of age, or, if over
21 years of age, is congenitally or while still a minor
has been permanently incapacitated and incapable
of self-support, physically or mentally; and (c) the
parent who is receiving regular support from the
member. Secondly, Section 4(f) of R.A. No. 7875, as
amended by R.A. No. 9241,25 enumerates who are
the legal dependents, to wit: (a) the legitimate
spouse who is not a member; (b) the unmarried and
unemployed legitimate, legitimated, illegitimate,
acknowledged children as appearing in the birth
certificate; legally adopted or step-children below 21
years of age; (c) children who are 21 years old and
order but suffering from congenital disability, either
physical or mental, or any disability acquired that
renders them totally dependent on the member of our
support; and (d) the parents who are 60 years old or
older whose monthly income is below an amount to
be determined by the Philippine Health Insurance
Corporation in accordance with the guiding principles
set forth in Article I of R.A. No. 7875. And, thirdly,
Section 2(f) of Presidential Decree No. 1146, as
amended by R.A. No. 8291,dependent for support
upon the member or pensioner; (b) the legitimate,
legitimated, legally adopted child, including the
illegitimate child, who is unmarried, not gainfully
employed, not over the age of majority, or is over the
age of majority but incapacitated and incapable of
self-support due to a mental or physical defect
acquired prior to age of majority; and (c) the parents
dependent upon the member for support.1âwphi1
It is clear from these statutory definitions of
dependent that the civil status of the employee as
either married or single is not the controlling
consideration in order that a person may qualify as
the employee’s legal dependent. What is rather
decidedly controlling is the fact that the spouse, child,
or parent is actually dependent for support upon the
employee. Indeed, the Court has adopted this
understanding of the term dependent in Social
Security System v. De Los Santos,27 viz:
Social Security System v. Aguas is instructive in
determining the extent of the required "dependency"
under the SS Law. In Aguas, the Court ruled that
although a husband and wife are obliged to support
each other, whether one is actually dependent for
support upon the other cannot be presumed from the
fact of marriage alone.
Further, Aguas pointed out that a wife who left her
family until her husband died and lived with other
men, was not dependent upon her husband for
support, financial or otherwise, during the entire
period.
LABOR LAW
Said the Court:
In a parallel case involving a claim for benefits under
the GSIS law, the Court defined a dependent as "one
who derives his or her main support from another.
Meaning, relying on, or subject to, someone else for
support; not able to exist or sustain oneself, or to
perform anything without the will, power, or aid of
someone else." It should be noted that the GSIS law
likewise defines a dependent spouse as "the
legitimate spouse dependent for support upon the
member or pensioner." In that case, the Court found
it obvious that a wife who abandoned the family for
more than 17 years until her husband died, and lived
with other men, was not dependent on her husband
for support, financial or otherwise, during that entire
period. Hence, the Court denied her claim for death
benefits.
The obvious conclusion then is that a wife who is
already separated de facto from her husband cannot
be said to be "dependent for support" upon the
husband, absent any showing to the contrary.
Conversely, if it is proved that the husband and wife
were still living together at the time of his death, it
would be safe to presume that she was dependent
on the husband for support, unless it is shown that
she is capable of providing for herself.
Considering that existing laws always form part of
any contract, and are deemed incorporated in each
and every contract,28 the definition of legal
dependents under the aforecited social legislations
applies herein in the absence of a contrary or
different definition mutually intended and adopted by
the parties in the CBA. Accordingly, the concurrence
of a legitimate spouse does not disqualify a child or a
parent of the employee from being a legal dependent
provided substantial evidence is adduced to prove
the actual dependency of the child or parent on the
support of the employee.
In this regard, the differentiation among the legal
dependents is significant only in the event the CBA
has prescribed a hierarchy among them for the
granting of a benefit; hence, the use of the terms
primary beneficiaries and secondary beneficiaries for
that purpose. But considering that Section 4, Article
XIII of the CBA has not included that differentiation,
petitioner had no basis to deny the claim for funeral
and bereavement aid of Alfante for the death of his
parent whose death and fact of legal dependency on
him could be substantially proved.
Pursuant to Article 100 of the Labor Code, petitioner
as the employer could not reduce, diminish,
discontinue or eliminate any benefit and supplement
being enjoyed by or granted to its employees. This
prohibition against the diminution of benefits is
founded on the constitutional mandate to protect the
rights of workers and to promote their welfare and to
afford labor full protection.29 The application of the
prohibition against the diminution of benefits
presupposes that a company practice, policy or
tradition favorable to the employees has been clearly
KAYE RAMOGA
established; and that the payments made by the
employer pursuant to the practice, policy, or tradition
have ripened into benefits enjoyed by them.30 To be
considered as a practice, policy or tradition, however,
the giving of the benefits should have been done
over a long period of time, and must be shown to
have been consistent and deliberate.31 It is relevant
to mention that we have not yet settled on the
specific minimum number of years as the length of
time sufficient to ripen the practice, policy or tradition
into a benefit that the employer cannot unilaterally
withdraw.32
The argument of petitioner that the grant of the
funeral and bereavement benefit was not voluntary
but resulted from its mistaken interpretation as to
who was considered a legal dependent of a regular
employee deserves scant consideration. To be sure,
no doubtful or difficult question of law was involved
inasmuch as the several cogent statutes existing at
the time the CBA was entered into already defined
who were qualified as the legal dependents of
another. Moreover, the voluntariness of the grant of
the benefit became even manifest from petitioner’s
admission that, despite the memorandum it issued in
200033 in order to "correct" the interpretation of the
term legal dependent, it still approved in 2003 the
claims for funeral and bereavement aid of two
LABOR LAW
employees, namely: (a) Cecille Bulacan, for the
death of her father; and (b) Charito Cartel, for the
death of her mother, based on its supposedly
mistaken interpretation.34
It is further worthy to note that petitioner granted
claims for funeral and bereavement aid as early as
1999, then issued a memorandum in 2000 to correct
its erroneous interpretation of legal dependent under
Section 4, Article XIII of the CBA. This
notwithstanding, the 2001-2004 CBA35 still contained
the same provision granting funeral or bereavement
aid in case of the death of a legal dependent of a
regular employee without differentiating the legal
dependents according to the employee's civil status
as married or single. The continuity in the grant of the
funeral and bereavement aid to regular employees
for the death of their legal dependents has
undoubtedly ripened into a company policy. With
that, the denial of Alfante's qualified claim for such
benefit pursuant to Section 4, Article XIII of the CBA
violated the law prohibiting the diminution of benefits.
WHEREFORE, the Court AFFIRMS the decision
promulgated on February 5, 201 0; and ORDERS
petitioner to pay the costs of suit. SO ORDERED.
KAYE RAMOGA
G.R. No. 202090 September 9, 2015
ICT MARKETING SERVICES, INC. (now known as SYKES MARKETING SERVICES, INC.), Petitioner,
vs. MARIPHIL L. SALES, Respondent.
DEL CASTILLO, J.:
1
This Petition for Review on Certiorari assails: 1) the
Januruy 10, 2012 Decision2 of the Court of Appeals
(CA) in CA-G.R. SP No. 109860 nullifying and setting
aside the February 16, 20093 and May 20,
20094 Resolutions of the National Labor Relations
Commission (NLRC) in NLRC LAC CN. 07-002404-
08(7)/(8) and reinstating with modification the April
30, 2008 Decision5 of the Labor Arbiter in NLRC-
NCR Case No. 10-11004-07; and 2) the CA's May
28, 2012 Resolution6 denying petitioner's Motion for
Reconsideration7 of the herein Assailed Decision.
Factual Antecedents
Petitioner ICT Marketing Services, Inc. (ICT) – now
known as Sykes Marketing Services, Inc. – is a duly
registered domestic corporation engaged in the
business of providing outsourced customer relations
management and business process outsourcing
solutions to various clients in government and in the
financial services, insurance, telecommunications,
health care, information technology, media, energy,
and hospitality industries.
On February 22, 2006, petitioner hired respondent
Mariphil L. Sales as its Customer Service
Representative (CSR) or Telephone Service
Representative (TSR), and assigned her to its
Capital One account. On August 21, 2006,
respondent became a regular employee, and her
monthly base salary was increased to P16,350.00
and she was given monthly transportation and meal
allowances.
On February 21, 2007, respondent was assigned to
the Washington Mutual account, where she was
awarded with a certificate for being the "Top
Converter/Seller (Second Place)" for the month of
April 2007.8
On July 3, 2007, respondent wrote to Glen Odom
(Odom) – petitioner’s Vice President – complaining
about supposed irregularities in the handling of funds top three highest converter[s] for the month of May,
entrusted to petitioner by Washington Mutual which
were intended for distribution to outstanding
Washington Mutual CSRs and TSRs as prizes and
incentives. However, no action appears to have been
taken on her complaint.
Respondent was then transferred to the Bank of
America account on July 30, 2007. Without prior
notice to respondent, petitioner scheduled her for
training from July 30 to August 6, 2007 on the very
same day of her transfer. On the third day of training said training. Later on during my training with Bank of
(August 1), respondent was unable to attend. When
she reported for training the next day, respondent
was informed that she could not be certified to
handle calls for Bank of America due to her failure to Another instance [of] discrimination [sic] and bad
LABOR LAW
complete the training. From then on, respondent was
placed on "floating status" and was not given any
work assignment.
In a September 28, 2007 letter9 to petitioner’s Human
Resource (HR) Manager, respondent tendered her
resignation from work, effective upon receipt of the
letter. Respondent wrote:
I was forced to resign due to the reason that my
employment was made on "floating status" effective
August 4, 2007 and up to present (almost two
months)
I haven’t receive [sic] any notice from you or the HR
department to report for work despite my repeated
follow-up [with] your office thru telephone and mobile
phone text messages. Hence, I consider your
inaction to my follow-up as an indirect termination of
my work with ICT.
The reason I was placed [on] floating status is that, I
was absent during the third day of my training with
Bank of America, the account to which I was
transferred from Washington Mutual (WaMu).
However, my absence during such period was
justified by the fact that I was sick and I need [sic] to
undergo a medical check-up on that date.
Furthermore, I see my transfer from WaMu Account
to Bank of America and the continued floating status
of my work was prompted by the fact that I lodged a
complaint against managers/supervisors assigned in
WaMu account regarding irregularities in the
handling of funds given by ICT clients which were
supposed to be distributed as prizes to TSR’s
assigned with WaMu. After the filing of the said
complaint, through your office, I was transferred to
another account (Bank of America) for no apparent
reason. I was not even included in the original list of
those who were supposed to be transferred because
my performance record with WaMu is satisfactory as
proven by the fact that I was even awarded with a
certificate as "top converter (seller)" for the month of
April and was supposed to be included again in the
but unfortunately irregularities were committed, that
is why I filed the aforementioned complaint [with]
your office.
On August 1, 2007, a few days after my transfer [to]
Bank of America, my coach, angelo [sic], informed
me that I will be having a training on that same day
with Bank of America which is really unexpected. I
was not given a notice in advance about the training.
My coach informed me only three hours before the
America I was [placed on floating status] indefinitely
due to a single absence even though I am a regular
employee having worked in ICT for almost two years.
faith on the part of ICT management is that, all my
KAYE RAMOGA
fellow agents who were [placed on floating status] for
the same reason were all ordered to return to work
except me [sic]. Moreover, ICT is continuously hiring
TSR’s which only shows that there are still accounts
open or work available in ICT. However despite the
availability of work, I was still on floating status.
Based on the aforementioned facts and
circumstance[s], it is very clear that the harassment,
pressure, and indefinite floating of my employment
with ICT are retaliatory acts perpetrated by the
company because of my complaint/ request for
investigation on the irregularities being committed by
certain company officials.
Thus, I can no longer bear the above-mentioned
abuses and discrimination committed against me by
ICT management. Therefore, I have no option but to
sever my relationship with the company, as my
continued floating status had already prejudiced me
emotionally and financially.10
Ruling of the Labor Arbiter
On October 2, 2007, respondent filed a complaint for
constructive dismissal against petitioner and Odom
before the NLRC NCR, Quezon City, docketed as
NLRC-NCR Case No. 10-11004-07.
In her Position Paper,11 Reply,12 Rejoinder,13 and
Surrejoinder,14 respondent claimed that for
complaining about the supposed irregularities in the
Washington Mutual account, petitioner discriminated
against her and unduly punished her. Although she
was not included in the original list of CSRs/TSRs for
program transfer, she was transferred to another
account, and then placed on "floating status," which
is tantamount to suspending her indefinitely without
due process, despite her satisfactory performance.
Respondent averred that petitioner’s claim of multiple
absences is not true, because not once was she
penalized therefor, assuming such charge is true.
Respondent also alleged that her one-day absence
during the training for the Bank of America program
cannot justify her being placed on a "floating status"
because the "no-absence during training"
requirement cited by petitioner – using her
employment contract15 and the "New Hire Training
Bay"16 as bases – applies only to new hires on
probationary status, and not to regularized
employees. In any case, the "New Hire Training Bay"
used by petitioner was for the Capital One program.
She also pointed out that during her indefinite
suspension or "floating status," petitioner continued
to hire new CSRs, as shown by its newspaper
advertisements during the period.17Finally, she
asserted that her resignation was not voluntary, but
was forced upon her by petitioner as a result of its
unlawful acts. Thus, respondent prayed for the
recovery of backwages, separation pay, P100,000.00
combined moral and exemplary damages, and
attorney’s fees equivalent to 10 per cent (10%) of the
total award.
LABOR LAW
In its Position Paper,18 Reply,19 Rejoinder,20 and
Surrejoinder,21 petitioner prayed for the dismissal of
the complaint, arguing that respondent was
transferred from the Washington Mutual account as
an exercise of management initiative or prerogative,
and due to infractions22 committed by her, as well as
attendance and punctuality issues that arose. It
claimed that respondent could not be certified for the
Bank of America account for failing to complete the
training. It maintained that respondent was placed on
standby status only, and not suspended or
constructively dismissed. In fact, she was directed to
report to its HR department, but she did not do so. It
also insisted that respondent resigned voluntarily. It
denied committing any act of discrimination or any
other act which rendered respondent’s employment
impossible, unreasonable or unlikely. Finally, it
claimed that prior notice of her transfer to the Bank of
America account was made through an electronic
mail message sent to her; and that respondent has
no cause of action since she resigned voluntarily,
and thus could not have been illegally dismissed.
On April 30, 2008, the Labor Arbiter rendered a
Decision23 finding complainant to have been
constructively dismissed and awarding separation
pay, moral and exemplary damages, and attorney’s
fees to respondent. The Labor Arbiter held:
x x x Complainant was indeed constructively
dismissed from her employment and she quitted [sic]
because her continued employment thereat is
rendered impossible, unreasonable or unlikely.
Complainant’s resignation was sparked by her
transfer of assignment and eventual placing her [sic]
by the respondent company of [sic] a "on floating"
status.
x x x [T]here was no x x x evidence x x x that
complainant’s transfer was due to the request of a
client. Further, if complainant was indeed remised of
[sic] her duties due to her punctuality and attendance
problem of committing twelve (12) absences alone
incurred in July 2007 [sic], why was there no
disciplinary action taken against her like reprimand or
warning[?]
xxxx
And its effect, complainant is entitled to her claim of
separation pay, moral and exemplary damages of
P50,000.00 pesos [sic] including an award of
attorney’s fees.
WHEREFORE, premises considered, judgment is
rendered ordering the respondents to pay
complainant of [sic] one month pay per year of
service as separation pay in the total amount of
P32,700.00, P50,000.00 moral and exemplary
damages plus 10% of the award as attorney’s fees,
hereunder computed:
I Separation Pay
2/21/06 – 8/4/07 = 2 yrs.
KAYE RAMOGA LABOR LAW

P16,350.00 x 2 yrs. = P32,700.00 Finally, it is well to emphasize that the complainant

II Damages P50,000.00 tendered her resignation on October 1, 2007. There
is no evidence that the complainant has presented
P82,700.00 that would indicate that duress or force has been
exerted on her.
P8,270.00
10% Attorney’s Fees
All told, We are of the opinion that the findings of the
P90,970.00
Labor Arbiter are in stark contrast to the evidence on
record.
SO ORDERED.24
WHEREFORE, in view of the foregoing, the decision
Ruling of the National Labor Relations appealed from is hereby reversed and set aside.
Commission Addordingly [sic], a new one is entered dismissing
the complaint for lack of merit.
Petitioner appealed before the NLRC arguing that the
Labor Arbiter erred in ruling that respondent was SO ORDERED.27
constructively dismissed. It also argued that Odom
was not personally liable as he was merely acting in Respondent filed a Motion for Reconsideration,28 but
good faith and within his authority as corporate in a May 20, 2009 Resolution,29 the motion was
officer. denied.

Respondent likewise interposed an appeal25 arguing Ruling of the Court of Appeals

that the award of backwages should be computed
from the date of her dismissal until finality of the
In a Petition for Certiorari30 filed with the CA and
Labor Arbiter’s Decision; and that the proportionate
docketed as CA-G.R. SP No. 109860, respondent
share of her 13th month pay should be paid to her as
sought a reversal of the February 16, 2009 and May
well. 20, 2009 Resolutions of the NLRC.
On February 16, 2009, the NLRC issued a
Petitioner filed its Comment,31 to which respondent
Resolution,26 declaring as follows:
interposed a Reply.32
We reverse.
On January 10, 2012, the CA issued the assailed
Decision containing the following pronouncement:
Upon an examination of the pleadings on file, We
find that in the past the complainant had been
This Court finds the petition meritorious.
transferred from one program to another without any
objection on her part. Insofar as the instant case is
While it is true that management has the prerogative
concerned, it appears that the complainant, aside
to transfer employees, the exercise of such right
from having been given a warning for wrong
should not be motivated by discrimination, made in
disposition of a call, had been absent or usually late
bad faith, or effected as a form of punishment or
in reporting for work, constraining the respondent ICT
demotion without sufficient cause. When the transfer
to transfer her to another program/account. Required
is unreasonable, unlikely, inconvenient, impossible,
of the complainant was for her to undergo Product
or prejudicial to the employee, it already amounts to
Training for the program from July 30 to August 6,
constructive dismissal. In constructive dismissal, the
2007, and the records indicate that she attended only
employer has the burden of proving that the transfer
two (2) days of training on July 30 and 31, 2007, did
and demotion of an employee are for just and valid
not report on August 1, 2007 and again reported for
grounds, such as genuine business necessity.
training on August 2, 2007. It was then that ICT’s
Should the employer fail to overcome this burden of
Operations Subject Matter Expert, Ms. Suzette
proof, the employee’s transfer shall be tantamount to
Lualhati, informed the complainant that she cannot
unlawful constructive dismissal.
be certified for the program because she failed to
complete the number of training days, and there was
a need for her to report to Human Resources for In the case at bench, private respondent corporation
further instructions. As the complainant did not report failed to discharge this burden of proof considering
to Human Resources, and due to her derogatory the circumstances surrounding the petitioner’s July
record, the respondent company could not find 2007 transfer to another account. Prior to her
another program where the complainant could be reassignment, petitioner’s annual performance
transferred. merited increase in her salary effective February
2007 and was also awarded a certificate of
achievement for performing well in April 2007. Her
From what has been narrated above, We come to
transfer was also abrupt as there was no written
the conclusion that the respondent company cannot
transfer agreement informing her of the same and its
be faulted for placing the complainant on "floating
requirements unlike her previous transfer from
status." And there does not appear to be any ill will or
Capital One to Washington Mutual account. It is
bad faith that can be attributed to the respondent.
therefore difficult to see the reasonableness,
urgency, or genuine business necessity to transfer
KAYE RAMOGA
petitioner to a new account. While it may be true that
petitioner has attendance and punctuality issues, her
over-all performance as a CSR/TSR cannot be said
to be below par given the annual merit increase and
the certificate of achievement awarded to her. If
indeed, private respondent corporation had trouble
transferring the petitioner to another post because of
her derogatory record, the corporation could just
have dismissed her for cause.
After petitioner’s unjustified transfer, she was
informed by private respondent corporation that she
could not be "certified" or allowed to handle calls for
the new account because of her absence during
training. She was later placed on a floating status
and was not given another post.
The Court considers placing the petitioner on a
floating status as another unjustified action of the
private respondent corporation prejudicial to
petitioner as employee. In this case, except for
private respondent corporation’s bare assertion that
petitioner no longer reported to the human resources
department as instructed, no proof was offered to
prove that petitioner intended to sever the employer-
employee relationship. Private respondent
corporation also offered no credible explanation why
it failed to provide a new assignment to petitioner. Its
assertion that it is petitioner’s derogatory record
which made it difficult for the corporation to transfer
her to another account despite its efforts is not
sufficient to discharge the burden of proving that
there are no posts or no accounts available or willing
to accept her.
In Nationwide Security and Allied Services, Inc. vs.
Valderama,33 the Supreme Court declared that due
to the grim economic consequences to the employee
of being placed on a floating status, the employer
should bear the burden of proving that there are no
posts available to which the employee temporarily
out of work can be assigned.
These acts by the private respondent corporation, of
transferring petitioner to another account without
sufficient cause and proper notice and its subsequent
failure to provide a new post for her for two months
without credible explanation, constitute unjustified
actions prejudicial to the petitioner as an employee,
making it unbearable for her to continue employment.
Thus, petitioner opted to resign, albeit involuntarily.
The involuntariness of her resignation is evident in
her letter which states categorically:
"I was forced to resign due to the reason that my
employment was made on ‘floating status’ effective
August 4, 2007 and up to the present (almost two
months) I haven’t receive [sic] any notice from you or
the HR department to report for work despite my
repeated follow-up to your office thru telephone and
mobile phone text messages.1avvphi1 Hence, I
consider your inaction to my follow-up as an indirect
termination of my work with ICT."
LABOR LAW
Further, petitioner immediately filed a complaint for
illegal dismissal. Resignation, it has been held, is
inconsistent with the filing of a complaint. Thus,
private respondent corporation’s mere assertion that
petitioner voluntarily resigned without offering
convincing evidence to prove it, is not sufficient to
discharge the burden of proving such assertion. It is
worthy to note that the fact of filing a resignation
letter alone does not shift the burden of proof and it is
still incumbent upon the employer to prove that the
employee voluntarily resigned.
Therefore, we believe and so hold that petitioner was
constructively dismissed from employment.
Constructive dismissal exists when the resignation
on the part of the employee was involuntary due to
the harsh, hostile and unfavorable conditions set by
the employer. The test for constructive dismissal is
whether a reasonable person in the employee’s
position would feel compelled to give up his
employment under the prevailing circumstances.
With the decision of the private respondent
corporation to transfer and to thereafter placed [sic]
her on floating status, petitioner felt that she was
being discriminated and this perception compelled
her to resign. It is clear from her resignation letter
that petitioner felt oppressed by the situation created
by the private respondent corporation, and this
forced her to surrender her position.
Under Article 279 of the Labor Code, an employee
who is unjustly dismissed from work shall be entitled
to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive
of allowances, and to his other benefits or their
monetary equivalent computed from the time his
compensation was withheld from him up to the time
of his actual reinstatement.
As petitioner did not pray for reinstatement but only
sought payment of money claims, the labor arbiter is
correct in awarding separation pay equivalent to one
month pay for every year of service. We also do not
find any cogent reason to disturb the award of
damages and attorney’s fees since we have found
bad faith on the part of the private respondent
corporation to abruptly [sic] transfer and place the
petitioner on floating status. Individual respondent
Glen Odom is however, exonerated from any liability
as there was no clear finding that he acted with
malice or bad faith. Backwages and other monetary
benefits must also be included in compliance with the
above-mentioned provision of labor law which shall
be reckoned from the time her constructive dismissal
took effect until the finality of this decision.
WHEREFORE, premises considered, the
Resolutions dated February 16, 2009 and May 20,
2009 respectively, issued by the public respondent
National Labor Relations Commission (NLRC) in
NLRC CA No. 07-002404-08 are REVERSED and
SET ASIDE. The decision of the Labor Arbiter dated
April 30, 2008 is REINSTATED with MODIFICATION
that the petitioner Mariphil L. Sales, be awarded
backwages and other monetary benefits from the
KAYE RAMOGA
date of her constructive dismissal up to the finality of
this Decision.
SO ORDERED.34
Petitioner filed a Motion for Reconsideration, but the
same was denied in a May 28, 2012 Resolution.
Hence, the present Petition.
In a November 11, 2013 Resolution,35 this Court
resolved to give due course to the Petition.
Issues
Petitioner submits that –
A.
THE COURT OF APPEALS ERRED WHEN IT HELD
THAT RESPONDENT’S TRANSFER WAS
UNJUSTIFIED NOTWITHSTANDING EVIDENCE
TO SHOW THAT RESPONDENT WAS NOT
DEMOTED AND WAS EVEN GIVEN THE SAME
RANK AND PAY.
B.
THE COURT OF APPEALS ERRED WHEN IT HELD
THAT RESPONDENT’S PLACEMENT UNDER
FLOATING STATUS WAS TANTAMOUNT TO
CONSTRUCTIVE DISMISSAL AS THIS IS
CONTRARY TO NUMEROUS DECISIONS OF THE
HONORABLE COURT.
C.
THE COURT OF APPEALS ERRED WHEN IT
REINSTATED LABOR ARBITER MACAM’S
DECISION DATED 30 APRIL 2008 WHICH
DECLARED THAT RESPONDENT WAS
CONSTRUCTIVELY DISMISSED,
NOTWITHSTANDING EVIDENCE THAT CLEARLY
SHOWS THAT RESPONDENT VOLUNTARILY
RESIGNED.
D.
THE COURT OF APPEALS ERRED IN AWARDING
RESPONDENT SEPARATION PAY, BACKWAGES,
MORAL AND EXEMPLARY DAMAGES AND
ATTORNEY’S FEES.36
Petitioner’s Arguments
Praying that the assailed CA dispositions be set
aside and that the NLRC’s February 16, 2009 and
May 20, 2009 Resolutions be reinstated instead,
petitioner maintains in the Petition and Reply37 that
respondent’s transfer to another account was done
as a valid exercise of management prerogative,
which allows it to regulate all aspects of employment.
Her transfer was done in good faith, and without
diminution in rank and salary. It contends that
respondent knew very well that any CSR/TSR may
LABOR LAW
be transferred to another program/account anytime
for business reasons; in fact, respondent herself was
transferred from Capital One to Washington Mutual,
and she did not complain. Moreover, she knew as
well that "schedule adherence" or
attendance/punctuality is one of the "metrics" or
standards by which the performance of a CSR is
measured, and that she failed to comply in this
regard. It claims that the decision to place her on
"floating status" instead of dismissing her was an
accommodation and should not be treated as an
illegal or unjustified act; that being on "floating status"
is not tantamount to constructive dismissal, and the
failure to place or transfer respondent to another
account was due to her derogatory record, and not
petitioner’s bad faith or inaction. It insists that the
placing of an employee on "floating status" for up to
six months is allowed in the event of a bona fide
suspension of the operations or undertaking of a
business.38 In any event, respondent’s voluntary
resignation prior to the expiration of the allowable six-
month "floating status" period cannot constitute
constructive dismissal, and her immediate filing of
the labor case thereafter is thus premature. Finally,
petitioner posits that since there is no illegal
dismissal but rather a voluntary relinquishment of
respondent’s post, then there is no basis for the
pecuniary awards in her favor.
Respondent’s Arguments
In her Comment39 praying for dismissal of the
Petition and the corresponding affirmance of the
assailed dispositions, respondent insists that she
was illegally dismissed. She reiterates that her
transfer to the Bank of America account was an
undue penalty for her complaining about supposed
anomalies in the Washington Mutual account. She
avers that the documentary evidence of her
supposed unauthorized absences were
manufactured to support petitioner’s false allegations
and mislead this Court into believing that she was
delinquent at work.
She argues that assuming that these absences were
true, then they should have merited her dismissal for
cause – yet the fact is she was not dismissed nor
punished for these supposed absences. She asserts
that petitioner’s claim that she was transferred on the
recommendation of a client is untrue and self-
serving, and is unjustified since the client has no
authority to order or recommend her transfer. She
maintains that her being placed on "floating status"
was illegal, since a) there is no evidence to prove her
alleged "attendance and punctuality issues," and b)
there was no bona fide suspension of petitioner’s
business or undertaking for a period not exceeding
six months, as prescribed under Article 286 of the
Labor Code,40 which would justify the suspension of
her employment for up to six months. As enunciated
in the Philippine Industrial Security Agency Corp. v.
Dapiton41 case which petitioner itself cited, Article
286 applies only when there is a bona fide
suspension of the employer’s operation or
undertaking for a period not exceeding six months,
KAYE RAMOGA
due to dire exigencies of the business that compel
the employer to suspend the employment of its
workers. Respondent points out that petitioner
continued with its business, and worse, it in fact
continued to hire new CSRs/TSRs during the period
of respondent’s suspension from work. In fine,
respondent alleges that she was constructively
dismissed and forced to resign, rather than continue
to subject herself to petitioner’s discrimination,
insensibility, harassment, and disdain; and that for
such illegal acts, she is entitled to indemnity from
petitioner.
Our Ruling
The Court denies the Petition.
Respondent’s Transfer
Under the doctrine of management prerogative,
every employer has the inherent right to regulate,
according to his own discretion and judgment, all
aspects of employment, including hiring, work
assignments, working methods, the time, place and
manner of work, work supervision, transfer of
employees, lay-off of workers, and discipline,
dismissal, and recall of employees. The only
limitations to the exercise of this prerogative are
those imposed by labor laws and the principles of
equity and substantial justice.
While the law imposes many obligations upon the
employer, nonetheless, it also protects the
employer’s right to expect from its employees not
only good performance, adequate work, and
diligence, but also good conduct and loyalty. In fact,
the Labor Code does not excuse employees from
complying with valid company policies and
reasonable regulations for their governance and
guidance.
Concerning the transfer of employees, these are the
following jurisprudential guidelines: (a) a transfer is a
movement from one position to another of equivalent
rank, level or salary without break in the service or a
lateral movement from one position to another of
equivalent rank or salary; (b) the employer has the
inherent right to transfer or reassign an employee for
legitimate business purposes; (c) a transfer becomes
unlawful where it is motivated by discrimination or
bad faith or is effected as a form of punishment or is
a demotion without sufficient cause; (d) the employer
must be able to show that the transfer is not
unreasonable, inconvenient, or prejudicial to the
employee.42
While the prerogative to transfer respondent to
another account belonged to petitioner, it wielded the
same unfairly. The evidence suggests that at the
time respondent was transferred from the
Washington Mutual account to the Bank of America
program, petitioner was hiring additional
CSRs/TSRs.43 This simply means that if it was then
hiring new CSRs/TSRs, then there should be no
need to transfer respondent to the Bank of America
LABOR LAW
program; it could simply train new hires for that
program. Transferring respondent – an experienced
employee who was already familiar with the
Washington Mutual account, and who even proved to
be outstanding in handling the same – to another
account means additional expenses for petitioner: it
would have to train respondent for the Bank of
America account, and train a new hire to take her
place in the Washington Mutual account. This does
not make sense; quite the contrary, it is impractical
and entails more expense on petitioner’s part. If
respondent already knew her work at the Washington
Mutual account very well, then it is contrary to
experience and logic to transfer her to another
account which she is not familiar with, there to start
from scratch; this could have been properly relegated
to a new hire.
There can be no truth to petitioner’s claim either that
respondent’s transfer was made upon request of the
client. If she was performing outstanding work and
bringing in good business for the client, there is no
reason – indeed it is beyond experience and logic –
to conclude that the client would seek her transfer.
Such a claim could only be fabricated. Truly,
Experience which is the life of the law — as well as
logic and common sense — militates against the
petitioners’ cause.44
Moreover, as the appellate court correctly observed,
even if respondent had attendance and punctuality
issues, her overall performance as a CSR/TSR was
certainly far from mediocre; on the contrary, she
proved to be a top performer. And if it were true that
respondent suddenly became lax by way of
attendance in July 2007, it is not entirely her fault.
This may be attributed to petitioner’s failure to
properly address her grievances relative to the
supposed irregularities in the handling of funds
entrusted to petitioner by Washington Mutual which
were intended for distribution to outstanding
Washington Mutual CSRs and TSRs as prizes and
incentives. She wrote petitioner about her complaint
on July 3, 2007; however, no explanation was
forthcoming from petitioner, and it was only during
these proceedings – or after a case had already
been filed – that petitioner belatedly and for no other
useful purpose attempted to address her concerns.
This may have caused a bit of disillusionment on the
part of respondent, which led her to miss work for a
few days in July 2007. Her grievance should have
been addressed by petitioner; after all, they were
serious accusations, and have a bearing on the
CSRs/TSRs’ overall performance in the Washington
Mutual account.
Respondent’s work as a CSR – which is essentially
that of a call center agent – is not easy. For one, she
was made to work the graveyard shift – that is, from
late at night or midnight until dawn or early morning.
This certainly takes a toll on anyone’s physical
health. Indeed, call center agents are subjected to
conditions that adversely affect their physical, mental
and emotional health; exposed to extreme stress and
pressure at work by having to address the
KAYE RAMOGA
customers’ needs and insure their satisfaction, while
simultaneously being conscious of the need to insure
efficiency at work by improving productivity and a
high level of service; subjected to excessive control
and strict surveillance by management; exposed to
verbal abuse from customers; suffer social alienation
precisely because they work the graveyard shift –
while family and friends are at rest, they are working,
and when they are at rest, family and friends are up
and about; and they work at a quick-paced
environment and under difficult circumstances owing
to progressive demands and ambitious
quotas/targets set by management. To top it all, they
are not exactly well-paid for the work they have to do
and the conditions they have to endure.
Respondent’s written query about the prizes and
incentives is not exactly baseless and frivolous; the
least petitioner could have done was to timely
address it, if it cared about its employee’s welfare. By
failing to address respondent’s concerns, petitioner
exhibited an indifference and lack of concern for its
employees – qualities that are diametrically
antithetical to the spirit of the labor laws, which aim to
protect the welfare of the workingman and foster
harmonious relations between capital and labor. By
its actions, petitioner betrayed the manner it treats its
employees.
Thus, the only conceivable reason why petitioner
transferred respondent to another account is the fact
that she openly and bravely complained about the
supposed anomalies in the Washington Mutual
account; it is not her "derogatory record" or her
"attendance and punctuality issues", which are
insignificant and thus irrelevant to her overall
performance in the Washington Mutual account. And,
as earlier stated, respondent’s "attendance and
punctuality issues" were attributable to petitioner’s
indifference, inaction, and lack of sensitivity in failing
to timely address respondent’s complaint. It should
share the blame for respondent’s resultant
delinquencies.
Thus, in causing respondent’s transfer, petitioner
clearly acted in bad faith and with discrimination,
insensibility and disdain; the transfer was effected as
a form of punishment for her raising a valid grievance
related to her work.
Furthermore, said transfer was obviously
unreasonable, not to mention contrary to experience,
logic, and good business sense. This being the case,
the transfer amounted to constructive dismissal.
The managerial prerogative to transfer personnel
must be exercised without grave abuse of discretion,
bearing in mind the basic elements of justice and fair
play. Having the right should not be confused with
the manner in which that right is exercised. Thus, it
cannot be used as a subterfuge by the employer to
rid himself of an undesirable worker. In particular, the
employer must be able to show that the transfer is
not unreasonable, inconvenient or prejudicial to the
employee; nor does it involve a demotion in rank or a
diminution of his salaries, privileges and other
LABOR LAW
benefits. Should the employer fail to overcome this
burden of proof, the employee’s transfer shall be
tantamount to constructive dismissal, which has been
defined as a quitting because continued employment
is rendered impossible, unreasonable or unlikely; as
an offer involving a demotion in rank and diminution
in pay.
Likewise, constructive dismissal exists when an act
of clear discrimination, insensibility or disdain by an
employer has become so unbearable to the
employee leaving him with no option but to forego
with his continued employment.45(Emphasis and
underscoring supplied)
The instant case can be compared to the situation in
Veterans Security Agency, Inc. v. Gonzalvo,
Jr.,46 where the employee concerned – a security
guard who was brave enough to complain about his
employer’s failure to remit its employees’ Social
Security System premiums – was "tossed around"
and finally placed on floating status for no valid
reason. Taking the poor employee’s side, this Court
declared:
True, it is the inherent prerogative of an employer to
transfer and reassign its employees to meet the
requirements of its business. Be that as it may, the
prerogative of the management to transfer its
employees must be exercised without grave abuse of
discretion. The exercise of the prerogative should not
defeat an employee’s right to security of tenure. The
employer’s privilege to transfer its employees to
different workstations cannot be used as a
subterfuge to rid itself of an undesirable worker.
Here, riled by respondent’s consecutive filing of
complaint against it for nonpayment of SSS
contributions, VSAI had been tossing respondent to
different stations thereafter. From his assignment at
University of Santo Tomas for almost a year, he was
assigned at the OWWA main [o]ffice in Pasig where
he served for more than three years. After three
years at the OWWA main office, he was transferred
to the OWWA Pasay City parking lot knowing that the
security services will end forthwith. VSAI even
concocted the reason that he had to be assigned
somewhere because his spouse was already a lady
guard assigned at the OWWA main office. Inasmuch
as respondent was single at that time, this was
obviously a mere facade to [get] rid of respondent
who was no longer in VSAIs good graces.
The only logical conclusion from the foregoing
discussion is that the VSAI constructively dismissed
the respondent. This ruling is in rhyme with the
findings of the Court of Appeals and the NLRC.
Dismissal is the ultimate penalty that can be meted to
an employee. Inasmuch as petitioners failed to
adduce clear and convincing evidence to support the
legality of respondent’s dismissal, the latter is entitled
to reinstatement and back wages as a necessary
consequence. However, reinstatement is no longer
feasible in this case because of the palpable strained
KAYE RAMOGA
relations, thus, separation pay is awarded in lieu of
reinstatement.
xxxx
Indeed, the Court ought to deny this petition lest the
wheels of justice for aggrieved workingmen grind to a
halt. We ought to abate the culture of employers
bestowing security of tenure to employees, not on
the basis of the latter’s performance on the job, but
on their ability to toe the line set by their employer
and endure in silence the flagrant incursion of their
rights, zealously protected by our labor laws and by
the Constitution, no less.47 (Emphasis and
underscoring supplied)
Respondent’s Floating Status
In placing respondent on "floating status," petitioner
further acted arbitrarily and unfairly, making life
unbearable for her. In so doing, it treated respondent
as if she were a new hire; it improperly disregarded
her experience, status, performance, and
achievements in the company; and most importantly,
respondent was illegally deprived of her salary and
other emoluments. For her single absence during
training for the Bank of America account, she was
refused certification, and as a result, she was placed
on floating status and her salary was withheld.
Clearly, this was an act of discrimination and
unfairness considering that she was not an
inexperienced new hire, but a promising and award-
winning employee who was more than eager to
succeed within the company. This conclusion is not
totally baseless, and is rooted in her outstanding
performance at the Washington Mutual account and
her complaint regarding the incentives, which only
proves her zeal, positive work attitude, and drive to
achieve financial success through hard work. But
instead of rewarding her, petitioner unduly punished
her; instead of inspiring her, petitioner dashed her
hopes and dreams; in return for her industry,
idealism, positive outlook and fervor, petitioner left
her with a legacy of, and awful examples in, office
politicking, intrigue, and internecine schemes.
In effect, respondent’s transfer to the Bank of
America account was not only unreasonable, unfair,
inconvenient, and prejudicial to her; it was effectively
a demotion in rank and diminution of her salaries,
privileges and other benefits. She was unfairly
treated as a new hire, and eventually her salaries,
privileges and other benefits were withheld when
petitioner refused to certify her and instead placed
her on floating status. Far from being an
"accommodation" as petitioner repeatedly insists,
respondent became the victim of a series of illegal
punitive measures inflicted upon her by the former.
Besides, as correctly argued by respondent, there is
no basis to place her on "floating status" in the first
place since petitioner continued to hire new
CSRs/TSRs during the period, as shown by its paid
advertisements and placements in leading
newspapers seeking to hire new CSRs/TSRs and
LABOR LAW
other employees.48 True enough, the placing of an
employee on "floating status" presupposes, among
others, that there is less work than there are
employees;49 but if petitioner continued to hire new
CSRs/TSRs, then surely there is a surplus of work
available for its existing employees: there is no need
at all to place respondent on floating status. If any,
respondent – with her experience, knowledge,
familiarity with the workings of the company, and
achievements – should be the first to be given work
or posted with new clients/accounts, and not new
hires who have no experience working for petitioner
or who have no related experience at all. Once more,
experience, common sense, and logic go against the
position of petitioner.
The CA could not be more correct in its
pronouncement that placing an employee on floating
status presents dire consequences for him or her,
occasioned by the withholding of wages and benefits
while he or she is not reinstated. To restate what the
appellate court cited, "[d]ue to the grim economic
consequences to the employee, the employer should
bear the burden of proving that there are no posts
available to which the employee temporarily out of
work can be assigned."50 However, petitioner has
failed miserably in this regard.
Resignation
While this Court agrees with the appellate court’s
observation that respondent’s resignation was
involuntary as it became unbearable for her to
continue with her employment, expounding on the
issue at length is unnecessary.
Because she is deemed constructively dismissed
from the time of her illegal transfer, her subsequent
resignation became unnecessary and irrelevant.
There was no longer any position to relinquish at the
time of her resignation.
Pecuniary Awards
With the foregoing pronouncements, an award of
indemnity in favor of respondent should be
forthcoming. In case of constructive dismissal, the
employee is entitled to full backwages, inclusive of
allowances, and other benefits or their monetary
equivalent, as well as separation pay in lieu of
reinstatement. The readily determinable amounts, as
computed by the Labor Arbiter and correspondingly
reviewed and corrected by the appellate court,
should be accorded finality and deemed binding on
this Court.
Settled is the rule that an employee who is unjustly
dismissed from work shall be entitled to
reinstatement without loss of seniority rights and
other privileges, and to his full backwages, inclusive
of allowances and to his other benefits or their
monetary equivalent computed from the time his
compensation was withheld up to the time of actual
reinstatement. If reinstatement is not possible,
however, the award of separation pay is proper.
KAYE RAMOGA
Backwages and reinstatement are separate and
distinct reliefs given to an illegally dismissed
employee in order to alleviate the economic damage
brought about by the employee’s dismissal.
"Reinstatement is a restoration to a state from which
one has been removed or separated" while "the
payment of backwages is a form of relief that
restores the income that was lost by reason of the
unlawful dismissal." Therefore, the award of one
does not bar the other.
In the case of Aliling v. Feliciano, citing Golden Ace
Builders v. Talde, the Court explained:
Thus, an illegally dismissed employee is entitled to
two reliefs: backwages and reinstatement. The two
reliefs provided are separate and distinct. In
instances where reinstatement is no longer feasible
because of strained relations between the employee
and the employer, separation pay is granted. In
effect, an illegally dismissed employee is entitled to
either reinstatement, if viable, or separation pay if
reinstatement is no longer viable, and backwages.
The normal consequences of respondents’ illegal
dismissal, then, are reinstatement without loss of
seniority rights, and payment of backwages
computed from the time compensation was withheld
up to the date of actual reinstatement. Where
reinstatement is no longer viable as an option,
separation pay equivalent to one (1) month salary for
every year of service should be awarded as an
alternative. The payment of separation pay is in
addition to payment of backwages.51
WHEREFORE, the Petition is DENIED. The assailed
January 10, 2012 Decision and May 28, 2012
Resolution of the Court of Appeals in CA-G.R. SP
No. 109860 are AFFIRMED, with MODIFICATIONS,
in that petitioner ICT Marketing Services, Inc., now
known as Sykes Marketing Services, Inc., is ordered
to PAY respondent Mariphil L. Sales the following:
1) Backwages and all other benefits from July
30, 2007 until finality of this Decision;
2) Separation pay equivalent to one (1) month
salary for every year of service;
3) Moral and exemplary damages in the amount
of P50,000.00;
4) Attorney's fees equivalent to ten percent
(10%) of the total monetary award; and
LABOR LAW
5) Interest of twelve per cent (12%) per annum
of the total monetary awards, computed from
July 30, 2007 up to June 30, 2013, and
thereafter, six percent (6%) per annum from July
1, 2013 until their full satisfaction.
The appropriate Computation Division of the National
Labor Relations Commission is hereby ordered to
COMPUTE and UPDATE the award as herein
determined WITII DISPATCH.
SO ORDERED.
Footnotes
22a) June 23, 2006 – respondent was issued a Formal Written
Warning for giving misleading information to a customer on June
22, 2006.
b) July 12, 2006 – she was again warned for selling to the wrong
person on June 27, 2006.
c) Another written warning on March 20, 2007 for wrong
disposition of a call.
40 Art. 286. 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.
49 See Salvaloza v. National Labor Relations Commission, 650
Phil. 543, 557 (2010), stating that –
Temporary "off-detail" or "floating status" is the period of time
when security guards are in between assignments or when they
are made to wait after being relieved from a previous post until
they are transferred to a new one. It takes place when the
security agency’s clients decide not to renew their contracts with
the agency, resulting in a situation where the available posts
under its existing contracts are less than the number of guards in
its roster. (Emphasis supplied)
In Nippon Housing Phil., Inc. v. Leynes, supra note 38 at 506,
this Court declared that the concept of "floating status" under the
Labor Code applies not only to security guards but to "other
industries" as well.
Thus:
x x x Traditionally invoked by security agencies when guards are
temporarily sidelined from duty while waiting to be transferred or
assigned to a new post or client, Article 286 of the Labor Code
has been applied to other industries when, as a consequence of
the bona fide suspension of the operation of a business or
undertaking, an employer is constrained to put employees on
floating status for a period not exceeding six months. x x x
KAYE RAMOGA
G.R. No. 174184 January 28, 2015
G.J.T. REBUILDERS MACHINE SHOP, GODO FREDO TRILLANA, and JULIANA TRILLANA, Petitioners,
vs. RICARDO AMBOS, BENJAMIN PUTIAN, and RUSSELL AMBOS, Respondents.
LEONEN, J.:
To prove serious business losses, employers must
present in evidence financial statements showing the
net losses suffered by the business within a sufficient
period of time. Generally, it cannot be based on a
single financial statement showing losses. Absent
this proof, employers closing their businesses must
pay the dismissed employees separation pay
equivalent to one-month pay or to at least one-half-
month pay for every year of service, whichever is
higher.
This is a Petition for Review on Certiorari 1 of the
Court of Appeals' Decision,2 granting Ricardo
Ambos, Russell Ambos,3 and Benjamin Putian's
Petition for Certiorari. The Court of Appeals found
that G.J.T. Rebuilders Machine Shop (G.J.T.
Rebuilders) failed to prove its alleged serious
business losses. Thus, when it closed its
establishment on December 15, 1997, G.J.T.
Rebuilders should have paid the affected employees
separation pay.4
G.J.T. Rebuilders is a single proprietorship owned by
the Spouses Godofredo and Juliana Trillana (Trillana
spouses). It was engaged in steel works and metal
fabrication, employing Ricardo Ambos (Ricardo),
Russell Ambos (Russell), and Benjamin Putian
(Benjamin) as machinists.5
G.J.T. Rebuilders rented space in the Far East Asia
(FEA) Building in Shaw Boulevard, Mandaluyong
City, which served as the site of its machine shop.
On September 8, 1996, a fire partially destroyed the
FEA Building.6
Due to the damage sustained by the building, its
owner notified its tenants to vacate their rented units
by the end of September 1996 "to avoid any
unforeseen accidents which may arise due to the
damage."7
Despite the building owner’s notice to vacate, G.J.T.
Rebuilders continued its business in the condemned
building. When the building owner finally refused to
accommodate it, G.J.T. Rebuilders left its rented
space and closed the machine shop on December
15, 1997.8 It then filed an Affidavit of Closure before
the Department of Labor and Employment on
February 16, 1998 and a sworn application to retire
its business operations before the Mandaluyong City
Treasurer’s Office on February 25, 1998.9
Having lost their employment without receiving
separation pay, Ricardo, Russell, and Benjamin filed
a Complaint for illegal dismissal before the Labor
Arbiter. They prayed for payment of allowance,
separation pay, and attorney’s fees.10
LABOR LAW
In their defense, G.J.T. Rebuilders and the Trillana
spouses argued that G.J.T. Rebuilders suffered
serious business losses and financial reverses,
forcing it to close its machine shop. Therefore,
Ricardo, Russell, and Benjamin were not entitled to
separation pay.11
Labor Arbiter Facundo L. Leda (Labor Arbiter Leda)
decided the Complaint, finding no convincing proof of
G.J.T. Rebuilders’ alleged serious business losses.
Labor Arbiter Leda, in the Decision12 dated
December 28, 1999, found that Ricardo, Russell, and
Benjamin were entitled to separation pay under
Article 283 of the Labor Code.13 In addition, they
were awarded attorney’s fees, having been
constrained to litigate their claims.14
Even assuming that G.J.T. Rebuilders’ closure was
due to serious business losses, Labor Arbiter Leda
held that the employees affected were still entitled to
separation pay "based on social justice and equity."15
G.J.T. Rebuilders and the Trillana spouses appealed
Labor Arbiter Leda’s Decision before the National
Labor Relations Commission.16
In contrast with the Labor Arbiter’s finding, the
National Labor Relations Commission found G.J.T.
Rebuilders to have suffered serious business losses.
Because of the fire that destroyed the building where
G.J.T. Rebuilders was renting space, the demand for
its services allegedly declined as "no same customer
would dare to entrust machine works to be done for
them in a machine shop lying in a ruined and
condemned building."17 The National Labor Relations
Commission then concluded that the fire "proximately
caused"18 G.J.T. Rebuilders’ serious business
losses, with its financial statement for the fiscal year
1997 showing a net loss of 316,210.00.19
In the Decision20 dated January 25, 2001, the
National Labor Relations Commission vacated and
set aside Labor Arbiter Leda’s Decision and
dismissed the Complaint for lack of merit. Since the
Commission found that G.J.T. Rebuilders ceased
operations due to serious business losses, it held
that G.J.T. Rebuilders and the Trillana spouses need
not pay Ricardo, Russell, and Benjamin separation
pay.
Ricardo, Russell, and Benjamin filed a Motion for
Reconsideration, which the National Labor Relations
Commission denied in the Resolution21 dated March
5, 2001.
Because of the alleged grave abuse of discretion of
the National Labor Relations Commission, a Petition
for Certiorari was filed before the Court of Appeals.22
KAYE RAMOGA
The Court of Appeals reversed the National Labor
Relations Commission’s Decision, agreeing with
Labor Arbiter Leda that G.J.T. Rebuilders failed to
prove its alleged serious business losses. The Court
of Appeals conceded that G.J.T. Rebuilders had to
close the machine shop for reasons connected with
the fire that partially destroyed the building where it
was renting space. Nevertheless, G.J.T. Rebuilders
continued its business for more than one year after
the fire. Thus, according to the Court of Appeals,
G.J.T. Rebuilders did not suffer from serious
business losses but closed the machine shop to
prevent losses.23
With respect to G.J.T. Rebuilders’ financial statement
showing an alleged net loss in 1997, the Court of
Appeals refused to admit it in evidence since it was
not subscribed under oath by the Certified Public
Accountant who prepared it. According to the Court
of Appeals, the financial statement was subscribed
under oath only after G.J.T. Rebuilders had
submitted it to Labor Arbiter Leda as an annex to its
Motion to re-open proceedings and to submit
additional evidence. Thus, the Court of Appeals gave
G.J.T. Rebuilders’ financial statement "scant
consideration."24
In the Decision25 dated January 17, 2006, the Court
of Appeals granted the Petition for Certiorari,
vacating and setting aside the National Labor
Relations Commission’s Decision. It reinstated Labor
Arbiter Leda’s Decision dated December 28, 1999.
G.J.T. Rebuilders and the Trillana spouses filed a
Motion for Reconsideration, which the Court of
Appeals denied in the Resolution26 dated August 11,
2006.
Petitioners G.J.T. Rebuilders and the Trillana
spouses filed before this court a Petition for Review
on Certiorari.27Respondents Ricardo, Russell, and
Benjamin commented28 on the Petition, after which
petitioners filed a Reply.29
In their Petition for Review on Certiorari, petitioners
maintain that G.J.T. Rebuilders suffered serious
business losses as evidenced by its financial
statement covering the years 1996 and 1997.
Petitioners admit that the financial statement was
belatedly subscribed under oath.30 Nevertheless, "the
credibility or veracity of the entries"31 in the financial
statement was not affected since the Bureau of
Internal Revenue received the same unsubscribed
financial statement when G.J.T. Rebuilders allegedly
filed its income tax return on April 15, 1998.32
Considering that petitioners sufficiently proved G.J.T.
Rebuilders’ serious business losses, petitioners
argue that respondents are not entitled to separation
pay.
As for respondents, they contend that G.J.T.
Rebuilders failed to prove its alleged serious
business losses. They argue that the financial
statement showing a net loss for the year 1997 was
LABOR LAW
not credible, having been belatedly subscribed under
oath by the Certified Public Accountant who prepared
it.33
With no credible proof of G.J.T. Rebuilders’
supposed serious business losses, respondents
argue that petitioners must pay them separation pay
under Article 283 of the Labor Code.34
The issue for our resolution is whether petitioners
sufficiently proved that G.J.T. Rebuilders suffered
from serious business losses.
This petition should be denied.
I
G.J.T. Rebuilders must pay respondents
their separation pay for failure to prove
its alleged serious business losses
Article 283 of the Labor Code allows an employer to
dismiss an employee due to the cessation of
operation or closure of its establishment or
undertaking, thus:
Art. 283. Closure of establishment and reduction of
personnel. – The employer may also terminate the
employment of any employee due to the installation
of labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of
operation of the establishment or undertaking unless
the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on
the workers and the Department of Labor and
Employment at least one (1) month before the
intended date thereof. In case of termination due to
installation of labor saving devices or redundancy,
the worker affected thereby shall be entitled to a
separation pay equivalent to at least his one (1)
month pay or to at least one (1) month pay for every
year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of
closures or cessation of operations of establishment
or undertaking not due to serious business losses or
financial reverses, the separation pay shall be
equivalent to one (1) month pay or to at least one-
half (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6)
months shall be considered one (1) whole year.
The decision to close one’s business is a
management prerogative that courts cannot interfere
with.35 Employers can "lawfully close shop at
anytime,"36 even for reasons of their own. "Just as no
law forces anyone to go into business, no law can
compel anybody to continue in it."37 In Mac Adams
Metal Engineering Workers Union-Independent v.
Mac Adams Metal Engineering,38 this court said:
It would indeed be stretching the intent and spirit of
the law if [courts] were to unjustly interfere with the
management’s prerogative to close or cease its
business operations just because [the] business
operation or undertaking is not suffering from any
KAYE RAMOGA
loss or simply to provide the workers continued
employment.39
However, despite this management prerogative,
employers closing their businesses must pay the
affected workers separation pay equivalent to one-
month pay or to at least one-half-month pay for every
year of service, whichever is higher.40 The reason is
that an employee dismissed, even for an authorized
cause, loses his or her means of livelihood.41
The only time employers are not compelled to pay
separation pay is when they closed their
establishments or undertaking due to serious
business losses or financial reverses.42
Serious business losses are substantial losses, not
de minimis.43 "Losses" means that the business must
have operated at a loss for a period of time for the
employer "to [have] perceived objectively and in
good faith"44 that the business’ financial standing is
unlikely to improve in the future.
The burden of proving serious business losses is
with the employer.45 The employer must show losses
on the basis of financial statements covering a
sufficient period of time. The period covered must be
sufficient for the National Labor Relations
Commission and this court to appreciate the nature
and vagaries of the business.
In North Davao Mining Corporation v. NLRC,46 North
Davao Mining Corporation presented in evidence
financial statements showing a continuing pattern of
loss from 1988 until its closure in 1992. The company
suffered net losses averaging 3 billion a year, with an
aggregate loss of 20 billion by the time of its
closure.47 This court found that North Davao suffered
serious business losses.48
In Manatad v. Philippine Telegraph and Telephone
Corporation,49 the Philippine Telegraph and
Telephone Corporation presented in evidence
financial statements showing a continuing pattern of
loss from 1995 to 1999.50 By 2000, the corporation
suffered an aggregate loss of 2.169 billion,
constraining it to retrench some of its employees.
This court held that the Philippine Telegraph and
Telephone Corporation was "fully justified in
implementing a retrenchment program since it was
undergoing business reverses, not only for a single
fiscal year, but for several years prior to and even
after the program."51
In LVN Pictures Employees and Workers Association
(NLU) v. LVN Pictures, Inc.,52 a case G.J.T.
Rebuilders cited, LVN Pictures, Inc. presented in
evidence financial statements showing a continuing
pattern of loss from 1957 to 1961. By the time the
corporation closed its business, it had suffered an
aggregate loss of 1,560,985.14.53 This court found
that LVN Pictures, Inc. suffered serious business
losses.54
LABOR LAW
Aside from the obligation to pay separation pay,
employers must comply with the notice requirement
under Article 283 of the Labor Code. Employers must
serve a written notice on the affected employees and
on the Department of Labor and Employment at least
one month before the intended date of closure.
Failure to comply with this requirement renders the
employer liable for nominal damages.55
We uphold G.J.T. Rebuilders’ decision to close its
establishment as a valid exercise of its management
prerogative. G.J.T. Rebuilders closed its machine
shop, believing that its "former customers . . .
seriously doubted [its] capacity . . . to perform the
same quality [of service]"56 after the fire had partially
damaged the building where it was renting space.
Nevertheless, we find that G.J.T. Rebuilders failed to
sufficiently prove its alleged serious business losses.
The financial statement G.J.T. Rebuilders submitted
in evidence covers the fiscal years 1996 and 1997.
Based on the financial statement, G.J.T. Rebuilders
earned a net income of 61,157.00 in 1996 and
incurred a net loss of 316,210.00 in 1997.57
We find the two-year period covered by the financial
statement insufficient for G.J.T. Rebuilders to have
objectively perceived that the business would not
recover from the loss. Unlike in North Davao Mining
Corporation, Manatad, and LVN Pictures Employees
and Workers Association (NLU), no continuing
pattern of loss within a sufficient period of time is
present in this case. In fact, in one of the two fiscal
years covered by the financial statement presented
in evidence, G.J.T. Rebuilders earned a net income.
We, therefore, agree with the Labor Arbiter and the
Court of Appeals that G.J.T. Rebuilders closed its
machine shop to prevent losses, not because of
serious business losses.58
Considering that G.J.T. Rebuilders failed to prove its
alleged serious business losses, it must pay
respondents their separation pay equivalent to one-
month pay or at least one-half-month pay for every
year of service, whichever is higher. In computing the
period of service, a fraction of at least six months is
considered a year.59
Ricardo began working as a machinist on February
9, 1978.60 Since he last worked for G.J.T. Rebuilders
on December 15, 1997, he worked a total of 19
years, 10 months, and six days. This period is
rounded off to 20 years, with the last 10 months and
six days being considered a year.61
Ricardo had a daily salary of 230.00 and worked 13
days a month.62 His one-month pay, therefore, is
equal to 2,990.00. On the other hand, his one-half-
month pay for every year of service is equal to
29,250.00. The latter amount being higher, Ricardo
must receive 29,250.00 as separation pay.
With respect to Russell, he began his employment on
September 1, 1992.63 Since he last worked for G.J.T.
KAYE RAMOGA
Rebuilders on December 15, 1997, he worked a total
of five years, three months, and 14 days. This period
is rounded off to five years, not six years, since the
last three months and 14 days are less than the six
months required to be considered a year.64
Russell had a daily salary of 225.00 and worked 13
days a month.65 His one-month pay, therefore, is
equal to 2,925.00. On the other hand, his one-half-
month pay for every year of service is equal to
7,312.50. The latter amount being higher, Russell
must receive 7,312.50 as separation pay.
As for Benjamin, he began working as a machinist on
February 1, 1994.66 Since he last worked for G.J.T.
Rebuilders on December 15, 1997, he worked a total
of three years, 10 months, and 14 days. This period
is rounded off to four years, with the last 10 months
and 14 days being considered a year.67
Benjamin had a daily salary of 225.00 and worked 13
days a month.68 His one-month pay, therefore, is
equal to 2,925.00. On the other hand, his one-half-
month pay for every year of service is equal to
5,850.00. The latter amount being higher, Benjamin
must receive 5,850.00 as separation pay.
II
G.J.T. Rebuilders must pay respondents
nominal damages for failure to comply
with the procedural requirements for
closing its business
In addition to separation pay, G.J.T. Rebuilders must
pay each of the respondents nominal damages for
failure to comply with the notice requirement under
Article 283 of the Labor Code.
Notice of the eventual closure of establishment is a
"personal right of the employee to be personally
informed of his [or her] proposed dismissal as well as
the reasons therefor."69 The reason for this
requirement is to "give the employee some time to
prepare for the eventual loss of his [or her] job."70
The requirement "is not a mere technicality or
formality which the employer may dispense
with."71 Should employers fail to properly notify their
employees, they shall be liable for nominal damages
even if they validly closed their businesses.72
Generally, employers that validly closed their
businesses but failed to comply with the notice
requirement are liable in the amount of
50,000.00.73 This amount of nominal damages,
however, may be reduced depending on "the sound
discretion of the court."74 In Sangwoo Philippines,
Inc. v. Sangwoo Philippines, Inc. Employees Union-
OLALIA,75 we said that:
[i]n the determination of the amount of nominal
damages which is addressed to the sound discretion
of the court, several factors are taken into account:
(1) the authorized cause invoked . . .; (2) the number
of employees to be awarded; (3) the capacity of the
LABOR LAW
employers to satisfy the awards, taking into account
their prevailing financial status as borne by the
records; (4) the employer’s grant of other termination
benefits in favor of the employees; and (5) whether
there was bona fide attempt to comply with the notice
requirements as opposed to giving no notice at all.76
G.J.T. Rebuilders allegedly "conferred with all [of its
employees] of [its] intention to cease business
operations"77 one month before closing its business.
It allegedly submitted an Affidavit of Closure to the
Department of Labor and Employment on February
16, 1998.78
"Conferring with employees" is not the notice
required under Article 283 of the Labor
Code.1âwphi1 The law requires a written notice of
closure served on the affected employees. As to
when the written notice should be served on the
Department of Labor and Employment, the law
requires that it be served at least one month before
the intended date of closure. G.J.T. Rebuilders
served the written notice on the Department of Labor
and Employment on February 16, 1998, two months
after it had closed its business on December 15,
1997.
With G.J.T. Rebuilders failing to comply with the
notice requirement under Article 283 of the Labor
Code, we find that it deprived respondents of due
process. However, considering that G.J.T.
Rebuilders attempted to comply with the notice
requirement, we find the nominal damages of
10,000.00 for each of the respondents sufficient.79
III
Respondents are not entitled to attorney’s fees
Attorney’s fees "represent the reasonable
compensation [a client pays his or her lawyer] [for
legal service rendered]."80 The award of attorney’s
fees is the exception rather than the
rule.81 Specifically in labor cases, attorney’s fees are
awarded only when there is unlawful withholding of
wages82 or when the attorney’s fees arise from
collective bargaining negotiations that may be
charged against union funds in an amount to be
agreed upon by the parties.83 For courts and
tribunals to properly award attorney’s fees, they must
make "an express finding of fact and [citation] of
applicable law"84 in their decisions.
In the present case, there is no unlawful withholding
of wages or an award of attorney’s fees arising from
collective bargaining negotiations. Neither did the
Labor Arbiter nor the Court of Appeals make findings
of fact or cite the applicable law in awarding
attorney’s fees. That respondents were "constrained
to engage the services of counsel to prosecute their
claims"85 is not enough justification since "no
premium should be placed on the right to litigate."86
For these reasons, we delete the award of attorney’s
fees.
KAYE RAMOGA
All told, G.J.T. Rebuilders failed to prove that it
closed its machine shop due to serious business
losses. Moreover, it failed to comply with Article 283
of the Labor Code on the notice requirement.
Therefore, petitioners must pay respondents Ricardo
Ambos, Russell Ambos, and Benjamin Putian
separation pay and nominal damages.
WHEREFORE, the Petition for Review on Certiorari
is DENIED. The Court of Appeals’ Decision dated
January 17, 2006 is AFFIRMED with
MODIFICATION.
Petitioners are ordered to PAY respondents their
separation pay with 6% legal interest87 from the
finality of this Decision until full payment:
Ricardo Ambos ₱29,250.00
Russell Ambos ₱7,312.50
Benjamin Putian ₱5,850.00.
Furthermore, petitioners shall PAY each of the
respondents ₱10,000.00 as nominal damages with
6% legal interest88 from the finality of this Decision
until full payment.
The award of attorney's fees is DELETED.
LABOR LAW
Footnotes
13
Id. at 39–40. This Article was renumbered to
Article 297 by Rep. Act No. 10151, otherwise known
as An Act Allowing the Employment of Night
Workers, Thereby Repealing Articles 130 and 131 of
Presidential Decree Number Four Hundred Forty-
Two, as amended, Otherwise Known as the Labor
Code of the Philippines; Sangwoo Philippines, Inc. v.
Sangwoo Philippines, Inc. Employees Union Olalia,
G.R. No. 173154, December 9, 2013, 711 SCRA
618, 624 [Per J. Perlas-Bernabe, Second Division].
82
LABOR CODE, art. 111(1) provides: Art. 111.
Attorney’s fees. – (1) In cases of unlawful withholding
of wages, the culpable party may be assessed
attorney’s fees equivalent to ten percent (10%) of the
amount of wages recovered; Reahs Corporation v.
NLRC, 337 Phil. 698, 709 (1997) [Per J. Padilla, First
Division].
83
LABOR CODE, art. 222(2) provides: Art. 222.
Appearances and Fees. - . . . . (2) No attorney’s fees,
negotiation fees or similar charges of any kind arising
from any collective bargaining agreement shall be
imposed on any individual member of the contracting
union: Provided, however, That attorney’s fees may
be charged against union funds in an amount to be
agreed upon by the parties. Any contract, agreement
or arrangement of any sort to the contrary shall be
null and void; Reahs Corporation v. NLRC, 337 Phil.
698, 709 (1997) [Per J. Padilla, First Division].
KAYE RAMOGA
G.R. No. 181490 April 23, 2014
MIRANT (PHILIPPINES) CORPORATION AND EDGARDO A. BAUTISTA, Petitioners,
vs. JOSELITO A. CARO, Respondent.
VILLARAMA, JR., J.:
At bar is a petition1 under Rule 45 of the 1997 Rules
of Civil Procedure, as amended, assailing the
Decision2 and Resolution3 of the Court of Appeals
(CA) dated June 26, 2007 and January 11, 2008,
respectively, which reversed and set aside the
Decision4 of the National Labor Relations
Commission (NLRC) in NLRC NCR CA No. 046551-
05 (NCR-00-03-02511-05). The NLRC decision
vacated and set aside the Decision5 of the Labor
Arbiter which found that respondent Joselito A. Caro
(Caro) was illegally dismissed by petitioner Mirant
(Philippines) Corporation (Mirant).
Petitioner corporation is organized and operating
under and by virtue of the laws of the Republic of the
Philippines. It is a holding company that owns shares
in project companies such as Mirant Sual
Corporation and Mirant Pagbilao Corporation (Mirant
Pagbilao) which operate and maintain power stations
located in Sual, Pangasinan and Pagbilao, Quezon,
respectively. Petitioner corporation and its related
companies maintain around 2,000 employees
detailed in its main office and other sites. Petitioner
corporation had changed its name to CEPA
Operations in 1996 and to Southern Company in
2001. In 2002, Southern Company was sold to
petitioner Mirant whose corporate parent is an
Atlanta-based power producer in the United States of
America.6 Petitioner corporation is now known as
Team Energy Corporation.7
Petitioner Edgardo A. Bautista (Bautista) was the
President of petitioner corporation when respondent
was terminated from employment.8
Respondent was hired by Mirant Pagbilao on
January 3, 1994 as its Logistics Officer. In 2002,
when Southern Company was sold to Mirant,
respondent was already a Supervisor of the Logistics
and Purchasing Department of petitioner. At the time
of the severance of his employment, respondent was
the Procurement Supervisor of Mirant Pagbilao
assigned at petitioner corporation’s corporate office.
As Procurement Supervisor, his main task was to
serve as the link between the Materials Management
Department of petitioner corporation and its staff, and
the suppliers and service contractors in order to
ensure that procurement is carried out in conformity
with set policies, procedures and practices. In
addition, respondent was put incharge of ensuring
the timely, economical, safe and expeditious delivery
of materials at the right quality and quantity to
petitioner corporation’s plant. Respondent was also
responsible for guiding and overseeing the welfare
and training needs of the staff of the Materials
Management Department. Due to the nature of
respondent’s functions, petitioner corporation
9
considers his position as confidential.
LABOR LAW
The antecedent facts follow:
Respondent filed a complaint10 for illegal dismissal
and money claims for 13th and 14th month pay,
bonuses and other benefits, as well as the payment
of moral and exemplary damages and attorney’s
fees. Respondent posits the following allegations in
his Position Paper:11
On January 3, 1994, respondent was hired by
petitioner corporation as its Logistics Officer and was
assigned at petitioner corporation’s corporate office
in Pasay City. At the time of the filing of the
complaint, respondent was already a Supervisor at
the Logistics and Purchasing Department with a
monthly salary of ₱39,815.00.
On November 3, 2004, petitioner corporation
conducted a random drug test where respondent was
randomly chosen among its employees who would
be tested for illegal drug use. Through an
Intracompany Correspondence,12 these employees
were informed that they were selected for random
drug testing to be conducted on the same day that
they received the correspondence. Respondent was
duly notified that he was scheduled to be tested after
lunch on that day. His receipt of the notice was
evidenced by his signature on the correspondence.
Respondent avers that at around 11:30 a.m. of the
same day, he received a phone call from his wife’s
colleague who informed him that a bombing incident
occurred near his wife’s work station in Tel Aviv,
Israel where his wife was then working as a
caregiver. Respondent attached to his Position Paper
a Press Release13 of the Department of Foreign
Affairs (DFA) in Manila to prove the occurrence of the
bombing incident and a letter14 from the colleague of
his wife who allegedly gave him a phone call from Tel
Aviv.
Respondent claims that after the said phone call, he
proceeded to the Israeli Embassy to confirm the
news on the alleged bombing incident. Respondent
further claims that before he left the office on the day
of the random drug test, he first informed the
secretary of his Department, Irene Torres (Torres), at
around 12:30 p.m. that he will give preferential
attention to the emergency phone call that he just
received. He also told Torres that he would be back
at the office as soon as he has resolved his
predicament. Respondent recounts that he tried to
contact his wife by phone but he could not reach her.
He then had to go to the Israeli Embassy to confirm
the bombing incident. However, he was told by Eveth
Salvador (Salvador), a lobby attendant at the Israeli
Embassy, that he could not be allowed entry due to
security reasons.
KAYE RAMOGA
On that same day, at around 6:15 p.m., respondent
returned to petitioner corporation’s office. When he
was finally able to charge his cellphone at the office,
he received a text message from Tina Cecilia
(Cecilia), a member of the Drug Watch Committee
that conducted the drug test, informing him to
participate in the said drug test. He immediately
called up Cecilia to explain the reasons for his failure
to submit himself to the random drug test that day.
He also proposed that he would submit to a drug test
the following day at his own expense. Respondent
never heard from Cecilia again.
On November 8, 2004, respondent received a Show
Cause Notice15 from petitioner corporation through
Jaime Dulot (Dulot), his immediate supervisor,
requiring him to explain in writing why he should not
be charged with "unjustified refusal to submit to
random drug testing." Respondent submitted his
written explanation16 on November 11, 2004.
Petitioner corporation further required respondent on
December 14, 2004 to submit additional pieces of
supporting documents to prove that respondent was
at the Israeli Embassy in the afternoon of November
3, 2004 and that the said bombing incident actually
occurred. Respondent requested for a hearing to
explain that he could not submit proof that he was
indeed present at the Israeli Embassy during the said
day because he was not allegedly allowed entry by
the embassy due to security reasons. On January 3,
2005, respondent submitted the required additional
supporting documents.17
On January 13, 2005, petitioner corporation’s
Investigating Panel issued an Investigating
Report18 finding respondent guilty of "unjustified
refusal to submit to random drug testing" and
recommended a penalty of four working weeks
suspension without pay, instead of termination, due
to the presence of mitigating circumstances. In the
same Report, the Investigating Panel also
recommended that petitioner corporation should
review its policy on random drug testing, especially of
the ambiguities cast by the term "unjustified refusal."
On January 19, 2005, petitioner corporation’s Asst.
Vice President for Material Management Department,
George K. Lamela, Jr. (Lamela), recommended19 that
respondent be terminated from employment instead
of merely being suspended. Lamela argued that even
if respondent did not outrightly refuse to take the
random drug test, he avoided the same. Lamela
averred that "avoidance" was synonymous with
"refusal."
On February 14, 2005, respondent received a
letter20 from petitioner corporation’s Vice President
for Operations, Tommy J. Sliman (Sliman),
terminating him on the same date. Respondent filed
a Motion to Appeal21 his termination on February 23,
2005. The motion was denied by petitioner
corporation on March 1, 2005.
It is the contention of respondent that he was illegally
dismissed by petitioner corporation due to the latter’s
LABOR LAW
non-compliance with the twin requirements of notice
and hearing. He asserts that while there was a notice
charging him of "unjustified refusal to submit to
random drug testing," there was no notice of hearing
and petitioner corporation’s investigation was not the
equivalent of the "hearing" required under the law
which should have accorded respondent the
opportunity to be heard.
Respondent further asserts that he was illegally
dismissed due to the following circumstances:
1. He signed the notice that he was randomly
selected as a participant to the company drug
testing;
2. Even the Investigating Panel was at a loss
in interpreting the charge because it believed
that the term "refusal" was ambiguous, and
therefore such doubt must be construed in his
favor; and
3. He agreed to take the drug test the
following day at his own expense, which he
says was clearly not an indication of evasion
from the drug test.
Petitioner corporation counters with the following
allegations:
On November 3, 2004, a random drug test was
conducted on petitioner corporation’s employees at
its Corporate Office at the CTC Bldg. in Roxas Blvd.,
Pasay City. The random drug test was conducted
pursuant to Republic Act No. 9165, otherwise known
as the "Comprehensive Dangerous Drugs Act of
2002." Respondent was randomly selected among
petitioner’s employees to undergo the said drug test
which was to be carried out by Drug Check
Philippines, Inc.22
When respondent failed to appear at the scheduled
drug test, Cecilia prepared an incident report
addressed to Dulot, the Logistics Manager of the
Materials Management Department.23 Since it was
stated under petitioner corporation’s Mirant Drugs
Policy Employee Handbook to terminate an
employee for "unjustified refusal to submit to a
random drug test" for the first offense, Dulot sent
respondent a Show Cause Notice24 dated November
8, 2004, requiring him to explain why no disciplinary
action should be imposed for his failure to take the
random drug test. Respondent, in a letter dated
November 11, 2004, explained that he attended to an
emergency call from his wife’s colleague and
apologized for the inconvenience he had caused. He
offered to submit to a drug test the next day even at
his expense.25 Finding respondent’s explanation
unsatisfactory, petitioner corporation formed a panel
to investigate and recommend the penalty to be
imposed on respondent.26 The Investigating Panel
found respondent’s explanations as to his
whereabouts on that day to be inconsistent, and
recommended that he be suspended for four weeks
without pay. The Investigating Panel took into
KAYE RAMOGA
account that respondent did not directly refuse to be
subjected to the drug test and that he had been
serving the company for ten years without any record
of violation of its policies. The Investigating Panel
further recommended that the Mirant Drug Policy be
reviewed to clearly define the phrase "unjustified
refusal to submit to random drug testing."27 Petitioner
corporation’s Vice-President for Operations, Sliman,
however disagreed with the Investigating Panel’s
recommendations and terminated the services of
respondent in accordance with the subject drug
policy. Sliman likewise stated that respondent’s
violation of the policy amounted to willful breach of
trust and loss of confidence.28
A cursory examination of the pleadings of petitioner
corporation would show that it concurs with the
narration of facts of respondent on material events
from the time that Cecilia sent an electronic mail at
about 9:23 a.m. on November 3, 2004 to all
employees of petitioner corporation assigned at its
Corporate Office advising them of the details of the
drug test – up to the time of respondent’s missing his
schedule to take the drug test. Petitioner corporation
and respondent’s point of disagreement, however, is
whether respondent’s proffered reasons for not being
able to take the drug test on the scheduled day
constituted valid defenses that would have taken his
failure to undergo the drug test out of the category of
"unjustified refusal." Petitioner corporation argues
that respondent’s omission amounted to "unjustified
refusal" to submit to the random drug test as he
could not proffer a satisfactory explanation why he
failed to submit to the drug test:
1. Petitioner corporation is not convinced that
there was indeed such a phone call at noon
of November 3, 2004 as respondent could not
even tell who called him up.
2. Respondent could not even tell if he
received the call via the landline telephone
service at petitioner corporation’s office or at
his mobile phone.
3. Petitioner corporation was also of the
opinion that granting there was such a phone
call, there was no compelling reason for
respondent to act on it at the expense of his
scheduled drug testing. Petitioner corporation
principally pointed out that the call merely
stated that a bomb exploded near his wife’s
work station without stating that his wife was
affected. Hence, it found no point in
confirming it with extraordinary haste and
forego the drug test which would have taken
only a few minutes to accomplish. If at all,
respondent should have undergone the drug
testing first before proceeding to confirm the
news so as to leave his mind free from this
obligation.
4. Petitioner corporation maintained that
respondent could have easily asked
permission from the Drug Watch Committee
LABOR LAW
that he was leaving the office since the place
where the activity was conducted was very
close to his work station.29
To the mind of petitioners, they are not liable for
illegal dismissal because all of these circumstances
prove that respondent really eluded the random drug
test and was therefore validly terminated for cause
after being properly accorded with due process.
Petitioners further argue that they have already fully
settled the claim of respondent as evidenced by a
Quitclaim which he duly executed. Lastly, petitioners
maintain that they are not guilty of unfair labor
practice as respondent’s dismissal was not intended
to curtail his right to self-organization; that
respondent is not entitled to the payment of his 13th
and 14th month bonuses and other incentives as he
failed to show that he is entitled to these amounts
according to company policy; that respondent is not
entitled to reinstatement, payment of full back wages,
moral and exemplary damages and attorney’s fees
due to his termination for cause.
In a decision dated August 31, 2005, Labor Arbiter
Aliman D. Mangandog found respondent to have
been illegally dismissed. The Labor Arbiter also
found that the quitclaim purportedly executed by
respondent was not a bona fide quitclaim which
effectively discharged petitioners of all the claims of
respondent in the case at bar. If at all, the Labor
Arbiter considered the execution of the quitclaim as a
clear attempt on the part of petitioners to mislead its
office into thinking that respondent no longer had any
cause of action against petitioner corporation. The
decision stated, viz.:
WHEREFORE, premises considered, this Office
finds respondents GUILTY of illegal dismissal, and
hereby ordered to jointly and severally reinstate
complainant back to his former position without loss
on seniority rights and benefits and to pay him his
backwages and other benefits from the date he was
illegally dismissed up to the time he is actually
reinstated, partially computed as of this date in the
amount of ₱258,797.50 (₱39,815.00 x 6.5 mos.) plus
his 13th and 14th month pay in the amount of
₱43,132.91 or in the total amount of ₱301,930.41.
Respondents are also ordered to pay complainant
the amount of ₱3,000,000.00 as and by way of moral
and exemplary damages, and to pay complainant the
amount equivalent to ten percent (10%) of the total
awards as and by way of attorney’s fees.
SO ORDERED.30
The Labor Arbiter stated that while petitioner
corporation observed the proper procedure in the
termination of an employee for a purported
authorized cause, such just cause did not exist in the
case at bar. The decision did not agree with the
conclusions reached by petitioner corporation’s own
Investigating Panel that while respondent did not
refuse to submit to the questioned drug test and
merely "avoided" it on the designated day,
KAYE RAMOGA
"avoidance" and "refusal" are one and the same. It
also held that the terms "avoidance" and "refusal" are
separate and distinct and that "the two words are not
even synonymous with each other."31 The Labor
Arbiter considered as more tenable the stance of
respondent that his omission merely resulted to a
"failure" to submit to the said drug test – and not an
"unjustified refusal." Even if respondent’s omission is
to be considered as refusal, the Labor Arbiter opined
that it was not tantamount to "unjustified refusal"
which constitutes as just cause for his termination.
Finally, the Labor Arbiter found that respondent was
entitled to moral and exemplary damages and
attorney’s fees.
On appeal to the NLRC, petitioners alleged that the
decision of the Labor Arbiter was rendered with
grave abuse of discretion for being contrary to law,
rules and established jurisprudence, and contained
serious errors in the findings of facts which, if not
corrected, would cause grave and irreparable
damage or injury to petitioners. The NLRC, giving
weight and emphasis to the inconsistencies in
respondent’s explanations, considered his omission
as "unjustified refusal" in violation of petitioner
corporation’s drug policy. Thus, in a decision dated
May 31, 2006, the NLRC ruled, viz.:
x x x [Respondent] was duly notified as shown by
copy of the notice x x x which he signed to
acknowledge receipt thereof on the said date.
[Respondent] did not refute [petitioner corporation’s]
allegation that he was also personally reminded of
said drug test on the same day by Ms. Cecilia of
[petitioner corporation’s] drug watch committee.
However, [respondent] was nowhere to be found at
[petitioner corporation’s] premises at the time when
he was supposed to be tested. Due to his failure to
take part in the random drug test, an incident report x
x x was prepared by the Drug Cause Notice x x x to
explain in writing why no disciplinary action should be
taken against him for his unjustified refusal to submit
to random drug test, a type D offense punishable
with termination. Pursuant to said directive,
[respondent] submitted an explanation x x x on 11
November 2004, pertinent portions of which read:
"I was scheduled for drug test after lunch that day of
November 3, 2004 as confirmed with Tina Cecilia. I
was having my lunch when a colleague of my wife
abroad called up informing me that there was
something wrong [that] happened in their
neighborhood, where a bomb exploded near her
workstation. Immediately, I [left] the office to confirm
said information but at around 12:30 P.M. that day, I
informed MS. IRENE TORRES, our Department
Secretary[,] that I would be attending to this
emergency call. Did even [inform] her that I’ll try to be
back as soon as possible but unfortunately, I was
able to return at 6:15 P.M. I didn’t know that Tina was
the one calling me on my cell that day. Did only
receive her message after I charged my cell at the
office that night. I was able to call back Tina Cecilia
later [that] night if it’s possible to have it (drug test)
the next day.
LABOR LAW
My apology [for] any inconvenience to the Drug
Watch Committee, that I forgot everything that day
including my scheduled drug test due to confusion of
what had happened. It [was] not my intention not to
undergo nor refuse to have a drug test knowing well
that it’s a company policy and it’s mandated by law."
In the course of the investigation, [respondent] was
requested to present proof pertaining to the alleged
call he received on 3 November 2004 from a
colleague of his wife regarding the bomb explosion in
Tel Aviv, his presence at the Israel Embassy also on
3 November 2004. [Respondent], thereafter,
submitted a facsimile which he allegedly received
from his wife's colleague confirming that she called
and informed him of the bombing incident. However,
a perusal of said facsimile x x x reveals that the
same cannot be given any probative value because,
as correctly observed by [petitioners], it can barely be
read and upon inquiry with PLDT, the international
area code of Israel which is 00972 should appear on
the face of the facsimile if indeed said facsimile
originated from Israel. [Respondent] also could not
present proof of his presence at the Israel Embassy
on said time and date. He instead provided the name
of a certain Ms. Eveth Salvador of said embassy who
could certify that he was present thereat.
Accordingly, Mr. Bailon, a member of the
investigation panel, verified with Ms. Salvador who
told him that she is only the telephone operator of the
Israel Embassy and that she was not in a position to
validate [respondent’s] presence at the Embassy. Mr.
Bailon was then referred to a certain Ms. Aimee
Zandueta, also of said embassy, who confirmed that
based on their records, [respondent] did not visit the
embassy nor was he attended to by any member of
said embassy on 3 November 2004. Ms. Zandueta
further informed Mr. Bailon that no bombing occurred
in Tel Aviv on 3 November 2004 and that the only
reported incident of such nature occurred on 1
November 2004. A letter x x x to this effect was
written by Consul Ziva Samech of the Embassy of
Israel. A press release x x x of the Department of
Foreign Affairs confirm[ed] that the bombing occurred
on 1 November 2004.
In his explanation, the [respondent] stated that the
reason why he had to leave the office on 3
November 2004 was to verify an information at the
Israel Embassy of the alleged bombing incident on
the same day. However, [petitioners] in their position
paper alleged that Ms. Torres of [petitioner] company
received a text message from him at around 12:47
p.m. informing her that he will try to be back since he
had a lot of things to do and asking her if there was a
signatory on that day. [Respondent] did not deny
sending said text messages to Ms. Torres in his reply
and rejoinder x x x. He actually confirmed that he
was involved in the CIIS registration with all
companies that was involved with [petitioner]
company and worked on the registration of
[petitioner] company’s vehicles with TRO.
It is also herein noted that [respondent] had initially
reported to Ms. Torres that it was his mother in law
KAYE RAMOGA
who informed him about the problem concerning his
wife. However, in his written explanation x x x, the
[respondent] stated that it was a friend of his wife,
whom he could not even identify, who informed him
of the alleged bombing incident in Tel Aviv, Israel.
[Respondent] also did not deny receiving a cellphone
call from Ms. Cecilia that day. He merely stated that
he did not know that it was Ms. Cecilia calling him up
in a cellphone and it was only after he charged his
cellphone at the office that night that he received her
message. In effect, [respondent] asserted that his
cellphone battery was running low or drained.
[Petitioners] were able to refute [these] averments of
[respondent] when they presented [respondent’s]
Smart Billing Statement
x x x showing that he was able to make a cellphone
call at 5:29 p.m. to [petitioner corporation’s] supplier,
Mutico for a duration of two (2) minutes.32
Given the foregoing facts, the NLRC stated that the
offer of respondent to submit to another drug test the
following day, even at his expense, cannot operate to
free him from liability. The NLRC opined that taking
the drug test on the day following the scheduled
random drug test would affect both the integrity and
the accuracy of the specimen which was supposed to
be taken from a randomly selected employee who
was notified of his/her selection on the same day that
the drug test was to be administered. The NLRC
further asserted that a drug test, conducted many
hours or a day after the employee was notified,
would compromise its results because the employee
may have possibly taken remedial measures to
metabolize or eradicate whatever drugs s/he may
have ingested prior to the drug test.
The NLRC further stated that these circumstances
have clearly established the falsity of respondent’s
claims and found no justifiable reason for respondent
to refuse to submit to the petitioner corporation’s
random drug test. While the NLRC acknowledged
that it was petitioner corporation’s own Investigating
Panel that considered respondent’s failure to take the
required drug test as mere "avoidance" and not
"unjustified refusal," it concluded that such finding
was merely recommendatory to guide top
management on what action to take.
The NLRC also found that petitioner corporation’s
denial of respondent’s motion to reconsider his
termination was in order. Petitioner corporation’s
reasons for such denial are quoted in the NLRC
decision, viz.:
"Your appeal is anchored on your claim that you
responded to an emergency call from someone
abroad informing you that a bomb exploded near the
work station of your wife making you unable to
undergo the scheduled drug testing. This claim is
groundless taking into account the following:
We are not convinced that there was indeed that call
which you claim to have received noon of November
3, 2004. On the contrary, our belief is based on the
LABOR LAW
fact that you could not tell who called you up or how
the call got to you. If you forgot to ask the name of
the person who called you up, surely you would have
known how the call came to you. You said you were
having lunch at the third floor of the CTC building
when you received the call. There were only two
means of communication available to you then: the
land line telephone service in your office and your
mobile phone. If your claim were (sic) not fabricated,
you would be able to tell which of these two was
used.
Granting that you indeed received that alleged call,
from your own account, there was no compelling
reason for you to act on it at the expense of your
scheduled drug testing. The call, as it were, merely
stated that ‘something wrong happened (sic) in their
neighborhood, where a bomb exploded near her
workstation.’ Nothing was said if your wife was
affected. There is no point in confirming it with
extraordinary haste and forego the drug test which
would have taken only a few minutes to accomplish.
If at all, you should have undergone the drug testing
first before proceeding to confirm the news so as to
leave your mind free from this obligation.
Additionally, if it was indeed necessary that you skip
the scheduled drug testing to verify that call, why did
you not ask permission from the Drug Watch
[C]ommittee that you were leaving? The place where
the activity was being conducted was very close to
your workstation. It was absolutely within your reach
to inform any of its members that you were attending
to an emergency call. Why did you not do so?
All this undisputedly proves that you merely eluded
the drug testing. Your claim that you did not refuse to
be screened carries no value. Your act was a
negation of your words."33
The NLRC found that respondent was not only validly
dismissed for cause – he was also properly accorded
his constitutional right to due process as shown by
the following succession of events:
1. On November 8, 2004, respondent was
given a show-cause notice requiring him to
explain in writing within three days why no
disciplinary action should be taken against
him for violation of company policy on
unjustified refusal to submit to random drug
testing – a type D offense which results in
termination.
2. Respondent submitted his explanation on
November 11, 2004.
3. On December 9, 2004, respondent was
given a notice of investigation34 informing him
of a meeting on December 13, 2004 at 9:00
a.m. In this meeting, respondent was allowed
to explain his side, present his evidences and
witnesses, and confront the witnesses
presented against him.
KAYE RAMOGA
4. On February 14, 2005, respondent was
served a letter of termination which clearly
stated the reasons therefor.35
The NLRC, notwithstanding its finding that
respondent was dismissed for cause and with due
process, granted financial assistance to respondent
on equitable grounds. It invoked the past decisions of
this Court which allowed the award of financial
assistance due to factors such as long years of
service or the Court’s concern and compassion
towards labor where the infraction was not so
serious. Thus, considering respondent’s 10 years of
service with petitioner corporation without any record
of violation of company policies, the NLRC ordered
petitioner corporation to pay respondent financial
assistance equivalent to one-half (1/2) month pay for
every year of service in the amount of One Hundred
Ninety-Nine Thousand Seventy-Five Pesos
(₱199,075.00). The NLRC decision states thus:
WHEREFORE, the decision dated 31 August 2005 is
VACATED and SET ASIDE. The instant complaint is
dismissed for lack of merit. However, respondent
Mirant [Philippines] Corp. is ordered to pay
complainant financial assistance in the amount of
one hundred ninety-nine thousand seventy five
pesos (₱199,075.00).
SO ORDERED.36
Respondent filed a motion for
reconsideration,37 while petitioners filed a motion for
partial reconsideration38 of the NLRC decision. In a
Resolution39 dated June 30, 2006, the NLRC denied
both motions.
In a petition for certiorari before the CA, respondent
raised the following issues: whether the NLRC acted
without or in excess of its jurisdiction, or with grave
abuse of discretion amounting to lack or excess of its
jurisdiction when it construed that the terms "failure,"
"avoidance," "refusal" and "unjustified refusal" have
similar meanings; reversed the factual findings of the
Labor Arbiter; and held that respondent deliberately
breached petitioner’s Anti-Drugs
Policy.40 Respondent further argued before the
appellate court that his failure to submit himself to the
random drug test was justified because he merely
responded to an emergency call regarding his wife’s
safety in Tel Aviv, and that such failure cannot be
considered synonymous with "avoidance" or "refusal"
so as to mean "unjustified refusal" in order to be
meted the penalty of termination.41
The CA disagreed with the NLRC and ruled that it
was immaterial whether respondent failed, refused,
or avoided being tested. To the appellate court, the
singular fact material to this case was that
respondent did not get himself tested in clear
disobedience of company instructions and policy.
Despite such disobedience, however, the appellate
court considered the penalty of dismissal to be too
harsh to be imposed on respondent, viz.:
LABOR LAW
x x x While it is a management prerogative to
terminate its erring employee for willful disobedience,
the Supreme Court has recognized that such penalty
is too harsh depending on the circumstances of each
case. "There must be reasonable proportionality
between, on the one hand, the willful disobedience
by the employee and, on the other hand, the penalty
imposed therefor" x x x.
In this case, [petitioner corporation’s] own
investigating panel has revealed that the penalty of
dismissal is too harsh to impose on [respondent],
considering that this was the first time in his 10-year
employment that the latter violated its company
policies. The investigating panel even suggested that
a review be had of the company policy on the term
"unjustified refusal" to clearly define what constitutes
a violation thereof. The recommendation of the
investigating panel is partially reproduced as follows:
"VII. Recommendation
However, despite having violated the company
policy, the panel recommends 4 working weeks
suspension without pay (twice the company policy’s
maximum of 2 working weeks suspension) instead of
termination due to the following mitigating
circumstances.
1. Mr. Joselito A. Caro did not directly refuse
to be subjected to the random drug test
scheduled on November 3, 2004.
2. In the case of Mr. Joselito A. Caro, the two
conditions for termination (Unjustified and
Refusal) were not fully met as he expressly
agreed to undergo drug test.
3. Mr. Joselito A. Caro voluntarily offered
himself to undergo drug test the following day
at his own expense.
Doubling the maximum of 2 weeks suspension to 4
weeks is indicative of the gravity of the offense
committed. The panel believes that although
mitigating factors partially offset reasons for
termination, the 2 weeks maximum suspension is too
lenient penalty for such an offense.
The Panel also took into consideration that Mr.
Joselito A. Caro has served the company for ten (10)
years without any record of violation of the company
policies.
xxxx
The Panel also recommends that Management
review the Mirant Drug Policy specifically ‘Unjustified
[R]efusal to submit to random drug testing.’ The
Panel believes that the term refusal casts certain
ambiguities and should be clearly defined."42
The CA however found that award of moral and
exemplary damages is without basis due to lack of
bad faith on the part of the petitioner corporation
KAYE RAMOGA
which merely acted within its management
prerogative. In its assailed Decision dated June 26,
2007, the CA ruled, viz.:
IN VIEW OF ALL THE FOREGOING, the instant
petition is GRANTED. The assailed Decision dated
May 31, 2006 and Resolution dated June 30, 2006
rendered by the National Labor Relations
Commission (NLRC) in NLRC NCR CA No. 046551-
05 (NCR-00-03-02511-05) are REVERSED and SET
ASIDE. The Labor Arbiter’s Decision dated August
31, 2005 is hereby REINSTATED with
MODIFICATION by omitting the award of moral and
exemplary damages as well as attorney’s fees, and
that the petitioner’s salary equivalent to four (4)
working weeks at the time he was terminated be
deducted from his backwages. No cost.
SO ORDERED.43
Petitioner moved for reconsideration. In its assailed
Resolution dated January 11, 2008, the CA denied
petitioners’ motion for reconsideration for lack of
merit. It ruled that the arguments in the motion for
reconsideration were already raised in their past
pleadings.
In this instant Petition, petitioners raise the following
grounds:
I. THE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR WHEN IT FAILED TO
CONSIDER THAT:
A. THE PETITION FOR CERTIORARI FILED BY
RESPONDENT CARO SHOULD HAVE BEEN
SUMMARILY DISMISSED CONSIDERING THAT IT
LACKED THE REQUISITE VERIFICATION AND
CERTIFICATION AGAINST FORUM SHOPPING
REQUIRED BY THE RULES OF COURT; OR
B. AT THE VERY LEAST, THE SAID PETITION
FOR CERTIORARI FILED BY RESPONDENT
CARO SHOULD HAVE BEEN CONSIDERED MOOT
SINCE RESPONDENT CARO HAD ALREADY
PREVIOUSLY EXECUTED A QUITCLAIM
DISCHARGING THE PETITIONERS FROM ALL HIS
MONETARY CLAIMS.
II. THE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR AND DECIDED QUESTIONS
OF SUBSTANCE IN A WAY NOT IN ACCORDANCE
WITH LAW AND APPLICABLE DECISIONS OF THE
HONORABLE COURT, CONSIDERING THAT:
A. THE COURT OF APPEALS REVERSED THE
DECISION DATED 31 MAY 2006 OF THE NLRC ON
THE GROUND THAT THERE WAS GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION NOTWITHSTANDING
THE FACT THAT IT AFFIRMED THE NLRC’S
FINDINGS THAT RESPONDENT CARO
DELIBERATELY DISOBEYED PETITIONER
MIRANT’S ANTI-DRUGS POLICY.
LABOR LAW
B. THE PENALTY OF TERMINATION SHOULD
HAVE BEEN SUSTAINED BY THE COURT OF
APPEALS GIVEN ITS POSITIVE FINDING THAT
RESPONDENT CARO DELIBERATELY AND
WILLFULLY DISOBEYED PETITIONER MIRANT’S
ANTI-DRUGS POLICY.
C. IN INVALIDATING RESPONDENT CARO’S
DISMISSAL, THE COURT OF APPEALS
SUBSTITUTED WITH ITS OWN DISCRETION A
CLEAR MANAGEMENT PREROGATIVE
BELONGING ONLY TO PETITIONER MIRANT IN
THE INSTANT CASE.
D. THE WILLFUL AND DELIBERATE VIOLATION
OF PETITIONER MIRANT’S ANTI-DRUGS POLICY
AGGRAVATED RESPONDENT CARO’S
WRONGFUL CONDUCT WHICH JUSTIFIED HIS
TERMINATION.
E. IN INVALIDATING RESPONDENT CARO’S
DISMISSAL, THE COURT OF APPEALS, IN
EFFECT, BELITTLED THE IMPORTANCE AND
SERIOUSNESS OF PETITIONER MIRANT’S ANTI-
DRUGS POLICY AND CONSEQUENTLY
HAMPERED THE EFFECTIVE IMPLEMENTATION
OF THE SAME.
F. THE EXISTENCE OF OTHER GROUNDS FOR
CARO’S DISMISSAL, SUCH AS WILLFUL
DISOBEDIENCE AND [LOSS] OF TRUST AND
CONFIDENCE, JUSTIFIED HIS TERMINATION
FROM EMPLOYMENT.
III. NONETHELESS, THE AWARD OF FINANCIAL
ASSISTANCE IN FAVOR OF RESPONDENT CARO
IS NOT WARRANTED CONSIDERING THAT
RESPONDENT CARO’S WILLFUL AND
DELIBERATE REFUSAL TO SUBJECT HIMSELF
TO PETITIONER MIRANT’S DRUG TEST AND HIS
SUBSEQUENT EFFORTS TO CONCEAL THE
SAME SHOWS HIS DEPRAVED MORAL
CHARACTER.
IV. THE COURT OF APPEALS GRIEVOUSLY
ERRED WHEN IT HELD PETITIONER BAUTISTA
PERSONALLY LIABLE FOR [RESPONDENT]
CARO’S UNFOUNDED CLAIMS CONSIDERING
THAT, ASIDE FROM RESPONDENT CARO’S
DISMISSAL BEING LAWFUL, PETITIONER
BAUTISTA MERELY ACTED WITHIN THE SCOPE
OF HIS FUNCTIONS IN GOOD FAITH.44
We shall first rule on the issue raised by petitioners
that the petition for certiorari filed by respondent with
the CA should have been summarily dismissed as it
lacked the requisite verification and certification
against forum shopping under Sections 4 and 5, Rule
7 of the Rules, viz.:
SEC. 4. Verification. – Except when otherwise
specifically required by law or rule, pleadings need
not be under oath, verified or accompanied by
affidavit.
KAYE RAMOGA
A pleading is verified by an affidavit that the affiant
has read the pleading and that the allegations therein
are true and correct of his knowledge and belief.
A pleading required to be verified which contains a
verification based on "information and belief," or
upon "knowledge, information and belief," or lacks a
proper verification, shall be treated as an unsigned
pleading.
SEC. 5. Certification against forum shopping. – The
plaintiff or principal party shall certify under oath in
the complaint or other initiatory pleading asserting a
claim for relief, or in a sworn certification annexed
thereto and simultaneously filed therewith: (a) that he
has not theretofore commenced any action or filed
any claim involving the same issues in any court,
tribunal or quasi-judicial agency and, to the best of
his knowledge, no such other action or claim is
pending therein; (b) if there is such other pending
action or claim, a complete statement of the present
status thereof; and (c) if he should thereafter learn
that the same or similar action or claim has been filed
or is pending, he shall report that fact within five (5)
days therefrom to the court wherein his aforesaid
complaint or initiatory pleading has been filed.
Failure to comply with the foregoing requirements
shall not be curable by mere amendment of the
complaint or other initiatory pleading but shall be
cause for the dismissal of the case without prejudice,
unless otherwise provided, upon motion and after
hearing. The submission of a false certification or
noncompliance with any of the undertakings therein
shall constitute indirect contempt of court, without
prejudice to the corresponding administrative and
criminal actions. If the acts of the party or his counsel
clearly constitute willful and deliberate forum
shopping, the same shall be ground for summary
dismissal with prejudice and shall constitute direct
contempt, as well as a cause for administrative
sanctions.
It is the contention of petitioners that due to
respondent’s failure to subscribe the Verification and
Certification of Non-Forum Shopping before a Notary
Public, the said verification and certification cannot
be considered to have been made under oath.
Accordingly, such omission is fatal to the entire
petition for not being properly verified and certified.
The CA therefore erred when it did not dismiss the
petition.
This jurisdiction has adopted in the field of labor
protection a liberal stance towards the construction of
the rules of procedure in order to serve the ends of
substantial justice. This liberal construction in labor
law emanates from the mandate that the
workingman’s welfare should be the primordial and
paramount consideration.45 Thus, if the rules of
procedure will stunt courts from fulfilling this
mandate, the rules of procedure shall be relaxed if
the circumstances of a case warrant the exercise of
such liberality. If we sustain the argument of
petitioners in the case at bar that the petition for
LABOR LAW
certiorari should have been dismissed outright by the
CA, the NLRC decision would have reached finality
and respondent would have lost his remedy and
denied his right to be protected against illegal
dismissal under the Labor Code, as amended.
It is beyond debate that petitioner corporation’s
enforcement of its Anti-Drugs Policy is an exercise of
its management prerogative. It is also a conceded
fact that respondent "failed" to take the random drug
test as scheduled, and under the said company
policy, such failure metes the penalty of termination
for the first offense. A plain, simple and literal
application of the said policy to the omission of
respondent would have warranted his outright
dismissal from employment – if the facts were that
simple in the case at bar. Beyond debate – the facts
of this case are not – and this disables the Court
from permitting a straight application of an otherwise
prima facie straightforward rule if the ends of
substantial justice have to be served.
It is the crux of petitioners’ argument that
respondent’s omission amounted to "unjust refusal"
because he could not sufficiently support with
convincing proof and evidence his defenses for
failing to take the random drug test. For petitioners,
the inconsistencies in respondent’s explanations
likewise operated to cast doubt on his real reasons
and motives for not submitting to the random drug
test on schedule. In recognition of these
inconsistencies and the lack of convincing proof from
the point of view of petitioners, the NLRC reversed
the decision of the Labor Arbiter. The CA found the
ruling of the Labor Arbiter to be more in accord with
the facts, law and existing jurisprudence.
We agree with the disposition of the appellate court
that there was illegal dismissal in the case at bar.
While the adoption and enforcement by petitioner
corporation of its Anti-Drugs Policy is recognized as
a valid exercise of its management prerogative as an
employer, such exercise is not absolute and
unbridled. Managerial prerogatives are subject to
limitations provided by law, collective bargaining
agreements, and the general principles of fair play
and justice.46 In the exercise of its management
prerogative, an employer must therefore ensure that
the policies, rules and regulations on work-related
activities of the employees must always be fair and
reasonable and the corresponding penalties, when
prescribed, commensurate to the offense involved
and to the degree of the infraction.47 The Anti-Drugs
Policy of Mirant fell short of these requirements.
Petitioner corporation’s subject Anti-Drugs Policy fell
short of being fair and reasonable.
First. The policy was not clear on what constitutes
"unjustified refusal" when the subject drug policy
prescribed that an employee’s "unjustified refusal" to
submit to a random drug test shall be punishable by
the penalty of termination for the first offense. To be
sure, the term "unjustified refusal" could not possibly
KAYE RAMOGA
cover all forms of "refusal" as the employee’s
resistance, to be punishable by termination, must be
"unjustified." To the mind of the Court, it is on this
area where petitioner corporation had fallen short of
making it clear to its employees – as well as to
management – as to what types of acts would fall
under the purview of "unjustified refusal." Even
petitioner corporation’s own Investigating Panel
recognized this ambiguity, viz.:
The Panel also recommends that Management
review the Mirant Drug Policy specifically "Unjustified
[R]efusal to submit to random drug testing." The
Panel believes that the term "refusal" casts certain
ambiguities and should be clearly defined.48
The fact that petitioner corporation’s own
Investigating Panel and its Vice President for
Operations, Sliman, differed in their
recommendations regarding respondent’s case are
first-hand proof that there, indeed, is ambiguity in the
interpretation and application of the subject drug
policy. The fact that petitioner corporation’s own
personnel had to dissect the intended meaning of
"unjustified refusal" is further proof that it is not clear
on what context the term "unjustified refusal" applies
to. It is therefore not a surprise that the Labor Arbiter,
the NLRC and the CA have perceived the term
"unjustified refusal" on different prisms due to the
lack of parameters as to what comes under its
purview. To be sure, the fact that the courts and
entities involved in this case had to engage in
semantics – and come up with different constructions
– is yet another glaring proof that the subject policy is
not clear creating doubt that respondent’s dismissal
was a result of petitioner corporation’s valid exercise
of its management prerogative.
It is not a mere jurisprudential principle, but an
enshrined provision of law, that all doubts shall be
resolved in favor of labor. Thus, in Article 4 of the
Labor Code, as amended, "[a]ll doubts in the
implementation and interpretation of the provisions of
[the Labor] Code, including its implementing rules
and regulations, shall be resolved in favor of labor."
In Article 1702 of the New Civil Code, a similar
provision states that "[i]n case of doubt, all labor
legislation and all labor contracts shall be construed
in favor of the safety and decent living for the
laborer." Applying these provisions of law to the
circumstances in the case at bar, it is not fair for this
Court to allow an ambiguous policy to prejudice the
rights of an employee against illegal dismissal. To
hold otherwise and sustain the stance of petitioner
corporation would be to adopt an interpretation that
goes against the very grain of labor protection in this
jurisdiction. As correctly stated by the Labor Arbiter,
"when a conflicting interest of labor and capital are
weighed on the scales of social justice, the heavier
influence of the latter must be counter-balanced by
the sympathy and compassion the law must accord
the underprivileged worker."49
Second. The penalty of termination imposed by
petitioner corporation upon respondent fell short of
LABOR LAW
being reasonable. Company policies and regulations
are generally valid and binding between the
employer and the employee unless shown to be
grossly oppressive or contrary to law50 – as in the
case at bar. Recognizing the ambiguity in the subject
policy, the CA was more inclined to adopt the
recommendation of petitioner corporation’s own
Investigating Panel over that of Sliman and the
NLRC. The appellate court succinctly but incisively
pointed out, viz.:
x x x We find, as correctly pointed out by the
investigating panel, that the [petitioner corporation’s]
Anti-Drug Policy is excessive in terminating an
employee for his "unjustified refusal" to subject
himself to the random drug test on first offense,
without clearly defining what amounts to an
"unjustified refusal."
Thus, We find that the recommended four (4)
working weeks’ suspension without pay as the
reasonable penalty to be imposed on [respondent]
for his disobedience. x x x51 (Additional emphasis
supplied.)
To be sure, the unreasonableness of the penalty of
termination as imposed in this case is further
highlighted by a fact admitted by petitioner
corporation itself: that for the ten-year period that
respondent had been employed by petitioner
corporation, he did not have any record of a violation
of its company policies.
As to the other issue relentlessly being raised by
petitioner corporation that respondent’s petition for
certiorari before the CA should have been
considered moot as respondent had already
previously executed a quitclaim discharging
petitioner corporation from all his monetary claims,
we cannot agree. Quitclaims executed by laborers
are ineffective to bar claims for the full measure of
their legal rights,52 especially in this case where the
evidence on record shows that the amount stated in
the quitclaim exactly corresponds to the amount
claimed as unpaid wages by respondent under
Annex A53 of his Reply54 filed with the Labor Arbiter.
Prima facie, this creates a false impression that
respondent’s claims have already been settled by
petitioner corporation – discharging the latter from all
of respondent’s monetary claims. In truth and in fact,
however, the amount paid under the subject
quitclaim represented the salaries of respondent that
remained unpaid at the time of his termination – not
the amounts being claimed in the case at bar.
We believe that this issue was extensively discussed
by both the Labor Arbiter and the CA and we find no
reversible error on the disposition of this issue, viz.:
A review of the records show that the alluded
quitclaim, which was undated and not even notarized
although signed by the petitioner, was for the amount
of ₱59,630.05. The said quitclaim was attached as
Annex 26 in the [petitioners’] Position Paper filed
before the Labor Arbiter. As fully explained by
KAYE RAMOGA
[respondent] in his Reply filed with the Labor Arbiter,
the amount stated therein was his last pay due to him
when he was terminated, not the amount
representing his legitimate claims in this labor suit x x
x. To bolster his defense, [respondent] submitted the
pay form issued to him by the [petitioner corporation],
showing his net pay at ₱59,630.05 exactly the
amount stated in the quitclaim x x x. Then, too, as
stated on the quitclaim itself, the intention of the
waiver executed by the [respondent] was to release
[petitioner corporation] from any liability only on the
said amount representing [respondent’s] "full and
final payment of [his] last salary/separation pay" x x
x. It did not in any way waive [respondent’s] right to
pursue his legitimate claims regarding his dismissal
in a labor suit. Thus, We gave no credence to
[petitioners’] private defense that alleged quitclaim
rendered the instant petition moot.55
Finally, the petition avers that petitioner Bautista
should not be held personally liable for respondent’s
dismissal as he acted in good faith and within the
scope of his official functions as then president of
petitioner corporation. We agree with
petitioners.1âwphi1 Both decisions of the Labor
Arbiter and the CA did not discuss the basis of the
personal liability of petitioner Bautista, and yet the
dispositive portion of the decision of the Labor Arbiter
- which was affirmed by the appellate court - held him
jointly and severally liable with petitioner corporation,
viz.:
WHEREFORE, premises considered, this Office
finds respondents GUILTY of illegal dismissal, and
hereby ordered to jointly and severally reinstate
complainant back to his former position without loss
on seniority rights and benefits and to pay him his
backwages and other benefits from the date he was
illegally dismissed up to the time he is actually
reinstated, partially computed as of this date in the
LABOR LAW
amount of ₱258,797.50 (₱39,815.00 x 6.5 mos.) plus
his 13th and 14th month pay in the amount of
₱43,132.91 or in the total amount of ₱301,930.41.
Respondents are also ordered to pay complainant
the amount of ₱3,000,000.00 as and by way of moral
and exemplary damages, and to pay complainant the
amount equivalent to ten percent (10%) of the total
awards as and by way of attorney's fees.
SO ORDERED.56 (Emphasis supplied.)
A corporation has a personality separate and distinct
from its officers and board of directors who may only
be held personally liable for damages if it is proven
that they acted with malice or bad faith in the
dismissal of an employee.57 Absent any evidence on
record that petitioner Bautista acted maliciously or in
bad faith in effecting the termination of respondent,
plus the apparent lack of allegation in the pleadings
of respondent that petitioner Bautista acted in such
manner, the doctrine of corporate fiction dictates that
only petitioner corporation should be held liable for
the illegal dismissal of respondent.
WHEREFORE, the petition for review on certiorari is
DENIED. The assailed Decision dated June 26, 2007
and the Resolution dated January 11, 2008 in CA-
G.R. SP No. 96153 are AFFIRMED with the
MODIFICATION that only petitioner corporation is
found GUILTY of the illegal dismissal of respondent
Joselito A. Caro. Petitioner Edgardo A. Bautista is
not held personally liable as then President of
petitioner corporation at the time of the illegal
dismissal.
No pronouncement as to costs. SO ORDERED.
KAYE RAMOGA
G.R. No. 198783 April 15, 2013
ROYAL PLANT WORKERS UNION vs. COCA-COLA BOTTLERS PHILIPPINES, INC.-CEBU PLANT
MENDOZA, J.:
Assailed in this petition is the May 24, 2011
Decision1 and the September 2, 2011 Resolution2 of
the Court of Appeals (CA) in CA-G.R. SP No. 05200,
entitled Coca-Cola Bottlers Philippines, Inc.-Cebu
Plant v. Royal Plant Workers Union, which nullified
and set aside the June 11, 2010 Decision3 of the
Voluntary Arbitration Panel (Arbitration Committee) in
a case involving the removal of chairs in the bottling
plant of Coca-Cola Bottlers Philippines, Inc. (CCBPI).
The Factual and Procedural Antecedents
The factual and procedural antecedents have been
accurately recited in the May 24, 2011 CA decision
as follows:
Petitioner Coca-Cola Bottlers Philippines, Inc.
(CCBPI) is a domestic corporation engaged in the
manufacture, sale and distribution of softdrink
products. It has several bottling plants all over the
country, one of which is located in Cebu City. Under
the employ of each bottling plant are bottling
operators. In the case of the plant in Cebu City, there
are 20 bottling operators who work for its Bottling
Line 1 while there are 12-14 bottling operators who
man its Bottling Line 2. All of them are male and they
are members of herein respondent Royal Plant
Workers Union (ROPWU).
The bottling operators work in two shifts. The first
shift is from 8 a.m. to 5 p.m. and the second shift is
from 5 p.m. up to the time production operations is
finished. Thus, the second shift varies and may end
beyond eight (8) hours. However, the bottling
operators are compensated with overtime pay if the
shift extends beyond eight (8) hours. For Bottling
Line 1, 10 bottling operators work for each shift while
6 to 7 bottling operators work for each shift for
Bottling Line 2.
Each shift has rotations of work time and break time.
Prior to September 2008, the rotation is this: after
two and a half (2 ½) hours of work, the bottling
operators are given a 30-minute break and this goes
on until the shift ends. In September 2008 and up to
the present, the rotation has changed and bottling
operators are now given a 30-minute break after one
and one half (1 ½) hours of work.
In 1974, the bottling operators of then Bottling Line 2
were provided with chairs upon their request. In
1988, the bottling operators of then Bottling Line 1
followed suit and asked to be provided also with
chairs. Their request was likewise granted.
Sometime in September 2008, the chairs provided
for the operators were removed pursuant to a
national directive of petitioner. This directive is in line
with the "I Operate, I Maintain, I Clean" program of
petitioner for bottling operators, wherein every
bottling operator is given the responsibility to keep
the machinery and equipment assigned to him clean
LABOR LAW
and safe. The program reinforces the task of bottling
operators to constantly move about in the
performance of their duties and responsibilities.
With this task of moving constantly to check on the
machinery and equipment assigned to him, a bottling
operator does not need a chair anymore, hence,
petitioner’s directive to remove them. Furthermore,
CCBPI rationalized that the removal of the chairs is
implemented so that the bottling operators will avoid
sleeping, thus, prevent injuries to their persons. As
bottling operators are working with machines which
consist of moving parts, it is imperative that they
should not fall asleep as to do so would expose them
to hazards and injuries. In addition, sleeping will
hamper the efficient flow of operations as the bottling
operators would be unable to perform their duties
competently.
The bottling operators took issue with the removal of
the chairs. Through the representation of herein
respondent, they initiated the grievance machinery of
the Collective Bargaining Agreement (CBA) in
November 2008. Even after exhausting the remedies
contained in the grievance machinery, the parties
were still at a deadlock with petitioner still insisting on
the removal of the chairs and respondent still against
such measure. As such, respondent sent a Notice to
Arbitrate, dated 16 July 2009, to petitioner stating its
position to submit the issue on the removal of the
chairs for arbitration. Nevertheless, before submitting
to arbitration the issue, both parties availed of the
conciliation/mediation proceedings before the
National Conciliation and Mediation Board (NCMB)
Regional Branch No. VII. They failed to arrive at an
amicable settlement.
Thus, the process of arbitration continued and the
parties appointed the chairperson and members of
the Arbitration Committee as outlined in the CBA.
Petitioner and respondent respectively appointed as
members to the Arbitration Committee Mr. Raul A.
Kapuno, Jr. and Mr. Luis Ruiz while they both chose
Atty. Alice Morada as chairperson thereof. They then
executed a Submission Agreement which was
accepted by the Arbitration Committee on 01 October
2009. As contained in the Submission Agreement,
the sole issue for arbitration is whether the removal
of chairs of the operators assigned at the
production/manufacturing line while performing their
duties and responsibilities is valid or not.
Both parties submitted their position papers and
other subsequent pleadings in amplification of their
respective stands. Petitioner argued that the removal
of the chairs is valid as it is a legitimate exercise of
management prerogative, it does not violate the
Labor Code and it does not violate the CBA it
contracted with respondent. On the other hand,
respondent espoused the contrary view. It contended
that the bottling operators have been performing their
assigned duties satisfactorily with the presence of the
KAYE RAMOGA
chairs; the removal of the chairs constitutes a
violation of the Occupational Health and Safety
Standards, the policy of the State to assure the right
of workers to just and humane conditions of work as
stated in Article 3 of the Labor Code and the Global
Workplace Rights Policy.
Ruling of the Arbtration Committee
On June 11, 2010, the Arbitration Committee
rendered a decision in favor of the Royal Plant
Workers Union (the Union) and against CCBPI, the
dispositive portion of which reads, as follows:
Wherefore, the undersigned rules in favor of ROPWU
declaring that the removal of the operators chairs is
not valid. CCBPI is hereby ordered to restore the
same for the use of the operators as before their
removal in 2008.4
The Arbitration Committee ruled, among others, that
the use of chairs by the operators had been a
company practice for 34 years in Bottling Line 2, from
1974 to 2008, and 20 years in Bottling Line 1, from
1988 to 2008; that the use of the chairs by the
operators constituted a company practice favorable
to the Union; that it ripened into a benefit after it had
been enjoyed by it; that any benefit being enjoyed by
the employees could not be reduced, diminished,
discontinued, or eliminated by the employer in
accordance with Article 100 of the Labor Code, which
prohibited the diminution or elimination by the
employer of the employees’ benefit; and that
jurisprudence had not laid down any rule requiring a
specific minimum number of years before a benefit
would constitute a voluntary company practice which
could not be unilaterally withdrawn by the employer.
The Arbitration Committee further stated that,
although the removal of the chairs was done in good
faith, CCBPI failed to present evidence regarding
instances of sleeping while on duty. There were no
specific details as to the number of incidents of
sleeping on duty, who were involved, when these
incidents happened, and what actions were taken.
There was no evidence either of any accident or
injury in the many years that the bottling operators
used chairs. To the Arbitration Committee, it was
puzzling why it took 34 and 20 years for CCBPI to be
so solicitous of the bottling operators’ safety that it
removed their chairs so that they would not fall
asleep and injure themselves.
Finally, the Arbitration Committee was of the view
that, contrary to CCBPI’s position, line efficiency was
the result of many factors and it could not be
attributed solely to one such as the removal of the
chairs.
Not contented with the Arbitration Committee’s
decision, CCBPI filed a petition for review under Rule
43 before the CA.
Ruling of the CA
On May 24, 2011, the CA rendered a contrasting
decision which nullified and set aside the decision of
LABOR LAW
the Arbitration Committee. The dispositive portion of
the CA decision reads:
WHEREFORE, premises considered, the petition is
hereby GRANTED and the Decision, dated 11 June
2010, of the Arbitration Committee in AC389-VII-09-
10-2009D is NULLIFIED and SET ASIDE. A new one
is entered in its stead SUSTAINING the removal of
the chairs of the bottling operators from the
manufacturing/production line.5
The CA held, among others, that the removal of the
chairs from the manufacturing/production lines by
CCBPI is within the province of management
prerogatives; that it was part of its inherent right to
control and manage its enterprise effectively; and
that since it was the employer’s discretion to
constantly develop measures or means to optimize
the efficiency of its employees and to keep its
machineries and equipment in the best of conditions,
it was only appropriate that it should be given wide
latitude in exercising it.
The CA stated that CCBPI complied with the
conditions of a valid exercise of a management
prerogative when it decided to remove the chairs
used by the bottling operators in the
manufacturing/production lines. The removal of the
chairs was solely motivated by the best intentions for
both the Union and CCBPI, in line with the "I
Operate, I Maintain, I Clean" program for bottling
operators, wherein every bottling operator was given
the responsibility to keep the machinery and
equipment assigned to him clean and safe. The
program would reinforce the task of bottling
operators to constantly move about in the
performance of their duties and responsibilities.
Without the chairs, the bottling operators could
efficiently supervise these machineries’ operations
and maintenance. It would also be beneficial for them
because the working time before the break in each
rotation for each shift was substantially reduced from
two and a half hours (2 ½ ) to one and a half hours (1
½) before the 30-minute break. This scheme was
clearly advantageous to the bottling operators as the
number of resting periods was increased. CCBPI had
the best intentions in removing the chairs because
some bottling operators had the propensity to fall
asleep while on the job and sleeping on the job ran
the risk of injury exposure and removing them
reduced the risk.
The CA added that the decision of CCBPI to remove
the chairs was not done for the purpose of defeating
or circumventing the rights of its employees under
the special laws, the Collective Bargaining
Agreement (CBA) or the general principles of justice
and fair play. It opined that the principles of justice
and fair play were not violated because, when the
chairs were removed, there was a commensurate
reduction of the working time for each rotation in
each shift. The provision of chairs for the bottling
operators was never part of the CBAs contracted
between the Union and CCBPI. The chairs were not
provided as a benefit because such matter was
KAYE RAMOGA
dependent upon the exigencies of the work of the
bottling operators. As such, CCBPI could withdraw
this provision if it was not necessary in the
exigencies of the work, if it was not contributing to
the efficiency of the bottling operators or if it would
expose them to some hazards. Lastly, the CA
explained that the provision of chairs to the bottling
operators cannot be covered by Article 100 of the
Labor Code on elimination or diminution of benefits
because the employee’s benefits referred to therein
mainly involved monetary considerations or
privileges converted to their monetary equivalent.
Disgruntled with the adverse CA decision, the Union
has come to this Court praying for its reversal on the
following GROUNDS
I THAT WITH DUE RESPECT, THE COURT OF
APPEALS COMMITTED REVERSIBLE ERROR IN
HOLDING THAT A PETITION FOR REVIEW
UNDER RULE 43 OF THE RULES OF COURT IS
THE PROPER REMEDY OF CHALLENGING
BEFORE SAID COURT THE DECISION OF THE
VOLUNTARY ARBITRATOR OR PANEL OF
VOLUNTARY ARBITRATORS UNDER THE LABOR
CODE.
II THAT WITH DUE RESPECT, THE COURT OF
APPEALS GRAVELY ABUSED ITS DISCRETION IN
NULLIFYING AND SETTING ASIDE THE DECISION
OF THE PANEL OF VOLUNTARY ARBITRATORS
WHICH DECLARED AS NOT VALID THE
REMOVAL OF THE CHAIRS OF THE OPERATORS
IN THE MANUFACTURING AND/OR PRODUCTION
LINE.
In advocacy of its positions, the Union argues that
the proper remedy in challenging the decision of the
Arbitration Committee before the CA is a petition for
certiorari under Rule 65. The petition for review
under Rule 43 resorted to by CCBPI should have
been dismissed for being an improper remedy. The
Union points out that the parties agreed to submit the
unresolved grievance involving the removal of chairs
to voluntary arbitration pursuant to the provisions of
Article V of the existing CBA. Hence, the assailed
decision of the Arbitration Committee is a judgment
or final order issued under the Labor Code of the
Philippines. Section 2, Rule 43 of the 1997 Rules of
Civil Procedure, expressly states that the said rule
does not cover cases under the Labor Code of the
Philippines. The judgments or final orders of the
Voluntary Arbitrator or Panel of Voluntary Arbitrators
are governed by the provisions of Articles 260, 261,
262, 262-A, and 262-B of the Labor Code of the
Philippines.
On the substantive aspect, the Union argues that
there is no connection between CCBPI’s "I Operate, I
Maintain, I Clean" program and the removal of the
chairs because the implementation of the program
was in 2006 and the removal of the chairs was done
in 2008. The 30-minute break is part of an operator’s
working hours and does not make any difference.
The frequency of the break period is not
LABOR LAW
advantageous to the operators because it cannot
compensate for the time they are made to stand
throughout their working time. The bottling operators
get tired and exhausted after their tour of duty even
with chairs around. How much more if the chairs are
removed?
The Union further claims that management
prerogatives are not absolute but subject to certain
limitations found in law, a collective bargaining
agreement, or general principles of fair play and
justice. The operators have been performing their
assigned duties and responsibilities satisfactorily for
thirty (30) years using chairs. There is no record of
poor performance because the operators are sitting
all the time. There is no single incident when the
attention of an operator was called for failure to carry
out his assigned tasks. CCBPI has not submitted any
evidence to prove that the performance of the
operators was poor before the removal of the chairs
and that it has improved after the chairs were
removed. The presence of chairs for more than 30
years made the operators awake and alert as they
could relax from time to time. There are sanctions for
those caught sleeping while on duty. Before the
removal of the chairs, the efficiency of the operators
was much better and there was no recorded
accident. After the removal of the chairs, the
efficiency of the operators diminished considerably,
resulting in the drastic decline of line efficiency.
Finally, the Union asserts that the removal of the
chairs constitutes violation of the Occupational
Health and Safety Standards, which provide that
every company shall keep and maintain its workplace
free from hazards that are likely to cause physical
harm to the workers or damage to property. The
removal of the chairs constitutes a violation of the
State policy to assure the right of workers to a just
and humane condition of work pursuant to Article 3 of
the Labor Code and of CCBPI’s Global Workplace
Rights Policy. Hence, the unilateral withdrawal,
elimination or removal of the chairs, which have been
in existence for more than 30 years, constitutes a
violation of existing practice.
The respondent’s position
CCBPI reiterates the ruling of the CA that a petition
for review under Rule 43 of the Rules of Court was
the proper remedy to question the decision of the
Arbitration Committee. It likewise echoes the ruling of
the CA that the removal of the chairs was a
legitimate exercise of management prerogative; that
it was done not to harm the bottling operators but for
the purpose of optimizing their efficiency and
CCBPI’s machineries and equipment; and that the
exercise of its management prerogative was done in
good faith and not for the purpose of circumventing
the rights of the employees under the special laws,
the CBA or the general principles of justice and fair
play.
The Court’s Ruling
The decision in this case rests on the resolution of
two basic questions. First, is an appeal to the CA via
KAYE RAMOGA
a petition for review under Rule 43 of the 1997 Rules
of Civil Procedure a proper remedy to question the
decision of the Arbitration Committee? Second, was
the removal of the bottling operators’ chairs from
CCBPI’s production/manufacturing lines a valid
exercise of a management prerogative?
The Court sustains the ruling of the CA on both
issues.
Regarding the first issue, the Union insists that the
CA erred in ruling that the recourse taken by CCBPI
in appealing the decision of the Arbitration
Committee was proper. It argues that the proper
remedy in challenging the decision of the Voluntary
Arbitrator before the CA is by filing a petition for
certiorari under Rule 65 of the Rules of Court, not a
petition for review under Rule 43.
CCBPI counters that the CA was correct in ruling that
the recourse it took in appealing the decision of the
Arbitration Committee to the CA via a petition for
review under Rule 43 of the Rules of Court was
proper and in conformity with the rules and prevailing
jurisprudence.
A Petition for Review under Rule 43 is the proper
remedy
CCBPI is correct. This procedural issue being
debated upon is not novel. The Court has already
ruled in a number of cases that a decision or award
of a voluntary arbitrator is appealable to the CA via a
petition for review under Rule 43. The recent case of
Samahan Ng Mga Manggagawa Sa Hyatt
(SAMASAH-NUWHRAIN) v. Hon. Voluntary
Arbitrator Buenaventura C. Magsalin and Hotel
Enterprises of the Philippines6 reiterated the well-
settled doctrine on this issue, to wit:
In the case of Samahan ng mga Manggagawa sa
Hyatt-NUWHRAIN-APL v. Bacungan,7 we repeated
the well-settled rule that a decision or award of a
voluntary arbitrator is appealable to the CA via
petition for review under Rule 43. We held that:
"The question on the proper recourse to assail a
decision of a voluntary arbitrator has already been
settled in Luzon Development Bank v. Association of
Luzon Development Bank Employees, where the
Court held that the decision or award of the voluntary
arbitrator or panel of arbitrators should likewise be
appealable to the Court of Appeals, in line with the
procedure outlined in Revised Administrative Circular
No. 1-95 (now embodied in Rule 43 of the 1997
Rules of Civil Procedure), just like those of the quasi-
judicial agencies, boards and commissions
enumerated therein, and consistent with the original
purpose to provide a uniform procedure for the
appellate review of adjudications of all quasi-judicial
entities.
Subsequently, in Alcantara, Jr. v. Court of Appeals,
and Nippon Paint Employees Union-Olalia v. Court of
Appeals, the Court reiterated the aforequoted ruling.
LABOR LAW
In Alcantara, the Court held that notwithstanding
Section 2 of Rule 43, the ruling in Luzon
Development Bank still stands. The Court explained,
thus:
‘The provisions may be new to the Rules of Court but
it is far from being a new law. Section 2, Rules 42 of
the 1997 Rules of Civil Procedure, as presently
worded, is nothing more but a reiteration of the
exception to the exclusive appellate jurisdiction of the
Court of Appeals, as provided for in Section 9, Batas
Pambansa Blg. 129, as amended by Republic Act
No. 7902:
(3) Exclusive appellate jurisdiction over all final
judgments, decisions, resolutions, orders or awards
of Regional Trial Courts and quasi-judicial agencies,
instrumentalities, boards or commissions, including
the Securities and Exchange Commission, the
Employees’ Compensation Commission and the Civil
Service Commission, except those falling within the
appellate jurisdiction of the Supreme Court in
accordance with the Constitution, the Labor Code of
the Philippines under Presidential Decree No. 442,
as amended, the provisions of this Act and of
subparagraph (1) of the third paragraph and
subparagraph (4) of the fourth paragraph of Section
17 of the Judiciary Act of 1948.’
The Court took into account this exception in Luzon
Development Bank but, nevertheless, held that the
decisions of voluntary arbitrators issued pursuant to
the Labor Code do not come within its ambit x x x."
Furthermore, Sections 1, 3 and 4, Rule 43 of the
1997 Rules of Civil Procedure, as amended, provide:
"SECTION 1. Scope. - This Rule shall apply to
appeals from judgments or final orders of the Court
of Tax Appeals and from awards, judgments, final
orders or resolutions of or authorized by any quasi-
judicial agency in the exercise of its quasi-judicial
functions. Among these agencies are the x x x, and
voluntary arbitrators authorized by law.
xxxx
SEC. 3. Where to appeal. - An appeal under this
Rule may be taken to the Court of Appeals within the
period and in the manner therein provided, whether
the appeal involves questions of fact, of law, or
mixed questions of fact and law.
SEC. 4. Period of appeal. - The appeal shall be taken
within fifteen (15) days from notice of the award,
judgment, final order or resolution, or from the date of
its last publication, if publication is required by law for
its effectivity, or of the denial of petitioner’s motion for
new trial or reconsideration duly filed in accordance
with the governing law of the court or agency a quo.
x x x. (Emphasis supplied.)’
Hence, upon receipt on May 26, 2003 of the
Voluntary Arbitrator’s Resolution denying petitioner’s
motion for reconsideration, petitioner should have
KAYE RAMOGA
filed with the CA, within the fifteen (15)-day
reglementary period, a petition for review, not a
petition for certiorari.
On the second issue, the Union basically claims that
the CCBPI’s decision to unilaterally remove the
operators’ chairs from the production/manufacturing
lines of its bottling plants is not valid because it
violates some fundamental labor policies. According
to the Union, such removal constitutes a violation of
the 1) Occupational Health and Safety Standards
which provide that every worker is entitled to be
provided by the employer with appropriate seats,
among others; 2) policy of the State to assure the
right of workers to a just and humane condition of
work as provided for in Article 3 of the Labor
Code;8 3) Global Workplace Rights Policy of CCBPI
which provides for a safe and healthy workplace by
maintaining a productive workplace and by
minimizing the risk of accident, injury and exposure
to health risks; and 4) diminution of benefits provided
in Article 100 of the Labor Code.9
Opposing the Union’s argument, CCBPI mainly
contends that the removal of the subject chairs is a
valid exercise of management prerogative. The
management decision to remove the subject chairs
was made in good faith and did not intend to defeat
or circumvent the rights of the Union under the
special laws, the CBA and the general principles of
justice and fair play.
Again, the Court agrees with CCBPI on the matter.
A Valid Exercise of Management Prerogative
The Court has held that management is free to
regulate, according to its own discretion and
judgment, all aspects of employment, including
hiring, work assignments, working methods, time,
place, and manner of work, processes to be followed,
supervision of workers, working regulations, transfer
of employees, work supervision, lay-off of workers,
and discipline, dismissal and recall of workers. The
exercise of management prerogative, however, is not
absolute as it must be exercised in good faith and
with due regard to the rights of labor.10
In the present controversy, it cannot be denied that
CCBPI removed the operators’ chairs pursuant to a
national directive and in line with its "I Operate, I
Maintain, I Clean" program, launched to enable the
Union to perform their duties and responsibilities
more efficiently. The chairs were not removed
indiscriminately. They were carefully studied with due
regard to the welfare of the members of the Union.
The removal of the chairs was compensated by: a) a
reduction of the operating hours of the bottling
operators from a two-and-one-half (2 ½)-hour
rotation period to a one-and-a-half (1 ½) hour rotation
period; and b) an increase of the break period from
15 to 30 minutes between rotations.
Apparently, the decision to remove the chairs was
done with good intentions as CCBPI wanted to avoid
LABOR LAW
instances of operators sleeping on the job while in
the performance of their duties and responsibilities
and because of the fact that the chairs were not
necessary considering that the operators constantly
move about while working. In short, the removal of
the chairs was designed to increase work efficiency.
Hence, CCBPI’s exercise of its management
prerogative was made in good faith without doing any
harm to the workers’ rights.
The fact that there is no proof of any operator
sleeping on the job is of no moment. There is no
guarantee that such incident would never happen as
sitting on a chair is relaxing. Besides, the operators
constantly move about while doing their job. The
ultimate purpose is to promote work efficiency.
No Violation of Labor Laws
The rights of the Union under any labor law were not
violated. There is no law that requires employers to
provide chairs for bottling operators. The CA
correctly ruled that the Labor Code, specifically
Article 13211 thereof, only requires employers to
provide seats for women. No similar requirement is
mandated for men or male workers. It must be
stressed that all concerned bottling operators in this
case are men.
There was no violation either of the Health, Safety
and Social Welfare Benefit provisions under Book IV
of the Labor Code of the Philippines. As shown in the
foregoing, the removal of the chairs was
compensated by the reduction of the working hours
and increase in the rest period. The directive did not
expose the bottling operators to safety and health
hazards.
The Union should not complain too much about
standing and moving about for one and one-half (1
½) hours because studies show that sitting in
workplaces for a long time is hazardous to one’s
health. The report of VicHealth, Australia,12 disclosed
that "prolonged workplace sitting is an emerging
public health and occupational health issue with
serious implications for the health of our working
population. Importantly, prolonged sitting is a risk
factor for poor health and early death, even among
those who meet, or exceed, national13 activity
guidelines." In another report,14 it was written:
Workers needing to spend long periods in a seated
position on the job such as taxi drivers, call centre
and office workers, are at risk for injury and a variety
of adverse health effects.
The most common injuries occur in the muscles,
bones, tendons and ligaments, affecting the neck
and lower back regions. Prolonged sitting:
● reduces body movement making muscles more
likely to pull, cramp or strain when stretched
suddenly, causes fatigue in the back and neck
muscles by slowing the blood supply and puts high
KAYE RAMOGA
tension on the spine, especially in the low back or
neck, and
● causes a steady compression on the spinal discs
that hinders their nutrition and can contribute to their
premature degeneration.
Sedentary employees may also face a gradual
deterioration in health if they do not exercise or do
not lead an otherwise physically active life. The most
common health problems that these employees
experience are disorders in blood circulation and
injuries affecting their ability to move. Deep Vein
Thrombosis (DVT), where a clot forms in a large vein
after prolonged sitting (eg after a long flight) has also
been shown to be a risk.
Workers who spend most of their working time
seated may also experience other, less specific
adverse health effects. Common effects include
decreased fitness, reduced heart and lung efficiency,
and digestive problems. Recent research has
identified too much sitting as an important part of the
physical activity and health equation, and suggests
we should focus on the harm caused by daily
inactivity such as prolonged sitting.
Associate professor David Dunstan leads a team at
the Baker IDI in Melbourne which is specifically
researching sitting and physical activity. He has
found that people who spend long periods of time
seated (more than four hours per day) were at risk of:
● higher blood levels of sugar and fats,
● larger waistlines, and
● higher risk of metabolic syndrome regardless of
how much moderate to vigorous exercise they had.
In addition, people who interrupted their sitting time
more often just by standing or with light activities
such as housework, shopping, and moving about the
office had healthier blood sugar and fat levels, and
smaller waistlines than those whose sitting time was
not broken up.
Of course, in this case, if the chairs would be
returned, no risks would be involved because of the
shorter period of working time. The study was cited
just to show that there is a health risk in prolonged
sitting.
No Violation of the CBA
The CBA15 between the Union and CCBPI contains
no provision whatsoever requiring the management
to provide chairs for the operators in the
production/manufacturing line while performing their
duties and responsibilities. On the contrary, Section 2
of Article 1 of the CBA expressly provides as follows:
Article I – SCOPE
SECTION 2. Scope of the Agreement. All the terms
and conditions of employment of employees and
workers within the appropriate bargaining unit (as
defined in Section 1 hereof) are embodied in this
Agreement and the same shall govern the
relationship between the COMPANY and such
LABOR LAW
employees and/or workers. On the other hand, all
such benefits and/or privileges as are not expressly
provided for in this Agreement but which are now
being accorded, may in the future be accorded, or
might have previously been accorded, to the
employees and/or workers, shall be deemed as
purely voluntary acts on the part of the COMPANY in
each case, and the continuance and repetition
thereof now or in the future, no matter how long or
how often, shall not be construed as establishing an
obligation on the part of the COMPANY. It is however
understood that any benefits that are agreed upon by
and between the COMPANY and the UNION in the
Labor-Management Committee Meetings regarding
the terms and conditions of employment outside the
CBA that have general application to employees who
are similarly situated in a Department or in the Plant
shall be implemented. [emphasis and underscoring
supplied]
As can be gleaned from the aforecited provision, the
CBA expressly provides that benefits and/or
privileges, not expressly given therein but which are
presently being granted by the company and enjoyed
by the employees, shall be considered as purely
voluntary acts by the management and that the
continuance of such benefits and/or privileges, no
matter how long or how often, shall not be
understood as establishing an obligation on the
company’s part. Since the matter of the chairs is not
expressly stated in the CBA, it is understood that it
was a purely voluntary act on the part of CCBPI and
the long practice did not convert it into an obligation
or a vested right in favor of the Union.
No Violation of the general principles of justice
and fair play
The Court completely agrees with the CA ruling that
the removal of the chairs did not violate the general
principles of justice and fair play because the bottling
operators’ working time was considerably reduced
from two and a half (2 ½) hours to just one and a half
(1 ½) hours and the break period, when they could sit
down, was increased to 30 minutes between
rotations. The bottling operators’ new work schedule
is certainly advantageous to them because it greatly
increases their rest period and significantly
decreases their working time. A break time of thirty
(30) minutes after working for only one and a half (1
½) hours is a just and fair work schedule.
No Violation of Article 100 of the Labor Code
The operators’ chairs cannot be considered as one of
the employee benefits covered in Article 10016 of the
Labor Code. In the Court’s view, the term "benefits"
mentioned in the non-diminution rule refers to
monetary benefits or privileges given to the
employee with monetary equivalents.
Such benefits or privileges form part of the
employees’ wage, salary or compensation making
them enforceable obligations.
KAYE RAMOGA
This Court has already decided several cases
regarding the non-diminution rule where the benefits
or privileges involved in those cases mainly concern
monetary considerations or privileges with monetary
equivalents. Some of these cases are: Eastern
Telecommunication Phils. Inc. v. Eastern Telecoms
Employees Union,17 where the case involves the
payment of 14th, 15th and 16th month bonuses;
Central Azucarera De Tarlac v. Central Azucarera De
Tarlac Labor Union-NLU,18 regarding the 13th month
pay, legal/special holiday pay, night premium pay
and vacation and sick leaves; TSPIC Corp. v. TSPIC
Employees Union,19 regarding salary wage
increases; and American Wire and Cable Daily
Employees Union vs. American Wire and Cable
Company, Inc.,20 involving service awards with cash
incentives, premium pay, Christmas party with
incidental benefits and promotional increase.
In this regard, the Court agrees with the CA when it
resolved the matter and wrote:
Let it be stressed that the aforequoted article speaks
of non-diminution of supplements and other
employee benefits. Supplements arc privileges given
to an employee which constitute as extra
remuneration besides his or her basic ordinary
earnings and wages. From this definition, We can
only deduce that the other employee benefits spoken
of by Article 100 pertain only to those which are
susceptible of monetary considerations. Indeed, this
could only be the most plausible conclusion because
the cases tackling Article 100 involve mainly with
monetary considerations or privileges converted to
their monetary equivalents. x x x x
Without a doubt, equating the provision of chairs to
the bottling operators Ds something within the ambit
of "benefits'' in the context of Article 100 of the Labor
Code is unduly stretching the coverage of the law.
The interpretations of Article 100 of the Labor Code
do not show even with the slightest hint that such
provision of chairs for the bottling operators may be
sheltered under its mantle.21
LABOR LAW
Jurisprudence recognizes the exercise of
management prerogatives. Labor Jaws also
discourage interference with an employer's judgment
in the conduct of its business. For this reason, the
Court often declines to interfere in legitimate
business decisions of employers. The law must
protect not only the welfare of the employees, but
also the right of the employers.22
WHEREFORE, the petition is DENIED. SO
ORDERED.
Footnotes
8 Article 3. Declaration of basic policy. The State shall
afford protection to labor, promote full employment, ensure
equal work opportunities regardless of sex, race or creed
and regulate the relations between workers and
employers. The State shall assure the rights of workers to
self-organization, collective bargaining, security of tenure,
and just and humane conditions of work.
9 ART. 100. Prohibition against elimination or diminution of
benefits. – Nothing in this Book shall be construed to
eliminate or in any way diminish supplements, or other
employee benefits being enjoyed at the time of
promulgation of this Code.
11 Art. 132. Facilities for Women. The Secretary of Labor
shall establish standards that will insure the safety and
health of women employees. In appropriate cases, he
shall by regulations, require employers to:
(a) Provide seats proper for women and permit them to
use such seats when they are free from work and during
working hours, provided they can perform their duties in
this position without detriment to
16 Art. 100. Prohibition against elimination or diminution of
benefits. Nothing in this Book shall be construed to
eliminate or in any way diminish supplements, or other
employee benefits being enjoyed at the time of
promulgation of this Code.
KAYE RAMOGA
G.R. Nos. 196280 & 196286 April 2, 2014
UNIVERSIDAD DE STA. ISABEL. vs. MARVIN-JULIAN L. SAMBAJON, JR.
VILLARAMA, JR., J.:
Before us is a petition for review on certiorari under
Rule 45 urging this Court to set aside the
Decision1 dated March 25, 2011 of the Court of
Appeals (CA) in CA-GR. SP Nos. 108103 and
108168 which affirmed with modification the
Decision2 dated August 1, 2008 of the National Labor
Relations Commission (NLRC). The NLRC affirmed
the Decision3 dated August 22, 2006 of the Labor
Arbiter in NLRC Sub-RAB V-05-04-00053-05)
declaring petitioner liable for illegal dismissal of
respondent.
The Facts
Universidad de Sta. Isabel (petitioner) is a non-stock,
non-profit religious educational institution in Naga
City. Petitioner hired Marvin-Julian L. Sambajon, Jr.
(respondent) as a full-time college faculty member
with the rank of Assistant Professor on probationary
status, as evidenced by an Appointment
Contract4 dated November 1, 2002, effective
November 1, 2002 up to March 30, 2003.
After the aforesaid contract expired, petitioner
continued to give teaching loads to respondent who
remained a full-time faculty member of the
Department of Religious Education for the two
semesters of school-year (SY) 2003-2004 (June 1,
2003 to March 31, 2004); and two semesters of SY
2004-2005 (June 2004 to March 31, 2005).5
Sometime in June 2003, after respondent completed
his course in Master of Arts in Education, major in
Guidance and Counseling, he submitted the
corresponding Special Order from the Commission
on Higher Education (CHED), together with his
credentials for the said master’s degree, to the
Human Resources Department of petitioner for the
purpose of salary adjustment/increase.
Subsequently, respondent’s salary was increased, as
reflected in his pay slips starting October 1-15,
2004.6 He was likewise re-ranked from Assistant
Professor to Associate Professor.
In a letter dated October 15, 2004 addressed to the
President of petitioner, Sr. Ma. Asuncion G.
Evidente, D.C., respondent vigorously argued that
his salary increase should be made effective as of
June 2003 and demanded the payment of his salary
differential. The school administration thru Sr. Purita
Gatongay, D.C., replied by explaining its policy on re-
ranking of faculty members7, viz: x x x x
Please be informed that teachers in the Universidad
are not re-ranked during their probationary period.
The Faculty Manual as revised for school year 2002-
2003 provides (page 38) "Re-ranking is done every
LABOR LAW
two years, hence the personnel hold their present
rank for two years. Those undergoing probationary
period and those on part-time basis of employment
are not covered by this provision." This provision is
found also in the 2000-2001 Operations Manual.
Your personnel file shows that you were hired as a
probationary teacher in the second semester of
school year 2002-2003. By October 2004, you will be
completing four (4) semesters (two school years) of
service. Even permanent teachers are re-ranked only
every two years, and you are not even a permanent
teacher. I am informed that you have been told
several times and made to read the Provision in the
Faculty Manual by the personnel office that you
cannot be re-ranked because you are still a
probationary teacher. x x x x8
Respondent insisted on his demand for retroactive
pay. In a letter dated January 10, 2005, Sr. Evidente
reiterated the school policy on re-ranking of teachers,
viz: x x x
Under the Faculty Manual a permanent teacher is not
entitled to re-ranking oftener than once every two
years. From this it should be obvious that, with all the
more reason, a probationary teacher would not be
entitled to "evaluation," which could result in re-
ranking or "adjustment in salary" oftener than once
every two years.
Since you are a probationary teacher, the University
is under no obligation to re-rank you or adjust your
salary after what you refer to as "evaluation."
Nevertheless, considering that in October 2004 you
were completing two years of service, the University
adjusted your salary in the light of the CHED Special
Order you submitted showing that you had obtained
the degree of Master of Arts in Education. Instead of
being grateful for the adjustment, you insist that the
adjustment be made retroactive to June 2003. Simply
stated, you want your salary adjusted after one
semester of probationary service. We do not think a
probationary teacher has better rights than a
permanent teacher in the matter of re-ranking or
"evaluation."9
However, respondent found the above explanation
insufficient and not clear enough. In his letter dated
January 12, 2005, he pointed out the case of another
faculty member -- whom he did not name -- also on
probationary status whose salary was supposedly
adjusted by petitioner at the start of school year
(June) after he/she had completed his/her master’s
degree in March. Respondent thus pleaded for the
release of his salary differential, or at the very least,
that petitioner give him categorical answers to his
questions.10
Apparently, to resolve the issue, a dialogue was held
between respondent and Sr. Evidente. As to the
KAYE RAMOGA
outcome of this conversation, the parties gave
conflicting accounts. Respondent claimed that Sr.
Evidente told him that the school administration had
decided to shorten his probationary period to two
years on the basis of his satisfactory
performance.11 This was categorically denied by Sr.
Evidente though the latter admitted having informed
respondent "that he was made Associate Professor
on account of his incessant requests for a salary
increase which the Universidad de Santa Isabel
eventually accommodated…considering that
[respondent] had obtained a Master’s Degree in June
2003." She further informed respondent that "his
appointment as Associate Professor did not affect his
status as a probationary employee" and that
petitioner "was not and did not exercise its
prerogative to shorten his probationary period to only
two years." Sr. Stella O. Real, D.C., who issued a
Certificate of Employment to respondent, likewise
denied that she confirmed to respondent that
petitioner has shortened his probationary
employment.12
On February 26, 2005, respondent received his letter
of termination which stated:
Greetings of Peace in the Lord!
We regret to inform your good self that your full time
probationary appointment will not be renewed when it
expires at the end of this coming March 31, 2005.
Thank you so much for the services that you have
rendered to USI and to her clientele the past several
semesters. We strongly and sincerely encourage you to
pursue your desire to complete your Post Graduate
studies in the University of your choice as soon as you are
able.
God bless you in all your future endeavors. Godspeed! 13
On April 14, 2005, respondent filed a complaint for
illegal dismissal against the petitioner.
In his Decision dated August 22, 2006, Labor Arbiter
Jesus Orlando M. Quinones ruled that there was no
just or authorized cause in the termination of
respondent’s probationary employment.
Consequently, petitioner was found liable for illegal
dismissal, thus:
WHEREFORE, in view of the foregoing, judgment is
hereby rendered finding respondent school
UNIVERSIDAD DE SANTA ISABEL liable for the
illegal dismissal of complainant MARVIN-JULIAN L.
SAMBAJON, JR.
Accordingly, and consistent with Article 279 of the
Labor Code, respondent school is hereby directed to
pay complainant full backwages covering the
period/duration of the 1st semester of academic year
2005-2006. Reinstatement being rendered moot by
the expiration of the probationary period, respondent
school is directed to pay complainant separation pay
in lieu of reinstatement computed at one (1) month’s
pay for every year of service. An award of 10%
LABOR LAW
attorney’s fees in favor of complainant is also held in
order.
(please see attached computation of monetary award
as integral part of this decision).
All other claims and charges are DISMISSED for lack
of legal and factual basis. SO ORDERED.14
Petitioner appealed to the NLRC raising the issue of
the correct interpretation of Section 92 of the Manual
of Regulations for Private Schools and DOLE-DECS-
CHED-TESDA Order No. 01, series of 1996, and
alleging grave abuse of discretion committed by the
Labor Arbiter in ruling on a cause of action/issue not
raised by the complainant (respondent) in his
position paper.
On August 1, 2008, the NLRC rendered its Decision
affirming the Labor Arbiter and holding that
respondent had acquired a permanent status
pursuant to Sections 91, 92 and 93 of the 1992
Manual of Regulations for Private Schools, in relation
to Article 281 of the Labor Code, as amended. Thus:
In the instant case, the first contract (records, pp. 36;
92) executed by the parties provides that he was
hired on a probationary status effective November 1,
2002 to March 30, 2003. While his employment
continued beyond the above-mentioned period and
lasted for a total of five (5) consecutive semesters, it
appears that the only other contract he signed is the
one (records, p. 103) for the second semester of SY
2003-2004. A portion of this contract reads:
"I am pleased to inform you that you are designated
and commissioned to be an Apostle of Love and
Service, Unity and Peace as you dedicate and
commit yourself in the exercise of your duties and
responsibilities as a:
FULL-TIME FACULTY MEMBER
of the Religious Education Department from
November 1, 2003 to March 31, 2004.
Unless otherwise renewed in writing this designation
automatically terminates as of the date expiration
above stated without further notice."
There is no showing that the complainant signed a
contract for the first and second semesters of SY
2004-2005.
Under the circumstances, it must be concluded that
the complainant has acquired permanent status. The
last paragraph of Article 281 of the Labor Code
provides that "an employee who is allowed to work
after a probationary period shall be considered a
regular employee." Based thereon, the complainant
required [sic] permanent status on the first day of the
first semester of SY 2003-2004.
As presently worded, Section 92 of the revised
Manual of Regulations for Private Schools merely
provides for the maximum lengths of the probationary
KAYE RAMOGA
periods of academic personnel of private schools in
the three (3) levels of education (elementary,
secondary, tertiary). The periods provided therein are
not requirements for the acquisition, by them, of
permanent status.
WHEREFORE, the decision appealed from is hereby
AFFIRMED. SO ORDERED.15
Petitioner and respondent sought reconsideration of
the above decision, with the former contending that
the NLRC resolved an issue not raised in the appeal
memorandum, while the latter asserted that the
NLRC erred in not awarding him full back wages so
as to conform to the finding that he had acquired a
permanent status. Both motions were denied by the
NLRC which ruled that regardless of whether or not
the parties were aware of the rules for the acquisition
of permanent status by private school teachers,
these rules applied to them and overrode their
mistaken beliefs. As to respondent’s plea for back
wages, the NLRC said the award of back wages was
not done in this case because respondent did not
appeal the Labor Arbiter’s decision.
Both parties filed separate appeals before the CA.
On motion by respondent, the two cases were
consolidated (CA-G.R. SP Nos. 108103 and
108168).16
By Decision dated March 25, 2011, the CA sustained
the conclusion of the NLRC that respondent had
already acquired permanent status when he was
allowed to continue teaching after the expiration of
his first appointment-contract on March 30, 2003.
However, the CA found it necessary to modify the
decision of the NLRC to include the award of back
wages to respondent. The dispositive portion of the
said decision reads:
WHEREFORE, premises considered, the petition
docketed as CA-G.R. SP No. 108103 is GRANTED.
The challenged Decision of the NLRC dated August
1, 2008 in NLRC NCR CA No. 050481-06 (NLRC
Sub-RAB V-05-04-00053-05) is AFFIRMED with
MODIFICATION in that Universidad de Sta. Isabel is
directed to reinstate Marvin-Julian L. Sambajon, Jr.
to his former position without loss of seniority rights
and to pay him full backwages computed from the
time his compensation was withheld from him up to
the time of his actual reinstatement. All other aspects
are AFFIRMED.
As regards CA-G.R. SP No. 108168, the petition is
DENIED for lack of merit. SO ORDERED.17
The Petition/Issues
Before this Court, petitioner ascribes grave error on
the part of the CA in sustaining the NLRC which
ruled that respondent was dismissed without just or
authorized cause at the time he had already acquired
permanent or regular status since petitioner allowed
him to continue teaching despite the expiration of the
first contract of probationary employment for the
LABOR LAW
second semester of SY 2002-2003. Petitioner at the
outset underscores the fact that the NLRC decided
an issue which was not raised on appeal, i.e.,
whether respondent had attained regular status. It
points out that the Labor Arbiter’s finding that
respondent was dismissed while still a probationary
employee was not appealed by him, and hence such
finding had already become final.
In fine, petitioner asks this Court to rule on the
following issues: (1) whether the NLRC correctly
resolved an issue not raised in petitioner’s appeal
memorandum; and (2) whether respondent’s
probationary employment was validly terminated by
petitioner.
Our Ruling: The petition is partly meritorious.
Issues on Appeal before the NLRC
Section 4(d), Rule VI of the 2005 Revised Rules of
Procedure of the NLRC, which was in force at the
time petitioner appealed the Labor Arbiter’s decision,
expressly provided that, on appeal, the NLRC shall
limit itself only to the specific issues that were
elevated for review, to wit:
Section 4. Requisites for perfection of appeal. x x x.
(d) Subject to the provisions of Article 218 of the
Labor Code, once the appeal is perfected in
accordance with these Rules, the Commission shall
limit itself to reviewing and deciding only the specific
issues that were elevated on appeal.
We have clarified that the clear import of the
aforementioned procedural rule is that the NLRC
shall, in cases of perfected appeals, limit itself to
reviewing those issues which are raised on appeal.
As a consequence thereof, any other issues which
were not included in the appeal shall become final
and executory.18
In this case, petitioner sets forth the following issues
in its appeal memorandum:
5.01
WHETHER THE MARVIN JULIAN L. SAMBAJON,
JR. WAS ILLEGALLY DISMISSED FROM THE
UNIVERSIDAD DE STA. ISABEL.
5.02
WHETHER THE UNIVERSIDAD DE STA. ISABEL
SHORTENED THE PROBATIONARY PERIOD OF
MARVIN JULIAN L. SAMBAJON.
5.03
WHETHER RESPONDENTS-APPELLANTS ARE
ENTITLED TO DAMAGES.19
Specifically, petitioner sought the correct
interpretation of the Manual of Regulations for
Private School Teachers and DOLE-DECS-CHED-
TESDA Order No. 01, series of 1996, insofar as the
probationary period for teachers.
In reviewing the Labor Arbiter’s finding of illegal
dismissal, the NLRC concluded that respondent had
already attained regular status after the expiration of
KAYE RAMOGA
his first appointment contract as probationary
employee. Such conclusion was but a logical result
of the NLRC’s own interpretation of the law. Since
petitioner elevated the questions of the validity of
respondent’s dismissal and the applicable
probationary period under the aforesaid regulations,
the NLRC did not gravely abuse its discretion in fully
resolving the said issues.
As the Court held in Roche (Phils.) v. NLRC20:
Petitioners then suggest that the respondent
Commission abused its discretion in awarding reliefs
in excess of those stated in the decision of the labor
arbiter despite the absence of an appeal by Villareal.
To stress this point, they cited Section 5(c) of the
Rules of Procedure of the National Labor Relations
Commission which provides that the Commission
shall, in cases of perfected appeals, limits itself to
reviewing those issues which were raised on appeal.
Consequently, those which were not raised on
appeal shall be final and executory.
There is no merit to this contention. The records
show that the petitioners elevated the issues
regarding the correctness of the award of damages,
reinstatement with backpay, retirement benefits and
the cost-saving bonus to the respondent Commission
in their appeal. This opened the said issues for
review and any action taken thereon by the
Commission was well within the parameters of its
jurisdiction. (Emphasis supplied.)
Probationary Employment Period
A probationary employee is one who is on trial by the
employer during which the employer determines
whether or not said employee is qualified for
permanent employment. A probationary appointment
is made to afford the employer an opportunity to
observe the fitness of a probationary employee while
at work, and to ascertain whether he will become a
proper and efficient employee. The word
probationary as used to describe the period of
employment implies the purpose of the term or
period, but not its length.21
It is well settled that the employer has the right or is
at liberty to choose who will be hired and who will be
denied employment. In that sense, it is within the
exercise of the right to select his employees that the
employer may set or fix a probationary period within
which the latter may test and observe the conduct of
the former before hiring him permanently.22 The law,
however, regulates the exercise of this prerogative to
fix the period of probationary employment. While
there is no statutory cap on the minimum term of
probation, the law sets a maximum "trial period"
during which the employer may test the fitness and
efficiency of the employee.23
Article 281 of the Labor Code provides:
ART. 281. Probationary Employment.–Probationary
employment shall not exceed six (6) months from the
date the employee started working, unless it is
LABOR LAW
covered by an apprenticeship agreement stipulating
a longer period. The services of an employee who
has been engaged on a probationary basis may be
terminated for a just cause or when he fails to qualify
as a regular employee in accordance with
reasonable standards made known by the employer
to the employee at the time of his engagement. An
employee who is allowed to work after a probationary
period shall be considered a regular employee.
The probationary employment of teachers in private
schools is not governed purely by the Labor Code.
The Labor Code is supplemented with respect to the
period of probation by special rules found in the
Manual of Regulations for Private Schools.24 On the
matter of probationary period, Section 92 of the 1992
Manual of Regulations for Private Schools
regulations states:
Section 92. Probationary Period. – Subject in all
instances to compliance with the Department and
school requirements, the probationary period for
academic personnel shall not be more than three (3)
consecutive years of satisfactory service for those in
the elementary and secondary levels, six (6)
consecutive regular semesters of satisfactory service
for those in the tertiary level, and nine (9)
consecutive trimesters of satisfactory service for
those in the tertiary level where collegiate courses
are offered on a trimester basis. (Emphasis
supplied.)
Thus, it is the Manual of Regulations for Private
Schools, and not the Labor Code, that determines
whether or not a faculty member in an educational
institution has attained regular or permanent
status.25 Section 9326 of the 1992 Manual of
Regulations for Private Schools provides that full-
time teachers who have satisfactorily completed their
probationary period shall be considered regular or
permanent.
In this case, the CA sustained the NLRC’s ruling that
respondent was illegally dismissed considering that
he had become a regular employee when petitioner
allowed him to work beyond the date specified in his
first probationary appointment contract which expired
on March 30, 2003. According to the CA:
… As can be gleaned from Section 92 of the 1992
Manual of Regulations for Private Schools, the
probationary period applicable in this case is not
more than six (6) consecutive regular semesters of
satisfactory service. In other words, the probationary
period for academic personnel in the tertiary level
runs from one (1) semester to six (6) consecutive
regular semesters of satisfactory service. In the
instant case, records reveal that Sambajon, Jr. only
signed two appointment contracts. The first
appointment-contract which he signed was dated
November 2002 for the period November 1, 2002 to
March 30, 2003, as Assistant Professor 10 on
probationary status. x x x The second appointment-
contract which Sambajon, Jr. executed was dated
February 26, 2004, for the period November 1, 2003
KAYE RAMOGA
to March 31, 2004. x x x Compared with the first
appointment-contract, it was not indicated in the
February 26, 2004 appointment-contract that
Sambajon, Jr. was hired on probationary status,
which explains the NLRC’s conclusion that
Sambajon, Jr. already attained permanent status. At
this juncture, it is worthy to emphasize that other than
the period provided under Article 281 of the Labor
Code, the following quoted portion of Article 281 of
the Labor Code still applies:
"ART. 281. PROBATIONARY EMPLOYMENT. –
x x x x An employee who is allowed to work after a
probationary period shall be considered a regular
employee."
Thus, We sustain the NLRC’s conclusion that
Sambajon, Jr. acquired permanent status on the first
day of the first semester of SY 2003-2004 when he
was allowed to continue with his teaching stint after
the expiration of his first appointment-contract on
March 30, 2003.27
On record are five appointment contracts28 of
respondent:
Date Contract Period
November 1, 2002 November 1, 2002-March 30, 2003
September 28, 2003 June 1, 2003-October 31, 2003
February 26, 2004 November 1, 2003-March 31, 2004
September 30, 2004 June 1, 2004-October 31, 2004
October 28, 2004 November 3, 2004-March 31, 2005
Only the first and third contracts were signed by the
respondent. However, such lack of signature in the
second contract appears not to be the crucial
element considered by the CA but the fact that the
third contract dated February 26, 2004, unlike the
previous contracts, does not indicate the nature of
the appointment as probationary employment.
According to the CA, this implies, as concluded by
the NLRC, that respondent was already a regular
employee.
We disagree.
The third appointment contract dated February 26,
2004 reads:
February 26, 2004
MR. MARVIN JULIAN SAMBAJON
Religious Education Department
Dear Mr. Sambajon,
I am pleased to inform you that you are designated and
commissioned to be an Apostle of Love and Service, Unity and
Peace as you dedicate and commit yourself in the exercise of
your duties and responsibilities as a:
FULL TIME FACULTY MEMBER
of the Religious Education Department from November 1, 2003
to March 31, 2004.
Unless otherwise renewed in writing, this designation
automatically terminates as of the date expiration above states
without further notice.
As a member of the academic/clinical community, you are
expected to live by and give your full support to the promotion
and attainment of the Vision-Mission, goals and objectives, the
LABOR LAW
rules and regulations, the Core Values which the University
professes to believe and live by.
Congratulations and keep your work full in the spirit of the Lord
for the Charity of Christ urges us to live life to the fullest.
God bless
In Christ,
Sr. Ma. Asuncion G. Evidente, D.C.
USI President
Witness:
Sr. Stella O. Real, D.C.
HR Officer
I, ______________________ understand that unless renewed in
writing, my services as ________________ expires automatically
on the specific date above stated.
Furthermore, I fully accept this appointment to help build the
Kingdom of God here and now and to facilitate the living of the
Core Values and the attainment of the Vision-Mission and the
goals and objectives of the University.
Received and Conforme:
(SGD.) MARVIN-JULIAN L. SAMBAJON, JR.29
Since it was explicitly provided in the above contract
that unless renewed in writing respondent’s
appointment automatically expires at the end of the
stipulated period of employment, the CA erred in
concluding that simply because the word
"probationary" no longer appears below the
designation (Full-Time Faculty Member), respondent
had already become a permanent employee.
Noteworthy is respondent’s admission of being still
under probationary period in his January 12, 2005
letter to Sr. Evidente reiterating his demand for salary
differential, which letter was sent almost one year
after he signed the February 26, 2004 appointment
contract, to wit:
The problem is that your good office has never
categorically resolved whether or not probationary
teachers can also be evaluated for salary
adjustment. Nevertheless, inferring from your
statement that evaluation precedes re-ranking and in
fact is the basis for re-ranking, may I categorically
ask: does it really mean that since, it precedes re-
ranking, evaluation should not take place among
probationary teachers for they can not yet be re-
ranked? If so, then how pitiful are we, probationary
teachers for our credentials are never evaluated
since we cannot yet be re-ranked. Oh my goodness!
Can your good office not give me a clearer and more
convincing argument shedding light on this matter?30
Respondent nonetheless claims that subsequently,
the probationary period of three years under the
regulations was shortened by petitioner as relayed to
him by Sr. Evidente herself. However, the latter,
together with Sr. Real, categorically denied having
informed respondent that his probationary period was
abbreviated, allegedly the reason his salary
adjustment was not made retroactive. Apart from his
bare assertion, respondent has not adduced proof of
any decision of the school administration to shorten
his probationary period.
In Rev. Fr. Labajo v. Alejandro,31 we held that:
The three (3)-year period of service mentioned in
paragraph 75 [of the Manual of Regulations for
Private Schools] is of course the maximum period or
upper limit, so to speak, of probationary employment
KAYE RAMOGA
allowed in the case of private school teachers. This
necessarily implies that a regular or permanent
employment status may, under certain conditions, be
attained in less than three (3) years. By and large,
however, whether or not one has indeed attained
permanent status in one’s employment, before the
passage of three (3) years, is a matter of proof.
(Emphasis supplied.)
There can be no dispute that the period of probation
may be reduced if the employer, convinced of the
fitness and efficiency of a probationary employee,
voluntarily extends a permanent appointment even
before the three-year period ends. Conversely, if the
purpose sought by the employer is neither attained
nor attainable within the said period, the law does not
preclude the employer from terminating the
probationary employment on justifiable ground; or, a
shorter probationary period may be incorporated in a
collective bargaining agreement. But absent any
circumstances which unmistakably show that an
abbreviated probationary period has been agreed
upon, the three-year probationary term governs.32
As to the Certificate of Employment33 issued by Sr.
Real on January 31, 2005, it simply stated that
respondent "was a full time faculty member in the
Religious Education Department of this same
institution" and that he holds the rank of Associate
Professor. There was no description or qualification
of respondent’s employment as regular or
permanent. Neither did the similar Certification34 also
issued by Sr. Real on March 18, 2005 prove
respondent’s status as a permanent faculty member
of petitioner.
It bears stressing that full-time teaching primarily
refers to the extent of services rendered by the
teacher to the employer school and not to the nature
of his appointment. Its significance lies in the rule
that only full-time teaching personnel can acquire
regular or permanent status. The provisions of
DOLE-DECS-CHED-TESDA Order No. 01, series of
1996, "Guidelines on Status of Employment of
Teachers and of Academic Personnel in Private
Educational Institutions" are herein reproduced:
2. Subject in all instances to compliance with the
concerned agency and school requirements, the
probationary period for teaching or academic
personnel shall not be more than three (3)
consecutive school years of satisfactory service
for those in the elementary and secondary levels;
six (6) consecutive regular semesters of
satisfactory service for those in the tertiary and
graduate levels, and nine (9) consecutive
trimesters of satisfactory service for those in the
tertiary level where collegiate courses are offered
on a trimester basis.
Unless otherwise provided by contract, school
academic personnel who are under probationary
employment cannot be dismissed during the
applicable probationary period, unless dismissal is
compelled by a just cause or causes.
LABOR LAW
3. Teachers or academic personnel who have
served the probationary period as provided for in
the immediately preceding paragraph shall be
made regular or permanent if allowed to work after
such probationary period. The educational
institution, however, may shorten the probationary
period after taking into account the qualifications
and performance of the probationary teachers and
academic personnel.
Full-time teaching or academic personnel are
those meeting all the following requirements:
3.1. Who possess at least the minimum academic
qualifications prescribed by the Department of
Education, Culture and Sports for Basic
Education, the Commission on Higher Education
for Tertiary Education, and the Technical
Education and Skills Development Authority for
Technical and Vocational Education under their
respective Manual of Regulations governing said
personnel;
3.2 Who are paid monthly or hourly, based on the
normal or regular teaching loads as provided for in
the policies, rules and standards of the agency
concerned;
3.3 Whose regular working day of not more than
eight (8) hours a day is devoted to the school;
3.4 Who have no other remunerative occupation
elsewhere requiring regular hours of work that will
conflict with the working hours in the school; and
3.5 Who are not teaching full-time in any other
educational institution.
All teaching or academic personnel who do not meet
the foregoing qualifications are considered part time.
4. Part-time teaching or academic personnel cannot
acquire regular or permanent employment status.
5. Teaching or academic personnel who do not meet
the minimum academic qualifications shall not
acquire tenure or regular status. The school may
terminate their services when a qualified teacher
becomes available.35
In this case, petitioner applied the maximum three-
year probationary period – equivalent to six
consecutive semesters – provided in the Manual of
Regulations. This can be gleaned from the letter
dated March 24, 2004 of Sr. Grace Namocancat,
D.C. addressed to respondent, informing the latter of
the result of evaluation of his performance for SY
2003-2004 and stating that November 2004 marks
his second year of full-time teaching, which means
he had one more year to become a permanent
employee.36
The circumstance that respondent’s services were
hired on semester basis did not negate the
applicable probationary period, which is three school
KAYE RAMOGA
years or six consecutive semesters. In Magis Young
Achievers’ Learning Center37 the Court explained the
three years probationary period rule in this wise:
The common practice is for the employer and the
teacher to enter into a contract, effective for one
school year. At the end of the school year, the
employer has the option not to renew the contract,
particularly considering the teacher’s performance. If
the contract is not renewed, the employment
relationship terminates. If the contract is renewed,
usually for another school year, the probationary
employment continues. Again, at the end of that
period, the parties may opt to renew or not to renew
the contract. If renewed, this second renewal of the
contract for another school year would then be the
last year – since it would be the third school year – of
probationary employment. At the end of this third
year, the employer may now decide whether to
extend a permanent appointment to the employee,
primarily on the basis of the employee having met
the reasonable standards of competence and
efficiency set by the employer. For the entire duration
of this three-year period, the teacher remains under
probation. Upon the expiration of his contract of
employment, being simply on probation, he cannot
automatically claim security of tenure and compel the
employer to renew his employment contract. It is
when the yearly contract is renewed for the third time
that Section 93 of the Manual becomes operative,
and the teacher then is entitled to regular or
permanent employment status.38 (Emphasis
supplied.)
Petitioner argues that respondent’s probationary
period expires after each semester he was
contracted to teach and hence it was not obligated to
renew his services at the end of the fifth semester
(March 2005) of his probationary employment. It
asserts that the practice of issuing appointment
contracts for every semester was legal and therefore
respondent was not terminated when petitioner did
not renew his contract for another semester as his
probationary contract merely expired. Plainly,
petitioner considered the subject appointment
contracts as fixed-term contracts such that it can
validly dismiss respondent at the end of each
semester for the reason that his contract had
expired.
The Court finds no merit in petitioner’s interpretation
of the Manual of Regulations, supplemented by
DOLE-DECS-CHED-TESDA Order No. 01, series of
1996. As we made clear in the afore-cited case of
Magis Young Achievers’ Learning Center, the
teacher remains under probation for the entire
duration of the three-year period. Subsequently, in
the case of Mercado v. AMA Computer College-
Parañaque City, Inc.39 the Court, speaking through
Justice Arturo D. Brion, recognized the right of
respondent school to determine for itself that it shall
use fixed-term employment contracts as its medium
for hiring its teachers. Nevertheless, the Court held
that the teachers’ probationary status should not be
LABOR LAW
disregarded simply because their contracts were
fixed.
The Conflict: Probationary Status
and Fixed-term Employment-term. Thus:
The existence of the term-to-term contracts covering
the petitioners’ employment is not disputed, nor is it
disputed that they were on probationary status – not
permanent or regular status – from the time they
were employed on May 25, 1998 and until the
expiration of their Teaching Contracts on September
7, 2000. As the CA correctly found, their teaching
stints only covered a period of at least seven (7)
consecutive trimesters or two (2) years and three (3)
months of service. This case, however, brings to the
fore the essential question of which, between the two
factors affecting employment, should prevail given
AMACC’s position that the teachers contracts
expired and it had the right not to renew them. In
other words, should the teachers’ probationary status
be disregarded simply because the contracts were
fixed-term?
The provision on employment on probationary status
under the Labor Code is a primary example of the
fine balancing of interests between labor and
management that the Code has institutionalized
pursuant to the underlying intent of the Constitution.
On the one hand, employment on probationary status
affords management the chance to fully scrutinize
the true worth of hired personnel before the full force
of the security of tenure guarantee of the Constitution
comes into play. Based on the standards set at the
start of the probationary period, management is
given the widest opportunity during the probationary
period to reject hirees who fail to meet its own
adopted but reasonable standards. These standards,
together with the just and authorized causes for
termination of employment the Labor Code expressly
provides, are the grounds available to terminate the
employment of a teacher on probationary status. For
example, the school may impose reasonably stricter
attendance or report compliance records on teachers
on probation, and reject a probationary teacher for
failing in this regard, although the same attendance
or compliance record may not be required for a
teacher already on permanent status. At the same
time, the same just and authorize[d] causes for
dismissal under the Labor Code apply to
probationary teachers, so that they may be the first to
be laid-off if the school does not have enough
students for a given semester or trimester.
Termination of employment on this basis is an
authorized cause under the Labor Code.
Labor, for its part, is given the protection during the
probationary period of knowing the company
standards the new hires have to meet during the
probationary period, and to be judged on the basis of
these standards, aside from the usual standards
applicable to employees after they achieve
permanent status. Under the terms of the Labor
Code, these standards should be made known to the
KAYE RAMOGA
teachers on probationary status at the start of their
probationary period, or at the very least under the
circumstances of the present case, at the start of the
semester or the trimester during which the
probationary standards are to be applied. Of critical
importance in invoking a failure to meet the
probationary standards, is that the school should
show – as a matter of due process – how these
standards have been applied. This is effectively the
second notice in a dismissal situation that the law
requires as a due process guarantee supporting the
security of tenure provision, and is in furtherance,
too, of the basic rule in employee dismissal that the
employer carries the burden of justifying a dismissal.
These rules ensure compliance with the limited
security of tenure guarantee the law extends to
probationary employees.
When fixed-term employment is brought into play
under the above probationary period rules, the
situation – as in the present case – may at first blush
look muddled as fixed-term employment is in itself a
valid employment mode under Philippine law and
jurisprudence. The conflict, however, is more
apparent than real when the respective nature of
fixed-term employment and of employment on
probationary status are closely examined.
The fixed-term character of employment essentially
refers to the period agreed upon between the
employer and the employee; employment exists only
for the duration of the term and ends on its own when
the term expires. In a sense, employment on
probationary status also refers to a period because of
the technical meaning "probation" carries in
Philippine labor law – a maximum period of six
months, or in the academe, a period of three years
for those engaged in teaching jobs. Their similarity
ends there, however, because of the overriding
meaning that being "on probation" connotes, i.e., a
process of testing and observing the character or
abilities of a person who is new to a role or job.
Understood in the above sense, the essentially
protective character of probationary status for
management can readily be appreciated. But this
same protective character gives rise to the
countervailing but equally protective rule that the
probationary period can only last for a specific
maximum period and under reasonable, well-laid and
properly communicated standards. Otherwise stated,
within the period of the probation, any employer
move based on the probationary standards and
affecting the continuity of the employment must
strictly conform to the probationary rules.
Under the given facts where the school year is
divided into trimesters, the school apparently utilizes
its fixed-term contracts as a convenient arrangement
dictated by the trimestral system and not because
the workplace parties really intended to limit the
period of their relationship to any fixed term and to
finish this relationship at the end of that term. If we
pierce the veil, so to speak, of the parties’ so-called
fixed-term employment contracts, what undeniably
LABOR LAW
comes out at the core is a fixed-term contract
conveniently used by the school to define and
regulate its relations with its teachers during their
probationary period.
To be sure, nothing is illegitimate in defining the
school-teacher relationship in this manner. The
school, however, cannot forget that its system of
fixed-term contract is a system that operates during
the probationary period and for this reason is subject
to the terms of Article 281 of the Labor Code. Unless
this reconciliation is made, the requirements of this
Article on probationary status would be fully negated
as the school may freely choose not to renew
contracts simply because their terms have expired.
The inevitable effect of course is to wreck the
scheme that the Constitution and the Labor Code
established to balance relationships between labor
and management.
Given the clear constitutional and statutory intents,
we cannot but conclude that in a situation where the
probationary status overlaps with a fixed-term
contract not specifically used for the fixed term it
offers, Article 281 should assume primacy and the
fixed-period character of the contract must give way.
This conclusion is immeasurably strengthened by the
petitioners’ and the AMACC’s hardly concealed
expectation that the employment on probation could
lead to permanent status, and that the contracts are
renewable unless the petitioners fail to pass the
school’s standards.40 (Additional emphasis supplied.)
Illegal Dismissal
Notwithstanding the limited engagement of
probationary employees, they are entitled to
constitutional protection of security of tenure during
and before the end of the probationary period.41 The
services of an employee who has been engaged on
probationary basis may be terminated for any of the
following: (a) a just or (b) an authorized cause; and
(c) when he fails to qualify as a regular employee in
accordance with reasonable standards prescribed by
the employer.42
Thus, while no vested right to a permanent
appointment had as yet accrued in favor of
respondent since he had not completed the
prerequisite three-year period (six consecutive
semesters) necessary for the acquisition of
permanent status as required by the Manual of
Regulations for Private Schools43 -- which has the
force of law44 -- he enjoys a limited tenure. During the
said probationary period, he cannot be terminated
except for just or authorized causes, or if he fails to
qualify in accordance with reasonable standards
prescribed by petitioner for the acquisition of
permanent status of its teaching personnel.
In a letter dated February 26, 2005, petitioner
terminated the services of respondent stating that his
probationary employment as teacher will no longer
be renewed upon its expiry on March 31, 2005,
respondent’s fifth semester of teaching. No just or
KAYE RAMOGA
authorized cause was given by petitioner. Prior to
this, respondent had consistently achieved above
average rating based on evaluation by petitioner’s
officials and students. He had also been promoted to
the rank of Associate Professor after finishing his
master’s degree course on his third semester of
teaching. Clearly, respondent’s termination after five
semesters of satisfactory service was illegal.
Respondent therefore is entitled to continue his
three-year probationary period, such that from March
31, 2005, his probationary employment is deemed
renewed for the following semester (1st semester of
SY 2005-2006). However, given the discordant
relations that had arisen from the parties’ dispute, it
can be inferred with certainty that petitioner had
opted not to retain respondent in its employ beyond
the three-year period.
On the appropriate relief and damages, we adhere to
our disposition in Magis Young Achievers’ Learning
Center45:
Finally, we rule on the propriety of the monetary
awards.1âwphi1 Petitioner, as employer, is entitled to
decide whether to extend respondent a permanent
status by renewing her contract beyond the three-
year period. Given the acrimony between the parties
which must have been generated by this controversy,
it can be said unequivocally that petitioner had opted
not to extend respondent's employment beyond this
period. Therefore, the award of backwages as a
consequence of the finding of illegal dismissal in
favor of respondent should be confined to the three-
year probationary period. Computing her monthly
salary of F15,000.00 for the next two school years
(F15,000.00 x 10 months x 2), respondent already
having received her full salaries for the year 2002-
2003, she is entitled to a total amount of
F300,000.00. Moreover, respondent is also entitled
to receive her 13th month pay correspondent to the
LABOR LAW
said two school years, computed as yearly salary,
divided by 12 months in a year, multiplied by 2,
corresponding to the school years 2003-2004 and
2004-2005, or F150,000.00 I 12 months x 2 =
F25,000.00. Thus, the NLRC was correct in awarding
respondent the amount of F325,000.00 as
backwages, inclusive of 13th month pay for the
school years 2003-2004 and 2004-2005, and the
amount of ₱3,750.00 as pro-rated 13th month pay.
WHEREFORE, the petition for review on certiorari is
PARTLY GRANTED. The Decision dated March 25,
2011 of the Court of Appeals in CA-G.R. SP Nos.
108103 & 108168 is hereby MODIFIED. Petitioner
Universidad de Sta. Isabel is hereby DIRECTED to
PAY respondent Marvin-Julian L. Sambajon, Jr. back
wages corresponding to his full monthly salaries for
one semester (1st semester of SY 2005-2006) and
pro-rated 13th month pay.
The case is REMANDED to the Labor Arbiter for a
recomputation of the amounts due to respondent in
conformity with this Decision.
No pronouncement as to costs. SO ORDERED.
Footnotes
26
Section 93. Regular or Permanent Status. Those
who have served the probationary period shall be
made regular or permanent. Full-time teachers who
have satisfactorily completed their probationary
period shall be considered regular or permanent.
KAYE RAMOGA
G.R. No. 192571 April 22, 2014
ABBOTT LABORATORIES, PHILIPPINES, CECILLE A. TERRIBLE, EDWIN D. FEIST, MARIA OLIVIA T.
YABUT-MISA, TERESITA C. BERNARDO, AND ALLAN G. ALMAZAR, Petitioners,
vs. PEARLIE ANN F. ALCARAZ, Respondent.
PERLAS-BERNABE, J.:
For resolution is respondent Pearlie Ann Alcaraz's
(Alcaraz) Motion for Reconsideration dated August
23, 2013 of the Court's Decision dated July 23, 2013
(Decision).1
At the outset, there appears to be no substantial
argument in the said motion sufficient for the Court to
depart from the pronouncements made in the initial
ruling. But if only to address Akaraz's novel
assertions, and to so placate any doubt or
misconception in the resolution of this case, the
Court proceeds to shed light on the matters indicated
below.
A. Manner of review.
Alcaraz contends that the Court should not have
conducted a re-weighing of evidence since a petition
for review on certiorari under Rule 45 of the Rules of
Court (Rules) is limited to the review of questions of
law. She submits that since what was under review
was a ruling of the Court of Appeals (CA) rendered
via a petition for certiorari under Rule 65 of the
Rules, the Court should only determine whether or
not the CA properly determined that the National
Labor Relations Commission (NLRC) committed a
grave abuse of discretion.
The assertion does not justify the reconsideration of
the assailed Decision.
A careful perusal of the questioned Decision will
reveal that the Court actually resolved the
controversy under the above-stated framework of
analysis. Essentially, the Court found the CA to have
committed an error in holding that no grave abuse of
discretion can be ascribed to the NLRC since the
latter arbitrarily disregarded the legal implication of
the attendant circumstances in this case which
should have simply resulted in the finding that
Alcaraz was apprised of the performance standards
for her regularization and hence, was properly a
probationary employee.
As the Court observed, an employee’s failure to
perform the duties and responsibilities which have
been clearly made known to him constitutes a
justifiable basis for a probationary employee’s non-
regularization. As detailed in the Decision, Alcaraz
was well-apprised of her duties and responsibilities
as well as the probationary status of her
employment:
(a) On June 27, 2004, [Abbott Laboratories,
Philippines (Abbott)] caused the publication in a
major broadsheet newspaper of its need for a
Regulatory Affairs Manager, indicating therein
the job description for as well as the duties and
responsibilities attendant to the aforesaid
LABOR LAW
position; this prompted Alcaraz to submit her
application to Abbott on October 4, 2004;
(b) In Abbott’s December 7, 2004 offer sheet, it
was stated that Alcaraz was to be employed on
a probationary status;
(c) On February 12, 2005, Alcaraz signed an
employment contract which specifically stated,
inter alia, that she was to be placed on probation
for a period of six (6) months beginning February
15, 2005 to August 14, 2005;
(d) On the day Alcaraz accepted Abbott’s
employment offer, Bernardo sent her copies of
Abbott’s organizational structure and her job
description through e-mail;
(e) Alcaraz was made to undergo a pre-
employment orientation where [Allan G.
Almazar] informed her that she had to implement
Abbott’s Code of Conduct and office policies on
human resources and finance and that she
would be reporting directly to [Kelly Walsh];
(f) Alcaraz was also required to undergo a
training program as part of her orientation;
(g) Alcaraz received copies of Abbott’s Code of
Conduct and Performance Modules from [Maria
Olivia T. Yabut-Misa] who explained to her the
procedure for evaluating the performance of
probationary employees; she was further notified
that Abbott had only one evaluation system for
all of its employees; and
(h) Moreover, Alcaraz had previously worked for
another pharmaceutical company and had
admitted to have an "extensive training and
background" to acquire the necessary skills for
her job.2
Considering the foregoing incidents which were
readily observable from the records, the Court
reached the conclusion that the NLRC committed
grave abuse of discretion, viz.:
[I]n holding that Alcaraz was illegally dismissed due
to her status as a regular and not a probationary
employee, the Court finds that the NLRC committed
a grave abuse of discretion.
To elucidate, records show that the NLRC based its
decision on the premise that Alcaraz’s receipt of her
job description and Abbott’s Code of Conduct and
Performance Modules was not equivalent to being
actually informed of the performance standards upon
which she should have been evaluated on. It,
however, overlooked the legal implication of the other
attendant circumstances as detailed herein which
should have warranted a contrary finding that Alcaraz
was indeed a probationary and not a regular
employee – more particularly the fact that she was
well-aware of her duties and responsibilities and that
her failure to adequately perform the same would
KAYE RAMOGA
lead to her non-regularization and eventually, her
termination.3
Consequently, since the CA found that the NLRC did
not commit grave abuse of discretion and denied the
certiorari petition before it, the reversal of its ruling
was thus in order.
At this juncture, it bears exposition that while NLRC
decisions are, by their nature, final and
executory4 and, hence, not subject to appellate
review,5 the Court is not precluded from considering
other questions of law aside from the CA’s finding on
the NLRC’s grave abuse of discretion. While the
focal point of analysis revolves on this issue, the
Court may deal with ancillary issues – such as, in this
case, the question of how a probationary employee is
deemed to have been informed of the standards of
his regularization – if only to determine if the
concepts and principles of labor law were correctly
applied or misapplied by the NLRC in its decision. In
other words, the Court’s analysis of the NLRC’s
interpretation of the environmental principles and
concepts of labor law is not completely prohibited in
– as it is complementary to – a Rule 45 review of
labor cases.
Finally, if only to put to rest Alcaraz’s misgivings on
the manner in which this case was reviewed, it bears
pointing out that no "factual appellate review" was
conducted by the Court in the Decision. Rather, the
Court proceeded to interpret the relevant rules on
probationary employment as applied to settled
factual findings. Besides, even on the assumption
that a scrutiny of facts was undertaken, the Court is
not altogether barred from conducting the same. This
was explained in the case of Career Philippines
Shipmanagement, Inc. v. Serna6 wherein the Court
held as follows:
Accordingly, we do not re-examine conflicting
evidence, re-evaluate the credibility of witnesses, or
substitute the findings of fact of the NLRC, an
administrative body that has expertise in its
specialized field. Nor do we substitute our "own
judgment for that of the tribunal in determining where
the weight of evidence lies or what evidence is
credible." The factual findings of the NLRC, when
affirmed by the CA, are generally conclusive on this
Court.
Nevertheless, there are exceptional cases where we,
in the exercise of our discretionary appellate
jurisdiction may be urged to look into factual issues
raised in a Rule 45 petition. For instance, when the
petitioner persuasively alleges that there is
insufficient or insubstantial evidence on record to
support the factual findings of the tribunal or court a
quo, as Section 5, Rule 133 of the Rules of Court
states in express terms that in cases filed before
administrative or quasi-judicial bodies, a fact may be
deemed established only if supported by substantial
evidence.7(Emphasis supplied)
LABOR LAW
B. Standards for regularization; conceptual
underpinnings.
Alcaraz posits that, contrary to the Court’s Decision,
one’s job description cannot by and of itself be
treated as a standard for regularization as a standard
denotes a measure of quantity or quality. By way of
example, Alcaraz cites the case of a probationary
salesperson and asks how does such employee
achieve regular status if he does not know how much
he needs to sell to reach the same.
The argument is untenable.
First off, the Court must correct Alcaraz’s mistaken
notion: it is not the probationary employee’s job
description but the adequate performance of his
duties and responsibilities which constitutes the
inherent and implied standard for regularization. To
echo the fundamental point of the Decision, if the
probationary employee had been fully apprised by
his employer of these duties and responsibilities,
then basic knowledge and common sense dictate
that he must adequately perform the same, else he
fails to pass the probationary trial and may therefore
be subject to termination.8
The determination of "adequate performance" is not,
in all cases, measurable by quantitative specification,
such as that of a sales quota in Alcaraz’s example. It
is also hinged on the qualitative assessment of the
employee’s work; by its nature, this largely rests on
the reasonable exercise of the employer’s
management prerogative. While in some instances
the standards used in measuring the quality of work
may be conveyed – such as workers who construct
tangible products which follow particular metrics, not
all standards of quality measurement may be
reducible to hard figures or are readily articulable in
specific pre-engagement descriptions. A good
example would be the case of probationary
employees whose tasks involve the application of
discretion and intellect, such as – to name a few –
lawyers, artists, and journalists. In these kinds of
occupation, the best that the employer can do at the
time of engagement is to inform the probationary
employee of his duties and responsibilities and to
orient him on how to properly proceed with the same.
The employer cannot bear out in exacting detail at
the beginning of the engagement what he deems as
"quality work" especially since the probationary
employee has yet to submit the required output. In
the ultimate analysis, the communication of
performance standards should be perceived within
the context of the nature of the probationary
employee’s duties and responsibilities.
The same logic applies to a probationary managerial
employee who is tasked to supervise a particular
department, as Alcaraz in this case.1âwphi1 It is
hardly possible for the employer, at the time of the
employee’s engagement, to map into technical
indicators, or convey in precise detail the quality
standards by which the latter should effectively
manage the department. Factors which gauge the
KAYE RAMOGA
ability of the managerial employee to either deal with
his subordinates (e.g., how to spur their
performance, or command respect and obedience
from them), or to organize office policies, are hardly
conveyable at the outset of the engagement since
the employee has yet to be immersed into the work
itself. Given that a managerial role essentially
connotes an exercise of discretion, the quality of
effective management can only be determined
through subsequent assessment. While at the time of
engagement, reason dictates that the employer can
only inform the probationary managerial employee of
his duties and responsibilities as such and provide
the allowable parameters for the same. Verily, as
stated in the Decision, the adequate performance of
such duties and responsibilities is, by and of itself, an
implied standard of regularization.
In this relation, it bears mentioning that the
performance standard contemplated by law should
not, in all cases, be contained in a specialized
system of feedbacks or evaluation. The Court takes
judicial notice of the fact that not all employers, such
as simple businesses or small-scale enterprises,
have a sophisticated form of human resource
management, so much so that the adoption of
technical indicators as utilized through "comment
cards" or "appraisal" tools should not be treated as a
prerequisite for every case of probationary
engagement. In fact, even if a system of such kind is
employed and the procedures for its implementation
are not followed, once an employer determines that
the probationary employee fails to meet the
standards required for his regularization, the former
is not precluded from dismissing the latter. The rule
is that when a valid cause for termination exists, the
procedural infirmity attending the termination only
warrants the payment of nominal damages. This was
the principle laid down in the landmark cases of
Agabon v. NLRC9 (Agabon) and Jaka Food
Processing Corporation v. Pacot10 (Jaka). In the
assailed Decision, the Court actually extended the
application of the Agabon and Jaka rulings to
breaches of company procedure, notwithstanding the
employer’s compliance with the statutory
requirements under the Labor Code.11 Hence,
although Abbott did not comply with its own
termination procedure, its non-compliance thereof
would not detract from the finding that there subsists
a valid cause to terminate Alcaraz’s employment.
Abbott, however, was penalized for its contractual
breach and thereby ordered to pay nominal
damages.
As a final point, Alcaraz cannot take refuge in Aliling
v. Feliciano12 (Aliling) since the same is not squarely
applicable to the case at bar. The employee in
Aliling, a sales executive, was belatedly informed of
his quota requirement. Thus, considering the nature
of his position, the fact that he was not informed of
his sales quota at the time of his engagement
changed the complexion of his employment.
Contrarily, the nature of Alcaraz's duties and
responsibilities as Regulatory Affairs Manager
negates the application of the foregoing. Records
show that Alcaraz was terminated because she (a)
LABOR LAW
did not manage her time effectively; (b) failed to gain
the trust of her staff and to build an effective rapport
with them; (c) failed to train her staff effectively; and
(d) was not able to obtain the knowledge and ability
to make sound judgments on case processing and
article review which were necessary for the proper
performance of her duties.13 Due to the nature and
variety of these managerial functions, the best that
Abbott could have done, at the time of Alcaraz's
engagement, was to inform her of her duties and
responsibilities, the adequate performance of which,
to repeat, is an inherent and implied standard for
regularization; this is unlike the circumstance in
Aliling where a quantitative regularization standard,
in the term of a sales quota, was readily articulable to
the employee at the outset. Hence, since the
reasonableness of Alcaraz's assessment clearly
appears from the records, her termination was
justified. Bear in mind that the quantum of proof
which the employer must discharge is only
substantial evidence which, as defined in case law,
means that amount of relevant evidence as a
reasonable mind might accept as adequate to
support a conclusion, even if other minds, equally
reasonable, might conceivably opine otherwise.14 To
the Court's mind, this threshold of evidence Abbott
amply overcame in this case.
All told, the Court hereby denies the instant motion
for reconsideration and thereby upholds the Decision
in the main case.
WHEREFORE, the motion for reconsideration dated
August 23, 2013 of the Court's Decision dated July
23, 2013 in this case is hereby DENIED. SO
ORDERED.
Footnotes
8 Section 2, Rule I, Book VI of the Implementing Rules of the
Labor Code provides that "[i]f the termination is brought about by
the x x x failure of an employee to meet the standards of the
employer in case of probationary employment, it shall be
sufficient that a written notice is served the employee, within a
reasonable time from the effective date of termination." To this
end, the Court in the assailed Decision pronounced that:
Verily, basic knowledge and common sense dictate that the
adequate performance of one’s duties is, by and of itself, an
inherent and implied standard for a probationary employee to be
regularized; such is a regularization standard which need not be
literally spelled out or mapped into technical indicators in every
case. In this regard, it must be observed that the assessment of
adequate duty performance is in the nature of a management
prerogative which when reasonably exercised – as Abbott did in
this case – should be respected. This is especially true of a
managerial employee like Alcaraz who was tasked with the vital
responsibility of handling the personnel and important matters of
her department. (Abbot Laboratories, Philippines v. Alcaraz,
supra note 1, at 709-710.)
11 "Evidently, the sanctions imposed in both Agabon and Jaka
proceed from the necessity to deter employers from future
violations of the statutory due process rights of employees. In
similar regard, the Court deems it proper to apply the same
principle to the case at bar for the reason that an employer’s
contractual breach of its own company procedure – albeit not
statutory in source – has the parallel effect of violating the
laborer’s rights. Suffice it to state, the contract is the law between
the parties and thus, breaches of the same impel recompense to
vindicate a right that has been violated. Consequently, while the
Court is wont to uphold the dismissal of Alcaraz because a valid
cause exists, the payment of nominal damages on account of
Abbott’s contractual breach is warranted in accordance with
Article 2221 of the Civil Code." (Abbot Laboratories, Philippines
v. Alcaraz, supra note 1, at 715-716.
KAYE RAMOGA
G.R. No. 170388, September 04, 2013
COLEGIO DEL SANTISIMO ROSARIO AND SR. ZENAIDA S. MOFADA, OP, Petitioners,
vs. .EMMANUEL ROJO,* Respondent.
DEL CASTILLO, J.:
This Petition for Review on Certiorari1 assails the
August 31, 2005 Decision2 and the November 10,
2005 Resolution3 of the Court of Appeals (CA) in
CA-G.R. SP No. 85188, which affirmed the July 31,
2003 Decision4 of the National Labor Relations
Commission (NLRC). Said NLRC Decision affirmed
with modification the October 7, 2002 Decision5 of
the Labor Arbiter (LA) which, in turn, granted
respondent Emmanuel Rojo’s (respondent)
Complaint6 for illegal dismissal.
Factual Antecedents
Petitioner Colegio del Santisimo Rosario (CSR) hired
respondent as a high school teacher on probationary
basis for the school years 1992-1993, 1993-
19947 and 1994-1995.
On April 5, 1995, CSR, through petitioner Sr.
Zenaida S. Mofada, OP (Mofada), decided not to
renew respondent’s services.9cralaw virtualaw library
Thus, on July 13, 1995, respondent filed a
Complaint10 for illegal dismissal. He alleged that
since he had served three consecutive school years
which is the maximum number of terms allowed for
probationary employment, he should be extended
permanent employment. Citing paragraph 75 of the
1970 Manual of Regulations for Private Schools
(1970 Manual), respondent asserted that “full- time
teachers who have rendered three (3) consecutive
years of satisfactory services shall be considered
permanent.”11
On the other hand, petitioners argued that
respondent knew that his Teacher’s Contract for
school year 1994-1995 with CSR would expire on
March 31, 1995.12 Accordingly, respondent was not
dismissed but his probationary contract merely
expired and was not renewed.13 Petitioners also
claimed that the “three years” mentioned in
paragraph 75 of the 1970 Manual refer to “36
months,” not three school years.14And since
respondent served for only three school years of 10
months each or 30 months, then he had not yet
served the “three years” or 36 months mentioned in
paragraph 75 of the 1970 Manual.15cralaw virtualaw
library.
Ruling of the Labor Arbiter
The LA ruled that “three school years” means three
years of 10 months, not 12 months.16 Considering
that respondent had already served for three
consecutive school years, then he has already
attained regular employment status. Thus, the non-
renewal of his contract for school year 1995-1996
constitutes illegal dismissal.17cralaw virtualaw library
The LA also found petitioners guilty of bad faith when
they treated respondent’s termination merely as the
LABOR LAW
expiration of the third employment contract and when
they insisted that the school board actually
deliberated on the non-renewal of respondent’s
employment without submitting admissible proof of
his alleged regular performance evaluation.18
The dispositive portion of the LA’s Decision19 reads:
WHEREFORE, premises considered, judgment is
hereby rendered ordering the [petitioners]:
1. To pay [respondent] the total amount of
P39,252.00 corresponding to his severance
compensation and 13th month pay, moral and
exemplary damages.
2. To pay 10% of the total amount due to
[respondent] as attorney’s fees.
All other claims are dismissed for lack of merit.
SO ORDERED.
Ruling of the National Labor Relations
Commission
On appeal, the NLRC affirmed the LA’s Decision with
modification. It held that after serving three school
years, respondent had attained the status of regular
employment21 especially because CSR did not
make known to respondent the reasonable standards
he should meet.22 The NLRC also agreed with the
LA that respondent’s termination was done in bad
faith. It held that respondent is entitled to
reinstatement, if viable; or separation pay, if
reinstatement was no longer feasible, and
backwages, viz:chanrobles virtua1aw 1ibrary
WHEREFORE, premises considered, the appealed
Decision is hereby, AFFIRMED with MODIFICATION
only insofar as the award of separation pay is
concerned. Since [respondent] had been illegally
dismissed, [petitioner] Colegio Del Santisimo Rosario
is hereby ordered to reinstate him to his former
position without loss of seniority rights with full
backwages until he is actually reinstated. However, if
reinstatement is no longer feasible, the respondent
shall pay separation pay, in [addition] to the payment
of his full backwages.
The Computation Division is hereby directed to
compute [respondent’s] full backwages to be
attached and to form part of this Decision.
The rest of the appealed Decision stands.
SO ORDERED.23
Petitioners moved for reconsideration which the
NLRC denied in its April 28, 2004 Resolution24 for
lack of merit.
Ruling of the Court of Appeals
Petitioners filed a Petition for Certiorari25 before the
CA alleging grave abuse of discretion on the part of
the NLRC in finding that respondent had attained the
status of a regular employee and was illegally
dismissed from employment.
KAYE RAMOGA
In a Decision26 dated August 31, 2005, the CA
denied the Petition for lack of merit. Citing Cagayan
Capitol College v. National Labor Relations
Commission,27 it held that respondent has satisfied
all the requirements necessary to acquire permanent
employment and security of tenure viz:
1. The teacher is a full-time teacher;
2. The teacher must have rendered three (3)
consecutive years of service; and
3. Such service must be satisfactory.28
According to the CA, respondent has attained the
status of a regular employee after he was employed
for three consecutive school years as a full-time
teacher and had served CSR satisfactorily. Aside
from being a high school teacher, he was also the
Prefect of Discipline, a task entailing much
responsibility. The only reason given by Mofada for
not renewing respondent’s contract was the alleged
expiration of the contract, not any unsatisfactory
service. Also, there was no showing that CSR set
performance standards for the employment of
respondent, which could be the basis of his
satisfactory or unsatisfactory performance. Hence,
there being no reasonable standards made known to
him at the time of his engagement, respondent was
deemed a regular employee and was, thus, declared
illegally dismissed when his contract was not
renewed.
Petitioners moved for reconsideration. However, the
CA denied the motion for lack of merit in its
November 10, 2005 Resolution.
Hence, the instant Petition. Incidentally, on May 23,
2007, we issued a Resolution30 directing the parties
to maintain the status quo pending the resolution of
the present Petition.
Issue
Whether the court of appeals [as well as the national
labor relations commission] committed grievous and
reversible error when it ruled that a basic education
(elementary) teacher hired for three (3) consecutive
school years as a probationary
employee automatically and/or by lawbecomes a
permanent employee upon completion of his third
year of probation notwithstanding [a] the
pronouncement of this honorable court in colegio san
agustin v. Nlrc, 201 scra 398 [1991] that a
probationary teacher acquires permanent status
“only when he is allowed to work after the
probationary period” and [b] dole decs-ched-tesda
order no. 01, s. 1996 which provide that teachers
who have served the probationary period “shall be
made regular or permanent if allowed to work after
such probationary period.”31
Petitioners maintain that upon the expiration of the
probationary period, both the school and the
respondent were free to renew the contract or let it
lapse. Petitioners insist that a teacher hired for three
consecutive years as a probationary employee does
not automatically become a regular employee upon
completion of his third year of probation. It is the
positive act of the school – the hiring of the teacher
LABOR LAW
who has just completed three consecutive years of
employment on probation for the next school year –
that makes the teacher a regular employee of the
school.
Our Ruling We deny the Petition.
In Mercado v. AMA Computer College-Parañaque
City, Inc.,32 we had occasion to rule that cases
dealing with employment on probationary status of
teaching personnel are not governed solely by the
Labor Code as the law is supplemented, with respect
to the period of probation, by special rules found in
the Manual of Regulations for Private Schools (the
Manual). With regard to the probationary period,
Section 92 of the 1992 Manual33 provides:
Section 92. Probationary Period. – Subject in all
instances to compliance with the Department and
school requirements, the probationary period for
academic personnel shall not be more than three
(3) consecutive years of satisfactory service for
those in the elementary and secondary levels, six
(6) consecutive regular semesters of satisfactory
service for those in the tertiary level, and nine (9)
consecutive trimesters of satisfactory service for
those in the tertiary level where collegiate courses
are offered on a trimester basis. (Emphasis supplied)
In this case, petitioners’ teachers who were on
probationary employment were made to enter into a
contract effective for one school year. Thereafter, it
may be renewed for another school year, and the
probationary employment continues. At the end of
the second fixed period of probationary employment,
the contract may again be renewed for the last time.
Such employment for fixed terms during the
teachers’ probationary period is an accepted practice
in the teaching profession. In Magis Young
Achievers’ Learning Center v. Manalo,34 we noted
that:chanrobles virtua1aw 1ibrary
The common practice is for the employer and the
teacher to enter into a contract, effective for one
school year. At the end of the school year, the
employer has the option not to renew the contract,
particularly considering the teacher’s performance. If
the contract is not renewed, the employment
relationship terminates. If the contract is renewed,
usually for another school year, the probationary
employment continues. Again, at the end of that
period, the parties may opt to renew or not to renew
the contract. If renewed, this second renewal of the
contract for another school year would then be the
last year – since it would be the third school year – of
probationary employment. At the end of this third
year, the employer may now decide whether to
extend a permanent appointment to the
employee, primarily on the basis of the employee
having met the reasonable standards of
competence and efficiency set by the employer.
For the entire duration of this three-year period,
the teacher remains under probation. Upon the
expiration of his contract of employment, being
simply on probation, he cannot automatically claim
security of tenure and compel the employer to renew
his employment contract. It is when the yearly
contract is renewed for the third time that Section 93
KAYE RAMOGA
of the Manual becomes operative, and the teacher
then is entitled to regular or permanent employment
status. (Emphases supplied)
However, this scheme “of fixed-term contract is a
system that operates during the probationary period
and for this reason is subject to Article 281 of the
Labor Code,”35 which provides:
x x x The services of an employee who has been
engaged on a probationary basis may be
terminated for a just cause or when he fails to
qualify as a regular employee in accordance
with reasonable standards made known by the
employer to the employee at the time of his
engagement. An employee who is allowed to work
after a probationary period shall be considered a
regular employee. [Emphasis supplied]
In Mercado, we held that “[u]nless this reconciliation
is made, the requirements of [Article 281] on
probationary status would be fully negated as the
school may freely choose not to renew contracts
simply because their terms have expired.”36 This will
have an unsettling effect in the equilibrium vis-a-vis
the relations between labor and management that
the Constitution and Labor Code have worked hard
to establish.
That teachers on probationary employment also
enjoy the protection afforded by Article 281 of the
Labor Code is supported by Section 93 of the 1992
Manual which provides:chanrobles virtua1aw 1ibrary
Sec. 93. Regular or Permanent Status. - Those who
have served the probationary period shall be made
regular or permanent. Full-time teachers who
have satisfactorilycompleted their probationary
period shall be considered regular or
permanent.(Emphasis supplied)
The above provision clearly provides that full-time
teachers become regular or permanent employees
once they have satisfactorily completed the
probationary period of three school years.37 The use
of the term satisfactorily necessarily connotes the
requirement for schools to set reasonable standards
to be followed by teachers on probationary
employment. For how else can one determine if
probationary teachers have satisfactorily completed
the probationary period if standards therefor are not
provided?
As such, “no vested right to a permanent
appointment shall accrue until the employee has
completed the prerequisite three-year period
necessary for the acquisition of a permanent status.
[However, it must be emphasized that] mere
rendition of service for three consecutive years does
not automatically ripen into a permanent
appointment. It is also necessary that the employee
be a full-time teacher, and that the services he
rendered are satisfactory.”38
In Mercado, this Court, speaking through J. Brion,
held that:chanrobles virtua1aw 1ibrary
The provision on employment on probationary status
under the Labor Code is a primary example of the
fine balancing of interests between labor and
management that the Code has institutionalized
pursuant to the underlying intent of the Constitution.
LABOR LAW
On the one hand, employment on probationary status
affords management the chance to fully scrutinize
the true worth of hired personnel before the full force
of the security of tenure guarantee of the Constitution
comes into play. Based on the standards set at the
start of the probationary period, management is
given the widest opportunity during the probationary
period to reject hirees who fail to meet its own
adopted but reasonable standards. These standards,
together with the just and authorized causes for
termination of employment [which] the Labor Code
expressly provides, are the grounds available to
terminate the employment of a teacher on
probationary status. x x x
Labor, for its part, is given the protection during the
probationary period of knowing the company
standards the new hires have to meet during the
probationary period, and to be judged on the basis of
these standards, aside from the usual standards
applicable to employees after they achieve
permanent status. Under the terms of the Labor
Code, these standards should be made known to the
teachers on probationary status at the start of their
probationary period, or at the very least under the
circumstances of the present case, at the start of the
semester or the trimester during which the
probationary standards are to be applied. Of critical
importance in invoking a failure to meet the
probationary standards, is that the school should
show – as a matter of due process – how these
standards have been applied. This is effectively the
second notice in a dismissal situation that the law
requires as a due process guarantee supporting the
security of tenure provision, and is in furtherance,
too, of the basic rule in employee dismissal that the
employer carries the burden of justifying a dismissal.
These rules ensure compliance with the limited
security of tenure guarantee the law extends to
probationary employees.
When fixed-term employment is brought into play
under the above probationary period rules, the
situation – as in the present case – may at first blush
look muddled as fixed-term employment is in itself a
valid employment mode under Philippine law and
jurisprudence. The conflict, however, is more
apparent than real when the respective nature of
fixed-term employment and of employment on
probationary status are closely examined.
The fixed-term character of employment essentially
refers to the period agreed upon between the
employer and the employee; employment exists only
for the duration of the term and ends on its own when
the term expires. In a sense, employment on
probationary status also refers to a period because of
the technical meaning “probation” carries in
Philippine labor law – a maximum period of six
months, or in the academe, a period of three years
for those engaged in teaching jobs. Their similarity
ends there, however, because of the overriding
meaning that being “on probation” connotes, i.e., a
process of testing and observing the character or
abilities of a person who is new to a role or job.
KAYE RAMOGA
Understood in the above sense, the essentially
protective character of probationary status for
management can readily be appreciated. But this
same protective character gives rise to the
countervailing but equally protective rule that the
probationary period can only last for a specific
maximum period and under reasonable, well-laid and
properly communicated standards. Otherwise stated,
within the period of the probation, any employer
move based on the probationary standards and
affecting the continuity of the employment must
strictly conform to the probationary rules.
x x x If we pierce the veil, so to speak, of the
parties’ so-called fixed-term employment
contracts, what undeniably comes out at the core
is a fixed-term contract conveniently used by the
school to define and regulate its relations with its
teachers during their probationary
period.39 (Emphasis supplied; italics in the original)
In the same case, this Court has definitively
pronounced that “in a situation where the
probationary status overlaps with a fixed-term
contract not specifically used for the fixed term it
offers, Article 281 should assume primacy and the
fixed-period character of the contract must give
way.”40
An example given of a fixed-term contract specifically
used for the fixed term it offers is a replacement
teacher or a reliever contracted for a period of one
year to temporarily take the place of a permanent
teacher who is on leave. The expiration of the
reliever’s fixed-term contract does not have
probationary status implications as he or she was
never employed on probationary basis. This is
because his or her employment is for a specific
purpose with particular focus on the term. There
exists an intent to end his or her employment with the
school upon expiration of this term.41
However, for teachers on probationary employment,
in which case a fixed term contract is notspecifically
used for the fixed term it offers, it is incumbent upon
the school to have not only set reasonable standards
to be followed by said teachers in determining
qualification for regular employment, the same must
have also been communicated to the teachers at the
start of the probationary period, or at the very least,
at the start of the period when they were to be
applied. These terms, in addition to those expressly
provided by the Labor Code, would serve as the just
cause for the termination of the probationary
contract. The specific details of this finding of just
cause must be communicated to the affected
teachers as a matter of due
process.42 Corollarily, should the teachers not have
been apprised of such reasonable standards at the
time specified above, they shall be deemed regular
employees.
In Tamson’s Enterprises, Inc. v. Court of
Appeals,43 we held that “[t]he law is clear that in all
cases of probationary employment, the employer
shall [convey] to the employee the standards under
LABOR LAW
which he will qualify as a regular employee at the
time of his engagement. Where no standards are
made known to the employee at that time, he shall
be deemed a regular employee.
In this case, glaringly absent from petitioners’
evidence are the reasonable standards that
respondent was expected to meet that could have
served as proper guidelines for purposes of
evaluating his performance. Nowhere in the
Teacher’s Contract44 could such standards be
found.45 Neither was it mentioned that the same
were ever conveyed to respondent. Even assuming
that respondent failed to meet the standards set forth
by CSR and made known to the former at the time he
was engaged as a teacher on probationary status,
still, the termination was flawed for failure to give the
required notice to respondent.46 This is because
Book VI, Rule I, Section 2 of the IRR of the Labor
Code provides:
Section 2. Security of Tenure. – (a) In cases of
regular employment, the employer shall not terminate
the services of an employee except for just or
authorized causes as provided by law, and subject to
the requirements of due process.
(b) The foregoing shall also apply in cases of
probationary employment; provided, however, that in
such cases, termination of employment due to failure
of the employee to qualify in accordance with the
standards of the employer made known to the former
at the time of engagement may also be a ground for
termination of employment. x x x x
(d) In all cases of termination of employment, the
following standards of due process shall be
substantially observed: x x x x
If the termination is brought about by the completion
of a contract or phase thereof, or by failure of an
employee to meet the standards of the employer in
the case of probationary employment, it shall be
sufficient that a written notice is served the
employee, within a reasonable time from the effective
date of termination. (Emphasis supplied)
Curiously, despite the absence of standards, Mofada
mentioned the existence of alleged performance
evaluations47 in respondent’s case. We are,
however, in a quandary as to what could have been
the basis of such evaluation, as no evidence were
adduced to show the reasonable standards with
which respondent’s performance was to be assessed
or that he was informed thereof. Notably too, none of
the supposed performance evaluations were
presented. These flaws violated respondent’s right to
due process. As such, his dismissal is, for all intents
and purposes, illegal.
As a matter of due process, teachers on probationary
employment, just like all probationary employees,
have the right to know whether they have met the
standards against which their performance was
evaluated. Should they fail, they also have the right
to know the reasons therefor.
It should be pointed out that absent any showing of
unsatisfactory performance on the part of
respondent, it can be presumed that his performance
KAYE RAMOGA
was satisfactory, especially taking into consideration
the fact that even while he was still more than a year
into his probationary employment, he was already
designated Prefect of Discipline. In such capacity, he
was able to uncover the existence of a drug
syndicate within the school and lessen the incidence
of drug use therein. Yet despite respondent’s
substantial contribution to the school, petitioners
chose to disregard the same and instead terminated
his services; while most of those who were involved
in drug activities within the school were punished
with a slap on the wrist as they were merely made to
write letters promising that the incident will not
happen again.48
Mofada would also have us believe that respondent
chose to resign as he feared for his life, thus, the
school’s decision not to renew his contract. However,
no resignation letter was presented. Besides, this is
contrary to respondent’s act of immediately filing the
instant case against petitioners.
WHEREFORE, the Petition is hereby DENIED. The
August 31, 2005 Decision and the November 10,
2005 Resolution of the Court of Appeals in CA-G.R.
SP No. 85188 are AFFIRMED. The status quo order
of this Court is LIFTED. SO ORDERED.
Endnotes:
33 As in the case of Mercado, the 1992 Manual of
Regulations is the applicable Manual in the present case
as it embodied the pertinent rules at the time of the
parties’ dispute. At present, the Manual of Regulations for
Private Higher Education of 2008 has been in place and
applies to all private higher educational institutions; while
the 2010 Revised Manual of Regulations for Private
Schools in Basic Education covers all private educational
institutions in basic education.
37Magis Young Achievers’ Learning Center v. Manalo,
supra note 34 at 435.
A similar requirement is also found in DOLE-DECS-CHED-
TESDA Order No. 01, s. 1996, entitled “Guidelines on
Status of Employment of Teachers and of Academic
Personnel in Private Educational Institutions.”
Contrary to petitioners’ assertions that said guidelines
support their claim that teachers who have served the
probationary period shall be made regular or
permanent only if allowed to work after such probationary
period, a perusal thereof would reveal that: x x x x
2. Subject in all instances to compliance with the
concerned agency and school requirements, the
probationary period for teaching or academic
personnel shall not be more than three (3)
consecutive school years of satisfactory service
for those in the elementary and secondary levels,
x x x.cralawnad
LABOR LAW
See Book VI, Rule I, Section 6 of the Implementing Rules
and Regulations (IRR) of the Labor Code, which provides:
Probationary employment. – There is probationary
employment where the employee, upon his engagement,
is made to undergo a trial period during which the
employer determines his fitness to qualify for regular
employment, based on reasonable standards made known
to him at the time of engagement.
Probationary employment shall be governed by the
following rules: x x x x
(c) The services of an employee who has been engaged
on probationary basis may be terminated only for a just or
authorized cause, when he fails to qualify as a regular
employee in accordance with reasonable standards
prescribed by the employer.
(d) In all cases of probationary employment, the employer
shall make known to the employee the standards under
which he will qualify as a regular employee at the time of
his engagement. Where no standards are made known to
the employee at that time, he shall be deemed a regular
employee. (Emphasis supplied)
44 CA rollo, p. 46.
45 The absence of such standards prompted this Court to
further examine the provisions of the Teacher’s Contract
entered into between the parties. It is surprising to note
that a perusal thereof would show that the contract itself
does not even indicate respondent’s employment status
as probationary in nature. From the looks of it, the
Teacher’s Contract seems to apply to all teachers,
probationary or otherwise, employed by petitioner CSR.
This can be reasonably concluded from the list of just
causes for termination of contract provided for in the
second (also the last) page of the contract, which does not
include non-passing of reasonable standards set by the
school and which reads:
Termination of the Contract:
The following are just causes for the terminat[ion of] this
contract by either the employer or employee.
1. By the employer:
a. The closing or cessation of the school or x x x
considerable decrease in enrollment.
b. Serious misconduct or willful disobedience by the
employee of the orders of his [employer or]
representative in connection with his work.
c. Gross and habitual neglect of duty or gross
inefficiency and incompetence of the employee.
d. Fraud or willful breach by the employee of the trust
reposed in him by his employer or representative.
e. Gross violation of [the] rules and regulations of the
school[;] or commission of a crime involving moral
turpitude and such offenses committed by the
employees[;] immorality[;] drunkenness[;] assaulting a
teacher or any other school authority or his agent or
student[;] instigating, leading or participating in school
strikes[; and/or] forging or tampering with the official
school records and forms.
Grave emotional disturbance on the part of the employee
which [in] the judgment of employer or his representative
could bring damage to the students and the school, in
general. x x x x
KAYE RAMOGA
G.R. No. 164078, 2007 November 23
AMA COMPUTER COLLEGE, PARAÑAQUE, and/or AMABLE C. AGUILUZ IX, President, MRS. CELESTE
BANSALE, School Director, MS. SOCORRO, MR. PATRICK AZANZA, GRACE BERANIA and MAJAL
JACOB, Petitioners, versus ROLANDO A. AUSTRIA, Respondent.,
NACHURA, J.:
Before this Court is a Petition for Review on
Certiorari[1] under Rule 45 of the Rules of Civil
Procedure seeking the reversal of the Court of
Appeals (CA) Decision[2] dated March 29, 2004
which affirmed with modification the Decision[3] of
the National Labor Relations Commission (NLRC),
dated March 31, 2003.
The Facts
Petitioner AMA Computer College, Parañaque (AMA)
is an educational institution duly organized under the
laws of the Philippines. The rest of the petitioners are
principal officers of AMA. Respondent Rolando A.
Austria[4] (respondent) was hired by AMA on
probationary employment as a college dean on April
24, 2000.[5] On August 22, 2000, respondent’s
appointment as dean was confirmed by AMA’s
Officer-in-Charge (OIC), Academic Affairs, in his
Memorandum,[6] which reads:
After a thorough evaluation of the performance of Mr.
Rolando Austria as Dean, we are happy to inform
you that he is hereby officially confirmed as Dean of
AMA College Parañaque effective April 17, 2000 to
September 17, 2000.
In view of this, he will be entitled to a transportation
allowance of One Thousand Five Hundred Sixty
Pesos (P1,560.00).
In the event that Mr. Austria gives up the Dean
position or fails to meet the standards of the (sic)
based on the evaluation of his immediate superior,
he shall be considered for a faculty position and the
appointee agrees that he shall lose the transportation
allowance he enjoys as Dean and be entitled to his
faculty rate.
Sometime in August 2000, respondent was charged
with violating AMA’s Employees’ Conduct and
Discipline provided in its Orientation Handbook
(Handbook),[7] as follows:
1) leaking of test questions;
2) failure to monitor general requirements vital to
the operations of the company; and
3) gross inefficiency.
In a Memorandum[8] dated August 29, 2000,
respondent refuted the charges against him.
Thereafter, respondent was placed on preventive
suspension from September 8, 2000 to October 10,
2000. Notices[9] of Investigation were sent to
respondent. Eventually, on September 29, 2000,
respondent was informed of his dismissal, to wit:
LABOR LAW
Dear Mr. Austria[,]
Please be informed that after a careful deliberation
on the case filed against you and upon serious
consideration of the evidences (sic) presented, the
Management has found you guilty of violating the
following policies:
A. Loss of trust and confidence by management due to
gross inefficiency. (5.21 Very Serious/Grave
Offense)
B. Failure to monitor general requirements vital to the
operations of the company. (5.10 Medium Offense)
C. Leaking of test questions. (4.17 Very Serious/Grave
Offense)
This resulted to the loss of trust and confidence in
your credibility as a company officer holding a highly
sensitive position. In view of this, your services as
Dean of AMA Parañaque is hereby terminated
effective immediately.
You are hereby instructed to report to the branch HR
Personnel for further instructions. Please bear in
mind that as a company policy you are required to
accomplish your clearance and turn over all
documents and responsibilities to the appropriate
officers.
You are barred from entering the company premises
unless with clearance from the HRD.[10]
On October 27, 2000, respondent filed a
Complaint[11] for Illegal Dismissal, Illegal
Suspension, Non-Payment of Salary and 13th Month
Pay with prayer for Damages and Attorney's Fees
against AMA and the rest of the petitioners. Trial on
the merits ensued.
The Labor Arbiter's Ruling
In his Decision[12] dated December 6, 2000, the
Labor Arbiter held that petitioners accorded
respondent due process. The Labor Arbiter however,
also held that respondent substantially refuted the
charges of gross inefficiency, incompetence, and
leaking of test questions filed against him. But since
respondent can no longer be reinstated beyond
September 17, 2000 as his designation as college
dean was only until such date, respondent should
instead be paid his compensation and transportation
allowance for the period from September 8, 2000 to
September 17, 2000, or the salary and benefits
withheld prior thereto. Thus:
WHEREFORE, premises considered, judgment is
hereby rendered ordering respondent AMA
Computer College, Parañaque to pay complainant’s
proportionate salary for the period beginning 8
September 2000 to 17 September 2000.
KAYE RAMOGA
P30,000 x 10/30 days = P10,000.00 and
his proportionate transportation allowance.
P1,560.00 x 10/30 days = P520.00 and the
salary/benefits withheld prior to 8 September
2000, if any.
All other claims are hereby dismissed for lack of
merit. SO ORDERED.
Aggrieved, respondet appealed the said Decision to
the NLRC.[13]
The NLRC's Ruling
On March 31, 2003, the NLRC, in its Decision,[14]
found merit in respondent's appeal. The NLRC
opined that the petitioners did not contravene
respondent's allegation that he had attained
regular status after serving the three (3)-month
probationary period required under the
Handbook.[15] Thus, while the NLRC sustained the
Labor Arbiter's finding that petitioners failed to
establish the grounds for respondent's dismissal, it
held that the Labor Arbiter erred in declaring that
respondent's appointment was only from April 24 to
September 17, 2000. Accordingly, the NLRC
declared that respondent was a regular employee
and that he was illegally dismissed. Nevertheless,
the NLRC held that reinstatement would not promote
industrial harmony; hence, the NLRC disposed of the
case in this wise:
PREMISES CONSIDERED the Decision of
December 6, 2000 is VACATED and a new one
entered declaring complainant illegally dismissed.
Respondents are directed to pay complainant
separation pay computed at one (1) month per year
of service in addition to full backwages from
September 29, 2000 until December 6, 2000, or in
the amount of one hundred thousand three hundred
seventy eight-pesos & 80/100 (P100,378.80).
SO ORDERED.[16]
Petitioners filed a Motion for Reconsideration[17]
assailing respondent's regular status, which the
NLRC in a Resolution,[18] denied for having been
filed out of time and for lack of merit. Respondent
also filed a Motion for Partial Reconsideration,[19]
which the NLRC, in another Resolution,[20] denied
for lack of merit.
Thus, petitioners went to the CA via Petition for
Certiorari[21] under Rule 65 of the 1997 Rules of
Civil Procedure.
The CA's Ruling
On March 29, 2004, the CA held that based on the
Handbook and on respondent's appointment, it can
be inferred that respondent was a regular employee,
LABOR LAW
and as such, his employment can only be terminated
for any of the causes provided under Article 282[22]
of the Labor Code and after observance of the
requirements of due process. Furthermore, the CA
upheld the Labor Arbiter’s and the NLRC’s similar
findings that respondent sufficiently rebutted the
charges against him and that petitioners failed to
prove the grounds for respondent's dismissal. The
dispositive portion of the said Decision reads:
WHEREFORE, premises considered, the petition is
hereby DENIED DUE COURSE and DISMISSED for
lack of merit. The decision of the NLRC is
AFFIRMED with MODIFICATION as above stated,
with regard to the computation of backwages.
SO ORDERED.
Petitioners filed a Motion for Reconsideration[23] of
the said Decision, which the CA denied, in its
Resolution[24] dated June 11, 2004, for lack of merit.
Hence, this Petition based on the sole ground that
the CA committed serious error of law in affirming
and then further modifying the erroneous decision of
the NLRC declaring that herein respondent was
illegally dismissed by AMA.[25]
Petitioners argue that respondent, as college dean,
was an academic personnel of AMA under Section
4(m) (4)(c) of the Manual of Regulations for Private
Schools[26] (Manual) and, as such, his probationary
employment is governed by Section 92[27] thereof
and not by the Labor Code or AMA's Handbook; that
under the circumstances, respondent has not yet
attained the status of a regular employee; that
respondent's employment was for a fixed term as
found by the Labor Arbiter but the same was
terminated earlier due to just causes; that the
respondent, whether he may be considered as a
probationary or a regular employee, was dismissed
for just causes; and that the award of backwages in
favor of the respondent, up to the finality of the
decision, is oppressive to the petitioners, considering
the absence of an order of reinstatement and the
respondent's fixed period of employment.[28]
On the other hand, respondent counters that both the
NLRC and the CA found that respondent was a
regular employee and that he was illegally dismissed;
that the instant Petition raises questions of fact -
such as whether or not respondent is a regular
employee and whether or not circumstances existed
warranting his dismissal - which can no longer
be inquired into by
this Court;[29] that petitioners assailed the regular
status of the respondent for the first time only before
the CA; that they never raised as issue
respondent's regular status before the Labor Arbiter
and the NLRC because they merely concentrated on
their stand that respondent was lawfully dismissed;
that petitioners failed to discharge the burden of
proving the existence of a valid ground in dismissing
KAYE RAMOGA
respondent as found by the Labor Arbiter, the NLRC,
and the CA; and that the CA's award of backwages
from the date of actual dismissal up to the date of
the finality of the decision in favor of the respondent
is consonant with Article 279[30] of the Labor Code,
and hence, valid.[31]
From this exchange of arguments, we glean two
ultimate questions that require resolution, viz.:
1. What is the nature of respondent's
employment?
2. Was he lawfully dismissed?
The first question, i.e., whether respondent is a
regular, probationary, or fixed term employee is
essentially factual in nature.[32] However, the Court
opts to resolve this question due to the far-reaching
effects it could bring to the sector of the academe.
As an exception to the general rule, we held in
Molina v. Pacific Plans, Inc.: [33]
A disharmony between the factual findings of the
Labor Arbiter and the National Labor Relations
Commission opens the door to a review thereof by
this Court. Factual findings of administrative
agencies are not infallible and will be set aside when
they fail the test of arbitrariness. Moreover, when the
findings of the National Labor Relations Commission
contradict those of the Labor Arbiter, this Court, in
the exercise of its equity jurisdiction, may look into
the records of the case and reexamine the
questioned findings.
The instant case falls squarely within the aforesaid
exception. The Labor Arbiter held that, while
petitioners did not prove the existence of just causes
in order to warrant respondent's dismissal, the latter's
employment as dean ceased to exist upon expiration
of respondent's term of employment on September
17, 2000. In sum, the Labor Arbiter held that the
nature of respondent's employment is one for a fixed
term. On the other hand, the NLRC and the CA both
held that respondent is a regular employee because
respondent had fully served the three (3)-month
probationary period required in the Handbook, which
the petitioners failed to deny or contravene in the
proceedings before the Labor Arbiter.
Prior to his dismissal, respondent held the position of
college dean. The letter of appointment states that he
was officially confirmed as Dean of AMA College,
Parañaque, effective from April 17, 2000 to
September 17, 2000. Petitioners submit that the
nature of respondent's employment as dean is one
with a fixed term.
We agree.
We held that Article 280 of the Labor Code does not
proscribe or prohibit an employment contract with a
fixed period. Even if the duties of the employee
LABOR LAW
consist of activities necessary or desirable in the
usual business of the employer, the parties
are free to agree on a fixed period of time for the
performance of such activities.
There is nothing essentially contradictory between
a definite period of employment and the nature of the
employee’s duties.[34]
Thus, this Court's ruling in Brent School, Inc. v.
Zamora[35] is instructive:
The question immediately provoked. . .
is whether or not a voluntary agreement on a fix
ed term or period would be valid where the emp
loyee "has been engaged to perform activities w
hich are usually necessary or desirable in the us
ual business or trade of the employer."
The definition seems non
sequitur. From the premise —
that the duties of an employee entail "activities
which are usually necessary or desirable in the
usual business or trade of the employer" —
the conclusion does not necessarily follow that th
e employer and employee should be forbidden to
stipulate any period of time for the performance
of those activities. There is nothing essentially c
ontradictory between a definite period of an empl
oyment contract and the nature of the employee'
s duties set down in that contract as being "usu
ally necessary or desirable in the usual business
or trade of the employer." The concept of the
employee's duties as being "usually necessary or
desirable in the usual business or trade of the
employer" is not synonymous with or identical to
employment with a fixed term. Logically, the dec
isive determinant in term employment should not
be the activities that the employee is called upo
n to perform, but the day certain agreed upon b
y the parties for the commencement and termina
tion of their employment relationship, a day certa
in being understood to be "that which must nece
ssarily come, although it may not be known whe
n." Seasonal employment, and employment for a
particular project are merely instances of employ
ment in which a period, where not expressly set
down, is necessarily implied. x x x
Some familiar examples may be cited of employ
ment contracts which may be neither for season
al work nor for specific projects, but to which a
fixed term is an essential and natural appurtenan
ce: overseas employment contracts, for one, to
which, whatever the nature of the engagement, t
he concept of regular employment with all that it
implies does not appear ever to have been app
lied, Article 280 of the Labor Code notwithstandi
ng; also appointments to the positions of dean,
assistant dean, college secretary, principal, and o
ther administrative offices in educational institutio
ns, which are by practice or tradition rotated am
ong the faculty members, and where fixed terms
are a necessity without which no reasonable
rotation would be possible . . . . x x x
KAYE RAMOGA
The instant case involves respondent's position as
dean, and comes within the purview of the Brent
School doctrine.
First. The letter of appointment was clear.
Respondent was confirmed as Dean of AMA College,
Parañaque, effective from April 17, 2000 to
September 17, 2000. In numerous cases decided by
this Court, we had taken notice, that by way of
practice and tradition, the position of dean is normally
an employment for a fixed term.[36] Although it does
not appear on record- and neither was it alleged by
any of the parties- that respondent, other than
holding the position of dean, concurrently occupied a
teaching position, it can be deduced from the last
paragraph of said letter that the respondent shall be
considered for a faculty position in the event he gives
up his deanship or fails to meet AMA's standards.
Such provision reasonably serves the intention set
forth in Brent School that the deanship may be
rotated among the other members of the faculty.
Second. The fact that respondent did not sign the
letter of appointment is of no moment. We held in
Brent School, to wit:
Accordingly, and since the entire purpose behind the
development of legislation culminating in the present
Article 280 of the Labor Code clearly appears to have
been, as already observed, to prevent circumvention
of the employee's right to be secure in his tenure, the
clause in said article indiscriminately and completely
ruling out all written or oral agreements conflicting
with the concept of regular employment as defined
therein should be construed to refer to the
substantive evil that the Code itself has singled out:
agreements entered into precisely to circumvent
security of tenure. It should have no application to
instances where a fixed period of employment was
agreed upon knowingly and voluntarily by the parties,
without any force, duress or improper pressure being
brought to bear upon the employee and absent any
other circumstances vitiating his consent, or where it
satisfactorily appears that the employer and
employee dealt with each other on more or less
equal terms with no moral dominance whatever
being exercised by the former over the latter. Unless,
thus, limited in its purview, the law would be made to
apply to purposes other than those explicitly stated
by its framers; it thus becomes pointless and
arbitrary, unjust in its effects and apt to lead to
absurd and unintended consequences.[37]
The fact that respondent voluntarily accepted the
employment, assumed the position, and performed
the functions of dean is clear indication that he
knowingly and voluntarily consented to the terms and
conditions of the appointment, including the fixed
period of his deanship. Other than the handwritten
notes made in the letter of appointment, no evidence
was ever presented to show that respondent’s
consent was vitiated, or that respondent objected to
the said appointment or to any of its conditions.
Furthermore, in his status as dean, there can be no
valid inference that he was shackled by any form of
LABOR LAW
moral dominance exercised by AMA and the rest of
the petitioners.
Alternatively, petitioners also claim that respondent
did not attain regular status, relying on Section 92 of
the Manual in connection with Section 4(m) 4(c)
thereof which provides for a three (3)-year
probationary period for Academic Personnel.
Petitioners submit that the position of dean is
included in the provision “school officials responsible
for academic matters, and may include other school
officials.” As such, petitioners aver that the three (3)-
month probationary period for officers set forth in the
Handbook is not applicable to the case of
respondent.
The Handbook merely provides for two classes of
employees for purposes of permanency, i.e., Faculty
and Non-Academic. However, the same does not
specifically classify the position of dean as part of the
Faculty or of the Non-Academic personnel. At this
juncture, we find solace in the Manual of Regulations
for Private Schools Annotated,[38] which provides
that the college dean is the senior officer responsible
for the operation of an academic program, the
enforcement of rules and regulations, and the
supervision of faculty and student services. We
already had occasion to state that the position of
dean is primarily academic[39] and, as such, he is
considered a managerial employee.[40] Yet, a
perusal of the Handbook yields the interpretation that
the provision on the permanency of Faculty members
applies to teachers only. But the Handbook or school
manual must yield to the decree of the Manual, the
latter having the character of law.[41] The specified
probationary periods in Section 92 of the Manual are
the maximum periods; under certain conditions,
regular status may be achieved by the employee in
less time.[42] However, under the given
circumstances and the fact that the position of dean
in this case is for a fixed term, the issue whether the
respondent attained a regular status is not in point.
By the same token, the application of the provision in
the Manual as to the required probationary period is
misplaced. It can be well said that a tenured status of
employment co-exists and is co-terminous only with
the definite term fixed in the contract of employment.
In light of the foregoing disquisition, the resolution of
the second question requires full cognizance of
respondent’s fixed term of employment and all the
effects thereof. It is axiomatic that a contract of
employment for a definite period terminates on its
own force at the end of such period.[43] The lack of
notice of termination is of no consequence because
when the contract specifies the length of its duration,
it comes to an end upon the expiration of such
period.[44]
Thus, the unanimous finding of the Labor Arbiter, the
NLRC and the CA that respondent adequately
refuted all the charges against him assumes
relevance only insofar as respondent’s dismissal
from the service was effected by petitioners before
expiration of the fixed period of employment. True,
petitioners erred in dismissing the respondent, acting
KAYE RAMOGA
on the mistaken belief that respondent was liable for
the charges leveled against him. But respondent
also cannot claim entitlement to any benefit flowing
from such employment after September 17, 2000,
because the employment, which is the source of the
benefits, had, by then, already ceased to exist.
Finally, while this Court adheres to the principle of
social justice and protection to labor, the
constitutional policy to provide such protection to
labor is not meant to be an instrument to oppress
employers. The commitment under the fundamental
law is that the cause of labor does not prevent us
from sustaining the employer when the law is clearly
on its side.[45]
WHEREFORE, the instant Petition is GRANTED
and the CA Decision in CA-G.R. SP No. 78455 is
REVERSED and SET ASIDE. The Decision of the
Labor Arbiter, dated December 6, 2000, is hereby
REINSTATED. No costs.
SO ORDERED.
FOOTNOTES
[22] ART. 282. Termination by employer. — An employer
may terminate an employment for any of the following
causes:
(a) Serious misconduct or willful disobedience by the
employee of the lawful orders of his employer or
representative in connection with his work;
(b) Gross and habitual neglect by the employee of his
duties;
(c) Fraud or willful breach by the employee of the
trust reposed in him by his employer or duly
authorized representative;
(d) Commission of a crime or offense by the
employee against the person of his employer or
any immediate member of his family or his duly
authorized representative; and
(e) Other causes analogous to the foregoing.
[26] Section 4. Definition of Terms. Except as otherwise
provided, the terms below shall be construed as follows: x
xx
LABOR LAW
(m) “Members of the school community “ refers to the
general membership of every private school established in
accordance with law and duly authorized by the
Department to operate certain educational programs or
courses. The term includes, either singly or collectively,
the following: x x x
(4) “School personnel” means the persons, singly or
collectively, working in a private school. They are
classified as follows: x x x
(c) “Academic personnel” includes all school personnel
who are formally engaged in actual teaching service or in
research assignments, either on full-time or part-time
basis, as well as those who possess certain prescribed
academic functions directly supportive of teaching, such
as registrars, librarians, guidance counselors, researchers,
and other similar persons. They include school officials
responsible for academic matters, and may include other
school officials. x x x
[27] Section 92. Probationary Period. Subject in all
instances to compliance with Department and school
requirements, the probationary period for academic
personnel shall not be more than three (3) consecutive
years of satisfactory service for those in the elementary
and secondary levels, six (6) consecutive regular
semesters of satisfactory service for those in the tertiary
level, and nine (9) consecutive trimesters of satisfactory
service for those in the tertiary level where collegiate
courses are offered on the trimester basis.
[30] Article 279. Security of tenure. In cases of regular
employment, the employer shall not terminate the services
of an employee except for a just cause or when authorized
by this Title. An employee who is unjustly dismissed from
work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the
time of his actual reinstatement.
KAYE RAMOGA
G.R. No. 160905 July 4, 2008
BIENVENIDO D. GOMA, Petitioner, - versus - PAMPLONA PLANTATIONINCORPORATED, Respondent.
NACHURA, J.:
For review is the Decision[1] of the Court of Appeals
(CA) dated August 27, 2003 granting respondent
Pamplona Plantation, Inc.s petition for certiorari and
its Resolution[2] dated November 11, 2003 denying
petitioner Bienvenido Gomas motion for
reconsideration, in CA-G.R. SP No. 74892.
Petitioner commenced[3] the instant suit by filing a
complaint for illegal dismissal, underpayment of
wages, non-payment of premium pay for holiday and
rest day, five (5) days incentive leave pay, damages
and attorneys fees, against the respondent. The case
was filed with the Sub-Regional Arbitration Branch
No. VII of Dumaguete City. Petitioner claimed that he
worked as a carpenter at the Hacienda Pamplona
since 1995; that he worked from 7:30
a.m. to 12:00 noon and from 1:00 p.m. to 5:00
p.m. daily with a salary rate of P90.00 a day paid
weekly; and that he worked continuously until 1997
when he was not given any work assignment.[4] On
a claim that he was a regular employee, petitioner
alleged to have been illegally dismissed when the
respondent refused without just cause to give him
work assignment. Thus, he prayed for backwages,
salary differential, service incentive leave pay,
damages and attorneys fees.[5]
On the other hand, respondent denied having hired
the petitioner as its regular employee. It instead
argued that petitioner was hired by a certain Antoy
Caaveral, the manager of the hacienda at the time it
was owned by Mr. Bower and leased by Manuel
Gonzales, a jai-alai pelotari known as
Ybarra.[6] Respondent added that it was not obliged
to absorb the employees of the former owner.
In 1995, Pamplona Plantation Leisure Corporation
(PPLC) was created for the operation of tourist
resorts, hotels and bars. Petitioner, thus, rendered
service in the construction of the facilities of PPLC. If
at all, petitioner was a project but not a regular
employee.[7]
On June 28, 1999, Labor Arbiter Geoffrey P.
Villahermosa dismissed the case for lack of
merit.[8] The Labor Arbiter concluded that petitioner
was hired by the former owner, hence, was not an
employee of the respondent. Consequently, his
money claims were denied.[9]
On appeal to the National Labor Relations
Commission (NLRC), the petitioner obtained
favorable judgment when the tribunal reversed and
set aside the Labor Arbiters decision. The dispositive
portion of the NLRC decision reads:
WHEREFORE, the Decision of the Labor Arbiter
is hereby SET ASIDE and a new one is hereby
LABOR LAW
issued ORDERING the respondent, Pamplona
Plantation Incorporated, the following:
1) to reinstate the complainant, BIENVENIDO D.
GOMA to his former position immediately without
loss of seniority rights and other privileges;
2) to pay the same complainant TWELVE
THOUSAND THREE HUNDRED FIFTY-NINE
PESOS (P12,359.00) in salary differentials;
3) to pay to the same complainant ONE
HUNDRED ONE THOUSAND SIX HUNDRED
SIXTY PESOS (P101,660.00) in backwages to
be updated until actual reinstatement; and
4) to pay attorneys fee in the amount of ELEVEN
THOUSAND FOUR HUNDRED TWO PESOS
(P11,402.00) which is equivalent to ten percent
(10%) of the total judgment award.
The respondent is further ordered to pay the
aggregate amount of ONE HUNDRED
FOURTEEN THOUSAND AND NINETEEN
PESOS (P114,019.00) to the complainant
through the cashier of this Commission within ten
(10) days from receipt hereof. SO
ORDERED.[10]
Respondents motion for reconsideration was denied
by the NLRC on September 9, 2002.[11]
The NLRC upheld the existence of an employer-
employee relationship, ratiocinating that it was
difficult to believe that a simple carpenter from far
away Pamplona would go to Dumaguete City to hire
a competent lawyer to help him secure justice if he
did not believe that his right as a laborer had been
violated.[12] It added that the creation of the PPLC
required the tremendous task of constructing hotels,
inns, restaurants, bars, boutiques and service shops,
thus involving extensive carpentry work. As an old
carpentry hand in the old corporation, the possibility
of petitioners employment was great.[13] The NLRC
likewise held that the respondent should have
presented its employment records if only to show that
petitioner was not included in its list of employees; its
failure to do so was fatal.[14]Considering that
petitioner worked for the respondent for a period of
two years, he was a regular employee.[15]
Aggrieved, respondent instituted a special civil action
for certiorari under Rule 65 before the Court of
Appeals which granted the same; and consequently
annulled and set aside the NLRC decision. The CA
disposed, as follows:
WHEREFORE, premises considered, the
instant petition is GRANTED. The assailed
decision of the NLRC dated October 24, 2000,
KAYE RAMOGA
as well as the Resolution dated September 9,
2002 in NLRC Case No. V-000882-99, RAB
VII-0088-98-D are hereby ANNULLED and
SET ASIDE. The complaint is
ordered DISMISSED. SO ORDERED.[16]
Contrary to the NLRCs finding, the CA concluded
that there was no employer-employee relationship.
The CA stressed that petitioner having raised a
positive averment, had the burden of proving the
existence of an employer-employee relationship.
Respondent, therefore, had no obligation to prove its
negative averment.[17] The appellate court further
held that while the respondents business required
the performance of occasional repairs and carpentry
work, the retention of a carpenter in its payroll was
not necessary or desirable in the conduct of its usual
business.[18] Lastly, although the petitioner was an
employee of the former owner of the hacienda, the
respondent was not required to absorb such
employees because employment contracts are in
personam and binding only between the parties.[19]
Petitioner now comes before this Court raising the
sole issue:
Whether or not the decision of [the] court of appeals
dated august 27, 2003, reversing and setting aside
the nlrc (fourth division, cebu city) ruling that the
petitioner was not illegally dismissed as he was not
an employee of respondent, is contrary to law and
jurisprudence on which it was based, and not in
consonance with the evidence on record.[20]
The disposition of this petition rests on the resolution
of the following questions: 1) Is the petitioner a
regular employee of the respondent? 2) If so, was he
illegally dismissed from employment? and 3) Is he
entitled to his monetary claims?
Petitioner insists that he was a regular employee of
the respondent corporation. The respondent, on the
other hand, counters that it did not hire the petitioner,
hence, he was never an employee, much less a
regular one.
Both the Labor Arbiter and the CA concluded that
there was no employer-employee relationship
between the petitioner and respondent. They based
their conclusion on the alleged admission of the
petitioner that he was previously hired by the former
owner of the hacienda. Thus, they rationalized that
since the respondent was not obliged to absorb all
the employees of the former owner, petitioners claim
of employment could not be sustained. The NLRC,
on the other hand, upheld petitioners claim of regular
employment because of the respondents failure to
present its employment records.
The existence of an employer-employee relationship
involves a question of fact which is well within the
province of the CA to determine. Nonetheless, given
LABOR LAW
the reality that the CAs findings are at odds with
those of the NLRC, the Court is constrained to probe
into the attendant circumstances as appearing on
record.[21]
A thorough examination of the records compels this
Court to reach a conclusion different from that of the
CA. It is true that petitioner admitted having been
employed by the former owner prior to 1993 or
before the respondent took over the ownership and
management of the plantation, however, he likewise
alleged having been hired by the respondent as a
carpenter in 1995 and having worked as such for two
years until 1997. Notably, at the outset, respondent
categorically denied that it hired the petitioner. Yet, in
its petition filed before the CA, respondent made this
admission:
Private respondent [petitioner herein] cannot be
considered a regular employee since the nature
of his work is merely project in character in
relation to the construction of the facilities of the
Pamplona Plantation Leisure Corporation.
He is a project employee as he was hired 1) for a
specific project or undertaking, and 2) the
completion or termination of such project or
undertaking has been determined at the time of
engagement of the employee. x x x.
In other words, as regards those workers who
worked in 1995 specifically in connection with the
construction of the facilities of Pamplona
Plantation Leisure Corporation, their employment
was definitely temporary in character and not
regular employment. Their employment was
deemed terminated by operation of law the
moment they had finished the job or activity
under which they were employed.[22]
Thus, departing from its initial stand that it never
hired petitioner, the respondent eventually admitted
the existence of employer-employee relationship
before the CA. It, however, qualified such admission
by claiming that it was PPLC that hired the petitioner
and that the nature of his employment therein was
that of a project and not regular employee.
Parenthetically, this Court in Pamplona Plantation
Company, Inc. v. Tinghil[23] and Pamplona
Plantation Company v. Acosta[24] had pierced the
veil of corporate fiction and declared that the two
corporations,[25] PPLC and the herein respondent,
are one and the same.
By setting forth these defenses, respondent, in effect,
admitted that petitioner worked for it, albeit in a
different capacity. Such an allegation is in the nature
of a negative pregnant, a denial pregnant with the
admission of the substantial facts in the pleadings
responded to which are not squarely denied, and
amounts to an acknowledgment that petitioner was
indeed employed by respondent.[26]
KAYE RAMOGA
The employment relationship having been
established, the next question we must answer is: Is
the petitioner a regular or project employee?
We find the petitioner to be a regular employee.
Article 280 of the Labor Code, as amended,
provides:
ART. 280. REGULAR AND CASUAL EMPLOYMENT.
- The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement
of the parties, an employment shall be deemed to be
regular where the employee has been engaged to
perform activities which are usually necessary or
desirable in the usual business or trade of the
employer, except where the employment has been
fixed for a specific project or undertaking, the
completion or termination of which has been
determined at the time of the engagement of the
employee or where the work or service to be
performed is seasonal in nature and the employment
is for the duration of the season.
An employment shall be deemed to be casual if it is
not covered by the preceding paragraph: Provided,
That, any employee who has rendered at least one
year of service, whether such service is continuous or
broken, shall be considered a regular employee with
respect to the activity in which he is employed and his
employment shall continue while such activity exists.
As can be gleaned from this provision, there are two
kinds of regular employees, namely: (1) those who
are engaged to perform activities which are usually
necessary or desirable in the usual business or trade
of the
employer; and (2) those who have rendered at least
one year of service, whether continuous or broken,
with respect to the activity in which they are
employed.[27] Simply stated, regular employees are
classified into: regular employees by nature of work;
and regular employees by years of service. The
former refers to those employees who perform a
particular activity which is necessary or desirable in
the usual business or trade of the employer,
regardless of their length of service; while the latter
refers to those employees who have been performing
the job, regardless of the nature thereof, for at least a
year.[28] If the employee has been performing the
job for at least one year, even if the performance is
not continuous or merely intermittent, the law deems
the repeated and continuing need for its performance
as sufficient evidence of the necessity, if not
indispensability, of that activity to the business.[29]
Respondent is engaged in the management of the
Pamplona Plantation as well as in the operation of
tourist resorts, hotels, inns, restaurants,
etc. Petitioner, on the other hand, was engaged to
perform carpentry work. His services were needed
for a period of two years until such time that the
respondent decided not to give him work assignment
anymore. Owing to his length of service, petitioner
became a regular employee, by operation of law.
LABOR LAW
Respondent argues that, even assuming that
petitioner can be considered an employee, he cannot
be classified as a regular employee, but merely as a
project employee whose services were hired only
with respect to a specific job and only while that
specific job existed.
A project employee is assigned to carry out a specific
project or undertaking the duration and scope of
which are specified at the time the employee is
engaged in the project. A project is a job or
undertaking which is distinct, separate and
identifiable from the usual or regular undertakings of
the company. A project employee is assigned to a
project which begins and ends at determined or
determinable times.[30]
The principal test used to determine whether
employees are project employees as distinguished
from regular employees, is whether or not the
employees were assigned to carry out a specific
project or undertaking, the duration or scope of which
was specified at the time the employees were
engaged for that project.[31] In this case, apart from
respondents bare allegation that petitioner was a
project employee, it had not shown that petitioner
was informed that he would be assigned to a specific
project or undertaking. Neither was it established that
he was informed of the duration and scope of such
project or undertaking at the time of his engagement.
Most important of all, based on the records,
respondent did not report the termination of
petitioners supposed project employment to the
Department of Labor and Employment
(DOLE). Department Order No. 19 (as well as the old
Policy Instructions No. 20) requires employers to
submit a report of an employee’s termination to the
nearest public employment office every time the
employment is terminated due to a completion of a
project. Respondents’ failure to file termination
reports, particularly on the cessation of petitioners’
employment, was an indication that the petitioner
was not a project but a regular employee.[32]
We stress herein that the law overrides such
conditions which are prejudicial to the interest of the
worker whose weak bargaining position necessitates
the succor of the State. What determines whether a
certain employment is regular or otherwise is not the
will or word of the employer, to which the worker
oftentimes acquiesces. Neither is it the procedure
of hiring the employee nor the manner of paying the
salary or the actual time spent at work. It is the
character of the activities performed by the employer
in relation to the particular trade or business of the
employer, taking into account all the circumstances,
including the length of time of its performance and its
continued existence. Given the attendant
circumstances in the case at bar, it is obvious that
one year after he was employed by the respondent,
petitioner became a regular employee by operation
of law.[33]
As to the question of whether petitioner was
illegally dismissed, we answer in the affirmative.
KAYE RAMOGA
Well-established is the rule that regular employees
enjoy security of tenure and they can only be
dismissed for just cause and with due process, i.e.,
after notice and hearing. In cases involving an
employees dismissal, the burden is on the employer
to prove that the dismissal was legal. This burden
was not amply discharged by the respondent in this
case.
Obviously, petitioners dismissal was not based on
any of the just or authorized causes enumerated
under Articles 282,[34] 283[35] and 284[36] of the
Labor Code, as amended. After working for the
respondent for a period of two years, petitioner was
shocked to find out that he was not given any work
assignment anymore. Hence, the requirement of
substantive due process was not complied with.
Apart from the requirement that the dismissal of an
employee be based on any of the just or authorized
causes, the procedure laid down in Book VI, Rule I,
Section 2 (d) of the Omnibus Rules Implementing the
Labor Code, must be followed.[37] Failure to observe
the rules is a violation of the employees right to
procedural due process.
In view of the non-observance of both substantive
and procedural due process, in accordance with the
guidelines outlined by this Court in Agabon v.
National Labor Relations Commission,[38] we
declare that petitioners dismissal from employment is
illegal.[39]
Having shown that petitioner is a regular employee
and that his dismissal was illegal, we now discuss
the propriety of the monetary claims of the
petitioner. An illegally dismissed employee is entitled
to: (1) either reinstatement, if viable, or separation
pay if reinstatement is no longer viable, and (2)
backwages.[40]
In the instant case, we are prepared to concede the
impossibility of the reinstatement of petitioner
considering that his position or any equivalent
position may no longer be available in view of the
length of time that this case has been
pending. Moreover, the protracted litigation may have
seriously abraded the relationship of the parties so
as to render reinstatement impractical. Accordingly,
petitioner may be awarded separation pay in lieu of
reinstatement.[41]
Petitioners separation pay is pegged at the amount
equivalent to petitioners one (1) month pay, or one-
half (1/2) month pay for every year of service,
whichever is higher, reckoned from his first day of
employment up to finality of this decision. Full
backwages, on the other hand, should be computed
from the date of his illegal dismissal until the finality
of this decision.
On petitioners entitlement to attorneys fees,
we must take into account the fact that petitioner was
illegally dismissed from his employment and that his
LABOR LAW
wages and other benefits were withheld from him
without any valid and legal basis. As a consequence,
he was compelled to file an action for the recovery of
his lawful wages and other benefits and, in the
process, incurred expenses. On these bases, the
Court finds that he is entitled to attorneys fees
equivalent to ten percent (10%) of the monetary
award.[42]
Lastly, we affirm the NLRCs award of salary
differential. In light of our foregoing disquisition on
the illegality of petitioners dismissal, and our
adoption of the NLRCs findings, suffice it to state that
such issue is a question of fact, and we find no
cogent reason to disturb the findings of the labor
tribunal.
WHEREFORE, premises considered, the petition
is GRANTED. The Decision of the Court of
Appeals dated August 27, 2003 and its Resolution
dated November 11, 2003 in CA-G.R. SP No. 74892
are REVERSED and SET ASIDE. Petitioner is found
to have been illegally dismissed from employment
and thus, is ENTITLED to: 1) Salary Differential
embodied in the NLRC decision dated October 24,
2000 in NLRC Case No. V-000882-99; 2) Separation
Pay; 3) Backwages; and 4) Attorneys fees equivalent
to ten percent (10%) of the monetary awards. Upon
finality of this judgment, let the records of the case be
remanded to the NLRC for the computation of the
exact amounts due the petitioner. SO ORDERED.
FOOTNOTES
[34] ART. 282. TERMINATION BY EMPLOYER. An
employer may terminate an employment for any of
the following causes.
(a) Serious misconduct or willful disobedience by the
employee of the lawful orders of his employer or
representative in connection with his work;
(b) Gross and habitual neglect by the employee of his
duties;
(c) Fraud or willful breach by the employee of the trust
reposed in him by his employer or duly authorized
representative;
(d) Commission of a crime or offense by the employee
against the person of his employer or any immediate
member of his family or his duly authorized
representative; and
(e) Other causes analogous to the foregoing.
[35] ART. 283. CLOSURE OF ESTABLISHMENT AND
REDUCTION OF PERSONNEL. The employer may also
terminate the employment of any employee due to the
installation of labor-saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation
of operation of the establishment or undertaking unless
the closing is for the purpose of circumventing the
KAYE RAMOGA LABOR LAW

provisions of this Title, by serving a written notice on the

workers and the Ministry of Labor and Employment [now
Secretary of Labor] 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 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 as
one (1) whole year.

[36] ART. 284. 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.

[37] Procedurally, (1) if the dismissal is based on a just

cause under Article 282, the employer must give the
employee two written notices and a hearing or opportunity
to be heard if requested by the employee before
terminating the employment: a notice specifying the
grounds for which dismissal is sought a hearing or an
opportunity to be heard and after hearing or opportunity to
be heard, a notice of the decision to dismiss; and (2) if the
dismissal is based on authorized causes under Articles
283 and 284, the employer must give the employee and
the Department of Labor and Employment written notices
30 days prior to the effectivity of his separation; Agabon v.
National Labor Relations Commission, G.R. No. 158693,
November 17, 2004, 442 SCRA 573, 607.

[39] The Court, in the case of Agabon enumerated the four

possible situations that may be derived in illegal dismissal
cases, thus:

(1) the dismissal is for a just cause under Article 282 of

the Labor Code, for an authorized cause under Article
283, or for health reasons under Article 284, and due
process was observed;
(2) the dismissal is without just or authorized cause but
due process was observed;
(3) the dismissal is without just or authorized cause and
there was no due process; and

the dismissal is for just or authorized cause but due

process was not observed; Agabon v. National Labor
Relations Commission, supra. at 60.
KAYE RAMOGA LABOR LAW

G.R. No. 209499 January 28, 2015

MA. CHARITO C. GADIA, ERNESTO M. PENAS, GEMMABELLE B. REMO, LORENA S. QUESEA, MARIE
JOY FRANCISCO, BEVERLY A. CABINGAS, IVEE U. BALINGIT, ROMA ANGELICA 0. BORJA, MARIE JOAN
RAMOS, KIM GUEVARRA, LYNN S. DE LOS SANTOS, CAREN C. ENCANTO, EIDEN BALDOVINO,
JACQUELINE B. CASTRENCE,MA.ESTRELLA V. LAPUZ, JOSELITO L. LORD, RAYMOND G. SANTOS,
ABIGAIL M. VILORIA, ROMMEL C. ACOSTA, FRANCIS JAN S. BAYLON, ERIC 0. PADIERNOS, MA. LENELL P.
AARON, CRISNELL P. AARON, and LAWRENCE CHRISTOPHER F. PAPA, Petitioners,
vs. SYKES ASIA, INC./ CHUCK SYKES/ MIKE HINDS/ MICHAEL HENDERSON, Respondent.

petitioners filed separate complaints17 for illegal

PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are
the Decision2 dated April 29, 2013 and the
Resolution3 dated October 3, 2013 of the Court of
Appeals (CA) in CA-G.R. SP No. 120433, which
annulled and set aside the Decision4 dated
November 15, 2010 and the Resolution5 dated May
10, 2011 of the National Labor Relations
Commission (NLRC), in NLRC LAC No. 07-001583-
10, and reinstated the Decision6 dated June 23, 2010
of the Labor Arbiter (LA), holding that herein
petitioners Ma. Charito C. Gadia7 (Gadia), Ernesto M.
Peñas,8 Gemmabelle B. Remo (Remo), Lorena S.
Quesea (Quesea), Marie Joy Francisco, Beverly A.
Cabingas, Ivee U. Balingit9(Balingit), Roma Angelica
O. Borja, Marie Joan Ramos, Kim Guevarra, Lynn S.
De Los Santos, Caren C. Encanto, Eiden Baldovino,
Jacqueline B. Castrence (Castrence), Ma. Estrella
V.Lapuz (Lapuz), Joselito L. Lord (Lord), Raymond
G. Santos, Abigail M. Viloria (Viloria), Rommel C.
Acosta10 (Acosta), Francis Jan S. Baylon,Eric O.
Padiernos, Ma. Lenell P. Aaron, Crisnell P. Aaron,
and Lawrence Christopher F.Papa (petitioners) are
project employees of respondent Sykes Asia, Inc.
(Sykes Asia), and thus, were validly terminated from
employment.
The Facts
Sykes Asia is a corporation engaged in Business
Process Outsourcing (BPO) which provides support
to its international clients from various sectors (e.g.,
technology, telecommunications, retail services) by
carrying on some of their operations, governed by
service contracts that it enters with them.11 On
September 2, 2003,12 Alltel Communications, Inc.
(Alltel), a United States-based telecommunications
firm, contracted Sykes Asia’s services to
accommodate the needs and demands of Alltel
clients for its postpaid and prepaid services (Alltel
Project). Thus, on different dates, Sykes Asia hired
petitioners as customer service representatives,
team leaders, and trainers for the Alltel Project.13
Services for the said project went on smoothly until
Alltel sent two (2) letters to Sykes Asia dated August
7, 200914and September 9, 200915 informing the
latter that it was terminating all support services
provided by Sykes Asia related to the Alltel Project.
In view of this development, Sykes Asia sent each of
the petitioners end-of-life notices,16informing them of
their dismissal from employment due to the
termination of the Alltel Project. Aggrieved,
dismissal against respondents Sykes Asia, Chuck
Sykes, the President and Chief Operating Officer of
Sykes Enterprise, Inc., and Mike Hinds and Michael
Henderson, the President and Operations Director,
respectively, of Sykes Asia (respondents), praying for
reinstatement, backwages, 13th month pay, service
incentive leave pay, night shift differential, moral and
exemplary damages, and attorney’s fees. In their
complaints, petitioners alleged that their dismissal
from service was unjust as the same was effected
without substantive and procedural due process.18
In their defense,19 respondents averred that
petitioners were not regular employees but merely
project-based employees, and as such, the
termination of the Alltel Project served as a valid
ground for their dismissal.20 In support of their
position, respondents noted that it was expressly
indicated in petitioners’ respective employment
contracts that their positions are "project-based" and
thus, "co-terminus to the project."21 Respondents
further maintained that they complied with the
requirements of procedural due process in
dismissing petitioners by furnishing each of them
their notices of termination at least thirty (30) days
prior to their respective dates of dismissal.22
The LA Ruling
In a Decision23 dated June 23, 2010 the LA ruled in
favor of respondents, and accordingly, dismissed
petitioners’ complaints for lack of merit.24 It found that
petitioners are merely project-based employees, as
their respective employment contracts indubitably
provided for the duration and term of their
employment, as well as the specific project to which
they were assigned, i.e., the Alltel Project.25 Hence,
the LA concluded that the cessation of the Alltel
Project naturally resulted in the termination of
petitioners’ employment in Sykes Asia.26 Dissatisfied,
petitioners appealed27 to the NLRC.
The NLRC Ruling
In a Decision28 dated November 15, 2010, the NLRC
modified the LA Decision, ruling that petitioners are
regular employees but were validly terminated due to
redundancy.29 Accordingly, petitioners, except Viloria
and Acosta whose complaints were dismissed
without prejudice for failure to prosecute,30 were
awarded their separation pay with interest of 12% per
annum reckoned from the date of their actual
dismissal until full payment, plus attorney’s fees
amounting to 10% of the total monetary award. In
KAYE RAMOGA
addition, the NLRC awarded nominal damages in the
amount of ₱10,000.00 each to petitioners Gadia,
Remo, Quesea, Balingit, Castrence, Lapuz, and Lord
for respondents’ failure to furnish them the required
written notice of termination within the prescribed
period.31
Contrary to the LA’s finding, the NLRC found that
petitioners could not be properly characterized as
project-based employees, ratiocinating that while it
was made known to petitioners that their employment
would be co-terminus to the Alltel Project, it was
neither determined nor made known to petitioners, at
the time of hiring, when the said project would end,
be terminated, or be completed.32 In this relation, the
NLRC concluded that inasmuch as petitioners had
been engaged to perform activities which are
necessary or desirable in respondents’ usual
business or trade of BPO, petitioners should be
deemed regular employees of Sykes Asia.33 This
notwithstanding, and in view of the cessation of the
Alltel Project, the NLRC found petitioners’
employment with Sykes Asia to be redundant; hence,
declared that they were legally dismissed from
service and were only entitled to receive their
respective separation pay.34
Respondents moved for reconsideration,35 which
was, however, denied in a Resolution36 dated May
10, 2011. Unconvinced, Sykes Asia37 elevated the
case to the CA on certiorari.38
The CA Ruling
In a Decision39 dated April 29, 2013, the CA annulled
and set aside the ruling of the NLRC, and
accordingly, reinstated that of the LA.40 It held that a
perusal of petitioners’ respective employment
contracts readily shows that they were hired
exclusively for the Alltel Project and that it was
specifically stated therein that their employment
would be project-based.41 The CA further held that
petitioners’ employment contracts need not state an
actual date as to when their employment would end,
opining that it is enough that such date is
determinable.42
Petitioners moved for reconsideration,43 which was,
however, denied in a Resolution44 dated October 3,
2013, hence, this petition.
The Issue Before the Court
The primordial issue for the Court’s resolution is
whether or not the CA correctly granted respondents’
petition for certiorari, thereby setting aside the
NLRC’s decision holding that petitioners were regular
employees and reinstating the LA ruling that
petitioners were merely project-based employees,
and thus, validly dismissed from service.
The Court’s Ruling: The petition is without merit.
At the outset, it must be stressed that to justify the
grant of the extraordinary remedy of certiorari,
petitioners must satisfactorily show that the court or
LABOR LAW
quasi-judicial authority gravely abused the discretion
conferred upon it. Grave abuse of discretion
connotes judgment exercised in a capricious and
whimsical manner that is tantamount to lack of
jurisdiction. To be considered "grave," discretion
must be exercised in a despotic manner by reason of
passion or personal hostility, and must be so patent
and gross as to amount to an evasion of positive duty
or to a virtual refusal to perform the duty enjoined by
or to act at all in contemplation of law.45
In labor disputes, grave abuse of discretion may be
ascribed to the NLRC when, inter alia, its findings
and the conclusions reached thereby are not
supported by substantial evidence. This requirement
of substantial evidence is clearly expressed in
Section 5, Rule 133 of the Rules of Court which
provides that "in cases filed before administrative or
quasi-judicial bodies, a fact may be deemed
established if it is supported by substantial evidence,
or that amount of relevant evidence which a
reasonable mind might accept as adequate to justify
a conclusion."46
Tested against these considerations, the Court finds
that the CA correctly granted respondents’ certiorari
petition before it, since the NLRC gravely abused its
discretion in ruling that petitioners were regular
employees of Sykes Asia when the latter had
established by substantial evidence that they were
merely project-based.
Article 29447 of the Labor Code,48 as amended,
distinguishes a project-based employee from a
regular employee as follows:
Art. 294. Regular and casual employment.—The
provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement
of the parties, an employment shall be deemed to be
regular where the employee has been engaged to
perform activities which are usually necessary or
desirable in the usual business or trade of the
employer, except where the employment has been
fixed for a specific project or undertaking the
completion or termination of which has been
determined at the time of the engagement of the
employee or where the work or services to be
performed is seasonal in nature and the employment
is for the duration of the season.
x x x x (Emphasis and underscoring supplied)
In Omni Hauling Services, Inc. v. Bon,49 the Court
extensively discussed how to determine whether an
employee may be properly deemed project-based or
regular, to wit:
A project employee is assigned to a project which
begins and ends at determined or determinable
times.1âwphi1 Unlike regular employees who may
only be dismissed for just and/or authorized causes
under the Labor Code, the services of employees
who are hired as "project[-based] employees" may
be lawfully terminated at the completion of the
project.
KAYE RAMOGA
According to jurisprudence, the principal test for
determining whether particular employees are
properly characterised as "project[-based]
employees" as distinguished from "regular
employees," is whether or not the employees were
assigned to carry out a "specific project or
undertaking," the duration (and scope) of which were
specified at the time they were engaged for that
project. The project could either be (1) a particular
job or undertaking that is within the regular or usual
business of the employer company, but which is
distinct and separate, and identifiable as such, from
the other undertakings of the company; or (2) a
particular job or undertaking that is not within the
regular business of the corporation. In order to
safeguard the rights of workers against the arbitrary
use of the word "project" to prevent employees from
attaining a regular status, employers claiming that
their workers are project[-based] employees should
not only prove that the duration and scope of the
employment was specified at the time they were
engaged, but also, that there was indeed a
project.50 (Emphases and underscoring supplied)
Verily, for an employee to be considered project-
based, the employer must show compliance with two
(2) requisites, namely that: (a) the employee was
assigned to carry out a specific project or
undertaking; and (b) the duration and scope of which
were specified at the time they were engaged for
such project.
In this case, records reveal that Sykes Asia
adequately informed petitioners of their employment
status at the time of their engagement, as evidenced
by the latter’s employment contracts which similarly
provide that they were hired in connection with the
Alltel Project, and that their positions were "project-
based and as such is co-terminus to the project." In
this light, the CA correctly ruled that petitioners were
indeed project-based employees, considering that:
(a) they were hired to carry out a specific
undertaking, i.e., the Alltel Project; and (b) the
duration and scope of such project were made
known to them at the time of their engagement, i.e.,
"co-terminus with the project."
As regards the second requisite, the CA correctly
stressed that "[t]he law and jurisprudence dictate that
‘the duration of the undertaking begins and ends at
determined or determinable times’" while clarifying
that "[t]he phrase ‘determinable times’ simply means
capable of being determined or fixed."51 In this case,
Sykes Asia substantially complied with this requisite
when it expressly indicated in petitioners’
LABOR LAW
employment contracts that their positions were "co-
terminus with the project." To the mind of the Court,
this caveat sufficiently apprised petitioners that their
security of tenure with Sykes Asia would only last as
long as the Alltel Project was subsisting. In other
words, when the Alltel Project was terminated,
petitioners no longer had any project to work on, and
hence, Sykes Asia may validly terminate them from
employment. Further, the Court likewise notes the
fact that Sykes Asia duly submitted an Establishment
Employment Report52 and an Establishment
Termination Report53 to the Department of Labor and
Employment Makati-Pasay Field Office regarding the
cessation of the Alltel Project and the list of
employees that would be affected by such cessation.
As correctly pointed out by the CA, case law deems
such submission as an indication that the
employment was indeed project-based.54
In sum, respondents have shown by substantial
evidence that petitioners were merely project-based
employees, and as such, their services were lawfully
terminated upon the cessation of the Alltel Project.
WHEREFORE, the petition is DENIED.
Accordingly, the Decision dated April 29, 2013
and the Resolution dated October 3, 2013 of the
Court of Appeals in CA-G.R. SP No. 120433 are
hereby AFFIRMED. SO ORDERED.
Footnotes
47 Formerly Article 280. As renumbered pursuant to
Section 5 of Republic Act No. 10151, entitled "AN ACT
ALLOWING THE EMPLOYMENT OF NIGHT WORKERS,
THEREBY REPEALING ARTICLES 130AND 131OF
PRESIDENTIAL DECREE NUMBER FOUR HUNDRED
FORTY-TWO,AS AMENDED, OTHERWISE KNOWN AS
THE LABOR CODE OF THE PHILIPPINES" (July 26
2010).
48 Presidential Decree No. 442 entitled "A DECREE
INSTITUTING A LABOR CODE THEREBY REVISING
AND CONSOLIDATING LABOR AND SOCIAL LAWS TO
AFFORD PROTECTION TO LABOR, PROMOTE
EMPLOYMENT AND HUMAN RESOURCES
DEVELOPMENT AND INSURE INDUSTRIAL PEACE
BASED ON SOCIAL JUSTICE" (May 1, 1974).
KAYE RAMOGA
G.R. No. 204406 February 26, 2014
MACARTHUR MALICDEM and HERMENIGILDO FLORES, Petitioners,
vs. MARULAS INDUSTRIAL CORPORATION and MIKE MANCILLA, Respondents.
MENDOZA, J.:
This petition for review on certiorari1 under Rule 45 of
the Rules of Court filed by Macarthur Malicdem
(Malicdem) and Hermenigildo Flores (Flores) assails
the July 18, 2012 Decision2 and the November 12,
2012 Resolution3 of the Court of Appeals (CA) in CA-
G.R. SP No. 1244 70, dismissing their petition for
certiorari under Rule 65 in an action for illegal
dismissal.
The Facts:
A complaint4 for illegal dismissal, separation pay,
money claims, moral and exemplary damages, and
attorney's fees was filed by petitioners Malicdem and
Flores against respondents Marulas Industrial
Corporation (Marulas) and Mike Mancilla (Mancilla),
who were engaged in the business of manufacturing
sacks intended for local and export markets.
Malicdem and Flores were first hired by Marulas as
extruder operators in 2006, as shown by their
employment contracts. They were responsible for the
bagging of filament yarn, the quality of pp yarn
package and the cleanliness of the work place area.
Their employment contracts were for a period of one
(1) year. Every year thereafter, they would sign a
Resignation/Quitclaim in favor of Marulas a day after
their contracts ended, and then sign another contract
for one (1) year. Until one day, on December 16,
2010, Flores was told not to report for work anymore
after being asked to sign a paper by Marulas' HR
Head to the effect that he acknowledged the
completion of his contractual status. On February 1,
2011, Malicdem was also terminated after signing a
similar document. Thus, both claimed to have been
illegally dismissed.
Marulas countered that their contracts showed that
they were fixed-term employees for a specific
undertaking which was to work on a particular order
of a customer for a specific period. Their severance
from employment was due to the expiration of their
contracts.
On February 7, 2011, Malicdem and Flores lodged a
complaint against Marulas and Mancilla for illegal
dismissal.
On July 13, 2011, the Labor Arbiter (LA) rendered a
decision5 in favor of the respondents, finding no
illegal dismissal. He ruled that Malicdem and Flores
were not terminated and that their employment
LABOR LAW
naturally ceased when their contracts expired. The
LA, however, ordered Marulas to pay Malicdem and
Flores their respective wage differentials, to wit:
WHEREFORE, the complaints for illegal dismissal
are dismissed for lack of merit. Respondent Marulas
Industrial Corporation is, however, ordered to pay
complainants wage differential in the following
amounts:
All other claims are dismissed for lack of merit. SO
ORDERED.6
Malicdem and Flores appealed to the NLRC which
partially granted their appeal with the award of
payment of 13th month pay, service incentive leave
and holiday pay for three (3) years. The dispositive
portion of its December 19, 2011 Decision7 reads:
WHEREFORE, the appeal is GRANTED IN PART.
The Decision of Labor Arbiter Raymund M. Celino,
dated July 13, 2011, is MODIFIED. In addition to the
award of salary differentials, complainants should
also be awarded 13th month pay, service incentive
leave and holiday pay for three years. SO
ORDERED.8
Still, petitioners filed a motion for reconsideration, but
it was denied by the NLRC on February 29, 2011.
Aggrieved, Malicdem and Flores filed a petition for
certiorari under Rule 65 with the CA.
On July 18, 2012, the CA denied the petition,9 finding
no grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of the NLRC. It
ruled that the issue of whether or not the petitioners
were project employees or regular employees was
factual in nature and, thus, not within the ambit of a
petition for certiorari. Moreover, it accorded respect
and due consideration to the factual findings of the
NLRC, affirming those of the LA, as they were
supported by substantial evidence.
On the substantive issue, the CA explained that "the
repeated and successive rehiring of project
employees do not qualify them as regular
employees, as length of service is not the controlling
determinant of the employment tenure of a project
employee, but whether the employment has been
fixed for a specific project or undertaking, its
completion has been determined at the time of the
engagement of the employee."10
KAYE RAMOGA
Corollarily, considering that there was no illegal
dismissal, the CA ruled that payment of backwages,
separation pay, damages, and attorney's fees had no
factual and legal bases. Hence, they could not be
awarded to the petitioners.
Aggrieved, Malicdem and Flores filed a motion for
reconsideration, but their pleas were denied in the
CA Resolution, dated November 12, 2012.
The Petition
Malicdem and Flores now come before this Court by
way of a petition for review on certiorari under Rule
45 of the Rules of Court praying for the reversal of
the CA decision anchored on the principal argument
that the appellate court erred in affirming the NLRC
decision that there was no illegal dismissal because
the petitioners’ contracts of employment with the
respondents simply expired. They claim that their
continuous rehiring paved the way for their
regularization and, for said reason, they could not be
terminated from their jobs without just cause.
In their Comment,11 the respondents averred that the
petitioners failed to show that the CA erred in
affirming the NLRC decision. They posit that the
petitioners were contractual employees and their
rehiring did not amount to regularization. The CA
cited William Uy Construction Corp. v.
Trinidad,12 where it was held that the repeated and
successive rehiring of project employees did not
qualify them as regular employees, as length of
service was not the controlling determinant of the
employment tenure of a project employee, but
whether the employment had been fixed for a
specific project or undertaking, its completion had
been determined at the time of the engagement of
the employee. The respondents add that for said
reason, the petitioners were not entitled to full
backwages, separation pay, moral and exemplary
damages, and attorney’s fees.
Now, the question is whether or not the CA erred in
not finding any grave abuse of discretion amounting
to lack or excess of jurisdiction on the part of the
NLRC.
The Court’s Ruling:
The Court grants the petition.
The petitioners have convincingly shown that they
should be considered regular employees and, as
such, entitled to full backwages and other
entitlements.
A reading of the 2008 employment
13
contracts, denominated as "Project Employment
LABOR LAW
Agreement," reveals that there was a stipulated
probationary period of six (6) months from its
commencement. It was provided therein that in the
event that they would be able to comply with the
company’s standards and criteria within such period,
they shall be reclassified as project employees with
respect to the remaining period of the effectivity of
the contract. Specifically, paragraph 3(b) of the
agreement reads:
The SECOND PARTY hereby acknowledges, agrees
and understands that the nature of his/her
employment is probationary and on a project-basis.
The SECOND PARTY further acknowledges, agrees
and understands that within the effectivity of this
Contract, his/her job performance will be evaluated in
accordance with the standards and criteria explained
and disclosed to him/her prior to signing of this
Contract. In the event that the SECOND PARTY is
able to comply with the said standards and criteria
within the probationary period of six month/s from
commencement of this Contract, he/she shall be
reclassified as a project employee of (o)f the FIRST
PARTY with respect to the remaining period of the
effectivity of this Contract.
Under Article 281 of the Labor Code, however, "an
employee who is allowed to work after a probationary
period shall be considered a regular employee."
When an employer renews a contract of employment
after the lapse of the six-month probationary period,
the employee thereby becomes a regular employee.
No employer is allowed to determine indefinitely the
fitness of its employees.14 While length of time is not
the controlling test for project employment, it is vital
in determining if the employee was hired for a
specific undertaking or tasked to perform functions
vital, necessary and indispensable to the usual
business of trade of the employer.15 Thus, in the
earlier case of Maraguinot, Jr. v. NLRC,16 it was ruled
that a project or work pool employee, who has been:
(1) continuously, as opposed to intermittently, rehired
by the same employer for the same tasks or nature
of tasks; and (2) those tasks are vital, necessary and
indispensable to the usual business or trade of the
employer, must be deemed a regular employee.
Thus:
x x x. Lest it be misunderstood, this ruling does not
mean that simply because an employee is a project
or work pool employee even outside the construction
industry, he is deemed, ipso jure, a regular
employee. All that we hold today is that once a
project or work pool employee has been: (1)
continuously, as opposed to intermittently, re-hired
by the same employer for the same tasks or nature
of tasks; and (2) these tasks are vital, necessary and
indispensable to the usual business or trade of the
KAYE RAMOGA
employer, then the employee must be deemed a
regular employee, pursuant to Article 280 of the
Labor Code and jurisprudence. To rule otherwise
would allow circumvention of labor laws in industries
not falling within the ambit of Policy Instruction No.
20/Department Order No. 19, hence allowing the
prevention of acquisition of tenurial security by
project or work pool employees who have already
gained the status of regular employees by the
employer's conduct.1âwphi1
The test to determine whether employment is regular
or not is the reasonable connection between the
particular activity performed by the employee in
relation to the usual business or trade of the
employer. If the employee has been performing the
job for at least one year, even if the performance is
not continuous or merely intermittent, the law deems
the repeated and continuing need for its performance
as sufficient evidence of the necessity, if not
indispensability of that activity to the business.17
Guided by the foregoing, the Court is of the
considered view that there was clearly a deliberate
intent to prevent the regularization of the petitioners.
To begin with, there is no actual project. The only
stipulations in the contracts were the dates of their
effectivity, the duties and responsibilities of the
petitioners as extruder operators, the rights and
obligations of the parties, and the petitioners’
compensation and allowances. As there was no
specific project or undertaking to speak of, the
respondents cannot invoke the exception in Article
280 of the Labor Code.18 This is a clear attempt to
frustrate the regularization of the petitioners and to
circumvent the law.
Next, granting that they were project employees, the
petitioners could only be considered as regular
employees as the two factors enumerated in
Maraguinot, Jr., are present in this case. It is
undisputed that the petitioners were continuously
rehired by the same employer for the same position
as extruder operators. As such, they were
responsible for the operation of machines that
produced the sacks. Hence, their work was vital,
necessary and indispensable to the usual business
or trade of the employer.
In D.M. Consunji, Inc. v. Estelito Jamin19 and Liganza
v. RBL Shipyard Corporation,20 the Court reiterated
the ruling that an employment ceases to be
coterminous with specific projects when the
employee is continuously rehired due to the
demands of the employer’s business and re-engaged
for many more projects without interruption.
LABOR LAW
The respondents cannot use the alleged expiration of
the employment contracts of the petitioners as a
shield of their illegal acts. The project employment
contracts that the petitioners were made to sign
every year since the start of their employment were
only a stratagem to violate their security of tenure in
the company. As restated in Poseidon Fishing v.
NLRC,21 "if from the circumstances it is apparent that
periods have been imposed to preclude acquisition of
tenurial security by the employee, they should be
disregarded for being contrary to public policy."
The respondents’ invocation of William Uy
Construction Corp. v. Trinidad22 is misplaced
because it is applicable only in cases involving the
tenure of project employees in the construction
industry. It is widely known that in the construction
industry, a project employee's work depends on the
availability of projects, necessarily the duration of his
employment.23 It is not permanent but coterminous
with the work to which he is assigned.24 It would be
extremely burdensome for the employer, who
depends on the availability of projects, to carry him
as a permanent employee and pay him wages even
if there are no projects for him to work on.25 The
rationale behind this is that once the project is
completed it would be unjust to require the employer
to maintain these employees in their payroll. To do
so would make the employee a privileged retainer
who collects payment from his employer for work not
done. This is extremely unfair to the employers and
amounts to labor coddling at the expense of
management.26"
Now that it has been clearly established that the
petitioners were regular employees, their termination
is considered illegal for lack of just or authorized
causes. Under Article 279 of the Labor Code, an
employee who is unjustly dismissed from work shall
be entitled to reinstatement without loss of seniority
rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or
their monetary equivalent computed from the time his
compensation was withheld from him up to the time
of his actual reinstatement. The law intends the
award of backwages and similar benefits to
accumulate past the date of the LA decision until the
dismissed employee is actually reinstated.
WHEREFORE, the petition is GRANTED. The
assailed July 18, 2012 decision of the Court of
Appeals and its November 12, 2012 Resolution in
CA-G.R. SP No. 1244 70, are hereby ANNULLED
and SET ASIDE.
Accordingly, respondent Marulas Industrial
Corporation is hereby ordered to reinstate petitioners
Macarthur Malicdem and Hermenigildo Flores to their
KAYE RAMOGA LABOR LAW

former positions without loss of seniority rights and Footnotes

other privileges and to pay their full backwages,
18
inclusive of allowances and their other benefits or Except where the employment has been fixed for a
their monetary equivalent computed from the time specific project or undertaking the completion or
their compensations were withheld from them up to termination of which has been determined at the time
the time of their actual reinstatement plus the wage of the engagement of the employee.
differentials stated in the July 13, 2011 decision of
the Labor Arbiter, as modified by the December 19,
2011 NLRC decision. SO ORDERED.
KAYE RAMOGA
GR No. 179640, Mar 18, 2015
HACIENDA CATAYWA v. ROSARIO LOREZO +
PERALTA, J.:
Before this Court is a petition for review
on certiorari dated September 28, 2007 of petitioner
Hacienda Cataywa, Manuel Villanueva, et al.,
(petitioners) seeking to reverse and set aside the
Resolutions, dated October 17, 2006[1] and August
10, 2007,[2] respectively, of the Court of Appeals (CA)
and the Resolution and Order, dated October 12,
2005 and March 8, 2006, respectively, of the Social
Security Commission, ordering petitioners to pay
jointly and severally all delinquent contributions, 3%
penalty per month of delayed payment and damages
to respondent Rosario Lorezo.
The antecedent facts follow:
On October 22, 2002, respondent Rosario Lorezo
received, upon inquiry, a letter from the Social
Security System (SSS) Western Visayas Group
informing her that she cannot avail of their retirement
benefits since per their record she has only paid 16
months. Such is 104 months short of the minimum
requirement of 120 months payment to be entitle to
the benefit. She was also informed that their
investigation of her alleged employment under
employer Hda. Cataywa could not be confirmed
because Manuel Villanueva was permanently
residing in Manila and Joemarie Villanueva denied
having managed the farm. She was also advised of
her options: continue paying contributions as
voluntary member; request for refund; leave her
contributions in-trust with the System, or file a
petition before the Social Security Commission
(SSC) so that liabilities, if any, of her employer may
be determined.[3]
Aggrieved, respondent then filed her Amended
Petition dated September 30, 2003, before the SSC.
She alleged that she was employed as laborer in
Hda. Cataywa managed by Jose Marie Villanueva in
1970 but was reported to the SSS only in 1978. She
alleged that SSS contributions were deducted from
her wages from 1970 to 1995, but not all were
remitted to the SSS which, subsequently, caused the
rejection of her claim. She also impleaded Talisay
Farms, Inc. by virtue of its Investment Agreement
with Mancy and Sons Enterprises. She also prayed
that the veil of corporate fiction be pierced since she
alleged that Mancy and Sons Enterprises and
Manuel and Jose Marie Villanueva are one and the
same.[4]
Petitioners Manuel and Jose Villanueva refuted in
their answer, the allegation that not all contributions
of respondent were remitted. Petitioners alleged that
all farm workers of Hda. Cataywa were reported a^id
their contributions were duly paid and remitted to
SSS. It was the late Domingo Lizares, Jr. who
managed and administered the hacienda.[5] While,
Talisay Farms, Inc. filed a motion to dismiss on the
ground of lack of cause of action in the absence of
LABOR LAW
an allegation that there was an employer-employee
relationship between Talisay Farms and
respondent.[6]
Consequently, the SSC rendered its Resolution
dated October 12, 2005, thus:
WHEREFORE, PREMISES CONSIDERED, this
Commission finds, and so holds, that Rosario M.
Lorezo was a regular employee subject to
compulsory coverage of Hda. Cataywa/Manuel
Villanueva/ Mancy and Sons Enterprises, Inc. within
the period of 1970 to February 25, 1990. In view
thereof, the aforenamed respondents are hereby
ordered to pay jointly and severally, within thirty (30)
days from receipt hereof, all delinquent contributions
within the proven employment period computed in
accordance with the then prevailing minimum wage
(at 11 months per year) in the amount of P8,293.90,
the 3% per month penalty on the delayed payment of
contributions in the amount of P59,786.10 (computed
as of September 9, 2005), pursuant to Section 22 of
the SS Law and the damages in the amount of
P32,356.21 for misrepresentation of the real date of
employment, pursuant to Section 24 (b) of the said
statute.
The SSS, on the other hand, is ordered to pay
(subject to existing rules and regulations) petitioner
Rosario M. Lorezo her retirement benefit, upon the
filing of the claim therefor, and to inform this
Commission of its compliance herewith. SO
ORDERED.[7]
The SSC denied petitioners' Motion for
Reconsideration. The petitioner, then, elevated the
case before the CA where the case was dismissed
outrightly due to technicalities, thus:
The Court Resolved to DISMISS the instant petition
on the basis of the following observations:
1. Signatory to the Verification failed to attach his
authority to sign for and [in] behalf of the other
Petitioners.
(Violation of Section 5, Rule 43 of the Rules of
Court, in relation to Section 7, Rule 45 of the
Rules of Court)
2. Certified true copies of pleadings and documents
relevant and pertinent to the petition are
incomplete, to wit:
- Petitioner failed to attach the following:
- Petition/Amended Petition filed before the
SSS of Makati City
- Respondents' Answer filed before the SSS of
Makati City
- Parties' respective position paper filed before
the SSS of Makati City
- Parties' respective memorandum of appeal
filed before the Commission (Violation of
Section 6, Rule 43 of the Rules of Court, in
relation to Section 7, Rule 43 of the Rules of
Court)[8]
KAYE RAMOGA
Following the denial of petitioners' Motion for
Reconsideration of the CA, petitioner filed with this
Court the present petition stating the following
grounds:
1) THE HONORABLE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR IN STRICTLY
AND RIGIDLY APPLYING THE TECHNICAL RULES
OF PROCEDURE AND DISMISSING THE CASE
ON TECHNICALITY WITHOUT EVALUATING THE
MERITS OF THE CASE;
2) THE [SSC] COMMITTED REVERSIBLE ERROR
IN MAKING CONCLUSIONS FOUNDED ON
SPECULATIONS AND SURMISES NOT
CONFORMING TO EVIDENCE ON RECORD,
MAKING MANIFESTLY MISTAKEN INFERENCES,
AND RENDERING JUDGMENT BASED ON
MISAPPREHENSION OF FACTS AND
MISAPPLICATION OF THE LAW, RULING AND
RENDERING JUDGMENT THAT:
a) RESPONDENT WORKED FROM 1970 TO
FEBRUARY 25,1990
b) PETITIONERS ARE LIABLE FOR DELINQUENT
CONTRIBUTIONS
c) PETITIONERS ARE LIABLE FOR 3% PER
MONTH PENALTY
d) PETITIONERS ARE LIABLE FOR DAMAGES
DUE TO MISREPRESENTATION
e) MANCY & SONS ENTERPRISES, INC. AND
MANUEL VILLANUEVA ARE ONE AND THE
SAME.[9]
The petition is partially meritorious.
Petitioners argues that the CA has been too rigid in
the application of the rules of procedure in dismissing
the appeal without evaluation of the merits.
This Court has emphasized that procedural rules
should be treated with utmost respect and due
regard, since they are designed to facilitate the
adjudication of cases to remedy the worsening
problem of delay in the resolution of rival claims and
in the administration of justice. However, this Court
has recognized exceptions to the Rules, but only for
the most compelling reasons where stubborn
obedience to the Rules would defeat rather than
serve the ends of justice.[10]
As in the case of Obut v. Court of Appeals,[11] this
Court held that "judicial orders are issued to be
obeyed, nonetheless a non-compliance is to be dealt
with as the circumstances attending the case may
warrant. What should guide judicial action is the
principle that a party-litigant is to be given the fullest
opportunity to establish the merits of his complaint of
defense rather than for him to lose life, liberty, honor
or property on technicalities."[12]
When the CA dismisses a petition outright and the
petitioner files a motion for the reconsideration of
such dismissal, appending thereto the requisite
pleadings, documents or order/resolution, this would
constitute substantial compliance with the Revised
Rules of Court.[13]Thus, in the present case, there
LABOR LAW
was substantial compliance when in their Motion for
Reconsideration, they attached a secretary certificate
giving Joemarie's authority to sign on behalf of the
corporation. Petitioners also included the necessary
attachment.[14]
At the outset, it is settled that this Court is not a trier
of facts and will not weigh evidence all over
again.[15] However, considering the issues raised
which can be resolved on the basis of the pleadings
and documents filed, and the fact that respondent
herself has asked this Court for early resolution, this
Court deems it more practical and in the greater
interest of justice not to remand the case to the CA
but, instead, to resolve the controversy once and for
all.
Petitioners are of the opinion that the SSC committed
reversible error in making conclusions founded on
speculations and surmises that respondent worked
from 1970 to February 25, 1990. Petitioners argue
that the SSC did not give credence nor weight at all
to the existing SSS Form R-1A and farm bookkeeper
Wilfredo Ibalobor. Petitioners insist that after thirty
long years, all the records of the farm were already
destroyed by termites and elements, thus, they relied
on the SSS Form R-1A as the only remaining source
of information available. Petitioners also alleged that
respondent was a very casual worker.
This Court disagrees.
It was settled that there is no particular form of
evidence required to Drove the existence of the
employer-employee relationship. Any competent and
relevant evidence to prove such relationship may be
admitted. This may entirely be testimonial.[16] If only
documentary evidence would be required to
demonstrate the relationship, no scheming employer
would be brought before the bar of
justice.[17]Petitioners erred in insisting that, due to
passage of time, SSS Form R-1A is the only
remaining source of information available to prove
when respondent started working for them. However,
such form merely reflected the time in which the
petitioners reported the respondent for coverage of
the SSS benefit. They failed to substantiate their
claim that it was only in 1978 that respondent
reported for work.
The records are bereft of any showing that Demetria
Denaga and Susano Jugue harbored any ill will
against the petitioners prompting them to execute
false affidavit. There lies no reason for this Court not
to afford full faith and credit to their testimonies.
Denaga, in her Joint Affidavit with Jugue, stated that
she and respondent started working in Hda. Cataywa
in 1970 and like her, she was reported to the SSS on
December 19, 1978.[18] It was also revealed in the
records that the SSC found that Denaga was
employed by Manuel Villanueva at Hda. Cataywa
from 1970 to December 1987.[19]
Jurisprudence has identified the three types of
employees mentioned in the provision[20] of the Labor
Code: (1) regular employees or those who have been
engaged to perform activities that are usually
KAYE RAMOGA
necessary or desirable in the usual business or trade
of the employer; (2) project employees or those
whose employment has been fixed for a specific
project or undertaking, the completion or termination
of which has been determined at the time of their
engagement, or those whose work or service is
seasonal in nature and is performed for the duration
of the season; and (3) casual employees or those
who are neither regular nor project employees.[21]
Farm workers generally fall under the definition of
seasonal employees.[22] It was also consistently held
that seasonal employees may be considered as
regular employees when they are called to work from
time to time.[23] They are in regular employment
because of the nature of the job, and not because of
the length of time they have worked. However,
seasonal workers who have worked for one season
only may not be considered regular employees.[24]
The nature of the services performed and not the
duration thereof, is determinative of coverage under
the law.[25] To be exempted on the basis of casual
employment, the services must not merely be
irregular, temporary or intermittent, but the same
must not also be in connection with the business or
occupation of the employer.[26] Thus, it is erroneous
for the petitioners to conclude that the respondent
was a very casual worker simply because the SSS
form revealed that she had 16 months of
contributions. It does not, in any way, prove that the
respondent performed a job which is not in
connection with the business or occupation of the
employer to be considered as casual employee.
The test for regular employees to be considered as
such has been thoroughly explained in De Leon v.
NLRC,[27] viz.:
The primary standard, therefore, of determining a
regular employment is the reasonable connection
between the particular activity performed by the
employee in relation to the usual business or trade of
the employer. The test is whether the former is
usually necessary or desirable in the usual business
or trade of the employer. The connection can be
determined by considering the nature of the work
performed and its relation to the scheme of the
particular business or trade in its entirety. Also, if the
employee has been performing the job for at least
one year, even if the performance is not continuous
or merely intermittent, the law deems the repeated
and continuing need for its performance as sufficient
evidence of the necessity if not indispensability of
that activity to the business. Hence, the employment
is also considered regular, but only with respect to
such activity and while such activity exists.[28]
A reading of the records would reveal that petitioners
failed to dispute the allegation that the respondent
performed hacienda work, such as planting
sugarcane point, fertilizing, weeding, replanting dead
sugarcane fields and routine miscellaneous hacienda
work.[29] They merely alleged that respondent was a
very casual worker because she only rendered work
LABOR LAW
for 16 months.[30] Thus, respondent is considered a
regular seasonal worker and not a casual worker as
the petitioners alleged.
Petitioners also assert that the sugarcane cultivation
covers only a period of six months, thus, disproving
the allegation of the respondent that she worked for
11 months a year for 25 years. This Court has
classified farm workers as regular seasonal
employees who are called to work from time to time
and the nature of their relationship with the employer
is such that during the off season, they are
temporarily laid off; but reemployed during the
summer season or when their services may be
needed.[31] Respondent, therefore, as a farm worker
is only a seasonal employee. Since petitioners
provided that the cultivation of sugarcane is only for
six] months, respondent cannot be considered as
regular employee during the months when there is no
cultivation.
Based on the foregoing facts and evidence on
record, petitioners are liable for delinquent
contributions. It being proven by sufficient evidence
that respondent started working for the hacienda in
1970, it follows that petitioners are liable for
deficiency in the SSS contributions.
The imposition upon and payment by the delinquent
employer of the three percent (3%) penalty for the
late remittance of premium contributions is
mandatory and cannot be waived by the System. The
law merely gives to the Commission the power to
prescribe the manner of paying the premiums. Thus,
the power to remit or condone the penalty for late
remittance of premium contributions is not embraced
therein.[32] Petitioners erred in alleging that the
imposition of penalty is not proper.
Petitioners also insist that the award of damages for
misrepresentation is without basis. This Court
disagrees.
The law provides that should the employer
misrepresent the true date of the employment of the
employee member, such employer shall pay to the
SSS damages equivalent to the difference between
the amount of benefit to which the employee member
or his beneficiary is entitled had the proper
contributions been remitted to the SSS and the
amount payable on the basis of the contributions
actually remitted. However, should the employee
member or his beneficiary is entitled to pension
benefits, the damages shall be equivalent to the
accumulated pension due as of the date of
settlement of the claim or to the five years' pension,
whichever is higher, including the dependent's
pension.[33]
Lastly, petitioners aver that there is no legal basis to
pierce the veil of corporation entity.
It was held in Rivera v. United Laboratories,
Inc.[34] that - While a corporation may exist for any
lawful purpose, the law will regard it as an
association of persons or, in case of two
corporations, merge them into one, when its
KAYE RAMOGA
corporate legal entity is used as a cloak for fraud or
illegality. This is the doctrine of piercing the veil of
corporate fiction. The doctrine applies only when
such corporate fiction is used to defeat public
convenience, justify wrong, protect fraud, or defend
crime, or when it is made as a shield to confuse the
legitimate issues, or where a corporation is the mere
alter ego or business conduit of a person, or where
the corporation is so organized and controlled and its
affairs are so conducted as to make it merely an
instrumentality, agency, conduit or adjunct of another
corporation. To disregard the separate juridical
personality of a corporation, the wrongdoing must be
established clearly and convincingly. It cannot be
presumed.[35]
This Court has cautioned against the inordinate
application of this doctrine, reiterating the basic rule
that "the corporate veil may be pierced only if it
becomes a shield for fraud, illegality or inequity
committed against a third person.[36]
The Court has expressed the language of piercing
doctrine when applied to alter ego cases, as
follows: Where the stock of a corporation is owned by
one person whereby the corporation functions only
for the benefit of such individual owner, the
corporation and the individual should be deemed the
same.[37]
This Court agrees with the petitioners that there is no
LABOR LAW
need to pierce the corporate veil. Respondent failed
to substantiate her claim that Mancy and Sons
Enterprises, Inc. and Manuel and Jose Marie
Villanueva are one and the same. She based her
claim on the SSS form wherein Manuel Villanueva
appeared as employer. However, this does not
prove, in any way, that the corporation is used to
defeat public convenience, justify wrong, protect
fraud, or defend crime, or when it is made as a shield
to confuse the legitimate issues, warranting that its
separate and distinct personality be set aside. Also, it
was not alleged nor proven that Mancy and Sons
Enterprises, Inc. functions only for the benefit of
Manuel Villanueva, thus, one cannot be an alter ego
of the other.
WHEREFORE, the petition for review
on certiorari dated September 28, 2007 of petitioners
Hda. Cataywa, Manuel Villanueva, et al. is
hereby DENIED. Consequently, the resolution by the
Social Security Commission is
hereby AFFIRMED with MODIFICATIONS that the
delinquent contributions should be computed as six
months per year of service, and the case against
Manuel and Jose Marie Villanueva be DISMISSED.
SO ORDERED.
KAYE RAMOGA LABOR LAW

G.R. No. 162025 August 3, 2010

TUNAY NA PAGKAKAISA NG MANGGAGAWA SA ASIABREWERY, vs ASIA BREWERY, INC.,

VILLARAMA, JR., J.: CBA. Eighteen (18) of these affected employees are
QA Sampling Inspectors/Inspectresses and Machine
For resolution is an appeal by certiorari filed by Gauge Technician who formed part of the Quality
petitioner under Rule 45 of the 1997 Rules of Civil Control Staff. Twenty (20) checkers are assigned at
Procedure, as amended, assailing the the Materials Department of the Administration
Decision[1] dated November 22, 2002 and Division, Full Goods Department of the Brewery
Resolution[2] dated January 28, 2004 rendered by the Division and Packaging Division. The rest are
Court of Appeals (CA) in CA-G.R. SP No. 55578, secretaries/clerks directly under their respective
granting the petition of respondent company and division managers.[7]
reversing the Voluntary Arbitrators
[3]
Decision dated October 14, 1999. BLMA-INDEPENDENT claimed that ABIs actions
restrained the employees right to self-organization
The facts are: and brought the matter to the grievance machinery.
As the parties failed to amicably settle the
Respondent Asia Brewery, Inc. (ABI) is engaged in controversy, BLMA-INDEPENDENT lodged a
the manufacture, sale and distribution of beer, complaint before the National Conciliation and
shandy, bottled water and glass products. ABI Mediation Board (NCMB). The parties eventually
entered into a Collective Bargaining Agreement agreed to submit the case for arbitration to resolve
(CBA),[4] effective for five (5) years from August 1, the issue of [w]hether or not there is restraint to
1997 to July 31, 2002, with Bisig at Lakas ng mga employees in the exercise of their right to self-
Manggagawa sa Asia-Independent (BLMA- organization.[8]
INDEPENDENT), the exclusive bargaining
representative of ABIs rank-and-file In his Decision, Voluntary Arbitrator Bienvenido
employees.On October 3, 2000, ABI and BLMA- Devera sustained the BLMA-INDEPENDENT after
INDEPENDENT signed a renegotiated CBA effective finding that the records submitted by ABI showed
from August 1, 2000 to 31 July 2003.[5] that the positions of the subject employees qualify
under the rank-and-file category because their
Article I of the CBA defined the scope of the functions are merely routinary and clerical. He noted
bargaining unit, as follows: that the positions occupied by the checkers and
secretaries/clerks in the different divisions are not
Section 1. Recognition. The COMPANY recognizes
managerial or supervisory, as evident from the duties
the UNION as the sole and exclusive bargaining
and responsibilities assigned to them. With respect to
representative of all the regular rank-and-file daily
QA Sampling Inspectors/Inspectresses and Machine
paid employees within the scope of the appropriate
Gauge Technician, he ruled that ABI failed to
bargaining unit with respect to rates of pay, hours of
establish with sufficient clarity their basic functions as
work and other terms and conditions of
to consider them Quality Control Staff who were
employment. The UNION shall not represent or
excluded from the coverage of the CBA. Accordingly,
accept for membership employees outside the
the subject employees were declared eligible for
scope of the bargaining unit herein defined.
inclusion within the bargaining unit represented by
Section 2. Bargaining Unit. The bargaining unit BLMA-INDEPENDENT.[9]
shall be comprised of all regular rank-and-file daily-
On appeal, the CA reversed the Voluntary Arbitrator,
paid employees of the COMPANY. However, the
ruling that:
following jobs/positions as herein defined shall
be excluded from the bargaining unit, to wit: WHEREFORE, foregoing premises considered, the
1. Managers questioned decision of the Honorable Voluntary
2. Assistant Managers Arbitrator Bienvenido De Vera is hereby REVERSED
3. Section Heads and SET ASIDE, and A NEW ONE ENTERED
4. Supervisors DECLARING THAT:
5. Superintendents a) the 81 employees are excluded from and are not
6. Confidential and Executive Secretaries eligible for inclusion in the bargaining unit as
7. Personnel, Accounting and Marketing Staff defined in Section 2, Article I of the CBA;
8. Communications Personnel b) the 81 employees cannot validly become
9. Probationary Employees members of respondent and/or if already
10. Security and Fire Brigade Personnel members, that their membership is violative of
11. Monthly Employees the CBA and that they should disaffiliate from
12. Purchasing and Quality Control respondent; and
Staff[6] [EMPHASIS SUPPLIED.] c) petitioner has not committed any act that
restrained or tended to restrain its employees in
the exercise of their right to self-organization.
Subsequently, a dispute arose when ABIs
management stopped deducting union dues from NO COSTS.
eighty-one (81) employees, believing that their
membership in BLMA-INDEPENDENT violated the SO ORDERED.[10]
KAYE RAMOGA
BLMA-INDEPENDENT filed a motion for
reconsideration. In the meantime, a certification
election was held on August 10, 2002 wherein
petitioner Tunay na Pagkakaisa ng Manggagawa
sa Asia (TPMA) won. As the incumbent bargaining
representative of ABIs rank-and-file employees
claiming interest in the outcome of the case,
petitioner filed with the CA an omnibus motion for
reconsideration of the decision and intervention, with
attached petition signed by the union
officers.[11] Both motions were denied by the CA.[12]
The petition is anchored on the following grounds:
(1)
THE COURT OF APPEALS ERRED IN RULING
THAT THE 81 EMPLOYEES ARE EXCLUDED
FROM AND ARE NOT ELIGIBLE FOR INCLUSION
IN THE BARGAINING UNIT AS DEFINED IN
SECTION 2, ARTICLE 1 OF THE CBA[;]
(2)
THE COURT OF APPEALS ERRED IN HOLDING
THAT THE 81 EMPLOYEES CANNOT VALIDLY
BECOME UNION MEMBERS, THAT THEIR
MEMBERSHIP IS VIOLATIVE OF THE CBA AND
THAT THEY SHOULD DISAFFILIATE FROM
RESPONDENT;
(3)
THE COURT OF APPEALS SERIOUSLY ERRED IN
HOLDING THAT PETITIONER (NOW PRIVATE
RESPONDENT) HAS NOT COMMITTED ANY ACT
THAT RESTRAINED OR TENDED TO RESTRAIN
ITS EMPLOYEES IN THE EXERCISE OF THEIR
RIGHT TO SELF-ORGANIZATION.[13]
Although Article 245 of the Labor Code limits the
ineligibility to join, form and assist any labor
organization to managerial employees, jurisprudence
has extended this prohibition to confidential
employees or those who by reason of their positions
or nature of work are required to assist or act in a
fiduciary manner to managerial employees and
hence, are likewise privy to sensitive and highly
confidential records.[14] Confidential employees are
thus excluded from the rank-and-file bargaining
unit. The rationale for their separate category and
disqualification to join any labor organization is
similar to the inhibition for managerial employees
because if allowed to be affiliated with a Union, the
latter might not be assured of their loyalty in view of
evident conflict of interests and the Union can also
become company-denominated with the presence of
managerial employees in the Union
membership.[15] Having access to confidential
information, confidential employees may also
become the source of undue advantage. Said
employees may act as a spy or spies of either party
to a collective bargaining agreement.[16]
In Philips Industrial Development, Inc. v.
NLRC,[17] this Court held that petitioners division
secretaries, all Staff of General Management,
Personnel and Industrial Relations Department,
Secretaries of Audit, EDP and Financial Systems are
confidential employees not included within the rank-
and-file bargaining unit.[18] Earlier, in Pier 8 Arrastre
LABOR LAW
& Stevedoring Services, Inc. v. Roldan-
Confesor,[19] we declared that legal secretaries who
are tasked with, among others, the typing of legal
documents, memoranda and correspondence, the
keeping of records and files, the giving of and
receiving notices, and such other duties as required
by the legal personnel of the corporation, fall under
the category of confidential employees and hence
excluded from the bargaining unit composed of rank-
and-file employees.[20]
Also considered having access to vital labor
information are the executive secretaries of the
General Manager and the executive secretaries of
the Quality Assurance Manager, Product
Development Manager, Finance Director,
Management System Manager, Human Resources
Manager, Marketing Director, Engineering Manager,
Materials Manager and Production Manager.[21]
In the present case, the CBA expressly excluded
Confidential and Executive Secretaries from the
rank-and-file bargaining unit, for which reason ABI
seeks their disaffiliation from petitioner. Petitioner,
however, maintains that except for Daisy Laloon,
Evelyn Mabilangan and Lennie Saguan who had
been promoted to monthly paid positions, the
following secretaries/clerks are deemed included
among the rank-and-file employees of ABI:[22]
[TABLE]
As can be gleaned from the above listing, it is rather
curious that there would be several secretaries/clerks
for just one (1) department/division performing tasks
which are mostly routine and clerical. Respondent
insisted they fall under the Confidential and
Executive Secretaries expressly excluded by the
CBA from the rank-and-file bargaining unit. However,
perusal of the job descriptions of these
secretaries/clerks reveals that their assigned duties
and responsibilities involve routine activities of
recording and monitoring, and other paper works for
their respective departments while secretarial tasks
such as receiving telephone calls and filing of office
correspondence appear to have been commonly
imposed as additional duties.[23] Respondent failed
to indicate who among these numerous
secretaries/clerks have access to confidential data
relating to management policies that could give rise
to potential conflict of interest with their Union
membership. Clearly, the rationale under our
previous rulings for the exclusion of executive
secretaries or division secretaries would have little or
no significance considering the lack of or very limited
access to confidential information of these
secretaries/clerks. It is not even farfetched that the
job category may exist only on paper since they are
all daily-paid workers. Quite understandably,
petitioner had earlier expressed the view that the
positions were just being reclassified as these
employees actually discharged routine functions.
We thus hold that the secretaries/clerks, numbering
about forty (40), are rank-and-file employees and not
confidential employees.
KAYE RAMOGA
With respect to the Sampling
Inspectors/Inspectresses and the Gauge Machine
Technician, there seems no dispute that they form
part of the Quality Control Staff who, under the
express terms of the CBA, fall under a distinct
category. But we disagree with respondents
contention that the twenty (20) checkers are similarly
confidential employees being quality control staff
entrusted with the handling and custody of company
properties and sensitive information.
Again, the job descriptions of these checkers
assigned in the storeroom section of the Materials
Department, finishing section of the Packaging
Department, and the decorating and glass sections
of the Production Department plainly showed that
they perform routine and mechanical tasks
preparatory to the delivery of the finished
products.[24] While it may be argued that quality
control extends to post-production phase -- proper
packaging of the finished products -- no evidence
was presented by the respondent to prove that these
daily-paid checkers actually form part of the
companys Quality Control Staff who as such were
exposed to sensitive, vital and confidential
information about [companys] products or have
knowledge of mixtures of the products, their defects,
and even their formulas which are considered trade
secrets. Such allegations of respondent must be
supported by evidence.[25]
Consequently, we hold that the twenty (20) checkers
may not be considered confidential employees under
the category of Quality Control Staff who were
expressly excluded from the CBA of the rank-and-file
bargaining unit.
Confidential employees are defined as those who (1)
assist or act in a confidential capacity, (2) to persons
who formulate, determine, and effectuate
management policies in the field of labor
relations. The two (2) criteria are cumulative, and
both must be met if an employee is to be considered
a confidential employee that is, the confidential
relationship must exist between the employee and
his supervisor, and the supervisor must handle the
prescribed responsibilities relating to labor
relations. The exclusion from bargaining units of
employees who, in the normal course of their duties,
become aware of management policies relating to
labor relations is a principal objective sought to be
LABOR LAW
accomplished by the confidential employee
rule.[26] There is no showing in this case that the
secretaries/clerks and checkers assisted or acted in
a confidential capacity to managerial employees and
obtained confidential information relating to labor
relations policies. And even assuming that they had
exposure to internal business operations of the
company, respondent claimed, this is not per
se ground for their exclusion in the bargaining unit of
the daily-paid rank-and-file employees.[27]
Not being confidential employees, the
secretaries/clerks and checkers are not disqualified
from membership in the Union of respondents rank-
and-file employees. Petitioner argues that
respondents act of unilaterally stopping the deduction
of union dues from these employees constitutes
unfair labor practice as it restrained the workers
exercise of their right to self-organization, as
provided in Article 248 (a) of the Labor Code.
Unfair labor practice refers to acts that violate the
workers right to organize. The prohibited acts are
related to the workers right to self organization and to
the observance of a CBA. For a charge of unfair
labor practice to prosper, it must be shown that ABI
was motivated by ill will, bad faith, or fraud, or was
oppressive to labor, or done in a manner contrary to
morals, good customs, or public policy, and, of
course, that social humiliation, wounded feelings or
grave anxiety resulted x x x[28] from ABIs act in
discontinuing the union dues deduction from those
employees it believed were excluded by the
CBA. Considering that the herein dispute arose from
a simple disagreement in the interpretation of the
CBA provision on excluded employees from the
bargaining unit, respondent cannot be said to have
committed unfair labor practice that restrained its
employees in the exercise of their right to self-
organization, nor have thereby demonstrated an anti-
union stance.
WHEREFORE, the petition is GRANTED. The
Decision dated November 22, 2002 and Resolution
dated January 28, 2004 of the Court of Appeals in
CA-G.R. SP No. 55578 are hereby REVERSED and
SET ASIDE. The checkers and secretaries/clerks of
respondent company are hereby declared rank-and-
file employees who are eligible to join the Union of
the rank-and-file employees. No costs. SO
ORDERED.
KAYE RAMOGA
G.R. No. 204944-45 December 3, 2014
FUJI TELEVISION NETWORK, INC., Petitioner, vs. ARLENE S. ESPIRITU, Respondent.
LEONEN, J.:
It is the burden of the employer to prove that a
person whose services it pays for is an independent
contractor rather than a regular employee with or
without a fixed term. That a person has a disease
does not per se entitle the employer to terminate his
or her services. Termination is the last resort. At the
very least, a competent public health authority must
certify that the disease cannot be cured within six ( 6)
months, even with appropriate treatment.
We decide this petition for review1 on certiorari filed
by Fuji Television Network, Inc., seeking the reversal
of the Court of Appeals’ Decision2 dated June 25,
2012, affirming with modification the decision3 of the
National Labor Relations Commission.
In 2005, Arlene S. Espiritu ("Arlene") was engaged
by Fuji Television Network, Inc. ("Fuji") asa news
correspondent/producer4 "tasked to report Philippine
news to Fuji through its Manila Bureau field
office."5 Arlene’s employment contract initially
provided for a term of one (1) year but was
successively renewed on a yearly basis with salary
adjustment upon every renewal.6 Sometime in
January 2009, Arlenewas diagnosed with lung
cancer.7She informed Fuji about her condition. In
turn, the Chief of News Agency of Fuji, Yoshiki Aoki,
informed Arlene "that the company will have a
problem renewing her contract"8 since it would be
difficult for her to perform her job.9 She "insisted that
she was still fit to work as certified by her attending
physician."10
After several verbal and written
communications,11 Arlene and Fuji signed a non-
renewal contract on May 5, 2009 where it was
stipulated that her contract would no longer be
renewed after its expiration on May 31, 2009. The
contract also provided that the parties release each
other from liabilities and responsibilities under the
employment contract.12
In consideration of the non-renewal contract, Arlene
"acknowledged receipt of the total amount of
US$18,050.00 representing her monthly salary from
March 2009 to May 2009, year-end bonus, mid-year
bonus, and separation pay."13 However, Arlene
affixed her signature on the nonrenewal contract with
the initials "U.P." for "under protest."14
On May 6, 2009, the day after Arlene signed the non-
renewal contract, she filed a complaint for illegal
dismissal and attorney’s fees with the National
Capital Region Arbitration Branch of the National
Labor Relations Commission. She alleged that she
was forced to sign the nonrenewal contract when Fuji
came to know of her illness and that Fuji withheld her
salaries and other benefits for March and April 2009
when she refused to sign.15
Arlene claimed that she was left with no other
recourse but to sign the non-renewal contract, and it
was only upon signing that she was given her
LABOR LAW
salaries and bonuses, in addition to separation pay
equivalent to four (4) years.16
In the decision17 dated September 10, 2009, Labor
Arbiter Corazon C. Borbolla dismissed Arlene’s
complaint.18Citing Sonza v. ABS-CBN19 and applying
the four-fold test, the Labor Arbiter held that Arlene
was not Fuji’s employee but an independent
contractor.20
Arlene appealed before the National Labor Relations
Commission. In its decision dated March 5, 2010, the
National Labor Relations Commission reversed the
Labor Arbiter’s decision.21 It held that Arlene was a
regular employee with respect to the activities for
which she was employed since she continuously
rendered services that were deemednecessary and
desirable to Fuji’s business.22 The National Labor
Relations Commission ordered Fuji to pay Arlene
backwages, computed from the date of her illegal
dismissal.23 The dispositive portion of the decision
reads:
WHEREFORE, premises considered, judgment is
hereby rendered GRANTING the instant appeal. The
Decision of the Labor Arbiter dated 19 September
2009 is hereby REVERSED and SET ASIDE, and a
new one is issued ordering respondents-appellees to
pay complainant-appellant backwages computed
from the date of her illegal dismissal until finality of
this Decision.
SO ORDERED.24
Arlene and Fuji filed separat emotions for
reconsideration.25 Both motions were denied by the
National Labor Relations Commission for lack of
merit in the resolution dated April 26, 2010.26 From
the decision of the National Labor Relations
Commission, both parties filed separate petitions for
certiorari27 before the Court of Appeals. The Court of
Appeals consolidated the petitions and considered
the following issues for resolution:
1) Whether or not Espirituis a regular employee or a
fixed-term contractual employee;
2) Whether or not Espiritu was illegally dismissed;
and
3) Whether or not Espirituis entitled to damages and
attorney’s fees.28
In the assailed decision, the Court of Appeals
affirmed the National Labor Relations Commission
with the modification that Fuji immediately reinstate
Arlene to her position as News Producer without loss
of seniority rights, and pay her backwages, 13th-
month pay, mid-year and year-end bonuses, sick
leave and vacation leave with pay until reinstated,
moral damages, exemplary damages, attorney’sfees,
and legal interest of 12% per annum of the total
monetary awards.29 The Court of Appeals ruled that:
KAYE RAMOGA
WHEREFORE, for lack of merit, the petition of Fuji
Television Network, Inc. and Yoshiki Aoki is DENIED
and the petition of Arlene S. Espiritu is GRANTED.
Accordingly, the Decision dated March 5, 2010 of the
National Labor Relations Commission, 6th Division in
NLRC NCR Case No. 05-06811-09 and its
subsequent Resolution dated April 26, 2010 are
hereby AFFIRMED with MODIFICATIONS, as
follows:
Fuji Television, Inc. is hereby ORDERED to
immediately REINSTATE Arlene S. Espiritu to her
position as News Producer without loss of seniority
rights and privileges and to pay her the following:
1. Backwages at the rate of $1,900.00 per month
computed from May 5, 2009 (the date of dismissal),
until reinstated;
2. 13th Month Pay at the rate of $1,900.00 per
annum from the date of dismissal, until reinstated;
3. One and a half (1 1/2) months pay or $2,850.00 as
midyear bonus per year from the date of dismissal,
until reinstated;
4. One and a half (1 1/2) months pay or $2,850.00 as
year-end bonus per year from the date of dismissal,
until reinstated;
5. Sick leave of 30 days with pay or $1,900.00 per
year from the date of dismissal, until reinstated; and
6. Vacation leave with pay equivalent to 14 days or
$1,425.00 per annum from date of dismissal, until
reinstated.
7. The amount of ₱100,000.00 as moral damages;
8. The amount of ₱50,000.00 as exemplary
damages;
9. Attorney’s fees equivalent to 10% of the total
monetary awards herein stated; and
10. Legal interest of twelve percent (12%) per annum
of the total monetary awards computed from May 5,
2009, until their full satisfaction.
The Labor Arbiter is hereby DIRECTED to make
another recomputation of the above monetary
awards consistent with the above directives.
SO ORDERED.30
In arriving at the decision, the Court of Appeals held
that Arlene was a regular employee because she
was engaged to perform work that was necessary or
desirable in the business of Fuji,31 and the
successive renewals of her fixed-term contract
resulted in regular employment.32
According to the Court of Appeals, Sonzadoes not
apply in order to establish that Arlene was an
independent contractor because she was not
contracted on account of any peculiar ability, special
talent, or skill.33 The fact that everything used by
Arlene in her work was owned by Fuji negated the
idea of job contracting.34
LABOR LAW
The Court of Appeals also held that Arlene was
illegally dismissed because Fuji failed to comply with
the requirements of substantive and procedural due
process necessary for her dismissal since she was a
regular employee.35
The Court of Appeals found that Arlene did not sign
the non-renewal contract voluntarily and that the
contract was a mere subterfuge by Fuji to secure its
position that it was her choice not to renew her
contract. She was left with no choice since Fuji was
decided on severing her employment.36
Fuji filed a motion for reconsideration that was
denied in the resolution37 dated December 7, 2012
for failure to raise new matters.38
Aggrieved, Fuji filed this petition for review and
argued that the Court of Appeals erred in affirming
with modification the National Labor Relations
Commission’s decision, holding that Arlene was a
regular employee and that she was illegally
dismissed. Fuji also questioned the award of
monetary claims, benefits, and damages.39
Fuji points out that Arlene was hired as a stringer,
and it informed her that she would remain one.40 She
was hired as an independent contractor as defined in
Sonza.41 Fuji had no control over her work.42 The
employment contracts were executed and renewed
annually upon Arlene’s insistence to which Fuji
relented because she had skills that distinguished
her from ordinary employees.43 Arlene and Fuji dealt
on equal terms when they negotiated and entered
into the employment contracts.44 There was no illegal
dismissal because she freely agreed not to renew
her fixed-term contract as evidenced by her e-mail
correspondences with Yoshiki Aoki.45 In fact, the
signing of the non-renewal contract was not
necessary to terminate her employment since "such
employment terminated upon expiration of her
contract."46 Finally, Fuji had dealt with Arlene in good
faith, thus, she should not have been awarded
damages.47
Fuji alleges that it did not need a permanent reporter
since the news reported by Arlene could easily be
secured from other entities or from the internet.48 Fuji
"never controlled the manner by which she
performed her functions."49It was Arlene who insisted
that Fuji execute yearly fixed-term contracts so that
she could negotiate for annual increases in her pay.50
Fuji points out that Arlene reported for work for only
five (5) days in February 2009, three (3) days in
March 2009, and one (1) day in April 2009.51 Despite
the provision in her employment contract that sick
leaves in excess of 30 days shall not be paid, Fuji
paid Arlene her entire salary for the months of March,
April, and May; four(4) months of separation pay; and
a bonus for two and a half months for a total of
US$18,050.00.52 Despite having received the amount
of US$18,050.00, Arlene still filed a case for illegal
dismissal.53
Fuji further argues that the circumstances would
show that Arlene was not illegally dismissed. The
decision tonot renew her contract was mutually
KAYE RAMOGA
agreed upon by the parties as indicated in Arlene’s e-
mail54 dated March 11, 2009 where she consented to
the non-renewal of her contract but refused to sign
anything.55 Aoki informed Arlene in an e-mail56 dated
March 12, 2009 that she did not need to sign a
resignation letter and that Fuji would pay Arlene’s
salary and bonus until May 2009 as well as
separation pay.57
Arlene sent an e-mail dated March 18, 2009 with her
version of the non-renewal agreement that she
agreed to sign this time.58 This attached version
contained a provision that Fuji shall re-hire her if she
was still interested to work for Fuji.59 For Fuji,
Arlene’s e-mail showed that she had the power to
bargain.60
Fuji then posits that the Court of Appeals erred when
it held that the elements of an employer-employee
relationship are present, particularly that of
control;61 that Arlene’s separation from employment
upon the expiration of her contract constitutes illegal
dismissal;62 that Arlene is entitled to
reinstatement;63 and that Fuji is liable to Arlene for
damages and attorney’s fees.64
This petition for review on certiorari under Rule 45
was filed on February 8, 2013.65 On February 27,
2013, Arlene filed a manifestation66 stating that this
court may not take jurisdiction over the case since
Fuji failed to authorize Corazon E. Acerden to sign
the verification.67 Fuji filed a comment on the
manifestation68 on March 9, 2013.
Based on the arguments of the parties, there are
procedural and substantive issues for resolution:
I. Whether the petition for review should be
dismissed as Corazon E. Acerden, the signatory of
the verification and certification of non forum
shopping of the petition, had no authority to sign the
verification and certification on behalf of Fuji;
II. Whether the Court of Appeals correctly determined
that no grave abuse of discretion was committed by
the National Labor Relations Commission when it
ruled that Arlene was a regular employee, not an
independent contractor, and that she was illegally
dismissed; and
III. Whether the Court of Appeals properly modified
the National Labor Relations Commission’s decision
by awarding reinstatement, damages, and attorney’s
fees.
The petition should be dismissed.
I complaint or other initiatory pleading but shall be
Validity of the verification and certification
against forum shopping
In its comment on Arlene’s manifestation, Fuji alleges
that Corazon was authorized to sign the verification
and certification of non-forum shopping because Mr.
Shuji Yano was empowered under the secretary’s
certificate to delegate his authority to sign the
necessary pleadings, including the verification and
certification against forum shopping.69
LABOR LAW
On the other hand, Arlene points outthat the authority
given to Mr. Shuji Yano and Mr. Jin Eto in the
secretary’s certificate is only for the petition for
certiorari before the Court of Appeals.70 Fuji did not
attach any board resolution authorizing Corazon
orany other person tofile a petition for review on
certiorari with this court.71 Shuji Yano and Jin Eto
could not re-delegate the power thatwas delegated to
them.72 In addition, the special power of attorney
executed by Shuji Yano in favor of Corazon indicated
that she was empowered to sign on behalf of Shuji
Yano, and not on behalf of Fuji.73
The Rules of Court requires the submission of
verification and certification against forum
shopping.
Rule 7, Section 4 of the 1997 Rules of Civil
Procedure provides the requirement of verification,
while Section 5 of the same rule provides the
requirement of certification against forum shopping.
These sections state:
SEC. 4. Ver if ica tio n. — Except when otherwise
specifically required by law or rule, pleadings need
not be under oath, verified or accompanied by
affidavit.
A pleading is verified by an affidavit that the affiant
has read the pleading and that the allegations therein
are true and correct of his knowledge and belief.
A pleading required to be verifiedwhich containsa
verification based on "information and belief," or
upon "knowledge, information and belief," or lacks a
proper verification, shall be treated as an unsigned
pleading.
SEC. 5. Certification against forum shopping.— The
plaintiff or principal party shall certify under oath in
the complaint orother initiatory pleading asserting a
claim for relief or in a sworn certification annexed
thereto and simultaneously filed therewith: (a) that he
has not theretofore commenced any action or filed
any claim involving the same issues in any court,
tribunal or quasi-judicial agency and, to the best of
his knowledge, no such other action or claim is
pending therein; (b) if there is such other pending
action or claim, a complete statement of the present
status thereof; and (c) if he should thereafter learn
that the same or similar action or claim has been filed
or is pending, he shall report that fact within five (5)
days therefrom to the court wherein his aforesaid
complaint or initiatory pleading has been filed.
Failure to comply with the foregoing requirements
shall not be curable by mere amendment of the
cause for the dismissal of the case without prejudice,
unless otherwise provided, upon motion and after
hearing. The submission of a false certification or
non-compliance with any of the undertakings therein
shall constitute indirect contempt ofcourt, without
prejudice to the corresponding administrative and
criminalactions. If the acts of the party or his counsel
clearly constitute willful and deliberate forum
shopping, the same shall be ground for summary
dismissal with prejudice and shall constitute direct
KAYE RAMOGA
contempt, as well as a cause for administrative
sanctions.
Section 4(e) of Rule 4574 requires that petitions for
review should "contain a sworn certification against
forum shopping as provided in the last paragraph of
section 2, Rule 42." Section 5 of the same rule
provides that failure to comply with any requirement
in Section 4 is sufficient ground to dismiss the
petition.
Effects of non-compliance
Uy v. Landbank75 discussed the effect of non-
compliance with regard to verification and stated that:
[t]he requirement regarding verification of a pleading
is formal, not jurisdictional. Such requirement is
simply a condition affecting the form of pleading, the
non-compliance of which does not necessarily render
the pleading fatally defective. Verification is simply
intended to secure an assurance that the allegations
in the pleading are true and correct and not the
product of the imagination or a matter of speculation,
and that the pleading is filed in good faith. The court
may order the correction of the pleading if the
verification is lacking or act on the pleading although
it is not verified, if the attending circumstances are
such that strict compliance with the rules may be
dispensed with inorder that the ends of justice may
thereby be served.76 (Citations omitted)
Shipside Incorporated v. Court of Appeals77 cited the
discussion in Uy and differentiated its effect from
non-compliance with the requirement of certification
against forum shopping:
On the other hand, the lack of certification against
forum shopping is generally not curable by the
submission thereof after the filing of the petition.
Section 5, Rule 45 of the 1997 Rules of Civil
Procedure provides that the failure of the petitioner
tosubmit the required documents that should
accompany the petition, including the certification
against forum shopping, shall be sufficient ground for
the dismissal thereof. The same rule applies to
certifications against forum shopping signed by a
person on behalf of a corporation which are
unaccompanied by proof that said signatory is
authorized to file a petition on behalf of the
corporation.78 (Emphasis supplied) Effects of
substantial compliance with the requirement of
verification and certification against forum shopping
Although the general rule is that failure to attach a
verification and certification against forum shopping
isa ground for dismissal, there are cases where this
court allowed substantial compliance.
In Loyola v. Court of Appeals,79 petitioner Alan
Loyola submitted the required certification one day
after filing his electoral protest.80 This court
considered the subsequent filing as substantial
compliance since the purpose of filing the
certification is to curtail forum shopping.81
In LDP Marketing, Inc. v. Monter,82 Ma. Lourdes Dela
Peña signed the verification and certification against
LABOR LAW
forum shopping but failed to attach the board
resolution indicating her authority to sign.83 In a
motion for reconsideration, LDP Marketing attached
the secretary’s certificate quoting the board
resolution that authorized Dela Peña.84 Citing
Shipside, this court deemed the belated submission
as substantial compliance since LDP Marketing
complied with the requirement; what it failed to do
was to attach proof of Dela Peña’s authority to
sign.85 Havtor Management Phils., Inc. v. National
Labor Relations Commission86 and General Milling
Corporation v. National Labor Relations
Commission87 involved petitions that were dismissed
for failure to attach any document showing that the
signatory on the verification and certification against
forum-shopping was authorized.88 In both cases, the
secretary’s certificate was attached to the motion for
reconsideration.89 This court considered the
subsequent submission of proof indicating authority
to sign as substantial compliance.90 Altres v.
Empleo91 summarized the rules on verification and
certification against forum shopping in this manner:
For the guidance of the bench and bar, the Court
restates in capsule form the jurisprudential
pronouncements . . . respecting non-compliance with
the requirement on, or submission of defective,
verification and certification against forum shopping:
1) A distinction must be made between non-
compliance with the requirement on or submission of
defective verification, and noncompliance with the
requirement on or submission of defective
certification against forum shopping.
2) As to verification, non-compliance therewith or a
defect therein does not necessarily render the
pleading fatally defective. The court may order its
submission or correction or act on the pleading if the
attending circumstances are such that strict
compliance with the Rule may be dispensed with in
order that the ends of justice may be served thereby.
3) Verification is deemed substantially complied with
when one who has ample knowledge to swear to the
truth of the allegations in the complaint or petition
signs the verification, and when matters alleged in
the petition have been made in good faith or are true
and correct.
4) As to certification against forum shopping, non-
compliance therewith or a defect therein, unlike in
verification, is generally not curable by its
subsequent submission or correction thereof, unless
there is a need to relax the Rule on the ground of
"substantial compliance" or presence of "special
circumstances or compelling reasons."
5) The certification against forum shopping must be
signed by all the plaintiffs or petitioners in a case;
otherwise, those who did not sign will be dropped as
parties to the case. Under reasonable or justifiable
circumstances, however, as when all the plaintiffs or
petitioners share a common interest and invoke a
common cause of action or defense, the signature of
only one of them inthe certification against forum
shopping substantially complies with the Rule.
KAYE RAMOGA
6) Finally, the certification against forum shopping
must be executed by the party-pleader, not by his
counsel. If, however, for reasonable or justifiable
reasons, the party-pleader is unable to sign, he must
execute a Special Power of Attorney designating his
counsel of record to sign on his behalf.92
There was substantial compliance by Fuji
Television Network, Inc.
Being a corporation, Fuji exercises its power to sue
and be sued through its board of directors or duly
authorized officers and agents. Thus, the physical act
of signing the verification and certification against
forum shopping can only be done by natural persons
duly authorized either by the corporate by-laws or a
board resolution.93
In its petition for review on certiorari, Fuji attached
Hideaki Ota’s secretary’s certificate,94 authorizing
Shuji Yano and Jin Eto to represent and sign for and
on behalf of Fuji.95 The secretary’s certificate was
duly authenticated96 by Sulpicio Confiado, Consul-
General of the Philippines in Japan. Likewise
attached to the petition is the special power of
attorney executed by Shuji Yano, authorizing
Corazon to sign on his behalf.97 The verification and
certification against forum shopping was signed by
Corazon.98
Arlene filed the manifestation dated February 27,
2013, arguing that the petition for review should be
dismissed because Corazon was not duly authorized
to sign the verification and certification against forum
shopping.
Fuji filed a comment on Arlene’s manifestation,
stating that Corazon was properly authorized to sign.
On the basis of the secretary’s certificate, Shuji Yano
was empowered to delegate his authority.
Quoting the board resolution dated May 13, 2010,
the secretary's certificate states:
(a) The Corporation shall file a Petition for Certiorari
with the Court of Appeals, against Philippines’
National Labor Relations Commission ("NLRC") and
Arlene S. Espiritu, pertaining to NLRC-NCR Case
No. LAC 00-002697-09, RAB No. 05-06811-00 and
entitled "Arlene S. Espiritu v. Fuji Television Network,
Inc./Yoshiki Aoki", and participate in any other
subsequent proceeding that may necessarily arise
therefrom, including but not limited to the filing of
appeals in the appropriate venue;
(b) Mr. Shuji Yano and Mr. Jin Etobe authorized, as
they are hereby authorized, to verify and execute the
certification against nonforum shopping which may
be necessary or required to be attached to any
pleading to [sic] submitted to the Court of Appeals;
and the authority to so verify and certify for the
Corporation in favor of the said persons shall subsist
and remain effective until the termination of the said
case;
....
LABOR LAW
(d) Mr. Shuji Yano and Mr. Jin Etobe authorized, as
they are hereby authorized, to represent and appear
on behalf the [sic] Corporation in all stages of the
[sic] this case and in any other proceeding that may
necessarily arise thereform [sic], and to act in the
Corporation’s name, place and stead to determine,
propose, agree, decide, do, and perform any and all
of the following:
1. The possibility of amicable settlement or of
submission to alternative mode of dispute resolution;
2. The simplification of the issue;
3. The necessity or desirability of amendments to the
pleadings;
4. The possibility of obtaining stipulation or admission
of facts and documents; and
5. Such other matters as may aid in the prompt
disposition of the action.99 (Emphasis in the original;
Italics omitted)
Shuji Yano executed a special power of attorney
appointing Ms. Ma. Corazon E. Acerden and Mr.
Moises A. Rollera as his attorneys-in-fact.100 The
special power of attorney states:
That I, SHUJI YANO, of legal age, Japanese
national, with office address at 2-4-8 Daiba, Minato-
Ku, Tokyo, 137-8088 Japan, and being the
representative of Fuji TV, INc., [sic] (evidenced by
the attached Secretary’s Certificate) one of the
respondents in NLRC-NCR Case No. 05-06811-00
entitled "Arlene S. Espiritu v. Fuji Television Network,
Inc./Yoshiki Aoki", and subsequently docketed before
the Court of Appeals asC.A. G.R. S.P. No. 114867
(Consolidated with SP No. 114889) do hereby make,
constitute and appoint Ms. Ma. Corazon E. Acerden
and Mr. Moises A. Rolleraas my true and lawful
attorneys-infact for me and my name, place and
stead to act and represent me in the above-
mentioned case, with special power to make
admission/s and stipulations and/or to make and
submit as well as to accept and approve compromise
proposals upon such terms and conditions and under
such covenants as my attorney-in-fact may deem fit,
and to engage the services of Villa Judan and Cruz
Law Officesas the legal counsel to represent the
Company in the Supreme Court;
The said Attorneys-in-Fact are hereby further
authorized to make, sign, execute and deliver such
papers ordocuments as may be necessary in
furtherance of the power thus granted, particularly to
sign and execute the verification and certification of
non-forum shopping needed to be filed.101 (Emphasis
in the original)
In its comment102 on Arlene’s manifestation, Fuji
argues that Shuji Yano could further delegate his
authority because the board resolution empowered
him to "act in the Corporation’s name, place and
stead to determine, propose, agree, decided [sic], do
and perform any and all of the following: . . . such
other matters as may aid in the prompt disposition of
the action."103 To clarify, Fuji attached a verification
KAYE RAMOGA
and certification against forum shopping, but Arlene
questions Corazon’s authority to sign. Arlene argues
that the secretary’s certificate empowered Shuji Yano
to file a petition for certiorari before the Court of
Appeals, and not a petition for review before this
court, and that since Shuji Yano’s authority was
delegated to him, he could not further delegate such
power. Moreover, Corazon was representing Shuji
Yano in his personal capacity, and not in his capacity
as representative of Fuji.
A review of the board resolution quoted in the
secretary’s certificate shows that Fuji shall "file a
Petition for Certiorari with the Court of
Appeals"104 and "participate in any other subsequent
proceeding that may necessarily arise therefrom,
including but not limited to the filing of appeals in the
appropriate venue,"105 and that Shuji Yano and Jin
Eto are authorized to represent Fuji "in any other
proceeding that may necessarily arise thereform
[sic]."106 As pointed out by Fuji, Shuji Yano and Jin
Eto were also authorized to "act in the Corporation’s
name, place and stead to determine, propose, agree,
decide, do, and perform anyand all of the following: .
. . 5. Such other matters as may aid in the prompt
disposition of the action."107
Considering that the subsequent proceeding that
may arise from the petition for certiorari with the
Court of Appeals is the filing of a petition for review
with this court, Fuji substantially complied with the
procedural requirement.
On the issue of whether Shuji Yano validly delegated
his authority to Corazon, Article 1892 of the Civil
Code of the Philippines states:
ART. 1892. The agent may appoint a substitute if the
principal has not prohibited him from doing so; but he
shall be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power, but without
designating the person, and the person appointed
was notoriously incompetent or insolvent. All acts of
the substitute appointed against the prohibition of the
principal shall be void.
The secretary’s certificate does not state that Shuji
Yano is prohibited from appointing a substitute. In
fact, heis empowered to do acts that will aid in the
resolution of this case.
This court has recognized that there are instances
when officials or employees of a corporation can sign
the verification and certification against forum
shopping without a board resolution. In Cagayan
Valley Drug Corporation v. CIR,108 it was held that:
In sum, we have held that the following officials or
employees of the company can sign the verification
and certification without need of a board resolution:
(1) the Chairperson of the Board of Directors, (2) the
President of a corporation, (3) the General Manager
or Acting General Manager, (4) Personnel Officer,
and (5) an Employment Specialist in a labor case.
LABOR LAW
While the above cases109 do not provide a complete
listing of authorized signatories to the verification and
certification required by the rules, the determination
of the sufficiency of the authority was done on a case
to case basis. The rationale applied in the foregoing
cases is to justify the authority of corporate officers or
representatives of the corporation to sign the
verification or certificate against forum shopping,
being ‘in a position to verify the truthfulness and
correctness of the allegations in the petition.’110
Corazon’s affidavit111 states that she is the "office
manager and resident interpreter of the Manila
Bureau of Fuji Television Network, Inc."112 and that
she has "held the position for the last twenty-three
years."113
As the office manager for 23 years,Corazon can be
considered as having knowledge of all matters in
Fuji’s Manila Bureau Office and is in a position to
verify "the truthfulness and the correctness of the
allegations in the Petition."114
Thus, Fuji substantially complied with the
requirements of verification and certification against
forum shopping.
Before resolving the substantive issues in this case,
this court will discuss the procedural parameters of a
Rule 45 petition for review in labor cases.
II
Procedural parameters of petitions for review in
labor cases
Article 223 of the Labor Code115 does not provide any
mode of appeal for decisions of the National Labor
Relations Commission. It merely states that "[t]he
decision of the Commission shall be final and
executory after ten (10) calendar days from receipt
thereof by the parties." Being final, it is no longer
appealable. However, the finality of the National
Labor Relations Commission’s decisions does not
mean that there is no more recourse for the parties.
In St. Martin Funeral Home v. National Labor
Relations Commission,116 this court cited several
cases117 and rejected the notion that this court had
no jurisdiction to review decisions of the National
Labor Relations Commission. It stated that this court
had the power to review the acts of the National
Labor Relations Commission to see if it kept within its
jurisdiction in deciding cases and alsoas a form of
check and balance.118 This court then clarified that
judicial review of National Labor Relations
Commission decisions shall be by way of a petition
for certiorari under Rule 65. Citing the doctrine of
hierarchy of courts, it further ruled that such petitions
shall be filed before the Court of Appeals. From the
Court of Appeals, an aggrieved party may file a
petition for review on certiorari under Rule 45.
A petition for certiorari under Rule 65 is an original
action where the issue is limited to grave abuse of
discretion. As an original action, it cannot be
considered as a continuation of the proceedings of
the labor tribunals.
KAYE RAMOGA
On the other hand, a petition for review on certiorari
under Rule 45 is a mode of appeal where the issue is
limited to questions of law. In labor cases, a Rule 45
petition is limited toreviewing whether the Court of
Appeals correctly determined the presence or
absence of grave abuse of discretion and deciding
other jurisdictional errors of the National Labor
Relations Commission.119
In Odango v. National Labor Relations
Commission,120 this court explained that a petition for
certiorari is an extraordinary remedy that is "available
only and restrictively in truly exceptional
cases"121 and that its sole office "is the correction of
errors of jurisdiction including commission of grave
abuse of discretion amounting to lack or excess of
jurisdiction."122 A petition for certiorari does not
include a review of findings of fact since the findings
of the National Labor Relations Commission are
accorded finality.123 In cases where the aggrieved
party assails the National Labor Relations
Commission’s findings, he or she must be able to
show that the Commission "acted capriciously and
whimsically or in total disregard of evidence material
to the controversy."124
When a decision of the Court of Appeals under a
Rule 65 petition is brought to this court by way of a
petition for review under Rule 45, only questions of
law may be decided upon. As held in Meralco
Industrial v. National Labor Relations Commission:125
This Court is not a trier of facts. Well-settled is the
rule that the jurisdiction of this Court ina petition for
review on certiorari under Rule 45 of the Revised
Rules of Court is limited to reviewing only errors of
law, not of fact, unless the factual findings
complained of are completely devoid of support from
the evidence on record, or the assailed judgment is
based on a gross misapprehension of facts. Besides,
factual findings of quasi-judicial agencies like the
NLRC, when affirmed by the Court of Appeals, are
conclusive upon the parties and binding on this
Court.126
Career Philippines v. Serna,127 citing Montoya v.
Transmed,128 is instructive on the parameters of
judicial review under Rule 45:
As a rule, only questions of law may be raised in a
Rule 45 petition. In one case, we discussed the
particular parameters of a Rule 45 appeal from the
CA’s Rule 65 decision on a labor case, as follows:
In a Rule 45 review, we consider the correctness of
the assailed CA decision, in contrast with the review
for jurisdictional error that we undertake under Rule
65. Furthermore, Rule 45 limits us to the review of
questions of law raised against the assailed CA
decision. In ruling for legal correctness, we have to
view the CA decision in the same context that the
petition for certiorari it ruled upon was presented to it;
we have to examine the CA decision from the prism
of whether it correctly determined the presence or
absence of grave abuse of discretion in the NLRC
decision before it, not on the basis of whether the
NLRC decision on the merits of the case was correct.
In other words, we have to be keenly aware that the
LABOR LAW
CA undertook a Rule 65 review, not a review on
appeal, of the NLRC decision challenged before
it.129 (Emphasis in the original)
Justice Brion’s dissenting opinion in Abott
Laboratories, PhiIippines v. Aicaraz130 discussed that
in petitions for review under Rule 45, "the Court
simply determines whether the legal correctness of
the CA’s finding that the NLRC ruling . . . had basis in
fact and in Iaw."131 In this kind of petition, the proper
question to be raised is, "Did the CA correctly
determine whether the NLRC committed grave abuse
of discretion in ruling on the case?"132
Justice Brion’s dissenting opinion also laid down the
following guidelines:
If the NLRC ruling has basis in the evidence and the
applicable law and jurisprudence, then no grave
abuse of discretion exists and the CA should so
declare and, accordingly, dismiss the petition. If
grave abuse of discretion exists, then the CA must
grant the petition and nullify the NLRC ruling,
entering at the same time the ruling that isjustified
under the evidence and the governing law, rules and
jurisprudence. In our Rule 45 review, this Court must
denythe petition if it finds that the CA correctly
acted.133 (Emphasis in the original)
These parameters shall be used in resolving the
substantive issues in this petition.
III
Determination of employment status; burden of
proof
In this case, there is no question thatArlene rendered
services to Fuji. However, Fuji alleges that Arlene
was an independent contractor, while Arlene alleges
that she was a regular employee. To resolve this
issue, we ascertain whether an employer-employee
relationship existed between Fuji and Arlene.
This court has often used the four-fold test to
determine the existence of an employer-employee
relationship. Under the four-fold test, the "control
test" is the most important.134 As to how the elements
in the four-fold test are proven, this court has
discussed that:
[t]here is no hard and fast rule designed to establish
the aforesaid elements. Any competent and relevant
evidence to prove the relationship may be admitted.
Identification cards, cash vouchers, social security
registration, appointment letters or employment
contracts, payrolls, organization charts, and
personnel lists, serve as evidence of employee
status.135
If the facts of this case vis-à-vis the four-fold test
show that an employer-employee relationship
existed, we then determine the status of Arlene’s
employment, i.e., whether she was a regular
employee. Relative to this, we shall analyze Arlene’s
fixed-term contract and determine whether it
supports her argument that she was a regular
employee, or the argument of Fuji that she was an
independent contractor. We shall scrutinize whether
KAYE RAMOGA
the nature of Arlene’s work was necessary and
desirable to Fuji’s business or whether Fuji only
needed the output of her work. If the circumstances
show that Arlene’s work was necessary and
desirable to Fuji, then she is presumed to be a
regular employee. The burden of proving that she
was an independent contractor lies with Fuji.
In labor cases, the quantum of proof required is
substantial evidence.136 "Substantial evidence" has
been defined as "such amount of relevant evidence
which a reasonable mind might accept as adequate
to justify a conclusion."137
If Arlene was a regular employee, we then determine
whether she was illegally dismissed. In complaints
for illegal dismissal, the burden of proof is on the
employee to prove the fact of dismissal.138 Once the
employee establishes the fact of dismissal,
supported by substantial evidence, the burden of
proof shifts tothe employer to show that there was a
just or authorized cause for the dismissal and that
due process was observed.139
IV
Whether the Court of Appeals correctly affirmed
the National Labor Relations Commission’s
finding that Arlene was a regular employee
Fuji alleges that Arlene was anindependent
contractor, citing Sonza v. ABS-CBN and relying on
the following facts: (1) she was hired because of her
skills; (2) her salary was US$1,900.00, which is
higher than the normal rate; (3) she had the power to
bargain with her employer; and (4) her contract was
for a fixed term. According to Fuji, the Court of
Appeals erred when it ruled that Arlene was forcedto
sign the non-renewal agreement, considering that
she sent an email with another version of the non-
renewal agreement.140 Further, she is not entitled
tomoral damages and attorney’s fees because she
acted in bad faith when she filed a labor complaint
against Fuji after receiving US$18,050.00
representing her salary and other benefits.141 Arlene
argues that she was a regular employee because
Fuji had control and supervision over her work. The
news events that she covered were all based on the
instructions of Fuji.142 She maintains that the
successive renewal of her employment contracts for
four (4) years indicates that her work was necessary
and desirable.143 In addition, Fuji’s payment of
separation pay equivalent to one (1) month’s pay per
year of service indicates that she was a regular
employee.144 To further support her argument that
she was not an independent contractor, she states
that Fuji owns the laptop computer and mini-camera
that she used for work.145 Arlene also argues that
Sonza is not applicable because she was a plain
reporter for Fuji, unlike Jay Sonza who was a news
anchor, talk show host, and who enjoyed a celebrity
status.146 On her illness, Arlene points outthat it was
not a ground for her dismissal because her attending
physician certified that she was fit to work.147
Arlene admits that she signed the non-renewal
agreement with quitclaim, not because she agreed to
itsterms, but because she was not in a position to
LABOR LAW
reject the non-renewal agreement. Further, she badly
needed the salary withheld for her sustenance and
medication.148 She posits that her acceptance of
separation pay does not bar filing of a complaint for
illegal dismissal.149
Article 280 of the Labor Code provides that:
Art. 280. Regular and casual employment.The
provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement
of the parties, an employment shall be deemed to be
regular where the employee has been engaged to
perform activities which are usually necessary or
desirable in the usual business or trade of the
employer, except where the employment has been
fixed for a specific project or undertaking the
completion or termination of which has been
determined at the time of the engagement of the
employee or where the work or services to be
performed is seasonal in nature and the employment
is for the duration of the season.
An employment shall be deemed to be casual if it is
not covered by the preceding paragraph; Provided,
That, any employee who has rendered at least one
year of service, whether such service is continuous
or broken, shall be considered a regular employee
with respect to the activity in which heis employed
and his employment shall continue while such activity
exist.
This provision classifies employees into regular,
project, seasonal, and casual. It further classifies
regular employees into two kinds: (1) those "engaged
to perform activities which are usually necessary or
desirable in the usual business or trade of the
employer"; and (2) casual employees who have
"rendered at least one year of service, whether such
service is continuous or broken."
Another classification of employees, i.e., employees
with fixed-term contracts, was recognized in Brent
School, Inc. v. Zamora150 where this court discussed
that:
Logically, the decisive determinant in the term
employment should not be the activities that the
employee is called upon to perform, but the day
certain agreed upon by the parties for the
commencement and termination of their employment
relationship, a day certainbeing understood to be
"that which must necessarily come, although it may
not be known when."151 (Emphasis in the original)
This court further discussed that there are
employment contracts where "a fixed term is an
essential and natural appurtenance"152 such as
overseas employment contracts and officers in
educational institutions.153
Distinctions among fixed-term employees,
independent contractors, and regular employees
GMA Network, Inc. v. Pabriga154 expounded the
doctrine on fixed term contracts laid down in Brentin
the following manner:
KAYE RAMOGA
Cognizant of the possibility of abuse in the utilization
of fixed term employment contracts, we emphasized
in Brentthat where from the circumstances it is
apparent that the periods have been imposed to
preclude acquisition of tenurial security by the
employee, they should be struck down as contrary to
public policy or morals. We thus laid down indications
or criteria under which "term employment" cannot be
said to be in circumvention of the law on security of
tenure, namely:
1) The fixed period of employment was knowingly
and voluntarily agreed upon by the parties without
any force, duress, or improper pressure being
brought to bear upon the employee and absent any
other circumstances vitiating his consent; or
2) It satisfactorily appears that the employer and the
employee dealt with each other on more or less
equal terms with no moral dominance exercised by
the former or the latter.
These indications, which must be read together,
make the Brent doctrine applicable only in a few
special cases wherein the employer and employee
are on more or less in equal footing in entering into
the contract. The reason for this is evident: whena
prospective employee, on account of special skills or
market forces, is in a position to make demands
upon the prospective employer, such prospective
employee needs less protection than the ordinary
worker. Lesser limitations on the parties’ freedom of
contract are thus required for the protection of the
employee.155(Citations omitted)
For as long as the guidelines laid down in Brentare
satisfied, this court will recognize the validity of the
fixed-term contract.
In Labayog v. M.Y. San Biscuits, Inc.,156 this court
upheld the fixedterm employment of petitioners
because from the time they were hired, they were
informed that their engagement was for a specific
period. This court stated that:
[s]imply put, petitioners were notregular employees.
While their employment as mixers, packers and
machine operators was necessary and desirable in
the usual business ofrespondent company, they were
employed temporarily only, during periods when
there was heightened demand for production.
Consequently, there could have been no illegal
dismissal when their services were terminated on
expiration of their contracts. There was even no need
for notice of termination because they knew exactly
when their contracts would end. Contracts of
employment for a fixed period terminate on their own
at the end of such period.
Contracts of employment for a fixed period are not
unlawful. What is objectionable is the practice of
some scrupulous employers who try to circumvent
the law protecting workers from the capricious
termination of employment.157 (Citation omitted)
Caparoso v. Court of Appeals158 upheld the validity of
the fixed-term contract of employment. Caparoso and
Quindipan were hired as delivery men for three (3)
LABOR LAW
months. At the end of the third month, they were
hired on a monthly basis. In total, they were hired for
five (5) months. They filed a complaint for illegal
dismissal.159 This court ruled that there was no
evidence indicating that they were pressured into
signing the fixed-term contracts. There was likewise
no proof that their employer was engaged in hiring
workers for five (5) months onlyto prevent
regularization. In the absence of these facts, the
fixed-term contracts were upheld as valid.160 On the
other hand, an independent contractor is defined as:
. . . one who carries on a distinct and independent
business and undertakes to perform the job, work, or
service on its own account and under one’s own
responsibility according to one’s own manner and
method, free from the control and direction of the
principal in all matters connected with the
performance of the work except as to the results
thereof.161
In view of the "distinct and independent business" of
independent contractors, no employer-employee
relationship exists between independent contractors
and their principals. Independent contractors are
recognized under Article 106 of the Labor Code:
Art. 106. Contractor or subcontractor. Whenever an
employer enters into a contract with another person
for the performance of the former’s work, the
employees of the contractor and of the latter’s
subcontractor, if any, shall be paid in accordance
with the provisions of this Code. . . . .
The Secretary of Labor and Employment may, by
appropriate regulations, restrict or prohibit the
contracting-out of labor to protect the rights of
workers established under this Code. In so
prohibiting or restricting, he may make appropriate
distinctions between labor-only contracting and job
contracting as well as differentiations within these
types of contracting and determine who among the
parties involved shall be considered the employer for
purposes of this Code, to prevent any violation or
circumvention of any provision of this Code.
There is "labor-only" contracting where the person
supplying workers to an employer does not have
substantial capital or investment in the form of tools,
equipment, machineries, work premises, among
others, and the workers recruited and placed by such
person are performing activities which are directly
related to the principal business of such employer. In
such cases, the person or intermediary shall be
considered merely as an agent of the employer who
shall be responsible to the workers in the same
manner and extent as if the latterwere directly
employed by him.
In Department Order No. 18-A, Seriesof 2011, of the
Department of Labor and Employment, a contractor
is defined as having:
Section 3. . . . (c) . . . an arrangement whereby a
principal agrees to put out or farm out with a
contractor the performance or completion of a
specific job, work or service within a definite or
predetermined period, regardless of whether such
KAYE RAMOGA
job, work or service is to be performed or completed
within oroutside the premises of the principal.
This department order also states that there is a
trilateral relationship in legitimate job contracting and
subcontracting arrangements among the principal,
contractor, and employees of the contractor. There is
no employer-employee relationship between the
contractor and principal who engages the
contractor’s services, but there is an employer-
employee relationship between the contractor and
workers hired to accomplish the work for the
principal.162
Jurisprudence has recognized another kind of
independent contractor: individuals with unique skills
and talents that set them apart from ordinary
employees. There is no trilateral relationship in this
case because the independent contractor himself or
herself performs the work for the principal. In other
words, the relationship is bilateral.
In Orozco v. Court of Appeals,163 Wilhelmina Orozco
was a columnist for the Philippine Daily Inquirer. This
court ruled that she was an independent contractor
because of her "talent, skill, experience, and her
unique viewpoint as a feminist advocate."164 In
addition, the Philippine Daily Inquirer did not have the
power of control over Orozco, and she worked at her
own pleasure.165
Semblante v. Court of Appeals166 involved a
masiador167 and a sentenciador.168 This court ruled
that "petitioners performed their functions as
masiadorand sentenciador free from the direction
and control of respondents"169 and that the masiador
and sentenciador "relied mainly on their ‘expertise
that is characteristic of the cockfight
gambling.’"170 Hence, no employer-employee
relationship existed.
Bernarte v. Philippine Basketball
Association171 involved a basketball referee. This
court ruled that "a referee is an independent
contractor, whose special skills and independent
judgment are required specifically for such position
and cannot possibly be controlled by the hiring
party."172
In these cases, the workers were found to be
independent contractors because of their unique
skills and talents and the lack of control over the
means and methods in the performance of their
work.
In other words, there are different kinds of
independent contractors: those engaged in legitimate
job contracting and those who have unique skills and
talents that set them apart from ordinary employees.
Since no employer-employee relationship exists
between independent contractors and their
principals, their contracts are governed by the Civil
Code provisions on contracts and other applicable
laws.173
A contract is defined as "a meeting of minds between
two persons whereby one binds himself, with respect
LABOR LAW
to the other, to give something or to render some
service."174 Parties are free to stipulate on terms and
conditions in contracts as long as these "are not
contrary to law, morals, good customs, public order,
or public policy."175 This presupposes that the parties
to a contract are on equal footing. Theycan bargain
on terms and conditions until they are able to reach
an agreement.
On the other hand, contracts of employment are
different and have a higher level of regulation
because they are impressed with public interest.
Article XIII, Section 3 of the 1987 Constitution
provides full protection to labor:
ARTICLE XIII. SOCIAL JUSTICE AND HUMAN
RIGHTS LABOR
Section 3. The State shall afford full protection to
labor, local and overseas, organized and
unorganized, and promote full employment and
equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-
organization, collective bargaining and negotiations,
and peaceful concerted activities, including the right
to strike in accordance with law. They shall be
entitled to security of tenure, humane conditions of
work, and a living wage. They shall also participate in
policy and decision-making processes affecting their
rights and benefits as may be provided by law.
The State shall promote the principle of shared
responsibility between workers and employers and
the preferential use of voluntary modes in settling
disputes, including conciliation, and shall enforce
their mutual compliance therewith to foster industrial
peace.
The State shall regulate the relations between
workers and employers, recognizing the right of labor
to its just share in the fruits of production and the
right of enterprises to reasonable returns on
investments, and to expansion and growth.
Apart from the constitutional guarantee of protection
to labor, Article 1700 of the Civil Code states:
ART. 1700. The relations between capital and labor
are not merely contractual. They are so impressed
with public interest that labor contracts must yield to
the common good. Therefore, such contracts are
subject to the special laws on labor unions, collective
bargaining, strikes and lockouts, closed shop, wages,
working conditions, hours of labor and similar
subjects.
In contracts of employment, the employer and the
employee are not on equal footing. Thus, it is subject
to regulatory review by the labor tribunals and courts
of law. The law serves to equalize the unequal. The
labor force is a special class that is constitutionally
protected because of the inequality between capital
and labor.176 This presupposes that the labor force is
weak. However, the level of protection to labor
should vary from case to case; otherwise, the state
might appear to be too paternalistic in affording
protection to labor. As stated in GMA Network, Inc. v.
KAYE RAMOGA
Pabriga, the ruling in Brent applies in cases where it
appears that the employer and employee are on
equal footing.177 This recognizes the fact that not all
workers are weak. To reiterate the discussion in
GMA Network v. Pabriga:
The reason for this is evident: when a prospective
employee, on account of special skills or market
forces, is in a position to make demands upon the
prospective employer, such prospective employee
needs less protection than the ordinary worker.
Lesser limitations on the parties’ freedom of contract
are thus required for the protection of the
employee.178
The level of protection to labor mustbe determined
on the basis of the nature of the work, qualifications
of the employee, and other relevant circumstances.
For example, a prospective employee with a
bachelor’s degree cannot be said to be on equal
footing witha grocery bagger with a high school
diploma. Employees who qualify for jobs requiring
special qualifications such as "[having] a Master’s
degree" or "[having] passed the licensure exam" are
different from employees who qualify for jobs that
require "[being a] high school graduate; withpleasing
personality." In these situations, it is clear that those
with special qualifications can bargain with the
employer on equal footing. Thus, the level of
protection afforded to these employees should be
different.
Fuji’s argument that Arlene was an independent
contractor under a fixed-term contract is
contradictory. Employees under fixed-term contracts
cannot be independent contractors because in fixed-
term contracts, an employer-employee relationship
exists. The test in this kind of contract is not the
necessity and desirability of the employee’s activities,
"but the day certain agreed upon by the parties for
the commencement and termination of the
employment relationship."179 For regular employees,
the necessity and desirability of their work in the
usual course of the employer’s business are the
determining factors. On the other hand, independent
contractors do not have employer-employee
relationships with their principals. Hence, before the
status of employment can be determined, the
existence of an employer-employee relationship must
be established.
The four-fold test180 can be used in determining
whether an employeremployee relationship exists.
The elements of the four-fold test are the following:
(1) the selection and engagement of the employee;
(2) the payment of wages; (3) the power of dismissal;
and (4) the power of control, which is the most
important element.181
The "power of control" was explained by this court in
Corporal, Sr. v. National Labor Relations
Commission:182
The power to control refers to the existence of the
power and not necessarily to the actual exercise
thereof, nor is it essential for the employer to actually
supervise the performance of duties of the employee.
LABOR LAW
It is enough that the employer has the right to wield
that power.183 (Citation omitted)
Orozco v. Court of Appeals further elucidated the
meaning of "power of control" and stated the
following:
Logically, the line should be drawn between rules
that merely serve as guidelines towards the
achievement of the mutually desired result without
dictating the means or methods to be employed in
attaining it, and those that control or fix the
methodology and bind or restrict the party hired to
the use of such means. The first, which aim only to
promote the result, create no employer-employee
relationship unlike the second, which address both
the result and the means used to achieve it. . .
.184 (Citation omitted)
In Locsin, et al. v. Philippine Long Distance
Telephone Company,185 the "power of control" was
defined as "[the] right to control not only the end to
be achieved but also the means to be used in
reaching such end."186
Here, the Court of Appeals applied Sonza v. ABS-
CBN and Dumpit Murillo v. Court of Appeals187 in
determining whether Arlene was an independent
contractor or a regular employee.
In deciding Sonza and Dumpit-Murillo, this court
used the four-fold test. Both cases involved
newscasters and anchors. However, Sonza was held
to be an independent contractor, while Dumpit-
Murillo was held to be a regular employee.
Comparison of the Sonza and Dumpit-Murillo
cases using the four-fold test
Sonza was engaged by ABS-CBN in view of his
"unique skills, talent and celebrity status not
possessed by ordinary employees."188 His work was
for radio and television programs.189 On the other
hand, Dumpit-Murillo was hired by ABC as a
newscaster and co-anchor.190 Sonza’s talent fee
amounted to ₱317,000.00 per month, which this
court found to be a substantial amount that
indicatedhe was an independent contractor rather
than a regular employee.191Meanwhile, Dumpit-
Murillo’s monthly salary was ₱28,000.00, a very low
amount compared to what Sonza received.192
Sonza was unable to prove that ABS-CBN could
terminate his services apart from breach of contract.
There was no indication that he could be terminated
based on just or authorized causes under the Labor
Code. In addition, ABS-CBN continued to pay his
talent fee under their agreement, even though his
programs were no longer broadcasted.193 Dumpit-
Murillo was found to have beenillegally dismissed by
her employer when they did not renew her contract
on her fourth year with ABC.194
In Sonza, this court ruled that ABS-CBN did not
control how Sonza delivered his lines, how he
appeared on television, or how he sounded on
radio.195 All that Sonza needed was his
talent.196 Further, "ABS-CBN could not terminate or
KAYE RAMOGA
discipline SONZA even if the means and methods of
performance of his work . . . did not meet ABS-CBN’s
approval."197 In Dumpit-Murillo, the duties and
responsibilities enumerated in her contract was a
clear indication that ABC had control over her
work.198
Application of the four-fold test
The Court of Appeals did not err when it relied on the
ruling in Dumpit-Murillo and affirmed the ruling of the
National Labor Relations Commission finding that
Arlene was a regular employee. Arlene was hired by
Fuji as a news producer, but there was no showing
that she was hired because of unique skills that
would distinguish her from ordinary employees.
Neither was there any showing that she had a
celebrity status. Her monthly salary amounting to
US$1,900.00 appears tobe a substantial sum,
especially if compared to her salary whenshe was
still connected with GMA.199 Indeed, wages may
indicate whether oneis an independent contractor.
Wages may also indicate that an employee is able to
bargain with the employer for better pay. However,
wages should not be the conclusive factor in
determining whether one is an employee or an
independent contractor.
Fuji had the power to dismiss Arlene, as provided for
in paragraph 5 of her professional employment
contract.200 Her contract also indicated that Fuji had
control over her work because she was required to
work for eight (8) hours from Monday to Friday,
although on flexible time.201 Sonza was not required
to work for eight (8) hours, while Dumpit-Murillo had
to be in ABC to do both on-air and off-air tasks.
On the power to control, Arlene alleged that Fuji gave
her instructions on what to report.202 Even the mode
of transportation in carrying out her functions was
controlled by Fuji. Paragraph 6 of her contract states:
6. During the travel to carry out work, if there is
change of place or change of place of work, the train,
bus, or public transport shall be used for the trip. If
the Employee uses the private car during the work
and there is an accident the Employer shall not be
responsible for the damage, which may be caused to
the Employee.203
Thus, the Court of Appeals did not err when it upheld
the findings of the National Labor Relations
Commission that Arlene was not an independent
contractor.
Having established that an employer-employee
relationship existed between Fuji and Arlene, the
next questions for resolution are the following: Did
the Court of Appeals correctly affirm the National
Labor Relations Commission that Arlene had
become a regular employee? Was the nature of
Arlene’s work necessary and desirable for Fuji’s
usual course of business?
Arlene was a regular employee with a fixed-term
contract
LABOR LAW
The test for determining regular employment is
whether there is a reasonable connection between
the employee’s activities and the usual business of
the employer. Article 280 provides that the nature of
work must be "necessary or desirable in the usual
business or trade of the employer" as the test for
determining regular employment. As stated in ABS-
CBN Broadcasting Corporation v. Nazareno:204
In determining whether an employment should be
considered regular or non-regular, the applicable test
is the reasonable connection between the particular
activity performed by the employee in relation to the
usual business or trade of the employer. The
standard, supplied by the law itself, is whether the
work undertaken is necessary or desirable in the
usual business or trade of the employer, a fact that
can be assessed by looking into the nature of the
services rendered and its relation to the general
scheme under which the business or trade is
pursued in the usual course. It is distinguished from a
specific undertaking that is divorced from the normal
activities required incarrying on the particular
business or trade.205
However, there may be a situation where an
employee’s work is necessary but is not always
desirable inthe usual course of business of the
employer. In this situation, there is no regular
employment.
In San Miguel Corporation v. National Labor
Relations Commission,206 Francisco de Guzman was
hired to repair furnaces at San Miguel Corporation’s
Manila glass plant. He had a separate contract for
every furnace that he repaired. He filed a complaint
for illegal dismissal three (3) years after the end of
his last contract.207 In ruling that de Guzman did not
attain the status of a regular employee, this court
explained:
Note that the plant where private respondent was
employed for only seven months is engaged in the
manufacture of glass, an integral component of the
packaging and manufacturing business of petitioner.
The process of manufacturing glass requires a
furnace, which has a limited operating life. Petitioner
resorted to hiring project or fixed term employees in
having said furnaces repaired since said activity is
not regularly performed. Said furnaces are to be
repaired or overhauled only in case of need and after
being used continuously for a varying period of five
(5) to ten (10) years. In 1990, one of the furnaces of
petitioner required repair and upgrading. This was an
undertaking distinct and separate from petitioner's
business of manufacturing glass. For this purpose,
petitioner must hire workers to undertake the said
repair and upgrading. . . .
....
Clearly, private respondent was hired for a specific
project that was not within the regular business of the
corporation. For petitioner is not engaged in the
business of repairing furnaces. Although the activity
was necessary to enable petitioner to continue
manufacturing glass, the necessity therefor arose
only when a particular furnace reached the end of its
KAYE RAMOGA
life or operating cycle. Or, as in the second
undertaking, when a particular furnace required an
emergency repair. In other words, the undertakings
where private respondent was hired primarily as
helper/bricklayer have specified goals and purposes
which are fulfilled once the designated work was
completed. Moreover, such undertakings were also
identifiably separate and distinct from the usual,
ordinary or regular business operations of petitioner,
which is glass manufacturing. These undertakings,
the duration and scope of which had been
determined and made known to private respondent
at the time of his employment, clearly indicated the
nature of his employment as a project employee.208
Fuji is engaged in the business of
broadcasting,209 including news programming.210 It is
based in Japan211 and has overseas offices to cover
international news.212
Based on the record, Fuji’s Manila Bureau Office is a
small unit213 and has a few employees.214 As such,
Arlene had to do all activities related to news
gathering. Although Fuji insists that Arlene was a
stringer, it alleges that her designation was "News
Talent/Reporter/Producer."215
A news producer "plans and supervises newscast . . .
[and] work[s] with reporters in the field planning and
gathering information. . . ."216 Arlene’s tasks included
"[m]onitoring and [g]etting [n]ews [s]tories, [r]eporting
interviewing subjects in front of a video
camera,"217 "the timely submission of news and
current events reports pertaining to the Philippines[,]
and traveling [sic] to [Fuji’s] regional office in
Thailand."218 She also had to report for work in Fuji’s
office in Manila from Mondays to Fridays, eight (8)
hours per day.219 She had no equipment and had to
use the facilities of Fuji to accomplish her tasks.
The Court of Appeals affirmed the finding of the
National Labor Relations Commission that the
successive renewals of Arlene’s contract indicated
the necessity and desirability of her work in the usual
course of Fuji’s business. Because of this, Arlene
had become a regular employee with the right to
security of tenure.220 The Court of Appeals ruled that:
Here, Espiritu was engaged by Fuji as a stinger [sic]
or news producer for its Manila Bureau. She was
hired for the primary purpose of news gathering and
reporting to the television network’s headquarters.
Espiritu was not contracted on account of any
peculiar ability or special talent and skill that she may
possess which the network desires to make use of.
Parenthetically, ifit were true that Espiritu is an
independent contractor, as claimed by Fuji, the
factthat everything that she uses to perform her job is
owned by the company including the laptop computer
and mini camera discounts the idea of job
contracting.221
Moreover, the Court of Appeals explained that Fuji’s
argument that no employer-employee relationship
existed in view of the fixed-term contract does not
persuade because fixed-term contracts of
222
employment are strictly construed. Further, the
pieces of equipment Arlene used were all owned by
LABOR LAW
Fuji, showing that she was a regular employee and
not an independent contractor.223
The Court of Appeals likewise cited Dumpit-Murillo,
which involved fixed-term contracts that were
successively renewed for four (4) years.224 This court
held that "[t]his repeated engagement under contract
of hire is indicative of the necessity and desirability of
the petitioner’s work in private respondent ABC’s
business."225
With regard to Fuji’s argument that Arlene’s contract
was for a fixed term, the Court of Appeals cited
Philips Semiconductors, Inc. v. Fadriquela226 and
held that where an employee’s contract "had been
continuously extended or renewed to the same
position, with the same duties and remained in the
employ without any interruption,"227 then such
employee is a regular employee. The continuous
renewal is a scheme to prevent regularization. On
this basis, the Court of Appeals ruled in favor of
Arlene.
As stated in Price, et al. v. Innodata Corp., et al.:228
The employment status of a person is defined and
prescribed by law and not by what the parties say it
should be. Equally important to consider is that a
contract of employment is impressed with public
interest such that labor contracts must yield to the
common good. Thus, provisions of applicable
statutes are deemed written into the contract, and the
parties are not at liberty to insulate themselves and
their relationships from the impact of labor laws and
regulations by simply contracting with each
other.229 (Citations omitted)
Arlene’s contract indicating a fixed term did not
automatically mean that she could never be a regular
employee. This is precisely what Article 280 seeks to
avoid. The ruling in Brent remains as the exception
rather than the general rule.
Further, an employee can be a regular employee
with a fixed-term contract. The law does not preclude
the possibility that a regular employee may opt to
have a fixed-term contract for valid reasons. This
was recognized in Brent: For as long as it was the
employee who requested, or bargained, that the
contract have a "definite date of termination," or that
the fixed-term contract be freely entered into by the
employer and the employee, then the validity of the
fixed-term contract will be upheld.230
V
Whether the Court of Appeals correctly affirmed
the National Labor Relations Commission’s
finding of illegal dismissal
Fuji argues that the Court of Appeals erred when it
held that Arlene was illegally dismissed, in view of
the non-renewal contract voluntarily executed by the
parties. Fuji also argues that Arlene’s contract merely
expired; hence, she was not illegally dismissed.231
Arlene alleges that she had no choice but to sign the
non-renewal contract because Fuji withheldher salary
and benefits.
KAYE RAMOGA
With regard to this issue, the Court of Appeals held:
We cannot subscribe to Fuji’s assertion that
Espiritu’s contract merely expired and that she
voluntarily agreed not to renew the same. Even a
cursory perusal of the subject Non-Renewal Contract
readily shows that the same was signed by Espiritu
under protest. What is apparent is that the Non-
Renewal Contract was crafted merely as a
subterfuge to secure Fuji’s position that it was
Espiritu’s choice not to renew her contract.232
As a regular employee, Arlene was entitled to
security of tenure and could be dismissed only for
just or authorized causes and after the observance of
due process.
The right to security of tenureis guaranteed under
Article XIII, Section 3 of the 1987 Constitution:
ARTICLE XIII. SOCIAL JUSTICE AND HUMAN
RIGHTS LABOR
It shall guarantee the rights of all workers to self-
organization, collective bargaining and negotiations,
and peaceful concerted activities, including the right
to strike in accordance with law. They shall be
entitled to security of tenure, humane conditions of
work, and a living wage. They shall also participate in
policy and decision-making processes affecting their
rights and benefits as may be provided by law.
Article 279 of the Labor Code also provides for the
right to security of tenure and states the following:
Art. 279. Security of tenure.In cases of regular
employment, the employer shall not terminate the
services of an employee except for a just cause of
when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive
of allowances, and to his other benefits or their
monetary equivalent computed from the time his
compensation was withheld from him up to the time
of his actual reinstatement.
Thus, on the right to security of tenure, no employee
shall be dismissed, unless there are just orauthorized
causes and only after compliance with procedural
and substantive due process is conducted.
Even probationary employees are entitled to the right
to security of tenure. This was explained in Philippine
Daily Inquirer, Inc. v. Magtibay, Jr.:233
Within the limited legal six-month probationary
period, probationary employees are still entitled to
security of tenure. It is expressly provided in the
afore-quoted Article 281 that a probationary
employee may be terminated only on two grounds:
(a) for just cause, or (b) when he fails to qualify as a
regular employee in accordance with reasonable
standards made known by the employer to the
employee at the time of his engagement.234 (Citation
omitted)
The expiration of Arlene’s contract does not negate
the finding of illegal dismissal by Fuji. The manner by
LABOR LAW
which Fuji informed Arlene that her contract would no
longer be renewed is tantamount to constructive
dismissal. To make matters worse, Arlene was asked
to sign a letter of resignation prepared by Fuji.235 The
existence of a fixed-term contract should not mean
that there can be no illegal dismissal. Due process
must still be observed in the pre-termination of fixed-
term contracts of employment.
In addition, the Court of Appeals and the National
Labor Relations Commission found that Arlene was
dismissed because of her health condition. In the
non-renewal agreement executed by Fuji and Arlene,
it is stated that:
WHEREAS, the SECOND PARTY is undergoing
chemotherapy which prevents her from continuing to
effectively perform her functions under the said
Contract such as the timely submission of news and
current events reports pertaining to the Philippines
and travelling [sic] to the FIRST PARTY’s regional
office in Thailand.236 (Emphasis supplied)
Disease as a ground for termination is recognized
under Article 284 of the Labor Code:
Art. 284. 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.
Book VI, Rule 1, Section 8 of the Omnibus Rules
Implementing the Labor Code provides:
Sec. 8. Disease as a ground for dismissal.– Where
the employee suffers from a disease and his
continued employment is prohibited by law or
prejudicial to his healthor to the health of his
coemployees, the employer shall not terminate his
employment unless there is a certification by a
competent public health authority that the disease is
of such nature or at such a stage that it cannot be
cured within a period of six (6) months even with
proper medical treatment. If the disease or ailment
can be cured within the period, the employer shall
not terminate the employee but shall ask the
employee to take a leave. The employer shall
reinstate such employee to his former position
immediately upon the restoration of his normal
health.
For dismissal under Article 284 to bevalid, two
requirements must be complied with: (1) the
employee’s disease cannot be cured within six (6)
months and his "continued employment is prohibited
by law or prejudicial to his health as well as to the
health of his co-employees"; and (2) certification
issued by a competent public health authority that
even with proper medical treatment, the disease
cannot be cured within six (6) months.237 The burden
of proving compliance with these requisites is on the
KAYE RAMOGA
employer.238 Noncompliance leads to the conclusion
that the dismissal was illegal.239
There is no evidence showing that Arlene was
accorded due process. After informing her employer
of her lung cancer, she was not given the chance to
present medical certificates. Fuji immediately
concluded that Arlene could no longer perform her
duties because of chemotherapy. It did not ask her
how her condition would affect her work. Neither did
it suggest for her to take a leave, even though she
was entitled to sick leaves. Worse, it did not present
any certificate from a competent public health
authority. What Fuji did was to inform her thather
contract would no longer be renewed, and when she
did not agree, her salary was withheld. Thus, the
Court of Appeals correctly upheld the finding of the
National Labor Relations Commission that for failure
of Fuji to comply with due process, Arlene was
illegally dismissed.240
VI
Whether the Court of Appeals properly modified
the National Labor Relations Commission’s
decision when it awarded reinstatement,
damages, and attorney’s fees
The National Labor Relations Commission awarded
separation pay in lieu of reinstatement, on the ground
that the filing of the complaint for illegal dismissal
may have seriously strained relations between the
parties. Backwages were also awarded, to be
computed from date of dismissal until the finality of
the National Labor Relations Commission’s decision.
However, only backwages were included in the
dispositive portion because the National Labor
Relations Commission recognized that Arlene had
received separation pay in the amount of
US$7,600.00. The Court of Appeals affirmed the
National Labor Relations Commission’s decision but
modified it by awarding moral and exemplary
damages and attorney’s fees, and all other benefits
Arlene was entitled to under her contract with Fuji.
The Court of Appeals also ordered reinstatement,
reasoning that the grounds when separation pay was
awarded in lieu of reinstatement were not proven.241
Article 279 of the Labor Code provides:
Art. 279. Security of tenure. In cases of regular
employment, the employer shall not terminate the
services of an employee except for a just cause or
when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive
of allowances, and to his other benefits or their
monetary equivalent computed from the time his
compensation was withheld from him up to the time
of his actual reinstatement. (Emphasis supplied)
The Court of Appeals’ modification of the National
Labor Relations Commission’s decision was proper
because the law itself provides that illegally
dismissed employees are entitled to reinstatement,
backwages including allowances, and all other
benefits.
LABOR LAW
On reinstatement, the National Labor Relations
Commission ordered payment of separation pay in
lieu of reinstatement, reasoning "that the filing of the
instant suit may have seriously abraded the
relationship of the parties so as to render
reinstatement impractical."242 The Court of Appeals
reversed this and ordered reinstatement on the
ground that separation pay in lieu of reinstatement is
allowed only in several instances such as (1) when
the employer has ceased operations; (2) when the
employee’s position is no longer available; (3)
strained relations; and (4) a substantial period has
lapsed from date of filing to date of finality.243
On this matter, Quijano v. Mercury Drug Corp.244 is
instructive:
Well-entrenched is the rule that an illegally dismissed
employee is entitled to reinstatement as a matter of
right. . . .
To protect labor’s security of tenure, we emphasize
that the doctrine of "strained relations" should be
strictly applied so as not to deprive an illegally
dismissed employee of his right to reinstatement.
Every labor dispute almost always results in "strained
relations" and the phrase cannot be given an
overarching interpretation, otherwise, an unjustly
dismissed employee can never be
245
reinstated. (Citations omitted)
The Court of Appeals reasoned that strained
relations are a question of fact that must be
supported by evidence.246No evidence was
presented by Fuji to prove that reinstatement was no
longer feasible. Fuji did not allege that it ceased
operations or that Arlene’s position was no longer
available. Nothing in the records shows that Arlene’s
reinstatement would cause an atmosphere of
antagonism in the workplace. Arlene filed her
complaint in 2009. Five (5) years are not yet a
substantial period247 to bar reinstatement.
On the award of damages, Fuji argues that Arlene is
notentitled to the award of damages and attorney’s
fees because the non-renewal agreement contained
a quitclaim, which Arlene signed. Quitclaims in labor
cases do not bar illegally dismissed employees from
filing labor complaints and money claim. As
explained by Arlene, she signed the non-renewal
agreement out of necessity. In Land and Housing
Development Corporation v. Esquillo,248 this court
explained: We have heretofore explained that the
reason why quitclaims are commonly frowned upon
as contrary to public policy, and why they are held to
be ineffective to bar claims for the full measure of the
workers’ legal rights, is the fact that the employer and
the employee obviously do not stand on the same
footing. The employer drove the employee to the
wall. The latter must have to get holdof money.
Because, out of a job, he had to face the harsh
necessities of life. He thus found himself in no
position to resist money proffered. His, then, is a
case of adherence, not of choice.249
With regard to the Court of Appeals’ award of moral
and exemplary damages and attorney’s fees, this
court has recognized in several cases that moral
KAYE RAMOGA
damages are awarded "when the dismissal is
attended by bad faith or fraud or constitutes an act
oppressive to labor, or is done in a manner contrary
to good morals, good customs or public policy."250 On
the other hand, exemplary damages may be
awarded when the dismissal was effected "in a
wanton, oppressive or malevolent manner."251
The Court of Appeals and National Labor Relations
Commission found that after Arlene had informed
Fuji of her cancer, she was informed that there would
be problems in renewing her contract on account of
her condition. This information caused Arlene mental
anguish, serious anxiety, and wounded feelings that
can be gleaned from the tenor of her email dated
March 11, 2009. A portion of her email reads:
I WAS SO SURPRISED . . . that at a time when I am
at my lowest, being sick and very weak, you
suddenly came to deliver to me the NEWS that you
will no longer renew my contract.1awp++i1 I knew
this will come but I never thought that you will be so
‘heartless’ and insensitive to deliver that news just a
month after I informed you that I am sick. I was
asking for patience and understanding and your
response was not to RENEW my contract.252
Apart from Arlene’s illegal dismissal, the manner of
her dismissal was effected in an oppressive
approach withher salary and other benefits being
withheld until May 5, 2009, when she had no other
choice but to sign the non-renewal contract. Thus,
there was legal basis for the Court of Appeals to
modify the National Labor Relations Commission’s
decision.
LABOR LAW
However, Arlene receivedher salary for May
2009.253 Considering that the date of her illegal
dismissal was May 5, 2009,254 this amount may be
subtracted from the total monetary award. With
regard to the award of attorney’s fees, Article 111 of
the Labor Code states that "[i]n cases of unlawful
withholding of wages, the culpable party may be
assessed attorney’s fees equivalent to ten percent of
the amount of wages recovered." Likewise, this court
has recognized that "in actions for recovery of wages
or where an employee was forced to litigate and,
thus, incur expenses to protect his rights and
interest, the award of attorney’s fees is legallyand
morally justifiable."255 Due to her illegal dismissal,
Arlene was forced to litigate.
In the dispositive portion of its decision, the Court of
Appeals awarded legal interest at the rate of 12% per
annum.256 In view of this court’s ruling in Nacar v.
Gallery Frames,257 the legal interest shall be reducd
to a rate of 6% per annum from July 1, 2013 until full
satisfaction.
WHEREFORE, the petition is DENIED. The assailed
Court of Appeals decision dated June 25, 2012 is
AFFIRMED with the modification that backwages
shall be computed from June 2009. Legal interest
shall be computed at the rate of 6% per annum of the
total monetary award from date of finality of this
decision until full satisfaction.
SO ORDERED.
KAYE RAMOGA LABOR LAW

G.R. No. 146408 February 29, 2008

PHILIPPINE AIRLINES, INC., petitioner, vs.

ENRIQUE LIGAN, EMELITO SOCO, ALLAN PANQUE, JOLITO OLIVEROS, RICHARD GONCER, NONILON
PILAPIL, AQUILINO YBANEZ, BERNABE SANDOVAL, RUEL GONCER, VIRGILIO P. CAMPOS, JR.,
ARTHUR M. CAPIN, RAMEL BERNARDES, LORENZO BUTANAS, BENSON CARESUSA, JEFFREY
LLENOS, ROQUE PILAPIL, ANTONIO M. PAREJA, CLEMENTE R. LUMAYNO, NELSON TAMPUS,
ROLANDO TUNACAO, CHERRIE ALEGRES, BENEDICTO AUXTERO, EDUARDO MAGDADARAUG,
NELSON M. DULCE, and ALLAN BENTUZAL, respondents.

CARPIO MORALES, J.: 10.2 Should CONTRACTOR fail to improve the

Petitioner Philippine Airlines as Owner, and Synergy
Services Corporation (Synergy) as Contractor,
entered into an Agreement1 on July 15, 1991
whereby Synergy undertook to "provide loading,
unloading, delivery of baggage and cargo and other
related services to and from [petitioner]'s aircraft at
the Mactan Station."2
The Agreement specified the following "Scope of
Services" of Contractor Synergy:
1.2 CONTRACTOR shall furnish all the necessary
capital, workers, loading, unloading and
delivery materials, facilities, supplies, equipment and
tools for the satisfactory performance and execution
of the following services (the Work):
a) Loading and unloading of baggage and cargo
to and from the aircraft;
b) Delivering of baggage from the ramp to the
baggage claim area;
c) Picking up of baggage from the baggage
sorting area to the designated parked aircraft;
d) Delivering of cargo unloaded from the flight to
cargo terminal;
e) Other related jobs (but not janitorial functions)
as may be required and necessary;
CONTRACTOR shall perform and execute the
aforementioned Work at the following areas located
at Mactan Station, to wit:
a) a. Ramp Area
b) b. Baggage Claim Area
c) c. Cargo Terminal Area, and
d) d. Baggage Sorting Area3 (Underscoring
supplied)
And it expressly provided that Synergy was "an
independent contractor and . . . that there w[ould] be
no employer-employee relationship between
CONTRACTOR and/or its employees on the one
hand, and OWNER, on the other."4
On the duration of the Agreement, Section 10 thereof
provided:
10. 1 Should at any time OWNER find the services
herein undertaken by CONTRACTOR to be
unsatisfactory, it shall notify CONTRACTOR who
shall have fifteen (15) days from such notice within
which to improve the services. If CONTRACTOR fails
to improve the services under this Agreement
according to OWNER'S specifications and standards,
OWNER shall have the right to terminate this
Agreement immediately and without advance notice.
services within the period stated above or should
CONTRACTOR breach the terms of this Agreement
and fail or refuse to perform the Work in such a
manner as will be consistent with the achievement of
the result therein contracted for or in any other way
fail to comply strictly with any terms of this
Agreement, OWNER at its option, shall have the right
to terminate this Agreement and to make other
arrangements for having said Work performed and
pursuant thereto shall retain so much of the money
held on the Agreement as is necessary to cover the
OWNER's costs and damages, without prejudice to
the right of OWNER to seek resort to the bond
furnished by CONTRACTOR should the money in
OWNER's possession be insufficient.
x x x x (Underscoring supplied)
Except for respondent Benedicto Auxtero (Auxtero),
the rest of the respondents, who appear to have
been assigned by Synergy to petitioner following the
execution of the July 15, 1991 Agreement, filed on
March 3, 1992 complaints before the NLRC Regional
Office VII at Cebu City against petitioner, Synergy
and their respective officials for underpayment, non-
payment of premium pay for holidays, premium
pay for rest days, service incentive leave
pay, 13th month pay and allowances, and
for regularization of employment status with
petitioner, they claiming to be "performing duties for
the benefit of [petitioner] since their job is directly
connected with [its] business x x x."5
Respondent Auxtero had initially filed a complaint
against petitioner and Synergy and their respective
officials for regularization of his employment status.
Later alleging that he was, without valid ground,
verbally dismissed, he filed a complaint against
petitioner and Synergy and their respective
officials for illegal dismissal and reinstatement with
full backwages.6
The complaints of respondents were consolidated.
By Decision7 of August 29, 1994, Labor Arbiter
Dominador Almirante found Synergy an independent
contractor and dismissed respondents' complaint for
regularization against petitioner, but granted their
money claims. The fallo of the decision reads:
WHEREFORE, foregoing premises considered,
judgment is hereby rendered as follows:
(1) Ordering respondents PAL and Synergy jointly
and severally to pay all the complainants herein their
13thmonth pay and service incentive leave benefits;
KAYE RAMOGA
xxxx
(3) Ordering respondent Synergy to pay complainant
Benedicto Auxtero a financial assistance in the
amount of P5,000.00.
The awards hereinabove enumerated in the
aggregate total amount of THREE HUNDRED
TWENTY-TWO THOUSAND THREE HUNDRED
FIFTY NINE PESOS AND EIGHTY SEVEN
CENTAVOS (P322,359.87) are computed in detail by
our Fiscal Examiner which computation is hereto
attached to form part of this decision.
The rest of the claims are hereby ordered
dismissed for lack of merit.8 (Underscoring supplied)
On appeal by respondents, the NLRC, Fourth
Division, Cebu City, vacated and set aside the
decision of the Labor Arbiter by Decision9 of January
5, 1996, the fallo of which reads:
WHEREFORE, the Decision of the Labor Arbiter
Dominador A. Almirante, dated August 29, 1994, is
hereby VACATED and SET ASIDE and judgment is
hereby rendered:
1. Declaring respondent Synergy Services
Corporation to be a 'labor-only' contractor;
2. Ordering respondent Philippine Airlines to
accept, as its regular employees, all the
complainants, . . . and to give each of them the
salaries, allowances and other employment benefits
and privileges of a regular employee under the
Collective Bargaining Agreement subsisting during
the period of their employment;
xxxx
4. Declaring the dismissal of complainant Benedicto
Auxtero to be illegal and ordering his
reinstatement as helper or utility man with
respondent Philippine Airlines, with full backwages,
allowances and other benefits and privileges from the
time of his dismissal up to his actual reinstatement;
and
5. Dismissing the appeal of respondent Synergy
Services Corporation, for lack of merit.10 (Emphasis
and underscoring supplied)
Only petitioner assailed the NLRC decision via
petition for certiorari before this Court.
By Resolution11 of January 25, 1999, this Court
referred the case to the Court of Appeals for
appropriate action and disposition, conformably
with St. Martin Funeral Homes v. National Labor
Relations Commission which was promulgated on
September 16, 1998.
The appellate court, by Decision of September 29,
2000, affirmed the Decision of the
NLRC.12 Petitioner's motion for reconsideration
having been denied by Resolution of December 21,
2000,13 the present petition was filed, faulting the
appellate court
LABOR LAW
I.
. . . IN UPHOLDING THE NATIONAL LABOR
RELATIONS COMMISSION DECISION
WHICH IMPOSED THE RELATIONSHIP OF
EMPLOYER-EMPLOYEE BETWEEN PETITIONER
AND THE RESPONDENTS HEREIN.
II.
. . . IN AFFIRMING THE RULING OF THE
NATIONAL LABOR RELATIONS
COMMISSION ORDERING THE REINSTATEMENT
OF RESPONDENT AUXTERO DESPITE THE
ABSENCE [OF] ANY FACTUAL FINDINGIN THE
DECISION THAT PETITIONER ILLEGALLY
TERMINATED HIS EMPLOYMENT.
III.
. . . [IN ANY EVENT IN] COMMITT[ING] A PATENT
AND GRAVE ERROR IN UPHOLDING THE
DECISION OF THE NATIONAL LABOR
RELATIONS COMMISSION WHICH
COMPELLED THE PETITIONER TO EMPLOY THE
RESPONDENTS AS REGULAR EMPLOYEES
DESPITE THE FACT THAT THEIR SERVICES ARE
IN EXCESS OF PETITIONER COMPANY'S
OPERATIONAL REQUIREMENTS.14(Underscoring
supplied)
Petitioner argues that the law does not prohibit an
employer from engaging an independent contractor,
like Synergy, which has substantial capital in carrying
on an independent business of contracting, to
perform specific jobs.
Petitioner further argues that its contracting out to
Synergy various services like janitorial, aircraft
cleaning, baggage-handling, etc., which are directly
related to its business, does not make respondents
its employees.
Petitioner furthermore argues that none of the four
(4) elements of an employer-employee relationship
between petitioner and respondents, viz: selection
and engagement of an employee, payment of wages,
power of dismissal, and the power to control
employee's conduct, is present in the case.15
Finally, petitioner avers that reinstatement of
respondents had been rendered impossible because
it had reduced its personnel due to heavy losses as it
had in fact terminated its service agreement with
Synergy effective June 30, 199816 as a cost-saving
measure.
The decision of the case hinges on a determination
of whether Synergy is a mere job-only contractor or a
legitimate contractor. If Synergy is found to be a
mere job-only contractor, respondents could be
considered as regular employees of petitioner as
Synergy would then be a mere agent of petitioner in
which case respondents would be entitled to all the
benefits granted to petitioner's regular employees;
otherwise, if Synergy is found to be a legitimate
contractor, respondents' claims against petitioner
must fail as they would then be considered
employees of Synergy.
KAYE RAMOGA
The statutory basis of legitimate contracting or
subcontracting is provided in Article 106 of the Labor
Code which reads:
ART. 106. CONTRACTOR OR SUBCONTRACTOR.
- Whenever an employer enters into a contract with
another person for the performance of the former's
work, the employees of the contractor and of the
latter's subcontractor, if any, shall be paid in
accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails
to pay the wages of his employees in accordance
with this Code, the employer shall be jointly and
severally liable with his contractor or subcontractor to
such employees to the extent of the work performed
under the contract, in the same manner and extent
that he is liable to employees directly employed by
him.
The Secretary of Labor may, by appropriate
regulations, restrict or prohibit the contracting out of
labor to protect the rights of workers established
under the Code. In so prohibiting or restricting, he
may make appropriate distinctions between labor-
only contracting and job contracting as well as
differentiations within these types of contracting and
determine who among the parties involved shall be
considered the employer for purposes of this Code,
to prevent any violation or circumvention of any
provision of this Code.
There is "labor-only" contracting where the person
supplying workers to an employer does not have
substantial capital or investment in the form of
tools, equipment, machineries, work premises,
among others, AND the workers recruited and
placed by such person are performing activities
which are directly related to the principal
business of such employer. In such cases, the
person or intermediary shall be
considered merely as an agent of the employer
who shall be responsible to the workers in the
same manner and extent as if the latter were
directly employed by him. (Emphasis, capitalization
and underscoring supplied)
Legitimate contracting and labor-only contracting are
defined in Department Order (D.O.) No. 18-02,
Series of 2002 (Rules Implementing Articles 106 to
109 of the Labor Code, as amended) as follows:
Section 3. Trilateral relationship in contracting
arrangements. In legitimate contracting, there
exists a trilateral relationship under which there is a
contract for a specific job, work or service between
the principal and the contractor or subcontractor, and
a contract of employment between the contractor or
subcontractor and its workers. Hence, there are three
parties involved in these arrangements, the
principal which decides to farm out a job or service to
a contractor or subcontractor, the contractor or
subcontractor which has the capacity to
independently undertake the performance of the job,
work or service, and the contractual workersengaged
by the contractor or subcontractor to accomplish the
job, work or service. (Emphasis and underscoring
supplied)
LABOR LAW
Section 5. Prohibition against labor-only
contracting. Labor-only contracting is hereby
declared prohibited. For this purpose, labor-only
contracting shall refer to an arrangement where the
contractor or subcontractor merely recruits, supplies
or places workers to perform a job, work or service
for a principal, and any of the following elements are
[sic] present:
(i) The contractor or subcontractor does not have
substantial capital or investment which relates to
the job, work or service to be performed and the
employees recruited, supplied or placed by such
contractor or subcontractor are performing activities
which are directly related to the main business of
the principal; OR
(ii) The contractor does not exercise the right to
control over the performance of the work of the
contractual employee. (Emphasis, underscoring and
capitalization supplied)
"Substantial capital or investment" and the "right to
control" are defined in the same Section 5 of the
Department Order as follows:
"Substantial capital or investment" refers to capital
stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements,
machineries and work premises, actually and directly
used by the contractor or subcontractor in the
performance or completion of the job, work or service
contracted out.
The "right to control" shall refer to the right
reserved to the person for whom the services of the
contractual workers are performed, to determine not
only the end to be achieved, but also the manner and
means to be used in reaching that end. (Emphasis
and underscoring supplied)
From the records of the case, it is gathered that the
work performed by almost all of the respondents -
loading and unloading of baggage and cargo of
passengers - is directly related to the main business
of petitioner. And the equipment used by
respondents as station loaders, such as trailers and
conveyors, are owned by petitioner.17
Petitioner asserts, however, that mere compliance
with substantial capital requirement suffices for
Synergy to be considered a legitimate contractor,
citing Neri v. National Labor Relations
Commission.18 Petitioner's reliance on said case is
misplaced.
In Neri, the Labor Arbiter and the NLRC both
determined that Building Care Corporation had a
capital stock of P1 million fully subscribed and paid
for.19 The corporation's status as independent
contractor had in fact been previously confirmed in
an earlier case20 by this Court which found it to be
serving, among others, a university, an international
bank, a big local bank, a hospital center, government
agencies, etc."
In stark contrast to the case at bar, while petitioner
steadfastly asserted before the Labor Arbiter and the
KAYE RAMOGA
NLRC that Synergy has a substantial capital to
engage in legitimate contracting, it failed to present
evidence thereon. As the NLRC held:
The decision of the Labor Arbiter merely mentioned
on page 5 of his decision that respondent SYNERGY
has substantial capital, but there is no showing in the
records as to how much is that capital. Neither had
respondents shown that SYNERGY has such
substantial capital. x x x21 (Underscoring supplied)
It was only after the appellate court rendered its
challenged Decision of September 29, 2002 when
petitioner, in its Motion for Reconsideration of the
decision, sought to prove, for the first time, Synergy's
substantial capitalization by attaching photocopies of
Synergy's financial statements, e.g., balance sheets,
statements of income and retained earnings, marked
as "Annexes 'A' - 'A-4.'"22
More significantly, however, is that respondents
worked alongside petitioner's regular employees who
were performing identical work.23 As San Miguel
Corporation v. Aballa24 and Dole Philippines, Inc. v.
Esteva, et al.25teach, such is an indicium of labor-
only contracting.
For labor-only contracting to exist, Section 5 of D.O.
No. 18-02 which requires any of two elements to be
present is, for convenience, re-quoted:
(i) The contractor or subcontractor does not
have substantial capital or investment which
relates to the job, work or service to be
performed and the employees recruited, supplied or
placed by such contractor or subcontractor are
performing activities which are directly related to
the main business of the principal, OR
(ii) The contractor does not exercise the right to
control over the performance of the work of the
contractual employee. (Emphasis and
CAPITALIZATION supplied)
Even if only one of the two elements is present then,
there is labor-only contracting.
The control test element under the immediately-
quoted paragraph (ii), which was not present in the
old Implementing Rules (Department Order No. 10,
Series of 1997),26 echoes the prevailing
jurisprudential trend27elevating such element as a
primary determinant of employer-employee
relationship in job contracting agreements.
One who claims to be an independent contractor has
to prove that he contracted to do the work according
to his own methods and without being subject to the
employer's control except only as to the results.28
While petitioner claimed that it was Synergy's
supervisors who actually supervised respondents, it
failed to present evidence thereon. It did not even
identify who were the Synergy supervisors assigned
at the workplace.
Even the parties' Agreement does not lend support to
petitioner's claim, thus:
LABOR LAW
Section
6. Qualified and Experienced Worker: Owner's Right
to Dismiss Workers.
CONTRACTOR shall employ capable and
experienced workers and foremen to carry out the
loading, unloading and delivery Work as well
as provide all equipment, loading, unloading and
delivery equipment, materials, supplies and tools
necessary for the performance of the Work.
CONTRACTOR shall upon OWNER'S request
furnish the latter with information regarding the
qualifications of the former's workers, to prove their
capability and experience. Contractor shall require
all its workers, employees, suppliers and
visitors to comply with OWNER'S rules,
regulations, procedures and directives relative to
the safety and security of OWNER'S premises,
properties and operations. For this purpose,
CONTRACTOR shall furnish its employees and
workers identification cards to be countersigned
by OWNER and uniforms to be approved by
OWNER. OWNER may require CONTRACTOR to
dismiss immediately and prohibit entry into
OWNER'S premises of any person employed
therein by CONTRACTOR who in OWNER'S
opinion is incompetent or misconducts himself
or does not comply with OWNER'S reasonable
instructions and requests regarding security, safety
and other matters and such person shall not again be
employed to perform the services hereunder without
OWNER'S permission.29 (Underscoring partly in the
original and partly supplied; emphasis supplied)
Petitioner in fact admitted that it fixes the work
schedule of respondents as their work was
dependent on the frequency of plane arrivals.30 And
as the NLRC found, petitioner's managers and
supervisors approved respondents' weekly work
assignments and respondents and other regular PAL
employees were all referred to as "station
attendants" of the cargo operation and airfreight
services of petitioner.31
Respondents having performed tasks which are
usually necessary and desirable in the air
transportation business of petitioner, they should be
deemed its regular employees and Synergy as a
labor-only contractor.32
The express provision in the Agreement that Synergy
was an independent contractor and there would be
"no employer-employee relationship between
[Synergy] and/or its employees on one hand, and
[petitioner] on the other hand" is not legally binding
and conclusive as contractual provisions are not valid
determinants of the existence of such relationship.
For it is the totality of the facts and surrounding
circumstances of the case33 which is determinative
of the parties' relationship.
Respecting the dismissal on November 15, 199234 of
Auxtero, a regular employee of petitioner who had
been working as utility man/helper since November
1988, it is not legally justified for want of just or
authorized cause therefor and for non-compliance
with procedural due process. Petitioner's claim that
KAYE RAMOGA
he abandoned his work does not persuade.35 The
elements of abandonment being (1) the failure to
report for work or absence without valid or justifiable
reason, and (2) a clear intention to sever the
employer-employee relationship manifested by some
overt acts,36 the onus probandi lies with petitioner
which, however, failed to discharge the same.
Auxtero, having been declared to be a regular
employee of petitioner, and found to be illegally
dismissed from employment, should be entitled to
salary differential37 from the time he rendered one
year of service until his dismissal, reinstatement plus
backwages until the finality of this decision.38 In view,
however, of the long period of time39 that had
elapsed since his dismissal on November 15, 1992, it
would be appropriate to award separation pay of one
(1) month salary for each year of service, in lieu of
reinstatement.40
As regards the remaining respondents, the Court
affirms the ruling of both the NLRC and the appellate
court, ordering petitioner to accept them as its
regular employees and to give each of them the
salaries, allowances and other employment benefits
and privileges of a regular employee under the
pertinent Collective Bargaining Agreement.
Petitioner claims, however, that it has become
impossible for it to comply with the orders of the
NLRC and the Court of Appeals, for during the
pendency of this case, it was forced to reduce its
personnel due to heavy losses caused by economic
crisis and the pilots' strike of June 5, 1998.41 Hence,
there are no available positions where respondents
could be placed.
And petitioner informs that "the employment
contracts of all if not most of the respondents . . .
were terminated by Synergy effective 30 June
1998 when petitioner terminated its contract with
Synergy."42
Other than its bare allegations, petitioner presented
nothing to substantiate its impossibility of
compliance. In fact, petitioner waived this defense by
failing to raise it in its Memorandum filed on June 14,
1999 before the Court of Appeals.43 Further, the
notice of termination in 1998 was in disregard of a
subsisting temporary restraining order44to preserve
the status quo, issued by this Court in 1996 before it
referred the case to the Court of Appeals in January
LABOR LAW
1999. So as to thwart the attempt to subvert the
implementation of the assailed decision, respondents
are deemed to be continuously employed by
petitioner, for purposes of computing the wages and
benefits due respondents.
Finally, it must be stressed that respondents, having
been declared to be regular employees of petitioner,
Synergy being a mere agent of the latter, had
acquired security of tenure. As such, they could only
be dismissed by petitioner, the real employer, on the
basis of just or authorized cause, and with
observance of procedural due process.
WHEREFORE, the Court of Appeals Decision of
September 29, 2000
is AFFIRMED with MODIFICATION.
Petitioner PHILIPPINE AIRLINES, INC. is ordered to:
(a) accept respondents ENRIQUE LIGAN, EMELITO
SOCO, ALLAN PANQUE, JOLITO OLIVEROS,
RICHARD GONCER, NONILON PILAPIL, AQUILINO
YBANEZ, BERNABE SANDOVAL, RUEL GONCER,
VIRGILIO P. CAMPOS, JR., ARTHUR M. CAPIN,
RAMEL BERNARDES, LORENZO BUTANAS,
BENSON CARESUSA, JEFFREY LLENOS, ROQUE
PILAPIL, ANTONIO M. PAREJA, CLEMENTE R.
LUMAYNO, NELSON TAMPUS, ROLANDO
TUNACAO, CHERRIE ALEGRES, EDUARDO
MAGDADARAUG, NELSON M. DULCE and ALLAN
BENTUZAL as its regular employees in their same or
substantially equivalent positions, and pay
the wages and benefits due them as regular
employees plus salary differential corresponding to
the difference between the wages and benefits given
them and those granted to petitioner's other regular
employees of the same rank; and
(b) pay respondent BENEDICTO AUXTERO salary
differential; backwages from the time of his
dismissal until the finality of this decision;
and separation pay, in lieu of reinstatement,
equivalent to one (1) month pay for every year of
service until the finality of this decision.
There being no data from which this Court may
determine the monetary liabilities of petitioner, the
case is REMANDED to the Labor Arbiter solely for
that purpose.
SO ORDERED.
KAYE RAMOGA
G.R. No. 144672. July 10, 2003
San Miguel Corporation, petitioner, vs. MAERC Integrated Services, Inc.; ET. AL., respondents.
BELLOSILLO , J.:
TWO HUNDRED NINETY-ONE (291) workers filed
their complaints (nine [9] complaints in all) against
San Miguel Corporation (petitioner herein) and Maerc
Integrated Services, Inc. (respondent herein), for
illegal dismissal, underpayment of wages, non-
payment of service incentive leave pays and other
labor standards benefits, and for separation pays
from 25 June to 24 October 1991. The complainants
alleged that they were hired by San Miguel
Corporation (SMC) through its agent or intermediary
Maerc Integrated Services, Inc. (MAERC) to work in
two (2) designated workplaces in Mandaue City: one,
inside the SMC premises at the Mandaue Container
Services, and another, in the Philphos Warehouse
owned by MAERC. They washed and segregated
various kinds of empty bottles used by SMC to sell
and distribute its beer beverages to the consuming
public. They were paid on a per piece or pakiao basis
except for a few who worked as checkers and were
paid on daily wage basis.
Complainants alleged that long before SMC
contracted the services of MAERC a majority of them
had already been working for SMC under the guise
of being employees of another contractor, Jopard
Services, until the services of the latter were
terminated on 31 January 1988.
SMC denied liability for the claims and averred that
the complainants were not its employees but of
MAERC, an independent contractor whose primary
corporate purpose was to engage in the business of
cleaning, receiving, sorting, classifying, etc., glass
and metal containers.
It appears that SMC entered into a Contract of
Services with MAERC engaging its services on a
non-exclusive basis for one (1) year beginning 1
February 1988. The contract was renewed for two (2)
more years in March 1989. It also provided for its
automatic renewal on a month-to-month basis after
the two (2)-year period and required that a written
notice to the other party be given thirty (30) days
prior to the intended date of termination, should a
party decide to discontinue with the contract.
In a letter dated 15 May 1991, SMC informed
MAERC of the termination of their service contract by
the end of June 1991. SMC cited its plans to phase
out its segregation activities starting 1 June 1991 due
to the installation of labor and cost-saving devices.
When the service contract was terminated,
complainants claimed that SMC stopped them from
performing their jobs; that this was tantamount to
their being illegally dismissed by SMC who was their
real employer as their activities were directly related,
necessary and desirable to the main business of
SMC; and, that MAERC was merely made a tool or a
shield by SMC to avoid its liability under the Labor
Code.
LABOR LAW
MAERC for its part admitted that it recruited the
complainants and placed them in the bottle
segregation project of SMC but maintained that it
was only conveniently used by SMC as an
intermediary in operating the project or work directly
related to the primary business concern of the latter
with the end in view of avoiding its obligations and
responsibilities towards the complaining workers.
The nine (9) cases[1] were consolidated. On 31
January 1995 the Labor Arbiter rendered a decision
holding that MAERC was an independent
contractor.[2] He dismissed the complaints for illegal
dismissal but ordered MAERC to pay complainants'
separation benefits in the total amount
of P2,334,150.00. MAERC and SMC were also
ordered to jointly and severally pay complainants
their wage differentials in the amount of P845,117.00
and to pay attorney's fees in the amount
of P317,926.70.
The complainants appealed the Labor Arbiter's
finding that MAERC was an independent contractor
and solely liable to pay the amount representing the
separation benefits to the exclusion of SMC, as well
as the Labor Arbiter's failure to grant the Temporary
Living Allowance of the complainants. SMC appealed
the award of attorney's fees.
The National Labor Relations Commission (NLRC)
ruled in its 7 January 1997 decision that MAERC was
a labor-only contractor and that complainants were
employees of SMC.[3] The NLRC also held that
whether MAERC was a job contractor or a labor-only
contractor, SMC was still solidarily liable with
MAERC for the latter's unpaid obligations, citing Art.
109[4] of the Labor Code. Thus, the NLRC modified
the judgment of the Labor Arbiter and held SMC
jointly and severally liable with MAERC for
complainants' separation benefits. In addition, both
respondents were ordered to pay jointly and
severally an indemnity fee of P2,000.00 to each
complainant.
SMC moved for a reconsideration which resulted in
the reduction of the award of attorney's fees
from P317,926.70 to P84,511.70. The rest of the
assailed decision was unchanged.[5]
On 12 March 1998, SMC filed a petition for certiorari
with prayer for the issuance of a temporary
restraining order and/or injunction with this Court
which then referred the petition to the Court of
Appeals.
On 28 April 2000 the Court of Appeals denied the
petition and affirmed the decision of the NLRC.[6] The
appellate court also denied SMC's motion for
reconsideration in a resolution[7] dated 26 July
2000. Hence, petitioner seeks a review of the Court
of Appeals judgment before this Court.
Petitioner poses the same issues brought up in the
appeals court and the pivotal question is whether the
KAYE RAMOGA
complainants are employees of petitioner SMC or of
respondent MAERC.
Relying heavily on the factual findings of the Labor
Arbiter, petitioner maintained that MAERC was a
legitimate job contractor. It directed this Court's
attention to the undisputed evidence it claimed to
establish this assertion: MAERC is a duly organized
stock corporation whose primary purpose is to
engage in the business of cleaning, receiving,
sorting, classifying, grouping, sanitizing, packing,
delivering, warehousing, trucking and shipping any
glass and/or metal containers and that it had listed in
its general information sheet two hundred seventy-
eight (278) workers, twenty-two (22) supervisors,
seven (7) managers/officers and a board of directors;
it also voluntarily entered into a service contract on a
non-exclusive basis with petitioner from which it
earned a gross income of P42,110,568.24 from 17
October 1988 to 27 November 1991; the service
contract specified that MAERC had the selection,
engagement and discharge of its personnel,
employees or agents or otherwise in the direction
and control thereof; MAERC admitted that it had
machinery, equipment and fixed assets used in its
business valued at P4,608,080.00; and, it failed to
appeal the Labor Arbiter's decision which declared it
to be an independent contractor and ordered it to
solely pay the separation benefits of the complaining
workers.
We find no basis to overturn the Court of Appeals
and the NLRC. Well-established is the principle that
findings of fact of quasi-judicial bodies, like the
NLRC, are accorded with respect, even finality, if
supported by substantial evidence.[8] Particularly
when passed upon and upheld by the Court of
Appeals, they are binding and conclusive upon the
Supreme Court and will not normally be disturbed.[9]
This Court has invariably held that in ascertaining an
employer-employee relationship, the following factors
are considered: (a) the selection and engagement of
employee; (b) the payment of wages; (c) the power
of dismissal; and, (d) the power to control an
employee's conduct, the last being the most
important.[10] Application of the aforesaid criteria
clearly indicates an employer-employee relationship
between petitioner and the complainants.
Evidence discloses that petitioner played a large and
indispensable part in the hiring of MAERC's
workers. It also appears that majority of the
complainants had already been working for SMC
long before the signing of the service contract
between SMC and MAERC in 1988.
The incorporators of MAERC admitted having
supplied and recruited workers for SMC even before
MAERC was created.[11] The NLRC also found that
when MAERC was organized into a corporation in
February 1988, the complainants who were then
already working for SMC were made to go through
the motion of applying for work with Ms. Olga Ouano,
President and General Manager of MAERC, upon
the instruction of SMC through its supervisors to
make it appear that complainants were hired by
LABOR LAW
MAERC. This was testified to by two (2) of the
workers who were segregator and forklift operator
assigned to the Beer Marketing Division at the SMC
compound and who had been working with SMC
under a purported contractor Jopard Services since
March 1979 and March 1981, respectively. Both
witnesses also testified that together with other
complainants they continued working for SMC
without break from Jopard Services to MAERC.
As for the payment of workers' wages, it is conceded
that MAERC was paid in lump sum but records
suggest that the remuneration was not computed
merely according to the result or the volume of work
performed. The memoranda of the labor rates
bearing the signature of a Vice-President and
General Manager for the Vismin Beer
Operations[12] as well as a director of
SMC[13] appended to the contract of service reveal
that SMC assumed the responsibility of paying for
the mandated overtime, holiday and rest day pays of
the MAERC workers.[14] SMC also paid the
employer's share of the SSS and Medicare
contributions, the 13th month pay, incentive leave
pay and maternity benefits.[15] In the lump sum
received, MAERC earned a marginal amount
representing the contractors share. These lend
credence to the complaining workers' assertion that
while MAERC paid the wages of the complainants, it
merely acted as an agent of SMC.
Petitioner insists that the most significant determinant
of an employer-employee relationship, i.e., the right
to control, is absent. The contract of services
between MAERC and SMC provided that MAERC
was an independent contractor and that the workers
hired by it "shall not, in any manner and under any
circumstances, be considered employees of the
Company, and that the Company has no control or
supervision whatsoever over the conduct of the
Contractor or any of its workers in respect to how
they accomplish their work or perform the
Contractor's obligations under the Contract."[16]
In deciding the question of control, the language of
the contract is not determinative of the parties'
relationship; rather, it is the totality of the facts and
surrounding circumstances of each case.[17]
Despite SMCs disclaimer, there are indicia that it
actively supervised the complainants. SMC
maintained a constant presence in the workplace
through its own checkers. Its asseveration that the
checkers were there only to check the end result was
belied by the testimony of Carlito R. Singson, head of
the Mandaue Container Service of SMC, that the
checkers were also tasked to report on the identity of
the workers whose performance or quality of work
was not according to the rules and standards set by
SMC. According to Singson, "it (was) necessary to
identify the names of those concerned so that the
management [referring to MAERC] could call the
attention to make these people improve the quality of
work."[18]
Viewed alongside the findings of the Labor Arbiter
that the MAERC organizational set-up in the bottle
KAYE RAMOGA
segregation project was such that the
segregators/cleaners were supervised by checkers
and each checker was also under a supervisor who
was in turn under a field supervisor, the responsibility
of watching over the MAERC workers by MAERC
personnel became superfluous with the presence of
additional checkers from SMC.
Reinforcing the belief that the SMC exerted control
over the work performed by the segregators or
cleaners, albeit through the instrumentality of
MAERC, were letters by SMC to the MAERC
management. These were letters[19]written by a
certain Mr. W. Padin[20] addressed to the President
and General Manager of MAERC as well as to its
head of operations,[21] and a third letter[22] from Carlito
R. Singson also addressed to the President and
General Manager of MAERC. More than just a mere
written report of the number of bottles improperly
cleaned and/or segregated, the letters named three
(3) workers who were responsible for the rejection of
several bottles, specified the infraction committed in
the segregation and cleaning, then recommended
the penalty to be imposed. Evidently, these workers
were reported by the SMC checkers to the SMC
inspector.
While the Labor Arbiter dismissed these letters as
merely indicative of the concern in the end-result of
the job contracted by MAERC, we find more credible
the contention of the complainants that these were
manifestations of the right of petitioner to recommend
disciplinary measures over MAERC
employees. Although calling the attention of its
contractors as to the quality of their services may
reasonably be done by SMC, there appears to be no
need to instruct MAERC as to what disciplinary
measures should be imposed on the specific workers
who were responsible for rejections of bottles. This
conduct by SMC representatives went beyond a
mere reminder with respect to the improperly
cleaned/segregated bottles or a genuine concern in
the outcome of the job contracted by MAERC.
Control of the premises in which the contractor's
work was performed was also viewed as another
phase of control over the work, and this strongly
tended to disprove the independence of the
contractor.[23] In the case at bar, the bulk of the
MAERC segregation activities was accomplished at
the MAERC-owned PHILPHOS warehouse but the
building along with the machinery and equipment in
the facility was actually being rented by SMC. This is
evident from the memoranda of labor rates which
included rates for the use of forklifts and the
warehouse at the PHILPHOS area, hence, the
NLRCs conclusion that the payment for the rent was
cleverly disguised since MAERC was not in the
business of renting warehouses and forklifts.[24]
Other instances attesting to SMCs supervision of the
workers are found in the minutes of the meeting held
by the SMC officers on 5 December 1988. Among
those matters discussed were the calling of SMC
contractors to have workers assigned to segregation
to undergo and pass eye examination to be done by
SMC EENT company doctor and a review of
LABOR LAW
compensation/incentive system for segregators to
improve the segregation activities.[25]
But the most telling evidence is a letter by Mr.
Antonio Ouano, Vice-President of MAERC dated 27
May 1991 addressed to Francisco Eizmendi, SMC
President and Chief Executive Officer, asking the
latter to reconsider the phasing out of SMCs
segregation activities in Mandaue City. The letter
was not denied but in fact used by SMC to advance
its own arguments. [26]
Briefly, the letter exposed the actual state of affairs
under which MAERC was formed and engaged to
handle the segregation project of SMC. It provided
an account of how in 1987 Eizmendi approached the
would-be incorporators of MAERC and offered them
the business of servicing the SMC bottle-washing
and segregation department in order to avert an
impending labor strike. After initial reservations,
MAERC incorporators accepted the offer and before
long trial segregation was conducted by SMC at the
PHILPHOS warehouse.[27]
The letter also set out the circumstances under which
MAERC entered into the Contract of Services in
1988 with the assurances of the SMC President and
CEO that the employment of MAERC's services
would be long term to enable it to recover its
investments. It was with this understanding that
MAERC undertook borrowings from banking
institutions and from affiliate corporations so that it
could comply with the demands of SMC to invest in
machinery and facilities.
In sum, the letter attested to an arrangement entered
into by the two (2) parties which was not reflected in
the Contract of Services. A peculiar relationship
mutually beneficial for a time but nonetheless ended
in dispute when SMC decided to prematurely end the
contract leaving MAERC to shoulder all the
obligations to the workers.
Petitioner also ascribes as error the failure of the
Court of Appeals to apply the ruling in Neri v.
NLRC.[28] In that case, it was held that the law did not
require one to possess both substantial capital and
investment in the form of tools, equipment,
machinery, work premises, among others, to be
considered a job contractor. The second condition to
establish permissible job contracting[29] was
sufficiently met if one possessed either attribute.
Accordingly, petitioner alleged that the appellate
court and the NLRC erred when they declared
MAERC a labor-only contractor despite the finding
that MAERC had investments amounting
to P4,608,080.00 consisting of buildings, machinery
and equipment.
However, in Vinoya v. NLRC,[30] we clarified that it
was not enough to show substantial capitalization or
investment in the form of tools, equipment,
machinery and work premises, etc., to be considered
an independent contractor.In fact, jurisprudential
holdings were to the effect that in determining the
existence of an independent contractor relationship,
several factors may be considered, such as, but not
KAYE RAMOGA
necessarily confined to, whether the contractor was
carrying on an independent business; the nature and
extent of the work; the skill required; the term and
duration of the relationship; the right to assign the
performance of specified pieces of work; the control
and supervision of the workers; the power of the
employer with respect to the hiring, firing and
payment of the workers of the contractor; the control
of the premises; the duty to supply premises, tools,
appliances, materials and labor; and the mode,
manner and terms of payment.[31]
In Neri, the Court considered not only the fact that
respondent Building Care Corporation (BBC) had
substantial capitalization but noted that BCC carried
on an independent business and performed its
contract according to its own manner and method,
free from the control and supervision of its principal
in all matters except as to the results thereof.[32] The
Court likewise mentioned that the employees of BCC
were engaged to perform specific special services for
their principal.[33] The status of BCC had also been
passed upon by the Court in a previous case where it
was found to be a qualified job contractor because it
was "a big firm which services among others, a
university, an international bank, a big local bank, a
hospital center, government agencies,
etc." Furthermore, there were only two (2)
complainants in that case who were not only selected
and hired by the contractor before being assigned to
work in the Cagayan de Oro branch of FEBTC but
the Court also found that the contractor maintained
effective supervision and control over them.
In comparison, MAERC, as earlier discussed,
displayed the characteristics of a labor-only
contractor. Moreover, while MAERCs investments in
the form of buildings, tools and equipment amounted
to more than P4 Million, we cannot disregard the fact
that it was the SMC which required MAERC to
undertake such investments under the understanding
that the business relationship between petitioner and
MAERC would be on a long term basis. Nor do we
believe MAERC to have an independent
business. Not only was it set up to specifically meet
the pressing needs of SMC which was then having
labor problems in its segregation division, none of its
workers was also ever assigned to any other
establishment, thus convincing us that it was created
solely to service the needs of SMC. Naturally, with
the severance of relationship between MAERC and
SMC followed MAERCs cessation of operations, the
loss of jobs for the whole MAERC workforce and the
resulting actions instituted by the workers.
Petitioner also alleged that the Court of Appeals
erred in ruling that "whether MAERC is an
independent contractor or a labor-only contractor,
SMC is liable with MAERC for the latter's unpaid
obligations to MAERC's workers."
On this point, we agree with petitioner as distinctions
must be made. In legitimate job contracting, the law
creates an employer-employee relationship for a
limited purpose, i.e., to ensure that the employees
are paid their wages.[34]The principal employer
becomes jointly and severally liable with the job
LABOR LAW
contractor only for the payment of the employees'
wages whenever the contractor fails to pay the
same. Other than that, th peope principal employer is
not responsible for any claim made by the
employees.
On the other hand, in labor-only contracting, the
statute creates an employer-employee relationship
for a comprehensive purpose: to prevent a
circumvention of labor laws. The contractor is
considered merely an agent of the principal employer
and the latter is responsible to the employees of the
labor-only contractor as if such employees had been
directly employed by the principal employer. The
principal employer therefore becomes solidarily liable
with the labor-only contractor for all the rightful claims
of the employees.
This distinction between job contractor and labor-only
contractor, however, will not discharge SMC from
paying the separation benefits of the workers,
inasmuch as MAERC was shown to be a labor-only
contractor; in which case, petitioner's liability is that
of a direct employer and thus solidarily liable with
MAERC.
SMC also failed to comply with the requirement of
written notice to both the employees concerned and
the Department of Labor and Employment (DOLE)
which must be given at least one (1) month before
the intended date of retrenchment.[35] The fines
imposed for violations of the notice requirement have
varied.[36] The measure of this award depends on the
facts of each case and the gravity of the omission
committed by the employer.[37] For its failure,
petitioner was justly ordered to indemnify each
displaced worker P2,000.00.
The NLRC and the Court of Appeals affirmed the
Labor Arbiters award of separation pay to the
complainants in the total amount of P2,334,150.00
and of wage differentials in the total amount
of P845,117.00. These amounts are the aggregate of
the awards due the two hundred ninety-one (291)
complainants as computed by the Labor Arbiter. The
following is a summary of the computation of the
benefits due the complainants which is part of the
Decision of the Labor Arbiter.
SUMMARY
NAME SALARY SEPARATION TOTAL
DIFFERENTIAL PAY
Case No. O6-1165-91 = 290 EEs
TOTAL P391,424.00 P1,138,410.00 P1,529,834.00
RECAP
CASE NO. SALARY SEPARATION TOTAL
DIFFERENTIAL PAY
GRAND
TOTAL P845,117.00 P2,334,150.00 P3,179,267.00
KAYE RAMOGA
However, certain matters have cropped up which
require a review of the awards to some complainants
and a recomputation by the Labor Arbiter of the total
amounts.
A scrutiny of the enumeration of all the complainants
shows that some names38 appear twice by virtue of
their being included in two (2) of the nine (9)
consolidated cases. A check of the Labor Arbiters
computation discloses that most of these names
were awarded different amounts of separation pay or
wage differential in each separate case where they
were impleaded as parties because the allegations of
the length and period of their employment for the
separate cases, though overlapping, were also
different. The records before us are incomplete and
do not aid in verifying whether these names belong
to the same persons but at least three (3) of those
names were found to have identical signatures in the
complaint forms they filed in the separate cases. It is
likely therefore that the Labor Arbiter erroneously
granted some complainants separation benefits and
wage differentials twice. Apart from this, we also
discovered some names that are almost identical.39 It
is possible that the minor variance in the spelling of
some names may have been a typographical error
and refer to the same persons although the records
seem to be inconclusive.
Furthermore, one of the original complainants40 was
inadvertently omitted by the Labor Arbiter from his
computations.41 The counsel for the complainants
promptly filed a motion for
inclusion/correction42 which motion was treated as an
appeal of the Decision as the Labor Arbiter was
prohibited by the rules of the NLRC from entertaining
any motion at that stage of the proceedings.43 The
NLRC for its part acknowledged the omission44 but
both the Commission and subsequently the Court of
Appeals failed to rectify the oversight in their
decisions.
LABOR LAW
Finally, the NLRC ordered both MAERC and SMC to
pay P84,511.70 in attorneys fees which is ten
percent (10%) of the salary differentials awarded to
the complainants in accordance with Art. 111 of the
Labor Code. The Court of Appeals also affirmed the
award. Consequently, with the recomputation of the
salary differentials, the award of attorneys fees must
also be modified.
WHEREFORE, the petition is DENIED. The assailed
Decision of the Court of Appeals dated 28 April 2000
and the Resolution dated 26 July 2000
are AFFIRMED with MODIFICATION. Respondent
Maerc Integrated Services, Inc. is declared to be a
labor-only contractor. Accordingly, both petitioner
San Miguel Corporation and respondent Maerc
Integrated Services, Inc., are ordered to jointly and
severally pay complainants (private respondents
herein) separation benefits and wage differentials as
may be finally recomputed by the Labor Arbiter as
herein directed, plus attorneys fees to be computed
on the basis of ten percent (10%) of the amounts
which complainants may recover pursuant to Art. 111
of the Labor Code, as well as an indemnity fee
of P2,000.00 to each complainant.
The Labor Arbiter is directed to review and
recompute the award of separation pays and wage
differentials due complainants whose names appear
twice or are notably similar, compute the monetary
award due to complainant Niel Zanoria whose name
was omitted in the Labor Arbiters Decision and
immediately execute the monetary awards as found
in the Labor Arbiters computations insofar as those
complainants whose entitlement to separation pay
and wage differentials and the amounts thereof are
no longer in question. Costs against petitioner.
SO ORDERED.
KAYE RAMOGA
G.R. No. 184977 December 7, 2009
COCA-COLA BOTTLERS PHILIPPINES, INC., vs RICKY E. DELA CRUZ, ROLANDO M. GUASIS, MANNY C.
PUGAL, RONNIE L. HERMO, ROLANDO C. SOMERO, JR., DIBSON D. DIOCARES, and IAN B. ICHAPARE,
BRION, J.:
The present petition for review
on certiorari[1] challenges the decision[2] and
resolution[3] of the Court of Appeals (CA) rendered
on August 29, 2008 and October 13, 2008,
respectively, in CA-G.R. SP No. 102988.
THE ANTECEDENTS
Respondents Ricky E. Dela Cruz, Rolando M.
Guasis, Manny C. Pugal, Ronnie L. Hermo,
Rolando C. Somero, Jr., Dibson D. Diocares, and
Ian Ichapare (respondents) filed in July 2000 two
separate complaints[4] for regularization with money
claims against Coca-Cola Bottlers Philippines, Inc.,
(petitioner or the company). The complaints were
consolidated and subsequently amended to implead
Peerless Integrated Service, Inc. (Peerless) as a
party-respondent.
Before the Labor Arbiter, the respondents alleged
that they are route helpers assigned to work in the
petitioners trucks. They go from the Coca- Cola sales
offices or plants to customer outlets such as sari-sari
stores, restaurants, groceries, supermarkets and
similar establishments; they were hired either directly
by the petitioner or by its contractors, but they do not
enjoy the full remuneration, benefits and privileges
granted to the petitioners regular sales force. They
argued that the services they render are necessary
and desirable in the regular business of the
petitioner.[5]
In defense, the petitioner contended that it entered
into contracts of services with Peerless[6] and
Excellent Partners Cooperative, Inc. (Excellent)[7] to
provide allied services; under these contracts,
Peerless and Excellent retained the right to select,
hire, dismiss, supervise, control and discipline and
pay the salaries of all personnel they assign to the
petitioner; in return for these services, Peerless and
Excellent were paid a stipulated fee. The petitioner
posited that there is no employer-employee
relationship between the company and the
respondents and the complaints should be dismissed
for lack of jurisdiction on the part of the National
Labor Relations Commission (NLRC). Peerless did
not file a position paper, although nothing on record
indicates that it was ever notified of the amended
complaint.
In reply, the respondents countered that they
worked under the control and supervision of the
companys supervisors who prepared their work
schedules and assignments. Peerless and
Excellent, too, did not have sufficient capital or
investment to provide services to the petitioner. The
respondents thus argued that the petitioners
contracts of services with Peerless and Excellent
are in the nature of labor-only contracts prohibited
by law.[8]
LABOR LAW
In rebuttal, the petitioner belied the respondents
submission that their jobs are usually necessary
and desirable in its main business. It claimed that
its main business is softdrinks manufacturing and
the respondents tasks of handling, loading and
unloading of the manufactured softdrinks are not
part of the manufacturing process. It stressed that
its only interest in the respondents is in the result
of their work, and left to them the means and the
methods of achieving this result. It thus argued
that there is no basis for the respondents claim
that without them, there would be over-production
in the company and its operations would come to a
halt.[9] The petitioner lastly argued that in any case,
the respondents did not present evidence in
support of their claims of company control and
supervision so that these claims cannot be
considered and given weight.[10]
THE COMPULSORY ARBITRATION RULINGS
Labor Arbiter Joel S. Lustria dismissed the
complaint for lack of jurisdiction in his decision
of September 28, 2004,[11] after finding that the
respondents were the employees of either
Peerless or Excellent and not of the petitioner. He
brushed aside for lack of evidence the
respondents claim that they were directly hired by
the petitioner and that company personnel
supervised and controlled their work. The Labor
Arbiter likewise ordered Peerless to accord to the
appropriate complainants all employment benefits
and privileges befitting its regular employees.[12]
The respondents appealed to the
NLRC.[13] On October 31, 2007, the NLRC denied
the appeal and affirmed the labor arbiters
ruling,[14] and subsequently denied the
respondents motion for reconsideration.[15] The
respondents thus sought relief from the CA
through a petition for certiorari under Rule 65 of
the Rules of Court.
THE CA DECISION
The main substantive issue the parties submitted
to the CA was whether Excellent and Peerless
were independent contractors or labor-only
contractors. Procedurally, the petitioner
questioned the sufficiency of the petition and
asked for its dismissal on the following grounds:
(1) the petition was filed out of time; (2) failure to
implead Peerless and Excellent as necessary
parties; (3) absence of the notarized proof of
service that Rule 13 of the Rules of Court requires;
and (4) defective verification and certification.
The CA examined the circumstances of the
contractual arrangements between Peerless and
Excellent, on the one hand, and the company, on
the other, and found that Peerless and Excellent
were engaged in labor-only contracting, a
prohibited undertaking.[16] The appellate court
explained that based on the respondents
KAYE RAMOGA
assertions and the petitioners admissions, the
contractors simply supplied the company with
manpower, and that the sale and distribution of the
companys products are the same allied services
found by this Court in Magsalin v. National
Organization of Workingmen[17] to be necessary
and desirable functions in the companys business.
On the matter of capitalization, the CA invoked our
ruling in 7K Corporation v. NLRC[18] presuming a
contractor supplying labor to be engaged in
prohibited labor-only contracting, unless the
contractor can show that it has substantial capital,
investment, and tools to undertake the contract.
The CA found no proof in the records showing the
required capitalization and tools; thus, the CA
concluded that Peerless and Excellent were
engaged in labor-only contracting.
The CA faulted the labor tribunals for relying solely
on the contract of services in determining who the
real employer is. Again invoking our 7K
Corporation ruling, it pointed out that the language
of a contract is not wholly determinative of the
relationship of the parties; whether a labor-only or
a job contractor relationship exists must be
determined using the criteria established by
law. Finding that the Labor Arbiters and the
NLRCs conclusions were not supported by
substantial evidence, the CA nullified the
challenged NLRC decision and ordered the
company to reinstate the petitioners with the full
status and rights of regular employees and to
grant them all benefits as provided by existing
collective bargaining agreement or by law.
The CA generally brushed aside the companys
procedural questions.
It ruled that the petition was filed on time, noting
that April 7, 2008, a Monday and the last day for
filing the petition, was declared a holiday in lieu of
April 9 (Araw ng Kagitingan), a Wednesday,[19] and
that the petition was filed on April 8, 2008, a
Tuesday and a working day.
That the contractors were not impleaded as
necessary parties was not a fatal infirmity,
according to the CA, relying on the ruling of the
Court in Cabutihan v. Landcenter Construction and
Development Corporation.[20] On the other hand,
the alleged lack of proof of service was brushed
aside on the finding that there is in the records of
the case (page 35 of the petition) an affidavit of
service executed by Rufino San Antonio indicating
compliance with the rule on service. Finally, the
CA ruled that the defect in the verification and
certification was a mere formal requirement that
can be excused in the interest of substantial
justice, following the ruling of this Court in Uy v.
Landbank of the Philippines.[21]
Petitioner moved for reconsideration of the
decision, but the CA denied the motion in its
resolution of October 13, 2008.[22]
LABOR LAW
THE PETITION
The company filed the present appeal on November
4, 2008 on the grounds that the CA erred when it:[23]
1. gave due course to the petition despite the
failure of the respondents to comply with the
Rules on Notarial Practice in its verification
and certification;
2. excluded the contractors as necessary
parties in violation of Section 8, Rule 3, in
relation with Section 5, Rule 65 of the Rules
of Court; and
3. refused to follow established jurisprudence
holding that the findings of fact of the NLRC
are accorded respect, if not finality, when
supported by substantial evidence.
On the notarial issue, the petitioner argues that Rule
65 of the Rules of Court requires that a petition filed
before the CA must be verified and accompanied
with a properly notarized certification of non-forum
shopping. It claims that the verification and
certification accompanying the petition were not
notarized as required by Section 12, Rule II of the
2004 Rules on Notarial Practice (for failure to
present competent evidence of identity) and Section
2, Rule IV (prohibition against the
notarization without appropriate proof of identity);
the verification and certification attached to the
petition before the CA do not indicate that the
affiants were personally known to the notary public,
nor did the notary identify the affiants through
competent evidence of identity other than their
community tax certificate. These violations,
according to the petitioner, collectively resulted in a
petition filed without the proper verification and
certification required by Section 4, Rule 7 of the
Rules of Court.
On the necessary party issue, the petitioner posits
that the CA ruling excluding the contractors as
necessary parties results in the absurd situation
whereby the grant of regularization by the Labor
Arbiter in favor of the respondents and against the
contractors, is actually the same award the CA held
in their favor and against the Company thereby
making them regular employees of both the
Company and the contractors, a situation which is
precisely what Section 8, Rule 3, in relation to
Section 5, Rule 65 of the Rules of Court seeks to
prevent.
The petitioner also takes exception to the CAs
reliance on the ruling of the Court in Cabutihan v.
Landcenter Construction and Development
Corporation.[24] It posits that the ruling
in Cabutihan was taken out of context; in that case,
the subject matter was divisible as it pertained to
the conveyance of 36.5% of the property under
litigation or, in the alternative, to the value
corresponding to this portion. On this fact situation,
the Court found that the non-joinder of the
companions of the petitioner as party-litigants was
not prejudicial to their rights.
KAYE RAMOGA
In the present case, the petitioner posits that
supposed cause of action (for regularization of the
respondents) and the issue of employer-employee
relationship cannot be ruled upon without including
the parties who had already been held liable by the
NLRC. It adds that as a result of the CA ruling, the
respondents are now regular employees of both the
petitioner and the contractors.
In their comment of March 4, 2009,[25] the
respondents, aside from the reiteration of their
previously expressed positions on necessary
parties and the labor-only contracting issues,
argued that the rules of procedure are not
controlling in labor cases and that every and all
the reasonable means shall be used to ascertain
the facts for the full adjudication of the merits of
the case. They argue that it is more in accord with
substantial justice and equity to overlook
procedural questions raised.
THE COURTS RULING
We resolve to deny the petition for lack of merit.
The Notarial Issue.
After due consideration, we deem the respondents
to have substantially complied with the verification
and certification requirements in their petition for
certiorari before the CA.
We find from our examination of the records that the
fact situation that gave rise to the notarial issue
before the CA was not a new one; the same
situation obtained before the NLRC where the
verification and certification of the respondents
appeal were also notarized before the same notary
public Diosdado V. Macapagal and where the
respondents presented the same evidence of
identity (their community tax certificates).[26]
The petitioners belated attention to the imputed
defect indicates to us that the petitioner did not
consider this defect worth raising when things were
going its way, but considered it a serious one when
things turned the other way. This opportunistic
stance is not our idea of how technical deficiencies
should be viewed. We are aware, too, that under
the circumstances of this case, the defect is a
technical and minor one; the respondents did file
the required verification and certification of non-
forum shopping with all the respondents properly
participating, marred only by a glitch in the evidence
of their identity.[27] In the interest of justice, this
minor defect should not defeat their petition and is
one that we can overlook in the interest of
substantial justice, taking into account the merits of
the case as discussed below.
The Necessary Party Issue.
In our view, the petitioners necessary party issue
proceeds from a misapprehension of the
relationships in a contracting relationship. As lucidly
pointed out in Azucenas The Labor Code with
LABOR LAW
Comments and Cases,[28] there are three parties in
a legitimate contracting relationship, namely: the
principal, the contractor, and the contractors
employees. In this trilateral relationship, the
principal controls the contractor and his employees
with respect to the ultimate results or output of the
contract; the contractor, on the other hand, controls
his employees with respect, not only to the results
to be obtained, but with respect to the means and
manner of achieving this result. This pervasive
control by the contractor over its employees results
in an employer-employee relationship between
them.
This trilateral relationship under a legitimate job
contracting is different from the relationship in a
labor-only contracting situation because in the latter,
the contractor simply becomes an agent of the
principal; either directly or through the agent, the
principal then controls the results as well as the
means and manner of achieving the desired
results. In other words, the party who would have
been the principal in a legitimate job contracting
relationship and who has no direct relationship with
the contractor's employees, simply becomes the
employer in the labor-only contracting situation with
direct supervision and control over the contracted
employees. As Azucena astutely observed: in labor-
contracting, there is really no contracting and no
contractor; there is only the employers
representative who gathers and supplies people for
the employer; labor-contracting is therefore a
misnomer.[29]
Where, as in this case, the main issue is labor
contracting and a labor-only contracting situation is
found to exist as discussed below, the question of
whether or not the purported contractors are
necessary parties is a non-issue; these purported
contractors are mere representatives of the
principal/employer whose personality, as against
that of the workers, is merged with that of the
principal/employer. Thus, this issue is rendered
academic by our conclusion that labor-only
contracting exists. Our labor-only contracting
conclusion, too, answers the petitioners argument
that confusion results because the workers will have
two employers.
The Contracting Out Issue.
Contracting and sub-contracting are hot labor
issues for two reasons. The first is that job
contracting and labor-only contracting are technical
Labor Code concepts that are easily
misunderstood. For one, there is a lot of lay
misunderstanding of what kind of contracting the
Labor Code prohibits or allows. The second,
echoing the cry from the labor sector, is that the
Labor Code provisions on contracting are blatantly
and pervasively violated, effectively defeating
workers right to security of tenure.
This Court, through its decisions, can directly help
address the problem of misunderstanding. The
second problem, however, largely relates to
implementation issues that are outside the Courts
KAYE RAMOGA LABOR LAW

legitimate scope of activities; the Court can only i) The contractor or

passively address the problem through the cases
that are brought before us. Either way, however, the
need is for clear decisions that the workers, most
especially, will easily understand and
appreciate. We resolve the present case with these
thoughts in mind.
The law allows contracting and subcontracting
involving services but closely regulates these
activities for the protection of workers. Thus, an
employer can contract out part of its operations,
provided it complies with the limits and standards
provided in the Code and in its implementing rules.
The directly applicable provision of the Labor Code
on contracting and subcontracting is Article 106
which provides:
Whenever, an employer enters into a
contract with another person for the
performance of the formers work, the
employees of the contractor and of the
latters subcontractor shall be paid in
accordance with the provisions of this Code.
The Secretary of Labor may, by appropriate
regulations, restrict or prohibit the
contracting out of labor to protect the rights
of workers established under this Code. In
so prohibiting or restricting, he may make
appropriate distinctions between labor-only
contracting and job contracting as well as
differentiations within these types of
contracting and determine who among the
parties involved shall be considered the
employer for purposes of this Code.
There is labor-only contracting where the
person supplying workers to an employer
does not have substantial capital or
investment in the form of tools, equipment,
machineries, work premises, among others,
and the workers recruited and placed by
such persons are performing activities which
are directly related to the principal business
of such employer. In such cases, the person
or intermediary shall be considered merely
as an agent of the employer who shall be
responsible to the workers in the same
manner and extent as if the alter were
directly employed by him (underscoring
supplied).
The Department of Labor and Employment
implements this Labor Code provision through its
Department Order No. 18-02 (D.O. 18-02).[30] On
the matter of labor-only contracting, Section 5
thereof provides:
Prohibition against labor-only contracting. -
Labor-only contracting is hereby declared
prohibited x x x labor-only contracting shall
refer to an arrangement where the contractor
or subcontractor merely recruits, supplies or
places workers to perform a job, work or
service for a principal, and any of the
following elements are present:
subcontractor does not have
sufficient capital or
investment which relates to
the job, work or service to be
performed and the
employees recruited,
supplied or placed by such
contractor or subcontractor
are performing activities
which are directly related to
the main business of the
principal; or
ii) The contractor does not
exercise the right to
control over the performance
of the work of the
contractual-employee.
Substantial capital or investment refers to
capital stocks and subscribed
capitalization in the case of corporations,
tools or equipment, implements,
machineries and work premises, actually
and directly used by the contractor or
subcontractor in the performance or
completion of the job, work or service
contracted out. [Emphasis supplied]
The right to control refers to the prerogative of a
party to determine, not only the end result sought to
be achieved, but also the means and manner to be
used to achieve this end.
In strictly laymans terms, a manufacturer can sell its
products on its own, or allow contractors,
independently operating on their own, to sell and
distribute these products in a manner that does not
violate the regulations.From the terms of the above-
quoted D.O. 18-02, the legitimate job contractor
must have the capitalization and equipment to
undertake the sale and distribution of the
manufacturers products, and must do it on its own
using its own means and selling methods.
In the present case, both the capitalization of
Peerless and Excellent and their control over the
means and manner of their operations are live sub-
issues before us.
A key consideration in resolving these issues is the
contract between the company and the purported
contractors. The contract[31] with Peerless, which is
almost identical with the contract with Excellent,
among others, states:
1. The CONTRACTOR agrees and
undertakes to perform and/or provide for the
COMPANY, on a non-exclusive basis, the
services of contractual employees for a
temporary period for task or activities that
are considered contractible under DOLE
Department Order No. 10, Series of 1 997,
such as lead helpers and replacement for
absences as well as other contractible jobs
that may be needed by the Company from
time to time.[32]
KAYE RAMOGA
5. The CONTRACTOR shall have exclusive
discretion in the selection, engagement and
discharge of its personnel, employees or
agents or otherwise in the direction and
control hereunder. The determination of the
wages, salaries and compensation of the
personnel, workers and employees of the
CONTRACTOR shall be within its full
control.[33] x x x x
. . . Although it is understood and agreed
between the parties hereto that the
CONTRACTOR, in the performance of its
obligations hereunder, is subject to the
control and direction of he COMPANY
merely as to result to be accomplished by
the work or services herein specified, and
not as to the means and methods of
accomplishing such result, the
CONTRACTOR hereby warrants that it will
perform such work or services in such
manner as will be consistent with the
achievement of the result herein contracted
for.[34]
These provisions particularly, that Peerless and
Excellent retain the right to select, hire, dismiss,
supervise, control, and discipline all personnel they
will assign to the petitioner, as well as pay their
salaries were cited by the labor arbiter and the
NLRC as basis for their conclusion that no
employer-employee relationship existed between
the respondents and the petitioner.
The Court of Appeals viewed matters differently and
faulted the labor tribunals for relying solely on the
service contracts to prove that the respondents
were employees of Peerless and Excellent. The CA
cited in this regard what we said in 7K Corporation
v. NLRC:[35]
The fact that the service contract entered
into by petitioner and Universal stipulated
that private respondents shall be the
employees of Universal, would not help
petitioner, as the language of a contract is
not determinative of the relationship of the
parties. Petitioner and Universal cannot
dictate, by the mere expedient of a
declaration in a contract, the character of
Universal business, i.e., whether as labor-
only contractor , or job contractor, it being
crucial that Universals character be
mentioned in terms of and determined by
the criteria set by the statute.[36]
as basis for looking at how the contracted workers
really related with the company in performing their
contracted tasks. In other words, the contract
between the principal and the contractor is not the
final word on how the contracted workers relate to
the principal and the purported contractor; the
relationships must be tested on the basis of how
they actually operate.
Even before going into the realities of workplace
operations, the CA found that the service
contracts[37] themselves provide ample leads into
LABOR LAW
the relationship between the company, on the one
hand, and Peerless and Excellent, on the other. The
CA noted that both the Peerless and the Excellent
contracts show that their obligation was solely to
provide the company with the services of
contractual employees,[38] and nothing more. These
contracted services were for the handling and
delivery of the companys products and allied
services.[39] Following D.O. 18-02 and the contracts
that spoke purely of the supply of labor, the CA
concluded that Peerless and Excellent were labor-
only contractors unless they could prove that they
had the required capitalization and the right of
control over their contracted workers.
The CA concluded that other than the petitioners
bare allegation, there is no indication in the records
that Peerless and Excellent had substantial capital,
tools or investment used directly in providing the
contracted services to the petitioner. Thus, in the
handling and delivery of company products, the
contracted personnel used company trucks and
equipment in an operation where company sales
personnel primarily handled sales and distribution,
merely utilizing the contracted personnel as sales
route helpers.
In plainer terms, the contracted personnel (acting as
sales route helpers) were only engaged in the
marginal work of helping in the sale and distribution
of company products; they only provided the muscle
work that sale and distribution required and were
thus necessarily under the companys control and
supervision in doing these tasks.
Still another way of putting it is that the contractors
were not independently selling and distributing
company products, using their own equipment,
means and methods of selling and distribution; they
only supplied the manpower that helped the
company in the handing of products for sale and
distribution. In the context of D.O. 18-02, the
contracting for sale and distribution as an
independent and self-contained operation is a
legitimate contract, but the pure supply of
manpower with the task of assisting in sales and
distribution controlled by a principal falls within
prohibited labor-only contracting.
The role of sales route helpers in company
operations is not a new issue before this Court as
we have ruled on this issue in Magsalin v. National
Organization of Workingmen[40] which the CA itself
cited in the assailed decision. We held in this cited
case that:
The argument of petitioner that its usual
business or trade is softdrink
manufacturing and that the work assigned
to the respondent workers so involves
merely postproduction activities, one
which is not indispensable in the
manufacture of its products, scarcely can
be persuasive. If, as so argued by
petitioner company, only those whose
work are directly involved in the
production of softdrinks may be held
KAYE RAMOGA
performing functions necessary and
desirable in its usual business or trade,
there would have been no need for it to
even maintain regular truck sales route
helpers. The nature of the work performed
must be viewed from a perspective of the
business or trade in its entirety and not
only in a confined scope.[41]
While the respondents were not direct parties to this
ruling, the petitioner was the party involved
and Magsalin described in a very significant way the
manufacture of softdrinks and the companys sales
and distribution activities in relation with one
another. Following the lead we gave in Magsalin,
the CA concluded that the contracted personnel
who served as route helpers were really engaged in
functions directly related to the overall business of
the petitioner. This led to the further CA conclusion
that the contracted personnel were under the
companys supervision and control since sales and
distribution were in fact not the purported
contractors independent, discrete and separable
activities, but were component parts of sales and
LABOR LAW
distribution operations that the company controlled
in its softdrinks business.
Based on these considerations, we fully agree with
the CA that Peerless and Excellent were mere
suppliers of labor who had no sufficient
capitalization and equipment to undertake sales and
distribution of softdrinks as independent activities
separate from the manufacture of softdrinks, and
who had no control and supervision over the
contracted personnel. They are therefore labor-only
contractors. Consequently, the contracted
personnel, engaged in component functions in the
main business of the company under the latters
supervision and control, cannot but be regular
company employees. In these lights, the petition is
totally without merit and hence must be denied.
WHEREFORE, premises considered, we
hereby DENY the petition and
accordingly AFFIRM the challenged decision and
resolution of the Court of Appeals in CA-G.R. SP
No. 102988. Costs against the petitioner.
SO ORDERED.
KAYE RAMOGA
G.R. No. 170054 January 21, 2013
GOYA, INC., Petitioner, vs. GOYA, INC. EMPLOYEES UNION-FFW, Respondent.
PERALTA, J.:
This petition for review on certiorari under Rule 45 of
the Rules of Civil Procedure seeks to reverse and set
aside the June 16, 2005 Decision1 and October 12,
2005 Resolution2 of the Court of Appeals in CA-G.R.
SP No. 87335, which sustained the October 26, 2004
Decision3 of Voluntary Arbitrator Bienvenido E.
Laguesma, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered
declaring that the Company is NOT guilty of unfair
labor practice in engaging the services of PESO.
The company is, however, directed to observe and
comply with its commitment as it pertains to the
hiring of casual employees when necessitated by
business circumstances.4
The facts are simple and appear to be undisputed.
Sometime in January 2004, petitioner Goya, Inc.
(Company), a domestic corporation engaged in the
manufacture, importation, and wholesale of top
quality food products, hired contractual employees
from PESO Resources Development Corporation
(PESO) to perform temporary and occasional
services in its factory in Parang, Marikina City. This
prompted respondent Goya, Inc. Employees Union–
FFW (Union) to request for a grievance conference
on the ground that the contractual workers do not
belong to the categories of employees stipulated in
the existing Collective Bargaining Agreement
(CBA).5 When the matter remained unresolved, the
grievance was referred to the National Conciliation
and Mediation Board (NCMB) for voluntary
arbitration.
During the hearing on July 1, 2004, the Company
and the Union manifested before Voluntary Arbitrator
(VA) Bienvenido E. Laguesma that amicable
settlement was no longer possible; hence, they
agreed to submit for resolution the solitary issue of
"[w]hether or not the Company is guilty of unfair labor
acts in engaging the services of PESO, a third party
service provider, under the existing CBA, laws, and
jurisprudence."6 Both parties thereafter filed their
respective pleadings.
The Union asserted that the hiring of contractual
employees from PESO is not a management
prerogative and in gross violation of the CBA
tantamount to unfair labor practice (ULP). It noted
that the contractual workers engaged have been
assigned to work in positions previously handled by
regular workers and Union members, in effect
violating Section 4, Article I of the CBA, which
provides for three categories of employees in the
Company, to wit:
Section 4. Categories of Employees.– The parties
agree on the following categories of employees:
(a) Probationary Employee. – One hired to occupy a
regular rank-and-file position in the Company and is
LABOR LAW
serving a probationary period. If the probationary
employee is hired or comes from outside the
Company (non-Goya, Inc. employee), he shall be
required to undergo a probationary period of six (6)
months, which period, in the sole judgment of
management, may be shortened if the employee has
already acquired the knowledge or skills required of
the job. If the employee is hired from the casual pool
and has worked in the same position at any time
during the past two (2) years, the probationary period
shall be three (3) months.
(b) Regular Employee. – An employee who has
satisfactorily completed his probationary period and
automatically granted regular employment status in
the Company.
(c) Casual Employee, – One hired by the Company
to perform occasional or seasonal work directly
connected with the regular operations of the
Company, or one hired for specific projects of limited
duration not connected directly with the regular
operations of the Company.
It was averred that the categories of employees had
been a part of the CBA since the 1970s and that due
to this provision, a pool of casual employees had
been maintained by the Company from which it hired
workers who then became regular workers when
urgently necessary to employ them for more than a
year. Likewise, the Company sometimes hired
probationary employees who also later became
regular workers after passing the probationary
period. With the hiring of contractual employees, the
Union contended that it would no longer have
probationary and casual employees from which it
could obtain additional Union members; thus,
rendering inutile Section 1, Article III (Union Security)
of the CBA, which states:
Section 1. Condition of Employment. – As a condition
of continued employment in the Company, all regular
rank-and-file employees shall remain members of the
Union in good standing and that new employees
covered by the appropriate bargaining unit shall
automatically become regular employees of the
Company and shall remain members of the Union in
good standing as a condition of continued
employment.
The Union moreover advanced that sustaining the
Company’s position would easily weaken and
ultimately destroy the former with the latter’s resort to
retrenchment and/or retirement of employees and not
filling up the vacant regular positions through the
hiring of contractual workers from PESO, and that a
possible scenario could also be created by the
Company wherein it could "import" workers from
PESO during an actual strike.
In countering the Union’s allegations, the Company
argued that: (a) the law expressly allows contracting
and subcontracting arrangements through
Department of Labor and Employment (DOLE) Order
No. 18-02; (b) the engagement of contractual
KAYE RAMOGA
employees did not, in any way, prejudice the Union,
since not a single employee was terminated and
neither did it result in a reduction of working hours
nor a reduction or splitting of the bargaining unit; and
(c) Section 4, Article I of the CBA merely provides for
the definition of the categories of employees and
does not put a limitation on the Company’s right to
engage the services of job contractors or its
management prerogative to address
temporary/occasional needs in its operation.
On October 26, 2004, VA Laguesma dismissed the
Union’s charge of ULP for being purely speculative
and for lacking in factual basis, but the Company was
directed to observe and comply with its commitment
under the CBA. The VA opined:
We examined the CBA provision Section 4, Article I
of the CBAallegedly violated by the Company and
indeed the agreement prescribes three (3) categories
of employees in the Company and provides for the
definition, functions and duties of each. Material to
the case at hand is the definition as regards the
functions of a casual employee described as follows:
Casual Employee – One hired by the COMPANY to
perform occasional or seasonal work directly
connected with the regular operations of the
COMPANY, or one hired for specific projects of
limited duration not connected directly with the
regular operations of the COMPANY.
While the foregoing agreement between the parties
did eliminate management’s prerogative of
outsourcing parts of its operations, it serves as a
limitation on such prerogative particularly if it involves
functions or duties specified under the aforequoted
agreement. It is clear that the parties agreed that in
the event that the Company needs to engage the
services of additional workers who will perform
"occasional or seasonal work directly connected with
the regular operations of the COMPANY," or "specific
projects of limited duration not connected directly
with the regular operations of the COMPANY", the
Company can hire casual employees which is akin to
contractual employees. If we note the Company’s
own declaration that PESO was engaged to perform
"temporary or occasional services" (See the
Company’s Position Paper, at p. 1), then it should
have directly hired the services of casual employees
rather than do it through PESO.
It is evident, therefore, that the engagement of PESO
is not in keeping with the intent and spirit of the CBA
provision in question. It must, however, be stressed
that the right of management to outsource parts of its
operations is not totally eliminated but is merely
limited by the CBA. Given the foregoing, the
Company’s engagement of PESO for the given
purpose is indubitably a violation of the CBA.7
While the Union moved for partial reconsideration of
the VA Decision,8 the Company immediately filed a
petition for review9 before the Court of Appeals (CA)
under Rule 43 of the Revised Rules of Civil
Procedure to set aside the directive to observe and
comply with the CBA commitment pertaining to the
hiring of casual employees when necessitated by
LABOR LAW
business circumstances. Professing that such order
was not covered by the sole issue submitted for
voluntary arbitration, the Company assigned the
following errors:
THE HONORABLE VOLUNTARY ARBITRATOR
EXCEEDED HIS POWER WHICH WAS
EXPRESSLY GRANTED AND LIMITED BY BOTH
PARTIES IN RULING THAT THE ENGAGEMENT
OF PESO IS NOT IN KEEPING WITH THE INTENT
AND SPIRIT OF THE CBA.10
THE HONORABLE VOLUNTARY ARBITRATOR
COMMITTED A PATENT AND PALPABLE ERROR
IN DECLARING THAT THE ENGAGEMENT OF
PESO IS NOT IN KEEPING WITH THE INTENT
AND SPIRIT OF THE CBA.11
On June 16, 2005, the CA dismissed the petition. In
dispensing with the merits of the controversy, it held:
This Court does not find it arbitrary on the part of the
Hon. Voluntary Arbitrator in ruling that "the
engagement of PESO is not in keeping with the
intent and spirit of the CBA." The said ruling is
interrelated and intertwined with the sole issue to be
resolved that is, "Whether or not the Company is
guilty of unfair labor practice in engaging the services
of PESO, a third party service provider, under
existing CBA, laws, and jurisprudence." Both issues
concern the engagement of PESO by the Company
which is perceived as a violation of the CBA and
which constitutes as unfair labor practice on the part
of the Company. This is easily discernible in the
decision of the Hon. Voluntary Arbitrator when it held:
x x x x While the engagement of PESO is in violation
of Section 4, Article I of the CBA, it does not
constitute unfair labor practice as it (sic) not
characterized under the law as a gross violation of
the CBA. Violations of a CBA, except those which
are gross in character, shall no longer be treated as
unfair labor practice. Gross violations of a CBA
means flagrant and/or malicious refusal to comply
with the economic provisions of such agreement. x x
Anent the second assigned error, the Company
contends that the Hon. Voluntary Arbitrator erred in
declaring that the engagement of PESO is not in
keeping with the intent and spirit of the CBA. The
Company justified its engagement of contractual
employees through PESO as a management
prerogative, which is not prohibited by law. Also, it
further alleged that no provision under the CBA limits
or prohibits its right to contract out certain services in
the exercise of management prerogatives.
Germane to the resolution of the above issue is the
provision in their CBA with respect to the categories
of the employees: x x x x
A careful reading of the above-enumerated
categories of employees reveals that the PESO
contractual employees do not fall within the
enumerated categories of employees stated in the
CBA of the parties. Following the said categories, the
Company should have observed and complied with
the provision of their CBA. Since the Company had
KAYE RAMOGA
admitted that it engaged the services of PESO to
perform temporary or occasional services which is
akin to those performed by casual employees, the
Company should have tapped the services of casual
employees instead of engaging PESO.
In justifying its act, the Company posits that its
engagement of PESO was a management
prerogative. It bears stressing that a management
prerogative refers to the right of the employer to
regulate all aspects of employment, such as the
freedom to prescribe work assignments, working
methods, processes to be followed, regulation
regarding transfer of employees, supervision of their
work, lay-off and discipline, and dismissal and recall
of work, presupposing the existence of employer-
employee relationship. On the basis of the foregoing
definition, the Company’s engagement of PESO was
indeed a management prerogative. This is in
consonance with the pronouncement of the Supreme
Court in the case of Manila Electric Company vs.
Quisumbing where it ruled that contracting out of
services is an exercise of business judgment or
management prerogative.
This management prerogative of contracting out
services, however, is not without limitation. In
contracting out services, the management must be
motivated by good faith and the contracting out
should not be resorted to circumvent the law or must
not have been the result of malicious arbitrary
actions. In the case at bench, the CBA of the parties
has already provided for the categories of the
employees in the Company’sestablishment. These
categories of employees particularly with respect to
casual employees serve as limitation to the
Company’s prerogative to outsource parts of its
operations especially when hiring contractual
employees. As stated earlier, the work to be
performed by PESO was similar to that of the casual
employees. With the provision on casual employees,
the hiring of PESO contractual employees, therefore,
is not in keeping with the spirit and intent of their
CBA. (Citations omitted)12
The Company moved to reconsider the CA
Decision,13 but it was denied;14 hence, this petition.
Incidentally, on July 16, 2009, the Company filed a
Manifestation15 informing this Court that its
stockholders and directors unanimously voted to
shorten the Company’s corporate existence only until
June 30, 2006, and that the three-year period
allowed by law for liquidation of the Company’s
affairs already expired on June 30, 2009. Referring to
Gelano v. Court of Appeals,16 Public Interest Center,
Inc. v. Elma,17 and Atienza v. Villarosa,18 it urged Us,
however, to still resolve the case for future guidance
of the bench and the bar as the issue raised herein
allegedly calls for a clarification of a legal principle,
specifically, whether the VA is empowered to rule on
a matter not covered by the issue submitted for
arbitration.
Even if this Court would brush aside technicality by
ignoring the supervening event that renders this case
moot and academic19 due to the permanent
LABOR LAW
cessation of the Company’s business operation on
June 30, 2009, the arguments raised in this petition
still fail to convince Us.
We confirm that the VA ruled on a matter that is
covered by the sole issue submitted for voluntary
arbitration. Resultantly, the CA did not commit
serious error when it sustained the ruling that the
hiring of contractual employees from PESO was not
in keeping with the intent and spirit of the CBA.
Indeed, the opinion of the VA is germane to, or, in
the words of the CA, "interrelated and intertwined
with," the sole issue submitted for resolution by the
parties. This being said, the Company’s invocation of
Sections 4 and 5, Rule IV20 and Section 5, Rule
VI21 of the Revised Procedural Guidelines in the
Conduct of Voluntary Arbitration Proceedings dated
October 15, 2004 issued by the NCMB is plainly out
of order.
Likewise, the Company cannot find solace in its cited
case of Ludo & Luym Corporation v. Saornido.22 In
Ludo, the company was engaged in the manufacture
of coconut oil, corn starch, glucose and related
products. In the course of its business operations, it
engaged the arrastre services of CLAS for the
loading and unloading of its finished products at the
wharf. The arrastre workers deployed by CLAS to
perform the services needed were subsequently
hired, on different dates, as Ludo’s regular rank-and-
file employees. Thereafter, said employees joined
LEU, which acted as the exclusive bargaining agent
of the rank-and-file employees. When LEU entered
into a CBA with Ludo, providing for certain benefits to
the employees (the amount of which vary according
to the length of service rendered), it requested to
include in its members’ period of service the time
during which they rendered arrastre services so that
they could get higher benefits. The matter was
submitted for voluntary arbitration when Ludo failed
to act. Per submission agreement executed by both
parties, the sole issue for resolution was the date of
regularization of the workers. The VA Decision ruled
that: (1) the subject employees were engaged in
activities necessary and desirable to the business of
Ludo, and (2) CLAS is a labor-only contractor of
Ludo. It then disposed as follows: (a) the
complainants were considered regular employees six
months from the first day of service at CLAS; (b) the
complainants, being entitled to the CBA benefits
during the regular employment, were awarded sick
leave, vacation leave, and annual wage and salary
increases during such period; (c) respondents shall
pay attorney’s fees of 10% of the total award; and (d)
an interest of 12% per annum or 1% per month shall
be imposed on the award from the date of
promulgation until fully paid. The VA added that all
separation and/or retirement benefits shall be
construed from the date of regularization subject only
to the appropriate government laws and other social
legislation. Ludo filed a motion for reconsideration,
but the VA denied it. On appeal, the CA affirmed in
toto the assailed decision; hence, a petition was
brought before this Court raising the issue, among
others, of whether a voluntary arbitrator can award
benefits not claimed in the submission agreement. In
denying the petition, We ruled:
KAYE RAMOGA
Generally, the arbitrator is expected to decide only
those questions expressly delineated by the
submission agreement. Nevertheless, the arbitrator
can assume that he has the necessary power to
make a final settlement since arbitration is the final
resort for the adjudication of disputes. The succinct
reasoning enunciated by the CA in support of its
holding, that the Voluntary Arbitrator in a labor
controversy has jurisdiction to render the questioned
arbitral awards, deserves our concurrence, thus:
In general, the arbitrator is expected to decide those
questions expressly stated and limited in the
submission agreement. However, since arbitration is
the final resort for the adjudication of disputes, the
arbitrator can assume that he has the power to make
a final settlement. Thus, assuming that the
submission empowers the arbitrator to decide
whether an employee was discharged for just cause,
the arbitrator in this instance can reasonably assume
that his powers extended beyond giving a yes-or-no
answer and included the power to reinstate him with
or without back pay.
In one case, the Supreme Court stressed that "xxx
the Voluntary Arbitrator had plenary jurisdiction and
authority to interpret the agreement to arbitrate and
to determine the scope of his own authority subject
only, in a proper case, to the certiorari jurisdiction of
this Court. The Arbitrator, as already indicated,
viewed his authority as embracing not merely the
determination of the abstract question of whether or
not a performance bonus was to be granted but also,
in the affirmative case, the amount thereof.
By the same token, the issue of regularization should
be viewed as two-tiered issue. While the submission
agreement mentioned only the determination of the
date or regularization, law and jurisprudence give the
voluntary arbitrator enough leeway of authority as
well as adequate prerogative to accomplish the
reason for which the law on voluntary arbitration was
created – speedy labor justice. It bears stressing that
the underlying reason why this case arose is to
settle, once and for all, the ultimate question of
whether respondent employees are entitled to higher
benefits. To require them to file another action for
payment of such benefits would certainly undermine
labor proceedings and contravene the constitutional
mandate providing full protection to labor.23
Indubitably, Ludo fortifies, not diminishes, the
soundness of the questioned VA Decision. Said case
reaffirms the plenary jurisdiction and authority of the
voluntary arbitrator to interpret the CBA and to
determine the scope of his/her own authority. Subject
to judicial review, the leeway of authority as well as
adequate prerogative is aimed at accomplishing the
rationale of the law on voluntary arbitration – speedy
labor justice. In this case, a complete and final
adjudication of the dispute between the parties
necessarily called for the resolution of the related
and incidental issue of whether the Company still
violated the CBA but without being guilty of ULP as,
needless to state, ULP is committed only if there is
gross violation of the agreement.
LABOR LAW
Lastly, the Company kept on harping that both the
VA and the CA conceded that its engagement of
contractual workers from PESO was a valid exercise
of management prerogative. It is confused. To
emphasize, declaring that a particular act falls within
the concept of management prerogative is
significantly different from acknowledging that such
act is a valid exercise thereof. What the VA and the
CA correctly ruled was that the Company’s act of
contracting out/outsourcing is within the purview of
management prerogative. Both did not say, however,
that such act is a valid exercise thereof. Obviously,
this is due to the recognition that the CBA provisions
agreed upon by the Company and the Union delimit
the free exercise of management prerogative
pertaining to the hiring of contractual employees.
Indeed, the VA opined that "the right of the
management to outsource parts of its operations is
not totally eliminated but is merely limited by the
CBA," while the CA held that "this management
prerogative of contracting out services, however, is
not without limitation. x x x These categories of
employees particularly with respect to casual
employees serve as limitation to the Company’s
prerogative to outsource parts of its operations
especially when hiring contractual employees."
A collective bargaining agreement is the law between
the parties:
It is familiar and fundamental doctrine in labor law
that the CBA is the law between the parties and they
are obliged to comply with its provisions. We said so
in Honda Phils., Inc. v. Samahan ng Malayang
Manggagawa sa Honda:
A collective bargaining agreement or CBA refers to
the negotiated contract between a legitimate labor
organization and the employer concerning wages,
hours of work and all other terms and conditions of
employment in a bargaining unit.1âwphi1 As in all
contracts, the parties in a CBA may establish such
stipulations, clauses, terms and conditions as they
may deem convenient provided these are not
contrary to law, morals, good customs, public order
or public policy. Thus, where the CBA is clear and
unambiguous, it becomes the law between the
parties and compliance therewith is mandated by the
express policy of the law.
Moreover, if the terms of a contract, as in a CBA, are
clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of their
stipulations shall control. x x x.24
In this case, Section 4, Article I (on categories of
employees) of the CBA between the Company and
the Union must be read in conjunction with its
Section 1, Article III (on union security). Both are
interconnected and must be given full force and
effect. Also, these provisions are clear and
unambiguous. The terms are explicit and the
language of the CBA is not susceptible to any other
interpretation. Hence, the literal meaning should
prevail. As repeatedly held, the exercise of
management prerogative is not unlimited; it is subject
to the limitations found in law, collective bargaining
KAYE RAMOGA LABOR LAW

agreement or the general principles of fair play and
justice25 Evidently, this case has one of the
restrictions- the presence of specific CBA provisions-
unlike in San Miguel Corporation Employees Union-
PTGWO v. Bersamira,26 De Ocampo v.
NLRC, Asian Alcohol Corporation v. NLRC,28 and
27
Serrano v. NLRC29cited by the Company. To
reiterate, the CBA is the norm of conduct between
the parties and compliance therewith is mandated by
the express policy of the law.30
WHEREFORE, the petition is DENIED. The assailed
June 16, 2005 Decision, as well as the October 12,
2005 Resolution of the Court of Appeals, which
sustained the October 26, 2004 Decision of the
Voluntary Arbitrator, are hereby AFFIRMED. SO
ORDERED.
KAYE RAMOGA
G.R. No. 160506 March 9, 2010
JOEB M. ALIVIADO, et. al., vs. PROCTER & GAMBLE PHILS., INC., and PROMM-GEM INC.,
DEL CASTILLO, J.:
Labor laws expressly prohibit labor-only contracting. To
prevent its circumvention, the Labor Code establishes an
employer-employee relationship between the employer
and the employees of the labor-only contractor.
The instant petition for review assails the March 21, 2003
Decision[1] of the Court of Appeals (CA) in CA-G.R. SP
No. 52082 and its October 20, 2003 Resolution[2] denying
the motions for reconsideration separately filed by
petitioners and respondent Procter & Gamble Phils. Inc.
(P&G). The appellate court affirmed the July 27, 1998
Decision of the National Labor Relations Commission
(NLRC), which in turn affirmed the November 29,
1996 Decision[3]of the Labor Arbiter. All these decisions
found Promm-Gem, Inc. (Promm-Gem) and Sales and
Promotions Services (SAPS) to be legitimate independent
contractors and the employers of the petitioners.
Factual Antecedents
Petitioners worked as merchandisers of P&G from
various dates, allegedly starting as early as 1982 or as
late as June 1991, to either May 5, 1992 or March 11,
1993, more specifically as follows:
Name Date Employed Date Dismissed = 80 EEs
They all individually signed employment contracts with
either Promm-Gem or SAPS for periods of more or less
five months at a time.[5] They were assigned at different
outlets, supermarkets and stores where they handled all
the products of P&G. They received their wages from
Promm-Gem or SAPS.[6]
SAPS and Promm-Gem imposed disciplinary measures
on erring merchandisers for reasons such as habitual
absenteeism, dishonesty or changing day-off without prior
notice.[7]
P&G is principally engaged in the manufacture and
production of different consumer and health products,
which it sells on a wholesale basis to various
supermarkets and distributors.[8] To enhance consumer
awareness and acceptance of the products, P&G entered
into contracts with Promm-Gem and SAPS for the
promotion and merchandising of its products.[9]
In December 1991, petitioners filed a complaint[10] against
P&G for regularization, service incentive leave pay and
other benefits with damages. The complaint was later
amended[11] to include the matter of their subsequent
dismissal.
Ruling of the Labor Arbiter
On November 29, 1996, the Labor Arbiter dismissed the
complaint for lack of merit and ruled that there was no
employer-employee relationship between petitioners and
P&G. He found that the selection and engagement of the
petitioners, the payment of their wages, the power of
LABOR LAW
dismissal and control with respect to the means and
methods by which their work was accomplished, were all
done and exercised by Promm-Gem/SAPS. He further
found that Promm-Gem and SAPS were legitimate
independent job contractors. The dispositive portion of his
Decision reads:
WHEREFORE, premises considered,
judgment is hereby rendered Dismissing the
above-entitled cases against respondent
Procter & Gamble (Phils.), Inc. for lack of merit.
SO ORDERED.[12]
Ruling of the NLRC
Appealing to the NLRC, petitioners disputed the Labor
Arbiters findings. On July 27, 1998, the NLRC rendered a
Decision[13] disposing as follows:
WHEREFORE, premises considered, the
appeal of complainants is hereby DISMISSED
and the decision appealed from AFFIRMED.
SO ORDERED.[14]
Petitioners filed a motion for reconsideration but the
motion was denied in the November 19,
1998 Resolution.[15]
Ruling of the Court of Appeals
Petitioners then filed a petition for certiorari with the CA,
alleging grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of the Labor Arbiter and
the NLRC. However, said petition was also denied by the
CA which disposed as follows:
WHEREFORE, the decision of the National
Labor Relations Commission dated July 27,
1998 is AFFIRMED with the MODIFICATION
that respondent Procter & Gamble Phils., Inc.
is ordered to pay service incentive leave pay to
petitioners. SO ORDERED.[16]
Petitioners filed a motion for reconsideration but the
motion was also denied. Hence, this petition.
Issues
Petitioners now come before us raising the following
issues:
I.
WHETHER X X X THE HONORABLE
COURT OF APPEALS HAS COMMITTED [A]
REVERSIBLE ERROR WHEN IT DID NOT
FIND THE PUBLIC RESPONDENTS TO
HAVE ACTED WITH GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF
OR IN EXCESS OF JURISDICTION IN
RENDERING THE QUESTIONED
JUDGMENT WHEN, OBVIOUSLY, THE
PETITIONERS WERE ABLE TO PROVE
AND ESTABLISH THAT RESPONDENT
PROCTER & GAMBLE PHILS., INC. IS
THEIR EMPLOYER AND THAT THEY
KAYE RAMOGA
WERE ILLEGALLY DISMISSED BY THE
FORMER.
II.
WHETHER X X X THE HONORABLE
COURT OF APPEALS HAS COMMITTED [A]
REVERSIBLE ERROR WHEN IT DID NOT
DECLARE THAT THE PUBLIC
RESPONDENTS HAD ACTED WITH
GRAVE ABUSE OF DISCRETION WHEN
THE LATTER DID NOT FIND THE PRIVATE
RESPONDENTS LIABLE TO THE
PETITIONERS FOR PAYMENT OF
ACTUAL, MORAL AND EXEMPLARY
DAMAGES AS WELL AS LITIGATION
COSTS AND ATTORNEYS FEES.[17]
Simply stated, the issues are: (1) whether P&G is the
employer of petitioners; (2) whether petitioners were
illegally dismissed; and (3) whether petitioners are entitled
for payment of actual, moral and exemplary damages as
well as litigation costs and attorneys fees.
Petitioners Arguments
Petitioners insist that they are employees of P&G. They
claim that they were recruited by the salesmen of P&G
and were engaged to undertake merchandising chores
for P&G long before the existence of Promm-Gem and/or
SAPS. They further claim that when the latter had its so-
called re-alignment program, petitioners were instructed to
fill up application forms and report to the agencies which
P&G created.[18]
Petitioners further claim that P&G instigated their
dismissal from work as can be gleaned from its letter[19] to
SAPS dated February 24, 1993, informing the latter that
their Merchandising Services Contract will no longer be
renewed.
Petitioners further assert that Promm-Gem and SAPS are
labor-only contractors providing services of manpower to
their client. They claim that the contractors have neither
substantial capital nor tools and equipment to undertake
independent labor contracting. Petitioners insist that since
they had been engaged to perform activities which are
necessary or desirable in the usual business or trade of
P&G, then they are its regular employees.[20]
Respondents Arguments
On the other hand, P&G points out that the instant petition
raises only questions of fact and should thus be thrown
out as the Court is not a trier of facts. It argues that
findings of facts of the NLRC, particularly where the
NLRC and the Labor Arbiter are in agreement, are
deemed binding and conclusive on the Supreme Court.
P&G further argues that there is no employment
relationship between it and petitioners. It was Promm-
Gem or SAPS that (1) selected petitioners and engaged
their services; (2) paid their salaries; (3) wielded the
power of dismissal; and (4) had the power of control over
their conduct of work.
LABOR LAW
P&G also contends that the Labor Code neither defines
nor limits which services or activities may be validly
outsourced. Thus, an employer can farm out any of its
activities to an independent contractor, regardless of
whether such activity is peripheral or core in nature. It
insists that the determination of whether to engage the
services of a job contractor or to engage in direct hiring is
within the ambit of management prerogative.
At this juncture, it is worth mentioning that on January 29,
2007, we deemed as waived the filing of the Comment of
Promm-Gem on the petition.[21] Also, although SAPS was
impleaded as a party in the proceedings before the Labor
Arbiter and the NLRC, it was no longer impleaded as a
party in the proceedings before the CA.[22] Hence, our
pronouncements with regard to SAPS are only for the
purpose of determining the obligations of P&G, if any.
Our Ruling: The petition has merit.
As a rule, the Court refrains from reviewing factual
assessments of lower courts and agencies exercising
adjudicative functions, such as the NLRC. Occasionally,
however, the Court is constrained to wade into factual
matters when there is insufficient or insubstantial
evidence on record to support those factual findings; or
when too much is concluded, inferred or deduced from
the bare or incomplete facts appearing on record.[23] In the
present case, we find the need to review the records to
ascertain the facts.
Labor-only contracting and job contracting
In order to resolve the issue of whether P&G is the
employer of petitioners, it is necessary to first determine
whether Promm-Gem and SAPS are labor-only
contractors or legitimate job contractors.
The pertinent Labor Code provision on the matter states:
ART. 106. Contractor or subcontractor.
Whenever an employer enters into a contract
with another person for the performance of the
formers work, the employees of the contractor
and of the latters subcontractor, if any, shall be
paid in accordance with the provisions of this
Code.
In the event that the contractor or
subcontractor fails to pay the wages of his
employees in accordance with this Code, the
employer shall be jointly and severally liable
with his contractor or subcontractor to such
employees to the extent of the work performed
under the contract, in the same manner and
extent that he is liable to employees directly
employed by him.
The Secretary of Labor may, by appropriate
regulations, restrict or prohibit the contracting
out of labor to protect the rights of workers
KAYE RAMOGA
established under this Code. In so prohibiting
or restricting, he may make appropriate
distinctions between labor-only contracting and
job contracting as well as differentiations within
these types of contracting and determine who
among the parties involved shall be
considered the employer for purposes of this
Code, to prevent any violation or
circumvention of any provision of this Code.
There is labor-only contracting where the
person supplying workers to an employer does
not have substantial capital or investment in
the form of tools, equipment, machineries,
work premises, among others, and the
workers recruited and placed by such person
are performing activities which are directly
related to the principal business of such
employer. In such cases, the person or
intermediary shall be considered merely as an
agent of the employer who shall be
responsible to the workers in the same
manner and extent as if the latter were directly
employed by him. (Emphasis and
underscoring supplied.)
Rule VIII-A, Book III of the Omnibus Rules
Implementing the Labor Code, as amended by
Department Order No. 18-02,[24] distinguishes
between legitimate and labor-only contracting: x x x
Section 3. Trilateral Relationship in Contracting
Arrangements. In legitimate contracting, there
exists a trilateral relationship under which there
is a contract for a specific job, work or service
between the principal and the contractor or
subcontractor, and a contract of employment
between the contractor or subcontractor and
its workers. Hence, there are three parties
involved in these arrangements, the principal
which decides to farm out a job or service to a
contractor or subcontractor, the contractor or
subcontractor which has the capacity to
independently undertake the performance of
the job, work or service, and the contractual
workers engaged by the contractor or
subcontractor to accomplish the job[,] work or
service. x x x x
Section 5. Prohibition against labor-only
contracting. Labor-only contracting is hereby
declared prohibited. For this purpose, labor-
only contracting shall refer to an arrangement
where the contractor or subcontractor merely
recruits, supplies or places workers to perform
a job, work or service for a principal, and any
of the following elements are present:
i) The contractor or subcontractor does not
have substantial capital or investment which
relates to the job, work or service to be
performed and the employees recruited,
supplied or placed by such contractor or
subcontractor are performing activities which
are directly related to the main business of the
principal; or
LABOR LAW
ii) [T]he contractor does not exercise the right
to control over the performance of the work of
the contractual employee.
The foregoing provisions shall be without
prejudice to the application of Article 248 (c) of
the Labor Code, as amended.
Substantial capital or investment refers to capital
stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements,
machineries and work premises, actually and
directly used by the contractor or subcontractor in
the performance or completion of the job, work or
service contracted out.
The right to control shall refer to the right reserved
to the person for whom the services of the
contractual workers are performed, to determine
not only the end to be achieved, but also the
manner and means to be used in reaching that
end. x x x x (Underscoring supplied.)
Clearly, the law and its implementing rules allow
contracting arrangements for the performance of specific
jobs, works or services. Indeed, it is management
prerogative to farm out any of its activities, regardless of
whether such activity is peripheral or core in
nature. However, in order for such outsourcing to be valid,
it must be made to an independent contractor because
the current labor rules expressly prohibit labor-only
contracting.
To emphasize, there is labor-only contracting when the
contractor or sub-contractor merely recruits, supplies or
places workers to perform a job, work or service for a
principal[25] and any of the following elements are present:
i) The contractor or subcontractor does not
have substantial capital or investment which
relates to the job, work or service to be
performed and the employees recruited,
supplied or placed by such contractor or
subcontractor are performing activities which
are directly related to the main business of the
principal; or
ii) The contractor does not exercise the right to
control over the performance of the work of
the contractual employee. (Underscoring
supplied)
In the instant case, the financial statements[26] of Promm-
Gem show that it has authorized capital stock of P1
million and a paid-in capital, or capital available for
operations, of P500,000.00 as of 1990.[27] It also has long
term assets worth P432,895.28 and current assets
of P719,042.32. Promm-Gem has also proven that it
maintained its own warehouse and office space with a
floor area of 870 square meters.[28] It also had under its
name three registered vehicles which were used for its
promotional/merchandising business.[29] Promm-Gem
also has other clients aside from P&G.[31] Under the
[30]
circumstances, we find that Promm-Gem has substantial
investment which relates to the work to be
performed. These factors negate the existence of the
KAYE RAMOGA
element specified in Section 5(i) of DOLE Department
Order No. 18-02.
The records also show that Promm-Gem supplied its
complainant-workers with the relevant materials, such as
markers, tapes, liners and cutters, necessary for them to
perform their work. Promm-Gem also issued uniforms to
them. It is also relevant to mention that Promm-Gem
already considered the complainants working under it as
its regular, not merely contractual or project,
employees.[32] This circumstance negates the existence of
element (ii) as stated in Section 5 of DOLE Department
Order No. 18-02, which speaks of contractual employees.
This, furthermore, negates on the part of Promm-Gem
bad faith and intent to circumvent labor laws which factors
have often been tipping points that lead the Court to strike
down the employment practice or agreement concerned
as contrary to public policy, morals, good customs or
public order.[33]
Under the circumstances, Promm-Gem cannot be
considered as a labor-only contractor. We find that it is a
legitimate independent contractor.
On the other hand, the Articles of Incorporation of SAPS
shows that it has a paid-in capital of
only P31,250.00. There is no other evidence presented to
show how much its working capital and assets
are. Furthermore, there is no showing of substantial
investment in tools, equipment or other assets.
In Vinoya v. National Labor Relations Commission,[34] the
Court held that [w]ith the current economic atmosphere in
the country, the paid-in capitalization of PMCI amounting
to P75,000.00 cannot be considered as substantial capital
and, as such, PMCI cannot qualify as an independent
contractor.[35] Applying the same rationale to the present
case, it is clear that SAPS having a paid-in capital of
only P31,250 - has no substantial capital. SAPS lack of
substantial capital is underlined by the records[36] which
show that its payroll for its merchandisers alone for one
month would already total P44,561.00. It had 6-month
contracts with P&G.[37] Yet SAPS failed to show that it
could complete the 6-month contracts using its own
capital and investment. Its capital is not even sufficient for
one months payroll. SAPS failed to show that its paid-in
capital of P31,250.00 is sufficient for the period required
for it to generate its needed revenue to sustain its
operations independently. Substantial capital refers to
capitalization used in the performance or completion of
the job, work or service contracted out. In the present
case, SAPS has failed to show substantial capital.
Furthermore, the petitioners have been charged with the
merchandising and promotion of the products of P&G, an
activity that has already been considered by the Court as
doubtlessly directly related to the manufacturing
business,[38] which is the principal business of
P&G. Considering that SAPS has no substantial capital or
investment and the workers it recruited are performing
activities which are directly related to the principal
business of P&G, we find that the former is engaged in
labor-only contracting.
Where labor-only contracting exists, the Labor Code itself
establishes an employer-employee relationship between
the employer and the employees of the labor-only
contractor.[39] The statute establishes this relationship for a
LABOR LAW
comprehensive purpose: to prevent a circumvention of
labor laws. The contractor is considered merely an agent
of the principal employer and the latter is responsible to
the employees of the labor-only contractor as if such
employees had been directly employed by the principal
employer.[40]
Consequently, the following petitioners, having been
recruited and supplied by SAPS[41] -- which engaged in
labor-only contracting -- are considered as the employees
of P&G: Arthur Corpuz, Eric Aliviado, Monchito
Ampeloquio, Abraham Basmayor, Jr., Jonathan Mateo,
Lorenzo Platon, Estanislao Buenaventura, Lope Salonga,
Franz David, Nestor Ignacio, Jr., Rolando Romasanta,
Roehl Agoo, Bonifacio Ortega, Arsenio Soriano, Jr., Arnel
Endaya, Roberto Enriquez, Edgardo Quiambao, Santos
Bacalso, Samson Basco, Alstando Montos, Rainer N.
Salvador, Pedro G. Roy, Leonardo F. Talledo, Enrique F.
Talledo, Joel Billones, Allan Baltazar, Noli Gabuyo, Gerry
Gatpo, German Guevara, Gilbert V. Miranda, Rodolfo C.
Toledo, Jr., Arnold D. Laspoa, Philip M. Loza, Mario N.
Coldayon, Orlando P. Jimenez, Fred P. Jimenez,
Restituto C. Pamintuan, Jr., Rolando J. De Andres, Artuz
Bustenera, Jr., Roberto B. Cruz, Rosedy O. Yordan,
Orlando S. Balangue, Emil Tawat, Cresente J. Garcia,
Melencio Casapao, Romeo Vasquez, Renato dela Cruz,
Romeo Viernes, Jr., Elias Basco and Dennis Dacasin.
The following petitioners, having worked under, and been
dismissed by Promm-Gem, are considered the
employees of Promm-Gem, not of P&G: Wilfredo Torres,
John Sumergido, Edwin Garcia, Mario P. Liongson, Jr.,
Ferdinand Salvo, Alejandrino Abaton, Emmanuel A.
Laban, Ernesto Soyosa, Aladino Gregore, Jr., Ramil
Reyes, Ruben Vasquez, Jr., Maximino Pascual, Willie
Ortiz, Armando Villar, Jose Fernando Gutierrez, Ramiro
Pita, Fernando Macabenta, Nestor Esquila, Julio Rey,
Albert Leynes, Ernesto Calanao, Roberto Rosales,
Antonio Dacuma, Tadeo Durano, Raul Dulay, Marino
Maranion, Joseph Banico, Melchor Cardano, Reynaldo
Jacaban, and Joeb Aliviado.[42]
Termination of services
We now discuss the issue of whether petitioners were
illegally dismissed. In cases of regular employment, the
employer shall not terminate the services of an employee
except for a just[43] or authorized[44] cause.
In the instant case, the termination letters given by
Promm-Gem to its employees uniformly specified the
cause of dismissal as grave misconduct and breach of
trust, as follows: x x x
This informs you that effective May 5, 1992,
your employment with our company, Promm-
Gem, Inc. has been terminated. We find your
expressed admission, that you considered
yourself as an employee of Procter & Gamble
Phils., Inc. and assailing the integrity of the
Company as legitimate and independent
promotion firm, is deemed as an act of
disloyalty prejudicial to the interests of our
Company: serious misconduct and breach of
trust reposed upon you as employee of our
KAYE RAMOGA
Company which [co]nstitute just cause for the
termination of your employment. x x x
Misconduct has been defined as improper or wrong
conduct; the transgression of some established and
definite rule of action, a forbidden act, a dereliction of duty,
unlawful in character implying wrongful intent and not
mere error of judgment. The misconduct to be serious
must be of such grave and aggravated character and not
merely trivial and unimportant.[46] To be a just cause for
dismissal, such misconduct (a) must be serious; (b) must
relate to the performance of the employees duties; and (c)
must show that the employee has become unfit to
continue working for the employer.[47]
In other words, in order to constitute serious misconduct
which will warrant the dismissal of an employee under
paragraph (a) of Article 282 of the Labor Code, it is not
sufficient that the act or conduct complained of has
violated some established rules or policies. It is equally
important and required that the act or conduct must have
been performed with wrongful intent.[48] In the instant
case, petitioners-employees of Promm-Gem may have
committed an error of judgment in claiming to be
employees of P&G, but it cannot be said that they were
motivated by any wrongful intent in doing so. As such, we
find them guilty of only simple misconduct for assailing the
integrity of Promm-Gem as a legitimate and independent
promotion firm. A misconduct which is not serious or
grave, as that existing in the instant case, cannot be a
valid basis for dismissing an employee.
Meanwhile, loss of trust and confidence, as a ground for
dismissal, must be based on the willful breach of the trust
reposed in the employee by his employer. Ordinary
breach will not suffice. A breach of trust is willful if it is
done intentionally, knowingly and purposely, without
justifiable excuse, as distinguished from an act done
carelessly, thoughtlessly, heedlessly or inadvertently.[49]
Loss of trust and confidence, as a cause for termination of
employment, is premised on the fact that the employee
concerned holds a position of responsibility or of trust and
confidence. As such, he must be invested with confidence
on delicate matters, such as custody, handling or care
and protection of the property and assets of the
employer. And, in order to constitute a just cause for
dismissal, the act complained of must be work-related
and must show that the employee is unfit to continue to
work for the employer.[50] In the instant case, the
petitioners-employees of Promm-Gem have not been
shown to be occupying positions of responsibility or of
trust and confidence. Neither is there any evidence to
show that they are unfit to continue to work as
merchandisers for Promm-Gem.
All told, we find no valid cause for the dismissal of
petitioners-employees of Promm-Gem.
While Promm-Gem had complied with the procedural
aspect of due process in terminating the employment of
petitioners-employees, i.e., giving two notices and in
between such notices, an opportunity for the employees
to answer and rebut the charges against them, it failed to
comply with the substantive aspect of due process as the
acts complained of neither constitute serious misconduct
nor breach of trust. Hence, the dismissal is illegal.
LABOR LAW
With regard to the petitioners placed with P&G by SAPS,
they were given no written notice of dismissal. The
records show that upon receipt by SAPS of P&Gs letter
terminating their Merchandising Services Contact
effective March 11, 1993, they in turn verbally informed
the concerned petitioners not to report for work
anymore. The concerned petitioners related their
dismissal as follows: x x x
5. On March 11, 1993, we were called to a
meeting at SAPS office. We were told by Mr.
Saturnino A. Ponce that we should already
stop working immediately because that was
the order of Procter and Gamble. According to
him he could not do otherwise because
Procter and Gamble was the one paying
us. To prove that Procter and Gamble was the
one responsible in our dismissal, he showed to
us the letter[51] dated February 24, 1993, x x x
February 24, 1993
Sales and Promotions Services
Armons Bldg., 142 Kamias Road,
Quezon City
Attention: Mr. Saturnino A. Ponce
President & General Manager
Gentlemen:
Based on our discussions last 5 and 19
February 1993, this formally informs you that we
will not be renewing our Merchandising Services
Contract with your agency.
Please immediately undertake efforts to ensure
that your services to the Company will terminate
effective close of business hours of 11 March
1993.
This is without prejudice to whatever
obligations you may have to the company under
the abovementioned contract.
Very truly yours,
(Sgd.)
EMMANUEL M. NON
Sales Merchandising III
6. On March 12, 1993, we reported to our
respective outlet assignments. But, we were
no longer allowed to work and we were
refused entrance by the security guards
posted. According to the security guards, all
merchandisers of Procter and Gamble under
S[APS] who filed a case in the Dept. of Labor
are already dismissed as per letter of Procter
and Gamble dated February 25, 1993. x x x[52]
Neither SAPS nor P&G dispute the existence of these
circumstances. Parenthetically, unlike Promm-Gem which
dismissed its employees for grave misconduct and
breach of trust due to disloyalty, SAPS dismissed its
employees upon the initiation of P&G. It is evident that
SAPS does not carry on its own business because the
termination of its contract with P&G automatically meant
for it also the termination of its employees services. It is
obvious from its act that SAPS had no other clients and
had no intention of seeking other clients in order to further
its merchandising business. From all indications SAPS,
KAYE RAMOGA
existed to cater solely to the need of P&G for the supply of
employees in the latters merchandising concerns
only. Under the circumstances prevailing in the instant
case, we cannot consider SAPS as
an independent contractor.
Going back to the matter of dismissal, it must be
emphasized that the onus probandi to prove the
lawfulness of the dismissal rests with the employer.[53] In
termination cases, the burden of proof rests upon the
employer to show that the dismissal is for just and valid
cause.[54] In the instant case, P&G failed to discharge the
burden of proving the legality and validity of the dismissals
of those petitioners who are considered its employees.
Hence, the dismissals necessarily were not justified and
are therefore illegal.
Damages
We now go to the issue of whether petitioners are entitled
to damages. Moral
and exemplary damages are recoverable where the
dismissal of an employee was attended by bad faith or
fraud or constituted an act oppressive to labor or was
done in a manner contrary to morals, good customs or
public policy.[55]
With regard to the employees of Promm-Gem, there
being no evidence of bad faith, fraud or any oppressive
act on the part of the latter, we find no support for the
award of damages.
As for P&G, the records show that it dismissed its
employees through SAPS in a manner oppressive to
labor. The sudden and peremptory barring of the
concerned petitioners from work, and from admission to
the work place, after just a one-day verbal notice, and for
no valid cause bellows oppression and utter disregard of
the right to due process of the concerned
petitioners. Hence, an award of moral damages is called
for.
Attorneys fees may likewise be awarded to the concerned
petitioners who
were illegally dismissed in bad faith and were compelled t
o litigate or incur expenses to protect their rights by
reason of the oppressive acts[56] of P&G.
Lastly, under Article 279 of the Labor Code, an employee
who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other
.
LABOR LAW
privileges, inclusive of allowances, and other benefits or
their monetary equivalent from the time the compensation
was withheld up to the time of actual
reinstatement.[57] Hence, all the petitioners, having been
illegally dismissed are entitled to reinstatement without
loss of seniority rights and with full back wages and other
benefits from the time of their illegal dismissal up to the
time of their actual reinstatement.
WHEREFORE, the petition is GRANTED. The Decision
dated March 21, 2003 of the Court of Appeals in CA-G.R.
SP No. 52082 and the Resolution dated October 20,
2003 are REVERSED and SET ASIDE. Procter &
Gamble Phils., Inc. and Promm-Gem, Inc.
are ORDERED to reinstate their respective employees
immediately without loss of seniority rights and with full
backwages and other benefits from the time of their illegal
dismissal up to the time of their actual
reinstatement. Procter & Gamble Phils., Inc. is
further ORDERED to pay each of those petitioners
considered as its employees, namely Arthur Corpuz, Eric
Aliviado, Monchito Ampeloquio, Abraham Basmayor, Jr.,
Jonathan Mateo, Lorenzo Platon, Estanislao
Buenaventura, Lope Salonga, Franz David, Nestor
Ignacio, Rolando Romasanta, Roehl Agoo, Bonifacio
Ortega, Arsenio Soriano, Jr., Arnel Endaya, Roberto
Enriquez, Edgardo Quiambao, Santos Bacalso, Samson
Basco, Alstando Montos, Rainer N. Salvador, Pedro G.
Roy, Leonardo F. Talledo, Enrique F. Talledo, Joel
Billones, Allan Baltazar, Noli Gabuyo, Gerry Gatpo,
German Guevara, Gilbert Y. Miranda, Rodolfo C. Toledo,
Jr., Arnold D. Laspoa, Philip M. Loza, Mario N. Coldayon,
Orlando P. Jimenez, Fred P. Jimenez, Restituto C.
Pamintuan, Jr., Rolando J. De Andres, Artuz Bustenera,
Jr., Roberto B. Cruz, Rosedy O. Yordan, Orlando S.
Balangue, Emil Tawat, Cresente J. Garcia, Melencio
Casapao, Romeo Vasquez, Renato dela Cruz, Romeo
Viernes, Jr., Elias Basco and Dennis
Dacasin, P25,000.00 as moral damages plus ten percent
of the total sum as and for attorneys fees.
Let this case be REMANDED to the Labor Arbiter for the
computation, within 30 days from receipt of this Decision,
of petitioners backwages and other benefits; and ten
percent of the total sum as and for attorneys fees as
stated above; and for immediate execution.
SO ORDERED
KAYE RAMOGA
G.R. No. 179807 July 31, 2009
RAMY GALLEGO, Petitioner, vs. BAYER PHILIPPINES, INC., DANPIN GUILLERMO, PRODUCT IMAGE
MARKETING, INC., and EDGARDO BERGONIA, Respondents
CARPIO MORALES, J.:
Ramy Gallego (petitioner) was contracted in April
1992 by Bayer Philippines, Inc. (BAYER) as crop
protection technician to promote and market BAYER
products.[1] Under the supervision of Aristeo Filipino,
BAYER sales representative for Panay Island,
petitioner made farm visits to different municipalities
in Panay Island to convince farmers to buy BAYER
products.[2]
In 1996, petitioners employment with BAYER came
to a halt, prompting him to seek employment with
another company. BAYER eventually reemployed
petitioner, however, in 1997 through Product Image
and Marketing Services, Inc. (PRODUCT IMAGE) of
which respondent Edgardo Bergonia (Bergonia) was
the President and General Manager, performing the
same task as that of crop protection technician
promoting BAYER products to farmers and dealers in
Panay Island solely for the benefit of BAYER.[3]
By petitioners claim, in October, 2001, he was
directed by Pet Pascual, the newly assigned BAYER
sales representative, to submit a resignation letter,
but he refused; and that in January, 2002, he was
summoned by his immediate supervisors including
respondent Danpin Guillermo (Guillermo), BAYER
District Sales Manager for Panay, and was ordered
to quit his employment which called for him to return
all pieces of service equipment issued to him, but
that again he refused.[4]
Still by petitioners claim, he continued performing his
duties and receiving compensation until the end of
January, 2002; that on April 7, 2002, he received a
memorandum that his area of responsibility would be
transferred to Luzon, of which memorandum he
sought reconsideration but to no avail; and that
Guillermo and Bergonia spread rumors that reached
the dealers in Antique to the effect that he was not
anymore connected with BAYER and any transaction
with him would no longer be honored as of April 30,
2002.[5]
Believing that his employment was terminated,
petitioner lodged on June 6, 2002 a complaint for
illegal dismissal with the National Labor Relations
Commission (NLRC) against herein
respondents BAYER, Guillermo, PRODUCT IMAGE,
and Bergonia, with claims for reinstatement,
backwages and/or separation pay, unpaid wages,
holiday pay, premium pay, service incentive leave
and allowances, damages and attorneys fees.[6]
Respondents BAYER and Guillermo denied the
existence of an employer-employee relationship
between BAYER and petitioner, explaining that
petitioners work at BAYER was simply occasioned by
the Contract of Promotional Services that BAYER
had executed with PRODUCT IMAGE whereby
PRODUCT IMAGE was to promote and market
BAYER products on its (PRODUCT IMAGE) own
LABOR LAW
account and in its own manner and method. They
added that as an independent contractor, PRODUCT
IMAGE retained the exclusive power of control over
petitioner as it assigned full-time supervisors to
exercise control and supervision over its employees
assigned at BAYER.[7]
Respondents PRODUCT IMAGE and Bergonia, on
the other hand, admitted that petitioner was hired as
an employee of PRODUCT IMAGE on April 7, 1997
on a contractual basis to promote and market
BAYER products pursuant to the Contract of
Promotional Services forged between it and
BAYER. They alleged that petitioner was a field
worker who had no fixed hours and worked under
minimal supervision, his performance being gauged
only by his accomplishment reports duly certified to
by BAYER acting as his de facto supervisor;[8] that
petitioner was originally assigned to Iloilo but later
transferred to Antique; that petitioner was not
dismissed, but went on official leave from January 23
to 31, 2002, and stopped reporting for work
thereafter; and that petitioner was supposed to have
been reassigned to South Luzon effective March 15,
2002 in accordance with a personnel reorganization
program, but he likewise failed to report to his new
work station.[9]
By Decision of May 6, 2004,[10] the Labor Arbiter
declared respondents guilty of illegal dismissal,
disposing as follows:
WHEREFORE, judgment is rendered declaring
respondents, Bayer Phil. Inc./Danpin Guillermo and
Product Image Marketing Services, Inc./Edgardo
Begornia [sic] guilty of Illegal Dismissal and is
hereby ORDERED to Reinstatecomplainant to his
former or equivalent position ten (10) days from
receipt hereof and to immediately pay complainant
upon receipt of this decision the following:
Backwages Php 228,000.00
13th Month Pay Php 19,000.00
Holiday Pay Php 9,500.00
Service Incentive Leave Pay Php 4,750.00
Attorneys Fees ` Php 26,125.00
Total: Php 287,375.00
In so deciding, the Labor Arbiter found, among other
things, that there was an employer-employee
relationship between BAYER and petitioner since
BAYER furnished petitioner the needed facilities and
paraphernalia, and fixed the methodology to be used
in the performance of his work.
On appeal by respondents, the NLRC reversed the
Decision of the Labor Arbiter and dismissed
petitioners complaint by Decision of February 22,
2006,[11] holding that as an independent contractor,
PRODUCT IMAGE was the employer of petitioner
but there was no evidence that petitioner was
dismissed by either PRODUCT IMAGE or
KAYE RAMOGA
BAYER. Sustaining PRODUCT IMAGEs claim of
abandonment, it held that an employee is deemed to
have abandoned his job if he failed to report for work
after the expiration of a duly approved leave of
absence or if, after being transferred to a new
assignment, he did not report for work anymore.
Petitioners Motion for Reconsideration having been
denied by Resolution of May 25, 2006,[12] he
appealed to the Court of Appeals via Certiorari.[13]
By Resolution of September 25, 2006, the appellate
court dismissed petitioners petition for failure to
attach to it the complaint and the parties respective
position papers filed with the Labor Arbiter.[14] His
Motion for Reconsideration having been denied by
Resolution of August 14, 2007,[15] petitioner comes
before this Court via the present Petition for Review
on Certiorari.
Petitioner argues that the appellate court erred in
dismissing his petition outright considering that it had
previously allowed subsequent submission of
required documents not attached to a petition for
certiorari; and that he attached the required
pleadings to his Motion for Reconsideration with the
appellate court. Moreover, he contends that
respondents failed to discharge the burden of proving
the validity of his dismissal in order to overturn the
finding of the Labor Arbiter that he was illegally
dismissed.[16]
BAYER and Guillermo counter that petitioner raised
factual issues in his petition before the appellate
court which are not reviewable by certiorari; that
petitioners failure to attach the required pleadings to
his petition before the appellate court, coupled with
his failure to offer any justification therefor, provides
no occasion for a liberal application of the rules in his
favor; that petitioner has no cause of action against
them as his employer is PRODUCT IMAGE; and that
assuming that petitioner is entitled to his money
claims, the same should be enforced against the
performance bond posted by PRODUCT IMAGE to
cover the claims of its employees assigned at
BAYER.[17]
PRODUCT IMAGE and Bergonia postulate in their
Comment that the appellate courts outright dismissal
of petitioners appeal was proper in view of, among
other things, the summary nature of proceedings in
labor cases. They also contend that petitioners
present petition suffers from the following infirmities:
(1) it does not contain an affidavit of service; (2) it is
not accompanied by petitioners Petition for Certiorari
before the appellate court; (3) it does not specify the
errors of law allegedly committed by the appellate
court; (4) it is not accompanied by proof of service
upon the adverse party of a copy of the payment of
docket fees; (5) it raises questions of fact; and (6) it
impleads the NLRC and imputes grave abuse of
discretion to the appellate court, thereby implying
that the petition is likewise made under Rule 65 of
the Rules of Court. Lastly, they maintain that
petitioner was not dismissed as he actually
abandoned his job.[18]
The Court shall first resolve the procedural issues.
LABOR LAW
Only errors of law are generally reviewed by this
Court in petitions for review on certiorari of the
appellate courts decisions,[19] and the question of
whether an employer-employee relationship exists in
a given case is essentially a question of fact.[20] Be
that as it may, when, as here, the findings of the
NLRC contradict those of the Labor Arbiter, this
Court, in the exercise of its equity jurisdiction, may
look into the records of the case and reexamine the
questioned findings.[21]
Respecting the appellate courts dismissal of
petitioners Petition for Certiorari for his failure to
attach thereto the relevant pleadings filed with the
Labor Arbiter, the requirement to attach the same
under Section 1, Rule 65[22] is considered vis a
vis Section 3, Rule 46[23] which states that the failure
of the petitioner to comply with any of the
documentary requirements, such as the attachment
of relevant pleadings, shall be sufficient ground for
the dismissal of the petition. By and large, the
outright dismissal of a petition for failure to comply
with said requirement cannot be assailed as
constituting either grave abuse of discretion or
reversible error of law.[24]
The Court, however, is inclined to, as it does,
overlook petitioners failure to attach the subject
relevant pleadings to his Petition for Certiorari before
the appellate court in view of the serious matters
dealt with in this case. That brings the Court to
consider the substantial merits of the case, thus
rendering it unnecessary to still discuss the other
procedural matters raised by respondents.
In the main, the substantive issues are: whether
PRODUCT IMAGE is a labor-only contactor and
BAYER should be deemed petitioners principal
employer; and whether petitioner was illegally
dismissed from his employment.
Permissible job contracting or subcontracting refers
to an arrangement whereby a principal agrees to
farm out with a contractor or subcontractor the
performance of a specific job, work, or service within
a definite or predetermined period, regardless of
whether such job, work or, service is to be performed
or completed within or outside the premises of the
principal.[25] Under this arrangement, the following
conditions must be met: (a) the contractor carries on
a distinct and independent business and undertakes
the contract work on his account under his own
responsibility according to his own manner and
method, free from the control and direction of his
employer or principal in all matters connected with
the performance of his work except as to the results
thereof; (b) the contractor
has substantial capital or investment; and (c) the
agreement between the principal and contractor or
subcontractor assures the contractual employees
entitlement to all labor and occupational safety and
health standards, free exercise of the right to self-
organization, security of tenure, and social welfare
benefits.[26]
In distinguishing between permissible job contracting
and prohibited labor-only contracting,[27] the totality of
KAYE RAMOGA
the facts and the surrounding circumstances of the
case are to be considered,[28] each case to be
determined by its own facts, and all the features of
the relationship assessed.[29]
In the case at bar, the Court finds substantial
evidence to support the finding of the NLRC that
PRODUCT IMAGE is a legitimate job contractor.
The Court notes that PRODUCT IMAGE was issued
by the Department of Labor and Employment (DOLE)
Certificate of Registration Numbered NCR-8-0602-
176 reading:
CERTIFICATE OF REGISTRATION
Numbered NCR-8-0602-176
issued to
Mr. Edgardo V. Bergonia
President
PRODUCT IMAGE & MARKETING SERVICES, INC.
Unit 5& 6 GF J & L Bldg., 251 EDSA Greenhills,
Mandaluyong City
for having complied with the requirements as provided for under
the Labor Code, as amended, and its implementing Rules and
having paid the registration fee in the amount of ONE HUNDRED
(P100) PESOS per Official Receipt Number 6530485Y, dated 21
June 2002.[30]
The DOLE certificate having been issued by a public
officer, it carries with it the presumption that it was
issued in the regular performance of official
duty.[31] Petitioners bare assertions fail to rebut this
presumption. Further, since the DOLE is the agency
primarily responsible for regulating the business of
independent job contractors, the Court can presume,
in the absence of evidence to the contrary, that it had
thoroughly evaluated the requirements submitted by
PRODUCT IMAGE before issuing the Certificate of
Registration.
Independently of the DOLEs Certification, among the
circumstances that establish the status of PRODUCT
IMAGE as a legitimate job contractor are: (1)
PRODUCT IMAGE had, during the period in
question, a contract with BAYER for the promotion
and marketing of BAYER products;[32] (2) PRODUCT
IMAGE has an independent business and provides
services nationwide to big companies such as
Ajinomoto Philippines and Procter and Gamble
Corporation;[33] and (3) PRODUCT IMAGEs total
assets from 1998 to 2000 amounted
to P405,639, P559,897, and P644,728,
respectively.[34] PRODUCT IMAGE also posted a
bond in the amount of P100,000 to answer for any
claim of its employees for unpaid wages and other
benefits that may arise out of the implementation of
its contract with BAYER.[35]
PRODUCT IMAGE cannot thus be considered a
labor-only contractor.
The existence of an employer-employee relationship
is determined on the basis of four standards,
namely: (a) the manner of selection and engagement
of the putative employee; (b) the mode of payment of
wages; (c) the presence or absence of power of
dismissal; and (d) the presence or absence of control
of the putative employees conduct. Most
determinative among these factors is the so-
called control test.[36]
LABOR LAW
The presence of the first requisite which refers to
selection and engagement is evidenced by a
document entitled Job Offer, whereby PRODUCT
IMAGE offered to hire petitioner as crop protection
technician effective April 7, 1997, which offer
petitioner accepted.[37]
On the second requisite regarding the payment of
wages, it was PRODUCT IMAGE that paid the
wages and other benefits of petitioner, pursuant to
the stipulation in the contract between PRODUCT
IMAGE and BAYER that BAYER shall pay
PRODUCT IMAGE an amount based on services
actually rendered without regard to the number of
personnel employed by PRODUCT IMAGE; and that
PRODUCT IMAGE shall faithfully comply with the
provisions of the Labor Code and hold BAYER free
and harmless from any claim of its employees arising
from the contract.[38]
As to the third requisite which relates to the power of
dismissal, and the fourth requisite which relates to
the power of control, both powers are vested in
PRODUCT IMAGE. The Contract of Promotional
Services provides that PRODUCT IMAGE shall have
the power to discipline its employees assigned at
BAYER, such that no control whatsoever shall be
exercised by BAYER over those personnel on the
manner and method by which they perform their
duties,[39] and that all directives, complaints, or
observations of BAYER relating to the performance
of the employees of PRODUCT IMAGE shall be
addressed to the latter.[40]
If at all, the only control measure retained by BAYER
over petitioner was to act as his de
facto supervisor in certifying to the veracity of the
accomplishment reports he submitted to PRODUCT
IMAGE. This is by no means the kind of control that
establishes an employer-employee relationship as it
pertains only to the results and not the manner and
method of doing the work. It would be a rare contract
of service that gives untrammelled freedom to the
party hired and eschews any intervention whatsoever
in his performance of the engagement.[41] Surely, it
would be foolhardy for any company to completely
give the reins and totally ignore the operations it has
contracted out.[42]
In fine, PRODUCT IMAGE is ineluctably the
employer of petitioner.
Respecting the issue of illegal dismissal, the Court
appreciates no evidence that petitioner was
dismissed. What it finds is that petitioner unilaterally
stopped reporting for work before filing a complaint
for illegal dismissal, based on his belief that
Guillermo and Bergonia had spread rumors that his
transactions on behalf of BAYER would no longer be
honored as of April 30, 2002. This belief remains just
that it is unsubstantiated.While in cases of illegal
dismissal, the employer bears the burden of proving
that the dismissal is for a valid or authorized cause,
the employee must first establish by substantial
evidence the fact of dismissal.[43]
WHEREFORE, the petition is, in light of the
foregoing, DENIED. SO ORDERED.
KAYE RAMOGA
G.R. No. 205300, March 18, 2015
FONTERRA BRANDS PHILS., INC., Petitioner, v.
LEONARDO1 LARGADO AND TEOTIMO ESTRELLADO, Respondents.
VELASCO JR., J.:
The Case
This is a Petition for Review on Certiorari under Rule
45 of the Rules of Court seeking the reversal and
setting aside of the Decision of the Court of Appeals
(CA) dated September 6, 2012, as well as its
January 11, 2013 Resolution denying reconsideration
thereof, in CA-G.R. SP No. 114227,
entitled Leonardo Largado and Teotimo P. Estrellado
v. National Labor Relations Commission (NLRC),
Fonterra Brands Phils., Inc./Carlo Mendoza, Zytron
Marketing & Promotions Corp./Francisco Valencia,
A.C. Sicat Marketing & Promotional Services/Arturo
Sicat.
The Facts
Petitioner Fonterra Brands Phils., Inc. (Fonterra)
contracted the services of Zytron Marketing and
Promotions Corp. (Zytron) for the marketing and
promotion of its milk and dairy products. Pursuant to
the contract, Zytron provided Fonterra with trade
merchandising representatives (TMRs), including
respondents Leonardo Largado (Largado) and
Teotimo Estrellado (Estrellado). The engagement of
their services began on September 15, 2003 and
May 27, 2002, respectively, and ended on June 6,
2006.
On May 3, 2006, Fonterra sent Zytron a letter
terminating its promotions contract, effective June 5,
2006. Fonterra then entered into an agreement for
manpower supply with A.C. Sicat Marketing and
Promotional Services (A.C. Sicat). Desirous of
continuing their work as TMRs, respondents
submitted their job applications with A.C. Sicat, which
hired them for a term of five (5) months, beginning
June 7, 2006 up to November 6, 2006.
When respondents’ 5-month contracts with A.C.
Sicat were about to expire, they allegedly sought
renewal thereof, but wereallegedly refused. This
prompted respondents to file complaints for illegal
dismissal, regularization, non-payment of service
incentive leave and 13th month pay, and actual and
moral damages, against petitioner, Zytron, and A.C.
Sicat.
The Labor Arbiter dismissed the complaint and ruled
that: (1) respondents were not illegally dismissed. As
a matter of fact, they were the ones who refused to
renew their contract and that they voluntarily
complied with the requirements for them to claim
their corresponding monetary benefits in relation
thereto; and (2) they were consecutively employed
by Zytron and A.C. Sicat, not by Fonterra. The
dispositive portion of the Decision2 reads:
WHEREFORE, in view of the foregoing, judgment is
hereby rendered DISMISSING the instant case for
utter lack of merit. SO ORDERED.
LABOR LAW
The NLRC affirmed the Labor Arbiter, finding that
respondents’ separation from Zytron was brought
about by the execution of the contract between
Fonterra and A.C. Sicat where the parties agreed to
absorb Zytron’s personnel, including respondents.
Too, respondents failed to present any evidence that
they protested this set-up. Furthermore, respondents
failed to refute the allegation that they voluntarily
refused to renew their contract with A.C. Sicat. Also,
respondents did not assert any claim against Zytron
and A.C. Sicat. The NLRC disposed of the case in
this wise:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, the appeals
are hereby ordered DISMISSED and the Decision of
the Labor Arbiter is AFFIRMED [in]toto. SO
ORDERED.3
The NLRC decision was assailed in a petition under
Rule 65 before the CA.
Ruling on the petition, the CA, in the questioned
Decision,4 found that A.C. Sicat satisfies the
requirements of legitimate job contracting, but Zytron
does not. According to the CA: (1) Zytron’s paid-in
capital of P250,000 cannot be considered as
substantial capital; (2) its Certificate of Registration
was issued by the DOLE months after respondents’
supposed employment ended; and (3) its claim that it
has the necessary tools and equipment for its
business is unsubstantiated. Therefore, according to
the CA, respondents were Fonterra’s employees.
Additionally, the CA held that respondents were
illegally dismissed since Fonterra itself failed to prove
that their dismissal is lawful. However, the illegal
dismissal should be reckoned from the termination of
their supposed employment with Zytron on June 6,
2006. Furthermore, respondents’ transfer to A.C.
Sicat is tantamount to a completely new engagement
by another employer. Lastly, the termination of their
contract with A.C. Sicat arose from the expiration of
their respective contracts with the latter. The CA,
thus, ruled that Fonterra is liable to respondents and
ordered the reinstatement of respondents without
loss of seniority rights, with full backwages, and other
benefits from the time of their illegal dismissal up to
the time of their actual reinstatement. The fallo of the
Decision reads:chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, the petition is
hereby GRANTED. The assailed Decision dated 20
November 2009 and Resolution dated 5 March 2010
of the National Labor Relations Commission (NLRC),
Seventh Division, are hereby ANULLED and SET
ASIDE. Private respondent Fonterra Brand, Inc. is
hereby ordered to REINSTATE [respondents] without
loss of seniority rights. Private respondents Fonterra
Brand, Inc. and Zytron Marketing and Promotional
Corp. are hereby further ORDERED to jointly and
severally pay petitioners their full backwages and
other benefits from the time of their illegal dismissal
KAYE RAMOGA
up to the time of their actual reinstatement; and
attorney’s fees. SO ORDERED.
Zytron and Fonterra moved for reconsideration, but
to no avail. Hence, this petition.
The Issues
Petitioner presents the following issues for Our
resolution:chanRoblesvirtualLawlibrary
I.The CA erred in ruling that Zytron was a mere
labor-only contractor to petitioner Fonterra, in
that:
a. As held by the Court, there is no absolute
figure that constitutes “substantial” capital for
an independent contractor, and the same
should instead be measured against the type
of work it is obligated to do for the principal. It
is most respectfully submitted that, here, the
merchandising work undertaken by Zytron’s
paid-in capital of P250,000 was as of 1990,
the year it was incorporated;
b. As shown in its Articles of Incorporation,
Zytron had been in business since 1990, or
more than a decade before it signed a
merchandising agreement with petitioner
Fonterra;
c. Very importantly, petitioner Fonterra never
exercised the right to control respondents and
other employees of Zytron. Indeed,
respondents neither alleged that petitioner
exercised control over them nor presented
proof in support thereof in any of their
previous pleadings.
II.Respondents never claimed nor adduced
evidence that they were dismissed from
employment by Zytron. In fact, Zytron denies
terminating them from work. The CA, thus, erred
in finding that respondents were “illegally
dismissed.”
Succinctly, the issues in the case at bar are: (1)
whether or not Zytron and A.C. Sicat are labor-only
contractors, making Fonterra the employer of herein
respondents; and (2) whether or not respondents
were illegally dismissed.
Our Ruling
We find merit in the petition.
As regards the CA’s conclusion that Zytron is not a
legitimate job contractor, We are of the view that
such is immaterial to the resolution of the illegal
dismissal issue for one reason: We find that
respondents voluntarily terminated their employment
with Zytron, contrary to their allegation that their
employment with Zytron was illegally terminated.
We do not agree with the CA that respondents’
employment with Zytron was illegally terminated.
As correctly held by the Labor Arbiter and the NLRC,
the termination of respondents’ employment with
LABOR LAW
Zytron was brought about by the cessation of their
contracts with the latter. We give credence to the
Labor Arbiter’s conclusion that respondents were the
ones who refused to renew their contracts with
Zytron, and the NLRC’s finding that they themselves
acquiesced to their transfer to A.C. Sicat.
By refusing to renew their contracts with Zytron,
respondents effectively resigned from the latter.
Resignation is the voluntary act of employees who
are compelled by personal reasons to dissociate
themselves from their employment, done with the
intention of relinquishing an office, accompanied by
the act of abandonment.5chanroblesvirtuallawlibrary
Here, it is obvious that respondents were no longer
interested in continuing their employment with
Zytron. Their voluntary refusal to renew their
contracts was brought about by their desire to
continue their assignment in Fonterra which could
not happen in view of the conclusion of Zytron’s
contract with Fonterra. Hence, to be able to continue
with their assignment, they applied for work with A.C.
Sicat with the hope that they will be able to continue
rendering services as TMRs at Fonterra since A.C.
Sicat is Fonterra’s new manpower supplier. This fact
is even acknowledged by the CA in the assailed
Decision where it recognized the reason why
respondents applied for work at A.C. Sicat. The CA
stated that “[t]o continuously work as merchandisers
of Fonterra products, [respondents] submitted their
job applications to A.C. Sicat xxx.”6 This is further
bolstered by the fact that respondents voluntarily
complied with the requirements for them to claim
their corresponding monetary benefits in relation to
the cessation of their employment contract with
Zytron.
In short, respondents voluntarily terminated their
employment with Zytron by refusing to renew their
employment contracts with the latter, applying with
A.C. Sicat, and working as the latter’s employees,
thereby abandoning their previous employment with
Zytron. Too, it is well to mention that for obvious
reasons, resignation is inconsistent with illegal
dismissal. This being the case, Zytron cannot be said
to have illegally dismissed respondents, contrary to
the findings of the CA.
As regards respondents’ employment with A.C. Sicat
and its termination via non-renewal of their contracts,
considering that in labor-only contracting, the law
creates an employer-employee relationship between
the principal and the labor-only contractor’s
employee as if such employees are directly
employed by the principal employer, and considers
the contractor as merely the agent of the principal,7it
is proper to dispose of the issue on A.C. Sicat’s
status as a job contractor first before resolving the
issue on the legality of the cessation of respondents’
employment.
In this regard, We defer to the findings of the CA
anent A.C. Sicat’s status as a legitimate job
contractor, seeing that it is consistent with the rules
on job contracting and is sufficiently supported by the
KAYE RAMOGA
evidence on record.
A person is considered engaged in legitimate job
contracting or subcontracting if the following
conditions concur:
1. The contractor or subcontractor carries on a
distinct and independent business and
undertakes to perform the job, work or service on
its own account and under its own responsibility
according to its own manner and method, and
free from the control and direction of the principal
in all matters connected with the performance of
the work except as to the results thereof;
2. The contractor or subcontractor has substantial
capital or investment; and
3. The agreement between the principal and
contractor or subcontractor assures the
contractual employees entitlement to all labor
and occupational safety and health standards,
free exercise of the right to self-organization,
security of tenure, and social and welfare
benefits.8
On the other hand, contracting is prohibited when the
contractor or subcontractor merely recruits, supplies
or places workers to perform a job, work or service
for a principal and if any of the following elements are
present, thus:
1. The contractor or subcontractor does not have
substantial capital or investment which relates to
the job, work or service to be performed and the
employees recruited, supplied or placed by such
contractor or subcontractor are performing
activities which are directly related to the main
business of the principal; or
2. The contractor does not exercise the right to
control over the performance of the work of the
contractual employee.9
The CA correctly found that A.C. Sicat is engaged in
legitimate job contracting. It duly noted that A.C.
Sicat was able to prove its status as a legitimate job
contractor for having presented the following
evidence, to wit:
1. Certificate of Business
Registration;chanrobleslaw
2. Certificate of Registration with the Bureau of
Internal Revenue;chanrobleslaw
3. Mayor’s Permit;chanrobleslaw
4. Certificate of Membership with the Social Security
System;chanrobleslaw
5. Certificate of Registration with the Department of
Labor and Employment;chanrobleslaw
6. Company Profile; and
7. Certifications issued by its clients.10
Furthermore, A.C. Sicat has substantial capital,
having assets totaling P5,926,155.76 as of
December 31, 2006. Too, its Agreement with
Fonterra clearly sets forth that A.C. Sicat shall be
liable for the wages and salaries of its employees or
workers, including benefits, premiums, and protection
due them, as well as remittance to the proper
government entities of all withholding taxes, Social
LABOR LAW
Security Service, and Medicare premiums, in
accordance with relevant laws.
The appellate court further correctly held that
Fonterra’s issuance of Merchandising Guidelines,
stock monitoring and inventory forms, and promo
mechanics, for compliance and use of A.C. Sicat’s
employees assigned to them, does not establish that
Fonterra exercises control over A.C. Sicat. We agree
with the CA’s conclusion that these were imposed
only to ensure the effectiveness of the promotion
services to be rendered by the merchandisers as it
would be risky, if not imprudent, for any company to
completely entrust the performance of the operations
it has contracted out.
These sufficiently show that A.C. Sicat carries out its
merchandising and promotions business,
independent of Fonterra’s business. Thus, having
settled that A.C. Sicat is a legitimate job contractor,
We now determine whether the termination of
respondents’ employment with the former is valid.
We agree with the findings of the CA that the
termination of respondents’ employment with the
latter was simply brought about by the expiration of
their employment contracts.
Foremost, respondents were fixed-term employees.
As previously held by this Court, fixed-term
employment contracts are not limited, as they are
under the present Labor Code, to those by nature
seasonal or for specific projects with predetermined
dates of completion; they also include those to which
the parties by free choice have assigned a specific
date of termination.11 The determining factor of such
contracts is not the duty of the employee but the day
certain agreed upon by the parties for the
commencement and termination of the employment
relationship.12
In the case at bar, it is clear that respondents were
employed by A.C. Sicat as project employees. In
their employment contract with the latter, it is clearly
stated that “[A.C. Sicat is] temporarily employing
[respondents] as TMR[s] effective June 6[, 2006]
under the following terms and conditions: The need
for your service being only for a specific project, your
temporary employment will be for the duration only of
said project of our client, namely to promote
FONTERRA BRANDS products xxx which is
expected to be finished on or before Nov. 06,
2006.”13
Respondents, by accepting the conditions of the
contract with A.C. Sicat, were well aware of and even
acceded to the condition that their employment
thereat will end on said pre-determined date of
termination. They cannot now argue that they were
illegally dismissed by the latter when it refused to
renew their contracts after its expiration. This is so
since the non-renewal of their contracts by A.C. Sicat
is a management prerogative, and failure of
respondents to prove that such was done in bad faith
militates against their contention that they were
illegally dismissed. The expiration of their contract
with A.C. Sicat simply caused the natural cessation
KAYE RAMOGA
of their fixed-term employment there at. We, thus,
see no reason to disturb the ruling of the CA in this
respect.
With these, We need not belabor the other assigned
errors.
IN VIEW OF THE FOREGOING, the instant Petition
for Review is GRANTED. The assailed Decision of
LABOR LAW
the Court of Appeals dated September 6, 2012 and
its January 11, 2013 Resolution denying
reconsideration thereof, in CA-G.R. SP No. 114227,
are hereby REVERSED and SET ASIDE. The
Decision of the National Labor Relations Commission
dated November 20, 2009 and its Resolution dated
March 5, 2010 in NLRC Case No. RAB IV 12-23927-
06-Q are hereby REINSTATED. SO ORDERED.
KAYE RAMOGA
G.R. No. 128845. June 1, 2000
INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner, vs. HON. LEONARDO A.
QUISUMBING in his capacity as the Secretary of Labor and Employment; HON. CRESENCIANO B.
TRAJANO in his capacity as the Acting Secretary of Labor and Employment; DR. BRIAN MACCAULEY in his
capacity as the Superintendent of International School-Manila; and INTERNATIONAL SCHOOL,
INC., respondents.
KAPUNAN, J.:
Receiving salaries less than their counterparts hired
abroad, the local-hires of private respondent School,
mostly Filipinos, cry discrimination. We agree. That
the local-hires are paid more than their colleagues in
other schools is, of course, beside the point. The
point is that employees should be given equal pay for
work of equal value. That is a principle long honored
in this jurisdiction. That is a principle that rests on
fundamental notions of justice. That is the principle
we uphold today.
Private respondent International School, Inc. (the
School, for short), pursuant to Presidential Decree
732, is a domestic educational institution established
primarily for dependents of foreign diplomatic
personnel and other temporary residents.[1] To
enable the School to continue carrying out its
educational program and improve its standard of
instruction, Section 2(c) of the same decree
authorizes the School to
employ its own teaching and management personnel
selected by it either locally or abroad, from Philippine
or other nationalities, such personnel being exempt
from otherwise applicable laws and regulations
attending their employment, except laws that have
been or will be enacted for the protection of
employees.
Accordingly, the School hires both foreign and local
teachers as members of its faculty, classifying the
same into two: (1) foreign-hires and (2) local-hires.
The School employs four tests to determine whether
a faculty member should be classified as a foreign-
hire or a local hire:
a.....What is one's domicile?
b.....Where is one's home economy?
c.....To which country does one owe economic
allegiance?
d.....Was the individual hired abroad specifically to
work in the School and was the School responsible
for bringing that individual to the Philippines?[2]
Should the answer to any of these queries point to
the Philippines, the faculty member is classified as a
local hire; otherwise, he or she is deemed a foreign-
hire.
The School grants foreign-hires certain benefits not
accorded local-hires. These include housing,
transportation, shipping costs, taxes, and home leave
travel allowance. Foreign-hires are also paid a salary
rate twenty-five percent (25%) more than local-hires.
The School justifies the difference on two "significant
LABOR LAW
economic disadvantages" foreign-hires have to
endure, namely: (a) the "dislocation factor" and (b)
limited tenure. The School explains:
A foreign-hire would necessarily have to uproot
himself from his home country, leave his family and
friends, and take the risk of deviating from a
promising career path-all for the purpose of pursuing
his profession as an educator, but this time in a
foreign land. The new foreign hire is faced with
economic realities: decent abode for oneself and/or
for one's family, effective means of transportation,
allowance for the education of one's children,
adequate insurance against illness and death, and of
course the primary benefit of a basic
salary/retirement compensation.
Because of a limited tenure, the foreign hire is
confronted again with the same economic reality
after his term: that he will eventually and inevitably
return to his home country where he will have to
confront the uncertainty of obtaining suitable
employment after a long period in a foreign land.
The compensation scheme is simply the School's
adaptive measure to remain competitive on an
international level in terms of attracting competent
professionals in the field of international education.[3]
When negotiations for a new collective bargaining
agreement were held on June 1995, petitioner
International School Alliance of Educators, "a
legitimate labor union and the collective bargaining
representative of all faculty members"[4] of the
School, contested the difference in salary rates
between foreign and local-hires. This issue, as well
as the question of whether foreign-hires should be
included in the appropriate bargaining unit,
eventually caused a deadlock between the parties.
On September 7, 1995, petitioner filed a notice of
strike. The failure of the National Conciliation and
Mediation Board to bring the parties to a compromise
prompted the Department of Labor and Employment
(DOLE) to assume jurisdiction over the dispute. On
June 10, 1996, the DOLE Acting Secretary,
Crescenciano B. Trajano, issued an Order resolving
the parity and representation issues in favor of the
School. Then DOLE Secretary Leonardo A.
Quisumbing subsequently denied petitioner's motion
for reconsideration in an Order dated March 19,
1997. Petitioner now seeks relief in this Court.
Petitioner claims that the point-of-hire classification
employed by the School is discriminatory to Filipinos
and that the grant of higher salaries to foreign-hires
constitutes racial discrimination.
KAYE RAMOGA
The School disputes these claims and gives a
breakdown of its faculty members, numbering 38 in
all, with nationalities other than Filipino, who have
been hired locally and classified as local hires.[5]The
Acting Secretary of Labor found that these non-
Filipino local-hires received the same benefits as the
Filipino local-hires:
The compensation package given to local-hires has
been shown to apply to all, regardless of race. Truth
to tell, there are foreigners who have been hired
locally and who are paid equally as Filipino local
hires.[6]
The Acting Secretary upheld the point-of-hire
classification for the distinction in salary rates:
The principle "equal pay for equal work" does not find
application in the present case. The international
character of the School requires the hiring of foreign
personnel to deal with different nationalities and
different cultures, among the student population.
We also take cognizance of the existence of a
system of salaries and benefits accorded to foreign
hired personnel which system is universally
recognized. We agree that certain amenities have to
be provided to these people in order to entice them
to render their services in the Philippines and in the
process remain competitive in the international
market.
Furthermore, we took note of the fact that foreign
hires have limited contract of employment unlike the
local hires who enjoy security of tenure. To apply
parity therefore, in wages and other benefits would
also require parity in other terms and conditions of
employment which include the employment contract.
A perusal of the parties' 1992-1995 CBA points us to
the conditions and provisions for salary and
professional compensation wherein the parties agree
as follows:
All members of the bargaining unit shall be
compensated only in accordance with Appendix C
hereof provided that the Superintendent of the
School has the discretion to recruit and hire
expatriate teachers from abroad, under terms and
conditions that are consistent with accepted
international practice.
Appendix C of said CBA further provides:
The new salary schedule is deemed at equity with
the Overseas Recruited Staff (OSRS) salary
schedule. The 25% differential is reflective of the
agreed value of system displacement and contracted
status of the OSRS as differentiated from the tenured
status of Locally Recruited Staff (LRS).
To our mind, these provisions demonstrate the
parties' recognition of the difference in the status of
two types of employees, hence, the difference in their
salaries.
The Union cannot also invoke the equal protection
clause to justify its claim of parity. It is an established
principle of constitutional law that the guarantee of
LABOR LAW
equal protection of the laws is not violated by
legislation or private covenants based on reasonable
classification. A classification is reasonable if it is
based on substantial distinctions and apply to all
members of the same class. Verily, there is a
substantial distinction between foreign hires and local
hires, the former enjoying only a limited tenure,
having no amenities of their own in the Philippines
and have to be given a good compensation package
in order to attract them to join the teaching faculty of
the School.[7]
We cannot agree.
That public policy abhors inequality and
discrimination is beyond contention. Our Constitution
and laws reflect the policy against these evils. The
Constitution[8] in the Article on Social Justice and
Human Rights exhorts Congress to "give highest
priority to the enactment of measures that protect
and enhance the right of all people to human dignity,
reduce social, economic, and political inequalities."
The very broad Article 19 of the Civil Code requires
every person, "in the exercise of his rights and in the
performance of his duties, [to] act with justice, give
everyone his due, and observe honesty and good
faith."
International law, which springs from general
principles of law,[9] likewise proscribes discrimination.
General principles of law include principles of
equity,[10] i.e., the general principles of fairness and
justice, based on the test of what is
reasonable.[11] The Universal Declaration of Human
Rights,[12] the International Covenant on Economic,
Social, and Cultural Rights,[13] the International
Convention on the Elimination of All Forms of Racial
Discrimination,[14] the Convention against
Discrimination in Education,[15] the Convention (No.
111) Concerning Discrimination in Respect of
Employment and Occupation[16] - all embody the
general principle against discrimination, the very
antithesis of fairness and justice. The Philippines,
through its Constitution, has incorporated this
principle as part of its national laws.
In the workplace, where the relations between capital
and labor are often skewed in favor of capital,
inequality and discrimination by the employer are all
the more reprehensible.
The Constitution[17] specifically provides that labor is
entitled to "humane conditions of work." These
conditions are not restricted to the physical
workplace - the factory, the office or the field - but
include as well the manner by which employers treat
their employees.
The Constitution[18] also directs the State to promote
"equality of employment opportunities for all."
Similarly, the Labor Code[19] provides that the State
shall "ensure equal work opportunities regardless of
sex, race or creed." It would be an affront to both the
spirit and letter of these provisions if the State, in
spite of its primordial obligation to promote and
ensure equal employment opportunities, closes its
eyes to unequal and discriminatory terms and
conditions of employment.[20]
KAYE RAMOGA
Discrimination, particularly in terms of wages, is
frowned upon by the Labor Code. Article 135, for
example, prohibits and penalizes[21] the payment of
lesser compensation to a female employee as
against a male employee for work of equal value.
Article 248 declares it an unfair labor practice for an
employer to discriminate in regard to wages in order
to encourage or discourage membership in any labor
organization.
Notably, the International Covenant on Economic,
Social, and Cultural Rights, supra, in Article 7
thereof, provides:
The States Parties to the present Covenant
recognize the right of everyone to the enjoyment of
just and favourable conditions of work, which ensure,
in particular:
a.....Remuneration which provides all workers, as a
minimum, with:
i.....Fair wages and equal remuneration for work of
equal value without distinction of any kind, in
particular women being guaranteed conditions of
work not inferior to those enjoyed by men, with equal
pay for equal work;
x x x.
The foregoing provisions impregnably institutionalize
in this jurisdiction the long honored legal truism of
"equal pay for equal work." Persons who work with
substantially equal qualifications, skill, effort and
responsibility, under similar conditions, should be
paid similar salaries.[22] This rule applies to the
School, its "international character" notwithstanding.
The School contends that petitioner has not adduced
evidence that local-hires perform work equal to that
of foreign-hires.[23] The Court finds this argument a
little cavalier. If an employer accords employees the
same position and rank, the presumption is that
these employees perform equal work. This
presumption is borne by logic and human
experience. If the employer pays one employee less
than the rest, it is not for that employee to explain
why he receives less or why the others receive more.
That would be adding insult to injury. The employer
has discriminated against that employee; it is for the
employer to explain why the employee is treated
unfairly.
The employer in this case has failed to discharge this
burden. There is no evidence here that foreign-hires
perform 25% more efficiently or effectively than the
local-hires. Both groups have similar functions and
responsibilities, which they perform under similar
working conditions.
The School cannot invoke the need to entice foreign-
hires to leave their domicile to rationalize the
distinction in salary rates without violating the
principle of equal work for equal pay.
"Salary" is defined in Black's Law Dictionary (5th ed.)
as "a reward or recompense for services
performed." Similarly, the Philippine Legal
LABOR LAW
Encyclopedia states that "salary" is the
"[c]onsideration paid at regular intervals for the
rendering of services." In Songco v. National Labor
Relations Commission,[24] we said that:
"salary" means a recompense or consideration made
to a person for his pains or industry in another man's
business. Whether it be derived from "salarium," or
more fancifully from "sal," the pay of the Roman
soldier, it carries with it the fundamental idea of
compensation for services rendered. (Emphasis
supplied.)
While we recognize the need of the School to attract
foreign-hires, salaries should not be used as an
enticement to the prejudice of local-hires. The local-
hires perform the same services as foreign-hires and
they ought to be paid the same salaries as the latter.
For the same reason, the "dislocation factor" and the
foreign-hires' limited tenure also cannot serve as
valid bases for the distinction in salary rates. The
dislocation factor and limited tenure affecting foreign-
hires are adequately compensated by certain
benefits accorded them which are not enjoyed by
local-hires, such as housing, transportation, shipping
costs, taxes and home leave travel allowances.
The Constitution enjoins the State to "protect the
rights of workers and promote their welfare,"[25] "to
afford labor full protection."[26] The State, therefore,
has the right and duty to regulate the relations
between labor and capital.[27]These relations are not
merely contractual but are so impressed with public
interest that labor contracts, collective bargaining
agreements included, must yield to the common
good.[28] Should such contracts contain stipulations
that are contrary to public policy, courts will not
hesitate to strike down these stipulations.
In this case, we find the point-of-hire classification
employed by respondent School to justify the
distinction in the salary rates of foreign-hires and
local hires to be an invalid classification. There is no
reasonable distinction between the services rendered
by foreign-hires and local-hires. The practice of the
School of according higher salaries to foreign-hires
contravenes public policy and, certainly, does not
deserve the sympathy of this Court.
We agree, however, that foreign-hires do not belong
to the same bargaining unit as the local-hires.
A bargaining unit is "a group of employees of a given
employer, comprised of all or less than all of the
entire body of employees, consistent with equity to
the employer indicate to be the best suited to serve
the reciprocal rights and duties of the parties under
the collective bargaining provisions of the
law."[29] The factors in determining the appropriate
collective bargaining unit are (1) the will of the
employees (Globe Doctrine); (2) affinity and unity of
the employees' interest, such as substantial similarity
of work and duties, or similarity of compensation and
working conditions (Substantial Mutual Interests
Rule); (3) prior collective bargaining history; and (4)
similarity of employment status.[30] The basic test of
an asserted bargaining unit's acceptability is whether
or not it is fundamentally the combination which will
KAYE RAMOGA LABOR LAW

best assure to all employees the exercise of their

collective bargaining rights.[31]

It does not appear that foreign-hires have indicated

their intention to be grouped together with local-hires
for purposes of collective bargaining. The collective
bargaining history in the School also shows that
these groups were always treated separately.
Foreign-hires have limited tenure; local-hires enjoy
security of tenure. Although foreign-hires perform
similar functions under the same working conditions
as the local-hires, foreign-hires are accorded certain
benefits not granted to local-hires. These benefits,
such as housing, transportation, shipping costs,
taxes, and home leave travel allowance, are
reasonably related to their status as foreign-hires,
and justify the exclusion of the former from the latter.
To include foreign-hires in a bargaining unit with
local-hires would not assure either group the
exercise of their respective collective bargaining
rights.

WHEREFORE, the petition is GIVEN DUE COURSE.

The petition is hereby GRANTED IN PART. The
Orders of the Secretary of Labor and Employment
dated June 10, 1996 and March 19, 1997, are hereby
REVERSED and SET ASIDE insofar as they uphold
the practice of respondent School of according
foreign-hires higher salaries than local-hires. SO
ORDERED.